An Interview With Arthur Samberg: Masters in Business (Audio)

capital investors. Uh. He has a phenomenal track record. When he began his hedge fund was one of less than a hundred funds that were in existence, and he briefly he tells the story how he gets a call from the Wolf Street Journal to find out that his hedge funds is apparently George Soros had retired and um Julian Robertson had retired, and suddenly he's running the biggest hedge fund in the world at the time. And not not that that was his designer is focus, but it just

kind of happened. He's a fascinating guy. His his literally a rocket scientist, an aeronautical engineer who used to work on on missiles and satellites and things like that before he moved to Wall Street. He tells some of those stories and they're quite fascinating. Our conversation about venture capital investing in the areas he's looking into is really quite amazing. And you know, you guys by now know, I'm not

afraid to talk. Most of the time during this conversation, we're just sitting I'm just lobbing questions and listening UM in rapt attentions as to what he said. It wasn't until later in the podcast I actually come out of my shell. But UM, the elephant in the room is you know, it's public knowledge. Uh, there was an SEC investigation, it was started, it finished, it reopened again. Ultimately he

ended up settling without admitting or denying. UM, paid a twenty eight million dollar five I think it is, and and as the SEC tends to do, had him sign a non disclosure agreement or or something to that effect. So we really couldn't get into that in great detail. UM, but I did bring it up, and he did respond, I thought, in a rather forthright way, as much as he's allowed to say. He said, UM, really interesting guy, fascinating background, and some of the stories he tells are

they're just amazing. So sit back and brace yourself for our couple of hours with Art Samberg. This is Masters in Business with Barry Ridholts on Bloomberg Radio. This week on Masters in Business, I have a very special guest. His name is Art Samberg, and he's been running various hedge funds and venture capital funds for a good couple of decades, posting fairly spectacular returns. I'm only gonna have a short version of your CV because it will take

up the whole segment. Otherwise launched a hedge fund. Uh, it was Samberg, Dawson, Samberg, not Dawson and the originally back in eighties six, back when there was fifty hedge funds something. That's the number I made up, but it's under a hundred. It was a small number of hedge funds. Put it returns over the life of his funds of almost And the interesting thing about Mr Sandberg doesn't come

from the traditional business economic background. Undergraduate bachelors of science and aeronautics and astronautics from m I T and then a master's degree in those subjects from Stanford, So really you're a rocket science you were rocket science no longer I am, and then you end up getting your NBA from Columbia. We'll talk a little bit about some of

your classmates at Columbia. There's some really interesting stories there. Uh. You currently are the chairman of the m I T I'm sorry sits the board of advisors of the m I T Energy and UM Initiative, and you were chairman of the m I T Investment Management Company. I sit on the executive committee UM, and I'm very very involved in the school. There's so many other things and so many other titles you have. You're very active in philanthropy and a variety of other things. We'll get into that

as the show goes on. Let me just start by saying, welcome to bloom Buck. It's great to be here. Thank you, Verry. So first I have to ask you were at Lockheed Missile and Space Company in San Francisco, You come to New York, you get your NBA from Colombia, and then you end up working as a security analyst at Kidder Peabody. How do you transition from literally rocket scientists to financial analyst. UM, you gotta follow your passion. You've got to follow your

competitive advantage. And UM I quickly found out that I could solve the equations, but I had no idea what was really going on. UM. I worked in missilante aitude control UM. So these were defined. So we were the US launches rockets, UM. Satellites come off of those. I looked down on Russia back then, UM, and they have infrared sensors and they find out where, uh, the Russians are launching rockets, and there's a lot of orbital mechanics. And I could solid equations, but did I really have

any clue as to what was actually going on? I quickly found out that I did not. So you go to kid A Peabody, you're covering aerospace and and those sorts. It's so interesting how I made the transition. I I wasn't going to go to graduate school, but Locke would pay for it, so I said, sure, you're gonna pay for it, I'll do it. So I went to Stanford, UH. And it was during the day, and on the way back I would stop off at a brokerage office. And it was the time when comp Compsat went public. That's

something I know something about the sties. I got out of m I T and sixty two and I was working as an engineer from sixty two sixty five. Someplace in that time period, comps At law as the company goes public. Uh, and I'm fascinating. It's like, my goodness, all the stuff that I know, I can apply it to I can real money. Um, as opposed to supposed you're working my way up the engineering ladder where I had no illusion that I would ever be great. That

was a good middle class job. But you're never going to My dad was an electrician. UM, so you were making more money than your dad when you're so, then how did you go from there to Columbia? Um? Because my wife needed to get a job teaching school in New York any place, and the only place I knew for sure you could get one was back in New York because I people. So you go to Columbia and this is a rumor, and you have to tell me

if this is true. Used to car pool to Columbia with two guys named Mario Ga Belly and Lee Cooperman. It's no rumor, it's the actually truth. That's a that's a lot of intellectual firepower. Learned more in the car pool than I did at school. Don't tell, don't tell the school. I said that I cod share the board. By the way, the school that you're you're dissing right now. You made the biggest donation in their history to their

to their graduate program. It's been exceeded by a couple of other guys now, but people, it was a large no. I I My my success in life is UM is taking UM a decent expertise in technology and combining with finance and trying to apply those two things to help companies aggregate capital um and grow and create jobs. And so I'm one of those guys who believes in all of that good stuff? Are there many people who don't

believe a lot of people who don't. I think people believe it, they just get offended by some of the gross excesses that occasionally erupt. I think they're also jealous UM there's there's possible and possibly that. So so one of the things we've had Lee Cooperman on, I know you guys are friendly. One of the things that Lee talked about was how he developed his deep value framework from Colombia. What was your experience like? UM? My experience

was I was the antithesis of deep value. M I remember Mario Lee and I, Uh, well, Mario and I took a course from Roger Murray, who was the guy reinstituted the value investing stuff at Columbia. He got he got one grade higher than I did because it was analysis of a company where it turned out that the really key factor was the old man who found it was going to die and then value would be created, which Mario was fantastic at. I thought that was disgusting.

I mean, I really am interested in people who were alive and doing things. You care about the technology you have the physics. I care about solving the world's problems and getting rich while doing it, because I think the two actually do work together well. Many people who have created solutions to pernicious problems have not only helped society but created a tremendous amount of wealth. I think that's the americanay, and I think it's phenomenal. You're listening to

Masters in Business on Bloomberg Radio. We're speaking with Art Sandberg. He is the founder of Peaquad Capital Management and now he's running Hawks Financial venture capital and Hawks is a umbrella family office venture capital and stuff. But we do have a fun though that my older son is now the managing partner. We call it a Katia Woods uh and it's increasingly showing up in the holding of some very interesting companies. So that's that's fascinating. Let's talk about UM.

We mentioned earlier less than a hundred hedge funds when you launched, and and the fund returned a rather smart by the way, that's very similar to Lee Cooperman's returns seventent. Lee is a great friend. Mine is better. I think you're about half a percent well, And I will say, because you know, I believe that numbers are numbers, and you're full with numbers. I was, you know, I did go to M I T. But my first year I

was down. You were down about you were to adjust it like most people have first years when they were and then the money pours in, and then depending on you came in, you might not have even made money with one of these guys with a great record. The not true here. The dollar adjusted returns, not the time weighted returns for a lot of big funds are awful because they were putting up returns with twenty million dollars.

Then they're at forty five billion and they lose a third, So net net, over time there are a dollar loser. But percentage wise, UM on a time weighted basis, I've never had the chance to say this before, but that is absolutely not the case of QUI so you with down And one of your quotes that I really like was you learn more from your disappointments then you do from your successes. Success feeds on success, and people are there to tell you how wonderful you are. People don't

really unless money attracts. Money is used to and I never understood it until a few years ago, and and and and if you if you do that for a long enough period of time, my belief, um, clearly my belief is that people then want to start to tell your down. They either want to continue to build you up or tell you down, and there become a high profile target. So, um, you're not going to hear a lot of things you believe about what you're doing wrong

when you're doing right. Um, but you are doing things wrong. And and then if you just go into a shell and you don't realize and self analyze and you know, really look carefully at what you did and why it failed, um, you will not do well. So after I was down, because that was the crash of eight seven, and it was you had launched what Yes, so you did worse than the crash. Uh. It was one day the market was up almost and ended up returning for the year. That was a big, big down draft, which it was

brutal UM. And I remember having because I I when I started the fund it was in small companies that were overlooked that could become big companies. Those are exactly the kind of illiquid positions got creamed and so I ended up having Assuming that I was going to get redemptions, I had a call companies and say, would you buy my stock? Um? That is, if anybody who knows anything about anything, that is not a good way to UH

to execute a cell program. But there were no other buyers, so I got smoked UM and I so I was up three percent for my stub period in eighty six and I was down six I can't remember percent in eighty seven, but then it came roaring back. So what was what was the subsequent couple of years? So in other words, you put up eighteen almost eighteen percent a

year despite starting from that. So if you were to just do the simple math, it would take it up probably closer if you backed out that over UM the next few years we're up twenty up seventy five it's just you know, crazy numbers right in the late eighties up seventies, starting in back in eighty nine, UM, and then and then I can imagine were just insane. What sort of numbers were you doing those? Yes, you know.

But one of the things that did Pequa was to realize that because because I was sort of the first guy to really specialized in technology investing as as a hedge fund. Really yeah, without a doubt, and I sector funds, and I had I had a great partner, Dan Benton, who who then took over the technology she stuff, because I thought I had brought her background in the whole business and I can run the business and everything else. And he had a hundred percent year. I had a

healthcare fund that was up that time period. UM, we started an energy fund UM. So we had sector funds, and I devised a way for me to manage increasing amounts of money by using those talents and bringing him into the fund while I'm still doing trying to do research myself. In the early days of the fund, someone had written and I don't remember where I'm quoting this from, that it was over fifteen billion dollars and kept growing and at the time that made it the biggest hedge

fund in the world. Is that true? You wake up and and you wake up to unexpected news every once in a while, and that's happened to me more than once in my life. But the unexpected news in this case was in the spring of two thousand. UM, we had a PR firm, and the PR firm calls and says, Um, the Wall Street Journal, UM is going to do a story, uh on hedge funds now that George Soros and Julian Robertson have decided to close down to the outside investors.

And they have determined that you were the largest hedge funds in the world and clients at that point, sir and and and they will do the article, UM with or without your input. UM, and we suggest you probably should tell you're in the part of the story. I don't think anybody really, I mean, people on Wall Street knew who peak what was But I I don't like publicity. I like to just live my life, do my thing, give back. I believe I do give back. UM. And

I'm not out for self and grand grandizement. And uh So we were unknown and then all of a sudden, on a Monday morning, or Tuesday. Bang, there it was, and my life changed really in what ways? No, nothing positive. So hence the low profile is the better way to go. I've tried to maintain that ever since. And as you know, Barry, that was one of my reluctance is about doing this.

I do know and and for listeners, I've been chasing Art down for the better part of a year and Um after our conversation with Lee Cooperman, Lee eventually convinced you, oh, this guy isn't that bad. You should come to so so far, so good. You're listening to Masters in Business on Bloomberg Radio. My guest today is Art Sandberg. He is a former rocket scientist who became an analyst, hedge

fund manager, and venture capitalist. Let's talk a little bit about your methodology, because we've already identified you're not a deep value investor like your friends Lee and Mario Um, Lee Cooperman and Mario Gavelli. What is your methodology when you're looking at either a public stock that you're thinking about buying or a private company that you're thinking about investing in. UM, it sort of starts from the same It starts from the same basis, which is what kind

of change is possible. What kind of change can you find that is being implemented by smart people? UM. It becomes more difficult obviously as UM a trend goes on and as you become larger in size, you can't you really can't establish those positions. UM. But initially my my my fund was set up to invest in market caps if you can believe this in this day and age. But we're talking thirty years ago now of market caps under under two hundred million dollars, uh, YadA YadA ya.

And then of course it changed thirty years ago into two hundred million dollars today. That's still thousands of companies, but they trade by appointment. There's not a lot of liquidity of it, which is the only kind of things that owned my personal account right now. And I won't talk about any of those. But I'm back to back to being able to do what I first did when I UM, when you started the business, UM, you know, UH,

creating alpha through that cycle UM becomes difficult. UM. And and so that approach that I described, UM, you have to evolve into a master of markets, as it were, to be able to go short and know how to use derivatives appropriately match. You know the cost of doing that to um the potential upside, and that's become increasingly difficult for practitioners these days. And the results quite honestly

have been pretty pretty mediocre. When we look at the small cap there are guys like David Booth of Dimensional Funds. You've created a very nice business focusing on the small cap um advantage. The fact that you actually see out performance from smaller caps UM versus the big well followed. There's an inefficiency amongst small caps that leads to I think there's growing inefficiency UM because we all know what's happened to employment in the brokerage industry, all know how

many companies are followed that's declining all the time. The economics aren't there with the regulation um, they're burdens on the company's plus the financial companies to follow them UM. So the value is definitely there. The problem is that nobody knows when you're gonna get paid for that value. If David has managed to harvest some of these, more power to them. But some of the guys now Dimensional Funds, maybe they buy a position to everything, don't they they

have a quantitative model. They end up holding these things forever. I wouldn't say everything they run through a number of screens. Oh no, I'm not but detegrating what they do. Basically, it's very different than the model I'm talking about. For sure, I'm trying to identify winners. Um and they're in my experience, like there aren't that many winners. So you mentioned earlier you're running your own assets as opposed to when you

were running other people's money. How does that universe difference? What's what's it like running your own money versus what you have to deal with when you have outside of this. It's very simple. You don't have to report, Okay, I do have to report to uh I have to son, so I do it with um and I have a daughter who runs our family foundation. She and my wife. Um So, in our family, the males make the moneys, and the females or social conscience and and and and

help us give it back. Um So, my boss is really the women in the Sandburry clan. Okay. They expect that I will always perform, I will perform well, and we will do great, great deeds for the world. Um So, you still like have other other investors to to answer to. But I I can deal with that because they are in my family. So it's a little it's a little easier. It's so easier. So we were talking about the increased regulatory environment and how things have changed from when you

launched thirty years ago. Could you launch a fund today? How what let's say, hypothetically you're right out of business school today, what would it be like launching a fund in this environment? Well, I guess in some ways it's easy. Well talking about today today, UM, I don't really know because I haven't been then involved or involved at all. But um, at the peak of my success, it was

simple for anybody to raise a fund. I mean, everybody was looking for the next great manager and they throw money at him with fat return you know, return profiles for for the manager. Um. I think that welcome has been worn out. You know, that welcome has been worn out. So now I think, if you don't have a nest egg, um, you're not gonna make it. So you better have made some money um before and put it at risk in

doing what you're doing. I certainly did that back when, because if you're down, you can't really pay your bills, so you better you better have something to live on and then decide whether you really want to take the risk for your family and everything. Um going forward. Um, I think you went through a whole generation of people who didn't have that risk. They just we're having money thrown at them. Uh. And now there's a sorting out

process going on. So I think it's it's much more difficult right now to sort of fund You're listening a Master's in Business on Bloomberg Radio. My guest this week is Art Sandberg, probably best known for pe Quad Management, although he has been a well regarded venture capitalist and philanthropist over the years. Let's talk about running a business.

What it's like to run an investment management business. I some time ago read a speech you had given and you had talked about how challenging it is to find and hire the best people. M what why? Why? How significant is that and why is that such a challenge to an investment firm. Um, it's a challenge because um, uh, there are a lot of smart people out there. UM. So if you meet somebody and you talk to him, UM, you know you're not gonna think everybody's smart, but you're

gonna think a lot of people are smart. And then trying to distill down those who appear to be smart into those who are gonna be really a fair to be managing money, who are going to be um easy to live with, because you have to live with these people, UM, who aren't the kind of guys who become megalomaniacs. And I think that all the success is due to their efforts and not because of the team's effort. Very very difficult, very difficult. How how soon after you make a key

hire do you usually know if you're right or wrong? Um, well, I won't. I won't do anything that the key higher um tells me to do on the first recommendation. Um. I always waiting to see how that works out. Not because I don't believe in it, but I believe it's a it's a it's a far better learning example to pick that one apart about what went wright what went wrong? Um, so objectively with no money at risk, and and and

and then and then you you progress from there. But um, the great, the great fortune I had when I started peak was, UM, I hit a hot streak of hiring and UM, you know you like to think it's all because of yourself, but you know I brought in Dan Benton I brought in Mark Bach, I brought in Peter Dartley,

I brought in Church and Deel I brought it. The first four hires that I made were spectacular, and then it gets harder because they hire people and you hire other people, and all of a sudden, there's a lot of people, and all of a sudden you're getting bigger, and all of a sudden you have back office issues, and all of a sudden, every client wants to talk to you, and it's just very, very difficult to maintain your focus. But those are those are good problems. Those

are success. They're great problems. I'd rather have those problems and not have them. But they are problems, right, Well, they're better problems than why is the fund doing so poorly? Why have five of you employees laughed? Why you know those are bad problems? Yeah, well that's when you get into the point where so much money is coming into the consultant's controlled they as they should. I mean, they have a fiduciary responsibility, but do they I'm not sure

if consultants have a fiduciary response. Um, the consultants don't. But the boards in hospitals, the boards that educational institutions whatever they do, and they need the cover of the consultants. Um uh, not covered is gonna sound worse than it that I intended. They need the plausible, uh, somebody to point a finger at when things go wrong. They also need somebody who's gonna do it full time. I mean usually the people who are on these committees are very

very busy time. It's not a full time, part time. They've got very active careers that they're very good at, and they have to delegate to somebody. So the infrastructure builds up. Anything that is successful creates either regulators, consultants, an infrastructure around that activity. That. Um, there's a challenge to people who are really say dragged on future returns and operations. It's inevitable. There's no way around that. I

didn't know it's inevitable. I just inevitable, okay. Um. One of the themes that we've had in the show I'm Gonna Change Gears on You has been the role of luck, whether it's in business or investing or even careers. Lee talked about this, Clivastness talked about this a number of people. Bill Gross talked about this. What is the role of luck in in building a firm and making investments. How does it affect people's professional careers. I'm sure it's a

major Uh, it's it's a major causal effect. But if you think about it, um, that's the biggest mistake you can make. I mean I never thought about, boy, am I lucky? I mean after I had achieved the success, perhaps I thought that that was lucky. But you know, not, not, not while I was doing it. While you're doing it, what are you focused on? Your focus on your core principles? You know? What? What what is it that you bring

the table as different than other people? How do you, um, how do you build an organization around you that it amplifies that that competitive advantage? Um? And stay you know, and and continue to learn and and and and and learn from your setbacks all the things we talked about before. But to think that I don't really believe it was because of luck. I think it was because I was I was, I was, I was driven. Um I did

I have setbacks? You better have setbacks. But UM, I viewed those of setbacks and and things to overcome, not not like someday I'm gonna get lucky. So I'm gonna keep keep doing this, so you really have more of an engineers approach, which is, here's the formula, we're gonna plug and jug and ultimately you come out with the conclusion on the other end. So we have the pope in town. That makes it appropriate to talk a little bit about charity and giving back. We've we've talked about that, right.

You have a number of philanthropic causes, organizations, you have your foundation. Let's let's talk a little bit about about that. First question is what are your philanthropic goals? Um, I don't know what the goals are. You know, to to create a better world yet day Yeah yah, but um, but a lot of this is formed by by by your life experience. So my life experiences that my grandfather came over from Russian Poland UM one one was a tailor. UM my dad, who was very bright guy, was the

oldest five. His father lost his job in the depression and he ended up becoming an electrician because he had a support the family. But we you know, it was it was it was a strong family and my parents that everything he could to help me get along. And so I got into m I t um which is the ultimate in a meritocracy. Um, you you you you, you do the work, you do well, you don't do the work. You know. It's I think it's a great institution. I think I wish, I wish America reflected more more

of its core values. But I realized that, you know, I got I got to go there and and and all that it was. It was sort of somewhat random, um um. And there are a lot of people born in this world who have the same talents that I had, who are never gonna have that chance. And I got to write that. I can't. I can't. I can't. I can't make the world perfect and create equality across the

board for everybody. But but if I can affect the lives of a number of kids who don't have the opportunity I had because of just the way that you know, the their their family circumstances are, um, I want to. I want to make that difference. So how do you express that in terms of of in terms of philanthropy, what do you do with that? We We we do that um by supporting um lots of start up ventured you know, philanthropies that are in the area of education, healthcare,

I could name names. Is the Summit Health leads. Um, we were instrumental in getting the two of those started there. They're they're highly respected, UM, and they're My daughter who runs our foundation, will be annoyed at me if I forget all of them. UM, I'll so you know, I'm Jewish and UH believe um, you know, believe in the Jewish people. And so we were original investors in UM Birthright Israel, as was your friendly uh Lee Lee Lee

was as an investor in birth Right is Heal. We were one of the fourteen founding families UM uh and and and and a number of other things. So it's um those dual things, you know, giving back to your heritage, giving back to people who don't have the opportunities you had, but certainly have the ability that you had. Um. How does that manifesto itself in terms of scholarships or getting kids who might not otherwise get to a place like

m I t to that sort of school. I am told by the school, and I can't say this is true that that the scholarships I've given Um, I've given the largest amount of money in scholarships to m I t Um. I think that's true. My wife is very involved with west Chester Community College and UH, we're big supporters in Westchester Community College UM, UH Columbia Business School, which I co chair with with Henry Cravis. UM. We've got a major campaign going right now to UH build

a new business school up in the Manhattanville campus. UM. And I did a matching UM grant um for fellowships at UH UM at at Columbia UM. So it's it's it's it's not it's not per se about buildings. It's about you know, giving to the kids, giving to the professors. We have a program at UH Columbia Presbyterian New York Presbyterian UM where we have a thing called the Samburg Scholars and Pediatrics enabled them to hire a whole bunch more research people and fill in some gaps in there.

And so the emphasis is on young people and health UM. And it's a it's a pretty well thought out thing. My my my wife and I UH and our three kids are on the board. UM. We uh, you know, we take it very very seriously. My goal, you know, is to take care of my family. But if I die with out a penny to my name, UM, that would be just that would be ideal. Trying to figure out how you manage that is uh, not the easiest

thing in the world. But so if someone wanted to find out more about UM the charities and philanthropies you support, is there a place they could go online to look at that or is this all UM various meetings and committees and what have you. UM we have a website for the sand Rick Family Foundation, which we don't ever talk about the first time I've ever mentioned it. That does not include UM schools that we went to and stuff.

So everybody is responsible for their own alma mater. So it does talk to the kind of social things we are trying to do. We as a word of caution, we do not accept incoming inquiries inquiries We only we we do our reach, which can we go out and selectively pick what we want to do. We've been speaking with Art Samberg of Pequod Capital and the Samberg Family Foundation. If you enjoy these conversations, be sure and check out the rest of our chat. You can find that on

Bloomberg dot com, SoundCloud and Apple iTunes. Check out my column on Bloomberg View. Uh. Follow me on Twitter at Ridolts. I'm Barry Rihults. You've been listening to Masters in Business on Bloomberg Radio. Okay, welcome back to the podcast. Half Now, I don't have to worry about time that by the way, that's really annoying having like I have three minutes, one minute, thirty seconds, so he's in the back of it's it's such a distraction. So a couple of things I didn't

get to during the broadcast portion. Let's let's take up some some loose questions and then we'll we'll focus on some of my favorite questions to ask during the segment. So I see a name like pea Quat, which is an Indian triumbe obviously, how did you come up with a name peaquat capital for that? Well, in hindsight, I wish I hadn't because distinctive it stands out that was and it was a literate of Peaqua partners and it

sounded good, it felt good. Um, I had no idea the Peakuad Indians we're going to get a gaming license. And I remember getting letters from European investors about eight ten years into the life of the fund saying are you affiliated with that gambling tribe? No. I was at three fifty four Peak what avenue in south Ford today? Out and it sounded alliterate of it meant nothing. I didn't want anything that suggested, you know, did you predate

the casinos? And yeah, absolutely, yeah, absolutely didn't come after you, did they They called me and I said, well, just check the incorporation papers. It was three four Peak what Avenue and that was it. That was it and it works. So now you know Hawks, which is my family office. I live on a street by the name of Hawks. UM Katia Woods or our family venture fund. We live on a Katia Woods Road and uh, north Port, Michigan, UM,

which is where I spent my summer. So so you're you're in New York three quarters of the year and you're half the year and you're there a quarter a quarter of the time in Michigan. Yeah. Yeah, so you're they're just over the summer, over the summer beat. Oh that's awesome. We we lived down the beach from Mario Batali, who was a big champion of that area. Um, New Yorkers don't Italian tour it ends up in Northport, Michigan, which is on the tip of a peninsula jetting into

Lake Michigan. It's a beautiful, beautiful area. Um. If you're in. If you're in New Yorker, you go to the Hampton's, except if you're me, you go to Michigan. It's bizarre. Mario Batali, the chef for the Okay So, but he's not from the is he from that part now? But his his wife went to University of Michigan and was friendly with with a gal who grew up on that peninsula.

And that's and that's where you are right over. And because I do venture capital now and I don't know have to be I don't have to have morning meetings, I don't have to all of the paraphernalia about running a fund um. I can do everything, you know, electronically, take plane trips to where I have to go. How often are you on the West coast California? Eight times a year? So we were just in the beginning of this year. I was in Seattle for a week actually

um c F A events. I interviewed Howard Marks at at UM in Seattle, and then we spent a week in Seattle. Seattle is on fire. It's absolutely a city booming. And we just got back a few months ago from a week in San Francisco. It was a conference in Napa and then a week in sanci. San Francisco is on fire. It's San Francisco has been on fire ever since I got out of school in sixty two. Well, it waxes in Waynes but you know, post financial crisis, it was a little tamped down for a year or

two and it's just been booming. Ceccality is part of part of the human condition. So how do you But it's also true in Denver we have we started up a real estate development from Denver. Denver is another also booming booming. How much of that is related to the legal marijuana in Denver and how much of it is Well, I'll tell you. The best investment has not been art has not been. It has been buying up old warehouses in Denver because that's where they that's where they store

the marijuana they grow it. They're also they need they need they have big warehouses, but they're big new and they need electricity, and they need they need artificial light. But just the crumby old, hundred year old small warehouse just to store I missed it. I missed that play. Yeah, but I know it's true. So you're doing a lot of venture capital wise, how do you deal with the supposed valuation issues these days, all these billion dollar unicorns

where I hope that I get into a unicorn. So what sort of stuff do you like to to look at as a as a VC. Yeah, it's it's consistent with with my background. My my older son who I worked with, ran business strategy of people soft. He knows software far better than I do. Um, I'm better at the you know, the physical sciences. Um. We're involved with the fusion company that I really can't talk much about, but people should should should read read the newspapers and

fusion in terms of energy generation. Yes, thorium, I hope. Why don't we have thorium reactors? You have a physics? Because we have, we have we have a better approach really yea, because thorium is supposedly and now my physics is thirty years rusty, but supposedly better than uranium, better than plutonium, no waste issues. Tonium is highly radioactive. I can't remember how radioactive storium is. I looked at it

a while ago. Well, what we're trying to do is fuse hydrogen and boron, and I won't bore everybody that that results in three helium Adams energy and it's completely not completely, but largely into tronic and you can actually know part neutrons, high energy particles leaving correct and and therefore UM you can build a commercial reactor unlike what's the waste product? Like, Uh, there's very little waste really, so you're not left with there is waste and we've

got to take care of Is it radioactive waste? No? No, no, no no, it's non radioactive waste product out of a fusion. It's a major, major project. And you said you're trying to change the world. You really no, No, I am trying to change the world. Plus, I were invested in a and the solar company that uses UM three D bristols and it's a major breakthrough. Uh. And we're going through the last phases of we've seen technology on solar. I just had this conversation with someone not too long

ago on solar. All of the gains that we've seen have been so agonizing over thirty years. It's a substantial series, but they've been really incremental and evolutionary. This is not you're talking about a revolutionary talking about When I first met these guys, they were growing three million nana um

nickel nano fibers on a substrate per square inch. Doing a flat panel, you're doing three dimensional panel where the photons come in and spiral down the bristles, so you're capturing a lot more of the energy that ends three times this magnitude break. Photons stay in the structure three times as long as if they were to just reflect off of a plane surface. Um. So they stay in and the and the efficiency goes up. It's hard to do,

but we're almost there. How much more expensive of these panels than traditional Sure, we're now making them on glass panels. I'll give you the answer to that in the first quarter next year. All right, but none of these are open. This is your now, this is this is you know, I don't believe in share. This is risk uh um. But should just stay tuned and some really interesting things, really interesting things coming along. And that's two of a

number of others. So we do software companies. When you when you were running Peaquat, there was a lot of oil energy, natural gas LEAs, things like that. So energy has been an an interest of yours for a long time. Yeah, I had I had a bunch of sector funds as I mentioned, but they were in telecom, they were in technology, they were in healthcare, small cap indessing. The one exception was early on was an energy because I went you know, if you if you lived in the seventies, you went

through the oil embargo. I remember as a kid trying to get a gas can filled up to mow the lawn, and I would get the question, you know, what, what is your license plate even or on and have a gas can? Well, I don't have a license, so all right, they should have let the grass grow and give it to me. I mean, I was the adult with little kids. I needed it. I had a mo that's hey, listen. I had earned a living, so delivered papers. Same here I hated. Delivering papers was a terrible tal my. I

was so I had. I had a bunch of friends and to two of them head routes. The one the one key guy who I bought a route with, ended up being a sheet metal worker. He took a fifty paper route which we split in half, and he got it up to a hundred a hundred customers. Mine dwindled down to ten because I would sit on the curb and read the newspaper first, and he just took the

papers and delivered them. So, you know, the best part about delivering newspapers was Sunday morning, me and a few friends who all had routes would go to the diner and have breakfast at nine o'clock. That was the highlight. I didn't do that that would have been successful. That was the best part of it. Um. So it sounds energy is really in energy is really interesting that, you know.

It is my belief that you know, in thirty years all they're all producing countries in the world will be bankrupt meaningless, basically back to managing that sitting on a bunch of sand and rocks. Um. You know, I hope to I hope to help you want to accelerates. Not just not not because I have anything against them, It's just that it's absurd that burning fossil fuels, the burning fossil fuels, they're not really sharing the wealth with the

people of their country. When you look at all the problems we've had in the Middle East, I can't help but think if there wasn't oil there and we weren't so dependent on it, people wouldn't really care. We wouldn't have had it could be true. I come at it just from a pure you know, how can myself, How can I help solve the world's problem, which is making energy plentiful and cheap? Goes along? There's no doubt. I mean, you know, I don't even want to get involved in

the climate debate. Um, I am what debate of it? You know? Is carbon human generator or whenever? And I hear that this just came up at a dinner the other day. I always tell people, if you don't think you can affect your environment, park your car in your garage, leav the engine running, shut the door, and spend an hour or to that. I'd rather spend my time figuring out how to solve the problem rather than debate the issue.

I don't want to either. I just say, park in the car with the park of the garage, with the engine running, and we'll see how little you can affect you there there, that is an argument, um. But I don't get involved in stuff like that. I get involved in what is the problem, What is the solution? Can I affect the solution in a positive way? And that's an engineering approach? So what other from it? What other issues lend themselves to an engineering solution that you can

do venture investing with UM. I don't know if it's a problem or what, but UM we we we bought up the UM we bought up all the patents from A T and T in holographics. UM So yeah, storage, you know, data storage is growing a year UM and will continue to grow with those kind of absurd rates for quite some time. UM and UM So I'm involved in in some flash memory companies. I'm involved in UH some new algorithms to to to try and make servers much more efficient there and I don't want to name name.

So there's a hardware approach and a software approach and we're involved in both. And and what you really need is you need vast amounts of data UM on warm what's called warm storage storage. So you know, hot storage is our disk drives. UM and to some degree, flash memory and cold storage are tapes, which are you know, they just run sequentially. It's not random access. It's ancient technology, or it's it's ancient, but it's you know, on a

cost effective basis that still makes sense. But you really want something that was that is nearer than tape UM which which will burn out in five to ten years, can have the longer storage life. UM. I mean, our government goes out and has all these drones that are taking pictures of all kinds of stuff god knows what, UM, and they can't even they can't analyze half of it because they there's no way to process it all. And also as you get into genomics and other things, we

are just spitting out data. So if you could use holographic memories which would last for for fifty years um uh and uh down to the right price points um at any rate. So we're trying to develop that that is not that is not an area where we can go out and talk to a venture capitalists and get them to you know, go alongside you. UM just won't do it because it's that that area has been death to many many start ups. For my for for for

for our family purposes, we can take that risk. UM. It might take a little longer, we can take that risk. So we're trying to solve that problem. We're involved in medical devices and and some some medical uh um, some interesting companies. You were on the board of a New York genomics UM center before we get to that, because

that's an area I find absolutely fascinating. Would love to talk about you're buying these patents up from a T and T. Well, it wasn't from a T and T. There was a there were two venture groups that that did that. Uh. What year did these patents? Well, these are these were done in the nineties and um they were expired at this point or there enough because you keep refreshing them, there's enough. We keep improving the basic

UM stuff. So we own all the patents. We we we have two patents uh covering both the way you store it and the media you need to produce it. UM and uh to venture firms trying to put part a hundred million dollars into trying to develop this UM

and they were getting and we bought. We bought the asset at but hopefully there's a value of plate right if you were if well, anything you buy at a bankruptcy is usually well there's another one that we're involved with which we did help somebody buy a bankruptcy, which is clear, which is at the airports. What is what is clear clear is the a biometric screening technique at airports too. And now they're starting to be in court with the Yankees just um uh started using at the

San Francisco at the stadium at the stadium. So when I I assume that everybody else, although they don't assume everybody uses t S A pre so they can whisk through the airport and then when you come back, there's global entry. Will you bypass all the customs and beautiful? Right? So you you take your passport and then you take your hands and you put that on a machine and

you're done in thirty seconds. What is clear due relative to that sort of Clear does the same thing, um but biometric biometrics and checks it against the giant database to make sure you're not a Yeah. And so the Yankees are using this, and the San Francisco Giants are using this, and uh increasingly airports are using it. It's it's a company that went bankrupt. Um technology but dead business model and that that was in some ways of value play. But but but the value of play based

around superior technology of the bad go to market implementation. UM. So we're involved that. UM tons of things. These are really fascinating venture stuff. What what other areas intrigue you from a venture perspective? Um. So there's alternative energy, there's software. There's one company in Boston, UH that we're involved with that. Uh UM. I'm watching the wheel spin and fig watching you try and figure out what you can and can't

say what what subject does the technology cover? Well. The problem that companies like Hewlett Packard or Samsung or a bunch of them have is that the real money in in smartphones and devices these days are in the apps UM. And there are two app platforms, one of course is apples iOS UM uh iOS and and the other is UM. You know, the Android system UM. So if you look were to come out with a new product and not

support those apps UM, people won't buy it. So some some products have been introduced that are technically wonderful products, but they don't service the market as it is configured today. If you if you were able to UM, if you were able to solve that problem for manufacturers UM amplify their software or appify. They're there prom and you can emulate. You can emulate those things. But when you emulate, you have another microprocess. It's slow, it's inefficient, it just isn't competitive.

If you can do it and what's called native mode using the application control layer, UM, you can I'm looking to see if the word applify is taken because I want to. I think that's a word that I you know, it's all it's all yours, Telly rate. There's a company in Boston that has done that. Um, Samsung is UH incorporating, It's UH and it's ties and z one phone which is introduced into India. And the future looks pretty bright. So there are software applications that are that are that

are interesting because they solve problems. They solve problems. Yeah, I like solving problems. So what else? Um? Oh, I see why I keep speaking of problems. I keep searching for this and I keep coming up with an Amazon Applify create the simplest Mac possible, Mac from a show. So somebody else already has the sorry the word apifi. And then there's appify Android apps on Google play at appify on Twitter. So all right, I thought it was a good ours has a different name. I want to

even mention, Okay, don't mention. So you don't want to run an emulation because you're reading a whole another layer of software. It slows down, more buggy, more complicated. So but you make it need to do it. If you can do it off of the application control layer, it's completely legit and it's very hard to do. It's very hard to do. So this is a software solution to a programming problem. All right, what are the areas intrigue

you in terms of ventures? Right, young guys out of M I T who have come up with an active shock absorber system active shock absorber cars for bicycles or four cars, cars and maybe truck camps. But but right now the emphasis is on cars, um and it's it's truly. So the trick there is to get it to a low enough cost and put it in automobiles. There are many there there, there, there there there. There are systems today which use hydra fluids and the hydraulic that that's

pretty old school though. That's old school, and it's very expensive for a wheel. If you can get it down with a simple system, um, so that it would you know, sell for under two thousand dollars per automobile. Um, there's a vast market. And these guys, these guys, I think, have the solution to that. So so I'm on the board of that one. Yeah, that's interesting. So this, you know, there's great stuff out there. So I am not one of these people who believe, oh my god, the world

has a million problems. Let's stick our head in the ground. Unless it does have a million problems, but it's got two million solutions. That is, we go to this venture. It's really early stage. An angel conference in San Diego. I can't go every year on my head explodes. I go every other year and you cannot come out of and it's college kids and stuff. You cannot go through

an event like that. Well, they've told me. They've told me of an M I T. That um that in the generation or two ago, probably too, the every age of an M I. T. Graduate who started a company was forty two years old. And now, yeah, I find you can't go to one of those events and leave and not be optimistic about the future, no matter how terrible things are. It's like we're pikers. These kids are going to solve all these is that that is what keeps me going. It's amazing. I was at I think

I've told this story before. I was at a wedding in Virginia or maybe it's a bar Mitz, but it was a family member and the was it the no, no, it was a wedding because it was the grooms groomsmen, a couple of kids out of I think it was U v a UM down in Richmond, and they one of them had an iPhone. Okay, that had built into it. This sounds idiotic, but it was genius. Had built into it a bottle opener, like built into the things take your phone and and just pop a bottle. And I said, oh,

that's hilarious. You know how you guys gonna make that? And they look at me like I have two heads, dude. We're doing twenty thousand units a month we have manufactured in China. These guys are twenty, they're in college. We're selling units. What do you charge with this fourteen? What

does it cost you? I don't know? Eight seven shipping is more so when you see kids like that in college who was so I don't I don't understand the consistent pessimism from people about the world is terrible, America is terrible. You you meet some of these kids, that changes present. The people can't really relate to this kind of stuff, really don't like it, and therefore draw their own conclusions. They're not based on anything factual. I mean.

The problem the problem with all of this, of course, is the is the income divide between the people who can do what you've just described and the people I've been describing, UM and to help. Yeah, there there is there is a huge there is a huge problem developing. UM well in terms of in terms of income inequality or in terms of opportunity inequality. Maybe well it's both. Um. Some people will never be able to participate in this new world UM given advantages. They just not tech savvy.

They lack the skill set for that or the interest, or they might have the interest, but they're not gonna be able to implement. And I, you know, I believe that everybody should given a given a chance to so I will spend as much money as I can to to to try and help that. But you know, you know, there are a lot of people in this world and not everybody can can start these things. So you know that there are real social policy issues about how do you how do you fix that? I'm not a social scientist,

so I don't know, UM, but I don't know. One of the reasons that that we have emphasized things like fusion energy, solar things like that are because that they saved they address the basic problem, which is that unless you have cheap electricity or a number of other things you don't grow world income. And if you don't grow world income, everybody fights over the pie. And if everybody fights over the pie, you're gonna have a terrible, a terrible world system. UM. So I want to help people

grow the pie. I would like to help in some of this carbon stuff if I can. UM, I'd like to give part of the money back. I would like to keep some of it um to uh, to give everybody the opportunity to participate in that. It is then up to government to figure out the rest of it. And I see absolutely no movement towards coming up with any logical solutions to that. Well, but that's along the

government discussion. That's easy. That's long arc and eventually government, well what I mean by easy is over the next ten or twenty years. My guess is that government in competence, incompetency, especially partisan incompetency, collapses under its own weight, and eventually, eventually we're replaced with I don't think the Republican and the Democratic Party are infinite in lifespan and here forever.

I think these parties are slowly losing, slowly losing um membership, and you're gonna end up with more and more people as independents, and that's how you end up with somebody like Donald Trump, who really are hard to define by traditional party politics. Not not a coincidence that what's going on today in the Republican party, the appeal is the guy who's the least associated with with the party, And

the same thing is happening on the Democratic side. The Bernie Sanders is not a traditional Democrat, and suddenly there's all this So you have Trump and Sanders. The appeal isn't what they're specific politics are. The appeal is that they're not traditional partisan players. I agree, and I agree with your conclusion. So I hopefully hope it happens as

you go through that process or fragment. It's very painful. Yeah, that that's gonna So now let me let's talk a little politics and and let me force you to stop dancing around the carbon issue. You'll never you'll never be able to force me to stop. So global warming real,

I have no idea. Get out of here. Come on, how can you say that Because you're a physicist, you're investing in film strategy, you're an engineer, you have a ton of physics, you understand the scientific process, you know when of scientists say something, you don't think that Bible warming is a genuine climate change. I think the fact that there's so much carbon diox on the atmosphere is a really really bad thing. How did it get there? How did it get their sun spot? I don't know.

I don't carbon probably okay, alright, But I don't know if it's solely because of that. I I I know nothing is solely because of anything. I have friends who are on either side of this one, and I read it all, and I sit on this m I T Energy Initiative Board UM. At m I T. They have this guy, Richard Lindson, who is a world acclaimed UM climate scientist who doesn't believe it. UM. There are many others like he's a he's a very responsible guy, UM,

and they're responsible on the other side. I don't know. I mean, there are plenty of people arguing that you know that that matter. All I know is I think that I can support you guys who have a solution to it. I'd rather waste my brain cycles and energy and money on that rather than the debate. The argument is just wasted energy. Anyway, You're never got People aren't

gonna convince each other. By the way, when I say I think, when I say I think that burning carbon and eating red meat for that matter, contribute to global warming, I'm not saying that you shouldn't burn carbon and you shouldn't eat red meat. I have too many cars and boats. I eat lots of red meat. So I'm not I'm not let No, I'm fine. I'm not lecturing people, Hey,

change your life. But I think it's hypocritical for people who know better to say, oh, just because we have a cold company and we fund signed research that says this has no impact. I'm not. I object to the hypocrisy of that. I'm not telling people change your life. Hey, you're affecting the world. Let's accept it and move on. I like your solution, which is to try and come up with a solution rather than digress into the debate too.

It's all too complicated, and you're never, as you said, you will never change people's minds about this because it's become a religious fight. Not know, five million people a year die from burning wood. I mean, so, what do you mean in terms of the or or what we see every winter where people take a carosene heat or in the fumes. You know, a joke about the garage, but learning stuff releases all sorts of noxious fun. That's terrific.

It's terrific. And so you know, um, the people who believe that you should you know, like like so the Union of Concerned Scientists which was born about thirty years ago and opposial nuclear weapons, right well, an opposition to nuclear weapons, but also you know nuclear power plants because they were sort of hand in hand. Um. They just about two months ago reversed their position and said, you know, nuclear energy is the solution because there's no there's no

carbon dioxide. So you know, if you live long enough, you watch all these convoluting everything comes around. Um and uh, you know, it depends on what the priority is and what the new religious zeal is. UM. So advanced nuclear is legitimately back on the table, thank god, and much lower radioactive waste product. And no, that's the traditional way

of doing it. Um and and and so we actually another company we helped get started is a nuclear remediation It's called Curion ku r I. And what do they do. They they they try and vitrify the the waste product from nuclear fission plants. And um, that enables you to bury it in the store. It We're not all the way there yet, but in the process, we we we we developed a media that will enable to take caes the amount of water and um that radioactive very negative

and and we came a huge problem with Fukujima. Uh so we as a small startup company were the only ones who were able to get into Fukushima and help. Really and so something that was going to be like you know, growing very slowly at first, just grew in size. So we've added other capabilities and uh it's fascinating. So curium like with a K like madame k you are io n C. And so this removes radioactive season um from water in order to clean up that's the big

problem right now. It's not that people are dying and all that kind of no, but you you have potentially dangerous water. You can't put it into and you can't stop it. Water finds its own level and it's really a problem. But we, you know, we have been helping them fix that problem. And this company is removing radioactive season um from water in Japan today today has been for three years now. Really, wow, that's fast. It was a startup that was met him. You know, three people

back in and now what's going on there? That's a good question. Um, you're an investor in this company, and how is it growing? Is it home run? What's the exit strategy for a company like that? Um, that's a good question. I'll tell you next time we talk. Okay, well we'll we'll, We'll have to we'll have to revisit that any other VC stuff that's interesting before we move on. Probably probably I probably said I've said too much, and

I've probably caused too many eyes to glaze. All right, No, no, I well I can't tell you about other eyes, but I glazing over. But I find this sort of stuff, this stuff fascinating. There's a show on the Science Channel. So my background was applied mathematics and physics until my senior year in college. And I figured out that if I switched to polyscien philosophy, I can drink beer and chase girls and not have double labs for three times

a week. And so I have enough physics and math to be dangerous to my my My, my best friend uh as an undergraduate, was a brilliant guy who ended up being chairman of the Biomedical Engineering department at Hopkins for seventeen years. What worlding now and uh? And he helped me get through. You truly helped me get through UH. And whenever I would say I was really a very mediocre student in M I T he'd say, oh no, but when you know later on, when you started taking

religion and political science, you can help me. You really, you really knocked the ball out of the park. And I said, I don't think. I don't think that's what M I T is. All that comparative religious studies in M I not. It was a great It was a great. Houston Smith was a professor. He was he was world now and I mean I has got great but you know, but that was not but it was it was you know. But but but I learned so much from going there

about applying yourself, overcoming obstacles. It's not an easy place, but no, no, it's a very competitive place, very competitive, which I think is a great preparation for life, to say the least. What I was gonna mentioned, there's a show on the Science Channel called How the Universe Works, and essentially it's really complex astrophysics with great digital graphics. So I don't know if that's what the inside of a neutron star looks like. But okay, that's close enough.

It's a little more scientific than industrial light and magic shows. You on Star Wars, you know that stuff is is fascinating. So, speaking of of saying too much, let's talk a little bit about Um, the SEC, and I know this is a an area I want to tread lightly. Let me let me bring up another guest. I had Mark Cuban on some time ago, and well, let's let's let's talk about that a little bit. But Mark went off on an absolute jihad about the SEC and he talked about

how they're miss misfocused, misguided on fair. He went off and after the conversation was like, are you sure you want to say this? He's like, no, we just won in court. We're done with them. They they you know, they had to put their tail between their legs and walk away. Um, you had a not especially pleasant experience with the SEC. What do you think about what Mark had to say? Um? I know Mark, before Mark made his first fortune, we worked together on a private investment

I made. UM. He's a very smart guy. He's obviously where you're outspoken guy, very colorful guy. Um, he was managing his own personal money. He didn't have the responsibility of managing money for you know, for fiduciaries and have a lot of employees and everything. So I obviously I'm gonna approach this in a far different way. I did not. He has to be less circumspect than than you must, for sure. And um I I did one of those settlement things with the SEC neither admitting nor denying guilt.

Um uh. And that was that was that was after the case was reopened. People well, like I think they walked in and three or O four and it didn't get resolved until O nine. It was resolved once where they they dropped it and and there was a congressional hearing and they actually made their notes available their their closing document, which is an internal thing. And I'm told by the lawyer's this first time ever. And then it got reopened and and and it sort of got reopened

right when Nate Off happened. So you can you can come you can go to you can come to your own conclusions. Is to you know, what what what was going on? Um the case had to do with Microsoft, which is the most um widely followed company in the world. Um and uh. You know, there's really not much to say about it other than what I said at the time, which is, UM, this is too distracting, And that actually

was a factual statement. It was stremely distracting. There were many things I thought I could do with my life. I was sixty eight years old. To fight from that point I would have taken another three to five years. And so if I had one who's going to give money, a hedge fund guy who's in his early seventies, it was just it was a ludicrous battle to fight, um and uh and and I thought, how more interesting things to do with my life. And it sounds like you

certainly have been focusing on a lot. I'm very happy about the decision I made. It. It's nothing you like to go to your grave with you know UM and have your grandkids google UM and find out you know UM about But UM. I was convinced at the time it was the right decision, and I'm convinced still convinced. And it sounds like you have not, um lost a step in terms of what you're focusing on after that. Success in life is just keep moving forward, moving forward,

moving forward, like a shark. If you stop swimming. It's well. I client for my fifty ninth birthday, I claimed coleman Jaro and really yeah, and the locals have this expression pole, which means slow, slow, slow, slow, one foot in front of the other and keep moving forward. Count So you're still in the upper upper reaches of that. There's still elevation, sickness and terrible way weather. I know Everest is twenty

six something. That's supposed that's a technical claim, right, people, Supposedly the last five thousand feet of that are are hallucinating and what's terrible? Yeah, no, I didn't want to be miserable, but this, this was this was not quite miserable. But how long did it take to this is news to me. By the way, this doesn't show up in any of our research about you. Um, how long did it take to get to the top of how long there are? We prepped for six months? But really that's amazing. Yeah,

it wasn't strenuous prepping, but it was trapping. But there are two days ago. You can go and I've forgotten the names of the trails. You can go straight up the spine of the mountain. You can loop around, you can Yeah, which way did you the ladder because at nine I wanted to acclimate as slowly as possible. How long did it take to get to the top three days? Three days and then back down? Well that's the interesting thing. But the last day you wake up at ten eleven

at night. I can't remember exactly when, because you want to walk up the glacial rain while it's frozen so you don't slide back. You get to the peak at six thirty in the morning when the sun's just spectacular you then you go back down to the camp that you just straight down or it's you have a hard time lifting your legs at this point, I mean, the

quads are just a um and uh. So you stop at fifteen thousand feet where you were the night before, you sleep for two hours, and then you go down to twelve or ten I can't remember, just to acclimate the pressure, to get it all over with um and and uh. It's an exhilaration to believe you can do that. You're looking down on the clouds. It's uh, you know. But being being a hedge fun guy, I of course had my satellite phone and at the top of the mountain I had a call in to get quotes you

were trading. From the top of it. I didn't. I didn't trust my judgment off but but I certainly wanted to be in touch. Well, you had enough of your wits about you to know that you were not to be trust trust. I had a friend who once went to Africa for two weeks, came back and the crash of eighty seven had occurred, and he knew nothing about it during the whole really, and that that memory stayed with me. It's like, you cannot you cannot do what I do and be removed from the world for the

missed the You know. My one of my favorite eighty seven stories is David Rosenberg's first day of work. He had been a government economist and he went to work for not Mary Lynch. Was the job before that? His first day in the job was nice. Was the black Monday? Is that right? Yeah? That was the first day. You guys talked about autism by five. So this guy is running a hedge fund. He goes to Africa in he

he didn't have a hedge funt. He's running money. He goes in October and he comes back and what the hell happen? And he calls from the airport and I Robi and they tell him and where the markets are and don't don't joke with me, right, this is too serious.

This is where things are. Yeah, the flash crash in two thousand ten, I took off from I think it was Dallas at like nine in the morning, New York time, and this was there was no WiFi on the flight because it was a short flight, and I land in maybe a Chicago and land in in uh Laguardi, and it was what the hell happened? Is? Wait, we're down a thousand points and now we're only down what like I'm like, soun's wrong with I called somebody, Son's wrong my phone? It's shown, No, you don't stand It was

two thirty two three. Just just absolutely insane. All right. So let's um, let's get to some of my favorite questions. I know you, Um, you have to have other places to go, that's right. UM. So who are your early mentors? Who who really uh put the love of investing and and both technology venture investing and asset management into you? Um? Good question. UM, I mean we're talking to ancient history now. UM. I got out of Columbia and UH interviewed around and

I interviewed a Kidder. So what you mentioned was the first job. There was a guy at Kidder at the time, Tom Folder, who was an M I. T. Graand UM, who was director of research. He had hired about six months earlier, guy Bob Johnson to follow computers M I T. Harvard Business School. Uh. And he hired me and we formed the first sort of group group. Um. It was unheard of back in sixty seven, sixty sixty nine. UM.

And that that that was a kick. So you know, if I had gotten you recruited to follow the energy industry, I probably would have become a deep value energy buyers. I don't know, but I got in with these guys who who had a similar mindset, similar approach um. Uh. And so I would say that that that influenced me. And then I, uh, I've always worked for a smaller firm. You are what you are. So you know, my first job out of college was Lockheed, which not exactly a

small phone, exactly a small firm. Then then then I go down to Wall Street, uh, and I joined Kidder, which was a substantial firm at that time. And Kidder eventually became whatever or Dean Winder. No, No, didn't didn't buy it. I don't remember. I think Gee bought it and then hold it UM. But it disappeared. It was a great firm, but it disappeared. UM. I went from kidder uh to a small a small firm by the name of Lombard by Tallis Pagan, Ducy and Nelson, which

doesn't appear in any of bio stuff any longer. Was there for for all of one year, and the wise peg were was starting up a complete startup. That's a that's now a decent sized farm. They sold out to a Dutch bank, but um, I was the first. I was the first higher after the partners opened the doors. UM stay there for fifteen years, managed firm capital, had a pretty good record UM for five years, and went

out and started the funds. So the investing part of it was, you know, a combination of my first job and then the venture experience at weiss Peck and managing money. And I learned a lot about money management and cycles and money management, and I learned a lot UM and I learned a lot by managing partners Capital and anybody standing out at WISPEC as all my uh. I don't know if you'd say mentor but but influence influence. So Byron Ween was and and Byron has been an investor,

and I was an investor when I had funds. UM from the very beginning we had offices next to each other. Um eventually came to work for Peaquad as the chief strategist when he left Morgan Stanley's now with of course at Blackstone UM. So Byron was one of them. There's unfortunately a fellow just passed away. But then Mickey Straus, who who I worked with there, So it was really more my colleagues than it was you know, and and sometimes you learn as much from colleagues as you do

from Biman was on the show. He's now in his early eight he still maintains a relentless travel schedule. I think he's crazy. He flies to China all the time. He's like, I know people my age and younger who are like, oh, I can't travel that much. He's on the road a week or two a month. Like he's twenty six right out of school. I don't think he's like twenty six out of school, but he's uh but yeah, no, he's he's an amazing He's a warrior. He's a warrior.

He's eighty's something. He's a warrior. There's another guy who just loves what he does and nothing's going to stop him. And we're stiver close. I'm gonna ask about a book that I suspect you've read, and if you haven't, I'm going to recommend it. James Glicks The Information not the History of Information and Theory and and that put that right on the top of your list because you read enough interesting, eclectic stuff about both history and science. This

he's a brilliant writer. He's done the book Chaos about chaos theory. That's him and this book is this should have won the Pulitz or if it didn't, it may have. Just a brilliant If you like that sort of stuff, suspect you do, you're gonna you're gonna find that that fascinating. So so let's talk a little bit about what's changed during in the industry over the course of your career. What do you think, whether it's venture capital or traditional investing,

everything everything, what's what's the more? When you know I came down to Wall Street in seven and um, you know there was the Lost generation. Nobody came down to Wall Street in the thirties, forties to two people started. You know, so is that luck or is that I followed? What what what I thought my passion was. I don't know. I mean, I guess there's an element of luck to it. But so I got there at the beginning of the cycle, beginning of the bear market. It was also the beginning

of market. Yeah. So there was a bear market, as you know, from seventies seventy one to eighty three. Um. And uh, the time period I like to use is the Dow kissed the thousand in nineteen sixty eight. It did not eclipse that in nineteen sixty six until eighty two. So it's a full sixteen years and those are my formative years. So now you know, you come in, the FED keeps interustrates at zero assets getting fled to go

up though, doesn't it. But a lot of people come in and you know what one of my mentor there was a mentor um that I forgot to mention, but said, you know, I had the expression, which others have had, don't confuse brains with the market. Um. I really believe that. But you know so, um, but back then, UM, you didn't just come into the market, and you know, the averages went up because the government decided they should go

up or whatever is going on right now. Um, back then you had fifteen years of nothing and you had to survive. And that's that's nominal in real inflation, it was a big loser. Inflation was high, of course, so you know, um that that was my baptism. Um, well, what was it like in the early seventies? What what sucked? It sucked? That's that's an understatement. Obviously, the bond side was paying huge, yes, huge again nominal yields. But on

the equity side, who's buying stocks? There weren't that many. But you know, and that was all I did. I mean, you know, I've never met a bond I like, um, which is not true, but um, but you can put well if I haven't, you know, I knew the play. You know, when the rates were up, you know, at the end of that period, and you know, we've had the biggest bond bullmarket ever from two to You could have bought zero coupons and paid no interest and made a fortune, but um, you know, but I didn't do that,

So I stuck with the stock thing. Um, And you know that that's worked out. It's worked out enormously well. But it also means that I was a late bloomer because you know, I put in seventeen years before I started getting really paid back for credit ship. I paid my dues. But I did it. When I did it, I did it because I loved it. And now I

think people come in because they think you're gonna get rich. Well, that's always the wrong way to yeah, right, If you're doing it for the money, then everything that's not putting money in your pocket is a misery. Right. If you're doing it because you love it, Well, I'm not making money, but I'm having fun. So you know, I like, I like I like obviously I like engineering enough, you know, but I like the discipline of it, in the logic

of it. Um. But when you added to that the market and the uncertainty and the ability to try and outcuss other people along with data, um, that became really exciting. Um. It wasn't. It wasn't because I you know, my dad wasn't eluctrician, and I wanted to become a billionaire or something, and there was a farthest thing from my mind. It was just it just happened. It happened, truly, just happened

one of the one of those things. So maybe you said before, I don't really think about a lot about luck. How much of what happened was just serendipitous word. Yeah, No, that that I agree with. All right, So you're slicing the luck factor a little more right place, right time, and no doubt. Okay, So so there's an element of luck to that. True. No, that part is luck, I agree. But individual things I did or whatever, and that was a combination I believe I created that. That's a combination

of smarts and hard work and an application. So. Um, so we know lots and lots of stuff has changed in the past. What are some of the next shifts that you see in these industries? From your vantage point looking at technology and looking at the rate of change which just seems to keep accelerating. Yeah, I think you're in this fascinating Um. I mean one of the reasons I drifted to venture capital is because um um uh

markets of the economy is is matured. Um we have right, so we have huge amounts of social security UM, pension funds, UH savings plans, uh iras four O one foundations, trust and and anybody is that we're just a washing liquidity um and so it's got a go someplace. So um, it needs a big engine solution to how do you intelligently manage all these assets plus corporations um uh In

the US at least, um. The one good thing about activism and all the other stuff is it's formed forced productivity that keep increasing in the United States, which has not been happening in the rest of the world. Even though the measures of productivity in the US or are softer than a lot of people say that problem or do we still have good productivity? Yet? I think we have good productivity. I think the economy is changing rapidly. And the productivity in the areas that generate growth, I

think the productivity is good. And then and then in the areas that don't produce growth, capital is being returned um. So so the capital part is more productive. So there where washing liquidity um and uh. There's no worldwide, there's not a lot of growth in the US. The growth is obviously much slower than it used to be. So somebody has to manage all of that money. And you're not going to manage it by giving it to a guy like May back thirty years ago, who's going to

buy market capps under two hundred millions? So you know, you go to you know, Ray Dally has got a you know, a great engine, and other people have great engines. So you go to these algorithmic kind of things that that are more formulaic than than what I ever used to do. UM. So you know, when you say what's going to go on in the future, I think that those trends are going to continue. I think this this, this UM, this innovation that we're seeing is um is

there's no stopping it. And Ure's notion. And what does that mean in terms of of US growth, the change of technology and for the rest of the world economy. UM. I think it means, UM, don't bet against it. Well, for sure, you don't bet against it, and you should bet with it. And they're gonna be superior returns for people who fully understand it. UM. Right now, it's uh, the jealous or the envy factors has worked in and so you're seeing all these comments on the unicorns and

all that kind of stuff. You know, tem per cent of the unicorns will work, but they'll be monster companies and and and I think that's the wrong focus. These trends. There is no there, there there, there's there's no changing these trends. Um so that the amount of accority in the system is going to continue increase, the amount of growth is gonna diminish. The growth is gonna shift from old ways of doing things in new ways of doing things. Uh. And there's huge opportunities for me um in what I

now do. God knows if there would be any opportunities and what I used to do. Okay, so we're running out of time. Let me get to the last two questions. These are my my favorite questions. First, what sort of advice would you give to a millennial or a college graduate today if they were interested in going into either at some management or a venture capital Get a job, really, yeah, just just find some related job and get some get a job in an industry. I would not come into

this industry fresh out. I didn't. I went and work in the aerospace industry for three years. So get some other sort of experience and then use that. And then last question, what do you know about the world of investing today that you wish you knew when you began forty years ago? Oh? Well, that's I knew nothing forty years ago. I mean I was, you know, was I was.

I was a wet behind the years, ex college student aeronautical engineer, gotten a car pool with Cavelly and Cooperman, got fascinated by markets, which I had been a little bit interested in before, but I didn't know diad lely. Um, so everything everything you know today? Everything all right? Thank you so much for being so interest with your time. This has really been a fascinating conversation, UM, and I really appreciate UM you're spending so much time with I

appreciate the opportunity to tell the story. You've been listening to Masters in Business. I want to thank our our engineer Can, my producer Charlie, and my head of research Mike bat Nick. If you enjoy this conversation, look up an Inch or down an Inch on iTunes and you could see the other sixty such conversations we've had. Be sure and check out my daily column on Bloomberg View dot com or The Big Picture at Dholtz dot com. Follow me on Twitter at rid Holts. I'm Barry Hults.

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