"The Strongest Buyer on Earth" NBIM talks with Citadel CEO: The future of the US economy, the AI bubble, and how to manage huge amounts of money?

24-05-09 17:57
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This interview is from the podcast In Good Company by Nicolai Tangen, the chief investment officer of Norges Bank Investment Management. Norges Bank Investment Management manages the world's largest sovereign wealth fund, the Norwegian Sovereign Wealth Fund. As of the beginning of this year, the fund has reached 16 trillion Norwegian kroner (10.78 trillion yuan). According to Prism statistics, its return rate in 2023 reached 16%, and the annual floating profit was 222.2 billion Norwegian kroner (1.5 trillion yuan), a record high. From a more intuitive perspective, it is equivalent to giving 5.534 million people in Norway, each of whom earned 270,000 yuan.

It can be said that Norges Bank Investment Management is the largest buyer in the financial field on the planet, which also allows Nicolai Tangen, as the chief investment officer, to interview almost any industry leader. Today's protagonist is Ken Griffin, CEO of Citadel. It can be said that Citadel is the most dazzling star on Wall Street in the last round of dollar issuance cycle. In 2022, it achieved a revenue of 28 billion US dollars. After entering the interest rate hike cycle, Citadel still maintained a good performance.

As CEO, Ken is like a rock star. There are news about his shopping almost every month. He bought the most expensive apartment in US history for US$238 million, tried to acquire the NFL Miami Dolphins and its home Hard Rock Stadium for US$7.5 billion, and purchased part of the shares of the F1 Miami Grand Prix. In addition, Ken Griffin also has a lot of fate with the Crypto industry. Its market maker business Citadel Securities has been involved in cryptocurrency transactions for a long time and has become one of the mainstream liquidity providers.

At the end of 2021, Ken Griffin also won the auction of a copy of the U.S. Constitution for $43.2 million, snatching this precious artifact from People Dao. Even many industry practitioners believe that Citadel is the mastermind behind the collapse of the algorithmic stablecoin project Luna/UST in 2022. Ken Griffin personally led the short-selling of UST in May 2022.

In this conversation, Ken Griffin talked about many hot topics today, the current state of the US economy, the impact of remote work on technology companies, and how he views the AI bubble. In addition, Ken also talked about Citadel's business philosophy, the principles of recruiting talents, and how to face the ever-changing market.

The following is the full text of the interview:

The Financial Road of the Giant Crocodile

Nicolai Tangen: Welcome to today's podcast. We are honored to invite Ken Griffin, one of the best investors of all time. Ken started his financial journey in a Harvard dormitory and founded Citadel with the great ambition of becoming the most successful investment company in history, which is exactly the ambition we like. Welcome Ken, it's a pleasure to have you join us, and thank you very much for taking the time to participate in this interview. So first of all, what made you enter the financial industry? Ken Griffin: I have always been interested in the stock market for reasons I don’t quite understand. I wrote an essay in junior high school saying I wanted to understand how the stock market works. I have been on this path for nearly 40 years (Ken is 55 years old now), but I still feel like I am at the beginning of the learning curve. The global stock market is full of interesting and complex issues. The intersection of business models, earnings, and investor psychology is really an endless field. I am always learning, trying to understand how to value companies and how to be a successful investor in the stock market. It is simply the most complicated game in the world. Nicolai Tangen: When you started in your dorm at Harvard, what was your vision? What did you think the industry might look like? Ken Griffin: As a fun fact, I bought two put option contracts on HNSI (Home Shopping Network, which was delisted in 2017) in my college dorm during my freshman year. In part, I have to thank good journalism for launching my career thanks to an article written by Gret Morgenson of Forbes. In it, she made the argument that HNSI was the meme stock of the day. I liked her argument and bought the two put contracts. Fortunately for my career development, the stock subsequently plummeted and I made a few thousand dollars.

Ken Griffen at his college graduation in 1989, courtesy of The Harvard Crimson

But you and I both know that when you're a freshman, making $2,000 or $3,000 is incredible. When I sold those puts, the market makers were quoting me below their intrinsic value, and that got me really interested in the pricing of derivatives. I realized that I was lucky to buy those options after the stock crashed, but the market makers were making a risk-free profit. I really, really wanted to understand the pricing of derivatives, so I started to understand the pricing of convertible bonds, and that was the beginning of my understanding of the hedge fund industry in my college dorm room.

Nicolai Tangen: Do you think there are as many market opportunities now as when you first started? Ken Griffin: I think the opportunities today are different than when I started. Obviously, how to price derivatives is well known, and there are tons of Masters and PhD programs around the world, and degrees in financial engineering. So the knowledge level of society as a whole has really improved a lot in terms of investing. But conversely, today the market is much larger, it’s global, and the product diversity is much richer. So there are always niche opportunities for investors to gain insight and gain a competitive advantage in trading. Nicolai Tangen: When you started out, what mistakes did you make, and what did you learn from them and improve on? Ken Griffin: I made almost every mistake you could make, and unfortunately, I made some mistakes twice or even three times. But the key to finance is to try to learn from your successes and failures. I think a mistake people often make is not to study their own successful trades, they don’t try to understand what they did right in that successful trade.

Let's be clear, in finance, you make money when you have successful trades, and we all tend to put too much emphasis on learning from failures and not enough on learning from successes.

Nicolai Tangen: So what is your trading strategy that has been a huge success for you? I mean, if you were to summarize your trading strategy, what would be the most successful thing?

Ken Griffin:Where we are most successful as investors is that we have a clear competitive advantage in absorbing information, processing information, and reacting to information. That's what we do best. So we built the company on the principle of a "research business", and the core of this business is research, whether it's picking stocks or predicting the weather to trading commodities, it's first and foremost a research business, and trading is just how we monetize research, it's that simple.

The US Economy, Online Office, and the AI Bubble

Nicolai Tangen:So based on all the data and research you've collected, where is the US economy today?

Ken Griffin:If you look back at all the data we have, we are in very interesting uncharted territory. You and I have studied economics in some form our entire lives, and let me ask you a question, have you ever imagined a US society at near full employment, inflation around 3%, and massive government spending going on?

Nicolai Tangen: No, I would not have anticipated that.

Ken Griffin: We are in uncharted territory, we are at that stage of the cycle right now, trying to pay down government debt, trying to get fiscal consolidation in place so that we have fiscal flexibility when the rainy days inevitably come, and yet, at this very moment, the U.S. economy is growing almost at or above capacity, and the government is still spending massively.

The massive fiscal stimulus is leading to higher inflation in the economy than we expected to see, which puts the United States in a more dangerous long-term position, and it will give us less freedom to deal with the next crisis, or even unfortunately a depression.

Nicolai Tangen: You often emphasize the crisis of fiscal deficits, why are you so worried about this?

Ken Griffin:You and I both grew up in an era of worry about the crowding-out effect, where the size of government deficits around the world would displace private sector demand for capital. Of course, for those who think about the very long term, that worry still exists. How do we make sure we don't crowd out the private sector to boost government spending?

But there's another important point, which is the issue of fairness. You know, there's a lot of focus on fairness around the world today. For example, do we have too much income inequality? In a way, we are borrowing money from the future, from our children and grandchildren, right here and now, to maintain a standard of living that is not consistent with productivity or the work culture that is emerging in developed economies. From the perspective of intergenerational fairness, it's really unfair that we are spending so much money in the form that we are.

Nicolai Tangen: If you were advising the president or actually dealing with this issue, what would be the top priority for the country?

Ken Griffin: I think the top priority is that we need to improve productivity in the Western world, there is nothing more important than that, whether it's in Europe or the United States, that's the key path to maintaining prosperity.

Nicolai Tangen: How do we improve productivity now? Ken Griffin: You and I both know that we need to improve our education system, especially in the U.S., where K-12 education puts our kids at a substantial competitive disadvantage compared to the rest of the world, and more importantly, at an absolute disadvantage in life, where they are not exposed to the ideas and concepts that will enable them to win a rich career. The second point is remote work, and the large amount of remote work is definitely reducing mentoring, collaboration, leadership development, and innovation, and it's time to get our people back together to collaborate, mentor, and develop leaders so that in 20 or 30 years we don't end up in the terrible situation of a severe lack of leadership in the Western world because of the way we work today, which I worry about. So there is no working from home at Citadel, we are all back in the office, and the better part is the impact on mental health, remote work makes it difficult to separate life and work, and it's great to see my colleagues working passionately and happily at work while maintaining the separation of personal and professional life.

Nicolai Tangen: What else do we need to do besides education and the Office of Return?

Ken Griffin: Education, the Office of Return, and prudent government regulation to encourage entrepreneurship and entrepreneurship, promote the growth of small and medium-sized enterprises, and promote increased economic competition are all very important. The West must continue to formulate trade policies that truly realize the benefits of free trade between North America and Europe. Therefore, some of the tendencies towards protectionism, we really need to think about taking back and creating greater economic integration between the two continents.

Nicolai Tangen: Now when we look at all of this, is the stock market in a bubble? Or how do you view the stock market?

Ken Griffin:You know, it's always very difficult to determine if you're in a bubble, because even if you're in a bubble, you're clearly pricing assets. Can you and I go back to the dot-com bubble and what we were talking about at the time, and do you remember some of those conversations?

We were talking about how e-commerce was going to revolutionize the way we get goods, and metrics like "time on page" became the dominant metric for pricing securities, but we created an entire terminology, vocabulary, and framework to justify and rationalize the existence of a bubble at the time. Now what's interesting is that jumping forward 20 years later, many of the things that we thought would happen in this revolution actually happened, and many of the largest companies in the world today are actually businesses that are symbolically related to or similar to the internet phenomenon that we envisioned.

So what's interesting is that we had the right thesis, we had the right idea, but people just lost their minds about valuations for a while.

Nicolai Tangen: Are we now in a valuation frenzy for AI again?

Ken Griffin:The AI frenzy is really amazing, and it will be very interesting to see how quickly the success of AI is integrated into our daily lives and the way businesses operate. However, the second trend that is happening now is the importance of your Chief Information Officer or Chief Technology Officer in the management and boardroom is rising again. People are starting to really focus on digitalization and using software and analytics to improve the business.

So what's really interesting is when you talk to CEOs of companies, they will tell you how their company is embracing AI and how it is having a profound impact on their business. But if you dig deeper into these stories, you'll find that there's no AI involved at all, but the adoption of modern technology capabilities and digitization involved can really improve and enhance American and European businesses.

So what I find really great about AI is that it allows entrepreneurs to re-emphasize the importance of technology and deliver goods and value to consumers more efficiently. At Citadel, we use AI in many ways to improve the daily productivity of our team members, and we will use AI in the next two to three years to help draft emails, summarize research reports, understand or write memos and other documents required for daily business.

For example, we use AI to help label data and then use it for some very important tasks, like how to help our software engineers be more productive. So we have all sorts of uses for AI in our company. If we look back at machine learning, it's kind of the most important part of the evolution of AI. We've been using machine learning at Citadel for about eight or nine years now, and it plays a very important role in how we think about asset pricing, and occasionally in how we think about asset risk management, but it really plays a big role in asset pricing.

How do you manage a portfolio?

Nicolai Tangen: Ken, I want to go back to your vision for Citadel, what was your vision for the company? What did you think it might look like when you started this company?

Ken Griffin: Well, it's a trip down memory lane. At 20 years old, I had the opportunity to manage a million dollars for a fund of funds company in Chicago.

They promised me that if I did well, they would help me start my own fund and help me raise money. So Citadel started a little over a year after I graduated from college, and we raised about four and a half million dollars in November of 1990, and we started a strategy of trading derivatives, convertible bonds, and warrants tied to stocks. That was the genesis of Citadel.

Now there are a few key things in this story that are important, and the first is that I believed that you could use math and software to help understand these pricing relationships, in an area where most of the world was still using pen and paper and rules of thumb. I remember back in the day we hired a rocket scientist to help with these pricing models, and a friend of mine from a big bank literally laughed his head off when he heard how we were doing it, saying, “You’re not trying to put a man on the moon, you’re trying to trade bonds.”

Ken Griffen at Citadel, image from WSJ

Now more than 30 years later, the bank he worked for no longer exists, and Citadel and Citadel Securities are two of the most important companies in global financial markets. To some extent, we have successfully ridden the wave of the rise of mathematics in finance, which has in some ways passed. We now take for granted the use of a lot of mathematical concepts in finance that were actually first applied in our daily work in the 80s and 90s.

In dealing with this wave, I think the biggest challenge is that you have to cultivate your own talent. In the early days, you have to hire people with very different backgrounds that were usually rare on Wall Street at the time, such as physicists, nuclear engineers, mathematicians. You have to hire people with very different backgrounds than the typical Wall Street trader, and you have to teach them financial knowledge and let them participate in solving problems such as the value of derivatives and the value of complex securities. There is a knowledge gap between them, which requires us to help balance the different views between the people responsible for investment and the people responsible for analysis in the middle, and try to bridge their differences.

Nicolai Tangen: Your ability to innovate and expand in the financial field is quite unique, so what do you think is the reason why you are so successful here?

Ken Griffin: I think some of the things we do are very different from most companies. Everyone thinks that investing is an art, but we think that investing is also a science. As we run this company day in and day out, we really focus on the combination of the art and science of investing and how to make our investment decision-making process work well.

The second point is that I think our hard work in analysis and learning has brought us a rigorous discipline in investment, from which we have created differentiated insights and given us confidence in the deployment of capital.

The third point is experience, that is, the wisdom brought by our past losses and pain. My leadership team has been through many difficult times in the market together, and we have learned some very painful lessons, but this has made us better investors during turmoil and crisis.

Nicolai Tangen: Another thing that happened during this time is that passive capital and short-term capital became more prevalent. What do you think this means for more long-term fundamental investors like us?

Ken Griffin: This is very interesting. The rise of passive investing suggests that the market is either efficient or semi-efficient, and investors can get exposure to broad indexes of the entire world or specific industries at a lower cost without having to pay the fees of active management. This embrace of passive investing has been revolutionary for the industry, but passive investing only works when there is a community of people doing fundamental research involved and helping to price securities.

Thus, passive investing needs capable, successful, and competitive traditional asset managers behind it to make the theory of passive investing work. The increase in short-term investors will help ensure that markets remain efficient in response to rapidly evolving news information, but we really should do everything we can to ensure that traditional asset managers thrive and that they maintain their research and investment capabilities, as they are critical to the price discovery process that passive investing relies on.

Nicolai Tangen:So given all of this, what should you do if you are an average retail investor?

Ken Griffin:If you are a lawyer, dentist or teacher with a full-time job, I think the best way to make money depends on your position in the financial markets, and you should choose to invest in a broad stock index product or a broad pool of actively managed funds. For example, you manage the Norwegian sovereign wealth fund. I know that you are very focused on investing a considerable portion of the funds in stock indices. The strategies that you have developed over the years around the world have enabled you to obtain a comprehensive growth and profitability of countries around the world at a very low cost.

It is a very prudent way to allocate the large amount of capital you have, and you also invest in non-equity assets, and then use a variety of strategies based on what you think the relative competitive advantages of the internal team and external managers. This is the way I would recommend any large-scale capital management so that it can be done internally in a cost-effective manner, and find what you think are the best managers around the world to obtain portfolio diversification.

How do you build a good investment team?

Nicolai Tangen: I couldn't agree more with you. Now, 34 years after the founding of the firm, we have a report card, you are very successful, how do you stay ahead of the curve? How do you ensure that you remain hungry?

Ken Griffin: There are a lot of different aspects to this question, let's unpack them. How does Citadel continue to thrive? We have an incredible leadership team, I have world-class leaders at Citadel who are managing our various businesses, and I am very grateful for them to be part of this team. I also constantly work with my leadership team to improve and strengthen our investment strategy. I maintain constant communication and engagement with my senior leadership team on the core issues of recruiting great talent, developing great risk takers, and ensuring that capital is deployed in the hands of our best risk takers when the best opportunities arise.

Our first focus is on human resource development and optimal allocation of human capital, and then there is a second thread in everything we do, which is how to build competitive advantage, how to better collect information, how to make better decisions.

Nicolai Tangen: One of the things you do is have multiple managers and these overall concepts, how are teams organized, how do you think about this?

Ken Griffin:We look at the business as various verticals, like the global commodities business, the long and short equity business, and the various credit businesses. Within each of those verticals, we ask our business leaders to be entrepreneurial and really say to themselves: I have, in a sense, almost unlimited capital from this perspective. What is the most appropriate team, the most appropriate strategy, and the most competitive advantage to build and leverage in this world and environment today? That's how we run the business, very much with a clean sheet of paper, what should we do today to be one of the most effective deployers of capital in the world's financial markets.

Nicolai Tangen: Does each team decide on their investment strategy?

Ken Griffin:The investment strategy is determined by the portfolio managers, the business heads, and me, so the three of us will come together depending on the nature of the problem and work together to make sure that we have thought through how to create the most successful investment strategy.

Nicolai Tangen: So now you give me $100 million and I work for you, how would you view my mistakes?

Ken Griffin: First of all, we want to give you more money to manage. And part of that is because, you know, we have really great people here, and we want them to have access to enough capital to support the teams around them to achieve revenue and profitability, to support the super teams around them. We really view investing as a task for world-class teams, because within the team, you have a much healthier debate and dialogue, which helps to uncover the truth, to reveal the true nature of the debate, which is so important to our business.

So when we hire you as a portfolio manager, we spend a lot of time trying to understand a few things, first of all what kind of team we are going to build, and how to attract the best talent to join your team. Secondly, we want to work closely with you to make sure that you have a replicable investment process that you can learn from, both from your successes and failures, and that you are able to teach your team members to create their own operating leverage, so these are some of the things we consider when you join the firm as a new portfolio manager.

Nicolai Tangen: When will Citadel fire me?

Ken Griffin:First of all, we don't want to fire you, we want to see you have a very successful career.

Why do people have problems in their careers, why do they get stuck? There are a few reasons. First of all, some people are just not very good risk takers. You can put the facts in front of them, you have a very highly concentrated portfolio, you have large positions, and you can't clearly and unambiguously prove that you have a clear advantage in these positions. If these things are wrong, we have no basis for cooperation. And then there are some people who, even if they have all the information, can't help themselves and improve their portfolio construction.

Nicolai Tangen:You mentioned information a lot, and you are one of the really great users of alternative data, talk about some of the alternative data sources that you use.

Ken Griffin:The specific type of alternative data used depends on the area we invest in. If you're investing in airlines, you're very interested in current airfares; if you're trying to predict inflation, you're going to break down each of the factors that the Bureau of Labor Statistics (BLS) looks at and produce their inflation forecasts; if you're involved in the commodities market, you might run a world-class meteorology program trying to predict short-term weather patterns or the dispersion of weather patterns. So you focus on using alternative data based on the nature of the problem at hand. We always try to peel back the data and understand what information is critical to driving revenue for a business or demand for a commodity, and then get that information in the right way, process it quickly, and make the right decisions.

How does Citadel recruit people?

Nicolai Tangen: You were attracted to market makers in college, and now you've created Cedar Securities, one of the most sophisticated market makers in the world. First, for those in the audience who don't understand the role of market makers in finance, can you explain it?

Ken Griffin: A market maker is a company that provides liquidity to buyers and sellers who don't trade at the same time. What this means is that when you want to sell $50 million worth of stock, if there is no buyer in the market at the same instant, you will not overly drive the stock price, the market maker will use their capital to facilitate your trade, and then hope to find the final buyer of your stock at some time in the future.

We do this on a global scale, in fixed income and equity products. You know, in the U.S. for example, we trade almost 25% of all equity every day. These are huge numbers, right? Citadel Securities trades up to $400 billion a day across all asset classes.

Nicolai Tangen: What do you think Citadel Securities will look like in the next 5 to 10 years?

Ken Griffin: I think it will be very similar to what it is today, but we will be deeper into more products, diversifying our business and expanding our connections to more trading partners, and we also provide a range of other services that investors really value, such as corporate financing and new issues. It will increase in size and scope in the coming years as we continue to solve the challenges and problems faced by our clients.

Nicolai Tangen: What do you think about the current geopolitical situation?

Ken Griffin: You know, you and I are very lucky, we really grew up in a peaceful era until the last two or three years. It's been heartbreaking to watch the war in Ukraine unfold before our eyes. It's unbelievable, did you ever think that there would be war in Europe again in your lifetime? No. But now, we are witnessing this firsthand, seeing the terrible losses and devastating effects on the Ukrainian people and economy in the war with Russia, it's really heartbreaking.

And of course, just a few days ago, we saw Iran attack Israel. Israel has been in great trouble, and what's happening in the Middle East is probably not as surprising as the war in Ukraine. The Middle East has always been a region that is more susceptible to geopolitical challenges, but regardless, the events of last October, the war in Gaza, were very heartbreaking moments.

Nicolai Tangen: So, Ken Griffin, if someone asked you to take over the finances of the United States, would you do it?

Ken Griffin:Look, if the United States was facing fiscal challenges and I was able to help the country, of course I would do it.

Nicolai Tangen: Let's talk about corporate culture. You've talked about the importance of talent. So how much time do you spend recruiting?

Ken Griffin:I've been talking to candidates, and there's nothing more important than the talent we bring in. They've been trained here and are leading this company in terms of investing capital and building the business.

Nicolai Tangen: You had a lot of applicants, right? I think you had 1,500 positions in New York, but you received 100,000 applications, right?

Ken Griffin: Yeah, we received about 100,000 applications from all over the world. Let me tell you, what makes me most happy is that people all over the world know that we work 5 days a week, which shows that there are a lot of young people around the world who want to enter an environment where they will receive good guidance and leadership development, and they will have an excellent career. This makes me optimistic about the future, and I hope that those of us who run companies around the world can reach a consensus with these students and give them the experience that will allow them to have an excellent career.

Nicolai Tangen: Let's say now that I am one of those 100,000 people, and I successfully get the opportunity to interview with you. Of course, I am a little nervous because you are a very famous person. What questions will you ask me? Ken Griffin: I'll be the fourth person you meet, so there's a really great set of questions for you. I look for people who are ambitious. I want to find people at Citadel who really want to change the world of finance, who want to live a life of impact, who want to make an impact in the world. I look for strong communication skills. I think it's really important to be able to communicate ideas, and you have to be able to express your ideas no matter what business goals you pursue in life. We're always debating the merits of our ideas within the firm to find the truth. So I look for ambition, communication skills, and the ability to reason and rationalize across a wide range of areas, and I look for people who are really good thinkers because problem solving is so fundamental to what we do every day, and good problem solvers are the people who succeed at Citadel. Nicolai Tangen: Can you tell these traits from a resume? Or do you need to meet the person?

Ken Griffin:You need to meet people. Today people know how to write resumes to cater to the needs of employers.

Nicolai Tangen:

How do you tell if I am a good problem solver?

Ken Griffin: What problem did you solve?

Ken Griffin:"What problem did you solve?"

Ken Griffin:"What problem did you solve?"

Ken Griffin:"What problem did you solve?"

Ken Griffin:"What problem did you solve?"

Ken Griffin:"What problem did you solve?"

Nicolai Tangen:What's the hardest problem you've solved?

Ken Griffin:Well, the hardest problem is not solved yet, but you know, there's a lot of work going on, and one of the challenging problems is multi-period optimization. Multi-period optimization is taking different views of how a stock is going to perform in the next day, week, month, or year, and then how to create the best portfolio based on those different views at this moment in time. This involves capital allocation decisions that we have to make. It's an interesting and challenging problem that we haven't fully solved at Citadel yet.

Nicolai Tangen:

I read somewhere that you said that if you were naturally inclined to be a good competitor, you would love to work here. What does that mean?

Ken Griffin:We make no secret of the fact that we want to hire people who really enjoy competing and winning. The financial markets provide competitors with a report card every day on how they are doing against the competition. We find that people who enjoy competing and winning enjoy working here because they enjoy seeing the results of their work at one of the world's leading financial institutions and seeing their research reflected in the portfolios they build and manage.

Nicolai Tangen: What is your view on leadership? What is good leadership for you?

Ken Griffin:Good leadership is about dealing with the realities at hand. Good leaders are very objective about the problems, challenges and opportunities they face, and they make rational decisions about them. They are not affected by the cost-paid fallacy, nor do they lose hope when things are not optimistic, but they are able to make good rational decisions at all times.

Nicolai Tangen: Are you a good leader?

Ken Griffin:Most of the time, yes. Speed is a key factor in decision making, and on the axes, one is accuracy and the other is speed. It's important to understand what the tradeoffs are between the two axes at any given time. Sometimes it's more important to be close to right and fast than to be absolutely right and slow.

The cost of changing your mind is a key factor in determining how fast you need to be. If you're going to invest in a real estate development that's going to take 40 years to complete, you don't need to be fast, you need to think thoroughly because once you start the journey, it's going to be a very long journey. Whereas if you buy $500 million of Apple stock and the next day you realize you missed an important fact, you can quickly move to exit the deal.

Nicolai Tangen:How do you balance analysis and intuition?

Ken Griffin:The best intuition is actually almost like subconscious analysis. When people tell me, "Just intuitively, I believe X," I wonder if that's their subconscious mind at work, where they've had this sort of thing many times before, and they know roughly what the answer is, but they haven't written it down, but their intuition is actually more a reflection of their inherent ability to analyze a problem and tell you what to do.

Some people's intuition seems to be just: what coffee I had this morning, so I should go long or short the S&P 500 because I had a good coffee that day. But that doesn't apply here, at Citadel, intuition is actually a reflection of the analysis going on in the analyst's brain that may not be fully formed or fully manifested yet.

Out of Office

Nicolai Tangen: What would happen if you left Citadel?

Ken Griffin: That's a great question, and the good news is that I have a lot of people here who can run this business successfully without me. I don't want to leave, I love my job, I love the people I work with, and it's really a passion for me. So I don't want to think about that day, but if it does, I have great partners who will continue to run the company.

Nicolai Tangen: If you were to go back to university again, what would you study?

Ken Griffin:Wow, so was that me when I was 20, or was that me now?

Nicolai Tangen: You are the age you are now.

Ken Griffin:I would probably go back to college and study a little bit more about philosophy and the field of government, which have always been issues that I've been interested in. Good governance is important, and having a solid philosophical foundation I think would help in better policy making. I would probably also spend some time studying math and computer science to get a better understanding of today's latest technology. It's been a long time since I've studied math or computer science in a classroom, and it would be interesting to see where the world has come in those fields today.

Nicolai Tangen: What are you most curious about?

Ken Griffin:I would say my curiosity ranges from innovations in biotechnology to computer science, so STEM (an acronym for the first letters of the four subjects in English, Science, Technology, Engineering, Mathematics) is my area of interest. I am very interested in the development of STEM fields around the world, from nuclear fission and nuclear fusion to microprocessors and genetic engineering, and I have an insatiable desire to learn more about the problems and developments in these broad fields.

Nicolai Tangen:When you are not spending time on this, how do you relax?

Ken Griffin:I am a big fan of cycling, there are great bike paths here in Miami, and I am very lucky to have three young children, all of whom are almost teenagers, so most of the time, I basically spend all my free time with them.

Nicolai Tangen:Speaking of young people, we have thousands of young listeners, what advice do you have for young people?

Ken Griffin:I love cycling very much, there are great bike paths here in Miami, and I am very lucky to have three young children, all of whom are almost teenagers, so most of the time, I basically accompany them and consume all my free time.

Nicolai Tangen:Speaking of young people, we have thousands of young listeners, what advice do you have for young people?

Ken Griffin:Now, you know, my advice hasn't changed much in thirty years, pursue what you're passionate about, to excel at something, you have to be passionate about it. If you don't have passion, you're not going to excel at it, you're not going to be satisfied with your career, you need to pursue something that actually makes you want to get up in the morning and do it. It could be becoming a doctor, it could be becoming a lawyer, it could be picking stocks, but you have to find what you want to do when you get up in the morning, what is the thing that is intrinsically motivating to you.

If you are driven by extrinsic motivations, you will feel that life is superficial, and you need to find your inner calling in life. I remember there was a young woman here once, about thirty years ago, who was very talented on the investment team, had been with us for about a year and a half, two years, and she walked in with her manager and said she was thinking about going to medical school, and I needed you to convince her to stay at Citadel. I said, well, the thing is, as soon as she walked into my office, I offered to write her a letter of recommendation, and the world desperately needed another great doctor, and if that was what she wanted to be, I wanted to help her achieve her dream.

Nicolai Tangen: So, just to end on such a great note, it seems like you have achieved your dream, and you are working hard to make Citadel the most successful investment firm ever, so I have to sincerely congratulate you and thank you for being on the show today, thank you very much.

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