Invest Like the Best with Patrick O'Shaughnessy
· Paul Tudor Jones
[00:00:00] S1: It’s such a great question because the kindest thing was also my very, very, very first childhood memory. I was probably two and a half or three. It was probably 1957, and I was with my mother at this place called the Curb Market. I got separated from my mother. And boy, you can imagine being two and a half years old and separated from your mother, you're terror stricken. This elderly black gentleman came up – and I was sitting there bawling my eyes out because I thought my mother had left me – and he said, “What's the matter, little boy?” And I said, “I lost my mama.” And he said, “Here, don't you worry, we're gonna find her.” And he grabbed my hand and we started walking up and down the aisles. It was an outdoor vegetable market. Gosh, I can almost still smell fruits and vegetables. We come around the corner finally and I see my mother and I was so happy. And my mother saw me, and at first, she just started laughing. And I remember her, she was laughing so hard. She comes and she gets me and she says to that man, she tries to give him $5 – which was in 1957, a huge amount of money. And he said, “No ma'am. I know you'd do that for my child too.” And it was such a simple act of kindness, but it was so profound to me at the time. So that night, I had a prayer list with my mother that she used to go through with me every night. So it'd be God bless Mama, Daddy, Peter, Paul, Alberta, Granddad, Pete and Judy Lennon, and Sid. And then we added – I said, “What was that man's name?” She goes, “I never got his name.” For the next 10 to 12 years, right in that prayer list would be that man. Probably four or five thousand reps, every night for that man. Fast forward to 1986. I'm living in New York City, I'm lying on my couch. 32 years old. And I'm watching 60 Minutes and Harry Reasoner’s interviewing this guy, Eugene Lang. And Eugene Lang was a businessman who had gone back to give the commencement address to his elementary school up in Harlem, which over the course of the intervening 60 years, had completely transformed from a gentrified area into an African-American and Hispanic community, with almost a population entirely consisting of people of color.
· Paul Tudor Jones
Gene asked the principal, “How many of these kids, these 12 year olds, are gonna go to college?” The guy said, “Hmm, statistically maybe, I don't know, 8 or 9%, something like that.” He could not believe that because obviously he had graduated from that school, gone on to college and then done very well. So, right there on the spot, he decided, “I'm gonna promise every one of those kids, if they graduate from high school, I'll put 'em through college.” And that resonated with me so much. And he adopted that class and he created something called the I Have a Dream Program. I said, I can do that. The next day I called him up and he said, “You know it's funny, three or four other people have called me and we're all meeting at my apartment on Tuesday night.” I got there late. I was seeing myself up in Harlem or somewhere on the lower east side of Manhattan. I got Bed-Stuy, the highest crime ridden community in New York at that time, even higher than the Bronx. And that began this journey. I put my heart and soul into it. I'd go over there every Tuesday. I went to the commencement address for this elementary school, did the same thing that he did, told 'em that if they graduated from high school, I’d put them through college. Of course everybody was jubilant. It was a big surprise. The parents were so happy. That began this big journey for really the next 14 years, because I kept adopting successive classes. I had tremendous passion. We were doing after school programs, we were playing sports, teaching life skills. About three years in, I realize these kids aren't doing that great. Now they'd gone on to different junior highs, they're not doing that great. So I started hiring some tutors, figured that out. And then probably four years in, I had one kid who got killed. I had a bunch of girls become teenage moms. So now all of a sudden I'm dealing not just with the academic challenges, but also with the social challenges to boot, of which there are many. Along the way I learned so much by failing. I learned so much about what it takes to actually beat poverty. And by the way, 1987, the year after that, was when Robin Hood started. And then that informed me through – certainly, it was extraordinarily instructive as we built Robin Hood out and began applying metrics and making sure we had goals and standards and a variety of things.
· Paul Tudor Jones
It also led me ultimately to start one of the first charter schools, in the late nineties. In Bed-Stuy, right next to that spot actually. I started a charter school called the Bed-Stuy Charter School of Excellence. The first one started out as an all-boys school. We named it Excellence because I wanted these boys to know that we were going to demand excellence of them. And we completely, totally crushed it. We hired the absolutely dream team of educators to do it. And within about four or five years, we were number one out of 543 elementary schools in New York City. The point being that you can have all the passion in the world, but you have to have a plan. There has to be a great pedagogy in what it is that you're trying to do when educating a kid. Why is all this relevant? Well, just think about this. So, here was this one simple act of kindness – of this elderly man helping this young child. In that case, a black man helping this young white boy. And so when I saw Harry Reasoner and I saw that elderly man helping those young kids, it was the photo negative of what had happened to me. And I thought, wow. It just was instinctive. The point here is that one simple act of kindness can have waves of betterment. It can be so transformative and so multiplicative. There's no doubt in my mind that 4,000 reps of thanking that elderly man who helped me as a child inspired me when I saw Harry Reasoner interviewing Gene Lang, to emulate that in a sense. I keep thinking how instructive it would be if intentionally, we just all start every day with the goal of one simple act of kindness. It doesn't have to be anything big; it can be something as small as what happened to me when I was three. And look at the possibilities that come from it. Just imagine if 350 million Americans intentionally start out every day for one simple act of kindness. What I will say, particularly to young people that might be listening to this, I'll tell you before 2000 – I would say 2000 was kind of a turning point. All this demonization and criticism, and the attack mode that we seem to be in – it didn't exist. It's not the way, by the way, that this generation that's perpetrating it and promoting it was raised. It's not the way we were raised. It's not the way of the seventies, eighties, nineties, you didn't have these vitriolic attacks. There was a much higher level of civility and respect.
· Paul Tudor Jones, Patrick O'Shaughnessy
And I think down the road, we'll get back to it. So I would just say to young people, you don't have to accept today is what this country historically has been about, because it wasn't that way when I grew up. It certainly wasn't that way, and it's not going to be that way in the future. [00:00:00] S0: Absolutely incredible story. Maybe my favorite version of this answer that I've ever had. First time I've ever done it at the beginning of the episode, which makes it fun too. What was your message in the commencement speech that you ultimately gave? What did you decide was the message to leave them with? [00:00:00] S1: So I got up there and I looked on the dais and I said, “how many – you know, there's like 20 people over 50 or 60 – how many of you remember your college commencement address? None of 'em, not one of 'em could remember. I loved to hunt and fish. So I go through and I talk about just kind of the normal challenges they're gonna face in life. And I also talked about how going through this process, I wanted to make sure I was gonna say something that was memorable. So right there at the end, I said, so whatever you do – and I pulled out my bow and I knocked in the arrow – I said, so whatever you do, aim high and shoot straight. And when I went like this, the whole crowd goes, “whooo”. Aim high and shoot straight. And I had an apple on a table over here and smashed it. [00:00:00] S0: Knocked it. [00:00:00] S1: I don't know whether they still remember or not, but I know when everybody was ducking I thought, oh, they're gonna remember that.
· Paul Tudor Jones, Patrick O'Shaughnessy
[00:00:00] S1: I don't know whether they still remember or not, but I know when everybody was ducking I thought, oh, they're gonna remember that. [00:00:00] S0: Absolutely love it. It's an excuse for me to ask my other question about this difference between investing and trading. So I'd love you to explain the life of a trader in contrast to that of an investor.
· Paul Tudor Jones
[00:00:00] S1: If I just think about when I started – I started in 1976. Inflation was raging. I started on the floor of the commodity pits. Stuff was literally going up and doubling and cutting in half every year. The volatility was insane. To give you an example of how crazy things got, Bunker Hunt was squeezing silver at the time, and he bought about 200 million ounces at an average price of about three and a half bucks. And between 1976 and 1980, we had crazy monetary policy. Inflation started ripping and silver went literally through the roof. Ultimately, I started out on the floor of the cotton exchange. I bought a membership on COMEX, which was the metals exchange at that time. I got in the pit and was executing some orders for them sometimes along the way. And the bottom line was that it was just the most amazing bull run. And I wanna say by like ‘79, silver was around 30 bucks an ounce, and all of a sudden he was worth about five or six billion, which made him worth three times the next closest person in the world. Bunker says, “Well, I think this silver here is the most valuable asset and resource on Earth.” And someone asked him, “What are you gonna do with all that silver?” And he goes, “I'm gonna bury it. I'm gonna bury it. In fact, what I'm gonna do is I'm gonna buy 20 million more ounces, and then I'm gonna bury that too.” So he buys 20 million ounces at 35 bucks. And when that happened, it just, woo-hoo! It just roofed, right. Goes to 50 bucks. So at 50 bucks now, he's worth about 11 billion and he's got a multiple of five or six on the next closest guy. I just couldn't even believe what I had seen and how much money that this guy had made. Anyway, so that was when COMEX decided – the commercials had been just eradicated, because they're sitting there holding physicals and having to put up this margin every day. And their bankers are going, “Yeah, can’t do it.” So anyway, they made it liquidation only. Silver collapsed. It went from 50 bucks to under 10 bucks in the space of about eight weeks. And that had a searing impact on me, to see him go from the richest guy to virtually bankrupt in the short space of six or seven weeks. Right then and there, I would never own anything or trust anything for the rest of my life.