#384 Ken Griffin: Founder of Citadel and Citadel Securities

0:00 There's a book that Ken Griffin recommends reading. It's called Hardball, and the subtitle of that book Is are you playing to play? Are you playing to win? It is a book. about extreme winners and some of the best operators in business. And there's a line in that book. That sounds like it could have been written by any of the almost four hundred historically great founders that you and I have studied on this podcast so far.

0:20 It says. If you have not examined your costs in detail. It is very likely that there exists. Lurking somewhere in your cost structure. A major opportunity to improve your profits.

0:31 Weaken your competitors and expand your influence. The first move. is to drive down your cost faster than your competitors can. and use that savings to upset. their strategies. Two weeks ago. I told you about Todd Graves, who owns ninety percent of his business, over ninety percent of his business.

0:47 That is a business that's worth at least ten billion dollars and is still growing at thirty percent a year. Todd Graves is obsessed about staying in the details of his business, just like Ken Griffin is obsessed about staying in the details of his business. And Todd said, That one of the most Some of the most successful or all of the most successful people he knows stays in the detail of their business. He mentioned learning. From one of his friends who runs a multi billion dollar shipping company.

1:11 And how that friend would even pay attention. To how much his business was spending on bottled Water. When I read that section. I thought it'd be a lot easier to do that.

1:21 If that shipping company was running on ramp. something a lot of history's greatest founders have in common. They know their business from A to Z. And their costs down. to the penny. Ramp makes doing this.

1:32 Effortless. Ramp gives you easy to use corporate cards for your entire team. automated expense reporting and cost control. These corporate cards are fully programmable. You can set limits so the spending of your team

1:43 never gets out of hand. Most companies only find out about excessive spending. After the fact. Just like that shipping company with the rampant spending on water. With ramp. You stop it before it happens. Matt Paulson, who listens to founders.

1:56 and is the founder of this company called Marketbeat. recently switched to ramp and this is what he said about it. Ramp is the best. The amount of money you will save from unwanted renewals and employees who think company credit card equals I can buy whatever I want. Will far exceed

2:10 the best credit card rewards program. Matt is talking. about the importance of cost control. There is a line in Andrew Carnegie's autobiography. This is cost control. became nearly an obsession. All of history's greatest founders were the same way. Ramp helps you make this an obsession. If Andrew Carnegie was alive today,

2:27 He'd run his business on ramp. Make history's greatest Entrepreneurs proud. by going to ramp.com. And you will see why many of the world's top founders are running their business on ramp. Go to ramp.com to learn how they can help your business today. That is ramp. Dot com

2:41 I had a lot. of fun making this episode and I hope you enjoy it. As head trader at Enron when it filed for bankruptcy, I received many calls from firms that were recruiting. I was busy trying to close out the trading book and wanted to take some time to decide my future, so I didn't take any meetings. But Citadel was by far

2:59 The most aggressive Other companies set up a few interviews with Enron's senior people. Citadel. Interviewed Everyone in the trading operation.

3:09 at all functions and all levels. Citadel's team called me twice, but I declined to meet. It was apparent to me that their intent was to reverse engineer their business. And I wasn't going to help them. They knew that people looking for a job.

3:23 Particularly if they didn't have a fiduciary responsibility to a current employer. would be very free with info. Interview everyone and you get a three hundred and sixty degree perspective of the industry. How the business makes money, its competitive edge. who the best employees are, et cetera.

3:40 Citadel probably interviewed several hundred Enron employees. Much more importantly. They built the framework. For how to enter the energy business. Which as Ken has said has been an enormous success.

3:53 I did eventually Citadel. On their third call to me. They asked if I would talk to Ken directly. I was at that point heading to Aspen. For a quick industry event.

4:06 I didn't know Ken personally, but I had great respect for what he had built. So I told his rep that he could call me when I got back to Houston the following week. She said great. But then she called back a few minutes later with a question. If Ken flew to Aspen to meet me in person the next day, would I?

4:22 Out of respect, I said of course. The next day I had a great meeting with him. And later that week he offered me a job. as head gas trader. I wanted to fully run an operation and thought there was more upside.

4:34 If I could have my own fund. So I declined. I ended up building my own firm starting with traders. and hiring deep fundamentals expertise. Citadel started with research, as is their DNA.

4:47 and built up a trading operation around it. Both models worked fabulously well. I came away from the experience with an even deeper respect. For both Ken and Citadel. And remain friends with him to this day.

5:01 I started with a niche. Gas trading. built a niche fund and burnt out. After seventeen years. Ken started with a niche.

5:09 Convert Arb. And built one of the most successful financial firms ever. And has never Tired.

5:18 That was a tweet written by John Arnold. I came across there a few weeks ago and it further piqued my interest. On doing an episode, making an episode about Ken Griffin. There's no biographies, there's no books written about him. But I keep coming across these little clues that he's a very special person.

5:33 That tweet being one of them. I wanna pick up this book that I read y many years ago for the first time, probably five or six years ago. Uh the last I've done a few episodes on'em but the one I'd recommend listening to is episode two twenty two. Ed Thorpe is a legit genius.

5:48 Uh, he was the person that and uh he he founded the very first quantitative hedge fund. He built the world's first wearable computer with Claude Shannon. He was the one that came up with the strategy and the process to beat the dealer, the blackjack dealers in Vegas, and wrote a book about it that sold like millions of copies in the nineteen sixties. He his autobiography reads like a thriller, and he constantly pops up in all these important events in financial history. Let me give you an example. He has dinner.

6:12 with Warren Buffett. Warren Buffett's thirty eight years old. Uh, Ed Dorp I think is thirty five at the time. He leaves the dinner, gets in the car, tells his wife, I think that man's gonna be the richest person in America one day. But there's also a very interesting thing towards the end of the book that I'm gonna read to you real quick.

6:26 Where a nineteen year old Ken Griffin comes to Ed Thorpe's house. So he had closed down by this time Ed had closed down his hedge fund called Princeton Newport Partners. And so he says, you know, if I would have kept going How like how big could have that idea have gotten?

6:44 Right? He's like There's no really way to know. But there is an interesting anecdote and I have a story for you. And he says Amazingly enough, a market neutral hedge fund operation was built on the Princeton Newport model. Citadel.

6:55 It was started in nineteen ninety in Chicago by former hedge fund manager Frank Meyer. When he discovered This young quantitative investment prodigy Ken Griffin. Who was then trading options and convertible bonds from his Harvard dorm room. I met with Frank and Ken.

7:11 Of Princeton Newport Partners. As well as turning over cartons of documents. outlining in detail the terms and conditions of older outstanding warrants and convertible bonds. These were very valuable because they were no longer available. Citadel grew.

7:29 From a humble start in nineteen ninety, and he says, I became its first limited partner. So that adds to, you know, Ed Thorps. A financial lore. the first LP in Citadel. He's also starts buying Buffett stock at like six hundred dollars a uh a share. And so through my normal reading research that I do for this podcast I keep coming across all these like anecdotes and these stories of Ken Griffin.

7:50 And I just couldn't figure out a way to make an episode on them. So I started I was like, Okay, if there's no book I mean, listen every single interview or talk that he's given, most of the talks and the interviews that he gives, they're very topical. As you know, like I'm not interested in topical, I'm interested in timeless. And so I was able to find

8:07 A a talk that Ken Griffin gave at Yale about a year or two ago. that I feel has time as principles, he kinda lays out a you know, a very brief Uh overview of his career.

8:18 And so what I did is I transcribed that interview. And then I went through the transcription just like I go through the books. So underlining, notes, highlights, everything that I do. This and then I'm gonna jump into that right now, but there's another reason that I wanted to cover him. Because of the podcast, I get to meet a lot of wildly successful people. And I always ask them the same questions like who's the smartest person you know. What's the best business you know?

8:38 And if they're in finance and they're talking about people that are still operating. Ken Griffin's name comes up over and over again. And there's two ways that he's been described to me many, many times. And it's funny that these people don't know each other, but they describe him the same way. They say winner. And they say killer. And one thing that I think is true is

8:56 If you just listen to the books that people recommend and you read them, you have a kind of a fundamental uh a deeper fundamental understanding of how they think. And so there is In this talk at Yale he he recommends a few books. And one of them is this book that I've heard that he makes people at Citadel or strongly recommends people at Citadel read. It's called it's really hard to find. It's out of print. It's called Hardball. Are you playing to play or playing to win?

9:19 And so in addition to listening to every single interview I could find about Ken, reading everything I could find online about him. I also read this book. I may do a bonus episode in a few days on this. I'm not sure if I have enough material to do an episode if I do. Obviously release it on this feed. But I do wanna just give you an insight into his

9:36 his mindset, which he's gonna talk about at in this talk through Yo. You I think you got the hint when When you saw his reaction to the Enron bankruptcy, that he was just him and Citadel were by far more relentless. Everybody knew there was valuable information up for grads, like who went the furthest. This is I'm very interested in these people.

9:52 that play at a different level. Looks like we're all playing the same game. And essentially the book is talking about it's like oh from the outside. It may seem that we're all playing the same game the same game, but there's certain companies and certain founders that take it to a completely different level. So I just want to Read one paragraph. for you from the book Hardball. And then I was I promise I'm gonna jump into the rest is all being Ken's words.

10:11 But it says this kind of winning through competitive advantage may sound like nothing more than good, serious, and sensible business practice. But hardball companies are further distinguished By their attitude and behavior. They play with such a total commitment to the game. Such a fierceness of execution and such a relentless drive

10:31 to maximize their strengths. That they look very different. From other companies. That have admirable performance and sound business skills. I think of

10:42 These few sentences when I when I read that tweet, that anecdote, that story from John Arnold. Hardball players play to win in every aspect of the game. It's like oh yeah, y you know, can I'm a big fan.

10:56 Call me next week. How about I fly to where you are the next day? That's a different level. They always seek decisive victory. Sounds like exactly in that story. They don't want to win two to one. They would prefer a nine to two. Route. Okay.

11:10 So that is the book Hardball. I will leave a sh uh link down below. If you I think there's a few copies left on Amazon, but it is uh I I bought a few for friends as well. But it is sometimes difficult to find. Okay. Wanna go right into Ken's own words. And he starts to talk keep in mind he he's being interviewed.

11:27 at Yale, he's talking to a bunch of, you know, college students. And his big thing is like you need to be seeking risk. Remember last week with Todd Graves? He talked about you know that guy owns ninety percent of a business is worth at least ten billion dollars. And he's growing at thirty percent a year. So, you know, his net worth is skyrocketing.

11:44 And his whole point was like he believes that one entrepreneurs need to have way higher risk tolerance, that his risk tolerance and and you heard it on the podcast was sky high. And uh this is the advice that Ken is giving to these students. So yo, I tell this to everybody, you should be risk seeking. At this point in your life. So keep in mind Ken Ken started Citadel right out of college.

12:06 This is a great moment to think about pursuing opportunities. That have the maximum Personal interest. You should go for it. right here and right now because there will come a time

12:16 Where it's going to be harder to take risks. Right now you should absolutely be thinking about what the high risk opportunities that you could pursue are. that you'll have the greatest experience with. And so he talks about this a bunch. you know, you you're gonna take risk. You have no idea. There's no way you could possibly predict if you're gonna be successful or not. The important thing is that you're maximizing The the the speed at which you're learning and then you're following something that you're just completely obsessed with. In fact

12:39 I'll start with this. There's a b a bunch of other um talks that I took notes on. They just You know, in in many cases I spent like hours and hours and I'd pull out like one or two lines. Uh, there is something that's interesting that he says later on. I'll just bring it to the front now.

12:52 And he says, This is gonna remind you th there's there's this idea that you and I have talked about over and over again. that uh I think Jeff Bezos puts it into words better than anybody else that I've come across. And he says that you don't choose your passions. Your passions choose

13:07 You. And this is what Ken s says in a different talk. I've always been interested in the stock market. For reasons I don't fully understand. In third grade

13:16 I wrote a paper. that I wanted to learn how the stock market works. And I've been on that journey now for almost forty years. She's okay. You need to

13:26 You need to be taking risks. What's the highest risk opportunity that you're actually that you'll have the greatest experience with that you'll learn the most about? Right. And that you're just naturally interested in. He says, I started Citadel right out of college. I joined a firm in Chicago that gave me capital to manage. We had a very simple understanding. If I did well, I'd raise money. From outside investors.

13:44 I would start a formal firm. If things didn't go so well. I'd go back to graduate school and I think It the I'm pretty sure I read somewhere, I heard somewhere.

13:54 Hopefully I'm right about this. That They seeded him with something like a million dollars. So you know, a very small commitment. I think he had heard. You're like seventy percent returns on that money.

14:03 And so he says that was the deal. And then he talks about why he went to Chicago. I went to Chicago because the two partners that ran the firm that backed me. He talked about the One thing he's gonna talk about a lot. is Ken is a

14:17 Believer in the power of mentorship. So he went to Chicago because he thought the two people that were backing him actually cared. About what happened to him. And they took an interest in his career. In fact,

14:28 This is something that appears over and over again in the books. It's really, really important. It's really one of the miracles of You know, founders and entrepreneurs. They may be competing with each other when they're alive. But when they get older, they're always willing. I can't think of another example of like where they're they're willing to

14:43 help the next generation. They're like, Oh, that I know all the shit you had to go through, right? I I'm deeper down the path. I wanna like r reach back and help you as much as possible. In fact, I have a book on my desk. Uh this is really important in another hard to find book. Um it's called Anatomy of a Merger.

15:00 And it is a book on Jay Pritzker. Now why was I interested in that? Because Sam Zell was one of the most fascinating entrepreneurs to me. I did his autobiography. I did an episode on his autobiography. Sam Zell listened to that. Episode.

15:12 Loved it, asked to beat me. Then I had a got to have a two hour lunch with Sam Zell. That changed my life. The w that one conversation really affected and and changed my behavior. About how I think about things. But Sam talked about it in his book.

15:25 And at lunch. that Jay was like twenty years older. Jay Pritzker was old like twenty years older than Sam. And in his book Sam Zell said that Jay was by far the greatest financial mind that he ever came across. And that Jay was so helpful and acted like an older brother and a mentor to him.

15:41 that changed the trajectory of Sam Zell's career. And you know, Sam Sam was a legend. So We have Ken Griffin saying, Hey, you know, I was a nineteen year old kid, I moved to Chicago, and I did that because the two partners that back me, I they they had Been interest in me. And he says one of'em uh reminded would remind you of your high school physics teacher.

15:58 He was Plain spokenly brilliant. And I felt that he would care about my career. And he goes, I think that's really important. Find people that are going to take a vested interest in how you do.

16:10 So much of your career will come down to mentorship and apprenticeship and can continue. It's one of the great parts of American culture. Is the willingness for people of people Intergenerationally. To give to those who are younger. So we see this

16:24 All the time. You and I see this all the time with older founders. They love sharing their knowledge. with younger founders. You know, think about the how much we benefited from You know, and this usually happens when they're when they're you know Towards the end of their career, or maybe even after their career, towards the end of their life. And they write these autobiographies. Think of Sam Walton. Think of the how influential Sam Walton's autobiography was. He wrote it when he was dying. He knew he was dying.

16:45 He had cancer was riddling his body. He was in pain and yet he took time out. Limited time he had left on his earth. to to summarize All the lessons he learned.

16:54 from building one of the greatest companies that w the world's ever seen. It's we're so We we benefit so much from this. This is so important. He says m then he talks about some other mentors before Were they they were mentors were the traders and salespeople of Wall Street. So Again, I just keep going back to that.

17:09 I think that story at the very beginning. of the blow up of Enron, which he's gonna talk about too in this talk. It just gives you an insight. This guy was Relentless. About seeking information.

17:20 that would be beneficial to his career. So He was mentored. By some traders and salespeople on Wall Street. He goes, You have no idea how many hours a day I spent on the phone. Like a sponge. Learning about finance from those

17:32 Who had fifteen. twenty. twenty five. Thirty years of experience. He even mentions this guy, he goes Terry O'Connor, Merrill Lynch, Boston.

17:39 I In talk. He doesn't have notes in front of him. I I watched this many times. He spits out the guy's phone number. He still remembers the guy's phone number. He goes, I could go to Merrill Lynch's office after school. And I'd go there at the end of my school day and stay till midnight.

17:54 They would let me use their Bloomberg, read the value lines, and read all of their research. And so then after Ken is describing His own experience, he gives Uh advice. Take advantage of all the people in whatever firm you join and in whatever community you're part of to learn from

18:09 Those who simply have more years of experience make the most of that. So think about what is this founders podcast is exactly this. You know, we're up to what, four hundred, four hundred fifty hours, almost four hundred books. What are what are you and I doing every week, right? We're taking advantage And we're learning from those who simply have many more years of experience. We're making the most of that. So then he continues telling us about his early career.

18:32 Oh, this was very fascinating, and this is something I see all the time as well. So he says an acquaintance of mine who has started one of the most successful internet companies of all time. Said to Ken one day. That great entrepreneurs have the right toolkit to solve a problem. of that particular moment in time. And so Ken is gonna talk about the early days of his career. And this is So

18:52 the he doesn't name who this person is, the the successful internet company founder. you know, great entrepreneurs have the right toolkit to solve a problem of that particular time. You've heard me reference this over and over again on the podcast that This is the right person. with the right set of skills at the right time.

19:05 So he says for me, that toolkit was an understanding of software engineering. An understanding of mathematics. A background in economics. And a passion for finance. Remember going back to hey, I was obsessed with this starting in the third grade, I don't even know why. And a belief that you could use quantitative analytics to have a competitive advantage in the financial markets. This is always fascinating to me.

19:26 Hell. An insight that no one else has acted on or no one else has mastered yet, which is exactly what he's talking about, right? Eventually. will become completely commoditized. It will be obvious to other people. And so that's what he's he's gonna talk about here.

19:40 And believe it or not, in the nineteen eighties, that was still a reasonably novel thought. One of my earliest hires was a Russian rocket scientist. One of my friends in Wall Street called me up and said You're not trying to put a man on the moon. You're trying to make money.

19:52 And I'm like No I believe that this is the future. that those firms that can price derivatives analytically are going to have a real advantage. The guy that called me was a partner at one of the most successful investment banks That no longer exists.

20:06 And we at Citadel today are one of the largest market makers in the world. So I had the right toolkit in the right moment in time. And I think my friend is really right. So the friend he's talking about is the one that's saying, Hey, great entrepreneurs have the right toolkit to solve a problem. At that particular moment in time.

20:20 It's thinking about this is such great advice. Such great advice. Okay. And I wanna go back actually before I go to the great advice. There is something where d this this idea th I'm gonna tell you what came to mind. This idea.

20:34 Where he is trying to he he's applying essentially if you really think about what he's doing, he's he's Investing in technology. He's applying technology in a way to an existing industry that no one was doing before that. There's a line. it that that part when it was surprisingly enough, when I got to that part

20:49 Of of this talk and of the transcript. I thought of Andrew Carnegie. If you go back and read Andrew Carnegie's autobiography. He was doing the same thing we was doing in the eighteen hundreds, and he was doing it to the steel industry. He would constantly invest And

21:02 A ton of money. In the latest technology that would help him become more efficient. Right. And produce Higher quality steel

21:09 At a lower cost. And these all he calls them like old heads. He says in his autobiography older guys in his existing industry. Did the exactly what This guy

21:19 who called Ken is like, You're not trying to land on the moon. What are you doing here? They would tell young Andrew Carnegie This is a waste of money. You shouldn't be doing this. And he knew that the investing in technology was the right one it was the right move. It made him more efficient, the savings compounded.

21:32 And then he even says in his autobiography, Carnegie says that In some years. that new if that that the efficiency he gained from investing technology? was the difference between profit and loss. And he was able to make a profit where his old head competitors told him not to do that, were making a loss and they rent eventually go out of business. I just think it's fascinating that human nature just

21:51 Again, history doesn't repeat, human nature does. I love this. Now let's go to this great advice. It's thick this excellent. It's thinking about what tools that you have. That at this moment unlock problems that just simply didn't exist before. What is your natural skill set that you can apply that maximum take remember, take high risk, right?

22:11 And you can apply that opportunities. that you are uniquely s suited to solve right now and you need to act on it right now because What if he had that idea of like, hey, I think I can get a competitive advantage in the financial markets. Uh, you know, if I I I can use quantitative analytics. And then he waits a decade and a half.

22:28 Or a decade or five maybe even five years, maybe even two years. that that edge that he saw that that novel thought he had, that edge that he thought he could pursue. is competed away. So again, he says every thing and he talks about this, everything we did in the early nineties is completely commoditized. That's just a profound

22:45 Fact. A huge competitive edge in nineteen ninety is just trivial today. And so this is Again, when I get when I ask people about Can

22:55 Another thing that comes up. Is What exactly what he's gonna talk about here. that he is just a learning machine and he's constantly seeking out opportunities and you can see that he's learning. And he's expanding the ways he makes money. He understands

23:09 that these edge the the edges he has. They may not last forever. He he just talked about this. It's ridiculous that everything that he thought he was solving or he did solve and it all the difficulty went through in the eight late eighties and in the nineties, now you could just literally get for free online. So he says now the fortuitous part of the story is that over the last thirty years, we've radically improved our business and transformed what we do and how we do things. We continue to build our competitive advantage in the various business.

23:34 In which we choose to compete. That Is the essence Of running a business. He what's the essence of running a business?

23:41 How do you build You're competitive. Moat. And so uh by this time, when I'm going back through and doing the transcript to get ready for this episode I had already read.

23:51 Hard ball. And I just wrote that's exactly What the book Hardball is about. Are you playing to play or are you playing to win win? It's how do you build your competitive

24:01 Moat. We trade financial assets that involve a research process. We need to understand what moves the prices of assets. More thoughtfully and more quickly than our competitors. And then trading is simply how we monetize.

24:15 our research. That is how he thinks about what he does. We are just researchers. The glory is in the research. This is w exactly what he says. He says the glory is in the research. Trading

24:26 is the monetization of that research. Now he just got done mentioning the fact that his first edge was competed away. And so the advice he's giving he's like you have to. This is just the the importance of lifelong continuous Learning. It's related to the fact that his first competitive edge

24:41 You know, was was commoditized. For all that you've learned so far at Yale, the vast majority of what will matter in your career you have yet to learn. If you look at the people who have been extraordinarily extraordinarily successful in finance, They are lifetime learners. They are always learning.

24:57 And so he even talks about the fact that, you know, he was gifted in math at an early age, but eventually he builds a company. where he's able to recruit and there's some crazy numbers. Like I think it's like a hundred thousand people. That applied. To work for Ken last year? And so

25:11 He he knows his own skills. As he goes from y as he continues to build his company. Like he's gonna be able to hire people that are better at each individual skill than he is. It's very simple remember the the episode I did a few weeks ago? Uh we Jensen Wong. I can't c I can't stop thinking about what what

25:26 the way that Jensen looks at his business. So Jensen's point was like, Hey, we're gonna have all these like super brilliant, smarter than us. Uh AI agents. they're gonna go out and be able to actually to complete entire jobs for us. You know, people are scared of this. He's like, it's ridiculous we scared of it because it's it's my life now. And so what are you talking about? He's like, I have sixty direct reports.

25:44 Every single one of them. is smarter at in their respective part of the business than I am, and yet I am able to manage and direct them and essentially direct their activities. He's like you're gonna be doing exactly that, but instead of doing it through people, you'll be doing it through AI agents. So When He's talking about the fact like, yeah, I used to be good at math. And then

26:02 I can hire people that are great at math and he has a funny way to talk about the story. He says it's funny you speak of me as being mathematically literate. There's a conversation that I had inside Citadel that always makes me smile. with one of my absolute top guys. We were going through a particular problem and he looks at me and he goes And he says this in front of a room full of people.

26:19 Yeah. So he looks at Kenny goes, Hey. If you were good at math, this would be much easier to explain. And so he he thought that was obviously humorous. He says, My mentors now are my colleagues that I work with. that I choose to surround myself with. What I see inside of our four walls

26:36 is my sharpest young colleagues. Gravitate. Towards people who invest their time with them. In fact, this is another thing that he says. I'm gonna read uh to you. He's asked in another interview uh that I found he says how much this is gonna sound a lot like Steve Jobs. Really all the great entrepreneurs understand that it's just talent over everything.

26:54 He goes, uh, how much time do you spend on recruitment? I am talking to candidates all the time. Nothing is more important. Then the talent that we're bringing into our four. Walt. And so he goes back and continues some more advice.

27:08 You need to find yourself in relationships where somebody takes an interest in you. Now an interest in you won't always be He says, Let's be clear, that doesn't necessarily mean it's like this big smiling festival, right? Some of the best people That you will work for. You will find to be just incredibly painful to work for.

27:25 An interest in you does not necessarily mean like wow, everything you do is great. Sometimes the best advice you get Is here are four things. That you need to do better. You want to find somebody who's going to push you.

27:37 Some people push you. In more in a more kind way than others. But you want to find people who are going to push you. So I would say way before I had ever had people Yeah, because I had

27:49 Absolutely no network at all. You know, before I started the podcast. I I would say and I think that's true for most people, right? The vast majority are not surrounded. I always talk to some of my friends, it's like we understand we're in a bubble inside of a bubble inside of a bubble. If you just look at like the vast major majority of hum humanity, just they don't have access to these networks. then it m maybe they can access them online, but they definitely can't access them in person.

28:09 But Biographies can do that in the very beginning. Like I when I started reading biographies where he says, Hey, you want to find people that push you. I feel that every time I read a biography, like every single person, in my opinion, every single person I've studied on Founders Factory so far. Is Smarter and more productive than I am.

28:24 And they're constantly stretching. uh what I believe is possible. They're all they're constantly pushing me, realizing like Even that story, think about it. You want you want to win, right? Everybody wants to win. Like how bad do you actually want it? And and Ken will tell you how about it, like actions express priority.

28:40 Ken actions express priority. How bad did Ken want the information that was inside of And Ron's Trading department. Ve like to the point where he's like, Hey, I will come wherever you are and I will get on the the plane right now and he's gonna talk about chartering a jet. All this crazy shit that he did.

28:55 to get this information then he winds up making like thirty billion dollars you know, off that information over the the s from them till now. So like how bad do you want it? So again, I I do think like yeah, you can have people around you that push you, and I definitely now have have a network that does that. And friends that do that? But

29:11 even before that, these biographies just like, dude, I could be doing so much more. You know, what you thought was possible. There's a great line, like uh it's mediocrity is always invisible until passion shows up and exposes it. Mediocrity is always invisible until passion shows up and exposes it. The way that Ken goes around running his life. His business is full of passion. He's showing you how far you can go. So uh more advice. If you're in an environment where you've been thro somewhere for six months and you haven't learned much

29:37 Do not make it six months in a day. The most valuable equity that you'll create in your lifetime is your career equity. that you own is really think about your education, your skills. It doesn't go up and down with the market. You own that equity and you want to think about how to maximize your career equity because that toolkit that you develop over your career. That's your ultimate job security. That's your ultimate ticket to success. Another piece of advice that Ken has here.

29:59 Really, I'm gonna read this Warren Buffett quote that came to mind first. Because this is exactly what he's talking about. So Warren Buffett says a rising tide floats all boats. Only when the tide goes out Do you discover who has been swimming naked? Ken will reference multiple times the fact that Citadel almost went out of business completely. during the great financial crisis from you know oh eight to o o oh seven to oh eight. He says when you're when you're in a firm in difficult moments, you actually see in well managed firms, you see what real leadership looks like.

30:26 What real leadership teams are actually made of. It's much like when that the rising tide lifts all boats. Poorly run firms and great run firms. It's sometimes hard to distinguish between the two. Well when times are tough is when you really see

30:41 the character of the firm. Yeah, this is why we say that time is the only filter that I trust. There's another great adv piece of advice that Warren Buffett gives You know, he's like, Listen, I don't really believe in formulas, but I tell all the managers of our our wholly owned businesses It's like a three three step

30:57 uh formula. It's like uh make every decision as if you own a hundred percent of your company. As if it's the only asset that your family owns or will ever own, and then you can't sell it for a hundred years. And if you run your decision making process through that rubric. you've you're optimizing for long term survival.

31:14 Right, time is the only filter that I trust. So what's interesting is the number of people that I know that started their careers during the oh seven, oh eight, oh nine. And they start him in finance, who have this just incredible perspective. So he is talking about the fact that adversity is an asset. And that's something that also Ken has in common with a lot of history's greatest entrepreneurs.

31:32 So it's like okay, well if you started your career then, right, you're you're going through hell at the very beginning. And he says later on, you know, now we're thirteen years later, 15 years later, whatever the time is, the people that had to go and had to survive that adversity. you know, decade, decade and a half later. They are remarkably wise and well grounded and able to navigate moments of adversity as if it's a walk in the park. 'Cause they've been through

31:56 A difficult time. First thing that popped to my mind. When it got to that part, it's like oh This is like Rockefeller. Rockefeller praised

32:03 The benefits of diversity all of his life. In fact, he said what a school. The school of adversity and stress. to train a boy in. He's talking about himself.

32:13 Another great line. D. Hawk, the founder of Visa, has this great maxim. He says, The wise made great use of adversity. The foolish Whine about it. And so Ken's gonna keep talking about that. And he says, I say it's Citadel, we forge talent.

32:27 That implies a concept of pressure. The world also forges talent, and those difficult moments give people almost extraordinary opportunities to make decisions. In the most difficult of times. and to have a very fast rate of development and growth. And then he talks about the opposite. When times are good, what happens? It makes you soft.

32:45 And so he's talking about it on a country level. And again. So many the I think the benefit of of Watching the interview, then obviously transcribing and reading it at the same time I read Hardball, you see

33:00 Ex is connected. There's ideas. You could see why he recommends that book, I guess is what I'm saying. So He's talking about hey. You know in the United States we have a really big problem. We've been

33:08 after Wor post World War Two. We the United States really had no competitors. That has shifted in the last fifteen years, and he talks about this report that really bothered him when he's reading it. He says this report was published in Australia. Uh, there was a survey of roughly 45 of the most important emerging technologies from quantum computing to solar power cells to various areas in biotechnology, and the Chinese led in 30 of these areas.

33:29 That is really frightening. Now in the United States. United States is so entrenched in this unshakable belief. That we cannot be challenged in technology. Oblivious to the fact that

33:39 That not only are we being challenged, we're being Beaten. And so if you read Hardball. There's a great line that I just sent to a friend of mine who's dealing with this with a a massive organization.

33:51 And from H there's a line from Harbaugh says when an organization Ken's talking about it could be a company. Obviously in in the example he just gave it could be a country. When an organization achieves advantage It develops a tendency to continue operating.

34:03 With the same strategy. That produced The advantage. It is the leader's main role. To kip alive.

34:11 The quest For advantage. And so then we get to the part where Ken talks about Almost going out of business. He says there's a little saying

34:20 A little quip that I like to make. History is written by the winners. So the wonderful history of Citadel is how we are the most profitable hedge fund of all time. The chapter of how we were of how we were on the verge of going out of business in oh eight is now a footnote in that book. But it is a very important note.

34:39 It has not been an easy march to success. I think I have the most interesting position in life. I've probably lost and my team has probably lost more money than any other firm in existence. We just happen to have made more money.

34:53 than almost any other firm in existence. And it's the net. That everyone talks about. There are years where our losses Or hundreds of billions of dollars.

35:04 I don't know if it's hundreds. But it's over a hundred. The number is incomprehensible. It's also why it's really important. Like who's interviewing the person or who gets to ask the questions. There's so many

35:15 Times. During this. It's like if I was the one talking to Ken, I'm like, Wait, pause, pause. Can you explain that? How did you lose a hundred billion dollars in a year? And

35:25 No disrespect to the guy, y you know. Asking the questions. Just multiple times where I'm like No no like I just think I could do a better job. I guess is what I'm saying. No disrespect them.

35:35 But I wanna about what What like how the hell do you lose a hundred billion dollars in a year? says the numbers are incomprehensible. But this is the the main point. I didn't mean to d distract our conversation.

35:46 All of my losses are my tuition. And I have the most expensive education in American history. If every time you lost money You got depressed and angry? You could deal with it?

35:57 You'd have a very short career. So you need to be able to take a step back and go. It's a tuition bill I paid. This doesn't mean that you don't think very long and hard about what went wrong. But you have to keep it in perspective.

36:08 In two thousand eight That tuition pill Bill. almost became getting expelled from school Because we lost half.

36:16 our equity in sixteen weeks in a firm. that had never dr had a double digit drawdown in twenty Years. Now this is another example. He says he's always going to like the scene of the crime, I think is how Is how he puts this.

36:29 I actually love the fact that he did this. The principal reason that we survived is that when long term capital management failed in nineteen ninety eight. So nineteen ninety eight, Ken would be thirty when he's doing what he's about to describe here. In two thousand eight when he almost goes out of business, he's forty, okay?

36:45 So he's like, This is the reason that we were able to survive ten years later. 'Cause back in nineteen ninety eight. I went and met with a number of the senior people that worked at long term capital management. And why did I do this? What was my agenda?

36:57 I wanted to understand how does a firm That loses ninety percent. Of its equity. in a levered financial service industry still stay in business. They lost ninety percent.

37:09 Of their equity. Before they lost control. Of their business. And much of what we learn from how they survived. was actually fundamentally and extent existentially important to our ability

37:21 To withstand the turmoil. Of two thousand eight. So there's a very important lesson here. Which is not only do you want to learn from your mistakes. You really want to learn from the other guys.

37:32 in the other people's mistakes too, because they're much cheaper tuition bill. So A few episodes ago, I think it's episode three eighty. on Buffett and Munger. It's uh four hundred pages of Buffett and Munger in their own words. They said This exact same thing. In fact they quoted Patton. I think Buffett's the one that said this. He says the best thing to do

37:50 Is learn from the other guy's mistakes. George Patton used to say. It's an honor to die for your country. Make sure the other guy gets the honor. And so this is another great idea. That Ken has here.

38:01 I spent over my lifetime a lot of time At the proverbial scene of accidents where other firms have gone awry. And so now he's gonna talk about what we talked about at the very beginning, when Enron filed for bankruptcy. Enron was the largest energy trading firm in the United States, and they blew apart spectacularly. In two thousand one.

38:20 They day they so that means around this time that Ken would have been around thirty years old when he's doing this. So that story we told at the beginning at the beginning. The day they filed for bankruptcy. I charted a Gulfstream jet and put sixteen people on it. Straight to Houston. And all we did was interview people at Enron for several days.

38:38 The day, not the day after. Not a week, let's wait a month. He says the day. I chartered jet got and went down there. Again, hardball. He's playing it very obvious that Ken plays the he's not playing to play. He's playing to win and he wants a landslide. Um all we did was interview people at Enron for several days. What worked, what didn't work, how they made money, how they ran their business, what their competitive advantage was. Now the great part of the story is I hired the entire leadership team of the quantitative research effort at Enron.

39:03 All the people who actually knew how the place worked. And we've made Thirty billion dollars. in commodities since then. So he calls this being on the ground.

39:14 That's about being on the ground. That that's about understanding where the business actually created value. That's about extracting the right people from that moment in time and surrounding them. with the right leadership team. the right investment professionals, the right software engineers, and building what is today one of the most important commodity businesses in the world.

39:32 So going back to our two thousand eight experience. The first point Is when This is hilarious. Is when you're walking through hell, just put one foot in front of the other. Just keep going.

39:45 I was Ring. That we would find our way out of the fire. And he goes, Why do I use This fire analogy.

39:53 I called Llockfine, who ran Goldman Sachs at the time. And they say Lloyd. When is this going to end? And he goes a force fire. ends when there's nothing left to burn.

40:03 You said that did not make me feel very a lot better. But we never gave up during that period of time. And so when you're going through hell, he has a piece of ice for you. Make sure you push your decision making to those who are mentally in the game in the right way. Because some people just

40:17 If if it's their first diversity. They're they're like the proverbial deer in the headlights. So I was thinking about this where Versus he's an asset.

40:25 The long the the more he's gonna talk about the importance of reps later on. He's seen so much in his forty year career in finance. So when he's talking about this, like no people are going through hell, there's some people are just like Completely freaked out and some people are cool and calm and collected. You have to push the decision making to those who are mentally in the game in the right way. This is where Who you surround yourself really matters.

40:44 Because when you surround yourself with the right team, you will buttress each other. On your darkest days. And he said talks about Some people just are gonna struggle with stress and adversity.

40:56 Other people. are going to prosper. In fact, they're my f one of my favorite lines I've ever heard of any founder ever. And I think it's the right mentality. Is her Hard killer her.

41:05 was the founder of Southwest Airlines. Did start South West, so we're like in his mid thirties thing he's like thirty five, and winds up for the next forty years just completely kicking all his competitors' asses. And he was asked by an interviewer one time, You undergo a lot of stress all the time. How do you handle it? And Herb's answer was perfect.

41:22 I don't handle it. I like it. Entrepreneurs are seeking stress. You're seeking challenge. You're seeking

41:29 problems that you can solve that no one else can solve. And if you can't deal with stress, then you just can't do this job. What Ken's about to say here. I think he has a common with a lot of history's grace entrepreneurs. Is

41:40 Their main sources of stress. Are not external. It's the pressure and expectations they put on themselves. It comes from within. He says My biggest stressor, that's me. I'm always trying to figure out how I can be better, how I can do better.

41:53 I might be demanding of the people that work for me. But I am no less demanding of myself. And so one of my favorite stories to ever tell. As I'm watching this interview. Uh with Kobe Bryant and a moder shad assum. Like how do you deal with fans' expectations and before Maud could even finish his sentence?

42:10 Kobe makes the stanky face. He's just like oh Just like complete disgust comes a look of disgust comes over takes over his entire face. He immediately interrupts. Ahmad Rashad and he says their expectations will never be higher than my own. Never

42:23 Never Never. I think it's exactly what Ken says. I think again, I think a lot of history's greatness is like if other people's expectations of you are higher than your own You're probably again not in the right

42:33 in the right job. And so one reason that entrepreneurship is full of stress. I I love this idea that um Mark and Dreeson said one time that You only ever feel two you only ever feel Two emotions. Euphoria and terror.

42:47 And nothing in between. And part of the reason that there's a lot of terror and uncertainty. And you know, it's stress and discomfort. And that I loved Herb Keller's perspective that you should just think of that as good thing. It was like I don't manage it. I like it. I don't handle it. I like it.

43:00 is you're causing making decisions under certainty. Like that is the job. And so he's gonna talk a lot about that on you have to get used to And you have to understand that you're the part of the job is making decisions under uncertainty. He says good leadership is about acknowledging That I'm gonna make decisions under uncertainty. And people who are very good at business

43:18 Are very good at understanding The process is what matters. Do I make decisions with a well framed and thought out process? People get in trouble when they start to become reductionists. Like if I do X

43:29 Why is going to happen? Very little In business. is actually that straightforward. And so he gives an example. Well the fact that that you're you're You're working in this constantly evolving and changing

43:40 uh environment. You know, you can't survive over Founded What what was that forty years ago? Citadel Securities, I think twenty five five years ago. So you know, he's seen a lot in in that time. And his example is like okay, well, how many retailers had a mobile strategy in two thousand four before the iPhone?

43:59 He said no one. The world around you is going to be constantly changing. And by and you need to leave yourself in a position to be more psychologically flexible and to be clear. financially flexible to deal With evolving

44:10 Change. And if you do that, you have a much higher chance of being a survivor. So you have to leave yourself to be psychologically flexible and financially flexible to deal with evolving change. There's a great line. And and for as far as like the changing technology. There's this uh interview that Steve Jobs does. In this book called In the Company of Giants. I think it's episode two oh eight.

44:29 where these Stanford NBA students interview like sixteen or seventeen Think sixteen. uh technology company leaders at the time. So like Michael Dell's in there, Steve Jobs, Bill Gates, all these other people as well. And Steve's point was like I don't You do like

44:42 I don't he's like, I don't know. I remember saying this in ninety seven, he goes I don't know what the next big thing is. I just know there will be a next big thing. And so he is He was psychologically and uh and financially flexible to deal with that. But the greatest example of this with that came to mind.

44:57 when when I read uh what Ken was saying here. comes from Henry Singleton. you know, Henry Singleton, Charlie Mugger said Henry Singleton was the smartest person he ever met. Buffett says that it's a crime that more business schools don't study him, that he put up one of the greatest records in American business history. One of Singleton's main ideas was like, Hey, I'm just gonna I'm gonna maintain flexibility, I'm gonna steer the boat a little bit every single day. And so as once criticized for not having a business plan,

45:21 Henry replied that he knew a lot of people running companies That had very definitive plans that they followed assiduously. But we're so this is Direct quote from Henry now. But we're subject to a great number of outside influences on our business.

45:34 And most of them cannot be predicted. So my plan is to stay flexible. My only plan is to keep coming to work every day. I like to steer the boat each day. rather than plan way ahead into the future. So back to Ken. You have a much higher chance

45:51 Of being a survivor. If you're financially and psychologically Flexible. And then he gives us an example that should Terrify you.

45:58 You do not want to wind up like these people. I keep going back to this main point. That in my fifties and even my forties. I would have friends or contemporaries who you saw got off the learning treadmill. And life just passed them by.

46:13 And it doesn't pass them by in twenty years. It passes them by in five or ten. They stop learning. They lost their edge. It's really important if you're not finding yourself learning and growing as a leader.

46:25 And as a domain expert in your field. That you pursue. You've got to move on. The other thing I would say is that if the field That you chose to pursue

46:34 Ultimately inspires no passion. You need to move on also. Because if you're not passionate about the field you're engaged in. You won't have the grit or perseverance

46:45 To compete. With those Who are And does that not repeat over and over again in these biographies that you and I go over? Uh

46:54 You could say passion. I I the I definitely think that's that's a word. Another way to think about that too, which I think is very similar, is um Munger has this Charlie Munger has this quote that He says another thing that I found is that intense interest in any subject is indispensable if you're going to excel in it. So think about that. It's like, you know. If you don't have this in the field that you're engaged in, you're just you're not gonna have the grit or perseverance to compete with those

47:16 Who are Think about Todd Grace. Go back to Yep. Built a ten billion dollar company. And

47:22 one of the greatest things about that episode, uh that I did um a week or two ago. was the fact that he's ass, like You know, he he he's in his case, he's competing with a l in his industry he's competing with a l a lot of Such a corporate owned companies. There's only there's no founder led companies that he's competing with. And so that's why he's just tranceling them all.

47:39 One of the reasons he's transcending them. And He he says, I don't fear, you know, the big corporate guys. I'm not worried that McDonald's is gonna come and and and and destroy me. What I'm worried about is the young guy that has the same hunger that I had, that is wants to compete head to head with me. But then he makes this this warning where he's like, That's fine.

47:56 But understand that I love compete and he goes, and I'm on this day and night. Are you? That's an interesting question to ask yourself. And again, I have tried to maneuver my myself into a position where I don't think there's anybody on the planet. That is more passionate, more interested in working harder on what I am. On this exact thing. I don't care about anything else.

48:14 But I will collect more information and I will keep doing this on history's greatest entrepreneurs than anybody else in the world. And I'm glad if somebody wants to jump in, but like I'm on this day and night. I told you in the Todd Graves episode. I was laughing to myself. When I was preparing for the episode and I looked at a clock. It was Saturday night. at nine oh five PM

48:30 I didn't want to do anything else. I didn't want to go out. I I want to work on this. Podcast. And the people that I respect and admire the most and people I try to learn from is like They're that. They're like, I'm on this. That whatever I'm interested in, I am more interested in it in it than almost anybody else in the world. And certainly more than anybody else that I know of.

48:46 I think that's a great line. Again, let's go back to that. Like I I'm on this day and night are you. go back to that idea. If you d if you're not really if you don't have this intense interest in what you're working on. Right. You're not gonna have the grit or perseverance to compete. With those who are. Think about

48:59 The very beginning. That story he told. Yeah, I I'm pretty su Like this guy's was wildly successful, but he's like, listen. I started with a niche fund.

49:07 And I burnt out after seventeen years. Ken started with a niche. Built one of the most successful financial firms ever and he's never tired. He's still on it. All right, so let's go back to this. So Ken says this is very fascinating too.

49:19 Success is elusive. However, you climb success is probably twice as far. That was told to me by one of our friends who's one of the most successful people in the history of finance. When he's asked what is success, his answer is It's twice what I've accomplished.

49:35 That is a pretty daunting concept. And he noticed another thing. About the the most successful people. That He knows and it's definitely true for him. It's really important that you hit the ground running and you run really hard early in life.

49:48 You know There's great stories where Ken had convinced uh Harvard to install like a salad dish. And I think it was the first person ever. On his dorm so he can get real time information so he could trade all these options and and all these financial instruments that he was trading.

50:03 You know, he starts Citadel at nineteen, he's going to Ed Dorp's house and pulling out boxes and boxes. of data for for Prince from Prince and Newport partners. And his whole point is just like All the stuff that you're doing. Yeah, life might be long.

50:16 But It compounds the info like the the skill set and the knowledge you have. Like don't like oh I have time. Like no, just work as fast as possible. There's no doubt in that in your twenties and thirties your rate of learning is astronomically high. There's a much strongger focus. He's talking about the issue.

50:32 Uh Something he brings up over and over again that I'm kinda skipping over, but I'll just Kind of fill it in for you. He's very concerned. about American competitiveness.

50:41 And that We're not working as hard as we the young people are not working as hard. He says there's a much stronger focus on gratification in the here and now. And great anything. Great companies. Great anything.

50:53 It takes Time. Yeah. You give a perfect example. Uh Citadel was founded thirty five years ago. Citadel Securities was founded twenty three years ago.

51:02 His best and most profitable years have come in the last like Three to four. So twenty five years into his Fund. Is

51:11 The most successful years. Same thing with we see this over and over again. This is something that that Peter Thiel uh realized that The problem uh a lot of technology company entrepreneurs. is they optimize for growth at the expense of durability. But if you actually look at when these companies make the most money, it's like ten, twenty, thirty years into the future.

51:28 So that takeaway was like you don't want to optimize for uh growth at the expense of durability,'cause you want to be around two, three, four decades from now to to reap all those rewards that are so much greater than the ones you'll get early in your career. And so it's like you you can't just like oh I w I have to be Really, really rich in like a year or two.

51:45 'Cause highly likely what you think is really, really rich, right? We'll seem like a drop in the bucket. if your company is successful and you start running it three or four decades from now. In fact a a friend of mine was showing me revenue numbers. He was texting me th this last night. In two thousand seventeen, I think his company did eight million. In revenue.

52:00 And this year it'll do close to two hundred million. And one of my texts back to him is something that I've noticed. It's very obvious if you read all these biographies like things grow in mysterious ways. Your job is to get into a great business and stay there. That's exactly what Ken did. So I'm all over the map. Let me go back to this. On hitting the ground, running. and running hard. Okay. So great companies, great anything, take time.

52:21 It's not clear to me how this is gonna play out because what I see is that people that had really intense careers early on. Just tend to go so much farther over the ensuing twenty or thirty years. This idea of late bloomers in careers. Yeah, it happens, but I think it's pretty infrequent. I think it's important to hit the ground running and to run pretty hard.

52:41 So There's a bunch of of founders that I've profiled. that got their break or their their big break later in life life. So Estee Lauder. Sam Walton.

52:50 Ray Crock. But I think Ken is dead right about this. If you look at what they were doing when they're in their 20s, they weren't just like sitting around waiting for inspiration. They were honing their skills. They just were waiting for the right opportunity. So Estee Lauder, you know, she started her company as a forty year old.

53:06 Stay at home mom. But for twenty five years before that, she was obsessed with making these potions. And essentially she was running her business. W before running her business. She was making these these skin care, these beauty uh routines. and giving it away for free and bothering all the people around her, her sister, her mom.

53:23 Everybody she ran into. She was doing the job before she had the job. Same thing with Sam Walton. Same same thing with Ray Croc. They just needed they were hitting the ground, they were running. They just didn't unlock the their their greatest opportunity for a decade or two.

53:36 If the work isn't really satisfying, go find somewhere else to run. That is a great line. Go find somewhere else to run. Because if you're not running and it's not satisfying, where do you think you're gonna be in twenty years? Where are you going to be? You're going to be miserable and unhappy is where you're going to be. So

53:54 Again. This is another Yeah. The the the Todd Graves episode on Raids and Kings I did, you know, very well received. A lot of people are listening to it. Well it's interesting, uh like these guys get some random comments online like

54:05 I can't believe this guy Dedicated his life mission. You know, making the best chicken fingers and they're as if that was a bad thing. And my response is like

54:14 Most people never even find a mission in life. What are you talking about? I'm just glad he ha I don't care what other people's mission is. I'm just glad he has one. The vast majority of people that have ever lived and died never even had a mission. And the pursuit of that mission is gonna be difficult. It's gonna cause stress. But I think it is fundamental Like you the the humans with missions, even if they have to go through a lot of stress and adversity, will be much more satisfied when they're looking back on their life. In fact

54:36 This is a great line. I found this um this biography. It's really hard to find. Uh it's on Bugatti. And the founder of Bugatti his daughter writes the book. I think it's published in nineteen sixty. I wanna pull this line up because It he's she's quoting somebody else, but I think it's e it's excellent. It's really talking about

54:51 The fact that Just try to find work that's satisfying that you can do for a long time. And this is this is a description of Bugatti's you know, passed away at the time that his daughter's writing this book. And she finds this quote and she's you know, it sounds to her like what her father was.

55:06 says a human life by its very nature. has to be devoted to something or other. To a glorious or humble enterprise. An illustrious or obscure destiny. This is the strange but inexorable condition of things.

55:20 So I I think it's exactly what he's saying,'cause listen. You're not if you're not running and you're not satisfying. Where do you think you're gonna be in 20 years? Where are you going to be? You're going to be miserable and unhappy is where are you going to be? I read

55:31 the biography of George Lucas, which is remarkable. It's by Brian J. Jones. Uh it's called George Lucas A Life. What's remarkable about that is how much struggle everyone knows, Oh, yeah, this guy sold his company for five billion dollars, he invented Star Wars, this stuff. You didn't see that he was obsessed with building a life that he Like he was in charge of

55:48 that was dedicated to a mission and all the struggle, the debt that he had to go into. He was in credit card debt. He's borrowing money from friends. And even when he was doing this, he was talking about the the contrast between the the path that he's pursuing in life and how most people would just they won't even take the risk. They'll just sit there in jobs they fucking hate.

56:06 And this is what George Lucas said in nineteen seventy one. People would give anything to quit their jobs. All they have to do is do it. There are people in cages with open doors. Let's go back to what Ken is saying here. If your work is actually engaging and exciting. You're gonna look back on the first ten years of that journey and say, You know what? I worked really hard.

56:27 But we did some really amazing things and I'm really proud of I think doing work that you're proud of. is really, really important. to the satisfaction that we're gonna draw out of life. now now we're going back into this idea that great takes time, things grow in, you know, mysterious ways. Citadel founded thirty five years ago, Citadel Securities found it twenty three years ago.

56:45 And yet You know th twenty three and thirty five years into his business, we have a hundred thousand applicants. for positions this year. We've never

56:54 had so many people looking to work at our firm. So then at this point in the talk he starts taking questions from audience members. One of uh one of one of these questions was okay. You know, you you have to d there's this unknown, unknowable, and highly uncertain future that we all have to navigate. Many of the decisions we're making we they're g d

57:13 Decisions based on judgment rather than facts. Like at what point in your career Did you feel you were able to develop the ability to comfortably make those judgments? And Ken has a great line here. He goes, It was the quantity of decisions made.

57:28 Steve Jobs said something very similar when We talked about how great his taste was? And he said taste was a byproduct of the number of decisions he made. Again, he gave this interview uh with Michael Moritz. It's on the Steve Jobs archive. Website which if you haven't checked out.

57:41 It's run by Steve's widow. It's excellent. Uh, it says this was Steve says things get more refined. As you make mistakes. I've just had a chance to make a lot of mistakes. Your aesthetics get

57:52 Better. as you make mistakes. So Ken says it's the quantity of decisions made. And to be clear, the more decisions of a similar nature you can make, the better at those decisions you become. So when we think about business activities far away from our core.

58:06 I get much more anxious. Decisions within our core. I think we make pretty easily and pretty fluidly. It is repetition. Of the type of decision.

58:16 Reps matter. If you go through my notes, you'll see I'm constantly s the notes and the highlights that I I accumulate uh through the research for the podcast. Yeah, I see that over and over again. I just the shorthand I have is reps, reps, reps. You see this over and over again. Quantity, reps matter, it's the repetition of the type of decision.

58:33 So then he's asked how he decides which new businesses to pursue. He says total Adjustable market matters. Why does it matter? Because the odds that you get everything right to launch a successful product Those odds are not high.

58:46 So when it all comes together, you want there to be something at the end of the rainbow. Think about the total adjustable market of the product or business that you're going to pursue. The markets that we're in Are deep. Liquid markets.

58:59 That means Then when we do our research right, we can monetize it because we can get the liquidity to express that view. We want to be in deep liquid markets. And then in the middle of this Answer this question.

59:12 I think he gives one of the most important pieces of advice uh during this entire talk or really more more important most important pieces of advice that uh that anybody can give is that entrepreneurship is sales. And you better damn well get comfortable selling. Says you're always selling.

59:27 When the guy that backed me out of college retired from Chicago, he said I could have whatever I wanted from his office. I took a plaque that probably cost nine dollars and ninety-nine cents. And that plaque said. If we're gonna eat Someone's got to sell.

59:42 That's a great line. If we're gonna eat Somebody's got to sell. That is the story of being an entrepreneur. And that is the story of being a CO. If we're all going to eat, somebody's got to sell.

59:53 Every CEO is a salesperson. They've got to sell a venture capital firm. They've got to sell customer. They have to sell an employee. You were always selling.

1:00:01 And if you don't like to sell Here's my advice. Get over it. I had no interest in selling when I was twenty years old. This this is hilarious. So

1:00:10 He he's twenty years old, he's trying to raise money for his fund, right? He says I was in a conference room in nineteen ninety four in Switzerland. Trying to raise money. Let me tell you about a this bad trip. I show up for lunch.

1:00:22 And the guy I meet with goes You're not John Griffin. And I said, No, I'm Ken Griffin and he goes I thought you were John Griffin. John Griffin was at Blue Rage at the time. He goes, I thought you were John Griffin.

1:00:33 I need to go. Well, great. I just flew all the way to Switzerland. To have my lunch walk out on me. Then

1:00:39 I get to another meeting late in that later that day. And we were doing convertible bond arbitrage and in nineteen ninety four That was a tough space to be in. And I'm in this beautiful office in Switzerland. And this guy's just smoking his cigar. Puff, puff, puff.

1:00:52 So Ken does his pitch. At the end the guy goes so sad. Such a bright young man. Pick the wrong career. My point is

1:01:01 You've got to be able to play through these moments. And then the last comment he has, he's this is where he's recommending all these books. He's talking about the importance of playing hardball, about playing to win. And he's talking about really having the ability, like going through this experience in life. And this is really what you know Founders Podcast is doing. This is like

1:01:19 You wanna learn Not just from your competition. Not just from inside your business. From but you can grab all these ideas. from businesses in industries that are far afield.

1:01:30 Of where you are and it gives a great example of this. So first He's talking about all these books that he likes. And he goes, Another book that's out of print is hardball. It's really fun to read. Hardball is just great.

1:01:41 In business, you don't play to win. You play to win by a landslide. If you don't win by a landslide. Then your competitors come back. So And come back and beat you.

1:01:52 Again, when I when I think of this can This is the way Ken thinks. But Jeff Bezos has a line that's almost exactly like this. Jeff says. When it comes to competition, being one of the best is not good enough.

1:02:04 That is how it would describe. It's almost like a one sentence summary of hardball. Being One of the best is not good enough. You wanna be the best. So it says when it comes to competition, being one of the best is not good enough. Do you really want to plan for a future in which you might have to fight with somebody who is just as good as you are?

1:02:19 I wouldn't. It's Bezos. Think about how Bezos built Amazon, right? He he played hardball. Just like Uh Ken Griffin. Ken gives another example of somebody playing hardball. He talks about Michael Dell.

1:02:30 This is Michael Dell of Dell Computer. He manufactured computers in America and won. Think about how well he ran the business to do that. The next episode is actually going to be on Michael Dell. Michael Dell sent me the greatest DM I've ever gotten in my life.

1:02:45 He DM'd me and he says your podcasts are A plus plus and a bunch of like trophy emojis. It's just incredible. I couldn't believe it. Uh, but I've read two books on Michael Dell. And I'm gonna do an episode. The next episode's gonna be on his second autobiography, which is fantastic. If you wanna start reading that now, I highly recommend. And he reads the audiobook too, which I've listened to like three times. Excellent. So it says uh think about how hard uh or how Well, he ran the business to do that.

1:03:07 He says you're gonna do this for the rest of your life. So you want to study successful businesses. Even if they're far afield of what you do. And so he says, I have a I have a story that you'll love. You'll love this. We built a risk wall in Chicago. At the headquarters of the Citadel, okay? Before we built this risk wall.

1:03:27 It was written that we had a B quality risk management. So Yeah. Everything you've heard about kenzo for. He's not gonna be accepted uh just not gonna find getting a B on something acceptable, okay? So decide to build a risk wall. What is a risk wall?

1:03:41 It's this giant screen in their headquarters. It's thirty feet long, ten feet high. And they rendered all the risk information in one place in this giant visual. And then put it where everybody has to see it. Right.

1:03:53 And so he says we went from being from getting a B to being an industry Leader. 'Cause packaging matters. Where did the idea for the risk wall come from? It came because he went to

1:04:04 Saudi Aramko's Headquarters in Saudi Arabia. Okay. He says th this is where they oversee their production from their oil fields. They have this giant wall on all the important data of their business, is what he's telling us here. Okay. They s they ever see their production from their oil fields.

1:04:20 The output from their power plants. The ships on the open sea. And looking at that visualization and seeing how powerful that was. And I said, you know what? What if I render all of our risk numbers

1:04:32 that same way. You always need to think like an entrepreneur. You always need to think how do you create advantages and how do you learn Not just from your competitors. But from businesses.

1:04:42 Far afield. From where you are. And when you do this, a lot of interesting and fun things happen. That you can learn from And incorporate.

1:04:51 And that is where I'll leave it. I will leave a link down below. for the if you want to watch the full talk, I will also leave a link down below in case you want to grab that book that he recommends called Hardball. If you haven't yet joined my personal email list, make sure you do that. That link will be down below. And it's also available at DavidCenter.com. I email the top ten highlights from every single book that I read. That is three hundred and eighty four down, one thousand ago.

1:05:13 And I'll talk to you again soon. Real quick before you go, I need to tell you the update to founders notes. There is now a monthly option. And I brought back the lifetime option by popular request. If you subscribe to Founders Notes. You'll get access to all of my notes and highlights. That's over twenty thousand. Notes and highlights on history's greatest founders.

1:05:31 You can search through all of them by keyword, or you can have the AI assistant. that I built four founders notes. which is called Sage, read everything. and summarize it for you. I use Sage almost every day. It's actually a tool that I built for myself. So when you subscribe to Founders Notes, you see exactly

1:05:48 What I see. It's the same exact tool that I use. Jensen Wong, the founder of NVIDIA. said that in the future everyone will have a virtual assistant, almost like a brilliant intern, with near perfect memory, capable of instantly recalling any piece of knowledge. Sage is that now, the future's already here. Except Sage is

1:06:07 hyper focused on the collective knowledge of history's greatest entrepreneurs. So if you have access to Sage, you then have access to all that collective knowledge. On demand. I really believe you should be using it to supplement the decisions that you make in your work. And you can do that by going to foundersnotes.com. That is founders within us, just like the podcast.

1:06:25 So that's foundersnotes.com and the link is also down below and available at founderspodcast.com.

What you see above is a preview of the first minutes. One unlock costs 10 credits and covers this episode forever: full segment and word-level timestamps on this page, plus .txt, .srt, .vtt and word-level JSON downloads, as many times as you like.