The Hedge Funds Club Good Life Interviews – Part 31: Patrick Rial

Patrick RialOur popular Hedge Funds Club Good Life interview series continues with HFC boss Stefan Nilsson checking in with Varecs Partners’ Patrick Rial in Tokyo.


From where and how do you get your daily general news updates?

Having worked as a reporter, I try to minimise my news consumption. Once you’ve seen how the sausage is made, you tend to lose your taste for it. I read the New Yorker and listen to a lot of podcasts, mainly regarding investing or interviews with company CEOs.


What do you do to unwind on a weekend?

I have a young daughter, so she gets most of my attention on the weekend.


Can you name a great book you have recently read?

“DisneyWar” by James Stewart. I grew up knowing the names of the people in the book – Michael Eisner, Michael Ovitz, Jeffrey Katzenberg, David Geffen, Bob Iger. But you find the information the public receives is completely opposite to the reality of the situation. It seems a miracle Disney survived the 90s under Eisner, but it also shows that nearly every company is a hot mess on the inside and a truly well-functioning company is the exception, not the rule. I highly recommend reading it before you read Iger’s “Ride of a Lifetime.” As you might expect, Iger’s own book presents his career in a much more flattering light than Stewart’s.


Your soundtrack of choice?

My music tastes are fairly catholic – punk, hard rock, 70s folk. These days, maybe as a result of listening to a lot of Weird Al Yankovic when I was growing up, I tend to listen to music with a comedic element – Cheekface, They Might Be Giants, Jeffrey Lewis.


What drink do you start the day with and what drink finishes it?

Decaf coffee in the morning and water the rest of the day.


What’s the worst money mistake you’ve made?

Sometimes I feel like all I’ve done is make mistakes. Broadly speaking, I spent far too long being a Graham-style investor focused on statistical cheapness. That approach worked very poorly for me in Japan, where statistical cheapness very often comes hand-in-hand with a business in secular decline and hyper-conservative management that ignores shareholders. I was 35 before I started to study Warren Buffett seriously and understand the importance of quality and growth to successful investing.


Have you ever had a great mentor and what did you learn?

I feel very lucky to have had a number of great mentors. Stefan Pendert took a chance on a very unpolished young man and helped mould me into a professional. Jesper Koll taught me how to be an analyst and how to understand the interests of your counterparts. Jiro Yasu continues to teach me every day about temperament as well as the long-term benefits of taking a cooperative approach.


What gives you energy?

Every day is another chance to learn something new, to get a little better and beat back the grim reaper.


How do you stay grounded and focused as a person in these turbulent and fast-changing times?

Books and interviews with truly remarkable people help remind me of the large chasm between myself and the true superstars of this world. They also set a standard to strive for. It’s a cliché, but my wife is also always prepared to keep me humble.


Can you name a terrific restaurant that you love?

I have simple tastes and have no particular favourites. Anytime I can eat and drink with friends, I consider it a wonderful meal.


What’s your favourite museum in the world?

The Barnes Collection in Philadelphia is an unparalleled collection of post-Impressionist masterpieces, including works by Matisse, Picasso, Degas and van Gogh. But it is even more remarkable from an investment perspective – Barnes was buying up the works of many artists when they were out of fashion and his patronage helped keep a number of those artists afloat. It was only many decades later that the world realised he had accumulated one of the greatest collections in history. The saga of Barnes and how the Philadelphia establishment eventually turned its greedy eyes to his collection, is told in the excellent documentary “The Art of the Steal”.


Are you active on social media and what do you actually use it for?

I find Twitter to be a great resource. You can get a glimpse into the thoughts of some very talented investment professionals. But generally, I don’t post myself and tend to stay away from social media.


What kind of battle dress do you normally put on for work?

I try to clear the lowest possible standard of acceptable workplace attire. When I meet with companies, I want them to see a poorly dressed analyst across the table. I find it to be a valuable indicator if they appraise me on form or substance. My experience has been that the price of someone’s clothing is inversely correlated with their character.


Do you celebrate your wins? If so, how?

Not really. I am more interested in the journey than the result. That’s the fun part. I play a lot of tennis and can never remember the score even while playing or if I won or lost. It’s so much fun to play, it doesn’t matter in the end. Investing is the same. The goal line is always being reset, whether it’s a new investment or a new year. If you can make the journey the fun part, then every day is new and exciting.


What makes you happy?

Getting to relive my childhood through my daughter: watching “Karate Kid” and Arnold Schwarzenegger movies together, water balloon fights, tag, that kind of thing.