Your "Diversified" Portfolio Might Secretly Be One Big Bet on AI, with Alec Litowitz

Paula Pant (0:00)

Things are changing faster than ever, and that means we need to sharpen our decision making and become more adaptable. When a resource goes from being scarce to becoming abundant, its cost declines, its use increases, and something else becomes the scarce thing that turns into your edge. Speaking of having an investment edge, today's guest is one of the most successful investors and entrepreneurs of our day. Alec Litowitz is one of the four original partners of the hedge fund Citadel. And Citadel, which was originally founded by Ken Griffin, is widely recognized as the most successful hedge fund in history. Ken Griffin started Citadel in 1990 using money that he made trading from his dorm room at Harvard. Four years later, today's guest Alec Litowitz joins. He becomes one of the four original partners. He's a principal at the firm. He had almost no trading experience. Ken Griffin asked him to build out Citadel's merger arbitrage business from scratch. He becomes the global head of equities. Ken Griffin gives him a part ownership stake. Citadel becomes the most successful hedge fund in history, posting over $90 billion in cumulative net profits since its inception. It manages somewhere between $69 billion to $77 billion in net investment capital, and it employs more than 3,100 people, highly selective.

Litowitz ultimately left Citadel in 2003, sat out his non-compete, and then started his own powerhouse hedge fund called Magnetar Capital, which he created in 2005

Now, Alec has spent most of his career outside of the spotlight. He's more of a behind-the-scenes guy, but right now, he has a message that he really wants to share, and it's about AI. The way he sees it, a lot of the conversation, the public discourse right now, is about AI technology. How do you guardrail it? How do you regulate it? How do you align it? How do you make it more capable? That matters, but he believes that we're not spending enough time thinking about the other side of the equation, which is, what is it doing to us? How is it affecting how we learn and the judgment that we execute? How does it relate to our authorship, our agency, our authority, over the decisions that we make?

That's what he joins us today to discuss.

Welcome to the Afford Anything Podcast, the show that knows you can afford anything, not everything. The show covers five pillars, financial psychology, increasing your income, investing, real estate and entrepreneurship, acronym, Double Eye Fire. I'm your host, Paula Pant. Today's episode is about how humans think and decide. It is thinking about your thinking. It is metacognition. We recorded this interview on Wednesday, September 2nd, which was one day before OpenAI unveiled GPT-6 Astra, which led the CEO of NVIDIA, Jensen Huang, to declare, quote, AGI is here. So just so you know, because we do talk about AGI later in the interview, this episode was recorded one day before Astra was unveiled. So context that you should know when you listen to the AGI portion of the conversation.

But this interview is not about AGI. It's about you. It's about humans. It's about thinking. It's about decision making. It's about adaptability. Litowitz is the author of a new book called The Adaptability Quotient. All proceeds go to charity. He's not writing it for money. He doesn't need money. He's writing it because he believes that in the face of rapid technological acceleration, these are essential conversations that our society needs to have. So, welcome Alec Litowitz.

Hi Alec. Hi.

Alec Litowitz (3:51)

It's great to be here.

Paula Pant (3:52)

Thank you for being here. Can you tell us the story of Shackleton and his Antarctic adventure?

Alec Litowitz (3:59)

Yeah. I mean, this is, I think, one of the epic adventure stories that exists in history. It's almost a miniature version of AQ in operation, Adaptability Quotient in operation. But it's a classic story of explorers that are searching for some achievement that hasn't been done before. And Ernest Shackleton sets out to cross Antarctica. I've been to Antarctica. I've been there with my family, and I've been to the South Pole. Fewer people have been to the South Pole than the top of Everest. So I can say conditions there are unfriendly, and they vary quite a lot. So even in the luxury that I went there, there isn't really luxury in Antarctica. Conditions can change quite rapidly. Your ability to even fly in and out, much less do mini excursions on land vary a great deal. So his original mission and the original goal with his team was to literally cross the continent. And just to give a sense of that, because I don't think people have scale here, the land mass underneath Antarctica is twice the size of Australia. It's not small, okay?