Rishi Ganti - Esoteric Assets

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is a Principal and Portfolio Manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
Before we begin, there is something else that I want to bring to your attention. I am working on a new project, codenamed Frontier, and I'd like you to be involved. The honest truth is that I am not yet sure what Frontier will be, other than a means to connect what has become an insane network of smart, interested and interesting people who can all stand to learn from one another.
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My guest this week is Rishi Ganti, whose resume is bonkers. I'm not sure what to do other than laugh in amazement at his professional credentials. PhD in economics, CFA, CPA, lawyer, speak six languages, and so on. The best part is he isn't lording these credentials over anyone, and in fact casts some shade on the whole idea of credentials in our conversation. He just did it all because he's a learning fiend.
Rishi's core idea about markets is this, avoid markets at all costs.
As he explains off the bat, the minute there are multiple buyers for anything, prices get efficient very quickly, and therefore opportunity to find alpha shrinks.
Instead, he searches for what he calls esoteric assets, things without a market, orphaned assets that require high human capital and human touch. We explore several interesting examples, from charter school financing to factoring receivables for the Vatican. A stark realization I had during the episode is how big the world's asset base is. Almost all of our attention goes to the most highly refined ones, stocks and bonds, but there is a whole other world out there. We explore in great detail. The closing sections of this conversation on what Rishi would do if not investing and his answer for the kindest thing that anyone has done for him were among the best answers that I've heard. Please enjoy this great conversation with Rishi Ganti. Rishi, thank you very much for doing this with me. This is going to be a very interesting conversation, largely because I don't know all that much about you and your background. So this will be a couple hours or an hour of discovery for me, as much as it is for people listening. A fun place to start would be your overall take on markets. And just that word is an important one for you. But you've got a variety of interesting experiences across sort of the traditional Wall Street circles. But the place that you've ended up is extremely different. It's actually a category called esoteric asset. So by design, very different. So I'd first love just to hear your very broad take on the very concept of markets and whether or not you like markets.

**Rishi Ganti** (4:09)
So I think markets are one of the greatest human institutions ever invented. My personal training was in markets. I received a PhD in economics with a specialty in finance. And in that era, not to date myself, in the 90s, the number one thing you would do to graduate with a dissertation would be you would try to show that markets weren't efficient. Of course, they are highly efficient. So you would find the smallest of tremors in the market, the smallest perturbations we call these anomalies. And I won't tell you, I was a poor graduate student. I was paid to attend school and then we were trading on all the anomalies we could discover as we were delivering seminars on them. But bottom line is when I graduated, I had a healthy respect for markets both in the way that they could change things for the good, and at that point there were lots of experiments, for example, with markets in carbon trading or other sorts of purposeful markets to help things, as well as a healthy respect for the fact that if you tried to beat a market, you would generally lose.