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Seth Masters

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94

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2018-01-29

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2018-01-29

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1. “The most important advice is to take yourself seriously but not too seriously, to recognize that the chances are always that The things you are convinced of could well be wrong, and while you have to have a strong set of guiding principles, you also have to really be constantly your own devil's advocate.”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “I would turn that one around on you. I think the fact is if you actually knew all those lessons, you wouldn't live a full life. I think the most important thing is to go into decisions understanding that you won't know enough information to make the right decision, but you have to make the decision anyway. And that you should take perhaps the less obvious path when it feels right to you. It's not always going to be comfortable, but it might be more rewarding.”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “A fictionalized world how that could happen and it doesn't seem completely as crazy. I think it's important sometimes to let fiction be your guide so that you can experience possible other worlds that could have been our own and then that opens up the mind to the fact that our own world may not be the one we think it is.”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “Well, I am kind of omnivorous. One thing I would say is sometimes fiction is really more illuminating than anything else for sort of giving you perspective on things. For example, I've always found it's really, really hard in this day and age. To make sense of a world in which there is so much terrorism that is suddenly taking hold, why is that happening? There's a wonderful book called The Association of Small Bombs that came out in 2016, which is about essentially understanding one particular bombing incident, what led to it, and its consequences. And of course it's fiction, but it takes this issue and allows it to be accessible through your imagination so that you can actually not be empathetic with, but at least understand.”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “My father was an academic. So he was always very avid for knowledge and was very focused on not just the knowledge in any one discipline, but thinking that it was most interesting to look at where there were interstices or gaps between different disciplines, where there were things that basically people weren't connecting, but that might somehow be related. But if you can connect them, you can actually see something that other people aren't seeing.”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “Well, I'm not the greatest athlete, I got to say. So anytime I've been on any kind of winning team in general, I've been pretty proud or anytime, for example, when I was When I was a graduate student at Oxford, I managed to make it unto my cricket team mostly because the Oxford College I was in only had about 60 students. So it was not a high bar, but I did manage to have a batting average of 13, which for a yank on a cricket team was a really good number.”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Underdogs who somehow prevail in the face of overwhelming odds, but I think I can't really come up with one that sort of epitomizes that more than any other.”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “My favorite sports moment. I don't think I have just one. Also, as a contrarian, it's always hard to go with something that's like a crowd pleaser. Gosh, I hate to punt on a question, but look, I think that what's great is when you have...”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Figure that out, and you don't, and so your whole dispatch function is inefficient and you have pissed off customers. Now imagine if you knew exactly when and where There was a failure in every single pole in your system. That could make for a much better system. And there's. Lots, I think, of analogies of things like that that eventually are enabling technologies that are only beginning to be applied today, usually not in financial services, that will ultimately become very, very helpful in the financial services environment as well.”

   2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “If that happens, you know that there's a problem somewhere, mostly because you have inconvenienced customers who are suddenly calling you, but you don't know exactly where it's happened.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “Classic thing, right? So their hope is that they can be a really good, essentially integrator of all the technology, which is pretty complicated. So you have to basically figure out how to put the right kind of sensor on a chip and manufacture that chip. And there's only so many sensors. Right now, I think they're up to like 27 or 28 different kinds. Now there's all kinds of places where you can just go with a design and get a chip made. So they help clients do that. Then they inject code into that chip that takes the measurements and readies it for dissemination to the web. Then they interface with all different kinds of connectivity like Bluetooth and Wi-Fi and cellular signals, et cetera. Pull it up to the cloud, process it so that, for example, a power company can put those tiny little chips on all of its utility poles and know instantly if a pole has fallen down in a storm. Now think about that. Today...”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Are becoming cheaper and cheaper, and connectivity is becoming easier and easier and more and more widespread. It's only a matter of time before almost every object in the world ends up having embedded sensors that are connected to the internet of everything else. Now, how could that work? I mean, one company that I've invested in realized that that problem of figuring out how to make that work is something that most big industrial firms are not going to be good at because it involves a whole set of domain expertise that is not in there.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Not necessarily going to be applied to financial services first, but they may be the things that matter most. So I'm focusing now on a combination of taking advantage of my subject matter expertise in financial services, where I think I can probably help the startups more, but also looking at startups in other areas that have interesting technologies that might be applicable to a financial service company someday because I can learn from them. For example, one really great area that I think is going to be potentially very important for financial services down the road is the Internet of Things. Essentially, historically most objects in the world are basically just dumb. Like we're talking into the microphone, but it does its job. It's not aware of anything else apart from the fact that it needs to vibrate as I speak and translate that into something that you can store for the podcast.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “One thing I started out thinking is maybe I should just focus on fintech financial services oriented startups. And then I realized, no, that could be a big mistake because a lot of the most interesting enabling technologies”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Think the single most important thing is to remember that the odds are really, really long that any given startup will succeed. And so you have to first of all have an immense amount of respect for the people who dedicate their life to trying. And recognize too that If you really want to engage with them, hopefully you can provide them resources that are not just financial but also advice. And if you can do that, that can really help them succeed, which is a really good feeling. And it can also be very rewarding in all kinds of dimensions. You can learn a lot about what's going on in an industry, which is a big motivation for me.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “I think probably in a typical week I end up at least learning about maybe a couple dozen companies, probably talking to something per week on the order of four or five of them and then selecting maybe in a given week one of those to really focus on a little bit of which who knows maybe one out of five or one out of ten of those will end up being something I'd want to invest in. So there's a very, very sharp funnel and what you hope is that the top of the funnel is you're holding over the parts of the rain cloud that are raining good drops and then as it collects you're hopefully narrowing down the very best ones of those so that the stuff that comes out is really good.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “No, actually, I'd say it's almost, if anything, the opposite. So now because I'm an angel and also a mentor, I'm seeing companies and I'm also bumping into people in other ways too. And the combination of all that just gives me a non-hopefully non-random sample of all of the ideas that are out there and the potential deals that there are to be done. But it's like anything in an illiquid market, you really don't know. And one of the biggest challenges whenever you're dealing with startups in particular, probably when you're dealing with investments in general, is how do you engineer the playing field so it's slightly tilted in your direction? So you have positive selection as opposed to negative selection bias in the non-random subset of the literally thousands and thousands of companies that are being created every year, you're only going to have time.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “Inefficient from their point of view. And also there's some best practices that I think angels can help impose on themselves and help with the process too so that it doesn't take too long to do all the due diligence that it takes to go through the process. And then another thing that I've become involved with is being a A mentor in an accelerator program. There's a number of these around in New York. There's, I think, now almost half a dozen of them. And so I'm involved in one particular one that is affiliated with Barclays.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “Yeah, so it does mean basically starting over in that sense, which is really exciting and interesting, the way that made sense to me is to first of all become an angel investor, and there are groups that do that. I joined one of them called New York Angels. I think it's really important if you're going to be an angel investor to be in a group for a whole bunch of reasons. One is you're not going to know what you're doing, so at least do it with other people who possibly do know what they're doing. And also you want to have a critical mass because the people who are entrepreneurs trying to start a company have limited budgets of time and you don't want to abuse it. And if you're an audience of one listening to them tell their story, knowing that they're going to have to do the same thing another hundred times to get the money they need to start their company, that's really not fair to them. That is creating failure. Whereas if you have a syndicate of 150 people in the room, which is about the size of New York Angels, at least that's led.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “I think that there are a lot, although it's interesting, the closer I get to this, the more I think that it's hard to say which technologies will ultimately be the ones that matter most. So, for example, these days everybody's talking about blockchain and distributed ledger technology, which is very interesting, and I think we'll have some pretty deep impacts over time, although it's still not totally apparent what they'll be. But I think there are many, many others. So I think artificial intelligence, AI, but especially machine learning and particularly something called deep learning, are probably going to be very important for pockets of what the industry does today.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “So, a big company can never access that part of the market. And therefore, it's always going to be very, very inefficient. Having really spent a lot of time and effort in trying to make for better financial services for investors of all kinds, one thing that I became convinced of is that there's a lot of new technology that is now beginning to develop that over the next decade or two is going to transform the industry. And I really thought the only way to understand it was to really roll up my sleeves and sit down with the people who are working on it trying to understand what they're doing and why.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “They're just so small. And think about this the average startup that I'm looking at today has Often no revenue, or if it does, it has a paltry amount that's probably not coming from the same thing that's going to ultimately make it into a successful business if it ever does succeed. And it doesn't need that much capital, but it takes, if anything, more research to understand it than you would need for a mature company for that exact reason. And even if you did do that research and came to the conclusion that it was an exciting opportunity, you can't invest a lot of money in it because it doesn't need the money.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Relatively more efficient than they've been in the past. What I think was interesting to me as an investor is there's a lot of very straightforward structural reasons why startups are not going to be accessible to large institutions ever. And they're also structurally very, very inefficient and probably always will be. So I think there's a tremendous amount of potential value add if you're an investor and you figure out how to crack that problem. So there's always going to be, if you think about the paradox of skill, the things that become well understood will always be less investable, but the things that are hard to access, either because it's infrastructure that everybody's using that has itself got to fly inside. Or in the case of early stage investments, startup companies”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “Well, I'm right now focusing on a part of the investing world that I actually had never had the opportunity. And it's very, very interesting for somebody who comes at this from decades of looking at mature companies as a large investor. This is the exact opposite, being an individual investor in tiny little entities that are at the very beginning of their life cycle. I think that most of the large liquid asset markets in the world are now getting pretty fully priced. I think they're also”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Yeah, and in fact, it's not coincidental. If you look at inflationary episodes, they tend to occur about a generation apart. And I don't think that's a coincidence. I think that inflation is such a huge systemic problem when it happens and so devastating to both the financial system and also the political system when it happens because it completely restacks the deck that it kind of inoculates people against or occurrence of those stupid policies for the generation of people who suffered from it. But then when that memory gradually dissipates is when you have the most risk. I think that's a really, I think that's a really important observation.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “I'm sitting here nodding my head because I've heard these types of stories for a long time, but I know a lot of people probably haven't. And what I'm turning to is demographics, of participants in the markets and participants in policy decisions. And I wonder 30 years is a long time. You're now retired after a 30-year career. At some point in time, as these risks, hopefully these risks don't surface in a big way in the near term, more and more of the participants in the markets, more and more of the policy decision makers need to look back and study history of something they didn't live through. And it's a totally different perception.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “Incorporating that And there is no material evidence that inflation is going to be a problem now either. So everybody's basically just assumed it won't happen. My view, again, as a contrarian, is that's the riskiest time. Because you're going to have policymakers as well who are using, if not the same, then similar risk models who are going to be making their decisions in that same kind of vacuum. And so when we do have the next inflationary surprise, it's going to throw all of this completely haywire and it's going to be underpriced in the market as well. The issue I see with the risk models today is that they are systematically designed to blind the people making investment decisions and policy decisions from some of the biggest risks that exist. It's not intentional, but it's a byproduct of the way that all the incentives run.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

28. “Six months. Exactly. And when it stops being sticky, Nobody knows exactly where it goes, but typically it actually doesn't just go back to the mean it actually overshoots. And finally, another thing that's a problem is all the data the people need for their risk model is most available for probably the last five or ten years. Almost no one has risk models that use data that goes back further than ten years, let alone 20 or 30. So let me tell you why that's very problematic in my view. There's this thing called inflation. It happens every once in a while, but it hasn't happened for 30 years. At least not in almost any country that people care about. Right now it's, by the way, a devastating problem in Venezuela. But I'm not aware of a single risk model that is even...”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

29. “You're going to completely misunderstand what your risk was. And also, you're not going to be able to integrate that into the process you use. And the second thing is most risk models have become much more adaptive over time, meaning if risk has recently been low, they incorporate that into their forecast for what will happen, which is not necessarily wrong because over short periods of time Risk is somewhat sticky. And if you want to make a good forecast for the next call,”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

30. “In most portfolios, most of the time. What I always worry about when you look at those risk models is, okay, well, so what does that mean is being left off the table? What's the residual? Most people do the opposite. They focus almost all their effort on looking at the systematic factors that the model quote explains, unquote. And they think of that as what the risk in their portfolio is. And that's not a bad idea, especially if the risks that they're focusing on are actually tightly linked to the way you make your portfolio investments. So if you have an investment process that's focused on those variables, that's a very good thing to be aware of. But if you have an investment process that is really not based on that, and the countries you happen to be in or the sectors you happen to have chosen are just a byproduct of something else you were doing.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

31. “Yeah, so the first thing I think is that most risk models that exist out there commercially are designed. For the marketplace. So they're trying to answer the questions that people are generally asking. And most of those questions are about one of two things. One is the tracking error question we were discussing before, how do I look versus my benchmark? And for that particular question, what you typically find is if you're commercially trying to build a successful risk model, you want to capture the things that people are doing.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

32. “There are only a certain number of models, a certain number of developers. Are there two or three things that you know from having looked at these that you think are a potential flaw that someone will either trip up on or take advantage of if they understand it?”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

33. “Developed. There's only a few someone else's, and they're all competing with each other in a marketplace. So guess what? There's conversion thinking on this, which is really bad because everybody's using the same risk model, which is itself a risk. So what I think you're going to see is that the people who understand where those vulnerabilities are and think about that creatively are going to make a lot of money off of it.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

34. “I think that's the paradox of skill that you were highlighting. And I think that that has made it tougher. But on the other hand, I think the other thing that's happened as a result is there's a lot more free riding in the environment. In many ways that are not apparent. So for example, now everybody also appreciates the importance of risk. Another thing that Bernstein did really early is incorporate risk models into its investment processes, into the systematic part, and recognize that every single thing that you thought was a return factor had a risk attached to it, which is so basic when you think about it, but that was very original thinking once upon a time. Well, I think almost every decent investor today is more or less on board with that. Here's the thing. Risk models are pretty complicated, clunky things to develop, having built a couple and also used third-party ones. I've seen that from both sides. So almost everybody these days actually uses risk models that someone else”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

35. “The world really has gotten much more challenging because now there are literally thousands and thousands of value investing firms. Not all of them are good, but many of them are pretty good. So just being a value investor isn't enough. You have to be a better value investor than everybody else, right?”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

36. “And also, that it was actually A hard bias to overcome because it was so ingrained, and therefore an organization that really was really focused on value investing had to have a strong culture to stick with it at tough times and a systematic approach. And back then we used the dividend discount model, which was, I think, at the time Bernstein was one of two companies in the entire world that had one, which was basically just a bunch of tools and processes to help overcome all of these innate decision flaws that we have as human beings because frankly when humans were first evolving Influence on who survived and who didn't. So in that case, I think you can really see that From where things were College three decades ago to today,”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

37. “So yeah, I think that those things are definitely good possibilities. Look, I think the paradox of skill is a really interesting thing to think about. That, you know, when I first joined Bernstein, I could really feel that one of the things that made Bernstein unique was it had this tremendous investment discipline. It had a view that value investing was really a logical hypothesis to hold about the world that when things got terrible for a company or for a whole sector or for a whole country, there were good reasons to believe that markets would overreact. And it turns out subsequently that we now can explain exactly what those reasons are because it's wired into our brains. Anybody who's read Daniel Kahneman's books knows what the answer to that is at that point we didn't know why, but we could observe that it happened.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

38. “In a lot of the conversations about public market investing, we've had this big move to indexation. There's this notion Michael Movison who's just talked to recently, talked the paradox of skill, and that active management is getting that much more challenging as a result. But there's also this question of is it secular or cyclical? And is there a scenario you could think of where the opportunities for active managers get better and markets that have seemingly gotten increasingly efficient in one sense, reverse and become less efficient over time?”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

39. “I'm not taking enough risk now, because that's what it looks like today. They therefore act on that and then end up with far, far more risk than they thought they had, which also means that they will then have to make decisions that they didn't anticipate were ever going to be needed, so they'll be painful.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

40. “Now, I don't think it will because it never has, and especially if we are going to see a transition from abundant liquidity to less abundant liquidity, the risk of something going wrong and the penalty for that thing going wrong when it does are going to be higher than what we've experienced recently. And when that happens, all the risk models will start registering what they think are four and five standard deviation events, which really aren't. The fact is the risk wasn't properly measured to begin with, and therefore it led people probably to say, logically, oh.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

41. “To the current environment. And so, and this actually relates back to the liquidity problem too. Think about this. If you think, okay, I am as a person equipped with a risk thermometer, which obviously doesn't exist in real life, but it tells me how much downside risk I can absorb. I can live with 10% drops in my portfolio, but 20% is too much. So if you're looking at the world through almost any risk model that's been tuned to the way the world currently has been working for the last five or six years, it will spit out a number that tells you just how much downside risk your portfolio currently has. But of course, that's all based on the assumption that the world will stay low.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

42. “But the low cost of that and the easy access to it made it irresistible. And when it turns out that the terms aren't as attractive and they don't have that same equation, I think what you'll see is what you usually do. There'll be a significant rise in credit problems and you'll also see that some business models that seem like they were very robust aren't. The second thing I think that is not unrelated to this is we've been through an extremely long period of low volatility. That has a whole bunch of consequences. The first is people are just not taking risk into account the way they should. But even more disturbing in my mind is when people do take risk into account, they do it with risk models that are calibrated”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

43. “Than you would have expected because 2008 was such a harsh environment that there was a lot more prudence than you would normally see in a high liquidity environment for a while. But the last few years you've begun to see reversion to form, right? There is a lot more debt being piled up by people who probably will discover that they can't really run a business with that much debt.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

44. “The simple answer is yes, because we always do. But I think there's a couple of basic forces that are worth thinking about. The first is we have had an extended period of enormous amounts of liquidity sloshing around the world. And that's basically been an artifact of excess savings, in my opinion, a lot of it coming from countries like China that have, as we discussed earlier, going to be changing structurally. For that reason among a few others, you will see an end to this period of abundant liquidity. Going from abundant liquidity to not abundant liquidity has always been traumatic in the capital markets every single time it's happened. And the reason I think is that whenever people have a lot of liquidity, think of it as margin of error, they try a bunch of things that they otherwise wouldn't try. And we've had less of that in this side.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

45. “But A, not in a linear fashion, it will be stimulated by whatever the next crisis is. And it will take longer than you think.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

46. “A long time. I think that's actually. A really important realization. And so it will take a while, first of all, because it always does, because a new idea doesn't really materialize fully formed. Every single successful startup I've seen so far has pivoted at least once and often multiple times. They had an idea that sounded good, but it turned out they hadn't thought about X and then they pivoted to something else, and then they realized they also hadn't thought about Y. And in addition, even the startups that have an idea that turns out to be a really great idea tend to learn that the process of making that into a business almost like a video game has multiple stages in it. And the skill set that you need to master stage one doesn't necessarily work when you hit level two and graduating from level two to level three is probably even harder, right? And so because of that, I think you will see change happening.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

47. “Investment process. Yeah, I think that what happens in the world is that when everything else fails, people will try something new. And so in the financial world especially, the way that materializes is that there's always a crisis and that leads to more experimentation. By the way, one thing that's fascinating is Were founded in 2008 and 2009 It's incredible how fertile a year that was. Of course, there were a lot of talented people who were suddenly out of a job, which is part of it. But also, when the existing rules of the game clearly have failed is a great time for people to essentially open their minds to possibilities that they wouldn't have considered otherwise. I mean, the thought.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

48. “And can that change as you've been in a lot of different seats in front of a lot of a lot of these types of institutions knowing this all along pervasive throughout the investment industry is this question of sort of job risk, the risk of being different. Can it change? And if it can, how can we get from here to 10 years from now something where there's a better matching of consideration of both sides of the balance sheet, which is what we're talking about in the investment process?”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

49. “Why not? It's because there's this blindness. And I think that's one example. There's many dimensions to this problem. I think aren't addressed well. And it's precisely because we have this very narrow view that investment is about beating benchmarks as opposed to investment is about achieving objectives. And what are those objectives and how do you Minimize, how do you de risk them as much as possible?”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source

50. “Principle at the worst possible time. That's when you should be investing. But if you could get the community to understand this and to agree, oh, wait a second, our spending policy is a strategic element in our financial survival. That can lead to much, much better outcomes in the long run. And it can mean that you can get those better outcomes with less investment risk.”

    2018-01-29 · Capital Allocators · Seth Masters – Investment Polymath (Capital Allocators, EP.38) · IDENTIFIED FROM THE TRANSCRIPT · source