Michael Shearn - Golden Rules on Life & Investing

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Mar 06, 2014
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Michael Shearn is the Managing Partner of the Time Value of Money Fund based in Austin, Texas. He is also the author of The Investment Checklist: The Art of In-Depth Research. On September 20th, 2013, Michael visited Bulldog Investment Company (an undergraduate investment program) at Texas Lutheran University in Seguin, Texas, to share his thoughts on life and investing.

If you Google "Michael Shearn" you won’t find much on the money manager. And yet his research prowess commands an audience with the likes of Warren Buffett (Trades, Portfolio), Charlie Munger (Trades, Portfolio) and top hedge fund managers. He is energetic and enthusiastic, but quite unassuming. My Texas Lutheran University students came to this realization as they researched the investor and author in preparation for his speaking engagement on campus.

Once the investment manager arrived the students found that in a world of non-stop self-promotion and hyper-consumption, Shearn is perfectly happy to live below the radar screen. As his story unfolded, the students quickly realized there was much more to this guy than just formulas and ratios. He definitely does not fit any Wall Street stereotypes.

Shearn started his talk by saying he wanted to share his biggest mistakes. As his career has progressed, the disciplined investor has kept a log of mistakes made, why he made them and what he does so he doesn’t repeat them. This has allowed him to be increasingly efficient and focused over time.

In expanding upon mistakes, Shearn said you have to keep your emotions from getting the best of you. He quoted Charlie Munger (Trades, Portfolio) saying, "You can always tell someone to go to hell tomorrow." Learning from his own experiences, Shearn says he will often compose a biting email but waits to see how he feels after cooling down. He added that when managing investments you must keep your emotions in check and allow logic and rationale to guide your decisions.

Shearn then asked the students, "What is the one sin you’ll have no fun with?" He joked that lust and gluttony can be fun, but you’ll never be happy if you allow envy to take hold of you. Shearn said envy is the worst human emotion as it distracts you from focusing on things that matter. This causes resources to be allocated in less than productive manners and causes people to do things that aren’t who they truly are. As such, you have to be authentic to yourself.

Instead, Shearn encouraged the students to look for their passions in life. If you focus on things you are passionate about, it helps to block out envy. He added, "Passion is the fuel for tenacity which allows us to push through obstacles and succeed."

In addition to being a well regarded investment analyst and manager, Shearn is the author of the "The Investment Checklist: The Art of In-Depth Research." I first picked up the book more than a year ago and found myself rapidly underlining passages and scribbling notes in the margin. The thing I found most impressive was not the usual analysis of financial statements, but rather Shearn’s ability to deeply and thoroughly evaluate who management is, how they function and what they value.

Fortunately, the author shared a few of his secrets mined from countless hours of research and interviews. He told my TLU students that before investing you must determine if management has sincere integrity indicating that this is often not revealed until management is challenged by difficult circumstances. Furthermore, he added that shareholder value is not just maximizing rates of return — but rather providing value to all stakeholders. In doing so, Shearn wants to make sure customers, suppliers and employees are all treated well. Maybe Wall Street should take note.

As Shearn concluded his two-hour talk he shared two final points. He reminded the students to be careful of how they use their time as it is a finite resource that is never replenished. In recognizing this, he emphasized that they think about how they allocate time just as they would the finances on an investment project.

Shearn then offered that his biggest lesson to impart was, "Money does not buy us happiness, but rather offers financial flexibility and freedom." Just as with time, use your financial resources wisely.

The two-hour talk went by so quickly. However, as I thought about Shearn’s words I realized that no matter what your major, career path or stage in life, his "investing" lessons are invaluable for everyone.

Part 1: Michael Shearn on Investments

Part 2: Q & A