Bruce Flatt is the CEO of Brookfield Asset Management, a Canadian alternative asset manager with over $330 billion in assets under management. His focus on buying quality assets at value prices has earned him comparisons with Warren Buffett (Trades, Portfolio). Flatt gave a talk at Google in September of 2018, where he discussed Brookfields’ guiding philosophy and the mistakes he has made along the way.
Guiding principles
Flatt’s philosophy is quite Buffettesque in the sense he seeks to buy great assets at fair prices, rather than poor assets at great prices:
“If one has to pay more for great assets, that’s OK. But make sure you buy quality. Don’t do it at any price, because price is important. Go away from the trend and buy value. If you can buy great assets, especially during distressed times, then [do so].”
When it comes to real estate, this advice is of particular importance as quality property tends to be sheltered from downturns. For instance, if you own commercial office space in the center of London, the value of that real estate portfolio is unlikely to decline in value over time.
Flatt talked about buying an office block on Park Avenue in Manhattan in 1996 for $432 million. Brookfield held it for 21 years and sold it for $2.2 billion, all the way through 9/11 and the financial crisis. No matter what was happening, that asset kept appreciating in value.
Mistakes made
Flatt doesn’t believe in limiting the number of mistakes. Rather, he believes in limiting the impact of mistakes. That way, you can learn from them and incorporate those lessons into your philosophy.
“We make lots of mistakes. It’s not possible in investing not to make mistakes, so everyone should remember that you just have to keep making them. We don’t try to limit the amount of mistakes, we try to limit what the effects of those mistakes are.”
Flatt then went on to list some of the mistakes he has made in his career:
“Sometimes we’ve got seduced into buying a bad business cheaply. That’s a mistake. Sometimes we started too large in a business or a market. Sometimes we got the compensation and incentive plans wrong. Sometimes we weren’t as strict on the financial covenants in an up market. Because what happens in an up market is that everyone wants to lend you money...And lastly sometimes we’ve taken on undue development risk in new jurisdictions, or unstable ones”.
The ability to own up to one’s mistakes is a true mark of mature thinking. Others make mistakes so that we don’t have to. So the next time you are contemplating a stock investment, think about the above. Think about what it means to buy value in areas that you understand.
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