SPEAKER_00: legendary activist investor dan loeb he of course is the ceo and cio of third point the lost art of short selling has come back and it's absolutely critical it doesn't matter what

SPEAKER_01: you do you have to be really selective people talk about stock pickers market this is a bond and

SPEAKER_04: credit pickers market when we were small our main tool was shame and humor dan loeb turning up the heat on nestle over the weekend the shift has really been more towards a dare to be great

SPEAKER_02: message activism without proxy contest is like catholicism without hell you're very active on

SPEAKER_08: the twitter as well oh you found your voice a lot of emotion brewing there can we actually start with

SPEAKER_14: that before twitter you were actually quite active but they were in very different places i mean you were in wall street bets before wall street bets existed can you just walk us through your evolution

SPEAKER_17: as a as a uh public persona sure i mean there was this brand new technology uh that came out called

SPEAKER_19: the internet and really shortly that thereafter uh long before reddit or any of these other things there were a series of of chat boards there was you know yahoo there was something called silicon investor um a few other ones and people would congregate and kibitz it was done mostly anonymously and um it was an interesting place to exchange ideas there was it was it was really the wild west people could pretty much say or do anything but there was a lot of but there's a lot of substance there too it's not

SPEAKER_14: actually that much different than from today you uh did you engage at all in any trolling per se

SPEAKER_19: well some people use the term og sometimes i say i was the ot um the original troll yeah no i did i mean it was it was fun you know i i didn't know i was one day going to run institutional money and have a big fund and you know i was just having fun and uh and blowing off steam and and uh yeah it was fun i mean investing is fun and particularly on the short side i mean there's so much humor in it when you detect these companies especially in the 90s i mean that the it was really unsupervised there were some incredibly fraudulent companies out there and it was just fun to uncover them and kind of taunt the management teams and ultimately uh prevail you have one story above others that kind of stands out in that era i mean there were there were a bunch there was uh wow um there was a company called act trade that i remember run by a guy who was like a repeat uh fraudster and we uncovered it and and um you know i know we really got under this person's skin and ultimately it was really just a factoring company trading at five six i don't remember what it was some large multiple of book value and they had created a new technology called tads i don't remember what ted stood for but they were basically repackaging factory securities and saying that they had some special technology they were

SPEAKER_14: financing refrigerators and things like that tell us um your evolution as an investor when you started third point i mean you started with very very little capital now it's almost 30 billion of aum you're multi-strat but you learned at jeffrey's i think like you learned helping people like david tepper allocate capitals just walk us through how you learned to invest well i i started um really

SPEAKER_19: fascinated by investing and wanting to do it i think when i remember when i was 10 years old my dad took me my dad was a notoriously bad investor himself so he didn't give me any good examples he's a great lawyer not a great investor but he took me to meet a broker and i started investing and then in high school in the 11th grade i got a job at the branch office of bear stern sorry of pain weber working for a guy named alan crown who let me post his books and make cold calls and i think we broke certain securities laws but i think the statute of limitations has passed i would trade um options on occidental petroleum and teledyne there was a lot of volatility and um i think i had flurries of making money and lost all of it a couple of different times but it was a good good lesson i continued doing it in college and then um my learning started really formally at moorberg pincus where i really learned to value enterprises as my first job private kind of across the spectrum of private equity and venture capital i worked at a risk arb firm which was really invaluable uh and then uh skipping forward i had a i had way too many jobs in my 20s uh but i got really serious at jeffrey's i had an amazing opportunity to work on the distressed debt desk there i started out as a research analyst and i was just like drinking out of a fire hose there was so much activity the securities were so cheap coming out of distressed and um it was you know the 10 000 hours 10 000 reps we would write up uh different things every every day there are big blocks of debt to move and i really got that that was my real learning point and you know i stress this to people that you know everyone kind of sees mentorship is a sort of hierarchical thing where you you know learn from some wise older person but it's i i learned a ton from my colleagues from my own cohort and i learned a ton from my customers you know like eric mindich was a um boy wonder at goldman he was the youngest partner his partner at goldman yeah ran the arb desk there and he had this triumvirate or quadrumvirate whatever the four four people uh i don't want to leave them out but almost moron uh dinaker and um you can't think of some other guys anyway they were great and they really kind of brought me into their thought process thinking about event-driven investing and then you know i covered some of the smartest people in the business including david tepper i got to watch their thought process and i was like a you know like a chinese corporation that was like copying and reverse engineering and taking everything in and creating my database of knowledge and my own operating system kind of taking the best out of what all these different people did

SPEAKER_18: and what was that style when you first started third point what did you what was that expression that

SPEAKER_19: was well i think you know we call it event-driven investing it was really less focused on the quality of business more focused on very complex transactions takeovers spinoffs risk risk or arbitrage bankruptcies privatizations demutualizations and these transactions created unbelievable opportunities for alpha because of the confluence of dislocation opacity kind of time but also this goes and nothing changes now i always quote this jesse livermore line there's nothing new under the sun a real focus on management incentives so in all these different kinds of transactions management was incentivized to sandbag their numbers during a time when there was an excess supply of securities where their options were being set and we as co-investors got to come in with these depressed projections and ride along not just the um well we got to ride along a few different things that would happen greater transparency and understanding of the business coverage uh companies that that delivered a top line and margins and roe and everything else better than expectations so it was really a golden era for that type of investment from

SPEAKER_14: where that started to what third point is today just describe that and where you want to what where do

SPEAKER_19: you go from here yeah so stylistically that event um approach it's it's it's still something we think about it's in our um it's in our framework but i think what happened really when technology became a bigger uh force but really everything changed is a greater focus on business quality and um innovation and disruption and more thematic on the one hand understanding of consumer trends what's going on in financial services what's the economic macro backdrop that's that's supporting all this and of course the big topic of this event you know ai is sort of the culmination of that but all these major technological innovations that have really happened since you could make money before by not being technology savvy in the markets you'd be technologically illiterate or just say i don't do it and you could also be even more or a second you know up until the gfc i think you could be

SPEAKER_41: more or less economically illiterate and make a lot of money and now you wouldn't want to be either

SPEAKER_19: one of those things i mean given how much how much more important like the tech through line needs to

SPEAKER_14: be understood everywhere yeah but even if you're like blue owl and you're trading i mean blue owl obviously is very sophisticated in tech now but any pool of capital that used to not be correlated is

SPEAKER_43: effectively correlated i mean yeah yes yeah you could say that and i just want to answer your

SPEAKER_19: question just to kind of fast forward and give people a snapshot of what we do today rob schwartz is my partner and we took kenpo karate together when we're 10 years old it was a purple belt i think i never made it past yellow belt but um we reconnected at our 20-year reunion and i'm we're age i'm aging both of us sorry to give up your secret rob uh in 1999 it was our 20-year reunion and he was working as a sales rep for wireless rf components and i said wow this guy'd be great to do channel checks for us and then i asked him um a couple years later say you meet some smart people if you ever come across a really savvy engineer we should invest we didn't know what we're doing we weren't venture capitalists but we're getting behind a person there was a guy named dave fisher started a company called radio communications they made chips he made chips that were i still remember abg compatible for wi-fi base stations and ultimately the company was sold to texas instruments and you know we've i won't go deep into our our venture business but that we started to do within the fund we've done a couple of dedicated funds so we have that strand of activity we can talk about a little bit more about what we're thinking and how we're seeing this but i think what ultimately want you to get to is that all these things are interconnected and come together under the platform that we have today because we have the main hedge fund which does credit equity long short credit is both structured credit and high yield we have a clo business that we acquired we started a um a private credit business uh does traditional private credit direct uh sponsor financing direct lending and workouts which is very important so credit solutions as they call it a lot to do there and then we started an insurance company a few years ago it's not the first insurance company we did we did a pnc company but this one is was wholly owned now we own half of it and the insurance company um captures basically the investment grade part of what we do so private credit through structured vehicles structured credit whole loans um uh investment grade both private and in public but we also can use our surplus capital in very interesting ways so so what's the role of the human what's the

SPEAKER_14: role of dan loeb in running third point 10 years from now like 10 years before dan loeb was 100 of third point and then there's now there's agents there's ai there's all this learning there's all of this

SPEAKER_24: data where do you see the role of the human where do you see the role of systems making decisions

SPEAKER_19: allocating capital managing risk i mean so first of all investing now like well first of all my time is spent primarily on managing the hedge fund which for now is the biggest capital pool and most important business that we're in yeah the human element i think this is true for everyone you have here like the the element of uh the the social component that the the human network of knowing people being able to capture opportunities work with people interact like that's never going away like you never had get it maybe maybe you can theorize that there will be agents that will sit at andreason horowitz and whoever else your funds but i think the human will always have to be

SPEAKER_50: there because people like to you don't want to know who's making or losing the money yeah there's

SPEAKER_19: a there's a thing that i think the the agents they have will never really be able to look in your eye

SPEAKER_51: and assess all the things that you've expanded your philosophy of investing in companies from cheap cattle uh cheap securities with catalysts is i think how you described it on a podcast recently um and now you're very concerned about moats defensibility and just the quality or the brittleness as chamath likes to remind us of the revenue so maybe could you tell us how you evolved that core thinking about the quality of companies and then maybe give us some examples of the companies

SPEAKER_53: that now fit through that filter where you feel they have a moat you feel they have durability yeah

SPEAKER_19: obviously that's everything right now chamath talks about the time bounded value of companies and i think that's essential um what what are the companies that are going to be around 7 to 10 to 20 like what what what are the real moats that exist out there and it's it's it is harder now i don't think we can i i don't know that we can really go out you know 10 or 20 years ago by the way i think we deluded ourselves earlier because i think if you ask people about the moat around you know ibm or you know some of the other companies aol aol yahoo you know you say the same thing i mean look we're we're we're investing outside of tech into uh companies that have uh you know some great well first of all it also comes back to the management because we can't really just look at a product or a technology and say oh this is going to be it forever so we really look for a management team that we think will be adaptable and just like you guys were saying last night you don't want to be on boards of companies these are things that they should be doing so i think that's a huge part of

SPEAKER_27: it like finding management teams that you really believe in that have should have a proven ability

SPEAKER_61: to stay ahead of is that quantifiable or is it still very much a subjective sorry is what is it quantifiable assessing the management team no have you built a rubric for doing that no it's

SPEAKER_65: still very subjective qualitative i i think it's one of those things after 30 years there's like a

SPEAKER_64: pattern recognition and you let me ask a question on um on screening you know in the i think you've said recently publicly that there's a lot of opportunities on the short side in the market right now for the first time in a long time how do you start top down is that a top down or is it an opportunistic you know something comes across the wire and you guys jump on it in kind of an event

SPEAKER_63: driven way or do you guys have kind of a systematic top-down approach to looking at the market and

SPEAKER_65: finding those opportunities yeah there's no one approach to it i think one thing that we've avoided

SPEAKER_19: is kind of a valuation a solely valuation based approach there's a i've just seen i've seen too many people get run over by shorts that have dumb valuations but they get captured on you know reddit or one of these other things and they just get there you know or like some of these space companies right now that there's no rhyme or reason we had a really strong view on home builders from last year that uh there were two things going on it wasn't just it wasn't just rates mortgage spreads that were depressing housing prices that home prices that the home building industry was first structurally um impaired because of the way that they were all pretending to be nvr which is they all pretending to be asset light but they had massive commitments to these land pools which in in things that they said were options but they were really very committed in the capital and that that value was going on but but that the um the home building industry was really the last industry that had this post-covid hangover of inventory disruptions and and pricing um pricing that really made no sense you know you had all those prices went up to unsustainable levels but so did um building costs went up and and buyers are no longer able to pay those prices at the current current um uh in the current financing environment but that the but they've also gotten squeezed by by inflation and costs so that's been you know something so we've been sure things related to that let me bring sax into the discussion

SPEAKER_51: here sex we've learned uh a little bit about distribution of public securities you're famous in the all-in theme song of this great quote let your winners ride i'm curious when you hear dan talking about this um how you think about as a private market investor how to navigate distributing

SPEAKER_69: equities and and how you've sharpened your blade about you know which ones have brittle or you know more

SPEAKER_19: robust revenue i mean that's i'm sure you guys should this it's one of the most vexing questions we were um we were private investors in palantir and i think we sold all our stock in the 20s huge mistake gosh so you missed the 10x after going public yeah or 8x or something we were um private we led the b round in in upstart uh that was one i think we learned not to go on boards anymore because it restricts your ability to be liquid but we're also early investors in in n phase and we um sold some stock on the ipo and then took a tax hit and i think sold it under a dollar and the stock i think had we stayed on would have made four billion dollars so i'm not claiming to have any great expertise in knowing how to best distribute our dude markets are brutal it's so hard i mean you know this is so

SPEAKER_78: i bring it up we've all struggled with this actually wherever you wound up i i think it's case by case

SPEAKER_80: i mean there's some companies where like i was on a board and you can't sell and you end up regretting that and then there's others where the best thing to do is just hold on to that stock forever examples in your portfolio we've made great decisions i'm not going to talk about the ones that didn't do so well but um but no i mean look i've i've owned um meta and palantir as a private you know as a venture investor as an angel investor and you saw and the question well i sold some and held on to some obviously in hindsight you take meta i think meta ipos facebook back then ipo did a 50 billion

SPEAKER_84: our 22 yeah yeah 50 billion now it's here went down to 18. yeah yeah can you imagine how alternate

SPEAKER_86: universe like 400 right chamath never sold his facebook how insufferable he'd be or if i would reberg never sold his google i would i would be worth 10 billion no i wouldn't be nearly as good what's

SPEAKER_91: that i wouldn't be nearly as good it's like a like an analyst because it created tension i mean it's

SPEAKER_80: not real it's not it's not earned so back in those days 10 years ago we thought 100 billion dollar market cap company was pretty much as big as anything could get yeah and so facebook at 50 or whatever it's like the upside was to 100 and things are just totally different now we have

SPEAKER_96: multi-trillion dollar companies the market's so much bigger and that that changes i mean that's

SPEAKER_19: a rub against nvidia which is a five billion dollar company and people feel like it's sort of a ceiling on i think we'll look back at some point in time and say that was a foolish way to think about nvidia given its dominant position and its valuation relative is it undervalued right now yeah absolutely

SPEAKER_86: on earnings over the next two or three years and is it because people are having a hard time processing

SPEAKER_27: the largest entity that's ever existed in human i think that and and the narrative that that the well

SPEAKER_19: first of all technically there's all this other stuff that's growing faster and going up more people are it's and the long short pods are structured such that they have to be short something so nvidia feels like a safe short by the way google was a safe short um amazon was a safe short so i mean

SPEAKER_34: this just happens and sometimes the language at a valuation then they they break out i think that'll

SPEAKER_103: eventually happen with nvidia but there's probably some boundary condition discount to that right like we've never seen a valuation like this you can't over bet that i want to shift topics for a second i just

SPEAKER_14: want to talk society and culture before we run out of time with you there was this uh incredible thing that you told me which i relate to these guys which is um you're very passionate about criminal justice reform and specifically you were a key person to get the pardon of ross albert tell us your views on criminal justice why it hit such a nerve and then why ross albert what was what happened there that

SPEAKER_19: said i must fight for this guy let me take a step back and just talk about my framework for philanthropy which is i think not unlike brad gerstner and many people in the room here is that i care i would say everybody up here i care deeply about income inequality i care deeply about making sure that as many people have opportunities to the incredible things that we've all had here so my interest in criminal justice reform really started earlier with an interest in education and education reform and i was very lucky to get on the to start supporting get on the board ultimately be chairman of success academies which is a charter school network in new york and i do think nobody talks about it but the thing that's hiding out in plain sight for everybody is that the problems with income inequality isn't that you know jeff bezos is going to be a trillionaire or all these other people are gaining wealth it's that we're not equipping children and particularly the most vulnerable children with the intellectual tools that they need to succeed and compete and it's not because poverty is this intractable thing that can't be overcome we've proven that it can be the problem is that the unions and the basic principles that we all use in business which is accountability and merit and cultivating talent is set aside for the benefit of adults who are part of these unions it's a systemic thing it's it's not a lack of money it's really a lack of it's just a broken structure accountability is i think what i'm hearing yeah so i spent a lot of time on that just leave it that um i i then became aware and it was interesting i was looking for issues that conservatives you know it's great to see fetterman and mccormick up here like what are issues that conservatives and liberals progressives can agree on hopefully they can agree that we want young people to be better educated i think we can also agree that whenever you put the government in charge of something they'll it up one way or another i i want to give you guys a shout out though for not up this private public partnership with the investments in the private sector because i think this administration has done enormously good job at backing companies but let's put that aside it's one of the rare instances where i've seen that

SPEAKER_68: but um can you give an example of that that's standing out in your mind we have a company in

SPEAKER_19: our portfolio called atom computing that with many other quantum companies um has gotten money from the government and we were just super impressed that they uh how they contracted with us to engage with them in cryptography and to meet the government's needs but also in the financial component they drove a really tough bargain the the the government the taxpayers are going to make a ton of money on this and their involvement also has will contribute meaningfully to the value of this business it's just like a win all the way around investor and a customer right and they are capturing part of that value as a customer for the american people which they i think everybody deserves okay so back to the so criminal justice reform first of all there's a lot of bad people in jail i'm not one to you know i think the criminal justice uh uh movement has been undermined by uh folks who see it as an opportunity to not prosecute not deal with bad people that are out there but there's also a lot of people that are rehabilitated uh well there's really three different categories there's people who are falsely uh convicted uh convicted there are people who have shown uh contrition and rehabilitation and those then there are those who just had a really disproportionate sentence relative to what they did there's a case right now of a guy named john john grubman who's uh dealt in gray market diapers and formula he got an 18-year sentence for dealing these goods uh in the case of ross albrecht i was approached by someone and this just seemed ross as people may know uh probably this room knows he was sort of a uh a folk hero because he had this sort of cat and mouse game with the government he ran silk road silk road was a one of the first like crypto based exchanges he acknowledges that he did things that were illegal that he should have done he regretted regress it uh drugs were were dealt on the exchange um but that that's that's what he was accused of the government later said that there were murder for for hire uh incidents that was never that wasn't in he was never prosecuted for that and he denies that that ever happened but in any case um he was sentenced to a double life double life plus 40 years who knows how he got the extra 40 years on there and how he would spend that after he'd been there for two lifetimes and um there uh there's a uh a woman i met through intel named riva tez who alerted me to this friends with olaf carlson we and uh sort of the crypto insiders and um um i i thought about this like this guy's got no way out there's no there's no recourse through the system to get someone with a life sentence out of jail this this will only work with a presidential pardon and we worked on it we had some familiarity with the pardon process worked on it um then i approached charlie kirk about this and charlie really embraced this and embraced this individual as someone who had been falsely or not falsely but unfairly sentenced he took it to the president um charlie had a also had an attorney named david warrington who's currently the uh white house counsel white house counsel i just found out a couple days ago because i was talking to him that he was his lawyer for a decade um so i'm not taking credit for this i'm not saying charlie does it takes a village but david had been working on it and on the last day of trump's 45th term we were we were certain that he was going to get out and the justice department for whatever reason said if you if you if you commute his sentence we're going to go after you to the president so he uh as i understand um he uh withdrew the commutation so four years went by and um really charlie took the lead on this this was his only ask of the president and the president had a uh to libertarians and to the crypto community promised to uh deal with this and not only was his sentence commuted but he's pardoned and today charlie is married and not charlie sorry um ross is married is having a child and uh living a free life after spending a decade which is probably argue whether that was the right

SPEAKER_14: amount or not um and you feel like you should is there a role for you to play in doing more of this

SPEAKER_17: was this yeah no i continue i continue to work on cases there's an organization called olive

SPEAKER_19: uh and we work you know constantly on different people and i think it's you know look it's i i feel like as philanthropists it's great to do to work with organizations and there's a lot of great organizations i work with i do a lot fighting anti-semitism and um supporting jewish identity also but i also think that we can help people one at a time i think it just really nurtures

SPEAKER_113: the soul and i think it's just it's a good thing to do all right let's give it up for dan dan logan