“Torture numbers, and they’ll confess to anything.” – Gregg Easterbrook

“He uses statistics as a drunken man uses lamp-posts … for support rather than illumination.” — Andrew Lang

“There’s no sense in being precise when you don’t even know what you’re talking about.” – John Von Neumann

“For every complex problem there is an answer that is clear, simple, and wrong.” – H. L. Mencken

“Not everything that can be counted counts, and not everything that counts can be counted.” – Albert Einstein (attributed)

Q1 2010 report excerpts

The last few months were a period of much study and few operations. Following a time with plenty of clear opportunities, since the last quarter of 2009 we have found ourselves in a phase with few new situations in which we could have great convictions.

During the first quarter of 2010, we took part in six conferences in Brazil and the USA, including some focusing directly on investors and some to do with companies themselves and sector professionals. There were over 200 presentations and there were advances both in getting to know companies and sectors better and in identifying potential new opportunities. In the short term, however, we did not find any that would fit the “easy as falling off a log” category (high value and low price) that we like so much. As the historic Peter Sellers character would say in the fantastic film “Being There”, “there’s a time for planting and a time for reaping”.

We take the opportunity to thank readers for their participation and suggestions in the Buysiders.com website, IP’s blog. We have recently started using Investidor    Profissional’s    pages    in    Facebook and in Twitter to publicize the new articles released in Buysiders.com. This is still an embryonic use of these tools, but it may make things easier for those who are already well acquainted with them.

PROSPECTS: Brazil

Lately, in addition to all the efforts applied to studying specific companies and sectors, we have allocated more than the habitual amount of time we dedicate to macro and political questions. In fact, we have “worked” more than ever and studied much more than the historical average. Mainly thanks to the maturity reached by the IP model, we have spent less time on commercial and managerial issues.

It is important to make it clear that we have not changed at all our fundamental belief in the way we should operate. Much to the contrary. But we always seek to take care not to allow the “execution mode” to prevent the basic assumptions from being revalidated from time to time. And recent times have clearly called for a revalidation. What is the risk of a swerve towards a more populist agenda, where property rights are less respected? After all, we have lived with movements like the “landless people’s movement”, and with growing rumors of coercion against certain companies and entrepreneurs, as well as restrictions to the press and controversial constitutional amendments proposed by the government. We have the example of “Chavismo”, which has not been repelled by the Brazilian government, indicating a lower degree of aversion than we would like to a regime that is so primitive and harmful to society.

What are the risks involved in the renewal of concessions, or in the creation of new and yet heavier taxes, rates and “contributions”?

Our conclusion up to now? If we have not reached (and are not even close to) an “all in” position, like the famous Warren Buffett declaration regarding the US economy (…) we are moderately optimistic regarding the Brazilian economy in the medium term. By fits and starts, the institutionalization of Brazilian politics is taking place. Even the worst elements are not succeeding in perpetrating greater and more lasting damage to the extent of annulling the advances achieved in the last 16 years (…). Our fears of a greater and longer negative discontinuity in the fundamentals are relatively low.

President Lula is an example of the fact that, with a certain degree of common sense, even historical opponents of a liberal capitalist society end up surrendering to most of the evidence contrary to their ideological beliefs. The government’s efforts to continue the initiatives of the previous Administration in order to make the real-estate market viable are another example. This is a sector that keeps the economy spinning, but one which did not have “wealthy sponsors” (…). Fortunately, the logical thing happened and things are moving.

In economic terms, in addition to the (already commonplace) commodities, the domestic market development case becomes better consolidated day by day, based – by order of solidity and importance – on the demographic profile, the formalization of the economy, credit expansion, and a not-so-bad political scenario.

Companies and their businesses do not exist in the void, and whenever we identify “clouds of change” on the horizon, we pay much greater attention. So far, so good…

So we should explain why we do not “fill up the bucket” in view of such good fundamentals for the Brazilian economy, and manageable disturbances. As always, we have to weigh up the asset price factor. The present levels, in general, already take into account a large portion of the prospects listed. Turbulence does happen, and when it does, many people panic. The best moments to fill the bucket are these: good fundamentals plus panic caused by the situation of the moment. Until then, we maintain our positions in companies that not only have fundamentals that lead them to consistently surpass market expectations, but also have a good cash reserve.

PROSPECTS: Global

We remain quite cautious. The improvement observed in the symptoms are a result of the “liquidity flooding” measures taken since the 2nd half of 2008 – and not of a frontal attack on the fundamental causes that weakened the markets. Populist policies in the main economies continue to set the tone of governments. They all seek an exchange-rate depreciation as a way to improve their trade balances and boost their economies. Obviously, in a scenario like this, this brings us to a race towards the bottom.

Economics is far from being an exact science. The FED, still the great protagonist of the world economy, seeks a narrow path between the precipice of depression and the “dragon” of inflation. In difficult situations like this, the stronger aversion tends to prevail. “Helicopter” Ben was given this nickname because of his thesis in relation to Depression, where he concluded that the solution was to “print” money until the economic agents lost their fear and returned to economic activity. It makes sense, but the risk is obvious. A loose monetary policy brings inflation, with a few years’ lag. The most likely scenario at the moment is that of constant growth in the inflationary risk in the USA, borne by many people who focus on the American Government’s gains arising from the depreciation of its debt – largely fixed-rate, in Dollars. In a scenario like this, the majority lose. Or rather, feel in their pockets the costs of the party, the incompetence, hypocrisy, and irresponsibility of the past. Those with greater power to adjust prices and hold long-term fixed-rate liabilities gain – or suffer less. (…)

An interesting exercise is to try building a counter- case. What could go so right as to neutralize the clouds on the horizon? We imagine events that would radically alter our general perception:

1. Reduction in conflicts based on religious extremism.

2. Radical productivity gain in the healthcare sector – which every day consumes an ever greater part of societies’ resources – in line with what happened to the production of clothes and food.

3. A pick-up in the speed at which knowledge and education are disseminated. This is where we see the strongest driver and the one most often present, which has made itself keenly felt in the last two decades with the advances in telecommunications in general, and the Internet in particular.

4. Improved public governance systems. The predominant government models today seem to us clearly deficient and a much greater threat to the well-being of mankind than the famous global warming, for example (which, if true, reflects a flaw in public governance itself). A reduction in the general hypocrisy is the greatest target to be pursued and the event that would bring the greatest gains to mankind.

Unfortunately, for certain problems, the speed of progress seems to be lower than what is needed to avoid more acute crises, which are historical catalysts for many necessary changes.

Obviously, the short list above says much more about our lack of capacity than about the real probabilities of results. One of the determining factors for advances in History lies in the fact that some societies and civilizations sometimes change on account of a single individual. But, for each case like the US rally of the eighties and nineties, there is a USSR, just to mention the biggest and most recent examples. After all, “lost civilizations” is a very commonplace expression (about 494,000 quotations in Google in 0.28 seconds…).

“Let’s hope for the best but prepare for the worst…”

Last but not least, for those interested in an inside view of the crisis, in the value of an independent view and in yet another report on the general institutional blindness (to say the least), we strongly recommend the videos and articles written by Michael Lewis when publicizing his book “The Big Short” (which we also emphatically recommend). The links to the relevant videos and articles can be found on Buysiders.com.

FOOD FOR THOUGHT

The Italian political scientist Antonio Gramsci was, as is well known, a great thinker. Gramsci’s Marxist convictions do not invalidate many of his ideas and observations. One of his lucubrations is about the significance of the dominant power exercised through ideology and culture, where the values of the bourgeoisie become the “consensus”. Everyone then identifies with this consensus, helping to maintain the status quo. Although Gramsci was obviously referring to the class struggle between the proletariat and the bourgeoisie, one wonders whether this has not been replaced by (or at least is not comparable to) the present situation between the big shots of corporate America (including, of course, the big banks) and the “rest”, here including most investors? Or people in government versus those they govern, in general?

MISCELLANEOUS

“The problem with socialism is that eventually you run out of other people’s money.” – Margaret Thatcher

“Only the paranoid survive” – Andy Grove

“If you want to know where the next crisis will be, then look at where the leverage is being created today. And nowhere is there more leverage being created at the moment than on sovereign balance sheets. What is happening is an experiment never undertaken before.” – Martin Barnes

“The best way to think about investments is to be in a room with no one else and just think (…) What you are looking for is some way to get one good idea a year. (…) Wall Street makes it money on activity. You make your money on inactivity” – Warren Buffett

Seth Klarman

We highlight below a few quotes from the always interesting annual report by Seth Klarman about what lessons investors should have learnt from the 2008 crisis, with which we agree 100%:

• “Nowhere does it say that investors should strive to make every last dollar of potential profit; consideration of risk must never take a backseat to return.”
• “Risk is not inherent in an investment…Do not trust financial market risk models. Reality is always too complex to be accurately modeled. Attention to risk must be a 24/7/365 obsession, with people – not computers – assessing and reassessing the risk environment in real time. Despite the predilection of some analysts to model the financial markets using sophisticated mathematics, the markets are governed by behavioral science, not physical science.”
• “Do not accept principal risk while investing short-term cash: the greedy effort to earn a few extra basis points of yield inevitably leads to the incurrence of greater risk, which increases the likelihood of losses and severe illiquidity at precisely the moment when cash is needed to cover expenses, to meet commitments, or to make compelling long-term investments.”
• “A broad and flexible investment approach is essential during a crisis. Opportunities can be vast, ephemeral, and dispersed through various sectors and markets. Rigid silos can be an enormous disadvantage at such times.”
• “Be sure that you are well compensated for illiquidity – especially illiquidity without control – because it can create particularly high opportunity costs.”
• “Having clients with a long-term orientation is crucial. Nothing else is as important to the success of an investment firm.”
• “To not only learn but also effectively implement investment lessons requires a disciplined, often contrary, and long-term-oriented investment approach. It requires a resolute focus on risk aversion rather than maximizing immediate returns, as well as an understanding of history, a sense of financial market cycles, and, at times, extraordinary patience.”

Q2 2008 report excerpts on investment analysis

A GOOD INVESTMENT ANALYSIS IS NOT PRECISELY AN “ANALYSIS”. NOR “INVESTMENT-RELATED”

(…)

The widespread impression that persists is that even among value-oriented funds, to assess investments consists essentially of systematically applying a pre-defined set of routines and mechanisms, with special emphasis on building complex financial models which, mired in naïve scientism, confuse and disorient more than they reveal.

(…)

Many seem to believe that valuing a company diligently consists of setting young men who have recently graduated or concluded their MBAs to read prospectuses, half a dozen annual reports and the same amount of conference calls, to talk two or three times with the company’s management, ask about their “sustainable competitive advantages”, apply Porter’s 5 strengths model, and the grand finale: process a discounted cash-flow model, making a cut of 10 to 15% in the management’s projections in order to avoid, of course, potential “execution errors”. To lend an even more “professional” aspect to the process, one adds to this basic “conservative” scenario another more optimistic one and a pessimistic one, and – voilá, the cake is ready.

In our experience, evaluating investment opportunities is not limited to this type of mechanical proficiency. It does not assume training by means of analysis manuals and “kits” that, once learnt by heart, are applied on an industrial scale by anyone, as the occasion dictates. This “pasteurization” leads, in the best of cases, to consensus, to the average.

After all, “analysis” does indeed involve discipline, sweat and hard work, but it is more finesse and interdisciplinary integration than brute force.

Evaluating investments is a much broader, richer and more interesting process than the idea evoked by the word “analysis”.

“PASSIVE” ANALYSIS

In the first place, any “investment analysis” process starts well before we have even selected an asset as the object of evaluation: it happens every day, every second, in a “passive” manner, without our intervention. After all, every new stimulus or item of information we receive daily only makes sense when it fits into a pre-established network of beliefs, values, myths, and mental models, which we have built slowly in the course of time. When we encounter the “new”, our conceptual frameworks, truths and prejudices “arrive before us” and fit this marginal information into themselves.

This discovery brings important consequences: if we know a priori that we only succeed in giving meaning to the “new” when we fit it into the patchwork of values, frameworks and previous experiences that we gather throughout our lives, we have the obligation, the responsibility, to build and renew – pro-actively, day after day – this network of mental models and experiences, so that we are better prepared to know, at the proper time, how to give a practical meaning, rapidly and precisely, to the most varied business situations that may appear. Considering that, from the perceptive point of view, you only reap what you plant, the solution is to plant all the time.

In short, given that part of the “analysis” is carried out passively, we have the responsibility to turn the game around, playing an active and vigilant role in forming our perceptive and interpretative apparatus.

In this context, it is fundamental to be pro-active in seeking new and exclusive sources of information, in building and nourishing high-level relationships, travelling to see the evolution of the industry in other countries and to better understand the movements in the supply chains at global level, reading voraciously about many different subjects, and so on.

ANALYSIS AS A SYNTHESIS

The etymology of the word “analysis” leads us to the meaning “to separate a subject into pieces and understand the inter-relations between its parts” or, in a wider sense, “to examine with care”.

However, paradoxically, the desired output in an investment “analysis” process is in fact, a synthesis. What is sought is an ingenious, clear and well- structured re-combination of a collection of information and judgments gathered from different sources, into a “whole” that enlightens with clarity the process of deciding whether to buy or sell an asset.

That means identifying, after research that is often exhaustive, two or three key points that clearly define the reasons for a distortion between the price and the value of the asset under analysis.

Just as in traditional, empirical research, the process of conceiving and formulating the key hypotheses to be verified requires perspicacity, imagination and creativity.

ANALYSIS AS A NARRATIVE, INTERPRETATIVE ACTIVITY

To “analyze” is to manipulate concepts, to reason in an abstract manner. To produce meanings, build stories, raise hypotheses. A good investment case is, in general, only a simple story, with a plot. And a clear conflict as its focus point: the market’s consensus view against the analyst’s alternative view, that is, the distortion between the price and the perceived value of the asset.

ANALYSIS AS AN ACTIVITY OF AN ADVERSARIAL AND INVESTIGATIVE NATURE

Investment analysis is, from beginning to end, an eminently investigative process. A good analyst starts from a hypothesis – or from a set of them – and pro- actively seeks both confirmatory and disconfirmatory evidence to assess the strength of his “thesis”. With the same impetus. He is not satisfied with easy answers: he pursues the necessary information wherever it is. Provided it addresses a key point of the analysis, the more difficult it is to obtain, the more valuable and exclusive the information.

Analyzing an asset in a diligent manner sometimes involves interviewing shareholders, managers, clients, suppliers and employees of the company in question.

Obviously, each of the persons involved – especially the managers – is not exactly in line with us. It seems obvious that this should be considered in an “analysis”, but it is not. Even experienced analysts let themselves be influenced by the contagious optimism of an articulate and well-prepared CEO, by the enthusiastic statement of a good CFO.

In our experience, it is a crucial part of an analysis process to profess skepticism when one is presented with any information, regardless of the origin. There is no neutral information.

But it is one thing to make contact with these agents in order to meet a schedule and tick off the items on the due diligence worksheet. It is quite another to see these interactions as opportunities to test hypotheses, confirm or discard evidence, raise new questions. And to an experienced analyst, the key questions are those picked up on the spur of the moment.

More senior analysts not only make this kind of visit after preparing well, in advance, but also know that each interaction represents an opportunity to produce an important, decisive insight.

As Ken Fisher says regarding his legendary father, Phil, in the excellent foreword to the classic work “Common Stocks and Uncommon Profits”:

“In looking at companies, he always prepared himself in advance before meeting the management (…). He always wanted to be prepared and he wanted the company to know he was well prepared so they would appreciate him”.

“But his very best questions always popped out of his mind, unprepared, never having been written in advance, because they were the angle he picked up on the fly, as he heard the answer to a lesser question. Those creative questions were the art. It is what, in my mind, made his querying great.”

“The art is to get more questions – and the right questions – flowing from the answers you receive to prior questions. I’ve seen people who rigidly run down a standard question list, regardless of the answers they get. What question best flows from the answer is key. And so on. When you can do that on a real-time basis, you are a composer, an artist, a creative and investigative investor”.

CONCLUSION

The “investment analysis” process, as we see it and try to put it into effect at IP, is more complex, far-reaching and stimulating than may seem at first sight. Strictly speaking, it is not even just “analysis”, nor just “investment- related”. And it starts clearly with a choice: to adopt, a priori, an active, skeptical and vigilant posture in relation to information and knowledge throughout the process.

And the cost of this constant vigilance and continuous preparation, which is paid well before reaping the benefits, is quite high. But in respect of “investment analysis”, this is the path we have chosen to follow.

Our 1st quarter 2008 report marked the period in which our flagship fund celebrated its 15th birthday, but 2008 as a whole was also special because IP itself turned 20. This report also marked the beginning of a series of texts in which we discussed IP itself – our risk management philosophy/ culture, our analysis process, our “diligence filter”. These excerpts tell a little bit about us.

Q1 2008 report excerpts on risk management

Summary:

For IP, the management of risk is strongly intertwined with our daily and absolute commitment with the quality – current and future – of our analysis process and investment decision making.

• According to our experience, there is not algorithm or ‘triple A rating’ that could replace the common sense and discipline in risk management. We usually pay a high price for the illusion of precision. We believe, as do Keynes and Buffett, that “it is better to be roughly right than precisely wrong”.
• The great financial institutions downfalls arise, in short, from motivations, incentives, judgments and behaviors of people. Flesh-and-bone folks: shareholders, executives, employees and other stakeholders.
• To understand a little bit more of our daily investment routine, getting closer to IP’s ‘inner workings’ can hopefully help the reader to understand how we end up mitigating some very important risks without even needing to speak formally and explicitly of “risk”.
• For IP, our ‘risk management’ is deeply intertwined with our day-to-day activities. We believe our key risk mitigation process is, simply put, our strong commitment with the quality – current and future – of our analysis process and investment decision making. The fact that a significant amount of IP partner’s wealth is invested in the funds is also very relevant. In this regard, we fully agree with Bernstein: “Risk is a choice, not a fate”.
• At IP we cherish the habit of “permanent preparation”, which is slowly accomplished, in ‘baby steps’, throughout time. We believe that this “always alert” frame of mind help us to “connect the dots” fast when the planets get aligned and the big opportunities arise.
• We have learned, with each of our mistakes, that it is extremely healthy to be suspicious of ourselves and of our own certainties. The surest we are of a matter, the more actively we seek counter-evidences that may eventually prove us wrong. Over time this is a very efficient ‘risk control’ tool.

Expanding on IP’s “inner workings” as they relate to risk management, we select more excerpts. You may recognize some parts from our “Why we Write” page above, and that’s no accident or coincidence, as we hope you’ll see.

WITHIN IP: NETWORK, PROCESSES AND DISCIPLINE

(…)

Among the daily micro-practices that define us as investors, the awareness of our cognitive, analytical and informational limitations is, by far, the most relevant one. First, because by systematically and structurally doubting our “knowledge”, we avoid the excesses of excitement and confidence with respect to our investment ideas. Second, because the internalization of that belief lead us to channel our efforts to the development of process, systems and methods that mitigate these limitations. As usual, pretty simple stuff.

We believe that true, sincere intellectual humbleness is critical so that we may approach each investment decision as it was the first, without the arrogance of the “I already know that”, “it works like this” frame of minds. It seems easy, but it is not. In the investment world, it is relatively common to experience absolute and relative financial success very early In life. As a result, it’s quite common to start to take yourself too seriously, to believe that you have almost “magic” talents and abilities. A deadly chain of thought that cannot only impair you intellectually, behaviorally and socially, but ultimately hurt you big time as you get betrayed by your own (mis-)judgments.

(…)

We believe, just like the physicist and outstanding professor Richard Feynman, that “The first principle is that you must not fool yourself – and you are the easiest person to fool”.

In these almost 20 years, we have learned with each of our mistakes that it is desirable and extremely healthy to be suspicious of ourselves and our own certainties. The surest we are of some issue, the more actively we seek counter-evidences that eventually prove us wrong or at least raise a “reasonable doubt”. A simple assertion or conjecture disguised as a ‘thesis’ can make or break an investment case.

(…)

To assume that, by definition, we cannot know everything we need and would like to, in a world where relevant information is abundant, but disperse, and time, attention and individual “processing” capacity are finite, is a first and very important “liberating” step. But how do we proceed from this point on? How to transform that restriction in a driving force?

We believe, like Bob Rubin, that “(…) rejecting the idea of certainties and needing to make the best judgments possible about probabilities, should drive you restlessly and rigorously to analyze and question whatever is before you – and to treat assertions as launching pads for analysis, not as accepted truths – in pursuit of better understanding.”

At IP we seek to fight our structural cognitive limitations acting with discipline and dedication in 4 fronts:

1) Investing our attention in the acquisition of “frameworks”, “mental models”, “vocabularies” and information of several disciplines, industries, companies, geographies, business models, vehicles and investment structures.

These resources form a tacit knowledge mosaic that: a) creates context(s) for us to understand and organize the innumerable stimuli we receive, helping distinguish what is relevant and what is not; b) functions as a repository of information with potential to be used in the future; c) encourages our creativity, providing us with perspectives and starting points different from the “average view” for everything we do.

The experience shows us that we take very long to learn and organize new ideas in such a way as to use them on a functional, actionable manner. Therefore, we encourage all in the team to keep track of companies, businessmen and fund managers they admire, to regularly read on the most different subjects and travel frequently, as well as to keep in touch with people with more experience and knowledge than us in matters that are of our interest now or that have a good chance to draw our interest in the future.

At IP, we really nurture the daily habit of “permanent preparation” which is accomplished very slowly, little by title, baby step by baby step, throughout time. We believe that this “always alert” mindset help us “connect the dots” quickly when the planets align and the big opportunities arise.

(…)

2) Building up and developing a local, national and international “intelligence network”.

Although we truly appreciate Renaissance-like generalist wisdom, both individually and as a ‘closed’ group we do know that at IP we are not even close to knowing in-house what would be considered ‘sufficient’ about several matters that drive and influence investment decisions.

According to our experience, it is not very “wise” to leave out of consideration, in a strict process of evaluation of investments, the input of people who know much more than you about some key points of your analysis. A tiny, single judgment error can jeopardize a whole investment thesis.

Sure, many times some of the marginal knowledge required is indeed in-house: for example, we have among partners and employees, specialists in governance, regulation, structuring of deals, marketing, commercial, information technology and operations, which assist upon demand the analysts of all sectors in their projects. Each partner of IP has a set of functional expertise and abilities that add value to the group.

However, there are also thousands of formal and informal specialists spread throughout Brazil and worldwide. They are former company administrators, regulators, shareholders, investors, consultants. They are very useful on several manners: as independent source of information on companies, people background checks (administrators, shareholders), as ‘devil advocates’, for specific aspects of an investment thesis, and are also useful to make us get quickly up to speed with respect to relevant themes that take place in countries different from ours.

The value of that network is immeasurable. Building it up and nurturing it requires precious time and effort. To replicate it is not easy. Our almost 20 years of existence and the tradition of supporting the companies where we invest in, respecting their managers and shareholders help us a lot.

3) Developing and improving systems and processes that help to process “in parallel” the information gathered collectively.

At IP we are highly concerned with the storage and the flow of the information we generate, and that is so precious to us. There is no use in gathering lots of information generated by the “permanent prospecting” of analysts described in (1) and the “intelligence network” mentioned in (2) if both the information and the analysis are not prepared and stored in such a way as to be easily accessible in the time and place where the “end user” effectively needs to use it.

Besides, this information is much more valuable when it is disclosed to the right people and generates discussion and reflection among the internal and external members of the “IP Network”. This interaction magnifies relevant ‘marginal’ knowledge generant.

With this purpose in mind, we created 5 years ago, an intranet that allows the synchronous participation (in real time) and asynchronous (the information is stored and the user participates when it is more convenient) of partners, employees of IP and selected guests, and it is accessible from anywhere in the world.

The system itself is very simple. The key to make it work is the relentless willingness to make it happen. It took a lot of time to get widespread adoption. But once it did, it became part of our lives. Gains in terms of organization, productivity and alignment of the group have been significant.

4) Really doing what we say we do: following in a relentless, disciplined way a value oriented investment philosophy with a long-term investment horizon, supported by independent, fundamental research.

In order for the tacit knowledge built up throughout the time to be transformed in decisive insights, so that hypotheses and ideas generated in various nodes of IP Network evolve towards becoming grounded investment decisions, a differentiated “research” method subordinated to a strong investment philosophy is key.

Although various institutions allege orientation to value, long-term horizon, deep and independent study, etc., we know that it is a very difficult promise to deliver on a consistent manner. There are always several ‘short-termish’ temptations that can make you compromise your principles.

In short, throughout this first 2008 report we sought to show that at IP, given the risk and uncertainty inherent to each and every investment decision, we try to overcome our incomplete information and structural cognitive limitations with permanent preparation, discipline, processes and method. Which at the end of the day should provide the basis for sound judgments.

The management of risk in IP is strongly intertwined with our daily and absolute commitment with the quality – current and future – of our analysis process and investment decision making. The fact that a significant amount of IP partner’s wealth is invested in the funds is also very relevant. In a way, we fully agree with Bernstein: “Risk is a choice, not a fate”.