In this episode, host Michael Mauboussin sits down with Seth Klarman, CEO and portfolio manager of The Baupost Group. One of the most influential practitioners of value investing, Seth shares his formative stories — from arbitraging coins as a kid to launching Baupost in 1982 — and reflects on his decades-long investment philosophy. They explore timeless principles of market inefficiencies, the importance of temperament, specialization versus generalization, the role of patient capital, and the challenges and opportunities ahead for investors in today’s world. Seth also opens up about technology trends like AI, the evolving market structure, and the enduring lessons from Graham & Dodd — and much more!

Key Topics:

• Seth’s early entrepreneurial ventures and coin arbitrage (2:10)
• Lessons from working at Mutual Shares with Max Heine and Michael Price (4:12)
• Starting Baupost and managing the founding families’ wealth (10:53)
• Core principles behind value investing and market inefficiencies (13:06)
• The impact of indexing, ETFs, and passive investing trends (16:42)
• Generalists vs. specialists in investment research (19:06)
• How Baupost evaluates opportunities across asset classes (21:13)
• Why value investing combines a contrarian streak with a calculator (23:51)
• The importance of meeting management teams and assessing intent (26:44)
• Building and educating a long-term oriented client base (29:06)
• Managing behavioral biases and fostering the right temperament (31:21)
• Current market outlook and where Baupost sees value today (34:03)
• How AI is changing research and efficiency at Baupost (36:54)
• Broader applications of the “Moneyball” mindset (40:13)
• The difference between an analyst and a portfolio manager (44:01)
• Seth’s views on risk, business ethics, and business education (45:50)
• What worries Seth about the future — and what excites him (48:11)
• Book recommendations from Seth Klarman (51:42)
• And much more!

Mentioned in this Episode:

• Margin of Safety by Seth Klarman
• Security Analysis by Benjamin Graham & David Dodd (Seventh Edition)
• Moneyball by Michael Lewis
• Lost & Found by Kathryn Schulz
• Being Wrong by Kathryn Schulz
• The Light Eaters by Zoë Schlanger

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In this episode of Value Investing with Legends, Tano Santos and Michael Mauboussin sit down with Kent Daniel, Professor of Finance at Columbia Business School, to discuss his journey from physics at Caltech to leading research in behavioral finance and quantitative investing. Kent shares insights from his academic work and his years at Goldman Sachs, including his critiques of the Fama-French model, the role of intangible information in asset prices, and the implications of short selling constraints. The conversation spans decades of market evolution, empirical challenges, and the behavioral patterns that continue to shape financial theory and practice.

Key Topics:

● Introduction by Tano Santos and Michael Mauboussin (0:00)

● Introduction of guest Kent Daniel and his academic and professional background (0:48)

● Kent shares his early life, education at Caltech, and influences like Richard Feynman (3:31)

● Transition from physics to finance, MBA at UCLA, and entry into PhD program (5:46)

● Kent's dissertation on time variation in asset returns and statistical test power (8:02)

● Discussion on behavioral vs. rational explanations for return predictability (11:51)

● Kent's time at University of Chicago during the rise of behavioral finance (15:18)

● Challenge to the Fama-French three-factor model with characteristics vs. covariances paper (22:40)

● Behavioral finance classic: Overreaction and underreaction explained through psychology (27:31)

● Discussion on tangible vs. intangible information in financial markets (36:04)

● Current research on short selling, borrow costs, and market inefficiencies (41:40)

● Kent's experience at Goldman Sachs and practical application of academic research (50:02)

● Reflections on the quant crisis and build-up of leverage pre-2008 (56:26)

● Discussion on value investing post-2008 and limitations of book-to-market (57:00)

● Kent’s nuanced view on market efficiency and the role of frictions (1:02:16)

● Views on indexing, ETFs, and financial market design (1:06:11) 

● Kent shares what excites and worries him about the future of markets (1:08:09)

● Kent's current reading and listening recommendations (1:10:07) And much more!

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In this episode, Cliff Asness joins Tano Santos and Michael Mauboussin for a conversation that spans the evolution of quantitative investing, lessons from market crises, and the enduring tension between risk and behavioral explanations in finance. From his formative years at the University of Chicago under Gene Fama to building AQR into a quant powerhouse, Cliff reflects candidly on theory, performance, and how markets may have become less efficient in recent years.

Key Topics:

• Tano and Michael return from sabbatical and reflect on recent academic and classroom experiences (0:00)
• Overview of Cliff’s career and contributions to quant investing and academic finance (1:13)
• Cliff recounts his underachiever label, how standardized tests changed his path, and why he chose Penn’s M&T program (2:54)
• How Cliff’s coding work for Andy Lo inspired his academic path and led to Chicago (5:03)
• A breakdown of the 1992 and 1993 Fama-French papers, and how they reshaped asset pricing (8:45)
• Cliff discusses the theoretical divide between Fama and Thaler and his own evolution toward a behavioral perspective (13:08)
• Memories of presenting momentum to Fama, intellectual honesty, and voice-shaking dissertation defenses (17:13)
• Why Cliff chose Goldman over academia, his role in developing Goldman’s quant group, and the influence of LTCM (22:00)
• Launching in August 1998 during the Russia default; early drawdowns and lessons from the tech bubble (27:50)
• How quant signals hold up, risks of crowding, and the difference between short-term and long-term capacity (34:32)
• Momentum held, but value strategies collapsed. How AQR dealt with long underperformance (43:31)
• Valuation starting points can obscure long-term performance; recent decades viewed in proper context (49:22)
• Cliff's provocative “Less Efficient Market Hypothesis” and three key drivers: indexing, interest rates, and social media (50:54)
• Is passive investing weakening price discovery? Reflections on Sharp’s arithmetic and Grossman-Stiglitz (54:12)
• How echo chambers and meme stocks challenge traditional models of rational price formation (58:28)
• Why companies aren’t issuing more equity despite sky-high valuations, and the fading role of smart capital allocators (1:00:46)And much more!

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In this episode, Michael Mauboussin, adjunct professor at Columbia Business School, hosts Phil Ruvinsky, Managing Director and Head of the Fundamental U.S. Growth Team at BlackRock. With extensive experience in the investment industry, Phil shares his journey from law to finance, discusses his investment philosophy, and explains the importance of sustainable competitive advantages. The conversation explores the evaluation of management, the impact of AI on the competitive landscape, and the nuances of portfolio construction. Phil also highlights the role of macroeconomic factors and regulatory changes in investment decisions, shares his thoughts on the future of active management in an increasingly indexed market, and much more!

Key Topics:

• Introduction to Phil's career and background (1:06)

• Transition from law to investment and early career challenges (2:15)

• Importance of business school in shaping investment philosophy (3:47)

• Recommended books for new team members (4:22)

• Utilizing competitive strategy analysis in investment decisions (5:50)

• Unique characteristics of technology, media, and telecom sectors (7:03)

• Analysis of return on invested capital in different business models (9:10)

• Approaches to valuation and use of different tools (10:25)

• Evaluating the importance of management in investment decisions (12:15)

• Impact of AI and generative AI on the competitive landscape (14:17)

• Application of AI in the investment process (18:07)

• Trends in market concentration and their implications (20:26)

• Effects of indexing and rules-based investing on markets (23:27)

• Corporate governance, capital allocation, and executive compensation (25:35)

• Differences between being an analyst and a portfolio manager (28:02)

• Portfolio construction and risk management (29:38)

• Considering macroeconomic factors in investment decisions (32:00)

• Concerns and excitement about the future (34:21)

• Phil's book recommendations (35:58)

• And much more!

Mentioned in this Episode:

• Digital Empires: The Global Battle to Regulate Technology by Anu Bradford

• Expectations Investing: Reading Stock Prices for Better Returns by Michael Mauboussin

• Competition Demystified: A Radically Simplified Approach to Business Strategy by Bruce Greenwald

• The Platform Delusion: Who Wins and Who Loses in the Age of Tech Titans by Jonathan Nee

• Napoleon Unleashed: A History of the Revolutionary, Emperor, and Military Genius who Reshaped Europe and Defined Modern Leadership by Aeon History

• Meditations by Marcus Aurelius

• Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts by Annie Duke

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In this episode, hosts Tano Santos and Michael Mauboussin speak with Anu Bradford, the Henry L. Moses Professor of Law and International Organization at Columbia Law School, to discuss the intricate dynamics of global technology regulation. Anu is recognized for her deep expertise in international economic law. Her pivotal books "The Brussels Effect" and "Digital Empires" explore how significant regions like the US, EU, and China shape technological standards worldwide. The conversation probes the complexities of regulating big tech companies across different legal and political landscapes, highlighting the significant influence of European regulations on global markets. She also touches on the impact of regulatory practices on innovation, the challenges of enforcing extensive digital laws, and the future trajectory of global tech governance. This episode offers a comprehensive look into the power struggles and cooperative efforts that define international technology regulation and much more!

Key Topics:

• Introduction to Anu Bradford and her background (04:01)
• The unique position of the EU in global regulatory practices and its impacts (10:48)
• Detailed exploration of "The Brussels Effect" and its significance (12:56)
• Global market influence through regulatory strategies (17:02)
• The challenges and methodologies of tech regulation in the EU, US, and China (31:55)
• The role of data security and privacy in international relations and tech regulation (43:06)
• Future challenges and directions in global technology regulation (52:47)
• The preservation of liberal democracy in the digital age (54:51)
• Anu's book recommendations (58:56)
• And much more!

Mentioned in this Episode:

• Digital Empires: The Global Battle to Regulate Technology by Anu Bradford
• The Brussels Effect: How the European Union Rules the World by Anu Bradford
• Chip War: The Quest to Dominate the World's Most Critical Technology by Chris Miller
• Underground Empire: How America Weaponized the World Economy by Henry Farrell and Abraham Newman
• High Wire: How China Regulates Big Tech and Governs Its Economy by Angela Huyue Zhang

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In today's discussion, Jonathan Knee, a distinguished advisor at Evercore Partners and Professor of Professional Practice of Media and Technology at Columbia Business School, explores the themes of his influential work, "The Platform Delusion." Jonathan's insights stem from a rich career in both the banking and academic sectors, bringing a nuanced perspective on digital versus analog platforms, competitive strategies, and the evolving landscape of technological advancements. The conversation uncovers the myths surrounding platform businesses and their impact on the economic principles that govern market dynamics. Jonathan also discusses the implications of regulatory frameworks and their intersection with business strategies in shaping industries and so much more!

Key Topics:

• Jonathan Knee's background and expertise in media and technology (01:40)
• The initial impetus behind writing "The Platform Delusion" and the misconceptions it addresses (13:14)
• Definitions and the real economic underpinnings of platform businesses (17:52)
• Competitive advantages and the robustness of network effects in digital platforms (35:02)
• Exploring the sustainability of various business models within tech giants like Meta and Google against emerging technologies (44:51)
• Insights into the strategic decisions that have fortified Apple's market position over the years (48:38)
• The impact of generative AI on existing business ecosystems and future market trends (55:36)
• Societal and technological transformations influencing today's business environment (58:55)
• Jonathan’s book recommendations (01:01:30)
• And much more!

Mentioned in this Episode:

• Evercore Partners
• Columbia Business School
• The Platform Delusion by Jonathan Knee
• Small Things Like These by Claire Keegan

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In the third episode of Season 10, hosts Tano Santos and Michael Mauboussin speak with James Bessen, Executive Director of the Technology and Policy Research Initiative at Boston University. Delving into the intricacies of technological advancement and market dynamics, Bessen shares his insights on the evolving landscape of competition and innovation. The discussion highlights the impact of proprietary software on industry disruption, exploring the significant shift from mass production to mass customization facilitated by technology. This episode not only provides a deep dive into the challenges and opportunities presented by the digital age but also prompts a reflection on the future of value investing in a tech-dominated world and so much more!

Key Topics:

• Welcome to Season 10 of Value Investing with Legends (0:20)
• Exploring the concept of barriers to entry in value investing (1:05)
• James Bessen discusses technology's economic impact (3:15)
• Analysis of the decline in economic disruption despite technological growth (5:10)
• Impact of proprietary software on industry stability and market concentration (6:35)
• Historical perspective on technology's influence on the economy (8:25)
• The role of proprietary software in shaping competitive dynamics (10:30)
• The transition from mass production to mass customization in retail (12:05)
• Walmart’s evolution and strategy in retail sector dynamics (14:20)
• Discussion on the concept of skill premium and technological advancements (24:55)
• Artificial intelligence’s influence on market dynamics and job skills (26:10)
• Examining the pace and implications of innovation diffusion (31:00)
• Regulatory challenges and tech dominance in the market (34:10)
• Concentration of innovation and its economic implications (36:20)
• James’ book recommendations (43:10)
• And much more!

Mentioned in this Episode:

• The New Goliaths: How Corporations Use Software to Dominate Industries, Kill Innovation, and Undermine Regulation by James Bessen
• Learning by Doing: The Real Connection between Innovation, Wages, and Wealth by James Bessen
• The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon
• The Lever of Riches: Technological Creativity and Economic Progress by Joel Mokyr
• Worldly Philosopher: The Odyssey of Albert O. Hirschman by Jeremy Adelman

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In this episode, Tano Santos sits down with Jan Hummel, CIO of Paradigm Capital, revisiting his investment strategies and exploring the nuanced dimensions of risk management in the evolving European asset landscape. Jan discusses the foundational investment philosophy of Paradigm Capital, emphasizing risk minimization and the strategic deployment of assets across Europe. Key discussions pivot around the firm's selective investment criteria, focusing on companies in the small to mid-cap space and the significance of geographical and cultural nuances in their investment decisions. This conversation offers listeners insights into the subtleties of value investing, portfolio construction, the implications of geopolitical and economic dynamics on market opportunities, and so much more!

Key Topics:

• Introduction and background of Jan Hummel (0:37)
• Fundamental tenets of investment philosophy at Paradigm Capital (1:25)
• The impact of European market dynamics on investment strategies (7:25)
• Sourcing and valuing investment opportunities (9:47)
• Specific approaches to risk management and hedging strategies (22:23)
• Portfolio sizing and the decision-making process behind exiting investments (26:00)
• The role of geographical focus in Paradigm's investment strategy (29:12)
• Valuation techniques and practical applications in portfolio management (32:03)
• Trends and challenges in the European asset management industry (36:48)
• Macro-economic factors influencing market conditions and investment decisions (40:30)
• Prospects for growth and opportunities in the European financial landscape (45:17)
• Jan’s book recommendations (46:06)
• And much more!

Mentioned in this Episode:

• The Fiscal Theory of the Price Level by John Cochrane
• Paradigm Capital
• Columbia Business School

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In this heartfelt episode, we pay tribute to Charlie Munger, the visionary vice chairman of Berkshire Hathaway who recently passed away. Joining us is Todd Combs, an investment officer at Berkshire Hathaway and a close acquaintance of Munger. Todd shares personal anecdotes and insights into Munger's profound influence on the investment world and his unique approach to life and business. From his early meetings with Munger to the invaluable lessons on value investing and rational thinking, Todd provides an intimate look into the wisdom of one of the greatest investors of our time.

Key Topics:

• Celebrating Charlie Munger’s contributions and legacy (01:20)
• Todd’s initial encounters with Munger (02:15)
• The intellectual journey and partnership between Munger and Buffett (08:57)
• Munger's approach to life, investing, and the importance of mental models (11:22)
• Behavioral economics insights shared by Munger (13:00)
• The practical applications of Munger’s wisdom in business and investing (16:17)
• Munger’s lasting impact (24:59)
• And much more!

Mentioned in this Episode:

• Poor Charlie’s Almanack: The Essential Wit and Wisdom of Charles T. Munger by Charles T. Munger 
• Thinking, Fast and Slow by Daniel Kahneman 

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Today's discussion with Kim Lew, President and CEO of the Columbia Investment Management Company, traverses her unique journey from her roots in the Bronx to managing a prominent Ivy League endowment. Kim shares her insights on navigating the intricate world of investment management, particularly in risk management and asset allocation. With a career marked by pivotal roles at entities like the Ford Foundation and Carnegie Corporation, her expertise brings a nuanced understanding of the interplay between market dynamics and organizational strategy. This episode explores how adaptability, intellectual curiosity, and understanding global trends shape successful investment approaches.

Key Topics:

• Kim's early career and transition to finance (2:59)
• Role at Chemical Bank and career progression (5:05)
• Experience at Prudential Capital and Ford Foundation (9:27)
• Shift to Carnegie Corporation and Columbia Investment Management (18:07)
• Challenges of managing a larger endowment (20:13)
• Aligning endowment goals with university values and ESG considerations (22:08)
• Comprehensive approach to risk management (26:54)
• Asset allocation and balancing public vs. private markets (34:06)
• The concept of future-proofing investment strategies (41:19)
• Organizational behavior in asset management (48:54)
• Importance of intellectual curiosity in team members (55:11)
• Kim’s book recommendations (1:01:01)
• And much more!

Mentioned in this Episode:

• Columbia Finance
• The Worlds I See: Curiosity, Exploration, and Discovery at the Dawn of AI by Fei-Fei Li
• Quit: The Power of Knowing When to Walk Away by Annie Duke
• Hidden Potential: The Science of Achieving Greater Things

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