04 Nov John Burbank Seminar In UC Berkeley Haas School of Business

3 basic ways of thinking about investing. Most firms are driven by one of these, e.g. a quant shop, a macro firm amd a long-short stock picking firm.

1. Macro
   • Recognition of big trends and themes that are hard to capture but affect everything else
2. Fundamental bottom up research
   • “Americans are best at this”
   • They trust that the Macro will work out
3. Quant (study of risk)
   • Recent thing, didn’t have the numbers to generate information
   • See the world through a string of numbers which is backward looking
   • Very model driven people like economists, central banks, quants
   • Anchor incorrectly because its tough to put in new variables that do not have sufficient data

  Likes to be roughly right and not precisely wrong and miss the big moves. On idea generation He invests in things that never happened before:

• Internet Browser in 1994, no one pricing internet
• China in 1999, no one pricing China demand in commodities until 2003
• “No model on Wall Street that imagined negative housing returns” in 2009

  On Price

“Price is a liar”. The human mind wants to come up with a unifying theory to explain complexity. Price is all the information that exists in the market. He thinks that price means nothing other than the equilibrium of liquidity (buyers and sellers, supply and demand). It doesn’t mean good or bad, it’s just where people agree. Hence price as it moves gives you tremendous opportunities. Current liquidity (demand and supply) does not reflect the future and the further up the future or the more extraordinary the future the less current price matters. Price is full of risks; one direction or the other.

On technology Before Dotcom bubble, internet infrastructure were being built. The unicorn tech companies were tangible companies. The unicorn tech companies now are service companies.