📚 How To Invest by David Rubenstein.

Really: how to navigate the world of institutional investing.

Hello everyone,

Interviews with, and profiles of, prominent investors used to be a successful niche genre. There was the timeless Market Wizards series, John Train’s Money Masters, and books like Inside the House of Money on macro traders. Information about great investors was scarce and trading at a premium. Publications like the Outstanding Investor Digest flourished by sharing letters, ideas, and notes from events. Presumably, this format should be dead in the age of podcasts and the internet. Right?

Not quite it seems. David Rubenstein, co-founder of the Carlyle Group and host of Peer to Peer, figured out that one can easily repackage a selection of podcast conversations as a book. He did so with historians and now with “the biggest names in finance” in How to Invest: Masters on the Craft.

Rubenstein has a stellar rolodex and the book’s line-up seemed promising, including names like Stanley Druckenmiller, Seth Klarman, Oaktree’s Bruce Karsh, Ron Baron, Michael Moritz, Ray Dalio, Larry Fink, Blackstone’s Jon Gray, Sam Zell, Jim Simons, John Paulson. You can probably picture my excitement when skimmed through the names.

The book covers a wide range of areas, including public markets and hedge funds, distressed, private equity and venture capital, and even wealth management, endowments, and niches like SPACs and crypto. Unfortunately, it’s difficult to go deep if you move from one area to another with every second conversation. And compared to the investor interviews of old, many of the subjects are active in areas that have little to do with what a reader might do at home. As a result, rather than offering a framework for how to invest, the book offers a glimpse into the mindset and career paths of successful professional investors.

This plays to Rubenstein’s strengths who made his fortune not as an investor but with “strategy, fundraising, recruiting, government affairs, and public relations”; in other words, by building an investment organization. Like many of the subjects in his book, his expertise lies in navigating and shaping the ecosystem of institutional investing, not in making judgments about individual assets.

The tension with the book’s title already surfaces in the preface:

This book is designed to provide a glimpse into the investment thoughts and practices of many of America’s leading investors. By doing that, I hope to help three different types of readers: 1) those interested in learning more about investing on their own; 2) those interested in learning more about investing through funds managed by professional investors; and 3) those who are students or young professionals interested in exploring an investment career.

I believe the book is most interesting to the third category, those exploring career paths in the field, as well as to those interested in learning more about the broader ecosystem of institutional investing. It’s not going to be particularly helpful to experienced active investors looking to improve their process.

Take the conversation with Larry Fink of BlackRock. Fink left First Boston after his unit experienced a severe trading loss. “I was blamed for the loss,” Fink reminisces. “I never forgave the firm for a lack of partnership. In a brief moment, this whole concept of partnership and friendship turned out to be false.”

He and Rubinstein talk about the importance of culture and the strategy behind the deals that shaped Blackrock.

Every transaction was motivated by “Can we expand our footprint? Can we provide a more complete array of investment choices to our clients?”

It’s interesting if you’re trying to understand the business of asset management. But it’s not going to help you better manage assets.

Another difference between the leaders and builders of large investment organizations and active investors is the level of communication skills and media training. Fink and others are more likely to offer polished anecdotes that would go well with the firm’s pitch book than get into the lessons of individual investments.

We get a glimpse at this from Orlando Bravo, co-founder of software-focused private equity firm Thoma Bravo:

Rubenstein: What are the skills that a top-notch buyout professional possesses?

Bravo: Salesmanship and the power of persuasion. I think that’s why we see quite a bit of people with law school backgrounds in the industry. The rest of the stuff isn’t that hard.

It’s not an answer that will help you invest better. But it’s worth letting it sink in if you’re looking at a career as a professional investor.

Still, some conversations were novel to me. For example, a rare conversation with a top family office investor, Dawn Fitzpatrick (first female CIO of the Soros family office). Unfortunately, like other interviews with allocators it remains at the level of reflection on investment process and philosophy. Fitzpatrick won’t share the nuts and bolts of what she does, except that it’s not what Soros used to do back in the day. Asked about Soros’s concept of reflexivity, she responds:

The game and markets in that context have changed a little bit. It used to be easier for assets to move in those ways, because there was more asymmetry of information. There were a greater number of currencies. Central banks were less sophisticated.

The opportunity set in markets is very different than when George made his billions. I think if George was investing today, he’d make his billions differently than he did back in his heyday.

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How to Invest offers a snapshot of the mindsets and careers of prominent people in the investment industry. It’s not quite what the title indicates but can still be compelling for those looking to navigate an industry that has become significantly more institutionalized since the days of John Train and George Goodman.

Rubenstein comments that any investing career will feel more rewarding “if you believe that this kind of activity is beneficial not only to you but also beneficial to your society, your economy, and your country.”

If you see investing only as a way to make more money than is possible in another profession, you will never have the intensity and drive and joy needed to be successful in this line of work. And you will miss much of the joy of investing (and life). In the end, it is not only about the money.

I agree that passion and a love for the game are required to compete at the highest level. But Rubenstein’s book is a helpful reminder that the game of investing at scale is as much about solving the puzzle of markets as it is about managing people, selling ideas, and building organizations. It’s a different kind of drama. But it’s still where the money is.

“If a graduating MBA were to ask me, ‘How do I get rich in a hurry?’ I would not respond with quotations from Ben Franklin or Horatio Alger but would instead hold my nose with one hand and point with the other toward Wall Street. – Warren Buffett, Janet Lowe, Warren Buffett Speaks

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Subscribers can keep reading for a short selection of my favorite quotes.

A few of my favorite quotes:

• Adebayo Ogunlesi of Global Infrastructure Partners on advice from Henry Kravis and how to identify an experienced investor.

• Dawn Fitzpatrick on great money managers.

• Ron Baron on the patience required to invest in fundamentals.

• Jim Simons’s success: piling up anomalies and good people.

• Bruce Karsh: distressed investing is about timing.

• Ray Dalio on the pleasure of global macro and his most important lesson.

• Stanley Druckenmiller: always moving and changing his mind.

• Michael Moritz’s best investment and favorite shorthand.

• Jon Gray: real estate warning signs and the importance of focus.