Invest Like the Best with Patrick O'Shaughnessy

My guest this week is Ryan Caldbeck, a private equity investor who wants to bring quantitative rigor to the private markets. Ryan is the CEO of Circle Up, which uses a system it calls Helio to identify attractive investments in early stage consumer brands.  While I am of course a fan of quantitative investing, I also know from experience how much harder private markets are than public markets when it comes to the transactions themselves. We discuss this and many other potential roadblocks to bringing models to private markets. Using many individual companies as examples, Ryan explains some of the major predictive factors they’ve uncovered in their research. We also discuss which parts of the private markets might be infiltrated by quant processes first, and which may never be.  I expect many more to go on a journey similar to Ryan’s in the years to come. They serve as an interesting example for ambitious investors out there. Please enjoy our conversation. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 1:39 - (First Question) – Formation of Helio 6:57 – How they handle the relationship building needed to make investments in private markets 10:26 – Why consumer and retail are interesting spaces to apply their quantitative approach in private markets 12:54 – Searching for new relevant data 16:14 – How do they stay ahead of the commoditization of uniqueness             16:21 – Pattern Recognition and Machine Learning             17:24 – Sam Hinkie Podcast Episode 18:00 – Dominant predictive factors in this world 21:05 – Which is more important, relative value or rate of change 21:48 – What does the data say about online sales vs offline (being in a store) 23:30 – Variable that consumer investors think matters but it doesn’t 24:53 – Valuing companies and accounting for mispricing’s             25:36 – Michael Recce Podcast Episode 26:41 – Goes through the process using Liquid Ivy as an example 28:46 – Most interesting sub-categories 29:33 – Future for this model             32:10 – Albert Wenger Podcast Episode 35:19 – Other categories outside consumer and retail interest Ryan 36:28 – Biggest challenges for CircleUp as a business 38:46 – Handicapping their earnings expectations 41:36 – Take on the VC/PE landscape 43:03 – The types of models that are most interesting to the team 45:05 – Quantitative elements of brand that are most interesting 47:30 – Most unique brand and distribution strategy he’s come across 53:27 – Who has influenced Ryan the most 54:37 – His personal values 55:51 – More people who had an influence on Ryan             56:05 – The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business 57:07 – Thoughts on goal setting at the company 59:29 – Unchangeable factors that shape their long-term vision 1:02:01 – Most interesting individual conversation as part of this journey 1:04:02 – If he could only keep one dataset, what would he keep 1:05:09 – kindest thing anyone has done for Ryan   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

My guest this week aspires to be the Larry David of investing, and we discuss why. Howard Lindzon is hard to categorize. He’s primarily an early stage investor right now, but he’s participated in all types of investing. He describes himself as a trend follower and always has a unique take on popular topics.  In this conversation, we cover his investing history and his take on the fintech investing landscape. What I’ll remember most is the idea that we should focus on what is happening versus what we think will happen or might happen. There is a Peter Lynch like quality to some of Howard’s thinking, and a willingness to embrace the weird that I find very appealing. The few times I’ve met Howard, I’ve smiled or laughed most of the time, which is about as nice a thing as I could say about someone. He’s a good example of why I like this podcast format. His investing style bears literally no resemblance to my own, but it got me thinking about a lot of new things. I hope you enjoy our chat. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 1:42 - (First Question) – Why he wants to be the Larry David of investing 2:00 – Why his investing style is best described as trend following 4:05 – The biggest inspirations/influencers on Howard’s investing 6:39 – What made his second mentor, Fred Wilson such a great investor 9:52 – Formation of Wall Strip 12:33 – Why weird is so important in his investment philosophy 14:56 – Understanding his investment philosophy through his investment in Rally Road. 21:02 – His assessment of the fintech space 28:54 – Why fintech pushes away from human nature 30:50 – Major trends in fintech that have his attention 35:02 – What stands out about the teams at these companies he invests in 36:37 – Thoughts on fractionalization plays             36:44 – Capital Allocators podcast episode             36:54 – Venture Stories Podcast 40:03 – Any major trends that are changing and worth attention             42:06 – The Tipping Point: How Little Things Can Make a Big Difference 43:26 – His take on the media landscape 45:10 – Kindest thing anyone has done for him   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

My guests this week are Ali Hamed, Brian Harwitt and Marc Porzecanski who work together at CoVenture Credit. When I first had Ali on as a podcast guest, we discussed the many aspects of what his firm does, ranging from venture, to crypto, to credit. We glossed over the lending side of the business, but having since learned a lot from them on the topic, I was excited to get the chance to talk with members of their credit team for today’s longer exploration of esoteric high yield lending. I am always proselytizing the value of investor education, s this week we have a podcast first. The CoVenture team has prepared a long series of posts that correspond to our conversation and go even deeper into the topic of credit investing. You can find them in the shownotes at investorfieldguide.com/credit This is entirely differently from any conversation I’ve shared before, so I hope you learn as much as I did. Please enjoy my discussion with team CoVenture Credit. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag Show Notes 1:42 - (First Question) – The formation of their unique credit business 7:09 – Their advantage in seeing both the equity and credit side of their investments 10:23 – Looking at the Returnly deal as an example 14:07 – How they view these deals and are able to sustain them as long-term investments 18:09 – Their interest in payroll deduction lending 20:08 – Finding unique types of default risk 21:31 – What stands out in a platform that makes CoVenture want to take a deeper look 26:43 – Most interesting types of problem they have come across that they have yet to do a deal in 31:35 – What is going to change to make for more thoughtful underwriting of subprime lending 35:51 – Major structures of asset backed lending 39:49 – Whether the home serves as an interesting playground for credit opportunities and whether people will own anything again 42:44 – Mark’s experience working at a huge firm vs his experience at CoVenture 44:31 – How does the current credit cycle impact their view 47:04 – Lending against bitcoin 50:06 – Who is interested in these loans against bitcoin 50:57 – How to set interest rates against a weird asset like this 53:00 – What are the key determents of success in this business 1:02:27 – Kindest thing anyone has team for the team 1:03:52 – How to treat people that you pass on   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

My guest this week is Saifedean Ammous, author of the book the Bitcoin Standard. This was one of the more interesting conversations I’ve had in the world of cryptocurrency, primarily because we don’t talk about Bitcoin or Crypto until 25 minutes into the talk. Instead, we focus on history, economics, sound money, low time preference, and gold—all interesting topics. Saif’s thinking on cryptocurrencies other than bitcoin—which is that they are worthless—is unique and thought provoking. His reasoning around why gold shouldn’t be compared to the returns generated by assets like equities was also compelling. If you’ve followed my Hash Power episodes, this is a new a differentiated interpretation of Bitcoin as a technology for the store of value use case. Please enjoy our conversation. Hash Power is presented by Fidelity Investments   For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 2:10 - (First Question) – Explain Sound Money 4:25 – Examples of hard vs easy money 7:36 – the even money trap 9:36 – The benefits of hard money vs today’s standards 14:05 – Why this interests him             14:16 – Gold Wars: The Battle Against Sound Money As Seen From A Swiss Perspective             14:56 – Democracy – The God That Failed: The Economics and Politics of Monarchy, Democracy and Natural Order 16:17 – Correlation between time preference and people’s ability to succeed in life 19:59 – How money markets worked in the late 18th century vs today 27:57 – How he came across Bitcoin and how he thinks of it as a digital gold 35:42 – How will the world transition to a sound money standard 42:15 – The impacts of hyperinflation on crypto currencies 45:04 – The idea of a orderly upgrade of the world currency 48:20 – His thinking on alternative coins 54:05 – What it takes to compete with bitcoin 1:01:43 – How he diversifies 1:04:35 – Stalling bitcoins demand 1:06:11 – Does he apply his thinking of lower time preference elsewhere in his life 1:07:09 – Kindest thing anyone has done for him   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

Jeremiah Lowin, a former statistician turned founder of Prefect, discusses machine learning in investing. He addresses data workflows, friction between data scientists and engineers, deploying machine learning in investing, the importance of data and error minimization. The conversation explores applications in finance, model testing, label formation, and the significance of interpretability in machine learning.

This week, to mark the two-year anniversary of the podcast, I offer a quick summary looking back and forward.

My guest this week is Kathryn Minshew, the co-founder and CEO of the Muse, and the co-author of The New Rules for Work: the Modern Playbook for Navigating Your Career. I’ve learned in business is that the quality of people and the culture they create dictate outcomes. Having made plenty of mistakes hiring, and having had many enormous successes, I am always interested in best practices for finding and successfully recruiting the right people. Given that Kathryn runs a jobs marketplace and has written a book on the topic, she is the perfect person to explore some the core concepts around pairing people with the right positions. We discuss how companies should market to prospective employees, how employees should represent themselves to employers, and the most common mistakes she sees across the hiring landscape. Please enjoy our conversation. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 1:31 - (First Question) Largest changes in the nature of work and how people approach finding the right job for them 3:27 – Can this work be jammed into a formula 5:18 – What strategies is she sharing with employers when it comes to hiring 8:31 – How long should the process take 9:33 – Biggest mistakes employers make in this process 10:39 – Besides the usual stuff, what can perspective employees do to bolster their chances 12:50 – How much more efficient will matching technology get in the years to come 16:00 – What will be the largest changes to work itself 19:09 – Will we move away from full time work into parsels of work units 20:50 – Most successful piece of content or content strategy the Muse has employed 22:34 – Advice for early stage entrepreneurs 26:24 – Kindest thing anyone has done for Kathryn   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

I intentionally avoid the world of quantitative investing on this podcast. The whole point of this format is to learn about many different fields, and the vast majority of my time is already spent in quant world. Occasionally I’ve broken this rule because of something unique, including this week’s conversation with Richard Craib, the founder and CEO of Numerai. If you listen to the podcast often you’ll have heard me reference Numerai, a hedge fund which blends quant investing, cryptocurrencies, crowdsourcing, and machine learning — talk about a PR company’s dream. One important note: Numerai is both incredibly open and very secretive. You may sense a bit of frustration on my part, but that is only because, as a fellow quant who loves details about data and modeling, we couldn’t go deeper into the details on the record. We discuss how Numerai has created an incentive structure to work with data scientists around the world in an attempt to build better investing models. The idea of having data scientists stake cryptocurrency in support of the quality of their models is fascinating. Like many hedge funds, Numerai doesn’t share its track record, so we don’t know if this works—but I hope you, like me, use this conversation as inspiration for how different technologies can intersect. Hash Power is presented by Fidelity Investments Please enjoy my conversation with Richard Craib.   For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 2:32 - (First Question) – How he came up with Numerai and how its related to his background 4:08 – How he works with and models the data for his system 5:24 – Describing machine learning as it relates to his work, and specifically linear regression 7:11 – The important stages in his sequence 8:46 – How the scale in the number of data scientists they use is different from other areas 11:30 – Which is the most important aspect of creating alpha; their data, algorithm work, proprietary ensembling of those algorithms. 14:30 – The idea of staking in blockchain 17:30 – Does the magnitude of the stake matter in blockchain 19:10 – Understanding the full incentive structure for both staked and unstaked work 21:07 – How is the prize pool determined 22:29 – Philosophy on how to source interesting data 26:11 – His thoughts on the crowd model and the wisdom of crowds 27:12 – The size of stakers for Numerai 27:51 – Interpreting the models and knowing when something is broken 30:03 – How they think about people not submitting their models 31:48 – Their model building 32:39 – Most interesting set of things they are working on to improve the overall process             35:38 – The Market for "Lemons": Quality Uncertainty and the Market Mechanism 37:11 – How people can come along with their own data 39:00 – His thoughts on the quantitative investment community 40:44 – What else is interesting him in the hedge fund world 44:03 – Building a marketplace and staving off competition 46:16 – Kindest thing anyone has done for him   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

My guest this week has a fascinating background. He has a PhD in biology but has split his time as both an investor and an operator. As an investor, he’s involved in companies like Airbnb, Coinbase, Instacart, Opendoor, Stripe, Square, and Pinterest—not too shabby. As an operator, he helped both Google and Twitter scale their businesses, in the case of Twitter from 100 employees to 1500 over two years. He’s just written a book about these experiences called the High Growth Handbook.  Our talk centered on what makes for a good investment and more specifically how Elad identifies an interesting market. Operators and early stage investors will find lots of nuggets in this fun conversation. Please enjoy.  For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 1:31 - (First Question) – Process for evaluating a young business             2:43 – Andy Rachleff Podcast Episode 3:09 – Data factors for evaluating a business 5:08 – Reference checks 6:42 – Advice for companies that are reliant on product cyclicality             7:01 – Where to Go After Product-Market Fit: An Interview with Marc Andreessen 7:31 – High Growth Handbook 9:30 -   Lessons learned from marketing and growing companies 12:09 – How do you hire the best people to improve your distribution 13:16 – How does he think about lifetime customer value vs customer acquisition cost 15:57 – Should companies just focus on the high margin power users 16:35 – Best ways to organize a company hierarchy 19:16 – His interest and background in the area of longevity research 21:52 – Changes he has made in his own life as a result of this longevity research 22:56 – Most effective use of a CEO’s time 24:58 – How he evaluates or identifies interesting markets for potential businesses 28:03 – Any markets that fit his criteria that are underappreciated by investors 30:02 – Worst practices for businesses 32:19 – Kindest thing anyone has done for him 33:20 – What would be the topic of his next book 34:40 – Biggest lessons he’s learned about markets   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

For the 100th episode, I’ve brought back my good friend Brent Beshore. Brent was the 10th guest on the podcast, after we met because of a mutual interest in capital allocation. I quickly learned that Brent was one of the most unique and thoughtful investors around. He was an entrepreneur from the moment he left school, trying many different things before finding a fit buying smaller business with the intention of owning them forever. What amazes me about Brent is his encyclopedic understanding of business and the nuances of different business models and deal structures. This comes from reps. He and his team have looked at about 12,000 deals over the years, at every kind of business that you could imagine. I’ve been with him when he goes through this process and it’s fun to hear what makes certain businesses stand out from others, which is largely the topic of this conversation. You all know transparency is key for me, so it’s important to know that my family and I are investors in a fund called permanent equity, run by Brent and his firm Adventure.es. To commemorate this milestone episode, I can think of no one better than Brent, because he exemplifies what has made this podcast so fun for me: learning from other people who are willing to share what they themselves have learned through fun, blood, sweat, and tears. Please enjoy our conversation, and thank you so much for coming along on this journey. I can’t tell you how much it means to me. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 2:02 - (First Question) – How does he think about optimizing risk in terms of the capital stack when looking at deals 5:27 – What conditions would they add debt down the road after investing in a company 6:52 – What business sectors are most intriguing for Morgan to invest in right now             6:57 – Trent Griffin Podcast 9:34 – Why no HVAC businesses if it’s such an attractive sector 13:56 – thoughts on rolling up similar businesses and horizontal scale 16:04 – Another industry Brent would focus on 18:02 – Difference between property management in larger cities vs smaller metro areas 18:51 – What role does profit margin play when Brent is evaluating a business 22:46 – The appeal of a hyper cyclical business             22:52 – Brent Beshore Podcast Episode 27:27 – Favorite counter cyclical business 28:14 – How they judge assets, tangible vs intangible assets 33:58 – How does he think about wage inflation when considering the cost of a business 37:21 – His fascination with pet crematoriums 38:57 – History of the permanent equity fund and the changes by having a larger pool of capital 43:48 – Pitching investors on a new structure for the business 46:14 – How will this business model scale   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag