How They Invest: Tactics and Tools of the World's Best Investors

We explore emerging markets and the great pendulum shift. We’re joined by Howie Schwab, Lead Portfolio Manager for Emerging Markets Growth at Driehaus Capital. We cover the lure of emerging markets, a behavioral focus on investing, and the impact of shifting voting demographics.

“I think it's true everywhere, but data shows it's particularly true in emerging markets, which is that the persistence of risk is generally higher than the persistence of return.” – Howie Schwab

EPISODE GUIDE (LINKS, QUOTES, NOTES, AND BOOKS MENTIONED)

https://www.danielscrivner.com/notes/driehaus-capital-investing-emerging-markets-howie-schwab-spotlight-show-notes 

FULL TEXT TRANSCRIPT

https://www.danielscrivner.com/notes/driehaus-capital-investing-emerging-markets-howie-schwab-spotlight-transcript 

CHAPTERS

This episode is our definitive guide to emerging markets and the great pendulum shift. In it we cover:

(00:00:00) – Introduction

(00:02:20) – Howie’s background and work at Driehaus Capital

(00:06:52) – The lure of emerging markets

(00:12:20) – A behavioral focus in investing

(00:19:30) – Seeing patterns and avoiding fraud

(00:24:12) – Researching and publishing market analysis

(00:43:21) – The state of financial assets today

(00:49:41) – The future and financial repression

(00:56:42) – The shift in voting demographics and its economic impact

(01:02:14) – Advice for investors

ABOUT DRIEHAUS

Howie Schwab manages more than five billion in emerging market growth for Driehaus, which is based in Chicago, and it's where Howie has worked for the last 20 years. At Driehaus, Howie is the lead portfolio manager for the Emerging Markets Growth, and he's a portfolio manager for the Emerging Markets Small Cap Equity and Emerging Markets Opportunity Strategies. I've learned an enormous amount from Howie, both as an investor and a macro thinker, since I first met him, and I am beyond thrilled to have him on the show to share what he's learned managing many of the world's best performing emerging market funds over the last 20 years.

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ABOUT OUTLIER ACADEMY

Learn timeless lessons on work and life from iconic founders, world-renown investors, and bestselling authors. Outlier Academy is the forever school for those chasing greatness. Past guests include Gokul Rajaram of DoorDash, Scott Belsky of Benchmark and Adobe, Joey Krug of Pantera Capital, Mark Sisson of Primal Kitchen, Luke Gromen of The Forest for the Trees, and Brian Scudamore of 1-800-GOT-JUNK.

Website: https://www.outlieracademy.com

Twitter: https://www.twitter.com/outlieracademy

ABOUT DANIEL SCRIVNER

Outlier Academy is hosted by Daniel Scrivner. Over the last 15 years, Daniel has led design teams at Square and Apple, turned around a $3M+ ARR SaaS business, and invested in more than 100 companies. He launched Outlier Academy in 2020 to learn from the world’s best founders, investors, authors, and peak performance experts.

Website: https://www.danielscrivner.com

Twitter: https://www.twitter.com/danielscrivner

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Listen to one of our favorite moments from tomorrow’s Spotlight episode featuring Driehaus Capital with Howie Schwab.

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We explore network effects and investing in network effect businesses. We’re joined by James Currier, co-founder and general partner of NfX. We cover virality vs. network effects, tweaking rules and systems to take advantage of network effects, and network effects as a business strategy.

“Every company is its own work of art, and the founder is the artist.” – James Currier

EPISODE GUIDE (LINKS, QUOTES, NOTES, AND BOOKS MENTIONED)

https://www.danielscrivner.com/notes/james-currier1-outlier-academy-show-notes 

FULL TEXT TRANSCRIPT

https://www.danielscrivner.com/notes/james-currier-outlier-academy-transcript 

CHAPTERS

This episode is our definitive guide to network effects and investing in network effect businesses. In it we cover:

(00:00:00) – Introduction

(00:01:58) – James’ background and journey to NfX

(00:07:50) – Defining network effects and why they are so powerful

(00:11:20) – Virality vs. network effects

(00:14:46) – Examples of businesses with network effects

(00:24:57) – Tweaking rules and systems to take advantage of network effects

(00:31:07) – Networks effects as a business strategy

(00:33:58) – Investing in network effects businesses

(00:40:26) – Advice for founders

ABOUT NFX

The name NfX is actually short for Network Effects, and James with his founding partner, Pete Flint, founded NfX after seeing the power of network effects, partially by doing research that confirms that 70% of all unicorns are companies with proven network effects driving their businesses. While NFX has become one of the world's leading thinkers on network effects, having published incredibly salient posts from 13 different network effects and counting, where they've now identified 16 different types of network effects, to their very popular self-help article titled Your Life is Driven by Network Effects, and their strategy is clearly working.

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Welcome to another edition of Cheat Sheet by Outlier Academy. Where each week we compress 6+ hours of research and interviews into 3 big ideas that you can read in 5 minutes.

This week we profiled Worm Capital, who call themselves “value investors focused on the future.” They’re one of our favorite technology and disruption investors in the public markets. Since Worm’s inception in 2012, they’ve outperformed the S&P 500 by over 2X net of fees—generating 26.73% per annum vs the S&P 500’s 12.08%).

Read the newsletter companion to this episode:

https://www.cheatsheetnewsletter.com/p/the-secret-to-eternal-life-in-business

Here are the 3 big ideas in this week's Cheat Sheet:

Markets provide liquidity, businesses generate value. Or why the game of business has nothing to do with the stock market.

How to find the best companies in any industry. First observe, then deconstruct inputs and outputs.

The secret to eternal life in business. Or why the company that delivers the best customer value proposition consistently always wins.

Sign up for the Cheat Sheet newsletter:

https://www.cheatsheetnewsletter.com

Listen, watch, or explore more of this week’s Outlier Academy episodes:

20 Minute Playbook - Eric Markowitz, Worm Capital’s Head of Research | Conviction vs Opinions, Two-Step Research Process, Favorite Books, and More

Listen Now | Watch Now | Episode Guide | Transcript

Outlier Investors - Worm Capital: Value Investors Focused on the Future | On Worm Theory, Worm’s Investing Algorithm, and The Game of Business

Listen Now | Watch Now | Episode Guide | Transcript

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We’re joined by Eric Markowitz, Head of Research at Worm Capital, to explore Worm Theory, the Worm Algorithm, and investing in disruptive technology. We go deep on being an optimistic and open-minded investor, time horizons, thinking in decades, and constructing a survivable portfolio.

“I think we're just optimists. I think that we believe that technology and the culture that we live in will actually improve over time, that there will be more efficiencies across the market, that our lives will improve, that there can be some really great opportunities for wealth creation.” – Eric Markowitz

EPISODE GUIDE (LINKS, QUOTES, NOTES, AND BOOKS MENTIONED)

https://www.danielscrivner.com/notes/worm-capital-investing-in-technology-and-disruption-eric-markowitz-spotlight-show-notes 

FULL TEXT TRANSCRIPT

https://www.danielscrivner.com/notes/worm-capital-investing-in-technology-and-disruption-eric-markowitz-spotlight-transcript 

CHAPTERS

This episode is our definitive guide to Worm Theory and investing in disruptive technology. In it we cover:

(00:00:00) – Introduction

(00:03:30) – Worm Capital’s focus on technology, innovation, and disruption

(00:07:43) – Investing in the customer value proposition as it stands

(00:16:19) – The Worm algorithm for investing

(00:21:22) – Being an optimistic and open-minded investor

(00:26:01) – Time horizons and thinking in decades

(00:32:50) – Conviction and concentration

(00:42:39) – Constructing a survivable portfolio

(00:52:22) – Worm theory

(01:02:00) – Investing in Tesla

ABOUT WORM CAPITAL

Worm Capital runs a concentrated long only strategy and invests in technology, innovation and disruption. They hold a concentrated portfolio of between five and 10 positions that today includes Shopify, Spotify, Tesla, Airbnb, Amazon, and NextEra Energy. Since inception, Worm has compounded their investors capital at over 31% per year, while the S&P 500 has delivered just over 15% over the same period. Worm Capital has a unique approach to investing, which they call the Worm Algorithm and Worm Theory to understand how they've generated such incredible returns over the last decade.

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Overcast: https://overcast.fm/itunes1523851182

ABOUT OUTLIER ACADEMY

Learn timeless lessons on work and life from iconic founders, world-renown investors, and bestselling authors. Outlier Academy is the forever school for those chasing greatness. Past guests include Gokul Rajaram of DoorDash, Scott Belsky of Benchmark and Adobe, Joey Krug of Pantera Capital, Mark Sisson of Primal Kitchen, Luke Gromen of The Forest for the Trees, and Brian Scudamore of 1-800-GOT-JUNK.

Website: https://www.outlieracademy.com

Twitter: https://www.twitter.com/outlieracademy

ABOUT DANIEL SCRIVNER

Outlier Academy is hosted by Daniel Scrivner. Over the last 15 years, Daniel has led design teams at Square and Apple, turned around a $3M+ ARR SaaS business, and invested in more than 100 companies. He launched Outlier Academy in 2020 to learn from the world’s best founders, investors, authors, and peak performance experts.

Website: https://www.danielscrivner.com

Twitter: https://www.twitter.com/danielscrivner

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Worm is one of my favorite hedge funds. I've been reading their quarterly reports for years. They run a concentrated long only strategy and invest in technology, innovation and disruption. They hold a concentrated portfolio of between five and 10 positions that today includes Shopify, Spotify, Tesla, Airbnb, Amazon, and NextEra Energy. Since inception, Worm has compounded their investors capital at over 31% per year, while the S&P 500 has delivered just over 15% over the same period.

I sat down with Eric Markowitz, Worm's Head of Research, to dive into Worm's unique approach to investing which they call the Worm Algorithm and Worm Theory to understand how they've generated such incredible returns over the last decade.

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In Episode #136, we explore AgeTech and investing in the future of how we age. We’re joined by Abby Miller Levy, Primetime Partners’s Managing Partner and Co-Founder. We cover becoming an accidental investor, the compelling white space in the senior market, and ending ageism.

“I hope we have a society that isn't plagued by obesity and diabetes because people are excited to live longer and are therefore making trade-offs when they're younger to enjoy a longer, healthier life.” – Abby Miller Levy

EPISODE GUIDE (LINKS, QUOTES, NOTES, AND BOOKS MENTIONED)

https://www.danielscrivner.com/notes/primetime-partners-abby-levy 

FULL TEXT TRANSCRIPT

https://www.danielscrivner.com/notes/primetime-partners-abby-levy-transcript/ 

CHAPTERS

This episode is our definitive guide to AgeTech and investing in the future of how we age. In it we cover:

(00:00:00) – Introduction

(00:03:00) – From business building at OXO and SoulCycle to becoming an accidental investor

(00:07:58) – The compelling white space of the senior market

(00:19:22) – Focusing on seed to Series A and launching incubations

(00:22:15) – Consumer behavior and employment opportunities in the aging population

(00:29:16) – Maximizing today vs. planning for tomorrow

(00:37:18) – Housing opportunities for the senior market

(00:43:15) – Ending ageism, focusing on preventative healthcare, and embracing multiple careers

ABOUT PRIMETIME PARTNERS

Abby Miller Levy is Co-founder and Managing Partner of Primetime Partners, which is a new venture capital firm that specializes in AgeTech, or investing in technology around the future of how we age.

As you'll hear in this interview, the latest data and statistics around aging are almost too hard to believe. Here are just two data points. As of 2007, it's expected that about half of all babies born will live to be over 100 or become what are called centenarians. And by 2024, it's expected that workers aged 55 or older will represent a full 25% of the nation's workforce, with the fastest annual growth rates among those aged 65 and older. And yet, before Primetime Partners was founded by Abby Levy and venture legend Alan Patricof of Greycroft and Apax Partners fame, there were no venture firms focused solely on aging and enabling the technologies, products, and businesses we'll need to support an aging population.

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iTunes: https://podcasts.apple.com/us/podcast/outlier-academy/id1523851182

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Overcast: https://overcast.fm/itunes1523851182

ABOUT OUTLIER ACADEMY

Learn timeless lessons on work and life from iconic founders, world-renown investors, and bestselling authors. Outlier Academy is the forever school for those chasing greatness. Past guests include Gokul Rajaram of DoorDash, Scott Belsky of Benchmark and Adobe, Joey Krug of Pantera Capital, Mark Sisson of Primal Kitchen, Luke Gromen of The Forest for the Trees, and Brian Scudamore of 1-800-GOT-JUNK.

Website: https://www.outlieracademy.com

Twitter: https://www.twitter.com/outlieracademy

ABOUT DANIEL SCRIVNER

Outlier Academy is hosted by Daniel Scrivner. Over the last 15 years, Daniel has led design teams at Square and Apple, turned around a $3M+ ARR SaaS business, and invested in more than 100 companies. He launched Outlier Academy in 2020 to learn from the world’s best founders, investors, authors, and peak performance experts.

Website: https://www.danielscrivner.com

Twitter: https://www.twitter.com/danielscrivner

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Listen to one of our favorite moments from tomorrow’s Spotlight episode featuring Primetime Partners with Abby Miller Levy.

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We explore building the world’s first design-centric venture capital firm. We’re joined by Ben Blumenrose, Designer Fund’s Co-Founder and Managing Partner. We cover the Designer Fund algorithm, the core qualities of great startups, and how designers can add value as investors.

“What are you spending your nights and weekends on and is there a way for you to make that your job? Because that's the stuff that you're really into.” – Ben Blumenrose

EPISODE GUIDE (LINKS, QUOTES, NOTES, AND BOOKS MENTIONED)

https://www.danielscrivner.com/notes/designer-fund-ben-blumenrose 

FULL TEXT TRANSCRIPT

https://www.danielscrivner.com/notes/designer-fund-ben-blumenrose-transcript 

CHAPTERS

This episode is our definitive guide to building the world’s first design centric venture capital firm. In it we cover:

(00:00:00) – Introduction

(00:02:39) – The genesis of Designer Fund

(00:22:31) – Demystifying design

(00:28:28) – Traits of designer founders

(00:35:02) – Sweat the details that matter

(00:39:23) – The Designer Fund algorithm

(00:44:23 – Balancing skepticism and optimism in investing

(00:48:47) – Core qualities of great startups

(00:50:32) – How designers can add value as investors

ABOUT DESIGNER FUND

Ben Blumenrose is Co-director and Managing Partner of Designer Fund, which is an early stage venture capital firm that backs founders that both recognize the power of design and are committed to getting design right from day one. Designer Fund was founded by Ben Blumenrose and Enrique Allen in 2012 after the two met at a program put on by Stanford's D school, where students use design to develop their own creative potential. When Ben and Enrique founded Designer Fund, there were few companies in Silicon Valley outside of Apple that understood the power of design to build incredible products, create a category defining brand, and ultimately forge an enduring company.

There were also no other venture capitalists with a pure design background. And yet, over the last decade Designer Fund has built an incredible venture firm. They've produced top quartile returns for their investors, beating out almost all of their peers in the market, and we're early investors in a wave of design-centric companies that have defined the last 10 years, including Stripe and Gusto. 

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🎙 LISTEN ON

iTunes: https://podcasts.apple.com/us/podcast/outlier-academy/id1523851182

Spotify: https://open.spotify.com/show/58edVNgqaPNaCSGSxM6pef?si=88f37a5d20434775

Overcast: https://overcast.fm/itunes1523851182

ABOUT OUTLIER ACADEMY

Learn timeless lessons on work and life from iconic founders, world-renown investors, and bestselling authors. Outlier Academy is the forever school for those chasing greatness. Past guests include Gokul Rajaram of DoorDash, Scott Belsky of Benchmark and Adobe, Joey Krug of Pantera Capital, Mark Sisson of Primal Kitchen, Luke Gromen of The Forest for the Trees, and Brian Scudamore of 1-800-GOT-JUNK.

Website: https://www.outlieracademy.com

Twitter: https://www.twitter.com/outlieracademy

ABOUT DANIEL SCRIVNER

Outlier Academy is hosted by Daniel Scrivner. Over the last 15 years, Daniel has led design teams at Square and Apple, turned around a $3M+ ARR SaaS business, and invested in more than 100 companies. He launched Outlier Academy in 2020 to learn from the world’s best founders, investors, authors, and peak performance experts.

Website: https://www.danielscrivner.com

Twitter: https://www.twitter.com/danielscrivner

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Listen to one of our favorite moments from tomorrow’s Spotlight episode featuring Designer Fund with Ben Blumenrose.

Learn more about your ad choices. Visit megaphone.fm/adchoices