Eva Shang on Litigation Finance Funds

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This week on the podcast What a Fascinating Conversation, Iva Shang co founded legal List while she was in Harvard and then subsequently dropped out with her co founder to launch what essentially became an alternative credit fund that specialized in litigation financing along with two other types of credit related to litigation outcomes. Really a fascinating combination of legal

Eva Shang, thank you so much for having me.

So let's just go to Cambridge and talk about you drop out of Harvard at the age of twenty to start an alternative investment funds. What were you thinking?

That's a great question. So back in the day, my co founder, Christian was actually the one who came up with the first seedlings of the idea to start Legalist. And what happened was he was very interested in data scraping, and he had taken some classes with a CS professor who did data scraping, and one day he decided to

So so you had no idea where this was going to go.

Initially, we had no idea.

Let's see what happens. And that's just with the with Massachusetts, right, will you also involved in y Combinator while you were at Harvard as well?

Yes, So we got into y Combinator the summer of twenty sixteen just off of this legal analytics idea. And after we got into y Combinator, basically the very first day, the general counsel, who kind of keeps a watch over all the legal tech companies, pulls us aside and is like, I don't think your business idea is very good. I don't think this legal analytics thing is going to work out for you. Lawyers hate to pay for things. They like to get paid for things. I don't think you

That raises the question, if they're going really really well, why would anybody want to take outside funding when they want to see it through and maximize their returns. Or are these so expensive that even the cases that are going well need a little outside financial help.

So I think when people think about litigation, they imagine how it is in the movies, where you file a case and then you go to trial the next day and then judge here's your case. So in reality, what happens is, you know, let's just take a prototypical scenario where you have a business that gets acquired and I'm

What does the founder have to give up in exchange for all that financial support? What is legalists share of the outcome.

So the way that litigation finance works is that it is non recourse, which means that if we invest into litigation and it loses, then we don't get repaid.

All the risk is on you, exactly.

But if the litigation wins, then we share in the upside. So we normally aim to take around thirty or forty percent of the case, depending on how long it goes for.

So it's almost as if it's a lawyer charging a contingency fee. Exactly, Hey, you don't have to pay me any legal fees for this car accident, but if we win, I take a third of the outcome.

Exactly exactly, And there are types of cases that lawyers take on contingency. Frequently contingency lawyers are the original litigation funders, but in order to put together a diversified portfolio, they only have so much time, and so they usually do things like personal injury, employment, class action, things that are predictable in which where they have a lot of control and cases settle quickly an earnout case or a commercial

So you're y combinator over the summer, when do you decide, Hey, this is a real business and I think I should drop out of Harvard to do this.

Yeah. So, after we decided to switch to doing litigation funding, we went to John Levey, who's the general counsel at YC, and we were like, Okay, what do you know about litigation funding? And he said, the only reason I know about it is because I have friends who work in insurance and insurance is the mirror image of litigation funding,

Right because they have a giant financial advantage being part of a exactly big perpetual insurance company versus lawyers come and.

Go exactly So that was pretty much all we needed to hear to actually make the switch. But then once we made the switch, it was a lot more challenging than we initially expected to actually raise a fund. There's that John F. Kennedy quote where he says, you know, we go to the moon. We choose to go to the moon not because it is easy, but because it

So when you launched, there aren't a whole lot of dedicated litigation finance funds. But you've become successful, are you attracting competition or other people saying, Hey, we didn't realize this was so doable. What's it look like out there?

So at the time that we launched, there were already public companies that were doing litigation finance. One of our LPs likes to say he likes to say that he invests in managers where it's so time consuming and difficult to do what they've done that no one in their right mind would do it, And if they could go back in time and redo it, even the founders wouldn't do it over again. And I kind of think that

Huh, really interesting, So you drop out of Harvard is that twenty seventeen.

We drop out of Harvard in twenty sixteen, and it takes us a full year to raise our first ten million dollar fund in twenty seventeen.

Wow, So stay with dropping out of college. First of all, what did your parents say? They must have been bereft.

My parents are immigrants, and so they feel like playing it safe is always the way to go. But while I was at Harvard, it quickly became apparent to me that nothing you do plays it safe. Like you can either be in lockstep with everyone else and do the whole recruiting for a consulting firm and then working at a consulting firm and then going to business school and then you know, ascending the ladder and not take any chances,

Huh. So you raised ten million in your first year? Ten million? Is that right?

That's right?

The first year? And then you are involved with the Field Fellowship. Peter Thield's award to young people who he's looking to, Hey, get out in the real world. You don't need to go to school. Was how helpful was Peter Teel's capital?

So the Teal Fellowship is a one hundred thousand dollars grant that's given to people who drop out of school. It's given to the individual rather than to the company. But it did create a little bit of a problematic situation for us early on because he was known for his own litigation funding situation.

Well, the whole thing with what took place with Crocker and Paul Cogan. There even was a book, right and if that was actually quite fascinating.

But it's not actually litigation funding, that's right. That case is not that a grudge, yes.

As a personal grudge, and it just goes to show you even when only two people know a secret, it still eventually comes out, which which is was my big takeaway from that book. But back to the fellowship, did it help you raise other assets that people say, oh, Peter Teel is successful if he's putting money into EVA, well he must see something there.

Not really, but we did get a lot of questions about whether we were going to be suing media companies, and the answer was always no, media companies are.

Not usually very That wasn't especially profitable, It just that was that was you know, when you sue a small website into oblivion, there's not a lot of cash to pay back. That was just I'm going to spend what it takes because I'm not happy with these people. You guys are in business looking for an economic outcome, that's right, not a personal outcome. So sounds like the first year

So I was thinking of going to law school. But what ended up happening was that in California there is a Law Office study program where you can apprentice under a lawyer and you have to study for a certain number of hours per week. And Christian and I ended up doing the Law Office apprenticeship program starting in twenty eighteen with our general counsel at the time, Curtis.

And YC or Legalist GC.

LEGALISTGC, and that took us almost five years and then We ended up taking the bar exam last year and we both passed. Oh that's so now we actually are lawyers.

That's amazing that you went that route instead of going to finishing college and going to law school. Tell us a little bit about your partner, Christian hay Am I pronouncing that.

Right now, Christian hag Haigu.

So he's your co founder. He's the person who was initially scraping all the data off of the Massachusetts court system websites. He sounds more like a computer science che then a legal geek. What was his background and tell us a little bit about how you guys met.

So Christian was studying economics and computer science and I actually think he's incredibly operationally minded and just one of the smartest people I've ever met. And the crazy thing is that we've known each other for over ten years at this point, and it's definitely one of the most important relationships in my life. And when there's a fire at the company, when the two of us leap into

Was that your first investment, or was that your first loss then you had subsequent you had previous winners to that.

It was one of the early cases and it was our first loss. So I just remember feeling like the entire world was falling, and we were also so young that we hadn't been through a lot of bad things happen in our life. And so Christian and I we snuck into the back of a Costco because we didn't have a Costco membership, and then we bought those one dollar fifty hot dogs that they sell at Costco, and then we ate it for dinner more roastly, and we

Huh. Really interesting. So the initial strategy of litigation finance comes from the general council at Y Combinator. Why did do you think it took so long to convince you that that was the way to monetize the tech that you guys had developed scraping state judicial records.

Litigation finance is a very obscure asset class. It's really not the first thing that a college kid would think of as a business to run. And I also think that one of the features of being young is that you can't recognize or understand good advice, even when it comes your way. I remember there was one other hedge fund that did credit on these p top lending platforms that was a few years ahead of us, and back when we were trying to raise our first fund, they

It's very hard to take advice when you're young, because you don't have a frame of reference, right, You don't have the breath of hear the range of possibilities right. And that's why this advice is really useful for someone who's been through that. Really very very interesting. Now you're

I remember one of our advisors in LPs, who's a billionaire, came by our office and I was like, what's the secret to your success? And this is when I think I must have been like twenty two or so, and he was like, hire good people and retain them. And I was like, well, obviously, what else? And then the farther I get into the business, the more I'm like, oh, yeah, that is the main thing. It's just that when you're at that stage, it's not apparent to you exactly how to apply it.

And that's really interesting. One of the things you don't realize when you are making your first I don't know ten hires, first dozen HighRes that five or ten years down the road, that group of people you're hiring are going to be the ones doing the subsequent hiring yeah road, And you just can't anticipate that until you've lived through it, and then it's like, wow, those were really important hires

I also think that the cohesion of an organization is so much more important than how talented the individual parts are. So there's this children's book called Enders Game, which I've always loved. You reread it.

I don't know if I would call that a children's book. I mean it's a sci fi book scott orson Cards.

Or scott Card. Yeah, but in Enders Game you'll notice that at the very end, they don't bring in the top kids from every class they alert. Yeah, and when they're actually battling the aliens for the final battle on behalf of all of humanity. I'm outing myself as a huge nerd here, but they bring in Ender's closest friends. And these are.

People that he respects, not just one person, because all these any challenge against high are high odds. It's never just Michael Jordan. It's got to be everybody around him, right right, And if you look at I don't want to go into sports metaphors because occasionally Michael Jordan can carry a team, but even the Bulls didn't start winning until he had good players around him, and it made a big difference.

Yeah, And I always wondered why huge bureaucracies could sometimes lose to startups, and it's because there's so much internal energy that's spent fighting each other, and the lack of cohesion means that you can't all row the boat in the same directions. There's actually energy working against each other.

Let's talk a little bit about the process of litigation financing and some of your other strategies. The flagship strategy obviously litigation financing. You mentioned you've done about four hundred financing so far.

Is that about right? That's right. We've done over four hundred deals.

And how many of these have reached their.

Conclusion over one hundred and thirty.

So you're about a third of the way through the initial the first let's call it five years or so, seven years of financing.

It's been a long time, I mean, so we raised our first fund in twenty seventeen, second fund in twenty nineteen, third fund in twenty twenty one. I think the pace of the number of deals we do is definitely accelerating, considering the fact that we only had ten million for the first two years. But we've learned a lot along the way.

And in twenty twenty two you raised four hundred million dollars. That's a pretty hefty number for what was then, I guess a five year old fun putting together a good track record. Let's talk a little bit about the sort of returns you target and how long the should take. So you have four hundred investments done since twenty seventeen, about a third of them have reached fruition. What's the win loss rate? You mentioned seventy five percent before.

That's right, So we went about seventy five percent of the deals that we do when being calculated as it makes above the amount that we put in and lost being anything below principle.

So you could actually win the case but not be financially successful because there returns are less than the initial investment.

That was the big thing that we learned in the early years. So in the early years, we only had ten million of assets, but we had billions of dollars of deal flow. And so what we would do is we would work with other litigation funders multi strat hedge funds that did litigation funding, and we would refer cases to them and watch how they did their work. And what we noticed was that litigation is essentially like an envelope with a check in it. You do not know how much is written on that check.

Oh it's a sealed envelope.

It can seal develope, right, And everyone has their best estimate of how much is in that check. But theoretically, if you were to buy the envelope for ten dollars or even ten thousand dollars, you would always make money. A defendant is always willing to settle for at least ten thousand dollars just to avoid paying their lawyers.

Make it go away, absolutely exactly.

That's called a nuisance value settlement. And so theoretically, the less money you can invest in each claim, the higher the likelihood of success. And if you were to invest one dollar, you would win every single lidiation.

Because you would always take the ten thousand dollars check to go away. That's a great ROI. In reality, you have a plaintiff that doesn't want to settle for right brand they feel they're wrong. Once it gets you know, people forget. Ninety something percent of cases settle before trial. So one question I have to ask you is, when you're doing litigation financing, of the cases that are resolved, how many of them actually go to trial and how many of them are resolved way before trial?

The majority of them are settled, and litigation finance, I have to admit, does introduce a hurdle beyond which the plaintiff has to hit in order to settle for a reasonable amount and make a reasonable amount of money. So that's the reason why in litigation finance you don't see settlement rates that are as high as you would normally see.

I would think that it's a self selecting group in two ways. One is people who know in advance I'm giving up some of my upside, but I want to go the distance. And two, because they're funded, they don't have to take a low bull settlement. I would imagine the defense side, Oh, they have a deep pot supporting them, We're going to have to be prepared to go to court. It changes the dynamics of the subsequent settlement discussions. I would imagine it makes the defendant a whole lot more

Cash exactly exactly. Now. The secret about the defense side is that it's often in their best interest to draw out the litigation process, One because the plaintiff might run out of money, and two just because if I'm owed ten million dollars in an earnout, it benefits the defendant to pay that to me in five years rather than today,

Huh interesting. So, given three quarters seventy five percent success rate, what sort of returns are you targeting? I know we can't talk about actual performance, but when you're looking at an individual case, one would have to think the average of the cases are looking for x percent a year? Is it fifteen percent? Is it twenty percent? The winners have to offset the losers, So I got to think you're looking for way more than ten percent.

Right, that's right. So we usually charge a significant multiple on our dollars put out and across the fund we target a twenty to twenty five percent net, So we're trying to be comparable to private equity, but in half the duration and uncorrelated of course.

So litigation finances the flagship strategy. What other strategies do you employ?

So litigation finance is by far our largest strategy, But we also have a couple hundred million in a type of distress lending in bankruptcy called dip lending. And we also have a couple hundred million in a type of

I just had a conversation with a friend who does that sort of work for state and county governments, and the problem they run into is when they're too successful, when they have all these accounts receivable to them, it's like, Hey, we have too much business. How do we fund this? And it seems like it's pretty guaranteed. I didn't realize that sort of old credit was something you do. How

Right, So, the individual receivables can be as low as ten twenty thousand, but we usually set them up as credit facilities with people who generate lots of these receivables, and the facilities might be a couple million. And the reason why we're able to find these businesses is because, and you'll notice, everything we do is related to either the legal system, the judicial system, or the government in

That's really interesting. And you mentioned dip or debtor in possession financing. So in a bankruptcy, the debtor takes control of the entity and suddenly they're operating on behalf of all the other creditors and that requires a line of capital as well.

So most large bankruptcies are called pre packaged bankruptcy, so there's already a dip lender in place. What we specialize in is looking for these sub scale dip opportunities where there is no prepetition lender that's willing to put up the dip financing and so you can come in and be a priming lean on all the assets of the bankruptcy.

And we briefly discussed competitors, but but it sounds like it's deep pocketed high net worth individuals and some multi strat funds that sort of do this on the side. Is anybody else focusing on this sort of strategy directly or for now? Do you pretty much own the space?

So we did not invent any of the asset classes that we are in. However, we approach what we do in a very unusual way, and a lot of our LPs see that. So the reason that we even came up with a government receivable strategy, which is a liquid hedge fund. It's got a much shorter duration than we're used to, it's a different type of database, is because one of our LPs, a university endowment, approached us and said, hey, look, I've got this other manager. They do government receivables financing.

You're scraping it right off the sites. That gives you a ugee.

Yeah, we don't need to go to people we know and say hey, is there any chance you want financing? We can actually go into the government contract websites and say, okay, who here looks like they would need government receivables financing.

So everything you've described so far is both technologically driven and outside of what we think of as traditional finance or even old finance. I don't want to use the phrase niche, but I got to ask how far can this scale up? Like this is not going to be a trillion dollar business ever, Right, even if you attract thousands of competitors, you're coming up on a billion dollars.

So each one of our strategies individually is capacity constrained. And you can see this by the fact that the industries that they are in are not that large. So the largest government receivables funder has two billion of assets under management, the largest litigation funder has a couple billion of assets under management. They are kind of what they are. But we see our firm as a tech driven alternative credit firm, and the types of alternative credit there are out there is huge.

Right, that's a trillion dollar industry, clearly, But you've found an area that is the fishinghole you you're operating in as relatively small as compared to let's call it middle market funding of existing companies. So the other thing I find so fascinating. So you've diversified across three different lines, so it's debtorin possession of financing accounts receivable, and then litigation finance. But all of this sounds completely uncorrelated to

So that is the niche that we occupy for our LPs. They have a lot of things that are market correlated, and depending on their liquidity and return profile that they're looking for, they might invest in lidiation finance, which is longer duration, it's a kind of a five to seven

Huh. So some people want liquidity, they're going to do accounts receivable. If a big endowment or foundation is less concerned about regular demands on capital or future liabilities. If you're doing the flagship litigation finance, expect to be locked up seven years, fair statement.

Five to seven years, five to seven years.

Really interesting. I got to ask about the name. Where did the name legalists come from?

I think that it was related to our very very original business idea, which was a list of attorneys and a list of cases.

Legal list. That's right, So back and White combinator, when you're just scraping this and saying, we don't know what the hell we're going to do with this, but here's a list.

Of attorneys in cases exactly.

Huh. But you just kept it for for nostalgia sake.

I do. I do identify as a legalist. I'm very big on rule of law.

Yeah, some people less so right to say that. So let's talk a little bit about the asset growth, which has been pretty amazing. You start with ten million and twenty seventeen. By twenty twenty one, that's under half a billion in now you're knocking at a billion. That's pretty rapid growth for a startup. Most startup al credit funds or alt edge funds don't scale up to a billion dollars that quickly.

I think that's right. I think we happen to be at a very good moment in time where a lot of our investors are people who were already familiar with litigation finance but happened to not like how it was being done before. So the big problem with litigation finance traditionally as an industry is that each litigation itself carries

Huh really interesting, Well, you're out if the judge dismisses it, unless there's an appeal. Do you guys fund appeals?

We don't fund appeals for cases that have lost.

We have well would you fund? Would you fund an appeal for cases that one? Not because you're challenging the outcome, but you're challenging the dollar amount the award, not the verdict.

So the qualifier for the Truffle Sniffer is based on a set of variables that include static variables, so these are things that would eliminate a case categorically or qualify a case categorically. And then there are also time series variables. So the time series variables are related to things that happen in the case. And this is not at all obvious to detect, and this is what our machine learning is trained on. But we're looking for signs that a

So the future is inherently unpredictable, but by controlling a handful of variables, you can narrow the range of potential outcomes to something manageable exactly.

And what then our underwriters do. And there is still a big human lawyer underwriting component for the simple reason that you know, if you look at a case, there are three elements to underwriting it. There's will it win? How much will it win? And if they do win, can the defendant even pay it? And the latter two are really what we still need a lawyer to check for. So a lot of what the lawyers check for is does it actually make sense for this guy to get

Good policy in just about every endeavor.

Yeah, but what we found is that people put out energy into the world and then it is reflected back to them. And so when we've had situations where we've just we're just like, did you really hate that guy?

It's always funny when you when you come to the realization, hey, this ape million people in the world. Even if one percent of them are let's use the word jerks instead of the a word. That's still you know, a ton of people. That's still if there's eight billion people, well, guess what, it's eighty million jerks out there. I don't need to deal with them. So anyway, I totally get

So, even though we fund the plaintiffs, the attorneys are usually our primary points of contact because attorneys are repeat players, and so at this point, you know, our team has five thousand calls with attorneys every single year, and at this point we've spoken to tens of thousands of attorneys pretty much everyone that does the type of case that we'd like to do. When we first started out, it

You're relying too much on serendipity as opposed to something that is not only quantitative, but structured and rules driven. It gives you a more consistent thing. So you mentioned no patent cases. What are the sort of commercial cases that you very much like, what catches your eye?

So two thirds of our cases are breach of contract and business towards. Do you know what business to Of course.

I didn't do your out. I went to law school, so I kinda yeah, I know what business torts are. That's why, which is part of the reason why I'm in finance, because I found that stuff kind of not nearly as interesting as finances.

It does make me a lot more aware of all the things that could go wrong when you do business with people. It's like, no matter what industry it is. We've had several cases with indoor trampoline companies, right. I was really shocked when the second indoor trampoline company dispute came my way. I was like, how many indoor trampoline companies are there anyway, meaning like.

Where kids go to play or companies at manufacture them and sell them, because the ones where kids go to play, even if you're like padding everything, it still looks like a litigation nightmare.

These are contract disputes between franchisees, franchise ors, distributors, things like that. But no matter what type of company it is, whether it's a trucking company, a software company, an entertainment company, there are only so many types of disputes. It's like you don't honor your contract right. You steal someone's money, you steal their employees, you steal their trade secrets, you take the business opportunity you were meant to do together

The interesting thing you raised about franchises, I've noticed, and it kind of waxes and wings over time, but there is a regular series of litigation between franchisees and Burger King or McDonald's or whoever the franchiser is. Have you looked at those sorts of cases that seems to be something that pops up pretty regularly.

It's not common for us to fund franchise e franchise or cases. This is not really detailed because the franchise franchise or agreements are written in a pretty air tight way. Yeah.

No, that McDonald's is as slick and tight as you can possibly get. And how much upside is there? What made me think of this is I just saw a bunch of franchisees or up in arms over the possible reintroduction of the five dollars value meal, which McDonald's wants to do, and somebody claimed it's violation of their franchise agreement. I'm I gotta think McDonald's is savvier than that, Like, if they want to introduce the fi dollar value meal,

Another commonly misunderstood litigation is the McDonald's coffee litigation. Did you hear about that? Oh?

God, that's an infamous one which anti anti lawyer people talk about all the time, but when you read the facts of the case, this woman was badly scolded. The coffee was thirty degrees hotter than the typical takeout coffee. They screwed up. They have the top on. I mean, there's talk about the wronghill to die on. If you're against litigation as a way to solve some societal problem, that's not the case you want to use.

Right, right. I think that litigation is frequently misunderstood in that way. Most people do not want to be in litigation. It's not a fun place to be in, which is where you see, which is why you see so few lawyers act as plaintiffs themselves in litigation because it's just not very fun. It kind of eats you from the inside, emotional.

Straining, it's emotionally difficult. And you know, I always see people threatening litigation, and it's like, hey, if you want to sue, sue, don't wave a gun around, use it. Don't threaten to use it, right, And that's what litigation seems to be. Anyone who threatens litigation usually isn't serious, right me. Know, when you fired an attorney and you filed the summary, you know emotion and complaint, and then we can have a conversation about how serious you are.

Right, The reason that litigation happens is because of a gap in expectations between the plaintiff and the defendant. So the closer the gap is, the more likely it is to settle quickly. And then the wider the gap is, whether one side is unreasonable or the other, the more likely it is to drag on and actually go to trial.

The assumption is everybody is operating in good faith, and once that good faith disappears, then whatever the opposing party is doing is read in a negative light and it just gets further and further apart. Yea not a big surprise. So, given how tech oriented you are, how much time and effort do you spend building out the tech continuing to expand it, making it just beefier than it was. How much innovation can there be in terms of scraping state judicial or federal judicial websites.

So there are two ways in which we can improve the technology. One is adding more data sources for instance, you know, adding our government receivable strategy. It was so many new government websites that had to be scraped. And

So you're looking at rulings, are you looking at motion papers also to see the strength of either either side's argument? Is that something else you're looking at?

We usually analyze the orders themselves, so when an order comes down, we can see exactly how many counts were denied and how many counts were accepted, and that will influence whether we reach out and when we reach out and what we say when we.

Do reach out really interesting. So we're talking about scraping data off of websites. In the world of economics, I could go to FRED, or I could go to BLS or BEEA, and I could just download an Excel spreadsheet of all the historical data. Do the states not make that sort of data available for anybody who wants it? Does it require this complex scraping process.

So everything that the government does has to be publicly accessible, but it doesn't mean that it has to be easy to access, which is a completely different standard. And so many of these state court websites are extremely difficult to access. They are updated every day with new filings, But it doesn't mean that you can just go in and download a CSV. I mean, if we could, that would make our lives so much.

Easier, although it make it easier for people to come in and compete with you.

That's also true.

Do you ever get pushed back from states? Hey, why are you spending so much time on our servers? We've noticed that eighty percent of our traffic was you last week. What sort of pushback do you get from individual state websites?

So that was the problem that Christian ran into at Harvard back in the day, and it was because we were newbies at it. And when you actually do it for a long time, you learn to moderate your traffic and only go to the pages that you need to go to.

Right, I'm assuming you could do that at night. You could do it when it's less less trafficked. You could show up in a way that isn't taxing to them.

We're trying to build a sustainable business here, not take down a state server.

Right, easy enough. So out of all of these cases that you've done over the years, and now you're on your fourth fund, is that right?

Fourth? Fie? Right? We're launching our fourth fund later this year.

So what's the biggest takeaway from the process that you've learned? Like, having done this for nearly a decade, how are you looking at this practice of alt credit? What's the big lesson you've learned in building the fund since twenty seventeen.

So I think that people over complicate finance. I've learned that if I can't understand someone after having it explained to me once or twice, then it probably doesn't make

So I'm going to give you a little pushback on that. I think complexity is a feature, not a bug, and it's done by people within a particular industry. That's what jargon is because they're trying to prevent people from understanding. And you're not going to pay for a consultant or an expert if it's simple. But look how complex it is. Write me a big check and I'll explain it to or I'll explain it to whoever you want me to

It's intentional.

You have to look at the insensive the incentive to make things simple and understandable versus the incentive for them to be complex, and the amount of fees that can be charged on that.

My other pet theory about finance is that there are many ways to make money, but most of them have markets associated. And so anytime there's a market, the purpose of a market is to compete out all the alpha and so what people are saying is usually I'm smarter than everyone else in the market, and that goes against the fundamental efficient market hypothesis, right, And so where you should try to be instead is the area where there

Right, when you're buying in a deep broad market, you would assume that you're going to get something close to fair value. It's not going to be If it's too much over fair value, well people aren't going to buy it, right. And if it's too much under fair value, it'll attract enough competition that will eventually inefficiencies get arbitraged out of the market. So let me throw you one curveball before we get to our favorite questions. And I'm kind of

So the interesting thing about my life has been that I kind of grew up with the company. So when I started the company, I was twenty and I was basically just out of my parents' house. And these days I have my own house and I have a one

All right, let's jump to our speed round, our favorite questions. We ask all our guests, starting with tell us what you're streaming these days? What are you watching or listening to that's keeping you entertained.

So I'm a big fan of Morgan Housel's podcast, where talks about the psychology of money. It's very rare to find someone who's deeply philosophical but also interested in finance, and his podcast is the perfect intersection of that.

Let's talk about your mentors who helped to shape your career.

I'm going to have to say our old general counsel Curtis, who shaped everything that Christian and I know about litigation and also made us lawyers like it.

Let's talk about books. What are some of your favorites and what are you reading right now?

Oh? Okay, So there are two people who have worked in finance who have written actual literary works. One is Gary Sernowitz, who wrote The Counting House and I've got a copy for you today. And then the second is this guy name Amore Towels, who worked at an investment bank for twenty years and then switched completely to writing fiction. And so what I like about his stuff is that most literary authors have only ever been authors. And you're an author, you are coming from a place of passivity

Oh of course.

Yeah. The main character is literally trapped in a hotel in revolutionary Russia, but he manages to create a life there, which shows that you can you can change your environment no matter what your environment is.

You know, I used to think all of the Michael Lewis books that were so interesting were because he spent years in finances at Salomon Brothers. So Liar's Poker and The Big Short. Yeah, but then you start to see his other books like Moneyball or The blind Side or the Pandemic book Premonition, and he has no experience in those spaces. He's just like an incredibly talented writer. Yeah, but that's really an interesting set of observations. The guy

That you like. He has one that he just published called Table for Two. And then my favorite of his is a short story called You Have Arrived at Your Destination. And the short story is about this idea that if you were to be able to project the lives of your children, it would be in three acts like a play. So in the first act you have youthful optimism, where you have all these hopes and dreams and the world is opening itself up to you. But then you have

I can't argue with that. That sounds pretty accurate. Our final two questions, some of which I'm really curious to see your answers. So what sort of advice would you give I shouldn't even say, reaching recent college grad somebody in college who was interested in a career in all credit or hedge funds or finance, how would you advise them?

So my own trajectory has been a little bit unusual, and I think that most people assume that finance is an apprenticeship business where you can only learn by studying with someone who has already done it. But I think that coming from that perspective means that you're always going to do it the way that people did it before, and we've always had this advantage from being able to

And our final question, what do you know about the world of litigation, finance, data scraping, investing, Waltz credit today you wish you knew back in twenty sixteen when you were first thinking about launching the business.

Back then, I really didn't know anything. So being young is like having a flashlight that only shines on and step ahead of you and no further.

That's very interesting.

I don't think that there's anything that I've could have told myself that I would have had the context to understand.

So it's really the journey, the process that you learn along the way. Even had you started with what you know today, it doesn't sound like you think it would have been in any use.

Yeah, So land Samantha Chang has this quote where she says, if I could change anything about my life, I would not have been so unhappy when I was young.

You're so focused on the future sometimes forget to enjoy the moment exactly, and that is very true for a lot of young people, especially in hyper competitive fields, no doubt about it. Well, Eva, this has been absolutely fascinating. We have been speaking with Eva Shang. She is the co founder, CEO, and general partner at Legalist. If you enjoy this conversation, well check out any of the past five hundred discussions we've had over the previous July will