Ex- Citadel Analyst and Millennium PM: What It’s Like Inside Both Hedge Funds

classic quote is, you know, you're only

as good as your last trade to start from

zero every January one. Obviously, if

you go to one of the top five Ivy

Leagues, you could be recruited right

into the buy side or a top hedge fund. I

wasn't in that camp. So, there's a lot

of ways to get there, but at the end of

the day, the most important thing is

grit and curiosity over pedigree. My

guest this week has seen the highest

levels of finance from two titans of the

hedge fund industry. This is Doug

Garber, the CIO and managing partner at

Westport Alpha Group. Formerly, he was

an analyst at Citadel and a senior

portfolio manager at Millennium.

>> Citadel was there a lot longer. They've

learned a lot of things over the years

and there's a lot more structure,

whereas Millennium is less homogeneous.

There's a lot of different strategies.

>> What traits have you seen where you can

really tell, okay, this guy's going to

be a great analyst? The great traits are

Doug. Thanks so much for doing this.

>> My pleasure to be here. Thanks for

inviting me.

>> Of course. Of course. What makes a great

fundamental investment process?

>> A great um investment process is domain

knowledge. You need to have a deep

knowledge of the companies and the

industries that you're invested in. You

need to understand the businesses, how

the businesses operate so that you could

understand what are the drivers of the

business when there's a variant view and

when management when the industry is

changing or when management might be

overplaying their hand or underplaying

it. So it starts with just a deep

understanding of the underlying business

before you start to get into what the

stock is worth.

100%. Um I mean it makes a lot of sense.

I

you know your background is very unique

in that you went from the cell side

before you joined these large

multi-managers namely Citadel and

Millennium. And one of the things that I

find very interesting about being at

these shops, or at least from what I

hear about being at these shops and

running a pod in your case, is I feel

like the mind

the the way your mind is wired to run a

pod is very different from just simply

uh picking and buying and holding

companies. I feel like you have to think

about your exposures, think a lot about

outperformance.

But one of the things the thing the main

thing you mentioned when I asked the

question what makes a great fundamental

investment process is understanding the

company understanding the industries and

understanding those things very very

deeply and so I'd love to hear it from

you

>> well how does yeah go on go

>> I would say the common theme is research

and if you ever talk to Ken Griffin or

if you've heard him on these recent

podcasts he says You know a research

shop first and foremost trading is just

how we implement it. You know I spent 10

years doing sellside research in the

domain. So then going over using that

base knowledge then when you move over

to Citadel I used then right how do I

shape that knowledge you're 90% of the

way there into a bet into a variant

view. And that's what my first PM taught

me and he came from um SACE at the time

or 72 and he's like all right now let's

place a bet. you have all this great

knowledge. My edge is you because you've

been studying this industry for so long.

And I actually learning on the sell

side, it's great because you're learning

the knowledge that you're going to need.

Um,

and it's the same knowledge you'll need

on the buy side. You're doing quarters,

you know, the management team, and it's

it's actually pretty common. A lot of

the people that I ended up working with

um came from the sell side. And what

happened is the long short uh businesses

keep getting bigger and we're so big

they've picked out all of the sellside

juniors that have been there. It's kind

of like a you know you work for on the

sell side for two three years you get

picked up and now they're starting to

recruit out of colleges and you know 72

used to go right from banking. Um so

that skill set of the deep research um

is very transferable

um into the buy side uh from the sell

side and then the other place people go

is obviously you know people put in

their banking you do you do investment

banking for a couple years you learn

some model you're kind of you know what

I call good athletes so they pick those

up pick up those people and and mold

them a little bit um and now they train

them you know right out of schools. So

they're like so you don't have you have

fewer bad habits. Um and you're the more

time you could be trained by other teams

and other mentors and being around that

you'll learn from. um you know it's a

lot of

lessons that are passed down um in the

hallways at the water cooler and lunch

um because a lot of it is applicable

even though you have deep domain

knowledge and I couldn't go trade a

healthcare stock but some of the things

that the setups way um positioning is

there are certain things that are very

that are common across all of them that

it's actually you know you share with

them even though the guy next to you is

doing, you know, maybe maybe healthcare

or another another sector that I knew

absolutely nothing about, but um

it's it's sort of the same the same

game.

>> And so do you think that I mean you

maybe you're biased, but do you think

that the sell side is the best place to

learn before entering one of these long

short shops? I'd love to hear your

thoughts.

>> Well, I am biased because I started

there. Um,

>> yeah, I mean

>> I think that that's the best for me. So,

yes, I'm biased. That's important to

know. Um, you know, obviously if you go

to one of the top, you know, five Ivy

Leagues or whatever, you could be

recruited right into uh the buy side or

a top hedge fund. Um, I wasn't in that

camp. Um, so there's a lot of ways to

get there, but at the end of the day,

the most important thing is grit and

curiosity

over

kind of pedigree. Um, I know, you know,

there still is some pedigree, especially

in the long only space. Um, and now even

some of the top hedge funds, they're

like, well, we want the grit, the

curiosity, and the ped we want, we want

it all. Um, and you know, the top people

can do that, but there's a lot of ways

to to prove yourself and and to get the

knowledge. Um, I think one of the the

funny quotes was like in the in one of

the NBA programs, it was some one of the

professors said, well, you know, if you

were good, you wouldn't be here in the

NBA. You would have already figured it

out at, you know, 22, 23. You'd be

training yourself. You would have had a

passion for it, and, you know, you would

have found it, right? I mean, there's

the stories about, you know, Steve Cohen

watching the ticker tape in the rain

outside of the brokerage houses, right?

That's what he loved to do. Um, so if

you have the passion and the curiosity,

um, there's a lot of ways to

to get to the buy side. Um, and and

that's what they're looking for is the

unique people. The the drive, I think,

is most important.

>> No, for sure. Uh, I guess I guess that

that life lesson applies to everything

to to anything. And um you know one of

the things I am very curious about these

these large shops is the way that the

way they so you think I think take a

shop like Millennium um the pod

structure separating people um you know

separating all these exceptional people

do you think that I mean I know that

that the there's philosophy is that

you're able to you know get all everyone

is think somewhat independently and you

can risk manage on top of that. Um, and

and I'm curious about that. Do you think

that that sort of structure, competition

maybe between the pods, do you think

that that makes these exceptional people

that that you're talking about, people

with drive, do you think that that puts

them in in an environment where they can

they can truly thrive and generate

exceptional exceptional ideas? I'd love

to hear it from your perspective having

having worked there.

>> Well, two different places, two

different cultures, right? I was at

Millennium and I was at Citadel and

they're they're somewhat different even

though they're from the outside they're

both top

top hedge funds and pod shops with you

know multistrats. Um

you know Millennium

they're they're decentralized. They um

they want each team to be independent

and they want uncorrelated returns. They

want your P&L or alpha stream to be

uncorrelated from what they already

have. Right? They might they'd rather

they probably rather take a second team

in a sector, not necessarily based on

the highest P&L, but if it's

uncorrelated and it's additive to their

overall, right? Because they're trying

to produce P&L every month and they that

reduces their overall risk um by having

uncorrelated streams and there's not a

lot of sharing of information. Your your

pod is essentially isolated. I mean you

obviously you can you're in the same

building. You have the same you know LPs

and you share me into conferences. Um

but you're in it's your team it's your

business. It's kind of they're just your

investor right they're they're

Millennium is essentially a fund of

funds and bringing in top talent and and

seeding them and they're you know

they're trying to get different

strategies that are uncorrelated with

great people and they're they they want

you to be entrepreneurial and do what

you've been doing. So they're not taking

risk of, oh, you're a good athlete,

let's go have you do a different sport.

They want you to do the same exact thing

you were doing, but then grow the

business how you want to grow it. So

they're very much like as a PM, you're

you run your own business there, and

they're giving you all the backend

support, all the capital. You're in

charge of hiring. I mean, they give you

some support and some help there, but

recruiting and hiring is the most

important thing. Um and then you know on

the tradein side they obviously have

world-class systems to help you from

there so you can focus on idea

generation and portfolio construction

and you know mentoring your team and

risk management. So it's a little bit of

a philosophy there where I don't know

how many equity teams there are there

might be like 200 or something and you

know they have different strategies. You

don't necessarily even know people that

are in stat orb or commodities or macro.

Um those are different different right

um now at Citadel. So also Millennium

you don't certainly know how the other

teams are doing. There's no way for me

to know you know you I get the same

information everyone else does about how

the how the fund's doing um from

Bloomberg. Um I mean I'm sure if I ask

management they'll tell me it's not

really that relevant. The fund is so big

and robust. Um you know there's not

really netting risk at the PM level.

It's a great thing to have that. Um,

Citadel is structured a little

differently. Um, they have currently

three equity platforms or maybe a fourth

internationally. So, it's obviously

global equities, uh, surveyor which is

where I worked, Ashler and then um

there's some another international um

division. So, now within each one of

those

there's kind of a separate business ed

and those are run individually. Now that

there's also macro and energy and other

strategies there, but

there's a little bit more camaraderie um

between when you're in one of those

divisions, you might you're more

friendly with the people you're sharing

meetings in those

um the the the few other sectors and the

people just because

it's kind of like a little group. You're

sharing all the meetings. If you're at a

conference at Millennium, it'll be 10

people, 10 different people with all

some half of them with different names,

a couple with the Millennium name, all

sharing a meeting. You know, if you're a

different thing, if you're paying the

street together, that's what happens at

Citadel. It's kind of broken into three

different groups right now. And no, so

and you also share information. You

might share notes. You might talk to

them in the hall. You're on the same

floor. So, there's a little bit more

communication within your that up to

your PM. from your team like, "Nope,

we're not talking to anyone. Our ideas,

that's it." And it just depends on the

culture also of of that the whoever's

running that division. They might say,

"Let's be collaborative." You know, you

might want your tech guy talking to your

energy guy or talking to your industrial

guy, your consumer guy. They might want

that culture and that's up to the head

of that division, but I found it to be a

little bit more collaborative uh within

there. Now, there's only probably 20 30

teams

per division roughly. Um and there it is

much more competitive. Um you you know

how people are doing on a daily basis

and

you know it's the same as in you know

baseball where you know you see the

standins and the thought is these are

competitive people they want to see it

they want to do better. So let's let's

um you know

you have when you have competitive

people they want to win so you might as

well show them where they are on the

standards and that's going to motivate

them. And it works right. It's just that

the the sort of people you you screen

for um and there are analogies, you

know, to sports, baseball, football, um

throughout, you know, throughout the

culture. Um just, you know, it's the

same sort of thing where

you want you want who's on the field,

are you a starter? Do you want to win?

And um yeah.

>> Which culture did you prefer? I mean,

we're having worked at both places.

Which one did you enjoy more?

Well, I I they're both phenomenal places

to work. Um, and you're lucky to be in

either one. They've both got an

outstanding reputation. They got

everything we need from capital to trade

in to some help hiring. Um, you know,

Citadel, I was trained there. I was

there a lot longer. um they're much more

they've learned a lot of things over the

years and those things are passed down

and there's a lot more tools and

processes and you know tight tighter

risk controls um and there's a lot more

structure,

right? There's there's a lot more guard

rails and structure and we we've learned

what works and this is what we want to

do and it's a little bit more of a

unique system that you kind of have to

be brought up in, right? Um whereas

Millennium is

um less homogeneous. There's a lot of

different strategies

there. I mean still has different

strategies too, but at Millennium it's

more here's your capital, good luck.

Um and

you know, you have your strategy, your

processes that you implement that you

came with that you know, that you

understand. And for me, that was the

things that I learned at, you know, over

my time on the sales side and at Citadel

and your processes and those things that

you're you're always improving them,

right? You have a process, you're

learning, you're doing postmortems, your

feedback, and you're always trying to

improve and learn from your mistakes.

So, I think

Millennium um they're a little bit more

entrepreneurial, like you can kind of

go, you know, go in your own direction.

Obviously, there's management you're

talking to and you've kind of already

agreed on what box and what are the

parameters.

Um

but they they're both phenomenal places.

Um, it's just what are you used to? And

I would say there's a little bit there

probably a few more rules or

more particular things that how to

learn, know what work.

Um, at Citadel and Millennium, it's we

trust that you know what works and go

for it. Um, and it's your business. You

go grow it and you're the entrepreneur.

Whereas still it's more

this is what works and you're brought up

in that.

>> No. Fascinating.

>> And this is mine in the equity here. A

lot of different people are going to

have different experiences based on who

their PM is, who their sector head is.

Um so you could have different people

um having very different experiences at

different shops. And the truth is the

people go back and forth. Um and you

know when I when I went started at

Millennium they the um you go for all

the hires and rehires and actually when

I left Millennium

um Citadel was trying to get me to come

back. So you always want to be friendly

to both places. is I mean it also kind

of just depends

um what they're looking for to given

what what what positions are open what

teams they're trying to build

and

um yeah so yeah what the and

the timing of that

um you know Citadel is more about they

want to build robust teams right they

want to and you know they're going to

know the analyst, they're going to know

the PM, the associate, the senior

associate. Whereas at Millennium, they

have a relationship with the PM, then

the PM's in charge of there's not as

much

monitoring. I mean, there's some they

they definitely implemented things over

the years. Um, but they're buying their

businesses with the PM. Um, whereas

there's there might be multiple at there

might be relationships

and that's true at both places. Yes.

>> Yeah. I was I was listening to a podcast

um I think it was Jeppi Palo and he was

talking about the differences between

the shops and I like the metaphor he he

used he used he likens citadel more to

to more like a Singapore some something

centralized something that's run very

efficiently but a lot of you know

government inter intervention um and

then you liken Millennium to like the US

I mean you have all these different

states all with their own rules and

regulations but both systems work and

both work in in you in in delivering

growth and prosperity. I

>> I I guess one of the things I want to

transition more towards um you know I I

just want to talk a little bit more

about is the way risk is is managed at

these top multi-managers and I think we

were talking a little bit about this um

you know before the call before we

started the podcast but I guess I'd love

to hear from you um what are the ways

that risk is managed for these for these

you know two respective Titans, what was

what was it like

>> risk? Um there's definitely a

quantitative focus

um in terms of I would call it quant

overlay. I mean fundamentally

you are investing you know you're doing

your work but then you want to also you

know if you add up all these stocks that

you have in your portfolio these 8000

stocks you might your biggest position

might be you know five 6% on a

um GMV basis but if all these positions

have a 1% you know factor exposure you

want to be aware of that you don't want

to have a 15% bet on a factor that

you're not even trying to make a bet on.

So you want to be aware of that. Um so

you want to have the quant overlay um

there and you know you grow up in the

school model there's a lot of focus on

the risk models and what are the factors

and you know you're typically held to

it's pretty well known in the industry

you're typically held to an idio um

which is the amount of risk um that

you're allowed to take that is not alpha

right you're trying to target the alpha

which is the residual what's left over

after the factors obviously you know

you're not going to not 100% idio which

means everything is alpha. So you're

going to have some exposure to these

factors but they want the majority of

what you're doing 80 85% of what you're

doing to be focused on the alpha. But

you know if you have 15% or so risk and

and the target the the the bottom number

it changes what you know maybe it's 80

maybe it's 83 maybe it's 10 just the

model changes right the the the model

will change based on which factors

you're putting in um and so it's not a

simple number and you are held to a

number um but there's also ways to hedge

that you could you know you can also put

in uh quant quantitative factors and

limit factors that all they do is hedge

your risk um to do that. They also you

have ways to look at your stocks to know

I mean my second PM at Citadel his I I

think his job every day was to come and

say how do I get my idio higher he

wasn't looking for how do I size up a

name he was a super he ran the highest

idio there he was you know really good

at managing risk and that was from an

earlier experience that he had like

early in his job career went to the buy

side and the PM blew up on like a super

concentrated like dry bulk trade in like

two months he had to go back to his wife

and be like oh man go back to the sell

slide and then he came back. So super

riskadverse and he ran the highest idio

but that was his job as the PM like a PM

you could be a great recruiter, you

could be a great stock picker, you could

be a great risk manager. Um it's a

different job than being an analyst and

he would yeah literally like they would

tell you if you it might be your highest

conviction idea but if you trim this

there add to this it'll help your idio

the most. Um so they had a lot of great

tools to do that. Um, so you are looking

at your IDO on a daily basis to try to

know where it is because you're held

accountable to maintain a certain level.

Now you got to balance that with your

analyst convictions and catalysts and

you know price targets and all that. Um

so there's definitely a quant overlay

there and the more this more senior you

get when you start running capital you

start to be aware of it and then when

you start you know analysts a lot of

analysts there run money and then you

get to be a PM you're you know you're

aware of not only your risk everyone

else's risk the combined risk um so you

know when I was there I would look at

four different risks I had you know the

risk of all of the energy and industrial

book the the risk of my um energy and

industrial book and then the risk of

like the combined because there's a

center book on top of it energy and

industrial that I ended up running and

so I was running four different books

there and you can look at any different

combination of the risk. So um and the

risk is essentially just what is your um

your quant what is your idio uh how much

of your bet is alpha which is what

you're focused on and the higher the

better right if you could be 90% alpha

10% factors that we have no skill in

betting on I'm not in the business of

making a trade on short-term mo

long-term mo value short interest quant

do that that's not my skill set so I

want to focus on the fundamental stuff

the stuff that quants can't explain. Um,

and then you know you go to Millennium

there's

like you define where where

you expect to operate in terms of the

risk parameters. Um, and and this it

goes from everything from you know

market risk to obviously currency risk.

There's then the um quantitative factor

called style risk that we were just

talking about and then there's industry

risk and there's a little bit of a

debate about industry risk and if that's

a skill or not and you know do analysts

have

that skill set or is that considered

something they can't forecast? Then you

get into the Gixs code and you can start

debating about well why you know why is

this classified like this? It should be

classified like this. So you can get

into debates with kind of the risk team

on that because it might be thrown off

your risk metrics. Um other times people

had overrides in the risk model from

other sectors. There's one risk model.

Um so you got to just it's making you

aware of what bets are in your book. You

obviously know that you like this name

and you have a 5% position or 3%

position because you like it this much.

You expect this to happen. You want to

be aware of these other bets in the

market that are in your book that you're

not trying to make a bet on. Um or other

exposures. Do you have currency

exposure? Are you trading in in Europe

or Canada? Do you have sector exposure

that you don't actually want? Because

there's other people trade in those bets

that can impact you um that you want to

be be aware of. And at Millennium, you

know, it's not there's not like a strict

idio

um floor. And again, the risk models are

different. I don't think people realize

uh when you start talking about idio

that it depends which factors you put in

there and then the f the models can get

updated. Are you doing it are you doing

a sector model? Are you doing an a full

um US model? Are you running a European

model like and so yeah I mean I would

try and run you know market neutral. I

wasn't taking um can easily hedge out

the uh the beta the S&P that's an easy

one currency. rarely was I trade a

little bit in other markets. Um a little

Canada, a little Europe, but I wasn't

taking a lot of currency risk. Um

industry bet

Millennium, it's more they're just kind

of looking at the stats. Now they are in

the last few years, they are starting to

dig in. They have another layer of

management to dig into all the teams and

understand what what's going on behind

the P&L. So they they've kind of they

get in more similar. They're adding a

lot of the same functions. you know,

they're both great places, right? It's

just

uh slightly different. Um, you know,

there's some people who say,

well,

there there are others in the industry

who would say, you know, if you're sales

is great for an analyst, Millennium is

great for a PM, but I think it's all

situational and timing. I mean, I think

the most important thing is is hiring.

Um, and also

when you move, you have a lot of

goodwill you're leaving behind. You

don't get to keep that goodwill of your

previous track record. You're starting

from zero. Although I think that you

know the classic quote is, you know,

you're only as good as your last trade.

You're start from zero every January

one.

We used to kind of say this every

quarter like all right the scoreboard's

zero. Like doesn't matter if you're up

on the year or down on the year the

score is zero going into the quarter.

Let's try and make our you know a few

percent on gross every quarter. And that

was that was the strategy.

when more traditional people who I guess

people who came from funds that didn't

look at Idio it was kind of just select

your names and and buy and hold them

let's say long only when those types of

PMs would get recruited by Millennium

and Citadel how would they deal with

having to think in idio terms all the

time because I imagine it's a bit

difficult to explain to someone let's

say he's very much long Nvidia while

Nvidia is shooting up uh and you're but

you know the risk managers are like oh

but you know make it such that the bet

is only on the idio of Nvidia and not on

the momentum factor for example or or or

tech or how would you know how would how

do you how did these firms train their

managers to be able to think in those

terms?

So,

two different

um firms, right? Um at Citadel, you're

held to an idio. You have to run that

way.

And there's definitely great people who

have come in and been and they their

changing their style and their risk

parameters and it's just harder to make

it work even though they're super

talented. Um you know, I grew up in that

system. So, you're not going to it's a

risk when you bring in outside talent

and you know, they obviously have

internal talent and outside talent. Um

I'm not sure how many long only PMs

they've brought in. It tends to be more

long short. Um

you know if they're great people I'm

sure they have brought in long onies and

and tried to train them. You know that's

you know the the sector the head of the

division or the QR team they're going to

work with them but it's a process and

they're probably going to be frustrated.

My first PM came from SACE or 72 and

then came in and he ran the lowest

video. He hated the thing. We were

trying never to open it. He was just

trying to run money and he was always at

the bottom getting reminders um and ran

high volence and I'm just going to I

don't care about this. I'm just going to

run stocks and and that was between him

and the head of the divi the head of the

division. Um

so yeah, he was always frustrated.

didn't he didn't embrace it cuz he came

from the outside

and

you know I think everyone at this point

not everyone but a lot of the other

shops you really have to be factor aware

I think that's you don't necessarily

have to be held to it and make trades

just to appease

the factor model I mean there are times

where you will when you're held to it

right um but you don't even the other

shops now across multistrat you really

have to be um factor aware at a minimum

and you know I'm not I haven't been at

BAM or P7 but I'm I'm pretty sure

there's it's embedded in the culture at

this point as well and they've also you

know at one point P7 was going you know

they were more risktakers going for

bigger bets and then they've kind of

said oh we want less V more you know

tighter tighter constraints so they've I

think they've kind of conformed to

I would call it the sit of of kind of

lower lower volatility is what the

industry has kind of wanted.

Um,

so to me, tricky, you know, millennium,

they when they hire people, they

they have their constraints, but they're

not holding you to a risk model, but

they want you to do exactly what you

were doing before. So, they're not

saying, "Hey, you were doing X. We're

going to come in, have you do that, but

we're going to put a different rapper on

you. You're doing the same thing. We're

trying to empower you." Um so you know

you've also seen people citadel try to

start hiring earlier on and train people

so you grow up in that system. Um it's

one less risk and and it's something I'm

sure they weigh when they are hiring

from the outside verse promoting from

the inside and they like to do both like

you know it's organic and inorganic

growth like any sort of sort of

business. Um but there's less risk when

you promote from within than hire

externally because you don't know

uh it's more of a unique

uh operating environment and

trying to change a talented person has a

risk that

can be fine if they're super talented

and committed or might

not work or just

>> in in your experience hiring as a

portfolio manager, what has made the

difference or what have what traits have

you seen that where you can really tell,

okay, this guy's going to be a great

analyst? What what are those traits?

So, I the great traits are

drive.

You have to be committed to go above and

beyond and hustle.

You have to be curious and a selfarter

to go figure out what you need to go

learn and go get that information. Um,

and you have to be willing to learn. You

have to know what you don't know, which

is always humbling

because there's always more we don't

know. And then you want to have a

an even keel because

when you get one right, you feel great.

When you get one wrong,

you feel not great. And you want to make

a logical, rational decision and be able

to look at the evidence and

not make an emotional decision. Um, you

want to say, "Did this move for a

reason? What's the evidence?"

And that gets hard when you're managing

the risk and you have real P&L and um I

think the quote was, you know, Joel

Greenblat said, you know, they're rent

in my stomach. That's that's what it is.

Um and you don't know, they could be the

brightest person in the world, but once

they're managing risk, how are they

going to react,

right? Are they going to get are they

going to have something go against them

and say, "Oh, I lost money. I'm out." Or

are they going to say, "Well, it went

against me, but for the wrong reason.

then my thesis is still there and we

should buy more.

So that you have to kind of do the work

in advance and have your signpost and

your evidence. This is why it's

important to do the work. You just get a

tip from someone, you're going to have a

position, but you're not going to know

when to double down, when to exit. Um,

so it's always important to kind of have

your thesis and write the signpost out

ahead of time. Um, and then I think the

other thing is you need to have an

attitude of your only job is to make

your boss's life easier because they

have a lot more weight on their

shoulder. They're managing the risk.

They're

they have a lot more positions and and a

lot more on their shoulders. So you have

to have that mentality that I'm just and

the best way to do that is to give them

good ideas with logic behind it and that

they they can trust that you've done all

the work and having cut taken shortcuts.

Um, so it's, you know, it's about

process, um, and accountability.

And, you know, there's this big debate

when you hire people. Do you hire for

domain knowledge,

which is what I had and what I typically

started with, or do you hire someone

who's a great athlete, might take longer

to ramp, but can continue to grow with

the business or can adapt?

Um, and you know, when I I started with,

you know, domain knowledge because you

also have to there's a little bit of

pressure when you when you launch to get

up and going relatively quickly. Um, now

I think I was actually on I've done I've

been on four different teams and one

team I inherited a book and we grew it

and the other three we you know I we

started and ramp started from zero. So

you do a bunch of launches you're going

to be on a few different teams. Um, so

it's domain knowledge or the athlete and

some of the people who had a lot longer

uh careers, you know, they hired

people that were

more junior, more moldable, they were

with them longer, too. You hire a more

senior person, you know, then they're

just going to people are always moving

around. Retention's it's a tricky thing

in this business. So that's always the

debate to athlete or domain knowledge.

And um

I don't know that there's a right

answer. Um I definitely have noticed

a couple examples call it N12 and three

where perhaps going with the um

you know the athlete who will learn is

the better long-term decision. Um

but you also have me telling you that

domain knowledge was my edge that I knew

the industry, I knew the companies. Um

and that's just pattern recognition. Um

and through cycles how these how they're

what's next. And I think the other

important thing is just you have to know

the industries and the companies really

well. We always give companies benefit

of the doubt that they know more because

they're on the inside and they are on

the inside. We're we're in the cheap

seats as analysts. Um

but there are times when

you know they're always going to

forecast a rosy situation. that's

probably why they're the CEO or

whatever, we could kind of see clouds on

the horizon or we can be a little bit

more intellectually honest. And you

know, when you have that variant view

where you're seeing something that the

management's not or you see something

that's likely going to happen, um that's

when you kind of know you have a good

good variant view.

If you're an analyst and you're not

happy with the decisions your PM's

making, knowing fully well that that

that your job is not to tell your PM

what to do. What should one do in those

situations?

>> Yeah, the analyst PM relationship is

communication is super important and you

got to develop trust and credibility

with your PM. Um because PMs have a lot

on their plate and they're essentially

starve for new ideas, right? your newest

idea is quasi your best idea is kind of

the saying and there's a lot of turnover

um and they need to be able to trust

you. So if you make a mistake, um you

got to say, "Hey, I'm wrong. Let's move

on. Here's why." And there's always

there's always this um

kind of training or not this

this friction, right, where the PMs

maybe it also depends. Are you trading

the sector that the knows the best or

you train a sector the PM doesn't know

and they're relying on it? How senior

are you? Um, but I've always found that

there's always this trick where the

analyst is

has a recommendation or that, you know,

they're saying this and the PM doesn't

listen and, you know, the analyst is

right. And then, you know, usually you

need kind of one of those to happen

before the PM's like, "All right, I'm

just going to listen to you." Car plot,

but it kind of takes six months of you

proven, hey, I've done the work. I'm in

the model. They ask you questions. You

know, the numbers off the top of your

head. I just spoke to management. Uh,

I've, you know, my you gota at least

prove credibility on the numbers. That's

your job is to get the model and the

numbers right. The setup's a little

trickier. Um, PM is gonna want to have a

say on that. The size in, you know,

um, that's going to be something you do

together. If if you both love it, how

much room do you have in the book for

your high conviction idea? All right,

remind me. Um, before earnings or before

the catalyst or you're starting to talk

about an idea, the PM likes it. He

starts to put in, you're like, well, I

wasn't done with my work yet. But he's

starting to he kind of liked it and he

was buying it a little early to so you

got to communicate every day. Um the

communication when I started my boss

gave me a he wrote communication

communication communication in all caps

the most important thing. So it's your

job as the analyst to communicate what

you want to do and why. It's like oh I

told my PM this no you told him once and

I am no you told him in your weekly. You

told him in your IM. You called him

twice a day. he kept showing him more

evidence and you should be

evidence-based. In the beginning, no one

cares about your opinion. They care

about your evidence.

Um, so ga gather the evidence, put it

into the process, and then after a

while, people will ultimately care about

your opinion. But support it. Show show

the evidence of why you believe that or

what you uncovered from

whether it was a management call, an

expert network call, a customer call,

whatever, however you're building your

mosaic and why you believe what you

believe. If you show your PM your

evidence

and you need to kind of do it over and

over again that they have so many small

pieces coming in and out, you can't be

like, "Oh, I told you to buy that. I I

you know, I sent you an IM a week ago.

You didn't buy it." No. every every

morning you tell them

what the new news is, what it means.

It's not always going to be good for

your thesis or bad. Um, but you're

collecting evidence and you're

organizing it to make their life easier.

So, they know that the 30 names that

you're responsible for in the book that

you know everything

that is possible to know out there.

That's how you gain the trust that

they're not learning something new from

they're reading a sellside note and

they're learning something new. They're

like, "How come they're learning this

before you?" you need to you need to be

on it because sales siders are spending

a lot of their time marketing. Your only

job is to do research and you have every

resource available to you. Um and you

got to wake up and think about how do I

go down this rabbit hole and dig into

this customer relationship or this

contract or this dynamic to figure out

what the debate is and how do I have a

view on it. Um that's see yeah I just

showing the evidence is important and to

get the credibility and saying when you

don't know it's different because when

you're on the sell side it's you're

supposed to have conviction whether you

know or not right not a lot of people

and then I have to learn that because

you know you need to

you need to say I don't know but you

know I'm going to spend that's my number

one priority. I'm going to you know get

on the expert calls. I'm going to go fly

to management next week. Whatever. I'm

going to I updated my model. I've done

these scenarios. You know, I've read the

K. I know where whatever it is. You need

to that's all table stakes, right? Um so

you just got to prove that you're

you're you've checked every box and

turned over every rock that you're not

going to be right all the time. That's

the hard thing, right? is I think

Griffin was saying you know an analyst

his best people have a 54% hit rate that

means you're wrong a lot and you still

got to get up and go again so it's kind

of it's about resilience right so yes

intellectual being intellectually honest

and you got to click with your PM and

some they're stressed they're yelling I

mean some of the it's different

personality sometimes they'll chew you

out um that wasn't really my personality

But you just got to uh I've seen it.

I've heard it. I'm like, "Wow, that's a

lot of yelling." Um that it sometimes it

works, right? People,

they know no one's going to yell at. So,

you're going to make sure you get your

your numbers right and Right. So,

I've noticed it works sometimes. Um I

wish I had that in me to kind of yell

people in a mouse. It's not my style. Um

so yeah.

Now the the thing you mentioned of

yelling I find that very interesting uh

because

I mean this is on a personal note but I

had this realization for talking to my

mom before leaving for my masters that

when my parents would get angry at me

they wouldn't act always actually feel

angry they just needed to correct

certain behaviors and I imagine that it

might even be similar for a case like

this where maybe you know someone's

running a pod and one of his analysts

mess messes up big time. You know, if he

yells at him, maybe he doesn't actually

feel the emotion, but perhaps he's just

trying to get the memo sent over to the

analyst that this is not how you should

behave. This is not what you should be

doing. You shouldn't make these errors.

And and and I found that extremely

interesting. Now I guess related to that

that intellectual laziness in that

situation right now go on there could be

there are a lot of situ you're going to

be wrong even if you've done all the

work you don't know what's going to

happen you're wrong you can still be

wrong you don't know what the numbers

are or what management's going to say or

what the stock's going to do even if you

knew that so sometimes it's just the way

the the PM's vent it you just have to

yell and get it out and they're not

yelling at you they're just mad at this

you know so don't take it personally

and just let it vent and then say, "All

right, here's our evidence. Come

grounded. Here's our evidence. This is

what we learned. This is what we're

doing." And I had one PM who would just,

he wasn't yelling at me. He was just

yelling to to get it out of his system

because he was mad that this went

against us and we're still in us. We're

still a team. You're still the adviser.

All right. Now, what do you want to do?

So, I I found that he was yelling more

at the frustration, not necessarily at

at MIT.

>> And but I've worked for great people. I

was lucky. Um, but you know, when I just

started at one one of these places, I

you know, around the corner, I'm like,

this I heard all this yelling. I'm like,

there's things being thrown. This is

this what is going on? And I'm like,

should I say something? And then I'm

like, you know, I found out like six

months later, this is like the number

one guy who's like putting up a P&L for

a couple years, like really high up guy.

And I'm like, I think I didn't say

anything. It was like, so, but I think

it's it's probably calmed down, you

know, over the years. I think it kind of

gets

um a little bit more mellow and

professional, a little less locker

roomy, but I'm not I'm not on those

floors anymore.

Um and yeah, those more those are more

the one-offs, I would say. They're

entertaining enough because there's a

lot of emotion, right? There's high

stakes, people are emotional, and

um I've seen it both ways. people are

yelling to get out of the system or

they're yelling sometimes at people or

um so

>> fascinating

after those years work go on

>> thing is always you know this job's hard

enough you don't need to work for a uh

an explicative

>> yeah

for sure for sure

you worked at Millennium at Citadel um

anal yeah analyst at at Citadel then

portfolio manager Millennium Yeah. What

are you doing now? Why didn't you take

that job at Citadel? You know, you

mentioned there like they offered you a

job. I think there are many people who,

you know, you get to run a book at

Citadel. Like 100% sign me up.

>> Yeah. Why' you say no? What do you do

now?

>> Um, so what I do now, I do a bunch of

different things. I have a podcast,

Pitch the PM. Um, I have my own little

Westport Alpha Group where we do a bunch

of, you know, smaller deals, uh, more

family office style stuff. Um, SPVS

and,

you know, I also have three kids, so

that takes up a lot of my time. When

you're working, you bought, you know,

it's a you're a weekend parent at best.

You're working Sundays, you're doing,

you know, your mind, even if you're

home, your mind's always there. Um, so

it's a little bit more balance, uh,

change of values.

um you know when I was climbing the

ladder I you know everything was I'm

climbing this I'm doing everything

you know you have tunnel vision right

you're you make a lot of tradeoffs and

sacrifices and um you know prioritize

your work and you're climbing the ladder

and not your relationships so you know

you should you can only do that for so

long um

and

why why didn't I go back Um,

well,

there was a couple iterations. I'll

leave it at that. There was there was a

yes and then there was a change, then

there was a no. But I don't think I'm

going to get into all the details. I

think um

I had I had done that, right? Um, and

it's kind of like what's next? you

wanted you wanna

I've kind of I kind of accomplished that

that role and I wanted to

I also didn't live in the city I was now

in the suburbs and I wanted to

see what else was out there grow in a

different way you know it doesn't grow

my bank account the same way but

there are other there are some other

objectives as well um to kind of to grow

professionally and we'll see where this

goes. You know, I have I have the

podcast. I'm having a lot of fun. It

feels fulfilling to to help people out.

Um I'm still talking about stocks. I do

my own investing. Um and there's a bunch

of opportunities that are coming across

my desk just from putting this out

there. And

so

there's one, you know, there's one

opportunity right now for for Multistrat

where they're asking me to come in as a

CIO to kind of run a bunch of PMs. But,

you know, similar. It's not too

different when I was doing Millennium

where I had a bunch of subPMs. So, we'll

see where that goes. This is uh it's

early stages in that conversation. Um,

and I enjoy I enjoy giving back. Um, I

recently had a post about a friend who

just left Millennium, was at BAM, and

then Millennium, and he just gave back a

very large book and to go be a teacher.

when he was over for dinner the other

day and he said, "I I feel fulfilled."

He had done he had done well and he

wanted to do something else he'd done

for 20 years and

um he's in a is in a fortunate position

to be able to make that decision. So

what have I said no to Citadel at the

beginning? No, I mean I I was when I

first met with them I was I remember I

went in for one meeting. It was probably

like the third or fourth interview and I

was I probably had the flu where I was

really sick. I was like sneezing,

constantly. They're like, "Why'd you

come in?" I'm like, "Well, I just wanted

to show you that I really wanted this

job." And they're like like I clearly

shouldn't have been at work. I was, you

know, they're like, "I'm not going to

shake your hand. Like, you shouldn't be

here." And

well, yeah. When I when I was earlier,

that was the seat I wanted. That's why I

moved from DC to New York. And that, you

know, I wanted to be sidelbranding.

So the smartest guys were at, you know,

um, global equities were surveyor and

that's where I wanted to be. That was my

job and I,

you know, uh, what I jumped through

hoops and I and I showed them I was 100%

committed. I'd do anything to be here.

This is the seat I wanted. And they saw

that commitment. Um, they probably

didn't appreciate the exposure to to the

germ. I'm still friends with both of

those BD folks. Um, so it's just a

different point in my life and

yeah,

>> no, I admire you taking a step back from

uh highly prestigious, extremely high

paying role to to focus on your family.

I think that's admirable. Uh, and I

think yeah, I think that that does lead

to fulfillment down the road for sure.

And even now, I'm sure you I'm sure. Um,

I guess my question is going to be about

advice for young people. So I when I

started the podcast and you know you

also you also have a podcast I'll link

it in the description. Um I used to have

this set structure. It was about what

would the guest would do and then I'd go

somewhere towards advice. I'd ask the

guests if they had kids and then I'd ask

them how do you raise your kids to to

thrive in the world that's that's

changing a lot. And I guess I want to

ask that same question to you. I haven't

done this in a while but you have three

kids. How old are your kids, Doug?

Seven, five, and one and a half. Wow.

Okay. So, you got young you got young

kids. So, I I am curious. I I come from

a large family. So, I've I I have six

siblings. I'm the second eldest of

seven. And so, I've seen all my younger

siblings grow up. I've seen my parents,

you know, teach them how to act and and

then discipline them. Um, but what are

some of the things that you stress at

home um to to make them not just

to to raise them not just to be

exceptional, I don't know,

professionally and academically, but but

also just to be good people growing up?

Well, I'm trying to teach them to be

kind to each other.

Uh, that's and I'm trying to show them

that they're loved. Um, at this point,

at this age, I'm not really focused on

them to create a profession or excel at

anything. I'm trying to I want them to

be happy and I want them to find

activities that they love and I want

those are my than my focuses. Um,

so it's a it's a little different than I

guess when they get older then you can

maybe worry about what school they're

going to or what their career path is.

that's not right on our plate right now.

Now it's just um

trying to trying to teach them to be

kind people to each other with siblings

or

um you know that's kind that's kind of

it. and let them know that, you know,

that that we love them and

uh support their interests, whether

that's reading books or playing guitar

or just, you know, learning a few words.

I went happy. Well, thank you the other

day and that was an amazing experience.

>> Yeah.

>> So, just trying to be present for them

um and their activities. Um, that's kind

of that's kind of my goal.

>> It's a lot.

>> Wonderful.

Wonderful. I think that's a great place

to leave our conversation. Thanks a lot,

Doug. You really learned a lot from

this. All the best with everything.

>> Sure. Well, thanks for having me. And

anyone uh feel free to to reach out. Uh,

you know, we have pitched the PM. We're

on a bunch of channels and, um, you DM

me on LinkedIn. I I typically respond.

>> Amazing.