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.
[sloane]: And welcome to the free moneyy podcast. Um, it's where we start the podcast. Kind of
[sloane]: by surprise a little bit earlier than actually. thought.
[ash_b]: Yes, yes,
[ash_b]: we screwed it all up, but we're got we do it. live here,
[sloane]: we do it life, we do it. life. And yeah, as I was just telling Ashby I'm just back
[sloane]: from my family reunion in Salt Lake City, where I definitely picked up Uh, something
[sloane]: along the lines of a cold or coved. Um, so
[ash_b]: fingers cross, We didn't break through Cause
[ash_b]: you, you provx. so I know that. Yeah, Me too.
[sloane]: I'm provx, Yeah, Yeah, exactly, get the facts about the facts.
[ash_b]: I'm sorry to hear you feeling down, but I have to say look great. You let
[sloane]: thank you.
[ash_b]: your butter like bubbly. you know.
[sloane]: Well, I, I mean, it's There's nothing like hanging out like I have the most adorable
[sloane]: Mormon family in the history of the world. I mean,
[sloane]: like my. my grandparents are like Um, actual icons. Um.
[sloane]: the Re. the reason we were out there was for a Gaa event to commemorate my Uh,
[sloane]: grandfather's ninetieth birthday, and to raise a Um. an endowment to fund arts
[ash_b]: my gosh.
[sloane]: Um, it' ro, and like it unbelievably cool they've been. They set up this thing
[sloane]: called the Latter Day Saint Arts center,
[sloane]: Um. That is like really helping people remagine what it means to be Mormon. Um. they
[sloane]: wanted to create space for people like me who are not you know, religiously Mormon.
[sloane]: Uh, to be
[sloane]: like affiliated with it in the same way. So many people are culturally Jewish, Uh,
[ash_b]: Yeah, I was going to say I know a lot of Jewish people that are atheists but are
[ash_b]: still Jewish.
[sloane]: exactly exactly. Yeah, And and like you know, you can't really opt out of the
[sloane]: Mormonism it's pretty inbred at this point. Uh,
[sloane]: but yeah,
[ash_b]: So you were in Salt Lake.
[sloane]: you know, uh over. I was over in Salttics, I got my uh, s. ▁l u T shirt, um,
[sloane]: slut, uh,
[ash_b]: you didn't. I don't think you needed to spell out of the. Yeah, no, I think
[sloane]: yeah, the guy, uh, I, I want to. really. I want to make sure the joke translates for
[sloane]: the folks in the cheaep seats at home. Uh,
[ash_b]: that true people who were. I'm not willing to sound out the letters you've just said
[ash_b]: to be.
[sloane]: s ▁l u. T. Now what could be
[sloane]: aligned with Slun's politics? that?
[ash_b]: I'll come back to that.
[ash_b]: Well, fantastic I.
[sloane]: um, but yeah, it's like. I mean. it's like a big hug. I have like the most
[sloane]: photogenic and lovely family in the world and there, like some of my cousins have
[sloane]: new babies. That I got
[sloane]: to play with and who probably got me sick? Um
[ash_b]: that's who got you sick. Yup babies are filthy. I've got two of them.
[sloane]: y. yup. Yep. What's up in what's up in Ashyland?
[ash_b]: You know that gets you sick all the time. I have uh, an
[sloane]: You got news? You got an insight?
[ash_b]: insight I got. Well, I got news. That's next. but, but off the top I got some
[ash_b]: insights for you. Here's
[sloane]: I'm clutching my pearls.
[ash_b]: what I've learned. Here's where I've learned everybody. Everybodycause, it is
[ash_b]: actually important in detail
[ash_b]: On sites.
[ash_b]: Are the new off sits?
[ash_b]: I'll say it again on side to the new off sites. I keep getting invited to big fancy
[ash_b]: meetings at the office
[ash_b]: and it's almost like
[ash_b]: instead of doing an offsight with your team where you go in brainstorm, you finally
[ash_b]: go to the fricken office for the first time in ages, and you sit down for a big
[ash_b]: meeting. I've done too in the past
[ash_b]: two weeks, and it actually feels like the appropriate way to use the office
[sloane]: yeah, y.
[ash_b]: like you don't need to be in the office every day. People. I don't want to sit in the
[ash_b]: But like you know, going into the conference room sitting with your folks once a
[ash_b]: month once every two months for a big strategy Seash. that
[ash_b]: feels right. And so I'm calling it, I think people like the new post coveed way of
[ash_b]: doing off sites will be on sites. You'll finally go to the office.
[sloane]: I. I love that idea. So you'd have like firms setting up like their own little tree
[sloane]: houses where they can get people together and like you know, kind of have
[sloane]: like. it'd be more about a hang than than being like, then creating a place for
[sloane]: people to like. Do you know like the kind of work where you? should you like stick
[sloane]: your head to a spreadsheet and figure stuff out?
[ash_b]: exactly. First off. Have I told you that my fantasy with tree houses like I am,
[ash_b]: like this, Isra that you would just call that out? Um, I really want a tree house? I
[ash_b]: love the idea about being up the trees. Uh, that's but, anyways, that's for another
[ash_b]: podcast. I think. Uh, probably not the free money and but then, yeah, I think it
[ash_b]: changes the type of um. office space You even need
[ash_b]: you know? Like why do you? Maybe it makes the case for we work. I don't know what the
[ash_b]: hell it does, but
[ash_b]: it definitely is going to change the way you use office space. and um, you know, much
[ash_b]: more like sharing space, much more like party space.
[ash_b]: Things like that rather than offices with doors,
[ash_b]: you know,
[sloane]: yeah. well, I. what I love about that is it recognizes the nature of work as a
[sloane]: social organism.
[sloane]: You know, Um, like, I mean the now, like so many people are starting jobs that
[sloane]: they'll never meet their coworkers Il, unless those are int. Unless like,
[ash_b]: so true.
[sloane]: it's intentionally and and that's great for diversity in a lot of cases. Right like
[sloane]: that means that you know the the kinds of conversations that like long tenndered
[sloane]: employees have about strategy wind up being on slack and not in person, and
[sloane]: therefore they're accessible to people and you know whatever, but um, you know I do
[sloane]: love this. Uh, this idea of like let's all get together and and like talk for a day.
[ash_b]: Oh, my gosh, Me too. I. it was a blast to actually sit there in a in an office with
[ash_b]: some people, and like you know, shoot the shit, Um,
[sloane]: W. Were you like Hey, so, uh,
[sloane]: you guys like you guys got. think the world's going crazy.
[ash_b]: tons of that like, Hey, how, what's crazy for you? I think this is crazy. It's like
[ash_b]: you forget about the little chit chat you have with coworkers. because the ▁zoom. the
[ash_b]: stakes are too high. You know,
[ash_b]: it's like we're on the ▁zoo. Now this is serious.
[ash_b]: Whereas when you're just like pass people in the hallway, you're like. let me tell
[sloane]: oh yeah, it's a Ods.
[ash_b]: you about this crazy shit that's going on. you know you don't. you don't get that in
[ash_b]: the virtual world.
[sloane]: Yeah, I always that guy's time all day,
[ash_b]: Yeah, anyway, let me get to my news. Now
[sloane]: M. Mhm,
[ash_b]: that was my insight. you're welcome, and uh,
[ash_b]: sorry. the news is quite good. My first bit of news has to do with playing. Follow
[ash_b]: the Leader in the investment world, Um, I saw the Free Money podcast. Reteed This bit
[ash_b]: of news to today, so I'm
[sloane]: you know, if you,
[ash_b]: guessing you might be familiar with it
[sloane]: it. Yeah, if you go ahead and follow out free money for twenty sixty nine on
[sloane]: Twitter, you can actually get ahead of the news cycle. Um, that's one of the things.
[ash_b]: wholly. Should I forgot. We were free money for twenty sixty nine. That is fantastic.
[ash_b]: How do we get the lift to pay for that or that was that available?
[sloane]: Um, yeah, yeah, it's a you know like Dick, and you know, and uh, what's what's this
[sloane]: face? Jack, the see of Twt and I go way back. I mean, so you know,
[ash_b]: sweet swee,
[ash_b]: um, free money for twenty sixty nine. Ah, okay, so follow the leader.
[ash_b]: these organizations that we study in the world, O pensions and Sovereign Funs, et
[ash_b]: cetera they struggle to innovate. They would look to each other, and they just follow
[ash_b]: each other around.
[ash_b]: Um. And in some ways I find that incredibly frustrating. In other ways, it is
[ash_b]: actually pretty interesting to see when one organization finally gets off their ass
[ash_b]: and does something great. All of a sudden, all the others start to follow. And so
[ash_b]: when the University of California divested from fossil fuel, people are like Huh. And
[ash_b]: then when Harvard did it, people were like, Oh,
[ash_b]: and now this week we've got B, U and Mccarthur that have announced they're going to
[ash_b]: divest from fossil fuel. And I think you know that dyke in the Netherlands is leaking
[ash_b]: now and we are about to see a flood of these organizations. Decide that they're going
[ash_b]: to divest out of fossil fuels And those are the moments when you're like shit. Maybe
[ash_b]: I don't want to teach these organizations to be different.
[ash_b]: You know where, like,
[ash_b]: we could take advantage of their dysfunction, Um, in the herding and the follow the
[ash_b]: leader mentality, Because pretty exciting to see these these organizations taking
[ash_b]: that step.
[sloane]: well, and like tactically now, it's a pretty good time to do it. If you're going to
[sloane]: do it. I mean, like the cause. You know you've got this nice bump in, you know those
[sloane]: commodity prices. you know. I guess the Um. you know, the the lexicon is to call it
[sloane]: a dead cat bounce, which you know is not the most
[sloane]: vegan thing. but like you know, if you do believe over a long of time scale that
[sloane]: those things are going away and you see prices behaving Um. And you have perhaps a
[sloane]: multi year process of unwinding some of your positions in privates, and whatever,
[sloane]: Um, you know, I mean like no time like the present to get off the horse, you know,
[sloane]: or get on the horse, or
[ash_b]: exactly. let's get. Maybe we can do one more analogy. A ho, a cat.
[sloane]: I'm working on. I mean, I'm a little. I'm a little under the weather, so I, I don't
[ash_b]: I'll give you to the end of the shell, Giveiv the other of the show to get what more
[sloane]: know. my
[ash_b]: edible refers in here.
[ash_b]: speaking of carbon, not animals, speaking of carbon, Norways, Baheuth,
[ash_b]: the Um. Government pension fund Global, It doesn't manage a pension fund, Just in
[ash_b]: case you're wondering, it used to be called the petroleum fund, but it has one point
[ash_b]: six trillion dollars of capital in it and it is going on The path hasn't come out and
[ash_b]: said it itself yet. I don't think, um to net neutrality, but even more interesting,
[ash_b]: it owns about one percent of every company on Earth
[ash_b]: and it is going to start pushing companies to define their path to net neutral. And
[ash_b]: so you think about this, one of the world's biggest shareholders is. put, the put the
[ash_b]: word out that they need plans from every
[ash_b]: company they hold, which is every company.
[ash_b]: Um, that every company they hold needs to show them a credible plan to net
[ash_b]: neutrality. Very powerful.
[sloane]: that's a huge deal. I mean these, these things are getting raised at a g. M. Now,
[sloane]: Um, by adoacy groups like there's one called as you. So that has
[sloane]: done like you know, Probably three hunt. I feel like starting an active asset
[sloane]: manager makes this a better podcastcause. Now I have a lot more scuttleb about
[ash_b]: Yeah, you know a lot. you know a lot more.
[sloane]: what's happened,
[sloane]: Um, but like, but yeah, like there's so this, this group, as you say, has been
[sloane]: trying to do that on their own forever. Um, and they're they routinely get like six
[sloane]: percent of of the vote and shareholder
[sloane]: resolutions. I think they had like three that passed or ate the past, you know.
[ash_b]: so six percent I should not be impressed by, Is that we are saying that's a bad thing
[sloane]: S. Yeah, yeah, six, six percent of shareholders roote in favor of something is
[sloane]: basically uh.
[ash_b]: you lost.
[sloane]: e. yeah, yeah, yeah, yeah, yeah.
[ash_b]: This isn't like the Nater crowd being like, Dude, we got four per cent. That's not
[sloane]: whoa, were go to put the Libertarian party on the map. Uh
[ash_b]: He was
[sloane]: you? Yeah, well, whatever,
[ash_b]: mix bi. a news
[ash_b]: coming to you from the great City of Saint Louis,
[ash_b]: Universities Endowment did something that I didn't think was possible. It. Basically,
[ash_b]: if I round the numbers correctly, Um doubled last year.
[ash_b]: you know, I'm going
[ash_b]: to do some rounding. I'll admit
[sloane]: it's a slight right. everything.
[ash_b]: that, okay, you know, and I'm rounding one down that I know I'm supposed to round up,
[ash_b]: and then I'm rounding the other one up that I know I'm supposed to round down, but
[ash_b]: I'm defining my own rules on free money
[sloane]: Mhm, Mhm,
[ash_b]: and I basically think it went from eight to sixteen billion in one year, and I am
[ash_b]: just kind of blown away that you can take that much money which was already a big
[ash_b]: eight million, and turning into almost sixteen in a single year.
[sloane]: yup. what. but
[ash_b]: I think we should all be afraid. I think we should all be afraid by that.
[sloane]: well, also I think we should be a little bit delighted. I mean, you know one of the
[sloane]: things I know you love. permanent capital vehicles played a role role in that. Um,
[ash_b]: Oo. go on
[sloane]: you know, one of the Uh Washu is the biggest investor in Uh. Brentb Shore's
[sloane]: permanent capital vehicle.
[sloane]: Um, the you know, which is like, I mean. I remember when he started making noise
[sloane]: about it on Twitter. I was like this man is insane. Uh, you know, I think he started
[sloane]: in twenty twelve or something like that. Um, you know and then our friends had. S.
[sloane]: he's got got on board not too long ago. Um, but I don't know. I don't know how that
[sloane]: coincides with the wash U thing, but like, Um, you got to do weird stuff.
[ash_b]: Well, I probably contributed to the performance. must have contributed.
[sloane]: Yeah, yeah, it's I mean, and it's not by. um.
[sloane]: It's not by being like, Uh, you know, too super conformist If they did that's by
[sloane]: taking some risk.
[ash_b]: Oh, you got to differentiate.
[sloane]: Yep, yup. you got to
[sloane]: differentiate speak. Speaking of different
[ash_b]: It' got a different.
[ash_b]: Speaking of differentiation. What are we talking about?
[sloane]: y, we got the. We have probably the most differentiated guy on Earth in the waiting
[sloane]: room right now.
[ash_b]: Oh perfect.
[sloane]: Uh, the Voss of reason, Uh,
[ash_b]: this is. This is going to be mind blowing to
[ash_b]: many of our listeners.
[sloane]: my f, my former colleague, your current colleague, Theoss of reason, Jason of Paul
[sloane]: of us,
[jason_apollo_voss]: For for of reason,
[sloane]: I can't believe I've never done that before. I can't like. I like. I came up with
[sloane]: that. Uh, in the well, I was you know, getting ready for this to start. Welcome to
[sloane]: the Free Money podcast.
[ash_b]: Hi, Jason.
[jason_apollo_voss]: I, it' superciing to be here honestly, because I haveve watched a couple
[jason_apollo_voss]: of episodes, then also to hear the level of excitement in Sloan's voices.
[jason_apollo_voss]: she describes the broadcast like In what you guys are up to that, I'm
[jason_apollo_voss]: guess the super coal.
[ash_b]: Yeah, we get really excited about the things that we do.
[ash_b]: So there's that part of it, but Jason is awesome to have you here. We're going to get
[ash_b]: into all the wild stuff that you do
[ash_b]: as chief executive officer of data, which we will define in a moment. We're
[ash_b]: not going to define it yet.
[sloane]: the the literal president of Data here President,
[ash_b]: Yes, like if you're a listener. Okay,
[ash_b]: C, e, o of data like that's not it and we are not ▁lying. When we say that and Jason
[ash_b]: will be able to assess that In a moment. You'll see why, But Jason, before we get
[ash_b]: into deception and truth analysis,
[ash_b]: We, you were a fun manager. Yout you've been writing
[ash_b]: like you've been around for a long time, and I didn't realze until part of this this
[ash_b]: show not says we were preparing for you to come on that you' such a big defender of
[ash_b]: active management,
[ash_b]: defender, huge defender of active management, which is fun
[jason_apollo_voss]: not but not broadly. I'm a defender under certain conditions.
[ash_b]: right. so let's under, let dig in and cause we talk a lot about how you know the
[ash_b]: world of private equity is one in which seventy eight percent of Gp's top corrt.
[ash_b]: You know everybody
[ash_b]: is perpetrating like they're adding tons of value. but I want to hear from you. When
[ash_b]: does active management work? And why are you such a staunch defender of it in those
[jason_apollo_voss]: well, I actually like how you thequi with the. What are the criteria?
[jason_apollo_voss]: Because that's exactly the conditions that I put on it. Um, I'm gonna
[jason_apollo_voss]: Ashby, Sloan. You both know me pretty well, but for the audience's sake,
[jason_apollo_voss]: I like to think of things in terms of continuums, and especially
[jason_apollo_voss]: opposites, So on one side we've got qualitative, then we've got
[jason_apollo_voss]: quantitative trying to get in frame. here. Um, so let's serve qualitative
[jason_apollo_voss]: right. All good arguments and logic theory. Say, you start with
[jason_apollo_voss]: assumptions first, So the first, then the qualityative one will just get
[jason_apollo_voss]: out of the way Is. I'm a believer in active management because I'm a
[jason_apollo_voss]: believer in human beings and human potential and human consciousness to
[jason_apollo_voss]: solve crazy problems. In fact, passive investing, index investing is a
[jason_apollo_voss]: human invention, so that's the first thing. But then logically what are
[jason_apollo_voss]: the criteria? Um, actually, No, I'm going to share a metaphor. So I was a
[jason_apollo_voss]: speaker in an event called the fund Form in Boston. I don't know. Six,
[jason_apollo_voss]: seven years ago, it was on the stage. I've written an article talking
[jason_apollo_voss]: about the benchmark tail, wagging the portfolio management dog that
[jason_apollo_voss]: morning. Start picked up, and the organizer of this conference unbeknowns
[jason_apollo_voss]: to me, as well as my guest on stage, which was the Morning Star analyst,
[jason_apollo_voss]: who actually liked my post, but had written a rebuttal for Morningn Star
[jason_apollo_voss]: was on stage, and the organizer had set it up as a debate, and both the
[jason_apollo_voss]: Mo star guy and I thought that that was pretty tacky To sort of throw us
[jason_apollo_voss]: the wols, but we're both prepared. whatever. So anyway, in the ▁q and A,
[jason_apollo_voss]: though I asked the following, I was asked the falling question. Um, are
[jason_apollo_voss]: you believer and active And what? And I said Well, I'm a believer in
[jason_apollo_voss]: active, because I think almost everybody is looking for their keys under
[jason_apollo_voss]: the the uh night light or the street light. Not because that's where the
[jason_apollo_voss]: keys have been lost, but but that's because everybody said that's where
[jason_apollo_voss]: they should be found.
[jason_apollo_voss]: And so
[jason_apollo_voss]: what does that mean And how doess that relate to the criteria? Well,
[jason_apollo_voss]: First of all, I was an active and I had success. Uh, I beat the s. P.
[jason_apollo_voss]: Five hundred, my benchmark by forty nine point one percent, and my career
[jason_apollo_voss]: iss a perennial lipper number one for multiple periods, I still don't see
[jason_apollo_voss]: from my Catbird seat, Uh, being a consultant firms doing what I used to
[jason_apollo_voss]: do. So I know that it's possible I know those techniques work. Because,
[jason_apollo_voss]: when I have worked with firms that are successful as a consultant,
[jason_apollo_voss]: Because, until the first of September, I was C you of Active investor
[jason_apollo_voss]: Management consulting Dot Com, the firms that I work with that are
[jason_apollo_voss]: beating the benchmark, Consistently beating the benchmark are doing very
[jason_apollo_voss]: similar things to what I was doing. So then that says Huh, Maybe we can
[jason_apollo_voss]: trust these criteria. Okay, so what are some of the criteria? Um,
[jason_apollo_voss]: concentrated works well, Uh, conviction works well, M. those things are
[jason_apollo_voss]: somewhat the same assets under their management. Less than two billion
[jason_apollo_voss]: works well, unconstrained works well, There's a perfect. No.
[jason_apollo_voss]: But is it predictive of future outper performance? Yes, that was part
[jason_apollo_voss]: comes from a study that we did for Active, and or I'm sorry, The return
[jason_apollo_voss]: of the active manager? A co authorhur, Burke, I did with Tom Howard, and
[jason_apollo_voss]: we actually did research for the book to support Um. our point of view
[jason_apollo_voss]: because we heard people say. Yeah, I believe in active, but I know how to
[jason_apollo_voss]: identify those managers. I'm just going to sell these Uh index products
[jason_apollo_voss]: because of it, Um. So
[jason_apollo_voss]: the the short answer is, I'm I'm a believer because I know that people
[jason_apollo_voss]: still aren't doing what I did as late as two thousand five, sixteen years
[jason_apollo_voss]: ago, and I can. I'm happy to talk about this criteria. I talk about them
[jason_apollo_voss]: publicly frequently. Um, but one final point, Um,
[jason_apollo_voss]: Because it I, I have to explain my metaphor with the looking for your
[jason_apollo_voss]: keys under the light,
[jason_apollo_voss]: and I'm going to use. I forgive, I'm using another analogy And and it
[jason_apollo_voss]: comes from Return to the act of manager, Yeah, can,
[ash_b]: 's all good. We, before you get on we, we had like seven animal
[ash_b]: analogies, So if you could throw an animal in there
[sloane]: yeah, y, y.
[jason_apollo_voss]: Yeah, exactly
[ash_b]: that would be great.
[ash_b]: that would be great.
[sloane]: yeah, yeah,
[jason_apollo_voss]: I, I. I will. I will throw in a sprinter. How is that somebody who runs
[jason_apollo_voss]: as fast as or faster than Min Anals? So ussain bull, say, whossain ball,
[jason_apollo_voss]: unquestionably the greatest, You, one hundred and two meters, two hundred
[jason_apollo_voss]: meters sprinter of all time, Say you are some one trying to recruit a Uh,
[jason_apollo_voss]: great sprinter for your Olympic track, Teak, right, tough competition. We
[jason_apollo_voss]: can liken it. Investment management, very tough to do is every sprinter,
[jason_apollo_voss]: you sayain, Bo. no, No, they are not, and that isn't the standard. But
[jason_apollo_voss]: imagine the following, Ah, I want Luce Bolts retired so Iward to uh,
[jason_apollo_voss]: somebody who is exactly his same height. I wanted somebody the same
[jason_apollo_voss]: weight. I want somebody who has the same body mass index, his body fat
[jason_apollo_voss]: level. I want somebody who has the same Fastwich muscle responses in his
[jason_apollo_voss]: legs. I would have hired his track coach. Six, I want to hire. I may even
[jason_apollo_voss]: get Nike to make the same custom shoes. They made for Husseain and I, and
[jason_apollo_voss]: maybe I'll even get the same person from the same township to run the
[jason_apollo_voss]: race. Here's that is a metaphor for how active manager is done and the
[jason_apollo_voss]: constraints put on them. You have to be Hussaint Bull, and by a
[jason_apollo_voss]: definition we've said The index is you say. Well, here's the problem.
[jason_apollo_voss]: We've lost sight of something. It's not about being you sain bol, it's
[jason_apollo_voss]: about winning the god damn race.
[sloane]: three, yeah,
[jason_apollo_voss]: to me, that's why I'm a defender of active management is our active
[jason_apollo_voss]: manager is constructed unconsciously. A number of mechanisms designed to
[jason_apollo_voss]: describe performance after the fact that have become navigal compass
[jason_apollo_voss]: points before the fact, and most of the problems of why act of under
[jason_apollo_voss]: performs I would chalk up to,
[jason_apollo_voss]: We will do anything to get the additional dollar of assets under
[jason_apollo_voss]: management that our consultants and our acid owners request of us,
[jason_apollo_voss]: including throw on to the bonfire, our actual ability to deliver Alpha.
[ash_b]: the very fact that we call it Active management. By the way.
[ash_b]: it. It is a very conformous way of describing it because it's it's a function of like
[ash_b]: putting it up against the passive management, and so act in the old days we would
[ash_b]: just call it investing.
[ash_b]: And then we had the passive and now you're active. but oh, you're an active. so
[ash_b]: you're all together over there in active land. The the difference for us is that,
[ash_b]: like I think the three of us would say, the differentiation is where the value comes
[ash_b]: from. and, and so, calling them active, or calling them, whatever the point is, you
[ash_b]: need to be unconstrained and you need to be able to go and and pursue the truth in
[ash_b]: different ways. anyway. I love the way you're describing it.
[jason_apollo_voss]: Yeah, yeah, oh, I'll have one other thing other there. But and I I love
[jason_apollo_voss]: analogies. Both of you know that by now, Um,
[jason_apollo_voss]: creativity enough are essentially the same thing. right Alpha is
[jason_apollo_voss]: delivering results that nobody else is doing by doing things that nobody
[jason_apollo_voss]: else is doing. And by the way, creativity has the same definition. One of
[jason_apollo_voss]: the things that I used to do was I wanted as many options on the table as
[jason_apollo_voss]: possible to unleash my creativity. How creative is it when you are a
[jason_apollo_voss]: midcap core manager? and if you've done your job well and your assets
[jason_apollo_voss]: appreciate, you may have ▁zero turnover, but eventually you're going to
[jason_apollo_voss]: drift up into large cap value. you're going to have a consultant call you
[jason_apollo_voss]: up and say you know what you've got. Style drift. You know you guys need
[jason_apollo_voss]: to manage this or we're going to fire you. Oh, by the way, that's twenty
[jason_apollo_voss]: percent of your a U. M that it's going to go out the door, and so now
[jason_apollo_voss]: we're going to have to lay off the two hundred uh, customer service. C.
[jason_apollo_voss]: you know representatives that we've got in part of the compliance
[jason_apollo_voss]: department and the real world consequences to style drift. That has
[jason_apollo_voss]: nothing to do with seeking performance. So to me that's that's why I'm a
[jason_apollo_voss]: believer in active now. If I were starting affrm today, I would not want
[jason_apollo_voss]: to scale it, I would start with a different business model. I think all
[jason_apollo_voss]: of these things are rooted in the business model of the business is
[jason_apollo_voss]: management fee, a percentage of the assets under management. If you had
[sloane]: mm, Hm. Well, so
[jason_apollo_voss]: it performance based,
[jason_apollo_voss]: nobody would make the decisions to scale up their assets because every p.
[jason_apollo_voss]: M, who's ever managed money actively at the bar, they will all say well,
[jason_apollo_voss]: it's a pain of the butt. It's really hard to do it, and your three
[jason_apollo_voss]: hundred and third favorite security is not likely to deliver the same
[jason_apollo_voss]: outf as your top ten. and the data shows that
[jason_apollo_voss]: and the only reason I buy the three hundred and third position in my
[jason_apollo_voss]: portfolio, you know, be less less condescending my hundred and third
[jason_apollo_voss]: largest position. The only reason I do is I have to soak up assets in
[jason_apollo_voss]: cash that's been sent to me because the way I make money is a bigger pile
[jason_apollo_voss]: of cash as opposed to uh, actually delivering performance.
[sloane]: hm. I mean. Well, you know that's that gets right to the next question. I mean, like
[sloane]: you know, I, I think that you know investors in general if you go to them and you're
[sloane]: like Hey, you guys have and you've kind of done this like you've taken your like
[sloane]: ninety five theseis, and like you know, pin them to the front door, Uh, various, you
[sloane]: know, uh investment industry, um cathedrals, And you know, and sort of said he, you
[sloane]: know, Hey, like look, I mean this is. this is the metaphor show guys. Everyone loves
[sloane]: but you know, I mean that's one of the big big blind spots right there is optimizing
[sloane]: for fee income. Um, you know, I wonder like, are there any other unifying
[sloane]: characteristics that you would kind of point you if you think about, you know things
[sloane]: that the investment profession is just not set up to deal with wealth?
[jason_apollo_voss]: Well, I mean, that's a huge one, right. So if that were changed and were
[jason_apollo_voss]: performance driven, you would see the immediate
[jason_apollo_voss]: loss of a u. M in the ▁quot active categories because people who have
[jason_apollo_voss]: been closet indexers or just barely fail Ors, For you know, ten years
[jason_apollo_voss]: would leave the business and what they would do is they would consolidate
[jason_apollo_voss]: with other managers. scale and slow. You and I wrote about this
[jason_apollo_voss]: investment idea generation guide, Or I'm sorry, we, We did work for a
[jason_apollo_voss]: future state of investment profession. My apologies for C F. A institute,
[jason_apollo_voss]: but we use scenario planning thinking to do this. What does the world
[jason_apollo_voss]: look like? Fast forward seven to ten years in theveestel business? And we
[jason_apollo_voss]: said there'd be massive consolidation. What would be left are Act
[jason_apollo_voss]: manager? You actually could do what they do. The consolidators will cut
[jason_apollo_voss]: their fees lower, lower, lower, lower, and essentially they're going to
[jason_apollo_voss]: look for ways to compete. The prediction of future, Sayve, the investment
[jason_apollo_voss]: profession that I argued, and it was really hard to get in. Uh, it was
[jason_apollo_voss]: kind of an over my dead body. If this doesn't get in, I said that we
[jason_apollo_voss]: would see
[jason_apollo_voss]: Uh, fund management offered as a lost leader,
[jason_apollo_voss]: and like twenty four months later Fidelity came out and offered ▁zero
[jason_apollo_voss]: In thats what Management and I said. What they will try to do is add on
[ash_b]: Yeah, I'
[jason_apollo_voss]: higher value ad services. And because of computing, because of a I,
[jason_apollo_voss]: because of big data scraping all that stuff, you can offer a high touch
[jason_apollo_voss]: private wealth client to a smaller a U M client than you were before. My
[jason_apollo_voss]: prediction is we're going to see lots of consolidation and the small and
[jason_apollo_voss]: medium sized clients are going to get better service than they ever have
[jason_apollo_voss]: been before. And they'm not talking about some of the the robos, Um.
[jason_apollo_voss]: That's a whole, another subject. But anyway, Um, and I and I think what
[jason_apollo_voss]: youre couldnna have left is an active category that has different
[jason_apollo_voss]: business models. They're going to say, you know what we can't compete
[jason_apollo_voss]: here. Interesting, Stat'll throw out because this is a. This is such a
[jason_apollo_voss]: fun topic and a passion. One. For me, Um, you would think that the
[jason_apollo_voss]: highest fee charging managers. Oh, I'm sorry, you would think the best
[jason_apollo_voss]: performing managers, the most consistently good performing managers would
[jason_apollo_voss]: have low fees. It's actually the opposite. They charge the highest fees
[jason_apollo_voss]: because they recognize the value of research. That was research that we
[jason_apollo_voss]: did for Return of the Active Manager that we published in the book, And
[jason_apollo_voss]: it's on. I think, s. s r N. if I'm not mistaken, and we thought that was
[jason_apollo_voss]: quite interesting. Somebody else did a follow piece of research and they
[jason_apollo_voss]: confirmed the same thing. The best performing managers have the highest
[jason_apollo_voss]: fees and that runs completely contrary to what people believe, but it
[jason_apollo_voss]: again shows charge for performance and that that's a more
[jason_apollo_voss]: correct business model.
[sloane]: It that also kind of underpins like you know what you know, a view of what investing
[sloane]: is right. Like you know, Th. Those guys are charging higher fees because they have
[sloane]: process thats outside of the the the traditional. You know way of doing things that
[sloane]: that creates results that are outside of the traditional way of doing things, and
[sloane]: that allows them to justify. You know this sort of thing, I think Steve Cohen
[sloane]: famously charge like four and forty for a while, or rent, maybe charges four and
[sloane]: forty or something like that.
[jason_apollo_voss]: Ford Forty, that's good. get my answerk. One last thing. I know, we got a
[jason_apollo_voss]: lot to cover, and
[sloane]: Absolutely not. No, yes, you what you want?
[jason_apollo_voss]: it asy is a as a, a full disclosure founding advisor of data wants me to
[jason_apollo_voss]: talk data. Oh, this
[jason_apollo_voss]: is ancient industry.
[jason_apollo_voss]: Well, well, so the the other thing I'll say, Uh about active is it's not
[jason_apollo_voss]: it's even harder. still if you agree to all these unnecessary own goals
[jason_apollo_voss]: and to going back to the Fun forum thing in Boston. I gave the the
[jason_apollo_voss]: analogy you know, with the looking for the keys, cent of the light and a
[jason_apollo_voss]: guy the guys follow. Question to me was the following. he said. Well, how
[jason_apollo_voss]: do you compete when? Uh, everybody in the universe now looks at, you
[jason_apollo_voss]: know, the large cap stocks in the United States already have bad value
[jason_apollo_voss]: and I said I hope that every single one of my computeretors thinks that's
[jason_apollo_voss]: the problem to solve.
[jason_apollo_voss]: The problem to
[jason_apollo_voss]: solved is define return wherever it exists, and by the way, that is what
[jason_apollo_voss]: the fund management industry was, prior to Famma and French saying,
[jason_apollo_voss]: identifying two unique factors, the small cap effect and the value
[jason_apollo_voss]: effect, which then literally not for return to the act of Bandro, I traed
[jason_apollo_voss]: the history like two months after Farm and French in Chicago.
[jason_apollo_voss]: At their there, they had some event I, that which they still host
[jason_apollo_voss]: occasionally, Um, where they talk about. You know anomalies within the
[jason_apollo_voss]: official market hypothesis and they, anyway, they revealed these two to
[jason_apollo_voss]: greatate claim in Nineteen ninety Two two months later, Morning Star,
[jason_apollo_voss]: also in Chicago. I'm guessing they' in attendance I' tried to confirm. it
[jason_apollo_voss]: released the style boox with Guess what, and essentially this was meant
[jason_apollo_voss]: to describe the Starbucks was how performance is delivered by managers.
[jason_apollo_voss]: Because the progenitors of the official market hypothesis, Sonoa,
[jason_apollo_voss]: acknowledg, You can't add value. These are the two ways how, and we're
[jason_apollo_voss]: stuck now with the style Boox and it is illegitimate. So reasons, it's
[jason_apollo_voss]: such a passiono. Last thing I said, this is the third time I said last
[jason_apollo_voss]: thing, both axes, proof that it's illegitimate. Both actxes have price of
[jason_apollo_voss]: the securities that the measure of both axes. So what that means is both
[jason_apollo_voss]: of them are superp sensitive. Tell you what
[jason_apollo_voss]: independent measures of the same if different phenomena, wouldn't that
[jason_apollo_voss]: alone, tell you that it's illegitimate.
[jason_apollo_voss]: Just just logically
[ash_b]: yeah, and if cre, if creativity is alpha, you've now been stuck in a box like.
[ash_b]: Where's the creativity?
[jason_apollo_voss]: I don't. I'll I. I will smack my gob. I learned today, The God Smack
[jason_apollo_voss]: literally means to like, cover your mouth right, some Fx gopsma.
[sloane]: Well, no, hey', I mean,
[ash_b]: Thank you, Thank you,
[sloane]: I guess I have a related question before we get the data, which is, have you ever
[sloane]: had a lukewarm opinion? Jason.
[jason_apollo_voss]: I did it earlier today. I was I. I. I'm winding up my consulting career
[jason_apollo_voss]: and I was talking to a consultant and they asked me how how to discuss a
[jason_apollo_voss]: difficult subject. Guess what with their consulting community and I said,
[jason_apollo_voss]: I don't know. I said I said I'm fifty fifty Either way, so that's your
[jason_apollo_voss]: judgment, so yes, I do. I have Luke form opinions, but I'm privileged
[jason_apollo_voss]: because people, I guess either like what that I'm loud, or whatever they
[jason_apollo_voss]: it is they like about me that I'm invited into the forms where I get to
[jason_apollo_voss]: talk about the things I do have strong opinions about.
[sloane]: Yep. well, and like I mean, so this is. You know what we've been leading up to.
[sloane]: Let's talk about data. I mean, like I, you know, I am old enough to remember. I've
[sloane]: known you for long enough to uh, remember you like selling doing some lie detection
[sloane]: research internally. It. see if institute as like a thing that was worth your time.
[sloane]: But can you maybe characterize like what the heck people thought about it? What was
[sloane]: published when you got to it and what's changed in the last five years in terms of
[sloane]: like you know, professional practical understanding of this stuff?
[ash_b]: and defined data so that we can
[sloane]: Oh yeah,
[ash_b]: find late. Yeah,
[jason_apollo_voss]: Yeah, guess so data that Ashby Sloan are referring to Deception of truth
[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
[jason_apollo_voss]: of first of September, though I'm winding down previous commitments. Uh,
[jason_apollo_voss]: and it? It's a company where we use computers, specifically natural
[jason_apollo_voss]: language processing to quickly and rapidly assess the level of
[jason_apollo_voss]: deceptiveness or truthfulness within a document. We can ▁zero in within
[jason_apollo_voss]: like you, like four pages. Uh, within a document of where the deception
[jason_apollo_voss]: is in the language That trigger triggered our egos. Um. So anyway, going
[jason_apollo_voss]: back to c f a institute? Yeah, th. it was actually slung when I chose to
[jason_apollo_voss]: exit retirement. I don't know. To what degree this has really sort of
[jason_apollo_voss]: been widely discussed in a public forum before, and I don't even know
[jason_apollo_voss]: that you know it'slo But I chose to exit retirement. I was a happy you
[jason_apollo_voss]: know, uh, pickup football basketball, uh player, and published a
[jason_apollo_voss]: investment blog mostly to deflect uh, relatives and friends asking me
[jason_apollo_voss]: investment questions. Like if I put on a blog, I can just say read the
[jason_apollo_voss]: blog. Um, and to to preserve, you know, my pickup football games, and
[jason_apollo_voss]: what have you? Um? so anyway, um, during the financial crisis, though uh
[jason_apollo_voss]: dawn, my wife and I were watching television and there was a Perp walk
[jason_apollo_voss]: and they were walking out some finance executive. Uh, to to you know,
[jason_apollo_voss]: they were arrested and I said we're all the good people in finance. I
[jason_apollo_voss]: said I, You know, I've been in finance at that point twenty years, or how
[jason_apollo_voss]: many years it had been? They said there are good people in finance. In
[jason_apollo_voss]: fact, most of them are Renaissance human beings that are curious, broadly
[jason_apollo_voss]: interested in the world, trying to do things right, trying to change
[jason_apollo_voss]: things, Et cetera And she goes,
[jason_apollo_voss]: and I was like. Are are you talking to me And she's like
[jason_apollo_voss]: And I was like Point taken. Yeah, I. I. I guess I'm one of supposedly
[jason_apollo_voss]: good people in finance and I'm just yelling at this T. v doing nothing.
[jason_apollo_voss]: And so I was like, Okay, Well, where can I have influence? And where can
[jason_apollo_voss]: I have platform without necessarily being a fund manager again, which I
[jason_apollo_voss]: wasn't interested in. So I was looking around for jobs. I was thinking
[jason_apollo_voss]: about writing a book. I did write a book. Um, and I saw. I went to the c.
[jason_apollo_voss]: F. A Institute Jobs Board and see if Institute was advertising for the
[jason_apollo_voss]: role of content director, which you know, Uh, both of you, I think that
[jason_apollo_voss]: I, I held that role. That's where I'm att, Sloan, as content,
[jason_apollo_voss]: directctory, fancy, And what appealed to me about that role was something
[jason_apollo_voss]: to the effect of Um. Your job is to make members wiser or smarter. Uh, by
[jason_apollo_voss]: identifying compelling investment ideas or speakers that are new and
[jason_apollo_voss]: cutting edge and you know, feature them througho. you know distribution
[jason_apollo_voss]: of as well as if there, subjects you think should be being talked about,
[jason_apollo_voss]: but aren't you? You are charged with developing that and the original job
[jason_apollo_voss]: description and something like that. I was like. That is what I'm looking
[jason_apollo_voss]: to do and I've you know, Call Ashby, knows this about me better than you
[jason_apollo_voss]: do. Sloane, uh, I, I like the Jeddi K nights. I always kind of saw a C if
[jason_apollo_voss]: they introduceed
[jason_apollo_voss]: the Jatites, But
[sloane]: I mean, yeah. you know before you start working there,
[jason_apollo_voss]: yeah, exactly, and then I kind of thought they were the Catholic Church,
[jason_apollo_voss]: but that's the whole mother story. Um, you know, they're similar, right,
[jason_apollo_voss]: right, A correct genderating orders
[ash_b]: I think Ana and Sky Walkaler had the same reaction.
[jason_apollo_voss]: Toche th t th. But anyway I joint see iff to literally, day two, Uh of me
[jason_apollo_voss]: joining. I sent an email to Rob Gown, who was Uh you. At one point four,
[jason_apollo_voss]: both of our supervisors, uh, Sn to mine, and I said, uh, my detection, I
[jason_apollo_voss]: think is a uh skill. I said, We are super dependent upon the statemention
[jason_apollo_voss]: forth from the mouths of management of businesses, and we have no skill
[jason_apollo_voss]: set on how to do this. At the very least we should develop. We should
[jason_apollo_voss]: work with people on how do you interview people or something, And I was
[jason_apollo_voss]: interested in a whole suite of interview techniques, and literally, like
[jason_apollo_voss]: four weeks later I started working with Doctor Maria Hartwig, one of the
[jason_apollo_voss]: few deception scientists in the world. There, Not a lot. And we we sa
[jason_apollo_voss]: down. We outline like if we want to change the world through lie
[jason_apollo_voss]: detection, What do we have to do And over Luunnch at Landmark at Uh,
[jason_apollo_voss]: Columbus Circle and Central Park South, Uh, the restaurant. We, on a
[jason_apollo_voss]: napkin, outlined what we wanted to do, and so it's a subject I've always
[jason_apollo_voss]: been interested in from my days as a fund manager, and then in the last
[jason_apollo_voss]: couple of years I in, in my being a deception scientist and a published
[jason_apollo_voss]: deception scientist, I knew that there you could use computing to to
[jason_apollo_voss]: solve this problem. And uh, so, a couple of years ago I had a venture
[jason_apollo_voss]: capital consulting client. say hey, we're getting burned by our hires. We
[jason_apollo_voss]: keep hiring people who have fibbed on there in the recruiting process.
[jason_apollo_voss]: Can you help me? And so that's how data started? Whereas I developed
[jason_apollo_voss]: something based on reading the scientific literature and applying my own.
[jason_apollo_voss]: I don't know how to characterize Uss. Here's a lukewarm opinion. Um. I
[jason_apollo_voss]: would call myself Uh, mildly quantity, you know. And so I applied what I
[jason_apollo_voss]: know from how to solve quap
[jason_apollo_voss]: problems in investing to what the academics are doing, and sort of
[jason_apollo_voss]: developed data, and it's evolved over time. but like I did it fairly
[jason_apollo_voss]: quickly, like in a couple of weekends I had an algorithm ready that
[jason_apollo_voss]: actually s helped them solve their problems. So that's the the long long
[jason_apollo_voss]: story there.
[ash_b]: What? just for the like, the benefit of everybody out there that is wondering what
[ash_b]: the heck these algorithms are tracking. What is the difference between deception and
[ash_b]: ▁lying? And what? Like what it is the algorithm doing That's better than others. And
[ash_b]: how much better is it? Just give us some more contexts. There.
[jason_apollo_voss]: Yeah, so so thank you for asking. Um, So W, Technically we're looking at
[jason_apollo_voss]: what it call psycho linguistic ▁ cues, which are essentially behaviors of
[jason_apollo_voss]: an individual revealed through their language use. So a, as an example,
[jason_apollo_voss]: when asked to recall a memory, Uh, truth tellers reference in actual
[jason_apollo_voss]: memory, and usually it's a memory of them moving through time and space,
[jason_apollo_voss]: And so they use uh, motion verbs, and they use time oriented verbs like
[jason_apollo_voss]: before, After sense. You know those kinds of things later. Uh, liars
[jason_apollo_voss]: manufacture it and they're abstracting and they don't use those kinds of
[jason_apollo_voss]: details. So that that's a a difference you know between lawers and twof
[jason_apollo_voss]: and data we're looking at more than thirty of those psycho linguistic ▁
[jason_apollo_voss]: cues, all of which have
[jason_apollo_voss]: been Uh, identified as statistically significant, Um. The difference
[jason_apollo_voss]: between liars and deceivers or lies and deception is something actually
[jason_apollo_voss]: that the academics uh, obsess over, and they've been a great lenks to
[jason_apollo_voss]: define what technically is a lie. The difference in deception, Lie is
[jason_apollo_voss]: sort of uh, intent and damage done. So,
[jason_apollo_voss]: for example, uh, if if your spouse or significant other says, do I look
[jason_apollo_voss]: good in this outfit for the evening,
[jason_apollo_voss]: and do you say yes? But you really mean no. the academics would say
[jason_apollo_voss]: That's really more about deception than a lie. And the reason why is it
[jason_apollo_voss]: benefits both parties
[jason_apollo_voss]: that that that whye actually benefits your your supposedly sensitive
[jason_apollo_voss]: spouse, Though they didn't get a vote. Uh, really, and it protects you as
[jason_apollo_voss]: well. Um, Whereass a lot of benefits only one party. So that's one of the
[jason_apollo_voss]: technical ways that they've tried to draw the line and say this is bad.
[jason_apollo_voss]: This is semi bad, but not entirely bad. you know. Um, so that's that's
[jason_apollo_voss]: That's the academic way of describing them. Oh, oh, you askedk me about
[jason_apollo_voss]: improvement. So, um, uh, data, Uh, there, there' a a piece of research
[jason_apollo_voss]: done in January this year that looked at expert's ability to surface
[jason_apollo_voss]: deception by reading texts of any kind, Right, and they and I, I don't
[jason_apollo_voss]: remember. the. S. what? What the variety was in the sample Like? Was it
[jason_apollo_voss]: scientific papers? essays? I, I don't remember, but they human beings
[jason_apollo_voss]: came in at exactly fifty percent accurate in surfacing deception, So here
[jason_apollo_voss]: Ive got a I've got an old fiftypence or fifty shilling point Here my
[jason_apollo_voss]: desk. I like it because they have seven sides anyway.
[jason_apollo_voss]: fifty percent is flipping that coin rank. It's not very good. Uh data. We
[jason_apollo_voss]: are eighty seven a half percent accurate for word samples of eight
[jason_apollo_voss]: hundred and fifty, Um, and we're able to assess much much faster. We're
[jason_apollo_voss]: ninety, nine point nine, nine, seven percent faster than people. Based on
[jason_apollo_voss]: clock speed tests, we've done. Um. Humans can read about a hundred and
[jason_apollo_voss]: twenty five words a second. We can assess seventy thousand four hundred
[jason_apollo_voss]: words per second and with a much higher accuracy, so that that's why this
[ash_b]: some of the. I feel like there was a story in a news outlet recently about Uh ensurer
[jason_apollo_voss]: is incing.
[ash_b]: that was claiming to use facial, um, recognition software to spot fraudulent
[ash_b]: Is that a good technology? like?
[ash_b]: How should we think about all? Are you guys like that technology?
[ash_b]: You guys? I mean, are we, are we?
[jason_apollo_voss]: No, yeah, yeah, exact talk. I, That's a tea ball question. That's almost
[jason_apollo_voss]: like Jason. You're a supportive active management kind of a question.
[jason_apollo_voss]: So so no, the a.
[ash_b]: we. we have already established that bias. Here
[sloane]: Yeah, I mean this is the. This is the unofficial title of his spotcast is the
[sloane]: related party
[sloane]: transaction or the related party podcast?
[ash_b]: we are all,
[ash_b]: and we have a pirate at the top that talks about all the conflicts we have, So
[jason_apollo_voss]: Oh yeah, what? so what? we'? We're letying the bare right, which is
[jason_apollo_voss]: better than many. Do, uh, let let's just be Uh, full confession. Um, so
[jason_apollo_voss]: no, um, the academic literature. Sh, And it. it started Nineteen fifty
[jason_apollo_voss]: eight, which is looking at facial takegs, body language, vocal
[jason_apollo_voss]: intonation, All that kind of jazz and literally hundreds of these things
[jason_apollo_voss]: have been examined Starting nineteen fifty eight and the global average
[jason_apollo_voss]: has revealed the meta analysis, which is a study of studies is fif four
[jason_apollo_voss]: per cent, and in investments, Uh, which is the research I did with Maria,
[jason_apollo_voss]: Uh, which was a resulting a journal, behavior, Fiance article in finances
[jason_apollo_voss]: were even worse. We're just fifty one point eight percent accurate. Uh,
[jason_apollo_voss]: when we rely on these kinds of ▁ cues, and by the way, we're even worse
[jason_apollo_voss]: than that because we're only fifty one point eight percent accurate
[jason_apollo_voss]: because we have an over sixty percent truth byas, So because we guess
[jason_apollo_voss]: truth way more than we should, we' really right on the truths, but were
[jason_apollo_voss]: really wrong on when somebody iss deceiving, Um, So anyway, uh, no, the
[jason_apollo_voss]: facial recognition that this insurance company is using. Most likely the
[jason_apollo_voss]: software is picking up on the facial cues. The promise is too twofold.
[jason_apollo_voss]: Either those cues are not uniquely associated with deception or ▁ly,
[jason_apollo_voss]: which is the bigger of the problems, or too, they are so subtle is to
[jason_apollo_voss]: defy capturing the former. The the accused not being adgor of ▁lying is
[jason_apollo_voss]: the bigger one. That theory of using body language, their multiple
[jason_apollo_voss]: assumptions In the theory, one of them is that as the liars feel anxiety
[jason_apollo_voss]: when they lie, and if we look for or we create conditions under which you
[jason_apollo_voss]: feel greater anxiety, we create a gap between the truth teller and the
[jason_apollo_voss]: deceiver, such that the deception is more noticeable, so I think they're
[jason_apollo_voss]: probably. If they're picking up on anything accurately, they're picking
[jason_apollo_voss]: up on anxiety. but anxiety is not the same thing as deception. So for
[jason_apollo_voss]: example, in a job interview or on a podcast, if somebody's examining
[jason_apollo_voss]: right now, if I weren't as polished as I am, have done a lot of this. Is
[jason_apollo_voss]: it possible I would feel anxious? Yeah, is that necessarily
[jason_apollo_voss]: the case? I be deceiving, No, Is
[jason_apollo_voss]: it true in a job interview that I might be anxious? Yes, and by the way,
[jason_apollo_voss]: some of these technologies they are being used are used in job
[jason_apollo_voss]: interviews? Some organizations are using ▁zoo exclusively to see if job
[jason_apollo_voss]: candids are deceiving them. I couldn't be more disheartened Honestly, And
[jason_apollo_voss]: then the last misuse of this
[jason_apollo_voss]: is. Uh. Police departments have wrongfully convicted people for a long
[jason_apollo_voss]: time because they've read these ▁ cues and they've been trained on these
[jason_apollo_voss]: cues and they think that they are seeing deception Uh in these settings
[jason_apollo_voss]: when what they're really reading is anxiety. And I'll tell you what if
[jason_apollo_voss]: you've ever been questioned by the police, Uh, when we lived in New York,
[jason_apollo_voss]: Sn. I know you live in New York. I don't know if the police have ever
[jason_apollo_voss]: knocked on your door to ask you questions about A.
[sloane]: they wouldn't dare,
[jason_apollo_voss]: I'm sorry.
[sloane]: they wouldn't dare.
[ash_b]: it's tell a dare sloide's, until they di.
[jason_apollo_voss]: What you explore that way have to explore. I'm not sure why they would'
[jason_apollo_voss]: dare, I don't have. I don't see as a prime imment to sort of a person.
[jason_apollo_voss]: but anyway, when theynocked on our door because there' been like a theft
[jason_apollo_voss]: in our building, our apartment building like I got nervous like I'm like.
[jason_apollo_voss]: Well, why are they asking me? You know I hadn't didn anything
[jason_apollo_voss]: to do soway I think with the police question, you have reason to being
[sloane]: well, and you know one of the things that I love about you know how data works is
[sloane]: distinct from Mo. Those other technologyno work is you know, the cultural you know.
[sloane]: Uh, underpinning of a habit is very difficult to kind of
[sloane]: program some aggregate level logic to encapsulate right. So like Navajo. Uh, folks,
[sloane]: for for instance, really don't like to make eye contact on speaking. Um, you know,
[sloane]: and like that, those there are, you know, all sorts of differences like that. I mean
[sloane]: it. It seems a little bit like a modern phonology, you know, Like the. That's the.
[sloane]: you know, the antiquated discredited science where people are using scull shap to
[sloane]: denote uh, criminality or whatever, to kind of use just like a video, And assume
[sloane]: that the robot can like magically tell. I mean, I. I. I don't know for a fact, but I
[sloane]: would imagine that a lot of white people seem to be telling the truth and a lot a
[sloane]: lot of black people seem not to be telling the truth on those videos.
[jason_apollo_voss]: slow. I'm going to steal Phnology. You have just uh, revealed to me a
[jason_apollo_voss]: very good way of explaining why body language doesn't work in one fellow
[jason_apollo_voss]: swoop that said, Upstairs in our bathroom I, my mom just gave Da and me
[jason_apollo_voss]: as a an anniversary or no, it was Donw's birthday. Uh, cat phronology
[jason_apollo_voss]: little statue, which we have sitting in our powder room, which is
[sloane]: Oh, I love that. That's amazing.
[jason_apollo_voss]: Anyway, not a believer, but, but, but, uh, I do have a phreology cat
[jason_apollo_voss]: statue My my powder room.
[sloane]: Yeah, like a, as a bit as a bit. Um, The. so I guess you know my last question and
[sloane]: there's a ▁zillion things we can talk about. But like you know, I, I can imagine
[sloane]: some ways that I could use uh data to you know, assess investment decisions right,
[sloane]: like I've had. I mean just this like I have a c, e, O, say something in writing, and
[sloane]: then it turned out that they don't. really. You know. I think the S think you know
[sloane]: in terms of their actions, The you know that the statements startly translated
[sloane]: action, And you know I could see it being useful for that. But how how do you
[sloane]: imagine Um data being used? Uh, you know by investment managers by the public at
[sloane]: large. Um, and like, who's your client?
[jason_apollo_voss]: Yeah, great question. When we sat down to think of use cases, Uh, we came
[jason_apollo_voss]: up with like over forty just within investing. I think the biggest one is
[jason_apollo_voss]: W. and this ties both parts of our conversation together. Right. We're
[jason_apollo_voss]: talking about a consolidation within the active investment management
[jason_apollo_voss]: business. Uh, and necessarily, those who want to remain active are going
[jason_apollo_voss]: to. Unless they change a business model, they're going to try and c their
[jason_apollo_voss]: expense ratio, but still deliver world class research result. So the
[jason_apollo_voss]: first in primary use case is a Um. focusing of your human based
[jason_apollo_voss]: intelligent resources onto the core problems. I think we would all agree
[jason_apollo_voss]: as a pres screen on our entire investment universe. We'd like to
[jason_apollo_voss]: eliminate all companies. They arere tempting to deceive, or
[jason_apollo_voss]: especially to lie to us. And so I think that's probably the primary use
[jason_apollo_voss]: case in a massive time saver, and it gives you confidence of in a new way
[jason_apollo_voss]: that your universe at least doesn't suffer from that Right now. It can
[jason_apollo_voss]: focus on other questions, like competitive advantage. Do you know? Are
[jason_apollo_voss]: they is the strategy? the business expanding the Moes is the management
[jason_apollo_voss]: team, the proper management team to execute the vision of the business.
[jason_apollo_voss]: Uh, are they properly uh, investing in things to deliver R o, i C, return
[jason_apollo_voss]: on investor capital. Um,
[jason_apollo_voss]: are are they uh, a good e, s, G candidate. Are they a good corporate
[jason_apollo_voss]: actor? You know. whatever your it is, you're worrying about another one
[jason_apollo_voss]: would be as a one time sort of uh, cleanliness test of your existing
[jason_apollo_voss]: universe. right? The average number of portfolio holdings I think is a
[jason_apollo_voss]: hundred and ten. Last I looked at that data, It's It's some big number
[jason_apollo_voss]: and so I'm guessing there's something lurking in that portfolio you don't
[jason_apollo_voss]: necessarily want in there. Um, and wouldn't you like to be able to uh,
[jason_apollo_voss]: ask better questions of those, c, e Os, or just outright cell, but it
[jason_apollo_voss]: could also be used as an investment, uh idea generator for a hedge fund
[jason_apollo_voss]: that does shorting, for example, if I'm a shorter, I want to know these
[jason_apollo_voss]: about the level of deception before the rest of the market does, and now
[jason_apollo_voss]: it can scour a much bigger universe and turn my Uh,
[jason_apollo_voss]: financial statement, an analyst expert, uh to to that problem based on a
[jason_apollo_voss]: universe of probably very highly likely already committing fraud, Uh. And
[jason_apollo_voss]: by the way, there's almost no competition for what we're doing, So you're
[jason_apollo_voss]: go to be looking at a universe that maybe nobody else is, anyway. I could
[jason_apollo_voss]: go on and on. Um, you know Ashby. I know you serve on a number of Uh
[jason_apollo_voss]: boards and advised pensions. How about just examining like the board
[jason_apollo_voss]: book, right? I?
[ash_b]: yeah, yeah,
[jason_apollo_voss]: I used to deliver the board book and those board books. Are you know,
[jason_apollo_voss]: like eight hundred pages? Sometimes, uh, and I guarantee you no board
[jason_apollo_voss]: member really reads every page. I bet they'd really like to ask
[jason_apollo_voss]: thoughtful intelligent questions, but they don't even know where to
[jason_apollo_voss]: begin. And so they're forced to sample that book. Usually it'd send a
[jason_apollo_voss]: week ahead of time. They're forced to sample the book. Wouldn't it be
[jason_apollo_voss]: nice to actually ask great questions on the key issue and the key areas?
[ash_b]: absolutely. What a great use case. Um. you know, because a a lot of times management
[ash_b]: of pension funds will inundate the board with so much information,
[ash_b]: because then they can say well, you had the data, you know, and by data, I mean, just
[ash_b]: like endless amounts of quantitative facts, and you know descriptive text around it.
[ash_b]: If we could use the data algorithms in order to pinpoint deceptive text in that eight
[ash_b]: hundred pages, Yeah, could really help boards spend time on things that are
[jason_apollo_voss]: Yeah, and like in a v C, and like, everybody goes to the private market
[jason_apollo_voss]: or ors, the public market space, which I did naturally because I used to
[jason_apollo_voss]: certain you know, compete in public markets, But think of the value in
[jason_apollo_voss]: public markets with bond inventures. every bond issue is unique, Um, and
[jason_apollo_voss]: a company may issue forty bonds like you, look at the cap table. In the
[jason_apollo_voss]: bond footnote of many publicly traded firms, there may be sixty pieces of
[jason_apollo_voss]: debt that they have issued for some of the bigger firms. Good luck
[jason_apollo_voss]: reading through those adventures to see what. what bad news they've
[jason_apollo_voss]: buried in the indenture. Who knows right so. but now, look at the private
[jason_apollo_voss]: markets, look at like v. C. look at private equity. as when you mentioned
[ash_b]: Yeah, yeah,
[jason_apollo_voss]: E, there is no public market mechanism. There is sometimes no auditing
[jason_apollo_voss]: mechanism for looking at financial results. Um. And so what do you turn
[jason_apollo_voss]: to in those situations? and by the way right now, V C. there's so much
[jason_apollo_voss]: capital in these funds. Thank you very much. I'm grateful for that fact.
[jason_apollo_voss]: Um. but there's so much capital there. Do you really have time to
[jason_apollo_voss]: underwrite deals with the same level of scrutiny that you did ten years
[jason_apollo_voss]: ago? Probably
[ash_b]: and they have to move so much faster. I mean, because we're the top of the market and
[ash_b]: the entrepreneurs get to dictate terms in many cases, And so the Vcs are making
[ash_b]: commitments in two days instead of two weeks.
[ash_b]: yeah, by almost by definition I have to cut corners. And so you expect four years
[ash_b]: from now that you know the next decades Fairnoe will have emerged in this time period
[ash_b]: and we just don't know it,
[jason_apollo_voss]: Yeah, I think that's that's a fair point, so I think it's slowly. Answer
[jason_apollo_voss]: to question. I think there' a lots of use cases, but we havent talked
[jason_apollo_voss]: about like auditing. Uh, we haven't talked about insurance adjusting. we
[jason_apollo_voss]: haven't talked about content. moderational.
[ash_b]: ex, exfriends, ex boyfriendrry,
[jason_apollo_voss]: No, absolutely not. Yes's, a good good point. Yeah, W. one of the things
[jason_apollo_voss]: I'm really sensitive about is that phys. Yeah, no, No, it's all good.
[jason_apollo_voss]: Another te baall question. Um, it could really be misused right, Um,
[jason_apollo_voss]: we're trying to use sell u. S. target market, target market is a person
[jason_apollo_voss]: making a an important
[jason_apollo_voss]: decision at scale by, at scale. We're talking significant outcome
[jason_apollo_voss]: relative to a business right. so that could be hundreds of thousands of
[jason_apollo_voss]: dollars or millions of dollars. like my average straight side. Use trade
[jason_apollo_voss]: ticket used to be like ten mill right, and that's small. That's small.
[jason_apollo_voss]: Some firms issue like a hundred million dollar trade tickets. So you,
[jason_apollo_voss]: it's an assist in those situations where people are wearing their big
[jason_apollo_voss]: person pants or skirts or whatever, Um, And that's what we aim to help.
[jason_apollo_voss]: Um, we don't want this used in divorce cases, we don't want to used uh f
[jason_apollo_voss]: job interview settings. That's a no. No, because our whole effort is
[jason_apollo_voss]: grounded in compassion. We're trying to make the world more truthful, so
[jason_apollo_voss]: that we're not burned by the malfeason of something. and by the way the
[jason_apollo_voss]: research thecentic research serves, we all lie. And so because I know
[jason_apollo_voss]: that, based on the signi of me being a deception scientist, I have
[jason_apollo_voss]: compassion, right, we're all deceived, we're all
[jason_apollo_voss]: liyars. We, we do it one point eight times per day on average, so
[ash_b]: I'm not ▁lying. When I say it was awesome having you on the free money poadcast.
[sloane]: Yeah, absolutely fabulous, Jason, thank you so much for coming on.
[ash_b]: we're going to have you back be cause we love having you here, but you know
[ash_b]: once you're live with data and your sell subscriptions will get you back on and will
[ash_b]: kind of understand the exact use cases so you can put
[ash_b]: you out there,
[jason_apollo_voss]: well, I would love on the hold of a mi to both of you, Um, thank you both
[jason_apollo_voss]: for fighting a good fight. Like the Free Money podcast, You guys cover
[jason_apollo_voss]: interesting subjects that I don't see covered elsewhere. Like usually the
[jason_apollo_voss]: vessel, Podcas is what to invest in now or let's let's sit the fire. You
[jason_apollo_voss]: do a firesight chat with somebody who's made money, Um, and even actually
[jason_apollo_voss]: covered some of the nuts of bolts and some of the gritty bits of the
[jason_apollo_voss]: business Well done.
[sloane]: thank you.
[ash_b]: Thank you so much, Jason.
[jason_apollo_voss]: Of course,
[ash_b]: All right,
[sloane]: Yeah, and what you know, Yeah, Invest Vean would will be a a very happy early
[sloane]: subscriber whenever you get around. Do
[jason_apollo_voss]: all right
[sloane]: it, and whateverever we can afford it
[jason_apollo_voss]: co, thanks for happening, Guys say go goy and go
[sloane]: thank you,
[sloane]: I have a a great Jasonoss story. Uh that I will some raise this with which I like, I
[sloane]: think is the story of how he came to see if a institute told from our our boss. Uh,
[sloane]: The So you know Contentt, director C. If institute right, See if Institute is an
[sloane]: incredibly conservative organization. Um, you know somebody, Uh, described it as
[sloane]: more establishment that Goldman Sachs and I was just like. Yeah, that's probably
[sloane]: right. Um,
[sloane]: and uh, So Jason shows up for his interview at C F. A institute in like, uh, I. I. I
[sloane]: forget exactly what Rob City was wearing, but it you know he hadn't shaved. He was.
[sloane]: It wasn't wearing A to a Uh, A Perm, Or if he was ring tie, he was wearing one of
[sloane]: his very unusual ties.
[ash_b]: right, right,
[sloane]: Um, and his business card is a twenty four sided, Um, like starbirs, That's circular
[sloane]: and it says like Jason, a Pavoss on the front of it. I still, I have one of these
[sloane]: like on my like mood board, Um, and on the back of just this balance, you know, and
[sloane]: of course everyone else who shows up uh to interview for this job is like you know
[sloane]: very much out of the ▁j P. Morgan mold. Uh,
[sloane]: you know, and thank God they went with Jason. I think the whole investment profess
[sloane]: I, I certainly am un, uh, you know, completely changed as a result of
[ash_b]: I know
[sloane]: getting to know that guy. Yeah,
[ash_b]: I have been, too. I have to say I I've been working really close to. I mean, you know
[ash_b]: this is the related party's poadcast. So you know, like we. I've been working with
[ash_b]: Jason for six, six or nine months now on on this project and Ive learned so much. The
[ash_b]: dude is just next level on a lot of different fronts. So and that just kind of
[ash_b]: trickled out in the podcast where like, he's got frameworks and analogies for for
[ash_b]: like hundreds of other things, so we got.
[sloane]: oh my God, Yeah, and the, I mean the the book we wrote together. the C. F. a
[sloane]: investment idea, a generation guy. There's a link on his side and on on invest. van.
[sloane]: Um, but it. I mean, it's like I. I. I've been re reading it because it's now a part
[sloane]: of my process and we,
[sloane]: we went all over the place. I can't believe let us publish that thing.
[ash_b]: Well because he said he was good. It was over his dead body, right.
[sloane]: Whoa that that was. Uh, that was a slightly later one that was once
[sloane]: we had already. you know, like kind of broken a couple of heads. Um,
[ash_b]: but he's building stuff, which is hard
[sloane]: he's building stuff, which is hard.
[ash_b]: and that brings us to our de segment
[sloane]: building stuff is hard. Uh.
[ash_b]: building stuff hard. This is the part of the show where we reflect on how hard it is
[ash_b]: to build stuff. And well, you're about to go. Let me tell you that I was laughing to
[ash_b]: myself that if Jason is successful, he will take the whole fake it till you make it
[ash_b]: world of Silicon Valley
[sloane]: oh. Oh, my god.
[ash_b]: and make it harder. So Jason is making it harder to build stuff. Or
[ash_b]: maybe maybe he's making it easier for those of us to think we're building real stuff
[sloane]: I think so.
[ash_b]: people will spot us and be like. That's not the fake stuff. That's the real stuff. So
[sloane]: yeah, I, I mean, I, I think so like. I. I think you know. there's like this culture
[sloane]: of like fake metrics or vanity
[ash_b]: that's right.
[sloane]: metrics that you know. Data seems aimed right squarely at. You know where people
[sloane]: like show up in like, kind of do statistical vomit, and then'd be like, Oh yeah,
[sloane]: therefore I'm a good investment, Um.
[ash_b]: That's a good name for either a new Startu or a band.
[sloane]: statistical vomit,
[ash_b]: subsidiary, free money. When we, when we really hit a big time.
[sloane]: yeah, exactly when we finally get our Vc investment, and uh, you know it gets so
[sloane]: back on the phone. Um, what's been heard this month? Um?
[sloane]: well, I, uh, I actually had this amazing. uh. it took this amazing decision to not
[sloane]: only uh, go off my anti depressant, which it turns out I'm allergic to,
[sloane]: um, but also deconstruct my office and rebuild it. Um. in the court.
[ash_b]: were those two uh decisions interlinked
[sloane]: I, you know, I don't think so. I, I wanted a bigger desk, Um, and this
[sloane]: one's a lot nicer. Uh,
[sloane]: but um, but yeah, I would say like, hypothetically and I had no control over this
[sloane]: because uh, unfortunately it hasn't really played into performance or anything like
[sloane]: that. but um, the yeah. I mean, if it turns out you're allergic to your
[sloane]: antiimpressant, try to not figure that out
[sloane]: the first in the first month of launching your business.
[sloane]: that's that's that's my thing.
[ash_b]: I'm sorry to hear that. How uh are have you been doing some investments with the
[ash_b]: money I gave you? I haven't. I haveve' noted that
[sloane]: Uh, yeah, yeah, totally totally invested it. Yeah, definitely invested
[ash_b]: so invested.
[sloane]: it. Yeah, no, uh, yeah, no, honestly, um, you know one of the things that I've been.
[sloane]: You know, when you start thinking about the investiging hypothesis, what's tricky
[sloane]: about it? I think to a lot of people as they think. Okay, so you're investing in
[sloane]: protein, which
[sloane]: is not the deal. The deal is, we're investing in stuff that doesn't do cruelty to
[sloane]: other stuff. Um,
[sloane]: you know, so the like it has to be, you know, not just on the net, but on the gross
[sloane]: addited to society in my criteria, right, Um, and
[sloane]: you know I, what I would say is like, I mean, our benchmark is the Russell Three
[sloane]: thousand. We've done
[sloane]: quite well compared to it. Um. you know, in the in the downturn, at various points
[sloane]: we were, We'd opened up five percentage points of about performance on on the rustle
[ash_b]: my goodness,
[sloane]: over the first month of operations. Um, and you know, obviously final numbers will
[sloane]: come in later. but Um, you know the the big, S. The big takeaway so far has been
[sloane]: that you know. these things that don't do cruelty on a systematic level seem to have
[sloane]: more durable businesses, right,
[ash_b]: Yeah, resilient
[sloane]: Um, you know resilient. Yeah, it's the whole resilience theme that we keep
[sloane]: talking about. Um,
[sloane]: What's been hard for you lately?
[ash_b]: Oh, I. I feel like Um, just being uh. I'm building something new, Um in in both at
[ash_b]: Stamford. I, I'm building like a new research program,
[ash_b]: Um, and then also doing some in some of the the land of start up, building an a
[ash_b]: little research function And it's just also for me. It's it's hard, but it's a
[ash_b]: reminder of how fun it is to like dig in and do the fundamental research. You know.
[ash_b]: what got me here and Um. And so
[ash_b]: building stuff is hard, but it's kind of worth it. like I, I'm publishing I, I'll
[ash_b]: maybe I'll use this segment to brag, But like I'm publishing a couple of papers this
[ash_b]: month that like I'm justper proud of, And it's been it. They've been the private
[ash_b]: equity paper we put out yesterday was
[ash_b]: coming. The portfolios resilience paper were putting out Um early next month in
[ash_b]: October, So this month when you listen to it
[ash_b]: it, it's uh, you know forty plus pages. It took M years to do. I have a paper with
[ash_b]: Alicster Barker, Um. on how investors deal with technology disruption. We've been
[ash_b]: working on it for two and a half years. It'll be coming out before, Um. twenty twenty
[ash_b]: two. So these things are hard and I feel like it takes a long time to do them. But
[ash_b]: when they come out you know it's like you're kind of giving birth to something so,
[ash_b]: and then sometimes you put them out, and like nine, nine people see it and then they
[ash_b]: never hear of it again. Um, but sometimes you know they have an effect, so yeah,
[sloane]: I mean that's that's really awesome and like it it. and it is like, I, honestly,
[sloane]: whenever my mood has been kind of unwavery, Like a little ▁jittery. or whatever.
[sloane]: lately I've been. I've just gone back to my spreadsheet, and that's really brought
[sloane]: me kind of back up. Uh, it's
[sloane]: always the. It's. It's the Adman crap. It's the. You know, it's the back and forth,
[sloane]: but the the research is really just a joy. Uh, you know
[ash_b]: it is fun and it's actually that's the link by the way between academia and finance.
[sloane]: so true.
[ash_b]: people who are are really great investors. They spend their life doing research. It's
[ash_b]: just they don't publish it. you know they. They make use of it in an investment
[ash_b]: strategy. So
[sloane]: Yeah, they just sit in there skyscrapers and cackle about it.
[ash_b]: Halloween episode coming up.
[sloane]: Whoop. sorry.
[ash_b]: Oh no. that's great. it's badd.
[sloane]: it's time. Um. it's s for dear Ashby. This is the segment where we beg you to review
[sloane]: our podcast If you've listened this long, you know how good it is. Um,
[sloane]: you know, But, And and it's also the segment Uh, more importantly, where we answer
[sloane]: questions from you, and it's very easy to send us questions, Um, free money pot at
[sloane]: Gil dot Com At Free money for twenty sixty nine on Twitter. All of these things, all
[sloane]: of these ways you can just I. Also, you
[ash_b]: There's many ways.
[sloane]: can connect with us on. Yeah, yeah, I mean, if you want to connect to this Mm.
[ash_b]: mail us a letter to a appal box, which you can find on the website. Maybe
[sloane]: I. I, yeah. yeah. I mean if you could find an a, if you could find a mailing Gu
[ash_b]: if there's a peel box on the W. The website Bail it.
[sloane]: address up.
[sloane]: Yeah, yeah, send us some chocolates. Um, you know, and if you're if you happen to be
[sloane]: hanging out on the astroplane, just connect with us
[sloane]: commune. you know, Um, the first ▁qu. but the me. Oh God, not the matter.
[ash_b]: Metaverse come say his hard.
[sloane]: So the first question for this speak is I think this is a really interesting. Uh
[ash_b]: I do too.
[sloane]: question, Um, retail investors,
[ash_b]: I think my answer will surprise you.
[sloane]: Oh, really,
[ash_b]: Mm. Ask it.
[sloane]: Mm, retail investors have readily bought the dip in crypto in a way that they
[sloane]: struggle to do with stocks. Um, do you have any pet theories as to why this is
[ash_b]: I actually think buying the dip is super easy. Like if especially
[sloane]: Hm. That is a surprising answer.
[ash_b]: Yeah, especially if you do no fundamental analysis.
[ash_b]: So the world of crypto is like, almost by definition a speculative thing.
[sloane]: Yeah, you can't do fundamental analysis. Really? Yeah,
[ash_b]: Yeah, there's no cash flows. Like what? what are you studying you? You know, it's the
[ash_b]: same thing that people do around currencies. Uh, you know, except at least
[ash_b]: when people are modeling currencies, they're the underlying economies and central
[ash_b]: bank policies and things like that. here. this is literally like
[ash_b]: price was high.
[ash_b]: Now price is low.
[ash_b]: Let's buy. And
[ash_b]: and so I find like, even in my own life when I've been in a speculative mood, Um,
[ash_b]: when markets drop, I'll be like O. let's put money in there. you know like, but when
[ash_b]: it becomes individual stocks, which I think is this, Um. user's question, You get a
[ash_b]: lot. It gets a lot more complicated. You start to think to yourself. Oh, is there
[ash_b]: something fundamental about this? You
[sloane]: M. Mhm.
[ash_b]: know, Is it did the like? I'm not doing research. It's like you know our guest who is
[ash_b]: like. I don't do research in stocks. I can't remember her day.
[sloane]: Oh, yeah, the iconic Liz. Yeah,
[ash_b]: Liz. Liz was like research.
[sloane]: Yeah, read the longest one. or, or I find the longest one and then I don't read it
[sloane]: and I buy the stock.
[ash_b]: Yeah, exactly. Lizz's proxy was length of research. not actually doing the research.
[ash_b]: Um, So that's a little bit like this world right. And and so when I'm you know,
[ash_b]: playing around in the markets and like doing index funds, I see a big drop. I'll put
[ash_b]: all rebalance. I'll get in there, but if you own, you know, g, e or something in the
[ash_b]: stock drops, you're definitely wondering. Oh, is there something going on here?
[sloane]: Yeah, what I miss?
[ash_b]: Like what did I miss? Because I know I missed everything 'cause I don't actually do
[ash_b]: any work. you know. Whereas stuff like this, it's like there's nothing to miss, you
[ash_b]: And so I think that's what's going on and why people seem to buy the dip on these um
[ash_b]: crypto assets Because it's impossible to do fundamentals and it's
[ash_b]: highly likely that they're not missing anything that they didn't know before because
[ash_b]: there was nothing there to begin with, But ummp,
[sloane]: that's a really compelling theory.
[ash_b]: hm, hm.
[sloane]: Um, y, you know. I. I. my. I. I guess my. My take on it was that like, you know,
[sloane]: Because it comes as this, like incredibly speculative asset. you know you.
[ash_b]: that's very similar thought though that's
[sloane]: Yeah, it is. that's true.
[ash_b]: that's kind of where I'm going, you know.
[sloane]: Yeah. yeah. yeah. I guess it's trick is like, if you, if you have it identified as
[sloane]: like a speculation at the outset,
[sloane]: Um, you know, Yeah, and then
[ash_b]: like if you're if fine, If you buying bitcoin Mi, maybe you can start to make the
[ash_b]: case as a store of value. But if you're like, how many or athorium or whatever,
[ash_b]: like many of these other coins that are out there,
[ash_b]: people are still trying to figure out what to do with them. you know like
[ash_b]: it is by almost definition like, Um, a speculation.
[ash_b]: You're I don't know. Yeah, I like I said Y, there is no fundamental analysis that I
[ash_b]: know of yet. Like, have we seen the fundamental like tool kit? Is there an
[ash_b]: intelligent crypto investor book coming out with cigar butts?
[sloane]: you know. F. Funny you should ask, uh you. I. I mean, like there. There are some
[sloane]: like pretty cool ways that you could because you know you can think about, for
[sloane]: instance, like in def, right, like there are all of these like decentralized finance
[sloane]: protocols that purport to be about Uh, facilitating the transformation of one
[sloane]: cryptoacident to another, Um, You, you usually taking a more mainstream crypto. And
[ash_b]: Hm. okay,
[sloane]: uh, transmuting it into something that could be invested aggressively instead of a
[sloane]: yield pool or something like that. And and in that case, um, a lot of the
[sloane]: fundamentals are explicitly observable because you can watch how many people use the
[sloane]: protocol to transmit the, the, The, the vanilla crypto into the the Whatever, And
[sloane]: then you can see like Okay, Protocol One is being used twenty five times more
[sloane]: frequently than protocol, too, Um, And is that in line with pricing or not? Um, You
[ash_b]: yeah, fascinating.
[sloane]: know, but, but like you know, that's that's pretty. I mean that's like it is. I
[ash_b]: but at' the beginning
[sloane]: mean, but basically what you're doing there is you're valuuing the New York Stock
[sloane]: Exchange based on volume. you know. Like, which is how you would do it. Uh, you
[sloane]: know, but admittedly incomplete. Um, but yeah, it's that
[ash_b]: yeah, you're not. You're not actually connecting into the underlying economy. you're
[ash_b]: You're still
[ash_b]: operating at the level of the abstract financial market,
[sloane]: exactly You're still playing with abstractions, Um li. the next question, um,
[sloane]: M macquets, I feel like I need to like. Have a have like a
[ash_b]: Oh, is our Boston part of the show?
[sloane]: mackets, Yeah, uh, yeah,
[ash_b]: No, you know what
[sloane]: markets have been swornen recently, I can't. I. I, every time I try to do an accent
[sloane]: on the show I get in trouble.
[ash_b]: Museum of finance
[ash_b]: I live. Remember, I lived in Boston for two, uh
[ash_b]: two years, and these are things I heard on the street which are now part of my
[sloane]: Oh yeah, yeah, yeah.
[ash_b]: repertoire. A mom grabbing Um, her little child and saying No, Y, new lot.
[sloane]: the Museum of finites, it's the
[ash_b]: No, you're not. No, you're not in case I need to translate, and obviously Museum of
[sloane]: best. the Museum of finance, definitely, um,
[sloane]: um. So the markets have ensuthing because of the wories associated with high debt
[sloane]: levels in the Chinese property development sector have come home to roose.
[sloane]: This year is as old as time. Do
[sloane]: you remember the first time that you heard somebody worry about Chinese property
[sloane]: development? Deb.
[ash_b]: it is his oldest time. I feel like at my entire professional career Is this question
[ash_b]: went to the core of my being because when I saw the question I was like, Holy cow.
[ash_b]: You're right. Everybody has been talking about this for
[ash_b]: twenty years.
[ash_b]: Uh, this is going to take down the globallye. This got definitely takeed down the
[ash_b]: Chinese economy. These, the, especially the state own banks, Um, which are holding
[ash_b]: the bag here. But then it's going to take on the global economy,
[sloane]: yep, yep.
[ash_b]: and uh, what's so funny is Um.
[ash_b]: I can remember when Central Huujin, which is a a state owned entity, which was, is
[ash_b]: like largely responsible. the' best I can tell, just to bail out banks in China, Um,
[ash_b]: In two thousand five, it was in the business of bailing out banks, Um,
[ash_b]: then I think it was part of the state administration of foreign exchange. This was
[ash_b]: even before of the C. i. C came into being when C. I. C took over. They moved Central
[ash_b]: Hojen under the China Investment Corporation because it owns so much of the state
[ash_b]: banks. It was like a holding company at that point because it had done so much baling
[ash_b]: outing. Um. But in case you thought that was over, like in twenty nineteen, Hugh End
[ash_b]: did a fourteen billion bailo of Heng Feng Bank, and all of these bailouts go back
[ash_b]: down into the real, the real estate economy, and like the overheating that's going on
[ash_b]: Um. And you know the fact that like the way they strilize the currency, I think
[ash_b]: they're issuing local debt. It's all this stuff right. that like powers forward, the
[ash_b]: the biggest real state boom in the history of the universe. And I say universe,
[ash_b]: because we don't know if there's aliens, but on Earth, at least
[sloane]: I mean if if there are aliens, I doubt that they are engaged in as aggressive the
[sloane]: scale of property development. Un. unless they'. I mean they, they would literally
[ash_b]: I think that fast
[sloane]: have to be a multiplanetary species. Uh,
[ash_b]: to beat us. Yeah, be cause what the Chinese are number one.
[sloane]: y. yeah, to Yeah. to beat the Chinese at building property.
[ash_b]: I agree. I agree. Yeah, I've read the expanse. I know about the uh proto molecule.
[ash_b]: You got to have the proto molecule to beat the giess.
[ash_b]: Somebody knows what I' talk about out there.
[sloane]: Yeah, yeah, it's a great. I mean, Jeff Basis is a favorite T V show. By
[ash_b]: Oh, is it
[sloane]: the way. Yeah, he actually saved the expanse from being cancelled. Uh, and brought
[sloane]: it on to Amazon. Uh,
[ash_b]: that's so funny? It is
[sloane]: it's like
[ash_b]: a great series of books.
[sloane]: it. Yeah, I, I've only watched the show because
[ash_b]: Oh, yeah,
[sloane]: I'm you know, I'm a P. I'm a piece of trash.
[ash_b]: it's still a pretty good show. I've seen it too. Yeah.
[sloane]: Um, Okay, so we have a lot of Chinese questions. I
[sloane]: guess Ch. you know. Yeah, we get Uh, China on the mind,
[ash_b]: what's up? What's up? Yeah,
[sloane]: Um, Hong Kong police. hopely, should I have forgot about this question? Hong Kong
[sloane]: police have arrested activists for trying to incite subversion by distributing
[sloane]: Eminem chocolates. If you were to use candy to incite subversion, is this the one
[sloane]: you're choose? and by the way, the person who sent this question included a link to
[sloane]: the article, which is a a good best practice for these insane questions?
[ash_b]: yes, please do that going forward, Uh readers.
[ash_b]: I love this. I have to tell you, I've had a sneaking suspicion for a long time, and
[ash_b]: this allows me to reveal it. Um, I think the candy bar Mounds was an as asop by the
[ash_b]: C, I, A. I think
[ash_b]: the candy bar mounds has created far more pain on the earth than pleasure.
[ash_b]: How many children have reached into their Halloween candy bag and pulled out of
[ash_b]: mounds and been horrified.
[ash_b]: So if I was going to incite
[ash_b]: subversion, I would replace old kidy bars with mounds candy bars, and you would see
[sloane]: hm, mm,
[ash_b]: so mad when they realize this delicious candy bar you gave them was filled with some
[ash_b]: random gross Cocan nuut, not even good coconut.
[sloane]: yup, yup, I. I love this. so this implies heavily that the Chinese Act activists are
[sloane]: distributing eminems because they're shitty.
[ash_b]: Oh, oh, I don't know what their logic is. I thought I was in. Try to incite you know,
[ash_b]: a Yeah, disbelief in the government or something. I don't know what they.
[sloane]: I, I don't. I mean, I don't know why they're doing it, uh,
[ash_b]: Oh, Oh, so you're
[ash_b]: saying? what is the capitalist thing that I would give people that would prove they
[ash_b]: love it so much.
[ash_b]: Is that what the question is?
[sloane]: I mean, I don't know. it's not my question, Um, the. I, I like. I guess you know I,
[sloane]: I would kind of go like if I was trying to you know, get everybody you know hooked
[sloane]: on my, my
[sloane]: mind, my way of seeing the world. you know, like if we were to have like,
[sloane]: I mean, portable Alpa, obviously is not available at sufficient scale to insighter
[ash_b]: M Hunter Grandbar,
[sloane]: revolution, because it's you know, Y hundred grand baar, Mm,
[ash_b]: very delicious and capitalist.
[sloane]: that's a. I mean, there you go.
[sloane]: Let's yeah, I mean I, I would go with a skiddle too. I mean, like,
[sloane]: I think Tasing the rainbow, You know, especially if you haven't partaken before. I
[sloane]: mean that would be enough to change anybody's mind. Hm.
[ash_b]: very good. Have you ever had smarties from Canada that are like emine Ms, but they
[ash_b]: don't selld them in America.
[sloane]: I don't think I have
[ash_b]: Ah, for the Canadian listeners out there, Um
[sloane]: real heads. No,
[ash_b]: smarties which also exist in the U. K. It's a chocolate candy that looks in fields
[ash_b]: like Eminem's They never brought to America, but in all the other parts of the
[ash_b]: English speaking world, they're like as popular as Eminem's They're
[ash_b]: everywhere. they're called smarties. Look it up. People in America think smarties of
[ash_b]: these little candy things.
[sloane]: the chalk things.
[ash_b]: Yeah, no, no, smarties everywhere else are like better Eminem.
[sloane]: Yeah, Yeah, like like, Oh, Oh, you like smarty', The the worst candy
[ash_b]: Yeah, so in America, maybe that's what happened. people are like more smarties. Hell,
[sloane]: of the entire worldm. Yeah, the brand is poisoned.
[ash_b]: No, those things are terrible.
[ash_b]: Yeah, now look it up. These are chocolate covered candies
[ash_b]: and they're better than Eminm's. You heard it here first.
[sloane]: sounds pretty good. Um, we got. uh, we have one last segment which is, of course,
[sloane]: whatever ones. everyone's everyone's waiting around for. I mean
[ash_b]: Yeah, I know that
[sloane]: it's like I know you hear. I know you feel that applause every time you step out of
[ash_b]: they're like. What garden tip of the week? It's a big one.
[sloane]: your garden. What's your garden tip for the week?
[ash_b]: It's juju B season
[ash_b]: and I planted the juju be fruit tree in my backyard in the middle of Coved, Because I
[ash_b]: was like what grows without water. Basically that was the logic. I was like highly
[ash_b]: drought tolerant trees, please. And
[ash_b]: it's almost like I organized it because I think the jujubi tree originally cubs from
[ash_b]: China, So it's almost like this is a segment we planned, but we did not.
[sloane]: Well what I actually googled it because I was like. Is he making that up?
[sloane]: Um, The. and I see that it's you, Uh, the Indian and the Chinese juj be, uh,
[ash_b]: Yes, so I think I have the Chinese juju be, I think
[ash_b]: I seem to recall,
[ash_b]: and they tell you on the internets. this is where we're getting into the tip part of
[ash_b]: the show That this uh tastes like apples.
[ash_b]: And so it encourages you when you read that to maybe pick it a little early because
[ash_b]: you see it Uh, when you get an apple and it searchs to get brown spots on it. You're
[ash_b]: like Mm. I don't want to eat
[sloane]: mm, yeah,
[ash_b]: that apple jujupies. You got to plough through until that entire jujibi is a dark
[ash_b]: and then you eat it and I have to say I've I was eating them way too early
[ash_b]: and I finally forgot about my tree. For two weeks. I went down there and I was like
[ash_b]: Damn it, everything's brown
[ash_b]: because I, apparently I don't pay enough attention to this stuff, but I pulled them
[ash_b]: off and I was like Wow, It still feels great. It's not squishy or anything. I took a
[ash_b]: bite. It is like an apple was combined with brown sugar.
[sloane]: Oh, it rules.
[ash_b]: It is one of the best
[ash_b]: fruits I think I have had in a very long time, and my wife informed me not twenty two
[ash_b]: minutes ago when I was talking about this that if you want to get a bag of jujib' at
[ash_b]: whole foods is over eight dollars.
[sloane]: Oh, wow.
[ash_b]: Yeah, super
[ash_b]: expensive fruit.
[sloane]: Also like can I say, has one of the best Latin names of any plant that I've seen
[ash_b]: Hi me with it.
[sloane]: ▁zsiphus Motania,
[sloane]: But I mean like I, it doesn't get much better than that. As far as I'm concerned,
[ash_b]: hu. I wonder if it's from Mauritious,
[ash_b]: Interesting. interesting,
[sloane]: we have Mauritus, not just for Asia Pacific dinosaur offshore funds anymore.
[ash_b]: No, for the ginger bee,
[ash_b]: All right, That was a log show
[sloane]: Well with that that's the show. I got nothing. I have nothing left. You took it all
[ash_b]: un exhausted
[mediaboard_sounds]: I'm looking
[ash_b]: by. We do love you.
[mediaboard_sounds]: more than remember, Then I go ra on a