Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Masters in
Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
Speaker 2: This week on the podcast What a delight extra special
Speaker 2: guest Jim O'Shaughnessy. His book that I came to know
Speaker 2: him with first was What Works on Wall Street, which
Speaker 2: has been just a perennial seller. I think it's in
Speaker 2: its fourth or its sixth edition and really influenced several
Speaker 2: generations of quants. On finance, O'Shaughnessey Asset Management became a
Speaker 2: leader indirect indexing eventually was bought by Franklin Templeton, leading
Speaker 2: him to launch O'Shaughnessy Ventures, O'Shaughnessy Fellowships, Infinite Loops podcast,
Speaker 2: just so many different things. New book is delightfully titled
Speaker 2: Two Thoughts, a timeless collection of infinite wisdom, and reflects
Speaker 2: many of the insights and just thoughtfulness that Jim shows
Speaker 2: in everything he does. I always find it delightful to
Speaker 2: have him on the show, and you can tell how
Speaker 2: much I appreciate him just by the conversation meanders wherever
Speaker 2: it goes, and I occasionally look at my list of questions,
Speaker 2: but really I just want to see where Jim's mind
Speaker 2: is going to take it and come along for the ride.
Speaker 2: I thought this was delightful and I think you will
Speaker 2: also with no further ado my conversation with Jim O'Shaughnessy Barry.
Speaker 3: I am always looking forward to these conversations. That's great
Speaker 3: to be back.
Speaker 2: It's a pleasure for me. Also, you and I.
Speaker 3: Go way back, way way back.
Speaker 2: And it's kind of funny, Like twenty five years later,
Speaker 2: I was like, oh, how do you know Jim. Oh,
Speaker 2: we met in the green room of TV, you know,
Speaker 2: right after the dot com crash. It was kind of
Speaker 2: it was kind of funny. But let's talk a little
Speaker 2: bit about all the different businesses and ventures that you're
Speaker 2: you're involved with. So I knew you right around the
Speaker 2: time you were getting ready to depart bear Sterns. You
Speaker 2: at bear Stearns for like.
Speaker 3: A decade or so, no, about five and a half years.
Speaker 2: Okay, so the in the mid two thousands, and you
Speaker 2: had the great insight and business acumen to tap out
Speaker 2: of bear Sterns in two thousand and seven with all
Speaker 2: of those options that you had and exercise the option
Speaker 2: sell them and launch your showing. Essy asset management. So
Speaker 2: you went on the way out, you went on the
Speaker 2: way into starting the new firm. Tell us a little
Speaker 2: bit about the early days leaving bear Stearns and setting
Speaker 2: up OSAM.
Speaker 3: So first, let me correct everyone assumes that I saw
Speaker 3: the Great financial crisis coming and therefore wanted to spin
Speaker 3: out of bear Stearns. Yeah, what do they say if
Speaker 3: the story conflicts with the legend, print the legend. The
Speaker 3: legend really isn't correct. Though, we had begun conversations with
Speaker 3: bear Stearns folks months and months before the financial crisis
Speaker 3: came on the scene, and it was essentially a very
Speaker 3: amicable parting. As you note, when we spun out, we
Speaker 3: kept all of our bear Stearns accounts, continued to work
Speaker 3: with all their private client service people over there, So
Speaker 3: it was very very amicable. But of course, because the
Speaker 3: Great financial crisis came along and bear had those CDO
Speaker 3: funds that had a little bit of a problem. Was
Speaker 3: it was just irresistible for Newspece people to say. I
Speaker 3: had one reporter sit with me for an hour and
Speaker 3: a half and all she kept doing was, come on,
Speaker 3: tell me the truth, tell me the truth, tell me
Speaker 3: the truth.
Speaker 2: You know, It's funny because when we look at certain
Speaker 2: books that get the timing of things right or completely wrong.
Speaker 2: People forget a book just doesn't appear wholesale out of
Speaker 2: thin cloth. It's the idea has to come along, and
Speaker 2: then then you got to get a publisher that wants
Speaker 2: and unless you're gonna self publish, then you got to
Speaker 2: write it so that it's like a one or two
Speaker 2: year lag. I would imagine pulling out a substantial division
Speaker 2: from a major brokerage firm doesn't happen overnight. It's going
Speaker 2: to be like a six or twelve month.
Speaker 3: Process, absolutely, because you have to have everyone with the
Speaker 3: oars going in the same direction. You want to make
Speaker 3: sure that it is agreeable and everyone is whether they're
Speaker 3: unhappy that you're going, they're happy with the deal that allowed.
Speaker 2: You to go.
Speaker 3: And so I took extra time to make sure that
Speaker 3: that happened because I loved the folks over at Bear
Speaker 3: and it was really just my own desire to be
Speaker 3: an entrepreneur again, and they really got that and so
Speaker 3: very amicable. But as you know, those things take a
Speaker 3: long time to get negotiated out.
Speaker 2: Yeah, you know, to me, the thing I'm I was
Speaker 2: always kind of sad about with the fall of Bear
Speaker 2: Stones eventually picked up for pennies by Jamie Diamond and
Speaker 2: JP Morgan Chase and then even Lehman brothers. I know
Speaker 2: a lot of great people in a lot of different divisions.
Speaker 2: You know, we all have mentors all over the street
Speaker 2: that even if they're a counterparty or if they're a salesperson,
Speaker 2: there were things to learn from folks. And Bear and
Speaker 2: Lehman were two like giant storied names. And I mean,
Speaker 2: obviously there was a massive disruption throughout society, but the
Speaker 2: tragedy that a lot of lay people don't know are
Speaker 2: really good people doing really good work get they're the
Speaker 2: collateral damage from someone else's screw up.
Speaker 3: Totally agree, and the you know, obviously just my personal opinion,
Speaker 3: but I think at that particular point in time, all
Speaker 3: of the investment banks were bankrupt or insolvent.
Speaker 2: And well some were a little more insolvent than others.
Speaker 3: Yeah, I agree, I agree, And so it was almost
Speaker 3: a bit like luck of the draw that Lehman and
Speaker 3: Bear were the ones to go.
Speaker 2: Down there went down early enough that would be salvageable.
Speaker 2: And then a little known story that a lot of
Speaker 2: people are unaware of. When I was writing Bail Out
Speaker 2: Nation and doing my homework, it turned out that JP
Speaker 2: Morgan Chase had a little derivatives flare up like years earlier.
Speaker 2: And I don't remember if it was Jamie Diamond or
Speaker 2: one of his lieutenanenans, but someone said, hey, this is
Speaker 2: a mess, and this is really potentially damaging. And it
Speaker 2: might have been Diamond who said, sell it all. I
Speaker 2: don't care the price, if you have to take a
Speaker 2: ten or twenty percent haircut. I want all this, well
Speaker 2: of the books. And that's what they did. And so
Speaker 2: when the world went to hell, they were They picked
Speaker 2: up Washington Mutual, they picked up Bear Sterns. They got
Speaker 2: to cherry pick the best of the best at pennies
Speaker 2: on the dollar. And that's why JP Morgan is the
Speaker 2: monster success it is today.
Speaker 3: Well, Jamie is a super smart guy, and that does
Speaker 3: not surprise me at all. You know, the joke around
Speaker 3: Bear Stearns at the time was that Jamie really the
Speaker 3: real reason he wanted to buy Bear.
Speaker 2: Was he wanted the building right right, which is now
Speaker 2: overshadowed by their brand new headquarter no park. But that
Speaker 2: was a great octagonical building which we could see out
Speaker 2: from our farm's windows on Brian Park with the glass.
Speaker 3: It was a beautiful.
Speaker 2: And and you walk in and it's like, you know,
Speaker 2: they used to be Wall Street and then there was
Speaker 2: you know, the Morgan, Stanley and Lehman brothers sort of
Speaker 2: off of Midtown. Yeah where, and then this was just
Speaker 2: all right, so very prescient before Vanderbilt was even a thing.
Speaker 2: That's right, And there they are now when Vanderbilt is
Speaker 2: a monster. So so let's bring it back to to
Speaker 2: what you're doing. So you leave there you launch. Oh, Sam,
Speaker 2: you've already had great success with what works on Wall Street?
Speaker 2: What made you think? I think we're gonna develop a
Speaker 2: series of quantitative approaches to managing money?
Speaker 3: Wow? Uh so that was a dinner when I was
Speaker 3: a teenager. My grandfather had been very successful. He was
Speaker 3: an oil speculator, uh huh, and he kind of beat
Speaker 3: the pledge guys by about seven years. He proceeded to
Speaker 3: give away the vast portion of his fortune during his
Speaker 3: own lifetime.
Speaker 2: What was it really a fortune?
Speaker 3: It really was, no kidd. And what he couldn't give
Speaker 3: away he put into a foundation, the Iao'shaughnessy Foundation, which
Speaker 3: I think today is still about one hundred million dollar foundation,
Speaker 3: No kidd, but he made his five kids the trustees,
Speaker 3: and so once a quarter there would be a dinner
Speaker 3: and it would rotate. I was brought up at Saint Paul,
Speaker 3: and so during the Saint Paul rotation, I got lucky
Speaker 3: enough at I think I was sixteen to get invited
Speaker 3: to the adult table. And of course, like i'd want
Speaker 3: it to be an adult, I loved going to my parents'
Speaker 3: cocktail parties and talking to adults, and so I was
Speaker 3: really excited. And literally I was put down next to
Speaker 3: my uncle John and my dad, and I'm listening and
Speaker 3: they're talking about IBM, but they're just talking about the CEO.
Speaker 3: They're not talking about how.
Speaker 2: Much do they make?
Speaker 3: How much do you have to pay for every dollar
Speaker 3: of earnings or sales or evida? And I kind of
Speaker 3: raised my hand and said, Dad, Uncle John, don't you
Speaker 3: think it might be a better idea to look at
Speaker 3: it by the numbers? And they dismissed me. This is
Speaker 3: nineteen seventy six, right, So I got yeah, exactly, well exactly,
Speaker 3: and so I decided, you know what, I'm going to
Speaker 3: go look into this. So I took myself down to
Speaker 3: the James J. Hill Research Library in downtown Saint Paul,
Speaker 3: and I thought I was going to be really ambitious,
Speaker 3: but I am potentially the world's laziest man. So when
Speaker 3: I saw the five hundred of the S and P,
Speaker 3: the S and P tear sheet book, I'm like, oh,
Speaker 3: I'm not gonna be able to do that. So I
Speaker 3: alighted on the Dow thirty sucks right? Did the research
Speaker 3: found very compelling evidence that what it's pe is really
Speaker 3: matters to your returns going forward. Very very high valuations
Speaker 3: tended to crash and burn, Very very cheap valuations tended
Speaker 3: to do well. But of course, you know Barry, I
Speaker 3: was sixteen seventeen, much more interested in girls, and so
Speaker 3: after college, got married young, I was like, I've got
Speaker 3: to revisit all this, and got the data set from
Speaker 3: Compu's stat and essentially that became what works on Wall Street.
Speaker 2: So wait, would you study in college?
Speaker 3: So the reason I am an economics I have a
Speaker 3: degree in economics. The reason for that was I had
Speaker 3: maybe six more credits, four to six more credits in
Speaker 3: economics than I had in history. So history absolutely well, listen,
Speaker 3: I think a good knowledge of history is absolutely vital
Speaker 3: if you want to be a good investor, right yeah.
Speaker 3: I mean, like one of the Roman wits said, he
Speaker 3: who does not understand what happened before they were born
Speaker 3: remains forever a child, And essentially I didn't want to
Speaker 3: remain a child. If you look back at the market's history,
Speaker 3: guess what. History doesn't repeat itself.
Speaker 2: But it rhymes.
Speaker 3: I mean, you go back to Isaac Newton losing a
Speaker 3: fortune in the south Sea bubble, and like, literally I
Speaker 3: always do this joke because people get it. It's like
Speaker 3: people were so in love with that stock. Poets wrote
Speaker 3: poetry about it. One went fill the south Sea goblet
Speaker 3: ful the God's shill of our stocks. Take care europea
Speaker 3: please accepts the bull, but Jove with joy puts off
Speaker 3: the bear. And I used to when I was still
Speaker 3: at OSAM, I used to say, I'm totally a quant
Speaker 3: but if if somebody writes a poem about a stock
Speaker 3: you owned.
Speaker 2: That's a high. That's amazing, and it's funny. You and
Speaker 2: I both have a love of quotations. And the I
Speaker 2: tried repeatedly to track down the source of history doesn't repeat,
Speaker 2: but it rhymes. It's always attributed to Mark Twain or
Speaker 2: someone else, and I've never been able to really verify that.
Speaker 3: Yeah, quote investigator.
Speaker 2: I love that site.
Speaker 3: Yeah, it's pretty good. They can normally get you to
Speaker 3: the original sighting of the text. What's funny about that, though,
Speaker 3: is almost inevitably it's somebody you've absolutely never heard of.
Speaker 3: That's right, And I think that's why people like when
Speaker 3: that sounds like something Mark Twain would say.
Speaker 2: Right.
Speaker 3: But then there's also the Mark Twain Oscar wild I
Speaker 3: mean there's a bunch of them. Like any quote that
Speaker 3: you really love and you don't know who did it,
Speaker 3: people tend to say Mark Twain Oscar.
Speaker 2: The one from Twain that stands out is and I'm
Speaker 2: gonna mangle this. It's not the things we know that
Speaker 2: get us into trouble. It's the things we know for
Speaker 2: sure that just ain't show.
Speaker 3: Yeah. That was actually a character of Mark Twain's, Oh really,
Speaker 3: And he spoke like a Southerner of the late a
Speaker 3: nineteen hundreds, and I think his last name was Ward.
Speaker 3: The character's last name was Ward Twain. I mean, he
Speaker 3: has some of the great actual quotes that are really his.
Speaker 3: What I love is like if you pick up a
Speaker 3: dog in the street that is starving and feed it.
Speaker 3: It will love you. If you do the same for
Speaker 3: a human, it will bite you. This is the principal
Speaker 3: difference between a dog and a man, which A.
Speaker 2: Is true and B leads to the newer line, if
Speaker 2: you want a friend on Wall Street, get a dog. Yeah,
Speaker 2: it's really true. We're going to talk more about quotes
Speaker 2: and books in a moment. Before we do that, I
Speaker 2: just want to bring up the first book, What Works
Speaker 2: on Wall Street. That book not only has been through
Speaker 2: multiple editions, it's had legs, It's influenced an entire generation
Speaker 2: or two of quants. What was the most surprising thing
Speaker 2: about what you found in the book and then its
Speaker 2: subsequent reception in finance?
Speaker 3: So, I think the most surprising thing was a number
Speaker 3: of people at various firms that I was investigating working
Speaker 3: for before starting my own I mean, I had my
Speaker 3: own company, but I was getting a lot of offers,
Speaker 3: primarily because they knew the book was coming right many
Speaker 3: of them when they saw the galleys of the book,
Speaker 3: the manuscript, the first thing they said to me, Bary
Speaker 3: was we would love to hire you, but you cannot
Speaker 3: publish this view you're giving it away, right exactly, going
Speaker 3: to go there exactly. And I was like, no, no, no, no, no,
Speaker 3: you you can have the greatest truth in the world.
Speaker 3: You can scream it from all the rooftops, you can
Speaker 3: take full page ads in the Wall Street Journal. Most
Speaker 3: people are just gonna go, eh, they're not gonna do it.
Speaker 2: It's so true. You know. My takeaway from my first book,
Speaker 2: which is now fifteen years ago, was there would be
Speaker 2: these debates about what led to the crisis, what were
Speaker 2: the factors? What were And I'm like, no, no, We've
Speaker 2: solved that. I've addressed that. Let's let's move beyond that.
Speaker 2: And the arguments didn't stop. People just kept on debating it.
Speaker 2: And my takeaway was, oh, you could just drop a
Speaker 2: truth bomb on people's laps and if they don't want
Speaker 2: to believe it, they're not gonna believe it. And that
Speaker 2: was like, maybe I was naive, but you're one hundred
Speaker 2: percent right. The fact that they thought you were giving
Speaker 2: the secret away you could here's a secret to investing.
Speaker 2: Not maybe you'll do okay with it, but nobody's going
Speaker 2: to really adapt.
Speaker 3: Well, you know what's funny is I would say to
Speaker 3: these people It was one of the like when I
Speaker 3: started out, and actually What Works wasn't my first book,
Speaker 3: invest Like the best was, which showed you really how
Speaker 3: to clone your favorite money managers right by looking at
Speaker 3: the biggest difference between their portfolio factor distribution and then
Speaker 3: using those as screens to get a portfolio much like
Speaker 3: your manager. Note we used to update the clones versus
Speaker 3: the manager. Last time we did it was years and
Speaker 3: years ago. But the thing that I found really interesting
Speaker 3: was all of the clones were beating the managers that
Speaker 3: they cloned.
Speaker 2: Was that case of the fee or was that cos
Speaker 2: they're not great sellers?
Speaker 3: It was because of our very human emotional decision makings.
Speaker 3: Almost always under extreme stress, models don't get stressed, you know,
Speaker 3: they don't get hungover, They never fight with their spouse.
Speaker 3: They just keep applying those criteria. You're in, you're out.
Speaker 3: And I think that the you know, we went through
Speaker 3: some tough times after that book came out, and and
Speaker 3: people have different ways of dealing with stress, and one
Speaker 3: of them is not being good at selling.
Speaker 2: So there's been a number of studies and I don't
Speaker 2: want to talk about my book, We're going to talk
Speaker 2: about your book, But some really fascinating things you learn
Speaker 2: are when you look at the academic research fund manager.
Speaker 2: Fund managers are actually surprisingly good buyers, yes, but they're
Speaker 2: terrible sellers. And part of the reason is the emotionality
Speaker 2: of the sale. They tend to panic out when they shouldn't,
Speaker 2: or through the opposite, hold on right to the bitter
Speaker 2: end when they.
Speaker 3: Really should well. And also it's just because it's just
Speaker 3: part of our human os, part of our human operator system.
Speaker 3: I remember when Enron was going through difficulties and I
Speaker 3: was set to speak with a classic manager, right, a
Speaker 3: fundamental guy, and we were going to share the stage.
Speaker 3: And the first question went to me and it was like,
Speaker 3: are you do you own Enron? And my answer was no,
Speaker 3: the numbers are pretty bad and so we don't. And
Speaker 3: he looked at me kind of you know, with the
Speaker 3: chuckle ugh you quants, you know, and then he launched
Speaker 3: into this description of not only did he hold, he
Speaker 3: bought more and then he gave this as the explanation.
Speaker 3: I went to a barbecue at the cfo's house. The
Speaker 3: CEO was there, the CFO, and I looked them in
Speaker 3: the eye and I said, is there trouble? And they
Speaker 3: assured me there wasn't and I'm just kind of like
Speaker 3: sitting over there with Oh, okay, just don't touch this one.
Speaker 2: Maybe we could get a short put on this that
Speaker 2: just like I'll tell you something, it's really funny. And
Speaker 2: this just goes to how naive and stupid I am,
Speaker 2: or especially was early in my career. I would listen
Speaker 2: in on quarterly calls, and I would believe every word
Speaker 2: I heard, like, these guys aren't going to lie to
Speaker 2: their investors. Everything's gonna be great. And I very quickly learned, oh,
Speaker 2: you're a terrible judge of people. You'll buy anything that
Speaker 2: a slick salesman is selling you. You just have to stop.
Speaker 2: And I just stopped listening to calls because I'm an idiot.
Speaker 2: I believe what they say. I would rather look at
Speaker 2: the numbers and yeah, I know the numbers can lie,
Speaker 2: but not as easily as you know that.
Speaker 3: That's also a really big part of human os default
Speaker 3: to trust.
Speaker 2: Well, we're social.
Speaker 3: Right, right, were domesticated primates. We grew up in groups
Speaker 3: where trust was really really important. So your average human
Speaker 3: defaults to trust. And by the way, that's not a
Speaker 3: bad default for the vast majority of people. It probably
Speaker 3: works better to trust who you're listening to, right, And
Speaker 3: so one of the things that we're looking at in
Speaker 3: one of our divisions at O'Shaughnessy Adventures right now is
Speaker 3: voice software AI that does stress analysis on any type
Speaker 3: of media. So obviously earning calls present themselves as kind
Speaker 3: of number one. Yeah really and I got to tell you,
Speaker 3: Barry Wow.
Speaker 2: Exciting way stuff.
Speaker 3: Oh my god.
Speaker 2: Now how much of that is nervousness about speaking to
Speaker 2: a large audience and nervousness because they know something and
Speaker 2: they don't want to disclose it.
Speaker 3: So, as you might guess, you do baselines. You take
Speaker 3: a recording where clearly either you know, you get some
Speaker 3: tape that was before the call or you know, a
Speaker 3: speech that had nothing to do with earnings, and that
Speaker 3: creates your baseline, and then you get to see very
Speaker 3: very quickly, like Spike, we don't have any worries.
Speaker 2: Spike, Wow, that sounds like fun.
Speaker 3: Yeah, it is fun, And we're not sure how we're
Speaker 3: gonna do it because we don't offer asset management services
Speaker 3: to people outside of O'shaughna's Adventures. That was a deal
Speaker 3: that we made with Franklin Templeton that we would not launch, but.
Speaker 2: You could still do a little Come on, don't don't
Speaker 2: you get the itch sometimes to say, hey, x y
Speaker 2: Z stock is wildly overvalued and the CFO is full
Speaker 2: of it. Let's put on some let's buy some deep
Speaker 2: out of the money puts. We'd see where this goes.
Speaker 3: You know, if you can keep a secret, we might
Speaker 3: try that with some of our internal capital.
Speaker 2: Let me know, I'm right there with you. I love
Speaker 2: the idea of that. Where did the title come from?
Speaker 3: So it came from a group of my teammates at OSV.
Speaker 3: Essentially I have been a quote junkie all of my life.
Speaker 3: Same so I have kept I Barry have notebooks filled
Speaker 3: with oh really, from way back when I I think
Speaker 3: the first time I started it, I was twenty one.
Speaker 3: And so I just love them and I think that
Speaker 3: you know, they can pack a lot of a punch
Speaker 3: if you if you put them together right, if you
Speaker 3: curate them right, et cetera. If you read what Works
Speaker 3: on Wall Street, I open every chapter with it.
Speaker 2: I do that a lot. Also, I writ it's fun.
Speaker 2: Let me let me ask you one other question about
Speaker 2: the title. So one of the things that's fascinating if
Speaker 2: you're if you like music or poetry or even I'm
Speaker 2: gonna go into the weed Shakespearean iamic pentameter. Okay, so
Speaker 2: there is a rhythm too, and I'm gonna write this
Speaker 2: down so you know, even if if you get this,
Speaker 2: I want you to know there is a rhythm to
Speaker 2: the phrase A timeless collection of infinite wisdom. That reminds
Speaker 2: me of another book title. And I'm curious if it
Speaker 2: was in your mind when you came out with this.
Speaker 3: Oh you got me on that one.
Speaker 2: A heartbreaking work of staggering genies, A timeless collection of
Speaker 2: infinite wisdom. It just leaves off in that same rhythm.
Speaker 3: I don't know if that was a wasn't purpose behind
Speaker 3: recause I've always loved that title.
Speaker 2: Heartbreaking work, stagger and and it's like you could go
Speaker 2: with you a different It's a staggering work of heartbreaking
Speaker 2: gene It's like you could flip it around, but this
Speaker 2: phrase theology just left that left right out.
Speaker 3: I am incredibly lucky to have just extraordinarily talented teammates.
Speaker 3: We have a lot of writers on the team, we
Speaker 3: have a lot of editors, and you know they would
Speaker 3: just go at it like, what about this title? What
Speaker 3: about because we had to call it two thoughts because
Speaker 3: this started very on a whim.
Speaker 2: Well, I know you have been tweeting for I don't
Speaker 2: know ten years, not just a quote. And I was
Speaker 2: doing that for a long time, just throwing a quote
Speaker 2: up that I thought was relevant. Sometimes I would stagger
Speaker 2: them out, like you can plan a tweet six months
Speaker 2: in advance. Hey, I don't know what's going to be happening
Speaker 2: in August, but I think this is relevant. You have
Speaker 2: been doing two tweets for forever.
Speaker 3: Yeah, And so it was kind of like, you know
Speaker 3: Ken Stanley's book Greatness can't be planned, This is a
Speaker 3: perfect example of that. So I just thought, you know,
Speaker 3: what the heck, I'm going to put up two thoughts
Speaker 3: and I'll see if I like it, if I keep
Speaker 3: doing it, I'll just keep doing it right. And then
Speaker 3: all of a sudden, like the people that got attracted
Speaker 3: to it were there was a lot of people, and
Speaker 3: then I started getting dms on Twitter basically saying hey,
Speaker 3: if you would do this in a newsletter, I would subscribe.
Speaker 3: And then one of my colleagues was like, well, let's
Speaker 3: do the newsletter, and in the newsletter, why don't we say, hey,
Speaker 3: would you like a book? And that's what happened. Literally,
Speaker 3: we iterated, iterated, iterated, and ended up publishing the book.
Speaker 2: Huh. So that's really interesting that that's the genesis of
Speaker 2: the two thoughts. When you're picking a pair of thoughts
Speaker 2: from the same author, are you looking for things that
Speaker 2: compliment each other? Are you looking for their most to
Speaker 2: most profound statements? How are you selecting A and B
Speaker 2: for this author?
Speaker 3: Yeah, it's a little bit messy to be really honest,
Speaker 3: because I'll usually start with the notebooks that have all
Speaker 3: my handwritten quotes out when I copied the quote over,
Speaker 3: and sometimes I'll think, Ooh, I found like the perfect
Speaker 3: one quote from this author, And then I'll spend some
Speaker 3: time going through the rest of their work, etc. Finding
Speaker 3: one that would compliment it. But then sometimes some of
Speaker 3: the best two quotes that work the best they don't
Speaker 3: compliment each other. In other words, it's kind of like, hey,
Speaker 3: you know history rhymes, But then the second quote is
Speaker 3: but always keep your eyes on the horizon, right, Like.
Speaker 2: Hmmm, two very different, two very different things.
Speaker 3: And so I wasn't precious about it at all, literally,
Speaker 3: because it just grew out of me thrown. Two quotes
Speaker 3: from the same author are up on Twitter, and so
Speaker 3: you know, after the fact, people start asking like, well,
Speaker 3: did you plan it that way? And the honest to
Speaker 3: God truth is no, I did not organically grew up ratically. Hey,
Speaker 3: if you do something, my experience has been tacking into
Speaker 3: what works. Yeah, and you know it's not quite direct mail,
Speaker 3: no where. Hey, we're getting a response from this, but
Speaker 3: not that. It's not exactly an ab test, but hey,
Speaker 3: people seem to like this, Let's give them more. Yeah,
Speaker 3: and that's what happened here. You know, like one of
Speaker 3: the best growth factors in investing is momentum, and if
Speaker 3: you see something gaining momentum, this is this is a
Speaker 3: really important idea for me. I always listen to the
Speaker 3: market because if I have one opinion and the market
Speaker 3: has a different opinion, I'm wrong probably most of the time.
Speaker 3: And so momentum in this regard. You see all the
Speaker 3: dms increasing, Hey, when are you going to do the
Speaker 3: book for the Hey, where's the newsletter? Etc. And I'm like, Okay,
Speaker 3: this is truly emerging from beneath, not from me saying
Speaker 3: you know what I'm gonna do a two quotes book
Speaker 3: and it's gonna be great. No, this was all others
Speaker 3: in the marketplace saying to me, hey, Jim, do a
Speaker 3: two thoughts book.
Speaker 2: A grassroots groundswell. So let's talk about knowing that you've
Speaker 2: had all these quotes over the decades, how did you
Speaker 2: begin to think about organizing this? Just quotes this Bartlett's
Speaker 2: Book of Quotations, and that's alphabetical. Yeah, and you know
Speaker 2: that's a research piece, but you're putting this out as
Speaker 2: less of an encyclopedia more of a nonfiction. How'd you
Speaker 2: think about how you wanted to structure it and organize it.
Speaker 3: We went back and forth on that forever, and then
Speaker 3: we decided, okay, let's separate it by broad groupings like thinkers, writers,
Speaker 3: author you know, dynamos, people who founded companies and were
Speaker 3: incredibly successful. And we in the hardcover of the book,
Speaker 3: we made sure that each one was color quote coded,
Speaker 3: because really, the book is not meant for you to
Speaker 3: sit down and read all the quotes. It's really meant
Speaker 3: to have on your coffee table, have on your desk
Speaker 3: and just open it up randomly. It's what I do,
Speaker 3: and just read the two quotes because you'll see two
Speaker 3: quotes on each page and kind of think about them.
Speaker 3: And because people are and by the way, that's the
Speaker 3: way everyone I've ever talked to as a copy of
Speaker 3: the book, that's the way they're using it. And so
Speaker 3: it was the kind of the you know, a lot
Speaker 3: of people do morning pages, do that kind of thing
Speaker 3: in the morning they write. And the number of people
Speaker 3: who've either emailed me, texted me, or dm me on
Speaker 3: Twitter saying I absolutely love this for my morning writing,
Speaker 3: right because they'll open it randomly, right, they'll they'll contemplate
Speaker 3: the quote, they'll write it at the top of their
Speaker 3: their morning writing and then that's what they talk about.
Speaker 2: It inspires them. So based on that, let me suggest
Speaker 2: we need a two quota day desktop calendar where you like,
Speaker 2: do you remember those old ones where I just pull
Speaker 2: you know, just it was almost like a giant pad
Speaker 2: of mine. Mine.
Speaker 3: Mine was a far side.
Speaker 2: I was about to say that I still have this
Speaker 2: in my head, this School for the Gifted where he's
Speaker 2: pushing on the and the door says, well like from
Speaker 2: that exact same exactly. I had one of those, and
Speaker 2: I had a Calvin and Hobbes and it's just a
Speaker 2: different one every other one of my favorites. Absolutely, that's
Speaker 2: so funny. So let's talk about what are real quotes
Speaker 2: and what or not. And I have a very vivid
Speaker 2: recollection of putting a quote that supposedly was Thomas Jefferson
Speaker 2: in Bailout Nation, and like a year after the book
Speaker 2: was published, I got an email from someone saying they
Speaker 2: liked the book. Ps, this is an urban legend. Thomas
Speaker 2: Jefferson never said this. And that's how I ended up
Speaker 2: eventually tracking down Quote Investigator because I was so horrified
Speaker 2: and one person said something nobody ever mentioned it again,
Speaker 2: and it was like, all right, so the good news
Speaker 2: is the bad news is what a screw up. The
Speaker 2: good news is nobody noticed. How did you go about
Speaker 2: the process of validating and verifying that the quotes were
Speaker 2: real and genuine. It's not just Mark Twain, it's Albert
Speaker 2: Einstein and George Carlin apparently said all these things. They
Speaker 2: never said compounding is the eighth wonder. Einstein never said, yeah,
Speaker 2: I know.
Speaker 3: So there. I was very lucky to have a very
Speaker 3: diligent team, and they identified a host of sources. We
Speaker 3: use Quote Investigator, but we used others as well. To
Speaker 3: try to get the veracity of the author and the
Speaker 3: quote right now. Having said that, I'm sure that there
Speaker 3: are still some examples in there where we got it wrong,
Speaker 3: and so we even put a little thing in there saying,
Speaker 3: you know, yeah, all errors are our own, right. But philosophically,
Speaker 3: I have a little bit of a different view of this.
Speaker 3: I think that we all too often because we anthromorphize
Speaker 3: things to the extent where if Albert Einstein said this,
Speaker 3: then it's important I invert that and I say, it
Speaker 3: doesn't matter who said this. Let's stay with the compounding
Speaker 3: of the eighth wonder of the world. You know what,
Speaker 3: you and I know that's true, actually is true. We
Speaker 3: know that's true. And so what's more important that idea
Speaker 3: getting into somebody's head, or that Barry Ridholts or Jim
Speaker 3: O'Shaughnessy actually said that. To me, it doesn't really matter. Now.
Speaker 3: I'm not trying to diss the people who want to
Speaker 3: be exact. They should be. You want to be accurate,
Speaker 3: absolutely correct, But with me, it's always more like I'm
Speaker 3: fascinated by the thought or the message that's being communicated.
Speaker 3: That's what I want people to focus on now, obviously,
Speaker 3: we want it to be attributed to the right person.
Speaker 3: You know, Banksy had a really funny quote. I don't
Speaker 3: think we put it in the book, but I put
Speaker 3: it up on Twitter a lot, And it's any kind
Speaker 3: of philosophical statement sounds better if you put the name
Speaker 3: of a dead famous philosopher after it. And he put
Speaker 3: Plato and then and then waved beneath it he wrote,
Speaker 3: no Banksy, And so I thought that was really funny.
Speaker 3: But you know that's probably what's actually happening, right. It's like, Hm,
Speaker 3: I want people to really take this seriously. So I'm
Speaker 3: going to make sure that Einstein said this, so that
Speaker 3: you know, it doesn't add to what the what the
Speaker 3: thought is inspiring in you.
Speaker 2: You know, that kind of reminds me of the Abe
Speaker 2: Lincoln line, don't believe everything you read on the internet. Right,
Speaker 2: But let me let me invert the question. In your
Speaker 2: research process, did you find a quote that you knew
Speaker 2: and loved and thought, oh, this is great and it
Speaker 2: fits this person so well, and then subsequently you discover oh,
Speaker 2: it wasn't by that person. Yes, and any come to mind.
Speaker 3: Well, we had quite a few, actually, Eleanor Roosevelt quotes
Speaker 3: that were not Eleanor Roosevelt, and we had a lot
Speaker 3: of well, not going back over the obvious ones Einstein,
Speaker 3: you know, TWAINN. Twayne, George Carlin, oscar Wilde, etc. And
Speaker 3: if we love the quote, we would put it in
Speaker 3: under the actual author's name. And I can't think of
Speaker 3: one that's great right now where we did that. But
Speaker 3: it's really funny too because the reaction we did this.
Speaker 3: We did a test on our company slack. I put
Speaker 3: the same quote when we found one of these and
Speaker 3: it was originally attributed to Eleanor Roosevelt, and it actually
Speaker 3: ended up being a woman who was a friend of
Speaker 3: hers and often in the White House, but who no
Speaker 3: one had ever heard of, at least no contemporary person
Speaker 3: had ever heard of. So I put them both up
Speaker 3: on our company slack and I said, what do you
Speaker 3: guys think of the first one? Lots of emojis and everything,
Speaker 3: And then I put it up with the other woman's name,
Speaker 3: the less famous author, actual author crickets. And so to me,
Speaker 3: there's obviously something being activated in our brain that says, ooh,
Speaker 3: must be important because Eleanor Roosevelt or Albert Einstein said it,
Speaker 3: and I always try myself to be neutral on that.
Speaker 3: I always try to focus on what is being said,
Speaker 3: not who is saying it.
Speaker 2: And to give you the behavioral finance spin on that,
Speaker 2: that's the halo effect. You're giving credit to a person
Speaker 2: for success in one area, and you're allowing that to
Speaker 2: spill over to the quote, whether or not they said
Speaker 2: it or not. It's not quite social proof, but hey,
Speaker 2: if it's Oscar Wilde or Mark Twain, we know they
Speaker 2: were wordsmith's and brilliant, and hey, if they said it,
Speaker 2: it must be must be good, right, And I wonder
Speaker 2: if that's why people, you know, attribute thing to George
Speaker 2: Carlin and to say nothing of Einstein. So you co
Speaker 2: wrote this book. Tell us a little bit about your
Speaker 2: co author, Vatsill Kowshk. How did you guys handle the workload?
Speaker 2: Did you? Was he more organizational and you're more philosophical.
Speaker 2: I know you're deep down inside a philosopher. Tell us
Speaker 2: how did you go about putting the work together.
Speaker 3: So Vatsil was the first employee of Infinite Loops, my podcast,
Speaker 3: and he is an amazing guy. He is multi talented.
Speaker 3: He's a great builder of tech, but he also reads extensively,
Speaker 3: And it was actually Vasil who came to me and said, okay, Jim,
Speaker 3: you got all these guys and women texting you saying
Speaker 3: we want a book. He goes, let's do the book.
Speaker 3: And so what he handled was almost exclusively the vetting,
Speaker 3: the process of making sure who I had attributed the
Speaker 3: quote to was correct. But then he also did a
Speaker 3: bit of curating. You know, he decided, with ultimately my approval,
Speaker 3: you know, we don't think this group really goes in there.
Speaker 3: We'd much prefer this group. So he was very instrumental
Speaker 3: on the actual curation of the quotes. Where I was,
Speaker 3: as you say, much more philosophical. If there was one
Speaker 3: that I absolutely loved and he just wasn't finding a
Speaker 3: place to fit it in, then I would say, well
Speaker 3: try harder.
Speaker 2: All right. So I know, I know there are certain
Speaker 2: authors you really appreciate, but I'm curious what thinkers, what philosophers,
Speaker 2: what books found their way into the gestalt of this book,
Speaker 2: What really influenced your approach to this.
Speaker 3: So it was not necessarily because hint, there'll probably be
Speaker 3: another version of this book coming out. It could be
Speaker 3: this book, right, So some I held in abeyance because
Speaker 3: I really wanted them to go into the second book.
Speaker 3: But you know, I admire greatly all of the Age
Speaker 3: of Enlightenment authors and thinkers. You know, you're Adam Smith's,
Speaker 3: You're you know, all the people who were like way
Speaker 3: to tick. We could actually do things that we might
Speaker 3: call the scientific method and really test all of our beliefs,
Speaker 3: much to the chagrin of the ruling churches of the
Speaker 3: time period. And so Voltaire always big, big fan of
Speaker 3: his work, and you know, but I didn't go at
Speaker 3: it from that vantage point. What I really want I
Speaker 3: wanted to do because of the nature of the book.
Speaker 3: In other words, I never expected anyone to sit and
Speaker 3: go from the front page to the last page. If
Speaker 3: I had, I would have done it differently. Then I
Speaker 3: would have tried to tell a story, an overall story
Speaker 3: with the quotes, something we might actually try with the
Speaker 3: one of the next versions of the book, but with
Speaker 3: this one, since I knew I wanted it to be
Speaker 3: kind of a jumping off point for people to get
Speaker 3: an idea to think about it, I just was very
Speaker 3: much not you know, I'm not going to make it
Speaker 3: obvious and.
Speaker 2: I'm not gonna.
Speaker 3: Follow them in sequential order or you know, this group
Speaker 3: all are together and absent from other places in the book.
Speaker 3: So yeah, I mean like you'll get a very good
Speaker 3: idea for some of my favorite thinkers by just looking
Speaker 3: at who I'm doing quotes by.
Speaker 2: Why a book? Why not some other media? You're so,
Speaker 2: you know, digital forward and have been for a long time.
Speaker 2: I always find I like physical books. But you know
Speaker 2: you and I are from an earlier generation. Everything seems
Speaker 2: to be moving in a different direction.
Speaker 3: It is, but number one, like if you look at
Speaker 3: Ojenasy Ventures, it's everything that I love, like infinite books,
Speaker 3: the publisher, infinite film, I love movies, the fellowships, which
Speaker 3: you know all about. But I think that it's not
Speaker 3: just people of our generation who like beautiful books. In fact,
Speaker 3: the people who were the most excited about it were
Speaker 3: younger people because we took a great deal of care
Speaker 3: to make it beautiful, and we had the printer from
Speaker 3: Italy do the printing, and it's got color and the
Speaker 3: spine isn't glued. So the number of younger people, and
Speaker 3: when I say younger, anyone probably under thirty five. The
Speaker 3: notes that I would get saying this is the most
Speaker 3: beautiful artifact and I heard that term more than once
Speaker 3: artifact artifact. So there, so one was a friend and
Speaker 3: so I called him and I'm like, why are you
Speaker 3: calling this an artifact? And he goes because I'm beginning
Speaker 3: to look at these hardcover books as works of art, right,
Speaker 3: and so that was surprising to me. But I love
Speaker 3: I love books, you know, I have big libraries at
Speaker 3: my house. What I mostly by the way Berry read
Speaker 3: on Kindle for iPad rightly, But if I love a book,
Speaker 3: I always buy the hard copy. And if I really
Speaker 3: love a book, I buy the hard copy for my
Speaker 3: library and three paperbacks to give to and and so
Speaker 3: one of the things, it's kind of like vinyl, right,
Speaker 3: we grew up on vinyl. That's how we made our
Speaker 3: mixtapes everything else. But guess what, a lot of young
Speaker 3: people are going back and sampling vinyl. So I gues
Speaker 3: everyone seems to like it.
Speaker 2: There's there's a certain tactile, yeah, feel I used to
Speaker 2: love the multi album art, which not only do you
Speaker 2: not get with the same way with small CDs, but
Speaker 2: when you move to streaming, you don't even know the
Speaker 2: names of half the songs on an album because it
Speaker 2: just all kind of comes through it's a different experience, Yeah,
Speaker 2: very much so. So let's talk a little bit about
Speaker 2: both O'shaughnessee Ventures and O SAM. I sort of look
Speaker 2: at them as part of a continuum on your on
Speaker 2: your career. You let your son Patrick take over as
Speaker 2: CEO of O'Shaughnessy Asset Management. He was a key driver
Speaker 2: of Canvas, which was built on top of a database
Speaker 2: that you've been refining since the nineteen nineties. How do
Speaker 2: I have that?
Speaker 3: Yeah, yeah, And actually you might remember I started the
Speaker 3: first online investment advisor called netfolio. That's right in nineteen
Speaker 3: ninety nine, two thousand. I was just, you know, twenty
Speaker 3: three years too early. And I also made the mistake
Speaker 3: of making it B to C, whereas that was a
Speaker 3: huge mistake. Should have gone B to B because I
Speaker 3: later learned, you know, I was a level playing field guy,
Speaker 3: and like people can just buy their no loads and everything.
Speaker 3: But the more the data presented itself to me, the
Speaker 3: more I came over to the side where advisors are
Speaker 3: earning every dollar you pay them because the results, the
Speaker 3: outcomes were just so much better. So we started building
Speaker 3: the tools that became Canvas. During the Great Financial Crisis,
Speaker 3: I'm like, okay, we're probably not going to sell another
Speaker 3: long only US stock portfolio over the next three years,
Speaker 3: so let's really attack the data. Let's clean it. By
Speaker 3: the way, really hate it by my research team for
Speaker 3: that entire period, right because it's really.
Speaker 2: My numbering bad.
Speaker 3: But by the way, now that's a great use case
Speaker 3: for AI. It can do it much faster. It can
Speaker 3: do it. You know, you can free your staff to
Speaker 3: not have to do that laborious, mind numbingly dull type
Speaker 3: of work so that they can work on better research,
Speaker 3: more interesting topics. But yeah, and as we were doing it,
Speaker 3: and Patrick walked into my office and he's like, you know, Dad,
Speaker 3: we he actually did say this to me. I know
Speaker 3: it became lower, but he goes, we built the death
Speaker 3: star to kill a mouse here. I'm like, what do
Speaker 3: you mean. He goes, Well, our clients, the rich Holts
Speaker 3: wealth managements of the world could could use this and
Speaker 3: it would be amazing for their business. Now, obviously, because
Speaker 3: I had already tried with metfolio, I was like, let's
Speaker 3: do it. So yeah. Building out the actual technology though,
Speaker 3: that was a multi year effort. It took us a
Speaker 3: long time.
Speaker 2: But what you know, our mutual friend Dave Knadig has
Speaker 2: been a supporter of direct indexing and ETFs obviously for
Speaker 2: a long time, and my complaints were always, yeah, but
Speaker 2: it's cludgy. Yeah, but I get these two hundred page,
Speaker 2: you know, quarterly appointments and it's not very fine tunable.
Speaker 2: And and I'll never forget when Batana came back to
Speaker 2: the office having seen a demo. If he had hair,
Speaker 2: it would have been on fire. That's what it was.
Speaker 2: That's what it was like. He was jumping up and
Speaker 2: down and just the demo is like, oh, wow, this
Speaker 2: is slick, and wow, this really looks good. I can't
Speaker 2: believe it's that definable. It's that user and like the
Speaker 2: deeper you went into it, it was just every step
Speaker 2: along the way there was a ton of stuff. What
Speaker 2: was the vision when you originally were building this, was it, Hey,
Speaker 2: let's pump this up and sell it, because I know
Speaker 2: you guys never were really shopping this around. Yeah, it
Speaker 2: kind of fell out of the blue.
Speaker 3: Yeah, No, we it was not to pup it up
Speaker 3: and sell it at all. It was we wanted to
Speaker 3: have the absolute best software for the way we managed money.
Speaker 3: And there was really nothing off the shelf that suited
Speaker 3: our needs, and so we put on a pretty significant
Speaker 3: developer team that had background in portfolio management. This is
Speaker 3: key the problem with just a technologist trying to come
Speaker 3: into our industry and build a platform like this. They
Speaker 3: don't know all of the junk that goes on underneath.
Speaker 3: We do because that's what we do, right. They don't
Speaker 3: think about, well, who's the clearance agent, who's the custodian,
Speaker 3: all of those types of things. So by actually having
Speaker 3: people very very with very deep domain knowledge in asset
Speaker 3: management the way it really works, that was a huge
Speaker 3: help in us building out the software. But the original
Speaker 3: thing Barry was, we wanted to serve you our clients
Speaker 3: better and faster. And then when we saw that the customization,
Speaker 3: that the tax management, that all of that would be
Speaker 3: really appealing to not only our advisors but to our advisors' clients,
Speaker 3: that's when it clicked Wow, like kind of our aws
Speaker 3: moment was huh, we think other people might really like
Speaker 3: this too.
Speaker 2: No. Absolutely, the tax side of it was a game changer.
Speaker 2: And when I was doing some recent research for another project,
Speaker 2: I just started going through the list of trillion dollar
Speaker 2: asset managers that either bought or built a direct index, sir.
Speaker 2: And when you see ten or twenty of the largest
Speaker 2: farms in the world or moving in the same direction, hey,
Speaker 2: pay attention to something.
Speaker 3: Customization is the future.
Speaker 2: We are leaving.
Speaker 3: We are leaving one size fits all, and the ability
Speaker 3: to customize your client's portfolio down to their specific needs
Speaker 3: is really it really is a game changer, especially on
Speaker 3: the tax alfa that you can generate.
Speaker 2: So you mentioned your AI earlier. I know you've been
Speaker 2: appointed chairman of the board at Stability AI. Up to
Speaker 2: I was, so that's no longer. So let me rephrase
Speaker 2: that question mentioned AI earlier. How do you see AI
Speaker 2: transforming either the investment management industry or venture capital? What
Speaker 2: is the role of AI going to be going forward?
Speaker 3: I truly believe that AI is the most powerful technology
Speaker 3: that has ever come on the scene during my career, wow,
Speaker 3: and it is going to be used primarily for replacing arduous, boring,
Speaker 3: mind numbing type activities that humans are currently doing the
Speaker 3: AI can do. Let me give you an example in
Speaker 3: our publisher. If you work with a legacy publisher, you're
Speaker 3: done with your manuscript, you sent it and you probably
Speaker 3: had this experience right typos, typos, typos, but it didn't
Speaker 3: get back to you, probably for a couple of months.
Speaker 3: With infinite books, it'll probably get back to you the
Speaker 3: next day because we have an AI that takes all
Speaker 3: of those typos, fixes them, it prints it in Galley format.
Speaker 3: Because non authors might not believe this, but an author,
Speaker 3: when they see their work in the way it's going
Speaker 3: to look as a book, it kind of freaks you out.
Speaker 3: You start reading it differently, very much so. And so
Speaker 3: we'll have that that will go back to the author.
Speaker 3: All the typos will be gone, and any incongruity in
Speaker 3: the manuscript will be noted. We won't touch it because
Speaker 3: we want to leave it to the author to make
Speaker 3: whatever changes they want. But if it says, hey, Barry,
Speaker 3: in chapter one you said this, but in chapter four
Speaker 3: you said the exact opposite thing, which one do you want?
Speaker 3: And then finally we have plagiarize of routines where you know,
Speaker 3: a million little pieces where you have to go on
Speaker 3: and get scolded by Oprah. Will should never happen again
Speaker 3: because some times people aren't pleasiarizing intentionally. They are maybe
Speaker 3: doing it for a memory something they read, et cetera.
Speaker 3: And wouldn't it be far better for everyone concerned if
Speaker 3: you just bring that to the author's attention and they
Speaker 3: can fix it.
Speaker 2: So you have a lot of interest. So it's not
Speaker 2: just venture investing, it's AI, it's publishing, it's fellowships where
Speaker 2: you find somebody who you sponsor for a year and
Speaker 2: you know, sort of a MacArthur genius grant. Where can
Speaker 2: you go? What can you do with this? You know,
Speaker 2: where do you really focus your time and effort? What
Speaker 2: most interests you?
Speaker 3: So I'm going to cop out and give you the answer.
Speaker 3: All of it interests me, Barrier, Okay, we have it true.
Speaker 3: But I'm very lucky in that we have a senior
Speaker 3: person at the head of each one of these verticals,
Speaker 3: and so I let them. I'm very big on higher
Speaker 3: vring people with super high agency and who are really
Speaker 3: really bright, mostly brighter than me, and I let them
Speaker 3: run with what they want to do. They always keep
Speaker 3: me informed as to hey, we might be trying this
Speaker 3: big change, and then I sign off there. But I mean, basically,
Speaker 3: the verticals were all areas that I loved. I love movies,
Speaker 3: I love books, I love media, I love podcasts, etc.
Speaker 3: And they were also areas where I felt that there
Speaker 3: was a lot of arbitrage opportunity available. For instance, like
Speaker 3: most legacy publishers are operating under best principles, but they're
Speaker 3: operating under the best principles from nineteen twenty five, not
Speaker 3: twenty twenty five. And so there is so much that
Speaker 3: can be improved in the process to make the author
Speaker 3: a good deal, happier, to make the reading public have
Speaker 3: access to their own authors work sooner than they might otherwise.
Speaker 3: But also because of the technology, we are able to
Speaker 3: offer a much better deal to our authors. Our authors
Speaker 3: typically will take seventy percent of the royalties after the
Speaker 3: costs have been cleared, so we can still make a
Speaker 3: great deal of money at the thirty percent that we maintain.
Speaker 3: But there's also cross polonization. Right, there's a great podcaster
Speaker 3: who is going to be a great author. There is
Speaker 3: a great author who might be a great podcaster or
Speaker 3: will do the whole thing for them. We'll set them
Speaker 3: up on a sub stack, we'll give them a podcast,
Speaker 3: we'll publish their book. What we really want to focus
Speaker 3: on is ideas that ended up in slush piles in
Speaker 3: days of yore. A lot of great writing is there
Speaker 3: and so we want to be able to not only
Speaker 3: see that, but publish the best of it.
Speaker 2: So you're publishing books, you're hosting your own podcast, Infinite Loops.
Speaker 2: I'm kind of intrigued by the idea of investing in movies,
Speaker 2: which tend to be a black hole of losses. You know,
Speaker 2: it's like restaurants, plays, and films tell us what you're
Speaker 2: doing cinematically.
Speaker 3: So cinematically we started our little mantra is Crawl Walk Run,
Speaker 3: and so, you know, it was odd for me because
Speaker 3: you know, I had a very established reputation in asset management,
Speaker 3: and here I'm the total underdog. I mean, like we
Speaker 3: are the rebel Alliance, if you will, going up against
Speaker 3: some very very tough competitors. So on the film side,
Speaker 3: we started with documentaries. Uh huh. One of our first
Speaker 3: Flip Side, actually premiered at the Toronto Film Festival, got
Speaker 3: amazing reviews, got bought out by a distributor, and so
Speaker 3: that went very very well. We are now commissioning documentaries
Speaker 3: with some younger talent that isn't really bound up by
Speaker 3: the way Hollywood currently does things.
Speaker 2: And get a little more nimble, like.
Speaker 3: Much more nimble, much faster, much more responsive.
Speaker 2: Someone had shot a film on an iPhone sort of
Speaker 2: is a little bit of a publicity stunt, I want
Speaker 2: to say, eight or ten years ago, But that's really
Speaker 2: very feasible today, isn't.
Speaker 3: Oh absolutely, And when you add in all of the
Speaker 3: things that ai I mentioned, all of the laborious stuff
Speaker 3: that you get rid of with publishing, same is true
Speaker 3: in film. So this is going to sound weird, but
Speaker 3: you know what eats up like huge amounts of time
Speaker 3: and is ridiculous boring color matching. Well, when things are
Speaker 3: filmed over a variety of days or locations or what
Speaker 3: have you. One day's cloudy, one day's sunny, you've got
Speaker 3: to have that match up so that your film appears
Speaker 3: of a piece. So it's more than just continuity. Absolutely,
Speaker 3: the next step they step beyond that, and there's just
Speaker 3: so much that can be done with the visual part,
Speaker 3: with the editing ais that we have always going to
Speaker 3: have a human editor, but we are giving them tools
Speaker 3: that just makes them able to do their job in
Speaker 3: a much more creative way because they don't have to
Speaker 3: take that hour or two hour and do the Niggadly,
Speaker 3: I've got to move this to here, and that to
Speaker 3: their They literally can press a button and it happens.
Speaker 3: So what we're finding is a great amount of the
Speaker 3: workflows in these industries are time consuming, boring, and just
Speaker 3: like they take forever, and we can fix that to
Speaker 3: the point where they no longer take forever. And the
Speaker 3: people were working with absolutely love it because they can
Speaker 3: spend their time making that edit like supreme right, we're
Speaker 3: giving them back time that they can use artistically.
Speaker 2: So so many people have been pessimistic about AI. It's
Speaker 2: gonna kill jobs, it's gonna damage society. You won't know
Speaker 2: what to do to believe, to trust, we'll all be
Speaker 2: out of work. I don't get the sense that you're
Speaker 2: looking at AI that way. You seem to think that
Speaker 2: this or sounds like you're finding this is just an
Speaker 2: incredibly useful tool and it's gonna make all of us
Speaker 2: more productive and more creative.
Speaker 3: Precisely, you know, we always frightened when some new technology
Speaker 3: comes on the scene. And by the way, this goes
Speaker 3: back forever, like when the Latites right, the Ludites right,
Speaker 3: It goes back to Ned Ludd and who broke up
Speaker 3: all the machines because they were going to take their jobs.
Speaker 3: While he ended up working on one of those looms,
Speaker 3: and he vastly preferred his new job because he didn't
Speaker 3: have to do it the old horrible way. Same thing's
Speaker 3: going to happen here, but it happens all the time, right,
Speaker 3: So when records first came out, you know that symphony
Speaker 3: orchestras took full page ads in newspapers saying that isn't
Speaker 3: real music. Real music is live and you have to
Speaker 3: hear it live or you're listening to a counterfeit. Right,
Speaker 3: So when this type of advance comes along, you always
Speaker 3: axiomatically people get freaked out. I think, you know, AI
Speaker 3: is not going to take your job. A human being
Speaker 3: using the AI tool will because they are going to
Speaker 3: be so much more proficient at what they're doing. They're
Speaker 3: going to have so much more time to focus on
Speaker 3: the really high value stuff and not have to worry
Speaker 3: with all the stuff that you know they had to
Speaker 3: do in the past. But now we can automate it
Speaker 3: through AI workflows. So I subscribe to what they call
Speaker 3: the Sentataur model. You remember the mythical be sure half horse,
Speaker 3: half man. That's what is going to happen with AI.
Speaker 3: It's going to be AI plus human being. That's where
Speaker 3: all the great stuff is going to come. Right now,
Speaker 3: we're going to see a tsunami of slop that's going
Speaker 3: to be just AI generated and people will think, oh,
Speaker 3: that's good enough, right, and so going forward, you can
Speaker 3: create a huge edge by having good taste and curating
Speaker 3: itll but I can guarantee you almost all of that
Speaker 3: is going to be human using AI as a tool
Speaker 3: to make their jobs better, easier, more creative. The way
Speaker 3: I look at it is, you know, Steve Jobs famously
Speaker 3: said computers were bicycles for your mind. AI is a
Speaker 3: rocket ship for your mind. Huh.
Speaker 2: I like the way you phrase that. You know. Someone
Speaker 2: once asked me, you know what's the secret to putting
Speaker 2: out the daily reads? And my answer was curate viciously exactly.
Speaker 2: And you you know, AI. I don't think in our
Speaker 2: lifetime and probably not our kids' lifetime, is going to
Speaker 2: reach the point where it can be a taste maker.
Speaker 3: We believe, passionately believe that if you have good taste
Speaker 3: and you are a great curator, your future looks incredible
Speaker 3: because you'll be able to use these tools. You won't
Speaker 3: have to spend all the time that you used to
Speaker 3: and that's going to even make It's going to be
Speaker 3: the rocket ship to give you get you to the
Speaker 3: next level of your good taste and curation.
Speaker 2: So a couple more questions before we get to our
Speaker 2: final question, and that is first, I have to ask
Speaker 2: you about the O'Shaughnessy Fellowship, what I've been calling your
Speaker 2: MacArthur Reward. Tell us a little bit about the support
Speaker 2: you offer for young entrepreneurs. What inspired you to start
Speaker 2: this program. I know we've had at least one O'shaughnessee
Speaker 2: Fellowship person, Kyle Scanlon, as a guest on the show,
Speaker 2: maybe one other. I'll have to go through the list
Speaker 2: and see what motivated you to create this program and
Speaker 2: how has it been running.
Speaker 3: So it's running really, really well. We have the applications.
Speaker 3: We're now in our third year. The applications are much
Speaker 3: more numerous and the quality of the applicant I mean
Speaker 3: very literally. If I could, would give most of our fellowships.
Speaker 3: But the real reason that I did it was because
Speaker 3: I had become convinced that geography, time and space have
Speaker 3: all collapsed and in the old days, you know, you
Speaker 3: and I would know each other still because we both
Speaker 3: live here in New York and we both are in
Speaker 3: the same business. But other than that, like prior to
Speaker 3: the Internet, prior to what I call the human Colossus,
Speaker 3: we couldn't find those geniuses elsewhere. We can now, and
Speaker 3: I believe that it is absolutely imperative to show the
Speaker 3: world that there are a ton of brilliant people in
Speaker 3: this world, many of them young, who don't have an
Speaker 3: opportunity to demonstrate what they have to offer to the world.
Speaker 3: Now we can find and more importantly, fund them. And
Speaker 3: the way we do it is it's totally no strings funding.
Speaker 3: So if you're a fellow, you get one hundred thousand
Speaker 3: dollars over a one year period to work on your project.
Speaker 3: If you're a grantee, you get ten thousand. We have
Speaker 3: obviously many more grantees than we have fellows, but just
Speaker 3: the blossoming of the way the groups work together. Like
Speaker 3: I thought that it would take us at least five
Speaker 3: years to build like a really cool network of super smart,
Speaker 3: switched on people, it's already happened. We have we have
Speaker 3: in person meetings once a year, and the last one
Speaker 3: we had I'll just give you a quick example. We
Speaker 3: have a scientist who is developing an in home way
Speaker 3: to test your babies poop to make sure that it's okay.
Speaker 3: She had no idea how to market this. Another fellow
Speaker 3: was sitting right next to her. He's a writer, he's
Speaker 3: a thinker, and he knows all about this, and literally,
Speaker 3: or the course of an hour and a half, he
Speaker 3: gave her a completely different marketing plan that she adored.
Speaker 3: She came over to me and she said, I can't
Speaker 3: believe that in an hour and a half he totally
Speaker 3: changed the way I'm going to bring this to market.
Speaker 2: Huh.
Speaker 3: So the cross polonization and the synthesis of these great
Speaker 3: minds is really a thing to behold. I'm just very,
Speaker 3: very excited about what's coming out.
Speaker 2: And before we get to our favorite questions, I want
Speaker 2: to throw you a curveball.
Speaker 3: Curveball.
Speaker 2: So, since we first met back in a CNBC green
Speaker 2: room in the early two thousands, so a few decades ago,
Speaker 2: you've had a fairly unique perch on the world of
Speaker 2: finance and investing in asset management. How has financial media
Speaker 2: and asset management changed over the course of your career.
Speaker 3: Well, at the beginning of my career, kind of squawk
Speaker 3: box on CNBC was the gold standard and the format
Speaker 3: they used at that time. I used to co host
Speaker 3: with Marcain's All the Time.
Speaker 2: I've done a few times.
Speaker 3: Back then it was a three hour program in which
Speaker 3: the portfolio manager or these strategists that we were talking to,
Speaker 3: was given like twenty minutes to actually articulate their thesis
Speaker 3: about why they were bullish or bearish, why they liked
Speaker 3: this particular group or that particular group. So one of
Speaker 3: the things that I saw happening when that changed was
Speaker 3: we were not giving the audience like that kind of treatment,
Speaker 3: which is really really incredible treatment. It was a three
Speaker 3: hour period that gave you enough time to actually talk
Speaker 3: things out. Now what's happened. Podcasts like yours really have
Speaker 3: come along and you've replaced that aspect, And so you know,
Speaker 3: I would bemoan when I saw that happening with Squawk especially, Oh,
Speaker 3: I would really wish that they could return to the
Speaker 3: old format. But then you and many many other my
Speaker 3: son with as absolutely came in and filled the void.
Speaker 3: So I think what investors are able to get access
Speaker 3: to now is just it. Dwarfs are the early days
Speaker 3: when you and I met in that green room. They
Speaker 3: have so many podcasts they can choose from the can
Speaker 3: they can still watch financial media. Then there's the YouTube people.
Speaker 3: But like everything, you've got to aggressively curate somebody like you.
Speaker 3: You know, you're way up here and you're kind of
Speaker 3: the gold standard. But how many shows have you done?
Speaker 3: You you have proof of work.
Speaker 2: I'll tell you a funny story. So we're July will
Speaker 2: be an years. It's five hundred and fifty shows. The
Speaker 2: Origin story. I don't know if I ever told this
Speaker 2: on my own podcast. I'm pretty sure i've told it elsewhere.
Speaker 2: It's coming back from a conference in Vancouver, Canada, and
Speaker 2: I had to either change planes in Chicago or Montreal.
Speaker 2: I and remember coming back to New York and I'm
Speaker 2: in the lounge and I want to say it was
Speaker 2: CNBC and they were interviewing Bill Ackman. I could be wrong.
Speaker 2: Maybe it was Einhorn. I don't remember, but it was
Speaker 2: a fund manager like that who back then was not
Speaker 2: There's no Twitter, they weren't doing a lot of TV.
Speaker 2: They like, you really don't go on TV unless you
Speaker 2: were marketing or had a really good quarter. And I
Speaker 2: just remember hearing the worst like it was a five
Speaker 2: minute hit, not a twenty minute hit. That's right, And
Speaker 2: when you have five minutes, it's what's your favorite stocks,
Speaker 2: when the head gonna cut, where the dew going to
Speaker 2: be next year? Thanks for coming by, and the moment
Speaker 2: that guy walks out of the building. Those answers are stale.
Speaker 2: And so I was flying back after you changed planes.
Speaker 2: I bumped into a friend and I was kind of
Speaker 2: like grinding my teeth and he's like, what's on your mind?
Speaker 2: You look like you're annoyed, and I relate the story,
Speaker 2: and he said, what questions would you ask? And the
Speaker 2: questions we're about to ask I'm about to ask you
Speaker 2: those were some of the questions. Who are you? How'd
Speaker 2: you get that way? What are you reading? Who your mentors?
Speaker 2: How did you develop your philosophy? If you were giving
Speaker 2: me advice as a college grad, what would you tell
Speaker 2: me if I wanted to go, like just off the
Speaker 2: top of my head, sure, just because I wanted the
Speaker 2: person to have to use the word you used earlier,
Speaker 2: agency and control over the story, but also express what
Speaker 2: they've learned over the decade exactly, and thirty seconds doesn't
Speaker 2: give you that. So on that note, let's let's jump
Speaker 2: to our speed rounds, to our favorite questions that we
Speaker 2: ask all of our guests. I think this is probably
Speaker 2: the third or fourth time I've had you do these.
Speaker 3: I hope I don't give answer.
Speaker 2: Hey, listen, We'll have AI go through it and find
Speaker 2: out how you're how you're thinking has evolved.
Speaker 3: Let's there we go.
Speaker 2: I love that, right, So starting with what's keeping you
Speaker 2: entertain these days? What are you watching or listening to?
Speaker 1: So?
Speaker 3: Uh, mostly listening to the normal group of podcasts that
Speaker 3: you would yours, my son's, my own.
Speaker 2: But do you find listening to your own is a
Speaker 2: challenge in that it sucks up time that you can't
Speaker 2: listen to others, or you don't want to listen to
Speaker 2: somebody you're going to interview and you don't want someone
Speaker 2: else's questions.
Speaker 3: So my dirty little secret is that I very very
Speaker 3: seldomly listen to my own. I do read the transcripts
Speaker 3: just to make sure, Oh I really screwed that up.
Speaker 3: I got to fix that.
Speaker 2: Transcripts don't come across the same way.
Speaker 3: I know, I know, I know, but I prefer to
Speaker 3: give my active listening time to like your podcast and
Speaker 3: and Patrick's. In terms of reading, I continue to read
Speaker 3: very very broadly My favorite, uh sort of literary fiction
Speaker 3: author is David Mitchell, who wrote Cloud Atlas. Oh really,
Speaker 3: and I've.
Speaker 2: Started Reade into a movie. Yeah.
Speaker 3: Yeah, the book's much better than the movie. And I
Speaker 3: love Howard Bloom's work.
Speaker 2: You know, the He's Closing of the American Mind.
Speaker 3: No, no different guy, sounds like right. Howard is a
Speaker 3: very fun, eccentric genius who sort of started life as
Speaker 3: a scientist and now takes all of what he learned
Speaker 3: there and applies it to the social world or the
Speaker 3: business world.
Speaker 2: Closing of the American Mind, entertaining ourselves.
Speaker 3: One of his would be the Lucifer principle, about how
Speaker 3: all of our evolutionary things that are driving a lot
Speaker 3: of our actions have profound implications for markets, for societies,
Speaker 3: for all of these things. And like, he's got a
Speaker 3: great book caming Reimagining the Beast where he talks about capitalism, saying, hey,
Speaker 3: capitalism is hands down the winner, but we can still
Speaker 3: improve it, and we should improve it. And here's how
Speaker 3: I think we should. So love his work. Read pretty
Speaker 3: much any paper I can get my hands on having
Speaker 3: to do with advances in AI and and that sort
Speaker 3: of thing. For fun. I just saw the new Bob
Speaker 3: Dylan movie. Loved it and Complete Unknown, And I also
Speaker 3: love the way Timothy Challow may the lead in that.
Speaker 3: I loved his speech when he got up and said,
Speaker 3: you know what, I could say, oh shucks, and I'm nothing,
Speaker 3: but I want to tell you something. I am aspiring
Speaker 3: to greatness. I want to be great. And I love
Speaker 3: actually seeing the younger generation start saying things like that,
Speaker 3: because it's so for so often, you know, we we
Speaker 3: you know, wasn't really anything. Come on, false humility, false humility,
Speaker 3: just like it stands out, doesn't it jar when you
Speaker 3: hear it? And it's like when I heard him give
Speaker 3: that speech, I'm.
Speaker 2: Like, right on.
Speaker 3: That's where I love hearing from a young actor or
Speaker 3: a writer or whatever. I Hey, I aspire to this.
Speaker 2: Don't we all aspire to greatness? Or we should, like
Speaker 2: you get one run, make it make it worth.
Speaker 3: Something, make it worthwhile. And so I was very happy
Speaker 3: to see that again just for total fun. I love
Speaker 3: Billy Bob Thornton. So we really enjoyed Land. Man.
Speaker 2: You know, you're like the third or fourth person who
Speaker 2: told me how much they love that, sir.
Speaker 3: It is so much. It's just fun and so You're
Speaker 3: probably not gonna learn a lot by watching it. Other
Speaker 3: than that Billie Bob Thornton choose up every scene that
Speaker 3: he appears in. He's such a good actor.
Speaker 2: Always is every time I see him me too. He's
Speaker 2: a delight. You know. You have such an interesting background.
Speaker 2: I'm curious if you had any mentors help shape your career.
Speaker 3: I did. I had a gentleman who was when I
Speaker 3: was very, very young. I'm not gonna mention his name
Speaker 3: because some of his kids might be listening, but we'll
Speaker 3: go with Jim. He was also a Jim and he
Speaker 3: probably did more for me when I was young and
Speaker 3: filled with you know, vinegar and very definitive beliefs. And
Speaker 3: I'll tell you all, I'm going to proselytize this is
Speaker 3: the way to do it. And he was really really
Speaker 3: good at saying, Uh, Jim, you might want to take
Speaker 3: that a step back, because what do you really want?
Speaker 3: I want people to know about this, Okay, but what's
Speaker 3: the broader implication here? Process over outcome? Okay, Well, why
Speaker 3: did you talk a little bit more about that? Why
Speaker 3: don't you talk about the way that people can actually
Speaker 3: take what you're saying to them and make them useful
Speaker 3: in their own life. So he was an amazing mentor
Speaker 3: to me because he was very patient, wicked sense of humor,
Speaker 3: and always good at reminding me that you might want
Speaker 3: to take it back an ouch or two.
Speaker 2: That's great. Let's you mention a few books, any other
Speaker 2: favorites you want to mention before we get to our
Speaker 2: favorite questions.
Speaker 1: The the what?
Speaker 3: Let me reference our infinite books. We have a list
Speaker 3: that you can get anywhere. You can go to Twitter,
Speaker 3: you can go to our substack, and it's kind of
Speaker 3: our seminal books, you know, books like the Beginning of
Speaker 3: Infinity by David Deutsch I think is a masterpiece. Beginning
Speaker 3: of Infinitinity by David Deutsch, who's a quantum physicist in
Speaker 3: the UK. I love all of his work, but I
Speaker 3: also think people should be reading things like my perennially
Speaker 3: read The Dowdy Jing by Lautsu. It packs a wallup man,
Speaker 3: because you can read the whole thing in an hour.
Speaker 3: But I used to joke, you know, I started reading
Speaker 3: that when I was eighteen, and I read it every year,
Speaker 3: sometimes multiple times every year, and I finally started to
Speaker 3: understand it when I was about fifty five.
Speaker 2: I was gonna say it's a different book each time
Speaker 2: you read it. It really is.
Speaker 3: It's like heraklitis. You know, no man steps in the
Speaker 3: same river twice because it's not the same man and
Speaker 3: it's not the same river.
Speaker 2: Absolutely, all right. Our final two questions that we ask
Speaker 2: all of our guests what sort of advice would you
Speaker 2: give to a recent college grad interested in a career
Speaker 2: in either investing, quantitative analytics, or venture capital.
Speaker 3: Understand the leverage that you get from all of the
Speaker 3: new AI tools. It gives you several advantages. The older
Speaker 3: people on those desks might not be rapidly adopting those tools.
Speaker 3: And if you walk into a job interview with some
Speaker 3: mastery of them, what they're doing in terms of what
Speaker 3: they can uncover for VC, for traditional long only or
Speaker 3: long short management is staggering. Get a deep domain knowledge
Speaker 3: there as it fits into your particular passion, be it
Speaker 3: investing or an analysis, etc. But that would be my
Speaker 3: number one piece of advice.
Speaker 2: Wow, And our final question, what do you know about
Speaker 2: the world of investing today that would have been helpful
Speaker 2: back in the nineteen nineties when you were first starting out.
Speaker 3: People don't change, markets change, And when I really really
Speaker 3: came to understand that was after actually the Great Financial Crisis.
Speaker 3: I went through the crash in nineteen eighty seven, I
Speaker 3: went through the other bear markets, but I didn't really
Speaker 3: lock in on the fact that markets change millisecond by millisecond,
Speaker 3: human behavior barely budgees millennia by millennia. Arbitraging human nature
Speaker 3: is the final moat. Arbitraging human nature is the final moat.
Speaker 3: That's fantastic place to end it. Jim, thank you so
Speaker 3: much for being so generous with your time and for
Speaker 3: being just such a great colleague, mentor source of wisdom.
Speaker 3: Like it's been my privilege to know you my whole career.
Speaker 2: I remember, I want to say it was like the
Speaker 2: late two thousands, sitting at an outdoor on a Starbucks.
Speaker 2: I remember one of my well don't we know each other?
Speaker 2: And it was it was just like one of those
Speaker 2: small world moments. And you've always been just so thoughtful,
Speaker 2: so inspiring, and your insights just I know so many
Speaker 2: people you've had such a positive impact on. It's just
Speaker 2: a delight and a pleasure to.
Speaker 3: Know you well right back at Youbury. It's been my
Speaker 3: great pleasure knowing you all of these.
Speaker 2: Years, so this mutual admiration society has to come to.
Speaker 3: An It's a bromance.
Speaker 2: We have been speaking with Jim O'Shaughnessy, founder and CEO
Speaker 2: of O'shaughnessee Ventures. If you enjoy this conversation, well check
Speaker 2: out any of the five hundred previous ones we've had
Speaker 2: over the past ten, almost eleven years. You can find
Speaker 2: those at iTunes, Spotify, YouTube, Bloomberg, or wherever you find
Speaker 2: your favorite podcast. Be sure and check out my new book,
Speaker 2: How Not to Invest The Bad Ideas, numbers and Behaviors
Speaker 2: that Destroy Wealth, coming wherever you get your favorite books
Speaker 2: on March eighteenth, twenty twenty five. I would be remiss
Speaker 2: if I did not thank the crack team that helps
Speaker 2: put these conversations together. Anna Luke is my producer, Meredith
Speaker 2: Frank is my audio engineer. Sage Bauman is the head
Speaker 2: of podcasts at Bloomberg. Sean Russo is my researcher. I'm
Speaker 2: Barry Rutults. You've been listening a Master's in Business on
Speaker 2: Bloomberg Radio.