The Seven Spirits of Investing
Sharks, Elephants, Tortoises, and More
In a recent podcast by Red Eye, Laurence Endersen—investor, author of The Compounder’s Element, and advocate for patient capital—outlined a taxonomy of fund managers based on their strategies, temperaments, and ultimate objectives. His framework goes beyond the usual "value vs. growth" dichotomy, instead categorizing investors by what they optimize for: returns, assets, duration, or psychological edge.
For long-term investors, understanding these archetypes isn’t just academic—it clarifies whose approach aligns with your own goals and whose might lead to disappointment. Below, we break down Endersen’s seven fund manager types, their strengths, and their pitfalls.
1. The Sharks (IRR Chasers)
Motto: "Go big or go home."
Sharks are the high-octane fund managers obsessed with internal rate of return (IRR). They want explosive gains, fast exits, and a spot in the "IRR Hall of Fame." Their strategy leans heavily on the 'R' (return) in the compounding formula (FV = PV(1+R)^N), believing that sky-high returns will compensate for shorter holding periods.
But Endersen warns: This is an exceptionally hard game. The more aggressive the returns sought, the higher the risk of blowups. Many Sharks get "taken out of the game" before compounding can work in their favor. Think of hedge funds that post 100%+ returns one year, only to collapse the next.
Who does this suit? Traders, venture capitalists, and hyper-competitive investors willing to accept high volatility.
2. The Elephants (Asset Gatherers)
Motto: "Assets under management (AUM) first, performance second."
Elephants are the empire-builders of finance. Their goal isn’t necessarily outperformance—it’s scaling AUM to collect management fees (AUM × fee %). Performance fees are a bonus, not a necessity.
Endersen is blunt: Elephants aren’t running investment businesses; they’re running asset-gathering businesses. The product they sell is often "peace of mind" (brand, stability) rather than alpha. Many large mutual funds and private equity firms fall into this category—once they reach a certain size, beating the market becomes secondary to retaining capital.
Who does this suit? Institutional players, wealth managers, and those who prioritize business stability over beating benchmarks.
3. The Tortoises (Duration Focused)
Motto: "Time in the market beats timing the market."
Endersen identifies himself and his firm as Tortoises—investors who prioritize duration ('N' in the compounding formula) over flashy returns. Instead of chasing 20% annual gains, they focus on staying in the game for decades, letting time do the heavy lifting.
The math is compelling: A 10% return over 30 years compounds to 17.45x. A Tortoise would rather achieve this reliably than swing for 20% returns and risk ruin. As Endersen notes, "It’s easier to survive 20 years than to compound at 15% for 20 years."
Who does this suit? Patient capital allocators, index-fund investors, and those who value sustainability over heroics.
4. The Short Sellers (Pessimists by Nature)
Motto: "I’ll wait for the world to burn."
Short sellers thrive on disaster—they profit when others fail. Endersen acknowledges this is a psychologically grueling strategy: It requires constantly rooting for (or anticipating) bad outcomes.
While short selling has produced legends (Jim Chanos, Muddy Waters), Endersen implies it’s a poor fit for most personalities. The market’s long-term upward bias means shorts fight against gravity—and the emotional toll of being perpetually bearish is high.
Who does this suit? Contrarians with strong risk tolerance and a knack for forensic analysis.
5. The Cash Hoarders vs. The Fully Invested
Motto (Cash Hoarders): "Cash is a comfort blanket."
Motto (Fully Invested): "Time, not timing."
Endersen reflects on portfolio managers who hold large cash positions—sometimes as a "safety blanket," other times as a tactical reserve. He questions whether this is truly prudent or just a way to avoid tough decisions.
His view? If investors allocate to equities, they expect equity exposure—not hidden cash drag. A mandate to manage stocks implies a mandate to be fully invested (or close to it).
Who does this suit?
Cash hoarders: Market timers, macro traders.
Fully invested: Long-term compounders, Buffett-style investors.
6. The Concentrators vs. The Diversifiers
Motto (Concentrators): "Bet big when you have an edge."
Motto (Diversifiers): "Protection against ignorance."
Endersen contrasts two schools of portfolio construction:
Concentrators (Munger-style): Few bets, high conviction.
Diversifiers (Schloss-style): Many small bets, margin of safety.
He notes that concentration is an act of arrogance—it assumes near-perfect foresight. While it can produce legendary returns (Buffett’s "20-slot punch card"), survivorship bias means we mostly hear about the winners, not the blown-up funds.
Endersen himself has grown more respectful of diversification over time, seeing it as "protection against ignorance."
Who does this suit?
Concentrators: Experts with deep industry knowledge.
Diversifiers: Those who admit uncertainty and prioritize capital preservation.
7. Personal vs. Professional Portfolios
Motto: "No one fights harder than when it’s their own money."
Endersen observes a curious phenomenon: Personal accounts often outperform professional ones. Why?
No career risk: You can buy at the bottom without fear of redemptions.
No need to "look rational": No quarterly reports to justify decisions.
The "family effect": Managing money for relatives often brings extra discipline and care.
This suggests that institutional constraints (client expectations, compliance rules) may hinder performance more than we admit.
Which Investor Are You?
Endersen’s framework reveals that investment success isn’t just about strategy—it’s about alignment.
If you crave excitement and can handle risk, maybe you’re a Shark.
If you value stability over stardom, perhaps an Elephant.
If you believe slow and steady wins the race, you’re a Tortoise.
The key is knowing which game you’re playing—and sticking to it. Because as Endersen’s compounding philosophy reminds us: The biggest returns come from consistency, not heroics.
But what if you don’t fit neatly into one box?
Personally, I’ve found myself a blend of Shark and Tortoise—drawn to high-conviction opportunities (letting ‘R’ work its magic) but anchored by long-term discipline (letting ‘N’ do the heavy lifting). My portfolio reflects this hybrid approach: a concentrated core of best ideas, surrounded by a diversified periphery—enough arrogance to bet big, enough humility to admit I could be wrong.
The key isn’t purity; it’s self-awareness. Know your edges, respect your blind spots, and compound accordingly. Because in the end, the best strategy is the one that lets you sleep well and eat well.
Subscribe to First Followers for more unfiltered takes on the art of investing.