SIP010: Sean Iddings on Intelligent Fanatics - Sure Dividend Sure Dividend

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SIP010: Sean Iddings on Intelligent Fanatics

Today’s conversation is with Sean Iddings, the co-author of the book Intelligent Fanatics: How Great Leaders Build Sustainable Businesses. Sean’s research is focused on finding leaders (both in business and other domains) who have achieved remarkable success through unconventional methods.

Sean (and his co-author Ian Cassel) have now published a second book called Intelligent Fanatics: Standing on the Shoulders of Giants. They write extensively about their research at www.IntelligentFanatics.com. Outside of his work with the Intelligent Fanatics research team, Sean is also the founder of Unconventional Capital Wisdom, a registered investment advisor in New York State seeking to invest in high-quality companies led by intelligent fanatics.

In this episode, we discuss a number of interesting concepts that are applicable to both business and to general life, including how to identify intelligent fanatics, what investors should do when an intelligent fanatic leaves the company they founded, and how to take the principles used by intelligent fanatics to drive personal growth. Please enjoy this wide-ranging discussion with Sean Iddings.

Full Transcript Below

Nick: first of all thanks for taking some time to speak with us today. I thought a great way for us to get started would just be to dig in and ask you directly what is an intelligent fanatic and why so much interest in them from you and your team?

Sean: well an intelligent fanatic, Charlie Munger talked about them, he said occasionally you’ll find an individual who’s so talented that he or she can do things that ordinary skilled mortals can’t.

Of course he named these people intelligent fanatics and for for me I didn’t really think that was a nuanced enough definition of who these people were and how they become what they become – that true master. And so for me I’ve been trying to figure out as a businessman and investor how can I myself become one.

I think I have a background in music and it’s given me a really good idea you’ve probably heard Malcolm Gladwell’s 10,000 hour rule, you might have heard or read Peak by Anders Ericsson and how they talk about all that deliberate preparation going into a skill to raise somebody’s skill level from a novice to amateur to advanced and then to a master.

And so for me I’m trying to figure out how can I myself become a master of business and investing and so that’s really how I think we can start looking at it and if you step back and see well there’s masters in many fields we can start taking in great ideas lessons stories and philosophies from business from investing from art from music and from many different areas and then apply them to how we can become like I said adapt them to become a better businessman or investor or person at life.

Nick: so super broad and I mean I’m surprised and interested to hear that you study people from outside the business world as well.

Sean: correct.

Nick: on a general basis what are the personality traits of an intelligent fanatic?

Sean: well it’s the personality traits can be widely ranging and especially if you look at any intelligent fanatic in any field, it ranges. It’s a wide spectrum I would say. And so that’s one thing that we don’t really focus too much of our attention on because what I try to do at least and I know Ian’s trying to do as well, he’s my partner with intelligent fanatics.

He and I, we’re trying to look at it – what are the best positive attributes we can take from greatness in any field and then I like to think of it as an analogy with a huge pot of gumbo. Where a gumbo isn’t good if you have one or two ingredients, you need a wide variety. You need shrimp, you need onions, you need this that and then you need different things. And so we think of that wide variety of positive attributes from a wide variety of obscure highly successful individuals in any field.

Put them into our huge pot of gumbo we stir it around with our proper reflection and then we add our own unique spice to that pot and then you take a scoop of that and what it’s going to really good tasting pot of gumbo and it’ll be truly uniquely yourself.

So there’s some characteristics and traits that might be a little similar we talked about in our first book focus and some other general characteristics. But really what we’re trying to do is we’re trying to hone in on the positive attributes of intelligent fanatics from a variety of fields and throw away some of the bad habits.

Tonight I go back to music and I have a background in music where my heroes especially the blues and rock players guitar players because I’m specifically a guitarist a lot of them were druggies and so there’s a lot of quality things you can take from them but there’s a lot of bad things as well. It’s trying to take those quality attributes lessons stories and philosophies and add them into our head and make a unique stir on that and then find out our own true unique voice and true mastery that we can apply to business investing and we’re out ever else in our lives.

Nick: from the time I’ve spent reading your work in your book I agree with you that there’s definitely not a certain set of personality traits that characterize an intelligent fanatic. It’s more results based. So these people are identified by their ability to do things that normal people can’t.

But like you said in your book and in your comments earlier interestingly enough there are things that ring true among the different intelligent fanatics that you studied. So probably the best way for our listeners to get a sense of what these people are like is maybe for you to discuss a few intelligent phonetics that you’ve studied maybe in your book or on your website or otherwise?

Sean: I think a good thing to do that I’ll draw from a wide different a variety of fields and so take for instance like Wayne Gretzky – how did he know where the puck was going before other players? And like how did Larry Bird from the Boston Celtics and General George S Patton – how did both of them anticipate action before actually happened? Or again coming from my background in music specifically jazz you have jazz pianist Herbie Hancock – how does he have the ability to improvise in the moment?

And so what we see it all comes down to is that highly skilled level that all these people attain alright and so the true master is these intelligent fanatics in any field. So they have some of those common traits characteristics and some also some other things that they do if we’re speaking about the business operational standpoint that focus on culture focus on people.

But for them to make the quality decisions they deliberately practice their crap so much that it becomes second nature and there’s a gentleman who described a term in 1970 his name was Noah Burch he described it is unconscious confidence.

So one two thing that we firmly believe is that really if we become an intelligent fanatic ourselves to internalize these stories lessons some philosophies to the point where it becomes truly ours as if we experienced it ourselves. Then it’s just applying that to our daily lives to our business endeavors to our investing endeavors and then natural will start to gravitate towards these individuals.

And so you might ask well what are some of those traits how can we build up a pattern recognition for say like intelligent fanatics focus on culture or something like that.

Well I’d say again going back to becoming a fanatic ourselves and then you start to naturally gravitate toward these individuals so I’ll give you a great example.

Warren Buffett that I’m sure many people are familiar that he brought on Ajit Jain to run the reinsurance operation now the great thing Nick is this now Ajit he had no experience in the insurance business as hero and what Warren said and his biography snowball is he said that I just like the guy. Now that isn’t that’s just an amazing thing. For me at least is that a lot of these guys women whoever all these intelligent fanatics they have they’re masters at their craft and they are intelligent fanatics themselves so they just naturally look for people who have the same high standards the same potential they can see themselves and these other individuals.

When Warren saw Ajit who came from McKenzie – the consulting firm – he could just see in his eyes that that “early Warren Buffett” and Buffett could also see the potential that Ajit had that integrity that he had that he himself could help mentor and I don’t know if you’ve heard that Ajit and Warren on the phone at night practically every day.

And it’s we might talk about a little bit later that mentor-apprentice relationship and how it’s necessary to become a fanatic ourselves but let me give you a few other examples of other fanatics trying to find and partner with other people.

And so for instance in our recent book Standing on the Shoulder of Giants we have John Malone known as the cable cowboy written in Outsiders to be one of the top capital allocators. I think is returns have been like 30 percent compounded annually at least with TCI his first organization that was for many decades and that Liberty he’s done fantastic with that.

But throughout all those decades Malone has partnered with say like 40 intelligent fanatics and one of them is an individual we highlight in our second book Bob Johnson and who started and ran BET Black Entertainment Television.

And the thing Bob Johnson he didn’t have any experience and running and operating a television channel no he was a lawyer he was a lobbyist for the cable companies. He had a little bit of idea of the entrepreneurial landscape but Malone who was the chair of that department he saw Johnson he knew he could sense that Johnson had the same standards that Malone had and so he just naturally gravitated towards him.

And when Bob Johnson came with an idea to start be BET, John Malone immediately gave him $500,000 investment because that’s he had the idea that Malone wanted to execute on and Bob Johnson was just the right guy to do it.

I’ll give you one last example Nick we have SoftBank it’s a run by Masayoshi Son and I think this is a great example he started a software company he did really good job but he came from nothing but he had that that huge drive that huge execution that we see with intelligence fanatics.

Of course when he’s older he meets Jack Ma who has maybe 30 or 40 employees and practically no business plan they didn’t really even have Alibaba set up yeah and really any revenues coming into that business but Masayoshi Son right to check for 20 million dollars to Jack Ma and it’s gone to be what he ridiculously great investment and what did Masayoshi saw in C and Jack Ma well he saw the fire in his eyes he saw himself in Jack Ma,

Because there was another individual who gave Masayoshi Son an opportunity and he just gave that to Jack Ma so it’s again if we raise our own standards become intelligent fanatics ourselves it’s our belief that we will just naturally gravitate towards those with potential to become fanatics.

Nick: let’s really dig into this notion that you don’t have to have relevant business experience to be an intelligent fanatic so that’s something that was in your book. Sol Price other than FFed-Martwhich I guess you could say was his first intelligent fanatic experience. He didn’t have experience before he started Price Club and there’s all kinds of other examples like that. The 3G guys didn’t have too much experience before they started their first bank they didn’t have brewer experience before they bought their first brewery there’s all sorts of examples like that in your book.

So how do you think about the importance of experience versus say nature or temperament when you study people who are intelligent fanatics today early on in their careers?

Sean: I think you brought up a very good point Nick and that is a lot of intelligent fanatics do not have any experience in the field that they are going to disrupt and they’re like you said there’s many different examples that we could list. And it really I think comes down to the human natural tendency for individuals with experience to be jaded to look at the business or industry through a certain lens.

And if you look through that common lens that you start to see things too similar to everybody else and it’s hard to get out of it and it’s hard to make your own path something lead your own path and then have everybody else follow you.

It’s hard to do that when you’re established or entrenched in some certain idea or ideal. But we see these intelligent fanatics coming from different areas and then they create totally different unique industries and they do it because they just don’t even know what the established industry norm is. And I think it’s that fresh eyes fresh set of eyes that really can raise the level and do unique direction and disruption in any kind of industry.

So it’s those new eyes and there are many different other examples of say inventions coming and disrupting any industry and that’s come from people with no experience. They’re not entrenched by the old way of thinking and I think it also can come back to science and how a lot of the big discoveries can come from and have come from those younger individuals.

And so I I’ll butcher this because I haven’t fully internalized this but I remember Charlie Munger saying that it’s sort of like an egg a human egg inside of a woman and then there’s a sperm once there’s one sperm that gets inside that egg then no other sperm can come and enter that and so it’s the same thing with the human mind if we have a certain idea implanted in it – it’s really hard for another idea to come in.

So those younger individuals can see with fresh eyes and develop new technologies ideas and the such.

Nick: do you have any notable examples of an intelligent fanatic who came into a new industry with these fresh eyes your speaking about and just did something that everyone else thought was impossible I’m actually I’m sure you have tons of examples of this. but are any are there any of them that stand out in particular?

Sean: so we have one example there’s Clessie Cummins we bright about in our second book and he was a young gentleman who had some a little little bit of tinkering competencies he liked to play around and fix things. But back in the early nineteen hundred’s he well it was just common for newly invented cars to be really expensive. So the rich were the only ones able to afford these luxuries and so what was common then was to hire a handyman and a chauffeur but they would be the same individual.

And so Clessie Cummins who has really no experience he’s I don’t even think he finished high school he becomes a taxi not taxi but a limousine driver for a wealthy family named the Irwin family and he eventually starts to tinker around and develop diesel engines.

It’s a new form of diesel engine and he plies it in a 9th, 10th, 11th hour desperation because they started a business and it wasn’t doing too well of course it was the depression that was just starting to happen. and what he does he puts it into an automobile it was absolutely unheard of for somebody to put a huge diesel engine into a car but he did he’s a young kid he doesn’t know any better and he wants to really help the little teeny business that would they were running and eventually he puts it in he drives to Irwin Joseph WG Irwin’s house and of course they thought their company was going to bottom out at that point in time.

And he drives there and he drives Irwin around and eventually they go back and Irwins just really unhappy and Clessie mentions oh I just spent $6,000 of our company on this limousine and the guy’s even more frustrated why would you waste all of our money we’re going to be bankrupt any any time.

But he’s like well wait I put one of our diesel engines into this car and it’s like what it actually worked and it’s just amazing. So many people back in those days could not see a automobile driven by any other means other than a gasoline-powered engine. But Clessie did it and he was he was a chauffeur driver.

That’s just one example there’s of course many different other examples that that I can do pas de deux there’s other questions that we can probably get to.

Nick: these guys are clearly different thinkers these intelligent fanatics and in your first book one of the recurring themes that they applied their unique way of thinking to was incentive systems so these intelligence fanatics consistently found ways to motivate employees that made them think like owners instead of employees.

I have two questions here and I guess the first one is do you have any notable examples of incentive systems that you think are useful for helping people to identify intelligent fanatics today?

Sean: why I think it just comes down to what are just we might not even have to think of any specific incentives we just have to think of a general. if we can get a team that can be incentivized and lined all together to meet short-term goals that help propel the business. Then we should be able to have a incentive system that should be working out in the long term.

For example we have Les Schwab tire centers that was run by Les Schwab in Oregon and what he did was he set up a partnership system or incentive system where the owners of these tiny stores they’re not really owners but they were manager but they were incentivize as owners.

To always be mindful about running their operation as if they were the owner themselves and also the individuals in their team and they have to be incentivize and aligned all together. And then of course over time they’ve grown into a massive retail footprint throughout the United States and they’ve done fantastically well.

And other fanatics they figure out what is absolutely necessary for their operation and how to glue their team together to be aligned and then reach goals together. Because I think that’s the main point we see with fanatics of business fanatics of say military leaders.

Its how can we align a team together to get extraordinary results because I think a team that’s cohesive can get extraordinary results and it’s much better than having a team of independent like talented individuals who are totally not cohesive. And I think that’s a really quality thing to look at but of course it’s it differs from one case to another.

Nick: my second question about incentives is about finding intelligent fanatics today. A lot of these unique incentive systems like the Les Schwab example you shared are shared later on because the intelligent fanatic in question does interviews or writes books or shares publicly how he used to incentivize employees back in the heyday.

So today it’s different because not everything is public knowledge so how do you identify unique incentive systems from intelligent fanatics who are still in the middle of their career today?

Sean: so again I kind of go back to the if we become intelligent fanatics ourselves and we try to align our everyday situations our everyday business and ways like the fanatics trying to create these win-win situations trying to incentivize say relationships with our family to get the most out of them and to provide those win wins.

Then we start to in see notice some new incentivized systems and again I think the human constant which I think is not nothing different. so we have a business today which might have slightly different economics in business conditions than say a company of your so Les Schwab, Forbes, or Standard Oil this that or another.

While those are slightly different examples different industries the constant is the people so again I go back to if we can set up and find those incentivize systems that are aligning the people to be together and to get the most out of each other. Then I think those are the ones that will start to perk our interest.

Nick: I thought it would also be interesting to turn back the clock a little bit and discuss why you originally became interested in intelligent fanatics and how you met Ian who co-runs the website and co-authored the books with you.

Sean: so Ian Cassel he runs Micro Cap Club and I became a member in 2014 and we both have approximately the same time and I think later 2015 read Sanjay Bakshi’s seven case studies on intelligent fanatics of India and we of course have heard Charlie Munger who talked about these individuals who are so talented that they could do things ordinary skilled mortals can’t.

And so we started both independently thinking oh this is an interesting area of study and so I started to look into John H Patterson and a few others and started writing up something I sent it to Ian just because see what he thought he’d said then we started to collaborate and it’s really snowballed from there. and we’ve really started to lean into focusing on how these fanatics do what they do but again how do we become fanatic so we can raise our own level to have that pattern recognition that mastery to start noticing these individuals early because of course we’re both micro-cap investors.

Nick: it’s a nice segue into how you can apply this notion of a intelligent fanatic to the world of investing so obviously the best time to find an intelligent fanatic is when they’re just starting their business and share prices are low you can get in early obviously the lower the price you pay the higher your expected returns.

So how do you with searching for new investments in the micro-cap space I guess I have two questions how do you go about finding intelligent fanatics today who are still unknown? And secondly why do you think it’s best to focus in the micro-cap space given the risks associated with investing in small stocks who are often illiquid?

Sean: so what we liked to think of I like to think of it as kind of like a forest of redwoods. You think of a redwood as the tallest tree in the world right and so for us that would be more akin to those large cap companies who are and much later in their phase of growth and it’s pretty obvious redwoods a redwood and you can see it from a mile away but if you get really close and you’re trying to look at those saplings and you’re trying to figure out whom which one is a redwood?

Well it’s not really totally noticeable which one is and so we want to be getting those huge returns so we want to get a company starting from the first stage and we want to ride it practically the whole way so again that sapling to a huge redwood that’s what we want to get that’s the return we want to get.

But again it comes back to that which one is going to be a huge redwood someday that’s the really hard thing. Because it’s there’s no established track record you can’t really go and cut the DNA and see okay it is it what it is.

So for us we focus on those teeny tiny companies who are very early in their stage of growth and try to figure out those intelligent fanatic characteristics. Because that tends to be the like I said that constant the people is the constant.

We can’t tell what wave will be the next wave but the people if we can find the people with a big enough track way or road ahead of them then we think it’s a good place to to look at. And so take for instance you might be thinking or what what’s an example so say for instance Jeff Bezos so we have Amazon today in 2018. Now Nick do you do how big it is today?

Nick: market cap of hundreds of billions I don’t know off the top of my head.

Sean: I think it’s like I think it’s over 700 something like that so it’s big when wouldn’t you agree yeah I definitely I just like to have a seven hundred and seventy four billion dollars thank you thank you for right so seven hundred seventy four billion dollars that’s 2018 that’s Jeff Bezos in the Amazon but if we go back to nineteen ninety-seven I don’t know how big it was them but it was teeny tiny and they’re just focusing on books right?

Nick: yes.

Sean: so the constant is Jeff Bezos right so the constant is Jeff Bezos so the organization is changed drastically.

We’re now in the later stages of Amazon’s growth now I have no clue whether Amazon is in let’s use a baseball analogy and bottom of the fourth or the top of the ninth. So I don’t know exactly where they are in there they’re stage of growth and I don’t know if anybody can.

But I can tell you what I think would somewhat certainty that Amazon and Jeff Bezos are not in the bottom of the first so it’s they’re not just starting so he’s established a strong operational track record and he’s shown that he has the ability to go from he and his team I should say has the ability to go from a small book niche build it up and go into practically every other retailing segment and totally dominate.

And so the market is pricing that in and so what I’m trying to get at is I don’t think I have any competency and looking at redwoods take for instance Amazon and having the ability to see oh well that one has a couple more inches to grow then another redwood.

I think that’s why we tend to focus on those teeny small companies and the ones that have a potential for really dominating their niche and then growing outside and riding waves and I think the the one I’ll kind of give you a nice little story.

I remember reading on Twitter from an acquaintance and I think this kind of shows the beauty of investing in intelligent fanatics well in some cases the some of the errors that can come out but so take for instance what’s is there I’m David Rubenstein.

So he is the co-founder of Carlyle Group and one time he mentioned the story of Jeff Bezos when he was getting started and I’ll give you a little background. So Rubenstein is it Carlyle Group owned Baker and Taylor and they were the owner of the largest bibliography and of books in print and so Bezos went to Baker and Taylor and he said well I don’t have any money but I’ll offer you 1/3 of Amazon stock for use of the bibliography. And now of course in hindsight we can say Wow anybody would jump at that but at that time nobody had any clue how well Amazon was run and the potential all that kind of stuff. So the Baker and Taylor salesman said no I want cash only.

But Rubenstein who I I’d say is an intelligent fanatic he’s really worked hard he has those high standards he’s a master in private equity and so he even back then long time ago in the mid-90s before Amazon when I had their IPO. He went back and he’s like oh well what the salesman might not have been made the right decision.

He went back to Jeff Bezos met with him personally and he said yeah what I think your your company’s going to go public and it might be worth two hundred three hundred million and so he tried to set up a deal with Jeff Bezos and try to get that one-third of equity. But face is set now I don’t need Baker and Taylor as much I do now and so he said what stuff 33% I’ll give you a percent and so Rubinstein actually had a percent of Amazon held it until their IPO and why of course he sold it then.

But that 1% would be as you said roughly around eight billion dollars today so it’s you can kind of see these fanatics they gravitate towards these other fanatics. but if we look at their mistakes of omission we can kind of see that if he really saw the potential of Jeff Bezos and really had committed to him he could be could have made a huge return but of course so it’s I think it is pasta Boult partner with these individuals who are so telling the other people can’t do it’s goodbye we just have to be able to rise their own standards.

Nick: interesting. so I’m a quant we do quantitative dividend investing in research at sure dividend and yep there’s plenty of market participants who believe that all the quantitative information in the market is pretty much baked in. But there’s definitely and no one will ever convince me otherwise in this there is definitely an ability to exploit pricing differentials when it comes to the qualitative because that computers can’t deal with the qualitative in the same way that they can quantify stuff.

That is very related to what you guys do but I want to relate it to the quantitative stuff that I’m more familiar with now by asking you. How do you think about valuation so for a company like Amazon that’s a great business but I’ll say it’s probably a bad stock because it’s at like 300 times earnings right now?

So how much can the leadership of someone like Jeff Bezos offset another valuation that kind of makes me a little sick to the stomach?

Sean: well like again I go back to that that redwood. So what we’re looking at is if we’re looking at the established companies the room for error even with the established intelligent fanatic like Jeff Bezos or previously with Steve Jobs or say with Elon Musk. They’re there at a later stage it’s much harder to quantify and look at valuation but even if you look at the tiny companies that we look at the micro caps generally they’re you know the quality companies are going to be at a higher multiple than any other company.

And it’s just because there’s a scarcity of quality companies to begin with so you just have to be and we think it like this we have to be comfortable paying a an okay price. But we think if it’s a tiny company there’s a huge runway and there’s a quality intelligent fanatic and a quality team I have to make that clear quality team and quality culture.

Then there’s a better chance that paying say of 15 20 times multiple on earnings or even if it might not even be profitable it might be close to being profitable paying a decent multiple of revenues it. You shouldn’t have that much error or there’s less room for error than if you’re trying to invest into a intelligent fanatic way later on in their company’s growth.

That’s how we so we have to be comfortable paying a okay price even what might seem a high price for these early what we think is intelligent fanatics running quality companies.

Nick: so 15 to 20 times earnings is definitely not crazy in the term like when you think about large cap or mega cap public equities. but how would that compared I guess the average valuation of the micro-cap space where you guys tend to live?

Sean: well and I I’ll just note that 15 to 20 times isn’t really and then again I looking at valuation it’s really hard and we it changes from one case to the next. But again like I said there will be and it’s a common theme for the companies the quality companies that we tend to look at to be higher priced higher than others based on you know multiple of earnings.

I can leave that at that so but again it’s the valuation is based on say trailing twelve months it’s not really that big of a huge poor part of how I would see investing in micro caps. It’s mainly what’s the potential what’s the potential who’s leading and what’s because that that’s the thing that’s really hard to see.

It’s the potential and what niches they can get into and of course if you have an intelligent fanatic early and you strap your side card to them you should be you should do fairly well.

Nick: thinking again about I guess the difference is between a quant strategy and a qualitative strategy. So a lot of what many clients do is they run stock screens and back tests and those kinds of things or if they’re kind of more of special situations to cigar butts they’ll said they’ll read 10ks until their face turns blue.

With you guys what does your research process look like how do you go about identifying the next individual company that’s led by an intelligent fanatic do you read 10ks or is it more of kind of a primary research attending conferences and those sorts of things?

Sean: well I think this is a great question Nick because really what we’re trying to do again we’re trying to become that intelligent fanatic so what at least what I’m doing I’m spending more of my time studying the past those successes in industries of the 1900s the early 1900’s and such and really establishing my raising my own standards that building that pattern recognition.

And then I of course attend some investor conferences and tried to search through stuff or micro-cap Club is a really good idea generator. But least right now for me I’m spending practically all of my time building that that competency and seeing how the great leaders have built companies before. That’s where I’m spending my time and I think that’s a proper way if we’re trying to look at the art of qualitative investing in these intelligent fanatics is really honing in and internalizing these stories lessons and philosophies to the point where it’s as if we experience them ourselves and we do it at a young age. So once we see things and we start getting into working and looking at the companies today.

Then it just becomes like I said before like Wayne Gretzky looking to where the puck is going we we’ll have that sense but it takes so much time and I have that music background to vouch for this. Where I know what it takes to get unconscious competence on guitar. It’s a ridiculous amount of work but it’s there’s a there’s a process and I think it really comes back to that standing on the shoulder of giants and trying to really hone in and master that master apprentice relationship.

Nick: I want to talk more about how you spend your time today. So you run intelligentfanatics.com and I’m sure you’re doing lots of writing and research for that.

Could you tell us about the membership program that’s on intelligent fanatics.com and what inspired you to do a membership model – I guess fund your studies of these business leaders?

Sean: sure, so well Ian and I decided at least on the business sense with books so we started off with publishing books and that’s not really high margin well technically is but it’s the growth in that is limited compared to what we could do with memberships and of course coming back to that how do we become intelligent fanatics ourselves?

We think that there’s a whole system that we can take and I have that from music where we’re providing the tidbits the golden nuggets from these intelligent fanatics from any field.

We’re focusing out really on business so far but we do pretty much any field and we think that with the right mindset we can get all this information. That’s why we decided the membership and we continually try to give as much value to members so we have a membership form so members can collaborate we provide some unique exclusive material.

And then one thing that I personally have been working on and I think this is something that’s truly unique is I take my 20 years of guitar experience and I’ve adapted how I’ve become reached mastery on guitar and how do we adapt that to the business investing landscape and how do we truly stand on the shoulder of these giants.

So we can see further and so we have an online course that’ll be available free for members who sign up and that should be coming out fairly soon. but it’s me providing many examples of intelligent fanatics from many fields I give examples a lot in music and I’ve provide examples in music and then of course giving those adaptations into how we can apply these methods in business investing and any other craft and really truly internalize.

And I think that’s the main thing internalized these stories lessons and philosophies to where we build that unconscious competence.

Nick: one of the most interesting aspects to me of the membership model is the network effect so obviously the more people the more members you have the more valuable the membership becomes and I’m sure I’m curious if you have any anecdotes or data on how like whether there’s been any fruitful relationships that has phosphor it as a result with the intelligent fanatics website I guess what’s your take on that?

Sean: oh yeah it’s definitely we’re working towards that network effect that’s why we started and continually price our offering at a ridiculously low price and – in comparison to what value that we provide.

So we’re trying to build that network of individuals and yet we have some really interesting connections that we’ve been able to build through the membership and it’s just going to multiply from there.

Have that flywheel effect so it’s where we’re looking forward and I don’t know if listeners are familiar but we have a following in India and so we’re kind of leaning in towards there. We hired two analysts to help us kind of uncover intelligent fanatics in India so we can learn and study on and also just really again build that that network of individuals to provide more value to ourselves to our members and really help each other stand on the shoulders of these giants – to really see further.

Nick: so I’ve read on your website that one of the reasons you guys focused on India was because it turned out that there is a huge proportion of your audience was reading from India of members or readers not I can’t quite remember.

But I’m curious are there any other aspects of India as a country that have encouraged you to focus on it geographically?

Sean: oh yeah so it’s I’d say India is you course they’re a developing country we kind of see it as the USA like in the early 1900s so that’s there’s a lot of really interesting things happening over there that are aren’t here. And that provide us with lessons we can take directly from these fanatics.

It’s say kind of the equivalent of you know being able to meet say like Henry Ford chat with him so we’re really trying to go directly toward to these fanatics for this wisdom and driving the these things to learn from so it’s sort of like that. And there of course there’s a demographic there demographic is growing quite significantly so there’s a lot of really interesting things about India and why we we think what it’s necessary to really lean into this this area.

Nick: for me personally if I had to do due diligence on companies or management or I guess intelligent fanatics in India I would be pretty lost myself.

Sean: so if you have wait that’s the same thing with us that’s why we brought on Indian analysts to help us out.

Nick: yes, I mean that’s exactly I’m curious how you found your two research analysts in India?

Sean: so we provided a kind of like a search for this these initially for one position but we actually found two people that were exactly what we need and kind of have two different backgrounds. One has more of investing background he’s a full-time investor and the other has a journalist background.

And so we think we had them create a case study all of our applicants and these one stood out to us and we’re really really looking forward to working with them. Their top level individuals and they’re masters of their Indian industry and the other journalism trade so like I said we’re really excited.

Nick: I wanted to wrap up by asking you a few targeted questions about intelligent fanatics today and I guess in the future for people who are considering investing companies run by intelligent fanatics.

So the first one I have is I guess what is the appropriate action when an intelligent fanatic that you’ve already identified leaves the business they founded?

Sean: you have to be careful you have to make sure that they the culture is highly intact and it’s really tight. They have a system of hiring individuals through the company and they have a deep bench of talent. If they don’t have those things you better run you got to sell your position rethink your partnership with that company.

Because I think it’s really important if the culture isn’t highly intact again that team there is that it’s the team is the one executing its then intelligent fanatics that’s leading them. So both are highly important if intelligent fanatic leaves and there’s not that great of culture there then better start running real quick.

Nick: earlier in this conversation you identified Warren Buffett as an intelligent fanatic. what’s your take on Berkshire after Buffett that is a great question Nick and so what I could say with that is that really I hope I’m wrong I really hope I’m wrong but I think the departure of Warren Buffett and Charlie Munger is going to be a huge blow to the company.

And I have total immense respect for whoever is truly running the business after they are gone and the others involved by I personally this is my opinion and others might be seeing it differently.

But I think Warren Buffett himself is truly one of the best business managers and investors of our time I think he’s really rare and I think his born talents and his fanaticism and his ability to overcome his weaknesses is really rare.

And then you, of course, you have Charlie Munger whose partner and then you have like a great duo and so when they’re gone there’s going to be a huge void.

And I can just kind of let me give you a little example. Some people might say like why is he so unique and why is he so rare in my opinion?

Well, I think Buffett is the equivalent of an autistic savant who’s been able to get over his weaknesses and so I’ll give a musical example. There’s an individual he’s probably in his mid to late 30s he was born blind he’s an autistic savant and he plays piano.

Now this guy is absolutely rare he’s like Mozart he has the ability to hear a song once and he can play the song back perfectly without practice now you might be thinking wow well from a music musician standpoint that’s really like nobody can do that it doesn’t matter how much you practice.

Having the ability to store and recount a song perfectly from your mind 10 minutes later is really one in a billion two in a billion Reiter there’s a very few people who can do that. But I see Warren Buffett he’s an intelligent fanatic he’s read all these books but he has a mind that is eidetic.

Eidetic meaning he can store in recount practically an in limited number of data points of what he reads is practically absorbed 100% ninety ninety-five hundred percent he’s sort of like Rain Man, some people might have seen that movie and it’s based on an individual who’s an autistic savant his name was Kim and he could read whatever he read a dictionary a phone book everything he read he could not forget he would recall it perfectly.

And I think Warren Buffett is close to that or if not that and so having that ability with the intelligent fanaticism that he has and his reading and his studies and who he’s been meeting. But he’s really rare because he can get past this weaknesses so he might have been weird and awkward to begin with. But he you know took a Dale Carnegie course and he really worked on speaking and getting over some of his weaknesses.

But say like Mozart or Derek Pagan Cheney no they weren’t able to get over their weaknesses and speaking and interacting with other humans. So you know they never really reached their fullest potential because they couldn’t get past the weaknesses. But Buffett he could he has so I think that once Charlie and Warren are gone it’s going to be difficult for them to maintain extraordinary returns.

And of course it’s just a much bigger company with more capital so it’s it’s going to be more difficult.

Nick: I want to ask you similar questions for two other companies with obviously two different leaders as well. What are your thoughts on Amazon after Jeff Bezos?

Sean: he’s much younger so they don’t really have to worry about it. but yeah III think he’s different in the sense that there’s a few win-lose situations say with taxing and all that kind of stuff that might hurt them and in the meantime. But I think once he leaves they have a strong culture too but it’s still it’s difficult he’s a very he’s kind of similar to Buffett where he’s say like Elon Musk’s those three they have a different kind of mind.

And something you really can’t learn or teach those guys are truly unique intelligent fanatics and once they’re gone it’s going to be a little bit more difficult.

Nick: and my last question for you is this what are some examples of relatively unknown intelligent fanatics today?

Sean: well I just leave it at this again I’m still trying to become an intelligent fanatic myself I’m trying to raise my own standards I still am not there and so for me to say I know with absolute certainty that somebody else is an intelligent fanatic early and there company’s growth.

I can’t really say that but of course I’m trying to work on that there’s unique companies there’s one company the case study that was written up for our one of our positions in India.

She wrote about a company called Furtado’s it’s a music store retailer and even though the intelligent fanatic is gone. He’s since passed a number of years ago but for a hundred years they were able to create a really truly unique company and get amazing results that’s unknown.

But that’s we already have that track record to see and we can learn from that so that’s one that would be unknown little known and many of the case studies that we have in our second book us take for instance Roger Milliken, he’s since passed as well so we have that track record there to show but in the textile industry which is second to the airline industry and the you know the pork capital market whole not catalogs but just think it’s a horrible industry to be operating in.

Roger Milliken went from a traditional textile mill and he built it into a highly specialized textile producer and inventor on the scale of WL Gore. And you know that’s something that you a company Milliken and company hasn’t been talked about much and then you have Hank Rowan. He built Inductotherm, again another case study in our second book not really well known but he was the really interesting philanthropist.

He built this great company and then all of a sudden he gives a tiny public college in New Jersey a hundred million dollar gift and so he again it’s that intelligent fanatic they do things that other people don’t and they’re willing to make those risky bets.

But just stray away from the beaten path but you there’s many cases I would say established intelligent fanatics just that aren’t known that I could name off but intelligent fanatics that are you know early in their stage right now and that are not well known.

I’m still working really hard getting there and knowing who they are if you if know any buddy Nick please let me know.

Nick: actually it’s like I said that was my last question. I lied I have one more do you have a favorite intelligent fanatic?

Sean: oh all right that’s a good question so what I try to do well what it’s not business okay but there is one individual in music I’m not a fan of this individuals music or their band I appreciate what they do but Bono the singer for U2. I recently finished his autobiography that’s a string of interviews that he did over number of years in the early 2000s.

He is an intelligent fanatic and not only is he an intelligent fanatic but he’s one of those rare individuals that really understands like the lessons and great ideas from many different modalities disciplines and he’s the rare bandleader who can take a band these ragtag group of Irish kids from like high school and with the help of their really good manager Paul McGuinness.

They were able to can maintain success for many decades in it they’re not one of the top bands ever and he’s worth 590 million dollars. It’s really rare to see a band staying success that long continually coming out with great songs and building their audience.

But also at the same time not getting into drugs and doing it purposely creating great relationships really working with the business side of music and really setting up those win wins.

Those are the rare people those are the rare intelligent fanatics and those are the ones that I really like so it’s when I talk about that huge pot of gumbo where you need a bunch of different quality aspects from different intelligent fanatics. Well what there’s some times where you can have one intelligent fanatic who has all the good qualities that you can learn from and you only really need one or two of those type of people or mentors to study and really internalize and I say Bono is one of my favorites.

Nick: almost like every one of these interviews I get another book to add to my reading list it is one of them. thanks so much for your time today Sean, I learned out a bunch about intelligent fanatics and I appreciate your time, it’s been a great conversation.

Sean: thank you very much Nick I really appreciated it too.