In Good Company with Nicolai Tangen - Citadel Founder and CEO: Investing, Innovation, Culture, and Politics

Episode Date: May 1, 2024

Since founding Citadel in 1990, Ken Griffin has become one of the most successful investors of all time. In this episode, Ken shares his journey from starting Citadel after university, to leading the world's most successful hedge fund. He also shares valuable advice on politics and maintaining resilience in a volatile economic landscape.The production team for this episode includes PLAN-B's Pål Huuse and Niklas Figenschau Johansen. Background research was conducted by Kristian Haga and Erik Dengerud, with input from portfolio manager.Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

Very welcome to the podcast In Good Company. Today, we are joined by Ken Griffin, one of the best investors of all time. Now, Ken started his journey in finance from his Harvard dorm. He founded Citadel, which has a great ambition of being the most successful investment firm of all times. Now, that's the kind of ambitions that we like. So, very welcome, Ken. Great to have you on. It is a pleasure to be here today. Thank you so much for taking the time to do this interview.

Fantastic. Now, what motivated you to go into finance in the first place? So I've always been interested in the stock market for reasons I don't fully understand. And in third grade, I wrote a paper where I set forth that I wanted to learn how the stock market works. I've been on that journey now for almost 40 years, and I still feel like I'm at the beginning of the learning curve. The equity markets around the world are just awash in interesting and complex problems. The intersection of business models, earnings, and then the psychology of investors.

It's really an endless journey of learning, trying to appreciate how to value businesses and how to be a successful investor in the stock market. It is just the most complex game in the world. Now, when you started back at your Harvard dorm, what was your vision? What do you think this could be? Well, what's interesting is in my college dorm as a freshman, I bought two put contracts in Home Shopping Network. And in some sense, I owe my career to good journalism. There was an article in Forbes by Gretchen Morganson where she set forth a thesis as to why Home Shopping Network was the meme stock of that moment in time. And I loved her thesis. I bought these two-put contracts. And fortunately,

from the perspective of my career, the stock cratered shortly thereafter. And ready for this? of my career, the stock cratered shortly thereafter. And ready for this? I made a few thousand dollars. But you and I both know when you're a freshman in college, if you make $2,000 or $3,000, that's all the money in the world. When I sold those put contracts, the market maker paid me less than their intrinsic value. And that made me very curious about the pricing of derivatives. Because I realized that I got very lucky in buying those puts with an expiration that fell after the stock had cratered, but the market maker made a risk-free profit. And I was very interested in trying to learn about the pricing of derivatives. And that took me to understanding the pricing of convertible bonds, which is the area that I

started in from my college dorm room when I began my first hedge fund. Do you think there are as many opportunities in the markets now as there were when you started? I think the opportunity set is different today than when I started. Obviously, the commoditization of the know-how of how to price derivatives, for example, has been incredible. There's a tremendous number of programs around the world with master's and PhD in financial engineering. So as a society, we've really increased our know-how when it comes to investing.

But conversely, the markets today are much, much bigger and they're global. And there's far more product proliferation. There will always be niche opportunities for investors to gain an insight with and to have a competitive advantage in trading. What were some of the mistakes you made in the beginning, which you learned from and have built on? I mean, I've made every mistake you can possibly make. And unfortunately, I've made some of them two or three times. So the key in finance, though, is to try to learn from both your successes and from your failures. And I think that one of the things that people do too often is they don't study their winners. They don't try to learn what did they get right in that winning trade.

Because let's be clear, you make money in finance when you have winners. And we all tend to put way too much emphasis on trying to learn from our losers and not nearly enough emphasis on trying to learn from our winners. So what have been your big winners? I mean, if you were to try to summarize your kind of winning strategies, what's been the best things you've done? as investors, is where we have a clear competitive advantage in assimilating information, processing that information, and reacting to that information. That's where we do best. And so we architect the firm around this principle of we're in the research business. And the core of this business is research. It's good old-fashioned, whether it's

stock picking or forecasting the weather to trade commodities. It's a research business first and foremost. And trading is simply how we monetize our research. It's just that simple. When you look at all your data points and all your research now, where is the U.S. economy? So if I look at the mosaic of the data points that we where is the U.S. economy? So if I look at the mosaic of the data points that we have in the U.S. economy today, we're in a very interesting uncharted territory. You and I have both studied economics our entire life in one form or another. Let me just ask you a question. Would you have ever imagined the United States to be at near full employment with inflation running somewhere around three and change percent?

And yet the government is on a massive spending binge? No, I wouldn't have expected that. I mean, as economists, we are just in uncharted territory that we are at that moment in the cycle where generally you're trying to pay down your government debt. You're trying to put your fiscal house in order. You're trying to create that capacity to have flexibility when the rainy day inevitably comes. And yet right here, right now with the U.S. economy pretty much growing at or beyond capacity, the government is still engaged in a massive, massive degree of fiscal stimulus.

That's creating hotter inflation than we would like to see in the economy. And it is leaving the United States in a more precarious long-term position and having fewer degrees of freedom to deal with the next recession or God forbid, depression. You are a vocal advocate about the fiscal deficit and the dangers of it. Why are you so concerned about it? What's so important? Well, I mean, you and I both grew up in the era of fears about crowding out. That the scale of the government deficits around the world would crowd out private sector access to capital. And of course, that fear still exists amongst those of us who think about a very

long-term process. How do we make sure that we do not crowd out the private sector from profit government spending? But there's another important point, which is the matter of equity. There's an incredible focus around the world today around equity. Is income inequality, for example, too high? This is an incredible moment of just, in some sense, we're borrowing from the future. We're borrowing from our children, our grandchildren, and our great-grandchildren right here, right now, to maintain a standard of living that is not in sync with either productivity or with the culture of work that's emerging across the developed economy. It's just not fair as a matter of equity across generations for us to be engaged in this level

of spending in the form that we're spending the money right here, right now, in my opinion. in the form that we're spending the money right here, right now, in my opinion. So if you were advising the president, or indeed were in charge of the country's finances, what would you do? Look, job number one is we need to improve productivity in the Western world. Like, there's nothing more important than we need to do than to increase productivity both in Europe and in the United States. This is the path to sustain prosperity. Now, how do we improve productivity? You and I both know we need to improve our education system, particularly in the United States. K-12 education is leaving our children at a material competitive disadvantage

relative to the rest of the world, and more importantly, at an absolute disadvantage in life. They just aren't having the exposure to the ideas and concepts that will give them their ability to earn a rewarding and rich career. Number two is the work-from-home phenomena is unquestionably reducing mentorship, collaboration, leadership development, and innovation. And it's time that we bring our people back together to collaborate and to mentor and to develop leaders so that in 20 or 30 years, we're not left in the very frightening predicament of having a leadership deficit in the Western world because of today's work practices. And I worry about that.

No home office in Citadel. No, we're all back at work. And the wonderful thing is the mental health ramifications are profound. It's so great to see my colleagues meaningfully engaged in their work, happy in their work, and having that separation of personal life and professional life. So education, back to office, what else do we need to do? So education, back to office, thoughtful government regulation that encourages entrepreneurship, that encourages the growth of small and medium enterprises, that creates more competition in our economy. That's really important. And the West must continue to engage in trade policies that really bring the benefits of free trade across North America and Europe.

of free trade across North America and Europe. So some of the trends towards protectionism between our two continents, we really need to think about pulling back on and creating greater economic integration. Now, when we look at all these kinds of things, is the stock market in a bubble or how do you see the stock market? You know, it's always very hard to know when you're in a bubble

because when you're in the middle of the bubble, you have the clear justification for why prices are where they are. You know, you and I go back to the dot-com bubble. What were the key things that we were talking about back in the height of the dot-com bubble? Do you remember some of those conversations, right? It was about how e-commerce was going to radically change the way that we

secured goods. Metrics like eyeballs on pages became the dominant pricing metrics for securities. But we created a whole lingo, a whole vocabulary, a whole set of frameworks to justify and rationalize the bubble that was taking place back at the height of the dot-com frenzy. Now, what's interesting is, jump forward 20 years, and many of the things that we thought were going to happen in the dot-com revolution have actually happened. And many of the biggest companies in the world today are actually symbolically the same businesses

or similar businesses to what we had all envisioned was going to be the revolution of the dot-com phenomenon. So what's interesting is we had the right thesis, we had the right ideas, but people just got carried away in valuations for a period of time. Are we carried away now with the AI evaluations? The AI frenzy is pretty amazing to watch. What's going to be fascinating is how fast do we see some of the AI wins incorporated into both our daily lives and into how we run our businesses. That speed of adoption, I think, is going to be pretty quick. There's a second trend, though, that's happening right here, right now. pretty quick. There's a second trend though that's happening right here right now. It's the rise of the importance of your chief information or chief technology officer. Once again in the c-suite in

the boardroom there's a real focus on digitalization and the use of software and analytics to improve your business. So what's really interesting is when you talk to CEOs, they'll tell you about how their companies embraced AI and how it's making these profound impacts on their business. Now, if you peel back the onion of most of these stories, there's no AI involved at all. But what is involved is an embracing of the use of modern capabilities and digitalization to really improve and enhance American and European businesses.

So what I find to be really great is that AI has reopened the dialogue about how to use technology to make our businesses more successful and more effective delivering goods and value to consumers. And Ken, how do you embrace AI at Citadel? So we use it in a number of ways to enhance productivity day in and day out amongst our team members. In some sense, the way that many of us will use AI over the next two or three years, helping to draft emails, helping to summarize research pieces, helping to understand or how to write the introductions to memos and other documentation that's required in the day-to-day flow of business.

We also use it for some very mundane tasks, for example, to help tag data. And then we use it for some very important tasks, such as how to help our software engineers be more productive. So we've had a litany of uses of AI within our four walls. If we go back to machine learning, which in some sense is the tree from which AI sprouts, we've used machine learning for over, looking at the date here on the screen, for about eight or nine years here at Citadel. And machine learning plays a very important role in how we think about the pricing of assets and has a small role in us thinking about risk management of assets from time to time. But pricing of assets, machine learning does play an important role here at Citadel.

Ken, I'd love to go back to when you started Citadel and the vision you had for the firm. So when you set it up, what did you think it could be? Well, that's a walk down memory lane. And I'll give you the history that's not revisionist. 20 years old, I had an opportunity to manage a million dollars for a fund of funds that was based in Chicago. And if I did well, they'd help me leave, start my own business, and raise some capital for me. So Citadel was started just over a year after I finished college. We raised about four and a half million dollars in November of 1990.

And we started with one strategy, which was the trading of equity-linked derivatives, convertible bonds, and warrants as compared to the common stock. So that was the genesis of Citadel. Now, there's a couple of key things that are important in this story. Number one is I believed you could use mathematics and software to help to understand these pricing relationships in an area where most of the world was still using paper, pencils, and rules of thumb. And I remember we hired a rocket scientist back in those days to help work on these pricing models. And one of my friends from a major bank literally called me, sort of laughing. He's like, you're not trying to put a man on the moon you're trying to trade bonds now jump forward 30 some years that bank he worked for is no longer in business and citadel and citadel securities are two of the most important firms in the world

in the financial markets we did we did manage to some sense, ride the wave of the rise of mathematics in finance, which has, in some sense, long since crested. We all take for granted the mathematical concepts that were really first utilized in the 80s and 90s in our day-to-day work today. What's been the challenges in riding this wave? were really first utilized in the 80s and 90s in our day-to-day work today. What's been the challenges in riding this wave? So I think the largest challenge in riding this wave has been the necessity to create your own talent. So in the early days, you had to hire people with very, very different backgrounds from the backgrounds typically found on Wall Street at that point in time. Physicists,

found on Wall Street at that point in time, physicists, nuclear engineers, mathematicians. You had to hire people who had a very different background and pedigree than you typically found on a Wall Street trading desk. And you had to teach them about finance. And you had to get them engaged in solving how do you value derivatives? How do you value complex securities? solving how do you value derivatives, how do you value complex securities. And there was a knowledge gap that had to be crossed or bridged between those of us who were committing the capital and those of us who were helping to write the analytics with which we made these decisions. Your ability to innovate and to grow successfully into new areas of finance is quite unique to Citadel. So why do you think you've been so successful here?

Look, I think there's something that we do that's very different than most firms. Everyone agrees that there is an art to investing. But there's also a science. And when we think about running this firm day in and day out, we really think about the union of the art and the science of investing in how we make our investment decision-making processes work. Number two is I think we bring a rigor and discipline to trying to understand where we create differentiated insights that give us confidence in deploying capital.

And then third is its experience. It's the price paid in losses and pain that converts into wisdom. My leadership team, we've been through a lot of very difficult moments in the markets together. We've learned some very bitter lessons, but it makes us much more effective as investors in periods of turmoil and crisis. One of the things which has changed during this period is much more passive capital, much more short-term capital. Now, how do you see that that has changed the world for more long-term fundamental investors like us?

So what's very interesting is the rise of passive investing plays to the realization that markets are either efficient or semi-efficient. And it's a way for investors to have low-cost exposure to either broad indices, to the world as a whole, or to specific sectors, without having to pay the fees of active management. It's been revolutionary for the world, this embracing of passive investing. But passive investing only works if there's a meaningful community of people involved in fundamental research who are helping to set the pricing of securities. So passive investing requires the existence of capable, successful, and competitive

traditional asset managers for the theory that underlies passive investing to actually play out, to actually manifest itself. So the rise of short-term investors helps to ensure that markets are efficient with respect to news that's rapidly evolving. But we should really try to make sure that we take every step possible to make it that traditional asset managers have the ability to have prosperous and successful firms because they are so critical in the price discovery process that passive investing depends upon. So given all this, if you're an equity investor, what do you think is the best way to make money now?

Look, I think it comes down to where you're situated in the financial market. If you have a full-time job as a lawyer or a dentist or as a teacher, you should be in a broad-based equity index product or an actively managed pool of capital that's broadly based in its management. And I would say you, let's say, let's say you were running the Norwegian So-and-Well Fund. Well, I know as a factual matter that you are very thoughtful about indexing a substantial portion of your capital to indexes that you've developed over the years around the world. And that gives you very low cost exposure to the holistic growth and profitability that we have watched play out around the world in various countries. It is a very thoughtful way to deploy the massive quantities of capital that you have to deploy.

investing in assets away from equities and then using a variety of either external managers or internal capabilities depending upon what you view to be the relative competitive advantages of the in-house team and the external managers. This is how I would recommend any large pool of capital to be managed. To do what can be done effectively, cost effectively, in-house and then to find around the world, your best of breed managers and the various strategies that give your portfolio diversification. Well, very, I'm very thankful for that approval of how we do things there up in, up in Norway. Now, to be clear, you know, part of the reason that I'm sure that you walked away from your career as a very successful hedge fund manager is you believe in the same ethos of how capital should

be deployed. Absolutely. So I agree entirely with you there. Now, 34 years after inception, we have the scorecard. You've been incredibly successful. How do you stay at the top? How do you make sure that you are still hungry? So there's very different questions in that question.

We're going to unpack it a little bit. How does Citadel continue to prosper? We have an incredible leadership team. World-class leaders here at Citadel that are running our various businesses. And I'm grateful for them being part of this team. I'm also constantly engaged with my leadership team on how to improve and strengthen our investment strategies. So a constant level of engagement with my senior leadership team on the core problems of recruiting great talent, on the core problems of recruiting great talent, developing great risk takers,

making sure that we push capital into the hands of our best risk takers when the best opportunities present themselves. So there's a huge emphasis on just human capital development and deployment of capital with our best people. And then there's a second thread in everything we do. How do we build a competitive advantage? How do we gather information better? How do we make better decisions? One of the things you do is to have multi-managers and these whole concepts, how are the teams structured? How do you think about this? So we think about the business as a variety of verticals. For example, a global commodities business, a long short equities business, a variety of credit businesses. Within each vertical, we ask our business leaders to act as entrepreneurs

and to really to say to yourself, I have, for all intents and purposes, access to unlimited capital. From that vantage point, what's the right team, the right strategies, and the right competitive advantages to build and to utilize in today's world, in today's environment? That's how we run our businesses. It's very much a mindset of clean sheet of paper. What should we be doing today to be one of the most effective deployers of capital in the world's financial markets? Does each team decide their investment strategy? So the investment strategies are honed between the portfolio managers, the business heads, between the portfolio managers, the business heads, and myself.

So it's the three of us will come together, depending upon the nature of the problem, and work together to try to make sure that we've really thought through how to create the most successful investment strategies that we can possibly create. So now you give me $100 million. I work for you. How do you look at my mistakes well i mean first of all um we'd like to give you a lot more than 100 million dollars to manage all right and and part of this is you know we're bringing really great people here we want them to

have access to sufficient capital to have both the revenues and the profitability to support superlative teams around them. We really view investing as the undertaking of world-class teams because within teams, you have a much healthier debate and dialogue that helps one uncover the truth, to uncover the real essence of the debate that's at play. And that's so important to how we run our business. So when we would hire you as a portfolio manager, we'd really spend a lot of time to understand, number one, what team do we put around you and how to recruit the best and brightest to be on your team. And then number two is we want to be very engaged with you in making sure that you have an investment process that's repeatable,

that you learn from, and you learn from both, again, your successes and your failures, and that you can teach this process to your team members to create operating leverage for yourself. So those are some of the things that we think about when you join the firm as a new portfolio manager. When do you sack me? Well, let's be clear. We don't want to sack you. We want to see you have an incredibly successful career.

Why do people's careers derail? Why do people run into tough, tough predicaments? There's a couple of reasons. Number one is some people just to be blunt, they're just not good risk takers. You can put the facts right in front of their face. You have a portfolio that is extraordinarily highly concentrated. Your large positions, you cannot demonstrate a clear and concise competitive advantage in why you own those positions. If these go awry, we don't have a basis to work together. And there are some people that just with full information are unable to help themselves and

get to a better portfolio construction. You talk about information many times, and you are one of the really great users of alternative data. Tell us about some of the type of alternative data sources that you use. What types of alternative data do we use? Yeah. So it really depends upon the nature of where we're investing. If you're investing in airlines, you're very interested in prevailing airfares. If you're trying to forecast inflation, you're literally breaking down every element of what the BLS looks for in the United States and producing their inflation forecast. If you are involved in the commodities markets, you might be running a world-class meteorology effort to

try to predict short-term weather patterns or dispersion of short-term weather patterns. or a dispersion of short-term weather patterns. So you're going to focus your use of data and alternative data to the nature of the problem at hand. So we're always trying to peel back the onion and understand what information is important to driving the revenues of a business or the demand for a commodity, and how do we secure that information in an appropriate way, process it quickly, and make good decisions with it. Changing tacks a bit here. You mentioned that already back at Udiversity, you were fascinated by market makers. And then now you made Citadel Securities, which is one of the world's most sophisticated market makers.

So first of all, just for the people who listen, who don't know, what is the role of a market maker in finance? Why is this important? is a firm that provides liquidity to buyers and sellers who are not contemporaneously meeting each other in the marketplace. Which means that when you go to sell $50 million of a stock, if there's not a buyer in the market at the exact same instant, you're not pushing that stock price unduly. The market maker will use their capital to facilitate your trade and then will hope to find the eventual buyer of your stock at some point in the future. And we do this in a massive scale around the world

in fixed income and equity products. How massive? How massive? In the United States, we trade almost 25% of all the equity that trades every day. Big numbers, huh? $400 billion of daily turnover across all asset classes here at Citadel Securities. What do you think Citadel Securities would look like in 5 to 10 years' time? Look, I think it's going to look very similar to how we look today, but will deepen across more products, will expand its reach across more trading partners, and will offer a variety of other services that investors really value, such as corporate access, access to new issuance.

It will broaden its scale and scope over the years to come as we continue to seek to solve the challenges and problems that our end clients face. Well, for sure, really, really impressive. Now, moving on to the bigger picture, just what do you make out of today's geopolitical situation? You know, you and I have been very fortunate. We have really grown up through an era of peace until the last two and change years. And it's heartbreaking to watch the war play out in the Ukraine. This is one of the, you know,

would you ever thought there'd be a war in Europe in your lifetime again? No. All right. And we're watching that happen right here, right now. And the horrible loss of life and the devastating impact of the Ukrainian people and the economy with this war that they're entangled with with the Russians. It's really, it's heartbreaking.

And then, of course, just a few days ago, we saw the Iranians take a strike at Israel. Israel has been under great duress in the Middle East. Probably not as much of a surprise as the war in the Ukraine. The Middle East has always been more susceptible to geopolitical challenges. But nonetheless, the events of October of last year, the war in Gaza, this has been a very heartbreaking moment for humanity across these two fronts. So, Ken Griffin, if you were asked to take over the finances of the United States, would you do that? Look, if we had a financial challenge in America and I could be of help to this country, of course I'd do that.

Ken, moving on to corporate culture, you've talked quite a bit about talent and, of course, the importance of having talent and so on. How much time do you spend on recruitment? So I am talking to candidates all the time. Nothing's more important than the talent that we bring into our four walls, that we develop within our four walls, and that leads this firm, both in the deployment of capital and the building of businesses. And you have like a wall of applications, right? I mean, I thought, you know, we have like 1,500 applications for like three positions now in New York, but you have like 100,000 applications. We do. We have about 100,000 applicants from colleges and universities around the world. Wow. How do you...

Let me tell you what makes me smile the most about that. Everybody around the world knows that we work five days a week in an office. This tells you that there are an enormous number of, of young adults around this world that want to be in an environment, which will be a wash in mentorship. A wash in leadership development. Where they're going to have careers. Like that makes me very optimistic about the future. And I hope that those of us who run businesses around the world. Meet these students in the middle.

And give them that experience. That will let them have great careers. So now I'm one of the 100,000 people. I managed to get an interview with you. I'm, of course, a bit nervous because you're a very famous person. But what would you ask me? What would I ask you? So I'm going to be the fourth person to meet you. So I'm going to have a really great set of questions to pose to you. Let me tell you what I look for. I look for ambition.

I want people at Citadel who really want to change the world of finance. They want to have a life that is full of impact. They want to make a difference in this world. I look for strong communication skills. I think the ability to convey an idea is extraordinarily important, no matter what commercial undertaking you seek in life. You've got to be able to express an idea. We're always trying to debate within our four walls the merits of our ideas to get to the truth. So I look for ambition. I look for communication skills. I look for an ability to reason and to rationalize across a broad array of problems.

I want people who are really good thinkers because problem solving is so inherent in what we do in our work day in and day out. And people who are good problem solvers are people who prosper here at Citadel. Are you seeing, can you see any of this from the CV or do you need to meet people? Oh, you need to meet people. I mean, let's be clear. People know how to write CVs today to hit the sweet spot of the employer they're seeking an employment at.

And how do you find out whether I'm a good problem solver? Well, what problems have you solved? And every student is going to have stories of how they've solved problems, whether it's the laundry service they launched or whether it's a prior summer job they had, whether it's a thesis they wrote. There's just a litany of opportunities for students to demonstrate that they're really good problem solvers. What's the most difficult problem you have solved? The most difficult problems have yet to be solved.

What is that? There's a lot of work that gets done in multi-period optimization that's tough to solve. Multi-period optimization is, I have a view as to how a stock is going to move over the next day, over the next week, over the next month, over the next year. How do I create the optimal portfolio at this moment, giving these different views I may have with respect to time? And this comes into play in just a variety of ways in which we have to make capital deployment decisions. So that's an interesting, fascinating problem that we've yet to really fully solve here at Citadel.

Very interesting. Now, I read somewhere that you said that if you were to enjoy being a good competitor, you love working here. What does that mean? Look, we're shameless. We want to hire people who really enjoy winning. And the financial markets give you a scorecard each and every day as to how you're doing as a competitor. And what we find is that people that like to compete,

that like to win, love being here because they like to see the real-time feedback that goes with being at one of the world's leading financial institutions and seeing the success of their research bear fruit in the portfolios that they build and construct. When you look at leadership, what is good leadership for you? Look, great leadership comes down to dealing with the realities of the situation at hand like great leaders are just very matter of fact about the problems issues and opportunities that they face and the decision making that they make around the problems the opportunities and the challenges that that they face. Like they're just very centered in the reality of a situation. They don't suffer from sunk cost fallacy.

They don't suffer from undue hope when a situation is not hopeful. They make good, rational decisions all the time. Do you? Most of the time. You asked? Most of the time. You ask what great leadership looks like. Absolutely. How important is speed in decision making? Speed, there's an element,

in one axis there's accuracy, the other axis is speed. What's important to understand at any point in time is what's the trade-off between the two axes that you want to be on. Sometimes it's more important to be nearly right and quick than it is to be absolutely right and slow. You know, if you think about it, you want to think about the cost of changing your mind as a key determinant of how fast you want to be. If you're going to make an investment in a real estate development project that's going to take 40 years to play out, you don't need to be quick. You need to be thorough. Because once you start that journey, that's a very long journey to be on. Whereas if you buy

$500 million of Apple and you realize the next day that you missed a salient fact, you can move quickly to get back out of that trade. How do you balance analysis with gut feel? So gut feel, the best gut feel is actually almost like subconscious analysis. Yeah. All right. So when people tell me like, just in my gut, I believe X, I'm trying to think about, is that their subconscious playing out? They've had many at-bats in this kind of problem.

They know roughly what the answer is. They haven't put it down on paper yet. But their gut's really more of a reflection of an intrinsic ability to analyze a problem and tell you what to do. Some people's gut feel just seems to be, you know, what coffee did they have that morning? And I should be long, you know, S&Ps because like it was a good day for coffee. That doesn't work here at Citadel.

Gut feel at Citadel is people whose gut really is a reflection of the analysis taking place in their minds that may be not fully formed or fully manifested yet. What would happen to Citadel if you stepped down? That's a great question. And the good news is I've got a number of people here who would very successfully run the business without me. I don't want to step down. I enjoy my job. I love the people I work with. This really is a passion for me in life.

So I'd like to not cross that bridge. But God forbid if I had to, I've got great partners who would run this firm if I had to step down. Now, if you had to go back to university, what would you study? Wow. So am I 20 years old again or am I at this age in life? No, no, you are the age you are. I'd probably go back to university and study a bit more in the realm of philosophy and government. Those have been problems that have always interested me. Good governance is important.

And having a solid underpinning in, I think, helps to better policy decisions. I'd probably also take a bit of time to study mathematics and computer science and understand the state of the art today better. It's been a long time since I was in a classroom studying mathematics or computer science. It'd be interesting to see where's the world today in those fields. What are you the most curious about just now? I would say my curiosity ranges from innovations in biotechnology to computer science. So STEM is my area of curiosity. I'm really interested in the developments that are taking place in STEM around the world. From nuclear fission, nuclear fusion, microprocessors to gene editing,

I'd say I have just an insatiable thirst to understand more about problems and developments in fields as broad as that. And when you don't spend time on that, how do you relax? I mean, I can see out of the window here you're in miami sun is shining what do you do outside office so i i love to bike we've got great biking here in miami and i'm very fortunate i have three young kids who are all roughly teenagers so most of the time most time when i'm not at work, I'm having three kids basically consuming all of my free time. And talking of young people, we have thousands and thousands of young people listening to this. What is your advice to young people now? My advice hasn't changed much over three decades.

Pursue what you're passionate about. To really excel at something, you're going to have to be passionate about the work. If you're not passionate, you're not going to be great at it. You're not going to be satisfied with your career. You need to pursue areas that really just, you wake up and you want to go do X. It might be being a doctor. It might be being a lawyer. It might be picking stocks. But you've got to find, like, what do you wake up in the morning and want to do? What's just intrinsically motivating to you? If you're driven by extrinsic motivation, you will find life to be very shallow.

You need to find what's your intrinsic calling in life. I remember there was a young woman here, this is almost 30 years ago. She was so talented on the investment team. She was with us for about a year and a half, two years. And her manager walked in and said, she's thinking of going to medical school and I need you to convince her to stay here at Citadel. I said, well, here's the problem. The minute she walks in my office, I'm going to offer to write her a letter of recommendation. The world desperately needs another great doctor.

And if that's what she wants to be, I want to help her make her dream come true. Well, that's a very nice place to end. It for sure seems like you have managed to get your dreams to come true and that you are on your way to make Citadel the most successful investment firm of all time. So I just have to really congratulate you. And a big thank you for being on here today.

You are most welcome. Thank you so much.