Templeton's Way with Money by Alasdair Nairn & Alasdair Nairn

Author:Alasdair Nairn & Alasdair Nairn
Language: eng
Format: epub
Publisher: John Wiley & Sons, Ltd.
Published: 2012-02-01T16:00:00+00:00

Learn from Your Mistakes (Rule 11)

Investment analysis is an evolutionary process because the world itself is constantly evolving and it takes time to gain the necessary experience and historical perspective to learn how to assess absolute value in stocks and how the corporate environment is likely to impact the future earnings potential of companies. Anyone who worked for Templeton was aware of his constant search for new insights into the way the world was evolving. Nothing was more important, in his view, than to study and to understand why reality so often turns out to be different from what faulty analysis expects. Hindsight is a wonderful teacher, but in many investment organizations the need to learn lessons is frequently lost in a hunt for scapegoats to blame when things go wrong. This was not Templeton’s way. He was his own taskmaster. While working for the company in the 1990s, for example, one of the authors observed firsthand how much effort Templeton put into trying to work out whether he was wrong to have dumped his Japanese stocks as early as he did, a decision which, as we have seen, led to one of his longest periods of relative underperformance. This was only one of many examples of how Templeton sought to learn from his own mistakes. It is also another way of saying that having the right investment philosophy is not itself sufficient to guarantee success, as many “how to” investment books effortlessly imply. Implementation is the key, and while setting out to buy low and sell high is simple, it is not easy to do.10

Begin with a Prayer (Rule 12)

Sir John used to start meetings with a prayer. Even for those who are not of a religious disposition, there was nothing to object to in the words he spoke. All that he asked for was to be able to work to the best of his ability to help his clients. “We don’t pray that a particular stock we bought yesterday will go up in price today, because that just doesn’t work,” he told his biographer William Proctor. “But we do pray that the decisions we make today will be wise decisions and that our talks about different stocks will be wise talks.”11 If nothing else, opening with a prayer helped him to create an atmosphere that was conducive to the kind of calm and deliberate analysis that he held to be essential to good investment decision-making. Many of his colleagues recall finding themselves motivated to work harder for fear of failing to live up to their employer’s own, much higher personal standards.

Outperforming the Market is Difficult (Rule 13)

Although his own track record as an adviser and fund manager was proof that it could be done, by the time of the sale of his fund management business to Franklin, John Templeton was well aware of the difficulties both individual investors and fund managers face in seeking to outperform the market on a sustained basis. As an investment counselor in the

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