Start – 0:58
1:44 – What is scuttlebutt?
- Mosaic theory: the cobbling together of information to corroborate what management teams are saying in order to make a more informed decision.
2:45 – How scuttlebutt helps investors differentiate between different shades of grey.
- Example: The discrepancy found doing scuttlebutt between the importance an Australian accounting software provider’s management team put on having their end-user accountants on the same software. The accountants had a slightly different story.
5:11 – How to get people to open up to you
- Don’t pretend to be someone that you’re not
- Always maintain a high degree of integrity
6:55 – Scuttlebutt is not commonly used in the investing world because it demands the investment of time. For long-term investors, the data gathered is worth this investment.
8:34 – Always on my mind: John can’t stop doing scuttlebutt, even in his personal life!
Key scuttlebutt learnings:
- Price is not always a customer’s main priority—there can be search costs, switching costs, or trust factors that trump price.
11:10 – A sharing culture: using M42 database to share scuttlebutt learnings with the entire research team
11:58 – Scuttlebutt can cause a dramatic shift in direction: From Bogota to Oslo
- Example: In doing scuttlebutt on a Columbian stock exchange, the team reached out to the Oslo stock exchange and found they were much more impressed with the latter. Oslo Børs is still a holding in the global small cap strategy years later.
13:12 – How the Mawer team weighs the information they learn from scuttlebutt
- Bayes Theorem: Not all information gained in terms of updating your hypothesis is the same. The rarer the information is, the better.
- Example: If you ask CEOs who they respect in their industries, they are not biased to sing the accolades of their competitors: the answers gleaned is rare and therefore, we weigh it more heavily than other information.
15:30 – When scuttlebutt can change our thesis completely and we walk away from an investment
17:24 – Rapid Fire Round: Get to know John Wilson better
- What’s the hardest part about learning to ski?
- Relating learning to ski to investing
- What John is reading (outside investing): The Effective Engineer
- What John likes best about Toronto