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a16z Podcast | Mellody Hobson and Ben Horowitz Talk Investing, Career, and Star Wars!

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💫 Short Summary

The video features Mellody Hobson discussing patient investing with Ariel Investments, emphasizing long-term views for successful investments. John, Ariel's CIO, shares insights on decision-making beyond financial gain. The importance of talent retention, intrinsic value, and assessing companies is highlighted. Success stories like Microsoft's turnaround and identifying talent early are discussed. The video also covers the unpredictability of business outcomes, scenario analysis, and BIA's role in detecting nonverbal cues. Additionally, George Lucas's entrepreneurial journey and strategic decisions in negotiating Star Wars rights are explored, along with insights on leadership alignment, CEO ownership, and behavioral finance principles.

✨ Highlights
📊 Transcript
Mellody Hobson, president of Ariel Investments, is praised for her stellar reputation and involvement in running large companies like DreamWorks, Starbucks, and Estee Lauder.
Hobson is recognized for organizing the Black Directors Conference, a prominent business conference.
Quincy Jones hails Hobson as the best and most trustworthy person.
Ariel Investments' logo, a turtle, symbolizes their patient investment philosophy of time arbitrage.
The company focuses on long-term views to navigate market volatility for successful investments.
Importance of patience in investing.
Being patient allows for independent thinking and deep focus.
Becoming an expert by knowing more about less and less.
Example of buying Madison Square Garden during a time of turmoil, focusing on media aspect.
Innovative changes, such as creating sky boxes on the ground floor, leading to successful investment.
Renewal of contracts in sports and significance of Madison Square Garden.
Increased rates for NEX contracts and barriers to entry in rebuilding the venue.
Impact of Jeremy Lin's presence on stock ownership and benefits of spin-offs.
Behavior of public shareholders and institutional investors.
Emphasis on faster velocity of money in the current market compared to previous years.
John from Ariel discusses the importance of making decisions beyond financial gain.
John advises against making decisions based solely on money, emphasizing the undervaluation of time and overvaluation of money.
He shares the story of starting Ariel with no clients or money, relying on friends and family to invest $20,000 each to establish a track record.
This led to the creation of a successful $2.5 billion mutual fund.
John believes people often make poor decisions due to the imbalance of undervaluing time and overvaluing money.
Importance of being frugal and thoughtful in talent decisions and not overextending based on money.
Investment philosophy focuses on intrinsic value and buying companies at a discount.
Emphasis on assessing companies with potential leadership or earnings issues.
Example of Microsoft's turnaround under new leadership as a demonstration of the impact of strong leadership on company performance.
Importance of Scenario Analysis in Business Outcomes
McCormick Spice Company faced challenges with its real estate division.
Buying cheaper items during a bad economy led to increased seasoning purchases.
CEO John Rogers' talent identification skills at Ariel Investments led to success in identifying and retaining talent at a young age.
Speaker's early career experiences at Ariel and interactions with John Rogers.
Speaker sent to work on research side for portfolio manager Jack Laporte, shares anecdotes about John's networking strategies.
Speaker tasked with meeting important industry figures like Dick Parsons, successfully secures a meeting by mentioning his love for bacon.
Experiences highlight speaker's introduction to high-profile individuals.
Importance of networking in the business world emphasized.
Jack Bogle predicts Melody as future president of Ariel during a train ride.
Bogle's prediction allowed Melody to prepare and created loyalty and dedication.
Bogle's ability to foresee leadership transition led to significant developments for Ariel.
Despite initial resistance, Bogle's decision to designate Melody as future president showed confidence and strategic foresight.
This unique succession planning approach had a lasting impact on Melody and the company, emphasizing visionary leadership.
Speaker shares a story about presenting an idea that increased assets significantly.
Challenges faced during this period are discussed, along with interaction with mentor John.
John emphasizes solving problems instead of bringing them.
Speaker reflects on their role as a 'fixer' and simplifying John's life.
Ariel values long-term employees, patience in business approach, and aims to attract individuals with a patient mindset.
Challenges in Retaining Talent in a Hyper-Competitive Environment.
Difficulty in finding committed employees as many tend to move on quickly.
Short lifespan of technology companies due to fast product cycles, contrasting with older companies like IBM.
Going public is seen as risky for tech companies due to pressure from short-term investors, potentially hindering long-term growth.
Importance of investing in the next product cycle is highlighted as crucial for survival in the industry.
Benefits of delaying going public for as long as possible.
Challenges of public investor engagement.
Focus on long-term strategy and winning plans over short-term earnings.
Importance of discussing long-term issues and strategic plans in investor meetings.
Emphasis on consistent communication with investors to build trust and understanding.
Importance of understanding nonverbal cues in foreign interactions.
BIA associates, ex-CIA agents, assist in detecting discomfort without asking direct questions.
Planting a 'virus' question to test reactions and alignment.
Maintaining a cooperative approach with stakeholders for better results.
Focus on long-term returns and strategic buying based on conviction for success despite challenges.
Overview of Bristow, a helicopter company that transports oil workers and provides search and rescue services.
Bristow's stock price is affected by oil trading, but their contracts remain fixed regardless of oil prices.
The company's earnings are impacted by providing search and rescue services for the UK government.
The importance of regular helicopter maintenance is highlighted.
Potential financial decisions of the company are discussed.
Importance of aligning leaders with shareholders and favoring CEOs who own stock and are smart allocators of capital.
Value of long-term investing over hype-driven momentum buying.
Identifying truth tellers in company management teams who provide honest assessments of performance.
Emphasis on behavioral finance principles, including avoiding anchoring bias and evaluating investments objectively.
Warren Buffett's philosophy of not getting emotionally attached to stock performance as a key takeaway for investors.
CEO emphasizes concentrated portfolio strategy with only 40 out of 400 stocks.
Thorough screening focuses on companies with strong brands, franchises, or moats.
Avoidance of commodity businesses and new ventures without a track record.
CEO shares past successes in the casino industry, including owning Caesars multiple times.
Learning from past mistakes is key in the investment process.
George Lucas's entrepreneurial journey and success with the Star Wars franchise.
Investors initially doubted Lucas but he secured groundbreaking merchandising rights for the sequels.
Mandalay Bay's cash flow potential was underestimated, resulting in missed returns.
Lucas overcame budget constraints to create the original Star Wars trilogy, which was a massive success.
Strategic decision to divide the script into three movies led to unprecedented success, showcasing Lucas's vision and perseverance.
Negotiation and Sale of Lucasfilm for Star Wars Franchise.
George Lucas negotiated the terms for Star Wars deal, including licensing and sequel rights, eventually selling Lucasfilm for four billion dollars.
Importance of Confidence and Long-term View as an Entrepreneur.
Successful investors like Mario Gabelli emphasize detailed knowledge and conviction in investments, seeing opportunities others may overlook, and taking a long-term approach to business.
George Lucas focused on storytelling over merchandise in Star Wars creation.
Lucas invested detailed imagination into creating worlds and characters.
He meticulously crafted binders for each planet with intricate details.
Lucas showcased a unique entrepreneurial mindset in his world-building approach.
His tech-based ventures, such as selling Pixar to Steve Jobs, demonstrated innovative business acumen.
Ed Catmull's perspective on technology in art and creativity.
Catmull discusses the importance of utilizing technology to enhance artistic processes, highlighting the historical significance of oil paint in art.
The role of board members at DreamWorks is emphasized, focusing on governance, management, and accountability.
Diversifying business is crucial to mitigate risks and ensure long-term success.
Voting control at DreamWorks is discussed, with an emphasis on making decisions in the company's best interest.
Importance of challenging perspectives and asking questions in corporate decision-making.
Open communication and robust discussions are emphasized for better outcomes.
Integrity and assuming honesty in interactions with management teams are key.
Diverse backgrounds and perspectives contribute to a well-rounded approach in decision-making.
Encouraging critical thinking and avoiding handling discussions with 'kid gloves' is beneficial for successful outcomes.
Presence of influential figures like Nathan Myhrvold, Meg, Paul Allen, and David Geffen in the boardroom.
Emphasis on the importance of inviting the right people and not underestimating their intelligence or experience.
Comparison made to moguls in the movie industry, highlighting the level of respect and professionalism required.
Speaker expresses gratitude for the enlightening experience and acknowledges the impressive nature of the gathering.