"Dynamism is usually the result of disequilibrium." - Goldsmith

Down a rabbit hole watching interviews with Sir James Goldsmith last night, Great Britain’s first self-made billionaire, and a private equity pioneer, who died in 1997.

Here’s one of them.

Goldsmith is full of colour on investing and management. I took a few quotes from the second half of this interview.

on Risk:

"You have to take risks. There’s nothing for nothing. There are no shortcuts in the amount of work you put into it, the amount of worry you put into it, there are very few shortcuts if you want to succeed."

"Risk is a disagreeable thing. Some people become addicted to it… I personally hate risk. I am willing to take risk for a particular purpose, for a particular period of time. Once I am at risk I want to get out of risk as soon as possible. I do not enjoy physical fear or financial fear whatsoever."


"If you cast aside the sick, psychopathic gambler, and just take a gambler, I think he has advantages in business. If there’s one things a gambler learns, is that luck goes in streaks. All of a sudden the light goes on. Everything goes well. All of a sudden it turns off like an electricity switch and you can’t get a thing right. You stumble around in the dark. Gamblers know they are on a roll. A good gambler presses his luck and when it turns he feels it and goes home. A good gambler is one who presses his luck and cuts his losses. The best gamblers I have ever met, and the ones who are the most dangerous for a casino, are those who know how to press their luck and cut out and ho home when they are unlucky. Human nature is the opposite, human nature, when the fellow is up a bit, his wife will tell him to go home, and when he’s down, he’ll lose his head and try to get it back that evening."


"There is nothing more destructive, dangerous, than a really good, efficient, hard working, dedicated, effective man, going in the wrong direction. He will destroy you with incredible speed… Usually inactive governments are the best… Insofar as business is concerned, if you have a really effective manager, going in the right direction, you will do extremely well. Being able to identify the objectives, being able to delegate, being able to pick the right management to delegate, being able to motivate them, being able to control them, in the sense of knowing whats happening without taking away their responsibility, giving them a sense of pride in what they are doing. All of those things are normal talents of leadership and that’s what you want in a manager."

"Management is a pyramid. In terms of responsibility, it’s an inverse pyramid… The people at the top should not be intervening in day to day matters. He should be letting other people do it whose job it is to concentrate in that specific matter. They should be thinking strategically. Where do we want to go? What are we doing? Why are we doing it? … As you go up and the area of interest of responsibility is broader, that person has to be more strategic, and must avoid in getting tied up in daily tasks which avoids him from doing his task, which is being strategic, and stop the person tactical doing his job, so you’re being doubly damaging. As their management role increases, they’ve got to extend their vision, and learn how to delegate. As you rise in a company you become more strategic and less tactical."

Trend investing:

"If you see a bandwagon, it’s too late to get on. It’s structural. If you take the markets. If the fashion is to be bullish, if you speak to ten investment managers, institutional managers, and 9/10 are optimistic, it means they are all invested… There’s no further room to go. No tide, no impetus to push it further. Whereas if you telephone ten investment managers, and you find unanimity that the market is going to hell, what happens then. You know they’ve pulled out of the market, they’ve got cash. The slightest turn, you’ve got a huge flood of money damned up and ready to go. There’s a structural reason if you can find quasi unanimity in the stock market you can do the opposite and be almost certain of success."

Agency conflict:

"There’s a huge conflict of interest between shareholders and managers. A shareholder wants value. He wants to see the business grow in value, get better, become more valuable, thereby the shares become better, the dividends become greater. A manager, if he has no shares, manages, not for profit, but manages to create an empire. He manages for size rather than value. Why? If he can create a vast empire he can get the trappings of an emperor. A private plane, cars, assistants, he’s treated by the community, he has patronage, he’s a man of great importance… Shareholders who are intelligent will motivate management by making them shareholders to align interest. If they don’t companies can grow for no logical reason for no other reason than the satisfy the ego of the manager, then they have to be changed.”

More on Sir James http://www.sirjamesgoldsmith.com/