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Economic Innumeracy : Some individuals experience math anxiety, but it only takes a bit of insight to navigate the many ways numbers can mislead us. We evolved in an arithmetic world, so we are unprepared for the exponential math of finance. Investing is simple but hard, and therein lies our challenge. Bad Numbers : 4.
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And then at some point after my PhD school studies, we could get into that if you like, but I kind of decided to switch and finance was kind of what was available for me at that point. 00:05:02 [Speaker Changed] So, so how does the transition to finance take place? How did you, how did you find your way to both finance and GMO?
It sounds like the career plan was always finance. Heather Brilliant : I worked at Bank of America and, and they had a wonderful corporate finance training program. But there’s always gotta be some element of the valuation really being compelling. But maybe second to valuation as a primary consideration.
It was about $170 million valuation. He’s probably never done a down round of financing in the last 10 years. So here’s the math, Barry. 00:59:32 [Speaker Changed] So, so in late 21, 20 22, valuations had gotten a touch frothy in, in both the public and the private markets. 00:33:48 [Speaker Changed] 17%.
So, yeah, I had a career in investment banking with Jefferies, and it was a really good professional experience because I do have the opportunity to work in M&A, equity and debt financing. What’s the finance industry like in Spain? I had the chance to be part of some very interesting transactions in the banking space.
RITHOLTZ: So hold the duration risk aside with those two, but just for an investor in treasuries, I know you’ve done the math before. If you’re giving up that 1% big fat yield in 2019, 2021, let’s say you give up three years of 1% and get zero, how does the math work over the subsequent couple of years?
Was finance and investing always part of the plan? So I pretty much tripped into finance when I was in middle school and high school. So then I decided to explore other options, but finance was not one of them because I just had no exposure to finance whatsoever. 00:01:55 [Speaker Changed] The quick answer is no.
RITHOLTZ: So it just seems like the healthiest way to think about what is unavoidable, yet so many people within the world of finance, kind of dance around it, try not to deal with it. So along those lines, there are some venture firms that don’t really seem to care a lot about valuations and others seem to focus on a little bit.
Jonathan Clements was the personal finance columnist at the Wall Street Journal for nearly 25 years. And I think you will also, if you are at all curious about estate planning or investing or personal finance, this is not the usual discussion and I think it’s very worthwhile for you to hear this and share it with friends and family.
And so transition like many people did in my generation into finance. Camp as you, you’ve had a fairly entrepreneurial background, not just in finance over the past decade or two, but you founded or co-founded value add software in the 1990s. Similar, 00:02:48 [Barry Ritholtz] Similar story. It was VisiCalc and Lotus, right?
I didn’t really know much about the world of finance. So how do you then go from tax and audit practice to finance and investing? Quote, “The world of finance isn’t as complicated as newcomers expect. In order to compete and win in so many things today in finance, you have to be super specialized.
So, started examining opportunities in finance, real estate and insurance. RITHOLTZ: You know, what’s really interesting is everybody tends to think of Wall Street and investing and finance in terms of the investing side. A lot of people in finance have been saying it’s difficult to find people in this environment.
He has a very interesting approach to thinking about market valuations and strategies and when to deploy capital, when to go with the crowd, when to lean against the crowd, and has amassed and excellent track record. Second part of our framework is valuation fundamental work. Well, that means valuations are probably too high.
Among those who do not, the perceived cost was the most common reason given (38%), followed by not having enough money (33%), having a financial situation simple enough to handle on their own (27%) and enjoying handling their finances themselves (17%). And while Buffett was naturally gifted in math, he was initially scared of public speaking.
They’re also owned by a foundation, something that’s rather rare in the finance industry. So I, I did a math degree at Oxford, which is more pure math. You know, pure math can be very theoretical and detached from the real world, and it’s getting worse. They have a truly unique approach to investing.
I’m good at math and science and you know, I always had an idea what go into business, but I felt that electrical engineering would be a good foundation. Why don’t you just switch over to finance? I mean, it certainly was a indoctrination into the world of finance. 00:02:16 [Speaker Changed] Me too.
You graduate Emory University with a degree in finance. No, I’m — RITHOLTZ: You beat me by an hour, RIEDER: You know, I think, I would say to young people who come into the business, you know, why are you coming into finance? You know, whereas, parts of credit card, auto finance are more attractive. Probably not.
And we’ve automated the, the appraisal process for valuation, both intrinsic value, meaning like, where would we pay it, where would we buy it, and where is the fair market price that asset from that level, from price and from consumer behavior now. Is there financing 00:47:41 [Speaker Changed] For that? Should you respond to it?
SAVI is one of these women in the world of finance who is a powerhouse. She is one of the few people who combine quantitative investing with behavioral finance. I’m kind of in intrigued by the idea of philosophy and math. They’ve completely accepted me for who I am as the dark, you know, dark art of finance person.
Barry Ritholtz : So what changed your mind to say, all right, let me, let me go see what these finance bros on Wall Street are all about. 00:31:40 [Speaker Changed] So there’s the emotions and then there’s the math, right? But we think that that valuations are there. So that’s what I did for the first job.
This is like quant finance circa 1990. And this doesn’t create a 10 Sharpe ratio, but a holy grail of quant finance is to try to find two things that, on average, make money that hedge each other. But plenty of valuation measures, it has no applicability for price-to-sales. RITHOLTZ: Bill Sharpe. ASNESS: Bill Sharpe.
How, how different is the UK finance from the US and start the startup mentality? And I imagine the same is true vice versa, when a US company goes to the uk, at least outside of finance, finance seems to have found, found a foothold in Europe from the us. 00:18:19 [Speaker Changed] Nylon. Why the big cultural differences?
You get a, a BS in computer science from Cornell, a master’s in computational finance from Carnegie Mellon. And I, and I really like the application of math and statistics and computer science to markets. You learn the math that can help you with, with market making operations. Corey Hoffstein : Absolutely not really.
Literally the first check-in to Robinhood, which went public in 2021 at about a $34 billion valuation. I’ve known you for forever and over the course of most of that time, your work has really operated at the intersection of finance and media. You know, I’m just a retail Yahoo finance kind of guy. RITHOLTZ: Right.
Jeffrey Sherman : Well, what it was was, so I, as I said, with applications, there’s many applications of math, and the usually obvious one is physics. Barry Ritholtz : It seems that some people are math people and some people are not. The, the math came easier. And I really hated physics, really. It’s so true.
He’s just charming, as is Jeremy Schwartz is one of the smartest people you meet in finance, just a thoughtful, intelligent person who really understands what value is about, how to find investments that will outperform the broader markets with less risk, less volatility. And they have some fascinating things to say. SIEGEL: Right.
The firm specializes in litigation finance, which is non-correlated with equities. She leads the company’s 50-person team of engineers, attorneys, and analysts, and is a member of the firm’s valuation & investment committees and board of directors. Before co-founding Legalist at 20, Eva studied economics at Harvard College.
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