My First Million - Stanley Druckenmiller on What Makes a Great Investor, Bitcoin & His Biggest Trades

Episode Date: May 27, 2021

Trung Phan (@TrungTPhan) -- lead writer for The Hustle -- interviewed hedge fund legend Stanley Druckenmiller on May 11. Widely regarded as one of the greatest investors ever, Druckenmiller famously made $1 billion in a single trade shorting the British Pound in 1992.  Sam (@theSamParr) has a brief intro chat with Trung before transitioning into the 40-minute Druckenmiller Q&A, which covers: 1) the parallels between now and the Dot-com bubble; 2) the appeal of Bitcoin; 3) the first Big Tech firm likely to reach a $5T valuation; 4) what makes a great investor; and 5) Druckenmiller’s investment in fintech startup Toggle AI (which set up the interview).  --------- * Want to be featured in a future episode? Drop your question/comment/criticism/love here: https://www.mfmpod.com/p/hotline/ * Support the pod by spreading the word, become a referrer here: https://refer.fm/million * Have you joined our private Facebook group yet? Go to https://www.facebook.com/groups/ourfirstmillion and join thousands of other entrepreneurs and founders scheming up ideas. --------- Show notes: * (8:25) Lessons from the Dot-com Bubble  * (17:40) What’s the first Big Tech company likely to reach a $5T valuation?  * (19:25) What’s the biggest risk to the equity markets?  * (21:55) What are the long-term effects of the Wall Street Bets saga?  * (24:20) How he uses Toggle AI in his investing process * (26:50) What makes a great investor?  * (35:20) What is the appeal of Bitcoin?  * (42:20) His thoughts on Dogecoin  * (44:20) Advice for 20-year olds 

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On a road, let's travel, never looking back. So today, Trong, who writes our daily email and is going viral on Twitter right now, is here with a special episode. Trump, what are people about to listen to? All right. So I had the chance to interview Stanley Drucken Miller. He's widely considered one of the greatest investors ever.

Just top-level notes. One of the richest people in America with 5.6 bill. He famously broke the Bank of England while working at George Soros Fund, a quantum fund. They made a billion dollars on a trade shorting the British pound. And he has an incredible investing track record over 40 years. He's never had a down year. 2008, he was up 11%, which a lot of people actually point to as the impressive thing. So even when the entire market is tanking, he's able to be up.

And the other thing that he's really known for in terms of his track record is 30 years of 30% returns or more. So 30 for 30. I don't know who else has that record. I know if you look at Buffett annualized over his entire career is like 20% a year, but 30% for 30 years straight is outrageous. So that's amazing. I would like that. But our audience is typically guys and folks building companies, not necessarily investing. but we wanted to air this anyway because A, you're blowing up and people want to hear from you.

And if this works, maybe you're going to want to do your own podcast. But also, how does this apply to our listeners and what should they look out for? Absolutely. So the first thing I want to mention, actually, that I forgot to say was this entire meeting was set up by Toggle AI. You can find them at toggle.g-g-g-g-g-g-g-global. And the reason why they set it up is because Stan's actually an investment. in their company. So he's invest in startups and they're a fintech company. So they're able to serve the meeting. But if you were to answer your questions around the lessons of what people can

apply, I say there are kind of three takeaways from just his mindset as an investor that I think matter in a business building world is he said what makes a great investor is having small bets in concentrated positions, but with super high conviction. And the example he brings up in the interview that you will hear coming up is he mentions Buffett and Carl Icon and he says if you actually look at them, they're not doing the whole MBA playbook of diversifying. They're identifying crazy, good opportunities and going all in on them. And he brings up his personal examples when he broke the pound or broke the Bank of England is he went into George Sourdes' office and said, hey, we put 100% of the fund into this short trade. And then the lesson that he drew for it,

a source goes to him and says, if you're so confident in this trade, why aren't we doing even more? Why isn't there 150% of the fund in it or 200% when using leverage, right? Which is exactly what they ended up doing. So the number one thing would be, you know, find something that you really, really have a high confidence in and kind of go all in on it. That's one thing I think could be a perfect. But you, I thought you said he takes a lot of small bets. No, no. He makes, he said to take high conviction bets.

When I said small bets is like, I think it was more just his track record over 30 years is what you're alluding to is he has a long career where he's been across many assets and a lot of different investments. But having said that as an investor where his biggest wins are is when he's gone all in and he's found these once in a generation opportunities. The other thing that he does is, you know the famous saying from Mark Andreessen is, you know, strong ideas but loosely held. like being able to draw on beliefs how much. Exactly. So being able to take an information and having the conviction that I talked about like he did with this pound trade, but then if information changes, being able to pivot. And he actually famously, during the dot-com bubble was one of these people.

He was shorting it from 98-99. And he's like, this is insane. It's never going to play out. And it's going to be really bad for a lot of people. But then he was losing hundreds of millions of dollars shorting the dot-com bubble. And to the quote there, he literally turned around. He didn't take his money off the shorts. He went long.

So it's insane. He did a full 180 after fully convincing himself that it was a bubble. And he still believed it was a bubble, but he was looking at the information. And he didn't believe that he could win. Or in trading terms, he didn't want to fight the tape anymore. So that was pretty amazing. But then that leads into my third lesson, which is it's all about emotion at the end of the day.

And he was explaining that in 1999 after he went from a fully short position in the dot-com bubble, he went long and he made billions of dollars in 99. And in 2000, he's like, okay, I'm taking all my chips off the table. I think the bubble's finally going to burst. But this is where the emotion component comes in. He watched two younger portfolio managers on his team keep Ryan England dot-com bubble, and he couldn't take it anymore. And this guy's like a 25-year vet, right?

And with an impeccable track record, but he could not take. the fact that there were two people underneath him, outperforming him. So he literally called his broker, put a $6 billion bet back on the market, and he says in the interview that he basically called the top of the dot com by 10 minutes. He ended up losing $3 billion. And insane, right? And he goes, and he goes, people always ask me, what did you learn from losing $3 billion effectively in a couple months? He's like, I learned nothing. Like, I already knew that lesson. I knew never to invest on my emotion, but I still couldn't help myself. And it's just, I think that's just a forever battle, right? It doesn't matter how seasoned or good or amazing you are or amazing your past track record

is. You always have to battle that demon of the emotions. I mean, you tweeted this morning, right? You tweeted something about, something about psychology and emotion. You're reading a new book, and I think you said that what was a quote you put is if you're comparing yourself to others. The best thing to be miserable is to compare yourself to other people. So like, it's like there's these little things about emotions, a psychology that will always be with you no matter how successful you are. So I think those would be the three takeaways is high concentrated, concentrated bets and high conviction plays, the ability to change course if it's clear that it's not working. And then the third thing is just like, you're wrestling with emotion no matter who you are. You can be a nobody

or one of the greatest investors ever. And those, those human elements never go away. And I just love what he said is like, I didn't learn anything. I already knew this lesson. I still lost. We'll start the interview now. If you guys listening like this, comment in the reviews. So go to iTunes and leave a review. Or you can go to Twitter. What's your handle?

Trung. Is it Trung P? What is it? Trong T-Fan. T-fan. And then I'm at the Sam Park. So tweet at us. I prefer you leave something in the comments because it's easier for us to see.

But let us know what you think. And we'll see Trung again soon. Thank you. Awesome. Thanks, guys. Thanks for putting this on. We're live. So, yeah, and RJ and myself had kind of put these kind of these questions together, which we think would be great for a bit of a younger audience.

So the first question we wanted to dig into was, you're obviously there at 2000.com. Are you seeing any similarities with what's going on, especially the last couple days, this week's been kind of ugly for tech. And I know there's been a lot of talk about it has growth run its path, was COVID. Are you seeing any similarities to the dot-com error 2000? And if so, what are they?

If not, what are the differences? Okay. I'm seeing some similarities. I'm seeing some differences. Okay. Number one, valuations in both periods got to what I would call mania speculative levels. Okay. monetary policy was part of the issue in 99 when Greenspan decided he wanted to run an experiment

where he'd let unemployment go below levels where it had historically been it's nothing like the crazy stuff we're doing now but that helps set it up but what was really going on back then I mean think about the fact that Netscape didn't really agree exist until 95. So other than some nerdy professors back in the early 80s, no one even had email. Right. So all the stuff we had now.

So literally, the internet was just sort of being built. And the big winners in 99 were companies like Sun Micro and Cisco that were building the guts of the internet, constructing it. So what happened was the growth was so rapid. as this went on and valuations combined with some easy money got baked in those growth rates as far as you are I could see. But think of the internet infrastructure like the railroads 150 years ago and think of the tech stocks as a company selling railroad ties,

building the guts of the internet. So once the railroad is built, while you're building the railroad, your sales are going up 50, 60, 70% a year. But once the railroad is built, your growth not only doesn't go up 70%, it goes down because on a rate of change basis, you don't need any more railroad ties. So what none of us saw me included in early 2000 were a lot of these companies with estimates of 50, 60, 70%, for the next two or three years, their business was literally about to collapse. So the NASDAQ went down 95%, not 30, 95, because you had this combination of inflated values,

way overestimated earnings out there, and then earnings collapsed. So today, you have something similar and something different. So monetary policy is absolutely insane. We had no QE back then. Our rates weren't zero. They were four or five when they probably should have been six or seven. No comparison. So we have an asset bubble now that's not just in tech stocks.

It's in everything. Spacks, Dogecoin, or maybe some of the young viewers disagree. You name it, if you're an asset, you've been moving. But what we also have, back then, you had this incredible wave from 95 to 2000 while the internet was being built. What you have now is this incredible wave of digital transformation, particularly moving on to the cloud. and I used to say two or three years ago in some interviews,

well, we're in like the bottom of the first or the second inning, and this is a 10-year runway. Well, COVID sort of jumped you from the bottom half of the first to the sixth inning. Not the ninth, but to the six. I think the guy from Shopify said, we went from 2019 to 2030. in one year because of COVID. I think it was him.

I think the difference now is if you're a customer and you haven't moved to the cloud, you're dead because who you're competing against, they can just beat you because the technology is so important. So now, full disclosure, I didn't see what was coming in 2000 coming,

but I am really hard up to come up the scenario while this digital transformation thing is going to collapse and these SaaS companies are going to go away. And the biggest problem you have now is the overall bubble and asset prices and where price got to these names in particular. The good news is if we had had this conversation two months ago, the good ones were like 45 or 50 times sales, not. not earning sales. They're down to, there's a range, I'd say now 10 to 25 times sales for the good ones. So if the problem is price, and in my opinion that is the problem, a lot of that has been rung out. And I think if you hold these names for three or four years, they can easily grow

under their valuations where if you held the names in 2000, a lot of these companies, you've still have losses of 90, 85, 90% of your value. Right. So those are the similarities and those are the differences. Right. So to summarize, it sounds like kind of the key differences would be the monetary policy completely different. And the names themselves are just as a company and looking further out in the economy,

it's just the likelihood of those still existing as much higher. Yeah. The other similarity is back then, I remember a lot of value managers were virtually going out of business. Right. At the end of 2000, one of the greatest investor of all time, Julian Robertson, who was long value and short these crazy tech names, he basically threw in the towel and said he couldn't take it anymore and stopped managing money in early 2000.

But what happened in the next three to five years was incredible. Companies like Phelps Dodge copper companies went up six to eight fold, six to eight times for the old industrial stuff. So everything Julian was long went up many fold and the tech stocks went down a lot. We do have some similarities there today because these COVID companies, beneficiaries, so much demand was pulled forward. that they got too high and too much ownership. And as we're reopening, there's also an ownership problem where there's probably more money that needs to rotate out of the secular growers into these,

I'll call them reflation names. But I do want to say very differently, I think these things are secular growers, and they'll probably be fine long term. Amazon at 3200 is not a bubble. stock, not whatsoever. It's basically decent value. And I don't just mean Amazon, but a lot of the so-called fang's names, yeah. Absolutely. Just as a curiosity that I see, I actually asked yesterday a bunch of my Twitter follows, what they want to ask is, do you have an opinion of any of the

fang kind of names, including Microsoft, who will get the $5 trillion first? What a great question. I've always answered that with Amazon and Microsoft. I've never really believed Apple had the innovation to take you to the next level, and it was mainly a hardware company. They obviously have morphed into the services app company. But as you know, it's funny, that's the one they haven't talked about being Monopoly. But when you look at monopoly behavior, charging a 30% rent to all these little companies seems a little extreme, whereas Amazon and Microsoft, they basically don't raise price. So my guess, first of all, I have no idea.

But my number one, if you put a gun to my head or we're going to Vegas, would be Amazon and number two would be Microsoft. Okay. Google could have a big pop, ironically, if the government breaks them up. Because their core search business is literally the best business I've ever seen. But they keep trying all this experimental stuff that challenges shareholder value. But those guys are so rich, they're more interested in changing the world right now, and good for them. Yeah, they get to do mushrooms, go to the desert, and just think about wild things. do in their space with the moonshots, right?

Well said, well set. I think the question here that Jan and RJ had pled that out, we thought would be a great follow-up was out. So what is the biggest risk to the equity market right now? I think you touched on some of them as to do with, I guess, the valuations and just the... Without a doubt, it's inflation strong enough that this Fed responds to it. Right.

No doubt about it. This bubble has gone long enough and it's extended enough that the minute they start tightening, the equity market should go down a lot, particularly with so much of the cap weighted in growth stocks, which would be hit the worst. And our central case is that inflation occurs, but we're open-minded to some, something like 0708 where you never really got to the inflation because the bubble popped. So the inflation never got to the manifestation stage. That would be the second one.

In terms of geopolitical stuff, it's become a popular view, but I'm worried about Taiwan. And I think it's probably not a worry until after the Beijing Olympics. Right. Xi Jinping wants to deal with sanctions and boycotts and all that. But I can't imagine he's not going to try something close to Beijing Olympics. And I don't think that's big stuff. That's not some little thing where Yemen is fighting Saudi Arabia. If you were to get worried about the United States and China, that could be an exogenous event.

could get quite nasty. Absolutely. So to summarize then the inflation concern and the Fed tightening, it's kind of a big risk. Longer turmoil is just Taiwan is actually a massive hot spot. And post-2020, the Winter Olympics, there's an opportunity for something to happen. That's our central case. As you know, I tend to change my mind. But right now, if you're asking me what the biggest risks are.

it would be them. Absolutely. So the next one we had here is a more retail-oriented question, or actually not necessarily retail-oriented, but it does concern retail is, do you see anything from as a long-term after effect of what happened earlier this year with Wall Street bets with retail being able to congregate in one place

and kind of direct money flows? I know in the past you've talked about the importance of liquidity, and do you see any long-term effects of having the ability of millions and millions of millions of resources? retail investors to put their targets on a single name? No. Let me restart. The answer is yes.

I don't know why I just said, no, I guess I'm too old. When I started in the business, retail dominated institutions. Okay. And you got most of your information from your broker. the amazing thing about the current retail investor is they have access to things like toggle so they're actually much better informed than the retail investors were in the late 80s and early 90s and with the internet they have tools and the way you already mentioned they congregate the big risk is they're all loaded up in this stuff you know don't convince you

confuse genius with a bull market. And something exogenous talks like we're talking about. And they all lose enough money that they're scarred. Yeah. I've always thought the Japanese investor would come back to the market in five or ten years after the bubble burst. That was 1990 and they still haven't come back to the market. So I worry about scoring. but no, I think my guess is the after effect of All Street Betts is here to stay.

And they'll probably migrate away from some of the more radioactive names like GameStop. And I think it'll actually end up being some kind of healthy information sharing network. Right. All right. Let's talk about one of the most important parts of any business, your CRM, right? This is where you see who are my prospects, who are my customers, who are my hardcore customers. And you want to have conversations, you want to have information about them that goes throughout all stages of the customer journey.

So HubSpot's CRM platform, it's easy to align your team using the features that they have like their messaging tools, live chat, email templates, and having a unified system of record. So how does it work? You can install live chat on your website, and this will let sales and customer support talk to your prospects. You could send marketing emails on behalf of your sales rep, to your customers. You can have prospects, book meetings with your reps without wasting time,

and all of this is stored in one unified system of record so that teams can get access to all of your contact history. Why is it so important to have live chat and a unified system of record, you ask? Great question. It's because when all your systems are separate, you're just cobbling together data from one place and data from another. It's all disjointed. There's no single source of truth.

What I like when I'm the CEO of a company is to be able to click one button and see who are our customers, where are they at in the journey, how do we quickly message them, how do we get them moving forward to success? So that's what it does. That's HubSpot CRM. And do you want to learn about how you can scale your company without scaling complexity? Go to HubSpot.com. So you didn't mention toggle as kind of a tool that can be used in these environments,

or just in general, as an investor's toolkit. So how different would that have been, you know, back in the 80s to have a tool like that? Oh, my God. If you had toggle and nobody else. did, you have absolutely murdered their results. Right. When I started in the business, Fedwatching was considered unique, and I used Ned Davis and other technical services, and I just felt I had a huge advantage over the general public.

So any tool you have, like Toggle, which is clearly predictive of price moves, but even more interesting in this case, because of the mathematical capability of it, can analyze thousands of thousands of securities. I only have 16 hours a day, and I'm not that fast of a reader. So if you had a tool like that back then, it would be like my advantages plus 5x. And the way I think about toggle is, I don't know how much you know about me, but I've always said, I like multidisciplines in managing money. So my first boss taught me technical analysis. So I use fundamental analysis and technical analysis.

And if there's thousands securities out there and my portfolio is only going to insist of 15 or 20, I'm never going to buy something that doesn't have a great chart and great fundamentals. Right. I do that. If you brought something like toggle into that, it's just, one more fantastic screening mechanism that gives me the discipline. So now I've got a triple screen to hold or buy or sell securities. That would be invaluable. And again, to the public, who doesn't have access to information I have as an institutional investor and paying tons and

tons of money to consultants. Something like this, the value added to them could be even more valuable than it's to me. And I find it value added. Right. Absolutely. And so you did mention a lot about your trading back in the 80s. I don't want to say back in the day, it feels kind of wrong to say that. You've been described as someone that has a stomach of a riverboat gambler. I literally don't even know what that means. But what I will say is, what do you think are kind of the keys to a good investor, right? So just from your own experience. So when I've looked at all the investors of very large reputations, Warren Buffett, Carl Icon, George Soros, they all only have one thing in common. And it's the exact opposite of what they teach in a business school.

It's they make large concentrated bets where they have a lot of conviction. They're not buying 35 or 40 names and diversifying. I don't know whether you remember. I count a few years ago put $5 billion into Apple. And I don't think he was worth more than $10 billion when he did that. When I went in to tell Soros that I was going to short 100% of the fund in the British pound against Deutschmark, he looked at me with great disdain because he thought the story was good enough that I should be doing 200% because it was sort of a once-in-a-generation opportunity.

Right. So, A, they concentrate their holdings. B, concentration, this is very counterintuitive. It really gets your intention. So it actually, in my thinking, decreases. your overall risk. Because where you tend to be in trouble is if you have 35 or 40 names and you stop paying attention to one, if you have big massive positions, it has your attention.

Right. So the way my favorite quote of all time maybe is Mark Twain, put all your eggs in one basket and watch the basket carefully. Right. I tend to think that's what great investors do. The other thing to me is you got to go. You've got to have to know how and when to take a loss. I've been in business since 1976 as a money manager.

I've never used the stop loss, not once. Dumbest concept I've ever heard. It goes down 15%. I'm automatically out. Right. But I've also never hang on to a security if the reason I bought it has changed. And that's when you need to sell. if I buy X security for A, B, C, and D reasons, and those longer are valid, whether I have a loss or a gain, that stock doesn't know whether you have a loss or a gain.

You know, it's, it is not important. Your ego is not what this is about. What this is about is you're making money. So if I have a thesis and it doesn't bear out, which happens often with me, I'm often wrong, just get out and. move on. Because I said earlier, if you're using a most-discitimate approach, you can find something else. There's no reason to hang on to any security where you don't have great conviction in it. Right. No, absolutely. So along that kind of metric where when you're saying what makes a great investor is kind of the mindset and the approach, what about from kind of

the emotional side, like managing the emotions and the, the psychologist? You just have to be disciplined and you're constantly fighting your own emotions. Look, I'm not going to lie to you. My first boss had this saying the higher they go, the cheaper they look. There's something weird, and I know everybody watching this has experienced this, and it doesn't make any sense. But when a security goes up, every bone in your body wants to buy more of it. And when it goes down, you're fighting, making yourself not sell it. It's just the nature of the beast.

And you have to constantly remind yourself, why you own that security. And just because it's going down doesn't necessarily mean you should sell it. If it's going down, it definitely means you should reevaluate your thesis, but it doesn't mean you should sell it. And you cannot get crazy when it's going up.

One of the, probably the biggest mistake I ever made in the business, and I knew better. Somebody asked me what I learned from this. I said nothing. I already knew it. In January of 2000, after riding that tech boom to a T and making billions of dollars in 99, I sold everything out in January, and I had a couple of internal portfolio managers at Soros

who didn't sell out and they had these. It was a smaller portfolio, but they made 30% after I sold. And I just couldn't stand it anymore. And I'm like watching them make all this money. day. And like for two days, I'm like ready to pick up the phone and buy this stuff back. And, you know, there's a little devil there and then the angel and she's saying, don't do it. And he's saying buy it. And I pick up the phone and I buy them. I might have missed the top of the dot com bubble by an hour. I ended up losing $3 billion on that trade alone. I had made more the year before, but, you know,

$3 billion is a lot of money. And it was all because I got emotional and dropped every tool of discipline I've ever had. And somebody says, well, what did you learn from? And I just said, I learned nothing. I learned that 25 years ago. So you can talk about not being emotional, but it takes incredible discipline to act on that. No, that's, I mean, that's incredible. You said it started 76, right?

That's 24 years later. You've been going through it for almost a quarter of a century and it still happened. Yep, yep, yep. So it's something I wanted to just add on to kind of what you just mentioned was the actual approach of investing for yourself. You famously talked about looking at what makes the stock up and down. What does that mean specifically for yourself when you say what makes stock up and down? What does that mean in terms of fundamentals? It varies from stock to stock.

Right. Interesting thing about toggle. They'll find things that I didn't even know. move the stock. But if it happens over and over again, you figure it's not random. So I'll never forget. I keep going back to my boss in Pittsburgh, but I was an analyst and I analyzed retail. And I come in with my earnings estimate on Kmart and my earnings estimate on this company and that. And he says, yeah, but what's going to make the stock go up? And I said, what do you mean? And he says, everybody knows what you just told me. Keep looking. Keep looking. Finally, I came back.

I found out at the time, by the way, this is change in sin. If you graft the change in food and energy prices over top the retail index, it was like clockwork. Retail and food prices, I'm sorry, food and energy prices go up. Retail relative stocks go down. It's not rocket science here. If you take discretionary spending and you increase the cost of it, she's got less money to buy a dress. And I watched that, and I worked for 10 or 12 years, and then for some reason,

it's stuck working. But there's an analysis of fundamentals, which I completely endorse, where look at the balance sheet, try and figure out a couple of years from now what people are going to think about this company or the earnings can be different than they think now, that kind of stuff. But then there's all the weird stuff, like I just mentioned. The beauty of toggle is it comes up with stuff that sometimes I don't even quite understand. But frankly, I don't care.

If the stuff works, I'm going to go with it. I'm very open-minded. I don't need to totally understand something if I've seen it work over and over again. Right. Absolutely. But most of these things I understand. Yeah. So it would be the equivalent of toggle finding that relationship you just mentioned, right?

the food energy and discretionary spending. Yeah, and the beauty of toggle is, I might get a notice one day that XYZ looks good. Then I can do my fundamentals. Then I can look at the chart. So it's not only a discipline in terms of buying and selling. It can also be an idea generator. Absolutely.

No, that makes a lot of sense. Now, I thought this was a good opportunity to hop into something. I kind of want to ask it first, but I figured it'd be better to kind of be good there. I think I know what's coming. You're young. I can tell by the look on your face is crypto.

Yeah, 100% correct. See, I can predict the future. The toggle probably gave you the alert, right? This guy's about to ask crypto. I'm not going to ask you to put a price target or anything, but the question just to refer out there to get the conversation going is, does Bitcoin have the opportunity to the thesis? It'll replace $9 trillion of gold, right?

Along those lines, or it'll match it. Do you, I mean, what are your opinion about that piece? So I've evolved on this. Okay. If you've done your homework about five or six years ago, I said more than once, crypto and Bitcoin are a solution in search of a problem. Right. So what the hell are these people all looking for?

We already have that. It's called the dollar. Right. Okay. So for the first move in Bitcoin, I think it went from, what, 50 bucks to 17,000. I just sat there aghast. And by the way, consistent with our earlier conversation, I wanted to buy it every day it was going up, even though I didn't think much of it. I just couldn't stand the fact that it was going up and I didn't own it. So fast forward, I never owned it from like, $50 to $17,000, felt like a moron. Then it goes back down to $3,000 again. And then a couple things happened. And this is consistent with the fundamental and then let's make something go up or down.

So solution in search of a problem. I found the problem. When we did the CARES Act and Chairman Powell started crossing all sorts of red lines in terms of what the Fed would and wouldn't do. The problem was J-PAL and the World Central Bankers going nuts and making fiat money even more questionable than it already been when I used to own gold. Then the second thing that happened is I got a call from Paul Jones and he says to me, do you know that when Bitcoin went from 17,000 to 3,000, 86% of people that owned it at 17,000 never sold it.

Well, this was huge in my mind. This is just something with a finite supply, 86% of the owners are religious zealots. I mean, who the hell holds something through 17,000 to 3,000? And it turns out none of them, you know, 86% of people never sold it. and I had this new central bank craziness phenomena. The other thing that happened, it had been, you know, it had a few more years under its belt.

So it goes up to $6,000 in the middle of the last spring. And I go, well, I got to buy some of this just because these kids on the West Coast that are already worth more than I am and they're going to be making a lot more money than me in the future for some of the kids. some reason they're looking at this thing, the way I've always looked at gold, which is score of value if I don't trust fiat currencies. And then the thing that Paul told me, and then the

fact that it had been around 13 years, it had become a brand. Right. So it's funny. I try to buy $100 million at $6,200. It took me two weeks to buy $20 million. I bought it all around $6,200. 500, I think, and I said, this is ridiculous. You know, it takes me two weeks. I can buy that much gold in two seconds. So like an idiot, I stopped buying it. Next thing I knew, the thing's trading at 36,000. I took my costs and then some out of it.

And I still own some of it. My heart's never been in it. I'm a 68-year-old dinosaur. But once it started moving and these institutions started adopting it, I could see the old elephant trying to get through the keyhole and they can't fit through in time. I own this company called Palantir, and I see they announce with their earnings today. They're going to start accepting Bitcoin and the million invests. That's happening all over the place.

And, you know, this thing is never going to have more than $21 million. It's a fixed supply. So I think because it's a brand, it's been around for 14 years, because, because of the finite supply, it has sort of won the store of value game. Is it going to beat gold? I don't know. It sure is held doing a good imitation of it the last year or two. But is it going to beat the other cryptos in terms of digital gold store value?

I would say it's going to be very, very tough to unseat. Then you go to what I call the commerce facilitators, which obviously the lead in smart contracts and that kind of stuff would be Ethereum. There I'm a little more skeptical of whether they can hold their position. It reminds me a little of MySpace before Facebook came along, or maybe a better analogy, Yahoo before Google came along. Google wasn't that much faster than Yahoo, but it didn't need to be. All it needed to be was a little bit faster, and the rest is history. And I'm so impressed. One of the ways we've always invested in the private sector is to try and figure out where the engineering kids from Stanford and Brown and MIT where those kids are going.

And so many of them are in love with crypto and that's where they're going. I'm worried about the talent that's like 23 to 28 years old. Somebody we don't even know who they are yet. come up with a payment system or whatever and unseating. So again, I don't know. But my guess is the winner in the commerce facilitating, whether you want to call it payments or smart contract or whatever we're on, there's a good chance that company hasn't even been in,

or that currency hasn't even been invented yet. Absolutely. So Bitcoin as a store value, probably safer in the crypto space, But as you mentioned, the computing aspect, there's a lot of potential here to be unseated. Yeah, and I think, you know, as long as Jay Powell keeps acting like he's been acting, I think gold and Bitcoin seems to be a high beta gold are going to have the wind behind them. High beta gold. That's a never heard of them.

So that is a fantastic terminology. Well, it's so fantastic. I'm wondering why the hell I didn't just own Bitcoin two years ago instead of just gold and a little Bitcoin. So just to put the cherry on top of the crypto combo, you mentioned it once earlier, dogecoin, is it just to you ridiculous and Elon's involvement in it?

What is your reaction to all that? It's just a, you know, it affects NFTs. It's just a manifestation of the craziest monetary policy in history. Right. And I think since there's no limit on, supply. I don't really see the utility of this thing. Right now it's just this wave of money and the greater food theory. Um, no. No. Now, having said that, I, I'm, I wouldn't short it because I don't like putting campfires out with my face. Um, so I just try and present Doge coin doesn't exist.

Right. I think so little of it, it doesn't even bother me when it goes up. Right. The Bitcoin used to go up, I'd go crazy that I didn't own it. When Dogecoin goes up, I just start laughing. But to me, it's all about your own pal. Right. At the end of the day, it goes back just to the money printer. Yeah. Yeah.

I like that how you said about Doge where it's a joke. I mean, it was literally created as a joke. So for you just to look at it as joke, that's probably the best way for everyone to look at it, right? Hey, this is a joke. Don't even consider it. It's like, you're relevant. Yeah, don't go long and don't go short. You know, unless you like going to Vegas, then I guess.

it's okay because it's a lot of action. Yeah, absolutely. So I think one of the last questions we had here, obviously thank you so much for any time. The question we had here was, if you were 20 years old today, what would you be doing as you started your career? The number one necessary condition would be something I was passionate about.

Okay. Particularly in this business, the people that love it like me are so addicted to it and so intellectually stimulated by it, if you're not and you're in for the money, you have no chance competing with these people. They're going to outwork you. They're going to out-execute you.

So, and I think it's probably true of a lot of professors, but let's not forget, if you're American, you're probably going to spend 60 to 70 hours a week minimum working. If you're in your job for the money, not because you love it, you just blew 70 hours a week on the happy, happiness quotient, that's pretty rough. Right.

So I would tell a 20-year-old, follow your passion. I was just lucky. I followed my passion. My mother-in-sill law says I'm an idiotic savant, and I wouldn't be good in anything else. But I would do this for 50,000 a year. I really would. I just love it.

And I hate to see young people get trapped in something. And I would also say, keep an open mind. I started at Bowden as an English major. I took economics just so I could read the paper intelligently. I went to get a PhD in economics. And I went there and I said, these people are crazy. They're trying to shove the economy into a math formula.

It doesn't make any sense. Then I went to, I work construction for six months. I got kind of a weak upper body, so that didn't work for me. Then I went to the bank. and I found out what I was just in love with. And so try stuff out. And if you're not really, really engaged during the day and you're not happy, move on to something else because there's something out there for everybody.

But I would not let money be the driver of the equation. That can lead to a lot of not maximizing what I call the happiness quotient, which is the most important question in your life. Well, you mentioned that you would be doing this job if you're making 50 grand in years. So the question, will you hand over the family office? When do you expect that to happen if ever until? Will I what? Will the handover of the family office to another manager and you just go hands off happen in the near future?

This is something you just want to be doing just for your own happiness question. So as you probably know, a lot of people when they retire, they start messing around in stock market for fun. So if they're all retiring and doing this to other 90, why am I supposed to stop doing it? What I will say is my skill set, you know, I think a lot of my performance has been because I'm flexible in terms of instruments I use in terms of assets. So I'm not afraid to just plan bonds or currencies or this or that. But my real passion is in macro. And I think history would say in macro, I'm probably an A plus and in equities on probably B minus.

Equities are much more labor intensive, as you know. There's only one yen. There's only one euro. Treasuries. I guess my dream to your excellent question would be to find a successor to run the entire equity part of my family office. Right. But have me fiddling around in the macro and acting like the old talking head sage,

you know, coach to him. That's where I'd be. But I think I would die if I couldn't have some connection with the investment market and the markets during the day. I just, first of all, I'm not very good at golf. I like doing stuff I'm good at. And I think that's part of what we're talking about with passion. No one likes being a loser.

So, yeah, I think I'll probably go to my grave doing this stuff, but maybe not with the control I have right now. Well, just the last comment on that point is for the equity side, we should have toggle, right? Absolutely. Absolutely. Takes a lot of the labor out, I'll tell you that. You can cover a lot more ground in an hour than you can try to do normal reading. No, that's perfect. I wrapped up on my end.

Those are all the questions we had. And it was amazing, Stan. That was incredibly insightful. And I really appreciate your time. Thank you to Jan and Audrey for setting that up. Yeah. Okay, nice. Hopefully this does some good for everybody.

I feel like I can rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's travel, never looking back.