WEBVTT - BILLIONAIRE DAVID RUBENSTEIN ON HOW TO BE A GREAT INVESTOR 0:00:00.120 --> 0:00:03.920 All right, So here we are with the legendary David Ruberstein. 0:00:04.480 --> 0:00:08.280 Thank you for joining us. Yes, you're not familiar with David. 0:00:08.360 --> 0:00:10.760 He is the chair of the board of Trustees of 0:00:10.840 --> 0:00:14.120 Duke University. He is the host of Bloomberg's pay a 0:00:14.200 --> 0:00:17.479 pair of conversations, and he is the co founder and 0:00:17.520 --> 0:00:21.599 co chairman of private equity firm the Carlisle Group, which 0:00:21.640 --> 0:00:25.360 is a global private equity investment firm. How much the 0:00:25.480 --> 0:00:27.400 assets on the management four hundred billion? 0:00:27.480 --> 0:00:30.440 If that number has changed, please correct me for four 0:00:30.720 --> 0:00:35.600 million advantage under management right now, which is amazing. 0:00:37.840 --> 0:00:40.559 Yes, so thank you for joining us. 0:00:40.560 --> 0:00:43.400 Appreciate it, my pleasure. Thank you very much for having me. 0:00:43.800 --> 0:00:45.600 And he's an author too. We'll talk about his book. 0:00:45.800 --> 0:00:49.240 Yes, I'm looking for Yes, very important. 0:00:49.520 --> 0:00:52.200 So all right, so let's get into it. I want 0:00:52.200 --> 0:00:54.880 to start off with, you know, some education for the 0:00:54.960 --> 0:01:00.279 audience private equity. Can you explain what private equity years? 0:01:00.320 --> 0:01:04.800 I feel that people have a good understanding of venture 0:01:04.880 --> 0:01:07.400 capital because that's been the news a lot, and that's 0:01:07.400 --> 0:01:11.600 been very popular the last couple of years. But I 0:01:11.600 --> 0:01:15.200 think that the general public still doesn't have a good understanding, 0:01:15.280 --> 0:01:17.440 or they might not have even heard of private equity? 0:01:17.920 --> 0:01:20.440 Can you explain? Explain? 0:01:21.600 --> 0:01:24.560 In the United States, the phrase private equity means one thing. 0:01:24.760 --> 0:01:27.760 Outside the United States, it means another thing. In the 0:01:27.840 --> 0:01:32.320 United States, private equity more or less means all private investments. 0:01:32.360 --> 0:01:33.520 It could be venture. 0:01:33.240 --> 0:01:37.520 Capital, growth capital, the stress debt, anything where you're buying 0:01:37.520 --> 0:01:41.160 an asset that is something that's going to be held privately. 0:01:41.200 --> 0:01:42.880 It's not going to be public when you own it. 0:01:43.440 --> 0:01:46.440 And the theory behind private equity is that when you 0:01:46.520 --> 0:01:49.080 have something that's not in a public setting, you can 0:01:49.120 --> 0:01:51.880 make changes, you can improve it, you can in send people, 0:01:51.920 --> 0:01:54.280 you can pay them more, and ultimately you'll get a 0:01:54.280 --> 0:01:58.080 better return. So the theory behind private equity is that 0:01:58.120 --> 0:02:01.240 you buy an asset, you make it much better when 0:02:01.280 --> 0:02:03.440 you sell it or you take it public. You're going 0:02:03.480 --> 0:02:06.080 to get a rate of return on your investment that's 0:02:06.080 --> 0:02:08.800 going to be let's say, twenty percent per annum. So 0:02:08.880 --> 0:02:10.680 if you put your money in the bank, you're going 0:02:10.760 --> 0:02:13.240 to get maybe one percent a year. If you put 0:02:13.240 --> 0:02:15.440 your money in stock market, maybe you get on the average 0:02:15.400 --> 0:02:17.800 six percent a year. If you put your money in 0:02:18.880 --> 0:02:22.240 private equity, and it's a good private equity funder or 0:02:22.320 --> 0:02:24.840 or or deal, you might get twenty percent or thirty 0:02:24.880 --> 0:02:27.760 percent a year. Well that's pretty good. So the theory 0:02:27.880 --> 0:02:30.960 is it's a better way to make add value to 0:02:31.040 --> 0:02:34.920 an organization and you can and you can get a 0:02:34.919 --> 0:02:35.680 good rate of return. 0:02:35.720 --> 0:02:36.400 So that's what it is. 0:02:36.440 --> 0:02:39.960 Basically fixing up something in a private setting, making it better, 0:02:39.960 --> 0:02:42.720 and ultimately selling it after three to five years. That 0:02:42.840 --> 0:02:45.040 gets you a return of maybe twenty percent a year. 0:02:46.760 --> 0:02:49.040 Thank you for being here, A huge fan of your show. 0:02:49.480 --> 0:02:53.440 Can you talk to us about the importlance of being 0:02:53.440 --> 0:02:55.960 a controller in the face and conventional wisdom? And are 0:02:56.000 --> 0:02:59.160 there any sexes right now? You think people should take 0:02:59.200 --> 0:03:01.560 a ConTroll and take on in this environment. 0:03:01.760 --> 0:03:06.679 Right, the greatest investors in the world of generally or contrarians. 0:03:06.760 --> 0:03:10.239 If you just went along with the average common sense 0:03:10.360 --> 0:03:12.640 view of what the average person thinks, you would be 0:03:13.040 --> 0:03:14.920 one of the pack and you wouldn't do anything that 0:03:15.200 --> 0:03:18.560 make you stand out. So contrariants take a view that's 0:03:18.600 --> 0:03:20.840 different than the average common sense wisdom. 0:03:21.040 --> 0:03:21.440 Today. 0:03:21.480 --> 0:03:25.040 For example, the common sense wisdom that the average investor 0:03:25.080 --> 0:03:27.679 would have is get out of the stock market, sell 0:03:27.720 --> 0:03:29.880 whatever you have. The economy is going to hell in 0:03:29.919 --> 0:03:32.119 a handbasket, and we're going to be in a recession. 0:03:32.600 --> 0:03:35.600 The smart investors would say, now's the time to come in, 0:03:36.000 --> 0:03:39.960 buy things in a discount, and eventually in the recessions 0:03:40.000 --> 0:03:42.760 always end and eventually in three or four years you 0:03:42.920 --> 0:03:45.520 have bought something at fifty cents on a dollar and 0:03:45.560 --> 0:03:47.120 then two or three years are gonna be worth three 0:03:47.160 --> 0:03:50.440 dollars something like that. So that's what our contraan goes 0:03:50.440 --> 0:03:53.200 against the conventional wisdom. 0:03:53.520 --> 0:03:58.160 Well, our audience is, you know, filled with retail investors. 0:03:58.160 --> 0:04:00.400 We have some institutional investors, I'm sure, but a lot 0:04:00.440 --> 0:04:04.760 of retail investors and obviously they're learning the market, they're understanding, 0:04:04.960 --> 0:04:08.200 they're investing in. What are some habits that you've come 0:04:08.240 --> 0:04:11.000 across in your career that you've noticed that great and 0:04:11.040 --> 0:04:13.440 good investors have, right, so they can have an age. 0:04:13.600 --> 0:04:17.719 Well, people who are great investors generally, this is their life. 0:04:17.760 --> 0:04:20.440 This is what they do full time. They don't kind 0:04:20.440 --> 0:04:22.840 of have a day job and then they're picking stocks 0:04:22.839 --> 0:04:24.719 at night and then they kind of they do Well, 0:04:24.760 --> 0:04:26.680 you have to do this full time. You have to 0:04:26.720 --> 0:04:29.680 be pretty smart, good with numbers. You have to have 0:04:29.720 --> 0:04:33.440 a willingness to read enormous amounts of material. You have 0:04:33.480 --> 0:04:35.200 to admit a mistake when you make it and get 0:04:35.240 --> 0:04:36.960 out of a bad deal, because everybody. 0:04:36.640 --> 0:04:37.320 Makes a mistake. 0:04:37.680 --> 0:04:39.599 I think it also takes some humility to be a 0:04:39.600 --> 0:04:41.760 great investor, because you realize you're going to make mistakes, 0:04:41.800 --> 0:04:44.720 and you can't say I'm so brilliant and the market's wrong, 0:04:44.760 --> 0:04:46.640 but I'm right and the market's wrong, and you start 0:04:46.720 --> 0:04:49.840 losing money, and you know, those are things that make 0:04:49.880 --> 0:04:55.039 great investors. The average retail investor who buy stocks in 0:04:55.080 --> 0:04:58.320 the public market, you know, they're probably not great investors. 0:04:58.360 --> 0:05:00.240 They just they haven't done this for a living. You 0:05:00.320 --> 0:05:02.840 have to do something for a living, and you know, 0:05:02.880 --> 0:05:05.320 if you were you were going to a dentist, you 0:05:05.320 --> 0:05:10.360 wouldn't want a dentist who is spending full time picking stocks. 0:05:10.720 --> 0:05:12.520 You want a dentist who's going to actually know how 0:05:12.520 --> 0:05:15.000 to be a dentist. So an average dentist or doctor 0:05:15.120 --> 0:05:17.919 isn't doing this full time, and therefore they're probably not 0:05:17.960 --> 0:05:19.320 going to be that good at it. That's why for 0:05:19.400 --> 0:05:23.280 the average retail investor, the average person who's not a professional, 0:05:23.600 --> 0:05:26.120 they're probably best to go into index funds, which just 0:05:26.240 --> 0:05:29.719 mirror the market very modest fees, and the stock market 0:05:29.720 --> 0:05:31.479 goes up thirteen percent a year, you're going to go 0:05:31.520 --> 0:05:33.960 up thirteen percent a year. Trying to pick stocks and 0:05:34.000 --> 0:05:36.680 become Warren Buffett while you have a day job as 0:05:36.720 --> 0:05:39.800 a as a dentist or doctor is a fool's Errand. 0:05:41.200 --> 0:05:44.200 So let me ask you this, what are your thoughts 0:05:44.240 --> 0:05:46.960 in the handling of the economy by the Fed this year? 0:05:47.160 --> 0:05:49.880 Been my thoughts on what I'm sorry, can you speak up. 0:05:50.080 --> 0:05:52.200 The Fed's handling of the coat? 0:05:52.480 --> 0:05:55.400 Okay, I should disclose that I hired a young man 0:05:55.480 --> 0:05:57.920 that worked for me years ago, and he was at 0:05:57.960 --> 0:05:59.520 our firm for a number of years and he left. 0:05:59.640 --> 0:06:02.000 His name is Jay Powell, so now it's the chever 0:06:02.040 --> 0:06:02.719 in the Federal Reserve. 0:06:03.200 --> 0:06:05.760 But he doesn't give me any insights. The Federal Reserve 0:06:05.839 --> 0:06:09.880 made a terrible mistake. They underestimated how serious the inflation 0:06:10.040 --> 0:06:13.240 was going to be. The United States government injected five 0:06:13.360 --> 0:06:17.720 trillion dollars into our economy to deal with COVID. And 0:06:17.800 --> 0:06:20.839 you put five trillion dollars into an economy that's roughly 0:06:20.839 --> 0:06:23.440 a twenty two trillion dollar economy, you're going to get inflation. 0:06:23.839 --> 0:06:26.600 So we got a lot of inflation. The Fed said 0:06:26.600 --> 0:06:29.160 for a while it's transitory, which means it'll. 0:06:28.920 --> 0:06:31.600 Be gone soon. They were wrong. So now they're going. 0:06:31.560 --> 0:06:34.640 To increase interest rates a fair bit to get inflation 0:06:34.880 --> 0:06:37.600 down now. As you may have seen last week, inflation 0:06:37.720 --> 0:06:40.800 came down a little bit still at seven point seven percent. 0:06:41.240 --> 0:06:43.520 The Fed wants to get inflation down to two percent 0:06:43.600 --> 0:06:45.839 per year. That's what we had for the last twenty 0:06:45.839 --> 0:06:48.160 five years, two percent a year. It wasn't a big factor. 0:06:48.520 --> 0:06:51.560 Getting back to two percent is not easy. I know 0:06:51.640 --> 0:06:53.520 a lot about inflation because I worked in the Carter 0:06:53.600 --> 0:06:56.080 White House when we got inflation to nineteen percent. 0:06:56.320 --> 0:06:59.280 Nobody's ever to do that again, right, so. 0:07:00.880 --> 0:07:05.279 Please, please, So I would say the Fed is now 0:07:05.320 --> 0:07:08.719 serious about fighting inflation. They're going to keep increasing interest 0:07:08.800 --> 0:07:12.440 rates for a while, and I spect in December they 0:07:12.480 --> 0:07:14.640 will have another meeting and they'll increase interest rates by 0:07:14.680 --> 0:07:18.080 another seventy five basis points, or almost one full point. 0:07:18.440 --> 0:07:21.920 So yeah, I think the Fed has probably made a 0:07:21.960 --> 0:07:24.200 mistake in the beginning. Now they're trying to compensate for it, 0:07:24.200 --> 0:07:26.000 and I think they're doing a reasonably good job now. 0:07:27.600 --> 0:07:29.160 In light of the FTX scandal. 0:07:29.520 --> 0:07:31.560 Looking back at the interview that you deal with Sam 0:07:32.000 --> 0:07:34.920 as An investor. Is there anything in hindsight that made 0:07:35.000 --> 0:07:39.080 you say something about him or the strategy of the 0:07:39.080 --> 0:07:39.920 company didn't. 0:07:39.680 --> 0:07:45.960 Feel right, which would about him ftx oh FDx Yes, 0:07:46.920 --> 0:07:50.160 Sam Bankman freed, Well, it was the only interviewer I 0:07:50.160 --> 0:07:51.880 had with a guy showed up in a T shirt, 0:07:52.200 --> 0:07:54.960 shorts and tennis shoes. That's all he had wore, and 0:07:54.960 --> 0:07:56.600 that's apparently that was his normal dress. 0:07:56.640 --> 0:07:59.240 So I was a little It was a little unusual. 0:07:59.320 --> 0:08:02.000 Usually people dress a little bit better for the interviews. 0:08:03.160 --> 0:08:05.440 He's look, you meet a lot of people in this 0:08:05.520 --> 0:08:09.320 world who are brilliant young people, and when you're a 0:08:09.400 --> 0:08:12.200 brilliant young person and you haven't had a failure, you 0:08:12.240 --> 0:08:14.960 think you really are brilliant, and you walk on water. 0:08:15.280 --> 0:08:16.760 So he had never made a mistake. 0:08:16.960 --> 0:08:19.520 Really, he built a business where in at the age 0:08:19.560 --> 0:08:23.160 of thirty, he's worth twenty two billion dollars. So when 0:08:23.160 --> 0:08:25.480 you were thirty years old, you guys look like you're 0:08:26.280 --> 0:08:28.360 maybe a little older than thirty. I don't know, but 0:08:28.880 --> 0:08:30.480 when you were thirty years old, if you were worth 0:08:30.520 --> 0:08:32.160 twenty two billion dollars, you would think. 0:08:32.040 --> 0:08:36.000 You walk on water. Absolutely, he may have thought that. 0:08:36.760 --> 0:08:40.400 I would say, it appears that they made a terrible mistake, 0:08:40.440 --> 0:08:42.720 and whether it's criminal or not, I don't know. But 0:08:42.800 --> 0:08:47.240 they were taking customer accounts and putting them into other 0:08:47.480 --> 0:08:50.280 businesses that the customers didn't know about. So let's suppose 0:08:50.320 --> 0:08:52.400 you have an account at Merrill Lynch and you put 0:08:52.440 --> 0:08:55.600 a thousand dollars into it and they told you later, 0:08:55.960 --> 0:08:58.040 guess what. We took that thousand dollars. We lent it 0:08:58.040 --> 0:09:01.640 to something else, and we'll give your dollars back soon. Well, 0:09:01.679 --> 0:09:04.119 before they could give it back to you, it went bankrupt. 0:09:04.320 --> 0:09:06.640 So you're out here thousand dollars. That appears to be 0:09:06.679 --> 0:09:09.800 what they did, and therefore there's a lot of challenges there. 0:09:09.880 --> 0:09:11.920 So he's a smart guy. I've met him on a 0:09:11.960 --> 0:09:15.840 couple occasions. I would say, you know, you have to 0:09:15.880 --> 0:09:17.880 be wary of people who are thirty years old and 0:09:17.920 --> 0:09:20.280 think they walk on water, because it rarely happens. 0:09:22.000 --> 0:09:22.320 Noted. 0:09:23.280 --> 0:09:25.440 So there was there was one thirty three year old 0:09:25.480 --> 0:09:27.560 guy that did walk on water, but that was unusual. 0:09:29.960 --> 0:09:32.240 I had to get a love it walk on water. 0:09:32.400 --> 0:09:33.400 I love it. I love it. 0:09:34.720 --> 0:09:38.640 Obviously one of the greatest investors of our time, obviously 0:09:38.720 --> 0:09:42.040 the Carlo Group. Like we said, four hundred billion managing 0:09:42.120 --> 0:09:45.320 assets prior to even get into finance. I know you 0:09:45.320 --> 0:09:48.240 studied law, So what was that transition like from you 0:09:48.320 --> 0:09:49.800 going into law to find out? 0:09:50.600 --> 0:09:52.839 Well, let's be honest, if you're going to be good 0:09:52.840 --> 0:09:55.280 at something, you have to love it, and I wasn't. 0:09:55.360 --> 0:09:57.480 I didn't love the practice of law, and my clients 0:09:57.760 --> 0:10:01.839 told me I wasn't that good at it. I went 0:10:01.880 --> 0:10:03.839 to law school to make my mother happy because she 0:10:03.920 --> 0:10:05.800 said you'd either be a doctor or a lawyer. 0:10:06.120 --> 0:10:07.760 So I didn't want to go to medical school. So 0:10:07.800 --> 0:10:08.680 I went to law school. 0:10:09.000 --> 0:10:11.360 And I was really interested in politics, and so I 0:10:11.400 --> 0:10:13.600 was really interested in working in government. And I went 0:10:13.640 --> 0:10:15.480 to work for Jimmy Carter at the White House for 0:10:15.520 --> 0:10:19.000 four years when I was in my twenties, and you know, 0:10:19.040 --> 0:10:20.880 we got in place in the nineteen percent and the 0:10:20.920 --> 0:10:22.080 result was we didn't lose. 0:10:22.120 --> 0:10:22.880 We lost the election. 0:10:23.520 --> 0:10:25.400 So I had to go back and practice saw it, 0:10:25.440 --> 0:10:27.160 so I knew but I wasn't that good at it. 0:10:27.280 --> 0:10:28.600 My clients reminded me of that. 0:10:28.880 --> 0:10:31.400 So I decided to do something different and I started 0:10:31.440 --> 0:10:33.960 affirm in Washington nineteen eighty seven that grew to be 0:10:34.000 --> 0:10:35.479 one of the largest private equity. 0:10:35.200 --> 0:10:36.959 Firms in the world. So I got lucky. 0:10:37.000 --> 0:10:39.600 I surrounded myself with really smart people that knew more 0:10:39.600 --> 0:10:40.120 than I did. 0:10:40.520 --> 0:10:41.240 And the key to. 0:10:41.240 --> 0:10:43.880 Really building a great business is surrounding yourself with smarter 0:10:43.960 --> 0:10:47.240 people than you. So that's what happened. I built it 0:10:47.280 --> 0:10:49.400 that's now one of the largest firms in the world 0:10:49.480 --> 0:10:53.360 in this area. But I was attracted to it because 0:10:53.400 --> 0:10:56.120 I thought, if I'm going to be not in government 0:10:56.160 --> 0:10:58.000 and government doesn't want me because I didn't do a 0:10:58.000 --> 0:11:00.240 good job, and I'm going to be in the private sector, 0:11:00.840 --> 0:11:02.440 I might as well make the most amount of money 0:11:02.480 --> 0:11:02.920 I can make. 0:11:02.960 --> 0:11:04.400 And business people. 0:11:04.360 --> 0:11:07.080 And privatecy firms are making a lot more money than lawyers, 0:11:07.480 --> 0:11:09.640 and they ought to actually seem to be more enjoyable. 0:11:09.640 --> 0:11:11.760 So that's why I started, and it worked. 0:11:12.920 --> 0:11:15.200 So let me ask you this. You talked about inflation 0:11:15.280 --> 0:11:18.280 a few times. Last week a report came out and 0:11:18.280 --> 0:11:20.960 they said that they thought that inflation might have peaked 0:11:21.400 --> 0:11:23.640 and that that was good for the market. Do you 0:11:24.120 --> 0:11:25.520 think that inflation has peaked? 0:11:27.000 --> 0:11:29.880 Well, it's it's an interesting question. 0:11:31.320 --> 0:11:34.840 Last week, the numbers came out that said that inflation 0:11:35.000 --> 0:11:37.640 rate from month to month the year to year was 0:11:37.800 --> 0:11:41.120 seven point seven percent Now, if I told you inflation 0:11:41.280 --> 0:11:43.880 was going to be seven point seven percent annualized, you 0:11:43.920 --> 0:11:45.000 would run for the hills. 0:11:45.320 --> 0:11:47.080 But because it was previously. 0:11:46.679 --> 0:11:49.200 Over eight percent, it was eight point six percent, seven 0:11:49.280 --> 0:11:52.640 point seven percent looked wonderful. So yes, it may have peaked. 0:11:52.679 --> 0:11:57.120 I think it probably has. But remember inflation was pretty 0:11:57.160 --> 0:11:59.400 high because we injected so much money in the economy. 0:11:59.640 --> 0:12:02.120 The war or in Ukraine had a very high effect 0:12:02.160 --> 0:12:06.360 on energy prices and the food supply chain, so there 0:12:06.360 --> 0:12:09.400 are many things that produced this high inflation. I think 0:12:09.400 --> 0:12:13.520 it probably has peaked, but nobody really knows for certain. Now, 0:12:13.840 --> 0:12:16.280 I'd say if the war in Ukraine were to end 0:12:16.320 --> 0:12:18.600 in a couple of months, that would be great for inflation. 0:12:19.200 --> 0:12:23.240 And if Ukraine can start producing and shipping wheat again, 0:12:23.280 --> 0:12:25.840 that would be great for inflation. But I'd say it's 0:12:25.880 --> 0:12:28.959 a little premature to say it's peaked because we need 0:12:29.000 --> 0:12:30.200 a couple months of data. 0:12:30.240 --> 0:12:34.280 Just one month isn't probably enough. I'm looking forward to 0:12:34.280 --> 0:12:37.360 reading your book. Can you share with us what's one 0:12:37.440 --> 0:12:41.920 lesson you learned from maybe Jim Simmons, Ken Griffin and 0:12:42.000 --> 0:12:46.920 maybe John Paulson around how they invest in A very 0:12:46.920 --> 0:12:48.880 impactful lesson that will help audience tonight. 0:12:49.960 --> 0:12:50.280 Well. 0:12:50.440 --> 0:12:52.839 Ken Griffin is a guy that built one of the 0:12:52.880 --> 0:12:55.520 most successful hedge funds of all time. He's also got 0:12:55.520 --> 0:12:59.720 a separate company called Citadel Securities, and he's extremely wealthy. 0:13:00.080 --> 0:13:04.480 He basically believes in analyzing data very carefully. He surrounds 0:13:04.559 --> 0:13:07.600 himself with really really smart people and he tries very 0:13:07.679 --> 0:13:09.600 hard to get the best people in the country who 0:13:09.600 --> 0:13:12.520 are really good with numbers. He tries to steal people 0:13:12.520 --> 0:13:17.520 from Google, not steal, but recruit people from Google, Facebook, Microsoft, Apple. 0:13:17.600 --> 0:13:19.920 Get really smart people and have no numbers, and they 0:13:20.040 --> 0:13:24.599 really analyze these things carefully. John Paulson made one bet. 0:13:24.840 --> 0:13:27.200 It was a bet that the mortgage market would collapse, 0:13:27.520 --> 0:13:29.280 and at the time people didn't think it would be 0:13:29.360 --> 0:13:30.760 quite as bad as it turned out to be. So 0:13:30.800 --> 0:13:35.720 he made on one investment twenty billion dollars twenty billion, 0:13:36.280 --> 0:13:37.719 so you don't have to do anything the rest of 0:13:37.760 --> 0:13:38.040 your life. 0:13:38.120 --> 0:13:38.400 You're make. 0:13:40.240 --> 0:13:43.080 Good trade, like say, it was the greatest trade of 0:13:43.080 --> 0:13:45.000 all time, and so he did pretty well. 0:13:45.160 --> 0:13:46.959 But basically he analyzed. 0:13:46.480 --> 0:13:49.960 The fact that mortgage market was probably over inflated, and 0:13:50.200 --> 0:13:51.679 he correctly bet on that. 0:13:53.160 --> 0:13:56.200 Yeah, most people say no risk, no reward, obviously in 0:13:56.240 --> 0:13:59.960 your space when you're managing people's money that you know 0:14:00.120 --> 0:14:00.720 may not be true. 0:14:00.800 --> 0:14:01.320 Maybe it is. 0:14:01.360 --> 0:14:03.880 Can you talk about the importance of risk management when 0:14:03.880 --> 0:14:06.040 you're talking about private equity, So I. 0:14:06.040 --> 0:14:08.560 Think in private equity, I'm sorry. 0:14:08.080 --> 0:14:10.120 Risk management the important. 0:14:10.440 --> 0:14:16.400 Well, you know, risk management is a way of managing 0:14:16.400 --> 0:14:20.840 your money where you're basically in effect hedging. You're trying 0:14:20.880 --> 0:14:23.160 not to get the highest rate of return, but you're 0:14:23.160 --> 0:14:25.040 trying to protect against the downside. 0:14:25.400 --> 0:14:26.800 Private equity is different than that. 0:14:26.840 --> 0:14:29.120 Private equity is basically saying we're going to fix a company, 0:14:29.160 --> 0:14:31.720 make it better. We're not trying to hedge against it. 0:14:31.880 --> 0:14:34.760 So it's different. I would say, depends on what somebody 0:14:34.880 --> 0:14:38.840 really wants out of life. If you're seventy five years 0:14:38.880 --> 0:14:42.360 old and you're living on the retirement income and you 0:14:42.360 --> 0:14:44.240 don't have a lot of money coming in, you don't 0:14:44.240 --> 0:14:46.200 want to take a big risk. You probably have a 0:14:46.280 --> 0:14:48.880 more a risk management kind of approach, which is to 0:14:48.880 --> 0:14:52.440 say you're protecting the downside. If you're twenty five years 0:14:52.480 --> 0:14:55.320 old and you can take a lot of risk because 0:14:55.360 --> 0:14:57.360 if you make the mistakes, you can go make money again, 0:14:57.600 --> 0:15:00.000 probably private equity might be better for you because you're 0:15:00.080 --> 0:15:01.920 willing to take the upside and you don't need to 0:15:01.920 --> 0:15:03.160 protect the downside so much. 0:15:03.240 --> 0:15:04.400 It depends on your situation. 0:15:04.600 --> 0:15:07.960 How much money can you afford to lose, for example cryptocurrencies. 0:15:08.240 --> 0:15:10.120 I always told people, don't put more in than you 0:15:10.120 --> 0:15:13.680 can afford to lose, and some people did. 0:15:14.400 --> 0:15:14.960 People did. 0:15:16.920 --> 0:15:19.880 Is what's your economic outlook for twenty twenty three? 0:15:22.160 --> 0:15:24.760 I would say for twenty twenty three, I suspect the 0:15:24.840 --> 0:15:28.040 United States will probably go into a recession. That's a 0:15:28.120 --> 0:15:31.360 very common view, and that's because if you go back 0:15:31.400 --> 0:15:34.520 from to nineteen sixty, almost every time the Federal Reserve 0:15:34.520 --> 0:15:37.560 has increased interest rates dramatically, the result has been a 0:15:37.560 --> 0:15:40.560 so called hard landing or a recession. So it's unlikely 0:15:40.600 --> 0:15:42.320 we're going to be able to avoid it this time, 0:15:42.440 --> 0:15:44.680 but it'll probably be very modest. I don't expect it 0:15:44.680 --> 0:15:47.320 to be a serious inflatient of the type we had 0:15:47.520 --> 0:15:50.480 in the serious procession, of the type we had in 0:15:50.560 --> 0:15:52.560 the Great Recession of two thousands. 0:15:53.640 --> 0:15:54.320 Ernest, what's up? 0:15:54.400 --> 0:15:56.520 You have a walk into a small business and everything 0:15:56.760 --> 0:15:59.640 just works like the checkout is fast, there are seats 0:15:59.640 --> 0:16:03.160 of digital tipping is a breeze, and you're out the 0:16:03.200 --> 0:16:07.320 door before the line even builds odds are they're using Square. 0:16:07.800 --> 0:16:10.400 We love supporting businesses that run on Square because it 0:16:10.480 --> 0:16:13.440 just feels seamless. 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It's not just about payments, 0:16:36.800 --> 0:16:39.840 it's about giving you time back so you can focus. 0:16:39.480 --> 0:16:41.080 On what matters most ready. 0:16:41.080 --> 0:16:44.480 To see how Square can transform your business, visit Square 0:16:44.560 --> 0:16:49.080 dot com backslash go backslash eyl to learn more that 0:16:49.280 --> 0:16:54.720 Square dot com backslash, go backslash eyl. Don't wait, don't hesitate. 0:16:54.840 --> 0:16:57.200 Let's Square handle the back end so you can keep 0:16:57.240 --> 0:17:03.320 pushing your vision forward. This episode is brought to you 0:17:03.360 --> 0:17:05.640 by P and C Bank. A lot of people think 0:17:05.680 --> 0:17:09.560 podcasts about work are boring, and sure, they definitely can be, 0:17:10.080 --> 0:17:13.320 but understanding a professional's routine shows us how they achieve 0:17:13.400 --> 0:17:17.600 their success little by little, day after day. It's like 0:17:17.680 --> 0:17:20.480 banking with P and C Bank. It might seem boring 0:17:20.480 --> 0:17:23.320 to safe plan and make calculated decisions with your bank, 0:17:23.800 --> 0:17:26.240 but keeping your money boring is what helps you live 0:17:26.400 --> 0:17:30.399 or more happily fulfilled life. P and C Bank Brilliantly 0:17:30.480 --> 0:17:35.040 Boring since eighteen sixty five. Brilliantly Boring since eighteen sixty 0:17:35.040 --> 0:17:38.359 five is a service mark of the PNC Financial Service Group, Inc. 0:17:38.800 --> 0:17:42.640 P and C Bank National Association Member FDIC. 0:17:43.960 --> 0:17:44.919 Seven eight nine. 0:17:45.080 --> 0:17:47.480 I suspect it to be a two quarter recession, and 0:17:47.800 --> 0:17:50.399 you know, two quarters is not that serious, So I 0:17:50.440 --> 0:17:54.040 think the economy will probably slip a bit in that 0:17:54.080 --> 0:17:56.280 period of time, but I think inflation will come down, 0:17:56.600 --> 0:17:59.280 the unemployment rate will go up. I suspect the unemployment 0:17:59.320 --> 0:18:00.800 rate will probably go up to about four four and 0:18:00.840 --> 0:18:04.480 a half percent next year or something like that. Congress 0:18:04.520 --> 0:18:06.360 is not going to do anything, not that anybody will 0:18:06.359 --> 0:18:10.600 notice or want Congress to do anything. Congress isn't going 0:18:10.640 --> 0:18:13.080 to spend much money because they're just not a lot 0:18:13.119 --> 0:18:16.680 of money left to spend. We have thirty trillion dollars 0:18:16.680 --> 0:18:19.600 of debt in this country. This country, You and I 0:18:19.600 --> 0:18:23.480 owe other people thirty trillion dollars. That's a lot of money, 0:18:23.880 --> 0:18:25.560 and we can't afford to borrow much more. 0:18:26.480 --> 0:18:29.160 If you would get into private equity in twenty twenty three, 0:18:29.880 --> 0:18:32.800 what would be the differences in your strategy in twenty 0:18:32.840 --> 0:18:35.000 twenty three versus when you began in your career. 0:18:35.440 --> 0:18:37.840 Well, when I was starting, inflation was not a factor 0:18:38.520 --> 0:18:41.520 and certain things were not available then today, I would 0:18:41.520 --> 0:18:43.560 say a good thing in twenty twenty three would buy 0:18:43.600 --> 0:18:47.080 distress debt. Distress debt is when you're buying debt that 0:18:47.320 --> 0:18:49.440 our company that's not doing that well, and you buy it, 0:18:49.720 --> 0:18:51.679 you know, fifty cents on a dollar, and probably we'll 0:18:51.720 --> 0:18:53.200 come back to a dollar if you know what you're 0:18:53.200 --> 0:18:55.120 doing and it's a good deal. So I would buy 0:18:55.200 --> 0:18:57.840 a lot of distress debt. I would look at things 0:18:57.880 --> 0:19:01.160 that are going to be important certain areas of the future. 0:19:01.440 --> 0:19:05.439 One of them would be things like quantum computing. Another 0:19:05.480 --> 0:19:09.400 thing would be computational biology. Another on things would be crisper, 0:19:09.600 --> 0:19:13.439 which is gene splitting. Another kind of area that I 0:19:13.440 --> 0:19:16.520 think you would be good to be healthy food. Food 0:19:16.560 --> 0:19:18.320 that's healthy for you. That's going to be a big 0:19:18.359 --> 0:19:20.240