How do I get any research done since I travel a lot?

Painting is by my father, Naum Katsenelson

You can listen to a professional narration of this article below:

Article available in Spanish here.

I will be traveling a lot over the next two months: Copenhagen, Stockholm, London, Tallinn, Riga, Paris, London, Budva (Montenegro), Dubrovnik, and Budapest. If you live in one of the cities I am visiting, register here.

One more thing. We are considering holding a reader event in Denver at the end of August (around the 28th, 29th, or 30th). If you are interested in attending, register here.

We'll be giving away signed copies of my Little Book of Sideways Markets. The book is free with a minimum donation of $20 to Tikva [Odessa] Children Home (a charity that helps Jewish Ukrainian orphans and war refugees in the wonderful city that has recently been bombed by Russia).

In fact, here is an idea: Let's make August a charity month!

If you donate at least $40 to Tikva Odessa, we will mail you a signed copy of The Little Book of Sideways Markets. If you donate $100 or more, we will mail you both The Little Book of Sideways Markets and Soul in the Game  (signed!). Please email a proof of donation and your mailing address (in the US only) to Barbara pa@imausa.com .

Don't forget to tell your friends!  This offer ends August 31^st.

How do I get any research done since I travel a lot?

In today’s letter I want to address a question that I get asked at times: How do I get any research done since I travel a lot? And then I’ll explain the reasons for two next trips.

To answer this question, I need to explain how we do research.

The writer and investor in me are on never-ending quests. The writer is always seeking new stories, while the investor is looking for new ideas, mental models, and ways to optimize our current portfolio. It is difficult to distinguish where the writer ends and the investor begins – the two identities have a considerable overlap.

As my wife would tell you, my brain is constantly active. I have written extensively about how I write (I dedicated several chapters in Soul in the Game to this topic). I also wrote a lengthy essay in the past on how I work; therefore, here I will focus specifically on research and travel.

The way we do research resembles organized chaos; it looks nothing like the work life of a typical knowledge worker.

How does typical knowledge work proceed? Even though most people reading this are not working on assembly lines (if you are, my respect!), our society's thinking about work has been shaped by Henry Ford's assembly line, which revolutionized the auto industry and then went on to revolutionize many other industries, including fast food.

Fast food restaurants – take McDonald's and Chick-Fil-A for example – are just small food factories run by assembly line processes. Here is the issue: Most people who become knowledge workers had a job at a fast-food restaurant early in their lives. There is nothing wrong with that, except that it reinforces in our young minds what work is: going into a place with four walls, clocking in, diligently working for four hours, taking a lunch break, working for another four hours, clocking out, and then going home.

The assembly line mentality is appropriate for making burgers, where the worker falls into a temporary coma as he mindlessly repeats a narrowly defined set of tasks. The work switch turns off when he punches out and goes home, unless he is making burgers at home for dinner. Something similar often takes place in corporate America. 

Investing, on the other hand, is a creative activity. The key performance indicator (KPI) for a fast-food restaurant is meals per hour. Investing, like any other creative activity, is not an ideas-per-hour type of endeavor. A large part of investing is simply thinking (not acting), patiently researching, waiting for stocks to reach your desired prices, looking for insights, trying to figure out what others see and don't see. And doing all this while keeping your emotions – your biggest enemy – in a state of equanimity.

Creative thinking doesn’t start and stop when you punch in and out of your office time clock. This is not how creativity happens.

I speak from experience, and I am sure anyone who has done anything creative will agree with me. Any creative activity is an ongoing tango between our conscious and subconscious minds. The subconscious mind never shuts down; it keeps creating long after I step away from the computer, and it continues when I am engaged in activities unrelated to investing or writing, such as taking a shower, walking in the park, lifting weights, or doing any other mundane activity.

In fact, getting away from the computer and switching to any of the aforementioned activities is conducive to creativity; it introduces new and different pathways of thinking that I would not have stumbled upon if I had spent all day staring at the computer. This is why an assembly line attitude is counterproductive to creative work, especially investing or writing.

I read that walking in the park (something I do daily) is conducive to creativity because it introduces asymmetry into our lives. If you are reading this in the office or at home, look around you – you are surrounded by symmetry. Door frames, windows, mirrors, tables, photo frames, and the computer screen I am looking at as I type this – are perfectly symmetrical shapes. Trees, leaves, the sky are not symmetrical. Maybe this is why being exposed to art is also important.

Spending all your time within the four walls of an office is not conducive to generating new creative ideas. However, this point is nuanced. There is a lot of value in reading companies' financial filings, listening to conference calls, reading expert transcripts, building and updating financial models to understand the economics of a business, running screens to look for new stocks, going through the holdings of other investors, or reading their client letters.

However, none of these standard investing activities have to be done within the four walls of IMA Global HQ in Denver, even though when I am in Denver, I do them in the office. The wonders of modern technology allow me to do most of them from the comfort of my laptop at a coffee shop, on a park bench, or in an airplane or hotel room when I travel. Not all of them must be done by me, which is why IMA also employs an analyst (or two). 

I don't want to diminish the importance of these activities; they are the foundational layer of any investing research. We spend a lot of time in the domain of four-walled activities, but over the years I have found that doing them solely is not enough, at least not for us. Uncommon ideas, new ways of thinking, and seeing what others don't rarely come to me from the traditional activities. If you do what everyone else does, you'll get what everyone else gets.

I spend a lot of time talking to my investment friends, and I am lucky to have many of them. They enrich my knowledge and challenge my thinking. These conversations take place over the phone, face-to-face at conferences (I attend four or five small, private conferences a year), or during my personal and business trips.

I don't think this is unique to investing, but my personal and business lives often intertwine. Many of my business relationships have developed into meaningful personal ones. And my personal travels often bring me investment insights. It's impossible for them not to. Traveling allows me to break out of my myopic circles, of which I have plenty (I wrote about that here). I am seeing the world, and I am investing in companies that operate in this world. This is why I find travel so enriching. (In this video, I discussed how visiting Milan and Zurich helped me understand Philip Morris International better; a few years later, we bought the stock).

When I travel, I make an effort to meet the management of the companies we own and to break bread with IMA clients. We talk to the management of every company we own; meeting them in person is a nice bonus. IMA has about 330 clients, only a dozen of them in Colorado – they reside all over the world. When I travel, we host intimate client dinners and I get to meet them, often for the first time.

Also, traveling gives me the opportunity to meet my readers, who are all over the planet as well. I love those get togethers because they let me meet new, interesting people who have similar interests (this is why they are reading my articles) and learn from them.

When I travel, I always bring my laptop and still do some work-related activities. I talk to my analysts daily, even when I am away. Investing, if you truly love it, is not a job; it is a lifestyle. Ironically, my biggest issue is not finding enough time to work, but finding enough time to live.

My thoughts on work-life balance are always changing. But there are certain things that are absolute. Especially, I want to make sure I spend quality time with my family. This is why I bring my family members on business trips; plus, I have to confess, I hate traveling alone.

Love what you do and you’ll never work a day in your life. This is what I wish for my kids. This is the life I live.

About my next two trips.

My kids are growing, and I know the time will come when they won’t have time to travel with me. They love Europe. My only issue with Europe is that I cannot handle heat (growing up in a place located above the Arctic Circle had a lot do with that). This is why I decided to take my kids to a place I know (fingers crossed) will not be hot in the summer.

On August 6th, I am taking my oldest children, Jonah and Hannah, and Jonah’s girlfriend Molly to Scandinavia. We are going to fly into Copenhagen, spend a few days there, then take a train to Stockholm. From Stockholm, we are going to board an overnight ferry to Tallinn, Estonia. We will spend a few days there and then drive to Riga, Latvia. I have been to Tallinn twice in my life, in 1980 and 1990. I have fond memories of Tallinn.

In 1980, I was 7 years old and Tallinn was the first European city I ever visited. I still remember the cobblestones of Viru Street, my oldest brother Leo begging my parents to buy him a book of the Dutch painter Hieronymus Bosch (they did), and chocolate-covered peanuts.

In 1990, I was a cadet at the Murmansk Marine College and my class was in Tallinn waiting to board the Kruzenshtern, a tall ship, and embark on a two-month voyage around Europe. My only memory from that trip is of ice cream in dozens of flavors – something I had never tried before.

Then, on September 18^th, on a separate trip, I am flying to Paris to have dinner with a person I have a tremendous admiration for, Sergey Guriev. Sergey is a Russian economist; he was an advisor and speechwriter to President Medvedev (this was before Medvedev went off the rails). Sergey criticized the government for seizing Yukos from its shareholders, and, facing imminent prosecution and possible imprisonment, he fled Russia to Paris. Today, he is the Provost of Sciences Po in Paris and a critic of Putin and the war. He coauthored a book that I really enjoyed and hopefully will review in the future, Spin Dictators. Sergey and I have been pen pals, and I really look forward to meeting him. 

I am going to be in Paris just one night, and in the morning I am taking a train to London. I will spend an evening there with a close value investing friend, then meet with two UK companies we own and have dinner with IMA clients. The next day, my brother Alex and I are flying to Croatia. 

Alex and I will spend a day in Dubrovnik, and the following day we are going to take a taxi to Montenegro, the real destination and purpose of this trip. I have a close childhood friend who lives in Russia and whom I will refer to as Mr. Z for his safety. I have not seen Mr. Z since 2008, the first and last time I visited Russia since I moved to the US in 1991.

Mr. Z’s 18-year-old son left university in Saint Petersburg and moved to Serbia because he did not want to be drafted into the Russian army to fight in an unjust war. A few months later, his older sister joined him. This is a typical story in Russia: Thinking people who oppose the war and have means have left Russia or sent their kids to other countries. 

Mr. and Mrs. Z are coming to Serbia to visit their children, and then they are going to spend a week in Montenegro. Alex and I are joining them for a few days there, then we’ll take an overnight train with them to Belgrade. We will meet IMA colleagues who live in Serbia, sight-see Belgrade, and fly back to Denver the next day. 

As you can see, my trips, especially the second one, will be packed; but I’ll try to find time to meet my readers.

Watch this video where I discuss an overlooked factor in investing.

Drawing is by my brother, Alex Katsenelson. Prints available on ArtistUSA.com.

Adagio from the Ballet Spartacus

Today I want to share with you an unbelievable piece: “Adagio,” from the ballet Spartacus, by Russian-Armenian composer Aram Khachaturian. Many of you, especially those who have kids, will know this piece from Ice Age 2.

Vitaliy Katsenelson is the CEO at IMA, a value investing firm in Denver. He has written two books on investing, which were published by John Wiley & Sons and have been translated into eight languages. Soul in the Game: The Art of a Meaningful Life (Harriman House, 2022) is his first non-investing book. You can get unpublished bonus chapters by forwarding your purchase receipt to bonus@soulinthegame.net.

Please read the following important disclosure here.