Bethany McLean - Business Gone Bad and the Art of Persistence

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
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**Patrick O'Shaughnessy** (1:24)
I've often heard that good investors are a bit like journalists, doggedly collecting evidence and building an understanding of how all the pieces of a company or an investment fit together. My guest this week is one of my favorite writers and journalists, Bethany McLean. Across her career, Bethany has covered many of the most interesting stories in business and investing, from Enron, which became the famous book and documentary, The Smartest Guys in the Room, to Valeant, Wells Fargo, SAC Capital, Fannie Mae and Freddie Mac, The Great Financial Crisis, and most recently, Fracking and the Energy Revolution.
Given how deeply she has investigated all of these topics, and thought about the common threads across them all, this was an amazing conversation. When talking to her, you can feel how much she cares and how diligent and fair she is when analyzing a topic. In addition to all the great stories already listed, we discussed the art of persistence and the other lessons she has learned about businesses and people gone bad. I especially loved her evolving take on housing in America. Please enjoy this great conversation with Bethany McLean.
I've heard a lot from a lot of investors, especially short sellers, that investing is kind of like journalism in the sense that you're trying to understand and construct a narrative and understand sort of every aspect of it. Have you found it interesting to interact with investors, maybe even specifically short sellers as you think about business?

**Bethany McLean** (2:38)
Oh, definitely. That's one of the great pleasures of doing this is all the highly intelligent and interesting people you get to meet, and I couldn't agree with that more. I think the process of thoroughly researching an investment is really analogous to what I do. I think the focus in the end is different. I'll have more of an interest in the characters and the narrative, whereas they have to have more of an interest in the numbers.
And then the real difference is just what's actionable at the end of it. But for me, it's creating a story out of it, actually creating a narrative, whereas for an investor, it's putting your idea to work.
And I have never had any interest in that.

**Patrick O'Shaughnessy** (3:17)
A common theme, having went back, it was fun to go back and read your catalog, read articles, etc. Obviously, a common theme is business has gone bad, or maybe even like negative type stories, people doing bad things.
I'm curious philosophically if you think that that does a greater service and catalyzes more change than positive stories or journalism.

**Bethany McLean** (3:36)
Oh, I wish I had a larger philosophical thought like that driving what I do, but I think that my, I think you're right, I think I have made a career out of sort of business gone wrong, but it actually wasn't really intentional in a way. When I first started working at Fortune, I wrote this column called Companies to Watch, which is essentially a stock picking column, and I was supposed to pick three stocks every two weeks that were going to double, triple, quadruple in value, you know, in the next six months or so.
And it was incredibly easy to do that because there were no shortage of people coming by Fortune in those days, from executives who ran businesses to portfolio managers who owned the stock, to analysts who would buy ratings on the stock. And I had no cynicism and no skepticism in those days. I thought somebody was saying it and they were smart, so it must be true. And I'd write up these stories only to kind of watch in horror as the stock would go in the opposite direction. Sometimes my phone would ring and it would be someone who was short the stock who would be like, basically, you idiot.