In this episode of Partnering Leadership, Mahan Tavakoli speaks with Vitaliy Katsenelson about leading with soul and living a meaningful life. Vitaliy Katsenelson is the CEO of the Denver-based value investment firm IMA. He is also the author of Soul in the Game: The Art of a Meaningful Life. His recent book has received praise from leading thinkers, including Nassim Nicholas Taleb and Ret. General Stanley McChrystal. In the conversation, Vitaliy Katsenelson spoke about the impact of scarcity on our thinking, the value of creating psychologically safe work environments, and the importance of connection to building trust. Vitaliy Katsenelson shared thoughts on failure's role in achieving success and some mental models he uses for better decision-making. Finally, Vitaliy Katsenelson shared how Stoic philosophy can help us lead more fulfilling lives and why we need to have soul in the game.
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[00:00:00] Mahan Tavakoli: Welcome to Partnering Leadership. I'm really excited this week to be welcoming Vitaly Katsenelson.Vitaly is the CEO of the Denver based value investment firm IMA, and the author of the book, Soul in the Game, The Art of a Meaningful Life.
General Stanley McChrystal said about Vitaly's book, "Soul in the Game is one of those much needed reminders that although we have no control over when we are born or when we will die, we are the architects of how we live." And you have heard me mention Nassim Nicholas Taleb quite a bit, most especially his concept on antifragility. Love Taleb's work.
Taleb says, "Vitaly knows how to tell a story. This book reads like a conversation with vital tally, deep, insightful, inquisitive, and civilized." That was our conversation and I really enjoyed it because Vitaly is one of those people that looks at life and how we can get the most from our experiences, so we maximize our time and our impact.
I'm sure you will enjoy the conversation too. I also love hearing from you. Keep your comments coming. email@example.com. There's a microphone icon on partneringleadership.com, you can leave voice messages for me there. Don't forget to follow the podcast. Tuesday, conversations with magnificent change makers from the greater Washington, DC, DMV region, and Thursday, conversations with brilliant global thought leaders.
Now here's my conversation with Vitaly Katsenelson.
Vitaly Katsenelson, welcome to Partnering Leadership. I'm thrilled to have you in this conversation with me.
[00:02:24] Vitaly Katsenelson: Mahan. My pleasure. Thank.
[00:02:26] Mahan Tavakoli: I loved reading Soul in the Game, The Art of a Meaningful Life. At the beginning I was a little suspicious. There is this guy who is in value investing and has written a book on Leading a Meaningful Life, and I saw the incredible quotes from a general Stanley McChrystal and Nassim Taleb, both of them brilliant in so many different ways.
I said, I gotta read this guy's book, and it didn't disappoint. So I'm really excited to have you in this conversation. Would love to first start out though Vitaly with your upbringing in Russia. You were born in Russia, made in America, what was that initial upbringing like?
[00:03:08] Vitaly Katsenelson: If I wrote the chapter today, I would've said Born in USSR, made in America, because I'm so embarrassed for Russia. I'm used to be proud to be born in Russia, but not anymore. So I grew up in Murmansk, Russia, and Murmansk is a city located in the Northwest Russia. And if you look on the map, and if you look for Norway, just look for the northern tip of Norway. That's where Murmansk is. There's a very long winters, very short summers, very little sunlight during the winter time. So I grew up in Murmansk. My family moved to United States in 1991 and just wanted to notice the contrast because we moved not just to the United States, we moved to one of the sunniest city in the states, which is, we moved to Denver, Colorado, which has lot of sunshine.
So the contrast between Murmansk and Denver could not be greater. And you could argue that was the similar contrast between growing up in Russia and moving to the United States because you suddenly go from this kleptocracy, corrupt, empty stores, little personal freedom to this free country. And that's basically my thinking about moving from Russia to United States. And I would argue that some people think that when you move to United States and as an immigrant, that's a disadvantage. I would argue that's a huge advantage.
Yes. The first couple years are difficult. You have to learn the language, you have to get used to the culture. But my God, seeing this contrast is so much oxygen in your engines, and makes you wanna work so much harder than everybody else. So we moved to United States 1991, and I lived here since.
[00:04:52] Mahan Tavakoli: Viatly, I wonder about that. I know you are also a proud parent of three kids. Parenting plays a big role in the stories that you tell in the book, in that you appreciated a lot of the freedoms, opportunities, the access to food and sodas and everything else when you came to the US in part because that wasn't available in USSR back then.
And my wife and I always talk about the fact that there are things we as Iranian Americans appreciate very differently than our girls do, having grown up with certain freedoms and access to all kinds of goods. So how do you approach this as a parent of three kids that are growing up in the US so they have the same appreciation for the opportunities that you did.
[00:05:46] Vitaly Katsenelson: There's a lot of value in scarcity. And I sprinkle throughout the book a little bit, like when I talk about how, when I was growing up in Russia, I think I had Coke or Pepsi once in my lifein Russia.
And when I came to United States, I was shocked that you can buy coke here by gallons. So in the first three years of my life in the United States, I consumed more Coke than in the previous 18 years in Russia. The irony of this was that maybe when I was 21, I remember going to village in and ordering a third refuel of Coke, and while I was drinking it, I realized I could not really taste the sugar anymore because I drank so much of that. That is the problem is abundance. You get used to it and you stop valuing it.
I don't want my kids to go through experiences I went through in Russia, but it wasn't all negative because now I value things a lot more than they do. So how do I introduce them to scarcity? My kids , they don't have a limited spending budget. So my daughter she can spend $15 a week for food, which is she can go out to lunch maybe one and a half times. And I'm doing it on purpose let me make this point clear. My kids are not starving. She can take lunch to school, or she can make this $15 go further, or she can work tutor chess, that's what she does, and she can make your own money, but I need to instill that value, that scarcity in them. And I could give her whatever money, I could just basically say you can buy as many lunches as you want, but then she will not value them. I tried to officially instill a sermon of scarcity in their life. So they appreciate it a lot more.
I'll give you another example. My two daughters are still in school and once a month when I drive them to school, we stop and get donuts. We do it only once a month because we could do it every day or we could do it once a week, but then they would not value their experience as much. But this one time a month when we do this, they really look forward to it. When you live in a country of abundance, which is United States and abundance goes for being a feature to becoming a bug, then I have to ensure that scarcity in my kids' lives.
[00:07:58] Mahan Tavakoli: That's a great way to look at it as you try to have some of these same values that you had growing up. You ended up changing majors half a dozen times when you were in college. How come you settled on finance and investing? Your dad, who is an incredible painter, some of the images of his paintings are in the book, had wanted you even to open up a bagel shop or something. So why go into investing?
[00:08:26] Vitaly Katsenelson: That's a great question. I have to really make this point clear. My father, in addition being a phenomenal artist, he has a PhD in electrical engineering. So this is a person of science with an incredible IQ, incredible amount of wisdom. And he always looked at investing what I do as a form of legalized gambling. we're referring to the bagel shop. You're absolutely right, because my father thought for long time when I do a legalized gambling and therefore I need a plan B. And what could be plan be something real? And he was like, Maybe we should do bagel shop.
That was his way of looking at my profession. A couple more caveats here. So when my first book, Active Value Investing came out, that book, when I was writing it subconsciously, I was really writing it so my father would read it and I would make him proud, and he would understand that what I do is not legalize gambling. That value investing is an intersection science and art, but it is real, it's very tangible. So when the book came out in English and, in the United States it was published in six or seven other languages from Chinese to Romanian to Polish and others, but it was not published in Russian.
So I reached out to Russian publisher and I said, I have this book. Would you guys wanna publish it in Russian? They looked at it, they said, great, let's publish it. We'll connect with Wiley, the publisher. We'll get it done, but could you please edit it for us? I said, Sure, why not? Eight months later, I get email with the word documents that my book they translated to Russian. Mahan, I start reading the book and I realized, I understand every single word, but the sentences don't click with me. So I actually asked my father if he could edit the book. He said, Sure, and I'll tell you, I was so lucky because my father going through the book and editing the book made him read every single word of the book. And after he was done by reading the book, he stopped telling me that I should open a bagel shop.
But to answer your question, how I got into investing and I think there was a lesson in this to everybody. When you are young, a lot of times you have an idea what you major, what you wanna practice in life. But it's a theoretical knowledge. And when the theory meets practice, a lot of times you get disappointed. So I think you should try out different majors and do as many internships as you can.
Diverse internships, not just in one profession, multiple professions, and then figure out what clicks with you. So I dated six or seven different majors and the more industries and professions you expose yourself to, the more luck you create. I was lucky that I was good with computers and I got a job at investment firm. They hired me for my computer skills, absolutely nothing to do with investing for my computer skills. at the same time, I was taken kind of business major, which is very ambiguous. Like I could have gone either direction and I was taking prerequisite finance classes. And when I took finance classes, they really clicked with me and I would discuss this concepts I learned from school at work with portfolio managers there, and these discussions really made this world of finance very exciting to me. This is when I realized I actually wanted to invest in. And so I was lucky in the sense early in my life, maybe it was 22, 23, I changed my major for the last time to finance and just got my undergraduate and grad graduate degrees in finance. I got my CFA designation and when you have focus and hard work, it's very difficult, but not to become successful. I actually had focused passion and hard work
[00:12:11] Mahan Tavakoli: You created your own luck by exposing yourself to different opportunities and seeing what clicks with you. And you mentioned your first job Vitaly, and I think there is a great leadership story and example in that first job, a lot of the listeners are people that want to improve their leadership skills.
How many years later is it, and how big of an impact has that first job had on you after you fry the database of the organization?
[00:12:45] Vitaly Katsenelson: Yeah. So I was good with computers, but what I did not say, I was good with software. But I was not good with hardware. So we needed to change the video card on a server. And everybody's working and I really just did not want to tell everybody to get off the server. So I tried to do a heroic thing and to change this video card on a running server. By the way, when I say it today, it sounds completely idiotic. I could have been electrocuted on top of everything else. But anyway, so I'm changing this video card on the server and I fry the server. It has all the data, this is like old days where this is how people access, internet, everything. So that computer is gone. And this is the leadership lessons of two founders of the company, so not a single one, shoot me out. They just basically look at the problem and then they try to address the problem. They found the new server brought in consultants to restore the backups. one of them was just completely focused on trying to get the things fixed. Another one tried to make me feel better because he saw how miserable I was. And just a little bit of empathy, you realize that it was no more feelings on my part. I just had a childhood stupidity, what I did was no ill intent and he really tried to make me feel better. And here's interesting part, this was almost 26, 27 years ago. One who passed away recently. We had very good relationship to the very end. And another partner that's one of the longest friendships I have. And today as a leader, I try to do the same thing when somebody makes a mistake. Especially if I can see this was done out of just, I guess ignorance and, my case or just, just honest mistake. I try to make sure that this person does not suffer unnecessary. And that was a very important lesson.
[00:14:38] Mahan Tavakoli: It's a powerful example Vitaly because there is a lot of times when as leaders we say, allow people to make mistakes, take chances, but reactions are different when things go wrong. Everyone wants those risks to be taken, but when things go wrong, their behaviors are different.
So in this example, things had gone wrong and they behaved in the way you would want other people to behave.
[00:15:06] Vitaly Katsenelson: I think that is a great point, I learned this as a parent and I learned that as a CEO, that your employees pay attention, not just to what you say, but what you do. I think what you do, your actions are incredibly important. And I'll give you one example when I make mistake, I tell 'em about the mistake I made and what I learned from it. And by doing that, I think I create a safe place for people to admit when they make mistakes and people to learn from it. And also, it's very important that I wanna create a culture here where people are comfortable. Like they don't hide problems under the rug, but they bring 'em to the surface.
And then therefore, if you do this, you're gonna deal with problems so much sooner. The two interesting developments that help me tremendously in my life. One is being a parent, another one is writing. And I'm not sure which one helped me more, but as a parent, if you think about it, I have to teach my kids a lot. And by teaching them I learn. And writing is the same thing. When I write, I learn, right? Because what I have to do, writing is a concentrated, focused thinking. For me, I write two hours a day every single day, and therefore it forces me to think two hours a day every single day. And so parenting and writing are probably the most important things that happen to me.
[00:16:31] Mahan Tavakoli: That writing is really important to you. Vital it is important to me also. When did you. Come up with the fact that you need to sit down and do this focus writing, and why did you do it? You're, you are, again, a very successful value investor. People typically wouldn't think of someone in your role sitting down and writing for what purpose?
How did you come up with it and why?
[00:16:56] Vitaly Katsenelson: I'll be honest, I look at my life and it's just a whole bunch of accidents happening to me. I would argue that accidents happen to all of us. Good accidents and bad accidents, and then we have to take advantage of them. So in 2004, I think I was done with my graduate school already for a few years. I've been teaching finance at CU Denver for a few years, and after I taught finance for a few years, I already got bored with that too. And the street.com was hiring writers. Street that come was at the time like Saturday night live for a lot of comedians. And what I mean by this, if you think about some of the writers who went out and became big, like James Altucher came from the street.com and many others started the career on the street.com. And so did I. And they were paying almost nothing and they were overpaying me because I knew nothing about writing. I had a CFA designation, I had a master's degree. I was doing investing thing for living and that's why they hired me. And over time I fell in love with writing. It's just something that I was born to do, and also, it took me a while to realize this, but it made me a much, much better investor just because it made me think so much more about different topics than I would otherwise. And then I ended up writing two investment books active value investing in a little book of side raise markets just understand working on the book, I don't know how many hours I spent on, it's thousands and thousands of hours I spent working in the book.
That's, again, a lot of thinking. So yes, my profession, people are not supposed to write, but I would argue that's one of my superpowers. It made me so much better investor because I started writing and I used to be somewhat embarrassed for writing, meaning that I wanted people to take me seriously as an investor. I basically look myself as a investor who writes, or as a student of life or as many different identities, but writing is definitely one of my identities. And it benefited me tremendously.
[00:18:56] Mahan Tavakoli: It's a practice everyone can take on and it's not necessary to take two hours a day. One of the things I find Vitaly is it becomes a second stage to reflection. Some people like to meditate, some people like to take silent walks, writing forces you to formulate your thoughts and decide what you believe and what you don't, and try to communicate it.
There is a lot of value in doing it that way, even to the point that Amazon still is very well known at a conversation with John Rossman, who's written series of books on the Amazon Way, on how before decision making meetings, people are to write six page memos. It forces them to really reflect. So I find it's a practice that can be helpful for all kind of leaders and it's not necessary to start at the couple of hours a day level.
[00:19:54] Vitaly Katsenelson: I agree. what I do two hours a day. For a lot of people, that's too much. I would argue that you wanna start with 5, 10, 15 minutes a day. One thing I would argue to do daily. So you can create a habit and What you need to do, you need to create a space. Space is a Physical location where you go, where you feel comfortable, where hopefully there are very few distractions and make it as easy as possible. If you are writing while you listening to music, as I do, make sure your headphones are right there, so easy to find them. And just create this space and start doing it every single day. Now, this is very important. A lot of times you show up to write and there is nothing you just walk away with a blank piece of paper and that is absolutely fine because what you are doing, you plant in seeds in your subconscious and your subconscious one of those things that actually works 24 7 while you're sleeping, while you're walking, while you're taking a shower, and you have no idea when these seeds will bear fruit.
I've been working on this article actually the next chapter of the book the book is already out, but I keep writing and I've been working on this probably for three weeks and yesterday I walked away from it knowing that something's not clicking. What I wrote, I wasn't really satisfied with that, but I walked away with such a ease knowing that I didn't waste my time. I'll come up with the answer during the walk or the next day. And today I woke up this morning and I rewrote where I struggled and it ended up being so much better and I learned a lot. So my advice to a listener would be when you start writing, be kind to yourself. Because there will be times where you just, produce absolutely nothing. And by the way, this could be happening for weeks. Actually, it happened to me for almost a month at one point. And when that happens, just. You are in the planting season.
[00:21:56] Mahan Tavakoli: So you have this writing practice, you wrote a couple of books that are related to your space and value investing. Why write a life philosophy book?
[00:22:09] Vitaly Katsenelson: So let me agree with you and disagree at the same time. I think the soul in the game, the art of meaningful life is the book about investing, but investing in your life.
[00:22:19] Mahan Tavakoli: way of putting it.
[00:22:19] Vitaly Katsenelson: So after being writing for a while and after I became a parent, little by little I started to introduce stories about my life. And in the beginning there was just, a few paragraphs that would insert in my emails that would send out to readers. And what happened over time, I started to receive emails from my readers saying, Vitaly, I came to you for your investment insights, but I'm really staying for your life stories. And I'll be honest, this is very important to understand as a writer, that provide me so much confidence to actually continue to write about life. Because as you mentioned, I have two finance degrees. I do investing for a living. So me writing about investing, it feels natural. I didn't get a liberal arts degree. I didn't study philosophy in school. I read the same parenting books everybody else did. But over time as again, self confidence, I started to write a lot more about this and again, Writing made me think a lot more about this topics as well, and that's how I got the confidence to write this book.
[00:23:28] Mahan Tavakoli: And you know what I find interesting Vitaly as I was reflecting on it because I wasn't familiar with your work in investing before reading the book and in reading the book, I felt a sense of connection to who you are. And to me this relates very well to a lot of aspects of leadership as well. One of the people I repeatedly talk about who's done a magnificent job on many different levels in leading the organization is Satya Nadella at Microsoft.
And he does a brilliant job of telling part of his life story, part of his struggles, part of his authentic self. And that helps people, whether it's in the organization or their clients, connect better with Microsoft and Satya Nadella. It doesn't substitute for the competence of the strategy, but there is a trust that is placed in the person because even though I've never met Nadella, I feel like I know him because I know some of his stories, some of what makes him tick.
And I think to a certain extent, your clients and your community appreciates this about you. You are great at value investing, but this also enables them to connect to Vitaly as the human being that human connection rather than just connection on the competence.
[00:24:56] Vitaly Katsenelson: That's very important so when you think about my business for a second, what we do we are money management firm. We have value investment, money management firm. People basically come to us and say here's my life savings, please don't screw it up. So it's a lot more than just somebody buying your product that costs $50, even a hundred dollars. Every time you get a new account, I feel a little bit humbled because the trust required for somebody to hand over their life savings to me is absolutely incredible. And when people do this, they don't just do it because of my skills. That's very important. I'm not dismissing that. But they also do it because they trust me as a human being.
[00:25:41] Mahan Tavakoli: Is important to be able to tell those stories Vitaly. And as you said, it's not a marketing strategy. Now the book. Has a lot of great insights and would love to touch on a couple of areas that really resonated with me. One is you are a big fan of mental models so how did you come to mental models and what are the mental models that you think are most applicable?
[00:26:11] Vitaly Katsenelson: If you think about anybody who writes, tells stories, they are in constant search for mental models. Because when you tell a story, a lot of times it's just an analog. You wanna make a point, but you need to find a vessel to make this point.
So you tell a story through something, through an analogy. So a lot of times mental models are like that. Myopic circle, a mental model, I realized about this mental model originally during the pandemic, when vaccinations were happening, and I discovered that everybody around me was vaccinated. There's very few exceptions. People who could not do it for true medical reasons. But then people who were not vaccinated on principle, those people would know a lot more people, who are not vaccinated. So when I look at the world from my prism, my myopic circle that's created my myopia like very narrow circle. I thought everybody's vaccinated, and then I realized, for me to understand how the world works, I need to be able to step out of my circle into other circles.
And that help me a lot of is investing because when, a lot of times when I analyze companies, I can't relate to the product because the product hasn't been designed for my demographic or for my social graphic, et cetera. I'll give you an example on tobacco stocks. I don't have a single friend who smokes. There's zero judgment here. I aspire certain type of values and those values conflict with smoking. There's nothing wrong with somebody who smokes, if you find a person who smokes, they're probably gonna want a lot more people who smoke. They own tobacco stocks and yes, there are 14% of Americans who actually smoke. So that's another example of my epic circles. So that's an example of mental model. What mental models help you to do it's a thinking shortcut. It allows you to analyze something so much quicker because you see parallel, from here to here. Soul In The Game, if you think about this is gonna the most important shop in the book, that is a mental model. That's what it is. It's a mental model that how I aspire to lead my life. Soul In The Game is attitude where it becomes part of your identity. So Soul In The Game is a mental model basically.
[00:28:36] Mahan Tavakoli:
I wonder Vitaly, what are examples of when people don't have soul in the game?
[00:28:42] Vitaly Katsenelson: When you have a job and you don't care for it, when you go to work and you don't want to be there, when you do something solely for money and the process of creating has a little meaning. Let me give you this very little example. This is how I used it in parenting. My daughter Hannah, she's 16, she's very good at chess, she's win me in chess, which frustrates me a little bit. And started to teach chess lessons and she's teaching chess lessons and she was gonna have her first lesson over eight year old girl. Like day or two before she had this lesson, I talked to her, I said, Have you prepared for the lesson? She's Nah, I, know what I'm gonna teach. And I said, Realize, You gonna have a huge impact on this eight year old girl. If you prepare or not, if you have passion for this or not, this is gonna determine if this girl is gonna love chess for the rest of your life or not. The impact you haven on her is absolutely incredible. So this money that she's gonna pay you, you're gonna spend this money very quickly, but the impact you're gonna have on her is gonna be long lasting. So you should have soul in the game when you do this or just don't do it.
[00:29:52] Mahan Tavakoli: I love that example, and I love, the parallel with Nassim Taleb's skin in the game, in that there is a level of ourselves that has to be involved in what we choose to do, it's our soul as a part of it, rather than a distant observer.
[00:30:09] Vitaly Katsenelson: Just Observer is a perfect analogy for that. Yes. And by the way, I gotta give Nasim a credit. I was reading his Skin in the game and he had this chapter there, which almost felt like it was a throwaway chapter, Soul in the Game. I tell you, I read this chapter and I had such a aha moment.
So let's talk about skin in the game a little bit. Skin in the game is basically where you share not just the upside, like with your clients, but also the downside in my investment industry is so famous or infamous actually, I would argue for not having skin in the game. Wall Street will come up in a poisonous product that they'll sell to you because you wanna buy it, but they would never consume it themselves. So they would enjoy the upside of that, of selling it, but they would never suffer the downside when it blows up. So when you have skin in the game, you enjoy not just the upside, but you suffer the consequences of the downside as well. And to me, that is incredibly important. As an example, most of my liquid net worth is invested in the same stocks my clients do. This is significant amount of money. The reason it's important is that when I buy a stock, if that stock is not gonna work out. It's not because I didn't care, it's because bad things happen. So if I make a mistake, it's never gonna be because of indifference. And I cannot tell you how important that is to my clients.
[00:31:36] Mahan Tavakoli: That is incredibly important. And I love the way you described Skin In The Game and its connection to Soul In The Game. We can all become better leaders by reflecting our soul in the game, in leadership. So I love the thinking behind that Vitaly and the reflection on how we can have greater soul in the game, like skin in the game if you have soul in the game , you lose when others lose.
[00:32:07] Vitaly Katsenelson: Very difficult to have a meaningful life if you don't have soul in a game. There is this terrific book called The Last Lecture by Randy Pausch and by the way, if you're listening to this podcast, you're watching it after you dumb this, go on YouTube and just watch Last lecture by Randy Pausch. It's gonna make you cry and it's one of the best 40 minutes you're gonna spend in your life. So Randy was a teacher at Carnegie University. He was 44 years old when he was diagnosed with cancer. I forget which type, but it was one of those cancers where you are healthy until suddenly you're not. So when he did this lecture, he was in perfect health. I think he did 30 pushups on stage, but he was basically saying, I got six months to leave. Carnegie Mellon, when they do a last lecture, usually it's not literal, it's , a professor's about to retire, but still has a long life ahead of him.
This was literally, his last lecture. He only had six months to live and it was turned into book and in the book he tells a story that really stuck with me. And Randy bought a new car, a new convertible, and this is before he got married and he went to pick up his niece and nephew and he was gonna take him to amusement park. And his sister saw that he has a new car and she told his kids, make sure to eat carefully in the car. Don't dirty Uncle Randy's car. And while she was saying it, Randy opened a bottle of Coke and just looking at his sister's peel this bottle of Coke on the backseat of the car. And his sister was absolutely stunned. And he said, This is just a car. It just a piece of metal. It doesn't matter. So what happens with us in life? We value material things too much. We spent too much of our energy on material things. And I'd like to pause and think for a second. So Randy's book came out maybe 12 years ago. This story happened maybe 15 years ago. Where is Randy's car today? Randy is gone. Randy died. He lived not for six months, for about 11 months. Where is Randy's car today, that convertible? It's probably some kind of junkyard. Doesn't even matter that it has, Jody, back seats or not, it's makes no difference.
And I think if you go through life, there's an attitude that you have six months to live. Then suddenly material things like, how dirty our car is, if you got dented et cetera, If our house, has a perfect, paying job, et cetera, those things become a lot less important and that energy we save from worrying about these things, we can redirect them to things that are more important to us, which is relationships.
This story came to me because we were flying from Europe to Denver and I bought some knickknacks for my kids at the airport and I left them there and I got upset and then I was telling with my brother, I was telling him this story about Randy and suddenly those knickknacks became so unimportant, my kids did not even miss them because they never knew I got it so that's how I go through life I guess.
[00:35:18] Mahan Tavakoli: I see a lot of stoicism. On one level, it is the scarcity of the moments and life, on the other level, the fact that a certain level of scarcity in your life allows you to appreciate the special moments even more.
[00:35:37] Vitaly Katsenelson: It's a great point because the stoics have this practice called negative visualization. All it is, you admit to yourself, there is scarcity in life and you admit to yourself that bad things do happen and helps you to prepare for them when they happen. And while you're doing this, it makes you appreciate what you have so much. I'll give you an example. My oldest daughter is 16. She basically has two years left in school, in two and a half years she's gonna go to college. So every day I drive her to school. I have this realization that there's only 400 more times I'm gonna drive her to school. That's about it. After that, she won't need me to drive her to school, She'll be driving herself to college. And in the past I would look as driving her to school as a chore. Today I have this deep appreciation for that, and I look at it as the gift. And by the way, same activity. Driving to school hasn't changed, but understanding the scarcity, understanding that this is not forever, has changed my perspective completely. Just one little thing, just, is what I love about stoic philosophy. This little exercise of reframing can change you life dramatically.
[00:36:53] Mahan Tavakoli: Vitaly that is such a beautiful example with you driving your daughter to school, it is not stoicism or stoic in the dictionary definition of not having emotions.
It is the stoic perspective of the limited time that we have, which allows us to be more present in those special moments. It allows us to appreciate the moment more, have more joy rather than not have emotion.
[00:37:20] Vitaly Katsenelson: Oh, absolutely. And I would argue that what it does, it helps you to minimize your negative emotions by reframing and it also enhances your emotion.
[00:37:30] Mahan Tavakoli: You had, written a book, you paused it for almost a year to write more on stoicism, but it sounds like your mother-in-law after reading the book, told you might need to practice it a little bit more yourself,
[00:37:44] Vitaly Katsenelson: Oh, absolutely. And that's a great point. This is a very important point , stoic philosophy. Should be called the stoic practice. Because there's this great, Asian proverb, we usually say this, when we don't know the origin of it could have been authored by Lujack John. But , are you gonna really trust the proverb by Lamber J John? No. And the proverb goes like this, knowing and not doing is not knowing. If you read about stoic philosophy, either in my book or other books and you don't practice it, then it's almost like if you never read it, cause what you do, because when you practice story philosophy, you're trying to rewrite your operating system, so this process, guess what? You get a fail. Many times I fail plenty. And as my stepmom would mention, you would tell everybody, I fail plenty. And then when I fail, I try to admit to myself, learn from it and keep going forward. The more I practice, the less I'm gonna fail that's all.
[00:38:44] Mahan Tavakoli: That's part of what helped your story and your examples resonate even better with me Vitaly in that it's the authenticity of the ongoing struggle of the practice that you go through yourself. . Would like to quickly touch on a couple of other areas.
I love your thoughts on the role that struggle plays in growth.
[00:39:07] Vitaly Katsenelson: I'll be honest, I still look as much to struggle as everybody else. Today I have a slightly different perspective when I go through struggle. I realized this is a learning opportunity for me. I'm gonna tell you a story.
I have a fellow working with me who is absolutely incredible employee. He's incredibly organized. He's perfect at his job. I give him a task that requires a little bit more creativity and he's been really taking it very seriously. And creativity is not something that he's used to, not something that required his normal tasks. And I was talking to him a couple of weeks ago and he was incredibly frustrated. And this task I gave him, there was a lot of creativity in this and you need to come up with a solution cuz we are installing this new software and requires the design of different things. He was telling me how frustrated he is and I said, this is a normal part of creative process. On one side you have the great curiosity you wanna see how you gonna solve it, on the other side, you have this fear that you won't be able to solve it.
This tug of war of this emotions, that is what kind of creative process is. I was talking to him couple days ago. He's much calmer about this. He is more at peace . If you go through life, it's impossible not to fail at something. And I would argue those fails are opportunities. There are opportunities for us to grow. In the book, I'm talking about how had a very difficult year in 2015. Failure made me grow as an investor. Because what failure does, it exposes all the weaknesses you have in your process, and you start seeing your weaknesses so much better. I think Bill Gates said that failure is so much better teacher than success. And That's exactly right, because it exposes your weaknesses and then what you can do, you can improve your process and the next time. You will fail less that's how I look at failure.
[00:41:09] Mahan Tavakoli: It's a great way to look at it on the tip of the hat again, to Nassim Taleb in anti fragility, in that failure helps you become stronger oftentimes. We don't like it. We don't like the setbacks. It's tough going through that struggle, but that struggle can lead to growth.
Now, you also mention the origin of the word Abra Cadabra in Hebrew, I will create as I speak.
I love the point that you make with Abra.
[00:41:42] Vitaly Katsenelson: So when we go through life, a lot of times our identity unfortunately is formed by random experiences. By random conversations that we have, by random arguments. What you think about your key issues a lot of times is formed not because you looked at three sides of the argument and you came to this conclusion thoughtfully just because you start target with somebody and the thought into your mind, and that's the position you took, and now you have a hard time given not the position. Again, I created a speak, you create it your identity, you create your identity as you speak, , So my argument would be you should be very thoughtful to go back and reexamine your values and see if you really believe in them or they were created through an argument.
[00:42:33] Mahan Tavakoli: I love behavioral economics and have had lots of conversations with people that talk about the psychological aspects of it, but this one word for me captured a lot of those things and has made it very memorable because it's so true that once we voice something, maybe in an argument, maybe by accident, maybe for whatever reason, we are creating a belief system oftentimes that then we end up looking for data and confirmation to support.
So there is a lot that comes as a result of us creating when we speak and then spending a lifetime confirming and supporting what we spoke, whether by accident or for whatever reason at the moment in time.
[00:43:22] Vitaly Katsenelson: That's right. And I think you should go through, life in a kind of an scientist mode where everything you look at is a hypothesis and then you carefully analyze that, and then after thorough analysis, it becomes what you think you should be even more careful when it becomes your identity, but you should not link ideas to your identities period. In other words, ideas should live in a separate space from your identity, because it's very difficult for us to change our identity, and that's a good thing. And therefore we should be incredibly careful that ideas leave in their own sandbox.
[00:43:59] Mahan Tavakoli: Vitaly I know you have many more books in you, and we've just touched the surface of Soul in the Game. How best can the find out more about you and the book?
[00:44:11] Vitaly Katsenelson: If they go to, soulinthegame.net, their instructions how you can get new chapters that I wrote after the book already came out because I just can't stop writing. I just keep writing and writing. So keep writing new chapters. Also we have a podcast and a podcast basically, my articles read to you and articles about investing life, classical music story philosophy, and you can listen to them if you go to investor.fm, like FM radio or just look for Intellectual Investor Podcast on wherever the podcasts are available. And finally to enjoy full experience of my writing, you really should subscribe to my articles because my articles have my father's artwork, classical music, et cetera. And you can do this as if you go to contrarianedge.com e dge.com.
[00:44:58] Mahan Tavakoli: I've become a fan of the articles and listened to some of the conversations on your podcast. Especially enjoyed the comparison between Bezos and Jack Welch, now there are many more books coming out on Welch and how he contributed to the downfall of GE while he was there, he was being celebrated as this heroic figure with the wrong measure. So you have an outstanding perspective on those two also.
[00:45:28] Vitaly Katsenelson: I have another article I'm thinking about writing on this topic, and I think in part why Jack Welch was so celebrated, because there's, in part because General Electric owned CNBC. And that was the biggest cheerleader of Jack Welch and GE. If they did not own CNBC, our perception of Jack Welch might have been different. Partially, well, number two, you know what I realized? Mark Herd. He used to be CEO of Hewlett Packard and he was very respected CEO. He passed away unfortunately a couple years ago, and he was very respected CEO. Then when he left Hewlett Packer's business fell appart. Literally six months later, it had huge problems. And people said, See, he left and the business fell apart. What people were saying, how important he was to the company and how great CEO he was. And to me that was the opposite argument because that showed that he did not build a sustainable company. A true CEO builds systems and culture that can function without him. And if you think about Jack Welch, he basically left a power keg when he left Gene Electric that was just waiting for the crisis to explode. And he also built short term culture, be the earnings culture where Jeff Bezos doesn't even know how to spoke world earnings.
I remember listening to Bezos conference call when somebody congratulated them on the latest quarter, and he said, I don't think he understand. This quarter is a reflection of decisions we made three years ago. What it really teaches you that a lot of times to make decisions for long term, you have to sacrifice short term profitability because you have today's outflows for the future returns. And that's embedded in the culture of Amazon. Not in culture of GE. Maybe that culture has changed since they have a new management. But that's the culture of GE that brought it to this short termism and lack of investment. And that's what basically ruined GE. And I would argue Jack Welch should not be going in a, wall of fame, but wall of shame.
[00:47:35] Mahan Tavakoli: That's why I wonder from a leadership perspective, when you invest in organizations, there are lots of different things you look at. Let's put that and the investment advice to the side. When you look at leadership in an organization, whether the CEO, senior team executives, or the people, what are the leadership practices that you would like to see in organizations that would be pluses as you look to invest in them?
[00:48:03] Vitaly Katsenelson: I want them to have, it is gonna sound bailed and tried, to have soul in the game. I want those people not to have a short term time horizon, but have a long term time horizon. I do also want 'em to have a skin in the game, so I do want 'em to own a lot of stock. This is how I changed this investor over the years. I started to appreciate the value of people a lot more. So now it's very important for me to listen to conference calls. And a lot of times I'm listening to how when management thinks, are they long term oriented or short term oriented? Are they, temporary steward of capital, or they're making decision for the period after they're gone, that's very, different behaviors.
[00:48:43] Mahan Tavakoli: Really appreciate. Thoughts. And as I mentioned, couple of people that I highly admire and respect, Carl Bernstein had said about the book, No Ordinary Self-Help Tone. I've never read anything quite like it. That's high praise coming from Carl Bernstein. Nasim Nicholas Taleb, who is one of, in my view most insightful philosophers, thought leaders, said deep insightful, inquisitive and civilized.
And then General Stanley McChrystal, who has a brilliant book, team of teams and I think has done a magnificent job reinventing himself. Said about your book, one of those much needed reminders that we are the architect of how we live.
Thank you for joining the Partnering leadership conversation and sharing some of your perspectives on your outstanding book,Vitaly.
So in the Game, The Art of a Meaningful Life. Thank you, Viatly Katsenelson.
[00:49:47] Vitaly Katsenelson: Thank you so much. You're such a wonderful host. I really enjoyed it. Thank you again.