market folly

Baupost Group's Seth Klarman gave an intriguing guest lecture at Harvard's Psychology of Leadership course back in 2006.  Given his rare appearances, we wanted to highlight his thoughts on this topic below:

On Leading An Investment Firm

His most relevant thoughts were perhaps where he talked about leading an investment firm.  He noted that he talks with the non-investment team every quarter to make sure they're kept afloat about the firm's investment strategy.

He does this in order to make sure everyone in his organization is on the same page.  Klarman wants a business culture where people are willing to spend extra time to keep an eye out for mistakes.

Klarman says a good leader isn't afraid to fail.  Klarman also recommends finding a good mentor.  The latter is evident all through the hedge fund industry as you often see analysts and portfolio managers learn from talented investors and then go off to start their own firms.

The Baupost man also noted that turnover is a hidden cost in running a business since it takes time and effort to train them.  In the past we've posted up a profile of Baupost Group for those interested.


Moral Values For Leaders

Klarman also touched on moral values for leaders, noting that you have to play by the 'news test.'  What he means by that is you should live in a way that you would not be embarassed if something appeared on the front page of the news.  Fellow hedge fund manager Lee Cooperman also touched on this in his recent presentation on hedge funds and life.


Mistakes He's Made As A Leader

As an investor, it's obvious that learning from mistakes is a must.  Given Klarman's ability to do so as an investor, it should come as no surprise that he's also learned from his mistakes as a leader.  He advocated not to tolerate a "difficult person" for very long, even if they are talented.  It's clear that Klarman places a lot of value/emphasis on the moral character of his firm.


Embedded below is the video of Klarman's interview on leadership:



Hat tip to Valueprax for flagging this video.

For more from this legendary investor, be sure to check out notes from Klarman's book Margin of Safety as well as Klarman's recommended reading list.