Pods & Recs No. 100

Today we have a great episode on alternative risk premia, a wide-ranging conversation with the Managing Director of Thiel Capital, Eric Weinstein, a great episode on investing in marketplaces, and an episode on why sleep is so essential.

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Business

Public Investing

• ***Must Listen*** Resolve’s Gestalt University: Chris Schindler: The Alternative to Alternative Risk Premia. Chris Schindler joined the Asset Liability Group at Ontario Teacher’s Pension Plan in 2000 and soon became one of the founding members of the Tactical Asset Allocation Group. This episode is as good as it gets for someone interested in developing quantitative tools and optimizing portfolios. Schindler’s early research led him towards CTA’s and Risk Parity and he discusses how, while most managers focus on returns, you need to think about correlation and risk as well. He discusses the difficulties in dealing with correlations within models, why global bonds are a better diversifier than equities, an old AQR paper on replicating the performance of some of the top investors (you can hear their podcast on that paper here), and the difference of investing in public and private markets. One theme he repeats throughout the episode is a PM has to be able to tell a good story to backup their model; with so many fundamental investors telling fantastic stories, a quantitative manager has to be able to do the same with their model in order to attract capital. [January 29, 2020–1 hour, 40 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link

I am expecting 8% return and the market is expected 6%, and I don’t know you how figure that out because that’s actually hard to figure out. And then you have to have the third piece which is here’s why the market got it wrong and here’s how they are going to come to my understanding. Those are the three things that have to happen in order for you to make money.

• The Acquirer’s Podcast: Simon Adler: Schroders Value Fund Manager on Recovery Value. Adler is a Fund Manager on the Schroders Global Value Team, where he manages two funds: Global Recovery and Global Income. He explains the Income fund focuses on earning income for investors, while the Recovery fund looks for the deepest value while screening for the cheapest stocks in the world, and they will not invest in a stock if it isn’t on that screen, no exceptions. He says he sees the best value in the UK (miners and banks) and Japan (strong balance sheets) and explains the four edges he believes his firm has at 30:10: informational, analytical, behavioral, and organizational. Other topics he covers include position sizing, assessing risk, where companies tend to fudge with their financial statements, and his team’s process of analyzing companies. [January 27, 2020–56 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link

I can’t tell you when, and I can’t tell you why, but what I can tell you is that if you invest over the long-term in the cheapest companies, I’m pretty sure you’ll significantly outperform.

• Bogleheads On Investing Podcast: Episode 018: Paul Merriman. Rick Ferri is joined by Paul Merriman, who is a nationally recognized authority on mutual funds, index investing, asset allocation and both buy-and-hold and active management strategies, and previously ran an investment advisory firm before retiring. Merriman explains why he believes a total market index is not ideal for investors because of its market-cap weighting, and investors should instead construct portfolios based on asset class weighting. Ferri then explains the difficulty with that is when an investor’s local market outperforms his portfolio, the investor tends to overtrade, resulting in even worse performance. While they disagree on this topic, they agree that the best strategy is the one that allows an investor to remain invested over time. Merriman also discusses the difference in investment styles between younger and older investors and emphasizes why he loves small/value portfolio tilts, along with being globally diversified. [February 1, 2020–59 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link
• The Jolly Swagman Podcast: #78: The Intellectual Wild South Is Open For Business — Eric Weinstein. This is one of the most wide-ranging conversations I have listened to, and although it is a big investment to devote three hours to an episode, this is worth it. Weinstein is the Managing Director of Thiel Capital, a mathematician, and host of a great podcast called The Portal. He talks about being weary of Mortgage Backed Securities in the early 2000’s because they were being valued based on a story instead of mathematically, his first time meeting Jeffrey Epstein (which led him to immediately call his wife to tell her how disturbing he was), the rise of Donald Trump, his relationship with Peter Thiel, and why he believes Thiel supports Trump. [January 30, 2020–2 hours, 56 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link

We do not appear to be developing wisdom at any rate comparable to that which we’ve developed power.

• The Meb Faber Show: #200 — Radio Show — Decade End Returns and Valuations . . . Process vs. Performance . . . VC Power Laws. This is a fun “radio show” which consists of Meb Faber and his co-host covering a variety of topics currently in the news. They talk about how the Coronavirus may or may not impact your portfolio, how U.S. stocks have surprisingly (at least to me) underperformed other asset classes the last two decades (shows my recency bias), the trouble with evaluating managers and CalPERS recently letting go managers. They also talk about how power laws impact investors returns and are even more prominent for venture capital funds, and some interest stories on what happens when people invest in funds without doing their due diligence. [February 5, 2020–52 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link

Venture Capital

• ***Must Listen*** Venture Stories: All Things Marketplaces with Fabrice Grinda. If you are interested in marketplaces, this is a fantastic episode. Grinda is an angel investor who has invested in over 124 startups last year, most of which are marketplaces. He explains the three trends he sees within marketplaces: 1) verticalization of marketplaces (StubHub for tickets, StockX for sneakers) and you can view his paper on this here and another great paper on this topic by a16z here, 2) marketplaces choosing the supplier for you (Uber sends you a driver they have chosen), and 3) B2B marketplaces. He provides countless examples of companies fitting all of these trends. He also explains the criteria he looks for in companies: 1) founder team he likes, 2) business he likes, 3) does he like the deal terms, and 4) does it match his thesis. He also covers what opportunities he sees for marketplaces, and areas that he is both bullish and bearish about. If you enjoyed this episode, Venture Stories recently had another great episode on marketplaces you can listen to here. [February 6, 2020–1 hour, 15 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link
• Off the Chain: David Pakman, Partner at Venrock: The Age of Automation. Pakman was the co-creator of Apple’s Music Group and is now a Partner at Venrock, where he focuses on early-stage venture investing in consuming and enterprise tech companies with a recent focus on robotics, crypto, and consumer products. The episode begins at 6:05 and talks about his time at Apple Music. Then at 28:45 he moves on to discuss his time post-Apple. He discusses why he wants to ride the crypto wave, why he is so bullish on audio to due its lack of friction to start, and why AI is being used as a feature instead of a company itself. He also addresses whether or not he thinks crypto and ICO’s will replace VC’s (he thinks they’re alternatives to each other and can co-exist), and explains why crypto collectibles is something that excites him. [January 27, 2020–1 hour, 51 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link

The Rest

• Talks at Google: Matthew Walker: “The Shorter Your Sleep, The Shorter Your Life.” Dr. Matthew Walker is a is Professor of Neuroscience and Psychology at the UC Berkeley and author of the best-selling book, Why We Sleep. He covers the same topics in this quick talk as he did in his book — the importance of sleep and how the global-sleep loss epidemic is causing a global health crisis. While that may seem dramatic, once you hear him explain the impact of sleep-loss on just about every facet of our life — reproductive systems, cardiovascular system, metabolic system, immune system, and brain — it is eye opening. His two pieces of advice are to have a regular sleep schedule and keep the temperature cool (67–68 degrees). If you enjoy this, I recommend reading his book and/or listening to his 3-part appearance on Peter Attia’s podcast. [January 31, 2020–21 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link

The number of people who can survive on seven hours or sleep or less without showing any impairment rounded to a whole number and expressed as a percent of the population is 0%.

When we lose one hour of sleep in the spring, we see a 24% increase in heart-attacks the following day. When we gain an hour of sleep in the fall, we see a 21% reduction in heart attacks.

• Impact Theory with Tom Bilyeu: #175 John Maxwell on How to Jumpstart Your Personal Growth with High Level Leadership. Maxwell is one of the most widely recognized experts in the field of leadership and has written numerous best-selling books on the topic. He stated the way to lead people is through influence, and the way to get someone’s influence is by adding value to them every single day (among many other great points). He says to go meet with people you lead where they are — don’t have them come to you. He finishes the episode by discussing the importance of growing future leaders, and then says the real impact of a leader is seen through all the future leaders they’ve developed over time. [February 4, 2020–50 minutes] iTunes Podcast | Spotify | Overcast | Breaker | Website Link

People say experience is the teacher, but it’s how we evaluate that experience that matters.

RECOMMENDATIONS

Books

Below are books that podcasts guests suggested on episodes I listened to last week. The descriptions are summaries of what the guest said, not my own opinion.

Keith Rabois (General Partner, Founders Fund):

1. High Output Management by Andy Grove — It is THE book on how to run a start-up, written in 1982 and I don’t think anyone has written anything nearly as good. The book has been so influential that many things that were radical and innovative in the book are now so widespread, like 1 on 1 meetings with managers.
2. The Score Takes Care of Itself: My Philosophy of Leadership by Bill Walsh— The philosophy of the book is that by not focusing on outputs like winning a football game, the way you fundamentally win a football game is by doing everything precisely and perfectly consistently. You start with a philosophy that you will measure everything and make people accountable for being incredibly disciplined and focused.

Sarah Leary (Co-Founder, Nextdoor):

1. Bowling Alone: The Collapse and Revival of American Community by Robert Putnam — Talks about the importance of building social capital and trust, and that has been on a slow & steady decline the last 30–40 years. This leads to issues where crime rate goes up, test scores go down, and public health is worse.

David Pakman (Partner at Venrock, Co-Founder, Apple Music):

1. Enlightenment Now: The Case for Reason, Science, Humanism, and Progress by Steven Pinker — Helped him be less depressed and realized the arc of history bends towards justice, and things are getting better if you look over the long term.