Transcript: Grant Williams in Conversation with Ben Hunt

Featuring: Ben Hunt

Published Date: July 27, 2018

Length: 01:45:25

Synopsis: Grant travels to rural Connecticut to spend a day with Dr. Ben Hunt, author
of Epsilon Theory. In a wide-ranging discussion, Ben shares his journey from tenured
academic to software entrepreneur and on to his role as Chief Risk Officer at Salient
Partners and the birth of Epsilon Theory. The two discuss the importance and power of
narratives in financial markets, the ways in which spending time surrounded by nature
can help improve investment returns and the reason “why” is the most important
question to ask.

Topics: Career, Financial System, Monetary Policy

Tags: Salient Partners Epsilon Theory

Video Link:
https://www.realvision.com/rv/television/videos/4c789bc157c040
d6a12f9506b0bf0d78

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 Grant Williams in Conversation with Ben Hunt

GW: For me, the best part of my Real Vision journey has been a chance to refine my own
investment framework through a series of conversations with brilliant investors in every corner of
the globe. In this series, I want to try to continue my education by digging deeper into the lives
and careers of my guests to try and learn how they think. I want to understand the experiences
that have shaped them, the failures that bounced back from, and the lessons that those values
have taught them. And I want to break down their success to find out what sets from apart.
I'm not looking for trade ideas or guesses about an unknowable future, but rather knowledge
accumulated over the course of careers to try and make me a better investor. And I want to share
those conversations with you.

Finding unique voices in the crowded world of finance is always a thrill, especially so when those
voices come with a weight of intellect and an ability to communicate complex ideas in a way that
resonates across a broad spectrum. Today, I'm traveling to rural Connecticut to while away some
hours talking with a man who has not only become a dear friend, but whose voice and unique
perspective have become a seemingly bottomless source of wisdom to me.

I'm not alone, however, as his incredible writing has attracted an audience of tens, if not hundreds
of thousands, who, like me, open his Epsilon Theory letter the second it lands in their inboxes.
One of the things I love about the time I get to spend with my guest today is that I know I'm not
going to hear any casual predictions about the future. But I'm absolutely guaranteed to get a read
on the present, which is not only going to be thought-provoking, but will also help me understand
the broader narrative, as I try to navigate my own way through the investment jungle. So please
join me for a conversation with Dr. Ben Hunt.

GW: Ben, thank you.

Ben Hunt: Oh Grant. It's great having you here.

GW: You know, I've read so much about this place in Epsilon Theory. And to see it come alive
like this is amazing. What an incredible corner of the countryside you've found yourself.

BH: Well, thank you. We're really, really lucky to have this. It's a real refuge for us. And it's been
a source of so much-- I'll use that word "education" for me because I'm a dilettante farmer. I'm like
Eddie Albert on Green Acres, if you remember that. But it's been such an important source of
these life lessons for me and our children. It's just been the best.

GW: And all the readers of Epsilon Theory.

BH: Oh, thank you. Thank you.

GW: So many people talk about your writings about raccoons, and bees. And all of the animal
imagery you conjure up resonates so strongly with people.

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 Grant Williams in Conversation with Ben Hunt


BH: You're right. And I started writing Epsilon Theory five years ago, almost to the date. And
really, I was writing to myself. I was kind of in a dark place, frankly, trying to figure out what was
wrong with markets. And so it was a very markets-focused piece at the beginning. And as time
went on and I started seeing how the patterns that exist in markets and market behavior, I saw
them in the patterns of life and behavior here at the farm. And about then, almost two years--
probably a year and a half ago, I said, well, I need to start writing about this directly-- not
obliquely-- but saying, here's something-- a pattern of life on Earth, on this farm. And bear with me
a second. But this has direct application to the patterns of behavior that we see in our investing
lives, or in our lives as citizens, as voters. And if does connect with people in a way, frankly, I
wasn't expecting. But it's so gratifying that it does.

GW: We'll talk a lot about Epsilon Theory because I think, to that point, there are so many
lessons in there. And of course, you know, it makes perfect sense to me that these patterns should
repeat because we're all animals, and we all have our patterns. But what it takes it takes a
missionary to steal from you, to be able to put that into a way that people can connect with and
suddenly join the dots for themselves because that's always the tricky part.

BH: Thank you. Thank you. There are so many different parts to this process. And a big part, as
you're saying, is, can you communicate, can you connect it with people's own lives and
experiences? And it's why I-- and something I know you see all the time in our business of call it,
"financial services"-- you see all these companies, all these asset managers, talk about, well, we
need to create content, as if it were a widget. And financial advisors are always saying, well, we
need to educate our clients.

And no. No, no, no, no. Content is not a widget. It's not something that you can just, OK, let me
turn that crank and put out that block. And no one wants to be-- or I think few people want to be
quote unquote "educated." They don't want to be lectured to.

GW: But they want to learn. That is the interesting thing.

BH: They want to learn. They want to learn with a peer, having a conversation, a guided tour, if
you will, so that they can think for themselves because the truth is, we're all smart enough to make
up our own damn minds about stuff.

[DOGS BARKING] Uh, oh.

GW: Here come the foxes.

BH: Because Grant, no one wants to be educated. But to your point, they want to learn.

GW: They want to learn. Exactly.

BH: They want to learn.

GW: But it is different. And some people don't understand they're two completely different things.

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 Grant Williams in Conversation with Ben Hunt

BH: Very different. And so the act of lecturing someone to say, OK, I'm up here. And let me tell
you, Grant. Let me tell you the way this works-- I find that that does such a poor job of doing what
I'd like to do, which is to communicate the ideas. It's not a lecture. And I really do want it to be a
conversation.

GW: Yeah.

BH: Anyway, so that's what we're trying to do.

GW: But you have done a great job in that—

BH: Thank you.

GW: --in creating that conversational aspect to this because Epsilon Theory does feel like a
conversation. And so we talk a lot about that. But what I want to do, because a lot of people
have kind of tuned into the Ben Hunt show in season 15, and so a lot of people don't understand
that you had this whole life before what they know you for. And so what I love to do in these
conversations is to give people a broader perspective on my guest is just to go back to the
beginning because here we are in this beautiful corner of Connecticut, and we're a world away
from where you grew up. The accent gives away a little bit.

BH: The accent does give it away.

GW: But take us back there. Take us back to the beginning.

BH: Sure. Well, I grew up outside of Birmingham, Alabama, in a little suburban unincorporated
place. My dad was a emergency-room doc back before it was called "emergency medicine," way
back in the day. And growing up in Alabama-- there's still family down there. Huntsville, Alabama
was settled by my great, great, great, great grandfather. And I say that only because he was just
this traveling guy. And he built a shack there on the big spring. So there's a plaque there in the
middle town. That's all we've gotten out of--

GW: Hey listen, I've got no claim on Williamsburg. So you're way ahead of me.

BH: Right, right. And Alabama is such a funny place. I'll use Huntsville as an example because it's
North Alabama. Nobody ever heard of Huntsville, Alabama. But that's where they brought all the
German scientists, the rocket scientists after World War II. They brought them to, you know, BF,
Alabama.

GW: Right, right.

BH: It's all the basically, the Nazi war criminals they brought over to build NASA and our space
program. So Huntsville grew up to be a pretty big city and a pretty technologically savvy city,
even today because of the government and bringing in NASA and building that there.

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 Grant Williams in Conversation with Ben Hunt

There are all these interesting stories. I find about the South and Alabama and the way it's grown
meteorically, over the last 50 years. I think you may have been in Atlanta recently. And that's a
prime example. Nashville is a crazy growing city today. So I do come from the South. And that
did really inform my way of thinking and living.

GW: But the South is a place. But the time that you came from, as well, was just post a time of
great upheaval, but the ripples were still--

BH: I was born eight months after the dynamite bombing of the 16th Street Baptist Church, where
four little girls-- four little African-American girls were killed. I was born 12 months after Bull
Connor was sicking dogs and giving the fire department to use the high-pressure hoses on kids.

GW: On kids, yeah.

BH: And I wrote recently about this because here's the thing. I never experienced any of that
growing up. None of it. It's not because I was in some well-to-do bubble. I'm the kind of-- you
know, this is a very modest house out in the burbs. It was really a set of choices, I think, that my
parents made about how to raise their pack, their family. And I really had to wrestle with that
recently because I think that it is important, certainly, to look down the family tree and support
your family and the like. But I also think it's so important to live our lives as citizens and to pick
and choose, but choose where we want to be active in our lives as citizens.

But to get back to your point, my fascination with markets and with investing was that I would--
back then, the only news you got was the newspaper. So I'd spend all this time-- it was just the
tickers. You'd just get the ticker and the open price and the closing price. You remember those.

GW: I do. I wish I don't. But no, I do remember those.

BH: And the newspaper-- the business section-- essentially, that's what it was. It was just very tiny
print of the tickers and the numbers. And I found that endlessly fascinating because I said, well
there's some pattern in here. And there's some way to make money, apparently, from this. So the
key is, I just have to find the pattern. And this is again, eight, nine years old. And it's basically
kabbalah numerology, where I'm writing down numbers and see how they repeat and stuff like
that. Totally useless, right? But that was the way I'm wired is to try to solve these puzzles.

GW: Where do you think that came from? You're growing up, the son of a doctor, in the south.
I'm always fascinated-- people would say, oh, my grandfather was into the stock market. It tends
to come from somewhere. I'm fascinated that this would be what you just found yourself drawn to.

BH: Well, I tell you, I think it comes from-- there are plays on the both sides, or a family, of risk
takers, and entrepreneurs, and frankly, puzzles solvers, because that's what it is for me. And this
is why I've always been fascinated by game theory. That's why I ultimately found the stock
markets because it is the biggest game, it's the biggest puzzle to try to solve. And card games are
another form of this. So gambling is big everywhere, I guess. But it's really big in the south. I

July 27, 2018 - www.realvision.com