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00:00THE LEGEND IS THAT YOU BEGAN TRADING convertible bonds out of your dorm room when you make a few thousand dollars as a freshman. You are rich by the time you graduated. Did you say I'm now going to do this full time. I became boy genius. Now I knew I was boy lucky. How does somebody invest. Which should it. I'm going to be the bearer of bad news. We've been closed for a long time. Stephen from interview you wouldn't take him Your parents must be very proud of you. I'm certain mom proud of me. Does she ever say well what do you think the markets are going where should I invest. Mom's all set. Would you fix your time please. People wouldn't recognize me if my tie was fixed but it just seemed so sweet. All right . I don't consider myself a journalist and nobody else would consider myself a journalist. I began to take on the life of being an interviewer even though I have a day job running a private equity firm. How do you define leadership. What is it that makes somebody tick . So let's start with your beginning. You grew up in Florida is that right. I was born in Daytona Beach. My father worked on the space program so I grew up in Florida Wisconsin. We went to Texas for a brief period of time and then back to Florida for middle school and high school. You applied to many colleges and you applied to Harvard. Were you surprised to get into Harvard or do you think you were gonna get in. So So David I'm so might my entire professional career working on probability OK right . So odd stocks go up versus down. So when I applied to college I played the same game I in the dark ages of using a typewriter . I typed out about 13 different college applications OK. And so your chance of getting in each of them applied to 13 colleges or right and I'll get into one of them hopefully the best I can get into. Now you were the president of the math club in high school. So I guess you were pretty good at math. I was I was pretty good at math pretty high. So you got into Harvard and when you got into Harvard did you decide to go there right away or you wanted to see if the other schools were going to accept you. That is a complicated story. My father's business partner was a Princeton graduate and Princeton Princeton was my first choice and my father had a falling out with his business partner just before the time you pick where you're going to college. And my dad's it would break his heart if I went to Princeton and I went to Harvard. Well that's broken the heart of the Princeton development people ise . Well one of my partners at Citadel who I've had the pleasure working with for almost two decades actually served on Princeton's investment committee oversight. And I think he's done wonders to help Princeton feel better. OK. So the legend is that you began trading convertible bonds out of your dorm room. Is that true or not that is true. So my my freshman year and I'm at Bloomberg. So I need to say a moment of gratitude to everybody in the press. My freshman year there was an article in Forbes on how home shopping network was overpriced and having read this article I went and bought to put contracts in Home Shopping Network and lo and behold the stock cratered like 30 or 40 percent. Shortly after I bought these puts and when you make a few thousand dollars a freshman like you are rich like this. This is the moment you have dreamed of. And that was what really started my interest in trading. You had never been that involved in it before. I. I never traded a financial asset before. But you know your classmates at Harvard they're presumably doing other things. Not worried about convertible bond arbitrage right. So what did they think of you . I was a bit of an anomaly. I mean look my classmates night same experiences we all had. We debate politics like rapidly we would have fun playing soccer in the yard at sunset and hope not to run into a tree and you'd have your Friday night fun. So it was it was a college experience but I spent a lot of time at Baker library just understanding try and understand trying to learn about finance. So it is the story is that you installed a kind of receiver in your room so you could receive data. Is that true or is that a legend. It's true. So this is this is the early days of Harvard saying no to any form of business on campus and the supervisor of the building gave me permission to put a satellite dish on top of the building so that I could have real time stock quotes because member before the day is the Internet. Did you have a roommate that said this isn't a good thing to do or I purposely chose a singles I would not have a roommate that I would enjoy every day. So by the time you graduated did you say I'm now going to do this full time. You're going to love this . Timing is so important one's career. When I started to engage in commercial Bon arbitrage at 87 I literally launched in September of 87 and I was I was very confident as to how this portfolio behave in a bull market and very uncertain as to how to behave in a bear market. The mathematics on the way down are just much more nebulous and on the way up and so I was short more stock than my back of the envelope math would tell me to be short and what happened a month later was the crash of 87. And so at that moment I became boy genius. Now I knew I was boy lucky because I was short the market intentionally but outside investors go look this person's a genius. He made money in the crash. So that was a very defining moment my career was the crash of 87 and being that short gave me a track record early on that was attractive to investors. So you graduate you say I'm going to set up my own company. Your family say you're a little younger set up your own company or they said it's a good idea. I was incredibly fortunate. My my father was first generation to go to college. He was one of seven. My grandfather worked on the railroads. My parents always placed great importance in education. On my mother's side my grandfather was an astronaut . He literally borrowed money from from my grandmother's mother to start a small business and ended up in the few oil distribution business back in the 50s and 60s. So that entrepreneurial bug was was part of my mom's entire life. Like she grew up in a family that was defined by my grandfather who was a bit of a maverick and so the idea that I'd go off and try to pursue this dream to my parents was it was very much go for it who actually made the trading decisions. I was very fortunate to have hired a handful of colleagues who who understood the products and who had very good judgment. What was most important in many respects in my my life's journey is we traded 24 hours a day from almost day one. So we traded commercial bonds. United States we traded Japanese EV warrants in Tokyo. And then we trade the convert market in Europe. Why was it so important . Because I can only be at work 13 14 15 hours a day. I had to learn to delegate and if I look at our success over the last 30 years it really comes down to have learned to trust people to trust their judgment and to delegate to skilled people. Which are you. Someone hold on to the market comes to your knowledge and wisdom. Or just get out when it's going against you. All right. So first of all the market is rarely dead wrong. And the history books are littered with people who are smarter in the market who've lost all their money. So when you're when you're investment and it's not working out you really need to take a step back what don't I understand in this situation. If you really think you've resolve all the unknowns that you can possibly get your head around you stay with your position . Before we went to the Great Recession How big was your company in terms of employees or assets under management so far from 1990 to 2008 we grew from effectively three people to right around 13 14 hundred people assets under management. Ballpark twenty five billion dollars. OK so the app the great recession comes. And how did you survive it. And how come how close did you come to not surviving it. So survival is the right choice of words. It it was the only moment in the history of sit at all that our actual existence was in question. Did you think it might not. You might not survive. I'll make it very clear I would go home on a Friday if Morgan Stanley did not open for business on Monday. I would be done by Wednesday and remember Morgan Stanley the questioners with the Japanese follow through on their financing commitment and their very existence was in question. So you quickly come to terms with the fact that we may not survive and it may have it may be an exaggerated event in some sense that causes us to fail and I have to accept that reality and now that I've accepted that reality what are the best decisions we can make to survive and that was the playbook we came to work with every day. We are going to fight to survive knowing we might fail but we are not going to give up. How does somebody invest sit it out. And is there a minimum. And how long should they hold the money with you . So I'm going to be the bearer of bad news. We've we've been closed for a long time. So we're not actively soliciting new investment we will even from interviewers you wouldn't take an now you built your business up in the hedge fund world too . What. What size level are you now worth 30 billion dollars today. We've been there roughly the last three or four years . Do you make the investment decisions or do you delegated to your vest various investment professionals. So we've been here now for about 30 40 minutes. And in our hedge fund today we'll trade about three or four percent of the entire U.S. equity turnover no BlackBerry there's no phone. Right ninety nine point nine percent of decisions that we make. My colleagues are making. I firmly believe. I want the individual closest to the information who has good judgment to make the call. There is no way for my seat that I'm going to be able generally speaking to make a better decision than my analyst who has covered Xerox for five years or is covered Amgen for a decade. There's there's no way I'll make a better call than they will. It is said that you spent a fair amount of time recruiting very good invest professionals that a big part of your job recruiting others to come to sit it out . I have interviewed ballpark 10000 people my career so recruiting is I will lead today and I will do two interviews today. I will do two interviews tomorrow. I am always always looking for talent. So if somebody is watching this and they say I'm going to be interviewed by Ken Griffin what should they do in the interview. To make you like them. So what's interesting is the make you like them is it is a cognitive bias . We have an interviewing people and you actually want to avoid being caught in that trap. What I'm looking for. I'm looking for for two key drivers in a candidate. I'm looking for their passion. Do they actually do they love what they do. They love the promise that they work on. There was a young woman who worked for us 15 16 years ago through roughly a year or two out of an Ivy League school. I forget which one . And her boss came to my office and he goes she's going to leave . She's incredibly talented. She wants to go to medical school . And you know you need to convince her to stay and I said with all due respect the minute she walks in my office I will offer to write her a letter of recommendation if she wants to be a doctor the world needs another great doctor . And I'm going to help her make that happen. So I'm really looking for what's the passion of the individual in this field because that passion is what drives so much of our success. The second is I'm looking for clear accomplishment. I'm looking for four individuals that have a demonstrated track record of having made good decisions and having accomplished in their life. How does somebody invest with Citadel. And if they say they won't invest with you. Is there a minimum and is there a certain rate of return that that person should reasonably expect. And how long should they hold the money with you . So I'm going to be the bearer of bad news. We've been closed for a long time. Oh so we're not actively soliciting new investment. We will even from interviewers who wouldn't take an OK. You fall into like one of my idol categories. So heroes of my career will I'll figure out how to solve for and I think that's actually an important statement. You know your success or Henry Kravis is success. Those are important stories that helped to encourage the next generation to to pursue a life with vigor with passion. So leave that aside. We are. We're close to an investment disclosed. OK. So your wealth has created opportunities for many other things including philanthropy. How do you decide what your philanthropic gifts are going to be. So first of all I'm in Bloomberg corporate headquarters and Michael Bloomberg gift to John Hopkins makes what I've done seem pretty pretty material. So congratulations Michael for really having completely set a new bar for all of us to focus on. Nothing is more important to American Heritage education. There's nothing more important. And it starts it starts preschool and goes through our our greatest universities. I've done a lot of work in K through 12 education and the numbers involved are staggering. So if you look at a city like Chicago will spend about five billion dollars a year in K through 12 education here's what's incredibly regrettable. We know how to educate youth in America. We just choose not to do it. It's heartbreaking. In that arena I spend much more time on the political front because it's our body politic that is letting our kids down and it's simply inexcusable it creates so many of the problems we face today. I mean I wish I wish Elizabeth Warren had one percent the passion to fix K through 12 education as she has to attack those of us who've been successful on the issue of higher education America leads the world. This is not a given. This is not a given that we have the greatest universities in the world. But I want to support excellence in American education have been very involved in philanthropy to art institutions. So what is the appeal of art collecting to you and where do you keep most of your art. I actually have a painting at home that I did and it is it's so profoundly ugly it's beyond imagination. I have zero artistic skill so maybe my love for art reflects my admiration for a talent that I'm so dearly lacking in. But it started it started about two decades ago. I was I was here in New York. Some of these they were auctioning off a collection and the little dancer aged 14 by the guy was there it's so iconic sculpture and she's so determined . She's she's not going to be put in her place she's so determined and it appealed to me so much. That was the pivotal moment that started my interest in art was was that work for the record. I was outbid. I was at it. I tried to buy it. Hammer went down wasn't my bed. I wasn't willing to go that far. And I've never been so frustrated my life you've never probably been outbid again right. I have been on it again. There's some level of discipline but I hung up the phone and I called to his next day and offered more money to the buyer. So that was that was my start of a passion and art and I really do believe art is one of the areas in which we can find a common ground as society we can find an appreciation for art that brings us together. My art collections almost all the RTS to Chicago. It's been there for years. Hey. So you're going to have your own art museum some people who have art collections build their own museums are you thinking of that. No no I I'm not I. For me the fact that 7 1/2 thousand to a million people a year will have a chance to see some of the greatest works of art of our culture that I'm fortunate enough to own. I have great satisfaction in that . Can you just take what your view is on political matters and freedom and things related to that. It's very important that we as a country embrace freedom of speech freedom and opportunity freedom of what our founding fathers put their lives on the line that's important to me. And so candidates that really support personal rights personal liberty on all causes are important to me . So you have bought the most expensive apartment ever in New York City and maybe in the United States you have also bought a lot of property in Palm Beach and in other places London so forth so you can't live in all these places. So what's behind it . Well you and I would probably be in competition for hours spent on a plane. I think I probably spent eight hundred hours a year on a plane so I'm actually I'm actually in New York every single week. We have hundreds of employees here. We pay the New York investment banks roughly a billion dollars a year in revenues . So this is this is my second home in some sense. This is home away from home. I have three little kids my ex-wife and I have debated do we make New York home and the apartment represents the possibility that this might be home for me and Siddle might be headquartered in New York one day. I'm frustrated by the political winds in the city over the last few months. Amazon opting out of New York is heartbreaking. It's heartbreaking because when you bring a firm that is such a great user of technology into your city it's not just about the success story at Amazon. It's about the fact that you now have a talent magnet that creates an entire ecosystem of success stories around it. They plant the seeds of other success stories . You're obviously a successful businessman philanthropist art collector. Your parents must be very proud of you. So do they call you to tell you how great you are. Do they still give you advice. Look I'm I'm. I'm certain mom's proud of me just as I'm proud of my children are all proud of our children. And I think my mom. We don't we don't talk about it much. I saw my mom yesterday I was at a conference about Raton my mom's down there for the winter. We went out and had a quick drink together and I got parenting advice like how to be a better parent and we talked about raising children because that's near and dear to my heart I have three little kids and and moms going through you know in high school here's how I thought about trying to encourage your interest and so forth of parenting advice. Does she ever say well what do you think the markets are going where should I invest. She invest with sit it out or she does her own thing. Moms all set moms all set happy that moms mom doesn't need to worry about it . Let me just ask one or two final questions if we wrap up. You have been somewhat involved in the political world as a donor to Republican causes very often and conservative causes. Can you just state what your view is on political matters and freedom and things related to that. I've supported over the years candidates on both sides of the aisle. I do live in Illinois which means that our mayors race for examples I get to pick who I think as a Democrat will be the most business friendly education friendly candidate that I can find and you would probably know this I was an early supporter of President Obama because he came to me to be the education president. That's you want my vote. You want my support . That's the issue. You come to me and you say I'm going to fight for education America. I've got your back. So that's number one. Number two is freedom . And in our country a government that can take care of all our needs also takes care of having left us with no freedom. It's very important that we as a country embrace freedom of speech freedom of opportunity freedom of of what our founding fathers put their lives on the line for. That's important to me. And so a candidates that really support personal rights personal liberty on all causes are important to me. Ever be a candidate for office yourself. I don't know. Yeah it's it's. We live in a post altered reality in politics today right. Facts no longer seem to matter and that's that's hard for me to understand how I'd be a candidate because if I were to be a candidate it would be about the substance of how America will be successful. It would be about the substance of how we have our individual rights protected. And I don't do well in in a debate which is untethered to facts. You've obviously got many years ahead of you but if you ever think what you'd like your legacy to be as you get older. David I'm 50 for God's sake. I know how young . But you know Bill Gates almost retired it pretty much at 50 from running the company and some people John D Rockefeller retired in late 40s so you haven't thought of retiring at a young age like 50 Rockefeller Group in a different era. We will live . Knock on wood we will live much longer much healthier lives . And I really hope to contribute to society in for decades to come. Whether it's in the business realm whether it's in the film topic Brown I want to be relevant to society. I'm very fortunate to know how to build teams to know how to make things happen. That wasn't a gift given to me that's a lot of trial and error a lot of learning. But if you if you look at Citadel we are so successful. We are far more than the sum of the parts we're far more and when you can put together the right team with the right mission you can accomplish great things. What I'm most proud of is actually how we've reshaped financial markets around the world with civil securities. If you look at interest rate swaps for example we we've helped to create a competitive dynamic that has brought bid ask spreads down by roughly 80 percent the last 10 years. That's money that goes right into the bottom line . Pension plans corporate treasuries and other parts of society and not into the wall street value chain. So by bringing competition into the securities markets we have created a huge creation of value for the end users of these products. Can I want to thank you for a very interesting conversation Have you ever open up your fund again could you let me know. Oh capsule . Thank you .

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The David Rubenstein Show: Citadel's Ken Griffin

David Rubenstein sits down with Ken Griffin, Citadel founder and CEO, for a conversation about how he made his first trades from a college dormitory, building one of the world’s great investment firms and his views on philanthropy and freedom. The interview took place at Bloomberg's headquarters in New York on March 14. (Source: TicToc)

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