The Softer Side of Value Investing

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Culture matters. I share how I evolved from an analyst purely focused on numbers to an investor and CEO focused on people. Using two stories from IMA’s own past, I recount how running the business made me a better investor.

I’ve been with IMA since August 1997. I started as an analyst, then transitioned to being a portfolio manager and CIO. Then in 2011 I became IMA’s unofficial CEO and in 2013 official CEO. The most important lesson I’ve learned running IMA is the importance of people and culture.

As a young analyst, I did not have much appreciation for people and did not think about IMA’s culture. I have a feeling this is true for most young analysts. When you are starting out, you are focused on things that are quantifiable – return on capital, return on equity, various growth rates and valuation metrics. You can look backwards and analyze numbers and then you can model them going forward.

Even when you mature as an analyst and start spending time on the company’s competitive advantages, you are still thinking about abstracts like the firm’s distribution strategy versus its competitors, the stickiness of customers, the size of the potential market, etc.

I don’t want to dismiss the importance of these factors. But as I started to manage people, after many painful experiences I realized that the success of IMA as an investment manager and a business was tied to people – human capital. Great employees push you forward; not so great ones drag you down.