Stanley Druckenmiller on What Makes a Great Investor, Bitcoin & His Biggest Trades

Trung Phan (@TrungTPhan) -- lead writer for The Hustle -- interviewed hedge fund legend Stanley Druckenmiller on May 11. Widely regarded as one of the greatest investors ever, Druckenmiller famously made $1 billion in a single trade shorting the British Pound in 1992. Sam (@theSamParr) has a brief intro chat with Trung before transitioning into the 40-minute Druckenmiller Q&A, which covers: 1) the parallels between now and the Dot-com bubble; 2) the appeal of Bitcoin; 3) the first Big Tech firm likely to reach a $5T valuation; 4) what makes a great investor; and 5) Druckenmiller’s investment in fintech startup Toggle AI (which set up the interview). --------- * Want to be featured in a future episode? Drop your question/comment/criticism/love here: https://www.mfmpod.com/p/hotline/ * Support the pod by spreading the word, become a referrer here: https://refer.fm/million * Have you joined our private Facebook group yet? Go to https://www.facebook.com/groups/ourfirstmillion and join thousands of other entrepreneurs and founders scheming up ideas. --------- Show notes: * (8:25) Lessons from the Dot-com Bubble * (17:40) What’s the first Big Tech company likely to reach a $5T valuation? * (19:25) What’s the biggest risk to the equity markets? * (21:55) What are the long-term effects of the Wall Street Bets saga? * (24:20) How he uses Toggle AI in his investing process * (26:50) What makes a great investor? * (35:20) What is the appeal of Bitcoin? * (42:20) His thoughts on Dogecoin * (44:20) Advice for 20-year olds

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Shaan Puri?

  This episode is brought to you by the HubSpot Podcast Network. But what is the HubSpot Podcast Network? That's right, it's a new thing by HubSpot. They started with our podcasts and now they're branching into more and more podcasts with experts in different business areas. So you might have a podcast about marketing, or sales, or operations, or customer service. And we're going to go over through the different podcasts on this network. Some are more entertaining, some are more informational, some are a good mix of both. That's what we try to do here. And HubSpot's goal here is to have on-demand mentors. So if you're an entrepreneur, you're a startup, or you're scaling up, you're going to be able to hear practical tips and inspirational stories by listening to the different podcasts on their network, which by the way, I think this is a smart idea. Too many brands just try to sell you their thing.

• 0:46Shaan Puri?

  HubSpot, I love their approach here. They're like, let's put out great valuable free content and help more companies succeed. And the more companies that we help succeed, the more will eventually come back to us, sort of like a good karma kind of thing. So listen, learn, and grow with HubSpot Podcast Network, hubspot.com/podcastnetwork.

• 1:18Sam Parr?

  So today, Trung, who writes our daily email and is going viral on Twitter right now, is here with a special episode. Trung, what are people about to listen to?

• 1:28Speaker 02

  All right, so I had the chance to interview Stanley Druckenmiller. He's widely considered one of the greatest investors ever. Just top-level notes, one of the richest people in America with 5.6 bill. He famously broke the Bank of England with, while working at George Soros' fund, a quantum fund. He made a billion dollars on a trade shorting the British pound. And he has an incredible investing track record, over 40 years. He's never had a down year. 2008, he was up 11%, which a lot of people actually point to as the impressive thing. So even when the entire market's tanking, he's been able to be up. And the other thing that he's really known for in terms of his track record is 30 years of 30% returns or more. So 30 for 30.

• 2:12Speaker 02

  I don't know who else has that record. I know if you look at Buffett annualized over his entire career, it's like 20% a year, but 30% for 30 years straight is outrageous.

• 2:23Sam Parr?

  That's amazing. I would like that. But our audience is typically guys and folks building, building companies, not necessarily investing. But we wanted to air this anyway because A, you're blowing up and people want to hear from you. And if this works, maybe you're gonna want to do your own podcast. But also, how does this apply to our listeners and what should they look out for?

• 2:47Speaker 02

  Absolutely. So the first thing I want to mention, actually, that I forgot to say was this entire meeting was set up by Toggle AI. You can find them at toggle dot global, T O G G L E dot global. And the reason why they set it up is because Stan's actually an investor in their company. So he's invested in startups and they're a fintech company. So they're able to set the meeting. But if you were to answer your questions around the lessons of what people can apply, I'd say there are kind of three takeaways from just his mindset as an investor that I think matter in the business building world is he said what makes a great investor is having small bets in concentrated positions, but with super high conviction. And the example he brings up in

• 3:31Speaker 02

  the interview that you will hear coming up is he mentions Buffett and Carl Icahn. And he says, if you actually look at them, they're not doing the whole MBA playbook of diversifying. They're identifying crazy good opportunities and going all in on them. And he brings up his personal examples when he broke the pound or broke the Bank of England, is he went into George Soros' office and said, hey, we put 100% of the fund into this short trade. And then the lesson that he drew from it is Soros goes to him and says, if you're so confident in this trade, why aren't we doing even more? Why isn't there 150% of the fund in it or 200% when using leverage, right? Which is exactly what they ended up doing. So the number one thing would be, you

• 4:14Speaker 02

  know, find something that you really, really have a high confidence in and kind of go all in on it. That's one thing I think could be a

• 4:20Sam Parr?

  But you, I thought you said he takes a lot of small bets.

• 4:25Speaker 02

  No, no, he, he makes, he said to take High conviction bets. When I said small bets is like, I think it was more just his track record over thirty years is what you're alluding to is he has a long career where he's been across many assets and a lot of different investments. But having said that, as an investor, where his biggest wins are is when he's gone all in and he's found these once in a generation opportunities. The other thing that he does is, you know, the famous saying from Marc Andreessen is, you know, strong ideas but loosely held, like being able to

• 4:58Sam Parr?

  Strong beliefs.

• 4:59Speaker 02

  Yeah, exactly. So being able to take in information and having the conviction that I talked about, like he did with this pound trade, but then if information changes, being able to pivot. And he actually famously during the dot com bubble was one of these people. He was shorting it from ninety eight, ninety nine. And he's like, this is insane. It's never going to play out and it's going to be really bad for a lot of people. But then he was losing hundreds of millions of dollars shorting the dot com bubble. And to the quote there, he literally turned around. He didn't take his money off the shorts. He went long. So it's insane. He did a full one eighty after fully convincing himself that that it was a bubble and he still believed it was a

• 5:41Speaker 02

  bubble, but he was looking at the information and he didn't believe that that he could win. Or in in trading terms, he didn't want to fight the tape anymore. So that was pretty amazing. But then that leads into my third lesson, which is, it's all about emotion at the end of the day. And he was explaining that in nineteen ninety nine, after he went from a fully short position in the dot com bubble, he went long and he made billions of dollars in ninety nine. And in two thousand, he's like, okay, I'm taking all my chips off the table. I think the bubble is finally going to burst. But this is where the emotion component comes in. He watched two younger portfolio managers on his team keep running the dot com bubble and he couldn't take it anymore. And this guy's like a twenty five year vet,

• 6:23Speaker 02

  right? And with an impeccable track record, but he could not take the fact that there were two people underneath him outperforming him. So he literally called his broker, put a six billion dollar bet back on the market. And he says in the interview that he basically called the top of the dot com By ten minutes, he ended up losing three billion dollars and insane, right? And he goes, and he goes, people always ask me, what did you learn from losing three billion dollars effectively in a couple of months? He's like, I learned nothing, like I already knew that lesson. I knew never to invest on my emotion, but I still couldn't help myself. And it's just, I think that's just a forever battle, right? It doesn't matter how seasoned or good or amazing you are, or amazing your past track record is. You always have to battle that demon of the emotions.

• 7:08Speaker 02

  I mean, you tweeted this morning, right? You tweeted something about, something about psychology and emotion. You're reading a new book and I think you said that, what was the quote you put? Is if you're comparing yourself to

• 7:18Sam Parr?

  The best way to be miserable is to compare yourself to

• 7:20Speaker 02

  Right, so like, it's like there's these little things about emotions or psychology that will always be with you, no matter how successful you are. So I think those would be the three takeaways is a high concentrated, concentrated bets and high conviction plays. The ability to change course if it's clear that it's not working. And then the third thing is just like you're wrestling with emotion, no matter who you are, you could be a nobody or one of the greatest investors ever. And those, those human elements never go away. And I just love what he said is like, I didn't learn anything, I already knew this lesson.

• 7:51Sam Parr?

  All right.

• 7:52Speaker 02

  Still lost.

• 7:53Sam Parr?

  We'll start the interview now, if you guys listening like this, comment in the reviews. So go to iTunes and leave a review or you can go to Twitter. What's your handle Trung, is it Trung T, what is it?

• 8:07Speaker 02

  Trung T Fan.

• 8:08Sam Parr?

  T Fan, and then I'm at the Sam Parr. So tweet at us, I prefer you leave something in the comments because it's easier for us to see, but let us know what you think. And we'll see Trung again soon. Thank you.

• 8:22Speaker 02

  Awesome. Thanks, guys. Thanks for putting this on. We're live. So Yan, RJ and myself had kind of put these kind of these questions together, which we think would be great for a bit of a younger audience. So the first question we wanted to dig into was, you're obviously there at 2000.com. Are you seeing any similarities with what's going on with the, especially the last couple of days, this week's been kind of ugly for tech? And I know there's been a lot of talk about it has growth run its path, was COVID. Are you seeing any similarities to the dot com era 2000? And if so, what are they, if not, what are the differences?

• 9:02Sam Parr?

  Okay.

• 9:04Speaker 03

  I'm seeing some similarities, I'm seeing some differences. Okay. Um, number one, um, valuations in both periods got to what I would call mania speculative levels. Okay. Um, monetary policy was part of the issue in ninety-nine when Greenspan decided he wanted to run, run an experiment, um, where he'd let unemployment go below levels where it had historically been. It's nothing like the crazy stuff we're doing now, but that helped set it up.

• 9:43Speaker 03

  But what was really going on back then, I mean, think about the fact that Netscape didn't really exist until ninety-five. So other than some nerdy professors back in the early eighties, no one even had email. Right. So the stuff we had now, so literally the internet was just sort of being built. And the big winners in ninety-nine were companies like Sun Micro and Cisco that were building the guts of the internet, constructing it. So what happened was the growth was so rapid as this went on and valuations combined with

• 10:25Speaker 03

  some easy money got baked in, baked in those growth rates as far as the art could see. But think of the internet infrastructure like the railroads a hundred and fifty years ago, and think of the tech stocks as a company selling railroad ties, building the guts of the internet. So once the railroad is built, while you're building the railroad, your sales are going up fifty, sixty, seventy percent a year. But once the railroad is built, um, your growth not only doesn't go up seventy percent, it goes down because on a rate of change basis, you don't need any more railroad ties.

• 11:06Speaker 03

  Um, so what none of us saw, me included, in early two thousand were a lot of these companies with estimates of fifty, sixty, seventy percent.

• 11:18Speaker 03

  For the next two or three years, their business was literally about to collapse. So the Nasdaq went down 95%, not 30, 95, because you had this combination of inflated values, way overestimated earnings out there, and then earnings collapsed. So today, you have something similar and something different. So monetary policy is absolutely insane. We had no QE back then, our rates weren't zero. They were four or five when they probably should have been six or seven. No comparison.

• 12:03Speaker 03

  So we have an asset bubble now that's not just in tech stocks. It's in everything. SPACs, Dogecoin, or maybe some of the young viewers disagree. You name it, if you're an asset, you've been moving. But what we also have, back then, you had this incredible wave from 95 to 2000 while the internet was being built. What you have now is this incredible wave of digital transformation, particularly moving on to the cloud. And I used to say, two or three years ago in some interviews, well, we're in like the bottom of the first or the second inning,

• 12:46Speaker 03

  and this is a 10-year runway. Well, COVID sort of jumped you from the bottom half of the first to the sixth inning. Well, not the ninth, but to the sixth. Right. I think the guy from Shopify said, we went from 2019 to 2030 in one year because of COVID. I think, I think it was him. I think the difference now is...

• 13:14Speaker 03

  If you're a customer and you haven't moved to the cloud, you're dead. Because who you're competing against, they can just beat you because the technology is so important. So now, full disclosure, I didn't see what was coming in 2000 coming. But I am really hard up to come up with a scenario while this digital transformation thing is going to collapse and these SaaS companies are going to go away. And the biggest problem you have now is the overall bubble in asset prices and where price got to these names in particular.

• 13:55Speaker 03

  The good news is, if we had had this conversation two months ago, the good ones were like 45 or 50 times sales, not earning sales. They're down to, there's a range, I'd say now 10 to 25 times sales for the good ones. So if the problem is price, and in my opinion, that is the problem, a lot of that has been wrung out. And I think if you hold these names for three or four years, they can easily go into their valuations where if you held the names in 2000, a lot of these companies, you still had losses of 90, 85, 90% of your value.

• 14:37Speaker 02

  Right.

• 14:38Speaker 03

  So those are the similarities and those are the differences.

• 14:41Speaker 02

  Right. So to summarize, it sounds like kind of the key differences would be the monetary policy completely different and the names themselves are just as a company and looking further out in the economy, it's just likelihood of those still existing is much higher.

• 14:58Speaker 03

  Yeah, the other similarity is back then, I remember a lot of value managers were virtually going out of business.

• 15:10Speaker 02

  Right.

• 15:11Speaker 03

  At the end of 2000, one of the greatest investors of all time, Julian Robertson, who was long value and short these crazy tech names, he basically threw in the towel and said he couldn't take it anymore and stopped managing money in early 2000. But what happened in the next three to five years was incredible. Companies like Phelps Dodge, copper companies went up six to eight fold.

• 15:37Speaker 03

  Six to eight times for for the old industrial stuff. So everything Julian was long um went up many fold and the tech stocks went down a lot. We do have some similarities there today because these COVID companies beneficiaries so much demand was pulled forward that they got too high and too much ownership. And as we're reopening, there's also an ownership problem where there's probably more money that needs to rotate out of the secular growers into these, I'll call them reflation names. But I do want to say very differently. I think these things are secular growers and they'll probably be fine long term.

• 16:22Speaker 03

  Amazon at thirty two hundred um is not a bubble stock, not not whatsoever. It's basically decent value.

• 16:31Speaker 02

  Right.

• 16:32Speaker 03

  And I don't just mean Amazon, but a lot of the

• 16:35Speaker 02

  But the big tech names.

• 16:36Speaker 03

  So-called Fang's names, yeah.

• 16:37Speaker 02

  Right, absolutely. Um, just as a as a curiosity that I see, I actually asked yesterday a bunch of my Twitter followers what they want to ask is, do you have an opinion of any of the Fang kind of names, including Microsoft, uh, who will get to five trillion first?

• 16:54Speaker 03

  What a great question. Um, I've always answered that with Amazon and Microsoft. I've never really believed Apple had the innovation to take you to the next level and it was mainly a hardware company. Um, they obviously have morphed into the services app company. But as you know, I it's funny, that's the one they haven't talked about being monopoly. But when you look at monopoly behavior, charging a thirty percent rent to all these, you know, little companies seems a little extreme, whereas Amazon and Microsoft, they basically don't raise price. So my guess, my

• 17:40Speaker 03

  First of all, I have no idea, but my number one, if you put a gun to my head or we're going to Vegas, um, would be Amazon and number two would be Microsoft.

• 17:51Speaker 02

  Okay.

• 17:53Speaker 03

  Google could have a big pop ironically if the government breaks them up. Cause their core search business is literally the best business I've ever seen. Um, but they keep trying all this experimental stuff that challenges, um, shareholder value, but those guys are so rich, they're more interested in changing the world right now and good for them.

• 18:16Speaker 02

  Yeah, they get to do, uh, mushrooms, go to the desert and just think about wild things they can do in their space with their moonshots.

• 18:23Speaker 03

  Well said, well said.

• 18:25Speaker 02

  Um, uh, I think the question here that Jan and RJ had plugged that out, we thought would be a great follow up was, uh, so what is the biggest risk to the equity market right now? I think you touched on some of them has to do with, uh, I guess the evaluations and just the.

• 18:40Speaker 03

  Without, without, without a doubt, it's, um, inflation's strong enough that this Fed responds to it.

• 18:49Speaker 02

  Right.

• 18:49Speaker 03

  Um, no doubt about it. The, this bubble has gone long, long enough and it's extended enough that the minute they start tightening, um, the equity market should go down a lot. Um, particularly with so much of the cap weighted in growth stocks would, which would be at the worst. And our central case is that inflation occurs, but we're open minded to something like oh seven, oh eight, where you never really got to the inflation because the bubble popped. So the inflation never got to the manifestation stage. That would be the second one.

• 19:31Speaker 03

  In terms of geopolitical stuff, it's become a popular view, but, um,

• 19:37Speaker 03

  I'm worried about Taiwan. And I think it's probably not a worry until after the Beijing Olympics. Because I don't think Xi Jinping wants to deal with sanctions and boycotts and all that. But I can't imagine he's not going to try something. Right. Post the Beijing Olympics. And I don't think, that's big stuff. That's not some little thing where Yemen is fighting Saudi Arabia. If you were to get worried about the United States and China, that could be an exogenous event.

• 20:17Speaker 02

  Right.

• 20:17Speaker 03

  It could get quite nasty.

• 20:19Speaker 02

  Absolutely. So to summarize then, the inflation concern and the Fed tightening is kind of a big risk. Longer term, it is just Taiwan is actually a massive hotspot. And post 2022, the Winter Olympics, there's opportunity for something to happen.

• 20:38Speaker 03

  That's our central case. As you know, I tend to change my mind, but right now, if you're asking me what the biggest risks are, it would be them.

• 20:48Speaker 02

  Absolutely. All right, so the next one we had here is a more retail-oriented question, or actually not necessarily retail-oriented, but it does concern retail, is do you see anything as a long-term aftereffect of what happened earlier this year with Wall Street Bets? With retail being able to congregate in one place and kind of direct money flows? I know in the past you've talked about the importance of liquidity. And do you see any long-term effects of having the ability of millions and millions of retail investors to put their targets on a single name?

• 21:21Speaker 03

  No. Let me restart. The answer is yes. I don't know why I just said no. I guess I'm too old. When I started in the business, retail-dominated institutions.

• 21:37Speaker 02

  Okay.

• 21:37Speaker 03

  And you got most of your information from your broker. The amazing thing about the current retail investor is they have access to things like Toggle. So they're actually much better informed than the retail investors were in the late 80s and early 90s. And with the internet, they have tools and the way, you already mentioned, they congregate.

• 22:05Speaker 03

  The big risk is they're all loaded up in this stuff. You know, don't confuse genius with a bull market. And something exogenous talks like we're talking about. And they all lose enough money that they're scarred. Yeah. I've always thought the Japanese investor would come back to the market in five or 10 years after the bubble burst. That was 1990 and they still haven't come back. Right. To the market. So I worry about scoring, but no, I think. My guess is the after effect of Wall Street Bets is here to stay.

• 22:47Speaker 03

  And they'll probably migrate away from some of the more radioactive names like GameStop. And I think it'll actually end up being some sort of healthy information sharing network. Right.

• 23:02Shaan Puri?

  All right. Let's talk about one of the most important parts of any business, your CRM, right? This is where you see who are my prospects? Who are my customers? Who are my hardcore customers? And you want to have conversations, you want to have information about them that goes throughout all stages of the customer journey. So HubSpot's CRM platform, it's easy to align your team using the features that they have like their messaging tools, live chat, email templates, and having a unified system of record. So how does it work? You can install live chat on your website and this will let sales and customer support talk to your prospects. You could send marketing emails on behalf of your sales reps to your customers. You can have prospects book meetings with your reps without wasting time. And all of this is stored in one unified system of record so that teams can get access

• 23:46Shaan Puri?

  to all of your contact history. Why is it so important to have live chat and a unified system of record, you ask? Great question. It's because when all your systems are separate, you're just cobbling together data from one place and data from another. It's all disjointed. There's no single source of truth. What I like when I'm the CEO of a company is to be able to click one button and see who are our customers, where are they at in the journey? How do we quickly message them? How do we get them moving forward to success? So that's what it does. That's HubSpot's CRM. And if you want to learn about how you can scale your company without scaling complexity, go to hubspot.com.

• 24:18Speaker 02

  So you didn't mention Toggle as kind of a tool that can be used in these environments, or just in general as an investor's toolkit. So how different would that have been, you know, back in the eighties to have a tool like?

• 24:32Speaker 03

  Oh my God, if you had Toggle and nobody else did, you would have absolutely murdered their results.

• 24:41Speaker 02

  Right.

• 24:42Speaker 03

  When I started in the business, Fed Watching was considered unique. And I used Ned Davis and other technical services. And I just felt I had a huge advantage

• 24:54Speaker 02

  Right.

• 24:55Speaker 03

  over the general public. Um, so any tool you have like Toggle, which is clearly predictive of price moves, but even more interesting in this case, because of the mathematical capability of it, can analyze thousands of thousands of securities.

• 25:15Speaker 02

  Right.

• 25:15Speaker 03

  I only have sixteen hours a day and I'm not that fast of a reader. Um, so if you had a tool like that back then, it would be like my advantage is plus five X. And the way I think about Toggle is, I don't know how much you know about me, but I've always said, um, I like multidisciplines in managing money. So my first boss taught me technical analysis. So I use fundamental analysis and technical analysis. And if there's thousands of securities out there and my portfolio is only going to consist of fifteen or twenty, I'm never going to buy something that doesn't have a great chart and great fundamentals.

• 26:01Speaker 02

  Right.

• 26:01Speaker 03

  Do that. If you brought something like Toggle into that, it's just one more fantastic screening mechanism that gives me the discipline. Um, so now I've got a triple screen to, um, hold or buy or sell securities.

• 26:21Speaker 02

  Right.

• 26:22Speaker 03

  That would be. Invaluable, and again, to the public who doesn't have access to information I have as an institutional investor and paying tons and tons of money to consultants, something like this, the value added to them could be even more valuable than it is to me, and I find it value added.

• 26:42Speaker 02

  Right, absolutely. And so you did mention a lot about you're trading back in the eighties. I don't want to say back in the day, it feels kind of wrong to say that. You've been described as someone that has a stomach of a riverboat gambler. I literally don't even know what that means, but what I will say is, what do you think are kind of the keys to a good investor, right? So, just from your own experience.

• 27:06Speaker 03

  So, when I've looked at all the investors of very large reputations, Warren Buffett, Carl Icahn, George Soros, they all only have one thing in common, and it's the exact opposite of what they teach in a business school. It's they make large, concentrated bets where they have a lot of conviction. They're not buying thirty-five or forty names and diversifying. I don't know whether you remember, Icahn a few years ago put five billion dollars into Apple, and I don't think he was worth more than ten billion when he did that.

• 27:50Speaker 02

  Right.

• 27:51Speaker 03

  When I went in to tell Soros that I was gonna short a hundred percent of the fund in the British pound against the Deutschmark, he looked at me with great disdain because he thought the story was good enough that I should be doing two hundred percent, because it was sort of a once in a, once in a generation opportunity.

• 28:13Speaker 02

  Right.

• 28:14Speaker 03

  So, A, they concentrate their holdings, B, concentration, this is very counterintuitive.

• 28:21Speaker 03

  It really gets your attention. So it actually, in my, in my thinking, decreases your overall risk. Because where you tend to be in trouble is if you have thirty-five or forty names and you stop paying attention to one. If you have big, massive positions, um, it has your attention.

• 28:42Speaker 02

  Right.

• 28:43Speaker 03

  So, the, the way, uh, my favorite quote of all time, maybe, is Mark Twain. Put all your eggs in one basket and watch the basket carefully.

• 28:53Speaker 02

  Right.

• 28:53Speaker 03

  Um, I tend to think that's what great investors do. The other thing to me is you gotta have to know how and when to take a loss.

• 29:03Speaker 02

  Right.

• 29:03Speaker 03

  I've been in business since nineteen seventy-six as a money manager. I've never used the stock loss, not once. Dumbest concept I've ever heard. It goes down fifteen percent, I'm automatically out. But I've also never hang on to a security if the reason I bought it has changed. And that's when you need to sell. If I buy X security for A, B, C, and D reasons, and those longer, longer are valid, whether I have a loss or a gain. That stock doesn't know whether you have a loss or a gain. You know, it's, it is not important. Your ego is not what this is about. What this is about is you're making money.

• 29:46Speaker 03

  So if I have a thesis and it doesn't bear out, which happens often with me, I'm often, I'm often wrong. Just get out and move on. Because I said earlier, if you're using a most disciplined approach, you can find something else. There's no reason to hang on to any security where you don't have great conviction in it.

• 30:07Speaker 02

  Right. No, absolutely. So, uh, along that kind of metric where, when you're saying what makes a great investor is kind of the mindset and the approach. What about from kind of the emotional side? Like managing the emotions and the, the psychology?

• 30:20Speaker 03

  You, you just have to be disciplined and you're constantly fighting your own emotions. Look, I'm not gonna lie to you. My first boss had this saying, the higher they go, the cheaper they look. Um, there's something weird, and I know everybody watching this has experienced this, and it doesn't make any sense. But when a security goes up... Every bone in your body wants to buy more of it. And when it goes down, you're fighting, making yourself not sell it.

• 30:48Speaker 02

  Right.

• 30:49Speaker 03

  It's just the nature of the beast. And you have to constantly remind yourself, um, why you own that security. And just because it's going down, doesn't necessarily mean you should sell it. If it's going down, it definitely means you should reevaluate your thesis. But it doesn't mean you should sell it. And you cannot get crazy when it's going up. One of the, probably the biggest mistake I ever made in the business. And I knew better. Somebody asked me what I learned from this. I said, nothing, I already knew it. Um, in January of 2000, after riding that tech boom to a T and making billions of dollars in 99,

• 31:33Speaker 03

  I sold everything out in January. And I had a couple of internal portfolio managers at Soros, who didn't sell out, they had these, it was a small portfolio, but they made 30% after I sold. And I just couldn't stand it anymore. And I'm like, watching them make all this money every day. And like, for two days, I'm like, ready to pick up the phone and buy this stuff back. And you know, there's a little devil there and then the angel and she's saying, don't do it. And he's saying, buy it. And, um, I pick up the phone and I buy them. I might've missed the top of the dot com bubble by an hour. I ended up losing $3 billion on that trade alone. I had made more the year before, but you know, $3 billion is a lot of money.

• 32:18Speaker 03

  And it was all because I got emotional and dropped every tool of discipline I've ever had. And somebody says, well, what did you learn from it? And I just said, I learned nothing. I learned that 25 years ago. So you can talk about not being emotional, but it takes incredible discipline to, to act on that.

• 32:37Speaker 02

  No, I was, that's, I mean, that's incredible. And you said you started in 76, right? And that's 24 years later, you've been going through it for almost a quarter of a century and it still happened.

• 32:47Speaker 03

  Yep, yep, yep.

• 32:49Speaker 02

  So it's something I wanted to just add on to kind of what you just mentioned was the actual approach of investing for yourself. You famously talked about looking at what makes the stock up and down. At a, you know, what does that mean specifically for yourself? When you say what makes the stock up and down, what does that mean in terms of fundamentals?

• 33:11Speaker 03

  It varies from stock to stock.

• 33:14Speaker 02

  Right.

• 33:14Speaker 03

  Interesting thing about Toggle, they'll find things that I didn't even know move the stock.

• 33:20Speaker 02

  Right.

• 33:20Speaker 03

  But if it happens over and over again, you figure it's not random. So I'll never forget, I keep going back to my boss in Pittsburgh, but I was an analyst and I analyzed retail. And I'd come in with my earnings estimate on Kmart and my earnings estimate on this company and that. And he says, yeah, but what's going to make the stock go up? And I said, what do you mean? And he says, everybody knows what you just told me. Keep looking, keep looking. Finally, I came back, I found out at the time, by the way, this is Chang Sin, if you graft the change in food and energy prices over top the retail index, it

• 34:00Speaker 03

  was like clockwork. Retail and food prices, I'm sorry, food and energy prices go up, retail relative stocks go down. It's not rocket science here. If you, if you take discretionary spending and you increase the cost of it, she's got less money to buy a dress. And I watched that and I worked for 10 or 12 years and then for some reason it stopped working. But there's an analysis of fundamentals which I completely endorse, where look at the balance sheet, try and figure out a couple of years from now, what people are going to think about this company or the earnings can be different than they think now, that

• 34:43Speaker 03

  kind of stuff. But then there's all the weird stuff like I just mentioned. The beauty of Toggle is it comes up with stuff that sometimes I don't even quite understand. But frankly, I don't care. If the stuff works.

• 34:58Speaker 02

  Right.

• 34:59Speaker 03

  I'm going to go with it. I'm very open minded. I don't need.

• 35:05Speaker 03

  I don't need to totally understand something if I've seen it work over and over again.

• 35:09Speaker 02

  Right, absolutely.

• 35:10Speaker 03

  But most of these things I understand.

• 35:13Speaker 02

  Yeah, so it'd be the equivalent of toggle finding that relationship you just mentioned, right? The food energy and discretionary spending.

• 35:21Speaker 03

  Yeah, and the beauty of toggle is, um, I might get a notice one day that XYZ looks good. Then I can do my fundamentals, then I can look at the chart. So it's not only a discipline in terms of buying and selling, it can also be an idea generator.

• 35:39Speaker 02

  Absolutely. No, that makes a lot of sense. Now, I thought this was a good opportunity to hop into something. I kind of wanted to ask it first, but I figured it'd be better to kind of do it there.

• 35:49Speaker 03

  I think I know what's coming.

• 35:52Speaker 03

  You're young, I can tell by the look on your face, it's crypto.

• 35:55Speaker 02

  Yeah, 100% correct.

• 35:58Speaker 03

  See, I can predict the future.

• 36:00Speaker 02

  Yeah, the toggle probably gave you the alert, right? This guy's about to ask crypto. I, uh, I'm not gonna ask you to put a price target or anything, but the question, just a third out there to get the conversation going is, uh, does Bitcoin have the opportunity to, the thesis is it will replace 9 trillion in gold, right? Or along those lines, or it'll match it? Do you, I mean, what is your opinion about that thesis?

• 36:25Speaker 03

  So I've evolved on this.

• 36:27Speaker 02

  Okay.

• 36:28Speaker 03

  If you've done your homework about five or six years ago, I said more than once, um, crypto and Bitcoin are a solution in search of a problem.

• 36:41Speaker 02

  Right.

• 36:41Speaker 03

  So what the hell are these people all looking for? We already have that, it's called the dollar.

• 36:48Speaker 02

  Right.

• 36:48Speaker 03

  Okay, so for the first move in Bitcoin, I think it went from, what, 50 bucks to 17,000? I just sat there aghast. And by the way, consistent with our earlier conversation, I wanted to buy it every day it was going up, even though I didn't, I didn't think much of it, I just couldn't stand the fact that it was going up and I didn't own it. So, um...

• 37:14Speaker 03

  Fast forward, I never owned it. From like fifty dollars to seventeen thousand, felt like a moron. Then it goes back down to three thousand again. And then a couple of things happened. And this, this is consistent with the fundamental and then let's make something go up or down. So, solution in search of a problem. I found the problem. When we did the CARES Act and Chairman Powell started crossing all sorts of red lines in terms of what the Fed would do and wouldn't do. The problem was Jay Powell and the world's central bankers going nuts and making fiat

• 37:56Speaker 03

  money even more questionable than it already been when I used to own gold. Then the second thing that happened is I got a call from Paul Jones. And he says to me, "Do you know that when Bitcoin went from seventeen thousand to three thousand, eighty-six percent of the people that owned it at seventeen thousand never sold it?" Well, this was huge in my mind. Here's something with a finite supply, eighty-six percent of the owners are religious zealots. I mean, who the hell holds something through seventeen thousand to three thousand?

• 38:40Speaker 03

  And it turns out, none of them, no, eighty-six percent of the people never sold it. And I had this new central bank craziness phenomena. The other thing that happened, it had been, you know, it had a few more years under its belt. So it goes up to six thousand in the middle of the last spring. And I go, "Well, I gotta buy some of this just because these kids on the West Coast that are already worth more than I am and they're gonna be making a lot more money than me in the future, for some reason, they're looking at this thing the way I've always looked at gold, which is a core value if I don't trust fiat currencies."

• 39:22Speaker 03

  And then the thing that Paul told me, and then the fact that it had been around thirteen years, it had become a brand. Right. So, it's funny, I tried to buy a hundred million at sixty-two hundred.

• 39:37Speaker 03

  It took me two weeks to buy 20 million. I bought it all around 6,500, I think, and I said, this is ridiculous. You know, it takes me two weeks, I can buy that much gold in two seconds. So like an idiot, I stopped buying it. Um, next thing I knew, uh, the thing's trading at 36,000. Uh, I took my costs and then some out of it. And I still own some of it. My heart's never been in it. I'm a 68-year-old dinosaur, but once it started moving and these institutions started adopting it, I could see the old elephant trying to get through the keyhole and they can't fit through in time.

• 40:20Speaker 03

  Um, I own this company called Palantir and I see the announcement, their earnings today, they're gonna start accepting Bitcoin and they may invest in that. That's happening all over the place. And you know, this thing is never gonna have more than 21 million. It's, it's a, it's a fixed supply. So I think because it's a brand, it's been around for 14 years. Because of the finite supply, it has sort of won this store of value game. Is it gonna beat gold? I don't know, it sure as hell doing a good imitation of it, um, the last year or two. But is it gonna beat the other cryptos in terms of digital gold store of value? I would say it's gonna be very, very tough to unseat.

• 41:05Speaker 03

  Then you go to what I call the commerce facilitators, which obviously the lead in smart contracts and that kind of stuff would be Ethereum. There, I'm a little more skeptical of whether they can hold their position. It reminds me a little of MySpace before Face- Facebook came along. Or maybe a better analogy, Yahoo before Google came along. Right. Google wasn't that much faster than Yahoo, but it didn't need to be. All it needed to be was a little bit faster. Right. And the rest is history. And I'm so impressed. One of the ways we've always invested in the private sector

• 41:49Speaker 03

  is to try and figure out where the engineering kids from Stanford and Brown and MIT, where those kids are going. And so many of them are in love with crypto and that's where they're going.

• 42:02Speaker 03

  I'm worried about the talent that's like 23 to 28 years old. Somebody we don't even know who they are yet. Come up with a payment system or whatever and unseating. So again, I don't know. But my guess is the winner in the commerce facilitating a call, whether you want to call it payments or smart contract, whatever we're on. There's a good chance that company hasn't even been in, or that currency hasn't even been invented yet.

• 42:35Speaker 02

  Right. Absolutely. So Bitcoin as a store of value, probably safer in the crypto space. But as you mentioned, the computing aspect, there's a lot of potential here to be unseated.

• 42:46Speaker 03

  Yeah, and I think, you know, as long as Jay Powell keeps acting like he's been acting. I think gold and Bitcoin, and Bitcoin seems to be a high beta gold, are going to have the win behind them.

• 43:01Speaker 02

  High beta gold, that's a, never heard of them. So that is a fantastic terminology.

• 43:05Speaker 03

  Well, it's so fantastic. I'm wondering why the hell I didn't just own Bitcoin two years ago instead of just gold. A little Bitcoin.

• 43:15Speaker 02

  So just to, just to put the cherry on top of the crypto combo, you mentioned it once earlier. Dogecoin, is it just to you ridiculous? And Elon's involvement in it? Like what, how did, what is your reaction to all that?

• 43:30Speaker 03

  It's just a, you know, it's like NFTs. It's just a manifestation of the craziest monetary policy in history.

• 43:38Speaker 02

  Right.

• 43:39Speaker 03

  And I think since there's no limit on supply, I don't really see the utility of this thing. Right now, it's just this wave of money and the greater fool theory. Um, no.

• 43:53Speaker 03

  No.

• 43:53Speaker 02

  Just enough.

• 43:55Speaker 03

  Now, having said that, I've, I'm, I wouldn't short it because I don't like putting campfires out with my face. Um, so I just try and pretend Dogecoin doesn't exist.

• 44:08Speaker 02

  Right.

• 44:08Speaker 03

  I think so little of it, it doesn't even bother me when it goes up.

• 44:11Speaker 02

  Right.

• 44:11Speaker 03

  Bitcoin used to go up, I'd go crazy that I didn't own it. When Dogecoin goes up, I just, I just start laughing. But to me, it's all about Jerome Powell.

• 44:20Speaker 02

  Right. At the end of the day, it goes back just to the money printer.

• 44:24Speaker 03

  Yeah. Yeah.

• 44:26Speaker 02

  I, I like that, how you, you said about Doge, where it's a joke. Uh, I mean, it was literally created as a joke. So for you, just to look at it as a joke, that's probably the best way for everyone to look at it, right? Hey, this is a joke. Don't even consider it. It's like, irrelevant.

• 44:37Speaker 03

  Yeah, don't go long and don't go short. And, you know, unless you like going to Vegas, then I guess it's okay, because a lot of action.

• 44:44Speaker 02

  Yeah, absolutely. So, uh, I think one of the, uh, one of the last questions we had here, obviously, thank you so much for your time. Uh, the question we had here was, if you were 20 years old today, what would you be doing as you started your career?

• 45:01Speaker 03

  Uh, the number one necessary con- condition would be something I was passionate about.

• 45:07Speaker 02

  Okay.

• 45:08Speaker 03

  Particularly in this business, the people that love it like me are so addicted to it and so intellectually stimulated by it. If you're not and you're in for the money, you have no chance competing with these people. They're gonna outwork you, they're gonna out execute you. So, and I think it's probably true of a lot of professionals, but let's not forget. If you're American, you're probably gonna spend 60, 70 hours a week minimum working. If you're in your job for the money, not because you love it, you just blew 70 hours a week on the heaven, on the happiness quotient, that's pretty rough.

• 45:48Speaker 02

  Right.

• 45:48Speaker 03

  So, I would tell a 20-year-old, follow your passion. I was just lucky. I followed my passion. My mother-in-law says I'm an idiot savant, that I wouldn't be good at anything else, but I would do this for 50,000 a year. I really would. I just, I just love it. And I hate to see young people get trapped.

• 46:10Speaker 03

  In something, and I would also say, keep an open mind. I started at Bowdoin as an English major. I took economics just so I could read the paper intelligently. I went to get a PhD in economics. And I went there and I said, these people are crazy. They're trying to shove the economy into a math formula. It doesn't make any sense. Then I went to, I worked construction for six months. I got kind of a weak upper body, so that didn't work for me. Then I went to the bank and I found out what I was just in love with. And so try stuff out. And if you're not really, really engaged during the day and you're not happy,

• 46:54Speaker 03

  uh, move on to something else because there's, there's something out there for everybody. But I would not let money be the driver of the equation. That can lead to a lot of not maximizing what I call the happiness quotient.

• 47:07Speaker 02

  Right.

• 47:08Speaker 03

  Which to me is the most important quotient in your life.

• 47:11Speaker 02

  Well, you mentioned that you would be doing this job if you're making 50 grand a year. So the question, will you, will you hand over the family office? When do you expect that to happen? If, if ever until?

• 47:20Speaker 03

  By what?

• 47:22Speaker 02

  Well, will the handover of the family office to another manager and you just go hands off happen in the near future? Or this is something you just want to be doing, just for your own happiness quotient?

• 47:32Speaker 03

  So as you probably know, a lot of people when they retire, they start messing around in the stock market for fun. So if they're all retiring and doing this to other 90, why am I supposed to stop doing it? What I will say is my skill set. You know, I think a lot of my performance has been because I'm flexible in terms of uh, instruments I use in terms of assets. So I'm not afraid of just playing bonds or currencies or this or that. But my real passion is in macro. And I think history would say in macro, I'm probably an A plus and in equities, I'm probably a B minus.

• 48:16Speaker 03

  Um, equities are much more labor intensive, as you know. There's only one yen, there's only one euro, uh, treasuries.

• 48:26Speaker 03

  I guess my dream to your excellent question would be to find a successor to run the entire equity part of my family office.

• 48:39Speaker 02

  Right.

• 48:39Speaker 03

  Have me fiddling around in the macro and acting like the old talking head sage, you know, coach to him. That's where I'd be, but I, I think I would die if I couldn't, if I couldn't do, have some connection with the investment market and the markets during the day. I just, first of all, I'm not very good at golf. I like doing stuff I'm good at and I think that's part of what we're talking about with passion. No one likes being a loser. So yeah, I, I think I'll probably go to my grave doing this stuff, but maybe not with the control I have right now.

• 49:14Speaker 02

  Well, just the last comment on that point is for the equity side, at least you have Pogo, right?

• 49:20Speaker 03

  Absolutely. Absolutely. Takes a lot of the labor out, I'll tell you that. You can cover a lot more ground in an hour than you can trying to do normal reading.

• 49:32Speaker 02

  No, that's perfect. I, I wrapped up on my end. Those are all the questions we had and it was amazing, Stan. That was incredibly insightful and I really appreciate your time. Thank you to Jan and Ajay for setting that up.

• 49:45Speaker 03

  Yeah. Okay, guys. Hopefully this does some good for everybody.