Closing Bell - Delivering Alpha Investor Summit: Risk, Rewards, Returns 10/17/23

Episode Date: October 17, 2023

In this new world of more normalized returns and emerging, shifting risks, what will give investors the edge to outperform and deliver alpha? The 13th annual CNBC Delivering Alpha Investor summit convened elite investors, thinkers and leaders across the spectrum of asset classes – equities, commodities, real estate, credit, alternatives and beyond – providing insights and ideas, analysis and intelligence, all designed to balance risk with maximized returns. Delivering Alpha was recorded on September 28th, 2023. You can watch all sessions of CNBC's Delivering Alpha Investor Conference on CNBC.com/deliveringalpha

It's one of the most influential investor conferences of the year. A gathering of the industry's top asset managers and investors right here in New York City. One of the best investments we've made. And we've bought more. Offering insight on how to gain an edge and deliver alpha. We're at the beginning of one of the biggest tech booms in the history of technology. From equities and commodities to real estate and beyond. Private credit is having a little bit of a moment.

Every single company is talking about the utilization of AI today. Bitcoin is the greatest distraction from the greatest disruption that is coming to financial services. It's all about risks, rewards, returns. This is a CNBC special event delivering output. Tech is almost always a wild ride, but with billions under management, Altimeter founder and CEO Brad Gerstner is in it for the long haul.

So the other day I read a story and it says, Open AI, chat, GPT fame, seeks a valuation of $90 billion for a possible share sale. Now the valuation was 30 billion back in January. So, $30 billion January, $90 billion in September. Is AI a bubble or not? I've now been investing in technology for 25 years. I've lived through a few bubbles. We like to describe these moments as super cycles, right? The internet, mobile, cloud computing, and now AI. They're the start of these things that are going to be profoundly impactful in our lives.

But at those moments, you can also have overhype and overprice. And so as an investor or a builder, you have to get comfortable with two simultaneous but competing truths. On the one hand, we probably overestimate in the very short term, which leads to price inflation, the impact that these things will have. But much like the internet in 98 and 99, where there was overpricing in the short run, we dramatically underestimated the impact it was going to have over the preceding decade. But I would say, no, we have overinflation in some assets, right?

Open AI at $90 billion may be ahead of itself, just like we saw stocks get ahead of themselves in 2021. But it doesn't mean that AI itself is not going to be profound. Okay, fair. The problem or the difficulty, I guess, for investors is separating the near-term winners from the longer-term beneficiaries. And it seems to me that right now everybody's kind of lumped in the same boat. Some of the other winners that are up 50 to 60 to 70 percent this year seem to me to be more hope and more hype. Is that fair? If we look at the start of the year, the consensus forecast for NVIDIA was that data center growth would be negative six percent this year, that there was going to be a hard landing in Q1 or Q2. And that led to really negative forecasts, which is why the

stock was trading just over $100 a share. So today at $400 a share, you say to yourself, well, this must be wildly overvalued. But the fact of the matter is on consensus forecasts for next year, it's trading just over $20 or 20 times earnings. It's trading at a lower multiple than many cyclicals in the public market. I would argue that I think what Jensen has done at Nvidia is one of the great strategic moves by any technology leader over the last decade. If you cover chips or think about chips, you need to think about them differently

than the way we've thought about them for the last 20 years. The data center is no longer a building full of computers each having their own chip. The data center is the computer, right? These are built as supercomputers today, and the provider of those supercomputers is a company like NVIDIA, where they're not only supplying the chip, they're supplying the interconnects, they're supplying the software, all the things that build that into, you know, a computer with massive capabilities to run these transformer models. Not that long ago, you made a case that Alphabet blew it, right? That when Microsoft announced the OpenAI transaction, that was a game changer. Yes.

In your mind, you obviously saw the reaction in Microsoft shares and the thought from you at the time was that Alphabet lost what they had and they had a real big head start because some of the transactions that they had made in years prior. And thus you sold Alphabet. I did. I think Alphabet today has had a better year than Microsoft

from a stock appreciation standpoint. Sure. Do you look at that and say, I sold it too soon? Did I make a mistake? Or does it not matter? Google has been a monopoly, a tax collector, on everything on the internet for 20 years. OK?

And they have monopoly pricing on search. That the culture at Google had evolved in such a way that it had become more of a research institution than a product-led growth institution. GPT has become the default verb for all things AI. And to relinquish that spot by letting open AI go first, when you had the technology, you had the supercomputer, you had the capabilities to release that product, I think was a mistake.

Because now you've opened the door you've allowed somebody to breach the competitive moat so you've had a unique ability i think to pick pick the right companies at the right time which takes me back to the beginning of this year when almost nobody was betting on tech because it had such a miserable 2022, as we all can remember, except for you. You went big at the beginning of the year back into big tech. And the numbers in terms of your performance to this date, in terms of your public portfolio, are massive. Everybody was in, you know, bomb shelter position. Net exposures were extraordinarily low. And when that hard NET EXPOSURES WERE EXTRAORDINARILY LOW. AND WHEN THAT HARD LANDING DIDN'T HAPPEN, AND WHEN COMPANIES LIKE NVIDIA AND META CAME OUT AND SCORCHED EARNINGS,

THEY MOVED VERY QUICKLY OFF OF THESE LOWS. NOW IS THE HARD PART. YES. THE STOCKS HAVE GONE UP A LOT. 40, 50% IN SOME CASES LIKE NVIDIA AND META, MORE THAN 150%. INTEREST RATES ARE ELEVATED AGAIN. NASDAQ HAS been depressed lately. Where are the risks lie now? And how are you thinking about your own positioning relative to

that? So I think the risk has increased that the Fed has overshot. We see lots of data points of consumer slowing, whether we're looking at travel demand or we're looking at leisure demand for things like RVs. And I'm not certain whether we're going to have a hard landing or a soft landing, but I am certain that the probability that we're going to have meaningful slowing in 2024 has gone up. So have you taken your positioning down? We've reduced our exposure quite considerably, you know, by, you know, at least 50% since the start of the year. So dollars at risk on the long side relative to dollars at risk on the short side are down by at least 50 percent.

You think the Fed's done raising rates or not? I mean, you already said you think they might have overshot, done too much and too short of a period of time. Are they done? So the market's still calling a bit of the bluff of the Fed. But I think there's a good shot. You have one more rate hike because I think they're really committed. He wants to be Volcker.

He doesn't want to be remembered as the Fed chair that didn't slay inflation. He doesn't want to see it tick back up. But he also acknowledges that the envelope as the pilot of the economy to stick that landing is very, very narrow, right? And so what it probably means is that we're going to have more slowing in 2024 than they want. But the reason the market is pricing in

two or three rate cuts next year is because the market is saying the economy is going to be worse than you're currently forecasting. So one of the other things we've seen recently, which I want to get your opinion on, you were in on the Instacart IPO. You have a good eye

on what's happening there. Is it open for business again? Or is this just are these idiosyncratic stories, mature companies like Instacart that had to go public now? No, this was definitely a cracking of the door. This was definitely the on ramp for the thousand unicorns that have been funded over the course of the last several years to get to the public market but it was also a wake-up call right Instacart's last private round was 39 billion dollars but yes the valuation of that reflected the drawdown and growth valuations that occurred in the public markets but the clearing event that occurred was a sobering up of the board of directors and the founders of these companies to say that liquidity is more important than price.

These companies need to get into the public market. I think I tweeted about it, you know, a couple of days later. You said VC backed companies should go public sooner. Correct. If you're over three billion dollars in valuation, hanging out in the private markets and thinking that the private market participants are going to overpay for your stock is wishful thinking. The public markets are a great place to grow, to innovate. You know, this idea that you can't innovate in the public markets.

Excuse me, what about Amazon? What about Google? What about Microsoft? What about Netflix? What about, you know, go through the list of companies. What about Meta? These companies did it all in the public markets. And we're at the beginning of one of the biggest tech booms in the history of technology. AI is going to be bigger than the internet, bigger than mobile, and bigger than cloud software. Coming up, the real deal in real estate.

Data centers, logistics, student housing, all of them have shown a great deal of resiliency. And later, the legendary Bill Ackman. A reported secret meeting that you had recently. Zelensky wanted to meet people who could be potential investors in the country. We are going to have a recession because that's the way the world works. It moves in cycles and we haven't had a real one for over a decade and a half, except for a short blip, which we all know. So we have a lot of excess we need to work out of the system. And the longer we go until we get that recession, the more leverage there is to the downside.

Data centers powered by artificial intelligence, resorts and gaming facilities. What's really going on in real estate and why diversification is key? The way I would put this is real estate is the second largest asset class in the world and Blackstone is the largest investor in that asset class. Well, you're right. We are the largest owner of real estate in the world. We have a portfolio approaching $600 billion of assets, and that's actually nearly 13,000 individual assets. And I would say what we see happening across our portfolio is that things are traveling at different speeds. So on the one hand, you have data centers, which are benefiting from a step function change driven by AI,

but all sorts of things that were already underway propelling unprecedented demand, content creation, our lives moving online, cloud computing. And so what you're seeing there is record rent growth and record low vacancy for this space. And these data centers are more and more essential to some of the biggest and fastest growing technology companies in the world, and frankly, essential to all of our lives. On the other end of the spectrum, though, you have obsolescent office buildings. And there are real headwinds there. They were created by factors before COVID, frankly, in terms of preferences from tenants and the kind of space they wanted to have

to help grow their business, bring their teams together for collaborative space, doing it in a more environmentally friendly and wellness-oriented environment. But now with the added pressures of work from home and additionally higher capital costs, the headwinds are real. Blackstone's been very good,

and you and your team have been very good at not only being ahead of the trends in terms of when you've bought into certain subsectors of real estate, but you've also been very good at exiting ahead of everybody. Historically, traditional office was a big part of our investment strategy, and when Blackstone went public in 2007, 61% of our real estate portfolio was in traditional offices. And that compares to 2% in traditional U.S. office today. We wanted to make sure our capital was concentrated in asset classes where there was cash flow flow through that could grow. And that we had short duration leases so we could capture the movement in rents and produce those higher cash flows. And so that combination of things of

which are the assets that we think are going to be winning based on the trends and tailwinds being created, and also which assets and asset classes are going to be resilient in a higher rate environment, it's a big part of that transformation in our portfolio. Okay, so we're in a higher rate environment. What's resilient so far? So I think the strongest performers today, I mentioned data centers, logistics, student housing is another sector. And all of them have shown a great deal of resiliency simply because there is more demand for housing than there is supply of it. As a country, when you think about housing, we're probably 4 million units shy of where we really should be by now based on just household formation growth since the global financial crisis. But we never really got back to the levels of building that would have delivered that

housing. And student housing is, I think, where the opportunity is most specifically generating a lot of strong cash flow growth for us and our investors. And so we have an opportunity that we created through a take private of a company called American Campus Communities. It's the largest student housing provider in the country. And we, through that team, not only own and manage terrific housing assets adjacent to some of the top

universities in the country, but we can also now partner with those universities to add new supply to meet those housing shortages that they are experiencing. You talked about warehouses before. I do want to go back to that. And you've had the likes of Amazon saying, you know what, we need to recalibrate our logistics and transportation portfolio. Has that affected you? Well, we just continue to see strong demand for warehouse space, but particularly in those more infill locations. So when you say Amazon or

Target or any number of retailers, I wouldn't pick on any one of them wanting to be more local. That is because they're trying to reach their customer within a couple hours, not a couple of days. And we see that trend globally happening and e-commerce penetration rates actually continuing to grow. And before others got there, we saw that e-commerce was creating unprecedented demand for warehouse space. And we didn't see that as a blip, but as something that would be a long-term trend of really share-shifting how we shop, moving it from going to a store to doing it online. You're invested in hotels and resorts as well, including in Vegas. You've done some transactions there this year, too. We've been talking about revenge travel. Is that something, is the demand and the money that's being spent on folks going out and having these experiences,

is that something that's going to sustain? Our portfolio today, I'd say, is concentrated on, I describe it as kind of two parts of the spectrum. One is beachfront, super special assets, you know, very special locations, and then special assets, but that deliver a high quality, but more affordable guest experience. Great Wolf Lodge is a perfect example of this. A very affordable family vacation. I encourage you all to go there with your family and friends. I call them water parks with hotels attached. And so, you know, what we're seeing through that and through the lens of all of our hospitality investments

globally is that there is some normalizing of the demand from the leisure traveler. But at the same time, actually, business travel has continued to be strong. And I think particularly when you look at what we call upper upscale hotels, that demand has continued to remain strong as business people are back out traveling,

conferences are happening. Still to come, the private credit boom. If you want to invest in the U.S. economy, you have to invest in the private markets. And alternatives, why Rihanna is going digital. When Spotify plays a Rihanna song, the smart contract executes and says, I owe royalties here, and he's paid.

There is a hole created by the regional banks in terms of lending capacity. And as much as private credit has grown, it hasn't grown enough to fill that gap. So those opportunities are going to be big and they're going to increase in number. Private credit assets have doubled to more than $1.3 trillion in the last five years. And despite the adverse rate environment, enthusiasm has not waned among big institutional investors. Mike, I'd love for you to set us up with, I mean really from the broadest possible perspective,

is why this asset class exists and is now growing and is so in favor. What private credit is just in its simplest form is private loans to privately owned companies, privately owned real estate, and privately owned infrastructure. A lot of these loans used to get made within the banking system, regional mid-sized banks. Some of these loans used to get made within the insurance market.

I just want to caution everybody, while private credit is having a little bit of a moment, these are not exotic instruments of any kind. These are plain and simple loans. And I think because they're plain and simple and because they're floating rate and senior secured, given some of the things that are happening in the world now, they're very valuable both to the investor community but also to the economy. These are massive, multi-trillion dollar global markets.

To put that in perspective, if you look at the US economy alone, 99% of companies with 100 employees or more are private. That's 30% of economic output in our country. It's 30% of employment. You have 30,000 companies with enterprise values over 100 million. So if you want to invest in the U.S. economy, you have to invest in the private markets. And if you want

to invest in the private markets prudently, private credit is a really good place to be, which is why I think so many people are paying attention to it. Armin, Oak Tree has been in the business for some time, so you're not kind of newly grabbing onto it. But what explains the motivation to get more involved than they have before? Is it some things going on in the banking industry? Is it the economy or something else? There is clearly a need for a replacement source of capital from pension funds, insurance clients, institution, and even retail entering that market.

I think the need is quite apparent and the returns are very attractive given the risk. Today, you're able to lend on a first lien basis at 11 to 13 percent, sometimes higher if you go into rescue lending or some of the more complicated situations or in industries that are a little bit harder to understand. But you could be top of the capital structure, often less than 50% loan to value, even in today's market with today's assumptions in place around a potential recession. Damien, how do you approach this market, the provision of capital to parts of the economy that at least by perception and some evidence is being underserved?

So we think about it in two dynamics. First, there's a geographic piece. We know today that half of the capital and private credit goes to five states. So we're a 50-state lender, not a five-state lender. And we push this concept because we think it is diversifying. The second is we're making a big bet on labor. We believe in the American worker. We want to do everything we can to improve the employee benefits within the portfolios where we invest because we know it improves our chance of getting repaid. How does that occur in practice? So we literally have the technology and the wherewithal to go in and assess a labor pool of a company, stratify the wages for that business, study the uptake of retirement benefits, health care benefits, and then make recommendations to the company on things they could do to fortify their workforce.

If the company follows our advice, we'll actually give them an interest rate reduction on the loan we made. I do think that you've posed things, all of you, as this kind of win-win, but I need to know where the returns come from. Like in a capitalist economy, why are you able to get 11, 12, 13 percent returns if the issuer is also, I mean, if the borrower is also getting a fair deal? If you go back 30 years, just in the U.S., we had 8,000 banks. Today we have 4,000, which is still way too many.

But as these banks consolidate, all of that supply that used to find its way into the real economy actually consolidated and moved into the securities market. If you have any need for creativity or flexibility to execute on a business plan, you're probably going to find your way into the private market. So you're going to have a willingness to pay for the opportunity to generate those equity gains. And that's a big part of it. Damian, how do you get beyond the notion, though, essentially that the risk might even be more concentrated than in other structures? It's interesting. You've got 240,000 businesses with more than $10 million of revenue in this

country. You have 30 million companies with less than $10 million of revenue, and they're all underbanked. If you took a poll of CEOs, they would say they feel access to credit is inadequate at any point on that EBITDA scale. It's stunning. Meanwhile, the number of firms who have the track record, the trust with institutional investors and retail investors to raise this type of capital and have an appropriate asset liability match is very few and far between. The mechanism for how credit flows to our businesses, our private employers, is compromised.

And conferences like this give us a chance to hopefully draw attention to this and support the winners. Next up, Alpha Alternatives. Bitcoin is just securitization done on steroids. Plus, ACMIN on AI. Alphabet is one of your more recent investments. It will be a dominant player in AI for the very, very long term. Every single company is talking about the utilization of AI today, and it's really hard to substantiate that as a core technical AI. But I do think we're starting to think about optimization through technical tools, not just headcount reduction.

I think the concept AI is a little bit farcical right now in terms of how overused it is, but I'm starting to see a real innovation impact how companies are thinking about bringing better tools to customers. And that's an exciting sea change. Private debt, secondaries, digital assets. This next panel is all about diversification and aiming for outsized returns, leaning into alternatives. Where does alternative investing, where does it fit in today's market? And if we use a 60-40 portfolio as a base, where does alternative investing fit in? It'll vary from investor to investor, but generally speaking, it's going to be viewed as alternatives represent an opportunity to sort of mitigate your risk and take advantage of some absolute alpha as well.

The notion that it's not getting to the average investor is absolutely spot on, but that's changing really quickly. For sure. With everybody now focused on that great investor pool that is as yet untapped, that is a great source of capital for alternative investments broadly and still generates a substantially great return both in fees as well as absolute returns on investments for those folks who are creating those products i want to focus on something you've been

talking about jenny um nfts so a lot of them they've simply lost their secondary secondary they lost a lot of their value but you're looking at them this is where the rihanna reference comes in you're saying that there's there's a way to actually invest in them in the future that might be lucrative. Give us the example that you're really focused on that you think might be a model. It's not just Rihanna, but including Rihanna. Bitcoin is the greatest distraction from the greatest disruption that is coming to financial services. I think AI is probably the other big disruption there. But there's so much noise around a lot of things like FTX and others.

But if you bring the technology down to its core value, it does three things. One is it allows a payment mechanism. Number two, it allows smart contracts to be programmed into the token. And three, because it's a general ledger, it has a source of truth. So whoever has that token, all rights in that token are granted to that person. So if I sell it to Frank, I don't have to go through a third party to do it. Frank gets it and Frank gets all the rights. So my favorite example is Rihanna, who came out with, right before the Super Bowl, and I know she's just testing the market in this 300

nfts each one worth 0.00033 royalties of one of her biggest songs well why can she do that she can do it because when spotify plays a rihanna song it can capture the smart contract executes and says i owe royalties here and so nobody has to be involved in it. And it can take the fractional payment and go to, because Frank's a big Rihanna fan, so it goes to his account. He owns a couple of those. And he's paid, right? So now think about any way in which you have revenue streams or royalty streams that you can now start to fractionalize that or democratize that and think about how that is an uncorrelated asset to all the traditional assets. So other examples is, you know, I think that athletes are going to,

they'll sign a big contract, they'll say to their fans, I'm going to sell off, you know, tokens worth 10% of my future revenue stream. I'm going to, you know, 100,000 tokens and boom, the fans are going to probably pay a premium for it. So it will be a way, if you think about it, it's just securitization done on steroids. And it's merely that this technology is enabling it. And it's also enabling other very interesting companies that will disrupt some of the traditional business models that we have today. Les, you're also looking at diverse companies as a source of untapped alpha. So I'm just going to give you some numbers right now.

According to Crunchbase, women receive just over 2% of PE and VC funding. Black and Latinos, just over 2% combined. Is there just a missed opportunity here that you think should be exploited? I'm using it in the best term, that there's an opportunity really to make money. Yeah, yeah. Listen, I think the overarching theme is that minority-owned companies, whether they be ethnic minorities or women, are generally small in scale and have had a difficult time integrating into the supply chains across America,

across the globe for that matter, in ways which allow them to participate at the grown-ups table instead of at the kids' table. And so our premise, what we're doing in our organization is to try to create entities of scale that can sit at the big boy table and compete for the same dollars through those supply chains as some of the larger names that you might know of that deal with the Fortune 500. So yes, there's a missed opportunity. Coming up, Alpha without borders.

China's not for the faint of heart. It's interesting to watch a shift when markets are still so volatile there. And how Bill Ackman puts his money to work. Google really fumbled their offering and it led to a very mispriced stock. I think through a series of economic policies and national security policies, we have to stand up to China in the right way and also find areas that we can work with them. And I think that's the center of a national security strategy today for the United States. Big-name investors hunting for alpha beyond traditional asset classes

turn to the world's most important capital markets. We zero in on the keys to cross-border exposure. These pension funds in Australia, you're the belle of the ball because now Australian companies have to pay 12% of their salaries to you. That's a new law. But you also have seen your assets under management balloon as your parent company has acquired Credit Suisse and now as the head of all of assets under management how much have you added and how big are you? We're now at about 400 so we're 1.6 trillion.

Wow. She has you beat, Mark. So absolutely I think starting with China would be a good place to start it's at the top of minds and worries these days. Suni, but you're actually bullish on China. China's not for the faint of heart, which I think we all have learned. So we actually believe in China. It is a very big economy, as everybody knows. So it's a question of finding access there, bringing the world to China, because their middle class is growing and all of the trends we see around the globe are accelerated there and it's a question of getting those opportunities in China for global investors as well so there was most of those investors are back to pay for now but there was a faint of heart

interestingly we are seeing a trend most of our institutional accounts have asked us about China again and are putting money to work even as the markets been like it got too cheap? I don't know, they're just trying to time the coming back in, right? And that the government programs do feel like they're settling in and it feels like maybe the shoe has, the last shoe has fallen. We'll see, but it's interesting to watch a shift when markets are still so volatile there to see people want to talk to us about China again.

Well I think it's worth talking about what's happening there as countries onshore supply chains and we are seeing industrial policies like the CHIPS Act and how as a global investor to think about that. I think industrial policies are going to become really important. So I saw the largest manufacturer of solar panels in China and they've bought a business in the US as a hedge against the US putting tariffs on them. It's really interesting. It's more profitable to manufacture them in China than to do it in the US, but they're

not going to have all their eggs in that basket. And that's a Chinese corporate looking outward. The same way a US corporate would think as a supplier, we can't rely solely on a US or a China led supply chain. They'll diversify that as well. So nearshoring, friendshoring, onshoring, I think it's here to stay. What about you? Is that one of your areas? I'll take the other side of that with a slightly different twist. I think one of the things we can thank Donald Trump for was when he went out and reneged on all the bilateral trade agreements he had, or the treaties, everything became bilateral.

Southeast Asia is here to stay because they're finding a way around just direct China-US. And I think it's like water. Water will find a way, as will capital and as will trade. But I'm a long-term believer that we're going to be global again before people think we are. Is anybody excited about opportunities in Europe? And I know these are bigger themes and they're not necessarily geographic, but it's been a lot of U.S. and China right now. Well, I'm a Swiss bank after all. We love Europe and Switzerland. Look, I think what's the issue with Europe, if you will, to put it that way, and why you're hearing less about it,

is because we were all quite poised for the growth of Europe, right? We've been waiting for the market to grow and for the world to change right up until Russia invaded Ukraine. And that really set the world back. We are bullish on Europe, but in terms of the rate of growth, I think the rest of the world should be ahead of that. After the break, Bill Ackman on all things alpha. I thought it was risk management like maybe people hadn't seen from you in the past. Okay. You don't accept that? I don't think so. Hedge fund titan Bill Ackman is a legend. His current portfolio totaling an estimated $13 billion. The fund's 21% five-year return doubles that of the S&P.

Gains earned by Ackman's notoriously bold positions. I do want to start, though, with news, but I think it's news. A reported secret meeting that you had recently, you and a bunch of other people with Zelensky of Ukraine. Within the last few weeks, it was said to have happened. What happened in that room? So I don't know that it was so secret. But basically, I think Zelensky wanted to meet people from the business community. And there were about 10 of us there. It was organized by J.P. Morgan. I think his goal here, I think, was to meet people who could be potential investors in the country, people who could bring business to the country.

And I think what he really had to say was, don't wait until after the war. You can really help us by bringing business to our country now. Are you going to commit personally that you'll give money towards the rebuild, either through you personally or the foundation? So I've invested about $24 million in Ukraine philanthropically during the war. You already have. Already have. Some of that was a philanthropic investment in a company called Zipline,

which is a really interesting startup. It's well beyond a startup. They apparently raised $400 million at a $4 billion valuation recently. But our philanthropic support was to get them to launch in Ukraine. And basically, it's a drone company that ships medical supplies, principally in Africa. It was not in their business plan to launch in Ukraine. It was a good segue to get to the markets. Alphabet is one of your more recent investments, is that correct? Yeah, we bought it late last year, early this year. How much did that have to do with ai it had a lot to do with ai

because ai was the reason why the stock was cheap right chat gpt was launched incredible game-changing kind of product and google really fumbled their offering and so people said oh my god google's way behind on ai and the stock sold off to you know 15 times earnings for one of the greatest businesses in the world. And they took a much more cautious launch approach, and I think, and then kind of fumbled in an early demonstration, made people think they were behind in Microsoft and chat GPT would sort of, if you will,

OpenAI would eat their lunch. And it led to a very mispriced stock. And then we actually, we've bought more in the 120s. It's our second largest investment. Alphabet. Some would suggest that, and it was said on this stage earlier today by somebody who sold Alphabet when the chat GPT and open AI thing came out. We bought from them, so we should thank them.

That the ball was fumbled and recovered by the other team who ran for touchdown and then piled on with other touchdowns. And now Alphabet may not be able to recover the leadership role that it had. And DeepMind is a perfect example of Alphabet having this in-house and still fumbling the ball. I would say they fumbled the PR around the ball, but I think they've subsequently demonstrated publicly that they are integrating AI in all their various products. If you think about the enormous amounts of access to data that they have by virtue of everything from search to the various products they offer to their customers, email and otherwise, data and the ability to legally extract and train on data is a really important competitive advantage.

They also have designed their own chips. Access to the cloud, access to the processing power is critical. So they've got many, many competitive advantages. And I think in some ways, in an integrated fashion, it gives them an enormous advantage. They will be a dominant player in AI for the very, very long term, we would expect. It's hard to believe for me, and I wonder for you, that it's been 10 years since the Herbalife battle with Carl. Yeah.

Do you believe it's been 10 years? Yes. By the way, had we held our short, we'd be up like 70%. So I'm still psychologically short on that position where we've got a nice profit. Are you still seeing ghosts at night? By the way, being psychologically short is a much lower risk way. Yeah. Are you a changed investor from then?

Are you different as an investor than you were 10 years ago? And if so, how? Of course. I'm a continuous learning machine. And all mistakes are opportunities for learning and so hopefully you know I sort of decided at 50 I was like okay I'm not going to make any more mistakes and I made one but no look we've been very fortunate we've had the best five years in the history of the firm. And we're fortunate in the way that we're structured. You know, I've been a kind of Warren Buffett devotee, unofficial.

He's been my unofficial mentor for many years. And if you look at his trajectory, he started out as a what today you would call an activist hedge fund manager running a series of private partnerships. Over time, he took control of what he called a crappy textile company, or probably what was best described as a crappy textile company. But the access to the permanency of that capital gave him the ability to take kind of the very long-term view in a world where people in the investment management business generally have to make short-term decisions because their capital, you know, can leave. We really, five years ago, got to that place in terms of the

structure of our organization and allows us to take the kind of very long-term view. And we can buy Google at $94 a share when people are scared about, and we can own it. And that, I think, is a nice, very fortunate competitive advantage we have. The moment from you that i said to myself this looks to me like a different ackman was netflix okay you're a huge believer in netflix

and i remember the day where that earnings report came out and that stock dropped like a bomb the old bill ackman might have said now this is a moment in time management team's great company's great i'm staying with it the new bill ackman was like no i'm done this is just a moment in time. Management team's great. Company's great. I'm staying with it. The new Bill Ackman was like, no, I'm done. That's it. I'm moving on. Look, we think Netflix is going to be a great investment over time. But in terms of do we want it to be one of eight things we own or one of 10 things we own? No, because it's kind of the range of outcomes as a result of the sort of change in strategy, going to an advertising model, et cetera, and predicting the probability of the success of that was a different kind of hurdle for us to climb. I mean, basically, we took the Netflix losses,

but the capital, if you will, and we invested in Google, and it was a good decision. We were able to make a bigger investment in a company we had more confidence in. I think part of my point would be just because you like the management team and you think it's a great company doesn't mean it's a good stock.

And you recognized that at a moment where maybe in the past you wouldn't have, because you would have believed in it so much that you wouldn't have sold it when you did. I thought it was a moment, I did. Okay, I'll take that. I thought it was risk management like maybe people hadn't seen from you in the past. Okay.

You don't accept that? I don't think so. I think it's something we would have done in the past. I think the best outcome is we could get our entire position purchased and then it goes straight up. That rarely happens. What normally happens is you buy something, you make it a meaningful position, and then something happens that causes the market, either not like the stock or the market itself, goes down and you can buy a lot more of something you know well at an even more attractive price.

We've done that all the time in our history. You're pretty active. Chipotle being a perfect example. I mean, Chipotle, we bought initially at $400 a share and then they had a couple more food safety problems and the stock was $250, right? Which is about the move, almost exactly the move that Netflix made. And then we hired Brian Nickell to be CEO and we bought more.

And one of the best investments we've made. So I wanna talk politics with you too. In February, you said of Vivek Ramaswamy, quote, "'I'm gonna make a bold and early call. "'He will run for president and win.'" You supporting him now? I have supported Vivek. I was hoping he would be, as I described, a kind of more center-right candidate. And I think he's got a lot of great

ideas. But on some positions, Ukraine and some others, I think I profoundly disagree. Okay. So it sounds like he's off the check writing list, not getting any more contributions. We'll see where he goes on his various policies. And look, I think, look, I like a number of the candidates. Chris Christie, I've spent some time with recently. I thought he did a great job in the debate. I think he is much more of a, I would say, more traditional Republican candidate. I think he's done a great job in New Jersey as governor. He's got a lot of political experience. But, you know, is that someone that the American people will support? I don't know.

But I do think we would benefit with a broader array of choices on both sides of the aisle here. Yes. Which is why I've been supportive of multiple people. Well, including Robert F. Kennedy Jr. Yes. Are you supporting him? Certainly, I like that his voice is in the race for sure. Have you given him any money yet?

I have. I've written him a check. Yes. January 20th, 25. Who's taken the oath? I don't know. I don't know. But I think I think, you know, the logical it's going to be Trump or Biden, absent someone else credible running for office. And I've done my best to try to convince others to run. I was a big advocate for Mr. Dimon, who unfortunately decided not to. Are you thinking about today what the market impacts are going to be

if one of those two win? No. No. I think about the global impact. I think our country deserves a great leader that the entire country can get behind. And imagine what America would be like if you woke up in the morning and you're incredibly, the entire country was excited about who was leading the country, right? And therefore, we're working together as a country to solve problems, to grow the economy,

you know, to protect the world. You know, that's a world we've had in our history. We have not had it recently. And I'd love to see the world. You know, that's a world we've had in our history. We have not had it recently. And I'd love to see that world come back. You've just heard from thinkers and leaders from across the spectrum of asset classes on balancing risk and maximizing returns. This has been Delivering Alpha.

From all of my colleagues at CNBC. Thanks for watching.