Chuck Akre - The Three Legged Stool

**Patrick O'Shaughnessy** (0:03)
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**SPEAKER_2** (0:28)
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**Patrick O'Shaughnessy** (0:56)
My guest today is Chuck Akre, a now widely famous investor who founded Akre Capital Management in 1989, which now manages approximately $10 billion. We discuss his investing style and his three-legged stool for evaluating companies. Please enjoy this great conversation.
So given that Chuck, this is my first time here in Middleburg, I thought it would be a fun place to start with the place where we're sitting. You've talked a lot about the one traffic light town as maybe an advantage, something very different from the typical investor. Talk about Middleburg, why you're here and what you love about it.

**Chuck Akre** (1:26)
We're here because of, in effect, quality of life issues. And I happen to be a person who works well without a lot of commotion around. And I know lots of people in the business who love commotion, and I work with some of them. But the low level of activity around here is just helpful for us being able to sit there with our doors open and not be disturbed by outside events. And then as it relates to, let's say, Middleburg versus Central Park South, if my office were there, I'd have a thousand friends who are very bright and very interesting, and I would be distracted.
I'd become curious and engage in their thought process, and it would distract me from what it is that I do well.

**Patrick O'Shaughnessy** (2:10)
So investing on an island, so to speak, in a very bucolic, beautiful spot.

**Chuck Akre** (2:13)
Yes, indeed. We live on a farm and that sort of stuff, so it all fits together.

**Patrick O'Shaughnessy** (2:18)
We're going to talk a lot about the ideas of Nirvana investing, the three-legged stool, the components of that, etc. But I'd love to begin with, given that you've created this sort of interesting isolation for yourself, what a day looks like for you. So at this stage of your investing process, what are you literally spending your time on day to day? Is it looking through businesses? Is it checking in on existing businesses? How's that sort of allocated?

**Chuck Akre** (2:40)
My participation in the business evolves and continues to evolve, and so on. So I'm personally doing less pure fundamental research today than I did years ago. There are others here who do that.
And we talk about ideas and stuff all day long.
And I spend a lot of time reading. And that's how ideas bubble up in my universe. And others here use screens. But mostly it is a serendipitous, inefficient, let's just say, non-quantitative approach.

**Patrick O'Shaughnessy** (3:12)
You mentioned before this idea that imagination is as or more important than knowledge. Can you talk about that concept a little bit?

**Chuck Akre** (3:17)
Well, it's very simple.
I have in my career run across literally thousands of people who are very, very bright, who are not necessarily good investors. And so pure knowledge is in and of itself not a ticket to being a good investor. Imagination and curiosity are what's hugely important. And we've discovered things over the years purely by being curious and continuing to keep involved in the search process to find these exceptional businesses.

**Patrick O'Shaughnessy** (3:45)
Can you distinguish it all between curiosity and imagination? One sounds like a search and another sounds like more of a creative force.

**Chuck Akre** (3:51)
Well, they're both creative. My older son was a tenured college professor for a while, and he used to say that he worked at a university that, as he said, didn't have the luxury of being highly selective in its student body. And he said the thing that disappointed him the most was that even his best students, his students who got A's, typically only wanted to know what they needed to know to get an A rather than have curiosity.
And I find that curiosity has been useful to me in search for investing and relating real life experiences to allowing me to pursue lines of thought, whether it's trying to figure out why a stock art track might be interesting or something else, that sort of stuff. So I guess I'm probably not very articulate in explaining the difference between curiosity and imagination, but they go hand in hand in being creative and identifying businesses.