Adam Karr: The Investing Blueprint
Investor Adam Karr, President and Portfolio Manager at Orbis Investments, shares his 'blueprint' for success, emphasizing defining your game, cultivating obsession, and aligning all aspects of your strategy. He details techniques like using decision analytics, seeking unfiltered information, and embracing disconfirming evidence to build deep conviction and outperform.
Deep Dive Analysis
18 Topic Outline
Selecting Your Game and Investment Horizon
Adapting Investment Styles and Environment
Identifying Obsessed CEOs and Company Culture
Building Long-Term Positions Amidst Short-Term Pressures
The Blueprint Methodology for Success
Learning from Role Models and Mentors
Recognizing and Learning from Being Wrong
The Power of Writing and Decision Analytics
The Magic in the Last 5% of Investment Research
Case Study: Motorola Solutions and LMR Networks
Case Study: XPO Logistics and Short Reports
Accelerating Learning and Feedback Loops
Sifting Important from Irrelevant Information
Cultivating an Independent View and Embracing Dissonance
The Will to Practice vs. The Will to Win
Time Management as Capital Allocation
Positioning for Success and Resilience
Defining Success and Helping Others
7 Key Concepts
Game Selection
This refers to consciously choosing the competitive arena or 'game' you are playing in life or business, especially in investing. Different games (e.g., algorithmic trading, day trading, long-term investing) require different skills, infrastructure, and time horizons, and being clear about your game is crucial for success.
Obsession
Obsession in a leader or individual is a deep, unwavering commitment to their chosen field, leading them to undertake extraordinary actions and consistently grind at their craft. It's a powerful force that makes someone incredibly difficult to compete against, as exemplified by athletes like Kobe Bryant.
The Blueprint
This is a methodology for personal and professional development, involving identifying a highly respected role model who has achieved what you aspire to. You then obsessively study their actions and the 'why' behind them, imitate their methods, and over time, adapt and innovate to create a unique, authentic approach that becomes your own.
Magic in the Last 5%
This concept emphasizes that true breakthroughs and deep conviction in understanding a business or situation come from pushing beyond standard, surface-level research. It involves grinding to uncover nuanced details, proprietary insights, or disconfirming evidence that others miss, allowing for a unique and advantageous perspective.
Decision Analytics Initiative
A systematic process involving a dedicated team and third-party software to analyze past investment decisions made by portfolio managers and analysts. Its purpose is to identify individual strengths, weaknesses, and behavioral biases, providing objective feedback and 'nudges' to improve future decision-making.
Intellectual Ambidexterity
This describes the ability to hold strong convictions about a position or idea while simultaneously and actively seeking out opposing viewpoints and disconfirming evidence. It's about being open to changing one's view entirely if new information warrants it, rather than being rigid or seeking only confirming data.
Advantageous Divergence
This is the goal of independent thinking, where one not only diverges from the crowd but does so correctly. It's not enough to be contrarian; the divergence must lead to superior results, creating a positive deviation from common outcomes by being right when others are wrong.
8 Questions Answered
Successful investors deeply consider the game they are playing, understanding that different approaches (e.g., millisecond algos, day trading, long-term holding) require distinct skills, infrastructure, and time horizons. They align their strategy with their strengths and the environment, adapting as market conditions change.
Obsessed CEOs are identified by their demonstrated track record of action and a deep passion for their company's culture. Investors look for responses to generative questions about culture or advice for new hires that reveal genuine passion rather than scripted answers, and a focus on building something special over short-term guidance.
CEOs can maintain a long-term strategy by clearly communicating their time horizon to clients and attracting those with similar long-term goals. This alignment empowers them to operate in an environment that supports their strategy, even when it's out of sync with short-term market sentiment.
The blueprint methodology involves identifying a respected role model, obsessively studying their methods and the 'why' behind them, and imitating their approach. Over time, individuals adapt these learnings to their authentic self, incorporating new elements and discarding those that don't resonate, eventually creating a unique and effective personal strategy.
Writing helps crystallize thinking by forcing individuals to distill complex information into key points and articulate the 'why' behind their decisions. This process, combined with tracking and measuring outcomes against written reasoning, creates a powerful feedback mechanism that accelerates learning and helps identify patterns and biases.
Finding 'the magic in the last 5%' means pushing beyond standard research to gain a deep, nuanced understanding of a business that others miss. It involves rigorous, bottom-up work to uncover the true essence and key drivers of a company, often turning common bear narratives into bull cases due to a superior understanding of its competitive advantages.
This can be developed by framing questions to CEOs that require a direct response to potential threats, actively focusing on disconfirming information when it arises, and cultivating intellectual ambidexterity. It involves seeking out opposing views and being willing to change one's perspective, rather than dismissing information that challenges existing beliefs.
Time allocation is considered even more crucial than capital allocation because time is finite. Investors should rigorously evaluate whether spending time on a particular area of research or decision-making will yield the highest return on time, focusing efforts where they can genuinely move the probabilities for a better outcome.
40 Actionable Insights
1. Select Your Game Wisely
Be clear and thoughtful about ‘what game you’re playing’ in life or business, then ’lean into playing to that’ because different games require distinct skills and environments for success.
2. Play to Your Obsessions
Set up your life and environment to align with your obsessions, as this enables you to dedicate intense, compounded effort that few others will match, leading to significant achievement.
3. Develop a Personal Blueprint
Identify someone who has excelled in your desired domain and create a ‘blueprint’ by obsessively learning everything about how they achieved their success, using them as a virtual mentor.
4. Imitate Before You Innovate
Begin by emulating your chosen blueprint or role model exactly, then gradually adapt elements that don’t authentically resonate with you and incorporate new ideas to evolve into something uniquely your own.
5. Align All Aspects for Success
Ensure complete alignment across your stated goals, hiring practices, team culture, client relationships, and even fee structures to reinforce your chosen strategy (e.g., long-term investing) and enable consistent decision-making.
6. Accelerate Learning with Feedback Loops
Continuously accelerate your learning curve by creating case studies, writing down your reasoning for decisions, tracking outcomes, measuring your performance, and adapting your approach based on feedback.
7. Cultivate Predatory Instinct for Criticism
Develop a ‘predatory instinct’ to actively seek out and deeply investigate criticism, threats, or disconfirming information, viewing it as the most valuable input for challenging beliefs and improving.
8. Prioritize First Principles Thinking
Always prioritize first principles thinking to arrive at an independent view and the truth, rigorously pulling on opposing threads and being comfortable with being different from the crowd.
9. Position for Resilience, Not Prediction
Instead of attempting to predict specific outcomes and positioning for them, focus on building resilience in your strategy and resources to absorb unexpected events, maintaining optionality and adaptability.
10. Embrace Setbacks as Part of Journey
When facing setbacks, invert your thinking to embrace them as an inevitable ‘part of the struggle’ or ‘hero’s journey,’ focusing on how to effectively play the hand you’ve been dealt rather than succumbing to ‘why me’ thinking.
11. Prioritize Return on Time
Rigorously evaluate where you spend your time by asking if an activity will yield the ‘highest return on time,’ recognizing that time is a finite resource more critical than capital.
12. Push for the ‘Last 5%’ Understanding
Don’t stop short in your analysis; push until you achieve the ’last 5%’ of understanding, where you make a breakthrough and can distill the true essence or core driver of a business or problem.
13. Distill Complexity in Writing
Practice clarifying your thinking by distilling complex work (e.g., lengthy reports) down to a few key points, as achieving simplicity on the other side of complexity demonstrates profound understanding.
14. Go to the Source, Remove Filters
When consuming information, always strive to go directly to the primary source to remove filters and process it authentically, rather than relying solely on others’ interpretations or distillations.
15. Manage Personal Overhead Mindfully
Maintain a mindful fixed cost base in your personal life to avoid needing investments or ventures to work, which can compromise your temperament and emotions, leading to poor risk-adjusted decisions.
16. Treat Practice Like the Game
Instill a mindset where practice is approached with the same respect, effort, dedication, and intensity as the actual game or performance, rather than coasting and expecting success without full effort in preparation.
17. Practice Daily ‘Scales’ for Investors
Identify and consistently practice the equivalent of ‘scales’ for investors, such as deferred gratification, thinking probabilistically, and internalizing uncertainty, to inoculate yourself and enhance decision-making.
18. Focus on Your Circle of Competence
As an investor, focus on things ’that you touch, see, know, understand’ and that are accessible to you, like analyzing businesses related to what you spend money on, to leverage your inherent knowledge.
19. Internalize Being Wrong Often
Internalize the concept that you will not be right most of the time (e.g., 55% right is good in investing), which is crucial for managing expectations and maintaining resilience, especially for high achievers.
20. Maintain Investment Journal for Emotions
Keep an investment journal to track and describe your emotions during decision-making, as studies suggest that a better understanding of one’s feelings correlates with improved investment performance.
21. Create Space Before Emotional Decisions
Implement a rule, such as not selling on the same day a strong emotion (e.g., frustration with management) arises, to create space for reflection and a more objective decision, reviewing your original thesis.
22. Utilize Decision Analytics for Biases
Implement a decision analytics system to review past decisions, identify personal strengths, weaknesses, and biases (e.g., regret aversion, endowment effect), and use this data for continuous improvement.
23. Create Nudges for Behavioral Correction
Based on identified biases, create real-time ’nudges’ (e.g., automated emails) within your system that remind you of your biases when they appear, encouraging you to think objectively before acting.
24. Maintain Open Mind for Critical Factors
Avoid myopically focusing on one perceived ‘important thing’; keep your mind open to other critical factors in the mosaic, and aggressively pursue any ‘flags’ or disconfirming information that emerge.
25. Frame Questions to Elicit Truth
When seeking critical information from leaders, frame questions in a way that forces them to respond to potential issues (e.g., ‘We’ve been hearing about turnover, why is that?’), preventing deflection and eliciting honest answers.
26. Seek Opposing Views Actively
Actively seek out individuals who hold opposing views or disagree with your position, as intellectually wrestling with counter-arguments is crucial for challenging convictions and uncovering truth.
27. Be Convicted But Loosely Held
Strive to hold strong convictions, but always hold them loosely, maintaining a willingness to ’totally flip your view’ if new, compelling counter-evidence emerges, demonstrating intellectual ambidexterity.
28. Turn Rocks Constantly for Ideas
Embrace the idea that ’the secret to a good idea is a lot of ideas’ by constantly ’turning rocks’ and exploring new possibilities with enthusiasm, maintaining a love for the process of discovery.
29. Seek Unfiltered, Contemporary Information
Actively seek unfiltered information and contemporary views, especially from younger individuals or those closest to the problem, to avoid filtered information and stay connected to the cutting edge.
30. Use ‘Is It Knowable?’ Filter
Apply the filter ‘Is it knowable?’ to arguments or discussions; if the answer is no, acknowledge ‘you might be right’ and move on, saving time and energy on subjective or unknowable topics.
31. Define Success as Helping Others
Define success as having a meaningful pursuit and using your strengths and skills to help other people, particularly those who possess a hunger for achievement but lack the knowledge of how to pursue it.
32. Lead by Example for Children
The primary way to instill a strong work ethic in children is by setting an example, allowing them to witness your consistent effort and ‘grind every day,’ even if they don’t fully comprehend the difficult moments.
33. Help Kids Find Their Obsessions
Support your children in discovering what they can be ‘obsessed about,’ regardless of the specific domain, and encourage them to be deliberate and intentional in practicing and leaning into that passion.
34. Adapt Your Strategy Authentically
Continuously adapt your ‘game’ to align with your authentic self and leverage your strengths, recognizing that market conditions and personal resources (like growing capital) evolve over time.
35. Identify Obsessed Leaders (Investors)
To identify obsessed CEOs for investment, look for a track record of ‘demonstrated action’ and ask generative questions about culture or advice for new hires that force them off script, revealing genuine passion.
36. Ask ‘What’s Important to You?’ (Leaders)
When evaluating leaders, simply ask ‘What’s important to you?’ to quickly discern whether their focus is on building something special long-term or merely hitting short-term quarterly guidance.
37. Be Wary of Public Turnarounds
Exercise extreme caution when investing in public market turnaround situations, as they have ‘very low base rates’ of success due to short market tolerance and the difficulty of dramatic change under public scrutiny.
38. Track Incremental Steps for Long-Term
Even for long-term decisions (e.g., 4-5 year investments), track many incremental steps, holding yourself accountable to what you said you’d be looking for, identifying what worked/didn’t, and adapting along the way.
39. Aim for Advantageous Divergence
When diverging from the crowd, ensure it’s ‘advantageous divergence’ by being thoughtful and correct in your independent view, rather than being contrarian merely for the sake of it, to generate positive results.
40. Focus on a Few Things, Push to Extremes
Concentrate your efforts on a few key areas where you can make a significant difference, and when you have clear conviction, ‘push on it’ by going deep and sizing positions meaningfully.
7 Key Quotes
You never want to compete with somebody who's obsessed.
Adam Karr
Take a simple idea and take it seriously.
Charlie Munger (quoted by Adam Karr)
You have to imitate before you can innovate.
Adam Karr (quoting a friend)
If you're right 55% of the time, like you're, you're doing pretty darn well.
Adam Karr
The magic's in the last 5%.
Adam Karr
There's nothing more perishable than a great idea.
Alan Gray (quoted by Adam Karr)
The secret to a good idea is a lot of ideas, like always turning rocks.
Alan Gray (quoted by Adam Karr)
2 Protocols
The Blueprint for Success
Adam Karr- Know yourself: Understand your strengths and what resonates with you.
- Be clear on the game you're playing: Define your competitive arena and its requirements.
- Have a blueprint: Identify a highly respected role model, obsessively study their actions and the 'why' behind them, imitate their methods, and then adapt and innovate to create a unique, authentic approach that becomes your own.
Investment Decision Analytics Initiative
Adam Karr- Run all investment decisions from portfolio managers and analysts through third-party software.
- Analyze the data to identify individual strengths, weaknesses, and behavioral biases (e.g., endowment effect, regret aversion).
- Create 'nudges' coded into the system that monitor real-time behavior and send emails when a demonstrated bias is detected, encouraging reconsideration.