Episode 6: Steve Cohen - Founder and CEO of Point72 Asset Management

Hi, I'm Amir, and I'm Owen. We're the co-founders of the Generating Alpha Podcast. Today, we're thrilled to have on Steve Cohen, a very special guest.

Steve Cohen is widely regarded as one of the greatest Wall Street traders of all time. He's the founder and CEO of Point72 Asset Management, one of the largest and most respected hedge funds in the world.

Beyond finance, Steve is also a majority owner of the New York Mets and is known for being one of the best owners in sports today. He is a board member of the Robin Hood Foundation and is deeply involved with philanthropy in communities through the Steven and Alexandra Cohen Foundation.

Steve is also an avid art collector, owning one of the most extensive and diverse private art collections in the world, featuring works by artists such as Monet and Picasso.

We're incredibly excited to share this conversation with you guys, and we hope you enjoy it as much as we will. Thank you, Steve, we really appreciate it.

I'm Amir, in case you didn't know.

I'm Owen, and also I've been a Mets fan for a long time.

I really like how you are developing the farm system and signing big free agents.

What's that?

What you said, like, you're developing the farm system, like, new, like, recruits, like Luisangel Acuña and, like, other people, and which we traded for those guys in 2023, and, like, Francisco Alvarez.

Well, Alvarez was drafted a while back, but it's good to—it's good that we have some prospects that are actually, you know, coming up and doing something.

So it's—if it's OK, we'll just dive in. And again, we appreciate you taking it. So going back all the way to your childhood, tell us a little bit about your childhood in Great Neck, Long Island and how you grew up.

Yeah, I mean, listen, I grew up one of seven, eight brothers and sisters. I mean, I have seven brothers and sisters, a total of eight. Grew up in a nice area, you know, great, great place to grow up, Great Neck. You know, not dissimilar probably from Greenwich, you know, from a standpoint of, you know, nice suburbia. I loved it, you know, it was fun. And, you know, so, you know, there was no complaints in my childhood.

Yeah. So you were—you mentioned you have seven sisters and brothers. What was the atmosphere like, and how did it, like, develop you as a person today?

Well, I mean, it's a little chaotic when you're, you know, in a small house, a lot of people running around, a lot of kids running around. So it's a little chaotic. Probably helped me deal with chaos in the markets, because I'm so used to dealing with it on a daily basis that I'm sort of oblivious to it.

And we heard you're a big poker player—but you're still a big poker player, but you were a big poker player in high school. Tell us a little bit about your poker experience in high school, and what did poker teach you about human nature, and how did it kind of carry over to trading?

Well, I don't play poker now, um, but I did play poker every day in high school. Um, I'll give you one little anecdote. We were playing, uh, poker at about 5:30 in the morning, the day—the day of my SATs. Like, nobody cared. We were, you know, no one cared about stuff like that. And so, uh, you know, listen, it—it really taught you how to take risks, right? 'Cause I didn't have a lot of money in my pocket. I mean, I wasn't a rich kid, and so I had to—I had to win. And so that's pressure when you have to win. And so it teaches you how to take probability bets, right? I mean, when you play, when you fold, how do you raise, all that type of stuff. And so I think it's a great early educational experience on how to—and not only that, how to deal with money.

You know, like, it became not about the money; it became about, you know, just making good probability bets, which is sort of what I do in the markets.

Yeah. Yeah. So obviously you went to Wharton, one of the biggest business schools in the world. What are some lessons you've learned at your time there?

Well, it's funny because I have tons of friends who graduated, and I know what they were like there, so I can't take them seriously today. So, um, but, um, yeah, listen, you know, you met interesting people, people I've stayed in contact with to this day. You're part of something, the best and brightest, so it forces you to work a little harder perhaps, even though I think maybe I didn't work as—looking back, I missed a lot of class. And basically what I did at Penn is I went down to the local brokerage firm every day and literally stood outside the local brokerage firm, no matter what the weather, and watched the tape. And eventually, they invited me in because I was there every day, and I used to sit with the brokers, and I got a better education there than they did in school. And, like, between your time playing poker and Wharton, when do you think your kind of—

During Wharton, of course, you said you watched the tape every day. But between your time in high school and Wharton, where do you think your kind of love for the market started?

Well, it started before that. I mean, it started when I was 12, 13. There used to be like a CNBC-similar program where you could watch stock prices move up and down. You could see the tape coming across. But I used to want to stay home from school and just watch it all day. And that was nice. And I worked at a brokerage firm—I worked at a clothing store next to a brokerage firm. And so—so I could be—so I could then run over and take a look at the stock quotes when I was 14. So this has been in my blood forever.

Yeah, really passionate. Um, let's move a little bit onto your career. Uh, so after school, if I'm correct, you went to Gruntal & Co. Then you started S.A.C. After you were at Gruntal & Co. when you decided to start S.A.C., were you scared to go out alone or were you confident in your abilities? ’Cause we heard you were really successful at Gruntal & Co., but what was your kind of feeling going out on your own?

Yeah, listen, I was ready. I mean, I had basically stayed at Gruntal for 14 years. And so I was 36 when I started my hedge fund. And frankly, I had outgrown Gruntal & Co., and they couldn't provide enough capital to where I wanted to grow to. And so I started my firm with 20 million in 1992. And today, the successor firm, Point72, we're running about 37 billion.

Wow, great to hear. So Point72 is a major hedge fund. And what is it like differentiates them from other firms in the hedge fund industry, you would say?

Well, I think a lot of different hedge funds get lumped together, and I think they all have different strategies. And so we're what they call multi-strat, where we have macro, we have quant. You know, we have equities, we have credit. And so, you know, we cover a lot of different areas. I mean, you can be a hedge fund and be a single manager and just do equities and do quant. So, you know, I think everything gets lumped together, but there are lots of different strategies in the hedge fund business.

Yeah. And we understand that you stopped taking trades on your trading book recently, quite recently. Yes, that's right. And so right now, as you're still CEO and founder, what does your overall day-to-day consist of, very broadly?

Well, I mean, I sat in meetings all day today. There's a thing called running the firm. We have 3,200 employees all over the world. And frankly, that's the best use of my time trading. I'm good at it, but that didn't, you know, when the firm gets this big, someone's got to manage it. and manage it and get in the weeds and so not that i wasn't in the weeds before when i was trading but it's better for the firm that i'm actively managing the firm and not a book and we understand you have a multi-strat um and

—it's much harder to manage a multi-strat since you have many different verticals. Can you kind of, for our listeners, can you explain, like, what would the difference in leadership skills need to be to develop a multi-strat rather than just one vertical like quant or macro or something like that?

I'll give you an example. I was interviewing somebody who does European gas the other day. Okay. Now, if I—if I was just doing equities, you know, the interview would be—if I was just doing equities as a hedge fund manager, it tends to be pretty much the same questions over and over again. When you're dealing with different strategies and different approaches, you have to really get into the particular strategy and the nuances of that strategy. And so it's a little bit more complicated. But in the end, what are you doing in all cases? You're taking risk. And then the question is, how do you manage that risk?

So, what do you look for when you're trying to hire an associate? I know that you're very high up and you might not do the hiring.

I do a lot of the hiring for people who run the money, not necessarily the analysts.

But what would you look for in someone coming out of college, you would say?

You want someone passionate. You want, you know, we want someone, depending how old they are—like, we have development programs. So what—what—how we would hire for the development program might be very different than how we hire for a senior analyst or a senior PM. Um, and so really it's a question of what they've done, how successful they've been, how passionate they are, have they managed people? Um, do they have a specialty, or expertise in something as opposed to being a generalist? And, you know, we like sector expertise. You know, basically, are you good at something?

Yeah. And as you said, you have a lot of employees now. What core philosophy drives your culture, and how has it evolved over time?

Yeah. Listen, I think, you know, I think they tend to carry the principles that I hold. You know, culture is really important to me. You know, I want a collaborative culture. You know, I want a transparent culture. I want employees to feel like they can trust what we say, senior management, and—and I want a relationship with our people. I feel like it's a two-way deal. It's not like I give them capital, they give me performance. I feel like I owe them, too. So, I want to help them think about their career. I want to help them develop. I want to support them in the things they want to accomplish. And so, you know, my door is always open. I have 3,200 employees, but if someone needs to talk to me, I'll make myself available.

Yeah. And you were talking about developing younger people, like looking for analysts. And we heard about Point72 Academy. So, of course, we're listener-based. Tell us a little bit about Point72 Academy.

Yeah, I mean, you know, these are—we hire, you know, last—this year we hired for 40 positions. We had 30,000 applicants. I mean, so really hard to get into. And so we're seeing the best and brightest across the world. And this is not just the U.S. program. It's a worldwide program. And so, you know, it's really about someone coming in as an undergraduate and we're teaching them the skills they need to be an analyst. And, you know, the talent level that we're seeing is extraordinary.

And moving on to, like, a little bit of investing, how do you make decisions? Like, what is your decision-making process? And of course, overall, I try to buy low and sell high.

Now, you know, investing is really about probabilities, you know, measuring your risk and reward.

Feeling confident in the work that's been done. I mean, we're a heavy fundamental shop. And so, do I believe the work? If something was being pitched to me, I'd be asking a lot of questions about the idea and try to understand why this is a view that's not already reflected in the market price. So, I mean, those are some of the things I'd be thinking about.

So, how does the worldwide economic outlook affect the way you invest and your outlook specifically?

Well, I mean, you can't ignore the macro. Okay. You know what I mean? Whether it's the US economy or the world economy, that's ultimately going to reflect company earnings and company stock prices, right? So, if the world's going into recession, clearly, you know, companies are going to have a tough, tougher time. If things are expanding, they're going to do well. If there are new trends out there that companies can take advantage of, they're going to do well. If the—you know, if Russia invades Ukraine, well, guess what? The price of gas and price of oil may change. That could affect lots of different things. So, you constantly got to be monitoring the global macro and the US macro because things are always dynamic.

And would you also say that for people who like to trade intraday, trade one-hour and minute, even for that?

Well, I think there are plenty of quants that trade second-by-second. If you trade minute-by-minute—most of my fundamental discretionary equity, the guys that do the analytical work, don't trade minute-by-minute. Your transaction costs would kill you. Getting in and getting out of the market is expensive.

Markets have become more and more efficient, although there is a rise of traders who buy out-of-the-money call options as soon as they hear AI. But as markets have become more and more efficient, there are fewer opportunities to exploit the inefficiencies, so—I don't know if that's true.

Mark, however, I mean, we had a phenomenal year last year, so how do you explain that if things were efficient?

So what do you think is—can be attributed to, if the market's getting less and less efficient, what do you think that can be?

Uh, there's tension between, since like the beginning of the stock market, between conviction and selling out of a losing trade. What is your opinion on conviction or selling out of a losing trade?

And how do you decide when to reverse course and ride it out? What is your, just like, thought process on it?

I mean, listen, you gotta keep processing information. You gotta remember the way we do things, one stock is part of a bigger portfolio. So how it sits within the portfolio, you might have, you know, let's say you own a stock and it's going down, you may have shorts against it, protecting you. We run long-short; we don't necessarily just run long. And so there's a lot of components to that decision. Ultimately, if you're going through a, you know, stock's not working for you and working against you in some way, um, you gotta re—you gotta recheck your, your, your, your work and, you know, make sure that you're not missing something. I mean, you can't know everything.

Yeah.

And so, you know, that gets to, why isn't this working? Trying to figure it out, try to understand why something is going against you. And you may wanna add, if you've done all the work and decide, "Hey, this is a great opportunity."

So how important is passion at, like, a company like Point72 or just hedge funds in general?

Well, what do you think the answer is?

I think it's a big one.

Very much so. Okay. If you don't enjoy what you do, you shouldn't be doing it.

Yeah. Right? I mean, let's keep it simple. And AI has been an up-and-comer. I don't know how to spell it. How do you spell AI? Probably an A and an I, I think. Right. You're right. What are your thoughts on AI, and how do you think it will affect the financial industry in the near future?

You can automate stuff, especially the manual stuff, then they can do the higher-value stuff. So that to me is a real efficiency tool. In addition, I think we create a lot of unique data and how do we harness that? And through AI tools, you can imagine harnessing that data in ways that we're not doing today. And so that could create the opportunity to find new ways to be profitable that doesn't exist today.

Yeah. So let's move on to your more philanthropy and like how you give back to the community. Obviously purchased the Mets thing in 2020. And how do you deal with being an owner of a big franchise in the MLB?

Well, that's not philanthropy, right?

You did say it was a civic responsibility.

It is a civic responsibility. So it is a little bit like philanthropy. I just wanted to make sure you caught that. So you did your homework. So, yeah, I mean, you know, I said at my initial press conference, if I can make millions of people happy, wow, you know, if we can win a World Series, that'd be fantastic. And so, and that's my goal, you know, and that's how I look at it. Like, you know, I'm willing to, I'm willing to lose money to support this effort. And I think we've done a great job in turning it around, but we still haven't won a championship.

Hopefully. Hopefully, right? You never know.

Every season, when you're 0-0, you haven't lost a game yet.

And what would you say are some similarities and differences between running a hedge fund and running a sports team?

Well, I think there's a lot of similarities, right? You use analytics, we use analytics. You know, you're trying to evaluate talent, trying to—we develop talent, but my farm system does the same thing. So yeah, there's, there's a lot of commonalities there. And, and, and you're dealing with humans, right? So how do you get the best out of humans? Right? How do you get the best out of your employees? Very similar.

Yeah, and especially as a multi-strat, because there's batters, there's pitchers, and there's macro, and there's quant. There's all these kinds of different players in the field. Yeah, the cool thing would be if I had a pitcher that could do macro.

That would be very good. Wow. That would be one of those two-way players.

Yeah. Talk about a tie-in, heaven forbid. You know, this would be even better. Yes.

We'll make quants learn how to pitch and, you know, actually, you know, I didn't want my quants to help out on analytics.

Right. I mean, you would think that would be good synergy. They didn't really bite on that one, but I thought they would.

Yeah.

They'll make a Moneyball Part Two about it. Exactly. Totally.

So you have one of the biggest art collections, private art collections in the world. What inspired your love of art?

Yeah, just some of the people I worked with were art collectors. And so they'd go down and look at galleries and the auction houses. I started going with them and got hooked.

And do you mind—I like that painting behind you, the red one. Do you mind telling us, who's that by?

Yeah, that's—what is that? I think it's—now I'm embarrassed. I think it's an Ellsworth Kelly. And is it Ellsworth Kelly? No, no.

I forget, okay, to be honest about it.

But it's very subtle. When you get close to it, you see different gradations of it. It's all red, and it's very monotone-ish. But it shows that art can be right in your face, or it can be very subtle.

Yeah, I like it. I think both of our parents have taken us to a lot of museums in our youth. How important do you think art is in someone's development, like, a basic education?

Well, I think what it does is it opens your eyes to different types of art. You know, it makes you think about why the artist did what he did. There's always a historical context. And, you know, I think history matters. And I think history matters whether it's in art, politics, the world, anything. And so, you know, you're learning about something. You're learning about, you're developing your eye, right? You're starting to, you know, the world isn't just about everything in your head. It's also about how you feel, what you respond to. And so that's what art is.

Okay. Just remember, didn't cost you anything. That's probably what it's worth. Yeah, it's—it's free advice. Exactly. So, who were some of your mentors, or one of your mentors, and what were some valuable pieces of advice they gave you? Yeah, it's funny. I didn't—God, I mean, I started when I was 21 at this firm. I had someone who hired me, and they taught me the options business, but I sort of had my own style, so I kind of created—I kind of created it myself, yeah. And no one was really doing what I was doing. Now, they started copying me at some point because it was pretty profitable. But I sort of—I mean, people have always traded the markets, but the way I was doing it was different.

Yeah. And we interviewed Jim Rogers last, and he also kind of—he, he said the same thing. He said he couldn't remember any mentors. And I think there's—there's a point to be made about that, about people who kind of blaze their own path, or have a vision, right?

Or something that they believe in, right? You want to talk about conviction, that's conviction. Yeah. And, and, uh, and not to be swayed because every—what I've found is everywhere along the way, as I was growing my firm, people would say, 'What do you need it for? You're working too hard. You don't need to be any bigger.' I mean, people just do not have the imagination,

you know, to, to create something. You know, some people do, but a lot of people don't. And so, it's very easy to get talked out of something you feel passionate about.

Yeah. And I think I see that a lot in today's world. Some people aren't willing to reach out to Steven A. Cohen to ask him to come on to the Generating Alpha Podcast.

Yeah. I mean, look how easy that was. I just hope, before you know it, this will get out there and I'm going to be jammed with requests.

Yeah. So, what is one piece of advice you can give to high schoolers today?

I mean, follow your passion. I mean, you've got to love what you do. If you love what you do, it's not work.

Jim Rogers also said that on our last podcast.

So maybe I'm copying him.

Yeah. Jim Rogers is probably your mentor. He didn't even know.

I didn't know until now.

Yeah. And also, yeah, the head of equities at Bridgewater that we interviewed also, he was former, but he also said that, too.

I think if three people say, yeah, probably that's close to true.

Should rename it the Passion Podcast, you know, something. Passion matters. It really does. And what is one question you rarely get asked that you think you should be? Well, I don't know. I mean, why do you keep doing what you're doing? I always say, 'Because I like it, because it's fun.' Yeah, yeah. Well, that's kind of the end of our, um, that's it. That's all you got? That's all we got. Yeah. Wow. Do that.

That's it. Yeah. No, I'm kidding. I'm kidding.

Yeah. Yeah. That's good. I love it. Beautiful.

All right. You kept your word. I appreciate it.

Thank you. Thank you very much for coming on the podcast.

All right. All right. What's that?

You just get out of the mental World Series.

Yeah. No pressure, right? I got it. All right. Good enough. See you guys. All right.

Thank you very much.