Jim Collins explains in his book “Good to Great” that the best companies in every industry have a clear focus. They do one thing, and they do it extremely well. The strategic focus lies at the intersection of the following three questions:
The hedgehog principle
We use Collins’s hedgehog principle to find out whether a company has a clear understanding of its strategic focus. In the same way, we have applied the concept to ourselves and have come to the following conclusion:
What is our passion?
We love to learn and constantly improve our understanding of what works and what does not. Riechert’s passion is the curious exploration and discovery of successful companies and business models. Polleit’s passion is the analysis of macro-economic developments as well as explaining and teaching his findings.
What can we be the best in the world at?
At the analysis of all those elements that make a company great so that we can find “young elephants” at bargain prices and at building and maintaining a group of long-term supporters (“fans, not customers”) who share our views and gain through investing with us.
What drives our economic engine?
The long-term performance of our fund, measured by the compound annual growth rate (CAGR) and a stable, sufficiently large investor base, allowing us to stay in business through good and bad times. (It is not asset gathering through marketing & sales).
If we fanatically focus on those activities that we like, that we can become the best in the world at and that drive our economic engine, we will be able to achieve our audacious long-term goal: We want to build the best investment fund for long-term investors in times of uncertainty.
Our higher purpose
In addition, we want to help people getting a better understanding of what works in investing, on how free markets work and why entrepreneurship benefits all of us. We will be excited if our work helps people make better decisions and thereby having a positive impact on all stakeholders. We want to achieve this by writing our letters to investors, by Matthias Riechert mentoring students in value investing at London Buisness School and by Thorsten Polleit publishing articles about macro-economic issues.