The Exchanges

Q Which trade that you made was your biggest windfall, your biggest win?

A My biggest win, ah, was I think buying JetBlue. It was actually, ah, it was actually early in, in the time when they were still growing, and I think I made them within, I think in about a week or two, I made them like three or four million dollars. That was one of the big trades. I'm trying to remember. There was another one called Peregrine Software, where, uh, my boss had had the position for a long time, and I had been in charge to start monitoring the company. I went over to meet the CEO in Atlanta, uh, and I came back and I said, no, we're not selling the position. We're going to keep it. And I think they made like nine or ten million dollars.

AI assessment note: “My biggest win, ah, was I think buying JetBlue.”

Q Okay. So this is kind of making sense now while you got out, right? Like you learned a bunch and probably once you felt like you learned all you could, it wasn't worth staying for the salary. So is it, is that accurate? Then you head to China.

A Yeah, that's correct. Uh, part of it was salary. Part of it was environment of the, you know, the actual hedge fund environment. And part of it was knowing that the economy was going to collapse. Um, You know, in 2006, 2007, we were in Miami. I was born there, right? So I, I saw this crazy boom happening right before my eyes, and I would see, you know, sixty-something cranes building apartments, and I saw all my friends from high school that probably, uh, that didn't even go to college, and basically were just buying five, 10 homes on adjustable rate mortgages and driving BMWs, and I just kept on asking them, how are you making this money? And they kept on saying, oh, real estate, real estate. And it got to the point where I knew, and even the team knew that sooner or later this was all going to fall apart.

AI assessment note: “Yeah, that's correct. Uh, part of it was salary.”

Q Okay. So you don't do, you don't go in the hedge fund and make a big salary then. I mean, your maximum salary, you know, base plus commission or bonuses was probably somewhere in the, what, 40 or 50 K range when you left?

A Yeah, that's about right. And I think the problem, the thing was, there's two factors. And I think people, um, don't realize, I came in at the very beginning in the sense of 21 years old. Not many people at 21 years old get started in hedge funds. Everybody that was my co-worker were basically people from Stanford, Columbia, Harvard, you know, UPenn, you name it. Um, they got paid a hundred and something thousand dollars a year, and then they were paid, uh, the bonuses, and the bonuses could have been a certain, a certain potential, a percentage of their salary, or a multiple of their salary. It could be two times, could be three times, depending on how much money they made for the funds. And the way it works with the way this fun works.

AI assessment note: “Yeah, that's about right.”

Q Come on, Derek, who the hell, who the hell cares about a college degree? You're, you're, it's all about the hustle, right?

A Oh, no, that's exactly right, and that's what happened, um, when I went in for the interview, I did the interview for eight hours, they liked me, they, they, they saw that I had, I read the 4000 something annual reports, and the boss said, um, you know, I found out later through the interview process, the main reason why they hired me is because the boss had said that he, that I reminded him when he was young, and so he said he liked that. And when they kind of gave me the offer, he said, oh, you know, we're going to try you out for three months. And I said, and I looked straight at the guy's face and I said, I'm going to prove you wrong. And I did, you know, I was there for like almost four years. So, um, you're right. I mean, it is all about the hustle. And I think the main reason why they kind of took advantage of me was they knew that I didn't come from a good educational background, but at the end of the day, they wanted to say, they were hedging their bets. Say, you know what? We'll pay this guy this amount. And if he works out great. If he doesn't, well, at least, No, we don't have to pay that.

AI assessment note: “that's exactly right... it is all about the hustle”

Q So sorry, I cut you off. How do you make money?

A Oh, so in the beginning, we're going to do subscriptions, uh, with actually membership subscriptions. So the goal is that people are going to want this information, and they think it's valuable, and then eventually we're just going to charge nine nine dollars for a yearly subscription. And so the goal is, um, the thing is, like, Yahoo Finance has about forty million people from the United States alone visit their website. Uh, seventy million people worldwide. The thing is, the information that they're getting from Yahoo Finance is horrendous. And so we feel like there's a lot of misinformation, there's a lot of opportunity to get from Yahoo Finance to start to look at other websites that would help people to make better investment decisions.

AI assessment note: “we're going to do subscriptions... charge nine nine dollars for a yearly subscription.”

Q now it's back up around 20 bucks as of today, February, 2016. So interesting trade. So you, you, I always wonder when I talk to hedge fund folks, I mean, how much of it is luck versus how much did you know that the stock was going to do like a little bump and you guys were going to be able to profit, you know, three, four bucks per share?

A That's interesting. Uh, well, usually whenever we make investments, uh, we always try to look for a catalyst that's, uh, that's going to happen within the next three to six months. It's going to get the stock to move higher, whether it's, uh, a corporate event, uh, whether it's earning surprises, whether it's, uh, a strike, uh, you know, a strike basically not, you know, not happening or something like that. I mean, specifically with airlines. Um, so there's always something like hedge fund people are always looking for catalysts. There's gotta be something that has to happen with an X amount of time period. And if nothing happens, two things, uh, occur. Either they unwind their position because they just don't want to wait any longer, or they put them along and they just want to cut their losses, or they get active. In other words, they get involved, they start buying even more shares, and they figure out ways to get what they want through.

AI assessment note: “we always try to look for a catalyst that's, uh, that's going to happen”