WEBVTT - A Quant’s Take on Innovation 0:00:01.320 --> 0:00:12.240 Strap on your parachute. It's time for What Goes Up. Hello, 0:00:12.280 --> 0:00:15.640 and welcome to What Goes Up, a Bloomberg Weekly Markets podcast. 0:00:15.920 --> 0:00:18.480 I'm Mike Reagan, and this week on the show, we'll 0:00:18.520 --> 0:00:21.160 talk to one of the pioneers of factory investing about 0:00:21.200 --> 0:00:23.920 his new endeavor and why he's taking a more active 0:00:23.960 --> 0:00:27.880 approach these days, using quantitative methods to hunt for innovative 0:00:27.880 --> 0:00:30.680 small cap companies to go both long and short on. 0:00:31.360 --> 0:00:34.840 But first, I think regular listeners are probably wondering now 0:00:35.120 --> 0:00:38.920 who this week's mystery co host is, So Charlie Pellett 0:00:38.920 --> 0:00:41.559 taken away and tell them who this week's co host is. 0:00:42.520 --> 0:00:47.800 This week's mystery co host is Lisa Abramowitz. Lisa is 0:00:47.840 --> 0:00:51.560 the co host of Bloomberg Surveillance and a mother of two. 0:00:51.880 --> 0:00:54.360 And even though she has been friends with Mike Reagan 0:00:54.480 --> 0:00:57.720 for a decade, she's never laughed at one of his jokes. 0:00:58.080 --> 0:01:02.360 Not even once. Okay, Mike, that is just not true. 0:01:02.480 --> 0:01:05.280 Let's just set the record straight. I laugh at every 0:01:05.400 --> 0:01:07.560 single one of your jokes. You could rely on me 0:01:07.680 --> 0:01:09.960 in the news room to be your joke laugher, So 0:01:10.080 --> 0:01:13.199 don't even start with that. You're calling Charlie Pellett a liar, Lisa, 0:01:13.360 --> 0:01:17.560 I'm calling him misinformed by the best out there. Okay, 0:01:18.240 --> 0:01:20.600 it's you know, it's it's a dangerous power to have 0:01:21.400 --> 0:01:23.319 to be able to ask Charlie Pellett to read some 0:01:23.400 --> 0:01:26.360 insult comedy for you. I I this could get this 0:01:26.400 --> 0:01:29.840 could get dangerous. But Lisa, for listeners who don't know, 0:01:29.920 --> 0:01:32.160 Lisa and I go pretty far back, I guess. I 0:01:32.160 --> 0:01:34.160 don't want to say too far back, but back to 0:01:34.200 --> 0:01:36.360 the days of Bloomberg gad Fly for sure, where I 0:01:36.360 --> 0:01:38.920 think we were the original too god flies we were, 0:01:38.920 --> 0:01:41.240 we were, and now of course Lisa the co host 0:01:41.319 --> 0:01:44.360 of bloomberg Sperience. I need to confess though, in in 0:01:44.400 --> 0:01:47.039 the pandemic lockdown era, I don't watch it as much 0:01:47.040 --> 0:01:50.360 as I should, just because my WiFi. I've got a 0:01:50.360 --> 0:01:52.760 bunch of kids on WiFi and I don't have a TV. 0:01:53.240 --> 0:01:56.240 I know, excuses, excuses. Don't tell Tom Keened any of this. Please, 0:01:56.320 --> 0:01:59.120 you don't have a TV. Your kids ate your television. 0:01:59.160 --> 0:02:01.840 That's why you can't watch for the survillains. That's cool, great, 0:02:01.880 --> 0:02:04.080 I'm glad. You know what. Keep telling us that it's 0:02:04.120 --> 0:02:08.080 the internet, it's the broadband save the kids. Now in 0:02:08.200 --> 0:02:11.440 my office, the kids are all watching their TikTok's the 0:02:11.440 --> 0:02:13.639 TVs in the TV room. I can't go in there. 0:02:13.880 --> 0:02:17.080 I'll have I'll just be too distracted. Well, my point is, Lisa, 0:02:17.160 --> 0:02:20.680 I want a download of your just quick download of 0:02:20.720 --> 0:02:23.000 your current thoughts of the market. I think of Lisa A. 0:02:23.040 --> 0:02:27.240 Brahma Witz as what's the best word market sentiment? We'll 0:02:27.240 --> 0:02:30.480 say cautious? Is cautious? Fair? Well? I think if you 0:02:30.560 --> 0:02:32.680 lask my co host, they'll just say perme bear. I 0:02:32.680 --> 0:02:34.680 would say that it's not so much permea bear as 0:02:34.720 --> 0:02:37.080 it is trying to see around corners. That's my recent 0:02:37.160 --> 0:02:39.040 line to try to defend myself against all the people 0:02:39.080 --> 0:02:41.160 who try to slam me down. But the idea is, 0:02:41.240 --> 0:02:43.000 what are we missing right? I Mean, there's a sort 0:02:43.000 --> 0:02:45.639 of idea that we're in this incredible melt up that 0:02:45.720 --> 0:02:47.920 can't be stopped because of the wall of money, whether 0:02:47.960 --> 0:02:50.640 it's from monetary stimulus or whether it's from fiscal stimulus. 0:02:50.639 --> 0:02:53.280 And here we are in a situation that seems too 0:02:53.280 --> 0:02:55.440 good to be true for some people, because if you 0:02:55.480 --> 0:02:57.919 buy what's been doing well, you will keep doing well. 0:02:58.200 --> 0:03:00.440 And so there is a question what are we missing 0:03:00.440 --> 0:03:04.560 either about the economic recovery or about inflation, or about 0:03:04.600 --> 0:03:07.880 this idea that yield will remain contained for the longer term. 0:03:07.960 --> 0:03:10.200 And these are some of the conundrums that I think 0:03:10.240 --> 0:03:13.880 that I spend every day discussing. That is a quick overview. 0:03:14.520 --> 0:03:16.799 I I love it. You know. I've always been team 0:03:16.840 --> 0:03:19.880 of Brahma Witz and I gotta say as I've gotten older, 0:03:19.919 --> 0:03:22.800 I've gotten more quote unquote cautious too. I'd like to 0:03:22.800 --> 0:03:24.760 say it's you getting older too, but you've been that 0:03:24.800 --> 0:03:27.520 way since you were much younger, that way, since I 0:03:27.600 --> 0:03:32.120 was a five year old. Al Right, great, that is 0:03:32.160 --> 0:03:34.920 the That's the kind of temperature check I needed from Lisa. 0:03:35.040 --> 0:03:37.240 I'm glad because we haven't talked so long. It's it's 0:03:37.280 --> 0:03:40.200 it's a shame. But anyway, enough about us. We've got 0:03:40.200 --> 0:03:43.080 a really fascinating guest this week, and I'm so excited 0:03:43.120 --> 0:03:46.040 to have him on the show. He uh, it's the 0:03:46.080 --> 0:03:51.320 founder of a firm called gir Gersteine fisher Um, which 0:03:51.320 --> 0:03:54.960 he founded at the ripe old age of one just 0:03:55.040 --> 0:03:57.520 a few years ago. We'll say, we won't say the 0:03:57.560 --> 0:04:01.440 exact date. He's now gone on to start a new 0:04:01.520 --> 0:04:05.160 firm called Quent's Capital. His name is Greg Fisher. Greg, 0:04:05.200 --> 0:04:08.440 welcome to the show. Thank you so much. It's uh, 0:04:08.480 --> 0:04:10.600 it's really nice to be here with you, Mike and Lisa. 0:04:10.640 --> 0:04:12.600 And I was I was kind of prepared for this 0:04:12.760 --> 0:04:15.560 very serious interaction, and I'm having so much fun just 0:04:15.640 --> 0:04:18.680 watching the two of you interact with one another. I 0:04:18.720 --> 0:04:22.120 think I'm now officially on team Abrama. It's two alright, alright, 0:04:22.760 --> 0:04:25.360 there's always there's always room for another on on team. 0:04:27.320 --> 0:04:31.520 It's a small ship. But Greg, I, I really I'm 0:04:31.520 --> 0:04:36.080 fascinated by the the approach you're taking at quent Capital Um. 0:04:36.120 --> 0:04:38.719 And let me describe it briefly the way I understand it. 0:04:38.720 --> 0:04:41.400 Correct me if I'm wrong, which is highly likely me 0:04:41.520 --> 0:04:44.120 talking about quantz. It's kind of like a Norwegian guy 0:04:44.320 --> 0:04:47.359 explaining baseball, so to feel, you know, feel free to 0:04:48.120 --> 0:04:50.680 correct any of this. But what I think of sort 0:04:50.680 --> 0:04:53.039 of the methods of a quant um I think of 0:04:53.160 --> 0:04:56.919 sort of big data, you know, crunching through massive amounts 0:04:56.920 --> 0:04:59.760 of data trying to find I don't know, momentum or 0:04:59.839 --> 0:05:04.600 the factors of certain companies that historically have have outperformed. 0:05:05.000 --> 0:05:07.839 But your approach now applies sort of the quant method 0:05:07.920 --> 0:05:11.240 to finding finding innovative companies and what I think of 0:05:11.320 --> 0:05:14.440 investing in innovators. Um, I think that's something sort of 0:05:14.440 --> 0:05:17.800 completely different, you know, not a lot of historical data 0:05:17.880 --> 0:05:20.760 to work with, sort of having to take some intuitive 0:05:20.800 --> 0:05:23.360 leaps about what trends are gonna be like in the future. 0:05:23.720 --> 0:05:25.200 You know, I'm basing a lot of this on kind 0:05:25.240 --> 0:05:28.960 of the public face of the quote unquote innovator investment 0:05:29.000 --> 0:05:31.680 space these days, which is obviously our investment in Cathy. 0:05:31.720 --> 0:05:34.360 Would you know you can listen to Kathy talk about 0:05:34.360 --> 0:05:37.480 her strategy for a long time and not hear any ratios, 0:05:37.520 --> 0:05:40.400 not here, any numbers. So I'm just curious from your perspective, 0:05:40.440 --> 0:05:42.760 how do you sort of tie the two approaches together. 0:05:43.600 --> 0:05:46.520 That's a good question, and thanks so well. First, you know, 0:05:46.600 --> 0:05:49.680 Quent Capital my new firm. I started my original firm 0:05:49.720 --> 0:05:54.440 back and back then there was like one index fund 0:05:54.440 --> 0:05:56.480 that nobody used. There were no E T f s, 0:05:56.520 --> 0:05:59.760 no text messaging, no email, you know, barely an internet, 0:06:00.320 --> 0:06:04.440 and uh the idea. I was twenty one. I sold 0:06:04.480 --> 0:06:07.440 the drum set my father bought me for nine bucks, 0:06:07.720 --> 0:06:11.080 bought a computer, hung up a shingle, opened up a phone, 0:06:11.120 --> 0:06:13.599 book and started calling people asking if they would allow 0:06:13.640 --> 0:06:15.720 me to manage their assets using this sort of like 0:06:15.960 --> 0:06:19.240 data driven investment strategy. It was sort of a funny thing. 0:06:19.520 --> 0:06:22.240 It kind of worked out and uh and and I 0:06:22.279 --> 0:06:25.280 was successful for my investors and myself too. I mean 0:06:25.279 --> 0:06:28.320 it was it was a great good time. I'm now fifty. 0:06:28.320 --> 0:06:30.960 When I was forty six, I sold the company a 0:06:31.000 --> 0:06:33.080 few years ago, take a little break, work on this 0:06:33.160 --> 0:06:36.520 new thing. And I think, like the motivation when I 0:06:36.520 --> 0:06:40.000 think about quantitative investing, I think people's minds would immediately 0:06:40.040 --> 0:06:43.240 go to, you know, algorithms and complexities and high frequency 0:06:43.279 --> 0:06:46.279 trading and all these jazz. But I think about it 0:06:46.320 --> 0:06:50.679 more as evidence based investing, where you have an idea 0:06:51.320 --> 0:06:54.720 and you can go back looking at data to sort 0:06:54.720 --> 0:06:57.680 of prove out that idea that at least you can 0:06:57.720 --> 0:07:00.279 show that this has worked in the past with a 0:07:00.400 --> 0:07:04.320 large sample of data, so that it's not completely judgment 0:07:04.839 --> 0:07:07.960 around your predictions of what will happen in the future. 0:07:08.279 --> 0:07:10.320 We never know what will happen in the future, but 0:07:10.760 --> 0:07:14.760 using evidence based investing is how I think about quantitative investing. 0:07:15.440 --> 0:07:18.520 And if you don't have evidence around what you're doing, 0:07:19.080 --> 0:07:21.240 if there are things you're doing that you don't have 0:07:21.600 --> 0:07:23.600 evidence of You can't go back and look at them, 0:07:23.600 --> 0:07:26.080 there isn't data to try them well. Then, in fact, 0:07:26.080 --> 0:07:28.080 it's a little bit more of what I think people 0:07:28.120 --> 0:07:31.560 think of as more traditional active management, where you know 0:07:31.600 --> 0:07:34.080 it's your gut or your intuition or some prediction into 0:07:34.120 --> 0:07:37.680 the future. I came up with this term quent Capital, 0:07:37.720 --> 0:07:42.360 as our firm name blends together the word quant and entrepreneur. 0:07:42.960 --> 0:07:47.160 In my career, I've been managing portfolios of growth stocks, 0:07:47.280 --> 0:07:51.920 largely globally, and what I found was that when you're 0:07:51.920 --> 0:07:55.360 trying to invest in growth stocks, it's very difficult to 0:07:55.440 --> 0:07:57.880 put a number in the numerator and a number in 0:07:57.920 --> 0:08:01.040 the denominator and compare things to one another. There's a 0:08:01.080 --> 0:08:05.160 lot more ambiguity of the valuation of these businesses, particularly 0:08:05.200 --> 0:08:08.880 in the last ten years. So I use this term 0:08:08.960 --> 0:08:11.240 quent to show that you know, data can only take 0:08:11.280 --> 0:08:16.320 you so far um with these small, innovative, disruptive, entrepreneurial 0:08:16.480 --> 0:08:20.400 style businesses. You know you mentioned TikTok earlier. My kids 0:08:20.400 --> 0:08:22.760 are watching TikTok, and I noticed you didn't say Facebook. 0:08:23.000 --> 0:08:25.560 You sort of need to be like I think genuinely 0:08:25.680 --> 0:08:29.640 resident to the universe you're thinking about, um to really 0:08:29.720 --> 0:08:33.360 understand it. And I do think that being an entrepreneur myself, 0:08:33.520 --> 0:08:36.240 my whole life, does make me a better investor in 0:08:36.280 --> 0:08:40.480 these entrepreneurial activities. Before we get into the idea of 0:08:40.600 --> 0:08:43.679 entrepreneurship at this moment, I want to talk about the 0:08:43.720 --> 0:08:48.040 nexus between high frequency trading and the quantitative strategies that 0:08:48.120 --> 0:08:51.440 you started up before the Internet was as adopted as 0:08:51.480 --> 0:08:55.520 it is even ten years ago. Did high frequency trading 0:08:55.840 --> 0:08:59.800 destroy the notion of quantitative investing as you knew it 0:09:00.040 --> 0:09:03.840 me launched you from initially? It didn't. I mean, I 0:09:03.880 --> 0:09:06.600 think that to the extent that a lot of things 0:09:06.640 --> 0:09:12.760 that happened in the industry made costs lower and liquidity higher. 0:09:13.360 --> 0:09:15.480 Um I think to some degree that sort of helped 0:09:15.520 --> 0:09:18.320 me personally in my firm for my investors. As you know, 0:09:18.440 --> 0:09:22.000 costs continue to drive down. But UM, I guess there's 0:09:22.000 --> 0:09:25.000 always this argument that if you know, if there's some 0:09:25.080 --> 0:09:28.280 good idea, like let's just use the oldest one we 0:09:28.320 --> 0:09:31.480 all know, like value investing a good idea, right. We'll 0:09:31.480 --> 0:09:34.400 probably get to that later, but anyway, so you know, 0:09:34.520 --> 0:09:36.720 price to book, it's you know, I could teach my 0:09:36.840 --> 0:09:38.960 nine year old how to do that, And I guess 0:09:38.960 --> 0:09:40.800 it took a while for people to realize that that 0:09:40.880 --> 0:09:42.880 was a powerful signal. And then all of a sudden, 0:09:42.880 --> 0:09:46.640 one day, everybody knows that this thing works, everybody starts 0:09:46.640 --> 0:09:49.600 doing it, doing it faster than everyone else does, the 0:09:49.679 --> 0:09:53.319 benefit of that style of investing go away. And I 0:09:53.400 --> 0:09:56.040 guess there's arguments around all these things. That's an easy 0:09:56.080 --> 0:09:59.400 one to understand. They're the more complicated ones. I think 0:09:59.400 --> 0:10:01.760 the issue is just simply, you know, if the reason 0:10:01.800 --> 0:10:06.200 that this is happening is because of some behavioral factor, um, 0:10:06.240 --> 0:10:09.640 some flaw in the human system, and or risk, you know, 0:10:09.679 --> 0:10:12.200 the efficient market stories around these things, if it's one 0:10:12.240 --> 0:10:14.640 of those two things where you know, I always give 0:10:14.640 --> 0:10:17.360 an example. Uh, you know, if you're trying to lose weight, 0:10:17.480 --> 0:10:20.319 and you like me and you like chocolate chip cookies. Um, 0:10:20.320 --> 0:10:22.720 I come home, there's a chocolate chip cookie on the table. 0:10:22.800 --> 0:10:24.520 I know if I eat it, I'm gonna gain weight, 0:10:24.559 --> 0:10:27.240 But I eat it anyway. UM, I just can't help myself. 0:10:27.400 --> 0:10:29.200 So there are a lot of things that we all 0:10:29.240 --> 0:10:32.720 know that are well documented that people could do faster 0:10:32.840 --> 0:10:35.520 than all of us, but they still work. Because they're 0:10:35.600 --> 0:10:39.880 happening for reasons that are not necessarily about market manipulation 0:10:40.280 --> 0:10:44.680 or transaction costs or how fast you can trade. Hey, Greg, 0:10:44.720 --> 0:10:47.080 I want to rewind and and go back to something 0:10:47.120 --> 0:10:49.959 you said that I find completely fascinating, and that's that 0:10:50.280 --> 0:10:53.480 you sold a drum set for nine bucks in the nineties. 0:10:53.600 --> 0:10:57.360 I mean, it's not like a Neil Pert style piece 0:10:57.440 --> 0:11:00.280 drum set. I I'll tell you why. I I'm a 0:11:00.480 --> 0:11:03.000 sort of hack musician myself, and I recently bought a 0:11:03.080 --> 0:11:06.600 drum set off of Facebook marketplace from some high school 0:11:06.679 --> 0:11:08.600 kid who I think was driving his parents nuts for 0:11:08.600 --> 0:11:12.080 a hundred and fifty bucks. So there must be deflation 0:11:12.120 --> 0:11:14.960 and drums going on there this set. Man, I would 0:11:15.000 --> 0:11:17.760 do anything to have it back. Um. When I sold 0:11:17.800 --> 0:11:21.520 my company, I there's not much that I really wanted, 0:11:21.559 --> 0:11:23.720 but I did do one thing. I built a music 0:11:23.720 --> 0:11:27.040 studio in my basement and bought two drum sets. But uh, 0:11:27.120 --> 0:11:29.040 and they were more expensive than when I was old. 0:11:29.080 --> 0:11:32.800 But it was a Slingerland like old school metallic red 0:11:33.000 --> 0:11:36.480 jazz set. And uh. I played this thing like every 0:11:36.520 --> 0:11:38.880 minute of my life, starting from when I was twelve 0:11:38.920 --> 0:11:41.400 years old. I would do anything to have that thing back. 0:11:41.520 --> 0:11:45.640 I tried actually years ago, but I wasn't successful. But 0:11:45.920 --> 0:11:47.720 I am still a drummer, and so was my my 0:11:47.760 --> 0:11:50.480 son actually, but I uh yeah, I think uh, I 0:11:50.520 --> 0:11:54.240 think music actually and playing the drums was one of 0:11:54.280 --> 0:11:56.959 the reasons I got into math, just you know, always counting. 0:11:57.679 --> 0:11:59.680 You know, I hear that a lot from five A 0:11:59.679 --> 0:12:02.760 lot of smart finance people are are side musicians on 0:12:02.760 --> 0:12:05.840 the side. It's an interesting phenomenon. But Greg, I wanted 0:12:05.840 --> 0:12:08.840 to ask you about that notion of the switch from 0:12:09.080 --> 0:12:13.199 sort of a more index factor based approach to actually 0:12:13.240 --> 0:12:16.720 more active stock picking. I make a joke that, um, 0:12:16.760 --> 0:12:18.720 every time we have an active manager on, he goes, 0:12:18.760 --> 0:12:20.960 you know, this is the year of the stock picker, 0:12:21.200 --> 0:12:23.400 and as it has been the case, I think in 0:12:23.440 --> 0:12:26.800 two thousand, two thousand and two that I could go on. 0:12:27.200 --> 0:12:30.040 But I really do think there's a case now, uh 0:12:30.120 --> 0:12:32.920 that it seems like it's gonna be true. Active funds 0:12:33.559 --> 0:12:37.120 majority are once again outperforming their benchmark by a lot 0:12:37.160 --> 0:12:40.040 of metrics. But I'm curious how you made that lead 0:12:40.040 --> 0:12:42.320 because here's a guy, or if it really was a 0:12:42.320 --> 0:12:44.760 big lead, because here's a guy who's spen sort of 0:12:45.160 --> 0:12:49.480 looking more closely at indexes for decades and then to 0:12:49.559 --> 0:12:52.320 kind of make that jump into a more active approach. 0:12:52.800 --> 0:12:55.760 I wonder how is has passive investing, you know, sort 0:12:55.760 --> 0:12:58.800 of jumped the shark. Has it become a crowded trade 0:12:58.840 --> 0:13:02.400 in a way. It's a great question. Boy, I can 0:13:02.440 --> 0:13:04.600 talk for hours about this, so I hope you'll edit this. 0:13:04.960 --> 0:13:08.199 But but at any rate, so a little a little 0:13:08.200 --> 0:13:11.080 bit of a background on this. So, um, yeah, I was. 0:13:11.120 --> 0:13:12.760 If you sort of look me up, you'll see that 0:13:12.800 --> 0:13:15.320 for the last thirty years, I've been basically telling the 0:13:15.360 --> 0:13:19.600 world you should build market based portfolios, keep turnover down, 0:13:19.760 --> 0:13:22.760 keep taxes down, keep an eye on your costs. You know, 0:13:22.800 --> 0:13:25.480 buy and hold. You know, these things still work. They'll 0:13:25.520 --> 0:13:28.719 always work. Bill Sharp wrote that paper years back, the 0:13:28.760 --> 0:13:32.480 Arithmetic of active management. So this idea that there's certain 0:13:32.480 --> 0:13:35.440 market environments where you know, on the average, we can't 0:13:35.440 --> 0:13:37.880 be better than average in any market at any moment, 0:13:37.920 --> 0:13:40.560 at any time, right, he tells, he talks about this, 0:13:41.480 --> 0:13:43.760 of us will do better, of us will do worse. 0:13:43.800 --> 0:13:46.960 You add in costs, you knock out another. The math 0:13:47.040 --> 0:13:51.160 doesn't change. But what I experienced in all the years 0:13:51.160 --> 0:13:53.560 that I was, you know, sort of working within this 0:13:53.800 --> 0:13:57.080 market based framework of investing. Um I had. I had 0:13:57.080 --> 0:14:00.640 actually trademarked the term multi factor in the use of 0:14:00.720 --> 0:14:05.280 mutual fund investing about twelve so years ago. I launched 0:14:05.320 --> 0:14:08.080 a bunch of funds. This was like the innovative way 0:14:08.080 --> 0:14:12.240 to index. It was evidence based investing your building market portfolios. 0:14:12.440 --> 0:14:14.040 But you have a little more of the things that 0:14:14.120 --> 0:14:16.800 have worked historically a little less of the things that hadn't. 0:14:17.400 --> 0:14:19.240 Um So I was doing this stuff for a long time, 0:14:19.280 --> 0:14:22.120 but what I watched is indexing go from like zero 0:14:22.320 --> 0:14:24.560 to a lot all of a sudden. I mean, the 0:14:24.560 --> 0:14:27.760 whole idea of the efficient market idea hypothesis is that 0:14:28.160 --> 0:14:32.160 if everyone's out there searching for miss price security, spending 0:14:32.200 --> 0:14:34.720 billions of dollars and lots of energy, and we're all 0:14:34.720 --> 0:14:38.160 working so hard to find miss price securities, then it's 0:14:38.160 --> 0:14:40.040 hard to find miss price securities. And you might as 0:14:40.040 --> 0:14:42.320 well just accept the price of the stocks and markets 0:14:42.360 --> 0:14:44.400 because on average, everyone is spending a lot of time 0:14:44.400 --> 0:14:46.720 doing it. Why waste your own time just by it 0:14:46.800 --> 0:14:50.360 accept everyone else's price. And that's that and and that's 0:14:50.360 --> 0:14:52.640 a beautiful thing. And it worked quite well for a 0:14:52.680 --> 0:14:55.160 long time. But I think that when you get to 0:14:55.200 --> 0:14:57.000 a point like where we are now, where there's been 0:14:57.000 --> 0:15:01.120 this huge decline in analysts, where the there's this increase 0:15:01.240 --> 0:15:03.520 in indexing too, depending on who you ask, I think 0:15:03.520 --> 0:15:06.320 I've heard something like six of all the assets indexed 0:15:06.400 --> 0:15:09.920 now or something like that. If you have fewer people 0:15:10.040 --> 0:15:14.160 searching for missed priced securities and no incentive to go 0:15:14.200 --> 0:15:15.880 out and do it. My son is in school as 0:15:15.920 --> 0:15:18.720 a finance major. I'm like, don't become an analyst. You 0:15:18.760 --> 0:15:21.560 know I'm an analyst, but like, there's no money in 0:15:21.560 --> 0:15:24.520 being an analyst. Um, nobody wants to pay analysts anymore. 0:15:24.560 --> 0:15:27.320 We just accept market prices. I was kind of kidding, 0:15:27.480 --> 0:15:29.920 but I wanted to see what his reaction was. Anyway, 0:15:29.920 --> 0:15:32.360 you get to this point where if everyone is just 0:15:32.440 --> 0:15:35.560 accepting market prices and fewer people are doing the work 0:15:35.920 --> 0:15:39.000 to determine if the prices right or wrong, Well, we 0:15:39.040 --> 0:15:42.120 still have this fifty fifty thing Bill Sharp described, but 0:15:42.240 --> 0:15:45.520 the distribution around that average would be wider. If you 0:15:45.640 --> 0:15:47.400 get it right, you'll be more right. If you get 0:15:47.400 --> 0:15:50.080 it wrong, you'll be more wrong. So I I have 0:15:50.240 --> 0:15:54.600 this perspective, and I watched this happen, that there is 0:15:54.640 --> 0:15:58.360 an opportunity. It's still the fifty fifty thing. But if 0:15:58.360 --> 0:16:00.440 you're the person, if you're on the rights side to that, 0:16:00.520 --> 0:16:04.640 your ability to outperform by more I believe exists and 0:16:05.000 --> 0:16:08.320 less two, which is why I actually built a long 0:16:08.360 --> 0:16:12.200 short strategy versus long only strategy. My last point on this, 0:16:12.280 --> 0:16:15.480 I published a paper with some co authors last summer 0:16:15.600 --> 0:16:18.440 was in the Journal of Indexing, and it talked about this. 0:16:18.600 --> 0:16:22.440 You know, the market environments. You know, we never know 0:16:22.600 --> 0:16:25.360 when when we're going to enter an environment where the 0:16:25.400 --> 0:16:30.320 correlation of securities is less positive, where the difference across 0:16:30.360 --> 0:16:33.640 securities is less positive. We never know when we're going 0:16:33.680 --> 0:16:36.160 to enter that environment. But what we can know is 0:16:36.200 --> 0:16:39.320 when we're in those environments, the difference between winners and 0:16:39.360 --> 0:16:41.920 losers is greater. We've been in an environment for a 0:16:41.920 --> 0:16:45.040 while where things were just trending together. I had this 0:16:45.160 --> 0:16:47.920 hypothesis that sooner or later we'll enter an environment where 0:16:47.920 --> 0:16:50.280 that's not true. Didn't know COVID was going to happen, 0:16:50.320 --> 0:16:52.680 because as we know, I think last year something like 0:16:52.720 --> 0:16:55.840 half the securities and the Russell two thousand um had 0:16:55.920 --> 0:16:59.000 negative returns or something like that. So if you're in 0:16:59.000 --> 0:17:02.320 an environment where lots of people are indexing, and there's 0:17:02.400 --> 0:17:05.560 fewer people paying attention to what the price should be. 0:17:06.359 --> 0:17:08.720 If you're in an environment where the difference between winners 0:17:08.760 --> 0:17:11.280 and losers is greater. You know, it's my belief that 0:17:11.359 --> 0:17:14.359 at least for some portion of someone's portfolio, and probably 0:17:14.359 --> 0:17:16.480 not the majority of it, by the way, but for 0:17:16.560 --> 0:17:20.640 some portion of someone's portfolio, having a strategy that could 0:17:20.640 --> 0:17:24.400 take advantage of those themes and trends I think is important. 0:17:24.440 --> 0:17:27.240 So that's how I got here today. I'd still say 0:17:27.280 --> 0:17:31.480 that most investors should have like their portfolio in a 0:17:31.560 --> 0:17:34.960 market based strategy of some capacity. But if there was 0:17:35.000 --> 0:17:36.720 ever a time to give this thing a shot, I 0:17:36.760 --> 0:17:38.879 think it's probably now, which is why I'm doing it. 0:17:50.600 --> 0:17:53.560 I'm hung up on what you said about the right price, 0:17:54.240 --> 0:17:57.520 and I'm struggling with it, because how do you analyze 0:17:57.560 --> 0:18:01.440 a stock when it's determined as much by what FED 0:18:01.520 --> 0:18:05.359 chair J. Powell says today or tomorrow as it does 0:18:05.560 --> 0:18:08.160 how much they're earning, or how much some people might 0:18:08.200 --> 0:18:11.840 think they are, or perhaps what somebody on Reddit says 0:18:11.880 --> 0:18:14.439 about the stock price. In other words, how do you 0:18:14.600 --> 0:18:18.359 figure out the winners when the right price isn't being 0:18:18.440 --> 0:18:24.640 determined by fundamentals that are a stagnant concept. That's so 0:18:24.640 --> 0:18:27.320 so important, Lisa UM. I think Keene said it the 0:18:27.320 --> 0:18:30.000 best a hundred years ago. It wasn't important what I 0:18:30.040 --> 0:18:32.480 thought something was worth. It was more important for me 0:18:32.520 --> 0:18:35.560 to understand what you thought Mike thought, his sister or 0:18:35.640 --> 0:18:38.840 brother thought it was worth. Like many of us, I've gotten, 0:18:38.920 --> 0:18:42.479 you know, fascinated with behavioral finance for my whole career. 0:18:42.880 --> 0:18:45.879 I grew up in the tax business. My family started 0:18:45.880 --> 0:18:49.320 this tax business and park Slope in the nineteen seventies, 0:18:49.359 --> 0:18:52.160 and I watched people coming in with like a shoe 0:18:52.160 --> 0:18:55.919 box filled with their statements from all these different brokerage firms, 0:18:55.960 --> 0:18:58.680 with all the things they bought, and like the way 0:18:58.720 --> 0:19:01.760 people were making decisions some Another paper I wrote with 0:19:01.800 --> 0:19:06.119 another co author mine is titled um Past Performance is 0:19:06.480 --> 0:19:10.159 Indicative of future beliefs. What we did is we we 0:19:10.240 --> 0:19:12.880 analyzed and we showed. Look, we know security prices are 0:19:12.920 --> 0:19:18.160 positively correlated like yesterday, security prices actually have memory. It's 0:19:18.200 --> 0:19:20.600 not this random walk where today has nothing to do 0:19:20.640 --> 0:19:23.679 with yesterday. We all make decisions today based on what 0:19:23.720 --> 0:19:26.600 we ate for breakfast, how we're feeling, what music we 0:19:26.640 --> 0:19:29.479 listened to whether the sun was shining, whether things went 0:19:29.560 --> 0:19:33.040 up or down yesterday. So Lisa, you're right read it today, 0:19:33.400 --> 0:19:35.680 you know, whatever it is like, we have to pay 0:19:35.720 --> 0:19:38.520 attention to what people think. We can't only look at 0:19:38.520 --> 0:19:41.080 the fundamentals. But I think the mistake people are making 0:19:41.640 --> 0:19:44.840 these days is to not look at the fundamentals at all, um. 0:19:44.880 --> 0:19:47.159 And that's a whole different discussion. This point you make 0:19:47.200 --> 0:19:51.040 about looking around corners. What you pay for things still matters, 0:19:51.760 --> 0:19:54.720 it like actually matters, you know. Now the question is 0:19:54.760 --> 0:19:57.040 what are we valuing. Like in the old days, we 0:19:57.160 --> 0:19:59.960 used to think sewing machines and buildings were worth something, 0:20:00.359 --> 0:20:02.800 And these days our greatest assets are the people who 0:20:02.880 --> 0:20:06.160 work for us, our brand, um, you know, our customer 0:20:06.280 --> 0:20:08.919 service scores. You know, there's a lot of things that 0:20:08.960 --> 0:20:12.480 are really hard to measure. We're all trying, but what 0:20:12.640 --> 0:20:15.680 you pay for things still matters. But this behavioral thing 0:20:15.720 --> 0:20:19.600 you touched on is critical. You know, Lisa, my fourteen 0:20:19.680 --> 0:20:21.520 and year old and I we have this game where 0:20:21.520 --> 0:20:23.600 we try to scare each other, you know, you hide 0:20:23.600 --> 0:20:25.879 and jump out and and so I'm looking around corners 0:20:25.880 --> 0:20:28.440 a lot these days as well. I'm a very abrama 0:20:28.480 --> 0:20:31.959 with approach. But Greg, one thing I love when I 0:20:32.000 --> 0:20:35.359 talked to uh small cap fund managers is you guys 0:20:35.440 --> 0:20:38.320 have your heads wrapped around companies a lot of times 0:20:38.320 --> 0:20:40.720 that I've never even heard of. Um, So if you 0:20:40.760 --> 0:20:44.320 could just kind of rapid fire through for us some 0:20:44.359 --> 0:20:46.879 of the stocks that have you excited, uh, sort of 0:20:46.880 --> 0:20:49.760 on the long end the short end. I mean one 0:20:49.800 --> 0:20:53.760 in particular, there's this company that we've invested in called 0:20:53.960 --> 0:20:56.919 smart Eye. I would say, like, there'sn't any one company 0:20:56.920 --> 0:20:59.359 I would necessarily hone in on in this conversation, but 0:20:59.440 --> 0:21:02.800 just to use them as an example, it's it's a 0:21:02.840 --> 0:21:08.840 company in Sweden that basically has created technology that looks 0:21:08.840 --> 0:21:11.840 at your eyeballs while you're driving in your car and 0:21:11.880 --> 0:21:14.840 it helps to in advance determine if you're falling asleep 0:21:14.960 --> 0:21:17.399