“Innovation everywhere, but especially in the land of pensions, endowments, and foundations, is a function of courage and crisis.” – Ashby Monk
Dr. Ashby Monk is currently a Senior Research Engineer, School of Engineering at Stanford University and holds the position of Executive Director of the Stanford Research Initiative on Long-Term Investing.
Ashby has more than 20 years of experience studying and advising investment organizations. He has authored multiple books and published 100s of research papers on institutional investing. His latest book, The Technologized Investor, won the 2021 Silver Medal from the Axiom Business Book Awards in the Business Technology category.
Outside of academia, Ashby has co-founded several companies that help investors make better investment decisions, including Real Capital Innovation (acquired by Addepar), FutureProof, GrowthsphereAI, Long Game Savings (acquired by Truist), NetPurpose, D.A.T.A., SheltonAI, and ThirdAct. He is co-founder and managing partner of KDX, a venture capital firm focused on investment technologies.
He is a member of the CFA Institute’s Future of Finance Advisory Council and was named by CIO Magazine as one of the most influential academics in the institutional investing world. He received his Doctorate in Economic Geography at the University of Oxford, holds a Master’s in International Economics from the Université de Paris I – Pantheon Sorbonne, and has a Bachelor’s in Economics from Princeton University.
You can find Ashby on his socials here:
X / Twitter: https://x.com/sovereignfund
LinkedIn: https://www.linkedin.com/in/ashby-monk-208a479/
And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters
Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.
Brought to you by Alchemist Accelerator.
OUTLINE:
[00:00] Intro
[03:44] “I don’t know what to do with my hands”
[04:44] The origin story of Ashby’s LinkedIn skills
[09:04] Ashby’s obsession with the worst title out there
[12:54] Titles at institutional investment firms
[17:05] Building the right incentives for institutional LPs
[20:54] The decision to buy or build for pension funds
[22:36] What’s a smart way to think about the difference of gross and net?
[23:17] When are management fees not justified?
[26:06] When managers charge fees on SPVs
[28:12] When are GPs still grateful for your LP capital?
[29:40] Challenges with the endowment model in PE and VC
[31:14] Why LPs misrepresent what budget fees come out of
[35:28] Compensation structure of a pension fund
[37:59] CalPERS compensation structure
[39:19] The highest paid employees in government jobs
[42:39] Traits of an incredibly talented investor
[47:06] Hire hard, manage light
[51:07] Ashby’s journey into the LP space
[56:05] Why should a young professional work at a pension
[1:00:24] Who outside of investments influences the way Ashby thinks about investing?
[1:02:28] What is organic finance?
[1:07:08] The post-credit scene
[1:12:32] Thank you to Alchemist Accelerator for sponsoring!
[1:13:33] If you enjoyed the episode, would love if you shared it with one friend who would enjoyed it as well!
SELECT LINKS FROM THIS EPISODE:
- Stanford Long-Term Investing
- Eric Ries
- Long Term Stock Exchange
- Addepar
- Shelton AI
- ThirdACT
- Will Ferrell
- Talladega Nights
- “I don’t know what to do with my hands” reference
- George Costanza (from Seinfeld)
- New York Yankees
- “Titles” by Gokul Rajaram (how Square normalized titles like “Lead” and “Head of…”)
- Princeton University
- Stanford University
- CalPERS
- David Swensen
- The Diary of a CEO (podcast)
- Marc Randolph
- Former Netflix CEO: “Hard Work Does Not Matter!” A $278 Billion Company Wasn’t Built On Hard Work! on The Diary of a CEO
- Alaska Permanent Fund Corporation
- Stephen Gilmore
- Marcie Frost
- Goldman Sachs
- Morgan Stanley
- Bridgewater Associates
- Elon Musk
- Richard Branson
- Warren Buffett
- Bill Gates
- “What I Learned from Warren Buffett” by Bill Gates
- Simon Sinek
- Simon Sinek’s anecdote on the Navy Seals
- SEAL Team Six
- Delta Force
- Tyler Kulp
- Lance Armstrong
- University of Oxford
- Gordon Clark
- 10X Capital Podcast
- Ashby Monk on 10X Capital Podcast
- Jagdeep Singh Bachher
- University of California Investments
- Schoolytics
- Seinfeld (TV Show)
- McDonald’s Big Mac
- Organic Finance in Action: Practical Tools for a New Paradigm by Ashby Monk
- Resilient Portfolio Theory
- The Don’t Get Fired Podcast
- Martin Luther King Jr.
- “Interviewers I Really Respect and Why”
- Conan O’Brien
- Tim Ferriss
- ChatGPT
SELECT QUOTES FROM THIS EPISODE:
“The fastest way to become a billionaire in America today is to set up an alternative investment firm and manage pension capital. Literally. That’s the fastest path. Faster than starting a tech company.” – Ashby Monk
“Many pension plans, especially in America, put blinders on. ‘Don’t tell me what I’m paying my external managers. I really want to focus and make sure we’re not overpaying our internal people.’ And so then it becomes, you can’t ignore the external fees because the internal costs and external fees are related. If you pay great people internally, you can push back on the external fees. If you don’t pay great people internally, then you’re a price taker.” – Ashby Monk
“You need to realize that when the managers tell you that it’s only the net returns that matter. They’re really hoping you’ll just accept that as a logic that’s sound. What they’re hoping you don’t question them on is the difference between your gross return and your net return is an investment in their organization. And that is a capability that will compound in its value over time. And then they will wield that back against you and extract more fees from you, which is why the alternative investment industry in the world today is where most of the profits in the investment industry are captured and captured by GPs.” – Ashby Monk
“[LPs] want to solve the problem for their sponsor by reducing the cost of a promise.” – Ashby Monk
“Innovation everywhere, but especially in the land of pensions, endowments, and foundations, is a function of courage and crisis.” – Ashby Monk
“The highest people paid in state jobs are football coaches.” – Ashby Monk
“I often tell pensions you should pay people at the 49th percentile. So, just a bit less than average. So that the people going and working there also share the mission. They love the mission ‘cause that actually is, in my experience, the magic of the culture in these organizations that you don’t want to lose.” – Ashby Monk
“The job of an investor is to look at the same data that you and I are looking at, and be ready to make a different conclusion. That’s how you outperform.” – Ashby Monk
“Hire hard; manage light.” – Ashby Monk
“The way best practices are communicated in this industry is through role models. So, Yale model, Canadian model, Norway model… There are no schools of investing. […] And the way models emerge is you get an innovation that results in outperformance.” – Ashby Monk
“I do research projects on nothing.” – Ashby Monk on research into solutions that don’t exist in the world yet
“There are two types of innovation. There’s innovation as an invention. And there’s discovery. And a lot of what I do is discover and apply.” – Ashby Monk
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