Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Paul Tudor Jones
[00:00:00] S0: What does that mean? Exquisite execution. [00:00:00] S1: Am I buying when there's blood on the ground and am I selling when there's complete elation? Let’s take last Friday where you had the largest down day in the history of gold and silver. So you have to be paying attention every minute, because when you have a 33% move in silver in one day, you just have to be so focused on that day's activity. What you're gonna do on the opening, what you're gonna do if the price moves through a certain price that you weren't anticipating that day. It gets back to what I learned in Bed-Stuy. You better have a plan. You better have a plan ahead of time, and it better be self-executing, and you better have thought through that. And I hear it from my other friends who are macro traders. They go, “God darn it. I just feel like I'm two hours late, three hours late.” And last Friday was a great example. It can be so material. [00:00:00] S0: If I think about what's required to do that day in, day out, there's gotta be an enormous amount of passion for markets and what you do. Can you just talk about the notion of finding, nurturing the importance of passion in a life's work?
· Paul Tudor Jones
[00:00:00] S1: It's so funny, when we talk about traders, great traders – and again, I'm talking about people who are alpha generators, not investing. We had a dinner about – I guess it was a year ago Christmas, and I had four or five of my best risk takers at dinner. And we had the debate, are great traders born or made? I'd say it was unanimous agreement at the table that 70% of it is nature. And when I say born with it – by the time I was 21, I loved games. I loved chess, backgammon, Parcheesi, Monopoly, Battle, Gin Rummy. You name it, I played it. Then I started gambling in college. I had a degree in probability theory and had never taken a math course on it, but I knew it. I was such a game fanatic, and I loved it so much. If I had to pick out the number one traits – Type A personality, incredibly curious and inquisitive. And loves competition, loves games. Because again, our whole business is just another form of probability theory. And I still love it today. I play bridge with my friends all the time. I can't get enough of that. I love any kind of game of chance. And I love trading. And the other reason that I love trading, I'll never forget – my wife's Australian and we first got married back in 1989. She said, “Well. I know you gotta live in New York, but I came from the beach. So when our last child graduates from college, you're taking me to the beach.” So sure enough, my son turns 18, my fourth child. 2014, we're going. So we ended up down here in Palm Beach. She gets me a GP. The GP, a general practitioner. She makes me go in, I see the guy and this guy's 83 years old and I say to him, “You're living here in the land of the walking dead. Everyone here is basically fossilized. What is the secret to longevity?” And he goes, “It's real simple. You retire, you die.” That had a really profound impact on me, because I realize as I get older, and maybe when you get older, you will too. If you don't use it, you're gonna lose it. And that's why I try to work out two hours a day. Another reason that I enjoy trading is I want to keep my mind sharp. Because there are too many things that I want to do when I'm – my father lived to be a hundred – when I'm in my nineties, that I want to do. So I think trading is great therapy for me. The other reason that I really enjoy trading is I'd like to make an absolute pot of money so I can give it away.
· Paul Tudor Jones, Patrick O'Shaughnessy
I got so many causes that I want to give it to that I actually feel like this is the pursuit of nobility. I feel it's a privilege to wake up and I just hope I freaking kill it, so I can give it away. [00:00:00] S0: Can you tell us the story of starting Robin Hood? You talked to us earlier about the charter school work and everything in Bed-Stuy. Robin Hood started the year after. It's a really important part of your life and legacy.
· Paul Tudor Jones
[00:00:00] S1: Robin Hood happened the day after the crash. Maybe the worst macro call of my life was thinking we were going to go into depression. I thought for sure – I’d been looking at the parallels to 1929 for a year, all of a sudden it happens. I think, “Oh my God, this is a perfect replay, a perfect analog.” So I called up my friends and we began it. It has just been the most marvelous journey. I can't recommend anything more highly than getting involved with some cause that you believe in. The best part of philanthropy and charitable giving is the people you meet. Oh my gosh, I've met the greatest, most wonderful, most giving – it just brightens every aspect of your life to be associated with the best people, who embody the best ideals. We say we've gotta do something. So the only alternative at that – there really weren't any charities focused on fighting poverty, which I thought was gonna be rampant at the time. So, I've always believed if you want to do something, you're better off doing it yourself. So we started out very small, and we just applied basic business principles to finding the most efficacious way of helping people in need. Again, along the way, I'm learning by doing and making all these mistakes along the way, and I'm learning so much. And then I realized, boy, this is a science. And then we just started hiring the very best people that we could as our staff, and then recruited – it was so easy to recruit people from the financial world to help. The nineties were a special time. Everyone wanted to participate and give back and help. I don't know what it was, but my gosh, we created so many fantastic philanthropists in that era. In the eighties, it was completely different. Everyone wanted to be associated with the Philharmonic – and these are all great – but they wanted to be with the named social charities. And I'd say after the crash, everyone found their significance by helping others. Maybe it was just because that was when you really started to accumulate these big fortunes, individual fortunes for people. And they were just really, really wonderful about wanting to give back. And the whole financial community supported Robin Hood in such a spectacular way, and the whole hedge fund community in New York. It was really– it still is a joy.
· Patrick O'Shaughnessy, Paul Tudor Jones
[00:00:00] S0: If you think about the whole broad world, what feels the healthiest to you today about the system that is the world, that makes you the most optimistic? And where does it feel the most fragile? [00:00:00] S1: I'm trying to fast forward to the workless world. To where AI does so much for us that we don't have to work. And I used to have a really negative outlook on what that would be like, because if you think about it, so many of us define our significance through our work. Imagine a world where now the significance – that huge, incredibly important component of human happiness – is now taken away from us because of the fact that we don't have to work. I used to really despair about that, because as someone who works all the time and finds mine significant, what am I gonna do? But I've become more optimistic recently, because as I think through how athletes find significance in the sports they do, how I play bridge with my friends and find so much significance in competing with them, I think maybe humans are adaptable enough that we'll find a different way to find significance. Maybe it's gonna be in finding that intentional, simple act of kindness every day. I'm not sure what it is, but I do think that as a race, we're so unbelievably adaptable, so smart that we might be able to find out a way to find happiness. I think that's gonna be the biggest challenge potentially in four or five years, is what do we do when so many of our jobs have been replaced by AI?
· Patrick O'Shaughnessy
[00:00:00] S0: So many young people are trying to figure out what to do, what their careers are gonna be. You've talked and written a lot about the power of communication. Great communication is such an essential skill. Journalism is an interesting way of learning that. Can you talk just about that power, as a message to young people trying to figure it out? Why they should maybe focus on that?