Alec Litowitz, Founder of Magnetar Capital and Qstar Capital
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A lot of people think about the left tail, and we talked about that already, is I don't care about small losses where I get feedback back, I learn and I go redraw. I care about catastrophic losses. But let's think about the right tail because anybody who's very familiar with decision making could say, Alec, it sounds like you're saying say fail or fail safe, there's words for that. But here's where mine differs a little bit, which is that I also believe that when you're experimenting, and this will be very, very well understood by investors who sit around and might be listening going, But wait
Hello. This is Dean Kernutt, and welcome to the Alpha Exchange, where we explore topics in financial markets associated with managing risk, generating return, and the deployment of capital in the alternative investment industry. My guest today on the Alpha Exchange is Alec Litowicz. He is the founder of Magnetar Capital of Q Star Capital, a philanthropist, and now an author. Alec, it's great to have you on the podcast today.
I appreciate you having me here. I am a fan of the Alpha Exchange and I was laughing thinking about what you called it because I think I spent thirty years hoarding as much alpha as I could. And here we are having an alpha exchange. So I hope I make the transition well.
Yeah. Well, listen, we're gonna talk about markets. We're gonna talk about your book, The Adaptability Quotient. Really fascinating and I would say timely read for an environment in which it would be almost impossible to say the pace of change is not remarkable and probably accelerating from here. We'll get into your motivations for writing the book, but I think that's a big part of it. Let's start with the investing side of things. So you've been in this business for thirty odd years. You founded Magnetar in, I want to say 2005 or is it 2006? It was 'five,
yeah.
2005 and the pre financial crisis period. So things were about to get absolutely haywire in markets. As you look back on your time in markets and you think about the characteristics that make for truly differentiated investors, what do you think that looks like with the benefit of so many years of doing this, of seeing so many people, of experiencing so many different cycles of markets and volatility? Is there a thread you would say that ties together the success of investors in this business?
Yeah, it's a great question. It makes me look back and realize I'm somewhat old because I have that thirty years of having seen lots of different regimes and working alongside lots of incredibly talented people. What I would say is probably that I think most people think about this not quite right. I think a lot of people would probably have an intuition that it's an IQ contest and that people think that the highest IQ would win out all the time. And I think the analogy that I like to think about is from the time I spent between where I was one of the original partners at Citadel to founding M
If you go back to, let's say the global financial crisis, because it's in some ways the biggest test of survivability for banks, for investors, we saw such incredible consequence to potentially missizing your exposures, to being in the wrong instruments. So those were career ending, in some ways, firm ending events. And yet, perhaps we look back on these times with more clarity than they really had. But by March 'nine, the market turns. And so my question is around the folks that might have gotten that risk event right going into it, saw perhaps the systemic uncertainty, the systemic risk of t
Sure. I think it goes to what is AQ
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