Inside Dan Sundheim’s Bets on Anthropic, OpenAI, and SpaceX

[00:00] My guest today is Dan Sunheim, the founder and CIO of D1 Capital Partners. Anyone that loves investing in markets has surely heard Dan's name [music] before. I think you'll very quickly realize that he is one of the most passionate investors operating in the world today. that D1 operates across markets, both across sectors and public markets, and having invested in some of the most valuable and important private markets companies like SpaceX, OpenAI, and Anthropic is just a testament to how universal Dan's curiosity is about companies and markets. I find Dan to be
[00:30] one of the quickest, smartest thinkers [music] about just about any company. When we recorded this conversation in his office in Miami, I spent the next hour talking to him about name after name after name. And I could not believe the deep clarity and understanding that he had about a small private markets company, then a big public markets company in technology, then another public company that was an industrial. He could move all over the map. And it's incredibly clear that he spends all of his waking hours studying markets and studying companies. The takeaway for me from this conversation is how good you
[01:01] can be when you are as passionate about what you do as Dan is about investing. Please enjoy this great and wide-ranging conversation on all things markets with Dan Simon. I want to spend a bunch of time talking about public versus [music] private. You do both. You started investing in privates more than 10 years ago. You were kind of one of the pioneers of this. You've got some amazing huge private positions, SpaceX, SpaceX, and lots of others. draw the contrast today in 2026 of the difference in how the two markets feel. Curious a lot of things here like how you think about valuation
[01:31] differences, what one tells you about the other, you know, the business of privates versus a public equity hedge fund. Like I want to go into kind of all of it, but but at a high level, what what is your feeling on the difference between the two markets? >> It changes over time. Uh so like it depends where you are in a cycle. Um I'd say right now I think that there's a lot of interesting opportunities in late stage privates. It's a moment in time. There are some, you know, companies that are uh, you know, you've never seen these some of the largest companies in the world by market cap are private
[02:01] right now. Um, and not only are they large and private, they are innovating in a way that's going to change the world, right? So, this this moment is particularly interesting. I think that in general, private markets are less competitive. There's obviously the core skill set of analyzing businesses is uh the majority of what creates value. Um but there's other aspects of it too like um often times there's no disagreement among private investors that a certain
[02:31] company is is excellent. Um but that company has to want you to be an investor in the company. So it's competitive uh from the standpoint of like being able to um you know create a situation where you can invest in the best companies. But in terms of like just pure uh how difficult is it to um generate returns by assessing companies? Uh I'd say the public markets are the most competitive in the world.
[03:01] Even though I told you even though they are less efficient than they were before, it's still you have you know um more people in more places looking at information in companies. uh where in the private side just by definition you um you have fewer people looking at every uh situation and uh less capital. One difference that equalizes a bit is that you don't have this dynamic on the private side of people doing things that are economically irrational because
[03:31] they're focused in the short term or they're just their business model is you know not consistent with investing based on long-term intrinsic value where you have in the public markets. in the private market. Um, every time we're looking at a business, everybody's doing the same thing. You know, we could talk to other firms that, uh, are investing in the same company. Their research, you know, may be different than ours, but it is all trying to get at the same uh, you know, and same answer. That's very different than the public market. So, there's fewer people competing, but
[04:01] they're all doing the same thing. Whereas the public markets, there's tons of people competing, but they're all playing a different sport. M >> if you think about the the key companies in your private portfolio today, Anthropic, OpenAI, companies like SpaceX, Ramp, etc. What does that group teach you? Like what do you think you see coming that maybe the public markets don't fully appreciate yet that don't have that same exposure to those these great private businesses? >> As long as I've been doing private and public investing, at some points in time, there is synergy. Um but I'd say
[04:34] uh if you go back to when we founded the firm 25% of the time we looked at a private company there was some synergy with what we were doing the public side now um because of AI and because of uh there's so much innovation happening in the private markets the synergies are just greater than I've ever seen before in that um I think if you're going to take a view on uh public companies that are deeply impacted by AI which eventually will be almost every public you should have an opinion on
[05:05] where is the technology now, where is the technology going, um what are the implications of it and um investing in those companies I think gives you that perspective uh in a way that um I've never seen greater synergy. >> When you first were considering your initial investments in Open Anthropic, did you pattern match their businesses or their business models on anything that you had seen historically? Did they remind you of anything? >> They were very different in that uh when we first invested in OpenAI um I
[05:36] wouldn't say it was contrarian at all. Uh to some extent we invested originally at the $125 billion round. So I don't think people were entirely sold on LLMs as a business model, but if you want to invest in LLM as a business model, OpenAI was kind of the, you know, was the one. Whether you invest in LLMs or didn't invest in LLM was debated quite a bit. I mean I think there was a lot of you know um uncertainty about the ultimate business model of these companies. So that was what we had to figure out. Anthropic was a different situation. We first invested in Anthropic. A number of people uh that I
[06:08] spoke to who I think are very smart um drew the analogy of Uber versus Lyft or you know why are you going to invest in in the in the second player? In most industries uh investing in the second player is not uh the path to glory. The way I viewed it was um it was incredibly difficult to at that stage to say like who was going to be first and who was going to be second. Um and uh the pattern recognition to answer your
[06:38] question for me uh on anthropic was just reading Daario's essays and listening to him on podcasts. When I look back at my career and look back at the companies we missed like Amazon uh in the early days uh and I think like what could I have seen um if you look at their income statement you would just see a sea of red you wouldn't have seen anything >> the only telltale sign was like reading Jeff Bezos's 1997 97 shareholder letter which was like
[07:09] >> just the clarity of thought uh and um you know his understanding of what uh he wanted to achieve and how to create value for shareholders >> was greater than you know almost any public CEO I dealt with. Uh and if I had read that and almost ignored everything else uh it would have been uh a really important sign uh and very profitable. Dario struck me
[07:39] >> like that. uh it was like you know he um it wasn't that the models at that point were uh so differentiated um I think they were considered to be one of probably maybe at that point five six seven players that could ultimately be important um there was still a lot of debate around LLM as a business model but um I felt like he was uh incredibly skilled um and extremely focused. I place a lot of weight, rightly or
[08:10] wrongly, on clarity of thought and the ability to communicate uh as a CEO like what you want to achieve and how you're going to achieve it. And uh especially in written form because taking the time to write something down, you actually really have to uh go through, you know, everything you plan to do and express it uh in a in a way that makes sense to everybody else. Um and Dario just did that better than
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[09:41] can unlock for your firm. schedule a demo at ridgelineapps.com. >> How would you frame the debate today about LLMs as a business model now that we know a bit more? >> Back then it was like are these businesses going to ever generate an economic return? Like uh I think one analogy was um AI will be huge um so is air travel. Uh airlines were not a good business, right? there's nothing differentiating about one airline from the other and so therefore the you know just returns go down to the cost of
[10:11] capital. Obviously we took a different view uh but that was like a 6535 7030 degree of confidence in that uh at that point. Um it was more about like the skew if things played out like we thought and the business models were actually moted uh would be huge. I think at this point we're in a different place in terms of the debate that's important. If you want to look through a positive lens, businesses have taken slightly different lanes uh and um have excelled
[10:42] at different things within AI. Um so OpenAI has been great at consumer and has had good traction enterprise. Anthropic has been incredibly successful at coding. There was a thesis when we first invested that like APIs um or the business of having other software companies plug into your other developers plug into your model would be commoditized because they could just one day use your model, one day use it just be a race to the bottom. I think that debate is uh you know more or or less uh
[11:14] irrelevant uh because you've just seen with clog code and even open API business like these are durable businesses and yes can you switch you can the same way you could switch AWS or Azure um but it's not worth it for a lot of businesses to do it and uh there's sufficient differentiation among the models if you look at the underlying margins of these companies they are not uh the margins that you see in a commoditized industry. Uh you know the gross margins are quite high. The
[11:45] competitive landscape I think is not heavily debated. Um at this point you probably have four or five LLMs that will be relevant in the long term. Uh I don't see that changing. Um not that there's not sufficient talent out there. Uh it's just that the capital required to get into this business is too great and these companies are too big at this point. And then you kind of get like the snowball of you know uh more capital you have the more compute you get better researchers I think it' be very difficult so the competitive landscape
[12:15] is not really in question I don't think anyone would say that these business models are commoditized I think the real debate is these are extremely capital intensive businesses uh you know capital intensive uh to a degree that we've never seen before in the history of business and the question is you're spending a ton of capital and the ultimate return on that capital is unknown. own. So it's not like a normal business who builds a factory and kind of knows what they're going to sell. you are um spending tons of capital to train a model and the question is
[12:46] you know do the scaling laws um work such that the returns on that capital continue to be attractive which means that you will be able to attract more capital uh and build better models or are you going to get to a point where uh everyone looks back and says we raised too much money we spent too much training models we didn't get the economic return or I think equally likely if not more likely people would say um ultimately you will get the
[13:18] economic return but uh it just happened slower than you would have thought like enterprise adoption just didn't take off as quickly as you thought and therefore the problem is like when you are this capital intensive as a business it introduces financial leverage and operating leverage to a degree you don't see in normal businesses so you don't have the luxury of you know uh 2 or 3 years of things going slower than you otherwise you know uh would expect
[13:48] the scaling laws the returns on capital and uh the speed at which these tools and AI is adopted throughout the economy are the questions >> is there anything that like Netflix or something like that could teach us where that's another business that comes to mind where there's crazy amount of capital that was spent to build an asset and then it gets you know advertised over a bigger and bigger user base and that's turned to be a great stock and one that I know you've owned a lot. >> Yeah. >> Is there any analogy between those two that's interesting to you? >> When I was speaking to the the executives at the LLMs, like the way I
[14:19] framed this, I said, "Look," I said, "I think your business is some kind of combination between um Netflix and Spotify." Netflix in that um unlike other tech companies, you are spending a ton of money upfront uh to train these models. Once these models are trained, you go sell them at extremely high incremental margins. You don't know what the revenues are going to be from that fixed asset that you've built. Um, but to the extent that you've built that asset, you want to sell it as much as
[14:50] possible. Um, so that you can get the cash flows to build the next model and so on and so forth. Um that's very similar to Netflix in that like they invested in content and when you're an early mover in that this kind of fixed asset business uh you invest heavily you get the capital to invest heavily you get the revenues uh you spread it out over increasing number of people uh you invest more in that fixed asset and that just kind of has a flywheel effect of
[15:20] generating more revenue more content more revenue more content and eventually you get to the point where it's almost impossible to compete because >> it's just a first pair of advantages, right? Yeah. If you were to say like what is an important difference of Netflix versus these models is Netflix's content was differentiated. the models are more similar than they are different in that like you know at any given time uh open AAI may have a better model anthropic may have a better model but a
[15:50] lot of the expertise and innovation gets disseminated pretty quickly so these models are not terribly different um and that's where the Spotify analogy comes in in that um I think if you're Google or you are open AI the uh differentiating factor will not necessarily be that Google gives you better answer like if we were just like to you know uh query Gemini or chat GBT on something uh I I don't think it's the case that we would say definitively one
[16:20] will give you a better answer over time however the personalization matters and the first mover advantage is like the more that these models know about you uh how you live your life your health uh all the things are important to you um you build up this history with and it becomes very sticky the Music on Spotify is no different than Apple Music or Amazon Music, right? It's theoretically it's a pure commodity. What makes Spotify uh have pricing power? What makes it differentiated? Why would
[16:51] people, you know, be incredibly upset if you said like you had to, you know, not use Spotify anymore? It's because it's personalized. It's because they've uh they've tailored the service to take a um product which is a commodity and personalize it to the point where you're willing to pay a premium for that commodity. If you were giving advice to the executives at these companies and telling them what to lean into and what to look out for over the next five years, I'm curious what you would say because the scaling laws are so
[17:21] interesting in the sense that like the models keep getting unbelievably better and that probably means the revenue available is like who who knows how big it could be. It could be the whole world. But the cost keeps going up by like orders of magnitude. You know, the Colossus 2 data center is like this unfathomably big thing. It's like two gigawatts of power. or it's crazy. What advice would you give them based on everything you've learned about, you know, these big massive businesses? >> The really interesting thing uh and challenging aspect of these businesses,
[17:51] the LLMs, is that the the models they are building uh now and especially in the future can be applied to almost any aspect of the economy. You can take these models and you can uh make consumers lives more efficient by you know having them be personal have personal assistants. You could solve physics problems. You could uh help with drug discovery. You could make enterprises more efficient. The the TAM is certainly not the problem. Uh focus
[18:22] is going to be uh you know a question mark. you know, on the one hand, if you the more and markets you go after with a fixed asset, the better, right? Because you're just getting you're spreading that cost over more uh and markets and having more revenue, which then can be reinvested. I think the flip side of that is that I rarely have seen uh any company succeed trying to do go after multiple end markets at the same time. Um you know, it's usually you have an a team, that a team is focused on one
[18:53] thing. uh your culture as a company is oriented towards uh either consumer or enterprise. Uh they have just different uh even even Amazon which you you'd say is like the example of a consumer company that got into enterprise. They got into it like seven years later after uh even after they went public. So trying to do everything at once is tempting because if you're successful you're effectively just advertising that fixed asset over more revenue streams. um at the same time uh you risk uh not
[19:26] being uh the best at any one thing. So that is the trade-off and I think that um uh I'm not sure we have the final answer. Um I think it you know right now the market has gone through periods where they thought you know anthropic was and open was Uber and you know now uh up until recently the sentiment on open AI was was more negative. I I think OpenAI is taking the strategy of let's do everything. Let's, you know, we're going to go after Apple hardware.
[19:57] We're going to go after robotics. We're after enterprise consumer uh science. They've been very successful in a lot of ways, but that's hard. I'm sure there are companies I'm not thinking of, but I can't think of many examples where that's been successful. I understand the temptation to do it. Uh and obviously the the difference versus history is that the smartest people in the world are all going to work at these companies. So if anyone's going to pull it off, they will. Anthrop took a different approach and just said we are going to focus on enterprise. They tried
[20:29] consumer early on but it became clear they didn't have traction. So then they just went all in enterprise and um you know they've had a lot of success with coding in enterprise and um because they've now taken a marketleading position uh generally sentiment is that anthropic is winning and you know they are like uh kind of now the Uber if you want to use that analogy. I think this is going to go back and forth over time and people like most things to watch. Yeah, people probably get carried away in both directions, but I think those
[21:00] are the biggest >> differences. I would probably error on the side of focus, but I do understand the economic rationale for trying to do as many things as once. The only thing I early on when we invested in OpenAI, this is probably a year and a half ago, I said to them, I'm like, "You uh have to do ads." I said like, "Yeah, you have to do ads." Um, I understand. I've seen it so many times people in Silicon Valley um the idea of ads is like they're allergic to that. I had this amazing pure technology product and you
[21:31] want me to like paint it >> paint it with ads and like you see Anthropic Super Bowl commercial. That being said, even the companies that were the most adamant about never getting into ads, like Netflix, if you go back and just listen to what Netflix was saying even 15 years ago, it was like, you know, um getting into ads, even Reed would have been like, you are out of your mind. We would never do that. >> Ultimately, they did it. And to me, it's like if you're going to do it ultimately, uh one, you can't really
[22:02] compete against companies that are using ads if you're not. Very hard. if you're ultimately going to do it, you might as well start earlier because you have to build a culture around, you know, um it just takes time. I I don't think it's a big deal that opening I waited. Um but uh I was probably, you know, rightly or wrongly, I was pushing for ads sooner than they've chosen to do it. I think now they're probably going to get it right. >> I'm so curious what you think is going to happen to the hyperscalers now. I saw this news report the other day that uh
[22:33] Enthropic is considering securing 10 gigawatts now of their own power which just makes me think okay they're gonna have the power like why don't they just the scale is going to be so big why don't they just create their own clouds effectively the hardware might be different more focused on inference etc does that jeopardize what these business models which I think people have thought of as pretty damn good at at the hyperscalers do you think the future is different as a result of AI >> I do I mean I we I've kind of thought this for probably about a year now and I wouldn't say I um we're not there's
[23:04] nothing conclusive I'd say but I am I more confident in it. I am more confident in uh the thesis that the hyperscalers are a worse business model going forward. Now it's interesting because usually when you say something is a worse business model uh you're implying that growth is going to slow, margins are going to contract. Um I actually think you're going to see the opposite. I think that you know AWS and Azure I maybe Azure doesn't accelerate certainly uh GCP >> I think these businesses are going to accelerate for a while just because they are um you know their customer bases
[23:35] anthropic openi are growing at enormous pace and as they get to be a bigger part of the business the growth accelerate the problem is is that you went from a dynamic where uh AWS Azure um to some extent GCP um their customer base was like every corporation in the world and therefore um uh they had fragmentation and they had the benefits massive economies of scale that no single company could get. Um and it was a good very good business. Um the problem going
[24:07] forward is that I think that uh economically it's highly unlikely that a that LLMs are not very concentrated in the hands of like four or five companies. those companies right now um you know they are obviously as we discussed they're investing a ton uh and they are you know cash flow negative and therefore they're looking for compute anywhere they can get it but if we're correct and if anyone who owns these companies is correct at some point in the next 5 to 10 years they will be
[24:37] generating enormous amounts of free cash flow when that happens I think that uh they are likely to insource the compute every year AI is going to be a bigger percentage of the workloads uh at any hyperscaler. And so if you roll out like 10 years from now, I think that the majority of the workloads will probably be uh AI uh the LLMs will probably be providing a lot of a lot of those workloads and I think that it will make economic sense to take it in house.
[25:07] Yeah. >> Right now I think that they look at the hyperscalers as um you know more of a financing mechanism. These are well- capitalized companies with big balance sheets. But I don't think these companies are better than them at uh building u data centers. Like building CPU clusters is different than building GPU clusters. Running inference on GPUs is very different than um workloads on CPUs. And I think these the LLMs are actually better at inference than the hyperscalers. Uh and then you have this
[25:37] whole dynamic of neoclouds. Um and um yeah, I think that the initial view from most public investors was that this was like pure overflow capacity. There weren't enough GPUs and you know these things would be dead as soon as Microsoft got their Yeah, I certainly would not make the case that they are fantastic businesses, but I don't think they're going away uh like people thought because I think they're better at running GPU clusters than the traditional hyperscalers are. uh and I
[26:09] think there's a lot of interest uh from Nvidia and uh other chip companies to make sure that their the customer base is diversified. Nvidia is a very big balance sheet and they want to keep these players in business. So um over the next 10 years I think the b these hyperscalers AWS Azure will grow fast. I think the margins my guess is will be challenged both because the businesses are getting a lot more capital intensive
[26:39] because AI is capital intensive uh more capital intensive than traditional workloads and also the customer base is getting more concentrated. Meta is not a hyperscaler but they insourced all their compute because why would they pay I mean they're just too big to to use somebody on the outside. If you think about the last couple of years, probably the best thing you could have done is just belong the AI buildout in all its various forms. And maybe that will remain true going forward. But it seems like the market a little bit is is starting to think now ahead to the other implications of AI. Software, you know, we're talking like the week after
[27:09] software got absolutely decimated in the market and everyone thinks, you know, because of cloud code and the amazing experiences that they're having with cloud code, like software businesses are just screwed. I'm curious how you're starting to think now beyond just the AI built. Okay. It seems like AI AI is a thing like it's going to it's going to be here now. The rest of the world has to start to absorb this technology. How are you thinking through that? Maybe I'm I'm super curious what you think about the software, you know, selloff, but even more broadly like the real economy now has to start to swallow this new technology. I'm so curious how you think
[27:39] that's going to happen. >> It is incredibly difficult uh to to know and I don't think that's because I don't have perfect information. I think it's just these models are uh improving at a rate which is uh exponential and um understanding how that makes its way into the real economy and the implications is uh is difficult. I think that you probably want to use a few frameworks. It really comes down to like
[28:09] which companies do you think will have a moat in most circumstances. It's fairly straightforward to identify modes that are protected from digital LLMs like you know just the proliferation of digital intelligence. Once you get into robotics and other areas you start to have to question the moes around some other traditional industrial companies and uh you know also just like the moes of globally. How
[28:42] do countries that were arbitizing labor do relative to you know uh developed economy? So there's I think there's there's going to be phases of this. The first phase is um with software and uh and that's really cuz like cloud code entered the zeitgeist and it's like all of a sudden uh people receive cloud code and all of a sudden they just see on Twitter that people are saying like oh I you know I created a CRM system in like in a day and I was like oh my god like you know this this isn't good. that's
[29:12] kind of where people are now. We wrote in our letter at the end of the year, I said like look, the buildout is still going to be a thing in terms of like, you know, places to invest in the public markets, but it's increasingly going to become which companies are affected and it's going to become there haven't been any shorts in AI. There's been there was like basically no shorts prior to uh 2026 really. Like if you want to just say like I'm going to short something because of AI, you didn't make a lot of money doing that. In our letter, I said like there are going to be a lot of shorts, some longs um uh because of AI
[29:45] and um software is the first one. The market tends to swing to extremes. My my guess is that software will have to evolve. We'll probably be a worse business model going forward. Um but I think the same way that like Walmart evolved uh with e-commerce uh and yes was that um would they have all us equal prefer that e-commerce never happened probably at least at the beginning um it required enormous amount
[30:15] of investment their margins took a hit they had new competitors I think that'll be the case with software too where companies that have really great distribution and great business models and are systems of record for companies you know one of the things I is like I asked the LLMs I said are you designing your own ERP system >> and they said no we're buying a new ERP system from this company >> teller if they're not if they're not [laughter] at least you're protected at least for for a few years if they're not doing it yet um so I think systems of record are
[30:48] going to be difficult to displace I think companies while you know it's neat to create software for uh small productivity enhancements if you really want to run your entire business on something like an ERP system or a CRM system. I think it's going to be quite a while before people are just, you know, going to be um, you know, vibe coding uh ERP system. But I don't think that you can just sit back as a software company and say, you know, we're a system of record. We'll be fine. You're going to have to integrate AI and find ways the
[31:18] same way Walmart uh, you know, integrated e-commerce into their business model. And it was painful for a long time and probably in the other side of it. But this is like I'd say fairly low conviction because everything that everything about AI's impact on the economy is inherently uh low conviction. I think everyone is likely underestimating how much these models are going to improve. And to really think about what's going to
[31:49] happen, you have to almost not think like an investor. You have to think like somebody who's, you know, into science fiction. >> Can you imagine a version of the story where this is all just overblown? Like is is there any coherent potential future where 5 years from now we're just like actually these things weren't that big of a deal and or they were much less of a big deal than we thought they were going to be sitting here today. The only way that would be the case is um and even this I think would would that that
[32:19] argument wouldn't hold would be if scaling laws just totally stopped out >> like >> but even if scaling laws stopped um even if these models got no better I think you probably have 3 years of just people learning how to incorporate um AI into their daily life or their companies. Certainly it wouldn't be good for the businesses if scaling laws stopped. I still think you'd have pretty profound changes within the economy. Um, and you know, betting that scaling laws are going to stop is like a really low
[32:51] probability assumption. I mean, there's just nothing to suggest that's the case. In fact, everything suggests the opposite. Um, and I think it's difficult to really get your arms around what that means, right? cuz we went from like this is like an interesting like chatbot that's like Google to like oh my god like you know these are going to be solving problems that humans can't do. We're already almost there. >> I have a 12-year-old son who's interested in investing. I think your son's interested in investing. We've talked about before as well. What do you tell him about the future of this
[33:23] profession given these tools? Like surely it applies to us too and you know we may be smart now but >> Elon Musk says like you know I I think a line he's used is it's better to go through life being an optimist and be proved wrong than a pessimist and be proved right. So like to be young and to be interested in something and be dissuaded because >> you're just obserfeating mindset. It is likely that at some point in the future everything that we do is uh you know
[33:56] arbitrageed away by AI for sure. I mean I think that that would be naive of me to say no. Um >> do I think that's happening anytime the next couple years? I don't. What do you tell someone to to focus on? Like you know first of all people are not going to unless someone is really interested in something they're not going to be good at it. So, you know, it might be the case that like being a plumber or being electrician is like the most, you know, motive job in the world, but if you don't want to be plumber electrician, it doesn't help very much. So, it's hard to tell your kids like,
[34:27] you know, don't do this or don't do that because uh it's going to be irrelevant. Um I saw a podcast recently with a with a Google uh researcher who left and he said like, "Oh, I don't even tell my daughter to study. It's just like go out and >> have a good time." I think that's like a very >> destructive like way of going through life. You should go through life thinking that you want to achieve things and that you're interested in things and you're curious and the same way as if this doesn't exist. And if it turns out that whatever job you envision having no
[34:59] longer exists, then you'll have to adjust. >> Talked with John and um and Daniel about the GameStop, you know, the GameStop story. We can touch on it here, too. I'm curious though what you most learned about yourself during that period of time when uh lore has it that you know in fe I guess it was February of 21 so at January was the was GameStop that you went to your team and basically said look the way we're going to calculate your comp this year is not going to include January like that was just a completely insane period of time and so you took certain steps to like create
[35:30] stability in the business or whatever but in such a stressful period of returns I'm just curious what Yeah. What you learned about yourself or what it was like emotionally to go through that time. >> It's incredibly difficult. Like I, you know, I mean, there are uh I never want to, you know, come across as like too exaggerative about like my experience cuz there's people who go through a lot worse things like in life. But as an investor, I'd say that was about as bad as you know it gets. We went from being
[36:00] um like top of the world, everyone thinks we walk on water to being like everyone thinks we're going to go to business. I have a lot of pride in what I do and uh you know I don't need to be celebrated but I also uh really did not like you know having uh our firm and our performance dragged through the mud. Um now granted it deserved to be you know um treated that way cuz the performance was very bad. it it also is a bit lonely and that like you know there's so there
[36:31] during GameStop there's probably >> couple one or two other people who are going through the same thing you had. I found it helpful to go back and like read and and listen like Ken Griffin's interviews in 2008 and and people that I respected. Um but it's it's lonely. It's a matter of like testing your resilience. First of all, we never came close to going out of business. That that was just nonsense for me. It was I never um was going to quit. Uh because you know I even though we had made some
[37:01] mistakes um I deeply believe that we were still good at what what we do um and that we had something to offer the world and um that um you know we could be excellent again. I was confident in that. But GameStop was it, you know, it changed. It was the beginning of a change in the market structure and in on the retail side and uh so I knew we had to adapt to that. I didn't know exactly how that would play out by that point.
[37:31] By 2021, 2022, I've been doing the job for 20 years, right? I never really had um severe adversity. Um probably because at some point like Andreas was just like he was just very quick to risk manage. Um but I never really had that. And so like I thought to myself like am I really going to be like the guy who quits the first time like you know uh you know there there's a severe bump in the road. I think the analogies that like people gave was like you know one day at a time like Bill Aman was like look every day try to do something that like makes things a little bit better.
[38:02] Um cuz it's not like uh something that uh when you have that kind of a draw down. nothing I do even if I hit the ball out of the park for like three months like investors would be like he's just volatile and and crazy and you know um if I slowly and methodically did it some people would just give up because they'd say um you know this was just too crazy like we don't believe in him so it's impossible to disprove the negative narrative in the short term takes a lot
[38:32] of time years um and so acknowledging that like this was not going to be something that you changed overnight. Um, you know, people's perception of you as investor, people's perception of D1 as an attractive place to invest capital. That was not going to change overnight. no matter what I did. It was um really like looking inwardly at the team, making sure that uh we were all on the same page, that we were, you know, what we were trying to achieve and that
[39:02] uh and that no matter how many people outside might doubt us, like we were going to do it, uh or at least we were going to try very very hard. Was there a specific one moment in the whole experience that most stands out in your memory as particularly salient whether it was on the difficult side like you know emotionally difficult or on the resilience side like a you know a decision that you were going to forge ahead any does any one moment stand out? The moment that stands out is um I mean there are different moments that like you know emotionally just kind of like
[39:33] hit you in different ways like news articles and friends calling you saying are you going out of business or yeah a lot of that and obviously like those things are uh you know were painful and something I had never had to deal with before. I've never tried to be a public figure uh and all of a sudden it became um you know very public. I think the the the most important like moment was we do semiannual investor dinners with our LPs. That's our primary form of communication. We write letters periodically, but we we do these
[40:03] semianual dinners where over a period of four nights we meet with all of our LPs and >> four straight dinners. >> Yeah. It was June of 22, beginning of June of 22. And um we were our the peak of our draw down trough of our draw down was uh at the end of May of 2022. And these dinners were scheduled for like June 3rd of 2022, right? And uh Jeremy, the president of our firm, he said to me, he said like, "We can't do these dinners. Like this is going to be a blood bath." Um
[40:33] and um to me it was like really clear. I said, "No, like this is we have to do these dinners and uh this is the most important time, you know, to go out there and speak to our investors." You know, the message was that we were going to do things differently. Not in that the stock selection, all of that was going to be the same, but the portfolio construction was going to be done in a way that um was much less uh riskprone. And um the analogy I gave was like we're
[41:03] going to hit singles and doubles. It might take us longer to get back to the high water mark because singles and doubles are not fireworks. But um we feel like what we've gone through in 2122 tough enough that like e e even if like the right positive MPV thing would be to just like keep taking a ton of risk and obviously usually the best time to take a ton of risk is when you've lost a lot of money emotionally I would not be able to go through this like again. So we just said look we're going to run the business differently. We very much understand if this is like not what you signed up for
[41:33] here. Um although I think at that point people were like not like yeah I really signed up for like them to take on more risk. They were [laughter] kind of like this like I think most of them were like happy to hear it even if they didn't believe in it. You know we really went about managing the firm differently. And so that was a pretty pivotal moment just looking in the eyes of all the investors and like you know feeling like you know pretty horrible in every way. Um, but there is something invigorating about um, a turnaround and uh, you know, when
[42:06] you're going through something like GameStop and like there's the world collapsing and there's nothing you can do, it's like uh, okay. Like that's a very uh, um, uncomfortable position when you actually even if things are really bad when you have a plan and you believe in that plan um, it changes the perspective entirely. Uh, and I really did believe in the plan and I believed in the team. And so all of a sudden I felt like, okay, everybody else may doubt us, but I believe it. And we are now uh the start of a mission to um
[42:39] dramatically improve our returns, improve our firm, and uh earn back our reputation as being um great investors. >> Assuming some did, what do you think of the people that redeemed from D1 during that time? Yeah, I don't I don't harbor any ill will. I mean, look, I think that uh you know, the act of redeeming is like to some extent we deserved it, right? I mean, obviously I appreciate it much more when people stayed. Uh I always start out these dinners, even the
[43:09] worst time. I say like ask me anything, >> criticize me like it is my job to deliver for you. If I don't do it, like >> you know, it's on me. ultimately uh think that uh when you screw up in business um capital follows returns and uh when you deliver poor returns, capital will leave. We had a lot of great investors that stuck through it and I I deeply appreciate that more than
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[45:41] vant.com/invest. Ridgeline is redefining asset management technology as a true partner, not just a software vendor. They've helped firms 5x and scale, enabling faster growth, smarter operations, and a competitive edge. Visit ridgelineapps.com to see what they can unlock for your firm. Can you do great investing in your experience, you know, meeting others without having like a pretty um narrow band of excitability versus despondency? >> For better or worse, I've always from the first day I got the job had a lot of
[46:11] confidence what I was doing. I never like stepped in and said like I'm just better than everyone else. I'm going to be like the most important head. You know, that was never it. But I always like when it came down to looking at a company and making a decision, I felt, you know, I felt confident in it. And when I felt confident in the analysis, I um I generally am pretty balanced. Uh is it possible for somebody to have a very volatile personality um but uh train themselves to um deal with the ups and downs of markets? I think the answer
[46:41] is yes. Um I think there are some hedge fun managers that have been like, you know, are truly, you know, generationally great. And you hear the stories of early on they were just like throwing things at people on the trading floor and yelling and like you know and ultimately they ended up being great. Um but you have to be able to like uh not let that emotion influence your trading. >> Yeah. If you think about the the future of the world given the crazy changes in technology, we haven't talked about SpaceX yet. That's a whole different
[47:11] dimension of like an incredible technology curve that's going on. That's a huge position for you. You mentioned earlier the importance of being optimistic. Where are you the most optimistic and and where are where what what parts of the world and its progression gives you the most pause or you know things you have your eye on to be if not worried about you know keep your eye on. >> I'm most optimistic in economic growth. It has to be the case that if you believe in scaling laws and you believe in AI that economic growth will be very
[47:41] powerful. I mean this is the ultimate productivity tool and what productivity does is allows you to grow while having disinflation which is like nirvana for markets. Um so I'm very bullish on that. Uh and then there's implications that you know flow from that which you know are more macro which is something we don't do but like that can cure deficits. you know, that can um do a lot of great things like economic growth does a lot of great things for everybody from hedge fund managers and CEOs to uh
[48:14] you know people who are in lower level jobs. It just if a country is not growing, it's hard to have a better standard of living. That's my more optimistic take. The part of me is more uncertain is that um I think that you know we as humanity I I just think we've never encountered something like we're about to encounter. And so with that kind of profound change like we're going from the smartest uh animals
[48:44] on the planet. We were never the fastest or the strongest just were smarter than other animals. um we're no longer going to be the most intelligent uh beings on the planet. >> And so what are the implications of that? Um I'm not really sure. Uh I think that um there's a lot of negative externalities in that like I don't think humans, as much as um people like Daario, who I respect a lot, might say like, "Well, we're just going to give everybody a check and like everybody
[49:14] just kind of live off universal basic income." I I just don't think humans are wired to just collect a check and like, you know, go around and like, you know, play sports all day. Like, humans are wired to um create relationships, to uh create value, to work, to coordinate with other humans and achieving things. And I just don't think you're going to have a great society if it's just a bunch of people living off of checks that come from the government as a
[49:44] result of this massive economic boom. >> One of the most interesting stories you've told me before was this time when you made I think similarly sized investments in Rivian and SpaceX at the same time. Can you tell that story? Both big big bets. Obviously SpaceX is you got this huge position now. I loved that story of like this style of big bet private market investing and exciting technologies and then the way things can go and if you could bring us back to that those moments of decisions those are huge checks that you wrote into those companies um I would love to hear that story. The thesis was that EVs were
[50:15] going to um dominate the auto market. Um and that EVs were an entirely different kind of automobile like in that they were software. Uh and it was the equivalent of like the iPhone versus uh you know Motorola and Nokia. The same way Motorola and Nokia were not able to move into smartphones um cuz that was like hardware and not software. There would be few companies that would be able to do this successfully. Ultimately, autos are a bad business. Could be
[50:45] software autos, hardware autos. It It's a bad business and it's a really tough business to scale. Uh, and very capital intensive. The manufacturing didn't go as smoothly as it could have. The cost of delays in manufacturing when you're ramping up and burning a lot of cash are quite significant. Um, the technology I think was always good and not getting up the manufacturing curve very quickly meant you didn't get to scale fast enough and I really believe that scale in EVs is going to be important which is why Tesla's kind of one of the reasons
[51:16] why Tesla's one you know the IPO it was great. It looked like a great investment. Um, but ultimately I don't I don't know what our ultimate return was on Rivian but it wasn't what we planned for when we made the investment. the the bad ones tend to like be more obvious faster. Um the great private tech investments I think are um sometimes slower to prove how great they are >> because like you have these amazing founders who are just you know
[51:48] constantly making decisions which take the business in one direction or another and ultimately the compounding of those decisions takes time but leads to great outcomes. SpaceX was pretty obvious to me that the launch business at a minimum was going to be a very good business. What they had achieved I thought was just like from an engineering perspective like insane. Um so to me if I could buy a company that had achieved the most amazing engineering fee I'd ever seen at some multiple of you know um revenue with very little cash burn at
[52:20] that point. Like I didn't know what was going to come. I just knew that the skew was very good. Uh cuz if they if they achieve that then like who knows what they could do in the future. >> What do you think about that business today? Like so much has changed since you first invested. What's your updated you know prognosis for it or thoughts about it? >> The initial prognosis was just always that like you know they were going to be a lowcost provider of launch. Um I think the uh success of Starship and we're not I wouldn't say like we're fully there but I think we're pretty much goddamn
[52:51] thing. >> Yeah. They caught Yeah, you caught a skyscraper with chopsticks. It's pretty good, you know, the proof full reusability and scale like, yeah, okay, there's more to come. Starship is a game changer, which, you know, we knew about fairly early on, but didn't know if it would work. What that means very simply is that the cost of launching everything goes down dramatically. And the engineering that they've done with the satellites to harness solar power um and be able to deliver really high speed
[53:21] bandwidth has surprised me to the upside. There's a lot of software that goes into that too just given these networks of satellites are all communicating. The ramification of that I think is that the telecom market uh globally is now the TAM >> whereas before it was like okay like you live in you know whatever and like you know you don't have cable to your homes it's like you get this Starlink thing and like there there's a boats and there's planes and there's people living in the lower I think that the cost
[53:52] they've come so far down the cost curve I think that um in a relatively short amount of like like months, few years, uh they are going to be dramatically cheaper than any other form of delivering broadband. >> You just said how much you love shorting stocks. What is it about it that you like? And because you just don't meet that many people that are focused on this or really that good at this anymore. >> My wife begs me all the time to stop shorting stocks. Anytime she she looks at me and she's like like uhoh. Like this is like a short like it's a bad
[54:24] business. And so you have to be intellectually stimulated by it. And most people in the market are just not fundamentally based period. And even if they are fundamentally based, they're not interested in shorting or they pretend like they're shorting and they kind of short indices or whatever. Um, very few people are doing it. There are tons of people investing in things that are just based on stories like because of social media and because of Robin Hood and and so there's just endless amounts of shorts if you have duration and if you take a fundamental view.
[54:55] >> Why do you think markets are less efficient now? >> I think it's just the um the people transacting in the market uh or the nature of the institutions transacting in the market. So if you go back 10 20 years ago um mutual funds uh long short hedge funds you know they were a big part of the market uh now it is uh a lot of passives a lot of retail investors the people who are making investment decisions that are not based upon long-term considerations of intrinsic
[55:25] value uh quants um you know even uh multi-manager long short funds uh you know while they are focused on fundamentals. They are uh by necessity. They are short-term oriented. The majority of the time uh the moves you see in the short term are um exaggerate the true change in intrinsic value of the company which makes for a less efficient market. >> One of the things that interests me a lot about you is I'll use the word like loyalty. So, uh Jeremy's been your
[55:56] partner. He's your one of your best friends from growing up. Uh the guy runs your family office, your director of research. lots of your key partners you've known a really long time and are good friends of yours. I think you met your wife in college. Um I did too. So I'm always that always perks me up when I hear that that example. Can you say a little bit about the role of like how you feel about loyalty? I know these people the best like you know and so I've just dealt with them through so many different things in life and I have a lot of confidence in you know their confidence. So to me um there's a lot of people that I love in life that uh for
[56:28] different reasons and have are wonderful people and you know would be loyal but they have to be really competent to the job. This is a very like intense job. So uh the bar is extremely high and the people that I've hired that are friends of mine forever um you know uh I am just confident cleared that bar by a lot. But when you are able to find people that you know for a long time and uh liked you before you had any money or any signs that you'd ever have any money,
[56:58] you know, that is a different kind of relationship. Like for me at this point like I don't like most people I meet like I don't know like do they nice to me because you know they think I can do something for them. you know there are a group of people in my life that have always been there uh and that you know I you know they will be close close close close to me for the rest of my life >> and like to the extent I can work with those people great now you know but as I said they have to be excellent >> one of the things that you do is for
[57:28] your portfolio host this like group chat that's just full of your thinking on what's going on in markets and one of the things that struck me the most about this is just how prolific you are in it like you're just thinking and writing about this at all hours like all the time clearly like this is the thing that you just love and are passionate about. What has been the impact of that like constantly communicating with the people that you care about about markets? I asked the question because I just want to encourage give examples to encourage other people to do the same because I think it can be so powerful. Look, when you're investing in a company
[57:59] privately, there is obviously a financial aspect to it that's the driver, but there's also a relationship, you know, part of it like in that like you are signing up to um hopefully help that help that person grow their business. um you know be with them through ups and downs and um when you're doing the initial investment you spend a lot of time together you know but then it's very easy for uh for me to um go months without communicating with the CEO on the private side if nothing's happening I don't like that like I like
[58:30] to be uh if we have something that we can offer people and they you know they can just opt in they can ether read the stuff I write or not read the stuff I write it is a way to broadcast communicate with people um that I want to be in touch with and I want to know us better as a firm, know me better as a person, know us better as a firm, I find that like now uh even if I haven't spoken to a CEO in like 3 months and I call them, it's almost like they feel like they talk to me every day, right? It's the same way like when you meet
[59:00] someone on Zoom during co you don't really you never met that person in person. I know that being a founder is lonely like you are kind of like going through all kinds of issues and so being around other founders almost universally the feedback I get is that they founders like to be around other founders because there's they're the only people that can sympathize and understand everything that they go through and so by having a bunch of them together in a chat it's helpful for to us uh from a business
[59:31] perspective but I think it's also just group therapy would be too strong of a word but I think it's like nice for them to you know know that these other people are part of this community that they're in and if they want to reach out to these people they can and they hear these people's perspective and some of these people are worldleading experts in areas like AI that are going to be impactful to companies that um you know are not experts in AI. So just getting that getting that input I think is really helpful and you know we have a
[60:01] network of a lot of companies a lot of industries being able to share the insights not just my insights on markets but having companies share insights with each other uh and seeing like you know how the world is impacting companies is I think you know useful. >> Do you care whether or not D1 has enterprise value as a business? Is that something you think about? It's something I I've started to think about, you know, more recently. Um, I think the answer is no. Look, money to me is a
[60:32] scorecard. Um, and I want to have the best score. It is a, you know, really great positive externality of being a good investor. Um, but, um, and maybe I will just be so intellectually interested by the idea of being a CEO that I want that go from being 10% of my job to 30 to 40% of my job. and that's how you would create enterprise value. Um, I'm just not there right now and I want to uh deliver amazing returns. I
[61:02] think that'll be very, you know, that'll be financially, you know, more than compensatory. And so like maybe one day, but um I don't I don't think hedge funds are a good business. Our business like is horrible. It's like it's amazing cash flows. It cash flows really well. It has no terminal value. I told this to my companies I invest in. I'm like, you have no cash flows and tons of terminal value. I have tons of cash flows, no terminal value. So, like, you know, we're good together. Like, you know, we can we can kind of arbitrage that. I think there's other businesses
[61:33] within asset management that have value. I definitely do not ever aspire to having >> hundreds of employees or something like that. So, and that's kind of what you need to do to have enterprise value. >> Why do you care so much about the scorec card? Like, where does the competitive drive come from? this is what I've devoted my life to, right? And so anything you devote your life to, you want to be great at um or at least having an impact that is tangible and measurable. I could be a family office right now and there's plenty of, you
[62:05] know, positive um things about being a family office. The drawback is like you're not in the arena. I'm very collaborative with other investors. It's not like I'm sharp elbowed, but being out there like being able to prove that we can be great. not just me like our firm can be great uh is invigorating and I think I'd be kind of bored if I was just like investing my own money. And going back to some of the history, I want to start with something I've never heard you talk about publicly, which is the early writing you did in Value Investors Club and specifically the
[62:36] Orthodontics of America shortcase that you wrote about. I'd love to just hear the origin story of how you found Vic, why you started doing it. I'm very interested in this idea of how much can come if you do some great posting online which is a very early version of this. So maybe just tell us the story of Vic and and that early passion for stocks. >> It was 2002. I was working at a private equity group within Bear Sterns. I always had an interest in stocks but I didn't have like the tool set to analyze stocks until uh I got there and I kind of deeply understood accounting and
[63:07] finance and so I started just looking at stocks of my own. The only way to really get exposure to investment ideas written up by hedge fund managers was or investment managers was this site called value investors club. I applied, you had to send an idea. Uh I applied and like every week you'd have like I don't know tens of ideas posted by people uh anonymously and um you could read them and like I would just consume everything. So, it was like reading
[63:37] about merger or like long, you know, long ideas, short ideas. Every week they paid $5,000 >> to the best idea. >> And um >> yeah, I uh just got inspired by all the stuff I was reading and decided to try to find some of my own ideas. Did a few uh that were probably, you know, not particularly successful. Some were, some weren't. they were like really deep value like kind of like trying to buy
[64:07] cigar butts uh you know trying to buy a dollar for 50 cents. After maybe 6 12 months uh I had a portfolio of things I'd written up on value investors club and I decided I wanted to go work at a hedge fund and the first thing hedge funds ask you to do is talk about investment idea and so I had all these investment ideas. One of the hedge funds I went to interview at was a spin-off of SACE uh that did healthcare. I had no particular interest in healthcare, but it was just where I got an interview. Uh back then hedge funds weren't as big of
[64:37] a thing. And they said to me, uh we want you to do a case study, you know, for the interview. And um the company is called uh Orthodontic Centers of America. For me, this was like not like a task. It was like something I was really excited to do. Uh cuz I had never had my work shown given to somebody who was a professional. I went home and uh I spent like I don't know maybe like hours and hours like going through uh the financial filings and trying to build a
[65:08] model >> uh with it. And um I was pretty good at accounting. It kind of was like a puzzle that just made sense. I really tried to get like deep into the financial statements and like nothing reconciled. Like nothing made sense. Um, and I couldn't figure out what was going on. Um, and I kept going through it and going through it. It hit me that um, what they were doing was um, kind of the simplest form of accounting fraud, which
[65:38] is just capitalizing expenses that should have been expensed uh, in in a big way. Uh, there are other things too, but like that was the most egregious. I was able to effectively prove that without you know obviously you know it wasn't uh incontrovertible proof but it was pretty close uh just by building up all the unit economics as they said they were comparing them to the unit level economics that you could actually uh decipher by going through their
[66:08] financial statements and it was clear I did a write up that was about >> I don't know six pages long >> and uh before I went back to to, you know, the uh the follow-up interview where I presented my case study. >> I was like, you know, I think I'm on to something here. Let me post it online first >> uh and I'll get some feedback. I wasn't allowed to trade stocks cuz I was working at investment bank. Uh so I wasn't short the stock. I wasn't allowed in the stock. D Investors Club is done anonymously with a tag name. Um so I posted online within I don't know a few
[66:41] hours uh the stock started to go down. Um and um I was like that's cool. Like people are noticing. There's a couple comments online. I you know the market closed a few hours later whatever you know um I'm watching online there's some more posts being like this is really interesting. Has anyone double checked these numbers? There's people like commenting. Next day stocks stock starts to crater. Stock's down like 20 30%. I started getting calls from people um
[67:11] working at mutual funds who own the stock because even though it was anonymous online I had told friends of mine hedge funds I'm like you should look at this stock and short it I think it's a fraud and they had told other people and so I started getting calls at Bear Sterns from like people at Tro Price and Fidelity being like what's going on and I was like you know I wasn't supposed to be you're working in investment bank last thing you're trying to do is supposed to like posting about companies that are fraud like I didn't know even know if they were a client I wasn't, you know, so uh the stock just got it got habedded. I went back into
[67:42] the uh interview and um you know to present the case study at this point like they were just like what did you do? >> And I was like and I was like look I was like you told me to look at this. I thought it was a fraud. They're like did you tell anyone that like we we told you to do this? >> I was like no no. They're like you you sure? And I'm like yeah yeah yeah. Nobody knows. Nobody nobody knows. And they're like, "Okay." And they're like, "We basically thought you were going to come back and tell us if they were going to miss earnings." Like, I didn't want
[68:12] to do healthcare, so I didn't work there, but I now had this, you know, um, write up that could go around to, you know, different hedge funds. And most of them already knew about it cuz they would short it. They were short it um after the write up. And that's how I got my job. >> So, you go, you end up at Viking. You're there for a long time. You're the CIO. You've got an [clears throat] incredible track record while you're there. If you think about the moment that you decided to go start D1, what what was it like? Bring us back to that moment to go hang your own shingle and build this thing. >> I started out as a banks analyst. So, uh
[68:45] that's what I did for the first couple years. I still had a value bent. I think most investors who love investing uh start out with a deep value bent because it's, you know, if you want to read um about great investors historically, most of them were deep value investors. Ben Graham, you know, Buffett. I was working for somebody named Tom Purcell, who's a [clears throat] >> amazing investor. I realized that Tom was an awesome mentor, but I realized that, you know, Tom was uh, you know, very well equipped to generate returns
[69:15] and financial services for Viking. And so, if I wanted to grow in my career, I had to move into other areas. And so um gradually I took on um other sectors like starting with healthcare uh industrials TMT and um you know the nature of those companies was different than banks that was a learning process. there's just like years of covering different companies and different industries and uh you know the deeper you got into like
[69:46] what created value in TMT was different than what might create value in industrials or healthcare. So it was like to me if you love investing my time at Viking was amazing because I was able to get exposure to every industry almost by 2016 I was managing uh just over half of Vikings capital somewhere 55 something percent of Vikings capital and I'd started out you know in 2002 uh being an analyst with no portfolio and so kind of
[70:17] I'd gone from no portfolio to portfolio to eventually CIO to you managing more than half the firm's capital, which was an abnormal percentage historically for Viking. Viking is usually more diversified, but yeah, it was pretty clear to me that uh from a business perspective, it was not in uh Andreas's best interest to have one person manage more than half the capital. I don't think that would be even good for LPs. Um, and so I kind of recognized that, um, I had pretty much
[70:48] achieved what I could achieve at Viking. Um, you know, over time I'd be probably managing a smaller percentage almost regardless of how well I did. Um, I've always had a mindset of like I want to, um, grow. I want to get better. I want to achieve new things. And, uh, I kind of felt like there wasn't that much more for me to achieve at Viking. And I was 40. Um I was I started a fund relatively late in life. >> Um and I kind of recognized that at some
[71:19] point you just wouldn't have the energy to go, you know, do something like starting a fund is, you know, obviously it's a big endeavor. Uh and so I felt like I had the energy and so everything kind of came together. >> What interests you about art? Like it's something that obviously you care a lot about. You've devoted some time to understanding. What What is it that attracts you? I've always had more of a leaning towards humanities than STEM uh which is like you know unusual and uh certainly tech and somewhat finance.
[71:49] That is why I perhaps look at my job is more art than science. The science is very simple. DCF I could learn how to do 25 years ago and hasn't changed. The humanity side interests me and uh you know art is certainly one aspect of that. Um, and I am particularly interested in aesthetics. Like I like design, I like architecture, I like art. Um, to me like it's just beauty and like you know there's beauty like you go to you go to uh the beach and like watch
[72:21] the wave that's beauty. Like there's beauty in the world and like art is one example of beauty. There's usually a story behind it. Uh, and there's people behind art. Art is important because it is created by people. And I think the bullcase in art would be like >> as everything else is like automated and you know in um infinite supply because it's being created by uh AI you know art created by people reflects emotion and
[72:51] you know often times like what's happening in the moment just in the world when they're making that piece of art or what's happening in their life. If you apply the same aesthetic idea, the beautiful idea, what is the most beautiful business you've ever seen or just like the best business you've ever seen? >> I think that the best businesses are usually lowcost producers of something that's like very durable. And I think people underestimate like the ability to provide a given product or service sustainably at low cost and where there
[73:23] is a a a positive feedback loop of like low cost drives more volume which drives low cost. And I think that like I could say like a bunch of businesses which are really great like Moody's or S&P those are great businesses when you're wrong but uh you know something like where the cost advantage is so substantial uh and so impenetrable um like SpaceX with you know launch or Costco with um you know groceries. The
[73:54] only way to win in most businesses is to provide a great product at a low cost. And so like the businesses that do that at scale and build a mode around it are amazing. Amazon's like e-commerce business is amazing. There's so many amazing businesses um very few monopolies and when they are a monopoly usually what happens is they tend to get lazy and uh and you know uh the returns aren't as good. >> What parts of the world do you think are underappreciated right now? like when I
[74:24] look at your top 10 holdings actually like didn't recognize a number of the companies. Lots of them are not in the US. Um they're international. Where's your eye right now that you think the world is not paying enough attention to? >> It's hard to say Europe in that like Europe is economically stagnated. So I'm not sure anyone should pay attention to it other than if you are a pure fundamental stock picker, it's an easier market. Um I think there's really interesting things happening in Asia uh just as um globally as politics change
[74:54] uh like you saw what happened in Japan and for the first time Japan's probably going to become a military power at some point in the future again and you know that has all kinds of implications. Um I think there's a lot uh going on within defense. I think there's obviously AI uh geographically the Europe is always the most inefficient. Uh I think Japan and Korea are probably um pretty inefficient as well. A lot of retail investors, some really great companies that happen to be
[75:24] like Japan and Korea were not well positioned for the last 20 years because it was just like digital companies. But when it comes to like actually hard assets and good engineering, they Germany, Korea, and Japan uh have a lot of companies that um have excellent physical assets in engineering. >> Is there anything else that we haven't talked about today that you're that you have on your mind or you're especially passionate about things you're thinking about in the world? The thing that
[75:54] troubles me the most frankly is I think we are on a um collision course with China over semiconductors. And I'm not sure I think there are ways to get out of that. Um but uh you know none of them are easy and um to the extent that we don't figure that out um I think you know we're going to have something you know akin to the Great Depression. It's very straightforward in that like um Taiwan produces 90 something percent of uh you know the
[76:25] most advanced semiconductors and uh everything we use is semiconductors. So I I would say like it's almost as if if you went back 50 years if there's only one country that produced oil, >> right? Um and oil was that important. We went to war over oil even though you could get it in all over the world. like uh Taiwan is uh produces um all the leading or vast majority of leading semiconductors and that is what powers everything and that supply chain is
[76:56] fragile like it's not like it's easy to replicate it's uh easy to uh destroy. If that supply chain were to get uh screwed up or uh disintermediated, we would have like a incredibly bad economy on the order of like depression type economy. Um and um you know, I think that probably a lot of people in government understand this. I've heard Scott Besson talk about it. I think people understand it, but there are some scenarios that are um okay for the for
[77:30] the global economy. Um, but there is no scenario I can think of where everybody's happy. >> Um, China's happy, Taiwan's happy, and the US is happy. Um, somebody's going to be unhappy. Um, either because the economy collapses or because their sovereignty is handed over. >> What do you hope happens that we build fabs here? What I hope happens is that we replicate the supply chain uh over time in the US and we work something out
[78:00] with China where they see uh a path to integrating Taiwan. If we um replicate the supply chain, um the risk is that we're probably less likely to defend Taiwan, in which case China will attack Taiwan anyway, right? Bad for Taiwan, fine for the US. you know, China uh achieves its objectives. Um I would like to see the world avoid uh depression and that's going to require
[78:30] like I think some understanding of we need 10 to 20 years to replicate this supply chain. Over that period of time, China will not screw up the world economy by um being very aggressive with Taiwan. And then eventually um there's a path where China feels comfortable that they will be able to reintegrate with Taiwan. Um otherwise like you're kind of usually when dictators say they say something and
[79:01] they say it like religiously, you should believe them. Like when when Putin, you know, talks about like the glory days of the Soviet Union, like he like he may not have the capabilities always, but like as soon as he did, he he he he acted on it. and dictators usually do. And so like every time she makes a speech that's of any, you know, importance in China, he emphasizes Taiwan. And so we can pretend like this is like, you know, going to happen in some time that's not relevant, but it's
[79:32] important that uh an AI just raises the stakes so much that it's it would affect everybody. Um, >> Zach told me to ask you what you've learned or what you like about the Real Dictators podcast. >> Oh. Um, >> basically just this. [laughter] >> I like history. I like history and like these like, you know, sometimes just >> listening what's happened in history and like how many horrible leaders there are and how like Charlie Munger say like, you know, tell me where I I'm going to die so I never go there. It's like
[80:02] learning, you know, learning about like >> bad things and, you know, so you don't go there to me is it's interesting whether it's like communism or you know, fascism. It's just like all of these things are still possible and relevant in modern day >> and we see seeds of them >> and we see seeds of them like it's like and so like just understanding how things have played out in the past and it tends to repeat itself like communism starts but like communism without
[80:32] dictatorship doesn't work because eventually people realize it it's not good and so then they they they want to change and the only way you know it doesn't change is if you have a dictator who's really benefiting from from all this And so like that to me is like interesting just cuz the world a lot more things have gone wrong in the world than right. In our in our lifetime things have gone right technologically geopolitically but over history more things have gone wrong. >> Good leadership can be as impactful or more than bad leadership. You've worked
[81:02] with a lot of invested in a lot of great leaders. I'm wondering specifically around CEOs but broadly about leadership. What have you decided are the mo like what are you looking for in a leader? >> Real passion. like real passion, uh like a strong competitive streak, >> uh like an desire to win, deeply engaged in the business, um like somebody who like knows the details like when you talk to them. Um and uh somebody who people want to work for. Um and that
[81:33] could be because they like the person personally or it could be because they don't necessarily love the person, you know, dayto-day. like Elon Musk I'm sure in the factory is not like you know all giggles >> but like people are like I'm going to learn more by working with this person always says like the business is more important than leader cuz eventually like I I kind of disagree with that I think if you look over 30 years sure but over any med period of time like businesses are just people and if you have amazing people they make great
[82:03] decisions and bring great people and you know my investing time frame is like more like 10 5 to 10 years at max And I think people are more important in that time frame, especially in technology businesses. I >> I think it's come through today that you are clearly one of the most passionate stock pickers, stock people, markets people that's active today. And uh mostly I like these things just to be inspirational to to other people that might want to do the same thing. So it's been so much fun to do it with you. I ask everyone the same traditional closing question. What is the kindest thing that anyone's ever done for you?
[82:34] with my wife right now. I was a pretty bad boyfriend in college and that like I was busy doing other things and you know I just like I was not very attentive. I was not like, you know, somebody that like you'd want to like necessarily marry. And I kind of um and we broke up and I remember like I sat down with her and I said like, you know, we went to get a drink and just to like catch up as friends and I said I got a job at Bear Sterns and I just remember like she just started crying cuz it wasn't like the easiest thing for I got I was fine but it wasn't like it wasn't like I was
[83:04] Goldman Sachs was like you know knocking down my door to get me to go. I I didn't really work for the first three years of college. So, and you know just she just started like crying like tears of joy and I was like wow like this person who really didn't properly appreciate like how you know uh how much they cared for me and how devoted they were and like how much they were rooting for me and like that was like you know to me like it wasn't an act that was kind it was just a gesture uh uh that I was like I
[83:35] was kind of taken back by and immediately I walked out and I was like I'm going to marry [snorts] that girl because like you know like and I'm going to be better going I'm going to be a better boyfriend/husband going forward. >> I love that story. I haven't heard like a specific moment quite like that one and all the 500 times I've asked this question. So an awesome place to close. [music] Thanks for your time. >> Awesome. Thank you. >> Most software companies try to maximize [music] your time on their app to juice engagement. Ramp does the exact
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