The $2 Trillion Mind | Nicolai Tangen

0:00 If you have really, really high ambitions. You achieve great things even if you fail. If you have low ambitions, you achieve nothing even if you succeed. Where do you think the tech sector evolves from here? Well that's the Trillion dollar question, right? Luckily you manage what, two trillion?

0:17 When I give presentations at universities I I ask people, hey Anybody here who thinks differently from other people who kind of think that they are weird, hands up. Such a big game. Less than ten percent. I said, You guys, you're great. We'd love to hire you. And then the other ninety percent. She's like, you know, sorry guys. Yeah, just like everybody else. you're never going to make much money. Okay. So I never do politics because I'm my job is not it's totally not political.

0:39 But if I were like uh Prime Minister for Day, I would inject AI everywhere. If you look at the golden ages we've had. And you look at you know the real powers we've had during the years, you know, Rome, Venice They were open economies, free trade. Um

0:56 free movement of uh labour, thought and so on. What they all have in common in terms of the end of the golden ages is What are you leaning against right now? Well I think uh the stuff to lean against if you really want to do the opposite of everybody else would be to And I'll do less AI related investments than more real estate investments. How do you see real estate playing out?

1:24 Well, that's a very tough one, right? But it's not very popular. And I see that uh a lot of big investors are uh reducing their exposures to to real estate, so that's probably a good sign, right? That uh there are better times ahead. What do you think of office? I I guess that's the worst real estate class. Very bad. It's very bad.

1:45 So You have to think uh in a way you've had a bit of a perfect crisis there now in that uh Covid meant that more people were working from home, you had uh some trouble with the uh you know part of the banking system, you had rates uh, you know, being relatively high. And so you had a few factors there, uh

2:05 Impacting it negatively. How do you think about rates? I mean, historically there's been a I think the average is six percent or something, somewhere thereabouts. And we've been lower than that for almost twenty years now. Yeah. Uh we have been very low. and for a very long period of time. I think there are some structural issues which mean that they probably will be

2:25 A bit higher than they have been. And I think one one um factor here which uh, you know, people don't talk so much about just now is is the impact on climate, you know? So climate is impacting harvests, is impacting prices for a lot of you know, raw material and uh and input factors in particular to the food side. So be it uh you know, chocolate coffee and so on. Then you got uh various fires, uh you just you just got a lot of Kind of. impacts from climate on pricing structures.

2:57 Um, you know, it also hits kind of insurance rates, reinsurance rates, um And so on. So that's on the one hand. Now the thing which is pulling in the other direction is of course efficiency gains through AI. And uh you'll have uh you know, just much more intelligence. Uh

3:15 cheaper levels, right? Where do you think the tech sector evolves from here? Yeah. Well that's the Trillion dollar question, right?

3:26 Luckily you manage what, two trillion? So Um It's pretty pretty hot, right? That I think we can agree on that. And I think it's quite interesting. So you have Yan Sen Huang, the CO of N Media. Who goes to Korea, right?

3:42 he hangs out with the guy said Samsung, they go and have uh you know, some uh deep fried chicken. And so When they are photographed in this uh chicken uh restaurant. The share price of uh

3:57 of that chicken chain is going up like twenty percent, right? And the company that actually breeds chicken in Korea is going up a lot. And the company that does the robotic arms to actually deep fry the chicken is also going up a lot. So It's uh

4:11 just indicates to me that this is now a very, very hot sector when things like that happen. What would be your argument for the fact that we're in an AI bubble and then against the fact that we're in Well, I think um okay, AI bubble you would look at things like uh valuations, you'd look at circularity in terms of ownership and and uh you know vendor financing, uh these type of things. Um you'd look at

4:36 Uh news coverage. Uh, you look at things like what happens when they eat, you know, chicken at a restaurant. So you just kind of just look at how frothy a sector is. On the other side It has huge um ramifications for how we live our lives. And we see in our firm we are increasing productivity probably by twenty percent just by utilizing it more and we're just stuffing it in wherever we can. And it's making a huge impact.

5:01 How does that show up, the increase in productivity? Well, we shows up um In that we do more. with the same amount of people. You know, we have we are keeping headcount now flat. And we are just producing more and producing better quality. What do you think would cause inflation to come back?

5:20 Um slower world economy. A you know, um AI. Leading to more productivity gains. Uh humanoids. So increased use of robotics. Which is just a cheaper labor supply.

5:33 Is AI making decisions now? At the firm or is it No, we are there is always a human in the loop. But it's helping us. It's supporting our decision making. Do you think it'll ever replace humans in investing? I uh not in overplace. Um but uh clearly in some places, right, you have uh fully automated uh

5:54 uh you know, investment models in a lot of places. What skills do you think will matter more in an AI world? Interpersonal skills. uh, you know, the ability to talk to people. The ability to listen. And uh, you know, empathy.

6:11 I mean these these things have always been important. But they are just even more important, you know? And I'm just I'm just seeing it so many places. It's really, really interesting. You talked about uh the ability to listen, I think in your uh Wharton commencement speech. Yep.

6:29 Um How would you teach somebody to do that? Well that's a tough one. I'm I mean it it can be taught in that you can point it out to people that they talk all the time and they don't listen, right? So you can say that. But I think we we would fall back to how we are generally

6:48 Um and I think it needs to come with some curiosity. Because if you're not curious, you're not going to listen. So I think it goes it goes hand in hand with that. I mean, generally you should listen twice as much as you speak. Why? That's why you got two hairs and Um, but um

7:05 It's super important. A lot of people think they're listening, but they're not actually listening. Yeah, they're just processing stuff and can't wait to get to the next questions themselves, you know? So there is there is little listening.

7:21 Um I um I spoke to you. This guy called Saul Perlmetter, he is a scientist. He got the Nobel Prize in Physics. And uh he said, uh, Nikolai, we are now at the stage in the world where we for the first time can solve all the problems.

7:40 Because of all the problems. We we know how to solve the climate problem. We know how to feed everybody in the world. We have the technology, we have the science. It's just that we don't talk to each other. We don't listen. We don't work together properly. So That's what we need to have. Zoom in, I think.

7:54 Would you say that's the biggest problem in society? I think that one of the biggest problems now is um is the fact that we we close up, you know. We um if you look at the golden if you look at the golden ages we've had. You and you look at you know the real powers we've had during the years, you know, Rome, Venice uh, you know, the Song Dynasty, uh the Netherlands, you know, these They were open economies, free trade.

8:23 Um free movement of uh labour, thought and so on and What has what they all have in common in terms of the end of the golden ages is Uh close up free trades. Tariffs.

8:38 Um End of immigration. End of free thoughts. The rise of the strong man. Uh attack on you know

8:47 Freedom so all types of you know, sorts, and we are seeing that in many places of the world. And uh and that's a native. Which one of those concerns you the most? All the above.

8:59 For me it's free speech. It's like that seems to be the big Limiter. Yeah, but you need you need new ideas, you know, you need to rejuvenate countries. And societies. But it's clearly a free speech.

9:14 It's important. How do you see the difference between American and European mindsets? So this is super interesting, right? Um Uh and now I'm in New York for a month. And you know, wow, the energy here, uh

9:32 The entrepreneurship, the drive You know, I just get so much energy just Living here. Uh, level of ambitions super high. uh versus Europe where there is I mean Europe is a

9:47 Fantastic place too, right? But for different reasons. Um You know. Culturally uh incredible. Uh you know, fo food pretty good in many places.

9:58 But less ambitions. You know, the thing with ambitions, I think it's so interesting. If you have really, really high ambitions You achieve great things even if you fail. If you have low ambitions, you achieve nothing even if you succeed. And so having great ambitions is just fantastic. And you know, in in America Five. I mean, do you think five is a high number or a low number?

10:18 For what? Well, just generally a number. Oh. Well there you go. You think you think five is low. You asking a uh you know, a European, is five high or low? They would say it's pretty high.

10:29 So it's just like and so the whole concept of You know, growth rates, ambitions and so on is different. And then of course you work much harder in America. I mean that's just not something I think. It's just like the facts. You got Less holiday. Uh and so on.

10:45 Do you think that's good or bad? I think it's both. I think it's good for um some things in society and I think it's not so good for the people uh involved. It's so interesting'cause if you think of it from an evolutionary point of view, I mean evolution doesn't care about you, it cares about the species. Yeah and so it would sacrifice you and make you work harder for the good of the the whole unit and the survival of the unit.

11:09 Was it a culture shock when you came to Wharton? To warn. Yeah. Absolutely. Absolutely. Well. You see the um

11:18 In a way, Norway is the opposite of Wharton. Um Because in Norway everybody's supposed to be the same. You have this thing called Janteloven, it's just like don't don't think you're fantastic in any way, shape, or form. Uh so you come to Warden and I sit there in a class and it's just like, Hey, what do you guys want to achieve in life? And one of the my fellow students just hands up. Wait, money.

11:38 I just want to conquer the world. And that's kind of a statement which is totally normal. You know? I wouldn't, but it it's not particularly normal in where I'm from. How would you change that to add more ambition? I don't think you can change it. You can't you can't change it.

11:55 You can't change a nation. But you can change it in your own company. And you can work on the global culture. In the firm you work. And you can change it with yourself and your family and your friends.

12:05 But to change the ambition level of a whole country, I don't think you can do that. It's tough. How would you go about it if you had to, if that was your task? Okay, so I never do politics because I'm my job is of course it's totally not political. But if I were like uh Prime Minister for a day.

12:21 And your only job, just ambition, nothing sort of like I would I would inject AI everywhere. Um I would I would just go all in. I would do what they did. You know, in Sweden in the eighties they had something called home PC. So they bought thousand PCs in a country of, I don't know, at that stage, let's say it was six, seven million or something, eight.

12:45 Um put them in people's homes and it just increased the digitalization of the country. So now you have, you know, Spotify, Clark, all these things. So is it directly linked? No, probably not, but you know, they they they increase the digitisation. Now they're doing the same thing with AI. Now they're doing the same in Iceland. In Iceland they are. They just did a co uh they announced a corporation project with um uh you know, with anthropics where they're basically going to stuff it in to all the schools and all that kind of thing. And I think it should be perfect for Norway. It's a high highly digitalised country.

13:18 And where people think it's pretty nice to have a lot of spare time. And of course AI helps you with that. And it's a once, you know, you you read the book uh about uh NVIDIA, for instance, and Jensen Huang talks about this once in a lifetime opportunity. And this is just a once in a lifetime opportunity for

13:37 People. Companies and countries to pull apart. And if you don't do that, you're sort of gonna be left behind if people don't. Yeah. There's uh

13:46 Tune. I mean Alpha School, I guess, is one of them who's who's using AI to get curriculum down to two hours a day. The students are getting massively better outcomes and then Synthesis Tutor?

13:59 has created this math program through I think it's uh Kindergarten through grade eight or nine now. And the results are Like just off the charts. They move kids to standard deviations within Like three or four months.

14:13 And so we've demonstrated that it's better than teachers, but the impediment to that would be what do you think? Like why wouldn't people do it? What would be the argument against it? I don't know why people wouldn't do it. They should do it. I mean they saw should do it. What's the most important data you look at these days? Uh I don't have like just one or two data sources. I read uh just a lot of newspapers.

14:39 And I think what's going on in the world now is just so incredibly fascinating and it's so exciting to be alive, you know. And so I just wake up at five and I just spin out of bed. I just can't wait to get out of bed uh to start to read the papers. And then I just started, you know, the Financial Times, Wall Street Journal, New York Times, all these things. And wow, the stuff that goes on now is just in incredible. Things that you didn't think was possible Uh you know, a year ago that's now happening, right? Um

15:07 So we uh I was up in a forest Um a few weeks ago. And um With seven of my best friends and um And we were predicting okay what's going to happen in the next twelve months. So we and we tape it. We tape card it.

15:21 And then we were we were playing Oh predictions from last year. And you know, these are really clever people. And how do you think we did? Terrible. Terrible. Terrible. I mean we were like eighty percent wrong. You know, we didn't we didn't

15:35 We didn't predict that. Trump had win the election a few weeks Later. We didn't we didn't think about like tariffs and relationship between the US Europe, you know, what's going on now

15:46 In the US, in Europe, in India, in China, we have no clue. And so I think trying to predict in this world is just m more and more You know. Useless. So you what do you need to do? You just need to work on

15:59 Speed and agility. Go deeper on that for a second. How important is speed and agility? Well, I have a big thing with speed, you know, speed is Well I mean it's a mindset and it is, you know. Um He struck me again going back to New York, you know, by this

16:17 Every morning I buy this uh, you know, egg and uh Eganham roll. And just speed with which they wrap it. Oh man, my. So the speed in New York is very high. But speed generally, I think is is super important, you know? Um It comes to this first principle. Things shouldn't take longer than

16:34 Then they need to take. You know um You save time by being fast. So this sounds a bit

16:43 Um Strange, but you know, if you answer if I if I send you an email and you answer within One minute. How long does that email need to be? Two two words, right?

16:53 And I'm impressed because you answer really quickly. If you answer a The next day. How long does it have to be? Paragraph. And you answer a week later, it needs to be a page, right? So you

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18:30 Find someone in yours. Download the app and apply today. How do you think about urgency? That's one thing we didn't that was not a word we used when we were sort of like thinking about uh American versus European mindsets. Yeah, I I I just think Uh, you know, urgency is I I try to build urgency into most things. You know, in my office I have a I have this uh this watch, this kind of clock, and it counts down the number the days I've got left in In my job.

18:57 So it's not because I look forward to to stop working because I I love my job. But I have this thing on the wall and so you come in and say, Hey Nicole, are we We're going to work on this and um do you m it' you you know, I'll s I'll sort it by January and I said. Uh January?

19:11 Luke here. I've got one thousand seven hundred and sixty five days left. We need to do it now. And then you said. Oh really? You only have one thousand seven hundred and sixty five days left. Yeah, let's do it now. Let's do it now.

19:21 So you just you build urgency into these tasks. I love it. I like that. That's cool. Yeah. When I was talking with Charlie Munger about predicting and he basically said it's a fool's errand. It's better to position and have agility, but you kind of have to mix that with a stubbornness, too. Yeah. How do you think about that? Um so I think the most important thing to have in investing is you need to be stubborn, but you need to have the ability to change your mind. Very few people have that.

19:51 Um Somebody like Stan Rick and Miller has it. But the combination is rare. You need to be stubborn in all in order to do the opposite of everybody else. Um and when you are when you do these kind of contrarian investment investments, uh there will be periods where everything goes against you and it's stressful, but you need to hang in there.

20:13 Do you think you can teach people to change their minds? Um I think you can To a certain extent you can Teach them it's um easier as you get older, I think, because you've seen more cycles. But it's difficult to find people who are really contrarian now because it's you need to

20:31 You need to live in a in a space where you are Well people don't agree with you. And we, you know, in in today's world, everybody wants to be liked and You know, I've Hundred like.

20:42 You know, like some Facebook or whatever and so to be To be different from other people is is tough. So now when I have when I give presentations at universities, I I ask people, hey Anybody here who thinks differently from other people, who kind of think that they are weird?

20:57 That they that nobody understands them. Hands up. Such a big yeah. Less than ten percent. I said, You guys, you're great. We'd love to hire you.

21:05 Can everybody else put their hands up? And then the other ninety percent is like, you know, sorry guys. You're just like everybody else. you're never going to make much money. But there is hope. You can change. You know?

21:15 And I I kinda think people hopefully they go out of that room and think, you know what? I want to be different. You know? It's something we should really treasure and and love. I you know, it's where it is good, right? Go deeper on that for a second in terms of I think a lot of people optimize their lives

21:32 Not necessarily to be liked, but definitely not be, you know, hated or disliked by people. And that causes all these weird societal distortions. Yeah, but you you don't have to be disliked even though you disag you know, people disagree with you. But you know in my mind in in my mind, life is not a popularity contest. So my wife says that well, only people without friends say that. But I don't know

21:54 I don't think so. I think you Life is for sure not the popularity contest. You're definitely not popular all the time. You have that big number on the screen. You can't you know, you can't be popular all the time and you have to

22:08 You know, you have to be used the fact that whatever, even if you're right, ten percent will disagree with you. Do you read the comments that are negative about you? No. Do you read it? But I also don't I also don't read the positives. Okay. And I don't believe them, you know. I don't believe the positives, I don't believe the negatives.

22:24 So when you read the newspapers, like how do you read them? Are you reading headlines and then if it catches you, you read the article, or is there a different way that you skim or process that I read I go through headlines and then I drill down. If it's either something I am interested in or something I No I should know more about? Uh Or if I'm going to meet somebody who's interested in that particular field or

22:49 I know somebody's interested, then I pass it on to somebody else. Or if I've met the person uh or had him on now podcasts. How do you test your assumptions before making a big investment? So that's where we that's where I think we can be better and I think we can develop this. And I think the

23:08 By using more of the scientific method. Um, I think we can be better. And I do think that there is I I think there is something called I I think there is an objective truth. I think there is something which is correct. And we need to we need to find it. And um so I have much more of an open mind now than I had in the past.

23:28 I I think I'd listen to more different types of input and opinions. And I try not to jump to conclusion. Has that made you a better or worse investor based on Returns.

23:40 Well, so so I I don't run money. Myself now, I'm you know Uh running a a company where we have a lot of people running money. But for sure it's going to make you a better investor.

23:50 If you take more uh of the different opinions into into the equation. If you are long something, you listen to the shorts you and vice versa. I mean there there really is a truth, you know? Don't you think? Yeah. Do you think there is an objective to it?

24:05 I I would like to think so, yeah. Yeah. I think that that's But how do we get at that truth is the listening to different types of people. Yeah, but then you're you're making a judgment call at some point on what what's closer to the truth and what's not.

24:20 Of course. And then you have to kind of uh well, and then you link in analysis and, you know, some pattern recognition and And so on and hopefully you get to something which is correct. I think the the source of m most of our poor decisions is just blind spots. There's information we're missing, there's something we don't see. There's something and our job is to

24:42 reduce our blind spots. I don't know if we can completely eliminate them, but we can definitely reduce the yep. And then we reduce it through talking to people and getting different perspectives. And it's just like if you and I were standing beside each other right here and you took a photo and I took a photo, both of those photos are one hundred percent accurate. Yeah. But if we add them together, we get more of a picture than we do individually, because they'll be slightly different because we're standing at slightly different angles with different offsides. How has your attitude towards risk changed? It's um

25:12 It it's a difficult one. I um Problem. Some waste become more risk averse. On the other hand, there are Some risks I probably take more of now than I did in the past, right? So the risk people's risk app appetite Uh depends on many things.

25:29 Um I mean everything else being equal. Men take more risk than women. Which is why we crash our cars much more, right? Um

25:38 Young take more than older people. Extroverts take more than introverts. It's geographically based, right? American people take more risk than let's say Asian people.

25:51 Um And I and I'm sorry, I'm not the I'm not the one who has invented this, okay? Because I I did a degree in social psychology on one of my papers was on exactly this, is just how his risk uh appetite linked to the big five. You know? And uh so as you get older, on average, you take A bit less risk.

26:10 But as you also as you build wealth, you take a bit More risk. Sometimes. Um so I don't I'm sorry, this was a long answer. I'm not sure I have a Very clean here.

26:20 So risk is interesting, right? So you then you talk to some people. So in pr so let's say you you private equity and you interview somebody like Steve Schwartzmann. Which we did on our podcast, right? So okay, it's really important not to lose money. So you need to really look at the downside. Now

26:36 In venture capital. It doesn't matter whether you lose money on a lot of stuff. As long as you capture the b really big winners, right? So you can do you can use nine out of ten, as long as you get the one right, which is just like Going up like a rocket. The the issue here is that the rocket, the the entry ticket for the rocket, which was one million dollars in the past, that's not like five hundred million dollars.

26:57 Yeah. So that rocket better better go up, right? And you guys do mostly it's like index plus Yeah, we are we are we are very indexed now. We got a very uh we got a really great investment mandate from the Minister of Finance. It tells us how we're going to be pos how roughly how we're going to be positioned. It gives us a risk budget. And then we are pretty close to that. And that's that's important for many things, but it's also important because it limits how much money We can lose.

27:21 So how does that work in practice? You you basically like start with a hundred percent in the index and then you're like, Okay, well we're gonna take a little less of this and a little more of that, or Yeah, pretty much. Right. So we would I would say we have Twenty percent of the active m twenty percent of the capital we would run in a very active way and the other one the other part of the capital will do smaller tweaks. But you ha you have a lot of money coming in every year, I would imagine. It's

27:44 Probably on the order of a hundred billion ish, if if not more. Well, this um it depends on the energy prices, but uh generally there's been inflows. And so do you take that and you no matter what the price is, like say today where you have uh, you know, the top seven stocks account for 46% of the US index, do you just How do you allocate that new money coming in? Do you just sort of like pop it into the index or kind of. We get we get uh the the the the inflows or outflows are they monthly, right?

28:14 So you get the money, uh On a particular day and then you have to think uh when do you deploy it into the market. You do it a bit in bit beforehand or a bit afterwards, or you know, a bit before and after, and we use AI to optimize those type of decisions. Do you try to front run index changes? Yeah.

28:30 Using AI, I would imagine. Yeah. What's gotten harder in investing? Everything. Nothing's gotten easier. No. Everything's gotten harder. I mean everything is gonna hard. I would say what's getting getting easier is research.

28:43 Right. Uh because of the deep research functions in some of the models. You get Incredible.

28:51 Incredible. I'm out of knowledge within within five seconds. I would take you ages. To do that before. And it's well structured and it's um and you can play around with it. And so that's

29:03 I mean, that's just phenomenal. It's just phenomenal. How do you think about the rise of passive investing when it comes to retail. What are the pros and cons of that? Well the pros is that it's uh cheaper. So people don't

29:18 Pay that much fees? It's difficult to beat the market. Um the natives is that you will I mean they would typically perpetuates Uh bubbles.

29:29 Mm because With more passive money, they go into you know, stocks which have done historically well and they perpetuate uh the moves. Is your goal active return like a active Um total return, absolute return, or is it sort of relative to the index. Relative. Relative. So we are measured against the reference index, which is uh constructed by the ministry.

29:52 And then we try to beat that. Historically, over the last close to thirty years, we've had Twenty five basis points or performance. So you would say, Hey, that's not so much. Well the thing is that if if you have a lot of money, it's these are pretty they it ends up being pretty big, uh, you know Absolute uh amounts. And when you were running your own fund before that, what was the the worst sort of investing mistake that you made and what happened?

30:16 The worst mistake was during the financial crisis we were in a subprime Blender. And it turned out that there was Accounting fraud. And um it was a big position and that's that's the worst.

30:30 That's the worst investment I've ever made. Uh And what I learned was that Um You don't want to go into dubious business models.

30:39 And so Brian, you can say uh you know, it's not really Um certainly the type of company we're interested in. I I would say it's not really I mean Is it ethical to

30:51 Lend money to people who Or in a tough situation in life. Well I don't know. It's certainly. was a really bad investment.

31:00 I wouldn't invest in that type of company, no. Yeah. What would you like what was the last thing you took away from that? Is it the business model? And it's just I just don't want to I just don't think you should profit From people who have a tough time. What would be the counter argument to that if you were to argue with yourself? I mean there's a I don I don't think there's a good counterargument. The pushback wouldn't wouldn't it be like maybe I'll play devil's advocate here for a second, but wouldn't it be that people uh all need credit? We've all been down on our luck and maybe we don't have the best credit rating and but it's just how you do it and

31:35 How you go about it and what you charge for it. Yeah. Yeah. It shouldn't be sort of used area rates for sure. No. Um, did you do a postmortem after that? Totally.

31:45 And then how do you have the confidence to sort of come back and take big swings after you lose like you lost a lot of money on that one? Because you as long as you don't do the same mistake. I mean why why why make the same mistakes when there are so many mistakes to take from, you know? You can find some new ones.

32:01 That's originality and mistakes. I love it. Um but you know uh okay, so so the risk taking is really interesting. So most people take less risk when they lose money. Even though you should take the same amount of risk. So here we use as sport psychologists. I I sailed.

32:19 And I did a lot of competition when I was A bit younger. And I sailed with some of the British Olympic sailors and they were just really, really good, right? And so I asked him, hey, why are you so good? Well, you know, we we we have two reasons. One, we have a very uh great we got a really good debrief system. And also we work with uh sports psychologists, you know, to work with on mental type of uh you know

32:42 Strength. And So W what is important in sailing is that you know you can be number one and then the wind the wind direction changes and then suddenly you're number you're the last one. Now, next race, you need to take the same type of risks, you know, you cannot let it impact you. And that's the same way it is with investing.

32:59 No, just because you lost, you need to get back on your horse and take the same amount of risk and it's very difficult. And that's why you need some psychologists to help you with this. Um You know, I did a podcast with Magnus Carlson, the chess player. And so I asked him, Hey, what happens when you l when you lost the you know, a game? Do you

33:16 Take more less. Well she takes more risk. In the next game, which I think is interesting. But normally people take less. That's fascinating,'cause I I was thinking as you were saying that a little bit that the worst people would take less or more risk because isn't that the

33:30 Uh I just picture this guy at the or girl, I guess, or whatever, at the gambling table in Vegas and they lose and they keep go you know, double down, double down, double down. Investors don't do that. Yeah. Why did you take this job? Like what did you see? Why did you want it? Why did you want it? Oh my. It was my it was my it's my dream job, right?

33:49 So I had um I had run. Uh this investing company investment company called AKO Capital has set it up and um And Kind of

34:01 Done fifteen years and And I thought it was time to pass it on to the next generation and do something else. So I wanted to go back to university. And to another degree. And uh learn some more more things. And then I had just before that taken a degree in uh done a degree in in social psychology and uh organizational development.

34:21 And so when this job came up, it was just like wow, you know, it combines uh you know, asset management. And asset management is the most interesting thing you can do in life. Because it's about everything that moves, everything you eat, wear, drive, all that kind of thing. It's about psychology, it's about markets, it's about greed and fear. It's about Microeconomy, geopolitics, defense.

34:41 Uh It's about everything, right? So it is it is the most incredible game you could ever construct. Then I could combine it with organization development and really

34:53 See whether we could take this organization, you know. To a place. But it hadn't been before. And then do something great for the country. So all my interests.

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36:09 Shopify dot com slash knowledge project. I'm a huge proponent in sovereign wealth funds. How would you advise the United States or Canada to set one up, knowing what you know now? I I I um I think I'm too h too humble to Advice anybody, uh

36:29 In that field. What has worked well for Norway? is to have a sovereign wealth fund which is has broad political anchoring. So the political parties generally agree on the On the On the big decisions.

36:40 Which means that when you have a change in government, you do not change the way you run the fund. That's important. Then transparency. We are the most transparent fund in the world. And there is actually a world championship. In that and we won it three times in a row. Um

36:56 The world championships which has been run by actually a Canadian company. And Turn on. Uh and then uh the last thing is you have a we have a spending rule, which means that Um

37:08 the politicians spend three percent of the fund every year, a maximum of three percent. So I think the You know, the broad political anchoring, the transparency and the spending rule. Those those are three really important factors. Are there any acute sort of um

37:23 political factors that Go into this? I imagine it would become political. You're like twenty or thirty percent of the budget at this point. Well we yeah the fund is twenty five percent of the state budget. Well the whole idea is that the fund should not be political. And then how do How does

37:38 Norway's politics work its way into how you might vote for your shares on things like ESG or um Yeah, well so that's but so that is not politically decided, that's decided How is that decided? Well that is decide we got a group of people who sit and look at uh votes, right?

37:56 And uh they're very, very experienced people. So for instance we look at pay packages Are they structured in a way which Coincide with With the way, um You know, I mean are they aligned with our interests?

38:10 Are they long term enough? Are they equity based enough? Those kind of things. Do those decisions come up to you or are you at least aware of the big ones? I am aware of the big ones, but I deliberately do not uh make decisions here. What was the thinking behind voting against Elon's pay package? Like what was the rationale?

38:30 Um well, the team thought it was too too big. And uh didn't have the right alignment. With shareholders. Yeah. And and the fact that it was valuti and

38:45 You know, we own we own shares in nine thousand companies, if If all the COs were going to have a billion dollars, that would be pretty expensive for us. I like to think of it as you basically have a Almost a two percent toll on the world economy at this point. Or something similar. Is that a fair way to think about it? I think so.

39:04 I think that's a I think that's really cool, personally. How do you build long term thinking into the organization? Mm.

39:15 Because people want To do things. Okay. You know, I think Wealth wealth is basically created by owning one or two really good assets and then you just hold on to it for the very long term. That's when you when you know you look at the wealth.

39:29 the really big pockets of wealth, that's basically how it has been created. So You make money by doing as little as possible. In terms of ownership and change of ownership stakes. But imagine now you're a portfolio manager.

39:40 You come home from work on Monday. And your husband asks you, Hey, how how was it today? What did you do? I did nothing. Okay, and next day Tuesday, it's like Hi, darling. Um You know, what did he do today?

39:52 Nothing. And the same thing on Wednesday, Thursday, Friday. And it's just like at the end of the week, hey, did you would did you do anything? No, I didn't do a thing. It's um It's not intuitive that that's easy. Right.

40:04 So very often the most difficult thing is not to do anything. And so one way to look at it is w what I call the iner inertia analysis. You take the portfolio from January Jan one. And you and you see what would have been the investment result if I just stuck to that and not made a single change. And then you look at your actual results for the year.

40:24 And so often you actually have detracted from your performance. By the things you've done. That is so true. What does it mean to think long term? Like if if you were to are there elements to that thinking that go into it.

40:38 Um well, you have to figure out what's your time horizon, right? Ideally we should be thinking With the wealth fund, we should think. Fifty ahead. But that's tough because you haven't got a clue what the world is going to look like in fifty years' time. We don't even know what it's going to look like in

40:54 I would say Three years time is probably the max you can You can look into the future. So it's very tough to be it's very tough. to be long term what you do.

41:06 I know um Draken Miller is widely known to take a position, then do research after. Yeah. Uh do you do that as well, or I did I did that uh quite a lot. And I think it's Why do you want to do that? Well, Um

41:21 First of all, you If your gut feel is good and you know People don't believe in gut feel if you call it gut feel. If you call it pattern recognition, more people believe in it. But if your if your pattern recognition is good and you see something that looks really interesting

41:36 the probability of that being a good investment is pretty high. Okay, it's like way over fifty percent. Um And by taking a position you create some urgency. in the research process.

41:49 And it's also easier to add to but the add to the position. you know, if it goes up'cause you already have you already have some shares, right? So it's just like mentally a bit easier to get going. So I I was in his camp. Do you think you can teach intuition? Or pattern recognition, if you will.

42:06 No, you can't. But you can but you gain it with time. So I did uh I did a research process when I studied social psychology, I interviewed the twenty best asset managers in Europe. And I asked them, you know, about pattern recognition. You know, when do you when do you use it, when don't you use it? Well, first of all, you call it gut field, nobody believes in it, you call it pattern recognition. A lot of people

42:27 Believe in it. You don't believe in anybody else's. Good feel. Only your own. You can't apply it when you're young.

42:33 Because nobody believes in it. You can't go to your boss and just like, Hey, you know what? I think we should fire I think we should You know. buy uh you know, a hundred million worth of apple. Is that okay, well why? Oh, it's just a good feel I have. It it doesn't it doesn't work, right? Nobody's gonna listen to you. So you need to be pretty senior.

42:50 And ideally you want to be the boss. Because if you're the boss Uh. You can actually do it. And it gets better over time.

42:58 So the best but the best people use a combination of the two. They use a combination of pattern recognition and analysis depending on the situation. If you are if you press for time. you you are m you're more likely to use pattern recognition and if it's a really complex situation where where it's difficult to put numbers on the altcom. Their pattern recognition is more important. I think I remember an interview with Magnus where he said something like that where it's I have an intuition, like an intuitive

43:23 recognition of what move I'm going to make. Yeah. And then the person the follow up was, Well, why does it take you like five minutes to move sometimes? And he's like, Well, I'm double checking. Yeah. I'm slowing down. I'm So what he does. Uh well, according to what he told me, is that he He's Uh his gut feel uh gives him like three moves three different types of moves and then he analysed them.

43:44 And then he spends like five, ten minutes, but beyond that, uh time, he doesn't need time more than that. 'Cause it doesn't add to Do the allcome. And we we over analy there are a lot of things we overanalyze. By over analysing you

43:58 It doesn't Often it doesn't improve the old comp, but it makes you more confident about the old comp, which is also not always a good thing. How do you r like how do you think about chess, which is sort of like a defined board, defined rules. Uh finite it it's knowable. Everything's knowable. All the information is knowable. It's all visible versus something like poker.

44:19 When it comes to intuition. 'Cause you you if you listen to Conman, I mean his argument was to really develop intuition. You need a constant environment, rapid feedback, and a lot of Iterations. And in investing you

44:35 Definitely don't have a constant environment. Feedback can sometimes take a long time. And you might not get a lot of iterations at the table. Well, I would argue you get feedback all the time. In investing.

44:49 How is that the market? But the share price tomorrow, like if you buy today, the share price tomorrow, is that feedback or is that sort of noise? How do you think about it? Well it depends. It depends. It can be Can be either. So how do you know when you're wrong? Generally speaking, uh, I don't know, with the share prices go against you, that's an indication of the fact that you may be wrong.

45:11 But of course you don't know for sure. How do you seek out disagreement? Well, first you have to create an environment where people are okay to disagree with you. You need to listen. Um

45:25 You need to take what they say into Consideration. Uh you need to create that kind of Atmosphere. In the beginning in my job, people didn't disagree with me.

45:37 No. Agreed. And that's not very good. No, they disagree all the time. Yeah, it's really good.

45:44 How did you change that? 'Cause that so often insulated. No, by creating that's hopeful security for people to be able to speak up. I mean, is everybody telling me all the things they mean all the time? No, of course they don't, because some people have, you know, respect for the CO and that kind of stuff. But we are creating. Ways of doing it. For instance, I mean you're Canadian, right? So you are you are I'm sure you're g you know into ice hockey.

46:07 No, yeah, we have these pucks. Is you know. Things that you You know, play with. We have them on the table. It's just like hey.

46:16 There is a straight book. I disagree with what you say. I think you're wrong. So then you put the disagreement into like a physical object. And you take it away from the person. So it's not personal. It's just hey, you know what, I think what you're saying here is just crap.

46:29 And that's really good. So in the front now we have like a straight pack award. So the people who is kind of talking up uh You know. Probably disagreeing with me against a buck.

46:41 Good. I like that idea. I love it. I think it's just really good. What other ideas do you use internally that would be along the same lines that may seem interesting or counterintuitive that are actually super effective? Well you just have to work on getting a feedback culture. You know, we are working on it. It's not easy. It's not easy to give feedback and it's not easy to to receive feedback.

47:02 So you just have to You do it all the time. I'm getting better at it at this, you know. I'm I'm I'm more of a straight talker. I tell people more uh now that I disagree with them and uh and I try to give them feedback straight after but it's not easy. Pe people are very sensitive, you know?

47:18 Is there anything you've learned about how you disagree with people that makes a difference? Well, you I mean you can pack it in a touch, but I think you just want to be pretty straight. A lot of people are sensitive when you sort of I mean but it's also the age, right? I mean young people are very, very sensitive. In in the Nordics we are like hyper sensitive, and in the public sector they are very, very sensitive. You know? Yeah.

47:42 And then the the feedback you get is it's so interesting because a lot of these conversations actually turn into that, which is like, I disagree with you. And then it's well, I didn't like the way you disagreed with me and you made me feel and then the the whole topic of the conversation has changed from the actual thing where It's not like I disagree with you as a person. I disagree with your opinion on this thing. But now all of a sudden we're talking about how you feel about my disagreement. Absolutely. And it sort of derailes things. It's crazy. What do you look for when hiring?

48:11 Um curiosity? Intelligence, integrity. Drive. How do you test for curiosity? Like what does that look like? What are you trying to learn now?

48:21 What have you learned lately? What have you learned that? Me, I'm learning every dev. Fan deep dive on you for the past two days. Poor thing. Terrible. I've learned lots about you. One of the favorite things that came up about in my learning about you is you have an ice cream stand outside of your office or something. Yeah. H why do you use that? Because you want um you want people to come by and talk to you.

48:43 And so I got a sofa next to the ice cream. box and I kinda hang out on the sofa quite a bit, you know, like Uh just chill there. I'm uh People can buy it to have an ice cream and say, Hey what are you working on just now? And they're telling me what they're working on.

49:00 It's really interesting. And sometimes you're like, Yeah, but have you spoken to this guy? I think he or she is doing the same thing as you. Have you spoken to that person? So I just learn a lot. It's great. I mean the payback on that ice cream box is probably a

49:12 Thousand times payback. At least. One of the other things I learned about you that I found fascinating that I wanted to follow up on actually is You had all these conversations after you started or right before you started. You had hundreds of conversations with people. Oh, I don't know forty.

49:27 A hundred and forty. What were those what was the structure of those conversations like? Um okay, so this is something I learned from a guy called Albert Benny. He was the head of a company in specifically called Gebbert and another one called Nunza. And here's a nickel when you because when I got the job, I thought, you know, gee, I got the job. I mean What do you do when you get a new job?

49:47 What do you do? So I rang all the best CLs I've ever met. I said, Hey, what do I do? I I got a new job. I mean, how should I How do you approach a new job? You have a lot of conversations with people. And you do them before you start, because after you start it you have you won't have any time.

50:03 And um And you do it because people need to get to know you and you need to get to know them and you need more data points so that you can make good decisions. So that's very important. So I sit down with Hundred and forty people and I just thought, Hey, what's on your mind?

50:20 That's it. Yeah. People have stuff on their mind, right? Yeah, but what do people think about? That's very interesting. But then of course you you develop. It's just like okay, what is What are the

50:32 What are the good things here? What would you change? What's your advice to me? Those kind of things. And it's very clear. You know what you the the funny thing is that

50:40 When I had you know, when you've had half of them. Yeah. you get the general gist of what you need to do. You've kind of triangulated, like the same thing is coming up over and over again. So that's a strong signal. Absolutely. I do the same now. So I'm in New York for a month. I sit down with everybody in the firm. Here we go a hundred people. And uh hey, what's on your mind?

50:59 And um you know, there's a bet on Emerging and I If there is a problem I try to change I ch well, I change it. Do you ask people what you're doing that doesn't make sense. Uh yeah, I do, but I probably should be even more.

51:13 Because people do generally speaking, we all do things which are which don't make sense. And then inertia sort of like takes over totally. Like we're doing we make reports which nobody reads, right? That kind of thing. Yeah. So so that's the first thing you do when you when you talk to people. So then you just still down, okay. Of everything I've taken from these hundred and forty conversations, what is it, what are the three most important things? And then you put together a leader group. And you execute. Those three things.

51:37 And you take the time. You spend the time it takes. Peop leaders who fail, they try to do too many things too quickly. And we were in the beginning I we move too quickly twice.

51:49 And then we We got the message and we slowed down. Go deeper on that for a second, because that that strikes me as Um something really interesting where a lot of people Are trying to go faster and faster. And I'm thinking, you know, specifically, uh my friend Kaz had a shirt on yesterday. He did the

52:07 uh open investor call. Um And his shirt literally said faster and he was all about increasing velocity and he had just taken over, I think Uh September fourteenth or sixteenth or whatever. Um but like how do you how how do you yeah just go deeper on that.

52:24 First of all Um you need to you need to execute change as a combined leader group because if you If you don't have If you don't if you aren't a combined leader group and you try to do something on your own you'll trigger uh the immune system of the organization. You know, the organization just wanna have you out.

52:41 And they often succeed. You know, you are Isolated, you just don't get things done. And so on. So you need to the organization needs to feel okay, this is a this is a combined leader group. There is no It doesn't make any sense to try to resist this change because it's going to come. I can just as well just

52:57 Came in and And accept it, right? Um and then you need to you need to prioritize and you need to have not too many things and you need to overcommunicate. And um the thing with the communication, it's become just becoming clearer and clearer. You know, you think you've said it, you think they've heard it, they haven't heard it. It's very, very tough to get something to really permeate through an organization.

53:19 So we just but then you think gee, I've said it ten times and I nearly I'm g I'm so bored of myself. But then you're only halfway. Just need to keep going, you know. Same message over and over and over again. Yeah. And how do you evaluate CEOs from a competence point of view from the outside, just using public information? What's your thought process when you're sort of evaluating whether this person's effective or ineffective?

53:47 I think it's difficult to C before they have been in the position. Most people I see are competent, otherwise they wouldn't have gotten the job. You know, they are They are I mean they know the stuff, right? They know the company, they know the things.

54:04 But are they good communicators? Are they good at executing? It's tough to see from the outside. How long after somebody has taken over do you start to see it in the finances, like the analytic numbers, the quantitative numbers? I think it depends.

54:21 It depends on the it depends on the business cycle. It depends on Kind of the product cycle of a company. But it takes time to turn around a company. Totally. I guess the I would say.

54:34 To change a culture. It's a ten year project. Oh wow. Yeah. Why do you think it takes so long? I mean this j I've been in the job for five years now. I think I'm roughly half the way in.

54:45 If you had to do it faster, how would you do it? Is it a matter of force? Like if we think of it from physics, it's No, I think if you do it faster, you need to lay off people. Then you need to change the people. Right. And in some in some businesses you can do that, but But I but you know w we can't do that in I mean in Europe it's it's difficult. And also we got great people. You know, we were amazing people. I think we got the

55:07 An incredible lineup. Of you know, very, very able You know. Professionals. And so you know, but there just are

55:16 A few things that we'd love to, you know. to change, right? We wanna have more feedback into the system. We wanna Move a bit faster, we wanna have a bit less sphere we wanna Uh do these kind of things. But that was w I mean it was uh it probably it wasn't working as well. um before you as as now maybe

55:34 Um but it's sort of like that's working when you think about it. I mean It was working well. I mean it was a it's a great company. It was not nothing wrong with the company. I mean really good. I mean just had a Fantastic. Performance, right? But I just thought it needed some tweaks.

55:50 Yeah. I mean technologically it was Top notch. Um Compliance wise, top notch.

55:57 A lot of really, really good things. It's the envy of the world now. Well it's a g it's a good company. You've taken I mean just in the sense of the sovereign wealth fund too, right? You've taken these these reserves that you have and you've turned them into perpetual wealth, not only for all your citizens. um but global influence and a toll bridge on the world economy. I mean, I think that's amazing.

56:20 Well I well I so I would say that's that's really the um that's to the credit of the politicians. You know, the politicians decided when they found oil and Back in sixty nine, I mean they decided after their found though, listen, we should put this into a fund. And So in ninety six they set it up.

56:39 first deposit was, you know, relatively small and now it's grown a lot, right? But um the politicians were really four sighted. And uh And they've been good ever since to be true to the principles. What are you trying to learn right now?

56:53 Lots of things. I Yeah. I I just feel I know so little. And

57:00 podcasts I'm doing over the next few months and I'm learning about all these kind of things and I needed to learn them anyway. But But that kind of makes it urgent. I really need

57:13 You know, by next week. I need to know more about uh networks. Um I need to read up on crypto. I need to

57:26 Uh read up on IMS. I need to Uh Oh my.

57:36 There is just so much I need to learn. You guys incredible. You guys don't invest in No we don't, but I'm talking to somebody who's in that space. In crypto at all. Yeah, and I d I just don't understand. I don't understand it, so I need to To learn. Is it that you don't invest in the coins themselves, or you sort of like a bitcoin or you don't invest in the exchanges like Coinbase or something? Well, we have we have some we have some ownership stakes in in some of the infrastructure. Because it's in the index and we are, you know

58:06 So we would own it. In a in a bit more passive way. How much do you work? I work uh I I work uh all the time. But it's not work.

58:18 It's like Jensen. Is it like Jensen, you wake up at five and you're like go go go until nine and then you know, for him it's it doesn't feel like work. It's just a bit I mean, uh that's what he that's what he told me. And I kinda I I mean he works more than he works a lot more than me because he works every holiday and every Saturday and every Sunday and all the time. But you know, I d I tend to wake up at five and then I read papers and try to understand what's going on in the world and then I Start to shoot mails. And uh you know, I have a notepad at the

58:50 Design over bed because if I wake up in the middle of the night, I typically have some ideas. And if you don't get them down a piece of paper, you're going to forget them, right? So I do that and then I work meetings. Um And I read in the evenings and

59:06 uh, you know, check out the papers from the next day and But it's not work. Yeah. It's life. So many people uh Michael Ovitz gave me this phrase, but it's like so many people fight their job.

59:21 Um, and so that it's more of like a transaction than an integration between work and life. Strikes me that having the view that you have towards work is much healthier and Yeah, but not all people I mean, hey, I mean it's not like everybody have the opportunity to work with what they love and you know, but not everybody is that fortunate, but I've been really fortunate in that I've ended up with the things I I I just cannot think of anything more interesting in in the world.

59:46 Who do you go to for advice? I go to lots of people. I um I speak with as many people as I can. The funny thing, when you ask people for advice, what do what do what do they think about you afterwards?

59:59 Do you think that you think that you are more clever or less clever? More clever. They because you must be very clever. Who asked me for advice. You know, he must he must be really clever. He understands how clever I am, and therefore he wants to have my opinion. What surprised you the most this year?

1:00:15 Everything that goes on in Geopolitically. You didn't see it coming, or it just continues to like push the limits of what you thought was possible. Yeah. Yeah. But that's

1:00:29 makes life interesting to live, you know. You can be you can do one or two. If you don't like what's going on, you can Or You can put on your student hat and just think oh my My, I can't believe I'm alive to see these things. You know, it's so interesting. And I think it is like super interesting. And technology, you know, so the thing is that everything is coming together at the same time. You know, the technology development now is just like totally

1:00:51 Totally phenomenal. What a time to be alive. It's the best. I wake up every day. It's the best, yeah. And I remember it wasn't l it was only a couple of weeks ago where um AI actually made the first sort of um bio advanced that humans hadn't made. So in cancer research and they tested the hypotheses and it was true. And it was like this is like Neil Armstrong is stepping on the moon. Like this is this is incredible. This is the first

1:01:17 stage of The first real thing. I thought that was amazing. I was so excited about that. We always end with the same question, which is what is success for you? Success is to make a an impact in other people's life in a positive manner. That's a great answer. Thank you for taking the time today. I really appreciate it. Thank you.

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