The Exchanges

Q So before we turn to that, let's talk hedge funds. What's your take on hedge funds today? And it's broad category, but have at it however you want.

A Sure. Well, here's one thing I say to people about The industry in general is we've had almost the perfect academically designed test, whether there's alpha in the market or not. So there's ongoing debate of whether there's markets are efficient or not. That perfect test has a name. It's called millennium. So millennium is a hedge fund that hires lots of smaller groups of people to come in and manage some part of their capital. They have a large pool of capital. I think it's thirty five billion more or less. And they'll give A new manager at chance, if they believe that they have potential to be someone who can make money, can add alpha, and maybe start them with a hundred million dollars and see how they do. If they do well, it grows. If they do poorly, it shrinks, or maybe it's taken away. It's basically a kind of a genetic algorithm to see if there's alpha or not. That would be the perfect experiment to see if markets are efficient or not. If that doesn't work, that's evidence that markets are pretty darn efficient. If it does work, That's pretty strong evidence that that works. So they've been doing this for, I don't even know how many years now. It's in decades, not in single digit years with hundreds of different groups on board. And it would be impossible statistically to think that that's random at this point. Let's put it that way. They continue to do well.

AI assessment note: “we've had almost the perfect academically designed test, whether there's alpha in the market”

Q All right, Steve, let's turn to some closing questions. What's your favorite hobby or activity outside of work and family, and in your case, we'll say, and philanthropy?

A Anybody that knows me for the last few years would know that I have a complete Addiction to the game of pickleball. For those who don't know what pickleball is, it's a, it's the quote unquote, this is what the phrase that every pickleball player says, it's the fastest growing sport in the world, or fastest growing sport in America. About three million players now, growing at about 25% a year, which means it doubles every three years. It is, for lack of a better description, the child of tennis, ping pong, and badminton, or I sometimes describe it as miniature tennis. It's It's amazingly fun to play. It's hand-eye coordination. It's thinking. It's logic. It's almost like chess. You have to think about where to hit the ball and how you work with a partner. It's usually teams two versus two. I told you I was on Andy Roddick's charity board. I got Andy Roddick and Andre Agassi to do a charity event playing pickleball last year at my house in Austin, raised some money. Now you're seeing a lot of former Tennis players come into the sport. The sport's getting bigger. They're starting to be a little bit more money in terms of tournament winnings. We've seen several people start pickleball themed bars, kind of the top golf of pickleball. I'm completely addicted. That's another thing that this immigration passion is kind of ruining. It's my, my pickleball game is suffering because I'm sp…

AI assessment note: “I have a complete Addiction to the game of pickleball.”

Q Yeah. So what you've done so far, for me, is take a controversial, hotly contested topic and make it sound like, huh, that sounds like a really good solution. So what do you do as a single retired hedge fund manager with some resources to, okay, you've created this, there's a policy. How do you make an impact?

A Yeah. Good question. I'm trying to figure that out myself with the help of, like I said, a great group of people in Austin, probably been at this for about four months, created a website, which is step one. I'm working with some really talented filmmakers. To do a short film. And my goal is to do something along the lines of what Charity Water did in their video called The Spring. If you haven't seen the Charity Water video of The Spring, go watch it. If you don't cry and open your checkbook after watching that video, I'll be surprised. It's amazing. You know, that's why another reason I met with Scott Harrison this morning is like, get his advice. How do I tell this story? How do I open people's heads and hearts to this possibility? So working on the video, I've hired a lobbyist group. In D.C. to help get me in front of people on this. I'm reaching out to all of my friends, former colleagues, and I'm basically telling them that, yeah, I'm calling it every favor, and I need to get in front of politicians. I need to get in front of thought leaders. I need to get in front of public intellectuals and make the case. So I've met with a number of politicians already. And the diversity where they are on the political spectrum is very wide, and they all like it, not just both. I've met with a number of different politicians, and they've offered me wonderful advice on who's important an…

AI assessment note: “created a website... working with some really talented filmmakers... hired a lobbyist group”

Q And so sure, there are some infrastructure tools. There are some things that you could scale that one person can't, but there is a gap of capital. That goes into that space partially because there's a perception that, you know, who needs the next hedge fund?

A I think there's a solution to that too. I think, by the way, the biggest thing you'd be helping the new funds with is marketing and helping them tell their story because a new hedge fund manager, they have to have a great first year in terms of their performance and they have to raise money and there's only so many hours in the day. And investors want to meet the leader, whoever that is, whoever he or she is. They want to meet that person. And if that means getting on an airplane, that means you're not sitting in front of your screens that day. It doesn't work. If they could say, this is our third party marketing person, and they have the right incentives, and they're aligned, it goes to the secret sauce of kind of how I want this idea to work. I think that would make their chance of success in the first year go way up. And that would be a game changer. That's the essence of what really is the value add for the funds that would work with this entity.

AI assessment note: “I think there's a solution to that too. I think... the biggest thing you'd be helping”

Q What do you think hedge funds look like five or 10 years from now?

A One thing that I've told people, I think it's become more difficult to launch a hedge fund now than probably ever in the wake of the 2008 financial crisis. I think that means as of now, kind of the big market leader is in the big brands like the millenniums of the world have a pretty big edge because the The person who wants to raise a hundred million dollar fund has a very difficult time doing that themselves, but Millennium says, I got a check for you, and they have a pretty big edge in finding that talent. I think there would be ways you could change that and make it easier for people. Some of these would be kind of a, the idea of like a tech incubator for hedge funds. Someone that would give you advice on how to get a lawyer that can do your documents relatively cheaply because they've done it. They'll do it repeated times. Someone that could help you with staffing of your compliance Someone that could provide kind of a third party marketing for you. I think that would be a great business.

AI assessment note: “the idea of like a tech incubator for hedge funds”

Q Well, so let's go back before we, we'll go forward to the other things in life, which will be fun to talk about. What was it like at the very beginning of your career when you were learning in the mortgage market?

A It was great. A unique situation came to me early in my career. I was, I went to Harvard. You know, you think that that's going to open every door for you. I happened to graduate in 1991. It was the biggest recession probably since it happened in 2008. It was, it was a really tough time to get a job. I had been offered a job by a firm back in my hometown in Minneapolis, a financial firm, all lined up, all set. I was happy. And then the recession hit and they said, we have a hiring freeze. And by the way, we're actually not going to really bring you on. So my first job out of Harvard was delivering pizzas for Domino's, which was not exactly.

AI assessment note: “So my first job out of Harvard was delivering pizzas for Domino's”

Q After you had this run at Pine River, how do you decide when to step away?

A There were a lot of forces that led me to that decision, but I kind of had a rising force of wanting to do good in the world. Some of this was spiritually based, and I made that clear at the time, but I think I'd always been a humanitarian and thinking about how can I take the skills I have and think about how can I help the most people or maximize good with that. I think that's a different game. And the game I played out of college was how could I make money or find something I enjoyed while doing that. And then I decided that at some point I wanted to play a different game. I wanted to play the, what can I do to, to make the world better game, if you will.

AI assessment note: “There were a lot of forces that led me to that decision”

Q How did you get involved? Are you a singer?

A Well, that's funny. It happened because one of the investors in my hedge fund was on the board and said, you have to come to this gala this year. When he said that, I really want you to come to this kids' youth choir, I'm like, you know, boy, that's the last thing I want to do on a Tuesday night when I'm working my tail off. But he's an investor. He was a friend. I said, yes. And literally three minutes into it, I'm like, this is the best thing I've ever seen. And Eventually, I was a board member of that when I lived in New York. That's how inspired I was. It's that amazing. I did not want to go. Three minutes after being there, I was like, this is amazing. And now we're trying, with Diana's help, we're in year two, and I think Young People's Chorus just celebrated their 25th anniversary, I believe. I should know that, but I'm pretty sure that's right. We're not quite as big, or we don't quite have the same organization that they've built, but, you know, that's our goal. But it's already great. The impact we've already had on the children's lives is unbelievable. You can, again, you see it in their faces. So super happy about that. So that's some of the things I do.

AI assessment note: “It happened because one of the investors in my hedge fund was on the board”

Q How have you thought about the whole pie for your own capital?

A I've done some investing in local companies in Austin. I've also done some kind of venture capital type stuff. I actually just invested with a group called Next Gen Venture Partners, part of Brown Advisory, who I think do a great job. I've done some of my own companies, some of which I have really high hopes for as an early investor in a company called BMO education, which I think is brilliant. I hope that's going to really, really work. When I first describe it to people, they think it's idiotic. And then if I spend like three minutes explaining why it's not idiotic, they usually kind of come around. They do something called income sharing agreements. And the idea is you're selling some of your future income For Monday to day to go to school, which sounds terrible. I know it's indentured servitude. I get how that doesn't sound great, but let's think of one use case for this. You might know about these computer coding academies, you know, galvanize general assembly, et cetera. And typically it's a three month, very intensive course to learn something in computer programming where it could be how to build a website. It could be any number of things. And people typically pay anywhere from, you know, 25 to 30,000 dollars. It's a three-month intensive course. It's 12 hours a day, six days a week, and the pitch is you go into this with a 40,000 dollar job, and you come out with a 10…

AI assessment note: “I've done some investing in local companies in Austin. I've also done some”

Q What does it look like in terms of homogeneity or heterogeneity of the student population, given that there's really one factor determining where they go to school?

A Well, they're all brilliant. This test is a two-day long test. It makes the SAT test look very, very small compared to what they do. Students often faint going into it because it's that important. This one test in many ways determines your fate. If you get a very, very high score, you get a Tsinghua If you get a next level score, you get to go to a, not quite as prestigious university, but it's still a great university. You get a low enough score, you don't get to go to college. It is crunch time. Everything's on the line for that test. If you go to a high school in China, and I don't care whether that's in Beijing or in Shanghai or, or if it's in, you know, the smallest rural village, the textbooks have pictures of the gates of Tsinghua and Beida on them. It's the equivalent of getting your son or daughter into a pro sports league. Getting into those schools, that's the prestige level for a parent. And You know, when we talk about, you know, the future of tech supremacy or the future of economic supremacy, when you see that, you'll see that we're going to be challenged. We're going to have to think what advantages our society have, and we have tremendous advantages that China doesn't have, but we have to maximize those advantages if we want to compete economically or strategically in the world against China. They have some advantages, and we have other ones, but we have to thi…

AI assessment note: “when we talk about, you know, the future of tech supremacy”

Q How have you applied the knowledge that you gained from managing money to these challenges?

A It's very different. I'm learning how, how DC works a little bit, but by the way, as part of this, I'm planning to move to DC for six months, starting in January. And if anybody didn't understand that I'm committed to this, The fact that I would move from Austin to DC in January, I'm really committed to this. What I bring to this is passion. I bring some financial resources. I'm hoping other people will join me in that. I'm trying to raise money to spread this idea and make this idea go viral and tell the story more. So I bring some financial, I bring, I think I bring credibility when it comes to what I think on the economic side. But trust me, there are people who are better economists than me, and more trained economists than me, and who have studied immigration policy for a long time. I'd like to say that, I don't know what percentage, but it would start with a nine, the, you know, something percent of economists that would hear this would agree that this would be hugely beneficial to our country. One phrase, professor at George Mason, Brian Kaplan, who says that immigration reform is Isn't trickle-down economics. It's Niagara Falls economics. All the picayune debates we have about little differences in tax laws, et cetera, they pale in comparison to getting an immigration policy right. They're small. This is big.

AI assessment note: “It's very different. I'm learning how, how DC works a little bit”

Q So what do you think the bottlenecks are in adoption of this?

A I've always been just a ridiculous optimist. I think that's, and both of those words are often appropriate. I really do believe that things can change, and sometimes that proves to be, I certainly haven't been right about things I'm optimistic about before. I've been wrong. I think this can happen. I look at who the key players are and what their incentives are, and I honestly think this is a win for both sides. I mean, when I say both sides, both the Democrats and Republicans, it's also just beyond that. It's a win for America. It's a win for people who are here undocumented now. It's a win for people that would come in this proposal. It's a win for their home countries in that they would be have remittances that they would be able to send back, money they'd be able to send back to these countries. I talked to Scott Harrison today. I said, I'm encouraging him to help me Spread this message. So I think it's all very logical and it's difficult.

AI assessment note: “I've always been just a ridiculous optimist. I think that's, and both of those”