Stay on the road less travelled

by James Anderson

source: Stay on the road less travelled | Scottish Mortgage

In his final review as joint manager of Scottish Mortgage Investment Trust, James Anderson reflects on the challenge and excitement of the search for extreme returns. Anticipating greater change to come, he urges investors to keep thinking distinctively.

After many years of anodyne reviews perhaps some bluntness is permissible in this final and twenty second version. There’s much that I have misunderstood and misjudged over the two decades but my ever-growing conviction is that my greatest failing has been to be insufficiently radical. To be blunt: the world of conventional investment management is irretrievably broken. It demands far in excess of the canonical ‘six impossible things before breakfast’ that Alice in Wonderland propounds.

经过多年的平淡无奇的评论，在我的第二十二封，也是最后一封致SMT投资者的信中，也许可以允许我多一些直率。在过去的二十年里，我误解和误判了很多事情，但我越来越坚信，我最大的失败就是不够激进。坦率地说：传统投资管理的世界已经不可挽回地崩溃了。它的要求远远超过了《爱丽丝梦游仙境》提出的经典“早餐前六件不可能的事”。

Some contentions

一些争论

But let me start by trying to set out what I do believe. Hopefully it doesn’t need saying that my successors should be suspicious of continuing to believe in these contentions for the next decades. As the world changes so should we. Indeed this is an appropriate point of departure. The investment world changed profoundly in the mid 1980’s. It resembles that most famously described by Ben Graham, the apostle of value investing, paid homage to by Warren Buffett and perpetually embraced by the media, as little as Alice’s rabbit hole described the reality of the late 19th century. To illustrate the change from the world in which a growth stock was defined by Graham as one able to double earnings in a single decade let’s look at some more recent figures:

但让我先试着阐述一下我的信仰。希望以后也不需要质疑我的继任者会怀疑未来几十年里继续相信这些论点。随着世界的变化，我们都应该如此。事实上，这是一个恰当的出发点。对于过去的投资，是价值投资之父本·格雷厄姆的叙事的世界，沃伦·巴菲特也非常认可。为了说明世界的变化，格雷厄姆将成长型股票定义为能够在十年内将收益翻一番的股票。这个想法一直受到媒体的欢迎，就像爱丽丝的兔子洞讲述了19世纪末的环境一样。但是，20世纪80年代中期，投资界发生了深刻的变化。让我们看看一些近期的数据：

I’m sure that many of you will recognise these numbers as the annual revenues of Amazon. They rather understate progress as the accounting for third party fulfilment is conservative. But we still have a compound growth rate of 41% per annum for over two decades. For those, like Graham, who prefer the bottom line then 2020 produced $31bn in free cash flow. This pattern of sustained growth at extreme pace and with increasing returns to scale has become more and more evident since the emergence of digital technologies as first exemplified by Microsoft (still growing after 35 years as a public company).

我相信你们中的许多人会发现，这些数字是亚马逊的年收入。他们在当年相当低估了公司的进展，因为受托责任让他们变得保守。但在过去的二十多年里，公司股价的复合增长率是每年41%。对于像格雷厄姆这样更喜欢利润数据的人来说，亚马逊在2020年产生了310亿美元的自由现金流。自数字技术出现以来，这种以极快的速度持续增长、规模回报率不断提高的模式变得越来越明显，微软就是第一个例子（作为一家上市公司35年后仍在增长）。

It is in these extremes that investing resides. Despite what the CFA foists on the young and innocent you cannot choose a level of risk and return along a classic bell-curve to suit your portfolio because that is neither accepting the deep uncertainty of the world nor acknowledging that the skew of returns is so extreme that it is the search for companies with the characteristics that might enable extreme and compounding success that is central to investing. But distraction through seeking minor opportunities in banal companies over short periods is the perennial temptation. It must be resisted. This requires conviction. The share price drawdowns will be regular and severe. 40% is common. The stock charts that look like remorseless bottom left to top right graphs are never as smooth and easy as they subsequently appear.

投资，就是在这些异常值的情况展开的。无论CFA对年轻和无辜的人灌输了什么，（在现实世界中），你不能沿着经典的钟形概率曲线（正态分布）选择风险和回报水平来构建你的投资组合。因为钟形概率分布既不接受世界的深刻不确定性，也不承认回报分布的倾斜如此极端。寻找具有可能实现极端和成功复合增长的特征的公司才是投资的核心。但通过在短时间内在平庸的公司寻找微小的机会来分散注意力是一种永恒的诱惑。我们必须予以抵制。这需要信念。这样的公司，股价会出现大幅下跌。40%的下跌是正常的。看起来像无情的从左下到右上的图表的股票图表永远不会像它们随后出现的那样平滑和简单。

So how do we identify these stocks with extraordinary potential? How do we acquire the conviction to allow the compounding to work its magic? As Jeff Bezos steps down as CEO let’s look back at what we spotted, how we endured and what we failed to do for shareholders. The common factors that are most likely to recur in the narratives of great investments are that the company should have open-ended growth opportunities that they should work hard never to define or time, that it has initial leadership that thinks like a founder (and almost always is one) and that has a distinctive philosophy of business - almost always from independently thought through first principles. Now, I think that all these traits were identifiable in Amazon from the start. To read the initial shareholder letter of 1997 was to know that this was the ambitious, patient creation of a very special mind. To be frank our failure to recognise this was because of our own limitations not an absence of clues. We were simply too aware of market movements and too preoccupied with the terrible combination of short-term performance and fear of downside to be able to be committed owners. By 2005-6 we were less bad investors and could recognise some of the potential and endure more of the slings and arrows. Of those there were plenty: the share price fell 46% from peak to trough in 2006. I became used to peers at client conferences declaring Amazon their favourite short. They particularly disliked the costs of two projects - Prime and Amazon Elastic Compute. The latter became AWS. Gradually we learnt and understood. But we should apologise for our willingness to trim Amazon back repeatedly when our holding size approached 10% of assets. That was misguided. Only in recent months has our enthusiasm waned. Amazon is now seen as good value, safe and acceptable. It no longer has a founder CEO. We fear that in his inimitable terms it is no longer Day 1 in Seattle though the road ahead is still long and profitable.

那么，我们如何识别这些具有非凡潜力的股票呢？我们如何获得信念，让复利发挥其魔力？在杰夫·贝佐斯卸任首席执行官之际，让我们回顾一下我们发现了什么，我们是如何忍受的，以及我们错失了什么。在伟大投资的叙事中，最有可能重复出现的共同因素是，公司有开放式的增长机会，他们应该努力工作，永远不要给自己框定范围或发展时间，它有像创始人一样思考的引领者或管理层，并有独特的商业哲学。它几乎总是从第一性原理出发，独立思考。可以说，所有这些特征从一开始就可以在亚马逊上识别出来。如果你阅读1997年亚马逊的第一封股东信，就会知道这是一个雄心勃勃、耐心创造的非常特殊的想法。坦率地说，我们没有认识到这一点是因为我们自身的局限性，而不是缺乏线索。我们只是太想了解市场走势，太专注于短期表现，以及由于对下行风险的恐惧而构建的糟糕投资组合。这让我们无法成为坚定的企业所有者。到2005-2006年，我们作为投资者不再那么糟糕，可以认识到一些发展潜力，并承受更多的挑战。这也让我们度过了很多困难时期：亚马逊股价在2006年从峰值下跌了46%。我已经习惯了在客户会议上，投资界同行们宣布亚马逊是他们最喜欢的做空标的。他们特别不喜欢Prime和Amazon Elastic Compute这两个项目的成本。后者则成为了AWS。渐渐地，我们学习和理解了它的战略。但我们也做错了一点，就是当我们的亚马逊持股规模接近总资产的10%时，我们削减了亚马逊的资产。对此我们应该道歉，这是错误的。直到最近几个月，我们对亚马逊的热情才减弱。亚马逊现在被市场认识到了价值、公司资产安全且可接受。它不再有创始人担任首席执行官。我们担心，用贝索斯无与伦比的的话来说，亚马逊已经不是Day One了，尽管未来的道路仍然漫长而投资亚马逊依然可以赚钱。

Time frames, likelihoods and radical uncertainty

时间框架、可能性和根本不确定性

The litany of reasons to be obsessed with long-term decision making is too long to describe here. But there’s an offshoot of it that seems unusually important yet neglected. It is inherent to the notion of efficient markets that all available information is incorporated in share prices. Only new information matters. This is used to justify the near pornographic allure of news such as earnings announcements and macroeconomic headlines. In turn this is reinforced by the power of near-term financial incentives.

痴迷于长期决策的一连串原因太长了，无法在这里全部描述。但长期投资的一个分支似乎异常重要，但却被投资者忽视了。有效市场概念的内在特征是，所有可用信息都包含在股价中。只有新的信息才重要。这被用来为上市公司的盈利公告和宏观经济头条等新闻近乎贪婪的吸引力辩护。反过来，短期的财务激励的力量又加强了这一点。

So far this is a standard critique. We share it but there is a twist to come. If you believe that all information is built into the share price and simultaneously that it is near term investment outcomes that matter this leaves a vacuum of thought. There is no apparent rationale for deciphering the future. If this sounds abstract it’s not so. Let’s take a look at Tesla to illustrate the puzzle. When we first invested in the company seven years ago we thought, or rather observed, that the regularity and pace of improvement in battery performance and of learning in building electric vehicles was already clear in practice and well-elucidated in academic study. Since then both the pace of improvement and the level of confidence surrounding the data has risen consistently. This made it as close to inevitable as investing allows that at some point electric vehicles were going to be better and cheaper than the internal combustion engine - quite aside from environmental issues. That’s simply what happens when a 15% plus improvement rate meets a 2-3% snail.

到目前为止，这是对短期投资标准的批评。我们也认同，但是除此以外还有更进一步的想法。如果你认为所有信息都包含在股价中，同时认为短期投资结果很重要，这就留下了一个思想真空。如果这样的话，我们投资者就没有必要去解读未来。这听起来很抽象，但事实并非如此。让我们用特斯拉来说明这个谜题。七年前（2014年），当我们第一次投资特斯拉时，我们认为，或者更确切地说，我们观察到，电池性能和制造电动汽车学习的规律和速度在实践中已经很清楚，在学术研究中也得到了很好的阐述。从那时起，数据的改善速度和信心水平都在持续上升。这使得我们投资特斯拉几乎不可避免，因为在某个时刻，电动汽车将比内燃机更好、更便宜，也更环保。当一个行业出现了一个15%以上的改善率的挑战者，遇到以前2-3%的改善率企业时，就会发生现在特斯拉的这种情况。

Since Tesla was the only substantial Western player our investment decision was hardly demanding. We just had to listen to experts and wait. But most investors do not listen to experts. Instead they listen to brokers and the media, besotted as it is by fear mongering and the many short sellers. The headlines tell them that next quarter will be hard for Tesla and that Elon Musk is outspoken. To us this was a blatant market inefficiency offering an extraordinarily high likelihood of high returns to the patient. All too many investment decisions are marginal judgments. That electric vehicles would win had become intensely likely. We needed no insight, no clever model to spot it - only patience and trust in experts and the company. The uncertainty was elsewhere. It was elsewhere geographically - given the levels of competition in China it was profoundly uncertain that our investment in NIO would flourish or even survive. It was elsewhere in return calculations for Tesla itself. This particularly applies now and to Tesla’s autonomous driving ambitions. This could transform the economics of the company. But try though we do it seems implausible that we can estimate either the likelihood of success in a radically new endeavour nor the precise outcomes in cash-flows should success emerge. To us it is bizarre that brokers, hedge fund mavens and commentators can claim to be able to decipher the future and assign a precise numerical target to the value of Tesla. Perhaps they are all geniuses. We are not. We should respect and endure uncertainty, try to identify where extreme upside might occur and observe patiently.

由于特斯拉是唯一一家重要的西方电动汽车公司，我们的投资决定并不苛刻。我们只需听取专家的意见并等待。但大多数投资者不听专家的话。相反，他们听从经纪人和媒体的意见，被散布恐惧和许多卖空者所迷惑。头条新闻告诉他们，下个季度特斯拉将很艰难，埃隆·马斯克说话太过耿直。对我们来说，这是一种明显的市场低效，为耐心的投资者提供了极高回报的可能性。市场上太多的投资决策都是边际判断。而电动汽车获胜的可能性非常大。我们不需要洞察力，也不需要聪明的模型来发现它——只需要耐心和对专家和公司的信任。不确定性在别处。这是在其他地理位置的地方——考虑到中国的竞争水平，我们投资的蔚来汽车能否蓬勃发展甚至生存下来，存在很大的不确定性（他山之石注：SMT已经清仓蔚来的持仓）。这是特斯拉自己的回报计算。这尤其适用于现在和特斯拉的自动驾驶野心，可能会改变公司的经济状况。但是，尽管我们这样做了，但似乎不太可能估计公司一项全新的尝试取得成功的可能性，也不可能估计成功后现金流的确切结果。对我们来说，经纪人、对冲基金专家和市场评论员声称能够破译未来，并为特斯拉的价值设定一个精确的数字目标，这很奇怪。也许他们都是天才。但我们不是。我们应该尊重并忍受不确定性，努力找出可能出现极端上涨的地方，并耐心观察。

It’s not growth versus value

这不是增长与价值之争

Tesla is but an example, if a crucial one, of the central issue for investing in our times. It isn’t growth versus value, it isn’t the level of markets, it isn’t the economic growth rate in 2021 or the progress of the pandemic but it is understanding change, how it happens, how much happens and its implications. The refusal to embrace this is probably a reflection of the doomed desire for security but it is also emblematic of a broader crisis in economic thought that is preoccupied with the mathematics of equilibrium. But if we switch our attention to studying deep change then there is less temptation to believe that investing has eternal verities that we can default to as a rule book. It’s not ‘this time it’s different’ that is the cry of danger but the refusal to admit that the world, and its reflection that is investing, is ever the same. The only rhyme is that in the long run the value of stocks is the long-run free cash flows they generate but we have but the barest and most nebulous clues as to what these cash flows will turn out to be. But woe betide those who think that a near term price to earnings ratio defines value in an era of deep change.

特斯拉是投资我们这个时代核心问题的一个关键的例子。这不是看待增长与价值的关系的问题，也不是市场热度水平，也不是2021年的经济增长率或疫情的进展，而是理解变化。它是如何发生的，发生了多少变化，其影响如何。拒绝接受这一点可能反映了对投资中安全的注定的渴望，但它也象征着专注于均衡数学的经济思想所带来的更广泛的危机。如果我们把注意力转移到研究深层次的变化上，那么就不会有那么大的诱惑去相信投资有永恒不变的真理，这些真理会永远成为我们的教科书。这并不是“这次不一样”的意思，而是意味着拒绝承认世界及投资永远都是一样的。唯一押韵的是，从长远来看，股票的价值是它们产生的长期自由现金流的反映，但我们对这些现金流的结果只有最简单、最模糊的线索。但在这个深刻变革的时代，那有认为短期市盈率定义了价值的人，未来要倒霉了。

The future

未来

There will almost certainly be more wrenching, inspiring and dramatic change in the next decade than we have ever seen. I’m very envious of the opportunities and experiences that my successors will enjoy. Even in the last year, amidst the tragedies of the pandemic, there have been hints of what is to come. I don’t mean the surge in digital platforms that helped to navigate the constraints of the pandemic but still more dramatic and important rising forces. From the extraordinary revolution that will transform our societies for the better in renewable energy becoming mainstream to the emerging wonders of synthetic biology to the possibility that healthcare innovation becomes a regular series of beneficial revolutions rather than a complex and frustrating drain of resources the potential is wonderful and the threat to old empires looms. It would have been hard for us to have educated ourselves in these areas of unashamed excitement without our involvement in venture capital. We are forever grateful that we have found our way to interact with the extraordinary minds and energies in the unquoted world. Frankly, five years ago I would have been amazed at the access and opportunities that we have come to take as normal. We are very fortunate. It’s a privilege. Our former Board member, John Kay, taught us many things but one of the most valuable was the role of obliquity. By engaging with visionary minds and their companies we are simply seeking insight into the world of tomorrow. Often we are overwhelmed and puzzled more than comprehending. That’s the plan. The investment outcomes are but the eventual outcomes of the mentality and process.

在接下来的十年里，几乎可以肯定会有比我们所见过的更痛苦、更鼓舞人心、更戏剧性的变化。我非常羡慕我的继任者将享受的机会和经历。即使在去年，在疫情的悲剧中，也有迹象表明未来会发生什么。我并不是说数字平台的激增有助于克服疫情的限制，而是更具戏剧性和重要性的崛起力量。从将使我们的社会变得更好的非凡革命（可再生能源成为主流）到新兴的合成生物学奇迹，再到医疗创新成为一系列常规的有益革命而不是复杂而令人沮丧的资源消耗的可能性，潜力是巨大的，对旧帝国的威胁已经近在眼前。如果没有参与风险投资，我们很难在这些令人兴奋的领域接受教育。我们永远感激我们找到了与未知世界中非凡的思想和能量互动的方式。坦率地说，五年前，我会对我们像往常一样获得的机会和机会感到惊讶。我们很幸运。这是一种特权。我们的前董事会成员约翰·凯教会了我们很多东西，但其中最有价值的是间接思考的作用。通过与有远见的人及公司接触，我们在寻求对未来世界的洞察。我们会在过程中常常感到不知所措和困惑，而不是理解。但这就是我们的计划。投资结果只不过是我们每个人心态和过程的最终结果。

We need to remain eccentric. In fact we need to become more so and more prepared to be radical. We’ve always claimed to learn from the remarkable leaders we are lucky enough to meet in managing Scottish Mortgage. If I may I’d like to end by quoting two of them. The first is Noubar Afeyan, founder of Flagship health investors but also Chair of Moderna. A year ago I would at this point have needed to detail the purpose of Moderna but that is now delightfully redundant. But the comment I want to quote applies far beyond Moderna and vaccines:

我们需要保持特立独行。不仅如此，我们需要变得更加激进，并做好更激进的准备。我们一直声称要向我们有幸在管理苏格兰抵押贷款（SMT，柏基的旗舰产品）方面遇到的杰出领导人学习。如果可以的话，我想引用其中两个来结束我的演讲。第一位是Noubar Afeyan，Flagship health investors的创始人，也是Moderna（MRNA）的主席。一年前，我需要在这一点上详细说明Moderna的目的，但现在这是令人愉快的冗余。但我想引用的评论远远超出了莫德纳和疫苗的范围：

“Let me say maybe something stark…which is that we have to be willing to embrace unreasonable propositions and unreasonable people in order to make extraordinary findings because the notion that utterly reasonable people doing utterly reasonable things will produce massive breakthroughs doesn’t compute to me”.

“让我说，也许有一点很明显……那就是我们必须愿意接受不合理的主张和不合理的人，才能做出非凡的发现，因为完全合理的人做完全合理的事情会产生巨大的突破性想法对我来说并不成立”。

There is no industry more suspicious of the unconventional than fund management. We need to reinvent from first principles. We need to help create great companies that embrace the extraordinary. Plainly no one has been better at demonstrating and articulating this than Jeff Bezos. His recent, and sadly last, CEO letter concluded with a plea:

没有哪个行业比投资管理更怀疑这种非常规做法了。我们需要从第一性原理中重新考虑投资管理。我们需要帮助创建拥抱非凡的伟大公司。显然，没有人比亚马逊的杰夫·贝佐斯更善于展示和阐明这一点。他最近，也是最后一封信中以恳求结束：

“We all know that distinctiveness - originality - is valuable…What I’m really asking you to do is to embrace and be realistic about how much energy it takes to maintain that distinctiveness. The world wants you to be typical - in a thousand ways, it pulls at you. Don’t let it happen”.

“我们都知道独特性，原创性，是有价值的。我真正要求你做的是拥抱这种独特性，和现实地看待保持这种独特性需要投入多少精力。这个世界希望你成为普通人，并千方百计地吸引你。但别让这种情况发生。你必须为自己的与众不同付出代价，但这是值得的”。

I don’t think Tom and Lawrence need this advice, or would neglect the views of Mr Bezos. But please help Scottish Mortgage become more unreasonable and more distinctive as the pressures of the investment world continue to pull at us.

我不认为汤姆（Tom）和劳伦斯（Laurence）需要这个建议，也不认为他们俩会忽略贝索斯先生的观点。但是请帮助SMT变得更不合常规、更加独特，因为投资界的压力持续的拉扯着我们。

2021.5.12

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