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Thinking Aloud is a podcast series where Brown Advisory’s investment professionals unpack an idea that has recently shaped their perspective. Each episode features an informal conversation with a Brown Advisory expert about their insight, gathered from a book or article, a conversation, speaker, conference, podcast, compelling data point, or even a personal event. At its heart, the podcast invites you to explore how broad insights can challenge assumptions, deepen understanding, and inspire more intentional decision‑making. We hope each episode encourages you to stay curious, reflect on what influences your own thinking, and remain open to learning from the world around you.
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Carey Buxton: Hello, I'm Carey Buxton, a partner at Brown Advisory, and I'd like to welcome you to Thinking Aloud, a Brown Advisory podcast about the ideas that change how investors think and why that matters. The quality of investment outcomes is driven by the decisions behind them. This podcast looks upstream at the ideas and experiences that shape how those decisions are made. We hope these conversations spark reflection, encourage new ways of thinking, and remind us that there's always more to learn.
Maud Bridel: Hello listeners, and welcome to the second episode of Thinking Aloud. I'm Maud Bridel, an associate at Brown Advisory, and I have the pleasure to be joined by Nick Kirrage. Nick is a portfolio manager at Brown Advisory leading the Global Value Select and International Value Select strategies, which first of all, congratulations because these were launched very recently and welcome to the episode.
Nick Kirrage: Thanks very much for having me. It's great to bge here.
Maud Bridel: To start, we had a conversation last week, a very interesting conversation, and you mentioned you were rereading a book, Think Twice by Michael Morbison. And I wanted to ask you to introduce the book, perhaps how you came across it, and introduce the contents and what you learned from it.
Nick Kirrage: Yeah, I don't typically go back and reread lots and lots of books. I like reading new books. But I've had the opportunity in starting up a new team to think with a blank piece of paper and to be able to question what it is I really believe. And I wanted to go back to some source material that have been really influential and have really kind of shaped who I am as an investor over time. And there's probably no modern market commentator or author who's been more influential than Michael Mauboussin. He's still practicing. He's a guru around behavioral finance and decision-making and investor psychology. But what's really fascinating about him is he works within financial markets and has done for a very long period of time. And so he frames all of that psychology and thinking and decision-making and grounds it in stuff that's actually relevant to us as investors day to day. And it's just a fascinating book where if you look at my notes on this book, it's just endless scribbles in margins and stars and underlinings because there's just so much great material in there. And you find yourself looking at this and thinking, oh yeah, or that's great, or, oh, I do do that. You know, it's full of the old anecdotes about 70% of all people think they're an above-average driver. And I always think when I hear that stat that Despite the fact that investing is very hard to do and less than 50% of fund managers after fees outperform, I bet you 100% of all fund managers think they're in the group that do outperform. So it's a really, really good book and very humbling to read, but it's been great going back through that and reminding myself of so much of its wisdom.
Maud Bridel: Is there anything that you noticed sort of differently about yourself when you reread it, or was there something different that you took away from it?
Nick Kirrage: I think encouragingly, I mean, I had learned from it the first time. So when I think about, there's a whole section on there about trying to avoid confirmation bias and challenging yourself and building up processes that embed data and base rate rather than— there's that old thing about the plural of anecdote isn't data. And making sure that as you think of a process, you've been ruthless in making sure that the bias doesn't creep in, or as it does creep in, you have guardrails that nudge you back towards a path that's more empirical to go along with that instinct and judgment that's obviously inherent in what we're doing and an important part of what we're doing. So yeah, I mean, yeah, I was encouraged that I had learned good lessons over time. What I would say though is, and come back to the blank piece of paper I talked about, there's a lot of layering of extra process. As you go along and do this job, you learn something new and you think, that's really brilliant and insightful, I should embed that in the process. And what I would say is that in my experience in investing, doing is very easy. So adding something to a process and undoing is very, very hard because we struggle to get rid of our sacred cows. And what element of the process are you really going to say that's got no value? Let's just get rid of that completely. And this, of course, is the amazing privilege of a blank piece of paper is you don't start with any of that embedded bias or endowment effect on we must do it. You can literally just be ruthless and say, What do I think day one, we're starting from scratch today, what do I think is the right thing to do And that's where I think it's really great to be rereading something like this at this moment.
Maud Bridel: And how do you decide what really deserves to stay in the process and what needs to go?
Nick Kirrage: I think the best thing to do is not to start with what you have and ask yourself what stays and what doesn't. The best thing to do is start with a completely blank piece of paper and say, how would I do it today? As someone who's trying to build a team and believes in the power of the people within that team, The way that I did it, and I don't know if this is right or wrong, but it's the way I did it, was to think a bit about what is the vision for the team? What are we trying to do? What after 5 years, we look back and say, we've been successful, we delivered what? And then think a bit about the cultures and values that you need from team people to deliver that, you know, and what is the overarching philosophy of the team? How are we aligned and how do we come together? But then also how do we bring together differences? So how do we make sure we embed? I mean, very seldom in life do you get a chance to build a team completely from scratch. Normally you build a team, you add one, and then if you're successful, you add a couple more, and then if you're successful, you add a few more. And over time you end up with a wonderful selection of people that you've individually picked. But if you were starting with a blank piece of paper, you wouldn't have picked those 10 people. Whereas we've been able to start and say, we want to bring together people from day one who are different but the same, philosophically aligned, but have different experiences and backgrounds. And that will enable us to have lots of challenge in portfolios. I mean, ultimately successful portfolios, I've always thought, are an exercise in Basically effective conflict. This is a job where being right 60% of the time would make you an absolute genius. So it is probabilistic. You've got to remember that. And therefore everything needs to be debated and challenged to get high conviction in. So coming back to where we started, you've got these values and then cultures, then a set of skills. And then once you've got all of that in place, you start thinking about the process. And what I would say is keeping things simple. Richard Oldfield, the old value investor who wrote a book once called Simple But Not Easy. And I think that's what investing is to me. You have to reduce everything to its simplest possible form, but no simpler.
And then spend a lot of time thinking about that.
Maud Bridel: Can you give an example of something that may seem simple but is actually something that is a lot more complex?
Nick Kirrage: Yeah, I think there's very, very significant elements to this, but to me, the mistake that most investors make, and this is very easy to do, is conflating a great business with a great investment. And the reason that investors do that, and just to be clear, I know that might sound like those are the same thing, but what we learn over time is that the price you pay determines the return you make. So the only thing that makes a great company a great investment is getting a great price for it. You can pay the wrong price for a great company and lose money over time. So the reason that we do that as humans is because, is this a good investment? Is a very, very hard question to answer. Do I like this company? Is a much easier question to answer. So our brain does a bait and switch and it switches those two questions around without us subconsciously even understanding that's happening.
And what we think we're doing is analysing a company, but what we're really doing is working out if we like it. And if we like it, we'll find it a good investment. And that is very, very easy to do. And even as someone who knows that that has the potential to happen all the time, and I'm, I'm a value investor, but that doesn't mean I avoid all the biases. I still have the biases. I just try and be a bit self-aware and self-correct and put in place process to avoid it where possible. Even knowing that's happening, I still every day catch myself confusing those two things and those situations.
Maud Bridel: That point that you've just alluded to, that the real challenge is not just spotting bias in markets, but spotting it in yourself. How do you do that in practice?
Nick Kirrage: Badly, inconsistently. I mean, this is an area we're trying to build this up as a process so that there are multiple stages where you can step back and sense check, where you're constantly bringing data in to say, hang on. I mean, we literally was having this conversation this morning with the team about a particular set of circumstances in the fashion retail space where a business that was run by a mercurial founder, incredibly successful, now falling off a cliff a bit. He's left under a cloud, but the business looks ridiculously cheap. And everything suggests statistically you should be buying and looking at this kind of company and potentially put it in your portfolio. But my mental base rate on founders who are very successful startup fashion retail businesses over time leave under a bit of a cloud, and then that business turns out to be a bit of a disaster. Now think about Philip Green, or in the UK there are dozens of examples of this, the kind of Ray Kelvins at Ted Baker or Julian Dugton at Superdry or JD Sports, they're just endless. But come back to it, the plural of anecdote is not data. So what does the data actually tell us about whether or not these companies recover? And that's what we need to do is go away because we have these anecdotes about how painful it's been, how we've lost money and hurt. But the truth is, were we unlucky or is there genuinely a thing here where in those situations the culture suffers and it's just a lower probability way of making money? But ultimately challenging ourselves like that and thinking, is there an opportunity rather than just a threat? Is how we make money as value investors, trying to build that in. But look, I know that's already going on in my head. I know I have this bias creeping in. It feels like experience. Yeah. And therefore that's a great thing because I've got experience and therefore let's not do this. But is it experience or is it bias? Someone once said to me that getting older and more knowledgeable, you think you've learned things, but you've learned in an anecdotal way. There's nothing structured about that. You've just gone through a set of experiences. And we are trying to do something where, come back to it, if we're right 60% of the time, we're geniuses. So if you've got 2 instances of doing it and losing money, were you just unlucky or is that enough to start telling you that there's a process there where this is a low probability place in making money?
Maud Bridel: Just on that point, last week you mentioned that the benefit of experience is becoming more comfortable with what you're bad at. Has that changed the way you lead and build a team?
Nick Kirrage: No, I think being a portfolio manager is a naturally narcissistic job, right? Is the potential to become egotistical and all the rest of it because you are putting together a portfolio that's high conviction and you live or die by the results of that portfolio. And so you are constantly making difficult judgments, but you are having to make those judgments. And so there's an element of I'm in control and I need to believe in what I'm doing. And there's a bit of a suit of armor of so I can get out of bed in the morning. Equally though, you've got to be humble enough to understand that you're making dozens and dozens of mistakes. And even in making dozens of mistakes, you could still be one of the best investors who ever lived, being right 60% of the time. So how do you balance those things? How do you understand the probabilistic nature of what you are doing and learn to make money out of that? And it is a real balance. And to the point, and I totally stand by this, I do think that a lot of people think that as you get older, and I've been doing this, oh, 25 years now, people think, well, the great benefit of that is he knows a load of extra stuff that people who've been doing this 5 years don't know. And there is a bit of that. But I ultimately think, I come back to it, the great skill and strength of having done this for a long period of time is you start to become more aware of where you're not good at things. And rather than need to puff your chest out and be good at them and pretend you're good at them, or God forbid, waste your client's money trying to be good at them, you can just say, look, we don't need to be good at everything. It's okay. I know where we're good. We're good at these things. Let's double down on those things and focus on those things. Let's put our egos to one side and do that. In all honesty, it takes time to get to that place, but it's, I think, much better for your clients when you get there.
Maud Bridel: I guess for a more broad question, what do you think is the broader lesson here about making better decisions? It's quite a tough question.
Nick Kirrage: Sorry. No, no, it's the question. It's a brilliant question. And I think the big thing here is about constantly trying to be better. And this is where joining Brown, for me, where the DNA overlap, you know, I'm a value investor. This is quite different to a lot of the investment strategies that exist at Brown. They're much more high quality, more growthy, quite differentiated. But the thing that I always felt through the entire process of joining Brown was the greatest alignment of DNA was that Brown is full of people who want to be better. They want to do better for their clients, even where they've been highly successful over decades in terms of performance. And, you know, that performance has led to many clients joining them. They still remain very humble and paranoid to want to be better and willing to ask difficult questions to get better, which— not come back to this as an egotistical industry. Not everyone wants to ask difficult questions. You know, how could I be better? Where am I bad? It's not a natural thing everyone wants to ask themselves. But the fact that people do here, to me, is one of the big reasons I want to be here. You know, you constantly ask yourself, how do I get better at this? There's almost no industry where that industry is unchanged over even 20 years, but definitely 70 or 80 years, right? And yet in our industry, things staying the same and just never evolving. It's almost sometimes prized, you know, the clients like the consistency, consultants like the consistency, saying we're doing it the same way over and over and over and it's repeatable. And I understand why that's alluring, but to me it's not the reality of the world, which is that the only constant is change and is evolution. And if you stand still, you're going to get left behind. And so for value investing, there's this very real and important question, which is our entire investment philosophy is based on something we say never changes, you know, human nature, human emotions. It's consistent over time, but that isn't to say that the best way to exploit that for our clients and to make money is to do it the same way as Ben Graham did in 1940 or whatever it was, right? Actually, we want to get better and evolve, and that's why we have modern in the title when we talk about modern, true-to-label, data-led value investing philosophy. And I think there are always ways that you can push yourself to be better. And that is, frankly, at the end of the day, our clients deserve no less.
Maud Bridel: Yeah, I just actually read his quote on how the market is a voting machine and we've got to play the weighing machine game, which I thought was a really interesting one. But just on the point on how the world is changing very quickly, and especially with AI in the mix nowadays, you know, it's the word that everyone talks about. But do you still think that human behavior is one of the few constants then worth building around?
Nick Kirrage: I like two things. I like a good structure and a good process. And I did engineering at university. I didn't do finance. I like things that you can prove, you know, engineering equations, this equals this and this happens. And I like psychology because I think it is the one thing in human markets that is consistent over time. We see it play out in repeatable waves. Yeah. History doesn't repeat, but it does rhyme type thing. Those two things together. I think create a potent mix. And the difficulty for me about trying to go at this any other way is that in my time doing this as an investor in 25 years, everything has changed. The investments change, the politics has changed wildly, the macro has changed, the thematics, you know, it was tech, then it was China, then it was tech again. It's been oil in the past. It's like there's always some zeitgeist. I find it very hard to make money by working out or guessing what's coming next. Whereas understanding that humans, how they're going to interpret these things is very consistent, is a much more effective way, I think, to make money for clients. And so I like that there's a causal relationship there that I can prove. The engineer in me likes that there is a reason that value works over time. And then it's about trying to exploit that in a way that's deeply diversified. That does something for my clients and will fit within their portfolios. And frankly, it's pretty differentiated to most of our peers because very few people self-select an investment style where— there's this anecdote I always tell about when I was, I think I was 18 months into my career and I went to see a guy called James Montier who now works at GMO, is a very senior guy, but back in the day was working at, I think it was Dresdner Kleinwald. And he put up this presentation on the board and it basically said, look, If you're a value investor and you invest for 30 years, you've got a 70% chance at some point in that 30-year career of underperforming for 3 years in a row. And the second that happens, you'll be sacked. And I remember everyone looking around being like, why would anyone do that? And all I was thinking was, I hope it's the last 3 years of my career and not the first 3, because that would really suck. It kind of was like— Yeah, well, exactly. But it made me realize I was wired a bit wrong. Like I was clearly not thinking what everyone else was thinking. We've had a couple of years certainly. So it is a difficult thing to do, but I think you need to slightly make peace. And the thing about being an investor is there are many different types of investment. Value investing is not the only way to make money, right?
Nick Kirrage: But it needs to suit your temperament, personality, and what you can do. There are many ways out there to make money, but the question isn't, can you make money doing them? The question is, can I make money doing it that way? Yeah. And for all of them, the answer is no, except value investing.
Maud Bridel: Thank you. To round off this episode, Nick, I wanted to ask you about your best book recommendation. So Tim had asked Mick for his best piece of advice he has received. So because we started with a book, I thought we should end with a book.
Nick Kirrage: There are many, many books. What I would say is I think many of the really great books aren't necessarily pure investment books. They're books outside of investment that you can take lessons away from and apply them in an investment context. I'm going to use one that's a bit of a hybrid. So The Great Crash by John Kenneth Galbraith, and it's not a book about finance specifically, but it is a history book about a period of time. It's a book written in the '50s about the '30s. And the reason I would advise this book as one to read is first, it's short. So it's easy. It's not a tome. Second is it's very engaging and easy to read, even though it was written a long time ago and it's not ye olde English. And the third thing is that the thing I really like about it— I'm not suggesting people read this because I think the crash is coming or a depression's coming or any of those things. I just think what is lovely about that book is the behaviors that you see in it and feel from the writing in that are for anyone who's been in markets for the last 15, 20 years. There are huge echoes. The repeating, the rhyming of history will just feel almost visceral. And particularly if you went through the GFC, it'll feel like, wow, the parallels. And there's this old adage, which is about humans, which is in the short term, we learn a lot. And in the medium term, we learn a bit. And in the long term, we learn nothing. And I think that's a bit too cynical and harsh for me. I don't believe that. I think we are evolving and improving, but in a cycle. And I think one of the things though, that comes across loud and clear from this book is humans are humans. And I feel really very comfortable and quite positive about the future for value investing based on those echoes from the past.
Maud Bridel: Nick, Thank you so much for joining me.
Nick Kirrage: Thanks a lot, Maud.
Carey Buxton: Thank you for listening to Thinking Aloud. Please subscribe to hear more conversations like this.