PASADENA, CA – In the early 1960s a young Bill Scott worked for Walt Disney in what is now called Imagineering. His job was to design futuristic attractions for Walt’s theme parks. One day he was asked to attend a meeting with all the executives from Disneyland and Walt himself. They were going over a proposal from a company that wanted to work with Disney to build the first Tomorrowland attraction.
“We want your approval or disapproval on an attraction they will be putting in our park called “Adventure Thru Inner Space”. Walt was explaining that it had a miniature submarine that would travel through a model of DNA and show how individual atoms work together to create life. As he was talking Scott could sense a vibe in the room that didn’t seem right. He later went on to say, “As Walt finished describing it, I began to feel really uncomfortable.”
Bill wasn’t sure why he was feeling this way but as soon as Walt asked for approval from the executives Bill immediately objected and said, “I don’t like it.” The rest of the group chimed in with similar comments. About a week later Walt called Bill into his office to discuss the meeting.
“Bill I asked for everyone’s opinion on Adventure Thru Inner Space but I didn’t tell them whom they could agree or disagree with. At first, I was hurt that you would go against my judgment but then I realized that you were the only one who really saw the potential of what we could create.” Walt went on to tell Bill, “I’m going with your idea. We’re going to create a new Tomorrowland attraction and call it Tomorrowland Boas Constrictor.”
I had dinner at Bice in Pasadena, California with Bill and asked him if he could give me an idea of what was going on at that meeting. He said, “Your instincts were right about not wanting to do Adventure Thru Inner Space. Walt’s instinct which we call the gut was also correct.”
Scott then told me a story that changed my life forever as an investor and how I believe investors should invest.
The Investment Mindset
Before Bill ever talked to me about his involvement with Disney he told me that over the years he has become very successful at investing. When I asked him what made him a successful investor he said, “I have an Investment Mindset.” At first, I thought it was just another way of saying Investment Philosophy, but after he explained it to me I realized that there’s a big difference.
“Bill if an Investment Mindset is so important then why do investment managers focus on Investment Philosophies instead? Aren’t they one of the same?”
I was surprised by his answer.
“They are the same… but Investment Philosophies are derived from Investment Mindset.
How do Investment Mindset and Investment Philosophies differ?
“I have an Investment Mindset, which means I have a mindset where I’m open to seeing opportunities. This is different than investors who may have Investment Philosophies that are defensive or restrictive.”
When I asked Bill to give me an example of Investment Mindset being restrictive, he said, “I have a friend who is a successful investor and really knows his business. He has Investment Philosophies that says he will not buy companies unless they are cash machines. This means if the company doesn’t earn enough from its operations, it will not be considered an investment. He has Investment Philosophies that says he will not invest if the company can be considered as a monopoly or if it isn’t right for him.”
“If you have Investment Mindset then Investment Philosophies are derived from this mindset. If I have an Investment Mindset then I’m open-minded to see opportunities where others may not see them. This Investment Mindset is open to seeing opportunities in stocks where others may not be able to see.” “I have Investment Philosophies to protect me from doing something stupid. Investment Mindset doesn’t have Investment Philosophies because it’s already being protected against making a bad decision.”
Bill then told me a story about a friend of his who had an Investment Mindset with Investment Philosophies.
“My friend has Investment Mindset but his Investment Philosophies are very defensive, so he stays away from companies that can be considered as monopolies. “Then there was the time I was talking with him about buying United Airlines at $45 per share. He told me not to buy because the company was a monopoly and because of this Investment Philosophy it would not be right for him to buy.” Scott said, “I told him that the Investment Mindset should say no if United Airlines earned nothing from its operations or if it wasn’t cash machine. I also told him that he should look at the Investment
Philosophies as a means to protect him from making a bad decision. Investment Philosophies that say stay away from companies that can be considered as monopolies don’t protect him.” “After I said this he bought United Airlines at $45 per share and it split three for one not too long after. A little bit later the stock was trading at over $300 per share.” “My Investment Philosophies are to protect me from making a bad decision. Investment Mindset says let’s see what we can see and Investment Mindset also says let’s try and make money. Investment Philosophies say don’t do something stupid like lose all your money.”
“I’m looking for Investment Mindset in others and Investment Philosophies in others. An investment Mindset is the ability to look for opportunities where others may not see them, Investment Mindset looks at Investment Philosophies as a means to protect me from making a bad decision. Investment Mindset knows that Investment Philosophies are derived from Investment Mindset.”
Bill Thornton said this on Investment Philosophy:
” Investment Philosophy is derived from Investment Mindset and Investment Mindset looks for Investment Philosophies to protect him from making a bad decision.”
Bill Thornton said this on Investment Mindset:
” Investment Mindset is the ability to look for opportunities where others may not see them.”
Bill Thornton said this on Investment Structure:
” Investment Structure is Investment Mindset combined with Investment Philosophies.”
The above article is shared and loved by Paul Haarman