The Intersection (w/ Raoul Pal & Dylan Grice)
RAOUL PAL: The next bit we're going to do is we're going to do a series of fixed questions. We've done this before on Real Vision, I think with you in the very early days. It's called the Intersection. Is there one person living or dead you'd want to interview more than anyone? If so, who and why? DYLAN GRICE: It would actually be Jim Simons. I was going to see Richard Feynman who is a hero of mine. In many ways, Feynman had a bigger impact on the way I think of investing than any investors. I said, I really think that science is-- I think that science and investing are actually cousins. I don't think that there is far removed-- in principle and in essence, they're not so different. Subject matters are radically different but in essence, they're not different. I wouldn't be able to have much of a conversation with Feynman about theoretical physics. I don't know if he'd be that interested in finance, whereas Jim Simons is both. He's a brilliant guy. He had a brilliant career as a mathematician. He won the, what was the-- the Veblen Prize for geometry, age under 40. He assembled a team of code breakers for I think the NSA, and then he's assembled this team of code breakers who have cracked the market. This is a guy who does understand finance. He doesn't understand markets, but fundamentally, he understands science and I just think that that would be a mind blowing conversation. RAOUL PAL: Yeah, that's right. Okay, next question. What is the book or books that have changed how you view the world, and how so? Also, what are you reading right now? DYLAN GRICE: The books that really change the world indeed, for me, these are always funny ones because something that had huge-- books that have a big impact on you are really very much a function of where they hit you. RAOUL PAL: Absolutely right. DYLAN GRICE: You can see well, for me, a book that had a huge impact on me was Taleb's Fooled by Randomness. I'm a huge-- I know he's not everyone's taste. I'm personally a huge fan of the guy. When I flipped through that book, and I find that there isn't really much in any of the chapters that surprises me or that I didn't know, or that I don't know, and not anymore. It was almost like when the first time I read it, a light went on. The fact that I can look at it-- I've been in this dark room and all of a sudden, somebody just switched the light on. That's the central foundational role of irreducible uncertainty. This is central to everything that I do as an investor and everything that I think of as an investor, and I can trace that back to Taleb really. The fact that when I look at the book, and I almost-- there is nothing left to absorb. I think I've absorbed this all so watch, I think that's testament to just what bigger impact to add on. RAOUL PAL: Yeah, and it could've been a better book for now. I suppose a Black Swan and a half. DYLAN GRICE: Yeah, completely. One month, what won't change in one month. It was just [indiscernible] now. RAOUL PAL: Okay, next question. As an individual and as a leader in your field, how do you stay engaged and relevant in a world that's moving so quickly? DYLAN GRICE: Well, engaged is easy. Relevant, geez, let's talk about-- you just hope I guess. How I stay engaged-- RAOUL PAL: Basically, how do you stay on top of where we are in the world? We have a lot of people who get left behind. DYLAN GRICE: I think from an investment perspective, this is again, I need to invest, I need to be investing. I can't just be reading about investing, reading about the newspapers. I have to be a participant in the market, so I know how to feel it. When the market's going down, I have to feel that pain. I have to feel that anguish and that anxiety. It's almost like I have to have that connection to what's going on. That's how I stay engaged. That's how I stay curious. That's why I just have a daily flood of questions that don't have answers to, I want answers to, and therefore, that's how I spend my day trying to answer as many of those questions as I possibly can. How do you stay engaged? Just by being embedded. That's it. I think more broadly, kids are great for making you realize how quickly the world is changing. I've got a couple of kids and they just do-- they do and see hilarious things, and I think that that keeps you engaged with the broader world. In terms of staying relevant, yeah. RAOUL PAL: Well, running a portfolio keeps you relevant. Because we are basically saying the skin in the game. DYLAN GRICE: Yeah. Oh, for sure. This is, again, this is central, and this is an obviously that's a big Taleb thing, but another one of my view is Warren Buffett, always, always getting his own ticker, always-- I may be wrong. I could be very, very wrong, but I'm not going to sell you something that I'm not going to do myself. I think that that's almost as-- that's a bit as good a safety valve is that you're going to get with any manager. Question number one, are you invested in this portfolio as much as you expect me to be? When you hear-- [indiscernible] has got a couple of million in it? The answer is no. RAOUL PAL: Okay, next question. Some of our guests can tie their success to one key breakthrough. Did you experience a tipping point in your career? DYLAN GRICE: Yeah, actually. I think the biggest and maybe it was thanks to Table, I don't know, but I was sitting on the prop desk at Dresdner. I'd come down from the economics department. I was the bookish academic, didn't really know much, which is all true. The other guys on the desk were seasoned traders, options traders, options market makers, they've cut the teeth in there in the open outcry system of life, cash equity market makers, risk ARB traders, investors I should say, so I really was the outlier. It was my job just, as I saw it, to shut up and listen and learn. We had this conversation one Friday morning about the article in payrolls and what we thought the payrolls were going to be. We haven't really long involved debate and it basically went on like this. I think we're going to be charging 50, I don't want to be charging 20, I don't want to be charging any, what do you think, Dylan? You're the economist. I've not got the faintest idea. I really, genuinely, truly don't know. Oh, you must have a view. Okay, well, what is this in the screen? What's the market expectation? Okay, that's my expectation. You don't have a view? You're in the wrong job, man. That's what the guy sat next-- who's really, really lovely guy, a good friend of mine. He said, you know what, you're in the wrong job, man. I thought, yeah, I'm in the wrong job. I honestly, I don't know. Then I had this second thing, which is, you don't know either. You don't know. Therefore, you're in the wrong job, find your own admission. The difference is I know, I know I don't know, you don't. I think I actually have an advantage. In that strange way, I think I'm on the wrong job. This realization had a very big effect on me, as an owner, I realized that not knowing something didn't necessarily make you fundamentally stupid, lots of other things make you stupid, but not knowing why the payrolls are going to be in the Friday when everyone else thought it did was actually okay. I think this was the a very big epiphany for me. RAOUL PAL: Who is a person you admire and why? Well, we probably talked about this with Richard Feynman. DYLAN GRICE: And Jim Simons. Who do I admire? Lots of people I admire for different reasons. I admire Alex Ferguson, the Manchester United manager, who I think was just a brilliant, brilliant guy and he wrote a book called Leading. There are so much lessons in that book about how to manage a team, like assemble a team, how to manage Eagles. How to manage a bunch of people who, frankly, are much better doing what they do than you ever were or that you even are. I think it's a really important principle. Certainly, in my career, when I started my career, it was all you wanted the best mentor you could possibly have. I was quite lucky, I had some very good mentor named Albert Edwards, who you know, a great soldier, but I've known him for years before then. He's always been a very good mentor for me. There comes a point where you don't have some-- the education doesn't necessarily come from the guys above you. It comes from the guys below you. It comes from the guys that you hire. Because they're much better than you are. They're much smarter than you are, and they can push you and you start to learn from them. I think that this is very much a theme in Ferguson's book, even though they're much better than you in lots of things, you discover there's some things they haven't quite gotten yet. This was a-- he built a club, he wasn't just a great manager, he built a club, and they did fine, but I think he's just an intriguing guy. I'm reading the book on the factual biography of Margaret Thatcher. I think she's also a very intriguing and passionate, very intriguing politician. In many ways, the politician I hate, which is a career politician. All she ever did was politics. I have a real suspicion of people who've never actually done a real job in our lives other than politics. There's always an exception to that, and one exception she was, so she's fascinating character as well. Yeah, I obviously gotten [indiscernible] there. RAOUL PAL: Okay. Final question. This is probably-- you probably hold a few of these. What view do you hold that is most controversial in your professional life? DYLAN GRICE: What view is most controversial in my professional life, God, that's a tricky one I don't know. At the time I felt the most embarrassed for thinking something wasn't necessarily, it was probably to do with the context. It was during Brexit. I voted for Brexit. Okay, I was in favor of Brexit. I was one of those idiots who didn't know what he was doing, who was probably xenophobic and just didn't understand, needed to have a rethink. Look at what the economists still say, it's 6%, that's much poorer, we're going to be working together, are you? I think I should see I am-- it was like a limbo call for me. I don't hate the European Union at all. I can certainly see lots of benefits to stay in the EU. It was probably 55, 45 in favor of Brexit for me. For reasons, really to just to-- we live in Switzerland, I can see how distributed power works. Decentralization works. Being used to the opposite of decentralization. The idea of taking some decision making power from Brussels to London, I think it should go from London to the regions, that should be the next step. That was basically all. That was it. I thought it was a reasonably-- I didn't realize it was such a controversial view. I happened to be at a conference, a medical conference with lots of people who you will know, and in Lake Como, and on the day of the vote, and I think the odds going to bed that evening, where the bookies odds were like at 13%, 1-3 in favor of Brexit. People were talking about it, but it's just an assumption there, of course we're going to vote to remain. Then obviously, that's not what happened. The next morning, the whole place was just in shellshock. I hadn't really realized just how remain-- because this was very establishment, there were some very establishment politicians, policymakers, and large hedge fund managers and asset managers and I just haven't fully realized that the strength appealing in favor of remain and literally, in about 100 people I was the only Brexit here, or the only one stupid enough to say so. My God, I just got an absolute, God, it was actually vitriolic at times. I was like shocked there. I was an idiot. I was total idiot. What the hell, it was all my fault. I was the one who came at all, I really feel like a dummy here. I really got this one watching the camera on the show. RAOUL PAL: Yeah, exactly. Dylan, look, fantastic to get you back. It's been a long time and far too long. I think people are going to love this. Lots of stuff to chew over. Now, where do they find you to-- because you launched a the research service, how do I find it? Find you, website, anything? DYLAN GRICE: Well, probably the easiest way to get me is on Twitter, which I sporadically, but I spend some days engaging and then the other things, but I met some great people actually on Twitter when we really started using-- RAOUL PAL: That's just amazing. That is, if you ask me the question of how do I stay relevant and engaged? It's Twitter. It changed my life. DYLAN GRICE: It's great. There's some just some really, really smart people and I think really some complete dummies as well but that isn't going to make it [indiscernible]. There's some incredibly smart people. Connecting and reconnecting with some great people on Twitter. I'm on Twitter @dylangrice, and also the company website called calderwoodcapital.com and then the people who are distributing my research is Eric so if people who know Eric or who have a relationship with Eric, then they can get me on that as well. RAOUL PAL: Perfect. Dylan, good to speak to you man. Best of luck. DYLAN GRICE: Thanks a lot. RAOUL PAL: Take care and I'll see you soon.