LAWRENCE LAM | The Founder Effect

I recently had the pleasure of sitting down with Lawrence Lam, author of The Founder Effect, for an engaging chat about founder-led companies and what makes them tick.

Lawrence is the Managing Director and Founder of Lumenary Investment Management. Before diving into funds management, he worked at APRA (the Australian Prudential Regulation Authority), which he likened to a goalkeeper in soccer— unnoticed when they’re doing well, but critical nonetheless. Pre-GFC, he found it “quite boring,” monitoring global banks and insurers operating in Australia. That experience shaped his risk-management lens, but it was his dad’s transition from a big-four bank mortgage broker to running his own successful firm that sparked his fascination with founders. Watching his father build a business from a phone and a laptop instilled a belief in me that resonates with Lawrence’s philosophy: “You eat what you cook.”

Lawrence introduced his three-pillar framework—judgment, alignment, and influence—as a way to assess management teams objectively. Bold judgment calls, like Mark Zuckerberg rejecting Yahoo’s $1 billion offer for Facebook in 2007 or Lego’s pivot from near bankruptcy to a physical-play powerhouse, stood out in his research. Alignment means syncing boards, management, and shareholders to row in the same direction, minimizing self-interest. Influence, meanwhile, is about shaping internal teams and external perceptions—think Jensen Huang at NVIDIA, less focused on selling chips and more on painting the future of AI.

We dug into what distinguishes founders from professional managers. Founders tend to spend more on R&D, keep teams small for agility, and take calculated risks—often because they own the business and see it as their legacy. Professional managers, on the other hand, can fall into short-sighted traps, driven by personal agendas or five-year plans rather than dynastic visions. Lawrence shared a gem from a founder he worked with: after a five-year strategy day, the guy was more excited about the next 20 years. That’s the founder mindset.

Of course, it’s not all rosy. We touched on scandals like WiseTech and Mineral Resources, where founders Richard White and Chris Ellison’s egos became liabilities. Lawrence sees these as red flags—when ego overshadows judgment, it’s a risk to watch for. But his book isn’t just for investors; it’s for management teams and boards too, offering tools to spot blind spots and align for the long haul.

One surprising takeaway? There’s no one-size-fits-all founder. Some flip companies, others build dynasties, and a few just fund lifestyles (a red flag for investors—check those insider transactions!). Cultural context matters too—Asian and European founders often prioritize profit early, while American and Aussie upstarts chase market share. Lawrence predicts an acceleration in founder-led companies over the next two decades, fueled by easier creation and the need for rapid innovation.

We wrapped up with a nod to basketball, Lawrence’s other passion. “Ball don’t lie,” he said—on the court, you see true team chemistry, not just individual flair. It’s a perfect metaphor for what he looks for in companies: teams that gel, not just stars that shine.

The Founder Effect is out now—e-book, physical copy, and soon an audiobook. Grab it at any good bookstore and dive into Lawrence’s insights.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

Get 4 months free on an annual premium plan when you use Sharesight, the award-winning portfolio tracker. Sign up for a free trial today.

Sharesight automatically tracks price, performance and dividends from 240,000+ global stocks, crypto, ETFs and funds. Add cash accounts and property to get the full picture of your portfolio – all in one place.

Portfolio tracker Sharesight tracks your trades, shows your true performance, and saves you time and money at tax time. Get 4 months free at this link

Disclosure: The links provided are affiliate links. I will be paid a commission if you use this link to make a purchase. You will receive a discount by using these links/coupon codes. I only recommend products and services that I use and trust myself or where I have interviewed and/or met the founders and have assured myself that they’re offering something of value.

EPISODE TRANSCRIPT

Chloe: Shares for Beginners. Phil Musatello and FinPods are authorized reps of Money Sherpa. The information in this podcast is general in nature and doesn't take into account your personal situation.

Lawrence: One German kid stood out to them. He said, my favourite possession are uh, these raty shoes I've got. And they ask why is that? Well these shoes that are worn and really worn out actually represent my hard work that I put into skateboarding. That's why they're so worn out, because I learned all my tricks wearing this pair of shoes. And so for them the executive team took that away and said hey, that's actually really insightful because one, it's about physical play, but two, it's also about upskilling and how we motivate kids to achieve more in their skill base. And that level up in skill is an important aspect that they've incorporated into all their toys now.

Phil: G'day and welcome back to Shares for Beginners. I'm Phil Muscatello. Is there a special source in founder led companies that can lead to better returns and how can you assess the potential of uh, management teams? Joining me today is Lawrence, the author of the Founder Effect. G'day Lawrence. Hi Phil, thanks very much for coming on and joining me today.

Lawrence: It's great to be here and happy to dive into the learnings of what I've written about in the book.

Phil: I know it's a fascinating theme isn't it that what founders can add to companies and you which can be a good and bad thing, can't it?

Lawrence: I mean all companies start off as uh, founder led companies. Only a very few can make it to the top. But if you look at the biggest companies in the world today, globally, a lot of them are founder led and they're not just all in tech. So uh, I'll give you a couple of names. Lvmh, the luxury brand, Aldi, Nike, Patagonia, Lego, Ferrari goes on and on. Yeah actually I don't know if Ferrari is anymore.

Phil: Lawrence Lam is the managing director and founder of funds management firm Lumenary Investment Management. He specialises in strategic investments in global founder led companies. But before we start talking about founder led companies, I saw in your resume that you worked at aprra. Tell us. Uh, I mean I just like exploring all the nooks and crannies of the finance industry. Tell us about aprra, what they do and what you did there.

Lawrence: Yeah, at a high level APRA was spun out of the RBA, the World bank of Australia. And they were spun out in the early 2000s to effectively regulate banks and insurers and super funds. And back then when I joined it was pre GFC, very nascent superfund industry. In fact, the SMSF industry really was quite brand new. The team I was involved in was monitoring the global banks and insurers that had operations here in Australia, as well as some local big names here. So during my time I got to say it was quite boring. It was pre gfc. Not much is happening. But I uh, liken the role of APRA as a very important one. A bit like the goalkeeper of a soccer team because when they do a good job, no one notices them. When they do a bad job, that's when you start talking about. And apra for those that don't know is probably a good thing because that means they've been doing their job really well over uh, some turbulent times of late.

Phil: And specifically, like you said, it is the banks and the superannuation industry that they're really regulating and in charge of and acting as a watchdog as well, I'd assume.

Lawrence: Yeah, correct. But it's ensuring that you know, as deposit holders in banks and as policyholders for insurance companies that when you need to draw on your funds, the banks are ready and they can pay you out and they're not going to go under. And that is a simple statement, but encompasses a wide range of analysis from how they operate through the technology, through the fraud, through to all aspects of their risk management processes.

Phil: Okay, so let's get on to founder led companies which you've written the book about. And we'll talk about the book. But what inspired you to focus on founder led companies and their unique traits?

Lawrence: Well, I grew up, my dad was a mortgage broker, uh, with uh, a big four bank. And then he, he started his mortgage broing his own firm when I was in late high school. And watching him start with a phone and a laptop and build that into a very successful business was kind of what instilled in me a philosophy of business which is that uh, you know, you eat what you cook so you put in the hard work and you get the rewards. It wasn't until later. So as you mentioned, my first job was at apra, so it kind of changes how you perceive the world in a risk management sense for me. And then through my exposure at Appa where I saw a lot of different companies, I

00:05:00

Lawrence: also noticed that there were companies that were operating very successfully under the radar Companies and I started digging into them just as a personal interest and came across a company called Mortgage Choice which was back then, it's been sold now to rea, but back then it was a founder led company by Rod and Peter Higgins. And because I naturally had uh, some background knowledge in the mortgage brokeing industry through my dad, that sort of connected the dots for me and sort of opened up this world of companies out there which led to me investigating oftentimes, you know, outside of workhouse digging into companies annual reports, companies like Reese Plumbing, ARB, Corporate Travel Technology 1. These are all Australian names and that's where I kind of really started my interest in founder led companies.

Phil: So I want to read you this quote from your book as I always love an analogy to describe financial concepts. And you use the blood test analogy. Financials reveal a company's underlying health just like a blood test indicates the health of a person. But more than that, they show and reveal intention. They show where decision makers are prioritizing their capital. How do you see that, how do you read that intention in the company numbers?

Lawrence: As investors, you know, a lot of the times we, we gravitate towards the numbers and certainly through the past decade or two the proliferation of information has increased exponentially and access to that data has been made wide open to any investor. And so naturally, you know, we gravitate towards the numbers. But I write that line in the book because a lot of, just like a blood test, it's actually the result of your behaviors. Uh, if you live a healthy lifestyle, your blood test should be relatively good just as it is for companies. You know, we only focus on the financials which is the result of everything management teams have decided on, executed on and done and not done. And that is what drives the numbers which we only see at the end. So if you really want to foretell the excellent companies and the excellent management teams, what you need to look at is not just the end result, that is the blood test. What you need to consider is all the work and all the intention and decision making that leads up to that. Because the companies that do really well, they make decisions again and again that steer their ship in the right direction and they are able to produce the good numbers again and again. So it's easy to look at the numbers. It will give you what has been success in the past. If you want to predict what's going to be success from the future, it's about understanding how people are making those decisions.

Phil: And the decisions are about prioritizing their capital, where in the balance Sheet, I'm assuming it would be the balance sheet that this would show up how they're.

Lawrence: Prioritizing their capital capital is one aspect. Other aspects, for example you look at resourcing so it's not so black and white. So how do I allocate with my finite number of people in my organization, how do I allocate them to work on the things that will lead to the Most profit in 10, 20 years time? So that's one aspect. The capital side of things is interesting because uh, List and I talk in detail about this in the book. Typically what you'll see in founder led companies is the good ones anyway. They will behave very prudently, they will have very little debt. They prefer to fund projects using their internal cash flows and it's often shown through studies that their research and development is usually higher than their peers. So they're thinking longer term, they're thinking about the next wave of growth and they're not just kind of sitting on their laurels like a cash cow business extracting dividends. So in a nutshell it's probably a mindset of short term pain for long term gain.

Phil: You also describe the three pillars of judgment, alignment and influence in their role in longer term success. Just dig into that a little bit deeper for us please.

Lawrence: Yeah, it is the framework of the book and it's an objective way to assess management teams. And through my research as a fund manager, but also the interviews that I've done for the book, I really distilled the key elements of success in the really great management teams and that is the ability to make really strong judgment calls, the ability to be aligned with investors, uh, and in fact all three aspects. So I consider board management and investors shareholders as a triangle where if you maximize the alignment, everyone is rolling in the same direction and there's minimal self interest because as you'll see in some examples that I give in the book, self interest

00:10:00

Lawrence: does come into play and it can cause cognitive biases in decision making. So that's, that's alignment and influence is about the ability for management teams to positively impact both internal teams to do what they want in terms of the philosophy and the way they want to operate, but also the external stakeholders, customers, media and you see some companies do this really well. A uh, good example is, and I don't have to be found al led companies, but this is one is uh, Jensen H. Huwang from Nvidia. Do you notice that he's not talking about Nvidia chips that much. He's actually spending most of his time talking about AI, the advancement in AI and where it.

Phil: Yeah, he's taking that thought leadership role, isn't he?

Lawrence: Yeah. And that level of influence, it's almost self fulfilling. The way he's describing where we're headed almost drives the demand for his chips. But that's just uh, a uh, he doesn't really sell the chips that much. But that's the level of influence that I talk about that successful management teams have. They can shape the future.

Chloe: Super is one of the most important investments you'll ever make. But how do you know if you're in the best fund for your situation? Head to lifesharpa.com.au to find out more. Life Sherpa, uh, Australia's most affordable online financial advice.

Phil: And so you're using this framework to help investors assess the potential of management teams, aren't you?

Lawrence: Yeah, because inherently assessment of MA all investors will have to some degree in the analysis of companies the management team. So they'll make some assessment and oftentimes you hear people say uh, I like to travel, I like to meet the management team in person, I like to read their body language. But ultimately these things are all very subjective tools and also not very accessible to a lot of people that uh, are not fund managers and they're just looking to investing companies. So the motivation for me writing this book is to distill everything that I've come across and I've observed. For an outsider to look at a company and say well what is an objective way I can look at this scientifically, um, and break down what constitutes a great management team and predict their success rather than know that they're successful now and invest in them but predict their success.

Phil: You cite bold decision making is a cornerstone of uh, great leadership. Some people youe this is a two edged sword. Some people like a bold decision making, others not so bold. Can you share an example that stood out during your research?

Lawrence: Yeah. Boald is about making tough decisions, hard decisions that potentially unpopular. It's not reckless. There's a clear distinction. A lot of the excellent management teams they make in fact very calculated risk taking decisions 1A stand out to me uh, in terms of being a great story is Mark Zuckerberg when he got an offer uh, for his company in 2007 I believe from Yahoo. And Yahoo made an offer for Facebook, $1 billion USD and he was under immense pressure. That was actually ah, quite a high valuation at the time. And he rejected that knowing it was hugely unpopular with his staff because his staff were waiting to be Paid out and they had shares in the business. He said no. All his exec team left within a year and he had to start again. But he saw something bigger, uh, for Facebook. And you know, history reveals itself over time. You know, he obviously made a very, very bold decision. It was correct judgment there came into it got other examples like Lego. LEGO actually was very close to being bankrupt, if not bankrupt in the early 2000s. You know, they were disrupted heavily by digital toys, iPads, the like. They had to reinvent themselves. They went and did a global study. Very costly exercise. And because they were actually privately owned by uh, a family, they were able to actually weather the storm and take a long term horizon with reshaping how LEGO is. And then they moved into things like integration of digital tools, so programming with LEGO toys. But the conclusion there for their team was we absolutely are a company about physical play. We're not trying to compete in the digital sphere in video games. We're absolutely leaning into physical play. And, but they've turned it around. And if you look at their financials, they're hugely, not only is their brand in the top 10 brands in the world, every, almost every person in the world with know Lego, but their financials have just been turned around 360 degrees and now they're on a growth trajectory that looked pretty dire actually and required some

00:15:00

Lawrence: very bold decision making with how they operated in the early 2000s.

Phil: And it's really borne out. I mean you just see the way kids play with LEGO these days and you think, you know, it's so fantastic that at least they're away from screens and working with something in the physical world, aren't they?

Lawrence: Yeah, it's, you know, they tapped into it because they did a survey as part of their revisiting their whole business model and one German kid stood out to them. He said, my favorite possession. They asked what favorite possession is and he said, my favorite possession are these racky shoes I've got. And they ask why is that? Well, these shoes that are worn and really worn out actually represent my hard work that I put into skateboarding. That's why they're so worn out, because I learned all my tricks wearing this pair of shoes. And so for them, the executive team took that away and said, hey, that's actually really insightful because one, it's about physical play, but two, it's also about upskilling and how we motivate kids to achieve more in their skill base. And that level up in skill is an important aspect that they've incorporated into all their toys. Now if you notice, there's the junior level right through to the very senior level, right through to adult Lego, right through to Lego that you can program with software. And that's how they turned it around.

Phil: So what distinguishes founders from professional managers in their decision making approach?

Lawrence: Several things. The first being more R and D spent, which I'alluded to it before, they spend more or on R and D, um, they attain more patents. As a result they tend to have smaller teams. So if you look at the size of boards and size of management teams, founder led companies generally don't like large, large teams because they know that it slows down decision making. And their advantage inherently is making quick decisions that can outmaneuver large bureaucratic organizations. The other thing that I've observed on an anecdotal level, having worked with some family officers that uh, are led by founders, is that they have a greater propensity to take calculated risks. And that's because they own most of the business. They have the ability to be innovative in how they tackle problems. And so one story is had a founder and he had a strategy day for his company. And I asked him afterwards, I said, how do you think it went? He said it was great, it was a five year plan. But what I was more interested in is what is the vision for the next 20 years? What are we doing for the next 20 years? And that showed me the key difference between founder led and non founder led. I uh, might point out that the book is not exclusively talking about founder led companies, it's talking about successful management teams. Because it is possible that non founder led companies with management teams, professional management teams, take on board some very successful attributes of founders and become successful themselves. And there's a few examples that I write about in the book.

Phil: So investors, how can they filter for companies that are going to hopefully shoot the lights out and gain in value and market share?

Lawrence: I think it's important that you don't start from a point of relying on other people's analysis. You know, always looking at things independently, assessing things with a structured approach.

Phil: Yeah, because this is the point of you writing the book. It's, you want to give people the tools to do this for themselves, don't you?

Lawrence: Yeah, correct. And oftentimes we do hear about the next hot tip or we do rely on so called experts to give us a steer as to which area to invest in. But I would be very independent about my approach. I would also not neglect the qualitative side. Things like competition, things like management teams, things like the ability for a company to grow and compound market share. These are, uh, generally not financial statements, not the quantitative side. And I see a lot of investors kind of make the mistake of just focusing on the numbers and the results. As I said, they're just results. What you really want to get to is the qualitative side, which is can they repeat those results over time? And lastly, I would suggest that you mitigate a portfolio by having 20 plus stocks, even if they are all found or led. Because as we've seen in recent times, you just never know when one of them has a surprise announcement, uh, be it positive or negative. And you don't want to be stuck in a situation where, hey, most of your portfolio is allocated to only a handful of companies.

Phil: Just want to say at this point, it's great that we've both got noisy kids in the background. It's a family run podcast really, isn't it? So you've just alluded then to the problems with some

00:20:00

Phil: companies that can impact the share price. And I just want to talk about founder led scandals at WiseTech and Mineral Resources with Richard White and Chris Ellison. Has their behavior changed the way you think about founder led businesses at all?

Lawrence: Yeah, well, there's a wide range of founder led companies. In fact, all companies start off has found a lead. Right. So not all will succeed, not all become great. So how does an investor from the outside differentiate between the mediocre from the truly great? Well, one of the things you're looking for is the red flags. Red flags being when ego becomes a liability. So these founders, we see that what has made them successful is to an extent their ego, because they're able to sell the company, represent the company and.

Phil: Influence people and have the drive and motivation to do it as well in many cases.

Lawrence: Yeah, correct. But if overdone, it can lead to their downfall. I think wisetech for me is a clear red flag. The way that Richard White has managed the board in recent times. It also probably goes to show a little bit about his MO in terms of how he operates on a person to person level. So we've seen large investors like Australian Super Exit wisetech, and these are some of the red flags where you know that hey, maybe their ego is too big and it becomes a risk for the company. I would argue also potentially, you know, Elon Musk, the chainsaw wielding sort of antics. You know, it's one thing to get into government and do work in that space, but when your ego becomes too big, it can lead to blind spots.

Phil: So, um, you've written this book for investors but also for management teams as well, haven't you?

Lawrence: Yeah, I've written it for management teams are written for board directors because management teams can sort of look at, use the framework and look at themselves and say, hey, where are my weaknesses? I talk extensively in the book about cognitive biases and how organization structure matters so much to influence. So how can they assess themselves? How can they spot their own blind spots and how do they renew themselves over time so they don't become stagnant? And uh, for boards it's about how can I look at my management team and make sure they're not just giving me the information that is the stuff that I want to see, how do I truly motivate them and incentivize them for the long term. And obviously for investors this will be useful because you don't get all the information but you can certainly make some astute uh, observations if you know what to look for. And then from an analysis around, okay, is this management team going to take the business to the next level? Because ultimately all companies are just a collection of decisions made over time and.

Phil: They'Re all bureaucracies as well. I've seen a lot of companies from the outside coming from an audio uh, background and dealing with companies from the outside and you can see good companies where people seem to be all pulling in the same direction. But then there's other companies that they just. There just doesn't seem to be alignment or motivation at all. Everyone's just looking after. No matter what level they are in the company, they're looking after their own self interest. How can you work against that and try and get alignment and motivation all working together?

Lawrence: Yeah, I think the total opposite of a founder led company is one of the big four banks in Australia. You can't how many levels of staff there are from top to frontline. And you look at government organizations, I've been there myself, relatively bureaucratic and you look to do the total opposite of what they do. When we talk about motivation it's actually quite an interesting and undercovered area within investing because a lot of people associate motivation with financial incentive and that's why we get these thick remuneration reports in the annual report that no one really understands and no one can be bothered reading.

Phil: But actually I'll just say apart from the Australian Shareholders association and if you go to the website you can go and find some great information with insights into this area. But anyway, please continue.

Lawrence: Yeah, yeah, it's only a special few, I would say that can actually go there in it.

Phil: Uh, yeah. It's a real nerd out, isn't it? Yeah. But it really is important to understand this, isn't it? Because it has so much impact on total returns. But like you say, it's almost an ignored area of study.

Lawrence: Yeah. Uh, but I would argue that's only just a fraction of what represents motivation. You know, how often do we do things that aren't just about getting a paycheck at the end? Right. When we want to do things, we are truly motivated by more than just money. And as we see with founder led companies, for them it's building a legacy, it's beating the competition, it's expanding. Uh, my company which has my surname on the logo. It's all those things that truly motivate someone.

Phil: So I've just got a couple of bullet points here. I think they're from the press release for the book.

00:25:00

Phil: But I just wanted to talk about design scalable company structures that magnify productivity as they grow. What do you mean by that?

Lawrence: I mean uh, a decentralized approach to organizational structures. Because for companies that I've seen that are really, really successful, the founders have figured out a way to crack the typical pyramid bureaucracy structure, which is how most people tend to grow. Right. And uh, I write about this in the book. There are many different ways to do this, different contexts in different countries. But at the end of the day they've figured out a way to split their teams up, uh, into smaller teams so that an incentivizes them to become entrepreneurial, not be slow moving and not have to seek 10 layers of approvals for decisions. A good example of that is a local one flight center. They do it really well with how they group themselves into tribes and villages. A very relevant example overseas is lvmh, the big luxury conglomerate. They own multiple brands under their umbrella that operate separately. Another one is Berkshire Hathaway. I think his head office in Omaha is sub 100 people. So those founders have found a way to disseminate decision making in a way that is scalable.

Phil: That would be a hard thing to give up that idea of control though, uh, because so many people want to micromanage, don't they? Rather than leaving the leadership and the management decisions to be a little bit more organic and closer to where these decisions are going to have an effect on the business.

Lawrence: Yeah, correct. And that's why oftentimes people just stick with the classic triangle bureaucracy pyramid structure. The way they have categorized different layers of decision making is the key to how They've done this because obviously they're not going to disseminate the most important decisions to different groups. They obviously keep that for themselves. But for all the other decisions it's knowing what matters and what doesn't matter that much.

Phil: So what are some common mistakes that you've observed in professional management teams?

Lawrence: They're very short sighted I think. A lot of times I went through that story of the family business that I was helping out a lot of personal agendas as you've noted because professional managers and um, this is a huge generalization by the way. I give examples in the book where professional managers have been hugely, hugely successful. Irisa Networks is one of them. Personal agendas come into play because professional managers obviously want the next role. They want a board position, they want higher salary, they want a uh, larger portfolio, larger companies that incentivizes them to do certain things that are adverse actions for investors, like large M and A deals that are very risky and require a lot of cost to integrate afterwards. These are uh, things that are born out of a personal agenda potentially and.

Phil: A lot of ego as well. That's merger and acquisitions isn't it? Taking over um, other companies and bringing them under the fold to build their empire a little bit more.

Lawrence: Yeah, correct. Another mistake is I see themselves as only a short term steward of the company. Know they don't see themselves there 20 years time. It's just I'm here to do an execute a five year plan, turnaround plan, whatever it is, expansion plan and that's all I'm there for. And so I make decisions with that five year window and I leave the next five, ten years to someone else.

Phil: Yeah, and that's just referring back to the remuneration reports. And there's many short term incentives. And these short term incentives do incentivise for short term goals, don't they?

Lawrence: Yeah, exactly. And I think uh, my fund to invest globally but in Australia a lot of the REM reports are broad, broadly the same. What we don't see is a very long dated incentive, long date been seven years plus and we don't see a very large payoff if that is successful. And we see that more in other jurisdictions like America. And it's just a cultural context thing to consider when you're investing.

Phil: Really there's a big difference between companies overseas to Australia. You've observed that have you?

Lawrence: Absolutely. Yeah. You look at you companies in Asia and Europe and they have this mindset of being dynastic. The founders want to hold on to as much equity as they can produce profits straight away as early as possible. You know, in America and to an extent in Australia now when you see up and coming companies, many of them aren't really producing profit. You know, that's not their focus. They're focusing on expanding market share, growing rapidly and then for some founders, selling out. And we've seen that founders have an uncanny ability to pick when their share price is overvalued.

Phil: Okay, so share some memorable success stories of uh, founder led companies for us please.

Lawrence: Well, obviously in the companies in my portfolio with Linary Investment Management, I believe they will be successful over time. A lot

00:30:00

Lawrence: of them have been successful in a names that not many people may have heard of. You know, uh, I talk a little bit in the book about risk. The networks I mentioned is not managed by a founder, but is a founder led company, but is managed by a professional manager that has herself become a billionaire just from the success of what she's done over the past couple of decades.

Phil: Tell us about the company. What is, what is the company? What does it do?

Lawrence: In short, they supply infrastructure, hard infrastructure, networking infrastructure to uh, big tech in America. And it, it started decades ago by, by a couple of co founders that came out of Cisco. Then they hired a professional manager, she's been with them ever since and she's one of the longer serving Silicon Valley CEOs and consistently producing results that now have uh, moving now into AI and data centers. They'really reaped the benefit of this kind of wave of infrastructure spending in AI. So these are kind of under the radar companies, some that are less under the radar. Uh, BYD that you'll start to see already are seeing a lot of EV cars. They're the first real EV company that has cracked the mass market.

Phil: I would say that's the Chinese company, isn't it?

Lawrence: Correct, yeah. Wang, uh, Tran Fu is the founder. They're still heavily involved. I think Warren Buffett was an early backer of their company. But what they're doing now in terms of vertical integration of their entire supply chain is something that other companies can't compete with because the way they've grown their business and competed with others is based on that full control over uh, from mining of the rare minerals through to production of batteries, through the production of the EVs. So that is born off the back of a very visionary, long term thinking founder.

Phil: So they've got control of the whole supply chain, have they?

Lawrence: Yeah, correct. And that's very different to the Teslas of the world. And what it does give Them is one, flexibility with how they distribute their products but two, their sensitivity to supply chain shocks they can handle and therefore that's why we're seeing that their prices are so competitive. And that's something because they've really looked at making their supply chain really efficient.

Phil: Did you find anything surprising or counterintuitive while you were writing the book?

Lawrence: Yeah, you know I often started by approaching the research as uh, a uh, one type of founder. But what I found was actually there's many different types of founders. There's the flippers, there's the people that want to grow a company for the long term. There's the people that are uh, up to their third or fourth generation and just to extract dividends from the company. There's the founders with a personal agenda that want to use their companies, a stepping stone into something else. There's a wide rangch. But for investors what really matters the most is you really want to pick the people that are stayers and that'll be there for a long, long period of time and have a vision that can take the company to the next level. I also observed that you know, cultural context matters a lot. I mentioned that Americans have a different approach to business and Australians, Europeans and Asian countries. But I think that what we're seeing now and what we will see over the next 20 years is an acceleration in founder led companies because the ability to create companies has become easier and the innovation that's required in the world over the next two decades will be quicker and quicker. And there's only one breed of company that can really do that and that's the breed company that has a has that can make quick decisions, take calculated risks and some pay off, some don't. Because if you look at the biggest names in the world today, most of them are founder led companies. And um, I expect that trend to accelerate over the next two decades.

Phil: Let's talk about basketball. You seem to have a passion for basketball. How does it influence about how you think about frameworks and leadership?

Lawrence: There's a saying in basketball field that ball don't lie. And I like that saying because once you play basketball with someone, you know what they're really like, you know what they're like as a team member, how they see the world and how they express themselves physically. And for me basketball is about teams, it's not about individuals. And what I've learned is that you don't need to have the best betatting five but uh, with team chemistry is what wins you games, not individuals. So for me I Love basketball for that reason. It's a team game, it's physical, it's competitive at its ball. Don't lie.

Phil: So you'd prefer to have your investor calls on the basketball court, would you?

Lawrence: Absolutely. But I don't know how many basketball players there are, uh, in the companies that I look at, but absolutely, yeah. If they were basketballers, I think you can really

00:35:00

Lawrence: tell. Uh, it goes for any sport really. You can apply it to any sport, but I think more so basketball because you can play, you can express yourself in such a, uh, wide variety of ways.

Phil: So in that list that you were just before you started talking about basketball, you were giving a list of all the kinds of different company frameworks that management and founders approach them at. There's also not many people know about lifestyle companies. You've heard this term, haven't you? Lifestyle companies? Yeah.

Lawrence: Sir, you're referring to companies that are just sort of for the founders to live a lifestyle.

Phil: Yeah. Finance their lifestyle.

Lawrence: Yeah, yeah.

Phil: Do, do you see any red flags that would mourn against that?

Lawrence: Uh, well, I certainly wouldn't invest in them. I mean the lifestyle company.

Phil: But how do you find out if it is a lifestyle company?

Lawrence: Well, oftenime by the time they get become public, you know, it's very hard to just be a lifestyle company. Right. Uh, and so you're really referring to privately owned kind of family owned businesses where you can kind of incorporate how you want to live into the business. By the time you become public, it's pretty hard to get away with public scrutiny. That's why you have sort of inside transactions sections within annual reports. You want to make sure that people aren't using company resources for personal benefit. Nothing wrong with uh, a lifestyle business if you're privately owned. I mean a lot of people do it, it makes sense. But as an investor, as someone looking for the next 10 bagger, obviously for me that's something that I skip past.

Phil: So show viewers. The book. It's out, isn't it?

Lawrence: It is out. Uh, Founder Effects and Audiobook will be coming out shortly. It's on all major platforms as an ebook, physical book and audiobook comes out very shortly.

Phil: Yep. And you can buy it in the old fashioned way at any good bookstore, I'm assuming, correct?

Lawrence: Yes.

Phil: Yeah. Okay Lawrence, fantastic. It's lovely to meet you and thanks very much for coming out and joining me on the podcast.

Lawrence: Really enjoyed it. Thanks Phil.

Chloe: Thanks for listening to Shares for Beginners. You can find more@sharesforbeginners.comt. if you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing for their future.

00:37:19

Any advice in this blog post is general financial advice only and does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs before acting on the information. If you do choose to buy a financial product read the PDS and TMD and obtain appropriate financial advice tailored to your needs. Finpods Pty Ltd & Philip Muscatello are authorised representatives of MoneySherpa Pty Ltd which holds financial services licence 451289. Here's a link to our Financial Services Guide.