John Arnold - China, Energy Markets and Fixing America's Systems - [Invest Like the Best, EP.461]

“The one big takeaway was just the speed and scale of which they can do things is unlike anything in the world. This highly educated population, it's a very entrepreneurial culture. They've figured out how to get capital to these companies, and they have this deep domestic market. And so it allows them to build up the supply chains and acclimation effects to create something that I don't think exists in the rest of the world, where we're talking to a battery company and asking them, are they looking at replicating factories elsewhere in the world? And one of their responses was, every one of my suppliers is within 200 miles of here, and I can call them and meet with them same day.”

“So I had the best or as good economics as almost anybody in the business. And then we had very good financial returns early on. So that did two things. Number one, there was a lot of retained earnings, and new investors came in, and so we had a lot of risk capital. And second was we had a very good investor base that trusted the team I had built. Whenever we had a down month or a down time period, which we had, they weren't calling to redeem, but they would call up and say, do you need more capital? So I'd set up this really powerful seat where I had good economics, so I could hire the best people in the business that I knew of.”

“One of the big components is do something that you're really passionate about, that you want to do, that is not a job that you do for income. But if you can have a profession that you love, that you have this real deep passion for, and that's what I found with trading. I just loved the battle, the puzzle, the game of it. I would sit there from six in the morning to six at night at the desk, and either staring at the computer screen or doing some analysis, and then go out with people from the industry that night and then dream about the industry in the shower in the morning.”

“I managed to talk myself onto this bulletin board of baseball card dealers back in the late eighties, and you had to get some references. And I'm, like, 14, 15 years old, and I somehow finagle myself to be on this bulletin board, which is when Internet commerce is just getting going, and they just had this wholesale system that was in a real time pricing in effect. You'd have people in New York were trying to buy hockey cards, and people in Texas were trying to sell their hockey cards because there wasn't much demand for them. And there was these arbitrage opportunities that got created. Turns out there were a lot of similarities between doing that and trading.”

“This nimbyism and this difficulty in building is what would lead to the problem of not being able to supply or energy becoming the choke point for development of The United States and particularly bringing it back to the first part of the conversation of China and just the speed and scale that they can build. They don't have this problem. I'm confident of that. It is one of the biggest differences between the two countries. I really worry about if energy becomes a choke point in The US, it has real ramifications for strategic ranking of this country.”

“Promising, but very, very difficult. The innovation hasn't been proven. We can build the AP 1,000. The AP 1,000 is the latest of the traditional nuclear power plant. We know it's a very, very costly electron. The Vogtle plants were enormously expensive. And if anything, they've gotten harder to build since then because they require a very significant amount of labor in generally rural parts of this country. We're probably looking ten, fifteen years to really have advanced nuclear be at any scale in United States, and that's best case.”

“And so they were using the individual to try to improve the system. And what many states have decided is what's important is, are you a threat to others, and what's the likelihood that you're gonna come back for your trial? And that should decide, do you need to be detained before you're convicted of the crime, or can you be released back into the community? Meanwhile, we have this cash bail system that's largely based upon, do you have money to post to get out or not?”

“It culminated with a bipartisan crime bill under Bill Clinton in the early nineties that was really about getting tough on crime, and it was about increasing the penalty for if you're caught doing things. And meanwhile, the researchers have known for years that what's more important than the penalty if and when you're caught is probability you get caught. That a lot of people who are committing crime don't have the ability to process. If I get caught, will I have a five year sentence or a ten year sentence, and that's gonna change my behavior. A lot of it more is, am I gonna get caught or not?”

“What my hesitancy to get too excited about is we've been hearing this promise from the ed tech industry for twenty years now. We've adopted more and more technology in the classroom over that twenty years, and outcomes have gone down. You talk to any of these providers of an EdTech platform, they have all this data they're gonna show you about the remarkable results that they get from their students. And then you step back, and you just never see it in the actual data applied in the real world.”

“Right now, one of the big things is skin substitutes. So if you get a burn, you need some type of new skin on, there's regs about how those get reimbursed. And the first six months whenever a product is released, there's not history of how those have been priced before, so the federal government gives a lot more latitude on how a manufacturer of that product can price it for the first six months. So what manufacturers have done is introduce a new product, let it be out there for six months, take that off the market, introduce a new one that's slightly different, and the prices keep going up.”

“When I was really deep into trading and about how it created some unhealthy habits and started to change me, at one point, my brother pulled me aside and just said, you've changed, and not for the better. Took courage on his part to do, and I think it caused me to step back and try to think about, did I agree with it or not? And, of course, the first instinct is to say, no. You're wrong. And then that thought lingers and start trying to see yourself as a third person would. And I started to think, maybe he's right.”