When smart people lose money, it's not,

you know, they lose 10%. It's always a

catastrophe, like draw down, bro.

[music] Draw downs. Do you think there

will be a lot more BS retail ideas?

There's a group of stocks out there in

the stock market that retail keeps

buying. If they had a knowledge of

history, they know how that story is

going to end. Younger generations that

don't have analog training, that haven't

read the book, that just look at

snippets and snack on information,

they're going to lose a lot of money.

We're already seeing it happen. Don't do

violence to yourself in the morning.

These guys that are plunging into ice

cold bass when they first wake up.

That's stupid.

Hey, thank you so much for listening to

Odds on Open. This week, we're going to

be doing something slightly different.

One of my mentors, a hedge fund manager

by the name of Alex Pascet, is going to

be giving a talk on why smart people

lose money. I hope you guys enjoy.

>> Ethan, really thank you for having me.

Okay. the the the that to be asked to

speak publicly about any topic uh is a

great honor and I try to add a lot of

value. Part of our content strategy is

to add value. Um uh having a content

strategy is very important for us. Uh it

helps us make money. Uh but it also

helps us generate insights and to get

feedback on our ideas. You know, if our

ideas are wrong, believe me, the crowd

will quickly tell us uh that it is, but

often the crowd also adds value to you

when you share your your content. It's

actually a mistake smart people make,

which is not to share their thinking um

especially publicly.

But anyways, so my background is that I

am probably not genetically designed or

culturally designed to make money. Uh I

come from the Caribbean. Uh not a place

known for their capital allocators.

Um

uh I studied gains for growing up. You

know, I was obsessed with gains. Um, I

went to business school to Babson. Uh,

but really all I did during college was

play poker and backammen. Uh, and uh,

even played poker and back with my

teachers. Sometimes we let them win to

get better grades. Um,

uh, but my background, you know, I

wasn't designed to be an analyst. I

never learned accounting. Uh, I mean, I

took accounting class, but I never

really sat there and learned accounting,

modeling, or any of these things. Uh,

but after college, I gambled for a

living. Spent three years doing that,

playing back gaming poker, and I'll get

to that. Um, and then, uh, one of the

guys I used to gamble with was a very

wealthy, uh, businessman.

uh he offered me a job to come run his

personal money and because I did not

know what the hell I was doing. Um uh

that that businessman had an interesting

model. He would take young guys that he

liked and he thought were usually more

street smart than smart. Put a lot of

pressure on them and basically throw

them in the deep end of the pool and

say, "Can you swim?" And if you sw if

you knew how to swim, he would put more

and more responsibilities on you. Uh,

and I loved him dearly, both him and his

son. Um, and I I still can't believe

they gave me the responsibilities that

they gave me at the time because I

seriously did not know my ass for my

elbow. Um, but I started out allocating

money to money managers

and that's where I really learned

investing by literally taking meetings

with other money managers and just

asking them questions and whoever I

thought we were uh was smart, we would

give them money. And it was one of the

best um schools for investing

uh that you could have. Um, and I'll get

to that. All right. So, the topic is

why do smart people lose money? Uh, I'm

fascinated by this uh for a lot of

reasons. Um,

one of them is I'm forced in our

business to compete against people that

are much much smarter than I am.

And how do you do that? How do you

compete against smart people that are

better resourced than you, have more

experience than you, and also have teams

that are bigger than yours, and smarter

than yours? I mean, it's uncanny how

much money people are spending on

resources now in the investment

business. So, how can we as a firm,

Prime Makaya, compete against these

really, really smart guys that are out

there?

Uh but also how do you mitigate the

catastrophic mistakes smart people can

make?

You know, uh it's a I find that to be a

fascinating topic. Uh and I'll walk you

guys through

um

how I came to some of those insights.

Okay. All right. First, a couple of

quotes. Uh one by Phil Burnbomb. You

gain more by not being stupid than you

do by being smart. Smart gets

neutralized by other smart people.

Stupid does not.

Uh by Thomas Soul. There is usually only

a limited amount of damage that can be

done by dull stupid people. For creating

a truly monumental disaster, you need

people with high IQs. One of my favorite

quotes from from the big guy, uh that's

what I call Warren Buffett, by the way.

uh he said over time markets will do

extraordinary even bizarre things. A

single big mistake could wipe out a long

stream of successes. We therefore need

someone genetically programmed to

recognize and avoid serious risks

including those never before

encountered. Certain perils that lurk in

investment strategies cannot be spotted

by use of the models commonly employed

today by financial institutions.

Temperament is also important.

Independent thinking, emotional

stability, and a keen understanding of

both human and institutional behavior is

vital to long-term investment success.

I've seen a lot of very smart people who

have lacked these virtues.

This was written before the age of AI.

It's one of my beliefs that AI is going

to make the things that Warren talked

about worse,

at least for the first

growing pains that we're going to go

through as we use these AI tools. I'll

get to that.

All right. So, what you're looking at

here

is

uh a theme. So, we're big into themes in

our business. We're always looking for

tailwinds that are pushing our

businesses forward if we're long or

headwinds that are pushing our

businesses back if we're short. And we

like to find tailwinds that other people

are not thinking about. And one of them

is what we call the generational battle.

So the first baby boomer is turning 80

next year. The first baby boomer was

born 1946.

And in terms of wealth, that generation

has $76 trillion in the United States.

Gen X, which is my generation, by the

way, I call Gen X neoboomers because we

were raised by boomers and we have

boomer sensibilities, but we were the

first to really use the internet. So,

we're both analog and digital. Um,

uh, Amogenics, by the way, and our

generation has 37 trillion. the silent

generation. So, this would be your

grandparents, your great-grandparents,

my grandparents, they have 19 trillion.

And then the millennials have 13

trillion. And we don't know how much the

zoomers have. Uh, but you guys are

popping up. So, basically what's

happening is the first baby boomer is

reaching 80 next scare and as he's

passing

that wealth is trickling down

to the generations. It's going to Gen X,

then Millennial, and the baby zoomers.

Right? And

that wealth is causing a generational

battle. Why? Because millennials and the

zoomers are taking these these uh this

money and actually putting into the

stock market,

right? That's actually one of the

explanations for the persistent retail

bid that we are seeing

because people are like why is why is

where is this retail get this cash from?

Why do retail keep buying uh uh these

stocks and coins? Well, one of the

reasons is they're inheriting money,

right?

Reason why I put that in there is you

guys have a problem. the zoomers. It's a

generation that no longer reads

all the information is uh in and in and

digital media and short content. The

problem is to really develop judgment as

a smart person, you have to read.

You have to do what's called analog

training. I mean, I don't know if I say

that's called that. Sorry. It's what we

call it. Um uh and analog training is

disconnected

mental training that older generations

had to do more of because we didn't have

the digital tools. And we believe that

the future of investment performance is

guys that have both jet analog weapons

and digital weapons. Okay. By the way,

value investors, specifically

smart value investors, have to pay

attention to this stuff because the

mistakes that they're making right now

are borderline catastrophic. Um, and uh

we've tried explaining that to some of

our value investor friends. Uh but one

of the problems with value investing is

that almost all the reference material

that they've learned is pre208

reference materials.

Since 2008, things have changed. The

market structure has changed. There's

new investment players. Businesses,

especially internet enabled businesses,

have changed and so have business

tactics. And a lot of things that drove

cheap valuations almost no longer exist.

Uh it's totally different things that

drive cheap valuation. The availability

of information that could make something

cheap pre208 doesn't exist today.

Usually when something is cheap today,

it has a problem, right?

All right.

Don't be the Erade baby. A lot of people

are like, "Isn't it difficult to invest

in the markets?" And I'm like, not if

you're using Erade. Making a big

investment is as easy as a single click.

Boom. I just bought some stocks. See, it

was totally easy. Check this out. Boom.

More stocks. Boom. Asset back

securities. Boom. Credit default swaps.

Boom. Boom. Boom. Hell. I don't even

know what app this stuff means. But

thanks to E Trade, I can Wait, why is

this line going down? Oh god, just

dropped 400 points. This is not

happening. Dear Lord, I made a horrible,

horrible mistake.

Dropping more. [ __ ]

I want to take it back. I want to take

it back. Sell.

Too late. It's all gone. I've just lost

my entire life savings. Oh god. Steph

was saving for med school. [ __ ] I think

I'm going to be sick.

I'm going to jump out the window now. He

train, sorry, you can't take a nap.

>> You know, in 25 years of doing this,

um, I gotta sound like a [ __ ] boomer.

Um, in 25 years of doing this, I've seen

a lot of smart people go through every

emotion that the E Trade Baby has gone

through.

I've seen grown men cry when they lose

money.

I've seen people having

to move their families to cheaper

neighborhoods and cheaper schools

because they lost everything.

Okay? And really high IQ people at that.

I've seen guys that I would consider

average become billionaires.

Okay? So the when you study the dynamic

range between an average investor and a

great investor, one of the things that

you see is that IQ and intelligence is

actually a small percentage of what

drives our success.

Okay. The first place that I saw this

was games and and playing games for a

living. So my story with with uh Backam

is when when I was 18 I saw my uncles

play the game and I remember we were we

were by uh at the beach and they were

playing and I had noticed them playing

before but that moment I started paying

attention and I noticed that there was

probability and I was obsessed with

probability at the time and I learned

the rules. I played with them and they

got very cocky with me as they were

beating me because I didn't know uh how

to play. So I got pissed. I went back uh

home and I bought all the books on back

that I could find,

right? Uh there was actually a gambling

store in France and they had all these

backon books. I bought them all. I read

them, got better, came back a couple

months later and trounced my uncles.

Okay. Graduated high school, went to

college. There was a back gaming club in

Boston. I think it was called the Cavern

Dish. Uh, I went to play there and a

schwat which is back at it more than

than than two people and they killed me.

Lost a bunch of money. I was too cocky.

I got pissed. I found out that the best

player in the world lived in Boston. I

hired him to give me lessons. Came back

six months later and I killed all these

guys at that club.

uh and then I was introduced to

the back gammon uh neural nets. So a lot

of people don't know this but the first

neural nets were developed to play uh a

backam

um uh well to be fair the first neural

nets were developed by intelligence

services mostly DARPA the CIA MOSAD uh

uh and the others uh and then as these

people left to go to academia they

started introducing these neural nets

and one of them was developed to play

back a guy called Gerard Toro

at IBM in the 80s he built a program

called TD gamut. Uh this was actually

really useful by the way because the uh

to understand AI because the mistakes

that people made using AI and back

they're also making them in the

investment world. Same mistakes.

It's also the same mistakes is being

done with AI and chess. same mistakes

that are being done with AI and Go and

so on. But basically, my process for

getting better at the game was getting

playing against smart players for not a

lot of money and and also uh hiring

coaches. And imagine my surprise when

you could use that same process to

improve at investing. But the first

place that I started seeing smart people

make mistakes is that in back end and

you have all these great players and the

problem is sometimes to make money they

like to compete against each other.

And I noticed that if you wanted to make

a lot of money gambling you shouldn't do

that. And it wasn't about ego, about

being the best player is to really make

a lot of money, you had to find rich

back gamma players that had big egos.

Dad did not know how to play as well as

you did.

And if you did that, you could

consistently make money. Same thing in

poker, same thing in jin and basically

any game of strategy and chance mixed

together.

Okay, but there were also other lessons.

Um if you study poker for example very

quickly it lends you to study the metag

game ranges. Uh all of these are very

powerful lessons for that you can apply

to investing.

But the first big mistake that smart

people make is wanting to compete

against other smart people. No. When

you're fiduciary

when you're fiduciarially responsible

for other people's capital, it's your

duty to compete against morons.

Okay? You cannot risk capital. Competing

against smart people is a very very

stupid thing to do. Okay? So, one of the

guys I used to gamble with uh uh very

smart businessman gave me a job and I

ran money for him and I applied that

same lesson from poker and backon to

investing and basically go with smart

people read all the books on investing.

Uh, I still can't believe, by the way,

that people will write books, spend two

years writing books that they sell for

$15 and you can get all those lessons

and less than a day sometimes.

Um, but it was very powerful when I got

into investing to apply the same

process. Find smart people, uh, read

books, ask for advice. But one of the

beauties of investing is if you're

playing poker in the middle of a hand,

you cannot call a smart guy and say,

"Hey, what do you think I should do?"

Whereas investing, you actually can,

right? Uh, and that's actually a lesson

that I still do today. If I don't know

what to do about something, I literally

will call a smart person about my idea

and just say, "Hey, what do you think

about this?" But we'll get to that.

But then in 2006

um my mentor became president of a very

large well-known quant fund and uh so

did his uh stepson uh who was a very

close friend of mine and

we never invested in quant funds because

I never really understood what they did

and uh my mentor said hey uh we have a

problem. Uh the family office community

knows that you and I are close and they

keep asking has the lease invested has

the lease invested and we need to be

able to solve for that right so can you

come and do some work on us. I'm like,

well, you guys are known for being

secretive. You know, I can't I need to

be able to understand what you guys do

because if there's a period of

underperformance, I have to know whether

to cut the position or to actually add

because it's a momentary lapse and

performance. You guys look, there's a

lot we can't share with you, but come

in, we'll give you access and you'll

learn uh from uh from the team. And for

a period of a few months, I had access

to to some of the smartest quant

investors in the world. And it was

incredible. And one of the things that

they taught me was that every quant fund

has to solve for about six problems. The

first is having access to data.

It's actually really, really hard and

expensive to have access to all of the

data sources that you need. to run a

quad strategy. Well,

right, it's not as easy as you think.

Uh, and the barrier to entry, it's

really expensive. Not only that, you

need decades of that data. The second

problem quant funds have to solve for is

scrubbing the data. Sometimes when you

run a quant model that's supposed to

find investment anomalies or trading

anomalies in it, it finds uh uh a piece

that it thinks an anomaly. And the

problem is that's actually a data entry

mistake. And do you know as a team of

engineers how to scrub that data? It's a

very complicated process and you have to

know. The third is

lowering your market impact when you

trade. So you find a a signal and you

think it's an anomaly. Can you put a

trade in that actually doesn't create

market movement and the anomaly so that

it's almost like the Heisenberg

principle that observing something can

actually affect that thing where trading

something can actually impact. So how do

you lower your market impact? The next

is how do you lower your transaction

costs? It's actually not easy and

requires scale and the right

relationships with the brokers. And then

next is access to leverage. Often the

anomalies that these quant funds find

is uh so small that you need leverage to

be able to amplify that. How do you

manage that in those trading systems? Uh

and and then last is how do you find

really really smart people, manage them,

incentivize them and and that's not

easy. And the founder of that quant

fund, one of his genius other than

intellectual

uh uh heft was also he was really good

businessman and very street smart which

is very usually unusual that you're

street smart and book smart at the same

time. But anyways, it was amazing

because I actually saw

how smart people had thought about all

the problems of not only dealing of of

making money but managing other smart

people. And one interesting thing is

when I asked them, hey, you guys can't

tell us any signals today, but are there

any older signals that you guys have

found that that uh that you guys have

used in the past that are no longer

viable? And the the the Yeah, it's easy.

One of our first signals is in E8, we

noticed that market specialists did not

like to go home with positions on. So

around 355 and a lot of positions they

had in inventory, they would actually

sell those off and the stocks would go

down imprecibly,

right? And they realized that they could

build a quant signal that could pick up

on which are these stocks and actually

short them around 350 and cover them

right before the close and make a small

amount of money that with leverage could

actually become a decent amount of

performance. Right? And when he said

that, the insight we had is that oh

unlike the other quant funds that use

let's say statistical arbitrage, these

guys actually exploit human behavior.

And that's actually was very valuable in

terms of us understanding what they

actually did, right? But even that

wasn't enough for us to really

understand what they did. And one of the

things that I that to because they were

very secretive, I noticed that the

majority of them had gone to one school,

right? So I literally took a trip to

that school, had meetings with all the

teachers and said, "Hey, what do you

teach?" And this was where I when my

development as a fundamental investor

picked up because I started

understanding the philosophies

that this firm was using to actually

make money including chaos theory,

complexity, systems thinking

um and others, right? And that was

actually very very useful. And again

that was another lesson. If you're very

very smart, you have to study systems

thinking, complexity, uh cybernetics,

network theory, uh uh and others because

a lot of the mistakes of judgment smart

people make you solve for that by

studying those things. Um

but anyways

that also led me to understand August of

2007 when the quant funds were blowing

up what actually was happening. Um

and that saved our fund actually because

I ran a uh my first hedge fund I started

in 2006 and we were up uh 35% in 2007.

Uh but August alone we dropped 10%

because when quant funds were

deleveraging

a lot of our longs went down and our

shorts went up. Uh we made most of that

back in the end of Q3 and Q4. Uh but

still understanding how the quants were

blowing up because I had studied them

before was actually very helpful. Okay.

So the the the

um sorry I lost my train of thought but

anyways the the the it's very powerful

and there are books on the quad funds

that you can read by the way and I would

definitely ask Ethan for advice on that.

Okay. So,

one of the things

about the younger generations right now

is hyper simulation.

And one of the things we noticed is

young guys don't handle market swings up

and down as well as the older ones. And

that's actually something that didn't

used to happen. There's a problem right

now in the investment business called

the junior senior problem. And a lot of

PMs are noticing that they don't want to

hire juniors anymore. They don't want to

hire junior guys, right? That's a

problem. And they say, look, the the the

they know how to model, they learn the

pod talk early in college, idios and and

and

factors and such. But if you ask them,

hey,

what do you think the CEO is thinking?

They don't have the strategic reference

points to be able to put themselves in

the shoes of the CEO and saying, look,

this is what he said, but here's what he

actually is thinking of doing or see the

competitive reaction. And the other part

of the junior senior problem is the

junior guys don't handle pressure as

much as the senior guys. And I think one

of the reasons is the overuse of hyper

stimulants. By the way, I have a similar

problem. I had to quit caffeine, right?

I started drinking caffeine uh coffee

late in 2016 and I was noticing that

wow, like the the a stock was going

against me and usually I'm able to

emotionally regulate and I wasn't able

to. And it's when I quit caffeine that a

lot of that came back, right? And

caffeine is a hyper stimulant. As much

as I love me a cup of a great cup of

espresso, I had to quit. And maybe I

have it once or twice a year now, uh,

sadly, but caffeine just makes my highs

higher, my lows lower. Um, and the

ability to self-regulate is something

that sometimes very smart people don't

have. And I really do believe that hyper

stimulants cause that. Alcohol,

nicotine, social media, caffeine,

recreational drugs, porn. And by the

way, sometimes I we have a theme called

the modern addict. You see somebody

drinking a cup of coffee vaping while

he's on Instagram at the same time. Uh

that has an impact on your thinking.

Okay? And by the way, we're all guilty

of it. you have to figure out a way to

to to minimize it or better yet for

example uh manage it. So for so if you

hyper stimulate you need to do things

like massage, sauna, uh cardio and

working out because it helps clear these

from your system.

Okay. So what are the mistakes that

smart people make? One of the first ones

wanting to compete against other smart

people.

Don't do it. You know, one of my

favorite analysts and the beginning of

his career. Uh Ethan, you might want

There you go. Uh uh um and beginning of

his career, he used to love to compete

against Viking, Lone Pine, uh Blue

Ridge, even he's like, "Here's what

these guys are thinking, but here's

why." I'm I'm like, "Duh, dude. No, no,

no, no, no, no, no, no. That's not your

job. Your job is not to compete against

the smartest people you've ever seen."

Okay? your job to compete against

morons. Okay? And if you don't think

other great investors don't have that

mentality, it's what we call the prime

pattern. The prime pattern is when uh an

institution or individual

is taking advantage of a competitively

competitively disadvantaged institution

or individual. Um uh look at what

Charlie says. Competency is a relative

thing. What I needed to get ahead was to

compete against idiots. And luckily,

there's a large supply.

And Warren Buffett, if you've been

playing poker for half an hour, you

still don't know who the psy is, you're

the psy. Uh, by the way, the strategic

implication of that is fine game. I have

a lot of psis. So, this book uh by

Willis Johnson, one of my favorites uh

is from junk to gold, the story of

Copart. This guy would took junkyards

which is um usually historically

uh run by uh people that are not very

educated and he brought sophisticated

business techniques to that space and

eventually consolidated and became one

of the best businesses out there. We

love this business. We've held it uh at

various moments throughout my career.

one of my mentor used to be on the board

of the company. Um,

and that's the kind of of competing that

you want to do. So, one of my favorite

stories on this is uh to protect uh the

guilty I won't name, but a very close

friend of mine, his father study

engineering at MIT and he moves back to

his home country and people are like,

"What are you going to do? Are you going

to start a think tank? Are you going to

join the government?" He's like, "No,

I'm going to uh start a car repair

shop."

And he said, "What? Why are you going to

do that?" And he's like, "Just, you

know, I think it's a good business to go

into." And he became and he owns now one

of the largest car repair shops. Uh, and

it's almost a monopoly in that country.

And the reason why when I asked him why

did you do that? And he said, "Did you

see who I was competing with?" you know,

he was competing against car mechanics

that were doing this as a almost like a

lifestyle business and he just trounced

all these guys. That's the kind of

thinking that you need to do if you're

going to mark.

You need to com stop competing against

other smart people. Compete against

idiots. Okay? Trust me on this. Now,

smart people can make really dumb

mistakes.

Okay? And it's a lot of fun to be able

to exploit that when it's happening. Uh

uh it's rare but it's possible.

Okay.

M smart people do a lot of networking

mistakes. They don't belong to multiple

networks. Okay. So what I mean by that

is is they tend to have one network and

then belong to just that. Whereas you

should join multiple networks. So for

example, we've tried to build a network

to be east coastbased, west coastbased,

um to have a network in Europe, to have

a network in Southeast Asia,

and I want to belong to multiple

networks. So there's my back network,

there's my poker network, there's my

investing network, there's my all the

geeky stuff that I study. Recently, we

did a case study on the NFL. It's the uh

uh case study that keeps on making us

money. Uh because a lot of the tactics,

the new tactics that we've learned,

we've learned from the NFL. We're

applying it to investing. Like for

example, in the NFL, there's a concept

called football intelligence. And we've

realized that young investors that have

great investing intelligence tend to be

better analysts. uh uh and we have ways

of picking up on investing uh in we call

investing intelligence. Now um uh uh so

you know how can you belong to multiple

networks you have to think about that

uh having an underutilized network a lot

of smart people tend to know a lot of

people but they don't keep in touch with

the network or know how to utilize it

for idea generation idea confirmation

now having a lot of triads in your

networks so I've spoken about this in

other my talks so triads is when you've

introduced uce two people to each other.

And Judaism, uh, it's called a mitzvah

to introduce a man and a and a and a

woman together. Uh, it's a blessing. Um,

uh, I'm not Jewish, by the way, but one

of my mentors, uh, is, and he's been

teaching me, and I've applied that, how

do you do business mitzvah? So, one of

the things that I do if I'm studying an

idea is I always say, "Hey, who are the

two smartest people that I'm

collaborating with this idea that don't

know each other that I can introduce

to?" the more triads you have in your

network, the more you perform uh uh or

you're successful. The sociologists

actually done a great work on that. Not

refreshing your network. You know, the

smart people tend to consolidate with

this group that they have and they very

rarely go and meet new people and then

too many dormant ties uh which is people

that you know that you haven't spoken

with. You have to fix all of that.

Smart people tend to love intricate

complexities. It's kind of how they show

they're smart. Uh the a very close

friend of mine runs a fund and he was

invested in the name where literally to

understand it and to make money in it,

you have to understand California

weather patterns. Okay? And the guy the

analyst that was covering that for him

uh was intellectually arrogant and he

loved this idea but he also lost $400

million investing in it. Right? It's not

intricate complexities that matter. It's

actually finding unrecognized

simplicities that matter. Right? And

this quote most geniuses especially

those who lead others prosper not by

deconstructing intricate complexities

but by exploiting unrecognized

simplicity. It's something that is

simple that no one is really looking at

that really you're going to be making

money on.

Smart people love to be right.

And again, as the words of Stan Duck

Miller, it's not about being right or

wrong. It's about how much money you

make when you're right minus how much

you lose when you're wrong. I'm wrong

all the time and it's okay. But I like

to be the first to recognize that I am

wrong. And I have designed my friends to

literally grab me by the shirt, slap me

around me like, "Hey, jackass, you're

about to make a mistake." And it's okay.

And I'm okay with making mistakes. And

then you realize, all right, you know,

it's you made a mistake. So what? Move

on. Okay? Learn from it, but move on.

try not to repeat it and it's actually

one of the qualities of great investors

is they tend to not repeat that big

mistake again. Okay. Uh but it's very

important to be able to let go of being

right. One of the smartest macroinkers I

know is one of the worst money makers

I've ever seen. Mostly because he wants

to be right. Not being emotionally

developed. Okay. For a smart person in

the mid20s, much more important to go

develop your emotion emotional side and

not be emotionally repressed than it is

to go and learn modeling skills, for

example. Take a dance class, travel,

preferably as a group activity, what's

called a compound experience. Learn new

languages, try new foods, have novel

experience, constantly meet new people,

learn diverse skills. Especially if

you're shy, go learn comedy, improv,

public speaking, acting even. There's a

concept called dynamic evaluation. Uh

it's one of the new ones for us and

since we've started doing that, our

performance has improved, which is that

if I'm studying an idea, instead of

putting my strengths in play, I put my

weaknesses in play as well. So, for

example,

uh uh if an analyst is shy

and he's reporting to me on an idea, I

always be like, "Okay, I need you to

call five people that you don't know and

ask them these questions." So, that

since his weakness is shyness, putting

that weakness into motion actually helps

you make money. Okay, we learned that

concept from a psychologist called Phil

Stuts, who I'm kind of obsessed with

right now. If you haven't seen Stuts,

the documentary on him uh by Jonah Hill

on Netflix, it's a mustwatch. It's it's

one of these things where maybe I got

exposed to it when I needed to, but I

literally improved

when I when I when I learned and studied

uh uh all his books, his interviews. I I

did a deep dive on him last year.

Fascinating. must learn especially if

you're a very smart person.

Um, okay.

So, Celeb wrote this amazing piece in a

very Tbian

uh way uh usually filled with insults

and and

uh very very smart sarcasm. But I

actually think this is a required

reading for today. uh and he calls it

the intellectual yet idiot. It's a

chapter in one of his books called Skin

in the game. You can actually find it

for free on Medium. Um there's a lot of

people in academia, leadership,

governance, governments that are

intellectual but yet morons and you have

to kind of know when you're dealing with

horn.

By the way, there's a lot of these guys

in the investment business as well.

Okay. Lack of self-awareness. Big

mistake smart people make. You don't

know your power zone. What are the ideas

that are your power zone that if you

invest them, you're going to make money.

I find that you need outside people to

tell you that because some of my

friends, they actually don't know what

their power zones are. Where if you're a

great observer of your friends, you'll

know what their power zones are. So, for

example, if one of my buddies calls me

with a retail name, it's an automatic

short because he's been trying to go

long retail for 22 years that I've known

him and he's O for O at every moment.

And at one point, he was like, I'm going

to quit investing in retail. I was like,

no. He's like, why? He's like, why

deprive the rest of us? You know, doing

the opposite what you do in retail is as

good as doing, you know, like no, don't

keep doing that.

um you know, but he like persists. He

like is obsessed with retail uh and

losing money at it. But yet, if he's

doing industrials, he makes money. And

for some reasons, industrials have saved

them. And then, and by the way, not just

the last few years where industrials are

literally like this, but throughout our

careers together, okay? Not taking care

of your life force. So your life force

is

your relationship with your body, your

relationship with your mind, and your

relationship with other people. Okay?

Very smart people need to take care of

their bodies. One of the reasons you see

smart people leave the investment

business is they lose the energy of

dealing with markets. So working out

uh relaxing, massaging, doing things

that force you to recover

uh over long periods of time is very

important. Keeping up with emotional

relationship with others. The the study

this concept life force is very

powerful. Never developing your own

style. So

when my first coach, investment coach,

had me go to things that were more my

style, despite my insecurities about my

style, my performance went up. To this

day, I'm still shocked. Uh, and being

okay with that. There's something about

Mrs. Market,

when she feels your style, she wants to

reward that. I know it sounds like

cuckoo nonsense, but I really do believe

that that when your personality and your

authenticity is imbued in your

investing, that's when you get rewarded.

Not getting feedback on your ideas and

sites or processes, not knowing your

talents that you have ritualized and

amplified to be a strength. So, for

example, if you're good at field

research, and by the way, we are,

we like to focus on consumer stocks

because the field research is much more

easier to be done, right? So, how do you

amplify that? Follow the 13Fs uh and

hedge fund letters of great consumer

investors, surround yourself with other

people that are great consumer stocks,

and so on. Not knowing your weaknesses

or negative patterns, which leads to a

lack of dynamic evaluation, which I was

just talking about.

All right. There's a great book, I think

it's called No More Mr. Nice Guy, where

he talks about the paradigm. And we've

noticed this in multiple aspects that

smart people often have the wrong

paradigms. And what he says is that a

paradigm is a road map we use to

navigate life's journey. It's everyone

uses these road maps and everyone

assumes the map they are using is up to

date and accurate. Paradigms often

operate at an unconscious level, yet

they determine to a large degree our

attitudes and behavior. They serve as a

filter through which we process life

experiences.

Data that does not fit our paradigm is

screened out and reaches our conscious

mind.

One of the ways that we add value to

analysts

that come work for us is we find where

their paradigm is wrong about investing

and we give them the concepts, the

tools, and the processes to shift that

paradigm. And it's it's one of the ways

you should never hire somebody unless

you know how to improve them without him

being known that he's that that he's

being improved. And one of the problems

with hiring the kind of guys that we

like to hire and they tend to be uh uh

uh intellectually set in their ways. So

you you you have to improve them in a

way where you're not forcing yourself uh

uh upon them. And changing the paradigm

is how you start uh doing that. And we

have ways of doing that. By the way, the

last part is cool. It's very important.

Most paradigms are developed when we are

young, naive, and relatively powerless.

They are often based on the inaccurate

interpretations of childhood

experiences. Since they are often

unconscious, they are rarely evaluated

or updated. Unfortunately, these

paradigms are assumed as to be 100%

accurate even when they are not the

wrong mindset. So think about paradigm

as having an influence on mindset. When

you change somebody's paradigm, it can

have an impact on mindset. But

analytical mindset

is

a very powerful to actually be able to

alter especially in your own. If you if

you see investors that have improved

over long periods of time, they had a

process for consciously

changing their mindsets over time to be

able to adapt. Uh you saw Warren do it.

You saw Charlie do it. You saw a lot of

Tiger Cubs do it, especially with the

influence of Steve Mandel. You saw

Julian do it. Uh you saw a lot of the

Tiger Grand Cubs do it, especially after

the influence of two of the best

investment teachers that the world has

ever seen uh at Columbia University. Uh

and it's very powerful, but you got to

be aware of it to be able to do it. And

this quote uh by Richard Hoyer, so

Richard Hoyer was inside the CIA, and

he's the one that taught CIA analysts to

do better analysts and literally put in

a book called The Psychology of

Intelligence Analysis. and his kid Dick

Hoyer Jr.

wrote structured analytical techniques

uh which is a must readad okay as an

analyst um and by the way structured

analytical techniques I often thought it

was wrongly named it should actually be

called structured uh networked

analytical techniques because the

networking advice it gives in those

books are even more powerful uh

all right

we have let's say 10 more minutes and

then we'll get to questions Ethan. Okay.

All right. So, what are the biases?

So, you see, one of the problems with

smart people is that they're still prone

to cognitive biases and blind spots.

But because they're smart, the

intelligence actually amplifies these

things as opposed to minimizing it.

Somebody that's not so smart

doesn't have that. He doesn't know about

these things. That's why he rushes in.

Right? The first time I noticed that was

in high school. In my high school, it

always befuddled me that the smartest

guys I know were very bad with girls,

whereas all the morons were getting all

the girls. I was like, how is that? I

don't how I don't understand how that

works. And I think sometimes smart

people are really good at coming up with

negative visualization as to why what

they're doing is not going to work.

Right? she's not gonna like me because

of these really brilliant reasons.

Right? Whereas the the other guy is

like, "Yeah, I have nothing to lose.

Let's go." Right? And you know, to this

day, I still can't believe I would look

at how is I don't get it. Um, okay. So,

what are the biases? Intellectual

arrogance,

lack of meta rationality. So what metar

rationality is is having the humility

and understanding

right that there's somebody smarter than

you doing something and that you need to

to to to m to minimize your own

intelligence that wants to do X and go

do Y which is what the smart guy is

doing gets more effective. It's actually

harder than you think. Okay.

When I hear I've done six months of work

on this and I think the idea is bad, if

the guy is long, it's almost an

automatic short. Okay? Why? Because

you've probably done five months, three

weeks, five days too much work on this.

Okay? Be very careful whenever you hear,

I've done six months of work on this,

especially as a stock is going down.

value itis when you overly anchor to

valuation your investment thesis. Why do

you own it? It's cheap. So that's not a

that's not an investment thesis. Who

cares

if it's cheap? There's 5,000 books on

value investing on Amazon. Okay?

Everybody's a value investor. It has it,

you know, in the 70s when no one knew

value investing, it was an advantage to

be a value investor. Okay? Today it's

very it's harder. It's way more

competitive.

I missed it. Bias. This is when you you

you talk about an idea, the stock is up,

and you hear somebody say, "I missed

it." Or better yet, you think it time to

do some work. You haven't missed

anything.

The best stocks are the ones that you

buy at new highs.

Um, emotional estimation, seeing

validation. You have an emotional

reaction about something that is not

based on thought and then you go and you

only look for validation that you're

right as opposed to disisconfirm the

evidence that you're wrong. Loss

aversion. So like I said, this causes

very smart people to be risk averse and

they make mistakes of omission often

that maximizes opportunities because

they come up with extremely intelligent

negative visualizations about

opportunities,

right? ambiguity aversion. You know the

one of my favorite strategic thinkers,

he says we are born into a probable

reality with ambiguity aversions as

humans. Okay, you have to be comfortable

with that. You have to be comfortable

what the v military

uh calls vaua conditions. So volatility,

uncertainty, complexity and ambiguity.

You know we love vaua conditions in

markets for example because that's where

opportunities are actually created.

Justice mechanism. So a lot of smart

people have the justice mechanism where

they want to see justice and you often

see short sellers that have that when

management teams are committing fraud.

They're like these guys are fraudsters

and they want to short the stock not

realizing that they don't set the price

and they're shorting into massive retail

buying that is not seeing the fraud and

they can lose a lot of money. As a short

seller, you have to be very very careful

that mechanism self- sabotage the

self-destruct button. One thing I

noticed very smart people, they get rich

and there's a self-destruct button that

they keep pushing and they start losing

money. Um, it's one it's we all have it

in humans. By the way, I'm not saying uh

by the way, I'm prone to probably every

bias in here, but we have

systems and processes.

Usually my friends that thank God love

me dearly are like, "Hey, jackass,

you're doing that again, okay?" And stop

it, right? Projecting too much of the

past into the future. The game has

changed. the internet, social media,

narratives, new players, quant funds,

ETF, passive,

uh, uh, have changed the game. You can't

take a look at a past situation and

project it into the future anymore.

There's novelty now. It It's very, very

different. And then procyclical

behavior, which usually you're making

money, so you jack up risk, you jack up

exposure, and you come into a loss and

you start losing the money that you put

you put in. All right, here are the

blind spots.

High personal business overhead, a

killer for smart people. Be very careful

as you succeed that you jack up your

personal overhead. It amplifies almost

every uh bias you have and creates blind

spots. While you're focusing on your

overhead and the cost and how expensive

it is, opportunities are going by,

threats are going by, you're not seeing

them. Goal induced blindness or having

the wrong goals. So, for example, in our

investing, one of our goals is

mentoring, learning, and teaching.

It's actually even though it seems like

a selfless act, it's actually something

that helps us make money as well. The

echo chamber problem where you have the

same source of information, same people

that you speak with and you don't have

diversity in them and it forces you to

lose money. Uh stale networks, same

thing. Having the wrong social

influences causes massive blind spots.

Structural and conditional blindness.

You know, we tend to walk around

regulatory, physical structures, social

structures, and almost are blind to it,

right? We're blind to the economic

regulatory forces that are having a

massive impact on our lives or pushing

us backwards. You have to wake up to

these things. you know the in the

investment business the there's a

there's either micro guys or macro guys

but there's actually one level called

the messo. So you have the micro, the

messo and and the macro. And the messo

is one step above the mic, the micro.

You have to know the influences that are

having an impact on you, your

businesses, and it's only one step

above. Don't go too far because I think

really ma real macro investing is very

difficult. Um, uh, we've studied it.

Eventually, we will evolve to that, but

we don't have what it takes yet to get

there. Uh if you study the evolution of

Stan Duck Miller and George Soros, they

started out as equity guys first and it

involved a macro. But start getting good

at the messo, right? And then the

geography and culture of your thought,

you know, in the west we tend to see

things very differently than in the

east. There's a great book on this. It's

called the geography of thought. A

second great book on this. I'm obsessed

with the writer. um is he's a French

sonologist called uh Franisa

he

uh the book is called treaties on

efficacy which is an analysis of Chinese

strategic thought and western strategic

thought brilliant and then being stunned

in one part of your be Mary as a last so

body emotion mind environment

relationship ideas if you're missing

things in those areas that can have a

big impact and create a blind spot

Okay. Tools to mitigate your blind

spots. I have to speed up because I have

five minutes. Price implied

expectations. Very powerful to do. Uh

it's a lesson from Michael Moeson. Read

his book, Expectational Investing.

Tutorial 8 for free on his website.

Teaches you how to do these things. Do

it. Okay. When I started out gambling,

I loved it because a gambling position

has embedded odds in it that you can

figure out and then you can actually

estimate your probability of winning and

losing and what your profit margin is

going to be. When I got to investing, it

was actually very difficult to to

understand what odds are priced into a

stock. Well, guess what? Mobison gives

you that process. very powerful teaching

and mentoring. Even at your age today,

start teaching and mentoring younger

people. Very important. Look for

mentors. You know, I have a saying. It's

from my grandfather actually. When

you're younger, you need older mentors.

But when you're older, you need younger

mentors because they remind you how to

be young again. It's one of the reasons

why I like to spend time with younger

people, right?

uh value principles

uh get to know them. Value investing

isn't dead, okay? It's just that there

needs to be an adaptation of how you

apply value principles. The premortem

and the pre- parade by Gary Klein and

Danny Conaman. So premortem is a process

of saying, "Hey, I'm about to make an

investment or a decision.

If five years from now ends up that

decision was a catastrophe, why did it

go wrong?"

and take those reasons and and solve for

them. It's very powerful. But also do a

pre- parade, which something I learned

from uh uh uh venture capital where they

say, "Hey, the mistake is not losing a

dollar." The mistake is when you've lost

access to $1,000 from investing one is

you say, "Five years from now, this

thing has been a a multibagger.

Why did it happen or why did we miss it

five years from now? It's very powerful

psychologically to do it especially as a

team. AC analysis competing hypothesis

very powerful process that you get from

that book. Uh the psychology of

intelligence analysis. Okay. And then

scenarios, timelines and indicators also

that you get from that book. Boar

debates very powerful to if you're long

to find a short seller and debate him on

the idea. If you're short, find a guy

that's long, debate him on the idea.

There are services that you can pay on

Wall Street to get that. One of our most

used tools is the bull bear debate. In

fact, sometimes I don't know anything

about an idea. I literally will study

for 20 minutes and come up with a thesis

and debate a short seller on it uh long

or if he wants me to debate the short

side, I'll debate the short side. It's a

very powerful way to learn.

Here are some of the books I would

recommend. Uh the intelligence trap uh

mistakes were made but not by me. Uh one

of my favorites on here is Military

Misfortunes: How Smart Militaries Make

Catastrophic Mistakes. when genius

failed which is on on long-term capital

management and how they failed why smart

people make big money mistakes and how

to correct them and then one of the best

ways to understand narrative investing

today which is the halo effect

you have to read Michael Moes's research

this one methods to improve decision-m

very powerful

Elon has a process that I love I just we

just did a study on this actually and it

improved our process is like what are

the requirements of our investment

process and how do we kind of make them

less dumb like for example

a lot of investment firms require

meeting management to make investments

we don't why do you need to meet a CEO

like literally you know no father ever

thinks his daughter is unattractive no

mother ever thinks uh uh her son is

unattractive of course the CEO is going

to say good things it's a waste of time

sometime if you meet a CEO Talk to him

about his competition, about his

suppliers, what's going on in the

industry. Fine. You talk to him about

the business. That's not a requirement

for us. Delete the parts of process

step. For example, on the short side,

we've deleted a lot of process steps.

Well, the pro you to solve the problems

of the short side. Optimize, you know,

how do you make a step or process

uh a part of the process better?

Accelerate. How do you speed it up? How

do you automate? You know, with the the

with AI, there's certain things that

we've automated, but today people are

automating things without doing the

previous four. Very dangerous.

Michael Moeson wrote a memo called Alpha

and the Paradox of Scale, which is a

must readad of how to find weak games to

compete against. All right.

Final

mentor and teach use coaches.

One of the latest things we've been

teaching and I'll stop with this by the

way is

young as a younger person start watching

out for the decade of your 40s and your

50s both men and women. The and for many

people this is a lost decade and often

because they don't understand what's

happening there. But men go through a

form of menopause.

Women go through a form of menopause.

And it starts impacting your energy, how

you think, your mood, and all of these

things. And the midlife crisis dynamics

are really real. Okay? You don't have to

worry about that. And you're probably

saying, "Why is this boomer talking

about this shit?" But trust me, it's

coming. Okay? And the earlier you manage

for it, the better. uh for in many ways

for me my 40s was a lost decade. It

really was. Uh because the the the even

though I was aware of it there were

certain things it's like it's and I find

almost everybody goes through it. You uh

investment man there's a great data set

that Michael Mglesson showed me once

about investment managers how their

performance drops in their 40s. Okay.

Really interesting. Okay. Build leverage

into your personal and business life.

Not the ability to borrow money but

capital code content community

contractual structural and conditional

leverage. Very powerful. I have a

YouTube talk on this. Go do it. Have a

spiritual practice. Very important for

smart people to have a spiritual

practice. Uh have thought partners and

confidence. The power pair or the power

of the unstoppable too. I'm very lucky

to have confidence that if I have an

idea, I can pitch it to them and they're

very gentle with my ego about giving me

feedback on it. Okay, you need people

like that. You want to be people like

that and know how to build the right

ritual. So, we have a ritual, for

example, called the morning 90. Every

day, even today, I wake up, I read three

hedge fund letters, one investment memo,

and I go through the 13F of one

investment manager looking for ideas

every day. And that process feeds my

competitive advantage.

I have four or five things I'm world

class at. I need to do something on a

daily basis that feeds these things.

Find what that is for you. AI is going

to amplify smart people's mistakes.

Okay? Where we're where a people are

using these AI tools

and they're making really big mistakes

using them. Okay? An analyst has five

skills they need to hone and develop.

Recall off past patterns, mental

visualization of a business within the

feedback loops of its ecosystem, to read

between the lines, to make leaps of

judgment, and to synthesize. AI tools

inhibit or dull all these investment

skills, especially in rookies. Okay, so

watch out for these tools. Learn analog

training.

Thanks so much, guys, by the way, you

know, so you know, for listening. If you

have any questions, you know, hit me up

on LinkedIn afterwards if there's any

way I can be helpful.

>> Oh, for sure. And thanks so much for

your talk. There were a lot of

interesting insights there. I think I

definitely related to the over

stimulation

um and the reliance on Gen AI. Like I

think because you have so much access to

these tools, we have so much access to

these tools. It's very easy to get

intellectually lazy and just um pull out

my phone over here and just, you know,

go straight to the chat GPT app and and

ask something and have a discussion

because the, you know, the the speed of

information is rapid. And I [snorts]

guess my first question is about that.

It's about this intellectual laziness.

Um, and I I guess I'm curious how you

think that what are the specific impacts

that you think will come from that

within the markets? Do you think there

will be a lot more BS retail ideas? Um,

and and because that's the the one thing

I can think of as a as a clear, you

know, it amplifies a certain story.

Let's say there's an there's a certain

AI narrative that a lot of news outlets

are talking about and and obviously that

text data gets fed into the models and

we have this kind of recursive thing

going on and you know cuz because that's

one thing I can think of and I'm curious

if someone identifies something like

that is it exactly a short because these

things can go much higher before they

can go lower. I'd love to hear your

thoughts.

So, uh, great question.

Uh, uh, the first is [ __ ] goes and

fantasy stocks.

Okay. So, there's a group of stocks out

there in the stock market that retail

keeps buying.

And if they had a knowledge of history,

they kind of know how that story is

going to end. You know, you have $20

billion market cap companies that are

never going to earn the free cash flow

that has to actually justify those

valuations. Okay? So, just imagine

a $20 billion market cap company at a 5%

discount rate has to generate 1 billion

in free cash flow every year to just

justify the market cap at no growth.

Assuming a 20% free cash flow margin,

that 1 billion, you got to do 5 billion

in sales.

Okay? If you take their cost per widget

that they're selling and you take that 5

billion divided by it, they they have to

do a number of units that they they

don't even know how to manufacture that.

So, some of these businesses that have

zero revenue, that have large market

caps, will never make the free cash flow

to justify the market caps in the long

term. And the short term, people are not

doing deep work on them and they're

bidding them up and buying them on

narratives,

right? And narratives are amplified by

AI tools.

by the way. Um,

so

one of the problems of these AI tools

that it hasn't escaped the manipulators

that people are using these tools

already. Smart marketers are designing

pieces of content that the LLMs pick up

on and put as a link with their product

and to the link if you click through it

so that you go and pay the product. you

know, the smarties out there that are

way smarter than we will ever be,

they're figuring out, hey, how can we

use this to growth hack the system,

okay? So, you're you're going to need to

to to be careful. I think AI is going to

amplify

uh one of my favorite lines from a one

of I'm obsessed with Chris Nolan. Uh

almost everybody my personality, if you

ask somebody my personality type, what's

your favorite movie? the Batman trilogy

is always in there like and you know

theatricality and deception you know are

going to be amplified by AI you know so

so you have to be very very careful uh

with that and the younger generations

that don't have analog training that

haven't read the book the books that

don't know the historical context that

just look at snippets and snack on

information as opposed to sitting with

the book under constraints and really

thinking about it. Um,

they're going to lose a lot of money.

We're already seeing it happen.

>> Another thing you talked about during

your talk is this this idea that you

have multiple networks. So, I think you

said Southeast Asia, Europe, I think you

did you grew up in Paris. Correct me if

I'm wrong.

>> Uh, partly Haiti and France and

Switzerland and United States.

>> Okay. Okay. Then I lived in Zilla at one

point. I lived in Jamaica at one point

and I've traveled uh one of my goals is

to go to every country in the world. I

think I'm halfway there by now actually

the day I did I did cheat a little bit.

I crossed from Sweden into Norway uh and

a bridge and came back. I'm like check I

need to go back.

>> Yeah. Awesome. Awesome. Um and I I just

love to for you to expand on that. Are

you talking about different geographies,

different industries or is it just

everything in general just so that you

can have

>> as diverse in thought?

>> Of course. So, so for example,

um in your network needs to be

structured by age,

geography,

sectors

and then whatever passion projects you

have,

you know. So for example, a lot of

people they have their their people they

know at work an extended network people

they know in their country club and

that's all a lot of political problems a

United States today for example is guys

that don't know what it's like in a

steel me mill town in Ohio

that that steel mill is no longer there

you know that you you don't have that

perspective

um uh so for example if I'm learning so

my passion project right now is is

learning uh producing and movie

directing.

Okay. And I've been expanding my network

of producers and I've met a couple

directors. Unbelievable what we're

learning there. Okay. And we've been

literally stealing stuff from there. How

can we apply that to investing,

right? So, so you want to develop that

network. And then what you see is that

when you're asking for advice, you can

ask different people in different

networks. And there's two processes uh

that come from that. Uh one of them is

wisdom is multiple perspectives.

When you get multiple perspectives on

something, you tend to be wiser on it.

And the second is leading versus lagging

indicator analysis. So if for example on

a stock you talk to a day trader on it,

then you talked to an option market

maker on it, then you talked to a long

only guy on it, then you talked to a

short seller on it, you talked to a

macro guy on it. At the end you will

notice who is a leading indicator on the

idea, who is a lagging indicator on the

idea. It's a very powerful uh thing to

do. So, so for example, one of the

things I always advise young people

whenever they join a city is join at

least two or three different uh clubs.

Try to join the Brook, try to join the

racket club in New York City, try to

join the university club. And those

networks are very powerful.

leverage the alumni network of your

school. You belong to that. Okay. So,

you you literally want to classify by

network. Um

um you know the I'm probably going to do

uh a piece on networking. I think I may

have actually on that because they

people don't know how to network in the

investment business. What's funny is

that I'm known as a good networker. I'm

actually not. It's that the techniques I

use are really good.

Right. So, and one of them is you have

to belong to multiple network. One of

the latest ones uh uh for me a lot of my

friends are either on the board or

involved with the Santa Fe Institute

which is a complexity and network theory

think tank. Very important to study what

these guys are up to. some of the the

earliest VCs that were able to value of

of social media had read a book called

complexity by Mitch Waldrop that came

from the Santa Fe Institute and is still

an edge today by the way to read that

stuff. And going back to the

self-regulation for a young person,

sometimes I feel I don't know if it was

this morning, I'll pull out my phone and

I'll just check messages immediately

check Instagram and just get, you know,

hammered with all the stimulation

imaginable. And I'm just curious, what

does your typical morning routine look

like? And I say that question knowing

that what your routine should look like

should be very different to ours cuz

we're students and and but you are

trying to make the best investment

decisions possible. Yeah. What does it

look like? I'm curious.

>> Okay. So, it sounds

weird. Um it is.

Um,

and uh,

it's not as if I don't have an addiction

to this thing either, okay? I'm a

junkie.

>> And not only that, we own Meta, so I

have to be constantly on Instagram. I'm

addicted to Instagram,

okay? U, and Instagram knows me very

well. It's really interesting what

Instagram wants to show me sometimes,

especially if you go to your search

page. Sometimes I really don't like who

Instagram thinks I am, but fine.

The mornings

to emotionally self-regulate

uh are very important because the

initial conditions that you set in the

morning can drive

your entire day. Right? So what I do on

a daily basis and also by the way I'm a

bit reluctant always of talking about

this stuff because people think you do

this you're going to be successful. No,

that has nothing to do with success

because I know very successful people

that literally wake up with a cigarette

and a cup of coffee, okay? Like

literally a disaster way to nicotine and

caffeinate early in the morning. Don't

do that. Okay? Like the the the but what

a morning routine is going to do is

protect your resilience, longevity, and

self-regulation.

So me, I wake up and I go I get a

theraun or rumble ruler and I literally

give myself a massage.

And the reason for that is when you're

responsible for capital as you're

sleeping, you tense up because of all

the risks you're taking.

and your body when you wake up is

especially I'm 51 now you're you're you

feel more tense. So you got to trigger

your life force by working on your body

first. And the way that you do that is

actually not working out is actually

something that relaxes you. So a hot

shower and a and a theraun or rumble

roller massage. You guys know what a

rumble roller is? It's a roller with

nubs on it. It's look looks like a

torture rack and then you you rumble

your body on it. It detenses you after

that. I drink a liter of water.

You need when you get older you

dehydrate faster. It's actually one of

the things that also makes you look

older is you it's not that you you have

to hydrate more. Younger you need to

hydrate less. You still need to hydrate

but as you get older you have to hydrate

a lot more. And water when it goes

through your system actually wakes every

system up in your body. And then the

third thing I do is I exercise. Uh so

that's my morning routine. Uh and then I

have usually a a breakfast which is

usually very heavy on fats. Um it's a uh

one of the greatest harms nutrition has

ever done. The nutritional industry is

tell you that fats are bad for you. you

actually need healthy fats for thinking

especially for the brain. Uh and then

after that I do my morning 90 which is

three hedge fund letters, one investment

memo, 113F. That's my morning routine.

You know there are days when I meditate

uh especially if I'm having a problem

coming up with insights. Um one of the

things that we use to meditate by the

way is I wear earplugs when I meditate.

Okay? It's very or when I work. This is

actually one of the best things that you

can do because I'm very distraction

prone uh you know the have you ever seen

up you know squirrel you know I'm Doug

the dog you know the so so I have to put

earplugs on when I work shut down my

phone and just like like focus on stuff.

That's what my morning routine looks

like. Don't do violence to yourself in

the morning. These guys that are

plunging into ice cold bass when they

first wake up. No, no, no, no, no.

That's stupid. The you're you're

literally jacking up your adrenaline,

jacking up all sorts of negative

hormones. No, don't do that in the

morning. Wake up gently. You know, don't

do yourself violence in the morning.

>> And you know, it's it's the end of we

have four minutes left, but a lot of the

people here,

>> you can go longer if you want.

>> No worry. Yeah. Okay. No worries. But um

a lot of the people here are very smart,

very driven people. I've met them,

spoken to them, good friends with a lot

of them. And if there's one lesson that

you think a young, intelligent, driven

person should take from this talk, like

one thing, what would it be?

Triads.

So

what you did with me

where you cold called me, I happen to be

receptive to cold calls because I myself

cold call a lot,

right? And we actually design our

content strategy so that smart people

find us,

right?

But this thing of cold reaching out to

somebody that you don't know and then

building a relationship with them,

adding value to them, never lose that

ever.

One of the best ways to add value is you

meet with somebody and you ask them

whether young or old, what are your

fears and frustrations?

What are your wants and aspirations

across categories? And then you go back

and if you study a way of adding value

to them, call them back and said, 'Hey,

you know that problem you're dealing

with, that fear and that frustration,

have you considered this to solve for

it? One of the best ways to solve other

people's problems is to introduce them

to somebody that can help them solve

that problem

is how you create triads, which is group

of three people in your network.

That's the biggest leverage that you can

take as a smart person because it's

going to take you out of your echo

chamber. It's how you create emergence,

how you create luck. It's how you create

business opportunities. It's how you

create, by the way, don't get me wrong,

there are triads that go wrong, but

usually the cost of them are totally

dimminimous versus the upside that you

get. you know, the amount of time that a

great investment idea comes to us and we

realize that it came to us because of a

triad that we created a decade ago. I

introduced one of my best friends to a

venture capitalist once. It was a

venture capitalist to another person and

then two years later they asked me to be

on the board of a company they were in

and it's been one of the biggest

investments I've ever made on the

private side. Right? So, so that's the

the one advice that I would uh follow

>> when so another thing for a lot of these

people that I've met a lot of them go to

good you know great schools and I think

that you know I studied at UCL was a

good school and I'm now I'm at Colombia

and one of the things I noticed with

people intelligent people who go to good

schools is they can generally

fall into a position well get into a

position where they're in love with

their ideas and they're so convinced

they're right because they're surrounded

by other people who are extremely smart

and they're consistently told you are

winners. You are the future of society.

You are going to rule the world. You

deserve the world. And sometimes I find

it extremely funny and I find myself

being an ambitious person falling into

this trap going, "Oh yeah, wow. I've

I've realized something that's this is

this is crazy." And I guess I'd like to

hear it from you who's been around

winners, been done extremely well for

himself financially.

How do you avoid these pitfalls and

thought and how do you make sure that

you are you constantly remain that

intellectual humility that everyone

needs?

>> So at one end you have to expose your

ideas to a wider public.

you know, the uh taking an idea that you

have,

putting it into a YouTube talk and then

having people comment on it or somebody

will be like, "You're an idiot."

Somebody else will be like, "Hey, by the

way, have you considered X?" Uh, one of

the insights that's changed my life,

literally changed it, was I gave a talk

on idea ingredients. It's on YouTube,

Yale University, idea ingredients. And I

listed 20 idea ingredients,

right? And my business partner

looked at the ingredients. He's like,

"You're making a mistake." And I was

like, "What's the mistake?" He's like,

"Well,

these 20 matter, but at any one time,

there's really four of those ingredients

that are 80% of the value.

You should only focus on these four."

And when I said to him, "Look, do me a

favor. Pick the four you think. I'll

pick the four I think are the most

important. We pick the same four.

And since then that idea criteria has

been literally multiplying our

performance.

It would have never happened had I not

taken my ideas if I cherished it. Such a

competitive advantage to know. No. Put

it out there.

If your ideas, including investment

ideas, are really good, when people hear

it, usually they're going to hate it.

Okay, that's also good feedback. Why are

they hating it, right? There's a lot of

really powerful competitive advantage

that can be designed from that. So, put

yourself out there, you know, don't

think that you're right. If you think in

your mind when you're debating somebody,

I know I'm right, he's wrong. It's time

to understand the other person's

perspective. literally turn on your

empathy muscles like help me understand

the way you're thinking like what's

going on, you know, and dig in. You

know, the intellectual arrogance kills

smart people. It's intellectual

arrogance is even worse when it's

secret. A lot of passive aggressive guys

in the investment business have this

secret intellectual arrogance. I'm

right, but I'm not going to tell you I'm