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BILLIONAIRE DAVID RUBENSTEIN ON HOW TO BE A GREAT INVESTOR · Earn Your Leisure

• 0:00
  Speaker 1: All right, So here we are with the legendary David Ruberstein.
• 0:04
  Speaker 1: Thank you for joining us. Yes, you're not familiar with David.
• 0:08
  Speaker 1: He is the chair of the board of Trustees of
• 0:10
  Speaker 1: Duke University. He is the host of Bloomberg's pay a
• 0:14
  Speaker 1: pair of conversations, and he is the co founder and
• 0:17
  Speaker 1: co chairman of private equity firm the Carlisle Group, which
• 0:21
  Speaker 1: is a global private equity investment firm. How much the
• 0:25
  Speaker 1: assets on the management four hundred billion?
• 0:27
  Speaker 2: If that number has changed, please correct me for four
• 0:30
  Speaker 2: million advantage under management right now, which is amazing.
• 0:37
  Speaker 1: Yes, so thank you for joining us.
• 0:40
  Speaker 3: Appreciate it, my pleasure. Thank you very much for having me.
• 0:43
  Speaker 1: And he's an author too. We'll talk about his book.
• 0:45
  Speaker 4: Yes, I'm looking for Yes, very important.
• 0:49
  Speaker 1: So all right, so let's get into it. I want
• 0:52
  Speaker 1: to start off with, you know, some education for the
• 0:54
  Speaker 1: audience private equity. Can you explain what private equity years?
• 1:00
  Speaker 1: I feel that people have a good understanding of venture
• 1:04
  Speaker 1: capital because that's been the news a lot, and that's
• 1:07
  Speaker 1: been very popular the last couple of years. But I
• 1:11
  Speaker 1: think that the general public still doesn't have a good understanding,
• 1:15
  Speaker 1: or they might not have even heard of private equity?
• 1:17
  Speaker 3: Can you explain? Explain?
• 1:21
  Speaker 5: In the United States, the phrase private equity means one thing.
• 1:24
  Speaker 5: Outside the United States, it means another thing. In the
• 1:27
  Speaker 5: United States, private equity more or less means all private investments.
• 1:32
  Speaker 3: It could be venture.
• 1:33
  Speaker 5: Capital, growth capital, the stress debt, anything where you're buying
• 1:37
  Speaker 5: an asset that is something that's going to be held privately.
• 1:41
  Speaker 5: It's not going to be public when you own it.
• 1:43
  Speaker 5: And the theory behind private equity is that when you
• 1:46
  Speaker 5: have something that's not in a public setting, you can
• 1:49
  Speaker 5: make changes, you can improve it, you can in send people,
• 1:51
  Speaker 5: you can pay them more, and ultimately you'll get a
• 1:54
  Speaker 5: better return. So the theory behind private equity is that
• 1:58
  Speaker 5: you buy an asset, you make it much better when
• 2:01
  Speaker 5: you sell it or you take it public. You're going
• 2:03
  Speaker 5: to get a rate of return on your investment that's
• 2:06
  Speaker 5: going to be let's say, twenty percent per annum. So
• 2:08
  Speaker 5: if you put your money in the bank, you're going
• 2:10
  Speaker 5: to get maybe one percent a year. If you put
• 2:13
  Speaker 5: your money in stock market, maybe you get on the average
• 2:15
  Speaker 5: six percent a year. If you put your money in
• 2:18
  Speaker 5: private equity, and it's a good private equity funder or
• 2:22
  Speaker 5: or or deal, you might get twenty percent or thirty
• 2:24
  Speaker 5: percent a year. Well that's pretty good. So the theory
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  Speaker 5: is it's a better way to make add value to
• 2:31
  Speaker 5: an organization and you can and you can get a
• 2:34
  Speaker 5: good rate of return.
• 2:35
  Speaker 3: So that's what it is.
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  Speaker 5: Basically fixing up something in a private setting, making it better,
• 2:39
  Speaker 5: and ultimately selling it after three to five years. That
• 2:42
  Speaker 5: gets you a return of maybe twenty percent a year.
• 2:46
  Speaker 4: Thank you for being here, A huge fan of your show.
• 2:49
  Speaker 6: Can you talk to us about the importlance of being
• 2:53
  Speaker 6: a controller in the face and conventional wisdom? And are
• 2:56
  Speaker 6: there any sexes right now? You think people should take
• 2:59
  Speaker 6: a ConTroll and take on in this environment.
• 3:01
  Speaker 5: Right, the greatest investors in the world of generally or contrarians.
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  Speaker 5: If you just went along with the average common sense
• 3:10
  Speaker 5: view of what the average person thinks, you would be
• 3:13
  Speaker 5: one of the pack and you wouldn't do anything that
• 3:15
  Speaker 5: make you stand out. So contrariants take a view that's
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  Speaker 5: different than the average common sense wisdom.
• 3:21
  Speaker 3: Today.
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  Speaker 5: For example, the common sense wisdom that the average investor
• 3:25
  Speaker 5: would have is get out of the stock market, sell
• 3:27
  Speaker 5: whatever you have. The economy is going to hell in
• 3:29
  Speaker 5: a handbasket, and we're going to be in a recession.
• 3:32
  Speaker 5: The smart investors would say, now's the time to come in,
• 3:36
  Speaker 5: buy things in a discount, and eventually in the recessions
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  Speaker 5: always end and eventually in three or four years you
• 3:42
  Speaker 5: have bought something at fifty cents on a dollar and
• 3:45
  Speaker 5: then two or three years are gonna be worth three
• 3:47
  Speaker 5: dollars something like that. So that's what our contraan goes
• 3:50
  Speaker 5: against the conventional wisdom.
• 3:53
  Speaker 2: Well, our audience is, you know, filled with retail investors.
• 3:58
  Speaker 2: We have some institutional investors, I'm sure, but a lot
• 4:00
  Speaker 2: of retail investors and obviously they're learning the market, they're understanding,
• 4:04
  Speaker 2: they're investing in. What are some habits that you've come
• 4:08
  Speaker 2: across in your career that you've noticed that great and
• 4:11
  Speaker 2: good investors have, right, so they can have an age.
• 4:13
  Speaker 5: Well, people who are great investors generally, this is their life.
• 4:17
  Speaker 5: This is what they do full time. They don't kind
• 4:20
  Speaker 5: of have a day job and then they're picking stocks
• 4:22
  Speaker 5: at night and then they kind of they do Well,
• 4:24
  Speaker 5: you have to do this full time. You have to
• 4:26
  Speaker 5: be pretty smart, good with numbers. You have to have
• 4:29
  Speaker 5: a willingness to read enormous amounts of material. You have
• 4:33
  Speaker 5: to admit a mistake when you make it and get
• 4:35
  Speaker 5: out of a bad deal, because everybody.
• 4:36
  Speaker 3: Makes a mistake.
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  Speaker 5: I think it also takes some humility to be a
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  Speaker 5: great investor, because you realize you're going to make mistakes,
• 4:41
  Speaker 5: and you can't say I'm so brilliant and the market's wrong,
• 4:44
  Speaker 5: but I'm right and the market's wrong, and you start
• 4:46
  Speaker 5: losing money, and you know, those are things that make
• 4:49
  Speaker 5: great investors. The average retail investor who buy stocks in
• 4:55
  Speaker 5: the public market, you know, they're probably not great investors.
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  Speaker 5: They just they haven't done this for a living. You
• 5:00
  Speaker 5: have to do something for a living, and you know,
• 5:02
  Speaker 5: if you were you were going to a dentist, you
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  Speaker 5: wouldn't want a dentist who is spending full time picking stocks.
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  Speaker 5: You want a dentist who's going to actually know how
• 5:12
  Speaker 5: to be a dentist. So an average dentist or doctor
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  Speaker 5: isn't doing this full time, and therefore they're probably not
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  Speaker 5: going to be that good at it. That's why for
• 5:19
  Speaker 5: the average retail investor, the average person who's not a professional,
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  Speaker 5: they're probably best to go into index funds, which just
• 5:26
  Speaker 5: mirror the market very modest fees, and the stock market
• 5:29
  Speaker 5: goes up thirteen percent a year, you're going to go
• 5:31
  Speaker 5: up thirteen percent a year. Trying to pick stocks and
• 5:34
  Speaker 5: become Warren Buffett while you have a day job as
• 5:36
  Speaker 5: a as a dentist or doctor is a fool's Errand.
• 5:41
  Speaker 1: So let me ask you this, what are your thoughts
• 5:44
  Speaker 1: in the handling of the economy by the Fed this year?
• 5:47
  Speaker 3: Been my thoughts on what I'm sorry, can you speak up.
• 5:50
  Speaker 1: The Fed's handling of the coat?
• 5:52
  Speaker 5: Okay, I should disclose that I hired a young man
• 5:55
  Speaker 5: that worked for me years ago, and he was at
• 5:57
  Speaker 5: our firm for a number of years and he left.
• 5:59
  Speaker 3: His name is Jay Powell, so now it's the chever
• 6:02
  Speaker 3: in the Federal Reserve.
• 6:03
  Speaker 5: But he doesn't give me any insights. The Federal Reserve
• 6:05
  Speaker 5: made a terrible mistake. They underestimated how serious the inflation
• 6:10
  Speaker 5: was going to be. The United States government injected five
• 6:13
  Speaker 5: trillion dollars into our economy to deal with COVID. And
• 6:17
  Speaker 5: you put five trillion dollars into an economy that's roughly
• 6:20
  Speaker 5: a twenty two trillion dollar economy, you're going to get inflation.
• 6:23
  Speaker 5: So we got a lot of inflation. The Fed said
• 6:26
  Speaker 5: for a while it's transitory, which means it'll.
• 6:28
  Speaker 3: Be gone soon. They were wrong. So now they're going.
• 6:31
  Speaker 5: To increase interest rates a fair bit to get inflation
• 6:34
  Speaker 5: down now. As you may have seen last week, inflation
• 6:37
  Speaker 5: came down a little bit still at seven point seven percent.
• 6:41
  Speaker 5: The Fed wants to get inflation down to two percent
• 6:43
  Speaker 5: per year. That's what we had for the last twenty
• 6:45
  Speaker 5: five years, two percent a year. It wasn't a big factor.
• 6:48
  Speaker 5: Getting back to two percent is not easy. I know
• 6:51
  Speaker 5: a lot about inflation because I worked in the Carter
• 6:53
  Speaker 5: White House when we got inflation to nineteen percent.
• 6:56
  Speaker 3: Nobody's ever to do that again, right, so.
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  Speaker 5: Please, please, So I would say the Fed is now
• 7:05
  Speaker 5: serious about fighting inflation. They're going to keep increasing interest
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  Speaker 5: rates for a while, and I spect in December they
• 7:12
  Speaker 5: will have another meeting and they'll increase interest rates by
• 7:14
  Speaker 5: another seventy five basis points, or almost one full point.
• 7:18
  Speaker 5: So yeah, I think the Fed has probably made a
• 7:21
  Speaker 5: mistake in the beginning. Now they're trying to compensate for it,
• 7:24
  Speaker 5: and I think they're doing a reasonably good job now.
• 7:27
  Speaker 4: In light of the FTX scandal.
• 7:29
  Speaker 6: Looking back at the interview that you deal with Sam
• 7:32
  Speaker 6: as An investor. Is there anything in hindsight that made
• 7:35
  Speaker 6: you say something about him or the strategy of the
• 7:39
  Speaker 6: company didn't.
• 7:39
  Speaker 5: Feel right, which would about him ftx oh FDx Yes,
• 7:46
  Speaker 5: Sam Bankman freed, Well, it was the only interviewer I
• 7:50
  Speaker 5: had with a guy showed up in a T shirt,
• 7:52
  Speaker 5: shorts and tennis shoes. That's all he had wore, and
• 7:54
  Speaker 5: that's apparently that was his normal dress.
• 7:56
  Speaker 3: So I was a little It was a little unusual.
• 7:59
  Speaker 3: Usually people dress a little bit better for the interviews.
• 8:03
  Speaker 5: He's look, you meet a lot of people in this
• 8:05
  Speaker 5: world who are brilliant young people, and when you're a
• 8:09
  Speaker 5: brilliant young person and you haven't had a failure, you
• 8:12
  Speaker 5: think you really are brilliant, and you walk on water.
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  Speaker 3: So he had never made a mistake.
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  Speaker 5: Really, he built a business where in at the age
• 8:19
  Speaker 5: of thirty, he's worth twenty two billion dollars. So when
• 8:23
  Speaker 5: you were thirty years old, you guys look like you're
• 8:26
  Speaker 5: maybe a little older than thirty. I don't know, but
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  Speaker 5: when you were thirty years old, if you were worth
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  Speaker 5: twenty two billion dollars, you would think.
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  Speaker 3: You walk on water. Absolutely, he may have thought that.
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  Speaker 5: I would say, it appears that they made a terrible mistake,
• 8:40
  Speaker 5: and whether it's criminal or not, I don't know. But
• 8:42
  Speaker 5: they were taking customer accounts and putting them into other
• 8:47
  Speaker 5: businesses that the customers didn't know about. So let's suppose
• 8:50
  Speaker 5: you have an account at Merrill Lynch and you put
• 8:52
  Speaker 5: a thousand dollars into it and they told you later,
• 8:55
  Speaker 5: guess what. We took that thousand dollars. We lent it
• 8:58
  Speaker 5: to something else, and we'll give your dollars back soon. Well,
• 9:01
  Speaker 5: before they could give it back to you, it went bankrupt.
• 9:04
  Speaker 5: So you're out here thousand dollars. That appears to be
• 9:06
  Speaker 5: what they did, and therefore there's a lot of challenges there.
• 9:09
  Speaker 5: So he's a smart guy. I've met him on a
• 9:11
  Speaker 5: couple occasions. I would say, you know, you have to
• 9:15
  Speaker 5: be wary of people who are thirty years old and
• 9:17
  Speaker 5: think they walk on water, because it rarely happens.
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  Speaker 4: Noted.
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  Speaker 3: So there was there was one thirty three year old
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  Speaker 3: guy that did walk on water, but that was unusual.
• 9:29
  Speaker 3: I had to get a love it walk on water.
• 9:32
  Speaker 3: I love it. I love it.
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  Speaker 2: Obviously one of the greatest investors of our time, obviously
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  Speaker 2: the Carlo Group. Like we said, four hundred billion managing
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  Speaker 2: assets prior to even get into finance. I know you
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  Speaker 2: studied law, So what was that transition like from you
• 9:48
  Speaker 2: going into law to find out?
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  Speaker 5: Well, let's be honest, if you're going to be good
• 9:52
  Speaker 5: at something, you have to love it, and I wasn't.
• 9:55
  Speaker 5: I didn't love the practice of law, and my clients
• 9:57
  Speaker 5: told me I wasn't that good at it. I went
• 10:01
  Speaker 5: to law school to make my mother happy because she
• 10:03
  Speaker 5: said you'd either be a doctor or a lawyer.
• 10:06
  Speaker 3: So I didn't want to go to medical school. So
• 10:07
  Speaker 3: I went to law school.
• 10:09
  Speaker 5: And I was really interested in politics, and so I
• 10:11
  Speaker 5: was really interested in working in government. And I went
• 10:13
  Speaker 5: to work for Jimmy Carter at the White House for
• 10:15
  Speaker 5: four years when I was in my twenties, and you know,
• 10:19
  Speaker 5: we got in place in the nineteen percent and the
• 10:20
  Speaker 5: result was we didn't lose.
• 10:22
  Speaker 3: We lost the election.
• 10:23
  Speaker 5: So I had to go back and practice saw it,
• 10:25
  Speaker 5: so I knew but I wasn't that good at it.
• 10:27
  Speaker 3: My clients reminded me of that.
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  Speaker 5: So I decided to do something different and I started
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  Speaker 5: affirm in Washington nineteen eighty seven that grew to be
• 10:34
  Speaker 5: one of the largest private equity.
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  Speaker 3: Firms in the world. So I got lucky.
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  Speaker 5: I surrounded myself with really smart people that knew more
• 10:39
  Speaker 5: than I did.
• 10:40
  Speaker 3: And the key to.
• 10:41
  Speaker 5: Really building a great business is surrounding yourself with smarter
• 10:43
  Speaker 5: people than you. So that's what happened. I built it
• 10:47
  Speaker 5: that's now one of the largest firms in the world
• 10:49
  Speaker 5: in this area. But I was attracted to it because
• 10:53
  Speaker 5: I thought, if I'm going to be not in government
• 10:56
  Speaker 5: and government doesn't want me because I didn't do a
• 10:58
  Speaker 5: good job, and I'm going to be in the private sector,
• 11:00
  Speaker 5: I might as well make the most amount of money
• 11:02
  Speaker 5: I can make.
• 11:02
  Speaker 3: And business people.
• 11:04
  Speaker 5: And privatecy firms are making a lot more money than lawyers,
• 11:07
  Speaker 5: and they ought to actually seem to be more enjoyable.
• 11:09
  Speaker 5: So that's why I started, and it worked.
• 11:12
  Speaker 1: So let me ask you this. You talked about inflation
• 11:15
  Speaker 1: a few times. Last week a report came out and
• 11:18
  Speaker 1: they said that they thought that inflation might have peaked
• 11:21
  Speaker 1: and that that was good for the market. Do you
• 11:24
  Speaker 1: think that inflation has peaked?
• 11:27
  Speaker 3: Well, it's it's an interesting question.
• 11:31
  Speaker 5: Last week, the numbers came out that said that inflation
• 11:35
  Speaker 5: rate from month to month the year to year was
• 11:37
  Speaker 5: seven point seven percent Now, if I told you inflation
• 11:41
  Speaker 5: was going to be seven point seven percent annualized, you
• 11:43
  Speaker 5: would run for the hills.
• 11:45
  Speaker 3: But because it was previously.
• 11:46
  Speaker 5: Over eight percent, it was eight point six percent, seven
• 11:49
  Speaker 5: point seven percent looked wonderful. So yes, it may have peaked.
• 11:52
  Speaker 5: I think it probably has. But remember inflation was pretty
• 11:57
  Speaker 5: high because we injected so much money in the economy.
• 11:59
  Speaker 5: The war or in Ukraine had a very high effect
• 12:02
  Speaker 5: on energy prices and the food supply chain, so there
• 12:06
  Speaker 5: are many things that produced this high inflation. I think
• 12:09
  Speaker 5: it probably has peaked, but nobody really knows for certain. Now,
• 12:13
  Speaker 5: I'd say if the war in Ukraine were to end
• 12:16
  Speaker 5: in a couple of months, that would be great for inflation.
• 12:19
  Speaker 5: And if Ukraine can start producing and shipping wheat again,
• 12:23
  Speaker 5: that would be great for inflation. But I'd say it's
• 12:25
  Speaker 5: a little premature to say it's peaked because we need
• 12:29
  Speaker 5: a couple months of data.
• 12:30
  Speaker 6: Just one month isn't probably enough. I'm looking forward to
• 12:34
  Speaker 6: reading your book. Can you share with us what's one
• 12:37
  Speaker 6: lesson you learned from maybe Jim Simmons, Ken Griffin and
• 12:42
  Speaker 6: maybe John Paulson around how they invest in A very
• 12:46
  Speaker 6: impactful lesson that will help audience tonight.
• 12:49
  Speaker 3: Well.
• 12:50
  Speaker 5: Ken Griffin is a guy that built one of the
• 12:52
  Speaker 5: most successful hedge funds of all time. He's also got
• 12:55
  Speaker 5: a separate company called Citadel Securities, and he's extremely wealthy.
• 13:00
  Speaker 5: He basically believes in analyzing data very carefully. He surrounds
• 13:04
  Speaker 5: himself with really really smart people and he tries very
• 13:07
  Speaker 5: hard to get the best people in the country who
• 13:09
  Speaker 5: are really good with numbers. He tries to steal people
• 13:12
  Speaker 5: from Google, not steal, but recruit people from Google, Facebook, Microsoft, Apple.
• 13:17
  Speaker 5: Get really smart people and have no numbers, and they
• 13:20
  Speaker 5: really analyze these things carefully. John Paulson made one bet.
• 13:24
  Speaker 5: It was a bet that the mortgage market would collapse,
• 13:27
  Speaker 5: and at the time people didn't think it would be
• 13:29
  Speaker 5: quite as bad as it turned out to be. So
• 13:30
  Speaker 5: he made on one investment twenty billion dollars twenty billion,
• 13:36
  Speaker 5: so you don't have to do anything the rest of
• 13:37
  Speaker 5: your life.
• 13:38
  Speaker 3: You're make.
• 13:40
  Speaker 5: Good trade, like say, it was the greatest trade of
• 13:43
  Speaker 5: all time, and so he did pretty well.
• 13:45
  Speaker 3: But basically he analyzed.
• 13:46
  Speaker 5: The fact that mortgage market was probably over inflated, and
• 13:50
  Speaker 5: he correctly bet on that.
• 13:53
  Speaker 2: Yeah, most people say no risk, no reward, obviously in
• 13:56
  Speaker 2: your space when you're managing people's money that you know
• 14:00
  Speaker 2: may not be true.
• 14:00
  Speaker 3: Maybe it is.
• 14:01
  Speaker 2: Can you talk about the importance of risk management when
• 14:03
  Speaker 2: you're talking about private equity, So I.
• 14:06
  Speaker 3: Think in private equity, I'm sorry.
• 14:08
  Speaker 4: Risk management the important.
• 14:10
  Speaker 5: Well, you know, risk management is a way of managing
• 14:16
  Speaker 5: your money where you're basically in effect hedging. You're trying
• 14:20
  Speaker 5: not to get the highest rate of return, but you're
• 14:23
  Speaker 5: trying to protect against the downside.
• 14:25
  Speaker 3: Private equity is different than that.
• 14:26
  Speaker 5: Private equity is basically saying we're going to fix a company,
• 14:29
  Speaker 5: make it better. We're not trying to hedge against it.
• 14:31
  Speaker 5: So it's different. I would say, depends on what somebody
• 14:34
  Speaker 5: really wants out of life. If you're seventy five years
• 14:38
  Speaker 5: old and you're living on the retirement income and you
• 14:42
  Speaker 5: don't have a lot of money coming in, you don't
• 14:44
  Speaker 5: want to take a big risk. You probably have a
• 14:46
  Speaker 5: more a risk management kind of approach, which is to
• 14:48
  Speaker 5: say you're protecting the downside. If you're twenty five years
• 14:52
  Speaker 5: old and you can take a lot of risk because
• 14:55
  Speaker 5: if you make the mistakes, you can go make money again,
• 14:57
  Speaker 5: probably private equity might be better for you because you're
• 15:00
  Speaker 5: willing to take the upside and you don't need to
• 15:01
  Speaker 5: protect the downside so much.
• 15:03
  Speaker 3: It depends on your situation.
• 15:04
  Speaker 5: How much money can you afford to lose, for example cryptocurrencies.
• 15:08
  Speaker 5: I always told people, don't put more in than you
• 15:10
  Speaker 5: can afford to lose, and some people did.
• 15:14
  Speaker 3: People did.
• 15:16
  Speaker 1: Is what's your economic outlook for twenty twenty three?
• 15:22
  Speaker 5: I would say for twenty twenty three, I suspect the
• 15:24
  Speaker 5: United States will probably go into a recession. That's a
• 15:28
  Speaker 5: very common view, and that's because if you go back
• 15:31
  Speaker 5: from to nineteen sixty, almost every time the Federal Reserve
• 15:34
  Speaker 5: has increased interest rates dramatically, the result has been a
• 15:37
  Speaker 5: so called hard landing or a recession. So it's unlikely
• 15:40
  Speaker 5: we're going to be able to avoid it this time,
• 15:42
  Speaker 5: but it'll probably be very modest. I don't expect it
• 15:44
  Speaker 5: to be a serious inflatient of the type we had
• 15:47
  Speaker 5: in the serious procession, of the type we had in
• 15:50
  Speaker 5: the Great Recession of two thousands.
• 15:53
  Speaker 4: Ernest, what's up?
• 15:54
  Speaker 7: You have a walk into a small business and everything
• 15:56
  Speaker 7: just works like the checkout is fast, there are seats
• 15:59
  Speaker 7: of digital tipping is a breeze, and you're out the
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  Speaker 7: pushing your vision forward. This episode is brought to you
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• 17:43
  Speaker 3: Seven eight nine.
• 17:45
  Speaker 5: I suspect it to be a two quarter recession, and
• 17:47
  Speaker 5: you know, two quarters is not that serious, So I
• 17:50
  Speaker 5: think the economy will probably slip a bit in that
• 17:54
  Speaker 5: period of time, but I think inflation will come down,
• 17:56
  Speaker 5: the unemployment rate will go up. I suspect the unemployment
• 17:59
  Speaker 5: rate will probably go up to about four four and
• 18:00
  Speaker 5: a half percent next year or something like that. Congress
• 18:04
  Speaker 5: is not going to do anything, not that anybody will
• 18:06
  Speaker 5: notice or want Congress to do anything. Congress isn't going
• 18:10
  Speaker 5: to spend much money because they're just not a lot
• 18:13
  Speaker 5: of money left to spend. We have thirty trillion dollars
• 18:16
  Speaker 5: of debt in this country. This country, You and I
• 18:19
  Speaker 5: owe other people thirty trillion dollars. That's a lot of money,
• 18:23
  Speaker 5: and we can't afford to borrow much more.
• 18:26
  Speaker 6: If you would get into private equity in twenty twenty three,
• 18:29
  Speaker 6: what would be the differences in your strategy in twenty
• 18:32
  Speaker 6: twenty three versus when you began in your career.
• 18:35
  Speaker 5: Well, when I was starting, inflation was not a factor
• 18:38
  Speaker 5: and certain things were not available then today, I would
• 18:41
  Speaker 5: say a good thing in twenty twenty three would buy
• 18:43
  Speaker 5: distress debt. Distress debt is when you're buying debt that
• 18:47
  Speaker 5: our company that's not doing that well, and you buy it,
• 18:49
  Speaker 5: you know, fifty cents on a dollar, and probably we'll
• 18:51
  Speaker 5: come back to a dollar if you know what you're
• 18:53
  Speaker 5: doing and it's a good deal. So I would buy
• 18:55
  Speaker 5: a lot of distress debt. I would look at things
• 18:57
  Speaker 5: that are going to be important certain areas of the future.
• 19:01
  Speaker 5: One of them would be things like quantum computing. Another
• 19:05
  Speaker 5: thing would be computational biology. Another on things would be crisper,
• 19:09
  Speaker 5: which is gene splitting. Another kind of area that I
• 19:13
  Speaker 5: think you would be good to be healthy food. Food
• 19:16
  Speaker 5: that's healthy for you. That's going to be a big
• 19:18
  Speaker 5: trend as well. So I look for things that in
• 19:20
  Speaker 5: the future that are going to be good trends that
• 19:22
  Speaker 5: people want to buy things into and you get there
• 19:24
  Speaker 5: ahead of them.
• 19:26
  Speaker 3: Yeah.
• 19:27
  Speaker 2: So for obviously for twenty twenty three, you said the
• 19:29
  Speaker 2: outlook is a recession. But in these type of environments
• 19:32
  Speaker 2: you mentioned some set are there other sectors that retail
• 19:35
  Speaker 2: investors definitely should be looking at. I know you said
• 19:36
  Speaker 2: maybe indexes we should start, but other sectors.
• 19:39
  Speaker 3: That's one on the retail side that we should be
• 19:41
  Speaker 3: looking at. Well.
• 19:41
  Speaker 5: Yes, for example, healthcare. When I worked in the White
• 19:46
  Speaker 5: House before you were born, were any of you born
• 19:48
  Speaker 5: in nineteen seventy seven, any of you alive then?
• 19:52
  Speaker 3: No?
• 19:52
  Speaker 5: No, no, right, So I was working for President Carter
• 19:55
  Speaker 5: in the White House. At that time, the GDP of
• 19:58
  Speaker 5: the United States was seven percent in the healthcare area
• 20:01
  Speaker 5: seven percent. Today it's about twenty two percent. So that
• 20:04
  Speaker 5: means we are spending much more money on healthcare because
• 20:07
  Speaker 5: people are wealthier and they want to live longer, and
• 20:10
  Speaker 5: so what they do is they spend money on healthcare, telemedicine,
• 20:12
  Speaker 5: all kinds of pharmaceutical things you can buy. So I
• 20:15
  Speaker 5: think healthcare is going to be one of the great
• 20:17
  Speaker 5: continuous growth sectors in our country. But people outside the
• 20:21
  Speaker 5: United States they want to live long time too. So
• 20:23
  Speaker 5: as people get wealthier outside the United States, they want
• 20:26
  Speaker 5: to spend more money on medical treatment, healthcare, and so
• 20:28
  Speaker 5: that's going to be one of the great growth areas
• 20:30
  Speaker 5: I think in our country and around the world.
• 20:33
  Speaker 1: So the name of your new book is how to
• 20:36
  Speaker 1: Invest Masses of the Craft. So along the lines of that,
• 20:40
  Speaker 1: I definitely want you to talk about the book. But
• 20:43
  Speaker 1: what are some keys to becoming a great investor?
• 20:46
  Speaker 5: One do reasonably well in school. Two keep reading, Always
• 20:51
  Speaker 5: read stuff you never know when's going to be helpful. Three,
• 20:54
  Speaker 5: be willing to go against the conventional wisdom. Four surround
• 20:58
  Speaker 5: yourself with smart people. Next, maintain some humility. Next, make
• 21:03
  Speaker 5: sure when you make a mistake and own up to it,
• 21:06
  Speaker 5: share the credit and be willing to take the blame.
• 21:10
  Speaker 5: And also I think in the end, if you make
• 21:12
  Speaker 5: a fair amount of money, be philanthropic.
• 21:14
  Speaker 3: I think it's very helpful.
• 21:17
  Speaker 6: You've done incredibly well in your career. Like what drives
• 21:19
  Speaker 6: you to continue going and how many hours a day
• 21:22
  Speaker 6: are you putting into massing your craft?
• 21:26
  Speaker 5: I am old now, I'm seventy three years old. So
• 21:30
  Speaker 5: when Ronald Reagan was sixty nine and running for election
• 21:33
  Speaker 5: against Jimmy Carter. I told Carter, look, Reagan is so
• 21:36
  Speaker 5: old he can't get into bed in the morning. He's
• 21:38
  Speaker 5: sixty nine years old. Now I'm seventy three, so you know,
• 21:41
  Speaker 5: I'm old. But what motivates me is I want to
• 21:44
  Speaker 5: you know, I came from very, very modest circumstances. My
• 21:47
  Speaker 5: parents didn't graduate from high school. I was the only child.
• 21:51
  Speaker 5: My father made seven thousand dollars a year. So I
• 21:54
  Speaker 5: wanted to work hard and get somewhere and make something
• 21:56
  Speaker 5: up myself and make my parents proud of what they
• 21:59
  Speaker 5: had produced. So I worked hard, and you know, a
• 22:03
  Speaker 5: hard work generally pays off, and I got lucky, a
• 22:05
  Speaker 5: lot of luck. So what motivates me now is to
• 22:08
  Speaker 5: kind of be a role model for other people, but
• 22:10
  Speaker 5: also my own children. I have free children, and I
• 22:12
  Speaker 5: don't want them to think that their old man is
• 22:14
  Speaker 5: basically slopping off and not doing anything and doing you know,
• 22:17
  Speaker 5: I want them to think I'm doing something productive for
• 22:19
  Speaker 5: the country.
• 22:20
  Speaker 3: And so that's what motivates me.
• 22:22
  Speaker 2: In your book, How to Invest, you got you got
• 22:24
  Speaker 2: the opportunity to interview some of the greatest investors in
• 22:28
  Speaker 2: the history of the United States of America. A lot
• 22:32
  Speaker 2: of success stories were told, but I'm interested in seeing
• 22:36
  Speaker 2: what was some of the mistakes as some of these
• 22:37
  Speaker 2: investors need right because we hear the glory stories, but
• 22:40
  Speaker 2: obviously they had to go through some trials and tribulations
• 22:42
  Speaker 2: to get to that point. What are some of some
• 22:44
  Speaker 2: of the mistakes that you can share.
• 22:46
  Speaker 5: Well, they all made mistakes. Everybody's made mistakes. Ken Griffin
• 22:50
  Speaker 5: now one of the greatest investors, now, very wealthy guy.
• 22:54
  Speaker 5: His company almost went bankrupt. His company almost went bankrupt
• 22:57
  Speaker 5: and in great recession. The guy that runs the biggest
• 22:59
  Speaker 5: henche fun of all time and the most successful head
• 23:02
  Speaker 5: fund of all time is Ray Dalyo. He invested one
• 23:06
  Speaker 5: way when he was early out of business school and
• 23:08
  Speaker 5: he lost all his money.
• 23:09
  Speaker 3: He had to go to his father to borrow four
• 23:11
  Speaker 3: thousand dollars. He was broke.
• 23:13
  Speaker 5: So you know, he also made a mistake of punching
• 23:16
  Speaker 5: his boss in the face one time. That's become a
• 23:18
  Speaker 5: good idea. So people always make mistakes. Warren Buffett made mistakes.
• 23:24
  Speaker 5: They all make mistakes. You just have to pick yourself
• 23:27
  Speaker 5: up off the ground and learn from your mistakes. That's
• 23:30
  Speaker 5: the key. If you find somebody that never made a mistake.
• 23:33
  Speaker 5: You've got to be careful because that person has too
• 23:35
  Speaker 5: big an ego and telling people how great you are
• 23:38
  Speaker 5: is not a good thing.
• 23:40
  Speaker 3: You know.
• 23:40
  Speaker 5: There may be some people are presidents of the United
• 23:42
  Speaker 5: States who tell people how great they are, but generally,
• 23:44
  Speaker 5: I don't think that's a good idea.
• 23:46
  Speaker 3: You know.
• 23:46
  Speaker 5: Can you imagine Abraham Lincoln saying I won the Civil
• 23:49
  Speaker 5: War by myself?
• 23:50
  Speaker 3: No, it wouldn't happen.
• 23:52
  Speaker 5: You want somebody that's humble and great investors have a
• 23:54
  Speaker 5: certain amount of humility. They've made mistakes, but they've learned
• 23:57
  Speaker 5: from it. So you guys seem like you're in sports
• 24:03
  Speaker 5: as well. You got these those tennis shoes behind you.
• 24:05
  Speaker 5: Are you great athletes?
• 24:06
  Speaker 3: Also?
• 24:07
  Speaker 2: Now that's subjective, definitely love sports. The memorabillion in your
• 24:13
  Speaker 2: background as well.
• 24:15
  Speaker 5: Well, I'm a terrible athlete. But I'll show you this.
• 24:20
  Speaker 5: This is from Coach K. We won the national championship
• 24:24
  Speaker 5: when I was the chairman of the board of Duke.
• 24:27
  Speaker 5: I was sending him plays from him by hand signals.
• 24:31
  Speaker 5: He said, that was the key, is those hand signal plays.
• 24:34
  Speaker 5: That's how we won.
• 24:35
  Speaker 4: Yes, Coach K.
• 24:37
  Speaker 1: The legend of so let me ask you this, ninety
• 24:43
  Speaker 1: eight point five percent of asset management firms, which includes
• 24:48
  Speaker 1: private equity VC and investment management firms, ninety eight point
• 24:53
  Speaker 1: five percent are run by white men. Obviously, a lack
• 24:58
  Speaker 1: of diversity is understatement. Do you do you have a
• 25:01
  Speaker 1: problem with that? What's your thoughts on that?
• 25:04
  Speaker 5: Well, if you read my book, it wasn't ninety eight
• 25:06
  Speaker 5: point five percent of the people in that book were
• 25:08
  Speaker 5: white men. So I had a fair number of people
• 25:11
  Speaker 5: who were women and minorities because I thought it was
• 25:14
  Speaker 5: important to show that while there has been a bias
• 25:17
  Speaker 5: towards white men and it's been a white male society,
• 25:21
  Speaker 5: it's it's it's changing a bit.
• 25:24
  Speaker 3: You know.
• 25:25
  Speaker 5: I don't think it's a great situation. You have a
• 25:28
  Speaker 5: this country is going to be a minority white country
• 25:31
  Speaker 5: in my lifetime. Right now, probably the country is about
• 25:35
  Speaker 5: sixty fifty eight percent white, but I suspect if I
• 25:39
  Speaker 5: live long enough, it's going to be less than fifty percent,
• 25:42
  Speaker 5: and that should be reflected in the investment management and
• 25:45
  Speaker 5: other things. So I put a number of African American
• 25:48
  Speaker 5: leaders in the book in the investment world, and I've
• 25:52
  Speaker 5: interviewed it many others as well. One in the book
• 25:54
  Speaker 5: is a guy named John Rogers. John Rogers built the
• 25:57
  Speaker 5: Aerial Capital when is the largest Africa American owned investment
• 26:02
  Speaker 5: firms in the in the country. I've interviewed on my
• 26:04
  Speaker 5: TV show Melody Hobson, who you may know. Melody Hobson
• 26:07
  Speaker 5: is married to George Lucas, but in her own right,
• 26:11
  Speaker 5: she's built with Ariel Capitol into a really successful investment career.
• 26:16
  Speaker 5: So I think it's if it's ninety eight point five percent,
• 26:19
  Speaker 5: I wouldn't I wouldn't dispute your number, but I would
• 26:21
  Speaker 5: say it's changing.
• 26:24
  Speaker 6: I have a quick quote, a two parter, what does
• 26:27
  Speaker 6: your day to day schedule look like? And who has
• 26:29
  Speaker 6: been your favorite guest on the show of the last
• 26:32
  Speaker 6: few years and what was the biggest lesson you learned
• 26:34
  Speaker 6: from them?
• 26:36
  Speaker 3: My favorite guest was like asking which of my children
• 26:38
  Speaker 3: is my favorite?
• 26:39
  Speaker 5: I don't ever tell people, but I would say a
• 26:42
  Speaker 5: guest that I thought was really good was Jeff Bezos,
• 26:45
  Speaker 5: because what makes a guest work well is he has
• 26:48
  Speaker 5: a sense of humor, sense of humility, plays along with
• 26:51
  Speaker 5: some jokes I might give, and he also it's good
• 26:54
  Speaker 5: to do this in front of a live audience, because
• 26:56
  Speaker 5: if you have a live audience that it makes it
• 26:59
  Speaker 5: makes the interviewee uh plant to the audience a little
• 27:02
  Speaker 5: bit and makes it more interesting. If you're just doing
• 27:04
  Speaker 5: it with nobody in the audience, it's sometimes can fall
• 27:07
  Speaker 5: Platt not be as interesting. Jeff Bezos was great. Oprah
• 27:10
  Speaker 5: Winfrey was one of the best. Bill Clinton and George
• 27:13
  Speaker 5: Bush together were really great. I just interviewed uh not
• 27:18
  Speaker 5: long ago. Uh, Sam Bankman freed and that was we
• 27:23
  Speaker 5: discussed a little unusual. I am scheduled interviewing soon. I
• 27:27
  Speaker 5: hope to be interviewing very soon. Uh, Mike Tyson and
• 27:31
  Speaker 5: Alex Rodriguez. I'm gonna see whether Mike Tyson, you know,
• 27:37
  Speaker 5: can beat me in an arm wrestling masterss.
• 27:42
  Speaker 2: You mentioned uh, your children, your three children, uh, and
• 27:45
  Speaker 2: obviously you mentioned him as you know, being great guests.
• 27:48
  Speaker 2: I wonder did they take an interest in your career
• 27:52
  Speaker 2: path as well. I know you wanted to do low
• 27:54
  Speaker 2: because of what your parents said. Well, what was the
• 27:56
  Speaker 2: interest in your kids as as you were going through
• 27:58
  Speaker 2: your career.
• 28:00
  Speaker 5: Well, when I was building my firm, I was running
• 28:02
  Speaker 5: around the world raising money and doing stuff, so they
• 28:05
  Speaker 5: didn't probably know what I was doing when they were younger.
• 28:07
  Speaker 3: They just had no clue.
• 28:09
  Speaker 5: It now turns out that all three of my children
• 28:12
  Speaker 5: are in private equity and they have their own funds.
• 28:15
  Speaker 5: So now they call me up and asked me if
• 28:17
  Speaker 5: I can introduce them to an investor or, I can
• 28:19
  Speaker 5: help them and analyze the deal.
• 28:21
  Speaker 3: So in that way, it's good.
• 28:22
  Speaker 5: But my kids all were well educated, they went to
• 28:25
  Speaker 5: really good schools, But I didn't push them to do
• 28:29
  Speaker 5: any of these things. They kind of came to it eventually.
• 28:31
  Speaker 5: I don't know why, but they did.
• 28:33
  Speaker 1: Yeah, before we leave, I wanted to ask you this question.
• 28:36
  Speaker 1: What do you personally look for in investments? It could
• 28:38
  Speaker 1: be an investment in a company, investment in stocks, Like
• 28:40
  Speaker 1: what's important to you to say, Okay, I feel comfortable making.
• 28:44
  Speaker 5: Out When we're looking at an investment in a private company,
• 28:46
  Speaker 5: we're looking for a management team that's pretty strong, committed
• 28:51
  Speaker 5: to it.
• 28:51
  Speaker 3: They've got a lot of their own networth tied up
• 28:53
  Speaker 3: into it.
• 28:54
  Speaker 5: You want to make sure the company has the ability
• 28:56
  Speaker 5: to survive downturns, make sure the capital structure works, make
• 29:02
  Speaker 5: sure it's a product that is likely to be popular
• 29:04
  Speaker 5: in the future.
• 29:05
  Speaker 3: Not just now, but in the end, you're looking for
• 29:07
  Speaker 3: the right price.
• 29:08
  Speaker 5: You know, you can have the greatest company in the world,
• 29:10
  Speaker 5: but if you pay too much for it, it's not
• 29:11
  Speaker 5: gonna work. So you've got to pay at the right
• 29:14
  Speaker 5: price and make sure that you're not overpaying for these things.
• 29:18
  Speaker 6: One of the biggest things that I find men have
• 29:20
  Speaker 6: a struggle with is balance. You have any advice for
• 29:24
  Speaker 6: men that are running businesses but are also trying to
• 29:27
  Speaker 6: have a good healthy work life balance or do you
• 29:29
  Speaker 6: think that's a fallacy?
• 29:32
  Speaker 3: Well, that's the great conundrum in the world.
• 29:34
  Speaker 5: I mean, can you really build a great business and
• 29:36
  Speaker 5: have a healthy personal life and have a good balance
• 29:40
  Speaker 5: of life. Some people figure it out. You know, obviously
• 29:42
  Speaker 5: it's not it's not perfect. It's not easy to do.
• 29:46
  Speaker 5: You know, some of the wealthiest people in the world
• 29:48
  Speaker 5: that you've read about recently, they've they've become the divorced.
• 29:52
  Speaker 5: So you know, you could say that's, you know, maybe
• 29:55
  Speaker 5: because they work so hard. Who knows, I'm divorced because
• 29:57
  Speaker 5: maybe I work so hard. But Jeff Bezo skill gates
• 30:01
  Speaker 5: a lot of entrepreneurs, maybe they put too much time
• 30:05
  Speaker 5: into their business. So a healthy life work balance is
• 30:11
  Speaker 5: not as easy to talk about it's hard to do,
• 30:13
  Speaker 5: very hard to do because you're driven. If you're a
• 30:16
  Speaker 5: driven person, you want to make your company work so well,
• 30:19
  Speaker 5: and you measure your companies and success every day by
• 30:23
  Speaker 5: various metrics. You don't measure how good you're doing your
• 30:26
  Speaker 5: job as a husband, or as a wife, or as
• 30:29
  Speaker 5: a parent every day, so you can you can slough
• 30:32
  Speaker 5: off that because you don't have a metric every day.
• 30:34
  Speaker 5: But I think it's not as easy to do as
• 30:38
  Speaker 5: talk about.
• 30:38
  Speaker 4: For sure, if you can do it again, would you
• 30:40
  Speaker 4: do anything differently?
• 30:43
  Speaker 5: I had to do anything differently, what I would do
• 30:45
  Speaker 5: is I wouldn't have gone to Las.
• 30:46
  Speaker 3: Probably I would have gone to business school. That would
• 30:48
  Speaker 3: have been good.
• 30:49
  Speaker 5: Secondly, I wouldn't have spent four years in the Carter
• 30:51
  Speaker 5: White House because I you know, maybe I would have
• 30:53
  Speaker 5: been better for the country. I didn't do that, and
• 30:55
  Speaker 5: I came out and practiced law for five years after
• 30:58
  Speaker 5: I left the White House.
• 30:58
  Speaker 3: That was a waste of my time.
• 31:01
  Speaker 5: But in the end, I probably would have given away
• 31:03
  Speaker 5: more money by earlier. I've given away, you know, well
• 31:07
  Speaker 5: over a billion dollars in cash to are lots of
• 31:10
  Speaker 5: things around the country. And I probably wish I had
• 31:13
  Speaker 5: worked harder, made more money, and given away more and
• 31:15
  Speaker 5: started earlier. But on the whole, you know, I'm seventy three.
• 31:19
  Speaker 5: When you're seventy three, you read the obituary pages every
• 31:22
  Speaker 5: day to see who your age is dead.
• 31:25
  Speaker 3: And you guys are too young.
• 31:27
  Speaker 5: You don't read the obituary I'm sure, but no doubt
• 31:29
  Speaker 5: you must have known somebody in your life who died
• 31:32
  Speaker 5: when you thought it was earlier than they should have died.
• 31:34
  Speaker 5: So I'm always, you know, thankful I'm still alive and
• 31:37
  Speaker 5: trying to do things that make sure I don't, you know,
• 31:39
  Speaker 5: die prematurely.
• 31:41
  Speaker 2: Well, you talked about the things that you're looking for
• 31:43
  Speaker 2: when you're analyzing the company. I wonder if from on
• 31:47
  Speaker 2: a daily basis the deal flow, how often are you
• 31:50
  Speaker 2: involved or is it a process before it even gets
• 31:53
  Speaker 2: to you?
• 31:54
  Speaker 3: Okay, Carlisle.
• 31:57
  Speaker 5: Is probably investing ten billion to twelve billion dollars of
• 32:00
  Speaker 5: equity every year, and we're probably doing around the world.
• 32:04
  Speaker 5: I don't know, fifty seventy deals a year. I sit
• 32:07
  Speaker 5: on the investment committees of many of these things, but
• 32:09
  Speaker 5: I am not doing the deals. So I read the
• 32:11
  Speaker 5: investment committee memos, I give them my thoughts. They generally
• 32:14
  Speaker 5: ignore them when I give them my thoughts the farm
• 32:17
  Speaker 5: or not. I have a family office and they do.
• 32:21
  Speaker 5: My family office does a lot of investments that are
• 32:23
  Speaker 5: smaller than Carlisle's, and you know, I look at what
• 32:26
  Speaker 5: they're doing, but I generally I don't really have the
• 32:29
  Speaker 5: time to dig into any.
• 32:30
  Speaker 3: One deal that much.
• 32:31
  Speaker 5: So I just hire good people and hopefully they don't
• 32:34
  Speaker 5: come up with good recommendations. You know, if you keep
• 32:37
  Speaker 5: turning down the recommendations the people you hired, they're going
• 32:39
  Speaker 5: to quit. So you have to trust them a bit.
• 32:41
  Speaker 5: So I generally trust people and generally don't turn down
• 32:44
  Speaker 5: the recommendations. So I've made mistakes. I turned down Facebook personally,
• 32:49
  Speaker 5: and when Mark was in college, I turned down in
• 32:52
  Speaker 5: effect Amazon when when Jeff was just starting the company.
• 32:56
  Speaker 5: So I make a lot of mistakes.
• 32:59
  Speaker 1: Well, mister team, has been a pleasure. Before we leave,
• 33:01
  Speaker 1: anything that you would like to say.
• 33:03
  Speaker 5: Look, thank you, thank you all for inviting me, and uh,
• 33:07
  Speaker 5: you know, I appreciate it.
• 33:09
  Speaker 3: Good day, all right, take care, thank you so much,
• 33:13
  Speaker 3: A good one. Bye.
• 33:16
  Speaker 7: My graduates from my school being forced back drop bag
• 33:21
  Speaker 7: drop my drop back drop drop