Ken Griffin In A “Peer To Peer” Conversation With David Rubenstein

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Citadel Founder and CEO Ken Griffin recently joined esteemed investor and Carlyle Group founder David Rubenstein for an hour-long “Peer to Peer Conversation.” The interview, which was broadcasted live on Bloomberg TV, covered a variety of topics, including Citadel’s evolution over the past 29 years, the outlook for global markets, and Ken’s approach to philanthropy.

Home Shopping Network: Ken Griffin In A “Peer To Peer” Conversation With David Rubenstein

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So let's start with your beginning. You grew up in Florida. Is that right.

I was born in Daytona Beach. My father worked on the space program and then when the space firm went down he moved off to Wisconsin to work at GM medical systems. Jack Welch of Wisconsin so I grew up in Florida Wisconsin. We went to Texas for a brief period of time and then back to Florida for middle school and high school.

So you went to high school in Florida. I did. And were you like popular classes or something like that. That was Dolores de Graaf. So Dolores was valedictorian. Paris I remember who salutatorian was wasn't me OK wasn't top of the class and you know OK.

But you applied to many colleges and you applied to Harvard and Harvard. You got into Harvard you have to be pretty near the top of your class so were you surprised to get in Harvard or do you think you were going to get in.

My entire professional career working improbability. OK. Right so odd stocks go up versus down. So when I applied to college I played the same game I in the dark ages of using a typewriter. I typed out about 13 different college applications. OK. And so your chance of getting in each of them you apply to 13 colleges are right. I'll get into one of them. Hopefully the best I get into.

Now you were the president of the math club in high school so I guess we're pretty good at math. I was. I was pretty good at math pretty. So you got into Harvard and when you got into Harvard did you decide to go there right away or you wanted to see of the other schools were going to accept you.

That is a complicated story. My father's business partner was a Princeton graduate. And Princeton Princeton was my first choice and my father had a falling out with his business partner just before the time you pick where you are going to college. And my dad said a break his heart.

I went to Princeton and I went to Harvard had broken the heart of the Princeton development people I met.

Well one of my partners at Citadel who I have had the pleasure working with for almost two decades actually served on Princeton's investment committee oversight and I think he's done wonders to help Princeton feel better.

OK. So you go to Harvard and most people go to Harvard. They don't know whether when they get there they're going to be smarter than everybody else are not as smart as everybody else. When you got there did you say these people aren't as smart as I thought they were they are actually they're smarter than I thought they would be.

I'm pausing as I'd ever actually thought about that and I just went through my I'm at Harvard. I am I am so fortunate. I met one of the greatest writers to higher education the world.

But the legend is that you began trading convertible bonds out of your dorm room. Is that true or not that is true. Or did you do that in the freshman year or are you started that later.

So my freshman year and I'm at Bloomberg so I need to say a moment of gratitude to everybody in the press. My freshman year there was an article in Forbes on Home Shopping Network written by Gretchen Orenstein who is over at the New York Times. And it was a great article is now home shopping network was overpriced and having read this article I went and bought to put contracts in the Home Shopping Network and lo and behold the stock trader like 30 or 40 percent shortly after I bought these puts and when you make a few thousand dollars a freshman you are rich like this. This is the moment you have dreamed of. And that was what really started my interest in trading. I mean you'd never been that involved in that before. I I never traded a financial asset before that. So you started doing more of that is that right. So the most defining moment of my career in some sense was I went to sell these two pet contracts and this is the days of floor based trading. There were no electronic trading markets were the good old days and in the good old days when you went to sell it and in the money put the market make you pay you less than the intrinsic value. And I realized that the market makers profit was risk free. That in a sense they just going to get a kick out of this 50 bucks off of me and a risk free way and that that really drove my interest in the pricing of derivatives which is what led me into convertible bond arbitrage which was trying to understand how does one price an equity derivative as compared to the common stock.

You know your classmates in Harvard they're presumably doing other things not worried about convertible bond arbitrage. Right so what did they think of you.

I was a bit of an anomaly. I mean look I classmates were same experiences we all had. We debate politics like rapidly we would have fun playing soccer in the yard at sunset and hope not to run into a tree and you'd have your Friday night fun. So it was.

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