From chapter 5 – MAGELLAN – The Middle Years
Early in my tenure, we formalized the swapping of information. Our random powwows in the hallway near the refrigerator were superseded by a scheduled event in a conference room, where all the analysts and fund managers presented our picks of the week.
Later, I presided over these meetings with a small kitchen timer, which I pretended to set at three minutes – the official time limit for any defense or explanation of a pick. In fact, I was setting the timer at progressively shorter intervals, until I got it down to a minute and a half. I'm confessing this now that it's too late for anyone to demand a chance to make up the lost time.
People were too excited about their favorite subject to notice that I was fooling with the timer. Anyway, 90 seconds is plenty of time to tell the story of a stock. If you're prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won't get bored.
These sessions of ours were not put-down contests. Wall Street tends to be a combative environment where only the glibbest survive, but combat is not the best way to arrive at the truth about stocks. When you are openly criticized for your ideas, you may tend to hold back the next time. And when there's a chorus of criticism, you're likely to lose faith in your own research.
A hostile reception might not affect your confidence immediately, but the brain never forgets a painful experience. It will remember that every person in the room ridiculed the notion that Chrysler was an exceptional bargain at $5 a share. Then one night a year or more later, when the stock's at $10 and the brain has nothing better to do, it will remind you that “maybe all those smart people were right,” and the next day you'll wake up and sell your Chrysler about $30 a share too soon.
