The Exchanges

Q Well, why don't we just start with your background?

A I went to law school. I became an M&A lawyer. I did that in like, 2005, which is when M&A lawyers all thought they should be investment bankers. And also I was working all the time. So at some point, someone came to me and offered me a job as an investment banker. And I said, that sounds good. By which I meant, like actually, this guy who I used to work with called me, he's like, do you want a job at Goldman? And I said, Is it better than this job? And he said, it's a little better than this job. And I asked him very specific questions about the hours and the hours were a little better. I was like, okay, fine, let's do it. So I went to Goldman. I asked a lot of questions about the hours. I didn't really understand what the job was until I got there. It was like structuring equity derivatives and doing convertible bond underwriting, which like, he told me that I just like, it's impossible to know what that means when you're an MNA lawyer. So I went and did that. It was a very strange field. Like no one leaves that to do anything else. After I left, Years later, recruiters would call me. I was like a journalist. Recruiters would call me and be like, do you want to head up convertible bonds at like some investment bank? Because there's no one who does it. And everyone who does it just keeps doing it and rotating between banks. But it was like a good exposure to a lot of things. I …

AI assessment note: “I went to law school. I became an M&A lawyer.”

Q Oh, so you start the day it comes out?

A Well, my day starts at, like, five a.m. I wake up. I have, like, some stuff collected for that day's money stuff. Sometimes I've written a section. Mostly I've collected links. Sometimes I've written two sections. But, you know, it's mostly, like, pretty ill-formed. And then I sort of sit down and write it from five a.m. to 11 a.m. with some time out to get my daughter off to school and whatnot. And then around 11 I send it to an editor, and then it gets published at noon. And then usually I, like, Go into the office, and then from sort of one till five, I, like, look for other stuff, and start writing stuff, and have lunch with people, and complain to reporters, and do all of the job stuff that isn't typing the thing.

AI assessment note: “I sort of sit down and write it from five a.m. to 11 a.m.”

Q Should we take it away from the pure corporate side, and I want to get into the markets a little bit. You've been writing a lot about what's happening in the CDS market. Why don't you start with where the CDS market started, where it is today, and where you think it's going?

A So, CDS is a contract that allows you to bet on the credit quality of a company. CDS is a contract that pays off when a company defaults on its debt, and it pays off basically the amount of money that, theoretically, pays off the amount of money you would have lost on default. So, when you think about how that started, you could short bonds, right? You could borrow a bond and sell it short, and then if the company defaulted, the value of that bond would go down and you'd make money, right? But CDS has some advantages over that. One is that it's like kind of hard to borrow bonds. They're often like, it's kind of locked up. Another is that it allows you to make a sort of generic bet on the company rather than picking a specific bond to bet on. So you have more liquidity because you're, there's sort of one CDS contract on the company rather than a bunch of different bonds. Another thing is like, there's, there's someone on the other side, like someone who wants exposure to the credit of a company, but doesn't have the funding to buy the bond can buy the CDS. There are elements that make CDS as a contract a nice way to bet on the credit of a company, but it is different from just the bond. And so what's happened now is that a bunch of people have found ways to more or less drive a wedge into that difference to say, instead of just being like a pure bet on outside facts in the world…

AI assessment note: “when you think about how that started, you could short bonds”

Q How did you come to the structure of this kind of lens of corporate finance? From your couple years at Goldman, and then just applying it to what you're seeing in the markets and in companies.

A I started at DealBreaker as like a blogger, right? I wasn't like an investigative reporter. I didn't have time to like go spend a month chasing down a story, you know? So it was very much like reacting to the news. And I always sort of felt like if I'm going to ask people to read what I write rather than someone else writes, I should bring to bear some expertise or something that I'm not just quoting people are making a joke, but I know something that isn't obvious about the news. So like, that's the basic thing is sort of old school blogging is it's like someone who has an expertise in something other than journalism, like writing about the news of the day. So it's not like necessarily like reporting or research intensive, but it is applying knowledge to something.

AI assessment note: “I should bring to bear some expertise or something that I'm not just quoting”

Q There's been this wave in the last couple of years of the private unicorn. Obviously, more and more money from big institutions going to private equity managers and sitting in the coffers there and not seeing those stocks grow in the public markets. How do you think about that lens of looking at mostly public markets, but a little bit on the private side as well?

A These two things seem related in a somewhat hard to articulate way, right? It seems like the public markets have become more passive, more of the sort of investing decisions and like providing capital to companies that are growing is occurring in the private markets while the public markets are for mature companies to kind of harvest profits. And there's probably a feedback loop where as public companies are bigger and more mature and more steady and profitable, it's easier to index because you just get less alpha by picking stocks. And as public markets become more index dominated, it's like harder to make your case to index funds if you're like a sort of interesting growth company. So you might be more interested in staying private. And so it probably feeds on itself. There does seem to be independently, like there's a lot of money that is available to private markets. And like, there's probably just a series of economic and technological changes there where like, it used to be, if you wanted to raise a lot of money, you had to go to the public markets because that's where the money was. Now there are more billionaires. There are pools of money in like the Middle East and China that are accessible to American companies that didn't used to be, and technologically it's easier to raise private money. There's been some legal changes that make it a little easier to raise private m…

AI assessment note: “public markets have become more passive, more of the sort of investing decisions... in private”

Q Did you have both that kind of business lens of what is this as a business and then also the journalistic angle when you started?

A No, it's a very small company, so you think about things like that in a way you don't at Goldman. You know, at Goldman, yeah, they'll probably, they'll make some money somewhere. Also, I was like selling things at Goldman, but I do it at Bloomberg, right? Like, at Bloomberg, I'm not really that worried about, like, the business. Someone else takes care of the business. Someone else took care of the business at Dealbreaker, too, but it was a much smaller company, and you sort of, like, sat in the same room as the person who took care of the business. We had to do a little more thinking about, like, how the thing was paid for. So the dramatic greeting night, we sold tickets, you know, like, we always were thinking about, like, we could have an events business, but not in any, like, really structured way. There was a business side who did the business job, and I did not do the business job, but you just do a little closer to it then.

AI assessment note: “There was a business side who did the business job, and I did not”

Q It used to be you pick stocks, and I'm comparing you to the S&P. How should people think about what value added really means?

A I don't know. I genuinely don't know. I mean, like, there are statistical methods for discriminating alpha, and there's some room for assumptions there. I mean, I often write that the essential skill of a hedge fund manager is continuing to run a hedge fund. There's some sort of Inherent storytelling element to the job where you'll have like a time series of returns and like, that's interesting, but what you make of it and what you're able to tell people and what story you can tell about why your process is good and why these returns represent that process is as important as like the actual set of numbers, which is a half joking thing I say about hedge fund managers, but it makes it challenging for allocators, right? I mean, like if you're an allocator, like, I don't know, you're You're sort of on the opposite side of that. Like you're thinking of a story for yourself about like what is appealing to you. I realize that's not what you want. You want to be like, here's the objective, like science of just determining it. But to some extent, it's like you're telling yourself a story about like why this guy, why his good results are representative and his bad results are anomalous. And the story that is intellectually satisfying to you is naturally going to get some weight.

AI assessment note: “you're telling yourself a story about like why this guy, why his good results are representative”