Raw Data By P3 Adaptive
True North Versus Magnetic North w/Jeff JorgensenListen Now:
Hold onto your seats as Jeff takes us on a rollercoaster ride through his incredible journey from pro baseball player to Wall Street wizard. Get ready to have your mind blown as he dishes out the juiciest insights on using data and tech to stay on top of the game, steer clear of blunders, and achieve mind-boggling success!
But wait, there’s more! Jeff’s knack for turning complex investing ideas into thrilling sports analogies will have you on the edge of your seat but won’t leave you disappointed. He’ll emphasize the power of building an all-star team and making tiny tweaks that lead to colossal victories in life, data, and investing!
And that’s not all! Our very own Justin Mannhardt, our newest co-host extraordinaire, will throw in his two cents and insights coming. While we dive into Jeff’s collaboration with P3 to create game-changing decision-making tools, you’ll also glimpse the wild ride we enjoy with our clients.
This episode will leave you buzzing with energy and grounded in the reality of data’s transformative potential for old-school industries. Rob, Justin, and Jeff will inspire you to adopt a go-getter mentality, focused on relentless growth and learning. So, strap in, folks, because this is an episode you won’t want to miss!
Also in this episode:
Rob Collie (00:00:00): Hello friends and welcome back. It's been a minute, hasn't it? What have we been up to at the Raw Data Podcast? Well, I'm glad you asked. We took a breath to consider not what we want to be when we grow up, but where we want to go next as a show. And we've covered a lot of ground, haven't we? So this is releasing on Tuesday, October 10, 2023. On Thursday the 12th, we will observe the three-year anniversary of launching this podcast. We've done 120 episodes and we've loved it. We've had a blast and there's been basically two common threads in terms of guests and format. We've really had two kinds of shows with some overlap. One kind of show is old friends of Rob, usually from the software industry. We get an old friend of mine on, a veteran of the industry, and we jaw for a while and it's a lot of fun. We cover a lot of interesting things. There's a lot of wisdom typically on display with our guests.
Rob Collie (00:00:57): And the other theme, the other format for a show that we've had is we brought on a bunch of practitioners of the power platform and gotten their origin stories and talked about a little bit, not a lot, about their usage of the platform itself. And like I said, I have loved both of those formats. Spoiler alert, we're not going to do away with those formats. Those are still going to be part of the show, but I didn't want them to be the only thing we did. So we've done 120 episodes like that. Love them dearly, but I think something has been missing and I wanted us to get a good plan in place to add the missing thing or things into our format. So here it is.
Rob Collie (00:01:36): Going forward, we're going to have four different, let's call them templates or flavors of show. The new flavors, the goal is to bring not just the wisdom, but also some direct professional relevance to people who are working with or working near data technologies, data platforms, and of course, primarily the Microsoft platform. All right, so here are the flavors. Flavor one, customers, people that we have worked with at P3 Adaptive. How much more relevant can it possibly get than hearing the stories of people's businesses that have been almost magically transformed by the new wave of technologies? Real human stories of professional impact, of business impact, how they were thinking about their problems going in versus how they think about them now and all the lessons they learned along the way. Flavor two is we'll just pick a topic that is interesting and relevant, the professionals who are working with or near these kinds of tools, and we're just going to draw about it. We're just going to talk shop. That'll be a little bit more snackable, let's say, than what we typically do with our 90-minute marathon episodes.
Rob Collie (00:02:39): Flavor three is a Q&A session, and here's the key to a Q&A podcast session. We need cues, don't we? We need questions. And those, dear friends, are going to come from you. So we've set up multiple ways to collect those. You can ask them of us on social media, hit up the P3 Adaptive Twitter or the Raw Data Twitter or hit us up on LinkedIn. We've also created an email address [email protected]. And we've also, this is probably my favorite, we've created a LinkedIn group. Just search for Raw Data by P3 Adaptive on LinkedIn. It's really going to be one of the most exclusive clubs of all time, but really it's just a place to submit questions, submit ideas for episodes. Hell, even just to talk to us about the episodes, tell us where we're wrong or even when we're right, but I think it's long overdue that we made this a bit more of a two-way conversation, and I'm really, really, really excited about that.
Rob Collie (00:03:32): And then the fourth flavor, well guess what? That's going to be the traditional flavor. For the fourth flavor, the fourth and final flavor, we'll bring on one of Rob's old friends or we'll bring on a practitioner from the power platform world and we'll do the thing we've always done because we still love that and we're going to continue doing that. We just wanted to bring some variety to what we were doing. So that's the new format and we're going to be resuming our weekly cadence. Isn't that exciting?
Rob Collie (00:03:56): Now, before we get into today's episode, I have one final very, very, very important thing to say, which is a huge, huge thank you to one Thomas LaRock. He didn't know what he was getting into when I asked him to be the co-host of this new podcast we were launching. He asked me like, "Well, what's it going to be about?" And I said, "Well, we're going to figure that out as we go." It didn't take us too long to figure it out, but we didn't know necessarily a hundred percent when we started it. And again, that was three years ago. But with the change in format, three quarters of our shows going forward are going to be a lot more focused on the specifics of things in the Microsoft platform. We're probably going to be talking a lot about fabric, for instance, and while Tom does absolutely know his way around the Microsoft platform, the citizen developer aspects of that platform are the thing that we live and breathe here at P3. That's our all day every day.
Rob Collie (00:04:47): So here's what we're going to do. You know how at Oxford or whatever, the head of the physics department is said to hold Isaac Newton's chair. It's pretty cool, right? Well, we're going to do the same thing. From henceforth, the Raw Data co-host chair will be known as the Thomas LaRock chair, and we're asking our chief customer officer, Justin Mannhardt to fill those big shoes, if you allow me the mixed metaphor. He runs our consulting team. He's up to his eyeballs in all things citizen developer and otherwise, and is he up for the challenge? Let's find out.
Rob Collie (00:05:19): Okay, longest intro ever. We're coming out of the gate hot with flavor number one, customer guest. Today. It's Jeff Jorgensen. All he's doing is disrupting the entire world of investment with the Microsoft platform. This is his third or fourth career, so it's no big deal really. And one of them just happened to be that he started out as a professional baseball player. It's your usual story. If you've heard it once, you've heard it, well, once. He's a great conversation. I felt super energized. Can't really think of a better way to relaunch the podcast. So let's get into it.
Speaker 2 (00:05:53): Ladies and gentlemen, may I have your attention please?
Speaker 3 (00:05:58): This is the Raw Data by P3 Adaptive podcast with your host, Rob Collie. Find out what the experts at P3 Adaptive can do for your business. Just go to p3adaptive.com. Raw Data by P3 Adaptive is data with the human element.
Rob Collie (00:06:22): Welcome to the show, Jeff Jorgensen, how are you this fine day?
Jeff Jorgensen (00:06:26): Fantastic. It's good to be with you guys.
Rob Collie (00:06:29): We really, really appreciate it. We're relaunching in a way. We're taking this podcast in a whole new direction.
Jeff Jorgensen (00:06:36): Oh boy.
Rob Collie (00:06:37): No, not really, but more focused on our customers.
Jeff Jorgensen (00:06:40): Awesome.
Rob Collie (00:06:40): We've done a hundred and something episodes, the vast majority of them round to my old friends, but also people from the community who have adopted the power platform and become data superheroes like the people at P3. But there's a whole demographic that we really haven't spent much time on. It's the people that we work with and help all the time and really, really, really appreciate you being here. So why don't you tell us what's the name of your company, what's your role?
Jeff Jorgensen (00:07:07): Okay, our company's called Cap Six, C-A-P space S-I-X. We're an asset management firm, so we invest in public equities and I am the chief investment officer. It's a small firm. There's three of us. We peaked at four and we realized we could do it with three and here we are, and that's kind of the point. Leveraging data and technology allows you to do that, and I want to keep it that way for as long as possible. An investment in technology can keep our headcount down, and that's got an NPV and IRR that's extremely attractive.
Rob Collie (00:07:41): Can you explain to the court MPP and IRR?
Jeff Jorgensen (00:07:45): Oh, NPV, net present value.
Rob Collie (00:07:47): Right, sorry.
Jeff Jorgensen (00:07:49): If I invest 50 grand with P3 today and never have to hire someone because I took all their automated tasks and made them very simple for me to do, then that salary, that healthcare, all of that is out of my system forever, and I can streamline this business. And I think one of the best ways to create entrepreneurial value is by managing the expense side. I think there's a lot of focus on revenues, growth, growth, growth, and I think what you guys help me do every day is invest in a platform that can manage the expense side so that we can do more with less.
Jeff Jorgensen (00:08:21): Cap Six today, we have launched seven strategies, portfolios of public equities. I left a firm, we have three people. They're all performing well. Everything as of last month was outperforming. That was we put a line in the sand at the end of the month, so all doing their job and the predecessor firm I went to had 150, 200 people and five types of strategies. We have seven with three and dare I say, they're performing better. I don't have their current numbers and I'm not talking too much smack about the great people, but I think we're doing an excellent job and that's the whole point.
Rob Collie (00:09:02): I thought when you said if I invest 50 grand with P3, we can get Justin a proper chair.
Jeff Jorgensen (00:09:11): That's on you.
Justin Mannhardt (00:09:11): I think the chair is coming from the returns on the seven strategies. It's a really nice chair, Jeff.
Rob Collie (00:09:17): Yeah.
Jeff Jorgensen (00:09:21): That's right. That's going to be a good chair. If I do my job, that's going to be a good chair.
Justin Mannhardt (00:09:24): Screw the retirement account, I want that chair, man.
Rob Collie (00:09:30): The downsides of the audio only podcast format is that people can't see the very uncomfortable chair that I gave Justin to sit in today because he's visiting me here in Indie. Anyway, that all makes total sense to me. And in fact, just this morning I was writing a sentence in a slide deck that was essentially along the lines of the new tools make big team, big budget, enterprise level capabilities available to any size team. Even beyond that, once you have those tools, the small team is actually an advantage.
Jeff Jorgensen (00:10:05): A hundred percent agree.
Rob Collie (00:10:06): It's not just leveling the playing field, it's tilting it. Imagine if I gave you 10 people, these 10 new people were all free. They cost you nothing. You still probably would be worse off.
Jeff Jorgensen (00:10:17): I totally agree. I love small teams and I think when you're all working with interconnected data on the same system and you're fast and you're quick and you're nimble, particularly in public markets, huge advantage to a giant bureaucracy that's very difficult to make decisions.
Rob Collie (00:10:34): The other theme that's been running through my life and the story of this whole industry, the data industry, that I think you were also lighting up for me there as well, is that data, going through a computer in the right way gives you essentially infinite vision. You can see everything. If you build the right processes, the right rules, the right business logic, the analytics, that's the work that we do, you can see to the horizon and beyond in a way that's like a superhero movie.
Jeff Jorgensen (00:11:03): Well, that's how I feel today. I can see lots and lots of things, more than I've ever been able to see. I've been doing this for a long time and I've never felt more confident in the decisions we're making because of the data I have at my fingertips to make those decisions. And that was the whole point.
Rob Collie (00:11:18): I get the sense that you and I are of a similar age, so do you remember the movie Highlander?
Jeff Jorgensen (00:11:23): I remember it. I'm going to disappoint you here and say that even as a movie buff, I haven't seen Highlander.
Rob Collie (00:11:27): Wow. Okay, let's put it this way. Don't see anything other than the first Highlander. It's famously... Connery almost lost his career over that.
Jeff Jorgensen (00:11:39): I'm going to have to watch it.
Justin Mannhardt (00:11:40): We had budget for the sequel, but we didn't need it.
Rob Collie (00:11:44): Highlander one in hindsight is not going to hold up super well because it's just so of the eighties.
Jeff Jorgensen (00:11:50): That means it's fantastic though.
Rob Collie (00:11:52): It's like Flash Gordon and that I think Queen does the soundtrack. I'm not really spoiling anything here. At the end, the protagonist finds himself in a state of being where he is seeing, hearing every human conversation everywhere, all at once at the same time, and he's at peace with it, but he's experiencing everything. I feel like that's the state you're describing.
Jeff Jorgensen (00:12:14): I love it and I want even more. As Justin knows, I keep asking more data.
Rob Collie (00:12:20): You're like, "Hey, okay, fine. Now I know everything on earth."
Jeff Jorgensen (00:12:24): What's on the next planet? One more hit.
Rob Collie (00:12:30): That's so awesome. You've worked in this industry before. Was that your whole career up until now?
Jeff Jorgensen (00:12:37): No. I'll give you a really brief background. I have a weird background probably for many of your customers or the people you're around in the data world.
Justin Mannhardt (00:12:46): You'd be surprised.
Jeff Jorgensen (00:12:48): Well, I guess that's true. I haven't met a lot of you and all weird in a lovely way. My first job out of college, I was a professional baseball player. I was drafted, did that.
Rob Collie (00:12:56): You did tell me that when we met before.
Jeff Jorgensen (00:12:59): I try to tell everyone I meet. It's like, "Have I told you this yet?"
Rob Collie (00:13:05): I would be exactly the same way.
Jeff Jorgensen (00:13:09): It usually comes up real quick in conversation. Went to Rice, did that, we had a great team there. I was always a jock, but really a nerd deep down inside, and then ended up going to law school because I had never had a summer internship or anything. I was a lawyer in finance, and I was like, "Wow, what my clients are doing is much more interesting than me writing about it in a contract." So I became an investment banker. You know how I became an investment banker? I was a lawyer who only knew Microsoft Word. So I bought one of those, learn how to do Excel things, Training the Street or breakingintowallstreet.com or something, and I took this Excel course where you don't use your mouse.
Rob Collie (00:13:47): Of course not.
Jeff Jorgensen (00:13:48): Yeah, of course not. Then you go to an interview and they say, "Oh, can you model companies?" You're like, "After I practice law, I go home and I learn how to model." And they're like, "Oh my gosh, our kind of people. You're a grinder and you don't touch the mouse." I was like, "Of course not." But I really did, and I absolutely fell in love with Microsoft Excel in that world, and then I became an investment banker, did that for a long time, and then I was a specialty type investment banker in a certain type of asset, went to become the director of research for a firm that invested in that type of company.
Jeff Jorgensen (00:14:20): So I was at Morgan Stanley and UBS doing this investment banking job, and then I went to a boutique portfolio management firm, an asset manager, like what we're doing now, but their specialty was this one type of asset that I knew extremely well by being a banker for that. Then we got bought by big firm, Brookfield, one of the biggest asset managers in the world, and I got very involved in their entire public securities group. So all of the strategies and all along the way, I became obsessed with process, curious about data, now I'm obsessed. Curious about data, obsessed with Excel from day one. I would relax and build models for fun.
Rob Collie (00:14:59): I understand.
Jeff Jorgensen (00:15:00): Just love it. Still love it, by the way.
Rob Collie (00:15:04): Me too.
Justin Mannhardt (00:15:04): There's a story about Jeff's love for Excel that we need to come back to.
Jeff Jorgensen (00:15:09): There's probably so many. And then all along the way, as I was learning more about asset management, I just kept going, "There's got to be a better way to do this." And I think this data stuff, at the time it was this data stuff would be about as much as I could even think about, and then I got to a bigger firm and I said, "Well, they're probably utilizing these amazing tools. Of course they are. They're one of the biggest asset managers in the world." And I was like, "Oh, they're not?" Oh my gosh, there could be a real opportunity here in this industry because every other industry has been disrupted, been disrupted by data, been disrupted by the information age, been disrupted by using technology, cloud-based computing, all of the things that you guys do and have helped us accomplish at Cap Six, using that to drive efficiencies, drive consistency, drive returns, what have you.
Jeff Jorgensen (00:15:58): So I'm like, "Why hasn't anyone done it here?" And I could talk for a whole podcast about why I think that's the case. And so I left and started pursuing these things. Now what's interesting though, I'm sitting there, my wife, we got bought, our company got bought and we had a four year earn out. So that means that you have to say... at this point, I'm running all the strategies and we managed about $4 or $5 billion and I'm running all that money and I've got a team of research analysts that worked for me, but I had a four year earn out and now I'm getting very involved in everything that Brookfield does with public securities on the investment committees, managing the risk process, and they say, "You got to stay for four years. After four years, you're a little bit more free and clear." So I said, "Okay."
Jeff Jorgensen (00:16:43): So in advance of that, I say, talking to my wife who's really one of the smartest people I've ever known, said, "I think I'm going to do my own thing." She goes, "Whoa, hold your horses." They're these really great ideas who've just been swimming in my head, and the more I stay in this industry, the more I realize that this industry is so dumb and there's such a better way to do things and I just cannot. I have anecdotes after anecdote, after anecdote, after anecdote about this industry could be better if someone just did this thing or these things. And so she says, "Don't quit your day job yet. It's a really good one. Let me go figure it out." So she taught herself... She was like, "Do you know anyone that knows data SQL?" I was like, "I don't even know what that is." She's like, "Let me go test drive some of this stuff on my own."
Jeff Jorgensen (00:17:33): She bought data, did her own thing. I was uninvolved. I kept my day job. She's like, "Hey, I think there could be really interesting ideas here." So she taught herself Python. She taught herself some machine learning. She took portfolio construction classes. She taught herself SQL and was able to beta test a small sample of what we were doing, and she's like, "Hey, I think this is worth pursuing because I have money to invest. I've been investing my whole life. I think it needs to be done better too. So if no one's going to do it, let's do it." I left. We started Cap Six and eventually found you guys, and that's when Cap Six started really getting exciting.
Rob Collie (00:18:11): In a sense of even greater self-interest than you telling everyone about your professional baseball start, you said you eventually found us. I'm just going to ask you a leading question. Were you working with anyone else before you worked with us?
Jeff Jorgensen (00:18:26): I was. Okay, so the first thing was I called my friend who's had some successful tech companies and I said, "I got these things. I need to scale them out. What do I do?" He had me talk to his friend. He says, "Oh, you can do this by yourself in SQL. You're good." I was like, "Well, I don't think anyone's going to give anyone money that said, oh, I put it together. I think it'd be nice to have a third party firm." First off, I couldn't have done it, so we hired a third party firm that was recommended to us. I'm not going to say their name.
Rob Collie (00:18:51): Don't have to.
Jeff Jorgensen (00:18:52): And was just beating my head against the wall going, "This can't be the best you can do. Why are there so many errors? Why can't you execute these things?" I'm researching now things like Synapse. This is a greenfield project. It's very different than I think a lot of what people in your industry see, which I call it a lift and shift. I've got this thing I do in Excel, put it in SQL with a Power BI kind of user interface. This is not that. This was, I have an idea and I need to explore the edges of it and go down the rabbit trails, and they were unwilling to do anything but a lift and shift. They were unwilling to go down the rabbit trails and be creative with me. Gosh, Justin, how many times... I tried to find you multiple times.
Justin Mannhardt (00:19:42): It's fun to hear, Jeff, two years later I think is about the timeframe.
Jeff Jorgensen (00:19:47): Yeah, two years.
Justin Mannhardt (00:19:48): Because I think your office maybe you faced differently and the bricks were behind you and you had your backwards baseball cap on and you could tell you were so defeated at the time. I think we probably talked three or four times before you were just like, "I'm done. Let's go."
Jeff Jorgensen (00:20:05): And then we met you. I got to say, I've met a lot of people at P3, but Justin, you had the wisdom to put me with the right person too, and Chris Haas, he's a curious person. He watches math YouTube videos in his spare time And as a totally greenfield thing, I'll wake up and go... And there's really no finite... We don't know what the end looks like, so you go, "Chris, I think it's time to start testing this in a new language." And he doesn't say, "But I've never coded in that language." He goes, "Well, this'll be fun." And someone that intellectually curious and that maniacal about finding the end of this theory. It's just been a great partnership and I've now worked with six people at P3. And Rob, you really do have a way of collecting talent, interesting people, but people that are good at what they do and nice to work with. Such a contrast to what I was doing with before.
Rob Collie (00:21:03): I love this band. We're rolling down the highway and pass someone, we're like, "Hey, you look like one of us. Jump on."
Jeff Jorgensen (00:21:09): Yeah, exactly.
Rob Collie (00:21:12): It really is a fantastic group of people. I don't think we have any former professional athletes on the team, but there's a lot of variety in origin stories.
Jeff Jorgensen (00:21:21): At this point, I feel like I'm on the team so you can claim me if you want.
Rob Collie (00:21:25): Fantastic.
Jeff Jorgensen (00:21:26): And poor Chris and everyone I've worked with, this is what we do. I'm not working in the operations or IT department and saying, "I got a call from my boss that says, hey, make this faster." And so I hire someone and disappear. Poor Chris, I call him, I go, "Hey, what are we working on today?" This is early days now. I kind of leave them alone, but I'll be like, "No, I'm just going to stay on the phone and watch you do it." He's like, "Seriously?" "Yeah, this is what I'm doing today. My task is to work with you." And also though it's people's money that we handle. This is our money that we handle, and so I have to watch every little comma, every little semicolon get put in because this is really important stuff and it's our experience that has to combine with y'all's skillset to build what we need.
Justin Mannhardt (00:22:11): I remember, Jeff, we had a conversation and you're just like, "Hey, I'm having a rough time. I'm just looking to see what else is out there. We're trying to get this into Power BI and can it do it?" I was like, "I don't know, probably." And so the more we talked and I understood what you were trying to do, that was the time I was like, "Chris had gone through some projects that weren't very exciting for him." And so for Chris, this was also very interesting, and when we got to the point where we said, "Okay, let's do something." We did that kind of first assessment. Basically send Chris over to Jeff, Chris learned what's going on and see if we can even do what he wants to do.
Jeff Jorgensen (00:22:47): Oh, he got us past where... Okay, I'd been working six months with the firm I'd started with, and he got us past them in one week. I had yet to see any data come through Power BI. I was still in SQL server writing things out just to see a table, just to know that my data is there and some calculations have been run, and within a week I had a Power BI interface that was well past them in terms of one week. He talked to me a few times and I was like, "Let's go. Giddy up."
Rob Collie (00:23:19): I love that. That's my favorite kind of story. I tell stories like that from my time when I was the only consultant here when there was only enough demand in the universe to support me. That kind of story, six months of effort going nowhere and then in a week we're past it, the numbers might change a little bit, but that is almost exactly one of the stories that I tell about something that we did for one of the major movie studios.
Justin Mannhardt (00:23:43): Oh, that's so cool.
Jeff Jorgensen (00:23:44): Well, and what's so crazy is I first called Justin, I'm defeated, and I've heard Justin talk. He's like, "You were just defeated." And now people ask me, friends of mine, they say, "How's Cap Six going?" I go, "What we've built is much cooler than I ever thought we could build from a business perspective." Where are we? What's our AUM? All that stuff. I don't care. That's going to come. That's going to be fine. What we have achieved is well beyond the initial vision. I was at a point where I was like, "Can the initial vision even get done?"
Rob Collie (00:24:12): That's actually one of the questions I like to ask our consultants about the work they've been doing with our customers is has there been a point in this relationship where the customer's ambitions grew beyond their original scope, where they became essentially greedy in a good way that they started to understand just how much possibility there really is? We're a lot less constrained by the tech than I think most people expect to be.
Jeff Jorgensen (00:24:39): That's right. And there's always a... Well, when you work with the right people, there's a solution out there.
Rob Collie (00:24:44): True story about Chris in this past year's white elephant gift exchange at the holidays. He drew my name and he gave me a coffee mug, which is very on brand for me. Coffee, yes, yes. This coffee mug is a mathematical topology puzzle. It's a coffee mug with a tunnel through the middle, and it comes with a white dryer erase marker, and you have to draw a path from this animal to that animal to that animal without ever crossing the path, and it's only doable because of the tunnel through the middle of the mug, and I'm just like, "If I go into that mug, I'm never coming out."
Jeff Jorgensen (00:25:28): I love that guy. And what a perfect partner for Cap Six. The other day I called him and I said, "All right, so I've got a new problem that I need solving." This was supposed to be Cap Six 5.0, and we're tackling it now. And he goes, "Oh, that's interesting. I was watching a video on that today as I was having breakfast." I was like, "On a calculus problem? Why dude, why?" I was on some dumb website or on Imgur or something, just doom scrolling memes. Good for you.
Rob Collie (00:26:00): He and I and a couple other people, he engaged a number of us in a trigonometry problem the other day. I don't think it was something he was doing with you. There was this sign wave prediction of where these peaks would occur. Oh my God, I haven't done trig since my teens.
Jeff Jorgensen (00:26:18): I remember him mentioning that he was working on sign waves, and I was like, "I don't even know. I want advanced algebra two, and then we're done."
Rob Collie (00:26:24): Yeah.
Justin Mannhardt (00:26:25): Now that we've covered Chris's magic in this whole scenario, we get the assessment with Jeff, the project gets going, and then okay, got to a point where Chris and I were very close during the early stages of what he was working on. I felt in the loop and up to speed. Then I pulled back and then Chris pulled me up. He was like, "Hey, I'm going to show you what I built for Jeff today." "It's over my head, man. You're in a different stratosphere." Four months later, Jeff, he called me. He had a sad face on and he said, this is a joke, but he said, "All of that amazing things we've built for Jeff, I figured out how to just spit the output into a spreadsheet." He like, "Justin, I've accepted the fact that all roads just lead to Excel."
Jeff Jorgensen (00:27:07): It's so amazing. I don't know if you know this Rob, but one of the coolest things we've built is actually in Excel.
Rob Collie (00:27:14): I did not know that.
Jeff Jorgensen (00:27:15): And we are going to get on the phone with the power apps people and we're going to figure out a way to get this right back so that it can be as functional, but it's actually really amazing. I thought I knew everything about Excel, but that's what's great is we've got Excel, we've got Synapse, I don't know what we're not using that Microsoft offers. You're going to die, it starts in an Access database and ends in Excel.
Rob Collie (00:27:37): That's a good sign. Another movie, Needful Things from the nineties.
Jeff Jorgensen (00:27:42): Oh, I'm disappointing you so much, and I feel like I'm such a movie guy.
Justin Mannhardt (00:27:45): Rob's the movie guy.
Rob Collie (00:27:47): No, not really. I don't watch a lot of movies. It's just that I extract certain scenes from the movies I saw mostly growing up. They just seem to have a staying power, these sentences, these scenes that apply across so many different aspects of life. But this one's just a joke though. So Max von Sydow probably not pronouncing his last name, but anyway, he plays the devil.
Jeff Jorgensen (00:28:06): Okay, love devil movies.
Rob Collie (00:28:08): He's slowly tempting this town into tearing itself apart in conflict with each other, and at the very end, the sheriff has figured him out and they're having that frank conversation between protagonist and villain that happens very often in movies. The devil says something to the effect of, "This is how it goes. I start off with this and that and I escalate them to this." But then he turns and looks at him and says, "But in the end, I always give them weapons." And so in the end, I always give them spreadsheets.
Jeff Jorgensen (00:28:43): Well, I'll tell you the movie quote that kept me going a lot of the times. You like the movie The Martian?
Rob Collie (00:28:47): See, I haven't seen The Martian. Here's the thing, you and I have never seen the same movie.
Jeff Jorgensen (00:28:51): Yeah, we've both been watching movies our whole life, never seen them, but spoiler alert, at the end, he's a professor and he is talking to a class full of students and this is an entrepreneur's journey, and at the time I was so just stressed and worried about is Cap Six going to get there? Can we do this vision of mine of how asset management could be? And he says, "I always get asked," he says this to the class, "About How'd you get off Mars?" And he goes, "Well, I woke up and I solved one problem, and then I kept going, and then I solved the next problem and I solved the next problem. If you solve enough problems, you'll get home." And that's why if you solve enough problems, you'll get there.
Jeff Jorgensen (00:29:29): And so every day it's not a lift and shift, it's, "Hey, now we got to do this one thing." It's really funny. Back in the day there was this portfolio construction, which is sizing your stocks and managing your risk. We had done this whole big project on our analyst selection, our stock selection as Justin knows some of the details, and I was like, "Oh, yeah, yeah, Chris, we got to do portfolio construction now." Yeah, yeah, it's no big deal. We've been working on that for a year, just, "Hey, I'm going to solve this first thing and if I can do that, then I can do the next thing. Then I can do the next thing, then I can do the next thing." And I just know with the right partner that you'll solve those problems and you'll get home.
Rob Collie (00:30:05): One of the really important arts to being a human being and being happy, successful, whatever is having the right kind of relationship with your future self. So on the one hand, you can make very selfish decisions today on behalf of today's self that tomorrow's self has to pay for, and you got to learn not to do that. But at the same time, you also as today's self need to remember that tomorrow's self needs something to do. Tomorrow's self has capacity that isn't yet allocated, isn't yet spoken for, and so don't pull all of tomorrow's problems into today. Solve today's problem with today's resources, your today energy. Let tomorrow's problem be tomorrow's problem, but again, this is always a balance, not screwing over future self, but not trying to solve tomorrow's problems today because tomorrow's self has all kinds of energy that you don't feel right now.
Jeff Jorgensen (00:31:12): That's right.
Rob Collie (00:31:12): You only feel today's energy.
Jeff Jorgensen (00:31:14): We'll deal with that later, but right now we're going to maniacally attack this problem.
Rob Collie (00:31:17): That's right.
Jeff Jorgensen (00:31:18): Okay. What's the next thing? Got it. Let's go.
Rob Collie (00:31:21): And in some sense, mastering life, you could boil it down to... There's a million things you can boil life down to, that's one of them.
Jeff Jorgensen (00:31:29): I love that. Well, I immediately thought of the quote that was drinking too much tonight is just borrowing from tomorrow's happiness. I'm butchering the quote, but basically the same concept flipped on its head and talk about worrying about tomorrow's problems tomorrow and just solving today's today.
Rob Collie (00:31:44): There's another quote or a T-shirt or whatever that goes along with that quote, which is, "What I do when I'm blackout drunk is none of my business."
Jeff Jorgensen (00:31:54): That's really great. I'm going to steal that one.
Rob Collie (00:32:01): Going back to the relationship you've had with us as compared to the relationship with the prior technical consulting firm... By the way, it actually suits my purposes best that we don't give them a name.
Jeff Jorgensen (00:32:12): Yeah, yeah,
Rob Collie (00:32:13): Now it could be everybody.
Jeff Jorgensen (00:32:14): It could be everybody, and you know what? It probably is everybody from what I've learned about this industry.
Rob Collie (00:32:19): That's my belief fundamentally, it basically is everybody. And so I'd like to drill into, and this is the academic philosophical nature I often bring to things, where's the magic? You're at six months, right? I'm going to tell you what I think the magic is and see what you think of it. You spend six months with this other firm and you get something rounding to nowhere, and then in a week with us, you get beyond all that.
Jeff Jorgensen (00:32:45): Hope is restored.
Rob Collie (00:32:46): Awesome. That kind of emotion, that's what we're here for.
Jeff Jorgensen (00:32:50): Yeah.
Rob Collie (00:32:50): I love it. And we've talked a lot about Chris and what a polymath, you can see the hangover scene with the equations, that's true about him, but I want to make sure we highlight that that actually isn't the magic. What I think the magic is, all of that technical skill that he's got lives in the same brain as the brain that has the skills to understand what you are trying to do.
Jeff Jorgensen (00:33:19): A hundred percent right.
Rob Collie (00:33:20): I'm positive that Chris is also more technically savvy than whoever you were working with before, but that delta in technical savvy isn't the magic. It's what I call the decathlete nature of being able to do multiple things, one of which is communicate, empathize, understand, think creatively, think aspirationally, join you on your side of the table, what you're trying to achieve, and then also have that skill to know what's possible and not dead end lines of thinking because you don't know how to do it. Suddenly it's free energy. We've solved cold fusion.
Jeff Jorgensen (00:33:57): Well, and I'll speak from my experience, which is limited. I haven't worked with every technical consulting firm in the world, but in researching a lot of them, this is what I think the practical side of what you're saying is, and I agree that that is the magic, there were those people at other firms and they've created a business that is in the business of that talent farms it out. The person who understands what you need isn't touching the computer to do the work.
Rob Collie (00:34:23): Yep. So now we're going to get really nerdy.
Jeff Jorgensen (00:34:25): Oh yeah.
Rob Collie (00:34:26): Are you familiar with the physics concept of dark matter?
Jeff Jorgensen (00:34:30): Yes. I've heard those two words spoken next to each other. Did I mention I was a baseball player?
Justin Mannhardt (00:34:41): You're not being assertive enough about that factor. Don't be so shy, Jeff.
Rob Collie (00:34:49): So you were a baseball player, a lawyer, an investment banker, you don't get to claim any sort of I don't get it card.
Jeff Jorgensen (00:34:55): Okay, good. All right.
Rob Collie (00:34:59): Something like greater than 90% of the matter in the universe, we can tell it's there by mass, but we can't see it anywhere.
Jeff Jorgensen (00:35:06): Can't see it, right.
Rob Collie (00:35:07): This is where the metaphor is a little bit weak because actually 99% of the cost of a technical project like this is communication cost. Communication is the dark matter. Let's say you achieve some sort of mind meld with this architective person that you're talking to who probably doesn't understand it as well as you think, because you would only find that out when they started to build something.
Jeff Jorgensen (00:35:31): But they make me feel like they understand it.
Rob Collie (00:35:33): Whatever level of understanding they have, let's give them full credit and say that they 50% get it. They turn around and then replay that to all these other technical specialists who get maybe 5% of what's coming across the wire.
Jeff Jorgensen (00:35:47): Then they probably do it again.
Rob Collie (00:35:48): And then you wait for all the misunderstanding to come bubbling back to you in a waterfall fashion some number of weeks later, and you go, "No, not that." And then you go and you spend almost as much of your time communicating the clarification as you did the original.
Jeff Jorgensen (00:36:03): Yeah, a hundred percent.
Rob Collie (00:36:04): Wash, rinse, repeat with a two-week wavelength.
Jeff Jorgensen (00:36:06): That's exactly what was going on.
Rob Collie (00:36:08): And so there's a point at which speed is no longer just a quantitative difference. It's also a qualitative difference. You're never going to get anywhere at 1% progress rate. It's not that a project's going to take a hundred times as long. It's that the project isn't going to work.
Jeff Jorgensen (00:36:24): It's not going to work, right.
Rob Collie (00:36:25): It's going to take you 50 times as long to find out that it's not going to work. Isn't that fun? But it's never going to work. But when you can compress all of that, and this is why I've been using this decathlete metaphor so much lately, it turns out Chris, for example, or really any of our consultants, we communicate incredibly well with ourselves.
Jeff Jorgensen (00:36:44): Is that part of your interview process? How do you collect these people that are capable of doing that? Because I'm six for six on P3.
Justin Mannhardt (00:36:52): We'll show you our IP if you show us yours.
Rob Collie (00:37:01): But you know what the difference is, and that difference is the thing that I couldn't unsee in the same way that you had this vision.
Jeff Jorgensen (00:37:09): I know. You're through the looking glass. Let's say that I just gave up on Cap Six and said, "I'm going to go get a big corporate job," for whatever reason. It would be really frustrating to be over there and say, "Gosh, it could be done a different way." But you almost have to step out of corporate America to have the creative space to really build something new and to not be impaired by bureaucracy or the way things have always been. I used to always say with an investment banker, I don't know if y'all know much about it, you basically have a senior level person making you stay up till 4:00 AM to build some M&A model where you're merging two companies together because there's a PitchBook tomorrow that has to go out where they're going to just go talk to the CFO and CEO of that company and say, "Hey, Apple, what if you bought Disney?" By the way, that'd be a cool acquisition. I don't think it's completely off the table.
Rob Collie (00:38:03): Think of the M&A fees we could charge. Think of the amount of overhead costs we could introduce into that transaction.
Jeff Jorgensen (00:38:09): But somewhere along the way, you're building this M&A model and you go, "It's 2:00 AM I got to get to bed." So you hard code a sell. Well, now that is an unusable M&A model for any new scenario. I can't just type in Apple and type in Disney and then all the math comes together because it pulls in from a dataset and I get all my revenue figures coming together with the M&A costs and all the assumptions. I used to always say, "If someone would just leave me alone for a year, I could build the ultimate M&A model that you could cut out your whole bullpen. You wouldn't need all those analysts." Well, you'd need a couple of them. I still believe in humans and human interaction and all those things, but you just wouldn't need so many of them.
Jeff Jorgensen (00:38:48): And we could go home at reasonable hours and it could automatically feed into a PowerPoint or a Power BI model. Actually, at the time, I didn't know what that was, but you know what I mean? That's what I've done here is say, "I couldn't do it here." There were some of the ideas that I had that are foundational to Cap Six that I would bring up at my predecessor firm and it would be so quickly dismissed and had I worked on them, they would've farmed it out from the person with experience and with vision on it, I'm not calling myself some sort of visionary, but I was the one with the idea. I'm the one who really sees it.
Justin Mannhardt (00:39:18): That makes you a visionary, Jeff.
Jeff Jorgensen (00:39:21): I don't want to come off as braggadocious, but sure.
Rob Collie (00:39:24): We'll call you a visionary. That's the visionary rule. You can't call yourself a visionary, but the rest of us can. Yes, you're a visionary.
Jeff Jorgensen (00:39:30): But let's say then they would form it out to the IT department. They'd say, "Okay, you go do your day job." It goes away. It comes back. First of all, it took a year. This is what I asked for. So you almost have to step out completely, find the right partner and just be a maniac for a while, and not many people get that chance. And I had unique life circumstances that gave me the opportunity, and had I not find you guys, I'd be back banging my head against the wall somewhere. But like I said, I'm through the looking glass. I don't know that I could go back to one of those places and ever see it the same way.
Justin Mannhardt (00:40:00): Jeff, I'm curious. You've been on this two-year journey where you've accomplished so much. You described this more of a greenfield effort, and there's all these rabbit trails that you need to run down and figure out what's working. So a conceptual concept I describe to the team a lot is the distance to certainty, which is the distance to a certain outcome, good or bad, is always much shorter than we realize it is. And the way you've figured out how to work through these problems is evidence of that. You have this idea, you bring it up to the team. Nobody's really certain if it's going to work the way we think it's going to work or what's involved to make it work, but well, if we run a certain distance, we'll have a higher level of certainty about something. So I'm just curious the way you have found to work on this problem, just the experience day to day. You have a hundred ideas, which one should we work on today? How do you decide when to abandon something that's not... What have you learned about that process over the last two years?
Jeff Jorgensen (00:40:58): That's a really interesting question. Now that we've got money invested, the priorities become real quick. So that was easy, but when it was totally greenfield, pre-investment, how would we come up with what we needed to work on that day? That's a difficult one, I've never thought about, to be honest, but Chris has helped me a lot. P3 has helped me a lot. I got an email the other day from Emily. She's been fantastic to work with by the way. She says, "Look, hey, the juice isn't worth the squeeze." And I said, "Okay, that's nice to have, but juice ain't worth the squeeze, I'm good. We're good to go." So I think it's also nice having a partner in this that can tell you that that's not a really good high priority item. But we've gone down a lot of rabbit trails that didn't work out.
Jeff Jorgensen (00:41:40): Can I tell you a funny story, though, about something that had to be done? It was the highest priority item. And so just for the non-financial professionals, I'll tell you, there's two parts to making a portfolio. There is I have to pick the stocks. So there's 500 stocks in the S&P 500. Well, which ones do you want? Step one. Step two, what size should those stocks be? It's really not step one, step two, they actually go together. Now, step two is very difficult and people often overlook it. Do you remember this, Justin, when me and Chris were going bottom up and we were saying instead of using a solver algorithm, we were basically let's test every iteration that it could possibly be? And it was more than the grains of sand on the beach.
Justin Mannhardt (00:42:22): Yeah.
Jeff Jorgensen (00:42:23): Because if you do the factorial math, if I could buy one stock or 500 stocks and everything in between, and I could buy them at any floating decimals of three, I'm well over a quadrillion possibilities.
Justin Mannhardt (00:42:34): Let's just find them all.
Jeff Jorgensen (00:42:35): And see which one's the best. I'm like, "Whoa, that was hard. That didn't work." But Chris and I, we finally figured out, and one of the really fun things about... I like to do everything Excel first, as you guys know. It's the only skill I have and I'm pretty good at it. In early days when we were building, I was like, "If I can't do it in Excel, then no one's going to invest in us because they can't explain it." We actually had some really complicated stuff that I couldn't understand. So we just said, "Abandon it and go with a simpler approach." Turned out to be better. But [inaudible 00:43:00] Excel, and we had our portfolio construction model that took all the stocks that we wanted and found the perfect size. I had one month, there were 150 stocks, and for one month it took me 40 minutes to build one month portfolio. I had a macro on there, we called it pit. It was just day trading stocks and this is your optimal combination.
Jeff Jorgensen (00:43:19): And then Chris was like, "Okay, I'll see you one better. I'll get in Python." And he got done to seven minutes. I was like, "All right, now we did 150 stocks, seven minutes, one month. Now I need 13 years every month, and I need 4,000 stocks." And he's like, "What are you talking about?" Never said no. And now with things that we've built on those same 150, I can do 27 13-year tests in seven minutes. So it now takes 10 milliseconds, but it was step by step. It was like, "Oh, what if we did this way?" And I did in Excel. I got my Excel down to four seconds for one month, and then he was like, "Oh, I'll see you one better." He got his down to 0.1 milliseconds, and then we rewrote the whole problem to make it even exponentially faster and more deterministic. And so we went from 40 minutes in one month down to 30 tests in a matter of minutes. It's fantastic.
Rob Collie (00:44:18): And it's just layer after layer after layer of insight that leads to a refinement in your technique, your algorithm that speeds things up. There's so many individual breakthroughs.
Jeff Jorgensen (00:44:30): So many, and we're still breaking through and we're still doing it,
Rob Collie (00:44:35): By the way, that reminds me almost perfectly of what it was like to be sitting next to the folks who were building the Vertipaq engine at Microsoft.
Jeff Jorgensen (00:44:45): That's what powers Power BI, right? That's DAX, right?
Rob Collie (00:44:48): It's the compression and storage, but also the query layer in Power BI. You think about the fact that you've got sometimes billions of rows of data in a model, and you can do this crazy filtered, complicated calculation that executes in sub second. Even with modern CPUs, this is a magic trick.
Jeff Jorgensen (00:45:06): Yeah, totally.
Rob Collie (00:45:07): It had nothing to do with that algorithm or with that technology, but I was sitting right next to them and I was a preferred audience member for them to show things off to. So I got to watch the same series of breakthrough after breakthrough after breakthrough that got the size of a dataset compressed smaller and smaller and smaller, and every time it compressed smaller, they were also able to increase the speed with which they could execute these calculations and queries. It was like Amir Netz would go home for the weekend and come in on Monday with some inspiration he had over the weekend and say, "Okay, let's try this out." And they would go and do it, and it would almost be like a laboratory experiment. We huddled in this office in real time. They're like, "They're making the changes. And then press go." And we're like, "Oh, well, another, how did we know? Just 20 times faster again."
Jeff Jorgensen (00:46:01): It's so fun. And so speed, depth, all that stuff, it's so cool and so fun to get those breakthroughs, whether it be Vertipaq-
Rob Collie (00:46:09): Which they've got a million names for now, like Parquet and blah, blah, blah.
Jeff Jorgensen (00:46:13): Oh, is that Parquet?
Rob Collie (00:46:15): So Parquet is a derivative of Vertipaq.
Jeff Jorgensen (00:46:18): That was the big thing that solved it for us originally that allowed us to store and call on our files so much quicker.
Rob Collie (00:46:26): What's the new direct query mode? What do they call it in fabric, the third mode?
Justin Mannhardt (00:46:29): Direct Lake.
Rob Collie (00:46:31): Direct Lake. Oh my God.
Jeff Jorgensen (00:46:32): Oh, is that similarly impressive?
Justin Mannhardt (00:46:35): It's a derivative of the same technology, so the compression algorithms and the query algorithms. So basically the storage format that would exist in a Power BI model is now the storage format of everything. And so it's become industry standards. You experienced that in your solution, Jeff, where you hit this stuff with Synapse and it hits the power BI and all these spiderwebs of how all this works. Without that-
Jeff Jorgensen (00:47:03): It just doesn't work.
Justin Mannhardt (00:47:04): It doesn't work. And I remember our early conversations, you're like, "We're doing all this in a SQL data warehouse." And I'm like, "That doesn't sound like the move. We don't know enough." And so it's pretty cool stuff.
Jeff Jorgensen (00:47:15): It's so fascinating and it's so fun because once you build and you have a good partnership, something will come out and I'll be like, "Ooh, can we utilize that?" We're on the edge. We're getting it all put together, and you guys always have someone that can help out with it.
Rob Collie (00:47:28): You ever hear the physicist Max Planck's theory, the way that science actually progresses? So the thing that they'd have you believe, the story they want you to buy about science is that it's a meritocracy of ideas. There's an open conversation. There's a lot of competition and fighting over what's right and what's wrong, and the best idea bubbles to the top. And Max Planck, they named things after him like Planck's constant. He's a titan of physics and science.
Jeff Jorgensen (00:47:58): I've even heard of him.
Rob Collie (00:47:59): And he said that that whole thing about meritocracy of ideas and everything, it sounds good and all. He's like, "That's not what really happens." He says, "Science advances one funeral at a time."
Jeff Jorgensen (00:48:11): Oh, that's great.
Rob Collie (00:48:13): The old people have to die.
Jeff Jorgensen (00:48:14): Yeah.
Rob Collie (00:48:15): Because they made their bones on that old theory.
Jeff Jorgensen (00:48:20): That's really interesting. Yeah, behavioral bias is one of my favorite things to go after. I think it's one of the hardest things for us to get away from, but anchoring bias, you anchor to your ideas and it just plagues so many people and it can plague entire industries.
Justin Mannhardt (00:48:34): You think about your own experience, Jeff, or any of our experience, if you were still in some big firm reporting to a different chief investment officer, your ability to advance your vision is either one of two possible ends of a spectrum. Either that person leaves and now your ideas are the dominant ideas, or you go off and you do your own thing. And I talk to customers all the time where maybe we're working with a manager or a VP or a director, you really realize that the roadblock is until the person that has the commanding voice of the room is no longer in the room, it may be difficult to advance.
Jeff Jorgensen (00:49:11): And what makes it even harder, I think particularly in our industry, you went out and you raised money based on an investment process that did A, B, C, and D, because you said, "I do A, then I do B, then I do C, then I do D. Oh, so now we can never change A, B, C, D ever, or because of these two portfolio managers, they've been doing it for five years, they have a good track record. Okay, so they can never be questioned? It's over?" And so you fast-forward 20 years in my industry, and I think this goes for a lot of industries. I think our industry might be one of the best examples of this, but I think everyone suffers from it, you walk in and you go, "I could walk in your office. I could watch you work for a little bit, and I wouldn't know if it was 2001 or 2023."
Rob Collie (00:49:58): That's savage. I love it.
Justin Mannhardt (00:50:03): That's why I sit in this chair so you know I'm in the future.
Jeff Jorgensen (00:50:07): That's right. And that is a sad reality. I think a lot of people are living in a world where they're like, "Well, it's been done this way. I sold it this way. I can't ever change," some incumbent bias that can never be questioned.
Rob Collie (00:50:24): I think I'm going to now probably end up setting a record for the most cheesy science metaphors in a single podcast.
Jeff Jorgensen (00:50:31): Well, and you picked a dumb baseball player to listen to this because I'm going to sound impressed no matter what.
Rob Collie (00:50:36): I did not pick a dumb baseball player.
Justin Mannhardt (00:50:39): We didn't know you were a baseball player. Let's just clarify that.
Jeff Jorgensen (00:50:42): But have I mentioned it? I'll tell you again.
Rob Collie (00:50:45): This shtick is wearing old.
Justin Mannhardt (00:50:48): I'm calling [inaudible 00:50:49], this is-
Jeff Jorgensen (00:50:50): Yeah, exactly.
Rob Collie (00:50:51): You remember Phil Hartman on Saturday Night Live with his unfrozen caveman lawyer routine?
Jeff Jorgensen (00:50:56): I do. It's the best stuff ever.
Rob Collie (00:50:59): There's one thing that's been on a screen that you and I have both seen. Okay, so he just stands there in court and says-
Jeff Jorgensen (00:51:05): Just a caveman.
Rob Collie (00:51:09): And he's devastatingly effective. This is your dumb baseball player.
Jeff Jorgensen (00:51:13): Exactly.
Rob Collie (00:51:15): No one sees it coming. No one sees it coming from you.
Jeff Jorgensen (00:51:21): That's so true. That's great.
Rob Collie (00:51:22): Diplomacy is the art of saying nice doggy until you can find a rock, right?
Jeff Jorgensen (00:51:27): Exactly.
Rob Collie (00:51:30): You're sneaking up on the entire investment banking industry, but you got a baseball cap on, they don't see you.
Jeff Jorgensen (00:51:36): Just a regular guy who played some baseball, just doing simple things over here.
Rob Collie (00:51:40): I'm just trying to come out here and just hit some singles. So here's the next science metaphor. There's a difference between magnetic north and true north. What we think of the northernmost tip of the globe, that's not where our compasses point.
Jeff Jorgensen (00:51:58): Depends on where you're standing, correct or no?
Rob Collie (00:52:00): Totally. Earth's magnetic pole runs through the earth at a slight angle to the spin where the axis would be. That's what we think of as true north, right?
Jeff Jorgensen (00:52:10): Yeah.
Rob Collie (00:52:11): But the magnetic pole isn't quite aligned with the spin axis. It's a little bit off. So where that magnetic pole comes out the top of the earth is 20 miles away from the actual North Pole in terms of the spin of the earth.
Jeff Jorgensen (00:52:24): Oh, that really messes with my OCD.
Rob Collie (00:52:26): It does, doesn't it? Okay, so most of the time, if you're just following a magnetic compass, if your real goal is true north, most of the time following the magnetic compass is fine. These two incentives reach true north and reach magnetic north are so closely aligned that it doesn't really matter most of the time. You've gotten actually close to the North Pole, and now there are situations where it could literally be leading you south. If you're between the North Pole and the magnetic pole, that compass ain't going to help.
Jeff Jorgensen (00:52:59): That's right.
Rob Collie (00:52:59): Well, it might if you know how to ignore it. If you go back five, 10 years in the NFL and the analytics were showing, for example, that going for it on fourth and one was overwhelmingly positive. We were all assuming that the coaches were incentivized towards true north, which is win the most games. What they were really incentivized towards, though, was don't get fired.
Jeff Jorgensen (00:53:25): Exactly. Oh, I love this. It's so true. And you have to have some wacko that comes in and says, "Moneyball." Tell me you've seen that one.
Rob Collie (00:53:34): Oh yeah, totally. Oh, and read the book. I don't even like baseball, Jeff. And I love the hell out of Moneyball.
Jeff Jorgensen (00:53:40): I'm like Billy Beane, I'm just a dumb baseball player. But that's exactly, exactly right. And a lot of people are just like, "Don't get fired. Just stick to the status quo, no need to question things." Here's my interesting Moneyball thing, though, that I don't want to talk about because people say, "What are you doing?" "Oh, we're Moneyball for asset management and we're bringing analytics into an industry that desperately needs them."
Rob Collie (00:54:05): Which is ironic because you know where he went to get his quants to do Moneyball for the A's, he went to the investment banking industry and stole your quants. This is like Chris's mug that he gave me my head's about to twist into itself.
Jeff Jorgensen (00:54:22): But what's so interesting about it is that first you get the analytics and then they use the analytics for a while. Now everyone has the analytics. I actually don't think that'll happen in our industry. And if it did, that's fine. They actually realize that the perfect combination is the analytics with the scouts.
Jeff Jorgensen (00:54:38): I'm not like, "Hey, let the computers run the world." Actually, the A's and other teams of the Red Sox famously used Moneyball more successfully than the A's. Hey, let's get pointed at true north. Let's look at the correct stats. What do I do on fourth and one? What's our true objective? And so that's the kind of stuff that we're doing, you guys are helping us do. And so, okay, we get that. But you can't do it without a human touch. You can't do it without the touch and feel. And that's really part of some of our foundational ideas, leveraging the best of humans who are in there, talking to management, getting that sense, getting that touch, getting that feel. And so I do think Moneyball has come around to it's the best of man and machine. Our first page in our slide deck, it sounds really cheesy, I promise it looks good, but it's a picture of a guy reaching in and shaking hands with a computer. It's actually the combination of you two things that make you really powerful.
Justin Mannhardt (00:55:30): This is a soapbox of mine, especially with all the rage about AI. You'll read articles where the conclusion is this AI or a hundred percent autonomous system is as good as an average team with average tools and sort of like a cop out. We could be great. We use excellent tools with excellent people. That's better because you could do it. You could put what you build on autopilot and I would bet it would be as good as average people with average tools.
Rob Collie (00:56:04): I don't even know how to disclaim this. Let's just say it. So one of the things I like to say or think about anyway is that intuition is merely your own thinking that you can't explain in words. Intuition is a distributed low level, multichannel. Whereas, logic and math are things that proceed one step at a time in the center of your brain that you can put in English. So if you think about it that way, then you can step back and go, "Oh, AI, machine learning, is intuition in a machine." Because it's the same thing, you can't explain how it reaches its recommendation. Now, it's also got bad intuition.
Jeff Jorgensen (00:56:46): It does.
Rob Collie (00:56:47): Just like we do.
Jeff Jorgensen (00:56:49): Just like we do.
Rob Collie (00:56:50): The balance between machine and human is so crucial. Someone on the podcast here, Shishir Mehrotra, who for a while in the early days ran YouTube.
Jeff Jorgensen (00:57:00): Oh, that's a decent job.
Rob Collie (00:57:01): A decent job.
Jeff Jorgensen (00:57:02): Pretty impressive.
Rob Collie (00:57:03): He and his team invented/discovered the concept of ads that you could skip. This was incredibly controversial when they introduced it, and this was covered in the podcast. For people who are listening and haven't heard that one, I recommend you go look it up in our catalog, but one of the things he told me, "Rob, even at YouTube where we had all these incredibly sophisticated machine learning algorithms, blah, blah, the big data, all this, everything's running all the time, doing all this smarts." He's like, "On the side of those machines where these knobs from zero to 10, and it's a human hand on those knobs that's turning it from zero to 10. And you know what this human being is using to decide where to set the knob? It's a pivot table in Excel." And I was just like, "Yes."
Jeff Jorgensen (00:57:45): But I truly believe that, and this is what I was going to say is that all of this cool stuff you talk about, and then one of my favorite podcasters always says, "It's not AI that's going to take your job, it's someone who knows how to use AI." These are tools that make us better. These are not things that replace you. They're tools that make you better. Moneyball stats made managers better. They made scouts better. They didn't necessarily replace them. I think the combination of people with the right tools, with the right data, with the right data model, with the right user interface can do so much better than people without. For me, I'm just A, lazy, and B, I want the right tool.
Rob Collie (00:58:24): We even have a very recent example in baseball of a team being very, very successful using a combination of technology and human factors that, wasn't it Houston, with a elaborate system of cameras?
Jeff Jorgensen (00:58:35): Elaborate system of cheating.
Rob Collie (00:58:41): How are we going to send this signal? I don't know, maybe just bang this garbage can.
Jeff Jorgensen (00:58:48): I'm so glad we've proven to be good without cheating since, because you've got little kids and you get all excited and then it comes out, they're cheating. What do you tell your kids? You're like, "Ugh." And then we've since proven that we're actually pretty good, which is good because that was a black eye.
Rob Collie (00:59:04): Bill Belichick is always in the NFL, like finding some loophole.
Jeff Jorgensen (00:59:08): Like deflated balls.
Rob Collie (00:59:10): You know what's funny is that the Patriots over that era when Brady was having the footballs deflated, had the lowest fumble rate in the NFL.
Jeff Jorgensen (00:59:19): Because they could grab onto a deflated ball much easier than that hard piece of glass.
Rob Collie (00:59:24): That's absolutely right. That side of the story never came out. They had an outlier, improbable, impossibly low fumble rate.
Jeff Jorgensen (00:59:33): Yeah, you'd never fumble like a bedsheet. You fumble a piece of glass pretty easily.
Rob Collie (00:59:40): And he fumbled his jersey, ladies and gentlemen.
Jeff Jorgensen (00:59:48): Oh, that's funny.
Rob Collie (00:59:49): Yeah. So you're at a stealth mode. You were under the radar for a while. You're open for business.
Jeff Jorgensen (00:59:55): Open for business, taking meetings. I think about this. There's no end game. That's what I described that I ran away from, businesses that said, "Oh, we figured it out and we stopped innovating. In 2001, we developed an investment process and now we can never question it." So we often talk, "Hey, what else? What else, what else?" And you're like, "Oh, where's the there? Where's the end game?" I was like, "Well, Google didn't wake up today and go, hey, we're done." There's no end game where we built all the technology. We have the perfect way to invest. We're going to keep waking up and getting better. Oh, that wasn't good. Let's make that better. So we're taking meetings, we're being very patient about it. We're telling more people about what we're doing without being so cagey because at this point you cannot IP financial services.
Jeff Jorgensen (01:00:38): But at this point, anyone that wanted to try to emulate what we're doing, I'd just say good luck. I can tell you exactly what we're doing, you're going to screw it up. It seems very intuitive, but it's very difficult and you have to have the right partner, and no one's going to go do this.
Rob Collie (01:00:53): Even if the moat that you've got around your business is only four feet deep, it's thousands of miles wide. So what are the characteristics, the necessary characteristics and the ideal characteristics of a customer of Cap Six?
Jeff Jorgensen (01:01:12): Interesting. We had a meeting the other day, and it was a senior level person. It was a really good meeting. It was our first meeting since some initial feeler meetings way back in the day. The ideal type customer was someone who goes, "Oh my gosh, I manage money, but I haven't had time to do this. I need someone doing this. I'm uninspired by these." But they're really into how investments are made and processed and things like that. And from a size perspective, we're looking for investors with enough net worth to put a decent slug in, understand the markets. I don't need Uncle Rico coming in here and thinking that I'm going to win every day. You need someone that's invested for the long-term and understands that what we're doing is optimized, not perfect. We are trying to beat the market.
Jeff Jorgensen (01:02:00): We're looking for allocators, people who have an allocation model and they say, "I need someone to give me a portfolio that meets these characteristics." And I give them a portfolio that meets these characteristics that are better than the alternatives. We are trying to beat the alternatives by 1%, 2%, 3% a year. And when you compound the effect of that at a lower fee, that can be worth hundreds of percent over a long period of time. The compounding effect of gains is a really powerful thing. So we're just trying to be slightly better over long time horizons, and that's pretty much all the market's going to give you. But there is that asymmetry of information. There is opportunity. The market's not perfect. Out of all those quadrillion portfolios that can be made, there are optimized ones that can be invested in, and we think we can find them.
Rob Collie (01:02:45): I love that whole 1% to 2% better piling up.
Jeff Jorgensen (01:02:49): Yeah. It's like the James Clear philosophy. You ever read him, the habit guy? Atomic Habits is his book. He's says, "Try to get 1% better every day." All of a sudden you'll look up and you'll go, "Oh my gosh, we're trying to get 1% better a year."
Rob Collie (01:03:02): I'm not in the habit of reading except for reading Reddit. I consume a lot of internet media. I don't read books anymore.
Jeff Jorgensen (01:03:08): You're not not reading words.
Rob Collie (01:03:10): That's right.
Jeff Jorgensen (01:03:11): You are just not reading books, words organized in books.
Rob Collie (01:03:14): I've been saying that a long time about myself, just constantly grinding a little bit,
Jeff Jorgensen (01:03:19): A little bit better.
Rob Collie (01:03:19): Just 1% better all the time, trust the process, right?
Jeff Jorgensen (01:03:24): Yeah. We launched something in March that's 10% better than the market already. I don't expect that we'll be 10% better every six month period. But you roll in more wins than losses, do that over time. And we have stuff that's up 1%, stuff that's up 2%. In three, six month time periods, that's what we're trying to achieve and just slightly better. But today, looking at our seven portfolios, four winning, three aren't okay. Okay, if the wins count up more than the losses, we're trying to put a team on the field that is better than the opposing team. The opposing team are what investors have access to now. And I'm trying to say, I can put a team out there that's better than the other team. I'm not going to go 163 and 0, but I'm going to make the playoffs, and if I don't, I'm going to study intensely. I'm going to put together the right team for next year because we're constantly improving, constantly getting better.
Jeff Jorgensen (01:04:18): And I think we have world series type teams and all-star teams that we can put on the field every day, and that's the point of what we're doing. So really we're targeting allocators, people who, not day traders, it's not someone who wakes up and goes, "Should I buy a Tesla or should I not?" I was like, "No, no, no. We build portfolios. Those portfolios serve a purpose." And usually it's for allocators, and those are financial advisors. Those are pension plans, endowments, things like that. I think it's really interesting. To many people, it's very boring, but it's a huge market that needs sophistication and they should have all-stars on the field.
Rob Collie (01:04:51): I wonder if you had played football instead of baseball.
Jeff Jorgensen (01:04:54): What would my analogies would be?
Rob Collie (01:04:56): Well, no, even if you might've missed out, I actually think you might've even missed out on being able to wire your life around something like the 1% better every day. The time that I finally came to understand baseball was that a game in baseball, a win, you didn't win a game. You actually scored a point in the larger game. The larger game is the season.
Jeff Jorgensen (01:05:18): Yes.
Rob Collie (01:05:19): And every game is just a point, right?
Jeff Jorgensen (01:05:20): That's right.
Rob Collie (01:05:21): And who wins a particular baseball game? It's a weighted coin, but it's basically a coin flip.
Jeff Jorgensen (01:05:27): That's what we're doing in the markets, and I think it's really hard to deprogram people about that. You're really trying to win the season. I'm trying to create a system. I'm the owner of your portfolio, and I'm trying to create a better team than the other teams that will make the playoffs more often that does that, and that's going to be a better experience, make you more money, which is the goal. And we can do it for a lower fee. That's another thing that needs to desperately happen. People's good asset management shouldn't be expensive, and it has to be, if you're using disconnected Excel files and 150 people to do redundant research and operational work, it has to be expensive.
Rob Collie (01:06:06): I can't resist landing the sports metaphor. In football, it's such an incredibly short season. There's so few games, and I think the chances of an upset in a football game are actually quite a bit lower than an upset in a single baseball game.
Jeff Jorgensen (01:06:22): I agree with that.
Rob Collie (01:06:23): So there's a lot less comfort in a sport like football with the mentality like you're talking about. 1% better every day ain't going to get it done.
Jeff Jorgensen (01:06:32): No, that's right.
Rob Collie (01:06:33): We don't have that many days.
Jeff Jorgensen (01:06:35): We've got 16 shots.
Rob Collie (01:06:37): And we have to be objectively superior to our opposition in an almost airtight manner to win the game. Of course, there is some chance.
Jeff Jorgensen (01:06:46): Sure.
Rob Collie (01:06:46): There is a lot of one score game variance and things like that. If you'd come out of that culture, I wonder if that would've launched you on a completely opposite path.
Jeff Jorgensen (01:06:55): I wonder if I'd have completely different perspective, yeah.
Rob Collie (01:06:58): The one you have is the right one.
Jeff Jorgensen (01:06:59): For our industry, sure.
Rob Collie (01:07:00): Well, but I think for life, the football thing is you don't encounter that in life.
Jeff Jorgensen (01:07:05): No, you don't. Baseball, you're good if you fail 70% of the time. Someone texted me yesterday and said, "What experience did you have as a professional and college athlete that helped you," I seriously got this text, it was out of nowhere, "That helped you in your finance career?" And I said, "A very odd combination of confidence and ego and humility because I failed all the time." So you're not scared to strike out, but you're also like, "I can run through walls." And I think football, it breeds a little bit different of that mentality to your point, Rob. It's like, "I can only run through walls." And failure and you lose, and you're probably not going to make it. Where baseball is a long, slow grinding game. That's a lot of life, right?
Rob Collie (01:07:50): I didn't play either of these sports, so I didn't learn anything.
Jeff Jorgensen (01:07:57): Did you play sports?
Rob Collie (01:07:58): I played a lot of recreational basketball growing up.
Jeff Jorgensen (01:08:02): I wish I would've done that.
Rob Collie (01:08:03): I got into roller hockey in my twenties after never skating. I'd never skated in any form in my entire life until my twenties. Justin saw me go over the wall in a roller hockey league here.
Jeff Jorgensen (01:08:14): No way. You still roller hockey?
Justin Mannhardt (01:08:17): Oh, yeah, yeah.
Rob Collie (01:08:17): My wife plays too. I'm 49. She's 48.
Jeff Jorgensen (01:08:20): That's really cool.
Rob Collie (01:08:21): We're playing with 25 year olds who played in minor leagues, and we are terrible. My wife and I are bad at hockey.
Jeff Jorgensen (01:08:31): But you have fun, which is the point of sports.
Rob Collie (01:08:33): Totally. And this league is really expert at integrating players of all skill levels into cohesive teams that actually result in competitive games. And it's just a miraculously beautiful thing.
Jeff Jorgensen (01:08:44): That's really cool.
Rob Collie (01:08:46): What year did you graduate high school?
Jeff Jorgensen (01:08:47): I graduated in '99. So Graduated college in '03. Went to Rice here in Houston. My wife and I, my now CEO, we met at UT Law. My kids are seventh generation Texans.
Rob Collie (01:09:02): Wow.
Jeff Jorgensen (01:09:02): Seventh gen. So we are proud Texans.
Rob Collie (01:09:05): The only state in the country that's proud of itself.
Jeff Jorgensen (01:09:07): Yeah, exactly. And we're very proud.
Rob Collie (01:09:15): It's really striking driving into Dallas, something like that, and the billboards for Budweiser say, "Budweiser, true to Texas."
Jeff Jorgensen (01:09:24): Exactly.
Rob Collie (01:09:25): I never see true to Indiana beer.
Jeff Jorgensen (01:09:31): No, or even California, also a giant state. And no one's out there bragging. They're just like, Hey."
Rob Collie (01:09:37): Not a lot of sense of identity around. Not the same thing. So the reason I ask is that I went to high school. I graduated '92 from high school. I went to high school with Johnny Damon.
Jeff Jorgensen (01:09:48): No, come on.
Rob Collie (01:09:49): I did.
Jeff Jorgensen (01:09:50): Who's in Moneyball famously.
Rob Collie (01:09:52): Yeah. And he was my year. And then the year right before him, one year older than us, Brian Barber was drafted in the first round of the MLB draft out of high school. I think Brian is now a scout for maybe the Phillies.
Jeff Jorgensen (01:10:09): Okay.
Rob Collie (01:10:10): Claim to fame in a game of rec basketball against Brian and Johnny, I pump faked.
Jeff Jorgensen (01:10:18): No way.
Rob Collie (01:10:18): I pump faked Johnny Damon. And he went flying and I got the layup right.
Jeff Jorgensen (01:10:23): Have you told him this story?
Rob Collie (01:10:25): No.
Jeff Jorgensen (01:10:26): I hope he hears it. I hope he listens to this podcast.
Justin Mannhardt (01:10:31): We'll have to go out of our way for that, Jeff.
Rob Collie (01:10:35): I don't even watch baseball, but I turned on one night game seven of the World Series when Johnny was on the Yankees. I turned it on just in time to see him hit the winning home run.
Jeff Jorgensen (01:10:47): Surreal.
Rob Collie (01:10:48): But at the same time, I was like-
Jeff Jorgensen (01:10:49): I pump faked that guy.
Rob Collie (01:10:50): I was pissed off. Here I am like a nobody cog in the Microsoft machine. And Johnny Damon is the hero of the universe, and I'm screaming at the television, "You were terrible at Spanish, Johnny Damon."
Jeff Jorgensen (01:11:13): Oh, that's fantastic.
Rob Collie (01:11:14): I was just an epic nerd in high school. I was on the calculus team.
Jeff Jorgensen (01:11:18): But what about that pump fake though?
Rob Collie (01:11:20): I know. It's just like, "Yeah, bye-bye." I had time to stop and lick my fingers and then do the... He was out of the frame and he had to know as he was in the air, he is like, "Oh my God."
Jeff Jorgensen (01:11:36): No, the calculus kid.
Rob Collie (01:11:40): Oh, suck it.
Jeff Jorgensen (01:11:43): Yeah, exactly.
Rob Collie (01:11:44): Johnny ran into my younger sister at a golf tournament years later. My sister's like really cute. She introduced herself, and the first words out of his mouth were, "Your Rob Collie's sister?"
Jeff Jorgensen (01:11:57): No way. Oh, that's so cool though that he remembered you.
Rob Collie (01:11:58): Oh, that's so funny.
Jeff Jorgensen (01:12:02): Well, so can I tell you one actual real-
Rob Collie (01:12:04): Please.
Jeff Jorgensen (01:12:05): So in our industry, Johnny Damon, looks the part, he has all the things that you want, you're not going to get fired if you hire him, he's muscular, he is fast, he hits the ball hard, but obviously Moneyball says he's not that great. So in baseball, I was like that. I was a seventh round draft pick, and I was really fast, well proportioned and all those things. You're not going to get fired for taking a chance on me, but obviously went on with my career. I got injured and moved on. And then in asset management, Wall Street tends to hire a certain profiled person. They've got a really good degree. I've got a good degree, an advanced degree. And I started to ask the question, "Are we really good? Are we actually good or do we just look the part and look like everyone else?" And so I don't care the answer. I would love to know that I'm really good. I'd love to know that they're really good and that we're all right the whole time. But we should know. We should know.
Jeff Jorgensen (01:12:56): So that's why we're doing the analytics on all the things we're doing to actually know who is good, who's not, and we don't care what they look like. Imagine going to the baseball field and going, and this is how job interviews on Wall Street often are. You ask all those cutesy questions and all that stuff, but at the end of the day, you go, "Okay, this guy, he looks pretty good in his baseball pants. Let's put him on the team." And they're going, "All right, you're on the team forever. You still look good in your pants." And having no analytics on those people.
Jeff Jorgensen (01:13:22): And so we're spending all this time and money to come up with the analytics to truly find the people that are good at the purpose of what we're trying to do, not at the incumbent advantage and the not get fired guy. So I don't know if I was good or not. We don't have the stats, but just call me the Johnny Damon of asset management. Now I'm trying to find the Scott Hattebergs or Johnny Damon. I don't care. Just find me the best.
Rob Collie (01:13:45): Well, you're trying to beat the Scott Hatteberg.
Jeff Jorgensen (01:13:46): I'm trying to beat them all, trying to beat them all and try to do so at a low cost for our customers.
Rob Collie (01:13:51): As you were telling that story, I got a really powerful visual in my head. Imagine a political cartoon, one frame, political art.
Jeff Jorgensen (01:13:58): Ooh, I need visuals. This is good.
Rob Collie (01:14:00): And you've got all of these good-looking, six foot plus all American men, and they are all mindlessly stuck, crowded and squished in a circle like moths to flame around magnetic north on the top of the earth. And just a little off to the side is this huge pot of gold sitting on true north. The band at the end of Animal House. They're all just like...
Jeff Jorgensen (01:14:35): I love it. That's exactly right. It's so easy to stay in that crowd, right? It's so easy to be like, "Wow, life's just a layup. I can just do this and it's safe. Or I can go take a risk and actually do things in a way like look for true north." Whether we find it or not, I think we found we're closer and we're going to keep looking for it with you guys.
Rob Collie (01:14:55): The real treasure was the friends we made along the way.
Jeff Jorgensen (01:14:59): Look at us, look at us.
Justin Mannhardt (01:15:05): Thank you for paying your invoices, Jeff.
Jeff Jorgensen (01:15:06): Oh man.
Rob Collie (01:15:12): I think we might call this one true north versus magnetic North with Jeff Jorgenson. I think that'd be a good running theme for it.
Jeff Jorgensen (01:15:18): I like it, or ladies and gentlemen of the jury dot, dot, dot.
Rob Collie (01:15:23): I may be just a simple unfrozen baseball player. Yeah, there's unfrozen, caveman baseball player, but also-
Jeff Jorgensen (01:15:34): That's a pretty good one too.
Rob Collie (01:15:35): It'd be a pretty good one. I don't know, we'll think about it. Justin, you had a question.
Justin Mannhardt (01:15:40): If people want to learn more about y'all, what should they do?
Rob Collie (01:15:43): Yes.
Jeff Jorgensen (01:15:43): You can reach out at [email protected] and email us. And our favorite way to tell people about us is actually tell them and not have them read. So reach out at infocap-six.com. Also, I'm getting more involved on LinkedIn, so go read my posts and get into our head a little bit. Friend me, connect. Our website doesn't say much, to be honest, intentionally.
Rob Collie (01:16:05): Yeah, I think that's a good move.
Jeff Jorgensen (01:16:07): This was fun.
Justin Mannhardt (01:16:08): Yeah. Appreciate it, man.
Jeff Jorgensen (01:16:09): I can talk to you guys for a while.
Rob Collie (01:16:11): Likewise. I've enjoyed the hell out of this.
Speaker 3 (01:16:13): Thanks for listening to The Raw Data by P3 Adaptive podcast. Let the experts at P3 Adaptive help your business. Just go to p3adaptive.com. Have a day today.
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