Nick Train (Lindsell Train) - The Patient Optimist

Nick Train founded Lindsell Train, alongside Michael Lindsell, in 2000 and has generated outstanding returns by investing in a concentrated portfolio of exceptional companies.  In a rich and varied discussion, Nick talks about the power of optimism, the rewards of being patient, and the value of semi-eternal brands in a rapidly changing world.

Show notes:
[1:13] Nick talks about how he got into the investment profession
[3:48] GT Management
[6:18] Learning from Warren Buffett and Alex Dundas
[9:17] Investing in consumer brands
[11:02] The power of being an optimist
[14:49] Avoiding losing strategies
[16:15] The benefits of being a boutique
[17:59] The importance of having the support of like-minded people
[19:06] The power of patience
[21:42] Being a hoarder of valuable things
[24:20] Hanging on to losers as well as winners
[25:52] Investors’ perception of management is influenced by share prices
[28:04] Investing in outstanding businesses when they are cheap
[29:15] The rewards for corporate success are structurally higher in the 21st century
[31:31] Investing in technology proxies
[34:23] Digital permits higher cash flow returns on capital
[36:24] The value of semi-eternal brands in a rapidly changing world
[38:57] Owning defensive and diversified staples companies
[41:37] Unilever’s adaptability
[42:44] Do yoga

Transcript

Nick Train – The Patient Optimist

Tom Yeowart: Nick, welcome to the podcast. It's a real pleasure to have you on. So, you may not thank me for mentioning this, but your career has spanned 40 years, I believe. What was it about investing or a career in investment that you thought, okay, that suits me as a person, this could be something worth pursuing over 40 years?

Nick Train: I think for me it was meeting, at an interview, an exceptionally charismatic and talented man, Richard Thornton, the T of GT Management, perhaps sadly lamented, but long since disappeared from the investment marketplace. But I had in fact applied across a range of industries, both sides of the financial community, the broking side, as well as the investment management side, and a couple of things in industry as well. But the interview with Richard was just so thrilling to me, his account of what the work involved, but more than that, just the energy and the ambition that this individual had.

I think I'd have gone to work for him, whatever industry he represented. And it was a great call. We hire young people to come to work for us and my goodness, their level of comprehension about the industry, their qualifications to almost immediately add value to our business. I just shrivel up with embarrassment when I conceive how totally, totally naive I was when I started. But I had some comprehension that this job might suit somebody with not just a degree in history, but an interest in history and historic forces. 

And it might also suit somebody who I knew fundamentally, and it's been proven ever since, fundamentally unadilettante. I know a little bit about a lot of things. And I've never really had the diligence or fortitude to become a top-quality accountant, that's much too much like hard work, so there is an aspect, and I don't mean that wholly in a disparaging way, there is an aspect of this role, of this work, where having a grasp of historically relevant factors and having a curiosity about a wide range of things, that's enough, or so far, it's been enough for me.

There's been a lot of serendipity over the 40 years, but by and large, I think that that very, very naive apprehension I had about the nature of the work, that was a relevant apprehension. And I don't remember being bored by it. You know waves of euphoria and self-doubt and big emotional swings, but rarely boring.

George Viney: And once inside GT's doors, what was it like to work for somebody like Richard Thornton?

Nick Train: Well Richard actually it transpired, and bless him, what a man, actually he was quite a difficult person to work for and with, and I was just an oik. Okay, he hired me, but his lieutenants, they had a tough time because he was exceptionally demanding and he had the sort of intellect where, and I admire people like this, Richard could change his mind three times a day on some totally fundamental issue. Maybe I exaggerate, but you know what I mean? That mercurial sort of brain that can persuade themselves that's absolutely what we should be doing, but then 24 hours later, it isn't. 

GT was an extraordinarily eclectic investment culture. There were growth investors, tech investors, Japanese small company investors, value investors, bond investors, commodity traders. It was really very, very eclectic. And it meant that young people like me, whether justifiably or not, I hope over time I've repaid the confidence that was put onto me, but it meant that young people essentially had an opportunity to experiment with other people's savings. Which is a blunt way of putting it, not necessarily a nice way of putting it, but it was true. That latitude I was afforded was hugely valuable to me.

I think GT over time was successful, you know, let a thousand flowers bloom, and enough of them work to maintain the momentum of the company. But I contrast that with what we require the people that we've hired to submit to, which is a single investment approach, really quite dogmatic, but it's a radically different approach to building an investment business.

Tom Yeowart: Sometimes when there are so many ideas, and it sounds like at GT there were so many different investors doing very different things, it's hard to get to the end state where you've got a fully developed view of your own in terms of this is the investment approach which I think works best for me as an individual. And I appreciate what you said about learning from experience and the mistakes you made along the way, but how long did it take you to get to where you are today in terms of your investment philosophy and investment approach and focus on really high quality, durable businesses?

Nick Train: I'm not a great one for looking back. We're being tested against the market every day. It's today's market close that matters. Okay. I was intrigued as there was an investment writer called John Train. That's my surname. We're not related, but it's a relatively unusual surname. He'd written a book about Buffett and I read the book about Buffett in part, because it was written by a namesake of mine. And I thought, wow, that's an interesting way to approach the investment challenge. And it seems to work for this guy Buffett. Then a year, a couple of years later, a very successful investor at GT, a man I became enormously fond of called Alex Dundas, came back to GT's London office, where I was based. He'd been in Japan. I'd known that Alex had been very successful. But I hadn't understood what the basis of the success of Alex's strategy was. And I got to know him and Alex was running a Japanese fund that had 12 stocks, 8% each, they were all in long-term high-quality growth businesses. And Alex seemed to spend most of his time reading Berry Brothers & Rudd wine lists rather than fussing about what was going on in the market and his returns were incredible. And that validation of seeing a colleague doing it in a similar way. Yeah, no one had 12 stock portfolios. Many of my peers, both within GT and outside GT, their war stories were all, what did I trade last month? What was the hot idea, that was what it was, and that's what purportedly you needed to do to be successful. And yet here was Dundas doing something Buffettesque and my God Dundas' numbers, for a long period of time, just wiped out anybody else's.

This was a pivotal moment. I was running a UK equity fund and I got terribly interested in, partly inspired by Buffett, I got terribly interested in television. And in particular, in the value of the television programmes or content that attracted people and advertising around those programs. And a very, very long time ago there used to be a dozen television companies in the UK, and they all gradually got taken over and merged. At one stage I probably owned a chunk of all 12 and I probably don't even dare think how much of my fund was invested in those TV companies. But actually, and this is serendipity, but that idea really worked and that idea of focusing a fund around a relatively narrow idea and that paying off, that kind of set me on my way of investing a la Buffett, a la Alex Dundas. 

George Viney: Did you have a similar experience of investing in a business with consumer brands? 

Nick Train: Many, many, you know, maybe as we get further into the 21st century, I think this is up for debate, but the consumer brand thing, I mean, it was just Buffett. It was, oh, he owns 10% of Coke, what could I find in the UK that looked a bit like Coke or 

George Viney: Or See's Candy. 

Nick Train: Absolutely. And so, I owned a range of beverage brands, confectionary brands, food brands and for a period of time, they either got taken over at big premiums or they carried on providing inflation protected, compounded returns and did very well. You know, for me, an archetypal validating investment was AG Barr. There was an opportunity when we set up Lindsell Train to access quite a big chunk of AG Barr's equity, which is Irn Bru of course. And you know, what a simplistic observation, Scotland was the one market in the world where Coke competed and it was the number two soft drink brand because Irn Bru was the dominant brand.

And beyond optically the valuation of the company looking low and understanding the economics of a soft drinks business, it wasn't much more sophisticated from my point of views to say, well, you know, if it's worked for Coke, maybe it'll work for AG Barr and Irn Bru. And certainly, for the first 10 years of Lindsell Train's history, that was not only in percentage terms one of the biggest gains that we had, it was just such a nice way to be able to illustrate a simple idea. 

Tom Yeowart: Nick, you've talked before about becoming a better investor when you became an optimist. And I wonder if you could just expand on that a bit.

Nick Train: I do think it's of absolutely fundamental importance, not just in business life, you know having an optimistic outlook and an outlook based on gratitude, that is a healthy way to get through this sometimes-stressful thing called life. There's learned behaviour, I guess there's also sort of constitutional, your emotional makeup. 

I'd noticed that many of my more senior colleagues they had gravitas and wisdom. And yet whenever they express themselves to clients, the way that they conveyed that gravitas and wisdom was by talking in a cautionary way about what might happen next. Ooh, we might be optimistic in the long-term, but in the short-term there are all of these issues, whatever they might be, macro issues or, or whatever, and it always makes sense to keep a bit of your powder dry and, don't like the look of the market over the next three months, might make sense to take a bit of money off the... Do you know what I mean? And it sounds so wise, but I don’t know, it just struck me after a while that it didn't seem so wise because everything that they were worried about seemed to disappear after three months and maybe there was something else to worry about, but what they were worrying about didn't seem so relevant anymore.

And every 18 months you look back and things seem to be higher than they were. And I just, it took a while for it to click. I give credit, I really do, I think we all should do, we've seen the unprecedented global wealth created in the last decade by American can-do entrepreneurial belief in the future and optimism. I think the world needs to give credit for that energy and belief that the United States offers us all.

I knew that, because I'd read about them, Charlie Munger is 96 now, but you know, even 20 or 30 years ago, I knew that Munger was optimistic, I knew that Sir John Templeton was always optimistic, and he was in his eighties. It was always the best is yet to come. And I just thought, if my betters, these people who I admire and aspire to, even remotely, at least having as long a career as they've had, if their basic default position has been optimism, maybe I ought to try that as well. 

In the very final analysis, we are in a speculative industry because the only thing that matters is that which is unknowable. You've got to have an attitude about what that unknown next thing is going to be. And it's either a good thing or a bad thing, and I try to discipline myself to believe that the next unknown thing is going to be a good thing. 

I don't even know how value creating this is, but if it means that you're not constantly running 5% of your portfolio in cash. And I do know professional investors who always run 5% of their portfolio in cash because they always thought the market was going to have a setback but it kind of never happened. And if you're a hundred percent investor and someone else's 95% invested over time, you're just giving yourself an edge.

Maybe it's also through pretty rubbish times, like at the moment, and there have obviously been others, but if you get up and you think, well, it could be better today, you know. That's helpful. That's helpful. 

Tom Yeowart: Clearly the mindset is incredibly powerful, but you could invest in all sorts of things where the range of outcomes vary significantly, but you choose to invest in things where, yes, the future is uncertain, but hopefully the range of potential outcomes is narrower because of the essence of the businesses you invest in, is that fair or am I oversimplifying?

Nick Train: I genuinely don't know. Of course, we all understand, theoretically, my view about the investment merits of Diageo. I ought to have nothing to add, should I, to the investment merits of Diageo because everybody knows it. Everybody follows it. Everybody analyses it. What possible value am I adding by saying be optimistic about Diageo for the long term?

I don't know. I think that I've been quite good at avoiding the obvious losing strategies. Some people can make losing strategies work, but believing that you're a great trader, trying to time markets, trying to trade macro-economic variables. This is a pertinent one, taking arguably unwarranted views about highly speculative, emergent industries and companies. I would have said that for the bulk of my career, taking speculative positions on emergent industries and companies was a losing strategy, by and large, but it's not been over the last 10 years and you talk about learning and one's got to respond to and learn from that. 

George Viney: I guess one way of asking the same question in a different way is to ask why do you think other investors don't copy what you do? Why can't other investors resist the temptation to do something different? 

Nick Train: It's an interesting question, but I'm not going to answer it by saying I think people ought to copy what we do, because maybe what we do is risky in terms of particularly portfolio concentration. Why did we set up Lindsell Train? I mean, one reason is because we literally couldn't run money in this way in the previous institutions that we were working for. That's not to be disparaging or dismissive of those institutions, but you couldn't run money in the way that Mike and I wanted to run money.

So that's what setting up a boutique does. You can set the terms of how you're going to invest, and I do hope that we've always been transparent about what we were going to do and about the strengths and weaknesses, and the upsides and downsides, of what we do and I think by and large we have been candid and transparent and we have pretty well stuck to what we were going to do. So, I sort of feel that's okay, but I equally get why it could really only work in the sort of constitution that we created with Lindsell Train.

I don't in the slightest disparage other market participants. I'm full of awe at the achievements of other market participants. But I do think it is difficult to do nothing. It really is difficult to do nothing when your performance isn't very good because you really want things to get better quickly, and the temptation to think, oh, I just need to sell that and buy that and everything will work out. And it's not just you, it's your clients want you to do something to make things better. It's tough. 

George Viney: There must be something in you that has great self-restraint to limit that temptation to tinker with your portfolio. 

Nick Train: I think it's called Lindsell. I mean, he's amazing and even more dogmatic, doctrinal than I am. So, we still get questions, is there enough challenge in Lindsell Train, do the two investing partners challenge each other enough, you've hired these younger people, you've indoctrinated them to do what you do. Is there enough challenge within the process? But what I would say is my goodness, you need the support of like-minded people doing what we do. I wouldn't be able to have done this if my investment partner had been constantly saying, you shouldn't be doing this, we should be selling this, so it's been necessary to have this cohesive and consistency of approach I think.

Tom Yeowart: One aspect of your investment approach is clearly running your winners and appreciating that you need to be patient through both good times and bad times if you're going to get those multibaggers, as you've referred to them in the past, and I'd just love you to articulate the power of patience in your approach with that in mind.

Nick Train: The narrative, certainly amongst the broking community, and I think endorsed by the hedge fund community, is the idea that investment returns, investment rewards, they're kind of a myriad of brief instance where you should be clipping or capturing a multitude of relatively minor returns, maybe enhanced by leverage. I know this is trite, but if you have a historic view and you're prepared to look at what price Unilever was 30 years ago, what dividend Unilever was paying 30 years ago, and then look at where the price is and where the dividend is today. You kind of think, wow, there's been a big reward, even for a business-like Unilever, which has its current issues and all the rest of it, but there's been a big reward for patience in a company that is not that difficult to understand, but actually the reward over time has been really very acceptable. Not as good as taking a bigger risk in a younger company, but it's still been pretty acceptable. And that's, since I got Buffettised and since we formalized that in Lindsell Train, that's always been the prize that we've been hoping to achieve. And yeah, it takes time.

Listen, I mean as we all know, there genuinely, truthfully are a myriad of potential ways to approach the investment challenge. Most of which have the potential if pursued with discipline and acumen to be successful. I really, really believe that. And yeah, this is just one of those myriad of mindsets.

Tom Yeowart: It comes back to something you said earlier about setting up Lindsell Train to pursue a strategy that you wanted to pursue, but equally I think the benefit of setting up your own thing with Michael Lindsell is you can design your investment approach around your personalities. And that's something that isn't necessarily achievable when you're working in a big organization. You can achieve investment success in a myriad of different ways. But I think everybody who achieves investment success arguably does it in a way that is suited to their own particular personality and temperament, and I know you've written about being a hoarder of valuable things and maybe that makes you good at the way you approach investing.

Nick Train: I do think it's very interesting. I sometimes wonder, should you want your investment adviser to be a miser? That's not a nice thing to call anybody is it, a miser. But that sense of wanting to capture value and own valuable things. I sometimes look inside myself and think, well, that's maybe not terribly attractive, but maybe that is an element of the way that we've chosen to do it. So maybe you should want your investment manager to be a miser. Would you want your investment manager to be a spendthrift, just to splash money about? I mean, you know, all those wonderful folksy stories about Buffett living in the same house that he was when he first got married and hadn't bought a new car for a decade. He's a bit of a miser.

What's attractive about this as a business. And again, I think one must confront this. You know, I tut tut like everybody else at the number of betting advertisements around sports on TV. And you know, what a terrible thing encouraging young males in particular to squander their income on betting on a losing game, which much sports betting I suspect is. But we mustn't be hypocritical. What we are doing is definitely a form of gambling and there is the same hedonic pleasure and massive displeasure when the gamble doesn't work for you. Investing is fascinating, it's not boring, but one reason that it's fascinating and not boring is the speculative aspect to it. 

George Viney: Going back to running your winners. In creating a portfolio, do you feel like you have to treat each of your investments with a similar level of commitment in order to, in a way, not prejudge which ones are going to be the big winners 10, 20 years from now? 

Nick Train: I think not. I think that there is a spectrum of conviction. I mean, of course, to get into a portfolio, there is some conviction, but even for me or us, there are a range of levels of confidence and attitudes can change. So, I don't think I've ever started a portfolio with equal position sizes. 

Tom Yeowart: Is it fair to say though that you've allowed companies that haven't done so well to wither on the vine, because you're committed to being patient and seeing if they can improve. So, the successes have become bigger parts of the portfolio and the losers have become smaller parts, but you take your time before committing to sell them outright.

Nick Train: Yes. Selling anything, that's a mistake, for us anyway, you get to the point where you've got to sell something, you've made a mistake and that's emotionally and intellectually very, very painful. And maybe all we're doing is trying to defer the recognition of a mistake. But we also know the primrose path to perdition is you accept you've made a mistake once a year and then before you know where you are, you're accepting that you've made a mistake once every three months. And where do you stop? How do you judge the gravity of a given mistake relative to another one and avoid just slipping back into the behaviour that the people who aren't mindful about this, you know, this is what they're constantly doing. So, although I don't regard it in any way glorious, and I'm not proud of it, but it's probably better to run some losing investments, as long as they're not major, major parts of the portfolio, than taking the highly more active path. 

Maybe that's been validated, maybe it hasn't, but it's what the great Warren said. In anything but extremis, you should hang on. Because you never know. 

George Viney: I think you've said in the past that you think that management are more likely to get it right eventually, in a situation that's troubling, than you have confidence in yourself to trade in and out of investments. 

Nick Train: I don't remember saying it, but it sounds like something I might say. You know, an associated observation, and I really think this is particularly evident in the media, but I think it has a wider relevance, that the way that investor's perspective on the calibre of management is driven by the share price. A share price has gone up, they're geniuses, the share price that's fallen, they're morons. There can be brilliantly skilful execution by management. There can be brilliant investment by management that might not pay off for five years, but it could be brilliant and yet they can be vilified during the period that it's not. And so, it's important not to get swung by that perspective on a company or on a management. Almost all businesses will have tough times and they will come through to the other side of those tough times and they'll look attractive again and it's difficult to trade that.

Reading what other talented investors have said, these heuristics, rules of thumb, that constantly running through my mind, I remember the great Peter Lynch saying most of the best ideas in Fidelity Magellan didn't really work for the first five years. He'd buy them and it would take sometimes years for the ideas to pay off, and I found that inspiring, or it's worth waiting to see often. 

Tom Yeowart: One of the things I've observed Nick is that you're obviously incredibly patient with the companies you do own, but there's an opportunistic side to you as well, you can go through periods of inactivity and then maybe a Remy Cointreau comes along and a Prada, and you're relatively quick to act and I'd just be interested in hearing your views on how important buying well is in your process because you're prepared to hold companies when the valuation of the business fluctuates quite significantly. I'm thinking about the likes of sort of PayPal over the last couple of years, where you've had a big rerating and then a big de-rating. But one common theme seems to be when you buy new businesses, it's typically when you believe the valuation is particularly attractive.

Nick Train: If I can go back to Alex Dundas, Alex saying you can be very successful investing in outstanding businesses pretty much at any time, but you can be really successful if you invest in an outstanding business when other people, for whatever reason, don't get it or are disenchanted with it, and that made an impact on my impressionable young brain and probably to a fault, actually. I think we could have had better performance over the last five years if we hadn't been so fussy about trying to only access things when other people appear not to like them. So maybe it's not an advantage, but that got embedded in what we do a long time ago.

George Viney: Is there much FOMO, fear of missing out, of owning, some would argue, the best, the biggest, the greatest examples of companies in your favourite areas of luxury goods, if you think of LVMH, or cosmetics, if you think of L’Oréal, that your success hasn't depended on owning those, but they are arguably the best examples of the businesses you favour. 

Nick Train: We've actually had a pretty good investment in a company called Shiseido, which is Japanese cosmetics and beauty. And I guess we thought when we made the investment in Shiseido, which by and large has worked, that we were being clever and differentiated because we'd found an Asian company, partly using Mike's experience in Japan, which we thought had the potential, at least in that part of the world to be as good a business as L’Oréal, and that meant perhaps we didn't need L’Oréal. In hindsight, would have been better to have owned L’Oréal and not Shiseido.

Yeah. Fear of missing out. I don't even know if this is right. I mean, in the 20th century it was right not to get carried away by bandwagons. It was right not to get carried away by the momentum of the big businesses, the most popular sectors. I think it's fair to say that it was right that a contrarian slant brought some value. However, I don't know in the 21st century, or certainly the recent phase of the 21st century, as globalisation, particularly globalisation of digital businesses has accelerated, you've absolutely been rewarded being part of the bandwagon.

Tom Yeowart: Why do you think that is?

Nick Train: I think the rewards to corporate success in the 21st century are structurally higher than they were in the 20th century. There is genuinely a big potential market, obviously particularly for a digital product, but also consumer brands are globalising as well. The scope for success is so much greater that the warranted value and the ultimate warranted market value of a successful global business, particularly a digital one is, well, as we've seen, market capitalizations of a trillion dollars, it's amazing.

Tom Yeowart: Nick you've used the Andy Grove quote before that every company is going to become an internet company and reframing that, do you think every investor and analyst needs to almost be a technology analyst?

Nick Train: No, I don't, I don't. But I could be wrong. Investing in tech at least until the last decade, it was very up and down, you know, really significantly boom and bust and almost always the next generation of winners wasn't the same as the previous gen, you know, I don't want to believe that the only rewards for equity investing will accrue to people with the most specialist insight into cutting edge technology. For me anyway, I see little historic evidence that anybody has got that gift to be able to analyse emerging technology to that extent. I don't have the numbers at my fingertips but the history of tech IPO's in the United States, maybe even here, I mean, it's catastrophic, isn't it? For every one that works there's 99 that you've lost a lot of money in after three years.

What pragmatically we've sought to do is to find companies that either are exempt from technology change, and very few of them are, or are beneficiaries of them. I think you were kind enough to mention Remy Cointreau, which I think we did buy in quite a timely way a number of years ago, but forgive me if it sounds absurd, but I always think about Remy essentially as a proxy play on technology, because technology creates wealth and when people get wealthy, they drink premium cognac. I mean, it's one of the clearest correlations I know on the planet is as people get richer, they drink better quality stuff and particularly they drink high quality cognac. You see Remy's revenues in particularly the United States and particularly the west coast of the United States, but also in China where a lot of wealth has been created recently, it acted as a pretty good proxy for that wealth creation delivered by technology. And yet, even if it's just as an emotional thing for me, I'm investing in an asset that dates back to 1740, with a product that I can know and touch and understand. And the whole point about Louis XIII at $3,000 a bottle is that it contains stuff that's a hundred years old within that bottle and only Remy has got the stock, so that's been the way that we've thought about it.

Tom Yeowart: You invest in some companies which I guess you can class more directly as technology businesses. So, I'm thinking of the likes of Intuit. What have you learned from observing those businesses and the power of their business models, their ability to sell to a much broader global audience, but also innovate and adapt quickly over time?

Nick Train: All of the things that you've just outlined. Reverting to those earlier observations, digital permits higher cashflow returns on capital than were available to capital intensive 20th century business models and that fundamentally increases their TAM's, fundamentally increases the warranted value. As an evolving thing, we need to find ways to capture those opportunities within the context of where we feel we might have some value to add. I don't want to over-egg this or over-glamorize this, but a willingness to have owned the London Stock Exchange since 2003, have a ride in a stock from £2.50 to a 100 quid back to 70 quid today, but understanding that, as the finance director of the London Stock Exchange put it to us back in 2004/2005, this is essentially a technology company and a data company. Now that's a model or a franchise that we felt comfortable with and actually has done pretty well.

So, I think we understand the effects and we're keen to capture them. There's no scepticism or denial about what enduring value can be created by digital businesses, nor indeed the enduring value that can be created by a generation of 21st century consumer brands. There will be Coke's of the 21st century and we would like to own some of them. 

George Viney: Do you think there's a change in consumer brands, that the likes of Fever-Tree has grown up in the shadow of Schweppes, or a Red Bull in the shadow of a Coke or a Pepsi, that the phenomenal success of these businesses is something new to behold and understand? 

Nick Train: I particularly think that the Fever-Tree and Schweppes tale is enormously instructive. In a sense, I'm not sure that those brands were ever in competition, although would have seemed that way for a long time, but it's actually more about the creation of a new category. That's what's so interesting. And I think the Red Bull example as well, essentially that was a new category, or the way it presented itself was. 

I would nonetheless still like to make a plea for the value of, nothing is truly eternal, but of semi-eternal brands. We've got the image behind you of Cadbury's Dairy Milk. I think that is probably more valuable today than it's ever been in its history. It's definitely selling more globally than it ever has in its history and the likelihood of people enjoying Cadbury's Dairy Milk in 25 years’ time is pretty high. And that's of extraordinary value in a rapidly changing world.

You mentioned PayPal, and you're right. I mean, incredible switchback ride in PayPal. We're owners, we're optimists about PayPal, but I cannot look you in the eye and say in a decade's time, PayPal is going to be the online payment system of choice for sure. But I'm pretty happy to say to you that your grandchildren will be enjoying Cadbury's Dairy Milk. I'm pretty sure Heineken, that's a semi-eternal asset. Doesn't mean that it's going to grow as quickly as Microsoft, it doesn't mean it has to be valued as highly. 

Everybody goes through phases of being in love with the new, and then being scared of the ephemeral nature of the new. And sometimes stuff that endures is of inestimable value as well.

Tom Yeowart: How do you think about growth and the risks and opportunities amongst staples companies themselves. I guess the likes of Fever-Tree and Heineken are more exposed to one core brand than say a company like Unilever which is more diversified, but where growth is materially lower as a result. So how do you position yourself on that spectrum of more brand concentration, higher risk, higher growth versus more diversification, lower growth, but maybe more sustainable growth.

Nick Train: I think both types should be part of any well-structured portfolio. I mean, I do. It's been an extraordinary and, by and large, hugely rewarding, and fascinating episode to watch Tesla become a trillion-dollar company. Just incredible. But there will be times when it's going to be very easy to lose money. And in those times owning something, maybe it won't be Unilever, but owning something that might look a bit like Unilever... the incredible ubiquity of its products and the spread of its brands, it condemns Unilever to relatively modest growth, without the share buyback, earnings probably aren't progressing in the current set of circumstances, but believe me, there have been times over the last 30 or 40 years where you've been so grateful that you've owned an asset like Unilever.

Maybe this isn't a relevant thought. It's maybe a more relevant thought for Personal Assets or Trojan type thinking, because we are a pure equity house, but would you rather own a government bond on a 1.5% coupon with a guaranteed loss or Unilever for all of the faults and issues with Unilever, but it's incredible ubiquity and it still generates cash. If there's a big mistake in the world today, its people having pension funds stuffed full of stuff that's going to be eviscerated by imprudent monetary policy over time... and it amazes me that people are prepared to allow an asset, like Unilever, which probably can deliver index-linked bond type returns, definitely can deliver conventional bond type returns, to be valued at such a massive disparity. Now, could that be wrong? It could be wrong if there's kind of an extinction event out there for 30% of Unilever's brands. Maybe, it's not impossible, but that's conceptually how we think about it.

George Viney: In the past, you've been quite critical of Diageo's management for instance, in the way that they've approached capital allocation. Seems like the issues at Unilever are to some extent on a long cycle of management execution or error, and that Unilever's issues are fixable so long as the brands and the distribution remain healthy. 

Nick Train: The past is a lousy guide, but it is something. Everybody can see this, and I've said it so many times, and I don't know what weight to attach to it, but there are not many corporations that have grown their dividend every year for over half a century and Unilever has done that. The brands that were paying the dividends in 1950 are not the same brands that are paying the dividend in 2021 and 2022. It is a consumer facing company that thinks hard about what consumers are going to be prepared to buy and pay for... And the company has used its cash flow to more or less skilfully, with some obvious mistakes, tilt its way to finding products that are relevant to people all around the planet. If you say that's the core capability in Unilever, and the portfolio is not perfect, but what's the reason that Unilever won't have grown its dividend every year for the next 30 years?

Tom Yeowart: Turning to our closing question, what piece of advice would you give a young Nick Train at the beginning of his career?

Nick Train: Take up yoga at 22, not 42. You'd be a better investor, better person, fitter in every regard. That's the most important advice to give to your younger self. It's never too late to start, but the sooner you start the better. Our fight or flight instincts are constantly being stimulated and jangling, actually in life but particularly this life that we lead. When your fight and flight instincts are jangling, your breathing is shallow and focused at the top of your chest. You need to be able to fully, deeply inhale and fully, deeply exhale down to the pit of the abdomen. That's what you learn from yoga. And that's what makes you fit at many, many levels. 

Tom Yeowart: Great, thank you Nick.