Antifragile Investing: Josh Tarasoff's Strategies for Thriving in Uncertainty
He launched Greenlea Lane with $2.3 million in assets under management (AUM). Currently, Greenlea Lane oversees over $450 million in AUM, showcasing substantial growth from its inception.
I attended a guest speaker series at CSIMA (Columbia's Student-Run Investment Club), where Josh Tarasoff was invited to share his thoughts and approaches to investing. I was impressed by his reputation, especially considering that very few people know about him and that he doesn't even have a formal office (he started everything in his humble bedroom and even showed it to us). In this post, I aim to summarize some insights about Josh's approach to building Greenlea Lane that may be valuable for emerging fund managers to learn from.
Josh Tarasoff is the General Partner of Greenlea Lane Capital Partners, LP, a private investment partnership he established in 2006. He received a degree in philosophy from Duke University in 2001 and previously worked at Goldman Sachs. Josh also holds an MBA from Columbia Business School. In 2006, he launched the partnership with $2.3 million in assets under management, no employees, and no office, and did not engage in proactive marketing. He remains the sole investment professional, still without a formal office. Despite this, the partnership has seen remarkable success, growing to over $450 million in assets under management, primarily through a 17.3% compounding return net of all fees and expenses since 2006.
Josh kicked off our session with a surprising dose of humility. He shared that he majored in philosophy and graduated in 2001 before venturing into Wall Street. Interestingly, he admitted that philosophy would have been his path if he had followed his heart. It wasn't until 2004, while reading Buffett's letters, that he had an epiphany about investing. He ended up in New York, where Columbia offered a value investing program, and he jumped right into starting his own firm after graduation.
Josh explained that he intentionally avoided the traditional institutional path to gain a competitive edge. He views investing as a creative pursuit, not something to be optimized for any external metric. He felt a calling towards investing, and that's what led him to a 7-year stint living in a row house in Jackson Heights, Queens.
His advice to others was quite profound: your best work is tied to who you are. The highest calling is to do something in a way that only you can. He believes any dilution of this purpose diminishes its significance. “It's a privilege to be able to do so”, he said.
Below are the takeaways I got from the session with Josh Tarasoff:
Win by playing your own game, tailored to your unique individuality and circumstances
Josh's philosophy is to win by playing your own game, tailored to your unique individuality and circumstances. He introduced the concept of superpowers, which he defines not as strengths but as idiosyncrasies. The key is to create a game where these idiosyncrasies become superpowers.
He also critiqued the industry's standard of being hurried, seeing it as detrimental to good decision-making. He dismissed the idea of a portfolio with 24 stocks and a 2-year holding period as unrealistic (with which I completely agree).
Instead, Josh advocates for a self-driving portfolio. This is the opposite extreme of expecting to hold forever, aiming for compounding returns. He suggests starting with this ideal and working towards it over time. The benefits include anti-fragility, stronger decisions, and more time for offense rather than constantly putting out fires.
Focus on the end game
When it comes to companies, Josh has a clear vision of what he seeks. He defines the end game as a future scenario backed by undeniable logic, emphasizing that he deserves to lose on that investment if he's wrong about this scenario.
He illustrated this with an example: over a decade ago, he started investing in e-commerce despite the controversy surrounding it at the time. His end game was the prediction that a substantial portion of retail spending would shift online, and the market share would consolidate, leading to more efficient capital allocation.
When asked about his early interest in e-commerce, he pointed out that people often struggle to handle radical change. He used Amazon as an example: despite its initially poor financials, retail insiders felt a sense of urgency and fear, which wasn't reflected in the financial world.
He contrasted industry perceptions with those of the financial world. Insights from the ad industry supported his belief that Facebook could successfully monetize on mobile. This highlights his emphasis on intuition and focusing on results, especially when dealing with new concepts.
Josh also believed that physical retailers would still capture their fair share of the online market, but he recognized that online retail was a different game, requiring different skills and assets for success.
Take a deep dive and be prepared to challenge your beliefs
He shared that he was initially hesitant about investing in Amazon, especially regarding AWS (Amazon Web Services). However, his confidence grew around 2013. He emphasized that he wouldn't have ventured into something so far outside his circle of confidence without self-sourced expertise. He utilized platforms like Upwork and consulted with experts to gain a deeper understanding.
When discussing Amazon's streaming business, Josh questioned its value. He views it as a standalone business today, separate from Amazon’s core. He sees the marketplace and Prime as interconnected pillars, where one cannot exist without the other. This perspective highlights his customer-centric approach, advocating for viewing everything from the customer's perspective by default.
Becoming Antifragile and Wu Wei (無為)
Josh's investment philosophy aligns with nature, viewing time as a friend and ballast in turbulent times. He referenced works like "Treatise on Efficacy" by François Jullien and "Antifragile" by Nassim Nicholas Taleb to support his perspective. He firmly believes that knowing something will be the case in the fullness of time is a good bet.
Few understand that procrastination is our natural defense, letting things take care of themselves and exercise their antifragility; it results from some ecological or naturalistic wisdom, and is not always bad -- at an existential level, it is my body rebelling against its entrapment. It is my soul fighting the Procrustean bed of modernity.
― Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder
When discussing "Inevitables by Buffet," Josh emphasized the need for underlying logic indicating that the company or thesis is leading the world to a better way, rather than simply relying on convictions in competitive advantages. He used the example of selling sugar water, highlighting that without careful consideration, it wouldn't be evident if there's an end game.
Positive feedback loops lead to quality
He emphasized that overwhelmingly beneficial positive feedback loops are not just good but necessary. He cited examples like network effects and economies of scale, referencing works such as "Scale" by Geoffrey West and "Thinking in Systems" by Donella Meadows. He views companies resembling cities with scalability and interconnectedness as more promising than traditional companies.
While exponential growth is a remarkable manifestation of our extraordinary accomplishments as a species, built into it are the potential seeds of our demise and the portent of big troubles just around the next corner.”
― Geoffrey West, Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life, in Organisms, Cities, Economies, and Companies
Josh continued his discussion by emphasizing that everything has its limits, leading into a conversation about quality. He acknowledged that quality is difficult to define or articulate, but shared a personal experience from visiting an office in 2010 where he recognized it. He contrasted companies that have a soul with those that merely go through the motions. For him, attributes of quality include being mission-driven, expressing deep truths, and demonstrating devotion and mastery.
He concluded with a reference to "Zen and the Art of Motorcycle Maintenance," likely emphasizing the importance of quality and attention to detail in all endeavors, even seemingly mundane ones. This suggests that a holistic approach to quality, encompassing both the tangible and intangible, is key to success.
This is great, Excelsior! I'm a big fan of Josh. MOI Global has an excellent old interview with Josh. I don't remember pretty well but you can find Josh's investment thesis on Markel Corp navigating on the Internet.