THE REAL EDGE IS IN PEOPLES’ HEADS (Guest: Ahmed Husain)

it's our great pleasure to welcome to the show someone i've been looking forward to chatting for quite a while now amen miss hussein the author of the curious mind amen thanks for joining us thank you kevin long time listener first time caller now um i just want to get it off the the right off the bat we're recording this a little earlier than usual this is uh going to be uh we're recording it at the end of august and we're going to be putting it out in the middle of september so if we talk about things that are um not quite up to date just you'll understand why but uh you um have quite a great background in terms of your career and it's very very uh all over the place and very illustrious and when i was like listening to you go on about the different places you worked i thought oh my goodness like he this is uh the real cat's meow of uh of jobs that you've had did you know you always wanted to be in finance like did you have a plan to do this like how how did how did we get to this point it's a funny story it's a long story but i'll give you the super short version uh i was an immigrant kid uh born in pakistan lived there um came over the u.s luckily got into a place called northwestern uh i wanted to study uh computer science my dad was like i don't know what computers are son how about electrical engineering we kind of agreed to computer engineering and then as the years went by i convinced him computer science was the way to go and then um sort of three years through the degree of computer science i was like shit actually i don't like computer science it's a little bit boring actually what i love is economics so i got a little side minor thing in in economics and i graduated in 99 um or i was going to graduate 99 and i was like oh wow i love economics what can i do with this um and all the banks used to come to northwestern to interview i ended up there and i was like oh my god i'm going to get a job at lehman brothers and then when you join a firm like lehman uh as you know they're taking a bunch of people into their start program sales and trading program and you go and interview with all the different desks um and the group that i liked was the credit derivatives desk or what was then called the cdo desk collateralized debt obligation wow there i was the collateralized debt obligations desk in the year 1999 in new york city and three world financial center that's 1989 or 99 99 99 okay fair enough so you were you had a ringside seat for what is about to come yeah so super lucky to to be sitting there right on the ground floor when we were building all of these cdos and all of a sudden you know i could see our business boom uh and there we were doing synthetic cdos i never went over the mortgage kind so you can't blame me for blowing up the world i only did the credit kind um and uh slowly i moved over the trading desk uh at lehman and then one day i was like oh my god i'm going to do this i'm going to do this i'm going to do this uh goldman came calling in 2006 hey um we hear that you're doing good things would you like to come over to goldman and so i was very lucky the story was a great move buddy that was probably a move of your career exactly um and there's there's a funny story there too i had wanted to move to goldman many times and i tried to interview with them in 2001 they denied me after the first interview tried to go there in 2003 they denied me after the first interview okay this time you guys are calling me uh so this is this is great news uh yes after you know you have to do goldman has this process that you have to interview with 25 people uh and after two three months of interviewing they hired me in april 2006 so okay so can you tell people about what a cdo is and and you know no no i think a lot of people would be interested like a lot of people might know and they're kind of feel like they they're you know aware but why don't you just go over it and then we'll talk a little bit about the the meltdown of the the the financial system so the best way to think about a cdo um i guess and i'm trying to go back in history right now since i've tried not to think about this ever since i left that job i'm sorry i'm digging up past drama you're like you're like taking me so i will after years of therapy i will try to deal with this um basically uh in a typical cdo the first thing to know is you have two boxes one box with assets and the other box with assets and one box with liabilities so say uh in the credit kind that we were doing your assets were leverage loans loans to u.s market large companies sponsored by companies and then you would issue liabilities the liabilities you would issue would be say 70 75 triple a rated moody's and s&p you could have some double a single a triple b double b inequity so what you've done is you've transformed and this has formed what were in a pool of single b or double b rated leverage loans into something that is 70 75 triple a rated now all because because they get the cash flows at the beginning and so it's exactly right so it's rearranged in terms of cash flows i didn't realize that drexel mick you know that milken was part of that but what was what's the origin story there well the origin story there is the origin story there is uh and i don't know if if milken exactly uh did any of these but all the people that work with milken and drexel then went on to other shops like solomon and others and the mortgage vac security which is also just a form of a cdo you're just slicing up cash flows right any of these mortgage fanny freddy they're all just all of those securities just slicing up a bunch of cash flows you're over collateralizing the triple a's and then there's a leveraged equity bid at the bottom that gets it residual or access cash flow and because of that over collateralization you've done sort of regulatory arbitrage where you had a hundred dollars worth of single b loans nobody could buy that weren't easily tradable or in the case of mortgage bonds nobody wanted a single household exposure but you've arbitraged or you've transformed this unownable piece of security or securities into something any any guy can go take those triple a's and say yes moody's and s p have blessed them i can get good um regulatory capital against these assets let's sell these to the banks and insurance companies let's go sell this middle part to somebody else some asset manager and let's go sell the bottom to family offices and equities so you've taken a security which it was really hard for most people to buy and you've turned it into a much more um standardized piece of paper right and that was originally thought of from the guys who worked with milken is what you're saying that was the that concept was was born out of that crew exactly okay so you're there at lehman you luckily move over to goldman and now you're a goldman you have a ringside seat for what is the global financial crisis and not only that you're in the you know yes you're not in the area that blows up the world but you're pretty close um so tell us you know what that was like what you saw there i'd love to hear any stories or anecdotes that you could share with us sure so um here i go i find myself at goldman in 06 and i am on the 50th floor of one new york plaza which was the old original um goldman had two buildings one was a broad street building which was really historically old and then when they had overflown that building they were in one new york plaza uh right by the train station south seaport and so there we are at um and i'm sitting right outside a guy's office who's pretty well known harvey schwartz now the ceo of uh carlisle and uh don mullen now the founder of lehman so i'm sitting outside the firm called pre-gym so i'm still trying to do my uh cdo bid i've sort of graduated from cash flow cdos into synthetic cdos and goldman was looking for people so there we were uh making these things and you can kind of feel that the ground is starting to shake you know in 06 or 07 you could already feel like credit quality not what it used to be everybody's pushing the envelope all these new things are being created uh i was seeing synthetic cdo squares synthetic cdo cubes being created so i was like probably not gonna probably not gonna end well so what do we do here uh luckily i managed to there was a new team being created by a famous guy called alan brazil and if you google alan brazil goldman sachs you'll find out he uh ran quite an interesting business at goldman so i joined him and our job then became from 06 07 onwards to basically go to his biggest clients which were hedge funds at that time uh and take the best ideas so the model being usually when you call a hedge fund what you say you call oak tree you're usually a credit sales guy calling a credit hedge fund if you're a macro sales guy calling a macro uh hedge fund but the goldman idea was well the best idea is right now the world is becoming correlated in 07 08 all the trades were trading all things were trading as one so we want to show our clients the most interesting trades the most asymmetric trades and as you know one of the things that a lot of hedge funds benefited from at the time people like paulson was short the mortgage trade or short cds trade right so we helped clients get that trade on whether the short uh mbs trade or the short cmbs trade or the short credit trade and so my group's job was to take the best ideas that we had on the goldman trading floor whether they came from credit rates fx commodities equities and say go to our top clients and say we got this idea for you and like it's like wow thing as salesmen do, your job shouldn't be to just be selling whatever it is and clipping that offer you want to you want to be innovative you know goldman i think has always been good at um sort of trying to be value add and so our job was hey this is the best idea we have this is what you should do or hey we know you have this risk on on your books you're very long credit um this is how you can hedge some of that exposure so that so i i didn't realize this so goldman realized that that there was in essence uh uh the market was too segmented in that everyone just spoke to their own silo and that there was a value added by taking a bigger picture and crossing over asset classes and trying to sell clients on a bigger picture trade and this was and no one had done this before yeah i don't think anybody had done it before most most hedge funds were used to covered by one guy who only spoke the language or rates language um because by the way one other thing you should know about goldman it's a super competitive place also internally so if you're calling a hedge fund again let's just use oak tree because everybody's heard of them there might be five different people from goldman calling the same uh hedge fund there might be a salesperson fx salesperson right equity and so you're all competing for the same thing and the reason i'm telling you this is it leads to the next part of the story but um everybody would be trying to pitch something and so you as a salesperson uh would have to have you know better ideas than the other guy calling because you're not just competing against stock chain or credit suites you're competing against your own goldman okay so tell us tell us about the because first of all i'm fascinated and i think that a lot of kudos you know go owed to goldman for having the guts to do that and to be able to withstand the internal politics because as you say you're absolutely correct that that is the problem these sales guys are usually very protective of their clients and don't want to let another sales guy into their client into their to talk to their client um so tell me about how that works because you guys come up with all these trades so you're in essence going around pitching everyone oh look this risk is way um underpriced meaning or you know it's trading too rich you can short it and uh so you guys are in essence the ones that are telling people to put on the big short yeah so you know one thing you should know about firms like goldman um there's three types of people at these firms right most people most people have heard of traders everybody's heard of sales people one thing that goldman figured out a long time ago was something called strats there and so strats are strategists these were like the geeks like me uh you know geeks like and so i always laugh about you know that movie that scene with ryan uh gosling in the movie the big short hey have you seen have you seen my quant so i i was at quant right and so that was my job and so my job was to find like how to make things work and how to come up with big trades um and i tell the strat story also because for every flashy sales guy there was somebody behind the scene who was coming up with the right trade to be like hey sales guy we should take this trade and so the group i was in we were sales strats and so our job was to feed the sales people the best ideas in the firm and so the better i had the more our team um got paid all right so so walk us through any stories or tell us how that played out in the next year or two as it all came on glued i'd love to hear any war stories you can share yeah so there was a lot that was happening let's just say um i mean i remember doing trades where things were really coming unhinged and in the sovereigns you might remember the pigs were were something you know the europe was blowing up basically it was portugal uh greece spain and people got that trade put on uh and then people were worried about germany going down i even remember panic got so high that people were buying cds protection on the us at 10 basis points and seeing it trade to 30 basis points and 40 basis points and so i guess what you know and then on the other hand i was sitting next to another sales guy who was talking to some of the the biggest guys who had the credit in the mortgage trade on and unwinding those guys or aig and some of those transactions things that i can't go into given things that i've signed but uh but but sitting there it made you made you realize oh my god like the world's a super complicated place and like it's amazing that i get to sit in the middle of it and it was also amazing to go from you know a guy who was deep in the world of credit structuring and just making these asset liability things to being like oh my god all these macro things connect and what's happening here will impact here if the guy has a credit trade on what can you do to hedge it using nikkei dividend swaps or print put options like all of these sort of things connect in an interesting way and even the smartest people in the world don't see that okay so the world became more clear as you sat here on the front row of the world falling apart yeah that became clear and i think the other thing that became clear was because i left that job right in 2009 i stayed with goldman but i asked to be moved from goldman new york from trading floor to covering family offices because what i saw there was sometimes hedge funds who work with other people's money firstly it's opm secondly hedge funds come and go they had many did go out of business i was also part of that team that was basically saying hey hedge fund you need to post more margin and if you don't like we're gonna have to wind you down as your prime broker and so you see these people who are betting with other people's money often they got taken out um and so in 0809 i sort of had the realization hey man i need to work with people whose money it is because oftentimes i'd be talking to my clients in 0809 and they're like funds shutting down i'm like are you guys being redeemed they're like yeah like where's the money going it's going back to the european family offices who gave us the money 10 years ago i was like i guess in the end you got to follow the money and i don't know if you were in new york in 0809 but new york became quite a depressing place and we were all talking about you know do we need guns and a canoe to get out of here when the pitchforks come for us because things were pretty bad in new york if you're a goldman backer in 0809 but you guys were doing god's work though okay so so you asked to go you know work with the family office and so that must have been quite a change in terms of time frames like you go from guys worrying about next month you know markings to people thinking about next year maybe next decade walk tell me you know what were your biggest surprises and how did that work out as you moved for to the family office side of goldman sachs yeah so i think what you said is a big idea that we could double click on into which is you know this whole idea of time frame um because families whose money it is or anybody whose money it is can sort of think and if you're a family and you want to be around in 10 or 50 or 100 years time then you act differently versus hey if you're just intermediary playing with somebody else's money and or by the way you're on a tight leash right i'm sure you and i have both heard the stories of friends who can't stand to underperform for three or six months because they know they'll get redeemed and so right i wanted to find this who didn't need to think about redemption who could think about big ideas personally i felt like my edge was not in thinking about what's going to happen next week or next month but actually what could happen in two three years and and by the way the more i sort of looked at you know being a kid who's fascinated with money the more you look at these big lists like the richest people in the world you're like well this guy didn't make money overnight he compounded right so you want to be with people who have the ability and capacity to compound for 30 40 years and not just day trade them their way into into success because that's not how successful i was like well wouldn't it be cool to hang out with some of the richest people in the world and work with them and trade with them and help them because this guy's figured out a way to be worth five or ten billion obviously he probably has a lot more to teach me than some hedge fund analyst who just blew up his fund right not every hedge fund goes up there's many successful guys but and and by the way then the other other problem i've always had personally and this is the personal problem which is i get bored every five to six years so i have to change jobs every five years otherwise i just feel like you're stagnating okay so so you're there you work for five five years at goldman sachs private clients or the high net worth individuals or whatever division that was eventually you go somewhere else where do you go from there yeah so i was there from 2009 2014 made md along the way 11 2011 2012 and then in 14 one of my clients hires me uh famous guy now probably was well less well known then a guy called patrick grahi uh altice telecom um he's known for having a lot of debt he also owns sotheby's uh an interesting colorful guy right so it was my dream to work with one of these guys who had gone from being worth nothing to being worth five or six or seven billion i don't know what he was worth at the top and there he was and so he he gave us a bunch of money he said go at it uh manages money compound it grow it and being next to a guy who's gone from being worth nothing to being worth five or six billion and who gives you a bunch of money and says make it grow now there i was uh a guy who had worked on mostly the sell side his whole life and now he's been given a bunch of money kind of a dangerous thing and so i'm very thankful to thankful to patrick that he gave us the opportunity and we could do anything and when you can do anything what you know what do you even do um so our job was to do equities and credit and real estate and distressed it was a bunch of things and you enjoyed it a bunch. There were things that went wrong in that relationship, which there's no need to go into. And so I said, okay, well, what do I like? I like the probably I like the buy side more. There's no point going to the sell side. I've seen enough of the sell side. And so I was lucky a firm called Neuberger Berman found me and I joined them and I became the global head of their family office strategy. So my job was to figure out what do we do with this client base, the richest people in the world? How do we get Neuberger in front of them? And then my job was to work directly with a bunch of these clients. If I'm not mistaken, I think I have a book like it's so far so good and or something of that nature. And it's about the Neuberger Berman story. I got this right. The first 94 years in autobiography of the Wall Street legend, Roy Neuberger. Is that the same firm? Have I got it right? That's the same firm. So you're there, you're doing that. And then now eventually you've recently left there and you're now writing for yourself. Why don't you tell us about the curious mind of what you're doing today? So I was trying to follow the Kevin Muir life journey. I'm a little bit slower. And so it just took me a little bit longer. I said, hey, if Kevin can do it and I should try. So no, I just kind of got to a place where the institution. Constraints were boring. Things you can't say, trades you can't do. It didn't seem as fun anymore. And I'm 49 now. I'm going to turn 50 at the end of the year, probably a midlife crisis happening somewhere there. And so at least it's just starting a sub stack instead of a blonde at a Ferrari. Funny you say that. So when I left Neuberger in July, I've started writing. And so the idea behind, you know, I sort of had three loves. One love is investment capital markets. That's sort of one big bucket. The other is, like I said at the beginning, I was a computer science major. I care about technology. I think it's important. And three, you know, once I had kids and I have two now, 13 and 15, two girls, I care about human potential, human agency. And so I've been doing that. And so I wanted to have a place where I could talk about all of those things. And so that is what thecuriousmind.org is, a place where I think about, talk about all of those things. Then turned into a research letter. It's then turned into something super private called the brain trust. But that's what I'm investigating. I'm investigating the intersection of those three places, markets, technology and people. Okay. So let's get into it. Let's start with markets, technology and people. Let me think about where we should go first. I guess, you know, let's keep it big picture. Because one of the things that I think too often in life is that everyone wants to know where the next tick is going to be in the next, you know, what they're going to say at this next Jackson Hole or what the Fed's going to do next meeting. And that's actually, you know, sure, it's interesting, but the real big money is made in the bigger calls, right? So let's, let's zoom out and let's first examine where do you think the opportunities lie in terms of the current market structure, where you have all these pod shops that are forced to mark to market every month and are chasing returns. And not only that, we have this insane momentum occurring and all of these different, uh, aspects where the world has become flatter, meaning that there's all sorts of, uh, technology in the old days with us on the trading desk, we actually had an edge with, uh, being on a trading desk. And now you get on Twitter and anyone can get all the information that we had back then. So stepping back, where do the opportunities lie in terms of investing from your perspective? Yeah, I think firstly, great question, uh, which leads to, uh, any, even bigger, bigger question behind that. What are you solving for? You know, so because we could say, what's the opportunity to market, I would say, well, what do you want out of your money? Uh, some people are like, well, actually, and, and, you know, this is true. A lot of people are in the market just to be entertained. Uh, it's, it's a habit they want to be entertained. They want to learn and putting their money. Some people are there purely as, and I see this with some large families, their goal is just like, I need to leave more money to my kids in 20 years time. And what happens between now and 20 years? It's irrelevant as long as I'm on that curve of getting there. Right. So, um, so one bigger thing to just think about is what is the point of money? Because I think sometimes when you're in the markets all the time, and I'm guilty of this too, we sort of are looking like I got to trade, I got to make money, but like, Hey dude, like what, what do you, what is the goal? Cause money, money is not the goal in and of itself. Right. I'm sure if you think about your happiest memories, they have nothing to do with money and how money might've bought you some of those things, but they have nothing to do with money. So I always say like, make sure that you're sort of putting money as a tool that allows you to accomplish your goals, not something that is like, Hey, that's all I think about every single day. I don't know your happiest memories. Yes. Some of my happiest memories are with my family and stuff, but right below that is selling the high in the, you know, so I'm not sure I might be too much of a DJ and because too often, um, my non-family happiest memories are some trade I nailed, but okay. I hear you for a lot of people that is not what their, their goal is. I wanted to just contact that, but look, we're on the market handle, so we should focus on the market. So sorry. Okay. Okay. So, so when you're looking at it, do you agree though, that the world has become faster, more short-term oriented, and that in itself is an opportunity for people that aren't constrained by that same sort of, um, okay. Nobody can think long-term anymore. Nobody can hold things for any length of time anymore. Cause as we discussed, a few minutes ago, everybody's on this three month, if not six month treadmill. And if you're a pawn shop, your treadmill is a lot shorter. I was going to say three, six months, that's giving them a lot of chance because it feels like a lot of times it's two months stops. It's over. Right. Exactly. And so most people, most people are in the end, just chasing momentum. And I think that's, if you look at this market where you have these parabolic rallies, you have this flash crashes because when it's working, we all have to chase it because our LP is going to be judging us every three months, six months on performance. And if we weren't, the best, somebody else did better, the money will move. So there is no staying power anymore. If you talk to most GPs, they're like, dude, my LPs are so fickle. I wish I had better LPs or their structure is just set up to just give their LPs weekly or quarterly or monthly liquidity. And so they just can't keep the money. And so there's this whole structure that's broken down. And I think partly to do with societal trust partly is to do with, um, just the nature of finance. Partly to do with information is just so easily available that all of a sudden you're all of that thinking is gone. And that's partly broken capitalism because we're all just teaching chasing momentum. Right. Can I interrupt there actually, because I have this theory and I wrote about this back in 2014 and I called it a series of rolling mini bubbles. Yeah. And what I did was I noticed, and I noticed this, that there was these bubbles and they just seemed to, they were violent and they, and they took long, they didn't take long. They were up and down in a year or two years time. And in the past, it felt like the bubbles were much longer and bigger. And then I noticed these, these kind of little mini bubbles that I, that I, I was starting to notice is your, and I I've never like people have asked me why this has occurred. And I, and I've always struggled with this part of the answer. I haven't had a good reason to explain it, but I think you just did a better job than I've ever done. Do you, you think it's the structure of the way that the money management industry has arranged itself? Has forced these guys to actually chase momentum? Well, I think the structures are definitely, you know, having seen what we've built they're designed to give clients uses ETF gives clients during the day liquidity, right? We used to have a world in which you made a commitment, you were in this fund, you're, you probably wouldn't know what it was worth until every week or every on Barron's weekly stock code. And now you're like, Oh, I'm down today. I got to get out. This is not working. Right. Human emotions, we feel fear and greed were monkeys in the end. And, you know, having been in finance for so long, I've realized just how sad the monkey mind is. But I think to your specific point, yes, the structure of a lot of these things because of LP pressure have made, have made them be much more transient. Okay. All right. So I, I interrupted you though. You continue. So we have this situation where there's more and more momentum, where do the opportunities lie for somebody who is like? Aware of that and is able to fade it like the problem is that the momentum is so strong. It feels so difficult to be on the other side. And I guess you shouldn't be on the other side, you should really just be going and trying to find the thing that everyone's forgetting about as opposed to trying to fade the momentum. Am I correct? Yeah, I think, you know, I wrote about this this week, which was this idea of the weirdness premium. And I can go a lot of ways with that. But one of those is just having a beginner's mind, right? If you look at this, take the AI bubble for a second. Let's call it bubble, because I'm sure a lot of your listeners would be like, Yeah, it's definitely a bubble, it's gonna go up three times soon. You won't hear any arguments from me, man. So, but, you know, when, when I don't get into a trade, uh, when something goes up and something does well, I always ask myself, there's probably three things that happen. Did I not know about this trade? Did I not have time to diligence this trade or three, which I think is true for most of us is it didn't somehow align with my identity or what I thought I knew, you know? I remember looking at NVIDIA, uh, six years ago and thinking like, Oh my God, like whatever, 300 billion is too rich. CUDA. Yeah. It has all of this, but it doesn't really work. It's too expensive already. Uh, and I didn't even do the real work. It was, I was just like, this looks wrong. AI is a fake, just like the metaverse or all these other things. This is another hype cycle. I feel like we often too often get into our tribes that we're comfortable with and those tribes because of who we spend time with and who we talk to and what we read, keep us in these filter bubbles. And so one of the things I'm trying to break, and I'm worried about this for, for us and for our kids is that we need more cognitive diversity. We need more weirdness in our life. People who don't look like us, but might take a different view. We need more disagreement in our life. We've kind of coddled ourselves to be like, we just want to hang out with people like us who agree with us and share our views. But like, I think it's very important to have polite disagreement. Uh, what's the art of right. And you could see with a Democrat Republican, all the issues that are happening in our country are also reflected in our markets. Are also. Are also reflected in our trades. We're doing the comfortable trade as opposed to what actually makes us uncomfortable. And sometimes sitting with a manager who's underperforming is also uncomfortable. So we've kind of placated ourselves to always do what's comfortable. I need to redeem. I need to do this. I need to do that. Like, bro, just maybe even though you think AI is a bubble, like let's go do the work. Don't read the negative AI stuff for awhile, go six months and only meet positive AI. Go move to San Francisco. Like what are you doing to convince yourself that you're wrong? Yeah. I see some of the greatest investors out there. Um, one of the things that always surprises me is how much they seek out the other side, right? They go out and they say, I want to go. And even though every bone in my body tells me that this guy's wrong, I want to understand where they're coming from. Totally. And this happened to me when I was working at the family office, we had this position on in this company, a goal are, and I was like, oh, it's so good. It's 25, $30 stock. It's going to 60 or 70 met with this hedge fund in New York. And I was like, oh, this guy's wrong. Yeah. And this, this hedge fund in New York told me all these negative things. And I was just too tight to the, I'm the bull on this. I understand better than you. And he was right about this entire thing. I just wouldn't take him seriously. Cause I was, I was like, clearly I've done more work or my position is right. You know, you like, you got to take people who don't agree with you seriously and actually just assume, you know, like the old saying, assume that you know, nothing. Yeah. The other thing I, I, I really struck me when you were talking there was you said we need to have more. Disagreement and society. And I think that is also one of the problems in, and I find this in Twitter and I've gotten off Twitter, but like you get on there and people view, you know, if you're short, one of the stocks that they're long, they feel like you're, you know, coming to take over their village and you're about to crush them. And one of the things that always, my, I always admire about the Chicago guys, whenever I would interview a Chicago trader. They were very much like, that's what makes a market. Like they'd be like, okay, you're long, I'm short. And I think that part of the reason that they're so comfortable with having people on the other side of the trade is because they saw them all every day in terms of their, like the guys they were trading with where the guys opposite them in the pit. So they, you know, they were, they were fine with having different positionings and it really kind of, I'm, I'm very disappointed how we've gone down this road. Whereas if you say something is overvalued, people take it as an affront and that you're in essence, like, you know, insulting them. And no, like I have a different opinion and not only that you should welcome different opinions. And I always tell people, I said, the reality is that if we all agreed, then there would be no trade. You need someone on the other side of your trade. So when I sit there and I come up with a trade and people tell me I'm wrong, I'm like, well, that's great because actually that means that there's more people to agree with me. When they change later, hopefully. And now I could be wrong as well, but I, I just, the thing that really makes me sad in our society is how that polite disagreement is completely vanished. Exactly. Exactly. I think that is the biggest failure. And I think one of the biggest risks to thinking, because if you, it just makes your portfolio very fragile because all you know is one, one angle, one approach. A, your question, your approach might be wrong. B, there's a lot of money. You're probably losing money. You're probably leaving on the table. You might have a, you an oil going to a hundred. Cool man. But maybe there's money to be made on being short, short oil, or maybe there's money to be made in AI at the same time or in Korea. There's lots of ways to make money with people who get religious and like, you know, which is why I try never to talk about my positions or my trades because then it ties you to position. You've automatically said, this is me. And which is why I never write about what I'm doing because then, you know, psychologically you get married to a position. And if you look at, um, Stanley Druckenmiller, when he's talking about his positions, often he'll say, I'm telling you this today, but it could change tomorrow. And he does it and he's not, he's doing it for everyone else, but he's also doing it for himself because what he's trying to do is he's trying to maintain the ability to be intellectually flexible and to move his position. Not only that, he knows that it's going to change. And I'm sure you've seen traded with, I'm sure some of the greatest traders. I'm sure some of the greatest traders in the world. I'm sure some of the greatest traders out there, you know, how intellectually flexible they are in terms of the best traders out there. Exactly. It's like, you know, the book title being right versus making money. Your job, I think is just to take the line as Dennis Gartman used to say from bottom left to top right is not to have a fucking view. Your job is bottom left to top right. And I remind myself that you don't need to have a view or just do that. So we're talking about, this is one aspect of great traders and how they make money. So you've been around a lot of different traders, a lot of different investors. What are some of the other things that have surprised you about what traits they might have in common? I think if you look at, you know, a few years ago, I went and looked at some of the richest families in the world, right? Because hopefully we're, we can all be fascinated with markets and be degen and all of that, but we want, we're doing this for our family, our kids. Most of us live pretty comfortable, right? That we're not doing this to just put food on the table on a daily basis. So this is to say, we think about legacy. We think about the impact of our money on other people. We think about the charitable causes we can support, which means again, you're back to thinking long-term and thinking, if I have X dollars today, how can I create a machine, you know, take a Ray Dalio idea of having two X or three X or four X dollars. So what is the portfolio I need to construct? And what are the things that could destroy my portfolio? So not some kind of idea. How do I make myself anti-fragile? So what I've sort of learned from all of these people is make sure firstly, you don't blow up. Okay. How are you going to blow up? B, know clearly what is the goal you're solving for? And hopefully it's more than just entertainment. You're trying to get to an X number at an X point. Okay, great. Three, simplicity. A lot of, you know, what I see go wrong with a lot of families is they have super complicated processes. Structures, risks, nobody's tracking it and stuff disappears after one generation, two generations, three generations, all gone. And so, you know, you need to know what you're solving for, figure out what's going to kill you and make sure it doesn't kill you. Three, keep your stuff simple. Even, you know, like imagine explaining your investments. Imagine, and this is morbid, but imagine you pass away tomorrow and your kid or your wife has to look at the portfolio. Are they going to know what's what or which asset is where and is it tax protected? Again, basic stuff, but these are the things you learn from people because they're not thinking Jackson Hole. They're thinking like, I got to be better in five or 10 or 20 years time. And then, and then the other thing is they are spread across a bunch of things. You know, obviously a billionaire had one thing that went really well and they probably held it for 50 years or, and it was a single investment. But most people, if you, that's not going to happen for most people, right? For most people, what you really want is you want to figure out how you're going to harvest. A lot of different risk premium. So some people, they only trade commodities and that's fine. But what I'm saying is if you're good at public markets, good, but go find a buddy who's really good at private markets and figure out how he's doing, what he's doing, a, it'll give you cognitive diversity. B it'll feed your curiosity and it'll help you. Okay. I'm long this public company here. What are they doing in private markets that might come and kill this company? Three, there are interesting opportunities everywhere. So just because you've done this segment of the public market your whole life, don't think that you're limited to that. Right. And most families, if you look at, um, the biographies, you look at people like Rockefeller, Carnegie Mellon, it doesn't feel like technology now because it feels boring, but they were all doing some high tech stuff. Rockefeller figured out some high tech stuff about how to be vertically integrated, big Mellon figured out steel banking. So all of these people were operating at the cutting edge of the technology at the time. We don't think of canals, railways, roads as technology. But they were the hot technology at the time. And so when we downplay technology or because you know, the human mind likes to play mean reversion and I'm down with that. There's mean reversion but the big money is played on the big themes of big technology and writing them for one of the things that you've highlighted there is allocation to different asset classes and i think that um too often you're right we get stuck in our in our different uh silos i'd love to kind of understand how if you're a large family and you're thinking about how to allocate money how that's moving around and and specifically one of the things that i i know i talked to one of my buddies that's been around he's a very smart guy and he always says to me okay but we know the um the consultants are just starting to get a hold of that trade and that when that tr the consultants are just starting and and he says it's going to be years for them to move it around and i think that we as traders sit around as you you know rightfully say jackson hole thinking about the next 10 minutes not understanding that some of these trends are extremely long and you have highlighted private equity and private credit and there's no doubt that money has been flowing into there but what do you explain to people in terms of how long it takes for that money to move around and then specifically highlight where you think money might be headed in the big picture asset classes in the years to come yeah so i think a lot a lot of good points in that uh statement kevin firstly you know if you are investing five or ten billion if you're fiduciary a pension insurance company sovereign wealth fund family office jackson hole irrelevant because what are you going to do about it you're not going to move 10 billion 5 billion just because of some statement or what the fed did like you can't and you won't and so therefore it is irrelevant what matters is okay step one what's my goal if you're a family office maybe your goal is cpi plus six okay firstly people are surprised when i say that what do you mean cpi plus six they want to make real return inflation they want to beat inflation because they want to be richer in the future in real terms and then by how much some are as simple as cpi plus three some are cpi plus six then we started getting more new ones right firstly did this family make money and let's just talk about family offices because i know that segment uh better than other segments is did they make money are they first generation versus third generation first generation totally different behavior they made the money they know how to handle it if they lost it they could probably make it again third generation somebody who inherited from grandpa is really scared because if they lost it they don't really know how to make it back and there'll be a lot of people pissed off at them because hey dude what the hell and their lifestyle is going to be impacted so totally different risk appetite then what in the world are you going to invest in you're going to make a lot of money and you're not going to be able to make a lot of money and you're not going to be able to make a lot of money and you're not going to be able to make a lot of money and you're not going to be able to make a lot of money and you're not going to be able to make a lot of money if they made their money in finance they're probably quite comfortable with markets if they made their money in shipping and they probably are uncomfortable with markets and yeah they sold their shipping company but now they're like oh my god capital markets and trades how do i do this which probably means that when they build a team around them they probably don't pay them finance wages they pay them shipping container wages which is to say that they have probably lower quality people working there than than finance people right so just quickly because you know when i first got into the family office i'm like oh they're going to look like hedge funds it's going to be a bunch of smart guys just like the hedge fund guys i used to cover totally different setup because every rich dude is totally different from every every other rich dude because they all totally different ways and so if you are a totally different individual you hire totally different teams and have totally different experience you end up with totally different portfolios so we used to cover some of the richest people in europe and a guy worth 50 billion at his peak at his entire family office was in cash why because he had a steel company that would keep doing rights offering as the price of steel was falling and to to buy those rights offering the family office just needed to sit in cash we had other people who were 90 privates private funds co investments direct deals because they just needed to make 15 per annum and the only way to do that was doing direct deals both rich families both first or second generation totally different way of seeing the world okay so so those are a bunch of you know generalizations on even these people are quite different let's go to your i think let's go to your last question which is to say what do we do about all of this right like where where are things headed i think one thing it's clear look i was very lucky to join finance in 99 we had a lot more boom that happened whether it was interest rates or new technologies being created um and but by the way a lot of money is being created and a lot of money is being created and a lot of money is being created um and but by the way a lot of money is being created and a lot of money is being created and a lot of money the big money in the last few years has not been made on wall street it's been made in silicon valley yeah that's where the big money we all the wall street guys look around and feel poor compared to yeah much billions of dollars so firstly we should know that the game has moved if you thought you were just moving pieces of paper around to make money those guys are moving bits around so i think when you when you look at the world firstly you have to say and by the way this is one of the reasons i left finance which is to say the world is changing massively um and it's changed a lot since i've been in it but i feel like right now it's a much bigger change than the 27 years that i've been in finance since 99 so one thing is just to like stop the music for a little bit look around like am i just pretending like nothing has changed in the world because you got to take things like ai quite seriously right so you you say the world has changed more in the last year or two than any time in your 27 year career is that specifically technology like the ai the ai world i would say it has changed and i can see it changing much faster from here okay not all you might say well actually functionally isn't it the same thing that i was doing two years ago i say well i hope that you're not doing things exactly you were doing two years ago i hope you're using these tools a lot more but i can see because of the way these tools are now being integrated the world's going to look super different in five years time and so that change is coming and most people are not appreciating it because the human mind doesn't understand exponentials and human mind generally believes in mean reversion things will generally be because but i fundamentally feel which is why i left my job because i feel like the world's going to change a ton and i gotta just spend all my time thinking about that and helping the world think about those changes okay explain to me how you think the world is going to change like like i i understand you're saying that we're at a monumental point in our in the evolution of our society and that this is going to be one of those periods like the railroad coming that it's going to change but what do you think it looks like in five years time and how you know like give us some color on on those changes if you can so you know simple things like um how in the old days you would be okay i need to read a lot of stuff i need to read the 10ks i need i need to build the models myself i need to be on the conference call i need to suck in all that data all that stuff can happen in a second now you know i've had many friends who've built these tools i've built these tools who can digest all of that information and give you the you had to ingest the information and then put your judgment to it to come up with a question a lot of those ingestion analyzing building can be done in a second so therefore the question becomes what is the human for what do i know that a machine cannot know and will not know is it judgment is it character is it curiosity is it asking a better question so i think we need to prepare for a world in which because you know all of us did jobs that were a lot of different things ninety percent of that job can now be done by a machine you have to figure out and everybody's job is different so that's why i'm not going to specifics what is going to be your special edge that a machine will want because because in the capitalist system if they can have a machine that works twenty four seven seven days a week and can do exactly what you do it will do that right and i've tried to for the last three years with my kids and myself become an uber user of these tools cloud code cloud design all of that and i've seen the value i get for twenty dollars for twenty pounds a month i'm getting like thousands of dollars worth of value you would something that i would pay somebody for as an individual be sitting with me i'd probably pay them 100 grand 200 000 to do that job so what you're seeing is a productivity will massively go up b and we saw this again at my prior firm we don't need to hire as many young people right and the reason again i'm being general here is that there's so many ways you can go down it's going to impact and it's already impacting young people being hired into the industry right so we're going to have this weak link where my class when i joined lehman was they took in 50 new analysts or 90 new analysts why would i hire an analyst right now like i can have them i can have the machine do what i needed to do so uh what value are you bringing so if you're a young person you show up in the industry you either better know how to use these tools better than me and teach me something or figure out how to add value because i'm not paying for you to just come and learn that that world is gone now right there's a lot more pressure from shareholders to get something going and if i can get the machine to do it and the machine can operate already at a 22 or 25 year old level and they're going to get to the 29 year old level and the 30 year olds level And so you need to figure out, but it's like, you know what happened in chess um man machine together can beat the machine and can beat man and so we need to figure out and again i'm spending a lot more time on this which is like how do i become better at these tools which is the only way to stay up to speed you asked a specific question which is like no no it's i'm just i'm just asking specific questions to try to get you to explain your thinking so whatever gets us there is great i i didn't realize this i'm not up to speed on chess you're saying that that man versus machine man loses machine man and machine together beat machine is that what you're saying yeah oh i didn't realize that so so sorry go ahead that's and that's and that's true in in most industries right because machine can do a lot of the thinking man man has a different role to play i think we need to all think about you know some people say well the machine's never going to come for this job and there's probably a lot of healthcare jobs and there's probably a lot of healthcare jobs and there's probably a lot of healthcare jobs where uh it'll be fine but the machines are going to come for all of it and they have come for a lot of these jobs over the years most of us have been immune because they've been knowledge worker has been spared from it but there's lots of other industries that have been taken away because of technology i think they're coming for knowledge work and even if your job is not at risk don't think about it from a job risk point of view just think about it like please use these tools they will make you 50 if not 100 more productive um i mean you know i mean if you could you're a solo guy right you might have two people no i'm sure it's just me yeah so there's there's so many more things that i can do now through using these tools that i have not been able to do so i i just tell people look for for whatever dollars a month you can be twice as productive go check it out but this is going to permeate the industry and folks like citrinean have done a good job writing that memo i think it was super memo it got people super nervous at the beginning but these things are feeding through i've seen it across industries it is now impacting how you hire people how you train people what you yourself can do there's going to be more people to start businesses because it's much easier to start that got it and so my question to you is that it's interesting to hear you say that you know the have this this optimistic or not or this excited view about ai and how it's going to change the world because the other you know earlier in this conversation you said it's a bubble so how do you reconcile it's a bubble and um just give us your thinking about ai in terms of changing the world versus ai as an investment so and i was half joking about ai being being a bubble because you know that is a narrative and um to your point on what consultants as long as the world keeps calling ai a bubble i know what's going to happen we will climb the wall of worry, right? People have, remember the wall of worry? Like we've applied it to so many things and we had walls of worry for QE and we had walls of worry for, so AI is another wall of worry. People are now like, oh my God, all this hyperscaler capex is a waste of money. Memory stocks, they're trading at five times earnings because we're going to find a way to work around them. So I've seen this wall of worry in multiple different industries. This is another wall of worry. Great, you know, when oil spiked right into Hormuz, I'm like, okay, we've got a wall of worry. That was a high. So I think just to go on a tangent for a second, one of my angles on macro is more important than predicting an event is to know what everybody else is already betting on, right? And mostly, usually is better to fade the consensus, but you got to know where everybody is. And the same thing happens when companies announce earnings. The company might not be consensus, but you have to know based on consensus, what was the risk for a number? How was everybody positioned? And then the number is a number. You don't really need to know the number. You just need to know what everybody's positioning is. And then you play with the positioning. The position doesn't matter. But sorry to go back to what you were saying. Remind me. I was talking about the fact that you think it's a bubble. You think it's this revolutionary technology that's in fact going to change the world even more dramatically. Like you have a very, like, it's a very dramatic prediction you have about how much it's going to change the world. And yet at the same time, you would think almost with that, you know, other guys that have, that believe it's going to change the world that much would be all in on AI, Dan Ives kind of Tom Lee style. And you're not that. So where's the, where does your thinking break down, not break down, but where does the difference between you and Dan Ives in terms of. - Yeah, so let's get into specifics. And this is not an investment device, but you know, right now, my investment book is like 30, 40% AI related, 30% coal miners, 20% commodities, coal, metal, things like that. And then a bunch of other value bets, which is to say I'm invested in AI and where you need to be invested in that space changes over time. And so you need to speak to the guys who are at the forefront of that and where the money is moving. But fundamentally with AI, let me, simple stats, right? Where is the largest CapEx dollars in America being spent? - Yeah, the only CapEx dollars in America. - The only CapEx dollars in America are being spent. Okay, so now you could say, now you could go into an argument, well, this CapEx and how they're expensing it and the data center life is only three years, not seven years. You can get all technical and we could go down that rabbit hole. But dude, all of GDP growth in America is coming from one thing. All CapEx is going into building one thing. So do you just wanna call it a bubble and like, no, I'm not even gonna think about it and talk about it. I'm just gonna call it a bubble and that's it. I put it in a box and I'm gonna go do my other thing. Like you could do that, but like there's a trillion dollars worth of money moving around. Don't you wanna figure out if you could make some money from it? So, and that's what I've tried to do. And so then the question then becomes, if you go do that work. And of course with any CapEx, you know, you go read Alistair, Aaron's book, the engine that moves market, biggest Oracle book. I'm sure you've read it too. It's about all the technology bubbles from canals to roads, to railways over time. Of course, CapEx bubbles end up in over-investment and of course they end up in, and that's fine. But as Soros used to say, if you see a bubble forming, And so I don't think we're in the early innings anymore. And clearly it's more dangerous. You're sort of going up there, but you don't, you don't know if there's two or three years ahead. I think we'd still have two or three years ahead. But again, this is not a market prediction. So bottom line is go to the work, figure out where the angle is. But again, don't be what I said at the beginning, which is like get married to one idea and said, my whole portfolio is gonna be in one trade. There's money to be made in gold miners too. And there's money to be made in coal miners and all sorts of other areas. So build yourself a portfolio that is anti-fragile. So if you get it wrong, you're not gonna blow up. And then also don't just be in public markets. And you know, most people, public is easiest, but there's capital to be made in privates also. - Got it. Okay. We're getting towards the end here. In terms of like asking you questions, if you were on the other side of the interview podium here, what would you have asked yourself that I've missed? Like what is the big question that we haven't spoken about? - I think the question that I thought about in my job the whole time, and I still think about now, and especially for the future and my kids is, what is your edge? - Okay. - What's your edge? You know, as a father, as husband, as an investor, as a writer, as a thinker, like what's your edge? - Your wife is a hard partner. What's your edge? - What's your edge, buddy? - You know, all these people are, you know, and related to that idea that I figured out in finances, you're always being measured. Like you might think, you know, a lot of people, once they get a job, they're like, okay, I got a job. But like, dude, every day is an interview. Every day you're being measured, every day you're being judged. And so one advice I always give to young people is like, just because you're doing a job where you just got hired, without a big bonus, but like you're always being measured and you're always being judged and you're being judged in rooms. And I wrote an essay about this. You know, 20, 2,500 years of strategic wisdom, what I learned from Clausewitz and others. - Can I just jump in here? You can take the boy out of Goldman, but you can't take Goldman out of the boy. - Eight years of brainwashing. - Okay, so what is your edge? So what do people do and how do they figure out their edge and, you know, expand on that? - So, you know, I've been between jobs many times. We talked about the positive parts of my career where there are times that did not work out and I had to be like, dude, what is wrong with me? I remember being out of a job after being a Goldman MD and many firms wouldn't hire me. And I was like, dude, but I was a Goldman MD. Like, how come you're not hiring me? What the hell? And so, look, yeah, I've been humbled. I've had my ass kicked. I've lost 20% of my net worth in one year. I've made a fair share of mistakes. So, you know, it's kind of what you say. All I have is 25 years of mistakes. 35 now, 35, I have to update it. - All I have is 27 years of mistakes. - There you go. - I've been humbled, I've been broken. And so when I exercise, that i did and it's different from everybody is just it's just to spend a lot of time journaling right and this is again you know getting philosophical on us but i think a lot of times we don't spend like actually getting inside our head and being like what am i thinking what am i doing this for what do i need what am i good at uh what should i be getting better at what do i already know um and just turning yourself into a compounding machine like james clear has this great analogy that i always tell young people which is like look um just figure out where you want to go and then get one percent closer to it on a daily basis we all talk about compounding investment in our capital but and buffett talks about this the most important asset is you dude like you are the most important are you getting better as a person every single day and if you get one percent better every single day which doesn't seem hard for an individual to be one percent better every day you're 37x better after a year like that's compounding wow yeah you compound yourself more than you can compound your portfolio so just compound yourself right we talk about buffett but we missed that part about buffett okay that is awesome so listen i'm going to spring a last question on you and over the years i've done a bunch of different ones sometimes it's music sometimes it's something else i think for you and your philosophical bent i i think that it's an easy one i'm gonna grab i think it's patrick who does this one so i'm gonna steal it from him and and you i apologize that i didn't prepare you for this for this but i was wondering if you could share a story of some time in your career of something that someone once did that was very kind to you that was very important in terms of your uh development of your career so i'm going to keep talking so that you have chance to think about this but um but in essence what we're looking for is like a somebody that was helpful and kind to you along the way and a story that you could share with us you could do that sure um i i I will get personal on this one. And it's not directly to do with my career, but it has shaped my career. So, look, I got married at 25, divorced at 29 in New York, right? So there I am, divorced before most people get married. I'm sitting in New York City, 29, divorced, like, what the heck has just happened to me? And I meet this girl who's now my wife, Nilou. And she's a lawyer at JP Morgan. She's a big breadwinner and cracking the whip on me and having me find my edge. But where she found me, I was in the abyss. I was a broken man. And she picked me up and she changed me. And I was a very alpha, angry guy. And she fixed me. And then I fell again in 2010, 2011. I was trying to make an MBA at Goldman. I didn't make it. Fell into an abyss. 2016, I lost 20% of my net worth. She was there. Never has she questioned me. Never has she pushed on me. She has always held my hand. She's always been supportive. She's brought me out of the abyss multiple times. I can't help but fall into the abyss. And she always pulls me out of the abyss. So that is. That is a lovely answer. And unfortunately, you've ruined this question for every single guy who goes in and has to answer in the future. Because people will listen and go, geez, you know what? My wife is never going to be able to live up to your wife. Anyway, that is a lovely story. And so let's talk a little bit about your substack, your letter. Tell us about it. Tell us what you're trying to accomplish, who it's for, how they can learn more about it. Thank you. You know, No Big Sales Pitch, it's, like I said, I write something every week or so. It's at the intersection of markets, technology, and people just trying to make sense of reality, trying to make sense of where I think we should be going, we should all be going. It's free. For everybody, if you want the back catalog, there's paid. And for people who like things like 13D or what I learned this week, I've started a research letter that is sort of off that ilk that will be launching in September. And then I have a super secret thing called the Brain Trust, which, you know, what I said earlier about the weirdness premium or cognitive diversity, it is a gathering of 80 or 100 of people that are at the top of their game in different worlds, in different geographies. And we all come together to share what is the super secret stuff. Because of the internet, everybody has stuff from Brock and ILMs. But the real edge now, I think, is what lives in people's heads. And so I spend a lot of time talking to people and getting that edge. I got to write that down because that's the real edge is what lives in people's heads. Okay. You know, Ahmed, this has been a lovely, lovely time talking to you. And you did not disappoint. Again, it's The Curious Mind on Substack. Go sign up. It's free. Everyone, I highly recommend you do that. Thank you very much for your time. Thank you, Kevin. Pleasure.