WEBVTT - Timeless Wisdom: A Mailbag Episode 0:00:02.720 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:08.640 --> 0:00:11.200 Should we talk about the fact that we're recording a mail. 0:00:10.960 --> 0:00:12.719 Bag, recording a mail bag? 0:00:12.960 --> 0:00:14.920 Mail bag not too tired to sing? 0:00:15.200 --> 0:00:20.200 Yeah, we're going to release this sometimes Ny eight. Yeah, 0:00:20.200 --> 0:00:22.279 it's the end of April now, but it's going to 0:00:22.320 --> 0:00:24.439 be it's gonna be all timeless wisdom from the Money 0:00:24.480 --> 0:00:27.160 Stuff Podcast today, so we can release it at anytime. 0:00:27.320 --> 0:00:30.080 That's true. On May eighth, I'll have just gotten back 0:00:30.120 --> 0:00:33.000 from the Milkan Conference in Los Angeles, So if. 0:00:32.920 --> 0:00:36.560 You're listening to this, Katy has returned from Milkin. But yeah, 0:00:36.800 --> 0:00:39.880 hasn't had time to podcast this week, So we're diving 0:00:39.880 --> 0:00:41.360 into the wall for some timeless wisdom. 0:00:41.560 --> 0:00:44.279 Yeah, we've got some good ones lined up. 0:00:44.720 --> 0:00:46.879 Should we do the thing where I say hello and 0:00:46.920 --> 0:00:48.240 welcome to the Money Stuff Podcast. 0:00:48.240 --> 0:00:52.120 I love doing that, So, yeah. 0:00:51.200 --> 0:00:54.160 Hello and welcome to the Money Stuff Podcast. I'm Matt 0:00:54.200 --> 0:00:57.800 Levin and I heard the Money Stuff Calm Opinion. 0:00:58.720 --> 0:01:01.880 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:01:01.880 --> 0:01:03.440 an anchor for Bloomberg Television. 0:01:04.040 --> 0:01:06.280 All right, let's get into the mail bag. 0:01:06.600 --> 0:01:20.080 Yeah, mail bag mailbag. 0:01:21.160 --> 0:01:24.800 Pierre started us off strong. You've put this disclosure in 0:01:24.920 --> 0:01:29.520 newsletters before or specifically one your disclosure read through a 0:01:29.520 --> 0:01:31.959 financial advisor. I have a small amount of money in 0:01:32.000 --> 0:01:34.680 a blue alphund though I am not sure which one. 0:01:34.840 --> 0:01:37.640 Pierre wants to know why does Matt have a financial 0:01:37.640 --> 0:01:39.760 advisor and does he read money stuff? 0:01:41.680 --> 0:01:43.200 So first of all, I want to address the fact 0:01:43.240 --> 0:01:46.639 that I do own a little bit of bluel credit 0:01:46.680 --> 0:01:51.880 Incomcorp is private BDC that once not yet tender before, 0:01:51.920 --> 0:01:54.080 but he said today he's thinking about tendering for it. 0:01:54.160 --> 0:01:56.960 Are you panicking, No, I'm not panicking. 0:01:57.240 --> 0:01:59.320 So when I started this financial advisor, he's I got 0:01:59.320 --> 0:02:01.720 this great thing for you called b read the Blacks 0:02:01.840 --> 0:02:04.280 on real estate like non treated to real estate Investment trust. 0:02:04.680 --> 0:02:06.000 And I was like, no, I don't think I can 0:02:06.040 --> 0:02:08.480 do that because I've written about them like four times 0:02:08.480 --> 0:02:10.079 and I don't want to own something I write about. 0:02:10.240 --> 0:02:10.880 Yeah, that's fair. 0:02:11.040 --> 0:02:13.600 And he was like, okay, what about the Star War one? 0:02:13.680 --> 0:02:16.880 I was like no, no, no, still counts. And then 0:02:16.880 --> 0:02:19.120 he's like, what about just like a little little scooch 0:02:19.160 --> 0:02:20.880 of private credit. I was like a little scooch of 0:02:20.880 --> 0:02:21.480 private credits. 0:02:21.800 --> 0:02:22.960 I'll never write about that. 0:02:23.240 --> 0:02:25.079 I don't know what. I don't know what I was thinking, 0:02:25.240 --> 0:02:27.680 but obviously now I own a little bit of this 0:02:27.760 --> 0:02:32.079 private credit fund, and I don't want to own it. 0:02:32.200 --> 0:02:38.240 Not because I'm panicking about software companies or whatever. It's 0:02:38.320 --> 0:02:40.240 really like a tiny portion of my net worth. But 0:02:40.320 --> 0:02:41.840 I don't want to own it up because I'm panicking 0:02:41.840 --> 0:02:45.720 about liquidity or software companies or whatever, but because I 0:02:45.720 --> 0:02:47.519 don't want to have to say every time I write 0:02:47.520 --> 0:02:49.359 about it, I own a little bit of this one. 0:02:49.520 --> 0:02:51.440 So I'd love to be out of it. But unfortunately 0:02:51.440 --> 0:02:53.880 getting out of it is like the thing that is 0:02:53.880 --> 0:02:57.240 the news story. So if I were tendering, then I 0:02:57.280 --> 0:02:58.880 would be a good more of the story. So I 0:02:58.960 --> 0:03:02.959 just have to hold it and or it. So I'm not. Well, 0:03:02.960 --> 0:03:04.920 he didn't bid for that one, but he's going to. 0:03:05.720 --> 0:03:07.360 If he bids for that one, I might have to 0:03:07.360 --> 0:03:08.960 sell to him so that he can come back on 0:03:09.000 --> 0:03:11.959 the podcast. How are you enjoying my shows? 0:03:12.040 --> 0:03:15.519 And it would be a very fun science experience. I 0:03:15.560 --> 0:03:17.200 wouldn't though I'd enjoy it. 0:03:18.080 --> 0:03:20.360 I would enjoy it. Yeah, I would get sixty five 0:03:20.400 --> 0:03:25.320 cents on the dollar it's worth anyway. I have no 0:03:25.400 --> 0:03:28.000 investment advice. I have no opinions on the Blue Prior 0:03:28.080 --> 0:03:30.679 Credit Fund. I have no complaints about their management of 0:03:30.680 --> 0:03:32.080 the fund, but I also wish I had known it 0:03:32.120 --> 0:03:35.240 for purely journalistic re since way about my financial advisor 0:03:35.280 --> 0:03:35.640 that does. 0:03:35.520 --> 0:03:38.000 He read money stuff? Does he listen to this podcast? 0:03:38.160 --> 0:03:39.600 So see a man. 0:03:39.440 --> 0:03:42.119 Most of most importantly, I hope he does not listen 0:03:42.200 --> 0:03:44.960 to this podcast. I feel bad talking about him. He 0:03:45.040 --> 0:03:47.160 definitely did not know who I was when I sort 0:03:47.200 --> 0:03:49.560 of came in the door. Yeah, this is like a 0:03:49.560 --> 0:03:52.640 few years ago. I was like talking to a fancy 0:03:52.640 --> 0:03:54.320 friend of ours in the newsroom and she was like 0:03:54.640 --> 0:03:57.520 talking about her financial advisor giving her like tax advice. 0:03:57.560 --> 0:04:00.800 And I was like, I've always been like a bang guy. 0:04:01.040 --> 0:04:03.280 I don't want a financial advisor to tell me what 0:04:03.440 --> 0:04:07.720 stocks to buy, yeah, what credit funds to buy, But 0:04:08.480 --> 0:04:11.960 you know, I want like some professional to hold my 0:04:12.000 --> 0:04:13.840 hand a little bit on like how much should I 0:04:13.840 --> 0:04:15.960 be putting in college funds? How much should I be 0:04:16.560 --> 0:04:19.239 like what's my target number for retirement? What tax stuff 0:04:19.240 --> 0:04:21.920 should I do to make my taxes lower? All the 0:04:22.000 --> 0:04:25.719 sort of not investing advice stuff that financial advisors do. 0:04:26.080 --> 0:04:29.000 And our fancy newsroom friend was talking up the benefit 0:04:29.080 --> 0:04:32.919 so I came in the door and had a moment 0:04:32.960 --> 0:04:38.400 of like nervousness but also arrogance that like that like 0:04:38.680 --> 0:04:40.640 this guy like ooh, the money stuff guy. But in 0:04:40.640 --> 0:04:44.279 fact he was like okay, whatever. We really did not 0:04:44.360 --> 0:04:47.080 know who I was. But now I believe he is 0:04:47.120 --> 0:04:50.080 at least aware of the newsletter because when I moved 0:04:50.080 --> 0:04:52.520 talked to him most recently, he was like, yeah, I 0:04:52.680 --> 0:04:55.640 sometimes skim him the newsletter and you probably don't want 0:04:55.640 --> 0:04:58.159 to be in this blue al fund anymore. Like yeah, 0:04:58.200 --> 0:05:00.560 but you know what can you do? So yeah, I 0:05:00.560 --> 0:05:04.000 have a financial advisor for like tax and other advising stuff. 0:05:04.360 --> 0:05:05.440 That's what you're supposed to do. 0:05:05.600 --> 0:05:08.160 Yeah. I feel conflicted about it because I'm definitely like 0:05:08.640 --> 0:05:12.120 I am sophisticated enough that I probably could just use 0:05:12.120 --> 0:05:14.640 index funds and like figure stuff out on my own. 0:05:15.320 --> 0:05:17.479 But like it's nice to like talk to a professional 0:05:17.680 --> 0:05:19.000 and be like this is how much I was thinking 0:05:19.040 --> 0:05:20.720 of saving for college and and being like, yeah, that 0:05:20.760 --> 0:05:24.160 sounds good, right, It's just like confirmatory. Yeah, eventually I 0:05:24.240 --> 0:05:27.120 just do that with like chat JPT. It's true, but no, 0:05:27.240 --> 0:05:29.440 it's it's helpful to have someone whose job it is 0:05:29.520 --> 0:05:31.960 to do this, even though my job is not unrelated 0:05:32.000 --> 0:05:32.200 to this. 0:05:32.400 --> 0:05:34.520 Yeah, I mean I feel like that's the pitch of 0:05:34.800 --> 0:05:36.559 financial advisors. 0:05:36.040 --> 0:05:39.880 Right, It's not really like we will buy this stocks 0:05:39.960 --> 0:05:41.839 that will go up, right. Yeah, that's not the pitch 0:05:41.880 --> 0:05:45.440 to me. Although if I had like bit at b Read, 0:05:45.480 --> 0:05:48.000 he might have had like a lot more spicy stuff 0:05:48.080 --> 0:05:50.960 to put into my portfolio. Like there's a certain amount 0:05:51.000 --> 0:05:52.719 of him being like what about this, and maybe like, 0:05:52.800 --> 0:05:55.200 nah's index one? Yeah, what about you? 0:05:55.640 --> 0:05:57.680 I have a financial advisor. 0:05:59.360 --> 0:05:59.960 For the comment. 0:06:01.200 --> 0:06:04.320 No, I'm in all index funds and it's just you 0:06:04.360 --> 0:06:09.400 know the other stuff. Yeah, I'm also I mean, we're journalists. 0:06:10.680 --> 0:06:12.920 We're not supposed to like do too much. 0:06:14.800 --> 0:06:35.160 No one private credit fund. 0:06:35.240 --> 0:06:38.960 Justin has a question. Justin says, I just recently finished 0:06:39.000 --> 0:06:42.320 reading and loved When Genius Failed, along with the Jamie 0:06:42.320 --> 0:06:45.880 Diamond biography. Last man standing, what are some of your 0:06:45.880 --> 0:06:49.599 favorite books about finance? That's fun. I don't have any 0:06:49.640 --> 0:06:50.359 favorite fund. 0:06:50.480 --> 0:06:52.440 Any favorite finance books, I don't think so. 0:06:52.720 --> 0:06:55.080 I like fiction. I feel like we've talked about it 0:06:55.120 --> 0:06:57.600 a bit on this podcast. I like sci fi and fantasy, 0:06:57.680 --> 0:06:59.680 and I really. 0:06:59.680 --> 0:07:01.000 I mean, I'm going to send you some. 0:07:02.240 --> 0:07:04.920 They have to be really good finance sci fi books 0:07:05.440 --> 0:07:06.520 that would be great. 0:07:06.360 --> 0:07:09.360 A genre that is not high on my list, but 0:07:09.400 --> 0:07:12.480 a genre that I read because sometimes people will be like, Hi, 0:07:13.120 --> 0:07:15.840 I work in finance and read it wrote a finance 0:07:15.840 --> 0:07:16.720 sci fi book. 0:07:16.480 --> 0:07:19.000 And I'll be like, well, that would be absolutely I 0:07:19.080 --> 0:07:21.760 have like four of those. Yeah. I feel bad saying 0:07:21.760 --> 0:07:25.080 that because I actually really love finance and markets and 0:07:25.120 --> 0:07:27.720 like the world that I exist in in a professional capacity. 0:07:27.760 --> 0:07:29.600 But when I get out of this building, I like 0:07:29.640 --> 0:07:33.120 to read fiction. But you definitely have a library. 0:07:33.360 --> 0:07:35.360 Yeah, I have some of that. Like I definitely try 0:07:35.360 --> 0:07:37.559 not to spend all of my time reading business books, 0:07:37.600 --> 0:07:39.400 but no, I do have a long list of fair 0:07:39.600 --> 0:07:42.080 finance books. Yeah, and I'm going to go to town on that. Now. 0:07:42.400 --> 0:07:44.000 Yeah, you can name five? 0:07:44.760 --> 0:07:45.960 Really five? 0:07:46.240 --> 0:07:47.000 Well, how many do you have? 0:07:49.840 --> 0:07:53.840 Seven? Like Pinnacle is Liar's Poker and by Brands at 0:07:53.840 --> 0:07:55.320 the Gate, everyone knows that it's boring. 0:07:55.320 --> 0:07:57.440 I can talk about I have started Liar's Poker. 0:07:57.480 --> 0:08:00.600 I do enjoy like the whole language of wallstre continues 0:08:00.640 --> 0:08:03.400 to be derived from jokes on that book. But so 0:08:03.440 --> 0:08:05.400 I want to talk about a few others that I 0:08:05.480 --> 0:08:09.320 love and just tell an anecdote from each one. Yeah, 0:08:09.320 --> 0:08:12.440 I get prepared unusually. So one that I recommend all 0:08:12.480 --> 0:08:14.200 the time is a book called Diary of a Very 0:08:14.200 --> 0:08:17.640 Bad Year, which is from N plus one, the literary magazine. 0:08:17.640 --> 0:08:19.880 It's like Keith Kessen is an N plus one editor 0:08:20.360 --> 0:08:23.520 interviewing an anonymous hedgehund manager. It's like a PM at 0:08:23.520 --> 0:08:26.640 a multispreat firm, and it's like he sort of like 0:08:26.640 --> 0:08:28.680 does periodic interviews throughout like the two thousand and eight 0:08:28.680 --> 0:08:32.880 financial crisis, and this guy gives a window into how 0:08:32.920 --> 0:08:35.560 he's thinking about the financial crisis and how he's trading markets, 0:08:35.600 --> 0:08:36.320 and it's really good. 0:08:36.440 --> 0:08:37.040 That's awesome. 0:08:37.240 --> 0:08:39.079 One thing that I love. He's like a credit he's 0:08:39.080 --> 0:08:42.839 like an emerging markets manager, and he says, every time 0:08:42.880 --> 0:08:45.040 you do a private investment, you're writing a call option 0:08:45.120 --> 0:08:47.400 on your own time. In a sense, you're writing more 0:08:47.440 --> 0:08:49.760 call options against your time than you have time, on 0:08:49.800 --> 0:08:52.160 the assumption that the correlation is not one hundred percent, 0:08:52.720 --> 0:08:55.360 And in a crisis, correlations go to one hundred percent, 0:08:55.440 --> 0:08:57.719 and so you just run out of time because you're 0:08:57.760 --> 0:09:00.120 dealing with all of these like fires on all all 0:09:00.120 --> 0:09:03.040 of your investments, and you sort of figured these investments 0:09:03.080 --> 0:09:04.800 won't all catch fire at once, but they do, and 0:09:04.840 --> 0:09:07.040 so you have no time and so it's not just 0:09:07.080 --> 0:09:10.200 like about your portfolio, it's about your time management. Another 0:09:10.240 --> 0:09:14.839 favorite book is in a different vein. Auntie Ilmanon of 0:09:14.880 --> 0:09:17.400 a AQR wrote a book called Expected Returns, which I 0:09:17.400 --> 0:09:19.920 think is the best book about investing. When people ask me, like, 0:09:20.120 --> 0:09:23.080 actually think about investing, I'm like, the question is like, 0:09:23.640 --> 0:09:26.120 why are you getting paid? Why should you expect to 0:09:26.120 --> 0:09:29.960 get money for this investment? Yeah, And this book is 0:09:30.040 --> 0:09:32.440 like an attempt to sort of answer that question comprehensively 0:09:32.440 --> 0:09:34.920 about all sorts of investments, and it has all these 0:09:34.960 --> 0:09:38.640 like little stylized facts that I love. One that I 0:09:38.679 --> 0:09:42.600 think about sometimes is that carry basically works if you 0:09:42.600 --> 0:09:45.120 have two investments and one pays ten percent a year 0:09:45.120 --> 0:09:47.120 and the other pays like eight percent a year. Right, 0:09:47.240 --> 0:09:50.160 Like financial theory would say that the one that pays 0:09:50.160 --> 0:09:52.360 ten percent a year has like a higher expected loss. 0:09:52.800 --> 0:09:55.760 And so really like they're like risk of tusted returns 0:09:55.800 --> 0:09:57.640 are the same. But in fact, like over time, things 0:09:57.679 --> 0:09:59.560 that pay more tend to pay more than things that 0:09:59.559 --> 0:10:02.400 pay less. So it's like the very intuitive, like simple 0:10:02.720 --> 0:10:04.680 thing that you just sort of eyeball turns out to 0:10:04.679 --> 0:10:06.600 work a lot of the time. This is famous in 0:10:06.640 --> 0:10:09.800 foreign exchange, where economic theory says that currency is that 0:10:09.880 --> 0:10:13.160 pay higher interest rates you're expected to depreciate, but like 0:10:13.200 --> 0:10:15.440 that never works at all, and it's like always the 0:10:15.480 --> 0:10:17.160 case that you can like make money in the character 0:10:17.160 --> 0:10:21.280 and not not investing in this. Okay, our friend Mary 0:10:21.320 --> 0:10:22.240 Childs wrote a book. 0:10:22.040 --> 0:10:23.719 Called The Bottom King that I did read. 0:10:24.400 --> 0:10:26.640 Okay, Okay, there's one favorite finance book. 0:10:26.679 --> 0:10:27.520 I had to read it. 0:10:28.760 --> 0:10:30.240 Are you saying it's not your favorite? 0:10:30.480 --> 0:10:33.160 I mean, I guess it has to be the one finance. 0:10:32.880 --> 0:10:37.000 Book you've ever read. I love The Bond King. One 0:10:37.000 --> 0:10:39.360 thing I love is I read all the time everything 0:10:39.400 --> 0:10:42.920 is seating charts, and in The Bond King, like you know, 0:10:43.000 --> 0:10:44.679 it's like sort of the story of how Bill Gross 0:10:44.720 --> 0:10:48.400 pilt pimcos and investing firm and then got defenestrated from PIMCO, 0:10:48.920 --> 0:10:51.320 And like why did he get kicked out? I like 0:10:51.400 --> 0:10:53.800 to say that he got kicked at because like he 0:10:54.000 --> 0:10:56.480 was like having tension with like the other senior managers 0:10:56.480 --> 0:10:59.160 at PIMCO, and he called a meeting and in the meeting, 0:10:59.400 --> 0:11:01.920 he didn't put his enemies at the front table. He 0:11:01.960 --> 0:11:04.199 put them in the audience facing the front table instead 0:11:04.200 --> 0:11:06.080 of at the front table where the big people sat. 0:11:06.320 --> 0:11:07.960 And so they got so mad that they went back 0:11:07.960 --> 0:11:10.240 to their offices afterwards, like he has to go and 0:11:10.280 --> 0:11:12.720 they fired him. That's not quite true. That's like a 0:11:12.760 --> 0:11:16.400 little true. Yeah, And you know sheple making millions and 0:11:16.400 --> 0:11:18.719 millions of dollars a year. All they care about is 0:11:18.720 --> 0:11:19.480 where they sit. 0:11:19.320 --> 0:11:20.960 At the big Mom, We're all a human at the 0:11:21.000 --> 0:11:21.600 end of the day. 0:11:21.920 --> 0:11:23.400 One I could go on for I have like. 0:11:23.760 --> 0:11:26.800 I can tell Yeah, I'm looking at a long list, 0:11:26.920 --> 0:11:28.800 strapping in here for a long time. 0:11:28.960 --> 0:11:32.920 Katie is literally falling asleep. Okay. Donald McKenzie, he was 0:11:32.920 --> 0:11:36.240 on oddlines recently. He's like a Scottish sociologist. He wrote 0:11:36.240 --> 0:11:37.880 a book called Trading at the Speed of Light, which 0:11:37.920 --> 0:11:42.319 is about like how high frequency trading rooms live their 0:11:42.360 --> 0:11:44.520 lives and think about things. And it has so many 0:11:44.520 --> 0:11:48.680 great antingtudes, including that when the CME, the Chicago Meercandolics 0:11:48.760 --> 0:11:52.640 Change moved its technology from writing trade tickets in pencil 0:11:52.720 --> 0:11:55.280 to writing them in pen it took eight months of 0:11:55.280 --> 0:11:57.920 fighting to change from pencil to pen It's like a 0:11:57.960 --> 0:12:01.800 great story of technological progress. On the seventy eighties. But 0:12:01.920 --> 0:12:05.280 also it's a lot about like microwave links from Chicago 0:12:05.320 --> 0:12:08.120 to New York. And apparently in the twenty tens of 0:12:08.200 --> 0:12:11.880 rain created liquidity because when it rained, the microwave link 0:12:11.960 --> 0:12:14.080 went down and it was like slower to get information 0:12:14.160 --> 0:12:17.199 from Chicago to New York. And so what that meant 0:12:17.280 --> 0:12:21.200 was that basically like predatory high fergency traders were slowed 0:12:21.240 --> 0:12:24.160 down enough that market makers could quote tighter spreads because 0:12:24.160 --> 0:12:27.560 they weren't getting picked off by predatory market by predatory HFTs. 0:12:27.840 --> 0:12:30.000 And then like later in the decade, that factory reversed 0:12:30.040 --> 0:12:33.280 because I guess the market makers couldn't get the information 0:12:33.360 --> 0:12:35.600 past enough. But anyway, so rain created liquidity. 0:12:35.679 --> 0:12:40.000 That's amazing. Justin, that was the most fun that matters. 0:12:40.440 --> 0:12:43.040 Justin, will have a beer at Morgan's. I'll give you 0:12:43.080 --> 0:12:44.040 some of my other voices. 0:12:45.080 --> 0:12:49.240 Great question, Justin. Okay, Chris has a question. Though Chris 0:12:49.360 --> 0:12:51.960 works at a private equity firm. Like many firms, we 0:12:52.000 --> 0:12:56.600 advertise our ESG credentials to our institutional LPs parentheses. I 0:12:56.600 --> 0:12:58.400 mean less so now than two years ago. But you 0:12:58.440 --> 0:12:59.080 get the idea. 0:12:59.480 --> 0:13:01.480 Among the we get this question a while, like a 0:13:01.520 --> 0:13:03.840 few weeks ago, and it's probably like they've really scrubbed 0:13:03.840 --> 0:13:05.120 it entirely from the web pitch. 0:13:05.160 --> 0:13:08.599 But yeah, Anyway, among the ESG initiatives we tout is 0:13:08.640 --> 0:13:11.280 how well we treat our employees, things like health and 0:13:11.320 --> 0:13:15.160 wellness initiatives, but also nice corporate retreats does sound nice. 0:13:15.320 --> 0:13:18.880 My question is this our employee benefits for private equity employees, 0:13:18.920 --> 0:13:21.200 good ESG or bad ESG. 0:13:22.960 --> 0:13:26.280 Someone once told me that ESG is really E and 0:13:26.480 --> 0:13:28.680 S and then G is just there to make the 0:13:28.760 --> 0:13:32.640 numbers work. So one pitch for ESG environmental, social and 0:13:32.679 --> 0:13:37.319 governments investing is that it's good for returns, Like if 0:13:37.360 --> 0:13:39.640 you buy things with good if you buy companies with 0:13:39.679 --> 0:13:43.400 good ESG scores, you'll get a higher return. And the 0:13:43.400 --> 0:13:46.600 theory that I've heard is that the G is there 0:13:47.000 --> 0:13:49.280 because that's what gives you the higher returns. And like 0:13:49.320 --> 0:13:52.079 that theory is very simple, which is that G governance 0:13:52.360 --> 0:13:56.920 basically means doing shareholder friendly stuff basically means like supervising 0:13:57.000 --> 0:14:00.079 management and trying to get good returns for shareholders and 0:14:00.120 --> 0:14:02.760 being aligned with shareholders rather than doing whatever management wants. 0:14:03.120 --> 0:14:08.760 E and S. Environmental and social stuff are about other stakeholders. 0:14:09.600 --> 0:14:11.520 Environmental is about like doing good stuff for the environment 0:14:11.600 --> 0:14:14.360 even have cost shareholders. Social is about doing good stuff 0:14:14.400 --> 0:14:17.520 for employees or communities, even if it costs shaholders money. 0:14:17.760 --> 0:14:19.960 But G is about doing stuff for shareholders even who 0:14:19.960 --> 0:14:23.320 it costs the CEO money, And so G doesn't really 0:14:23.320 --> 0:14:25.440 fit with with like ESG like the other things are 0:14:25.440 --> 0:14:27.960 about like having a broader set of stakeholders, and G 0:14:28.160 --> 0:14:30.560 is just about trying to MAXI my Chareolter returns in 0:14:30.600 --> 0:14:34.080 that vein. Being nice to your employees is good social, 0:14:34.920 --> 0:14:39.080 and if they're very senior management employees, then it's kind 0:14:39.080 --> 0:14:41.320 of bad governance, right. It's like if you give the 0:14:41.360 --> 0:14:44.160 CEO one hundred million dollars at the expensive shaholders, that's like, yeah, 0:14:44.480 --> 0:14:49.200 not ideal governance. Right. So I think that there's no 0:14:49.280 --> 0:14:51.400 like real answer to this question. But I think there's 0:14:51.440 --> 0:14:54.760 some like seniority dividing line where like giving your CEO 0:14:54.960 --> 0:15:00.960 nice perks is bad governance and giving your cashiers is 0:15:01.320 --> 0:15:05.920 good social. I think that like, probably the employees of 0:15:06.160 --> 0:15:10.600 portfolio companies are good social, and probably the like actual 0:15:10.640 --> 0:15:14.520 employees of the private equity funder a little more don't 0:15:14.560 --> 0:15:16.960 advertise the parks that give them that's fine. 0:15:17.120 --> 0:15:19.520 Cool. Well, thanks for the question, Chris, I hope things 0:15:19.520 --> 0:15:40.119 are going yeah, okay. This comes from Ron asking about IPOs. 0:15:40.240 --> 0:15:43.400 Ron asks, after a company has gone public and has 0:15:43.480 --> 0:15:46.840 received the infusion of cash from the IPO, what role 0:15:46.920 --> 0:15:49.200 does the share price actually play in the operation of 0:15:49.240 --> 0:15:52.480 the company. Do most companies continue to hold a percentage 0:15:52.480 --> 0:15:55.360 of shares that they buy slash sell to generate cash 0:15:55.400 --> 0:15:58.200 at later dates or is this mainly for employee stock 0:15:58.280 --> 0:15:59.720 compensation slash options. 0:16:00.120 --> 0:16:02.080 You know, I used to be a capital markets banker, 0:16:02.200 --> 0:16:04.680 and it is always straighting to me how much people 0:16:04.680 --> 0:16:07.200 believe in like the concept of treasury stock. Like people 0:16:07.240 --> 0:16:10.240 believe that companies have stock and there's a pot and 0:16:10.280 --> 0:16:12.040 they can sell that stock, and then they run out. 0:16:12.040 --> 0:16:13.800 They run out, And that's not how it works in 0:16:13.800 --> 0:16:15.360 the US. It is how it works in some of 0:16:15.400 --> 0:16:17.400 the places. But in the US there's no such thing 0:16:17.440 --> 0:16:21.640 as like you can pretty much always print new stock 0:16:21.680 --> 0:16:23.720 whenever you want, so it's not like they're holding stock 0:16:23.800 --> 0:16:28.360 to sell. And most companies don't sell stock after they 0:16:28.360 --> 0:16:31.720 go public. Maybe that's not true and exaggeration, but like classically, 0:16:31.960 --> 0:16:34.080 the big successful companies tend not to sell a lot 0:16:34.120 --> 0:16:37.600 of stock. I have written that at this point the 0:16:37.600 --> 0:16:40.480 public stock market is for returning capital to shareholders rather 0:16:40.520 --> 0:16:42.840 than raising capital from shareholders. And even a lot of 0:16:42.880 --> 0:16:45.840 IPOs companies don't need the money. They're just going public 0:16:45.880 --> 0:16:48.200 so they can so their early investors can cash up, 0:16:48.720 --> 0:16:51.440 although that is very much changing with the big AI 0:16:51.680 --> 0:16:53.720 IPOs where people need all the money they can raise. 0:16:54.520 --> 0:16:56.400 But so why does the stock price matter? I mean 0:16:57.960 --> 0:17:02.440 A big part of the answer is executive and employee pay. Right, 0:17:02.440 --> 0:17:05.040 If you're paying people in stock, you're motivating them with 0:17:05.040 --> 0:17:06.800 the stock, and if the stock goes up, then they're 0:17:06.800 --> 0:17:09.200 more motivated, and so it is good for the stock 0:17:09.240 --> 0:17:13.760 to go up for compensation reasons. There's also like M 0:17:13.760 --> 0:17:16.600 and A, if your stock is valuable, you can buy 0:17:16.640 --> 0:17:20.240 companies with your stock. Yes, big successful public companies don't 0:17:20.280 --> 0:17:22.399 like to sell stock, but they do like to sell debt, 0:17:22.480 --> 0:17:25.000 and the more the stock is worth, like all things 0:17:25.000 --> 0:17:29.119 being equal, it's easier to raise debt financing. Probably the 0:17:29.160 --> 0:17:34.520 stock price is a market signal about whether your company 0:17:34.640 --> 0:17:38.160 is creating value, about whether you're like a good thing 0:17:38.200 --> 0:17:42.040 to allocate capital to. And so a lot of CEOs 0:17:42.080 --> 0:17:44.399 like are sort of raised in like the church of 0:17:44.640 --> 0:17:47.840 capital allocation discipline, and if their stock is going up, 0:17:48.200 --> 0:17:51.359 then they think we are doing good stuff. We should 0:17:51.359 --> 0:17:55.919 do more projects and build more factories and launch new 0:17:56.000 --> 0:18:00.000 products and generally invest more in this company that has succeeded. 0:18:00.520 --> 0:18:02.159 And if their stock is going down, they're like, we 0:18:02.200 --> 0:18:05.080 should do stock buybacks, right, which essentially means the stuff 0:18:05.119 --> 0:18:07.000 we're doing isn't working, so we should just give money 0:18:07.000 --> 0:18:08.560 back to shaholders and they can find something else to 0:18:08.600 --> 0:18:10.560 do with it, which is kind of the signals by 0:18:10.600 --> 0:18:12.920 a stock bybick. Yeah, well, kind of the signal that 0:18:13.080 --> 0:18:14.760 the stock prize going down sends you and then you 0:18:14.760 --> 0:18:18.640 do the stock bibike. So I think that like it's 0:18:18.720 --> 0:18:22.320 just the stock price is a signal of like where 0:18:22.320 --> 0:18:24.480 to allocate capital, both to like the market and to 0:18:24.600 --> 0:18:26.320 the to the executives. 0:18:26.400 --> 0:18:29.120 Yeah, and it's like a real time report. 0:18:29.000 --> 0:18:32.080 And then people believe in that. Executives are motivated by that. 0:18:32.760 --> 0:18:36.040 Executives try to allocate capital to things that are good. 0:18:36.080 --> 0:18:38.399 The stock price sends them a signal. There's also like 0:18:38.560 --> 0:18:41.680 the market for corporate control, which is a fancy way 0:18:41.720 --> 0:18:43.720 of saying, if your stock price gets too low, then 0:18:43.800 --> 0:18:46.040 like Carli Kin, is going to try to buy the 0:18:46.040 --> 0:18:48.040 company or something. You know, you try to keep the 0:18:48.040 --> 0:18:51.000 stock price high to fend off activists and hostile takeovers 0:18:51.000 --> 0:18:54.280 and whatnot. So yeah, I think that's the answer. I've 0:18:54.359 --> 0:18:57.400 enjoyed writing about memestacks over the last three years. Memestacks 0:18:57.440 --> 0:18:59.879 like break a lot of this, right, Like you're not 0:19:00.080 --> 0:19:03.160 getting the right capital allocation signals when you're stuck goes 0:19:03.200 --> 0:19:04.560 up a thousand percent for no reason. 0:19:04.840 --> 0:19:07.639 Yeah, you're getting other signals more. 0:19:07.640 --> 0:19:09.600 But more about you know, right, and you're sometimes like 0:19:10.200 --> 0:19:12.119 allocating more capital to your company, right, I mean, like 0:19:12.160 --> 0:19:14.760 we I wrote about like when Gameslop was like way up, 0:19:14.840 --> 0:19:17.119 they were like hiring executives from Amazon and you know, 0:19:17.200 --> 0:19:19.119 launching all these new projects. It's the same, you know, 0:19:19.240 --> 0:19:21.560 it's the if your sty price is up, that means 0:19:21.600 --> 0:19:24.960 you're a good allocator of capital. And so you start 0:19:25.000 --> 0:19:27.240 like doing new stuff and hiring new executives and making 0:19:27.320 --> 0:19:30.280 acquisitions and doing all the stuff that a big growing 0:19:30.320 --> 0:19:32.320 company does because the market is telling you you're a 0:19:32.320 --> 0:19:36.680 big growing company that like has you know, high returns 0:19:36.680 --> 0:19:38.800