Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341]

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0:25 Operate smarter and stay ahead of the curve. See what Ridgeline can unlock for your firm. Schedule a demo at ridgeline.ai. Hello and welcome everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at joincolossis.com.

1:00 Patrick O'Shaughnessy is the CEO and founding partner of Positive Sum and the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum or O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum or O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast. Yes, today's Lee Ainsley.

1:34 the founder of Maverick Capital. Lee started his investing career at Tiger Management, where he worked for Julian Robertson. In 1993, he left to start Maverick and has built the firm into one of the top performing hedge funds of the last 30 years. Lee doesn't speak in public often, so this is a fascinating insight into what it takes to build an enduring investment business, both psychologically and operationally. Throughout the conversation, we flick between his lessons building Maverick, his perspective on the market, and what he's learned about the craft of investing.

2:02 I hope you enjoyed this great conversation with Lee Ainsley. Mm-hmm. So Lee, this is gonna be such a blast. I think a fun place to begin is actually with your origin story, because the firm is so old. It's just not often that a firm like yours is able to stand the test of time. We're gonna talk a lot about investing culture and building a team. The tenure of your team is remarkable relative to others over several decades now that have been with you for so long.

2:29 And that has to be rooted in the earliest days of building the firm, of meeting other peer investors at the time. Obviously you were a tiger. At lunch you were telling me this incredible story about Steve Mandel and your relationship with him early on. Maybe you could retell that as just an amazing precursor to some of your ideas about integrity ethics.

2:49 and culture in an investing business. Well, thank you. I appreciate you having me on. It was a great fortune, you know, to work at Tiger in that amazing environment with so many Really talented people. As you were pointing out, one of the people that was quite nice to me at that point in time was C Mandel.

3:06 We started about the same time, but I had just come out of business school and he already was a well recognized investor All American Goldman Sachs, et cetera. And so it's under his wing for the first few months. And then I went into my year in review. thinking there was a decent chance I was probably about to be let go.

3:23 But to my surprise, I was paid well beyond my expectations. They actually doubled my percentage interest in the firm's profits. And they made it very clear this was all happening because of Steve's recommendation. And indeed they wanted me to uh take over a new sector altogether. Technology. Which I was really excited about. I thought that was a big promotion.

3:43 Throughout the rest of the day. three or four people came in to give me their condolences and give me some pep talks and I finally found out that my two predecessors had not lasted very long in that role, but nevertheless it worked out. But uh look back on the time at Tiger obviously was Not only very formative and learned a lot from Joyan, but I've really had the opportunity to work with So many talented people became the basis for what we did going forward.

4:06 Why do you think Steve did that? And what can be a very cutthroat. Environment. In the investing world, incredibly competitive, lots of type A people. That seems like a pretty generous and kind thing to do. What do you think was behind that?

4:19 Well, I agree, was generous and kind, which if you know Steve is very consistent with how he interacts with folks. I will say I started playing with socks when I was thirteen years old and I don't think Joanne fully recognized the depth of my knowledge and So was quite comfortable with what we were doing and I think Steve concluded that it would be in Tiger's best interest for me to have More responsibility more than anything else.

4:41 Why do you think there has not been Another Diaspora, I'll call it, of amazing. investors that came from one ecosystem Like has happened with Tiger.

4:52 Obviously the first generation of those firms, yours, Lone Pine, et cetera, Viking are well known, but it's continued through time. Almost like the Parcells coaching tree or something. this amazing singular investing Family tree, I'll call it. Why has that not happened more often? I think the only organization which has spawned as many successful investment firms

5:13 There's probably Goldman Sachs. But I think it's important to keep in mind. If you get back to the late nineties. Tiger had probably a dozen professionals. And Goldman probably had

5:23 hundreds if not thousands. So it's really different. The hit rate is crazy, yeah. Exactly. I don't think there was any one magic item that drove the fact that a few of us have been fortunate to enjoy success after Tiger, but

5:36 Do you think it is a testament to the fact that join had a really good eye for talent. And sometimes in places in people that weren't completely obvious. He created a culture where We worked closely together. We had a lot of trust in each other. It was pretty unusual at that point in time because Julian was so senior and already was such a well known investor.

5:56 and the bulk of the investment team were in our twenty, so We all reckon us. who was in charge. And therefore we as a team worked really hard. To support each other.

6:06 And to learn from each other. a lot of how I think about investing in different industries came from my time at Tiger. Not so much talking to Joanne, but talking to other folks. That were my peers. And as I left Tiger, then others after me.

6:20 The strength of that network really continued. We continue to work hard to help each other. To root for each other. One of the things I've always loved about the hedge fund industry Is even the largest funds have just

6:32 tiny market shares when you think about not only the hedge industry, but the stock market in general. Therefore is really no reason to be competitive with our competitors. On the contrary, to this day. I like to see the long short community do well. Together. as an asset class and typically I'm very supportive and helpful of those that I'm quote unquote competing against.

6:52 You said Julian was a great spotter of talent. And that's something obviously that's been a key part of your role too building Maverick the firm. What does investing talent mean to you? What is behind that idea or that concept? Well, again, I think very hard to distill in in terms of Here are the two or three attributes you have to have.

7:11 Because whatever magic was you can come up with There are a long list of people that have those attributes and yet Do not seem to make it. As an investor. And this is something internally we studied with great rigor because in the day

7:24 I would argue investment firm only has Two assets. The confidence of the investor base. And the talent and dedication. the investment team. And so we work really hard on both those.

7:34 To your point. Bringing people in. At Maverick Lee's is a very intensive process involves A lot of different steps, meeting with a lot of different people. A lot of testing work we do.

7:46 And all that does lead us to Making one or two all person year and those are typically accepted. If you were to look for some of the commonalities. Some I think you would expect. Intelligence.

7:58 Comparativeness. A real passion for stocks. But some are probably a little different at Maverick than elsewhere. We spend a lot of time trying to evaluate emotional consistency.

8:08 So the highs aren't that high, the lows aren't that low. P you're right in your stock picks, meaning you're outperforming on the long side or underperforming on the short side in Jerry Alpha. If you're right. Fifty five percent of the time? You are one of the best in the world.

8:23 That's a really hard number to attain. So by definition, you're gonna be wrong. a lot and how you deal with quote unquote being wrong. And again, it's a very competitive name and usually there's someone on the other side. So when you're wrong, they're right. How you deal with that.

8:36 is really important because A lot of people I think have those moments they just want to put their head in the sand and wait for the world to pass them by. But in reality, those are some of the most important decisions you make. When a socks is going against you. Is that an opportunity? Has the world misunderstood it?

8:52 And we need to take advantage of this? Or wait a minute. This is on a different path than we were thinking. This is not a good use for capital. Because yours should be one or the other. So emotional consistency is important.

9:04 We place a great deal of importance on a team orientation. Now part of that is just from the beginning recognizing the environments that I personally enjoy. I like environments where our success is driven by a team. We were talking about this the other day, but one of my favorite sports growing up was basketball. In part because

9:22 To really excel, you had to be a highly functioning team. where individual players willing to make sacrifices for the greater good of the team. And yet at the end of the day, everyone knows who really contributed. So to me it's a great parallel of the importance to success of teamwork. And yet still maintaining a meritocracy.

9:42 And at Maverick, everything we do is Based on teams. If you look at a lot of the stats we track. We actually don't track them per individual. We track them for the entire team. Because we want that mentality of we're all point together to achieve a common goal.

9:57 And also we recognize that given We have a rather concentrated portfolio and very long voting periods. That typically any one investor On our team. It's not gonna have enough stocks to consider it to be a valid sample set.

10:10 And then lastly, and it may sound a little corny, but it's very important to us. We really do spend a lot of time trying to make sure we have a very strong sense of someone's sense of integrity. whether or not they conduct themselves with the utmost ethical values, et cetera. So those are some of the things that we perhaps put a little more emphasis on than others. On the topic of emotional consistency, what episode across your entire investing career? most tested your personal

10:36 emotional consistency or stability, I guess you could say. Well, that's a hard question'cause it's a very long list. If I go back to early years uh Tiger This is back in ninety one. We had bought a lot of Oracle and I had concluded and actually wrote a memo that technology tends towards standards and became very clear to me in the database world back then.

10:58 that Oracle is becoming that standard And there are these flywheel impacts about what that means in terms of other products they can sell and customer switching, et cetera, et cetera. And I think my basic thesis is right. So we sort of buy a decent sized position. And they missed a quarter by an order of magnitude that was hard to comprehend.

11:16 If I recall. The stock went from eleven dollars to six dollars and there was such stress in the balance sheet. its ability to survive was all of a sudden brought into question. And this was obviously a

11:28 Challenging discussion with Joel in. But I did convince them this would be the absolutely wrong time to sell. even though I felt management had not been fully forthright and certain issues. But it was a real gut check because at that point in time to say, Yeah, Joey, I was wrong, we should sell. I don't think would have been great for my career.

11:48 but more importantly would not have been great for Tiger'cause it ended up being a very successful investment. So you have to Take those moments of disappointment. One of the phrases we use. Hey, we're not playing football, we're playing chess. Getting wound up in emotional

12:03 is just really counterproductive. We have a new set of facts today. Let's understand how that impacts your longer term view. Let's compare what the market is offering us in terms of value today versus what we now think the longer term value is. And if it's an opportunity, let's take advantage of it.

12:20 And it's clearly not an opportunity. Then let's move on and mark that as a loss and start focusing on the next investment. The last thing you listed there, this notion of ethics and integrity and sussing that out in somebody. Feels like one incredibly important. I know it's incredibly important to you. Especially given how long people have tended to stay at Maverick. So it can be something that defends you against bad situations for a long time.

12:42 But also seems very hard to suss out. In an interview process. So How do you do that? How do you come to peace with that aspects of someone's background or character or

12:52 worldview or whatever during an interview process specifically. Well, and this is really important not just for potential members of the team, but for management teams as well. We go about it a few ways. One There are certain questions that you tell me about a difficult situation you were put in and how you resolve that. He answer those questions to enough different people.

13:12 You do start to develop a sense of who struggles with some of those and who doesn't. But I mentioned earlier we do a lot of testing. Most of that is personality testing. And these questions seem bizarre. Would you rather Clip the hedges or move the lawn.

13:27 And yet the sum of that is a very long test. You got a lot of these strange questions. Sentimentary is one of the factors that they do try to evaluate. And there's been some evidence that they've done that rather well. Just to give an example of how far we'll take things. We actually hired a group of ex CIA interrogators who call themselves BIA. The business intelligence analyst.

13:48 To train us. on interviewing people. And again, helpful in both the interview process, but also with management teams. And they're basically trying to teach you how to be a human lie detector test. And all these things about little tells and

14:01 how they anchor their arms and their feet. Where they look Hesitancy to respond. Obfuscation. No one of those little things in itself goes, uh-huh. This person's not being honest.

14:14 But you start trying to compile A lot of those different signs. It may relay where someone's just being flat out dishonest, but but even more likely It helps you understand where they're clearly uncomfortable. So that's played a role.

14:27 I think all that. You do make mistakes. And I think It's worth pointing out. for a training period which every new member of the investment team goes through each year. The first session has been taught by me

14:39 For the past fifteen plus years. And it's entitled Integrity and Ethics. And we spend the entire time trying to make sure people fully understand

14:48 How damaging even a small Lapse of judgment can be Not just to you, but to everyone else at the firm. And also that this is the one area where we do not give second chances. You can't get to work on time.

15:01 Well buying the warm clock. You seem to have a drinking problem? We'll send you a rehab. But if you in any way, shape, or form Make a statement or conduct yourself in a way we think does not reflect

15:13 a total understanding of the importance of ethics. We'll let you go. And we'll let you go immediately. And we're up front again from day one. And that happened. That's happened in their test. over issues that I think at most firms would be considered

15:28 rather minor, hey, please don't do that again. But we just decided early on. Therefore we're gonna really emphasize how important this is. That's the appropriate reaction. And secondly, if someone was thinking about oh, I could get away with this

15:42 making sure they probably understand the reimplications of doing that. So it all goes back to having an environment where we're very transparent about mistakes as much as anything else. I wanna go again back to the beginning. seeds of Maverick and why you decided to do it when you decided to do it in nineteen ninety three. What was the precipitant that made you think, Okay, now it's time to strike out on my own and build something separate from Tiger?

16:06 I clearly was not looking to leave. Joan was treating me extremely well, both in terms of compensation and responsibility. I love everybody I worked with. But I was approached by a family A guy named Sam Wiley, who is really a serial entrepreneur. And he was smart enough to recognize

16:23 Huh. This hedge fund business model, that's pretty attractive. That works. Let's start one of those. He at the time was the CEO of two different public companies. One was a sulfur company, one was a retailer. And there were both companies I happen to know well.

16:38 when he went to those management teams and asked for ideas, my name came up in both cases. So we started talking, uh, enjoyed our conversations, but made it clear I had absolutely no interest in leaving. Sam's a pretty competitive guy. So he kept making the idea believing more and more and more attractive. And I did know that I always again I started playing with socks when I was quite young.

17:01 I always had this objective. to have my own portfolio. to have my results purely determined by my decisions and have it be very clear what those were. And it was clear to me That was very unlikely to happen at Tiger. Again, Joanne was his

17:16 very senior guy that we all held incredibly high regard. But he made every single Final decision. And the only catch was I really didn't think I was ready for that responsibility at the time I was twenty eight years old, that only been at Tiger for three years.

17:31 But at some point it hit me. Okay, Easily. You're gonna wake up two, three, five years, who knows? And decide that you're ready. But no one's gonna offer you the opportunity that these guys are being generous enough to put in front of you.

17:43 So decided really had to force himself to pull the trigger. In hindsight. That was pretty naive. I don't think I fully understood the challenge I was getting myself into. But luckily they worked out. What were the hardest parts about launching the business itself?

17:59 Back in those days. Well There weren't a lot of precedents. So one person had left Tiger at that point, David Gerston Harbor Star Orgnot, which was a macro fund. Today you can go to a prime broker and say, I wanna hang my shingle and boom, overnight you have

18:15 The whole apparatus springs to action. You have all your systems, you have people helping you raise money, cap venture people, et cetera, et cetera. None of that really existed. And we started a pretty small basis. We started with thirty eight million dollars, most of which came from the Wiley family back then. The hardest parts were

18:33 Getting recognized. Convincing people to even Meet with you. The name Maverick. Strolling didn't help.

18:39 I chose that name because I was twenty nine. I thought it sounded pretty cool when I was living in Dallas and wanted to reflect that. But realise My first management meetings or potential investor meetings in Europe. Where does this maverick you shoot from the hip?

18:54 Oh No no no we're actually very, very Conservative. Do why just name Maverick? I don't understand. I remember distinctly being in Geneva going, Oh, Angel, you're an idiot. What did you do? So that creates some challenges.

19:07 And then like everything else, performance drives all and we started October ninety three in our first quarter we had a strong start, but again it was on tiny assets. We had an okay ninety four. up mid single digits during a year that was quite challenging for most hedge funds. At least that was all on the public equity side. And I distinctly remember beginning in ninety five. This is make or break.

19:27 We don't have a good year in ninety five. running this firm, the economics of this firm are not gonna make sense to continue. and I'll be back in New York working for a job. Luckily we did have a strong ninety five and even a better ninety six and then has to start growing and all that took care of itself, but it was a challenge.

19:45 You and I were talking at lunch about the three jobs of someone running an investment firm that It's probably hard to appreciate if you haven't done that specific job. how hard it is to do all these things well. And I wanna talk about What you've learned about each of the three responsibilities. So those being Selecting the assets, whatever the stock picking, whatever you want to call it.

20:05 building and managing the portfolio, managing risk, portfolio construction. And building the business. And we'll probably tackle them in that order'cause I think they build upon each other. So starting with stock picking, you said at age thirteen, I think was when you first started getting into this. So you were young, you caught the bug, so to speak. In the early days as you were learning about this from great teachers that you've mentioned.

20:26 What was your early conception of what makes a great investment or a great business and how those two things relate to each other? Well depends. Then went to engineering school and I think that gave me some perspectives of Different ways of trying to evaluate and analyze Different businesses that probably would not have had and then I was a

20:44 Consultant for a couple of years focused on small businesses and that gave me a lot of insight into how businesses ran. in some ways probably the best job when I was in college. paid my way by developing systems for small businesses. And the one where I had the most intensive interaction over a couple of years was a small printing company. Which in hindsight was so cool'cause it was both a manufacturer

21:08 any service oriented business. And so we build a lot of systems to track costs accounting, inventory control. Use the presses labor management. And yet on the other side we did a lot to attract advertising expenditures, IR and customer acquisition, now you price things.

21:25 So by the time I got to start investing for real, I do think I had a strong understanding uh different business models. a very strong understanding of the importance of Motes are these defensible positions. I think again, given a little bit my background.

21:41 And we need a tech effort at Tiger. really understood the value of sustained growth and also how challenging it is to sustain growth. And working with Steve and others at Tiger obviously I learned a ton by how they thought C, for example, was always super focused on the individual unit economics. developed a better appreciation from that.

22:02 So I think by the time I was really picking socks, I did have a fairly good understanding of the attributes. I was looking for and yet. to this day, I think my ability to identify those attributes correctly continues to improve day after day. Nope, that's true for everybody in Maverick.

22:20 How does that happen? So let's say that each business has couple key attributes, variables, whatever you want to call them, that are gonna be the drivers of success or failure and If you understand those better than the market, maybe there's a big opportunity. How has that evolved? What would be examples of

22:36 a way you look at a business today that you think is significantly more productive than how you might have looked at it ten, twenty, thirty years ago. Well you back thirty years, people forget there was no internet. There was no email. You wanna get to ten Q it? Usually came by the fax machine.

22:51 And if you happen to pour through the 10 Q in an hour. you were now at a huge informational manage to everyone else you were competing against. So It was just a much, much less competitive environment. I remember going to IPO launches in nineteen ninety. and recognizing about half the guys there.

23:09 were having their two martinis and thinking, Wow. How are they gonna get anything done when I go back to the office? It's just a different world. Today it's almost I would argue the opposite where the challenges How can you possibly survive? the tidal wave of information that comes at you.

23:25 Every second. There's so many cell side reports. You could use the internet for days and days and days. There are podcasts like this. There's a lot of discussion about stocks on T V It's a very different world. So some of the basics.

23:39 Back to your question I think are still present. Can you have meaningful dialogues with customers, with competitors, with suppliers? Can you triangulate what you're hearing from a company? This is more challenging these days than it used to be, thanks to Reg F T. But we like to talk to several different members of management.

23:57 Look for consistency of answers. We like to talk to the same members of management over time. Look for consistency of answers, but now we also have data that helps support what we're trying to understand in terms of business trends. So we first went down the path of investing in trying to develop a quantitative research effort in two thousand six. Which is still a really important part of what we do.

24:17 But in 2015, we turned that talent to focus on alternative data. And can we recognize whether you want to call them alpha signals or KPIs? Are there ways of tracking different elements of the business through data? That's not perfect, but it gives us some greater clarity. And after working on this for almost eight years now.

24:37 We can touch Every single industry in which we invest. in terms of using all that to give us some insights. Now To be clear, in certain industries it's far more effective than it is in others. But yet it helps us have an indication of different trends and all that gives us a slight edge.

24:54 How do you think about the different edge that you can source from you talked about informational already and how that's evolved. There's analytical, there's behavioral, there's a couple of different ways that you can have a persistent edge. How do you answer that question for Maverick?

25:08 itself the business. How do you get and maintain an edge. Versus your competitors. when the world is so competitive and full of information and fast and connected and all these things.

25:21 Seems like a daunting task. So how do you think as the architect of this system, back to your system engineering days? About that edge inside the investment business itself. I've always felt investing is really a matter of doing everything you can.

25:36 To slightly improve your odds. In other words, you're not going to find this magic algorithm or magic bullet no one else has thought up and aha, I've got this huge advantage now, no one else has. But it's can we do a slightly better job of gathering information? Can we do a slightly better job of interpreting information, can we do a slightly better job thinking about risk? And all those little slightly betters, I think, add up to be hardcore advantage. So just to give some examples.

26:02 We typically have three two five. investment positions. per investment professional. I think you'll find that ratio is a fraction of what you'll see elsewhere. So right there where we're talking about level of due diligence is quite unusual.

26:15 You combine that with the fact that we have much longer holding periods than most long short funds. On the long side we average seventeen months. On the short side it's thirteen months. So people focusing on fewer, fewer positions and yet interacting with those management teams for a longer period of time. helps us not only improve our understanding of that business.

26:34 But again, developing real dialogues with those that can give us insights into that business, competitors, swires, customers. We use quantitative research in several ways. Every portion of the investment cycle is informed by Quant at Maverick. And then even outside of all that Over the years we used to hire people to go count cars and parking lots.

26:54 Now we do that by using satellite inventory. Remember one company in particular, which is extremely successful short. Ordered something from them once a week. Only so we can look at the PO number. Which told us how many POs they had processed in the past week.

27:07 There are all these things we've done to try to have a slight advantage. And her objective, not getting say we've always fulfilled it, but the objective has always been To never be at an informational disadvantage to another public investor.

27:21 Because our depth of resources, because how long we hold positions. There's really no excuse for that to happen. Now it does, obviously, but To me that's one of our most important differentiating advantages. Mm. I combine that with

27:35 the depth experience of the team. So the entire investment team is twenty nine individuals. On average they have fourteen years of experience. Importantly, ten of those fourteen years have been within Maverick. So a team that has worked together for a long time.

27:48 And if you look at our six senior decision makers at Mabert. Twenty one years of experience. sixteen of those years within Maverick. So It's that talent. That experience.

27:59 combined with a better set of tools and hopefully a better set of information. There are competitors that leads to what we hope ends up being superior results. You said earlier in the Oracle example that a lesson you learned early in technology was that you tend towards standards and once someone achieves that default mode, if you will. the power that the business generates is enormous, as Oracle did.

28:21 Are there other features like that? that did or still always get your attention as it relates to an individual business, features of a business that Or not. sufficient to buy the stock or belong the stock, but just get your attention in a unique way. There's one magic bullet, but there's several different aspects that can be

28:40 Very helpful. Once you really understand secular trends. Where is the world? Head it. And who's gonna win and who's gonna lose.

28:49 Not that you can't have a great investment without that secular trend. But it's it's a tailwind. So again, it improves the odds if they had that tet one at their back. Yeah for short. And that head one in their face.

29:01 thinking about competitive advantages. So we spent a lot of time with in industries trying to understand the competitive positioning among different companies. We spend I think much more time than most folks as we're looking at companies. looking at the quality of management teams and not just what they say. One of the things I concluded a long time ago.

29:19 Almost anyone who's the CEO of a large public company. It's pretty darn impressive in that forty five minute interview. And are smart enough to know what answers you want to hear. They won't be dishonest, but they will certainly shape their answers to make it close to what you want to hear. So for us it's much more important to judge actions.

29:38 What decisions did they make? And how do those decisions turn out over time. And then as I mentioned earlier, going back and comparing what they say they're gonna do versus what they end up actually doing. So I think all those things do help you.

29:51 Have a better perspective. When I say outstanding management team and you think across your whole career studying management teams Is there an example that just flashes To mind? Ed Marine.

30:03 at a couple of different stops. cleaning up the Tyco being the most impressive, but he's a guy that's had several situations where he took Apollo crap and turned it something which was very rewarding for shareholders. And you look at what Santiago's done at Microsoft. It's just pretty amazing and you don't want you to argue. Jeff Bezos, the Amazon, et cetera, et cetera. But

30:23 I point to Microsoft just because where that business was headed per conventional wisdom. And where it is there, not even where it is today, where it was just in two years. really shows the power of a CEO. What was Ed Breen's method since he was able to do it multiple times? What was his operating style that unlocked that value?

30:42 That's a great question I should ask him next time I see him. I would argue Something along the lines of brutal honesty. He was very willing to take I don't care what we've done, why we've done it. Let's start from scratch. We call this

30:55 The fresh sheet of paper exercises apply to Maverick. We've always had the philosophy If we were given this amount of money to invest today How would we invest it? If we didn't have any investments, have a fresh sheet of paper. What are we gonna do?

31:09 Okay. So why is your actual portfolio? Different that. That's the ideal portfolio. Let's move the actual to the ideal.

31:17 And I think Ed's always had the same approach when it comes to business. What are my set of businesses? What should be my set of businesses. Where is there opportunity improvement, where is there not opportune improvement? And all the obvious things as well in terms of Cost controls, motivating people, rewarding shareholders.

31:33 using the balance sheet more efficiently, et cetera, et cetera. But not many people have had that kind of impact in three different industries that it has. What did you learn from Soul Price? I don't know where you got that quote. And this applies to Maverick, but also applies to other businesses. So

31:49 Everyone's heard of Costco, but unfortunately Price Club is not as well known as it used to be. Price Club is actually the first warehouse business. So both Sam's Club and Calls Go copy price club. Price Club was eventually bought by Costco. Why Price Club is a great name in terms of it conveys what the retailers try and do.

32:07 It's also the name of the pounder. And one of my favorite business quotes. Firm sole price was The intelligent loss of business. Now what he was referring to is let's have a really limited SKU count.

32:21 So we can excel on the few skews where I'm buying such force. We get great pricing. We'll be able to advertise them, push them. Give them the in caps. We're gonna excel on these smaller number of things.

32:33 And not clutter or buying or the consumer's mentality with all these different options. That's something we've thought about a lot in Maverick. It's corny, but nineteen ninety five. I wrote to myself our long term strategic plan. And uh basically laid out by two thousand, by two thousand five, by two thousand ten.

32:50 what I wanted Maverick to look like. And it was essentially based on We're gonna start a new fund every X years, we need to raise X assets, see how many people you have to hire. The new funds were Maverick credit. Maverick currency, Maverick, whatever.

33:03 But somewhere between nineteen ninety five and two thousand. I started adopting that mentality. Wait a minute. We know we're really, really good at picking stocks. We know we're good at investing in equities. I don't know if we would be as good at these other things.

33:17 Let's focus on resources on where we know we can excel. And I think that principle has really served us and our investors well. The sole price impact on the hedge fund. Really cool. If you think about the second part of the job, so Obviously you need to pick great companies and invest in them.

33:34 Table stakes I think people probably have a hard time that don't do this for a living, understanding how challenging it could be to take even if you've got a bunch of great ideas. And building a really good portfolio from them. What lessons have you learned there over the years about doing that really well? And here we could talk about the role that quant plays. We could talk just in general about.

33:55 how you think about risk in a portfolio context, not just risk in an individual investment context. Talk us through the lessons of portfolio construction and risk. To Maverick at least. Every mess we make is driven on a bottom set basis. is in the portfolio because our teams concluded it is one of the very best uses of capital.

34:14 But then we look at that collection of different ideas. To see where Portfolio ends up. From a risk perspective. And this really started up until two thousand eleven. We thought about risk, we thought about our net exposure or our beta adjusted net exposure.

34:28 And then in August of two thousand eleven when treasuries were downgraded. Our portfolio went sideways. it performed much worse than you would have thought possible. simply looking at those rather basic measures. And it became very clear to me

34:42 that our approach to thinking about risk was not sufficiently sophisticated. There were some important things at work. We just weren't thinking about As I mentioned earlier, by then we had a quant team that had been in Maverick for five years, who had a lot of different tools at their disposal. And we try to take again press sheet of paper, a completely different approach. to understand the risk of our portfolio.

35:03 We could make this the entire podcast, so I won't try to get too detailed, but Now we look at everything. Such as our factor biases, how that compares to our history. How that compares to the market, how that compares to other funds.

35:17 a lot of tools to help us understand whether those biases or likely be productive or unproductive. A lot of things looking at risk appetites and likely that those risk appetites are changing. indicators what's happening in the economy in real time, which ends up being ninety percent plus correlated GDP. So it's a real time look at GDP.

35:35 A lot of work other hedge funds. our position and whether we share position it may be Not productive going forward. And the twigs we've made out of that It's not that often, again.

35:45 usually rely upon what we're getting from bottoms up perspective. But when we have Whether it's a factor or regional exposure. that we think may not be productive going forward. We're very proactive and controlling that and I do think that's led to a risk or volatility profile that we're proud of.

36:04 There's a spectrum here coming from the quant world. at one end of the spectrum you could say, Okay, just give me your ideas. Maybe this is more like the platform approach to Dell Millennium and others. Give me the ideas and then the portfolio construction's basically gonna be quantitative. It's just gonna be rules based. And the other end, of course, would be like no rigor around factor exposures or whatever. Where do you think of

36:24 Maverick as sitting on that spectrum and that slider. The extent to which it's not entirely rules based and there's still At the end of the day, judgment. position sizing, position selection, and so on. How and when does that play a role? And you don't just purely hand it off to a machine.

36:38 So Nothing is purely handed up to a machine. As an example. part of what quant does for us. is come up with recommended position sizes.

36:48 that looks at a lot of fundamental data that comes from our team no one else has. But it also looks at a lot of off the shelf, pretty typical quant factors. Looks at odds of success, looks at transaction costs, et cetera, et cetera, et cetera. and makes your recommendation from the machine point of view. This position should have two point eight percent r capital.

37:06 The portfolio management team. Voice to that, we especially pay attention where big outliers. But human judgment is gonna have the final decision. Just because as you understand, there's a fundamental weakness in quant. And that it doesn't really look forward.

37:21 You could argue it looks at sell aside estimates for revenues and earnings, et cetera, et cetera, gives us some glimpse of The world looking forward. But it surely doesn't understand. changes in secular trends or

37:33 Changes in strategic positioning. Showing does understand. There's a new management team that's gonna do wonderful things or there's a new management team that We don't have confidence in Since we're fundamental investors, it's really important to us that all final decisions are made by humans.

37:48 But if we were making more consistent, more accurate more informed decisions by using quant as a tool to support our decision making process. What are the hardest parts about that aspect of the job? What recurrent thing that you have to face down provides the most challenge when making portfolio construction decisions.

38:11 Well, we're very fortunate in that Almost all the senior people at Maverick started at Maverick. And you saw that in the stats about how long people have been at Maverick, but Every one of our sector heads started. a year or two after college, they've grown up in Maverick. If you were to bring in a successful investor

38:28 from another long short firm who's five plus years into his career. He would think he leaned it on Mars. You're making me do what? So for a model for income statement. Cash flow balance sheet.

38:41 Every element is picked up. By our quantum systems. Therefore it has to be entered. In a pretty particular way. One of the things the quad's gonna do is it's gonna screen your model.

38:51 Hm. You think revenue growth is gonna be fourteen percent? Could be. But that would be a two standard deviation difference from historical. Or you think incremental operation margins from OBX. You think

39:01 Whatever metric there is. They're all screened against history. Not that they're wrong. But let's just recognize That's unusual unless debate why you have an assumption that outlies what you would expect working in history or also not do it just for accessory but versus a subsid.

39:18 Often yeah. That's why we own that stock. Exactly. I get that, but let's make sure we recognize that merits discussion. So it helps us be, again, certainly more efficient, hopefully more accurate investors. But those things were head scratching at first for people that didn't grow up in Maverick.

39:34 Just a lot of work. Like anything. Well, they get the lot of work part, they may not always get the incremental value part. When it comes to the third leg of the stool, the notion of building the business. If you were addressing an audience of people that were all about to embark on that journey, let's say starting asset managers or hedge funds or whatever, investment firms of different types. What would you say have been the most surprising

39:57 challenges that they might then face in their journey to create their own business that maybe you didn't expect going in, but were really important. challenges to building a good enduring investment business. I'll answer it in real time rather than nineteen ninety three time because the world is just Change so much. There weren't a lot of

40:15 Long short time. And you had two hedge funds probably had sixty, seventy percent market share of the hedge fund space. We have a little seating business. Where we've help start funds that are starting up and

40:27 give'em a lot of advice, a little bit of capital, and hopefully a stamp of approval with our brand. It's hard. I've been surprised by There's an escape pillosity where you had to be at least a hundred million If not more like two hundred and fifty million.

40:41 to even get meetings, no matter how good your numbers are. Secondly having solid risk adjuster returns. Does not do you any good. You need to stand out. Which

40:52 I've concluded to C and L means you gotta take a lot of risk. You're starting out You better have numbers that two or three years into it are pretty eye popping. That's hard.

41:02 So the challenges of starting a small firm today Now don't get me wrong, there will be another David Einhorn, Jordan Birch with no money. did quite well year after year after year and it finally became a real big business. It's just the odds of it happening are much more today than they used to be.

41:19 And the enduring piece of advice I give everyone is You've gotta make sure That every thing you do represents integrity. And represents your ability to do what you say you're gonna do.

41:32 Because you won't get a lot of second chances in those regards. Fascinating comment that great risk adjusted returns is maybe necessary, but not a sufficient story to build an investing business. One of the things that's been really interesting in the world of hedge funds has been the role that rates have played just historically, whether it's related to the short rebate or Other aspects of portfolio construction.

41:52 How do you think about the role that zero interest rates for so long in the post financial crisis period played in the attractiveness of the opportunity set. For this long short style of investing. I'm amazed how often the higher rates are good for hedge funds because

42:09 Short rebates are higher. Okay, true, but that's just a very tiny part of the story. So the H F RI launch word index, which is the most comprehensive hedge fund index, started in nineteen ninety. If you go back from nineteen ninety and look at how hedge funds again, not Maverick, just the average long short fund. Did when rates were over two and a half percent versus under two and a half percent.

42:31 There's some interesting data. Now, first of all, people may forget, but that's about fifty fifty. In other words, since nineteen ninety the pet funds rate's been over two and a half, forty seven percent of the time. So it's a healthy sample set. When rates are over two and a half percent. On average hedge funds have outperformed the markets by six and a half percent.

42:48 Driven by twelve percent alpha. Under two and a half percent. they underperform by four percent on the back of less than one percent of Alpha. So clearly higher rates is a more productive environment. Rebate's playing a tiny role in that.

43:03 I think what people forget, especially now, so I sit on a few different investment committees. I can promise you. The world hates long short equity. And with good reason. So the underperformance over the last twelve years since the financial prices.

43:16 And then what really was nailed McCoffin last year. A lot of funds were down more than the market, even though net exposure was well under 100%. And I think people are missing that we are now in a different world and likely to be in a different world. And so if you use that two and a half percent benchmark and you just look at futures curves, the market is essentially predicting Net Fed funds will be between three point seven and five and half percent for the next five years. So now we're near two and a half.

43:42 Which I think is a fair way of saying we're likely to be over that two and a half. And what's also interesting about the over and under two and a half percent. is you just look at the rate of returns of the equity markets, it's not that different. When rates have been under two and a half, annualized. is nine percent with equity markets.

43:58 over nine point seven percent. So in terms of just looking at equity returns, those worlds don't look too different. But again. Something else is going on if you think about the stats I mentioned earlier. I compare it to

44:10 You have two swimmers, one slightly better than the other. And they're racing downstream. Well, the delta between how they finish is not gonna be that big. Okay, now turn around. Now they're going to swim upstream.

44:22 Now we're going to separate the men from the boys. Now you g more clearly see who that strong or swimmer is. And I think the same is true for companies when they're operating in different capital costs. So when capital is essentially free it's harder to understand which company is making better decisions than the other because every use of capital is a good decision.

44:42 Who cares if I had a small return? The investment was zero. in a higher cost of capital world. Well, wait a minute, my cost of capital is five percent and I only got a six percent return. That's a problem versus my competitor who got the fourteen percent return.

44:57 And so over time, higher costs of capital, I think, becomes that more demeaning environment that helps separate stronger companies from weaker companies. One way to look at that is again, thank you, quantum. I mean, look a lot of these things, but just the correlation between revenue beat and misses and subsequent stock reaction. And so this is reported revenues versus soul set expectations.

45:20 They beat, does the stock go up? They miss stock go down. That correlation for the first six months of this year Was this the highest it's ever been going back twenty some years, which is as far back as we can track the data. And if you do look at other periods which had the strong sorts. Ninety six and ninety nine.

45:37 It wasn't a hot six months, which didn't mean revert it. In each case that was the beginning of very strong periods of returns. And then again, to me that's a driver, but it's worth noting on the short rebate side. So you short a stock and you borrow it, you sell it. But when you sell it, you get a power cash.

45:55 That cash pays an interest rate. You what's deducting from that rate is what you pay to borrow stock. So our net is the highest it's been in twenty some years. A interest rate's higher than this been a long time, but B, this is a whole different discussion.

46:10 what we're being charged to borrow is about the lowest it's ever been because competition on the short side is about as lowest it's ever been as so many people have given up on shorts. So I don't think people fully appreciate how anomalous and how challenging the free cost of capital world that we've been living in. for twelve years was to all fundamental measures.

46:33 When you have stocks that are driven by what did the Fed say last night? Not how his earnings. That's challenging for a fundamental investor, but I think we're back in the world, which is more normal, again, thinking about rates. long term average is four point six percent. So the say over two and a half is nothing crazy. But it will have rates sustained at more typical levels or even

46:53 Anything less than free money. It should be a very, very productive environment for fundamental investors. How do you make sure that your team is best positioned for that whole opportunity setup? So if you're right and the current is now headwind or swimming upstream, sorry, don't mean to script the analogy. And the strength of the swimmer, your team, is now gonna get magnified.

47:15 How do you make sure that's the case?'Cause you're also swimming against other great swimmers. In this case, there's lots of now probably versus when you started. Incredibly well trained. really smart investors with incredible access to data and information. So

47:30 Yes, the absolute story is clear cut, as you just laid it out. But what about the relative story of like, okay, but the Maverick sector PM still has to outdo other great investors out there that are pricing the same securities. Not to brag, but when you look at how the average hedge fund in different regimes We did substantially better during all those regimes.

47:50 And the real question is how do we keep that up? I go back to no sorry to be a little repetitive, but back to the fact we have so much more focus on every individual investment given how few we have per person in given holding periods. I don't think many other fundamental firms Had to build. what we've developed both on the quant side, alternative data side.

48:11 And the other piece and this has really been terribly helpful recently. Or we have a significant bandage. is the fact we've been investing in private companies back to nineteen ninety four. We made that a more segregated focus back in oh four. and end up because we had so much success. So we've made all those investments within the hedge funds.

48:29 A few of them worked out so well. By two thousand fourteen, we concluded too much of the edge fund capital was essentially locked up in these private investments. And that forced us to launch a new entity altogether. Matter Ventures. We have learned so much over the years from those activities from talking to

48:46 Some which we invested in, some which we haven't, but had dialogues. that influence our thinking on disruption, on secular trends that had huge impacts on public companies. that why the ventures business has become a very successful business in its own right. there's also extraordinary value just into what we're learning to those efforts day in and day out.

49:10 Can you let us behind that curtain a little bit, so you're making these private investments, which means you're in the flow of founders and new companies and Like you said, disruptive innovation. How does that actually manifest? What are some examples? Let's say in the last ten years that you've been doing this.

49:25 where you saw something on the private markets and that gave you some window into Again, back to your notion of improving odds. What might happen. to public market companies. Just give us a felt sense of what that's like. I'm giving an old one and a new one, so

49:40 Years ago, probably fifteen years ago. We invest in in a company called Corval. Which would put new valves in your heart. But was the first company to figure out how you can then size the valve perfectly to fit what you're trying to replace. as opposed to a doctor taking their best guess from looking at images.

49:59 And then sewing it to get it as close as I could. This is a perfect fit that was done while it was being put in your heart. And as it became clear, wow. This is really gonna work. Huh.

50:10 How's that an impact that people are make the old valves? So one, that led to a great private investment, and two led to two pretty good shorts as well. Most recently AI's just been a great example of where the public side and the private side have been of a tremendous benefit to each other. So just to give a a little history. We invest in San Waltman's first company Looped back in two thousand eleven when he was at Stanford.

50:33 Sam ended up moving over to Y Combinator, a very successful seating platform, and he brought us in as one of the early investors. So we've had a long history with Sam. And as part of that, our ventures team had a very early look at Chat GBT. And like most of us they went Holy cow. This is something different.

50:51 What does this mean? Where's this going? And sort of making sure the public team was aware of what the world was about to be aware of in a few months. And we concluded pretty early on that the bottleneck to a lot of this will be GPUs and video chips. And as we started having more discussions in twenty twenty two. one of the leading LLM developers. Total Sh our total compute budget in twenty two is ten million.

51:15 This year it's gonna be a hundred million. And in twenty four be a billion. Huh. That's a pretty quick ramp. One of the lessons of investing around mobile and the iPhone was it's great, there's not a lot of phones. Well start thinking about what's inside those phones. Likewise, you just don't pick up an NVIDIA GPU chip and ask it to do AI.

51:34 There are a lot of things that surround that that make that work. And talking to a lot of those vendors. Yeah, there's actually an order out there. It's da da da da da. Huh. Well that'd be like Half the revenues next year, are you sure? So it became very clear to us late twenty two that there was gonna be a wild supply demand mismatch.

51:52 for GPUs. So we started thinking about the reunification on public side, likewise You think about the last ten, fifteen years Most technology investors have been really focused on software. For good reason.

52:04 And semi's got thought of as commoditized, it's very cyclical. more reality over the last ten years. The number of semiconductor companies is slightly over a billion dollars is slightly down on the software side, it's more than doubled. And yet collect a market cap of those semiconductor companies? The score in fivefold and margins have almost doubled.

52:22 So it's not what people have thought about semi classical fashion. So in this new world where Wow, the bottleneck's gonna be NVIDIA chips and other type forms of compute power. Let's go figure that out. Even Lords Lower Short Funds are scrambling to try to hire semi people.

52:38 I guarantee you, virtually no one in the bench world is not our expertise. Well we do. Andrew Hemman, who leads our technology efforts, has been at Maverick actually a little bit over 19 years now. We first fought Nvidia back in two thousand four. I mean this is a company we've known well for a long time.

52:54 And as the mentors team is starting to meet with some of these companies on the semi side. To bring in Andrew? Who's been investing in Sunnings for twenty seven years and knows all the management teams on a first name basis. We were able to make some decisions that I think other firms just didn't have the knowledge and experience to make. Those have already worked out pretty well. So our venture team and private teams are in meetings together all the time.

53:18 Andrew, the guy that runs technology on the bulk side. Meets with the entire venture team once a week. All just making sure what did you hear this week? What did you learn? And I'll say there's sometimes the venture team doesn't understand this turnover nugget. But oh wow, really? Because they don't understand the re implications for bigger companies. And likewise

53:37 bringing Andrew's relationships and his experience to bear on these small private companies. Not only is it helping us make better decisions, It's helping us win the deals. Wow, here's someone that actually knows a lot. Oh, you know that guy and that guy? It's a unique period, this whole different line of discussion, but this kind of disruption historically creates great opportunities.

53:57 I wanna come back to that disruption point, but make sure I squeeze the last little bit out of the semis example because I think it's a great one. Semis obviously became uninteresting to lots of hedge funds and long short managers, therefore everyone left. There was no expertise. But when you dig into Why? They're interesting.

54:13 In terms of like the motes around the business. It's not that hard. dig into T SM C or NVIDIA, like it's pretty clear why they're good businesses. It's easy to say that now in summer of twenty three, of course. But when you think about software, that same question for software businesses. Do you think it's as easy

54:29 The narrative has been that Software business is the best business in the world, super high margins, high retention. Can grow them cost effectively and so on. Obviously there's some great public software businesses. But do you think they're as defensible?

54:41 as some of these semi stories that you've spent decades watching unfold and grow? I think it's a really interesting point in time. So sulfur is king, sulfur eats the world, you know, all these phrases. Proved to be very true. You look over the last dozen, fifteen years.

54:57 Sar for businesses gained tremendous market cap, garnered tremendous amount of value add, et cetera, et cetera. But You need to think about what trobe that. And to me it's a few different issues. A Not very capital intensive.

55:10 B. Switching costs. And by walking to Maverick and say, Hey guys It's already Monday. We're not gonna use Excel. We're gonna use Google documents or whatever. There being a forum.

55:20 Network effect. There's a reason we use Instagram? And not something that no one's ever heard of'cause your friends aren't on that one. Just the value of having a better mouse trap. There's a reason you don't use Alta Vist or Yahoo to search because Google came up with a better solution.

55:35 everyone gravitated towards and universally calls us white. And then just critical mass. Well AI turns a lot of that on its head. So the infrastructure calls now sky high.

55:47 Again, talking to private companies. A different one, but another very large company. Cynthia, we just finally starting our heads around that we've looked at our core structure. It's not gonna be ninety percent labor and ten percent. infrastructure costs. It's something with the opposite.

56:00 Or entire everything we do. Microsoft just put in their in report. a material risk they may not get enough access to GPGU chips to maintain their competitive positioning. That's an interesting line item. So the low capex rules, mind you.

56:15 Switching costs. Who cares what AI engine you're talking to? Chat G B T obviously is amazing, but Anthropic, probably the number two player just released Claude Two. There's a lot of things where it blows chat G B T away. Chat GP does some things better as well, but

56:30 There's more than one of these. There is no user interface. You just type in your question or talk to it. I don't have to be retrained. I can use either one. Network effect. Some would argue, well, ChatGPT is gonna get spawner and squarner of all the more and more questions, but you don't want ChatGPT to be taking in your knowledge. You don't want your knowledge to be accessible by the public, number one.

56:52 Number two. Chat GDP doesn't want to be driven by people putting in garbage. So I don't think there's gonna be a huge network effect. And then finally in terms of the better mouse trap. Doesn't really matter.

57:03 For ninety nine percent of use cases for an AI engine. What was Robert Breford's best movie? You're gonna get a pretty similar answer or slightly different who cares. So write me a poem about this oak conference table and the style of Robert Frost. They'll be slightly different, but they'll all be good enough.

57:23 Now, gee, please read my radiology report. Okay, maybe I want the best one now. But for most things you're gonna use it for. if one slightly better, you're not gonna be able to tell so we indiscerning so I think and it went back to the last decade how semiconductor margins almost doubled At the same time, software margins have already been degrading. They're twenty nine percent down to about twenty four percent today.

57:45 I think that may continue. I think the ability for sure for companies to maintain their motes, if you will. will become more and more challenging. Not that they still won't be great businesses for a long time. Going back to what we talk about earlier. Technology tends towards standards.

58:01 Which is a memo I wrote back in ninety one. I think it's been a pretty useful Paradigm, as we think about technology. I'm not sure that's true anymore. Is that the key idea to understand the standards idea around investing through periods of disruptive innovation.

58:16 You mentioned the iPhone. It's discrete, it's not continuous. The thing didn't exist and then it existed it became the dominant platform and everyone builds on it and all this stuff happens. And obviously investing in companies around that platform change.

58:29 led to a lot of fortunes. You all of a sudden enable companies to exist that couldn't before. What are those lessons? Is it the standards thing? Is it something else? How do you think about if we're faced with another one here today, right now? What are the key things you're telling your team, this is what you need to know from what we've learned from history. Well, unfortunately I'm old enough that I've been through a few of these.

58:49 That's why I'm asking you. I first met Michael Dell, uh, probably ninety one. We're both in our mid twenties and saw what the P C revolution did to DEC, IBM, et cetera. First met Jeff Bezos in ninety eight. Amazon had a$400 million market gap. And Ultimus, it was a much bigger company back then.

59:09 Then of course we saw Mobile and the rise of Apple. Cloud computing, software as a service, and there've been a few of these disruptive technological changes. Maybe you could argue internet's gonna be as big in hindsight, but I really think AI will be bigger than any of those. And so we try to look back at all those and see what lessons we can learn and hopefully we can avoid some mistakes as well. And I'd say it's really twofold, Norman, to recognize that these disruptions create winners

59:36 In huge losers. And AI we have some ideas. I still think it's a little early. It's not as obvious. Number two. Don't forget about the peripheral players. A little while ago we were talking about when we were thinking about the GPUs.

59:50 what other components are needed to make those GPUs work. So We'll just take Apple and the iPhone. As well as AppleSock did. Or actually in terms of percentage gains. Some of their components suppliers did even better being along for the ride.

1:00:04 But you look at their competitors, so Two thousand seven the iPhone comes out. Both apple and blackberry or rim. have about a seventy billion dollar market cap. Year one, room actually goes up over Apple doesn't have great security.

1:00:18 Oh my God, who wants a type when I'm flat? Screen. Give me my keyboard. But by after about two thousand eight became pretty queer. Where was he? You go to two thousand twelve. Now Kia's gone from 100 billion market cap to ten.

1:00:31 Blackberry went from seventy then eighty. Two three. Apple went to six hundred and now is three drawing. But the winners aren't just gonna have a back quarter. It's gonna be much more extensive and last longer.

1:00:44 So as we think about this world of AI. Identifying winners and losers. identifying the peripheral plays, if you will, the secondary effects. is something we've been really focused on since late last year. And I think being ahead of the curve helped us a little bit. And again that was thanks to our private team. And in the private world.

1:01:02 As you can guess, there are so many talented people and so much money. trying to chase after different ideas. And I think a lot of our competitors, frankly, don't have the background to really evaluate those sufficiently, so we'll see. What has been your personal strategy for staying up to speed? On

1:01:19 an increasing pace change of innovation in All these different fields. You mentioned Sam Alman. Get aligned with the right people.

1:01:29 Because So often. Sam's a good example. Elon's an example. the most talented people are actually now doing multiple things across multiple technology fields. So is it people centric? Is it something different? I'm even curious are there specific things you read or conferences you go to or like

1:01:45 literal actions that you feel have most contributed to staying up to speed. in again a world that's drinking from a fire hose all the time. Abdubely personal relationships are really important. For all the bad press. Deservably so that San Francisco gets.

1:02:00 First quarter of this year. There was twice as much money B C money invested in companies in San Francisco. than the rest of the United States combined. And that's still where it's at. And I think AI actually is gonna make that even more true. And so yes, to have relationships with people that are

1:02:18 thoughts and also who attract a lot of talent around them. It is very helpful. You start the question personally. I'm very fortunate in that I work with extraordinarily talented people that will give me synthesis. of things they read, things they've heard.

1:02:35 we really should focus on this one, whether it's a cell side report or magazine article, et cetera. But it's a challenge. We haven't really talked about analysts and developing analysts, but one of the most common reasons a person on paper that should be a home run doesn't really make in our world.

1:02:51 is because up through being investment banker Cows, etc. They lived in a task oriented world. Write this paper, turn it in, take this test, great, build this PowerPoint presentation. Build the Excel model? Yes, sir. What's next?

1:03:04 And we throw them into our world. There is no what's next. So we've second every day. You got new things floating around and You're never finished. You never can say, Hey I talk to every single customer. Every single supplier

1:03:17 And every single competitor in every single employee, I'm done. It just is not possible. And so your question's a really critical one. How do you make the right decisions to use your time as reductively as possible to stay on top and that's everything from being pointing in the right direction to having a nose of what's gonna be important, not important. to have experience. I've read every time I read something or listen to this podcast.

1:03:41 It's really been useful. Let's do more of those. But I think it's a really challenging question these days. You say a bit about The topic of money. We're an industry that's funny. It's literally the product is turning

1:03:52 Money into more money. It's the scoreboard, it's a motivator, it's compensation's a key part of what drives the ecosystem of talented investors. And I'm trying not to get too specific with my question. And start by just asking like what have you learned about money? Making a lot of it.

1:04:08 being in an industry that's so focused on it. As a thing. What big lessons have you taken away on that strange topic when you step back and think about it? It's officially the most open question I've ever gotten in my life. Congratulations. So as relates to Maverick, I mean it goes back to who we're trying to track.

1:04:26 We're trying to make sure people are focused on the net present value of their economics over the next five, ten years. And did you have the opportunity to make more money next year? Yeah. Yeah, probably, but think it through and that becomes or counters some of the platform type businesses. For what reason uh first of all the Tiger and True at Maverick as well. when there is more money at stake, the more people care about it, even though on absolute terms, wait a minute, you should be the happiest guy on the earth. Aim when things are tough. And there's not a lot of money'cause we didn't have a good year.

1:04:56 People don't get us concerned. People are always more concerned about how they're compensated. On a relative basis. Not relative to the value they added. Provide to what their friend made.

1:05:07 Whether that friend works at Maverick, works at a different firm. And I get that. It's Human nature. Well, it's one measure of status, if you will, and I may more need to great And again going back to being fair.

1:05:20 And make sure we have this balance of a team orientation and meritocracy. That were really hard. Maybe not in any one year, but if I look One of the things we do do, we have four different metrics that we track to drive the conversation decisions. And we look how each team does in each of those metrics, are they trailing five years, three years, and one year.

1:05:39 And I also have it a lot of different metrics regarding how a team got compensated in different ways. Over time. Which team got compensated the most and which team had the best metrics should be highly aligned where I'm not doing my job. And that Maverick that's been true. The form.

1:05:55 At Tiger there were times that people would after they got their comp going the next thing and say, I don't think it's really fair. I think I deserve this. And here's why. And the systems back there aren't that great. And every now and then that worked. Oh, we have more money. But once the word got around

1:06:08 You talk like an idiot if you didn't go back in that room. And about year or two I had Maverick had someone do that and I held a uh firmware meeting the next day and say, Look There is someone here who's asked me to review their conversation. I just want everybody to know the policy. I'm happy to review it. I can promise you it will not go up.

1:06:25 Some chance will go down. But if you'd like me to review it. Feel free to come to the office, we'll talk about it. Except the turn. No more reviews after that.

1:06:34 Because I've worked really hard to be fair. As you think back on your career, I'm always interested in zooming really far in on the building blocks that make up the story. If you think about the most important individual conversation. that you had in Maverick's whole history, what comes to mind?

1:06:53 So I mentioned earlier that the first handful of people we joined were all people I'd known for a while, and I mentioned one was someone to go into business school with is a guy named Steve Capp. So after business school C work for a public company briefly and then started his own hedge fund. I went to Tiger. And when I decided

1:07:11 that cheat, there's a chance I'm really gonna leave Tiger because this is a very interesting opportunity. I also decided you know, I shouldn't just If I'm going to do this, just make sure I understand all my options. And the only other thing I seriously considered was partnering with Steve and his hedge fund has some success, but purely driven by him. as I recognize that was helping them out in certain things.

1:07:31 And Steve and I've always liked each other a lot. But at that time what he and I were thinking about didn't really compare Well too. What this family is all from me so we decide not to work together. You fast forward a few years.

1:07:44 Four years, yes. But now Merricks has some success become much larger. His one's doing fine, but not nearly as large. He has some frustrations in his position and we were comparing notes one day, and I said, Well, maybe you should come work here and we always wanted to work together. 'Cause yeah, I would be interested in talking about that. So you came down to Dallas.

1:08:01 wise and to go look at houses or meet them for dinner. We start about nine A. M. Now it's six thirty, you were supposed to meet our wives, and the whole day we've talked about What a fair economic arrangement would be. And of course are all these different how about we grow at this and returns in this, well we're smaller, we're gonna grow faster, da da. And we spent all the two reasonable, logical people who had the shared objective of getting that then diagrammed overlap.

1:08:25 And then we gotta leave in five minutes. We've got nowhere. We don't even have a rough idea. And he finally just says, I tell you what. If you can promise me you'll be fair. Amen.

1:08:35 And we shook hands, didn't have a contract for years, then Some general counsel said no, every I subcontracts eventually did. And we've lived off that handshake for now. Twenty some years. He's still there.

1:08:47 Oh yeah. And still a very important partner. He's semi retired, but any project where I need someone I trust who's super smart and We'll diving deep. I call Steve and taken care of. And to me, the conversation's always been the back of my head'cause it's just

1:09:04 the way you hope anyone who does know you've now worked at Maverick for five or six years can just say, Hey, it's gonna be okay. I can't tell you what the numbers and da. Just it's from me, okay. Yeah, I feel responsibility to earn that trust. And I think it's a good reminder of how important that is. Power of a handshake. Pretty amazing story.

1:09:24 And Jason Work. Long term partnership. I'd love to talk about the episode in two thousand and eleven. When you made the decision to start the transition towards not being the sole decision maker at the top of the investment process anymore, having a co CIO and then a CIO. as part of Maverick.

1:09:42 And I wanna really dig in on the story because When you study investment firms, the number one killer is succession, that it's really hard. Often there's a very talented, very tenacious, very entrepreneurial investor that starts the business. And then when they go to hand it off to a second generation, it just fails for whatever reason. It just happens over and over again in our industry.

1:10:03 So how did you manage that? And I'm curious about why you did it, how you did it, how it's gone. This whole process of starting to share some of the responsibilities in the portfolio specifically. It's fascinating to me, so I'd love to hear the story.

1:10:17 Well, as we mentioned earlier, there was this recognition that I had three different jobs and I wasn't doing any one of them as well as I would hope to do them. to really excel at that role, I do think takes an almost twenty four seven dedication. It certainly takes a level of commitment and energy Because again, it's a very, very, very competitive world.

1:10:36 And I was getting to the point where I was not as intellectually interested in stocks as I have been earlier in my life. I was getting the point where I miss not seeing my kids and starting to recognize wow. They're not gonna be kids a whole lot longer.

1:10:52 And then when it became evident through performance. That I was not doing Either of those. Well the three, but did they stock picking or Portfolio management risk control.

1:11:02 Particularly on either side. That to me was okay, now it's really time. And it's a little bit different than that. It wasn't handing down to the next generation'cause the senior team I was just a few years older than Sound like they were.

1:11:15 Fifteen, twenty years younger. It was more a sideways thing, if you will. and in part driven by So tiger by contrast. There was Joanne Robertson, there was everyone else beneath him beating him ideas, he said yesterday now.

1:11:28 We from the very beginning, back to that team oriented culture, were much more five individuals working together to come with the best decisions we could. And I was the leader of that five, but I was a member of the five, not The boss of the park. And so in that way it wasn't as a dramatic change. And the person and now we've got one more of the changes, but

1:11:47 As someone that was living, breathing, waking up at three A. M. to see what happened in Japan. Just couldn't let it go the way I I used to be. And so allowing myself to get more focused on the business and especially on risk management portfolio and develop some of the tools that we still have in place today. I really do think it worked out well for investors, which is the most important test of all.

1:12:09 And then almost three years ago, we went with a co CIO structure And Ben Silver and David Tikajinski have whether Fundamental efforts ever since. Slightly different investment styles, certainly different areas of expertise. And bringing both of their strengths together.

1:12:27 has really created a yin yang type dynamic that I think has been really, really effective. What advice would you give to those facing down that same challenge for how to affect that? And not trigger those landmines that seem to lay all in and around this process. Well, as I've mentioned to you at lunch, I did consult with a few people that I really respected who'd been through similar transitions.

1:12:50 Set Corman, Sandra, the list goes on. And they all had different perspectives, but one that was probably most influential to me. was Stan's point that if you're gonna give someone the responsibility and the authority you had to really give it to them.

1:13:05 You can't say. Usually you make decisions every now and then I'm gonna come and overrule you, but it will be fine, don't worry about it. one, the odds are you'll probably make a worse decision, not a better decision'cause you're not as close to it. But even if your decision was ag good or say even slightly better. just the demotivating impact of being in charge, but not quite being in charge.

1:13:25 has a real sipping cost. So we had a year where that transition sort of gradual and then it did get to the point that I would still give advice and coach, but also made it very, very clear to everyone that hey on the day to day investing I do not have final say.

1:13:41 unless it involved risk. So at final several risk, and if I thought a position was just too big, I would take it down. but not because I didn't think it was a great investment. more because I thought it contributed to a risk profile in a way that was inappropriate. If we zoom back to today, so we're in the summer of two thousand twenty three.

1:13:59 And you just survey the landscape of long short Equity, the whole industry. You said it based on your experience on investment committees, you can promise. It's not necessarily a popular camp. given performance over the last twelve years. How do you see the landscape? And where there's opportunity, especially given the presence of

1:14:17 Citadel of Millennium of Baliasny, these firms that have seem to create a better mouse trap. If you just look at the raw output. of these insanely sophisticated risk systems plus leverage plus talented stock pickers. Seems to be a pretty productive model. How does a traditional

1:14:34 investor, hedge fund manager. compete against the gravitational force that is these new models. in the long short industry today. I'm touching the first part of the question first.

1:14:45 the frustration with long insurance equity, one thing I did not point out, but I think says it all in a nutshell. If you look at the correlation between the HFRI launch word index in the equity markets on a trailing three year basis. Back in ninety eight, twenty five years ago. was under thirty percent.

1:15:01 Today it's seventy. It peaked at ninety. Two years ago. Well 90% correlation, why am I paying attention to these? I'm just getting data.

1:15:11 Even at seventy, I'm just a rag at Maverick, but it's been in the teens. So we'd knock on that path. And so going back to single investment committees, this is noticed. And the way we got there, shorting was really tough. through this world of cray monetary easing, fiscal stimulus, et cetera, et cetera.

1:15:28 And so many fonts in one, let's just take up net exposure. Do less of the shorting stuff. Number two. I can use S P puts or short futures to create my short exposure. Catches that doesn't generate alpha.

1:15:41 By definition and by the way, most of your sophisticated investors could do that themselves. They don't need to pay you to do that for them. Or ETFs, okay, maybe slightly better, but not nearly as good as researching every single stock in that ETF and making your own conclusions how they should be weighted, et cetera, et cetera. So people so but surely gave up on shorting. Especially after January twenty one, Wall Street bets. That's why I'll be able to talk about

1:16:03 Forget it. It's torpedoing firms. Ridiculous. So the long short profile has looked more and more like the beta profile. No wonder people sort of given up. You're right in that world.

1:16:16 the platform guys, whatever you want to call them, the the very successful millennium citadels. have generated a different return profile in a very different way. So every little pawn has extra coordinately tightly controlled parameters on not just exposure, but different factors, et cetera. Those are then collected.

1:16:34 They typically have a center book, which they have their own algorithms to pick off the best of the best and upsize those. And then they have leverage. Which all works because they had very strict control. Where I think the flip side is again, if we're back in a world Where fundamental side picking is more productive.

1:16:51 That model I would argue is gonna have a harder and a harder time. Keeping up. Just because when you put together all these collective books. Well you got a lot of things long and short at the same time. Now they're smart enough from a transactional point of view to pair those that.

1:17:07 But nevertheless. Collectively you Don't have Your very best on each side. Leverage is important, especially helpful in a low ball world.

1:17:16 Higher ball world, higher cost world leverage has different implications. And those places are hard places to work. And turnovers are higher there than elsewhere. I have huge respect for Ken Grickman, consider him a friend. I get what they built. who can't but be tremendously impressed with what they built. But it's just the person that we're asking Joey Maverick.

1:17:37 That's not typically the experience they're looking for. So last ten years They won, no question. I hope that next ten years and I think the next ten years may paint a deep story. How do you think about the next ten years for Maverick specifically?

1:17:51 What trends will continue from the firm's past? What do you hope breaks with the trend line and goes a different direction? How do you think about the vision for the business? I'm not asking you to redo your vision questing that you gave up'cause of salt price. But in the next ten years. What do you think? the direction of the firm will be.

1:18:08 So I think one of the mentalities that's really served us well over time is the desire to continuously improve. What can we do better this year? Whether it's part of the investment process or data gathering or managing people. Interacting with their ambassadors.

1:18:24 How can we do it better? And yet you need to balance that with consistency. Investors don't want to hear. Uh-huh. We decided we're going to invest in used cars because it's a great opportunity.

1:18:35 And so if you think about that we described early in the conversation that day one, the concept of being long and short within every region with e every entry or between us and Now backers take care of that. Therefore I hadn't changed.

1:18:48 Average net exposure, average gross exposure. Average industry weighting. All very consistent with the number thirty years. But within that, our ability to execute on those objectives of preserving growing capital and developing reputation. Has it root or backway?

1:19:02 There's so many things we're doing today that like you wouldn't even dream would be possible twenty years ago. So back to your question. I think in ten years not just from Aver from many places. AI is going to play a really big role. There are already ways we're using it both in the back office and the front office that already have been minor step function improvements. And it's in the very early days.

1:19:23 So back on that business plan where we do all these different things, one of the reasons we decided just focus on equities, I believe, even back then. It would be the most impervious to computers. to machine learning, to AI, where you call it. because we're in the bottom spectrum of the cap table.

1:19:40 Therefore the most sensitive to decisions humans make. And it won't happen eventually, I guess, but it's gonna be a very long time before any AI engine can evaluate a person. Their intentions. Their integrity. As well as we can.

1:19:55 And for equities. It's still management, management, management. So Well, I do think will become more proficient, more productive, et cetera. We will continue to focus on where we think we can excel. And that is understanding the value of businesses run by humans.

1:20:10 If you were throwing a dinner And the goal is just maximum interesting Stimulating conversation. What three other investors would you invite to the dinner? recognizing that there's a lot more than three that I'm sure would be great.

1:20:21 But just for fun. Let's see. Well I'm I'm a little biased, but join me top of us just'cause I love the opportunity to have another conversation with him, period. You gotta put Warren Buffalo on the list. Not that I agree with everything he says, but he also is so amusing, so he makes for a fun dinner. What do you disagree with most of what he says?

1:20:39 Well a couple of things, but he really and understand the logic Likes to argue That High turnover's evil. mutual funds are always over time gonna underperform the equity markets they pay

1:20:53 Missions. Taxes, da da. And I could make a compelling argument just looking at Maverick data. That degree to which we have outperformed the markets for one period of time now.

1:21:05 And we're doing that. We do pay commission, so it's after commission costs. And even after our fees. more than compensate for the incremental taxes. So If he's right, if you're just gonna m mess in indices and But there are in Scientist Matters, there are a lot of firms that have added enough value to more than compensate for those costs. But try to have that discussion one time with him, he wouldn't really

1:21:25 Wasn't having it. And from my best conversation with Warren Buckett who I met. Sorry. Probably won't be never had much interest. And he came up to me one time to say, Oh, hey, are we still having that?

1:21:37 As he's talking, I'm so excited he's talking to me. I realize. He thinks he's talking to someone else. Mr. Buff um actually liais, oh rightly. So that's why I invite him to dinner again to finally talk to me.

1:21:53 And the third probably Jim Simons. sort of Renaissance and and I do know Jim a little bit and he's a fascinating guy that I think has impacted our world more than most people recognize through his extraordinary playing through me. But he certainly is not very public about it, but I think very few people really have an understanding of the dollar amounts that he's been supporting causes are important to him for

1:22:14 Decades. then he was really in my mind the pioneer of quant investing and likewise A W Jones pioneer of all and short investing, but I've read everything he's ever written or written about. So I don't think I'm Learn as much from AW Just zooming to today and very much a selfish question. And we've talked a lot about the importance of great management behind teams and some historical examples.

1:22:36 If you had to go study three active Managers, CEOs, What have you. Any three that come to mind as ones that you think would be fruitful to go study how they're operating their business today? So

1:22:49 fruitful in terms of becoming a better investor. I mentioned it earlier, but I do think the turnaround Microsoft is Something that I can't remember a good parallel. Not just in terms of hey operating results are better, but completely new strategic focus, complete change in leadership style. So Sonny would definitely on the list.

1:23:09 Andrew Jassy. I don't know well, but met a few times. Again, very different than John Bezos. Almost like a Tim Cook to Steve Jobs, but highly competent. And this blood.

1:23:22 with an Amazon. Be alive. He does this cool thing on the first day of March Menace, which is a Thursday where there's so many games he employed. He invites over two hundred different Amazon employees to watch basketball all day long. Until the very last game. So meaning out there is chart.

1:23:38 At nine A. And for number three. probably Ed Barina hate to be repetitive and we've already talked about him, but again it's just someone I've held in such high regard and even when he's been in situations that people thought were Pretty hopeless he's shown the power of management. We talked a lunch about basketball, a shared passion of ours.

1:23:57 Who's your favorite basketball player ever and why? Well, this is wimpy answer, so I apologize, but I would say Michael Jordan in Lawrenceport because my dad played basketball at Carolina, so I grew up a huge basketball fan and very partial to Carolina. Even to the point my first year at UVA I was pulling for Carolina, which Against GBA, which did not go over very well with my friends.

1:24:18 Actually that what was it, the last dance show got my kids to recognize wow. Maybe he was as good as LeBron. What do you know? And my favorite set of all time to be both leading scorer and defensive player of the year in the same year is something you have to admire and respect. Yeah, the idea of basketball you mentioned earlier as this team game that nonetheless, obviously superstars matter. A lot, but without

1:24:40 The team It's just not gonna happen and not gonna work. As you think about Teamwork going forward. With your team.

1:24:47 Anything else that you would leave people with thinking about as they cultivate their cultures and teams inside of investing orgs that we haven't talked about that you think is Critical to Maverick's stitching. The obvious to make sure everyone's being treated fairly and respected. We worked really hard to try to have a culture of what we call constructive debate.

1:25:07 We wanna be friendly, wanna be a good team. doesn't mean you're not going to tell someone the wrong. Now you can say it politely, you can say it's a jerk, we prefer politely. But again, one or more phrase. If you're only telling me things I already know?

1:25:20 If you're agreeing with me on everything You're serving of no value. You're not helping me in any way, shape, or form. If you just Oh yeah, I I think so too. So we want people to be motivated to have differentiated perspectives.

1:25:34 Sometimes even it's just to be ball provoking. But that's important part of teamwork working effectively. And then finally. We've always had the approach, once you're on our team You better be ready to start.

1:25:46 Yeah, super brand new analyst. first year or two we're gonna be asked to do a lot of models and you're gonna support the people above you. But if you've been a member for like six months and you haven't come up with a potentially interesting investment idea. on the wrong path.'Cause that is your job. And we rather you Have something that has to be thought for.

1:26:04 Even we disagree, but we rather have those wheels turning and you showing us that, hey I'm thinking about these things and here's some potential ideas. Until you are. We hire w some super talented person that has a little too much confidence. We always hope his first idea is a disaster.

1:26:20 Just sort of a way of making sure we will understand just how hard this job is and let's all have some humility'cause we have a very difficult job. Since you're doing it to each other all day long for so long now. What are the components of a great investment pitch? They hadn't changed that much. So we have a version of a slide deck we put together back in ninety four.

1:26:41 And one of the slides was what we book for investment company fundamentals. Competitive positioning, quality management, different valuation metrics, da da da. And over the years has different marketing people been involved and different senior people. It's been tweak this, this, and that. But you'd be shocked.

1:26:58 by how some we're does. And part of this we're talking earlier about why so many folks the Done Wild Tiger. I think most folks coming out together would give you a pretty similar list of what we're looking for. And people have to get off track, but there also now there's period time like Oh, all the tiger pokes talk all the time, just copy each other's positions, look at the thirteen Fs.

1:27:18 In reality, we hardly At least. I mean I've talked to a couple but wouldn't based on we talk to each other, it's based on we're looking for the same qualities and we're identifying the same companies. This is a strange question, but what do you think the hardest question But still good question is that anyone could ask you.

1:27:34 Hardest but good question. That's not fair,'cause then you're asking it. Maybe. I don't know the answer, but the hardest question I honor with is How do you

1:27:46 Raise your children in a way that when you look back on your deathbed, you're really proud of them. What are some things that you think might be true as an answer to that. Again, typical me, I try to research a lot of different things when I recognize that my children are likely to grow up with more fortune than more comfort than I had.

1:28:04 That can sort of me. So I spent a lot of time with people I knew that Kids were all enough, they had her head screwed on straight and despite having some success, et cetera. And uh had probably a half dozen different conversations thinking I was gonna find Aha, here's a magic algorithm.

1:28:20 Everyone completely Different opinions. And the only one that was pretty common throughout Now my kids are adults, so this done boy pie, but Spend a lot of time with your kids.

1:28:31 Someone said, Ever talks about quality time? I don't know what that means. What matters is quantity of time. Just be with them. Discuss the meaning of life or watch TV. It doesn't matter. Just view them. So I think there's importance to that. And clearly

1:28:45 the example you set. So of course With regards to integrity and ethics, but Although with regards to work. There's a downside that I wasn't a very present parent through some critical years. But there is the upside is

1:28:58 My kids think it's the normal thing to do to work their butt off. They both work their butts off. But I think that is l largely from learning from example. And then lastly morning from example in terms of a healthy marriage and healthy dialogue and healthy arguments and all that, but like all these things kids learn about watching more than they do by listening. In bringing work to them. Was there anything that you did understanding like kids are gonna go their own way?

1:29:21 Gonna be interested in what you do or not. Some percent of the time. A lot of that's baked into their DNA probably. But is there anything that you look back on and think, Oh, that was pretty good? A good strategy for

1:29:32 telling my kids about what I do or involving them in some way. certainly something I'm thinking a lot about. My kids are nine and seven, so they're beginning to ask those questions and be interested or not. Curious if there's anything you did that you think was especially good. Well, we always and this is obviously not a unique idea, but When it came to allowance, a third was money that they could spend however they wanted, a third went into phantom, and a third was savings.

1:29:56 And on the philanthropic part. We would sit down at year in And we'll now scope and down depending on behavior, whatnot. Count Pumish ahead and make them make the decision of where it's gonna go.

1:30:07 And sometimes just things I thought were that great, but they weren't. Bad and that's what's important to them. And then the savings for could be Just let it sit there and I think I gave him a really high rate like twenty percent or something just so they could clearly see compounding the value of that.

1:30:22 Or they could pick a stock and I would guide them and give them a list of stocks they could pick from. And my older son was less interested in that last piece and my younger son was extremely interesting that last piece. So my goal was to give an exposure And as they move forward their life. Let them understand where their interests and passions are.

1:30:41 But by at least exposing them. It opened up the avenue as it potential passion again, my Yargo one. works at a venture capital firm and thin about all things investing all the time. My older son works at an environmental consulting firm and

1:30:55 We didn't talk earlier about Maverick Ventures and your point about your son just reminds me to ask the question. Any apart from the obvious advantage of information learned through that effort. being very positively impactful on the public equity portfolio.

1:31:10 Anything else that you think is really important about having started that inside of Maverick, especially given our discussion that you didn't want to start seven different business lines, credit and all this other stuff. Say a little bit more about the Maverick Ventures experience. So he first m made a private medicine back in ninety four.

1:31:27 For their first decade. And this was within the hedge funds. It was still in a very opportunistic sort sporadic basis, if something came our way, we'd look at it and say it was interesting or not. And now for a decade of that

1:31:40 We already concluded that we had learned a lot. that again was very helpful to decisions we were making the public markets. But I also recognize that The returns are okay, they weren't great, but most importantly To really add value.

1:31:55 You needed the expertise and experience to help these companies be successful on his public equity measures. We pick up a phone and buy the stock and pick up the phone and sell the stock and occasionally tell me what we think and they usually not listen to us. But this was a very different responsibility to help these small companies be successful.

1:32:12 So we concluded if we were gonna continue making such investments that we needed to bring in that expertise. David Singer started three different companies, all three went public. We invest in two of them. And I think Dave was at the point that he was looking for a change in his responsibility. So we convinced David to come join us late two thousand four.

1:32:31 Fast forward ten years, we'd had a lot of success under his leadership. Some of the investments have become quite large. We concluded we had a larger percentage of hedgement capital. in a liquid private system was appropriate.

1:32:45 start at Marventure so we can continue to make those investments, but have a different pool of investors to support that. That in itself has become a great business thanks to the leadership of David and other members of his team. To your point, has continued to be just invaluable in terms of

1:33:03 Not only what we learn, but what we can bring to bear on the private side. And it's also fun. Yeah, matter of fact, I think one of the risk, one of the disadvantages, if you will, is you have to every now and then remind a member of the public team I'm glad you're really jazzed up about that five million dollar private investment, but you do have this multi-hundred million dollar investment over here. that I also need you to focus on.

1:33:25 Haven't had too many of those conversations, but It's funny how that happens. It really does happen. But thinking you can really help influence a company to the next level of success. dealing with a management team that really is interested in your input. It's just a different experience than we have on the bulk side. So

1:33:42 Well yeah, this has been really fun. It's been so fun spending a day with you, learning about the history of the business with you and with your team. I always ask the same traditional closing question in all these conversations. What's the kindest thing that anyone's ever done for you? So having listened to a few of your podcasts, I had the suspicion that I may get this question. And see you know, think about different things like my parents teaching me the importance of integrity or the electoral science professor who made me retake an exam'cause he thought I didn't do a very good job on the first one.

1:34:10 And I finally realized there's nices and kindness that are connected. And so the nicest thing that ever happened to me. I don't even know the person's same. But whoever was director of admissions at the Stanford Business School in the late eighties and did not let me in. Was the nicest thing that ever happened to me. The kindest things to that.

1:34:30 Was going to University of North Carolina. I was asked to work with the board on something, Joan Robertson was on that board. We start talking stocks all the time. Going back to Jordan, it was just like talking basketball with Michael Jordan in my mind. And I was on my way to go work at Goldman Sachs and Al the Blue. He asked me if I would consider

1:34:47 working at Tiger and I consider it the kindest'cause I didn't really realize at the time But once I was at Tiger and saw the other people they were bringing in and How smart and talented driven they were. I recognize I didn't really fid the mold. I didn't go to Harvard Business School, obviously I didn't go to Stanford.

1:35:05 I didn't go to Ivy College. I didn't play Division One sport. But what I think Joan did see is I had a real passion for socks. And To me, again, I didn't realize at the time. It was so kind.

1:35:17 of him to give me that chance. Wonderful way to close. Lee, thank you so much for your time. Thank you. Enjoy the conversation. If you enjoyed this episode, check out Join Colossus.com. There, you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning.

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