Burns: From a philosophical perspective, we prioritize being good holders and owners of businesses over being the world’s best sellers of businesses. We’re willing to be patient so we can benefit during periods of transformational growth. We don’t want to sell a company like Tesla halfway through its journey because, mathematically, it becomes a lot more painful when you miss out on a continued upswing. We’re always trying to optimize that trade-off, but sometimes we’re going to end up selling a business a little bit later than we would ideally want to.
As valuation goes up, it can become harder to see when that point might be. Our performance has benefited from several companies that have experienced second acts, and we don’t always have that emergence priced in at the beginning. We’re seeing this now in the electric vehicle, autonomous driving, and artificial intelligence (AI) spaces in particular. AI is going to be huge and it’s going to have very complex impacts on civilization. It’s important that we remain open-minded, responsive, and adaptive as we consider where benefits may come through.
Coutts: As growth investors, we actively seek disruptive companies, those that we expect will thrive in different market conditions. We believe there is an awful lot of change that has happened in the world and that will continue to happen. Those special companies that can adapt to new things, if we can find those, we can own them for 10 to 20 years. That can be incredibly valuable.
It’s very difficult to identify those disruptors at an early stage, and it’s easy to think a company is of a higher quality that it really is. To help us in our search, we maintain several relationships with external academic experts and research institutes. Those relationships help us get a broader understanding of an industry, a particular company’s position within that industry, and how a macro environment might affect future growth. Some of what we learn through these partnerships can help us get ahead of and put appropriate weight on certain factors behind new and growing technologies—AI for example, including where benefits might come through for investors.