The Exchanges

Q All right, so you've had this incredible experience, quantitative investing, fundamental investing. You're now going to start your own fund. What happens?

A It was a difficult time. I felt like I'd sort of reached the plateau of working for somebody else. I wanted to try it out on my own. I had been very successful in my own investment strategies and implementations up until that point, but I'd never done it completely on my own where I'm fully accountable and have nobody else to blame, and that's a huge difference. I'd managed lots of people, and so I felt confident in my ability to build a team again and do that all over again, but I was definitely very nervous, and Being a portfolio manager or a founder of any type of investment business is still an entrepreneurial activity. There's inherently a deep insecurity that you kind of need to do that. There's a chip on everyone's shoulder, and I certainly had a chip That I wanted to sort of see if I could do it myself, and I wanted to see when I did it myself what it would look like, and for me, again, it was very process driven, so I got my hands on everything I could. I talked to you about starting a hedge fund. You obviously had a lot of experience with protege and, and what the elements of success were for early stage funds. While I've definitely had an ego about certain things in life over the years, which I then had to sort of beat myself out of, I've always known that I'm better with good teams, and I've never pretended that I could do things completely on my own, and so I felt …

AI assessment note: “for me, again, it was very process driven, so I got my hands on everything”

Q With someone you know, like people you mentioned, that are the smartest people you know, and you know because you were in it and you were competing against them, that they're the best around. When you think about how you invest your own money, do you say, well, yeah, but they're in the wrong box, or do you say, no, this particular practitioner, I think they'll still figure it out?

A I think it depends. There are a handful of people that are still out there that I think are extraordinary, and I've given a few of them my money, and that's with fees. And they're people who I think truly have something special. But again, I think the averages are doomed. I think even 80th percentile is doomed. I think you have to be in the 99th percentile at this point, whereas 20 years ago you could have been in the sixtieth percentile and you were pretty good. It's partially a function of that. I think there are a lot of people who are unwilling, despite their genius, who are unwilling to acknowledge that this game has changed As much as it has. And they're sort of, in an Einsteinian way, doing the same thing over and over again, and expecting a different result. And I think they need to have a dramatically different structure. I mean, I had a lot of conversations with some of my really good loyal investors before we returned the money, where they would ask me, like, there must be ways that you'll want to do this, and you should keep doing it, but just change your structure. And I actually believe that is an answer. I believe that there's a lot of people that are in the wrong structure. I think we were in the wrong structure in terms of your objectives, your biases towards betas and nets, leverage, and your time horizon, most importantly. I think opportunities are always goi…

AI assessment note: “I think it depends. There are a handful of people that are still out there”

Q So you mentioned we a couple times. Who's involved in the we?

A So my co-founder is a guy named Ross Berman. Ross has been a good friend of mine for probably 18 years. Incidentally, I met him through poker, and he joined me at Turbion about a year ago, more to sort of help out some of the family office activities that we were doing, but Ross Has a great background in derivatives. He ran several hedge funds. He's one of the best people I know in terms of sizing up risk and making decisions, and he's also just a great friend, and he's just a great partner. We have three other people that are part of our team. One is a data scientist. There's still a data focus to what we do. I believe there's as efficient as the public markets are, the private markets are wildly inefficient. And some of the things we're able to find and figure out using data and data science is just truly awesome.

AI assessment note: “So my co-founder is a guy named Ross Berman.”

Q All right, Jason, where can people find you if they're interested in what you're doing?

A I'm not on social media, which is something that you'll probably convince me to change. I'm on Twitter as an observer. I've never tweeted it, I'm on Instagram as an observer. I've never posted a post on Instagram. I haven't looked at my Facebook in probably five years, so I'm not in the conventional channels. I think what we're going to do for Human Co. is I'll probably have a Twitter account where I start posting interesting things like topics like this that we just talked about. Right now we have just a landing page for Human Co. We're just still in stealth mode. I think what we're eventually going to have Is an application process for entrepreneurs who want to partner with us because there's no monopoly on good ideas. There's brilliant people out there that will never find unless they reach out to us. But unlike a VC fund, we do expect human code to be pretty concentrated. We're not going to have like a hundred bets. We want to be very focused on a few verticals. And so I would just say, stay tuned.

AI assessment note: “Right now we have just a landing page for Human Co. We're just still in stealth”

Q So what's your take on the hedge fund industry today?

A Well, I'm obviously biased because I retired from it at the end of 18, and we returned all of our money. And over 20 years, and again, I've always been a student of the industry. You remember my letters. I used to write about lots of different elements of the industry and what makes it what it is. A lot of the elements as an industry have become hyper-commoditized and hyper-competitive. Most of the easy alpha is gone. At least in the durations that most people, including myself, were used to. 95% of managers, the bulk of their returns are some form of beta. And that's fine. I invest in things that have beta all the time, but I don't necessarily believe that allocators should pay full fees for that, because now in this new world, you can replicate that quite easily. It's also gotten a lot less fun. Shorting got so much harder. I used to love to short. It's gotten much more competitive in terms of hard to borrows and between passive and quants. I really think it's changed the dynamics of the industry. I always think there's going to be great opportunities for public investing. This is not necessarily a, a statement on public investing. I just think the types of edges and the fun that we used to have in identifying areas to exploit and areas where there was just rich opportunities, I feel like it's much more of a dearth of those types of opportunities than they're used to.

AI assessment note: “A lot of the elements as an industry have become hyper-commoditized and hyper-competitive.”

Q All right. So as we talk about this transition to what you're doing now, part of it we haven't talked about was a personal transition where you've moved from New York to Austin, Texas. What's that been like?

A Yes. I've made some of my friends describe it as a midlife crisis. I've always viewed life as a journey, and I'm always trying to learn about myself and about What makes me happy and what makes me a better person? And what I realized With deciding to exit the hedge fund industry and focus mostly on health and wellness was that New York City as a place to live has never really agreed with me. And I think this is an individual thing. Everyone has different utility curves on these types of topics, but for me, I'm an outdoorsy person. I've struggled with autoimmune disease for more than half of my life and all of my adult life. And I'm also very type A. I'm very, Susceptible to the energy around me in both the people and the atmosphere. And then I also, as part of my autoimmune problems, I don't detoxify properly. And so a city like this brings out in many ways the worst in me. And it's part of what made me actually good at my job in my early days, but it's also what drove me to illness, which is I'm hyper competitive. I was a competitive athlete my whole life, and I was a competitive athlete in college. And New York has the best and the brightest people. And I'm just sort of used to operating at 11 out of 10. And when I'm surrounded by all those people, it makes me want to do that too. And so Austin was really part of the culmination of this kind of recognition that I think I can …

AI assessment note: “Austin was really part of the culmination of this kind of recognition”

Q What teaching from your parents has most stayed with you?

A My mother was always about kindness. And being kind to people, especially in New York, there's just not enough of that, and sort of seeing the good in people. I think at times I'm not skeptical enough of certain people, but on balance, my ability to see the good in people, the benefits have far outweighed the cons, and kind to everybody. I have tremendous disrespect for people who are mean to staff, or waiters, Or cab drivers, and you learn a lot about somebody when you see how they treat people who are less powerful than them, and I think that's just disgusting when I see that, and it happens a lot. My father had this approach of never burning bridges, and I sort of think about it like the positional chessboard and optionality, and I've always done favors for people without any expectation of a quid pro quo. I've done favors for people with no expectation ever of getting that favor paid back, And except if they're a disgusting human being, which I have encountered a few of them, I try not to burn bridges, and I try to, to the extent that I can, and it doesn't take up all my time, to just help people when they need help.

AI assessment note: “My mother was always about kindness.”

Q Where are you on the spectrum of investments that you've already made at this point?

A So HumanCo is a little confusing in this perspective, because we just started talking to outside investors. I have been incubating it for over a year, just personally. Ross has been with me the whole time. And I have done a handful of investments under different legal entities, but we call it HumanCo, that meet our guardrails and meet our standards and meet our ethos. I think what also makes HumanCo unique is that we have very specific and strict parameters of what we will do and what we won't do. And that's related to the ingredients in the products. It's related to the sustainability of those products. It's related to the mission of the founder, and so we're very clear and defined on what we won't do. Prior to taking outside money, we've made a handful of investments in a few companies that sort of meet our standards and are consistent with the mission, and I'm currently warehousing these companies in kind of the family office balance sheet, and we may move them over formally, To this round of HumanCo, or we may not. It's only been a handful, and my belief is that there's way more to do. And so what we wanted to do was we wanted to basically take on a handful of highly strategic investors who believe in this mission, and really want to help us improve human health and change the world. And so HumanCo right now, at least in terms of what people are investing in, we have three …

AI assessment note: “we have three companies that we're incubating. We have one that we're in term sheet”

Q So what's the breadth of these investments? You just mentioned incubating, you mentioned some early stage companies, maybe some companies that have a few legs to it. Where are you looking in the spectrum for these opportunities?

A So it's cycle dependent. Right now, I believe, That we are in a very bubblish part of the cycle, particularly for these kind of early mid-stage health and wellness focused sexy startups. These companies are trading on revenue multiples. Almost everyone I've looked at doesn't make money or loses staggering amounts of money. Similar to the stock market, we're in very later stages of this where a lot of these companies have been growing revenue phenomenally, but It's not quite clear that they're viable business models, and their only hope is that they sell to a strategic, and that's how they cash out. And then they're hoping that the strategic can pull out all the fat, make it profitable, but there's a lot of companies that's not going to work for. So I believe that winter is coming, and I believe that a lot of the funding of their expectations of a B and a C and a D isn't going to happen, And similar to 1999, which I was fortunate enough to be in the market for, like, the tide goes out fast. All of a sudden, when people realize, like, wait a minute, this thing's not ever going to make money, there is no funding. I mean, it goes from, like, you're hot, you're hot, you're hot, to zero. And so right now, we believe there's much more alpha in incubating, and I say that with a grain of salt because incubating is hard. And I think the reason I can talk about this publicly is I believe …

AI assessment note: “right now, we believe there's much more alpha in incubating”

Q And so you're forming this holding company and you mentioned it like a mini Berkshire. Is that Hugh as the business is spinning off cash that you'd be reinvesting that cash into other businesses?

A No. So I think eventually we're going to have a cash cow type of business. The mini Berkshire aspect of it for me is not so much about having like one cash cow that then funds all the projects. It's more of the concept of having a holding company where Where you have a lot of synergies and a lot of benefits of having a parent, and this is something that I think is missing from the VC model, where in a lot of the VC portfolios for companies in this space, sometimes you have those portfolios are populated with quasi competitors, and so you might have literally a fund that has two companies that are sort of similar, and they don't want to share anything with each other. A lot of the earlier stage companies that are not that early, These are companies that are worth a 102 104 hundred million dollars. They're still not that profitable, or in many cases, they're not profitable at all, and there's a massive amount of duplicative resources. For many of these companies that might be in the same channels, you can have the same sales team, you could have the same marketing team, you could have the same CFO, and these are things that you can't do unless you're under a fully controlled holding company structure. Probably the most important feature of our structure for HumanCo Is that there are a lot of entrepreneurs, like me, who really care about health, and they care about this mission of…

AI assessment note: “No. So I think eventually we're going to have a cash cow type of business.”

Q So a couple things in that overview. So the first is, of the many systems, tools, behavioral tendencies that you studied and yourself and others, were there any key things that you took away that you implemented, say, when you went to start Turbillon?

A Oh, yeah. I mean, I learned a ton along the way, and I'd say that I had a lot of evolutions as a person, and I think good thinkers, not just good investors, go through these evolutions where you think you have something nailed down, and you get arrogant, and then you realize you don't know it, and probably one of the greatest things for me is I've always been very process-driven, and I've always been a believer in checklists, and so when Atul Gawande's book, The Checklist Manifesto, came out, I was obsessed with this concept, and people like us who had good academic success and then had good career success early, there's a sort of a natural arrogance that develops about your memory and your intelligence, and you think you can do anything, and what you realize when you read all the science is that it doesn't matter how smart you are, you still need the process, and you still need the checklist, because there's all sorts of ways that you can self-sabotage and not realize it. And just forget things along the way, and even ignoring cognitive biases, and there's a list of over a hundred now that humans are susceptible to. For me, it was having repeatable process, and then really respecting, and this is what we talked about with Michael Mobison, and, you know, Michael was one of the first pioneers in some of his early writing on this, this concept of process over outcome. And I'd say…

AI assessment note: “I've always been a believer in checklists... For me, it was having repeatable process”

Q and wealth management firms moving to Ridgeline gain a decided advantage. That's why customers call it miraculous, game-changing, and an awakening. If that's not how you would describe your investment management tech, request a demo at ridgeline.ai. And now back to the show. So you mentioned your autoimmune disease, and we're going to talk about health and wellness. What's been your path personally and your experience with health and wellness?

A So this has been probably the most formative and scariest part of my life, and one of the things that I've now discovered having not been in the hedge fund industry is that I've had periods where my health has been bad, Where I've also struggled with depression as well, and this was at a time when I have a great marriage, I have great kids, I was financially very successful, and all the typical things that people think are supposed to make you happy didn't matter, and I just want to say that because there's always been such a stigma on depression and mental illness that it's a sign of weakness, and only in the last few years have a bunch of Notable, famous, or successful people come out and said, I too have had this. And it's one of these things that as a kid, you never think. You have these fantasies that, yo, if I make X, and I have a house, and I have this kind of car, and I have a family, like, I'm just going to be the happiest person. And you start to realize that, for me, the single most important ingredient to life is your health. If you're not healthy, everything else is worthless. And if you're not happy with what you do every day, and you're not healthy on top of it, Then it's a disaster. So, for me, I grew up in kind of a middle-class household. I always wanted to please my parents. I wasn't actually an overachiever until I got to college. I was actually quite an und…

AI assessment note: “this has been probably the most formative and scariest part of my life”