This is about investor Carl Kawaja's decades of wisdom. He says long-term holding is harder than buying, but more profitable. He likes TSMC and Vale, both up ~18.5% annually for 22.5 years. He also sees opportunity in traditional giants like General Motors and Target fighting back against tech disruptors. He regrets missing Tesla (bought by a colleague at $18). Key takeaway: pick great companies, hold tight, and accept mistakes.
Carl Kawaja, a portfolio manager at Capital Group overseeing over $2 trillion in assets, shared decades of investment wisdom on the Invest Like the Best podcast. His core thesis: long-term holdings require deep conviction, uncertainty and ambiguity should be viewed as healthy, and tolerating failure
Carl Kawaja, a portfolio manager at Capital Group overseeing over $2 trillion in assets, shared decades of investment wisdom on the Invest Like the Best podcast. Core thesis: Long-term positions require high conviction; uncertainty and ambiguity should be viewed as healthy; tolerating failure is key to an investing career. He illustrated his investment logic through specific cases such as Vale and TSMC, and introduced the macro thematic framework "The Empire Strikes Back."
Carl Kawaja argues that the two longest-held companies—TSMC and Brazilian iron ore producer Vale—though operating in vastly different businesses, both possess unique competitive advantages that are difficult to replicate.
TSMC’s core strength lies not only in manufacturing precision (the mirror accuracy in ASML’s EUV lithography machines is equivalent to a height difference of no more than 1 millimeter between eastern and western Germany) but also in its ability to simultaneously meet the diverse needs of multiple customers. Kawaja uses analogies of “a mother cooking for 14 people” and “a Chinese restaurant with a 40-page menu”: TSMC serves different clients like a platform, while competitors such as Intel excel only at “the most popular dishes” and charge higher prices for other demands. This platform capability allows TSMC to continuously widen its cost advantage.
Vale’s competitive edge stems from resource scarcity—high-grade iron ore is primarily found in two locations: Brazil and Western Australia. Kawaja notes that while iron ore is a commodity, Vale’s ore has high iron content, and China needs imports to upgrade the quality of its low-grade domestic ore. The global seaborne iron ore market is controlled by three Australian producers and one Brazilian producer. Kawaja states bluntly: “I actually suspect Vale’s competitive advantage is more durable than that of Google, Amazon, or Facebook”—steel has not been replaced since the Iron Age, and it remains essential for urban skyscrapers, cars, and airplanes.
Key data: Over the past 22.5 years, the global national index has compounded at an annualized rate of approximately 7.5–8%, while both TSMC and Vale have grown at an annualized rate of about 18.5%.
Kawaja summarizes investment style into three key words: Simplicity, Echolocation, and Ambiguity.
Simplicity: Kawaja prefers companies where he can understand the economics of business units. He cites Bunge (a soybean crushing company) as an example—analysts told him that each bushel of soybeans (60 pounds) yields 44 pounds of soybean meal and 11 pounds of soybean oil, with meal priced at approximately $450 per ton and oil at around 60–70 cents per pound, while soybean costs are about $12–13 per bushel. This "simple equation" allows him to quickly grasp the impact of variable changes. Kawaja emphasizes: "Successful investments usually have only one thing that truly matters"—find that key variable and determine whether one has differentiated information.
Echolocation: Kawaja compares the investment process to a bat "screaming" in a cave and listening for echoes—he constantly pitches ideas to colleagues and gauges direction through feedback. For example, when Google went public, analyst Mark Casey's model assumed margin compression, but Kawaja calculated that "they would need to hire all U.S. computer science PhDs from the past five years to support such expense growth," leading to a more optimistic model.
Ambiguity: Kawaja quotes Bill Miller—"When I feel terrible about my portfolio, it usually performs well." He argues that post-hoc certainty is dangerous, and maintaining uncertainty helps avoid overconfidence. Kawaja warns: "Even for stocks you are bullish on, keep a bit of uncertainty, because sometimes you fall in love with a well-performing stock and blind yourself."
Kawaja believes that, for him personally, holding is harder than buying, as it requires overcoming the instinct to constantly seek a "better deal."
Kawaja attributes this tendency to his parents' influence: his mother's "stubborn" nature helped him stick with holdings, while his father (a former finance professor) taught him to constantly look for bargains — "My father often said that if a restaurant is full, it means the price is too low." This mindset of "buying well" brings short-term satisfaction, but Kawaja argues that long-term holding is key: "Sometimes you should buy that house and go there every summer, rather than switching to a cheaper place each year. "
Kawaja emphasizes that the difficulty of buying versus holding varies by individual personality. He advises investors to "be true to themselves" and incorporate their personal traits into the investment process.
Kawaja likens Capital Group’s culture to “river rafting”: you never know which stretch of the river you’ll enter, and you might hit rapids right away, but what matters is that there are seven other people on the boat who will pull you back.
Founded in the 1930s, Capital Group was established by founder John Lovelace, who withdrew half of his funds during the market frenzy of 1929 and moved to Los Angeles to start the company, remaining unprofitable for 26 consecutive years. This long-termism persists to this day: the firm invests with a long-term perspective (e.g., TSMC, Amazon, Vale) and treats its employees with the same long-term view. Kawaja notes: “Sometimes the best thing is to lose money right after joining”—as it quickly sharpens one’s focus. He warns that many graduates from top schools have never experienced failure, but the investment industry is rife with it. “If you can’t accept failure, don’t go into this business.”
Kawaja introduces the “The Empire Strikes Back” theme: traditional large enterprises are leveraging their own ecosystems and resources to counterattack tech disruptors, which may create investment opportunities.
He cites three cases:
Kawaja also raises a key market question: The top five companies (Apple, Microsoft, Amazon, Facebook, Google) account for 22% of S&P 500 earnings. If they continue to grow at 15-20% while the index does not, they would represent 75% of S&P 500 earnings in five years—“that seems unlikely.” He suggests investors consider: bet on these five companies, or bet on “the other 495”?
Kawaja argues that in investing, "errors of omission" deserve more attention than "errors of commission," as the former often stem from laziness and closed-mindedness.
He cites Tesla as an example: his colleague Andras Razan bought the stock at $18, while Kawaja, despite noticing more Teslas on the road and seeing that MBA students all wanted one, was "too lazy and too closed-minded" to conduct in-depth research. He quotes his father: "There are no difficult decisions, only decisions made with insufficient information" — if you cannot decide, go get more information.
Regarding errors of commission, Kawaja highlights a common pitfall: when a CEO leaves a well-performing company, it is essentially "a sell letter written to you." He advises that in such cases, one should either sell or double down on research.
Kawaja argues that humanities beyond investing—poetry, data visualization, and kindness—are crucial for long-term investment success.
He quotes Rilke’s verse: “Perhaps all the dragons in our lives are princesses who are only waiting to see us act, just once, with beauty and courage. ” Kawaja illustrates this with his own cancer experience: what seemed like a disaster turned into an opportunity—he became involved in cancer research, met scientists, joined a hospital board, and invested in oncology-related companies.
Edward Tufte’s The Visual Display of Quantitative Information is the most practical book Kawaja recommends to new investors. He uses the Challenger space shuttle disaster as an example: scientists sent 13 pages of data recommending against the launch, but Tufte condensed all the information into a single chart, clearly showing the correlation between low temperature and the accident. Kawaja emphasizes: “Our work requires a lot of numerical ability, but what matters more is how we present information. ”
Finally, Kawaja references George Saunders’s speech on kindness: what he regrets most in life is not the foolish things he did, but the opportunities to be kind that he let slip by. Kawaja shares the story of his doctor, Bill Stennis—when Kawaja was 11 and learned he needed to continue medication, the doctor personally delivered a model car that same evening, telling him, “You’ll be fine.” Kawaja still keeps that car: “When stocks take a big hit, I give it a little push and remember that those tough times are behind me. ”
| Position | Guest Stance | Key Data |
|---|---|---|
| TSMC | Bullish (long-term hold) | ~18.5% annualized over 22.5 years |
| Vale | Bullish (long-term hold) | ~18.5% annualized over 22.5 years; iron ore price ~$220/ton |
| Bullish (historical case) | Kawaja built a more optimistic model at IPO | |
| Apple | Bullish (historically held, sold) | Bought in 2007–2008 |
| Amazon | Bullish | Convertible bond yield of 13% in 2001 |
| Bullish | Advertising market far larger than traditional brand budgets | |
| Tesla | Not held (missed opportunity) | Colleague bought at $18 |
| General Motors | Bullish (Empire Strikes Back theme) | Going all-in on electric vehicles |
| Target | Slightly positive | Leveraging store network for online fulfillment |
| Inditex (Zara) | Bullish | Physical stores have an advantage in try-on and returns |
| Disney | Neutral (not held) | Disney+ content popular with families |
| Bunge | Case illustration | Simple equation for soybean crushing |
| Mitsubishi UFJ | Bullish (historical case) | CEO transparent about risks during Japan's banking crisis |
1. “Vale’s competitive advantage may be more durable than Google’s, Amazon’s, or Facebook’s” (Carl Kawaja) — Steel has never been replaced since the Iron Age; skyscrapers, cars, and airplanes all depend on it. The global seaborne iron ore market is controlled by three Australian producers and one Brazilian producer.
2. “In successful investing, usually only one thing truly matters” (Carl Kawaja) — Find the key variable and determine whether you have differentiated information. If you don’t know what it is, you are “the dumbest person at the poker table” and should walk away.
3. “When a CEO leaves a well-performing company, he has written you a sell letter” (Carl Kawaja) — A CEO’s departure usually means he knows something you don’t. At that point, either sell or double down on your research.
4. “The top five companies account for 22% of S&P 500 earnings. If they continue growing at 15–20%, they will represent 75% in five years — that seems unlikely” (Carl Kawaja) — This is one of the most interesting contradictions in today’s market. The report suggests investors consider whether to bet on the “Lakers” or the other 495 companies.
5. “Perhaps all dragons are princesses, just waiting for us to act beautifully and bravely once” (Carl Kawaja, quoting Rilke) — Kawaja uses his own cancer experience to illustrate that seemingly catastrophic events can become opportunities; what matters is how you respond.
6. “Edward Tufte’s The Visual Display of Quantitative Information is the most practical book for entering the investment industry” (Carl Kawaja) — In the Challenger disaster, scientists sent 13 pages of data; Tufte used a single chart to reveal the link between low temperature and the accident.
7. “The best thing is to lose money right after joining” (Carl Kawaja) — Capital Group’s culture gives newcomers time to grow. Early failure helps people focus quickly. Many top graduates have never failed, but the investment industry is full of failures.
8. “When I feel terrible about my portfolio, it usually performs well” (Carl Kawaja, quoting Bill Miller) — Maintaining uncertainty and ambiguity is a healthy state; post-hoc certainty is dangerous.