Frank Thoughts: PIGS
Frank Boland
April 19, 2011

“No!  I can’t talk to you now.  Call me another time,” bellowed the man on the other end of my phone.   Despite the abruptness, the voice had sounded cultured … even upper class.  But then why wouldn’t it?  As a young broker, I had cold-called the Chief of Psychiatric Services of Harvard University.      It was 1966 and my firm, Estabrook & Co., had opened an office in Harvard Square.  I was sent there with the message, “Penetrate the Harvard community.”  Hence the early evening call … and the rebuff!

     It was about a month later before I had the courage to call back.  He could not have been more gracious the second time.  In fact, I was invited to his house for the monthly meeting of his investment club called the PIG’s.  The acronym stood for PSYCHIATRIC INVESTORS GROUP.   I was asked to bring three or four “good” investment ideas.   You can imagine my unease at meeting and presenting before five Harvard psychiatrists!  Especially when one of them let me know early on that he was connected to the Johnson family at Fidelity and was an investor in Magellan which was then a private mutual fund.

      My first idea absolutely bombed.  But then I had presented it as the talking heads do today on CNBC ...  all quantitatively.  Isn’t that what the investment business is?  “We like XYZ because it’s cheap relative to its peers at 12x earnings, priced below a book value of … blah, blah, blah.”  All numbers.  I knew “shrinks” listen for a living … but then at some point I also expected they would say something.  Anything!  But no, I got total silence.  Five psychiatrists sitting in a room saying absolutely … nothing! 

      As I stared across the living room I made eye contact with the youngest one.  He was the one who had bragged about his Fidelity connection.  Suddenly, at a very sub-conscious level, I knew what to do; TELL THEM A STORY.  I didn’t think of it at the time, but psychiatrists listen to people’s stories all day long.  So I proceeded to tell them a story about International House of Pancakes.  They bought the stock. It worked well and I was invited back.  In subsequent meetings I told them stories such as … Digital Equipment.  “Ken Olson, a former M.I.T. professor, (M.I.T. is a mile down the street from Harvard so they could easily relate) had a vision of making smaller computers than I.B.M.’s big main-frames and set up shop in an old woolen mill that previously made blankets for the North during the Civil War.”etc. etc. 

      That night I realized investing is much more than numbers.  Sometimes the numbers –as in Enron and WorldCom- are just fraudulent.  To compete you need to grasp whole CONCEPTS.  Stories help us do this by providing us with knowledge (and entertainment) from other people’s experiences.  This is the foundation of the movie industry and best selling novels.  It is also the basis of money management.  Every good portfolio manager I’ve ever known has the art of the story teller in him.



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