Client Guide

Years ago, Warren Buffett wrote a short "owner's manual" to shareholders of his company, outlining how he would treat his shareholder and how he would take care of their money. As a tremendous admirer of Buffett's, I've adopted many of his principles. After reading this letter - my own owner's manual - I hope you'll feel you've learned something about me as well as my core strategies and principles.

One: I love what I'm doing.

I've been tracking the markets and making investments since high school. Even while studying computer science in college and grad school, I was making trades in my spare time. Some people think I'm crazy, but I really like researching the market and finding great investment opportunities.

After five years in software engineering at high-tech companies, I left Google in January 2009 to concentrate full-time on investing my own money. Then people thought I was really crazy: when the economy was completely tanking, I left Google and started a business. A financial services business. But investing is what I like to do most, and the timing looked right.

Two: Be greedy when others are fearful.

One of Buffett's famous quotes is to "be fearful when others are greedy and greedy when others are fearful." I generally try to follow this maxim. But consider its implications for a minute. In January 2009 when I left Google, the market continued to fall through March, at which point people thought I might be a little daft as well as crazy.

If you place money with me, there may be times when your portfolio is flat while everyone else is celebrating; or times that I want to jump in when all your friends are jumping out. There will also be times that I flat-out-screw-up and all I'll be able to do is apologize. Before you decide, make sure you have a clear understanding that the investment process I follow is fairly different than a typical mutual fund.

Three: Align my investors' interests with my own.

My personal retirement strategy doesn't require me to earn money from you at all: it only requires that I earn money for myself. But as long as I'm already doing lots of research to invest my own money with confidence, why not do so for others too? And so, Shih Investments was born.

At Netflix and Google, we often spoke of "eating your own dogfood" in reference to using the products you work on. Unbelievably, this practice is pretty rare in the investment industry. But I've been eating my dogfood for years, and I'd be pleased to share it with you.

Because my personal financial success does not depend on charging you money, I work differently than the majority of investment funds. For example, my preferred style of charging fees is to take a percentage of the profits I earn for you. If I lose you money, you owe no fees; but if I earn you lots of money, your fees will be higher than average. I think it's shameful that some investment managers and CEOs make plenty of money whether or not their clients or shareholders do too. I only want to be paid if you (and I) are earning money.

The last decade was a very challenging one for investors; legendary financial firms closed and many people lost money on their savings. I've already enumerated some drawbacks of my investment style. But in spite of these drawbacks, I'm happy with my returns and confident in my approach. I want to keep doing this for a long, long time and I hope you will join me.

Sincerely, Kai Shih