Joel Greenblatt— “Thought Process and Clarity are Key”
Fall 2012
Joel Greenblatt is the Managing Partner of Gotham Capital, an in- vestment firm he founded in 1985, and a Managing Principal of Gotham As- set Management. Mr. Greenblatt is the author of four investing-related books, including the New York Times bestseller The Little Book that Beats the Market and You Can Be a Stock Market Genius. Mr. Greenblatt is the former Chairman of Alliant Techsystems, a Fortune 500 company and the current Chairman of Success Charter Network, a network of charter schools in New York City. He is an Adjunct Professor in Finance at Columbia Business School and a graduate of the Wharton MBA program.
G&D: Professor Greenblatt, what was your introduction to investing and who were some investors who directly or indirectly influenced you early in your career?
JG: I went to Wharton,and, as they still do today, they taught the efficient market theory. This didn’t resonate with me all that well. Then, I think when I was a junior, I read an article in Forbes about Ben Graham. The article out- lined how he had this for- mula to beat the market, provided an explanation of his thought process, and described “Mr. Market” a little bit. I read that article and a light bulb went off — I thought: “boy, this finally makes some sense to me.” I started reading everything I could by Benjamin Graham. I also read a book called Psychology and the Stock Market by David Dreman. He was one of the first people to focus on behavioral finance and was really ahead of his time. I started reading about Buffett and his letters. All that stuff resonated very well with me. I would say that I’m self-taught in that sense. I learned the basics, I under- stood how to tear apart balance sheets, income statements, and cash flow statements from school and from growing up in a business family, but my under- standing of the stock market really came from my own independent reading.
G&D: You spent some time with Richard Pzena, who happened to be the first interviewee for Graham & Doddsville, while at Wharton. Do you have any stories or anecdotes that you could share from your time together at Wharton?
JG: Sure. We were in the same program and were also the same year at Wharton. We were in an under- grad/grad program where you earned your MBA and undergraduate degrees in five years. We were in that same cohort. I became friendly with Rich in our last year as undergraduates. When we first joined that program in our senior undergraduate year, I had told him about some of the reading I had done regarding Graham’s belief that formulas could be used to determine profitable investments. We decided to do a master’s thesis with another good friend of mine analyzing Graham’s approach. At the time, we didn’t have access to a database of stock market information.
Standard and Poor’s used to put out a Stock Guide with some balance sheet and income statement information on about 5,000 companies monthly. The school library had about 10 years’ worth of these guides. Not having access to a data- base, we actually went to the library. We wanted to go back and test Graham’s formulas, so to speak. So we went to the library and manually went through the S&P stock guides. We started with the A’s and B’s, which covered about 750 companies, and analyzed eight or nine years’ worth of financial data. It was very time intensive. Rich was also very good with computers. We had a DEC10 computer that was about six times the size of this room. Rich knew how to take the data that we had all com- piled and, with the little punch cards, get the data into the computer. So we were able to test some simple Graham formulas. That work ended up actually getting published in the Journal of Portfolio Management.
G&D: How long did you spend on that?
JG: That was many hours; I really couldn’t tell you. I guess my time was cheaper back then!
G&D: What inspired you to write You Can Be a Stock Market Genius?
JG: The motivation for me was the recognition that I had really learned about the business from reading. I thought it was pretty cool that these investors had been willing to share with readers what they knew and had learned during their careers. I’m not a very good listener, so I like to learn by reading. When I was in school, there were two things that seemed like interesting pursuits if I ever became successful: one was to write and one was to teach.
We ran outside capital at Gotham Capital for ten years and then returned the outside capital in ’94, though we continued to run our own money. We had been quite successful during that time and so I thought that if I put together a group of war stories as examples and described the principles that I had used to make money, it would be very instructive for people. I wanted to write it in a friendly, accessible way so that individual investors could profit from it as I had. I started writing the book in ’95 or ‘96. I also started teaching at Columbia in ’96. I hadn’t taught MBAs yet. So when I was writing the book, I didn’t realize that I was really writing it at an MBA level. I had assumed that because I had been doing it so long, individuals knew a lot more than they actually do. So I ended up writing a book that most hedge fund managers have read, but one which was perhaps at a little higher level than I had intended. I wrote it accessibly, so I had fun writing it, but I think it was at more of an MBA level, not just a regular investor level. I think that was a mistake that I made because I was looking to educate a much more needy bunch than MBAs and hedge fund managers. That was really one of the things that drove me to continue writing until I could accomplish my original goal. I am very proud of that book, but I just think it’s written at such a level that you have to be fairly sophisticated in financial analysis, at least, to fully profit from its advice.
G&D: Given the proliferation of hedge funds since the Stock Market Genius’s release, are the opportunities in some of those same types of special situations similarly available today?
JG: I think they are. I think there are always opportunities. What happens to people who become very good at special situation investing is that they make a lot of money, and then they get a little too big to invest in some of the smaller situations that are out there. In the book I wrote that some of these opportunities are less liquid or smaller, so a lot of people aren’t looking at them as a result. I think in the book I said something to the effect of: “don’t worry about getting too big for these strategies until you get to about $250 million. When you get there, give me a ring.” I would bump that number up to over $1 billion today. You can’t run $10 billion and get ridiculous rates of return, most likely. A few people can, but they have a large staff, or they have concentrated positions. There are still many strategies in that book that could make you a lot of money. I think that these opportunities are out there. Since I wrote Stock Market Genius, we had an internet bubble where people were pricing things stupidly, and then we had 2008, where stocks halved and a few years later they doubled. So to say assets were accurately priced all along, or that there were no opportunities, or that the market doesn’t get very emotional and throw you opportunities, is kind of silly in my mind. That doesn’t make it easy to tune out all of the noise that’s out there, but there are still ample opportunities that one can find.
My definition of value investing is figuring out what something is worth and paying a lot less for it. I make a guarantee the first day of class every year that if you’re good at valuing companies, the market will agree with you. I just don’t guarantee when. It could be a couple weeks or it could be two or three years. And the corollary is simply that, in the vast majority of cases, two or three years is enough time for the market to recognize the value that you see, if you’ve done good valuation work. When you put together a group of companies, that process can often happen a lot faster, on average. One argument I make in another one of my books (which few have read), called The Big Secret for the Small Investor, is that the world has become much more institutionalized over the years, even more than it was when I wrote You Can Be a Stock Market Genius, and that is a real advantage for longer-term investors. For institutional investors, you can track all money flows by one simple metric — which managers did well last year and which did poorly. Managers who did well last year attract all the money and managers who did poorly lose the money. If you’re an active manager, you may have a long-term horizon but your clients probably don’t. So, most managers feel that they need to make money over the short term. Therefore, professionals systematically avoid companies that are perhaps not going to do as well in the short term. In some ways, there’s actually more opportunity in those areas now than ever before due to the greater institutionalization of the market.
True, there are some areas that are more followed. For instance, I wrote about spin- offs in Stock Market Genius. Of course a lot of people follow spin-offs, yet if you look at the studies, they still seem to outperform the market after they’re spun off. Certainly a lot of the smaller situations are the situations where there is a huge dichotomy in size or popularity between the parent company and the spin- off. These opportunities are still there, partly because some are too small for most firms to take advantage of. Other opportunities are the result of volatile emotions in the market. Given the institutionalization of the investor base, the fact that markets are emotional, and the fact that there are still lots of nooks and crannies out there that even successful hedge funds can’t pursue, I’m not concerned about the size of the existing opportunity set.
G&D: Do you see anything that could lengthen institutional investors’ time horizons, thereby reducing the “time arbitrage” from which many value investors profit?
JG: No, not really. The reason is that there is an agency problem where the people who are allocating the capital are not making the investment decisions. I was talking to a gentleman at one of the top endowments, and he said, “I would like to tell you that we have a long-term horizon, be- cause we should. But I’ve been here 11 years, we’ve had three chief investment officers, and none of them left after a period of positive performance.” Jeremy Grantham spoke at a Graham and Dodd Breakfast several years ago and one of his lines that I thought was funny, and probably very, very accurate, was: “for the best institutional investors, their time horizon is 3.000000 years.” That is the horizon for the best. For many institutional investors, it’s even shorter. So I think that’s about all you can hope for as an investment manager. I think the reason for this is that your investors – your clients – generally just don’t know what the investment manager’s logic was for each investment. What they can view is performance. It’s pretty clear that for mutual funds, for instance, the performance of a given fund over the last 1, 3, 5, and 10 years has very little correlation with the future performance for the next 1, 3, 5, and 10 years. So institutional investors are left with predicting who’s going to do well in the future, which they attempt to do by looking at the manager’s process. For most clients, the manager’s process is not transparent and the ration- ale behind investment decisions is not clear. Clients tend to make decisions over much shorter time horizons than are necessary to judge skill and judgment and other things of that nature. So I think time horizons are get- ting shorter, not longer. We’re not in danger of people expanding their time horizons when they’re judging managers. I think time arbitrage will be the “last man standing,” pretty clearly.
G&D: Your career has really been, from an investment standpoint, composed of two parts. Earlier in your career, you made more concentrated investments in special situations. Now, you invest in a more diversified manner in higher quality companies. What drove this shift?
JG: I already talked about the research we did on Graham’s strategies. Around 2003, my partner, Rob Goldstein, and I decided to do some research on our own strategies, which had evolved to resemble the way Buffett looks at the world. Graham’s investment world view was to “buy it cheap.” Buffett added a little twist that probably made him one of the richest people in the world. He essentially said, “well if I can buy a good business cheap, that’s even better.” So we tested the principles behind what we look at when we value companies. The results were very robust. My write-up of the results of our very first test formed the basis for The Little Book That Beats the Market. The upshot was that those companies that were in the top decile, based on quantitative measures indicating that they were both cheap and good, performed better than those in the second decile, which performed better than those in the third, and so on in order. It was quite powerful and surprising. It just started us on a long path of research which tried to systematize the way we’d always valued companies.
We were able to achieve very robust long/short re- turns. We were able to add as much value on the short side as we were on the long side. So we were able to create very diversified long/ short portfolios with relatively smooth returns. We didn’t even know we could do that before seeing the results of our research. There’s absolutely nothing wrong with what I wrote in You Could Be a Stock Market Genius – it’s what I did for almost 30 years. But about three or four years ago, my partner and I decided that conducting really in-depth research on a handful of companies is a full-time job if you want to do it well.
Alternatively, more systematically valuing a large number of companies over time is a huge job itself due to risk management and other responsibilities. Though they’re a little different, both strategies are great and they’re both full-time jobs. I had been doing one thing for a long time and I was fascinated by our re- search results of the systematic valuation approach.
When you are very concentrated, you have the chance to make 20, 30, 40% annualized returns. Perhaps if I’m willing to accept somewhat lower returns, say mid- teens, and achieve a smoother return com- pounded at the same time, then that’s pretty attractive too. One approach is not better than the other. There’s an interesting trade- off between how much volatility you’re willing to accept and how much money you’re potentially going to make. If I were starting all over again, I’d do exactly what I did before. And now that we’re well established, I think the main attraction of the systematic approach is that it’s something a bit new and different, although I would reiterate that it’s really the same thing that we’ve always done with just a slightly different approach.
G&D: We’ve heard other investors who use their own formulaic approach to investing say that, from time to time, they get an itch to change their model or to otherwise override it. Have you ever had this urge and is it difficult to resist?
JG: The only way Rob and I know how to value companies is through various measures of absolute and relative value. Of course it won’t work for every company, but on average it works quite well. There are some companies that we buy that might make you scratch your head. On the other hand, we’ve been pretty good stock pickers over history, and we have not been able to improve our results by picking the things that we clearly don’t want. There’s a certain medication on the market that’s made by a small pharmaceutical company. This company was considered a very attractive buy according to one of our screens. But I knew why it looked cheap — its key medication was coming off of patent the next year and the stock was priced accordingly. My inclination could have possibly been to override the formulaic recommendation be- cause I knew exactly what was going on. It wasn’t like it was a big secret. I didn’t override anything, however, and the company subsequently figured out a way to extend the patent a little longer which then led to a doubling of the stock price over the next six months. I think that’s really been our experience. Part of the future is unknowable but there are some instances where you can take a calculated risk/reward bet. One thing I would say is that a common characteristic of many of the stocks that we buy is that everyone hates them. We do that a lot.
G&D: You mentioned taking short positions earlier. Can you be successful in this area merely by shorting the companies in the lowest deciles of your screens — that is, by systematically doing the opposite of your long approach?
JG: When we buy things, we like companies that in- vest their capital well; they generate large amounts of cash flow relative to the price we’re paying. On the short side, we would like to be short, in general, high- priced, cash-eating companies. So it is essentially the opposite of our long approach. You do have to balance your risk, though. In the original edition of The Little Book That Beats the Market, I grouped the “magic formula” stocks as I called them — or stocks which were systematically considered good and cheap – into deciles. Decile one was the best combination of good and cheap. Decile two was the second best, and the tenth decile was composed of companies that earn lousy returns on tangible capital, yet nevertheless were expensive. There was a big performance spread between decile one and decile ten when we did the study, and it worked in order as I mentioned earlier. Decile one beat two, two beat three, three beat four, all the way down through decile ten. Pretty much every student I’ve had, and hundreds of e-mails after the book was published, have said, “Joel, I have this great idea for you. Why don’t you buy decile one and short decile ten? You’ll take out the market risk and you’ll make 15% or 16% a year.” I did that experiment in the afterword of the revised addition of The Little Book, and the results showed that you couldn’t figure out a compounded rate of return because you lost all of your money. Somewhere around the first quarter of 2000, the shorts went up a lot and the longs went down such that the combined loss was so severe you went broke.
There were a couple things a bit unfair about that be- cause we kept the portfolios for a year, and we didn’t re- adjust as we lost money. What I was trying to show at a high level was that if I wrote a book that had a formula and it worked every day and every month and every year, everyone would use it and it would stop working. So, the magic formula, like all value investing, can give you noisy returns over the short term, but that’s also why it continues to work.
G&D: In class, you talked about how you try to assess how cheap or expensive the market is at any point in time. Can you talk about your views on the market today and how you look at it?
JG: Sure. Well we’ve looked bottoms-up at each stock in the Russell 1000 Index, the thousand largest stocks in the U.S. by market cap. We’ve looked at those over history, meaning the market-cap-weighted free cash flow yield of the Russell 1000 on each day over the last twenty years and right now we’re in about the 87th percentile towards cheap, meaning that the market as measured by the Russell 1000 on a free cash flow basis has only been cheaper 13% of the time over the last 23 years. When it has been this cheap, the forward return for the Russell has been about 17% and then about the mid-30’s two years out. That’s not to say that the market’s prospects are better or worse going forward– they’re probably a little below average for the for- ward period and therefore you could say that perhaps you won’t do quite as well as would be implied by historical returns. But, even in the 50th percentile, you would expect to make 8% or 9% based on the history of the last twenty-something years, so I would just say that if I had a choice be- tween being more long or more short, I’d be more long. It’s a very attractive time to invest in the market, despite the run-ups that we’ve seen in the last year.
G&D: Harkening back to the first part of your investing career, you talked about passing on ideas. How many ideas did you pass on for every idea that you ended up acting upon?
JG: It’s a tough one. I would say it obviously de- pends on how selective you are. If I looked at 40 or 50 ideas, and, while perhaps 12 or 13 of them would have worked out, if I end up only buying one, that’s okay. That’s fine as long as the one I choose works out. It doesn’t matter that I missed out on 11 or 12. Not losing money is a good way to ensure that your portfolio has a good risk/reward pro- file. One of the things I said in You Can Be a Stock Market
Genius is if you don’t lose money, most of the alternatives are good. Even if you don’t know what the upside is — if you just know there’s upside — you can create scenarios where you have an excellent risk/reward. Positions with limited down- side are the types of positions that I have loaded up on in the past. Not the positions with the biggest payoff. I could buy a lot knowing that I wouldn’t lose much and that there were good possibilities that it was worth a lot more over time. At the very least, I knew that my downside was well- protected and so I could create an asymmetric risk/ reward by saying if I don’t lose much, there are not many alternatives other than to make money.
Something else that I’ve said in my class is that if you are trying to analyze an investment and there’s a lot of uncertainty regarding a company — whether it’s new technology or new competitors, or something else — or the industry in general is uncertain such that it’s very hard to predict what’s going to happen in the future, just skip that one and find one you can analyze. If you invest in six or eight things that you’ve analyzed closely, and if you’re pretty good at valuation and you have a long time horizon to see your target valuation eventually play out, then you’re going to do incredibly well even if you’re right on only four or five of the ideas. This is especially true if you include a margin of safety so that you’re not losing too much on the ones where you’re wrong.
What I said in the beginning is true: if you’re good at valuing businesses, the market will eventually agree with you. But that’s eventually. It could be in a couple weeks or a couple years, and that’s a big difference. The traditional definition of arbitrage always went some- thing like this: buy gold in New York and sell it simultaneously in London, and you’ll make a dollar. But if I told you, “well, I guarantee you’ll make a dollar, but you could lose half of your money first, and it could take three years for you to make that dollar, and it’s going to bounce around randomly in the interim,” that’s not quite arbitrage in the traditional sense. It’s certainly not riskless arbitrage, but it is a type of arbitrage — it’s a type of time arbitrage. That’s very hard for people to do. Throw in the fact that you don’t always get the valuation right. Yes, if you did good valuation work, the market will agree with you. I would submit that most people cannot value most companies well. If you’re very selective, however, you can value certain companies well. And that’s what I would think about doing.
G&D: With respect to your risk management strategy, appropriately sizing positions has traditionally been one area of focus for you, correct?
JG: Yes, people would say ‘how can you own only six or eight companies,’ be- cause during a lot of my career, six or eight positions represented 80+% of my portfolio. People thought that was crazy because of the volatility and the Sharpe ratio or whatever you might want to look at, but the point is that I look at it differently. I look at stocks not as pieces of paper that bounce around. I look at them as ownership stakes in businesses. One of the examples that Buffett gives is as follows: suppose you sold your business and you had $1 million. You walk into a town and you want to invest the money conservatively. You might look around and see that there are 50 businesses in the town but you want to try to pick ones that you think have a nice future that you could buy at a reason- able price. If you pick six or eight of them, most people would think that owning a stake in the barbershop, the hotel, and whatever other businesses you thought had nice repeat customers that would continue to grow over time as the town grew, was a pretty conservative way to go. You’re not throwing all of your money into one business, you’re picking six or eight businesses that you researched carefully; have strong management and look like they have good franchises. That sounds fairly conservative to me. That’s how I look at owning a portfolio of stocks. Once again, they’re not pieces of paper that bounce around. If you’re a long-term holder and you own a chain of stores in the Midwest and something bad happens to Greece, there may be some small impact, but you’re not going to sell your business for half of what you think it’s worth all of a sudden. If I’m a shareowner in businesses, I need to have a long-term perspective that things will work out roughly as I expect, otherwise I shouldn’t own them.
G&D: Is there something in your background that made you predisposed to having a long-term mindset and a commitment to ensuring a margin of safety for each investment, or is this something which you developed over time?
JG: This is a mindset I developed as early as an undergraduate student. As I mentioned earlier, I became interested in this business by reading Ben Graham. That’s what resonated with me, so what can I say? Margin of safety and how to think about Mr. Market are things that I thought about very early in my investing career. Graham’s tenets seemed logical and simple – simple enough even for me to understand actually! So I started reading and thinking and experiencing. Some things you have to learn by doing them wrong, so I encourage people to risk being wrong. You can’t be a good investor without investing. As you gain experience you start to understand risk/ reward; you start understanding what looks like a good opportunity and what doesn’t; you recognize when you have more knowledge than the market about a given issue and when you don’t. So it’s a matter of comparing situations to your history of opportunities. I’ve also said in class that one of the important things to look at is not just what’s available now but what you think might be available in the future, and that perspective comes with time.
Here’s the other thing – unfortunately you don’t learn from your successes all that much; you learn from the things you screwed up. You have to screw up a little bit to learn what not to do again and to remember it as well. But you have to combine this with the right thought process, which I think is the key. There are a lot of smart people out there. A lot of people have financial skills and most of them fail. The difference between those who are successful and those who fail is perspective – the viewpoint of how they look at the market – which really just comes back to Ben Graham and keeping that long-term horizon and understanding how to filter out the noise. People are bombarded left, right, and center with information, even more so now; you can bury yourself as much as you want. Therefore, you need a simple filter through which to look at the world. Those who have a baseline from which they can really contextualize everything they look at are the people who are successful. A lot of things are driven by emotion. When things get bouncy, as long as I continue to believe that my work was good, and my thought process was right, I have to ride it out. As easy as it sounds, it’s really hard to do.
G&D: Over the years you’ve seeded some different investors – Robert Goldstein, Brian Gaines and some others along the way. Was there some commonality that you saw amongst these investors that gave you the confidence to provide them with capital relatively early in their careers?
JG: I really just look at thought process. I found them before they had a track record, right? So you want to find people who think correctly. When I listen to an investment pitch or an investment thesis, I’m looking to see if all of the right questions were asked and that the thought process was clear. Those who think clearly, stand out. Some people are good at it; some people are great at it. I’ve graded a zillion papers and I’ve talked to many people, and I’ve listened to many ideas over time. There is a certain thought process and clarity of thought that those who are great at it have. Or maybe they’re going through the steps that I would hopefully go through if I were looking at the same idea. It doesn’t mean that what they’re saying will always work out, but it does indicate that they could have a pretty good batting average over time. It doesn’t mean that there aren’t other ways to make money – those just aren’t my areas of expertise. In my circle of competence, I can perhaps recognize other people that think similarly, who I think do the work, and that’s really who I’m drawn to over time.
G&D: A couple of school related things… Do you find it more difficult teaching what you know about investing to MBA students than actually investing? Are there parts that are more difficult or frustrating for you?
JG: This is my 17th year teaching, so I think that the frustrating part was present more so when I first got started. I wasn’t particularly good at expressing myself and what I was thinking early on. The great part really have to boil down to the basic principles of why you did certain things and why you didn’t, what has been successful and what has not. You boil that down into some principles that people can learn to use so that they can do well them- selves. Learning to do that has actually been very helpful to me — it was helpful in writing, it’s been helpful for my own investing. I try to sit down and figure out what’s the best way to explain something that I’m looking at in a very simple, straightforward way. If you can’t explain it very simply and straightforwardly, then you probably don’t under- stand it all that well your- self. I’m not a rocket scientist and none of this is rocket science. It is just about understanding some very simple, basic principles that for some reason many people can’t stick to. But there are others who can. Columbia MBAs have tools to be successful investors but many won’t be. Some, however, if they have the right mindset and the right work ethic, will be successful.
G&D: As you said, this is your 17th year teaching. Have you noticed any change in the students over the years?
JG: I think the “money management business” has become more popular over the years than it was when I got started. I took my first job in 1981 and the market hadn’t gone up in 13 years, so it wasn’t a very popular thing to do. There have been waves. During the internet bubble, teaching value investing was, let’s just say, not appreciated as much. I would say that the growth of the hedge fund business and the money management business over the years has caused more people to be interested in this area.
I think it’s become a more popular field and that’s why, on the first day of each semester, I tell my students that I don’t think that there’s a great social value from this career. On top of that, if I’m teaching it, that’s even one more step re- moved from doing some- thing socially valuable. So, I just ask that if they learn the skills in the class and are successful with them, that they use that success for good. In other words, I ask my students to figure out a way to give back in some way that’s meaningful to them.
G&D: On that note, we know that the Success Academy Charter Schools organization is something about which you’re particularly passionate. Could you tell us a bit about this organization?
JG: Sure. It really goes back to teaching a man to fish. You want to give back in a way that’s leveraged and that allows you to help someone have a nice life that might not have that opportunity otherwise. You could do this in such a way whereby they’re helping themselves and doing it with the tools that you give them. Education to me is one of the most leverageable ways to give back. Typical public school systems are soviet- style systems, where there are no rewards or punishments for good or bad performance. The usual excuse for the lack of success of kids in need is that there is not enough money or that the parents don’t care or that the kids are stupid. Those are usually the reasons given. Rather than argue against those points — because I’m not very political — what I hoped to do through the Success Academy was to be involved in a project where we could use the same or fewer re- sources compared to the existing schools and be successful with the same kids. We thought about it like a business model – you set up a prototype and then you replicate that and refine that process over and over again. My hope was that if we could replicate such a thing 30 or 40 times with the same kids, with less money, then those old excuses would stop. Well it’s the same kids, we have less money, and parents do care and these kids are pretty darn smart. Even a kid who may have been considered average in another school can achieve at an extremely high level. We now have 14 schools and we’re hoping to build 40. We’ll open another six schools next year while trying to replicate the success we’ve had to date. So far these kids in high-need communities are beating out Scarsdale and all the top school districts in New York. The problem has been replication. You can always just throw money at an individual school, turn it into a private school, and maybe it’ll be very good. The challenge, however, is to do it with less money or the same money as the state and then to replicate it over and over, which is the really hard thing to do while keeping the culture and achievement levels high. Since we have the same kids as the regular public schools, all of our kids are selected by lottery. If the Success schools can show that it can be done, hopefully they will help move the system.
The great thing about this business is that if we are successful, other communities can look at what’s working here and can “steal” the intellectual property of the organization. The goal is to first demonstrate that we’ve been successful with this system and then share it with as many people as possible who want to learn how to do it too. If it works, hopefully it becomes built into the system. Right now every school we open is challenged in one way or an- other. Hopefully just by putting facts in black and white, we’re able to make a nice statement.
G&D: Any other parting words of wisdom for our readers?
JG: If you want to get good at investing, read a lot and practice a lot. Even if it’s not a lot of money, it’s real money. Don’t fool yourself into thinking that this is all you need to do to lead a successful life. This is fun for me; it’s fascinating. There’s nothing wrong with this field but, as I said before, I don’t think there’s much social value in it. You can probably say that about a lot of occupations that aren’t saving lives every day, so you don’t have to feel bad about it. But I would just encourage people pursuing an investing career who are ultimately successful in it, to figure out a way to give back. Many people reading this are Columbia MBAs and pretty much all of them are, or will be, successful in some field or an- other. If you can figure out a nice way to give back that’s meaningful for you, that’s even more fun than being successful in whatever you choose to do. Keep that in mind.
G&D: It was a pleasure speaking with you, Professor Greenblatt.
