John Rogers – Slow and Steady Wins the Race - [Invest Like the Best, EP.26]

Episode Summary

Executive Summary: Patrick O'Shaughnessy interviews John Rogers, founder, CEO and CIO of Ariel Investments, on the lessons from basketball, Ariel’s long-term value process, management evaluation, capital allocation, hiring, philanthropy, and the persistent lack of diversity in asset management.

Main Topics: Basketball as a leadership school (Priority: 5/5): Princeton basketball taught unselfishness, precision, and concentration. Ariel's investment process (Priority: 5/5): Ariel combines sector expertise, screens, and deep field work into a disciplined workflow. Long-term value investing edge (Priority: 5/5): Rogers argues patience and horizon length create an enduring moat. Evaluating management and capital allocation (Priority: 5/5): He prioritizes honest managers, strong balance sheets, and disciplined capital allocation. Building and retaining talent (Priority: 4/5): Ariel hires through institutional pipelines and gives people real ownership. Philanthropy and civic leadership (Priority: 4/5): His volunteer and political work have generated both impact and access to talent. Diversity in finance (Priority: 5/5): Rogers says underrepresentation remains severe and clients must demand change.

Key Arguments: Unselfish teamwork beats individualism; he applies that same culture at Ariel. Precision and consistency in every task are essential to good investing. Ariel's edge is a long-term horizon, not just a process or screen. Sector specialists plus field research help identify the best opportunities. Management teams must show honesty, execution, and shareholder alignment. Avoid empire builders, overleveraged acquirers, and groupthink capital allocators. Brand only matters if it preserves a durable moat over 5-10 years. Diversity has not materially improved; client pressure can force institutions to change.

Data Points: Ariel Fund inception: 1986 - Flagship fund launched in 1986. Ariel Fund performance vs peer group: top decile - The fund is in the top decile of mutual funds going back to 1986. Ariel Fund category rank: number one in its category - Rogers says the flagship fund ranks first among its category peers. Performance since March 9, 2009 lows: 13th best performer - A journal story cited Ariel as 13th best among over 1,700 funds. Funds since 2009: over 1,700 funds - Peer comparison for performance since the 2009 market low. Category funds since 2009: 251 funds - Ariel ranked number one in its category out of 251 funds. Compounded return since 1986: 11.5% - Rogers cited Ariel Fund compounded returns since inception. Compounded return since 2009: over 25% - Rogers cited returns since the March 9, 2009 lows. Princeton jersey number: 15th uniform - He barely made the Princeton team as the last man on the roster. Management committee cadence: every quarter - Ariel talks to management teams every quarter. Horizon for brand durability: 5 to 10 years - He evaluates whether brands can maintain moats over this period. Ownership period: over 20 years - Ariel has owned some stocks for more than two decades. Student pipeline age: 9th or 10th grade - He says some hires have been known since early high school. Ariel Community Academy start: kindergarten - Arnie Duncan expanded the program to begin in kindergarten. African-American and Latino professionals in major PE firms: none - Rogers said major Chicago private equity firms had no such professionals or partners. Financial services underrepresentation: 8% vs 16% - He cited minority representation in financial services versus the general population. Stock market crash year: 1987 - He remembered managing through the 1987 crash while planning his wedding.

Pivotal Quotes: "when you're on the basketball court, you always are thinking about your teammates first" — John Rogers: Explaining Coach Carril's core lesson and how it shaped Ariel's culture "the difficulty of executing it and thinking independently does allow for the moat" — John Rogers: On why value investing remains viable despite more competition "you've got to ask, if we're on an investment committee... to ask your advisors about the lack of diversity" — John Rogers: On how allocators can directly pressure institutions to improve representation

Implications: Rogers sees durable value in patience, strong culture, and direct client pressure; the unresolved test is whether allocators will consistently reward those behaviors.