Episode 162: Simon Evan-Cook, Downing Fox – The Role of Luck and Skill in Successful Fund Management and Business Building
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What if luck plays a bigger role in fund success than anyone wants to admit?
Simon Evan-Cook isn’t just throwing that idea out there. He’s lived it.
He spent years on the allocator side, vetting fund managers and learning what really sticks (hint: it’s not just your track record).
Now that he’s a fund manager himself, he’s pulling back the curtain on the truth no one wants to say out loud…
Yes, being good at what you do matters, but so does luck, timing, and learning how to stack the odds in your favor.
In this Episode, Simon and Stacy dig into:
Why some of the most skilled fund managers don’t always win
13 ways emerging managers can make their own luck
What allocators actually remember after your pitch
And why being honest, even when it’s uncomfortable, is the real differentiator
This is Billion Dollar Backstory: Encore, because some conversations are just too good not to bring back.
About Simon Evan-Cook:
Simon Evan-Cook is an award-winning multi-asset fund manager. In 2022 he joined Downing to set up and manage the Downing Fox range of funds. Before that he built his reputation at Premier Asset Management from 2006, where he was a senior member of their highly successful multi-asset team. He began his career with Fidelity in the late 90s, before joining Rothschild Asset Management and then Gartmore.
Simon also writes on investment (and beyond), including a monthly column for Citywire Magazine and his investment blog on Medium.com. Outside of work, he enjoys spending time with his family and dog, devouring movies and books, and superficially damaging European golf courses.
TRANSCRIPT
Below is an AI-generated transcript and therefore it may contain errors.
[00:00:00] Stacy Havener: You know that moment at a concert when the lights go down, but the crowd won't stop clapping until the band comes back out for one more song? That's what this is. Welcome to Billion Dollar Backstory Encore episodes. An encore only happens because people liked what they heard the first time around, and they want more.
[00:00:21] So today, we're doing exactly that, bringing back one of our favorite conversations just for you. Sit back, grab your popcorn, and enjoy. How can we evaluate whether a fund manager is talented and skillful versus lucky? That is an age-old question, and one that my next guest has been thinking a lot about.
[00:00:43] What is the role of luck and skill in investing, in biz, in life? Meet Simon Evan Cook, formerly a $5 billion premier miten, now leading the charge at Downing-Fox Funds, a multi-manager fund complex which requires [00:01:00] Simon to evaluate this very thing. He is one of my favorite thinkers and writers in our industry.
[00:01:07] He's also a friend. I'm thrilled to be back in the podcast studio with him in this reunion episode. Join us as we deep dive on the topic of success in fund management, and how we can put ourselves in the position to not only identify skill, but also to be more opportunistic when luck turns in our favor.
[00:01:29] Let's reunite with my friend, Simon. Hey, my name is Stacy Havener. I'm obsessed with startups, stories, and sales. Storytelling has fueled my success as a female founder in the toughest boys' club, Wall Street. I've raised over 8 billion that has led to 30 billion in follow-on assets for investment boutiques.
[00:01:51] You could say against the odds. Yeah, understatement. I share stories of the people behind the portfolios while [00:02:00] teaching you how to use story to shape outcomes. It's real talk here. Money, authenticity, growth, setbacks, sales and marketing are all topics we discuss. Think of this as the capital raising class you wish you had in college, mixed with happy hour.
[00:02:18] Pull up a seat, grab your notebook, and get ready to be inspired and challenged while you learn. This is the Billion Dollar Backstory podcast.
[00:02:33] Simon, welcome back to the Billion Dollar Backstory podcast studio with a twist.
[00:02:38] Simon Evan-Cook: Yes.
[00:02:39] Stacy Havener: Because we are sitting here in person, not on Riverside, our recording platform, and we're in London, and this is the third time we're trying to make this reunion tour happen, and we're doing it.
[00:02:50] Simon Evan-Cook: Yeah, the third time- ... 'cause the first two were technological horror shows.
[00:02:54] Stacy Havener: Total.
[00:02:55] Simon Evan-Cook: But I'm gl- this is a first, and like- Yes, this is a first ... that's a great thing. Yeah. Yes. I'm, I'm pleased with that. [00:03:00]
[00:03:00] Stacy Havener: Thank you. It's the first in person, in this location, but not your first time on the show.
[00:03:05] Simon Evan-Cook: No.
[00:03:06] Stacy Havener: And so in the spirit of the reunion, we're gonna need a chapter update on your story because it's been a minute since you've been here.
[00:03:15] It has. So tell us how it's going, what's new, what's this latest chapter like for you?
[00:03:19] Simon Evan-Cook: So when we last spoke, when you left off- Mm-hmm ... I was, I think pre even the Fox funds launching, the Downing Fox funds, I should say, so you can find them now that I'm plugging them. Yes. They were pre-launch but we had some money and we were up and running, but we were bright-eyed and bushy-tailed and waiting to see how we'd do.
[00:03:37] Fast-forward to now, we're up to 300 million under management, just over that, which is great. Great. That's a decent number. It gives us what we need to keep going for a lot longer, which if you're a new business or a new part of a business is obviously what you need. You need the runtime to keep going. So yeah, it's been a success.
[00:03:55] I would always like it to be more of a success.
[00:03:57] Stacy Havener: Yes.
[00:03:58] Simon Evan-Cook: That's the nature of me. [00:04:00] But it's been good so far. Yeah.
[00:04:03] Stacy Havener: Congratulations. And let's pause on this because I want people to really hear this and feel it. We all want the success to happen, you know, go farther faster.
[00:04:15] Simon Evan-Cook: Yes.
[00:04:16] Stacy Havener: This is one of the most challenging things for founders to really embrace, that it's not gonna happen on your timeline.
[00:04:22] That it's gonna take twice as long and probably cost twice as much. And so what happens when we're in that mindset is we forget to pause and celebrate how far we've come- Yes ... because we're always sort of moving- Yes ... the goalpost on ourselves.
[00:04:36] Simon Evan-Cook: You're completely right, and what it reminds me of is having kids.
[00:04:40] Like, before you have kids everyone says, "Oh my God, that's gonna be hard. You're in for a really hard time." And it's not that you're arguing with them, you're kind of agreeing with them, but you think, "Yeah, you found it hard, but I'm not gonna find it hard- Yeah ... 'cause I'm gonna be an amazing parent, and I've read all the books, and I'm just a natural."
[00:04:56] And then you become a parent, and you're like, "Oh my God, they were right. [00:05:00] Yes. This is really hard, and it's harder than I imagined it would be." Launching the funds has been exactly that because, yeah, like you said, everybody said, "Oh God, it's gonna be hard." And I thought, "Yeah, it was hard for you. It's not gonna be hard for me.
[00:05:13] I've got all this stuff in my favor. It's gonna be an absolute breeze." And yeah, it's been hard. But you're right also that we've reached a very good level. I'm definitely looking forward and looking where we wanna get next. But yeah, you're right. Absolutely we have to pause and go, "Yeah, we could quite easily have been at zero at this point- Yeah
[00:05:33] and I would've been looking for something else to do." So I'm very pleased we've got where we've got, but I just wanna go further.
[00:05:39] Stacy Havener: Yes. And you will. And actually, this is an interesting segue to our topic today, 'cause one of the fun things about the reunion tour is we're coming back with guests, and we're sort of deep diving on a topic that's near and dear to their heart.
[00:05:54] But what's interesting in this conversation, one of the things that we look for when we're working with [00:06:00] clients Is, has the fund manager done it before?
[00:06:05] Simon Evan-Cook: Yes.
[00:06:06] Stacy Havener: Okay? And by done it, I mean have they launched something and built it from sort of the get? Doesn't have to be from zero, but have they really built something from an idea all the way up over a billion dollars?
[00:06:23] And the reason that's so important to us, it's not so much the investing part of it, but it's that building a business is a skill in and of itself.
[00:06:32] Simon Evan-Cook: Yes.
[00:06:32] Stacy Havener: And if they've done it before, then they understand how it's done, and they've sort of proven that they're willing to play that game, for lack of a better phrase.
[00:06:41] Simon Evan-Cook: And I'm interested- And that's a
[00:06:42] Stacy Havener: skill ...
[00:06:43] Simon Evan-Cook: are, are there many of those around? Because I would think if you've built a business up to a billion, then you're done, aren't you? I mean, that would be my sort-- maybe it's a British kind of you do it once and you're done, but maybe not.
[00:06:53] Stacy Havener: Well, but I would say that you did it, right?
[00:06:56] You did it. It wasn't, quote, "yours." As part
[00:06:58] Simon Evan-Cook: of a bigger... Yeah,
[00:06:59] Stacy Havener: yeah. Yeah. [00:07:00] But you've done it. So, like, if we were vetting you, that would be something we would say that gets points- Okay ... because the fund was smaller when you started- Yeah, yeah ... and you grew it, so you understand how to do it. I'm with you.
[00:07:13] Simon Evan-Cook: It felt like that was doing it with stabilizers on.
[00:07:16] Now it's with the stabilizers off. But it, I guess it's all a, a spectrum, right? It's-
[00:07:19] Stacy Havener: Yes ...
[00:07:20] Simon Evan-Cook: degrees of difficulty.
[00:07:21] Stacy Havener: Yes. And so that's a skill, which I think is a good segue, and maybe we'll come back to the building bit But one of the things that you're really thinking a lot about is this idea of luck versus skill.
[00:07:34] Absolutely. So I'm gonna tee it up, and I'm gonna let you kind of unpack what are you thinking about specifically as it relates to that?
[00:07:40] Simon Evan-Cook: Yeah. So it's a really interesting one. I'm thinking a lot about luck, and I have been for years, because basically I'm in the luck business. And I think actually you're in the luck business as well.
[00:07:50] Yeah. And we'll get onto this in a bit, but I think probably most businesses are luck businesses. Yeah. But particularly fund management and particularly sales, marketing, distribution, [00:08:00] they are both luck businesses. Now, from my perspective, why it's interesting to me, and it has been interesting to me for as long as I've been running money, so that's going back almost 20 years now, is that my particular job is that I analyze fund managers.
[00:08:15] So I've got to work out the ones who are genuinely skillful and can keep producing the alpha versus the ones who just got lucky. Hmm. And when you're looking at that, you look at all the different ways in which you can be lucky, which you can be unlucky, and you start to think about that in quite some depth and from 100 different angles.
[00:08:35] But I'm also as a portfolio manager myself, because we run-- We're multi-manager, we run funds of funds. I am subject to the same luck myself, so I've got to be aware of that in how can I myself be more lucky as it were, and, you know, this is where luck and skill gets blurred. What can you do to become luckier?
[00:08:54] If you're doing something to become luckier, is that then skill? Arguably it is.
[00:08:59] Stacy Havener: Yeah.
[00:08:59] Simon Evan-Cook: But [00:09:00] part three, and where it comes into your world, is that now that I'm in the building a business and I'm a kind of founder of that business and I'm therefore responsible to a large part for selling it and encouraging other people to sell it, I'm realizing just how much luck is involved in the marketing, the distribution of those funds themselves.
[00:09:20] So all the way through everything we do there is luck. And clearly the thing to do is to tip the scales of luck in your favor.
[00:09:29] Stacy Havener: Yes. And
[00:09:30] Simon Evan-Cook: I think that's where it gets really interesting.
[00:09:33] Stacy Havener: All the Hunger Games nods on that one. Um, may the odds be ever in our favor. Okay, so let's do some definitional work because I love this topic and it's got a lot of layers.
[00:09:44] So when you say that you are trying to assess skill, what are you trying to assess? You mentioned alpha, so is it really that you wanna find the persistent alpha? Like, how are you thinking about the result that you're trying to [00:10:00] reverse engineer, basically?
[00:10:01] Simon Evan-Cook: Yeah, that's ultimately what we want from the fund managers.
[00:10:04] We are only interested in Downing-Fox at backing what we call the future GOATs, so the greatest of all times. We are only interested in trying to find the next Peter Lynch, the next Anthony Bolton, the next Warren Buffett. Anything else, anyone who isn't trying to be that to some degree or another is boring to us and is not gonna be in the portfolio.
[00:10:23] So, but obviously we're not gonna be successful. We are not gonna end up with 40 GOATs-
[00:10:28] Stacy Havener: Yeah ...
[00:10:29] Simon Evan-Cook: in the fund. We're gonna end up with a handful of those, and hopefully we'll have more exposure to them. We'll end up with some who are very good, but maybe they don't make it to the very- Mm-hmm ... top grade. Still really great fund managers who outperform the market by a long way.
[00:10:42] We'll end up with some who are quite good. We'll end up with some who are, turned out to be average. And maybe we'll end up with one or two who turn out over the long term to be subpar. And obviously we're trying to maximize the best and minimize the worst. So we are looking for that persistent outperformance.
[00:10:59] People who [00:11:00] have outperformed in the past.
[00:11:02] Stacy Havener: Mm-hmm.
[00:11:02] Simon Evan-Cook: But we're trying to work out whether they can keep doing that. How did they do it? What are they doing? Is that repeatable? Is it something that they just got lucky and the luck's about to run out, and actually they're not just gonna end up being average, they're going to end up being- Oh
[00:11:18] considerably worse than average because they just plumbed into something that worked for five years, and when it reverses-
[00:11:23] Stacy Havener: Yeah ...
[00:11:24] Simon Evan-Cook: you're gonna end up not just with market returns, but with considerably less than market returns. So we are, yeah, looking at the myriad of different ways in which you can be lucky or unlucky.
[00:11:35] Stacy Havener: Okay. So I would imagine if you're listening to this podcast, you're in the investment industry, all kinds of stats are swirling through everyone's head, mine included, and I'm not even a stat geek, but it's like you wanna go to, okay, well, you could look at persistence, you could look at batting average, you could look...
[00:11:52] You instantly go to all the quantitative ways that you could break down a portfolio manager's return. [00:12:00]
[00:12:00] Simon Evan-Cook: Yeah. Yep.
[00:12:01] Stacy Havener: Okay? And I, I know there are flaws to that. So I want you to kind of take this in the direction that sort of your thought process on this. Did you start quantitatively or did you start from a different place because you knew that the stats could be misleading and send you down a path that you didn't wanna go on?
[00:12:19] Simon Evan-Cook: It's a really good question. I think probably way back when I started statistically- Mm-hmm ... or with numbers, but I very quickly realized that there are lots of gaps in numbers. There are lots of gaps on a spreadsheet. There are things that you cannot put in a column on a spreadsheet. There are things you cannot measure.
[00:12:37] So I think if I look at the first few years of my actual fund management career when I was actually running money, that was probably my belief that actually- Yeah ... you could, you could sit down at a desk, you could look at some statistics about how funds are performed, and yeah, maybe it would help to speak to the fund manager a little bit, but basically you don't really need that I went 180 degrees backwards on that.
[00:12:59] If [00:13:00] I could only have one of the two things, stats or face-to-face meetings with fund managers, I'll take the face-to-face meetings with the fund managers every time. Now, don't get me wrong, we'll still look at track record. Sure. We'll still... 'Cause all of that is super, super useful. But I guess my turning point was meeting genuine great fund managers, and I mention them a lot in things I've written, in podcasts I've been on before, but there was a manager called Angus Tulloch, used to run Emerging Market Asian Money out of Edinburgh.
[00:13:27] A genuine GOAT. Mm-hmm. You know, retired with a GOAT-worthy track record as well. Wasn't one of those fund managers where it all fell apart at the end.
[00:13:35] Stacy Havener: Mm-hmm.
[00:13:36] Simon Evan-Cook: Um, and that's when I really got thinking about how he does it, and was there just one thing he was doing? Like, could you just look at his track record and go, "Oh, he's doing that."
[00:13:46] Mm-hmm. Like you could- basically, you could've said, "Oh, he's a quality investor."
[00:13:48] Stacy Havener: Yeah.
[00:13:49] Simon Evan-Cook: But when you met him, you realized he was doing 100 little things that maybe he didn't even realize he was doing- Hmm ... that added up to what turned out to be an exceptional [00:14:00] track record. Now, some of those were investment things- For sure
[00:14:02] for sure. You know, how he analyzed a company, what he'd realized about different types of companies in Asia and the different risks you face investing as it was back then in the '80s and '90s and, and noughties in, in emerging market companies. But some of the other things as well about how he treated his teammates, who he hired.
[00:14:21] Yeah. Trust. I'd say if there was a word that you could apply to his process that doesn't ever figure on a spreadsheet, it's trust. And basically, if you really wanted to get down to what he was doing, is that he was spending a lot of time analyzing companies, and then he was working out within this very high-risk world of emerging markets, which owners of businesses can I trust-
[00:14:43] Stacy Havener: Wow
[00:14:43] Simon Evan-Cook: with my money? There was more to it. Yeah. There was timing, there was valuation, all this type of thing. But ultimately, that was at the heart of what he was doing, and that's what he was looking for in companies. But actually, that's how he hired his team as well, and that's his team. He got genuine [00:15:00] teamwork happening within what he was doing because he trusted his junior members of his team, and his junior member of, of his team trusted him, which meant it was, I guess in modern parlance, a safe space-
[00:15:12] Stacy Havener: Yeah
[00:15:12] Simon Evan-Cook: for them to disagree with him, for them to come up with ideas. He may not accept the ideas, but he would never have ridiculed you for suggesting it. And I think that all adds up to what might look to a scientist as luck. How on earth did this guy do it? I don't understand it. Let's get rid of him. Right.
[00:15:28] He's an anomaly. But it's the anomalies
[00:15:33] Stacy Havener: that I'm after. This... I love that comment So then I'm gonna play devil's advocate for a second. I agree with you, especially on the qualitative bit, and actually studies show that allocators in general value qualitative due diligence at the same level, if not more, than they value quantitative due diligence.
[00:15:55] Simon Evan-Cook: Yes.
[00:15:55] Stacy Havener: I think the issue is that fund managers don't believe that to be true [00:16:00]
[00:16:00] Simon Evan-Cook: Yep, I can see that. I can see that.
[00:16:02] Stacy Havener: So they don't actually let allocators into the qualitative as much because they don't think that that's important to the allocator. So that's a really interesting nuance that I think is creating a disconnect.
[00:16:16] Yeah, I'm
[00:16:16] Simon Evan-Cook: with you on that. Yeah.
[00:16:17] Stacy Havener: Yeah. So but if I devil's advocate this for a second, so let's say you identify that, that manager and the trust bit and all of the qualitative description of the picture you painted, but how is that repeatable? Well, let me ask it differently. Is it repeatable?
[00:16:35] Simon Evan-Cook: Yes. Well, that's again where the, the luck comes in.
[00:16:38] Yeah. So there are... I mean, there are certain basic things you can look at, like the type of thing they're doing. One of my, I guess more controversial beliefs, controversial within the world of investing anyway- Yeah ... is, uh, that you can do bottom-up stock selection and you can do that well.
[00:16:56] Stacy Havener: Mm-hmm.
[00:16:56] Simon Evan-Cook: And you look at all the greats, you know, I've mentioned the names before, [00:17:00] but basically they were some form of bottom-up stock picker.
[00:17:03] I personally have the belief that the opposite of that, the top-down allocator, I don't think you can do that consistently well. I think- Mm ... people have done it well for a little while, maybe because they've picked up a certain trend or a thing. They happen to be early onto something that rules the roost for 10 years.
[00:17:22] But I don't think you can do it on a repeatable basis. So I think that's a really good example of what we do, and we do look at fund managers, and if that fund manager says they're a bottom-up stock picker, but they talk too much about the macro and about how- Yeah ... they're swinging the fund around, "This year we're gonna be heavily into oil because we think there's gonna be, you know, a glut or a, a change, or there's gonna be a war in the Gulf," whatever it might be, politics, economics come into it.
[00:17:47] We're not so much into that.
[00:17:48] Stacy Havener: Ah.
[00:17:49] Simon Evan-Cook: We like fund managers who look at companies, try to work out everything around that company, its quality, its management, ultimately its valuation, and then just structure [00:18:00] their portfolio around picking, I don't know, 30, 40, 50 different versions of that that are different in important ways but are same in a similar way, if that makes sense.
[00:18:09] Stacy Havener: That does make sense. So I want you... Like, if you, thinking about this conversation around the skill bit, like what else did you look at or are you looking at? Because this is a... I mean, this could be like a, a career-long journey that we're on here on the luck and skill bit. Yeah. Okay. So we've identified qualitative as if you had to have one, qualitative over quantitative.
[00:18:35] What else is kind of a big element to this assessment of skill?
[00:18:41] Simon Evan-Cook: So what we want to make sure in terms of repeatability are factors like- So I remember one US fund manager that I bought way back early in my career. So we're looking at maybe 2008, '9, '10, and he'd had an amazing track [00:19:00] record. And so if you were just looking at the fund, it looked great But then with hindsight, I know this now- Mm
[00:19:06] with hindsight, when you looked at the portfolio, you could tell that basically that portfolio was a thematic bet on China.
[00:19:14] Stacy Havener: Ah.
[00:19:15] Simon Evan-Cook: He never said so much when he was marketing it. Mm-hmm. Maybe it had come out a little bit in the conversation, and maybe at that stage I wasn't sufficiently experienced to pick up on it.
[00:19:24] But what that fund, despite looking diversified and despite being a US equity fund, was, was a thematic play on China. And obviously when that China trade then turned- Mm-hmm ... that whole fund then turned with it. I'm not even sure if the fund manager himself necessarily
[00:19:42] Stacy Havener: knew. Knew. I was... That, I had that exact thought.
[00:19:44] Simon Evan-Cook: Yeah, I don't think that he particularly- Yeah ... did, and so he couldn't work out what was going wrong when it changed-
[00:19:51] Stacy Havener: Yeah ...
[00:19:52] Simon Evan-Cook: either. So these are the little factors that are in there as well. Yeah, I, I guess you look at other things. That's one thing we're particularly interested in is [00:20:00] has somebody been doing something for 10 years that it's worked, but actually is gonna go spectacularly wrong in year 11?
[00:20:07] And another US investor, which was part of my formative years, Bill Miller, the famous one- Oh ... who he famously beat the S&P 16 years running, but then equally famously blew up in such a gigantically- Yes ... spectacular way in the financial crisis, was exactly that type of investor. So it's looking at what are they doing, you know, is this something that was repeatable or is this a one in 20 year event that can come along and absolutely- Yeah
[00:20:34] sideswipe this? But then also you're looking for changes in how the fund manager behaves, the size of the fund. So once you've found the fund manager, I was talking to a potential buyer of the fund yesterday and they were like, "We're looking at your portfolio. It just sounds like you could just go and sit on the beach."
[00:20:51] And we're like, "I suppose we could." But actually what most of what we do now is maintenance, and what I mean by maintenance is just making [00:21:00] sure that those fund managers are capable of delivering on what we thought they could deliver. And we're relatively early on in a lot of the journeys with these fund managers, so I think we've got a lot of runtime.
[00:21:10] But there does come a point when they begin to degrade-
[00:21:14] Stacy Havener: Yeah ...
[00:21:14] Simon Evan-Cook: and fall apart at the edges, like I guess we all do as we get older- Yeah. ... in some way or another. Uh, I'm saying this, you can tell I'm just staring down the barrel- ... of my 50th birthday. So, um- Yeah ... yeah, I'm starting to... You're starting to think about how things fall apart.
[00:21:28] But yeah, as you get older, maybe you've scratched the itch of whatever it was when you were-
[00:21:33] Stacy Havener: Yeah ...
[00:21:34] Simon Evan-Cook: 32 and you got your first shot at being a portfolio manager. You really wanted to prove yourself. Maybe once you've proved yourself, then you haven't got that hunger anymore. Maybe it was a money thing and maybe now you've got enough money-
[00:21:46] Stacy Havener: Yeah
[00:21:47] Simon Evan-Cook: or distractions. You're at a life stage where it doesn't work for you. Possibly, I mean, we all get a little bit more conservative as, as we get older, so possibly there's an element there of- There was a point in your life when you were taking [00:22:00] just the right amount of risk, like a Formula 1 driver, right?
[00:22:03] You're, you knew exactly how far to push a corner without spinning off or without other people catching you up. But as you maybe spin off of one or two corners, which is gonna happen in a fund management career, maybe you then take the pedal off- Yeah ... a little bit. All of these things are the things you have to be aware of as you sort of hold a fund through its lifespan.
[00:22:26] Stacy Havener: So true, the 50th birthday thing. I'm gonna try to push that out of my mind too, 'cause that really, it does- That's surely a long way off. It- No, it's not. But it's, but it is interesting because I think what it, what it says to me is not that we lose our skill, but maybe we lose some edge. So I wanna go back to something you said, which is, well, you mentioned Bill Miller, and I wanna talk about two things there.
[00:22:51] One is, is it easier to be skillful in a niche than it is to [00:23:00] be skillful as a generalist or vice versa? And then how does scale play into that?
[00:23:07] Simon Evan-Cook: Yes. Good questions. Um, in a niche-- We're in Europe now, I have to give the European pronunciation. Oh, I'm sorry. No, it's all right. Yeah. You say tomato, I say tomato.
[00:23:14] Okay. So in, in a niche, I don't know the honest answer to that. Okay. So one of the best funds I ever held was a-- It's the most boring sounding fund ever, but it's been amazing. It's really widely held by allocators over here, is the Polar Global Insurance Fund. And it's within their little, their niche, they are looking at companies within that world of non-life insurance.
[00:23:38] Super boring, but they know that world extremely well. Yeah. They know when a company's taking too much risk and they get away from it- Right ... and when it's not, and they've been amazing operators within that world. So arguably, yeah, if you are just within that smaller world, you get to know it a little bit better.
[00:23:53] Stacy Havener: Yeah.
[00:23:54] Simon Evan-Cook: But I suppose at that point you then take the risk of your fund buyers see you as, as niche as [00:24:00] well. So they will then say, "Well, I don't need a insurance fund" or, "I don't need a tech fund"- Right ... or, "I don't need a commodities fund anymore," and you can end up on the wrong end of that. So that, I guess that's the disadvantage to it, but possibly is- That would be unlucky
[00:24:11] Stacy Havener: perhaps.
[00:24:12] Simon Evan-Cook: Yeah. Again, if you've, yeah, if you've launched your fund just at the point, your commodities fund just at the point- Yeah ... when-
[00:24:17] Stacy Havener: I had a client that did that. So yeah, I've lived that.
[00:24:20] Simon Evan-Cook: Yeah. Yeah. Um, and but again, is that luck or is that could you have seen that coming? Because if everybody's launching a commodity fund at the same time, then maybe actually that is the point when you've had a, a part of the capital cycle which is telling you that the best years of this are behind you.
[00:24:36] That's a whole other conversation.
[00:24:37] Stacy Havener: That is a whole another conversation because I think that tees up an idea which is business skill versus investing skill, which we've kind of talked about at the beginning. Yes. Because you can be skillful-- Let's use commodities. It's a great example 'cause it's so asymmetric from a macro and trend perspective.
[00:24:55] But you could be skillful at commodities and a couple things could go [00:25:00] against you. Yes. The market could go against you- Yeah ... and capital could go against you because everybody thinks they can time it. So if you launched the fund at a time when it would make the most sense to allocate capital, that is not when allocators actually will give you the money.
[00:25:16] Simon Evan-Cook: This is the big problem.
[00:25:17] Stacy Havener: Right. It's
[00:25:17] Simon Evan-Cook: one of the big problems, yeah.
[00:25:18] Stacy Havener: Yeah, so, so but that doesn't make you any less skillful of an investor. No. Just you could say maybe it makes you less skillful from a business perspective, or it's unlucky that people aren't aligned with your skill. But going back to your comment about the niche, I don't know.
[00:25:36] My point of view would be if you can go deep into something, insert whatever it is- That that could be an advantage- Yeah ... to elevate your skill because you're not trying to be everything, you're trying to be one specific thing. Which I believe ties into how you're building a portfolio in general.
[00:25:58] Simon Evan-Cook: It does, yeah.
[00:25:59] It's, I guess it's [00:26:00] how niche-y it gets. But if you are, for example, and let's say your niche is Japanese small cap value- Yeah ... that for us is not too niche.
[00:26:09] Stacy Havener: Okay.
[00:26:09] Simon Evan-Cook: Because it's, and, and it's g- got enough companies there. You can move around within different sectors and industries. I guess where we struggle a little bit would be to have a very specific sector- Like a sector
[00:26:19] because I don't wanna- Yeah, no ... I don't wanna be calling that sector. I kind of want you to be doing it. Yeah. But that, that's just me. Other inv- Yeah ... other holders will like the fact that they can move in and out of different sectors using a specialist, and it's, it's a really interesting conversation for another time.
[00:26:33] But I think the bit that you're getting onto about luck-
[00:26:36] Stacy Havener: Yeah ...
[00:26:36] Simon Evan-Cook: is exactly that, where I've often wondered over the years, I mean, the massive role that luck plays in the sense that you could be the most naturally talented, let's say, US small cap value investor.
[00:26:50] Stacy Havener: Yeah.
[00:26:51] Simon Evan-Cook: Like, you've got all of the makings to be one of the GOATs.
[00:26:54] Stacy Havener: Yeah.
[00:26:55] Simon Evan-Cook: But if you just were unlucky enough to come of a certain age [00:27:00] when you would've had your, your chance or you get your chance in, I don't know, let's say 2018, so the beginning- Yeah ... of the rise of the FANGs Then within three years you're in McDonald's, frankly- Okay ... flipping burgers because it just, the market will not give you a chance-
[00:27:16] Stacy Havener: No
[00:27:17] Simon Evan-Cook: to prove that you're great at this thing. So you cannot get away from luck as much as you would like to, as much as we would all love to say, "Let's just get luck out of the system as much as- Yeah ... we possibly can," it is impossible to have a luck-free thing, I think, a luck-free business, a luck-free fund.
[00:27:36] There has to be some, at the very least, absence of bad luck for you to succeed.
[00:27:42] Stacy Havener: Ooh, absence of bad luck.
[00:27:45] Simon Evan-Cook: Yes.
[00:27:46] Stacy Havener: So then does that mean... Is that something you can control? Is this like a risk mitigation component to the skill versus luck?
[00:27:54] Simon Evan-Cook: Well, it's interesting. So, look, in my head- Yeah ... because I'm thinking possibly I might write a book about [00:28:00] luck.
[00:28:00] Stacy Havener: Mm.
[00:28:00] Simon Evan-Cook: I might not. I'm always thinking about writing books, and I've never, I've never managed to, to write one yet, which tells you something about my personality maybe. But I'm thinking about all these different ways in which you can be lucky. Yeah. And it just so as luck would have it, I've come up with 13 of them, and I've just now gotta write down what they mean.
[00:28:17] But yeah, I think if you wanna hack-
[00:28:19] Stacy Havener: Yeah ...
[00:28:20] Simon Evan-Cook: about luck to be more lucky, I would say the one thing to understand about luck is that there is not one thing to understand about luck. Like if you are trying to become luckier, and you're in the same business, so people effectively are coming to you when you are trying to...
[00:28:35] Or you're in the business of selling- Yeah ... their funds and saying, "Tell me how to do it." And, and I bet more often than not, they just want one thing. Oh, yeah. They just want someone to say, "Just tell me one thing I can do- Yeah ... to sell the funds better." And you're like, "There's not one thing you can do. You have to do 10 different things."
[00:28:48] And I think same with fund management. Mm. If you try and work out what a fund manager's doing, you say they're just doing this one thing. They're not.
[00:28:56] Stacy Havener: No.
[00:28:56] Simon Evan-Cook: They're doing 5, 10, 20, 50 different [00:29:00] things. Maybe they don't even know what they are. And it's the same with being lucky in general. I think you need to do loads and loads and loads and loads of different things.
[00:29:08] And if you do all of these things, you bring your chances of success up from, let's say it's launching a new fund boutique. You bring your chances of success if you do none of these things from, let's say, 5%, so still possible if you just happen to catch the wave.
[00:29:24] Stacy Havener: Mm.
[00:29:25] Simon Evan-Cook: 5% up to maybe 70%. You'll never get to 100%.
[00:29:28] Mm-hmm. But you can take it percent by percent from 5% up towards 50 to 60- Mm-hmm ... to 70 by just doing more and more of these sensible things, and by doing or not doing more and more of these dumb things.
[00:29:44] Stacy Havener: Yes.
[00:29:45] Simon Evan-Cook: And that's your expertise, is telling people, "Don't do this stuff." Yeah. "That's gonna decrease your chances of luck.
[00:29:53] And do do this stuff, it's gonna increase your chances of luck." Yes. But what I would imagine you've never said to a fund manager who [00:30:00] signed up with you is, "We're gonna give you 100% chance of success." No. This is a stick-on. Yeah. You will succeed if you do this, because there's no such thing and there's no such process in fund management- No
[00:30:10] either, that will definitely work, because we're in the real world, and the real world throws spanners in the works.
[00:30:16] Stacy Havener: Right.
[00:30:17] Simon Evan-Cook: Puts flies in the ointment. Oh
[00:30:18] Stacy Havener: my gosh. That's one of my new favorite phrases. I can't believe you said spanner in the works.
[00:30:22] Simon Evan-Cook: Yeah, absolutely.
[00:30:23] Stacy Havener: Yeah. It's one of my favorite British phrases right now.
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[00:32:08] Simon Evan-Cook: Yeah,
[00:32:09] Stacy Havener: yeah.
[00:32:09] Simon Evan-Cook: Yeah. We'll see.
[00:32:10] Stacy Havener: Yes, we'll see. I hope you do.
[00:32:12] Is one of those sides of the coin, the things that could go against you versus the things that could go right more important than the other? Because there is asymmetry in there too. Yeah. If the thing that goes against you is so big and so bad that it just takes you out.
[00:32:27] Simon Evan-Cook: Yeah, yeah.
[00:32:28] Stacy Havener: But on the flip side, if you don't go for that thing that could be great Will you ever actually get great or will you just sort of be mediocre, average, nothing burger?
[00:32:38] It's...
[00:32:38] Simon Evan-Cook: Yeah, it is. And let me just... So the first two- Yeah ... of my 13. So the first one is, don't do stupid
[00:32:46] Stacy Havener: things. So that's what I would say would be first.
[00:32:48] Simon Evan-Cook: First. Yeah, don't do stupid things. L- And this is... You might... If you wanna put it in scientific terms, you call this Bayesian reasoning. You look at that, say, you wanna start a restaurant, you look at the odds of that restaurant succeeding.
[00:32:59] [00:33:00] You see that actually there's only a 1 in 10 chance of it succeeding. And that is, that's gone from being quite an interesting and different way to thinking about things to, I'd say, the dominant way.
[00:33:09] Stacy Havener: Okay.
[00:33:09] Simon Evan-Cook: So if rule number one is don't do stupid things- Okay ... my rule number two is do stupid things.
[00:33:15] Stacy Havener: Right.
[00:33:15] Simon Evan-Cook: Which is, if everybody is doing the sensible things- That's right ... then... And they're using it, data to analyze it, and they're using data from the past, which suggests... Let's, I mean, let's face it today as we record this in 2025, launching an active fund, investing in anything other than the Mag Seven looks like a stupid thing to do, right?
[00:33:36] But I will bet you where we are in markets that actually it turns out to be quite a sensible thing to do- That's right ... because all the competition's just been wiped out. You're buying probably a load of cheap stuff, and the odds are on your side. So actually, you can do what looks like a stupid thing today because the data isn't there to tell you it's not a stupid thing, but it'll turn out to be an amazing thing.
[00:33:58] And I think this is where the great stuff comes [00:34:00] from. Yes. I think, you know, you look at where we are in the world today. Apologies if I mentioned this on the last time I was on the podcast. No, it's
[00:34:05] Stacy Havener: okay to come back. Yeah.
[00:34:06] Simon Evan-Cook: But movies, I mean, d- every movie today is just a rehash of an old movie, or it's a- Yes
[00:34:12] part of a superhero franchise. Yeah. And that's because the bean counters are saying, "Okay, you've got an idea for a movie, but prove to me that it'll work." Mm-hmm. And you're like, "I can't. If it's a brand new idea, I can't prove that it works." Right. But if someone comes up with the idea of the next Matrix, but no one's done it, I don't think that movie gets made today because you're like, "Well, show me that this thing works."
[00:34:33] There's no
[00:34:33] Stacy Havener: proof. Yeah. There's no, quote, "proof".
[00:34:35] Simon Evan-Cook: Yeah. It would've been a stupid thing to do back in the late '90s to make that movie, and yet It's the s- the mega smash that it is today, and now we're making remakes of that thing because- Yes ... people aren't brave enough to throw a lot of money behind a,
[00:34:48] Stacy Havener: a new thing.
[00:34:48] I'm glad you said that word brave, because I wanted to go to that. You talked about this concept in the first pod, which everybody should listen to 'cause it's... it is brilliant. But you talked about the concept of kodawari. [00:35:00]
[00:35:00] Simon Evan-Cook: Yes. Yeah.
[00:35:01] Stacy Havener: And I read this fantastic book, which I can't remember if I got for you, but maybe I'll get it for your 50th if I haven't- Oh, thank you
[00:35:07] which is called The Courage to Be Disliked. Have you read that book?
[00:35:10] Simon Evan-Cook: Uh, yes. I
[00:35:12] Stacy Havener: have. Yeah. You did read that. Yeah. Yeah, yeah. Okay. So do those two things go... Uh, well f- you're gonna have to explain kodawari if people ha- didn't listen to the first podcast, so that's one. But two is, does skill and greatness require us to actually be brave enough to be disliked or wrong?
[00:35:31] Simon Evan-Cook: Yes. Okay. So kodawari, first of all, that's a Japanese word, and the closest we have in English is probably you might call it an artisan. So it's someone who is obsessive about their thing.
[00:35:43] Stacy Havener: Yeah.
[00:35:44] Simon Evan-Cook: And it doesn't define what that thing is. It might be making music, it might be making art, it might be making sushi.
[00:35:50] It could be anything. It... Running a fund- Mm-hmm ... running a business. Whatever your thing is, you are obsessive about it, and you are obsessed with improving the quality [00:36:00] of that thing. So you can probably imagine in your life a product that you love. You like a, there's a certain chocolate m- maker or there's a shoemaker, and you just love their stuff.
[00:36:12] I bet that they're obsessing about quality. Yeah. And they are obsessing about... And there will have been people who said, "You know, forget about that. You could make it cheaper, you could make it faster-" Mm. "... you could make it-"
[00:36:20] Stacy Havener: Right ...
[00:36:20] Simon Evan-Cook: quicker." And they're like, "No." Yeah. "Because it ruins the quality of what I do, I will not hear of that."
[00:36:28] Yeah. "And I'm sticking to what is gonna make this the best version of whatever it is that you're doing." So that... When you meet someone like that, Steve Jobs is a very good example of someone who was, you might call one of the kodawari, is just obsessive about the quality of, of their thing. And you have to be, like Steve Jobs, be prepared to be disliked- Mm
[00:36:48] if you're gonna do that. Because you are probably operating in a niche of your own making. Maybe you are just like a lot of the greatest fund managers. You're not just trying to invest in everything and trying to beat the market every three [00:37:00] months. You're like, "No, this is the bit I do. I am looking for the finest companies," or, "I'm looking for the cheapest companies," or whatever it might be that is your thing.
[00:37:09] And at some point, the market, and therefore a lot of fund buyers, are not gonna like that. Mm-hmm. They're gonna hate you, and the pressure at that point is immense-
[00:37:18] Stacy Havener: Yeah ...
[00:37:19] Simon Evan-Cook: to fold and to become the thing that the market- To capitulate ... wants you to become.
[00:37:22] Stacy Havener: Mm-hmm.
[00:37:23] Simon Evan-Cook: So yeah, I think you're right. You have to be happy and willing that the thing that you love doing at some point is gonna be very, very uncomfortable.
[00:37:34] Stacy Havener: Yeah. And that's unlucky.
[00:37:36] Simon Evan-Cook: Yeah.
[00:37:37] Stacy Havener: But part of it.
[00:37:39] Simon Evan-Cook: Yeah, it is. And when that unlucky period comes-
[00:37:42] Stacy Havener: Yes ...
[00:37:42] Simon Evan-Cook: is that's complete luck. That the timing of it is... Well, maybe it's not complete luck, but there's a large slice of luck. I mean, when I think of launching the Downing-Fox funds, we had a double dose of bad luck, which has just been the bane of my life.
[00:37:56] One was we launched, it takes a day to become [00:38:00] invested- Oh ... on a fund of funds. We spent the first day in cash, so from midday one day to midday the next, because you have to wait before you can buy the underlying funds. Sure. And that day happened to be a big inflation announcement from the Bank of England that caused the market to rally by 2%.
[00:38:15] We were in cash, so we gave everyone a head start. But also the timing of our launch, because we only invest in the most active fund managers, we launched, we finally got the funds up and running in June. And the white labeled money, we had a great year in '22 because we'd been, didn't have a lot of the Mag Seven and we didn't have any bonds, and we had cash instead, so we looked great, but we didn't have any way of proving that in the fund range.
[00:38:39] So we finally got them launched in June '23. If you had asked me beforehand, "Simon, what conditions do you not want to see to launch your fledgling funds into?" I would've described exactly the conditions that we had, where it was only the world's biggest companies that were just trashing everything else.
[00:38:57] So we had to kind of hang in there for a bit. [00:39:00] But the good news as we enter '25 is it feels like that world has finally turned a little bit. So yeah, you catch me in optimistic mood now that maybe hopefully we've seen off this nasty period. But it could easily have gone worse, or if it carries on, it could easily have been toast for us, just because of the luck of timing.
[00:39:19] You just can't tell what you're gonna launch into.
[00:39:22] Stacy Havener: It's true, and it reminds me of the anecdote you shared earlier about small cap value. Certainly, if you've been a value investor over the last more than 10 years, that's been pretty painful.
[00:39:32] Simon Evan-Cook: Yeah. Yeah.
[00:39:33] Stacy Havener: Um, at some point there's probably a- another podcast conversation about at what point does unlucky just become, like, the new thing, right?
[00:39:41] And so I think you did see a lot of value managers just capitulate-
[00:39:45] Simon Evan-Cook: Yeah. Yeah ...
[00:39:45] Stacy Havener: and shut their doors or whatever. But that doesn't mean that they're not skilled at what they do.
[00:39:50] Simon Evan-Cook: Exactly.
[00:39:51] Stacy Havener: And so how do you square that? I mean, if you're a fund manager, I mean, you, you shared your own experience. But if I'm a, let's use the value [00:40:00] investing example, and you're just getting, like, kicked in the teeth every day and allocators are redeeming, do you stay the course and just trust that reversion is real and, you know, there is no new thing and it's all gonna come back around?
[00:40:16] Or at what point do you just go, "I don't know, I, I, I guess from a business perspective, I just can't keep doing this."
[00:40:23] Simon Evan-Cook: I think it's gotta be a personal decision. Yeah. I think it is a beating, it is extremely hard. The world is basically telling you you're a jackass every day, and you've gotta take it on the chin, and you've gotta have belief that what you're doing is worth it.
[00:40:37] And ultimately, the thing to remember, I think if you are in, in that journey as well, and you are absolutely certain that it is just bad luck- Yeah ... that what you do still will work, it's just that it's not working at the current time, is that everybody else is in the same boat, and one by one they are jumping out of that boat.
[00:40:54] Stacy Havener: Yes, that's right.
[00:40:54] Simon Evan-Cook: And if you are the last person left in that boat- You can stay ... when it does turn, then every [00:41:00] allocator in your market is suddenly gonna be looking for that thing of which you are now not one of 20, you are one of- Good point ... one. And so coming back to the commodities thing earlier.
[00:41:10] Stacy Havener: Mm-hmm.
[00:41:11] Simon Evan-Cook: And I think now if you look at sort of passive-based products or things that are very heavily in one way or another exposed to The Magnificent Seven, they are 10 a penny, they are everywhere. Um, so you are up against now potentially a shrinking market and lots of competition.
[00:41:27] Stacy Havener: Yeah.
[00:41:28] Simon Evan-Cook: Whereas if the world has turned and it does start to favor value again, and there's some evidence that perhaps it is, you're in an expanding market and you're one of only a handful of- Yeah
[00:41:37] funds. This is the capital cycle. It is. It happens across all industries. But that, I suppose, is the carrot or the light at the end of the tunnel that you keep thinking of, that if I can get through this-
[00:41:47] Stacy Havener: Yes ...
[00:41:47] Simon Evan-Cook: then I'm in such an incredible position. So yeah, ultimately, if it's causing you stress-
[00:41:53] Stacy Havener: Yeah ...
[00:41:53] Simon Evan-Cook: in your home life and your family life, and you think, "I can't handle it anymore," that's the personal
[00:41:57] Stacy Havener: decision-
[00:41:58] Simon Evan-Cook: Yeah.
[00:41:58] Yeah ... you've
[00:41:58] Stacy Havener: gotta
[00:41:58] Simon Evan-Cook: make. [00:42:00]
[00:42:00] Stacy Havener: I love the, like, just staying alive on the treadmill though. Like, if we're on a treadmill and we're all running, I will outlast you.
[00:42:07] Simon Evan-Cook: Yeah.
[00:42:07] Stacy Havener: And that, in and of itself, I don't know if that's skill, it's grit, it's... But it's probably something that if you are assessing a manager, you'd want to try to unpack.
[00:42:18] It is, yeah. Like, can this person stand what they are about to go through? I
[00:42:24] Simon Evan-Cook: tell you what, it's two things. Yeah. It's... So that's resilience. Yeah. Absolutely got to assess the manager's resilience, but you've also got to assess the position that they are in.
[00:42:32] Stacy Havener: Yes. And
[00:42:33] Simon Evan-Cook: it's the same goes for people's personal life.
[00:42:35] Like, you can have all the resilience in the world, but if you have just taken out a gigantic mortgage and you lose your job, you can be as resilient as you like, you can't afford it. Yeah. Someone's gonna call the money back in-
[00:42:45] Stacy Havener: Yeah ...
[00:42:46] Simon Evan-Cook: and therefore you're out of a job. So we don't just need to assess has the fund manager got the resilience for this?
[00:42:52] There are three people in this bed. There's me, the fund manager, and then there's the CEO-
[00:42:56] Stacy Havener: Yeah ...
[00:42:57] Simon Evan-Cook: of the company that they're invested in, and that's a lot of the [00:43:00] work you have to do there, is to assess if they're working for a bigger company or even a, a mid-size company, does this company have resilience itself to back fund managers- So
[00:43:09] Stacy Havener: true
[00:43:09] Simon Evan-Cook: and not flake out- Yep ... at the worst possible point? 'Cause then that forces me to flake out. Yes. If they sack the value manager and bring in a growth fund manager, I'm a forced seller at that point, and I do not want to be a forced seller. So yeah, you've got to look at the resilience of the fund manager, the position they're in, and then the resilience of the management of the firm.
[00:43:28] And again, why I like boutiques is it- it's kind of easier to do that. Because if the- Yeah ... fund manager has set up the boutique, and you can see that the boutique themself are financially stable, then you know they're not gonna capitulate, or you've got a much- Yeah ... better feeling that they're, they're not gonna capitulate.
[00:43:43] But then you also obviously have to make sure that they've got enough money still to run through this period. So it's, it's not easy. But these are all, that's why. That's- It's the job. Yeah ...
[00:43:52] Stacy Havener: that's the job.
[00:43:53] Simon Evan-Cook: Yeah.
[00:43:53] Stacy Havener: It's an odds management game, isn't it? Completely, yeah. Like, you're just trying to-
[00:43:57] Simon Evan-Cook: As is sales.
[00:43:58] Stacy Havener: Set... Yeah. Yeah. Yeah. [00:44:00] 100% is true. Yeah, we were talking about something over coffee before we came into the studio that I wanna come back to, which is the idea, and we kind of started the pod on this, which is the idea that somehow you can quantitatively get to that root of skill.
[00:44:17] Simon Evan-Cook: Yes.
[00:44:17] Stacy Havener: And you were giving an example of if you try to do that, you can, and everybody does, and there is a component of, of stats to this whole thing.
[00:44:27] But just how much you miss if you don't have a conversation with the person who's running the money to understand, like, the personal situation you just described, right? Yeah. To, to manage risk, but also to understand, like, what they were going through at the time of anything that doesn't sort of make sense, where it would be easy to dismiss them quantitatively.
[00:44:50] Should we be pausing and trying to understand what's behind that? And if we don't, are we gonna miss out on one of these boats?
[00:44:56] Simon Evan-Cook: You are.
[00:44:57] Stacy Havener: Yeah.
[00:44:57] Simon Evan-Cook: Yeah. You absolutely are. I mean, it's where all the good stuff sits. [00:45:00] It's why we as fund managers or, you know, fund selectors who do meetings have an advantage over those who just rely on the statistics.
[00:45:07] We have just bought a fund, for example. I'm quite happy to plug them here. Yeah. It's a fund called Nutshell Growth. I think they're a fantastic growth fund manager. Their edge, if you like, is that they're very good at picking the high-quality companies, but then they're very much quicker on their turnover and moving between them based- Oh, interesting
[00:45:22] on valuation. Mm-hmm. Which is, yeah, it's a whole other conversation- Yeah ... about whether that is more- Yeah ... suited to the world we're in than the kind of buy and hold 10-year approach. Mm-hmm. That's by the by. When you look at their track record, it looks very good recently, but the first sort of year or two doesn't look so good.
[00:45:38] But then when you speak to them, you find out that they had some seed money in there from a wealthy backer.
[00:45:44] Stacy Havener: Mm.
[00:45:45] Simon Evan-Cook: And that wealthy backer had some personal stuff going on through COVID where they needed to get some of the money, so they didn't want the money to be invested. I might not be getting the story- Right
[00:45:54] exactly right here, but it was something along those lines which meant that they weren't able to invest the way that they wanted to [00:46:00] invest- Yeah ... for some part of that period. Now, if you're just sat in front of a screen and you just pulled off the track record, you go, "Well, they look good recently, but they didn't look very good in that first two years, so forget that.
[00:46:09] They've obviously just got lucky." But when you get the context-
[00:46:12] Stacy Havener: Yeah ...
[00:46:12] Simon Evan-Cook: because you've sat down and spoken to them, you get it. Or you can find out that they've admit, "Yeah, we made some mistakes in the first year. We were trying this thing out and it didn't work." Yeah. "And now it does." Or, "We had a person in the team who was disruptive and was causing problems, and they're not here anymore."
[00:46:27] Yeah. "And the reason why it suddenly started to work is because suddenly the team is, is work." None of that stuff gets picked up in a scientific study-
[00:46:35] Stacy Havener: Yeah ...
[00:46:35] Simon Evan-Cook: done by someone from 10,000 kilometers away Who's just looking at the numbers because they don't get necessarily when the manager changed, they don't get when- Yeah
[00:46:44] somebody left, somebody joined, when there was a change at the corporate ownership, which allowed them to, you know, release the risk breaks, whatever it might be. None of that stuff shows up. So all of these scientific things are all obsessed with averages and finding a kind of [00:47:00] golden rule. The one thing again, which- Yeah
[00:47:02] when I wrote an entire series of blog posts, I called the blog Never Mind the Silver Bullets. That was meant to be- Yeah, perfect ... forget about trying to find a silver bullet, right? Forget trying to find- Yeah ... one thing that you can do that will always work because no such thing exists. Anything that's worth doing is gonna take you to work out five, seven, eight, 10 different things, and consistently do those things, and even then it might take years for the good work to show itself.
[00:47:29] There's yeah, there's just no silver bullet
[00:47:31] Stacy Havener: in this. Yeah. There's no silver bullet. Yeah, there's always more to the story.
[00:47:35] Simon Evan-Cook: Yeah.
[00:47:36] Stacy Havener: There's always more to the story, and I think it's a great reminder that those of us willing to ask why and take the time to do that work on understanding the nuances and the layers, you know, will be rewarded.
[00:47:51] Simon Evan-Cook: Yeah, absolutely right.
[00:47:53] Stacy Havener: I have a couple last questions for you, but before we leave Luck & Skill, is, is there any one thing [00:48:00] you want to leave us with to inspire us on this conversation?
[00:48:05] Simon Evan-Cook: I guess the one that keeps springing to mind, and it springs to mind in my work life but also my domestic life as well, is, 'cause I've got kids, and part of the reason I'm thinking of writing this book is I just wanna give them a shortcut to just become- Yeah
[00:48:19] luckier at life. But it's just to take more shots.
[00:48:23] Stacy Havener: Mm.
[00:48:23] Simon Evan-Cook: This is a thing, again, and, and it comes to that silver bullet thing, I think. And we were discussing again over coffee beforehand- Yeah ... about maybe the difference between Brits and Americans. Oh. So there's a very British thing where we kind of think, "I shouldn't start my own business.
[00:48:37] I'm not good enough to do it. I'm not g-..." And then maybe you think you should do, and then you put everything behind it, and then you, you finally do it, and you get something wrong. It's a very British mentality to go, "I knew I shouldn't have done that." You know? "My parents always told me I wasn't worth it, so I'll just go back and I'll work at the council, and that's where I belong."
[00:48:55] I think the difference between us and Americans is Americans will go, "Ah, I got [00:49:00] this wrong. Go again."
[00:49:01] Stacy Havener: Yeah. "
[00:49:01] Simon Evan-Cook: Go again." Yeah. "Go again. Go again." Now- It's interesting in fund management that you quite often don't get a chance to go again. One of the, the quirks of it is that if you happen to be given your fund too early, let's say in your career, and you haven't made enough mistakes yet, you can screw that up once and it's on your track record forever.
[00:49:20] Yeah. So again, we're coming back to luck, where that sits. So you, yeah, before you get your shot at running a fund, before you get your chance at starting a business, just try and do as much stuff. Take as many shots in a kind of- Yeah ... sandbox if you like, beforehand so you get that experience. You make your mistakes, because you, you will make mistakes, and the experience is basically working out not to make those mistakes again.
[00:49:45] So I was lucky enough before I started running actual money, 'cause I was trying to prove to my boss a point, that I was running a paper portfolio. Mm-hmm. And I, I remember the piece of software I used showed a dot every time you made a change.
[00:49:59] Stacy Havener: Mm.
[00:49:59] Simon Evan-Cook: And for the [00:50:00] first nine months of me running that paper portfolio, it's dots all over the place.
[00:50:04] I'm ripping things out, putting- Yeah ... new things in. Then gradually the dots get further and further apart, and I end up with a thing that's working. But if I'd been unlucky enough to be lucky enough to be given the fund-
[00:50:15] Stacy Havener: Yeah ...
[00:50:15] Simon Evan-Cook: at the start of that period, I either wouldn't have made the changes 'cause I would've felt like I'd committed.
[00:50:20] Stacy Havener: Yeah.
[00:50:20] Simon Evan-Cook: I've said I'd bought this thing- Sure ... I'm gonna stick to it. Or I just wouldn't have made the mistakes and learned what I learned in the sandbox process. Yeah. So yeah, it's take shots, and I think that applies to your world as well of sales and marketing- Yes ... in terms of you need as many prospects out there as you can possibly get.
[00:50:36] It's why LinkedIn's good, because you are- Yeah ... spreading yourself and you're giving yourself an audience of thousands, not just one or two. And I always, the sales guys that I'm most suspicious of are the ones who are always after the Moby Dick trade. Oh, yeah,
[00:50:51] Stacy Havener: yeah.
[00:50:51] Simon Evan-Cook: No. They're like spending all their time working on this one big trade but- No
[00:50:54] I'm not gonna bring in lots of little millions and half a millions. I'm gonna bring in this 100 [00:51:00] million whale.
[00:51:01] Stacy Havener: Yeah.
[00:51:01] Simon Evan-Cook: And I've never, never seen them bring it in. No, it's, that's- I've seen one or two people who weren't trying to catch a whale, catch a whale. Yeah. But I've never seen the whale hunters bring it in.
[00:51:09] Stacy Havener: Well, it's just too binary of a trade really. Like- Yeah,
[00:51:12] Simon Evan-Cook: and competitive, right?
[00:51:13] Stacy Havener: It's- Everyone's going for the whale. Yes. And also, and you know, I think it's great advice to take the shots. And I also think that it's helpful, at least for me, to remember- That we take a lot of shots, whether it's in our craft of investing or in sales, but, you know, we only ne- it only needs to work one at a time.
[00:51:34] Yeah, yeah. Right? You don't need everyone to like you. You don't need every investment to go right. I mean, what, it's like if you're batting 50%, that's pretty freaking amazing.
[00:51:45] Simon Evan-Cook: It is that, yeah.
[00:51:45] Stacy Havener: Right? And so I think it takes the pressure off of us that like take the shots and if it doesn't work, and again, I'm American, so maybe this is in my DNA, but like it's okay because 50% of the time it's gonna be a [00:52:00] miss- Yeah.
[00:52:00] Oh, yeah ... or we're gonna be wrong. And fund
[00:52:01] Simon Evan-Cook: managers-
[00:52:01] Stacy Havener: And that, yeah ...
[00:52:02] Simon Evan-Cook: get that with fund management. They don't get it with sales and marketing- That's right ... so much. They're like- Yeah ... "No, you said you'd bring in this client- Yeah ... here with 10 million and it hasn't happened." You're like- Right ... "Well, thought we could- Okay
[00:52:11] and it, and it didn't, but there's another one over here who is interested- That's right ... and there's another five who are making good noises."
[00:52:16] Stacy Havener: And timing is such a big part of that because going back to the start, we can't control when things happen.
[00:52:22] Simon Evan-Cook: No. No, no control- Yeah ... whatsoever.
[00:52:25] Stacy Havener: I mean, we could talk about this is an awesome conversation.
[00:52:28] This is- No, I've loved it ... a book that needs to be written by you.
[00:52:32] Simon Evan-Cook: Yes.
[00:52:32] Stacy Havener: Right? Those are two... It's a book that needs to be written, and you are the person to write it. So I hope y- Time is now ... I hope you give us that birthday present in your 50th year. Um, okay, so in the first podcast we had some questions, Proust inspired, to let us get to know you a little better.
[00:52:49] I had to come up with new ones because it's re- reunion tour. So we're gonna start though with you're a reader. Is there a book that's has inspired you recently that [00:53:00] you wanna share with us?
[00:53:00] Simon Evan-Cook: Yeah. Well, I'm just finishing it actually, and it's, it's long overdue, but it's, um, is it Robert Cialdini?
[00:53:06] Stacy Havener: Oh my
[00:53:07] Simon Evan-Cook: gosh.
[00:53:08] Cialdini, Persuasion. People have for years been saying, "Gotta read this book," and I'm like, "Yeah, yeah, whatever." Do you love it? I do love it, yeah.
[00:53:12] Stacy Havener: Yeah.
[00:53:12] Simon Evan-Cook: It's amazing. And you can see, 'cause I've, I've enjoyed reading writers like Malcolm Gladwell for years- Yes ... as well. You can see now where he got his- Yes
[00:53:20] inspiration from was from him. It's, it was written in the '80s. That amazes me 'cause it, if he released that today you'd be like, "Okay, yeah, I've heard of some of this stuff before," but it's great.
[00:53:31] Stacy Havener: It's brilliant.
[00:53:32] Simon Evan-Cook: But you've heard it before because he wrote this stuff and he inspired a whole lot of other people- Oh, gosh
[00:53:35] to go and do the work, and it is just brilliant, and it's entertaining. It's a fun read. Uh, but also it's profound in the sense of what it's telling you about how humans are persuaded to do things-
[00:53:46] Stacy Havener: Yeah ...
[00:53:47] Simon Evan-Cook: that they don't wanna do or maybe they did wanna do but they didn't know they wanted to do.
[00:53:50] Stacy Havener: That's right.
[00:53:50] Simon Evan-Cook: It's, it's amazing.
[00:53:51] Stacy Havener: It's a must read. I, I love that. Okay. This is a weird one, but I'm very excited to see. Okay. What word or [00:54:00] phrase do you most overuse?
[00:54:03] Simon Evan-Cook: There's two answers to the first one is because I've just started recording a few videos of our own. A few amateur efforts. And I've realized I say, "Right," too much.
[00:54:12] And I- And it makes me sound like Basil Fawlty. I'm like, "Right. Let's, let's kick off." And it makes it sound like we're going on a route march or something, and that is not a way to lead into a, any kind of- I like it ... podcast. It's, it's a horrible quirk. But the more profoundly possibly the thing I say the most, and I don't think I say it too much 'cause I, I, I like that I say it- Yeah
[00:54:34] and I said I caught myself saying it earlier-
[00:54:36] Stacy Havener: Okay ...
[00:54:36] Simon Evan-Cook: is, "We'll see."
[00:54:37] Stacy Havener: Oh, we'll
[00:54:38] Simon Evan-Cook: see. We were talking about whether I'm gonna write a book. Yeah. I'm like, "We'll see." Yeah. And I think why that is a great phrase to have, I read another book called, um, I'm paraphrasing, I might get the title wrong, and I think it's called I May Be Wrong.
[00:54:51] Stacy Havener: Okay.
[00:54:52] Simon Evan-Cook: But it was written by a, I think it's a Swedish guy who became a forest monk in Thailand, and the title I May Be Wrong was one of his [00:55:00] big teachings- Ah ... which is to always just say even when you believe that you are 100% correct on something, is just to catch yourself and go, "I may be wrong."
[00:55:10] Stacy Havener: Ah.
[00:55:10] Simon Evan-Cook: And I say that all the time because if I believe that I'm right about something, I just like to say, "Well, we'll see," because I accept- Yeah
[00:55:19] that I might be wrong about it. And if somebody else has just said something to me, which they sound like they're 100% right about but I disagree, I won't necessarily get into a big fight with them. I'll just say-
[00:55:29] Stacy Havener: Mm ... "
[00:55:30] Simon Evan-Cook: We'll see."
[00:55:30] Stacy Havener: So it works in both directions.
[00:55:31] Simon Evan-Cook: Yeah, absolutely.
[00:55:32] Stacy Havener: Yeah. Brilliant. Okay. What was your first job, not in the investment space?
[00:55:38] I mean, I'm talking like first job and a life lesson learned.
[00:55:41] Simon Evan-Cook: I'm gonna go with my second job here. Okay, fine. I'm gonna cheat. That's fine. First job was stacking fruit in a supermarket.
[00:55:45] Stacy Havener: I mean-
[00:55:45] Simon Evan-Cook: Second job was working in a bar in a pub in the town I grew up in, which was Tunbridge Wells in Kent. Uh, the bar was called The Compasses.
[00:55:55] A very old lovely pub, and it was, it was a good job. I quite enjoyed it. Uh, it wasn't [00:56:00] quite as much like Cheers as I hoped it would be. Oh. I was hoping there'd be like witty, lovely locals- Gosh ... and you'd just be having a constant- Yeah ... laugh. In practice it was old men coughing and talking to you about fishing, and it was it was mundane.
[00:56:12] But I did learn a big lesson from that, and it's in my trilogy of things that I have learned from dishwashers. So this is the first thing I learned from dishwashers. So I'll take you back to the bar. It was operating, it worked pretty well, but every now and again the whole thing would collapse 'cause we didn't have enough glasses.
[00:56:32] And so as a barman, uh, in which there were about three or four, I realized that what was happening is we're all serving drinks, and the drinks were just staying on the tables, the empty glasses not being picked up. So I thought, "Oh, I'll, I, I'm gonna get the whole thing to work better. Instead of serving drinks, I'm just gonna go around every now and again, pick up the glasses, put them through the dishwasher, bring them out again and keep the whole thing running."
[00:56:53] Stacy Havener: Yeah.
[00:56:54] Simon Evan-Cook: And that worked much better. The pub didn't collapse every now and again because we, all the people had to wait for clean [00:57:00] glasses, and then some of them would've left because you d- you couldn't serve them beer. And so it worked a lot better. But then the owners of the pub basically bollocked me.
[00:57:08] They were like, "Simon, we've looked at your stats, stats again."
[00:57:11] Stacy Havener: Uh-oh. "
[00:57:11] Simon Evan-Cook: And you are far less productive than all the other bar people." 'Cause they're looking at the amount of money that you have served And I'm like, well, I tried to explain to them, "Look, yeah, the reason I'm not doing that is because I'm letting the other guys serve while I'm taking one for the team."
[00:57:24] Yeah. "I don't wanna go and collect glasses." Yeah, of
[00:57:26] Stacy Havener: course not. "
[00:57:26] Simon Evan-Cook: It's more fun serving drinks, but nobody else is doing it, so I'm doing that bit, which means the whole thing-
[00:57:32] Stacy Havener: Yeah ...
[00:57:32] Simon Evan-Cook: works better." But they wouldn't buy it. And so I'm like, "Right, if you are gonna measure me by stats, then I'm gonna win by stats."
[00:57:38] So I just hung around in the bar, and as soon as anyone came in, I was the first to serve them.
[00:57:43] Stacy Havener: Yeah.
[00:57:43] Simon Evan-Cook: You know, screw the empty glasses, they can-
[00:57:46] Stacy Havener: Yeah ...
[00:57:46] Simon Evan-Cook: do whatever they
[00:57:46] Stacy Havener: want. Not, not your circus. Oh.
[00:57:47] Simon Evan-Cook: And so now the pub started to fall again. Yeah. We'd fall apart again every now and then because we didn't have any clean glasses, but my stats improved.
[00:57:54] So the lesson there is always look at how people are incentivized.
[00:57:57] Stacy Havener: Yeah.
[00:57:58] Simon Evan-Cook: And that's so appropriate [00:58:00] for the fund management. Well, we always check how people are incentivized. They say they're a long-term investor, but their bonus depends on what they do in the next six months to a year. That's a mismatch.
[00:58:09] Mm-hmm. You've gotta really think about that hard. So I learned that lesson early.
[00:58:13] Stacy Havener: That is a very good lesson to learn. And what is that? What you measure matters, right? Like- Yeah ... and that's that. Yeah, exactly that. Okay, last question. Given your experience now, what's something you'd tell your younger self?
[00:58:27] Simon Evan-Cook: Well, it's, it's funny because it's the thing that you mentioned right at the start of the podcast, which is try to enjoy the journey- Yeah ... more. So you mentioned about when we've raised assets, and I'm thinking about the next bit.
[00:58:38] Stacy Havener: Yeah.
[00:58:38] Simon Evan-Cook: I have got... When I do look back and I think, God, it was, you know, the days in Premier when we were raising a lot of money, and we were winning awards.
[00:58:45] Yeah. That was fun, but I was always thinking about the next thing, and I was always a bit annoyed that this thing wasn't working as well as it could've been. And it's the same today, so I haven't learned this lesson still at the grand old age of nearly 50. I'm still not enjoying the [00:59:00] journey as much as I should be.
[00:59:01] Yeah. But these... Like, doing stuff like this is fun. Yeah. I'm gonna look back on this very fondly, and I just need to make sure that I enjoy that journey all the way along, even the tough bits. You look back and you forget the bits that were hard, and the people you met, and the triumphs you had. All of it was great, but it didn't necessarily feel great at the time So I'm, if I can work out how to do it, I'll let you know.
[00:59:25] Yes. But if I can just enjoy the great bits today and not sweat the stuff that is annoying me, then yeah, I'll be 20% happier. Yeah.
[00:59:34] Stacy Havener: The business, business advice and life advice.
[00:59:36] Simon Evan-Cook: Yes, absolutely.
[00:59:38] Stacy Havener: Thank you so much for being here. Thank you for getting me into this amazing studio.
[00:59:42] Simon Evan-Cook: It's lovely, isn't it? Yeah.
[00:59:43] Stacy Havener: It's very lovely.
[00:59:44] Simon Evan-Cook: Modelled on my lounge.
[00:59:44] Stacy Havener: Yes. Well, and if people want to follow along, what's the best way for them to do that?
[00:59:49] Simon Evan-Cook: Uh, well check out the Downing Fox website. Okay. That's where you'll find most of our stuff. I write a quarterly letter, which hopefully is readable and gives you food for thought.
[00:59:58] Likewise, I write on [01:00:00] Medium. My old blog post, Never Mind the Silver Bullets, is up there as well. All of these things, yeah, if you Google me, you'll find various footprints I've left all over the internet.
[01:00:09] Stacy Havener: Awesome. Thank you, Simon.
[01:00:11] Simon Evan-Cook: Pleasure. Thank you.
[01:00:12] Stacy Havener: This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
[01:00:18] The information is not an offer, solicitation, or recommendation of any of the funds, services, or products, or to adopt any investment strategy. Investment values may fluctuate, and past performance is not a guide to future performance. All opinions expressed by guests on the show are solely their own opinion and do not necessarily reflect those at their firm.
[01:00:37] Managers' appearance on the show does not constitute an endorsement by Stacy Havener or Havener Capital Partners.
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