The Clockwork CIO: Leadership & Contrarian Thinking in Global Finance

Podcast: The Clockwork CIO
Host: Green Lion Media
Guest: Django Davidson, Partner & Portfolio Manager, Hosking Partners
Date: January 16, 2025
Theme: Exploring the multifaceted nature of leadership in global finance through the lens of contrarian thinking, capital cycles, and nonconformity.

Episode Overview

This episode kicks off 2025 with a deep-dive conversation between the host and Django Davidson, a partner at Hosking Partners, a global equity investment firm known for its unique supply-focused, capital cycle approach. Django shares personal insights on the value of contrarianism, the structure and ethos behind Hosking Partners, and how being comfortable with friction and challenging orthodoxy leads to real innovation, not only in investing but also in the broader context of societal progress.

Key Discussion Points & Insights

The Value of Contrarian Thinking

• Contrarian Inspiration:

  • Django expresses admiration for "iconoclastic contrarian, different thinker[s]" and references Peter Thiel’s thoughts on the difficulty of holding unconventional ideas.

    "What is it about our society that means it's only really people with Asperger's who can retain and are not talked out of unconventional ideas?"
    — Django Davidson quoting Peter Thiel [01:14]

• Django links contrarianism to neurodiversity, highlighting how society benefits when unconventional thinkers are empowered instead of sidelined.

• Nature versus Nurture:

  • Django reflects on an unconventional upbringing—musician father, academic mother, left-wing family—which instilled a comfort with independent, first-principles thinking.

    "[Contrarianism]... was really, in retrospect, a real privilege of my childhood. It wasn't economically privileged, but from an intellectual perspective it was."
    — Django Davidson [04:44]

Contrarianism in Industry & Investment

• Societal Ecosystem:

  • Contrarians are vital as "intellectual insurance" to challenge orthodoxy and push progress.

    "Contrarians provide a sort of intellectual insurance policy... they challenge the received wisdom."
    — Django Davidson [08:14]

  • However, most institutions, investment or otherwise, structurally prefer conformity (e.g., the military as an example).

• Hosking Partners' Philosophy:

  • The firm's unique structure is designed to enable and encourage contrarian thinking, resisting investment industry conformity.

    "We thought long and hard about structuring something that allows contrarian thinking to flourish..."
    — Django Davidson [10:20]

• Industry Critique:

  • Django critiques finance for attracting too much human capital away from more innovative scientific endeavors and for imposing both a "financial and intellectual tax" on society with little genuine conceptual advancement.

The Capital Cycle Approach

• Framework Core:

  • The "capital cycle" is about understanding supply-demand dynamics—how capital influx at high valuations can lead to industry bubbles, and how capital withdrawal leads to future outperformance.

    "The capital cycle is a very simple framework, a rubric for understanding an industry... it's returns on capital that drive share prices rather than quarterly earnings or various other... short term metrics."
    — Django Davidson [13:00 & 27:10]

• Global Go-Anywhere Remit:

  • Unlike mainstream concentrated portfolios, Hosking embraces diversification:

    "There is an orthodoxy around... diversification, which is that diversification is bad... We take the other side of that."
    — Django Davidson [18:37]

• Practical Examples:

  • Platinum Group Metals (PGMs):

    "Seven years ago there were eight major PGM miners. There are now basically four and a half... the industry has seen significant consolidation, but what it hasn't done over that period is invest in new supply... We've underspent by 18 billion."
    — Django Davidson [31:12]

  • Django outlines demand uncertainty in PGMs but believes in strong supply-side investment potential—"Supply is measurable and demand is storytelling." [34:55]

  • Contrast—Battery Metals (Lithium, Cobalt):

    "The flip side... is the negative capital cycle in a lot of battery metals. For the past decade we've seen masses of capital allocated to lithium projects... the lithium price is still in the doldrums... a lot of lithium projects look like they're going to be spectacular destroyers of capital."
    — Django Davidson [37:18]

• Contrarian Application Beyond Investing:

  • Django humorously relates the capital cycle to career advice, warning against overhyped industries (like private equity), and suggesting young graduates look to undercapitalized, overlooked industries (e.g., mining, materials, heavy industry).

    "A capital cycle framework would say, well, hey, don't look at [private equity]... look at areas where there's been relatively little investment, where there's a need for new talent..."
    — Django Davidson [39:18]

Leadership, Team Dynamics, and Organizational Structure

• Managing Contrarian Talent:
  • Hosking Partners is structured to harness the productive friction among its multiple contrarian investors, foster debate, and channel insights into the portfolio.

    "One of the great challenges of running a contrarian investment-led firm... is you have to get these contrarian investors... to create this environment where these contrarian ideas can percolate..."
    — Django Davidson [49:32]

Notable Quotes & Memorable Moments

• "Contrarians provide a sort of intellectual insurance policy... they challenge the received wisdom."
  — Django Davidson [08:14]

• "The capital cycle is a very simple framework... it's returns on capital that drive share prices rather than quarterly earnings or various other... short term metrics."
  — Django Davidson [13:00]

• "Supply is measurable and demand is storytelling."
  — Django Davidson [34:55]

• "A contrarian who is comfortable with social friction... can resist the temptation to be sucked in to a boom..."
  — Django Davidson [47:07]

• "It's an important part of the ecosystem... my expectation is, as always happens... the market will start to mean reverse and the contrarians will have their day."
  — Django Davidson [47:57]

• "Uncertainty is the friend of low prices. And so as a natural contrarian, the capital cycle gives you these guardrails... You want to be contrarian and right."
  — Django Davidson [38:11]

• "There is an orthodoxy around... diversification…we take the other side of that. We think there's huge advantage in being diversified."
  — Django Davidson [18:37]

Timestamps for Key Segments

• Intro & Contrarian Origins: [00:00–04:44]
• Contrarianism in Finance & Society: [07:10–14:11]
• The Capital Cycle Explained: [27:05–30:54]
• PGMs and Supply-side Examples: [31:12–35:56]
• Battery Metals and Overcapitalization Warning: [37:18–39:18]
• Career and Educational Contrarianism: [39:18–41:51]
• FOMO, Tech Bubbles, and Overbuilding: [42:11–45:51]
• Leadership, Boardroom Dynamics: [49:32–50:23]
• Outro & Capital Cyclists Podcast Mention: [50:42–51:38]

Summary Takeaways

• Contrarian thinking is crucial for societal and financial progress but requires organizations and individuals comfortable with friction and nonconformity.
• The capital cycle framework gives structure to contrarian investment, focusing on supply-side dynamics, and enabling avoidance of overpriced, overhyped industries.
• Diversification and a global mandate are core to Hosking Partners’ investment philosophy, allowing them to invest where capital is scarce, not crowded.
• Life and markets are cyclical; mean reversion and the eventual vindication of contrarians is a recurring theme.
• Investment and career advice alike benefit from contrarian approaches: Look for value and opportunity where others are not looking.

For more on Django’s approach, listen to "The Capital Cyclists Podcast" via the Hosking Partners’ website or Spotify.