WEBVTT - David Einhorn: Market Structures Are Broken

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<v Speaker 1>This is Master's in Business with Barry rid Holds on

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<v Speaker 1>Bloomberg Radio. This week on the podcast, I have an

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<v Speaker 1>extra special guest, David Einhorn, founder of Greenlight Capital. What

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<v Speaker 1>a fascinating investor and what a fascinating career David has had.

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<v Speaker 1>He came to public attention for shorting, probably most famously

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<v Speaker 1>Lehman Brothers about eight months before the company went bankrupt,

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<v Speaker 1>but he has very publicly talked about other companies that

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<v Speaker 1>he thought were either wildly overstating their results or actually

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<v Speaker 1>engaging in outright fraud. He has put together an amazing

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<v Speaker 1>track record at Greenlight in the middle two and tens.

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<v Speaker 1>The performance at the fun flagged, which sort of set

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<v Speaker 1>him back hunting for what was going wrong with his

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<v Speaker 1>style of value investing, and he came to some really

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<v Speaker 1>fascinating conclusions which led him to change how they approached investing.

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<v Speaker 1>And since that happens, I don't know, about four or

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<v Speaker 1>five years ago, the fund has been putting up great numbers, outperforming,

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<v Speaker 1>doing really really well. It's kind of rare to not

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<v Speaker 1>only find somebody whose variant perspective has allowed him to

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<v Speaker 1>make some tremendous and successful investments. Early in their career,

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<v Speaker 1>but when the world changed, they figured out they had

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<v Speaker 1>a change, also made those adjustments, and did so successfully.

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<v Speaker 1>I thought this conversation was absolutely fascinating, and I think

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<v Speaker 1>you will also with no further ado, my discussion with

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<v Speaker 1>Green Light Capitals. David Einhorn, thank you so much.

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<v Speaker 2>I'm excited to be here, bab.

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<v Speaker 1>I've been looking forward to this for a long time.

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<v Speaker 1>You and I had met way back when You've been

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<v Speaker 1>one of the people that I've really been enthusiastic about

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<v Speaker 1>getting here. So I'm thrilled you're year. Let's start out

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<v Speaker 1>talking a little bit about your background. You graduate from

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<v Speaker 1>Cornell Suma cum laude with distinction of ply Beta Kappa,

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<v Speaker 1>all the good stuff. What'd you study there? What was

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<v Speaker 1>the original career plan?

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<v Speaker 2>I studied government. I was a government major. And the

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<v Speaker 2>thing with me is that I don't really think too

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<v Speaker 2>far out into the future. What I just try to

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<v Speaker 2>do is do a really good job whereever I'm doing

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<v Speaker 2>when i'm doing it, and figure that that will just

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<v Speaker 2>create good options for me going forward. So in high school,

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<v Speaker 2>I didn't worry where I'd go to college. I just

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<v Speaker 2>tried to do well in college. I didn't try to

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<v Speaker 2>worry about what my career would be. I just figured

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<v Speaker 2>if I do well, I would be able to be

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<v Speaker 2>presented with good options. So I didn't even begin thinking

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<v Speaker 2>about my career really until my senior year, and at

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<v Speaker 2>that point I decided what I really wanted to do

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<v Speaker 2>was be a PhD in economics. So I applied to

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<v Speaker 2>half a dozen of the best programs. I got rejected

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<v Speaker 2>at all of them, really, and that gave me an

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<v Speaker 2>opportunity to enter the job market. So then I just

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<v Speaker 2>started interviewing with companies as they came on the on

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<v Speaker 2>campus recruiting to see what I could find. I interviewed

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<v Speaker 2>with the CIA. I interviewed with car Guilt they could

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<v Speaker 2>put me running a grain elevator, Gosh knows where. I

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<v Speaker 2>interviewed with consulting companies and banking companies. I interviewed with

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<v Speaker 2>some airlines. I interviewed with just whatever was coming on

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<v Speaker 2>to campus, and eventually I got a job offer at

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<v Speaker 2>Donaldson Lufkin Jenrett, which is no longer here, but it

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<v Speaker 2>was an investment bank of some note at the time,

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<v Speaker 2>and I joined their two year analyst programs so I

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<v Speaker 2>get the full benefit of knowing what happened and hindsight bias,

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<v Speaker 2>But I have a fairly good sense of you and

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<v Speaker 2>your personality, and I know what DLJ was like.

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<v Speaker 1>I don't really see that as a great fit.

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<v Speaker 2>Oh it wasn't a great fit. It was miserable for

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<v Speaker 2>me within three weeks of getting there. The one thing

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<v Speaker 2>you get in college is you have control over your time,

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<v Speaker 2>and so you study when you want to study, and

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<v Speaker 2>as long as you get your work done, you know

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<v Speaker 2>you can do great. And at DLJ, you know they

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<v Speaker 2>control your time. And I never really I came from

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<v Speaker 2>the West and in the Midwest where I grew up,

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<v Speaker 2>like all the dads were home for dinner, not just

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<v Speaker 2>my dad, everybody's dad was home for dinner. And we

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<v Speaker 2>didn't understand this thing about you know, overnights in the office,

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<v Speaker 2>and you know, if you don't come in on Saturday,

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<v Speaker 2>don't even think about coming in on Sunday, and all

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<v Speaker 2>of this kind of stuff. So I didn't really understand

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<v Speaker 2>what I was signing up for. And by the time

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<v Speaker 2>I figured it out, I mean it was it was

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<v Speaker 2>a tough, tough cultural fit for me.

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<v Speaker 1>I read somewhere you described it as similar to a

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<v Speaker 1>frat Hazen.

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<v Speaker 2>Well, I was in a fraternity and there was hazing,

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<v Speaker 2>but it wasn't bad. I actually didn't mind the hazing

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<v Speaker 2>at all because it was combined with basketball and parties

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<v Speaker 2>and beer and hanging out and people you want to

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<v Speaker 2>spend time with. When you have that same behavior, and

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<v Speaker 2>when they're done hazing you, then they're abusing you over

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<v Speaker 2>your work and your schedule and the rest of it,

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<v Speaker 2>well that's not fun at all.

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<v Speaker 1>So Siegler Collery and Company was next. Tell us what

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<v Speaker 1>you did there?

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<v Speaker 2>Well, I went to Siegler Collery. I worked for Peter Collery.

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<v Speaker 2>He was the research oriented of the two partners, and

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<v Speaker 2>he basically would tell you, here's an idea, Go look

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<v Speaker 2>at the idea, go figure it out, tell me if

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<v Speaker 2>we should invest in it. And I would go and

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<v Speaker 2>read all the stuff and spend a week getting ready

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<v Speaker 2>and making spreadsheets and talking to people, and I would

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<v Speaker 2>give it to Peter and then he'd take it all

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<v Speaker 2>home the next night that night, come back the next

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<v Speaker 2>day and ask me fifteen questions and I wouldn't know

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<v Speaker 2>the answer to any of them, and by the time

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<v Speaker 2>I progressed the next time, I could answer maybe five

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<v Speaker 2>of them. And then after that, eventually I could I

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<v Speaker 2>could figure out how to answer most of the questions.

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<v Speaker 2>But it was an amazing opportunity because he would just

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<v Speaker 2>show me what I should be asking, what I should

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<v Speaker 2>be looking for, and ultimately I just learned how to

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<v Speaker 2>do that. Huh.

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<v Speaker 1>Really interesting. Then nineteen ninety six you launch green Light Capital.

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<v Speaker 2>What were you.

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<v Speaker 1>Twenty seven at the time. What gave you the confidence

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<v Speaker 1>to say, sure, I could raise some money and launch

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<v Speaker 1>a hedge fund and have my entire income dependent on

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<v Speaker 1>how well we do. Where did the gumption for that

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<v Speaker 1>come from?

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<v Speaker 2>It came up on very very short notice. You know.

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<v Speaker 2>I got to the end of nineteen ninety five and

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<v Speaker 2>I was a little bit disappointed in how the compensation

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<v Speaker 2>worked out, as was the fellow who was in the

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<v Speaker 2>office next to me. And we went out to lunch

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<v Speaker 2>that December one day and said, why don't we just

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<v Speaker 2>go launch our own thing? And in early January there

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<v Speaker 2>was a huge snowstorm and we were on the street

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<v Speaker 2>looking for office space.

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<v Speaker 1>And how did you find the process of raising money

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<v Speaker 1>for a hedge fund when you guys were a bunch

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<v Speaker 1>of young tucks barely a few years out of school.

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<v Speaker 2>I would describe it as nearly impossible.

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<v Speaker 1>Really, yeah, and yet you guys still managed to raise

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<v Speaker 1>enough to launch with a decent pile cap.

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<v Speaker 2>We didn't. We raised with with of outside money. We

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<v Speaker 2>raised about just about one million dollars.

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<v Speaker 1>So not a lot of money.

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<v Speaker 2>Not a lot of money.

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<v Speaker 1>How did you ramp up from there? That that seems

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<v Speaker 1>like it's tough to make a living trading a million dollars.

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<v Speaker 2>Well, the thing was, I didn't really view it as

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<v Speaker 2>all that risky because I'd had some savings. I'd had

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<v Speaker 2>you know four you know, small Wall Street bonuses. I

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<v Speaker 2>had very little living expenses. There was no chance I

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<v Speaker 2>give this work. Didn't work, I'd be on the street.

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<v Speaker 2>So I would just go get another job similar to

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<v Speaker 2>the one that I just left if I needed to.

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<v Speaker 2>So I just didn't see this as so risky, and

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<v Speaker 2>it didn't matter if I didn't make very much money.

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<v Speaker 2>I didn't expect to make any money right away. But

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<v Speaker 2>the thing was is we did get to meet a

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<v Speaker 2>lot of people, and as we began to tell our

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<v Speaker 2>story and day with zero, they're not going to in

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<v Speaker 2>bad but as one of the best things my original

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<v Speaker 2>partner said was in April when we hadn't raised as

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<v Speaker 2>much money as we thought. He said, we better get started,

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<v Speaker 2>and I said, why are we going to get started? Well,

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<v Speaker 2>you know, you're not going to have a three year

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<v Speaker 2>record until you've been going for three years, so you

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<v Speaker 2>may as well get going. And that kind of worked.

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<v Speaker 2>So as we got going, and then as the initial

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<v Speaker 2>results just turned out to be, you know, extremely fortunate

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<v Speaker 2>some of the people that we met with earlier that said, yeah,

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<v Speaker 2>you know, two young guys. I don't know, but now

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<v Speaker 2>they're putting up some results. And the results were following

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<v Speaker 2>from the thesis that we were telling them, here's our style,

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<v Speaker 2>here's how we implement it. We're going to buy these

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<v Speaker 2>five stocks. Then we bought those five stocks, and then

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<v Speaker 2>they went up, and now we made this money, and

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<v Speaker 2>here's the next five stocks that we're going to buy.

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<v Speaker 2>That explaining that process in communication to people built confidence,

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<v Speaker 2>and one by one they began to give us some capital.

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<v Speaker 1>So not that complicated. You went out and said here's

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<v Speaker 1>our strategy. You executed on the strategy, and when people

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<v Speaker 1>saw you were doing what you said, suddenly the capital

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<v Speaker 1>access became a little better. When was it clear, hey,

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<v Speaker 1>we're going to get through a billion dollars or more.

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<v Speaker 1>How long did that take?

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<v Speaker 2>Yeah, I don't know about a billion dollars. But at

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<v Speaker 2>the end of the first year we were at ten

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<v Speaker 2>and at the end of the second year we were

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<v Speaker 2>at one hundred. And that was our best year ever.

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<v Speaker 2>We made fifty seven percent now and we have a

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<v Speaker 2>dinner for our partners every year in January, and I

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<v Speaker 2>remember going to that partner dinner and in January after

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<v Speaker 2>our fifty seven percent year, and we announced we were

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<v Speaker 2>going to close the fund for the time being to

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<v Speaker 2>absorb what we were doing. And we had about I

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<v Speaker 2>don't know, we had about eight or ten tables and

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<v Speaker 2>I do a presentation PowerPoint in the rest of it,

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<v Speaker 2>and then you have questions and answers, and what we

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<v Speaker 2>had essentially was a bloodbath. The partners were raising their

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<v Speaker 2>hands and saying, you've raised too much money, How are

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<v Speaker 2>you going to keep these returns up? This is really terrible,

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<v Speaker 2>And I just couldn't believe, like this dinner didn't go well.

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<v Speaker 2>It was like one of the worst partner dinners that

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<v Speaker 2>we that we ever had. And my answer was is

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<v Speaker 2>we're probably never going to fifty seven percent again. And

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<v Speaker 2>it doesn't matter what the amount of the capitol was, like,

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<v Speaker 2>we just had an incredible it was just a perfect

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<v Speaker 2>year nineteen ninety seven.

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<v Speaker 1>Yeah, there was a big drop in the latter part

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<v Speaker 1>of the year and then the fast recovery. If you

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<v Speaker 1>were on the right side of that, you would have

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<v Speaker 1>done really well. And if you're in the right companies.

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<v Speaker 1>There were some companies in ninety seven that really screamed high.

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<v Speaker 1>So you close the fund, when do you reopen the

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<v Speaker 1>gates to take capital in again?

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<v Speaker 2>We reopened I don't know sometime then. Nineteen ninety eight

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<v Speaker 2>was a tough year. That was the long term capital year,

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<v Speaker 2>and by the end of the year some people were

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<v Speaker 2>beginning to redeem because we had six straight down months

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<v Speaker 2>from like March to September, and so we opened again

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<v Speaker 2>and we were able to replace the capital that wanted

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<v Speaker 2>to leave with new capital that was coming in. Then

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<v Speaker 2>we stayed open until about two thousand and then in

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<v Speaker 2>two thousand I don't know, we were maybe around six

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<v Speaker 2>or seven hundred million at that point, and we closed

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<v Speaker 2>the fund and then we left it closed until two

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<v Speaker 2>thousand nineteen. We had four openings where we would say

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<v Speaker 2>we're open, and we raised a capital around like in

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<v Speaker 2>a week or like in a month or something like this.

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<v Speaker 2>But other than those grounds, we were hard closed for

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<v Speaker 2>the better part of like nineteen years.

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<v Speaker 1>And there's nothing that makes a wealthy investor want in

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<v Speaker 1>more than a closed fund, right, isn't that the psychology there?

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<v Speaker 2>Absolutely? Right now, we're an open fund and it's really

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<v Speaker 2>hard to convince people to invest.

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<v Speaker 1>You want to get more capital, close announce your closing,

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<v Speaker 1>and they'll be knocking your doors there.

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<v Speaker 2>You know, Well, maybe we'll get to that point.

0:11:37.800 --> 0:11:40.920
<v Speaker 1>So before we talk a little more about the style

0:11:41.000 --> 0:11:44.400
<v Speaker 1>and the process at green Light, I have to mention

0:11:44.640 --> 0:11:48.720
<v Speaker 1>that you've done incredibly well as an amateur poker player.

0:11:49.120 --> 0:11:52.640
<v Speaker 1>You played in the World Series of Poker finishing is

0:11:52.679 --> 0:11:56.280
<v Speaker 1>at eighteenth and the Poker Main Event finishing third or

0:11:56.280 --> 0:11:57.320
<v Speaker 1>do I have that backwards?

0:11:57.360 --> 0:11:59.120
<v Speaker 2>Eighteenth in the main event, Yes.

0:11:58.840 --> 0:12:03.160
<v Speaker 1>And one of them was a four million in change,

0:12:03.240 --> 0:12:06.640
<v Speaker 1>the other was six hundred and sixty thousand dollars pot,

0:12:06.760 --> 0:12:09.640
<v Speaker 1>all of which donated to charity. Tell us a little

0:12:09.640 --> 0:12:11.320
<v Speaker 1>bit about your interest in poker.

0:12:11.920 --> 0:12:14.640
<v Speaker 2>Yeah, Poker's just a hobby. I play it for fun.

0:12:14.840 --> 0:12:18.440
<v Speaker 2>I enjoy the game, I enjoy the people. So you

0:12:18.520 --> 0:12:20.959
<v Speaker 2>get some banter and then I like sorting out the

0:12:21.000 --> 0:12:23.480
<v Speaker 2>card problems and just trying to figure out, like how

0:12:23.520 --> 0:12:26.920
<v Speaker 2>to manipulate my way through a tournament or just even

0:12:26.920 --> 0:12:27.680
<v Speaker 2>a game with friends.

0:12:28.000 --> 0:12:30.160
<v Speaker 1>Are you playing the cards or playing the person across

0:12:30.240 --> 0:12:35.160
<v Speaker 1>the table from you both both The obvious question what

0:12:35.240 --> 0:12:37.920
<v Speaker 1>are the parallels between poker and investing?

0:12:38.559 --> 0:12:41.440
<v Speaker 2>There are some There's there's you know, when solving a

0:12:41.440 --> 0:12:44.800
<v Speaker 2>poker hand, there's things that you know like what cards

0:12:44.840 --> 0:12:47.280
<v Speaker 2>can you see? And investing there's facts that you know

0:12:47.960 --> 0:12:50.480
<v Speaker 2>like what was the actual in the press release? What

0:12:50.520 --> 0:12:53.559
<v Speaker 2>was the financial statements? What do they actually say? Right?

0:12:53.640 --> 0:12:56.760
<v Speaker 2>And then there's things that you can infer. You know,

0:12:57.200 --> 0:12:59.679
<v Speaker 2>what do I infer in a poker hand for what's happened?

0:12:59.720 --> 0:13:03.320
<v Speaker 2>What your behavior been? How what do I think your

0:13:03.360 --> 0:13:06.840
<v Speaker 2>bet means or something like this. And then in an investment,

0:13:06.840 --> 0:13:10.120
<v Speaker 2>what can you infer you know, how did management's tone

0:13:10.160 --> 0:13:12.080
<v Speaker 2>sound when they were on the conference call, how do

0:13:12.120 --> 0:13:15.439
<v Speaker 2>they react to particular questions? Or if you're doing research

0:13:15.520 --> 0:13:17.679
<v Speaker 2>in the field, like what can you find in the

0:13:17.679 --> 0:13:20.320
<v Speaker 2>field that's not definitive, but what can you adduce from

0:13:20.320 --> 0:13:23.920
<v Speaker 2>individual facts that lead you to a conclusion? Right? And

0:13:23.960 --> 0:13:27.280
<v Speaker 2>then there's uncertainty, like what's going to happen next, Like

0:13:27.360 --> 0:13:29.000
<v Speaker 2>what is the next card? You don't know what the

0:13:29.040 --> 0:13:30.800
<v Speaker 2>next card is going to be in a poker hand,

0:13:30.960 --> 0:13:32.760
<v Speaker 2>and you don't know what the next you know, macro

0:13:32.800 --> 0:13:35.280
<v Speaker 2>event is going to be in an investment, or what's

0:13:35.280 --> 0:13:38.000
<v Speaker 2>the next actual development? And then you play those things

0:13:38.040 --> 0:13:40.240
<v Speaker 2>out to a result and you manage your risk along

0:13:40.240 --> 0:13:40.520
<v Speaker 2>the way.

0:13:40.960 --> 0:13:46.240
<v Speaker 1>Really interesting. Let's talk process. Long term value is a

0:13:46.280 --> 0:13:49.800
<v Speaker 1>big aspect of what green Light Capital does. Tell us

0:13:49.800 --> 0:13:53.280
<v Speaker 1>what your decision making process is, like where do the

0:13:53.400 --> 0:13:55.840
<v Speaker 1>ideas come from, how do you screen them? And how

0:13:55.840 --> 0:13:58.319
<v Speaker 1>do you figure out we're going to pass on this

0:13:58.360 --> 0:14:00.079
<v Speaker 1>one but invest in that one?

0:14:00.240 --> 0:14:05.760
<v Speaker 2>Right? Our idea finding is very idiosyncratic. We generally start

0:14:05.760 --> 0:14:08.720
<v Speaker 2>with a narrative. We start with a qualitative assessment. What

0:14:09.080 --> 0:14:12.560
<v Speaker 2>is it that we think is likely to be misunderstood

0:14:13.000 --> 0:14:16.600
<v Speaker 2>about something? And if we think something is misunderstood, then

0:14:16.760 --> 0:14:20.960
<v Speaker 2>perhaps it's misunder misvalued. And since we're looking for narratives

0:14:21.040 --> 0:14:24.040
<v Speaker 2>as opposed and then do valuation work second as opposed

0:14:24.040 --> 0:14:27.760
<v Speaker 2>to cheap we don't screen, so we're not looking for

0:14:27.960 --> 0:14:30.720
<v Speaker 2>quantitative measures like this thing is trading it half a

0:14:30.720 --> 0:14:32.640
<v Speaker 2>book value. Let's go figure out why it's a good

0:14:32.680 --> 0:14:35.560
<v Speaker 2>thing to buy or not. We find we start with, well,

0:14:35.560 --> 0:14:37.560
<v Speaker 2>what is it that we think that other people are

0:14:37.680 --> 0:14:41.160
<v Speaker 2>likely to be overlooking about the situation? And if they

0:14:41.200 --> 0:14:43.480
<v Speaker 2>are in fact overlooking something, and then we deem it

0:14:43.520 --> 0:14:47.040
<v Speaker 2>to be important, perhaps it's mispriced. And so we're looking

0:14:47.040 --> 0:14:48.520
<v Speaker 2>for those differences of opinions.

0:14:48.920 --> 0:14:53.400
<v Speaker 1>So how do you figure out what the variant perception is?

0:14:53.520 --> 0:14:53.840
<v Speaker 2>Meaning?

0:14:54.360 --> 0:14:59.240
<v Speaker 1>How do you suss out what's the consensus on a

0:14:59.280 --> 0:15:03.560
<v Speaker 1>particular co company? And then tease out here's where the

0:15:03.600 --> 0:15:04.760
<v Speaker 1>misunderstanding is.

0:15:05.040 --> 0:15:07.800
<v Speaker 2>Sure, I'll give an example. Why non I do that?

0:15:07.920 --> 0:15:10.720
<v Speaker 2>You know, about a decade ago, we bought this company.

0:15:10.920 --> 0:15:14.240
<v Speaker 2>You might have heard of it. It's called Apple. And

0:15:14.760 --> 0:15:18.360
<v Speaker 2>at the time, Apple was trading at about nine times earnings,

0:15:18.840 --> 0:15:21.240
<v Speaker 2>and yeah, that seems kind of crazy right now, But

0:15:21.280 --> 0:15:24.360
<v Speaker 2>at the time we bought Apple at about nine times earnings.

0:15:25.040 --> 0:15:28.000
<v Speaker 2>The narrative that was out there, the general belief was

0:15:28.120 --> 0:15:32.200
<v Speaker 2>is they had this thing called an iPhone, and eventually

0:15:32.640 --> 0:15:35.520
<v Speaker 2>Samsung would compete it away, and the Chinese would compete

0:15:35.520 --> 0:15:37.640
<v Speaker 2>it away. And people would look at the builds and say,

0:15:37.880 --> 0:15:39.760
<v Speaker 2>you know, how much does the memory cost and how

0:15:39.800 --> 0:15:43.280
<v Speaker 2>much does the processor cost? And hardware companies never make

0:15:43.320 --> 0:15:45.520
<v Speaker 2>any money for a long period of time, and Apple

0:15:45.520 --> 0:15:47.800
<v Speaker 2>would eventually go the way the Nokia flip phone went,

0:15:48.040 --> 0:15:50.360
<v Speaker 2>which was followed by the BlackBerry phone and so on

0:15:50.400 --> 0:15:51.800
<v Speaker 2>and so forth. So you didn't want to pay a

0:15:51.920 --> 0:15:56.280
<v Speaker 2>high multiple for Apple. And our assessment was was that

0:15:56.320 --> 0:15:58.680
<v Speaker 2>Apple was not just a hardware company, that was actually

0:15:58.720 --> 0:16:02.880
<v Speaker 2>a software company too, and also services company three and

0:16:02.920 --> 0:16:05.680
<v Speaker 2>so you really had some blend that was needed between

0:16:05.680 --> 0:16:09.440
<v Speaker 2>a hardware commodity margin and a software you know, high

0:16:09.640 --> 0:16:13.360
<v Speaker 2>sustainable margin and a service which is a recurring cash

0:16:13.400 --> 0:16:16.920
<v Speaker 2>flow stream. And as you bought one Apple product, then

0:16:16.960 --> 0:16:19.320
<v Speaker 2>you wanted other Apple products. And then once you had

0:16:19.320 --> 0:16:21.760
<v Speaker 2>two or three Apple products, you weren't going to switch

0:16:21.840 --> 0:16:25.440
<v Speaker 2>to another phone because it was, you know, fifteen percent cheaper,

0:16:25.480 --> 0:16:27.480
<v Speaker 2>because it was too much of a pain to like

0:16:27.520 --> 0:16:29.720
<v Speaker 2>pourt all of your stuff over. So we thought they

0:16:29.720 --> 0:16:32.480
<v Speaker 2>were just building a recurring business and it deserves sort

0:16:32.520 --> 0:16:36.000
<v Speaker 2>of like a consumer branded multiple. And I made many

0:16:36.040 --> 0:16:38.640
<v Speaker 2>speeches about this, and nobody cared about it at all,

0:16:39.440 --> 0:16:41.320
<v Speaker 2>and we held it for I don't know, for a

0:16:41.400 --> 0:16:44.440
<v Speaker 2>number of years, and eventually the earnings went up twenty

0:16:44.480 --> 0:16:47.320
<v Speaker 2>five or thirty percent a year and the multiple went

0:16:47.360 --> 0:16:50.720
<v Speaker 2>from nine to eighteen and we had a We had

0:16:50.920 --> 0:16:51.920
<v Speaker 2>a great result.

0:16:52.320 --> 0:16:57.200
<v Speaker 1>That's really that's really intriguing. So it's narrative. First figure

0:16:57.240 --> 0:17:00.360
<v Speaker 1>out where it differs from the crowd, and then look

0:17:00.400 --> 0:17:03.880
<v Speaker 1>at the data to make sure that that above thesis

0:17:04.000 --> 0:17:09.040
<v Speaker 1>is correct. So I asked this about the longside. How

0:17:09.080 --> 0:17:12.159
<v Speaker 1>does the process differ when you're looking on the short side.

0:17:12.520 --> 0:17:15.080
<v Speaker 2>It doesn't. In the research process, again, we're looking for

0:17:15.240 --> 0:17:17.600
<v Speaker 2>things that are misunderstood. What is it that we think

0:17:17.720 --> 0:17:20.680
<v Speaker 2>is true that other people are the consensus or whatnot

0:17:21.000 --> 0:17:24.240
<v Speaker 2>are overlooking or not putting weight on, or where they're

0:17:24.240 --> 0:17:27.159
<v Speaker 2>putting too much weight on something that is unimportant, And

0:17:27.200 --> 0:17:30.040
<v Speaker 2>then we decide whether we think that it's misvalued, and

0:17:30.080 --> 0:17:32.600
<v Speaker 2>that as a result, whether we think that the risk

0:17:32.640 --> 0:17:35.840
<v Speaker 2>reward of owning the stock is sufficiently unfavorable that it

0:17:35.880 --> 0:17:37.520
<v Speaker 2>makes sense to take a short position. Huh.

0:17:37.720 --> 0:17:40.880
<v Speaker 1>Really really interesting. So let's talk a little bit about

0:17:40.880 --> 0:17:44.680
<v Speaker 1>the workflow between you and the other analysts in the firm.

0:17:44.720 --> 0:17:47.879
<v Speaker 1>I'm assuming there are other managers as well. Tell us

0:17:47.880 --> 0:17:50.520
<v Speaker 1>a little bit about how that back and forth works.

0:17:50.600 --> 0:17:52.879
<v Speaker 2>First of all, I love how you said you and

0:17:52.920 --> 0:17:56.280
<v Speaker 2>the other analysts. Yes, because I view myself as an analyst. First,

0:17:56.320 --> 0:17:59.920
<v Speaker 2>So I am I think that's fantastic. I'm the portfolio manager,

0:18:00.080 --> 0:18:04.200
<v Speaker 2>and I'm actually the only portfolio manager, But I view

0:18:04.240 --> 0:18:06.960
<v Speaker 2>my I enjoyed my analyst's job is certainly as much

0:18:06.960 --> 0:18:07.760
<v Speaker 2>as I enjoy the best.

0:18:08.000 --> 0:18:10.280
<v Speaker 1>And let me interrupt and point out that when you've

0:18:10.280 --> 0:18:16.000
<v Speaker 1>given presentations on not just Apple, but Applied Capital and

0:18:16.920 --> 0:18:21.080
<v Speaker 1>Lehman Brothers and anybody else I've seen you discuss, you

0:18:21.119 --> 0:18:24.440
<v Speaker 1>don't sound like a fun manager. You sound like an

0:18:24.440 --> 0:18:28.960
<v Speaker 1>analyst who's saying, here's my review of the everything but

0:18:29.320 --> 0:18:32.040
<v Speaker 1>great quarter. Guys, that's what the presentation looks like.

0:18:32.080 --> 0:18:34.000
<v Speaker 2>Well, first of all, that's fantastic, But I do have

0:18:34.040 --> 0:18:36.040
<v Speaker 2>to acknowledge a lot of these presentations come with a

0:18:36.080 --> 0:18:38.639
<v Speaker 2>lot of help, like these are team efforts. I usually

0:18:38.640 --> 0:18:40.720
<v Speaker 2>have an analyst who is helping me. I have other

0:18:40.760 --> 0:18:44.320
<v Speaker 2>people at the firm helping me prepare these these presentations.

0:18:44.320 --> 0:18:46.280
<v Speaker 2>It's a it's a lot of work to do these things,

0:18:46.880 --> 0:18:49.240
<v Speaker 2>to do these things correctly, but I really do enjoy it,

0:18:49.280 --> 0:18:51.760
<v Speaker 2>and I love rolling at my sleeves and getting into

0:18:51.800 --> 0:18:53.000
<v Speaker 2>the heart of things.

0:18:53.280 --> 0:18:55.400
<v Speaker 1>So let's talk a little bit about the team at Greenlight,

0:18:55.480 --> 0:18:58.080
<v Speaker 1>So how many other analysts are there? How many people

0:18:58.080 --> 0:19:02.320
<v Speaker 1>are thinking about Hey, this is an interesting story, let's

0:19:02.359 --> 0:19:03.040
<v Speaker 1>dive into it.

0:19:03.160 --> 0:19:06.320
<v Speaker 2>I have six analysts, I have two traders who execute

0:19:06.320 --> 0:19:09.240
<v Speaker 2>the trades, and we have a field researcher, and that's

0:19:09.320 --> 0:19:10.960
<v Speaker 2>kind of the investment team.

0:19:11.200 --> 0:19:14.160
<v Speaker 1>Field researcher. Yes, just what it sounds. They're out there

0:19:14.320 --> 0:19:15.240
<v Speaker 1>kicking tires and.

0:19:16.240 --> 0:19:18.840
<v Speaker 2>Yes, and finding people to talk to. You know, an

0:19:18.880 --> 0:19:21.040
<v Speaker 2>analyst will say I need to find an expert about this,

0:19:21.200 --> 0:19:24.679
<v Speaker 2>and he'll go around LinkedIn or through his network or

0:19:24.680 --> 0:19:27.000
<v Speaker 2>whatever it is, or are some of these other services

0:19:27.040 --> 0:19:30.560
<v Speaker 2>and help connect analysts with who that they might need

0:19:30.600 --> 0:19:33.720
<v Speaker 2>to talk to and help bring them online. Or we'll

0:19:33.720 --> 0:19:37.480
<v Speaker 2>do proprietary surveys, or we'll do you know what. We

0:19:37.640 --> 0:19:38.919
<v Speaker 2>will travel around and look.

0:19:38.760 --> 0:19:42.840
<v Speaker 1>At things so you have a reputation as a value investor.

0:19:42.960 --> 0:19:47.000
<v Speaker 1>I'm not sure that really best describes the sort of

0:19:47.000 --> 0:19:51.000
<v Speaker 1>holistic approach that you guys bring to the table. But

0:19:51.240 --> 0:19:54.600
<v Speaker 1>I have to ask a question. You found green Light

0:19:54.680 --> 0:19:58.000
<v Speaker 1>in nineteen ninety six. Does it mean the same thing

0:19:58.080 --> 0:20:02.160
<v Speaker 1>today to be a value investor that meant twenty thirty

0:20:02.240 --> 0:20:02.720
<v Speaker 1>years ago.

0:20:03.720 --> 0:20:06.520
<v Speaker 2>I think things have changed a lot. I think the

0:20:06.680 --> 0:20:10.200
<v Speaker 2>idea that we had back then, which a value investor

0:20:10.240 --> 0:20:13.639
<v Speaker 2>to us means buying something for less than it's worth.

0:20:14.320 --> 0:20:17.399
<v Speaker 2>So we don't view growth as the opposite of value.

0:20:17.560 --> 0:20:21.680
<v Speaker 2>We view anti value as the opposite of value. Right,

0:20:21.720 --> 0:20:24.680
<v Speaker 2>Growth is in our view, a component of value. So

0:20:24.720 --> 0:20:28.119
<v Speaker 2>if something is growing fast, it's going to be more valuable.

0:20:28.560 --> 0:20:31.720
<v Speaker 2>So I don't really see that continuity the same way.

0:20:32.080 --> 0:20:34.480
<v Speaker 2>But what we've learned over time. You know, when I

0:20:34.520 --> 0:20:38.080
<v Speaker 2>started in nineteen ninety six, you know, the main thing

0:20:38.160 --> 0:20:41.399
<v Speaker 2>people would say when we would pitch our services was, well,

0:20:41.400 --> 0:20:43.920
<v Speaker 2>what do we need another hedge fund for? Right, there's

0:20:43.960 --> 0:20:46.679
<v Speaker 2>a million guys trying to do what you're doing. In

0:20:46.680 --> 0:20:49.120
<v Speaker 2>addition to the hedge funds, there were all these mutual funds,

0:20:49.480 --> 0:20:52.040
<v Speaker 2>and so there were lots and lots of people trying

0:20:52.080 --> 0:20:57.040
<v Speaker 2>to pay attention and find undervalued things for customers. And

0:20:57.080 --> 0:21:02.840
<v Speaker 2>that's changed a lot because the passive world has taken

0:21:02.880 --> 0:21:07.920
<v Speaker 2>over and the number of active managers is down a lot,

0:21:07.960 --> 0:21:11.639
<v Speaker 2>and the active long only managers are down a lot,

0:21:11.800 --> 0:21:14.520
<v Speaker 2>and they still have people paying attention to certain stocks,

0:21:14.760 --> 0:21:18.080
<v Speaker 2>but there's entire segments now, mostly in the smaller part

0:21:18.119 --> 0:21:20.919
<v Speaker 2>of the market, where there's literally nobody paying any attention.

0:21:21.200 --> 0:21:23.639
<v Speaker 2>Like these companies could announce almost anything other than the

0:21:23.680 --> 0:21:27.679
<v Speaker 2>sale of the company and nobody would notice. And so

0:21:28.560 --> 0:21:31.159
<v Speaker 2>we've had to adjust our thinking because our thinking before

0:21:31.240 --> 0:21:33.880
<v Speaker 2>used to be, if we buy this at this time's earnings,

0:21:33.920 --> 0:21:36.600
<v Speaker 2>and they're going to do twenty percent better than everybody thinks,

0:21:36.800 --> 0:21:39.360
<v Speaker 2>and the multiple rerates as a result of that, we're

0:21:39.359 --> 0:21:42.280
<v Speaker 2>going to do terrifically. And that assumes that we're going

0:21:42.320 --> 0:21:44.160
<v Speaker 2>to figure out what somebody else is going to buy

0:21:44.240 --> 0:21:46.879
<v Speaker 2>six months, a year, two years before they come to

0:21:46.960 --> 0:21:50.720
<v Speaker 2>that conclusion. But what if those people aren't in business anymore,

0:21:51.080 --> 0:21:52.600
<v Speaker 2>or to the extent they are in business, they don't

0:21:52.640 --> 0:21:55.720
<v Speaker 2>have any capital to employ into new ideas. As those

0:21:55.880 --> 0:22:01.960
<v Speaker 2>situations develop, they fire their staffs. There's way fewer people listening.

0:22:02.240 --> 0:22:04.600
<v Speaker 2>And the result is is if we buy these things,

0:22:04.640 --> 0:22:06.480
<v Speaker 2>we're not going to get the same kind of return

0:22:06.880 --> 0:22:09.080
<v Speaker 2>that we used to get. So what we have to

0:22:09.119 --> 0:22:12.280
<v Speaker 2>do now is be even more disciplined on price. So

0:22:12.280 --> 0:22:14.840
<v Speaker 2>we're not buying things at ten times or eleven times earnings.

0:22:14.840 --> 0:22:17.360
<v Speaker 2>We're buying things at four times earnings, five times earnings,

0:22:17.560 --> 0:22:20.439
<v Speaker 2>and we're buying them where they have huge buybacks and

0:22:20.520 --> 0:22:23.520
<v Speaker 2>we can't count on other long only investors to buy

0:22:23.600 --> 0:22:25.520
<v Speaker 2>our things. After us, We're going to have to get

0:22:25.520 --> 0:22:29.200
<v Speaker 2>paid by the company. So we need fifteen twenty percent

0:22:29.280 --> 0:22:32.359
<v Speaker 2>cash flow type of type of numbers, and if that

0:22:32.400 --> 0:22:34.600
<v Speaker 2>cash is then being returned to us, we're going to

0:22:34.640 --> 0:22:35.800
<v Speaker 2>do pretty well over time.

0:22:36.119 --> 0:22:41.000
<v Speaker 1>So I'm intrigued by that description, but buried within it

0:22:41.040 --> 0:22:46.480
<v Speaker 1>is essentially the rise of passive has damaged either price

0:22:46.600 --> 0:22:52.120
<v Speaker 1>discovery or the reaction to price discovery on the sell side.

0:22:52.400 --> 0:22:53.280
<v Speaker 1>Is that a fair statement?

0:22:53.359 --> 0:22:57.080
<v Speaker 2>Oh, no question. I view the markets as fundamentally broken, like.

0:22:57.040 --> 0:22:58.520
<v Speaker 1>The fundamentally broken.

0:22:58.560 --> 0:23:01.879
<v Speaker 2>That's a big statement. Yeah, there's there's value is just

0:23:01.880 --> 0:23:05.480
<v Speaker 2>not a consideration for most investment money that's out there.

0:23:05.640 --> 0:23:07.960
<v Speaker 2>There's all the machine money and algorithmic money, which is

0:23:08.040 --> 0:23:10.159
<v Speaker 2>which doesn't have an opinion about value. It has an

0:23:10.200 --> 0:23:13.080
<v Speaker 2>opinion about price. What is the price going to be

0:23:13.080 --> 0:23:15.080
<v Speaker 2>in fifteen minutes and I want to be ahead of

0:23:15.080 --> 0:23:17.359
<v Speaker 2>that or zero day options? What is the price of

0:23:17.400 --> 0:23:20.199
<v Speaker 2>the S and P or whatever stock you're doing for today,

0:23:20.240 --> 0:23:22.320
<v Speaker 2>what's it going to be in the next half hour,

0:23:22.440 --> 0:23:25.560
<v Speaker 2>two hours, three hours. Those are opinions about price. Those

0:23:25.560 --> 0:23:29.840
<v Speaker 2>are not opinions about value. Passive investors have no opinion

0:23:30.000 --> 0:23:33.560
<v Speaker 2>about value. They're going to assume everybody else has done

0:23:33.560 --> 0:23:36.680
<v Speaker 2>the work right. And then you have all of what's

0:23:36.800 --> 0:23:39.320
<v Speaker 2>left of active management, and so much of it the

0:23:39.400 --> 0:23:43.159
<v Speaker 2>value industry has gotten completely annihilated. So if you have

0:23:43.200 --> 0:23:48.320
<v Speaker 2>a situation where money is moved from active to passive.

0:23:49.080 --> 0:23:52.840
<v Speaker 2>When that happens, the value managers get redeemed, the value

0:23:52.840 --> 0:23:55.639
<v Speaker 2>stocks go down more. It causes more redemptions of the

0:23:55.720 --> 0:23:59.000
<v Speaker 2>value managers. It caused those stocks to go down more, right,

0:23:59.040 --> 0:24:00.679
<v Speaker 2>and all of a sudden, the people or performing are

0:24:00.680 --> 0:24:03.640
<v Speaker 2>the people who own the overvalued things that are getting

0:24:03.680 --> 0:24:05.919
<v Speaker 2>the flows from the indexes that are getting the re

0:24:06.320 --> 0:24:07.760
<v Speaker 2>you take the money out of the value put in

0:24:07.800 --> 0:24:11.080
<v Speaker 2>the index. They're selling cheap stuff and they're buying whatever

0:24:11.119 --> 0:24:15.120
<v Speaker 2>the highest multiple most overvalued things are in disproportionate weight.

0:24:15.400 --> 0:24:18.359
<v Speaker 2>So then the active managers who participate in that area

0:24:18.400 --> 0:24:21.400
<v Speaker 2>of the market get flows and they buy even more

0:24:21.440 --> 0:24:25.080
<v Speaker 2>of that stuff. So what happens is instead of stocks

0:24:25.160 --> 0:24:30.240
<v Speaker 2>reverting toward value, they actually diverge from value. And that's

0:24:30.280 --> 0:24:32.320
<v Speaker 2>a change in the market, and it's a structure that

0:24:32.440 --> 0:24:34.760
<v Speaker 2>means that almost the best way to get your stock

0:24:34.840 --> 0:24:36.800
<v Speaker 2>to go up is to start by being overvalued.

0:24:37.119 --> 0:24:41.679
<v Speaker 1>Huh really interesting. I know value has had a rough

0:24:41.840 --> 0:24:44.080
<v Speaker 1>I don't know since the financial crisis. Let's go it

0:24:44.160 --> 0:24:48.520
<v Speaker 1>fifteen years. That's the most cogent explanation I've heard for

0:24:49.000 --> 0:24:53.640
<v Speaker 1>here's why value hasn't mean reverted since that period. And

0:24:53.880 --> 0:24:57.240
<v Speaker 1>it's the first time I've heard anyone say you can

0:24:57.320 --> 0:25:01.240
<v Speaker 1>blame passive in the flows to the biggest company as

0:25:01.320 --> 0:25:05.359
<v Speaker 1>a reason for that taking place. So let's dive into

0:25:05.400 --> 0:25:09.159
<v Speaker 1>that a little bit. You go through the twenty tens,

0:25:09.359 --> 0:25:12.359
<v Speaker 1>value is out of favor. I think your explanation makes sense.

0:25:12.920 --> 0:25:15.919
<v Speaker 1>What was it like on you when, Hey, I have

0:25:16.040 --> 0:25:19.320
<v Speaker 1>this philosophy that's worked for one hundred years, it's not

0:25:19.400 --> 0:25:21.600
<v Speaker 1>working anymore. How do you manage around that?

0:25:22.040 --> 0:25:23.760
<v Speaker 2>It took us a little time to figure out what

0:25:23.800 --> 0:25:27.800
<v Speaker 2>the dynamic was really. From twenty ten to twenty fourteen,

0:25:27.880 --> 0:25:30.359
<v Speaker 2>we were fine, but then things got a little tougher

0:25:30.359 --> 0:25:33.720
<v Speaker 2>in twenty fifteen and we ran through five years where

0:25:33.760 --> 0:25:37.200
<v Speaker 2>we had two awful years and three mediocre years, and

0:25:37.760 --> 0:25:40.520
<v Speaker 2>it was very tough. You come in every day, you

0:25:40.600 --> 0:25:43.760
<v Speaker 2>check your work. You see your stocks are undervalued. Whatever

0:25:43.840 --> 0:25:46.679
<v Speaker 2>you think your shorts are overvalued. You see the news,

0:25:46.720 --> 0:25:50.440
<v Speaker 2>the news actually is positive. Your lungs announced great results,

0:25:50.520 --> 0:25:54.000
<v Speaker 2>your shorts announced mediocre results. You feel like you should

0:25:54.000 --> 0:25:56.800
<v Speaker 2>be making money. On the day they announced the earnings,

0:25:56.800 --> 0:25:59.159
<v Speaker 2>you actually do make money, and then you spend the

0:25:59.200 --> 0:26:02.080
<v Speaker 2>next ninety days until the next quarterly report losing money

0:26:02.119 --> 0:26:03.920
<v Speaker 2>again as they kind of go up for a day

0:26:03.920 --> 0:26:05.639
<v Speaker 2>and then roll kind of back down the hill to

0:26:06.040 --> 0:26:09.080
<v Speaker 2>a lower level. And it was just super frustrating, and

0:26:09.119 --> 0:26:11.800
<v Speaker 2>we didn't really understand what was happening. But what was

0:26:11.800 --> 0:26:13.880
<v Speaker 2>happening was is what I just explained before. There were

0:26:13.920 --> 0:26:18.359
<v Speaker 2>just massive redemptions from people's style like ours. And I

0:26:18.400 --> 0:26:20.920
<v Speaker 2>was always worried about co investors, but co investors usually

0:26:21.000 --> 0:26:24.000
<v Speaker 2>meant like hedge funds, not like these long only mutual funds,

0:26:24.119 --> 0:26:27.840
<v Speaker 2>And that's where the real redemptions were. Hedge funds are

0:26:27.920 --> 0:26:31.240
<v Speaker 2>tiny piece of the market. But I mean there were many,

0:26:31.280 --> 0:26:33.480
<v Speaker 2>many years where all anybody cared about what's fidelity going

0:26:33.520 --> 0:26:36.040
<v Speaker 2>to do, what's Capital group going to do, what's you know,

0:26:36.720 --> 0:26:39.760
<v Speaker 2>a tiro price going to do. They were getting flows

0:26:39.800 --> 0:26:43.239
<v Speaker 2>of retirement money on a continued basis, and as that

0:26:43.359 --> 0:26:47.240
<v Speaker 2>money got redeemed or switched to index right then they

0:26:47.320 --> 0:26:49.479
<v Speaker 2>had to be selling the things that we were owning,

0:26:49.840 --> 0:26:52.160
<v Speaker 2>and then the index were buying things that we were

0:26:52.200 --> 0:26:55.119
<v Speaker 2>probably short, the overvalued things. And we had just a

0:26:55.200 --> 0:26:56.720
<v Speaker 2>rough go until we figured this out.

0:26:57.040 --> 0:27:01.080
<v Speaker 1>And to put some numbers on that industry is about

0:27:01.160 --> 0:27:04.240
<v Speaker 1>to and have three trillion dollars. Mutual funds are a

0:27:04.320 --> 0:27:07.080
<v Speaker 1>multiple of that. They're ten x or more. Throw an

0:27:07.119 --> 0:27:12.480
<v Speaker 1>ETFs and passive and it's even bigger. What was the

0:27:12.520 --> 0:27:16.240
<v Speaker 1>moment that the aha moment that oh, this is what's

0:27:16.280 --> 0:27:17.960
<v Speaker 1>going on? How did you figure this out?

0:27:18.680 --> 0:27:21.800
<v Speaker 2>You know? I sat down I think it was sometime

0:27:21.880 --> 0:27:26.639
<v Speaker 2>in early two thousand and nineteen with Michael Green, and

0:27:26.680 --> 0:27:29.080
<v Speaker 2>he explained what was going on to me better with

0:27:29.119 --> 0:27:32.560
<v Speaker 2>the index funds, and then I was able to take

0:27:32.560 --> 0:27:35.680
<v Speaker 2>what he was singing along with a couple of other

0:27:35.760 --> 0:27:38.800
<v Speaker 2>insights that I had relating to how the market structure was,

0:27:39.040 --> 0:27:41.520
<v Speaker 2>and I kind of developed this understanding of what was

0:27:41.560 --> 0:27:41.960
<v Speaker 2>going on.

0:27:42.119 --> 0:27:46.760
<v Speaker 1>Huh, really intriguing. I have to assume once you get

0:27:46.800 --> 0:27:51.400
<v Speaker 1>through that difficult stretch and sort of reframe your perspective

0:27:51.440 --> 0:27:54.399
<v Speaker 1>and understand what's going on, that has to make you

0:27:54.440 --> 0:27:57.239
<v Speaker 1>a better investor going forward. How did it change how

0:27:57.280 --> 0:27:59.200
<v Speaker 1>you approached what you were doing well.

0:27:59.240 --> 0:28:01.639
<v Speaker 2>We made two signals it can changes. First one, I

0:28:01.720 --> 0:28:03.919
<v Speaker 2>kind of explained before, we're not going to buy something

0:28:03.960 --> 0:28:06.280
<v Speaker 2>at ten times earnings thinking the earnings are going to

0:28:06.320 --> 0:28:08.480
<v Speaker 2>be fifteen percent better and then think we're going to

0:28:08.480 --> 0:28:10.439
<v Speaker 2>get a thirteen multiple at the end of that and

0:28:10.480 --> 0:28:12.600
<v Speaker 2>have made fifty to fifty percent over a year and

0:28:12.640 --> 0:28:15.080
<v Speaker 2>a half. Like that was our old way of doing it.

0:28:15.320 --> 0:28:16.520
<v Speaker 2>Because that isn't going to work.

0:28:16.600 --> 0:28:19.040
<v Speaker 1>Not enough juice and that squeeze to make it worthwhile.

0:28:19.080 --> 0:28:21.240
<v Speaker 2>Well, no, there's just nobody who's going to pay attention

0:28:21.320 --> 0:28:24.320
<v Speaker 2>to notice that the earnings were fifteen percent better. So

0:28:24.560 --> 0:28:28.560
<v Speaker 2>if nobody notices, nobody's there, nobody's going to buy. Nobody's

0:28:28.600 --> 0:28:30.840
<v Speaker 2>going to care. As Peter Coller used to say, a

0:28:30.840 --> 0:28:34.679
<v Speaker 2>bargain that remains a bargain is no bargain, right. And

0:28:34.760 --> 0:28:38.440
<v Speaker 2>so now we can take that to we can realize, well,

0:28:38.480 --> 0:28:41.840
<v Speaker 2>what has been created from this, which is what's been

0:28:41.880 --> 0:28:45.480
<v Speaker 2>created is is is there's complete apathy in a certain

0:28:45.520 --> 0:28:48.120
<v Speaker 2>segment of the market and you no longer have to

0:28:48.120 --> 0:28:50.680
<v Speaker 2>pay ten times earnings for that type of a situation.

0:28:50.920 --> 0:28:53.000
<v Speaker 2>I mean that there are ones at ten times earnings

0:28:53.040 --> 0:28:55.000
<v Speaker 2>and we pass on those But we can find that

0:28:55.040 --> 0:28:58.160
<v Speaker 2>same type of situation right now at four times earnings

0:28:58.320 --> 0:29:00.440
<v Speaker 2>and at five times earnings. And if you pay four

0:29:00.560 --> 0:29:02.920
<v Speaker 2>or five times earnings and the balance sheet is not

0:29:03.000 --> 0:29:05.640
<v Speaker 2>levered and they're able to return the cash and buy

0:29:05.680 --> 0:29:08.880
<v Speaker 2>back ten, fifteen to twenty percent of the stock, in

0:29:08.920 --> 0:29:10.560
<v Speaker 2>four or five years, they're going to run out of

0:29:10.600 --> 0:29:12.680
<v Speaker 2>stock or the stock is going to go up. So

0:29:12.800 --> 0:29:16.200
<v Speaker 2>you're literally counting on the companies to make that happen

0:29:16.240 --> 0:29:16.520
<v Speaker 2>for you.

0:29:17.000 --> 0:29:19.720
<v Speaker 1>So I want to think about this in terms of

0:29:19.880 --> 0:29:24.600
<v Speaker 1>the tradeable US equities out there. Willshure five thousand is

0:29:25.360 --> 0:29:28.560
<v Speaker 1>kind of about thirty four hundred names, not quite five thousand.

0:29:29.400 --> 0:29:35.080
<v Speaker 1>It sounds like you're looking at a huge percentage of

0:29:35.120 --> 0:29:39.880
<v Speaker 1>those names and pretty much funding their uninvestable I don't

0:29:39.920 --> 0:29:43.160
<v Speaker 1>know if it's the bottom thousand or fifteen hundred, but

0:29:43.720 --> 0:29:49.440
<v Speaker 1>they're just too mediocre and underfollowed for it to be

0:29:49.480 --> 0:29:50.240
<v Speaker 1>interesting to you.

0:29:51.160 --> 0:29:56.120
<v Speaker 2>Look, we have always had generally between thirty and sixty

0:29:56.160 --> 0:29:58.440
<v Speaker 2>percent of our capital and our top five names m H.

0:29:59.120 --> 0:30:01.360
<v Speaker 2>And we have maybe fifteen or twenty names that make

0:30:01.400 --> 0:30:04.080
<v Speaker 2>any difference at all in the long part of our portfolio.

0:30:04.480 --> 0:30:07.320
<v Speaker 2>So we don't need five hundred companies to invest in.

0:30:07.480 --> 0:30:08.720
<v Speaker 2>We need fifteen.

0:30:10.040 --> 0:30:14.600
<v Speaker 1>And you're today. So since that change about five years ago,

0:30:15.120 --> 0:30:18.840
<v Speaker 1>the numbers of the fund have improved dramatically. You're outperforming,

0:30:19.080 --> 0:30:23.120
<v Speaker 1>you're putting up good numbers. That's on a concentrated portfolio

0:30:23.120 --> 0:30:27.520
<v Speaker 1>when it's ten, fifteen, twenty stocks are the drivers? Yes,

0:30:27.880 --> 0:30:33.680
<v Speaker 1>huh really interesting. Short sellers seem to be an endangered species.

0:30:34.240 --> 0:30:39.080
<v Speaker 1>Value investors are thrown in the towel. What allows you

0:30:39.120 --> 0:30:40.680
<v Speaker 1>to stick to your disciplines.

0:30:41.640 --> 0:30:44.560
<v Speaker 2>Well, it's actually much more exciting now. Like I mentioned before,

0:30:44.600 --> 0:30:47.160
<v Speaker 2>in nineteen ninety six, there was just tons of competition,

0:30:47.720 --> 0:30:50.240
<v Speaker 2>and right now I just feel like there's way fewer

0:30:50.280 --> 0:30:53.840
<v Speaker 2>people competing with us for ideas trying to do what

0:30:53.920 --> 0:30:57.120
<v Speaker 2>we're doing, and so I just think the opportunity is

0:30:57.640 --> 0:31:00.800
<v Speaker 2>actually probably is good or better than than it's ever been,

0:31:00.920 --> 0:31:03.400
<v Speaker 2>and that energizes me every day to come in and

0:31:04.160 --> 0:31:05.240
<v Speaker 2>try to find ideas.

0:31:05.520 --> 0:31:10.600
<v Speaker 1>So Professor Andrew Lowe over at MIT was discussing the

0:31:10.640 --> 0:31:14.400
<v Speaker 1>issue of price discovery and the rise of passive and

0:31:14.480 --> 0:31:18.120
<v Speaker 1>his theory plays very much into what you're saying, which is,

0:31:18.760 --> 0:31:22.800
<v Speaker 1>as passive attracts more and more assets and people exit

0:31:22.920 --> 0:31:27.520
<v Speaker 1>things like shorting and value. It creates inefficiencies and suddenly

0:31:28.040 --> 0:31:32.480
<v Speaker 1>where there wasn't a whole lot of opportunity pre shift,

0:31:32.920 --> 0:31:35.920
<v Speaker 1>now those opportunities seem to be more and more available.

0:31:36.600 --> 0:31:38.880
<v Speaker 1>Is that a fair I know he's an academic, but

0:31:39.360 --> 0:31:41.640
<v Speaker 1>is that a fair description of what you see going on? Yeah?

0:31:41.720 --> 0:31:46.840
<v Speaker 2>No, it really is. The competitors have essentially left the field.

0:31:47.320 --> 0:31:49.640
<v Speaker 2>And it means, like I said, things that we used

0:31:49.680 --> 0:31:52.080
<v Speaker 2>to have to pay ten times earnings for we can

0:31:52.280 --> 0:31:55.720
<v Speaker 2>pay five times earnings for. And you think that the

0:31:55.760 --> 0:32:00.360
<v Speaker 2>market is very expensive, but our names are not expensive companies.

0:32:00.600 --> 0:32:03.040
<v Speaker 2>And these aren't terrible companies. They're just companies that are

0:32:03.280 --> 0:32:06.040
<v Speaker 2>too small and nobody cares, and you know they're not

0:32:06.080 --> 0:32:08.120
<v Speaker 2>in the sexiest of places.

0:32:08.960 --> 0:32:14.400
<v Speaker 1>So your strategies include long, short, and macro as well

0:32:14.440 --> 0:32:17.320
<v Speaker 1>as hedged. Can you explain what you focus on in

0:32:17.360 --> 0:32:20.080
<v Speaker 1>the macro portion of the funds or is that something

0:32:20.120 --> 0:32:21.320
<v Speaker 1>that just colors everything?

0:32:21.640 --> 0:32:24.200
<v Speaker 2>No? No, No, Macro is a it's a separate category.

0:32:24.240 --> 0:32:26.920
<v Speaker 2>And what we do and I'm the macro manager And

0:32:26.960 --> 0:32:30.440
<v Speaker 2>what I've learned over time is if you have an idea,

0:32:31.080 --> 0:32:34.719
<v Speaker 2>find the most direct way to express it. So if

0:32:34.760 --> 0:32:37.720
<v Speaker 2>you want to be bullish about oil prices. Don't buy

0:32:37.720 --> 0:32:41.120
<v Speaker 2>ten oil stocks. Buy oil. If you have an opinion

0:32:41.160 --> 0:32:43.920
<v Speaker 2>about interest rates, don't try to buy a bunch of banks,

0:32:45.040 --> 0:32:47.800
<v Speaker 2>buy sofa futures or sell sofa futures, or buy ten

0:32:47.880 --> 0:32:49.760
<v Speaker 2>year futures, or whatever it is that you think you

0:32:49.840 --> 0:32:52.200
<v Speaker 2>want to do. And I find that if you can

0:32:52.400 --> 0:32:57.240
<v Speaker 2>make your insight translate most directly into the investment, then

0:32:57.400 --> 0:32:59.400
<v Speaker 2>at least if you're right or you're wrong, it's going

0:32:59.440 --> 0:33:01.520
<v Speaker 2>to be for the reasons that you thought. And it's

0:33:01.560 --> 0:33:03.400
<v Speaker 2>not going to be because you bought some oil company

0:33:03.400 --> 0:33:06.560
<v Speaker 2>it turned out that they spilled the oil or the

0:33:06.600 --> 0:33:09.040
<v Speaker 2>well turned dry or something like that. You don't really

0:33:09.080 --> 0:33:11.400
<v Speaker 2>have a lot of insight about that. If your view

0:33:11.520 --> 0:33:13.640
<v Speaker 2>is is there's a great oil prospect and look at

0:33:13.640 --> 0:33:15.800
<v Speaker 2>this well it's going to be amazing, well, then go

0:33:15.800 --> 0:33:19.360
<v Speaker 2>ahead buy that oil company because that's what your insight is.

0:33:20.000 --> 0:33:22.040
<v Speaker 1>That sounds very different than the way a lot of

0:33:22.160 --> 0:33:26.320
<v Speaker 1>macro oriented funds invest. They have a big, top down

0:33:26.360 --> 0:33:29.920
<v Speaker 1>picture and they kind of spread the bets around. Hey,

0:33:30.080 --> 0:33:32.200
<v Speaker 1>these are the sectors, and these are the areas we

0:33:32.200 --> 0:33:35.040
<v Speaker 1>think are going to be most affected. If our macro

0:33:35.160 --> 0:33:39.720
<v Speaker 1>col is right, you're suggesting much more focus, much more

0:33:40.120 --> 0:33:43.240
<v Speaker 1>precise than that sort of thirty thousand foot view.

0:33:43.800 --> 0:33:45.680
<v Speaker 2>Well, I just think like a few years ago, we

0:33:45.800 --> 0:33:47.120
<v Speaker 2>came to the view that there was going to be

0:33:47.120 --> 0:33:49.320
<v Speaker 2>a bunch of inflation, and we could have bought a

0:33:49.320 --> 0:33:51.920
<v Speaker 2>bunch of commodities, but the best thing to do or

0:33:51.920 --> 0:33:55.000
<v Speaker 2>commodity companies or companies that would benefit from inflation, but

0:33:55.040 --> 0:33:56.960
<v Speaker 2>the best thing to do was there's a derivative called

0:33:57.000 --> 0:33:59.840
<v Speaker 2>an inflation swap where you actually got to bet on

0:34:00.040 --> 0:34:03.600
<v Speaker 2>what will the reported inflation be versus the market expectations,

0:34:03.920 --> 0:34:06.120
<v Speaker 2>and it's a derivative, and they pay you the difference.

0:34:06.160 --> 0:34:08.520
<v Speaker 2>And so if you think, if the market says inflation

0:34:08.600 --> 0:34:10.319
<v Speaker 2>is going to be two percent over the next year,

0:34:10.640 --> 0:34:12.840
<v Speaker 2>and you bet on the over effectively, and then it

0:34:12.880 --> 0:34:15.439
<v Speaker 2>turns out that it's six percent, well you make four

0:34:15.480 --> 0:34:18.080
<v Speaker 2>points times you're notional. And it doesn't matter what anybody's

0:34:18.080 --> 0:34:21.359
<v Speaker 2>opinion is, because the CPI is the CPI and that's

0:34:21.360 --> 0:34:23.279
<v Speaker 2>what defines the bet. So you don't even have to

0:34:23.280 --> 0:34:25.279
<v Speaker 2>figure out what market sentiment is going to be or

0:34:25.280 --> 0:34:27.799
<v Speaker 2>what other investors are going to do. It just realizes

0:34:27.840 --> 0:34:30.080
<v Speaker 2>all the way through. And so I always find if

0:34:30.120 --> 0:34:32.880
<v Speaker 2>we can find a direct way to express an opinion.

0:34:33.280 --> 0:34:34.879
<v Speaker 2>That's better than an indirect way.

0:34:35.000 --> 0:34:39.680
<v Speaker 1>Huh. Very interesting. Let's talk about shorting, which is really

0:34:39.760 --> 0:34:44.560
<v Speaker 1>what made your name way back when it seems especially

0:34:44.680 --> 0:34:47.319
<v Speaker 1>challenging these days, when the markets have been going up

0:34:47.680 --> 0:34:50.120
<v Speaker 1>as much as they have last year and twenty and

0:34:50.160 --> 0:34:54.319
<v Speaker 1>twenty one short funds are disappearing. How do you think

0:34:54.360 --> 0:34:57.799
<v Speaker 1>about shorting today and how different is it now than

0:34:58.360 --> 0:35:00.920
<v Speaker 1>the days of Allied Capital and and Lehman Brothers.

0:35:01.560 --> 0:35:05.840
<v Speaker 2>Yeah, shorting is very difficult. You know, a couple of

0:35:05.920 --> 0:35:07.719
<v Speaker 2>years ago we had a great year shorting. Last year

0:35:07.760 --> 0:35:12.400
<v Speaker 2>was not a good year shorting for us. You know,

0:35:12.480 --> 0:35:17.799
<v Speaker 2>a lot of the absence of market participants figuring out

0:35:17.840 --> 0:35:22.880
<v Speaker 2>what things are worth translates into more difficulty in shorting

0:35:23.200 --> 0:35:26.160
<v Speaker 2>because value it's just not a consideration for so many

0:35:26.200 --> 0:35:28.960
<v Speaker 2>investment strategies or so many investors. I mean, like all

0:35:29.000 --> 0:35:31.360
<v Speaker 2>the retail investors, not all, but many of them. They

0:35:31.440 --> 0:35:34.600
<v Speaker 2>couldn't figure out value even if they wanted to. Many

0:35:34.640 --> 0:35:38.640
<v Speaker 2>of the professional investors have completely lost their view of

0:35:38.680 --> 0:35:41.239
<v Speaker 2>what value is. Again, they have opinions about price, but

0:35:41.280 --> 0:35:44.520
<v Speaker 2>they don't have opinions about value. And the other thing

0:35:44.640 --> 0:35:47.920
<v Speaker 2>is is the world has become very cynical, and so

0:35:48.600 --> 0:35:51.960
<v Speaker 2>you know, if a company is like committing fraud, the

0:35:52.000 --> 0:35:54.399
<v Speaker 2>market has been conditioned well. When they announced the fraud,

0:35:54.480 --> 0:35:56.640
<v Speaker 2>that's a great time to buy the stock. And that

0:35:56.880 --> 0:35:59.399
<v Speaker 2>used to be like the opposite of that. And then

0:35:59.440 --> 0:36:04.480
<v Speaker 2>you add in that the regulatory infrastructure is essentially gone,

0:36:04.880 --> 0:36:05.719
<v Speaker 2>like they're.

0:36:05.840 --> 0:36:09.200
<v Speaker 1>Gone regulatory not not weekends, just gone exist.

0:36:09.239 --> 0:36:15.080
<v Speaker 2>There is no SEC policing corporate behavior, you know, they're not. Look,

0:36:15.120 --> 0:36:17.799
<v Speaker 2>they used to do real things to companies. They used

0:36:17.800 --> 0:36:19.879
<v Speaker 2>to go after the management and tell them they can't

0:36:19.920 --> 0:36:23.840
<v Speaker 2>be directors or officers. They used to, you know, and

0:36:24.440 --> 0:36:26.279
<v Speaker 2>for for a while they would, you know, they would

0:36:26.400 --> 0:36:29.600
<v Speaker 2>they would find some companies. Occasionally they would make people

0:36:29.600 --> 0:36:32.240
<v Speaker 2>even like, oh, well we'll just improve the disclosure, restate

0:36:32.280 --> 0:36:35.239
<v Speaker 2>the financials, stuff like that. Like these things don't don't

0:36:35.239 --> 0:36:37.160
<v Speaker 2>happen anymore, like they've did.

0:36:37.239 --> 0:36:40.080
<v Speaker 1>They yell at Elon Musk for smoking weed on Joe

0:36:40.200 --> 0:36:41.080
<v Speaker 1>Rogan's show.

0:36:40.920 --> 0:36:42.839
<v Speaker 2>Or I don't know, I don't think that. I don't

0:36:42.840 --> 0:36:44.800
<v Speaker 2>think it was the SEC with that. What happened with

0:36:44.840 --> 0:36:46.799
<v Speaker 2>the SEC was last year there was a story that

0:36:46.800 --> 0:36:49.279
<v Speaker 2>there was a whistleblower who sent a letter to the

0:36:49.320 --> 0:36:52.960
<v Speaker 2>SEC said there's massive accounting fraud at Tesla, and I

0:36:53.000 --> 0:36:55.880
<v Speaker 2>have twenty thousand documents I'd love to show you. And

0:36:55.920 --> 0:36:58.880
<v Speaker 2>the SEC didn't even bother to follow up with the whistleblower. Wow.

0:36:59.160 --> 0:37:00.520
<v Speaker 2>So that that's kind of where we're at.

0:37:01.280 --> 0:37:08.480
<v Speaker 1>Wow, that's a huge, huge statement. The regulators are not

0:37:08.920 --> 0:37:13.480
<v Speaker 1>doing their job. Do you think there's appreciably more fraud

0:37:14.080 --> 0:37:17.040
<v Speaker 1>in corporate statements today than what we saw twenty years ago?

0:37:17.120 --> 0:37:18.400
<v Speaker 2>Right? Well, let me just say it's not like the

0:37:18.440 --> 0:37:22.520
<v Speaker 2>SEC is completely gone. Like, if you have some inside information,

0:37:22.640 --> 0:37:24.319
<v Speaker 2>you tip off your brother in law and he makes

0:37:24.320 --> 0:37:26.799
<v Speaker 2>fifty thousand dollars, they're going to find that and come

0:37:26.840 --> 0:37:30.839
<v Speaker 2>down a ton of bricks on that. What all kinds

0:37:30.880 --> 0:37:32.879
<v Speaker 2>of regulations they want to deal with, like the hedge

0:37:32.880 --> 0:37:35.720
<v Speaker 2>fund industry and the rest of it. They're doing stuff

0:37:35.719 --> 0:37:38.480
<v Speaker 2>in crypto and things like this, But in terms of

0:37:38.520 --> 0:37:43.520
<v Speaker 2>their basic policing of financial statements, financial disclosures, corporate behavior,

0:37:43.880 --> 0:37:47.040
<v Speaker 2>that's where the SEC has They've essentially stopped they're what

0:37:47.040 --> 0:37:51.200
<v Speaker 2>they're doing there unless the company completely goes to bankruptcy,

0:37:51.600 --> 0:37:55.759
<v Speaker 2>and once the bankruptcy has happened, possibly they will look

0:37:55.840 --> 0:37:56.160
<v Speaker 2>at it.

0:37:56.280 --> 0:37:58.600
<v Speaker 1>That's a little little too late to help out the

0:37:58.640 --> 0:38:00.000
<v Speaker 1>investors involved.

0:38:00.120 --> 0:38:01.959
<v Speaker 2>I don't think they view that as their role because

0:38:02.000 --> 0:38:04.800
<v Speaker 2>they're The concern is is if they come in and

0:38:05.400 --> 0:38:08.319
<v Speaker 2>do something to you know, before the money has been lost,

0:38:08.560 --> 0:38:10.440
<v Speaker 2>that might make the stock go down a few percent

0:38:10.480 --> 0:38:13.640
<v Speaker 2>that day, and then they'll be blamed because then they'll

0:38:13.640 --> 0:38:16.759
<v Speaker 2>have helped cause investors to have lost money, and they

0:38:16.760 --> 0:38:18.640
<v Speaker 2>don't want that responsibility.

0:38:18.440 --> 0:38:21.719
<v Speaker 1>So let's talk about a little more about those financial statements.

0:38:21.960 --> 0:38:26.240
<v Speaker 1>There are four large accounting firms that do the vast

0:38:26.280 --> 0:38:31.600
<v Speaker 1>majority of the orderling for most of the biggest companies

0:38:31.600 --> 0:38:35.759
<v Speaker 1>in the US, and they're hired and paid by those companies.

0:38:36.719 --> 0:38:39.040
<v Speaker 1>I've always wondered that seems to be a little bit

0:38:39.040 --> 0:38:42.400
<v Speaker 1>of an incestuous relationship. Kind of reminds me back on

0:38:42.480 --> 0:38:45.719
<v Speaker 1>the rating companies SMP and Moody's being paid by the

0:38:45.760 --> 0:38:51.800
<v Speaker 1>bonds underwriters, which wasn't how it always was. It sounds

0:38:51.880 --> 0:38:57.320
<v Speaker 1>like you're implying that the entire system for identifying, policing,

0:38:57.360 --> 0:39:02.600
<v Speaker 1>and punishing fraud before a company runs into trouble is

0:39:03.480 --> 0:39:04.040
<v Speaker 1>not working.

0:39:04.680 --> 0:39:08.479
<v Speaker 2>Look, most people in business who are running companies try

0:39:08.520 --> 0:39:12.320
<v Speaker 2>to conduct their business basically honestly, so they're they're they're

0:39:12.360 --> 0:39:15.400
<v Speaker 2>selling their product, they're developing their product, they're paying their people,

0:39:15.800 --> 0:39:19.799
<v Speaker 2>they're they're recording their books. The auditors come in, they're

0:39:19.800 --> 0:39:22.640
<v Speaker 2>trying to show them the right results. Things work out

0:39:22.640 --> 0:39:26.040
<v Speaker 2>pretty good. The question is is for the handful that

0:39:26.200 --> 0:39:28.799
<v Speaker 2>are that don't view the world that way, that want

0:39:28.800 --> 0:39:31.600
<v Speaker 2>to take advantage of the system and you know, fake

0:39:31.640 --> 0:39:33.480
<v Speaker 2>it or lie or cheat or whatever that is they

0:39:33.480 --> 0:39:36.600
<v Speaker 2>want to do. And for those companies, there's there's probably

0:39:36.719 --> 0:39:38.759
<v Speaker 2>that they can probably get away with what they want to.

0:39:39.400 --> 0:39:43.719
<v Speaker 1>And at one point in time, the regulators were aggressively

0:39:43.800 --> 0:39:46.000
<v Speaker 1>policing that and that seems to have faded.

0:39:47.440 --> 0:39:48.399
<v Speaker 2>Yeah, I think that's right.

0:39:48.680 --> 0:39:52.399
<v Speaker 1>Huh, really really fascinating. So so, so let's talk about

0:39:52.400 --> 0:39:55.920
<v Speaker 1>something related. You do these wonderful post mortems in your

0:39:56.040 --> 0:40:00.160
<v Speaker 1>quarterly letters. It's kind of legendary. Here's what went right

0:40:00.200 --> 0:40:03.040
<v Speaker 1>with this trade, here's what went wrong. Here's why this

0:40:03.080 --> 0:40:05.759
<v Speaker 1>sector did well or poorly, or why this stock did

0:40:05.840 --> 0:40:09.759
<v Speaker 1>or didn't work out. Explain what goes into putting these

0:40:09.840 --> 0:40:12.680
<v Speaker 1>letters together together. It reminds me a little bit of

0:40:12.719 --> 0:40:13.920
<v Speaker 1>the presentations you do.

0:40:14.560 --> 0:40:17.480
<v Speaker 2>Like the quarter letters is something I enjoy doing. I

0:40:17.520 --> 0:40:21.400
<v Speaker 2>start thinking about it maybe a month before the quarter ends,

0:40:21.440 --> 0:40:24.080
<v Speaker 2>like what themes are going on in the world that

0:40:24.120 --> 0:40:27.120
<v Speaker 2>I might want to talk about. And then sometime after

0:40:27.160 --> 0:40:30.400
<v Speaker 2>the quarter I get some information about like how we

0:40:30.440 --> 0:40:32.400
<v Speaker 2>did in the market and what stocks helped us and

0:40:32.440 --> 0:40:34.879
<v Speaker 2>the rest of it. And then I write a letter

0:40:35.320 --> 0:40:38.440
<v Speaker 2>and I write the first draft. The first draft is

0:40:38.520 --> 0:40:42.359
<v Speaker 2>what I want to say. It's unedited and unfiltered, and

0:40:42.400 --> 0:40:44.160
<v Speaker 2>then I pass it off to the team and they

0:40:44.160 --> 0:40:46.279
<v Speaker 2>fill in the holes and then they help correct me

0:40:46.320 --> 0:40:49.600
<v Speaker 2>about things maybe that I shouldn't say, and it gets

0:40:49.840 --> 0:40:53.640
<v Speaker 2>edited down through a few cycles. But in terms of

0:40:53.680 --> 0:40:59.040
<v Speaker 2>the post mortems, I've always been like, you know, if

0:40:59.080 --> 0:41:01.480
<v Speaker 2>something goes great, explain why it went great. If it

0:41:01.520 --> 0:41:03.600
<v Speaker 2>didn't go well and we lost money on it, just

0:41:03.800 --> 0:41:06.880
<v Speaker 2>say so, if we do a really, really good job,

0:41:06.960 --> 0:41:09.839
<v Speaker 2>we're going to be wrong thirty five percent of the time, right, right,

0:41:10.080 --> 0:41:12.640
<v Speaker 2>So what's the shame in writing in a letter we

0:41:12.800 --> 0:41:15.200
<v Speaker 2>invested in this particular stock and it didn't work out

0:41:15.200 --> 0:41:17.439
<v Speaker 2>the way that we wanted it to and we lost

0:41:17.480 --> 0:41:19.760
<v Speaker 2>a whole bunch of money. It's in the result anyway,

0:41:19.840 --> 0:41:21.000
<v Speaker 2>so you may as well describe it.

0:41:21.320 --> 0:41:25.239
<v Speaker 1>Huh, that's really interesting. So I know what your presentations are, like,

0:41:25.520 --> 0:41:28.040
<v Speaker 1>I know what the quarterly letter is, like, what's a

0:41:28.080 --> 0:41:32.480
<v Speaker 1>typical day like for you at Greenlight? What happens on

0:41:32.520 --> 0:41:33.640
<v Speaker 1>a random Wednesday?

0:41:34.440 --> 0:41:38.080
<v Speaker 2>You know, the great thing about this business is every

0:41:38.160 --> 0:41:40.080
<v Speaker 2>day you wake up and you just don't know what

0:41:40.120 --> 0:41:41.160
<v Speaker 2>you're going to get.

0:41:41.600 --> 0:41:41.640
<v Speaker 1>You.

0:41:42.000 --> 0:41:43.719
<v Speaker 2>You know, you have things that are on your schedule, Oh,

0:41:43.719 --> 0:41:45.960
<v Speaker 2>this company's going to announce earnings, or you're going to

0:41:46.040 --> 0:41:47.560
<v Speaker 2>talk to this analyst, or you're going to talk to

0:41:47.600 --> 0:41:49.920
<v Speaker 2>this management team or whatever it is. And you have

0:41:49.960 --> 0:41:51.759
<v Speaker 2>a few things that are on your calendar, and then

0:41:51.800 --> 0:41:54.080
<v Speaker 2>you have the rest of the day. And the rest

0:41:54.120 --> 0:41:56.640
<v Speaker 2>of the day is dealing with the incoming email, it's

0:41:56.680 --> 0:41:59.239
<v Speaker 2>dealing with the news, it's dealing with developments that you

0:41:59.280 --> 0:42:02.000
<v Speaker 2>did in particular really expect and deciding if there's anything

0:42:02.040 --> 0:42:05.759
<v Speaker 2>that you need to research further or trade or do,

0:42:06.320 --> 0:42:08.879
<v Speaker 2>and so you know, you just you know, you never

0:42:08.920 --> 0:42:10.960
<v Speaker 2>know what you're going to get on any particular day,

0:42:11.000 --> 0:42:12.480
<v Speaker 2>and that's what makes it so exciting.

0:42:12.600 --> 0:42:16.080
<v Speaker 1>Huh, really really interesting. In your most recent met letter,

0:42:16.200 --> 0:42:19.200
<v Speaker 1>you mentioned the FED did they do a good job

0:42:19.239 --> 0:42:22.960
<v Speaker 1>on inflation? What sort of grade would you give them

0:42:23.040 --> 0:42:26.760
<v Speaker 1>for how well they've handled the entire post COVID era.

0:42:27.719 --> 0:42:30.399
<v Speaker 2>Well, I don't know how to award a grade. That's

0:42:30.520 --> 0:42:32.880
<v Speaker 2>I'm not the professor, and I'm not here to grade

0:42:32.920 --> 0:42:36.919
<v Speaker 2>the FED. I would observe that they've done some things

0:42:37.040 --> 0:42:40.320
<v Speaker 2>very well. You know, they created a stability at the

0:42:40.360 --> 0:42:43.640
<v Speaker 2>bottom of the crisis. They provided liquidity, they didn't let

0:42:43.719 --> 0:42:46.200
<v Speaker 2>lots of things go bankrupt and so forth. Now there's

0:42:46.239 --> 0:42:48.600
<v Speaker 2>a moral hazard that comes from that, because you condition

0:42:48.880 --> 0:42:51.680
<v Speaker 2>people to think that things won't be allowed to go bankrupt,

0:42:51.760 --> 0:42:55.320
<v Speaker 2>and essentially you're socializing a lot of risk effectively onto

0:42:55.360 --> 0:42:59.360
<v Speaker 2>the national balance sheet. Then they had the period of

0:43:00.080 --> 0:43:02.279
<v Speaker 2>pretending that there wasn't going to be any inflation, no

0:43:02.320 --> 0:43:05.000
<v Speaker 2>matter how much money that they printed, and then when

0:43:05.000 --> 0:43:07.840
<v Speaker 2>that became evident, they spent a long time explaining that

0:43:07.880 --> 0:43:10.839
<v Speaker 2>it was transitory. And then they finally decided that maybe

0:43:10.840 --> 0:43:13.440
<v Speaker 2>it wasn't transitory and they should do something about it.

0:43:13.760 --> 0:43:16.680
<v Speaker 2>And then they decided after none of it was transitory,

0:43:16.680 --> 0:43:18.719
<v Speaker 2>it turned out that some of it was transitory, and

0:43:18.719 --> 0:43:21.880
<v Speaker 2>now it's rolling itself back down. The basic thing with

0:43:21.960 --> 0:43:26.200
<v Speaker 2>the FED, I think is they don't seem to have

0:43:26.960 --> 0:43:30.920
<v Speaker 2>I disagree with their view relating to the relationship between

0:43:31.000 --> 0:43:34.839
<v Speaker 2>interest rates and the economy and inflation and what they're

0:43:34.840 --> 0:43:39.279
<v Speaker 2>actually doing, because I believe that when rates get low

0:43:39.480 --> 0:43:43.279
<v Speaker 2>below a certain amount, they actually slow down the economy

0:43:43.280 --> 0:43:46.920
<v Speaker 2>by lowering them further and when so as a result,

0:43:47.200 --> 0:43:49.280
<v Speaker 2>I had this thesis called I called it the jelly

0:43:49.280 --> 0:43:53.360
<v Speaker 2>donut monetary policy. Where the first jelly donut tastes great,

0:43:53.480 --> 0:43:55.920
<v Speaker 2>but the twenty fifth jelly donut, you're not really helping

0:43:56.000 --> 0:43:59.680
<v Speaker 2>yourself anymore. And so you had these emergency fed policies,

0:44:00.239 --> 0:44:02.520
<v Speaker 2>and that in an emergency, that makes sense. But then

0:44:02.560 --> 0:44:05.200
<v Speaker 2>after the emergency passes, they kept the policies and you

0:44:05.280 --> 0:44:07.680
<v Speaker 2>kept rates at zero for like some really long period

0:44:07.680 --> 0:44:10.000
<v Speaker 2>of time, and it was essentially just like giving a

0:44:10.040 --> 0:44:13.000
<v Speaker 2>diabetic person more jelly donuts. Since the economy had a

0:44:13.080 --> 0:44:16.799
<v Speaker 2>very gradual and slow recovery, and now as they had

0:44:16.800 --> 0:44:20.080
<v Speaker 2>the inflation and the rates have come back up, they

0:44:20.080 --> 0:44:22.319
<v Speaker 2>thought that they would be slowing the economy, but they're

0:44:22.320 --> 0:44:26.440
<v Speaker 2>actually strengthening the economy higher rates getting off the zero bound.

0:44:26.800 --> 0:44:29.360
<v Speaker 2>Not if you moved rates from five to ten, it

0:44:29.360 --> 0:44:32.239
<v Speaker 2>would certainly slow the economy, but from zero to five

0:44:32.280 --> 0:44:34.600
<v Speaker 2>it actually strengthens the economy. I think that's why we

0:44:34.680 --> 0:44:38.400
<v Speaker 2>have this really strong GDP growth that is that is

0:44:38.480 --> 0:44:42.000
<v Speaker 2>persisting right now. I think it's surprised a lot of people,

0:44:42.280 --> 0:44:44.160
<v Speaker 2>and so I think it's really weird now that everybody

0:44:44.200 --> 0:44:47.919
<v Speaker 2>thinks that they're going to lower rates. Things are pretty good,

0:44:48.160 --> 0:44:50.840
<v Speaker 2>like employment is really pretty full right now, and the

0:44:50.880 --> 0:44:54.360
<v Speaker 2>economy is kind of humming along, and I think the

0:44:54.440 --> 0:44:57.120
<v Speaker 2>idea that they're going to rush back to really lower rates,

0:44:57.120 --> 0:44:59.000
<v Speaker 2>and they may do it right, but I don't think

0:44:59.040 --> 0:45:03.200
<v Speaker 2>that they're really going to to help anybody, you know,

0:45:03.320 --> 0:45:04.520
<v Speaker 2>by by doing so.

0:45:05.000 --> 0:45:08.719
<v Speaker 1>The argument, the best argument I've seen anyway, for lower

0:45:08.800 --> 0:45:11.200
<v Speaker 1>rates is, hey, you have all these people with three

0:45:11.239 --> 0:45:15.560
<v Speaker 1>and four percent mortgages. We've had a wild shortfall in

0:45:15.640 --> 0:45:18.840
<v Speaker 1>home construction in the twenty tens following the financial crisis.

0:45:19.160 --> 0:45:22.000
<v Speaker 1>I know you were a big fan of the home builders.

0:45:22.040 --> 0:45:25.160
<v Speaker 1>Certainly worked out well given the shortfall. And if we

0:45:25.200 --> 0:45:27.360
<v Speaker 1>want to get some supply to the market, you have

0:45:27.480 --> 0:45:30.960
<v Speaker 1>everybody frozen in place with four percent mortgages. You got

0:45:30.960 --> 0:45:34.560
<v Speaker 1>to get mortgages down from seven to at least low

0:45:34.680 --> 0:45:38.000
<v Speaker 1>sixes or high fives, and all that supply will come out,

0:45:38.080 --> 0:45:41.680
<v Speaker 1>and therefore inflation will come down in the housing sector.

0:45:42.600 --> 0:45:46.279
<v Speaker 1>Do you buy that sort of analyst or economist commentary

0:45:46.360 --> 0:45:48.920
<v Speaker 1>that that's what's going to drive rates lower.

0:45:49.200 --> 0:45:52.640
<v Speaker 2>Well, a couple of things. First of all, housing prices

0:45:52.719 --> 0:45:55.640
<v Speaker 2>off the tenure. It doesn't price off the Fed funds.

0:45:56.080 --> 0:45:58.680
<v Speaker 2>So if the Fed Funds goes from five and something

0:45:58.760 --> 0:46:01.080
<v Speaker 2>to three and something like everybody thinks that it's going

0:46:01.120 --> 0:46:03.200
<v Speaker 2>to do, it's not clear that that's going to move

0:46:03.239 --> 0:46:04.640
<v Speaker 2>the ten year rate at all.

0:46:04.640 --> 0:46:07.680
<v Speaker 1>The ten year place, right, we went from just about

0:46:07.760 --> 0:46:08.640
<v Speaker 1>five percent to.

0:46:08.719 --> 0:46:11.400
<v Speaker 2>Three eight or so great and the Fed Funds hasn't

0:46:11.400 --> 0:46:15.000
<v Speaker 2>even moved yet, right, So it's not clear that these

0:46:15.040 --> 0:46:19.520
<v Speaker 2>two rates correlate one hundred percent. And so you could

0:46:19.560 --> 0:46:21.360
<v Speaker 2>even have a situation where you lower the rates and

0:46:21.400 --> 0:46:23.719
<v Speaker 2>the inflation starts coming back and it causes the long

0:46:23.840 --> 0:46:27.160
<v Speaker 2>rates to go up. It wouldn't surprise me at all,

0:46:27.440 --> 0:46:29.400
<v Speaker 2>you know, relating to the housing. I mean, I'm the

0:46:29.440 --> 0:46:32.759
<v Speaker 2>chairman of a homebuilder. It's Green Brick Partners, and we're

0:46:32.760 --> 0:46:35.959
<v Speaker 2>building houses as fast as we can. There's a ton

0:46:36.000 --> 0:46:39.319
<v Speaker 2>of demand for the houses. The rates are. I mean, sure,

0:46:39.360 --> 0:46:42.000
<v Speaker 2>we'd love lower rates to get people's monthly payments down

0:46:42.040 --> 0:46:43.920
<v Speaker 2>a little bit. I mean that would be great, but

0:46:44.000 --> 0:46:47.400
<v Speaker 2>it doesn't really matter. There's plenty of demand. The market

0:46:47.680 --> 0:46:51.560
<v Speaker 2>is very very strong for us, and so you know,

0:46:51.680 --> 0:46:53.960
<v Speaker 2>we're we're limited by how fast can we build the houses,

0:46:54.000 --> 0:46:55.240
<v Speaker 2>and that's terrific.

0:46:55.560 --> 0:47:00.000
<v Speaker 1>So it's interesting how you discuss variant perception in various

0:47:00.000 --> 0:47:04.440
<v Speaker 1>acre issues, in various stocks. It seems like the consensus

0:47:04.800 --> 0:47:06.640
<v Speaker 1>for what the Fed's going to do and what the

0:47:06.640 --> 0:47:09.520
<v Speaker 1>economy is going to do more broadly has been so

0:47:09.800 --> 0:47:15.160
<v Speaker 1>wrong for so long. When you're looking at everybody predicting

0:47:15.360 --> 0:47:17.720
<v Speaker 1>both the recession for two years and getting it wrong

0:47:18.080 --> 0:47:20.360
<v Speaker 1>and FED cuts for two years and getting it wrong,

0:47:21.040 --> 0:47:24.360
<v Speaker 1>how do you think about that in terms of analyzing

0:47:24.400 --> 0:47:27.360
<v Speaker 1>the FED and what that means to deploying capital.

0:47:28.040 --> 0:47:31.040
<v Speaker 2>Sure, look, I think that the economy is strong. I

0:47:31.040 --> 0:47:33.799
<v Speaker 2>don't think we are in a recession. I don't think

0:47:33.800 --> 0:47:37.839
<v Speaker 2>we're about to be in a recession. And so as

0:47:37.880 --> 0:47:40.719
<v Speaker 2>a result, I'm still more worried that if they lower

0:47:40.800 --> 0:47:44.520
<v Speaker 2>rates a whole bunch, they'll get the inflation to come back.

0:47:45.080 --> 0:47:47.239
<v Speaker 2>So I'm still long inflation, and I kind of don't

0:47:47.239 --> 0:47:49.080
<v Speaker 2>think we're going to see anywhere near as many FED

0:47:49.080 --> 0:47:52.560
<v Speaker 2>cuts as people are talking about this year. You know,

0:47:52.600 --> 0:47:54.759
<v Speaker 2>it's kind of funny people often look at just like

0:47:54.880 --> 0:47:56.680
<v Speaker 2>the wrong thing or are they look at they find

0:47:56.719 --> 0:47:58.719
<v Speaker 2>something very irrelevant and they spend a lot of time

0:47:58.719 --> 0:48:01.520
<v Speaker 2>on it. Like recently, you know, it came out that

0:48:01.560 --> 0:48:04.240
<v Speaker 2>the federal government was gonna borrow like fifty billion dollars

0:48:04.320 --> 0:48:06.920
<v Speaker 2>less this quarter. So they're only gonna borrow seven hundred

0:48:06.920 --> 0:48:09.719
<v Speaker 2>billion instead of seven hundred and fifty billion and.

0:48:09.760 --> 0:48:11.240
<v Speaker 1>Pass on the savings to you.

0:48:11.239 --> 0:48:13.160
<v Speaker 2>You know, it's it's it's fantastic. And so there's a

0:48:13.160 --> 0:48:15.719
<v Speaker 2>lot of enthusiasm for like a data point, and this

0:48:15.800 --> 0:48:17.960
<v Speaker 2>is like the world looking for data points, but they're

0:48:18.000 --> 0:48:20.680
<v Speaker 2>missing like it's a forest for trees, Like who really

0:48:20.680 --> 0:48:23.280
<v Speaker 2>cares if they're borrowing seven hundred billion or seven hundred

0:48:23.280 --> 0:48:26.759
<v Speaker 2>and fifty billion. They're borrowing so much money that you

0:48:26.880 --> 0:48:28.640
<v Speaker 2>just have to look at this and go like, where's

0:48:28.680 --> 0:48:31.480
<v Speaker 2>three trillion dollars gonna go to lend to the Fed

0:48:31.520 --> 0:48:34.200
<v Speaker 2>this year? Where's three or four trillion to go next

0:48:34.440 --> 0:48:36.720
<v Speaker 2>next time? So if you just take a step back

0:48:36.840 --> 0:48:39.640
<v Speaker 2>and you say, like how sustainable is this and where

0:48:39.680 --> 0:48:42.560
<v Speaker 2>is all of this money gonna come from? You realize, like,

0:48:42.600 --> 0:48:46.040
<v Speaker 2>instead of being enthusiastic for hey, they're gonna borrow fifty

0:48:46.080 --> 0:48:48.120
<v Speaker 2>billion less is if that's going to make all of

0:48:48.120 --> 0:48:50.120
<v Speaker 2>the difference in the world. Hey, we could we can

0:48:50.160 --> 0:48:52.319
<v Speaker 2>sell seven hundred billion of bonds, but we can't sell

0:48:52.320 --> 0:48:55.840
<v Speaker 2>seven hundred and fifty Like this is completely strange to me.

0:48:56.200 --> 0:48:58.239
<v Speaker 2>And I think as you, as the market looks at it,

0:48:58.760 --> 0:49:00.239
<v Speaker 2>over the course of the year, we're gonna at some

0:49:00.320 --> 0:49:02.640
<v Speaker 2>point get back to the point where they're saying, you know,

0:49:02.880 --> 0:49:06.120
<v Speaker 2>we're really borrowing, maybe more than more than we should.

0:49:06.360 --> 0:49:09.239
<v Speaker 2>And when you talk to people in Congress, like they

0:49:09.239 --> 0:49:12.319
<v Speaker 2>have no plans to do anything about this, Like it's

0:49:12.320 --> 0:49:15.720
<v Speaker 2>not even like there's an intermediate plan for fiscal responsibility.

0:49:16.040 --> 0:49:19.240
<v Speaker 2>So the idea that the market is focused on fifty

0:49:19.239 --> 0:49:21.799
<v Speaker 2>billion here they're of incremental treasury borrowings or how many

0:49:21.840 --> 0:49:23.600
<v Speaker 2>ten year bonds they're going to sell, or how many

0:49:23.800 --> 0:49:27.120
<v Speaker 2>thirtyer bonds. What it is is underneath that is an

0:49:27.160 --> 0:49:31.040
<v Speaker 2>acknowledgment that there's a big problem, because otherwise they wouldn't

0:49:31.040 --> 0:49:33.280
<v Speaker 2>be focused on it. But they're distracting from the problem

0:49:33.360 --> 0:49:37.400
<v Speaker 2>by trying to find like a second derivative incremental data point.

0:49:37.880 --> 0:49:40.920
<v Speaker 2>And I think that the easier thing to do is

0:49:40.960 --> 0:49:43.000
<v Speaker 2>to keep the eye on the bigger picture, which should

0:49:43.000 --> 0:49:45.719
<v Speaker 2>play itself out, maybe over the more intermediate term.

0:49:45.960 --> 0:49:49.520
<v Speaker 1>So here's the pushback to the to the deficit challenge.

0:49:49.960 --> 0:49:51.880
<v Speaker 1>You know, we're not that far apart in age. My

0:49:52.120 --> 0:49:56.800
<v Speaker 1>entire adult life, I've been told deficits are a problem.

0:49:57.239 --> 0:50:00.359
<v Speaker 1>They're going to cause inflation, destroy the dollar, crowd out

0:50:00.440 --> 0:50:03.680
<v Speaker 1>private investments. None of that seems to have happened over

0:50:03.719 --> 0:50:08.200
<v Speaker 1>the past couple of decades. Do we really need to

0:50:09.200 --> 0:50:13.239
<v Speaker 1>make the deficit our biggest priority? Tell us what the

0:50:13.640 --> 0:50:14.920
<v Speaker 1>risk factors are from that.

0:50:15.400 --> 0:50:18.080
<v Speaker 2>Well, we can't make the deficit our biggest priority. It's

0:50:18.120 --> 0:50:21.239
<v Speaker 2>our biggest problem. Like Congress can't do anything about this.

0:50:21.320 --> 0:50:23.279
<v Speaker 2>If you talk to a congress person and say or

0:50:23.320 --> 0:50:24.840
<v Speaker 2>a Senator and say, well, what are you going to

0:50:24.880 --> 0:50:27.920
<v Speaker 2>do about the deficit? Like the amount of change that

0:50:27.960 --> 0:50:30.440
<v Speaker 2>would need to happen to move the needle, it's kind

0:50:30.440 --> 0:50:33.280
<v Speaker 2>of almost like a waste of time because nobody's willing

0:50:33.320 --> 0:50:36.120
<v Speaker 2>to make the major major type of tax increases or

0:50:36.120 --> 0:50:39.000
<v Speaker 2>the major major types of spending cuts. You know, they're

0:50:39.000 --> 0:50:41.000
<v Speaker 2>willing to like nickel and dime away at the other

0:50:41.080 --> 0:50:44.000
<v Speaker 2>side's constituency. So the Republicans are willing to stick it

0:50:44.040 --> 0:50:47.560
<v Speaker 2>to the Democrat voters a little bit. The Democrats are

0:50:47.560 --> 0:50:49.879
<v Speaker 2>willing to stick it to the Republican voters a little bit.

0:50:50.040 --> 0:50:51.600
<v Speaker 2>But at the end of the day, like there's nobody

0:50:51.640 --> 0:50:55.160
<v Speaker 2>who's serious about it. It's more like, well, it's unsustainable,

0:50:55.360 --> 0:50:57.680
<v Speaker 2>and we're going to go up the roller coaster and

0:50:57.719 --> 0:50:59.600
<v Speaker 2>at some point it's going to go down, and then

0:50:59.600 --> 0:51:02.480
<v Speaker 2>we're going to deal with it then. And what is

0:51:02.480 --> 0:51:04.400
<v Speaker 2>that crisis going to look like? I don't know what

0:51:04.400 --> 0:51:06.239
<v Speaker 2>that crisis is going to look like. And I know

0:51:06.360 --> 0:51:08.960
<v Speaker 2>this has been a long time building, but it's going

0:51:09.040 --> 0:51:11.239
<v Speaker 2>up at an accelerating pace. I mean, we're now well

0:51:11.280 --> 0:51:15.160
<v Speaker 2>over one hundred percent debt to GDP, right, So if

0:51:15.200 --> 0:51:17.560
<v Speaker 2>interest rates are four percent or something like that, you're

0:51:17.600 --> 0:51:21.919
<v Speaker 2>paying out four percent or more of GDP in interest, right,

0:51:22.239 --> 0:51:24.399
<v Speaker 2>And so you're paying out a big percentage of your

0:51:24.400 --> 0:51:28.120
<v Speaker 2>tax collections in debt service, even before you get to

0:51:28.120 --> 0:51:30.200
<v Speaker 2>what you actually want to have. And you're at a

0:51:30.239 --> 0:51:33.239
<v Speaker 2>six and a half percent deficit to GDP with full employment,

0:51:33.600 --> 0:51:36.520
<v Speaker 2>which is something we've never seen before outside of a war.

0:51:37.200 --> 0:51:39.279
<v Speaker 2>And so if we have a recession, you know that

0:51:39.360 --> 0:51:41.520
<v Speaker 2>number is going to get much much worse. And at

0:51:41.560 --> 0:51:44.920
<v Speaker 2>some point, you know where is the three trillion dollars

0:51:44.960 --> 0:51:46.799
<v Speaker 2>going to come from. We just talked about the hedge

0:51:46.800 --> 0:51:49.160
<v Speaker 2>fund industry, the whole hedge fund industry, three trillion dollars.

0:51:49.200 --> 0:51:51.520
<v Speaker 2>So the government's going to borrow the entire hedge fund

0:51:51.520 --> 0:51:54.399
<v Speaker 2>industry this year, and then that just tides them over

0:51:54.440 --> 0:51:56.160
<v Speaker 2>for twenty twenty four. Where's it going to come for

0:51:56.200 --> 0:51:59.200
<v Speaker 2>twenty twenty five? Figuring this out to the nearest moment

0:51:59.239 --> 0:52:02.880
<v Speaker 2>is impossible because it's a question of confidence, it's a reflexivity.

0:52:02.920 --> 0:52:06.080
<v Speaker 2>It's George Soros's theory, like this is all fine until

0:52:06.120 --> 0:52:08.160
<v Speaker 2>it's not fine. But when it's not fine, then we're

0:52:08.160 --> 0:52:10.040
<v Speaker 2>going to have a really interesting.

0:52:09.520 --> 0:52:13.600
<v Speaker 1>Problem, really interesting. Let me pivot a little bit and

0:52:13.719 --> 0:52:18.239
<v Speaker 1>talk about the Einhorn Collaborative. What is that? Why did

0:52:18.280 --> 0:52:19.879
<v Speaker 1>you start this organization?

0:52:20.640 --> 0:52:25.440
<v Speaker 2>The Einhorn Collaborative is my philanthropic effort, and it is

0:52:25.680 --> 0:52:31.200
<v Speaker 2>a view that we have a crisis of connection, that

0:52:31.320 --> 0:52:34.160
<v Speaker 2>people are not connecting to one another, that the society

0:52:34.239 --> 0:52:38.160
<v Speaker 2>is becoming more divided, and that we need to work

0:52:38.480 --> 0:52:41.240
<v Speaker 2>on bridging people back together.

0:52:42.040 --> 0:52:49.000
<v Speaker 1>So that requires stronger relationships, embracing differences. Do we have

0:52:49.080 --> 0:52:52.160
<v Speaker 1>any general resources going in that direction or is this

0:52:52.280 --> 0:52:54.480
<v Speaker 1>something that really isn't happening.

0:52:54.800 --> 0:52:58.560
<v Speaker 2>Well, it's really interesting because like seventy percent or so

0:52:58.640 --> 0:53:02.640
<v Speaker 2>of America is not politically polarized. It's just a fifteen

0:53:02.640 --> 0:53:05.920
<v Speaker 2>percent on the far of each side that get all

0:53:06.000 --> 0:53:09.399
<v Speaker 2>the attention and drive everybody else crazy. Most people don't

0:53:09.400 --> 0:53:11.640
<v Speaker 2>care that much and they kind of want to get along.

0:53:11.960 --> 0:53:14.200
<v Speaker 2>Our efforts are not just political. In fact, they're mostly

0:53:14.239 --> 0:53:18.160
<v Speaker 2>not political. They're cultural. We are working on helping mothers

0:53:18.200 --> 0:53:21.520
<v Speaker 2>bond with their newborn babies, for example, because if you

0:53:21.560 --> 0:53:25.279
<v Speaker 2>can develop a connection with a newborn baby, between the

0:53:25.320 --> 0:53:27.480
<v Speaker 2>mom and the baby in a dual kind of way,

0:53:27.920 --> 0:53:30.200
<v Speaker 2>sure it's great for the mother, but it teaches the

0:53:30.239 --> 0:53:33.880
<v Speaker 2>baby also how to have a normal relationship with somebody,

0:53:34.080 --> 0:53:36.600
<v Speaker 2>and then they can take that forward into the rest

0:53:36.600 --> 0:53:37.120
<v Speaker 2>of their life.

0:53:37.320 --> 0:53:40.200
<v Speaker 1>Let's stay with that a second. How does a philanthropy

0:53:40.880 --> 0:53:42.880
<v Speaker 1>help a mother bond with a baby.

0:53:43.640 --> 0:53:49.080
<v Speaker 2>Well, we're literally starting a program where we've done a

0:53:49.120 --> 0:53:52.560
<v Speaker 2>lot of research. We've done clinical studies, and essentially, if

0:53:53.000 --> 0:53:55.400
<v Speaker 2>you teach the mother to hold the baby, you teach

0:53:55.440 --> 0:53:58.360
<v Speaker 2>the mother to talk to the baby, You teach the

0:53:58.360 --> 0:54:00.640
<v Speaker 2>mother what to say to a baby, how to get

0:54:00.640 --> 0:54:03.480
<v Speaker 2>the baby to make eye contact, back and forth, and

0:54:03.520 --> 0:54:07.000
<v Speaker 2>how when the baby becomes disregulated, you know, crying or

0:54:07.040 --> 0:54:11.320
<v Speaker 2>whatever it is, how do you regulate back and calm

0:54:11.640 --> 0:54:14.000
<v Speaker 2>And once you learn to calm yourself, and once the

0:54:14.000 --> 0:54:16.120
<v Speaker 2>mother learns to calm the baby, and sometimes actually the

0:54:16.160 --> 0:54:21.280
<v Speaker 2>baby calms the mother. By creating this kind of dual relationship,

0:54:21.719 --> 0:54:25.480
<v Speaker 2>you wind up with a healthy relationship between the mother

0:54:25.520 --> 0:54:27.799
<v Speaker 2>and the baby, which they're then both able to take

0:54:27.960 --> 0:54:29.920
<v Speaker 2>out positively into the rest of their lives.

0:54:30.200 --> 0:54:33.880
<v Speaker 1>Huh, that's really interesting. What other work does the collaborative do?

0:54:34.000 --> 0:54:34.960
<v Speaker 1>Where else do you focus?

0:54:35.160 --> 0:54:39.799
<v Speaker 2>We focus on what we call that bonding. We call

0:54:39.920 --> 0:54:42.680
<v Speaker 2>another aspect of what we're doing, bridging. That's where we're

0:54:42.680 --> 0:54:47.200
<v Speaker 2>trying to bridge across difference in communities. We're getting some

0:54:47.280 --> 0:54:52.200
<v Speaker 2>people together of different religions or different political persuasions or

0:54:52.239 --> 0:54:57.440
<v Speaker 2>different cultural views and giving them opportunities to experience things together,

0:54:57.520 --> 0:55:01.799
<v Speaker 2>whether it's service, whether it's dinner, it's going to the

0:55:02.280 --> 0:55:04.840
<v Speaker 2>church of the different religion, or going to the mosque

0:55:04.840 --> 0:55:08.160
<v Speaker 2>of the different religion or the synagogue, and creating you know,

0:55:08.239 --> 0:55:11.400
<v Speaker 2>bonding between religious groups and so forth.

0:55:12.239 --> 0:55:15.000
<v Speaker 1>How do you measure success in these different areas? How

0:55:15.040 --> 0:55:18.400
<v Speaker 1>can you tell, Hey, the philanthropic capital we're putting to

0:55:18.440 --> 0:55:20.280
<v Speaker 1>work is actually having an impact?

0:55:20.480 --> 0:55:23.080
<v Speaker 2>Well, well you can because like like in the in

0:55:23.120 --> 0:55:25.040
<v Speaker 2>the bonding thing I was talking about with them with

0:55:25.160 --> 0:55:27.920
<v Speaker 2>the babies and the mothers, you can actually follow them

0:55:28.200 --> 0:55:31.160
<v Speaker 2>on a longitude and no basis and say, how are

0:55:31.200 --> 0:55:35.080
<v Speaker 2>these people performing? How are these people behaving? How are

0:55:35.120 --> 0:55:37.759
<v Speaker 2>they you know? Are they healthy? Are they how are

0:55:37.760 --> 0:55:39.920
<v Speaker 2>their relationships? Do they make friends when they get to

0:55:40.239 --> 0:55:41.640
<v Speaker 2>middle school and so on and so forth?

0:55:41.880 --> 0:55:45.879
<v Speaker 1>You're tracking this over time? Yes, huh, really interesting. Let's

0:55:46.200 --> 0:55:48.800
<v Speaker 1>stick with philanthropy. You've been very generous to your alma

0:55:48.840 --> 0:55:53.800
<v Speaker 1>Mada Cornell. We've seen a lot of pushback, especially amongst

0:55:53.920 --> 0:55:58.000
<v Speaker 1>alums from various IVY leagues to their campuses. You seem

0:55:58.080 --> 0:56:00.920
<v Speaker 1>to still have a great relationship with Cornell. Well, what

0:56:00.960 --> 0:56:02.920
<v Speaker 1>do you like that's going on there? What are they

0:56:02.960 --> 0:56:06.040
<v Speaker 1>doing right and wrong that you Penn and Harvard seems

0:56:06.040 --> 0:56:07.200
<v Speaker 1>to have dropped the ball on.

0:56:08.320 --> 0:56:12.560
<v Speaker 2>Well, I think Cornell. Look, everybody has problems, and Cornell

0:56:12.640 --> 0:56:14.960
<v Speaker 2>has problems too, And I'm not going to point anything

0:56:15.000 --> 0:56:19.319
<v Speaker 2>at any of these other universities that I'm not as

0:56:19.440 --> 0:56:25.319
<v Speaker 2>involved with. My philosophy for this is to try to

0:56:25.480 --> 0:56:29.240
<v Speaker 2>bring about positive change. I think when you have a crisis,

0:56:29.280 --> 0:56:33.279
<v Speaker 2>it creates an opportunity for change. And I think that

0:56:33.280 --> 0:56:36.520
<v Speaker 2>that you do this internally. You do this by discussing

0:56:36.520 --> 0:56:38.680
<v Speaker 2>it with the President, You discusseduss it with the Provost,

0:56:38.719 --> 0:56:41.279
<v Speaker 2>you discuss it with the other trustees, you discuss it

0:56:41.320 --> 0:56:45.360
<v Speaker 2>with the deans. I've been very involved in many, many conversations,

0:56:47.160 --> 0:56:49.520
<v Speaker 2>and some things I'm very happy about, and some things

0:56:49.560 --> 0:56:52.319
<v Speaker 2>I feel like there's a lot more that can be done.

0:56:52.920 --> 0:56:55.919
<v Speaker 2>But I believe in trying to work this out through

0:56:55.960 --> 0:56:58.200
<v Speaker 2>the system and not coming out in a very public

0:56:58.239 --> 0:57:02.360
<v Speaker 2>way and criticize in the newspaper or on this interview

0:57:02.440 --> 0:57:03.120
<v Speaker 2>or something like that.

0:57:03.200 --> 0:57:07.480
<v Speaker 1>You seem to be very quietly going about bringing positivity

0:57:07.560 --> 0:57:11.640
<v Speaker 1>to a rancorous debate as opposed to just throwing gasoline

0:57:11.680 --> 0:57:12.200
<v Speaker 1>on the fire.

0:57:12.920 --> 0:57:15.240
<v Speaker 2>I think that's right, and because I believe in bridging,

0:57:15.480 --> 0:57:19.600
<v Speaker 2>like I believe, you know, people on both sides of

0:57:19.640 --> 0:57:22.240
<v Speaker 2>this argument think that they're right, and they don't think

0:57:22.240 --> 0:57:25.560
<v Speaker 2>that they're bad people. Right. No matter which side you're on,

0:57:25.600 --> 0:57:28.200
<v Speaker 2>you think you're the good guy, right, and so at

0:57:28.200 --> 0:57:30.840
<v Speaker 2>some level maybe they are, or maybe we've got at

0:57:30.920 --> 0:57:32.800
<v Speaker 2>least understand it. And then you've got to figure out

0:57:32.840 --> 0:57:34.720
<v Speaker 2>how to engage in it. And then how is it

0:57:34.920 --> 0:57:38.160
<v Speaker 2>that you can find some commonality? What values do we

0:57:38.240 --> 0:57:42.040
<v Speaker 2>all have in common even if we disagree in important

0:57:42.080 --> 0:57:45.919
<v Speaker 2>ways about what policies are being being performed or what

0:57:46.000 --> 0:57:49.800
<v Speaker 2>the you know, what the behavior is and and yes,

0:57:49.880 --> 0:57:53.320
<v Speaker 2>you do need some base level of societal norm and

0:57:53.360 --> 0:57:55.800
<v Speaker 2>if you don't have that, you can't have anything. But

0:57:55.880 --> 0:57:58.120
<v Speaker 2>once you get through that base level, then you can

0:57:58.200 --> 0:58:00.600
<v Speaker 2>try to figure out how you bring people together. And

0:58:00.680 --> 0:58:06.400
<v Speaker 2>sometimes just agreeing to disagree is fine. Right. Another major

0:58:06.400 --> 0:58:09.080
<v Speaker 2>initiative we have is something that we call the New Pluralists,

0:58:09.600 --> 0:58:12.360
<v Speaker 2>and the New Pluralist is a funding collaborative. We've gotten

0:58:12.400 --> 0:58:16.680
<v Speaker 2>twenty two funders of very diverse views, everything from the

0:58:16.760 --> 0:58:19.440
<v Speaker 2>Cochs to the Hewletts. And what we do is we

0:58:19.480 --> 0:58:22.720
<v Speaker 2>pool our money and we're working on these cultural problems.

0:58:22.800 --> 0:58:25.440
<v Speaker 2>We've created a fund essentially what we do, and then

0:58:25.520 --> 0:58:28.240
<v Speaker 2>we make grants out into the field, a field builders

0:58:28.280 --> 0:58:33.040
<v Speaker 2>of people who are doing things to unite and bridge differences.

0:58:33.480 --> 0:58:37.960
<v Speaker 2>And so what's interesting is is first you have just

0:58:38.080 --> 0:58:40.440
<v Speaker 2>the funders figuring out how they can sit at the

0:58:40.440 --> 0:58:42.840
<v Speaker 2>table together because some of these people don't like each

0:58:42.840 --> 0:58:45.320
<v Speaker 2>other or they don't like what they do in other

0:58:45.400 --> 0:58:47.880
<v Speaker 2>areas of whatever it is that they're doing, and they've

0:58:47.880 --> 0:58:49.960
<v Speaker 2>agreed to come together, and then you put them together,

0:58:50.000 --> 0:58:51.920
<v Speaker 2>and then you actually have to say, what is it

0:58:51.960 --> 0:58:53.880
<v Speaker 2>that we have in common that we can fund for

0:58:53.920 --> 0:58:56.200
<v Speaker 2>the good of the country, right, and then you do

0:58:56.280 --> 0:58:58.360
<v Speaker 2>the funding and you get the benefit of that from

0:58:58.400 --> 0:58:59.240
<v Speaker 2>the good of the country.

0:59:00.080 --> 0:59:00.960
<v Speaker 1>That's something to collaboration.

0:59:02.160 --> 0:59:04.680
<v Speaker 2>That's a real core effort from the onhearn collaboratives. We've

0:59:04.720 --> 0:59:06.919
<v Speaker 2>actually kind of got this thing going for the last

0:59:06.920 --> 0:59:07.480
<v Speaker 2>three years.

0:59:07.560 --> 0:59:11.080
<v Speaker 1>So let me ask you a philosophical question. How much

0:59:11.160 --> 0:59:15.960
<v Speaker 1>of this division amongst different people and you know, actively

0:59:16.040 --> 0:59:20.000
<v Speaker 1>disliking the other side just stems from a lack of

0:59:20.120 --> 0:59:24.560
<v Speaker 1>empathy to people who have different views. It seems like

0:59:25.760 --> 0:59:28.320
<v Speaker 1>that was something that used to be a little more

0:59:28.360 --> 0:59:34.720
<v Speaker 1>available in the pre online, pre social media era, and

0:59:35.080 --> 0:59:39.720
<v Speaker 1>you're trying to get back to that working around what

0:59:40.120 --> 0:59:43.240
<v Speaker 1>do you do when you look at a Facebook or

0:59:43.280 --> 0:59:47.760
<v Speaker 1>a TikTok or a Twitter where the vitriol and just

0:59:47.880 --> 0:59:51.000
<v Speaker 1>the insanity goes off the charts.

0:59:51.800 --> 0:59:54.800
<v Speaker 2>You know, I saw a little caption saying like I

0:59:54.880 --> 0:59:58.280
<v Speaker 2>need to spend more time arguing with strangers on the

0:59:58.280 --> 1:00:02.080
<v Speaker 2>internet about politics. Like this sounds like a really bad

1:00:02.120 --> 1:00:05.680
<v Speaker 2>idea to me. I don't really spend very much time

1:00:05.680 --> 1:00:08.520
<v Speaker 2>myself on these kinds of social media. I don't think

1:00:08.760 --> 1:00:13.760
<v Speaker 2>that they're helping. In fact, they're probably hurting. It's hard,

1:00:13.800 --> 1:00:16.840
<v Speaker 2>you know, having some humility makes a lot of sense.

1:00:17.320 --> 1:00:19.800
<v Speaker 2>And that's like admitting that you're not right about everything

1:00:19.880 --> 1:00:22.360
<v Speaker 2>and learning that you're wrong. And you need to spend

1:00:22.400 --> 1:00:24.240
<v Speaker 2>time with people that you disagree with. You know, if

1:00:24.280 --> 1:00:26.400
<v Speaker 2>you only spend time with people who agree with you, you

1:00:26.320 --> 1:00:29.240
<v Speaker 2>don't learn anything. It's the people who you disagree with

1:00:29.400 --> 1:00:31.760
<v Speaker 2>that can point out your biases and you can notice

1:00:31.840 --> 1:00:34.640
<v Speaker 2>their biases, and it helps you learn and helps you grow,

1:00:34.840 --> 1:00:37.400
<v Speaker 2>and it helps you develop your thinking. And so it

1:00:38.000 --> 1:00:40.000
<v Speaker 2>makes a lot of sense to engage with people that

1:00:40.120 --> 1:00:41.720
<v Speaker 2>you don't agree.

1:00:41.440 --> 1:00:43.440
<v Speaker 1>With, stay out of the echo chamber a little bit,

1:00:43.520 --> 1:00:47.280
<v Speaker 1>and look for diverse voices. Let's talk about the Michael J.

1:00:47.440 --> 1:00:52.200
<v Speaker 1>Fox Foundation for Parkinson's Research. You serve on that board.

1:00:52.200 --> 1:00:53.960
<v Speaker 1>Tell us a little bit about what you do for them.

1:00:54.480 --> 1:00:57.479
<v Speaker 2>Well, for them, mostly I host poker tournaments. Oh really, yeah,

1:00:57.520 --> 1:01:00.400
<v Speaker 2>because I'm not very good at the science part. Like

1:01:01.040 --> 1:01:04.360
<v Speaker 2>this is really really hard problem that they're dealing with.

1:01:04.440 --> 1:01:07.120
<v Speaker 2>I mean, this is a brain disease and there's nothing

1:01:07.120 --> 1:01:10.120
<v Speaker 2>more complicated than the brain and trying to figure out

1:01:10.160 --> 1:01:13.840
<v Speaker 2>like how to ameliorate this is really really hard work.

1:01:14.280 --> 1:01:19.000
<v Speaker 2>But Michael J. Fox has put together the world experts

1:01:19.000 --> 1:01:22.720
<v Speaker 2>on this, gathered a ton of funding, and is actually

1:01:22.760 --> 1:01:26.760
<v Speaker 2>making real important progress. Last year they had a major

1:01:26.840 --> 1:01:30.040
<v Speaker 2>major breakthrough where they have developed what they call a biomarker,

1:01:30.400 --> 1:01:34.000
<v Speaker 2>which basically means that they can tap into your back

1:01:34.400 --> 1:01:37.000
<v Speaker 2>and take out some of your material and figure out

1:01:37.040 --> 1:01:39.320
<v Speaker 2>whether you're likely to have or maybe even already have

1:01:39.440 --> 1:01:42.360
<v Speaker 2>Parkinson's and so if you're on the course to it,

1:01:42.400 --> 1:01:45.800
<v Speaker 2>that means they can identify and diagnose it earlier, which

1:01:45.840 --> 1:01:48.360
<v Speaker 2>means we can get to treatment faster.

1:01:48.640 --> 1:01:50.960
<v Speaker 1>And I'm assuming the poker tournaments were raising a ton

1:01:50.960 --> 1:01:53.280
<v Speaker 1>of money for them and everybody has a great time.

1:01:53.640 --> 1:01:55.720
<v Speaker 2>Though the poker tournaments are best are the best kind

1:01:55.720 --> 1:01:58.680
<v Speaker 2>of fundraiser because people want to support the cause, but

1:01:58.720 --> 1:02:00.480
<v Speaker 2>they don't really want to hear all about it for

1:02:00.520 --> 1:02:02.960
<v Speaker 2>an hour, and so it's way better than these dinners

1:02:02.960 --> 1:02:06.520
<v Speaker 2>with the PowerPoint presentations and the speeches and the and

1:02:06.560 --> 1:02:08.080
<v Speaker 2>the stuff like that. I mean we do that too,

1:02:08.360 --> 1:02:11.080
<v Speaker 2>and a lot of the things that we support. But

1:02:11.120 --> 1:02:13.080
<v Speaker 2>poker tournaments are fun because people are just gonna have

1:02:13.080 --> 1:02:15.040
<v Speaker 2>a great evening and we're going to raise a bunch

1:02:15.040 --> 1:02:16.720
<v Speaker 2>of money, which is kind of really what we want

1:02:16.720 --> 1:02:16.880
<v Speaker 2>to do.

1:02:17.200 --> 1:02:19.840
<v Speaker 1>And what about the robin Hood Foundation, what are you

1:02:19.960 --> 1:02:23.360
<v Speaker 1>looking to do there and what's you're involvement with that group?

1:02:23.440 --> 1:02:25.560
<v Speaker 2>Well, I've been involved with robin Hood for a long time.

1:02:25.640 --> 1:02:27.120
<v Speaker 2>I was actually the chair of it for a couple

1:02:27.080 --> 1:02:29.640
<v Speaker 2>of years, but that ended a while ago. We're onto

1:02:29.960 --> 1:02:32.600
<v Speaker 2>even more effective chairs than me, which is really which

1:02:32.640 --> 1:02:36.720
<v Speaker 2>is really great. You know, the Robinhood Foundation is truly remarkable.

1:02:38.600 --> 1:02:41.480
<v Speaker 2>It's when you talk about measured impact. They measure like

1:02:41.560 --> 1:02:43.560
<v Speaker 2>everything that they're doing. But then if you take a

1:02:43.560 --> 1:02:47.440
<v Speaker 2>step back further and you ask yourself, you look at

1:02:47.440 --> 1:02:51.480
<v Speaker 2>these I'll just call them blue state big cities and

1:02:51.560 --> 1:02:54.520
<v Speaker 2>the problems that they have across the country, and you

1:02:54.520 --> 1:02:56.360
<v Speaker 2>see what's going on in Chicago, and you see what's

1:02:56.400 --> 1:02:59.080
<v Speaker 2>going on in San Francisco, and you see what's happening

1:02:59.120 --> 1:03:01.800
<v Speaker 2>in you know, and some of the other major cities.

1:03:01.800 --> 1:03:03.640
<v Speaker 2>And you look at New York. You know, New York's

1:03:03.680 --> 1:03:06.120
<v Speaker 2>doing a lot better than a lot of these other cities.

1:03:06.160 --> 1:03:09.320
<v Speaker 2>And I think that a lot some of this is

1:03:09.360 --> 1:03:11.920
<v Speaker 2>from the cumulative effect of the Robin Hood Foundation. Real thing,

1:03:11.920 --> 1:03:13.680
<v Speaker 2>I'm very very proud to be involved with.

1:03:13.880 --> 1:03:17.960
<v Speaker 1>Huh really really quite fascinating. Let's jump to our favorite

1:03:18.040 --> 1:03:22.320
<v Speaker 1>questions that we ask all of our guests, starting with

1:03:23.240 --> 1:03:26.840
<v Speaker 1>what have you been either watching or listening to? What's

1:03:26.880 --> 1:03:28.040
<v Speaker 1>been keeping you entertained?

1:03:28.360 --> 1:03:31.480
<v Speaker 2>Entertained? Well, I just finished watching the last season of Fargo,

1:03:32.240 --> 1:03:35.240
<v Speaker 2>which is deep, and it's dark, and it's fantastic, and

1:03:35.280 --> 1:03:37.720
<v Speaker 2>it's right there with the previous four seasons. You know,

1:03:37.760 --> 1:03:39.360
<v Speaker 2>there was the movie a long time ago. Yes, and

1:03:39.400 --> 1:03:43.360
<v Speaker 2>they've done a series on FX and and and they're fantastic.

1:03:43.400 --> 1:03:45.800
<v Speaker 2>They get a different cast and a different story each time,

1:03:46.040 --> 1:03:49.960
<v Speaker 2>and and it's it's it's dark, and I enjoy that.

1:03:50.200 --> 1:03:53.480
<v Speaker 1>I have a vivid recollection of the scene of her

1:03:53.960 --> 1:03:56.320
<v Speaker 1>trying to get rid of the body with the wood

1:03:56.400 --> 1:03:59.040
<v Speaker 1>chipper and the movie that stays with you a long time.

1:03:59.080 --> 1:03:59.960
<v Speaker 1>That was pretty dark thing.

1:04:00.280 --> 1:04:04.000
<v Speaker 2>Yeah, Well, they've built five seasons since, five different casts,

1:04:04.040 --> 1:04:07.440
<v Speaker 2>five totally different casts, different stories, but the theme is

1:04:07.480 --> 1:04:11.120
<v Speaker 2>always the same, you know, the stories told exactly where

1:04:11.160 --> 1:04:13.920
<v Speaker 2>it is except the names have been changed to you know,

1:04:14.000 --> 1:04:15.560
<v Speaker 2>protect the survivors and so forth.

1:04:15.720 --> 1:04:19.000
<v Speaker 1>So let's talk about your mentors who helped to shape

1:04:19.040 --> 1:04:19.680
<v Speaker 1>your career.

1:04:20.040 --> 1:04:22.280
<v Speaker 2>Yeah, I don't think I ever really had like a

1:04:22.320 --> 1:04:24.720
<v Speaker 2>single mentor. The closest would have been my boss, Peter

1:04:24.840 --> 1:04:27.760
<v Speaker 2>Collery when I was at Siegler Collery. But he was

1:04:27.800 --> 1:04:29.760
<v Speaker 2>really more my boss, I think, and I learned a

1:04:29.760 --> 1:04:33.480
<v Speaker 2>lot from him. I think I've just taken on knowledge

1:04:33.520 --> 1:04:37.120
<v Speaker 2>from various people and things that I've observed along the way.

1:04:38.000 --> 1:04:40.120
<v Speaker 1>Let's talk about books. What are you reading now and

1:04:40.160 --> 1:04:41.400
<v Speaker 1>what are some of your favorites.

1:04:42.000 --> 1:04:44.400
<v Speaker 2>Well, I read a baseball book every year, usually the

1:04:44.400 --> 1:04:47.720
<v Speaker 2>baseball perspectus. I read a poker book every year. Last

1:04:47.800 --> 1:04:52.440
<v Speaker 2>year's was on physical tells, reading people's expressions and figuring

1:04:52.520 --> 1:04:55.080
<v Speaker 2>all of that out. I don't get to read a

1:04:55.080 --> 1:04:57.600
<v Speaker 2>lot of books. I'm really maybe three or four books

1:04:57.640 --> 1:04:59.360
<v Speaker 2>a year at this point.

1:05:00.000 --> 1:05:03.120
<v Speaker 1>And mention you read a baseball book every year? Of

1:05:03.200 --> 1:05:05.640
<v Speaker 1>what went wrong in twenty twenty three for the Mets,

1:05:05.640 --> 1:05:08.400
<v Speaker 1>and do we have a chance this year? What are

1:05:08.400 --> 1:05:09.040
<v Speaker 1>you thinking about?

1:05:09.240 --> 1:05:13.040
<v Speaker 2>You know? The thing is is it's January, and January

1:05:13.080 --> 1:05:15.160
<v Speaker 2>is about the season. You really don't think a lot

1:05:15.280 --> 1:05:18.520
<v Speaker 2>about baseball. It wasn't a great year for the Mets.

1:05:18.560 --> 1:05:21.600
<v Speaker 2>There's been lots and lots that have been written about it.

1:05:21.680 --> 1:05:24.000
<v Speaker 2>I'm also a Brewers fan. I'm from Milwaukee, so i

1:05:24.040 --> 1:05:26.640
<v Speaker 2>still do Brewers, Bucks and Packers, and I'm a little

1:05:27.040 --> 1:05:29.440
<v Speaker 2>still recovering from the loss to the forty nine ers

1:05:29.480 --> 1:05:30.400
<v Speaker 2>from a couple of weeks ago.

1:05:30.800 --> 1:05:33.680
<v Speaker 1>Our final two questions, what sort of advice would you

1:05:33.720 --> 1:05:37.200
<v Speaker 1>give to a recent college grad interested in a career

1:05:37.280 --> 1:05:39.120
<v Speaker 1>in either investing or finance.

1:05:40.600 --> 1:05:45.040
<v Speaker 2>My advice for all young people is figure out what

1:05:45.080 --> 1:05:48.040
<v Speaker 2>you're good at and find something that you can do

1:05:48.360 --> 1:05:51.880
<v Speaker 2>that plays to your strength. Right, people have strengths and

1:05:51.920 --> 1:05:54.280
<v Speaker 2>they have weaknesses, and you want to improve your weaknesses.

1:05:54.720 --> 1:05:56.680
<v Speaker 2>But don't do that at your job. Do that in

1:05:56.680 --> 1:05:59.000
<v Speaker 2>your social life. Do that for your hobbies. You know,

1:05:59.040 --> 1:06:01.280
<v Speaker 2>if you want to get physical stronger, go lift weights

1:06:01.360 --> 1:06:04.040
<v Speaker 2>or something like that if you're not strong. But you know,

1:06:04.080 --> 1:06:06.440
<v Speaker 2>if you're not strong, don't try to become an athlete

1:06:06.560 --> 1:06:09.280
<v Speaker 2>because that doesn't play to your strength. Figure it out.

1:06:09.280 --> 1:06:11.800
<v Speaker 2>What is it that you are good at where you

1:06:11.960 --> 1:06:15.360
<v Speaker 2>have the best advantage over other people, Because there's plenty

1:06:15.400 --> 1:06:17.360
<v Speaker 2>of people who are going to be competing for whatever

1:06:17.400 --> 1:06:19.240
<v Speaker 2>it is that you are trying to do, so you

1:06:19.280 --> 1:06:21.560
<v Speaker 2>may as well at least be trying to play to

1:06:21.600 --> 1:06:22.080
<v Speaker 2>your strength.

1:06:22.520 --> 1:06:25.120
<v Speaker 1>And our final question, what do you know about the

1:06:25.120 --> 1:06:28.160
<v Speaker 1>world of investing today you wish you knew thirty or

1:06:28.160 --> 1:06:30.560
<v Speaker 1>so years ago when you were first starting out.

1:06:31.720 --> 1:06:34.080
<v Speaker 2>Well, I guess if I had to pick one thing,

1:06:34.280 --> 1:06:36.960
<v Speaker 2>I think it's been just the change in the dynamic

1:06:37.000 --> 1:06:40.040
<v Speaker 2>of the market, the way that it's broken from active

1:06:40.080 --> 1:06:42.600
<v Speaker 2>and passive and all of the rest of it. And

1:06:42.640 --> 1:06:47.840
<v Speaker 2>to also just kind of realize that, you know, people

1:06:48.440 --> 1:06:50.840
<v Speaker 2>act to follow their motivations. If you figure out what

1:06:50.880 --> 1:06:55.160
<v Speaker 2>the motivations are, you can often understand people's actions. Huh.

1:06:55.240 --> 1:06:58.200
<v Speaker 1>Really interesting. Thank you David for being so generous with

1:06:58.240 --> 1:07:01.800
<v Speaker 1>your time. We have been speaking with David Einhorn, President

1:07:01.840 --> 1:07:06.120
<v Speaker 1>and founder of Greenlight Capital. If you enjoy this conversation,

1:07:06.280 --> 1:07:09.200
<v Speaker 1>check out any of the five hundred pass discussions we've

1:07:09.200 --> 1:07:12.040
<v Speaker 1>had over the previous ten years. You can find those

1:07:12.080 --> 1:07:16.360
<v Speaker 1>at iTunes, Spotify, YouTube, wherever you find your favorite podcasts.

1:07:17.320 --> 1:07:20.280
<v Speaker 1>Be sure and check out our new podcast at the Money,

1:07:20.280 --> 1:07:23.000
<v Speaker 1>where each week I speak to an expert for ten

1:07:23.080 --> 1:07:28.560
<v Speaker 1>minutes about the most important aspect of your money, investing, earning,

1:07:28.720 --> 1:07:32.040
<v Speaker 1>and spending. That's at the Money. You'll find that in

1:07:32.080 --> 1:07:35.440
<v Speaker 1>your Master's and Business feed. Sign up for my daily

1:07:35.480 --> 1:07:37.920
<v Speaker 1>reading list at ridults dot com. Follow me on Twitter

1:07:37.960 --> 1:07:41.400
<v Speaker 1>at ridults, Follow all of the Bloomberg Family of podcasts

1:07:41.800 --> 1:07:44.960
<v Speaker 1>at podcast I would be remiss if I did not

1:07:45.040 --> 1:07:47.560
<v Speaker 1>thank the crack team that helps us put these conversations

1:07:47.560 --> 1:07:52.080
<v Speaker 1>together each week. Kaylie Lapara is my audio engineer. Attika

1:07:52.160 --> 1:07:55.840
<v Speaker 1>Valbrunt is my project manager. Anna Luke is my producer.

1:07:56.160 --> 1:08:00.760
<v Speaker 1>Sean Russo is my researcher. I'm Barry Ridolts. You've been

1:08:00.800 --> 1:08:07.120
<v Speaker 1>listening to Master's Business on Bloomberg Radio.