Carl Kawaja - Wisdom from Decades of Investing

Principles & Lessons:

• Enduring Competitive Advantages Build Lasting Value: Carl emphasizes that truly distinctive businesses, like TSMC and Vale, succeed because they master complex, hard-to-replicate processes; he explains that “TSMC is the world’s leading semiconductor manufacturer” because it not only “does something that is really hard to do” but also satisfies multiple customer needs through “an element of art” in coordination, much like his analogy of a Chinese restaurant offering a 40‐page menu with many “chicken with …” variants, thereby creating a durable moat over time.
• Simplicity in Business Models Enables Clear Conviction: Carl values investments that he can reduce to simple, understandable metrics, noting that “I like being able to explain to myself … here are the simple metrics that drive [a] business” and comparing it to straightforward calculations in industries like soybean processing, reinforcing that if you can build a “simple equation for this business” you are better positioned to monitor the key variables that determine its success.
• Echolocation as a Tool to Gauge Market Sentiment and Refine Ideas: He uses the concept of echolocation—“I’m like a bat … shrieking out ideas and kind of hearing how it sounds when the sound comes back”—to illustrate how feedback from colleagues helps him test and sometimes overturn his initial models, as seen when he compared his bullish earnings model for Google against a more conservative one and learned that persistent skepticism can guide him to refine his views.
• Embracing Ambiguity and Uncertainty Strengthens Long-Term Decision Making: Carl shares that a “miserable state of uncertainty” is not only inevitable but can be a sign of healthy investment potential, recalling how even when he was unsure about a company’s trajectory, such ambiguity encouraged him to seek “more information” and avoid being blinded by premature certainty, a process that ultimately refines his conviction over time.
• Learning from Errors of Omission is Critical for Growth: He reflects on missed opportunities—citing his reluctance to further investigate Tesla when a colleague pointed out its promise—and acknowledges that “errors of omission” bother him more than errors of commission because they stem from not doing enough work; this humility and willingness to pursue more research when in doubt form a core part of his investment process.
• A Long-Term Horizon Allows Investors to Ride Through Market Volatility: Carl underscores the importance of patience by holding on to stocks like TSMC and Vale over decades, explaining that their compounded returns of around 18% per year over 22-plus years validate a strategy that “relies on a long-term time horizon” and tolerates short-term market fluctuations in favor of enduring value.
• Strong Firm Culture and Collaborative Networks Enhance Resilience: Using the river rafting analogy, Carl illustrates that being part of a firm with experienced “oarsmen” is essential; just as in a rafting trip where team members help each other navigate rapids, at Capital Group, long-term relationships and mentorship allow him to learn from failures and successes alike, reinforcing the idea that enduring institutional support is key to surviving turbulent market cycles.
• Kindness and Personal Relationships Fuel Both Personal and Professional Growth: Carl concludes with a personal story about how his doctor, Bill Stennis, gave him a model car during a difficult moment in his childhood, remarking that “the kindest thing someone can do for you is to believe in you,” a lesson he applies not only to his personal life but also to his role as an investor, where fostering trust and showing support helps build the enduring relationships that underlie successful long-term investing.

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