Equity investing
Joined July 2017
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Agnostic Capital retweeted
A man who pioneered parallel processing cannot be expected to run a single thread
Agnostic Capital retweeted
“You know how to fund the hedge fund, you just don’t know how to hedge the hedge fund. And that’s really the most important part of the hedge fund. It’s the hedging” - Jerry Seinfeld
“Some of his best shorts are down 40% and he's forgotten what the company does”
It’s not because you didn’t go to Harvard that people won’t give you institutional money…
Hedge Fund Manager David Orr (@orrdavid) on why he’ll back a delivery guy over a Harvard grad, as long as the track record is real.
David Orr runs Militia Capital, a ~$480M hedge fund. ~50% annualized, Sharpe 2.
“If you didn’t go to Harvard, they’re not going to give you money. They’re gonna lead you on for years.”
We cover:
- Edge is just reps. He's placed a few hundred independent bets every year since 2019, more in one year than a lot of hedge fund managers get in a decade.
- The two-hour rule: if he can't decide on a stock in an hour or two, he skips it. When a trade goes against him, he quits. "The market said I'm wrong, I'm wrong."
- 500 positions in his partition and zero notes. Some of his best shorts are down 40% and he's forgotten what the company does.
- The Gogo lesson: he spent 100 hours on a short and was right on the fundamentals (it's now $2), but it ripped to $20 first. All that research made him stubborn on the way up.
- The AI risk system: it groups the book into custom baskets like "Banks Done Right" and "yield traps," recalculated daily. A 25% bet can quietly become 45% in two weeks.
- How Militia recruits PMs: 95% of track records are junk, and one cherry-picker ran 30 accounts and sent the best one. The PMs who make it include a game show winner, a Spanish government worker and a programmer, with 0.15 cross-correlation.
- The best short seller in the world, quietly: 40% a year short only for years, and he still gets a tiny allocation at his fund.
- Why multi-managers' real business is marketing. Collect $2B a year in fees on $100B and it's "mission accomplished," whatever the returns.
- The long/short tax trick: harvest losses on losing shorts, and never cover one that's down 90%. No tax is due until it's delisted, which can take 10 years.
- $150M raised from one email asking LPs for $100M. He says he could raise a billion but won't, and admits they "must have gotten at least somewhat lucky."
- His AI stock map: hyperscalers locked customers into take-or-pay deals at ~35% return on capital. If compute prices crash 80%, the end customers get wiped out, not the hyperscalers.
- Is investing 99% talent? For big alpha, almost entirely. Pod shop alpha is teachable, maybe for 1 in 50 people rather than 1 in 10,000.
Highlights:
00:00 Intro
00:44 How AI custom factor baskets track dynamic correlation in levered portfolios
03:24 Sourcing non-consensus PM talent and verifying live Sharpe track records
07:24 Structuring carry and tax deferral to attract elite proprietary traders
12:50 Why institutional multi-manager platforms fail to back pure alpha
20:22 The two-hour research limit: Avoiding sunk-cost bias in short selling
27:58 Momentum screening vs deep value: Why top longs hit new highs
29:40 Why traditional finance books fail and what operator biographies teach
37:16 Why rapid technological adaptation beats traditional economic moats
39:26 Analyzing the AI trade: Why hyperscalers offer superior downside protection
44:57 Internalizing stock borrow desks to maximize net-of-fee fund compounding
55:25 Avoiding confirmation bias and why shorting revenue growth fails
01:01:42 Pod shop leverage factories vs raw discretionary alpha generation
01:07:12 Unplugging from market narrative feeds to preserve independent conviction
Imagine if in the 1900s the railways were built out based on capacity utilization calibrated to how much everyone would travel and ship across the rails if it was entirely free.
Then layer on a quasi Moore’s law (ish)-like mechanism and realize that the analogy would require
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Agnostic Capital retweeted
Which means Todd’s total comp was 1M/yr
on incentive comp
BUFFETT: But [Ted and Todd] are perfect, and we pay them each a salary of a million dollars a year, and we give them 10 percent of the amount by which their portfolios beat the S&P. So that if they beat the S&P by 10 points, they get one point, for example, and we get nine points. But we do it on a three-year rolling basis so you don’t get the seesaw effect. And each one gets paid 80 percent based on their own efforts and 20 percent based on the other person’s, so that they have every incentive to operate in a collaborative way rather than sit there jealously guarding their own ideas and hoping the other guy doesn’t do very well.
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WARREN BUFFETT: Well, we’ve always been more concerned about how our record is achieved than the precise record itself. And with both Todd and Ted, Charlie and I were struck by, not only a good record, but intellectual integrity and qualities of character, a real commitment to Berkshire, a lifelong-type commitment. And we’ve seen hundreds and hundreds of good records in our lifetimes; we haven’t seen very many people we want to have join Berkshire.
But these two are perfect, and we pay them each a salary of a million dollars a year, and we give them 10 percent of the amount by which their portfolios beat the S&P. So that if they beat the S&P by 10 points, they get one point, for example, and we get nine points. But we do it on a three-year rolling basis so you don’t get the seesaw effect. And each one gets paid 80 percent based on their own efforts and 20 percent based on the other person’s, so that they have every incentive to operate in a collaborative way rather than sit there jealously guarding their own ideas and hoping the other guy doesn’t do very well.
So it’s a — I don’t think we could have a better — it’s the same structure on pay, basically, that we had with Lou Simpson for 20-some years, except he did not have a partner. To the extent that they employ people underneath them, that comes out of their performance record, and it’s worked far better than either Charlie and I had hoped, and we had pretty high hopes. We had 1 3/4 billion with each of them at year end, but we’ve added another billion each on March 31, so they’re running 2 3/4 billion apiece.
Agnostic Capital retweeted
Billionaire hedge fund founder on how you should spend your prime career years:
"Most good money managers I know skipped their 20s or early 30s. I certainly didn't have anywhere near the best social life, but it was a great opportunity because stocks do not understand your age.
If you are willing to invest your time and energy, you can learn a lot just by being around. Regardless of the type of firm you are at, you still get to attend conferences and network with others. If you are good at observing, you can then pick the best pieces from other people and other firms."
- Larry Robbins, Founder, Glenview Capital Management
More buy-side career advice in my newsletter: richard-toad.ghost.io/buy-si…
Agnostic Capital retweeted
I lost my Dad on 9/11. I don’t get a lot of reach on here. But I just wanted to share a picture. He was 39. I thought he was old. I’m now in my mid 30s and I still feel like a kid.
He was a great trader. He loved markets. He loved to find a stock no one was talking about.
The first trade I ever placed was on his work computer, where he let me click the button to buy AMAT. I loved going to the office with him. It was electric.
He was the best dad. We spent hours out in the street after dinner where he’d throw “pop flys” for me to catch. Eye on the ball.
He loved watching Sponge Bob and eating cereal, wrestling with us in the living room. He just loved being around his kids so much, and we knew it. I’m so grateful I got a dad like that.
Love you, Pops.
Agnostic Capital retweeted
I resigned from Citadel today. I spent the last three years parsing alt data and gaming bogeys at both Surveyor and Baly. Neither company is acting responsibly. They are racing straight to uncorrelated super-alpha and gambling with our lives. More thoughts below.
