Category Archives: Business

How Strong Personal Character Defines Investment Decisions

It seems likely that many readers, except perhaps for those that knew Sir John, would have been surprised to see only occasional mention of financial analysis, models, investment rules, or so on, but instead a list of well-defined and reasoned character traits.

by Lauren Templeton, principal and portfolio manager of Lauren Templeton Capital Management, LLC, and Scott Phillips, portfolio manager and contributor to The Templeton Touch

The re-release of The Templeton Touch provided us with an obvious occasion to reflect upon another of the great blessings in our lives which was having the privilege to work for a number of years with our mentor, Sir John Templeton. Perhaps what is lesser known about his influence among investors (including ourselves), was that it extended far beyond any passion for investment or security analysis and instead into the realm of one’s set of values and perspective on life. Within the special section that Scott added to this revision, this was a constant theme that naturally took hold—if not dominated—these interview discussions with investment luminaries.

Although Sir John will always be recalled for the specific illustrations he provided for successful investing, such as pioneering global investing, his contrarian-minded purchases, etc., it was his character and example as a human being that left the strongest impressions among the acquaintances that contributed to the book.

Likewise, through the explorative dialogue of these interviews a consensus was reached that Sir John often took an interest in individuals who possessed a certain passion for learning, the joy of life, and upholding a standard of high integrity above all else.

When William Proctor first sat down with Sir John in the early 1980s to write the original version of The Templeton Touch, there was clearly a great effort put forth to reveal the underlying factors to Sir John’s success as an investor. It seems likely that many readers, except perhaps for those that knew Sir John, would have been surprised to see only occasional mention of financial analysis, models, investment rules, or so on, but instead a list of well-defined and reasoned character traits. Admittedly, some of these traits people are born with to some degree, and some others need to be cultivated from the ground up. No matter what the starting position however, the below excerpt from Chapter 1 of The Templeton Touch represents to us a basic template for success, and in this case success can be defined in the field of investment, but also more broadly in “the game of life” so to speak.

For that matter, these are the same ideals that we practice, strive for, and measure ourselves against for progress. In sum, we believe that the standards we maintain in these areas will ultimately define our level of success as investors, which is most appropriately measured by us, you, and other observers as an ability to safely compound returns in the market above what is commonly available through the market indices. Hopefully, you too will find the excerpt below helpful in your own self-examinations as an investor, or otherwise.

We now refer you to the central determinants of the “Templeton Touch” which are listed below from Chapter 1 of the book. Continue reading

Find a Need and Fill It

What do Sir John Templeton, Henry Ford, Sam Walton, and Steve Jobs have in common? A desire to improve the lives of others.

by Lauren Templeton, principal of Lauren Templeton Capital Management, LLC

Here is a simple question: what if the large majority of people engaged in commerce, business, and investment are taking the wrong approach right out of the gate?  We can all recognize that many people are motivated to act on the basis of “getting” something.  That something people try to “get” can range from the material to the emotive, i.e., from a new car to the admiration of peers. Ludwig Von Mises explained it well in his book Human Action, in our opinion, when he stated that the cause of human action is owed to a feeling of unease. 

Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness.

Therefore, this relative unease in a person may help explain, why they do, what they do, i.e., the means and the ends. The specific why’s and what’s depend on the individual and what they assign the highest values to in their life. With that said, most people toil in the hopes of getting that one thing, or even the several things that will calm their own personal state of unease. Some are successful, some are not, and many who are driven solely to get money may discover the irony that it eludes them the most. The reason for this is simple. The individuals who are most successful in the free-market system are those who best address and calm the unease in their fellow man, not themselves.

In sum, the individual focused on giving rather than getting is the one most likely to create value for others. For this individual it is seeing the value they create for others that represents the reward, although great material wealth often coincides with success in addressing the needs of others in the market economy.

Taken in this light, entrepreneurs and innovative businesses are expressions of generosity. Entrepreneurs give the full breadth of their minds, skills, hours, and talents to the market in the hopes of delivering a good or service that is better than the present experience of their customer. Entrepreneurs pool all the resources they can discover in themselves and coordinate the talent they see in partners to address the needs of someone they probably do not know or have even met.

This discussion is easily surmised by a piece of advice a young John Templeton received from his parents when discussing how to start a business, “find a need, and fill it.”  This later prompted him to deliver wealth to the masses as a pioneer in both global investing and the mutual fund industry. Here are some other examples:

  • Henry Ford set out to manufacture an automobile that every man could afford, and was not only successful in meeting this need, but also forever changed manufacturing processes.
  • Sam Walton’s goal was to lower the cost of living for Americans, and thereby increase their standard of living.
  • Steve Jobs connected humanity through personal computing that was easy, intuitive, and broadly universal. 

Even a brief review of these entrepreneurs (and many others) and their biographical information quickly reveals a pattern of pouring all of their talents, or giving themselves over to a singular goal of improving the lives of others.

We feel that one of the most important observations we can share is that each of the entrepreneurs described above (and countless others) introduced a new idea, product, or service that improved the lives of their end user.  In each instance the entrepreneur takes a group of people and leaves them better off than they found them, often raising their productivity.  This is the basis of progress for human beings.  When we find large collections of people engaged in this behavior, an entire society will likely progress.  Conversely, when not enough people are engaged in this behavior, progress may stagnate.  This is, in our view, the simplest explanation for the dramatic increase in the standard of living experienced across the United States during the twentieth century.

This originally appeared as an investment letter written in early 2013.

New Video Links for Sir John Templeton on the 1987 Market Crash

In October of 1987, the stock market took a tumble that left investors shell-shocked. In the wake of that meltdown, John Templeton appeared on a panel of experts on the television show Wall Street Week to share his insights on recent events. There are valuable lessons to be gleaned from this footage, so we’re very thankful to our friends at Maryland Public Television for allowing us to repost excerpts here.

Continue reading

Article from the Wilson College Bulletin on John Templeton

We recently unearthed this profile of John Templeton from the February 1960 edition of the Wilson College Bulletin.

Investment Counselor: Like Doctor, Lawyer

John M. Templeton, M.A. (law) Balliol College, Oxford, has been president of Templeton, Dobbrow & Vance, Inc. for twenty years.

The firm’s three founders, Templeton, Dobbrow and Vance, were not law partners, however, as the name might suggest, but rather investment counselors.

Forty-five minutes from Times Square via express subway and a commuter bus to the suburban community of Englewood, N.J. — across the Hudson from Spuyten Duyvil — is the headquarters office and research center of the firm.

Here, again, there is much that resembles a law office, for in the large house converted to offices there are some 20 rooms where men are hard at work preparing analyses of companies not unlike the way in which lawyers might go about preparing briefs. There is a large reference library to the right of the entrance as well as smaller collections of reference materials in the respective offices. One clue to the research center’s connection with matters financial is the “banker’s green” carpeting in office, reception room and library.

The semblance between investment counseling and the practice of law was affirmed by Mr. Templeton himself. “Our role as investment counsel in not unlike that of a doctor or a lawyer—except that there are no midnight emergencies,” he added with a twinkle in his eye. Continue reading

Two Principles of Success, Part 5

More today on this concept of orderliness that Templeton touches upon in Step 9 of The Templeton Plan, “Utilizing Two Principles of Success.” Here are two exercises that can boost your business acumen instantly if you can put them into practice.

Pretend you are sending a cable; that is one of the best methods for learning economy of speech. Cables are charged for by the word. Soon you will eliminate extraneous clauses, unnecessary words, and other forms of fuzzy thinking. You’ll begin to drive your points home with a force you never realized was within your power.

The persevering person will learn that in speaking and writing it is important to keep an outline in Continue reading

Three Lessons in Giving the Extra Ounce

templeton-planWe have been highlighting John Templeton’s theory of “Investing the Extra Ounce,” found in his book The Templeton Plan. He summarizes the lessons in the chapter with these three points of advice:

1. To be outstandingly successful you must work just a little harder than those who are moderately successful. Learn to give one extra ounce and your rewards will be all out of proportion to that ounce.

2.  The extra ounce results in producing higher quality in all lines of work.

3.  If you give the extra ounce, your morale will be high and the teamwork you can achieve with fellow workers is bound to be extraordinary.

Praise in the Workplace

templeton-planWe have been highlighting John Templeton’s theory of “Investing the Extra Ounce,” found in his book The Templeton Plan. While much of Templeton’s advice in this book relates to personal success, he touches on management philosophies in this chapter and discusses the importance of praising employees for their hard work which, in his perspective, will encourage them to give an extra ounce of effort in their work.

To make others believers in giving the extra ounce and producing better quality, it’s imperative that you have high team morale. Your staff must be motivated to work together with pleasure and enthusiasm. Contrary to the popular romantic notions about business, the successful executive is not a loner. Give credit and praise to others. Be quick to point out how much help you’ve received from others and what a central role they have played in your accomplishments. Whenever any praise comes to you, that praise is due to all of your fellow associates. Make sure you’re right down in the trenches with them at all times.

In order to promote an attitude of the extra ounce, it has been John Templeton’s practice for more than thirty years to pay employees about 20 percent above the current trade salary levels. That is not the result of kindheartedness, Templeton is quick to point out. Rather, it is his belief that if you pay 20 percent more than normal, you will gradually accumulate a superior team; for 20 percent more money, you will field a team that is 50 percent more effective. “You get what you pay for,’ Templeton says. “The old adage is true.”

Always Underestimate What You Can Accomplish

templeton-planIn the spirit of this time of year, when summer vacations wrap up with children and young adults heading back to school and working adults refocusing their energies on professional tasks, we wanted to share a very applicable piece of advice from John Templeton as highlighted in The Templeton Plan. Step 11, Giving the Extra Ounce, explains the payoff of giving a small amount of extra effort in everything you do. In this chapter, Templeton also warns people to not overstate your abilities:

Even the overachievers, though, must follow certain rules. First of all, when you promise a result, make sure it’s realistic and that you can deliver. Even better, give more than you promised. This is especially true in managing corporations that are involved in long-range planning. If you are constructing a building or an airplane, you are going to have a budget extending two or three years or even more into the future. A budget is a powerful kind of promise. If your work comes in ahead of schedule and below budget, you’ve exceeded your promise. Then, on top of that, if your work is of the highest quality because you gave the extra ounce, you are a prime candidate to move ahead in your company.

Always underestimate what you can accomplish; this is a key success tactic. There is a temptation among ambitious executives to overstate their abilities and what they can produce. Even in risk situations, they will say, “Don’t worry. I will have this done in such and such a time.”

If there is any doubt in your mind, refrain from grandiose promises. Present the case factually and your ability to handle it realistically. Then work as hard as humanly possible to better your promise.

If someone asks you what you can do for them that John Doe can’t do, give a careful and reasoned answer. Big words, brag words, can come back to haunt you. Don’t say you’ll produce 15 percent a year in your mutual funds. Say, instead, that you will do everything within your power to produce a superior result. If you then do more than promised, everyone is happy. But if you make exaggerated claims, you will create a group of discontented clients, and that can hurt your career.

Giving the Extra Ounce

templeton-planIn the spirit of this time of year, when summer vacations wrap up with children and young adults heading back to school and working adults refocusing their energies on professional tasks, we wanted to share a very applicable piece of advice from John Templeton as highlighted in The Templeton Plan. Step 11, Giving the Extra Ounce, explains the payoff of giving a small amount of extra effort in everything you do. From the schoolyard to the investing world, that extra ounce can significantly increase your chances of success:

Even as a boy, John Templeton was an observer of people. He watched them in every phase of their lives, studied them, and questioned why they did certain things—and what impact those things had on their happiness and level of success. He was strongly impressed by the discovery that the moderately successful person did nearly as much work as the outstandingly successful one. The difference in effort was quite small—only an “extra ounce.” But the results, in terms of accomplishment and the quality of the achievement, were often dramatic.

Templeton called this principle the “doctrine of the extra ounce.” And he quickly noticed that the doctrine was confined not to just one field of endeavor but could be applied in all fields. In fact, it seemed to be a kind of universal principle that could lead to success in life.

For example, when it came to high school football games, Templeton discovered that the boys who tried a little harder and practiced a little more became the stars. They contributed the key plays that won games. They tended to be the ones who gained the support of the fans and were complimented by the coaches. And all because they did just a little bit more than their teammates.

Templeton also noticed that same doctrine of the extra ounce at work in his high school classrooms. Those who did their lessons reasonably well received good grades. But those who did their lessons a little bit better than anyone else—who exerted the “extra ounce”—received top grades and all the honors.

The same principle applied to his experiences at Yale. Templeton made sure that he had his lessons not just 95 percent right but 99 percent right. The result? He got into Phi Beta Kappa in his junior year and was elected president of the Yale chapter—an accomplishment that went a long way toward helping him be selected for a Rhodes scholarship.

Out in the business world, Templeton refined his doctrine of the extra ounce even further. He came to realize that giving that single extra ounce results in better quality. Those who try harder are capable of a higher level of performance. And the person who gives seventeen ounces to the pint rather than sixteen will achieve rewards all out of proportion to that one ounce.

John Templeton’s Signature Strategy: Maximum Pessimism

So far, this summer has proven that the U.S. economy is still extremely vulnerable. Housing sales and prices are still low, unemployment is high, and the stock market is volatile. 

John Templeton’s investing prowess is key to understanding that there are better days ahead. His principle strategy, maximum pessimism, should be embraced by economists and investors right now. An interview with Templeton in Forbes magazine article from January 16, 1995, outlines his approach to investing and uses historical examples to illustrate why maximum pessimism works.

In our first excerpt of the article, Templeton explains maximum pessimism in his own words:

“People are always asking me where is the outlook good, but that’s the wrong question,” he responds. “The right question is: Where is the outlook the most miserable?” Templeton calls this approach to investing “the principle of maximum pessimism.” Others might call it contrarianism. He explains it this way:

“In almost every activity of normal life people try to go where the outlook is best. You look for a job in an industry with a good future, or build a factory where the prospects are best. But my contention is if you’re selecting publicly traded investments, you have to do the opposite. You’re trying to buy a share at the lowest possible price in relation to what that corporation is worth. And there’s only one reason a share goes to a bargain price: Because other people are selling. There is no other reason.

“To get a bargain price, you’ve got to look for where the public is most frightened and pessimistic.”