Invest Like the Best with Patrick O'Shaughnessy - SPECIAL EPISODE: Introducing Capital Allocators Podcast with Host Ted Seides

Episode Date: April 13, 2017

SPECIAL EPISODE: Introducing Capital Allocators Podcast with Host Ted Seides This is a special episode to premiere a new podcast from my friend, Ted Seides. In this show, Capital Allocators, Ted will feature a broad range of people that control the flow of money through the capital markets.  Ted is in a unique position to this; he knows this world as well as anyone having spent with both allocators and the money managers who invest on their behalf.  Below is the information about this first episode including a link to the homepage of this show, where you can subscribe.   Enjoy the first full episode of Capital Allocators. ———————————————————————— Steven Galbraith is best known as the former Chief Investment Strategist at Morgan Stanley. He also sat in every seat in the asset management industry – credit and equity analyst, portfolio manager, business executive, entrepreneur, and Board member at an endowment and a large family office. We discuss Steve's journey, incorporating his deep insights in the investing world alongside colorful anecdotes of market inefficiencies in European football, college sports gambling, local breweries, and Charter Schools. For more episodes, go to capitalallocatorspodcast.com/podcast Follow Ted on Twitter at @tseides

This is a special guest episode. I'm hoping to spread the word for what will be a fascinating new podcast hosted by my good friend Ted Sides. The show is called Capital Allocators and will feature a wide range of people that control the flow of money through the capital markets. Ted is in a unique position to do this. He knows the world as well as anyone, having spent his career with both allocators and the money managers who invest on their behalf. My guess is that most of Ted's guests will never have done an interview of this type before. so we are lucky to be along for the ride. What follows is the first episode in full, which is filled with great stories and insights.

Once you are done, you can subscribe to Capital Allocators on iTunes or wherever you get your podcasts. You can also learn more at Capital Allocatorspodcast.com. I really loved this first episode, and I think you will too. I'll let Ted take it from here. Enjoy the first episode of Capital Allocators. Hello, I'm Ted Sides, and this is this is. is Capital Allocators. This show is an open exploration of the people and process behind capital allocation.

Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can keep up to date by visiting www.com. Ted Sides is the managing director of Hidden Brook Investments LLC. All opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of Hidden Brook investments. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Hidden Brook investments may maintain positions and securities or managers discussed on this podcast. My guest on today's show is Steve Galbraith, an investment manager, brilliant writer, engaging thinker, and one of the most well-liked men on Wall Street.

Steve's career has touched every aspect of investment management. He's worked as a research analyst, portfolio manager, investment strategist, business leader, entrepreneur, and on the boards of an endowment and a family office. He started as an analyst at Chase Bank in Credit and Samper Bernstein in equities and later got recruited by Morgan Stanley to succeed the legendary duo of Barton Biggs and Byron Ween as chief investment strategist. Steve left Martin Stanley in the mid-2000s to join and help lead multi-billion dollar hedge fund Maverick Capital. He departed some years later to take his hand at his own hedge fund startup. Today, he manages his own family office in true family style, as you'll hear later in the show. At barely past 50, Steve has had a remarkable career and still

has a full tank of gas. Alongside his storied career in finance, Steve has dabbled in a European soccer team, a local beer company, and a wildly successful charter school. We discussed Steve's very personal take on all of this, and I promise you won't want to miss a second. So without further do, I bring you the incomparable Steve Galbraith. Steve, thanks for joining the show. Happy to be here. Thanks, Ted. There's a lot we can talk about investing. I think we may want to start with one of our shared passions of sports. Somehow in your life, you've found your way into owning a piece of a European soccer team European football. Why don't you tell the story of how that came about? Well, one of my buddies actually from, I went through the Chase training program with one of my dear buddies from, he's a fellow Rhode Islander. And he actually has turned his passion into his business. And he buys themselves effectively minor league baseball teams. And it was actually at one point was a very inefficient market. It was unlike the majors, which really are trading off egos and big price tags, it was an inefficient market. So he came to me with this wonderful value proposition. There was a club called the Darby County.

Ram's. And he said, Steve, in the UK, what happens is if you're in the, effectively, the major leagues and your team stinks, you get sent down to the miners as a team. And the economics of it can be actually catastrophic, because you go from the big leagues where you're getting all these sponsorships and AIG sponsoring you and you're selling out and you have TV contracts. And so it's worth a multi, multi, multi, multi, multi million. And when you get what's known as relegated, it results in a huge diminution value. And so like as with a stock and as a value guy, as you well know, we look at this and say this is a gift. We're like, we're basically buying this team because the seller panicked. He saw the future cash flows of this team imploding. And he said,

I'm out of here. And we basically bought the team for what we thought was the value of the stadium. So we're like, we're basically getting this team for free and we got the stadium. So it was one of these classics, some of the parts things. So or so you thought. Or so we thought. So I can't remember what the purchase price was. It may have been 25 million pounds or something like that. So we buy this thing. And one of the things we didn't quite realize is this whole concept of relegation can work in perpetuity. In other words, if your team stinks, you can get down to down multiple layers and you lose multiple economics. Anyway, long story short, that first year, for basically about 90% of the year, we were in the bottom position. So we were going to get relegated

again, at which point the economics would have just completely imploded. Then on top of it, we didn't fully understand that these are at their core money losing operations. The way you do make your money is through the sponsorships and the TV, so on and so forth. So we were hemorrhaging money about to get relegated again. And fortunately, they ended up pulling it out and doing fine. The real bittersweet part of it was three years later, though, when they actually went to the top of the league table. And the New York Times actually wrote a wonderful treatment of this. And basically, it's viewed as the most valuable game in all of sport. So the long story short there is teams playoff and the winner of this play-in game gets promoted.

And it literally would have meant probably 150 million pounds to us had they gotten promoted. If they win that one game. They win that one game. And so where were you at the time watching this game? So I fly over with my daughter and my wife and a bunch of friends. And it's at Wembley Stadium. And the place is just, it's, it's. It's far beyond the Super Bowl of the World Series.

You can't even put into it. And this is, was this the tier like below the Premier League or below that? It's one below the Premier League. Okay. And Darby County, for folks in the U.S., the equivalent is kind of like Akron, Ohio. Or maybe the Green Bay Packers would not be a bad analog in the sense that it's in the middle of nowhere, incredibly rabid following, 100-year history, and yet very downtrodden. I mean, they had a long, long history.

So anyway, we. With this game, we're dominating. We're playing Queens Park Rangers. We're dominating the game. And then right before half, they actually had a man sent off. And so what happens in soccer, you play a man down. 11 on 10. 11 on 10.

So we go into the second half and we had something like 12 shots on goal, which is almost unheard of in football, European football. And we're just dominating. And in fact, they only had it in our half of the field one time for the first 44 minutes of the half, second half. This doesn't sound like it's going to end well. This is foreboding. So this is kind of like when you're buying Enron on the way down, you know, or whatever. But anyway, unfortunately for us, they had it one more time in the second half.

And they scored with 35 seconds left in the game. And we lost. Painful. Painful. Painful. We subsequently sold the team. I'm patient, but not that patient. Another fire sale in the wrong way, apparently.

In the process of owning that team, and we've talked some about Moneyball, and I know you had done some work to try to figure out how do you apply those strategies to soccer. What did you learn? Well, we learned a couple things. One, the traditional UK management are just against it. So one of the things we did, much like Moneyball, where they figured out things like stolen bases were overrated, walks were underrated, we did a lot of analysis on, you know, what ends up contributing to great teams. And a couple things, some of them are fairly obvious, but the two most prominent features were time of possession. So if you control the ball, you tend to win. And secondly, shots on goal.

So just shoot the damn ball. It's kind of like investing. Too many people are striving for perfection. You got to take some shots on goal a little bit. And so those were the two kind of analytic things we learned. And so we incorporated it in the team. And the team did get better. But most interestingly, is soccer, like American football, is very much a team sport.

meaning you're much better off spending incremental money on the 15th, 14th, 13th, and obviously 12th, 11th player, the people coming off the bench and the less good players than paying a ton of dough for a Wayne Rooney or Ronaldo or one of these stars, because their incremental ability to influence the outcome is actually relatively low. So it's total contrast to like American basketball, where if you have a stud like LeBron James, you almost can't pay him enough, whereas in these more team-oriented games, you're far, far better off investing on the value spectrum, if you will, as opposed to the big growth guy. There's a book I read a couple of months ago called the Real Madrid Way. Stephen Mandus wrote it.

He was a former Goldman Sachs guy and had unfettered access to everyone in the organization. The core message of the book was the reason for their long-lasting success had to do with culture. The whole team in the Real Madrid community, the fans, employees, owners, players, everyone involved had to buy into being good citizens in this community. Part of that was a focus on getting the right personalities in the locker room and being willing to part with Primedana who was a great player but didn't represent the whole ethos of the community. So I'm wondering, how did you see that play out with the derby team? Well, it was interesting. The manager we originally had was a nondescript guy. And we brought back a gentleman named Nigel Clough.

And his father, there was actually a movie about Darby Rams and that Nottingham Forrest and some other things about his father who, and I can't remember his first name, but he was an unbelievably charismatic and very controversial footballer and beloved in the Midlands. And we bought Nigel back thinking, well, this will be a cultural shot in the arm. It's exactly what you want to kind of bring in. And it ended up being a complete fiasco. You can't create culture de facto, right? It just doesn't, you don't just insert this personality and expect it to win. So then we brought in a guy named Steve McLaren who had been coach for the UK team in the World Cup and somewhat ignominiously had a couple bad losses, but was a decent builder of culture and morale.

And he's the guy that got us to that championship game. or almost to the primarily. It turns out in some of these, if that sort of moneyball aspect was right about time of possession and shots on goal, that you had the right process and the wrong outcome, I have had a recent experience and a bet that some people know about that feels the same way. Yeah. But you try and control what you can.

And what we found, what was also interesting as part of our thing is we also implemented some of the, don't overpay for the stars. So when the team, and the team really did, we were, for I think five years in a row, we were in the top five or six, which is all you can hope for. It's kind of like the Patriots way. Or if you think about sports here, where you want a shot to be number one every single year. And that subtle tweak to the financial model actually helped, obviously, the finances of the company,

but also the outcomes for the team. And so that was kind of our view. It's exactly what you said. If you get the process right and you're taking enough shots on goal, you should ultimately get the prize. We didn't do it. Next time. Yeah. Let's circle back a little bit and talk about the process of your life and really how you got.

How did you initially get interested in investing? Yeah, so it's interesting, Ted, so many. So I worked with Lee Ainsley at Maverick. And one of the things he told me is, you know, I was, and you hear this a lot on Wall Street. I was buying and selling stocks as an eight-year-old. And that was completely foreign to me. I was buying and selling baseball cards. So I was a freak about statistics.

I love statistics. I knew who had the highest batting average in 1907. I mean, I just knew everything about it. So I really love the statistical part of it. My mom was actually more of an artist and an English major and had worked at Brown University. And my dad was a finance guy and retired as vice chairman of MetLife. And so I was kind of torn between the two. I went to Tufts University outside of Boston and actually majored both in economics, largely focusing on statistics and maths, but also English.

I actually got a double major and I was kind of torn between the two. And we share a mutual passion for writing, which we can talk about later in terms of investing. So I did kind of get a little bit of the exposure to the finance side. And then this is a somewhat more controversial part of it. I was in a fraternity, and we basically were part of a reasonably large betting ring upouts in Boston. And so Sal was our bookie, and he was over Jay's Deli. And one of the things we found was college sports were really inefficiently priced. So, and this was way before the internet.

So we used to bet on like Utah State against Montana in hoops or something like that. And you could really, with a little bit of homework, get an edge. And because unlike investing, the expected return on betting is negative because you have to pay the Vig. You really do have to have a system or a process and analytics behind it if you have even in hope. Anyway, long story short, there, I actually, we did really well. Like, I financed my junior trip to the Bahamas out of my wages from, I call them wages and Sal wasn't so happy. No, Sal wasn't so happy.

Fortunately for Sal, there were enough knuckleheads in my fraternity that we probably, in aggregate, did what most gamblers do. So I kind of caught the bug, and I saw that analytics kind of bring it all together. And so I found my way to Wall Street somewhat circuitously, but that was the early origins. And I do think, in my experience, I knew 10 years as well, you've seen it, I do think there is this linkage between statutes. sports and investing. You do see a pretty common theme where a lot of folks in this industry have that path.

And so that formative shot at Wall Street, how did you get there and talk a little about your formative training, which we've spoken about? So pure nepotism. My brother, who is clearly the smart one in the family. I mean, he graduated the highest honors from Brown and mathematically.

economics, very smart guy, went through the Chase training program. This was back in the day when the big banks had very large and long training programs. He did quite well. And I interviewed and they figured, well, he can't, you know, if he's half as good as brother, he'll get the job. And so I went through the training program. And I'm telling you, Ted, this was, it was gold dust. I mean, it was like a mini MBA. They spent a full year. They taught you accounting. I had never had accounting. You did all these case studies. You spent an immense amount of time on credit. So it was like a full year going through it. And it was the single best preparation you could have. And then from there, and we've talked about this in the past, I had just a dream job. At a young age, I was probably

23. Chase had this program called credit audit. And basically what it was was a group of SWAT analysts 23 to 26-year-olds who would be tasked with flying all over the world to do analyses of the bank's troubled loan portfolio. And so you'd fly in, and so I'd spend a month in Indonesia, a month in Chile, Argentina, all over the world, and you'd be kind of parachuted in and expected to analyze these really screwed up credits and come back with kind of a game plan for management. back in New York is how do we solve this? What was the bank's thought process then?

Was it that back then no one wanted to travel to Indonesia, so I send the 24-year-old? It was kind of things. And it was one of those things where to a young person, it's glamorous and great, to a 40-something-year-old, it's like, you got to be kidding me. I got a baseball game to go to with my kid or whatever. And to some extent, you know, you're so naive and young, you're willing to ask the dumb slash hard questions where you're looking at something fresh. And so there was something to be said for it. And it's worth noting that this was right after or around the petrodollary recycling crisis. So the bang, I always joke when I was working at Chase, the art collection was worth more than the bank.

Because we had a lot of bad Latin American loans. We had a lot of back real estate loans in Texas, so on and so forth. So it actually was a very fertile time to be doing what I did. And so the combination, again, as I said, I grew up in Rhode Island, a small town kid. I'd barely had a passport in college, and suddenly I'm spending time in all these countries. And for what it's worth, I do think in a young person thinking about a career in finance, if you get a shot to work overseas, do it. Just A, you get a lot more responsibility.

And B, just learning how things are done elsewhere, it can't help but make you a better investor. Or did you have outside of maybe it was within the training program, but did you have any key mentors in that period of time? No, it's funny, Ted. I really just flailed away and I just worked my ass off. Because my basic view is in finance and investing, there's a lot of uncontrollable. The only thing I really could control is my work ethic. And so early on, I just got lucky and worked my butt off and kept getting Peter Principle,

I kept getting promoted to way above my level of competence. I started getting mentors when I joined what I would call Wall Street proper. So on Chase, I really was part of a commercial bank. I then went to Sanford Bernstein. So I went to the equity side, the more traditional investing side. And there I've just been unbelievably blessed. I've had, you know, my first mentor was probably Lou Sanders at Bernstein, just an absolute brilliant man.

And he gave a damn about me. He was one of those guys. He was relatively aloof. he was just such a great mentor. I then moved on to Morgan Stanley and had Byron and Barton Biggs as mentors. And then most prominently, and perhaps the oddest couple of all, you know, Jack Bogle is probably not only my best friend in the industry, but he's just been an unbelievable both moral and intellectual mentor to me. And it's almost surreal the folks that have actually taken an interest in my career and in my life. That's great.

So you started analyzing a bank balance sheet. And then at Bernstein. Consumer, I started on. So it was interesting. So the segue to me, so I had a really robust credit background. So I really understood cash flow. I didn't even know what a stock was, really. And so at Bernstein, I came in and started covering consumer companies.

And in many ways, Ted, that was a perfect segue, just because they're not that hard. Right? It's almost like bond math. Like P&G is almost like a bond, right? The variance in their financial outcomes is very low. And so for a kid wanting training wheels for his equity investing, it was absolutely spectacular learning ground and training ground. And then when I found to the extent I had any strengths, it was I was pretty well regarded

on the strategic front. So what was neat about that role, because Bernstein was so well regarded in its research, I routinely got called to present the stuff I was coming up with to corporate boards. I got flown down to represent an Obisco's board, Quaker Oates board, Kellogg's board. And that's a really cool and pretty special feeling where the output you're producing is provocative enough that the company wanted to actually hear what you had to say. And would you say, did that come from some particular type of analytics you were doing? Is it your writing style? Is it a combination?

I think it's a combination. Like if a tree falls in the woods, if you can't write, if you can't communicate in this industry, you're going to have a hard time in any larger institution. And so there was a degree of catchiness to what I'd write. But the thing that was great about Bernstein is they didn't encourage you to, but they certainly allow you to fail. So in other words, a big part of their ethos was, you're going to be wrong. You've got to take risks. If you're just going to have the mean view on everything, you're going to get a mean outcome, except when you add in fees, you're going to underperform. And so, look, you can't be provocative for provocative sake.

But I do think one of the things they were pretty good at is saying, hey, you know what? think outside of what is currently the zeit guys, think about where things could evolve to. So one of my early pieces was on the serial industry and how the pricing structure had to collapse because the margin structure had run up too high. They were engaging in all kinds of couponing and things like that discounting. So things like that, whereas the conventional wisdom was this is the single greatest business ever. It's a consumer staple, blah, blah, blah. And so I think it was that, Ted. It's like, okay, take a risk.

That's very antithetical to the old cell side where we read reports all the time that there are only buy recommendations. And even today, the number of cell recommendations is in the minority. And you see there's a very, whether it's game theory or just behavior, there's a reason why, right? Because there's this sort of virtuous or vicious circle that comes from, you write something nice about the company. Hey, is P&G going to invite you if you wrote the bi report or the story? cell report and it goes on and on. Was Bernstein different from that in some ways? It was. We were vastly different.

So my initial launch report, I had more sales than buys, which was unheard of on Wall Street. And the reason we could do it is we didn't have any corporate finance arm. So they had an investment arm. They had no traditional underwriting arm. And so at some point, we took pride in it. And it was our point of differentiation. And what I found, Ted, is the better management, and I'm not saying by any means a lot of them,

but the better management did want to hear the negative scenario. Like as a portfolio manager, I don't want my analysts coming in telling me nothing but the good news. I know the good news. That's why we own the stock. Tell me where we're going to be wrong, you know? And so I'll never forget it. Ken Wolf was the CEO of Hershey.

He's a fellow Yale guy, actually, played football at Yale. And Ken was the CEO of Hershey. And I put a sell on her. Hershey because it was preposterously valued and I thought they were going to have issues in and around some stuff Nestle was doing. And I invited him. Bernstein had a big conference every year. And the IR guy didn't want Ken to go because he said, he's not being supportive. And Ken said, the hell no, I'm going.

I'll never forget that because he was such a stand-up guy. And he said, look, if he's right, he's right. And if we can prove him wrong, we should. But you're right. The biases are against that kind of recommendation. So let's take a little divergent path. You spend some time with financials. You spend some time with consumer companies.

And today, you own a small interest in a local brewery, not too far from your hometown. So let's go there. Narragansett for your company. How did that come about? How do you have a car that you drive around? That's a walking advertisement, a surfboard in your company. Your office of the same, a terrific story. Why don't you go ahead with that one?

Basically, I love investing in money-losing operations. Only with your own money, that's true. That is true. And actually, this one I think we're going to make money. Actually, we made money on the soccer team just because we bought low. With Gansett, it was a labor of love. I grew up in Rhode Island, and Narragansett beer had been the largest employer in the state, and it was the official beer of the Boston Red Sox. And this is a cautionary tale, because it does give you some sense,

particularly with the buyout, the private equity fever pitch we kind of see now with endowments and others. Gansett, in current dollars, probably had well over a billion dollars in revenue. It was the fifth largest beer in the whole country. When was that? That was in the 60s. And it probably had something like 60% market share in Rhode Island. It had well, well into the double digits throughout New England. You know, it's a huge enterprise.

And then it got bought by different lousy private equity guys and lousy industrial players. And they watered down the beer. They cut back on marketing. And ultimately, they ended up closing the plant in Cranston. It was bought by Fallstaff was, I think the last owner, which was an Indiana brewer. And they were brewing it in Indiana and shipping it to Rhode Island. And so I got involved in 2000. I'm at Maverick, and we're losing millions of dollars every single day.

I'm coming into the office and my eyeballs are bleeding from how much money we're losing. And I get a prospectus from a friend of mine and said, Narragansett is looking to resurrect itself. They had already had an angel investor. In fact, the current governor of Rhode Island, Gina Romando, another Yale, was the angel and they needed money. And frankly, the angel had overpaid or the company hadn't delivered it. as they thought. And so I just said, I got to do this. I grew up in Rhode Island. Out of nostalgia, I got to do this. And I talked to some of my buddies on Wall Street who had too much money and too much time on their hands, I guess. And what was interesting, Ted, is in hindsight, the response

was quite frosty. People are like, look, I'm getting killed in my portfolio. I don't want to do this. So this is October of 08. But interestingly, by like February, of 2009, all my buddies were suddenly very interested in this. And the deal ended up being oversubscribed. And if anything, it was, again, with the benefit of hindsight, it was a sign of risk tolerance coming back to the market. And so here we are today, speaking here in March, we just opened a brewery in Rhode Island. So it's the first time Narragansett beer has been brewed in Rhode Island in something like

50 years. When we bought the business, when it was originally bought, it went from, as I said, current dollars of a billion, it had $87,000 in revenue. I mean, it's just amazing. And today we're up to about $15 million. So we're making good progress, not making good money yet. But ultimately, I think we got a shot. It's a tough, tough business. But, you know, it's another thing about investing.

I do think it's very important for folks. if you can get a true, actually get real life experience at a company, right? Getting involved. So I've been on some corporate boards. I'm involved in large family offices and things like that. It just gives you a much better perspective of what the heck really goes on at these firms. And so in a weird way, I know it's a tiny little company, but it's helped me a lot understand what really is required to get through a cash flow cycle. and add value.

So let's take a step above the company analysis industry level. When you left Bernstein, you joined Morgan Stanley as the chief investment strategist followed in the footsteps of two mega giants, Barton Biggs and Byron Wien, who were just incredibly formidable in those seats. What was that like coming into a seat where you knew you were following kind of the Derek Jeter of strategy at the time? Well, I wrote this in one of my essays. I just said, you know, when I got the call from the headhunter,

I assumed it was a fraternity, but are you making fun? And I showed up at his office and it would be like a bombed out building in Harlem or something. Because I just thought there's no way they're looking to replace these two legends. And I didn't replace them, but bringing someone to come in and succeed Byron and Barton. And I was just, I was like a kid in the candy store tag. I was just thrilled because Morgan Stanley's access, I get to meet the best investors. in the world and then the data they had internally just to be able to see the flow and things like that and the main thing I figured out pretty quickly is I'm not going to replace them so what I did

to some effect I guess was I used a lot of the Bernstein stuff in other words it was very quantitative whereas Byron was always very impressionistic as was you know Barton used to cite poetry it is research pieces you know there's no way I'm doing poetry you know me too well. So it's like, I got to do something different. And so what I tried to do is obviously make it catchy, analytically readable, but also rely a lot on the data. And I'm proud. I mean, I did, I finished number one the two years I did it. And, you know, Byron used to give me a hard time because he actually never was number one. Which is totally bizarre because he was way over number one in terms of his mind share. But it was an interesting experience. And

It was also, without getting too nostalgic, I probably, and I've done this, in fact, we didn't get into this, but almost everything I've ever done was pretty damn close to the top. So it may be fodder for future conversations today, but, you know, if you think about it, I picked up the package food group. They had outperformed like nine out of the 10 years prior to me picking it up, and then they went into real secular decline. I picked up the broker dealers in 98-99 when they were all the IP ago, you know, and I joined Morgan Stanley when it was trading at about four times book value. And as we well know, it went to, I think it troughed at 0.5 a book.

And what year did you join? I joined Morgan Stanley in 2000. So really right at the time. I mean, it was really damn close. And naturally, I progressed into the hedge fund industry. I wasn't quite at the top for the hedge fund industry because I joined Maverick in 2004, but at some levels, parts of the hedge fund industry, it probably is at a top with respect to the fee structure. And your good friend from Omaha kind of made that point in his last letter. So 2004, when you were in the seat, you really did have a portion of what you're doing that was based on fundamentals, qualitative work and a fairly healthy from your statistical background interest in it, quantitative. And now more and more we're hearing about data analytics and big data and

quantum mental as a made up word. But you were doing it back then. Can you talk a little bit about what did you see that worked when you're blending the numbers, sort of data analysis and fundamentals, and what part might people be missing today that it's not just sort of the elixir to success? Yeah, so look, at the end of the day, the crux of what you're trying to achieve, and this is what Bernstein was very good at, was having a disciplined, repeatable process by which you can select overvalued and underdiallied securities. And in Bernstein, and it sounds unbelievably naive today, but they were kind of the first firm to uniformly use a DDM, a dividend discount model. So everything was put through that black box. And so what I learned and I've taken with me, and I'll take with me to my grave, I have a strong value orientation. In other words, I'm very, I'm Scottish. I'm very cheap. I don't like overpaying for anything. And you can tell from my haircuts that's true, among other things. But I just, so I like that framework. And then what's interesting as it's evolved is a lot of the value guys, Bernstein included, got into trouble because it was something of a statutes. valuation methodology that wouldn't necessarily account for these wildly irrational or excessive

squalls in the market. And so from Morgan Stanley, I really understood the power of momentum and trading. And a lot of the more what I would call real life as opposed to theoretical. So if you put something in a DDM, at the end of the day, there's a lot of research and all, but it is somewhat theoretical. And then when you get to the more Wall Streety side, making up a word of the business. And so in my mind, what we've tried to do with our work is kind of capture both, where you get the framework where you can somewhat naively figure out which companies are over-earning and

under-earning versus their stock price, but then also be acutely aware of the other stuff that goes into setting securities prices. And, you know, the purists might say, well, that's all short-term nonsense. But as I've seen too well, short-term can be, you know, investors are short-term. So you can't be wrong in this business. If you have the right investors, you can be wrong, quote, quote, wrong for a relatively long period of time. But investment horizons have shrunk to the point that running a commercial business and being wrong for 18 months is almost mutually exclusive. Yeah. Today, with sort of increase in computing power, more availability of data, unlimited amount of data, you've had the large quantitative hedge funds that have done really well in a period of time where most haven't.

What do you think the limit is of this? If we look out 10 years, how much can computers replace what are today sort of people in research analytics and stock selection decisions and improving behavior? Where do you think this can go? See, I think we're, and this is a self-interested comment, I think we have to be naturally nearer to the end of it than the start of it, because it's on everybody's mind and everyone's talking about it. And intellectually, what I would argue is, you know, the overall industry, as Vanguard has shown, had a massive fee problem.

In aggregate, the industry is doomed to underperform, by the extent of its fees. With the hedge fund side of the equation, because the fees were higher, it would be that much more magnified. And so, again, maybe I'm naive, and I'm asserting this. There's no analytic proof behind it. But I come back to Omaha where they have like,

freaking 20 people in the home office, right? And you know it better than anyone. And if you, one of my students, Todd Combs, actually works with Mr. Buffett. And he said it's, you know, we do it the old-fashioned way. We look through, we read through the documents. Now, they have a unique structure, an investor base and things like that. But I think at the end of the day, judgment will rule.

You just don't want to go into battle unarmed. And so I think where the big data stuff can help you is helping you systematize your decisions. But I'm not a believer that the computers are going to take over the world. And in fact, I think it's dangerous because I think. And he saw little snippets of it with a flash crash and some of these other things. 07, you'll remember well when you had that August when all the quants were betting. And now you've got the risk parity bets that people are making now. And I just, I think some of this stuff gets taken to extremists.

And the pendulum will swing the other way at some point. So let's shift from numbers to the pen. We talked a little bit about writing. For those who don't know, you wrote the forward of my book, that was a conscious decision for me to get people interested. We'll get to this today. You're effectively managing a family office with your wife. What part does writing play into your investment process and how is that buried over time? It's funny. And it goes back to what we talked about with my college, where I was, not that I was torn, but to the extent I have any unique skills, it was, it is somewhat

unusual. I did exactly the same on my math and verbal SAT, which is somewhat unusual. And so wasn't completely left and right brain. I had some on both sides. And so I always enjoyed writing at some level. But then when I became a quote unquote serious investor, I found having to actually put my thoughts to paper was an unbelievably powerful way of just martial. What the hell am I thinking about? Like what matters today?

Whereas if you don't, if you're not doing. this. So even if you're just, if you're not a portfolio manager or not responsible to outside investors, I would still argue it's worthwhile writing down your thoughts on what you're doing because it just clarifies where true north is. And so what I've found through the years, Ted, is sometimes there'll be a divergence between what I'm writing down and what's actually in the portfolio. And that's a time to step back. and reflect say, okay, which side of my brain's right? Is it the side that, you know, the poetic side or is it the quantitative side? And so I think it's almost, and we were talking about this

earlier, it's one of the things where I do think I probably have to, we do have some outside investors, so I think I will re-engage. But I don't think you necessarily want to do it wrote. In other words, why do it every quarter? Why not do it when it matters? Like, why not do it when, oh, God, Things are really strange today. And so I think that's the approach we'll end up taking. And then what part, so when you were, when you had your hedge fund and you were writing those quarterly letters, there was always something about the markets and something about your portfolio. What part of the process matters the most? So is it writing about the environment and how you're seeing things in the environment?

Is it writing about the specific investments you're making and where have you seen the benefits? So it'll change and that in itself has information content, right? So think about a year and a half ago. We wrote or I write a lot about like the impact of what I viewed as artificially low rates and quantitative easing. So just how difficult that was. So it was and that was informative like, okay, macro is driving everything right now. And in hindsight, maybe I should have just caved in and said, why bother with value? Like just just go ahead.

Own fang. You know, just throw on the towel on Facebook, Amazon, Netflix, and Google and call it a day, you know. But that was the anomaly, right? And then right now, what's interesting with the change administrations and everything is you are getting, you know, daily moves based on tweets and things like that. And so my sense is there's too many people ringing hands over, you know, Donald's. latest tweet where in fact the opportunities are much more micro and under the surface and don't get caught up in all the drama that's going on down in DC right now. That's an assertion on it. So you go from your strategy seat. You're at the top. You're the number one ranked strategist.

And of course, then you leave naturally. But you know, you join Maverick, one of the great hedge funds at the time in a very senior seat. and can you talk a little bit about what you saw inside, broadly in terms of capital allocation, in terms of how decisions get made, that might have been different from what you may have thought, from just knowing Lee and knowing the people there. Yeah, so stepping back after I had a modest degree of success in Morgan Stanley,

I actually was getting interesting approaches. Janice had approached me about running the whole company. The Harvard Endowment had actually approached me after Jack Meyer had left. And so there were things on my plane, and I wasn't offered the Harvard job. But, I mean, there were, people were throwing things out to me. And what was clear to me, Ted, was I didn't want to be a player coach. I wanted capital at risk.

At some point, you want to, not everyone, some people, you know, Byron continues to write very thoughtful pieces without actually managing money. I wanted to step across the divide. And when Lee approached me, I just thought what he had, the way, his structure made so much sense to me. me, and that was not trying to predict the market. So it was almost a classic Jones model, a little more leverage. So we were 150 long, 100 short. And really, the value add was going to be security selection. And then when I met the people, uniformly, they were of a high quality. And this sounds sappy, but they were genuinely, for the most part, quite nice people. And there was a family orientation. So from an outsider looking in,

That was the appeal to me. The biggest misconceptions, I guess, I had was that asset allocators were long-term in their thinking. Now, that's not fair in the sense that we had, and they still do have, a pocket of folks that genuinely they bought into what we were doing. I don't want you drifting. This is what you're going to do. We're behind you. And that was a big slug of the dollar. Interestingly, on a numbers basis, though, it was their high net worth investors that ended up being the most loyal that really bought into the culture.

But there was this constant ebb and flow of what I'll call ankle biters who people would come in when you're doing well and then they'd immediately leave. And I mean, this was and is one of the really well-run businesses. and I was just astonished by that kind of pattern of behavior. It was just like, what the heck is going? Like, what are these, wait, you spend all this time getting to know us, you give us. We had one investor that came in, and I won't name them, but they came in. I think they were $200, $200 million, and they'd spend all this time with us, and we had a lousy quarter or two, and they redeemed.

And I was just, I was just, I was completely mystified. Yeah, you know, I was talking to Patrick O'Shaughnessy. on his Invest Like the Best Podcast. And he had asked about a book that I might write that hasn't been written. And I said it should be called chasing returns, that we should all have a Bible of all of the stories, some of which you hear about in different organizations. But it seems like every time you turn around, there's another story of exactly that behavior. And it happens. I'm sure corporate executives feel the same way about their shareholders.

Manager certainly feel the same way about allocators. And these days, my guess is the CIOs of Endowments and Foundations feel that way about their boards. Which is an interesting topic because I'm on the board of Tufts and I'm chair the investment committee now. One of the things I've spent time with Salian and we're going to start doing is actually tracking the performance of people we've redeemed from to see in fact if we're making good decisions. And there is some accountability. Look, you don't want to overly focus on, you know, they're no longer in the portfolio. But I do think if you track these types of things, you're apt to have maybe a slightly more patient environment. So that was number one.

The second thing that was a positive surprise was maybe not surprised, but we were deeply analytical about how and why we made money. And I kind of knew this intuitively, Ted, or I thought I did. But, and we, because Maverick had been around for so long, we made money, you know, our best analysts were right, probably 55 or 60 percent of the time. time, like our real rock star guys. And I think the lay investor doesn't really understand that. Like there's this perception that, oh, my guy or, you know, whoever is right 80 or 90% of the time. It's not that way at all. And then the other thing, we've talked about this in the past. That said, there's also a cohort of our investors that, that in fact might have been right 45% of the time, but they were big money makers. And by that, I mean, when they were right, they were getting two, three baggers, and their wrong investments were very low.

Yeah, it's batting average and slugging percentage, right? Right. And to see that data live was great. And then the third thing, and this might be interesting to the folks that are listening to this, we spent a decent amount of time with psychometric testing. So we gave tests to people that measured pure horsepower. And look, not everyone was a mensa subject there, but in general, I think our folks were above average IQ. But we also looked for dispositional screening.

And what was interesting was, and then we'd look at who had success at the firm. And what was interesting is the most successful people actually tended to be loners. It was people that didn't require social affirmation. And that kind of makes sense, too. And if you look at the HBO documentary on Buffett or you know him, I mean, he's a very social guy in the sense when you meet him. He's incredibly engaging. On the other hand, you can tell he's a very insular man. Like he's nothing he'd rather do than kind of look through it, read through annual reports or whatever.

Whereas, you know, the president of the fraternity guy needs the affirmation. And so temperamentally, it's kind of Donald Trump versus whomever. I think that is something in terms of the key to successful investing. And so as an organization, did you and Lee, and that's Lee Ainsley, for those who don't know who founded Maverick, did you then take that and look at almost people reallocations based on it? Maybe you take the person that was the fraternity guy that's running a portfolio and say, maybe we should move him to the client-facing side of the business. Was there any of that?

Yeah. And look, I think one of the things I do genuinely think about Lee is he really was a wonderful manager of businesses. And he did do that. So we had one guy, and I don't know if he'll be insulted by this, but he had been an analyst. And he's one of my favorite people in the world. He's unbelievable great sense of humor, very bright, just a wonderful guy. But he wasn't killing it as an analyst.

and we put him in charge of the fund of funds business at Maverick. And they've done great. I mean, and he's absolutely killed it. And he is a terrific guy. I know who you're talking about. Right. And so in another instance, we turned one of the analysts who was really bright. He was exceptionally smart.

But he just wasn't getting it done as kind of a sector head. And we turned him into kind of a macro statistician. And he's done spectacular in that role. And that's a challenge because most organizations will just say you're gone. And that's the easier path in some ways. But you've made this investment in the person. Getting to your other questioning earlier, culturally, some of these people are very additive. You saw something originally in hiring them.

If you're a vibrant enterprise, can't you reposition them? And Maverick was pretty good at that. that, I have to say. They did do that. So now you leave Maverick and you're going to start your own hedge fund, which is how we met. And ironically, I noticed it's no longer in your biography on the Tufts website. So we know how that concluded. However, when you are starting a fund, you have far more limited resources than you did at Maverick or at Morgan Stanley. And so how did you think about having the right kind of culture, but then also making difficult and important personnel decisions?

if you saw something wasn't working where it wasn't so easy to just repot somewhere in another part of the business because resources are constrained. Yeah. So this is where I get into the self-flagellation part of the interview because in hindsight, you know, I made a lot of mistakes. But one of the ones that was most prominent was that issue of culture and investment. What I do feel good about is we invested a lot in building out the quantitative infrastructure and having the discipline.

And to this day, that lives on here at the family office. And we're actually commercializing that into a separate enterprise. And so that whole part of the buildout was terrific and, you know, it was very costly. But I felt if I wanted to manage outside capital, in other words, if I wanted to manage your money, I owed that to my outside investors to have that infrastructure. What I struggled with more, Ted, was at the very human level when guys weren't getting it done. And again, it's all on me because I made the initial hire and stuff like that. But when they were repeating consistently mistakes analytically and in their judgments, how do you deal with that? Do you deal with it quickly?

And you actually gave me great advice early on. He said, they're not going to get better. Like if it's truly not a fit, move on. And I'm too much of a wimp to my detriment. We kept some people on too long, and it impacted performance. And in hindsight, what I should have done is just kept virtually all of the capital with myself and one other person at the firm, who was also an experienced guy who had work with, who was a moneymaker.

So if you statistically looked at our performance, we were basically contributing 130% of the P&L. And while that's okay, it's not necessarily a sustainable enterprise, which proved to be quite correct in hindsight. So, but it's a real challenge. And, you know, I think it's underestimated. And I was a pretty experienced guy. I'd work with a, you know, I had dozens of people report. to me through the years. And yet it was challenging here, probably because I gave people too much rope.

And that's a tough thing to overcome. Yeah. So let's let you go from a failure to a success. And you are deeply involved with Success Academy, a fabulous charter school. Let's talk a little bit about what success is and what's happened with it. And then some of the lessons that you've learned being involved in that organization. First of all, thank you for asking. I'm having fun. This is actually really great. God knows if it'll turn into anything.

But a couple of things out of success. First, Joel Greenblatt is not only brilliant investor. He's a hero. And Eve is obviously here as well. But let me step back. So Success Academy, when I got involved, it's been almost a decade ago now, only had one school and we were educating about 250 people. We're going to have something in the 40s in terms of the number of, schools and within the next decade we'll be teaching 100,000 kids. Wow. I mean, it's just, Ted, it's just unbelievable. And Joel and Eva's basic premise was you need to find a way of replicating. The educational problem in this country is such that you can't just have beacons of excellence. it's necessary but not sufficient. In other words, too many of the charters historically had one great school.

And it was terrific and that was great. And so in that little part of the community, it was spectacular. Whereas we kind of or they, I'm on the board, but I'll credit to them, came up with the ideas. You needed the pedagogy and an ability such that you could replicate it at massive scale. And to do that. And it's similar to investing if you think about it. it. You need a framework. These are the things we got to do. And it's, you check the boxes, A, B, C. And then you roll it out, roll it out, roll it out. And for those who don't know,

success had, I think, something like five or six of the top 10 schools in the entire state of New York last year. And the demographics of our population are typically in the bottom 10% of wealth. In fact, one, you know, my wife, Lucy, Lucy and I sponsored Bronx success too. So we, we actually rolled out one of the schools. And the principal is this wonderful woman, Vanessa Bangzer, they actually were in, I believe, the second lowest socioeconomic zip code in the entire country. And they finished second in math. So the outcomes, Ted, are spectacular. They're doing it at scale now. And what we think is going to happen is, and it's kicking and screaming because we've had,

you know, the de Blasio administration has been a foe throughout the whole period. Bloomberg was a huge supporter of ours. But we think we're getting close to the tipping point. And this was Joel and Eva's goal, where it starts influencing. The numbers are big enough that it influences the whole pie. Obviously, we're doing it with success proper, but it'll start impacting other schools where they've got to compete. They've got to compete with us. So what are the three or four kind of key success factors for success?

What is it that you can take a school at such an underprivileged area and make it work? It's so basic. It's almost preposterous. Number one, time in school. one of the things you'll know from from lower socioeconomic strata a lot of learning is lost in the summer and so our school year they the kids basically only get about two or three weeks off a year they're in the classroom about an hour or two a day longer than the typical so just pure effort the second big bucket i would argue is what we're teaching we teach them science and chess starting in kindergarten So we're teaching them stems type stuff at an incredibly early age. Three is insisting that the parents are involved in care.

I don't know if it's still true, but when it was in the early days, the parents actually had to sign a contract that they would read to the kid every night and take care of, you know, they'd do that part of it. And fourth, and probably most controversial is the passion and energy of the teachers. If you look at our typical teacher, she and most of them are women, is a 26-year-old with almost no experience at all. And this is not a dig at traditional teachers. That's not what I'm trying to get at here. But the energy level and passion these young women are devoting to these kids is crazy.

And we treat them like professionals. They get iPhones. They get business cards. they get all the resources they need. And then the final thing we've done, Ted, and this is kind of success of secret sauce, is it'll ring awful to an educator. But effectively, we've set up an operating company,

holding company strategy. We're at the network board, where I sit with Joel and Eva, we do all the administrative stuff. So ordering the lunches, getting the janitorial things, changing the light bulbs. All of that.

All of that is done at the holding company. You got it. And then the principals and the teachers are allowed to teach. They're not spending a second on who's ordering the paper or the pencils or whatever. And my God, I mean, it's just been an unbelievable juggernaut what they've done. It's fantastic. It's cool. It's really cool.

So let's turn a little bit to your current endeavor. Yep. managing money alongside your wife. And I really want to focus on two things on the personal side of this. So what I just said, you are managing money with your wife. So how does that work? You guys have been married for how long now? 26 years.

Yeah. Is that right? But if I get that wrong, I'm dead. But it's a long time. What are the unique things that work and the unique challenges of doing this together? So the things that work is we actually work together at Chase. from day one. We worked together at Morgan Stanley in different roles. And Lucy had been a distressed investor with some success on, not some notable success on our own. So our dinner time conversation

tended to be very boring as it was. Like, oh, can you believe this? Or, you know, so there's been a long history of discussing. So that part has actually been seamless and easy. And I think actually quite, quite productive. And it's interesting when I tell friends or even colleagues or folks that know me this setup, 90% of them say you're crazy and then 10%, oh my God, that's my dream. Like, I'm working with my best friend and someone I respect and trust. And so so far it's been the 10%. The challenge is you are wrong and stocks blow up and it's embarrassing to blow.

You know, it's like, oh, Lou, you know, so we own our Adonnelly, and it's down 12% today. And I'm like, this is my idea. And am I not going to get dinner tonight? Or, you know, am I going to have to buy dinner tonight or whatever? And so the day-to-day vagaries of stock moves can be pretty, pretty funny. And then lastly, you know, her background is different enough. And as you well know, from your experience, you know, distressed investing, it can take, like, a week or a month to build a position because, you know, it's not an agency market.

It's a principal market and the price discovery can be very tricky. Whereas I'm like, we're wrong. Sell it. It's like, what do you mean? And it's like, yeah, we're, you know, we're a nanoseconds volume in this thing. We don't know what we're talking about. It's time to move on. And so that's been funny just to have the back and forth dialogue about stuff like.

The second question I want to ask you, Steve, is a sort of a personal reflective question, which is from what you studied and learned at Maverick, you came to the conclusion that often the best performers were loners. You, my friend, are not a loner. And so when you find yourself in a position where you say, huh, am I in the right seat here? because what I've seen from the data shows me that the optimal profile of a person to be the most successful is not who I am. And do you wrestle with that and how do you think about it? It's interesting. So I've clearly snowed you because I am one of the most socially awkward. And it comes out differently in a talk like this because I know you.

But if people that actually know me are stunned, A, because I can communicate pretty well and I can write okay, that that that is the fronting. But on this Maverick test, I was in the like one percentile of most neurotically loner, you know, not requiring social norms. And in fact, it was almost too extreme that we were a little worried.

There's something wrong with the test. It turns out there's anything wrong with you, Steve, it's just a test. And it was funny because we gave, and you know my former partner, John Jodga, he formed, he was,

he defined the other end. He sure does. And so it's odd and I appreciate it. It's funny because Barton was the same way, whereas Barton would write these marvelous pieces such that everyone felt they knew him, but he just was so uncomfortable. So like I'm one of those guys. If I go to a cocktail party, I immediately go into the corner with a friend and just I can't, I don't want to deal with it. And it's, it is odd. So what I do wrestle with is this kind of, because my prior role was in such. a high profile thing, there's this assumption that I was somehow comfortable with it. When in fact, I'm really not. And it's a big joke with Lucy's friends because like getting me out of the house is almost impossible. Like it's just, I just, I just, I have zero interest. Like I'm, I'm reading stuff. I'd rather sit here and read a book or read a 10K or read whatever.

But it's, so I get that there's a conflicting message. So Steve, you've sat on all sides of this. You were a research analyst. You were a You were a portfolio manager and executive at a large fund. You had your own fund. You're running a family office. And you also sit on as an advisor and a board, Tufts University of the Endowment and a family, a large family office. From your experiences, can you talk a little bit about the inside baseball of kind of capital allocation at that allocator level? And what are the things that you feel like work?

And what are the things that you get frustrated to say, why are we also chasing returns when everybody knows that that's not what we're supposed to do? The latter thing is the most challenging because even in a situation with Tufts or a family office where we're quasi-perman capital, even we do focus on how do the court of it. And we also have endowment envy. And not so much on the investment committee at Tufts, but if you think about stuff, stakeholders, they, oh, how did Amherst do? How did Williams do? How did, you know, the other NASCAR guys do? And it's a natural question as opposed to how are we doing versus what Tufts needs. And as we've talked about this before, but, you know, Tufts is, unfortunately, quite under endowed versus its peers. So we're probably only 10% of 10 to 13% of the university's operating budget,

whereas a Harvard or Yale would be a third. So that gives you a... And so in theory, we could actually take more risk because day to day, we're not as important to the university's P&L, if you will. And yet that's a tough thing to kind of marshal through the various stakeholders. With this family office, it's been some of the same in the sense that we could take... It truly is permanent capital, and they don't even really need a dividend of any note, right? So it's almost even better, and yet it still creeps into our discussions.

And so I just think that I don't know how some of these other folks deal with it. But I just think it's a natural outgrowth of the business. And it's a fresh, I'm disappointed myself that I haven't been able to sway the boats enough towards, let's just ignore it. Like, let's just outlaw. Now, you know, I don't think that'll necessarily worry, but I do feel like we should almost have each of these different things I'm involved with where we don't even do quarterly reporting of the results. Yeah. We ignore it. It's so challenging.

I was having conversation last week with someone about this who had asked me what were one of some of my biggest mistakes. And part of it training from David Swenson at Yale, I followed through a systematic bias to hold on too long at times. So the flip side of being patient if someone's underperforming is that in a competitive world, you know, you think the market doesn't know what stocks you own. But when you're not doing well, sometimes the market does and they just keep pummeling you. So it's really, really hard. And for me, I've had that increasing appreciation over the years for what my mentors at Yale have continued to do because you see how incredibly hard it is even when you're aware of everything going on around you. Yeah, I couldn't agree more. And I think that's what really ultimately, and look, there are other nuances to it.

So I met with David a couple months back. And one of the interesting things he talked to me about with his investment committee was getting non-financial people involved in the committee. And I think there's huge value in that. Like at Tufts, we have CEOs of a couple of large, you know, Pfizer, Bristol Myers, DuPont. We've had these people involved. They should be on the investment committee, actually. Instead, you tend to populate it with the Wall Street guys. And even subtle stuff like that, I think.

think can be very helpful. And so I see it with this family office. I think one of the most thoughtful guys on the board, he's running a company. And so he just asks questions differently than the rest of us. And oftentimes they're very, very insightful. And so take the road less traveled. But it's always easier said than done. Yeah. All right, Steve, I got a bunch of closing questions here. We'll wrap this up. What was your life's favorite sports moment as either a participant were a fan. And do not talk about that. It was a Red Sox.

I mean, I cried. I mean, and I'll never forget it because game six, we had a Maverick, it was a day before the Mavergianial meeting, and we actually brought a TV to a restaurant. We said we need, and then game seven,

I think we were down in Dallas, and I just, and it was interesting because it wasn't even the World Series. It was when, you know, Damon went deep and hit the home run. Yeah, yeah. Okay, we can stop.

talking about this. I am a big Yankee fan. We've talked about this enough. Okay. Second question. What is your favorite thing to do that is a complete waste of time? Watch the Red Sox on TV. I would agree that that is a complete waste of time. Okay. What do you know now that you wish she knew 10 years ago? You know what? It'll all be okay. I think we all suffer from, I've got to be hyper-achieving right now. And if I go through a rough patch, it's, I'm doomed. Or, you know, I'm suddenly going to lose status or whatever. You know, it kind of does work out. And I've talked about this before.

But, you know, after September 11th, it was one of the most poignant moments in my life because Morgan Stanley had been the largest tenant in that building. And we got up for the morning meeting. And it was Phil Purcell let it off. He was the CEO of Morgan Stanley. And then Barton got up there. And that's all he said. I think we're going to be able.

okay. And I'm like, that's it? You know, but, you know, with time and passage of time, it was like, that was the right thing to say. And so, I don't know, I think there was a sense, we're also hyper competitive and we demand on success that when you do go through the rough patch, and, you know, I just had a brutal string of stuff happened last year. I was just like, oh my God. And then, you know, it's a year later, and I'm happy as a clam and things are going great. All right. One last question.

In your waning days, Steve, you are now 100 years old, maybe 105, sitting in your rocking chair, looking back at your life, what advice would you give yourself? Some of it is hindsight. You know, I probably spend more time with friends. I mean, because I, it is getting back to our earlier conversation. I probably, I have spent too much time at work. I mean, I just, I know, I probably have. I've been too much of sleigh.

I work. I've always spent a lot of time and work. Now, part of it's because I like it. You know, so selfishly, it's like, it's just an interesting thing. But if I did look back, it's like, you know what? Cut it short. You don't need to take that meeting. You don't need to do this.

You don't need to do that. And I think if you ask most people on Wall Street, that would be you'd get a reply along those lines. Maybe not, but a lot of my friends. We've got more philosophic in our old age, and I think that it's one of the time. great Steve thank you so much it's been so much fun we'll figure out another time to do it again I'll bring the Gansett next time sounds good this is great thanks for listening to this episode I hope you found a nugget or two to take away and apply in your investing and your life if you've liked what you've heard please write a review on iTunes or Google Play to help others

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