Ken Griffin's Keys to Success

Ken Griffin is the founder, CEO, and co-CIO of Citadel, one of the most successful hedge funds ever built. Forbes puts his net worth at roughly $53 billion.

These are my key takeaways from two interviews and a biography.

• You need the right skills at the right moment. Ken studied software, math, econ, and finance in the 80s and 90s, exactly when finance was becoming a computational discipline.
• The cutting-edge quant finance of the 90s is now an online course. That is how fast the field moves. Citadel's moat isn't what it knew three decades ago, it's that it never stopped innovating.
• Research is figuring out what drives the price of an asset, better than your competitors can. Trading is the monetization of that research.
• Never stop learning. The most important things you learn in a career come after college. The good news is that college teaches you how to learn, which is priceless.
• You need mentors, and specifically mentors who are invested in you having a successful career.
  • Ken learned enormously from people with 10, 15, and 30 years in finance when he was young.
• Find people who will push you to be your best.
• If you are no longer learning at your job, change teams or firms immediately.
• The people who started their finance careers in 2007, 2008, and 2009 are remarkably wise and resilient today. They came up through adversity.
• History is written by the winners. The narrative on Citadel is that it's one of the most successful hedge funds of all time. The reality is that it nearly went bankrupt in 2008. "It has not been an easy march to success." "My firm has probably lost more money than any other firm in existence. It just so happens that we've also made more money than any other firm in existence. What matters is the net." Ken treats the losing years as a tuition bill.
• Learn from other people's mistakes. When Long-Term Capital Management collapsed in 1998, Ken went to their management and asked them exactly what happened.
  • When Enron collapsed in 2001, he and his team spent days interviewing Enron people about what worked, what didn't, and how they actually made money.
• A business is not one thing, it's parts, and the parts are not equally good. Enron obviously had smart people in it. Work out which ones were smart and ethical, and hire them. Google has departments that print money and departments that burn it. When you buy a business, identify the good part and buy or copy that part only.
• When you're walking through hell, put one foot in front of the other. Keep going.
• Surround yourself with people who have been through adversity. They are the ones who can get you through your own.
• "I'm always trying to figure out how I can do better; how to be better."
• "Success is elusive. However high you climb, success is probably twice as far."
• Total addressable market matters. Entering an industry with a large TAM raises your odds before you do anything else right.
• Asked how to get better and more confident at making important decisions, Ken's answer was volume. Make more of them. In powerlifting this is overload: do more reps. And if you make the same kind of decision over and over, you get better at that kind specifically. In powerlifting this is specificity. You learn which questions to ask and what you need to know before you decide.
  • This maps cleanly onto the scientific principles of strength training.
  • It also reminds me of Kobe and Jordan. Both are remembered for buzzer beaters. Both, when asked how they got so good, pointed out that they also missed more buzzer beaters than anyone. To be the best at something, you have to fail at that exact thing more than anyone else.
• Everyone is a salesperson. Every CEO is a salesperson. They sell VCs on capital, customers on the product, candidates on the job, and the government on the idea that they run an honest and diligent company.
  • If you don't like selling, too bad.
• Reading list: Good to Great by Jim Collins. Bruce Henderson on business strategy. Hardball by George Stalk.
• Take a known but useful product and make it beautiful, easy, and effective, and you can sell an enormous amount of it. The iPod was an MP3 player, and MP3 players already existed. It was well designed, came in a nice box, and was obvious to use. Charge a high price. Ideally it's something people carry and others can see: clothes, a phone, an MP3 player at the time.
  • Candidates: water bottles, briefcases, watches, sunglasses, umbrellas.
• In business you have to win by a landslide. Anything less and competitors take back your market share.
• Pattern recognition: study successful businesses even when they're nothing like yours. The principle, strategy, or tactic often transfers.
  • Citadel used to print risk information on paper and hand it to employees. Under that system they were B-quality at risk management. Then they built a screen 30 feet wide and 10 feet high across a wall of the Chicago office displaying the same information, and became the industry leader almost immediately. Same data, different packaging. Where did the idea come from? Saudi Aramco's operations center, where a giant screen displays oil field output, power plant production, and ships at sea.
  • Find the best ideas in research, academia, and on Wall Street, and implement them.
• Whatever is legal is fair game. Don't let morality stop you from monetary success.
• Work out who your great competitors are, who the real thought leaders are, and who you actually want to emulate.
  • Ken's idols in college were Henry Kravis and Paul Tudor Jones.
• "At its core, machine learning is about pattern recognition."
• Citadel's most profitable area is stock picking, not AI, not ML, not algorithmic trading. Top analysts study a single stock exhaustively, from its supplier relationships down to auditing the code in its software. Citadel's best stock pickers are right 53% of the time. It is nearly a coin flip. Technology helps those people decide better, but people, not computers, are picking the stocks.

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