Invest Like the Best with Patrick O'Shaughnessy - Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31]

Episode Date: April 4, 2017

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

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The views expressed in this podcast do not necessarily represent the views of CFA Institute. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com. Patrick O'Shaunisey is a principal and portfolio manager at O'Shaunisee Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Oshamously Asset Management.

This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shawnossey Asset Management may maintain positions in the securities discussed in this podcast. My guest this week is Kay High. Kay has a very interesting two-part story. We start with Kay's career at BlackRock, where he rose to be one of the youngest MDs at the firm, specializing in quantitative hedge funds. Kay 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 Kay'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, what he calls uncomfortable introspection, and finding truth. We explore what he means by each of these ideas in some detail. I'm not sure if Kay is capable of lying. He's 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 Kwan hedge fund, this was my kind of conversation. For show notes, visit investorfieldguide.com forward slash K, K-H-E.

And now please enjoy my conversation with K-H-H-E. This is going to be a conversation that I think about a third or half of the way through, will really start to surprise people. But we're going to start in a comfortable world, which is that of finance and investing. If you could give a 30 second to a minute summary of your career from start to finish in finance, we'll use that as the jump off point, kind of where you are and what you did at a high level. Well, first, thank you. It's a privilege to be here with you, and I'm really excited. So a minute on Wall Street. Let's see. I started as an investment banker. at a firm called Broadview and actually quit 18 months into it. Not that I couldn't cut it,

but it was not the kind of way that I wanted to be living my 22-year-old life. I stumbled upon a career in fund of hedge funds and started as a research analyst and effectively did continue down that path for 12 years. So a total of 14 years in finance. And I was evaluating hedge funds, predominantly hedge funds that were quantitative in nature and across all different asset classes. The last eight years, I was at BlackRock. I was the head of research for the New York office and was really focused on two parts of investing, evaluating quantitative equity funds and quantitative trading funds and doing seating. So let's talk a little bit about the hedge fund to fund business at a high level because it's something we've only really explored one.

maybe twice before. So just give a sketch of how the flow of capital works where you're a bottleneck in the process or a stage in the value process. From capital to end deployment, how does it work? We're one cog in the process and we used to take, and I say we fund of funds used to take quite a heavy toll fee along the way. And so if you step back hedge funds, I think there's 7,000 of them, highly unregulated, no real central database, a very much of a relationship and access-driven business. So you're a large institution, a family office, an endowment, a government, and you read about hedge funds and you hear that they're uncorrelated to other asset classes. You want to go invest in them. However, where do you go? You don't go to Morningstar, you don't go to WSJ or other sites.

you really need to know the inside baseball, A, of the players, and B, how to do due diligence. And so as a fund of funds, we sat between these big investors. And they're large institutions. They're also smaller individuals, but really we cater to the large institutions. And then they would come to us and say, we have half a billion dollars to deploy. We would like this return target. this is what the rest of our general asset allocation looks like. Can you build us a portfolio of hedge funds? Can you go find them, diligence them, put a portfolio together that matches that

risk return and liquidity profile and then monitor it for us and then in exchange will pay you a fee. So how much did that change across that 14 years? So you mentioned inside baseball. There is a sort of privileged access, deep relationships that govern a lot of this flow of capital. But would it be fair to say later in that in that time frame that more hedge funds were going direct to end investor, institutional investors, as sort of the Yale model or other big asset allocation models became popular in alternatives were on the rise. Did that reduce the edge that or the sort of joke point that fund of funds sat at? Yes. Great, great question. and it's one of the many reasons that I ended up changing careers.

So I'd separate that in two paradigms. There was really, and the ones that I lived through, so from 2003 until 2015, and obviously 2008 being the marker for the two paradigms. Prior to 2008, you had a bull market in pretty much everything. Leverage was cheap, and it was really easy to catch a trend, catch a beta trend, catch a credit trend. Lever it up. skim two and 20 off the top and still generate net returns in excess of 10 to 15%.

And so it was really, air quotes, easy. And fund of funds kind of stepped in and they took one in 10 on top of the two and 20. So basically everyone was making money. 2008 hits. And it's kind of an emperor has no close moment. All these assets that were supposed to be uncorrelated, highly correlated. leverage amplifies the drawdowns. I mean, you had major hedge funds that were down 50%, 5-0. Then you try to redeem, guess what? You actually can't get your money back because we own copper

mines in Indonesia. It'll take you seven more years. And then as if it wasn't bad enough, then Bernie Madoff happened. So you have this wounded industry fund of funds. And it gets kind of kicked to the curb because on top of that, you don't know how to do due diligence because the biggest fraudulent scheme ever was invested in by some of the top investors in the world. So what is your value? So that was the change on the fund-to-fund side. On the underlying collateral side being the hedge funds, you start to realize that it was a lot of levered, levered and crowded trades. And everyone had caught the trends in the right direction. but as QE came in, liquidity went away, these kind of easier trades were much harder to identify.

And hedge funds love to say that higher volatility is good for them because of increased stock dispersion. But it's like a slightly higher amount. It's like VIX 15, not in excess of that. Right. Because then your leverage starts to really become scary. Your investors start to panic. So the hedge fund strategy. I believe got more difficult because of the environment.

And just because of it was such a lucrative business, so many more people came in to chase out these excess rents. So it just became more competitive. And so there was just a gigantic end because the industry matured, the end investors matured. So they were also able to do the work better that they used to pay the fund to fund. So it was kind of a perfect storm in so many different angles. and one that the industry now, I mean, the fund-to-fund industry is fundamentally changed since 2008. And in fact, a lot of the smaller ones are already consolidating away.

And the bigger ones have changed their business models from what I gather. But even the hedge fund industry is really challenging now because it's been a long time since 2008. And the returns have not really been there as an industry. And then it's getting hard to justify fees of 2 and 20. Let's talk a little bit about the role of evaluating hedge funds. and maybe we could stick within quants, since obviously I'm familiar with that world. Talk to me a little bit about that process. So from soup to nuts, how are you sourcing the ones that you're going to look at?

How many are you looking at in a given month or year? We'll start with those two questions, and then we'll go kind of fund by fun, the things that matter most to you as a prospective investor. Yeah, I think a lot of it is about access, and there were a lot of, let's see, incentivized players to help kind of deliver some of that access. So prime brokerage being a very obvious one where for the unfamiliar, the prime brokers were effectively the hedge funds broker. So they were incentivized to do these kind of road shows of their hedge funds. Then there was the conference circuit.

There was the paid conference circuit, all the different providers. But the thinking that we had espoused was that by the time the hedge fund has got into that level of stature, popularity, and just AUM size, you really wanted to be there much earlier. And there's a lot of research that shows that hedge funds in the first couple of years performed significantly, as well as the fact that smaller size hedge funds in general tend to perform better than larger hedge funds. So the question is, how do you get there early? And there was no playbook for that.

And I think that this will come, this conversation will happen. And we'll talk about this many times today. But there is this mix of hustling, real genuine relationships, establishing yourself as a credible thinker, long-term, compounding small winds over a long-term. And so a lot of kind of, in summary, without giving away the juicy part of the answer, it was around being really good at building relationship, building long-term relationships. With your second question, how frequently it depends. So in quantitative equity, there just weren't that many funds, probably one per week you would look at and maybe invest in two per year. But if you were a long short equity fundamental analyst, you could in theory meet one hedge fund, new hedge fund per day. So it really depended on the space that you were at.

We were, we at BlackRock, we were also very big. So the two guys and the Bloomberg, it just really didn't make sense for us. So that kind of chopped off a portion of the long tail. So define big because in our world that can mean a lot of things. Yeah. At the time, it felt like, well, I could just use, if you use the kind of higher profile seed deals where those were the Blackstones and the reservoirs, you know, you're talking checks. of 50 to 150. So that kind of felt like the big size of the seed market. But funds with sub 20 million, it was very hard to justify the amount of resources. And oftentimes those

funds were very hesitant because because we were so, it was such an institutional platform. There was a very high bar on compliance on operations and all that that. It just required a certain AUM to make that even feasible. I'll mention this kind of slight nuance to maybe color your answer on how you then evaluated the funds. So there's a balance where some of it is just direct investment in existing hedge funds, some is actual seating, meaning put a new manager into business with a 50 to $150 million check, front load the management fee to fund their working capital, and usually take economics in the business, take some percentage of the GP. So when you're, you've got one of the one managers per week or whatever it is on your desk, what do you do? What is the process? What are the

things that you look for? We know how hard it is to pick stocks. I think it's arguably harder to move up a metal level and pickers of stocks, whether that's via quant models or fundamental analysis. So what's the process? How can you actually, how is there alpha at the manager picking level? And you could move up. Is there alpha? Do you think there is alpha? You can move up one level further is how do you pick the engineer who designs the computer that picks the stock. It's a really, it's a really, really tough question. But I would start with a few things. One would be to start with the history of the manager. And here I want to be a little careful and draw a nuance around, because history and are very different.

Because, yes, so there was a pedigree angle, and I'm always a little bit skeptical of that angle because that's like saying I would only invest in startups that are founded by someone from Harvard where it might actually be inversely correlated to where they went to undergrad. But I think the history is something a little bit different because that informs the type of thinking that they espouse.

So if you, and I'm not a fundamental equity guy, but if you look at the tiger lineage, it might be kind of a garpy approach. Or if you look at the green light and third point diaspora, it's kind of a value-oriented approach. And so if you look at kind of the Goldman special sits desk, it's kind of a legal nuance approach. And so if you take that into Quantland, you had, and this was what was so fun for me, is you would study. the history of these strategies and these organizations all the way up to like an Ed Thorpe in quantitative trading and kind of see how it evolved. And you actually learn a tremendous amount there because if you're very good at the relationship part, you start to see who were the

key teachers along that kind of family tree and their style of investing or trading. And then you can start to kind of tease out different patterns between different strategies. So I think, you know, one example that we used was Susquehanna, for example, are just notoriously, it's a proprietary trading firm outside of Pennsylvania, outside of Philly, notoriously great options, traders, poker players. And when it was very rare for Susquehanna guy to leave, Susquehanna. Kahana, but when they did leave, they actually had this really unique set of skills that were in finite supply because you could only learn them there, that if you had the relationship with the individual that was leaving, then you had privileged with air quotes access. But that whole thing,

believe it or not, in the fund of funds industry, there are people who invest in options funds who have never heard of Susquehanna. And so that just, that doesn't mean that knowing about not that makes you a better, a good investor, but it just shows the breadth of like how deep do you want to dig? We'll mention the incredible rise of quantitative strategies across the investing landscape. And it's sort of been like a takeover in the long only space where basically all the money is going to pure passive or I'll call them rules based. I don't want to use the word quantitative because sometimes it'll be like a hedged Europe

portfolio or something that fits like kind of a category need for the investors. But rules-based kind of systematic strategies have come to dominate the long, only world. And listen, of course, there's privilege data, but we all look and see value works. We see momentum works. So how did you think about differentiation at the hedge fund level? I'm sure you're looking at black boxes where it's hard to know exactly, they won't even tell you what they're doing. So then how do you think about it? What were things, did you perceive that the edge for quants dissipated over the eight years at BlackRock that you were looking at them? Okay, so there's two questions in there. What did we look at to distinguish on funds? So this is where kind of this really intense kind of curiosity was a sort of advantage.

And what I mean by that is that I would spend months, years, reading different approaches to building risk management systems like mean variance and different types of approaches, PCA and things like that. And there's no way that I could replicate them on my own or that I even understood all of the nuances of it. But it gave me a toolkit to have a meaningful conversation. And again, we were talking about this earlier, asking the right question. And so like, why would you use a principal components-based analysis versus a mean mean reversion risk model. And then you ask that question enough times to managers, but then you also go ask them to your smart friends who work at other hedge funds. And then you go ask them to like Andrew

Lowe to get his take on it. And you start to, it's no different than than the mosaic, mosaic theory of investing in fundamental stocks is you start to piece together these different platforms. And so, you know, you could talk about data sets. You could try, you know, and again, With time, you build that rapport that they wouldn't necessarily tell you what the data set was, but they might intimate something like, oh, we know of a site that gets crowdsourced earnings estimates. And you might happen to know that there exists a site that has crowdsourced earnings estimates. And then you realize that nine other managers never talk about that. So you kind of start to see like, okay, these people are in on the cutting edge.

The last thing I'd say on that point, and this is probably one. that brought me the most joy was that it brought me down this personal rabbit hole of trying to understand high frequency trading. High frequency trading for your listeners who may not know is pretty much uninvestable as a trading strategy because it doesn't really require much trading capital. It just requires a huge infrastructure built. But as you started to understand the high frequency trading world and the nuances between dark pools and all these different trading venues and order types and all that, there were times where I was actually more versed in trading infrastructure questions than the person that I was interviewing. And right away,

that was a red flag. So a lot of things I'm telling you are more red flags to pass than like a stamp of approval for a go. This comes up constantly. We see it all the time in the data. very often negative screens are more powerful than positive ones. And to kind of use that inversion approach of what not to buy and kind of what's left over is probably pretty good is always interesting. And I like the answer a lot because it just goes to show that there's not a formula, right? There can't be a formula for picking or denying managers. There's got to be some experience and mosaic behind it. Looking back on all the managers you saw, you don't have to name them or you can remove any specifics you feel necessary.

But what firm or strategy when you first saw it intrigued you the most? You could tell very quickly who was doing this for the intellectual pursuit and sport of investing and who wanted to buy the jet. and a heuristic that I personally use, I'm never funding the guy that wants to buy the jet because at some point he'll realize, and I use pronouns because they were all he's, especially in Kwan. But at some point, they'll realize that the jet is not worth it or the jet is unfulfilling or the jet is a proxy for a lot of other kind of personal manifestations in one's life. So I really, you know, there's something about the guy who has half a billion dollars personally that still has his psycho watch. Because then you realize that it's the true art that brings them joy and not the end result.

And I think I spent a lot of time trying to suss that out. And that's again where, again, I understood a lot of the quant stuff, but it's not, I mean, you know how that. works. Even if you understand it, if the person doesn't give you the information, it's really hard to know what's actually being discussed. But I think one of my abilities was to really get to know people, and this is why this was a long game, to know what their true motivations were. So that was the screen. Now I can answer your original question was, and this probably goes to my lust for technology, But there were a few firms that were fundamental trading firms that had such a deep commitment to investing in technology systems and data and the robustness of understanding decision-making

and type 1 and type 2 errors and all that for fundamental investors and risk management on top of that. And those were the incredible fundamental investors because they were truly skilled stock pickers. But on top of that, they just came to a knife fight with a. gun and they were all about repeatability of process. So they brought that quantitative mindset to a fundamental game, which really separated them from the kind of finger in the wind fundamental guys where it's actually hard to know if it was skill versus luck. That last point is so key. The need for repeatability and a process, it seems to me like if I were in that seat, that my first checklist

item, and maybe the checklist wouldn't be that long to allow for this mosaic understanding and experience driving the decisions would be there's got to be proof that this is repeatable. There's got to be a process, even if it's a loose process, and there needs to be a history of that process surviving a hard time, meaning, you know, it's easy to have a process from 2002 to 2006 when everything works and values working and momentum's working and it's hunky-dory. But there needs to be a process surviving a stress test. And at least in my limited investigation, I certainly don't evaluate managers for a but I'm interested in all of them. That seems to be a pretty ironclad, you know, must have if you're

evaluating any investing system. You'd be surprised, though, there, I mean, we were in a, I don't think anyone's officially called it a hedge fund bubble, but we were in a, in a regime where it was so easy to start a hedge fund, the combination of capital being a wash and returns having been so good that, you know, I mean, I take it back to Bernie Madoff, right? It wasn't that, if you ask a few right questions, you'd pretty quickly see that that was not a replicable strategy, yet some of the top investors were caught in that. So I want to do a couple of questions, which are sort of a holistic look back at this whole era. So the first is a positive one, which is at what stage, it doesn't have to be a moment or a defined period,

but at what stage of that whole run did you feel most alive? I would say around the actual credit crisis. I think that I was fortunate to be kind of young enough in my career that it was, you know, I didn't have a lot of deferred stock and I was less at risk of layoffs and things like that. But I love teachable moments. And every single day for two years, because, I mean, really it started in Feb of 07 if you were in credit. was a teachable moment. And you're just like learning about leverage loan unwinds in August of 2007, how that impacts equities. And then in 2008, you're learning about all the outs that prime brokers

have to de-lever books. And then you're looking at how netting agreements work with credit default swaps, these billion trillion dollar portfolios. And it was just like every single day you were like teaching yourself about short selling. And it was just, I think that's what I loved about the fund of funds industry was that there was infinite breadth potential, especially because things were changing so fast, but just the vast number of strategies that existed. And so 2008, which was terrifying in terms of the stability of the global system, I don't know, I guess, and I can segue later to some of the things I'm doing now, but it was kind of cool to be living through that. I was nervous, but I was also very aware of things that I couldn't control and things that I could control.

And being able to separate those two made for a little bit clearer thinking on what was happening. And it was a bonanza of learning experiences for two straight years. So then the second look back is thinking now about the industry itself. And maybe this is less of a look back and more of a look forward at the potential. for adding value in this space because I think under the right structure, it can be a really great vehicle or means through which capital that can't do all the work themselves can find interesting investment opportunities. So I'm actually going to ask, what was right about the structure while you were there? What was wrong? And kind of what parts of the business created the

wrong incentives or reduce the returns in the wrong way, that maybe those that are interested in this field will call it fund of funds, even though maybe it's going to be going to a different name in the future. The people that are going to be interested in this world, you know, what should they be thinking about if they're entrepreneurs in the space? What was right about it is that highly specialized understanding of specific markets combined with depth of relationship, technology, is never going to replace that. It might make, it could even become a tool for some of that. And so, so I think that that is a skill that no amount of technology and, you know, transparency can take away access and relationships, like meaningful relationships and specialization. So I think that those, that worked well. I think that what didn't work was too much capital.

And I don't think that that's a fund of funds thing specifically. There's just so much capital chasing not a lot of return with low fixed income rates. It's just pushing capital into these, you know, fringier or alternative asset classes. So size. And I think the measurement periods where, again, as fund of funds were derivative of hedge funds, obviously, but the monthly reporting cycle is just so bizarre and just it's, I don't know, I think it's wrong, even for liquid equities. And I think that that has such a trickle down effect all the way down to the capital that you're optimizing for, you're optimizing for the wrong thing. But not only that, you're actually injecting by claiming to try to manage volatility, you're actually injecting more volatility.

into the strategy. And so that would be the second thing is the actual window of measurement. And the third is incentives. I think that as you grow, by definition, you can't have skin in the game in all the things that you're adding. And so I think that is always going to be the kind of principal agent challenge with growth. And so I think for budding entrepreneurs, I think that there's an opportunity in specialization. There's an opportunity in staying small in many regards, like capacity incentives and things like that. And again, it goes back to, do you want a jet or do you find this fun?

And for those who want jets, you need to raise a lot of money. And that's fine. I mean, that's capitalism and incentives drive innovation. I'm not knocking that. But I think as someone that's choosing to get into these products, I think that's a legitimate diligence question. Do you want to chat? So we've referred now to, we get to the surprising part maybe of this, which will be the remainder of our conversation. You've referred to this 14 years past tense a couple

times. And what's unique about you is, where we to stop the recording right now? I'd get all these emails saying, wow, that guy really knows his stuff in that space. You know, this guy's clearly a deep expert in the world of alternatives and investing. And it'd be great. and it'd be a popular episode. But what's interesting is that when you were in your mid-30s, you completely left. You left it all. And so I'd like you to start by describing the period of deliberation, maybe we'll call it. When you started to, maybe you always had some pang of this, but what was the catalyst that caused kind of the cascade of events that led to you ultimately leaving?

You know, I think you've told me before you were one of the youngest MDs at, if not the youngest MD at BlackRock. that's something that is in some ways incredible but also can be can entrap people meaning it's extremely hard to leave something like that and you left it in your 30s so I'll just leave it there and let you describe the transition for those of you I mean everyone's listening Patrick has quite a smirk as he asked that entire question okay where to begin I was one of the youngest MDs at BlackRock at 31 and I think it was a combination of of luck and hard work. Mostly, I got a lot of battlefield promotes around that 2008 period, which might be why I felt so alive to your earlier question. You feel alive when you get

promoted. So I had been doing this, I'm going to cheat a little on the answer. When I joined the fund of fund industry in 2003, I told one of my friends, I don't think this industry is going to exist in 10 years. I knew nothing. But it was more just a, a comment on the like middlemen and the disintermediation of middlemen. And so I guess I always had that in the back of my head that it's just the economics just didn't make sense. And this was when things were returning well, where the returns were good for everyone. But what really started to happen was a few things. One, it was, I was really, really specialized. So the world of invest. The world is a huge place. The world of investing is a huge place. And here you have K,

who's reasonably smart guy that is really, really good at like one basis point's worth of the entire investing landscape. And I kind of hit me. It's like, yes, and I did a lot with that one basis point. You know, I went from high frequency trading to fintech data sets, but it was still one basis point. And so, you know, there's this kind of concept of being an eye, eye-shaped individual or a T-shaped individual. I spent my whole life becoming an eye-shaped individual, deeply, deeply specialized. And I collected excess rents from doing that. But it was very empty. And so it was intellectually empty. So that was the second thing was I started to just feel like this intellectual emptiness. And every year, I would try to disrupt myself.

with air quotes just to stay fresh. And so I just learned, I immersed myself in a new field just to learn about it. There was like startups was one year and Bitcoin was another year and high frequency trading was another year and energy markets was another year. And I was just having so much fun doing them. But as I started to get further off the reservation from my eye specialization, I really realized that I wanted to be more of a T-shaped individual. So that was the first two things.

Just hang on for one second. and just more thoroughly describe what those two things mean, what I versus T means. So I means you are a specialist. And by knowing more than, you know, everyone else in your field of specialization, you become an expert and you're able to collect access rents personally or from your company. A T is more like a CEO. Like the CEO, he might have a vision. about the product or the future.

Like there are going to be driverless cars. But to execute on that vision, he or she needs to, A, understand the self-driving car technology, like product. B, be a really good recruiter. So like just like empathy and compassion. C needs to understand marketing and branding and digital. D needs to understand operations. E needs to be a charismatic salesperson.

F, and I could go on and on and on. And I was kind of forcing myself to switch from an eye to a T through hobbies. But I hit this point where I said, I want to do that for like work. You know, why should I just do that with the evenings and the mornings and the weekends? Like, why can't that be my whole life? So that was, does that answer the question? It does. So that's kind of the seed, if you will, of.

That was one of the seeds. Like I am devoting crazy hours and, and, and, you know, mind share to deep knowledge in one tiny area. Yeah. And my interests, that doesn't align with my interests. No, my personal interests. So then that, that then starts to accelerate. Yeah.

Well, can I add one thing though? Yes. Before we accelerate. The other thing, and this is kind of captured in the story of, I guess, my life at this point, was that finance is a very zero-sum game. I win, you lose. And that was the prevailing mindset. in the industry. So the example that I always use to exemplify the scarcity thinking is

someone leaves, star analyst leaves to go to a competitor. What happens? And a lot of your non-finance listeners will really be surprised to hear this. So you announce you're leaving and then HR calls, I guess, security and the blackguard is like this big bald guy. And they come in and they open your desk and within two hours, you're out of the building and you're locked out of your email. And, and it's just, it's so humiliating. It's so inhumane. And I actually think it's bad business because it just shows like corporate insecurity that you're so tied to this one person that you need to humiliate them and, and show your, your colleagues and your fellow soldiers that, that, you know, betrayal will not be accepted and that we will plow on and he was worthless

us anyway. And then what happens in tech? When that happens in tech, the CEO writes this like, florally blog post that's like, we're so happy that so-and-so dedicated so much time. These were all the innovations that were attributed to them. While we're really sad that they're going to go, we're going to throw a party for them, and we hope that, you know, we encourage you all to stay friends. And then, so then what happens? Two years later, uh, the person who's going to go, the person who leaves is at a different company. No one cares anymore. Then they become a potential client. Then they mentor someone and they're like, oh, don't work for that company. They humiliated me the day I walked out of the door. And it's just, I think it's just the wrong way to do business.

And you kept seeing that everywhere. It's this premise. Like if I buy a stock and you sell a stock, one of us makes money, one of us loses money. It actually doesn't work that way. But this zero-sum game was everywhere. And it just, I kind of hit a point in my life, I think it's just a personal maturity, that I just didn't want to live in a zero-sum game environment. And I actually believed, I didn't know, I couldn't verbalize it as well as I can now, but I believe that there was a way that you could create businesses, create cultures around the concept of a rising tide lifts all boats. So more of like an abundant. A total abundant. Abundant philosophy versus a scarce scarcity or a zero-sum. Absolutely.

So what did that last day look like for you? Were you ushered out by the ball guy? Yeah. Yeah, good, good question. No, I was terrified to call the founder of the firm, not of BlackRock, but of my group and the CIO. But again, he's a special individual. And at first, he was a little skeptical because I also, what you didn't mention is I had nothing lined up. And so I told people, I'm quitting and I have nothing lined up. I don't even have a kernel of. an idea. And 90% of the people thought that that was my way of saying that I was going to a competitor and that I would just disappear and then pop up, you know, on the other side of Park Avenue. But my CIO is just a kind and cerebral guy who knew me. If you knew me, it would all start to make sense. Like, that's why he was always talking about Bitcoin in investment committee meetings, you know? Or, you know, that's why there are things that started to me. That's why he's been obsessing about China when it has nothing to do with, you know, so people who really knew me, they didn't agree, but they kind of saw how it could fit. And then and then there's just a lot of just general, like, confused. I think the biggest thing was why would you not try to start something while you have the job? And that was kind of the prevailing narrative, a reaction. And I had an answer to that question. My answer was, I tried. I tried for probably two years waking up at 4 a.m. writing business plans and trying to start

companies and try different ideas. But the reality is, and this is something that I talk a lot with with my finance friends still because they don't understand. It's a very linear way of thinking in a lot of ways. And they don't understand that the creativity, in their mind, this is a lot of peers, not everyone, but there's two states of the world. You're working on something or you're on vacation. And this kind of in-between area of creativity, of learning, of self-discovery, of experimentation, that's vacation. And so it was actually very hard for me because I'm extremely hardworking.

And for people to keep pointing their finger, I mean, say, you're on vacation, you're on vacation. You're on vacation. I'm not on vacation. Do you know that Twitter started as a podcasting company and became, And Slack started as a gaming company. But that's not a sexy media story. And no one really wants to believe that. And I really was insecure about that for a while being in that in-between phase.

But we're jumping forward a little bit. That was the process of me leaving. And just a lot of head scratching. I think people, especially when we talked about what I did after, but people just were just really confused. So where did you go? What did you do? So we left, this was May of 2015. My daughter was one.

And I had set up my life knowing, I had made the decision to leave a year prior. So I had set up my life in the sense that we had no debt. And we had savings. I had kind of earmarked. I did the whole, like, take a chunk of money, put it in a different account, pay yourself a salary monthly to give yourself that peace of mind. So we didn't have any assets, any debt. And we bought a one-way ticket. And we went to Bali.

family eat, pray love with my wife and my one-year-old. And we kind of got off the grid, did a lot of exercise surfing, just chilled out, and kind of very spontaneously decided where we would go next. And we'd kind of like open the map and see where there were cheap flights and went, we ended up going to seven different countries for three and a half months, although the last month was in L.A. Because we thought about maybe moving there. And so, so we did that. And it was one of the the most. It was difficult. I mean, traveling with a one-year-old on, I think she'd been on 22 flights on that trip is pretty... I know how that goes. Yeah, it's pretty daunting. But it was just a, it was just a magical, magical time. And I would add one thing, though, before we left, there was a

month before we left on that trip between quitting and leaving, going on the trip. I decided to really start to invest in, I would say my health, but almost like my emotional health. And meaning that I was, I wasn't physically burnt out. I didn't think I was, but I was a little bit emotionally burnt out. And what I was starting to realize was that I had never, my entire life was a sprint. And I just like cranked and worked and exercise. I just, I did everything. So, so intensely without really questioning why I was doing it. And I started to just see little strands that there might be more to my behavior than just being a high achieving person. And I really started to explore that. And the big change was almost, and I approached it from a performance

perspective. A lot of my entrepreneur friends had executive coaches and life coaches. And So I was like, oh, high performers can have coaches. Cool. I'll get one. And so I had started to see a life coach. And she just, I mean, she cracked the open. What on that trip did you learn, what were the lessons from that trip about, you know, what you were doing wrong or what you, what mistaken priorities that you had that had been most indelible? So that was, you know, a couple of years ago now, were there specific realizations? in that period that have lasted and or maybe things that you thought you had realized that have turned out not to be true. Yeah. The biggest realization that I had was that I was always living for tomorrow my whole life. And I had set up such an efficient machine of learning, of investing, of relationship building.

And it all came from a good place. I wasn't building relationships to transact on them. But it was so focused on achievement. And I had equated happiness with achievement. And I had tried to push that out as far as possible to have bigger achievement, hence bigger happiness. But deep inside, I was tremendously unsettled. You know, nothing bad, but I was anxious. I was envious.

was judging. I was entitled. I think the thing that really hits home with people is that my inner monologue, my self-talk was very, very vindictive. And so the way I would talk to myself in my head was basically like, can you curse? Yeah. It's like, you're a piece of shit. And you don't deserve this. You have to work harder. You're always on the cusp of losing it all. And I thought, that that was the way to motivate myself. And so I think when I talk about emotional burnout, you do that for 35 years and you don't share it with anyone. And on the outside, like, people are like, oh, things are great for you. Yeah. Like, you should be like the happiest person on the planet, a 31 year old MD. But I didn't realize the tax that that was putting on me.

And to be even more, more direct is like, I was just scared. I was just scared. I was just. an afraid, like, I was an afraid child. And that's, that was the biggest revelation from, it wasn't necessarily the trip, but the coaching work planted the seed and the trip gave the space for it to really kind of flush out in my head. But the afraid child that I was, when I was nine, 10, 11 years old, like, I grew up in New York City. I had been mugged three times. There was no girl would ever date me. I was 130 pounds when I got to college. Like, that stuff had really started to build up.

But in my 20s, I learned all these defense mechanism. It's like, okay, I'm 130 pounds. If I take creatine and do tons of burpees, I'll weigh 165. It's like, okay, that works. And it's like, oh, if I read white papers when everyone else is going to a bar, I'll make more money. Oh, that works. And so I had kind of tricked myself in thinking that I had created this elaborate machine of achievement.

And once that achievement had hit, happiness would just start raining, you know, like from the heavens. And that was the biggest shift, the combination of like giving myself that space. So I know I've mentioned this multiple times. So apologies if you're getting sick of, if everyone's getting sick of me talking about it.

But the story is pure Joseph Campbell mythology. It's pure, you know, a known world, a threshold that's crossed into an unknown, literally an unknown, where you don't even have anything lined up. And I'm very interested always in what happens kind of beyond the pale, beyond the threshold, because you always get these stories of kind of magical helpers that appear to help you along your way when you don't necessarily expect them. In classical mythology terms, sort of the grail that you find and then bring back the end of the mythology story, it's always a circle.

So there's a return. And looking at what you do now, and we'll get into this in some detail, it definitely has the flavor of a guy that figured something out after a really tough time and is trying to bring that understanding back to other people. I hope that's a fair characterization, understanding that it's not a process that ends and then it's ongoing and it's not like you figured everything out. But let's use that as a bridge to describe what you've done since. So you go on this sort of literal trip and start to learn a fundamental truth about sort of past and future versus the versus, focusing on the present. What has been the kind of organic process since then to get where you are now? So I'd love to hear kind of what, how are you going to make money? How are you going to,

you know, you're a father. And as a father, I should just say a parent, you know, there's that drive to provide and that's a double-edged sword. And so I'm curious how you think about, you know, what to pursue, what not to pursue and tell us a little bit about what you're doing. And then we'll get into some of the kind of philosophical points about what you've learned. There was a newsletter. There once was a newsletter. And it's a crazy thing to say that an email newsletter could really throw off all of these these like just out of not even left field, out of Mars occurrences for me.

But to, then I'll return to that. the only work with air quotes that I did while I was gone. I had started this email newsletter called Radreads. And the reason why it's called Rad Reads is I had said to myself, if I ever started a company as an homage to skate culture, I want to use the word rad. And I want to say it as often as I can in business settings, because that will really make me happy.

Because I'd just be reminded of this culture that I grew up in and that I really admire. And so this is a little... Can we pause for one second? What is it about skate culture that brought you joy? Yeah. What about that culture? I think... I know nothing literally less than zero about skate culture.

So skate culture is... It's creative within constraints, which was... That works well for me because I'm not... My wife's an artist. Like, she's the creative. I need constraints and I can create... That's why I'm really good at Snapchat. It's like creativity.

within very high constraints. There is an element of thumbing your nose at the establishment to it. There's a real element of fashion in it. It's like fashion trend setting, even back in the 80s. But you like this part, it's the ultimate 10,000 hours sport

because you do the same trick over and over and over and over with no reward. And then one year later, you can ollie over, trash can. And two years later, you can land a kickflip. And I do surf to not often, but it's that comparison. If you measure the minutes of joy that are brought in a server's lifetime, it's probably 1% of their lifetime. But it defines their happiness for an entire. And so skateboarding had that kind of combination of culture, culture slash counterculture,

the Gladwellian notion of 10,000 hours, and creativity within constraints. I'm glad I asked. Okay, so we were talking about, I left, come back from the trip. I have this email newsletter, really simple, just link blogging, five links with a little bit of perspective that I added,

and people thought it was cool. A couple hundred people subscribed to it. And that was the one common narrative of this entire journey, was the consistency. And you talked to a lot of entrepreneurs and investor. And I, the, the one recurring thing is consistency is just, it's a, I don't want to call it a superpower because it's pretty simple, but it's an underappreciated, uh, virtue. Totally. As you know, with, uh, your podcast consistency and probably many things in your life. So I, I'm doing this newsletter. I have a we work space. This is January of

2016. There were a few little things I dabbled in. Actually, there was one very important thing that happened at the end of 2015. And this will really resonate with your readers. And it's just, it's an insignificant event to most people, but I think you'll get it. Some point in late 2015, I had loosely explored the concept of doing a venture fund because that's what I should be doing. You know, you like finance, you like tech, like go do fintech. But I had this conversation with myself where I said, you know what?

I don't want to do finance. And that's a, it was a really difficult conversation. I mean, think about loss aversion there. Like, think about you, you built your entire life around getting that thing and you, you got it or you were on the path. And then you just say, I don't want to use those skills anymore. And you, I guess, throw them out. And I just say right now, because I just don't know how to predict the future.

But it was so liberating. because I basically gave myself permission to try whatever I wanted. But I needed to have had that conversation with myself. And that's the big turning point. I haven't actually verbalized that before. So that would be one major turning point. But again, nothing happened off of that. But I think it opened these kind of like creative and emotional, positively emotional floodgates.

So January 16 starts. I've given myself permission. And I just started to write. And what was happening was in my email newsletter, I was hiding behind curation to share my ideas. And I didn't have the courage to share my ideas. So instead, what I would do is X says that, like, manage your ego.

And then I'd say, I really agree with X. And, you know, like the internet's a very public place, say two guys recording a podcast. But especially in finance where you're just told to be like closed off. Don't show emotion. Like wear the mask and, you know, all that stuff. And so I was hiding behind that. But I could tell that people were really gravitating towards like even my little commentary. And I just kind of hit this point where I said, fuck it.

I'm going to stop hiding. I'm just going to write what I'm feeling about. And I just started to like write and it just came out of me about basically like my LinkedIn might look great, but I don't know what the fuck I'm doing. And and this is confusing and I feel like I'm disappointing a lot of people. I'm scared of the responsibilities. You know, I've got quote unquote two years to figure this out. I'm scared of the responsibilities of family. my identity.

I remember this moment when I went to a conference and they asked, the woman asked me, what's your company name? And I didn't have one. And my heart sunk. But like, it really, I just made one up. Like, K-H-H holdings, which are my initials.

But it really, you don't appreciate how intertoy. You know, when you equate achievement with happiness and in that achievement comes identity, you pull identity out of it. You pull happy. out of it potentially. And so it was just like grappling with all that stuff. And I just started writing about it. I mean, it was like like, like just coming out of me. And like five people would read it. Seven. My parents, a few friends. I didn't even have the confidence to link from my

newsletter to some of the things that I was writing. So it was almost like I was writing it to not have it be discovered. But it felt good. And then little by little, you know, mostly like in my finance circle, people would find it. And they would consistently come up to me and say, I don't know what you're doing, but you are writing about things that I have thought about my entire life or career that no one has ever put on paper. And it was really around three things. It was around fear. It was around ego. And kind of, it's kind of the mutant child of the two of them, mortality. and like yeah I was writing about my fear of death and being a secular like atheist hyper-rational

I can control everything through action through effort it was just it was a very difficult thing for me so we'll come back to the philosophical stuff but I just started writing and little by little people started picking it up then I started experimenting on Snapchat and I started just the reason why I got on Snapchat it was so silly, but it was basically, I kept reading all these articles that say millennials hate email. And so I thought my email newsletter was going to become my product, my source of revenue. So I said, well, if millennials don't like my source of revenue, like my product, I better learn what they like. And Medium.com is telling me that they like Snapchat. So I got on

Snapchat and I have no friends on Snapchat, you know, 37, 38 year old guy. My friends think Snapchat is like for like extramarital affairs and like weird. stuff like that. And I just started telling the stories. I was experimenting and I didn't hold the camera right because I'm not part of the selfie generation. So people would be like, you have a double chin, like hold the camera up into the right. I'm like, really? But you look like an idiot walking down the street doing that. I just did this when you had me do it at the start of the same episode. There you go. Rookie mistake. Everyone check out my Instagram and you'll see it. But anyway, by telling those stories, I started to get messages from

18 year old saying like thank you for sharing that and it just was really fun it was really rewarding I engaged it was a small enough audience that I could engage with with people and it was just it was just very moving and I never felt that alive and it kind of pushed me to go even deeper into my own psyche to put it out there and so I'll shift to the pragmatic because I know that people want to hear about the pragmatic, as do I want to hear myself explain the pragmatic. I had a moment like you had with the Jack Dorsey retweet. And for me, that was a Bloomberg article and a CNN article. And it took me from being this kind of quirky, you know, emo ex-Hedgefund guy to, to, I guess, I don't want to say expert, but a recognized. name in the self-exploration world. And so from that, we're actually sitting in the Quartz's

recording studio, the entrepreneur and residence at Quartz. So I write for courts. I do speaking. So I do a mix of paid and unpaid speaking around the topic of facing your fears, recognizing your ego and kind of unlocking performance. And, surprising a lot of financial services firms have asked me to come talk because I could really kind of speak the language. I've got Patreon going on my site. So I'm, I'm cobbling it together. I'm still eating into my savings, but, you know, I had a two-year plan, but the two-year plan assumed no revenue. And so now I'm cobbling together some revenue. So maybe it's a two-and-a-half-year plan, but it kind of goes to the abundance point that, you know, it's starting, and I have a

I have more confidence now. And I'm working on a book proposal. So, like, things are moving in the right direction that I'm not, I still have, like, real, you know, we're having our second child. And so I'm having, I have real pangs of what am I doing? But at the same time, I've just entrusting the process and just going for it. I'm surprised by something kind of almost every day. I'm surprised that I'm a guest on your podcast.

You know, and it, it just came from trusting the process. And so, so I, I have that, that confidence. And I mean, you're going to like this, this saying. I just, I just appropriated it. But I've done a lot of work on managed self, emotional self-regulation, kind of managing my psyche around fear and around, around different biases and, and different ambitions and over-ambitions. and when you're a solo entrepreneur with what kind of you haven't figured it out, things can be irrational for a very long time. And it reminds me of the, of the quote, you know, markets can remain irrational longer than investors can stay solvent.

And so what I've realized is the world for my ideas and business product can be irrational for as long as I can stay, for longer than I can stay emotional. solvent and more so than the amount of money in my bank account or the revenue that's coming in, the ability to extend the window of my emotional solvency, that is hands down more powerful and confidence building than knowing that I was able to generate a little bit of income from these kind of district sources. I'd like to do a little bit of like the equivalent of a sidebar or case study that you would read in a book. Okay.

And we'll use the way that you and I met and kind of how we've interacted since as the story. So can you talk about your approach to what you call mutually beneficial introductions? Yes. Yeah. The MBIs. My snap crew will know very much what I'm talking about. So I have this belief about the world, which is if there are two people in the world who should meet and I know about it, it's my responsibility to make it happen. And I just, with a little

footnote, if they're, if they're both kind people. And it was something that I, I just believe and I still do. And I developed, I guess I was doing it so often. I meet a lot of people. I think I meet this, in this current year, I'm meeting on average 17 people per week. And I know because I have like a calendarly set up. So it's like three per day, three per day plus Saturday, one Saturday, one Sunday, a mix of Skype and calls. And some are new and some are recurring and friends and business people and so on. But I believe that if two people should meet, then it's my duty to do it. And I call that the MBA. And somewhere right around when I had my daughter, I tried to use a heuristic where I would try to make three per day.

And I don't think I ever averaged three for a sustained period of time. But I would say, like, around when my daughter was born, I was definitely averaging like 2.5 per day. Now it's probably 0.7 to 1.2 a day. And the network compounds from the 17 people. And I think, but the thing that I want people to take away from that is, I don't expect anything. If I don't even, it's nice if they tell me what happens, but I don't even care what happens as long as no one's a jerk.

If someone's a jerk, I want you to tell me and not just that person, I will remove them from the heuristic. But other than that, I don't care. And so it's just. Abundance again. Total abundance. And from that, if I had to guess, I've probably connected to 2,000 pairs of people. in my adult life, I mean, in my lifetime.

And the way it comes back to help you, and I could say the great things that happened to me in 2016, TED Talk, Quartz, EIR, two great press coverages, and a coaching, someone asked, that was another source of income, I'd do a little bit of coaching. All of those happened through some random connection, this podcast. And so it's gotten to a point now that it's, it gives me a lot of confidence. It's something I've invested in a lot of time, a ton of time.

But it gives me this confidence that I'm going to be okay. And but more than that, it just gives me joy because I just, now there's so many of these pairings that happen that someone will say, hey, remember you connected me to this person in 270? Like, they're now my CTO. And I'm like, what? Like, I didn't even remember connecting you guys. And so I really do think. And I've structured, I've tried to bring as much abundance into my life right now.

And it's really made it special. And I'm really grateful. So I'll just tell one little tiny example of this just to put proof behind the system. So there's, I won't name who it is because he's going to be someone that will be on the podcast. But it's a guy who I didn't know anything about. I'd never heard of. And I hopped on the phone with it. you connected me to him, unsolicited.

You know, I just got it, I just got an email or a text. I think it was a text with, you know, the two of us on it or something. And this guy starts telling me a story. And literally, I'm sitting in a UBS office in between meetings talking to this guy with a little bit of a break. And my jaw is just like hanging on the floor. I mean, just the most ridiculous story and interesting guy and who the hell knows where that will go. I just think it's such a powerful, incredible thing that everyone, should do with almost no downside. Like it doesn't take much time. And you know how I met that guy

was under a business pretense. I won't give it away. A business pretense. I happen to be reading at that time, Lolita. And I think he sees it. And he says, oh, Lolita, we'll just say this guy's very technical. And he recites the entire first page of Lolita from memory because it's his favorite passage. It's his favorite literary passage ever. And so it's just, you can't make the shit up, you know. And I am a linear and hyper-rational thinker, but at some point, you have to tap out and say, there's something else happening to make it happen this way. So let's come back to philosophy now. Okay. Philosophy that makes it sound so serious. I just call it like a public confessional. there are four I think you call them pillars or truths or whatever name you want to use that it seems

like if you've if you've forced to distill some of what you've learned a lot of it would fall in these four categories and so I'd like to start let me let me think which one I want to start with I think maybe what I'd like to start with is compassion so that's one of the four and that's I started that one because it seems obvious, like, yeah, compassion's good. So I want to know maybe what, did that replace something? Is you're stumbling on that as being so important because before you weren't compassionate? What's the nuance behind this one that seems like the most obvious of the ones on your list? The most obvious is that, or the most surprising, I guess, is that it's self-compassion.

That's one of, it's two parts. It's compassion to itself and compassion. towards others. And self-compassion is, we're not very good at it. There is a narrative out there that if you are not compassionate to yourself, you are soft, you will lose your edge. And, you know, in the world of type A overachievers, you will wither away. And I bought into that very much. Don't call me soft. And there's actual research. So I actually actually ask, this question in my talks, if you take the ratio of yourself, your inner voice, what's the ratio of kind things and mean or like demanding voice? And for me, it was 90 berating

10% kind. And when I talk to people, usually they kind anecdotally they square in that that ratio. And the main fears, I don't want to be soft. I don't want to lose my edge. But what happens, and this is what happened to me, is I would have my unlimited metro card, and I'd forget it, and I'd have to be used my paid metro card. And I would beat myself up over that, because I'd like reamortize the cost of the metro card. And one of my kind of core fears, that I grapple with is that I'm going to have no money. And so I would, that fear would kick in off of a metro card swipe. And I would be on the train for 40 minutes just like talking crap to myself.

Like you're never going to amount to anything. How do you want to like start a company, you know, pick your favorite ambitious thing? You're an intense dude. And so I, the first thing was learning to flip it. A, to get to 50-50. Now, I had like a triple whammy on MetroCards. I, like, bought it unlimited. I lost it.

Then I got another one and I lost it. And then like, it happens. Like, I just kind of moved on. And like, at the end of the day, it doesn't matter. But if I could get back all of those like 40 minutes when I was beating the fuck out of myself out. And that's a MetroCard. Imagine like a presentation for a client that doesn't go exactly how I wanted to go. If I could take all of that back, A, I think I would be, I would have been happier for sure,

but I don't think it would have actually impacted my achievement level. I think I would actually, you know, air quote, achieved more. So that's one part of the compassion. It's a very, I would actually think it's more important than the compassion towards others' piece. I think that I was a pretty compassionate and empathetic person, but I was very judgmental. And I think that the, so I view judgment kind of as the opposite, the, the, the reflection of compassion. It's not totally one for one. But that judgment was very much a manifestation of my insecurities. And so, you know, I would say, I would see someone that was thriving and I'm like, oh, he's probably not happy, you know, it still happens now. You know, and it was kind of that. And it was kind of that. And it was kind of. way that I would self-soothe over my own issues. And so, and again, it wasn't, like,

I think I'm in general, like a nice, decent guy. But I never really looked into, like, I never lifted up the hood and saw some of this stuff. And I just didn't like what I, I didn't like what I saw. And I thought that there was a way, a way to change that. Let's move to stillness, which I think is another one that's maybe easy to describe, but incredibly hard to do. Yeah. When my, the first day I met my brother in law, he said, he said, you always remember this quote. And I said, I have the ability to squeeze the rag of time.

And he was like, what the fuck are you talking about? And I knew exactly what I was talking about because I had, you get a kick out of this, I had created a shorthand language on my BlackBerry. So I'd converted the top 40 words into two-letter equivalents. So I could write faster on a Blackberry because I'd then relearn the language. I could write faster on a Blackberry than on a keyboard. And so I was always like rushing like for the next thing. I could not sit still.

And so stillness and I've become a big meditator. And I don't, I think meditation is just one tool. in the quiver and I'm a big fan of it, but I'm not screaming on all rooftops that, like, meditate and all your problems will go away. In fact, I think when you meditate, you see more of your problems. And then that's where the other tools come in. But I view stillness as kind of this continuum where on one end, and I still struggle with this even today, I don't think I took one conscious breath, meaning like I took a breath of air, And I felt the air kind of go through my lungs, through my nostrils.

And even as I just described, like, both of our, like, both of our tension levels just kind of like went like, ah. And I mean, like, if we just did that from, from one breath. And I don't know. I don't think I took a conscious breath for 35 years. And as you start to re-center yourself around really, like, absorbing. what we have in the present, breathing is a big component of that. So that's like one part of stillness. When I'm stressed sometimes, I do these like four part breaths where you breathe in for four seconds, hold for four seconds, and breathe out for four seconds. Your stress will go down. So that's like one,

that's the very short end of the continuum. And then on the long end, there's the Yvall Harare, like 60 day, 60 day silent retreat. Like people ask me, can you write? Like, no, you can't, right? You could barely eat. And then somewhere in the middle, somewhere in the middle, there's more traditional forms of meditation. But then somewhere, like, closer to the one healthy breath is kind of mindfulness around your phone usage. And I think that not being on your phone for six hours is, you know, we talked about negative screening at the beginning, is now a form of meditation. When I first met Kay, he's engineered it so that his iPhone screen is black and white. And the password that he has to enter to get into it is like 75 characters long.

With disabled touch ID. Right. But I still have it. I put the color back on because I've been messing around with video stuff. But the reason why this is so important, this long password is, okay, you're in the kitchen with your wife. You know, you're having coffee on a Saturday with your wife and your kids are running around. And your phone's a little bit far away. It's on a desk, like 10 feet away.

You're in this, like, great conversation, the best part of the week, like Saturday morning, kids wake up. Everyone's in a good mood. You go walk, you happen to walk by your phone. You put your thumb on it. It unlocks. You read a few tweets. Maybe you respond to an email. Five minutes goes by.

And your kids, my kid, has done, like, one of the cutest thing in the best part of the day. and you missed it and you didn't, there was no value to reading those tweets, zero. Because either you would have read them later or just tweets have low value in general, the low expected value. So and then you realize how often that's like a very well crafted example. But you do that, you do that 150 times a day and you've just like you've missed a lot of beautiful things and like that breath that we took together. And so I view that as part of the stillness continuum and they're all challenging. And meditation for me being the anchor tenant and really

still struggling with a lot of that phone stuff to the point that I could type the 15 character password so quickly now that it's almost as quick as the touch ID. I considered making it 25. I didn't intend it this way, but this is going to flow nicely into the next one. You mentioned when you meditate, you become aware of problems. So the next one is uncomfortable introspection. So introspection straightforward. What is the uncomfortable part of that? This, I think of the four, if you really have to, if you made me pick one by leaps

and bounds, it's the uncomfortable introspection. And I think, so because of the work that I do, I often get lumped into kind of the wellness category. And I'm a big buyer of wellness. I believe it. I'm glad that wellness is a thing. But I also am a believer that things take work, especially things that are important take work. And I think that the work, the uncomfortable introspection is really the role of fear in our lives. especially with males there's this belief that well I take my fear and I put it in a box and I bury it deep inside my soul and I'm good I don't see it it doesn't see me it doesn't impact me and it's just in this box and hopefully it never comes out the reality though that I've

observed is that once that fear comes out when it comes out it probably will come out I don't think anyone would take the other side of that. It will probably be at the worst possible time for it to come out, meaning if you're a hedge fund investor, it might come out the day that the market's down 700 points. If you're a writer, it might come out as you're writing your first proposal. And I think that the reason why it's uncomfortable is because talking about fears is not particularly fun. And you kind of, it forces you to go places that are uncomfortable.

But like working out, like knowledge, like acquiring knowledge, like with consistent effort and work and practice, I guess, then you get to become one with them, I guess. And so it is, but it is, but it, it really does. For me, I'll say it flat out, like, I'm very scared of my own death. And it's because I'm hyper logical. I'm atheist. And I just generally enjoy life. And I love people. And it just really scares me to know that it's all going to end. So, okay, that's the starting point. I've never verbalized that until two years ago. So you can imagine what holding that in does for someone for their entire life. So I'm scared of that. Then on top of that is layered a fear that I'm going to have no money. And I grew up middle class, lower middle class, but very much a kind of immigrant

scarcity-based mindset. And I was always taught, and I think I said this earlier, at any point, it can all be taken away from you. And so you must be vigilant. You must never be complacent. and that's actually something that I don't know if I believe that anymore. Meaning, and it doesn't mean that I'm going to go and like totally live a hedonistic lifestyle and be irresponsible and do drugs and all that stuff. But I think that I could get a job. You know, if I panic financially, I think I'm pretty employable. And so why should I be so?

why should I be so hamstrung by that fear of like running out of money, right? That's it's almost an irrational fear that I could I could almost model my way out of it. Yet that almost prevented me from becoming an entrepreneur. And so as you go through these, you start to see how they're constantly reappearing. So perfect example. And this is where the emotional solvency. part kicks in. Health insurance. Health insurance is a really, it kind of, if your fears are mortality providing for your family and running out of money, health insurance cuts through the heart of all of

those three things. So when I left finance, the first question everyone asked me is what are you going to do about health insurance? Health insurance. And I had to do a tiny bit of research because I didn't know. And my answer was, well, I'll do COBRA. And so you get exactly the same insurance. It's just really expensive and you pay for it out of pocket. But there was something, it's such a simple. Health insurance is actually the least scary thing because it's a fixed cost and it's modable and you know the duration of it.

But it is, these are seven, eight figure people asking me, they're like, well, I couldn't do it because of the health insurance. I'm like, fucking pay for it. And then it gets into other stuff like loss aversion. And so you start to see all of these effects. And so to take the health insurance thing full circle, I almost tapped out of entrepreneurship. And it was the week after the election. And so my cobra had just ended.

So I switched over to ACA. We found out we were having our second kid. And we had a president that was going to. repeal the ACA. And that insurance, when you've had corporate insurance your whole life, it's like night and day difference. And so the, that's when I almost hit my point of emotional solvency. I'm like, what the fuck am I doing? My wife's an artist, so not W2 income. And, but then you step back and you're like, okay, the easy fix, the fear-based fix would be like, I'm going to get a job. But you step back and you say, okay, the ACA coverage is not what we're used to, but it's still coverage.

The new administration, it's going to take months or years. This is obviously before all this happened to know what's going to happen to ACA. And there actually are other ways to get private insurance. But can you stay emotionally solvent long enough when you've got a kid in your wife's stomach, your wife is like texting you in tears about the doctor's experience that she had. And on top of that, you're like, fuck, I didn't make any money. I haven't made any money in two years. And then I won't bore you the details.

We figured it out. Because we quickly could say, okay, that's not the existential fear that's at play here. It's a pragmatic service question. It's not a coverage question. a service question. It's an experience question. It's a friction question. Just because we're having another kid, that was actually part of the financial model and the two-year thingy. So that's already been accounted for financially. And the whole election thing, like, I mean, that's kind of an exogenous thing that you can't really control, but you have a sense of how politics works,

that it's not going to, no one's going to snap their fingers and make it go away. So you step back, But you have to know that like it's like it's like your fears. It's like that movie inside out. And they're all fucking with you inside. And they're like all like they're all like running for the dashboard. And but instead of everyone like beating each other for the dashboard, everyone's just kind of like staying where they're supposed to stay. Like you should have some fear.

It should cause you to reconsider. But there's no reason why that those confluence of events should have led me to go get a job and stop being an entrepreneur around things that had already taken like some shape or form. One of the interesting things about the entrepreneur idea is just you. And the last of the four things, I can't remember exactly what you call it, but I'll use Campbell's term, since we talked about Campbell earlier, which is to follow your bliss, which sounds admittedly corny and contrite. Or trite rather. but it's a good final of the four because it probably best describes your compass today.

When you are kind of facing still an unknown, you've tried a lot of things. Some things have worked. I'm sure a lot has not. What is the mechanism through which you're a very systematic type guy? What is the mechanism through which you are doing that? How do you know what to explore, what to amplify? on, how do you actually do that? How do you actually find the truth or the thing that's going to be, you know, the more permanent job or career or business or company or whatever it is?

And I call it live your truth, but same concept. It's going to sound super woo-woo, but it really is the compass and I use joy as my compass. And I use joy as my compass. And am I finding joy in what I'm doing? And people are, people will push back on that. They'll say, well, you have the luxury because you have savings and you had the luxury to find the joy. It's like agreed, but also you have to give yourself permission to find that joy and you need to unpack the fear.

You need to unpack the ego. Like, yeah, things are moving for me, but in January of a year ago, when I was writing these really mopey emo blog posts, like, friends behind my back were saying to each other, they were just really concerned about my well-being. They're like, is you okay? And I'm finding it out now, you know, as I've started to get some clarity, they're like, we were really, really worried about you. We had group threads like saying, did you see what he's doing on Snapchat right now? And and I think that so part of it is using joy as your compass. And I think that there's this narrative, it's scarcity base that you must, for something good to happen, you must suffer. And it must be really hard.

And I've even said it myself a few times. But in the abundant mindset, like when you find joy, it's kind of this exponential level up that's like unstoppable almost you know my best my like proudest piece of writing which was around my mortality fears I'd been thinking about it for two years but it came out in one sitting and so joy comes and things start to become easy as a sole entrepreneur you start to cut things out of your life cut people out of your life that don't bring you that joy you become very you become very in tune to it you start to shed your ego and stop caring I mean to do what I'm doing I had to stop caring a long time ago there's another part of the ego that's coming in now as I'm starting to get validated from it and

I'm I'm aware that it's happening and I'm very careful about it but it's definitely there like when the CNN article hits I'm hitting control refresh on my MailChimp account. And the dopamine is hitting hard. It's there. You probably felt it on the Jack retweet, right? And part of it is human, right? And so use joy, notice the ease.

And one thing I've written is I have written on a piece of paper, what does success mean to me and my family? And whenever someone starts to pull me in another direction, when I start to feel envious or judgmental or someone criticizes what I'm doing or passively aggressively says something, I take a few four part breaths and I just go back to that list. And it's going to change. But it is grounding.

And it's like, oh, like, yes, I'm annoyed that, you know, someone who is way junior than me has like a really nice car. And then I was like, I don't even like cars. And then, but I need to go through that exercise to say like, not only do I not like cars, but what I really value is the flexibility to travel, having a car's liability for travel, blah, blah, blah, blah, blah, blah, blah. And my wife doesn't like cars and all that. And so having that laid out, going, like using joy as a benchmark. And I guess like with all that is just a general openness to new things, new ideas, new experiences.

Of all the things you've got going right now, what's the top of the joy ranking? Maybe joy is the wrong word, but we can use joy. We could also use, like, what has you most excited? What's most interesting to you right now? And it can be a medium, it could be a specific idea, it can be anything. What's most exciting, so I've been giving talks about this. And the best part is the Q&A of the talks. because the it's real it's not like hiding behind a computer screen.

Real people with real questions. Sometimes they get really emotional. And it is, and I really do think that my ego is not in this because they, I've been able to connect with them on a certain personal level through story, through my story. And they want to know. Like they have a question that they can relate to.

something that I said. And that interaction, so it's the Q&A, I also like it because it's very unpredictable. It's predictable. I always get a few of the same questions, and it's unpredictable because I get the super left-field questions, and those are the fun ones because they make you think. And oftentimes, I don't know the answer to that. What's the best question you've gotten? The best question is around, so the Buddhist concept of non-attacks. And so the concept, I mean, I'm going to totally butcher it, but the general, one of the concepts of Buddhism is that the present moment is all that we have. And so if you attach to anything, it's not the right. You're going to be, you will suffer because you can't, you can attach.

And so as I'm talking about, and that works well with ego and things like that. but as you talk about non-attachment, there is, it jumps into this, like, how do I apply non-attachment in kind of a modern society? And I don't really know how to answer that question because I haven't answered it for myself. I guess it's like I haven't truly shed my ego to the point that I can just go sit. You're not a hermit in the Himalaya. Yeah. Nor do I think I want that. But at the same time, I move in that direction. So why, why move in that direction and then stop?

So, so that's, that's just a hard question to answer. And one that I struggle with because it's, it's just a little contradictory because you move in certain direction, but then you know that you're not going to go beyond that, right? And does it, is it disingenuous? Is it, are you being a hypocrite? I don't, I don't really know. So I'm going to pretend I'm in the audience and I'll ask you a question. Okay.

kind of in this world. So the framing of the idea behind these conversations is helping people find better returns on their time and their money. And so the question is, is that even the right framework? Is it is thinking about things in terms of return, obviously wanting a higher return? And I think you and I have, you and I definitely share this, this inclination to model stuff and create efficient systems and and, you know, the language you made up on your Blackberry, that I think we instinctively gravitate that way. But is that even, is a high return, is seeking out high returns, like sowing the seeds of your own destruction? I think it all starts with, one of my favorite quotes is the quality of your life is measured by the quality of your questions. And what

what does, I guess the question would be, what does high returns bring you? What do high returns bring you? And I would kind of keep, you know, the Simon Cynic, like, why, though? Because so I, so let's, let's walk that through. High returns bring you financial freedom, let's say, financial independence. Okay. But that's a discreet at some point it stops, right? At some point it doesn't matter. Then what do you, do you still pursue high returns? Do high, and so then the segue is do high returns bring you joy? And high returns may bring you joy through financial independence. High returns may bring you joy through recognition. High returns may bring you joy through cash flow, which can then be rerouted to different causes that make the world better.

And there's no right or wrong answer, but I think that you should really ask yourself the real kind of pronging, but like what does high returns really bring you to your life? And I think you would be surprised with some of the answers. I mean, here's the hypothetical. Would you still care about high returns if no one knew about your? your high returns. Like with the Warren Buffett quote, I'd rather be the world's best lover

that no one knows about than the world's worst lover that everyone knows about. It's an interesting, and I think about this because I'm getting, it's relevant to me personally because the returns in my case

are validation returns. Like I feel validated. Like someone says, you have, your ideas did something for me and there's a form of validation, which again, it's okay. But really, like when you could say that like new subscribers to rad reads is a form of validation, but that might really be more my ego, the dopamine hit to my ego, or it could be a

manifestation of my financial insecurity where it's like one more subscriber equals one more X of monetization, right? And so this is why this like framework is so powerful. because you have the stillness to kind of cut through it. Like time slows down when you, when your mind is quiet, when you can take those deep breaths. You have unpacked that, that fear that you put in a box. And it's just there. It's always with you.

So you just see it. It doesn't go away. But you just see it. You see its influence. And you can tango with it. And you, and then the joy, the blue, the truth from that emerges kind of your truest self, right? Because you're not putting the fear in the body. Like, you just, it's like, I am, I am how I am. You know, you're not doing something

because someone else wants you to do it. You're not doing something that's for validation. You're doing it because it's, it is your calling. It's your vocation. And I guess where it is compassion. But you see where I'm, where I'm going with that is that when all of those things align, And yes, if your bliss is the intellectual pursuit of being an excellent stock picker, yeah, like keep doing that, you know, and use all of this to, like, to enhance your return. But if your bliss is knowing that your age, that you had one higher point of return than your HBS classmate, I would just dig deeper at that. I would prod at that because there's something.

There's something else there. And, you know, newsflash, when you get there, there's so many studies that show that it actually, nothing will change. What is the single most memorable day of you can choose life or career? If you choose one day, what would it be what happened on that day? I think it would have to be, it was on our Bali trip. and it was like one of our last days there and it was my wife and Soraya and I were kind of sitting there watching a sunset and we were getting ready to leave.

The trip wasn't over, but we had kind of, it just, we all collectively felt that for that split moment, we had kind of figured it out, meaning that there was like some crazy stuff where, you know, I won't bore you with the details, but like logistics with children in third world countries is very difficult. And so you have to let go of certain things that you would assume to be normal, like car seats and things like that. And so there was just kind of like there's always a little struggle,

which some of it was just like unpacking stories that we had told ourselves. Some of it was actual fear because we had like rented a condo. Like the electricity would go down for two days and like what do you do about milk? You know, or you had to pay these like the gang members protected all the residences. And so every month they would show up and you had to give them like $10. And I was warned about it, but I was just like, this is so weird. And so kind of, but you realize that you're going to be okay. You know, and, you know, the little, like, the Harari, like, there were a lot of stories that we had told ourselves.

And you start to kind of pull back the stories. And then we're just kind of sitting there at this beach with a sunset, with a beer. And it's just, like, beautiful. And I think, and it's the three of us. You know, in thinking about that, it would be hard to pick a moment that didn't include my daughter. So, like, the window of, like, items to choose from. There's a lot of items, but the window is really short. So I feel like that might be one of them, which is actually ironic because I'm very influenced by Naval Rabakon.

And I've listened to his podcast, this recent one, twice. And he kind of like bashes sunsets. He's like, no one remembers. You never actually remember the sunset. Appropriate question. I ask everyone, but especially for this conversation, I think it's a really great closing one, which is the kindest thing that anyone's ever done for you. I would say it's going to sound a little weird at first. But my friend Sunil, you know, as a connector, I'm always like, I meet someone.

Like, how can I be helpful? What can I give to you? But he told me once, and I think this is, I'd say kindness, it's also probably the best advice that I think I've ever gotten. And he said, the best gift that you can give someone is to share authentically. with them and to share vulnerably. And it didn't really hit me for a while because he said this kind of before I had done a lot of this journey. And now it's like very, very much resonates.

And I think that because of that, it just the compassion that it unlocks. But it's just it is kind of our natural state as human. to be vulnerable. Like, we have something that scares us or that holds us back. And if you share that, it creates this kind of safe space for someone to share back. And from that, you get, like, true, true relationships, like, like, like, versus like, oh, how'd your day go? How'd your day go? And so I think that that was kindest, it is definitely a form of kindness.

but it's also, I think, the greatest piece of advice that I think I've ever gotten. A great unifying closing thought. I really appreciate your time. This has been awesome, as I knew it would be. So thank you. Thank you. Hey, everyone. Patrick here again. To find more episodes of Investor like the best, go to investorfieldguide.com forward slash podcast. If you're a book lover, you can also sign up from my book club at investorfieldguide.com forward slash book club. After you sign up, receive a full investor curriculum right away, and then three to four suggestions of new books every month. You can also follow me on Twitter at Patrick underscore Oshag, OSHAG.

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