Welcome to How leaders lead where every week you get to listen in while I interview some of the very best leaders in the world, I break down the key learnings of the by the end of the episode, you'll have something simple you can apply as you develop into a better leader. That's what this podcast is all about. Today's guest is Stanley Druckenmiller, the number one investor in the world. Now I know that's a big claim, but get this during his 30 years managing money for investors, he had an average annual return of 31%. And he never, I mean, never had a down year. So if you're even a little bit interested in finance, you're going to learn a lot from Stan, including some really practical investment advice, and his take on the future of our economy. But more importantly, there's a huge leadership lesson to learn. Stan isn't afraid to envision the future differently than other people, he can see trends and patterns, others can't. And then he has the courage to act on him. That's a skill every leader needs to develop. Seeing the future differently, allows us to spot opportunities and prepare for what's coming. If we just go with the flow of what's current will always just be a part of the trend, not ahead of it. You're about to see for yourself how great leaders aren't afraid to see the future differently. So here's my conversation with my good friend Ken soon to be yours, Stanley Druckenmiller.
I can't wait to dig into how you become the greatest investor of all time, and how you lead. But first of all, I know you've got a new puppy at the house. How's the potty training going with auto?
He's pretty good. He's about 24 for 25 everyday, but the 25th episode is not exactly ideal.
You know, as we get into this, people are going to see that you are absolutely in love with what you do. Talk about what you call the happiness quotient.
Let me just say that I like to work probably about 60 hours a week. Now it used to be a lot more. So if you're not happy at work, you're kind of screwed. If you add up the hours during the week, I fell in love with investing really right out of graduate school. I'll never forget my first interview, the guy asked me where I wanted to be in 10 years. And I said intellectually stimulated. I didn't get the job. He thought I was an idiot. But seriously, every event in the world affects some security somewhere. So you're constantly keeping yourself involved with what's going on in the world and trying to figure out the puzzle and envision the world as it might be, as opposed to it his way now. And it's been a love affair from the day I got in the business.
You know, you and I talked the last time we were together about how finding passion can make an average person great. You know, why do you think that is?
If you love what you do, first of all, your work ethic is going to be fantastic. Because you're gonna work hard if you say, Oh, he's a hard worker, man, I really admire him. Well, not really just enjoying himself. And if you work harder than other people in your industry, I'm in a very competitive one. Every time you buy something, there's a seller on the other side. So you better have done your homework, particularly if he's passionate. So I think a lot of his work ethic but I also think you're just going to be better at something if you enjoy it than if you don't enjoy it. I've seen your golf game you love golf. You now the oldest club champion in the history of Shinnecock hills. And I think I'd say 98% of that is your passion for the game?
Well, I think passion has a lot to do with you know, I was like a 2.0 student in college. But then when I got into marketing found what I really loved, everything changed. And I think that's really the point that you're making. You mentioned that we both play golf, and there's nothing like hitting a shot that's close to the hole, you hit that sweet spot, what gives you that same sensation in the world of investing, you know, what's the thing that really keeps you addicted to what you do?
If you envision the future, and you're wrong, is not very fun. It's like shanken, a wedge that really matters on key Hall. But if you envision the future, particularly in a way that others have not, and you bet it big, and it all comes to fruition. It's not so much that you make a lot of money. It's that you figured out a problem and you won and there's the self satisfaction of it. So constantly looking at the world is a collection of puzzles and trying to figure out those puzzles. When you get them right. It's wonderful. When you get them wrong. It's not so wonderful, but you move on I also remember my mentor Spiro strelets. In Pittsburgh saying, you get your grades in the paper every day. There's no hiding in the investment business. The numbers are what they are, you can make up all the excuses you want, at least in golf, you can say it took a bad bouncer did this, that, when you screw up in my business, there's no hiding. And the converse of that is when you do something, right, you have the self satisfaction knowing you figure it out. And I'll also say that, while I had clients, there was nothing better than making people money, other than their spouse and their children, you're, you're a really important part of their life is also miserable when you have draw downs. But to start with a lot of small businessmen like I did and doctors, and be able to contribute to their lifestyle later on. That was extremely satisfying.
I want to take you back, Stan, to your upbringing. Tell us a story from your childhood that really impacted the way you lead today.
Oh, that's a tough one. I my parents were divorced when I was six, and they split the children. So I was kind of shy and withdrawn. But I mean, one funny story is I used to travel on the train from Richmond, Virginia to Philadelphia to visit my mother. And the servicemen would be on the train. And I used to play poker with him. And I was only like 11 years old. And I used to win. So I kind of got addicted to gambling with an edge, which is what I do for a living. So maybe that impacted But to be frank David, I had no idea I was going to end up in the investment business. I was an English major, I thought I was being an English professor. Then I took economics so I could read the paper intelligently than I thought it'd be an economics professor. I went to graduate school, I hated it. So I kind of ended up in the business by default. And after about three or four different things, I never thought about investing on my way up and my childhood. Gambling, yes, investing. No.
I had a lot of fun, you know, learning about you and doing my research. And one of the things I learned was it didn't apply to any of the Ivy League schools. I was really surprised to learn that. Why is that?
Because I got 590 on my English essay T boards funding because then I was dumb enough to want to become an English major. My math was a lot better, but I knew I just didn't have the numbers to get an Ivy League school. The reason I applied to Bowdoin it was the best school in the country that didn't require SATs. So I knew they wouldn't hold that against me. I'd like to say it hurt my confidence. But I didn't have a lot of confidence going in that all developed later on when I took economics.
My understanding is you had your own startup, when you were at Bowdoin, you, you actually started a little hotdog business. So what do you learn from that experience?
I loved it. I mean, you probably know this, David, but my partner was Larry Lindsey, who ended up being the chairman of the economics under President Bush. So that was kind of an odd thing. But we bought a little hotdog stand and we serve these guys in Bath, Maine, who were the iron workers that come out. I made the sauerkraut overnight, he made the chili. I couldn't stand sauerkraut for the rest of my life. I can't even eat it now smelling it all night. But it was a little bit of an entrepreneurial thing. And I'm not sure what I learned from it. I I enjoyed physical labor a lot more. That was the only job I had before I went to the bank that wasn't physical. But we had we had fun.
That's interesting, because when I was in college, I had little hot dog business and you know, basically in a boil a hot dogs until they exploded, and we call them exploding dogs. You know, so you mentioned earlier, you go on to get your PhD, you go to Michigan, but then you dropped out after two semesters why?
You know, I loved undergraduate economics, you think on the margin, the invisible hand, all that stuff. Graduate economics are trying to jam the world into a mathematical equation. And I just didn't think it fit. I think I've been proved right on that when he looked at 800 PhDs at the Fed and their predictive record was not so good. But I didn't want to go into math. I wanted to go into sort of figuring out the world and I just didn't think the world could be stuffed into a mathematical formula. And the problem is, these people believed their models. And there was just no way so it wasn't for me.
I thought you actually started your career as a stock analyst. But I was surprised to learn from our good friend Ken Langone that your first job was as a Lending Officer at PNC and he he said you weren't any good ad it is that true?
Well, part of it's true. I was so bad. I didn't even get the job as a Lending Officer. So the route to landing officer which is the job at a commercial bank, is you go through this training program. And the key to the training program is the credit part. And I finished the program. I thought I was pretty good and the head of credit called me in and he said, Look, your brain is fine, but And in terms of being a Lending Officer, you got to be able to sell to people. And with your personality, you couldn't sell snowmobiles in Alaska, there was no other form of transportation. So there's a guy up on the 30th floor who runs trust department. And that's more just a numbers business. And maybe that's where you want to go. Because I can tell you right now, with your personnel, you just can't sell. So I didn't even like fail at the job. I didn't even get the job.
Okay, I didn't know that. Well, you then get into equities. And you become the head of equity research, which was the number two position in the firm, you did it at the age of 25, which is hard to even fathom. How did that happen so quickly, Stan,
it's more a comment on my mentor that on me, he was sort of like a mad genius. And he liked to do radical things. And I think there were 10 of us 10 research analysts and the other nine had MBAs. And I'd say their average age was between 30 and 40. And he calls me in one day, and he said, Stanley, I'm gonna make you a director research. You want to know why I go. Sure, Mr. Drella. So he says, For the same reason they sent 18 year olds to war. I looked at him, I didn't know what the hell he was talking about. And he said, Yeah, because they're too dumb to not to know to charge. This was 1978. He said, the rest of us have been in a bear market for 10 years. And we got scars, you can't see him, but we got scars, nobody here can pull the trigger. And I need somebody with a fresh mind, that's too stupid not to no charge. Because I think we're gonna have a great bull markets pretty good call, by the way, the Dow was 800 at the time, and he put me in charge. And that's how it happened. But it's more because he likes to sort of think out of the box and break the mold. I don't think a normal person would have promoted me wasn't so much my talent is luck.
That had to teach you a lot. And another thing I know they had to teach you a lot is that all of a sudden, you're in a situation where you're managing 30 years old, 40 year old people. You know, I remember coming up and getting managerial jobs and have an older people working for me, that was really hard. How did you work through the anxiety of actually managing these people?
To the credit guys point who said I couldn't sell snowmobiles in Alaska, I'm not sure they were too thrilled with my getting the job. And it got worse. The guy who promoted me, as I just said, was a bit of a maverick, and he lost his job. So now I was here all alone without a protector. And I was insecure, and anxious. But then something really fortunate for me happened not so fortunate for some of the United States, I ran, took all these hostages, and I'm like, 26 years old. I'm too dumb not to know to charge. And I said, Well, this is easy. Let's put 70% of our money in oil stocks and 30% of money in defense stocks. And the people with more experience going, what the hell, you can't put 70% and 30%. That's like, ridiculous. And frankly, had I been 35 years old, had no experience, I wouldn't have done it. But my portfolio went up 100%. And the s&p was flat because the only thing anybody wanted for the next two years were oil, and defense stocks. And that just kind of set me on a path where AI gain confidence and be I gain the confidence of the people in the department.
At 28. You decide to go out on your own you start Duquesne capital, you're on this incredible run at PNC a very reputable bank, you seem to be kicking ass. And now you leave and you start your own company. What gave you the courage to go out on your own and leave that comfort zone?
Well, this is an unbelievable story. I'm up in New York. And I'm the Head of Research at PNC. And I'm talking to one of these tout dinners. You know, everybody touts whatever it is they own. And I give this presentation on gold. And this guy comes up to me afterward and he says, You don't sound like you work at a bank. And I said, well, thank you. And he says, Why don't you go out on your own? And I said, Well, basically because I'm worth about 20 grand, and I don't have money to go out on my own. He says, Why don't I pay you $10,000 a month. And all you have to do is talk to me. And then you can try and go raise your clients on your own. So I figured it was a no brainer. I'll do this. And if I get fired, I can go get a job. Like the one I have. The bank was only paying me $43,000 a year. And by the way, I had a lot of people working for me who were paid a lot more This was back to what you mentioned earlier about me being 25. So I started this company by the way that was Joe Osorio of Drysdale securities who then had one of the most spectacular bankruptcies in the history of Wall Street and ended up going to jail two or three years later, but that's how I got the confidence. The guy just gave me a you know, an offer I couldn't refuse.
What about So what do you give others on how to make a move like that?
I think you have to weigh everything I was 28 years old, I was single, I looked at the risk reward, the risk was there. But what's the worst that can happen? I'll go back, you know, get another job, as an analyst probably won't be a research director. If you have a family, and you need income, which I didn't, because I was all by myself, it might have been a different decision. But I've always been a risk taker. And if you don't shoot for the sky, you're not gonna get to the sky,
your firm Duquesne capital, it just takes off. What did you do to unlock value for your clients in those early years? What were you looking at that most people weren't?
Well, again, I got lucky, not dissimilar to the Iran story, Volcker had just come in. And all of Wall Street was talking about inflation going to 25%. And bonds, I think, yielded like 14%. And nobody wanted anything to do with bonds. But I watched this guy give a talk. And I said, Oh, my God, this guy is a maniac. And he's gonna do whatever it takes to break inflation. And he raised rates to like 20%. And I think inflation was 12, or 13. So in my mind, he was going to crush the economy, he was going to crush inflation. So I put 50% of all our money into 30 year bonds and the rest of the cash I own no equities, which was heresy. And we went into a terrible recession, the bonds never traded there. Again, it was the luck of the draw, because trust me, David, I for 30 years, there were plenty of times if I had started in different moment, I would have had a bad year, and I probably would have gone out of business. But it was just a rocket ship, particularly relative to what else was out there. So it worked out well for me.
And then you know, Dreyfus comes along, they look at you as this money making machine, you're getting these great returns, and they entice you to join them. And you get to continue to run your own firm. You know, how did you pull that off? That seemed to be an amazing feat?
Well, I just told him, that's the only way he could have me. I actually it was easy to go to drive. Because being 29 years old, no one believed my record. They thought it was made up. And so I couldn't raise any money. Or maybe it goes back to the snowmobiles in Alaska story. But I needed to go to Dreyfus, because I wasn't getting the clients. I had this fabulous record. But for whatever reason, I go and give a presentation and think how smart I was. And then I'd always get the same call back. No, we're not giving you any money. But the same thing happened that happened with a sorry Oh, guy from drivers heard me at a at a tout dinner. And he talked Howard Stein into taking me, Stein fought very, very hard for me to give up Duquesne. But I always knew I was going to end up running my own firm, and I was running my own firm. And it was a no brainer for me, but I just told him, I wouldn't do it otherwise. So it's how I pulled it off.
I guess when you're a superstar, you can do those kind of things. Well, I
wasn't really a superstar, but maybe I thought I
will be back with the rest of my conversation with Stanley Druckenmiller in just a moment. Stan and I both have learned so much from the great Ken Langone, the co founder of Home Depot, Ken believes deep down in the power of people. And when he joined me on the podcast, we talked about helping others succeed. And that's ultimately how we succeed too.
If we do nothing more than bring people to the realization that they're capable of so much more, being a better person having solid value. See, these are all attributes, that if we can inspire them to people, when you unleash that force, there's no one to where Linda,
don't miss my entire conversation with Ken Langone episode 89 here on how leaders lead.
So you you go to Dr. Fish, you take over five funds, and they all do at least 40% growth. It's unbelievable. What was the soundtrack that was playing in your head? I mean, what were you telling yourself at that point in time,
as a teenager, I wasn't very confident. And now I was brimming with confidence. By hindsight, probably too much confidence. I think I was probably a little fool of myself. But I was just so in love with a business. And my growth curve was learning so fast because I had now expanded into currencies and commodities. I mean, I cared about my performance, but what I really cared about is how fast I was learning and how fun the business was. When was
it then Stan that you teamed up with the legendary George Soros? And how'd that come about?
Good question. So I read his book, which apparently no one else understood, but there was a chance I'm on currencies that I've found. Absolutely fascinating. This was August of 87, about six weeks before the crash. And I called him up. And I said, I read your book, we had lunch, he offered me a job at lunch. I found out later, he offers everybody a job. And the ones that take it, he then fires some shortly thereafter, we started a dialogue, really about daily right through the crash. And it was another one of those things where I actually predicted the crash. I've been wrong plenty in my career. So again, it was just luck. He was on the wrong side of the crash. So then he started making me all these ridiculous offers. Then the guy at Dreyfus only paid me a million dollars. And I was running five funds, and one of them was number one in the entire industry. So I went over to George about nine months later, I had four or five sort of business mentors. They all told me, he was a maniac, and whatever I did not to take the job. But my wife told me to take the job. And she was very complimentary of my skill set. And again, like when I started my business, I figured what's the downside? This guy is going to fire me in a year, but then I'll still have Duquesne. Same thing. I didn't give up Duquesne. A funny story, David, which probably didn't find any research. I went for lunch right after I took the job at his house in Southampton and his son was there. And his son said, congratulation. Cheers your successor, number nine. He retired six years ago.
Now, can you tell us a story about how Soros managed people and how he held him accountable.
He wasn't that hard to get a job with, but he was hard to keep a job with. And if you didn't perform, he didn't think twice about firing you. And as I said, I was as nine successor. I heard a couple of stories of my predecessors successors. But the most amazing one was some guy had let me say he was doing an okay job, but not up to Georgia Standards. And a new guy came in and had a spectacular success. Georgia basically just called the current guy in and said, We found a better guy, you're superfluous now. But he treated his employees a little bit like stocks. He was wonderful with me. I had tough periods there, draw downs. And he was extremely supportive when I wasn't doing well. And when I was doing extremely well, he was also good. And he sort of like wanted to bring me down to size a little bit and when I'd start getting a big head, so with me, he was terrific. And I had a great 12 years there, I really did.
Now, I know you've told this story a million times, but indulge me tell us the story of one of your most famous investments when the Berlin Wall came down?
Yeah. So when the Berlin Wall came down, the Deutsche Mark actually got trashed for a couple days. Because the conventional wisdom was the US mark, which was the East German currency, which was basically a bunch of communists was going to unite with the Deutsche Mark. And think about it polluting this precious thing. But what I saw was a labor supply and tremendous growth ahead, but with probably a lot of inflation. But I had studied Germany I had studied the Weimar Republic had always been kind of fascinated with how they got to hyperinflation. And I knew come hell or high water. The Bundesbank would not allow inflation. And I knew partly from the chapter I had read in Soros his book years before, that, if you have a strong economy, and a central bank, that is radically raising interest rates, present inflation, your currency is going to go up. So for two or three days, the Deutsche Mark got trashed. And I just kept buying it and buying it. And it worked out well, obviously. And then over the next four or five years, we made a lot more money because we shorted the Italian lira against it, which broke, we shorted the British pound against it, which broke, we shorted Swedish kroner against. So it's just a succession of waterfalls, of all these currencies linked to the Deutsche Mark. But their economies weren't linked to the German economy. So it was a singular case of a very strong economy with a very fanatical central bank. And if you were linked to that currency, you were kind of in a tough situation.
As the head of the hedge fund, you pull the trigger on all the investments, but you have analysts and consultants working for you, you know, a lot of hedge fund guys that I know are reputed for being screamers, you know, what's your management style?
I learned a little bit from my first boss. If you have a great performer, get out of the way and let them run and then I learned from my own experience Hence, if they're having a difficult time, don't scream at them be supportive. I can see why Vince Lombardi is screaming at an offensive lineman why it might be effective. Do you think it would be effective if you had the gift of I screamed at you every time you missed, because investing is an emotional business. And the last thing you want to do is parade somebody who just effectively emotionally choked, which are your worst trades, that's when they need your support. So my management style was pretty much to try and be supportive when they were having hiccups. And I would also say, for 30 years in a row running that business, I never went a year without firing anybody. And we weren't a big firm. So if there weren't performing, we just moved on. I never enjoyed firing anybody. I never slept the night before. But I did it if I thought it was right for the business.
You don't understand you quit working with Soros in the quantum fund in 2000. And then you went back to running Duquesne capital 100%, after taking a sabbatical with your family and Africa. Tell us a story about how this came about what took you to that point where you needed that sabbatical?
So in 99, the new Internet stocks, Yahoo, Amazon, and 10 stocks you've probably heard of, but you've forgotten them, because they all went bankrupt, they'd gone all up about eight or 10 fold. The Fed was easing, things had gotten really stupid. So I shorted a basket of about 12 of these things. I did not short Yahoo or AOL or the established winners. And I basically took a $200 million position the quantum fund. And in one month, 200 million turned into a $600 million loss, it went from 200 million to 800 million. I couldn't get out. So I licked my wounds. And I was someone who had been unbelievably spoiled by success. So I found myself down 16%. And I'd never been down more than five. And I hate to admit that I was a basket case, I was an emotional wreck. So somehow I kind of think things through and by June or July, I decided, Oh, well, the Feds going to continue easing because of Asia and Asia has nothing to do with us. So then the money will run me stocks. So now I actually embrace the bubble and all these technology stocks. And I ended up the year 42%. But I know it's crazy. So I go into sorrows in January of 2000. And I said, this is nuts. These things are selling for like 150 times earnings, the ones that even earn money, and I'm selling everything, and I do sell everything. But then for the next six weeks, the market goes straight up. And I've got two kids I have hired to buy technology stocks with names I never heard of that I don't understand. And they're literally making like 5% a day with a small amount of money. And then I commit the cardinal sin in money management, I get emotional. And I'm watching these stocks go up every day. And you know, those those little cartoons, the Devils on this shoulder and the devils telling you to do it and the angels on the other shoulder tell you don't do it, don't do it. Well, every day, I want to pick up the phone and buy the market because I just can't stand that I'm missing out on this. Finally I do I'll never forget because we're about an hour from the top like the top of the.com bubble. And the market reverses like the next day, and I know I'm wrong. And a week later, I'm in a whole world of hurt. And I go into sorrows. And I go, I think we've gone from like 15% on the year to flat in a week. And I go, I can't take this anymore. I'm burnout, I'm exhausted. I said I need a break. And I'm going to resign. He accepted that by the time I got out of all this stuff. Here we are again, we're down 18%. And this is May, and I am a complete emotional wreck and mess. So I decided to go on a sabbatical. And I write a letter all my Duquesne clients said I'm going on a break. I don't know when I'm coming back. I can't even promise you I am coming back. You can have all your money back. Or you can leave it in cash. So what I did is I took a real break. I didn't read the newspaper. I didn't know where the market was. I wasn't allowed to watch TV. Not only did I go to Africa, I would play golf and read books but nothing financial. And then I came back four months later, extremely refreshed.
I want to get to what happened after when you came back refreshed. But when you're on that sabbatical, did you have a aha moment about your own self and your own being that that you wouldn't have had if you wouldn't have taken that time alone?
I'm almost embarrassed to admit this. It sounds so trivial But I went to an IMAX movie about Michael Jordan. And I can't remember what was in the movie. But somehow, during that movie, I decided that this was just a bump in the road, and 25 years or whatever it was, at the time, 20 years couldn't be an accident. And I needed at some point to come back to the business, because it's the only thing I'm really good at. And I did feel I had a special gift. But for some reason, I walked into that movie, feeling sorry for myself and depressed, and I walked out of that movie, going, you're so fortunate to have been given this gift, and to sit here and wallow in your misery, you ought to be ashamed of yourself. And that was kind of a turning point for me. And about four weeks later, I went back to work. So you come
back to work with a fresh perspective. And then what happens on the investment front, then,
while I'm gone, the s&p has rallied way back, the NASDAQ has rallied way back. So I pick up the newspaper and I see this and I go, Oh, my God, and then I see that the dollar is up, interest rates are up and oil is up. What whenever the dollar is up, interest rates going up, and oil is up. Historically, that is not good. Looking forward. So now I start calling all my clients. 200 of 201 stayed with me. And all their businesses aren't doing very well either. Then I start calling around so there's a famous Wall Street economist named Ed Hyman. So I go ahead, I'm, I'm shocked. Everything's going crazy and oil is up, interest rates are up and the dollar is up. And he sends me a regression analysis with oil, the dollar and interest rates. And it leads s&p earnings by a year. And it's predicting any year s&p earnings are going to be down 36%. And Wall Street analysts are predicting they're going to be up 18%. So I short the market. I buy all these treasuries betting on a recession. I started the fourth quarter down 18%. I had written off my record of never having a down year figured it was over wasn't trying even and ended up making 40% in the quarter. And I will tell you, had I not taken that sabbatical, and wallow in my misery all summer and try to trade my way out of it. I would have missed this entire trade that I just described. Well, I
think I'm gonna put a sabbatical. Right now, how do you keep a fresh perspective today? You don't take a sabbatical every year? How do you keep that perspective fresh today?
It's hard. You go through a rough period, I just have to keep reminding myself that this has been going on for 40 years. And things will get better because I get cold. You know, and in golf, you see some of the greatest putters or players in the world. And they have they have terrible streaks, and I still have them. I would also say I'm a lot older, and I'm a lot less risk averse. So that kind of tempers my gains and my losses relative to back when I had clients.
You know, I love Stan to learn how leaders think in big moments. And while everybody went down, almost everybody went down in the financial crisis in 2008. Again, you made a ton of money, you know, how did the stars align? And how did you think through that?
That was pretty easy, and I had a lot of conviction. Again, I think one of the big sins of the Fed, which we just relived again, is they tend to keep monetary policy too loose, for political reasons when the Punchbowl should be pulled away. And by Oh, 506, I looked at a 50 year trendline of housing, which, unfortunately, you can't see it through a microphone. But think of a steadily rising line 3% a year with very little variance around that line for 50 years, and then all of a sudden, it shoots straight up in the sky for four or five years. So you're clearly in a bubble, like nothing we've ever seen. And then this analyst comes in to me from Lehman Brothers of all places. And this is May of oh five and he lays out to me their subprime calendar and he says, There is no way this thing can last past the third quarter of oh seven. This guy's like a math genius. He's got the whole schedule lined up and he says all hell's gonna break loose. And I gave a speech at the our son conference. It's basically plagiarizing everything he told me and predicted the whole thing. And then oh six was a frustrating year David because everybody else was making a ton. And I was short betting that the world was going to come to an end. I think it was up 5% my competitors are all up 10 or 15. But then in oh seven when all hell broke loose, we were well positioned. But it was a store of bubble. It was obvious just because housing prices went up for 50 years every year, doesn't mean they're going to continue to go up if all the circumstances of change, people had borrowed $800 billion against their homes, and they were flipping them and doing all this crazy stuff, it was kind of obvious.
And then in 2010, you decide to end your Duquesne Capital Fund, return your clients money and invest your own money. That's a huge deal, big change. As a leader, how did you come to that decision?
I looked at the history of successful money managers, sorrows, Steinhardt, Bruce Kovner are some of my idols, by the time they hit late 50s, that kind of burnout, it doesn't make any sense. I know why a golfer is better at 28 and 58. But you would think with all this wisdom, you'd be a better investor. But you lose your risk appetite, or your enthusiasm or your ability to work as hard. I don't know what it was. But I could see that I was not the manager I was 15 or 20 years ago, and I was starting to lose it. And frankly, ego wise, I was worried about destroying a great record. And I became obsessed with the fact that I never had a down year and wasn't willing to take the risks I should be taking because that should have absolutely nothing to do with any trading and make. And it was time it was 30 years. I didn't want to compete anymore. I want to I want the intellectual satisfaction stimulation, but not the fire of competition that I once had. How do you look at competition, Stan? Well, as you know, cuz you know me, I'm, I'm overly competitive. I know that it's a sickness, it's the disease, but it's not what I can cure. I'm, I'm born with it. And I just gotta channel it, and realize that I'm sick. And I'm an overly competitive person. And I try and work around it and do the best, but obviously has advantages. Everyone's always said to me, what makes a great money manager. And they're always astonished. And my first answer, I said, they're all overly competitive. It's like, that's rule number one, which goes along with the passion you mentioned earlier, because they're passionate about competing, they're passionate about the business,
you openly tell others that you have a bearish, sometimes pessimistic mindset. How do you manage that when it comes to the decisions you make?
Well, I just have to know my own bias. So I'm constantly fighting my bearishness about the world and one of the great hedge fund managers of all time, Bob Wilson, the greatest short seller ever, he said he made 90% of his money on the long side, the math just works against you. If you're perfect on a short, you can double your money. But if you're wrong on a short, you can lose 10 times your money. If you're dead wrong on a long you lose your money. But if you're right, you can make 10 times your money. And it's a mathematical inverse of that was shorting and I don't have to be a rocket scientist. I know, therefore, that if you have a bearish bias, you have to be very aware of it. And you have to work around it. And I always have, you've got
a real strong self awareness of what your strengths and areas of opportunity might be. What advice can you give to others on how to build that self awareness because a lot of people kind of put their head in the sand on their own being
these successful people have all failed, they learn from their failures, probably the most famous commencement speech ever was Steve Jobs speech at Stanford when he talked about failure. And I would just say that, a Admit that you've had failures, and then go back and analyze those failures, and why they happen and learn from the people that aren't self aware, look, self aware of people like myself, and I do think I'm self aware, I've had a lot of failures. But I use them to learn from as opposed to pretend they didn't happen if you pretend they didn't happen, they're going to keep repeating themselves. So I would say that's the main thing is admit your failures, and then learn from their failures.
You know, I recall, eight or nine years ago that you toured college campuses, urging reform and taxation, health care, Social Security. Why did you feel compelled to do that? And what did you learn from getting out there with the students?
That was the most incredible experience? Look, I knew since 1994, because I looked at the demographics of the baby boom. And I looked at what our government was doing, that we're gonna have a problem sometime between say 2020 and 2030. So this was like 15 or 20 years before that, that when the baby boomers turn 65 You're gonna have all these people not earning any money anymore, but collecting Social Security, Medicare, all this stuff. So I knew we had a math problem. I waited until when I did because the spending boom that occurred after 1994 alarmed me, the most amazing thing David was I started at Bowdoin, I went to really liberal places like Brown, Berkeley. And then I went to places like North Carolina, USC, Notre Dame, I thought I was gonna get absolutely annihilated at the left wing places. And the students all loved it. They were all like, insanely in favor of it. And they got it because I presented the picture that we're not talking about just paying seniors we're talking about instead of calling them young people, future seniors not having any money so they can enjoy retirement. So it was more about a wealth transfer. And then I showed them how the government had started the internet, they'd started GPS, and the government wasn't making any of these kinds of investments anymore, because they were all going to transfer payments. But the most shocking thing to me was just how incredible the students were. But it was kind of like, and this is not shocking to me, because I was in college once too. It lasted for a couple of days. You know, you get them all worked up in the meeting. But then there's no follow through. And then of course, four years later, it was very discouraging, because the only thing Hillary Clinton and Donald Trump agreed on was we can't touch entitlements. And now you've got Biden screaming about entitlements, like you're going to be screwing old people. You're not going to be screwing old people. You're going to be screwing future old people. But no one frames it properly.
Stan, you still took that time you still went out to all these colleges. You know, what made you do it and what compelled you to do it. You had a great story you want to hear but why did you Stanley Druckenmiller say, I got to take this upon myself and get out there and get this message there.
I don't know you remember, I was a failed English professor and a failed economics professor. I wanted to teach and I felt I had a particular insight here. I love America. And we just can't keep doing this. And you keep eating your seat corn. Eventually, it's going to hit one day. And I just saw this tsunami coming 10 to 15 years ahead. So far, it hasn't hit by the way the fundamentals that I outlined, they've all gotten worse. What bailed you out was zero interest rates don't matter how much debt you have. If you're not paying anything on the debt, no one cares. It will be very interesting. If the Fed and rates do go to four, four and a half year, because the bills that I talked about, they assumed a 4% interest rate. That's why it hasn't hit yet. Because rates weren't four, they were zero. But I'm I'm more concerned about it than I've ever been. And I just felt I had an obligation to ring the bell for other people listen to I rang it, they didn't care. So I went back to my home.
People do listen to what you have to say. You know, we talked about this already. We both love golf. But I also know that you happen to be a huge Pittsburgh Steelers fan, which I know you almost bought the Pittsburgh Steelers Could you tell us that story?
I guess Pittsburgh has always been a love affair with me. I moved there right after Michigan it was a blue collar town. There was a work ethic there and a working man thing that kind of appealed to me. And when 2008 hit, I was worried about the city. And I thought it would be tremendous a I'm passionate about the Steelers. I'm passionate about the city. But the man who really made the franchise, Dan Rooney, who was art the chief son, he was dead set against it. And he didn't want it to happen. And all sorts of forces were put in place. And it got messy. And you know, I didn't really want it that bad. I could have had it. But it all worked out because the minute I withdrew, Uber, Microsoft, Google, They've all moved to Pittsburgh and Carnegie Mellon is sort of like a mini Stanford. So Pittsburgh, is growing tremendously.
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Stan, I've learned you've been and successful by following a number of concepts. And I'd like to talk about a few of them just get a quick snapshot of how you think about these things. I've called them Drax nuggets again. And nugget number one is do not invest in the present. Give me a for instance,
I learned this way back in the 70s. From my mentor drill us, I was a chemical analyst. So when should you buy chemical companies? Traditional Wall Street is when earnings are great. Well, you don't want to buy them when earnings are great, because what are they doing earnings are great. They go out and expand capacity into a bunch of capital spending. And then three or four years later, there's over capacity and they're losing money. What about when they're losing money? Well, then they stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So you always have to sort of imagine the world the way it's going to be in 18 to 24 months, as opposed to now if you buy it now, you're buying into every single fad every single moment. Whereas if you envision the future, you'll again trying to imagine a world how that might be reflected differently in security prices.
Nugget number two, put all your eggs in one basket and watch it very carefully.
Well, that's a plagiarism of Mark Twain. But absolutely, if you look at all the really great investors from Warren Buffett sorrows to icon, they don't have 200 Big positions. They take massive positions in something they really believe in. Or think about this. Ken Langone with Home Depot. It's not a law that he needed to keep owning Home Depot. But he knew Home Depot really well. He knew what he had. So that's what he did. Or Jeff Bezos, he didn't need to own all that Amazon, but he could have diversified at any point. So if you know something really well, and you believe in it, and I also say it imparts discipline, if you have massive positions in something, you're not going to have what they call in my industry lazy Long's where you're not really paying attention and you get blindsided. If you've got a position that's really going to hurt you when it goes down. Human nature, you're going to watch it thing much more carefully.
druk nugget number three, if you have an idea, invest quickly study it more later.
I think I stole a phrase from Soros, even though I was already doing and he called it invest and then investigate. And that's become much more true as time has gone by. Because when I got in the industry, two people in my class of Boden went to Wall Street and 75. By 2000, most of the hot shots in the Ivy League were going to Wall Street's with things have gotten much more competitive information has gotten much more competitive, it's gotten quicker, we got the internet. So if you get an idea, and you wait two or three weeks, while you're analyzing it to death, a lot of times the stock will already moved during those two or three weeks. And then God forbid, you're paralyzed, you can't buy it, because you saw the stock at 100. And now it's 150. So if I have a good concept, I buy it, do my work. And if it doesn't work out, if my concept was wrong, I get rid of it. Because we're in a world of just very, very fast moving information and security prices reflected.
You also believe another drakh nugget is that you need to be looking at leading and lagging industries, you were one of the first really take that approach to investing. Talk about that one.
My macro approach to the economy has always been looking at businesses, as opposed to statistics, like unemployment figures are all the stuff that the PhDs look at. So if you've got a business, like housing that leads or retail that's coincident, or trucking that leads, I have found that if you get into management, and even one level down from top management, and he talks about the trends, and if all those leading industries are really really strong, the economy is probably about to turn up and do very well and vice versa. If housing is weakening, and trucking is weakening, usually the economy is not going to have a good future.
You know, and I love this truck nugget. be imaginative around what could go wrong. What's your process for doing that? DRock
my first boss drawl us what's the obvious is obviously wrong. And it's already reflected in security prices. This kind of goes back to the invest in the present. If everything is rosy, it's already in the stock price. And already in the market. There's nobody left to buy. So you have to constantly be evaluating what could go wrong, but I'll turn that on its head you also have to evaluate what could go right. And it's not an accident that almost every stock market bottom happens during a recession and during lousy earnings. And every top happens with consumer confidence high, not low, the world changes, and you're only going to pick up change. If you're opening your mind up to how things could be different, whether it's better or worse.
But another nugget, just watching what you've done is you're very dispassionate about your decisions. And that's hard for me to really Fathom because I'm a pretty emotional guy, and he gets so focused on your decision yet, you can like change your mind in a hurry.
Look, I feel the emotion. So don't think I'm like, dispassionate, I feel the emotion. But I've learned through experience, just move on. And so yeah, I would say in actions. I'm extremely cold blooded, for an investor. But trust me, I'm feeling inside. It's sort of like watching Patrick Cantlie play golf. He looks like he's on autopilot. And he doesn't care. I would guess a lot that that is that young man is feeling it. But if you can control your actions, as opposed to what you're feeling, that's the only thing that matters.
You know, I want to shift gears a little bit, just talk about what's going on today, you know, because I think everybody would kill me. If I didn't ask you. A year ago, you predicted the high inflation we have right now. And at that the markets would correct and you were right, once again, what do you predict in the next few years?
Yeah, let me start by saying the cold emotion we just talked about, I changed my mind a lot. So it's always dangerous for anybody to listen to me because I can be in love with something on Friday. And then on Wednesday, I'm actually short it and said, well, drug said this or that. So that's qualifier number one, qualifier number two is probably more important right now. We've never seen an environment where you had the gap we have now between monetary policy and inflation. And a lot of my gig is to go back and find historical analogues and see how they worked out and learn from them. This is the most unprecedented cocktail I've ever been served up. So I have more humility than I've ever had, in terms of a forecast. In fact, my positions reflect that they're very light, not because I'm scared, just because I can't see a fat pitch, I can't figure it out. We've borrowed so much from our future. And with corporate profits at an all time high here, and interest rates, presenting a challenging situation. It's just hard for me to envision that we might not be ending the secular bull market. You know, on TV, I heard a guy this morning, say, but I'm really bullish on the long term. I'm actually not really bullish on the long term. I mean, anything could happen over 18 or 24 months. But what I'm worried about is like a 68 to 82 period, where you go up and down three or four times, but you basically go nowhere. I don't know, that's enough of a Dodge. But that's my answer.
You know, one of the things he said that I thought was really interesting that after we had the recession in 2000, and he said that it would take about 40 years for us to have something like this happen again. But you know, Dolly Parton song, here we go again, I mean, it happened a lot earlier than what you might have imagined. Why do you think that is?
Well, what I was talking about was a financial crisis. And to be fair, we haven't had another one yet. But it's a great question. Because the reason it takes so long between crises, is because the public learns from the catastrophe, and they get withdrawal is called scars. And it takes him a long time to screw it up again. But Bernanke threw so much firepower at the thing. And then, oddly, for the next 10 years, when it wasn't really necessary. The Fed has continued to throw firepower at the thing. So instead of taking 30 or 40 years, for people to get their speculative juices all turned on, again, zero rates for 10 or 11 years has set up a potentially dangerous situation that I could have never imagined 10 years ago, we'd be in this position. But it's basically the policy response has been unrelenting. We've never had a policy response like this. In fact, Bernanke bragged about the fact that the policy response in the 30s was and I applaud what he did and oh nine, but the fact that we've continued to use emergency measures until the last nine months when there was no emergency. Every big economic problem I've ever seen as proceed Need to buy an asset bubble 29 Here 89 In Japan, oh seven here and housing. So to have a really big problem, you need an asset bubble. And these guys created the biggest asset bubble I've ever studied in the last five or six years, crypto meme stocks, equities, credit bonds, this isn't necessarily going to happen, but that's why I'm scared.
We've got what is basically a G two economy now in the US on one side, China on the other. How do you see that playing out?
Well, the answer is I don't know. But I think she doesn't understand what made China great the last 20 or 30 years, which was Deng Xiaoping moving toward free market reforms, letting these entrepreneurs flourish, this common prosperity thing and going back to Maoism and communism, I'm not as high on them as an economic threat as the consensus. I am concerned that they're a geopolitical threat as an autocracy that's building a lot of military. But the economy, they seem to be moving in all the right directions pre G, and they seem to be moving in all the wrong directions now. So I'd say relative, the consensus, they remind me not as extreme but a little bit of all the predictions that the Soviet Union was going to surpass us, at the 60s, and Japan was going to surpass us in the 80s. I still think, despite all our problems, we have a good chance of remaining the king of the hill.
Besides being so renowned as an investor, you've been widely recognized as one of the most giving people in the world, you co founded the Harlem Children's Zone, tell us how that cause touched your heart and how it came about? Well, like
you, David, I've been lucky enough to live the American dream. And I believe in the American dream. But when I joined the Robin Hood board in New York City, it became quickly apparent that the American dream is not open to, I'd say, 5% of our population that are these pockets in these inner cities and these neighbors that aim to have to be an inner city, we've got some in Kentucky that aren't in the inner cities, you know, and I just passionately would like to help that not be the case. And when I met Jeff, Canada, I knew he was maybe the most extraordinary leader and person I'd ever met within an hour. And he came up with a dream of the Harlem Children's Zone, which was kind of leveled the playing field for Central Harlem, not guaranteed outcomes, but guaranteed opportunities. So these kids would have a chance to have a shot. And that's why it touched my heart.
That's great. And you and your family, you've been just a huge investor and you know, looking for the cures to cancer and where we've made a lot of progress. And you're also big time into neuroscience seeking a cure for Alzheimer's and dementia. What do you see happening on that front?
So cancer, we're already moving rapidly up the S curve. And I think the discoveries in cancer cure the next 10 or 15 years are gonna blow your mind. They've already been amazing. The last 10 years, we had basically shooting chemo into people for 50 years. And then 10 or 15 years ago, we figured it out. And we got AI, we got genetic sequencing, we got immunotherapy. So I'm very bullish, near and intermediate term on cancer cures, neuroscience, thank you S curve, but you're still down on the bottom part before it rises. But it's sort of the last frontier of the brain, between Alzheimer's, Parkinson's, ALS. And I just believe in human ingenuity, I see the sciences being applied there. And we've invested a lot in basic research. And we talked a lot earlier about failure. You're gonna fail at basic research for a long time before you get the solutions. But I believe that neuroscience is probably 10 or 15 years behind cancer and that, hopefully in 20 or 25 years, we'll be seeing in these brain things kind of thing. We just talked about cancer.
Well, thanks for everything you're doing on both those fronts. And, Stan, this has been awesome. It's been a lot of fun. And I want to have some more with my lightning round of q&a. Are you ready for this?
Probably not.
What are three words that others would use to describe you?
Abrupt? Dry, and I'd say competitive.
If he could be one person for a day besides yourself, who would it be and why?
Probably Jeff Bezos five years ago before he went on the bench he's on now because I think he invented the greatest company I've seen in my lifetime and brought so much change to so many of our lives. What's your biggest pet peeve? I would say what's happening. I hope it's temporary with the work ethic and the culture in the United States Post COVID.
What would you be if you weren't an investor?
A failure? My mother in law's says, I'm an idiot savant. And I totally agree with her.
What's something about you few people would know?
Probably that I have, you know, extreme bouts of emotional anxiety in terms of my investing career.
What's one word you'd use to describe being a parent?
Just joy.
What's one word used to describe being a grandparent?
More joy. It's the words
that your best golf coach and why?
Well, I'm going to cheat and give you two but Phil Robertson. I needed a major heart surgery and he started from the bottom up, took me but if, if you're even a decent golfer, there's nobody like Butch Harmon,
your predicted 2022? Pittsburgh Steeler record?
nine and seven? If you could boil your superpower down to one word, what would it be? I would say, Dr. Stan,
you've made so many decisions. What do you think is the most important decision you've ever made?
Oh, not even close when I'm married Fiona. Unbelievable partner, unbelievable. Mother, I have smart children because of her. She keeps me grounded.
You know, I think both of us have been blessed. And we have incredible families and in different ways, you know, we've experienced high levels of wealth. What advice can you give to people who have been blessed from a monetary standpoint on how to raise your kids and your grandkids?
My wife and I couldn't have disagreed more, and everything to do with the home, she wins. And she did not hold back on giving them material things. But what she did do was spend an unbelievable amount of time with them. And one of the things I bristle at is people say they spend quality time with their children. To me raising children is all about quantity, not quality. And if you're with them, and you've just lead by example, you don't need to lecture them. But if you're just with them a lot, they'll get it. And I don't know how she pulled it off. But I've got three overachieving children with high integrity and values. And I wouldn't have done a thing she did. And I'd say that's the number one. I've also learned, just spend as much time as you can with your children. How do
you do that? Stan, you were talking earlier about tout meetings you'd have to go to and you know, you could spend your whole life going to all these meetings. And how did you get that time with your kids, because I know you made that a huge priority.
I didn't get enough. But first of all, my wife when our kids were young, gave up her job until they were older. So she spent tremendous amount of time with them. One of my mentors in life, Sam Reeves told me the best thing you can do, if you have more than one child is spend one on one time with each child because they're always competing, that was helpful. And because I had a decent amount of money. By the time I was, say 42, or 43. And I had my kids at 35 or 36, I was able to spend a lot of time with them on the weekends. But you know, you just make your priorities I had an English teacher said to me when we had our children, just remember, it all happens in the first five years. And if you screw it up, you're gonna pay for it the rest of your life. And if you get it right, you're gonna be rewarded to the rest of your life. And even after the first five, you're only with those kids like 17 years, it's only a fifth of your life. So during those 17 years, you got to try and pack everything you can in. I know it's hard, but you really do.
That's great advice. And we've talked about our great mentor and friend Ken Langone, the co founder of Home Depot. He's been an important mentor in your life. What's the biggest thing you've learned from him?
The amazing thing about Kenan, I haven't learned it because I can't execute on the way he does is he just every day that man wakes up and wants to make himself a better person. He just wants to keep learning and keep improving. And he's 87 years old, and in my opinion, he represents perfection. But he's in improved mode. Every day of his life, he's striving to be a better person.
Another person you mentioned just a few minutes ago, Sam Reeves, you know, he was the king of cotton commodity trading. You know, he's just sort of like I call it the most interesting man in the world. You know, like, that's the SEC he's commercials. But what's something he taught you?
Just an unbelievable parent and grandparent? And also, he's so called retire or 20 or 30 years ago, he has kept himself very disciplined about maintaining intellectual stimulation. I don't care whether it's biotechnology, or investing, or world events, or parenting, or even what's new in golf, that man, he is just the epitome of never giving up in terms of pushing himself intellectually.
And then few people know that when Jimmy Dunn lost his firm in 911, you walked him home every night. You were with him when he needed you most. Tell us about that experience.
I don't know whether I walked him home every night. That's probably an embellishment, but he's just one of the most extraordinary leaders, human beings I've ever met. And here again, we talked about priorities about children early on and setting things aside. I mean, he he had just gotten to the point in his career when I think he thought he could play a lot of golf. And he was ready for transition. And bam, that thing hit. And that man gave up everything he did, like 200 eulogies. He met with those families. And the way he dug deep, when a lot of people could have felt sorry for themselves. And it was just all go with Jimmy and he impacted so many lives. But I think he would agree. As horrible as that was to go through. He's probably a lot better man. Now that one could have ever imagined pre it happening. He took strength from adversity, and that's really the measure of a human.
Last but not least, I know another good pal, yours, Zed. Hurley, he's a great friend, and advisor, what's he taught you?
Well, as you're smarter than the rest of us, and the thing about and is, he doesn't need to wear his success or his brains on his sleeve. And he's very quiet about what he does. But he's got a hidden aggression. And I say that in the highest complementary ways. He's so understated relative to the impact he has on people's lives. And, frankly, on American business. It's just It's awe inspiring.
I couldn't agree more. And Stan, Wendy and I, we watched your interviews on YouTube. And afterwards, she said, We need Stan to run for president. And I said, Why would you take that? And she answers? Well, he's smart. He tells it like it is. He's a better communicator than I thought he was. And he's always been really nice to me. We'll send what do you think drug for President?
I have sleep apnea, I'd probably be about where Biden is in about six months.
Stan, you are. In all seriousness, you are a great American, a great guy. So are you every sense of the world. And I want to thank you for taking the time out of this conversation. It means a lot to me. And it's been really special, I had so much fun getting to know you better. By getting to do this,
it was a lot of fun. And I appreciate you're doing it. Hopefully, we had some impact on some people.
Well, I just love how Stan sees the world. He's got such an incredible mind. And we all learn that he's even got a more incredible heart. He's unlike anyone else out there. And you know, he sees the future unlike anybody else do. And that's been a major driver of his unrivaled success in the investment world. He's always learning and seeing patterns. And then he's bold enough to trust that thinking and take a big swing. Like Stan, if you can anticipate trends before everyone else, you'll have an incredible opportunity to capitalize on it. The problem for us is we get so wrapped up in the urgency of the present, that we don't give ourselves the proper space to envision the future. So let's fix that. This week, grab coffee or lunch with a trusted colleague at your company, and just have a conversation about the future of your industry in the next 18 to 24 months. What are your bold predictions? What can you see that others might miss? What actions can you take to leverage those opportunities? When you make it a habit to think about the future in this way, you'll give yourself a really rare competitive advantage because you know what? Most people just don't do it. So do you want to know how leaders lead? What we learned today is the great leaders see the future differently. Coming up next on how leaders lead is Brian Cornell the chairman and CEO of target. How do you
manage your energy? How do you train like you're an athlete and transfer some of that learning from tennis. and golf and football and baseball into the corporate environment. How do you make sure that you're at your best when you have to get your best.
So be sure to come back again next week to hear our entire conversation. Thanks again for tuning in to another episode of how leaders lead where every Thursday you get to listen in while I interview some of the very best leaders in the world. I'm making a point to give you something simple on each episode that you can apply to your business so that you will become the best leader you can be
