One of the things I really like and, you only learn these things when you look in hindsight, I had this history of hanging out with the "bad people". So you all go back to the 90s, post the recession in 1991, there were "the bad people" that have caused all the stress in real estate and junk bonds, the Michael Milken crowd.
And we had gone to the board and said, hey, we should buy these high yield bonds because they're selling at big discounts. Oh, you can't buy those that's where all the bad people are. And how about real estate? Oh, no, no all the bad people you know Barry Sternlicht, he blew up JMB he's pretty smart guy built Starwood done okay for himself, billionaire now. And so we invested with these "bad people". And same thing with hedge funds.
We brought Tiger Management and Perry & Partners and a couple others to the guys that had noted in the board at Notre Dame and I call, that's bad people, A.W. Jones, they were inside traders. And come on guys.
So what's interesting is people always criticise things they don't understand.
So the fact that most people don't really understand how long short equity works or how short selling works or how a disciplined investment process around a hedged with a D fund, which A.W. Jones founded, and they don't really get the construct that wait a minute leverage, if I use leverage, you said leverage was risky? Well, it is if you use it in isolation, but if you use leverage plus short selling, which also is risky in isolation, and you put them together, you actually get a lower risk asset. Hedge funds have lower risk, not higher risk than equities.
So I was very fortunate. I've been privileged and had some great mentors. And, you know, when I came in North Carolina, you know, Julian Robertson was a big donor and grad and he was one of our biggest positions and he kind of took me under his wing and it's been a mentor and friend ever since. And I just thank upstairs every day for that privilege. And when you're around these legendary figures, you can't help but get better. And, you know, being around them teaches you what makes them special and what makes them really good at their job. I've interviewed thousands of managers over the years, I used to do 400-500 meetings a year with these great investors. And you see patterns and you see things that make them really good at what they do.
I'm big on edge. And I have a meta hashtag on Twitter about it. #edge, and I talked about what are the things that give you edge in the world and in investing, there's only a handful of edges.
So in the early days, it was about access to information, meaning that if you got information faster or got information that was unique, you had an edge.
If you go back to the original movie, Wall Street, right, you know, the guy on the motorcycle travelling around, you know, chasing the guy that we see where it's playing was going now there's an internet tool that does that for you. Or it was you know, going breaking in the lawyers, you know, office to steal stuff now that's bad, right that's I'm not saying you should break the law.
There's a great story of this guy in Chicago. He was the first customer of something called News Edge. And what it did is it basically was a computer system before Bloomberg and he basically got information before other people and all of his stocks look like hockey sticks. And why was that? Well, it was because he had access to information before other people. Now as everybody got a computer on their desk and Bloomberg and everybody had access to that information, that edge went away.
So then it became about not just accessed information, but then it became about processing information. Could you process faster, did you have an analytical or modelling edge? Those people who hired more rocket scientists like Renaissance actually built an edge that was unassailable.
Now, it isn't so much about intelligence and having smart people, because everybody's got smart people.
Now it's about speed and computing power.
And I said quantitative models and, alternative data sets and all these things. But at the end of the day, they're still coming down to do they have access to better information? Do they have the ability to process that information better or faster? And to me the most important is do they have the ability to synthesise, meaning know what to ignore? Because the problem is we're all constantly surrounded by incredible amounts of information. We can't process it. We can't listen to all the podcasts. We can't be you know, listen, read all the news, we can't do everything we want to do.
So what we selectively do, how we synthesise information is really important. And then the last and this is the one thing that I think can't be done by computers is judgement and what makes the great investors great is to have that judgement, to act and to act with conviction and to change their minds. And one of the things I talked about is the great investors, they cut their losses faster than other people. They don't say I'm right the markets wrong the market just doesn't understand they just cut their losses and move on to the next idea. And Soros actually says that:
"It is not whether you're right or wrong. It's how much money you make when you're right, how much money you lose when you're wrong."