Cliff Asness on How Markets Got Dumber in the Last 10 Years
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What is the overall premise of the episode and who is the guest?
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Hello and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Alloway
and I'm Joe Weisenthal.
Joe, it's a big month for us.
Big month for us. We've been doing this for ten years. I know. I can't believe
it. Do you remember the first episode?
Yeah, of course, with uh Tom Keane.
Yeah. And then our second episode I think was about bananas for some reason. I
think it was. You're right. It took us a long time. Um to figure out what we were doing. It took us a long time to figure out what we were doing. And I don't think at that point I would have expected that we'd be doing it ten years later. I don't know what I was expecting. We're just turning on a microphone in a radio studio and talking for a while.
Oh, we started doing it because we wanted to have a podcast and talk to interesting people. I think we were hashtag blessed that no one was listening for a very, very long time, which gave us a long runway to figure things out. So we got lucky. That said, you know, ten years, it is in fact a long time to be doing this and a lot has changed in that period.
A lot has changed in that period, sometimes mind-blowing. And we've talked about this before for sure. But the things that we were covering is capital and news at the time are now Capital H history. And it's like these things that are we sort of take for granted, everyone was there. It's like, no, children, let us tell you what it was like in the old days when people were worried the world was gonna come to an end because, you know, Greece's sovereign debt and all this stuff that Part of the landscape is people don't remember it.
No, one of those things has to be the idea of value or fundamental investing, right? Like let us tell you about the days when price actually mattered and had a limit to what investors would pile into.
Yeah, that's exactly right. Let us talk about the days when people used to talk about PE ratios and this stock, oh, it's at a twenty five PE. We better sell it and buy the stock at a fifteen P or whatever. Yes, it that feels quaint. Maybe it'll be back there one day, but for now, given how um many things in the market seem to be, the Graham and Dodd kind of stuff
feels a little
old.
A little old fashioned. A little old
fashioned.
Yeah, okay. So one of the big themes that has emerged in the 10 years that we've been doing this podcast is everyone seems to have grown more stupid, I would say.
How did Cliff Asness get started in quantitative investing and what was AQR’s early history?
Hopefully that's not related. That's not like a correlation thing. It might be. It mm, it could be. All right. But you know, we have all this gamification of investing, people betting on lines going up or down, people betting on random meme coins, things like that. And I think You know, we talk about it a lot on the podcast, but this is actually a fundamental shift in the market. If you think about the market as something that's supposed to be about capital allocation, alignment of incentives, people are investing in something because they think it's going to be profitable in the future at the right price. And now people are just sort of piling into stuff because other people are doing it. And again, line go up.
Deep down I still believe that the value of a stock should reflect the net present value of all the stuff. I know you're an
EMH guy.
But I've uh it's been a little bit hard with uh some of these things. And you know, the other thing too that is sort of changed is that like half of our episodes these days are kind of AI related in some way. And so I think there's a lot of interesting stuff going on, particularly at the intersection of tech and applying tech to both investing in tech, but then the application of tech to investing and so forth.
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Chapters
5 chapters
1
What is the overall premise of the episode and who is the guest?
0:01–2:55
2
How did Cliff Asness get started in quantitative investing and what was AQR’s early history?
2:55–23:23
3
Why does Asness believe markets have become less efficient over the past decade?
23:23–35:05
4
How has the rise of retail investors and meme‑stock trading changed market dynamics?
35:05–49:12
5
What role do AI and machine‑learning play in AQR’s current investment process?
49:12–59:40
Speakers
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