Jack Rivkin15 November 2014

Masters in Business: Altegris Group CIO Jack Rivkin (Audio)

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 1

Myth Buster49:42

Lehman Was the First Casualty, Not the Sole Cause of the Crisis

The discussion rejects the simple story that Lehman's failure independently toppled otherwise healthy institutions. Rivkin and Ritholtz describe a system already burdened by leverage, mortgage exposure, derivatives, and fragile short-term funding, with Lehman merely the most obvious early target.

Major financial firms shared heavy leverage and housing exposure.
Lehman's business mix made it resemble the already-stricken Bear Stearns.
Its failure removed important commercial-paper liquidity.
Saving Lehman alone would not have repaired the wider system.

“Lehman was the first trailer in the trailer park that the tornado came through. But it was gonna take everybody else.”
Barry Ritholtz · 49:52

“They were all going down. They were all heavily exposed, they were all heavily leveraged.”
Barry Ritholtz · 50:05

#financial-crisis#lehman#leverage#systemic-risk

Hot Take· 3

Hot Take46:52

Fearful Leadership Hides Bad News Until It Becomes a Crisis

Rivkin and Ritholtz argue that domineering chief executives create information bottlenecks. When employees fear delivering bad news, leaders become surrounded by reinforcement, potentially allowing manageable threats to grow into existential failures.

A command-and-control CEO can become the organization's bottleneck.
Fear discourages employees from reporting emerging problems.
Repeated past rescues can create excessive confidence.
Leaders should support the organization rather than merely issue orders from the top.

“There is this fear, and there's also an attitude I'm CEO, I'm in charge here. I have to make decisions and I'm going to make…”
Jack Rivkin · 47:02

“when you have that reputation of being a tough s O B and no one wants to bring you bad news, you end up surrounded…”
Barry Ritholtz · 47:39

#leadership#culture#risk#lehman

Hot Take1:14:20

Automation May Be Japan's Best Defense Against Demographic Decline

Japan faces an aging population, low birth rate, limited immigration, and extreme public debt, but Rivkin identifies two underused offsets: greater female workforce participation and automation. He remains pessimistic about the long-run outcome while acknowledging that technology can sharply reduce labor requirements.

Demographics may determine Japan's economic endgame.
Women represent an underused source of labor and talent.
Automation allows small teams to perform work that once required many employees.
Technology may mitigate labor scarcity without resolving the debt problem.

“what Japan has not done is it hasn't taken full advantage of their female population.”
Jack Rivkin · 1:15:01

“And now it's eight seconds pushing and it happens”
Jack Rivkin · 1:16:40

#japan#demographics#automation#labor

Hot Take1:23:55

Battery-Electric Cars May Be a Bridge to Hydrogen

Rivkin views present-day electric vehicles as an interim step between gasoline and hydrogen fuel cells. Falling fuel-cell costs and Japanese investment in vehicles and refueling infrastructure support his expectation that hydrogen adoption could arrive sooner than many assume.

Fuel-cell costs were moving toward commercially significant levels.
Renewable electricity could create hydrogen from water.
Hydrogen fuel cells return hydrogen to water while producing power.
Japanese automakers and infrastructure investment were advancing the approach.
Cheap oil could slow adoption without stopping technological development.

“I think electric cars as we're defining them today is our interim and it's a stop measure between gasoline and hydrogen”
Jack Rivkin · 1:24:35

“It is a threat. But you're again, technology is working for you there.”
Jack Rivkin · 1:25:16

#hydrogen#electric-vehicles#fuel-cells#energy

Explainer· 4

Explainer10:40

Why Fundamental Analysis Mattered More in the 1966-1982 Market

Rivkin recalls a long period when broad market appreciation offered investors little help. With major rallies and selloffs leaving indexes near their starting level, security analysis and exposure to profitable commodity cyclicals could materially affect results.

The market experienced repeated rallies and selloffs without sustained progress.
Company-specific analytical work had greater relative value.
Inflation and extremely high interest rates defined the environment.
Commodity-related cyclicals sometimes generated substantial profits.

“It was a time we're actually doing analytical work and coming up with specific investment decisions. Actually made a difference because the market wasn't helping…”
Jack Rivkin · 11:04

“The high the peak was twenty two point three percent and twenty two point three percent as the Fed funds rate”
Barry Ritholtz and Jack Rivkin · 11:32

#market-history#fundamental-analysis#inflation#cyclicals

Explainer27:18

Moore's Law Keeps Expanding the Venture-Capital Opportunity Set

Rivkin frames the evolution of venture capital around rapidly increasing computing capacity. Faster processing enables applications that were previously impossible to imagine, while biotechnology and healthcare create parallel opportunities driven by scientific progress.

Processing power compounds into dramatic capability gains over a decade.
Entrepreneurs continually discover new uses for cheaper computing.
Biotechnology and healthcare offer significant innovation opportunities.
Human ingenuity makes long-term technological pessimism difficult.

“It's really tough to make a bet against human ingenuity.”
Barry Ritholtz · 28:09

“And what you have to do is find some smart people who are driven and have a little bit of something that relates to management…”
Jack Rivkin · 28:20

#venture-capital#moores-law#innovation#biotech

Explainer1:07:23

Why India's Talent Has Not Yet Produced China's Growth Machine

Rivkin attributes India's unrealized potential less to human capital than to political fragmentation, bureaucracy, and corruption. His experience with Idealab companies suggested that outsiders could struggle to operate legally and efficiently, although Gujarat offered evidence that stronger administration could improve conditions.

India has abundant scientific and technical talent.
Provincial politics and bureaucracy reduce system efficiency.
Corruption creates acute barriers for foreign operators bound by US law.
Gujarat demonstrated the potential effect of firmer, more efficient governance.

“The politics are are severe.”
Jack Rivkin · 1:08:24

“we ultimately sold them both to Indians because as outsiders, we couldn't we couldn't deal.”
Jack Rivkin · 1:08:51

#india#emerging-markets#governance#corruption

Explainer1:17:44

Abundant Energy Shifts Both Geopolitical and Manufacturing Power

Rivkin argues that expanding hydrocarbon and alternative-energy supplies can suppress prices, weaken petroleum-dependent states, and alter strategic relationships. Cheap, reliable energy and feedstocks can also make technologically intensive domestic manufacturing more competitive after shipping and legal risks are considered.

New supplies put sustained pressure on energy prices.
Lower export revenues constrain countries such as Russia and Iran.
Hydrocarbons are industrial feedstocks as well as transportation fuels.
Reliable low-cost power can influence where manufacturers build plants.
Energy transitions repeatedly move economic and geopolitical power.

“Energy prices are just seeing a global a global shift here and and and actually I think it affects geopolitics dramatically.”
Jack Rivkin · 1:19:17

“Energy actually produces major shifts and powers structures.”
Jack Rivkin · 1:21:51

#energy#geopolitics#manufacturing#oil#natural-gas

Story· 3

Story08:31

How an Oklahoma Engineer Accidentally Found Wall Street

Rivkin entered the Colorado School of Mines intending to become a petroleum engineer, switched to metallurgy, and then worked for Procter & Gamble. Harvard Business School exposed him to finance, a field he had barely encountered while growing up in Tulsa.

He initially planned a career in petroleum engineering.
Disliking rock identification pushed him toward metallurgy.
He entered Harvard intending to become a manufacturing expert.
Wall Street was an unexpected career destination.

“I had no interest in finance, never, I had no clue.”
Jack Rivkin · 09:52

“I went to Harvard to become the world's expert in manufacturing.”
Jack Rivkin · 09:06

#career#engineering#wall street#education

Story23:18

Rivkin Turned an Abrupt Firing Into a Valuable Long-Term Relationship

After being dismissed from Lehman despite strong results, Rivkin accepted the decision and negotiated the best exit available rather than creating a lasting feud. His composure preserved relationships, and he later worked constructively with Lehman again when it acquired Neuberger Berman.

He did not receive a detailed explanation for the dismissal.
He shifted quickly from arguing the decision to negotiating his exit.
He retained friends and professional relationships at Lehman.
Dick Fuld later acknowledged that firing him had been a mistake.

“So it then became let me negotiate the best exit I possibly could”
Jack Rivkin · 23:37

“It is a small street, and it pays, it pays to actually makes realize that it's a small street and there's no place to hide”
Jack Rivkin · 46:04

#career#reputation#negotiation#wall street

Story36:04

3D Printing Turns Scans Into Surgical Practice and Living Bone

The conversation highlights medical uses of 3D printing beyond ordinary manufacturing. Doctors reportedly converted scans of an inoperable tumor into a physical model for repeated practice, while researchers were printing living bone structures containing veins.

Medical scans can become physical models for surgical planning.
Practice on an accurate tumor model can reduce operative uncertainty.
Biological printing may produce living structures rather than inert replacements.
Healthcare applications connect additive manufacturing with biotechnology.

“they were able to take the m R I and CAT scans of this tumor printed in three D so they could see how the…”
Barry Ritholtz · 36:16

“It's an actual bone, a growing, living, living, a living bone.”
Barry Ritholtz · 37:09

#3d-printing#medicine#biotech#surgery

Q&A· 1

Q&A55:44

Why the Fed Intervened When Credit Markets Froze

Rivkin defends crisis intervention by emphasizing the danger of refusing to act when ordinary corporate funding stopped functioning. Whatever the drawbacks of bailouts and quantitative easing, policymakers faced payroll failures and a breakdown in the normal circulation of capital.

Frozen credit markets threatened ordinary corporate payrolls.
The Federal Reserve became the institution expected to respond.
Policymakers judged the alternative to intervention too dangerous.
Monetary action also reduced pressure on Congress to provide fiscal support.

“It is think about the alternative, and it's think about an unwillingness to take the risk of the alternative.”
Jack Rivkin · 55:55

“monetary stimulus leads to no fiscal activity, and that's the period that we're in now.”
Jack Rivkin · 1:00:31

#federal-reserve#financial-crisis#qe#credit-markets

Takeaway· 2

Takeaway32:55

Start Portfolio Design With Risk and Goals, Not Headline Returns

Rivkin argues that investors should begin with the risk required to meet their goals rather than selecting products by past returns. Alternative strategies can modify portfolio exposure, but their complexity means most individuals need an adviser who understands both the instruments and the client's long-term objectives.

Define the acceptable risk level from the investor's goals.
Treat alternatives as tools for modifying exposure, not automatic return enhancers.
Allocate across strategies according to conditions and portfolio purpose.
Individual investors may need qualified help with liquid alternatives.

“we're moving toward risk is what you ought to be managing as opposed to what are my returns?”
Jack Rivkin · 33:19

“But for an individual investor to make these decisions around the particularly the liquid product that is out there, I think you need help. It's…”
Jack Rivkin · 35:01

#portfolio-risk#alternatives#asset-allocation#advisers

Takeaway1:28:13

Watching Builders Makes Technological Pessimism Difficult

Both speakers describe exposure to young founders as a recurring antidote to market and societal pessimism. The builders may fail on early attempts, but their energy and willingness to keep solving problems sustain Rivkin's optimism across medicine, data, manufacturing, and energy.

Incremental iterations can prepare the way for major breakthroughs.
Small teams pursue difficult problems with unusual energy.
Early failure does not end the attempt to solve the problem.
Political and social systems may remain harder constraints than technology.
Regular exposure to builders supports long-term optimism.

“It makes me just very optimistic in spite of what happens to the market on any given day.”
Jack Rivkin · 1:29:29

“it's not they're not saying no, they're saying, we're going to figure this out. Why not work the first time around, but we'll figure it…”
Jack Rivkin · 1:31:19

#innovation#entrepreneurship#optimism#technology