Legendary Trader Paul Tudor Jones on AI Risk, Bubbles and Buffett

My number one bullet point is you're going to make your money by writing a trend for the very, very longest time. Or you can be like Warren Buffett. You can be one of those value investors who won't spend a nickel. I used to just sit there and rail on Warren Buffett year after year after year. He just happened to be in the right place at the right time and caught this bull market.

I was just thinking, “Oh my God, why couldn't I be Warren Buffett? Just believe in America, and when you're down 50%, who cares? Because America's going to bring you through.” Warren, if you happen to hear this, I'm deeply apologetic. You are the OG of compound interest.

1. The Kindest Thing (first)

There was something that we talked about when we last met that made me laugh, and I thought it'd be a fun place to begin our conversation today. It was about the difference between being an investor and being a trader, and you mentioned something basically saying you wished you could be an investor. Life would be so easy. [laughter] I'd love you to describe the difference between the two and the life of a trader.

I promise I'll do that. We'll talk about markets and AI and everything, and at the end I'll say, “Were you not entertained?” [laughter] And I bet you'll say yes.

But of all the things that you do on your podcast, the one that I think is the most important, if you don't mind, I'd love to start with that one, which is the question you ask everyone at the end.

I'm in. I love it.

And the reason why is because it's such a great question. I gave this commencement address one time to what is now Roads College in Memphis. I remember when I was writing it, I was thinking, “Damn, who gave my commencement address?” And I couldn't remember. It was funny. No one remembers. Can you remember who gave your commencement? You're so young. You might.

It was the president of Ireland at the time. I went to Notre Dame.

And you're Irish, right? Okay. But it was so funny because no one remembers who gave their commencement address. I was sitting there thinking, “God, I'm getting ready to do this for 15 or 20 minutes, and no one's going to remember a damn thing. How do I make it special?”

On this podcast, I'm assuming people listen to millions of podcasts and they probably can't really remember but fractions of them. So if there's anything they remember from this, I hope it's this part.

All right. Everyone that listens knows that the question is: What is the kindest thing that anyone's ever done for you?

It's such a great question because the kindest thing was also my very, very, very first childhood memory. I was probably 2½ or 3. It was probably 1957, something like that. I was with my mother at this place called the Curb Market, and I got separated from my mother.

2. The Robin Hood Foundation

Boy, you can imagine being 2½ years old and separated from your mother. You're terror-stricken. This elderly Black gentleman came up while I was sitting there bawling my eyes out because I thought my mother had left me and said, “What's the matter, little boy?” I said, “I lost my mama.” He said, “Here, don't you worry. We're going to find her,” and he grabbed my hand and we started walking up and down the aisles.

It was an outdoor vegetable market. I can almost still smell the fruits and vegetables. We came around the corner, finally, and I saw my mother. I was so happy, and my mother saw me. At first, she just started laughing. I remember she was laughing so hard. She came and got me, and she tried to give that man $5, which was, in 1957, a huge amount of money. He said, “No, ma'am. I know you'd do that for my child, too.”

It was such a simple act of kindness, but it was so profound to me at the time. That night, I had a prayer list with my mother that she used to go through with me every night. It would be, “God bless Mama, daddy, Peter, Paul, Alberta, Grande, Pete, Judy Lyn, and Sid.” Then we added him. I said, “What was that man's name?” She said, “I never got his name.” For the next 10 to 12 years, right in that prayer list would be that man. So, probably four or 5,000 repetitions every night for that man.

Wow.

Now, fast-forward to 1986. I'm living in New York City, and I'm lying on my couch, 32 years old, watching 60 Minutes. Harry [likely Reasoner] was interviewing this guy, Eugene Lang. Eugene Lang was a businessman who had gone back to give the commencement address to his elementary school up in Harlem, which over the course of the intervening 60 years had completely transformed from a gentrified area into an African American and Hispanic community with almost a population entirely consisting of people of color.

Eugene Lang asked the principal, “How many of these kids, these 12-year-olds, are going to go to college?” The guy said, “Statistically, maybe, I don't know, 8% or 9%, something like that.” He could not believe that because, obviously, he had graduated from that school, gone on to college, and then done very well.

Right there on the spot, he decided, “I'm going to promise every one of those kids, if they graduate from high school, I'll put them through college.” That resonated with me so much. He adopted that class and created something called the I Have a Dream program. I said, “I can do that. I can do that.”

The next day, I called him up, and he said, “You know, it's funny. Three or four other people have called me, and we're all meeting at my apartment on Tuesday night.” I got there late, and I was seeing myself up in Harlem or somewhere on the Lower East Side of Manhattan. I got Bedstey, the highest-crime, crime-ridden community in New York at that time, even higher than the Bronx.

That began this journey. I put my heart and soul into it. I'd go over there every Tuesday. I went to the commencement at this elementary school, did the same thing that he did, and told them that if they graduated from high school, I'd put them through college. Of course, everybody was jubilant, right? It was a big surprise, and the parents were so happy.

That began this big journey for really the next 14 years because I kept adopting successive classes. I had tremendous passion. We were doing after-school programs, playing sports, and teaching life skills.

3. Information Overload

About 3 years in, I realized these kids weren't doing that great. They'd gone on to different junior highs, and they weren't doing that great. So I started hiring some tutors and figured that out. Then, probably 4 years in, I had one kid get killed. I had a bunch of girls become teenage moms.

All of a sudden, I'm dealing not just with the academic challenges but also with the social challenges to boot, of which there are many. Along the way, I learned so much by failing. I learned so much about what it takes to actually beat poverty.

By the way, 1987, the year after that, was when Robin Hood started. That informed me, too, which certainly was extraordinarily instructive. As we built Robin Hood out and began applying metrics and making sure we had goals and standards and a variety of things, it also led me ultimately to start one of the first charter schools in the late '90s in Bedstey, right next to that spot.

Actually, I started a charter school called Excellence Boys Charter School. The first one started out as an all-boys school. We named it Excellence because I wanted these boys to know that we were going to demand excellence of them.

We completely, totally crushed it. We had hired the absolute dream team of educators to do it, and within about 4 or 5 years, we were number one out of 543 elementary schools in New York City.

The point being that you can have all the passion in the world, but you have to have a plan. There has to be a great pedagogy in what it is that you're trying to do when educating a kid.

Why is all this relevant? Well, just think about this. Here was this one simple act of kindness of this elderly man helping this young child—in that case, a Black man helping this young White boy. When I saw Harry [likely Reasoner] and I saw that elderly man helping those young kids, it was the photo negative of what had happened to me, and I thought, “Wow, it just was instinctive.”

The point here is that one simple act of kindness can have waves of betterment. It can be so transformative and so multiplicative. There's no doubt in my mind that 4,000 repetitions of thanking that elderly man for helping me as a child inspired me, when I saw Harry Reasoner interviewing Eugene Lang, to emulate that in a sense.

I keep thinking how instructive it would be if intentionally we all just started every day with a goal of one simple act of kindness. It doesn't have to be anything big. It can be something as small as what happened to me when I was 3. Look at the possibilities that come from it.

Just imagine if 350 million Americans intentionally set out every day for one simple act of kindness. What I will say, particularly to the young people who might be listening to this, is that before 2000—I would say 2000 was kind of the turning point—all this demonization, criticism, and attack mode that we seem to be in, this didn't exist.

It's not the way, by the way, that this generation that's perpetrating it and promoting it was raised. It's not the way we were raised. It's not the way of the '70s, '80s, or '90s. You didn't have these vitriolic attacks.

There was a much higher level of civility and respect. I think down the road we'll get back to it.

But I would just say to young people, you don't have to accept today as what this country historically has been about, because it wasn't that way when I grew up. Certainly, when you grew up, it certainly wasn't that way, and it's not going to be that way in the future.

Absolutely incredible story. Maybe my favorite version of this answer that I've ever had, and the first time I've ever done it at the beginning of the episode, which makes it fun, too. What was your message in the commencement speech that you ultimately gave? What did you decide was the message to leave them with?

So I got up there, looked on the dais, and said, “How many of you—there are, like, 20 people over 50 or 60—how many of you remember your college commencement address?” None of them. Not one of them could remember.

I love to hunt and fish, so I talked about the normal challenges they're going to face in life. I also talked about how, going through this process, I wanted to make sure I was going to say something memorable. Right there at the end, I said, “So whatever you do,” and I pulled out my bow and nocked an arrow. I said, “So whatever you do, aim high and shoot straight.”

When I went like this, the whole crowd goes, “Woo! Aim high and shoot straight.” I had an apple on a table over here and smashed it.

Knocked it.

Yeah.

So, I don't know whether they still remember or not, but when everybody was ducking, I thought, “Oh, they're going to remember that.” I told the president of the university, “Listen, you don't have to tackle me or anything like that, okay? This is part of it. I'm just trying to let these people have a night that they'll remember for some time.”

And it's an excuse for me to ask my other question about this difference between investing and trading. So I'd love you to explain the life of a trader in contrast to that of an investor.

If I just think about when I started, I started in 1976. Inflation was raging. I started on the floor of the commodity pits. Stuff was literally going up and doubling and cutting in half every year. The volatility was insane.

To give you an example of how crazy things got, Bunker Hunt was squeezing silver at the time, and he bought about 200 million ounces at an average price of about $3.12. Between 1976 and 1980, we had crazy monetary policy. Inflation started ripping, and silver went literally through the roof.

Ultimately, I started out on the floor of the Cotton Exchange. I bought a membership on COMEX, which was the metals exchange at that time. I got in the pit and was executing some orders for them along the way. The bottom line was, it was just the most amazing bull run.

I want to say by 1979, silver was around $30 an ounce. All of a sudden, Bunker was worth about $5 billion or $6 billion, which made him worth 3 times the next-closest person in the world. Bunker said, “I think this silver here is the most valuable asset and resource on Earth.”

Someone asked him, “What are you going to do with all that silver?” He goes, “I'm going to bury it. I'm going to bury it. In fact, what I'm going to do is, I'm going to buy 20 million more ounces, and I'm going to bury that, too.”

So he buys 20 million ounces at $35. When that happened, it just roofed, right? Well, it goes to $50. At $50, he's worth about $11 billion, and he's got a multiple of 5 or 6 on the next-closest guy. I just couldn't believe what I'd seen and how much money this guy had made.

Anyway, COMEX decided the commercials had been just eradicated because they're sitting there holding physicals and having to put up this margin every day, and their bankers are going, “Yeah, I can't do it.” So they made it liquidation-only. Silver collapsed. It went from $50 to under $10 in the space of about 8 weeks.

4. Riding the Trend

It had a searing impact on me to see him go from the richest guy to virtually bankrupt in the short space of 6 or 7 weeks. Right then and there, I would never own anything for the long run or trust anything for the rest of my life.

My grandfather, when I was really young, said, “Son, you're only worth what you can write a check for tomorrow.” That also had a really deep impression on me.

Liquidity has always been something that was in my DNA as a child, because that was my grandfather's favorite saying all the time. Then, also, my early trading days were with a $10,000 account. I'd run that thing to $100,000, run it back down to zero.

Also, living in my early 20s, I had this friend—he's such a character—who could take $2,500 or $5,000 and run it to $2 million. Of course, the market moves were crazy, like none I'd ever seen. We were brokers at that time at E. F. Hutton.

We called him a mortician because he'd get an account with $10,000, churn about $100,000 in commissions, take it to $1 million, and then have it in deficit. So you learned that liquidity was really important because the volatility was so huge, and we were all living on the edge.

The idea of owning something for the long run was laughable, because look how much money you could make by trading in the short run. The volatility profile was off the chart.

One of my mentors who got me into trading was teaching a class on investments in Virginia and asked me to come be a guest lecturer. I started in 1982, and I've been doing it every semester since.

I remember one of my favorite stories to tell that class. I would go through how all the greatest fortunes in the world were made. I'd always ask them, “Who's the richest guy in the world?” Back then, it was Bill Gates and Warren Buffett. “How did they get there?”

My point to them would be, they got there by writing a trend for the long run. That would be my big lesson to them. I'd always have 2 or 3 bullet points. My number-one bullet point is, “You're going to make your money by riding a trend for the very, very longest time.”

I said there are many different ways to achieve it. You can own a company like Bill Gates or Steve Jobs, whatever. Or you can be like Warren Buffett. You can be one of those value investors who won't spend a nickel.

I used to just sit there and rail on Warren Buffett year after year after year. I would self-congratulate myself for trashing him, because he just happened to be in the right place at the right time and caught this bull market.

If that guy had been in Japan, forget it. It never would have happened. If it had started in 1989 in the Nikkei, forget it. It never would have happened. Different story. Right place, right time. Bull-market genius.

Oh, yeah. I guess this will be my 50th year. The difference between my trading and investing is, if I just take our BBI Fund over 40 years, it has a negative 0.12 correlation with the S&P 500. So you can see the difference between investing and trading. One hundred percent of our returns are alpha. One hundred percent.

I was just thinking, “Oh my God, why couldn't I be Warren Buffett? Just believe in America.” You go, “When you're down 50%, who cares? Because America's going to bring you through.” Not that he doesn't work hard—he works as hard as any human being—but it's that belief system that's so fantastic.

As opposed to that, I feel like I'm a right guard, and I've been a right guard in the NFL for 50 years, where I'm just every day fighting in the freaking trenches. Every time someone says to me, “Gee, I want to go into trading,” I say, “Go long-short. Go on the equity side.” I've always envied that belief system. It's such a great belief system, and it's worked so well for so long.

But I would have huge difficulty having been in Warren's shoes in 2008–09 and having a 50% drawdown. It would have had a really material impact on me. I don't think I have his calm and patience and fortitude to be able to do what he does.

5. The Existential Risks of AI

Anyway, I was listening to the Acquired podcast on likely Berkshire Hathaway, and for the first time I learned that at 9 years old, he understood the power of compound interest. When I listened to that podcast, I just went, “Oh my God, this guy is a genius, and I have been the biggest fool.”

I've always wanted to write a book called What I Realize Now, which would go through the successive mistaken beliefs that I've had in my lifetime.

What I realize now is what an idiot I was. That guy is a flipping genius because he understood the power of compounding, which I somehow managed brilliantly to avoid my entire career. He understood it at 9. He went out at 17, went to Colombia, and sought out Benjamin Graham. What a genius.

Now, the great thing from that podcast is that he was also so smart that he partnered with likely Charlie Munger. Charlie was clearly, clearly a tremendous genius in his own right because whereas Warren would buy 50-cent dollars, right? Charlie understood the power of compounding for companies that were growing all the time. I think the two of them together—man, what a combination. But anyway, Warren, if you happen to hear this, I'm deeply apologetic. You are the OG of compound interest, and I wish I was one-tenth as smart as you are.

Didn't you talk to him about what he thought about AI soon thereafter, when we first talked? What was that conversation like?

You cannot be a trader, investor, whatever term we use, and not be a really good risk manager. Anyone that's really succeeded investing or trading is first and foremost a great risk manager.

I went to this conference about 18 months ago, and I was so alarmed by what I heard. I mentioned it on CNBC, and he watches CNBC every day and sent me a note and said, “I agree with you 100%, but the genie's out of the bottle. I don't know if we can get it back in.” I think he's completely on board with the belief that we have some real threats from AI.

The problem with AI is that the news—I don't like the news in the last 12 hours—the news that keeps coming out is just more disturbing. The biggest problem with AI is that, if you think about the way AI is being practiced and deployed right now, it's the build-break-iterate model: build it, break it, fix it, and iterate. If you think about it, that's been the invention model since the beginning of man: build, break, iterate. But we've never been in a situation where the tail event—the break—could cost hundreds of millions, if not billions, of lives.

What's so scary is that when I was at this conference, which was only about 35 or 40 people, with 1 modeler from each of the 4 biggest model companies, I was able to ask them pointedly, “How do you think AI safety gets resolved?” Pretty much the consensus answer was, “I think we'll finally do something about it when 50 or 100 million people die in an accident.” I mean, it's crazy.

My big problems with AI are that, one, there's no plebiscite on this. There's no vote. There's no way for the public to say yay or nay on the pace at which we're going. And that's the way that most innovation occurs. Again, this one has a tail event on it that's so large.

I go back to when the nuclear bomb was dropped. 18 months later, our Congress and our administration were smart enough and forward-thinking enough to create the Atomic Energy Commission to begin to try to regulate something that had huge tails. Here we are—we're 3 years in—and “regulate”? What are you talking about? If there ever was a leadership position that needs to be taken by any president, it's on AI regulation right now, not just in the United States, but by convening with China and all the other AI purveyors to make sure that we don't do something that has catastrophic consequences. And that's just on the safety side, not even what's going to happen with social disruption.

Matt Shumer came out with a very lengthy essay on how the 2 new models that were released 6 days ago are going to be so unbelievably disruptive to the workforce. The news, in my mind, keeps getting more alarming. I can tell you, if this was anything to do inside Tudor, this thing would have been so contained long ago. I mean, that's what a good risk manager does, and yet there's zero risk management here.

Your point about great investors and traders being great risk managers in the face of AI: How do you think about this exogenous variable lurking?

The 1 thing that I think should be part of this next election—the simplest, most important thing that we can do—is demand that all AI is watermarked. That's the single most transformative thing that we could possibly do for the country, for the world. Make it a felony if someone knowingly violates that 3 times, and put them in jail.

I want to know what's authentically human and what's not. When that happens, talk about restoring trust in the country, which I think is 1 of the biggest problems. I would say 2 times since this year began, I've had very serious people call and say, “Did you see XYZ?” And, of course, it turned out to be a deepfake. I think, just so we can get back to some truth and honor and normal discourse, we've got to do that.

The reason why it's so important is, if I go back to that conference 18 months ago, I would say a significant portion of the scientists there envision a future where humanity is going to have a chip in our brain that's going to allow us to access so much knowledge, power, et cetera. I'm just kind of looking down the road and thinking, okay, we really need to know what we're reading and what we're looking at, because again, that group, without having any feedback from the rest of America, thinks that a blended human with a machine is perfectly acceptable, is the future, and should have inalienable rights. For me, I don't think that's the case. I'd vote no. I think most humans would vote no.

Coming back to some of these themes of investor versus trader, risk management, et cetera, I know you learned a lot from this guy, Eli Tullis. I love these lessons that were formative for you and for what became the trading legend that you now are. What did he teach you? Was there any specific episode from your time with him that taught you the biggest or most important lesson?

6. The Nature of Trading

God, he was so strong. He was really good at executing at the maximum apogee of fear as well as greed. He was so good at smelling that because he traded hardly anything but cotton. He would just sit there, focus, and wait for exactly when there was too much elation or when there was too much fear. So that was really helpful.

I would say the number 1 thing I learned from him was—we were so long cotton 1 weekend, and there was a great drought, a spectacular drought, and, of course, it rained all through the Belt over the weekend. The market was limit down. He'd gotten absolutely smashed. I thought, “Oh my God, it's over.”

That day for lunch, his wife brought in 4 of her friends. He had the most beautiful office I've ever seen in my life. He came out and, oh my God, he had a smile on his face—“Oh, ladies”—and was flirting with the wives. I was sitting there going, “Are you kidding me? This guy's just broke, and he's acting like he's Rock Hudson or something.” Wow. Boy, I tell you what, I'll never forget that one to this day.

When the going gets tough, the tough get going. You wear it here, and you have that confidence you're going to come back. Hugely important.

It feels like the right time to ask you just what trading means to you. You've said before that the whole world is just this interconnected series of capital flows, and part of the job is being on top of that and taking positions based on what's going on in the world.

7. Bitcoin

Mostly, I interview investors who buy stakes in companies. I very rarely interview someone that is moving and putting on major positions in any sort of asset class or trading instrument. I would love to just hear you describe what trading is like to you. What is the literal act that you are doing every day with such excellence for decades?

There are a couple of metaphors that come to mind. Let's start with boxing because you have an opponent. In this case, it's the market. You're going into the ring with this opponent who's after you the whole time. I'm thinking more of a classic one as opposed to a Mike Tyson one.

8. Passion for Markets

But you're kind of parrying, jabbing, feeling each other out, looking for an opening. Then every now and then you'll have a great opening, and you take a big shot and you may land one. If I think about big shots, just Bitcoin in 2020—a knockout. 2-year rates in 2022—a knockout. You have these incredible opportunities at times if you just sit and wait the whole time in the interim.

Some of it, you're just gathering information, looking for those openings. You're always trying to make progress. You're always trying to win the round, but there'll be those few opportunities where you can do something really material.

I love the boxing analogy and the examples you gave: Bitcoin, 2-year rates, precious metals—so many things you've been through. What is going on in one of those? Maybe pick one, and I'm literally curious what you are doing in the moments, what you're looking at, what you're studying, what supply-demand imbalances you see—what is the literal nature of one of these windows that opens every so often?

If you think about all the really big moves, it's probably because the market has gotten too carried away, or there's been some imbalance that's gone on for too long, or a central bank does something that it shouldn't be doing, or a government does something it shouldn't be doing. So that's, I think, the genesis of most of the big moves. Typically, it's going to be inspired by a central bank or central government.

A good one right now in the making that's going to be interesting, I think, is dollar-yen. The yen's grossly undervalued. It has been for some time. What's the catalytic moment? That's really the point you've got to ask. What's the catalytic moment? And that catalytic moment was this new prime minister that was just elected. She has all the characteristics of a Ronald Reagan or a Margaret Thatcher or Donald Trump when he got elected the second time.

And if you look at what those local currencies did, they all appreciated pretty quickly, 10% off the bat. I want to say Japan has $4.5 trillion—a $4.5 trillion net international investment position to the good with the rest of the world. Probably 60% of that is in the U.S., and most of that is unhedged. So they just have this massive dollar liability.

And all of a sudden, we've now got the most dynamic leader in certainly a half a century in Japan, who's Japan first and is going to have a very entrepreneurial way that she is going to remake that economy. So you're looking for something that's under-owned, undervalued, way out of whack.

Yeah.

People have gotten complacent on it, and you're looking for that catalytic moment. In the case of the 2-year rates in 2022, we had way too much fiscal stimulus. And then Powell overstayed being easy way too long because he wanted Biden to reappoint him.

So, as soon as Biden reappointed him, it was go time to get short 2-year notes because you knew the Fed was going to normalize.

9. Bubbles

And then in 2020, when you saw again all the interventions, both the central bank and the Treasury, you just knew that the inflation trades were going to take off. Of all of them, what was the best one at that point in time? It was Bitcoin.

Bitcoin is unequivocally the best inflation hedge that there is, more than gold, because Bitcoin is finite. There's only so much Bitcoin that can be mined. The problem with it as an inflation hedge is, if you got into a kinetic exchange, there's clearly going to be cyberwarfare, and anything that you have to deal with electronically is going down, including Bitcoin. So, strike 1.

And then, secondly, quantum computing. Who knows if and when, with AI advancing as fast as it is, we may actually have quantum computing? With quantum computing, someone can come in and hack any bank and hack anything they want to. So, in terms of it being a great inflation hedge, gold increases its supply every year by a couple of percent. Bitcoin has a finite amount that can be mined. It's decentralized. And so, in that sense, it has the greatest scarcity value of anything.

If you think about the big ones that you've lived through—1987, the global financial crisis, COVID, and various bubbles and asset bubbles through history—maybe say a little bit about those general experiences. You're very famous for what happened in 1987, of course, and I'm curious about those ones because I'm curious what you think about today's environment.

Are we in a bubble? That's a very popular question that's mostly answered by investors, less so by traders. I would love your perspective on the big ones you've experienced historically and how those lessons apply to today.

If I think of some really, really big accidents, most of them have the same underlying reason, the same underlying foundation, which is too much leverage somewhere. Most of the leverage, most of the time, if I think of the big ones, was derivative-inspired—either futures or options.

1987, that crash was 100% portfolio insurance—100%. Had they had limits, which they didn't, it would have been a 10% or maybe 15% maximum. But that was 100% derivatives.

If I think about 1998, Long-Term Capital Management had big derivatives. They had a huge balance sheet with a lot of derivatives they were offsides on.

2000 was a little different. 2000 was the easiest bear market I've ever seen in my whole life. It has so many similarities to right now, in the sense that the bear market of 2001 and 2002 was a consequence of all the IPOs in 1999 and 2000. Then, as they unlocked, you just had this never-ending—

Cascade of selling. That's a great way of putting it.

And we're getting ready. I want to say that the contemplated IPOs in the next year are going to be 5% or 6% of market cap. So why are we where we are right now? Because we've been retiring 2% or 3% of market cap, probably a little less than 2% of market cap every year without fail for the past 10 years—

Through buybacks and things like this.

Through buybacks.

And so now, all of a sudden, you're going to completely reverse that math.

And so now, all of a sudden, you're going to completely reverse that math. I don't think it necessarily happens instantaneously with the IPOs, but then there'll be the unlocks. So you could see a situation where, okay, maybe we go through some kind of rolling top, and then 18 months from now, 6 months from now, we'll have to look at the buyback and unlock schedule. But you're going to want to watch those because that'll just be adding equity supply, and you're already going to be diminishing the buybacks because of all the commitment to capex from the hyperscalers. They're already going to be eating into their cash flow.

So I think that's why tech has dogged it and why it will continue to dog it, because much of the funding for these IPOs is going to come out of existing tech stocks.

When you say, “Are we in a bubble?” I don't know if we're necessarily in a bubble. We're clearly so leveraged in equities in this country. We're so dependent upon firm equity prices at this point in time. When I say leveraged, we're at 252% stock market cap to GDP.

In 1929, I think at the top we were 65%. In 1987, we got to about 85% or 90%. In 2000, we got to 170%, and now we're at 252%. So you can just imagine, if you think about the periodicity of significant bear markets since 1970, we get kind of a mean reversion, on average, every 10 years.

When I say mean reversion, let's say mean-revert to the past 25- or 30-year P/E. If we did that here—and again, these are elevated P/Es, way elevated beyond the 20th century—that would be, say, a 30% to 35% decline. Well, 35% of 250% of GDP is 80% or 90% of GDP—the reverse wealth effect. Oh, my gosh, 10% of our tax revenues are capital gains; they go to zero. So you can see the budget deficit blowing up, you can see the bond market getting smoked, and you can see this kind of negative, self-reinforcing effect. And so it's troubling.

It's troubling. So, are we in a bubble?

10. A Day in the Life of PTJ

We're clearly in a sovereign debt bubble. In the stock market, we're over-equitized as a country and have the highest individual equity weightings in the history of the country.

And then the real problem is that, if you look at private equity, in 2007–08 that was about 7% of institutional portfolios. Now it's about 16% of institutional portfolios. Real estate has gone up. Infrastructure bets have gone up. We're so much more liquid than we were in 2008. So you have to be cognizant of that fact when you think about how you have your money deployed.

I had a friend ask me—he was a wealth manager, and he hates hedge funds because of the fees. He just says, “We just need to put money in the S&P 500.” He said, “If you were investing for 20 years, what would you tell somebody?” And because he knows that I'm supposed to say, “You just buy the S&P, close your eyes.”

Well, the problem is that if you buy the S&P at this current valuation, the 10-year return is negative when you buy with an S&P P/E of 22. That's what history shows. So yes, the S&P is a spectacular long-term investment if you have a 100-year view, but that's because that's an average of 100 years, including times when the S&P 500 P/E was 6, 7, and 8, or 1/3 of what it is right now.

So valuation matters a lot, and the stock market's really high. It's going to be really hard to make money from here, I think, with any kind of long-term view.

If I came and shadowed you on a given day today, how does it go? What are you doing? What does a day look like today? I know you have a system where you can be heard at all times by your execution traders. I know it's intense, but just walk us through a day in the life.

I get up at, say, 6:15. I work till 7:00. I go work out till 7:45. I try to do 45 minutes of hard cardio every day. I get in front of the screens for the opening. I typically won't have any meetings till 10:00, and then I'll probably do meetings till about 12:00.

I'll typically have lunch with someone, have a meeting after lunch, and try to make sure that I've got an hour before the close and an hour after the close to be able to map out what I want to do the next day because, again, I want to have a plan, as well as think about what's going to happen that night in Tokyo and Hong Kong.

I'll go home around 5:00, walk with my wife for an hour, go up and work for an hour, come back down and eat. I'll normally watch the news and the most mindless entertainment that I possibly can. I used to read a book and a half a week, and then once the internet came, forget it. I'm so tired of reading by nighttime.

I've read 1 book in the last year, which I'm going to, by the way, recommend everyone read. It's David Wood. He's kind of a newsletter writer, but he has written what's going to be a spectacular bestseller on globalization and markets. It's fantastic, and I'll bet you it gets made into a Netflix series. I bet you it's going to be a banger.

Anyway, I'll try to watch something on Netflix. Then I'll work from, say, 9:30 to 10:15 and then go to bed. I'll wake up probably at 2:30 or 3:00 and work for half an hour, watch the London open for half an hour, and do a lot of analytical work. Then it's a quiet time. It's good. Then I'll go back to sleep and wake up at 6:15.

Wow. And you've been doing that for 50 years.

I've been doing that certainly since the '80s. I feel like I work so much harder than I did 40 years ago, 30 years ago.

Because there's more information.

Oh, my God, I get 800,000 emails a day. If I think about when I was a pit trader, or even the '80s, when there was so much less information, I could spend more of my time intently focusing on what the highs and lows were going to be in the day, which are really important for execution.

Doing what my boss Eli did—just waiting, paying attention, focusing. Are we at a point of maximum pain? Is there so much fear right now? That’s a great time to buy. Does it look like it’s going to go up forever? That’s a great time to sell.

You have to be intentional to be able to pick those points in a day. When you’re trading 25 different instruments, instrument by instrument, a lot of times they’ll be correlated, and sometimes they’re not. You have to be very intentional about that.

If, while you’re doing that, there are 48 emails coming in at the same time, all of which could be actionable information, I think today, for me at least, it’s just a lot harder. The information overload distracts me from exquisite execution.

What does that mean, exquisite execution?

Am I buying when there’s blood on the ground? And am I selling when there’s complete elation? Take last Friday, when we had the largest down day in the history of gold and silver. You have to be paying attention every minute, because when you have a 33% move in silver in 1 day, you just have to be so focused on that day’s activity—what you’re going to do on the opening, what you’re going to do if the price moves through a certain price that you weren’t anticipating that day.

It gets back to what I learned in Bed-Stuy. You better have a plan.

You better have a plan ahead of time, and it better be self-executing, and you better have thought through that. I hear it from my other friends who are macro traders. They go, “God darn it, I just feel like I’m 2 hours late, 3 hours late.” Last Friday was a great example.

It can be so material. If I think about what’s required to do that day in, day out, there’s got to be an enormous amount of passion for markets and what you do. Can you just talk about finding and nurturing passion, and the importance of passion in a life’s work?

It’s so funny when we talk about great traders. Again, I’m talking about people who are alpha generators, not investors. We had a dinner about a year ago at Christmas, and I had 4 or 5 of my best risk-takers at dinner. We had the debate: Are great traders born or made?

I’d say it was unanimous agreement at the table that 70% of it is nature. When I say born with it, by the time I was 21, I had played and loved games: chess, backgammon, Parcheesi, Monopoly, Battleship, gin rummy—you name it, I played it. Then I started gambling in college. I had a degree in probability theory and had never taken a math course on it, but I knew it.

I was such a game fanatic, and I loved it so much. If I had to pick out the number-one traits: a Type A personality, being incredibly curious and inquisitive, and loving competition and games. Again, our whole business is just another form of probability theory.

I still love it today. I play bridge with my friends all the time. I can’t get enough of that. I love any kind of game of chance, and I love trading.

The other reason that I love trading—I’ll never forget, my wife is Australian, and when we first got married back in 1989, she said, “Well, I know you guys live in New York, but I came from the beach. So when our last child graduates from college, you’re taking me to the beach.” Sure enough, my son—my 4th child—turned 18 in 2014, and we went. We ended up down here in Palm Beach.

She gives me a GP—the GP, a general practitioner—so she makes me go in. I see the guy, and this guy is 83 years old. I say to him, “You’re living here in the land of the walking dead. Everyone here is basically fossilized. What is the secret to longevity?” And he goes, “It’s real simple: You retire, you die.”

That had a really profound impact on me, because I realized, as I get older—and maybe when you get older, you will too—boy, you better. If you don’t use it, you’re going to lose it. That’s why I try to work out 2 hours a day.

It’s another reason that I enjoy trading. I want to keep my mind sharp, because there are too many things that I want to do when I’m in my 90s. My father lived to be 100, and there are too many things that I want to do. I think trading is great therapy for me, too.

The other reason that I really enjoy trading is I’d like to make an absolute pot of money so I can give it away. I’ve got so many causes that I want to give it to that I actually feel like this is the pursuit of nobility. I feel it’s a privilege to wake up, and I just hope I freaking kill it so I can give it away.

Can you tell us the story of starting Robin Hood, and what you talked to us earlier about—the charter school work and everything in Bed-Stuy? Robin Hood started the year after. It’s a really important part of your life and legacy.

Robin Hood happened the day after the crash. Maybe the worst macro call of my life was thinking we were going to go into a depression. I thought for sure—I’d been looking at the parallels with 1929 for a year. All of a sudden, it happens, and I think, “Oh my God, this is a perfect replay, a perfect analog.” So I called up my friends, and we began it.

11. The Workless World

It’s just been the most marvelous journey. I can’t recommend anything more highly than getting involved with some cause that you believe in. The best part of philanthropy and charitable giving is the people you meet. Oh my gosh, I’ve met the greatest, most wonderful, most giving people. It just brightens every aspect of your life to be associated with the best people who embody the best ideals.

Anyway, we said, “We’ve got to do something.” At the time, there really weren’t any charities focused on fighting poverty, which I thought was going to be rampant. I’ve always believed that if you want to do something, you’re better off doing it yourself.

We started out very small, and we just applied basic business principles to finding the most efficacious way of helping people in need. Along the way, I’m learning by doing. I’m making all these mistakes along the way, and I’m learning so much. Then I realized, boy, this is a science.

We started hiring the very best people that we could as our staff and then recruiting. It was so easy to recruit people from the financial world to help. The ’90s were a special time. Everyone wanted to participate, give back, and help. I don’t know when it was, but my gosh, we created so many fantastic philanthropists in that era.

12. Journalism

In the ’80s, it was completely different. Everyone wanted to be associated with the Philharmonic, and these are all great, but they wanted to be with the named social charities. I’d say after the crash, everyone found their significance by helping others. Maybe it was just because that was when people really started to accumulate these big individual fortunes, and they were just really wonderful about wanting to give back.

The whole financial community supported Robin Hood in such a spectacular way. The whole hedge fund community in New York—it was really, and still is, a joy.

If you think about the whole broad world, what feels healthiest to you today about the system that is the world? What makes you the most optimistic, and where does it feel the most fragile?

I’m trying to fast-forward to the workless world, where AI does so much for us that we don’t have to work. I used to have a really negative outlook on what that would be like, because so many of us define our significance through our work. Imagine a world where that significance—that huge, incredibly important component of human happiness—is now taken away from us because we don’t have to work.

I used to really despair about that, because as someone who works all the time and finds my significance through it, I thought, “What am I going to do?” But I’ve become more optimistic recently, because as I think through how athletes find significance in the sports they do, or how I play bridge with my friends and find so much significance in competing with them, I think maybe humans are adaptable enough that we’ll find a different way to find significance.

Maybe it’s going to be in finding that intentional, simple act of kindness every day. I’m not sure what it is, but I do think that, as a race, we’re so unbelievably adaptable and so smart that we might be able to find a way to find happiness. I think that’s going to be the biggest challenge, potentially in 4 or 5 years: What do we do when so many of our jobs have been replaced by AI?

So many young people are trying to figure out what to do and what their careers are going to be.

You've talked and written a lot about the power of great communication. It's such an essential skill. Journalism is an interesting way of learning that. Can you talk just about that power as a message to young people trying to figure it out—why they should maybe focus on that?

I have long maintained that, better than a business school degree, Journalism 101 should be a mandatory subject in every college—newspaper writing in particular. It was so important to my development. My father had a really small trade finance legal paper in Memphis, with a 2,500-person subscription. I would be the copy editor, the front-page editor, and then I would write for it.

13. Principal Components of a Great Life

I took journalism classes, and what newspaper writing does is teach you that you have to write where the conclusion comes first. Unlike writing something and then getting to the story at the end, here the end comes first. You have to write it with this incredibly rigid discipline, so that in every succeeding thing that you write, the most important part is in the first sentence of the first paragraph. The first paragraph is no more than 2 sentences: who, what, where, when, why, and how.

That's the first one. Then the next most important thing—that's the second paragraph, no more than 2 sentences. The next one, same thing. What is that, really? It's a principal component analysis of taking whatever event may have transpired and putting it in this cogent way, where the most important stuff starts at the beginning and you work your way down through it.

Particularly in today's world, where attention spans are this short and time clearly is money, you want to be able to communicate in the quickest and most concise fashion you can, where you get your entire point across in the shortest amount of time. There's that old saying: if you can't tell your story in 15 seconds or less, no one's going to listen. It's never been more true than right now. If you're getting 1,000 emails a day, I want to know in the first paragraph whether I want to keep reading or not.

As a macro thinker, man, it helped me so much to frame every potential trading decision, every single action. I could, again, very quickly, because I had learned how to do that principal component analysis and hierarchize the most important things. In trading, there are so many different variables that come into play, so many different variables that come into making a trading decision.

Let's say that there are 10 really important things. Every one of those will have its day. It'll rotate through in terms of importance. Again, the yen's a great example. It's been completely undervalued for the past 24 months, way offside. It's so ripe to rally sharply, but it needed a catalytic moment.

That catalytic moment was this new prime minister that was just elected. If you take valuation, which everyone's ignored now for the past 2 years in the yen, all of a sudden this moment takes it from here and puts it at the very top. Newspaper style is hugely important in developing any logic framework: what's the most important thing that's actionable at this second in that particular instrument, what's my checklist, and how do I hierarchize? That's literally what trading is all about.

If I were to ask you to do that on the topic of the principal components of a great life, how would that read?

God, family, friends. When I think of friends, I think of fun. So, God, family, friends, and fun, service. My significance is not going to be from being a trader. I don't think that's where my significance is going to be. My significance is going to be, first and foremost, my family.

Every now and then, I actually get joy out of thinking about my funeral because I'm so excited about the songs that I've chosen that'll be sung. I almost wish I was going to be alive for that because it's going to be such a great time. I know my family and friends will enjoy it. I'm thinking of family because, again, if I think about the end of my life and I look back, I'm not going to be thinking about the 1987 crash or Bitcoin.

I'm going to be thinking about who I loved and who loved me. That's what I'm going to be thinking about: what kind of relationships we had and what kind of times we had. I think the professional aspects are these great tools that allow you to do more meaningful things and the things that count, which is: What have you done with your family? What have you done with your friends? How have you served others?

What have you done to leave a legacy of happiness and betterment and goodness to the people that you've been privileged enough to come in contact with? When I say legacy, I don't mean words. I mean deeds. What have you done that has allowed other people to enjoy and better their station in life, their happiness in life? For me, that's the most significant thing by far and away.

Do you always believe in God?

I have trouble at times. Yes, I do. My faith is tested, as I think anybody's faith is tested. I wish I could say with 100% certainty that I know I'm going to heaven. I certainly pray every night.

14. Kill Them With Kindness

The most important aspect, and the reason why I think it's so important for us all to have God in our lives, is you've got to have some set, some code by which you live. I think Christianity, Judaism, and a variety of these have these wonderful doctrinal ways of bringing stability, order, and goodness into people's lives. They give you something that you can lead a productive life with and in a way that's very sustainable, and that allows you to engage with everyone around you with great happiness and joy.

What about Africa?

I love Africa so much because I love the outdoors. Can I just say this? It's taken me 70 years to get to this point. My new thing is I love to find peak spring and peak fall. It doesn't have to be Africa. You can find that day in a neighborhood, and in peak spring, when the colors are vibrant and when the fragrance is just overwhelming, you can find it to the minute in the right place.

I've never felt so alive in my life. I look for that. I now travel the United States for that moment because I know when peak spring is in Georgia. I know when peak spring is in Tennessee, and I know when it is in New York City. New York City is normally a week behind this place I go to upstate.

The same thing happens in fall. There'll be a day where you get the intersection, and the Northeast is the best because it has the greatest biodiversity, where you see the greatest color. You can see those color changes by day, by tree, and you find that day with that intersection of color change. I'm telling you, if you find that day, you can feel the energy.

I've never felt so alive. You can feel God at those moments. It's such a wondrous moment as you go through how life is changing so fast. In the case of spring, obviously it's blooming; in the case of fall, it's transitioning into a more dormant period. But they are so energetic and so exciting, and I highly recommend people try to, in their neighborhood, find that day.

Boy, make sure you're walking that afternoon before sunset. Oh my gosh, it's a joy, boy.

You've lived so much life in the years that you've been with us, and I never ask the question of general advice. I think it's kind of a lame question, but I'm tempted to close the conversation there with what you would just tell people listening. This audience is passionate, they're curious, they're searching for their thing, or they're trying to get to be the greatest at their thing; they're competitive. What would you tell them based on the sum total of all your amazing life and experience?

My mother used to always say—and I think this is what this country really needs right now—“You've just got to kill them with kindness.” You're going to wake up someday, and it's going to be terrible. You're going to be in a bad mood. There's going to be something on TV that's going to make you angry. Particularly in these times right now, my gosh, when everyone wants to demonize the opposition, I think we've got to realize it doesn't have to be that way.

We can humbly devote ourselves to finding the kindness within ourselves and the goodness within ourselves and transmit that to somebody else during that day. I think that's the secret to happiness. You don't have to worry about yourself. You have to worry about how you're going to brighten someone else's day. With that attitude, you'll always be happy.

I'm just going to spend this one day doing this one outward act. If you repeat it enough, again, everything is about the reps, right? Pretty soon, you take “I should,” and they will become “I ams.” If you take that mentality that you want to do this wonderful act of kindness for someone else, pretty soon you become an incredibly kind person.

It becomes natural. It becomes instinctive and organic, and it's just going to brighten your day, and you'll have just such a positive outlook on life. I think that's what we need to intentionally begin to do—every single person, for sure. It'll be a much better world.

Paul, thank you so much for your time.

Thank you.