传奇投资人 Dan Loeb 谈 AI、信用与 Third Point 的250亿美元策略

There was a time when you could say, “I’m just going to punt on tech and focus on industrials and consumer and whatever.” I think you have to be a tech person today. It’s such a big, growing, and compounding part of the economy, and it affects everything else.

Hold on to your seats, because things are only going to accelerate from here. You have to figure out the things that are most important and most relevant. Maybe that’s where the human element comes in: to understand and to be able to make those tough trading decisions when fundamentals are going one way and stock prices are going the other way.

What an awesome opportunity to be able to incorporate everything that you can possibly know about the world that’s relevant.

Dan, we’ve only been trying to do this for 6 years.

Yeah, welcome.

I’ve been excited to finally chat with you about all things markets. It’s such a crazy time. I was walking in here thinking, What am I actually the most curious about as it relates to how Dan runs his life?

One of the questions is the simplest: in this time where there’s more information than you could ever read, literally, what does your day look like to stay up to speed on all the investments that you’ve made and the investments that you could make? What is your day like? Even just take today, where it’s the end of the day. How did you decide what to read, who to talk to? How do you stay on top of the fire hose?

I wish I could say I have a Claude Code that has organized all the information in one place and I go through it all. But I check the news and see what’s relevant for the economy and what’s relevant for our positions. I try not to get too obsessed with the minute-to-minute stuff, because that will drive you crazy. I try to be a little more tactical than strategic.

People will ask me about macro—what’s important? I think when people think about macro, they think about all the typical stuff that the government reports: growth, unemployment, inflation, rates, currencies, where was gold, and where’s crypto? I think all that stuff is trumped right now by 2 things.

Where’s oil? That’s going to be dictated by what happens in the war and geopolitics. And what’s happening with AI, both on the spending front—infrastructure—and what impact that’s going to have on society and on the economy. Those are the main things I’m focused on, really trying to deeply understand them.

1. Macro Views and Tech Trends

What is your model of both of those things? Everyone’s talking about this all day, every day, so obviously these are 2 big issues. Do you feel like you need to have a clear view or a differentiated view? How do you process things as big as this, where probably no one person can understand the whole thing?

I’m not natively a tech person, but I think, given where the world is today, there was a time when you could say, “I’m just going to punt on tech and focus on industrials and consumer and healthcare or whatever.” I think you have to be a tech person today. It’s such a big, growing, and compounding part of the economy, and it affects everything else.

As best as I can, I try to talk to smart people regularly. Jensen has laid it out well, and everybody kind of talks about the AI stack, starting with power and energy at the bottom, then chips and infrastructure, and moving up through LLMs, software, and applications and how that plays through. I think that’s a good mental model to just think about all of it.

We’ve played different elements of that through industrials and infrastructure, hyperscalers, and things like that. Look, I think right now the SOX is up 40%. I don’t think I’ve ever seen an event like that. In fact, if you just go back a few years, semiconductors were kind of left for dead. They were roadkill in the market. People were just not thinking about them at all.

I think that all changed when NVIDIA reported its March results 3 years ago. I think you either were there or it’s okay if you weren’t; you could quickly play catch-up, and that was the big event. Now, of course, it’s about thinking about the NVIDIA, Trainium, and TPU ecosystems, how those play out in relative strength, how that plays through the different hyperscalers, and then, of course, the foundational models.

I try to think in terms of that stack, but I also think about what’s going on in probably the 3 most consequential companies or areas today: NVIDIA, Anthropic, and Elon world—all of his companies collectively. I think there are a lot of ways to look through the prism, but for me, that’s been an effective way to think about how things flow through.

2. The Roots of Third Point

How would you describe yourself as an investor? You have an early reputation for having this incredibly precise ability to go through things with a forensic lens as an activist early in your career, but now Third Point is a much bigger, broader, more diversified collection of $25 billion or so in assets.

How do you think of yourself stylistically as an investor?

The roots of Third Point really come out of my experience as a credit investor and my time at Jefferies. Jefferies was like my laboratory for studying some of the best investors. My clients were people like David Tepper, who had not yet started Appaloosa but later started Appaloosa; guys like Eric Mindich, who ran the trading desk at Goldman; and firms like Angelo Gordon and Farallon.

I was able to watch firsthand how the best investors operated. At that point, I guess we would call them either distressed-debt, event-driven, or risk-arbitrage investors. My natural first lens was to think about credit, but on the equity side, to think about it in terms of a hierarchy and a mental model.

I completely thought about it through the lens of event-driven investing. Merger arbitrage was a little bit off to the side because that’s less directional. The non-merger-arb part is really just a mathematical exercise in earning a return and the risk that you’re taking. But in terms of a fundamental investment lens, I think it would be best characterized by those types of firms.

The best book, which I think is still relevant today, would be Joel Greenblatt’s classic, You Can Be a Stock Market Genius. I think the original title was You Can Be a Stock Market Genius, even if you're not that smart.

He cut it down a little bit.

He took that part out because investors don’t like to think of themselves that way. But it’s a brilliant book, and most of the people I know in that world kind of use that as their framework.

It talked about things like spin-offs, demutualizations, privatizations, and post-reorg equities. That’s how I thought about things. I was totally unfocused on business quality, the moat, or return on capital. I barely even thought about relative multiples for different kinds of businesses.

All I thought about was, am I buying something really cheap that has the following characteristics? A new security is often created, which is priced and valued at a very cheap price because of a lack of liquidity. When a large company or any company spins off a subsidiary, especially in those days, or part of the business, there’s a new stock being born.

The existing investors at that point in time, especially usually mutual-fund types or folks who didn’t want to, for whatever reason—maybe it wasn’t in their sector—they just weren’t doing the work. So they would routinely sell it. There would be this sort of liquidity gap. If you could figure out the value of the business, those tended to be good trades.

That was exacerbated by the fact that the management teams would go out, in the case of a spin-off, and do a road show that would present a very conservative view. Some might even say they sandbagged the numbers. Why? Because people are always creatures of incentives. Their incentive package would be set at the time of the spin-off, so they would come out very conservatively.

But there’s more. The companies themselves were inefficiently operated within these larger businesses. Margins were lower than they should have been. Sales were probably less. The management team didn’t have the incentives to really optimize the businesses. That was an incredible business model.

That dynamic that I just described applied to spin-offs. It applied to privatizations. It applied to demutualizations. It applied to newly created companies like Visa or Mastercard. That was a beautiful business, and it was underappreciated for a long, long time. You could generate really excess returns.

We would take that basic framework and start applying it to other things, like the synergies that come when you combine 2 companies in a major merger—something like Union Pacific and Norfolk Southern, things like that. From 1995, when we started the fund, probably up until the early 2010s—2013 to 2015—that was our bread and butter and how we thought about investing.

What changed in that era, and how would you describe that landscape today? Does Joel Greenblatt’s book still have as much value as it did when you first read it? Meaning, are there opportunities like that that still exist, or are they too small for someone like you?

3. Evolving to Quality and Thematic Investing

No, they still exist all the time. The real opportunity today is overlaying that understanding of those types of opportunities and looking for something that combines that with a business-quality lens.

So let’s talk about how my business evolved and how we evolved. I think if you look at a lot of the people who have underperformed or haven’t survived the last decade or so, they were really stuck on the idea of deep value, low multiples, and being really stubborn about how they viewed businesses, and less flexible about moving into higher-multiple companies or growthier companies.

We basically just started to look at companies that grew faster, that had better returns on capital, that were quote-unquote quality businesses. That kind of opened up a whole new world for us. So I would call that the other significant part of what we do, which would be quality investing and thematic investing. That's when we started to organize our team around industry experts—less generalists and less around the transactions.

If I were to suggest a couple of books, I'm sure people have mentioned them, and you may have—I think you may have even interviewed some of the people who wrote them. Two of the most consequential books that I read, and that had the most influence on me in that area, were The Outsiders.

Sure. We'll have that as our next book. Yeah.

So it talks about them more from the perspective of the managers who understand capital allocation along with great operations. Companies like Danaher, TransDigm, and others. The most influential and eye-opening book to me was Quality Investing: Owning the Best Companies for the Long Term by Cunningham. That really lays out the idea of super-high-quality businesses with good moats and high returns on capital that you might want to own for many, many years.

Now, what happened last year was really interesting because a lot of these companies that appeared to be super high-quality—it was probably the worst year, going into the beginning of this year, because of the disruption of AI. A lot of these apparently high-quality companies very rapidly became less so.

One of the most distinctive things about you and the business is how much of that you've done—how much changing of your stripes, or evolving of your strategy, you've done relative to others. I'm curious because I'm assuming that's going to have to keep happening. The world's going to keep changing, probably at a faster clip even than before. How have you done that, and how do you think about the conditions, the cultural touch points, or what the key is to doing that well across 30 years now for you?

I remember I was in a room—it was a dinner in Davos, which I don't go to anymore. It was a Goldman Sachs dinner, and Eric Schmidt was there and gave a talk. You go back to around 2013, and when you look back at it, it was almost quaint in terms of the technological innovation. This was probably around the time that the Uber app came out, and the iPhone was starting to—

Explode. Yeah.

Explode. I say “explode,” but it was starting to come up with some interesting apps that were starting to be adopted. The SaaS revolution was sort of at the front end. Companies like Microsoft were starting to find their footing.

Think about the period from the dot-com bubble through the GFC. The '90s were a time of incredible technological innovation. Yes, stuff was happening, but I don't think we felt there was a lot going on. There were other things going on in those years, but the sexy industries at times were natural resources, energy, and financial services.

He said to the room, “It will be your natural tendency to think that this increase in technological innovation, disruption, and change that we've been experiencing for the last couple of years is an anomaly, and that things are going to go back to a steadier type of innovation and growth. Hold on to your seats. Things are only going to accelerate from here.”

And he was really right. I think you could have said that again in 2017. You could have said it again in 2020. I think you can really say that right now. It has just continued to logarithmically accelerate, and we're going through something now where we're at the front end of AI. But I just think we're going to have to learn to live with this.

I don't know that, from an evolutionary standpoint, our brains have been able to deal with things like social media and some of the other changes. It's going to take a lot of work for us to prepare ourselves as a species, even mentally, for how to ingest all this information. Brad Gerstner talks about this book—

Essentialism.

Essentialism. I think we also have to adopt this idea of essentialism because you can't do it all. You have to figure out the things that are most important and most relevant to what you do.

I was going to ask: Imagine 5 years hence, or pick your period of time, when it seems that we're destined for a world where no human will be anywhere near as good at ingesting, pattern recognition, synthesis of data, analysis, and this sort of stuff. You could argue it's already here if you had the right pipeline set up and the right data.

What will be the role, do you think, of capital allocators in that kind of environment? I think about your early letters that you wrote to some of these companies, where you really had to pick your way through data sets and information and do some gumshoe-type work to find the data, and you could earn a ton of alpha that way. It seems like we're destined for a world where, if something is accessible by a computer, that's over. What will be the remaining job of the capital allocator, do you think?

I honestly have no idea. I don't even know what it's going to look like in 6 months or a year from now. I think we're okay for the next couple of years. I think companies will need to raise money. The securities that are created from that will need to change hands somehow. People want to save. People want to invest. People need to borrow. I think you always need some human interface in the middle of that. I think it's highly unlikely that there will be a completely AI-managed capital system.

Is your sense that there's a lot of opportunity to earn great returns still in this environment? The fact that SOX is up 40% this year—it's several years into everyone being aware that this is a big trend, and yet these things were up tremendously in year 3 or 4.

4. Market Psychology and Inefficiencies

I talk a lot about investment books. I think there's so much wisdom in books for investing. One of my favorite books is Reminiscences of a Stock Operator. The guy who wrote it quotes, I think, from Ecclesiastes, which says, “There's nothing new under the sun.” Human nature—the question is, will AI take human nature and the flaws in human emotion out of the investment process?

There is a lot of emotion in investing. Or might AI even adopt some of that under the name of risk management or managing downside or whatever? In theory, I guess it could take it out, but if you go back to the market, it will test the theory that there's nothing new under the sun. The thing that doesn't change is—

Yes.

Hysteria, bubbles, panics, and just the extremes of human nature, both optimistically and pessimistically.

I mean, think about just this year. Why is SOX up so much? It's up so much because all the evidence has pointed to the fundamentals in semiconductors, semiconductor capital-equipment companies, memory, and everything around it being super strong. So what happened? Expectations were too high.

In the same way that NVIDIA, after Q1 3 years ago, had this monster quarter, people piled on and it kept going up. You had a couple of quarters in a row where it put up solid numbers, then shockingly good numbers, and the stock tanked. Then the whole sector went down, and I think people were just scratching their heads, saying, “Why is everything going down? Why do the numbers look so good and keep going while stock prices keep going down?”

And then the same thing happened with Micron. They had a phenomenal quarter, up 80%, way ahead of expectations. The stock went up a little bit because expectations were too high, and then it went down.

That happened with Meta a couple of years ago. They put up a good quarter, and the stock went up. It was like Wile E. Coyote: there was no one else to buy the stock. Then it got tanked.

I think that's maybe where the human element comes in: to understand and be able to make those tough trading decisions when fundamentals are going one way and stock prices are going the other way, and to be able to take the pain of losses in the short run.

I think another advantage for someone like me—someone like me being a fundamental investor who doesn't make trading decisions based on computers—is that there are still a lot of market irregularities caused by some very good strategies, but collectively they create these anomalies. So you have quants and CTAs, you have pods. Let's just talk about them for a second. They have a great strategy for them and their investors, but it causes some unusual behaviors.

Fundamental investors believe that when—as Warren Buffett would say—if a stock goes down, you celebrate it because it's a chance to buy more at a better price. They have risk metrics which force selling on the way down, and so they do the opposite of what might be rational for their business model, but it's not rational for long-term investors. So you have a lot of these things that will continue to create opportunities, I think, for fundamental investors.

It's so interesting to imagine that the sources of potential outsized returns are human behavior—which, as you said, maybe changes how much that impacts prices—and structural things like these. Absent those 2, maybe it would be a less exciting market or something like that.

Yeah. But then you'll have corporate transactions that will create opportunities. It feels like there's always something. There are failures, credit cycles, and bankruptcies. It's hard to imagine computers sitting on a creditors' committee and working through the capital structure and being able to transact.

If you think about a continuum of public securities and private equity, AI will not do private equity. You always need people to do deals. I think you always will. Then you have the kind of stuff in between that requires a lot of negotiation and human interaction and high-touch, like private credit or, as I said before, working through a restructuring. You'll probably always need human beings to do that part of the investment business.

5. Good and Bad Corporate Governance

It seems like we're entering a time as well where governance becomes incredibly important, especially in companies. We saw this play out with OpenAI in public, where the governance structure and the people on a board can matter tremendously to outcomes. This has been an area where you've spent a huge amount of time thinking, writing, and investing. A lot of your great successes have come in and around this topic.

I want to ask all about governance. When did you first get interested in it? What sparked your interest? Where'd it come from?

Well, actually, my dad, who was a securities lawyer, was an expert on corporate governance and wrote books about it. So I always heard about it at home. He's actually the first person I'd ever heard of who talked about corporate responsibility. He was on the board of Mattel and later Williams-Sonoma. He would visit these factories where they were sourcing their materials from and wanted to make sure that they were ethically sourced and that the workers were treated well at Mattel or Williams-Sonoma. So he was really ahead of his time on that stuff.

What was he like as a person?

My dad was incredibly funny, warm, irreverent, and really smart. He was the only son of 2 immigrants from Europe. My grandmother, his mother, came from Poland in 1914, and his father came from Romania in, like, 1898. Incidentally, his mother's youngest sister was the first of that family to be born in this country. Her younger sister founded Mattel Toys.

He was a self-made person. He went to UCLA, did well, went to Harvard Law School, and spent most of his career at 1 law firm.

I'm curious for you to sum up, if you think about everything you've done in governance, what good and bad governance are at the highest possible level. How do you think about it?

We have an incredible system. Let's start with that. There's something beautiful about the American capitalist system in the aspect of it that creates boards of directors that ultimately have a role within both capitalism and a democratic system, where the board is responsible for, and answerable to, the shareholders, and is responsible for holding management accountable, setting strategy, and making the key financial decisions.

We have a great system in place. The shortcomings within governance happen when board members lose sight of what their duties are as fiduciaries, or the composition of the board is such that they aren't really equipped to carry out that duty because there is a lack of deep knowledge or intellectual or talent diversity on the board, or they are thinking excessively about things other than their duty to shareholders.

Not to say that the board doesn't have other responsibilities, but I think ultimately they should feed into creating shareholder value. If you go back to both Milton Friedman and things that Warren Buffett has said, of course boards care about the communities that they serve, the products, the employees, proper conduct, et cetera. All those things are very important, and they are not inconsistent with creating shareholder value. In fact, they're part of creating shareholder value.

But especially a few years ago, I think it was the Business Roundtable that said, "We're no longer going to say that the board's responsibility is primarily to drive shareholder value. It's this thing and that thing and the other thing." Well, I think it was a distraction from what their real duty is, and it didn't recognize how all these things, of course, go together.

The bad governance I've seen comes from a number of things. One, board members let their loyalty or relationship to a CEO who's not up to the job overshadow their duty to shareholders. That's probably the main thing, because it's very important to understand that boards don't run the companies. The board's responsibility is strategic, not tactical. So they should be really focusing on those things.

6. Activism

But if the company isn't allocating capital well, or isn't holding the management team responsible, or there are some very obvious things that should be done differently, that's when we can come in. Most of the time in our experience, we've been able to work with existing boards in redirecting them and offering solutions. Sometimes we don't even have to get on the board to get those things done. You hear about the extreme cases where we have to, or try to, shake things up, where our presence is needed on the board to do that.

What have you learned about the power of writing in investing? You're obviously extremely well known for some letters you've written to chairs of the board throughout your entire career, and I just know you're a writer. You've used writing in a lot of different ways. What is great writing to you, and how do you use it?

All great writing is really about clear thinking and organizing your thoughts, communicating them to people in a clear way to get a desired outcome. You can also use writing to influence, and in our case it's been helpful in getting the attention of other shareholders, sometimes the board itself, shaking them up a little bit, and getting media attention focused on a board.

I think about activism: you've got a few different levers. You have a financial lever by, obviously, making a bid for the company. You have legal levers—proxy contests, litigation, information requests, et cetera. Social pressure is actually a very effective way, and I think the best way to put social pressure on a company is through writing and PR efforts around the company.

7. Sotheby's

If I look across all the different activism that you've done, it seems like maybe there's an interesting theme of you going activist on places or people or companies that quite hold themselves out as high-status, but then they're not living up to it. Whether that's Sotheby's or some of the Japanese conglomerates, or just certain CEOs and their family members on the board, things like this, there's a status component that would be deserved if it were being earned on an ongoing basis, but maybe the company wasn't. You saw that gap as an opportunity. Do you think that's a thing? Am I seeing a correct pattern?

That's interesting. Certainly was the case in Sotheby's.

Can you tell that story? That's such a good story. Such an interesting one.

I'll come back to the story about Sotheby's in a second. But I think board members often feel a sense of status for being on these boards. I think that in itself needs to be dispelled, because if you're on a board because you are either getting status or you're getting income, and that's your primary reason for doing it—not for representing shareholders—then that's where we come in to try to disintermediate that and take away some of the status or increase the cost of doing that.

Sotheby's, I thought, was just an interesting company. It was a pretty small company and a small target for us. It's actually a very good example of what you're talking about, because although it was a public company, it wasn't really run for the shareholders. It was run because I think people did feel like it was a high-status business.

It had been mismanaged. It didn't really recover from an antitrust violation that spilled into criminal charges brought against the company and some of the individuals. The business itself was a good business, but just run unbelievably unprofitably. The company had been around since the 1700s, and some of the business practices had not really been updated since that time.

So we took a position: we bought 9.9% of the company. We went after the board but really just wanted them to implement some basic business practices that we thought would be better. We didn't think the CEO who was there had sort of come up. He didn't have a particularly deep knowledge of art. I think he came out of the rug division.

He didn't really have deep relationships with the collectors either. So we came in and gave him a shot for a year, and then I think the board came to realize he wasn't the right guy. We brought in a guy named Tad Smith, who was terrific from MSG. He cleaned up the operations, improved the technology, and then they sold the company.

Good result.

Yeah. A good result.

Do you think there's a lot of that lurking out there today? If one wanted to start a career and only do that—go find companies with mediocre or bad management where, with good management, the company would do way, way, way better—do you think there's still a lot of that out there?

There's probably some of that in the kind of sub-$2 billion market-cap space, and not necessarily even bad management, but maybe B+ management.

Not optimizing.

What we're finding is that it's almost like a negative-selection process. We'd much rather invest in a great company with awesome management that's doing all the right things and cheer them on than find something that, but for mismanagement, the company would be worth a lot more. What you find is that if the things that you've identified are badly run, then there are probably 10 times more things that are badly run. It just gets to be sort of a morass.

One of the interesting things about Third Point is that, if I understand it correctly, it's something like 60% credit, which I think would surprise a lot of people, of the total assets. Also, when you started, I think you started with no institutional investors. It was individuals, families, things like this.

It seems like you've sort of felt your way into the strategy. The strategy as it exists today probably wouldn't go on a clean PowerPoint deck if you were a new firm doing this from scratch. It would be hard to pitch what you have now, and I'm really interested by that—a firm that has evolved into its model. It's 60% credit today, and it's a blend of other things. I'd love to just talk about that evolution and why it is, and the value of that evolution versus predicting, “Okay, here's exactly what we're going to do.”

8. AI

Yeah. Well, first of all, Third Point is a whole collection of businesses. My main focus is on the hedge fund strategy, which started at $3 million. It's now about $9 billion. That fund itself is about 20%. It's about 30% credit in total.

The rest of the portfolio—I mean, it moves all over the place—is primarily equities. I think our equity book is generically around 110% long by 30% or 40% short, but that can be all over the place. Going into the war, I think it was down. We really dialed back our risk and were, I think, for the first time since 2009, more exposed to credit than equity. But we very quickly took that back up. In the hedge fund, we're still more equity than credit.

Across the fund, we have a CLO business with about $7 billion in it. Within Third Point itself, we have about 30% of AUM, which would make it close to $3 billion in structured credit and corporate credit, but that's within the hedge fund. Then we have an insurance company for which we manage about $1 billion in credit. We have a couple billion dollars in asbestos liabilities that we manage in their own pool, and we just started a private credit business, which is small.

What's the thread that unites all those things, like asbestos liabilities, private credit, and corporates? It seems kind of all over the place.

Well, we haven't even talked about the fact that we have a venture capital business, right? I've worked in venture capital. I've worked in risk arbitrage. I've worked in credit. I've worked in equities. I think having a view of value, thinking about valuing enterprises—whether they are earlier-stage, mid-stage, or mature businesses—and looking to invest in whatever the fulcrum security is in that enterprise is the thread that unites them. Obviously, for an early-stage company, the only fulcrum is the equity.

What does that mean, fulcrum? Just define that.

The one that's going to have the best risk-reward.

Got it. Yeah. It's usually used in terms of companies that have debt and equity. It's more in terms of companies that are going through a restructuring of some sort: Do you want to be in the equity? Do you want to be in this junior debt? Do you want to be in the senior debt?

Credit Suisse was going through its troubles and being bought by UBS. You could invest in the preferred shares. You could invest in the holdco paper, or you could invest in the opco paper, which was most senior within the capital structure. The fulcrum there was actually the holdco paper, which had the most upside, but the opco paper also did well. The preferred was wiped out, so that was the wrong place to be.

There are always different interesting places within the capital structure to play, and having a comprehensive view of these companies gives you a really great vantage point to make alpha-generating investment decisions. Let me give you 2 examples.

We had a workable, good-enough knowledge of Twitter and xAI to understand the equity value of both of those businesses. Without making a decision about whether or not we wanted to own equity in xAI, and having not participated in the Twitter deal, there were 2 financing transactions that came up: one for xAI and another one for Twitter.

The Twitter debt was a resale of the financing debt that was offered when Elon bought the company. Morgan Stanley sat on it for a while. It was deep underwater. When it got close to par, they decided to sell it.

Most credit investors were really scared and nervous to buy that, even though it was at 96 or 97 cents on the dollar. It was yielding around a 12% yield. We were comfortable enough with the underlying value of the business and with the fundamentals that we made that, at that time, our largest credit position.

Then, when xAI did a debt financing, very few credit people wanted to play in that one because there was no cash flow—$2 billion in revenues and a $20 billion enterprise value—but we were very comfortable that this was a real business. We looked at them as credit investors, but we were also able to bring in the resources of our private-investing knowledge.

Yeah, it's a fascinating example of the value of seeing across the whole ecosystem and being able to invest however you want, which brings me to the question of, as I understand it, you're still sort of the single portfolio manager who sits on top of all these assets across all these different buckets. Ultimately, you have to make the decision to buy or sell something.

Let me just push back on that. I'm the portfolio manager of the hedge fund.

Yeah. But private credit, CLOs, opportunistic structured credit, and a high-yield business all have their own portfolio managers. I will come in if there's an interesting opportunity. We supersized both Twitter and xAI when I got involved, but I'm not even on the investment committees of those businesses.

So, to zoom in on just a hedge fund where you're the PM, you mentioned before that you could be a great investor and not bother with tech, in the Warren Buffett style or something. Today, the market is whatever 70% tech, depending on how you measure it.

What do you think of that complex of companies today—the Amazon, Microsoft, Google, big technology companies—relative to the last 10 years of watching them and investing in them carefully? What does the setup feel like to you today?

I think the setup's great. You can still buy Nvidia. Maybe the multiple is slightly higher right now. There's such a catch-up trade in Nvidia at 15 times 2027 and 12 times 2028 for the most dominant, fastest—I don't know if it's the fastest-growing, but very fast-growing—company at its size.

I looked through our whole semiconductors, capital-equipment, and hyperscaler portfolio, and my instinct was going to be, “Okay, we've got to take profits here.” I looked at the valuations and the growth rates. Unless you are really draconian or negative and think that somehow the AI world is going to roll over in 2031 or 2032, I think it's some of the most attractive. Yeah, I think it's the most attractive sector right now. It's where the bulk of our capital is invested.

As a person who was born in the sort of value discipline and made a lot of money in that kind of investing, those people who tend not to have evolved as much would point to today and say, “Oh, it's just another classic example of a giant bubble in the making.”

Do you feel seeds of that at all? Are there other aspects of the market that feel euphoric or strange or out of whack?

If you don't believe the capex numbers are going to yield a return, then you would have to believe that they're just flushing money down the toilet and that they're not going to get a return, because the earnings are really strong and the multiples on that are reasonable. They might say, “Yes, but the cash flow after capex is…” You know, they're scoring. But these are companies that are also, for the most part, investing money off their balance sheets and generating enormous amounts of cash.

9. Sony

So it's very different from the dot-com bubble, which we were short going into and had good numbers in those years.

I just don’t see it. You don’t have the valuation bubble now on those companies that you had back in those days. You look at Anthropic’s revenue growth, the adoption and usefulness of its products, and the anecdotes you hear about the next generation of models and what that’s going to do.

You can make a good argument that we’re barely scratching the surface. There are so many layers of corporations that have just—they’re just getting started. So, I’m in the optimist camp in terms of seeing this as something that’s going to play out.

What about the rest of the world? I’d love you to tell the Sony story—the story of going to Japan and spending so much time there and everything that you learned. I think it’s a really colorful, cool story, but it’s also an excuse to ask about the rest of the world and what you see going on there.

I know you’d be willing to invest anywhere, whereas American companies get basically all the attention in markets these days. So, whichever order you want to go, you can tell the Sony story first as just an example of this, but I’m curious how you think about everything outside the U.S.

Israel is an interesting market. It’s kind of a nichier market, and we had one of our top investments there that, despite the war, has been one of the best-performing stocks in our portfolio.

But in terms of the big markets, there’s a lot going on in Korea, Taiwan, and Japan. I’m probably more bullish on them just in terms of a hunting ground to find great companies. The European markets are just tough right now, given the regulatory environment. They just have a different attitude about business and capitalism.

We’re invested in a couple of businesses there—Rolls-Royce, ASM, and ASML—but the companies that are in Europe and dependent on the local economy are more challenged.

Can you tell that Sony investment story and everything you learned through that process and what you did?

Sony was—at one point, we owned 7% of Sony. There’s a list of companies that we at one point owned significant stakes in that, had I not sold, would be worth in the mid- to upper-single-digit billions of dollars.

I feel like I hear this all the time.

Yeah. We all have that. We sort of took 2 runs at Sony. The first time we invested in it, it was basically a conglomerate. It had, obviously, the main Sony studios. It had a semiconductor business, a life insurance business, and all the consumer electronics.

We advised them to separate these businesses, certainly, at a minimum, to take out the insurance business, which had no place in it. We met with the management team and had a big deck that we went through. At the end of the meeting, we told them that, in the interest of transparency, we had shared our investment thesis with The New York Times.

Andrew Ross Sorkin wrote the story. They went into a panic when we told them about that, and Andrew agreed to embargo the story until the Japanese market closed. The story came out, and they had prearranged for us to go on a tour of their innovation center.

Before we went to the innovation center, when we told them there was going to be a story, Kazuo Hirai came out. He said, “You told The New York Times?”

I said, “Yeah, but just The New York Times. Nobody else.”

He said, “Okay, just The New York Times.”

It was wild. We were walking around the innovation center, looking at our BlackBerrys at that time, and the story went everywhere. It ended up being a really good investment.

They really pushed back on everything that we recommended. It took them about 5 years, and I think, one by one, they’ve done many of the things we recommended. They’ve broken out the semiconductor business. They partially spun out, or they plan to spin out, their financial services business. The one thing I learned is that activism in Japan is really hard.

I’ll tell you what’s interesting about activism in Japan. On one of our first trips, we met with the prime minister and his right-hand man, Suga-san. I told him I would write a paper explaining to him why activism was good for Japan as a country.

They had released something called the Three Arrows, which was about fiscal policy, monetary policy, and restructuring. My suggestion was that they needed to include corporate governance, and in particular a focus on return on invested capital, as part of their Three Arrows strategy.

I came back to New York and met with Larry Lindsey and Niall Ferguson. We wrote a 3-person paper. They did most of the writing, but we wrote a paper for AEI. It was then picked up as an editorial in The Wall Street Journal, and they adopted that. It was pretty cool.

The government actually really wants the companies to do this. It’s really the management teams that are more entrenched, because the shareholders and the government kind of want that. You’ve really seen progress since we first went over there. They’re breaking up some of these cross-shareholdings. They’re penalizing companies that trade at discounts to book value. There are a bunch of other things, so I think they’re definitely moving in the right direction.

If you think about all the investments that you’ve made, is there any that stands out as the one that taught you the most about how this world works?

I know I’ve asked this question a couple of different ways, but I’m always interested in learning by doing versus learning by reading. You can read all these amazing books, The Outsiders and Joel Greenblatt’s book, and they’re great, but it feels like part of investing is that you have to get hit in the face or experience things to really imbibe the lessons. Is there any investment through your career that stands out as one like that?

10. Danaher's Operating System

I think investing in Danaher has been the most instructive because it truly is one of the best-run businesses. It was also one of the first experiences I had investing in a super-high-quality business that had internalized some of the best practices of creating a corporate operating system.

My partner then, Munib, and I actually went to Danaher and got them to boil down their 5-day DBS—Danaher Business System—training into a 1-day thing for us. It was really instructive. It was a really good investment for about 4 years.

I learned by observing them, by watching them incrementally improve the business quality of the company by shedding lower-quality businesses and buying higher-return-on-capital, better-quality, higher-margin businesses to shift from general industrials into health care. I learned a ton, and then it stopped working as an investment.

Because of COVID, there were all kinds of irregularities, like surges in orders and increases in inventory, followed by a correction for that. All the benefits they got from the surge in demand that was a tailwind became a headwind, and they still haven’t really come out of it. It’ll be interesting to see how they navigate AI in the next few years.

We actually sold it and recently, with the recent sell-off, have gotten back in, but in a small way. I learned a lot about how really thoughtful businesses think philosophically and deeply about their operating system, about optimizing, motivating, and inspiring their team, and even about the fact that they have a system in place. It’s also been incredibly instructive watching the diaspora of executives.

Larry Culp was there, right?

Yeah, Larry Culp was there. There have been a lot of others—the guy from Ingersoll Rand, which has been a well-run business.

If you had to sum up that 1 day, what was it? Was continuous improvement the thing that you took away?

“Cult” is a little bit too strong of a word to describe it, but they had a very strong corporate identity and culture. It’s one thing to say, “We are a Kaizen company, and we’re dedicated to continual improvement,” but what they have is a whole system for implementing improvement across the organization.

One of my big takeaways from that day—there were a lot of things that I learned that day—was that they would hold people very accountable and individually show when people were underperforming. But the interesting thing about it was that, because these things were all addressable and fixable, when they found someone who was underperforming, it was celebrated instead of shamed because, look, look at all these things you’re doing wrong.

We can fix those. And they did. They do that over and over and over again. They do it both in terms of operations and working capital. It was really cool to just walk around a place where everybody was on the same wavelength, trying to accomplish that.

Can you talk about the insurance business that you've built and the acquisitions that you've done? On the same point, everyone talks about the stuff you're putting money in, but there's far less discussion of where the money's coming from. Apollo has certainly done this with Athene, and there's been a lot of cool innovation on the liability side. How have you thought about it? What have you done? What's the story?

We actually started an insurance company de novo. It was 2010.

11. Building an Insurance Business

We were backed by myself, Kelso, and Pine Brook, and we started a Bermuda-based reinsurance company. The thesis there when we started was that we had an executive who would do these reinsurance deals, we would invest the float all in Third Point and in Treasuries—sort of a barbell—and then we could defer taxes and get leverage on our capital. Greenlight Re at the time was trading at 140% of book value. I thought this would be the future: we'd just keep raising money for this vehicle.

The problem was that the reinsurance business took a sharp turn for the worse. We had some good years at Third Point, but we were scrambling to offset the losses from the insurance company. About 3 years ago, I said, “Well, we had the right idea, but we had the wrong insurance vehicle. We were doing P&C insurance. We really should have just done plain-vanilla annuities, basically.”

The problem is, the annuity business can't invest in the hedge fund. It can only do credit. The good news is that we had had about 5 years when Third Point stopped investing in my hedge fund, but we started investing in structured credit, corporate credit, and other things that were either rated or more appropriate for an insurance company.

We've done 2 things since then. We merged our reinsurance company into a closed-end fund that we had in the UK, Third Point Offshore Investors. We reincorporated that business from Guernsey to Cayman and repurposed it from a closed-end investor in my hedge fund into an insurance company. It still has some of the investment in the hedge fund, but it now owns our reinsurance company.

That company will then be in a position to do more reinsurance deals and issue primary annuities. Third Point manages the money in private credit, structured credit, whole-loan mortgages, some direct lending in real estate, some investment-grade corporate debt, and private investment grade. We also put the equity of that business in things like the junior tranches of structured financings, but we'll also be using it for growth-equity investments.

What's the hardest investment lesson that you've ever learned?

12. FTX

I would have to say our investment in FTX. It looked great. The company was growing fast. We could verify it all on the blockchain. We felt like we had some good company on the cap table with us. We did it. It just turned out that it wasn't what we thought it was.

It was painful because I think, in general, one of the amazing things about our capitalist system is the ability that venture-backed companies have to go out and raise capital for interesting ideas. I'd say most people are good actors with good intentions, and we've rarely had any kind of mishap. That doesn't mean that you don't do very careful due diligence. I will say that now our due-diligence process definitely checks bank balances and does the most basic due diligence that probably would have turned stuff up on this.

But if left alone, or if he hadn't ended up being a crook or very sloppy, the venture investments he made would have—

—been like the best venture investor of this era.

Cursor, philanthropic, Solano—everything he did. I mean, the guy had a great nose for value. So that was probably the toughest mistake that we made within the last 2 years.

We've made some great short investments in things that are being disrupted by AI, but where we've made the mistake is that we were contrarian and thought we knew better—that AI wasn't really going to affect this part of the information-services business, or that these guys had proprietary information. That's where we've made some mistakes.

I still think there could be a shakeout. There probably will be a shakeout where there will be some phoenixes that rise from the ashes, but that's been kind of the investment lesson of the last year or so.

How do you guide your team through this? You've got a bunch of extremely smart, ambitious, hungry analysts and investors. What do you tell them going into this crazy uncertainty?

First of all, we all have to start using it. The only way to get good at this is just to use it. We have people at different levels. We have experts that we've brought on who are native computer scientists, coming at this as expert AI people and working on specific projects. They're coaching the team, but we're also encouraging everyone to use AI and find as many applications as they can.

You can hire—and we do hire—system integrators. We have a system integrator working with us. We're starting a new insurance company; we'll talk about that a little bit later. I'm obsessive about continual improvement, both at the individual level and organizationally.

Claude really enables you to be an individual self-improver. It makes you very autonomous. It'll give you back whatever you put into it if you put a lot of time, energy, and effort into it. So I'm encouraging everyone to do that.

Collectively, we're all sharing best practices. Some people are running agents overnight and using tons and tons of tokens. Other people are probably more like me, just using it more for queries and things, but we're all very involved with it.

Where do you feel like your firm's view is the most different from your peers these days? I know you're close with lots of the great investors of this era that run firms like this one. Everyone's trying to do the best they can. Where do you feel the most out by yourself or distinctive in how you view the world?

I think we're probably more optimistic—or you could say maybe less pessimistic—that there's going to be some kind of apocalypse from AI. I'm still pretty optimistic that it will create opportunities, create jobs, and create net jobs. Obviously, it'll lose in some places and gain in other places.

I think the differentiator for us is that we can always default into credit investing. We haven't been in a scenario where we had a real credit cycle, but I'm very comfortable investing in incredibly stressed times. We really haven't had any since 2020.

Going back to COVID, the thing that we got really right was that we had a good year that year, but it wasn't because we piled into stocks; we piled into investment-grade credit. So maybe that's answering the question a little bit differently.

Why do you suppose more places don't do that? It seems like it would be an obvious thing to provide an advantage, to have more options for expressing a view.

It's so different. I grew up in credit. I worked on a trading desk. You don't just electronically trade bonds. You have to have relationships with these firms.

Part of the reason for expanding into the CLO business is that we had the high-yield market, a $1.5 trillion market, pretty well wired. We were sort of dabbling in the broadly syndicated loan market, which is another $1.5 trillion. But we also have eyes on a $6 trillion structured-credit market.

These are not markets that lend themselves to tourism. When the opportunities really come up, we're already there with the relationships and the understanding of the companies.

What makes a great analyst today in any way that's distinctive from what made a great analyst 20 years ago or something like that? How has that changed? If you picture the most talented analyst here right now, whoever that is, what are they like?

13. What Makes a Great Analyst Today

I think the great analyst 20 years ago was someone who could build a model really fast and understand some really complicated restructuring. I'll use myself as the example of that ancient dinosaur of an analyst who used to be useful.

When I was at Jefferies, Drexel went bankrupt, and there was a thick disclosure statement—about 3 or 4 inches thick—on the bankruptcy of a company called Drexel Burnham. This thing got passed around, and nobody could crack the code on it. I was relatively new, and I knew I had to differentiate myself, so I spent a whole weekend studying it.

Ultimately, that was one of the best investments ever in the history of bankruptcies: the claims on Drexel. People didn't understand the complexity of the different value pools and liquidations. The claims were overstated, and the assets were understated, but it was super complicated. That was the kind of thing that differentiated the analysts of the 1990s, when I did that, or even the 2000s.

I think now it's somebody who's like a Gavin Baker type—a junior Gavin Baker. Somebody who understands a company or understands an industry and understands the nuances of a technology.

Let’s get away from technology for a minute. Casey’s General Stores—why was this one of the best-performing stocks? It looked like a tech stock.

It was because they were not a convenience store chain. They were a pizza chain kind of masquerading as convenience stores. We had an analyst who went to Texas and ate pizza.

So that kind of an analyst today, I think, is what was different.

14. The Next Decade

If you think about the next 10 years for yourself, and everything going on in markets, it feels like we’re all lucky to be alive to watch this era. What excites you the most about this next 10-year period as an investor? You’re lucky to have all these resources, and you can invest in anything—credit, equity, whatever. And then what worries you the most?

The thing that worries me the most is just not having the time to do the things that I care about: spending time with my family, being able to go surfing, and reading books that I want to read. I’m not really worried about the business. We have a good process. We invest in things with good value.

The thing that excites me is just the things that have excited me, the things that keep me going. I mean, God, what an awesome opportunity to be able to incorporate everything that you can possibly know about the world that’s relevant: to study industries, to study technology, to study consumer behavior, to look at the U.S. economy, look at politics, and travel to the Middle East, which I think is probably the most vibrant, interesting part of the world.

Who would have thought 20 years ago, or even 3 years ago, that Bahrain, the Emirates, Saudi Arabia, Morocco, and Azerbaijan would be better allies to the U.S. than NATO? And who would have thought that their growth rates would way exceed ours, or that their growth and their embracing of technology? That’s the stuff that keeps me going.

It’s just being able to incorporate all these different things and also to form relationships with people who are doing interesting things, like Jeremy O’Brien, who founded PsiQuantum and talks about quantum computing; Elad Roisman, who started NextSilicon; or the CEOs of the companies that we invest in. I’ve gotten to know Mitch Rales from Danaher.

It’s so cool to finally hear about it directly and do this with you. When I do these, I ask the same traditional closing question of everyone: What’s the kindest thing that anyone’s ever done for you?

Gosh, I thought about that because I knew the question was coming, and I had a lot of different ways to answer it. But before I answer that, I do want to talk about the importance of kindness. And I know you know it’s important because you ask this question every time you interview someone.

15. Kindest Thing

It’s important on many levels because I think if you elevate kindness as a characteristic that you want to elevate in your hierarchy of things that you want to be—honest and truthful and smart, clever, innovative, whatever—I think kindness is very important. I think it goes with forming deep relationships with people. I think kindness enables you to be empathetic.

That enables you to connect with people, to learn from them, to be better as a human being, and ultimately—I hate to sound crass, but ultimately—it will benefit your business. So I will say, on the kindness front: Be kind to people, not just people who will benefit from you. Be kind to people when you have no idea how it will ever benefit you. And sometimes it will, and sometimes it won’t. Sometimes you just connect with someone who thinks you’re a better person.

Good for its own sake.

But anyway, I came down to my friend Carter, who, when I was, let’s just say, in between jobs before I started at Jefferies, let me sleep on his couch. I had about a 6- or 9-month period where I wasn’t working. And then when I got my job at Jefferies, I suggested to him a bunch of different distressed-debt situations, and he trusted me with a few hundred thousand of his money. Then it turned into a little over $1 million, and then he rolled that into my fund, and it really enabled me to get my business started.

So that was one of the kindest things. I want to say one other thing on the kindness topic. Gavin actually said this, and I think he was quoting Palmer Luckey. He said, “The one thing money doesn’t buy you is friends who believed in you when you had nothing.” [laughter]

It’s a great line. Amen. Shout-out to Carter, Dan. Thanks so much for your time.

All right. Thank you very much.