This piece explains how investor John Rogers uses discipline and a long-term view, like in basketball, to find bargains. He believes passive investing (like index funds) creates mispriced stocks, benefiting deep value investors. He highlights two holdings: JLL and CBRE, real estate service firms he thinks the market still undervalues as if the 2008 crisis will repeat, but they've become much more stable.
John Rogers, founder and CIO of Ariel Investments, shared his value investing philosophy and the evolution of his firm over more than 30 years in a podcast. His core thesis is "Slow and Steady Wins the Race," emphasizing long-term holding of high-quality small- and mid-cap stocks while avoiding freq
John Rogers, founder, CEO and CIO of Ariel Investments, has managed the same asset management firm for over 34 years. The central theme of this episode is the long-term practice of deep value investing—from the discipline and team spirit cultivated through his basketball career, to how to identify high-quality companies mispriced by the market, and the challenges of talent development and diversity in the asset management industry. The most impactful takeaway: Rogers argues that the rise of passive investing and ETFs has actually created greater opportunities for deep value investors, as a large number of stocks trade based on index inclusion/exclusion rather than fundamentals, leading to more severe pricing dislocations.
John Rogers believes that three principles imparted by Princeton basketball coach Pete Carril directly form the cornerstone of Ariel's investment culture.
First: Prioritize the team, eliminate selfishness. The coach repeatedly emphasized that on the court, one should always think of teammates first, and selfishness is unacceptable. Rogers translated this philosophy into Ariel's internal culture—employee stock ownership, collaborative decision-making, and contributions from everyone regardless of title.
Second: Execute correctly every single time. The coach demanded that every pass and every cut be precise and flawless, with no room for carelessness. Rogers mapped this to investment research: every research report must be complete and thorough, no shortcuts allowed, and all materials must be read before meeting with management.
Third: Stay fully focused on every single play. The coach stressed that each play is critical and did not permit slack during practice. Rogers believes that during periods of extreme market volatility (the financial crisis, the Greek crisis, the U.S. debt downgrade), the ability to remain focused and calm is a rare skill.
> "He made you understand that when you help others, you ultimately help yourself and help the team win. He would stop practice to show how selfless acts lead to truly good outcomes."
Rogers adds: Ariel conducts "post-mortems" on failed investments, bringing the team back to the original decision-making context to analyze, "What were we thinking? What did we miss?"—this directly mirrors the coach's practice of "stopping practice and recalibrating."
Rogers distinguishes between "process" and "edge": process is disciplined execution, while edge is what truly sets Ariel apart.
At the process level: Analysts must become industry experts—knowing the best and worst companies in the sector, as well as the cheapest and most expensive stocks. Computer screening helps identify companies that meet the criteria: sustained earnings growth, reasonable debt levels, and fair valuations. However, the critical steps cannot be replaced: meeting management face-to-face, attending industry conferences, and engaging with competitors, customers, and sell-side analysts.
The core of the edge — a long-term perspective: The turtle logo is ubiquitous in Ariel's office. Rogers emphasizes that they have held certain stocks for over 20 years, which is extremely rare in the industry. Management often tells them: "You are among the few firms that discuss 3-year, 5-year, or 7-year strategic plans, rather than 3-month, 5-month, or 7-month results." This long-term perspective helps Ariel avoid the "recency bias" in behavioral finance, enabling them to buy boldly when markets are pessimistic.
> "When we buy a company, it is often precisely when temporary bad news emerges. Being able to look beyond the horizon and see the business as it will be once the clouds clear is rare in the industry."
The second layer of the edge — management assessment within the circle of competence: Rogers draws on Warren Buffett's concept of the "circle of competence." Analysts, having deep industry experience over many years, can naturally identify which management teams are "honest intermediaries" and which are "herd-following groupthinkers." Ariel communicates with management every quarter, observing whether they deliver on promises and whether they candidly admit mistakes.
Rogers particularly emphasizes capital allocation judgment: Be wary of "empire builders" who continuously pursue leveraged acquisitions, as well as management teams that buy back shares at high prices simply to cater to the market. Buybacks only create value when executed significantly below intrinsic value; otherwise, they destroy shareholder value.
Rogers argues that the "moat" of value investing lies in the difficulty of execution itself, and the rise of passive investing has actually expanded opportunities for value investors.
He reviews key milestones from his 34-year career: the strong comeback of value investing after the bursting of the internet bubble; in the spring of 2009, when everyone gave up, investors who dared to buy saw their stocks rise from $2 to $50 two years later. These experiences repeatedly prove that groupthink and momentum trading periodically create extreme pricing.
Current unique opportunity: Active ETFs slice stocks across various dimensions, and investors buy for reasons unrelated to fundamentals, based solely on historical data. Once a stock is included in a specific index, its price movements become disconnected from discounted future cash flows.
> "Stocks are moving for reasons that have nothing to do with fundamentals—they are being put into these indices. I believe that indexing, especially specific indices around ETFs, is creating more opportunities."
Specific case – Real estate services industry: Ariel has long held Jones Lang LaSalle (JLL) and CB Richard Ellis (CBRE). The market still prices these two companies based on the logic of the 2008 financial crisis—assuming they will collapse during an economic downturn. However, Rogers points out that these companies have fundamentally changed:
Rogers' assessment: These two companies "almost hope for a recession to prove that their cash flows are far more stable than during the last downturn."
Rogers believes that the most difficult skill in investing—judging whether a brand's moat can endure over the next 5–10 years—requires "vision," and that this ability is largely set by age 18–19, making it very difficult to cultivate later.
He quotes a coach: "If you don't have vision by 18–19, I can't teach you. If you're 9–10, I might be able to help you develop it." Therefore, Ariel's talent strategy is to intervene deeply in the talent pipeline from an early stage:
Rogers emphasizes: If forced to choose between "hiring without training" and "training without hiring," he would choose the former—because "hard things are really hard to teach, and it's very difficult to change a person's DNA." Selfishness reveals itself in tough times, and contrarian thinking is most easily consumed by groupthink during market crashes.
Rogers states bluntly that the financial services industry has "not gotten better" in terms of diversity, "and in some ways may be worse."
He highlights the reality in Chicago: major private equity firms have never had an African American or Latino professional, let alone a partner; among 200 partners at a large investment bank, there may be only one African American; the proportion of female partners is similarly embarrassingly low. As wealth and influence become increasingly concentrated in the financial services sector (investment banking, hedge funds, private equity), this problem has grown more severe.
Ariel's solutions:
1. Serve as a model partner for public schools: Use the Ariel Community Academy to expose minority students to financial careers from a young age.
2. Fund paid internships for minority students at the University of Chicago in the endowment office: The goal is to steer these students away from law/medicine/traditional banking and toward asset management, potentially cultivating "the next David Swensen."
3. Apply demand-side pressure: If investment committee members at universities, museums, hospitals, and corporate pension funds ask their advisors about diversity, these institutions will begin to change.
> "If clients don't ask, nothing changes. There needs to be more supply, but there also needs to be demand — and people often forget that."
| Position | Guest Stance | Key Data |
|---|---|---|
| Jones Lang LaSalle (JLL) | Bullish (long-term hold) | Held for over 10 years; business has shifted significantly from capital transactions to outsourcing and asset management; balance sheet is "bulletproof" |
| CB Richard Ellis (CBRE) | Bullish (long-term hold) | Forms a global commercial real estate services duopoly with JLL; diversified across geographies and product lines |
| United Stationers | Historical case (exited) | Early heavy position, later acquired; returns were "excellent" |
| General Binding | Historical case (exited) | Early heavy position, later acquired |
| Sanford (Sharpie) | Historical case (exited) | Early heavy position, later acquired |
| Echo Staplers | Historical case (exited) | Early heavy position, later acquired |
| Kenner Parker Brothers | Historical case (exited) | Early heavy position, later acquired |
| Tonka | Historical case (exited) | Early heavy position, later acquired |
| Viewmaster | Historical case (exited) | Early heavy position, later acquired |
| Ideal Topps | Historical case (exited) | Early heavy position, later acquired |
| Hasbro | Historical case (exited) | Early heavy position, later acquired |
| Mattel | Historical case (exited) | Early heavy position, later acquired |
1. Rogers: The rise of passive investing and ETFs is creating greater opportunities for deep value investors. Stocks are trading based on index inclusion or exclusion rather than fundamentals, amplifying pricing dislocations—"stocks are moving for reasons unrelated to fundamentals."
2. Rogers: Judging whether a brand's moat can last 5-10 years requires "vision," and this ability is largely set by age 18-19. The coach says, "If you don't have vision by 18-19, I can't teach it"—which is why Ariel has been tracking talent since age 14-15.
3. Rogers: JLL and CBRE "almost wish for a recession" to prove themselves. The market still prices these two real estate services firms based on 2008 logic, but they have completely transformed—diversified businesses, global reach, and "bulletproof" balance sheets.
4. Rogers: Share buybacks create value only when done significantly below intrinsic value; otherwise, they destroy shareholder value. Beware of management that buys back shares at high prices to appease the market or fend off activists—this is a sign of "groupthink."
5. Rogers: Diversity in the financial services industry "has not improved and may have worsened in some respects." A major private equity firm in Chicago has never had an African American or Latino professional—"like baseball in 1940."
6. Rogers: Ariel's long-term perspective is core to its edge—holding certain stocks for over 20 years. Management feedback: "You are one of the few firms that come to discuss 3-year, 5-year, 7-year strategic plans, not 3-month, 5-month, 7-month results."
7. Rogers: On the day of the 1987 crash, he was in a wedding planning office trying to execute "be fearful when others are greedy." It was the most memorable day of his career—"Warren said to buy at maximum pessimism, John Templeton said the same, so I called from the wedding planning office to say buy."
8. Rogers: Ariel's "post-mortem" corresponds to the coach's "stop training" practice. The team revisits the context of their original decisions and analyzes, "What were we thinking? How did we miss it?"—this is a key discipline to avoid repeating mistakes.