Speaker 1: This is Masters in Business with Barry Ridholds on Bloomberg Radio.
Speaker 1: This week on our Masters in Business podcast, I actually
Speaker 1: have a really special guest. I know I said that
Speaker 1: every week and you guys make fun of me, but
Speaker 1: this is a really special guest. His name is arts Hamburg.
Speaker 1: He is a legend amongst both hedge funds and venture
Speaker 1: capital investors. Uh. He has a phenomenal track record. When
Speaker 1: he began his hedge fund was one of less than
Speaker 1: a hundred funds that were in existence, and he briefly
Speaker 1: he tells the story how he gets a call from
Speaker 1: the Wolf Street Journal to find out that his hedge
Speaker 1: funds is apparently George Soros had retired and um Julian
Speaker 1: Robertson had retired, and suddenly he's running the biggest hedge
Speaker 1: fund in the world at the time. And not not
Speaker 1: that that was his designer is focus, but it just
Speaker 1: kind of happened. He's a fascinating guy. His his literally
Speaker 1: a rocket scientist, an aeronautical engineer who used to work
Speaker 1: on on missiles and satellites and things like that before
Speaker 1: he moved to Wall Street. He tells some of those
Speaker 1: stories and they're quite fascinating. Our conversation about venture capital
Speaker 1: investing in the areas he's looking into is really quite amazing.
Speaker 1: And you know, you guys by now know, I'm not
Speaker 1: afraid to talk. Most of the time during this conversation,
Speaker 1: we're just sitting I'm just lobbing questions and listening UM
Speaker 1: in rapt attentions as to what he said. It wasn't
Speaker 1: until later in the podcast I actually come out of
Speaker 1: my shell. But UM, the elephant in the room is
Speaker 1: you know, it's public knowledge. Uh, there was an SEC investigation,
Speaker 1: it was started, it finished, it reopened again. Ultimately he
Speaker 1: ended up settling without admitting or denying. UM, paid a
Speaker 1: twenty eight million dollar five I think it is, and
Speaker 1: and as the SEC tends to do, had him sign
Speaker 1: a non disclosure agreement or or something to that effect.
Speaker 1: So we really couldn't get into that in great detail. UM,
Speaker 1: but I did bring it up, and he did respond,
Speaker 1: I thought, in a rather forthright way, as much as
Speaker 1: he's allowed to say. He said, UM, really interesting guy,
Speaker 1: fascinating background, and some of the stories he tells are
Speaker 1: they're just amazing. So sit back and brace yourself for
Speaker 1: our couple of hours with Art Samberg. This is Masters
Speaker 1: in Business with Barry Ridholts on Bloomberg Radio. This week
Speaker 1: on Masters in Business, I have a very special guest.
Speaker 1: His name is Art Samberg, and he's been running various
Speaker 1: hedge funds and venture capital funds for a good couple
Speaker 1: of decades, posting fairly spectacular returns. I'm only gonna have
Speaker 1: a short version of your CV because it will take
Speaker 1: up the whole segment. Otherwise launched a hedge fund. Uh,
Speaker 1: it was Samberg, Dawson, Samberg, not Dawson and the originally
Speaker 1: back in eighties six, back when there was fifty hedge
Speaker 1: funds something. That's the number I made up, but it's
Speaker 1: under a hundred. It was a small number of hedge funds.
Speaker 1: Put it returns over the life of his funds of
Speaker 1: almost And the interesting thing about Mr Sandberg doesn't come
Speaker 1: from the traditional business economic background. Undergraduate bachelors of science
Speaker 1: and aeronautics and astronautics from m I T and then
Speaker 1: a master's degree in those subjects from Stanford, So really
Speaker 1: you're a rocket science you were rocket science no longer
Speaker 1: I am, and then you end up getting your NBA
Speaker 1: from Columbia. We'll talk a little bit about some of
Speaker 1: your classmates at Columbia. There's some really interesting stories there. Uh.
Speaker 1: You currently are the chairman of the m I T
Speaker 1: I'm sorry sits the board of advisors of the m
Speaker 1: I T Energy and UM Initiative, and you were chairman
Speaker 1: of the m I T Investment Management Company. I sit
Speaker 1: on the executive committee UM, and I'm very very involved
Speaker 1: in the school. There's so many other things and so
Speaker 1: many other titles you have. You're very active in philanthropy
Speaker 1: and a variety of other things. We'll get into that
Speaker 1: as the show goes on. Let me just start by saying,
Speaker 1: welcome to bloom Buck. It's great to be here. Thank you, Verry.
Speaker 1: So first I have to ask you were at Lockheed
Speaker 1: Missile and Space Company in San Francisco, You come to
Speaker 1: New York, you get your NBA from Colombia, and then
Speaker 1: you end up working as a security analyst at Kidder Peabody.
Speaker 1: How do you transition from literally rocket scientists to financial analyst. UM,
Speaker 1: you gotta follow your passion. You've got to follow your
Speaker 1: competitive advantage. And UM I quickly found out that I
Speaker 1: could solve the equations, but I had no idea what
Speaker 1: was really going on. UM. I worked in missilante aitude
Speaker 1: control UM. So these were defined. So we were the
Speaker 1: US launches rockets, UM. Satellites come off of those. I
Speaker 1: looked down on Russia back then, UM, and they have
Speaker 1: infrared sensors and they find out where, uh, the Russians
Speaker 1: are launching rockets, and there's a lot of orbital mechanics.
Speaker 1: And I could solid equations, but did I really have
Speaker 1: any clue as to what was actually going on? I
Speaker 1: quickly found out that I did not. So you go
Speaker 1: to kid A Peabody, you're covering aerospace and and those sorts.
Speaker 1: It's so interesting how I made the transition. I I
Speaker 1: wasn't going to go to graduate school, but Locke would
Speaker 1: pay for it, so I said, sure, you're gonna pay
Speaker 1: for it, I'll do it. So I went to Stanford, UH.
Speaker 1: And it was during the day, and on the way
Speaker 1: back I would stop off at a brokerage office. And
Speaker 1: it was the time when comp Compsat went public. That's
Speaker 1: something I know something about the sties. I got out
Speaker 1: of m I T and sixty two and I was
Speaker 1: working as an engineer from sixty two sixty five. Someplace
Speaker 1: in that time period, comps At law as the company
Speaker 1: goes public. Uh, and I'm fascinating. It's like, my goodness,
Speaker 1: all the stuff that I know, I can apply it
Speaker 1: to I can real money. Um, as opposed to supposed
Speaker 1: you're working my way up the engineering ladder where I
Speaker 1: had no illusion that I would ever be great. That
Speaker 1: was a good middle class job. But you're never going
Speaker 1: to My dad was an electrician. UM, so you were
Speaker 1: making more money than your dad when you're so, then
Speaker 1: how did you go from there to Columbia? Um? Because
Speaker 1: my wife needed to get a job teaching school in
Speaker 1: New York any place, and the only place I knew
Speaker 1: for sure you could get one was back in New
Speaker 1: York because I people. So you go to Columbia and
Speaker 1: this is a rumor, and you have to tell me
Speaker 1: if this is true. Used to car pool to Columbia
Speaker 1: with two guys named Mario Ga Belly and Lee Cooperman.
Speaker 1: It's no rumor, it's the actually truth. That's a that's
Speaker 1: a lot of intellectual firepower. Learned more in the car
Speaker 1: pool than I did at school. Don't tell, don't tell
Speaker 1: the school. I said that I cod share the board.
Speaker 1: By the way, the school that you're you're dissing right now.
Speaker 1: You made the biggest donation in their history to their
Speaker 1: to their graduate program. It's been exceeded by a couple
Speaker 1: of other guys now, but people, it was a large no.
Speaker 1: I I My my success in life is UM is
Speaker 1: taking UM a decent expertise in technology and combining with
Speaker 1: finance and trying to apply those two things to help
Speaker 1: companies aggregate capital um and grow and create jobs. And
Speaker 1: so I'm one of those guys who believes in all
Speaker 1: of that good stuff? Are there many people who don't
Speaker 1: believe a lot of people who don't. I think people
Speaker 1: believe it, they just get offended by some of the
Speaker 1: gross excesses that occasionally erupt. I think they're also jealous
Speaker 1: UM there's there's possible and possibly that. So so one
Speaker 1: of the things we've had Lee Cooperman on, I know
Speaker 1: you guys are friendly. One of the things that Lee
Speaker 1: talked about was how he developed his deep value framework
Speaker 1: from Colombia. What was your experience like? UM? My experience
Speaker 1: was I was the antithesis of deep value. M I
Speaker 1: remember Mario Lee and I, Uh, well, Mario and I
Speaker 1: took a course from Roger Murray, who was the guy
Speaker 1: reinstituted the value investing stuff at Columbia. He got he
Speaker 1: got one grade higher than I did because it was
Speaker 1: analysis of a company where it turned out that the
Speaker 1: really key factor was the old man who found it
Speaker 1: was going to die and then value would be created,
Speaker 1: which Mario was fantastic at. I thought that was disgusting.
Speaker 1: I mean, I really am interested in people who were
Speaker 1: alive and doing things. You care about the technology you
Speaker 1: have the physics. I care about solving the world's problems
Speaker 1: and getting rich while doing it, because I think the
Speaker 1: two actually do work together well. Many people who have
Speaker 1: created solutions to pernicious problems have not only helped society
Speaker 1: but created a tremendous amount of wealth. I think that's
Speaker 1: the americanay, and I think it's phenomenal. You're listening to
Speaker 1: Masters in Business on Bloomberg Radio. We're speaking with Art Sandberg.
Speaker 1: He is the founder of Peaquad Capital Management and now
Speaker 1: he's running Hawks Financial venture capital and Hawks is a
Speaker 1: umbrella family office venture capital and stuff. But we do
Speaker 1: have a fun though that my older son is now
Speaker 1: the managing partner. We call it a Katia Woods uh
Speaker 1: and it's increasingly showing up in the holding of some
Speaker 1: very interesting companies. So that's that's fascinating. Let's talk about UM.
Speaker 1: We mentioned earlier less than a hundred hedge funds when
Speaker 1: you launched, and and the fund returned a rather smart
Speaker 1: by the way, that's very similar to Lee Cooperman's returns seventent.
Speaker 1: Lee is a great friend. Mine is better. I think
Speaker 1: you're about half a percent well, And I will say,
Speaker 1: because you know, I believe that numbers are numbers, and
Speaker 1: you're full with numbers. I was, you know, I did
Speaker 1: go to M I T. But my first year I
Speaker 1: was down. You were down about you were to adjust
Speaker 1: it like most people have first years when they were
Speaker 1: and then the money pours in, and then depending on
Speaker 1: you came in, you might not have even made money
Speaker 1: with one of these guys with a great record. The
Speaker 1: not true here. The dollar adjusted returns, not the time
Speaker 1: weighted returns for a lot of big funds are awful
Speaker 1: because they were putting up returns with twenty million dollars.
Speaker 1: Then they're at forty five billion and they lose a third,
Speaker 1: So net net, over time there are a dollar loser.
Speaker 1: But percentage wise, UM on a time weighted basis, I've
Speaker 1: never had the chance to say this before, but that
Speaker 1: is absolutely not the case of QUI so you with
Speaker 1: down And one of your quotes that I really like
Speaker 1: was you learn more from your disappointments then you do
Speaker 1: from your successes. Success feeds on success, and people are
Speaker 1: there to tell you how wonderful you are. People don't
Speaker 1: really unless money attracts. Money is used to and I
Speaker 1: never understood it until a few years ago, and and
Speaker 1: and and if you if you do that for a
Speaker 1: long enough period of time, my belief, um, clearly my
Speaker 1: belief is that people then want to start to tell
Speaker 1: your down. They either want to continue to build you
Speaker 1: up or tell you down, and there become a high
Speaker 1: profile target. So, um, you're not going to hear a
Speaker 1: lot of things you believe about what you're doing wrong
Speaker 1: when you're doing right. Um, but you are doing things wrong.
Speaker 1: And and then if you just go into a shell
Speaker 1: and you don't realize and self analyze and you know,
Speaker 1: really look carefully at what you did and why it failed, um,
Speaker 1: you will not do well. So after I was down,
Speaker 1: because that was the crash of eight seven, and it
Speaker 1: was you had launched what Yes, so you did worse
Speaker 1: than the crash. Uh. It was one day the market
Speaker 1: was up almost and ended up returning for the year.
Speaker 1: That was a big, big down draft, which it was
Speaker 1: brutal UM. And I remember having because I I when
Speaker 1: I started the fund it was in small companies that
Speaker 1: were overlooked that could become big companies. Those are exactly
Speaker 1: the kind of illiquid positions got creamed and so I
Speaker 1: ended up having Assuming that I was going to get redemptions,
Speaker 1: I had a call companies and say, would you buy
Speaker 1: my stock? Um? That is, if anybody who knows anything
Speaker 1: about anything, that is not a good way to UH
Speaker 1: to execute a cell program. But there were no other buyers,
Speaker 1: so I got smoked UM and I so I was
Speaker 1: up three percent for my stub period in eighty six
Speaker 1: and I was down six I can't remember percent in
Speaker 1: eighty seven, but then it came roaring back. So what
Speaker 1: was what was the subsequent couple of years? So in
Speaker 1: other words, you put up eighteen almost eighteen percent a
Speaker 1: year despite starting from that. So if you were to
Speaker 1: just do the simple math, it would take it up
Speaker 1: probably closer if you backed out that over UM the
Speaker 1: next few years we're up twenty up seventy five it's
Speaker 1: just you know, crazy numbers right in the late eighties
Speaker 1: up seventies, starting in back in eighty nine, UM, and
Speaker 1: then and then I can imagine were just insane. What
Speaker 1: sort of numbers were you doing those? Yes, you know.
Speaker 1: But one of the things that did Pequa was to
Speaker 1: realize that because because I was sort of the first
Speaker 1: guy to really specialized in technology investing as as a
Speaker 1: hedge fund. Really yeah, without a doubt, and I sector funds,
Speaker 1: and I had I had a great partner, Dan Benton,
Speaker 1: who who then took over the technology she stuff, because
Speaker 1: I thought I had brought her background in the whole
Speaker 1: business and I can run the business and everything else.
Speaker 1: And he had a hundred percent year. I had a
Speaker 1: healthcare fund that was up that time period. UM, we
Speaker 1: started an energy fund UM. So we had sector funds,
Speaker 1: and I devised a way for me to manage increasing
Speaker 1: amounts of money by using those talents and bringing him
Speaker 1: into the fund while I'm still doing trying to do
Speaker 1: research myself. In the early days of the fund, someone
Speaker 1: had written and I don't remember where I'm quoting this from,
Speaker 1: that it was over fifteen billion dollars and kept growing
Speaker 1: and at the time that made it the biggest hedge
Speaker 1: fund in the world. Is that true? You wake up
Speaker 1: and and you wake up to unexpected news every once
Speaker 1: in a while, and that's happened to me more than
Speaker 1: once in my life. But the unexpected news in this
Speaker 1: case was in the spring of two thousand. UM, we
Speaker 1: had a PR firm, and the PR firm calls and says, Um,
Speaker 1: the Wall Street Journal, UM is going to do a story,
Speaker 1: uh on hedge funds now that George Soros and Julian
Speaker 1: Robertson have decided to close down to the outside investors.
Speaker 1: And they have determined that you were the largest hedge
Speaker 1: funds in the world and clients at that point, sir
Speaker 1: and and and they will do the article, UM with
Speaker 1: or without your input. UM, and we suggest you probably
Speaker 1: should tell you're in the part of the story. I
Speaker 1: don't think anybody really, I mean, people on Wall Street
Speaker 1: knew who peak what was But I I don't like publicity.
Speaker 1: I like to just live my life, do my thing,
Speaker 1: give back. I believe I do give back. UM. And
Speaker 1: I'm not out for self and grand grandizement. And uh
Speaker 1: So we were unknown and then all of a sudden,
Speaker 1: on a Monday morning, or Tuesday. Bang, there it was,
Speaker 1: and my life changed really in what ways? No, nothing positive.
Speaker 1: So hence the low profile is the better way to go.
Speaker 1: I've tried to maintain that ever since. And as you know, Barry,
Speaker 1: that was one of my reluctance is about doing this.
Speaker 1: I do know and and for listeners, I've been chasing
Speaker 1: Art down for the better part of a year and
Speaker 1: Um after our conversation with Lee Cooperman, Lee eventually convinced you, oh,
Speaker 1: this guy isn't that bad. You should come to so
Speaker 1: so far, so good. You're listening to Masters in Business
Speaker 1: on Bloomberg Radio. My guest today is Art Sandberg. He
Speaker 1: is a former rocket scientist who became an analyst, hedge
Speaker 1: fund manager, and venture capitalist. Let's talk a little bit
Speaker 1: about your methodology, because we've already identified you're not a
Speaker 1: deep value investor like your friends Lee and Mario Um,
Speaker 1: Lee Cooperman and Mario Gavelli. What is your methodology when
Speaker 1: you're looking at either a public stock that you're thinking
Speaker 1: about buying or a private company that you're thinking about
Speaker 1: investing in. UM, it sort of starts from the same
Speaker 1: It starts from the same basis, which is what kind
Speaker 1: of change is possible. What kind of change can you
Speaker 1: find that is being implemented by smart people? UM. It
Speaker 1: becomes more difficult obviously as UM a trend goes on
Speaker 1: and as you become larger in size, you can't you
Speaker 1: really can't establish those positions. UM. But initially my my
Speaker 1: my fund was set up to invest in market caps
Speaker 1: if you can believe this in this day and age.
Speaker 1: But we're talking thirty years ago now of market caps
Speaker 1: under under two hundred million dollars, uh, YadA YadA ya.
Speaker 1: And then of course it changed thirty years ago into
Speaker 1: two hundred million dollars today. That's still thousands of companies,
Speaker 1: but they trade by appointment. There's not a lot of
Speaker 1: liquidity of it, which is the only kind of things
Speaker 1: that owned my personal account right now. And I won't
Speaker 1: talk about any of those. But I'm back to back
Speaker 1: to being able to do what I first did when
Speaker 1: I UM, when you started the business, UM, you know, UH,
Speaker 1: creating alpha through that cycle UM becomes difficult. UM. And
Speaker 1: and so that approach that I described, UM, you have
Speaker 1: to evolve into a master of markets, as it were,
Speaker 1: to be able to go short and know how to
Speaker 1: use derivatives appropriately match. You know the cost of doing
Speaker 1: that to um the potential upside, and that's become increasingly
Speaker 1: difficult for practitioners these days. And the results quite honestly
Speaker 1: have been pretty pretty mediocre. When we look at the
Speaker 1: small cap there are guys like David Booth of Dimensional Funds.
Speaker 1: You've created a very nice business focusing on the small
Speaker 1: cap um advantage. The fact that you actually see out
Speaker 1: performance from smaller caps UM versus the big well followed.
Speaker 1: There's an inefficiency amongst small caps that leads to I
Speaker 1: think there's growing inefficiency UM because we all know what's
Speaker 1: happened to employment in the brokerage industry, all know how
Speaker 1: many companies are followed that's declining all the time. The
Speaker 1: economics aren't there with the regulation um, they're burdens on
Speaker 1: the company's plus the financial companies to follow them UM.
Speaker 1: So the value is definitely there. The problem is that
Speaker 1: nobody knows when you're gonna get paid for that value.
Speaker 1: If David has managed to harvest some of these, more
Speaker 1: power to them. But some of the guys now Dimensional Funds,
Speaker 1: maybe they buy a position to everything, don't they they
Speaker 1: have a quantitative model. They end up holding these things forever.
Speaker 1: I wouldn't say everything they run through a number of screens.
Speaker 1: Oh no, I'm not but detegrating what they do. Basically,
Speaker 1: it's very different than the model I'm talking about. For sure,
Speaker 1: I'm trying to identify winners. Um and they're in my experience,
Speaker 1: like there aren't that many winners. So you mentioned earlier
Speaker 1: you're running your own assets as opposed to when you
Speaker 1: were running other people's money. How does that universe difference?
Speaker 1: What's what's it like running your own money versus what
Speaker 1: you have to deal with when you have outside of this.
Speaker 1: It's very simple. You don't have to report, Okay, I
Speaker 1: do have to report to uh I have to son,
Speaker 1: so I do it with um and I have a
Speaker 1: daughter who runs our family foundation. She and my wife.
Speaker 1: Um So, in our family, the males make the moneys,
Speaker 1: and the females or social conscience and and and and
Speaker 1: help us give it back. Um So, my boss is
Speaker 1: really the women in the Sandburry clan. Okay. They expect
Speaker 1: that I will always perform, I will perform well, and
Speaker 1: we will do great, great deeds for the world. Um So,
Speaker 1: you still like have other other investors to to answer to.
Speaker 1: But I I can deal with that because they are
Speaker 1: in my family. So it's a little it's a little easier.
Speaker 1: It's so easier. So we were talking about the increased
Speaker 1: regulatory environment and how things have changed from when you
Speaker 1: launched thirty years ago. Could you launch a fund today?
Speaker 1: How what let's say, hypothetically you're right out of business
Speaker 1: school today, what would it be like launching a fund
Speaker 1: in this environment? Well, I guess in some ways it's easy.
Speaker 1: Well talking about today today, UM, I don't really know
Speaker 1: because I haven't been then involved or involved at all.
Speaker 1: But um, at the peak of my success, it was
Speaker 1: simple for anybody to raise a fund. I mean, everybody
Speaker 1: was looking for the next great manager and they throw
Speaker 1: money at him with fat return you know, return profiles
Speaker 1: for for the manager. Um. I think that welcome has
Speaker 1: been worn out. You know, that welcome has been worn out.
Speaker 1: So now I think, if you don't have a nest egg, um,
Speaker 1: you're not gonna make it. So you better have made
Speaker 1: some money um before and put it at risk in
Speaker 1: doing what you're doing. I certainly did that back when,
Speaker 1: because if you're down, you can't really pay your bills,
Speaker 1: so you better you better have something to live on
Speaker 1: and then decide whether you really want to take the
Speaker 1: risk for your family and everything. Um going forward. Um,
Speaker 1: I think you went through a whole generation of people
Speaker 1: who didn't have that risk. They just we're having money
Speaker 1: thrown at them. Uh. And now there's a sorting out
Speaker 1: process going on. So I think it's it's much more
Speaker 1: difficult right now to sort of fund You're listening a
Speaker 1: Master's in Business on Bloomberg Radio. My guest this week
Speaker 1: is Art Sandberg, probably best known for pe Quad Management,
Speaker 1: although he has been a well regarded venture capitalist and
Speaker 1: philanthropist over the years. Let's talk about running a business.
Speaker 1: What it's like to run an investment management business. I
Speaker 1: some time ago read a speech you had given and
Speaker 1: you had talked about how challenging it is to find
Speaker 1: and hire the best people. M what why? Why? How
Speaker 1: significant is that and why is that such a challenge
Speaker 1: to an investment firm. Um, it's a challenge because um, uh,
Speaker 1: there are a lot of smart people out there. UM.
Speaker 1: So if you meet somebody and you talk to him, UM,
Speaker 1: you know you're not gonna think everybody's smart, but you're
Speaker 1: gonna think a lot of people are smart. And then
Speaker 1: trying to distill down those who appear to be smart
Speaker 1: into those who are gonna be really a fair to
Speaker 1: be managing money, who are going to be um easy
Speaker 1: to live with, because you have to live with these people, UM,
Speaker 1: who aren't the kind of guys who become megalomaniacs. And
Speaker 1: I think that all the success is due to their
Speaker 1: efforts and not because of the team's effort. Very very difficult,
Speaker 1: very difficult. How how soon after you make a key
Speaker 1: hire do you usually know if you're right or wrong? Um, well,
Speaker 1: I won't. I won't do anything that the key higher
Speaker 1: um tells me to do on the first recommendation. Um.
Speaker 1: I always waiting to see how that works out. Not
Speaker 1: because I don't believe in it, but I believe it's
Speaker 1: a it's a it's a far better learning example to
Speaker 1: pick that one apart about what went wright what went wrong? Um,
Speaker 1: so objectively with no money at risk, and and and
Speaker 1: and then and then you you progress from there. But um,
Speaker 1: the great, the great fortune I had when I started
Speaker 1: peak was, UM, I hit a hot streak of hiring
Speaker 1: and UM, you know you like to think it's all
Speaker 1: because of yourself, but you know I brought in Dan
Speaker 1: Benton I brought in Mark Bach, I brought in Peter Dartley,
Speaker 1: I brought in Church and Deel I brought it. The
Speaker 1: first four hires that I made were spectacular, and then
Speaker 1: it gets harder because they hire people and you hire
Speaker 1: other people, and all of a sudden, there's a lot
Speaker 1: of people, and all of a sudden you're getting bigger,
Speaker 1: and all of a sudden you have back office issues,
Speaker 1: and all of a sudden, every client wants to talk
Speaker 1: to you, and it's just very, very difficult to maintain
Speaker 1: your focus. But those are those are good problems. Those
Speaker 1: are success. They're great problems. I'd rather have those problems
Speaker 1: and not have them. But they are problems, right, Well,
Speaker 1: they're better problems than why is the fund doing so poorly?
Speaker 1: Why have five of you employees laughed? Why you know
Speaker 1: those are bad problems? Yeah, well that's when you get
Speaker 1: into the point where so much money is coming into
Speaker 1: the consultant's controlled they as they should. I mean, they
Speaker 1: have a fiduciary responsibility, but do they I'm not sure
Speaker 1: if consultants have a fiduciary response. Um, the consultants don't.
Speaker 1: But the boards in hospitals, the boards that educational institutions
Speaker 1: whatever they do, and they need the cover of the consultants.
Speaker 1: Um uh, not covered is gonna sound worse than it
Speaker 1: that I intended. They need the plausible, uh, somebody to
Speaker 1: point a finger at when things go wrong. They also
Speaker 1: need somebody who's gonna do it full time. I mean
Speaker 1: usually the people who are on these committees are very
Speaker 1: very busy time. It's not a full time, part time.
Speaker 1: They've got very active careers that they're very good at,
Speaker 1: and they have to delegate to somebody. So the infrastructure
Speaker 1: builds up. Anything that is successful creates either regulators, consultants,
Speaker 1: an infrastructure around that activity. That. Um, there's a challenge
Speaker 1: to people who are really say dragged on future returns
Speaker 1: and operations. It's inevitable. There's no way around that. I
Speaker 1: didn't know it's inevitable. I just inevitable, okay. Um. One
Speaker 1: of the themes that we've had in the show I'm
Speaker 1: Gonna Change Gears on You has been the role of luck,
Speaker 1: whether it's in business or investing or even careers. Lee
Speaker 1: talked about this, Clivastness talked about this a number of people.
Speaker 1: Bill Gross talked about this. What is the role of
Speaker 1: luck in in building a firm and making investments. How
Speaker 1: does it affect people's professional careers. I'm sure it's a
Speaker 1: major Uh, it's it's a major causal effect. But if
Speaker 1: you think about it, um, that's the biggest mistake you
Speaker 1: can make. I mean I never thought about, boy, am
Speaker 1: I lucky? I mean after I had achieved the success,
Speaker 1: perhaps I thought that that was lucky. But you know, not, not,
Speaker 1: not while I was doing it. While you're doing it,
Speaker 1: what are you focused on? Your focus on your core principles?
Speaker 1: You know? What? What what is it that you bring
Speaker 1: the table as different than other people? How do you, um,
Speaker 1: how do you build an organization around you that it
Speaker 1: amplifies that that competitive advantage? Um? And stay you know,
Speaker 1: and and continue to learn and and and and and
Speaker 1: learn from your setbacks all the things we talked about before.
Speaker 1: But to think that I don't really believe it was
Speaker 1: because of luck. I think it was because I was
Speaker 1: I was, I was, I was driven. Um I did
Speaker 1: I have setbacks? You better have setbacks. But UM, I
Speaker 1: viewed those of setbacks and and things to overcome, not
Speaker 1: not like someday I'm gonna get lucky. So I'm gonna
Speaker 1: keep keep doing this, so you really have more of
Speaker 1: an engineers approach, which is, here's the formula, we're gonna
Speaker 1: plug and jug and ultimately you come out with the
Speaker 1: conclusion on the other end. So we have the pope
Speaker 1: in town. That makes it appropriate to talk a little
Speaker 1: bit about charity and giving back. We've we've talked about that, right.
Speaker 1: You have a number of philanthropic causes, organizations, you have
Speaker 1: your foundation. Let's let's talk a little bit about about that.
Speaker 1: First question is what are your philanthropic goals? Um, I
Speaker 1: don't know what the goals are. You know, to to
Speaker 1: create a better world yet day Yeah yah, but um,
Speaker 1: but a lot of this is formed by by by
Speaker 1: your life experience. So my life experiences that my grandfather
Speaker 1: came over from Russian Poland UM one one was a tailor.
Speaker 1: UM my dad, who was very bright guy, was the
Speaker 1: oldest five. His father lost his job in the depression
Speaker 1: and he ended up becoming an electrician because he had
Speaker 1: a support the family. But we you know, it was
Speaker 1: it was it was a strong family and my parents
Speaker 1: that everything he could to help me get along. And
Speaker 1: so I got into m I t um which is
Speaker 1: the ultimate in a meritocracy. Um, you you you you,
Speaker 1: you do the work, you do well, you don't do
Speaker 1: the work. You know. It's I think it's a great institution.
Speaker 1: I think I wish, I wish America reflected more more
Speaker 1: of its core values. But I realized that, you know,
Speaker 1: I got I got to go there and and and
Speaker 1: all that it was. It was sort of somewhat random,
Speaker 1: um um. And there are a lot of people born
Speaker 1: in this world who have the same talents that I had,
Speaker 1: who are never gonna have that chance. And I got
Speaker 1: to write that. I can't. I can't. I can't. I
Speaker 1: can't make the world perfect and create equality across the
Speaker 1: board for everybody. But but if I can affect the
Speaker 1: lives of a number of kids who don't have the
Speaker 1: opportunity I had because of just the way that you know,
Speaker 1: the their their family circumstances are, um, I want to.
Speaker 1: I want to make that difference. So how do you
Speaker 1: express that in terms of of in terms of philanthropy,
Speaker 1: what do you do with that? We We we do
Speaker 1: that um by supporting um lots of start up ventured
Speaker 1: you know, philanthropies that are in the area of education, healthcare,
Speaker 1: I could name names. Is the Summit Health leads. Um,
Speaker 1: we were instrumental in getting the two of those started there.
Speaker 1: They're they're highly respected, UM, and they're My daughter who
Speaker 1: runs our foundation, will be annoyed at me if I
Speaker 1: forget all of them. UM, I'll so you know, I'm
Speaker 1: Jewish and UH believe um, you know, believe in the
Speaker 1: Jewish people. And so we were original investors in UM
Speaker 1: Birthright Israel, as was your friendly uh Lee Lee Lee
Speaker 1: was as an investor in birth Right is Heal. We
Speaker 1: were one of the fourteen founding families UM uh and
Speaker 1: and and and a number of other things. So it's
Speaker 1: um those dual things, you know, giving back to your heritage,
Speaker 1: giving back to people who don't have the opportunities you had,
Speaker 1: but certainly have the ability that you had. Um. How
Speaker 1: does that manifesto itself in terms of scholarships or getting
Speaker 1: kids who might not otherwise get to a place like
Speaker 1: m I t to that sort of school. I am
Speaker 1: told by the school, and I can't say this is
Speaker 1: true that that the scholarships I've given Um, I've given
Speaker 1: the largest amount of money in scholarships to m I
Speaker 1: t Um. I think that's true. My wife is very
Speaker 1: involved with west Chester Community College and UH, we're big
Speaker 1: supporters in Westchester Community College UM, UH Columbia Business School,
Speaker 1: which I co chair with with Henry Cravis. UM. We've
Speaker 1: got a major campaign going right now to UH build
Speaker 1: a new business school up in the Manhattanville campus. UM.
Speaker 1: And I did a matching UM grant um for fellowships
Speaker 1: at UH UM at at Columbia UM. So it's it's
Speaker 1: it's it's not it's not per se about buildings. It's
Speaker 1: about you know, giving to the kids, giving to the professors.
Speaker 1: We have a program at UH Columbia Presbyterian New York
Speaker 1: Presbyterian UM where we have a thing called the Samburg
Speaker 1: Scholars and Pediatrics enabled them to hire a whole bunch
Speaker 1: more research people and fill in some gaps in there.
Speaker 1: And so the emphasis is on young people and health UM.
Speaker 1: And it's a it's a pretty well thought out thing.
Speaker 1: My my my wife and I UH and our three
Speaker 1: kids are on the board. UM. We uh, you know,
Speaker 1: we take it very very seriously. My goal, you know,
Speaker 1: is to take care of my family. But if I
Speaker 1: die with out a penny to my name, UM, that
Speaker 1: would be just that would be ideal. Trying to figure
Speaker 1: out how you manage that is uh, not the easiest
Speaker 1: thing in the world. But so if someone wanted to
Speaker 1: find out more about UM the charities and philanthropies you support,
Speaker 1: is there a place they could go online to look
Speaker 1: at that or is this all UM various meetings and
Speaker 1: committees and what have you. UM we have a website
Speaker 1: for the sand Rick Family Foundation, which we don't ever
Speaker 1: talk about the first time I've ever mentioned it. That
Speaker 1: does not include UM schools that we went to and stuff.
Speaker 1: So everybody is responsible for their own alma mater. So
Speaker 1: it does talk to the kind of social things we
Speaker 1: are trying to do. We as a word of caution,
Speaker 1: we do not accept incoming inquiries inquiries We only we
Speaker 1: we do our reach, which can we go out and
Speaker 1: selectively pick what we want to do. We've been speaking
Speaker 1: with Art Samberg of Pequod Capital and the Samberg Family Foundation.
Speaker 1: If you enjoy these conversations, be sure and check out
Speaker 1: the rest of our chat. You can find that on
Speaker 1: Bloomberg dot com, SoundCloud and Apple iTunes. Check out my
Speaker 1: column on Bloomberg View. Uh. Follow me on Twitter at Ridolts.
Speaker 1: I'm Barry Rihults. You've been listening to Masters in Business
Speaker 1: on Bloomberg Radio. Okay, welcome back to the podcast. Half Now,
Speaker 1: I don't have to worry about time that by the way,
Speaker 1: that's really annoying having like I have three minutes, one minute,
Speaker 1: thirty seconds, so he's in the back of it's it's
Speaker 1: such a distraction. So a couple of things I didn't
Speaker 1: get to during the broadcast portion. Let's let's take up
Speaker 1: some some loose questions and then we'll we'll focus on
Speaker 1: some of my favorite questions to ask during the segment.
Speaker 1: So I see a name like pea Quat, which is
Speaker 1: an Indian triumbe obviously, how did you come up with
Speaker 1: a name peaquat capital for that? Well, in hindsight, I
Speaker 1: wish I hadn't because distinctive it stands out that was
Speaker 1: and it was a literate of Peaqua partners and it
Speaker 1: sounded good, it felt good. Um, I had no idea
Speaker 1: the Peakuad Indians we're going to get a gaming license.
Speaker 1: And I remember getting letters from European investors about eight
Speaker 1: ten years into the life of the fund saying are
Speaker 1: you affiliated with that gambling tribe? No. I was at
Speaker 1: three fifty four Peak what avenue in south Ford today?
Speaker 1: Out and it sounded alliterate of it meant nothing. I
Speaker 1: didn't want anything that suggested, you know, did you predate
Speaker 1: the casinos? And yeah, absolutely, yeah, absolutely didn't come after you,
Speaker 1: did they They called me and I said, well, just
Speaker 1: check the incorporation papers. It was three four Peak what
Speaker 1: Avenue and that was it. That was it and it works.
Speaker 1: So now you know Hawks, which is my family office.
Speaker 1: I live on a street by the name of Hawks.
Speaker 1: UM Katia Woods or our family venture fund. We live
Speaker 1: on a Katia Woods Road and uh, north Port, Michigan, UM,
Speaker 1: which is where I spent my summer. So so you're
Speaker 1: you're in New York three quarters of the year and
Speaker 1: you're half the year and you're there a quarter a
Speaker 1: quarter of the time in Michigan. Yeah. Yeah, so you're
Speaker 1: they're just over the summer, over the summer beat. Oh
Speaker 1: that's awesome. We we lived down the beach from Mario Batali,
Speaker 1: who was a big champion of that area. Um, New
Speaker 1: Yorkers don't Italian tour it ends up in Northport, Michigan,
Speaker 1: which is on the tip of a peninsula jetting into
Speaker 1: Lake Michigan. It's a beautiful, beautiful area. Um. If you're in.
Speaker 1: If you're in New Yorker, you go to the Hampton's,
Speaker 1: except if you're me, you go to Michigan. It's bizarre.
Speaker 1: Mario Batali, the chef for the Okay So, but he's
Speaker 1: not from the is he from that part now? But
Speaker 1: his his wife went to University of Michigan and was
Speaker 1: friendly with with a gal who grew up on that peninsula.
Speaker 1: And that's and that's where you are right over. And
Speaker 1: because I do venture capital now and I don't know
Speaker 1: have to be I don't have to have morning meetings,
Speaker 1: I don't have to all of the paraphernalia about running
Speaker 1: a fund um. I can do everything, you know, electronically,
Speaker 1: take plane trips to where I have to go. How
Speaker 1: often are you on the West coast California? Eight times
Speaker 1: a year? So we were just in the beginning of
Speaker 1: this year. I was in Seattle for a week actually
Speaker 1: um c F A events. I interviewed Howard Marks at
Speaker 1: at UM in Seattle, and then we spent a week
Speaker 1: in Seattle. Seattle is on fire. It's absolutely a city booming.
Speaker 1: And we just got back a few months ago from
Speaker 1: a week in San Francisco. It was a conference in
Speaker 1: Napa and then a week in sanci. San Francisco is
Speaker 1: on fire. It's San Francisco has been on fire ever
Speaker 1: since I got out of school in sixty two. Well,
Speaker 1: it waxes in Waynes but you know, post financial crisis,
Speaker 1: it was a little tamped down for a year or
Speaker 1: two and it's just been booming. Ceccality is part of
Speaker 1: part of the human condition. So how do you But
Speaker 1: it's also true in Denver we have we started up
Speaker 1: a real estate development from Denver. Denver is another also
Speaker 1: booming booming. How much of that is related to the
Speaker 1: legal marijuana in Denver and how much of it is Well,
Speaker 1: I'll tell you. The best investment has not been art
Speaker 1: has not been. It has been buying up old warehouses
Speaker 1: in Denver because that's where they that's where they store
Speaker 1: the marijuana they grow it. They're also they need they
Speaker 1: need they have big warehouses, but they're big new and
Speaker 1: they need electricity, and they need they need artificial light.
Speaker 1: But just the crumby old, hundred year old small warehouse
Speaker 1: just to store I missed it. I missed that play. Yeah,
Speaker 1: but I know it's true. So you're doing a lot
Speaker 1: of venture capital wise, how do you deal with the
Speaker 1: supposed valuation issues these days, all these billion dollar unicorns
Speaker 1: where I hope that I get into a unicorn. So
Speaker 1: what sort of stuff do you like to to look
Speaker 1: at as a as a VC. Yeah, it's it's consistent
Speaker 1: with with my background. My my older son who I
Speaker 1: worked with, ran business strategy of people soft. He knows
Speaker 1: software far better than I do. Um, I'm better at
Speaker 1: the you know, the physical sciences. Um. We're involved with
Speaker 1: the fusion company that I really can't talk much about,
Speaker 1: but people should should should read read the newspapers and
Speaker 1: fusion in terms of energy generation. Yes, thorium, I hope.
Speaker 1: Why don't we have thorium reactors? You have a physics?
Speaker 1: Because we have, we have we have a better approach
Speaker 1: really yea, because thorium is supposedly and now my physics
Speaker 1: is thirty years rusty, but supposedly better than uranium, better
Speaker 1: than plutonium, no waste issues. Tonium is highly radioactive. I
Speaker 1: can't remember how radioactive storium is. I looked at it
Speaker 1: a while ago. Well, what we're trying to do is
Speaker 1: fuse hydrogen and boron, and I won't bore everybody that
Speaker 1: that results in three helium Adams energy and it's completely
Speaker 1: not completely, but largely into tronic and you can actually
Speaker 1: know part neutrons, high energy particles leaving correct and and
Speaker 1: therefore UM you can build a commercial reactor unlike what's
Speaker 1: the waste product? Like, Uh, there's very little waste really,
Speaker 1: so you're not left with there is waste and we've
Speaker 1: got to take care of Is it radioactive waste? No? No, no,
Speaker 1: no no, it's non radioactive waste product out of a fusion.
Speaker 1: It's a major, major project. And you said you're trying
Speaker 1: to change the world. You really no, No, I am
Speaker 1: trying to change the world. Plus, I were invested in
Speaker 1: a and the solar company that uses UM three D
Speaker 1: bristols and it's a major breakthrough. Uh. And we're going
Speaker 1: through the last phases of we've seen technology on solar.
Speaker 1: I just had this conversation with someone not too long
Speaker 1: ago on solar. All of the gains that we've seen
Speaker 1: have been so agonizing over thirty years. It's a substantial series,
Speaker 1: but they've been really incremental and evolutionary. This is not
Speaker 1: you're talking about a revolutionary talking about When I first
Speaker 1: met these guys, they were growing three million nana um
Speaker 1: nickel nano fibers on a substrate per square inch. Doing
Speaker 1: a flat panel, you're doing three dimensional panel where the
Speaker 1: photons come in and spiral down the bristles, so you're
Speaker 1: capturing a lot more of the energy that ends three
Speaker 1: times this magnitude break. Photons stay in the structure three
Speaker 1: times as long as if they were to just reflect
Speaker 1: off of a plane surface. Um. So they stay in
Speaker 1: and the and the efficiency goes up. It's hard to do,
Speaker 1: but we're almost there. How much more expensive of these
Speaker 1: panels than traditional Sure, we're now making them on glass panels.
Speaker 1: I'll give you the answer to that in the first
Speaker 1: quarter next year. All right, but none of these are open.
Speaker 1: This is your now, this is this is you know,
Speaker 1: I don't believe in share. This is risk uh um.
Speaker 1: But should just stay tuned and some really interesting things,
Speaker 1: really interesting things coming along. And that's two of a
Speaker 1: number of others. So we do software companies. When you
Speaker 1: when you were running Peaquat, there was a lot of
Speaker 1: oil energy, natural gas LEAs, things like that. So energy
Speaker 1: has been an an interest of yours for a long time. Yeah,
Speaker 1: I had I had a bunch of sector funds as
Speaker 1: I mentioned, but they were in telecom, they were in technology,
Speaker 1: they were in healthcare, small cap indessing. The one exception
Speaker 1: was early on was an energy because I went you know,
Speaker 1: if you if you lived in the seventies, you went
Speaker 1: through the oil embargo. I remember as a kid trying
Speaker 1: to get a gas can filled up to mow the lawn,
Speaker 1: and I would get the question, you know, what, what
Speaker 1: is your license plate even or on and have a
Speaker 1: gas can? Well, I don't have a license, so all right,
Speaker 1: they should have let the grass grow and give it
Speaker 1: to me. I mean, I was the adult with little kids.
Speaker 1: I needed it. I had a mo that's hey, listen.
Speaker 1: I had earned a living, so delivered papers. Same here
Speaker 1: I hated. Delivering papers was a terrible tal my. I
Speaker 1: was so I had. I had a bunch of friends
Speaker 1: and to two of them head routes. The one the
Speaker 1: one key guy who I bought a route with, ended
Speaker 1: up being a sheet metal worker. He took a fifty
Speaker 1: paper route which we split in half, and he got
Speaker 1: it up to a hundred a hundred customers. Mine dwindled
Speaker 1: down to ten because I would sit on the curb
Speaker 1: and read the newspaper first, and he just took the
Speaker 1: papers and delivered them. So, you know, the best part
Speaker 1: about delivering newspapers was Sunday morning, me and a few
Speaker 1: friends who all had routes would go to the diner
Speaker 1: and have breakfast at nine o'clock. That was the highlight.
Speaker 1: I didn't do that that would have been successful. That
Speaker 1: was the best part of it. Um. So it sounds
Speaker 1: energy is really in energy is really interesting that, you know.
Speaker 1: It is my belief that you know, in thirty years
Speaker 1: all they're all producing countries in the world will be
Speaker 1: bankrupt meaningless, basically back to managing that sitting on a
Speaker 1: bunch of sand and rocks. Um. You know, I hope
Speaker 1: to I hope to help you want to accelerates. Not
Speaker 1: just not not because I have anything against them, It's
Speaker 1: just that it's absurd that burning fossil fuels, the burning
Speaker 1: fossil fuels, they're not really sharing the wealth with the
Speaker 1: people of their country. When you look at all the
Speaker 1: problems we've had in the Middle East, I can't help
Speaker 1: but think if there wasn't oil there and we weren't
Speaker 1: so dependent on it, people wouldn't really care. We wouldn't
Speaker 1: have had it could be true. I come at it
Speaker 1: just from a pure you know, how can myself, How
Speaker 1: can I help solve the world's problem, which is making
Speaker 1: energy plentiful and cheap? Goes along? There's no doubt. I mean,
Speaker 1: you know, I don't even want to get involved in
Speaker 1: the climate debate. Um, I am what debate of it?
Speaker 1: You know? Is carbon human generator or whenever? And I
Speaker 1: hear that this just came up at a dinner the
Speaker 1: other day. I always tell people, if you don't think
Speaker 1: you can affect your environment, park your car in your garage,
Speaker 1: leav the engine running, shut the door, and spend an
Speaker 1: hour or to that. I'd rather spend my time figuring
Speaker 1: out how to solve the problem rather than debate the issue.
Speaker 1: I don't want to either. I just say, park in
Speaker 1: the car with the park of the garage, with the
Speaker 1: engine running, and we'll see how little you can affect
Speaker 1: you there there, that is an argument, um. But I
Speaker 1: don't get involved in stuff like that. I get involved
Speaker 1: in what is the problem, What is the solution? Can
Speaker 1: I affect the solution in a positive way? And that's
Speaker 1: an engineering approach? So what other from it? What other
Speaker 1: issues lend themselves to an engineering solution that you can
Speaker 1: do venture investing with UM. I don't know if it's
Speaker 1: a problem or what, but UM we we we bought
Speaker 1: up the UM we bought up all the patents from
Speaker 1: A T and T in holographics. UM So yeah, storage,
Speaker 1: you know, data storage is growing a year UM and
Speaker 1: will continue to grow with those kind of absurd rates
Speaker 1: for quite some time. UM and UM So I'm involved
Speaker 1: in in some flash memory companies. I'm involved in UH
Speaker 1: some new algorithms to to to try and make servers
Speaker 1: much more efficient there and I don't want to name name.
Speaker 1: So there's a hardware approach and a software approach and
Speaker 1: we're involved in both. And and what you really need
Speaker 1: is you need vast amounts of data UM on warm
Speaker 1: what's called warm storage storage. So you know, hot storage
Speaker 1: is our disk drives. UM and to some degree, flash
Speaker 1: memory and cold storage are tapes, which are you know,
Speaker 1: they just run sequentially. It's not random access. It's ancient technology,
Speaker 1: or it's it's ancient, but it's you know, on a
Speaker 1: cost effective basis that still makes sense. But you really
Speaker 1: want something that was that is nearer than tape UM
Speaker 1: which which will burn out in five to ten years,
Speaker 1: can have the longer storage life. UM. I mean, our
Speaker 1: government goes out and has all these drones that are
Speaker 1: taking pictures of all kinds of stuff god knows what, UM,
Speaker 1: and they can't even they can't analyze half of it
Speaker 1: because they there's no way to process it all. And
Speaker 1: also as you get into genomics and other things, we
Speaker 1: are just spitting out data. So if you could use
Speaker 1: holographic memories which would last for for fifty years um
Speaker 1: uh and uh down to the right price points um
Speaker 1: at any rate. So we're trying to develop that that
Speaker 1: is not that is not an area where we can
Speaker 1: go out and talk to a venture capitalists and get
Speaker 1: them to you know, go alongside you. UM just won't
Speaker 1: do it because it's that that area has been death
Speaker 1: to many many start ups. For my for for for
Speaker 1: for our family purposes, we can take that risk. UM.
Speaker 1: It might take a little longer, we can take that risk.
Speaker 1: So we're trying to solve that problem. We're involved in
Speaker 1: medical devices and and some some medical uh um, some
Speaker 1: interesting companies. You were on the board of a New
Speaker 1: York genomics UM center before we get to that, because
Speaker 1: that's an area I find absolutely fascinating. Would love to
Speaker 1: talk about you're buying these patents up from a T
Speaker 1: and T. Well, it wasn't from a T and T.
Speaker 1: There was a there were two venture groups that that
Speaker 1: did that. Uh. What year did these patents? Well, these
Speaker 1: are these were done in the nineties and um they
Speaker 1: were expired at this point or there enough because you
Speaker 1: keep refreshing them, there's enough. We keep improving the basic
Speaker 1: UM stuff. So we own all the patents. We we
Speaker 1: we have two patents uh covering both the way you
Speaker 1: store it and the media you need to produce it.
Speaker 1: UM and uh to venture firms trying to put part
Speaker 1: a hundred million dollars into trying to develop this UM
Speaker 1: and they were getting and we bought. We bought the
Speaker 1: asset at but hopefully there's a value of plate right
Speaker 1: if you were if well, anything you buy at a
Speaker 1: bankruptcy is usually well there's another one that we're involved
Speaker 1: with which we did help somebody buy a bankruptcy, which
Speaker 1: is clear, which is at the airports. What is what
Speaker 1: is clear clear is the a biometric screening technique at
Speaker 1: airports too. And now they're starting to be in court
Speaker 1: with the Yankees just um uh started using at the
Speaker 1: San Francisco at the stadium at the stadium. So when
Speaker 1: I I assume that everybody else, although they don't assume
Speaker 1: everybody uses t S A pre so they can whisk
Speaker 1: through the airport and then when you come back, there's
Speaker 1: global entry. Will you bypass all the customs and beautiful? Right?
Speaker 1: So you you take your passport and then you take
Speaker 1: your hands and you put that on a machine and
Speaker 1: you're done in thirty seconds. What is clear due relative
Speaker 1: to that sort of Clear does the same thing, um
Speaker 1: but biometric biometrics and checks it against the giant database
Speaker 1: to make sure you're not a Yeah. And so the
Speaker 1: Yankees are using this, and the San Francisco Giants are
Speaker 1: using this, and uh increasingly airports are using it. It's
Speaker 1: it's a company that went bankrupt. Um technology but dead
Speaker 1: business model and that that was in some ways of
Speaker 1: value play. But but but the value of play based
Speaker 1: around superior technology of the bad go to market implementation. UM.
Speaker 1: So we're involved that. UM tons of things. These are
Speaker 1: really fascinating venture stuff. What what other areas intrigue you
Speaker 1: from a venture perspective? Um. So there's alternative energy, there's software.
Speaker 1: There's one company in Boston, UH that we're involved with that.
Speaker 1: Uh UM. I'm watching the wheel spin and fig watching
Speaker 1: you try and figure out what you can and can't
Speaker 1: say what what subject does the technology cover? Well. The
Speaker 1: problem that companies like Hewlett Packard or Samsung or a
Speaker 1: bunch of them have is that the real money in
Speaker 1: in smartphones and devices these days are in the apps UM.
Speaker 1: And there are two app platforms, one of course is
Speaker 1: apples iOS UM uh iOS and and the other is UM.
Speaker 1: You know, the Android system UM. So if you look
Speaker 1: were to come out with a new product and not
Speaker 1: support those apps UM, people won't buy it. So some
Speaker 1: some products have been introduced that are technically wonderful products,
Speaker 1: but they don't service the market as it is configured today.
Speaker 1: If you if you were able to UM, if you
Speaker 1: were able to solve that problem for manufacturers UM amplify
Speaker 1: their software or appify. They're there prom and you can emulate.
Speaker 1: You can emulate those things. But when you emulate, you
Speaker 1: have another microprocess. It's slow, it's inefficient, it just isn't competitive.
Speaker 1: If you can do it and what's called native mode
Speaker 1: using the application control layer, UM, you can I'm looking
Speaker 1: to see if the word applify is taken because I
Speaker 1: want to. I think that's a word that I you know,
Speaker 1: it's all it's all yours, Telly rate. There's a company
Speaker 1: in Boston that has done that. Um, Samsung is UH incorporating,
Speaker 1: It's UH and it's ties and z one phone which
Speaker 1: is introduced into India. And the future looks pretty bright.
Speaker 1: So there are software applications that are that are that
Speaker 1: are interesting because they solve problems. They solve problems. Yeah,
Speaker 1: I like solving problems. So what else? Um? Oh, I
Speaker 1: see why I keep speaking of problems. I keep searching
Speaker 1: for this and I keep coming up with an Amazon
Speaker 1: Applify create the simplest Mac possible, Mac from a show.
Speaker 1: So somebody else already has the sorry the word apifi.
Speaker 1: And then there's appify Android apps on Google play at
Speaker 1: appify on Twitter. So all right, I thought it was
Speaker 1: a good ours has a different name. I want to
Speaker 1: even mention, Okay, don't mention. So you don't want to
Speaker 1: run an emulation because you're reading a whole another layer
Speaker 1: of software. It slows down, more buggy, more complicated. So
Speaker 1: but you make it need to do it. If you
Speaker 1: can do it off of the application control layer, it's
Speaker 1: completely legit and it's very hard to do. It's very
Speaker 1: hard to do. So this is a software solution to
Speaker 1: a programming problem. All right, what are the areas intrigue
Speaker 1: you in terms of ventures? Right, young guys out of
Speaker 1: M I T who have come up with an active
Speaker 1: shock absorber system active shock absorber cars for bicycles or
Speaker 1: four cars, cars and maybe truck camps. But but right
Speaker 1: now the emphasis is on cars, um and it's it's truly.
Speaker 1: So the trick there is to get it to a
Speaker 1: low enough cost and put it in automobiles. There are
Speaker 1: many there there, there, there there there. There are systems
Speaker 1: today which use hydra fluids and the hydraulic that that's
Speaker 1: pretty old school though. That's old school, and it's very
Speaker 1: expensive for a wheel. If you can get it down
Speaker 1: with a simple system, um, so that it would you know,
Speaker 1: sell for under two thousand dollars per automobile. Um, there's
Speaker 1: a vast market. And these guys, these guys, I think,
Speaker 1: have the solution to that. So so I'm on the
Speaker 1: board of that one. Yeah, that's interesting. So this, you know,
Speaker 1: there's great stuff out there. So I am not one
Speaker 1: of these people who believe, oh my god, the world
Speaker 1: has a million problems. Let's stick our head in the ground.
Speaker 1: Unless it does have a million problems, but it's got
Speaker 1: two million solutions. That is, we go to this venture.
Speaker 1: It's really early stage. An angel conference in San Diego.
Speaker 1: I can't go every year on my head explodes. I
Speaker 1: go every other year and you cannot come out of
Speaker 1: and it's college kids and stuff. You cannot go through
Speaker 1: an event like that. Well, they've told me. They've told
Speaker 1: me of an M I T. That um that in
Speaker 1: the generation or two ago, probably too, the every age
Speaker 1: of an M I. T. Graduate who started a company
Speaker 1: was forty two years old. And now, yeah, I find
Speaker 1: you can't go to one of those events and leave
Speaker 1: and not be optimistic about the future, no matter how
Speaker 1: terrible things are. It's like we're pikers. These kids are
Speaker 1: going to solve all these is that that is what
Speaker 1: keeps me going. It's amazing. I was at I think
Speaker 1: I've told this story before. I was at a wedding
Speaker 1: in Virginia or maybe it's a bar Mitz, but it
Speaker 1: was a family member and the was it the no, no,
Speaker 1: it was a wedding because it was the grooms groomsmen,
Speaker 1: a couple of kids out of I think it was
Speaker 1: U v a UM down in Richmond, and they one
Speaker 1: of them had an iPhone. Okay, that had built into it.
Speaker 1: This sounds idiotic, but it was genius. Had built into
Speaker 1: it a bottle opener, like built into the things take
Speaker 1: your phone and and just pop a bottle. And I said, oh,
Speaker 1: that's hilarious. You know how you guys gonna make that?
Speaker 1: And they look at me like I have two heads, dude.
Speaker 1: We're doing twenty thousand units a month we have manufactured
Speaker 1: in China. These guys are twenty, they're in college. We're
Speaker 1: selling units. What do you charge with this fourteen? What
Speaker 1: does it cost you? I don't know? Eight seven shipping
Speaker 1: is more so when you see kids like that in
Speaker 1: college who was so I don't I don't understand the
Speaker 1: consistent pessimism from people about the world is terrible, America
Speaker 1: is terrible. You you meet some of these kids, that
Speaker 1: changes present. The people can't really relate to this kind
Speaker 1: of stuff, really don't like it, and therefore draw their
Speaker 1: own conclusions. They're not based on anything factual. I mean.
Speaker 1: The problem the problem with all of this, of course,
Speaker 1: is the is the income divide between the people who
Speaker 1: can do what you've just described and the people I've
Speaker 1: been describing, UM and to help. Yeah, there there is
Speaker 1: there is a huge there is a huge problem developing.
Speaker 1: UM well in terms of in terms of income inequality
Speaker 1: or in terms of opportunity inequality. Maybe well it's both. Um.
Speaker 1: Some people will never be able to participate in this
Speaker 1: new world UM given advantages. They just not tech savvy.
Speaker 1: They lack the skill set for that or the interest,
Speaker 1: or they might have the interest, but they're not gonna
Speaker 1: be able to implement. And I, you know, I believe
Speaker 1: that everybody should given a given a chance to so
Speaker 1: I will spend as much money as I can to
Speaker 1: to to try and help that. But you know, you know,
Speaker 1: there are a lot of people in this world and
Speaker 1: not everybody can can start these things. So you know
Speaker 1: that there are real social policy issues about how do
Speaker 1: you how do you fix that? I'm not a social scientist,
Speaker 1: so I don't know, UM, but I don't know. One
Speaker 1: of the reasons that that we have emphasized things like
Speaker 1: fusion energy, solar things like that are because that they
Speaker 1: saved they address the basic problem, which is that unless
Speaker 1: you have cheap electricity or a number of other things
Speaker 1: you don't grow world income. And if you don't grow
Speaker 1: world income, everybody fights over the pie. And if everybody
Speaker 1: fights over the pie, you're gonna have a terrible, a
Speaker 1: terrible world system. UM. So I want to help people
Speaker 1: grow the pie. I would like to help in some
Speaker 1: of this carbon stuff if I can. UM, I'd like
Speaker 1: to give part of the money back. I would like
Speaker 1: to keep some of it um to uh, to give
Speaker 1: everybody the opportunity to participate in that. It is then
Speaker 1: up to government to figure out the rest of it.
Speaker 1: And I see absolutely no movement towards coming up with
Speaker 1: any logical solutions to that. Well, but that's along the
Speaker 1: government discussion. That's easy. That's long arc and eventually government,
Speaker 1: well what I mean by easy is over the next
Speaker 1: ten or twenty years. My guess is that government in competence, incompetency,
Speaker 1: especially partisan incompetency, collapses under its own weight, and eventually,
Speaker 1: eventually we're replaced with I don't think the Republican and
Speaker 1: the Democratic Party are infinite in lifespan and here forever.
Speaker 1: I think these parties are slowly losing, slowly losing um membership,
Speaker 1: and you're gonna end up with more and more people
Speaker 1: as independents, and that's how you end up with somebody
Speaker 1: like Donald Trump, who really are hard to define by
Speaker 1: traditional party politics. Not not a coincidence that what's going
Speaker 1: on today in the Republican party, the appeal is the
Speaker 1: guy who's the least associated with with the party, And
Speaker 1: the same thing is happening on the Democratic side. The
Speaker 1: Bernie Sanders is not a traditional Democrat, and suddenly there's
Speaker 1: all this So you have Trump and Sanders. The appeal
Speaker 1: isn't what they're specific politics are. The appeal is that
Speaker 1: they're not traditional partisan players. I agree, and I agree
Speaker 1: with your conclusion. So I hopefully hope it happens as
Speaker 1: you go through that process or fragment. It's very painful. Yeah,
Speaker 1: that that's gonna So now let me let's talk a
Speaker 1: little politics and and let me force you to stop
Speaker 1: dancing around the carbon issue. You'll never you'll never be
Speaker 1: able to force me to stop. So global warming real,
Speaker 1: I have no idea. Get out of here. Come on,
Speaker 1: how can you say that Because you're a physicist, you're
Speaker 1: investing in film strategy, you're an engineer, you have a
Speaker 1: ton of physics, you understand the scientific process, you know
Speaker 1: when of scientists say something, you don't think that Bible
Speaker 1: warming is a genuine climate change. I think the fact
Speaker 1: that there's so much carbon diox on the atmosphere is
Speaker 1: a really really bad thing. How did it get there?
Speaker 1: How did it get their sun spot? I don't know.
Speaker 1: I don't carbon probably okay, alright, But I don't know
Speaker 1: if it's solely because of that. I I I know
Speaker 1: nothing is solely because of anything. I have friends who
Speaker 1: are on either side of this one, and I read
Speaker 1: it all, and I sit on this m I T
Speaker 1: Energy Initiative Board UM. At m I T. They have
Speaker 1: this guy, Richard Lindson, who is a world acclaimed UM
Speaker 1: climate scientist who doesn't believe it. UM. There are many
Speaker 1: others like he's a he's a very responsible guy, UM,
Speaker 1: and they're responsible on the other side. I don't know.
Speaker 1: I mean, there are plenty of people arguing that you
Speaker 1: know that that matter. All I know is I think
Speaker 1: that I can support you guys who have a solution
Speaker 1: to it. I'd rather waste my brain cycles and energy
Speaker 1: and money on that rather than the debate. The argument
Speaker 1: is just wasted energy. Anyway, You're never got People aren't
Speaker 1: gonna convince each other. By the way, when I say
Speaker 1: I think, when I say I think that burning carbon
Speaker 1: and eating red meat for that matter, contribute to global warming,
Speaker 1: I'm not saying that you shouldn't burn carbon and you
Speaker 1: shouldn't eat red meat. I have too many cars and boats.
Speaker 1: I eat lots of red meat. So I'm not I'm
Speaker 1: not let No, I'm fine. I'm not lecturing people, Hey,
Speaker 1: change your life. But I think it's hypocritical for people
Speaker 1: who know better to say, oh, just because we have
Speaker 1: a cold company and we fund signed research that says
Speaker 1: this has no impact. I'm not. I object to the
Speaker 1: hypocrisy of that. I'm not telling people change your life. Hey,
Speaker 1: you're affecting the world. Let's accept it and move on.
Speaker 1: I like your solution, which is to try and come
Speaker 1: up with a solution rather than digress into the debate too.
Speaker 1: It's all too complicated, and you're never, as you said,
Speaker 1: you will never change people's minds about this because it's
Speaker 1: become a religious fight. Not know, five million people a
Speaker 1: year die from burning wood. I mean, so, what do
Speaker 1: you mean in terms of the or or what we
Speaker 1: see every winter where people take a carosene heat or
Speaker 1: in the fumes. You know, a joke about the garage,
Speaker 1: but learning stuff releases all sorts of noxious fun. That's terrific.
Speaker 1: It's terrific. And so you know, um, the people who
Speaker 1: believe that you should you know, like like so the
Speaker 1: Union of Concerned Scientists which was born about thirty years
Speaker 1: ago and opposial nuclear weapons, right well, an opposition to
Speaker 1: nuclear weapons, but also you know nuclear power plants because
Speaker 1: they were sort of hand in hand. Um. They just
Speaker 1: about two months ago reversed their position and said, you know,
Speaker 1: nuclear energy is the solution because there's no there's no
Speaker 1: carbon dioxide. So you know, if you live long enough,
Speaker 1: you watch all these convoluting everything comes around. Um and uh,
Speaker 1: you know, it depends on what the priority is and
Speaker 1: what the new religious zeal is. UM. So advanced nuclear
Speaker 1: is legitimately back on the table, thank god, and much
Speaker 1: lower radioactive waste product. And no, that's the traditional way
Speaker 1: of doing it. Um and and and so we actually
Speaker 1: another company we helped get started is a nuclear remediation
Speaker 1: It's called Curion ku r I. And what do they do.
Speaker 1: They they they try and vitrify the the waste product
Speaker 1: from nuclear fission plants. And um, that enables you to
Speaker 1: bury it in the store. It We're not all the
Speaker 1: way there yet, but in the process, we we we
Speaker 1: we developed a media that will enable to take caes
Speaker 1: the amount of water and um that radioactive very negative
Speaker 1: and and we came a huge problem with Fukujima. Uh
Speaker 1: so we as a small startup company were the only
Speaker 1: ones who were able to get into Fukushima and help.
Speaker 1: Really and so something that was going to be like
Speaker 1: you know, growing very slowly at first, just grew in size.
Speaker 1: So we've added other capabilities and uh it's fascinating. So
Speaker 1: curium like with a K like madame k you are
Speaker 1: io n C. And so this removes radioactive season um
Speaker 1: from water in order to clean up that's the big
Speaker 1: problem right now. It's not that people are dying and
Speaker 1: all that kind of no, but you you have potentially
Speaker 1: dangerous water. You can't put it into and you can't
Speaker 1: stop it. Water finds its own level and it's really
Speaker 1: a problem. But we, you know, we have been helping
Speaker 1: them fix that problem. And this company is removing radioactive
Speaker 1: season um from water in Japan today today has been
Speaker 1: for three years now. Really, wow, that's fast. It was
Speaker 1: a startup that was met him. You know, three people
Speaker 1: back in and now what's going on there? That's a
Speaker 1: good question. Um, you're an investor in this company, and
Speaker 1: how is it growing? Is it home run? What's the
Speaker 1: exit strategy for a company like that? Um, that's a
Speaker 1: good question. I'll tell you next time we talk. Okay,
Speaker 1: well we'll we'll, We'll have to we'll have to revisit
Speaker 1: that any other VC stuff that's interesting before we move on.
Speaker 1: Probably probably I probably said I've said too much, and
Speaker 1: I've probably caused too many eyes to glaze. All right, No, no,
Speaker 1: I well I can't tell you about other eyes, but
Speaker 1: I glazing over. But I find this sort of stuff,
Speaker 1: this stuff fascinating. There's a show on the Science Channel.
Speaker 1: So my background was applied mathematics and physics until my
Speaker 1: senior year in college. And I figured out that if
Speaker 1: I switched to polyscien philosophy, I can drink beer and
Speaker 1: chase girls and not have double labs for three times
Speaker 1: a week. And so I have enough physics and math
Speaker 1: to be dangerous to my my My, my best friend
Speaker 1: uh as an undergraduate, was a brilliant guy who ended
Speaker 1: up being chairman of the Biomedical Engineering department at Hopkins
Speaker 1: for seventeen years. What worlding now and uh? And he
Speaker 1: helped me get through. You truly helped me get through UH.
Speaker 1: And whenever I would say I was really a very
Speaker 1: mediocre student in M I T he'd say, oh no,
Speaker 1: but when you know later on, when you started taking
Speaker 1: religion and political science, you can help me. You really,
Speaker 1: you really knocked the ball out of the park. And
Speaker 1: I said, I don't think. I don't think that's what
Speaker 1: M I T is. All that comparative religious studies in
Speaker 1: M I not. It was a great It was a great.
Speaker 1: Houston Smith was a professor. He was he was world
Speaker 1: now and I mean I has got great but you know,
Speaker 1: but that was not but it was it was you know.
Speaker 1: But but but I learned so much from going there
Speaker 1: about applying yourself, overcoming obstacles. It's not an easy place,
Speaker 1: but no, no, it's a very competitive place, very competitive,
Speaker 1: which I think is a great preparation for life, to
Speaker 1: say the least. What I was gonna mentioned, there's a
Speaker 1: show on the Science Channel called How the Universe Works,
Speaker 1: and essentially it's really complex astrophysics with great digital graphics.
Speaker 1: So I don't know if that's what the inside of
Speaker 1: a neutron star looks like. But okay, that's close enough.
Speaker 1: It's a little more scientific than industrial light and magic shows.
Speaker 1: You on Star Wars, you know that stuff is is fascinating. So,
Speaker 1: speaking of of saying too much, let's talk a little
Speaker 1: bit about Um, the SEC, and I know this is
Speaker 1: a an area I want to tread lightly. Let me
Speaker 1: let me bring up another guest. I had Mark Cuban
Speaker 1: on some time ago, and well, let's let's let's talk
Speaker 1: about that a little bit. But Mark went off on
Speaker 1: an absolute jihad about the SEC and he talked about
Speaker 1: how they're miss misfocused, misguided on fair. He went off
Speaker 1: and after the conversation was like, are you sure you
Speaker 1: want to say this? He's like, no, we just won
Speaker 1: in court. We're done with them. They they you know,
Speaker 1: they had to put their tail between their legs and
Speaker 1: walk away. Um, you had a not especially pleasant experience
Speaker 1: with the SEC. What do you think about what Mark
Speaker 1: had to say? Um? I know Mark, before Mark made
Speaker 1: his first fortune, we worked together on a private investment
Speaker 1: I made. UM. He's a very smart guy. He's obviously
Speaker 1: where you're outspoken guy, very colorful guy. Um, he was
Speaker 1: managing his own personal money. He didn't have the responsibility
Speaker 1: of managing money for you know, for fiduciaries and have
Speaker 1: a lot of employees and everything. So I obviously I'm
Speaker 1: gonna approach this in a far different way. I did not.
Speaker 1: He has to be less circumspect than than you must,
Speaker 1: for sure. And um I I did one of those
Speaker 1: settlement things with the SEC neither admitting nor denying guilt.
Speaker 1: Um uh. And that was that was that was after
Speaker 1: the case was reopened. People well, like I think they
Speaker 1: walked in and three or O four and it didn't
Speaker 1: get resolved until O nine. It was resolved once where
Speaker 1: they they dropped it and and there was a congressional
Speaker 1: hearing and they actually made their notes available their their
Speaker 1: closing document, which is an internal thing. And I'm told
Speaker 1: by the lawyer's this first time ever. And then it
Speaker 1: got reopened and and and it sort of got reopened
Speaker 1: right when Nate Off happened. So you can you can
Speaker 1: come you can go to you can come to your
Speaker 1: own conclusions. Is to you know, what what what was
Speaker 1: going on? Um the case had to do with Microsoft,
Speaker 1: which is the most um widely followed company in the world.
Speaker 1: Um and uh. You know, there's really not much to
Speaker 1: say about it other than what I said at the time,
Speaker 1: which is, UM, this is too distracting, And that actually
Speaker 1: was a factual statement. It was stremely distracting. There were
Speaker 1: many things I thought I could do with my life.
Speaker 1: I was sixty eight years old. To fight from that
Speaker 1: point I would have taken another three to five years.
Speaker 1: And so if I had one who's going to give money,
Speaker 1: a hedge fund guy who's in his early seventies, it
Speaker 1: was just it was a ludicrous battle to fight, um
Speaker 1: and uh and and I thought, how more interesting things
Speaker 1: to do with my life. And it sounds like you
Speaker 1: certainly have been focusing on a lot. I'm very happy
Speaker 1: about the decision I made. It. It's nothing you like
Speaker 1: to go to your grave with you know UM and
Speaker 1: have your grandkids google UM and find out you know
Speaker 1: UM about But UM. I was convinced at the time
Speaker 1: it was the right decision, and I'm convinced still convinced.
Speaker 1: And it sounds like you have not, um lost a
Speaker 1: step in terms of what you're focusing on after that.
Speaker 1: Success in life is just keep moving forward, moving forward,
Speaker 1: moving forward, like a shark. If you stop swimming. It's well.
Speaker 1: I client for my fifty ninth birthday, I claimed coleman
Speaker 1: Jaro and really yeah, and the locals have this expression pole,
Speaker 1: which means slow, slow, slow, slow, one foot in front
Speaker 1: of the other and keep moving forward. Count So you're
Speaker 1: still in the upper upper reaches of that. There's still elevation,
Speaker 1: sickness and terrible way weather. I know Everest is twenty
Speaker 1: six something. That's supposed that's a technical claim, right, people,
Speaker 1: Supposedly the last five thousand feet of that are are
Speaker 1: hallucinating and what's terrible? Yeah, no, I didn't want to
Speaker 1: be miserable, but this, this was this was not quite miserable.
Speaker 1: But how long did it take to this is news
Speaker 1: to me. By the way, this doesn't show up in
Speaker 1: any of our research about you. Um, how long did
Speaker 1: it take to get to the top of how long
Speaker 1: there are? We prepped for six months? But really that's amazing. Yeah,
Speaker 1: it wasn't strenuous prepping, but it was trapping. But there
Speaker 1: are two days ago. You can go and I've forgotten
Speaker 1: the names of the trails. You can go straight up
Speaker 1: the spine of the mountain. You can loop around, you
Speaker 1: can Yeah, which way did you the ladder because at
Speaker 1: nine I wanted to acclimate as slowly as possible. How
Speaker 1: long did it take to get to the top three days?
Speaker 1: Three days and then back down? Well that's the interesting thing.
Speaker 1: But the last day you wake up at ten eleven
Speaker 1: at night. I can't remember exactly when, because you want
Speaker 1: to walk up the glacial rain while it's frozen so
Speaker 1: you don't slide back. You get to the peak at
Speaker 1: six thirty in the morning when the sun's just spectacular
Speaker 1: you then you go back down to the camp that
Speaker 1: you just straight down or it's you have a hard
Speaker 1: time lifting your legs at this point, I mean, the
Speaker 1: quads are just a um and uh. So you stop
Speaker 1: at fifteen thousand feet where you were the night before,
Speaker 1: you sleep for two hours, and then you go down
Speaker 1: to twelve or ten I can't remember, just to acclimate
Speaker 1: the pressure, to get it all over with um and
Speaker 1: and uh. It's an exhilaration to believe you can do that.
Speaker 1: You're looking down on the clouds. It's uh, you know.
Speaker 1: But being being a hedge fun guy, I of course
Speaker 1: had my satellite phone and at the top of the
Speaker 1: mountain I had a call in to get quotes you
Speaker 1: were trading. From the top of it. I didn't. I
Speaker 1: didn't trust my judgment off but but I certainly wanted
Speaker 1: to be in touch. Well, you had enough of your
Speaker 1: wits about you to know that you were not to
Speaker 1: be trust trust. I had a friend who once went
Speaker 1: to Africa for two weeks, came back and the crash
Speaker 1: of eighty seven had occurred, and he knew nothing about
Speaker 1: it during the whole really, and that that memory stayed
Speaker 1: with me. It's like, you cannot you cannot do what
Speaker 1: I do and be removed from the world for the
Speaker 1: missed the You know. My one of my favorite eighty
Speaker 1: seven stories is David Rosenberg's first day of work. He
Speaker 1: had been a government economist and he went to work
Speaker 1: for not Mary Lynch. Was the job before that? His
Speaker 1: first day in the job was nice. Was the black Monday?
Speaker 1: Is that right? Yeah? That was the first day. You
Speaker 1: guys talked about autism by five. So this guy is
Speaker 1: running a hedge fund. He goes to Africa in he
Speaker 1: he didn't have a hedge funt. He's running money. He
Speaker 1: goes in October and he comes back and what the
Speaker 1: hell happen? And he calls from the airport and I
Speaker 1: Robi and they tell him and where the markets are
Speaker 1: and don't don't joke with me, right, this is too serious.
Speaker 1: This is where things are. Yeah, the flash crash in
Speaker 1: two thousand ten, I took off from I think it
Speaker 1: was Dallas at like nine in the morning, New York time,
Speaker 1: and this was there was no WiFi on the flight
Speaker 1: because it was a short flight, and I land in
Speaker 1: maybe a Chicago and land in in uh Laguardi, and
Speaker 1: it was what the hell happened? Is? Wait, we're down
Speaker 1: a thousand points and now we're only down what like
Speaker 1: I'm like, soun's wrong with I called somebody, Son's wrong
Speaker 1: my phone? It's shown, No, you don't stand It was
Speaker 1: two thirty two three. Just just absolutely insane. All right.
Speaker 1: So let's um, let's get to some of my favorite questions.
Speaker 1: I know you, Um, you have to have other places
Speaker 1: to go, that's right. UM. So who are your early mentors?
Speaker 1: Who who really uh put the love of investing and
Speaker 1: and both technology venture investing and asset management into you? Um?
Speaker 1: Good question. UM, I mean we're talking to ancient history now. UM.
Speaker 1: I got out of Columbia and UH interviewed around and
Speaker 1: I interviewed a Kidder. So what you mentioned was the
Speaker 1: first job. There was a guy at Kidder at the time,
Speaker 1: Tom Folder, who was an M I. T. Graand UM,
Speaker 1: who was director of research. He had hired about six
Speaker 1: months earlier, guy Bob Johnson to follow computers M I T.
Speaker 1: Harvard Business School. Uh. And he hired me and we
Speaker 1: formed the first sort of group group. Um. It was
Speaker 1: unheard of back in sixty seven, sixty sixty nine. UM.
Speaker 1: And that that that was a kick. So you know,
Speaker 1: if I had gotten you recruited to follow the energy industry,
Speaker 1: I probably would have become a deep value energy buyers.
Speaker 1: I don't know, but I got in with these guys
Speaker 1: who who had a similar mindset, similar approach um. Uh.
Speaker 1: And so I would say that that that influenced me.
Speaker 1: And then I, uh, I've always worked for a smaller firm.
Speaker 1: You are what you are. So you know, my first
Speaker 1: job out of college was Lockheed, which not exactly a
Speaker 1: small phone, exactly a small firm. Then then then I
Speaker 1: go down to Wall Street, uh, and I joined Kidder,
Speaker 1: which was a substantial firm at that time. And Kidder
Speaker 1: eventually became whatever or Dean Winder. No, No, didn't didn't
Speaker 1: buy it. I don't remember. I think Gee bought it
Speaker 1: and then hold it UM. But it disappeared. It was
Speaker 1: a great firm, but it disappeared. UM. I went from
Speaker 1: kidder uh to a small a small firm by the
Speaker 1: name of Lombard by Tallis Pagan, Ducy and Nelson, which
Speaker 1: doesn't appear in any of bio stuff any longer. Was
Speaker 1: there for for all of one year, and the wise
Speaker 1: peg were was starting up a complete startup. That's a
Speaker 1: that's now a decent sized farm. They sold out to
Speaker 1: a Dutch bank, but um, I was the first. I
Speaker 1: was the first higher after the partners opened the doors.
Speaker 1: UM stay there for fifteen years, managed firm capital, had
Speaker 1: a pretty good record UM for five years, and went
Speaker 1: out and started the funds. So the investing part of
Speaker 1: it was, you know, a combination of my first job
Speaker 1: and then the venture experience at weiss Peck and managing money.
Speaker 1: And I learned a lot about money management and cycles
Speaker 1: and money management, and I learned a lot UM and
Speaker 1: I learned a lot by managing partners Capital and anybody
Speaker 1: standing out at WISPEC as all my uh. I don't
Speaker 1: know if you'd say mentor but but influence influence. So
Speaker 1: Byron Ween was and and Byron has been an investor,
Speaker 1: and I was an investor when I had funds. UM
Speaker 1: from the very beginning we had offices next to each other.
Speaker 1: Um eventually came to work for Peaquad as the chief
Speaker 1: strategist when he left Morgan Stanley's now with of course
Speaker 1: at Blackstone UM. So Byron was one of them. There's
Speaker 1: unfortunately a fellow just passed away. But then Mickey Straus,
Speaker 1: who who I worked with there, So it was really
Speaker 1: more my colleagues than it was you know, and and
Speaker 1: sometimes you learn as much from colleagues as you do
Speaker 1: from Biman was on the show. He's now in his
Speaker 1: early eight he still maintains a relentless travel schedule. I
Speaker 1: think he's crazy. He flies to China all the time.
Speaker 1: He's like, I know people my age and younger who
Speaker 1: are like, oh, I can't travel that much. He's on
Speaker 1: the road a week or two a month. Like he's
Speaker 1: twenty six right out of school. I don't think he's
Speaker 1: like twenty six out of school, but he's uh but yeah, no,
Speaker 1: he's he's an amazing He's a warrior. He's a warrior.
Speaker 1: He's eighty's something. He's a warrior. There's another guy who
Speaker 1: just loves what he does and nothing's going to stop him.
Speaker 1: And we're stiver close. I'm gonna ask about a book
Speaker 1: that I suspect you've read, and if you haven't, I'm
Speaker 1: going to recommend it. James Glicks The Information not the
Speaker 1: History of Information and Theory and and that put that
Speaker 1: right on the top of your list because you read
Speaker 1: enough interesting, eclectic stuff about both history and science. This
Speaker 1: he's a brilliant writer. He's done the book Chaos about
Speaker 1: chaos theory. That's him and this book is this should
Speaker 1: have won the Pulitz or if it didn't, it may have.
Speaker 1: Just a brilliant If you like that sort of stuff,
Speaker 1: suspect you do, you're gonna you're gonna find that that fascinating.
Speaker 1: So so let's talk a little bit about what's changed
Speaker 1: during in the industry over the course of your career.
Speaker 1: What do you think, whether it's venture capital or traditional investing,
Speaker 1: everything everything, what's what's the more? When you know I
Speaker 1: came down to Wall Street in seven and um, you
Speaker 1: know there was the Lost generation. Nobody came down to
Speaker 1: Wall Street in the thirties, forties to two people started.
Speaker 1: You know, so is that luck or is that I followed?
Speaker 1: What what what I thought my passion was. I don't know.
Speaker 1: I mean, I guess there's an element of luck to it.
Speaker 1: But so I got there at the beginning of the cycle,
Speaker 1: beginning of the bear market. It was also the beginning
Speaker 1: of market. Yeah. So there was a bear market, as
Speaker 1: you know, from seventies seventy one to eighty three. Um.
Speaker 1: And uh, the time period I like to use is
Speaker 1: the Dow kissed the thousand in nineteen sixty eight. It
Speaker 1: did not eclipse that in nineteen sixty six until eighty two.
Speaker 1: So it's a full sixteen years and those are my
Speaker 1: formative years. So now you know, you come in, the
Speaker 1: FED keeps interustrates at zero assets getting fled to go
Speaker 1: up though, doesn't it. But a lot of people come
Speaker 1: in and you know what one of my mentor there
Speaker 1: was a mentor um that I forgot to mention, but said,
Speaker 1: you know, I had the expression, which others have had,
Speaker 1: don't confuse brains with the market. Um. I really believe that.
Speaker 1: But you know so, um, but back then, UM, you
Speaker 1: didn't just come into the market, and you know, the
Speaker 1: averages went up because the government decided they should go
Speaker 1: up or whatever is going on right now. Um, back
Speaker 1: then you had fifteen years of nothing and you had
Speaker 1: to survive. And that's that's nominal in real inflation, it
Speaker 1: was a big loser. Inflation was high, of course, so
Speaker 1: you know, um that that was my baptism. Um, well,
Speaker 1: what was it like in the early seventies? What what sucked?
Speaker 1: It sucked? That's that's an understatement. Obviously, the bond side
Speaker 1: was paying huge, yes, huge again nominal yields. But on
Speaker 1: the equity side, who's buying stocks? There weren't that many.
Speaker 1: But you know, and that was all I did. I mean,
Speaker 1: you know, I've never met a bond I like, um,
Speaker 1: which is not true, but um, but you can put
Speaker 1: well if I haven't, you know, I knew the play.
Speaker 1: You know, when the rates were up, you know, at
Speaker 1: the end of that period, and you know, we've had
Speaker 1: the biggest bond bullmarket ever from two to You could
Speaker 1: have bought zero coupons and paid no interest and made
Speaker 1: a fortune, but um, you know, but I didn't do that,
Speaker 1: So I stuck with the stock thing. Um, And you
Speaker 1: know that that's worked out. It's worked out enormously well.
Speaker 1: But it also means that I was a late bloomer
Speaker 1: because you know, I put in seventeen years before I
Speaker 1: started getting really paid back for credit ship. I paid
Speaker 1: my dues. But I did it. When I did it,
Speaker 1: I did it because I loved it. And now I
Speaker 1: think people come in because they think you're gonna get rich. Well,
Speaker 1: that's always the wrong way to yeah, right, If you're
Speaker 1: doing it for the money, then everything that's not putting
Speaker 1: money in your pocket is a misery. Right. If you're
Speaker 1: doing it because you love it, Well, I'm not making money,
Speaker 1: but I'm having fun. So you know, I like, I
Speaker 1: like I like obviously I like engineering enough, you know,
Speaker 1: but I like the discipline of it, in the logic
Speaker 1: of it. Um. But when you added to that the
Speaker 1: market and the uncertainty and the ability to try and
Speaker 1: outcuss other people along with data, um, that became really exciting. Um.
Speaker 1: It wasn't. It wasn't because I you know, my dad
Speaker 1: wasn't eluctrician, and I wanted to become a billionaire or something,
Speaker 1: and there was a farthest thing from my mind. It
Speaker 1: was just it just happened. It happened, truly, just happened
Speaker 1: one of the one of those things. So maybe you
Speaker 1: said before, I don't really think about a lot about luck.
Speaker 1: How much of what happened was just serendipitous word. Yeah, No,
Speaker 1: that that I agree with. All right, So you're slicing
Speaker 1: the luck factor a little more right place, right time,
Speaker 1: and no doubt. Okay, So so there's an element of
Speaker 1: luck to that. True. No, that part is luck, I agree.
Speaker 1: But individual things I did or whatever, and that was
Speaker 1: a combination I believe I created that. That's a combination
Speaker 1: of smarts and hard work and an application. So. Um,
Speaker 1: so we know lots and lots of stuff has changed
Speaker 1: in the past. What are some of the next shifts
Speaker 1: that you see in these industries? From your vantage point
Speaker 1: looking at technology and looking at the rate of change
Speaker 1: which just seems to keep accelerating. Yeah, I think you're
Speaker 1: in this fascinating Um. I mean one of the reasons
Speaker 1: I drifted to venture capital is because um um uh
Speaker 1: markets of the economy is is matured. Um we have right,
Speaker 1: so we have huge amounts of social security UM, pension funds,
Speaker 1: UH savings plans, uh iras four O one foundations, trust
Speaker 1: and and anybody is that we're just a washing liquidity
Speaker 1: um and so it's got a go someplace. So um,
Speaker 1: it needs a big engine solution to how do you
Speaker 1: intelligently manage all these assets plus corporations um uh In
Speaker 1: the US at least, um. The one good thing about
Speaker 1: activism and all the other stuff is it's formed forced
Speaker 1: productivity that keep increasing in the United States, which has
Speaker 1: not been happening in the rest of the world. Even
Speaker 1: though the measures of productivity in the US or are
Speaker 1: softer than a lot of people say that problem or
Speaker 1: do we still have good productivity? Yet? I think we
Speaker 1: have good productivity. I think the economy is changing rapidly.
Speaker 1: And the productivity in the areas that generate growth, I
Speaker 1: think the productivity is good. And then and then in
Speaker 1: the areas that don't produce growth, capital is being returned um.
Speaker 1: So so the capital part is more productive. So there
Speaker 1: where washing liquidity um and uh. There's no worldwide, there's
Speaker 1: not a lot of growth in the US. The growth
Speaker 1: is obviously much slower than it used to be. So
Speaker 1: somebody has to manage all of that money. And you're
Speaker 1: not going to manage it by giving it to a
Speaker 1: guy like May back thirty years ago, who's going to
Speaker 1: buy market capps under two hundred millions? So you know,
Speaker 1: you go to you know, Ray Dally has got a
Speaker 1: you know, a great engine, and other people have great engines.
Speaker 1: So you go to these algorithmic kind of things that
Speaker 1: that are more formulaic than than what I ever used
Speaker 1: to do. UM. So you know, when you say what's
Speaker 1: going to go on in the future, I think that
Speaker 1: those trends are going to continue. I think this this,
Speaker 1: this UM, this innovation that we're seeing is um is
Speaker 1: there's no stopping it. And Ure's notion. And what does
Speaker 1: that mean in terms of of US growth, the change
Speaker 1: of technology and for the rest of the world economy. UM.
Speaker 1: I think it means, UM, don't bet against it. Well,
Speaker 1: for sure, you don't bet against it, and you should
Speaker 1: bet with it. And they're gonna be superior returns for
Speaker 1: people who fully understand it. UM. Right now, it's uh,
Speaker 1: the jealous or the envy factors has worked in and
Speaker 1: so you're seeing all these comments on the unicorns and
Speaker 1: all that kind of stuff. You know, tem per cent
Speaker 1: of the unicorns will work, but they'll be monster companies
Speaker 1: and and and I think that's the wrong focus. These trends.
Speaker 1: There is no there, there there, there's there's no changing
Speaker 1: these trends. Um so that the amount of accority in
Speaker 1: the system is going to continue increase, the amount of
Speaker 1: growth is gonna diminish. The growth is gonna shift from
Speaker 1: old ways of doing things in new ways of doing things. Uh.
Speaker 1: And there's huge opportunities for me um in what I
Speaker 1: now do. God knows if there would be any opportunities
Speaker 1: and what I used to do. Okay, so we're running
Speaker 1: out of time. Let me get to the last two questions.
Speaker 1: These are my my favorite questions. First, what sort of
Speaker 1: advice would you give to a millennial or a college
Speaker 1: graduate today if they were interested in going into either
Speaker 1: at some management or a venture capital Get a job, really, yeah,
Speaker 1: just just find some related job and get some get
Speaker 1: a job in an industry. I would not come into
Speaker 1: this industry fresh out. I didn't. I went and work
Speaker 1: in the aerospace industry for three years. So get some
Speaker 1: other sort of experience and then use that. And then
Speaker 1: last question, what do you know about the world of
Speaker 1: investing today that you wish you knew when you began
Speaker 1: forty years ago? Oh? Well, that's I knew nothing forty
Speaker 1: years ago. I mean I was, you know, was I was.
Speaker 1: I was a wet behind the years, ex college student
Speaker 1: aeronautical engineer, gotten a car pool with Cavelly and Cooperman,
Speaker 1: got fascinated by markets, which I had been a little
Speaker 1: bit interested in before, but I didn't know diad lely. Um,
Speaker 1: so everything everything you know today? Everything all right? Thank
Speaker 1: you so much for being so interest with your time.
Speaker 1: This has really been a fascinating conversation, UM, and I
Speaker 1: really appreciate UM you're spending so much time with I
Speaker 1: appreciate the opportunity to tell the story. You've been listening
Speaker 1: to Masters in Business. I want to thank our our
Speaker 1: engineer Can, my producer Charlie, and my head of research
Speaker 1: Mike bat Nick. If you enjoy this conversation, look up
Speaker 1: an Inch or down an Inch on iTunes and you
Speaker 1: could see the other sixty such conversations we've had. Be
Speaker 1: sure and check out my daily column on Bloomberg View
Speaker 1: dot com or The Big Picture at Dholtz dot com.
Speaker 1: Follow me on Twitter at rid Holts. I'm Barry Hults.
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio