CIO Greatest Hits: Endowments – Andy Golden (Princo)

Summary

Capital Allocators – Inside the Institutional Investment Industry
Episode: CIO Greatest Hits: Endowments – Andy Golden (Princo)
Host: Ted Seides
Guest: Scott Wilson, Chief Investment Officer at Princeton University Investment Management Company (PRINCO)
Release Date: July 21, 2025

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Introduction

In this compelling episode of Capital Allocators, host Ted Seides engages in an insightful conversation with Scott Wilson, the Chief Investment Officer of Princeton University Investment Management Company (PRINCO). As a successor to Andy Golden, Wilson delves deep into the nuances of managing a prestigious endowment, sharing his unique experiences, investment philosophies, and strategic approaches that have shaped PRINCO’s success over the years.

Scott Wilson’s Journey to Endowment Management

Scott Wilson's path to becoming a CIO is unconventional and inspiring. He began his career as a professional photographer, driven by a passion for artistic expression. However, his interest in organizational management and economic principles led him to pursue further education:

"[08:25] Scott Wilson: ... I applied to the only management program that would even look at an application like mine, which was the Yale School of Organization and Management..."

Upon completing his studies, Wilson transitioned into the world of investment management, starting at a small firm before moving to Duke University’s endowment. His tenure at Duke paved the way for his eventual role at Princeton, where he has been instrumental in shaping the modern endowment model.

Transforming Princeton’s Investment Approach

When Wilson joined PRINCO in the late 1990s, the endowment was a "victim of its own success," having built a robust track record without the necessity for significant change. Wilson spearheaded a transformation by advocating for a staff-centric decision model, empowering the investment team with full discretion over manager selections.

"[17:57] Scott Wilson: ... We are empowering you. I'm going to hold you accountable."

This shift was initially met with apprehension but ultimately proved successful, especially during the 1998 crisis and the subsequent long-term capital issues. Wilson emphasized the importance of education and communication with the board to ensure alignment and trust in the new governance structure.

Core Investment Beliefs and Asset Allocation

Wilson outlines PRINCO’s investment philosophy, anchored in fundamental business principles and a long-term horizon. Key tenets include:

• Contrarian Thinking: Investing against the crowd by buying what others are selling and vice versa.
• Use of External Managers: Leveraging specialized outside firms to manage diversified asset classes effectively.
• Long-Term Orientation: Focusing beyond the immediate future to build a portfolio that maintains advantages over decades.

"[25:25] Scott Wilson: ... we think beyond the long term because the real horizon is how long you can go with a large amount of discomfort without changing your path inappropriately."

Asset Allocation Framework

PRINCO employs a top-down, strategy-focused asset allocation model, divided into two primary buckets:

1. Policy Portfolio: The foundational long-term allocation based on valuation-independent frameworks and core investment beliefs.
2. Midterm Adjustments: Tactical shifts responding to market dislocations or unique opportunities.

Three Years Ago Asset Allocation:

• Domestic Equity: 10%
• Developed Markets Equity: 6%
• Emerging Markets Equity: 10%
• Independent Returns (Hedge Funds/Absolute Return): 25%
• Private Equity: 25%
• Real Assets (Real Estate, Energy, Timber, etc.): 19%
• Fixed Income: 5%

"[33:37] Andy Golden: ... what's the baseline, long term, independent of market conditions, asset allocation, what does that look like?"
"[33:49] Scott Wilson: Roughly, we have 10% dedicated to domestic equity... 25% in private equity... 19% in real assets..."

Over time, PRINCO has adjusted its allocations in response to market conditions, such as the excess overweight in private equity during the crisis periods, leading to strategic rebalancing.

Managing Specific Asset Classes

U.S. Equities (10%)

PRINCO maintains a concentrated position in U.S. equities, focusing on specialized sectors like biotechnology. This approach allows for higher conviction investments rather than broad indexing.

"[36:51] Andy Golden: ... how have you approached when you only have that much exposure to the U.S. what are you trying to accomplish and then how do you go about doing it?"
"[39:33] Scott Wilson: ... many of our closest friends invest with them [biotech managers]... we're concentrating on a sector that can be quite volatile but very distinctive."

Independent Returns (Hedge Funds/Absolute Return) (25%)

PRINCO’s allocation to hedge funds emphasizes long-term relationships with select managers who demonstrate consistent value creation beyond the median performance of the hedge fund space.

"[43:39] Scott Wilson: We believe that who matters a whole lot more than when you invest and may even matter more than what they actually do."
"[44:43] Andy Golden: ... how do you think about that whole notion of balancing size is the enemy's performance?"
"[45:05] Scott Wilson: ... firms scale a lot better than other firms... it's smart to manage strategy evolution alongside firm growth."

Private Equity (25%)

Wilson discusses the strategic balance between fee optimization and ensuring managers have sufficient resources to deliver excess returns.

"[48:55] Scott Wilson: ... optimize fees, not minimize fees. We want to ensure firms are capable of returning excess returns and avoiding fee structures that could tempt managers to prioritize asset growth over performance."
"[52:42] Andy Golden: ... how do you think about that whole notion of balancing size is the enemy's performance?"

Real Assets (19%)

Investing in real assets like real estate, energy, and timber provides diversification and inflation hedging benefits.

"[34:58] Scott Wilson: ... we actually have had outsized exposures to things compared to most investors, and in some areas, that can be particularly risky."
"[42:49] Andy Golden: ... whether it is cyclical and..."

Fixed Income (5%)

PRINCO maintains a minimal allocation to fixed income, focusing primarily on higher-yielding opportunities aligned with their long-term objectives.

"[31:21] Scott Wilson: ... to think about asset allocation a little bit differently. We very explicitly and intentionally divide our asset allocation decisions into two buckets..."

Investment Team Structure and Decision-Making

Wilson emphasizes the importance of cultivating in-house talent and fostering a collaborative team environment. PRINCO recruits primarily from Princeton, focusing on first-principle thinkers rather than those adhering to rigid investment recipes.

"[52:50] Scott Wilson: ... we're hiring one to three or maybe more kids out of college, primarily Princeton, where we have some unfair recruiting advantages."

Decision-Making Process:

PRINCO employs a “gang tackle” approach where major investment decisions involve the entire investment team. This includes a "bull bear session" where team members present and debate investment ideas, with assigned devil’s advocates ensuring rigorous scrutiny.

"[56:38] Scott Wilson: ... 16 investment professionals sitting around the table... some playing devil's advocate... everyone shows their votes simultaneously."

This method, developed post-Global Financial Crisis (GFC), aims to balance robust debate with cohesive decision-making, reducing the influence of political or emotional biases.

Adapting to Market Conditions and Managing Risks

Wilson discusses PRINCO’s adaptive strategies in response to evolving market landscapes, such as increased volatility in fundamentals and high asset valuations.

"[65:21] Scott Wilson: ... there's a lot of potential volatility in fundamentals in the world that doesn't seem to be reflected in prices. We recognize premiums should account for possible shocks."

PRINCO remains cautious, maintaining diversified exposures while being prepared to adjust based on emerging risks and opportunities.

Future Outlook and Strategic Focus

Looking ahead, PRINCO aims to continue leveraging its strengths in managing long-term, diversified portfolios while fostering innovation in investment strategies. Wilson highlights the importance of staying adaptable and maintaining strong governance to navigate future market dynamics.

"[63:46] Scott Wilson: ... we're pretty circumspect about top down stuff. We're focusing on building a roster of managers and ensuring stability in our investment processes."

Closing Thoughts and Personal Insights

In the concluding segment, Wilson shares personal anecdotes and reflections on leadership, career advice, and life lessons. He emphasizes the value of following one's genuine interests and the importance of resilience and adaptability in both professional and personal realms.

"[70:46] Scott Wilson: ... follow your path that has a real natural attraction to you and iterate on it. Learn from diverse experiences to develop a detached yet passionate investment ego."

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Key Takeaways:

• Empowerment and Governance: Transitioning to a staff-centric decision model empowered PRINCO’s investment team, fostering accountability and trust.

• Strategic Asset Allocation: PRINCO’s diversified portfolio, anchored in long-term strategies and contrarian investments, aims to achieve above-market returns while managing risk.

• Talent Development: Emphasizing in-house talent cultivation ensures a cohesive, innovative team aligned with PRINCO’s mission and values.

• Adaptive Strategies: PRINCO remains vigilant and adaptable to market changes, balancing disciplined investment approaches with tactical flexibility.

Scott Wilson’s leadership at PRINCO exemplifies a blend of disciplined investment principles, adaptive strategies, and a strong organizational culture, positioning Princeton’s endowment for sustained success in the dynamic landscape of institutional investing.

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Notable Quotes:

• "We are empowering you. I'm going to hold you accountable." — [17:57] Scott Wilson
• "The real horizon is how long you can go with a large amount of discomfort without changing your path inappropriately." — [25:25] Scott Wilson
• "Who matters a whole lot more than when you invest and may even matter more than what they actually do." — [43:39] Scott Wilson
• "Investing is a science, craft, and an art." — [61:48] Scott Wilson

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For more insights and in-depth discussions with leading investment professionals, visit capitalallocators.com.

Transcript

[Ted Seides]

Capital Allocators is brought to you by my friends at WCM Investment Management. To outperform the markets, you have to do something differently from others. In my 30 something years investing in managers, there may be no one I've come across who does that as clearly and as well as wcm. I've seen it up close. As an investor in their international growth strategy for the last five years, WCM is a global equity investment manager majority owned by its employees. They believe that being based on the west coast, away from the influence of Wall street groupthink provides them with the freedom to live out their investment team's core values, think different and get better as advocates of integrating culture research into the investment process and advancing wide moat investing. With the concept of moat trajectory, WCM has delivered differentiated returns while building concentrated portfolios designed to stand out from the crowd. WCM is committed to defying the status qu by dismantling outdated practices, believing in the extraordinary capabilities of its people, and fostering optimism to inspire each individual to become the best version of themselves. To learn more about WCM, visit their [e-mail] and tune into this slot on the show to hear more about WCM all year long.

[WCM Investment Management]

This testimonial is being provided by Ted Seides and Capital Allocators who have been compensated a flat fee by wcm. This payment was made in connection with Capital Allocators testimonial and production of podcasts and is not depend on the success or level of business generated. The opinions expressed are solely those of Capital Allocators and may not reflect the opinions of others. Investing involves risk, including the possible loss of principle. Past performance is not indicative of future results. Please visit wcminvest.com for WCM's ADB and further information.

[Ted Seides]

Capital Allocators is also brought to you by AlphaSense. AlphaSense has become indispensable in modern investment research. It's the market intelligence platform trusted by the world's top institutional investors and for good reason. AlphaSense combines premium content with powerful AI to deliver clarity fast. From company filings to over 200,000 expert interview transcripts, it helps investment teams zero in on what matters most when deeper insights are needed. AlphaSense's expert call services provide direct access to high quality vetted experts on demand. Unlike Traditional Expert Networks, AlphaSense Custom sources experts to fill specific research needs. Whether validating a thesis, pressure testing an idea or gathering real time field intelligence, all without the friction or price markup of legacy models, what truly sets AlphaSense apart is its ability to surface proprietary insights combining expert access with AI purpose built to extract qualitative intelligence at scale. The result is differentiated perspectives and decision making confidence delivered faster than ever. See it in action at alpha alpha sense.com capital that's alpha-sense.com capital.

[Andy Golden]

Hello, I'm.

[Ted Seides]

Ted Seides and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation. Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can join our mailing list and access Premium [e-mail] All opinions expressed by Ted and podcast guests are solely their.

[Scott Wilson]

Own opinions and do not reflect the opinion of capital allocators or their firms.

[Ted Seides]

This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Capital Allocators or podcast guests.

[Scott Wilson]

May maintain positions in securities discussed on this podcast.

[Ted Seides]

With eight years and over £500 podcasts under my belt, I'm often asked to recommend my favorite episode. But I can't really answer that question. I feel like I have 500 children and don't think I've disowned a single one. So when asked, I usually offer up a great recent episode to get a listener started. Finding the best episodes in a big library of content isn't easy, so we thought we'd help. Each summer going forward, we're going to share our best. Over seven weeks, we'll replay conversations curated from our favorites and yours, excluding those from the last 12 months. Our 2025 Summer Series focuses on CIOs. We're blessed to have an incredible library of long shelf life content and we just couldn't pick seven. Instead, we'll share a dozen gems, canvassing every type of institutional asset owner. Our summer series kickoff is a twofer of Andy golden, now retired after 30 years at Princeton University Investment Management Company and Scott Wilson from Washington University St. Louis. We packaged these two leading endowment investment officers to compare their investment styles. Andy started his career at Yale with me and became one of the leaders of the Endowment model for decades. His discussion of print go's decision making process is among the most referenced descriptions of any podcast with a cio. We've Scott comes from a direct investing background and has adopted a position focused approach to diligence and co investing, leading to a very different portfolio construction. It's perhaps the leading example of a new approach in the endowment world.

[WCM Investment Management]

Before we get to the interview, a quick announcement. We've set new dates for our Capital Allocators University for Investor Relations and Business Development Professionals. Those dates are December 3rd and 4th in New York City. Later in the year is just a better time of year for this gathering. It's post AGM season, travel starts to wind down, it's right before the holiday crunch time and it's a great time for capital raisers to reflect on their previous year and plan for the year ahead. December 3rd and 4th in New York City. CAU for IRBD is a closed door gathering for capital raisers to connect with peers, learn from allocators and other experts and really share in best practices with each other. You can learn [e-mail] University. Thanks so much for spreading the word about Capital Allocators University for Investor Relations and Business Development professionals.

[Ted Seides]

Please enjoy my conversations with Andy golden all the way Back to episode 13 in 2017 and Scott Wilson from 2020.

[Andy Golden]

Andy, thanks for joining me.

[Scott Wilson]

My pleasure.

[Andy Golden]

You have been here at Princeton for a while now.

[Scott Wilson]

22 years.

[Andy Golden]

22 years in the same seat. So you started your career as a professional photographer, which is not the normal path to endowment management. How did you get from being a photographer to running the show here at Princeton?

[Scott Wilson]

You know, I was a photographer really as a day job supporting artistic aspirations. And what interested me in photography was the idea that maybe I could do some art with it. And I remember getting very excited when I finally landed a day job in photography as opposed to before that. I was basically carrying heavy things and I drove a truck a little bit and then of course I had a lot of bartending. I finally got the photography job and along the way after some geographic moves, I ended up in the in house advertising photography group for a department store. And I ended up kind of moving up the de facto ranks and getting involved in management. I was the assistant to the manager, not the assistant manager of this ten photographer studio and that actually got me interested in organizational issues. I was a philosophy major undergrad and I had not taken anything practical.

[Andy Golden]

The philosophical photographer.

[Scott Wilson]

Yeah, yeah. But you know, trying to organize a bunch of folks to throughput work, I stumbled on this economic principle of adverse selection that if you treat people really badly then you're unlikely to get really great people working for you and it creates a vicious cycle. So I had this notion that maybe there'd be a better way to let workers share in the gains, the productivity gains that maybe they could produce. And I knew I needed to learn more and so I applied to the only management program that would even look at an application like mine, which was the Yale School of Organization and Management, as was called back in those days. And sure enough, I got in writing an application about employee ownership, of all things. The woman who's now my wife had a wonderful opportunity land in her lap. That meant that I should defer. And I did defer my admittance for a year, again. With no economic training, though, I understood the idea of a free option, that I had the free option to try something completely different. And the option would be that if I didn't like it, I could go to school. If I loved it, I didn't have to go to school. And so what I did is I went through the newspaper, saw an ad, took a math test, and started to work in a very small money management firm outside of Philadelphia doing technical analysis. I was essentially a human Bloomberg machine. Bloomberg had just kind of gotten started. This is 1986, but we had a system called Quotron. And I would read numbers going across the screen and calculate them with my left hand and draw charts with my right hand. And. And it was really exciting to really be enmeshed in the market in that way. It was intense. And so I didn't like that job enough to stay, but I was fascinated by the market. And so when I went off to school, I wasn't quite sure what I want to do. And investing was interesting to me, but I was concerned that it wouldn't be fulfilling as a long term career because of the lack of kind of social impact. And I heard about this thing called socially responsible investing. And I thought, as many people of that age think, wow, that that sounds like cake and eat it too. I need to learn more. And I heard about this guy who had recently started working in the Yale Investments office, who had done community economic development work. And I was so naive about the world of investing that I didn't realize that those were two very different things. So I went for Dean Takahashi. And I wasn't sure if that was his name or his title, but I went off for an informational interview and within somewhere between three and eight minutes, he convinced me that socially responsible investing was a silly concept and certainly not a way that, not how I would want to spend my career, but if I was interested in doing good while investing. They were looking for an intern in really what was ground 0 at time T plus 2 for this revolution that you know well, the Takahashi Swenson model of investing. I can't, I'm not allowed to use the Y word. Yes, the endowment model. And that I just Felt like the luckiest guy I'd found the. A job that was just so fascinating and I would have stayed there but for, as you know. Well, there's an economic issue that endowment management did not pay very well. That was okay. I had bought onto that. But Yale paid particularly poorly.

[Andy Golden]

Back then.

[Scott Wilson]

Back then, back then. So Dave Swenson, I asked for his help and he got me an offer to come to Princeton for triple my compensation. I got my own welfare to go to Duke, my alma mater undergraduate, for double. So I took the Duke job and everyone in the Yale office applauded, not just because they're happy to see me go, but because it meant that finally there was a data point of someone who wouldn't put up with the pay scale there. So I went off to duke and then 18 months later Princeton called and said, hey, instead of actually being number two person in the office, we got some things going on here where we have a slot to run the university office.

[Andy Golden]

Yeah. And that was 22 years ago, almost.

[Scott Wilson]

As long as it took to tell the story.

[Andy Golden]

So what was here when you arrived and what did you felt you needed to change in the first couple of years?

[Scott Wilson]

Yeah, there was very little here here when I arrived. And it's an interesting story about. In some sense, Princeton was a victim of its own success. Its investment track record of what was then a three point some billion dollar endowment was very, very, very strong. And so it hadn't really been motivated. There wasn't that much broken to fix, at least in the trustees, the government's powers, minds, you can understand why. But Princeton had built up this long track record success in an unusual way. And for decades there had basically been a single volunteer who made security level decisions. And that went very well for a long time. Finally there was a shift to the use of a few, a handful of outside managers, but those were still selected by a trustee, the committee, although there was great deference paid to the chair's prerogative, or back then they would have said chairman's prerogative, because it was certainly a man. And it wasn't until 1987 that there was any professional staff dedicated to this. And the Princo, which is a university office, we're not a separate company, despite the name was set up and the first Princo president was chosen. He will tell you this, I'm not besmirching him in any way. He will tell you he was chosen in part because he didn't have a whole lot of experience in investing. And so the trustee who had the most Responsibility felt he wasn't going to get in the way. He's a tremendous smart guy who was a well known entity to the university president at the time. So from 87 to 95 he served. He then followed Bill Bowen, that's his name's Dan Sullivan. He followed Bill Bowen to the Mellon Foundation. Second pranko president came along, Randy Hack who had as his first career. He was a brilliant, tremendously successful real estate entrepreneur and well known entity to the inner circle of trustees. So he was brought in but he had no real experience outside of real estate. He's trying to figure out this governance model where the chair really remained the decision maker. There was a Princo president but by no means was the Princo president the true chief investment officer. And the chair at the time was a guy named Dick Fisher who had a day job as chair and CEO of a little firm called Morgan Stanley. And Dick had the vision to put forward three initiatives that he felt were really going to be important in the 1990s. He knew that the 90s were not going to be the 80s. You weren't going to be able to make money by simply showing up. Oh well, turns out he got that wrong. But he got the idea right of diversifying into private investment hedge funds. And also a third leg which was a little bit less clear was a good move. Global Balance Management. Randy recognized that the private investment really required an intensity of effort that could not flow through the chair. So he constructed the idea for this affiliated fund, Nassau Capital that was given an exclusive multi year contract to manage our non marketable. And he basically directly direct. Yeah, I mean they were holding onto it. They did both fund to funds and some direct investment, mostly co investment. But he basically took what was a small staff but he took essentially all of it with him. So I showed up here and there was one colleague who was pretty frustrated that she hadn't been given the nod to lead the office and two secretaries and a pretty much blank slate. And I spent the next several years trying to present a vision, simultaneously trying to improve the portfolio. Presented new philosophy for a decision framework. Present a vision for an organization that was first with Dick Fisher when his term ended. Another longtime trustee, Ed Matthews, who had been at the time was the chief investment officer for aig. And it was Ed that really helped move the ball forward on a new governance structure which became a staff centric decision model. Fully empowered.

[Andy Golden]

Yeah. Which is by the way pretty unusual for an investment staff to have full discretion to make mostly manager decisions at that point in time.

[Scott Wilson]

Right, right, right. It was really unusual and in fact was not what I originally proposed. I said to Ed, I don't want to reinvent things when there's a good model. You know, here's a kind of Yale light model where the major decisions manager hires fund re ups would still flow through the committee or what we'd call the Princo board. There'd be a lot of, kind of benefit of the doubt given that there's a presumption that if recommendations were sent until proven guilty. Yeah, yeah. You know, you reject a lot of recommendations, there's probably a bigger decision that needs to get made. But Ed said, andy, sounds to me like you're trying to have it both ways. You know, we're empowering you. I'm going to hold you accountable. And that, that was powerful. That was a big deal. And it would, it did come with a little bit of the risks I was afraid of. And the biggest concern was that the Prinko board would not feel true ownership and therefore might get more concerned during tough times.

[Andy Golden]

Yeah, sure.

[Scott Wilson]

And frankly, that wasn't a real problem because that authority model was almost immediately tested in 98 when there was a little bit of an emerging market and then bigger crisis, the long term capital crisis. But it was more that the board would show up and say, what are we doing here? There's no decisions for us to make. We're busy people. So we had to try and educate them about the importance of paying attention to us, that they were to us the way we are to our external managers, that we really need to know what's going on.

[Andy Golden]

So as you framed out a way of thinking about managing this pool of capital, what were the core beliefs that governed how you were going to go about structuring the portfolio? Then we talk a little bit about asset allocation and how you actually did it.

[Scott Wilson]

Well, buy low, sell high was one. That's a good one. No, I mean, in all seriousness, I think, I think it's a basic business principle about thinking about what you're trying to accomplish. And where do you have advantages naturally, where can you acquire advantages and where might you have the disadvantage that's unchangeable? And so that's where you quickly get to the use of outside managers.

[Andy Golden]

Let's start with that. Why outside managers and not internal managers?

[Scott Wilson]

I think the arguments are pretty clear that for any activity that we might pursue, and we pursue a lot of them, there are firms bringing just a whole lot more bandwidth. I won't even say firepower. I don't think that the people who work There are smarter than my colleagues, but they're focused and you know, they're structured to reward and they're culturally just about really getting into the weeds. And you know, it's hard to imagine us doing that across such a varied portfolio and competing well against these specialized firms. You could take the approach of, well then don't try and do it everywhere, just do it in some areas or maybe even just one area. And I think where you run into problems there is from an organizational dynamic and a culture and the rhythms of those decisions are so different that it's hard to bring a unified approach mindset, unified talent. You know, there's a reality of the compensation market that in the private sector, comparing private to private security selection in the trench work gets paid a whole lot more than fund to fund work. And so even though to this day places like Princeton operate at some discount to the private sector or on the fund to fund basis, not much, but still some. It's a huge discount to the front line. You know, this is the issues that Harvard had and it's even worse than that. Not only are we at a disadvantage in terms of that compensation element in terms of attracting and retaining people, there's a danger that it weakens an area where we have an advantage, which is this sense of mission. So what attracts people to print go, I hope I know are the same four things that I'm attracted to. First, the intellectual challenge is really special. All over the world, all different kinds of things. You know, we get to take a very, in fact, we have to take a very long term horizon. But we know that the long term comprise lots of short terms. To coordinate this portfolio, we necessarily have to have the 35,000 foot view. I mean that literally and metaphorically in terms of the travel, but we also swoop down from time to time and operate shoulder to shoulder with our external partners. And the ways out, I think in the data support make each other better. So that's really cool. We're given all the tools that we need to compete to be the very best at what we do. Got some tough competition, but no one has any additional tools than we have, you know. But the third one is really the distinctive, the sense of mission and frankly operating at a slight compensation discount underscores that and makes you feel really good. You know, the fourth one I used to stop at three because that's where the rhetoric coach would tell you have three points.

[Andy Golden]

Only three points.

[Scott Wilson]

Yeah, yeah. But the fourth one that I realized is that I get to come to work every day with Colleagues who share, you know, interest in that. Those same three. Again, that's all culturally, that we feel really good about what we're doing, and we feel that we are delivering a bargain, you know, to our client, which is kind of us, but we're delivering a bargain. So that's, that's, that's why.

[Andy Golden]

So that's a first tenant was the use of external managers and good. What are the other key advantages or disadvantages that you have sitting here?

[Scott Wilson]

Well, you know, I mentioned that the long horizon is a potential advantage. There are some other ones, like the fact that Princeton itself and then Princo has augmented this. We're an attractive client, and that's enmeshed in the ability to take long term. You know, there's, there's a saying that good clients make for good architects. It's also true that good bosses make for good workers. And so the fact that our governance structure is filled straight up and down the line with people who really are not just brilliant, but get it like, you know, understand investing. And so, you know, getting back to that buy low, sell high, it means you're buying what everyone else is selling and selling one else is buying. It means you got to be contrarian. And it means that you got to be able to do some uncomfortable things. And people who understand what you're doing will allow you greater units of discomfort, and they will also allow you to optimize that discomfort, spending them in ways that are counter to conventional wisdom. So, you know, we got this loyal network, it's information network of Princeton alums, but also Princo alums or Madur. So why wouldn't I want to exploit that intelligence? And I don't want to compete against those managers. I want to kind of work with them. So I think those are some of the obvious ones.

[Andy Golden]

You mentioned a potential long horizon. Most of the time, people in a seat like yours talk about having a long horizon. So why don't you talk a little bit about the word potential in that phrase?

[Scott Wilson]

Well, first of all, you got to talk about long and what we mean by long. There's a phrase we use here that we actually think blt, we think beyond the long term because a lot of people say Long is 10 years or something. And I think, well, I'd like to push our thinking on that. I'd like to not just produce the best possible results over the next 10 years, but I want to make sure that in doing so, at the end of those 10 years, we have a program that really looks like it's got unfair advantages. For the next 10 years. So, you know, that's. That's pretty good if you can do that. But the real horizon is not what you claim your horizon is. The real horizon is this thing that you maybe don't even discover until after the fact is how long can you go with a large amount of discomfort without changing your path inappropriately? One of the things I love about this business and I love about what I get to do in terms of focusing on the long term, is it brings back the philosopher me. Right? It's like if you set up a system where you say you won't really know how well you're doing until the long term is done. Wow, that sounds a little odd. That means you're going to ignore all information along the way. So being able to figure out when you should pay attention to the short term disappointment is really interesting. And I think that speaks to another advantage that we've had to develop around here, which is both the appreciation of theory. We don't use theoretical as a term to denigrate something. We use it to mean not empirically based. Being able to have an appreciation of things. Theory over data, in the right balance is key. You know, there are times when you want to say, if the data don't support the theory, the data are wrong. Right. And you know, so anyone listening is scratching their head at this point and you can say, see why this is an acquired advantage? Because when I used to say this stuff one year, two years into it, people would scratch their heads and say, what are you talking about? You know, so another advantage is if you put up good numbers for long enough, all of a sudden everything you say sounds a whole lot smarter than it used to.

[Andy Golden]

It do sound a lot smarter than.

[Scott Wilson]

I remember from a long time ago.

[Andy Golden]

What's an example of. Let's just talk about a manager. It would be a specific manager of what happens when a manager is going through a tough period of performance.

[Scott Wilson]

Yeah.

[Andy Golden]

What are you doing to figure out what's right, the theory or the data.

[Scott Wilson]

We want to talk about in the first instance, what's the simple explanation, the kind of attribution? But we don't want to get too involved in that. You know, attribution studies tend not to be worth the paper they're written on. And I believe or not can go on long about that. I think that's a kind of step into the what's really going on here, guys? And let's talk about not what's happened, but what we think, what the future might look like. So let's go through a portfolio and understand what your arguments are for this position versus that position and see if we can get confidence from that perspective. You of course want to. Maybe the short answer is you want to just re underwrite. And if you have experience like we have of investing with people who don't have a long track record, it's not that unusual. It doesn't feel that strange to invest. Despite a recent bad track record, it's not that much. No big deal, you know, so what are we trying to think about? We're trying to think about who the people are, what motivates them and what are they doing. Do they have an approach that can give them an edge and do they seem to be executing on that? You rarely have to relook at that point at some of these other agency issues. People tend to develop bad habits when things are going well in terms of separating interest with clients, not when things are going badly. Although it may be an opportunity to reexamine some of those collegially with our partners and see if there's some strengthening there. But you're really looking at things to just kind of understand the hows and whys. It's one of the reasons why there's a bunch of strategies that we don't invest in even though others have made a ton of money. But we know that when the bad times come, we would not be able to do anything to give us confidence to continue.

[Andy Golden]

So what are examples of those black box.

[Scott Wilson]

Any trading strategy where someone's just, just got a market feel, someone may have also flipped heads 100 times in a row up to that point, and now they've just done tails.

[Andy Golden]

So as you espouse the goals for the pool of capital, I was surprised to see a very high return goal, at least in these market conditions. And the reports say, the annual report of PRINCO says above 10% a year. And then you want to generate high returns, beat market indexes, beat your peers. How do you set up your asset allocation to try to get at those goals?

[Scott Wilson]

Yeah, although above 10% is shorthand. We think about things in real return space and then we're assuming a reasonable level of inflation. And this is a conversation I think we all need to be sensitive to in both the recent market, but also going forward is you gotta be consistent in what you're saying. If you think inflation is going to be low, then your nominal return is going to be low. But that's not so bad. I would sign up for that any day. You know, if I can make 5 or 6% real, compounding forever. I would sign that.

[Andy Golden]

And what's approximately the spending of the university?

[Scott Wilson]

Well, the spending is probably going to average a little north of 5 according to Dr. Nominal or 5, 5. Well, in any given year it's nominal, but it grows, you know. So to correct what I'm saying, if someone said devil walks in, says here's a contract, you can earn exactly 5% real, I'm not sure I would do that. We'd have to readjust our spending approach. But if they said something closer to six, you for sure you would do that. So your asset allocation question. We think about asset allocation a little bit differently. I'll give you the answer I would have given to you three years ago, and then I'll give you the answer today. The answer three years ago would have been, we think about asset allocation a little bit differently. We very explicitly and intentionally divide our asset allocation decisions up into two buckets, the longest horizon buckets called our policy portfolio. And it's constructed in a valuation, an independent framework. That means we're not looking around at what looks particularly good right now or bad. We're saying what are the kind of core beliefs about investing, the way asset classes perform and what are their characteristics and what are our distinctive circumstances, including our objectives as an investor and create this default position, this neutral position that addresses that. I think a lot of investors fail to recognize that there is no one right portfolio. It's right for what you're trying to achieve. Princeton should have a very different portfolio than my 89 year old mother should have for so many reasons, even though.

[Andy Golden]

They'Re both going to live forever, apparently.

[Scott Wilson]

Mom, if you're listening, I want that to happen. So you think about things like how much illiquidity can you tolerate, et cetera, and you create that base level positioning. It's then in step two that we say, is there anything unusual going on either in the world or with ourselves that suggests that we need to recognize a midterm target that's different from our long term target.

[Andy Golden]

And so that's the three years ago framework. I don't know if it's varied that much. But that baseline, long term, independent of market conditions, asset allocation, what does that look like?

[Scott Wilson]

Roughly, we have to earn a lot of money, so it's equity biased. If we just go around the pie chart, it's 10% dedicated to domestic equity, long only managers, 6% to other developed markets, longish only managers, 10% to emerging market public equity managers, 25% in the category we call Independent return subset of what the world calls hedge funds, what many others call absolute return. 25% in private equity as a long term target, that's venture and buyout. 19% in real assets, that's real estate, energy, timber, some other things in public and private format. And then if I said that right, at least 5% in fixed income, you know, the midterm allocation is quite different from that for the first half of the 22 years. Those differences were all intentional. You know, we could see there were such dislocations in markets that even we, you know, felt confident in swinging hard at them.

[Andy Golden]

What to give an example of that.

[Scott Wilson]

From Beck, you know, decrease your domestic equity exposure as much as you can tolerate in general and against the tech sector in particular and move it into emerging within domestic, put as much as you possibly can into value. And so, so we did well coming at least relative base coming out of the bubble because of that. You know, what's gone on for close to the second half of that 22 year period was this. We developed unintentionally an extreme overweight to private equity through the crisis. Yeah. And even leading up to it, we were steering that that boat was moving pretty fast for us. And. And so then it became a. Well, given that you are overweight that, and given that there's no way that you are interested in at least, least in kind of correcting that quickly, then why don't you be very deliberate and intentional about how you offset that. And so the conversations now are much more about which do you dislike least in terms of holding the smallest amount of that underweight.

[Andy Golden]

So that's been the gift that keeps on giving.

[Scott Wilson]

Yeah. No, yeah, hurt me. You know, it's like we're really overweight and that's part of why we value done better than we would have otherwise. It's still, since 2009, the frustration has still been that not just zero return to diversification, there's been a cost to diversification, but there's also been a cost to hard work. SP 500 just show up. You know, the Woody Allen approach to investing.

[Andy Golden]

20 years now that's worked well. Let's walk through each asset class briefly. I'd love to hear your take and your particular spin on each. So US equities is only 10%. Presumably that's not indexed.

[Scott Wilson]

It's the opposite index too.

[Andy Golden]

So how have you approached when you only have that much exposure to the U.S. what are you trying to accomplish and then how do you go about doing it?

[Scott Wilson]

Well, it's quite different from what you might expect. So one of the things I should have said about a core belief in a tenet here, I'm going to steal a phrase that one of our managers uses, that it's one team, one dream. So our whole decision process is structured in the hopes of moving closer and closer to that nirvana. Nirvana would be if every single investment truly competed against every other single investment. And by the way, what, you know, we never really fully answered, the asset allocation process today is really bottom up. And it's kind of, we like this manager, we like that manager. We think it makes sense to have this much money with that one and that, you know, with that one. And when we aggregate that all up, is that a tolerable position? You know, we're not fully there, but we're not. We don't articulate it that way. We think the construct is still helpful as a just a, almost a trail markers. But more often than not, if there's a manager that we like but it's would put us over the allocation, that's when we talk to the board about changing the allocation.

[Andy Golden]

Do you change the allocation or will you just port over the exposure, which is another viable. So if you had a framework of an asset allocation and you had too much in US Equity, you could either short out or swap it into development equities.

[Scott Wilson]

We do a little bit of that, but in the first instance it's more. Well, that 10% in domestic equity is an arbitrary number. Do we really think it's much better than 9% or 11%? Well, it depends how you make it up. So that gets us back to the one team, one dream. We try really hard to not think about these things as silos or make them justify themselves relative to just themselves. So within domestic equity, we've got 40% of that 10%. Your listeners can do the math. It's about four points with just one manager. If you were running a domestic equity portfolio, if you were compensated on just how domestic equity did, you would never take that much tracking risk. But everyone who works here is just thinking about the overarching bottom line. I guess your bottom line should be underpinning. Your bottom line should be on the bottom, not on the and the top. And you know, we want to kind of partner with great people and then we figure out which bucket makes the most.

[Andy Golden]

So what type of manager? Are they in a particular sector? Are they a broad US Equity manager that just happens to have a lot of conviction?

[Scott Wilson]

No, wait for it. These guys, you know, who many of our closest friends invest with them do biotech stocks, fallen angels, biotech stocks. So you're not just concentrating, you're concentrating on a sector that can be quite volatile, that is pretty distinctive. And by the way, we got some exposure in that area and other parts of the portfolio there as well in the independent return and even in the venture space. But I think most institutions are much more prone to over diversification or its cousin de worsification as pure lynch would say than they are the opposite issue. And that's where a lot of this again all is of peace. If you've built up confidence in yourself, your own team, but also you've inspired kind of confidence from the governance structure.

[Andy Golden]

You can do those things, you can.

[Scott Wilson]

Do those things and you feel like, well if I, I do have an advantage that others don't have, which is the possibility for lessened agency issue drag, the fact that others don't live with us day to day and so we can do things, you know, they might be concerned that we'd be doing things that they wouldn't like. But when you build the confidence then you can say, well look, you know that we're have this 4% position. I bet you that in the next 10 years will be a time when we stand up and do that attribution I was talking about, we have to say, and a large share of it was due to this outside position. Oh well, remember all the good that did up to that point.

[Andy Golden]

Do you envision as this rolls out five or ten years from now the portfolio could be mostly bottom up?

[Scott Wilson]

Yeah, I think there's at least one peer that describes it exactly that way. I'm not sure that I'm willing to give up this framework, a merely heuristic framework. I think it serves useful purposes beyond the actual decision of how much money to give each manager. One of our strengths again is we got a great set of bosses or partners. I'd prefer the think of them, but they're managing partners, they can fire me, I can't fire them. And these are people who come with a lot of experience in investing, but most of them come with experience investing in one particular area as opposed to say the fund to fund framework. And this is just one example of why I like still the top down terminology. If you come and you're used to investing in buyouts, illiquid buyouts, you might look and say you're less familiar with real estate and you say boy, that real estate performance has not been nearly as good as buyouts. Why are we doing any of that? If you have the language of portfolio theory you can explain. Well, because it still plays a role.

[Andy Golden]

And it's cyclical and.

[Scott Wilson]

Yeah. And it's, it's, it's time will come. But, but remember that ex ante, you know, we, we did not think it was going to be competing against any one particular category. It's whether or not the thing as a whole.

[Andy Golden]

Right. Where's a pure bottom up model. You can see how you can get into those natural habitats of people's knowledge, experience base.

[Scott Wilson]

Yeah, yeah, yeah.

[Andy Golden]

Let's turn a little bit to independent return. I know that's an area where you started off many years ago at Yale, focusing when at least in the hedge fund area, absolute return. At Yale there were, I remember you had a sheet of paper that listed all the hedge funds, I think might have been two sides, maybe one and.

[Scott Wilson]

A half the ones in the world. Not just in the, in the world. In the world. Yeah, yeah.

[Andy Golden]

Quite a bit different today. So how are you thinking about it in your portfolio?

[Scott Wilson]

How do we think about the role.

[Andy Golden]

Or the role, the area fees, all the, all the relevant issues.

[Scott Wilson]

Yeah. You know, if we were condemned to produce the median return of the hedge fund space, there's, I don't think we'd have any allocation. So it's a little bit of the act of confidence, some might say arrogance that, you know, our opinion of the asset class is quite different, if you want to call it NASA class opinion of, you know, that collection of managers is quite different from the opinion of our 15 or so relationships that we have there.

[Andy Golden]

So. Wow, 15 relationships. And it's 25% of the pool. So if you start doing the math, that's a lot of money with each manager on average. Yeah, on average.

[Scott Wilson]

It's a barbell approach. Like a lot of things that we do here, some are very big numbers and some are much smaller.

[Andy Golden]

And the ones that are big, those tended to be really long relationships.

[Scott Wilson]

Yeah, we don't step up and say here, here's 4% of the endowment. We've never met you before but you seem like a nice chap, so nice gal. You know, let's. Yeah, so in part because a lot of them have grown to that size the old fashioned way. You know, they've, they've earned it.

[Andy Golden]

They have.

[Scott Wilson]

You know, many of these go back, you know, the relationship predates my coming to Princeton. You know, there's folks have done business with for.

[Andy Golden]

So a lot of those firms both through organic compounding and then some of them through growth in acquiring assets are much, much bigger today than they were 10 years ago, certainly 20. But it's really the last, say, 15 years where there's been a tremendous amount of growth. How do you think about that whole notion of balancing size is the enemy's performance? As these guys grow, can they extract that much return in dollars from the markets? And at what point in time do you say, huh, boy, they're awfully big. We probably wouldn't give money to that fund if we hadn't had money with them for long time to get to this point.

[Scott Wilson]

Yeah. So you'll hear me talk a lot about vectors, things that push a decision one way or the other. And obviously there are a lot of things that would make. Should make one skeptical about ballooning assets. You know, on the other hand, the world's a lot more complicated, and there are certain strategies where the size actually helps. Now, those strategies, these bring with them a different kind of risk and a different kind of calculus. You know, there are some who have been very successful at keeping a war chest through long periods of time, so that when there's a highly motivated seller who really needs help with a problem, the fund can step forward and, you know, write a billion dollar check. So whether or not that's an approach that is attractive depends upon some implicit calculations that you're making. The drag of that dry powder and.

[Andy Golden]

How often are they going to get.

[Scott Wilson]

Versus how often and how big is it going to be?

[Andy Golden]

Right.

[Scott Wilson]

And even if it's not dry powder per se, it's not amazingly great investments while they're waiting.

[Andy Golden]

Sure.

[Scott Wilson]

Right. So this is where you get to the. There are several different ways that the cat can be skinned, several different ways that we're interested in backing. But those ways have to make sense when viewed as a whole, you know, with everything else that's going on. Yeah, right.

[Andy Golden]

Yeah.

[Scott Wilson]

You know, so you. Some firms scale a lot better than other firms. And I think it's one of the key challenges of investing is how does a firm develop, how does it grow? Right. Because it's not just asset size, it's evolution of strategy. And there's a natural tension. You know, there's a lot to be said for sticking with your knitting and doing the thing that got you there. But it turns out that the world may not reward that the same way. And so it isn't a question of are you evolving? The question is, are you evolving smartly in a way that inspires that confidence?

[Andy Golden]

On the private equity side, let's talk a little bit about the buyout portion of the equation. Rates have been low. It's given buyout firms chance to have cheap leverage for a long time. Returns have been great on the hedge fund world for the last 10 years, returns haven't been great. Now you're seeing particularly probably starting with the later movers, the public pensions, a lot of fee scrutiny. It makes sense. If returns are mid teens, you can extract more interest fees than when they're mid single digits. Private equity world people are starting to wake up to, huh, that's a deal fee and that's a monitoring fee and that's an exit fee and, oh, there's a management fee. But the returns have still been high enough that the capital is still strong. What's happening now in the sort of GPLP relationship with private equity firms? And what are the types of firms that you embrace as you look forward for the next 10 years?

[Scott Wilson]

On the specific point about fees, we believe it's important to optimize fees, not minimize fees.

[Andy Golden]

Sure.

[Scott Wilson]

And we want to make sure that the firms actually have revenues to the principals that are enough to make them silly rich without having to find some other way to justify themselves, like garnering assets. It's beyond the point of being able to execute their strategy where it no longer makes sense as a whole what they're trying to do. So we're a little bit less hawkish on some of these things than others are, but we still care a lot. And there's this idea that even the low end of the fee scale only makes sense if the firm is really capable of returning excess return. Right. It's like if they're not capable of that, then the chances are you could cut the fees by a very nice haircut and it still wouldn't make sense. One of the things that I think we found useful is to kind of reframe some of the ways others talk about this and talk not so much about alignment of interest, although that's important. But there feels like there should be a better word than interest. That feels like there's a contractual element of it. And I've been test driving this phrasing of alignment of appetites. I want to make sure that the natural inclination, the appetite of the managers, fits well with our own appetites. And, you know, so we're looking for managers who are competitive folks, but they're competing on producing the best possible returns, subject to making themselves, as I said, silly rich, as opposed to just trying to make themselves as rich as possible, subject to producing good enough returns. That happens if you can find folks who are motivated that way naturally not by Contract, then you can start talking about some contractual things that do help to align the interests at that point over the horizon of the contract. You can agree that base level fees really should not be the source of major wealth. We should understand what the compensation market is. The labor market is to get a talented person and tell them that you're going to be unleashed in this wonderful place that's going to get to do what you think think makes sense and create a lot of value and be proud of that value created. How much do you have to pay that person to show up to work each day given that if things do break the way they would expect them to, then they will get that lucre raining down on them. Yeah, yeah, yeah, sure. So on the fee side, you mentioned these kind of layering and opacity of where money going, you know, again, it's a kind of. Does this system make sense? We certainly want to have disclosure, but we need to understand does it make sense if a firm is providing a lot of value creation services to a company that would otherwise you have to be shopped out. Well, let's see, does that compensation make sense? In some cases it does. In some cases, oh, you want a fee for selling a company because you minimally used an investment banker. I don't know, you're already getting your incentive fee slice of that. That feels a little funnier. As opposed to, oh, you did this consulting study that said, here's who your customer should be.

[Andy Golden]

Let's talk a little bit about your team here. Where have you found the people on your team and how are they structured?

[Scott Wilson]

I tend to find them under their desks.

[Andy Golden]

And that's most days.

[Scott Wilson]

Yeah, yeah, yeah, you know, definitely blessed by having a lot of great colleagues. And where we found them is not necessarily where we think we'll be finding them going forward. Another core belief was that we do a whole lot better by growing our own talent. But when you're at certain stages, you can't wait. You can't plant the vines and wait for the grapes and then age the, you know. So if you look at people who are here, you know, we're, we're marked by some pretty long tenured people and some of those longest tenured senior people were lateral or lateral ish hires. But where we think the future of Prinko is, is mostly, if not entirely on our grow our own. And so we're hiring one to three or maybe more kids out of college, primarily Princeton, where we have some unfair recruiting advantages. And you know, it's exciting to see them Develop. It's another form of compensation. And what we're really looking for are first principle thinkers, as opposed to learn a recipe and just use that recipe. Which is one of the reasons why it's often difficult to bring the lateral higher in because they've got a certain way of doing it. And it's hard to know just through any kind of recruiting engagement whether or not they will be the type that will adapt to a somewhat different set of circumstances when appropriate. Because all the stories are talking about what they've done in the past. All made sense then, but we don't know if the last make sense going forward.

[Andy Golden]

And then with. With this one firm one goal, does that filter through to how you organize responsibilities of the people on the team as well?

[Scott Wilson]

Yeah. So at the senior level, we've divvied up the asset categories so that there's someone who feels ownership that helps avoid cracks that stuff may fall through. Yet everything's a gang tackle. And I'll explain that in a second. I'll say at the junior level, we've experimented lots of different ways and they tend to change depending upon who the athletes are of giving people broad exposures, not necessarily always cross sectionally. Sometimes it's serially over time to try and give them the ability to compare and contrast ways of thinking to make their lives more interesting. It helps us recruit people when they feel that they're at less risk of being pigeonholed into something. But the gang tackling, you know, for the major decisions, we had one this, this morning. It's all hands on deck. It's all 16 investment professionals sitting around the table. Everyone's gotten a packet for what we're calling the bull bear session. We've assigned not just proponents, but some people to play devil's advocate. And they go at it and kind of present opening arguments as to here's why we should and here's why we shouldn't do it. By the way, everyone walks in the room, the first thing they do is they get a ballot and they have to say what their vote is going into the meeting. And then at the end of the meeting, they write down what their vote is. And then that piece of paper is set aside. And then we all show our votes simultaneously through a set of hand signals. And then there's a super secret, not necessarily stable algorithm that's in my head as to how those votes get counted. So we're making the. We have a summer intern here who is in her second day and she voted. It turns out that her vote doesn't have quite the same weight as yours, perhaps. Well, maybe as much as mine, but not as much as my colleague John Erickson, who's been here for 19 years. And so, you know, that's that kind of one team, one dream gang tackle, you know, to process information efficiently. It's not everything we're doing is all the time, everyone involved. So you have to create a deal team and that gets constructed. There's certain tendencies of people who do more work in a category. There'll be mostly representation of that, but they're. There'll be someone else who is getting a visit into that world.

[Andy Golden]

That process, that kind of bull bear process. How long ago did you start thinking, hey, this might be a great way for us to enhance how we make decisions?

[Scott Wilson]

Yeah. So this is directly connected to the GFC or the global freaking crisis, as we like to call it. And the warning is it's a process of that rotating assigned devil's advocate sounds a whole lot better than it actually is. We still haven't cracked the code as to how they're really implemented. But the reason I say it came out of the GFC is because when the dust hadn't settled by yet, but when I was emotionally capable of inward reflection, I remember this plane ride, I said, well, let's think about this. The 10 worst decisions, investment decisions that you, Andy or Prinko has made and let's see if there's anything that we can figure out. And I was very careful to say, as always, you know, to differentiate between bad decision and bad result. And what I only got to about number seven or eight when I realized that more than half of them shared this characteristic of there was some, some kind of political element that, and I want to be careful what that word means. Some kind of element in decision process that can be traced back to the old style where, you know, I was always the last line of defense. I, I may still am, but I played the kind of skeptic, you know, I'm going to argue against you proponents. And I realized is that it was easy in that framework for there to be these kind of political, or maybe it's emotional elements. To push back three times in a row on someone's idea creates a risk that they're going to get frustration that is incommensurate with the lack of quality of the idea. So you begin to say, well, that's.

[Andy Golden]

Balancing your judgment against being supportive.

[Scott Wilson]

Yeah, all right, I think this is probably a B plus, a minus. You know, if it's a B minus, forget we're not going to do it, but you know, it's B plus. Well, maybe it's an A minus. Okay. You know, I could be wrong.

[Andy Golden]

Right.

[Scott Wilson]

And it worked the other way as well. You know, my, I wanted to do something. My colleagues would say, gee, we think it's kind of like an A minus. And when they say that, they mean they think it's a B minus. And I would say, oh, these people, we are agreeing that there's this hair on this thing, there's this risk on this thing, but they're just too risk averse. So to make that depersonalizes to say that you're playing an assigned role, let's see how strong your argument can be, you colleagues and take a little bit of the power dynamic out of it. You know, at the end of the day, I'm still counting the votes, so, you know, I'm still that last line of defense. But, you know, it's definitely more helpful. As I said, it sounds like a great idea. When I've ever told he said, oh yeah, it's just really hard to figure out how to execute it. You get these discussions that are orthogonal. Someone, you know, says, I believe A and someone else says I believe nine. Like okay, you know, I don't know how to weigh that. Right.

[Andy Golden]

Supposed to say bingo.

[Scott Wilson]

Yeah, right, Yeah, A nine. You know, so it's kind of always what level does the debate take place?

[Andy Golden]

How have there's been this explosion of data usage of data, financial markets, companies, everything. How have you used data increasingly or have you used data increasingly in your process?

[Scott Wilson]

There's a lot of information that's a whole lot easier to get. And so it means that you can and kind of test the stories that the arguments that Madras put force forth because they no longer have the same kind or degree of information asymmetry that they used to have, or at least you can hone in on the edges that they do have in terms of just having more information, you know, but I think it's not as important to the way we think about investing the long, long term horizon, investing in people. You know, the issue is that I say this as a recovering quant. You know, you can't drive the ship if the ship is to build a roster of managers. You can't get enough data to base a decision without, you know, running afoul of a key premise, which is that the engine that produced that is stable. Right. And that nothing's changed.

[Andy Golden]

Clearly not.

[Scott Wilson]

Right. So, you know, it's something you throw into the mix. But if you Think about how these judgments get made in a qualitatively focused, quantitatively facile group like ours. You know, it's, it's more of almost a Bayesian calculation. Like, you know, here's my, you know, I believe this thing with this much probability, this much certainty, and this new bit of information comes in. How much does it change it? I mean, I can't tell you the number of times when, you know, again, just to kind of noodle on something, I'll say to a relatively new colleague, you know, can you just regress, do a little regression on this information? It'll help me think about it. And they'll come back and they'll say, well, that was a complete waste of time. You know, it didn't come close to a system significant. I don't care. I need to see the number. Right. Because the significance, what I care about isn't the significance of that. Independent of other analyses, including these qualitative ones. I just want to throw it into the mix, you know, I want to. Right. And so I think there's still this judgment thing which goes beyond just cerebral stuff. There's a kind of emotional assessment being made as well that I don't say in a denigrating fashion. I believe that there's information. I think investing is a science, craft and an art. And the important thing is to A, be willing to use all three pathways, but B, make sure you know which pathway you're using at the time. You know, there's this art to it, but you should really be be very explicit declaring this is an art, judgment, not a scientific judgment. And I get frustrated when people try and torture some scientific judgment to justify their gut feeling.

[Andy Golden]

So are there opportunities in the market that you're particularly excited about today?

[Scott Wilson]

I think there's probably two ways of answering that. Normally that question is I should be able to tell you, oh, we really like timber or apartments in Brazil or something, you know, some asset based thing. Again, our business is really about finding great people and partnering with them. We believe that who matters a whole lot more than when you invest and may even matter more than what they actually do. There are just some, some horses you want to hit your wagon to and you know, some of the growing concerns, concerns of other customers in the hedge fund world. Create some opportunities. We were becoming a whole lot more attractive as people who are going to do the intense qualitative work. You know, the managers often have to choose between smart clients and rich clients. And rich clients are a lot easier to deal with. You know, until they're not, you know, so I think there's some, some firms that we're pretty excited about and I'm not going to tell you about it because I don't want to create competition. I also don't want to let my other son know that this is my favorite son. Of course. You know, I think that it's a time again where it may be better prospects, a little bit more off the beaten path. I felt that for a while now, but 20 years. Yeah, you know, but certainly in 09 you, you didn't have to. Cute. That's when it was really good to be rich.

[Andy Golden]

And how about risks that you're concerned about in the markets?

[Scott Wilson]

Yeah, in the markets. There's the obvious one. And this will make this very day that I assume that people will be listening to this podcast 30 years from now.

[Andy Golden]

Probably a safe assumption as many people.

[Scott Wilson]

Will be listening to it 30, 30 years from now. That's tomorrow. But wow, it feels like there's a lot of potential volatility in fundamentals in the world and that doesn't really seem to be in a lot of prices. Prices make more sense if you just simply in your base case assumption, interest rates are so low, so therefore asset prices are high. Yeah, sure, you know that again, cross sectionally makes sense. But seriously, shouldn't there be some premium for the world waking up to some kind of shock? It seems that all the time people always feel that this is the most risky time. But you'll find someone who will say that, right? I'm not saying it's the most risky time, but I'm willing to say, oh, okay, there's some, definitely there's visible, some risks that usually aren't visible. And I think that may be because they're usually not as prominent as likely to, you know.

[Andy Golden]

And do you do anything about that in managing the portfolio?

[Scott Wilson]

As you know we're pretty circumspect about top down stuff. You know, even if you're really good, since you're not making a lot of bets, you know, it's pretty easy to come up short, so to speak. You know, that being said, we have some outsized exposures to things compared to most investors and in some of those areas one can imagine that it's particularly risky. So we actually have had unusual for U.S. hedge, if you were to dig deep enough, you'd say, oh, I bet you they've got a lot of investment in China. Yeah, we do. And so maybe we want to take that RMB exposure to down a little bit because that's something you could imagine having, you know, a real break.

[Andy Golden]

Well, let's turn to some closing questions.

[Scott Wilson]

A mirror view. Yeah. Well, where'd you get that shirt?

[Andy Golden]

Golf course, I think. All right. What advice would you give your children early in their career? In fact, your kids are coming up to that point.

[Scott Wilson]

My kids are certainly one that's in well past first inning. So I'm going to answer without the presumption that their career is investing. If you want, I can return to that. There's a cliche about following your passion. I feel that it's true, except for I want to modify that and say follow your. Like, the problem with telling someone, follow your passion is it presupposes that they know what passion is. And, you know, it's almost like a dating situation. It's like saying, well, you should go out with the person that's going to be your spouse. Right. Like, I don't know that yet. Right. And I don't want to figure that out before I go out. And that's right. You should iterate on it. So I think you should, you know, really go down paths that have a real natural attraction to you and, you know, not try and plan too far in advance. You heard my story, and I think it actually was a source of strength when I finally did get interested in investing. Having done things that I had liked along the way had at least two advantages. One is I learned a lot about a lot of different things that I might not have otherwise learned if I had followed a straight and narrow. But they also. The other issue is it enabled me to develop an ego that was, in the early years, quite detached from investing. So when I first got involved in investing, I could think of myself not as a person who's destined to be an investor. I could think of myself as a guy who was a guy, as a human being who happened to be doing investing now. And that meant that there was a bunch of emotional concerns that weren't necessarily there. If I ended up not doing well in that, well, you know, I'd already not done well in, you know, another career, wouldn't have been new to me, you know, and I think that was an unfair advantage. It's frankly an advantage I don't have anymore because.

[Andy Golden]

Right.

[Scott Wilson]

You know, now my ego's pretty tied up in being an investor.

[Andy Golden]

Sure.

[Scott Wilson]

A global financier.

[Andy Golden]

Indeed. What is your favorite thing to do? That is a complete waste of time.

[Scott Wilson]

There's a particular solitaire game called Spider Solitaire that is a guilty pleasure because every time I'M doing it, I'm thinking, oh my God, there's no justification for this. And unlike the classic Klondike solder, whatever it's called, this one has a lot. Little bit more skill to it. Emphasis a little bit. I would choose that over some other activities because there's, you know, like, I could say I like stand up paddle boarding, but that's not a waste of time. That is making me healthier. You know, I. Yeah.

[Andy Golden]

You are a standup guy.

[Scott Wilson]

I am a standup guy. Yeah. Yeah.

[Andy Golden]

What phrase that your mother or father repeated to you over and over again? Most stuck with you.

[Scott Wilson]

You know, my, my parents would say whatever you do, do well. Right. And that unfortunately stuck with me because again, it raises the stakes. And also it turns out that not everything worth doing is worth doing really well. There's some, you know, you kind of want to spend your effort, budget wisely. There are some things where good enough is actually good enough. So, you know, that probably stuck with me.

[Andy Golden]

What was your favorite sports moment as a participant or a fan?

[Scott Wilson]

You know, I. No one ever has mistaken me for an athlete.

[Andy Golden]

I remember that.

[Scott Wilson]

Yeah.

[Andy Golden]

Softball team. Yeah.

[Scott Wilson]

Yeah. But I went, I went to an extremely small school, high school. And so I was able to compete in varsity sports, you know. Where'd you grow up? I grew up near here, near New Brunswick. I went to a very small private school school where I wrestled and was also. There was a sport that no one knew about that only like a few schools in New Jersey played called lacrosse.

[Andy Golden]

Yeah, I remember those days.

[Scott Wilson]

And you know, it was like anybody, literally any body that would show up, like, we need you on the field. I have some memories on that that were pretty fun. I think I learned a lot about what it's like to actually be the weak player on the field and learn about teamwork in a different way that, you know, there were times that even though I was likely to drop the ball of pass to me, it still made sense to pass it to me and that, that helps. But I think there's been some, some Princeton basketball moments have been pretty good. There's recently one that's pretty good.

[Andy Golden]

Yeah.

[Scott Wilson]

Back in the day there were some Duke basketball moments when I was a pretty good alum there. There's still full court pass. That kid Christian Leitner called 30 for 30 on.

[Andy Golden]

Yeah, yeah, I hate Christian Laitner or something like that.

[Scott Wilson]

Yeah, that's.

[Andy Golden]

That was my year.

[Scott Wilson]

That was pretty good.

[Andy Golden]

What's your favorite book?

[Scott Wilson]

My favorite book of all time. Well, you know me, it's. It's the good book? Is that. No, sorry to offend. I think it's Richard Dawkins the selfish gene concept. So that thought of. Instead of thinking about genes as the way entities reproduce as a way organisms reproduce, if you think about organisms as the survival mechanism for genes, that was a moment that blew my mind.

[Andy Golden]

Yeah. Yeah. So what profession other than investing would you like to attempt?

[Scott Wilson]

Yeah, I mean, I do have dreams of getting back on the professional shark wrestling circuit.

[Andy Golden]

A very short lived career that was.

[Scott Wilson]

Yeah, yeah. I am hoping that there is a way that I can exploit the lessons I've learned that don't relate so much to investing but relate to organizations and in particular what it feels like to be the leader of an organization. Meaning I don't want to pretend I'm qualified to give any advice on leadership, but I am. I do have one set of experiences about what it's like to be a leader. And you know, how to think about how you ask for help. When you ask for help, you know, when it's an okay sign, when you're feeling a little overwhelmed and when it's a sign that, you know, it's not how to kind of more quickly get the confidence to defy, you know, some pressure and how to quickly get the confidence to go in the same direction as the pressure is pushing you because you don't have to prove that you can stand up to the pressure.

[Andy Golden]

And those would be great lessons to in part, when you get the time.

[Scott Wilson]

Yeah. So to be some kind of coach or, you know, a fantasy about being a really good board member to help a CEO who, you know, doesn't have that experience.

[Andy Golden]

Yeah, sure. What do you know about life today that you Wish you knew 10 years.

[Scott Wilson]

Ago on the eve of the crisis that we. That I wish I knew for sure that Kristen would survive my misjudgments. It's hard to articulate. I think you get much more comfortable with the idea that there are multiple solutions. So when you're pressuring yourself to come up with the right way to fix something, one over time gets more comfortable realizing that you don't have to land on the perfect solution. You don't have to worry about the choice that seems to be the best choice, not being the best choice. You know, kind of just moving forward can be better. The, you know, don't let the perfect be the enemy of the good, you know, But I think the. The real kick in life is you feel like there's lessons that you learn over and over again, but they're a little bit different. It's kind of like Bob Dylan singing one of his old songs again, it's a little bit different. You know, listen to Jerry Garcia, you know, at age 50 versus, you know, 25. There's so much more there. Even though it's the same lyrics.

[Andy Golden]

Yeah, yeah.

[Scott Wilson]

Same guitar riffs.

[Andy Golden]

All right, one last.

[Scott Wilson]

Intentionally trying to make this podcast stand out from some of the other ones.

[Andy Golden]

And you're doing it. We're sitting down, so we're not really standing up, but that's okay. It's your waning days. You are 98 years old, sitting in a rocking chair. That's what you love to do. What advice would you give yourself today?

[Scott Wilson]

I would say that my advice would be that you should do 50 push ups every day for the next 40 years. And if you do that, you'll make it to 98. You may make it to 98 other other ways, but, you know, I mean, the idea of, first of all, you say 98 as if it's a good thing. Like, enough already. Yeah, yeah. What advice? You know, you know, enjoy your grandchildren. I don't have grandchildren now, but that's.

[Andy Golden]

Andy, thanks so much for taking the time. Really enjoyed the conversation.

[Scott Wilson]

Thank you. All right, peace.

[Ted Seides]

Thanks for listening to the show. To learn more, hop on our [e-mail] where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one and see you next time.