We Study Billionaires - The Investor’s Podcast Network

RWH048: Betting Billions On Outlier Talent w/ Adam Shapiro

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Aug 4, 2024

Adam Shapiro, Managing Partner at East Rock Capital, shares his insights on managing billions for wealthy families. He emphasizes the importance of identifying exceptional fund managers and building a strong investment network. Adam discusses the pitfalls of index funds, the hazards of investing in emerging markets, and his preference for small, driven funds. He advocates for reducing portfolio clutter and highlights traits like resilience as key to investment success. Discover why cultivating genuine relationships can be a game changer in the finance world.

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ANECDOTE

Latin American Investing Disappointments

Adam Shapiro's early career involved investing in Latin America during a time of economic and political change.
However, he became disillusioned due to fraud, corruption, and unpredictable growth, leading him back to the US.

INSIGHT

US Investment Advantage

Shapiro realized the US offers a superior investment environment.
Its cooperative relationship between capital and entrepreneurs fuels economic growth and market opportunities.

INSIGHT

Immigration's Economic Impact

The US economic advantage is significantly built upon immigration.
Immigration drives innovation, entrepreneurship, and addresses demographic challenges related to economic growth.

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Don't Trust Your Gut

Seth Stephens-Davidowitz

In 'Don’t Trust Your Gut,' Seth Stephens-Davidowitz uses extensive datasets to uncover surprising and effective strategies for life’s biggest self-help puzzles. The book reveals how data from sources like dating profiles, tax records, and career trajectories contradict our instincts and offer practical, data-driven advice on topics such as finding a mate, raising children, and achieving career success. It emphasizes the importance of relying on hard facts and figures rather than gut instincts for making smarter decisions.

When Genius Failed

Roger Lowenstein

When Genius Failed is a detailed account of the spectacular collapse of Long-Term Capital Management (LTCM), a hedge fund that was founded by Nobel Prize-winning economists and managed by some of the most brilliant minds in finance. The book explores the fund's rapid ascent, its complex trading strategies, and the catastrophic events that led to its downfall. Lowenstein provides a gripping narrative that delves into the psychological and financial factors that contributed to LTCM's failure, offering insights into the risks and consequences of high-stakes financial speculation.

Pioneering portfolio management

An Unconventional Approach to Institutional Investment, Fully Revised and Updated

David Swensen

This book provides a comprehensive guide for actively managed investment portfolios, drawing from David F. Swensen's experience as Yale's Chief Investment Officer. It outlines an unconventional approach to institutional investment, focusing on non-traditional assets such as private equity and venture capital. Swensen offers insights into asset allocation, risk management, selecting investment advisers, and navigating market pitfalls. The book is filled with real-world examples and strategies that have contributed to Yale's endowment's remarkable annualized returns of 16.2 percent.

Richer, Wiser, Happier

How the World's Greatest Investors Win in Markets and Life

William Green

In Richer, Wiser, Happier, William Green draws on interviews conducted over twenty-five years with many of the world’s greatest investors. The book highlights that the most successful investors are mavericks and iconoclasts who question conventional wisdom and think rationally, rigorously, and objectively. They maximize their odds of long-term success in markets and life by drawing insights from diverse fields such as neuroscience, economic history, psychology, philosophy, and more. Green explains how these investors can teach us not only how to become rich but also how to improve our thinking, decision-making, risk assessment, and resilience, and how to turn uncertainty to our advantage.

In this episode, William Green chats with Adam Shapiro, Managing Partner at East Rock Capital. Adam oversees billions on behalf of eight vastly rich families, allocating their assets to everything from hedge funds to private equity. Here, he explains how to build & safeguard wealth over the long term; how he identifies the best fund managers; why he’s wary of index funds & ETFs; & how to thrive by building a powerful network & removing excess “filler” from your portfolio & your life.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

07:29 - Why Adam Shapiro stopped investing in emerging markets.

11:26 - Why the U.S. is a great—but potentially perilous—place to invest.

25:31 - What he learned at Goldman Sachs about intelligent investing.

32:02 - How he identifies fund managers who are likely to outperform.

40:01 - Why he favors small funds run by young & hungry investors.

45:56 - What human qualities lead to investment success.

51:53 - How Adam built an investing edge through networking.

1:13:21 - Why Adam is wary of index funds & ETFs.

1:20:05 - How David Swensen’s Yale Endowment Model can be updated.

1:21:31 - Why his #1 financial rule is “never, ever run out of liquidity.”

1:24:20 - How to reduce your risk & ensure survival in extreme conditions.

1:32:22 - Why firms like Millennium & Citadel may be riskier than they seem.

1:43:16 - How to improve your portfolio & life by subtracting excess “filler.”

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Adam Shapiro’s investment firm, EastRock Capital.
Harvard Business School’s case study of EastRock Capital.
Adam Shapiro’s articles in his LinkedIn newsletter.
Check out Institutional Investor’s article on why early life-cycle funds outperform.
Seth Stephens-Davidowitz’s book, “Don’t Trust Your Gut.”
David Swensen’s book, “Pioneering Portfolio Management.”
Roger Lowenstein’s book, “When Genius Failed.”
William Green’s book, “Richer, Wiser, Happier” – read the reviews of this book.
Follow William Green on X.
Check out all the books mentioned and discussed in our podcast episodes here.
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