Source: Shaoshu Pai Investment
If you follow NBA games, you will find that the San Antonio Spurs are a truly remarkable team. Located in an unattractive small market, they have consistently ranked among the top teams over recent decades and won multiple NBA championships.
As the Spurs have perennially been contenders in the playoffs or championship race, their draft picks are often positioned late in the order (except for the past three years), allowing them to select players suitable for their needs only from a relatively weaker pool of talent.
Moreover, since the Spurs are located in a smaller city without the appeal of a major metropolis, they cannot rely on signing superstar players for explosive success. Instead, they achieve gradual improvement, enabling both the team and its players to make continuous progress.
It is precisely from such an NBA team that a successful fund manager emerged: Adam Wilk, the founder of Graystone Capital. Starting as a successful scout, he later applied the principles learned from the Spurs to the investment field, achieving similar success.
Whether as an NBA scout or as a fund manager, Adam Wilk has demonstrated an ability to uncover hidden value, enabling his team and investments to outperform the average. This indicates shared qualities between the two roles. After leaving his scouting position, inspired by Warren Buffett, he embarked on the path of value investing.
The skills he honed with the Spurs significantly contributed to his success in the investment arena. Similar to how the Spurs frequently discover hidden gems in the late first or second round of drafts, Adam Wilk primarily focuses on the small-cap stock market to uncover undervalued treasures.
Over more than a decade since its founding, Graystone Capital has achieved annualized returns exceeding 23%, far surpassing the broader market. If we were to attribute performance, 60% of these returns stem from fundamental mispricing, 25% from the correction of market sentiment-driven mispricings, and 15% from merger arbitrage opportunities.
Next, this story will explore the insights Adam Wilk gained from his work with the Spurs and how they apply to investing, his understanding of investment, and his approach to uncovering hidden investment opportunities.
You once quoted a very insightful statement by Jacob Reese. Let me reiterate it:
"When everything seems futile, I go watch a stonemason striking a rock. He may strike it a hundred times, without even a crack appearing. However, on the one hundred and first strike, the rock splits in two. I know it wasn't this single blow but the cumulative effect of all the previous strikes that caused it to break."
Could you elaborate further on how this metaphor applies to your overall investment strategy, particularly regarding decision-making discipline and maintaining a long-term perspective?
Adam Wilk: The so-called 'hammering the rock' concept, which is an abbreviated version of this famous saying, is actually a fundamental principle of the San Antonio Spurs. I began my career there as a scout and staff member in the basketball operations department. On my first day when I came to the arena for my interview and orientation, one of the first things they showed me was this.
When I arrived at the arena for my interview and on my first day of work, this exact phrase was what I saw. They had engraved it on a real piece of rock with a hammer placed beside it, displayed in a glass case in the training facility. It has long been one of the team’s guiding philosophies. Since Coach Popovich started working there in the late 1980s, it has been one of the Spurs’ most challenging tenets.
The team uses this philosophy to guide their daily operations. Its core idea is clear: incremental progress, bit by bit, can lead to significant returns over time. In sports, it's an excellent metaphor or analogy because it involves daily training, refining skills, and being slightly better each night than when you woke up that morning.
To be honest, I can’t think of a better analogy for describing the compounding effect. It closely relates to investing. The underlying idea is somewhat like this: no single day brings decisive change. From my personal experience, studying companies and industries, managing portfolios, and trying to expand or deepen my circle of competence... these efforts might not show much progress on any given day.
But over time, accumulating many such days will eventually lead to significant results. There’s a well-known statistic about Warren Buffett that everyone should know: the majority of his wealth was accumulated after he turned 50.
There’s a very interesting chart showing the trajectory of wealth growth, which clearly happened during the latter part of his life. So, although I initially learned this saying in the context of basketball, it truly set the tone for my daily work. That is, striving to make a little progress every day.
Greystone was founded based on a set of investment principles I believe are correct and a set of principles about how I hope to run the company in the future. The idea of persevering through ups and downs and committing to daily practice, regardless of circumstances, is something I drew from the Spurs.
I must admit, our company also ‘borrowed’ this saying. I think the biggest difference between its context in basketball and my work in investing is this: in the metaphor, the rock eventually breaks, and the analogy ends; but in investing, one thing I love about it is that it’s a lifelong practice, a profession and pursuit without an endpoint.
Therefore, I view my role and work as that of a professional learner, while also striving to improve a little every day. As long as my mind remains functional, I’ll keep honing my craft and career, hoping this can continue over several decades. This is also the operational timeline I’ve set for managing Greystone investments in company documents, as well as the timeframe I consider when thinking about how to structure the company and choose investment types.
The philosophy of 'hammering the rock' has become a very applicable and practical tenet that I have also incorporated into my documents, placed on my bookshelf, and genuinely attempted to use as a guide for both my life and business operations. I hope this explanation is reasonable.
That leads quite well into the next question about 'breaking stones.' In your founder’s letter, you made a very insightful comparison between basketball and investing. One key point you highlighted is that in basketball, once you reach a certain age, physical decline becomes inevitable, whereas in investing, it does not. This truly allows the compounding effect of knowledge to grow over decades, potentially spanning an entire lifetime.
The famous adage, 'Father Time is undefeated,' fits perfectly here. I am very eager to learn more. Are there one or two specific aspects of your investment practice that were directly inspired by the Spurs, perhaps something you haven't mentioned before?
Adam Wilk: Of course. The first thing I learned there was to uncover undervalued or mispriced 'talent.' My job with the San Antonio Spurs involved finding undervalued players, and I learned a great deal from that experience. Essentially, I was trained on how to do this and learned from my superiors where to look for such players.
The Spurs had a unique advantage because they had been doing this for decades before I joined. Since the team was consistently strong and made it to the playoffs every year, they never had the opportunity to pick players in the early rounds of the draft. As a result, they had to dig deeply from a scouting perspective to find any possible edge, identifying excellent contributing players in the second round of the draft.
Thus, they had to work hard to uncover every possible advantage from a drafting standpoint, seeking out excellent contributing players during the second round. The Spurs were pioneers in discovering players overseas, and I learned a great deal from this experience, which taught me that adopting strategies different from the crowd can create significant advantages.
The entire organizational philosophy of the Spurs was to be the first to do something — whether it was leveraging data analytics, enhancing sports science capabilities, or looking left when everyone else was looking right. From a scouting perspective, this was a very important focus of the organization.
This mindset enabled them to find some exceptional players in the later stages of drafts, such as Manu Ginobili and Tony Parker, who are prime examples. Translating this mindset from basketball to investing, the small-cap company space is filled with inefficiencies because these companies receive far less attention.
It's an area where large funds managing vast sums of capital cannot easily operate. Therefore, these companies inherently carry a certain discount and inefficiency, which is precisely where I see opportunities to capitalize. Unfortunately, the general perception of small companies is that, as a group, they are often considered to be of lower quality than larger companies.
On average, this may hold true. However, given that my role in San Antonio involved delving deep into this pool of players to find undervalued talent, I believe my investment work is quite similar. As a professional, my responsibility is to identify high-quality enterprises within this group (if one accepts that view) despite it potentially being perceived as having lower overall quality.
Thus, the first lesson I learned from the Spurs is this: if you do something different, such as focusing on undiscovered, overlooked companies, and you know where to look and how to assess corporate value, it often leads to good outcomes. The second lesson is making the process more labor-intensive.
In San Antonio, we avoided conventional scouting wisdom by focusing on areas others ignored, and a similar principle can be applied to investing. But it is much harder. Often, for smaller companies, there is less information available about the company itself or its management team, partly because fewer people pay attention to them.
The market also lacks sufficient understanding of these firms. Moreover, because of their small size, they typically lack video interviews with the CEO, detailed information about products or services on their websites, or individuals who can invest in the company based on firsthand experience.
Therefore, from a due diligence perspective, the work is extremely labor-intensive. Much of what I do at Greystone follows the same principle. It's not just that the companies themselves are unique, but understanding the company, getting to know the management team, relying on my own research and efforts, and being willing to delve into areas beyond public filings or financial data that others have not explored—all involve a hands-on process.
When you combine these two elements—doing what others don't (differentiation) and incorporating an almost artisanal, labor-intensive process—you create an advantage that allows me to form unique insights into how a company’s long-term profitability will evolve after thorough research.
Finally, I integrate this with a focus on corporate culture. The Spurs have one of the best organizational cultures I’ve seen in professional sports. It starts at the top, stemming from the principles they uphold, and permeates every level of the organization.
The Spurs have an extraordinary mindset. For anyone, no job is too big or too small. Everyone takes out the trash, and everyone must embrace the principles we’ve upheld over time. This is reflected in recruitment, talent evaluation, decentralized employee decision-making, the autonomy granted, and many other aspects.
If possible, one of my favorite things to do when studying a company is to try to discern the strengths and weaknesses of its corporate culture and how this will support the company’s long-term growth. Because in any company’s development trajectory, as it survives longer, culture eventually becomes dominant from a growth perspective, serving as the true driving force propelling the company forward. Therefore, understanding the people behind the company and its culture is a critical part of my work. It’s very challenging, but if I can combine the three lessons I’ve learned from San Antonio:
Focus on areas others ignore
Ensure the process is labor-intensive
Uncover those cultural dimensions that may not be openly visible.
This is often an excellent context for the existence of mispricing.
Discussing with a guest like you who operates a fund independently (a One Man Shop). In this scenario, you don't need to rely on others within an organization for information. I know that you outsource some third-party information when necessary, but overall, you work alone now. So, I would love to understand the advantages and disadvantages of running your fund independently.
Adam Wilk: Whether it was the decision to start my own business (founding Greystone) or the choice to remain a one-man operation, these decisions largely came about naturally rather than being deliberately planned.
In the years leading up to the creation of Greystone, I went through a very interesting process. I knew what I wanted to do, and I enjoyed gathering information before taking action. I spent a great deal of time interviewing peers in the industry, speaking with individuals managing funds, whether they were fund managers, financial advisors, or wealth managers.
This process provided me with a lot of interesting insights, though most were not particularly encouraging. To be honest, I was somewhat disappointed by the findings. However, the key takeaway was this: if I were going to go it alone, and if I wanted to succeed and differentiate myself, my approach and structure had to be fundamentally different from the models I observed at that time.
I documented some of these ideas in a document, focusing on maintaining a small scale, ensuring alignment with partners’ interests, concentrating on differentiated investment areas (as we discussed), and adopting an ultra-long-term perspective. These practices were not commonly seen when I researched the investment management industry.
This process was also helpful because my background is not related to Wall Street. As I mentioned earlier, I come from the sports world. I have virtually no formal experience in investing, so I had to create Greystone's operational manual from scratch. Thus, operating as a one-man show has allowed me to achieve many things:
First, the ability to think independently and make investment decisions without engaging in traditional marketing (although I am now being interviewed on a podcast). Second, maintaining extremely low operating costs. I believe this last point is crucial. Because, while there are certainly exceptions, emerging fund managers or new funds tend to adopt a high-cost structure right from day one.
Sometimes this comes with substantial capital, which is certainly beneficial. But regardless of whether you manage a small or large fund, no infrastructure truly enhances your ability to allocate capital. I think this is important because a bloated cost or fee structure, along with a team, a fancy office, and so forth, actually makes your business more vulnerable during periods of market volatility, economic shocks, and fluctuations.
Moreover, this may even lead you to accept, or be compelled to accept, funding from partners whose philosophies may not align with yours. This was a significant concern for me in the early stages. I believe my structure is unique because I dedicate the vast majority of my time to investment-related activities, such as investment research, portfolio management, corporate analysis, traditional reading, reflection, and extensive writing.
When making investments, or as I gather more information throughout the process, I can openly and transparently discuss my thought process and attempt to attract like-minded individuals to join the company, whether as partners or investors who ultimately wish to allocate capital. This creates a fascinating, self-selecting, organic process: those who eventually allocate funds to Greystone are people who have found our firm on their own.
This process has almost no — or very little — element of active selling on my part, no marketing efforts, and no hiring of others to assist with that task. It forms a structure where I believe my investors are able to: first, understand what I am doing and the objectives I aim to achieve; and second, hold steadfast during periods of market volatility. This is because they deeply understand my approach, and they have made a conscious decision: what I do resonates with them, and we can grow together while maintaining this long-term perspective. I consider this to be a powerful dynamic.
Furthermore, even when markets fluctuate, I do not need to adjust or contend with a high-cost structure. This makes the business itself quite antifragile.
IKEA has an extraordinary cultural principle: 'Achieve good results with small inputs.' This idea resonated with me in an incredible way. Since founding the company, I have become obsessed with cost control. To the extent that, when all is said and done, I hope to set some kind of record — such as the highest revenue per capita or the lowest operating costs as a percentage of assets — while still delivering world-class returns over the long term.
I believe this has become a crucial part of what I do. The second part of IKEA's principle is: 'Solving problems with expensive solutions is often a sign of mediocrity.' I think maintaining low expenses and having an almost obsessive focus on costs is one way to achieve true antifragility.
However, conventional industry wisdom dictates expanding your service providers and infrastructure, hiring a team, and doing everything to appear more institutional and investable. If there is one area where I might be considered off track, it’s that I have not tried to make myself appear 'investable' to just anyone — for better or worse.
So, this naturally leads into the disadvantages of operating in this manner: this model takes longer and progresses more slowly. I have had to decline funding from investors whom I deemed less suitable. The type of partner I seek is rare, and the process is slow — though, intentionally so, which is a good thing.
But I am not in a rush. As I mentioned earlier, I plan to engage in this work over a very long period. So far, I have found that acting according to my principles yields far greater benefits than trying to conform to some industry standard — if that makes sense.
Another topic of deep interest to me is quality. You mentioned earlier that some people (like myself) may have preconceived notions about micro-cap companies, often assuming they are of lower quality. This is somewhat analogous to how players selected in the second round of the NBA draft are generally perceived to be of lower quality.
I know you have long been highly focused on researching small-cap companies, and you actually do not equate being a small company with being of low quality. Could you elaborate on why you think this perception exists? Could investors be making a mistake by overlooking high-quality small-cap companies?
Adam Wilk: I believe I can make money when the market over-extrapolates: when a narrative dominates a particular area or direction and pushes it too far. This can sometimes be a powerful source of returns. I can refer back to my experience with the Spurs and use a previous example to illustrate: writing off all small companies is like saying every second-round draft pick is terrible.
As I mentioned earlier, on average, I would say second-round picks are not as good as first-round picks. In terms of career contribution statistics, that may be correct. But it doesn't mean every second-round pick is like that. In San Antonio, our job was to identify those higher-quality second-round picks who could contribute to the organization.
I can also acknowledge that, on average, the quality of micro-cap stocks in the public markets may indeed be lower than that of larger companies. The issue is that this perception may disproportionately bias against small-cap companies—there are indeed many low-quality companies in this space, especially among firms with market caps below $50 million, which are often driven by hype, questionable management, and a lack of understanding of how capital markets work. There are indeed some low-quality business models here, whether referring to products or services.
I need to sift through this area to find what I truly want. But I think the primary reason small-cap companies are perceived as low-quality is that they may have only a single product or service line, making them more vulnerable during economic downturns.
They may find it harder to secure funding, and their financial structures may not be robust or conservative enough. In adverse business environments, competitors may seize market share while they lose it. The interesting part is that I don’t screen for companies with these characteristics (i.e., low-quality companies); I look for the opposite traits. So, as I mentioned earlier, much of the time I can make money when a narrative is pushed too far, whether about a specific company or the broad statement that 'all small companies are bad.'
To stand out in this field and develop unique insights, I conduct extensive primary research, engage with many industry insiders, and deeply analyze the quality of companies and the competitive landscape. We hold a position in a company called Schlog. It is a software-focused company that sells software to non-profit organizations and government agencies.
It is an excellent business. There are publicly listed companies in the market with business models similar to Sage (note: Sage is a well-known enterprise software company), which are long-term compounders and perform exceptionally well. This company offers extremely high value propositions, outstanding fundamentals, high margins, strong business stickiness, and remarkable cash flow conversion capabilities.
It has significant growth potential and, overall, performs excellently across all metrics that I value in high-quality businesses. However, when I first started looking into it, there were concerns in the market about its growth prospects and doubts about the quality of the business and its margin trajectory for various reasons.
However, after spending considerable time engaging deeply with its customer base and industry experts, I gradually formed the view that the company’s product offers an extremely high value proposition. It is critical to customers’ daily operational workflows. Moreover, due to various reasons, following the COVID-19 pandemic, technology adoption by non-profits and government agencies is poised for explosive growth, and it is in an excellent position to capture some of that growth.
Moreover, as I mentioned, certain aspects of this business also reflect the characteristics of compound-interest companies that I have studied. Therefore, the trajectory of this company may (though not entirely identical) be very similar to Sage’s. In this case, when I conducted on-the-ground research and truly understood the quality of the company, what the mainstream market narrative was, or whether investors considered these companies 'low-quality' or believed they would 'remain perpetually cheap,' those factors became irrelevant to me.
I left with a distinctive perspective and was able to act on it. Returning to the labor-intensive process I referenced earlier, it indeed takes time. Sometimes, despite effort, no insights are gained, and one returns empty-handed. However, in this instance, by visiting 20 to 25 nonprofit organizations, speaking with their technical teams and decision-makers, and performing various other tasks, I ultimately formed the judgment that, based on multiple factors, this investment could yield excellent results. And again, this was entirely independent of the mainstream market narrative.
You just outlined the importance of holding outstanding businesses within a portfolio. It seems you might be reaching an inflection point where you are placing greater emphasis on the quality of enterprises. I would love to learn more about how your thinking has evolved over time to favor investments in genuinely high-quality businesses (the high-quality investment spectrum).
Adam Wilk: This process was not a deliberate decision but rather an evolution of my mindset and the types of companies I wish to hold in my portfolio. I’ve been working on this recently, which has given me clearer direction on how to refine my screening approach moving forward.
There are significant differences here. A remarkable enterprise versus an outstanding investment—or a high-quality business versus an exceptional investment—are distinctly different concepts. I don’t have a specific view on which type of asset investors should hold. However, analyzing my past successes and failures leads me to believe that going forward, I should place greater emphasis on high-quality investments.
This is because high-quality businesses tend to have much longer growth runways. Their competitive and cultural advantages often serve as broader barriers—or widen over time. The market's understanding of them evolves gradually, meaning that if all goes well, market expectations will adjust upward, thereby offering the potential for extremely long-term holdings (ultra-long holding periods).
My worst yet most valuable mistake has been selling high-quality businesses managed by exceptional teams too early. I’ve made this error enough times in the past that I hope now, having reflected deeply, I can finally resolve to stop doing so. Regarding truly exceptional investment opportunities... let me briefly mention NN Inc., which I once held, and why I exited that position. I did not consider it a great business (not a remarkable operation), and based on the reasons I just articulated, continuing to hold it in the portfolio no longer made sense.
One reason is that I genuinely liked the management team of that company and believed it had a bright future. However, with NN, I found myself starting to focus on a specific valuation target or price upside. Whenever I begin doing this—focusing excessively on future valuations, price ranges, or contemplating 'what I’ll do when the stock reaches a certain valuation'—it fundamentally indicates that I wasn’t planning to hold the company for the long term.
Moreover, during our holding period, a company’s intrinsic value can change dramatically—it can increase or decrease. There are many examples in my portfolio where, despite higher valuations, the risk-reward ratio remained highly attractive. Take Limbauh as an example: If I had set a fixed valuation target for Limbauh or other companies, I don’t think I would have been as open-minded in understanding and maintaining these positions after they appreciated (indicating that being tied to a target price can lead to missed opportunities).
This is why I lean toward emphasizing high-quality businesses (or purely holding genuinely superior enterprises): because it encourages directional thinking rather than striving for precision.
I am less concerned about whether they have achieved a certain cash flow target or whether the current valuation multiple should be 12x or 15x. What I focus more on is: Are the actions the company is taking now laying the foundation for its future success?
Moreover, relative to what their competitors are doing, how might their potential unfold over time? This leans more towards qualitative judgment. So-called 'quality' companies often possess value far beyond what quarterly financial reports can reflect—value that is typically not fully priced into the market.
This is one of the key reasons you see companies like $Amazon (AMZN.US)$ 、 $Berkshire Hathaway-B (BRK.B.US)$ , and even $Netflix (NFLX.US)$ eventually reach new valuation levels: Over time, people begin to truly understand and appreciate elements like corporate culture, competitive advantages, and cultural traits—qualities that cannot be easily replicated as the company grows.
These advantages tend to widen over time. While there are many factors to consider, I am trying to identify similar qualities in smaller companies... This has prompted me to reassess businesses like NN. While it may perform adequately as an investment, if it reaches a certain price target, that would be my rationale for selling (and I would consider exiting at that point).
Similarly, I evaluate this investment as the stock price rises. But I consider the underlying fundamentals: This company is highly cyclical and cannot truly control its own destiny. If the economy falters, it lacks some of the qualities I insist on and value. Therefore, I believe it no longer meets my criteria, and holding onto it would no longer be logical.
You made an excellent point about distinguishing between 'time-sensitive knowledge' and 'timeless knowledge.' You used an example: Some knowledge becomes irrelevant after a specific quarter ends. For instance, making macroeconomic forecasts falls under time-sensitive knowledge. In contrast, 'timeless knowledge' accumulates continuously, such as understanding a company’s competitive advantages or exploring why it has grown to its current stature and why it excels.
Timeless knowledge can be used to improve decision-making in the future; it keeps accumulating, with its value increasing over time. In your view, in which specific areas of time-sensitive knowledge does the market expend too much energy? What strategies do you employ to avoid wasting excessive time on such matters?
Adam Wilk: I was deeply inspired by Morgan Housel’s work (his book *Same as Ever*), which contains many compelling stories and data points. One chapter specifically discusses 'timeless vs. time-sensitive knowledge,' and I believe he has written about it before—I’ve encountered similar ideas elsewhere.
This perspective is largely derived from that. I have spent a considerable amount of time taking long walks to think deeply, aiming to make these reflections as valuable as possible for investors and those who follow Greystone.
I reviewed all previous sections on overall market commentary and realized they offered little useful insight into the direction I hope to focus on or discuss in the future. Even long-term experiential references were scarce. Nevertheless, every quarter, I still dedicate some time to contemplating these macro issues in an effort to derive insightful perspectives.
It became very evident: I could clearly discern that discussing such topics had limited value and yielded minimal meaningful takeaways. As my own cognitive approach evolved, I ultimately decided to stop doing so and instead concentrate on acquiring incremental knowledge about specific businesses or industries.
As for what the market focuses on, it’s hard to say what matters daily and what does not. However, I believe the market has become extremely short-sighted, and this tendency seems to have intensified since Greystone's founding. Part of the reason can be attributed to the industry structure—most actively managed funds operate within specific organizational frameworks with risk-return requirements and management objectives vastly different from ours.
But they control a significant amount of capital (though not the majority), and the rise of quantitative strategies and passive investing has further exacerbated this short-termism. Overall, the current structure leads to companies being harshly judged based on their most recent quarterly performance, with their short-term outlook and macroeconomic news significantly influencing investor decisions and daily trading activities.
I believe this information, whether it pertains to a single quarter’s performance or a piece of macroeconomic news, has a very short shelf life. For instance, if Company X reports earnings of 10 cents per share in Q4 while analysts expected 12 cents, this information becomes irrelevant or obsolete the moment the earnings report is read. For investors, beyond informing you of the deviation from expectations, it holds no future value.
Upon reflection, I realized (this is not rocket science): what truly matters and deserves attention are the drivers of industry growth and the reasons behind them. How are companies positioning themselves? How are they leveraging their strengths to better capture opportunities in the industry’s long-term development (relative to competitors)?
What efforts are they making in foundational areas such as talent pools, corporate culture, and market entry strategies to secure a long-term advantageous position? In short, how are the companies I hold gradually improving themselves? This is ultimately what drives the emergence of positive financial outcomes.
Therefore, I believe a significant part of my work involves first deciding where to allocate my time and then focusing on the latter—concentrating on the companies and industries themselves to uncover knowledge that will aid in researching my next investment or formulating patterns for long-term value discovery. Instead of overemphasizing short-term news, such as what happened or how the stock price or market reacted.
Such information often enters one ear and exits the other, quickly fading from my mind. Hence, an important shift for me has been to focus on addressing a simple and answerable question: Will this piece of information still matter in five or ten years? Will I remember it? Will it impact the outcomes my portfolio seeks to achieve? I strive to filter and acquire information around these questions—if this approach makes sense.
Looking to pick stocks or analyze them? Want to know the opportunities and risks in your portfolio? For all investment-related questions,just ask Futubull AI!
Editor /rice