The Art of Intelligent Investing: Lessons from Chris Begg on Long-Term Success

In a wide-ranging conversation, celebrated investor Chris Begg shares his unique approach to investing and life that has led to remarkable success. As the founder of East Coast Asset Management and a professor at Columbia Business School, Begg offers a wealth of wisdom on intelligent investing, personal growth, and living a purposeful life.

Long-Term Thinking in Volatile Markets

Begg begins by discussing his approach to market volatility, emphasizing the importance of maintaining a long-term perspective:

"I think if you looked at a very long-term compounding record of a business, you're always going to have these big drawdowns. And it's the big drawdowns - those are the times where the cash register is hitting 20% IRR or higher. You have to create a temperament to act intelligently in those times."

He notes that volatility is actually welcomed by long-term investors like himself, as it creates opportunities to buy great businesses at discounted prices. Begg explains that his firm maintains a "Grove of Titans" - a watchlist of 120-150 high-quality companies that they've thoroughly researched and modeled. When market volatility causes prices to drop, they're prepared to act on the most attractive opportunities.

This patient, long-term mindset is critical for weathering market turbulence. Begg advises:

"My advice to listeners that maybe don't have the years of experience having gone through tough markets is that I think if you looked at a very long-term compounding record of a business, you're always going to have these big drawdowns. And it's the big drawdowns - those are the times where the cash register is hitting 20% IRR or higher. And so you have to create a temperament to act intelligently in those times."

Embodied Intelligence and Intuition

Interestingly, Begg describes how he's cultivated an embodied, intuitive sense for making investment decisions:

"I truly believe intelligence is embodied. It's not something that's just cognitive. And so I'm learning to feel into what an embodied sensation feels like when even when I'm making an investment decision. There is a feeling I have, you know, and it's in different places in the body where you know you're making a high quality decision."

He notes this type of embodied intelligence comes with time and experience, and can be difficult to transfer cognitively. But by becoming more aware of his somatic experience, Begg has honed his ability to sense when an investment opportunity feels right.

Asking Better Questions

A key theme in Begg's approach is the importance of continually asking better questions. He explains:

"I think about a question as kind of a wave function. You don't want to collapse the wave function with an answer necessarily. You want the wave function to be open. You want to be curious. You want to be testing."

Rather than rushing to answers, Begg advocates living in the questions and maintaining an open, curious mindset. He sees this as critical for both investing and personal growth:

"Everything is kind of this hologram or this wave function where we're just on a railroad of curiosity of question asking... Let's continue to ask deeper questions, but we need a force function oftentimes for better questions."

The Power of Graphs and Networks

One of Begg's most powerful investing insights revolves around the concept of graphs and networks. He explains:

"I think all clustered systems are seeking to create value oftentimes. And what I realize when you look at this from a kind of an information theory perspective, that information wants to travel on networks or graphs - node and edge. The more information can travel through a network or a graph, the more valuable the graph becomes, meaning lower entropy, increase information."

Begg looks for businesses that benefit from or create powerful network effects and graph structures. He cites examples like Mastercard, Visa, Meta, and Google as companies whose value stems from their graph architecture.

This lens has become central to his investment approach:

"I said, 'Geez if I only focused on graphs, my record would be so much better.' You know, because I looked back and I said, 'Geez, you know, Mastercard and Visa was a graph. You know, Meta is a social network as a graph. Google was its page rank system literally was built on graph theory.'"

Begg is constantly on the lookout for emerging graph structures that could unlock enormous value creation. This framework has led him to investigate companies like Tesla and Palantir that are building powerful network architectures.

Cultivating a Balanced, Purposeful Life

Beyond investing, Begg shares his philosophy on designing a fulfilling life. He emphasizes the importance of allocating time thoughtfully across different areas:

"Time is our most valuable resource. We always talk about capital allocation. You know, ultimately we're all time allocators, and your joy will be how you think about how you allocate your time over your lifetime."

Begg aims for balance across seven key areas: his craft of investing, family, friends, extracurricular activities, community involvement, total wellness, and spirituality. He measures his joy by how well he maintains balance across these domains over time.

This often requires saying no to opportunities that would throw off this equilibrium. Begg notes:

"I'm very intentional about that, and that means saying no. It means saying no a lot. Um, it means saying no to potential investors that, you know, they may want 10 meetings with various things... And um, and just being really thoughtful about that and being kind of courageous to say no when you know that that time is just going to take away from leading that balanced life."

Begg has also found that splitting his time between two locations - a small town north of Boston and the jungles of Central America - creates a beneficial "time dilation" effect that makes each year feel richer and fuller.

Cultivating Spaciousness

A key principle for Begg is cultivating spaciousness in his schedule and life. He uses the Japanese concept of "yutori" to describe this:

"When I look at my week and I'm like, 'Oh look at the spaciousness in my week. I'm going to have this time to just sit and read annual reports, or I'm going to have this time to take a meeting that will just be really organic, some type of kind of fun interaction with someone that I wouldn't normally take if I was just going from meeting to meeting.'"

This spaciousness allows for serendipity, deeper thinking, and following interesting threads of inquiry. Begg notes some of his best discoveries and epiphanies have come during these open periods.

Building a Supportive Network

Begg emphasizes the power of surrounding yourself with a supportive network of peers to learn and grow with. He describes this as a "cumulative superpower" and advises:

"I wish I knew it 20 years ago, because I think I would have even approached it differently from the beginning... It is so joyful to go on a journey with people you love."

He cultivates various "mastermind" groups around different businesses and topics of interest, allowing for real-time exchange of insights. Begg notes the shift from a scarcity to an abundance mindset has been transformative:

"The more you give, the more you receive. And that was like so counterintuitive, but you talk to people who do this and operate this way and they're like, 'I don't understand. The more I give away, the more generous I am, the more I've been given.'"

Living with Purpose and Joy

Ultimately, Begg's approach centers on living with purpose, continual growth, and joy. He uses the acronym "LIGHTS" to capture key principles:

"Love, integrity, gratitude, humility, trust or deserve trust, and simplicity. You know, that last one - simplicity - is one of the most important ones. It's how do you design something that is also potentially simple."

By focusing on an inner scorecard aligned with these values, rather than external measures of success, Begg has crafted a deeply fulfilling life and career.

He beautifully summarizes his outlook:

"Everything is a paradox, everything is infinite, everything is a graph, everything is a miracle, everything at its core is pure joy."

For Begg, intelligent investing is not just about financial returns, but about compounding joy and living with purpose. By maintaining a long-term perspective, asking better questions, cultivating supportive relationships, and designing a balanced life, he has achieved remarkable success while staying true to his values.

His approach offers valuable lessons for investors and individuals alike on how to navigate markets and life with wisdom, curiosity, and joy.

Article created from: https://www.youtube.com/watch?v=Lyz3BhOYU6E