My guests this week are both veterans of the podcast, Jason Zweig and Morgan Housel. They are two of the best in the world at making the complicated simple, and in that spirit, I’ll keep this introduction short. Morgan shifted from public markets to the private markets a year ago when he joined the Collaborative Fund, so we begin with what he has learned about venture capital in his first year on the job.

For comprehensive show notes on this episode go to http://investorfieldguide.com/writers

For more episodes go to InvestorFieldGuide.com/podcast.

To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

Books Referenced

The Devil's Financial Dictionary

Modern Monopolies: What It Takes to Dominate the 21st Century Economy

Thinking, Fast and Slow

Shoe Dog: A Memoir by the Creator of Nike

Life and Fate

Online References

A Rediscovered Masterpiece by Benjamin Graham

Rishi Ganti podcast

Small Companies Are Gone, But Should they Be Forgotten (Zweig Column)

Show Notes

1:43 – (First question) – Morgan on why he got disenchanted with the investment industry and shifted to venture capital

4:05 – Jason’s thoughts about investing in the private markets

            5:19 - A Rediscovered Masterpiece by Benjamin Graham

7:57 – Morgan’s thoughts on how private market investments differ from public market investments

10:24 – Exploring valuations of businesses and what they say about broader trends in the market

13:21 – How much does Jason think about individual companies when exploring the overall market trends

            18:41 – The Devil's Financial Dictionary

19:28 –What does it take to be a successful founder

23:40 – How does Jason look at activities that are work related vs just for pleasure

25:33 – If Jason had to start a business, what would he do

27:22 – What business would Morgan start

29:18 – Problems with the financial planning industry

30:56 -  The role of stress in personal and business development

            31:04 – Modern Monopolies: What It Takes to Dominate the 21st Century Economy

38:17 – Are there signs that let you know when to cut and run vs when to keep slogging along with something

            42:02 – Thinking, Fast and Slow

            44:03 – Shoe Dog: A Memoir by the Creator of Nike

44:20 – Principals to approach learning

50:10 – The idea of keeping your identity small in a world where social media encourages one-upmanship

53:56 – Last significant thing Morgan changed his mind about

55:23 – Why Morgan chooses passive investing with stocks, but as a VC, essentially is a stock picker in private markets

            1:00:44 – Rishi Ganti podcast

1:02:14 – What major thing did Jason change his mind about

            1:02:30 – Small Companies Are Gone, But Should they Be Forgotten (Zweig Column)

1:06:33 – What was the most interesting idea Jason and Morgan have been tackling and what data helped to spark that interest

            1:09:32 – Life and Fate

This week's conversation is about performance. More specifically, it is about the ins and outs of steady progress and growth. My guest is Brad Stulberg who coauthored the book Peak Performance, which combines research from many fields into a description of how athletes, creatives and others continue to push boundaries in their respective crafts.

As someone who is intermittently lazy, the growth equation framework that Brad and I explore has impacted me often since I first read the book several months ago. I hope you enjoy this conversation, which isn't about investing, but which is, at its heart, still about the power of compounding. 

Books Referenced

Outliers: The Story of Success

Peak: Secrets from the New Science of Expertise

Online References

Jool Health

Show Notes

1:32 – (First question) – How Vick Stretcher influenced the book, Peak Performance

4:32 – Looking at some of the preliminary research at the science of purpose

7:58 – The idea of a growth equation and the components that can lead to success

11:47 – How the introduction of stress can help in all sorts of creative and entrepreneurial pursuits.

13:39 – The ratio between physical and mental as an impact on this formula

14:56 – Just manageable challenges and the role that they play in the growth equation

18:06 – The idea of just manageable challenges through the example of an athlete

22:19 – Favorite example of a crazy feat of physical performance, stress on older athletes operating at high levels

23:30 – Thoughts about outside influences like mentors/coaches and how they help high performance individuals advance

25:51 – Describe catabolic and anabolic states and why anabolic is so important

29:13 – How the relationship of catabolic and anabolic states also helps the mind

30:47 – How does the idea of practice play into the growth equation

32:49 – Exploring the nuances of practice and why you don’t go all out

            32:56 – Outliers: The Story of Success

33:00 - Peak: Secrets from the New Science of Expertise

34:24 – The idea of designing of a day

42:06 – What role can environment play on us

43:40 – How far is it healthy to run

46:25 – How does ego play into all of this

48:06 – The idea of camaraderie and study of Air Force Cadets highlighting this

49:28 – Fatigue and why it is believed to happen in the mind and not the body

54:00 – Most memorable day

55:43 - Method for finding purpose

            56:29 – Jool Health

58:26 – Kindest thing anyone has ever done for Brad

Learn More

For more comprehensive show notes on this episode go to http://investorfieldguide.com/brad

For more episodes go to InvestorFieldGuide.com/podcast.

To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

Several weeks ago my conversation with Leigh Drogen on quant investing proved timely and popular--because everyone in asset management is facing the rise of big data, and the use of data science in investing strategies. Because of the rise of quants, many are asking themselves how to survive and thrive in a changing industry. In short, how can traditional managers compete with quants?

This second conversation with Leigh was set up to answer many of the questions posed in the first one. If quants are taking over, what should other investors do about it?

Leigh proposes a method by which old school asset managers can restructure their thinking and their process to compete with and even beat purely quantitative competitors. The method involves pulling the best from both worlds and combining them into a hybrid structure. But it will be impossible without a wholesale change in mindset, which is where we begin. Please enjoy round two with Leigh Drogen.

Links Referenced

Revenge of the Humans Part II: A New Blueprint For Discretionary Management

Show Notes

2:14 – (First question) –  What role will ego and mindset play for traditional hedge funds looking to transition into quantitative investing strategies

4:21 – Describes the traditional process that hedge funds use to make investment decisions and how the internal politics can hamper it

6:08 – What value has portfolio managers played at hedge funds traditionally as the quarterback of a fund

9:57 – A look at what Leigh has seen as he sits with teams

12:20 – A look at places that have tried to simply add quant to their firm’s strategies without “tearing it down to the studs” and properly integrating them into the process

15:00 – Leigh is asked to define the basics of a good investment firm’s strategies

16:57 – Strategies for writing down core beliefs, whether it’s for yourself or your firm

17:49 – Exploring the second step, finding a differentiating view and how to succeed with it.

21:43 – The importance of force ranking and structuring the unstructured

26:14 – Building factor models

29:42 – How the portfolio manager position should have less room for subjectivity than at the analyst level

33:44 – Is anyone integrating this kind of high level data at the portfolio manager level into the decision making the way Leigh describes

35:07 – What blind spots are created by systematizing their processes

36:18 – Why much of this applies more to shorter and structured periods

38:23 – Shifting to portfolio constructions and what Leigh would do to create the right mix

43:39 – Shifting to management structures in these firms starting with the role of the CIO

45:24 – Looking at the different quant roles that exist in a firm and what they should be responsible for; data engineers, data analysts, pure quants, and quantitative engineer

48:20 – If you are an undergrad or grad student right now interested in asset management, what are the roles you should be thinking about targeting

49:25 – Why communication skills are still so important, no matter what role you are in

50:25 – With all of the tools and skills that Leigh has at his disposal at Estimize, why not institute an active strategy

52:01 – What has Leigh observed in the dispersion of skill in the Estimized data set

53:47 – What is the relationship between specialization and accuracy among funds

55:29 – The pros and cons of the generalist

56:56 – A look at Leigh’s background into War Theory and what lessons that he still draws on today

1:00:19 – How the field of study around war and battle relates to the investing world

Learn More

For more episodes go to InvestorFieldGuide.com/podcast. 

For complete shownotes, go to InvestorFieldGuide.com/leigh. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

My guest this week is a version of me—a funnier, cooler version who has a PhD and served as an active duty marine. Lots of you will already be familiar with Wes Gray, and those of you who are not are in for a treat. Wes is the founder of Alpha Architect, a firm which manages quantitative equity strategies for clients using factors like value and momentum. He also advocates for a more concentrated, pure approach to factor investing, which listeners know is music to my ears.

While we share a lot of the same views on markets and investing, you will still find this refreshing. The conversation was easy to structure--I just took all the questions clients and prospective investors always ask of me and my firm, and turned them on Wes. These range from very specific questions on quant investing to big existential ones.  I listened to this on a long drive home and laughed out loud in the car at least 5 times. You are going to love it all.

I close this introduction by offering you an opportunity which is not for the faint of heart. On September 16th, I will be joining Wes and his crew on a 28-mile trek called “March for the Fallen” which is a small but important way of honoring those who have given their lives in service of our country. Wes and I invite you to join as well. If you are interested, check out the post on Wes’s site with all the details. I will link to it in the shownotes at investorfieldguide.com/wes. If you are still interested, then email me with the subject heading “March for the Fallen.” I told you Wes is a much cooler version of me, and true to form he will be doing the hike with a 40-pound rucksack. I will be doing the version without a rucksack. Either way, it will be a day of comradery and remembrance that we won’t soon forget. Join us.

Books Referenced

The Devil Dogs at Belleau Wood: U.S. Marines in World War I

Thinking, Fast and Slow

Online References

The Limits of Arbitrage

Show Notes

3:07 – (First question) – Exploring the mindset that is ingrained into Marines

            3:16 – The Devil Dogs at Belleau Wood: U.S. Marines in World War I

5:27 – Most memorable experience growing up in the mountains of Colorado

6:29 – What experiences in the military have transferred to what Wes sees in the public markets

            6:48 – Thinking, Fast and Slow

7:51 – Wes’s first foray into stocks

10:51 – What was the transition into the quantitative investing space

12:29 – How Wes would describe quantitative investing and what the landscape looks like today

17:10 – What is the nature of the strategies Wes uses, like high-frequency and market-making, and what makes them stand out in those

20:57 – What about the human capital arms race in this space and how different firms are attracting the top talent

23:21 – What the approach is for Wes and what his research suggests is the best predictor of performance in stocks

25:36 – Wes’s approach to portfolio construction

33:19 – What is the thinking behind the number of and the size of names in the QVAL ETF

35:19 – Over a 20-year horizon, does Wes pick value or momentum

36:20 – Why the data suggests momentum is the better pick

37:36 – Why price-to-book sucks relative to other value factors

39:55 – What things worry Wes about the future of this strategy

44:39 – How does Wes think about research and what to explore next.

50:05 – Who would Wes have manage his money since he thinks Vanguard is not the best choice

57:01 – Exploring his firm Alpha Architect, how it started and has evolved since launch

            57:39 – The Limits of Arbitrage

1:02:36 – talk about the profile of the right investor

1:08:15 – How the influx of people to passive investments are impacting the overall market, especially for active investment strategies

1:13:13 – Wes’s most memorable day of his career both in the military and as an investor

1:17:19– Kindest thing anyone has ever done for Wes

Learn More

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

My guest this week is Rishi Ganti, who invests in what he calls esoteric assets. I'm not sure what to do other than laugh in amazement at his professional credentials -- PhD in economics, CFA, CPA, lawyer, speaks six languages, and so on. The best part is he isn't lording those over anyone and in fact casts some shade on the whole idea of credentials in our conversation. He just did it all because he's a learning fiend.

Rishi's core idea about markets is this: avoid markets at all costs. As he explains off the bat, the minute there are multiple buyers for anything, prices get efficient very quickly and there opportunity to find alpha shrinks. Instead he searches for what esoteric assets: things without a market, orphaned assets that require high human capital and human touch. We explore several interesting examples, from charter school financing to

A stark realization I had during he episode is how big the worlds asset base is. Almost all of our attention goes to the most highly refined ones: stocks and bonds. But there is a whole other world out there.

The closing sections, on what Rishi would do if not investing, and his answer for the kindest thing anyone has done for him were among the best answers I've heard.

Show Notes

3:30 – (First question) – Rishi’s broad take on markets and whether or not he really likes them

5:30 – Defining esoteric markets

8:31 – Looking at the mountain of assets that are most impacted or made most efficient by markets and how Rishi describes each level of that pyramid

12:28 – Looking at an esoteric asset at the early part of Rishi’s career

16:23 – Why is there little competition in these types of investment opportunities

23:06 – How they created a market and turned an esoteric asset into a return opportunity, starting with the charter school funding example

31:54 – Looking at how this is done internationally

38:55 – What they consider a platform

41:08 – How they are able to provide their service and skirt the government, legally

44:18 – A simplified explanation of what Orthogon does

50:30 – What are the main reasons people don’t want to go down this road since it seems like an obvious choice

59:00 – Looking at the most memorable experiences in esoteric investing

1:01:10 – What value has Rishi found in his extensive education, credentials, and certifications

1:07:31 – Another topic that Rishi finds interesting and he’d want to lecture on if he could other than investing.

1:09:48 – What is the right formula and types of goals you should consider in planning your life

1:14:39 – Kindest thing anyone has done for Rishi

Learn More

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

I am drawn to a group of investors that I call practitioner philosophers. These are people who have gotten their hands dirty in their respective fields, but despite being doers, they still often sit back and ponder the big questions in business and life.

My guest this week is one such practitioner philosopher, NYC based venture capitalist Jerry Neumann. I came across Jerry's essays a year ago, and he is on a very short list of writers whose work I read without fail and almost always more than once.

You can think about this conversation on business, investing, and venture capital as a big funnel. We start very broad, discussing where we may be in a large 70-year economic cycle. We then break down the so-called power law which seems to govern venture capital returns and business outcomes. Then we get even more specific, discussing Jerry's process for evaluating early stage companies, and the particulars of what might make a good venture capitalist. I say "might" because as Jerry explains often, nothing is certain, and luck may always play a huge role.

I just loved this conversation. It is the type that without the podcast as an excuse would be a very odd and intense one if I were just meeting someone for the first time. You'll find no small talk or even medium talk here. This is a meaty discussion with one of the smartest and most straightforward people I've come across.

Books Referenced

Carlotta’s Perez - Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages

Thomas Hughes – Networks of Power: Electrification in the Western Society, 1880 – 1930

Frank Knight – Risk, Uncertainty, and Profit

Jeffrey West - Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies

Links Referenced

Deployment Age

Oswald Spangler

About Men; Corporate Man

Howard Mark’s 2x2 matrix of superior investment results

Michael E. Porter - How Competitive Forces Shape Strategy

DJ Teece: Profiting from Technological Innovation

Porter’s Five Forces

Show Notes

3:27 – (First question) – Start with Jerry’s essay the Deployment Age and a look at what it means for where we sit today (looking forward as investors)?

            3:40 - Deployment Age

            4:26 - Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages

9:28 – What time in history can you compare our current deployment age to and what does that say about the next 10, 20, and 30 years?

            9:40 – Oswald Spangler

            11:09 – About Men; Corporate Man

15:36 - How have your views evolved over time and how do you square the 1950s-time period for venture capitalists?

            18:06 - Networks of Power: Electrification in the Western Society, 1880 – 1930

20:40 -  What lessons should venture capitalists make from these deployment age cycles

            25:27 - Risk, Uncertainty, and Profit

24:10 – Exploring how powerlaws govern returns for venture capital

            26:50 – Howard Mark’s 2x2 matrix of superior investment results

32:19 – Providing context and understanding to Alpha within Powerlaws.

32:56 – Nassim Taleb: Powerlaw

39:18 - Portfolio concentration and scaling

            42:31 – Venture Follow-on and the Kelly Criterion (Jerry's Blog)

44:34 - How have you have actually done this, Jerry? What is your process like and your focuses?

54:00 – Are there any circumstances where it is wise for friends and family to make venture investments?

59:20 - What is this idea of who profits from innovations?

            56:12 - DJ Teece: Profiting from Technological Innovation

1:02:57 – Understanding complimentary assets

            1:05:06 - Porter’s Five Forces

1:09:24  - Are Augmented and Virtual Reality interesting areas for venture capital and why?

1:15:28– What makes a successful venture capitalist? What makes you special?

1:23:43 – What is the most memorable day in your career in venture?

1:26:03 – Kindest thing anyone has ever done for Jerry

Learn More

For comprehensive show notes on this episode go to http://investorfieldguide.com/jerry

For more episodes go to InvestorFieldGuide.com/podcast.

To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

A future guest just told me, every band has a song about being in a band, so today I give you my version. I won’t do this often, and only do it this week in case listenership drops due to the holiday—I didn’t want any guest to have a smaller than normal audience. I have now been doing this for almost one year, and have learned a tremendous amount. Since the whole idea behind the show is to learn in public, I am going to share a few of the lessons I’ve learned with you today. I’ll shape it as a top ten list, which ends with a fun story about my recent dinner with Warren Buffett. You’ll notice that many of these are just good business and life lessons applied to something specific: a podcast. I hope you can pull the essence of one or more of these and change how you do things, especially if you create any sort of content as part of your job.

1. (1:35) Conversation is my new favorite way to learn. I love books, and always will, but conversations are even more efficient and engaging. Talking with people who know their field deeply is the most fun thing in the world, and it is an underused method of learning. Lectures are too one-sided. Books often don’t flow the direction you want them to. Conversations are alive and interactive. I have been doing this very publicly on the podcast, but I’ve also been doing it more in private after realizing how powerful it can be. If you can commit to having conversations with new people where you tell them as little about yourself as possible, you’ll be off to a good start. I don’t mean that talking about yourself is bad—not at all--only that in each conversation, the time you spend talking about you is time that you aren’t learning something new. The less your ego gets involved, the more you will learn—and I should know because I used to have a big ego. This means asking dumb questions, sometimes more than once. It means probing on the simplest parts of a person’s field or knowledge. As everyone knows, it is fun to explain something you love to people that don’t know as much about the topic in question, but are eager to learn. So it logically follows that you should want to be the less knowledgeable person in most conversations. If everyone took this tact, things would be a mess, but I wouldn’t worry too much about that! One side effect of learning to ask good and interesting questions is that you realize how rarely anyone asks you good or interesting questions. An example of why it pays to remove ego: A month ago I didn’t even know what a cryptocurrency token was. Now I can have a fairly in-depth conversation on the topic because I made small incremental improvement improvements across ten different conversations. In each of those, I was the moron, trying to get up to speed. The more times you are willing to be the idiot, the faster you will learn. It is a pretty cool formula: ten times the idiot, one time the (relative) expert. They should teach you how to have a good conversation in elementary school.
2. (3:31) Preparation and careful listening are everything. The best editing for the podcast is done before the conversation starts and during the conversation itself. Most of the episodes you hear are very lightly edited, if at all. A majority aren’t touched. The ones that I have edited a bit were my fault: I didn’t prepare well enough to be nimble and attentive in the conversation. What I’ve found is that the role of the person asking the questions is to create and sustain momentum. I have this visual of a rush of water running down a maze of tubes which have hatches that open and close. If the water hits a closed hatch, everything stops. My job is to anticipate by listening very carefully and get ahead of the water to open doors to keep the momentum going. The clues to what each person loves most are usually buried in another answer. I’ve gotten much better at picking up on those cues. One example: every time someone says “we can talk about that later,” it means “I want to talk about it now and if you ask me, I’ll give a great answer.” The way I prepare for this ahead of time is to read everything I possibly can and try to be able to discuss it as if I were answering my own questions. This way, I can sense when there is a deviation between how I’d answer my own question and how they do. That deviation is often the door to something very interesting: an opinion or idea not already discussed by the guest in some other medium. An example: Scott Norton mentioned in passing that he’d read up on the history of ketchup as part of his early research, so I asked him to tell me that history and it was one of my favorite answers. I moved it to the front of the podcast.
3. (5:07) Finding the next guest is all about the quality of other guests and the quality of my questions. The first few guests on the show were people I knew well, or well enough to invite onto a non-existent platform to chat about investing. But in the majority of the conversations, I was meeting the person for the first time-- 39 of the 47 guests to be precise. That means that almost all of these wonderful conversations started because someone else introduced me to the guest and their ideas. They introduce me because they either 1) liked being a guest themselves or 2) like listening to the show. At the end of each episode, I ask the guest who I should talk to next, which allows the conversation to thread from person to person organically. But it isn’t just the guests, it is all of you. I am grateful to everyone who devotes their time to listening to this show and for all the thrilling and often random connections it has created in the investing world. One tiny example: Brian Bares of Bares Capital Management emailed me offering to connect me with Will Thorndike. Will is the author of one of my favorite books, and was near the top of my wish list. But I had no connection to him whatsoever, and then one just appeared. Brian has also connected me with another guest who you’ll hear from soon. Because of Brian’s kind outreach, I know more today. This has happened many times. If you are listening, and know someone fascinating, please send them my way. Sidebar: If you are someone whose job it is to book podcast guests, please stop emailing me (not that you are listening, anyhow). The network effect is what drives this shows success, I just happen to sit at the central node in this particular network. The more listeners, the more connections, the more connections, the more great conversations you’ll hear. It is a virtuous cycle. So please, send me guest ideas, send me topic ideas—things you want to understand but don’t. Send me anything, I read it all. I’ll do my very best to keep the quality up, and then depend on you.
4. (7:01) Give your audience credit. There have been a few conversations—the recent one with Michael Mauboussin comes to mind—that have been pretty complicated. But these episodes often generate the most positive feedback. The accepted rules for content are that simple and short are good, but I’ve found the exact opposite. There is a strong positive correlation between the length of an episode and the number of listeners, and between the complexity or newness of the ideas explored and the number of listeners. I get emails from people all the time, and they are often a lot smarter than me. I’ve had countless coffees and lunches all over the country with listeners who have written incredibly thoughtful emails which help me understand fields like private equity and venture capital at a much deeper level. Because I push myself to the very limit of my brain’s abilities, I have been lucky to attract a ridiculously interested, smart, and kind audience. They say you get the investors you deserve, but its clear you also get the listeners you deserve. The biggest compliment I am paid is by the army of smart people who just give me their time. I think the real rule for content should be: just operate at your own level—don’t try to move simpler or more generic. The beauty of the internet is the power of the niche—find one and own it.
5. (8:15) Avoid colonized topics. I have a lot to say about smart beta strategies, but it is a topic that has been so thoroughly picked over by the investing community that it is no fun anymore. It is a very good rule that if I’m bored of some topic, everyone else will be too. Instead, I search for aspects of the investing world that I don’t know much about, because if I don’t know, it’s a decent indicator that some chunk of the audience won’t know. I think this lesson is key. It is so easy to explore the same stuff as everyone else, because it’s less work. But as many guests have pointed out: the key to their personal success was that they wrote the playbook instead of reading someone else’s. If the playbook is already out there, look for a different question to explore.
6. (8:59) Consider the user experience. An upcoming guest observed that most bank customers aren’t customers at all, but suppliers. They give banks the capital they need to do business, and are therefore treated like suppliers, not customers. I think it’d be easy to view podcast guests as suppliers—in this case suppliers of content—so I am very careful to remind myself that the opposite is true. The guests are my customer just as much as you are. I try to make the experience of coming on the show easy and fun, before, during, and after taping. I am careful to provide lots of feedback to each guest once the episode launches. I like Airbnb founder Brian Chesky’s notion of an 11-star experience. He suggests any business go through the thought experiment of explaining what an 1 through 11 star experiences would be for the product or service. When you do this, star levels 7 through 11 are ridiculous, but it helps you calibrate and re-orients you to your customer. I like to think I provide a 4-5 star experience now, but in the coming weeks I’ll sketch out what an 11-star experience might be and see how I can make it better. In fact, this is something I’d love to discuss with you: how to make both the guests and the listeners’ experience better. I’ll explain how to be a part of that conversation at the end of this episode.
7. (10:16) Find great partners. The show sounds so clean because of my excellent producer Mathew Passy. If you want to start a podcast, he is your guy. He has already started working with others that I know and my plan is to fill his entire schedule. He is one example of a key partner. The show also works because I don’t have to spend much time on finding guests. This is because of the great network, but a few nodes in that network stand out. Khe Hy, Jeff Gramm, Brent Beshore, Morgan Housel, Josh Brown, and Ted Seides, among others, have been instrumental in introducing to some of the best guests on the show and for that I am deeply grateful. People often ask how I have time to do this show, but the secret is it doesn’t take that much time! This is only possible because of the great partners I’ve found in the last year. The person whose voice or face is attached to something always gets way too much of the credit. Partners drive everything, and I’m thankful to have such great ones.
8. (11:11) A generalist mindset can be a huge advantage. It is easy to pay homage to Charlie Munger’s latticework of mental models, but when you live it, you see why he is right. Knowing the key drivers and major ideas in a variety of fields is a huge source of leverage. It is difficult to study broadly and deeply, but the two aren’t mutually exclusive. I could talk to you about quantitative equity strategies until you pass out, but a key to the podcast’s success is that I can usually fake it in other fields like history, psychology, science, philosophy, travel, books, food, economics, mythology, sports and so on. Having these in one’s repertoire is like having a set of keys to getting the best out of other people. Different keys unlock different people. I think that a lot of being a good investor is asking good questions. If you know a little about many different fields, it makes that task much easier, and increases the odds that you’ll get the goods from whomever you at talking to. If these seems too daunting, I’ve found food, travel, and sports to be the most widely accepted keys.
9. (12:17) Amplify what works. The most downloaded guest on the podcast so far is Brent Beshore. He has been on three times, and you can bet he will be on again. The second most downloaded is Michael Mauboussin, also a repeat guest. Andy Rachleff told me that one of his best business lessons is that you learn far more from success than from failure, and that you should use success as a compass. Drive hard in the direction of what works rather than trying to shore up weaknesses. If something is working, more of that thing, or a better version is likely to work too. A better version of a failure is likely still going to fail. A lesson within this lesson: this is all even more true for unexpected Brent is now a close friend, but I didn’t expect him to be the most popular episode. This has been a recurrent theme in my conversations on venture capital: it is usually the thing you didn’t expect which yields the biggest payoff. When something is expected or obvious to you, it is expected and obvious to others. That means competition. If Brent had been on 10 other podcasts before mine, the results would have been very different. Instead, Brent my eyes (and about 100 thousand other sets of eyes) to a fascinating new area of investing.
10. (13:29) Don’t expect anything in return. People always ask me what my goal is with the podcast. The answer is simple: none. I don’t expect to get anything out of this other than the conversations themselves. The means and the end are the same. This is so important to me. When the process itself is the goal, magical things happen. When I have a guest on the show, it is like buying a call option. Actually its better, because I’m not even paying for the option: instead the option is “purchased” through a conversation: it is free, and highly enjoyable. The beautiful thing about call options is that the potential upside is enormous and the downside is limited, or in this case close to zero. Investors everywhere hunt for asymmetric outcomes: low downside, huge upside. And that is exactly what I’ve found this podcast to be. The second-best compliment I get is from guests who often tell me that the podcast generated a bizarre amount of inbound feedback, or even opportunities that they never expected. I don’t expect anything in particular to happen, but now I know that crazy things just will Its hard to escape the most obvious example—so let me tell this story in closing. The entire podcast began because of a rule of mine: when I read an interesting book, I email the author and ask them to lunch. I emailed Jeff Gramm after I read Dear Chairman, we got lunch, and we hit it off. We hatched a plan to record a conversation, and that was the beginning of the podcast. Very simple. 6 weeks later, the same strategy paid off again, and I met and recorded an episode with Ted Seides on hedge funds. We give Ted endless grief for his losing bet with Buffett, but I have learned so much from him about all corners of the investing world. He quickly became a friend and confidant. Ted also happens to be friends with the best investor of all time—something I didn’t know when I first met him. Fast forward to this past week. Ted, Brent Beshore and I flew to Omaha to have dinner with Warren Buffett—street value of almost $3 million dollars, my dad reminded me. I’ll get back to Warren in a second, but first a key observation here: not in a million years would I have thought a podcast would turn into a three-hour private dinner with Warren Buffett. If I had had the temerity to set that as a goal, it would have probably been impossible. If I’d been angling to get a private dinner with him, it most likely would never have happened—because everyone hates that guy. I think that because I am never angling for anything, the outcomes are far more interesting and improbable than if I was trying to achieve some specific goal. Another thing: the best thing about the dinner wasn’t that it was with Warren, but that it was with Brent and Ted, who have become such close friends. And the chance to meet Todd Combs, who was fantastic. Back to Warren. He is incredible. Kind, sharp, funny as hell, and relaxed. Early on he said to us “do you know what it says on Wilt Chamberlain’s tombstone? It says, finally I sleep alone.” We spent the first hour talking about college football. He could be a football color commentator. The amount of facts and dates and people he was throwing at me was staggering, and I know a lot about college football. I went to Notre Dame, and he had 5 Notre Dame specific stories that were some of the best I’d ever heard. He told me he once got through to an ND captain by calling his dorm room. He’d heard that the player was a big Buffett fan, and when he called the kid was awestruck. The reason for his call was an offer: two stock picks in exchange for Notre Dame’s playbook for the upcoming game against Nebraska. I don’t idolize people, and I never will, because idols are just people like anyone else. What was most refreshing about this dinner was realizing that Warren is just a person too—an exceptional one, but still a normal person. One that wants to shoot the breeze, tell stories, tell jokes, and learn about you. Knowing that even the greatest investor of all time is just a person is so reassuring. It makes anything seem possible. I’ll keep most of the details of the dinner to myself, but suffice it to say it was something I’ll never forget. But, and this may be more important, it was something I never expected. If you can find some way to give back to other people which they enjoy, and do so without any expectation of a return, you’ll be so happy, and great things will result. It has worked for me and I’m sure it will work for you.

So those are ten of many observations and lessons learned so far, and here is a bonus: there is room for a lot more. In the coming year, I plan on experimenting with lots of ways of bringing this community together, digitally or in person. If you are interested in being more involved in the podcast in general, stop by investorfieldguide.com/frontier to learn more and get involved.

Thank you for listening, and have a happy fourth of July.

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

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If you told me a year ago that I’d be learning critical life and business lessons from the founder of a ketchup company, and that thirty to fifty thousand people would listen to our conversation, well, I’d have told you that’s impossible. But the fact that it is true proves many of the points laid out by this week’s guest Scott Norton, co-founder of Sir Kensington’s which was recently acquired by Uni-Lever. Sir Kensington’s, which makes “condiments with character” is no ordinary Ketchup company, and Scott is no ordinary founder.

We talk about the most elemental aspects of business: product, relationships, sales, marketing, and culture. I love that we can do so through the lens of such a seemingly simple product, something that we use all the time with our families at a BBQ. Scott’s observations on culture, the importance of relationships in sales, and competitive edge are all memorable. But above all, I’ll remember his line: seek to learn that which cannot be taught. And I will continually return to the mental image of the Temple of Poseidon.

Oh, and as a bonus we also talk about biking around Asia, which like all of Scott’s stories comes complete with thought provoking lessons.

Enjoy this unique conversation with one of the most interesting people I’ve met on this journey. We begin with the history of ketchup.

For comprehensive show notes on this episode go to http://investorfieldguide.com/norton

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

Links Referenced

They Call Me Supermensch: A Backstage Pass to the Amazing Worlds of Film, Food, and Rock’n’Roll  (Movie)

Books Referenced

Getting to Yes: Negotiating Agreement Without Giving In

How to Win Friends & Influence People

They Call Me Supermensch: A Backstage Pass to the Amazing Worlds of Film, Food, and Rock’n’Roll  (Book)

Show Notes

2:40 – (First question) – A look at the history of ketchup

5:16 – The milestones of ketchup’s history in the US

10:26 – What were the early days like to compete in a market where the leaders have such a stronghold on the consumer

13:03 – A ketchup party to survey users

14:41 – Effective ways to negotiate

            14:57 – Getting to Yes: Negotiating Agreement Without Giving In

16:32 – How may stages were there in the early products

19:04 – A look at kaizen and what it means to Scott

20:38 – Scandinavian business principles that they bring to the company

23:40 – As the company has grown, has Scott seen downsides to the stakeholder model especially when competing against larger companies that use the shareholder model

28:19 – How did they use outside capital in getting started

31:07 – What was the most memorable story from the early days of disrupting this legacy industry, especially as it relates to the sales of this product

            33:30 – How to Win Friends & Influence People

33:58 – How do you create trust and show the benefits of your product in sales

37:48 – How culture started for the company, how it’s shifted since then and what competitive advantage the right culture creates

41:47 – Some of the best outcomes are the result of mindset and culture

43:28 – What new frontiers is Scott and the company looking at today

46:53 – How often has Scott had to course correct and continue down the path of the unknown

49:28 – Kindest thing anyone has done for Scott outside of the company

51:41 – The power of giving and how it will bring large returns, especially when you don’t expect them as part of the giving

            53:04 – They Call Me Supermensch: A Backstage Pass to the Amazing Worlds of Film, Food, and Rock’n’Roll  (Book and Movie)

55:37 – Look at Scott’s decision to bike around Asia and what he experienced during that time

1:02:49 – Best advice for someone in their early 20’s

Learn More

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

My guest this week is Andy Rachleff, who is the CEO of the automated investing platform Wealthfront. Andy was also a co-founder and long-time partner at Benchmark capital--one of the most interesting and successful venture capital firms in the world.

We spend most of our conversation discussing venture capital investing and entrepreneurship. Andy coined the now ubiquitous term “product/market fit,” and has great insight into how investors and entrepreneurs should think about business. In that vein, we discuss both what we refer to as the value hypothesis: building a product or service that customers love, and the growth hypothesis: scaling that product or service to a large market.

We finish our conversation by talking about Andy and his teams mission at Wealthfront, and this conversation is perfectly timed, as Wealthfront just released a new feature that allows investors to buy factor portfolios, similar to Smart Beta ETFs.

Above all, I’ll remember Andy’s advice to “put the gun in the other person’s hand,” a strategy that we explore in the middle of our talk.

For comprehensive show notes on this episode go to http://investorfieldguide.com/andy

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

Books Referenced

The Four Steps to the Epiphany

The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

Millennial Money: How Young Investors Can Build a Fortune

Diffusion of Innovations

Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers

Show Notes

2:36 – (First question) – The partnership setup and how they came to be 5 equal partners

7:57 – Why benchmark would not take on the chairman role in companies they invested in

9:28 – What made John Doerr the greatest capitalist investor ever

11:59 – Looking at the venture process and what made it an attractive investment for Benchmark, using eBay as an example.

18:06 – If you are willing to help other people, without an expectation of return, it can create other opportunities

20:08 – Andy is asked to explain the idea of Product Market Fit, a term that he coined

22:18 – How does one go about finding a Product Market Fit

            23:05 – The Four Steps to the Epiphany

            23:19 – The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

25:55 – What are the components of the Growth hypothesis

26:51 – Why you can learn more professionally from success vs failure

28:13 – What it’s like to shift from venture capitalist to operator/CEO

30:24 – The rate at which technology gets adopted and what will help Wealthfront

            30:53 – Millennial Money: How Young Investors Can Build a Fortune

            31:26 – Diffusion of Innovations

            31:38 – Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers

32:38 – What does it look like to innovate on top of current platforms

41:07 – Will platforms like Wealthfront help to democratize access to private markets

44:23 – Kindest thing anyone has done for Andy

Learn More

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

I’ve often joked that this show should be called “this is who you are up against,” because I am so often having conversations with brilliant people across the investment landscape who are effectively my competition and yours. This week’s conversation fits that description because it gives you an inside view into how things work among some of Wall Street’s most competitive investment firms. My guest is Leigh Drogen, who has worked as a statistical arbitrage portfolio manager and who founded and now runs Estimize, a data company which works with some of the world’s largest hedge funds.

Our conversation centers on the massive shift from what we call discretionary portfolio management—basically stock picking—to a landscape that is increasingly dominated by quantitative investors of various types. We talk about how any investor might hope to earn alpha, and how doing so is harder and harder.

There are so many great stories in this episode, told by someone with the perfect career experience to know how the system actually works. After many episodes where I’ve been learning on the fly about topics like venture capital, permanent equity, or health, this episode marks a return to my world of quantitative investing. I think you’ll learn a lot, and that you’ll likely finish with an even deeper appreciation of just the type of investors that we are all up against.
 

Books Referenced

Revenge of the Humans: How Discretionary Managers Can Crush Systematics

Links Referenced

The Undoing Project: A Friendship That Changed Our Minds

Force Rank (App)

Founder of Estimize Explains How He Plans To Disrupt The World Of Wall Street Research

Show Notes

2:45 – (First question) – A look at Leigh’s early career and how he got started in investing

            3:13 – Revenge of the Humans: How Discretionary Managers Can Crush Systematics

5:39 – Leigh is asked to describe the inefficiency in sell-side analysts’ estimate set

8:04 – What happened when things stopped working towards the end of 2007.

9:35 – The proper dimensions to separate any sort of potential Alpha edge

11:15 – The traits that help a fund perform well

            11:42 – The Undoing Project: A Friendship That Changed Our Minds

            14:05 – Force Rank (App)

14:49 – How the scientific process plays into Leigh’s research strategies

19:18 – Explain what Estimize is and what it does

20:55 – How people are compensated for the estimates

23:33 – The scale of how many estimates they get per company

24:57 – Why you need to be part of this informational arms race if you hope to survive

28:30 – What happens if everyone buys Estimize data and the Alpha built into it goes away

31:04 – What has been the evolution in these hedge fund platform type companies

35:00 – If Leigh was designing a firm from scratch, what would it look like

37:25 – Understanding Numerai and crowdsourcing in funds

41:41 – What is an example of interesting data set that Leigh as come across

45:38 – What is the potential for a hybrid model between a quant only with a discretionary picker.

51:35 – How do you know when something is busted or broken?

55:33 – Exploring his most memorable individual day in his career – Flash Crash

58:16 – With all the algorithms and automation, will we continue to see more of these unforeseeable dislocations like the flash crash?

            1:01:00 – Bloomberg article about passive investing rates

1:07:50 – What is Leigh most excited about the future

1:13:15 – Kindest thing anyone has ever done for Leigh

            1:13:41 – Founder of Estimize Explains How He Plans To Disrupt The World Of Wall Street Research

Learn More

For comprehensive show notes on this episode go to http://investorfieldguide.com/drogen

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

This week’s episode is very unique. It is the first episode devoted to bonds, just not the kind of bonds you are used to. My guest is Ira Judelson, who is the leading bail bondsman in New York City. I met Ira through my friend and former podcast guest Danny Moses, who is also a part of this conversation.

I have always had a passion for understanding how different businesses work. In this case, this week we are exploring a different business, but also a different world. Ira’s story is larger than life. He is as authentic and hard working as they come. In both his book and this conversation, there is a lot about family, loyalty, and hard work—principles which really resonate with me.

You’ll emerge from this hour with an appreciation of hustle and what it takes to get ahead. I can’t stop thinking about our discussion on how sources of power in any career morph through time, a framework that can help anyone think about their work and where to apply effort.

The conversation goes all over the place, but suffice it to say we discuss bond collateral, Dominique Strauss-Kahn, and DMX—and that is but one small fraction.

Please enjoy my conversation with Ira Judelson and Danny Moses.

For comprehensive show notes on this episode go to http://investorfieldguide.com/ira

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

Books Referenced

The Fixer: The Notorious Life of a Front-Page Bail Bondsman

Links Referenced

Rao’s Restaurant

Show Notes

1:55 – (First question) – The role that Rao’s restaurant has meant to Ira’s business and career

6:11 – A look at Ira’s bail bonds business and how that industry works

            6:22 – The Fixer: The Notorious Life of a Front-Page Bail Bondsman

8:31 – The story of how a pizzeria was a bad piece of collateral

11:10 – How often does Ira deal with bail jumpers

12:10 – What is the size of the open liabilities

13:14 – How long will the open liabilities last

14:55 – Ira’s relationship with his clients and the importance of character in this business

17:46 – the amazing story of how Ira got started in this business

31:05 – His early years of being a bail bondsman and how important his wife was to his success

29:52 – How Ira balances family with this kind of work

32:22 – Ira’s ability to be amazingly efficient on the phone when in social settings and a work call comes in

33:14 – Ira is the fixer

36:40 – Exploring the “Sources of Power” and where the balance for Ira of who he knows vs who he has shifted in this line of work.   

38:29 – The importance of intense reliability, consistency and empathy, and why Ira can trust his clients may be considered bad people

30:19 – Two cases where Ira got emotionally involved

47:26 – Why Ira is not worried about people coming after him

48:57 – When a bunch of detainees were wailing to wait an extra day in jail for Ira because his wife was pregnant with their first daughter

54:06 – Ira’s relationships with Ja Rule and DMX

58:32 – What does Ira enjoy most about the business still

1:01:51 – Will Ira ever stop?

1:04:02 – What advice would Ira give to someone early in their career just getting started

1:08:42 – The importance in having a willingness to fail mixed with the passion for what you are doing

1:10:11 – Ira’s health scare and what it taught him about appreciating life

This week's conversation was especially fun. I have a long history with my guest, Dave Chilton, but this was the first time we'd met in person. I'd heard stories about him from people I work with for twenty years, so getting to finally spend time with him was a real treat. I'll let him reveal the connection.

This episode will also be fun for listeners in the US, as Dave is one of the best-known people in Canada because of his famous book the wealthy barber and his more recent stint as a dragon on Dragon’s Den, which is Canada's version of shark tank.

I called this episode the human blitzkrieg because of Dave's relentlessly positive style and curiosity. He has dabbled in many parts of the business and investing worlds. He is one of the most successful authors in history, has invested in dozens of interesting businesses, and is a Jedi master in the long-lost art of the phone conversation.

We discuss business, investing, and writing. If you enjoy this conversation and have any aspirations as a writer, I highly recommend you check out the series of videos Dave and his son recently released called the Chilton method, which I will link in the show notes. I have no financial interest in this recommendation, and neither does Dave! He put it together in large part to stop people from calling him for advice. We discuss a few of the hundred plus lessons from his course in this conversation.

As you'll be able to tell early and often, it is hard not to have a good time with Dave.

For comprehensive show notes on this episode go to http://investorfieldguide.com/chilton

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

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My guest this week is David Salem. David was the founding president and CIO for The Investment Fund for Foundations, which served 800 endowed charities under David’s 18-year tenure. He's now the CIO of the Windhorse Group, which focuses on long-term, value oriented investing.

This conversation wanders into and explores many different areas of investing and life. The theme is how to think about asset allocation and investing holistically--from first principles--but we talk a lot about motivation, incentives, human behavior, and the fear of missing out as key variables in money management.

We discuss the history of the Yale and Harvard endowment models and how their success has affected the asset management world for better or worse. I had never heard such an interesting take on two very important institutions.

I also can't stop thinking about David’s "Mt. Everest" question, which we explore early in our conversation. I'd love to hear your answers to that question, so email me or message me with your thoughts.

For comprehensive show notes on this episode go to http://investorfieldguide.com/salem

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

My guest today is Michael Mauboussin, who is the head of global financial strategies at Credit Suisse and is on my short list of must read writers on all things investing. If you read his entire catalogue, Howard Marks's memos, and Buffett's shareholder letters, you be sitting pretty. Michael was also a big reason for the early success of this show appearing as my second guest and now my 37th. He and his team have been prolific in the last six months, publishing several long research reports on the most interesting aspects of the investing landscape. In this conversation, we talk about business moats, industry analysis, and how to combine man and machine when building an investment strategy and portfolio. As I tell Michael at the end, you won't be able to listen to this episode at two times speed, because we go deep quickly.

For comprehensive show notes on this episode go to http://investorfieldguide.com/michael

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

This week’s guest is Will Thorndike, an author and investor whose book The Outsiders is an all-time favorite of mine. Our conversation is in two parts. First, we dive deep into the lessons of his 8-year research project studying CEOs who were master capital allocators. These CEOs include Henry Singleton, John Malone, Tom Murphy, Katherine Graham, and Warren Buffett. We discuss how these CEOs tended to be contrarians on topics like dividends, buybacks, acquisitions, and the use of debt. As we go through each of the tools in the capital allocators toolkit, you’ll hear several useful lessons for running or evaluating a business.

In the second part, we cover Will’s career in private equity. Will founded and continues to run Housatonic Partners, investing in buyouts, recaps, and search funds. Will has been one of the most active search fund investors for decades, and given how much time I’ve spent in past episodes on the searchers or operators in the micro-cap, permanent equity space, it was great to get the perspective of an experienced LP. As always, we also take time to survey the dangers and opportunities in today’s private equity market.

For comprehensive show notes on this episode go to http://investorfieldguide.com/thorndike

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

This coming weekend is the annual Berkshire Hathaway shareholder meeting in Omaha. That means this week is the perfect opportunity to discuss a topic which will likely figure prominently at Berkshire this weekend: Ted Seides’s famous bet with Buffett. Ted and I discuss the origins of the bet, the nuances beneath the headlines, and whether he’d make the bet again for the next ten years. Along the way, we cover many hot topics like hedge funds, alternatives, fees, and indexing. Please enjoy!

For comprehensive show notes on this episode go to http://investorfieldguide.com/bet

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

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My guest this week is Danny Moses, who was directly in the middle of the biggest trades in market history, chronicled by Michael Lewis in his book the Big Short. Danny was the head trader on the Frontpoint team led by Steve Eisman, which was one of a small group of firms that figured out, in real time, the dire situation with mortgage-backed securities during the financial crisis, and how to build a portfolio to bet against the U.S. housing market. We cover his part in the Big Short story, but also lots of other interesting ground, including the state of sell-side research and financial markets. I love conversations with traders because they live and breathe market risk. You’ll be able to see why quickly in this great conversation with Danny Moses.

For comprehensive show notes on this episode go to http://investorfieldguide.com/danny

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

In this episode, I continue to pull on one of the most interesting threads that I have uncovered while producing this podcast: the world of permanent equity. My guests today are Royce Yudkoff and Rick Ruback, two Harvard Business School professors who have partnered to create a popular class that teaches students how to search for, acquire, and run a small business directly after graduation.

I approach this conversation from an investors standpoint. LP investors usually partner with these searchers to form what is called a search fund. A search fund allows recent MBA grads to spend time looking for a business and ultimately acquire it. The result is a small scale but often high return proposition for investors. I loved our discussion of what to look for in a business and what to avoid. The principles we list are useful for investors of any kind, and will particularly appeal to those from the buy and hold, value investing, and quality investing camps.

One point of note which wasn’t captured during the recording. One of the reasons this style of investing isn’t more well known that it is extremely costly upfront. It can take years to find a company, and once found, the transaction costs can be 20% of the total purchase price. Rick calls this category “REALLY private equity.

If you enjoy this conversation, be sure to check our Royce and Rick’s book. HBR Guide to Buying a Small Business, which goes into many of the topics we cover in even greater detail.

For comprehensive show notes on this episode go to http://investorfieldguide.com/hbs

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

SPECIAL EPISODE: Introducing Capital Allocators Podcast with Host Ted Seides

This is a special episode to premiere a new podcast from my friend, Ted Seides. In this show, Capital Allocators, Ted will feature a broad range of people that control the flow of money through the capital markets.  Ted is in a unique position to this; he knows this world as well as anyone having spent with both allocators and the money managers who invest on their behalf.  Below is the information about this first episode including a link to the homepage of this show, where you can subscribe.  

Enjoy the first full episode of Capital Allocators.

————————————————————————

Steven Galbraith is best known as the former Chief Investment Strategist at Morgan Stanley. He also sat in every seat in the asset management industry – credit and equity analyst, portfolio manager, business executive, entrepreneur, and Board member at an endowment and a large family office. We discuss Steve's journey, incorporating his deep insights in the investing world alongside colorful anecdotes of market inefficiencies in European football, college sports gambling, local breweries, and Charter Schools.

For more episodes, go to capitalallocatorspodcast.com/podcast

Follow Ted on Twitter at @tseides

This week’s episode is the most unique to date. My guest is Boyd Varty, who grew up in the South African Bush, living among and tracking wild leopards. The main theme of our conversation is tracking, and how the same strategy for pursuing animals in the wild can be applied to all aspects of our lives. Boyd’s family has been tracking animals for four generations, and he is bringing what they have learned to a larger audience around the world.

The episode includes the best answer I’ve ever heard (which comes when I ask Boyd to describe his most memorable experience). We also discuss the dangers of an achievement or goal oriented mindset, and what he learned from spending time with Nelson Mandela as a boy.

This episode is one I hope you share with those you love, because I think Boyd’s ideas will have a profound impact on many who are thinking about what to do with their lives—whether they are young or old.

Please enjoy.

For comprehensive show notes on this episode go to http://investorfieldguide.com/boyd

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

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My guest this week is Khe Hy. Khe has a very interesting, two-part story. We start with Khe's career at Blackrock, where he rose to be one of the youngest MDs at the firm, specializing in quantitative hedge funds. Khe shares his perspective on how the hedge fund landscape has changed and what investors should look for in hedge fund managers in the future.

The second part of the story is about Khe's attempt to understand himself. We get into fear, joy, and all that he has learned across several years of introspection and exploration. His lessons coalesce around four key pillars--compassion, stillness, uncomfortable introspection, and finding truth. We explore what he means by each of these ideas in detail. I don’t think that Khe is capable of lying. He is one of the most honest people I've met, for better or worse, and was kind to share both his struggles and moments of clarity on investing and life.

With Deep questions about purpose and deep questions about how to evaluate a quant hedge fund, This was my kind of conversation. Please enjoy

For comprehensive show notes on this episode go to http://investorfieldguide.com/khe

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

This week, my good friends Ted Seides and Brent Beshore join me to discuss the future of asset management and a ton of fun side topics. While we are all passionate about investing, we’ve had very different careers: Ted in alternatives, hedge funds and fund of funds, Brent in lower middle market private equity, and my own in quantitative equities. What we share is a passion for investing in general, and a deep interest in where the asset management business and profession is going.

This conversation starts like most episodes—a somewhat structured exploration of the investing business –but morphs to be a bit more fun and informal as we work our way through a bottle or two of wine. In the later half, we talk about how to dissect an industry, common features of good businesses within a given industry, books we’d like to write, books we wish existed, and things we’ve learned in our careers.

For comprehensive show notes on this episode go to http://investorfieldguide.com/brentandted

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

My guest this week is my father, Jim O’Shaughnessy. He was a pioneer in quantitative equity research, part of an early group of explorers who combed through data to find factors which predicted future stock returns. While we’ve both written extensively on factor investing, we chose to mostly avoid that topic for this conversation. Instead, we discuss what has been a fascinating and colorful career on Wall Street. We talk about the power of premeditation, formative books, and his crazy experience during the dot-com boom when he ran a robo-advisor 15-years ahead of its time.

For comprehensive show notes on this episode go to http://investorfieldguide.com/jim

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

My guests this week are Trish and James Higgins, who run Chenmark Capital Management.  In this episode we continue to explore a style of investing I call Permanent Equity.  Returns in permanent equity come first from the ongoing cash flows of portfolio companies, not from reselling businesses down the line.  The partners are Chenmark are pioneering this style of small business investing and share their experience with us thus far.

For comprehensive show notes on this episode go to http://investorfieldguide.com/chenmark

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

My guest this week is Peter Attia, M.D., whose mission is to understand and improve human lifespan and healthspan (or quality of life).  Reading Peter’s research, you find that there are many similarities between health and investing—ideas like compounding—which we explore in detail.

We spend a lot of time on mind, body, spirit and performance as it relates to living a better life. Of particular interest is the strategic problem that we face when studying longevity. As Peter puts it in our conversation: we are the species of interest, but we can’t conduct the kinds of experiments on humans—randomized trials, with control groups—that we apply to solve other big problems. So we have to back our way into a better understanding of longevity and quality of life.

To that end, we discuss what we can learn from studying centenarians, the problem of progress in science, a drug called Rapamycin (which Peter believes could be revolutionary), eating, the importance of muscle mass, and the idea of distressed tolerance.  We emerge with a framework for thinking about health and well-being which can hopefully help us all live longer, better lives. Please enjoy!

For comprehensive show notes on this episode go to http://investorfieldguide.com/attia

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag