Paul Tudor Jones - Lessons From 50 Years in Markets - [Invest Like the Best, EP.470]

Introduction to Ramp

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Introduction to Invest Like the Best

1:34Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at colossus.com. Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests

2:06are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit PSUM.VC.

Guest Introduction

2:24My guest today is Paul Tudor Jones. I've been excited to do this episode for many years. I think Paul is one of the most legendary traders in market history. He's also just one of the most entertaining and interesting guys that I've ever met. Paul is so full of stories. It seems as though he's lived five lifetimes in just one, and all of the amazing lessons that he shares with us in this conversation I think will leave you searching to be as passionate about what you do as he is about what he does. This conversation was recorded in mid-February, 2026,

2:56weeks before the geopolitical conflicts now shaping the global economy. Please enjoy this great conversation with Paul Tudor Jones.

Difference Between Investor and Trader

3:05There was something that we talked about when we last met that made me laugh. I thought it'd be a fun place to begin our conversation today. And it was about the difference between being an investor and being a trader. And you mentioned something basically saying you wished you could be an investor. Life would be so easy. I'd love you to describe the difference between the two and the life of a trader. I promise I'll do that. And we'll talk about markets and AI and everything. And at the end, I'll say, were you not entertained? And I bet you'll say yes.

3:36But of all the things that you do in your podcast, the one that I think is the most important, if you don't mind, I'd love to start with that one, which is that question you ask everyone at the end. I'm in. I love it.

Kindest Thing Done

3:49And the reason why is because it's so funny. I gave this commencement address one time to what is now Rhodes College in Memphis. I remember when I was writing it, I was sitting there thinking, damn, who gave my commencement address? I couldn't remember. No one remembers. Can you remember who gave your commencement address? You're so young, you might. It was the president of Ireland at the time. Okay. Went to Notre Dame. And you're Irish. But it was so funny because no one remembers who gave their commencement address.

4:19So they're thinking, God, I'm getting ready to do this for 15 or 20 minutes, and no one's going to remember a damn thing. How do I make it special? And so on this podcast, I'm assuming people listen to millions of podcasts, and they probably can't really remember, but fractions of them. So if there's anything they remember from this, I hope it's this part. All right. So everyone that listens knows. The question is, what is the kindest thing that anyone's ever done for you? It's such a great question because the kindest thing was also my very, very, very first childhood memory.

4:56I was probably two and a half or three. It was probably 1957. And I was with my mother at this place called the Curb Market. I got separated from my mother. And, boy, you can imagine being two and a half years old and separated from your mother. You're terror-stricken. This elderly black gentleman came up, and I was sitting there bawling my eyes out because I thought my mother had left me, and said, what's the matter, little boy?

5:27And I said, I lost my mama. And he said, here, don't you worry. We're going to find her. And he grabbed my hand, and we started walking up and down the aisles. It was an outdoor vegetable market. Gosh, I can almost still smell fruits and vegetables. We come around the corner finally, and I see my mother, and I was so happy. And my mother saw me, and at first she just started laughing. And I remember her, she was laughing so hard. She comes and she gets me, and she says to that man, she tries to give him $5, which was

6:02in 1957, a huge amount of money. And he said, no, ma'am, I know you'd do that for my child, too. And it was such a simple act of kindness, but it was so profound to me at the time. So that night, I had a prayer list with my mother that she used to go through with me every night. So it'd be, God bless, Mama, Daddy, Peter, Paul, Alberta, Grandin, Pete and Judy Lennon, and Sid. And then we added, I said, what was that man's name?

6:33She goes, I never got his name. For the next 10 to 12 years, right in that prayer list would be that man. Probably 4,000 or 5,000 reps every night for that man. Fast forward to 1986. I'm living in New York City. I'm lying on my couch, 32 years old, and I'm watching 60 Minutes, and Harry Reasoner's interviewing this guy, Eugene Lang. And Eugene Lang was a businessman who had gone back to give the commencement address to his

7:09elementary school up in Harlem, which over the course of the intervening 60 years had completely transformed from a gentrified area into an African-American, Hispanic community with almost a population entirely consisting of people of color. Gene asked the principal, how many of these kids, these 12-year-olds, are going to go to college? The guy said, statistically, maybe, I don't know, 8% or 9%, something like that. He could not believe that because obviously he had graduated from that school, gone on to college,

7:44and then done very well. So right there on the spot, he decided, I'm going to promise every one of those kids, they graduate from high school, I'll put them through college. And that resonated with me so much. And he adopted that class, and he created something called I Have a Dream program. I said, I can do that.

Paul Tudor Jones' Journey

8:04And the next day, I called him up, and he said, you know, it's funny, three or four other people have called me, and we're all meeting at my apartment on Tuesday night. I got there late. I was seeing myself up in Harlem or somewhere on the Lower East Side of Manhattan. I got Bed-Stuy, the highest crime-ridden community in New York at that time, even higher than the Bronx. And that began this journey. I put my heart and soul into it. I'd go over there every Tuesday, went to the commencement address for this elementary school,

8:37did the same thing that he did, told them that they graduated from high school, put them through college. Of course, everybody was jubilant. It was a big surprise. The parents were so happy. That began this big journey for really the next 14 years, because I kept adopting success in classes. I had tremendous passion. We were doing after-school programs. We were playing sports, teaching life skills. About three years in, I realized these kids aren't doing that great.

9:08Now they'd gone on to different junior highs. They're not doing that great. So I started hiring some tutors, figured that out. And then probably four years in, I've had one kid who got killed. I had a bunch of girls become teenage moms. So now all of a sudden, I'm dealing not just with the academic challenges, but also with the social challenges to boot, of which there are many. Along the way, I learned so much by failing. I learned so much about what it takes to actually beat poverty.

9:44And by the way, 1987, the year after that, was when Robin Hood started. And then that informed me through, certainly was extraordinarily instructive. And as we built Robin Hood out and began applying metrics and making sure we had goals and standards and a variety of things, it also led me ultimately to start one of the first charter schools in the late 90s. In Bed-Stuy, right next to that spot, actually, I started charter school called the Bed-Stuy Charter School of Excellence.

10:17The first one started out as an all-boys school. We named it Excellence because I wanted these boys to know that we were going to demand excellence of them. And we completely, totally crushed it. We hired the absolutely dream team of educators to do it. And within about four or five years, we were number one out of 543 elementary schools in New York City. The point being that you can have all the passion in the world, but you have to have a plan.

10:48There has to be a great pedagogy in what it is that you're trying to do when educating a kid. Why is all this relevant to me? Just think about this. So here was this one simple act of kindness of this elderly man helping this young child, in that case, a black man helping this young white boy. And so when I saw Harry Reasoner, I saw that elderly man helping those young kids. There's the photo negative of what had happened to me.

11:20And I thought, wow, it just was instinctive. The point here is that one simple act of kindness can have waves of betterment. It can be so transformative and so multiplicative. There's no doubt in my mind that 4,000 reps of thanking that elderly man to help me as a child inspired me when I saw Harry Reasoner interviewing Gene Lang to emulate that in a sense. I keep thinking how instructive it would be if intentionally we just all start every day

11:55with a goal of one simple act of kindness. It doesn't have to be anything big. It can be something as small as what happened to me when I was three. And look at the possibilities that come from it.

Importance of Kindness

12:11Just imagine if 350 million Americans intentionally sat out every day for one simple act of kindness. What I will say, particularly the young people who might be listening to this, I'll tell you, before 2000, I would say 2000 was kind of a turning point. All this demonization and criticism and the attack mode that we seem to be in, it didn't exist. It's not the way, by the way, that this generation that's perpetrating it and promoting it was raised.

12:41It's not the way of the 70s, 80s, 90s. You didn't have these vitriolic attacks. There was a much higher level of civility and respect. And I think down the road we'll get back to it. So I would just say to young people, you don't have to accept today as what this country historically has been about, because it wasn't that way when I grew up. It certainly wasn't that way. And it's not going to be that way in the future. Absolutely incredible story.

13:12Maybe my favorite version of this answer that I've ever had. First time I've ever done it at the beginning of the episode, which makes it fun, too. What was your message in the commencement speech that you ultimately gave? What did you decide was the message to leave them with? So I got up there and I looked on the dais and I was like 20 people over 50 or 60. How many of you remember your college commencement address? None of them, not one of them could remember. I love to hunt and fish. So I go through and I talk about the normal challenges you're going to face in life.

13:44And I also talked about how going through this process, I wanted to make sure I was going to say something that was memorable. So right there at the end, I said, so whatever you do. And I pulled out my bow and I knocked an arrow. I said, so whatever you do, aim high and shoot straight. And when I went like this, the whole crowd was, aim high and shoot straight. And I had an apple on a table over here and smashed it. Knocked it. I don't know whether they still remember or not,

14:15but I know when everybody was ducking, I thought, oh, they're going to remember that.

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Life of a Trader

15:27It's an excuse for me to ask my other question about this difference between investing and trading. So I'd love you to explain the life of a trader in contrast to that of an investor. If I just think about when I started, I started in 1976. Inflation was raging. I started on the floor of the commodity pits. Stuff was literally going up and doubling and cutting in half every year. The volatility was insane. To give you an example of how crazy things got,

15:59Bunker Hunt was squeezing silver at the time. And he bought about 200 million ounces at an average price of about three and a half bucks. And between 1976 and 1980, we had a crazy monetary policy. Inflation started ripping. And silver went literally through the roof. Ultimately, I started out in the fourth account exchange. I bought a membership on COMEX, which was a metals exchange at that time. I got in the pit and was executing some orders for them sometimes along the way.

16:32And the bottom line was, it was just the most amazing bull run. And I want to say by like 79, silver was around 30 bucks an ounce. And all of a sudden, he was worth about five or six billion, which made him worth three times the next closest person in the world. Bunker says, well, I think this silver here is the most valuable asset and resource on earth. Someone asked him, what are you going to do with all that silver? And he goes, I'm going to bury it.

17:02I'm going to bury it. In fact, what I'm going to do is I'm going to buy 20 million more ounces and then we'll bury that too. So he buys 20 million ounces at 35 bucks. And when that happened, it just, whoa, it just roofed, goes to 50 bucks. So at 50 bucks now, he's worth about 11 billion and he's got a multiple of five or six on the next closest guy. I just couldn't even believe what I'd seen and how much money that this guy had made anyway. So that was when COMEX decided the commercials had been just eradicated because they're sitting there holding physicals and having to put up this margin every day and their bankers going, yeah, I can't do it.

17:43So anyway, I made liquidation only. Silver collapsed. Went from 50 bucks to under 10 bucks in the space for about eight weeks. And that had a searing impact on me to see him go from the richest guy to virtually bankrupt in this short space of six or seven weeks. Right then and there, I would never own anything or trust anything for the rest of my life. My grandfather, when I was really young, said, son, you're only worth what you can write a check for tomorrow.

18:14That also had a really deep impression on me. So liquidity has always been something that's been in my DNA as a child because that was my grandfather's favorite saying all the time. And then also just my early trading days because my early trading days had $10,000 a cow. I'd run that thing to 100, run it back down zero. Also living in my early 20s, I had this friend, he's such a character. He could take 2,500 bucks for five grand and run into 2 million.

18:47And of course, the market moves in and we're crazy like no one I'd ever seen. We were brokers at that time at EF Hutton. And we called him the mortician because he'd get an account with $10,000, churn about $100,000 commissions, take it to a million bucks and then have it in deficit. So you learned that liquidity was really important because the volatility was so huge. We're all living on the edge. So that had a real impact on me. The idea of owning something for the long run was laughable because look how much money you could make by trading in the short run because the volatility profile was off the chart.

19:26One of my mentors who got me into trading was teaching a class on investments in Virginia and asked me to come be a guest lecturer. And I started in 82 and I've been doing it every semester since. I remember one of my favorite stories to tell that class is I would go through how all the greatest fortunes in the world were made. I always ask them, who's the richest guy in the world? Back then it was Bill Gates and Warren Buffett. How did they get there? And my point to them would be they got there by riding a trend for the long run.

19:59And that would be my big lesson to them. I'd always have two or three bullet points. My number one bullet point is you're going to make your money by riding a trend for the very, very longest time. I said there are many different ways to achieve it. You can own a company like Bill Gates or Steve Jobs or whatever, or you can be like Warren Buffett. You can be one of those value investors who won't spend a nickel. And I used to sit there and rail on Warren Buffett year after year after year.

20:30And I would congratulate myself for trash and go, so, you know, he just happened to be in the right place at the right time and caught this bull market. If that guy had been in Japan, forget it. Never would have happened. If it started in 1989 and the Nicky, forget it. Never would have happened. Different story. Right place, right time. Bull market genius. I guess this will be my 50th year. The difference between my trading and investing is if I just take our fund, which BBI fund, for 40 years, it has a minus 0.12 correlation with the S&P 500.

21:05So you can see the difference between investing and trading. So 100% of our returns are alpha, 100%. And I was just thinking, oh, my God, why couldn't I be Warren Buffett? Just believe in America and just wave you down 50%. Who cares? Because America is going to bring you through. And not that he doesn't. He works as hard as any human being. But it's that belief system that's so fantastic as opposed to, I feel like I'm like a right guard, but a right guard in the NFL for 50 years where I'm just every day just fighting in the frickin' trenches every day.

21:44And every time someone says to me, gee, I want to go into trading, I said, go on a long short, go on the equity side, go do it. I've always envied that belief system, and it's worked so well for so long. I would have huge difficulty to have been in Warren's shoes in 2008 and 2009 and have a 50% drawdown. It would have had a really material impact on me. I don't think I have his calm and patience and fortitude to be able to do what he does.

22:15So anyway, I was listening to the Acquired podcast on Berkshire Hathaway, and for the first time, I learned that at nine years old, nine years old, he understood the power of compound interest. And actually, when I listened to that podcast, I just went, oh, my God, this guy is a genius, and I have been the greatest fool. Well, I've always wanted to write a book called What I Realize Now, which would go through the successive mistakes of beliefs that I've had in my lifetime.

22:53What I realize now is what an idiot I was. That guy is a flipping genius because he understood the power of compound interest, which I somehow managed brilliantly to avoid my entire career. He understood it at nine. He went out at 17, went to Columbia and sought out Benjamin Graham. What a genius. Now, the great thing from that podcast is that he was also so smart that he partnered with Charlie Munger. Charlie was clearly, clearly a tremendous genius in his own right because whereas Warren would buy $0.50, Charlie understood the power of compounding for companies that were growing all the time.

23:34And I think the two of them together, man, what a combination. But anyway, Warren, if you happen to hear this, I'm deeply apologetic. You are the OG of compound interest, and I wish I was one-tenth as smart as you are. Didn't you talk to him about what he thought about AI sitting there after when we first talked about? What was that conversation like? You cannot be a trader investor, whatever term we use, and not be a really good risk manager. Anyone that's really succeeded in investing or trading is first and foremost a great risk manager.

24:09And I went to a conference about 18 months ago, and I just was so alarmed by what I heard. And then I mentioned on CNBC, and he watches CNBC every day and sent me a note and said, I agree with you 100%, but the genie's out of the bottle. I don't know if we can get it back in. I think he's completely on board with the belief that we have some real threats from AI. The problem with AI is that the news, I don't know, like in the last 12 hours, the news that keeps coming out is just more disturbing. The biggest problem with AI is that if you think about the way AI is being practiced and deployed right now, it's the build, break, iterate model.

24:49Build it, break it, fix it, and iterate. That's been the invention model since the beginning of man, build, break, iterate. But we've never been in a situation where the tail event could be hundreds of millions, if not billions of lives. What's so scary, when I was at this conference, which is only about 35 or 40 people, with one modeler from the four biggest model companies, when I was able to ask them pointedly, how do you think that AI safety gets resolved?

25:22Pretty much the consensus answer is, I think we'll finally do something about it when 50 or 100 million people die in an accident. It's crazy. My big problems with AI are that, one, there's no plebiscite on this. There's no vote, there's no way for the public to say yay or nay on the pace. And that's the way that most innovation occurs. Again, this one has a tail event on it that's so large. I go back to when the nuclear bomb was dropped. 18 months later, our Congress and our administration was smart enough in forward thinking to create the Atomic Energy Commission

25:58to begin to try to regulate something that had huge tails. Here we are, we're three years in and regulate. What are you talking about? If there ever was a leadership position that needs to be taken by any president, it's on AI regulation right now, not just the United States, but convening with China, with all the other areas to make sure that we don't do something that has catastrophic consequences. And that's just on the safety side, not even what's going to happen to social disruption.

26:31And Matt Schumer came out with a very lengthy essay on how the two new models that were released six days ago are going to be so unbelievably disrupted in the workforce. So the news in my mind keeps getting more alarming. I can tell you if this was anything to do inside Tudor, which this thing would have been so contained so long ago. I mean, that's what a good risk manager does. And yet there's zero risk management here. So your point about great investors and traders are great risk managers. In the face of AI, how do you think about this exogenous variable lurking?

27:06The one thing that I think should be part of this next election, the simplest, most important thing that we can do is we can demand that all AI is watermarked. That's the single most transformative thing that we could possibly do for the country, for the world. Make it a felony if someone knowingly violates that three times, put them in jail. I want to know what's authentically human and what's not.

27:37And when that happens, talk about restoring trust in the country, which I think is one of the biggest problems. I would say two times since this year began, I've had very serious people call up and say, did you see X, Y, Z? And of course, it turned out to be a deep fake. I think just so we can get back to some truth and honor and normal discourse, I think we've got to do that. And the reason why it's so important is if I go back to that conference 18 months ago,

28:08I would say a significant portion of the scientists there envision a future where humanity is going to have a chip in our brain that's going to allow us to access so much knowledge, power, et cetera. So I'm just kind of looking down the road and thinking, OK, we really need to know what we're reading, what we're looking at. Because, again, that group, without having any feedback from the rest of America, thinks that a blended human with a machine is perfectly acceptable, is the future, should have inalienable rights.

28:46For me, I don't think that's the case. I'd vote no. I think most humans would vote no. So coming back to some of these themes of investor versus trader, risk management, et cetera, I know you learned a lot from this guy, Eli Tullis. I love these lessons that were formative for you for what became the trading legend that you now are. What did he teach you? And was there any specific episode from your time with him that taught you the biggest or most important lesson? God, he was so strong. He was really good at executing at the maximum apogee of fear as well as greed.

29:26He was so good at smelling that. Because he traded hardly anything but cotton, he would just sit there and he would just focus. He was just so good at waiting for exactly when there was just too much elation or when there was too much fear. And so that was really helpful. And then I would say the number one thing I learned from him was we were so long cotton one weekend and there was a great drought, spectacular drought. And, of course, it rained all through the belt over the weekend.

29:59Walk in, market was limit down. He had gotten absolutely smashed. I thought, oh, my God, it's over. That day from lunch, his wife brought in four of her friends. He had the most beautiful office I've ever seen in my life. And he came out and just, oh, my God, he had a smile on his face. Oh, ladies. And flirting with the wives. I mean, I was sitting there going, are you kidding me? This guy's broke. And he's acting like he's Rock Hudson or something.

30:29Wow. Boy, I tell you what, I'll never forget that one to this day. When the going gets tough, the tough get going. You wear it here and you have that confidence you're going to come back. Hugely important. Feels like the right time to ask you just what trading means to you. You've said before that the whole world is just this interconnected series of capital flows. And part of the job is being on top of that and taking positions based on what's going on in the world. But mostly I interview investors who buy stakes in companies. I very rarely interview someone that is moving and putting on major positions in any sort of asset class or trading instrument.

31:06I would love to just hear you describe what to you trading is.

Historical Market Experiences

31:10Like, what is the literal act that you are doing every day with such excellence for decades? There's a couple of metaphors that come to mind. Let's start with boxing because you have an opponent. In this case, it's the market. You know you're going into the ring with this opponent who's after you the whole time. And I'm thinking more of a classic one as opposed to a Mike Tyson one. But you're kind of pairing, jabbing, feeling each other out, looking for an opening.

31:43And then every now and then you'll have a great opening and you take a big shot and you may land one. If I think about big shots, Bitcoin 2020, a knockout, two-year rates, 2022, knockout, you have these incredible opportunities at times if you just sit and wait. The whole time in the interim, some of it you're just gathering information, looking for those openings. You're always trying to make progress. You're always trying to win the round.

32:15But there'll be those few opportunities where you can do something really material. I love the boxing analogy. In the examples you gave, Bitcoin, two-year rates, precious metals, so many things you've been through. What is going on in one of those? Like, maybe pick one. And I'm literally curious what you are doing in the moments, what you're looking at, what you're studying, what supply-demand imbalances you see. Like, what is the literal nature of one of these windows that opens every so often? If you think about all the really big moves, it's probably because the market has gotten too carried away or there's been some imbalance that's gone on for too long.

32:55Or a central bank does something that they shouldn't be doing or a government does something they shouldn't be doing. So that's, I think, the genesis of most of the big moves. Typically, it's going to be inspired by a central bank or a central government. A good one right now in the making that's going to be interesting, I think, is dollar yen. The yen's grossly undervalued, has been for some time. What's the catalytic moment? That's really the point you've got to ask. And that catalytic moment, in this case, was this new prime minister that was just elected.

33:29And she has all the characteristics of a Ronald Reagan or a Margaret Thatcher or Donald Trump when he got elected the second time. And if you look at what those local currencies did, they all appreciated pretty quickly 10% off the bat. I want to say Japan has $4.5 trillion, a $4.5 trillion net international investment position to the good with the rest of the world. Probably 60% of that's in the U.S.

34:01And most of that is unhedged. So they just had this massive dollar liability. And all of a sudden, we've now got the most dynamic leader in certainly a half a century in Japan, whose Japan first is going to have a very entrepreneurial way that she is going to remake that economy. So you're looking for something that's under-owned, undervalued, way out of whack. People have gotten complacent on it.

34:31And you're looking for that catalytic moment. In the case of the two-year rates in 22, we had way too much fiscal stimulus. And then Powell, he overstayed being easy way too long because he wanted Biden to reappointing. So as soon as Biden reappointing, it was go time to get short two-year notes because you knew the Fed was going to normalize. And then in 2020, you saw, again, all the interventions, both by the central bank and the treasury.

35:02You just knew that the inflation trades were going to take off. And of all of them, what was the best one at that point in time? It was Bitcoin. Bitcoin is unequivocally the best inflation hedge that there is, more than gold, because Bitcoin is finite. There's only so much Bitcoin that can be mined. The problem with it is inflation hedges. If you got into kinetic exchange, there's clearly going to be cyber warfare.

35:33Anything that you have to deal with electronically is going down, including Bitcoin, so strike one. And then secondly, quantum computing, who knows if and when, with AI advancing as fast as it is, that we may actually have quantum computing. Now, quantum computing, someone can come in and can hack any bank and hack anything they want to. So in terms of it being a great inflation hedge, gold increasing supply every year by a couple of percent. Bitcoin has a finite amount that can be mined. It's decentralized.

36:04And so in that sense, it has the greatest scarcity value of anything. If you think about the big ones that you've lived through, 87, the global financial crisis, COVID, et cetera, various bubbles, asset bubbles through history. Maybe say a little bit about those general experiences. You're very famous for what happened in 1987, of course. I'm curious about those ones because I'm curious what you think about today's environment. Are we in a bubble is a very popular question. Mostly that's answered by investors, less so by traders.

36:34And so I would love your perspective on the big ones that you've experienced historically and how those lessons apply to today. If I think of some really, really big accidents, most of them have the same underlying reason, same underlying foundation, which is too much leverage somewhere. Most of the leverage, most of the time, if I think of the big ones, were derivative-inspired, either futures or options. 1987, that crash was 100% portfolio insurance, 100%.

37:06Had they had limits, which they didn't, it would have been a 10%, maybe 15% max. But that was 100% derivatives. If I think about 1998, long-term capital, big derivatives, had a huge balance sheet with a lot of derivatives they were offsides on. 2000 was a little different. 2000 was the easiest bear market I've ever seen in my whole life. It's got so many similarities to right now in the sense that the bear market of 2001 and 2002 were a consequence of all the IPOs in 99 and 2000.

37:43And then as they unlocked, you just had this never-ending cascade of selling. Cascade of selling. That's a great way of putting it. And we're getting ready. I want to say that the contemplated IPOs in the next year are going to be 5%, 6% of market cap. So why are we where we are right now? Because we've been retiring 2% or 3% of market cap, probably a little less than 2% of market cap every year without fail for the past 10 years. Through five acts and things like this. Through buybacks.

38:14And so now, all of a sudden, you're going to completely reverse that math. And so I don't think it necessarily happens instantaneously with the IPOs, but then there'll be the unlocks. So you can see a situation where, okay, maybe we go through some kind of rolling top. And then 18 months from now, six months, we'll have to look at the unlock schedule. But you're going to want to watch those because that'll just be adding equity supply. And you're already going to be diminishing the buybacks because of all the commitment to CapEx and the hyperscalers.

38:47They're already going to be eating into their cash flow. So I think that's why tech has dogged it and why it will continue to dog it. Because all the funding, much of the funding for these IPOs, it's going to come out of existing tech stock. When you say, are we in a bubble? I don't know if we're necessarily in a bubble. We're clearly so leveraged in equities in this country. We're so dependent upon firm equity prices at this point in time. And when I say leveraged, we're 252% of stock market cap of GDP.

39:23So 1929, we were, I think at the top, we were 65%. And then in 87, we got to about 85 or 90%. In 2000, we got to 170%. And now we're at 252%. So you can just imagine, if you think about the periodicity of significant bear markets, since 1970, we get kind of a mean reversion about on average every 10 years.

39:54And when I say mean reversion, let's say mean revert to the past 25 or 30 year PE. So if we did that here, that would be, and again, these are elevated PE's, way elevated beyond the 20th century. That would be a, say, a 30, 35% decline. Well, 35% on 250% of GDP is 89% of GDP, the reverse wealth effect. Oh my gosh. 10% of our tax revenues or capital gains, they go to zero.

40:24So you can see the budget deficit blowing up. You can see the bond market getting smoked. You can see this kind of negative self-reinforcing effect. And so it's troubling. It's troubling. So are we in a bubble? We're clearly in a sovereign debt bubble. In the stock market, we're over-equitized as a country. I have the highest individual equity weightings in the history of the country. And then the real problem is, is that we're also, if you look at private equity in 2007, 2008, that was about 7% of institutional portfolios.

41:00Now it's about 16% of the institutional portfolios. Real estate's gone up. Infrastructure bets have gone up. We're so much more illiquid than we were in 2008. So you have to be cognizant of that fact when you think about how you have your money deployed. I had a friend ask me. He was a wealth manager and he hates hedge fund because of the fees. He just says, we just need to put money in the S&P 500. He said, if you were investing for 20 years, what would you tell somebody? Because he knows that I'm supposed to say, you just buy the S&P, close your eyes.

41:34Well, the problem is that if you buy the S&P at this current valuation, the 10-year forward returns negative when you buy with the S&P PE of 22. That's what history shows. So yes, the S&P is a spectacular long-term, if you have a 100-year view. But that's because that's an average of 100 years, including times when the S&P 500 PE was six and seven and eight or one-third of what it is right now. So valuation matters a lot and the stock market's really high and it's going to be really hard

42:10to make money from here, I think, with any kind of long-term view. If I came and shadowed you on a given day today, how does it go?

Day in the Life

42:17What are you doing? What does a day look like today? I know you have a system that you can be heard by all times by your execution traders. I know it's intense, but walk us through a day in the life. If I get up at 6.15, I work till 7 o'clock, I go work out till 7.45, I try to do 45 minutes of hard cardio every day. I get in front of the screens for the opening. I typically won't have any meetings till 10 o'clock and then I'll probably do meetings till about 12 o'clock.

42:48Typically have lunch with someone, have a meeting after lunch, try to make sure that I've got an hour before the close and an hour after the close to be able to map out what I want to do the next day. Because again, I want to have a plan as well as think what's going to happen that night in Tokyo, Hong Kong. I'll go home around 5, walk with my wife for an hour, go up work for an hour, come back down and eat.

43:18I'll normally watch the news in the most mindless entertainment that I possibly can. I used to read a book in a half a week and then once the internet came, forget it. I'm so tired of reading by the nighttime. I've read one book in the last year, which is going to be, by the way, I recommend everyone read it. It's David Wood. He's a newsletter writer, but he's written what's going to be a spectacular bestseller on globalization markets. It's fantastic. And I'll bet you it gets made in a Netflix series and I'll bet you it's going to be

43:50a banger. Anyway, I'll try to watch something on Netflix. Then I'll work from say 9.30 to 10.15 and then go to bed and I'll wake up at... 6.15 and different times? No, no, no. I'll wake up at probably 2.30 or 3 and I'll work for half an hour, watch London Open for 45 minutes, half an hour. And I'll do a lot of analytical work then. It's a quiet time. It's good. Then I'll go back to sleep and wake up at 6.15. Wow. And you've been doing that for 50 years? Yeah, I've been doing that certainly since the 80s.

44:20I feel like I worked so much harder than I did 40 years ago, 30 years ago. Because there's more information? Oh my God, I get 800, 1,000 emails a day. If I think about when I was a pit trader, I think about even the 80s when there was so much less information, I could spend more of my time intently focusing on what the highs and lows were going to be in the day, which are really important for execution, doing what my boss Eli did, just waiting, paying attention, focusing, are we a point of maximum pain?

44:56Is there so much fear right now, which is a great time to buy? Does it look like it's going to go up forever? A great time to sell. You have to be intentional to be able to pick those points in a day. And when you're training 25 different instruments, instrument by instrument by instrument, a lot of times they'll be correlated, sometimes they're not. You have to be very intentional about that. So if while you're doing that, there's 48 emails coming in at the same time, all of which could be actionable information. I think today, for me at least, it's just a lot, lot harder, I think, because the information

45:32overload distracts me from exquisite execution. What does that mean, exquisite execution? Am I buying when there's blood on the ground, and am I selling when there's complete elation? Let's take last Friday, where we had the largest down day in the history of gold and silver. So you have to be paying attention every minute, because when you have a 33% move in silver in

46:02one day, you just have to be so focused on that day's activity, what you're going to do that opening, what you're going to do if the price moves to a certain price that you weren't anticipating that day. It gets back to what I learned in Bedstock. You better have a plan. You better have a plan ahead of time, and it better be self-executing. And you better have thought through that. And I hear it from my other friends who are macro traders. I think, oh, God darn it.

46:32I just feel like I'm two hours late, three hours late. Last Friday was a great example. It can be so material. If I think about what's required to do that day in, day out, there's got to be just like an enormous amount of passion for markets and what you do. Can you just talk about the notion of finding, nurturing, the importance of passion in a life's work? It's so funny when we talk about traders, great traders. And again, I'm talking about people who are alpha generators, not investing.

47:04We had a dinner about, I guess it was a year ago Christmas, and I had four or five of my best risk takers at dinner. And we had the debate, a great trader is born or made. I'd say it was unanimous agreement at the table that 70% of it is nature. And when I say born with it, by the time I was 21, I loved games. I loved chess, backgammon, Parcheesi, Monopoly, Battle, Gin Rummy, you name it, I played it.

47:38Then I started gambling in college. I had a degree in probability theory and had never taken a math course on it, but I knew it. I was such a game fanatic and I loved it so much. If I had to pick out the number one traits, type A personality, incredibly curious and inquisitive and loves, loves competition, loves games. Because again, our whole business is just another form of probability theory. And I still love the day.

48:09I play bridge with my friends all the time. I can't get enough of that. I love any kind of game of chance. And I love trading. And the other reason that I love trading, I'll never forget, my wife's Australian. And we first got married back in 1989. She said, well, I know you got to live in New York, but I came from the beach. So when our last child graduates from college, you're taking me to the beach. So sure enough, my son turns 18, my fourth child, 2014, we're going.

48:41So we ended up down here in Palm Beach. She gets me a GP, the GP, a general practitioner. She makes me go in. I see the guy. This guy's 83 years old. And I say to him, you're living here in the land of the walking dead. Everyone here is basically fossilized. What is the secret to longevity? And he goes, it's real simple. You retire, you die. And that had a really profound impact on me. Because I realize as I get older, and maybe when you get older, you will too.

49:14If you don't use it, you're going to lose it. And that's why I try to work out two hours a day. Another reason that I enjoy trading is I want to keep my mind sharp because there are too many things that I want to do when I'm, my father lived to be 100 when I'm in my 90s that I want to do. So I think trading is great therapy for me. The other reason that I really enjoy trading is I'd like to make an absolute pot of money so I can give it away. I got so many causes that I want to give it to that I actually feel like this is pursuit of nobility.

49:48I feel it's a privilege to wake up and I just hope I freaking kill it so I can give it away. Your finance team isn't losing money on big mistakes. It's leaking through a thousand tiny decisions nobody's watching. Ramp puts guardrails on spending before it happens. Real-time limits, automatic rules, zero firefighting. Try it at ramp.com slash invest. As your business grows, Vanta scales with you. Automating compliance and giving you a single source of truth for security and risk. Learn more at vanta.com slash invest.

50:20Ridgeline is redefining asset management technology as a true partner, not just a software vendor. They've helped firms 5x in scale, enabling faster growth, smarter operations, and a competitive edge. Visit ridgelineapps.com to see what they can unlock for your firm. Every investment firm is unique and generic AI doesn't understand your process. Rogo does. It's an AI platform built specifically for Wall Street, connected to your data, understanding your process, and producing real outputs. Check them out at rogo.ai slash invest.

50:51The best AI and software companies, from open AI to cursor to perplexity, use WorkOS to become enterprise-ready overnight, not in months. Visit workos.com to skip the unglamorous infrastructure work and focus on your product. Can you tell us the story of starting Robinhood?

Starting Robin Hood

51:07You talked to us earlier about the charter school work and everything in Bed-Stuy. Robinhood started the year after. It's a really important part of your life and legacy. Robinhood happened the day after the crash. Maybe the worst macro call of my life was thinking we were going to go into depression. I thought, for sure. I've been looking at the parallels in 1929 for a year. All of a sudden, it happens. I think, oh my God, this is a perfect replay, a perfect analog. So I called up my friends, and we began it.

51:39It's just been the most marvelous journey. I can't recommend anything more highly than getting involved with some cause that you believe in. The best part of philanthropy and charitable giving is the people you meet. Oh my gosh, I've met the greatest, most wonderful, most giving. It just brightens every aspect of your life to be associated with the best people and embody the best ideals.

52:13We said we've got to do something. So the only alternative is that there really weren't any charities focused on fighting poverty, which I thought was going to be rampant at the time. So I've always believed if you want to do something, you're better off doing it yourself. So we started out very small, and we just applied basic business principles to finding the most efficacious way of helping people in need. Again, along the way, I'm learning by doing and making all these mistakes along the way, and I'm learning so much.

52:52And then I realized, boy, this is a science. And then we just started hiring the very best people that we could as our staff and then recruited. It was so easy to recruit people from the financial world to help. The 90s were a special time. Everyone wanted to participate and give back and help. I don't know what it was, but my gosh, we created so many fantastic philanthropists in that era. In the 80s, it was completely different.

53:22Everyone wanted to be associated with the Philharmonic. And these are all great, but they wanted to be with the name Social Charities. And I'd say after the crash, everyone found their significance by helping others. Maybe it was just because that was when really started to accumulate these big fortunes, individual fortunes for people. And they were just really, really wonderful about wanting to give back. And the whole financial community supported Robin Hood in such a spectacular way.

53:56And the whole hedge fund community in New York, it was really still is a joy. If you think about the whole broad world, what feels the healthiest to you today about the system that is the world that makes you the most optimistic? And where does it feel the most fragile? I'm trying to fast forward to the workless world, to where AI does so much for us that we don't have to work. And I used to have a really negative outlook on what that would be like.

54:27Because if you think about it, so many of us define our significance through our work. Imagine a world where now the significance, that huge, incredibly important component of human happiness is now taken away from us because of the fact that we don't have to work. I used to really despair about that. Because as someone who works all the time and finds my significance, what am I going to do? But I've become more optimistic recently because as I think through how athletes find significance in the sports they do,

55:04how I play bridge with my friends and find so much significance in competing with them, I think maybe humans are adaptable enough that we'll find a different way to find significance. Maybe it's going to be in finding that intentional, simple act of kindness every day. I'm not sure what it is, but I do think that as a race, we're so unbelievably adaptable, so smart, that we might be able to find out a way to find happiness.

55:35I think that's going to be the biggest challenge potentially in four or five years is what do we do when so many of our jobs have been replaced by AI? So many young people are trying to figure out what to do, what their careers are going to be. You've talked and written a lot about the power of communication, like great communication. It's like such an essential skill. Journalism is an interesting way of learning that. Can you talk just about that power as a message to young people trying to figure it out, why they should maybe focus on that? I have long maintained that better than a business school degree, journalism 101 should be a mandatory subject in every college,

56:15which is newspaper running in particular. It was so important to my development. So my father had a really small trade finance legal paper in Memphis, 2,500 person subscription. I would be the copy editor, the front page editor, and then I would write for it and took journalism classes. And what newspaper writing does is it teaches you, you have to write where the conclusion comes first. So unlike writing something, and then at the end we get the story. Here, the end comes first.

56:46And you have to write it with this incredibly rigid discipline so that every succeeding thing that you write, the most important part is in the first sentence of the first paragraph. The first paragraph is not more than two sentences. Who, what, where, when, why, and how. That's the first one. Then the next most important thing, that's the second paragraph. No more than two sentences. The next one, same thing. What is that, really? It's a principal component analysis of taking whatever event may have transpired and putting it in this cogent way where the most important stuff starts at the beginning and you work your way down through it.

57:29Particularly where today's world, the attention spans are this short and time clearly is money. You want to be able to communicate in the quickest and most concise fashion you can where you get your entire point across in the shortest amount of time. There's that old saying, if you can't tell your story in 15 seconds or less, no one's going to listen. Never been more true than right now. Because, again, if you're getting 1,000 emails a day, I want to know in the first paragraph whether I want to keep reading or not.

58:01As a macro thinker, man, it helped me so much frame every potential trading decision, every single action. I could just, again, very quickly, because I had to learn how to do it, do that principal component analysis and hierarchicalize the most important things. And in trading, there's so many different variables that come into play, so many different variables that come in in making a trading decision. Let's say that there's 10 really important things.

58:33Every one of those will have its day. It'll rotate through in terms of importance. Again, the yen's a great example. It's been completely undervalued for the past 24 months, way off sides. It's so ripe to rally sharply, but it needed a catalytic moment. And that catalytic moment was this new prime minister that was just elected. So if you take valuation, which everyone's ignored now for the past two years in the yen,

59:03all of a sudden, this moment takes it from here and puts it at the very top. So newspaper style, hugely important in developing any logic framework. What's the most important thing that's actionable at this second in that particular instrument? What's my checklist and how do I hierarchicalize it? And that's literally what trading is all about. If I were to ask you to do that on the topic of the principal components of a great life, how would that read?

59:34God, family, friends. When I think of friends, I think of fun. God, family, friends and fun. Service. I mean, my significance is not going to be from being a trader. I don't think that's where my significance is going to be. My significance is going to be, first and foremost, going to be my family every now and then. Like, I actually get joy out of thinking about my funeral because I'm so excited about the songs that I've chosen that'll be sung.

1:00:08I almost wish I was going to be alive for that because it's going to be such a great time. I know my family and friends will enjoy it. I'm thinking of family because if I think about the end of my life and I look back, I'm not going to be thinking about the 87 crash or Bitcoin. I'm going to be thinking about who I loved and who loved me. That's what I'm going to be thinking about and what kind of relationships we had and what kind of times we had. I think the professional aspects are these great tools that allow you to do more meaningful things and the things that count, which is what have you done with your family?

1:00:48What have you done with your friends? How have you served others? What have you done to leave a legacy of happiness and betterment and goodness to the people that you've been privileged enough to come in contact with? And when I say legacy, I don't mean words. I mean deeds. So what have you done that have allowed other people to enjoy and better their station life, their happiness in life?

1:01:19For me, that's the most significant thing by far and away. Do you always believe in God? I have trouble at times. I mean, yes, I do. My faith is tested like I think anybody faith is tested. I wish I could say with 100% certainly I know I'm going to heaven. I certainly pray every night. The most important aspect is and the reason why I think it's so important for us all to have God in our lives is you've got to have some set, some code by which you live.

1:01:55I think Christianity, Judaism, a variety of these have these wonderful doctrinaire ways of bringing stability and order and goodness in people's lives. They give you something that you can lead a productive life with and in a way that's very sustainable and allows you to, again, engage with everyone around you with great happiness and joy. What about Africa? What has it taught you?

1:02:25I love Africa so much because I love the outdoors. Can I just say this? It's taken me 70 years to get this point. My new, new thing, I love to find peak spring and peak fall. It doesn't have to be Africa. You can find that day in a neighborhood and in peak spring when the colors are vibrant and when the fragrance is just overwhelming. You can find it to the minute in the right place. And I've never felt so alive in my life.

1:02:56And I look for that. I now travel the United States for that moment because I know when peak spring is in Georgia. I know when peak spring is in Tennessee. And I know when it is in New York City. And I know when it is north of New York City because New York City is normally a week behind this place I go to in upstate. Same thing in fall. There'll be a day where you get the intersection. And the northeast is the best because it has the greatest biodiversity where you see the greatest color. And you can see those color changes by day by tree.

1:03:28You find that day with that intersection of color changes. I'm telling you, if you find that, you can feel the energy. I've never felt so alive. You feel God at those moments. It's such a wondrous moment as you go through how life is changing so fast. In case of spring, obviously, it's blooming. In the case of fall, it's transitioning into a more dormant period. But they are so energetic and so exciting. And I highly recommend people try to, in their neighborhood, find that day.

1:04:01Boy, make sure you're walking that afternoon before sunset. Oh, my gosh, it's a joy. You've lived so much life in the years that you've been with us. And I never asked the question of general advice. I think it's kind of a lame question. But I'm tempted to close the conversation there with what you would just tell people listening that this audience is passionate, they're curious, they're searching for their thing, or they're trying to get to be the greatest at their thing, they're competitive. What would you tell them based on the sum total of all your amazing life and experience?

1:04:32My mother used to always say, and I think this is what this country really needs right now. You've just got to kill them with kindness. You're going to wake up. Someday it's going to be terrible. You're going to be in a bad mood. There's going to be something on TV that's going to make you angry. Particularly in these times right now, my gosh, when everyone wants to demonize the opposition, I think we've got to realize it doesn't have to be that way.

1:05:04We can humbly devote ourselves to finding the kindness within ourselves and the goodness within ourselves and transmit that to somebody else during that day. I think that's the secret to happiness. You don't have to worry about yourself. You have to worry about, how am I going to brighten someone else's day? And with that attitude, one, you'll always be happy. I'm just going to spend this one day doing this one outward act. And if you repeat it enough, again, everything is about the reps.

1:05:38Pretty soon, you take I should, and they will become I am's. So if you take that mentality that I want to do this wonderful act of kindness for someone else, pretty soon you become an incredibly kind person. It becomes natural. It becomes instinctive and organic. And it just it's going to brighten your day. And you'll have just such a positive outlook on life. And I think that's what we need to intentionally begin to do every single person.

1:06:13For sure, it'll be a much better world. Paul, thank you so much for your time. Thank you. If you enjoyed this episode, visit Colossus.com. You'll find every episode of this podcast complete with hand edited transcripts. You can also subscribe to Colossus, our quarterly print, digital and private audio publication featuring in-depth profiles of the founders, investors and companies that we admire most. Learn more at Colossus.com slash subscribe.

1:06:48You know how small advantages compound over time. That's true in investing and just as true in how you run your company. Your spending system is your capital allocation strategy. Ramp makes it smarter by default. Better data, better decisions, better economics over time. See how at ramp.com slash invest. As your business grows, Vanta scales with you, automating compliance and giving you a single source of truth for security and risk.

1:07:21Learn more at Vanta.com slash invest. Every investment firm is unique and generic AI doesn't understand your process. Rogo does. It's an AI platform built specifically for Wall Street, connected to your data, understanding your process and producing real outputs. Check them out at Rogo.ai slash invest. The best AI and software companies from OpenAI to Cursor to Perplexity use WorkOS to become enterprise ready overnight, not in months. Visit WorkOS.com to skip the unglamorous infrastructure work and focus on your product. Ridgeline is redefining asset management technology as a true partner, not just a software vendor.

1:07:53They've helped firms 5x in scale, enabling faster growth, smarter operations, and a competitive edge. Visit RidgelineApps.com to see what they can unlock for your firm.