John Armitage: How He Invests, Building Egerton, and What Worries Him About AI

If you use AI too much, your brain is going to rot and it's quite simple. People who don't do mental arithmetic lose the ability to do it. It's just simple. So we want AI to help us and to short circuit things. But we don't want it to think for us. Hi everybody. John Armitage has been the most important person for my professional development. I traveled with him for several years when he was my largest client back when I was an analyst. And then I worked for him for five years at Edgerton Capital. Nobody has taught me as much about investing in markets as John has. So John is an honor and long overdue to have you here. It's going to be a masterclass, how to look at a company, how to build a position and how to run a firm for 30 years without losing your edge. John, welcome. Thank you very much. It's a great honor to be here. Let's start with the basics. What is a good company? Well, you know, I think, first of all obviously there's a difference between a good company and a good investment. And second, and I would say many things go into something being a good company. And today, today a lot of people talk about moats. Moats are critically important. But at the same time, if you have a moat without the right management, you get destroyed. And look at Boeing, under its previous CEO, look at Rolls-Royce before the brilliant new chief executive who's running it. Rolls-Royce had a moat, but somehow as he put it, it was a burning platform. I would also say that if you think about the theoretical value of a company, it's the value of the future cash flows. Therefore, how those future cash flows are invested is important. So one of the things that's important is capital allocation. And if you think what Berkshire Hathaway originally was, it was a New England textile mill, which got closed. And look what it turned into, and that's because of capital allocation and culture. And I think culture is critically important in a company. And look at the way Intel lost its way for such a long period. And that was because they didn't data innovate, they didn't data enter new fields, and there was a business with incredible market shares getting eroded. So I think culture, capital allocation and moats are all very important. What's the first thing you look at? So how do I give you, okay, this is a company, this is a new idea, what's kind of the first thing you look at? Well, the first thing I look at is, is it worth the time? How do you design that? Well, many businesses are fairly priced. There's no point in spending a lot of time on something which is fairly priced. What is the point? And the second thing I think about is, can I understand it? Will I understand it? I once had a very interesting meeting with the CFR of a drug company. And I asked him how they were able to assess whether a phase three clinical trial would be successful or not. And he said, look, we can't assess it, we just think of them as a series of options. And I sort of thought to myself, well, look, if you're the CFR of one of the largest drug companies in the world and you don't know whether a phase three trial is going to be successful, how the hell am I getting to? So how many, so one of the type of companies you can understand? Well, well, we try to understand as many types of companies as is possible. And where, look, I'm not a physicist, I can't write code, but I'd like to try and feel that I can understand why Nvidia might be successful. And what's very important for us is to understand the inherent operating leverage in a business by which I mean, what is it that will make it massively out or underperform expectations? And if you can't grasp that, I think you're on a hiding to nothing. How many great companies are there? Probably more than you think. And we own some of them. And there's a lot we don't own and haven't own. But the nature of great companies changes over time. Look, Coca-Cola is a great company. And there isn't a subspecies for Coke. But the fact is it's probably underperform the market in the last 25 years. And why is that? Because they haven't come out with the, with the new Coke. Well, when they did, it didn't quite work, didn't it? That's true. One of the things that you taught me was the importance of pricing power. Why is pricing power important? Well, what is it, first of all? Well, pricing power is the ability to have a product whose price you can raise despite competition. And why is it important? Because all companies face cost inflation. Because all companies, because the world is more competitive for companies today than it was before. Because trade barriers are lower, because technology is something which opens up competition. And if you can sustain your pricing power, it is a sign that you have something truly marvelous about your business. And because if you can price more than your cost inflation, you're going to structurally achieve margin growth. And how does cclicality come into play here? Well, we are not a style defined firm. In some ways I wish we were, because I think if you're style defined, you probably have greater, greater staying power than if you're not. I clients like investing in defined styles. So we do invest in cycles and it's very important to get those right. Because if you invest with a cyclical company, you often feel the best before a downturn. So cycles are important, particularly if you're like us and you try to sort of traffic in whatever is doing well. Are you sure you haven't got a style as a firm? I mean, I think we have a style which is, which is to do with investing in, I like to define it. I like to invest in a company where if the stock market closed, I wouldn't feel worried. And I like to invest a style, that is some sort of style. And I like to invest in a company where I feel I have valuation protection on the downside. And I like to invest with management, which are realistic. And I hate to invest with management, which use accounting policies to make their results seem better than they in practice. And I hate to invest with management where you feel they have a sort of where life is always lazy. What other type of industries you will never touch? We're not very big on drugs. And I guess to find otherwise we otherwise in my time I've invested in most things ranging from a metals company located in the forbidden zone of Russia to oil and gas, to oil services, to technology, to retail. But I think today some industries are more exposed to competition than others. And that's because of the impact of technology. Do you do you think you have to have a world view to be a good investor? I think you have to have a view about economic conditions. But I don't think it has to be more sophisticated than is this a time when companies are swimming upstream against the current as opposed to downstream with the current. Unless you are trying to be a macro investor and that's not what we can do and it's not what we would do. And I would leave that to geniuses like Stanley Druckermiller. What is your world view now? The world view is look, markets are high. Interest bond yields have gone are high in the US. We've got two wars. The oil prices up. And the markets are old. The markets are high. It's strange. How do you read it? How I read it is that if we didn't have the stimulus of AI-driven growth and if we didn't have strong earnings in the US, the world would be in a different place. You studied finance, you studied modern history. How does that shape your way of looking at the world do you think? Well, I don't think it necessarily shapes my way of looking at companies, although I do think history is about investigating things and you have quite a sort of good training at doing that if you do it properly. I haven't to think that I've never found it easy to tell whether a good investor benefits. is or not from reading business studies. You know I know you have an MBA from Walton but I undergrad but I know plenty of people who have MBAs and I know plenty of people who read art subjects and I can't you wouldn't know it from the way they invest and I personally believe to higher MBAs yes but I never really look at it we have hard MBAs my father when I was young tell me that universities were about education rather than being a technical school and you should focus on that and that's what I believe in you were really into modeling right I mean you you believe in your we are into modeling and I think although there's a lot of very good work from the cell site yeah concentrated in individual terms and a lot of very good work I think you know too many of the sort of leading analysts models of juniors and I think there is fine art to modeling which is about the right sort of detail but not too much of it tell me about it well you know if you have too much detail garbage in garbage out yeah too much detail minor changes of assumptions everything goes haywire yeah when you're forecasting when you're forecasting how a company will do you need to be able to isolate what are the absolute key factors and focus on them okay let's not like a qualitative lens to that okay let's model a company how do you what goes into the top line well I mean if we talk about a company like Abus which we have a big holding in there it's it's very simple isn't it it's the number of planes you sell times times the price you don't know what the price is because it's all contract you so the way you have to think about Abus is what might the incremental margins be on each unit how will is develop when we'll pricing trends in the order backlog manifest themselves in revenues what about the big lumpy cost items that they can forecast like R&D and that they do forecast and how will FX work and the answer is with a company like Abus a lot of the information is simply private you have no way of knowing what the price on an order is so how do you model it you try to piece together inferences from what they've told you and if you take a reinsurance company and we had big holdings in reinsurance companies reinsurance contracts are private between the insurer and the reinsurer you have no you have absolutely no evidence about a contract and about the level at which losses kick in and about how the losses are divided and again you sort of have to take their word on it and then you have to look at how their reserves have developed over time because how their reserves have developed over time tells you how they've estimated losses in the past and one of the things about insurance is that is that good companies tend to do better and bad companies tend to do worse so so you know in general much about companies is private and you have to you have to you have to use inferences from companies to apply them to numerical output look if you take Nvidia if you take Nvidia one of the biggest issues about Nvidia is memory cost inflation and what it does to their bill of materials because Nvidia makes 75 cent race margins now they've as it happens they've just guided to they've just guided to gross margins in the near term but you kind of have to piece together what the composition of their bill of materials is how memory price contracts have worked when they will impact and then try to work out the sensitivity of what what the further spike in memory cost inflation do to them you know there is a lot in companies which is very private but then there are some companies like we happen to have we happen to own visa where they make 67 cent margins you kind of know roughly what drives the top line and the costs are pretty clear and you know makes effects are a lot less relevant so I'd say I'd say modeling a company the skills involved range from being quite quite sort of numerical to applying a sort of detective overlay to what you're told and drawing inferences from what you're told and thinking about it and stress testing it as much as you can one of them one of them points at the Profit and Law Statement where which you taught me to focus in a lot on was was the the margin at the margin the incremental margins incremental why is that so important because if companies have sales overshoots or undershoots a very high incremental margin relative to a lower stated margin can cause a big profit beat or a big profit loss so should you be high or low you want high incremental margins but you also want to start with high margins depends what you're shooting for if you think you find a recovery story which no one else has found you want massively high incremental margins because no well incremental margins are very no one really kind of factors in the benefits of what a really good incremental margin can be come people don't really dare to do that so that's why Nvidia is so good because they sell it has a very high margin things and bang profits but Nvidia has a very high margin start with yeah yeah one of the other things you'd particularly look at down the Profit and Laws account I look at accounting policies I look at depreciation rates but you know once you've got to the ebit the operating profit everything else is pretty simple what about cash flow very important you know what's the point of profitless prosperity what about balance it's very important and someone I know who's a finance director once said to me the cruel accounting which is the way standard profit and loss accounting works is a balance sheet output and I think that's correct and so you can't you can't disaggregate balance sheet moves from P&L moves and you have to focus on them so no hair is a balance sheet what do you look at what you look at what's happened to the inventors because that will impact revenues they've recognized and cost they've put on the balance sheet you look at and then you look at their terms of trade how their payables are doing how their receivables are and you look at whether the cash has gone up and then you look at artificial measures they could have taken to boost cash like factoring receivables you look at all kinds of things oh you talked about clients so one of the things you told me was that it's important to have many clients so that one client is not too important and then that your sales you shouldn't sell everything in one month so for instance that's true running a ski that's true you know like a ski lift is not a very good idea because you don't control the snow and depends whether it's monopoly or not do you like tell me monopoly is and market power how do you look at these things well I think monopoly is generally good if they've been honestly produced you know and I think market power is a very nice thing to have if it's been honestly achieved yeah for sure you talked about management so and you mentioned them some which were outstanding and yeah and really really important just how do you how do you judge management well you know one of the things I pay a lot of attention to is do management admit their mistakes and one of the most outstanding executives in the world is Michael A. Larry and if you sometimes if you listen for the listener Ryan air CEO yeah and if you listen to Michael A. Larry sometimes you'd think he just he hadn't created the world's most profitable outline but he just made a series of mistakes and here is someone with an incredible focus on detail he's quite relentless also very funny also very funny he has a team of really super people around him and and he's highly aware of what he does right and wrong when when you know Pat Gelsinger came into Intel one of the first things he did was change their accounting so that stop based comp was added back to earnings you kind of think you know like really what does that tell you so so stop based comp is not part of compensation it's not a cost like really is that realism or not you know I love for management which is realistic and grounded and can see that things aren't always rosy what are the red flags consistently missing expectations and that feeling that someone is always presenting a picture which is slightly biased to be positive that feeling that people don't like or can't admit something might be wrong but isn't there an intuitive thing that yeah but isn't that also a Joe Gauvin. think about it. I mean, not always. You know, one of the best sales I ever did was if a company called Altees. And that was of run by a very, very, very compelling person who was brilliant at cutting costs. It was a French cable company and then it became a telecom company. They used a lot of leverage and the model really worked. If you have the model was not much growth in the top line, but some, a lot of cost cuts, a lot of leverage, acquisitions. And I remember there was one quarter when the numbers came in just slightly light. And I'm always quite suspicious when companies don't have much top line growth because I think if they don't have much top line growth, what's the room for a mistake? And I remember we, I just didn't really like the fact that it was just a very slight miss. It had nothing to, it didn't really affect the medium term numbers the way we model them. But I just decided we should sell it. And so we did sell it. And, you know, I was just a bit suspicious of the model. What did you base the decision on? I base the decision on the fact that I thought the model, the business model, didn't have much room for something to go wrong. And that's very important. Does a business have some have room for some, you know, what's the benefit of a high margin? The benefit of a high margin is that if you have a sale shortfall, your PNL isn't short to pieces. Do you think there's a risk of getting too close to management? Yes, I do. And my partner Ralph calls it paralysis by analysis. And I think it's a bigger risk today than it used to be. Why? And it's a bigger risk today because today information has proliferated around the world. You know, think of the number of analysts who write on a stock. Anytime any company executive speaks anywhere in the world, there will be people listening to him and reacting to it. So you get deluged by information. And one of the difficult things about investing today is on the one hand, you always have to cover the basis. It's a bit like panning for gold. You just never know. And you have to cover the basis. You have to listen and be aware because there might be something valuable in it. And also because other people are. And if you're not, and someone else is, and they decide something's going wrong, you're screwed if you haven't realized. So you, one of the big differences from when I was young is, is you have to absorb so much more. The problem with absorbing so much more is, you know, it's probably a bit like a semiconductor. It just gets imprinted on your brain. And it's difficult to, it can be difficult to get away from it. And so you do, you know, we do sometimes suffer from this phenomenon of paralysis by analysis. How important is valuations? Well, valuations really important to me. And it's probably been too important in my career because I've probably missed lots of great, great stocks. But I like it. But, you know, I like owning things where there is some valuation support on a conventional basis. And I hate with a passion, EV to EBITDA valuations. I think I'm meaningless. When you say conventional, what do you want out of the type of them? Well, PE is free cash flow multiples. EV to EBIT maybe. But EV to EBITDA, you know, you get these near clouds today, valued on EBITDA. And the biggest cost they have is depreciation. Yeah, that really makes sense. Tell me about PE. Tell you about what's high, what's low. Well, when I was young, 20 times was high. I guess now it depends on the grade three. I tend to think of, if I can buy a fast growing company on a multiple next year of PE, by the way, it's a price divided by earnings. So it's kind of how many years it would take for a company to make it, make its own jeopardizing earnings. I mean, I have less comfort than some people for high earnings multiples. And someone I have a huge amount of respectful who I think's got the most incredibly powerful intellect. He thinks GE is cheap valuation. To me, it's a bit rich, 35 times earnings. I feel like if you can buy a good company with decent double digit growth near 30 times next year, that's attractive in today's environment. Some people start by spending a lot of time on valuation and then end up spending less time on it, like Warren Buffett, for instance, more into high-quality stocks than they were early on. I feel the issue with that is that you can get too attached to the quality and not notice something's underperforming. And here's the luxury of permanent capital. And we have weekly redemption. But you have thought differently about it if you had permanent capital? I've never thought about permanent capital. I don't sort of particularly want it. I think the risk with permanent capital and lockups is that they're a trap. The risk is you say to yourself, "Well, I've had a really bad six months. This stocks collapsed, but I really like it. It'll work itself out over the two or three years. My investors have got to stick with me." And then you realize it went. And you allow permanent capital to be a luxury, permanent capital, you know, or long lockups. They become a luxury which removes the tension of needing to make, of needing to grapple with proper investment decisions. It can make. I worry it would make me relax and be complacent. Well, because you can't be complacent in the stock market. I think it takes more than that to get you to relax, John. But you were dismissive of EBDA, which is a different way of looking at valuations, just why you dismissive about that. Because depreciation and amortization is a cost. Why should you add that back? It's a real cost. Companies need to replace the capital. And then you get serial acquirers, which always have some amortization. And quite often serial acquirers put more. could put more costs into intangible assets than they should. And the amortization of those costs is added back to EBIT. Why would you do that? Let's move on to good ideas. Where do good ideas come from? Well, they come from all the people around me. And they come from. look, the invest. you know, the stock markets yield lots of profits for people. Therefore, there are lots of people who are incentivized to give you good ideas. And I think you have to be eclectic about where you get those ideas from. And I have a lot of, you know, very clever partners. I read lots of research. I troll through what is produced by the major investment banks to decide whether I think something was interesting. And ideas sort of dawn on me over time. Do you find good ideas from the sales side? Yeah, often. And sometimes very good research and in pockets, some outstanding research. And who are the investors you talk to? If you want to name them. I'm not one of these people who's always on the phone. And I'm not a sort of particular networker. But there are some people I deeply admire and like catching up with a few times a year. And look, I think Chris Honds got an amazingly powerful intellect. I really like some friends in New York, like my friends at Lane Pine, like Marla Gonca at Sergei Cat, like Eric Mandelblatt at Soroban. And the world is full of clever people. But I'm not a sort of, I'm not kind of permanently on the phone. I feel like the New York investment community is quite kind of incestuous. And they talk to each other all the time. And I'm not really like that. I would be a bit embarrassed bringing people up to us than what they thought about things. So from that point of view, is London a bit of a backyard? Well, London, I think the difficulty with being in London is that if the important things happen in America, you, there's a risk you are late. And sometimes it's important to follow the fashion. And sometimes it's important to be where the dominant economy is, often it is. It would have been in 2007-8. And it would have been, and we'd probably have done better if we had been there this year. But equally, you can get too close to things and have not enough detachment. And you can be in too small a world. Was London the centre of the universe when you started? Yes, it was. And it is a third, and it is not now. It's a different discussion. No, you are not employing data scientists. Tell me about it. Well, I've never wanted to invest in companies where I was reliant on the latest channel check. And I think in any case, channel check results are a function of something else which is more powerful, which is the business itself. And I'd rather try and understand that. And I'm a skeptic about opinion polls. And I know that data scientists do more than look at opinion polls. But you know, I'd rather not invest in something where, oh gosh, the latest credit card data shows the following. That's one thing. But the world has moved on. And we do have some data scientist technologists today who are helping us, helping us get grips with AI and AI as a tool for our investment process. How does AI change the art of investment for the sense of money? I think AI changes a lot. I'm not sure whether it's a good thing, but I think it changes a lot. What is at the moment AI enabled? Well, if you're in the business that we're in as opposed to the Jane Street capital business or probably the Citadel and Millennium business, if you're in the business that we're in, what does AI give you? It gives you instant access to knowledge and which can be formatted any way you want so you get conclusions. That's what it can give you. I do think there are two risks with that. One is that if too many people ask, if people ask the same questions, are they going to get the same answers? No one's really, no one really knows, I don't think, but is it going to turn out there's a single source of truth? And the second thing I worry about personally and for all our people is that if you use AI too much, your brain is going to rot. And it's quite simple. It's just simple. So we want AI to help us and to short circuit things, but we don't want it to think for us. Is it going to make market more efficient? Is it making market more efficient? I think markets are infinitely more efficient than they were when I was young and clearly AI will and AI will speed things up and maybe we'll all have to be, I don't think anyone knows the extent to which do large language models and the answers they give train on like search results. Google will surface answers based on the questions that have been asked. If more people say, if more people ask a question on Google, it's more likely to surface the same answer to me. Based on with the nuance that it's based on my knowledge of me, is that true of AI? Will it produce a herd effect? I don't think anyone knows. If it produces a herd effect, then maybe you'll have an opportunity to get away from the herd. Do you think alpha is the thing on the past? I think it's definitely much harder and one of the implications for people like you and some of us. Well, that's good. That's good. I mean, I don't want to, I don't want to, okay, how do you get alpha today? You can get alpha today by being highly, highly concentrated and you can get alpha today both in single stocks and thematically. I think very few people are capable of doing that well. I really do think that and the professional buyers of investment products, they love concentrated portfolios. Why? Because they run lots of funds. So they like concentration and I don't think they really understand that concentration is just marvellous when it goes right, but when it goes wrong, boy, it's a disaster. So I don't want to go the route of just putting everything on red. What are the implications? I don't know. We just have to keep doing what we do and see whether we can do it effectively. So in this world, whether it's more momentum, there is more AI and so on, just how do you, how do you keep this sense of intrinsic value and sticking to your guns? Well, numbers and numbers. And earlier this year, well, we're having a pretty poor year this year. And there was a time when I really fell on my god, maybe I should jump off cliff. But you said, can't you realize that from time to time, right? Yes, I do, but I did this year. And I came to realize that fine, we'd missed a humongous, great trade. What was important for us was did we, did we think the numbers that underpinned our investments were valid? And if they were valid, would we make money? And so we stuck to that. And that was bloody lucky because if we'd chased the crowd at the time I was one, I was most depressed, it would have been a disaster. What kind of situation are you talking about now? Well, I mean, there was a time when you couldn't give away visa. And luckily, it's up 20% since then. And that's true of other stocks. When many of the real high flyers dropped a lot. And so, you know, I feel like you have to be true to yourself and work out other numbers, the valuation numbers that underpin your position, are they valid? Will they work out? And if they do, is the position attractive? And you have to just stick to that. You've been through most type of market situations in your professional life. In what type of markets are you doing the best? Trending markets and trending stocks. We don't like we're very bad at violent movements. Violent movements tend to be emotional. They tend to often pressage a big change in the environment. They tend to be caused by geopolitics or big economic shifts. And if you're stockpickers like we are or like we try to be, what resonates with you are the numbers in your spreadsheet? What resonates with you is the conversation you had with that company a few weeks ago. And you think to yourself, it kind of changed that much. And so, you can be far too late to realize there's a change. And when I think back to 2008, you know, I think we were handicapped then by sitting in London because sitting in London when people told me that US house prices had gone up a lot and they compounded at 7% per annum. I thought, well, that's quite low. And I just didn't have a clue. And I didn't really have a clue about how the linkages would work into the broader economy. And I think that is the danger of being a stock picker. You can be too focused on the individual investment and not really realize that it's part of a jigsaw in the economy. And it depends on lots of things. And if you take one of those supports away, you know, if you take one of the legs of the stoolder way, it can fall to the floor. When you have these volatile markets, how do you cope with stress, personally? I wake up every morning wondering whether I'll ever be successful again. That's the truth. And my wife and I have this discussion. God is it all over. That is the truth. And I walk her on the office feeling a bit black. And then I try and count my blessings because I'm very fortunate. I've lived in a great time. And when my father's generation were young, well, not that I'm young now, life was all a bit worse. Now when I did my master's degree in social psychology, I interviewed you to talk about pattern recognition. So just remind us, just when do you use pattern recognition and when do you use analysis and just how do you switch between the two? Well, first of all, when you talk about pattern recognition, I feel a bit like the character in Mollia, who was told he was speaking prose, but what I mean by, and he didn't know it, I got to feel it. Look, you know, when we don't understand something, which has on the face of it had a minor impact on earnings, we're reasonably quick to pull the trigger. And what I mean, we had a long-term holding in a company called Pfizer, and it was a very good investment for us. They had some results, which weren't quite what we thought they were. We didn't understand it, and we sold the position, and subsequently, you know, it was one of the names which did go down a lot. It was the same with Altis, you know, I tend to be. But these are pattern recognition. Yes, so those would be two examples. So you don't like disappointments? I don't like disappointments. And if there's a disappointment, I always tend to cut the position back a bit, because people say disappointments, only come, don't come in, don't come along in ones. But also because I kind of like the, I like confirmation of a thesis rather than contradiction. So when people do a bit bad, are you by? Often. Hmm. You have an incredible ability to not think about where the share prize was. Well, you have to, because nearly every good investment you have made has gone up a huge amount. Yeah. And the stock price doesn't, the stock doesn't, you're trading in it. How do you build a position then? Well, we start slowly, and we start slowly. We slowly, you mean small, or you mean small? We start small. And then we try and do a lot of work. How quickly do you put on a position? How quickly can you put on a position? Well, it takes time for it to get big. Yeah. But obviously, we can put a position on very quickly. And what typically happens is either I will suggest something, or one of my partners will. And if they do, I have the sort of Sisyphian task of trying to keep up with them. So, you know, one of my partners will suggest something and I will, I don't know, spend the weekend working on it or something. And then there is a process of working at the thesis. I ask questions, get answers, ask more questions. The questions get, obviously, all the time with the company. We build up a model. We think about it. We interrogate each other. And we derive, we, if we generate greater conviction, we add. Hold on, time does it take? It can really vary. I mean, I, I couldn't say. It's interesting. A lot of very, very good investors. But I start small to create that urgency. I think that's easier. I think that's an easy way to do it. Because the other thing is, you know, a new investment has to displace an old one. And it's just psychologically very difficult to tear up, to tear up an intellectual presupposition. You know, you own this company. It's done well for you. It's psychologically just very different. It's, it's harder than it should be to substitute something else for it. Has Edgerton changed a lot since you started it? Roughly 30 years ago. Well, thanks to Jeff, our CEO, we're a great, we're, you know, we're much better run, not that we were badly run. We didn't have to be a modern business when you, you were in it. We didn't have to be. Now you do have to be. There are all kinds of regulatory demands on U.S. But in terms of the investment philosophy, have we, are we better run? Well, I mean, if you look at the numbers, it's hard to say we're better run in at in relative terms because. But is it the same philosophy? Yes, it is the same philosophy. Yeah. Yeah. Do you have the same focus? I remember talking on focus, so we moved when I had the pleasure of working for you. We moved into new fancy offices. You had never visited. I have quite a lot of, you had never visited the office. And when you came into the morning, you didn't even, you didn't even walk around the office. You had been straight into your cubicle and started to invest. Well, I have quite a lot of focus. I thought that was pretty, pretty good focus or weird. I have quite a lot of focus. I mean, what I will tell you is I'm not on the Management Committee. I have never been on the Management Committee. I do not read the minutes. And the other day, there was an internal presentation on something, which I listened to. And I said to one of my partners, look, why weren't you there? And she said, oh, I wasn't invited. And so I said to someone else, why wasn't you later on in the presentation? And this guy said, well, it was the Management Committee and you. And I didn't know who was on the Management Committee. So, like, you know, luckily, I don't have to do any of that. It's experience and advantage in today's investing world. I'm not sure. Sometimes I think you have to be young and naive to embrace visions. Sometimes, and I do think that as you get older, you get more conservative. And in my case, that could be for two reasons. It could be one, the fact that, you know, if other people knew more, you have to know more. And it could be a feeling that, you know, when I started investing, look, inflation was coming down. Interest rates were coming down. We had the fall of the Berlin Wall. We had 40 years of peace. And what's happened? 40, a long time when we thought free markets and liberalism would win. And what's happened now? Economies have maxed out. Corporates have sort of done a lot to raise their earnings. We have two wars. And the West is under threat. And so maybe I am more cautious as a result of it. Just a few words on how you constructed portfolio. How many stocks do you hold? Well, we hold about 40. And the biggest positions tend to be sort of 8 to 6. And I like having small positions, which can grow if we like them. I like having, I like being thematically diversified, which is very unfashionable today, because professional buyers of independent funds value concentration. I don't think they know what can happen when concentration goes wrong. And I don't really like financial leverage or portfolio leverage, because longs and shorts can have positive values and both can go against you at once. So how do you read the concentration, the AI concentration in the market just now? I don't like it, but it's very powerful. And how do you participate? Yes, we are. We own, we own, we own Nvidia and a brilliant company, which supplies into it, Amphanol. We own ASMR, we own two hyperscalers. And so many things in the US economy are key to AI. That inevitably we have, we and every other portfolio will have more of it than they think. And you mentioned exposures, so historically you were mainly a hedge fund. Now you're a bigger long only. Yeah. Why have you, do you think long only is easier? I had a view after the GFC that global financial crisis, after the global financial crisis, that I had a view that we would end up by being too conservative and that we wouldn't make the most possible returns for our clients. And therefore I wanted our clients to have a mixture of long, alien, long short. And that's been correct. And in the long run, if you think that markets go up, not paying a performance fee should help, particularly if you're a fund which doesn't go leverage long. Why is shorting so difficult? Well, many stocks go up over time. And when interest rate, for a very long period when interest rate, it's been less difficult recently because since interest rates went up, but for a very long period when interest rates were low, everything floated up. And in periods of euphoria, people believe all kinds of things. And in periods of euphoria, any company can raise capital. Now when you started back in '94, you were a fund number two in Europe, I think? Well, one of the very early websites. I'd been like, yeah, we were, yeah. And in a way, it was a good time and in a way, it was a bad time to start. How come? Well, it was a bad time because our first evening, we raised one point, the equivalent of 1.25 million euros, which was not a lot of money. And it was a good time because there weren't many people doing it. And somehow we had a good, and we had a good start. And it was a good time because there were just fewer funds. Today, how many funds are there, all doing the same thing? Loads and loads and loads and loads. How do you differentiate? And how do you raise enough money to be viable and to get attention when costs are higher? It's a bigger risk. How did you come up with that error? I mean, you were very successful at Morgan Grenfell? Well, I'd been very lucky at Morgan Grenfell and having worked for a brilliant and amazing guy called Mike Dobson, who helped me a lot in ways which he probably didn't even realise. And then I'd been given a unit trust to run, mutual fund. And that was a huge break for me because it meant that I had an independent track record, which was totally my own. And that fund did. It was a six-year fund. I ran it for six years. It beat the index 10% a year. It was the number one out of 85 funds over its period. And that gave me the confidence that trying to go on my own would be a viable thing. And then I met a very good man who I thought would be highly complimentary to what I did, Bill Bollinger. And that I felt would get a soft to a good start. Well, for sure it did. Now, you call Edgerton a benevolent autocracy. What does that mean? That means that two people must love a position for it to be large. And that if I don't love it, it won't be large. Two people must endorse something for it to be of significance. It doesn't mean that I have anything to do with the management of the company which I don't. What's the one thing about you that most people don't know? Well, as I'm not really a public figure, I hell of a lot, I'd have felt. But I suppose I mean, a new thing in my life, which I've rather enjoyed, is sponsoring the publication of nice books. And I've just got a new, I've been lucky enough to come into contact with a wonderful academic and a wonderful book designer. And a new book is about to come out on Wordsworth's manuscripts or one of its, one of his manuscripts. So I like, I like, I like private press books. How do you relax? Reading those books, I guess. How do I relax? My wife would say I'm never relaxed. But uh. I mean, I do the usual things, I walk, I talk to friends, I find people interesting. I go on holiday and sit by the scene and work. I find it relaxing to be in control of my work and to be working on interesting things. And if I was just leaving behind 300 emails a day and lots and lots and lots and lots of stuff which I had to do when I came back, I wouldn't find that relaxing. And I read, I like reading. And what keep you going? Well, I feel today that you are younger at my age than you used to be. A, I've got nothing else to do and no value to bring to anything else I didn't think. I would get bored if I stopped and went to a book shop every day. I'd get bored with doing the same thing every day. The markets are interesting. You feel like you never achieve enough. When you're doing badly, you feel like you can't go out on the low. And when you do well, it's kind of too much fun. And I really like the people around me in our firm. I really like my partners and I really like everyone who works there. What is your advice to young people? Well, my advice to young people, they're okay. Well, first of all, I would say study what you like because you'll be good at it and you'll be better at it than if you study something you don't like. And in my opinion, there's absolutely no point in studying something on business. It's not going to help you. The second thing I'd say is nearly everything is more interesting than you think if you follow it closely. The third thing I'd say is, so, you know, there was no detaining Prime Minister in the UK until quite recently, a few years ago. And what his career shade is that, you know, up till you're 21 or whatever it is, you can get by by being very clever. And therefore, after that, you actually have to work. And I think to succeed in life in your career, you need a lot of luck being in the right place at the right time. You need enthusiasm and you need drive and I think the intelligence, you need a modicum of intelligence, but it's not like working at Anthropic. And you know, you need to be happy in your personal life. And I once met Scott Nuttle, who runs KKR. And we'd invested in it, stock had done really, really well. It was the beginning of the year. I was still feeling the afterglow of the previous year, which had been good. And Scott came to our office and I said to him, look, Scott, you know, thanks for KKR, but I don't want to ask you about that. What I want to ask is, how do I get to be like you? It's effortlessly successful at the top of KKR looking, I didn't say this, looking like he was 20 years younger. And you know, how do I get to be like you? And he said to me, marry well. And I have married well and it's important to be happy in your life. If you're not happy in your personal life, you're not going to be happy at work. You're not going to do well at work. Don, it's been fantastic. I want to thank you, first of all, for hiring me, paying me well, treating me well, being such a tremendous gentleman, giving me advice to go to the court or institute, helping me set up AKL because without you, there would have been no AKL capital, no AKL foundation, and I would not have had this job. Well, me thank you. You're very sweet in the club and it's all done to you.