November 22, 2018

Jonathan Freedman – If I’m Being Totally Honest

25 minutes

Jonathan Freedman is the managing member of Consilience Capital Management LLC. He began his career at Sanford C. Bernstein & Co. as a clerk in 1992 quickly moving up to research assistant to the Chief Investment Strategist, followed by a promotion to research associate. Subsequently, he was promoted to research analyst for the firm’s equity hedge fund product with responsibility for industrial cyclicals.

In 1999 Jonathan joined Ulysses Partners as a research analyst. Then in 2000 and 2001, he started managing personal and family portfolios. In 2002, he founded Consilience Partners LP, a long/short value hedge fund with $1.5 million of capital raised. During his time managing Consilience, he had tremendous initial success with select small capitalization ideas. A seed was planted.

In 2004, he began to manage a separate account focusing on US small cap value strategies for a multi-strategy hedge fund as an external manager. In 2009, he completely upgraded his idea generation, research, and trading capabilities to tackle global small-cap investing. In 2018 he relaunched his strategy using friends and family capital on a path to once again build a stand-alone investment firm.

In this episode, Jonathan shares the importance of developing a strong sense of business ethics and philosophy. This was brought about by his worst investment ever story working for a hedge fund that collapsed in spectacular fashion, got its management arrested and offices raided. Although he operated independently and had absolutely no involvement in any of the wrongdoing this experience brought crushing disappointment to Jonathan’s life.

“…when you're dealing with money to make sure you are in a complete alignment.”

-Jonathan Freedman

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Resources:

My Worst Investment Ever Book
myworstinvestmentever.com
Jonathan Freedman's Linkedin Article: If I'm Being Totally Honest

Topics Covered:

00:45 – An account of Jonathan’s educational and career background as well as his personal life and what he does for good causes and charities.

03:09 – Jonathan relating his worst investment ever and the lessons and insights about that business failure.

09:17 – Talking in hindsight about the downfall of Jonathan's previous business.

11:58 – Explaining business ethics and investment philosophies.

14:38 – Jonathan talking about the value of honesty in business dealings and how his father was his biggest influence on that matter.

15:50 – Valuable lessons learned from a failed business and the long-term consequences of every decision you make especially in business.

18:58 – The thing about the sixth sense in business dealings.

19:48 – Jonathan sharing his thoughts on decision making and the power of chance.

23:10 – Nuggets of wisdom from Andrew on zero-based thinking.

22:10 – Jonathan's specific action: Self-reflect and align yourself in a better way.

Main Takeaways:

Lesson 1: “Every single decision has long-term implications. So if I think about one skill that we want to keep developing in our life, its decision making. It's always impossible to see unintended consequences that come from decisions, but let's just learn from this to say every decision has long-term consequences.”– Andrew Stotz

Lesson 2: “The ultimate customer is the client. The ultimate beneficiary is the client. So wrongdoings done by some clown, overtrading someone's account, or not following the mandate that they've been given. Those types of things are going to damage the client and therefore we all have an obligation to speak up so that the client is not damaged.”– Andrew Stotz

Lesson 3: “The hard-line about honesty that you're building in your son is actually building a sixth sense. So that when in the future you're not around and he's about to make a small little decision that crosses that line, his sixth sense about the ethics will hopefully shine a light on what behavior to do. ”– Andrew Stotz

Lesson 4: “If you're in this situation where you have misgivings of any kind, whether they're very subtle or very stark, change course because you know ultimately dishonesty never leads to anything good.”– Jonathan Freedman

Lesson 5: “…when you go into business with people you know, you want to make sure that the ideals match. I think there's a subtle difference between the two, right? Because if you say compromise your ideals, you're saying you are going to conduct business in a slightly different way. Of course, you're going to get a capital allocation and it makes you uncomfortable, but you're going to do it anyway.”– Jonathan Freedman

You can also check out Andrew’s books