Mike Conover: belief

Transcript context

…What about AI hedge funds? Obviously, I mean, we have quants today, right? But those are more kind of like momentum driven, kind of like signal driven and less about long thesis driven. Do you think that's a possibility? It's, this is an interesting question. I would put it back to you and say like, how different is that from what hedge funds do now? I think there is, the more that I have learned about how teams at hedge funds actually behave, and you look at like systematics desks or semi-systematic trading groups, man, it's a lot like a big machine learning team. And it's, I sort of think it's interesting, right? So like, if you look at video games and traditional like Bay Area tech, there's not a ton of like talent mobility between those two communities. You have people that work in video games and people that work in like SaaS software. And it's not that like cognitively they would not be able to work together. It's just like a different set of skill sets, a different set of relationships. And it's kind of like network clusters that don't interact. I think there's probably a similar phenomenon happening with regards to machine learning within the active asset allocation community. And so like, it's actually not clear to me that we don't have AI hedge funds now. The question of whether you have an AI that is operating a trading desk, that seems a little, maybe, like I don't have line of sight to something like that existing yet. No, I mean, I'm always curious. I think about asset management on a few different ways, but venture capital is like extremely power law driven. It's really hard to do machine learning in power law businesses because, you know, the distribution of outcomes is like so small versus public equities. Most high-frequency trading is like very, you know, bell curve, normal distribution. It's like, even if you just get 50.5% at the right scale, you're gonna make a lot of money. And I think AI starts there, right? And today, most high-frequency trading is already AI driven. You know, Renaissance started a long time ago using these models. But I'm curious how it's gonna move closer and closer to like power law businesses, right? I would say some boutique hedge funds, their pitch is like, hey, we're differentiated because we only do kind of like these long-only strategies that are like thesis driven versus, you know, movement driven. And most venture capitalists will tell you, well, our fund is different because we have this unique thesis on this market. And I think like five years ago, I've read this blog post about why machine learning would never work in venture because the things that you're investing in today, they're just like no precedent that should tell you this will work. You know, most new companies, a model will tell you this is not gonna work, you know, versus the closer you get to the public companies, the more any innovation is like, okay, this is kind of like this thing that happened. And I feel like these models are quite good at generalizing and thinking, again, going back to the partnering thought, like thinking about second order.…

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