Invest Like the Best with Patrick O'Shaughnessy
00:55:32 · Patrick O'Shaughnessy, Dan Loeb
[00:55:32] S0: Why do you suppose more places don't do that? It seems like it would be an obvious thing to provide an advantage, have more options for expressing a view. [00:55:40] S2: It's so different. I grew up in credit, I worked on a trading desk, you don't just electronically trade bonds, you have to have relationships with these firms. Part of the reason for expanding into the CLO business is that we had the high yield market, trillion and a half dollar market, pretty well wired. We were sort of dabbling in the broadly syndicated loan market, is another trillion and a half dollars, But we also have eyes on a $6,000,000,000,000 structured credit market. But these are not markets that lend themselves to tourism. When the opportunities really come up, we're already there with the relationships and the understanding the companies. [00:56:21] S0: What makes a great analyst today in any way that's distinctive from what made a great analyst twenty years ago?
00:56:28 · Dan Loeb
[00:56:28] S2: The great analyst twenty years ago was like someone that could build a model really fast and understand some really complicated restructuring. Like when I was, I'll use myself as the example of that ancient dinosaur of an analyst that used to be useful. When I was at Jefferies, Drexel went bankrupt And there was a thick disclosure statement about three or four inches thick on this bankruptcy of a company called Drexel Burnham. And this thing got passed around and nobody could crack the code on this thing. And I was relatively new. And I knew I had to differentiate myself. So I just spent like a whole weekend studying this thing. And ultimately, that was one of the best investments ever in the history of bankruptcies was the claims on Drexel, because people didn't understand the complexity of the different value pools and liquidations, and the claims were overstated, the assets were understated, but it was super complicated. And that was the kind of thing that differentiated the analysts of the nineties when I did that. I think now it's somebody who's like a Gavin Baker type, a junior Gavin Baker, somebody who understands a company or understands an industry and understands the nuances of a technology. Let's get away from technology for a minute. Casey's General Stores. Why was this one of the best performing stocks? It looked like a tech stock. It was because they were not a convenience store chain, were a pizza chain masquerading as convenience stores. I had an analyst who went to Texas and ate pizza and that kind of an analyst today, I think is what is different.
00:58:10 · Patrick O'Shaughnessy
[00:58:10] S0: If you think about the next ten years for yourself and everything going on in markets, I feel like we're all lucky to be alive to watch this era. What excites you the most about this next ten year period as an investor? And you're lucky you have all these resources and you can invest in anything and credit, equity, whatever. And then what worries you the most?
00:58:30 · Dan Loeb
[00:58:30] S2: The thing that worries me the most is just not having the time to do the things that I care about, spending the time with my family or being able to go surfing and read books that I want to read. I'm not really worried about the business. And then the thing that excites me is just the things that have excited me that keep me going. Mean, what an awesome opportunity to be able to incorporate everything that you can possibly know about the world that's relevant to study industries, to study technology, to study consumer behavior, to look at The US economy, at politics, to travel to The Middle East, which I think is probably the most vibrant, interesting part of the world. I mean, would have thought twenty years ago, or even three years ago, that Bahrain, The Emirates, Saudi, Morocco, Azerbaijan would be better allies to The US than NATO? Who would have thought that their growth rates would weigh exceed them or their embracing of technology? That's the stuff that keeps me going. Just being able to incorporate all these different things and also to form relationships with people that are doing interesting things. It's just incredibly fun to hang out with Jeremy O'Brien who founded SciQuantum and talk about quantum computing or Eilad Raz who started NextSilicon or the CEOs of the companies that we invest in. I've get to know Mitch Rails from Danaher's.
01:00:02 · Patrick O'Shaughnessy, Dan Loeb
[01:00:02] S0: It's so cool to finally be able to do this with you. I've obviously followed the Third Point story for many years talking to you about it and others. And the thing that I really take away is draw your own path. Don't just copy other people. Third Point doesn't really look like any of the other firms that had been built, but it works for you and for the team. So it's so cool to finally hear about it directly and do this with you. When I do this, I ask the same traditional closing question of everyone. What's the kindest thing that anyone's ever done for you? [01:00:25] S2: Before I answer that, I do want to talk about the importance of kindness. And I know you know it's important because you ask this question every time you interview someone. It's important on many levels because I think if you elevate kindness as a characteristic that you want to elevate in your hierarchy of things that you want to be honest and truthful and smart, clever, innovative. Kindness is very important. I think it goes with forming deep relationships with people. Kindness enables you to be empathetic. I think it's that empathy that enables you to connect with people, to learn from them, to be better as a human being. I hate to sound crass, but ultimately it will benefit your business. So I will say on the kindness front, be kind to the people, not just that will benefit from you, be kind to people you have no idea how it will ever benefit you. And sometimes it will. And sometimes it won't. Sometimes you just connect with someone who thinks you're a better person.
01:00:25 · Dan Loeb, Patrick O'Shaughnessy
[01:00:25] S2: Before I answer that, I do want to talk about the importance of kindness. And I know you know it's important because you ask this question every time you interview someone. It's important on many levels because I think if you elevate kindness as a characteristic that you want to elevate in your hierarchy of things that you want to be honest and truthful and smart, clever, innovative. Kindness is very important. I think it goes with forming deep relationships with people. Kindness enables you to be empathetic. I think it's that empathy that enables you to connect with people, to learn from them, to be better as a human being. I hate to sound crass, but ultimately it will benefit your business. So I will say on the kindness front, be kind to the people, not just that will benefit from you, be kind to people you have no idea how it will ever benefit you. And sometimes it will. And sometimes it won't. Sometimes you just connect with someone who thinks you're a better person. [01:01:30] S0: Good for his own sake.