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welcome to episode 278 can Griffin 14 lessons this is an outline of episode 270 a lesson 1 2007 this is an outline of episode 278 lesson 8 lesson 14 lesson number 1 a prodigy at grade 6 helpful to share a bit about myself let's take a journey back through time yes this is me on the beach as a young boy with the business section of paper and here's a report that I wrote in sixth grade where I set out to understand how the stock market works that's the number 2 audacity to ask questions this is my favorite as you pointed out I started trading my dorm room I started to sit it out right out of college for all intensive purposes I never worked on Wall Street and yet I had some of the best Wall Street training anywhere in the world hat it was my sales coverage of Bear Stearns my friend at Drexel who gave me advice my friend at Merrill Lynch she would let me come into the office and go through the research reports and their analysis my friend at Lehman Brothers who let me see on the stock loan desk and understand how the securities lending market worked you would be amazed by just asking how much people who you respect will share their time and insights with you just pick up the phone send a letter make a trip listen number 3 high tech from day one he was 18 and since my teenage years I've had a love for computers next to the definition of geek you could find my picture now I was armed with all the modern technology today I had a fax I had a phone I had a IBM ps/2 personal computer and it is true I put a satellite dish on top of the building ran the cable through an old unused elevator shaft pulled it through a window and into my dorm room so I could have real-time stock quotes lesson number four he met a great mentor and a great investor his name is Frank Meyer and over the 30 years I've known Frank he has been a great partner a great mentor and most importantly a great friend but Frank offered more than capital and more than moral support he gave me great advice he said don't focus I'm just a single investment strategy focus I'm building a firm a platform that attracts the best and brightest people and that deploys capital across an array of investment strategies what is it that you think and ceders or people that are early stage investors should look out for when looking at the new upcoming manager I think you have to look at the manager and see you know what are his strengths what are his weaknesses and to the extent that he has weaknesses and all of them do how is he going to compensate for the weakness I mean basically when you're a money manager and you're leaving working for someone else and going on your own you have to manage the portfolio but you also have to manage your business so I think it's important that you see a manager that has that shows breath that he respects the parts of the business that he doesn't know that well as well as the parts of the business that he does know that's a number five war on talents including only the best it's a huge trial challenge and I actually I copy one of the business practices from Google so the co SEOs of Google sign off on every single hire at Google which is we have somebody spent four hours with the candidate and talked about their career history we're going to hire this person I still retain an Opel ultimate Vito right and I use it if I don't think the person has the qualities that we're looking for to be the foundation of our future I just say no it drives my colleagues nuts but nothing is more important than maintaining that standard of excellence who we choose to hire and you know people tell me how much time we spend interviewing I've interviewed over 10,000 people my career it's just what's required to succeed listen number six deep specialization so what I find works well over time is having a deep expertise in the area in which you're participating I always think about investors that run a big us book and they go buy a stock in Brazil as being like drive by or tourist investors that investment in Brazil is almost certainly not going to work they don't understand the come company the country the pricing dynamics what's relevant so for us the core belief that we have is that deep expertise is rewarded so we organize our affairs where people specialize they're a health care expert there are an expert in industrial stocks they're specialists in pricing natural gas across Europe it's that deep specialization that we think drives differentiated in superior returns and that's the number seven execution ten grievance firm Citadel is the largest market maker and high-speed trading firm in the world that's a number eight be decisive hustle I'm Sunday morning the summer of 2007 so it had a very large and complex book of credit related instruments they had lost hundreds of millions of dollars in the blink of an eye now so it brought in another large bank to provide a competing solution bursting on the deal from the other bank calling me and he said look it's getting late this isn't gonna get done tonight I'm heading off to bed I'm telling my guys to go home and we'll pick this up in the morning and I said there will be nothing to pick up in the morning we're gonna get this done he sort of laughed and hung up 6 a.m.
before the opening of the markets we bought that entire portfolio which brings me to a quote that describes the ethos of Citadel things may come to those who wait but only those things left by those who hustle that's number nine teamwork Citadel has been built on one simple equation a belief that was super talented individuals working together as a team can create extraordinary results that's a number 10 extremely high leverage party because Citadel worked as a market maker high speed trader and sometimes investment bankers see that their borrows a lot of money five to six times its asset that's number eleven be very liquid citadel almost ran out of cash in 2008 to thousands were incredibly good years for us and that became our killers hill so when Lehman Brothers failed in September of o8 the money markets stopped lending to the financial community I did not foresee a day where the government had to intervene to bail out basically everybody lesson number 12 competitive advantage is that we're extraordinarily focused on how do you build competitive advantage in everything you do how do you think about every everything we do how do you do it better than the competition because if you're not there in the competition you have no reason to exist and in particular I think we live in this this very unusual winner-takes-all world more and more where your market leaders really do dominate listen 13 be a market leader or die and in particular I think we live in this this very unusual winner-takes-all world more and more where your market leaders really do dominate you know I say to my colleagues who's the fifth largest manufacturer of personal computers now almost no one knows and frankly no one cares listen 14 is harder to generate alpha today the industry is consolidating well I've been in the space for almost 30 years now and over the 30 years has just been an explosion in the size the industry the number of funds that three trillion dollars of capital not employed and hedge funds it is an unbelievable growth story and like many growth stories we're going through a period of retrenchment as the dynamics of the playing field are changing it's harder to create alpha today there's more competition there's a lot of very sharp people trying to find opportunity place thank you for watching please subscribe and leave your questions and comments below wishing everyone peace and prosperity
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