Rob Vinall on Seeing Two Sides

Rob Vinall’s RV Capital letters are among the few I read as soon as they hit my inbox. One reason is how he questions foundational norms. Not disagreeing with some popular belief but helping me see the other side of the coin. 

Concepts such as: How can discipline be a bad thing? How can regulation be a great thing? What if two competitors have more in common than different? What if stock picking requires shunning reversion to the mean? These were some of the questions he helped me ponder. 

Youth vs. Experience

One element Vinall questions is whether more experience makes you a better investor. Looking at most jobs, years of experience is considered the benchmark of competence. The running joke against start ups is the hypocrisy of college drop outs looking for 10+ years of work experience when hiring. People dislike uncertainty and we’ll find whatever proxy we want to create faux certainty. 

Investing, like many professions, is one that requires adaptation to new environments. Vinall points out young people may have a leg up against older investors who are used to a different investment world. This runs in parallel to Stan Druckenmiller’s story. 

Druckenmiller was promoted to lead the investment team at his bank when he was 25 years old. His boss told him it wasn’t because Druckenmiller was more qualified. It was because all the other experienced investors were shell-shocked from the past market environment and wouldn’t be able to adapt to the new bull market. Druckenmiller had no precedent so he could go out guns blazing. 

It’s the 18 year olds who will charge machine gun nests and capture positions. Sometimes, the naive and ignorant survive because they aren’t stricken with fear when shells pound their foxholes. 

Now, while youth might make the investor ready for the current market, he might not be ready for the next. This is the experienced investor’s advantage if he was able to continuously adapt. The skill of adapting time and time again is what makes the experience valuable. Not doing the same thing for decades and hoping for different results. Einstein would say that’s insanity. 

Discipline & Conservative

Words are powerful. Some have universal pedagogy like discipline. Whenever it’s used, it often has a positive connotation. I had never considered the other side before Vinall.

"Notice how the adjectives “disciplined” and “conservative” are generally considered positive attributes in an investor whereas the perception of “visionary” is more nuanced. I disagree with this assessment and often find that the adjectives “disciplined” and “conservative” are used to hide a lack of thought. This is most clear in the “disciplined” investor, who gives no thought to the future whatsoever, but the “conservative investor” is just a less extreme incarnation of the same phenomenon. Forecasting only part of a company’s long-run development is only slightly better than forecasting none of it all.”

Therein lies how words take on different meaning in different professions. A client might want a conservative money manager or accountant. An angel investor might not want a conservative entrepreneur. Spectators might think athletes are risk-takers but the best train with lots of conservatism. 

China & U.S.

The battle between China and the U.S. in the 21st century is a popular story. What I can infer from the mudslinging between both nations is that they have more in common than different. They are like vanilla and chocolate—both dominant ice cream flavours. Neither is better than the other, just a matter of preference. 

For a Korean-Canadian, both my countries rely on the U.S. and China. The common rhetoric from both nation’s point-of-view is that they are the bullies we rely on. It’s just the fate of weaker nations. We know we’re getting fucked by both of em, but we live with it. Eh, capitalism. 

China’s regulatory moves on their technology companies in 2021 were seen as major negatives by the West. But Vinall points out how every major government is trying to regulate big tech companies. It’s just China has the ability to execute within a year what’ll take the U.S. ten years to do. The systems are different. The end result will be regulations on both sides. 

"I prefer the way things work in the West for all its drawbacks, however it is important to acknowledge that there are trade-offs. In the West, it is harder for government to get stuff done (including the good stuff). In China, it is easier for government to get stuff done (including the bad stuff).” 

It’s also been a result of different economic development. I think the U.S. has been a gradual technological development and have had small regulations built up in accordance. China went from zero to 100 at rapid scale, creating a Wild West with absolutely no rules. 

It could be seen that China’s approach may look more drastic because of 180 degree turns compared to the U.S. gradual approach. But that also makes China’s regulatory moves understandable. 

"China simply had a lot of catching up to do. This certainly is confirmed by my own subjective experience. I was amazed how often mergers were announced with the stated goal of eliminating competition (for example in the ride share, food delivery, and online travel sectors). This would never have been permitted in the West. An alternative explanation for the sudden burst of regulation now is that China prefers to let markets develop first and only regulate once they reach a level of maturity, and it is clearer what needs to be done. This is certainly something European regulators could learn from.”

It’s in moments when I learn from people like Vinall that I have to sit and reflect on my own one-sidedness. I often make the error of thinking I have considered two opposing views. But just like I hadn’t considered regulation to be a good thing, I never considered when discipline could be a bad thing. 

This got me thinking about the word “we”. Companies love lauding how they are a “we” company and it’s all about the team. This too is something that’s universally accepted as a positive right? Everyone thinks going from a me to a we is a good thing. I’m sure it is on most occasions. Yet, consider how that could be showcase a superior that lauds over the achievements of individuals as his own. Is individual recognition that bad? Should everyone accept they are a cog in a massive organization and be happy with contributing to the goals of the team? 

Maybe in some occasions but not in others. It’s my opinion that popular social psychology will say so and that absolutism probably means they are wrong. Nothing is absolute after all and I’m (maybe we) going to try and see the opposite of things I take as absolute all too often.