WEBVTT - Capital Allocators Founder on CIO Philosophies

0:00:00.160 --> 0:00:04.160
<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Bloomberg

0:00:04.240 --> 0:00:08.360
<v Speaker 1>Quick Takes. Tim Stinovic from Bloomberg Radio joining us as

0:00:08.440 --> 0:00:12.480
<v Speaker 1>Ted Saide's. He's founder imaging partner of Capital Allocators, author

0:00:12.520 --> 0:00:15.000
<v Speaker 1>of a new book entitled Capital Allocators, How the World

0:00:15.080 --> 0:00:18.520
<v Speaker 1>Delete money, Managers, lead and invest and he joins us

0:00:18.680 --> 0:00:21.239
<v Speaker 1>on the phone in Greenwich, Connecticut. Ted, nice to have

0:00:21.239 --> 0:00:24.599
<v Speaker 1>you here on Bloomberg. Oh, thanks so much for having

0:00:24.640 --> 0:00:27.040
<v Speaker 1>me Carol. Well listen, and you're also host of the

0:00:27.120 --> 0:00:29.960
<v Speaker 1>Capital Allocators podcast. You talk to some of the world's

0:00:30.000 --> 0:00:34.320
<v Speaker 1>top professional investors. Um, before we get into the conversations

0:00:34.320 --> 0:00:36.360
<v Speaker 1>you've had in the book, how are you. What's the

0:00:36.360 --> 0:00:40.480
<v Speaker 1>past year been like for you? You know, it's hard

0:00:40.520 --> 0:00:43.479
<v Speaker 1>to stay given what's happened, but honestly, it's been one

0:00:43.520 --> 0:00:47.400
<v Speaker 1>of the best years of my life. Why. Well, it's

0:00:47.400 --> 0:00:50.640
<v Speaker 1>a combination of things on the professional side, the podcast.

0:00:50.720 --> 0:00:54.040
<v Speaker 1>As it turns out, right, this medium can grow and

0:00:54.080 --> 0:00:56.840
<v Speaker 1>continue in an environment like this, So I've been able

0:00:56.880 --> 0:00:59.880
<v Speaker 1>to focus. It's been easier to get access to some

0:01:00.040 --> 0:01:01.840
<v Speaker 1>the people that I get a chance to talk to

0:01:02.040 --> 0:01:06.000
<v Speaker 1>because their scheduled their travel schedules are down and the

0:01:06.080 --> 0:01:09.600
<v Speaker 1>engagement with the content we've been putting out has just grown.

0:01:09.640 --> 0:01:13.640
<v Speaker 1>That grew over last year in terms of downloads, So

0:01:13.720 --> 0:01:15.760
<v Speaker 1>that's been great. On the personal side, I got married

0:01:15.840 --> 0:01:18.720
<v Speaker 1>last year. That's the love of my life, and things

0:01:18.720 --> 0:01:22.000
<v Speaker 1>have been great. Congratulations. Wow, like kidding, get out of

0:01:22.000 --> 0:01:25.400
<v Speaker 1>the park. That is incredible. Um. You know, it's funny

0:01:25.440 --> 0:01:26.920
<v Speaker 1>that you say that about access to people, because I

0:01:26.920 --> 0:01:29.760
<v Speaker 1>think that's something we realized too, that everybody once you

0:01:29.880 --> 0:01:34.360
<v Speaker 1>realized it was kind of okay to talk. Uh, everybody

0:01:34.680 --> 0:01:37.280
<v Speaker 1>was home and in the same situation. And you're right,

0:01:37.319 --> 0:01:40.400
<v Speaker 1>we had like access to people too that we hadn't before.

0:01:40.520 --> 0:01:44.280
<v Speaker 1>So it's interesting that that that was your experience as well.

0:01:44.600 --> 0:01:49.200
<v Speaker 1>Let's talk about um, your book and capital allocators, because

0:01:49.200 --> 0:01:51.160
<v Speaker 1>I do think we're in an interesting time where we're

0:01:51.160 --> 0:01:56.040
<v Speaker 1>watching a lot of investment trends. We're watching this back explosion,

0:01:56.160 --> 0:02:00.080
<v Speaker 1>the Reddit revolution, We're watching crypto bitcoin values continuing to

0:02:00.120 --> 0:02:03.440
<v Speaker 1>grow and actually go more mainstream. Um, how do you

0:02:03.440 --> 0:02:04.840
<v Speaker 1>see it? What are some of the things that you

0:02:04.920 --> 0:02:10.040
<v Speaker 1>find interesting, what's worrisome? What screams opportunity to you? Sure? Well,

0:02:10.120 --> 0:02:12.240
<v Speaker 1>you know the people that I talked to regularly in

0:02:12.280 --> 0:02:15.040
<v Speaker 1>the world, I came from are really these asset owners,

0:02:15.160 --> 0:02:19.480
<v Speaker 1>these long duration, long term pools of capital, and not

0:02:19.600 --> 0:02:23.160
<v Speaker 1>a lot changes in the way they go about investing

0:02:23.280 --> 0:02:25.959
<v Speaker 1>day to day or week to week. So there are

0:02:26.000 --> 0:02:28.519
<v Speaker 1>always a few key trends that come into play and

0:02:28.880 --> 0:02:32.600
<v Speaker 1>come in and out of their idea generation. But for

0:02:32.639 --> 0:02:37.480
<v Speaker 1>the most part, what they're finding um is that generally speaking,

0:02:37.480 --> 0:02:41.679
<v Speaker 1>capital markets look expensive and they all have spending obligations

0:02:41.720 --> 0:02:44.000
<v Speaker 1>they need to meet, call it, you know, five for

0:02:44.040 --> 0:02:46.160
<v Speaker 1>a foundation or a little bit more for pension fund.

0:02:46.400 --> 0:02:48.880
<v Speaker 1>So they're really scratching their heads and saying, how are

0:02:48.880 --> 0:02:51.320
<v Speaker 1>we going to meet these long term objectives given that

0:02:51.400 --> 0:02:55.080
<v Speaker 1>the easy ways of accessing, say you know, index funds

0:02:55.160 --> 0:02:57.120
<v Speaker 1>or things like that, just don't look like they're priced

0:02:57.200 --> 0:03:00.839
<v Speaker 1>to reach these long term return objectives. Okay, So then

0:03:00.919 --> 0:03:03.679
<v Speaker 1>having said that, when you look at some of them more,

0:03:03.880 --> 0:03:07.040
<v Speaker 1>maybe you know other areas to go. Whether it's crypto,

0:03:07.200 --> 0:03:12.360
<v Speaker 1>I mean you like crypto, correct the crypto do I

0:03:12.440 --> 0:03:15.560
<v Speaker 1>like it for a particular reason, which is we are

0:03:15.600 --> 0:03:19.840
<v Speaker 1>in this world of fiat money debasement, and all of

0:03:19.880 --> 0:03:22.600
<v Speaker 1>the risk assets, whether you like stocks or bonds, or

0:03:22.760 --> 0:03:25.960
<v Speaker 1>venture capital or private equity, they're all sort of predicated

0:03:25.960 --> 0:03:29.959
<v Speaker 1>on dollar based instruments, and so crypto is this kind

0:03:30.000 --> 0:03:34.480
<v Speaker 1>of asymmetric option for the potential of digital gold uh

0:03:34.520 --> 0:03:37.560
<v Speaker 1>and bitcoin in particular. So you have a combination of

0:03:37.720 --> 0:03:40.520
<v Speaker 1>the thought of something that may be very important ten

0:03:40.600 --> 0:03:44.480
<v Speaker 1>years from now in terms of maintaining your store of value,

0:03:44.720 --> 0:03:46.320
<v Speaker 1>and then you have attached to that sort of the

0:03:46.400 --> 0:03:49.360
<v Speaker 1>venture capital thesis, which is if you look at where

0:03:49.360 --> 0:03:51.760
<v Speaker 1>all the talent is going of these young people coming

0:03:51.760 --> 0:03:54.640
<v Speaker 1>out of school, all these engineers, something like twenty or

0:03:54.640 --> 0:03:58.040
<v Speaker 1>twenty of them um and this according to Christic said

0:03:58.040 --> 0:03:59.880
<v Speaker 1>that Andrews and Horowist, who I had on the show,

0:04:00.400 --> 0:04:03.280
<v Speaker 1>you said something like them, they're all going to build

0:04:03.280 --> 0:04:06.640
<v Speaker 1>blockchain technologies. And when all the talents that's what Silicon

0:04:06.720 --> 0:04:09.000
<v Speaker 1>Valley does. When the talent moves in a certain direction,

0:04:09.360 --> 0:04:11.480
<v Speaker 1>they go and look to access it. And so you

0:04:11.520 --> 0:04:14.000
<v Speaker 1>put those two things together, and I have a small

0:04:14.000 --> 0:04:17.799
<v Speaker 1>percentage of my personal portfolio invested in crypto in particular.

0:04:18.040 --> 0:04:20.240
<v Speaker 1>I'm taking baby steps. So for me, it's just bitcoin

0:04:20.320 --> 0:04:22.440
<v Speaker 1>and ethereum at this point in time. Hey, Ted, one

0:04:22.480 --> 0:04:23.960
<v Speaker 1>thing I want to ask you, and we just did

0:04:23.960 --> 0:04:26.920
<v Speaker 1>a story Charlie and I um for some of our

0:04:26.920 --> 0:04:29.480
<v Speaker 1>audience and it's about E s G and it's an

0:04:29.480 --> 0:04:32.719
<v Speaker 1>opinion column here at Bloomberg. But it's just there is

0:04:32.760 --> 0:04:36.240
<v Speaker 1>a feeling that because there's so much money flowing into

0:04:36.240 --> 0:04:38.520
<v Speaker 1>the E s G space, it's where investors, a lot

0:04:38.520 --> 0:04:42.280
<v Speaker 1>of institutional investors are increasingly looking to commit new money

0:04:42.320 --> 0:04:46.480
<v Speaker 1>that a lot of you know, uh, investment houses are

0:04:46.520 --> 0:04:48.560
<v Speaker 1>fund offerings, are just kind of slapping an E s

0:04:48.640 --> 0:04:50.839
<v Speaker 1>G label on it. What do you think about I

0:04:50.880 --> 0:04:53.080
<v Speaker 1>know you like the E s G space and that

0:04:53.160 --> 0:04:56.440
<v Speaker 1>you are following it. How do you you know, how

0:04:56.440 --> 0:05:00.960
<v Speaker 1>do we make it purer and more true? Yeah, well,

0:05:01.680 --> 0:05:04.120
<v Speaker 1>I think you have to start with that perspective. If

0:05:04.160 --> 0:05:07.400
<v Speaker 1>you look backwards, as this sort of research study showed,

0:05:07.480 --> 0:05:09.920
<v Speaker 1>there will be a lot of that. And the reason is,

0:05:10.120 --> 0:05:12.880
<v Speaker 1>as one of my guests, James Aitken had said, there's

0:05:12.920 --> 0:05:16.120
<v Speaker 1>a tsunami's capital coming into this space for all the

0:05:16.200 --> 0:05:19.960
<v Speaker 1>right reasons. And so, really starting with Greta Thunberg a

0:05:20.040 --> 0:05:23.560
<v Speaker 1>year and a half ago, her her description of what

0:05:23.640 --> 0:05:27.280
<v Speaker 1>was happening Davos just before COVID, every description was about

0:05:27.320 --> 0:05:30.800
<v Speaker 1>climate change. We know that this is really important and

0:05:30.839 --> 0:05:33.760
<v Speaker 1>it will be a very strong secular change in how

0:05:33.800 --> 0:05:38.479
<v Speaker 1>capital gets allocated worldwide. Now, as soon as money starts flowing,

0:05:38.760 --> 0:05:41.880
<v Speaker 1>it's not that surprising that people trying to capture their

0:05:41.920 --> 0:05:44.320
<v Speaker 1>share of it will do, you know, what you call greenwashing.

0:05:44.600 --> 0:05:47.240
<v Speaker 1>But let's not be too short term about that. If

0:05:47.279 --> 0:05:49.680
<v Speaker 1>you look over time, the first thing is we now

0:05:49.720 --> 0:05:52.440
<v Speaker 1>had interest. We have interest in doing things that are

0:05:52.480 --> 0:05:56.279
<v Speaker 1>better for the environment. We have interest in promoting more

0:05:56.360 --> 0:06:00.719
<v Speaker 1>socially diverse people throughout the economy, all of which is

0:06:00.720 --> 0:06:03.919
<v Speaker 1>good for the long term. Now, as that happens, we

0:06:03.960 --> 0:06:07.400
<v Speaker 1>need definitions. We need to understand in the capital markets

0:06:07.400 --> 0:06:10.120
<v Speaker 1>and public markets, we need benchmarks. And if you look

0:06:10.200 --> 0:06:12.960
<v Speaker 1>at the different benchmarks, nobody really knows yet what is

0:06:13.000 --> 0:06:15.960
<v Speaker 1>a good company what is a bad company, And that

0:06:16.040 --> 0:06:18.640
<v Speaker 1>will get worked out, but it does take time. And

0:06:18.640 --> 0:06:21.080
<v Speaker 1>in that process, I'm not that surprised that you have

0:06:21.200 --> 0:06:23.760
<v Speaker 1>products that want to say they have in the s

0:06:23.800 --> 0:06:25.760
<v Speaker 1>G lens for the first time, and maybe they do

0:06:25.800 --> 0:06:28.880
<v Speaker 1>and maybe they don't. But over time, I think we'll

0:06:28.920 --> 0:06:33.279
<v Speaker 1>see the stronger companies that have the those trends and

0:06:33.360 --> 0:06:36.240
<v Speaker 1>doing the right things for a broader constituency than just

0:06:36.440 --> 0:06:40.039
<v Speaker 1>the shareholder will be the winners over time. And you

0:06:40.080 --> 0:06:44.120
<v Speaker 1>know that will play out as capital markets do. Until then, Yeah,

0:06:44.120 --> 0:06:46.200
<v Speaker 1>there'll be a little bit of a mess along the way, okay,

0:06:46.240 --> 0:06:49.279
<v Speaker 1>but ultimately, like the long game is that we get

0:06:49.320 --> 0:06:53.359
<v Speaker 1>to a better point. Yeah, I think so. Hey, listen

0:06:53.400 --> 0:06:56.000
<v Speaker 1>your book, your podcast, your approach. There's a lot of

0:06:56.080 --> 0:06:59.159
<v Speaker 1>useful information. Informative. It's you know, really on how the

0:06:59.160 --> 0:07:02.599
<v Speaker 1>best invest. It's very instructional. I think you even in

0:07:03.000 --> 0:07:06.760
<v Speaker 1>maybe the forward call it a textbook. Um, you talk

0:07:06.839 --> 0:07:09.400
<v Speaker 1>with the best. Are there common threads among the best

0:07:09.440 --> 0:07:12.560
<v Speaker 1>capital allocators and elite money managers and how they lead

0:07:12.600 --> 0:07:16.960
<v Speaker 1>and how they invest? There really are, And you could

0:07:17.000 --> 0:07:19.720
<v Speaker 1>really break it down into two sets of disciplines, one

0:07:19.800 --> 0:07:22.840
<v Speaker 1>or the investment related and then the other the leadership related.

0:07:23.280 --> 0:07:26.120
<v Speaker 1>So if you start with the ladder, the investment industry

0:07:26.200 --> 0:07:29.560
<v Speaker 1>is known for managing money well, not for managing people well.

0:07:30.280 --> 0:07:32.360
<v Speaker 1>And one of the things I've had the benefit of

0:07:32.400 --> 0:07:35.400
<v Speaker 1>doing on the podcast is interview people from other disciplines

0:07:35.720 --> 0:07:40.120
<v Speaker 1>who are talented at leadership and management and things like

0:07:40.200 --> 0:07:42.920
<v Speaker 1>decision making. Annie Duke the Great, the great form of

0:07:42.920 --> 0:07:47.000
<v Speaker 1>poker player, and so the great c I O S

0:07:47.200 --> 0:07:51.280
<v Speaker 1>are really like Baseball's five tool players. They really understand

0:07:51.280 --> 0:07:53.440
<v Speaker 1>all of these different disciplines, And what I tried to

0:07:53.440 --> 0:07:55.560
<v Speaker 1>do in that section of the book is describe some

0:07:55.640 --> 0:07:57.520
<v Speaker 1>of the basics, like how do you do this well?

0:07:58.200 --> 0:08:00.400
<v Speaker 1>Then you turn to the investment side. And you know,

0:08:00.440 --> 0:08:02.680
<v Speaker 1>I was very fortunate to learn in the formative part

0:08:02.680 --> 0:08:05.400
<v Speaker 1>of my career from David Swinton, who is sort of

0:08:05.440 --> 0:08:07.559
<v Speaker 1>the dean of this and wrote the seminal book twenty

0:08:07.640 --> 0:08:11.560
<v Speaker 1>years ago. Um, And it does start with really an

0:08:11.640 --> 0:08:14.080
<v Speaker 1>understanding of what's the purpose of the capital, what is

0:08:14.120 --> 0:08:17.840
<v Speaker 1>the time horizon, what beliefs about investing the people bring in?

0:08:18.160 --> 0:08:20.600
<v Speaker 1>And then the discipline process that I walked through in

0:08:20.600 --> 0:08:23.280
<v Speaker 1>the book of how did these people find their investment ideas,

0:08:23.320 --> 0:08:26.240
<v Speaker 1>how do they do their research, how do they make decisions?

0:08:26.280 --> 0:08:29.200
<v Speaker 1>And then how do they monitor and manage their portfolio,

0:08:29.320 --> 0:08:32.920
<v Speaker 1>manage risk over time? Is there something to like do

0:08:33.040 --> 0:08:35.240
<v Speaker 1>all of them admit that they've made some really big

0:08:35.600 --> 0:08:38.079
<v Speaker 1>mistakes and that was kind of a big learning opportunity,

0:08:39.360 --> 0:08:42.400
<v Speaker 1>Not all of them, but only the good ones. Okay,

0:08:42.679 --> 0:08:45.680
<v Speaker 1>you admit that they made a mistake. You know, the

0:08:45.720 --> 0:08:48.800
<v Speaker 1>investment business in some ways is very humbling. Morgan Howbell,

0:08:48.800 --> 0:08:50.920
<v Speaker 1>who recently wrote the book Psychology of Money, has this

0:08:51.000 --> 0:08:54.360
<v Speaker 1>great analogy that he says, you could be trained at

0:08:54.360 --> 0:08:57.400
<v Speaker 1>the greatest academic institution, worked for the best place on

0:08:57.440 --> 0:09:00.520
<v Speaker 1>Wall Street, and still underperform someone who knows is nothing.

0:09:00.880 --> 0:09:04.040
<v Speaker 1>If you were a brain surgeon, that would never ever happen.

0:09:05.080 --> 0:09:08.719
<v Speaker 1>So yeah, the great investors are only right to six

0:09:09.200 --> 0:09:11.880
<v Speaker 1>of the time in the public market. So um. Yeah.

0:09:11.920 --> 0:09:14.680
<v Speaker 1>It's a very humbling business and it's important for people

0:09:14.679 --> 0:09:16.520
<v Speaker 1>who learn from their mistakes. How do you hope people

0:09:16.600 --> 0:09:20.560
<v Speaker 1>use this book? You know? I wrote this book in

0:09:20.679 --> 0:09:23.480
<v Speaker 1>large part because it was what I wanted to distill

0:09:23.559 --> 0:09:25.760
<v Speaker 1>from my own investing in the investing that I do,

0:09:26.160 --> 0:09:28.800
<v Speaker 1>and what I hope is that people see it as

0:09:29.320 --> 0:09:32.319
<v Speaker 1>incremental ways that they can get better. And that's what

0:09:32.360 --> 0:09:35.679
<v Speaker 1>the podcast has been. This just phenomenal way of sharing

0:09:35.720 --> 0:09:38.320
<v Speaker 1>in public with some of these great investors how they

0:09:38.360 --> 0:09:40.839
<v Speaker 1>go about doing what they do, and every single one

0:09:40.880 --> 0:09:43.520
<v Speaker 1>of them has a little nugget of wisdom along the way,

0:09:43.640 --> 0:09:45.520
<v Speaker 1>which in fact is the whole third section of the

0:09:45.559 --> 0:09:48.200
<v Speaker 1>book is just a series of quotes that are some

0:09:48.280 --> 0:09:50.439
<v Speaker 1>of the very best quotes about how these people think

0:09:50.440 --> 0:09:54.200
<v Speaker 1>about it, the nuggets of wisdom, nuggets of wisdom, and

0:09:54.240 --> 0:09:56.640
<v Speaker 1>how they think about life too. Well, listen, I'm not

0:09:56.640 --> 0:09:59.079
<v Speaker 1>going to ask you to say your favorite conversation. That

0:09:59.080 --> 0:10:01.880
<v Speaker 1>wouldn't be fair. I you know, somebody who talks to

0:10:01.880 --> 0:10:03.800
<v Speaker 1>a lot of people. When people ask me that question,

0:10:03.800 --> 0:10:05.920
<v Speaker 1>I'm like, I like everybody. I mean, you know, it's

0:10:05.920 --> 0:10:09.080
<v Speaker 1>just a it's fun to kind of go back and forth. Um,

0:10:09.160 --> 0:10:12.960
<v Speaker 1>but you have some that stand out for you? It's hard.

0:10:12.960 --> 0:10:15.679
<v Speaker 1>I do have two hundred children, and probably undred ninety

0:10:15.720 --> 0:10:20.640
<v Speaker 1>of them have been outstanding students. Um or any surprises, Yeah, god, yeah,

0:10:20.679 --> 0:10:22.640
<v Speaker 1>there there is one I loved to point to. Not

0:10:22.880 --> 0:10:24.960
<v Speaker 1>so much that it's so much different or better than

0:10:25.000 --> 0:10:27.240
<v Speaker 1>any others, but it really was what I thought I

0:10:27.320 --> 0:10:29.120
<v Speaker 1>might be able to get at. And that was the

0:10:29.160 --> 0:10:32.240
<v Speaker 1>conversation I had with Scott Malpas, who's the recently retired

0:10:32.320 --> 0:10:36.000
<v Speaker 1>chief investment officer at Notre Dame University. And I had

0:10:36.080 --> 0:10:37.800
<v Speaker 1>known Scott from when I worked at Yale, but I

0:10:37.840 --> 0:10:39.560
<v Speaker 1>hadn't seen him and I hadn't seen him in over

0:10:39.600 --> 0:10:43.600
<v Speaker 1>a decade. And when we sat down, that conversation for

0:10:43.640 --> 0:10:46.480
<v Speaker 1>me was, hey, how have you evolved investing over the

0:10:46.559 --> 0:10:50.000
<v Speaker 1>last ten years? And he walked through every aspect of

0:10:50.000 --> 0:10:51.640
<v Speaker 1>what they had done in that office, and there was

0:10:51.679 --> 0:10:55.480
<v Speaker 1>so much rich information about his investment process, and he's

0:10:55.600 --> 0:10:57.680
<v Speaker 1>uniquely positioned because he had been in the seat for

0:10:57.800 --> 0:11:01.400
<v Speaker 1>thirty years and really had a stellar result. So that

0:11:01.480 --> 0:11:04.520
<v Speaker 1>wasn't so much. It wasn't my favorite or least favorite.

0:11:04.559 --> 0:11:07.240
<v Speaker 1>It was just something that was really emblematic over the

0:11:07.320 --> 0:11:10.480
<v Speaker 1>lessons that people can learn from listening to the show. Well,

0:11:10.480 --> 0:11:14.199
<v Speaker 1>I'm just thinking these words of wisdom, uh, or nuggets

0:11:14.200 --> 0:11:15.600
<v Speaker 1>of wisdom. I should say it would be a great

0:11:15.679 --> 0:11:18.080
<v Speaker 1>series of T shirts because there's some really great ones

0:11:18.720 --> 0:11:21.440
<v Speaker 1>um there listen. Good luck with the book, uh, and

0:11:21.640 --> 0:11:23.600
<v Speaker 1>really fun to have you join us, So thank you

0:11:23.640 --> 0:11:26.559
<v Speaker 1>so much, really appreciate it. Ted Side's he's founder and

0:11:26.640 --> 0:11:30.000
<v Speaker 1>managing partner Capital Allocators. The book Capital Allocators How the

0:11:30.000 --> 0:11:33.040
<v Speaker 1>world's elite money managers lead and invest just out