YouSaid · the spoken record

Lee Ainslie

lines on the record: 99
first: 2023-08-22
most recent: 2023-08-22
sittings or episodes: 1
sources: podcast

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“One of the leading LLM developers told us, yeah, our total compute budget in 22 is 10 million this year. It's going to be 100 million, and in 24 would be a billion. Huh? That's a pretty quick ramp, one of the lessons of investing around mobile and the iPhone was it's great. There's not a lot of phones. Let's start thinking about what's inside those phones. Likewise, you just don't pick up NVIDIA GPU chip and ask it to do AI. There are a lot of things that surround that to make that work. And talking to a lot of those vendors, yeah, there's actually an order out there. It's da-da-da-da. Huh. Well, that would be like half the revenues next year. Are you sure? So it became very clear to us late 22 that there was going to be a wild supply demand mismatch for GPUs. So we started thinking about the ramifications on the public side. Likewise, you think about the last 10, 15 years, most technology investors have been really focused on software.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, one that led to a great private investment, two led to pretty good shorts as well. Most recently, AI has just been a great example of where the public side and the private side have been of a tremendous benefit to each other. So just to give a little history, we invested in Santa Altman's first company looped back in 2011 when he was at Stanford. Sam ended up moving over to Y Combinator, a very successful seating platform, and he brought us in as one of the early investors. So we've had a long history with Sam. And as part of that, our ventures team had a very early look at ChatGBT. And like most of us, they went, holy cow, this is something different. What does this mean? Where's this going? And started making sure the public team was aware of what the world was about to be aware of in a few months. And we concluded pretty early on that the bottleneck, a lot of this will be GPUs and video chips. And as we started having more discussions in 2022,”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll give you an old one and a new one. So years ago, probably 15 years ago, we invested in a company called Core Valve, which would put new valves in your heart, but was the first company to figure out how you can then size the valve perfectly to fit what you're trying to replace, as opposed to a doctor taking their best guess from looking at images and then sewing it to get as close as they could. This is a perfect fit that was done while it was being put in your heart. And as it became clear, wow. This is really going to work. Huh, how's that going to impact that people make the old valves?”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Altogether ventures. We have learned so much over the years from those activities from talking to private companies, some of which we invested in, some which we haven't, but had dialogues that have influenced our thinking on disruption, on secular trends that have had huge impacts on public companies. That wide the ventures business has become a very successful business in its own right. There's also extraordinary value just into what we're learning through those efforts day in and day out.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Not to brag, but when you look at how the average hedge fund in different regimes, we did substantially better during all those regimes. And the real question is how do we keep that up? I go back to a sort of a little repetitive, but back to the fact we have so much more focus in every individual investment given how few we have per person and given our holding periods. I don't think many other fundamental firms had developed what we've developed both on the quant side and alternative data side. And the other piece, and this has really been clearly helpful recently, where we have a significant advantage, is the fact we've been investing in private companies back to 1994. We made that a more segregated focus back in 04 and end up because we had so much success. So we made all those investments within the hedge funds. A few of them worked out so well by 2014. We concluded too much the hedge fund capital was essentially locked up and things private investments and that forced us to launch a new entity.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“The capital world that we've been living in for 12 years was to all fundamental measures. When you have stocks that are driven by, where did the Fed say last night? Not how was earnings, that's challenging for fundamental investor. But I think we're back in the world, which is more normal, again, thinking about rates, long-term average, it's 4.6%. So the sale we're two and a half is nothing crazy, but we have rates sustained at more typical levels or even anything less than free money. it should be a very, very productive environment for fundamental investors.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“And if you do look at other periods which had those strong sorts, 96 and 99, it wasn't a hot six month, which didn't mean revert it. In each case, that was the beginning of very strong periods of returns. And then began, to me, not the driver, but it's worth noting on the short rebate side. So when you short a stock, you borrow it, you sell it, but when you sell it, you get a pile of cash. That cash pays an interest rate. It was deducted from that rate is what you pay to borrow stock. So our net is the highest it's been in 20 some years. A interest rate is higher than it's been a long time, but B, this is a whole different discussion. What we're being charged to borrow is about the lowest it's ever been because competition on the short side is about as low as it's ever been as so many people have given up on shorts. So I don't think people fully appreciate how anomalous and how challenging the free costs.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Capital is 5%, and only got a 6% return. That's a problem versus my competitor who got the 14% return. And so over time, higher cost of capital, I think, becomes that more demeaning environment that helps separate stronger companies from weaker companies. One way to look at that is, again, thank you, quantum. Look a lot of these things, but just the correlation between revenue beat and misses, and subsequent stock reaction. And so this is reported revenues versus sales set expectations they beat. Does the stock go up? They miss stock go down. That correlation for the first six months of this year was as the highest it's ever been going back 20 some years, which is”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Half annualized is 9% for the equity markets over 9.7%. So in terms of just looking at equity returns, those worlds don't look too different. But again, something else is going on if you think about the stats I mentioned earlier. I compare it to you have two swimmers, one slightly better than the other, and they're racing downstream. Well, the delta between how they finish is not going to be that big. Okay, now turn it around. Now they're going to swim upstream. Now we're going to separate the men from the boys. Now you're going to more clearly see who that stronger swimmer is. And I think the same is true for companies when they're operating in different capital costs. So when capital is essentially free, it's harder to understand which company is making better decisions than the other because every use of capital is a good decision. Who cares if ahead of a small return? The investment was zero. In a higher cost of capital world, well, wait a minute.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Environment rebates playing a tiny role in that. I think what people forget, especially now, so I sit on a few different investment committees, I can promise you the world hates long short equity. And with good reason. So the underperformance over the last 12 years since the financial crisis. And then what really was nailed on the coffin last year, a lot of funds were down more than the market, even though net exposure was well under 100%. And I think people are missing that we are now in a different world and likely to be in a different world. And so if we use that 2.5% benchmark and you just look at futures curves, the market is essentially predicting that fed funds will be between 3.7 and 5.5% for next five years. So nowhere near two and a half, which I think is a fair way of saying we're likely to be over that two and a half. And what's also interesting about the over and under two and a half percent is you just look at the rate of returns of the equity markets. It's not that different.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Amazed how often the higher rates are good for hedge funds because short rebates are higher. Okay, true, but that's just a very tiny part of the story. So the HFRI and Launch Road Index, which is the most comprehensive hedge fund index, started in 1990. If you go back from 1990 and look at how hedge funds, again, not Maverick, just the average Launch World Fund, did when rates were over 2.5% versus under 2.5%, there's some interesting data. Now, first of all, people may forget, but that's about 50-50. In other words, since 1990, the Fed funds rate's been over $2.5, 47% of the time. So it's a healthy sample set. When rates were over 2.5% on average, hedge funds have outperformed the markets by 6.5%, driven by 12% alpha, under 2.5%, they've underperformed by 4% on the back of less than 1% of alpha. So clearly higher rates is of more productive”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“The challenges of starting a small firm today, don't get me wrong, there will be another David Einhorn starting virtually no money after year after year and it finally became a real big business. It's just the odds that are happening are much smaller today than they used to be. And the enduring piece of advice that give everyone is you've got to make sure that everything you do represents integrity and represents your ability to do what you say you're going to do because you won't get a lot of second chances in those regards.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll answer it in real time rather than 1993 time because the world has just changed so much. They weren't a lot of long short funds. You had two hedge funds probably had 60, 70% market share of the hedge fund space. We have a little seating business where we've helped start funds that are starting up and give them a lot of advice, a little bit of capital, and hopefully stamp of approval with our brand. It's hard. I've been surprised by there's an escape velocity where you have to be at least $100 million, if not more like 250 million, to even get meetings, no matter how good your numbers are. Secondly, having solid risk adjuster returns does not do you any good. You need to stand out, which I've concluded to stand out means you got to take a lot of risk. If you're starting out, you better have numbers at two or three years into it or pretty mind popping. That's hard.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“But let's just recognize that's unusual unless debate why you have an assumption that outlies what you would expect looking at history or also not do it just versus history but versus a suicide. Often yeah, that's why we own that stock exactly. I get that, but let's make sure we recognize that merits discussion. So it helps us be, again, certainly more efficient, hopefully more accurate investors, but those things are head scratching at first for people that didn't grow up in Maverick.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, we're very fortunate in that almost all the senior people Maverick started Maverick. And you saw that in the stats about how long people have been at Maverick, but every one of our sector heads started a year or two after college. They've grown up in Maverick. If you were to bring in a successful investor from another long, short firm who's five plus years into his career, he would think he landed on Mars. You're making me do what? So for a model for income statement, cash flow balance sheet, every element is picked up by our quant systems. Therefore, it has to be entered in a pretty particular way. One of the things the quant's going to do is it's going to screen your model. Hmm. You think revenue growth is going to be 14%? Could be. But that would be a two standard deviation difference from historical. Or you think incremental opera margins are going to be X. You think whatever metric there is, they're all screened against history. Not that they're wrong.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Strategic positioning totally does understand there's a new management team that's going to do wonderful things or there's a new management team that we don't have confidence in since we're fundamental investors, it's really important to us that all final decisions are made by humans. But hopefully we're making more consistent, more accurate, more informed decisions by using quant as a tool to support our decision making process.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“So nothing is purely handed off to a machine. As an example, Hardwood Kwan does for us is come up with recommended position sizes that looks at a lot of fundamental data that comes from our team. No one else has, but also looks at a lot of off-the-shelf, pretty typical quantitors, looks at odds of success, looks at transaction costs, et cetera, et cetera, et cetera, and makes a recommendation from the machine point of view. This position should have 2.8% per capital. The portfolio management team looks at that, we especially pay attention, we're big outliers, but human judgment is going to have the final decision just because, as you understand, there's a fundamental weakness in quant and that it doesn't really look forward. You could argue it looks at sell-side estimates for revenues and earnings, et cetera, et cetera, gives us some glimpse of the world looking forward, but it certainly doesn't understand changes in secular trends or changes in”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“That we think may not be productive going forward. We're very proactive in controlling that. And I do think that's led to a risk or a volatility profile that we're proud of.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“A completely different approach to understanding the risk of our portfolio. We could make this the entire podcast. So I won't try to get too detailed, but now we look at everything such as R factor biases, how that compares to our history, how that compares to the market, how that compares to other funds, a lot of tools to help us understand whether those biases are likely to be productive or unproductive. A lot of things looking at risk appetites and likely that those risk appetites are changing. indicators, what's happening in the economy in real time, which ends up being 90% plus correlated GDP. So it's a real-time look at GDP. A lot of work in other hedge funds are positioned in whether we share position, it may be not productive going forward. And the tweaks we've made out of that, it's not that often. Again, usually we rely upon what we're getting from bottoms up perspective. But when we have, whether it's a factor or regional exposure,”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“At Maverick, at least every mess we make is driven on a bottom-up basis, is in the portfolio because our teams concluded is one of the very best uses of capital. But then we look at that collection of different ideas to see where portfolio ends up from a risk perspective. And this really started up until 2011 when we thought about risk. We thought about our net exposure or beta adjusted net exposure. And then in August of 2011, when treasuries were downgraded, our portfolio went sideways. It performed much worse than you would have thought possible simply looking at those rather basic measures. It became very clear to me that our approach to thinking about risk was not sufficiently sophisticated. There were some important things at work. We just weren't thinking about. As I mentioned earlier, by then we had a quantine that had been at Maverick for five years who had a lot of different tools at their disposal. And we tried to take, again, press you to pay.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Something we thought about a lot in Maverick is corny, but 1995, I wrote to myself our long-term strategic plan. And I basically lagged out by 2000, by 2005, by 2010, what I wanted Maverick to look like. And it was essentially based on we're going to start a new fund every X year is we need to raise X assets, how many people you have to hire. The new funds were Maverick Credit, Maverick Currency, Maverick, whatever. But somewhere between 1995 and 2000, I started adopting that mentality. Wait a minute, we know we're really, really good at picking stocks. We know we're good at investing in equities. I don't know if we would be as good at these other things. Let's focus on resources on what we know we can excel. And I think that principle has really served us and our investors well.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know where you got that quote. And this applies to Maverick, but also applies to other businesses. So everyone's heard of Costco, but unfortunately Price Club is not as well known as it used to be. Price Club is actually the first warehouse business. So both Sam's Club and Costco copied Price Club. Price Club was eventually bought by Costco. Why Price Club is a great name in terms of conveys with the retailers trying to do. It's also the name of the founder. It's founded by a game sole price. And one of my favorite business quotes from Sol Price was the intelligent loss of business. Now what he was referring to is let's have a really limited SKU count so we can excel on the few SKUs where I'm buying such force. We get great pricing. We'll be able to advertise them, push them, give them the end caps. We're going to excel on these smaller number of things and not clutter our buying or the consumer's mentality with all these different options.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“A great question should ask him next time I see him. I would argue something along the lines of brutal honesty. He was very willing to take, I don't care what we've done, why we've done it. Let's start from scratch. And Maverick, we call this the fresh sheet of paper exercise. This applies to Maverick. We've always had the philosophy. If we were given this amount of money to invest today, how would we invest it? If we didn't have any investments, have a fresh sheet of paper, what are we going to do? Okay, so why is our actual portfolio different than that? That's the ideal portfolio. Let's move the actual to the ideal. And I think Ed's always had the same approach when it comes to business. What are my set of businesses? What should be my set of businesses? Or is there opportunity improvement? Where is there not opportunity improvement? And all the obvious things as well in terms of cost controls, motivating people, rewarding shareholders using the balance sheet more efficiently, et cetera, et cetera, but not many people have”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Ed Breen had a couple different stops cleaning up the Tyco being the most impressive, but he's a guy that's had several situations where he took Apollo crap. Turn to something which is very rewarding for shareholders. And you look at what Santio's done at Microsoft. It's just pretty amazing. And you could argue Jeff Bezos and Amazon, et cetera, et cetera. But I point to Microsoft just because where that business was headed per conventional wisdom and where it is, or not even where it is today, where it was just in two years, really shows the power of a CEO.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Certainly shape their answers to make it close to what you want to hear. So for us, it's much more important to judge actions. What decisions did they make and how those decisions turn out over time? And then, as I mentioned earlier, going back and comparing what they say they're going to do versus what they end up actually doing. So I think all those things do help you have a better perspective.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Here's one magic bolt, but there's several different aspects that can be very helpful. One is really understanding secular trends. Where is the world headed and who's going to win and who's going to lose? Not that you can't have a great investment without that secular trend, but it's a tailwind. So again, it improves the odds. And they have that tailwind at their back if it's short and have that headwind in their face. Thinking about competitive advantages, so we spend a lot of time with end industries trying to understand the competitive positioning among different companies. We spend, I think, much more time than most folks as we're looking at companies, looking at the quality of management teams, and not just what they say. One of the things I concluded a long time ago, almost anyone who's the CEO of a large public company, it's pretty darn impressive. And that 45-minute interview, and they're smart enough to know what answers you want to hear, they won't be dishonest, but they'll.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Our depth of resources, because how long we hold positions, there's really no excuse for that to happen. Now, it does, obviously, but to me, that's one of our most important differentiating advantages. Then I combine that with the depth experience of the team. So entire investment team is 29 individuals. On average, they have 14 years of experience. Importantly, 10 of those 14 years have been within Maverick, so a team that has worked together for a long time. And if you look at our six senior decision makers at Maverick, 21 years of experience, 16 of those years within Maverick. So it's that talent, that experience combined with a better set of tools and hopefully a better set of information than our competitors that leads to what we hope ends up being superior results.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“And yet interacting with those management teams for a longer period of time helps us not only improve our understanding of that business, but again, developing real dialogues with those that can give us insights into that business competitors, suppliers, customers. We use quantitative research in several ways. Every portion of the investment cycle is informed by Quant at Maverick, and then even outside of all that over the years, we used to hire people to go count cars and parking lots. Now we do that by using satellite inventory. Remember one company in particular, which is extremely successful short, ordered something from them once a week only so we can look at the PO number, which told us how many POs they processed in the past week. There are all these things we've done to try to have a slight advantage in our objective, and I can't say we've always fulfilled it, but the objective has always been to never be at an informational disadvantage to another public investor.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“I've always felt investing is really a matter of doing everything you can to slightly improve your odds. In other words, you're not going to find this magic algorithm or magic bullet no one else has thought of. And aha, I've got this huge advantage now no one else has. But it's can we do a slightly better job of gathering information? Can we do a slightly better job of interpreting information? Can we do a slightly better job in thinking about risk? And all those little slightly betters, I think, add up to be hardcore advantage. So just to give some examples, we typically only have three, two, five investment positions per investment professional. I think you'll find that ratio is a fraction of what you'll see elsewhere. So right there, we're talking about a level of due diligence. That's quite unusual. You combine that with the fact that we have much longer holding periods than most long short funds on the long side. We average 17 months on the short side is 13 months. So people focus on fewer positions.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of investing and trying to develop a quantitative research effort in 2006, which is still a really important part of what we do. But in 2015, we turned that talent to focus on alternative data. And can we recognize, or they want to call them alpha signals or KPIs? Are there ways of tracking different elements of a business through data? That's not perfect, but it gives us some greater clarity. And after working on this for almost eight years now, we can touch every single industry in which we invest in terms of using alt data to give us some insights. Now, to be clear, in certain industries, it's far more effective than is in others, but yet it helps us have AND indication of different trends. And all that gives us a slight edge.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“A different world. Today, it's almost, I would argue, the opposite where the challenge is how can you possibly survive the tidal wave of information that comes at you every second. There are so many sell-side reports. You could use the internet for days and days and days. There are podcasts like this. There's a lot of discussion about stocks on TV. It's a very different world. So some of the basics back to your question, I think, are still present. Can you have meaningful dialogues with customers, with competitors, with suppliers? Can you triangulate what you're hearing from a company? This is more challenging these days than you speak. Thanks for regd. But we like to talk to several different members in management, look for consistency of answers. We like to talk to the same members of management over time, but for consistency of answers. But now we also have data that helps support what we're trying to understand in terms of business trends. So we first went down the path.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“30 years people forget there was no internet, there was no email. You want to get to 10q. It usually came by the fax machine. And if you happen to pour through the 10q in an hour, you were now at a huge informational advantage to everyone else you were competing against. So it was just a much, much less competition environment. I remember going to IPO launches in 1990 and recognizing about half the guys there were having their two martinis and thinking, wow, how are they going to get anything done? Go back to the audience.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Start investing for real, I do think I had a strong understanding of different business models, a very strong understanding of the importance of moats or these defensible positions. I think, again, given a little bit my background in leading a tech effort at Tiger really understood the value of sustained growth and also how challenging it is to sustain growth and working with Steve and others at Tiger, obviously I learned a ton by how they thought Steve, for example, was always super focused on the individual unit in economics, developed a better appreciation from that. So I think by the time I was really picking stocks, I did have a fairly good understanding of the attributes I was looking for and yet to this day I think my ability to identify those attributes correctly continues to improve day after day and hopefully that's true for everybody at Maverick.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Depends. I went to engineering school, and I think that gave me some perspectives of different ways of trying to evaluate and analyze different businesses that probably would not have had. And then I was a consultant for a couple years focused on small businesses, and that gave me a lot of insight into how businesses ran. In some ways, probably the best job when I was in college paid my way by developing systems for small businesses. And the one where I had the most intensive interaction over a couple years was a small printing company, which in hindsight was so cool because it was both a manufacturer and a service-oriented business. And so we built a lot of systems to track cost accounting, inventory control, uses of presses, labor management, and yet on the other side, we did a lot to attract advertising expenditures, IR and customer acquisition. Now you price things. So by the time I got to”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“No, no, no. We're actually very, very conservative. Do I just name Maverick? I don't understand. I remember sink being in Geneva going, oh, Angel, you're an idiot. What did you do? That created some challenges. And then like everything else, performance drives all. And we started October 93 in our first quarter, we had a strong start. But again, it was on tiny assets. We had an OK94 up mid single digits during a year that was quite challenging for most hedge funds. At least that was on the public equity side. And I just don't remember beginning of 95. We don't have a good year in 95 running this firm, the economics of this firm are not going to make sense to continue. And I'll be back in New York looking for a job. Luckily, we did have a strong 95 and even a better 96 and then has to start growing and all that took care of itself. But it was a challenge.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“But realized at first management meetings or potential investor meetings in Europe, what is this metric you shoot from the hip?”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“You have all your systems, you have people helping you raise money, cap intro people, et cetera, et cetera. None of that really existed. And we started a pretty small basis. We started with $38 million, most of which came from the Wally family back then. The hardest part were getting recognized, convincing people to even meet with you. The name Maverick certainly didn't help. I chose that name because I was 29. I thought it sounded pretty cool. I was living in Dallas and wanted to reflect that.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there weren't a lot of precedents. So one person had left Tiger at that point, David Gerston Harvard Argonaut, which was a macro fund. Today, you can go to a prime broker and say, hey, I want to hang my shingle. And boom, overnight you have.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“I always had this objective to have my own portfolio, to have my results purely determined by my decisions and have it be very clear what those were. And it was clear to me that was very unlikely to happen at Tiger. Again, Join was this very senior guy that we all held incredibly high regard, but he made every single final decision. And the only catch was I really didn't think I was ready for that responsibility at the time I was 28 years old. I'd only been at Tiger for three years. But at some point it hit me, O Kingsley, you're going to wake up two, three, five years, who knows, and decide that you're ready, but no one's going to offer you the opportunity that these guys are being generous enough to put in front of you. So decide to really had to force myself to pull the trigger in hindsight. That was pretty naive. I don't think I fully understood the challenge I was getting myself into, but luckily it worked out.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“I clearly was not looking to leave. Julian was treating me extremely well, both in terms of compensation and responsibility. I loved everybody I worked with, but I was approached by a family, a guy named Sam Wiley, who was really a serial entrepreneur, and he was smart enough to recognize, huh, this hedge fund business model, that's pretty attractive. That works. Let's start one of those. He at the time was the CEO of two different public companies. One was the software company, one was a retailer. And there were both companies I happen to know well. When he went to those management teams and asked for ideas, my name came up in both cases. So he started talking and enjoyed our conversations, but made it clear I had absolutely no interest in leaving. Sam's a pretty competitive guy, so he kept making the idea of leaving more and more and more attractive. And I did know that I always, again, I started playing with soccer when I was quite young.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's happened a couple times, unfortunately. And again, over issues that I think of most firms would be considered rather minor. Hey, please don't. But we just decided early on if we're going to really emphasize how important this is, that's the appropriate reaction. And secondly, if someone was thinking about, oh, I could get away with this, making sure they fully understand the re-implications of doing that. So it all goes back to having an environment where we're very transparent about mistakes as much as anything else.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, people fully understand how damaging even a small lapse of judgment can be, not just to you, but to everyone else at the firm, and also that this is the one area where we do not give second chances. You can't get to work on time when buying alarm clock. You seem to have a drinking problem. We'll send you a rehab. But if you in any way, shape, or form, make a statement or conduct yourself in a way we think does not reflect a total understanding of the importance of ethics, we'll let you go and we'll let you go immediately. And we're up front again from day one.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Interview process, but also in the internet teams. And they're basically trying to teach you how to be a human lie detector test. And there are all these things about little tells and how the anchor their arms and their feet, where they look, hesitancy to respond, obfuscation. No one of those little things in itself goes, aha, this person's not being honest, but as you start trying to compile a lot of those different signs, it may relay where someone's just being flat out, dishonest, but what's even more likely to helps you understand where they're clearly uncomfortable. So that's played a role. And despite all that, you do make mistakes. And I think it's worth pointing out for a training period, which every new member of the investment team goes through each year, the first session has been taught by me for the past 15 plus years. And it's entitled Integrity and Ethics. And we spend the entire time trying to make.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, and this is really important not just for potential members of the team, but for management teams as well. And we go about it a few ways. One, there are certain questions that you tell me about a difficult situation you were put in and how you resolve that. If you ask those questions to enough different people, you do start to develop a sense of who struggles with some of those and who doesn't. But I mentioned earlier we do a lot of testing. Most of that is personality testing. And these questions seem bizarre. Would you rather clip the hedges or mow the lawn? And yet the sum of that is a very long test. You got a lot of these strange questions. Sense of integrity is one of the factors that they do try to evaluate. And there's been some evidence that they've done that rather well. Just to give you an example of how far we'll take things, we actually hired a group of ex-CIA interrogators who call themselves BIA, the business intelligence analyst, to train us on interviewing people. And again, helpful both.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Though I felt management had not been fully forthright in certain issues, but it was a real gut check because at that point in time to say, yeah, Julie, I was wrong, we used to sell. I don't think would have been great for my career, but more importantly would not have been great for Tiger because it ended up being a very successful investment. So you have to take those moments of disappointment one of the phrases we use, hey, we're not playing football, we're playing chess. Getting wound up and emotional is just really counterproductive. We have a new set of facts today. Let's understand how that impacts our longer-term view. Let's compare with the market is offering us in terms of value today versus what we now think the longer-term value is. And if it's an opportunity, let's take advantage of it. And it's clearly not an opportunity, then let's move on and mark that as a loss and start focusing on the next investment.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a hard question. It's a very long list. If I get back to early years at Tiger, and this is back in 91, we had bought a lot of Oracle and I had concluded and actually wrote a memo that technology tends towards standards and became very clear to me in the database world back then that Oracle is becoming that standard and there are these flywheel impacts about what that means in terms of other products they can sell and customer switching, et cetera, et cetera. And I think my basic thesis is right. So we started to buy a decent sized position and they missed a quarter by an order of magnitude that was hard to comprehend. And if I recall, the stock went from $11 to $6 and there was such stress on the balance sheet its ability to survive was all of a sudden brought into question. And this was obviously a challenging discussion with Joan, but I did convince them this would be the absolutely wrong time to sell.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Per individual, we track them for the entire team because we want that mentality of we're all pulling together to achieve a common goal. And also we recognize that given we have a rather concentrated portfolio and very long holding periods, that typically any one investor on our team is not going to have enough stocks to consider it to be a valid sample set. And then lastly, and it may sound a little corny, but it's very important to us. We really do spend a lot of time trying to make sure we have a very strong sense of someone's sense of integrity, whether or not they conduct themselves with the utmost ethical values, et cetera. So those are some of the things that we perhaps put a little more emphasis on than others.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“Wait a minute, this is on a different path than we were thinking this is not a good use for capital because you're just going to be one or the other. So emotional consistency is important. We place a great deal importance on a team orientation. Now part of that is just from the beginning recognizing the environments that I personally enjoy. I like environments where our success is driven by a team. We were talking about this the other day, but one of my favorite sports growing up was basketball in part because To really excel you had to be a highly functioning team where individual players were willing to make sacrifices for the greater good of the team and yet at the end of the day everyone knows who really contributed. So to me it's a great parallel of the importance to success of teamwork and yet still maintaining a meritocracy and it maverick everything we do is based on teams. If you look at a lot of the stats that we track, we actually don't track them.”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source
“A real passion for stocks, but some are probably a little different at Maverick than elsewhere. We spend a lot of time trying to evaluate emotional consistency. So the highs aren't that high, the lows aren't that low. If you were right in your stock picks, meaning you're outperforming on the long side or underperforming on the short side in Jerry Alpha, if you're right 55% of the time, you are one of the best in the world. That's a really hard number to attain. So by definition, you're going to be wrong a lot in how you deal with quote-unquote being wrong. And again, it's a very competitive name, and usually there's someone on the other side. So when you're wrong, they're right. How you deal with that is really important because a lot of people, I think, have those moments. They just want to put their head in the sand and wait for the world to pass them by. But in reality, those are some of the most important decisions you make. When a sock is going against you, is that an opportunity, as the world misunderstood it, and we need to take advantage of this?”
2023-08-22 · Invest Like the Best · Lee Ainslie - Hedge Fund Maverick - [Invest Like the Best, EP. 341] · IDENTIFIED FROM THE TRANSCRIPT · source