Cliff Asness on Bubbles, Private Equity and His Research Greatest Hits

**Matt Zeigler** (0:00)
You said this place was steps from the water.

**SPEAKER_2** (0:02)
We just haven't found the steps yet.

**Matt Zeigler** (0:05)
How much did we save?

**SPEAKER_3** (0:07)
Enough.

**Matt Zeigler** (0:08)
Enough to get lost?

**SPEAKER_4** (0:10)
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**SPEAKER_5** (0:13)
Welcome to your oceanfront room, just steps from the water.

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**Matt Zeigler** (0:36)
Hey Meta, where's the nearest metro station?

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Closest metro to you is Union Square, about three blocks away.

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**Cliff Asness** (1:00)
You have to be a crazy person to say you are certain of something. I just think the idea of a permanent loss of capital, yeah, if you're certain it's gonna come back, it's not risky. Risk control to me is how bad is it if you are wrong? Or how bad is it if the market doesn't recognize you're right for a long time? There is no cash on the sidelines.
When someone says there's a lot of cash on the sidelines, I always ask, all right, well, when that cash gets spent on stocks, they have to buy them from someone, right? A lot of these have like the S&P 500 sitting out at 17% annual vol.

**SPEAKER_5** (1:43)
Privates, 5%.

**Cliff Asness** (1:47)
And that would just send steam coming out. And when you have no hair on your head, the steam is really obvious.
We all know the prices are moving, but we can't just stop observing them.

**Matt Zeigler** (1:59)
You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use for better questions, lead to better decisions. I'm Matt Zeigler, Jack Forehands in the co-host seat with me. And I was thinking about this time in 1997, when I go see the Rolling Stones, Bridges to Babylon tour, a giant stadium.
And it's just like, all you can do is go out and play the hits. There's just so many songs. And they had the B stage and he's dancing across. You're thinking like, he's old, but he's not old yet. They still got it. They're doing covers. They're inviting guests out. And you're like, this is such a cool thing. It's a cherished memory. Again, it's almost 30 years old in my own brain at this point.
But where are the people in all the other industries who could go out and play the hits and talk through stuff? Jack and I were talking about it. We're like, you know who would be killer? Who's got a greatest hits catalog to get to go through the hits and get some takes in some B stages? Cliff Asness from AQR. I don't know why you said yes to this, but you did. Cliff, how are you doing?

**Cliff Asness** (3:04)
I'm good. You're already getting us in trouble because most artists want to do the new stuff.
And then they get the audience all mad. But I will acquiesce and do the greatest hits. I saw the Stones at Jazz Fest two or three years ago, and I think they were over 80 at the time. And they were still jumping around the stage. I don't know if they put them in some hyperbaric chamber when they're not performing, but it was incredible. Like if I'm doing that when I'm 80, I win.

**Matt Zeigler** (3:40)
Whatever the transition is from the old drugs to the new drugs, I'll still be moving like that, man. I mean, we need to get that for everybody.

**Cliff Asness** (3:46)
No, no, it was really good.

**Matt Zeigler** (3:48)
So, The Bridges to Babylon Tour was the first, I think it was the first time they did, they did something where like fans could vote in songs. And they had this whole thing, but.

**Cliff Asness** (3:58)
Well, then you're definitely going to play the hits.

**Matt Zeigler** (4:00)
Then you're definitely going to play the hits. And they always sneak a few in. So, let's take you back. I want to start with Bubble Logic.