The $2 Trillion Mind | Nicolai Tangen

9:15Shane Parrish:How do you see the difference between American and European mindsets?

9:20Nicolai Tangen:So this is super interesting, right? and now I'm in New York for a month and you know, wow, the energy here, the entrepreneurship, the drive, you know, I just get so much energy just living here. Level of ambitions, super high versus Europe where there is, I mean, Europe is a fantastic place too, right? But for different reasons, you know, culturally incredible, you know, food pretty good in many places, but less ambitions. You know, the thing with ambitions, I think it's so interesting. If you have really, really high ambitions, you achieve great things, even if you fail. If you have low ambitions, you achieve nothing, even if you succeed.

10:10Nicolai Tangen:And so having great ambitions is just fantastic. And, you know, in America, five, I mean, do you think five is a high number or a low number?

10:18Shane Parrish:For what?

10:19Nicolai Tangen:Well, just generally number. Is number five high or low? There you go. You think five is low. You ask a European, is five high or low? They would say it's pretty high. So it's just like, and so the whole concept of, you know, growth rates, ambitions, and so on is different. And then, of course, you work much harder in America. I mean, that's just not something I think. It's just like the facts. You got less holiday and so on. Do you think that's good or bad? I think it's both. I think it's good for some things in society and I think it's not so good for the people involved.

10:55Shane Parrish:It's so interesting because if you think of it from an evolutionary point of view, I mean evolution doesn't care about you, it cares about the species and so it would sacrifice you and make you work harder for the good of the whole unit and the survival of the unit. Was it a culture shock when you came to Wharton?

11:12Nicolai Tangen:To Wharton?

11:13Shane Parrish:Yeah.

11:13Nicolai Tangen:Absolutely. Well, you see the in a way, Norway is the opposite of Wharton. Because in Norway, everybody's supposed to be the same. You have this thing called Jantelovn. It's just like, don't think you are fantastic in any way, shape or form. So you come to Wharton and I sit there in a class and it's just like, hey, what do you guys want to achieve in life? And one of my fellow students just hands up, what do you want to do? I just want to conquer the world. And that's kind of a statement, which is totally normal, you know, at Wharton. but it's not particularly normal in where I'm from.

11:48Shane Parrish:How would you change that to add more ambition?

11:52Nicolai Tangen:I don't think you can change it. You can't change a nation. But you can change it in your own company and you can work on the corporate culture in the firm you work. And you can change it with yourself and your family and your friends. But to change the ambition level of a whole country, I don't think you can do that.

12:08Shane Parrish:It's tough. How would you go about it if you had to, if that was your task?

12:13Nicolai Tangen:Okay, so I never do politics because my job is totally not political. But if I were like prime minister for a day.

12:22Shane Parrish:And your only job, just ambition, nothing sort of like.

12:25Nicolai Tangen:I would inject AI everywhere. I would just go all in. I would do what they did. You know, in Sweden in the 80s, they had something called home PC. So they bought 800 ,000 PCs in a country of, I don't know, at that stage, which let's say was six, seven million or something, eight, put them in people's homes, and it just increased the digitalization of the country. So now you have Spotify, Klarna, all these things. So is it directly linked? Probably not, but they increased the digitalization. Now they're doing the same thing with AI. Now they're doing the same in Iceland. In Iceland, they announced a cooperation project with Anthropics, where they're basically going to stuff it in to all the schools and all that kind of thing.

13:13Nicolai Tangen:And I think it should be perfect for Norway. It's a highly digitalized country and where people think it's pretty nice to have a lot of spare time. And of course, AI helps you with that. And it's a once, you know, you read the book about NVIDIA, for instance, and Jensen Huang talks about this once-in-a-lifetime opportunity. And this is just a once-in-a-lifetime opportunity for people, companies, and countries to pull apart.

13:40Shane Parrish:and if you don't do that you're sort of going to be left behind if people do yeah there's uh two i mean alpha school i guess is one of them who's who's using ai to get curriculum down to two hours a day the students are getting massively better outcomes and then synthesis tutor has created this math program through i think it's uh kindergarten through grade eight or nine now and the results are like just off the charts. They move kids to standard deviations within like three or four months. And so we've demonstrated that it's better than teachers, but the impediment to that would be what do you think?

14:19Shane Parrish:Like why wouldn't people do it? What would be the argument against it?

14:22Nicolai Tangen:I don't know why people would do it. They should do it. I mean, they so should do it.

14:27Shane Parrish:What's the most important data you look at these days?

14:33Nicolai Tangen:uh i don't have like just one or two data sources i read uh just a lot of newspapers and i think what's going on in the world now is just so incredibly fascinating and it's so exciting to be alive you know and so i just wake up at five and i just spin out of bed i just can't wait to get out of bed uh to start to read the papers and then i just start you know the financial times waltz journal new york times all these things and wow the stuff that goes on now is just incredible Things that you didn't think was possible a year ago, that's now happening, right? So I was up in a forest a few weeks ago with seven of my best friends, and we were predicting, okay, what's going to happen in the next 12 months.

15:18Nicolai Tangen:And we tape it, we tape record it. And then we were playing our predictions from last year. And these are really clever people. And how do you think we did?

15:28Shane Parrish:Terrible.

15:29Nicolai Tangen:Terrible, terrible. I mean, we were like 80 % wrong. You know, we didn't predict that Trump would win the election a few weeks later. We didn't think about like tariffs and the relationship between the US and Europe. You know, what's going on now in the US, in Europe, in India, in China, we had no clue. And so I think trying to predict in this world is just more and more, you know, useless. So what do you need to do? You just need to work on speed and agility.

16:00Shane Parrish:Go deeper on that for a second. How important is speed and agility?

16:04Nicolai Tangen:Well, I have a big thing with speed. You know, speed is a mindset and it is, you know. He struck me again going back to New York. You know, every morning I buy this, you know, egg and ham roll and just speed with which they wrap it. I mean, my. So the speed in New York is very high. But speed generally, I think, is super important, you know. It comes to this first principle, things shouldn't take longer than they need to take. You know, you save time by being fast. So this sounds a bit strange, but you know, if you answer, if I send you an email and you answer within one minute, how long does that email need to be?

16:51Nicolai Tangen:Two words, right? And I'm impressed because you answer really quickly. If you answer the next day, how long does it have to be? a paragraph and you answer a week later, it needs to be a page, right? So you just save time by being quick.

17:05Shane Parrish:You're in meetings all day. You're trying to stay present, but you're also worried you'll forget the decision, the action item, the important next step. That's where Granola comes in. Granola is an AI-powered notepad for meetings. You jot down rough notes like you always do, and in the background, Granola transcribes and turns them into clear, useful notes when the meeting ends. There are no bots joining your calls, no distractions, just a clean notepad that helps you focus. During or after the call, you can chat with your notes. You can ask Granola to pull out action items, help you negotiate, make a decision, write a follow-up email, and so much more.

17:40Shane Parrish:I even use it when I'm listening to podcasts. Once you try it on a first meeting, it's hard to go without. Head to granola.ai slash Shane and get three months free with the code Shane. That's granola.ai slash Shane. Most things worth having in life reward focus. Dating should too. The league is built for people like me who know who they are and what they want. Instead of endless options, it delivered me a curated set of profiles each day so my time and attention stay directed towards what matters. What stood out to me most is the community. High quality people who are intentional and serious about building something real.

18:21Shane Parrish:If you're ready to approach dating the same way you approach the rest of your life with clarity and purpose, this is worth your attention. The League. Find someone in yours. Download the app and apply today. How do you think about urgency? That's one thing we didn't, that was not a word we used when we were sort of like thinking about American versus European mindsets.

18:43Nicolai Tangen:Yeah, I just think, you know, urgency is, I try to build urgency into most things. You know, in my office, I have this watch, this kind of clock, and it counts down the days I've got left in my job. So it's not because I look forward to stop working because I love my job. But I have this thing on the wall. And so you come in and say, hey, Nikolai, we're going to work on this. And, you know, I'll sort it by January. And I said, January? Look here. I've got 1 ,765 days left. We need to do it now. And then you say, oh, really? You only have 1 ,765 days left? Yeah, let's do it now. Let's do it now.

19:21Nicolai Tangen:So you build urgency into these tasks. I love it.

19:24Shane Parrish:I like that. That's a really good idea. When I was talking with Charlie Munger about predicting, and he basically said it's a fool's errand. It's better to position and have agility. But you kind of have to mix that with a stubbornness too. Yeah. How do you think about that?

19:42Nicolai Tangen:So I think the most important thing to have in investing is you need to be stubborn, but you need to have the ability to change your mind. Very few people have that. Somebody like Stan Druckenmiller has it, but the combination is rare. You need to be stubborn, you know, in order to do the opposite of everybody else. And when you do these kind of contrarian investments, there will be periods where everything goes against you and it's stressful, but you need to hang in there.

20:12Shane Parrish:Do you think you can teach people to change their minds?

20:16Nicolai Tangen:I think you can. To a certain extent, you can teach them. It's easier as you get older, I think, because you've seen more cycles. But it's difficult to find people who are really contrarian now because you need to live in a space where people don't agree with you. And in today's world, everybody wants to be liked. and have 100 likes on Facebook or whatever. And so to be different from other people is tough. So now when I give presentations at universities, I ask people, hey, anybody here who thinks differently from other people who kind of think that they are weird, that nobody understands them, hands up.

21:00Nicolai Tangen:So typically less than 10%. I said, you guys, you're great. We'd love to hire you. Can everybody else put their hands up? And they did on 90%. She's like, you know, sorry, guys. You're just like everybody else. You're never going to make much money. But there is hope. You can change, you know? And I kind of think people, hopefully they go out of that room and think, you know what? I want to be different, you know? It's something we should really treasure and love. You know, where it is good, right?

21:27Shane Parrish:Go deeper on that for a second in terms of, I think a lot of people optimize their lives not necessarily to be liked, but definitely not be, you know, hated or disliked by people. and that causes all these weird societal distortions yeah you don't have to be disliked

21:44Nicolai Tangen:even though you disagree you know people disagree with you but you know in my mind in my mind life is not a popularity contest so my wife says that well only people without friends say that but i don't i don't think so i think you life is for sure not the popularity contest

22:00Shane Parrish:and you're definitely not popular all the time you have that big number on the screen

22:03Nicolai Tangen:You know, you can't be popular all the time. And you have to, you know, you have to be used to the fact that whatever, even if you're right, 10 % will disagree with you.

22:14Shane Parrish:Do you read the comments that are negative about you? No.

22:18Nicolai Tangen:But I also don't read the positives. Okay. And I don't believe them, you know. I don't believe the positives. I don't believe the negatives.

22:24Shane Parrish:So when you read the newspapers, like how do you read them? Are you reading headlines and then if it catches you, you read the article? Or is there a different way that you skim or process that?

22:33Nicolai Tangen:I read, I go through headlines and I drill down if it's either something I am interested in or something I know I should know more about. Or if I'm going to meet somebody who's interested in that particular field, or I know somebody who's interested, then I pass it on to somebody else. Or if I met the person or I had him on our podcast.

22:56Shane Parrish:How do you test your assumptions before making a big investment?

23:01Nicolai Tangen:So that's where I think we can be better, and I think we can develop this. And I think by using more of the scientific method, I think we can be better. And I do think that there is an objective truth. I think there is something which is correct, and we need to find it. And so I have much more of an open mind now than I had in the past. I think I listen to more different types of input and opinions, and I try not to jump to conclusion.

23:35Shane Parrish:Has that made you a better or worse investor based on returns?

23:40Nicolai Tangen:Well, so I don't run money myself now. I'm running a company where we have a lot of people running money. But for sure, it's going to make you a better investor if you take more of the different opinions into the equation. If you are a long something, you listen to the shorts. you and vice versa. I mean, there really is a truth, you know? Don't you think? Do you think there is an objective truth?

24:05Shane Parrish:I would like to think so, yeah. Yeah. I think that that's... But how do we get at that truth is the... Well, but listening to different types of people. Yeah, but then you're making a judgment call at some point on what's closer to the truth and what's not.

24:20Nicolai Tangen:Of course. And then you have to kind of... Well, then you link in analysis and, you know, some pattern recognition and so on. And hopefully you get to something which is correct.

24:30Shane Parrish:I think the source of most of our poor decisions is just blind spots. There's information we're missing. There's something we don't see. There's something. And our job is to reduce our blind spots. I don't know if we can completely eliminate them, but we can definitely reduce it. And then we reduce it through talking to people and getting different perspectives. And it's just like if you and I were standing beside each other right here and you took a photo and I took a photo, both of those photos are 100 % accurate. But if we add them together, we get more of a picture than we do individually because they'll be slightly different because we're standing at slightly different angles with different offsets.

25:06Shane Parrish:How has your attitude towards risk changed?

25:12Nicolai Tangen:It's a difficult one. I am probably in some ways become more risk averse. On the other hand, there are some risks I probably take more of now than I did in the past, right? So the risk, people's risk appetite depends on many things. I mean, everything else being equal, men take more risk than women, which is why we crash our cars much more, right? Young take more than older people. Extroverts take more than introverts. It's geographically based, right? American people take more risks than, let's say, Asian people. and i'm sorry i'm not i'm not the one who has invented this okay because i i did a degree in social psychology and one of my papers was on exactly this is just how is risk appetite linked to the big five you know and uh so as you get older on average you take a bit less risk but as you also as you build wealth you take a bit more risk sometimes um so i don't i'm sorry this was a long answer.

26:18I'm not sure I have a very clear answer here.

26:20Nicolai Tangen:So risk is interesting, right? So then you talk to some people. So let's say you do private equity and you interview somebody like Steve Schwarzman, which we did on our podcast, right? So, okay, it's really important not to lose money. So you need to really look at the downside. Now, in venture capital, it doesn't matter whether you lose money on a lot of stuff, as long as you capture the really big winners, right? So you can lose 9 out of 10, as long as you get the one right, which is just like going up like a rocket. The issue here is that the rocket, the entry ticket for the rocket, which was$1 million in the past, that's not like$500 million.

26:57Nicolai Tangen:So that rocket better go up, right?

27:00Shane Parrish:And you guys do mostly, it's like index plus?

27:03Nicolai Tangen:Yeah, we are very indexed there. We got a really great investment mandate from the Minister of Finance. It tells us roughly how we are going to be positioned. It gives us a risk budget. And then we are pretty close to that. And that's important for many things, but it's also important because it limits how much money we can lose.

27:21Shane Parrish:So how does that work in practice? You basically like start with 100 % in the index and then you're like, okay, well, we're going to take a little less of this and a little more of that or?

27:29Nicolai Tangen:Yeah, pretty much, right. So I would say we have 20 % of the capital we would run in a very active way. And the other part of the capital will do smaller tweaks.

27:40Shane Parrish:But you have a lot of money coming in every year. I would imagine it's probably on the order of 100 billion-ish, if not more?

27:47Nicolai Tangen:Well, it depends on energy prices, but generally there's been inflows.

27:52Shane Parrish:And so do you take that new, no matter what the price is, like say today where you have, you know, the top seven stocks account for 46 % of the US index, do you just, how do you allocate that new money coming in? Do you just sort of like pop it into the index?

28:08Nicolai Tangen:Kind of. We get the inflows or outflows, they're monthly, right? So you get the money, on a particular day. And then you have to think, when do you deploy it into the market? You do it a bit beforehand or a bit afterwards or a bit before and after. And we use AI to optimize those type of decisions.

28:27Shane Parrish:Do you try to front run index changes? Yeah. Using AI, I would imagine?

28:32Nicolai Tangen:Yeah.

28:32Shane Parrish:What's gotten harder in investing?

28:35Nicolai Tangen:Everything.

28:36Shane Parrish:Nothing's gotten easier. No. Everything's gotten harder.

28:39Nicolai Tangen:No. I mean, everything's gotten harder. I would say what's getting easier is research, right? Because of the deep research functions in some of the models, you get incredible, incredible amount of knowledge within five seconds. It would take you ages to do that before. And it's well-structured and you can play around with it. And so that's just phenomenal. It's just phenomenal. How do you think about the rise of passive investing when it comes to retail?

29:11Shane Parrish:What are the pros and cons of that?

29:13Nicolai Tangen:Well, the pros is that it's cheaper. So people don't pay that much fees. It's difficult to beat the market. The negatives is that you will, I mean, they would typically perpetuate bubbles because with more passive money, they go into, you know, stocks which have done historically well and they perpetuate the moves.

29:38Shane Parrish:is your goal active return like a active um or total return absolute return or is it sort of relative to the end relative relative to so we are measured against the reference index which is

29:50Nicolai Tangen:uh constructed by the ministry and then we try to beat that historically over the last close to 30 years we've had 25 basis points of performance so you would say hey that's not so much well the thing is that if if you have a lot of money it's these are pretty they it ends up being pretty big you know, absolute amounts.

30:08Shane Parrish:And when you were running your own fund before that, what was the worst sort of investing mistake that you made and what happened?

30:15Nicolai Tangen:The worst mistake was during the financial crisis. We were in a subprime lender and it turned out that there was accounting fraud and it was a big position. And that's the worst. That's the worst investment I've ever made. and what I learned was that you don't want to go into dubious business models. And so Brian, you can say, it's not really certainly the type of company we were interested in. I would say it's not really, I mean, is it ethical to lend money to people who are in a tough situation in life? Well, I don't know. It certainly was a really bad investment. I wouldn't invest in that type of company now.

31:03Shane Parrish:What would you, like, what was the lesson you took away from that? Is it the business model? Is it the ethics? Yeah, it's just the business model.

31:08Nicolai Tangen:And it's just, I just don't want to, I just don't think you should profit from people who have a tough time.

31:16Shane Parrish:What would be the counter argument to that? If you were to argue with yourself, I mean.

31:20Nicolai Tangen:I don't think there's a, I don't think there's a good counter argument.

31:22Shane Parrish:The pushback, wouldn't it be like, maybe I'll play devil's advocate here for a second, but wouldn't it be that people all need credit? we've all been down on our luck and maybe we don't have the best credit rating and but it's just how

31:33Nicolai Tangen:you do it and how you go about it and what you charge for it yeah yeah there shouldn't be sort

31:39Shane Parrish:of usury rates for sure no um did you do a post-mortem after that totally and then how do you have the confidence to sort of come back and take big swings after you lose like you lost a lot

31:50Nicolai Tangen:of money on that one because you as long as you don't do the same mistake i mean why why make the same mistakes when there are so many mistakes to take from you know you find some new ones originality and mistakes i love it um but you know okay so so the risk taking is really

32:07Shane Parrish:interesting so most people take less risk when they lost money even though you should take the

32:13Nicolai Tangen:amount of risk so here we use a sports psychologist i i sail and i did a lot of competition when i was a bit younger and i sailed with some of the british olympic sailors and they were just really really good right and so i asked them hey why are you so good well you know we were two reasons one we have a very great we got a really good debrief system and also we work with sports psychologists you know to work with a mental type of uh you know strength and so what is important in sailing is that you know you can be number one and then the wind the wind direction changes and then certainly you're the last one.

32:53Nicolai Tangen:Now, next race, you need to take the same type of risks. You know, you cannot let it impact you. And that's the same way it is with investing. You know, just because you lost, you need to get back on your horse and take the same amount of risk. And it's very difficult. And that's why you need some psychologists to help you with this. You know, I did a podcast with Magnus Carlsen, the chess player. And so I asked him, hey, what happens when you lost, you know, a game? Do you take more risk? So he takes more risk in the next game, which I think is interesting. But normally people take less.

33:22Shane Parrish:That's fascinating because I was thinking as you were saying that a little bit that the worst people would take less or more risk because isn't that the, I just picture this guy or girl, I guess, or whatever at the gambling table in Vegas and they lose and they keep double down, double down, double down.

33:39Nicolai Tangen:Investors don't do that.

33:41Shane Parrish:Why did you take this job? What did you see? Why did you want it?

33:46Nicolai Tangen:Oh my, it was my dream job, right? So I had run this investment company called AKO Capital, set it up, and it kind of turned 15 years. And I thought it was time to pass it on to the next generation and do something else. So I wanted to go back to university and do another degree and learn some more things. and then I had just before that taken a degree in, done a degree in social psychology and organizational development. And so when this job came up, it was just like, wow, you know, it combines, you know, asset management. And asset management is the most interesting thing you can do in life because it's about everything that moves, everything you eat, wear, drive, all that kind of thing.

34:34Nicolai Tangen:It's about psychology, it's about markets, it's about greed and fear, it's about macroeconomy, geopolitics, defense. It's about everything, right? So it is the most incredible game you could ever construct. Then I could combine it with organization development and really see whether we could take this organization, you know, to a place that it hadn't been before and then do something great for the country. So all my interests came together in one job.

35:04Shane Parrish:You know, people talk a lot about product market fit, sales tactics, or pricing strategy. But the truth is, success in selling often comes down to something much simpler, the system behind the sale. That's why I use and love ShopPay, because nobody does selling better than Shopify. They've built the number one checkout on the planet, and with ShopPay, businesses see up to 50 % higher conversions. That's not a rounding error, that's a game changer. Attention is scarce. Shopify helps you capture it and convert it. If you're building a serious business, your commerce platform needs to meet your customers wherever they are.

35:40Shane Parrish:On your site, in store, in their feed, or right inside their inbox. The less they think, the more they buy. Businesses that sell more sell on Shopify. If you're serious about selling, the tech behind the scenes matters as much as the product. Upgrade your business and get the same checkout that I use. Sign up for your$1 per month trial period at shopify.com slash knowledge project, all lowercase. Go to shopify.com slash knowledge project, upgrade your selling today. Shopify.com slash knowledge project. I'm a huge proponent in sovereign wealth funds. How would you advise the United States or Canada to set one up, knowing what you know now?

36:21Nicolai Tangen:So I think I'm too humble to advise anybody in that field. What has worked well for Norway is to have a sovereign wealth fund, which has broad political anchoring. So the political parties generally agree on the big decisions, which means that when you have a change of government, you do not change the way you run the fund. That's important. Then transparency. We are the most transparent fund in the world, and there is actually a world championship in that and we won it three times in a row. It's a world championship, which has been run by actually a Canadian company called SEM in Toronto. And then the last thing is we have a spending rule, which means that the politicians spend 3 % of the fund every year, a maximum of 3%.

37:12Nicolai Tangen:So I think the broad political anchoring, the transparency and the spending rule, So those are three really important factors.

37:20Shane Parrish:Are there any acute sort of political factors that go into this? I imagine it would become political. You're like 20 or 30 % of the budget at this point.

37:31Nicolai Tangen:Yeah, the fund is 25 % of the state budget. Well, the whole idea is that the fund should not be political.

37:35Shane Parrish:And then how does Norway's politics work its way into how you might vote for your shares on things like ESG or...

37:46Nicolai Tangen:Yeah, well, so that is not politically decided. That's decided. How is that decided? Well, that is decided we got a group of people who sit and look at votes, right? And they are very, very experienced people. So for instance, we look at pay packages. Are they structured in a way which coincide with a way, you know, I mean, are they aligned with our interests? Are they long-term enough? Are they equity-based enough? Those kind of things.

38:15Shane Parrish:Did those decisions come up to you or are you at least aware of the big ones?

38:19Nicolai Tangen:I am aware of the big ones, but I deliberately do not make decisions here.

38:24Shane Parrish:What was the thinking behind voting against Elon's pay package? Like what was the rationale? Well, the team thought it was too big and didn't have the right alignment. With shareholders.

38:39Nicolai Tangen:Yeah. and the fact that it was dilutive. And, you know, we own shares in 9 ,000 companies. If all the CEOs were going to have a billion dollars, that would be pretty expensive for us.

38:53Shane Parrish:I like to think of it as you basically have almost a 2 % toll on the world economy at this point or something similar. Is that a fair way to think about it? I think so. I think that's really cool, personally. How do you build long-term thinking into the organization?

39:11Nicolai Tangen:It's very difficult because people want to do things. I think wealth is basically created by owning one or two really good assets and then you just hold on to it for the very long term. That's when you look at the wealth, the really big pockets of wealth, that's basically how it has been created. So you make money by doing as little as possible in terms of ownership and change of ownership stakes. But imagine now you're a portfolio manager. You come home from work on Monday and your husband asks you, hey, how was it today? What did you do? I did nothing. Okay, and next day, Tuesday, it's like, hi, darling, you know, what did you do today?

39:52Nicolai Tangen:Nothing. And the same thing on Wednesday, Thursday, Friday, and it's just like at the end of the week, hey, did you do anything? No, I didn't do a thing. It's not intuitive that that's easy, right? Right. So very often, the most difficult thing is not to do anything. And so one way to look at it is what I call the inertia analysis. You take the portfolio from January, Jan 1, and you see what would have been the investment result if I just stuck to that and not made a single change. And then you look at your actual results for the year. And so often, you actually have detracted from your performance by the things you've done.

40:29Shane Parrish:That is so true. What does it mean to think long term like if you were to are there elements to that thinking that go into it um well you have

40:39Nicolai Tangen:to figure out what's your time horizon right ideally we should be thinking with a wealth fund we should think 50 years ahead but that's tough because you haven't got a clue what the world is going to look like in 50 years time we don't even know what it's going to look like in i would say three years time is probably the max you can you can look into the future so it's very tough to be it's very tough to be long-term in what you do i know um drucken miller

41:08Shane Parrish:is widely known to take a position then do research after yeah do you do that as well or well i did i did that uh quite a lot and i think it's why do you want to do that well um first of

41:22Nicolai Tangen:all you if your gut feel is good and you know people don't believe in gut feel if you call it gut feel. If you call it pattern recognition, more people believe in it. But if your pattern recognition is good and you see something that looks really interesting, the probability of that being a good investment is pretty high. Okay. It's like way over 50%. And by taking a position, you create some urgency in the research process. And it's also easier to add to the position, you know, if it goes up, because you already have some shares, right? So it's just like mentally a bit easier to get going so i i was in his camp do you think you can teach intuition or pattern recognition if you will no you can't but you can but you gain it with time so i did uh i did a research process when i studied social psychology i interviewed the 20 best asset managers in europe and i asked them you know about pattern recognition you know when do you when do you use it when don't you use it well first of all you call it gut feel nobody believes in it you you call it pattern recognition, a lot of people believe in it.

42:27Nicolai Tangen:You don't believe in anybody else's gut feel, only your own. You can't apply it when you're young because nobody believes in it. You can't go to your boss and he's like, hey, you know what? I think you should buy a hundred million worth of Apple. It's like, okay, well, why? It's just a gut feel I have. It doesn't work, right? Nobody's gonna listen to you. So you need to be pretty senior. And ideally you wanna be the boss because if you're the boss, you can actually do it and it gets better over time so the best the best people use a combination of the two they use a combination of pattern recognition and analysis depending on the situation if you are if you press for time you you are you're more likely to use pattern recognition and if it's a really complex situation where it's difficult to put numbers on the outcome their pattern recognition is more important i think i remember an interview with magnus where

43:19Shane Parrish:he said something like that, where I have an intuition, like an intuitive recognition of what move I'm going to make. And then the person, the follow-up was, well, why does it take you like five minutes to move sometimes? And he's like, well, I'm double checking. I'm slowing down.

43:33Nicolai Tangen:So what he does, well, according to what he told me, is that his gut feel gives him like three different types of moves, and then he analyzed them. And then he spends like five, 10 minutes, But beyond that, time, he doesn't need time more than that because he doesn't add to the outcome. And there are a lot of things we overanalyze. By overanalyzing, often it doesn't improve the outcome, but it makes you more confident about the outcome, which is also not always a good thing.

44:07Shane Parrish:How do you think about chess, which is sort of like a defined board, defined rules, finite? It's knowable. Everything's knowable. all the information is knowable, it's all visible versus something like poker when it comes to intuition. Because if you listen to Kahneman, I mean, his argument was to really develop intuition. You need a constant environment, rapid feedback, and a lot of iterations. And in investing, you definitely don't have a constant environment. Feedback can sometimes take a long time, and you might not get a lot of iterations at the table.

44:44Nicolai Tangen:Well, I would argue you get feedback all the time in investing.

44:49Shane Parrish:How is that?

44:49Nicolai Tangen:Well, because the share price tells you something.

44:53Shane Parrish:But the share price tomorrow, like if you buy today, the share price tomorrow, is that feedback or is that sort of noise? How do you think about that?

44:59Nicolai Tangen:Well, it depends. It depends. It can be either.

45:02Shane Parrish:So how do you know when you're wrong?

45:04Nicolai Tangen:Generally speaking, you know, with the share prices go against you, that's an indication of the fact that you may be wrong. But, of course, you don't know for sure.

45:13Shane Parrish:How do you seek out disagreement?

45:16Nicolai Tangen:Well, first, you have to create an environment where people are okay to disagree with you. You need to listen. You need to take what they say into consideration. So you need to create that kind of atmosphere. In the beginning, in my job, people didn't disagree with me. They all agreed. And that's not very good. Now they disagree all the time. You know, it's really good.

45:44Shane Parrish:How did you change that? Because so often leaders create insulated.

45:49Nicolai Tangen:No, by creating that, hopefully, security for people to be able to speak up. I mean, is everybody telling me all the things they mean all the time? No, of course I don't, because some people have, you know, respect for the CEO and that kind of stuff. But we are creating ways of doing it. For instance, I mean, you're Canadian, right? So you are, I'm sure you are, you know, into ISO key. No, you know, we have these pucks, these, you know, things that you, you know, play with. we have them on the table. It's just like, hey, here is a straight puck. I disagree with what you say. I think you're wrong.

46:21Nicolai Tangen:So then you put the disagreement into like a physical object and you take it away from the person. So it's not personal. It's just like, hey, you know what? I think what you're saying here is just crap. And that's really good. So in the front now, we have like a straight puck award. So the people who is kind of talking up, you know, properly disagreeing with me gets a puck. It's good.

46:41Shane Parrish:I like that idea. I love it.

46:43Nicolai Tangen:I think it's just really good.

46:44Shane Parrish:What other ideas do you use internally that would be along the same lines that may seem interesting or counterintuitive that are actually super effective?

46:52Nicolai Tangen:Well, you just have to work on getting a feedback culture. You know, we are working on it. It's not easy. It's not easy to give feedback and it's not easy to receive feedback. So you just have to do it all the time. I'm getting better at this. You know, I'm more of a straight talker. I tell people more now that I disagree with them and I tried to give them feedback straight after, but it's not easy. People are very sensitive, you know?

47:17Shane Parrish:When you want your spring break to feel like... And your kid's pool day to feel like...

47:26Nicolai Tangen:And your hotel bed to feel like... And room service to feel like... Because at Hilton, hospitality feels like... Your cabana's ready. Would you like fresh towels? It matters where you stay. Book now at Hilton.com. Hilton, for this day. This episode is brought to you by Nespresso. Introducing Virtuo Up,

47:54Shane Parrish:the latest in a long line of innovation from Nespresso. It's innovation you can touch, sense, and taste in every single cup. With a three-second start, easy open lever, and dedicated brew over ice button, it's even easier to enjoy your coffee your way. Sip for yourself. Shop Virtuo up exclusively at Nespresso.com. Is there anything you've learned about how you disagree with people that makes a difference?

48:20Nicolai Tangen:Well, I mean, you can pack it in a touch, but I think you just want to be pretty straight. Yeah.

48:24Shane Parrish:A lot of people are sensitive when you serve.

48:27Nicolai Tangen:Totally. I mean, but it's also the age, right? I mean, young people are very, very sensitive. In the Nordics, we are like hypersensitive. And in the public sector, they are very, very sensitive. You know? Yeah.

48:39Shane Parrish:And then the feedback you get is it's so interesting because a lot of these conversations actually turn into that, which is like, I disagree with you. And then it's, well, I didn't like the way you disagreed with me. And you made me feel. And then the whole topic of the conversation has changed from the actual thing where it's not like I disagree with you as a person. I disagree with your opinion on this thing. But now all of a sudden we're talking about how you feel about my disagreement.

49:02Nicolai Tangen:Absolutely.

49:03Shane Parrish:And it sort of derails things. It's crazy. What do you look for when hiring?

49:10Nicolai Tangen:curiosity intelligence integrity drive how do you test for curiosity like what does that look like what are you trying to learn now what have you learned lately what have you learned lately

49:21Shane Parrish:me i'm learning every day i've done a deep dive on you for the past two days i've learned lots of it you one of the favorite things that came up in my learning about you is you have an ice cream stand outside of your office yeah that's really good that's really good yeah

49:35Nicolai Tangen:So why do you use that? Because you want people to come by and talk to you. And so I got a sofa next to the ice cream box, and I kind of hang out on the sofa quite a bit, you know, like just chill there. And then people come by to have an ice cream and say, hey, what are you working on just now? And they tell me what they're working on. And it's really interesting. And sometimes it's like, yep, have you spoken to this guy? I think he or she is doing the same thing as you. Have you spoken to that person? So I just learn a lot. That's great. I mean, the payback on that ice cream box is probably, I don't know, a thousand times payback, at least.

50:12Shane Parrish:One of the other things I learned about you that I found fascinating that I wanted to follow up on, actually, is you had all these conversations after you started or right before you started. You had hundreds of conversations with people. I had 140. 140. What was the structure of those conversations like?

50:30Nicolai Tangen:Okay, so this is something I learned from a guy called Albert Bene. He was the head of a company in Switzerland called Geberit and another one called Lonza. And he said, Nikolai, when you, because when I got the job, I thought, you know, gee, I got the job. I mean, what do you do when you get a new job? What do you do? So I rang all the best CEOs I've ever met. I said, hey, what do I do? I got a new job. I mean, how should I, how do you approach a new job? You have a lot of conversations with people and you do them before you start because after you started, you won't have any time.

51:02Nicolai Tangen:and you do it because people need to get to know you and you need to get to know them and you need more data points so that you can make your decisions. So that's very important. So I sit down with 140 people and I just start, hey, what's on your mind?

51:17Shane Parrish:That's it. Yeah.

51:20Nicolai Tangen:And then people have stuff on their mind, right? Yeah, well, what do people think about? That's very interesting. But then, of course, you develop. It's just like, okay, what are the good things here? What would you change? What's your advice to me? Those kind of things. And it's very clear. The funny thing is that when you've had half of them, you get the general gesture of what you need to do.

51:44Shane Parrish:You've kind of triangulated, like the same thing is coming up over and over again. So that's a strong signal.

51:49Nicolai Tangen:Absolutely. I do the same now. So I'm in New York for a month. I sit down with everybody in the firm. Here we've got 100 people. And hey, what's on your mind? and you know there's a pattern emerging and I if there is a problem I try to well I change it

52:03Shane Parrish:do you ask people what you're doing that doesn't make sense

52:07Nicolai Tangen:yeah I do but I probably should be even more because people do generally speaking we all do things which don't make sense

52:14Shane Parrish:and then inertia sort of like takes over totally

52:16Nicolai Tangen:we make reports which nobody reads right that kind of thing so that's the first thing you do when you when you talk to people so then you distill down okay of everything I've taken from these 140 conversations what is it what are the three most important things and then you put together a leader group and you execute those three things and you take the time you spend the time it takes people leaders who fail they try to do too many things too quickly and we were in the beginning i we moved too quickly twice and then we we got the message and we slowed down go deeper on that for

52:51Shane Parrish:a second because that strikes me as something really interesting where a lot of people are trying to go faster and faster. And I'm thinking, you know, specifically my friend Kaz had a shirt on yesterday. He did the open investor call and his shirt literally said faster. And he was all about increasing velocity. And he had just taken over, I think, September 14th or 16th or whatever. but like how do you how do you yeah just go deeper on that first of all um you need to you need to

53:24Nicolai Tangen:execute change as a combined leader group because if you if you don't have if you don't if you aren't a combined leader group and you try to do something on your own you'll trigger uh the immune system of the organization you know the organization just want to have you out and they often succeed you You know, you are isolated. You just don't get things done and so on. So you need to, the organization needs to feel, okay, this is a combined leader group. There is no, it doesn't make any sense to try to resist this change because it's going to come. I can just as well just cave in and accept it, right?

53:59Nicolai Tangen:And then you need to prioritize and you need to have not too many things and you need to over-communicate. And the thing with over-communication, it's just becoming clearer and clearer. You know, you think you've said it. you think they've heard it they haven't heard it it's very very tough to get something to really permeate through an organization so we just but then you think gee I've said it 10 times and I nearly I'm so bored of myself but then you're only halfway just need to keep going you know

54:26Shane Parrish:same message over and over over and over again yeah and how do you evaluate CEOs from a competence point of view from the outside just using public information what's your thought process when you're sort of evaluating whether this person's effective or ineffective?

54:45Nicolai Tangen:I think it's difficult to see before they have been in the position. Most people I see are competent, otherwise they wouldn't have gotten the job. You know, they are, I mean, they know their stuff, right? They know the company, they know the things. But are they good communicators? Are they good at executing? It's tough to see from the outside.

55:09Shane Parrish:how long after somebody has taken over do you start to see it in the finances like the analytic numbers the quantitative numbers i think it depends it depends on the it depends on the business cycle it depends on kind of the product cycle of a company but it takes time to turn

55:27Nicolai Tangen:around a company totally i guess the argument i would say to change a culture is a 10-year project Oh, wow. Yeah. Why do you think it takes so long? Well, I mean, I've been in the job for five years now. I think I'm roughly half the way in.

55:42Shane Parrish:If you had to do it faster, how would you do it? Is it a matter of force? Like if we think of it from physics, it's like -

55:47Nicolai Tangen:No, I think if you do it faster, you need to lay off people. Then you need to change the people. Right. And in some businesses, you can do that. But, you know, we can't do that. I mean, in Europe, it's difficult. And also, we got great people. You know, we are amazing people. I think we got an incredible lineup of, you know, very, very able, you know, professionals. And so, you know, but there just are a few things that we'd love to, you know, to change, right? We want to have more feedback into the system. We want to move a bit faster. We want to have a bit less fear. We want to do these kind of things.

56:25Shane Parrish:But that was, I mean, it was probably, it wasn't working as well before you as now maybe. but it's sort of like that's working when you think about yeah i mean it was working well i

56:38Nicolai Tangen:mean it was a great company was not nothing wrong with the company i mean really good i mean just had a fantastic performance right but i just thought it needed some tweaks yeah i mean technologically it was top-notch compliance-wise top-notch a lot of really really good things It's the envy of the world now. Well, it's a good company.

57:01Shane Parrish:You've taken, I mean, just in the sense of the Sovereign Wealth Fund too, right? You've taken these reserves that you have and you've turned them into perpetual wealth, not only for all your citizens, but global influence and a toll bridge on the world economy. I mean, I think that's amazing.

57:18Nicolai Tangen:Well, so I would say that's really to the credit of the politicians. you know the politicians decided when they found oil and back in 69 i mean they decided after they found all that listen we should put this into a fund and so in 96 they set it up first deposit was you know relatively small and now it's grown a lot right but the politicians were really foresighted and uh and they've been good ever since to be true to the principles what are you trying to learn right now lots of things i I just feel I know so little. And, you know, I'm just looking at the podcasts I'm doing over the next few months and I'm learning about all these kind of things.

58:03Nicolai Tangen:And I needed to learn them anyway. But that kind of makes it urgent. I really need, you know, by next week, I need to know more about networks. I need to read up on crypto. I need to read up on IMF. I need to...

58:33Nicolai Tangen:Oh my, there is just so much I need to learn. It's incredible. You guys don't invest in... No, we don't, but I'm talking to somebody who's in that space.

58:40Shane Parrish:In crypto at all.

58:41Nicolai Tangen:Yeah, and I just don't understand. I don't understand it, so I need to learn.

58:45Shane Parrish:Is it that you don't invest in the coins themselves, or you sort of like a Bitcoin or you don't invest in the exchanges like Coinbase or something?

58:54Nicolai Tangen:Well, we have some ownership stakes in some of the infrastructure because it's in the index and we are, you know, so we would own it in a bit more of a passive way. How much do you work? I work all the time. But it's not work. It's life.

59:16Shane Parrish:It's like Jensen. Is it like Jensen, you wake up at five and you're like, go, go, go until nine. And then, you know, for him, it doesn't feel like work. It's just...

59:24Nicolai Tangen:I mean, that's what he told me. And I kind of, I mean, he works a lot more than me because he works every holiday and every Saturday and every Sunday and all the time. But, you know, I tend to wake up at five and then I read papers and try to understand what's going on in the world. And then I start to shoot mails. and you know I have a notepad at the side of my bed because if I wake up in the middle of the night I typically have some ideas and if you don't get them down on a piece of paper you're going to forget them right so I do that and then I work at meetings and I read in the evenings and you know check out the papers from the next day but it's not work you know it's just like it's life

1:00:13Shane Parrish:so many people michael ovitz gave me this phrase but it's like so many people fight their job um and so that it's more of like a transaction than an integration between work and life strikes me that having the view that you have towards work is much healthier and yeah but not

1:00:30Nicolai Tangen:all people i mean hey it's not like everybody have the opportunity to work with what they love and you know not everybody is that fortunate but i've been really fortunate in that i've ended up with the things I just cannot think of anything more interesting in the world.

1:00:43Shane Parrish:Who do you go to for advice?

1:00:45Nicolai Tangen:I go to lots of people. I speak with as many people as I can. The funny thing, when you ask people for advice, what do they think about you afterwards? Do you think they think that you are more clever or less clever?

1:01:01Shane Parrish:More.

1:01:01Nicolai Tangen:More clever. Because you must be very clever who asks me for advice. He must be really clever. He understands how clever I am.

1:01:08Shane Parrish:and therefore he wants to have my opinion what surprised you the most this year everything that goes on and geopolitically you didn't see it coming or it just continues to like push the limits of what you thought was possible yeah yeah but that's makes life interesting to live you know

1:01:28Nicolai Tangen:you can be you can do one or two if you don't like what's going on you can be really depressed about it or you can put on your student hat and just think oh my my i can't believe i'm alive to see these things you know it's so interesting and i think it is like super interesting and technology you know so the thing is that everything is coming together at the same time you know the technology development now is just like totally totally phenomenal what a time to be alive i wake up

1:01:52Shane Parrish:every day it's the best yeah and i remember it wasn't it was only a couple weeks ago where um ai actually made the first sort of um bio advance that humans hadn't made it's on cancer research and they tested the hypotheses and it was true. And it was like, this is like Neil Armstrong stepping on the moon. This is incredible. This is the first stage of the first real thing. I thought that was amazing. I was so excited about that. We always end with the same question, which is what is success for you?

1:02:29Nicolai Tangen:Success is to make an impact in other people's life in a positive manner. That's a great answer.

1:02:34Shane Parrish:Thank you for taking the time today. I really appreciate it. Thank you.