This is a very special episode of Free Money. Our guest, Jason Voss, is a close collaborator of both of ours and the Founder/CEO of Deception and Truth Analysis, or DATA. And honestly, if you like this show at all, you're gonna love this one. We talk about identifiable blind spots in active management processes, the difference between deceit and lying, and all sorts of other good stuff.

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[sloane]: And welcome to the free moneyy podcast. Um, it's where we start the podcast. Kind of

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[sloane]: by surprise a little bit earlier than actually. thought.

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[ash_b]: Yes, yes,

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[sloane]: Uh,

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[ash_b]: we screwed it all up, but we're got we do it. live here,

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[sloane]: we do it life, we do it. life. And yeah, as I was just telling Ashby I'm just back

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[sloane]: from my family reunion in Salt Lake City, where I definitely picked up Uh, something

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[sloane]: along the lines of a cold or coved. Um, so

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[ash_b]: fingers cross, We didn't break through Cause

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[sloane]: yep,

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[ash_b]: you, you provx. so I know that. Yeah, Me too.

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[sloane]: I'm provx, Yeah, Yeah, exactly, get the facts about the facts.

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[sloane]: Um,

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[ash_b]: I'm sorry to hear you feeling down, but I have to say look great. You let

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[sloane]: thank you.

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[ash_b]: your butter like bubbly. you know.

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[sloane]: Well, I, I mean, it's There's nothing like hanging out like I have the most adorable

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[sloane]: Mormon family in the history of the world. I mean,

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[ash_b]: Hm.

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[sloane]: like my. my grandparents are like Um, actual icons. Um.

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[ash_b]: Oh,

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[sloane]: the Re. the reason we were out there was for a Gaa event to commemorate my Uh,

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[sloane]: grandfather's ninetieth birthday, and to raise a Um. an endowment to fund arts

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[sloane]: programs.

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[ash_b]: my gosh.

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[sloane]: Um, it' ro, and like it unbelievably cool they've been. They set up this thing

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[sloane]: called the Latter Day Saint Arts center,

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[ash_b]: Hm.

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[sloane]: Um. That is like really helping people remagine what it means to be Mormon. Um. they

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[sloane]: wanted to create space for people like me who are not you know, religiously Mormon.

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[sloane]: Uh, to be

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[ash_b]: yeah.

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[sloane]: like affiliated with it in the same way. So many people are culturally Jewish, Uh,

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[ash_b]: Yeah, I was going to say I know a lot of Jewish people that are atheists but are

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[ash_b]: still Jewish.

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[sloane]: exactly exactly. Yeah, And and like you know, you can't really opt out of the

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[sloane]: Mormonism it's pretty inbred at this point. Uh,

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[sloane]: um,

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[sloane]: but yeah,

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[ash_b]: So you were in Salt Lake.

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[sloane]: you know, uh over. I was over in Salttics, I got my uh, s. ▁l u T shirt, um,

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[ash_b]: Oh,

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[sloane]: slut, uh,

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[ash_b]: you didn't. I don't think you needed to spell out of the. Yeah, no, I think

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[sloane]: yeah, the guy, uh, I, I want to. really. I want to make sure the joke translates for

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[sloane]: the folks in the cheaep seats at home. Uh,

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[ash_b]: that true people who were. I'm not willing to sound out the letters you've just said

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[ash_b]: to be.

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[sloane]: s ▁l u. T. Now what could be

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[sloane]: aligned with Slun's politics? that?

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[ash_b]: I'll come back to that.

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[ash_b]: Well, fantastic I.

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[sloane]: um, but yeah, it's like. I mean. it's like a big hug. I have like the most

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[sloane]: photogenic and lovely family in the world and there, like some of my cousins have

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[sloane]: new babies. That I got

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[ash_b]: Oh,

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[sloane]: to play with and who probably got me sick? Um

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[ash_b]: that's who got you sick. Yup babies are filthy. I've got two of them.

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[sloane]: y. yup. Yep. What's up in what's up in Ashyland?

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[ash_b]: You know that gets you sick all the time. I have uh, an

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[sloane]: You got news? You got an insight?

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[ash_b]: insight I got. Well, I got news. That's next. but, but off the top I got some

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[ash_b]: insights for you. Here's

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[sloane]: I'm clutching my pearls.

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[ash_b]: what I've learned. Here's where I've learned everybody. Everybodycause, it is

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[ash_b]: actually important in detail

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[ash_b]: On sites.

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[ash_b]: Are the new off sits?

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[sloane]: Hm.

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[ash_b]: I'll say it again on side to the new off sites. I keep getting invited to big fancy

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[ash_b]: meetings at the office

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[sloane]: hm,

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[ash_b]: and it's almost like

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[ash_b]: instead of doing an offsight with your team where you go in brainstorm, you finally

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[ash_b]: go to the fricken office for the first time in ages, and you sit down for a big

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[ash_b]: meeting. I've done too in the past

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[sloane]: hm,

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[ash_b]: two weeks, and it actually feels like the appropriate way to use the office

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[sloane]: yeah, y.

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[ash_b]: like you don't need to be in the office every day. People. I don't want to sit in the

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[ash_b]: commune.

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[ash_b]: But like you know, going into the conference room sitting with your folks once a

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[ash_b]: month once every two months for a big strategy Seash. that

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[sloane]: yeah.

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[ash_b]: feels right. And so I'm calling it, I think people like the new post coveed way of

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[ash_b]: doing off sites will be on sites. You'll finally go to the office.

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[sloane]: I. I love that idea. So you'd have like firms setting up like their own little tree

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[sloane]: houses where they can get people together and like you know, kind of have

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[ash_b]: Totally

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[sloane]: like. it'd be more about a hang than than being like, then creating a place for

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[sloane]: people to like. Do you know like the kind of work where you? should you like stick

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[sloane]: your head to a spreadsheet and figure stuff out?

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[ash_b]: exactly. First off. Have I told you that my fantasy with tree houses like I am,

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[sloane]: No,

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[ash_b]: like this, Isra that you would just call that out? Um, I really want a tree house? I

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[ash_b]: love the idea about being up the trees. Uh, that's but, anyways, that's for another

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[ash_b]: podcast. I think. Uh, probably not the free money and but then, yeah, I think it

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[ash_b]: changes the type of um. office space You even need

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[sloane]: yeah,

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[ash_b]: you know? Like why do you? Maybe it makes the case for we work. I don't know what the

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[ash_b]: hell it does, but

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[sloane]: Mm.

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[ash_b]: it definitely is going to change the way you use office space. and um, you know, much

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[ash_b]: more like sharing space, much more like party space.

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[sloane]: yep.

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[ash_b]: Things like that rather than offices with doors,

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[ash_b]: you know,

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[sloane]: yeah. well, I. what I love about that is it recognizes the nature of work as a

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[sloane]: social organism.

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[ash_b]: Mm.

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[sloane]: You know, Um, like, I mean the now, like so many people are starting jobs that

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[sloane]: they'll never meet their coworkers Il, unless those are int. Unless like,

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[ash_b]: so true.

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[sloane]: it's intentionally and and that's great for diversity in a lot of cases. Right like

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[sloane]: that means that you know the the kinds of conversations that like long tenndered

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[sloane]: employees have about strategy wind up being on slack and not in person, and

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[sloane]: therefore they're accessible to people and you know whatever, but um, you know I do

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[sloane]: love this. Uh, this idea of like let's all get together and and like talk for a day.

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[ash_b]: Oh, my gosh, Me too. I. it was a blast to actually sit there in a in an office with

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[ash_b]: some people, and like you know, shoot the shit, Um,

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[sloane]: W. Were you like Hey, so, uh,

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[sloane]: you guys like you guys got. think the world's going crazy.

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[ash_b]: tons of that like, Hey, how, what's crazy for you? I think this is crazy. It's like

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[ash_b]: you forget about the little chit chat you have with coworkers. because the ▁zoom. the

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[ash_b]: stakes are too high. You know,

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[sloane]: Yeah,

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[ash_b]: it's like we're on the ▁zoo. Now this is serious.

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[ash_b]: Whereas when you're just like pass people in the hallway, you're like. let me tell

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[sloane]: oh yeah, it's a Ods.

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[ash_b]: you about this crazy shit that's going on. you know you don't. you don't get that in

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[ash_b]: the virtual world.

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[sloane]: Yeah, I always that guy's time all day,

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[ash_b]: Yeah, anyway, let me get to my news. Now

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[sloane]: M. Mhm,

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[ash_b]: that was my insight. you're welcome, and uh,

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[ash_b]: sorry. the news is quite good. My first bit of news has to do with playing. Follow

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[ash_b]: the Leader in the investment world, Um, I saw the Free Money podcast. Reteed This bit

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[ash_b]: of news to today, so I'm

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[sloane]: you know, if you,

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[ash_b]: guessing you might be familiar with it

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[sloane]: it. Yeah, if you go ahead and follow out free money for twenty sixty nine on

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[sloane]: Twitter, you can actually get ahead of the news cycle. Um, that's one of the things.

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[ash_b]: wholly. Should I forgot. We were free money for twenty sixty nine. That is fantastic.

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[ash_b]: How do we get the lift to pay for that or that was that available?

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[sloane]: Um, yeah, yeah, it's a you know like Dick, and you know, and uh, what's what's this

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[sloane]: face? Jack, the see of Twt and I go way back. I mean, so you know,

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[ash_b]: sweet swee,

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[ash_b]: um, free money for twenty sixty nine. Ah, okay, so follow the leader.

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[ash_b]: these organizations that we study in the world, O pensions and Sovereign Funs, et

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[ash_b]: cetera they struggle to innovate. They would look to each other, and they just follow

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[ash_b]: each other around.

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[ash_b]: Um. And in some ways I find that incredibly frustrating. In other ways, it is

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[ash_b]: actually pretty interesting to see when one organization finally gets off their ass

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[ash_b]: and does something great. All of a sudden, all the others start to follow. And so

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[ash_b]: when the University of California divested from fossil fuel, people are like Huh. And

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[ash_b]: then when Harvard did it, people were like, Oh,

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[ash_b]: and now this week we've got B, U and Mccarthur that have announced they're going to

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[ash_b]: divest from fossil fuel. And I think you know that dyke in the Netherlands is leaking

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[ash_b]: now and we are about to see a flood of these organizations. Decide that they're going

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[ash_b]: to divest out of fossil fuels And those are the moments when you're like shit. Maybe

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[ash_b]: I don't want to teach these organizations to be different.

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[ash_b]: You know where, like,

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[sloane]: Yeah,

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[ash_b]: we could take advantage of their dysfunction, Um, in the herding and the follow the

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[ash_b]: leader mentality, Because pretty exciting to see these these organizations taking

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[ash_b]: that step.

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[sloane]: well, and like tactically now, it's a pretty good time to do it. If you're going to

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[sloane]: do it. I mean, like the cause. You know you've got this nice bump in, you know those

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[sloane]: commodity prices. you know. I guess the Um. you know, the the lexicon is to call it

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[sloane]: a dead cat bounce, which you know is not the most

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[ash_b]: Yes,

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[sloane]: vegan thing. but like you know, if you do believe over a long of time scale that

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[sloane]: those things are going away and you see prices behaving Um. And you have perhaps a

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[sloane]: multi year process of unwinding some of your positions in privates, and whatever,

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[ash_b]: Yeah,

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[sloane]: Um, you know, I mean like no time like the present to get off the horse, you know,

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[sloane]: or get on the horse, or

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[ash_b]: exactly. let's get. Maybe we can do one more analogy. A ho, a cat.

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[sloane]: I'm working on. I mean, I'm a little. I'm a little under the weather, so I, I don't

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[ash_b]: I'll give you to the end of the shell, Giveiv the other of the show to get what more

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[sloane]: know. my

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[ash_b]: edible refers in here.

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[ash_b]: speaking of carbon, not animals, speaking of carbon, Norways, Baheuth,

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[ash_b]: the Um. Government pension fund Global, It doesn't manage a pension fund, Just in

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[ash_b]: case you're wondering, it used to be called the petroleum fund, but it has one point

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[ash_b]: six trillion dollars of capital in it and it is going on The path hasn't come out and

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[ash_b]: said it itself yet. I don't think, um to net neutrality, but even more interesting,

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[ash_b]: it owns about one percent of every company on Earth

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[sloane]: yup.

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[ash_b]: and it is going to start pushing companies to define their path to net neutral. And

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[ash_b]: so you think about this, one of the world's biggest shareholders is. put, the put the

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[ash_b]: word out that they need plans from every

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[sloane]: Yep,

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[ash_b]: company they hold, which is every company.

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[ash_b]: Um, that every company they hold needs to show them a credible plan to net

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[ash_b]: neutrality. Very powerful.

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[sloane]: that's a huge deal. I mean these, these things are getting raised at a g. M. Now,

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[sloane]: Um, by adoacy groups like there's one called as you. So that has

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[ash_b]: Hm.

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[sloane]: done like you know, Probably three hunt. I feel like starting an active asset

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[sloane]: manager makes this a better podcastcause. Now I have a lot more scuttleb about

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[ash_b]: Yeah, you know a lot. you know a lot more.

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[sloane]: what's happened,

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[sloane]: Um, but like, but yeah, like there's so this, this group, as you say, has been

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[sloane]: trying to do that on their own forever. Um, and they're they routinely get like six

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[sloane]: percent of of the vote and shareholder

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[sloane]: resolutions. I think they had like three that passed or ate the past, you know.

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[ash_b]: Wow,

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[ash_b]: so six percent I should not be impressed by, Is that we are saying that's a bad thing

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[sloane]: S. Yeah, yeah, six, six percent of shareholders roote in favor of something is

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[sloane]: basically uh.

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[ash_b]: you lost.

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[sloane]: e. yeah, yeah, yeah, yeah, yeah.

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[ash_b]: This isn't like the Nater crowd being like, Dude, we got four per cent. That's not

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[ash_b]: badn.

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[sloane]: whoa, were go to put the Libertarian party on the map. Uh

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[ash_b]: He was

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[sloane]: you? Yeah, well, whatever,

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[ash_b]: mix bi. a news

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[sloane]: Mm.

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[ash_b]: coming to you from the great City of Saint Louis,

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[ash_b]: Washington

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[ash_b]: Universities Endowment did something that I didn't think was possible. It. Basically,

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[ash_b]: if I round the numbers correctly, Um doubled last year.

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[sloane]: yep,

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[ash_b]: you know, I'm going

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[sloane]: Yep,

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[ash_b]: to do some rounding. I'll admit

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[sloane]: it's a slight right. everything.

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[ash_b]: that, okay, you know, and I'm rounding one down that I know I'm supposed to round up,

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[ash_b]: and then I'm rounding the other one up that I know I'm supposed to round down, but

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[ash_b]: I'm defining my own rules on free money

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[sloane]: Mhm, Mhm,

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[ash_b]: and I basically think it went from eight to sixteen billion in one year, and I am

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[ash_b]: just kind of blown away that you can take that much money which was already a big

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[ash_b]: amount,

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[sloane]: Yep,

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[ash_b]: eight million, and turning into almost sixteen in a single year.

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[sloane]: yup. what. but

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[ash_b]: I think we should all be afraid. I think we should all be afraid by that.

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[sloane]: well, also I think we should be a little bit delighted. I mean, you know one of the

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[sloane]: things I know you love. permanent capital vehicles played a role role in that. Um,

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[ash_b]: Oo. go on

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[sloane]: you know, one of the Uh Washu is the biggest investor in Uh. Brentb Shore's

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[sloane]: permanent capital vehicle.

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[ash_b]: right.

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[sloane]: Um, the you know, which is like, I mean. I remember when he started making noise

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[sloane]: about it on Twitter. I was like this man is insane. Uh, you know, I think he started

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[sloane]: in twenty twelve or something like that. Um, you know and then our friends had. S.

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[sloane]: he's got got on board not too long ago. Um, but I don't know. I don't know how that

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[sloane]: coincides with the wash U thing, but like, Um, you got to do weird stuff.

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[ash_b]: Well, I probably contributed to the performance. must have contributed.

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[sloane]: Yeah, yeah, it's I mean, and it's not by. um.

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[sloane]: It's not by being like, Uh, you know, too super conformist If they did that's by

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[sloane]: taking some risk.

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[ash_b]: Oh, you got to differentiate.

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[sloane]: Yep, yup. you got to

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[sloane]: differentiate speak. Speaking of different

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[ash_b]: It' got a different.

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[ash_b]: Speaking of differentiation. What are we talking about?

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[sloane]: y, we got the. We have probably the most differentiated guy on Earth in the waiting

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[sloane]: room right now.

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[ash_b]: Oh perfect.

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[sloane]: Uh, the Voss of reason, Uh,

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[ash_b]: this is. This is going to be mind blowing to

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[sloane]: yeah,

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[ash_b]: many of our listeners.

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[sloane]: my f, my former colleague, your current colleague, Theoss of reason, Jason of Paul

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[sloane]: of us,

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[jason_apollo_voss]: For for of reason,

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[sloane]: I can't believe I've never done that before. I can't like. I like. I came up with

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[sloane]: that. Uh, in the well, I was you know, getting ready for this to start. Welcome to

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[sloane]: the Free Money podcast.

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[ash_b]: Hi, Jason.

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[jason_apollo_voss]: I, it' superciing to be here honestly, because I haveve watched a couple

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[jason_apollo_voss]: of episodes, then also to hear the level of excitement in Sloan's voices.

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[jason_apollo_voss]: she describes the broadcast like In what you guys are up to that, I'm

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[jason_apollo_voss]: guess the super coal.

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[sloane]: Oh,

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[ash_b]: Yeah, we get really excited about the things that we do.

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[ash_b]: So there's that part of it, but Jason is awesome to have you here. We're going to get

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[ash_b]: into all the wild stuff that you do

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[ash_b]: as chief executive officer of data, which we will define in a moment. We're

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[jason_apollo_voss]: Yeah,

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[ash_b]: not going to define it yet.

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[sloane]: the the literal president of Data here President,

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[ash_b]: Yes, like if you're a listener. Okay,

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[jason_apollo_voss]: noion,

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[ash_b]: C, e, o of data like that's not it and we are not ▁lying. When we say that and Jason

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[ash_b]: will be able to assess that In a moment. You'll see why, But Jason, before we get

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[ash_b]: into deception and truth analysis,

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[jason_apollo_voss]: Yes,

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[ash_b]: We, you were a fun manager. Yout you've been writing

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[ash_b]: like you've been around for a long time, and I didn't realze until part of this this

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[ash_b]: show not says we were preparing for you to come on that you' such a big defender of

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[ash_b]: active management,

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[jason_apollo_voss]: hu,

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[ash_b]: huge

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[sloane]: awkward,

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[ash_b]: defender, huge defender of active management, which is fun

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[jason_apollo_voss]: not but not broadly. I'm a defender under certain conditions.

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[ash_b]: right. so let's under, let dig in and cause we talk a lot about how you know the

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[ash_b]: world of private equity is one in which seventy eight percent of Gp's top corrt.

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[jason_apollo_voss]: Yeah,

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[ash_b]: You know everybody

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[ash_b]: is perpetrating like they're adding tons of value. but I want to hear from you. When

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[ash_b]: does active management work? And why are you such a staunch defender of it in those

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[ash_b]: circumstances

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[jason_apollo_voss]: well, I actually like how you thequi with the. What are the criteria?

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[jason_apollo_voss]: Because that's exactly the conditions that I put on it. Um, I'm gonna

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[jason_apollo_voss]: Ashby, Sloan. You both know me pretty well, but for the audience's sake,

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[jason_apollo_voss]: I like to think of things in terms of continuums, and especially

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[jason_apollo_voss]: opposites, So on one side we've got qualitative, then we've got

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[jason_apollo_voss]: quantitative trying to get in frame. here. Um, so let's serve qualitative

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[jason_apollo_voss]: right. All good arguments and logic theory. Say, you start with

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[jason_apollo_voss]: assumptions first, So the first, then the qualityative one will just get

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[jason_apollo_voss]: out of the way Is. I'm a believer in active management because I'm a

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[jason_apollo_voss]: believer in human beings and human potential and human consciousness to

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[jason_apollo_voss]: solve crazy problems. In fact, passive investing, index investing is a

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[jason_apollo_voss]: human invention, so that's the first thing. But then logically what are

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[jason_apollo_voss]: the criteria? Um, actually, No, I'm going to share a metaphor. So I was a

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[jason_apollo_voss]: speaker in an event called the fund Form in Boston. I don't know. Six,

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[jason_apollo_voss]: seven years ago, it was on the stage. I've written an article talking

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[jason_apollo_voss]: about the benchmark tail, wagging the portfolio management dog that

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[jason_apollo_voss]: morning. Start picked up, and the organizer of this conference unbeknowns

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[jason_apollo_voss]: to me, as well as my guest on stage, which was the Morning Star analyst,

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[jason_apollo_voss]: who actually liked my post, but had written a rebuttal for Morningn Star

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[jason_apollo_voss]: was on stage, and the organizer had set it up as a debate, and both the

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[jason_apollo_voss]: Mo star guy and I thought that that was pretty tacky To sort of throw us

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[jason_apollo_voss]: the wols, but we're both prepared. whatever. So anyway, in the ▁q and A,

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[jason_apollo_voss]: though I asked the following, I was asked the falling question. Um, are

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[jason_apollo_voss]: you believer and active And what? And I said Well, I'm a believer in

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[jason_apollo_voss]: active, because I think almost everybody is looking for their keys under

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[jason_apollo_voss]: the the uh night light or the street light. Not because that's where the

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[jason_apollo_voss]: keys have been lost, but but that's because everybody said that's where

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[jason_apollo_voss]: they should be found.

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[ash_b]: right.

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[jason_apollo_voss]: And so

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[sloane]: y,

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[jason_apollo_voss]: what does that mean And how doess that relate to the criteria? Well,

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[jason_apollo_voss]: First of all, I was an active and I had success. Uh, I beat the s. P.

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[jason_apollo_voss]: Five hundred, my benchmark by forty nine point one percent, and my career

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[jason_apollo_voss]: iss a perennial lipper number one for multiple periods, I still don't see

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[jason_apollo_voss]: from my Catbird seat, Uh, being a consultant firms doing what I used to

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[jason_apollo_voss]: do. So I know that it's possible I know those techniques work. Because,

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[jason_apollo_voss]: when I have worked with firms that are successful as a consultant,

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[jason_apollo_voss]: Because, until the first of September, I was C you of Active investor

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[jason_apollo_voss]: Management consulting Dot Com, the firms that I work with that are

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[jason_apollo_voss]: beating the benchmark, Consistently beating the benchmark are doing very

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[jason_apollo_voss]: similar things to what I was doing. So then that says Huh, Maybe we can

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[jason_apollo_voss]: trust these criteria. Okay, so what are some of the criteria? Um,

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[jason_apollo_voss]: concentrated works well, Uh, conviction works well, M. those things are

353

[jason_apollo_voss]: somewhat the same assets under their management. Less than two billion

354

[jason_apollo_voss]: works well, unconstrained works well, There's a perfect. No.

355

[jason_apollo_voss]: But is it predictive of future outper performance? Yes, that was part

356

[jason_apollo_voss]: comes from a study that we did for Active, and or I'm sorry, The return

357

[jason_apollo_voss]: of the active manager? A co authorhur, Burke, I did with Tom Howard, and

358

[jason_apollo_voss]: we actually did research for the book to support Um. our point of view

359

[jason_apollo_voss]: because we heard people say. Yeah, I believe in active, but I know how to

360

[jason_apollo_voss]: identify those managers. I'm just going to sell these Uh index products

361

[ash_b]: Hm

362

[jason_apollo_voss]: because of it, Um. So

363

[jason_apollo_voss]: the the short answer is, I'm I'm a believer because I know that people

364

[jason_apollo_voss]: still aren't doing what I did as late as two thousand five, sixteen years

365

[jason_apollo_voss]: ago, and I can. I'm happy to talk about this criteria. I talk about them

366

[jason_apollo_voss]: publicly frequently. Um, but one final point, Um,

367

[jason_apollo_voss]: Because it I, I have to explain my metaphor with the looking for your

368

[jason_apollo_voss]: keys under the light,

369

[jason_apollo_voss]: and I'm going to use. I forgive, I'm using another analogy And and it

370

[jason_apollo_voss]: comes from Return to the act of manager, Yeah, can,

371

[ash_b]: 's all good. We, before you get on we, we had like seven animal

372

[ash_b]: analogies, So if you could throw an animal in there

373

[sloane]: yeah, y, y.

374

[jason_apollo_voss]: Yeah, exactly

375

[jason_apollo_voss]: all

376

[ash_b]: that would be great.

377

[ash_b]: that would be great.

378

[sloane]: yeah, yeah,

379

[jason_apollo_voss]: I, I. I will. I will throw in a sprinter. How is that somebody who runs

380

[jason_apollo_voss]: as fast as or faster than Min Anals? So ussain bull, say, whossain ball,

381

[jason_apollo_voss]: unquestionably the greatest, You, one hundred and two meters, two hundred

382

[jason_apollo_voss]: meters sprinter of all time, Say you are some one trying to recruit a Uh,

383

[jason_apollo_voss]: great sprinter for your Olympic track, Teak, right, tough competition. We

384

[jason_apollo_voss]: can liken it. Investment management, very tough to do is every sprinter,

385

[jason_apollo_voss]: you sayain, Bo. no, No, they are not, and that isn't the standard. But

386

[jason_apollo_voss]: imagine the following, Ah, I want Luce Bolts retired so Iward to uh,

387

[jason_apollo_voss]: somebody who is exactly his same height. I wanted somebody the same

388

[jason_apollo_voss]: weight. I want somebody who has the same body mass index, his body fat

389

[jason_apollo_voss]: level. I want somebody who has the same Fastwich muscle responses in his

390

[jason_apollo_voss]: legs. I would have hired his track coach. Six, I want to hire. I may even

391

[jason_apollo_voss]: get Nike to make the same custom shoes. They made for Husseain and I, and

392

[jason_apollo_voss]: maybe I'll even get the same person from the same township to run the

393

[jason_apollo_voss]: race. Here's that is a metaphor for how active manager is done and the

394

[jason_apollo_voss]: constraints put on them. You have to be Hussaint Bull, and by a

395

[jason_apollo_voss]: definition we've said The index is you say. Well, here's the problem.

396

[jason_apollo_voss]: We've lost sight of something. It's not about being you sain bol, it's

397

[jason_apollo_voss]: about winning the god damn race.

398

[ash_b]: Am

399

[jason_apollo_voss]: and

400

[sloane]: three, yeah,

401

[jason_apollo_voss]: to me, that's why I'm a defender of active management is our active

402

[jason_apollo_voss]: manager is constructed unconsciously. A number of mechanisms designed to

403

[jason_apollo_voss]: describe performance after the fact that have become navigal compass

404

[jason_apollo_voss]: points before the fact, and most of the problems of why act of under

405

[jason_apollo_voss]: performs I would chalk up to,

406

[jason_apollo_voss]: We will do anything to get the additional dollar of assets under

407

[jason_apollo_voss]: management that our consultants and our acid owners request of us,

408

[jason_apollo_voss]: including throw on to the bonfire, our actual ability to deliver Alpha.

409

[sloane]: hm,

410

[ash_b]: the very fact that we call it Active management. By the way.

411

[ash_b]: it's

412

[ash_b]: it. It is a very conformous way of describing it because it's it's a function of like

413

[ash_b]: putting it up against the passive management, and so act in the old days we would

414

[ash_b]: just call it investing.

415

[sloane]: yup,

416

[ash_b]: And then we had the passive and now you're active. but oh, you're an active. so

417

[ash_b]: you're all together over there in active land. The the difference for us is that,

418

[ash_b]: like I think the three of us would say, the differentiation is where the value comes

419

[ash_b]: from. and, and so, calling them active, or calling them, whatever the point is, you

420

[ash_b]: need to be unconstrained and you need to be able to go and and pursue the truth in

421

[ash_b]: different ways. anyway. I love the way you're describing it.

422

[jason_apollo_voss]: Yeah, yeah, oh, I'll have one other thing other there. But and I I love

423

[jason_apollo_voss]: analogies. Both of you know that by now, Um,

424

[jason_apollo_voss]: creativity enough are essentially the same thing. right Alpha is

425

[jason_apollo_voss]: delivering results that nobody else is doing by doing things that nobody

426

[jason_apollo_voss]: else is doing. And by the way, creativity has the same definition. One of

427

[jason_apollo_voss]: the things that I used to do was I wanted as many options on the table as

428

[jason_apollo_voss]: possible to unleash my creativity. How creative is it when you are a

429

[jason_apollo_voss]: midcap core manager? and if you've done your job well and your assets

430

[jason_apollo_voss]: appreciate, you may have ▁zero turnover, but eventually you're going to

431

[jason_apollo_voss]: drift up into large cap value. you're going to have a consultant call you

432

[jason_apollo_voss]: up and say you know what you've got. Style drift. You know you guys need

433

[jason_apollo_voss]: to manage this or we're going to fire you. Oh, by the way, that's twenty

434

[ash_b]: Ssssssssssssss.

435

[jason_apollo_voss]: percent of your a U. M that it's going to go out the door, and so now

436

[jason_apollo_voss]: we're going to have to lay off the two hundred uh, customer service. C.

437

[jason_apollo_voss]: you know representatives that we've got in part of the compliance

438

[jason_apollo_voss]: department and the real world consequences to style drift. That has

439

[jason_apollo_voss]: nothing to do with seeking performance. So to me that's that's why I'm a

440

[jason_apollo_voss]: believer in active now. If I were starting affrm today, I would not want

441

[jason_apollo_voss]: to scale it, I would start with a different business model. I think all

442

[jason_apollo_voss]: of these things are rooted in the business model of the business is

443

[jason_apollo_voss]: management fee, a percentage of the assets under management. If you had

444

[sloane]: mm, Hm. Well, so

445

[jason_apollo_voss]: it performance based,

446

[jason_apollo_voss]: nobody would make the decisions to scale up their assets because every p.

447

[jason_apollo_voss]: M, who's ever managed money actively at the bar, they will all say well,

448

[jason_apollo_voss]: it's a pain of the butt. It's really hard to do it, and your three

449

[jason_apollo_voss]: hundred and third favorite security is not likely to deliver the same

450

[jason_apollo_voss]: outf as your top ten. and the data shows that

451

[jason_apollo_voss]: and the only reason I buy the three hundred and third position in my

452

[jason_apollo_voss]: portfolio, you know, be less less condescending my hundred and third

453

[jason_apollo_voss]: largest position. The only reason I do is I have to soak up assets in

454

[jason_apollo_voss]: cash that's been sent to me because the way I make money is a bigger pile

455

[jason_apollo_voss]: of cash as opposed to uh, actually delivering performance.

456

[sloane]: hm. I mean. Well, you know that's that gets right to the next question. I mean, like

457

[sloane]: you know, I, I think that you know investors in general if you go to them and you're

458

[sloane]: like Hey, you guys have and you've kind of done this like you've taken your like

459

[sloane]: ninety five theseis, and like you know, pin them to the front door, Uh, various, you

460

[sloane]: know, uh investment industry, um cathedrals, And you know, and sort of said he, you

461

[sloane]: know, Hey, like look, I mean this is. this is the metaphor show guys. Everyone loves

462

[sloane]: it,

463

[sloane]: but you know, I mean that's one of the big big blind spots right there is optimizing

464

[sloane]: for fee income. Um, you know, I wonder like, are there any other unifying

465

[sloane]: characteristics that you would kind of point you if you think about, you know things

466

[ash_b]: issssssssssssss.

467

[sloane]: that the investment profession is just not set up to deal with wealth?

468

[jason_apollo_voss]: Well, I mean, that's a huge one, right. So if that were changed and were

469

[jason_apollo_voss]: performance driven, you would see the immediate

470

[jason_apollo_voss]: loss of a u. M in the ▁quot active categories because people who have

471

[jason_apollo_voss]: been closet indexers or just barely fail Ors, For you know, ten years

472

[jason_apollo_voss]: would leave the business and what they would do is they would consolidate

473

[jason_apollo_voss]: with other managers. scale and slow. You and I wrote about this

474

[jason_apollo_voss]: investment idea generation guide, Or I'm sorry, we, We did work for a

475

[jason_apollo_voss]: future state of investment profession. My apologies for C F. A institute,

476

[jason_apollo_voss]: but we use scenario planning thinking to do this. What does the world

477

[jason_apollo_voss]: look like? Fast forward seven to ten years in theveestel business? And we

478

[jason_apollo_voss]: said there'd be massive consolidation. What would be left are Act

479

[jason_apollo_voss]: manager? You actually could do what they do. The consolidators will cut

480

[jason_apollo_voss]: their fees lower, lower, lower, lower, and essentially they're going to

481

[jason_apollo_voss]: look for ways to compete. The prediction of future, Sayve, the investment

482

[jason_apollo_voss]: profession that I argued, and it was really hard to get in. Uh, it was

483

[jason_apollo_voss]: kind of an over my dead body. If this doesn't get in, I said that we

484

[jason_apollo_voss]: would see

485

[jason_apollo_voss]: Uh, fund management offered as a lost leader,

486

[jason_apollo_voss]: and like twenty four months later Fidelity came out and offered ▁zero

487

[jason_apollo_voss]: fee.

488

[jason_apollo_voss]: In thats what Management and I said. What they will try to do is add on

489

[ash_b]: Yeah, I'

490

[jason_apollo_voss]: higher value ad services. And because of computing, because of a I,

491

[jason_apollo_voss]: because of big data scraping all that stuff, you can offer a high touch

492

[jason_apollo_voss]: private wealth client to a smaller a U M client than you were before. My

493

[jason_apollo_voss]: prediction is we're going to see lots of consolidation and the small and

494

[jason_apollo_voss]: medium sized clients are going to get better service than they ever have

495

[jason_apollo_voss]: been before. And they'm not talking about some of the the robos, Um.

496

[jason_apollo_voss]: That's a whole, another subject. But anyway, Um, and I and I think what

497

[jason_apollo_voss]: youre couldnna have left is an active category that has different

498

[jason_apollo_voss]: business models. They're going to say, you know what we can't compete

499

[jason_apollo_voss]: here. Interesting, Stat'll throw out because this is a. This is such a

500

[jason_apollo_voss]: fun topic and a passion. One. For me, Um, you would think that the

501

[jason_apollo_voss]: highest fee charging managers. Oh, I'm sorry, you would think the best

502

[jason_apollo_voss]: performing managers, the most consistently good performing managers would

503

[jason_apollo_voss]: have low fees. It's actually the opposite. They charge the highest fees

504

[jason_apollo_voss]: because they recognize the value of research. That was research that we

505

[jason_apollo_voss]: did for Return of the Active Manager that we published in the book, And

506

[jason_apollo_voss]: it's on. I think, s. s r N. if I'm not mistaken, and we thought that was

507

[jason_apollo_voss]: quite interesting. Somebody else did a follow piece of research and they

508

[jason_apollo_voss]: confirmed the same thing. The best performing managers have the highest

509

[jason_apollo_voss]: fees and that runs completely contrary to what people believe, but it

510

[jason_apollo_voss]: again shows charge for performance and that that's a more

511

[ash_b]: yeah.

512

[jason_apollo_voss]: correct business model.

513

[sloane]: It that also kind of underpins like you know what you know, a view of what investing

514

[sloane]: is right. Like you know, Th. Those guys are charging higher fees because they have

515

[sloane]: process thats outside of the the the traditional. You know way of doing things that

516

[sloane]: that creates results that are outside of the traditional way of doing things, and

517

[sloane]: that allows them to justify. You know this sort of thing, I think Steve Cohen

518

[sloane]: famously charge like four and forty for a while, or rent, maybe charges four and

519

[sloane]: forty or something like that.

520

[jason_apollo_voss]: Ford Forty, that's good. get my answerk. One last thing. I know, we got a

521

[jason_apollo_voss]: lot to cover, and

522

[sloane]: Absolutely not. No, yes, you what you want?

523

[jason_apollo_voss]: it asy is a as a, a full disclosure founding advisor of data wants me to

524

[jason_apollo_voss]: talk data. Oh, this

525

[ash_b]: ▁zero,

526

[jason_apollo_voss]: is ancient industry.

527

[jason_apollo_voss]: Well, well, so the the other thing I'll say, Uh about active is it's not

528

[jason_apollo_voss]: easy,

529

[jason_apollo_voss]: but

530

[ash_b]: right,

531

[jason_apollo_voss]: it's even harder. still if you agree to all these unnecessary own goals

532

[jason_apollo_voss]: and to going back to the Fun forum thing in Boston. I gave the the

533

[jason_apollo_voss]: analogy you know, with the looking for the keys, cent of the light and a

534

[jason_apollo_voss]: guy the guys follow. Question to me was the following. he said. Well, how

535

[jason_apollo_voss]: do you compete when? Uh, everybody in the universe now looks at, you

536

[jason_apollo_voss]: know, the large cap stocks in the United States already have bad value

537

[jason_apollo_voss]: and I said I hope that every single one of my computeretors thinks that's

538

[jason_apollo_voss]: the problem to solve.

539

[sloane]: Yup,

540

[jason_apollo_voss]: The problem to

541

[ash_b]: totally

542

[jason_apollo_voss]: solved is define return wherever it exists, and by the way, that is what

543

[jason_apollo_voss]: the fund management industry was, prior to Famma and French saying,

544

[jason_apollo_voss]: identifying two unique factors, the small cap effect and the value

545

[jason_apollo_voss]: effect, which then literally not for return to the act of Bandro, I traed

546

[jason_apollo_voss]: the history like two months after Farm and French in Chicago.

547

[jason_apollo_voss]: At their there, they had some event I, that which they still host

548

[jason_apollo_voss]: occasionally, Um, where they talk about. You know anomalies within the

549

[jason_apollo_voss]: official market hypothesis and they, anyway, they revealed these two to

550

[jason_apollo_voss]: greatate claim in Nineteen ninety Two two months later, Morning Star,

551

[jason_apollo_voss]: also in Chicago. I'm guessing they' in attendance I' tried to confirm. it

552

[jason_apollo_voss]: released the style boox with Guess what, and essentially this was meant

553

[jason_apollo_voss]: to describe the Starbucks was how performance is delivered by managers.

554

[jason_apollo_voss]: Because the progenitors of the official market hypothesis, Sonoa,

555

[jason_apollo_voss]: acknowledg, You can't add value. These are the two ways how, and we're

556

[jason_apollo_voss]: stuck now with the style Boox and it is illegitimate. So reasons, it's

557

[jason_apollo_voss]: such a passiono. Last thing I said, this is the third time I said last

558

[jason_apollo_voss]: thing, both axes, proof that it's illegitimate. Both actxes have price of

559

[jason_apollo_voss]: the securities that the measure of both axes. So what that means is both

560

[jason_apollo_voss]: of them are superp sensitive. Tell you what

561

[ash_b]: yeah.

562

[jason_apollo_voss]: independent measures of the same if different phenomena, wouldn't that

563

[jason_apollo_voss]: alone, tell you that it's illegitimate.

564

[jason_apollo_voss]: Just just logically

565

[ash_b]: yeah, and if cre, if creativity is alpha, you've now been stuck in a box like.

566

[ash_b]: Where's the creativity?

567

[jason_apollo_voss]: anyway,

568

[sloane]: Yp.

569

[jason_apollo_voss]: I don't. I'll I. I will smack my gob. I learned today, The God Smack

570

[jason_apollo_voss]: literally means to like, cover your mouth right, some Fx gopsma.

571

[sloane]: Well, no, hey', I mean,

572

[ash_b]: Thank you, Thank you,

573

[sloane]: I guess I have a related question before we get the data, which is, have you ever

574

[sloane]: had a lukewarm opinion? Jason.

575

[jason_apollo_voss]: I did it earlier today. I was I. I. I'm winding up my consulting career

576

[jason_apollo_voss]: and I was talking to a consultant and they asked me how how to discuss a

577

[jason_apollo_voss]: difficult subject. Guess what with their consulting community and I said,

578

[jason_apollo_voss]: I don't know. I said I said I'm fifty fifty Either way, so that's your

579

[jason_apollo_voss]: judgment, so yes, I do. I have Luke form opinions, but I'm privileged

580

[jason_apollo_voss]: because people, I guess either like what that I'm loud, or whatever they

581

[jason_apollo_voss]: it is they like about me that I'm invited into the forms where I get to

582

[jason_apollo_voss]: talk about the things I do have strong opinions about.

583

[sloane]: Yep. well, and like I mean, so this is. You know what we've been leading up to.

584

[sloane]: Let's talk about data. I mean, like I, you know, I am old enough to remember. I've

585

[sloane]: known you for long enough to uh, remember you like selling doing some lie detection

586

[sloane]: research internally. It. see if institute as like a thing that was worth your time.

587

[sloane]: But can you maybe characterize like what the heck people thought about it? What was

588

[sloane]: published when you got to it and what's changed in the last five years in terms of

589

[sloane]: like you know, professional practical understanding of this stuff?

590

[ash_b]: and defined data so that we can

591

[sloane]: Oh yeah,

592

[ash_b]: find late. Yeah,

593

[jason_apollo_voss]: Yeah, guess so data that Ashby Sloan are referring to Deception of truth

594

[jason_apollo_voss]: in us is d a t. a uh, my new company and I'm the full time c, e o of A as

595

[jason_apollo_voss]: of first of September, though I'm winding down previous commitments. Uh,

596

[jason_apollo_voss]: and it? It's a company where we use computers, specifically natural

597

[jason_apollo_voss]: language processing to quickly and rapidly assess the level of

598

[jason_apollo_voss]: deceptiveness or truthfulness within a document. We can ▁zero in within

599

[jason_apollo_voss]: like you, like four pages. Uh, within a document of where the deception

600

[jason_apollo_voss]: is in the language That trigger triggered our egos. Um. So anyway, going

601

[jason_apollo_voss]: back to c f a institute? Yeah, th. it was actually slung when I chose to

602

[jason_apollo_voss]: exit retirement. I don't know. To what degree this has really sort of

603

[jason_apollo_voss]: been widely discussed in a public forum before, and I don't even know

604

[jason_apollo_voss]: that you know it'slo But I chose to exit retirement. I was a happy you

605

[jason_apollo_voss]: know, uh, pickup football basketball, uh player, and published a

606

[jason_apollo_voss]: investment blog mostly to deflect uh, relatives and friends asking me

607

[jason_apollo_voss]: investment questions. Like if I put on a blog, I can just say read the

608

[jason_apollo_voss]: blog. Um, and to to preserve, you know, my pickup football games, and

609

[jason_apollo_voss]: what have you? Um? so anyway, um, during the financial crisis, though uh

610

[jason_apollo_voss]: dawn, my wife and I were watching television and there was a Perp walk

611

[jason_apollo_voss]: and they were walking out some finance executive. Uh, to to you know,

612

[jason_apollo_voss]: they were arrested and I said we're all the good people in finance. I

613

[jason_apollo_voss]: said I, You know, I've been in finance at that point twenty years, or how

614

[jason_apollo_voss]: many years it had been? They said there are good people in finance. In

615

[jason_apollo_voss]: fact, most of them are Renaissance human beings that are curious, broadly

616

[jason_apollo_voss]: interested in the world, trying to do things right, trying to change

617

[jason_apollo_voss]: things, Et cetera And she goes,

618

[jason_apollo_voss]: and I was like. Are are you talking to me And she's like

619

[jason_apollo_voss]: And I was like Point taken. Yeah, I. I. I guess I'm one of supposedly

620

[jason_apollo_voss]: good people in finance and I'm just yelling at this T. v doing nothing.

621

[jason_apollo_voss]: And so I was like, Okay, Well, where can I have influence? And where can

622

[jason_apollo_voss]: I have platform without necessarily being a fund manager again, which I

623

[jason_apollo_voss]: wasn't interested in. So I was looking around for jobs. I was thinking

624

[jason_apollo_voss]: about writing a book. I did write a book. Um, and I saw. I went to the c.

625

[jason_apollo_voss]: F. A Institute Jobs Board and see if Institute was advertising for the

626

[jason_apollo_voss]: role of content director, which you know, Uh, both of you, I think that

627

[jason_apollo_voss]: I, I held that role. That's where I'm att, Sloan, as content,

628

[jason_apollo_voss]: directctory, fancy, And what appealed to me about that role was something

629

[jason_apollo_voss]: to the effect of Um. Your job is to make members wiser or smarter. Uh, by

630

[jason_apollo_voss]: identifying compelling investment ideas or speakers that are new and

631

[jason_apollo_voss]: cutting edge and you know, feature them througho. you know distribution

632

[jason_apollo_voss]: of as well as if there, subjects you think should be being talked about,

633

[jason_apollo_voss]: but aren't you? You are charged with developing that and the original job

634

[jason_apollo_voss]: description and something like that. I was like. That is what I'm looking

635

[jason_apollo_voss]: to do and I've you know, Call Ashby, knows this about me better than you

636

[jason_apollo_voss]: do. Sloane, uh, I, I like the Jeddi K nights. I always kind of saw a C if

637

[jason_apollo_voss]: they introduceed

638

[ash_b]: Yep,

639

[jason_apollo_voss]: the Jatites, But

640

[sloane]: I mean, yeah. you know before you start working there,

641

[jason_apollo_voss]: yeah, exactly, and then I kind of thought they were the Catholic Church,

642

[jason_apollo_voss]: but that's the whole mother story. Um, you know, they're similar, right,

643

[jason_apollo_voss]: right, A correct genderating orders

644

[ash_b]: I think Ana and Sky Walkaler had the same reaction.

645

[jason_apollo_voss]: Toche th t th. But anyway I joint see iff to literally, day two, Uh of me

646

[jason_apollo_voss]: joining. I sent an email to Rob Gown, who was Uh you. At one point four,

647

[jason_apollo_voss]: both of our supervisors, uh, Sn to mine, and I said, uh, my detection, I

648

[jason_apollo_voss]: think is a uh skill. I said, We are super dependent upon the statemention

649

[jason_apollo_voss]: forth from the mouths of management of businesses, and we have no skill

650

[jason_apollo_voss]: set on how to do this. At the very least we should develop. We should

651

[jason_apollo_voss]: work with people on how do you interview people or something, And I was

652

[jason_apollo_voss]: interested in a whole suite of interview techniques, and literally, like

653

[jason_apollo_voss]: four weeks later I started working with Doctor Maria Hartwig, one of the

654

[jason_apollo_voss]: few deception scientists in the world. There, Not a lot. And we we sa

655

[jason_apollo_voss]: down. We outline like if we want to change the world through lie

656

[jason_apollo_voss]: detection, What do we have to do And over Luunnch at Landmark at Uh,

657

[jason_apollo_voss]: Columbus Circle and Central Park South, Uh, the restaurant. We, on a

658

[jason_apollo_voss]: napkin, outlined what we wanted to do, and so it's a subject I've always

659

[jason_apollo_voss]: been interested in from my days as a fund manager, and then in the last

660

[jason_apollo_voss]: couple of years I in, in my being a deception scientist and a published

661

[jason_apollo_voss]: deception scientist, I knew that there you could use computing to to

662

[jason_apollo_voss]: solve this problem. And uh, so, a couple of years ago I had a venture

663

[jason_apollo_voss]: capital consulting client. say hey, we're getting burned by our hires. We

664

[jason_apollo_voss]: keep hiring people who have fibbed on there in the recruiting process.

665

[jason_apollo_voss]: Can you help me? And so that's how data started? Whereas I developed

666

[jason_apollo_voss]: something based on reading the scientific literature and applying my own.

667

[jason_apollo_voss]: I don't know how to characterize Uss. Here's a lukewarm opinion. Um. I

668

[jason_apollo_voss]: would call myself Uh, mildly quantity, you know. And so I applied what I

669

[jason_apollo_voss]: know from how to solve quap

670

[sloane]: '.

671

[jason_apollo_voss]: problems in investing to what the academics are doing, and sort of

672

[jason_apollo_voss]: developed data, and it's evolved over time. but like I did it fairly

673

[jason_apollo_voss]: quickly, like in a couple of weekends I had an algorithm ready that

674

[jason_apollo_voss]: actually s helped them solve their problems. So that's the the long long

675

[jason_apollo_voss]: story there.

676

[ash_b]: What? just for the like, the benefit of everybody out there that is wondering what

677

[ash_b]: the heck these algorithms are tracking. What is the difference between deception and

678

[ash_b]: ▁lying? And what? Like what it is the algorithm doing That's better than others. And

679

[ash_b]: how much better is it? Just give us some more contexts. There.

680

[jason_apollo_voss]: Yeah, so so thank you for asking. Um, So W, Technically we're looking at

681

[jason_apollo_voss]: what it call psycho linguistic ▁ cues, which are essentially behaviors of

682

[jason_apollo_voss]: an individual revealed through their language use. So a, as an example,

683

[jason_apollo_voss]: Uh,

684

[jason_apollo_voss]: when asked to recall a memory, Uh, truth tellers reference in actual

685

[jason_apollo_voss]: memory, and usually it's a memory of them moving through time and space,

686

[jason_apollo_voss]: And so they use uh, motion verbs, and they use time oriented verbs like

687

[jason_apollo_voss]: before, After sense. You know those kinds of things later. Uh, liars

688

[jason_apollo_voss]: manufacture it and they're abstracting and they don't use those kinds of

689

[jason_apollo_voss]: details. So that that's a a difference you know between lawers and twof

690

[jason_apollo_voss]: and data we're looking at more than thirty of those psycho linguistic ▁

691

[jason_apollo_voss]: cues, all of which have

692

[ash_b]: Interesting.

693

[jason_apollo_voss]: been Uh, identified as statistically significant, Um. The difference

694

[jason_apollo_voss]: between liars and deceivers or lies and deception is something actually

695

[jason_apollo_voss]: that the academics uh, obsess over, and they've been a great lenks to

696

[jason_apollo_voss]: define what technically is a lie. The difference in deception, Lie is

697

[jason_apollo_voss]: sort of uh, intent and damage done. So,

698

[jason_apollo_voss]: for example, uh, if if your spouse or significant other says, do I look

699

[jason_apollo_voss]: good in this outfit for the evening,

700

[ash_b]: Yes,

701

[jason_apollo_voss]: and do you say yes? But you really mean no. the academics would say

702

[jason_apollo_voss]: That's really more about deception than a lie. And the reason why is it

703

[jason_apollo_voss]: benefits both parties

704

[jason_apollo_voss]: that that that whye actually benefits your your supposedly sensitive

705

[jason_apollo_voss]: spouse, Though they didn't get a vote. Uh, really, and it protects you as

706

[jason_apollo_voss]: well. Um, Whereass a lot of benefits only one party. So that's one of the

707

[jason_apollo_voss]: technical ways that they've tried to draw the line and say this is bad.

708

[jason_apollo_voss]: This is semi bad, but not entirely bad. you know. Um, so that's that's

709

[jason_apollo_voss]: That's the academic way of describing them. Oh, oh, you askedk me about

710

[jason_apollo_voss]: improvement. So, um, uh, data, Uh, there, there' a a piece of research

711

[jason_apollo_voss]: done in January this year that looked at expert's ability to surface

712

[jason_apollo_voss]: deception by reading texts of any kind, Right, and they and I, I don't

713

[jason_apollo_voss]: remember. the. S. what? What the variety was in the sample Like? Was it

714

[jason_apollo_voss]: scientific papers? essays? I, I don't remember, but they human beings

715

[jason_apollo_voss]: came in at exactly fifty percent accurate in surfacing deception, So here

716

[jason_apollo_voss]: Ive got a I've got an old fiftypence or fifty shilling point Here my

717

[jason_apollo_voss]: desk. I like it because they have seven sides anyway.

718

[ash_b]: Yeah,

719

[jason_apollo_voss]: fifty percent is flipping that coin rank. It's not very good. Uh data. We

720

[jason_apollo_voss]: are eighty seven a half percent accurate for word samples of eight

721

[jason_apollo_voss]: hundred and fifty, Um, and we're able to assess much much faster. We're

722

[jason_apollo_voss]: ninety, nine point nine, nine, seven percent faster than people. Based on

723

[jason_apollo_voss]: clock speed tests, we've done. Um. Humans can read about a hundred and

724

[jason_apollo_voss]: twenty five words a second. We can assess seventy thousand four hundred

725

[jason_apollo_voss]: words per second and with a much higher accuracy, so that that's why this

726

[ash_b]: some of the. I feel like there was a story in a news outlet recently about Uh ensurer

727

[jason_apollo_voss]: is incing.

728

[ash_b]: that was claiming to use facial, um, recognition software to spot fraudulent

729

[ash_b]: behavior.

730

[ash_b]: Is that a good technology? like?

731

[ash_b]: How should we think about all? Are you guys like that technology?

732

[jason_apollo_voss]: No,

733

[ash_b]: You guys? I mean, are we, are we?

734

[jason_apollo_voss]: No, yeah, yeah, exact talk. I, That's a tea ball question. That's almost

735

[jason_apollo_voss]: like Jason. You're a supportive active management kind of a question.

736

[ash_b]: Yeah,

737

[jason_apollo_voss]: So so no, the a.

738

[ash_b]: we. we have already established that bias. Here

739

[sloane]: Yeah, I mean this is the. This is the unofficial title of his spotcast is the

740

[sloane]: related party

741

[sloane]: transaction or the related party podcast?

742

[ash_b]: we are all,

743

[ash_b]: and we have a pirate at the top that talks about all the conflicts we have, So

744

[jason_apollo_voss]: Oh yeah, what? so what? we'? We're letying the bare right, which is

745

[jason_apollo_voss]: better than many. Do, uh, let let's just be Uh, full confession. Um, so

746

[jason_apollo_voss]: no, um, the academic literature. Sh, And it. it started Nineteen fifty

747

[jason_apollo_voss]: eight, which is looking at facial takegs, body language, vocal

748

[jason_apollo_voss]: intonation, All that kind of jazz and literally hundreds of these things

749

[jason_apollo_voss]: have been examined Starting nineteen fifty eight and the global average

750

[jason_apollo_voss]: has revealed the meta analysis, which is a study of studies is fif four

751

[jason_apollo_voss]: per cent, and in investments, Uh, which is the research I did with Maria,

752

[jason_apollo_voss]: Uh, which was a resulting a journal, behavior, Fiance article in finances

753

[jason_apollo_voss]: were even worse. We're just fifty one point eight percent accurate. Uh,

754

[jason_apollo_voss]: when we rely on these kinds of ▁ cues, and by the way, we're even worse

755

[jason_apollo_voss]: than that because we're only fifty one point eight percent accurate

756

[jason_apollo_voss]: because we have an over sixty percent truth byas, So because we guess

757

[jason_apollo_voss]: truth way more than we should, we' really right on the truths, but were

758

[jason_apollo_voss]: really wrong on when somebody iss deceiving, Um, So anyway, uh, no, the

759

[jason_apollo_voss]: facial recognition that this insurance company is using. Most likely the

760

[jason_apollo_voss]: software is picking up on the facial cues. The promise is too twofold.

761

[jason_apollo_voss]: Either those cues are not uniquely associated with deception or ▁ly,

762

[jason_apollo_voss]: which is the bigger of the problems, or too, they are so subtle is to

763

[jason_apollo_voss]: defy capturing the former. The the accused not being adgor of ▁lying is

764

[jason_apollo_voss]: the bigger one. That theory of using body language, their multiple

765

[jason_apollo_voss]: assumptions In the theory, one of them is that as the liars feel anxiety

766

[jason_apollo_voss]: when they lie, and if we look for or we create conditions under which you

767

[jason_apollo_voss]: feel greater anxiety, we create a gap between the truth teller and the

768

[jason_apollo_voss]: deceiver, such that the deception is more noticeable, so I think they're

769

[jason_apollo_voss]: probably. If they're picking up on anything accurately, they're picking

770

[jason_apollo_voss]: up on anxiety. but anxiety is not the same thing as deception. So for

771

[jason_apollo_voss]: example, in a job interview or on a podcast, if somebody's examining

772

[jason_apollo_voss]: right now, if I weren't as polished as I am, have done a lot of this. Is

773

[jason_apollo_voss]: it possible I would feel anxious? Yeah, is that necessarily

774

[ash_b]: Yeah,

775

[jason_apollo_voss]: the case? I be deceiving, No, Is

776

[sloane]: Yeah,

777

[jason_apollo_voss]: it true in a job interview that I might be anxious? Yes, and by the way,

778

[jason_apollo_voss]: some of these technologies they are being used are used in job

779

[jason_apollo_voss]: interviews? Some organizations are using ▁zoo exclusively to see if job

780

[jason_apollo_voss]: candids are deceiving them. I couldn't be more disheartened Honestly, And

781

[jason_apollo_voss]: then the last misuse of this

782

[jason_apollo_voss]: is. Uh. Police departments have wrongfully convicted people for a long

783

[jason_apollo_voss]: time because they've read these ▁ cues and they've been trained on these

784

[jason_apollo_voss]: cues and they think that they are seeing deception Uh in these settings

785

[jason_apollo_voss]: when what they're really reading is anxiety. And I'll tell you what if

786

[jason_apollo_voss]: you've ever been questioned by the police, Uh, when we lived in New York,

787

[jason_apollo_voss]: Sn. I know you live in New York. I don't know if the police have ever

788

[jason_apollo_voss]: knocked on your door to ask you questions about A.

789

[sloane]: they wouldn't dare,

790

[jason_apollo_voss]: I'm sorry.

791

[sloane]: they wouldn't dare.

792

[ash_b]: it's tell a dare sloide's, until they di.

793

[jason_apollo_voss]: What you explore that way have to explore. I'm not sure why they would'

794

[jason_apollo_voss]: dare, I don't have. I don't see as a prime imment to sort of a person.

795

[jason_apollo_voss]: but anyway, when theynocked on our door because there' been like a theft

796

[jason_apollo_voss]: in our building, our apartment building like I got nervous like I'm like.

797

[sloane]: Yep.

798

[jason_apollo_voss]: Well, why are they asking me? You know I hadn't didn anything

799

[ash_b]: Yeah,

800

[jason_apollo_voss]: to do soway I think with the police question, you have reason to being

801

[jason_apollo_voss]: anxious

802

[sloane]: well, and you know one of the things that I love about you know how data works is

803

[sloane]: distinct from Mo. Those other technologyno work is you know, the cultural you know.

804

[sloane]: Uh, underpinning of a habit is very difficult to kind of

805

[sloane]: program some aggregate level logic to encapsulate right. So like Navajo. Uh, folks,

806

[sloane]: for for instance, really don't like to make eye contact on speaking. Um, you know,

807

[sloane]: and like that, those there are, you know, all sorts of differences like that. I mean

808

[sloane]: it. It seems a little bit like a modern phonology, you know, Like the. That's the.

809

[sloane]: you know, the antiquated discredited science where people are using scull shap to

810

[sloane]: denote uh, criminality or whatever, to kind of use just like a video, And assume

811

[sloane]: that the robot can like magically tell. I mean, I. I. I don't know for a fact, but I

812

[sloane]: would imagine that a lot of white people seem to be telling the truth and a lot a

813

[sloane]: lot of black people seem not to be telling the truth on those videos.

814

[jason_apollo_voss]: slow. I'm going to steal Phnology. You have just uh, revealed to me a

815

[jason_apollo_voss]: very good way of explaining why body language doesn't work in one fellow

816

[jason_apollo_voss]: swoop that said, Upstairs in our bathroom I, my mom just gave Da and me

817

[jason_apollo_voss]: as a an anniversary or no, it was Donw's birthday. Uh, cat phronology

818

[jason_apollo_voss]: little statue, which we have sitting in our powder room, which is

819

[sloane]: Oh, I love that. That's amazing.

820

[jason_apollo_voss]: abdorable.

821

[jason_apollo_voss]: Anyway, not a believer, but, but, but, uh, I do have a phreology cat

822

[jason_apollo_voss]: statue My my powder room.

823

[sloane]: Yeah, like a, as a bit as a bit. Um, The. so I guess you know my last question and

824

[sloane]: there's a ▁zillion things we can talk about. But like you know, I, I can imagine

825

[sloane]: some ways that I could use uh data to you know, assess investment decisions right,

826

[sloane]: like I've had. I mean just this like I have a c, e, O, say something in writing, and

827

[sloane]: then it turned out that they don't. really. You know. I think the S think you know

828

[sloane]: in terms of their actions, The you know that the statements startly translated

829

[sloane]: action, And you know I could see it being useful for that. But how how do you

830

[sloane]: imagine Um data being used? Uh, you know by investment managers by the public at

831

[sloane]: large. Um, and like, who's your client?

832

[jason_apollo_voss]: Yeah, great question. When we sat down to think of use cases, Uh, we came

833

[jason_apollo_voss]: up with like over forty just within investing. I think the biggest one is

834

[jason_apollo_voss]: W. and this ties both parts of our conversation together. Right. We're

835

[jason_apollo_voss]: talking about a consolidation within the active investment management

836

[jason_apollo_voss]: business. Uh, and necessarily, those who want to remain active are going

837

[jason_apollo_voss]: to. Unless they change a business model, they're going to try and c their

838

[jason_apollo_voss]: expense ratio, but still deliver world class research result. So the

839

[jason_apollo_voss]: first in primary use case is a Um. focusing of your human based

840

[jason_apollo_voss]: intelligent resources onto the core problems. I think we would all agree

841

[jason_apollo_voss]: as a pres screen on our entire investment universe. We'd like to

842

[jason_apollo_voss]: eliminate all companies. They arere tempting to deceive, or

843

[sloane]: Two?

844

[jason_apollo_voss]: especially to lie to us. And so I think that's probably the primary use

845

[jason_apollo_voss]: case in a massive time saver, and it gives you confidence of in a new way

846

[jason_apollo_voss]: that your universe at least doesn't suffer from that Right now. It can

847

[jason_apollo_voss]: focus on other questions, like competitive advantage. Do you know? Are

848

[jason_apollo_voss]: they is the strategy? the business expanding the Moes is the management

849

[jason_apollo_voss]: team, the proper management team to execute the vision of the business.

850

[jason_apollo_voss]: Uh, are they properly uh, investing in things to deliver R o, i C, return

851

[jason_apollo_voss]: on investor capital. Um,

852

[jason_apollo_voss]: are are they uh, a good e, s, G candidate. Are they a good corporate

853

[jason_apollo_voss]: actor? You know. whatever your it is, you're worrying about another one

854

[jason_apollo_voss]: would be as a one time sort of uh, cleanliness test of your existing

855

[jason_apollo_voss]: universe. right? The average number of portfolio holdings I think is a

856

[jason_apollo_voss]: hundred and ten. Last I looked at that data, It's It's some big number

857

[jason_apollo_voss]: and so I'm guessing there's something lurking in that portfolio you don't

858

[jason_apollo_voss]: necessarily want in there. Um, and wouldn't you like to be able to uh,

859

[jason_apollo_voss]: ask better questions of those, c, e Os, or just outright cell, but it

860

[jason_apollo_voss]: could also be used as an investment, uh idea generator for a hedge fund

861

[jason_apollo_voss]: that does shorting, for example, if I'm a shorter, I want to know these

862

[jason_apollo_voss]: about the level of deception before the rest of the market does, and now

863

[jason_apollo_voss]: it can scour a much bigger universe and turn my Uh,

864

[jason_apollo_voss]: financial statement, an analyst expert, uh to to that problem based on a

865

[jason_apollo_voss]: universe of probably very highly likely already committing fraud, Uh. And

866

[jason_apollo_voss]: by the way, there's almost no competition for what we're doing, So you're

867

[jason_apollo_voss]: go to be looking at a universe that maybe nobody else is, anyway. I could

868

[jason_apollo_voss]: go on and on. Um, you know Ashby. I know you serve on a number of Uh

869

[jason_apollo_voss]: boards and advised pensions. How about just examining like the board

870

[jason_apollo_voss]: book, right? I?

871

[ash_b]: yeah, yeah,

872

[jason_apollo_voss]: I used to deliver the board book and those board books. Are you know,

873

[jason_apollo_voss]: like eight hundred pages? Sometimes, uh, and I guarantee you no board

874

[jason_apollo_voss]: member really reads every page. I bet they'd really like to ask

875

[jason_apollo_voss]: thoughtful intelligent questions, but they don't even know where to

876

[jason_apollo_voss]: begin. And so they're forced to sample that book. Usually it'd send a

877

[jason_apollo_voss]: week ahead of time. They're forced to sample the book. Wouldn't it be

878

[jason_apollo_voss]: nice to actually ask great questions on the key issue and the key areas?

879

[ash_b]: absolutely. What a great use case. Um. you know, because a a lot of times management

880

[ash_b]: of pension funds will inundate the board with so much information,

881

[ash_b]: because then they can say well, you had the data, you know, and by data, I mean, just

882

[ash_b]: like endless amounts of quantitative facts, and you know descriptive text around it.

883

[ash_b]: If we could use the data algorithms in order to pinpoint deceptive text in that eight

884

[ash_b]: hundred pages, Yeah, could really help boards spend time on things that are

885

[ash_b]: important.

886

[jason_apollo_voss]: Yeah, and like in a v C, and like, everybody goes to the private market

887

[jason_apollo_voss]: or ors, the public market space, which I did naturally because I used to

888

[jason_apollo_voss]: certain you know, compete in public markets, But think of the value in

889

[jason_apollo_voss]: public markets with bond inventures. every bond issue is unique, Um, and

890

[jason_apollo_voss]: a company may issue forty bonds like you, look at the cap table. In the

891

[jason_apollo_voss]: bond footnote of many publicly traded firms, there may be sixty pieces of

892

[jason_apollo_voss]: debt that they have issued for some of the bigger firms. Good luck

893

[jason_apollo_voss]: reading through those adventures to see what. what bad news they've

894

[jason_apollo_voss]: buried in the indenture. Who knows right so. but now, look at the private

895

[jason_apollo_voss]: markets, look at like v. C. look at private equity. as when you mentioned

896

[jason_apollo_voss]: P,

897

[ash_b]: Yeah, yeah,

898

[jason_apollo_voss]: E, there is no public market mechanism. There is sometimes no auditing

899

[jason_apollo_voss]: mechanism for looking at financial results. Um. And so what do you turn

900

[jason_apollo_voss]: to in those situations? and by the way right now, V C. there's so much

901

[jason_apollo_voss]: capital in these funds. Thank you very much. I'm grateful for that fact.

902

[jason_apollo_voss]: Um. but there's so much capital there. Do you really have time to

903

[jason_apollo_voss]: underwrite deals with the same level of scrutiny that you did ten years

904

[jason_apollo_voss]: ago? Probably

905

[ash_b]: no,

906

[jason_apollo_voss]: not.

907

[ash_b]: and they have to move so much faster. I mean, because we're the top of the market and

908

[ash_b]: the entrepreneurs get to dictate terms in many cases, And so the Vcs are making

909

[ash_b]: commitments in two days instead of two weeks.

910

[ash_b]: And

911

[ash_b]: yeah, by almost by definition I have to cut corners. And so you expect four years

912

[ash_b]: from now that you know the next decades Fairnoe will have emerged in this time period

913

[ash_b]: and we just don't know it,

914

[jason_apollo_voss]: Yeah, I think that's that's a fair point, so I think it's slowly. Answer

915

[jason_apollo_voss]: to question. I think there' a lots of use cases, but we havent talked

916

[jason_apollo_voss]: about like auditing. Uh, we haven't talked about insurance adjusting. we

917

[jason_apollo_voss]: haven't talked about content. moderational.

918

[ash_b]: ex, exfriends, ex boyfriendrry,

919

[jason_apollo_voss]: No, absolutely not. Yes's, a good good point. Yeah, W. one of the things

920

[jason_apollo_voss]: I'm really sensitive about is that phys. Yeah, no, No, it's all good.

921

[jason_apollo_voss]: Another te baall question. Um, it could really be misused right, Um,

922

[jason_apollo_voss]: because

923

[jason_apollo_voss]: we're trying to use sell u. S. target market, target market is a person

924

[jason_apollo_voss]: making a an important

925

[jason_apollo_voss]: decision at scale by, at scale. We're talking significant outcome

926

[jason_apollo_voss]: relative to a business right. so that could be hundreds of thousands of

927

[jason_apollo_voss]: dollars or millions of dollars. like my average straight side. Use trade

928

[jason_apollo_voss]: ticket used to be like ten mill right, and that's small. That's small.

929

[jason_apollo_voss]: Some firms issue like a hundred million dollar trade tickets. So you,

930

[jason_apollo_voss]: it's an assist in those situations where people are wearing their big

931

[jason_apollo_voss]: person pants or skirts or whatever, Um, And that's what we aim to help.

932

[jason_apollo_voss]: Um, we don't want this used in divorce cases, we don't want to used uh f

933

[jason_apollo_voss]: job interview settings. That's a no. No, because our whole effort is

934

[jason_apollo_voss]: grounded in compassion. We're trying to make the world more truthful, so

935

[jason_apollo_voss]: that we're not burned by the malfeason of something. and by the way the

936

[jason_apollo_voss]: research thecentic research serves, we all lie. And so because I know

937

[jason_apollo_voss]: that, based on the signi of me being a deception scientist, I have

938

[jason_apollo_voss]: compassion, right, we're all deceived, we're all

939

[ash_b]: Mhm,

940

[jason_apollo_voss]: liyars. We, we do it one point eight times per day on average, so

941

[jason_apollo_voss]: anyway,

942

[ash_b]: I'm not ▁lying. When I say it was awesome having you on the free money poadcast.

943

[sloane]: Yeah, absolutely fabulous, Jason, thank you so much for coming on.

944

[ash_b]: we're going to have you back be cause we love having you here, but you know

945

[sloane]: Yes,

946

[ash_b]: once you're live with data and your sell subscriptions will get you back on and will

947

[ash_b]: kind of understand the exact use cases so you can put

948

[sloane]: Yep,

949

[ash_b]: you out there,

950

[jason_apollo_voss]: well, I would love on the hold of a mi to both of you, Um, thank you both

951

[jason_apollo_voss]: for fighting a good fight. Like the Free Money podcast, You guys cover

952

[jason_apollo_voss]: interesting subjects that I don't see covered elsewhere. Like usually the

953

[jason_apollo_voss]: vessel, Podcas is what to invest in now or let's let's sit the fire. You

954

[jason_apollo_voss]: do a firesight chat with somebody who's made money, Um, and even actually

955

[jason_apollo_voss]: covered some of the nuts of bolts and some of the gritty bits of the

956

[jason_apollo_voss]: business Well done.

957

[sloane]: thank you.

958

[ash_b]: Thank you so much, Jason.

959

[jason_apollo_voss]: Of course,

960

[ash_b]: All right,

961

[sloane]: Yeah, and what you know, Yeah, Invest Vean would will be a a very happy early

962

[sloane]: subscriber whenever you get around. Do

963

[jason_apollo_voss]: all right

964

[sloane]: it, and whateverever we can afford it

965

[jason_apollo_voss]: co, thanks for happening, Guys say go goy and go

966

[sloane]: By

967

[jason_apollo_voss]: bye.

968

[sloane]: thank you,

969

[sloane]: I have a a great Jasonoss story. Uh that I will some raise this with which I like, I

970

[sloane]: think is the story of how he came to see if a institute told from our our boss. Uh,

971

[ash_b]: Yeah,

972

[sloane]: The So you know Contentt, director C. If institute right, See if Institute is an

973

[sloane]: incredibly conservative organization. Um, you know somebody, Uh, described it as

974

[sloane]: more establishment that Goldman Sachs and I was just like. Yeah, that's probably

975

[sloane]: right. Um,

976

[sloane]: and uh, So Jason shows up for his interview at C F. A institute in like, uh, I. I. I

977

[sloane]: forget exactly what Rob City was wearing, but it you know he hadn't shaved. He was.

978

[sloane]: It wasn't wearing A to a Uh, A Perm, Or if he was ring tie, he was wearing one of

979

[sloane]: his very unusual ties.

980

[ash_b]: right, right,

981

[sloane]: Um, and his business card is a twenty four sided, Um, like starbirs, That's circular

982

[sloane]: and it says like Jason, a Pavoss on the front of it. I still, I have one of these

983

[sloane]: like on my like mood board, Um, and on the back of just this balance, you know, and

984

[sloane]: of course everyone else who shows up uh to interview for this job is like you know

985

[sloane]: very much out of the ▁j P. Morgan mold. Uh,

986

[sloane]: you know, and thank God they went with Jason. I think the whole investment profess

987

[sloane]: I, I certainly am un, uh, you know, completely changed as a result of

988

[ash_b]: I know

989

[sloane]: getting to know that guy. Yeah,

990

[ash_b]: I have been, too. I have to say I I've been working really close to. I mean, you know

991

[ash_b]: this is the related party's poadcast. So you know, like we. I've been working with

992

[ash_b]: Jason for six, six or nine months now on on this project and Ive learned so much. The

993

[ash_b]: dude is just next level on a lot of different fronts. So and that just kind of

994

[ash_b]: trickled out in the podcast where like, he's got frameworks and analogies for for

995

[ash_b]: like hundreds of other things, so we got.

996

[sloane]: oh my God, Yeah, and the, I mean the the book we wrote together. the C. F. a

997

[sloane]: investment idea, a generation guy. There's a link on his side and on on invest. van.

998

[sloane]: Um, but it. I mean, it's like I. I. I've been re reading it because it's now a part

999

[sloane]: of my process and we,

1000

[ash_b]: Yeah,

1001

[sloane]: we went all over the place. I can't believe let us publish that thing.

1002

[ash_b]: Well because he said he was good. It was over his dead body, right.

1003

[sloane]: Whoa that that was. Uh, that was a slightly later one that was once

1004

[ash_b]: Oh,

1005

[sloane]: we had already. you know, like kind of broken a couple of heads. Um,

1006

[ash_b]: but he's building stuff, which is hard

1007

[sloane]: he's building stuff, which is hard.

1008

[ash_b]: and that brings us to our de segment

1009

[sloane]: Oop.

1010

[sloane]: Ah,

1011

[sloane]: yeah,

1012

[sloane]: building stuff is hard. Uh.

1013

[ash_b]: building stuff hard. This is the part of the show where we reflect on how hard it is

1014

[ash_b]: to build stuff. And well, you're about to go. Let me tell you that I was laughing to

1015

[ash_b]: myself that if Jason is successful, he will take the whole fake it till you make it

1016

[ash_b]: world of Silicon Valley

1017

[sloane]: oh. Oh, my god.

1018

[ash_b]: and make it harder. So Jason is making it harder to build stuff. Or

1019

[sloane]: Mm,

1020

[ash_b]: maybe maybe he's making it easier for those of us to think we're building real stuff

1021

[ash_b]: because

1022

[sloane]: I think so.

1023

[ash_b]: people will spot us and be like. That's not the fake stuff. That's the real stuff. So

1024

[ash_b]: um,

1025

[sloane]: yeah, I, I mean, I, I think so like. I. I think you know. there's like this culture

1026

[sloane]: of like fake metrics or vanity

1027

[ash_b]: that's right.

1028

[sloane]: metrics that you know. Data seems aimed right squarely at. You know where people

1029

[sloane]: like show up in like, kind of do statistical vomit, and then'd be like, Oh yeah,

1030

[sloane]: therefore I'm a good investment, Um.

1031

[ash_b]: That's a good name for either a new Startu or a band.

1032

[sloane]: statistical vomit,

1033

[ash_b]: Yes,

1034

[sloane]: uh,

1035

[ash_b]: Okay,

1036

[sloane]: uh,

1037

[ash_b]: subsidiary, free money. When we, when we really hit a big time.

1038

[sloane]: yeah, exactly when we finally get our Vc investment, and uh, you know it gets so

1039

[sloane]: back on the phone. Um, what's been heard this month? Um?

1040

[sloane]: well, I, uh, I actually had this amazing. uh. it took this amazing decision to not

1041

[sloane]: only uh, go off my anti depressant, which it turns out I'm allergic to,

1042

[ash_b]: Oh,

1043

[sloane]: um, but also deconstruct my office and rebuild it. Um. in the court.

1044

[ash_b]: were those two uh decisions interlinked

1045

[sloane]: I, you know, I don't think so. I, I wanted a bigger desk, Um, and this

1046

[ash_b]: Okay,

1047

[sloane]: one's a lot nicer. Uh,

1048

[sloane]: but um, but yeah, I would say like, hypothetically and I had no control over this

1049

[sloane]: because uh, unfortunately it hasn't really played into performance or anything like

1050

[sloane]: that. but um, the yeah. I mean, if it turns out you're allergic to your

1051

[sloane]: antiimpressant, try to not figure that out

1052

[sloane]: in

1053

[ash_b]: yeah,

1054

[sloane]: the first in the first month of launching your business.

1055

[ash_b]: yeah,

1056

[sloane]: that's that's that's my thing.

1057

[mediaboard_sounds]: Ssssssssssssss,

1058

[ash_b]: I'm sorry to hear that. How uh are have you been doing some investments with the

1059

[ash_b]: money I gave you? I haven't. I haveve' noted that

1060

[sloane]: Uh, yeah, yeah, totally totally invested it. Yeah, definitely invested

1061

[ash_b]: so invested.

1062

[sloane]: it. Yeah, no, uh, yeah, no, honestly, um, you know one of the things that I've been.

1063

[sloane]: You know, when you start thinking about the investiging hypothesis, what's tricky

1064

[sloane]: about it? I think to a lot of people as they think. Okay, so you're investing in

1065

[sloane]: protein, which

1066

[ash_b]: M.

1067

[sloane]: is not the deal. The deal is, we're investing in stuff that doesn't do cruelty to

1068

[sloane]: other stuff. Um,

1069

[ash_b]: Okay,

1070

[sloane]: you know, so the like it has to be, you know, not just on the net, but on the gross

1071

[sloane]: addited to society in my criteria, right, Um, and

1072

[ash_b]: Yeah,

1073

[sloane]: you know I, what I would say is like, I mean, our benchmark is the Russell Three

1074

[sloane]: thousand. We've done

1075

[sloane]: quite well compared to it. Um. you know, in the in the downturn, at various points

1076

[sloane]: we were, We'd opened up five percentage points of about performance on on the rustle

1077

[ash_b]: my goodness,

1078

[sloane]: over the first month of operations. Um, and you know, obviously final numbers will

1079

[sloane]: come in later. but Um, you know the the big, S. The big takeaway so far has been

1080

[sloane]: that you know. these things that don't do cruelty on a systematic level seem to have

1081

[sloane]: more durable businesses, right,

1082

[ash_b]: Yeah, resilient

1083

[sloane]: Um, you know resilient. Yeah, it's the whole resilience theme that we keep

1084

[ash_b]: Mhm,

1085

[sloane]: talking about. Um,

1086

[ash_b]: per.

1087

[sloane]: What's been hard for you lately?

1088

[ash_b]: Oh, I. I feel like Um, just being uh. I'm building something new, Um in in both at

1089

[ash_b]: Stamford. I, I'm building like a new research program,

1090

[sloane]: Hm?

1091

[ash_b]: Um, and then also doing some in some of the the land of start up, building an a

1092

[ash_b]: little research function And it's just also for me. It's it's hard, but it's a

1093

[ash_b]: reminder of how fun it is to like dig in and do the fundamental research. You know.

1094

[ash_b]: That's

1095

[sloane]: Yep.

1096

[ash_b]: what got me here and Um. And so

1097

[ash_b]: building stuff is hard, but it's kind of worth it. like I, I'm publishing I, I'll

1098

[ash_b]: maybe I'll use this segment to brag, But like I'm publishing a couple of papers this

1099

[ash_b]: month that like I'm justper proud of, And it's been it. They've been the private

1100

[mediaboard_sounds]: Ssssssssssss,

1101

[sloane]: Oh,

1102

[ash_b]: equity paper we put out yesterday was

1103

[ash_b]: coming. The portfolios resilience paper were putting out Um early next month in

1104

[ash_b]: October, So this month when you listen to it

1105

[ash_b]: it, it's uh, you know forty plus pages. It took M years to do. I have a paper with

1106

[ash_b]: Alicster Barker, Um. on how investors deal with technology disruption. We've been

1107

[ash_b]: working on it for two and a half years. It'll be coming out before, Um. twenty twenty

1108

[ash_b]: two. So these things are hard and I feel like it takes a long time to do them. But

1109

[ash_b]: when they come out you know it's like you're kind of giving birth to something so,

1110

[ash_b]: and then sometimes you put them out, and like nine, nine people see it and then they

1111

[ash_b]: never hear of it again. Um, but sometimes you know they have an effect, so yeah,

1112

[sloane]: I mean that's that's really awesome and like it it. and it is like, I, honestly,

1113

[sloane]: whenever my mood has been kind of unwavery, Like a little ▁jittery. or whatever.

1114

[sloane]: lately I've been. I've just gone back to my spreadsheet, and that's really brought

1115

[sloane]: me kind of back up. Uh, it's

1116

[ash_b]: yeah,

1117

[sloane]: always the. It's. It's the Adman crap. It's the. You know, it's the back and forth,

1118

[sloane]: but the the research is really just a joy. Uh, you know

1119

[ash_b]: it is fun and it's actually that's the link by the way between academia and finance.

1120

[ash_b]: Like

1121

[sloane]: so true.

1122

[ash_b]: people who are are really great investors. They spend their life doing research. It's

1123

[ash_b]: just they don't publish it. you know they. They make use of it in an investment

1124

[ash_b]: strategy. So

1125

[sloane]: Yeah, they just sit in there skyscrapers and cackle about it.

1126

[ash_b]: Halloween episode coming up.

1127

[sloane]: Whoop. sorry.

1128

[ash_b]: Oh no. that's great. it's badd.

1129

[sloane]: it's time. Um. it's s for dear Ashby. This is the segment where we beg you to review

1130

[sloane]: our podcast If you've listened this long, you know how good it is. Um,

1131

[sloane]: you know, But, And and it's also the segment Uh, more importantly, where we answer

1132

[sloane]: questions from you, and it's very easy to send us questions, Um, free money pot at

1133

[sloane]: Gil dot Com At Free money for twenty sixty nine on Twitter. All of these things, all

1134

[sloane]: of these ways you can just I. Also, you

1135

[ash_b]: There's many ways.

1136

[sloane]: can connect with us on. Yeah, yeah, I mean, if you want to connect to this Mm.

1137

[mediaboard_sounds]: Ssssssssssssss.

1138

[ash_b]: mail us a letter to a appal box, which you can find on the website. Maybe

1139

[sloane]: I. I, yeah. yeah. I mean if you could find an a, if you could find a mailing Gu

1140

[ash_b]: if there's a peel box on the W. The website Bail it.

1141

[sloane]: address up.

1142

[sloane]: Yeah, yeah, send us some chocolates. Um, you know, and if you're if you happen to be

1143

[sloane]: hanging out on the astroplane, just connect with us

1144

[ash_b]: Yeah,

1145

[sloane]: commune. you know, Um, the first ▁qu. but the me. Oh God, not the matter.

1146

[ash_b]: Metaverse come say his hard.

1147

[sloane]: So the first question for this speak is I think this is a really interesting. Uh

1148

[sloane]: behavioral

1149

[ash_b]: I do too.

1150

[sloane]: question, Um, retail investors,

1151

[ash_b]: I think my answer will surprise you.

1152

[sloane]: Oh, really,

1153

[ash_b]: Mm. Ask it.

1154

[sloane]: Mm, retail investors have readily bought the dip in crypto in a way that they

1155

[sloane]: struggle to do with stocks. Um, do you have any pet theories as to why this is

1156

[ash_b]: I actually think buying the dip is super easy. Like if especially

1157

[sloane]: Hm. That is a surprising answer.

1158

[ash_b]: Yeah, especially if you do no fundamental analysis.

1159

[ash_b]: So the world of crypto is like, almost by definition a speculative thing.

1160

[sloane]: Yeah, you can't do fundamental analysis. Really? Yeah,

1161

[ash_b]: Yeah, there's no cash flows. Like what? what are you studying you? You know, it's the

1162

[ash_b]: same thing that people do around currencies. Uh, you know, except at least

1163

[sloane]: yep.

1164

[ash_b]: when people are modeling currencies, they're the underlying economies and central

1165

[ash_b]: bank policies and things like that. here. this is literally like

1166

[ash_b]: price was high.

1167

[ash_b]: Now price is low.

1168

[ash_b]: Let's buy. And

1169

[sloane]: yup,

1170

[ash_b]: and so I find like, even in my own life when I've been in a speculative mood, Um,

1171

[ash_b]: when markets drop, I'll be like O. let's put money in there. you know like, but when

1172

[ash_b]: it becomes individual stocks, which I think is this, Um. user's question, You get a

1173

[ash_b]: lot. It gets a lot more complicated. You start to think to yourself. Oh, is there

1174

[ash_b]: something fundamental about this? You

1175

[sloane]: M. Mhm.

1176

[ash_b]: know, Is it did the like? I'm not doing research. It's like you know our guest who is

1177

[ash_b]: like. I don't do research in stocks. I can't remember her day.

1178

[sloane]: Oh, yeah, the iconic Liz. Yeah,

1179

[mediaboard_sounds]: Ssssssssssssss.

1180

[ash_b]: Liz. Liz was like research.

1181

[ash_b]: Um.

1182

[sloane]: Yeah, read the longest one. or, or I find the longest one and then I don't read it

1183

[sloane]: and I buy the stock.

1184

[ash_b]: Yeah, exactly. Lizz's proxy was length of research. not actually doing the research.

1185

[sloane]: Yup,

1186

[ash_b]: Um, So that's a little bit like this world right. And and so when I'm you know,

1187

[ash_b]: playing around in the markets and like doing index funds, I see a big drop. I'll put

1188

[ash_b]: all rebalance. I'll get in there, but if you own, you know, g, e or something in the

1189

[ash_b]: stock drops, you're definitely wondering. Oh, is there something going on here?

1190

[sloane]: Yeah, what I miss?

1191

[ash_b]: Like what did I miss? Because I know I missed everything 'cause I don't actually do

1192

[ash_b]: any work. you know. Whereas stuff like this, it's like there's nothing to miss, you

1193

[ash_b]: know,

1194

[sloane]: Yep,

1195

[ash_b]: And so I think that's what's going on and why people seem to buy the dip on these um

1196

[ash_b]: crypto assets Because it's impossible to do fundamentals and it's

1197

[sloane]: Hm,

1198

[ash_b]: highly likely that they're not missing anything that they didn't know before because

1199

[sloane]: Hm.

1200

[ash_b]: there was nothing there to begin with, But ummp,

1201

[sloane]: that's a really compelling theory.

1202

[ash_b]: hm, hm.

1203

[sloane]: Um, y, you know. I. I. my. I. I guess my. My take on it was that like, you know,

1204

[sloane]: Because it comes as this, like incredibly speculative asset. you know you.

1205

[ash_b]: that's very similar thought though that's

1206

[sloane]: Yeah, it is. that's true.

1207

[ash_b]: that's kind of where I'm going, you know.

1208

[sloane]: Yeah. yeah. yeah. I guess it's trick is like, if you, if you have it identified as

1209

[sloane]: like a speculation at the outset,

1210

[ash_b]: Yeah,

1211

[sloane]: Um, you know, Yeah, and then

1212

[ash_b]: like if you're if fine, If you buying bitcoin Mi, maybe you can start to make the

1213

[ash_b]: case as a store of value. But if you're like, how many or athorium or whatever,

1214

[sloane]: Mm.

1215

[ash_b]: like many of these other coins that are out there,

1216

[ash_b]: people are still trying to figure out what to do with them. you know like

1217

[sloane]: yeah,

1218

[ash_b]: it is by almost definition like, Um, a speculation.

1219

[sloane]: yup

1220

[ash_b]: You're I don't know. Yeah, I like I said Y, there is no fundamental analysis that I

1221

[ash_b]: know of yet. Like, have we seen the fundamental like tool kit? Is there an

1222

[ash_b]: intelligent crypto investor book coming out with cigar butts?

1223

[mediaboard_sounds]: Ssssssssssssss.

1224

[sloane]: you know. F. Funny you should ask, uh you. I. I mean, like there. There are some

1225

[ash_b]: Yeah,

1226

[sloane]: like pretty cool ways that you could because you know you can think about, for

1227

[sloane]: instance, like in def, right, like there are all of these like decentralized finance

1228

[ash_b]: yeah,

1229

[sloane]: protocols that purport to be about Uh, facilitating the transformation of one

1230

[sloane]: cryptoacident to another, Um, You, you usually taking a more mainstream crypto. And

1231

[ash_b]: Hm. okay,

1232

[sloane]: uh, transmuting it into something that could be invested aggressively instead of a

1233

[sloane]: yield pool or something like that. And and in that case, um, a lot of the

1234

[sloane]: fundamentals are explicitly observable because you can watch how many people use the

1235

[sloane]: protocol to transmit the, the, The, the vanilla crypto into the the Whatever, And

1236

[sloane]: then you can see like Okay, Protocol One is being used twenty five times more

1237

[sloane]: frequently than protocol, too, Um, And is that in line with pricing or not? Um, You

1238

[ash_b]: yeah, fascinating.

1239

[sloane]: know, but, but like you know, that's that's pretty. I mean that's like it is. I

1240

[ash_b]: but at' the beginning

1241

[sloane]: mean, but basically what you're doing there is you're valuuing the New York Stock

1242

[sloane]: Exchange based on volume. you know. Like, which is how you would do it. Uh, you

1243

[ash_b]: H.

1244

[sloane]: know, but admittedly incomplete. Um, but yeah, it's that

1245

[ash_b]: yeah, you're not. You're not actually connecting into the underlying economy. you're

1246

[ash_b]: You're still

1247

[sloane]: exactly

1248

[ash_b]: operating at the level of the abstract financial market,

1249

[sloane]: exactly You're still playing with abstractions, Um li. the next question, um,

1250

[ash_b]: Hm.

1251

[sloane]: M macquets, I feel like I need to like. Have a have like a

1252

[ash_b]: Oh, is our Boston part of the show?

1253

[sloane]: mackets, Yeah, uh, yeah,

1254

[ash_b]: No, you know what

1255

[sloane]: markets have been swornen recently, I can't. I. I, every time I try to do an accent

1256

[sloane]: on the show I get in trouble.

1257

[ash_b]: Museum of finance

1258

[ash_b]: I live. Remember, I lived in Boston for two, uh

1259

[ash_b]: two years, and these are things I heard on the street which are now part of my

1260

[sloane]: Oh yeah, yeah, yeah.

1261

[ash_b]: repertoire. A mom grabbing Um, her little child and saying No, Y, new lot.

1262

[sloane]: the Museum of finites, it's the

1263

[ash_b]: No, you're not. No, you're not in case I need to translate, and obviously Museum of

1264

[ash_b]: finance.

1265

[mediaboard_sounds]: Ssssssssssssss.

1266

[sloane]: best. the Museum of finance, definitely, um,

1267

[sloane]: um. So the markets have ensuthing because of the wories associated with high debt

1268

[sloane]: levels in the Chinese property development sector have come home to roose.

1269

[ash_b]: Mm,

1270

[sloane]: This year is as old as time. Do

1271

[ash_b]: Yes,

1272

[sloane]: you remember the first time that you heard somebody worry about Chinese property

1273

[sloane]: development? Deb.

1274

[ash_b]: it is his oldest time. I feel like at my entire professional career Is this question

1275

[ash_b]: went to the core of my being because when I saw the question I was like, Holy cow.

1276

[ash_b]: You're right. Everybody has been talking about this for

1277

[ash_b]: twenty years.

1278

[sloane]: Yep,

1279

[ash_b]: Uh, this is going to take down the globallye. This got definitely takeed down the

1280

[ash_b]: Chinese economy. These, the, especially the state own banks, Um, which are holding

1281

[ash_b]: the bag here. But then it's going to take on the global economy,

1282

[sloane]: yep, yep.

1283

[ash_b]: and uh, what's so funny is Um.

1284

[ash_b]: I can remember when Central Huujin, which is a a state owned entity, which was, is

1285

[ash_b]: like largely responsible. the' best I can tell, just to bail out banks in China, Um,

1286

[ash_b]: In two thousand five, it was in the business of bailing out banks, Um,

1287

[ash_b]: and

1288

[ash_b]: then I think it was part of the state administration of foreign exchange. This was

1289

[ash_b]: even before of the C. i. C came into being when C. I. C took over. They moved Central

1290

[ash_b]: Hojen under the China Investment Corporation because it owns so much of the state

1291

[ash_b]: banks. It was like a holding company at that point because it had done so much baling

1292

[ash_b]: outing. Um. But in case you thought that was over, like in twenty nineteen, Hugh End

1293

[ash_b]: did a fourteen billion bailo of Heng Feng Bank, and all of these bailouts go back

1294

[ash_b]: down into the real, the real estate economy, and like the overheating that's going on

1295

[ash_b]: there,

1296

[sloane]: yep.

1297

[ash_b]: Um. And you know the fact that like the way they strilize the currency, I think

1298

[ash_b]: they're issuing local debt. It's all this stuff right. that like powers forward, the

1299

[mediaboard_sounds]: Ssssssssssssss.

1300

[ash_b]: the biggest real state boom in the history of the universe. And I say universe,

1301

[ash_b]: because we don't know if there's aliens, but on Earth, at least

1302

[sloane]: I mean if if there are aliens, I doubt that they are engaged in as aggressive the

1303

[sloane]: scale of property development. Un. unless they'. I mean they, they would literally

1304

[ash_b]: I think that fast

1305

[sloane]: have to be a multiplanetary species. Uh,

1306

[ash_b]: to beat us. Yeah, be cause what the Chinese are number one.

1307

[sloane]: y. yeah, to Yeah. to beat the Chinese at building property.

1308

[ash_b]: I agree. I agree. Yeah, I've read the expanse. I know about the uh proto molecule.

1309

[ash_b]: You got to have the proto molecule to beat the giess.

1310

[ash_b]: Somebody knows what I' talk about out there.

1311

[sloane]: Yeah, yeah, it's a great. I mean, Jeff Basis is a favorite T V show. By

1312

[ash_b]: Oh, is it

1313