YouSaid · the spoken record

George Michelakis

lines on the record: 62
first: 2024-01-15
most recent: 2024-01-15
sittings or episodes: 1
sources: podcast

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“And this is a very deville want to put in practice, but really keep the contract with the people around you that understanding with people, what I'm bringing, what they're bringing, what we expect from each other, and really flesh that out as much as possible. It's a hard thing to do in practice. I think people are good at it tend to get much further in life. As human beings, I think we enjoy a bit of ambiguity. Life is ambiguous, but the more you can create that clarity in your personal relationships and business relationships, any kind of relationship really, the more you can do that, the better you can do that, the more effective your relationships are.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the investment side, I would say buy good companies and short bad companies. It's so, so, so simple. And the number of people that tell me they're going to shorten video or have a short NVIDIA, I'm just giving you a recent example. I've probably heard that half a dozen times in the last few weeks. And I'm sure they'll eventually be right for some period of time. But is that investing or is that just trying to catch trade? And so a little bit, why good companies and short bad ones?”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Intellectual dishonesty gets to me people confabulate and make stuff up that sounds right, but it's intellectually just invention.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was multiple yo-yo champion. You didn't know that. I actually forget that for some reason. But I think I won every single yo-yo event I ever participated in. I was really good.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Playing the game is you're gonna not be as good, sir, but I've accepted that. It's more who the characters are what the politics are and understanding how the game's evolving. I'm taking the team to have dinner with a seventeen year old who recently was number eight in the world, and just to hear from him what methods and techniques are different from ten, twenty years ago and getting my investment team to engage with somebody who on average is half their age and is eighth in the world. So this is what's achievable, this is what's possible.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Would have to be chess, so I'm still somehow entertained by the game, and I do love to stay in touch with the community globally. Still fascinated by the sport, you feeling.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rolof Sequoia, I think he's very much a foll of the data and the fundamentals and understand data and what the drivers of change are. So that's been a super valuable learning for me and he's in the business of backing the right people who can grow companies. So also learning about backing the right quality of innovation and creativity. Frederick Stolar, who worked with me at Capital Z, who was a Wooper Pinkis partner, and just the rigor and discipline to dissect businesses and really get to the bottom of is this a good business? How does the flywheel work at each level of the business? It was a sort of analytical process and rigor that I hadn't seen before, and we try and apply here. So I'd say those two, probably the most influential.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“At interesting startups, that realization that Longshort is the same thing, it's actually quite a boutique bespoke business, and it probably shouldn't be that many proper long short single managers out there when all is said and done”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there seems to be more skepticism. And I think that's healthy because I don't think it's possible to have a thousand great longshore managers. It's just too hard and it's too specific a skill set. So that's skepticism is probably healthy. I sense disappointment in the community with the overall returns from Long Short. I think once they get over that, they'll just realize it's quite a bespoke business. How many great venture firms are there? Maybe ten. How many venture firms are around today as a consequence of the last TMT boom? Probably three hundred. So three hundred's gonna peel back. It has to, and it may be a decade long process. I think Long Short is a bit the same that just like venture is a very particular skill set, and it takes very strong world, particular people to get good at it. It's not just throwing money.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Embrace them. Their messages to learn. And I just haven't seen people do that. And part of the growth path for people to join us is enjoy that aspect. Then take it personally. No one shy acknowledged their mistakes because if you weren't making mistakes, you'd be perfect, and none of us are perfect.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think really being honest about what the data is telling us, looking in the mirror and measuring everything, and being brutally honest about what it's telling us. So that's embracing data. It sounds again simple, and most people think that they're doing it, but when it comes to themselves, they're far more reticent to embrace the data. I think this is one of the learnings from Chess, is that you want to get good at chess, you probably have to spend the most amount of time looking at the games you lost, because there's something you didn't understand about that game. Was somebody understood better than you? Reflecting on the games you won isn't going to get you better. It's reflecting on the games you've lost that gets you better. And take them personally. I think one of Dalio's philosophies that I very, very much like is mistakes, errors in the part of the business, part of life, but treat them like opportunities and try to make.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“I worry about cultural dilution, I think long short is a very specific performance oriented business where you have to be watching what are the great things that I want to belong and where's the trouble and what are the bad things happening where I want to be short and you have to be watching those two things simultaneously, morphing into a long only business the times where that's worked very well for people and I can really see how that's a good business for the manager But right now I think we've still got runway in terms of building the long short business out and retaining as the culture It's important to me why not? If somebody came along and said, Can you replicate your long book for us in some long product? It's possible. There's a time and place for things, but it's really not a priority”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you have the ability to generate a substantial amount of alpha over time, I'm curious your thoughts about extending your offerings to you. You've been this one long short equity fund for nearly 20 years. Lots of folks in your boat have said, oh, we're going to scale by offering a long-only fund out of your longs. And curious why you have not done that.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a totally different skill set, essentially, because that's about sizing and risk management and exposures. And then if you go all the way to the factor neutral world, it seems that 3% alpha works for everybody, that's fine. We're shooting for 20% alpha. Completely different order of magnitude.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's as simple as neck decisions at the fun level tend not to work. Two you want to do mid cap long investing Any hair on that acid tends to not produce outcomes that are good when shorts get below a billion dollars and we've probably had fifteen stocks in our history that have gone from large to below billion dollars and when they get to that type of market cap their behavior changes dramatically It's a survival call option. The data can tell you all kinds of things. I actually heard a great expression for those small shorts. Somebody call them squirrels. They keep making these noises. And a lot of people, yes, you can analyze companies and you can analyze what's a good company and what's not a good company. But can you create a portfolio that actually works with that information? And in long short equity, I've seen a lot of people who, the good at the analysis, the good at saying this is a good company and that's a bad one, but populating a portfolio that actually produces out.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Coded all these triggers. It's very much based on our long track record of me being the single trigger puller, which means the date is very consistent because I've made every single buy and sell decision in the portfolio. And there's a DNA. It's the countries. It's the sectors. It's the market caps. And there's a tendency to have a preference for some growth in a company. Doesn't mean I'm a growth guy, but we're not just looking for cheap for cheap sake, etc., etc., etc. So that DNA is encoded in literally, call it thirty thousand individual trades over time. So you can analyze all of that, and then it's extracting what your risk framework is from it. And we've probably spent a good five years doing that.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, as I mentioned, we have risk metrics, and it's a plethora of them, from country limits to subsector limits to sizing limits on the short side if stocks are extraordinarily volatile, to factor limits, to limits by analyst. So we've got a wide range of hard limits that are coded into our portfolio management system. They're based on our data. So this is based on a long track record and learnings from that track record, and they're not intended to produce what the platform is trying to produce, which is no beta, no factor neutrality, no risk to the house, essentially. So it's more, how do we optimize based on our data set? What exposures we're willing to take by country subsector factor, sizing, individual positions, stop losses? We've got this very colorful portfolio management system.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just not the fun part of being in TMT. Companies are companies and good companies that are getting better tend to embark on very similar journeys over time. And I think bad companies that are getting worse tend to embark on the same types of fact patterns occurring. The underlying principles tend to be the same.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Take the financial sector? I think there's naturally an underweight of management assessment. The expertise lends itself to a lot of three letronyms and lends itself to detail and numbers and a lot of information. And people often just don't lift their heads and say, who's running that company to the night around this company? We were disclosed on a short in Europe with a CEO had no experience running anything. And that CEO subsequently got let go overnight, but getting the team to focus on how's this person ended up running this company? That simple question, as opposed to all the facts and figures about how the business is doing this quarter versus next quarter, etc. And I think important for different sectors to hear how in TMT it all comes down to the seer or the management team. And TMT people naturally know that. But TMT people tend to not spend a whole lot of time on the balance sheet.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was looking at this insurance company in Bermuda versus I was looking at this tech company in Palo Alto. Great forum for that. And always surprising how similar people's experiences are. We're all somehow on the same journey when it comes to public market investing and getting people to actually realize that and be open about it. And oh, this wasn't unique to me. And what can we learn from that? And can I improve that? Oh, you did that? I probably should have done that. Just getting people to be open about what worked, what didn't work.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've organized the team by industry, so I work with three sub teams, as you point out, and we have three meetings a week, one with each of those teams, that runs through research and analysis, new ideas, existing ideas once a week. We're talking every day, but as a formal how we've organized ourselves and making sure that people have got a target date to present work, update, imposing some discipline and rigor and structure to everything. I found that's worked very well and allows small enough forum for everybody involved in that subsector to talk and engage and express their views. What we've moved away from is the entire organization sits down to talk about stocks. The entire organization, on the investment side, will sit down to talk about lessons learnt, share what happened when I was looking at this industrial in Germany versus”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're running 60 shorts. The average size is just over one percent each. And that takes a lot of manpower, especially when you have a very detailed framework and you're confirming every quarter a lot of numbers from cash flows to earnings to management turnover to incentive plans. So that takes a lot of organization. So I think of our portfolio as on the long side concentrated, private equity philosophy, longer dated holding periods. We're not interested in it's going to have a good quarter. And then on the short side a very industrial process with a lot of names. But the majority of the investment team organization time and effort is on the short side.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Alongside we've always ended up with 2025 longs, and I think the concentration and the private equity philosophy comes from my background. And if you're looking for businesses that you can sleep well at night and they're high quality and it's a good time to own those businesses, getting those factors to come together doesn't produce Android longs. It produces twenty to twenty-five at least of the quality that we like to invest in. So that's been very consistent. And here I could make an investment case for another 50 stocks, but does it fit our framework? And does it really tick enough boxes? Probably not. So that's been very, very consistent. Where we varied over time and we've now settled on a pretty consistent range is on the short side. And this is back to what I said right at the beginning. Manpower, how large want your short book to be with size shorts do you want, etc.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Business models and that seems like an obvious thing to say. But if I had to say something contrary to that, has Amazon proven that it has a good business model yet on the consumer side? Three percent margins It's a good business proposition for customers. That's very different to it's a good business model for shells. So really being focused on business models that actually are just great business models. Certain businesses over time have proven to just be better businesses because the model is better. That's again super high on my list of Darwin to be an investor in something. The external environment, is this a good time to be invest in this company or I can wait? This is just the wrong environment for this business. So identifying good businesses and then understanding when it's a good time to actually own that business. And then I could go through the list of moats and good management. But if I boil it down.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Counting is a big driver. It's an obvious one that people always talk about. If I had to pick one leading indicator on the short side, it's aggressive accounting tends to be symbolic of a management team that's trying to prove that it's better than it really is or trying to obfuscate something. So that tends to be another item on the list. And then we have another eight items.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Last decade, but over the last fifty years, that's not true. At some point you can't run a bank on the basis that you're going to have thirty basis points of loan loss provisions forever. It's not true. When that changes and how that changes, it's going to happen. It's just a question of when. They've overinvested in their cost bases, and they're behind on tech. So there's just a bunch of environmental factors that mean the entire regional bank space is probably under the most pressure it's been in for a decade. And we were short ahead of the market recognizing that. The market just didn't want to believe that things were actually not good for the banks until SVB happened. We're trying to score on a long duration, just what's happening in the sector. Is it a good time for these businesses or a bad time? Management departures, so just underscoring what key management departures and can be the chief accounting officer. It can be the chief financial officer.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“As I alluded to external environment, really understanding where we are, and I ask the team to think in tenure time frames. If you look at the company, what environment it's in today, how does that compare versus the last ten years? So I'll give an example. As we speak, regional banks in the US, if you look at the environment they're operating in today versus any point of the last ten years, it's the worst environment they've had. The regulators obviously tightening up, following SVB, rates have unstuck with low deposit rate culture that's helped the banks over the last at least forty years. So now that interest rates have moved up and customers actually expect to get a return on their deposits, that's meant the cost of funding has gone up. That hasn't been present. Never mind the last ten years, has been present for the last forty years. It's been great that there's been such low loan losses, there's been very little credit risk in the US system over the last”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Generally speaking, I think poor management tends to persist in upward folio, the longest standing positions are actually short positions. This is more of a bell curve, maybe things pay off quickly, maybe they just don't work and you cut and you say, look, the timing's not good. But the ones that have persistently underperformed, we tend to just stay short. And it's often about management and just their inability. Maybe they just have the wrong skill set. Maybe the political appointees. Maybe there's a disconnect between Sheldon incentives and how they've been elected. There's all kinds of stories. There's not just one template out there.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“They got a right eventually, getting under the hood and observing whether somebody's actually making the right decisions capital allocation decisions, MA decisions, and tracking what they say versus what actually happens and disaggregating them. So you've got to have a pretty sharp inquiring mind to keep listening out for gaps in what people say and then what they do.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Look into their background. We look for alignment of their skill set with the job that they've been hired to do. And you'd be surprised how many really good companies just hire the wrong people to run them. You've got to develop an eye for that. That's just the wrong person. They're not going to be able to do that job. It's coaching people to develop a sense of what does it take to run a business? And is that CV the right one? It's rare to see lateral hires hiring people from totally different industries coming in to run businesses that did our CEO was previously at a chemicals company. That's not a natural evolution in my mind. He was highly regarded in the chemicals industry. He had no experience that we could tell in the consumer industry. And some of these things are happening more regularly and frequently than we realize. It took Microsoft three ghosts to replace Bill Gates.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do they even think about understanding executives? What do they look for in the history and their buyers? And how do they assess them? And that's more the art side of this business? Calculating whether next quarter's earnings per share is going to be at plus or minus one percent is the science part. We should be talking more about management strengths and whether that behavior that we think the market will reward or not and actually creates fundamental value and less time talking about whether the next earnings per share is up or down one percent.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've got a short framework. There's 10 boxes in the short framework and it divides broad-lent internal dynamics to a company and external environmental factors. We probably spend the most amount of time talking about management because I do believe that it's probably the one dimension that people spend the least amount of time thinking about measuring understanding. We'll have people come in who do executive work.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Current information is telling you is true that could be on this management team is promotional, obfuscating, so the information looks better than it really is. And that's going to unravel in the future. So that's assured. And human nature, the human condition, it's prevalent in everything, in how companies get built, and how communication happens with the stock market, in whether management wants to be promotional because they want to feel like they're good guys because the share price is strong. Or your tech company, and you have to keep being promotional because so much of your comp is in SBC. There's a lot of understanding incentives. There's various areas where, yes, there's a lot of information in the current stock price, but management behavior and incentives, I think, tends to be very underestimated in terms of the future prospects of a company.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Everything's an experiment, and the market is a snapshot of its estimate of what that experiment means in terms of the value of companies traded on and exchange. The fact that next year out of the SP five hundred, fifty companies will be up X percent and 200 companies will be down y percent. That estimation is perpetually changing. And it's not just the companies said X and therefore the stock went up or down. It's an estimation of how the macro is affecting the company, what impact will AI have on these companies. We're always trying to gauge future prospects with current stock prices. That is inefficient. So the idea that the market is efficient is true of what is known. But as regards the future, it tends to be a very inefficient mechanism. I think we're all trying to estimate where is the future likely to be different to what”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that tends to be a market I play in, and I lived in Australia, so that tends to be a country where we do things. And beyond those it's de minimis. So stick geographically to what you understand, and stick from a sectoral perspective to what you understand. And that's led to a risk framework where we've, much like the platforms, we're measuring exposures by country aggregations of certain countries, by sectors, by subsectors, by factors. So there's very much a risk system, a framework that we use that dovetails the expertise.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“My background is financials and TMT, so those have tended to be the big areas where we focused on. We've extended that to consumer, which is touching TMT. So those today are the biggest three areas, and then over time you can do smatterings of things as add ons, some industrials, some healthcare. But really deciding what your core areas of expertise are and getting better at those and building the organization around those, building a culture of excellence around those. So that takes an awareness of what am I going to do and what am I not going to do? What sectors, what market caps I'm willing to invest in? My background's always geographically been London, so European equities has always been an obvious investment place for us. The US is such a big deep market, and we try and use what we see in Europe or our understanding of the world and apply that to the US. And then I grew up in South Africa.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Alpha measurement recognizing it's their idea versus somebody else's idea, the firm's idea Measuring, just measure as much as you possibly can, and alpha being that North Star back to all good and well these were money making ideas, but there was no alpha. Or it was an okay short but not a great short, or it was a decent short, but we actually added at the wrong times and therefore there was no alpha. It's a little bit getting people to be more precise about how much alpha they're measuring and really measure themselves, build the habits internally and also with the team to want to be measured, to enjoy being measured, to check their own performance. It's a performance industry.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“As you set up those contracts with the people on your team, how do you bring that down into practice of what the alignment is or different compensation structures that people use? Is it one portfolio? Is it individual ideas, a contribution to the portfolio? What have you actually done that's worked?”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the most important learnings is having that contract with people up front so that okay here to do research and help produce alpha the alpha will be measured so having that contract with your investment team what precisely are you expected them to do and how you're going to remunerate them for it and I think again the platforms they got that right because the contract gets set very clearly on day one whereas in the single manager construct I think it's often quite fluid and people are just expected to do more as they stay with the firm and it's not always clear whether they are doing more the measurement of what they are doing and what they're not doing isn't clear so a lot of effort from our side to get better at that contract with the investment team the incentives how we measure sitting with them on a by weekly basis to go through what they are and aren't doing”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“How to set yourself up from a portfolio side I think is probably the number one lesson I had to learn pretty quickly. And then on the business side, and this is a recurring theme that I've experienced with entrepreneurs that I've engaged with, is I should have brought in a chief people's office or an HR person very early on. This business is about people, and having somebody full time focused on that flywheel is super important.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Makes it into the portfolio. It requires this many man hours. But you need to start with a really clear idea of what your portfolio actually is going to look like. And it's a tough exercise because when you're starting, you're not quite clear enough about all these variables. But spending the time to work that out and then ask yourself what resource that takes and how am I going to set my team up to execute on it is such a worthwhile investment because all the noise that can happen, if you haven't done that, and I've seen managers on the single manager side, one day they're trying to be very long, the whole team's working on longs. The next moment they want to be neutral and the whole team's working on shorts. That's not possible. You can't manage an organization to go from serving Italian food one week and Chinese food the next week. It just doesn't work. Being very clear in your mind.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“That will inform that you need fifty shorts or you need thirty longs, whatever the number is, and how many people you need to do that and how you're going to go about doing that. I think managers who haven't thought through those things, they're often doing what their resources allow them to do, and they end up with the product that their resources allow them to have, which may again not be a product that actually works. The comparison would be in tech land. If what I need to do is build this type of AI and have this size R&D team and invest twenty million dollars to build it, because that's the only way to compete, I'm not going to be able to do it with five million dollars. It's just an insufficient budget. Well, you'd never start that tech company if you only had five million dollars. I think this business is the same. What you need is eight people you need to generate a short idea a week. You need to generate one long idea every three weeks.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the investing side, I think probably the most valuable lesson I wish I knew back then that took me probably the first five years to figure out is have a very clear idea in your mind how you're going to construct the portfolio. And somehow committing to that structure really informs how you build a team, how many longs you need, how many shorts you need. It sounds simple and most people think they have the answers to those because their presentation deck has an answer to that. And I wonder how many people it changes every three or five years, but really committing to a portfolio construction system ideology that you've thought through. And if you have something that works, and it might be 180 gross, thirty net, or whatever it is, stick to it and really build from there.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'd love to circle back in time to your founding of Gladstone as you come out of Lansdown. If you look back, what are the things that you've learned both about building a business and about the investment process that you may not have known, even if you thought you did when you launched Gladsoon?”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're going to spend 50 hours getting a bit better at your short side. People are under egg just how hard it is to get better, unless they're very determined.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's compare to professional sports. There's ten thousand guys with a great fur serf, top one percent type of great surf. Of those ten thousand what percent have a great forehand? Maybe twenty percent. And then of those two thousand, how many have a great backhand? Maybe twenty percent. And then how many can play grass and clay? Maybe twenty percent. So one of the challenges is that you're having to keep adding new skills. And not only refresh the old ones because things are changing, but having to actually add new strengths, so you have to keep getting better. And that personal drive to keep wanting to improve and find areas that you can improve and then working hard at them to improve. People underestimate just how many thousands of hours a tennis player might spend just looking at his backhand. And the idea that”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm sure I'll hear a lot of people say, No, that's not true because they scrape data, but it's as simple as, okay, you keep trying to short this sector and there's no alpha doing that. And you've been trying to do that for three years. It just shows that is this a good idea? And it's like money ball. And if you can actually dissect performance into pieces and really analyze not just your lungs and your shorts, but let's disaggregate that down into sectors. Have you managed to prove that you can generate alpha in this sector repeatedly or in that sector? I think that's where the platforms, again, just the entire construct is imposing that measurement discipline. I find in the single manager construct, many people are resisting that measurement.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Changing your mind, being intellectually flexible? I think a lot of people get into I'm right, and the idea that just toggling other potential outcomes, possibilities, approaches, there's an inertia, there's a stubbornness. I angle that's quite hard for people to navigate. If you think about it, in any professional sport, there are times when the individual, the team are not performing, and they probably need to change something, and somebody needs to drive that change. Just because they worked before doesn't mean they're going to work in the future. So being able to be dynamic enough and open enough intellectually open enough, emotionally open enough, maybe this has just changed. Let's just look at the facts anew. I say data is something that people struggle with embracing data seems to be a challenge, at least in the long short equity space.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“Many of them will say yes what it takes to actually do it that's a different matter. Everybody wants to be a world class tennis player or golf player or something that's extremely competitive and difficult. When you get down to what it takes to actually get to that level of performance, I think most people just have other things in their mind. It's as simple as that and differentiating between can I build a culture where people are aligned and motivated to win, to perform? It's not easy actually.”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source
“A high performance industry, so you need to set yourself up for that environment. That means people aligning yourself with your organization, sourcing talent, incentivizing the talent, training the talent. It's a lot about how do you find people that are aligned with that performance culture and have that persistent search for incremental performance bred into them. They don't think that it's just going to happen because it may have happened doesn't mean it's going to happen again. So you have to keep pushing as with every competitive industry. You have to keep pushing for what's the next idea, what's the next improvement, etc. I think ultimately it comes down to can you create that culture of performance, intellectual integrity, pursuit of excellence and when you canvas”
2024-01-15 · Capital Allocators · George Michelakis – Chess Master's Approach to Long-Short Equity at Gladstone (EP.362) · IDENTIFIED FROM THE TRANSCRIPT · source