Legendary activist investor Dan Loeb

You of course is the [music] CEO and CIO

of Third Point.

>> The lost art of short-selling has come

back and it's absolutely critical.

>> [music]

>> Doesn't matter what you do, you have to

be really selective. People talk about

stock pickers market, this is a bond and

credit pickers market. When we were

small, [music]

our main tool was a shame and humor. Dan

Loeb turning up the heat on Nestle over

[music] the weekend. The shift has

really been more towards a dare to be

great message. [music] Activism without

proxy contest is like Catholicism

without hell.

>> You're [music] very active on the

Twitter as well.

>> Oh, well.

>> your voice.

>> A lot a lot of emotion brewing there.

>> Can we actually start with that? Before

Twitter

you were actually quite active, but they

were in very different places. I mean,

you were in Wall Street Bets before Wall

Street Bets existed. Can you just walk

us through your evolution as a as a uh

public persona?

>> Sure. I mean, there was this

brand new technology

uh that came out called the internet.

And really shortly that thereafter

uh

long before Reddit or any of these other

things, there were a series of of chat

boards. There was, you know, Yahoo,

there was something called Silicon

Investor

um the a few other ones and people would

congregate and kibitz. It was done

mostly anonymously and um it was an

interesting place to

exchange ideas. There was it was it was

really the wild west. People could

pretty much say or do anything, but

there was a lot of there was a lot of

substance there, too. It's not actually

that much different than from today.

>> Do you uh did you engage at all in any

trolling per se?

>> Well, some people use the term OG.

Sometimes I say I was the OT.

Um

>> The original troll.

>> Yeah, no, I did. I mean, it was it was

fun. You know, I I didn't know I was one

day going to run institutional money and

have a big fund and, you know, I was

just having fun and uh and blowing off

steam and

and

yeah it was fun. I mean investing is fun

and particularly on the short side. I

mean there's so much humor in it when

you

detect these companies especially in the

90s. I mean that

it was really unsupervised. There were

some incredibly fraudulent companies out

there and it was just fun to uncover

them and

kind of taunt the management teams and

ultimately

>> prevail.

>> You have one story above others that

kind of stands out

in that era?

>> I mean there were

there were a bunch. There was

uh

Wow. Um

there was a company called Actrade that

I remember run by a guy who was like a

repeat uh fraudster and [laughter] we

un- uncovered it and

and um

you know I I know we really got under

this person's skin and ultimately it was

really just a factoring company trading

at

five, six. I don't remember what it was

at. Some large multiple of book value

and they had created a new technology

called TADs. I don't remember what TAD

stood for but they were basically

repackaging

factory securities and saying that they

had some special technology. They were

financing refrigerators and things like

that.

>> Tell us

um

your evolution as an investor. When you

started Third Point, I mean you started

with very, very little capital. Now it's

almost 30 billion of AUM. You're

multi-strat but you learned at

Jefferies, I think like you learned

helping people like David Tepper

allocate capital. Just walk us through

how you learned to invest.

>> Well, I I started um really fascinated

by investing and wanting to do it. I

think when I I remember when I was 10

years old

my dad took me and my dad was a

notoriously bad investor himself. So, he

didn't give me any good examples. He's a

great lawyer, not a great investor. But

he took me to meet a broker and I

started investing and then in high

school in the 11th grade, I got a job at

the branch office of Bear Stearns sorry

of Paine Webber working for a guy named

Alan Crown who let me post his books and

make cold calls and I think we broke

certain securities laws but I think the

statute of limitations is passed. I

would trade options on Occidental

Petroleum and Teledyne. There was a lot

of volatility and

I think I had flurries of making money

and lost all of it a couple of different

times but it was a good good lesson. I

continued doing it in college and then

um

my

learning started really formally at

Warburg Pincus where I really learned to

value enterprises as my first job in

private kind of a process spectrum of

private equity and venture capital.

I worked at a risk arb firm which was

really invaluable.

Um and then I s-

skipping forward, I had a I had way too

many jobs in my 20s.

Um but I got really serious at

Jefferies. I had a amazing opportunity

to work on the distressed debt desk

there. I started out as a a research

analyst. It was just like drinking out

of a fire hose. There was so much

activity.

Uh the securities were so cheap coming

out of distressed.

And um

it was you know, the 10,000 hours,

10,000 reps. We would write up uh

different things every every day. There

were big blocks of debt to move and I

really got that that was my real

learning point and you know, I stress

this to people that you know, everyone

kind of sees mentorship as a sort of

hierarchical thing where you you know,

learn from some wise older person but

it's I

I I learned a ton from my colleagues,

from my own cohort and I learned a ton

from my customers. You know, like did

Eric Mindich was a

um boy wonder at at Goldman. He was the

youngest partner

>> Youngest partner at Goldman.

>> Yeah, ran the arb desk there, and he had

this triumvirate or quadrumvirate,

whatever the four four people. Uh

I don't want to leave them out, but

almost Marrone, uh Dinakar, and um

can't think of some other guys. Anyway,

they were great, and they really kind of

brought me into their thought process,

thinking about event-driven investing.

And then, you know, I covered some of

the smartest people in the business,

including David Tepper. I got to watch

their thought process. And I was like a

you know, like a Chinese corporation

that was like copying and reverse

engineering and taking everything in and

creating my database of knowledge and my

own operating system, kind of taking the

best out of what all these different

people did.

>> And what was that style when you first

started Third Point? What did you What

was that expression?

>> That was Well, I think that you know, we

call it event-driven investing. It was

really

less [snorts] focused on the quality of

business, more focused on very complex

transactions, takeovers, spin-offs, risk

risk or arbitrage, bankruptcies,

privatizations, demutualizations. And

these transactions created unbelievable

opportunities for alpha because of the

confluence of

dislocation,

opacity,

kind of time, but also this goes and

nothing changes. You know, I always

quote this Jesse Livermore line, there's

nothing new under the sun.

A real focus on management incentives.

So, in all these different kinds of

transactions, management was

incentivized to sandbag their numbers

during a time when there was an excess

supply of securities where their options

were being set, and we as co-investors

got to come in with these depressed

projections and ride along not just the

Well, we got to

ride along a few different things that

would happen. Greater transparency and

understanding of the business,

coverage,

companies that

that delivered a top line and margins

and ROE and everything else better than

expectations. So, it was really a golden

era for that type of investing.

>> From where that started to what Third

Point is today, just describe that and

where you want to like where do you go

from here?

>> Yeah, so stylistically that event

approach, it's it's

it's still something we think about.

It's in our

um

it's in our framework, but I think what

happened really when technology became a

bigger

uh force, but really everything changed

is a greater focus on business quality

and

um innovation and disruption and more

thematic on the one hand understanding

of consumer trends, what's going on in

financial services, what's the economic

macro backdrop that's that's supporting

all this. And of course, the big

topic of this event, you know,

AI is sort of the culmination of that,

but all of these

major technological innovations that

have really happened since

>> You could make money before by not being

technology savvy in the markets.

>> could be technologically illiterate or

just say I don't do it. And you could

also be even more or less ac-

You know, up until the GFC, I think you

could be more or less economically

illiterate and make a lot of money.

>> And now?

>> Uh

uh

you wouldn't want to be either one of

those things. I mean, given how much how

much more important

>> Like the tech through line needs to be

understood everywhere.

>> Yeah.

>> But even if you're like Blue Owl on your

trade I mean, Blue Owl obviously is very

sophisticated in tech now, but

any pool of capital that used to not be

correlated is effectively correlated.

>> I mean,

yes. Yeah, you could say that. And I

just want to answer your question just

to kind of fast forward and give people

a snapshot of what we do today.

Rob Schwartz is my partner, and we took

Kempo Karate together when we were 10

years old. He was a purple belt. I think

I never made it past yellow belt, but um

we reconnected at our 20-year reunion in

I'm we're age I'm aging both of us.

Sorry to give up your secret, Rob.

Uh in 1999.

It was our 20-year reunion, and he was

working

as a a sales rep for wireless RF

components. And I said, "Wow, this guy'd

be great to do channel checks for us."

And then I asked him

um

a couple years later, "Say, you meet

some smart people. If you ever come

across a really savvy engineer,

we should invest." We didn't know what

we were doing. We weren't venture

capitalists, but we're getting behind

person There was a guy named Dave

Fisher. Started a company called

Radiocommunications.

They made chips He made chips that were

I still remember ABG compatible for

Wi-Fi base stations. And ultimately the

company was sold to Texas Instruments.

And you know, we've I won't go deep into

our our our venture business, but that

we started to do within the fund. We've

done a couple of

dedicated funds. So, we have that strand

of activity. We can talk about a little

bit more about what we're thinking and

how we're seeing this, but I think what

ultimately what what you get to is that

all these things are interconnected and

come together under the platform that we

have today cuz we have the main hedge

fund which does credit, equity long

short. Credit is both structured credit

and high yield.

We have a CLO business that we acquired.

We started a

um a private credit business.

It does

traditional private credit, direct

sponsor financing, direct lending, and

workouts, which is very important. So,

credit solutions, as they call it. Lot

to do there.

And then we started an insurance company

a few years ago. It's not the first

insurance company we did. We did a P&C

company, but this one is was wholly

owned. Now we own half of it. And the

insurance company

captures basically the investment grade

part of what we do. So, private credit

through structured vehicles, structured

credit, whole loans.

Um

investment grade, both private and

public. But we also can use our surplus

capital in very interesting ways. So,

>> So, what's the role of the human? What's

the role of Dan Loeb in running Third

Point 10 years from now?

Like

10 years before Dan Loeb was 100% of

Third Point.

>> Uh-huh.

>> And then there's now there's agents,

there's AI, there's all this learning,

there's all of this data.

Where do you see the role of the human?

Where do you see the role of systems

making decisions, allocating capital,

managing risk?

>> I mean, so

first of all, investing now like first

of all, my time is spent primarily on

managing the hedge fund, which for now

is the biggest capital pool and most

important business that we're in.

>> Yeah.

>> The human element, I think this is true

for everyone you have here. Like

the element of

the social component that the human

network of knowing people, being able to

to capture opportunities, work with

people, interact, like that's never

going away. Like you're never had going

to maybe maybe you can theorize that

there will be agents that will

sit at Andreessen Horowitz and whoever

else your funds.

But I think the human will always have

to be there because people like to

you know

>> to know who's making or losing the

money.

>> Yeah, and there's a there is a thing

that I think that it the the agents they

have will never really be able to look

in your eye and assess all the things

that

>> You've expanded your philosophy of

investing in companies from

cheap cattle cheap securities with

catalysts is I think how you described

it on a podcast recently.

Um and now you're very concerned about

moats, defensibility, and just the

quality or the brittleness as Chamath

likes to remind us of the revenue. So

maybe could you tell us how you evolved

that core thinking about the quality of

companies and then maybe give us some

examples of the companies that now fit

through that filter where you feel they

have a moat, you feel they have

durability.

>> Yeah, obviously that's everything right

now. Chamath talks about the time

bounded value of companies and I think

that's essential. Um what what are the

companies that are going to be around

7 to 10 to 20 like what what what what

are the real moats that exist out there?

And it's it's it it it is harder

now. I don't think we can

I don't know

that we can really go out, you know, 10

or 20 years ago. By the way, I think we

diluted ourselves earlier because I

think if you ask people about the moat

around, you know, IBM or, you know, some

of the other companies that

>> AOL

>> AOL, Yahoo, you know, you say the same

thing. I mean, look, we're we're we're

we're investing

outside of tech into uh

companies that have

uh

you know, some

great Well, first of all, it also comes

back to the management because we can't

really just

look at a

product or a technology and say, "Oh,

this is going to be

it forever." So, we really look for a

management team that we think will be

adaptable. And just like you guys were

saying last night, you don't want to be

on boards of companies. These are things

that they should be doing. So, I think

that's a huge part of it. Like finding

management teams that you really believe

in that have

have a proven ability to stay ahead of

>> Is that quantifiable or is it still a

very much a subjective

>> Um sorry, is [clears throat] what?

>> Is it quantifiable assessing the

management team? Have you built a rubric

for doing that? No, it's still a very

subjective, qualitative

>> I I think it's one of those things after

30 years there's like a pattern

recognition and you

>> Let me ask a question on um on

screening. You know, in the I think

you've said recently publicly that

there's a lot of opportunities on the

short side in the market right now for

the first time in a long time.

How do you start top down Is it Is it a

top down or is it an opportunistic you

know,

something comes across the wire and you

guys jump on it in kind of an

event-driven way? Or do you guys have

kind of a systematic top-down approach

to looking at the market and finding

those opportunities?

>> Yeah, there's no one approach to it. I

think one thing that we've avoided is

kind of evaluation

a solely evaluation-based approach.

There's a I've just seen

I've seen too many people get run over

by shorts that

have

dumb valuations, but they get captured

on you know, Reddit or one of these

other things and they just get there,

you know, or like some of these space

companies right now that there's no

rhyme or reason. We had a

a really strong view on homebuilders

from last year

that uh

there were two things going on.

It wasn't just

it wasn't just rates, mortgage spreads

that were depressing housing prices,

that home prices

that the home building industry was

first structurally

um

impaired because of the way that they

were all pretending to be NVR, which is

they're all pretending to be asset

light, but they had massive commitments

to these land pools, which in in things

that they said were options, but they

were really very committed in the

capital, and that that value was going

on. But but that the um the home

building industry was really the last

industry that had this post-COVID

hangover of inventory disruptions and

and pricing um

pricing that really made no sense. You

know, you had all those prices went up

to unsustainable levels, but so did um

building costs went up, and and buyers

are no longer able to pay those prices

at the current current um

uh

in the current financing environment,

but that the but they've also gotten

squeezed by

by inflation and costs. So, that's been,

you know, something so we've

been shorting things related to that.

>> Let me bring Sachs into the discussion

here. Sachs, we've learned uh a little

bit about distribution of public

securities. You're famous in the All-In

theme song of this great quote, "Let

your winners ride." I'm curious when you

hear Dan talking about this,

um

how you think about, as a private market

investor, how to navigate distributing

equities and and how you've sharpened

your blade about

you know, which ones have brittle or,

you know, more robust revenue.

>> I mean, that's I'm sure you guys share

this. It's it's one of the most vexing

questions.

We were

um

we were private investors in Palantir,

and I think we sold all our stock in the

20s. Huge mistake.

>> Gosh. So, you missed a 10x after going

public.

>> Yeah.

>> Or 8x or something.

>> We were um um private. We led the B

round in

in uh Upstart. Uh

that was one I think we learned not to

go on boards anymore because it

restricts your ability to be liquid. But

we're also early investors in in

Enphase. And we um

sold some stock on the IPO and then took

a tax hit. And I think sold it under a

dollar and the stock I think had we

stayed on would have made $4 billion. So

I am not claiming to have any great

expertise in knowing how to best

distribute our

>> Dude, markets are brutal.

>> It's so hard. I mean, you're

>> No, this is why I bring it up. We've all

struggled with this. Sachs, where did

Where have you wound up?

>> I I think it's case by case. I mean,

there's some companies where

uh like I was on a board and you can't

sell and you end up regretting that. And

then there's others where the best thing

to do is just hold on to that stock

forever.

>> Examples in your portfolio we made great

decisions.

>> I'm not going to talk about the ones

that didn't do so well, but um but no, I

mean, look, I've I've owned um Meta and

Palantir as a

private, you know, as a venture

investor, as an angel investor.

>> And you sold

>> And the question Well, I sold some and

held on to some.

Obviously, in hindsight, you take Meta.

I think Meta IPO's Facebook back then.

IPO'd at a $50 billion market

>> Yeah.

>> Yeah. $50 billion. Now it's

>> went down to 18. Now it's

>> Yeah.

>> Can you imagine

how the alternate universe

>> It's 400, right?

>> Chamath never sold his Facebook, how

insufferable he'd be?

>> Or

>> if

>> I would

>> Reberg never sold his Google. Reberg

would be worth $10 billion.

>> No, no, I I wouldn't be nearly as good.

>> What's that?

>> I wouldn't be nearly as good.

>> Like a I'm like an analyst.

>> Because he created $10 billion.

>> Not real. It's not It's not earned.

>> So back in those days, 10 years ago, we

thought a $100 billion market cap

company was pretty much as big as

anything could get.

>> Yeah.

>> And so Facebook at 50 or whatever, it's

like the upside was to 100.

And things are just totally different

now. We have multi-trillion dollar

companies. The market's so much bigger.

And that that changes.

>> that's a rub against Nvidia, which is a

$5 company and people feel like it's

sort of a ceiling on it. I think we'll

look back

at some point in time and say that was a

foolish

way to think about Nvidia given its

dominant position and

its valuation relative to everything

else.

>> right now?

>> Yeah, absolutely on earnings over the

next two or three years.

>> It's

>> And is it because people are having a

hard time processing the largest entity

that's ever existed in human

>> I I think

>> that and and the narrative that that the

Well, first of all, technically, there's

all this other stuff that's

growing faster and going up more. People

are It's

And in the long short, pods are

structured such that they have to be

short something. So, Nvidia feels like a

safe short. By the way, Google was a

safe short. Um

Amazon was a safe short. So, I mean,

this just happens and sometimes the

language should have a valuation and

they they break out. I think that'll

eventually happen with Nvidia.

>> But there's probably some boundary

condition discount to that, right? Like

we've never seen a valuation like this.

You can't

overbet that. I want to shift topics for

a second. I just want to talk society

and culture before we run out of time

with you.

There was this uh incredible thing that

you told me which I relate to these

guys, which is um you're very passionate

about criminal justice reform.

And specifically, you were a key person

to get the pardon of Ross Ulbricht. Tell

us your views on

criminal justice, why it hit such a

nerve, and then why Ross Ulbricht. What

was What happened there that said, "I

must fight for this guy?"

>> Let me take a step back and just talk

about my framework for philanthropy,

which is I think not unlike Brad

Gerstner and many people in the room

here is that I care I would say

everybody up here I care deeply about

income inequality. I care

deeply about

making sure that as many people have

opportunities to do the incredible

things that we've all had here. So my

interest in criminal justice reform

really started earlier with an interest

in education.

And education reform and I was very

lucky to get on the

to start supporting get on the board

ultimately be chairman of Success

Academy which is a charter school

network in New York and I do think

nobody talks about it but it the thing

that's hiding out in plain sight for

everybody is that the problems with

income inequality isn't that you know

Jeff

Bezos is going to be a a trillionaire or

all these other people are gaining

wealth is that we're not equipping

children and particularly the most

vulnerable children with the

intellectual tools that they need to

succeed and compete and it's not

because poverty is this intractable

thing that can't be overcome. We've

proven that it can be. The problem is

that the unions and the basic principles

that we all use in business which is

accountability and merit and cultivating

talent is set aside for the benefit of

adults who are part of these unions.

It's a systemic thing. It's not a lack

of money. It's really a lack of it's

just a broken structure.

>> Accountability is I think what I'm

hearing, yeah.

>> So spend a lot of time on that just

leave it at that. Um

I I then became aware and it was

interesting that I was looking for

issues that conservatives you know it

was great to see Fetterman and McCormick

up here. Like what are issues that

conservatives and liberals progressives

can agree on? Hopefully they can agree

that we want young people to be better

educated. I think we can also agree that

whenever you put the government in

charge of something, they'll it up

one way or another.

I I want to give you guys a shout-out

though for not up this private

public partnership with the investments

in the private sector cuz I think this

administration has done an enormously

good job at backing companies, but let's

put that aside. It's one of the rare

instances where I've seen that. But, um

>> Can you give an example of that that's

standing out in your mind?

>> We have a company in our portfolio

called Atom Computing that with many

other quantum companies um

has gotten money from the government,

and we were just super impressed that

they

uh

how they contracted with us to engage

with them in cryptography and to meet

the government's needs, but also in the

financial component, they drove a really

tough bargain. The the the uh

government, the taxpayers are going to

make a ton of money on this.

And their involvement also has will

contribute meaningfully to the value of

this business. It's just like a win all

the way around.

>> and a customer.

>> Right. And they are capturing part of

that

value as a customer for the American

people, which they

I think everybody deserves.

>> Okay, so back to the

>> So, criminal justice reform

First of all, there's a lot of bad

people in jail. I'm not one of you know,

I think the criminal justice

uh

uh movement has been undermined by

uh folks who see it as an opportunity to

not prosecute, not

deal with bad people that are out there.

But, there's also a lot of people that

are rehabilitated.

Uh

well, there's really three different

categories. There's people who are

falsely uh

convicted. There are people who have

shown

uh contrition and rehabilitation.

And those are then there are those who

just had a really

disproportionate sentence relative to

what they did. There's a case right now

of of a guy named John Jonathan Grobman,

who was a dealt in grey market diapers

and formula. He got an 18-year sentence

for dealing these goods.

In the case of Ross Ulbricht, I was

approached by someone and this just

seemed

Ross's people may know,

probably this room knows, he was sort of

a

a folk hero because he had this sort of

cat and mouse game with the government.

He ran Silk Road. Silk Road was a one of

the first like crypto-based exchanges.

He acknowledges that he did things that

were illegal that he shouldn't have

done. He regretted it regrets it. Drugs

were were dealt on the exchange.

Um

Uh

but

that that's that's what he was accused

of. The government later said that there

were murder for for hire

incidents. That was never That wasn't in

the He was never prosecuted for that and

he denies that that ever happened. But

in any case,

um he was sentenced to a double life

double life plus

40 years. Who knows how he got the extra

40 years on there and how he would spend

that after he'd been there for two

lifetimes.

And um

There

There's a

a woman I met through Intel named

Rivatez who alerted me to this. She's

friends with Olaf Carlson-Wee and

sort of the crypto insiders. And um

I I thought about this like this guy's

got no way out. There's no

There's no recourse through the system

to get someone with a life sentence out

of jail. This This will only work with a

presidential pardon.

And we worked on it. We had some

familiarity with the pardon process.

Worked on it. Um then I approached

Charlie Kirk about this. And Charlie

really embraced this and embraced this

individual as someone who had been

falsely

or not falsely, but unfairly sentenced.

He took it to the president. Um

Charlie had a

also had an attorney named David

Warrington, who's currently the uh

>> White House counsel.

>> White House counsel. I just found out a

couple days ago cuz I was talking to him

that he was his lawyer for a decade. Um

so I'm not taking credit for this. I'm

not saying Charlie does. It would It

takes a village, but David had been

working on it and on the last day of

Trump's

45th term

we we were we were certain that he was

going to get out and the Justice

Department for whatever reason said, "If

you

if if you if if you commute his

sentence, we're going to go after you."

To to the president. So he

uh as I understand um he uh

withdrew the

commutation. So 4 years went by and um

really Charlie took the lead on this.

This was his only ask of the president

and the president had a uh to

libertarians and to the crypto community

promised to uh

deal with this and not only was his

sentence commuted, but he was pardoned

and today Charlie is married Oh, not

Charlie, sorry. Um

Ross is married, is having a child and

uh

living a free life after spending a

decade, which is probably

argue whether that was the right amount

or not. Um

>> And you feel like you should Is there a

role for you to play in doing more of

this? Was this a one-off or a

>> I I continue to work on cases. There's

an organization called Aleph

uh and we work

you know, constantly on different people

and uh I think it's you know, look

there's I I feel like as

philanthropists, it's great to do

to work with organizations.

and there's a lot of great organizations

I work with.

I do a lot fighting anti-Semitism and

supporting Jewish identity also, but I

also think that we can help people one

at a time. I think it just really

nurtures the soul and I think it just

>> Amazing.

All right, let's give it up for Dan. Dan

Lowenthal.

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