Hedge fund manager Daniel Loeb, who runs $US14 billion Third Point LLC, was on a panel yesterday with His Holiness the Dalai Lama at the American Enterprise Institute in Washington, D.C.
Loeb explained to His Holiness how financial markets make the world a better place.
He also spoke extensively about his experience studying yoga and how that helps him be a better investor.
Loeb started Third Point LLC in June of 1995 with $US3 million under management. He began practicing Ashtanga yoga just a few months before that.
Five months later after starting Third Point, Loeb’s yoga instructor, Eddie Stern, convinced him to go to India to study yoga with Ashtanga yoga master, Pattabhi Jois. He said that was an “unusual decision.”
A friend/competitor of Loeb called him up and told him it wasn’t a good idea, “Don’t do that. That’s a huge mistake. Everyone’s going to think you’re a flake for leaving your business, going to India and studying yoga for a month.”
Back then, Loeb explained, there wasn’t internet access readily available or cell phone service, so the other fund manager’s concerns weren’t completely unwarranted.
Loeb went to India anyway.
He said that month-long experience was what launched him into a “life long passion for spirituality, for contemplation, meditation.”
“Contemplation, meditation — It’s not for monks and hermits,” Loeb said, adding, “I think they can really improve all of our lives and they can really improve us as business people as well.”
Basically, Loeb believes that contemplation makes people better decision-makers.
Through the practice of yoga, Loeb said he’s received three lessons that are crucial for being a better investor and decision-maker. He applies them to his work at Third Point, and we’ve paraphrased them below:
- Yoga quiets the fluctuations in the mind. Basically, it puts the mind at ease.
- Yoga helps put ourselves into difficult positions and to be able to create a sense equanimity in those difficult situations so that you can persevere and emerge from those situations making good choices.
- Yoga teaches us that when we make choices they come not just from what’s going to create a favourable outcome. Make sure we make decisions that do no harm and are consistent with our moral frame work.
Loeb said that there are three types of decisions that people make.
The first, he said, are the foundational decisions. These are the easy ones, such as the decision to be honest, not to hurt people and treat people fairly, he explained.
The second kind of decisions are the ones where you turn to a framework. Loeb used skiing as an example. He said if you’re going down a hill, you know how to bend your legs and distribute your weight in a certain way.
“In business, you may have things you’ve seen time and time again and you can make decisions consistent with that pattern,” he said.
The third type of decisions are the ones we all encounter in our own world. For Loeb, they’re trading decisions.
He said that some trading decisions might fall in a consistent pattern, while a lot of the time, “it’s all new territory.”
“That’s where this practice that enables us to be more creative, to be intuitive to make these better decisions is really important.”
It’s working for him.