Transcription
I've done a lot of DSS's, but I'm not sure I've done one quite like this, Ry. It's um truly an honor. I mean, we're celebrating our 50th anniversary, and you're our DSS uh guest. I just want to say how special it is for me to spend time and and you know, many of the people here will have long memories of working with you and some will have no memories of working with you. So, we're going to fill in the history. And before I get to it, I I do want to say um the news that came out this morning that we have completed you and us the last part of this transition is truly something that should be congratulated. So I just wanted to I just want >> Yes. Thank you. Thank you Bob. >> Bob and near to you Bob Greg the board everyone is really a fantastic accomplishment and I think u it it it's something to be celebrated. So with that said um I I really want to walk us through 50 years of time. I'm going to step in there when I have to to make sure we keep the time constraint, but >> good luck. >> So, the first question I want to ask you is we're sitting here >> before you ask me any questions. >> Yes. Uh let me just say how unbelievably grateful I am and to so many of you uh so many faces like you say are people that I've known for many many years um and I you know I truly love um because of what we've done and and the 50 years and then many of you are new folks so it's great to be able to speak with you but I you know I can name the people I see the faces I see you also in the t-shirt Okay. Uh, just get up and show them the t-shirt because uh like Okay. meaningful work. Give me meaning give me meaningful work and meaningful relationships. And anyway, so thank you. This is something else to be able on this day to transition uh completely after 50 years. So thank you all for that. and also it's good to see you >> and this uh we're sitting here in New York City in this beautiful new office location and if you just imagine 50 years ago we also were in New York City in a slightly different location. So, you kind of expressed some moments there, but how does that how does that make you feel just sort of the the the the difference locations where we are today and everything that uh you've put into to this?
>> Well, so it's a lifetime. It's 50 years. And when I started, you know, what I wanted was meaningful work and meaningful relationships. I had no idea how great it could be, how difficult it could be, you know, all of that. So you can imagine 50 years looking back and this is my extended family. It was raising a family and so how does it feel? It feels like the succession. It feels like uh maybe a father who loves their children and whatever who grow up to be adults and you can see them flourishing and so on. So it feels incredibly rewarding.
>> Yeah. So let's go back even before 50 years 1973 you come out of Harvard Business School and at the time the oil markets were going crazy and you decide to go in to the commodity brokerage business which is very unusual at at that time and you described that that decision um actually afforded you incredible opportunities that maybe you wouldn't have had at such a young age. describe for responsibility big responsibility describe.
>> So I I had uh invested in I'd been in markets since I was a kid and then I went to commodities futures because they had low margin requirements. So I figured if I'm going to be right, I can make more money with low margin requirements. And because of that in commodities, then when I graduated from Harvard Business School at 1973, I was hired as director of commodities at this brokerage firm. Um, and uh, to give you an idea, that wasn't probably a smart decision. But anyway, they uh, uh, they hired me as director of commodities and then they went broke pretty much because the stock market became crummy and the commodity markets were hot and futures were hot. And so then in 1973, that's when I graduated. 1975, I then got fired.
>> I wonder if anyone's surprised by that, by the way.
>> What? Well, it's the getting fired thing like like you know you working for other people and taking orders and I'm just wondering if anyone's surprised by that.
>> Yeah. I don't if they know me.
>> But none of none of us would be here in this space if if if that didn't all happen. Right. Right.
>> Right. So you start Bridgewater 1975.
>> Right.
>> In a two-bedroom apartment.
>> In a two-bedroom apartment. The roommate who was in the other apartment. he moved out and then um and I was there and a guy I played rugby with um became sort of my assistant of of sorts and then there was a woman who was helpful in other you know um assistant and so on and then um I needed a little bit more space. So we went to the basement of this brownstone that I was living in and it literally was a boiler room operation. I mean, there was a boiler >> and we worked in the basement and that's how it started. Yeah.
>> Now, I would bet that most people don't that that that haven't been here for a while or haven't looked at the history know that in the first 10 years of Bridgewater from 1975 to 1985, we weren't managing any client money. What were we doing?
>> What we were doing and and that's when Bob joined. What What year did you join?
>> 86. 86.
>> Okay. 86. Okay. That's after just after we got the World Bank account. Um, but what I was doing was uh advising and then managing positions for companies regarding hedging.
>> In other words, they had exposures and the world was really volatile and they needed to know how to deal with the um their exposures. And because I was in charge of institutional hedging at my prior job, then they wanted that business. And I then traded my own account and then we and I gave that advice and uh then uh we I at the time I suppose I and a couple of people uh got into the position of being able to give advice. we did it on a TX and so on and the head of the World Bank at the time um received that information and then um I talked with her about the idea of us opening account and they gave us um a first $5 million account Hildo at the World Bank and I thought $5 million was a lot of money to manage and so that's what got us started and then we became uh Bob joined in ' 86 and then we became um the number one bond manager in the world.
>> We're going to get to that in a second, but I want to first focus on this period because you describe that the way you would ultimately give advice is you would try and literally imagine yourself in their shoes, understand their problems at the deepest level. Everything that their their constraints, their problems, their opportunities and so on to the point where if you were them, you would know what you would do. Right.
>> Okay. And that literally became the model for client service at Bridgewater.
>> That's right.
>> Which is very unique, right? That that wasn't how things were going for money management firms for a long time.
>> Yes. It it's an extension I mean of the pleasure that of the mutual relationship. How would I be if I was in your shoes and so on and it had big impact. So yes, you're right. When we think about the relationships for clients and we think about the daily observations, for example, you know, they would want advice every day almost, you know, what's going on in the market. So, I put out a TX. I would dictate a TX in this basement with it would be typed and it would go out and um and then we had the relationships where we knew what they were doing and then we would manage those accounts uh to some extent and that that was great satisfaction and it's still great satisfaction but of course it had to be transitioned because I couldn't do all that and that's how we came up with the idea of client advisors.
>> Mhm. And then before we get to the point where now Bridgewwater is a money manager, let's just go to something you've talked about a lot. 1979 through 82, you were you were out there. You had started to gain a name for yourself. And you had seen that the interest rate rises that Paul Vulker was putting in were could potentially create a depression. And you were not you were not shy about articul. And you were not shy about articulating that view. You even say in retrospect, you know, when you said, "I'm 100% convinced," or something to that effect on Wall Street
>> and and and you were dead wrong,
>> right?
>> Tell us about that period, the dark period, and what you learned.
>> So, in 1979 and 80, I had calculated that American banks uh lent more to countries and they were going to be able to pay back at that interest rate and so on. And I realized uh we're going to have a debt default. And yes, then I was interviewed. I I went to Congress. Um, they asked me about all all of this. And in August 1972, Mexico defaults on its debt. And then through the next 10 years, many other countries defaulted on their debt. And I thought at the time uh we were going to have a crisis, a debt crisis. And I couldn't have been more wrong. uh uh August 1982 when Mexico defaulted on its debts. I I wasn't wrong about the debt defaults. I was wrong about the impact on the markets. I thought we were going to they were going to go down and they went up a whole lot. And so I lost money for me. I lost money for clients. I had to let people go. Uh it was down to me as an individual, you know, when I'm thinking what am I going to do? Am I going to, you know, put on my tie and commute into the city on the railroad or, you know, and all that or or what was I going to do? And but that was uh the best experience that happened to me. I mean, you know, it's almost the teaching me the pain plus reflection equals progress. There are lessons to be learned in that. And I learned u you know, a couple of lessons which uh changed everything for the future. I learned first of all, I learned humility. the fear of being wrong and the questioning myself, h how do I know I'm right? You know, arrogance. I needed some humility.
>> And then I learned how the power of diversification because I knew that I can play many bets and re lower my risk without lower lowering my returns by up to 80% if you can get 15 good uncorrelated return streams. So I learned that and then I learned that I wanted an idea meritocracy. So then we began to build. That was the uh that was the great bottom that uh never changed anything from there. From there we basically with bumps some bumps along the way but no really big performance bumps along the way that all the way you know all the way. So that's how we built it. So that lesson was the foundation of of of Bridgewater and I and and it exists in my mind you know in our portfolio how we structure portfolios and all that.
>> I mean you think about the the thing the diagram you always uh draw and that was that's in your books.
>> That's right. This looping okay that looping because I I believe in evolution and that that's personal evolution. In other words, it's the five-step process. You make advances, but then you're going to come across your problems, okay, and your mistakes. And then do you reflect on them and uh diagnose them to get at the root cause and make changes in which case you will come up and be better and you'll go to a new high. And that's the constant process. And so I could think about that in when we had 1994, we had all of these ways of constantly learning from mistakes. So much so that I've come to appreciate mistakes because I think of them as they're the best learning experiences if you
>> and I think you know it's possible that that people hear that but they don't really realize that out of the out of that 1982 experience the 15 uncorrelated return streams that was a staple of what had such great impact on clients. the dumb which is the staple of internally training people not to be arrogant uh was came out of that that that period you know and and so my my question to you is like is that's is that what it is like can people not get to those kind of great understandings without first hitting the depths
>> I I think that that's largely what it is there are some other things about what it is but yes everybody can si succeed if they know their own weaknesses and how that reality works. And everybody thinks I'm going to get strong in those things I'm weak. But when you start to appreciate how others are different and how you have to have a team and how you have to have high standards for that team and you can work together, then you get a Bridgewwater.
>> All right. 1985, let me ask you this. Um, did you know you wanted to go in the investment management business or is this something that came to you when the World Bank gave you money? you were now an investment manager. Did that come to you?
>> Well, that you know since I was 12, I knew that I wanted to play the game. So, I played the game and it's very well uh and um I knew that I wanted to play markets and so on when I went to the World Bank and so on then and I think Hilda Choa said why don't you manage bonds? In other words, they were getting information but then she sort of said well why don't you manage assets? Oh, okay. Yeah, I should manage assets. And that's how it started.
>> Now, one of the biggest first developments when we were managing money is 1987 because 1987 was that the big stock market crash uh and you caught it when you and team caught the big stock market crash. Tell us a little bit about that.
>> Oh, I remember well there was clearly a bubble going on, right? And then um and I and there was the vulnerability and then I remember that morning. I don't know if you remember the morning. Okay, Bob remembers the morning we were in it together and they had some storm in London and so on and uh this was it. And so I knew there were a variety of indicators. I won't go through it but I I kind of knew that that was going to be you know this was a good bet and so we went short then I thought okay now this is going to be a period of volatility. The next year was not a period of volatility and then we had the period after that and that was good. But again surprising like for example you would imagine after the stock market crash that you would have volatility. That was one thing I was always thinking that you would have
>> um and then you didn't have the volatility. And so um that also all of these lessons um taught me that what we needed to do was to test the rules and and have back tests. In other words, be very clear of what the rules, decision rules were and see how it would have performed over a period of time and that's what helped.
>> Now then the next thing of note is I think 1990 1991 because that's when you kind of pioneered this concept of the separation of alpha and beta which became so central to investing and to our business strategy also and there's lots to explore here. just walk us through the separation of alpha and beta, how you came to that and then we'll we'll we'll build on that from there.
>> Well, everybody in the uh in investing then uh would say I'll give you a stock mandate or a bond mandate. This was the way it was a stock mandate and then what everybody would do was try to add value within that universe of stocks and bonds. But I um so that would be your benchmark. your benchmark was stocks and you would and then people would time stocks but alphas can be brought from other areas. So I could port the alphas over
>> and I so as a result we can create alphas from different areas and overlay them on a benchmark to engineer it which gave a really uncompetitive a real competitive advantage because we could take all different alphas create a diversified portfolio of alphas and therefore engineer a better alpha. And so we would go to clients and say to them, okay, you can give me a mandate if you let me structure it this way in which you're going to have the S&P 500 or pick your benchmark. It's okay. We would replicate the benchmark or hold the benchmark and then be able to do this oper operation with um uh separation of alpha. I think it's because also my futures and my derivatives understanding allowed me to realize that I could separate those two things and that was an enormous competitive advantage
>> and this literally meant right we could be first of all we didn't even though we pure alpha started with that was our fullest diversified alpha in 1991 we could take subsections of that if a client like if we wanted to be in a currency overlay business and all they wanted currencies we could start there and then through our client service model start to grow the alpha,
>> right? You would pick what was your beta and then you'd pick what your alphas were and then we would put them together and to make a better engineered portfolio and it gave us a huge competitive advantage. And
>> so we could be in the currency overlay business, we were we could be in the global bond business, we were we can be the emerging market debt business, we were in any beta where we could port our alpha,
>> right? And I I just like to this day I don't know of any other firm that that did that and how how how differentiating that.
>> Well, it was none did and it was differentiating.
>> Now, first of all, in 1986, Bob comes along. So, that's pre predating that. But Bob comes along, Jazelle Wagner come along, Dan Bernstein comes along. How are you recruiting these people to this this place called Bridgewater when there's you and some others, but there's it's not it's not the equivalent of some of the brand names that
>> Well, each you know each one of them had the story. Boy, I wish I could take the time to tell you Bob's story, you know, and he's at uh First Oklahoma bank and it's a wonderful
>> He wrote you a letter. I think he would do anything. No, I had my newsletter and I think he I I don't forgot the newsletter was how much?
>> $290.
>> $290. He subscribed to the newsletter and for $18,000 he could have all my time or something. It was something when he was working down there and um and then we got acquainted and um he was what 27?
>> Yeah,
>> you were he was 27 years old and he was a star at 27 years old. We talked about markets. we got into this thing and um and then you know one thing led to another and you know what are you going for right what what is your life going to be like okay you could yeah there's an entrepreneurial spirit um you can go work at you know an established bank like first Oklahoma or you can go do this and you know and we like markets and so you know he went and did it
>> all right so then the the '90s become a magical time that becomes a period of enormous growth and um and then we get to basically the tech selloff. But
>> okay, but but I want to explain why that is before we get to that that particular thing. Okay, because these are the fundamentals. the fundamentals. Um, an idea
>> meritocracy,
>> meaningful work and meaningful relationships through radical transparency, radical truthfulness and radical transparency having to deal with, you know, like an intellectual Navy Seals kind of thing, right? And to be in that together and so to be what what that the culture is here to be super excellent and super rigorous with each other. And so what we did through those other money management things is that we um the upsides were big, very big, and the downsides were very little by comparison and we were uncorrelated with other managers and and we were dealing with clients as though we were in their shoes and like today they would read the daily observations and we would be able to communicate in a quality way. That was the many the winning combination of factors and it and for the future that is the winning combination of factors that I think you still have and will continue to pursue. I think
>> now in 96 Greg comes and joins but previous to that in '95 he was an intern. In 1995 Equuire magazine contacts you says Ray we'd love to do we'd love to come over to uh to Wilton at the time and we'd like to do an interview with you. And you say yeah come on. And then something happens during the the time that they scheduled the interview and they come and uh you can't do the interview. You don't have time to do the interview. So you say uh well Greg Greg Jensen, our intern will do the interview.
>> Yeah.
>> And uh so Greg Jensen, I'm just wondering this you got a lot of responsibility when you when you first came out of business school. Maybe this was your mentality, right? So, there's an there's an Esquire 1995 cover with our intern feature. What was going through your head on that one?
>> Well, uh um so he was, you know, he was an intern, but he was a very bright intern,
>> you know, like he got it uh you know, and so on. Yeah.
>> And and you know, I don't remember how many people with experience I had to be able.
>> It was actually a very good article, but it was a great a great interview, right? Yeah.
>> And and he told uh what you know was like uh
>> the computer wiz or something like that. It was
>> something like that. Yeah.
>> And then there was the other one where um you know uh you wrote The Wire every day, the Bridgewater Daily Observations. This is going back to the 80s. And um but you had to go on a business trip and so you you looked at you called Bob and you said, "You know, Bob, um I'm on a business trip. I'm not going to be able to write the wire." Bob was very new to Bridgewwater. And you said to him, "Why don't why don't you write the wire?" And then Bob froze and said, "I read the wire. I don't write the wire." But uh he then decided to write the wire. And your review, the quality review of that wire was was very good. So from then on you said Bob you're now going to write the wire and you've ruined his life for the next 30 years right there.
>> Uh the key to success is finding great people who can do things wonderful give you leverage and also find do things better than you can do them. Now just after this time there is a big debate that goes on internally at Bridgewwater because as I mentioned in the 90s incredible growth and success despite a painful draw down 99 through 01 but still nonetheless the decade really established starts to really establish Bridgewater and there is a debate that starts to take place internally about should Bridgewater hold its growth and kind of remain in a you boutique, you know, or do we really want to go hard and make Bridgewater an institution?
>> That's right.
>> First of all, who was lining up on what side of that debate?
>> Um, uh, Jazelle was, uh,
>> Wagner, who was our former chief of financial,
>> was lining up in
>> chief operating officer
>> and boutique.
>> Yeah.
>> Um, I lined up in terms of go for it.
>> Yeah. Um I think you where were you?
>> Bob wanted to go for it.
>> Yeah. Okay. He wanted to go for it.
>> And but what was the nature of the debate? Ray
>> Greg was go.
>> Greg was go. What was the nature of the debate?
>> The debate the debate was around as much around culture and and that aspect or quality.
>> Could we maintain the quality when we were going from that level to the next level? and and I viewed it as it's I think quality is of paramount importance and I think that when we looked at all of our needs the needs of back office the needs of legal the compliance and all those financial needs to be able to have the comp the capabilities they really uh were
>> better served by being able to have those resources to be able to go for it. So we went for it and and and I viewed that as the challenge. How would we be able to do that? That was also cultural, you know, I connected it to uh radical transparency,
>> right? Radical truthfulness and radical transparency and writing down principles. Principles first came from investment principles that we could back test and so on. But then also then the principles of every time I would make a decision or we would make a decision, I'd write down the criteria for making those decisions. And then I wanted everybody to see everything. So everybody everything was shown so anybody could see everything, including our stumbling, you know, all of that stuff. And that was what helped to keep it together and uh you know, and then go for it. The together behind the mission is an incredibly important force. you either have it or you don't. And so that's what and and it turned out to be very successful.
>> Did you find that the struggle from going from a boutique in the beginning parts of going to an institution was harder than you imagined?
>> Yeah, the hardest part was the technology part because like I was in uh you know I think about Claude and the other people who were involved and Rod Bruce. Is Rob Bruce here?
>> If he isn't, he's watching in Connecticut.
>> Okay. Hey Rob. Okay. Um, but u he knows we like we went through this okay because uh my original view of the technology was you know I wanted to build it fast figure it it's adapting and all of that and then um and then that created a technology hairball because we didn't have the documentation uh behind it people would change technologies would change and then I learned and we all learned together that oh oh my god we have this technology hairball that was our biggest problem. The other parts were were uh fine. We would bring in uh the people. That's how um
>> uh CL uh client advisors developed as you recall like when I found out that I couldn't be there or somebody else couldn't be there, we would have mocks, right? And the mocks would be I would play the role of a client and you would play the role of the client advisor and then I would grill you and so on so forth.
>> You were grilling me. I was the strategist and you were grilling. Yes. And yeah, we had a group the client advisor did the same thing.
>> Yeah. But no, no, no, but a strategist was the right term. A strategist was supposed to be the person who would replicate me or Bob or Greg and so on. So there were the growing adjustments. In other words, I couldn't do it personally, but then you get the leverage from great people and and so we figured our way to do that.
>> Yeah. Let's fast forward to another in my view this was a seinal moment just unbelievable. So 2006 around the same time it's becoming clear it's not actually I shouldn't say that there are warning signs that the mortgage market is going through the roof that more and more speculative housing and you can see it in the wires if you go back and you look you can see the buildup where the research is starting to point to the danger and the bubbles and so on.
>> and we would not have seen that if we didn't study the Great Depression to understand the nature of the risks,
>> right? Explain.
>> Well, I mean, the big risk is, you know, they could always lower interest rates and and and send money in, but what happens when they hit a zero interest rate when you have a debt crisis?
>> The last time that happened was 33,
>> right? So there was no time that you would have seen that if you didn't see March of 1933 when the interest rates hit zero. Okay. And what did they do? And that was the last time they did that was quantitative easing. You would not have understood the nature of that dynamic. So it was from that point. Okay. Not only did we catch the 2008 um cycle um down move, uh 2009 we went almost neutral,
>> but I want to keep going at this. By the way, if you go back and you look at the daily observations going back to 2001, there was this notion in the markets at the time called pulling on a string.
>> But you thought there's a chance here that we that we may be in that kind of environment then because you may not be able to to get to get out. That's why 200
>> that took you to the Great Depression.
>> 200 2008 was the bust.
>> Yes.
>> 2009 I honestly didn't know what was going to happen.
>> Right. And the thing you kept pointing out internally is that the higher these debts go, the more sensitive they are to interest rates. So you basically have to cut further and you were going to run out of room. And that that was the problem. Right.
>> Okay. So now 2007 I I just remember all these times we had people coming up to see us. Maybe it was 2008 at the time the banks that ultimately you know the brokerage
>> 2008.
>> Yeah. They got in big trouble.
>> Yeah. We you know we had the incidents and then um we were right and then um then it was helping others to S&P the guy who runs S&P.
>> Yeah. and he has to give ratings and we you know we went through his ratings and showed why his ratings were wrong and and he didn't mark to market
>> and so on and so then a lot of people started to come in I think that's probably what you're referring to
>> now in 2007208 beginning of 2008
>> walk us back how confident were you that we had it that we understood just how grave this was even if others were just starting to come to that recollection or didn't understand how confident Were you at that time?
>> I learned my humility and I learned to be scared of being wrong through my particular experiences.
>> It sure damn looked like it and and and you know it happened before and it made sense, but there's the question of how much you going to bet on it. And so when you say confident, you know, um I always come up with the template of how it's likely to go, who I I believe it's likely to go and then I follow things against that template.
>> Mhm. And it was operating like that template. But, you know, you've got to see what do they do.
>> So, I would say, you know, I was maybe 70% confident.
>> And when you look at the fact that that started to play out that way, how worried were you that even if you were right, this whole system could come down and that Bridgewater couldn't operate without a system? How worried were you about that? Uh well I was worried about you know the the terribleness of such an economic circumstances and I mostly felt that we were serving a real purpose for our clients because they were losing money everywhere else and we were making money for them. Um, and then it's just like being in the battle, you know, you think about the battle and then, you know, beyond you figure about after the battle, you think about beyond.
>> I mean, it's hard not to to be happy about those years. But I remember you writing some emails and so on. I we get them kind of from near now, which is enjoy maybe this much, but worry more.
>> That's right. Okay. I remember a meeting with Perog and everybody wants to celebrate and says how terrific we are and we want to celebrate and I remember this meeting with you know stop that I mean okay you otherwise you worry no worry about being weak and missing stuff and so on. Yeah. So I was I have a you know principle if you worry you don't have to worry and if you don't worry you need to worry because if you worry you will take care of the thing you're worrying about okay and you'll be okay.
>> Yeah. All right. The next big thing is 2013 because in 2013 it looked like Europe was just going to come
>> well this started really in 2010. Yeah. Okay. So 2009 and 10. Um, it was the same for me with Europe as it was going down to Washington in 2007. I went down to Washington in 2007,
>> right?
>> And um, and I'm like I think it was just in the Financial Times, Jillian Tet describes how I come with this pile of papers and I want to explain. and she threw the papers in the trash can and um and Paulson and and so on said, "Okay, and I'm just figuring please just go through the numbers and see what that that was the same in 2009 and 10 before the European crisis happened." And I, you know, I was lucky because um Mario Draghi would sit down and we some element of talks, but they still didn't believe it. They believe that the markets would adapt and correct things and and the markets are right and so on and they don't understand which is a very important principle that um it um uh there's a supply demand issue and then and you're not calculating don't wait for it to happen and so that started really 2009 and 10 dealing with that and then going through that then uh you know I was really lucky in the sense of that I I I can help them think about how to deal with it like um how do you do monetization in Europe when you have independent
>> you have the uh constitutional court in Germany and so on so forth but that's what yeah go ahead
>> so these countries had you know especially Spain and Italy and Greece had no degrees of freedom in their in their fiscal because it was all centralized and that's what you're referring to and so how do you how do you then deal with that and so what was the advice that you gave Mario
>> I I that um because the German constitutional court was standing in the way of this and so on
>> um that I I ask if you did it proportionately
>> across everything
>> then you're not um you know then could you do it and you could you essentially quantitative easing and doing other ideas and so that's when they uh that's when they did it. Now um if you look back you know again the growth of the 90s uh the all the events in 2008
>> and by the way let me just emphasize many people were involved in these discussions many of Bridgewater people and so it was this great team that would wrestle around with the uh questions. Um, by the time that we get to like the middle of the 2010s, like you're a very well-known person. Bridgewater is a very well-known firm,
>> which was the problem.
>> Tell us how. Tell us why.
>> Well, uh, I think it was like to I don't I don't know exactly what year it was, but we wanted to stay below the radar.
>> Mhm.
>> And um then when we became the largest hedge fund and then um people were thinking uh this is a cult weird place and so on. Stories began to emerge about the cult, you know, like woo. And so um so then I was put into a position what do I do about that? Um, and what I did is I put out the book of principles.
>> Uh, not the it wasn't a book. There were, you know, a handbook, you know, it's about this book.
>> Um, and, uh, I put that out and I put it out online and there were three million downloads of this and then people started to talk about that culture, that way of being and so on. And then it became more, it was the combination of being the largest hedge fund and so on. So I had to deal with and we had to deal with the question of what does it mean to be public because we couldn't avoid it anymore.
>> All right. So let's go to 20 2020 uh 2019 late 2019 this this COVID starts in in we we think in China and it's spreading around and in 2020 uh I remember Richard Falconrath uh was increasingly warning us about this and so on and you know we never you know we had the what was it 1920 I believe it was or 1920
>> 18 1918
>> pandemic but we didn't really have a lot of sample on these pandemics and so on and we didn't really manage it very well. So let's go back and reflect on uh what was coming at you and the team and uh how were you processing that and and then any reflections you have on that.
>> Well um you know uh my whole approach is did it ever exist in history? How does it work mechanistically and so on and there was no sample size and it would come as a surprise. So I was um then what we did is we decided that we would take positions and we take options protections against those positions uh because other things would say be long but on the other hand wow this is something and so that's how we worked ourselves through it.
>> Mhm. Okay. So
>> don't take positions big positions when you're not sure. So you you know we cut positions or option protect the positions. But I want to mention a few other things. May I? Yes. Go ahead.
>> Okay.
>> The culture is very very important. The culture is the most important things. And so there were certain decisions along the way I think that were important. And this was what I want to emphasize like uh um people who would get sick or and maybe um die or have family relatives who die and have diseases to be there at each other's weddings and funerals and so on. I I could I mean people in the audience know how we were in terms of okay we as a group would go to and I you know I remember so many that we would go to their funerals or celebrate their weddings or their the babies and these kinds of things. Okay. I I want to make sure that that is conveyed as being very important in terms of the meaningful work and meaningful relationships and I think you still do those kinds of things. So I just didn't want to go through performance and investment decisions and so on with leaving out those dimensions of what it really means to be meaningful having meaningful relationship particularly in bad times for the people and you have to make decisions. There were a bunch of principles that I would what do you do when somebody's dying of cancer
>> or their spouse is dying of cancer and they need space? How do you deal with that? You have to write down principles. It gets you to think. So that was an important thing. Another important thing was China,
>> you know. Um okay. Wow. Um you know curiosity and I went to China u 1984 um only because of curiosity and the interest like this isn't just a money-making business. Moneym was secondary. Okay. Be as great as you can be. but curiosity to go to China and then the relationships to help them build up markets and the economy and and develop those relationships, those dimensions which are now those that you can keep uh carrying forward. This is happening in different countries. Indonesia has a new sovereign wealth fund and that could use help and we and and how do you build those relationships? So, I just wanted to emphasize that aspect too before we go on to your next question.
>> Well, the the last question I was going to ask you was, you know, we're sitting here at 50 years and now this the people in front of you and on the screen and so on, they're going to be responsible for getting us off to the next 50 years. And and and I think the question for you is like what are the the the key tenants you would want us to internalize in order to raise the probability of success uh near and farm, you know, as we move forward?
>> Well, uh, they're all in the book. They're all in principles life and work. Okay. And there's a bunch of them. Yeah. And uh, but I would also say that you also have to do it in your own way. So in other words, it's like a generation, you know, thing. You you go from what parents and I look at, okay, now you're the next generation. And what do I want from you? I want you to do it for your own way. I want you to like your probably your parents feel about you. What do they want for you? They want you to be successful without them. In other words, but have a great relationship with them. So that's my aspiration and you have to learn by banging yourself and so on and you know these principles and how do you have an idea meritocracy and those things because those are the principles I can pass along and then what you do is up to you
>> right okay well that's
>> but 50 years wow do you know I mean you know how few companies have lasted 50 years let alone maintain being at the edge edge, you know. Um, okay. So, it works. It
>> does. I just want to tell you again, like I'm not sure I'm ever going to get this opportunity again, and it's very special to me. Um, so I hope you uh enjoy everything that you put in here and continue to be the daily observations. you come right through me and podcasts and uh stay involved with us because we love you and um you'll always you'll be our founder and our guiding light and so uh congratulations Ray on this on this whole thing
>> and I love you too. Okay. And so I want to have this continue to have this loving relationship. Thank you for it. Thank you for having me here. Thank you for allowing me to have that relationship. So, you know, I'll always be there with appreciating this. Thank you very much.