Breaking Bread with The Enemy Makes You a Better Investor

Joel Litman

How sharing a meal leads to understanding others' opinions...

There's a common understanding across different religions including Islam, Christianity, and Judaism that "breaking bread" with someone means making meaningful connections over a meal. It's a widespread notion that bread is a sign of life.

Some of the most important meetings in history have taken place over a meal.

The phrase has lived on, and it's often used to bring together people who otherwise may be disconnected. Many times, it's associated with enemies – bringing together two people to move forward and offer each other forgiveness.

When breaking bread with others, people often must consider viewpoints beyond their own, and that can make for significant connections.

Regardless of our differences, we all must eat, drink, and breathe, and doing so with others over a meal makes that consciously and subconsciously apparent.

The act of sitting down to eat forces you to recognize others' humanity and how you may be more similar than different.

It's one way of being more open to differing opinions... which is a necessity for great investing!

To be a great investor and beat the markets, it means, by default, you will often have a contrarian viewpoint. To accomplish that, you need to ingest new data points, varying theories, and differing opinions.

People have widely different opinions on what fair value is for any stock.

Just check out the bid/ask spread for any given name, and you will see a wide range of final values that people are willing to part with or pay to become owners of a company. The quoted price of any given company is just the equilibrium of a vast array of options on what a company is worth.

And people do not come to their individual price points lightly. There are generally strong opinions behind someone willing to buy at only $20 a share and another person who refuses to sell below $21.

Bill Miller is one of the greatest investors of the past 25 years. His 15 years of straight market-beating performance is matched today by yet another streak of performance that is shorter, however orders of magnitude better than his last streak.

I asked Bill for his permission to use his explanation about how he beats the market in my teaching and seminars. The first rule of great investing, Bill said, is to understand what the market is thinking, meaning what's embedded in the price.

He went on to say that failure to do that is the core of the poor performance of most money managers and poor investors.

Given that there will be a myriad of opinions that generate the market's final equilibrium price, it's important to have the confidence and ability to listen to all sides of an argument. Without this, one would fail to truly understand what the market is embedding and why you may be a contrarian.

Without listening to those who disagree with you, you will never have an idea where that middle is or why. It can be easy to miss opportunities if you get caught up only thinking about your own opinion and viewpoint.

As an example, one of our great equity analysts was looking at video game seller GameStop (GME) when the short squeeze spiked it to incredibly high levels of more than $300 per share.

While some purists in the investment world insisted that GME belonged at something below $20, if not below $10, their argument was based on very similar theses.

Our analyst investigated some of the bull cases for the company that went beyond explaining the price increase as simply a short squeeze trade. He felt that many of these theories had foundations.

While GME has retreated in price, it's nowhere near the $8 price point that many investors called out. It's still around $100 per share, well over a year later.

He was willing to consider the contrarian viewpoint, much like people do when they break bread with others, even those they consider their enemies.

Speaking of breaking bread, there is a return to fine dining, and with that, dining etiquette...

We are an international company with employees around the world. I remember once going out to eat with a group of interns who weren't exactly sure of the proper etiquette.

There are innumerable small customs baked into dining in the U.S. and Europe which we can take for granted... Or perhaps, we never even learned them!

When should you put your napkin back on the table (if ever!)? Which fork should you use when eating what portion, and how do you indicate when you are done with a meal? All these behaviors have some social expectations baked in.

But breaking bread is essential to form meaningful connections, and we shouldn't let a little uncertainty of dining etiquette stop that from happening.

So, our interns put together a dining etiquette guide and have built on that over the years, adding interesting nuances and sources.

If you have any interest, I am happy to share their guide with you. I've found it quite useful personally!

I wish you the best and hope you have time for some wonderful meals with your friends, family, and colleagues.

As always, I wish you love, joy, and peace,

Joel
May 20, 2022