Graham Duncan - Talent Whisperer - [Invest Like the Best, EP.409]

My guest today is Graham Duncan. This conversation will make you think about your life in new ways. This is a two-hour segment of a 4.5-hour interview I did with Graham last year. It stands alone as remarkable, but those who subscribe to Colossus Review will gain access to the full conversation. This will be true in future issues, too. In 2006, in his early 30s, Graham convinced Stuart Miller, CEO of home construction company Lennar, to let him manage $50 million of his family's wealth. A year later, Miller gave him the rest of his capital outside of Lennar. That investment turned into East Rock, where Graham built an incredible investing track record managing billions for a select group of families by focusing on people. Our conversation explores a wide range of topics—from what makes a great investment partnership to the power of positive feedback loops to starting a restaurant. I’m thankful to Graham for showing me the way so many times and for being willing to be so incredibly open in this conversation. Please enjoy this discussion with Graham Duncan. Subscribe to Colossus Review. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Ramp. Ramp’s mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Ramp is the fastest-growing FinTech company in history, and it’s backed by more of my favorite past guests (at least 16 of them!) than probably any other company I’m aware of. Go to Ramp.com/invest to sign up for free and get a $250 welcome bonus. – This episode is brought to you by Ridgeline. Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. I think this platform will become the standard for investment managers, and if you run an investing firm, I highly recommend you find time to speak with them. Head to ridgelineapps.com to learn more about the platform. – This episode is brought to you by Alphasense. AlphaSense has completely transformed the research process with cutting-edge AI technology and a vast collection of top-tier, reliable business content. Imagine completing your research five to ten times faster with search that delivers the most relevant results, helping you make high-conviction decisions with confidence. Invest Like the Best listeners can get a free trial now at Alpha-Sense.com/Invest and experience firsthand how AlphaSense and Tegus help you make smarter decisions faster. ----- Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes: (00:00:00) Learn about Ramp, Ridgeline, & Alphasense (00:05:12) Intro to Graham (00:05:54) Launching Colossus Review (00:08:05) The Principal-Agent Dynamic (00:10:47) Navigating Financial Crises (00:13:22) The Right Grip in Investing (00:17:32) Seeding and Investment Strategies (00:21:37) Defining 'Commercial' and Its Implications (00:26:31) The Role of Laziness and Prolific Output (00:28:20) Finding the Right People and Positive Feedback Loops (00:37:21) Navigating Career Transitions and Motivations (00:43:05) Understanding Source Dynamics (00:50:07) Key Criteria for a Great CIO (00:59:43) Structuring Relationships with CIOs (01:03:40) Managing Ambiguity and Protecting Mental Clarity (01:15:09) The Importance of Source in Business (01:17:49) Designing Physical Spaces for Success (01:22:46) Launching a Restaurant: A Casting Exercise (01:30:17) Taking Over and Transforming Existing Ventures (01:33:08) Macro Investing and Adaptability (01:36:06) Hierarchy of Investment Mastery (01:44:10) The Art of Referencing (01:52:08) Formative Experiences and Personal Growth (02:00:12) Building a Business and Taking Risks (02:07:46) The Origin of East Rock

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

• 0:00Patrick O'Shaughnessy?

  I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount and more risk. RidgeLine offers a better way forward. One unified platform that automates away the complexity across portfolio accounting, reconciliation, reporting, trading, compliance and more, all at scale. RidgeLine is revolutionizing investment management, helping ambitious firms scale faster, operate smarter and stay ahead of the curve. See what RidgeLine can unlock for your firm. Schedule a demo at ridgeline.ai.

• 0:35Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts and you can access all our podcasts, including edited transcripts, show notes and other resources to keep learning at joincolossus.com.

• 1:00Speaker 01

  Patrick O'Neal is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.

• 1:29Patrick O'Shaughnessy?

  Today's conversation is going to make you think about your life in a variety of new ways. You should listen to it in its entirety. I first met Graham Duncan in 2017 in the offices of East Rock Capital. We had lunch inside of his beautiful library. The food was insanely good and I remember thinking this person is extraordinarily special. I'd been a little bit nervous to meet him because his reputation was as the most discerning people picker on Wall Street. In the years since, I've been lucky to grow close to Graham and there are not many people that have impacted my life and thinking more than he has. He's one of the most generous people I've encountered, who has genuinely made me appreciate life in many new ways. His profile on X reads compulsively seeking new ways of seeing reality and that is an understatement.

• 2:13Patrick O'Shaughnessy?

  Among the dozens of lessons he's taught me, one stands out as having been the most impactful. He phrases it as a question, "What are you most compulsive about? Is it possible to put that at the center of your platform's activity?" Anyone that knows me knows I'm obsessed with the concept of finding and pursuing one's life's work. It is Graham as much as anyone else to whom I owe the impetus for my own quest to find mine. As you'll hear, because he has studied people more than anyone I know, he's the perfect guide for helping each of us think about ourselves in new and interesting ways. Graham is also fond of saying that talent is the best asset class. This is my obsession too. I want to spend my time finding the best people in the world and learning their life stories and sharing them with you all.

• 2:57Patrick O'Shaughnessy?

  Last year, we decided that it was time to build a new publication at Colossus that allowed us to go even deeper into life stories, which we are calling Colossus Review. It's a quarterly print, digital, and audio publication that profiles the people, investors, and founders that we respect most. We're launching it formally today, and to see more, you can click the link in the show notes or go to joincolossus.com/subscribe. When we were starting it, there was no doubt who we should put on the first cover. Graham himself embodies the work we hope to do, finding and enabling extraordinary people. He's the perfect teacher for those interested in this pursuit. This is a two-hour segment of a four-and-a-half-hour interview I did with Graham last year. It stands alone as remarkable, but those that subscribe to Colossus Review will also gain access to the full conversation.

• 3:42Patrick O'Shaughnessy?

  This will be true for future issues too. Graham built an incredible investing track record while managing billions for a select group of families. He did it by focusing on and backing people. Our conversation explores a vast range of topics, from what makes a great investment partnership, to the power of positive feedback, to starting a restaurant. We discuss what he's learned about building trust, creating sustainable relationships, and identifying talent. I'm so excited for this new effort from Colossus and so proud of what the team has put together for you all. I'm so thankful to Graham for showing me the way so many times and for being willing to be so incredibly open in this conversation. I hope it impacts you as much as it did me.

• 4:23Patrick O'Shaughnessy?

  I was thinking of the Stuart quote of people make money like pros and then manage it like amateurs. How many people like that I know that want an amazing setup, but somehow don't have it, or are in one of these mills that seems nice and probably feels nice, but under the hood is like, there's nothing actually going on. It's like a normal financial advisor with better trappings or something. And why there aren't more setups like what you had with Stuart? Why is it the exception that like proves the rule?

• 4:57Speaker 02

  I think it's a principal agent thing, that there's a way in which it's this paradoxical thing where if you're the principal and you treat the agent like an agent, then they become an agent. And so it's this very subtle energetic thing where you gotta have this vibe of let's make money together. So what happens is somebody who's commercial wants more control over their life than most principals will give them. And so when the principal tries to bring an A-player inside the boundary of their firm, quote unquote, it's not unleashing the commercial activity of

• 5:42Speaker 02

  the agent. And I think the fact that Stuart Miller let me set up my own company, it's possible it was path dependent because he initially gave me a smaller amount of money, 50 million, and I ran that for a year and built trust. And then if it hadn't been like that, it's possible the market construct would have been just run my family office, but it's my thing, and it wouldn't have unleashed what it ended up unleashing. It's also like, it has to be consistent with their existing aesthetic.

• 6:16Speaker 02

  I think so like if you had a quant guy whose family office needs a family office who wants to partner with somebody or put somebody in the business to run a family office, the underlying agent is going to need to be super mathematical, left hemisphere-y, in order to have the principles, map of reality, overlap enough with the agents that when shit goes down, it doesn't get wonky. Because inevitably, something's going to go wrong. And it's those moments when it goes wrong that you either get shaken out and there's one family office that famously has gone through like 15 CIOs because of that getting the dynamic wrong.

• 6:57Patrick O'Shaughnessy?

  In the early days, how would you describe that dynamic between you and Stuart personally? Like what matched, what fit?

• 7:05Speaker 02

  Well, one thing was the time horizon. Like he just from the beginning had a very long time horizon. And then he's just a very skilled manager of people. I was listening to Randall Steppman, who was famously Jamie Dimon's coach, and he has this theme of they studied all the best leaders and they found there's this quality of the people working for the leader as feeling like the leader's rooting for them. I knew exactly what he meant because I could feel it. That's exactly the vibe Stuart had been giving me and eventually my second partner as well. That feeling of, yeah, I'm rooting for you first and foremost, like let's do this. In retrospect, it was kind of crazy, right?

• 7:49Speaker 02

  Because I started it in 05, the initial vehicle, which was just a fund of hedge funds. And then Stuart gave me the rest of his capital outside of Lennar in early 2007. And then I convinced Adam Shapiro to leave Goldman and we started this new venture. And we had exactly a year to do stuff before the great financial crisis hit. And so picture you're him, Stuart, and it's the beginning, 08 is happening, and you have hired these two kids.

• 8:24Patrick O'Shaughnessy?

  You're like 32, something?

• 8:25Speaker 02

  Yeah, exactly. And you know me pretty well, but not that well. And then all of a sudden, your stock goes down to like, it was at the highs, but it went down to three bucks. So close to going bankrupt. And all of a sudden, all your money.

• 8:43Speaker 02

  It's one of these kid that you don't know that well. And there's this scene that I talk about in one of my essays where, and so he and his leadership team at Lennar is going around trying to raise money at the bottom. And he comes and he notices that Adam and I are kind of depressed. We were down like 12% at the time. But we had anticipated some elements of the great financial crisis and thought we'd be flat or up and we weren't. And so we were sad and mopey. And he said, you guys, what the hell do you think? Like, I knew we were at risk of losing money. You don't see me moping around. There's something about his physicality. He was like jaunty. And it was totally like what I imagine a SEAL team captain is just going down.

• 9:28Speaker 02

  Like, he's so funny. Turned on. Turned on and just cracking jokes left and right. And like, no, no identity as billionaire or as rich guy, just pure, this is a game. We're playing a game. It just got interesting.

• 9:45Patrick O'Shaughnessy?

  Yeah. Straighten your back out.

• 9:46Speaker 02

  Yes, exactly. There's something about that vibe of like, we're doing this together and we're grownups and we're taking risk and I know shit could go bad. That I think to your earlier question, like, the principal has to set this condition where it's okay for the agent to make mistakes. And there's a lightness to it because otherwise the agent, depending on their own risk tolerance, may not take enough risk. The difference of like managing your own money versus managing the optics of something can get so huge based on like one word from the principal.

• 10:23Patrick O'Shaughnessy?

  Is this a good example, do you think, of your notion of like the right grip? I know it's an unusual like application of the idea, but like his grip on the overall situation where a lot is handed to you. Maybe explain that whole grip thing. I would love this analogy.

• 10:39Speaker 02

  Yeah. I came, I guess, I mean, it was literal. I rode a lot in high school and a bit in college. And when you're holding the oar, there's a tendency to really grip it, in which case your forearm tightens up and you're kind of muscling it versus there's a version where your grip is, it's like paradoxical, it's both solid but also loose.

• 11:03Speaker 02

  And if you catch a crab, it's called catching a crab where the oar goes under the water, the blade goes under the water and you can get thrown into the water. If you're not careful, in that case, you need to be able to let go of the oar. Otherwise you're going in the water. So there's this tight but loose grip that I started noticing that when I speak to certain people, if someone's ideological about the thing they're discussing, they're kind of subtly conveying to you, it's not up for grabs. It's not debatable. They're not looking for your input on it. And so you're asking, is that the way Stuart was relating to this situation?

• 11:44Speaker 02

  Yeah, he had like a light grip on, I remember telling him at one point, JP Morgan, it was at the bottom in 08 and people were buying gold and really ready for physical gold. And he cracked a joke about, yeah, I can just see myself, Graham, you're going to buy me a bunch of gold and then I'm going to like be dragging this bag along the street with my, with my brother in law and what are you going to drive the car like, he's like, give me a fucking break. So it's like, this whole thing is, life is absurd. This whole capitalism is a construct. We're playing this game somehow, but it's the humor is embedded in the light grip.

• 12:26Speaker 02

  I feel like in those situations, you're conveying to somebody else, we're going to do the best we can here and who the hell knows what's going to happen.

• 12:32Patrick O'Shaughnessy?

  If you think back to like the way that East Rock as a platform evolved, one of the things that you ask around about East Rock that you'll hear often is that it feels like such an organic development of a platform that is very unusual in the sense that it can and did lots of different things and lots of different structures with lots of different kinds of managers and was fundamentally unconstrained in what it did. And I've seen you say before, in simplest terms, the idea is to find the best investors in the world and then make great investments with them. And there's sort of two key parts to that, that obviously we'll spend lots of time digging into both. Is that a fair summation of like the vision of East Rock was find and partner with the great investors of the world?

• 13:15Patrick O'Shaughnessy?

  And is the platform really just, we shouldn't study too much the platform itself because that's just an out, natural outcome of this very simple goal? Like, is that the right way to think about it?

• 13:24Speaker 02

  Yeah, I think it was downstream of an understanding I felt that Stuart and I had of the goal is to make money. And not lose too much. And it sounds so simple, but it's actually, of course, because of principal agent dynamics, like, super complicated. And I didn't feel like I had comparative advantage in picking stocks or doing any number of other styles of investment. And so for me, that was my comparative advantage. I think now that Adam is running the platform, he has a different comparative advantage, and it'll morph over time.

• 14:00Patrick O'Shaughnessy?

  Jesse Beirudi from IA Ventures said something to me really interesting. He said, "You have to decide probably whether the kind of capital you want to provide is unique, singular, or not," meaning if you didn't provide this capital to the person, they probably wouldn't be able to get it otherwise, versus winning access to the consensus, like, best new thing, that if your capital didn't go there, surely other capital would. But your advantage is that you're accessing a scarce supply. And I thought about that vis a vis you, and it seems like you did both. You both were often a day-one investor, not a seeder, in people like Dan Sundheim

• 14:40Patrick O'Shaughnessy?

  that were leaving and just incredible investors, and there's somewhat of a limited supply. And in the eight seed deals that you did, I think basically all of them, or most of them, worked out really, really well. And by definition, that's more of the former. If they're willing to give up economics, it means something. I'd love to explore maybe like one example of each. You could pick a seed deal, or you could pick an investment you made that wasn't a seed deal and a manager. We could also talk about a direct deal. But back to just understanding what you're doing and what's going on around one of these stories, I'd love to do one of each of your game.

• 15:14Speaker 02

  On the seeding, I feel like the process is, can we set the table in a way on terms that the market will agree with, but it's unclear whether the manager would have gotten those terms without us. So that could be lock up of capital, that could be fee, that could be something else. I always tried to hold myself to the standard of, I would invest in this manager, even if I didn't have seed economics, I would just do it smaller. I would just take less risk, and I wouldn't wear any reputational risk. I feel like that's one key distinction between just looking for seed deals, but holding yourself to the same bar of like, I just size it smaller and I wouldn't shape it.

• 15:58Speaker 02

  And so that kept us, I think, out of a fair amount of trouble.

• 16:02Patrick O'Shaughnessy?

  What about on the traditional side? Is Dan a good example?

• 16:06Speaker 02

  Yeah. So Dan Senham was leaving Viking. I interviewed over the years, all these people that worked for Dan, and they were always in such awe of him as a portfolio manager. And as a, I felt like it was them at the expert or professional level relating to him as a master. It was how I interpreted it at the time. I remember one guy saying, Dan would be planning how to get in and get out of a stock six months in advance of buying it. He was planning out the whole arc of, he was very focused on liquidity. And it was this mix of fundamentals and understanding market structure. We had a number of friends in common.

• 16:47Speaker 02

  And when he left, I feel like there's often within a hedge fund container, there's this dynamic where the founder of the hedge fund is pricing the up and comers each year. And it partly is expressed in terms of how much carrier are they going to have the subsequent year? And there've been a number of cases where you're kind of tracking, did the founder of the thing hit the bid correctly this year or not? And if they didn't.

• 17:11Patrick O'Shaughnessy?

  Opportunity.

• 17:13Speaker 02

  And so, so there was this moment where Dan was ready to go do his own thing. He had enough of his own money. And I aspired to earn the right to a dialogue with him and help him in his hiring. Because we were in touch with so many analysts. At any one time, I felt like I was able to calibrate on his taste in analysts and who would be at the right seniority and then help him with that hiring process. And I think. Forget of his initial, I don't know, I'm gonna say I could get these numbers wrong. Of his initial 12, maybe four of them were from Patrick and me. And I got to know him very well during that process and saw how he had this very optimal grip. Like he has no defensiveness whatsoever.

• 17:58Speaker 02

  If you tell him a new piece of information about him or a process or a person, there's like no ego in it. He'll just drop it with no hesitation. So there were a couple of cases where I gave him feedback on things. And the way he took the view, I was like, oh, my God, he was such a quiet ego. So focused on being commercial first and ego second. So we ended up being a day one investor in there. It's had its ups and downs, but I continue to really believe in him as a commercial actor and as a leader of his firm as well.

• 18:30Patrick O'Shaughnessy?

  Can you define commercial? It's such an important term in our dialogue over the years. Why is that word so incredibly useful?

• 18:39Speaker 02

  So the term originates, Adam used it at Goldman, other people at Goldman I'd heard it from. And it connotes all the cliches, moneymaker. I think what's in there is one way I've ended up defining it is it's the ability and the intent to create more value than you capture. So that would be a kind of abundant version of it. I feel like there are people who are signaling that they're in a repeat iteration game and they, they're not going to grab every penny on this transaction because they know that there's a sense of proportion about it somehow. You know, Goldman has that phrase, long-term greedy. It's like, I want to make money, but I'm going to do it with the knowledge that we're going to see each other again.

• 19:23Speaker 02

  And that sense of I'd rather make money than be right is another core tenet of it. Where there are people who seem to me to be in the game in order to experience the satisfaction of being right. And that's the primary goal. And that works some high percentage of the time, but then it can be disastrous, of course, because your ego and your portfolio can get caught up with that goal instead of just making money.

• 19:50Patrick O'Shaughnessy?

  Was there any through line to the mistakes that you made? At East Rock, backing deals, managers, seeds.

• 19:57Speaker 02

  There's a great story that Tina Fey has about the only thing she learned from Lorne Michaels, not the only thing, one important thing she learned at Saturday Night Live that she brought to 30 Rock was that you need, in the writing room, you need the optimal mix of Harvard nerds and Chicago improv. And I thought that was so profound when applied to investment managers, because I had experienced a lot of both types. And I would say the Chicago improv is pure plasticity, pure flexibility. They will do anything for a laugh to a fault. And the Harvard nerds, in her language, were planning everything out very high order,

• 20:38Speaker 02

  very high stability, but not able to improv as much. Over time, my taste evolved to accommodate more Chicago improv. I was at first attracted to Harvard nerds. Over time, I came to appreciate, Charlie Munger calls it the knack, or called it the knack. I remember, early on in working with Ted Seides, we were in a meeting with a former milk and credit trader of some sort. And we were sitting in a restaurant in Santa Monica, and he turned it to me at one point, he put his hand on my arm and said, "Money's like water. All you have to do is learn to turn on the faucet, see." And I thought I was like in some sort of David and Mamet

• 21:20Speaker 02

  movie or something. But he's right. There is this woo way, not forcing it, working with... There's a coach I like, who I follow online, named Joe Hudson, and he had this line of, "Where does the water want to flow downhill?" Working with, not forcing it, like, working with what already wants to happen, that I feel like is in there, a lack of stuckness. It's like a pragmatism that, at the end of the day, rules out over other facets of investing.

• 21:49Patrick O'Shaughnessy?

  When you think about the moment at which you were there and eStroc, the platform was sort of humming the most. I love that Josh Waitskin idea that not just career, but life is like this opportunity for self-expression. I'm curious where, if anywhere, it wasn't that. I know eStroc was a great vehicle for self-expression for you. We could talk about lots of ways that that was true. If you think about it and had that blank sheet of paper Josh always talks about, like going into the cave with a blank sheet of paper to come up with a new platform. Is there anything different that you would do to better have a vehicle for self-expression than played out with eStroc?

• 22:26Speaker 02

  Not really. For that chapter of my life, it was pretty amazing and ideal and fit. I really felt like Stuart provided a playing field with no constraints, but you had to earn the right to go anywhere. And so I feel like if I were doing it again, like I could picture furthering again, finding somebody, being purely opportunistic and fitting the current opportunity set to the risk tolerance of the principal. And then I could picture trying to seed somebody with a billion dollars if I had that level of confidence in them.

• 23:06Speaker 02

  And if I felt like the principal could have that level of confidence because it's the same aesthetic or the same map of reality. But I just feel like if you can eliminate the optics and the desire to look like you've added value as the agent and make it as pure an expression of this is genuinely what I would do with every single dollar if it were my money. I feel like there's such leverage to that. So I would fit it to the risk appetite and the trust level with another principal. But as I've said before, like I think I'm pretty lazy and it's a curse and a gift. And the gift side of it is like, I have no desire to work for work's sake, like zero, like negative.

• 23:48Patrick O'Shaughnessy?

  Is there a chance you're actually not lazy and you're just like applying that? Like you're lazy about taking action or hitting the hammer, whatever analogy you want to use. But it seems to me like, I was thinking about the word prolific. You've written seven very well read posts ever. Not exactly prolific in your writing output, but like extremely high impact. But I always wonder like, for what are you prolific? And it seems like you've read everything, you've met everyone. There is some unit for which you are prolific and maybe it's not output.

• 24:20Speaker 02

  Yeah.

• 24:20Patrick O'Shaughnessy?

  But it's like your own format of thing.

• 24:23Speaker 02

  Yeah.

• 24:23Patrick O'Shaughnessy?

  So do you think that's right? That you're not lazy? You're maybe lazy from the outside looking in or something, but I don't know. It just seems like you're always deeply tapped in and that's not.

• 24:34Speaker 02

  That's not lazy.

• 24:35Patrick O'Shaughnessy?

  Lazy.

• 24:36Speaker 02

  Yeah, I think that's a good catch.

• 24:38Patrick O'Shaughnessy?

  It's like we were joking, what was the nickname? It was something like leverage lion. And I was talking to Boyd because lions, when you watch them for long periods, they basically do nothing. And then they're just like ferocious around opportunity and the intensity level is just, I mean, you could feel in your chest when you're there in Africa. And leverage, because with you, I always think of that joke of the guy that charges $1,000 and $9.99 is for knowing where to hit and a dollar is for hitting it. And then that's sort of it. A lot of it can be boiled down to a handful of really great decisions that were carefully considered, obviously. But that to make those good decisions, you do need to be prolific in some sense. Like you need to have seen the thousand things you don't do.

• 25:19Speaker 02

  Yeah.

• 25:19Patrick O'Shaughnessy?

  And that's far from lazy.

• 25:21Speaker 02

  Yeah, yeah. My appetite for finding the best person in the world to do the thing instead of me doing it is almost infinite.

• 25:30Patrick O'Shaughnessy?

  Yes.

• 25:30Speaker 02

  So that applies to literally everything, including managing money.

• 25:35Patrick O'Shaughnessy?

  Yeah.

• 25:35Speaker 02

  Yeah.

• 25:36Patrick O'Shaughnessy?

  Say a little bit more about that. What is it about that process that's energizing to you? Is it figuring out the person? Is it something else? Is it excellence?

• 25:45Speaker 02

  Yeah, it's figuring out the person in some new field, trying to figure out how. It's like the what's going on here. Like, I can't get over how profound a frame that is. Like, it applies, obviously, at any level, to the point where it's so abstracted, it may not be useful. But I have this, like, I guess there's hope in there, like optimism, that I will find somebody. The kind of, you're in Boyd's thing of what's the- Peter Schuma. Yeah. We'll find it. We'll find it. I definitely had that. I've found the person when I thought there was no one enough times, that I'm always like, I have hope. I could go through so many examples of like, are you kidding me? This person exists and they're that obsessed with this crazy thing?

• 26:24Speaker 02

  And then, I think one key thing that people miss on hiring is, you need to understand why it makes sense for the candidate. Why the candidate should choose this container and this setup and be rating it like a hundred out of a hundred, if possible. Realistically, it won't be that. I see people make a mistake. It's like, I'm hiring, it's like a left hemisphere approach. It's like, I'm hiring this person to do this thing. It's like, they're treating it as a machine. But it's so much more complicated in that if you want the person to thrive and have the energy and then be rooting for them, you need to understand why, from their perspective, this is the right thing for them at this stage of their life with this set of skills. If you understand that, then it gives the stability to the whole thing.

• 27:10Patrick O'Shaughnessy?

  Maybe it's a great opportunity to talk about the idea of yours that's had the greatest impact on me personally, which is this notion of positive feedback loops, a person's compulsion or bliss, or lots of different names for, I think, probably the same thing. And like, the right setup that allows for this unlimited upside. And there's lots of dimensions to this. There's how to help someone find this thing, what the right setup is, how to partner with someone that's doing one of these things. But each of these aspects, to me, is like, has been in my life, an incredible unlock of like, self-awareness around what my compulsion is. And then constantly asking that question, not just once, not just at the setup phase, but constantly.

• 27:51Patrick O'Shaughnessy?

  Is this thing wrapped around my compulsion or has it bled into like, normalness? So, you've done this more than anyone I know, thought about it more than anyone I know. How does someone start to like, track that potential compulsion in themselves? What does it look like from the outside? What kind of questions do you get people to ask of themselves?

• 28:10Speaker 02

  One aspect is that- I have that analogy of a river with two banks. One is order and the other is chaos. And you kind of start off your career closer to order. And sometimes you swim closer to chaos over time. It's like a developmentally appropriate stage of being an intern and learning a craft and apprenticing and all that stuff, where you're not really often that in touch with what you actually want. You're just playing the game the way other people have defined it. And I feel like if you're talking to a 22 year old, they have been on the playing field less time, and so they don't know what they actually want.

• 28:52Speaker 02

  They're socialized, in Keegan's language, there are all these things they're subject to that they can't see. And so partly the hero's journey, or pick your metaphor, is about listening to what the world wants from you and what you actually want, and then looking for that intersection. So the questions I ask sometimes, what are you compulsive about? I notice it for myself, like, I could surf LinkedIn, I don't know what my appetite would be, I could probably do it for three or four hours, which is like so-

• 29:28Patrick O'Shaughnessy?

  I don't think I've ever surfed LinkedIn.

• 29:30Speaker 02

  Boring. For most people, it would be very boring. And so I like looking at their picture. I feel like someone's self-selected photo is so crazily high signal. If somebody chose that photo to represent themselves, they are saying, there's something of my essence that I want to have be my essence, it's in this photo. And then matching it up with my impression of what life has done to them, what they've done to life in the photo, and then matching it's resume, I could literally do that. What's the thing you do that other people kind of make fun of you for? I feel a little embarrassed that I can do that somehow. It feels like, oh, weirdly tactical and kind of boring.

• 30:10Speaker 02

  But on some level, I just enjoy seeing that dance of what somebody wanted and then what the world wanted from them. And then other places, other than what are you compulsive about? That question of, have you felt a moment of ignition where you saw somebody else and you said, I want to be that? I read that in The Talent Code. Have you read The Talent Code?

• 30:30Patrick O'Shaughnessy?

  Yeah. You said it's me.

• 30:32Speaker 02

  Yeah. I read that in The Talent Code. I was like, oh shit, I totally had that. I had that twice. I had that when I was in eighth grade and I was rowing. It was like the sixth time I went rowing. And this senior and junior, a guy and a woman who are tall and he was handsome and she was beautiful. And they just had such presence and mastery of rowing. They had both won national championships. And I was in eighth grade at the time. I was like, oh, all I have to do is row four hours a day and I can be that? Done.

• 31:04Patrick O'Shaughnessy?

  Wow.

• 31:05Speaker 02

  And then I didn't look back because it was so embodied. And it was also a recognition that I have enough overlap with them that I can do this. Like, it's not completely random, but then that feels like a viable path. It's not that reliable a question, actually. Like, a lot of people either fake it or they don't recognize those moments. It's kind of a subtle thing to catch. But Tim Galway, the Inner Game of Tennis guy, has this line, "Desire wants what it wants." I think it's so profound. Like, from schools, parents, peers, like, we cover up what the desire actually wants. And getting in tune with it is so powerful.

• 31:46Speaker 02

  And hopefully that happens to somebody in their twenties or thirties from a career perspective. When it does click, you can hear it in their voice. You can hear it in the way they create language to capture the things they've seen. Yeah.

• 32:02Patrick O'Shaughnessy?

  What was your second moment of ignition?

• 32:06Speaker 02

  I was working at a fund of funds and Dan Stern, who you may have met, who used to run Reservoir. The way these mutual friends described him and then his activity, which was so people-focused within investments. I was like, oh, that's my own orientation towards this. Oh, there's a path here of being an effective investor by selecting people having very high situational awareness on how to set up the right platform for them. That I thought, you know what? I've never met him, but I could just tell based on the friends we had in common and then how effective he'd been that, oh, that's a thing. I want to be that.

• 32:47Patrick O'Shaughnessy?

  Was he the most prolific, famous cedar at the time?

• 32:51Speaker 02

  Yeah.

• 32:52Patrick O'Shaughnessy?

  And what was your sense of what made him so good at that?

• 32:55Speaker 02

  Well, I think he apprenticed under Richard Rainwater and Rainwater had this feel for

• 33:01Patrick O'Shaughnessy?

  Platonic ideal of this concept.

• 33:03Speaker 02

  Yeah. And then you just tell from the people he had seeded, there was a consistency to his taste, which was in seeding, there's massive adverse selection, of course, like the people in general, somebody who has pulled out enough money from the market should have enough money to put themselves into business. So you have to understand why you're so lucky that you're either catching them. I generally like catching people super young. It's like a company going IPO. There's just not that much information yet about them. And so it makes sense there'd be inefficiency. But then other times, another pattern I liked a lot was someone's former

• 33:44Speaker 02

  boss damning them either with faint praise or not even with faint praise. It's a huge structural inefficiency because if you're the guy running the platform and your star guy leaves and you sponsor him and promote him too much, you create incentive for everybody else to do that. So I really like hair on a former situation, specifically where I know the former PM and I have a feel for why they might be a little sociopathic about it. Like, fair enough. I see what you're doing. I've been on so many counseling calls with people thinking of leaving. Like any one time, I have five to 20 conversations going with

• 34:27Speaker 02

  somebody who's thinking of leaving a thing. And the level of fear about how the source, the primary person of their existing platform is going to relate to them is so consistent and so high and correct.

• 34:41Patrick O'Shaughnessy?

  Yeah, of course. Is there anything you hear on those calls? I have a lot of those too. I'm fascinated by this category of call.

• 34:48Speaker 02

  Yeah.

• 34:49Patrick O'Shaughnessy?

  The want to lever. What are some common observations on those calls of like something you would hear where you're like, nope, not ready? Like, what are the piles you short people into on those calls?

• 35:00Speaker 02

  Well, one is it's very easy to be define almost everything.

• 35:06Speaker 02

  You're thinking of doing in reaction to your current container. The genesis, in part, I think of Josh Waitzkin's cave process is that's not a healthy way to start a new thing. You can't do it in reaction. You can do it somewhat in reaction to the old thing because that informs your map of reality and what you want to change. But if it's all reactive, there's something kind of, it's like the psychologists divide things into approach motivation and avoidance motivation. It ends up being too much avoidance motivation somehow. There's like this negativity baked into the DNA of the thing if you allow too much of that. So I feel like that's one thing. It's easy to be too cute about that. You don't want to overweight that when someone's talking, but I feel like over time,

• 35:51Speaker 02

  they need to get to the point where they're articulating a proactive vision, not just, "My job sucks." There is a category of it's like, "My friends have all started funds," or "They've all started," whatever the thing is, or "All starting," you get this in Silicon Valley right now where-

• 36:06Patrick O'Shaughnessy?

  The memetic kind of thing.

• 36:07Speaker 02

  Yeah.

• 36:08Patrick O'Shaughnessy?

  Yeah.

• 36:08Speaker 02

  "I'm a founder." You're not a founder yet? The founder thing is totally in this category and it's so distinctive to my ear because I've just spent more time on it in the last couple of years. And the Silicon Valley version of it is so distinctive of founder, capital F. So there's a version of it where someone is just frustrated with their current construct. The core motivation is, "I want to create a new job for myself." And I think that's not a great way to start a new thing. It needs to be slightly bigger than that, I think. And then, at the highest level, what it is, is what they're wanting is to be priced by the market. In a hedge fund context, or probably applies to startups too, of just,

• 36:52Speaker 02

  "What will VCs price me plus this opportunity at from a seed round or Series A valuation?" Like, I ever think of it, it's like a pricing exercise. Like, a guy who runs an enormous fund, I was talking with recently, and he's kind of debating whether to stay at this enormous fund. And the question he's really asking is, "If I launch my own fund, am I raising a billion or am I raising five billion?" And it's a great question. And I think there's kind of an answer to that. Based on, okay, how long have you been there? Do you have a standalone track record? It's answerable. Is that square with your?

• 37:30Patrick O'Shaughnessy?

  A hundred percent. I've never heard it put that way. It's so resonant.

• 37:34Speaker 02

  Yeah, price.

• 37:35Patrick O'Shaughnessy?

  What's my price?

• 37:35Speaker 02

  What's my price? And that should change over time. I remember there was a guy running a regional office for a really large hedge fund. And thinking that if we had been able to spring him, he would have raised 500 million to a billion. And we ideally would have seeded him, but quite possibly he wouldn't have needed it. But then he ended up running, call it a $10 billion plus fund. I was thinking, oh, that's a very interesting spread. Outside this container, the market as a whole would price him at 500 million to a billion. He's running a $12 billion plus fund. The founder of that firm who made that decision, that's that guy's arb. That's the bet. And it ended up being the correct bet.

• 38:20Speaker 02

  I didn't necessarily see it at the time. I was thinking, whoa, that's a huge spread. And if he went outside, it would be so much smaller.

• 38:26Patrick O'Shaughnessy?

  It's so interesting how it's turtles all the way down. Like, if you hear founders fund, GPs talk about what they do, it's the same. It's like they want the hair. They want any deal heat and they're gone because the price is wrong. And it raises an interesting question about seeding, which is if it has to overcome this adverse selection problem. And it has this juiciness to it. Like, I feel like every investor ever has had some period where they're like, we should do seeding because you're putting LP dollars in, so whatever, like the downside is they're a really bad investor. And I get GP economics on the other side. And it just seems like this money machine. But obviously it hasn't been like, you're probably the best seeder ever. There aren't 10 other great seeders.

• 39:12Patrick O'Shaughnessy?

  The model itself seems so sexy and alluring, but there's this adverse selection problem.

• 39:16Speaker 02

  Adverse selection. And the moment you have to, I remember we were so careful about this. And my partners who now run East Truck continue to be careful about this. If you have all the mentality of I need to put assets out, it completely screws up the dynamic. I wouldn't trust myself.

• 39:35Patrick O'Shaughnessy?

  If you had a seed fund.

• 39:36Speaker 02

  Yes. If I had $2 billion that's burning a hole in my pocket and I need to seed.

• 39:40Patrick O'Shaughnessy?

  Important point.

• 39:42Speaker 02

  The other thing that people do, I've noticed this, if you seed somebody. I was talking with a guy, I won't use the name of the fund, but he was at a very prestigious fund and somebody called him and offered him, it was a big seed, call it $200 million. My hypothesis, I remember talking to him, my hypothesis was if the guy hadn't called and given him the 200 million, he wouldn't have come up with it on his own. It's a very subtle, I forget, we've talked before about source dynamics, like work with source.com is a collection of information on this concept that I'm obsessed with. But it's like, the argument is this guy, Peter Koenig, and he had looked at all these startups

• 40:26Speaker 02

  in Europe, several hundred, and found that even when there were co-founders, there was really one person who took the first risk, even if that was calling the other co-founder, and that he'd be really careful about that first risk and who's taking it and why they're taking it. I remember meeting with a quant fund and when I pulled the thread on the origin story, there was something about the energetic of the guy running the quant fund, which was he was relating to it as a job, not his thing. It's like, that's so weird. And then I pulled the thread and it emerged that had happened to him. He'd been sitting at a fancy firm and a friend of his had said, "Let's do this thing." And the source dynamics were screwed up from the start.

• 41:09Speaker 02

  And this guy, Peter Koenig, has this argument that all organizational dysfunction can be traced back to disagreements about who is source, or the actual source playing small or not fully owning being the source of the thing. And it totally fit my sample of hedge funds where our friend Diana Chapman has this analogy of the chick needs to peck through the eggshell and develop the strength through the pecking in order to make it once you're outside. If you break the shell for them, they will die. If you mess with the origin in any subtle way, it can affect the entire trajectory of the thing in ways you wouldn't think.

• 41:54Patrick O'Shaughnessy?

  Does that mean you don't think of yourself as a cedar? That just happened to be the right expression eight times or however many it was?

• 42:02Speaker 02

  Yeah, yeah. Kind of up one level, looking to back people and fit their circumstance and they were going to do the thing anyway. Yeah.

• 42:12Patrick O'Shaughnessy?

  It's so interesting that working with source thing is just true. Like, if you go read it and you have a high N of investors or companies or founders or whatever, like, you just see it everywhere. Are there other aspects of your obsession with that and like how you suss it out that are interesting? When you're trying to identify what the source is for any given person?

• 42:35Speaker 02

  In this language, I often think of it as who is the source and are they owning it? I mean, you see it a lot in succession. One of the arguments in this literature is that heading off source is extremely subtle and hard to do. Where else do you? You see it with, in the dynamics between co-founders. Is there resentment on the part of the co-founder who's not source towards source because they don't want to be in that role? I feel like I see that a lot. And 80% of the time, that's held in check, but then conditions can change and then it's not held in check anymore. They can go through a difficult period or extreme success can also lead to it.

• 43:18Patrick O'Shaughnessy?

  Bringing it back to something very tangible, which is this interesting matching exercise between investors that might want to run money for a family or a set of families and someone that's commercial and talented enough that it would make sense to give them some of your money. Why is there not like a YC for that kind of person? Or even a YC for like investors? Why, if I'm new billionaire X that wants some great setup, is there not a demo day where I can meet highly talented, ambitious, hungry, low ego, commercial?

• 43:55Speaker 02

  Well, one thing is, I think, I wonder, I think it's because it's the skill set, it's the skill set at the highest level.

• 44:08Speaker 02

  It's managing risk and being pragmatic and commercial, I think. And so in general, those people tend to be older. I think giving a bunch of money to a kid, if you're running a family office, you need to do it in a way that there's room for them to screw up. And there's something around like, like the people who I think would be good at managing family office have taken risk with their own capital and other people's capital before. And I think ideally don't have identity. They have identity as being a moneymaker, but not as a specific thing. And their EQ and social intelligence is high enough

• 44:52Speaker 02

  that when they're talking with other people, like Rainwater is the gold standard on this. They're okay expressing a bet through other people. I feel like that's a distinct skill set. And so retired hedge fund managers who were pretty high EQ are probably a pretty good pool. If you could make it feel like it's their money, either lend them money or they put half their net worth in, you lever it. Some way to make it feel as though they're doing it.

• 45:26Patrick O'Shaughnessy?

  So there's no IC because it's like the inverse of companies. You want young people with raw potential who are going to go figure out some new thing.

• 45:35Speaker 02

  Yeah.

• 45:35Patrick O'Shaughnessy?

  Whereas an investing side, you want the grizzled, experienced veteran, on average.

• 45:41Speaker 02

  On average, yeah.

• 45:43Patrick O'Shaughnessy?

  You don't need a big selection mechanism. You just kind of know who these people might be. Like it's a small pool and they're not applying to it. They're not going to apply.

• 45:50Speaker 02

  Yeah. And that's why like setting up, figuring out why are they available? People screw up and they think it's like, oh, it's just a role I'm going to hire for. No, it's not. It's like. It's up one level or by definition, if the person's good, it needs to be a tricky setup.

• 46:07Patrick O'Shaughnessy?

  It really is kind of a paradox that you're stuck in. You really have to want, back to Stuart's line of make it like a pro, manage it like an amateur. Like you really want, need to want to manage it like a pro.

• 46:19Speaker 02

  Yeah.

• 46:19Patrick O'Shaughnessy?

  And the Batna is iconic or Jordan Park or something like, they're not going to fuck it up. They're going to do a fine job. It's going to be beta.

• 46:27Speaker 02

  Yeah.

• 46:28Patrick O'Shaughnessy?

  And it's going to feel nice.

• 46:29Speaker 02

  Yeah.

• 46:30Patrick O'Shaughnessy?

  So be it. You have to deeply want something better than that.

• 46:34Speaker 02

  Yeah.

• 46:34Patrick O'Shaughnessy?

  To find that great CIO.

• 46:36Speaker 02

  Yeah. Your ego needs to be able to take somebody else having the successes and failures around it. I think because if not, then if you want to be pretty involved or you have identity, because I made a bunch of money and blah, blah, blah, and I want to keep making money and blah, blah, blah. And now I want you to do it for me. Anybody commercial who's sitting in the front seat now has somebody telling them how to drive in the backseat. And unless the person in the backseat is extremely skilled, it's going to screw up the incentives of the whole thing.

• 47:10Patrick O'Shaughnessy?

  There's three criteria that you've written about that like if you were hiring for a CIO for yourself or your family office or something that you've laid out that I'd love to go through each one and kind of what you mean by each. So the first one is there's got to be evidence they have good taste in people. And taste is a fun and funny word to try to define, very hard to define. What's your definition of it? Like, what do you mean by that? And why is that one of the three key criteria, you think?

• 47:37Speaker 02

  Well, so I would say it's good taste in people from the perspective of the principal.

• 47:42Patrick O'Shaughnessy?

  It's not an absolute thing.

• 47:44Speaker 02

  Yeah. It needs to overlap. Otherwise they're not going to trust the agent's judgments and vice versa.

• 47:51Patrick O'Shaughnessy?

  Practically speaking, if you're the principal. Basically saying like, tell me who you like. And then meeting all those people. And if you like all those people, like probably a good sign.

• 48:01Speaker 02

  Yeah. I mean, I guess an example, the group of people around the Collison Brothers, I feel like is very distinctive. It's kind of nerdy and also-

• 48:11Patrick O'Shaughnessy?

  Alpha nerds.

• 48:12Speaker 02

  Yes, right? It's a very specific aesthetic and Patrick's got these public policy interests and Tyler Cowen and like that whole crew. It's a very specific aesthetic and by signaling it out to the world, they attract more of it.

• 48:28Patrick O'Shaughnessy?

  Did that happen at East Rock? Was there this gravity that got created as you partnered with and backed? Was the marginal one always a little bit easier than the last one because of the gravity and the reputation that you had built?

• 48:40Speaker 02

  Yeah, and I would host these events and people would come to the event and then you'd see, oh, one guy who runs a large investment firm in San Francisco had come to one and he said, oh, he sent me a note afterwards saying, Graham, you've restored my faith in humanity, which was like such a high compliment. He's like referring to the fact it's like being at a really good wedding. You're like, oh, my God, I like all these people. Like, there's not a bad seat in the house. And I would do business with all these people. There's a level of trust or integrity or something.

• 49:08Patrick O'Shaughnessy?

  Can you talk a little bit more about those events, big and small? I've been a part of that and it has that incredible effect. If you nail it and you're not compromising in any way about like who shows up, whether it's a dinner. You used to do this amazing dinner with dads, investors who were dads to talk, kind of talk about being a dad. But like, that was the frame and it would be very different people, but they would all be so great. And then a much bigger event that's 100 people that somehow also like every conversation is like, holy shit. Like, who are these people? How did you find all these people? And then that creates like a mystique around you like, wait a minute, who are you? Like, how are you doing this? So say more about the intentionality behind those gatherings.

• 49:52Patrick O'Shaughnessy?

  Seems like that is a really important ingredient in the recipe of your career.

• 49:57Speaker 02

  Yeah, it's creating talent density and then to your point, like- Creates a gravitational force of its own and people end up doing business with each other and then it

• 50:06Patrick O'Shaughnessy?

  Sticks to you somehow.

• 50:07Speaker 02

  Sometimes, sometimes not, but what I do is just very visceral. It's like if I get stuck sitting next to this person, am I neutral psyched or bummed?

• 50:19Patrick O'Shaughnessy?

  All psyched.

• 50:21Speaker 02

  All psyched. And then the result, it just takes care of itself. I came up with this back when I first started East Rock as a way to evaluate hedge fund managers. I felt like often if we had like 30 people in a room pitching investment ideas, the room knew who the best people were. I'd go in with a thesis on this guy's the best on special situations. This is the best tech long short guy. And then some percentage of the time the room agreed with me, but then over the course of several days of talking, like different people would emerge. If you read the room correctly, the room kind of knows where the pockets of quality are most of the time.

• 51:05Patrick O'Shaughnessy?

  Can you tell the story of working with the guys who started Paradigm?

• 51:09Speaker 02

  Charlie Song, who I think I introduced you to.

• 51:12Patrick O'Shaughnessy?

  You did. You sat me next to him at an East Rock event and I remember coming up to you afterwards and saying, what the fuck? Like, how does a guy like that exist? How does everyone in the world not know this guy exists? So unbelievably talented and smart and amazing.

• 51:26Speaker 02

  He had left Microsoft and he was trying to figure out what to do next. And I remember counseling him at the time. He said he really appreciated that I wasn't trying to fit him into existing concepts, but I was just trying to figure out what was best for him. His appreciation of my doing that kind of made it object to me and I tried to do it with other people. He had been at an East Rock event, a hedge fund gathering we had and had touted Bitcoin back when it was probably six months before we ended up buying it, but we bought a small amount at $300 a coin. And then it proceeded to go up quite a bit. And so I was trying to figure out what to do with the position, whether it was real, how to think about it.

• 52:07Speaker 02

  And so I went to a crypto conference and I've noticed this thing, I don't know if AI is like this now or not, but when you have a new field, it tends to attract the people who are available to be in that new field. And that's often unemployed people or people who are so Chicago improv that they're switching what they're doing and chasing the next thing. And so it can be kind of aesthetically distracting when there's a new thing, because the people who've gotten in there first are kind of scrappy, but also fly by night in this way. And crypto was like that. And so I went to this conference and I experienced a lot of the people as not, like that line from Succession, they're not serious people.

• 52:51Speaker 02

  And then I came across this woman who was running crypto for Facebook at the time. I was in a room of like 300 people and I just followed her because I noticed that the room seemed to know that she was among the most credible in the room. And if I just sat near her, there was interesting incoming. And Matt Wong was at Sequoia at the time and he came in. And then I was like, you know what, actually I'm going to follow him. And so I became kind of his wingman. And it turned out in retrospect, he and Fred Ursim were debating whether to work together and that they had gone on this trip partly to figure that out. I ended up having a road trip. I drove the two of them to the airport and we spent a bunch of time together.

• 53:30Speaker 02

  And I was just struck by, I experienced them both as commercial actors that I would back, field agnostic. I would bet on them individually and as partners, regardless of what they were pursuing. And I ended up interviewing CFOs for them. I like to interview team members for people because I can often add value that way. And I understand how they're approaching everything and I learn a lot about it. And I happened to have just read the description of Enneagram one on the morning that I interviewed this endowment person who they were interviewing as CFO. And she and I had this amazing, deep conversation and I realized, oh my God, she's in Enneagram one.

• 54:13Speaker 02

  And I said to them, to Fred and Matt, like, I think she's an amazing hire. She's going to bring institutional credibility into the inside of the firm. The shadow side, the one catch is she's going to have this slight vibe of you're trying to get away with something. I said particularly Fred, she's going to have this vibe of like, you're kind of getting away with something. Why are you being that way? And if you take that personally, you're going to end up firing her. But if you don't, she's going to be amazing. And Matt recently sent me, I think that email recapping that she's ended up becoming their CFO. She's amazing. She totally built their firm. She's their third partner.

• 54:53Speaker 02

  And because I was there with her before, it's like she and I share this. I noticed this recently in visiting somewhere else where I'd helped recruit a lot of people. You're sharing the before and after reality with somebody and you're on the same journey in this camaraderie like way. So I've seen them go from nothing to, I think they've managed like 10 billion today. And to their credit, they've consistently invested in crypto and put real money to work at multiple bottoms because of their long-term belief in it and the quality of their decision-making. I had kind of a front row seat to that and that's been really fun.

• 55:29Patrick O'Shaughnessy?

  I realized that earlier, we talked a lot about identifying the person that is maybe entering into their positive feedback loop, compulsion platform, whatever you want to call it. What we didn't talk about, which seems really important for the prospective CIO hire, whatever, doing this job in general, is the act of, once you've identified them, structuring the relationship with them in such a way that like everyone makes money together, to use your language. What was that process consistently like? And sometimes it was seeding, sometimes it was an LP investment, sometimes it was a direct deal. Maybe bring us into the room on what those processes tended to be like and what you learned about doing that second half so well, not just finding, but then ultimately consummating.

• 56:11Speaker 02

  Well, I think it's part of the pricing, right? You think of somebody like Musk, the terms of Musk's X.ai fundraise, I presume are egregious, quote unquote, from an investor's perspective. They have no control, they have no transparency, whatever, right? So that's the market pricing, the fact that he's highly credible. Part of pricing the talent, what you're pricing is the degree of autonomy, transparency and the fees and the duration of the capital. All those things are like, okay, what feels reasonable, given where this person is in life, what their track record is, your assessment of their competence and all of that. The way I ended up doing it is if I were them, at this stage,

• 56:56Speaker 02

  with this track record, with this set of relationships, would I feel like this is a fair deal or do I feel exploited? And if I would feel exploited, I'd try to dial it back a little bit so that it doesn't feel exploitative. And sometimes I would get it wrong, of course, but I feel like that. Part of pricing.

• 57:14Patrick O'Shaughnessy?

  Pricing talent.

• 57:14Speaker 02

  Pricing talent. It's like how much money and with what constraints on the activity? Like, what are your decision rights? And how often are you going to check back in? And then I think there's a way to do it if you're the, I guess, in this sense, the principal. There's a way to do it where you're, even though you formally have these rights, you're doing it with a very light touch. You can make the experience feel like a much more open field, depending on the tone of the people who you've struck the deal with.

• 57:48Patrick O'Shaughnessy?

  The second thing on this categorical list, which I love so much, is a quiet ego. Why those two words?

• 57:54Speaker 02

  Back to that part about identity. If you're the principal, you need an agent who can make money through other people and not care, be kind of indifferent about whether it's, quote, yours or somebody else's. It's just net of fees. How much money did you make? And I feel like I observed that a lot of people who allocate money to underlying GPs, they actually would prefer to be the underlying GP from a power and identity and experience perspective. You, the principal, should just want to make money. Like, it's not all the identity claims about who did what or whatever.

• 58:37Speaker 02

  So many people actually are not good at making money through other people. They need, they can do the analysis themselves, but they actually can't. It's like the stage of a portfolio manager's development, where if they've been a stock picker and then they move to being a portfolio manager, and they need to own a stock that actually is their analyst's favorite idea, and they aren't as deep on it as the analyst. That's a really big moment of transition, and a lot of people cannot make that transition. It's the equivalent transition, I feel like, in the family office CIO, where I think the ideal is just agnosticism on enough self-awareness to know where you have comparative advantage,

• 59:20Speaker 02

  but also an ability to interview other people. And appreciate them for who they are and what they're doing without any need to make it your own somehow.

• 59:29Patrick O'Shaughnessy?

  The third of those criteria is that they be conservative by nature. That one kind of stood out to me as interesting.

• 59:35Speaker 02

  You need somebody who knows what it's like to lose money and cares in their bones about never selling puts or never doing something that could take you out of the game. Because people do weird shit and so part of the trust is a conservatism of like, yeah, I'll let some things go. You want the agent to view the money as though it's theirs and there's a price for that, which is ideally they've got enough money that they've already found a way to relate to money that way, or they're just innately conservative. That's what I was trying to capture.

• 1:00:16Patrick O'Shaughnessy?

  On the topic of investment platforms, just like hiring a CIO, you've got some of these great questions that you encourage people to ask themselves. And I'd love to go not through all of them, but just through a few of them, the ones that stood out to me. Because I think people that listen and read what we're going to produce here, some huge portion of them are in that funny category of like, working at an investment firm, wondering, like, do I have what it takes to launch my own thing? And the first question you pose, or you encourage people to pose, is whether or not they can like manage the ambiguity of this new thing. Can you explain what you mean by that ambiguity and like where you've seen that sink people? Or be a hurdle that's harder than people might perceive from the outside looking in?

• 1:00:59Speaker 02

  There's a guy who has a quote, I'm blanking on the guy's name. The job of the leader is to define reality on the way in and thank them on the way out. Which I think is so profound because it speaks to how each container is a different reality. And I've been thinking lately how You've heard of Gelman amnesia?

• 1:01:21Patrick O'Shaughnessy?

  Yeah, Gelman amnesia, yeah.

• 1:01:22Speaker 02

  Where you're reading an article, it's about a subject you know about and you're like, oh my God, the reporter doesn't know what they're talking about. And then you turn the page and then you assume the next article accurately captures reality. I've been thinking, I have that and most people have that about moving from one container to another. You're like, oh, this one is so idiosyncratic based on the source and the way the leader defined reality on the way in. Oh, I'm going to go to this next one, but that won't be the case of the next one. It'll be, quote, "normal." No, every single one is so weird and idiosyncratic. And the older you get, your ability to transition between containers gets really compromised

• 1:02:02Speaker 02

  because either you've grown up in one container or your willingness to put up with somebody else's frame of reality diminishes. And so I think the ambiguity that I was referring to when somebody's starting something new is just that act of defining the reality is a creative act. But while you're doing it, it feels super slippery and amorphous. And it's like, I don't know if I'm going to get the investors. I don't know if I'm going to get the team. You're like holding so many 33% probability things at once that it's very taxing. And if you haven't run something yourself before, you're not used

• 1:02:45Speaker 02

  to having everything be up for grabs. And I feel like the act of starting something new, you're sitting there on Monday morning, hopefully you have an office. If you don't have an office, you're sitting at a Starbucks and you're like, the sheer, the lack of strict, right? You've moved from order to chaos.

• 1:03:03Patrick O'Shaughnessy?

  Yeah.

• 1:03:03Speaker 02

  There's no order. The only order comes from you asserting reality. And if you haven't done it before, you can feel fake. It can feel disorienting. You can have vertigo. You can be like, oh my God, what did I just do? So what is it? It's getting comfortable with... That level of uncertainty. And there's also this subtle thing where I'm actually working with somebody right now who's literally doing this very masterfully. You have to pretend it's more certain than it is because your pretending makes it so. But there's something slightly intellectually dishonest about that. And it's particularly hard for hedge fund managers because many of them are kind of default skeptical.

• 1:03:45Speaker 02

  They're likely to see the downside and the risk and the calling bullshit on things. And so if you're in that mode and yet your own thing feels like bullshit to you, it's not going to work. You gotta thread the needle on it's real enough. I'm gonna find the thing that's real enough to me that I'm willing to put a stake in while at the same time having a sense of humor about it.

• 1:04:09Patrick O'Shaughnessy?

  My favorite ever line on this from someone I know was Henry Schuck from ZoomInfo. When he was doing their first, they've been fascinating M and A story to that business and how it got pieced together and he did it all. Talk about asserting reality. And on his first big acquisition that was going on, he was flying somewhere and he's like, I remember I'm sitting on this flight and having this thought like, I'm playing pretend business.

• 1:04:33Speaker 02

  That's exactly, yes.

• 1:04:34Patrick O'Shaughnessy?

  Like, what the fuck is going on? Like, this is so weird. Like, I'm gonna buy a multi hundred million dollar company? Like, what? And like, my job is to pretend like this is normal. I'm playing pretend business. I'm in my pretend suit. I thought that was so funny, but also to the wrong person, terrifying. And it relates to the second question from that list that I love, which is protecting the climate in your skull. So it seems like that is the skill that allows you to do the first one well.

• 1:05:02Speaker 02

  Yeah.

• 1:05:02Patrick O'Shaughnessy?

  How have you seen people do that really well or poorly, protecting the climate in their skull? I love that visual.

• 1:05:09Speaker 02

  It's related to the idea in the investment world, but maybe applies to founders too. Like, the main asset is your future decisions. And so when you're moving from the container you were in before and the way reality was defined into this new ambiguous setting, if in the transition, you are now sitting next to somebody, I use the example in the piece of often younger hedge fund managers will hire a more seasoned CFO, but the CFO is taking risk that almost by definition, if they're a CFO and grew up in the accounting profession, is more risk than they actually feel comfortable taking. And so they're

• 1:05:49Speaker 02

  Risk aversion and slight skepticism about you, the portfolio manager, can enter your confidence when your fund is down 10%. You're less senior and your own chip stack is smaller. And you're sitting there and the guy sitting next to you, in his body language and in his questions, is conveying anxiety and fear. Those are very contagious emotions. You want to be very pristine, particularly early on as you're holding the ambiguity and asserting, trying to assert reality about the energy of the people around you and whether they believe in you because you need some skepticism in there.

• 1:06:34Speaker 02

  Of course, you don't want to go off a cliff because you're sizing something too big and or in some other way you haven't taken input. But you're managing your own psychology. And I think one of the best ways to do that is manage the inputs. And so it could mean turning down an investor where the check size is really good, but they're actually kind of an asshole. And they're going to call you weekly. And they signed up for your liquidity terms, but they've never signed up for a fund with that liquidity term before. They actually like quarterly liquidity. And in all these ways, they're faster twitch than you are. And you sold them on your strategy. The expectations you have with your team, with your investors have to be so pristine and so well managed

• 1:07:19Speaker 02

  or you don't protect the climate in the skull.

• 1:07:22Patrick O'Shaughnessy?

  What role does a partner or partners play in this? Like picking a partner?

• 1:07:27Speaker 02

  Yeah, it plays a big role, of course. And it's back to the source point. You want them senior enough that you find them credible and they find you credible and you've had enough time together. But then depending on the construct, you hopefully want them game for at the end of the day being on your ship. And the challenge becomes if actually they wanted to do their own thing or actually they think they should be. The PM or they should be co-PM or all of those. You're capturing somebody who's extremely talented on their path. Do they believe in you? And do they agree with how you price them? You don't want somebody who they think they should have 40%. You gave them 10%.

• 1:08:11Speaker 02

  Like, it's just in the water all the time. And if they wanted 40%, actually, maybe they actually wanted 50%. And if you could hold it for a couple of years and then they go off and do their own thing, that's great, but that can screw up the energy of the system. It's also like why in those settings, if your partner has experienced failure in some form or done it themselves and knows how hard it is, is pricing it correctly. Because if they think it's easy, then they should fucking go do it. And if they think it's too hard, they're probably not going to join you. So it has to be like right in that sweet spot. And the thing is, in personality terms, depending on how you're wired, how they're

• 1:08:55Speaker 02

  wired, you need to understand how those two are going to go together, just like it would in a marriage. Because if they're truly your business partner, I think David Sedarf picked out that amazing Zell quote, a partner is somebody who shares the same level of risk that you do. I thought that was so profound. That was such a good catch up his. Like, that is a partner. You're in this new thing and if it goes down, like it has real world implications for your family, for where your kids are going to go to school, where you're going to live. And yet, I think most of the time, those systems benefit from at the end of the day, the buck stops one person and they are going to make a call and everybody needs to be okay with that.

• 1:09:38Patrick O'Shaughnessy?

  It's interesting. It's like a calibration for the would be partner on whether or not they could be resentful in the case of success. If it works, what are the odds they're going to be like, ah, you know, that was more me than I got credit for or something like that. And your interesting point is if they have tried and failed, they'll better understand how hard it is and price themselves better. So it's both, like you want self-awareness on pricing and fairness on pricing or something like that.

• 1:10:05Speaker 02

  Yeah. Yeah. And having it be dynamic over time, of course, to accommodate the shifting system. There's a quant fund I'm obsessed with, the culture. And I probably shouldn't get into the specifics of it, but they have a very dynamic comp system in a way that gives rise to the culture. And so I think there are ways to be creative about how equity changes over time, how carry changes over time, that allows for meritocracy and for change. And people tend to do the same. Self-expression, hitting the comp system, and how value will change over time, I think is a fertile area as you're setting up something new.

• 1:10:50Patrick O'Shaughnessy?

  It seems like so much of what you write about is related to periods of transition. You want to start an investment platform. You want to set up a family office. You're trying to hire someone. You seem always keyed in on phase changes. What is it about transitions that fascinates you so much?

• 1:11:10Speaker 02

  It's the what's going on here. It's what's going on here in this new setup? And can I or anybody else describe it in a way that's useful to you, truly understanding the structure of what's going on here? If you have humility about it and realize the things you can't see, then if you read the right thing or hear the right person talking at the exact right moment, there's such leverage to that moment. Waitzkin has this language of firewalking somebody else's mistakes. Can you burn in someone else's mistakes or not? And it's really hard to do because it's obviously not visceral to you the way it was to them. But are there ways to inform your own compass in this whatever period, whatever rite of passage you're going through

• 1:11:55Speaker 02

  that makes you better at it or somehow improves your ability to do it? I just think there's extra leverage around those.

• 1:12:01Patrick O'Shaughnessy?

  I'm curious what those mistakes were that you made entrepreneurially that you referred to earlier that maybe fall in this category of if someone else heard this, they might avoid doing it.

• 1:12:12Speaker 02

  Well, a huge percentage of them are source related. Like knowing when you're sourced and when you're not is such a valuable thing. So the first business I started with a professor of mine. Out of Yale, Richard Medley, he was source on that, but I was running the business. He wasn't really a business guy. He, I was a beneficiary of his poor judgment about people, which extended to me. So he let this 21 year old run this thing and this completely, I had massive imposter syndrome at the time. I had 30 people working for me. Oh, wow. I don't think I knew that. Yeah, it built a big business. So if I were replaying that, there were moments at which, in retrospect, I was frustrated with him as source.

• 1:12:56Speaker 02

  Back then, I saw it as I'm producing The Richard Medley Show. But the moments when I didn't want to produce The Richard Medley Show, I wanted to produce The Graham Show. They were frustrating and he and I had conflict in a way that was extra. Like, no, I'm not source here. This is The Richard Show. At the end of the day, everyone, including me, needs to understand that the buck stops with him and he started it. And over time, we tried to grow it off of him. But knowing source is super powerful of like, am I source? I think in some ways, at East Rock, I didn't fully own source at times, as an example. And my partner, Adam Shapiro, has become, you know, I kind of handed source off to him.

• 1:13:40Speaker 02

  And now it's very coherent, is my sense. He's a great investor and people in East Rock and the clients are living within Adam Shapiro world. I'm helping an entrepreneur right now who I think is at risk of not fully owning source. It's something that Enneagram threes and nines in particular, I think are subject to where you can be so adaptable and pragmatic that you write yourself out of the narrative. Because it's like, at the end of the day, I'll take care of my own needs. I'm going to take care of everybody else's needs and I'll do anything to make this thing work. And so there's a very fine line of being flexible and adaptable, but allowing your own creative voice.

• 1:14:23Speaker 02

  What's coming through you, the reason you started the thing in the first place. And it's why, I mean, so many things do not work. At the end of the day, you need to be comfortable with the power dynamic of who is sourced. One tiny crimp in that hose and all sorts of weird shit happens. And if it's clean, if everybody in a system says, yeah, this guy's source and I want to live in this reality, it has such a healthy vibe to it.

• 1:14:52Patrick O'Shaughnessy?

  I'd love to understand your view on physical spaces. The East Rock office has this, someone texted me recently that it was like the best office that he had ever been in, in New York. And your attention to physical spaces is very notable. It's like one of the most reliable things about you, that like wherever I show up, it's going to have a specific feel to it. What's behind all of that? What is it about physical spaces that obviously intrigues you?

• 1:15:19Speaker 02

  It affects my mood when I'm in the space, obviously light and ceilings and all of that art, all of that kind of stuff. But one of the things about the East Rock office that I was focused on is I wanted a lot of extra space. I feel like one thing that people with capital should do more is provide physical space for up and comers. It's such an easy arb. And Richard Rainwater did that. I think Barry Sternlicht camped maybe in Dan Stern a reservoir space as he was starting Starwood. There's holding a physical space and covering the overhead of that. That's what a certain set of people are lacking. You want to pay their overhead so that and collect them. And ideally, they find things to do together

• 1:16:04Speaker 02

  and you find things to do with them. So we have a cafe at East Rock with a great chef for some of the same reasons you do it here. Like it creates more of a restaurant or not quite a club, but a just a vibe of-

• 1:16:18Patrick O'Shaughnessy?

  So welcoming.

• 1:16:18Speaker 02

  Yeah.

• 1:16:19Patrick O'Shaughnessy?

  Food is so welcoming.

• 1:16:20Speaker 02

  Yeah.

• 1:16:20Patrick O'Shaughnessy?

  Good food.

• 1:16:21Speaker 02

  Yeah.

• 1:16:21Patrick O'Shaughnessy?

  And community table.

• 1:16:22Speaker 02

  Yeah. Yeah, exactly.

• 1:16:24Patrick O'Shaughnessy?

  When you're making a major decision, let's say leaving East Rock, what process do you put yourself through as you analyze your own transitions? What do you do? What do you think about, maybe framed differently, like, why did you leave East Rock?

• 1:16:37Speaker 02

  In January of 2020, I had moved to Santa Barbara right before COVID. And I realized that there was enough of a difference in management style between partner Adam and myself, that it was incoherent to have me trying to- Input my claim to source from the West Coast. He's an amazing investor. He has such a different style than me. When we were in the same office, it worked. When I was on the West Coast, the people who worked for us were getting confused. This is no longer coherent. So I decided, you know what? At the highest level, what I'm really good at is finding somebody who's better than I am at doing a thing.

• 1:17:21Speaker 02

  And I realized Adam's better at running East Rock than I am. Like, I'm not that great a manager of people. I love coaching people. I love having a sense of abundance. I love setting people free. Not that good a manager of people. Like, if anything, not being that good a manager of people is, in part, why I have to be so good at hiring, because I don't have the attention span or the desire to stay in their business if they're not doing the thing they should do. And so I decided, you know what? I found somebody who's better than I am at running East Rock, and he should take it and make it his own and turn it into the next era. And I always thought that there's this concept of third culture kid, which I learned about

• 1:18:04Speaker 02

  from an Israeli friend of mine who grew up in Puerto Rico. And his Indian girlfriend said, "You're a third culture kid," which is such a great mix. I guess the concept is it's when you grow up in a place that's not your family's home culture. A lot of military brats are like this, and a lot of immigrants are like this, where you never quite feel like somewhere is home. And I had grown up, my parents were hippies, started a nonprofit in Kentucky, and I grew up in Kentucky, and I was homeschooled, and we were so different from everybody else. It was like I was growing up in a foreign country. And in retrospect, it felt incoherent to me. I had no alternative basis, other than the fact that we seemed very different. I moved to New Hampshire when I was 14, and that immediately felt much more coherent.

• 1:18:48Speaker 02

  My dad had grown up in Boston. My mom was, grew up in Santa Barbara and on the West Coast. And when we moved in January 2020 to Santa Barbara,

• 1:19:00Speaker 02

  It has felt like home in a way that I thought I was a third culture kid. One of the things about third culture kids is they know where it ever feels like home. They always feel like an outsider. They always feel like they're visitors. And so one way I made a decision was this feels like home. I don't want to leave. And whatever I do next, I want to use this as the base and travel from here. And so that is ultimately how I made the decision. And it feels like it's worn well. I miss the team. I miss the clients. I miss being in New York and the glow of it. But then I almost feel slightly smug saying this out loud. But on a hundred point scale, my life satisfaction is like a 98 or 99.

• 1:19:42Speaker 02

  I'm saying this in that spirit of like recognizing how fragile it is, how quickly it could change.

• 1:19:48Patrick O'Shaughnessy?

  So you're living on the West Coast now. I want to capture a sort of vignette of you with an idea of something you want to create. And the process by which you then go about creating this. You do more upfront work than anyone else. And you're willing to just put a tremendous amount that would frankly exhaust and extinguish most other people into getting the original setup right. And for some reason, the restaurant wanted, it's so simple and tangible. I also love restaurants. Maybe you could just tell that whole story like from start to finish. What did you identify? What did you want to do? What have you done so far?

• 1:20:27Speaker 02

  I had heard Danny Meyer say on maybe a podcast with Tim that there are some spaces, restaurant spaces, potential restaurant spaces, that if you gave them to him for free, he wouldn't start a restaurant there. That totally clicked because I'd been keeping an eye out kind of opportunistically in Santa Barbara and specifically in Montecito for a restaurant spot. And it constantly felt like I was forcing it. And so a spot came up that has such good Feng Shui. It's like your car kind of wants to go there. It's the center of this particular part of town.

• 1:21:07Speaker 02

  And I instantly knew, oh, if that were available, I would be drawn to go there myself all the time. Of course, I knew nothing about restaurants, but I figured it was a casting exercise, just like most other things. So I was like, okay, so I need to find. A chef, and the other thought I had was that the percentage mind share that Chez Panis has in Berkeley, like if I lived in Berkeley, being able to walk to Chez Panis and having that one woman in a house totally disproportionately impacts that whole place's sense of itself. Like, there's such leverage to a really good culinary and, more than culinary,

• 1:21:49Speaker 02

  just neighborhood experience. I aspired to bring that in some way to Santa Barbara and Montecito. And this restaurant spot came up. It ended up taking about a year to get the lease. It ended up being a sublease, but a long one. And then I started trying to figure out what distinguished different chefs. And I interviewed a ton of chefs. And the reality is that for a chef to get leverage, they need to open multiple locations and then most often not be in the original location. And so I had several potential licensing deals with very fancy chefs, because everybody seemed to agree, once I had this lease, that this was an amazing lease. But I realized that there's something about when you're in a restaurant and the chef is there versus-

• 1:22:34Patrick O'Shaughnessy?

  Jean Georges number 10.

• 1:22:36Speaker 02

  Yeah, yeah. That it just feels different, and it doesn't feel like a neighborhood place. And I wanted this to feel like a neighborhood place. I kept looking for either someone younger, this was going to be their first breakout restaurant, or someone for whom it made sense that they would actually be in the restaurant. And I interviewed a ton of chefs. And one of the co-founders of BlackRock, Keith Anderson, owns a restaurant called Community Table in Litchfield County. And I was speaking to him about it. I was speaking to him on a reference on a chef that had worked at Community Table back when he started it. And that chef, Joel Vealhand, ultimately we hired. And I'm super excited. He's moving to Santa Barbara in July, and then we're going to open this restaurant. But there's a dynamic between-

• 1:23:20Speaker 02

  The general manager and the chef that is very delicate because one runs the front of the house and one runs the back of the house. And one theme that people who've owned restaurants have is chefs are artists. They're only going to last three to five years. So you actually want the stability of the general manager and having it be an experience first and the food second. And I wrestled for a while with that trade off and openly decided I didn't want that trade off. And I was going to try to, we'll see whether it works. So you say, try to have it both ways. But this particular chef, I had interviewed him early in the process and he was so, Joel was so knowledgeable and wise about the business without being cynical.

• 1:24:02Speaker 02

  It was like this knife edge of, I interviewed so many chefs who were burned out, this particularly, probably a post COVID experience. They had gotten slightly cynical and victimized feeling about the profession and how restaurants fared during COVID. And Joel didn't have that. And then I was looking, so he's an Enneagram six, which my wife is and is the loyal skeptic or the, if you were to have a headline, it would be, winter is coming. So there was like, there was this underlying fear to it. But there's an excellence, the fear like coexists with this excellence and judgment.

• 1:24:43Speaker 02

  And then our general manager, I'd known for a while. She grew up in the business. Her parents ran a restaurant in Santa Barbara. Her name is Jane and she's an Enneagram eight. And I have a working theory that eights and sixes do really well together. The eights provide stability, the sixes are loyal, but also skeptical in a great way and alive in their decision making. So I ended up thinking, like I introduced the two of them. Sometime Joel did not want to be the general manager. He knew in his old restaurant, at one point he'd had to act as general manager and he hated it. It's a little bit like if you've had a failure, it's actually better sometimes

• 1:25:28Speaker 02

  because somebody prices themselves correctly. He prices the value of the general manager, in my view, correctly. Oh, interesting. And so And therefore values it. And values it. And I feel like there's a good chance it'll be a very long term thing for that reason. And so I guess the other element

• 1:25:48Speaker 02

  In Santa Barbara is the housing is so expensive. And so a couple of years ago, when I started this project, I knew that the toughest thing, if I was going to recruit somebody from outside of Santa Barbara, was going to be the housing. And the biggest carrot I could provide somebody would be a great housing setup. And I also wanted the feel of the restaurant to be of somebody of that neighborhood, not somebody who's commuting an hour in, but to serve somebody else, but somebody who's grounded in that community. So I had bought what at the time was the cheapest house in Montecito and redid it. It's right near a great public school and it's a three minute walk to the restaurant. And so I was able to get him. The reason I'm so lucky here and the reason I know why it's a good setup for him, he's going to live in this house, his kid's going to go to the school, he's going to walk to the restaurant.

• 1:26:32Speaker 02

  And so all those elements came together. And then the final one was, I was kind of debating whether to have a ton of investors in it and pass the hat to the community, or just kind of keep it simple and either just fund it myself. And I ended up finding a friend who's a partner at Sequoia, Brian Schreier, who he and his wife have a real interest in hospitality and have done other projects kind of like this. And they met Joel, met Jane, were extremely excited about it.

• 1:27:02Patrick O'Shaughnessy?

  It seems to me like this is just something you do all the time. I like the idea of a casting exercise. I don't think I've ever heard you use that specific terminology for it, but you are kind of a casting director in so many ways. That is kind of one angle to understand you, like the world's best casting director or something. Another great example of this is Sown, where Sown predated you. How many years have you run it now?

• 1:27:27Speaker 02

  Six.

• 1:27:28Patrick O'Shaughnessy?

  Okay. So what was it like to take over something that had its own shtick and gestalt? Which is literally just a casting exercise. Certainly suits you. And just same questions with the restaurant. Talk me through something that you didn't start in this case, but have sort of made more into your own and what you get out of it and what the process is like behind the scenes.

• 1:27:53Speaker 02

  You're right. It is that it's a casting exercise. It's so compact. This year, we had thirty two speakers. So it was thirty two choices that I did together with Paulino Lopez and a number of other friends on the host committee. And then one of the East Rock team, Brian Waterhouse, did Next Wave, which is how I started with Sone ten years ago. I see it as, is the person a credible threat at saying something interesting? If I saw them on the agenda and I already knew who they were-ish, is that when I'm gonna go take a call or not? And I try to have none of those breaks if I can. And then, a little bit like what

• 1:28:35Speaker 02

  we were talking about on the retreats, if I were sitting next to them, would I feel engaged? And in terms of making it my own, Doug Hirsch, who started it, who is Source, his big insight was to make it all actionable investment ideas and to hold the line on not having panels. I feel like that's one of the things that distinguishes it. But I, at various points, wanted to bring in people like Patrick Carlson or other tech people where there wasn't really an actionable idea, but I just give myself a small budget of those on a given conference. And then this year, my friend Boykin Curry came up with the idea of this lightning round where we did a series of five-minute talks that

• 1:29:17Speaker 02

  I thought really complemented the longer format quite well. And I think we'll double down on that next year.

• 1:29:23Patrick O'Shaughnessy?

  It seems like an interesting annual exercise in figuring out, like, who has it? Who is the main characters of the moment? Which is a fascinating exercise, like a fascinating check-in. And it makes me wonder about your thoughts on who somehow finds a way to maintain that over a long period of time. Like, Tepper's someone you've written about, who is very quiet, you know, doesn't show up in the press very often. But my sense is like, he's been it, or has had it, for just an insane long period. And I don't know how many I could rattle off like that. It's quite rare, when there's a handful. Any observations on that

• 1:30:03Patrick O'Shaughnessy?

  about the people that somehow you could say have it every year, year in, year out, over time?

• 1:30:10Speaker 02

  Yeah, well, macro, of course, may, because Druckenmiller also comes to mind, and Soros, in his day, had a long duration. Like, there's something about macro where you're opportunistic enough to shift to the style of what's making money in that period. So you could do long, short, you can do distressed, but you don't, you're not a hammer looking for a nail. So I feel like that provides some duration. And then, I do think, in general, that the financial markets, if you've made a lot of money, and you're starting to get, your ego and identity is starting to solidify, and you're not, the markets are such a good feedback mechanism to make you constantly learn.

• 1:30:52Speaker 02

  And so, if you're going to choose one profession to grow old in, to maintain intellectual and cognitive flexibility and responsiveness, rather than hardening, I feel like financial markets are pretty good, because you'll just lose all your money if you get too ideological or start drinking your own Kool-Aid. And so I feel like Tepper and Druckenmiller are both good examples of, they're forced to constantly engage with new ideas, young people, and move with that chapter in the markets. And so, there's something in that.

• 1:31:29Patrick O'Shaughnessy?

  The category of investor, I won't name them, but everyone can imagine them, who nailed doing one thing really well. They rode one specific wave, they invested in one specific kind of business model or something like that. None of that stuff lasts forever. And so, maybe macro is like a unique, ultra-flexible, and maybe Buffett's like the ultimate expression of this, shed his skin however many times to adapt to a new style. But maybe love of the game and a broad purview are like the two ingredients.

• 1:32:00Speaker 02

  Yeah, love of the game, humility, and bordering on paranoia that you're missing the thing that's now happening, so that you maintain extreme high-open-mindedness. Like, I feel like, there's a form where, when Sown works, you've got all these listing posts of people who are on the edge of a thing. I have thought this year, Eric Steinberger, Daniel Gross's interview of Eric Steinberger was super interesting, because Eric Is neck deep in the AI world. And from my perception, maybe the blue chip end of the pool. And how he makes sense of reality is so different than mine. Daniel was trying to act as a translational layer between.

• 1:32:38Patrick O'Shaughnessy?

  He even said that as he was doing it, like, let me translate for.

• 1:32:41Speaker 02

  Yeah, he was doing such a good job of it. And it was still hard. But the fact that in that world, there's this idea of I want to be in the room when AGI happens. And there are like, I don't know, five to 10 places that are in the hunt for that. And they're paranoid they'll be in the wrong room is such an interesting perspective. Maybe that's not the right frame, but the fact that that's a dominant frame totally strikes me.

• 1:33:08Patrick O'Shaughnessy?

  I'm curious, as I think about that hierarchy of yours. So I think it's apprentice, expert, professional, master, steward. What is the difference between professional and master? What happens in that gap? How many masters are there?

• 1:33:25Speaker 02

  Maybe there are 10 to 20, 10 to 30. I assume there are a bunch who are just managing their own money. And I know a number of those. I bet I'm missing a couple. What's the distinction? The distinction is a shift to thinking of it as becoming source, maybe of your own style of investing is how I think about it and not those portfolio managers who have had influences before them that leave their mark, but coming into their own and not playing the game the way other people have played it, but like truly playing it in their idiosyncratic way. Trying to think of an example beyond Tepper.

• 1:34:08Speaker 02

  Tepper is such a good one because it's in the public domain and I don't actually know him, so I'm not violating any confidentiality. I do think there's a consistency to what I think of as that master level where their identity is up one at the level of I'm a moneymaker, not I'm not a portfolio manager that invests in this sector. I think that shift is one elemental piece.

• 1:34:32Patrick O'Shaughnessy?

  How many stewards are there, do you think, at any given time?

• 1:34:37Speaker 02

  Yeah, also a handful. I think of John Arnold as working on the machinery, you know, the platform of the country in public policy right now in a way that's consistent with that. It's not financial markets per se, but he seems like he's heavily engaged. I felt like Bill Gates, controversy aside, I don't know if you think of him as an investor in that distinction between founder investor, but at the beginning of COVID, I felt like he was acting that way, like he was caring genuinely for the system more than his own interests. I feel like Mitt Romney is in that category right now as a former investor whose politics aside is like, seems to, from my perspective from afar, to be it's care of the system itself. You know, when Druckenmiller is concerned about

• 1:35:22Speaker 02

  the debt and playing the role of a modern bond vigilante, that's him saying like, guys, I see this. We've got to be careful here.

• 1:35:32Patrick O'Shaughnessy?

  I'm curious whether there's more or less capacity for like investing masters today than there used to be. And I guess it's kind of a question on like market efficiency and what you think about markets and whether or not it's going to attract great talent in the way it has in the past. As a profession, do you feel like it's as potentially rewarding and exciting for a 22 year old as it was 30 years ago?

• 1:35:56Speaker 02

  I think if you define it at the right level, it is, which is back to the point that maybe founders versus or startup founders versus hedge fund managers and private equity managers is a tricky distinction that the game, think of AI coming onto the scene and how much disruption that'll cause in investing, but how many new opportunities? And maybe it'll be a startup founder who's organized as a company that ends up making the most money. I was talking with a, somebody who's deep in the AI world recently and they're paranoid that there may already be AI at scale in markets. And I thought it was such

• 1:36:37Speaker 02

  an interesting idea, even if they're wrong, like, oh, it's the kind of thing that's going to happen sooner than you think. And then weird stuff's going to happen. I think existential questions about AI and how it'll reshape the world aside, I think it'll morph and commercial, pragmatic, aggressive, humble people will continue to thrive in the system, but it may take lots of different forms.

• 1:37:03Patrick O'Shaughnessy?

  Are there traits in investors that you think matter more in 2024 than they did in 2004?

• 1:37:11Speaker 02

  It would basically be the same. Decisiveness, the open minded with a point of view, like at a high level, that's the same. There are moments where in 2008, 2009 were like this, where you're on the field and the game itself changes in these structural ways. And people that can handle being comfortable with that level of change of, no, you thought you had cash at a bank, actually you don't. Oh, yes, you do. No, you don't. Those sort of movements of the game. Like I remember at the time, there were several managers who I would not have guessed felt wronged by, they were short. And when the SEC banned short selling, there was one guy in particular who just felt like that wasn't fair.

• 1:37:55Speaker 02

  It felt like the sentence underlying everything he said was, that's not fair. And that's a version of, I feel like, trying to be right rather than making money. Like, what? Nothing's fair. It's not fair that you have a gazillion dollars and you're managing a hedge fund. Like, what? So I feel like if you told me there was some shift in, I don't know what it would be, but just in the game itself over the next five to 10 years, that it's useful to be so opportunistic and so flexible that you're fine with that and you flow with it rather than getting stuck. And it matters more during periods of punctuated equilibrium.

• 1:38:32Patrick O'Shaughnessy?

  Does AI scare you? Like, what do you think about? It's freaking me out lately, to be honest.

• 1:38:37Speaker 02

  Scared and excited at the same time. Munger spoke at Sohn Australia a year before he died and he had this amazingly poignant thing where he said, I was talking with Warren this morning and we were both saying like, if we could just watch what happens the next 30 years. And then he said, not even participate, just watch. Think how like.

• 1:39:00Patrick O'Shaughnessy?

  Beautiful.

• 1:39:01Speaker 02

  Oh, yeah, I oscillate back and forth between fear around how my kids will navigate that reality.

• 1:39:10Speaker 02

  And we as a society, and then Tyler Cowen's frame of like, number one, it's happening no matter what.

• 1:39:17Patrick O'Shaughnessy?

  Yeah.

• 1:39:18Speaker 02

  So get over it. Number two, it's the return of history. Like, there have been other eras that felt like this. And so that's how I try to rationalize it.

• 1:39:26Patrick O'Shaughnessy?

  What would surprise people the most that aren't in the world of what I'll call like the very high end of the investment game? Where you have very talented, very smart, very aggressive, often investors vying for edge, vying for talent, vying for whatever funds from LPs. What would surprise people about the way that world works that you've seen having probably interacted with it as much or more than anyone?

• 1:39:56Speaker 02

  One thing is just the path dependence of it. You happen to have launched in a period where your first year, you made either good returns or bad returns. And then we tell all these stories after the fact. But I remember there was a, it's Cliff Aznes, AQR. There was another manager who launched at the exact same time, very similar pedigree.

• 1:40:20Patrick O'Shaughnessy?

  Yeah, yeah, I know who you're talking about. Yep.

• 1:40:22Speaker 02

  And it didn't work. And I remember one story on that is maybe they launched two months apart or something, or there's some.

• 1:40:30Patrick O'Shaughnessy?

  There was a difference in their initial returns. Yeah.

• 1:40:32Speaker 02

  Yeah. And then that led to just these, just crazy different, that we have all these stories about after the fact. I think there's a path dependence and an arbitrariness and luck component that we, in retrospect, tell stories about skill and other things. Of course, real life is it's both and it's messy. But so that's one.

• 1:40:52Patrick O'Shaughnessy?

  There's a lesson there to work really hard to start hot.

• 1:40:58Patrick O'Shaughnessy?

  Higher bar for that first deal.

• 1:41:00Speaker 02

  Yeah, yeah. And have a feel for.

• 1:41:04Speaker 02

  Where you are in the cycle, obviously, that requires a macro judgment that most people wouldn't have or that may not be available in any given period.

• 1:41:13Patrick O'Shaughnessy?

  Can we talk about referencing a little bit?

• 1:41:14Speaker 02

  Yeah.

• 1:41:15Patrick O'Shaughnessy?

  I don't think I knew that you were willing to troll LinkedIn as much as you were. You're certainly willing to do more referencing in pursuit of finding the perfect person to lead the thing. What have you learned about this art? And I would call it an art. It feels like it's a common thing to say now, I'd rather reference than interview, or it's become a popular idea to do referencing. But 99 times out of 100, when I see people reference, they do three references, three customer calls, three for our bosses or something. And I think that is very different from the way that you've done it. So how have you done it? I would actually love to hear the story of how you came to this. What was the origin story of you doing referencing? I don't think I've ever asked you that. And why do you find it so valuable?

• 1:42:00Speaker 02

  Well, the origin story is I worked for Ted Seides, who had learned it from the Yale Investment Office. Their emphasis on it and their professionalism around it was kind of my window into it. It was like, oh, it's not quite true. When I met Ted, I had started a reference oriented business and was pitching him as a client, and then I ended up joining him. So I was kind of already on to it, but he was so good at it, I felt like I learned a lot from, in effect, the Yale Endowment lineage of references. And they were maniacal about it, like they tracked down college roommates and that sort of thing. And then I wrote that piece, What's Going On Here With This Human, partly to put myself,

• 1:42:41Speaker 02

  like I reread it before I do references, because it captures a mood. And I'm trying to get myself back into the mood when I'm in the zone of holding somebody at the humility about how much you can see, how much you know at that moment, and then kind of enjoying the process of figuring them out together with other people. There's also just at this point. The felt experience of finding it so accurate, I can often find in the reference something that is highly relevant to what ends up happening later and how I end up experiencing that person. I've just seen the power of it. I do believe that there's signal in there. It's not 100%, but it's like 75%.

• 1:43:26Patrick O'Shaughnessy?

  Just to make sure I understand that point, which I hadn't thought of before. It's not just about making a decision to hire them or whatever. It's actually improving the chances of working well with them.

• 1:43:35Speaker 02

  Yes, exactly.

• 1:43:36Patrick O'Shaughnessy?

  After the decision. And so the component, I've seen you write about a couple of like goals that you have in a reference process. I think one of them is understanding the elephants in the room. Explain that process and a couple of other things I'll ask about too.

• 1:43:49Speaker 02

  I like Jonathan Haidt's metaphor of the elephant and the rider, which he says he came to in a psychedelic trip. And it resonates because both on references and when you're interviewing a candidate, there's some percentage of the time where you're interviewing the rider. And his idea is that they're too separate. I guess it could be just the ego and the unconscious, but it feels like it's more than that. You have to distinguish between what somebody's saying, how self-aware are they? And are they speaking for just the writer or for the writer and the elephant? And an example would be like, everybody knows that you need, quote, should be high conscientious

• 1:44:32Speaker 02

  and detail oriented in most professions on most things. But the reality is some people aren't. And understanding in a reference process, like the implications, where are they on that and the implications for that given role ends up being super important.

• 1:44:48Patrick O'Shaughnessy?

  How do you get at the elephant?

• 1:44:50Speaker 02

  You get at the elephant because it's the pattern of behavior over time that you're hearing from multiple people in different contexts.

• 1:44:58Patrick O'Shaughnessy?

  Past performance is indicative of future results.

• 1:45:01Speaker 02

  Well, it's like past.

• 1:45:02Patrick O'Shaughnessy?

  Past behavior is future indicative of future behavior.

• 1:45:06Speaker 02

  Past behavior as experienced by multiple agents.

• 1:45:10Speaker 02

  On the field over time about this, yeah, in similar contexts.

• 1:45:16Patrick O'Shaughnessy?

  How would you describe your own personal elephant?

• 1:45:19Speaker 02

  My wife knows my elephant well. People I've worked with, White Skin knows my elephant well. It's like, so to come out in adjectives from them, I'm extremely comfortable with ambiguity. And so I like to hold, I think one of the characters in Shogun apparently does this. I haven't just started watching it, but

• 1:45:39Patrick O'Shaughnessy?

  It's really good.

• 1:45:40Speaker 02

  Torunaga, just hold, hold.

• 1:45:43Patrick O'Shaughnessy?

  Totally.

• 1:45:44Speaker 02

  To the point where everybody else is losing their minds. I'll notice it when I'm working with somebody else on a reference process or on a given human decision. And I'm like, I feel no need to make up my mind. There's all this evidence on both sides on X. It would be useful to make up my mind. It's like, I'll just keep eating the grass over here and then I'll go over here. It can be maddening for people who are working with me.

• 1:46:08Patrick O'Shaughnessy?

  It's like you're the ultimate open loop person.

• 1:46:10Speaker 02

  Yeah.

• 1:46:11Patrick O'Shaughnessy?

  Closed loop being like, what's the thing that he's doing? Get it done as fast as possible versus like delay.

• 1:46:16Speaker 02

  Yes.

• 1:46:17Patrick O'Shaughnessy?

  The need to make a decision, like keep options open as long as possible.

• 1:46:20Speaker 02

  It probably makes me frustrating to work with at times, but then I think friends would say like, then I can act very decisively much faster than they would think when it lines up.

• 1:46:32Patrick O'Shaughnessy?

  In addition to the elephant concept, you talk about this in this whole like category of seeing reality clearly through understanding, through references, trying to understand a person and a situation. You talk about seeing your own reflection in the window. What does that mean?

• 1:46:46Speaker 02

  A metaphor that Sam Harris uses when you're trying to get someone to understand the non-dual perspective. And his point is just that if you and I were looking out this window and there was a very strong reflection, but you were focused on the building outside, that using language to get you to see the reflection is very hard. And I like it in the hiring context because

• 1:47:15Speaker 02

  I think many people are blind to the way that they're creating the interaction themselves with the other person. And so if you're interviewing somebody, the example I use in my essay is like, if you're interviewing somebody and you're nervous and holding your breath yourself, often they will start to do that and then you experience them as nervous, but actually you are the prime mover on that. That's why references, using the interview as just one piece. And then what's so hard is the interview is so vivid in your mind, you're inclined to really weight it. But the reality is if you can do really good references, then you can control for the fact that you've created the other person.

• 1:47:57Patrick O'Shaughnessy?

  The last of these goals, if you will, from this great amazing piece is seeing the water, which I think is a David Foster Wallace reference, if I'm guessing. Describe that last goal in the process of trying to understand what's going on with the person.

• 1:48:11Speaker 02

  We've talked earlier about containers and how different the reality is in each container. And I think of the water as they're making sense of reality based on their lived experience within a given field and within a given company. And you don't want to take somebody out of water that's working really well and just assume it applies somewhere else. And trying to think of an example. If you were working at Goldman Sachs in the 90s, there was a certain way of doing business that if you took that person out, somebody who was extremely commercial and extremely successful, and you put them in a different firm with a different style of doing business,

• 1:48:54Speaker 02

  they could be seen as super sharp elbowed or super something. And just being conscious of how different it is moving from container to container. And they aren't necessarily aware.

• 1:49:07Speaker 02

  They will not control for that themselves, so you have to control for it.

• 1:49:11Patrick O'Shaughnessy?

  When we talked when we were sitting by the beach, last time I was at Montecito with Boyd and a few others, you were telling us some of these amazing early formative experience stories. We talked about one, which was this moment of ignition, seeing the senior rowers and thinking, oh, you know, if I work hard, I could be that. I'd love to hear a few more of what you could think of as like the formative experiences of your life at any stage. Can be investing, can be rowing, can be anything that you feel like were pivotal moments of growth for you, or just formative in the way that you think about the world or have experienced the world. The rowing one's a great one because I can't remember how many championships you won, like a lot.

• 1:49:49Speaker 02

  Yeah, nine. Yeah.

• 1:49:50Patrick O'Shaughnessy?

  Yeah. So like an unbelievable amount of success tasted early, which is like an interesting thing. People taste excellence in their own.

• 1:49:59Speaker 02

  Yeah, touch it. Yeah.

• 1:50:00Patrick O'Shaughnessy?

  At different times.

• 1:50:01Speaker 02

  I feel like that's something I aspire to for my kids is because I feel like that experience for me, it locked in this sense of my identity being I can outwork other people if I just try hard enough. So when I subsequently hit challenges like having launched East Rock a year before the great financial crisis, I had this underlying confidence that it could only get so bad somehow. Cause I can always fall back on working hard. I've seen it before, so it's tangible in this way. Like I believe it in my bones. And that underlying confidence that I'll figure it out, I feel like when a kid has that or a grown up has that, it allows you to operate from integrity in periods where it's stressful.

• 1:50:45Patrick O'Shaughnessy?

  I would love to hear more about the rowing because I obviously it was formative, but also just like such an interesting contrast of, I think a little bit of identification for you as being somewhat lazy, but so much evidence to the contrary. And some of your formative experiences, willingness to work extremely hard. What was it about rowing? The physicality of it? Was it the pain? I've never rowed in my life. What did you learn there in that space that you worked your way into?

• 1:51:09Speaker 02

  There's a lot of pain tolerance. So the races, depending on how fast you row, it's 2000 meters. And in a single, you'll do it between like seven and eight minutes. And so that's a length where it's not a sprint and it's not a marathon. You're producing an incredible amount of lactic acid.

• 1:51:26Patrick O'Shaughnessy?

  It's like running the mile.

• 1:51:27Speaker 02

  Yeah. There's a threshold of, okay, I could get used to the pain and be okay with that. There was also a big difference between, I at first won a couple of national championships in the double, and it was striking how different it is to be out in the water with just one other person compared to being just yourself out there and how there's nowhere to hide. And so I feel like I learned partly just a training mindset. I was fortunate in that the club I worked at was mainly training national team members, like adult national team members. So we had fancy boats and we were videoed in every practice. So you'd go home and watch video and constantly work on your technique.

• 1:52:07Speaker 02

  And so that training mentality that my friend Josh Waitzkin is very focused on applying to any profession today is that confidence that the investment in the training pays off was one thing I learned and that you could always, this optimism, you can always tweak it a little bit and make it slightly better. My dad always said I was very coachable, which I think is true. So I was able to evolve my technique, I think, pretty effectively and pretty quickly because I just wanted to win. I didn't experience much friction. Did anything formative happen to you at Yale? Well, it was just the experience of being with so many ambitious, smart people kind of blew my mind.

• 1:52:50Speaker 02

  My freshman year, I was in a program called Directed Studies. You had to apply to get into and it was 60 kids and you had full professors teaching you classics. And I was in this philosophy class. Over the 60 kids, seven of them are from St. Anne's, the school in Brooklyn. And I'd gone to public school in New Hampshire and two of the St. Anne's kids were reading Plato in the Greek. At first, I mistook one of them as the TA. And when I remember calling my parents saying, I don't think I'm going to make it. Definitely in Directed Studies and maybe at Yale if this is what the standard is. The other thing was you were writing a paper a week. God. It was intense.

• 1:53:34Speaker 02

  And they called it directed suicide at the time. I'm sure that's no longer allowed as a term, but. I was at that guy's wedding, George's wedding, 15 years later. And I'm sitting at a round table where it was all directed studies alums. And somebody else told that exact story. It turned out, half the table had called their parents because George was

• 1:53:54Patrick O'Shaughnessy?

  Because of George.

• 1:53:55Speaker 02

  reading Plato and the Greek. So making it through that, over the course of the year, I got better at writing because of the paper week. And I got my footing and decided I could make it. The confidence that that felt formative. And then sophomore year, I read a paper by a professor, which implied that he was going to roll out this application of his political philosophy to a bunch of different domains. And I remember sitting there thinking, oh, that's going to require a lot of work. I wonder if he needs help and if that's an opportunity to apprentice under him. His name was Ian Shapiro. And I emailed him at 11:00 PM at night.

• 1:54:35Speaker 02

  And he emailed right back and said, yeah, actually, I do need people for exactly that project. And he and I grew very close over the subsequent two or three years. And I did a ton of research and kind of learned a standard of research from him. But I think that sense of taking initiative and of being like, I wonder if you're just reading things that are in the public domain. Can you intuit what the next thing is from that?

• 1:55:04Patrick O'Shaughnessy?

  Talk about the partnership that budded and what you did with him.

• 1:55:09Speaker 02

  He ended up writing a book. And I built, with my dad's help at the time, I built out a huge Lotus Notes database of all the literature around workplace democracy. And he ended up using a bunch of the things I had found and credited me in his book. And he became a real mentor. He's South African. You and I are still in touch. And it was kind of an intellectual touchstone of quality that I could measure somehow.

• 1:55:40Patrick O'Shaughnessy?

  Did it have a similar vibe of touching excellence that the rowing did?

• 1:55:45Speaker 02

  Mm hmm.

• 1:55:45Patrick O'Shaughnessy?

  Like the intellectual version?

• 1:55:46Speaker 02

  Yeah, exactly. Like, oh, people are doing a thing at a standard I was not aware was a thing.

• 1:55:53Patrick O'Shaughnessy?

  Huh. Makes me think a teller's thing about the competitive advantage of having seen true excellence. How excellent an example someone has seen is a really important factor about somebody. Cause it's the standard gets set. And of course he saw for Elon that is right hip for six years. So he may be arguably the best at this.

• 1:56:11Speaker 02

  Yeah, it's that belief in what's possible, right? Sometimes I would interview analysts who I realized were not calibrated on what excellence was. They had been at mediocre banks and mediocre hedge funds and they thought they knew the territory. But I was experiencing them as not. So yeah, I think it's super profound.

• 1:56:29Patrick O'Shaughnessy?

  Seek excellence early.

• 1:56:32Speaker 02

  Yeah, yeah.

• 1:56:33Patrick O'Shaughnessy?

  Not just watching, but helping or doing touching.

• 1:56:37Speaker 02

  There's a great moment in an interview with what Serena Williams' husband.

• 1:56:42Patrick O'Shaughnessy?

  The Reddit guy.

• 1:56:43Speaker 02

  Yeah. He talks about dating her and thinking he was kind of a tech guy in sort of scope. And he thought he knew what hard work was and he thought he knew what training hard was. And so he was kind of macho about it. And then as he started to date her, he was like, oh my God. The number of hours a day, the sheer intensity is at just a whole other level of what Serena does than what I thought was possible. And I remember thinking, oh, he's capturing exactly that moment when you see a person do a thing. They're bringing something to it.

• 1:57:15Patrick O'Shaughnessy?

  What happened after Yale?

• 1:57:17Speaker 02

  So Ian Shapiro, this professor had done his PhD at Yale in the, I guess in the eighties, together with a guy named Richard Medley. Who dropped out of his PhD program and went on and ended up working for Soros and being a partner at Soros, being his kind of in-house political intelligence guy. And so I remember there was this moment, I was sitting in my room, senior year, I had already selected all my classes, and Ian Shapiro emailed me that there's this interesting professor, visiting professor, and I should check out his class. Actually, I gave him grief for this later. He didn't pound the table on it, but he was like, you might want to check it out. I was in my gym clothes and the class was in like, an hour.

• 1:57:59Speaker 02

  I remember thinking, okay, do I go to the gym or do I play out this option? And thank God, I played out the option. I went to that class, I was like, oh my God, this guy is in, it was a moment of ignition. This guy is in a world that is extremely interesting to me, of financial markets meets politics. I didn't even know this was a thing. And it was a very small class, and over the course of it, he offered me a job of, after graduation, starting a company with him, which I ended up doing. Describe the company. Larry Summers called us a private sector CIA. It felt like I'd built a business a little bit around a Tom Friedman-like character,

• 1:58:42Speaker 02

  who is very good at narrating what's going on, and a feel for how events might unfold. He was a really good writer. So we had, in essence, a newsletter business. At first, we tried different business models, but I was out cold calling people, trying to sell them these services, and I had a, I think we were charging $400 a month, and I wasn't getting any meetings. And on a lark, I decided to try saying, oh, actually, we charge $20,000 a month. And all of a sudden, I got five meetings right in a row, because they were like, who the hell has the balls? Twenty grand worth, twenty grand worth of stuff a month. And then eventually, we charged even more than that. We built a big business.

• 1:59:23Speaker 02

  I remember, I started to develop kind of a feel for how information leaks through a system. And I remember, we were trying to track what was going on. Around in 97, 98, around the Russian emerging markets crisis. And your train to do is find people that are in the rooms where stuff is going down and are willing to talk to you. It was like an intelligence operation. You're trying to figure out whether when somebody's telling you something, and they could be a journalist, they could be a professor, they could be a former central bank official. Are they overstating what they know? Are they telling you exactly what they know? Because there's an incentive to overstate it. And I realized I was good at finding people who were a credible threat

• 2:00:08Speaker 02

  at having access to an information stream that was relevant to a given thing. And in the Russian case, I found a woman who was a documentary filmmaker, who just had bizarrely high signal reads of what was going down. I later, I think I found out, 80% chance in retrospect, she was sleeping with the finance minister at the time. But whatever it was, it was like very high signal and bizarrely accurate. And we had hundreds of stringers in effect. And we would be able to publish things that were more hunches than a normal newspaper would at the time.

• 2:00:48Patrick O'Shaughnessy?

  What was graduation like from that business? What happened? What was the transition to the next thing?

• 2:00:53Speaker 02

  We had the opportunity to sell it to one large news organization. The professor ultimately didn't want to sell it to them. I asked him to buy me out at that multiple, which he did. They ended up selling to the Financial Times a couple of years later. I was producing someone else's show. I wouldn't have had the language for it at the time, but I kind of wanted to try out being sourced and having my thing be at the center of it. I tried to start several businesses. There were failures.

• 2:01:22Patrick O'Shaughnessy?

  Like a wilderness period?

• 2:01:23Speaker 02

  A wilderness period. I remember somebody giving me grief for how many different email addresses I had. And that really stung at the time. I was like, ah, yeah, he's right. Like, fuck. I've had like three email addresses in two years, or maybe more than that, four. And he was giving me shit about that.

• 2:01:40Patrick O'Shaughnessy?

  So then bring us home. So from that wilderness period. Well, I guess maybe is there any other meta lesson from the wilderness period of just like? Wandering, trying to find the thing.

• 2:01:50Speaker 02

  I think one would be just patience and not over waiting. If you're doing that at a, what Bob Keegan would call the socialized stage of your life, where you're really focused on approval of other people and where you are in the system and being, quote, relevant, you gotta make that as object as you can and not let it freak you out. Tom Morgan did this five-minute talk at Sohn. Have you watched it?

• 2:02:16Patrick O'Shaughnessy?

  That was great.

• 2:02:16Speaker 02

  It's saying great. And he closes with one of your favorite quotes, I think, on like Joseph Campbell, follow your bliss. There's a follow your bliss element to it and trusting the universe that if you get in touch with the thing you're compulsive about and that you love, the world will come to you. It's a trust fall and it's hard. And I remember during that period thinking, I'm very interested in people and information networks. There's an element of almost being an anthropologist. I'm like thinking like, how does that fit in? I had that ignition around Dan Stern that we talked about, who had run reservoir. And so that, that was one compass point through that period.

• 2:02:55Patrick O'Shaughnessy?

  One thing I think a lot about is in that swim, to use your, back to your river analogy, after a long enough hard swim, you swim to the order side. And if I think about my own life, not having come from like crazy amounts of financial success or whatever early on, but I had enough support that I could keep swimming longer, like the sort of nepotism of having worked for my dad and knowing that I probably, he wouldn't fire me, was such an unfair advantage that I could swim longer without swimming to the order bank. I couldn't have taken as much risk. There's this great quote, and I want to find it and read it exactly right. Only those who will risk going too far can possibly find out how far one can go.

• 2:03:39Speaker 02

  Yeah.

• 2:03:40Patrick O'Shaughnessy?

  Does that feel like that wilderness thing? Like, is it related?

• 2:03:43Speaker 02

  Yeah. The tolerance for the ambiguity. The willingness to take risk, to not play within on somebody else's board. Yeah, but I think you're right that it's a nice image of you try chaos and then you go back to order as a default and then you try chaos and it's like a repeat iteration game. There's a quote I love from Michael Singer, who's a spiritual teacher of sorts. And he says, eventually you will see that in the way of the Tao, you're not going to wake up, see what to do and then go do it. In the Tao, you are blind and you have to learn how to be blind. You can never see where the Tao is going. You can only be there with it. I think there's something like that.

• 2:04:27Speaker 02

  It's like the tolerance to be blind and not know and just experiment and figure something out is very hard to do at any stage of life, but particularly when, you know, your rent is due and or you have a family or you have financial obligations. So that is in that seems good.

• 2:04:48Patrick O'Shaughnessy?

  We've talked a little bit about the origin story of East Rock itself, starting with, I think $50 million from Stuart and then growing from there. Maybe tell just a quick version of that origin story and what was going on in your head and what your source was, what your vision was, what you wanted to accomplish, how it came together.

• 2:05:06Speaker 02

  I had been working with one of the co-founders of Greenlight, Jeff Keswin, in running a fund of hedge funds and doing some seeding, keeping an eye out for how to be sourced on something myself and got an introduction to someone who was advising the Miller family. I wanted that sense of selecting people, empowering them. I had observed that a lot of fund of funds people and endowment allocators had this scarcity mindset and were very focused on fees and felt like they would be taken advantage of and kind of disgruntled all the time. I thought there was an opportunity to to approach it as being on the same side of

• 2:05:49Speaker 02

  the table of let's take risks together, let's make money together and have that be the overall gestalt of the place. Adam Shapiro had been a year ahead of me at Yale, and we'd talked about working together over the years. And he was in the special situations group at Goldman. And I remember thinking, actually, Vinod Khosla has this line that if you can hire somebody that your anchor client could not hire themselves for some reason, but is blown away by, try to do that. And I remember thinking, oh, I did that. Like, I found, it turned out, Adam and Stuart knew people in common and had been involved in similar deals. Adam had done a lot of real estate, and they had a similar, enough of an overlap in sensibility that that ended up being an amazing hire. And it was more than a hire.

• 2:06:34Speaker 02

  He ended up being the co-founder and co-CIO with me. And then we could build a great business.

• 2:06:39Patrick O'Shaughnessy?

  Can I ask about Josh's, for me, very beautiful visual exercise of going into this cave and bringing with you a stack of blank pieces of paper or something, and really trying to separate your attachment to the prior conditioning and experience, and on a blank piece of paper, write the perfect setup for yourself, and then come out of that cave? I just love that. I just love that idea, especially around transitions. If you were to think about going into a cave, and I constrained you on, like, I want you to come out and describe the perfect setup, and you're like, when I think of the word setup, I think of you. There's no one better at designing a setup for, yet again, managing your own and someone

• 2:07:24Patrick O'Shaughnessy?

  else's money. Tell me what you see on that piece of paper.

• 2:07:29Speaker 02

  I think it's somebody who's got similar taste in people that I do, or that I can sense their taste in people, and it's a subset of mine, and I can constrain the things we invest into that. And then the ability to hunt for opportunity in an extremely opportunistic, unconstrained way, where because I have so much money at risk, there's this mutual trust and credibility, and it overlaps with how they're already inclined to manage money. There are no style points. The lack of gap between principal and agent is so thin, it was what I would aspire to. And that the amount of money total...

• 2:08:14Speaker 02

  Provides leverage so that you can play interesting games and find interesting people and have it be worth their time. At this stage, I kind of want license to hunt big game. I already have some big opportunities in mind and my own chip stack is not quite big enough to closing those deals. But if somebody shares my taste and my map of reality and says, oh, yeah, you're right, then that would feel very satisfying. It's like the ease of it, the quality of it.

• 2:08:50Patrick O'Shaughnessy?

  One last quote. This is you. Whatever a human being desires for themselves will not come about exactly as they first imagined it or first laid it out in their minds. What always happens is the meeting between what you desire from your world and what the world desires of you. It's this frontier where you overhear yourself and you overhear the world. And that frontier is the only place where things are real, in which you just try to keep an integrity and groundedness while keeping your eyes and voice dedicated toward the horizon that you're going to, or the horizon in another person that you're meeting.

• 2:09:21Patrick O'Shaughnessy?

  Can you talk about that intersection? Desire and what the world desires of you?

• 2:09:26Speaker 02

  In terms of applying it to me, I feel like at this stage, I'm very open to what the world wants. Rather than trying to assert reality, I'm more letting it unfold and trying to surrender a little bit and see what comes in. I think I'm good at, I can be of service in putting two people together, all the source dynamics we've talked about, or finding the right fit for somebody at that stage of your life. I really like, I really like giving high context advice when there's a lot at stake, whether that's picking a business partner, picking an investor, picking a spouse.

• 2:10:08Speaker 02

  I think picking a nanny is oddly high stakes and I like really care about it on behalf of that person's kid. And so, something around that, like I can act as a sounding board for people and hold the complexity of the decision they're trying to make. And if I've met the person they're trying to decide about, I can sometimes give them a feel for unexpected positives and unexpected negatives that they may not have seen yet. And when I do these gatherings, sometimes I'll have people go around and say, "Call me if you need help with X." And people answer that at such different, it's a little bit like the criteria question of, "What criteria would you use to hire somebody?" People answer it at such different conceptual levels.

• 2:10:51Speaker 02

  And like one famous hedge fund healthcare guy said, "If you or any of your family members get sick, call me and I'll help you find blah blah." It was such a beautiful sentiment. That is his highest use. Like, he does know. The energy in the room like radically shifted when he said that. And then from then on, the offerings were much more high level and generous in this beautiful way. "Call me if you need help with..." My current formulation of that would be that. If you have an extremely high stakes decision that involves a person and you're agonizing about it, and there's a lot of leverage to the situation, I just enjoy that inherently.

• 2:11:29Patrick O'Shaughnessy?

  The big meta lesson that I would take away from reading everything you've written, spending a lot of time with you, learning from you, is that there probably is a path or a theme for everybody that if they were to get closer to it, on it, in it, that both their lives and the lives around them would materially improve. And I entirely credit you with a lot of how I've thought about structuring my life, and very specifically to be honest with myself about what I can outwork other people doing. And then to try my best, and I'm still not perfect by any means, to build my professional life and personal life around those things.

• 2:12:15Patrick O'Shaughnessy?

  And I have experienced personally the power of taking that simple idea seriously. And I am incredibly grateful that you've taken the time, both personally, between the two of us, but also at scale, to take great care and time. You know, I've seen drafts of your writing and you're painstaking. Like, you take great care to get it right. And I hope you know the impact that it's had. I'm sure that if I called around, which I might do for fun, and asked a lot of very impressive people the same question, they would say something similar. So I hope you feel that.

• 2:12:49Speaker 02

  Thank you. Yeah.

• 2:12:50Patrick O'Shaughnessy?

  Because it really, Munger said, "Take a simple, great idea, take it seriously." And different people have said it in different ways, but for whatever reason, the way you've said it got to me. And so I appreciate all the time and just all the amazing lessons and the amazing fun. You know what I'm going to ask at the end? What is the kindest thing that anyone's ever done for you?

• 2:13:12Speaker 02

  I'm going to answer that professionally because it's more useful. The kindest, in an absolute sense, it's obviously my parents and the way they raised me. In a professional setting, the level of risk that Stuart Miller took in trusting this kid to manage his money and then navigating the financial crisis together and then this feeling of him rooting for me all the way through, I would put that in that category. I've never really had a boss. I started that company, The Professor. I've done all these things, but well, I've had one or two bosses and it didn't go that well.

• 2:13:48Patrick O'Shaughnessy?

  Not an employee kind of guy.

• 2:13:50Speaker 02

  I don't know why, but that feeling, when Randall Stutman said, "That's the mark of a good leader," I aspire to take that feeling. And I hope maybe partly what you just said is you feeling me rooting for you.

• 2:14:04Patrick O'Shaughnessy?

  Always.

• 2:14:05Speaker 02

  I feel like I felt that and so I know it. And then I can pass it along and the gift keeps on moving in that way. That's how I would answer that.

• 2:14:14Patrick O'Shaughnessy?

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