Capital Allocators Founder on CIO Philosophies

Capital Allocators podcast. You talk to some of the world's top professional investors. Um, before we get into the conversations you've had in the book, how are you. What's the past year been like for you? You know, it's hard to stay given what's happened, but honestly, it's been one of the best years of my life. Why. Well, it's a combination of things on the professional side, the podcast. As it turns out, right, this medium can grow and continue in an environment like this, So I've been able

to focus. It's been easier to get access to some the people that I get a chance to talk to because their scheduled their travel schedules are down and the engagement with the content we've been putting out has just grown. That grew over last year in terms of downloads, So that's been great. On the personal side, I got married last year. That's the love of my life, and things have been great. Congratulations. Wow, like kidding, get out of

the park. That is incredible. Um. You know, it's funny that you say that about access to people, because I think that's something we realized too, that everybody once you realized it was kind of okay to talk. Uh, everybody was home and in the same situation. And you're right, we had like access to people too that we hadn't before. So it's interesting that that that was your experience as well.

Let's talk about um, your book and capital allocators, because I do think we're in an interesting time where we're watching a lot of investment trends. We're watching this back explosion, the Reddit revolution, We're watching crypto bitcoin values continuing to grow and actually go more mainstream. Um, how do you see it? What are some of the things that you

find interesting, what's worrisome? What screams opportunity to you? Sure? Well, you know the people that I talked to regularly in the world, I came from are really these asset owners, these long duration, long term pools of capital, and not a lot changes in the way they go about investing day to day or week to week. So there are always a few key trends that come into play and

come in and out of their idea generation. But for the most part, what they're finding um is that generally speaking, capital markets look expensive and they all have spending obligations they need to meet, call it, you know, five for a foundation or a little bit more for pension fund.

So they're really scratching their heads and saying, how are we going to meet these long term objectives given that the easy ways of accessing, say you know, index funds or things like that, just don't look like they're priced to reach these long term return objectives. Okay, So then having said that, when you look at some of them more,

maybe you know other areas to go. Whether it's crypto, I mean you like crypto, correct the crypto do I like it for a particular reason, which is we are in this world of fiat money debasement, and all of the risk assets, whether you like stocks or bonds, or venture capital or private equity, they're all sort of predicated on dollar based instruments, and so crypto is this kind of asymmetric option for the potential of digital gold uh

and bitcoin in particular. So you have a combination of the thought of something that may be very important ten years from now in terms of maintaining your store of value, and then you have attached to that sort of the venture capital thesis, which is if you look at where all the talent is going of these young people coming out of school, all these engineers, something like twenty or twenty of them um and this according to Christic said that Andrews and Horowist, who I had on the show,

you said something like them, they're all going to build blockchain technologies. And when all the talents that's what Silicon Valley does. When the talent moves in a certain direction, they go and look to access it. And so you put those two things together, and I have a small percentage of my personal portfolio invested in crypto in particular. I'm taking baby steps. So for me, it's just bitcoin

and ethereum at this point in time. Hey, Ted, one thing I want to ask you, and we just did a story Charlie and I um for some of our audience and it's about E s G and it's an

opinion column here at Bloomberg. But it's just there is a feeling that because there's so much money flowing into the E s G space, it's where investors, a lot of institutional investors are increasingly looking to commit new money that a lot of you know, uh, investment houses are fund offerings, are just kind of slapping an E s G label on it. What do you think about I know you like the E s G space and that you are following it. How do you you know, how

do we make it purer and more true? Yeah, well, I think you have to start with that perspective. If you look backwards, as this sort of research study showed, there will be a lot of that. And the reason is, as one of my guests, James Aitken had said, there's a tsunami's capital coming into this space for all the right reasons. And so, really starting with Greta Thunberg a year and a half ago, her her description of what was happening Davos just before COVID, every description was about

climate change. We know that this is really important and it will be a very strong secular change in how capital gets allocated worldwide. Now, as soon as money starts flowing, it's not that surprising that people trying to capture their share of it will do, you know, what you call greenwashing. But let's not be too short term about that. If you look over time, the first thing is we now had interest. We have interest in doing things that are

better for the environment. We have interest in promoting more socially diverse people throughout the economy, all of which is good for the long term. Now, as that happens, we need definitions. We need to understand in the capital markets and public markets, we need benchmarks. And if you look at the different benchmarks, nobody really knows yet what is a good company what is a bad company, And that

will get worked out, but it does take time. And in that process, I'm not that surprised that you have products that want to say they have in the s G lens for the first time, and maybe they do and maybe they don't. But over time, I think we'll see the stronger companies that have the those trends and doing the right things for a broader constituency than just the shareholder will be the winners over time. And you

know that will play out as capital markets do. Until then, Yeah, there'll be a little bit of a mess along the way, okay, but ultimately, like the long game is that we get to a better point. Yeah, I think so. Hey, listen your book, your podcast, your approach. There's a lot of useful information. Informative. It's you know, really on how the best invest. It's very instructional. I think you even in maybe the forward call it a textbook. Um, you talk

with the best. Are there common threads among the best capital allocators and elite money managers and how they lead and how they invest? There really are, And you could really break it down into two sets of disciplines, one or the investment related and then the other the leadership related. So if you start with the ladder, the investment industry is known for managing money well, not for managing people well.

And one of the things I've had the benefit of doing on the podcast is interview people from other disciplines who are talented at leadership and management and things like decision making. Annie Duke the Great, the great form of poker player, and so the great c I O S are really like Baseball's five tool players. They really understand all of these different disciplines, And what I tried to do in that section of the book is describe some of the basics, like how do you do this well?

Then you turn to the investment side. And you know, I was very fortunate to learn in the formative part of my career from David Swinton, who is sort of the dean of this and wrote the seminal book twenty years ago. Um, And it does start with really an understanding of what's the purpose of the capital, what is the time horizon, what beliefs about investing the people bring in?

And then the discipline process that I walked through in the book of how did these people find their investment ideas, how do they do their research, how do they make decisions? And then how do they monitor and manage their portfolio, manage risk over time? Is there something to like do all of them admit that they've made some really big mistakes and that was kind of a big learning opportunity, Not all of them, but only the good ones. Okay, you admit that they made a mistake. You know, the

investment business in some ways is very humbling. Morgan Howbell, who recently wrote the book Psychology of Money, has this great analogy that he says, you could be trained at the greatest academic institution, worked for the best place on Wall Street, and still underperform someone who knows is nothing. If you were a brain surgeon, that would never ever happen. So yeah, the great investors are only right to six of the time in the public market. So um. Yeah.

It's a very humbling business and it's important for people who learn from their mistakes. How do you hope people use this book? You know? I wrote this book in large part because it was what I wanted to distill from my own investing in the investing that I do, and what I hope is that people see it as incremental ways that they can get better. And that's what

the podcast has been. This just phenomenal way of sharing in public with some of these great investors how they go about doing what they do, and every single one of them has a little nugget of wisdom along the way, which in fact is the whole third section of the book is just a series of quotes that are some of the very best quotes about how these people think about it, the nuggets of wisdom, nuggets of wisdom, and how they think about life too. Well, listen, I'm not

going to ask you to say your favorite conversation. That wouldn't be fair. I you know, somebody who talks to a lot of people. When people ask me that question, I'm like, I like everybody. I mean, you know, it's just a it's fun to kind of go back and forth. Um, but you have some that stand out for you? It's hard. I do have two hundred children, and probably undred ninety of them have been outstanding students. Um or any surprises, Yeah, god, yeah,

there there is one I loved to point to. Not so much that it's so much different or better than any others, but it really was what I thought I might be able to get at. And that was the conversation I had with Scott Malpas, who's the recently retired chief investment officer at Notre Dame University. And I had known Scott from when I worked at Yale, but I hadn't seen him and I hadn't seen him in over

a decade. And when we sat down, that conversation for me was, hey, how have you evolved investing over the last ten years? And he walked through every aspect of what they had done in that office, and there was so much rich information about his investment process, and he's uniquely positioned because he had been in the seat for thirty years and really had a stellar result. So that wasn't so much. It wasn't my favorite or least favorite. It was just something that was really emblematic over the

lessons that people can learn from listening to the show. Well, I'm just thinking these words of wisdom, uh, or nuggets of wisdom. I should say it would be a great series of T shirts because there's some really great ones um there listen. Good luck with the book, uh, and really fun to have you join us, So thank you so much, really appreciate it. Ted Side's he's founder and

managing partner Capital Allocators. The book Capital Allocators How the world's elite money managers lead and invest just out