Invest Like the Best with Patrick O'Shaughnessy
· John Kim
[00:00:00] S1: The most common mistake is super easy — people over-index on logic. It blows me away. Logos, ethos, pathos, right? Logic, emotions, and values. Simon Sinek talks about the question why, which is actually your emotional and your value or your intuitive engine that actually makes you make decisions, and that the frontal lobe is what puts meaning to all of the feelings. Well, as it turns out, that's generally true. There are two ways I get people to remember this, that don't get confused with, here's the logic of why you need to do it. And usually the logic is, my returns are so great, I do such a great job. It's table stakes. But I always remind people of two things. First, I say, back to the difference between belief and trust. You can win the belief, this plane's not going to crash. I'm still scared — money's not going to move. So in other words, you got to get them past the fear. And people don't address the fear in the room. Biggest mistake is they stay with logic. They don't address the person in the room. They address the fiduciary objectives in the room. Second, the way I get them to remember it is, the phrase "-ization" literally means to create a condition. So you think of civilization means to take something that is hedonistic or brutish and to make it civilized. So you create civilization, but it does not start out as civil. To create organization, something is chaotic and dispersed, and you are creating that from something that is not naturally in its state into something that is now organized. Well, then what is a rationalization? Rationalization is you're taking something that is not rational and you are actually forcing it into becoming something that it is not, which is rational. In other words, rationalization is just the thing that we make up in our head to explain why we feel the way we feel. The most important thing to remember is that if you want to get to yes, it's desire minus fear. But desire and fear are both emotional states. They're both ethical states. And you have to win the hearts and bodies of the people and get them to a place where they are not instinctively scared. They trust you and they have an emotional desire or ethical desire to do this. Then the logic will follow. And the logic just helps define or helps justify the decision they want to make.
· John Kim, Patrick O'Shaughnessy
So the first mistake that everybody makes is that they think that the logic is where you're winning it. The logic actually is an output of a successful sales pitch, not the input. [00:00:00] S0: If I try to take that very helpful insight and put it in terms of what you said earlier, is it fair to say that in your equation of differentiation, fear is complications, track record is rationalization, and that differentiation is really the remainder — it's all this desire stuff. [00:00:00] S1: Well, that's pretty good actually. I think that gets you to quite a great description. Yeah, I love this. I've spent maybe 15, 20 years talking about track record plus differentiation divided by complexity of thought. And it's a trinity, just like any other trinity — size, speed, and terms; logos, ethos, pathos. And yeah, it does fit in that. [00:00:00] S0: After doing this in so many different interesting ways and seeing others do it in so many interesting ways, is there anything we've left on the table about the process and purpose of really good fundraising in a business that I haven't asked about?
· John Kim
[00:00:00] S1: The tactical part is what kind of person are you and what kind of person do you want to represent you? Are you looking for a salesman, a service provider, or are you looking for a Secretary of State? And what is a Secretary of State? Secretary of State's one of the most powerful people in the cabinet who actually is the one department where you actually don't have control over the constituents. You have control as a president over the Treasury. You do have control over energy. You do have control over Health and Human Services. You do have control over national security because you control budgets, you control influence. You do not have control over China. You do not have control over the UK. So therefore, you have to have a Secretary of State that actually allows you to interact with them and helps you create that and can represent you when you're not there. That's what a great fundraiser is, when you can send that person in and say, ah, this person is here. I know you speak for the president. And that's really hard to do. And it's fascinating how many people get this wrong. It's fascinating how when somebody asks me, well, what kind of Secretary of State am I looking for? I always say to them, well, what is the first impression you want people to make when you're not in the room? So if you think about presidents of the United States, President Nixon, he had Kissinger, kind of that look and feel of realpolitik. You take a look at President Clinton, he had Madeleine Albright — policy wonk of the highest order, United Nations ambassador. Incredible reputation of having the deepest international policy experience ever, exactly the image that President Clinton wanted. And then you take a look at Barack Obama. Barack Obama, he looks and says, Well, you know what? I want to be change that you can believe in. I want to be inspirational. And he also has very little foreign experience. So he hires his opponent to show that he can cross the bridge and also happens to be one of the most experienced people to ever sit in that chair — Hillary Clinton. It's just 100%, who do I want you to see? And that person has to be of industry. So when I meet somebody who says, well, the reason why I could be such a great fundraiser as an investment banker, as an ex-deal partner, is because I understand the system. I look and go, that's exactly the wrong person.
· John Kim, Patrick O'Shaughnessy
The person that you want as Secretary of State is someone who actually understands the language and what's going on. If you do not understand what's going on in the Middle East as Secretary of State, but you understand policy and how the president thinks, that's not so helpful. If you don't understand what's going on in Asia and how all that dynamic works in the culture and the politics, it's not so helpful to the president. But you understand what the president wants, great. But you have to understand what they want. And that intersection of who they are and what you are is the intersection of what a great investor relations professional is. [00:00:00] S0: Now, speaking to the people that want to go be the Secretary of State, not the people that want to hire them, but the people that could be that representative, what should they look for in a leader to go work for?
· John Kim
[00:00:00] S1: It depends on what your ambition is. In the end, the easy way to think about it is what kind of candidate do you want to support? There are people in the world, and I'm not judgmental about this, who say, look, I just want to be on a winning team. And there are candidates who are really strong candidates, who aren't necessarily people that giving them substantial sums of resources are going to do great in this world. But they're great candidate, and great candidates allow you to get elected. And when you're elected, there are benefits to the Secretary of State, period. In other words, the more powerful your candidate, the more powerful the Secretary of State. In some ways, many people who have these fundraising jobs — myself included — one of the humilities that we need to commit to is that we really are only as great as the people we represent. That I, when I was at my peak as a fundraiser, still am representing somebody else's greatness. And that's really important. So you have to then say, is it worth it to make the sacrifice and the ego deprivation for this candidate? And at different stages in your career and at different stages of your life and different stages of your egoic development, you'll make different decisions. You'll say, look, I want to make a lot of money for me and my family, so I'm going to find the best candidate who I can monetize. I want to be in a powerful place. And there are other places that say, look, I really actually want to try to attract resources to this individual because this individual is a candidate who I really believe in. And I'm okay if we only have a small amount of resources because I'm doing something that I believe in. And if you can find both, then you hit the jackpot. It's a little bit like marriage or careers in general. Why does everybody get married when 50% or more of people don't stay married? And actually maybe 75% of people shouldn't be. It's because when it works out, it's one of the most magnificent things that life can possibly give you. So the payoff's great. It's a little bit like jobs. When you find that candidate who is magnificent in their ability to attract capital and develop relationships, and they happen to be somebody who also is somebody who you ethically and emotionally just adore and want to see do well, that's like winning the lottery.
· John Kim
But unlike a bad marriage, it's not a binary experience. My experience is that to be a Secretary of State or a head of investor relations can have many powerful benefits and great intrinsic joys, because the flip side of it is that if you enjoy the job, you do — like your job — you enjoy the curiosity of meeting people and learning. If you like traveling a lot, you like interacting with people and playing the game of discovery of the person — then this is about as good a job as exists, because you get to play the exploration of people every minute of every day. When you're a Secretary of State or you're a head of investor relations and you're meeting all these people, you sometimes get some great intellectual stimulation, but you always get an opportunity to actually engage at the coalface of the human condition. And it's amazing what you get to experience. And I'd say that this is true for anybody who's done this job for a long time, or the job that I used to do for a long time, is that you make some incredible friendships. Because by definition, you spent all this time trying to get to the other side of trust. What is the other dividend? It's not the money that you were able to attract. It's that you actually became friends with the person. Cannot be any other way. If you're authentically developing trust, then you are authentically creating a friendship.