From GameStop to Meme Stocks with Ricky Sandler

26:04I'm going to interrogate management. I'm going to look at the footnotes. Old school stuff. Investors don't do that anymore. And that creates a great opportunity, assuming you've made these adjustments to how the market is. You know, it's so funny you call it ADD investing. We had that big dislocation in the beginning of August, and I'm home recovering from having some new parts put in, and I'm just flipping around the channels, and it's hilarious because, gee, what caused that giant correction? Well, it was the bad non-farm payroll report. No, wait, it's the SOM rule, and we're in a recession.

26:39No, wait, it's Japan and the end of the carry trade. Oh, no, wait, it's the unwind of the Trump trade and we're not going to get a 15 % corporate discount. No, no, it's the VIX complacency and it's been too – and nobody wants to say, hey, it's kind of random and there's a lot of moving parts. Oh, no, the Fed is behind the curve and it's – ADD investing is exactly what the pundits are talking about. And to your point, ADD investing is also ADD with my P &L. If I start to lose P &L, I move. So this is not eminence, but other investors have no tolerance for pain. There are all these risk triggers.

27:15So on top of the, I'm moving to where the narrative is, I also know that even if that narrative isn't what I believe, if my P &L starts to do something, that triggers me to do something. I de-risk, I de-lever. And so you have on top of people investing in ways that are narrative driven, they're also backward looking to their own P &L. So if I have a bad month, that means that I might have to do something differently. When I'm telling you all the stock prices are moving for non-fundamental reasons, we realize we have to absorb volatility. And that is part of the new market structure. We have to be comfortable.

27:49We have to be willing to live with it and then lean into it. We have the advantage of 25 years of investing, seeing a lot, having built a lot of credibility with investors so I don't have to make money every month. Maybe a newer manager doesn't. Or if you're at a platform shop, 5 % drawdown and they cut your capital in half. Another 5 % drawdown, you're out of a job. So that creates, on top of the narrative, behavior that's almost trigger-driven and exacerbates this volatility. That's kind of fascinating. And I can't help but notice, you mentioned the 25-year track record. Your first decade, arguably, is the lost decade.

28:25Markets peaked March 2000. You guys launch late 98, early 99. The main indices don't get back over that level till, what is it, 13 years later, 2013. So how formative was that first decade? How did it affect how you invested? What were you guys doing during the 2000s? So the 2000s, I would call the golden age of long short. This is when the product really showed its mettle because while the indexes didn't do a lot, underneath the surface, there were a bunch of winners and a bunch of losers. And what I always say about the short side and the long side is, I don't care what happened this year, 20 % of the companies really underperformed and 20 % of the companies outperformed.

29:08It's not so easy to find them and I'm not making it easy, but you can't tell me shorting's hard when I can show you that 20 % of the companies are underperformed, okay? You just didn't find them. And that's a separate issue. So I think those were the formative years that showed me that the power of long short, of stock picking, of finding things that can outperform and underperform, and in many ways, bred the opportunity to have a real business. Now, to your point, after the last decade, we go into the opposite environment. The S &P becomes the single best shop ratio possible from 2012 to COVID.

29:44What were we, 14 % a year or something? That's a great decade. With low vol on top of that. So this is why investors started to move away from long short, because any hedging was not helpful. It was harder to outperform the market. I heard it called expensive insurance. And I'm like, is that really what it is? Because you're kind of missing the point of long short. I don't want to call it a moment in time because it was long in that, but it was a cycle. It was a period. And that's what we've seen over time is markets go through phases. Then everyone says, this is it. Now you have to just buy indexes.

30:18And so we're at this phase right now where everybody's convinced that the S &P or the QQQ, like just buy that and don't worry about anything. I would tell you that the last 10 years, which has been dominated by that, is probably not going to be the same as the next 10 years. So to your point on higher interest rates and a different world, I think we're going to go back to a place where stock picking matters a lot. All this history has showed me is both markets go through cycles and investors, whether you like it or not, are backward-looking, return-looking animals. They rarely look forward. And so it's like, this worked for the last three years, just keep doing it, even if the world looks different going forward.

30:58And so this is human emotion. This is why computers are never going to take over from markets while we can get the benefit of quantum computers. Human emotion is backward-looking. and let's just do more of what worked in the past. That muscle memory is really tough to break. Let's stay with that idea that your job is to identify the 20 % of stocks that are gonna shoot the lights out and really beat the indices, as well as that bottom 20 % that's gonna soil the bed and do a terrible job. Is it the same process to identify both groups of stocks or is it a different set of research and analysis to pick the winners versus the losers?

31:38It's a different set of research and analysis. There are corollaries, but shorting is not just the inverse of long. Because of the nature of shorting and what you need in the form of catalyst and recognition, it's a little bit harder. You can be patient on the long side. And so for us, the long side, I described this durable business or good business and mispriced stock as the repeatable process that we're trying to do. So our research team of 20 people, We have 13 sector-based analysts and PMs that really know their sectors and tend to look amongst those sectors for businesses that are durable and then the opportunity to buy them when they think there's a misperception out there.

32:21And I think that means that a lot of things we do, we're researching companies and we say, well, it's not the right time. This is a good company. It's a good CEO, but it's fairly priced. There's nothing wrong with it. So I'm not just looking to buy good companies. I want to make sure that I'm delivering value to my investors and that I'm buying that good company when it's mispriced. So I earn outsized returns. So I think our team is doing lots of research across these sectors, identifying the right kinds of businesses. And then through different events that happen, there are things that create mispricings.

32:54Short-term company goes through a disappointment. Everyone gets short-term and no one wants to look out 12 or 18 months. Maybe there is a turnaround story in a business that have been underperforming. performing. Maybe there is a hidden asset that's going to start to show. So things that fundamental investors could create mispricings. On top of that, the new market structure that I talked about is creating new sources of mispricings. So this is, everybody's doing one thing. You're in the GLP One loser bucket. And you know what? Goldman Sachs decided that and Morgan Stanley decided that, and they put you in this basket of losers.

33:28Okay? That is not necessarily the most rigorous process. It doesn't mean that. But all the - Explain GLP-1 versus the winners and the losers briefly for people who are not market junkies. Yeah, so GLP-1, they are the diabetes drugs that are helping people lose weight. This is Ozempic. This is Monjuro. Wagovi. Wagovi is Ozempic, just a stronger version. It is a existing class of drugs applied to a new use and is applied to weight loss. And then there are a lot of downstream effects to weight loss. So a lot of the comorbidities or the co-issues we have in the health system come from people who are overweight.

34:05So heart disease, for an example, or other procedures, if people are healthier, are we going to have less of these other things? So you could be a GLP-1 loser because you help patients that have heart disease. So this can be anything from healthcare to, I saw people talk about Yum! Brands and McDonald's. So your eating habits are less, you snack less. And so there's the potential that we consume less food. I think it's moderate but accurate. I mean, today we have a relatively small percentage of the population on these things. But people are projecting out to when we have 10 or 20 percent of the population and they might eat 10 or 20 percent less.

34:43So alcohol is another one. There's no craving for alcohol. People are drinking less. That's a GLP-1 loser. And then some of these health care things could be GLP-1 losers. people throw you in this bucket and then it doesn't matter that you have a new product. It doesn't matter that you're gaining market share. It doesn't matter that you're going to grow your earnings at X or Y. They're just selling you because you're in this basket that Goldman Sachs and Morgan Stanley told you about. That is creating other sources of mispricing, throwing companies into the unprofitable growth basket. So back in 2022, people said, you know, you don't want to own unprofitable growth.

35:19Rates are going up. And again, they treat everything as one. Uber was a perfect example of a stock that was technically unprofitable, but it was fundamentally profitable at its core. And it was unprofitable because they were growing in Uber Eats and they were growing in new markets. And what we've seen happen over the last two years is Uber's all of a sudden become profitable. And point being, they're selling it because I classified it as something, but having nothing to do with both the micros of that company or how that classification might change in 18 months. And so that creates other sources of mispricing.

35:54So getting back to your question, we are trying to find durable businesses and mispriced stocks, and there are more mispricings coming from investors because it's not just fundamental investors. Now it's this new market structure, this thematic type of stuff. On the short side, you also asked about - Yeah, so I'm fascinated by the short side because short sellers have become an endangered species. And I always thought short sellers kept the market honest, were the first buyers in a crash. And losing shorts is not a good structural thing for the market. It's not a helpful thing. And I think we've had a number of kind of media and regulatory pushback on short selling and stuff as if we're the evil empire because stocks only go up and people own stocks and we're betting against it.

36:39The truth of the matter is short sellers do better research because the risks are skewed the other way. I can only make 100%. I can lose thousands of percent. I better be really good and really accurate, do really good research. I think it's an important part of being a skeptical investor. I think it's an important part of portfolio construction. And I think it's an important source of value add to our investors. And so for us, we are typically looking for both an overvalued stock and a reason why that overvaluation will correct. So we need to understand what is going to happen. So it's fundamentally worth less and something is going to drive that to happen.

37:19That could be an earnings miss. That could be a business that's over earning, that supply is coming on to it. It could be a company that has poor accounting or a fraud. It could be a fad, lots of different baskets of overvaluation. And then you also need to understand what is going to change that's going to cause investors to value this the right way in a reasonable time. It may not be tomorrow, but it can't be five years because you can lose a lot of money between now and then. Really interesting stuff. So let's talk a little bit about what's going on in the market today. You said something that I found fascinating.

37:53We were talking about shorting earlier. You said the mother of all short squeezes is no longer valid today. Short interest was at one point 30 % of the float. Today, it's well under 10%. Explain. So that was a tweet about GameStop specifically, because we obviously had the original GameStop episode in 2021. And then more recently, Roaring Kitty had come back and kind of created a new short squeeze in GameStop. And amidst that short squeeze, the company issued$3 billion of equity, massively increased the float, and a number of short sellers had covered. And the thesis behind being long GameStop for any of these retail investors is the market's rigged, the short sellers are going to have to cover, just hold the stock.

38:44Morals are coming back in a big way. Right. If we corner the market on GameStop shares and we never sell, then these short sellers are screwed. Which turned out to be fairly accurate for that one stock. For that one stock, in the original period, right, when the short interest was probably 80 or 90 percent, after this more recent episode, I tweeted, I said, I don't know what the thesis is now if the company just massively increased the float. So your short interest as a percentage of the float went down and other short sellers covered. So now your short interest is 9 percent. Like that's fairly low as far as short interest goes.

39:19So you don't really have a thesis if your thesis is mother of, you know, M-O-A-S-S with rocket ships. Right. Right. To the moon. To the moon. So to me, the whole original GameStop thing was so fascinating because I started on a trading desk in the 90s and we had the Yahoo message boards. I remember the iOmega fans driving to the factory on a Sunday night and seeing the parking lot full of cars and Wall Street didn't get it. They're running triple shifts and they're going to blow numbers away. This seems like very much a throwback to what took place in the early days of the internet? How different was Roaring Kitty and GameStop with what happened during the dot-com boom?

40:04So I think the fundamental differences are we now have much greater access for retail investors to the market. So we have access on our phones. We have free trading. Robinhood, absolutely. Robinhood, Schwab, they all can trade for free. So all of a sudden, the ability and access for retail investors to be meaningful players in the market is even bigger than it was back in 1999. And then I would say the other change is that no longer is this just creative research that some sort of savvy individual did, let's say, on a stock like iOmega. This is actually bullying. This is coordinated efforts to all come in and try to buy the stock at the same time.

40:48We'll drive it up, and then it'll cause short sellers to have to cover and other investors who get triggered by price movements to buy. And so we're going to create the price action. That's going to create further price action. So this isn't even the 1990s dot coms. These are the 1920s syndicate buyers. Yes. Right? Talk about everything old being new again. It's a century ago. This is the essence of what we're not allowed to do, which is act as a group. But the SEC doesn't do anything about retail investors. If If 30 % of the company all got together and they were retail investors and they did something, that's illegal as per SEC rules.

41:22Right. But nobody goes after the retail investor. And that's okay. This is the sandbox we've got to play in. I'm not complaining about it. It's a new phenomenon. It goes back to this new market structure that I talked about. Because I mentioned retail investors are a big piece of this new market structure. And one of the things that's happened that people don't appreciate is how significant they are as a player in the market. Even in indices, in the last six months, they have been putting a billion dollars a day into S &P. A day? A day. Retail investors. You want to know why a month ago the market was at a high even though the economy was slowing?

41:57It's because the retail investors are just giddy buying the indexes. And until we get a trigger to make stocks go down, other investors aren't selling. And so they are a real factor in the market. we have to both respect them and then ultimately take advantage of them because I don't think they're the most sophisticated, savviest investors. Some of them may very well be, but as a class, I would say they tend to be following themes and chasing things that are going up rather than doing what you described in iOmega, which is kind of good bottoms up fundamental research. Well, obviously what we saw in the first go round with GameStop was the stock went to the moon and a lot of people bought in very late.

42:37It was a ton of money lost by, let's call it unsophisticated retail investors. Let's talk about what took place in 2024 with GameStop and Roaring Kitty. This time, the SEC said, hey, we are investigating because this looks like blatant manipulation. What are your thoughts on that? I'd love to have some hope and trust that the SEC and the government's going to get to the right place, but I don't necessarily have that belief. It's nice to see that they looked at some of the actions and suggested, you know, are you misrepresenting? Are you committing fraud? You know, the size of Roaring Kitty's position was about$150 million.

43:19From what people understood, Roaring Kitty had made $30 million in the first go around in GameStop. People are unsure of where he got$150 million to buy more GameStop. He was also buying Chewy. The ultimate beneficiary of Roaring Kitty was GameStop itself. They raised$3 billion at prices that are well in excess of what the company's worth. They bought themselves a huge lease. They could try anything. That company will not run out of money for the longest period of time. It is a money-losing, bad business that's historically that is going down. But now it's like a SPAC with a couple of billion dollars and a famed CEO named Ryan Cohen who people want to believe in.

44:03And so the company really benefited from what Roaring Kitty did here, which is get retail to come back in and try to buy the stock, get professional investors who had PTSD who were like, oh my God, here it happens again. I better get out of the way. Last time it hurt me. And so that created a situation where the stock went from like 18 to like 50 in a couple of days. The company raised a bunch of money. The stock is back to 20 again. So they don't affect the long term of it, but they create a lot of P &L pain, a lot of emotion, and in this case, allow the company to raise$3 billion. So let's talk a little bit about Chewy and Ryan Cohen.

44:42Full disclosure, I occasionally order from Chewy for treats and stuff for our dogs, mostly Amazon, but very often Chewy is very competitive price-wise and tends to have stuff in stock, which Amazon doesn't always. You and I both have mixed it up with Ryan Cohen on Twitter. You know, again, to be even handed. Ryan, if you want to come on Masters in Business and talk about Chewy and talk about GameStop, I'd love to have you. But he blamed naked short sellers for trashing GameStop and all the garbage we heard about the decade before with Overstock and other companies that turned out to be frauds.

45:21Blaming naked shorts tends to be a red flag that something untoward is going on. That said, Chewy is a real company. It's the second incarnation of Pets.com, only timed right, funded right, and executed right. Why does Ryan Cohen care about GameStop? It seems so bizarre. It is a little bizarre. I've asked myself if this is this decade's version of Eddie Lampert, who made a wonderful trade buying Sears when it was on the verge. of bankruptcy, putting it together with Kmart, and in the short run, saving that company. I was told he's a real estate genius. Does that turn out not to be true? I won't opine on that, but I will say he's not a chief merchant of Sears and Kmart.

46:08So he ultimately put an enormous amount of his fund into this. He ultimately went and ran the company and tried to turn around or make a failing business successful. This goes back to the Warren Buffett quote, you know, you show me a good executive and a bad business, and I think that the reputation of the business is going to win out. I think Ryan Cohen putting himself in as CEO of GameStop, I think he's going to ruin whatever reputation he has as a businessman, because this is a business that is going to be really hard to turn around. That's my opinion. Maybe he's going to develop something.

46:42I'm going to be surprised. But when I look at where the world is going, GameStop as a physical retailer selling computer equipment that you can buy online, games that actually will have no physical component. You can just download them. It strikes me that this is a dead end. And to the credit of Roaring Kitty, he now has cash and he's going to have to go try to reinvent the company. But ultimately, I think that's going to be a failed attempt and he's going to ruin what reputation he got through Chewy. So can GameStop pull what Netflix did? I mean, DVDs through the mail was not the most compelling business model, but online streaming they became a dominant, giant, wildly successful company.

47:24Is that the future of GameStop following the Netflix model? So I think that Netflix in certain ways got lucky early on and then capitalized. And when I say lucky, the movie studios gave Netflix certain rights to online streaming that they didn't think were all that valuable. They had a Disney contract that allowed them to offer this product, the gaming companies are never going to allow this to happen. So I don't think it's possible for GameStop to do what Netflix did. They tried NFTs for a while. They've tried kind of collectibles and a few different things. And at the end of the day, it's a physical retailer with leases in malls that are dying.

48:10But he's got$3 billion in cash now. So So we'll have to watch. We'll see what happens. And for purposes of full disclosure, how did you guys trade around GameStop? We lost only a little bit of money the first time around in 2021. We have been short GameStop for most of the post-memestock craze period of time. So that has to be a giant winner. It has been a good winner since 2021. We made back more than our losses that we lost in January 2021. Having said that, it hurt us in the second quarter, and we lost about one percentage point shorting GameStop. We're still shorted today. It's come back down.

48:47And the portfolio construction changes that we've made post the MemeStock craze and how we ran into the portfolio allow us to ride through things like this. This is one sort of position. It hurt us in one period of time. But ultimately, I still think that GameStop is a short here. But it will not go broke. it will not go as far down as I ultimately originally thought it would. They're not blockbuster. Well, they are blockbuster, but they have$3 billion in cash now. To Ryan Cohen's credit, when this squeeze happened, he came out and sold a bunch of stock for the company. He's savvy. That's what you and I would have done if we happened to be in that situation.

49:26Good for him. He's maybe saving the company long term from being bankrupt. That doesn't mean that this is a successful business. Right. There needs to be a pivot. Let's talk about a different type of gaming. Eminence took a hefty stake in Entain, a UK gambling group. You're elected to that board. Tell us a little bit about Entain. Is this really a sort of activist play? How does this fit within your overall strategies? Yeah. Entain is a global online gaming company. They own brands like Ladbrokes and Coral in the UK. They own half of BetMGM in the US, so they're partners with MGM. They have businesses in UK, Australia, Italy, Brazil.

50:06The industry is growing. They have been a leader across many markets, and it is fundamentally a good growing business. MGM tried to buy the company in late 2020, and then DraftKings tried to buy the company in mid-2021. Over the three subsequent years or two and a half years to that point, Intane lost its way. It had a terrible CEO. It had a board that was not informed and unable to make the appropriate changes and over three-year period of time really underperformed. We have followed the company. We've owned it for this period of time in various sizes and recognizing it is both a really good business and a leader and it had a CEO that was absentee, completely taking the company down the wrong path and making poor capital allocation decisions.

50:57We decided there needed to be change there. I would say just taking a step back, in general, activism is not our strategy. While we get called activist investors in the press, we are not activist investors. We never go into a situation expecting to be activists. What happens from time to time is you go into a situation, you think management's a B, maybe a B minus, and it turns out you're wrong. They're a D or an F. And your choice is sell it, move on, which we often do, or push for change. In this case, because it is such a strong, a strategic asset, we felt stepping in and trying to make changes was the right thing.

51:37I've been on the board now for seven or eight months. We've made great strides. The interim CEO has done a terrific job. We just named a permanent CEO a couple of weeks ago, Gavin Isaacs, who a lot of U.S. investors know. And I think that the capital allocation decisions have been significantly better. We are in the path to turning around this company. I think this is a terrific growth business. It's a company that's a leader across many markets. And it's a company with so much opportunity because it had been so poorly executed and managed for three years prior to the last six or eight months.

52:08That's the opportunity here. And I'm at this point trying to make a difference on the board. And I think we've been very effective. I've been very pleased and surprised by how receptive it's been for me on the board. This is not a traditional activist where we're fighting with people. I think they saw the errors of the company's ways and believe that I and our agenda are a breath of fresh air. And so we're making really good progress. You know, time will tell how this works out. So last question before we get to our favorite questions that we ask all of our guests, a little bit of a curveball.

52:41You serve on the board of directors of the University of Wisconsin Foundation. Not only are you a member of the Development Committee, but you're also a member of the Investment Committee. Tell us a little bit about University of Wisconsin Foundation. I'm actually only on the Investment Committee today. I used to be on the broader board of University of Wisconsin, my alma mater. I do a lot there. I teach a class there. I host interns. I built the whole Badgers and Finance community, and I am on the Investment Committee. So I commit a lot of my time. It's a passion project. I feel great about helping kids in the things we do across the university.

53:17With respect to the investment committee, this is a traditional foundation, runs a bit over$3 billion allocating capital. And this is an opportunity for me to do two things. One is help this foundation with our perspectives, help evaluate how should we allocate the money? How should we think about evaluating this manager? How should we think about evaluating this strategy? How should we be appropriately diversified? How should we be opportunistic in times of dislocation? And secondarily, it's an opportunity for me to see investment committees and foundations from the other side of the table. Obviously, people like the University of Wisconsin are significant investors with me.

53:53Wisconsin is not an investor in our main fund, but we have similar institutions. And so it gives you a perspective for how endowments work, how committees work. And some of the same things that I've said about investors are also true about committees. Very sophisticated people coming together on committees look at backward-looking returns. Often don't ask the rigorous questions about how did you deliver those returns? Are they repeatable? Was this a cycle? How much risk did it take in there? And so it's been a really good exercise for me to be able to understand our investors and the investment community around.

54:32And it's been a great experience on both scores in helping the school. And they have a wonderful CIO. And I think that we've done a good job of not falling prey to the issues that could happen with a committee managing an investment team. But it's also allowed me to see things from the other side. And University of Wisconsin, always showing up on the list of top non-Ivy League schools. That has to be very rewarding for you to do your work with them. Yeah. Humble, hardworking Midwestern kids. every bit as capable as the kids that go to Ivy Leagues, but with better attitudes. And I think that there's a lot of this going on in the working world that I think the working world is realizing that I don't just need the kids from the best schools in the country.

55:10I need good kids that meet a certain standard of intelligence and capabilities. And then what I really want is the kids with the right attitudes. And kids that go to schools like Wisconsin, Midwest, humble, hungry, public school kids, they have a different attitude than maybe kids that might come from some of these Ivy League schools that have an expectation that the path is laid for them and that they just are going to be CEO within the next six years. Fundamental mispricing of an Ivy League education. Yeah, absolutely. All right, so let's jump to our favorite questions we ask all our guests, starting with what's been keeping you entertained?

55:43What are you watching or listening to these days? In the podcast land, I tend to listen to a number of what I would describe as business and health and fitness podcasts. So I listen to the Founders podcast. I love understanding kind of prior successful people. Invest Like the Best, your podcast. These are kind of interesting market-oriented podcasts. I also listen to a lot of health-oriented stuff. So Peter Attia, The Drive, Huberman Podcast. Peter Attia is the longevity. He wrote the book on longevity. Outlive. Yes, really interesting guy. Tremendous, really thoughtful. There's so much we've learned in the last 20 years about health, longevity, wellness.

56:23and he's a big believer in medicine 3.0, which is really us doing things preventatively versus medicine 2.0, which is like, you get sick, your hip hurts, you go for surgery. Well, what do we do to prevent that ahead of time? What do we do to prevent heart disease ahead of time? What do we do to keep us strong and living greater health span, not just lifespan? I read something this morning, it's so fascinating. 3.0 still comes back to all the things we knew 50 years ago. So don't be overweight, exercise, manage your stress, and be proactive in how you respond to any sort of infirmity or challenge.

56:59Yeah. I mean, the truth is you boil down all of this longevity stuff to a few key things. Move, eat less and eat healthy, get sunlight, have meaningful work and meaningful relationships, some strength training. Like, that's it. You're good. You read the blue zones and you look at – there's all this data and it's not that complicated. but I think kind of distilling it down, there are things that have really helped me change small things about my life, my morning routines, things like that, that, you know, switching from cardio and getting on a treadmill or a bike to strength training. Very significant improvement to longevity and the things we need to do.

57:37Getting out in sunlight, walking, just basic stuff. Let's talk about your mentors who helped shape your career. I think there was a handful of people, most importantly, my father, who ran a hedge fund. He was a Goldman Sachs analyst up until the early 1980s, and then early hedge fund founder, ran a hedge fund, always been around markets. And he was a mentor in sort of understanding the power of good businesses and growing. My first boss, Morris Mark, also another great mentor, a brilliant investor who's still at it today in the age of 80s. And going back to longevity, continuing to work in our life is important.

58:15A gentleman named David Harrow, who runs the Oakmark International Fund. He was someone I met when I went to school in Wisconsin. He was working at the State of Wisconsin Investment Board, a brilliant value investor. He's been a terrific mentor to me on the business side. And then there is a whole community of peers and people who have done this before I did that I think I've used little bits and pieces of. I'm a big believer that investing is about finding your own compass. But I'm not reinventing a complete wheel. I might take a little bit from Warren Buffett. I might take a little bit from a David Tepper.

58:50I might take a little bit from what Julian Robinson did, a Tiger or some of the Tiger Cubs. And you build what works for you. And so I think there's been a whole community out there that have been mentors to me, friends and peers and colleagues. Let's talk about books. What are some of your favorites and what are you reading right now? I would say similar to the podcast, my books come into a couple of different flavors. So some of the business books that I'm a big fan of, the Ray Dalio book, Principles, I I think is terrific. The David Rubenstein book on leadership. Just came out. Lessons of the Titans, another good business book.

59:25So a handful of business books. I think there's longevity and health books. I think Outlive, we mentioned Peter Atiyah. Life Force by Tony Robbins, terrific book. I tend to read some stuff on politics, like understanding our system. So the politics industry, a terrific book around the duopoly we've handed to these two political parties and how we change it back. And then some fun books that I tend to like around people, sports characters or other that I think are great. Open by Andre Agassi. So good. So good. And a recent book that I read, The Gambler, Billy Walters. A terrific book about maybe the most prolific sports gambler of our time.

1:00:04That's a great listen. I would also say I talk about reading books, but I listen to them now. Have you listened or read Shoe Dog? Phil Knight. Yes. Really, really interesting. Along the same sort of - Yes, 100%. It's amazing how these incredible companies, all these little places along the way could have just made one other wrong decision and we never would have heard of them. It's fascinating. All right, our final two questions. What sort of advice would you give to a recent college grad interested in a career in finance? A couple of things I would give. One is this concept of finding your own investing compass.

1:00:41Don't try to be just like me or just like Buffett or just like any one person. The benefit of taking all this information in is to build your own investing compass because what's really important in investing is consistency and confidence. So when things go wrong, you gotta be confident in what you're doing. We can't chase the latest trends. We can't try to buy the value investor when the market's value investing and the growth investor. Otherwise, we're gonna be chasing everything. So build your own compass. That will build consistency and it'll build something that you believe in. So that'd be one.

1:01:14I think the other thing that I would say is manage your Rolodex really proactively. At an early age, you start to get access to people who can be really helpful to you. And I think we often get that access and then don't cultivate it and harness it as we move on in life. And I would say this is a mistake that I made. I had this tremendous access when I worked for Morris Mark. I was 24 years old meeting with CEOs. I could have done a better job of cultivating these relationships and using them. Ultimately, over time, I've probably come back to some of them and have used them. But we don't get anywhere in life all by ourselves.

1:01:55We need advice. We need perspective. Somebody that you meet might know a lot about a particular industry. And that's not all that relevant today. But in 24 months, when you're doing research on another company, it could be very relevant. Being able to go back to that I think is really important. So being proactive about that, sending people a note every now and then, like, don't just call them when you want something from them. Hey, I read this article and it made me think of you and your company and what you're doing. Just keep in front of them. Categorize your Rolodex so that you can come back to that over time and use that as a powerful way to get smarter, quicker around a range of things.

1:02:30Really interesting. And our final question, what do you know about the world of equity investing today? You wish you knew 30 years or so ago when you were first getting started? I think the biggest thing that I wish I knew was how individual motivations create decisions by executives and boards that might not be the most beneficial. I think when I started in the business, I think I understood human emotion about investing, fear and greed and how investors behave. But I think I took what executives told me and board members told me at sort of face value. Like, this is right. This is what it is.

1:03:12The truth is that they have their own perspective, their own motivations. They might be trying to deceive you. As we moved on in time, we've come to ask different types of questions of executives. I'll do my own research on the business. I'm not going to rely on you to tell me what the company is going to do next year. I want to know how you think. I want to know how you allocate capital. I want to know what you're going to do. I want to make sure that you're a person that I can trust to make the right decisions. I'll do my research on the company. And I think I didn't quite appreciate that executives don't know what's going to happen next year.

1:03:44The world changes. There are things that they can be blind to. They could have their own poor motivations that may be getting the stock up in the short run, but not good for the business. And I think that whole area around understanding humans and why they tell you things and being skeptical is probably something I wish I knew 30 years ago. Really fascinating stuff. Ricky, thank you for being so generous with your time. We have been speaking with Ricky Sandler, CIO and CEO of Eminence Capital. If you enjoy this conversation, well, check out any of the previous 500 or so we've done over the past 10 years.

1:04:20You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcast. and be sure and check out my new podcast, At The Money, short 10-minute conversations with experts about information that relates directly to your money, earning it, spending it, and most importantly, investing it. At The Money, wherever you find your favorite podcasts or in the Masters in Business podcast feed. I would be remiss if I did not thank the crack team that helps us put these conversations together. John Wasserman is my audio engineer. Atika Valbron is my project manager. Anna Luke is my producer.

1:05:03Sage Bauman is the head of podcasts at Bloomberg. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.