1 00:00:01,960 --> 00:00:06,040 Speaker 1: This is Masters in Business with very Rid Holds on 2 00:00:06,200 --> 00:00:12,120 Speaker 1: Bloomberg Radio. This week on the podcast, my extra special 3 00:00:12,160 --> 00:00:16,079 Speaker 1: guest is Dominic Mielle. She is an author and former 4 00:00:16,520 --> 00:00:21,439 Speaker 1: hedge fund trader specializing in distressed assets. She was a 5 00:00:21,520 --> 00:00:26,479 Speaker 1: partner and a portfolio manager at Canyon Capital Farm that 6 00:00:26,640 --> 00:00:31,360 Speaker 1: runs currently about twenty five billion dollars. Her book, Damsel 7 00:00:31,360 --> 00:00:34,280 Speaker 1: and Distressed, My Life in the Golden Age of Hedge Funds, 8 00:00:34,680 --> 00:00:38,440 Speaker 1: is really a fascinating read. I know I when I 9 00:00:38,479 --> 00:00:41,000 Speaker 1: have a guest on with a book, I usually say 10 00:00:41,080 --> 00:00:43,360 Speaker 1: nice things about the book, and I don't do that 11 00:00:43,400 --> 00:00:46,040 Speaker 1: if I don't mean it. But I really had fun 12 00:00:46,360 --> 00:00:51,680 Speaker 1: reading this. It's very witty and charming and revealing about 13 00:00:51,720 --> 00:00:55,000 Speaker 1: an industry in a way that most books on hedge 14 00:00:55,040 --> 00:00:58,320 Speaker 1: funds simply are not. I found it to be a 15 00:00:58,400 --> 00:01:01,360 Speaker 1: very pleasant read, and I think you will also. And 16 00:01:01,400 --> 00:01:03,800 Speaker 1: I found this to be a fascinating conversation, which I 17 00:01:03,880 --> 00:01:07,800 Speaker 1: expect you will as well. With no further ado, my 18 00:01:07,959 --> 00:01:12,800 Speaker 1: interview with Dominic meel, author of Damsel and Distressed. First 19 00:01:12,800 --> 00:01:16,280 Speaker 1: of all, before we get started, I very much enjoyed 20 00:01:16,319 --> 00:01:19,759 Speaker 1: the book. You have a very wicked sense of humor 21 00:01:19,800 --> 00:01:23,039 Speaker 1: which comes through in the pages, starting with the title 22 00:01:23,600 --> 00:01:28,039 Speaker 1: Damsel in Distressed. What made you decide to write a 23 00:01:28,080 --> 00:01:31,600 Speaker 1: memoir about your decades in the hedge fund industry. Well, 24 00:01:31,600 --> 00:01:36,160 Speaker 1: it started with an article that I wrote as a 25 00:01:36,400 --> 00:01:40,880 Speaker 1: hobby about my experience as a woman at Lehman Brothers. 26 00:01:41,160 --> 00:01:45,120 Speaker 1: And it was picked up by Business Insider, and I 27 00:01:45,160 --> 00:01:48,200 Speaker 1: realized a couple of things. One was that I really 28 00:01:48,320 --> 00:01:53,240 Speaker 1: enjoy writing, and two was that I had never really 29 00:01:54,320 --> 00:01:57,040 Speaker 1: taken time to think about the lack of women in 30 00:01:57,080 --> 00:02:01,440 Speaker 1: the business and that there really wasn't a voice to 31 00:02:01,480 --> 00:02:05,160 Speaker 1: tell the story of female investors. And so that's when 32 00:02:05,160 --> 00:02:07,800 Speaker 1: I thought, you know, there might be a hole in 33 00:02:07,840 --> 00:02:12,000 Speaker 1: the market, huh, identifying an inefficiency so to speak. So 34 00:02:12,120 --> 00:02:14,800 Speaker 1: to speak, except that there's really no money in writing 35 00:02:14,800 --> 00:02:19,520 Speaker 1: a book. Well, it's best described as a branding exercise 36 00:02:19,760 --> 00:02:22,919 Speaker 1: and a way to sort of get things off your chest. 37 00:02:23,280 --> 00:02:25,720 Speaker 1: But but let's roll back a little bit. You get 38 00:02:25,720 --> 00:02:30,519 Speaker 1: an MBA at Stanford, how do you end up in finance? 39 00:02:30,639 --> 00:02:32,959 Speaker 1: Was that where you plan to go? Because a lot 40 00:02:33,000 --> 00:02:37,000 Speaker 1: of the Stanford MBA graduates tend to find the way 41 00:02:37,000 --> 00:02:40,640 Speaker 1: into technology, not finance. Right. Well, by the time I 42 00:02:40,680 --> 00:02:43,760 Speaker 1: got to Stanford, I pretty much knew I wanted to 43 00:02:43,800 --> 00:02:47,320 Speaker 1: be in finance, but where I started was at Lehman 44 00:02:47,360 --> 00:02:52,160 Speaker 1: Brothers in New York before Stanford, and that was completely 45 00:02:53,040 --> 00:02:56,960 Speaker 1: that was serendipity. Really. I wanted a job that would 46 00:02:57,000 --> 00:02:59,680 Speaker 1: take me away from Paris. I wanted to see the world, 47 00:02:59,760 --> 00:03:04,079 Speaker 1: and whether it was investment banking or basket weaving really 48 00:03:04,120 --> 00:03:09,160 Speaker 1: had absolutely no bearing on my decision. So I ended 49 00:03:09,240 --> 00:03:13,880 Speaker 1: up as an investment banker, which you know, like every analyst, 50 00:03:14,000 --> 00:03:16,880 Speaker 1: I hated after a few years. And so the NBA 51 00:03:17,040 --> 00:03:21,400 Speaker 1: was sort of a way out of that job, branching 52 00:03:21,480 --> 00:03:26,880 Speaker 1: into hopefully what I thought were better, better pastures. But 53 00:03:27,040 --> 00:03:30,440 Speaker 1: still in finance. Would you do with Lehman Brothers that 54 00:03:30,520 --> 00:03:33,960 Speaker 1: you grew to hate? Were you just a spreadsheet jockey? 55 00:03:34,000 --> 00:03:37,320 Speaker 1: And of course I was, and I was. It was 56 00:03:37,440 --> 00:03:41,600 Speaker 1: particularly ruthless because I was in a group called FIG 57 00:03:41,880 --> 00:03:46,080 Speaker 1: Financial Financial Institutions Group. At the time, there were still 58 00:03:46,120 --> 00:03:51,120 Speaker 1: a lot of savings and loan institution thrifts, lots of mergers. 59 00:03:51,120 --> 00:03:58,320 Speaker 1: So what I did basically was model the mergers of 60 00:03:58,360 --> 00:04:01,560 Speaker 1: any combination you could think of. I mean, I remember 61 00:04:01,560 --> 00:04:05,160 Speaker 1: it got so bad that there was a spreadsheet with 62 00:04:05,200 --> 00:04:09,400 Speaker 1: all the different institutions vertically and horizontally, and I had 63 00:04:09,400 --> 00:04:16,120 Speaker 1: to model them in each queer, and I thought, what happened? 64 00:04:16,320 --> 00:04:19,120 Speaker 1: What happens to the diagonal? Do they merge with themselves? 65 00:04:19,200 --> 00:04:21,479 Speaker 1: You want me to model that too, But that was 66 00:04:21,600 --> 00:04:27,200 Speaker 1: kind of the sort of, you know, almost mindless brute 67 00:04:27,400 --> 00:04:32,760 Speaker 1: force job that I was doing. So so you you 68 00:04:32,839 --> 00:04:35,680 Speaker 1: do win a couple of accolades at Stanford when you're 69 00:04:35,680 --> 00:04:39,240 Speaker 1: getting your MBA. What brought you to the attention of 70 00:04:39,360 --> 00:04:43,039 Speaker 1: Canyon Partners? How did you find your way there? Well, 71 00:04:43,160 --> 00:04:45,760 Speaker 1: first I sort of zoomed in on the fact that 72 00:04:45,800 --> 00:04:48,400 Speaker 1: I wanted to work for a hedge fund that I worked. 73 00:04:48,480 --> 00:04:51,600 Speaker 1: I wanted to go to the buy side. That was first, 74 00:04:51,760 --> 00:04:58,599 Speaker 1: and that was sort of really brought to me through 75 00:04:58,640 --> 00:05:02,960 Speaker 1: a couple of classes that were incredibly illuminating, one taught 76 00:05:03,000 --> 00:05:09,039 Speaker 1: by Bill Sharp and one by Darryl Duffy, both exceptional minds. 77 00:05:09,600 --> 00:05:13,799 Speaker 1: So I sort of narrowed down finance to buy side 78 00:05:13,839 --> 00:05:17,520 Speaker 1: by side, to hedge funds, hedge funds, to something that 79 00:05:17,640 --> 00:05:21,200 Speaker 1: had to do with junk bonds. Because I was a 80 00:05:21,240 --> 00:05:27,400 Speaker 1: great admirer of Michael Milkin, had read books about him, 81 00:05:27,440 --> 00:05:31,559 Speaker 1: and so I thought that seems a very interesting mix 82 00:05:31,600 --> 00:05:37,279 Speaker 1: of finance, but also strategy. You describe what we now 83 00:05:37,320 --> 00:05:40,680 Speaker 1: called junk bonds we used to call high yield, what 84 00:05:40,720 --> 00:05:44,400 Speaker 1: we now call distressed investing, we used to call vulture investing, 85 00:05:44,960 --> 00:05:49,520 Speaker 1: And you write the only difference between stressed and distress 86 00:05:49,560 --> 00:05:53,200 Speaker 1: bonds was the immediacy of the bankruptcy. Tell us a 87 00:05:53,279 --> 00:05:56,080 Speaker 1: little bit about what it was like to wade into 88 00:05:56,120 --> 00:06:01,039 Speaker 1: the world of distress investing for our bonds. Well, I mean, 89 00:06:01,320 --> 00:06:07,279 Speaker 1: it was a fairly new asset class. I think, you know, 90 00:06:07,320 --> 00:06:12,920 Speaker 1: it's not until probably fair Lawn came into existence that 91 00:06:13,760 --> 00:06:19,320 Speaker 1: it became a real asset class in itself that stressed 92 00:06:19,320 --> 00:06:23,880 Speaker 1: and distressed was um, you know, a category that was 93 00:06:24,000 --> 00:06:27,800 Speaker 1: thought as investable, but it was very tiny. I mean, 94 00:06:27,880 --> 00:06:31,000 Speaker 1: I think there were you know, probably fifteen billion in 95 00:06:31,040 --> 00:06:35,640 Speaker 1: assets in total of hedge funds investing in distressed at 96 00:06:35,680 --> 00:06:39,720 Speaker 1: the time in the in the mid nineties. And so 97 00:06:39,760 --> 00:06:42,839 Speaker 1: if you compare that to today, if you remember, Oak 98 00:06:42,920 --> 00:06:48,480 Speaker 1: three raised fifteen billion dollar fund in twenty twenty on 99 00:06:48,520 --> 00:06:52,800 Speaker 1: its own, so the magnitude is not even comparable. So 100 00:06:52,839 --> 00:06:58,080 Speaker 1: it was a it was a starting industry, very much 101 00:06:58,120 --> 00:07:01,080 Speaker 1: a sort of a venture but all type of business. 102 00:07:01,120 --> 00:07:05,440 Speaker 1: New asset class for this type of investing as well. Right, 103 00:07:05,760 --> 00:07:08,960 Speaker 1: So I like this quote of yours, which is stock 104 00:07:09,040 --> 00:07:12,520 Speaker 1: owners own a call option on the value of a company. 105 00:07:13,120 --> 00:07:18,200 Speaker 1: Bond holders have sold a put option. One is long volatility, 106 00:07:18,240 --> 00:07:21,280 Speaker 1: the other is short, and consequently are at odds in 107 00:07:21,440 --> 00:07:26,840 Speaker 1: times of changing volatility. Explain why bond holders have sold 108 00:07:26,920 --> 00:07:32,560 Speaker 1: a put option, because if if the value of the 109 00:07:32,600 --> 00:07:37,720 Speaker 1: business of the company falls below the part amount of 110 00:07:37,720 --> 00:07:40,840 Speaker 1: the bond, then the bond holders are going to repossess 111 00:07:40,920 --> 00:07:44,200 Speaker 1: the company. It's as simple as that. The equity guys 112 00:07:44,520 --> 00:07:48,480 Speaker 1: give you the keys and it's yours to run, and 113 00:07:48,640 --> 00:07:53,400 Speaker 1: anything above the part value of the total debt on 114 00:07:53,440 --> 00:07:57,640 Speaker 1: the capital structure belongs to the equity guys. And so 115 00:07:57,960 --> 00:08:01,360 Speaker 1: there are a lot of cases where it's really interesting 116 00:08:01,720 --> 00:08:05,800 Speaker 1: how this sort of game of strategy, this game of risk, 117 00:08:06,360 --> 00:08:09,480 Speaker 1: starts with a sudden change in volatility. It can be 118 00:08:09,640 --> 00:08:13,440 Speaker 1: a bankruptcy, but it also can be an MNA event, 119 00:08:13,600 --> 00:08:16,800 Speaker 1: it can be an LBO, it can be even a 120 00:08:16,920 --> 00:08:21,080 Speaker 1: change in regulation or in market, or suddenly volatility picks 121 00:08:21,160 --> 00:08:25,840 Speaker 1: up and the interest of bondholders and shareholders are at odds. 122 00:08:26,360 --> 00:08:30,560 Speaker 1: And that's really what made the job absolutely thrilling. I'm 123 00:08:30,680 --> 00:08:36,280 Speaker 1: less of a business lover. I invest less because I'm 124 00:08:36,360 --> 00:08:40,839 Speaker 1: interested in what widgets a company does, and more in 125 00:08:40,880 --> 00:08:44,360 Speaker 1: the capital structure and how to position yourself, what the 126 00:08:44,440 --> 00:08:46,760 Speaker 1: other guy is going to do at the bond level 127 00:08:46,880 --> 00:08:50,920 Speaker 1: or senior secured level, and how to position yourself to 128 00:08:51,000 --> 00:08:55,439 Speaker 1: make money. That's the thrill. So you're looking at the 129 00:08:55,520 --> 00:08:59,880 Speaker 1: various paper that's available. Here's the downside, risk and equity, 130 00:09:00,080 --> 00:09:02,400 Speaker 1: and for it to work out, the company has to 131 00:09:02,440 --> 00:09:05,120 Speaker 1: turn itself around and a miracle has to happen. The 132 00:09:05,240 --> 00:09:09,000 Speaker 1: bonds aren't worthless, but they're definitely not trading it par 133 00:09:09,679 --> 00:09:12,440 Speaker 1: but they've fallen so far that hey, it gives us 134 00:09:12,440 --> 00:09:14,720 Speaker 1: a callable option on the company if they do go 135 00:09:14,760 --> 00:09:19,480 Speaker 1: into bankruptcy. So let's get long. This debt which is 136 00:09:19,480 --> 00:09:21,600 Speaker 1: trading at a fraction of what it was issued for. 137 00:09:22,000 --> 00:09:24,200 Speaker 1: Is that more or less? That's correct, And it can 138 00:09:24,280 --> 00:09:27,720 Speaker 1: be a lot more complicated than that. Of course, it 139 00:09:27,760 --> 00:09:31,520 Speaker 1: can be a simple capital structure like PGNE in bankruptcy, 140 00:09:31,600 --> 00:09:34,720 Speaker 1: which had one layer of equity and one layer of bonds, 141 00:09:35,320 --> 00:09:38,200 Speaker 1: and it can be very complicated like Puerto Rico that 142 00:09:38,320 --> 00:09:43,840 Speaker 1: had nineteen different debt issues by different entities with different terms. 143 00:09:43,920 --> 00:09:47,520 Speaker 1: So not only can you be long one bond, you 144 00:09:47,559 --> 00:09:50,000 Speaker 1: can be long and short two bonds. You can be 145 00:09:50,160 --> 00:09:56,760 Speaker 1: long different maturities. You can be long claim insurance in 146 00:09:56,760 --> 00:10:03,120 Speaker 1: insurance claims. That's the English right insurance claims, meaning meaning 147 00:10:03,480 --> 00:10:07,800 Speaker 1: the insurance owns a claim against PGNE and that's they 148 00:10:07,840 --> 00:10:10,200 Speaker 1: want to sell it and get the cash immediately, and 149 00:10:10,240 --> 00:10:13,400 Speaker 1: they sell it to bound Post at a discount to 150 00:10:13,520 --> 00:10:17,240 Speaker 1: what they're entitled to. That could be a trade. So, um, 151 00:10:17,640 --> 00:10:21,920 Speaker 1: there are you know, infinite ways to position yourself in 152 00:10:22,000 --> 00:10:27,000 Speaker 1: this sort of game of throne type, right, you said 153 00:10:27,080 --> 00:10:29,160 Speaker 1: all the cursing and none of the sacks of Game 154 00:10:29,200 --> 00:10:32,840 Speaker 1: of thrones, not that I've witnessed, but you know, lots 155 00:10:32,840 --> 00:10:37,400 Speaker 1: of cursing. So you were very actively involved in the 156 00:10:37,440 --> 00:10:41,160 Speaker 1: restructuring of the airlines post nine to eleven. Um, what 157 00:10:41,320 --> 00:10:44,120 Speaker 1: about what happened with a lot of banks during the 158 00:10:44,160 --> 00:10:48,160 Speaker 1: financial crisis, I guess other than Lehman Brothers, most of 159 00:10:48,160 --> 00:10:52,240 Speaker 1: them were either rescued or absorbed into another entity. So 160 00:10:52,280 --> 00:10:55,640 Speaker 1: there really wasn't a whole lot of restructuring and distressed 161 00:10:55,640 --> 00:10:59,800 Speaker 1: assets afterwards? Or was there? Tell us about that period 162 00:11:00,520 --> 00:11:05,520 Speaker 1: after two thousand and eight or nine? Yeah, So financial 163 00:11:05,559 --> 00:11:09,760 Speaker 1: institutions were not my industry to cover. But of course 164 00:11:09,840 --> 00:11:14,880 Speaker 1: Lehmann was a huge restructuring and bankruptcy liquidations still going 165 00:11:14,920 --> 00:11:18,400 Speaker 1: on today, right, Yeah, that isn't crazy exactly. That kept 166 00:11:18,440 --> 00:11:23,400 Speaker 1: my colleagues occupied and making a lot of money. By 167 00:11:23,520 --> 00:11:27,160 Speaker 1: oh eight or nine, Look, there were bankruptcies everywhere in 168 00:11:27,200 --> 00:11:33,640 Speaker 1: every industry, from retail to telecom. Um and there were 169 00:11:33,200 --> 00:11:38,560 Speaker 1: the great bonanza of later eight and oh nine. Is 170 00:11:38,600 --> 00:11:41,320 Speaker 1: that there were companies that were not stressed at all. 171 00:11:41,520 --> 00:11:45,840 Speaker 1: It's just the bonds were trading horribly just because liquidity 172 00:11:46,120 --> 00:11:48,920 Speaker 1: was gone from the market. So it's it was a 173 00:11:48,960 --> 00:11:54,000 Speaker 1: pretty different situation from two thousand and one, the whole 174 00:11:54,120 --> 00:11:58,240 Speaker 1: dot com bust, but more importantly the telecom implosion. That's 175 00:11:58,280 --> 00:12:05,120 Speaker 1: when all the wire cable uh some wireline companies went bankrupt. 176 00:12:05,360 --> 00:12:10,760 Speaker 1: Names that maybe your listeners today wouldn't recognize, crossing fiber, 177 00:12:10,960 --> 00:12:14,240 Speaker 1: you go down. We watched Nortel and Lusen, like, are 178 00:12:14,280 --> 00:12:16,600 Speaker 1: those companies really going to go belly up? It was 179 00:12:16,880 --> 00:12:19,960 Speaker 1: sure that it was really fascinating. Yes, so all those 180 00:12:20,520 --> 00:12:25,199 Speaker 1: don't even exist anymore. Um, and that these were real 181 00:12:25,520 --> 00:12:34,079 Speaker 1: bankruptcies led by a supply demand imbalance too much, too 182 00:12:34,200 --> 00:12:37,439 Speaker 1: much leverage and not enough demand for the products, and 183 00:12:37,480 --> 00:12:41,160 Speaker 1: the demand demand was sort of tardy to come um, 184 00:12:41,200 --> 00:12:44,960 Speaker 1: so those companies restructured or liquidity, but it was not 185 00:12:45,040 --> 00:12:49,240 Speaker 1: a liquidity issue. Oh eight was purely liquidity issue, so 186 00:12:49,280 --> 00:12:54,920 Speaker 1: that the formidable trades were to buy companies that were 187 00:12:54,920 --> 00:12:58,680 Speaker 1: actually very viable the way they were, and bonds were 188 00:12:58,720 --> 00:13:02,440 Speaker 1: trading at huge gowns because there were no buyers anymore. 189 00:13:02,880 --> 00:13:07,079 Speaker 1: Really interesting. So you retire in twenty eighteen, and two 190 00:13:07,160 --> 00:13:11,360 Speaker 1: years later the pandemic strikes. A lot of companies crashed 191 00:13:11,440 --> 00:13:15,920 Speaker 1: and recovered, but we've been still watching the fallout. Here 192 00:13:15,960 --> 00:13:18,840 Speaker 1: it is three years later. Do you ever look at 193 00:13:18,880 --> 00:13:21,280 Speaker 1: that landscape and say, hey, if I was on the desk, 194 00:13:21,679 --> 00:13:24,760 Speaker 1: we'd be buying this, that, and the other. Because this 195 00:13:24,840 --> 00:13:28,239 Speaker 1: is just a temporary stress or. I wouldn't touch that 196 00:13:28,240 --> 00:13:31,720 Speaker 1: that's going to hell in a handbasket. I do less 197 00:13:31,760 --> 00:13:36,080 Speaker 1: of that and more thinking about the business of hedge 198 00:13:36,120 --> 00:13:39,280 Speaker 1: funds in general. So in other words, I'm less interested 199 00:13:39,320 --> 00:13:44,439 Speaker 1: in bond picking at this point and more interested in 200 00:13:44,520 --> 00:13:49,000 Speaker 1: what's going on. For example, you talk about the twenty 201 00:13:49,120 --> 00:13:54,480 Speaker 1: twenty distressed cycle, and it's interesting to me that it 202 00:13:54,559 --> 00:13:58,640 Speaker 1: was so short, so shallow, right, right, we had about 203 00:13:58,720 --> 00:14:02,800 Speaker 1: five months Flinken, you miss it exactly, and that is 204 00:14:03,000 --> 00:14:07,200 Speaker 1: of course due to the FED intervention. But if you 205 00:14:07,240 --> 00:14:13,600 Speaker 1: think about it, que is a relatively novel tool. Not 206 00:14:14,120 --> 00:14:17,800 Speaker 1: it wasn't invented it eight, but certainly before that it was. 207 00:14:17,960 --> 00:14:24,000 Speaker 1: It hadn't been used so massively, so widely, so so systematically. 208 00:14:24,680 --> 00:14:29,480 Speaker 1: And so you know, since oh eight, the FED had 209 00:14:29,480 --> 00:14:36,760 Speaker 1: has consistently used quee to rescue the bond market, and 210 00:14:37,040 --> 00:14:43,920 Speaker 1: with bigger and bigger purchases in more asset classes. And 211 00:14:43,960 --> 00:14:46,680 Speaker 1: so what that's done is a couple of things. One 212 00:14:46,840 --> 00:14:50,520 Speaker 1: is the period of time where you have distressed bonds 213 00:14:50,520 --> 00:14:54,280 Speaker 1: available has shortened, right, It's it was a few months 214 00:14:54,360 --> 00:14:58,160 Speaker 1: in twenty twenty five months before that twenty sixteen, the 215 00:14:58,320 --> 00:15:03,000 Speaker 1: energy crisis. Same before that, if you remember the tape 216 00:15:03,040 --> 00:15:06,320 Speaker 1: per tenttrum in the summer of eleven, I think also 217 00:15:06,400 --> 00:15:09,760 Speaker 1: a few months. So short you've got to be positioned 218 00:15:09,800 --> 00:15:13,640 Speaker 1: and ready and have the cash. And second, it's shallow 219 00:15:13,880 --> 00:15:18,520 Speaker 1: in the sense that the biggest distress companies are very 220 00:15:18,560 --> 00:15:22,240 Speaker 1: small Historically. If you think of the biggest bankruptcy in 221 00:15:22,240 --> 00:15:26,560 Speaker 1: twenty twenty was Hurts. That's only twenty five billion in assets, right. 222 00:15:26,680 --> 00:15:29,600 Speaker 1: Compare that to the Lehman brothers at six hundred billion. 223 00:15:30,040 --> 00:15:34,360 Speaker 1: Compare that to the period of Old One where we 224 00:15:34,440 --> 00:15:40,720 Speaker 1: had corporate malfeasans you'll remember Enron, Conseco, worldcome exactly. But 225 00:15:40,840 --> 00:15:46,400 Speaker 1: those were hundred billion cases. So they just was a 226 00:15:46,400 --> 00:15:50,920 Speaker 1: ton of distressed and therefore returns were easier to come by. 227 00:15:51,000 --> 00:15:55,160 Speaker 1: It's a lot harder when you've got, you know, a 228 00:15:55,360 --> 00:16:00,880 Speaker 1: few twenty billion distress situations to pick from. And meanwhile 229 00:16:01,480 --> 00:16:04,480 Speaker 1: the giant of the stress have raised funds that are 230 00:16:04,560 --> 00:16:08,080 Speaker 1: alone fifteen billion, So fewer targets and a lot more 231 00:16:08,120 --> 00:16:11,120 Speaker 1: funds doing the same thing. Correct. Really very very interesting. 232 00:16:11,640 --> 00:16:15,240 Speaker 1: So let's talk a little bit about those early days 233 00:16:15,760 --> 00:16:19,480 Speaker 1: you mentioned in the book. Canyon Capital took a chance 234 00:16:19,520 --> 00:16:23,080 Speaker 1: on you. First, why do you say that? And then second, 235 00:16:23,600 --> 00:16:25,120 Speaker 1: how did you get a foot in the door? How 236 00:16:25,120 --> 00:16:29,040 Speaker 1: did you start with them? Why do I say that? 237 00:16:29,200 --> 00:16:34,160 Speaker 1: Because I'm I'm a foreigner and I'm a woman, and 238 00:16:35,120 --> 00:16:37,840 Speaker 1: lots of foreigners and women out in Silicon Valley were 239 00:16:37,840 --> 00:16:41,560 Speaker 1: at Stanford, so it wasn't and they're in La so 240 00:16:41,640 --> 00:16:47,680 Speaker 1: it's not. Maybe it's it's rarer in Chicago and New 241 00:16:47,760 --> 00:16:51,480 Speaker 1: York in Boston, but it's not completely foreign although this 242 00:16:51,640 --> 00:16:55,080 Speaker 1: was what year did you start a Canyon? Eight? All right, 243 00:16:55,200 --> 00:16:58,120 Speaker 1: so a lot a little different world than than today, 244 00:16:59,440 --> 00:17:02,160 Speaker 1: Different and similar at the same At the same time, 245 00:17:03,520 --> 00:17:08,880 Speaker 1: if you're talking about female representation in hedge funds, it's 246 00:17:09,080 --> 00:17:14,359 Speaker 1: very similar. There's been nano steps, but it's nowhere near 247 00:17:14,920 --> 00:17:17,720 Speaker 1: what you would expect for an industry that's grown so 248 00:17:17,800 --> 00:17:22,280 Speaker 1: much and that's become so institutionalized. And that's something we 249 00:17:22,640 --> 00:17:25,800 Speaker 1: may want to talk about later. But they took a 250 00:17:25,920 --> 00:17:31,720 Speaker 1: chance because look, hiring a woman was exceptional. It wasn't 251 00:17:31,800 --> 00:17:36,760 Speaker 1: the typical profile. It still isn't. And on top of that, 252 00:17:37,840 --> 00:17:44,920 Speaker 1: hiring a foreigner was an additional hurdle and a French person, 253 00:17:45,080 --> 00:17:47,879 Speaker 1: which they probably didn't realize at the time, but you know, 254 00:17:47,960 --> 00:17:52,760 Speaker 1: made me probably raging socialists compared to the average hedge 255 00:17:52,760 --> 00:17:58,120 Speaker 1: fund political mind, even in California. Yes, sir, yeah, well 256 00:17:58,160 --> 00:18:01,119 Speaker 1: you were in Orange County, so that I was let No, no, 257 00:18:01,640 --> 00:18:08,040 Speaker 1: we were in Beverly Hills, but the same exactly. Interestingly, 258 00:18:08,640 --> 00:18:11,240 Speaker 1: it's it's interesting you're saying that because Kenyon has since 259 00:18:11,320 --> 00:18:14,560 Speaker 1: moved two Dallas. There you go that that makes a 260 00:18:14,640 --> 00:18:17,600 Speaker 1: lot of sense exactly. You cite in the book a 261 00:18:17,720 --> 00:18:23,560 Speaker 1: study that says men overtrade so much that it reduces 262 00:18:23,640 --> 00:18:28,200 Speaker 1: their risk adjusted returns by two point six percent. So, first, 263 00:18:28,800 --> 00:18:36,680 Speaker 1: is this just cockiness excess self confidence by male traders 264 00:18:36,760 --> 00:18:40,280 Speaker 1: versus female traders? What accounts for the difference between the 265 00:18:40,320 --> 00:18:43,639 Speaker 1: two and your experience working on on the trading desk? 266 00:18:44,160 --> 00:18:51,159 Speaker 1: And how has this gap persisted for so many decades? So, 267 00:18:52,040 --> 00:18:54,680 Speaker 1: first of all, it's not one study, There's now been 268 00:18:55,320 --> 00:19:00,639 Speaker 1: four studies. It's mutual funds, it's hedge funds across the board. 269 00:19:00,880 --> 00:19:04,560 Speaker 1: And the reason those studies exist is they're trying to 270 00:19:04,920 --> 00:19:08,320 Speaker 1: answer the question or men better investors than women? Because 271 00:19:08,359 --> 00:19:10,880 Speaker 1: if it were the case, then you wouldn't understand why 272 00:19:10,960 --> 00:19:15,439 Speaker 1: there's a preponderance of men in the investing jobs. And 273 00:19:15,520 --> 00:19:19,200 Speaker 1: it turns out not to be the case, not because 274 00:19:20,000 --> 00:19:25,320 Speaker 1: you can answer that men are smarter or not as 275 00:19:25,320 --> 00:19:29,800 Speaker 1: smart as women, but strictly because the friction of trade 276 00:19:29,920 --> 00:19:36,160 Speaker 1: overtrading costs a lot. And so why do they overtrade? 277 00:19:36,200 --> 00:19:41,280 Speaker 1: The studies don't say, and I wouldn't venture a reason 278 00:19:41,640 --> 00:19:45,200 Speaker 1: that you may have alluded to. What what does your 279 00:19:45,359 --> 00:19:48,760 Speaker 1: instinct tell you? Is it because the different let me 280 00:19:48,800 --> 00:19:56,480 Speaker 1: man explain quality. No, but in all seriousness, the broad 281 00:19:56,640 --> 00:20:02,399 Speaker 1: stereotype about men is, hey, we're idiots. We go anywhere 282 00:20:02,720 --> 00:20:06,159 Speaker 1: when we shouldn't, and we do it with such bravado 283 00:20:06,320 --> 00:20:10,840 Speaker 1: and such a surfeit of whether it's earned or unearned 284 00:20:11,160 --> 00:20:14,480 Speaker 1: self confidence that it leads us into trouble Or Am 285 00:20:14,520 --> 00:20:18,000 Speaker 1: I just engaging in pop psychology? No? I think that's right. 286 00:20:18,040 --> 00:20:21,760 Speaker 1: The study your sighting is actually called Boys Will Be 287 00:20:21,920 --> 00:20:26,080 Speaker 1: Boys over Confidence in Trading. So there you go. But 288 00:20:26,200 --> 00:20:31,119 Speaker 1: it's interesting that you really can pinpoint the difference in 289 00:20:31,240 --> 00:20:35,840 Speaker 1: return because there's this sort of impatient or over zealousness 290 00:20:35,920 --> 00:20:40,560 Speaker 1: in trading your portfolio, whereas standing still and second guessing 291 00:20:40,600 --> 00:20:46,719 Speaker 1: yourself and really doing quiet studying and reading would produce 292 00:20:46,800 --> 00:20:50,720 Speaker 1: better returns, which is what women in those studies generally 293 00:20:50,800 --> 00:20:55,440 Speaker 1: tend to do. So look, my point is very far 294 00:20:55,640 --> 00:20:58,840 Speaker 1: from saying women are better investors than men. That's sort 295 00:20:58,840 --> 00:21:02,719 Speaker 1: of a galization that I wouldn't make. But the study 296 00:21:02,880 --> 00:21:07,919 Speaker 1: does suggest the studies behaviorally men have certain behavioral flaws 297 00:21:08,160 --> 00:21:10,919 Speaker 1: correct that leads to a difference in outcome. At the 298 00:21:11,080 --> 00:21:15,200 Speaker 1: very least, I would take those studies and say, look, 299 00:21:15,960 --> 00:21:19,560 Speaker 1: having more women in your investment teams. In hedge funds 300 00:21:20,200 --> 00:21:23,760 Speaker 1: is not a matter of fairness or equity. Who cares 301 00:21:23,800 --> 00:21:28,080 Speaker 1: on the wall street whatever it is money, Yeah, it 302 00:21:28,119 --> 00:21:33,760 Speaker 1: really is alpha. It's a matter of making better decisions 303 00:21:33,800 --> 00:21:37,280 Speaker 1: and being more profitable. So it's kind of interesting about 304 00:21:37,400 --> 00:21:41,200 Speaker 1: the impact of overtrading. A couple of more bullet points 305 00:21:41,200 --> 00:21:45,200 Speaker 1: from the book I found fascinating. Over the past fifteen years, 306 00:21:46,200 --> 00:21:50,520 Speaker 1: nine percent of existing hedge funds close every year. Now 307 00:21:50,560 --> 00:21:52,680 Speaker 1: the first question is is that due to a high 308 00:21:52,760 --> 00:21:55,520 Speaker 1: watermark and they have to close and reopen in order 309 00:21:55,520 --> 00:21:58,639 Speaker 1: to be able to get incentive fees or is something 310 00:21:58,640 --> 00:22:04,080 Speaker 1: else going on. It's a pretty unstable business, really, Oh 311 00:22:04,119 --> 00:22:09,080 Speaker 1: it is, especially when you're small, meaning sub one billion. 312 00:22:10,200 --> 00:22:15,320 Speaker 1: You have a category exactly. The survival rate of an 313 00:22:15,320 --> 00:22:21,119 Speaker 1: emerging manager is low. There are a ton of expenses 314 00:22:21,200 --> 00:22:25,959 Speaker 1: and they're getting higher with compliance and marketing and reporting 315 00:22:26,000 --> 00:22:33,240 Speaker 1: and investor relationship, etc. And you typically have one anchor 316 00:22:33,280 --> 00:22:38,240 Speaker 1: investor maybe two three if you're lucky. But you're really 317 00:22:38,359 --> 00:22:42,520 Speaker 1: living month to months, and that's great fun when you start. 318 00:22:42,640 --> 00:22:45,200 Speaker 1: That was the great adventure of Canyon in ninety eight 319 00:22:45,280 --> 00:22:48,920 Speaker 1: for me. But it's also a you know, every month 320 00:22:49,080 --> 00:22:53,679 Speaker 1: is make a break. You have a terrible couple of months, 321 00:22:54,160 --> 00:22:58,240 Speaker 1: your anchor investor pulls his or her money and you're done, 322 00:22:59,240 --> 00:23:03,960 Speaker 1: or you you know, have a few star traders in 323 00:23:04,040 --> 00:23:08,399 Speaker 1: analysts who quit very hard. So you mentioned John Merriweather, 324 00:23:09,200 --> 00:23:13,919 Speaker 1: who was discussed as having bad luck for being in 325 00:23:14,000 --> 00:23:18,400 Speaker 1: charge of long term capital management, with which spectacularly blew 326 00:23:18,480 --> 00:23:21,840 Speaker 1: up the same year you began at Canyon. But I 327 00:23:21,880 --> 00:23:26,560 Speaker 1: didn't realize this. He subsequently opened and closed a couple 328 00:23:26,600 --> 00:23:27,840 Speaker 1: of more hedge funds. I don't know if he was 329 00:23:27,880 --> 00:23:31,280 Speaker 1: in three or four old told, all of which didn't succeed. 330 00:23:31,880 --> 00:23:34,720 Speaker 1: So was this a lack of skill or was this 331 00:23:34,880 --> 00:23:38,640 Speaker 1: just bad luck? Three times is kind of that's three 332 00:23:38,640 --> 00:23:41,359 Speaker 1: strikes when you're out in the US kind of. I 333 00:23:41,359 --> 00:23:44,919 Speaker 1: don't want to speak ill of the guy who I 334 00:23:45,040 --> 00:23:49,240 Speaker 1: greatly admired, you know from the he's obviously in the 335 00:23:49,240 --> 00:23:54,000 Speaker 1: book of Michael Lewis, who you interviewed. But but that's 336 00:23:54,040 --> 00:23:58,120 Speaker 1: the thing, even the guy you think of so highly, 337 00:23:59,240 --> 00:24:02,320 Speaker 1: you know, after three hedge funds open and closed, you 338 00:24:02,400 --> 00:24:07,040 Speaker 1: got to wonder if there's some risk management issue there. Yeah, 339 00:24:06,880 --> 00:24:09,480 Speaker 1: you look at Liar's Poker and it describes him as 340 00:24:09,520 --> 00:24:12,400 Speaker 1: this larger than life character. And then you read when 341 00:24:12,520 --> 00:24:17,800 Speaker 1: Genius failed and not so great exactly, and again that 342 00:24:17,960 --> 00:24:21,840 Speaker 1: is the thrill of this industry. Is that a hero 343 00:24:22,040 --> 00:24:25,960 Speaker 1: today and a loser tomorrow. Amazing. So let's go to 344 00:24:26,920 --> 00:24:30,000 Speaker 1: your work as a trader. One of the things that 345 00:24:30,119 --> 00:24:34,879 Speaker 1: struck me is very self aware and insightful, was you 346 00:24:35,040 --> 00:24:39,919 Speaker 1: got very quote comfortable being uncomfortable. So let's talk a 347 00:24:39,960 --> 00:24:43,560 Speaker 1: little bit about First what do you mean by being uncomfortable? 348 00:24:43,880 --> 00:24:47,960 Speaker 1: And second how did you recognize, Hey, this is uncomfortable 349 00:24:48,000 --> 00:24:53,600 Speaker 1: for most people, but I'm okay with it. Oh, from 350 00:24:53,680 --> 00:24:59,200 Speaker 1: many different situations where you know, being French, I grew 351 00:24:59,280 --> 00:25:04,760 Speaker 1: up with different ferent a different culture, different habits in 352 00:25:05,240 --> 00:25:08,399 Speaker 1: the US I was at the time. I like to 353 00:25:08,440 --> 00:25:10,679 Speaker 1: think that I'm more, you know, after thirty years in 354 00:25:10,720 --> 00:25:14,960 Speaker 1: this country, and I'm a little bit better acclimatized to 355 00:25:15,240 --> 00:25:21,280 Speaker 1: to how the people live in this beautiful country. But 356 00:25:21,359 --> 00:25:26,920 Speaker 1: I still do feel somewhat foreign in this country, and frankly, 357 00:25:26,920 --> 00:25:29,879 Speaker 1: when I go back to France, I feel equally foreign 358 00:25:30,000 --> 00:25:33,439 Speaker 1: because I'm not really French either. But look, I think 359 00:25:33,600 --> 00:25:38,879 Speaker 1: it is an important quality to to have to be 360 00:25:38,960 --> 00:25:44,040 Speaker 1: an investor because ours is an industry or a business 361 00:25:44,119 --> 00:25:50,520 Speaker 1: of conviction in the face of facts that are sometimes 362 00:25:50,720 --> 00:25:55,480 Speaker 1: very damning, sometimes very contradictory, especially if you were thinking 363 00:25:55,520 --> 00:25:57,919 Speaker 1: about investing in the stress you're going to buy a 364 00:25:58,000 --> 00:26:02,240 Speaker 1: company that is not doing well, where all the signs 365 00:26:02,320 --> 00:26:06,800 Speaker 1: are telling you this is not going in the right direction. 366 00:26:07,000 --> 00:26:10,639 Speaker 1: Either the left side of the balanche, the assets have 367 00:26:10,840 --> 00:26:15,760 Speaker 1: something to to you have to fix something, or it's 368 00:26:15,800 --> 00:26:18,840 Speaker 1: the right side with the capital structure. But something is 369 00:26:18,880 --> 00:26:22,679 Speaker 1: the right in this situation, and to most people it 370 00:26:22,720 --> 00:26:24,800 Speaker 1: would be a sign that you shouldn't touch it, and 371 00:26:24,920 --> 00:26:29,400 Speaker 1: you have to feel comfortable being in the minority. That's 372 00:26:29,440 --> 00:26:33,080 Speaker 1: probably true for probably every investor who's a bit of 373 00:26:33,080 --> 00:26:38,359 Speaker 1: a contrarian. It's it's very uncomfortable to be to be 374 00:26:38,440 --> 00:26:43,480 Speaker 1: in the minority. And with convictions, say I'm going to 375 00:26:43,760 --> 00:26:46,760 Speaker 1: buy this company. That's the right thing. There's something that 376 00:26:46,920 --> 00:26:50,480 Speaker 1: I see that others don't. There's safety and numbers. When 377 00:26:50,480 --> 00:26:52,840 Speaker 1: you're with the crowd, you're not going to get your 378 00:26:53,359 --> 00:26:55,920 Speaker 1: you know, your head cut off. You may not outperform, 379 00:26:56,320 --> 00:26:58,760 Speaker 1: but at least you could hide amongst the middle of 380 00:26:58,800 --> 00:27:01,879 Speaker 1: the back. Correct. And now we've gone full circle, barry 381 00:27:02,000 --> 00:27:04,840 Speaker 1: to what we were talking about just a second ago. 382 00:27:05,000 --> 00:27:08,480 Speaker 1: If you have ten white guys from Harvard, what are 383 00:27:08,520 --> 00:27:13,440 Speaker 1: the odds that one of them will be completely outside 384 00:27:13,560 --> 00:27:20,320 Speaker 1: the sort of think tank that is, you know this team. 385 00:27:20,359 --> 00:27:23,200 Speaker 1: If you again want to be uncomfortable, if you want 386 00:27:23,200 --> 00:27:27,920 Speaker 1: to be outside the box, you probably need people who 387 00:27:27,960 --> 00:27:31,359 Speaker 1: look different, who think different, who were raised differently. And 388 00:27:31,400 --> 00:27:34,840 Speaker 1: I'm not just talking about women, I'm talking about minorities. 389 00:27:35,240 --> 00:27:39,119 Speaker 1: So you talk about a couple of really interesting things 390 00:27:39,119 --> 00:27:42,840 Speaker 1: in the book relative to that, one of which is, 391 00:27:44,160 --> 00:27:49,320 Speaker 1: it's really more implied than anything what's changed in the 392 00:27:49,440 --> 00:27:55,320 Speaker 1: US since the eighties regarding economic mobility? That there used 393 00:27:55,359 --> 00:27:59,399 Speaker 1: to be a huge ability to move up or at 394 00:27:59,480 --> 00:28:02,439 Speaker 1: least in a better situation than your parents were, and 395 00:28:02,560 --> 00:28:05,639 Speaker 1: the data implies that from the nineteen eighties forward that 396 00:28:05,880 --> 00:28:11,280 Speaker 1: kind of stopped. Tell us about how you saw this 397 00:28:11,359 --> 00:28:15,919 Speaker 1: lack of diversity and the lack of economic mobility. What 398 00:28:16,080 --> 00:28:19,159 Speaker 1: is your perspective as a someone who grew up in 399 00:28:19,200 --> 00:28:22,240 Speaker 1: France come to the United States and seeing, Hey, I 400 00:28:22,280 --> 00:28:25,240 Speaker 1: thought there was a lot more mobility here, or at 401 00:28:25,280 --> 00:28:28,720 Speaker 1: least there used to be. Yeah, it's a look, I'm 402 00:28:28,760 --> 00:28:33,280 Speaker 1: not saying that France is much better, but over the 403 00:28:33,400 --> 00:28:37,720 Speaker 1: last thirty or forty years, probably forty years since the 404 00:28:37,760 --> 00:28:44,160 Speaker 1: Reggan years. If you look at the wealth and the 405 00:28:44,440 --> 00:28:47,920 Speaker 1: income distribution in this country, it really has sort of 406 00:28:49,000 --> 00:28:51,680 Speaker 1: gelled at the top right, very much so, not just 407 00:28:51,720 --> 00:28:54,200 Speaker 1: the one percent, but the point one and the point 408 00:28:54,240 --> 00:28:59,240 Speaker 1: on one percent. Correct, you know, the one percent probably 409 00:28:59,400 --> 00:29:03,000 Speaker 1: controls eighty percent of the wealth in this country. And 410 00:29:03,040 --> 00:29:06,760 Speaker 1: that's something that most Americans are not aware of. If 411 00:29:06,800 --> 00:29:10,520 Speaker 1: you ask them to describe their country, they'll describe a 412 00:29:10,560 --> 00:29:18,040 Speaker 1: country of which wealth structure resembles Norway. Right, We're not 413 00:29:18,080 --> 00:29:25,040 Speaker 1: in Norway Rum. But there was a lot more movement 414 00:29:25,440 --> 00:29:31,800 Speaker 1: upward movement. You know, back in the sixties and in 415 00:29:31,840 --> 00:29:37,080 Speaker 1: the seventies, there were marriages between the boss and the secretary. 416 00:29:37,320 --> 00:29:43,360 Speaker 1: They were jobs that allowed people to move up. Strangely, 417 00:29:44,080 --> 00:29:47,240 Speaker 1: you know, finance is still one of those jobs that 418 00:29:47,400 --> 00:29:51,720 Speaker 1: could take people from a very modest background. If you 419 00:29:51,800 --> 00:29:55,080 Speaker 1: think about George Soros, this is a guy who had 420 00:29:55,160 --> 00:29:59,080 Speaker 1: nothing when he was an emigrat from Hungary. Came here 421 00:29:59,280 --> 00:30:03,840 Speaker 1: more or less. And so I do recognize that finance, 422 00:30:03,880 --> 00:30:07,840 Speaker 1: in particularly investing in hedge funds, has this immense potential 423 00:30:08,120 --> 00:30:12,360 Speaker 1: for social mobility. But generally speaking, our society is pretty 424 00:30:13,880 --> 00:30:21,840 Speaker 1: frozen in that really disparate classes of people. There's a 425 00:30:21,920 --> 00:30:24,239 Speaker 1: quote in the book, the idea we're all equal and 426 00:30:24,280 --> 00:30:27,600 Speaker 1: the harder working and smarter people naturally come out ahead 427 00:30:27,720 --> 00:30:31,800 Speaker 1: is simply the childish statement of a person, most likely 428 00:30:32,240 --> 00:30:37,080 Speaker 1: an upper middle class Caucasian mail right. That's really very telling. 429 00:30:37,640 --> 00:30:40,120 Speaker 1: But one of the things I've learned doing this and 430 00:30:40,240 --> 00:30:45,080 Speaker 1: speaking to a lot of wildly successful people, men and women, 431 00:30:46,480 --> 00:30:49,880 Speaker 1: is how often the concept of luck comes up, Like 432 00:30:50,200 --> 00:30:53,960 Speaker 1: very successful people with a little bit of self awareness 433 00:30:54,560 --> 00:30:58,280 Speaker 1: seemed to recognize, Hey, you know, this could have just 434 00:30:58,320 --> 00:31:01,720 Speaker 1: gone a little differently, and we're not having a conversation 435 00:31:01,760 --> 00:31:05,920 Speaker 1: because I'm not, you know, running a successful business. How 436 00:31:05,960 --> 00:31:10,240 Speaker 1: important is the role of luck in people's success, be 437 00:31:10,360 --> 00:31:13,120 Speaker 1: it whether they're born in this country or elsewhere, whether 438 00:31:13,160 --> 00:31:16,760 Speaker 1: they're born male or female, or just in their day 439 00:31:16,760 --> 00:31:22,280 Speaker 1: to day life. How significant is law? Huge? Huge? Really? 440 00:31:22,920 --> 00:31:26,120 Speaker 1: I think so. And it's all a matter of how 441 00:31:26,480 --> 00:31:31,760 Speaker 1: whide your definition of luck is. If you're thinking very specifically, 442 00:31:32,080 --> 00:31:37,920 Speaker 1: did I win the lottery, did I meet somebody who 443 00:31:38,000 --> 00:31:42,040 Speaker 1: offered me a job at Canyon or you know, another 444 00:31:42,200 --> 00:31:45,120 Speaker 1: successful then you could say, well, no, I'm not lucky. 445 00:31:45,160 --> 00:31:48,200 Speaker 1: I worked really hard. But if you look at luck 446 00:31:48,360 --> 00:31:52,400 Speaker 1: in the much broader context of I was born in 447 00:31:52,600 --> 00:31:58,360 Speaker 1: a free, wealthy country, France, to parents who were both 448 00:31:58,520 --> 00:32:05,600 Speaker 1: educated and value education. Not particularly wealthy, but middle class, 449 00:32:05,840 --> 00:32:12,040 Speaker 1: upper upper middle class. Right. I was born white, yes, 450 00:32:12,360 --> 00:32:16,120 Speaker 1: a woman, which you know has came with some difficulties 451 00:32:16,120 --> 00:32:18,640 Speaker 1: in the field that I chose, But I would say 452 00:32:19,480 --> 00:32:25,080 Speaker 1: incredible luck. Right. And then the biggest luck of it 453 00:32:25,120 --> 00:32:29,320 Speaker 1: all is I joined Kenyon in the nineties and there 454 00:32:29,440 --> 00:32:34,120 Speaker 1: was a tsunami that literally lifted all waves of hedge 455 00:32:34,160 --> 00:32:39,280 Speaker 1: funds from ninety to two thousand and eight and even beyond. 456 00:32:39,520 --> 00:32:45,360 Speaker 1: You know, no offense to Canyon, but there you know, 457 00:32:45,480 --> 00:32:49,280 Speaker 1: their growth is very much a beta phenomenon that happened 458 00:32:49,320 --> 00:32:53,320 Speaker 1: to fair Long, to Citadel, to Omega, to I mean 459 00:32:53,440 --> 00:32:58,200 Speaker 1: new name exactly. It's funny because I was discussing luck 460 00:32:58,280 --> 00:33:02,800 Speaker 1: earlier today with someone who said, you know, if you 461 00:33:02,880 --> 00:33:06,400 Speaker 1: started as a bond trader, you were lucky to begin 462 00:33:06,520 --> 00:33:09,560 Speaker 1: your career in the early part of a thirty year 463 00:33:09,600 --> 00:33:13,160 Speaker 1: bull market in bonds, to which I said, well, at 464 00:33:13,200 --> 00:33:14,760 Speaker 1: the time, you didn't know it was going to last 465 00:33:14,800 --> 00:33:18,360 Speaker 1: thirty years. You had to be able to conceptualize that, 466 00:33:18,960 --> 00:33:22,080 Speaker 1: and the takeaway is luck is great to have, but 467 00:33:22,200 --> 00:33:26,080 Speaker 1: it's not a durable edge. It won't persist even if 468 00:33:26,120 --> 00:33:28,040 Speaker 1: you happen to be in the midst of the greatest 469 00:33:28,080 --> 00:33:31,240 Speaker 1: bond bull market. You have to be long. You can't 470 00:33:31,280 --> 00:33:33,160 Speaker 1: be on the other side of it. That's true. So 471 00:33:33,720 --> 00:33:37,040 Speaker 1: luck is the starting point, and then resilience is what 472 00:33:37,240 --> 00:33:41,360 Speaker 1: makes it. You gotta stick with it. There's a quote 473 00:33:41,480 --> 00:33:44,040 Speaker 1: you have at the end of one of the chapters 474 00:33:44,160 --> 00:33:47,560 Speaker 1: on endurance and resilience, and I'm going to throw the 475 00:33:47,640 --> 00:33:50,560 Speaker 1: quote at you and let you comment on it. The 476 00:33:50,600 --> 00:33:53,560 Speaker 1: woman the Canyon Partners hired was not a good girl 477 00:33:53,680 --> 00:33:57,080 Speaker 1: who chose to get along with people as her seminal virtue. 478 00:33:57,640 --> 00:33:59,640 Speaker 1: I was a girl who was good at seeing what 479 00:33:59,720 --> 00:34:03,520 Speaker 1: she wanted and convinced deep down she could get it. 480 00:34:04,080 --> 00:34:07,240 Speaker 1: Tell us a little bit about that. These are my qualities, 481 00:34:07,360 --> 00:34:10,440 Speaker 1: you know, I'm resilient. I'm I'm you know, in between 482 00:34:10,480 --> 00:34:14,880 Speaker 1: a dog and a donkey, you know, persistent. You know, 483 00:34:15,200 --> 00:34:19,920 Speaker 1: I get the bone and I and I just keep it. 484 00:34:20,280 --> 00:34:23,359 Speaker 1: That's you know. And by the way, Barry, I do 485 00:34:23,400 --> 00:34:27,440 Speaker 1: think these are huge qualities for investors. Resilience, the ability 486 00:34:27,520 --> 00:34:31,120 Speaker 1: to lose money on a daily basis and get back 487 00:34:31,160 --> 00:34:36,239 Speaker 1: into it and make up for it. That's an amazing 488 00:34:36,360 --> 00:34:41,040 Speaker 1: lesson in life, right to take failure and losses as 489 00:34:41,840 --> 00:34:44,719 Speaker 1: business as usual. It's just a flip side of a 490 00:34:44,760 --> 00:34:49,960 Speaker 1: winning trade. And you know, because you've interviewed so many 491 00:34:50,000 --> 00:34:54,879 Speaker 1: of those amazingly successful investors that the image of them 492 00:34:55,000 --> 00:34:58,640 Speaker 1: never having a losing trade is a fallacy. It's all 493 00:34:58,680 --> 00:35:02,360 Speaker 1: about what you do with failure that determines whether or not. 494 00:35:02,480 --> 00:35:06,280 Speaker 1: And it's also the average. Do you win on average 495 00:35:06,320 --> 00:35:08,560 Speaker 1: more than you lose, but you are going to lose. 496 00:35:08,680 --> 00:35:13,440 Speaker 1: I don't know a single investor who doesn't lose money regularly. 497 00:35:13,760 --> 00:35:16,880 Speaker 1: Someone once said, it's not how often you lose, but 498 00:35:16,920 --> 00:35:20,160 Speaker 1: it's how big your losses are, which is really interesting. Correct, 499 00:35:20,520 --> 00:35:25,120 Speaker 1: it's I know, I'm stealing that quote from somebody, somebody 500 00:35:25,239 --> 00:35:29,440 Speaker 1: very smart. Sure, it's it's the probability and the severity 501 00:35:29,520 --> 00:35:35,040 Speaker 1: of your loss. But sticking with it is you know 502 00:35:35,080 --> 00:35:40,759 Speaker 1: what it what it takes, endurance and resilience. Let's talk 503 00:35:40,800 --> 00:35:44,360 Speaker 1: a little bit about the peak we've seen in hedge funds. 504 00:35:44,920 --> 00:35:47,480 Speaker 1: For a lot of funds, the early two thousands saw 505 00:35:47,560 --> 00:35:51,160 Speaker 1: a lot of opportunity in the distressed market and in 506 00:35:51,280 --> 00:35:55,440 Speaker 1: other spaces. Why was the first half Why was the 507 00:35:55,480 --> 00:36:02,160 Speaker 1: pre financial crisis decade so lucrative for funds? I don't 508 00:36:02,160 --> 00:36:08,000 Speaker 1: think it's any different from any industry starting out right. 509 00:36:08,640 --> 00:36:12,520 Speaker 1: We talk about an S curve for most industries, and 510 00:36:12,600 --> 00:36:16,759 Speaker 1: there's a very rapid expansion when you start with a 511 00:36:16,800 --> 00:36:22,560 Speaker 1: good idea and few people going after a very large pot, 512 00:36:23,640 --> 00:36:26,720 Speaker 1: especially for distressed When you think of the two thousand 513 00:36:26,760 --> 00:36:30,000 Speaker 1: and one two thousand and two periods, I think, if 514 00:36:30,040 --> 00:36:34,239 Speaker 1: I recall correctly, there were some six hundred bankrupt companies 515 00:36:34,239 --> 00:36:38,640 Speaker 1: in one year, some lots of work, lots of work, 516 00:36:38,840 --> 00:36:43,880 Speaker 1: lots of gold to mine, and the industry was very small, 517 00:36:44,080 --> 00:36:48,160 Speaker 1: so it was a lot easier to make good returns, 518 00:36:48,400 --> 00:36:54,400 Speaker 1: and we indeed do who did produce amazing double digit 519 00:36:54,560 --> 00:36:58,000 Speaker 1: twenty percent return on the regular basis. Right, So you 520 00:36:58,080 --> 00:37:01,920 Speaker 1: have the dot com implosion, you have the telecom sector 521 00:37:02,000 --> 00:37:06,080 Speaker 1: going belly up, you have the airline industry in total 522 00:37:06,120 --> 00:37:09,960 Speaker 1: distress post nine to eleven. What else was going on? 523 00:37:10,000 --> 00:37:12,239 Speaker 1: I mean that seems like that's a lot just those 524 00:37:12,280 --> 00:37:16,520 Speaker 1: three areas, and in between corporate malfeasans was rampants. We 525 00:37:17,040 --> 00:37:20,440 Speaker 1: talked about how does how does that affect distress fund investing? 526 00:37:20,480 --> 00:37:23,560 Speaker 1: Do people just dump they have certain requirements? Well, though, 527 00:37:23,600 --> 00:37:32,440 Speaker 1: those companies went bankrupt, so that was more and Ron Concco, Tycho, 528 00:37:33,280 --> 00:37:39,640 Speaker 1: huge companies that produced um, you know, bad financials and 529 00:37:40,719 --> 00:37:45,319 Speaker 1: as a consequence, accounting malfeasans earnings freud. You go down 530 00:37:45,360 --> 00:37:47,880 Speaker 1: the list. It was. That was before we got to 531 00:37:47,920 --> 00:37:51,279 Speaker 1: the analyst scandal and the IPO spinning, and there was 532 00:37:51,320 --> 00:37:55,279 Speaker 1: a ton of stuff that basically made Main Street look 533 00:37:55,280 --> 00:37:57,840 Speaker 1: at Wall Street and saying, why am I even giving 534 00:37:57,840 --> 00:38:00,520 Speaker 1: you any money? You guys, can't you know, stay out 535 00:38:00,520 --> 00:38:06,560 Speaker 1: of jail. That was before socks, that was shortly after 536 00:38:06,760 --> 00:38:09,759 Speaker 1: reg FD. It's it's hard to believe, but there was 537 00:38:09,800 --> 00:38:14,959 Speaker 1: a time when companies disclosed different facts to different cotively, right, 538 00:38:15,280 --> 00:38:19,040 Speaker 1: very selective. I mean, I think any investor today would 539 00:38:19,680 --> 00:38:23,520 Speaker 1: gasp at the idea that a company could tell you 540 00:38:23,600 --> 00:38:27,799 Speaker 1: and me about their earnings next month and not to them. 541 00:38:28,920 --> 00:38:33,320 Speaker 1: It's amazing. And there have been other hedge fund managers 542 00:38:33,360 --> 00:38:37,440 Speaker 1: who've written tell all books from the nineties and you 543 00:38:37,520 --> 00:38:39,640 Speaker 1: go through these books and you're like, none of the 544 00:38:39,680 --> 00:38:43,560 Speaker 1: stuff could happen today. All of their alpha is illegal today, 545 00:38:43,800 --> 00:38:48,560 Speaker 1: exactly it's a lot of the whole concept of whisper numbers, 546 00:38:48,840 --> 00:38:52,040 Speaker 1: which we still use the phrase, but it doesn't really 547 00:38:52,080 --> 00:38:54,840 Speaker 1: exist anymore. It doesn't. And so a lot of the 548 00:38:55,000 --> 00:39:01,160 Speaker 1: competitive advantages that hedge funds really capitalized only on have 549 00:39:01,440 --> 00:39:06,040 Speaker 1: been regulated away or competed away. So let me let 550 00:39:06,080 --> 00:39:10,160 Speaker 1: me share a quote with you from Jim Chanos, who 551 00:39:10,239 --> 00:39:14,080 Speaker 1: runs Mechano's Partners, and he said when he started in 552 00:39:14,120 --> 00:39:17,319 Speaker 1: the late eighties or early nineties, there were a couple 553 00:39:17,440 --> 00:39:20,520 Speaker 1: hundred hedge funds and they all generated alpha, and it was, 554 00:39:20,800 --> 00:39:22,600 Speaker 1: you know, a few billion dollars. It wasn't a lot 555 00:39:22,600 --> 00:39:27,320 Speaker 1: of money. Today it's three trillion dollars, eleven thousand hedge funds, 556 00:39:27,400 --> 00:39:30,759 Speaker 1: but it's still the same five hundred generating alpha. Is 557 00:39:31,120 --> 00:39:33,799 Speaker 1: that an exaggeration or is there more than a little 558 00:39:33,840 --> 00:39:38,000 Speaker 1: truth to that. I actually don't know that they're the 559 00:39:38,040 --> 00:39:44,040 Speaker 1: same funds generating alpha. The numbers are correct. When I started, 560 00:39:44,080 --> 00:39:48,400 Speaker 1: there were two thousand hedge funds managing maybe three hundred 561 00:39:48,440 --> 00:39:51,759 Speaker 1: billion or eleven thousand or so, and now it's one 562 00:39:51,840 --> 00:39:57,040 Speaker 1: hundred as correct. What I do know is that there's 563 00:39:57,080 --> 00:40:01,360 Speaker 1: a handful or actually a bit more than a handful 564 00:40:01,920 --> 00:40:06,040 Speaker 1: that um are still in business today and that have 565 00:40:06,320 --> 00:40:12,600 Speaker 1: become the market right from Apollo to Citadel to oak Tree. 566 00:40:12,680 --> 00:40:19,279 Speaker 1: These are the mammoth of hedge funds. So um is 567 00:40:19,360 --> 00:40:22,920 Speaker 1: he talking about that there's a handful of guys who 568 00:40:23,040 --> 00:40:27,440 Speaker 1: started early and have become huge and are still added 569 00:40:28,160 --> 00:40:34,719 Speaker 1: um and still racking funds from investors. That's true, but 570 00:40:34,760 --> 00:40:39,400 Speaker 1: they're not producing alpha. If you look at their returns, 571 00:40:40,000 --> 00:40:45,319 Speaker 1: you know it's it's not particularly uh. They're not outperforming 572 00:40:45,360 --> 00:40:49,080 Speaker 1: the market at least not not systematically, and that was 573 00:40:49,160 --> 00:40:52,040 Speaker 1: really the promise of hedge funds. Well, well, you mentioned 574 00:40:52,080 --> 00:40:56,400 Speaker 1: in the book size is the enemy of performance. That 575 00:40:56,680 --> 00:41:00,279 Speaker 1: was at an issue before the financial crisis, or so 576 00:41:00,360 --> 00:41:05,000 Speaker 1: much money flowed into the space that it's become self defeating, 577 00:41:05,040 --> 00:41:09,160 Speaker 1: and all these formally high performers are now just so 578 00:41:09,239 --> 00:41:12,480 Speaker 1: big they're very happy collecting the management fee in the 579 00:41:12,480 --> 00:41:14,880 Speaker 1: performance fee managers less. By the way, you show the 580 00:41:14,960 --> 00:41:18,640 Speaker 1: math in the book very very easily and understandable for 581 00:41:19,200 --> 00:41:23,040 Speaker 1: those who may not be as Mathie, which is basically 582 00:41:23,080 --> 00:41:27,040 Speaker 1: a giant fund collecting two percent is much better than 583 00:41:27,080 --> 00:41:30,360 Speaker 1: a smaller fund that's killing it. But they're not starting 584 00:41:30,360 --> 00:41:32,720 Speaker 1: out with a lot of assets no, that's totally true. 585 00:41:32,920 --> 00:41:37,840 Speaker 1: That that is exactly what's happening. Size is the enemy 586 00:41:37,960 --> 00:41:41,200 Speaker 1: of outperformance. And if you think about it in very 587 00:41:41,239 --> 00:41:46,000 Speaker 1: simple terms, those funds have become the market. How could 588 00:41:46,040 --> 00:41:49,120 Speaker 1: they outperform the market. They are so big that they 589 00:41:49,160 --> 00:41:52,719 Speaker 1: are that they are the market. So that's one thing. 590 00:41:52,760 --> 00:41:56,520 Speaker 1: The second is that, yes, they're very happy collecting fees 591 00:41:56,719 --> 00:42:01,200 Speaker 1: because that is the business they're in. The business they're 592 00:42:01,239 --> 00:42:04,000 Speaker 1: in now is not to outperform the market, it's to 593 00:42:04,120 --> 00:42:08,120 Speaker 1: collect funds and so and there are studies that showed 594 00:42:08,200 --> 00:42:12,040 Speaker 1: that the incentive is about what they call hoarding funds, 595 00:42:12,120 --> 00:42:15,360 Speaker 1: so you know they're hoard funds, not hedge funds. I 596 00:42:15,480 --> 00:42:19,040 Speaker 1: have that question two and twenty. Hoard funds is not 597 00:42:19,160 --> 00:42:23,720 Speaker 1: about performance, it's about more assets under management, which raises 598 00:42:23,760 --> 00:42:29,960 Speaker 1: the question why should investors pay such large fees for beta? 599 00:42:30,360 --> 00:42:34,280 Speaker 1: Shouldn't the incentive fee be on alpha alone? In other words, 600 00:42:34,600 --> 00:42:37,600 Speaker 1: I go buy an SMP five hundred funds for three BIPs? 601 00:42:37,960 --> 00:42:39,360 Speaker 1: Why do I need to give you in two and 602 00:42:39,400 --> 00:42:42,120 Speaker 1: twenty tell you what I'll give you twenty on anything 603 00:42:42,160 --> 00:42:46,239 Speaker 1: you beat the SPX with And that seems reasonable. I'm 604 00:42:46,280 --> 00:42:50,879 Speaker 1: surprised that hasn't really caught on yet amongst endowments and foundations. Well, 605 00:42:50,920 --> 00:42:54,759 Speaker 1: to be fair, there is pressure on fees, so I 606 00:42:54,800 --> 00:42:57,840 Speaker 1: think at this point there are very few hedge funds 607 00:42:57,880 --> 00:43:01,520 Speaker 1: able to charge still two percent and twenty that it's 608 00:43:01,560 --> 00:43:04,840 Speaker 1: one in fifteen, one in fifteen, but it's it's really 609 00:43:05,280 --> 00:43:09,400 Speaker 1: coming down. So there is the awareness from institutional investors 610 00:43:09,440 --> 00:43:12,239 Speaker 1: that fees are too high. But I can think of 611 00:43:12,280 --> 00:43:15,880 Speaker 1: a couple of reasons of why that's going on, and 612 00:43:15,960 --> 00:43:18,279 Speaker 1: the main one is that it used to be that 613 00:43:18,440 --> 00:43:25,239 Speaker 1: hedge funds were populated with risk tolerant investors. It's not 614 00:43:25,320 --> 00:43:29,440 Speaker 1: the case anymore. It's mostly institutional investors who are advised 615 00:43:29,520 --> 00:43:35,879 Speaker 1: by third party lookers or consultants, and those consultants are 616 00:43:36,440 --> 00:43:40,320 Speaker 1: not paid to take risks. Nobody's going to get fired 617 00:43:40,440 --> 00:43:44,439 Speaker 1: by recommending that you put money with oak Tree, right right, 618 00:43:44,520 --> 00:43:47,640 Speaker 1: That's the safe thing to record. They've put up some 619 00:43:47,680 --> 00:43:52,719 Speaker 1: pretty good numbers lately, they have, But that is the 620 00:43:52,800 --> 00:43:57,240 Speaker 1: recommendation you'll get from every consultant to every family office 621 00:43:57,719 --> 00:43:59,880 Speaker 1: or you know, because that is the safe thing to 622 00:44:00,160 --> 00:44:04,560 Speaker 1: because those middlemen are paid for safety. So we've come 623 00:44:04,600 --> 00:44:12,640 Speaker 1: to this kind of surprising outcome where people put their 624 00:44:12,719 --> 00:44:17,520 Speaker 1: money really with the biggest funds and paying for safety 625 00:44:18,320 --> 00:44:22,480 Speaker 1: rather than outperformance. I'm not saying against paying for safety. 626 00:44:22,520 --> 00:44:24,560 Speaker 1: The question is how much do you pay for that? 627 00:44:25,400 --> 00:44:29,200 Speaker 1: That's five BIPs, is my answer exactly. The other thing 628 00:44:29,280 --> 00:44:32,360 Speaker 1: I can think of is that there'll always be room 629 00:44:32,520 --> 00:44:37,400 Speaker 1: for hedge funds in a portfolio allocation for diversification, and 630 00:44:37,520 --> 00:44:41,400 Speaker 1: that's a perfectly valid reason to invest in hedge funds. 631 00:44:41,760 --> 00:44:44,960 Speaker 1: I get that, But again, how much do you pay 632 00:44:45,000 --> 00:44:50,280 Speaker 1: for diversification and how good is it? Because lately diversification 633 00:44:50,400 --> 00:44:55,040 Speaker 1: has not been good from hedge funds. So every year 634 00:44:55,200 --> 00:44:58,919 Speaker 1: institutional investor puts out their rich list. Just came out 635 00:44:58,960 --> 00:45:02,319 Speaker 1: this week, and it's exactly what you're talking about. It's 636 00:45:02,360 --> 00:45:06,040 Speaker 1: all the giant funds, all the usual names that we 637 00:45:06,160 --> 00:45:09,400 Speaker 1: usually see at the top of the list. Ken Griffin, 638 00:45:09,480 --> 00:45:15,200 Speaker 1: Stephen Cone, Dave Tepper, Ray Dalio, Dsho, Jim Simons, that 639 00:45:15,239 --> 00:45:18,520 Speaker 1: whole list are all making a billion plus a year. 640 00:45:19,160 --> 00:45:21,080 Speaker 1: More or less. Ken Griffin had a good year, he 641 00:45:21,120 --> 00:45:25,360 Speaker 1: had a four billion dollar year. Is it now winner 642 00:45:25,400 --> 00:45:28,680 Speaker 1: take oil and hedge funds. Is that that same fat 643 00:45:28,760 --> 00:45:33,560 Speaker 1: headlong tail distribution of wealth even amongst the hedge fund community. 644 00:45:33,640 --> 00:45:37,239 Speaker 1: Oh yeah, I think it's definitely the case that the 645 00:45:37,280 --> 00:45:41,319 Speaker 1: biggest hedge funds are attracting the most money and the 646 00:45:41,440 --> 00:45:46,319 Speaker 1: smallest emerging managers are having a very tough time fundraising. 647 00:45:47,480 --> 00:45:50,520 Speaker 1: And this is you blame this on the consultants, that 648 00:45:50,760 --> 00:45:55,839 Speaker 1: they're the parties who or am I overstating that? I 649 00:45:55,880 --> 00:45:59,680 Speaker 1: think they're very much. I don't blame them because people 650 00:45:59,719 --> 00:46:03,960 Speaker 1: will act the way they're incentivized, and they're incentivized to 651 00:46:04,040 --> 00:46:09,799 Speaker 1: advise you to put your money with the safest all 652 00:46:09,840 --> 00:46:16,080 Speaker 1: in one shopping you know, very well staffed, compliance wise, 653 00:46:17,040 --> 00:46:21,840 Speaker 1: investor relation wise companies. Those are the big ones, right, 654 00:46:21,920 --> 00:46:24,799 Speaker 1: That's what they're incentivized to do. It's sort of like 655 00:46:26,280 --> 00:46:31,880 Speaker 1: any think of a mature industry like fashion. You know 656 00:46:31,920 --> 00:46:35,600 Speaker 1: you're not gonna buy Why do you buy Gucci sunglasses? 657 00:46:35,640 --> 00:46:39,520 Speaker 1: It's not because you see better, It's because the brand 658 00:46:39,680 --> 00:46:43,799 Speaker 1: says something that nobody's gonna make fun of you for 659 00:46:44,120 --> 00:46:51,239 Speaker 1: wearing Gucci glasses. It has a certain cachet of quality. 660 00:46:51,840 --> 00:46:55,799 Speaker 1: It's probably gonna last, and that's why people But that's 661 00:46:55,800 --> 00:46:58,799 Speaker 1: all marketing, right, That's the old expression used to be 662 00:46:58,880 --> 00:47:01,839 Speaker 1: nobody gets fired from buying IBM. If you bought an 663 00:47:01,840 --> 00:47:05,360 Speaker 1: IBM product, it was considered safe. But I don't really 664 00:47:05,360 --> 00:47:09,720 Speaker 1: think of investing along those same lines. But then again, 665 00:47:10,360 --> 00:47:12,760 Speaker 1: I don't have a family office with a billion dollars 666 00:47:12,760 --> 00:47:15,080 Speaker 1: in it, so maybe I might think differently. Who knows, 667 00:47:15,480 --> 00:47:18,239 Speaker 1: and it's not only the family office. The family offices 668 00:47:18,320 --> 00:47:20,640 Speaker 1: might be the ones willing to take a bit more risk. 669 00:47:21,000 --> 00:47:26,040 Speaker 1: But think of the pension plans, think about the school endowments. 670 00:47:27,400 --> 00:47:34,440 Speaker 1: They really need some safety. And you know, the thought 671 00:47:34,560 --> 00:47:37,920 Speaker 1: that they could be invested in a lot of emerging 672 00:47:38,200 --> 00:47:41,920 Speaker 1: managers that go belly up, you know, the year after 673 00:47:42,080 --> 00:47:48,040 Speaker 1: is not is not going to fit with their risk profile. 674 00:47:48,280 --> 00:47:52,240 Speaker 1: Huh really quite interesting. Let's talk a little bit about 675 00:47:52,680 --> 00:47:55,120 Speaker 1: what seems to be a bit of a reckoning for 676 00:47:55,200 --> 00:47:58,879 Speaker 1: hedge funds Following the financial crisis in O eight o nine, 677 00:48:00,120 --> 00:48:05,400 Speaker 1: hedge fund performance seemed to change markedly. What happened? Was 678 00:48:05,440 --> 00:48:08,080 Speaker 1: it simply size or is there more going on there? 679 00:48:08,560 --> 00:48:11,480 Speaker 1: What happened is in a way that was shocking, is 680 00:48:11,560 --> 00:48:15,440 Speaker 1: hedge funds that were supposedly hedge We're down thirty forty 681 00:48:15,880 --> 00:48:21,280 Speaker 1: so where was the hedge in that? And redemptions started flowing, 682 00:48:21,719 --> 00:48:27,280 Speaker 1: which led to you know a huge number of hedge 683 00:48:27,280 --> 00:48:32,520 Speaker 1: funds closing or putting up their gates, and I think 684 00:48:32,640 --> 00:48:37,239 Speaker 1: the realization then became, Okay, if we want to survive 685 00:48:37,480 --> 00:48:43,840 Speaker 1: and have a solid business going forward and also really 686 00:48:44,280 --> 00:48:48,759 Speaker 1: build equity value for fund we need to be large. 687 00:48:49,000 --> 00:48:53,040 Speaker 1: We need to offer multiple products. We need to think 688 00:48:53,080 --> 00:48:58,040 Speaker 1: about structure and think less about evergreen funds where people 689 00:48:58,080 --> 00:49:02,440 Speaker 1: can go in and out without friction, and start thinking 690 00:49:02,440 --> 00:49:10,960 Speaker 1: about locked up funds. So essentially, investment managers became captains 691 00:49:11,000 --> 00:49:16,279 Speaker 1: of industry, became people who thought about their fund not 692 00:49:16,400 --> 00:49:20,440 Speaker 1: just as shuffling money, but as a business with the 693 00:49:20,520 --> 00:49:28,200 Speaker 1: marketing team, with a strategic team, with different geographic offices, 694 00:49:28,560 --> 00:49:33,000 Speaker 1: a real business that could offer sort of that one 695 00:49:33,080 --> 00:49:38,640 Speaker 1: stop shopping to investors. That's a fundamental rethink of the 696 00:49:38,800 --> 00:49:42,480 Speaker 1: previous business of hedge funds, isn't it. So that raises 697 00:49:42,520 --> 00:49:47,960 Speaker 1: the question that seems like they're professionalizing and institutionalizing hedge funds, 698 00:49:48,880 --> 00:49:53,160 Speaker 1: but the pre financial crisis our performance didn't really seem 699 00:49:53,200 --> 00:49:56,440 Speaker 1: to follow. Why do we think that? Is? Is it 700 00:49:56,520 --> 00:50:00,920 Speaker 1: the FED? Is it technology? What change markets? Structure? What 701 00:50:01,120 --> 00:50:05,000 Speaker 1: is it that changed that led so many funds to 702 00:50:05,200 --> 00:50:08,759 Speaker 1: no longer perform the way they were well, size is 703 00:50:08,760 --> 00:50:11,840 Speaker 1: certainly one and I think probably the biggest one. But 704 00:50:11,960 --> 00:50:16,160 Speaker 1: also if you think about all those competitive advantages that 705 00:50:16,200 --> 00:50:21,000 Speaker 1: we had in the beginning, they were taken away from 706 00:50:21,080 --> 00:50:27,359 Speaker 1: us or competed away. So the information advantage before reg FD, 707 00:50:27,800 --> 00:50:31,000 Speaker 1: that was gone. And not only that reg FD I 708 00:50:31,040 --> 00:50:35,680 Speaker 1: think was implemented in two thousand. But what happened that 709 00:50:35,960 --> 00:50:40,680 Speaker 1: was that with technology, the information became cheap and available 710 00:50:40,880 --> 00:50:44,759 Speaker 1: to all of US retail and institutional investors. It wasn't 711 00:50:44,800 --> 00:50:48,720 Speaker 1: the case before. You couldn't just turn on your computer 712 00:50:48,880 --> 00:50:51,600 Speaker 1: and have your ten k's and ten q's on any 713 00:50:51,680 --> 00:50:58,000 Speaker 1: company and earnings release you know, webcast on Bloomberg at 714 00:50:58,040 --> 00:51:02,040 Speaker 1: your fingertip. So it was really an equalization of the 715 00:51:02,320 --> 00:51:07,840 Speaker 1: information that took away a competitive advantage. There's the fact 716 00:51:08,800 --> 00:51:12,520 Speaker 1: that there were so many more hedge funds, so not 717 00:51:12,560 --> 00:51:17,120 Speaker 1: only are they a bigger but also it's a very competitive, 718 00:51:17,200 --> 00:51:22,600 Speaker 1: mature industry. So that was you know, the story of 719 00:51:23,239 --> 00:51:28,080 Speaker 1: performance that was very subdued. Really. Some people have blamed 720 00:51:28,640 --> 00:51:31,960 Speaker 1: dilution of talent that when there's a few thousand hedge funds, 721 00:51:32,239 --> 00:51:34,680 Speaker 1: hey you could grab a great analyst, a great trade 722 00:51:34,719 --> 00:51:38,200 Speaker 1: or a great PM, but at eleven thousand, you're sort 723 00:51:38,200 --> 00:51:42,560 Speaker 1: of tapping into the ranks of the B players. Correct. 724 00:51:42,640 --> 00:51:47,040 Speaker 1: There there was a study on that that is called 725 00:51:47,040 --> 00:51:50,480 Speaker 1: I Think Hedge Fund How big is too Big? But 726 00:51:50,680 --> 00:51:54,279 Speaker 1: essentially they claim that there are two issues. One is, 727 00:51:54,920 --> 00:51:58,600 Speaker 1: if your out performance is related to an asset class 728 00:51:58,680 --> 00:52:01,800 Speaker 1: that's a liquid when you're too big, you're going to 729 00:52:01,960 --> 00:52:04,640 Speaker 1: run out of assets to invest in long term capital 730 00:52:04,640 --> 00:52:08,800 Speaker 1: management is correct. And if you're trading an asset class 731 00:52:08,840 --> 00:52:12,520 Speaker 1: that is very liquid with sort of unlimited supply like 732 00:52:12,760 --> 00:52:15,440 Speaker 1: the stock market, you're going to run out of talent. 733 00:52:15,800 --> 00:52:19,200 Speaker 1: And it's exactly as you said. When we started with 734 00:52:20,120 --> 00:52:24,600 Speaker 1: five hundred million in assets, you need ten excellent ideas. 735 00:52:24,800 --> 00:52:27,120 Speaker 1: When you have twenty five billion in assets, you need 736 00:52:27,600 --> 00:52:30,240 Speaker 1: two hundred excellent ideas. Well, let me tell you, maybe 737 00:52:30,239 --> 00:52:34,360 Speaker 1: the first ten are pretty good. The next one hundred 738 00:52:34,360 --> 00:52:39,239 Speaker 1: and fifty have the potential to really dilute the excellency 739 00:52:39,320 --> 00:52:43,560 Speaker 1: of your top ten investing ideas. Huh, that's really interesting. 740 00:52:43,960 --> 00:52:47,400 Speaker 1: Let's talk a little bit about in Vitro wealth creation. 741 00:52:48,040 --> 00:52:50,920 Speaker 1: You tell a story in the book that the Stanford 742 00:52:50,920 --> 00:52:55,240 Speaker 1: Alumni Organization asked you for a donation, which you promptly 743 00:52:55,360 --> 00:52:59,960 Speaker 1: make At the same time, Stanford works out in arrangement 744 00:53:00,160 --> 00:53:02,640 Speaker 1: with the fun you're working, and they put some money 745 00:53:02,680 --> 00:53:07,799 Speaker 1: into Canyon. Canyon collects big fees from Stanford, which they 746 00:53:07,840 --> 00:53:13,040 Speaker 1: then essentially bank for your bonus next year. And then rinse, lather, repeat, 747 00:53:13,080 --> 00:53:16,399 Speaker 1: just do the same thing over and over again. How 748 00:53:16,760 --> 00:53:19,960 Speaker 1: real is that sort of thing across the whole industry? 749 00:53:20,480 --> 00:53:24,160 Speaker 1: All these endowments and by the way, anybody could go 750 00:53:24,200 --> 00:53:26,640 Speaker 1: on a certain website and look up every non for 751 00:53:26,760 --> 00:53:30,600 Speaker 1: profit endowment and who their investors are. Yeah. I mean 752 00:53:30,680 --> 00:53:36,239 Speaker 1: that's the kind of thinking that made me widely unpopular 753 00:53:36,360 --> 00:53:40,200 Speaker 1: with the marketing team at Canyon and sort of, you know, 754 00:53:40,560 --> 00:53:45,320 Speaker 1: them deploring what a sort of socialist French citizen that 755 00:53:45,600 --> 00:53:48,239 Speaker 1: was even twenty years into being in this country is 756 00:53:48,280 --> 00:53:53,439 Speaker 1: that socialism? I live five minutes from Friends Academy, which 757 00:53:53,520 --> 00:53:58,239 Speaker 1: is a private school that has like a surprisingly big endowment, 758 00:53:58,600 --> 00:54:01,239 Speaker 1: and you go through what the endowment is invested in, 759 00:54:01,280 --> 00:54:03,960 Speaker 1: and there are a few sites that do this because 760 00:54:04,000 --> 00:54:06,200 Speaker 1: it's because they have to do tax filings, so it's 761 00:54:06,239 --> 00:54:11,799 Speaker 1: all available. And what a coincidence. A lot of the 762 00:54:11,800 --> 00:54:14,640 Speaker 1: funds they invest in, or parents of kids who go there, 763 00:54:14,880 --> 00:54:19,040 Speaker 1: and it's this really incestuous relations is it is. So 764 00:54:19,080 --> 00:54:22,120 Speaker 1: it's not this isn't like a one off example. There's 765 00:54:22,160 --> 00:54:24,480 Speaker 1: a ton of this. I mean, if you think about it, 766 00:54:25,600 --> 00:54:27,560 Speaker 1: you know, the people who work in the hedge funds 767 00:54:27,560 --> 00:54:31,400 Speaker 1: and make a lot of money, or typically Harvard, Stanford, 768 00:54:31,520 --> 00:54:35,040 Speaker 1: the Colombia, people on the list exactly. You go down 769 00:54:35,120 --> 00:54:38,759 Speaker 1: the list exactly, and those schools have huge endowments that 770 00:54:38,880 --> 00:54:43,920 Speaker 1: they have to invest and since you know, David Swinson 771 00:54:44,239 --> 00:54:50,720 Speaker 1: at Yale was so instrumental in making allocation to private 772 00:54:50,760 --> 00:54:56,600 Speaker 1: equity and hedge fund a real pillar of the portfolio 773 00:54:56,640 --> 00:55:01,640 Speaker 1: of those endowments, it's been systematically, okay, systematically the case 774 00:55:01,719 --> 00:55:05,440 Speaker 1: that those school endowments invest in hedge funds where they 775 00:55:05,480 --> 00:55:08,839 Speaker 1: are students are going and getting paid. And so as 776 00:55:08,880 --> 00:55:13,480 Speaker 1: you said, look, I'm not saying it's wrong. Obviously everything 777 00:55:13,640 --> 00:55:18,760 Speaker 1: is very transparent and legal. But there's something that strikes 778 00:55:18,800 --> 00:55:24,120 Speaker 1: me as not quite right when you know this money 779 00:55:24,160 --> 00:55:28,680 Speaker 1: is sort of recycled. It's a little icky. It's a 780 00:55:28,680 --> 00:55:31,880 Speaker 1: little icky, right, it just seems like, oh so that okay, 781 00:55:31,880 --> 00:55:36,239 Speaker 1: it's a little you know, it just feels like it's 782 00:55:36,280 --> 00:55:40,919 Speaker 1: not arms length what I would imagine is Hey, if 783 00:55:40,920 --> 00:55:44,400 Speaker 1: you're investing on behalf of the public, you have to 784 00:55:44,440 --> 00:55:47,479 Speaker 1: have an arms length relationship. It can't be that sort 785 00:55:47,520 --> 00:55:53,080 Speaker 1: of old boys network. But apparently it's not illegal. It's 786 00:55:53,120 --> 00:55:57,560 Speaker 1: just not pretty. It's just that's exactly what it is. 787 00:55:57,719 --> 00:56:01,360 Speaker 1: I'm not saying that there's any other way. I don't 788 00:56:01,360 --> 00:56:05,160 Speaker 1: have a genius idea to say, you know, those endowments 789 00:56:05,200 --> 00:56:09,960 Speaker 1: should invest with mutuo funds at five bibs a fee. 790 00:56:11,239 --> 00:56:14,440 Speaker 1: I just feel like the way you describe it, there's 791 00:56:14,520 --> 00:56:22,320 Speaker 1: something that is surprising in the way the world is working. 792 00:56:23,280 --> 00:56:25,560 Speaker 1: So there's a quote in the book that I really 793 00:56:25,600 --> 00:56:29,960 Speaker 1: really liked. My conviction is that the job of investing 794 00:56:30,320 --> 00:56:34,680 Speaker 1: is a highly creative enterprise, and that the qualities it 795 00:56:34,760 --> 00:56:40,520 Speaker 1: requires our imagination, ingenuity and guts tell us a little 796 00:56:40,520 --> 00:56:46,600 Speaker 1: bit about imagination, ingenuity and guts. Well, I think the 797 00:56:46,680 --> 00:56:51,520 Speaker 1: stereotype of a good investor is somebody who's incredibly quick 798 00:56:51,560 --> 00:56:56,080 Speaker 1: at numbers, or you know, a very ruthless deal maker. 799 00:56:56,719 --> 00:57:03,040 Speaker 1: And my experience is that at least when you trade 800 00:57:03,520 --> 00:57:07,680 Speaker 1: an invest in in distress, but probably in every other category, 801 00:57:08,320 --> 00:57:11,520 Speaker 1: there are other qualities that people don't talk about enough. 802 00:57:11,680 --> 00:57:15,960 Speaker 1: And imagination and creativity and being a good listener or 803 00:57:16,040 --> 00:57:18,280 Speaker 1: some of them. If you think about what it takes 804 00:57:18,320 --> 00:57:23,840 Speaker 1: to restructure a company, a lot of negotiations, thinking up 805 00:57:23,880 --> 00:57:30,520 Speaker 1: a new capital structure, explaining it, explaining it to other stakeholders, 806 00:57:30,520 --> 00:57:34,280 Speaker 1: having a vote on that. But it takes a lot 807 00:57:34,320 --> 00:57:39,000 Speaker 1: of you know, thinking outside the box and ingenuity to 808 00:57:39,800 --> 00:57:44,600 Speaker 1: see the potential of a different cap structure or different 809 00:57:45,160 --> 00:57:50,160 Speaker 1: type of assets. Selling a business that's no longer profitable, 810 00:57:50,280 --> 00:57:55,200 Speaker 1: or closing some stores, or expanding in an area where 811 00:57:55,200 --> 00:57:59,480 Speaker 1: the company hasn't done before. That's all stuff that is 812 00:58:00,480 --> 00:58:05,040 Speaker 1: just thinking up ideas and scenario that has very little 813 00:58:05,120 --> 00:58:07,840 Speaker 1: to do with numbers. I'm not saying it doesn't help 814 00:58:07,880 --> 00:58:11,280 Speaker 1: to have some ease with numbers, but it's certainly not 815 00:58:12,000 --> 00:58:16,840 Speaker 1: the foundation for success in my mind. When you're talking 816 00:58:16,880 --> 00:58:20,320 Speaker 1: about these highly creative qualities, you also note that men 817 00:58:20,320 --> 00:58:24,320 Speaker 1: and women possess these qualities in equal measure for sure, 818 00:58:24,640 --> 00:58:28,320 Speaker 1: for sure, And that was very much in response to 819 00:58:29,040 --> 00:58:32,600 Speaker 1: the idea of the concept that men are better at 820 00:58:32,680 --> 00:58:37,160 Speaker 1: taking risks or they're more aggressive, And that may be so, 821 00:58:38,760 --> 00:58:42,400 Speaker 1: but I don't think risk for the sake of risk 822 00:58:42,640 --> 00:58:46,840 Speaker 1: is the quality required in being a good investor. You know, 823 00:58:46,920 --> 00:58:51,000 Speaker 1: there's a famous joke by fran Leboiz who say, Hey, 824 00:58:51,040 --> 00:58:54,840 Speaker 1: I'm a smoker. I'm great at taking risk, and you know, 825 00:58:55,160 --> 00:58:57,880 Speaker 1: we'd have all smokers in trading rooms if that was 826 00:58:57,920 --> 00:59:00,360 Speaker 1: the case. You need to have a return for risk, 827 00:59:00,840 --> 00:59:05,640 Speaker 1: and return is the ability to think up a solution. 828 00:59:05,760 --> 00:59:08,920 Speaker 1: Look the hedge fund business, we're in the business of ideas, 829 00:59:09,480 --> 00:59:14,600 Speaker 1: and ideas are equally distributed between men and women. All Right, 830 00:59:14,640 --> 00:59:18,440 Speaker 1: I got a couple of curveball questions for you, starting 831 00:59:18,480 --> 00:59:22,000 Speaker 1: with it's not so much a glass ceiling as a 832 00:59:22,120 --> 00:59:26,840 Speaker 1: quicksand floor. Explain what you mean by that. I think 833 00:59:27,000 --> 00:59:30,640 Speaker 1: when I got stuck, or I saw other women stuck, 834 00:59:30,680 --> 00:59:33,120 Speaker 1: it's not so much that they were hitting their head 835 00:59:33,160 --> 00:59:36,320 Speaker 1: against some invisible ceiling, is that they were sort of 836 00:59:36,960 --> 00:59:40,080 Speaker 1: pulled down. They just had to and I had to 837 00:59:40,160 --> 00:59:46,040 Speaker 1: fight so much for what seemed to be much easy, 838 00:59:46,320 --> 00:59:49,960 Speaker 1: easier to get to for men. Now, of course, it's 839 00:59:50,000 --> 00:59:52,040 Speaker 1: just my impression. I was not a man, I was 840 00:59:52,080 --> 00:59:54,000 Speaker 1: a woman, and you could tell me, well, you had 841 00:59:54,920 --> 00:59:59,840 Speaker 1: the wrong impression, but it was sort of systematic and 842 01:00:00,080 --> 01:00:05,040 Speaker 1: enough for me to think it's very hard to get 843 01:00:05,120 --> 01:00:07,680 Speaker 1: up because I have to be so aggressive and fight 844 01:00:07,800 --> 01:00:11,520 Speaker 1: so much for you name it the capital behind my ideas, 845 01:00:11,640 --> 01:00:15,800 Speaker 1: the business line I want to lead, the extra analyst 846 01:00:15,840 --> 01:00:19,160 Speaker 1: I need. So it's twenty five years later since you 847 01:00:19,280 --> 01:00:24,200 Speaker 1: started at Canyon. In finance, generally we see women running 848 01:00:24,560 --> 01:00:27,480 Speaker 1: all sorts of companies and divisions in the world of finance, 849 01:00:28,680 --> 01:00:31,800 Speaker 1: but as you mentioned, we really haven't seen the changes 850 01:00:31,840 --> 01:00:36,560 Speaker 1: take place at the hedge fund sector. Why do you 851 01:00:36,560 --> 01:00:39,440 Speaker 1: think that is? Yeah, I mean hedge funds really do 852 01:00:39,560 --> 01:00:43,400 Speaker 1: remain a bastion of white men. It is changing some, 853 01:00:44,240 --> 01:00:48,240 Speaker 1: but slowly, I mean nano steps, and again certainly not 854 01:00:48,440 --> 01:00:50,760 Speaker 1: where you would expect them to be for the size 855 01:00:50,760 --> 01:00:53,880 Speaker 1: and the influence the industry has. I think it takes 856 01:00:53,920 --> 01:00:57,800 Speaker 1: two things. One is outside push from investors, and we're 857 01:00:57,880 --> 01:01:01,920 Speaker 1: definitely seeing that LPs really do want diversity and they 858 01:01:02,000 --> 01:01:05,800 Speaker 1: insist and ask questions about it. But the piece that's 859 01:01:05,800 --> 01:01:11,760 Speaker 1: still not completely bought in, I think is internally. I 860 01:01:11,800 --> 01:01:15,440 Speaker 1: still don't think hedge fund managers have bought the idea 861 01:01:15,520 --> 01:01:18,200 Speaker 1: that they'll make more money with a more diverse investing 862 01:01:18,240 --> 01:01:22,880 Speaker 1: fun and a ton of research supporting that. There is 863 01:01:23,680 --> 01:01:27,560 Speaker 1: really interesting and my something that just cracked me up 864 01:01:27,560 --> 01:01:30,080 Speaker 1: in the book. I'm gonna read you a quote and 865 01:01:30,120 --> 01:01:33,200 Speaker 1: you're gonna have to explain this to me. You walk 866 01:01:33,240 --> 01:01:37,720 Speaker 1: into the kitchen at Canyon and an imposing, handsome man 867 01:01:37,840 --> 01:01:40,520 Speaker 1: with a killer smile was pouring himself a cup of 868 01:01:40,560 --> 01:01:44,240 Speaker 1: coffee in the common kitchen. I said hello. One of 869 01:01:44,280 --> 01:01:48,439 Speaker 1: the other analysts, visibly excited, asked me, did you see him? Yes, 870 01:01:48,520 --> 01:01:51,400 Speaker 1: I think it's fabulous. We're bringing diversity onto the team. 871 01:01:51,960 --> 01:01:54,240 Speaker 1: And the other analyst says, to you, what are you 872 01:01:54,320 --> 01:01:58,160 Speaker 1: talking about? That was Magic Johnson. He's heading the Canyon 873 01:01:58,240 --> 01:02:03,560 Speaker 1: Johnson real Estate joined venture. You're from France. Still you 874 01:02:03,600 --> 01:02:08,840 Speaker 1: don't recognize Magic Johnson. New idea. I saw this LA Lakers. 875 01:02:08,960 --> 01:02:13,320 Speaker 1: You're in LA famous one of the most famous basketball 876 01:02:13,320 --> 01:02:18,240 Speaker 1: players ever up there with Michael Jordan. Didn't mean anything 877 01:02:18,240 --> 01:02:20,720 Speaker 1: to you. Yes, and when you you know, when you're 878 01:02:20,760 --> 01:02:24,440 Speaker 1: talking about being comfortable being uncomfortable right there? That was 879 01:02:24,560 --> 01:02:29,480 Speaker 1: that was an awkward pause. But no, I didn't recognize him. 880 01:02:29,560 --> 01:02:33,920 Speaker 1: I saw this really handsome black men with killer smile, right. 881 01:02:35,000 --> 01:02:37,280 Speaker 1: Can't argue with that. So I said hello, and I 882 01:02:37,360 --> 01:02:40,200 Speaker 1: was I was very excited to, you know, have some 883 01:02:40,400 --> 01:02:44,760 Speaker 1: diversity in the team. That's hilarious. That really is funny. Um, 884 01:02:44,840 --> 01:02:47,640 Speaker 1: let me move on to my favorite questions that I 885 01:02:47,680 --> 01:02:52,000 Speaker 1: ask all of my guests, starting with what is keeping 886 01:02:52,000 --> 01:02:56,640 Speaker 1: you entertained these days? What are you watching or listening to? Netflix, 887 01:02:56,680 --> 01:03:00,920 Speaker 1: Amazon podcast whatever? Uh? Well, I do watch quite a 888 01:03:00,960 --> 01:03:05,400 Speaker 1: few French shows. There's one on Netflix that's called Standing 889 01:03:05,480 --> 01:03:11,520 Speaker 1: Up about stand up comedians standing up in France or 890 01:03:11,920 --> 01:03:16,800 Speaker 1: in France, in France in French translated, of course, that's 891 01:03:16,880 --> 01:03:23,160 Speaker 1: quite funny. I recently benched on Silicon Valley, so that 892 01:03:23,240 --> 01:03:26,880 Speaker 1: I had seen before, but it's such a classic, and 893 01:03:26,920 --> 01:03:30,080 Speaker 1: you'll notice the first time around I didn't pay much 894 01:03:30,120 --> 01:03:36,280 Speaker 1: attention to how the private equity guys are depicted. It's priceless. Really, 895 01:03:36,320 --> 01:03:39,000 Speaker 1: I have to go back. It's really spot on. So 896 01:03:39,040 --> 01:03:42,960 Speaker 1: that that's Those are the two things that I've been watching. 897 01:03:43,160 --> 01:03:45,240 Speaker 1: So I got a couple of questions to ask you 898 01:03:45,640 --> 01:03:49,640 Speaker 1: about that. First, we loved to call my agent. I 899 01:03:49,680 --> 01:03:52,240 Speaker 1: don't know if you watch that. That's excellent, so good, 900 01:03:52,440 --> 01:03:56,120 Speaker 1: And in fact we ended up watching Emily in Paris, 901 01:03:56,760 --> 01:03:59,600 Speaker 1: not because it was good, just because the scenery was 902 01:03:59,680 --> 01:04:02,440 Speaker 1: just so amazing, like you could watch it on mute 903 01:04:02,440 --> 01:04:09,920 Speaker 1: and the architect yeah, no, it looked great. Just ignore 904 01:04:09,960 --> 01:04:14,120 Speaker 1: the plot line. And then if you like Silicon Valley 905 01:04:14,280 --> 01:04:18,360 Speaker 1: and this is just a touch more out there. Um, 906 01:04:18,440 --> 01:04:22,360 Speaker 1: there's a show on Apple TV called Mythic Quest, which 907 01:04:22,440 --> 01:04:26,360 Speaker 1: is about a game company, and it's the same sort 908 01:04:26,360 --> 01:04:32,400 Speaker 1: of crazy, quirky characters, and I hear it's only slightly exaggerated. 909 01:04:33,200 --> 01:04:37,200 Speaker 1: I got the same sense from Silicon Valley. This seems exaggerated. 910 01:04:37,240 --> 01:04:40,720 Speaker 1: And the response was not as much as you would guess. No, 911 01:04:40,920 --> 01:04:44,800 Speaker 1: Bill Gates was an advisor to this show. It's amazing noted. 912 01:04:45,240 --> 01:04:50,280 Speaker 1: We were in Andres and Horowitz, um for for a podcast. Actually, 913 01:04:50,640 --> 01:04:54,400 Speaker 1: and that weekend I'm watching Silicon Valley and I'm laughing. Oh, 914 01:04:54,440 --> 01:04:58,000 Speaker 1: there is the outside with the waterfall around it. I 915 01:04:58,080 --> 01:05:01,040 Speaker 1: was like, we were just there. They literally go into 916 01:05:01,120 --> 01:05:04,600 Speaker 1: these VC shops and film in it around it like 917 01:05:04,640 --> 01:05:07,760 Speaker 1: all the b roles were. They were really amazing. Yeah. Anyway, 918 01:05:08,240 --> 01:05:11,120 Speaker 1: if you like Silicon Valley, see if you like Mythic Quest. 919 01:05:11,160 --> 01:05:13,880 Speaker 1: It's a little weird, it's a little quirky. It's very fun. 920 01:05:14,720 --> 01:05:17,960 Speaker 1: Tell us about your early mentors who helped shape your career. 921 01:05:19,200 --> 01:05:21,720 Speaker 1: I don't know that I've had mentors. It's it's a 922 01:05:21,960 --> 01:05:26,440 Speaker 1: relatively new concept. Did you have mentors. There were people 923 01:05:26,600 --> 01:05:33,480 Speaker 1: who I put an outside value on their influence. Some 924 01:05:33,560 --> 01:05:35,960 Speaker 1: of them knew me, some of them we never spoke, 925 01:05:36,280 --> 01:05:40,160 Speaker 1: but I could create a list of Hey, these ten 926 01:05:40,240 --> 01:05:44,480 Speaker 1: people had an outside impact on how my career developed, 927 01:05:45,160 --> 01:05:48,040 Speaker 1: some without even their knowledge, right exactly, So, I think 928 01:05:48,040 --> 01:05:51,360 Speaker 1: it's when I think of mentor, my definition is somebody 929 01:05:51,400 --> 01:05:55,040 Speaker 1: who takes a special interest in developing your career. And 930 01:05:55,120 --> 01:06:01,080 Speaker 1: certainly that didn't really exist when I started. Did people 931 01:06:01,160 --> 01:06:05,280 Speaker 1: have an influence on my career. Obviously my ex co 932 01:06:05,840 --> 01:06:09,240 Speaker 1: partners Mitch Julius and Josh Friedman. I mean I grew 933 01:06:09,320 --> 01:06:12,280 Speaker 1: up with them. They ran the business. I learned most 934 01:06:12,320 --> 01:06:16,880 Speaker 1: of what I know from them, and they were interested 935 01:06:16,920 --> 01:06:20,000 Speaker 1: in my making money for the fund where they interested 936 01:06:20,080 --> 01:06:23,560 Speaker 1: in me Dominique having a wonderful career for the sake 937 01:06:23,600 --> 01:06:27,040 Speaker 1: of my career. No, not particularly. They had a fun 938 01:06:27,160 --> 01:06:30,000 Speaker 1: to run and money to make, and you know they 939 01:06:30,160 --> 01:06:34,840 Speaker 1: made sure that I performed. Let's talk a little bit 940 01:06:34,840 --> 01:06:38,360 Speaker 1: about books. You mentioned when Genius failed in Black Edge 941 01:06:38,360 --> 01:06:40,720 Speaker 1: in the book. What are some of your favorite books? 942 01:06:40,720 --> 01:06:43,960 Speaker 1: What are you reading right now? So my favorite books 943 01:06:44,000 --> 01:06:47,200 Speaker 1: are not financed books. I'm a huge reader. I read 944 01:06:47,560 --> 01:06:51,320 Speaker 1: in English in French. I read poetry, play. My favorite 945 01:06:51,320 --> 01:06:55,360 Speaker 1: books or have nothing to do with business, The Little 946 01:06:55,400 --> 01:07:00,800 Speaker 1: Prince by Santi Exipani and Kim by Rudier Kipling. I 947 01:07:00,840 --> 01:07:04,040 Speaker 1: am reading now a book called When We Were Orphans 948 01:07:04,120 --> 01:07:08,160 Speaker 1: by Ishiguro. I'm in a Japanese phase and so I'm 949 01:07:08,160 --> 01:07:12,360 Speaker 1: meeting Japanese contemporary authors. That's a good list. I get 950 01:07:12,400 --> 01:07:15,720 Speaker 1: emails from people all the time that tell me. Most 951 01:07:15,760 --> 01:07:19,200 Speaker 1: of what they read they find in recommendations from people 952 01:07:19,200 --> 01:07:22,240 Speaker 1: like you on the show. So a list of ideas 953 01:07:22,280 --> 01:07:25,240 Speaker 1: from other people, you know, I have a long list 954 01:07:25,280 --> 01:07:29,200 Speaker 1: of books. What sort of advice would you give to 955 01:07:29,320 --> 01:07:33,240 Speaker 1: a recent college grad, male or female who was interested 956 01:07:33,240 --> 01:07:36,600 Speaker 1: in a career in either hedge funds or distressed assets. 957 01:07:38,400 --> 01:07:42,400 Speaker 1: I'm not very good at giving sort of open ended advice, 958 01:07:42,480 --> 01:07:46,760 Speaker 1: but I'll try it, and that would be to make 959 01:07:46,760 --> 01:07:50,200 Speaker 1: sure they go into the field because they love it, 960 01:07:50,960 --> 01:07:56,520 Speaker 1: meaning it sounds don't just chase the bucks. That's what 961 01:07:56,640 --> 01:08:00,640 Speaker 1: I meant, and I think they were quite a few 962 01:08:01,080 --> 01:08:05,080 Speaker 1: people that I've interviewed in the later years where obviously 963 01:08:06,200 --> 01:08:09,960 Speaker 1: the money was the main incentive, and it's not clear 964 01:08:10,040 --> 01:08:13,560 Speaker 1: to me that you're going to be resilient enough if 965 01:08:13,600 --> 01:08:16,880 Speaker 1: that's your motivation, and as we spoke, I really think 966 01:08:16,920 --> 01:08:19,920 Speaker 1: that's an important quality if you If you can't stick 967 01:08:19,960 --> 01:08:22,880 Speaker 1: with it, it's going to be hard to be successful, 968 01:08:23,400 --> 01:08:26,400 Speaker 1: and sticking with it is what is required. You're not 969 01:08:26,520 --> 01:08:29,120 Speaker 1: going to get rich in a just a few years. 970 01:08:29,920 --> 01:08:32,360 Speaker 1: And our final question, what do you know about the 971 01:08:32,400 --> 01:08:35,720 Speaker 1: world of investing today? You wish you knew twenty five 972 01:08:35,840 --> 01:08:38,639 Speaker 1: or so years ago when you were first getting started. 973 01:08:39,680 --> 01:08:44,680 Speaker 1: I think it's mostly that people who speak with authority 974 01:08:44,840 --> 01:08:50,280 Speaker 1: and great, you know, the great assertive tone, don't always 975 01:08:50,320 --> 01:08:56,240 Speaker 1: know what they're talking about other than that nothing because 976 01:08:56,240 --> 01:09:00,240 Speaker 1: it was a great adventure. It's sort of a thrill 977 01:09:00,400 --> 01:09:04,880 Speaker 1: to discover a field, right, That is really what makes 978 01:09:04,920 --> 01:09:08,719 Speaker 1: a job so fascinating. Well, Dominique, thank you for being 979 01:09:08,760 --> 01:09:11,920 Speaker 1: so generous with your time. I really enjoyed the book 980 01:09:11,920 --> 01:09:16,240 Speaker 1: and heartily recommend it. Damsel and Distressed My Life in 981 01:09:16,280 --> 01:09:19,840 Speaker 1: the Golden Age of Hedge Funds by Dominic Mielle. If 982 01:09:19,880 --> 01:09:22,960 Speaker 1: you enjoy this conversation, well check out any of our 983 01:09:22,960 --> 01:09:27,439 Speaker 1: previous four hundred and eighty seven such discussions we've had. 984 01:09:27,600 --> 01:09:32,080 Speaker 1: You can find those at YouTube, iTunes, Spotify, wherever you 985 01:09:32,120 --> 01:09:35,559 Speaker 1: find your favorite podcasts. Sign up for our daily reading 986 01:09:35,560 --> 01:09:39,560 Speaker 1: list at Riholtz dot com. Follow me on Twitter at Ridholts. 987 01:09:39,560 --> 01:09:43,480 Speaker 1: Follow all of the Bloomberg podcasts on Twitter at podcast 988 01:09:44,120 --> 01:09:46,080 Speaker 1: I would be remiss if I did not thank the 989 01:09:46,120 --> 01:09:49,519 Speaker 1: crack team that helps put these conversations together each week. 990 01:09:49,960 --> 01:09:54,599 Speaker 1: Justin Milner is my audio engineer. Atika Valbron is our 991 01:09:54,720 --> 01:09:59,120 Speaker 1: project manager. Paris Wold is my producer. Sean Russo is 992 01:09:59,160 --> 01:10:03,120 Speaker 1: my head of research. I'm Barry Results. You've been listening 993 01:10:03,160 --> 01:10:06,000 Speaker 1: to Masters in Business on Bloomberg Radio