Q&A: Billionaire Steve Cohen’s Interview with Fortune

October 21, 2016, 3:45 PM UTC

“This morning I just thought, I feel like having breakfast with a Fortune reporter today!” Steve Cohen exclaims, standing up as I walk into his country club in Westchester County. It’s around 9:15 a.m. on a warm fall Saturday morning, and the billionaire investor seems to be thoroughly enjoying himself. He’s seated at a round table laden with toast and butter, in front of a large window overlooking the golf course. There’s a seat saved for me to his right; the other seats are taken by his two top spokespeople at his family office, Point72, along with his general counsel.

This interview is the final (and largely unexpected) component of the profile I’ve been writing about him and Point72—see, “Inside Billionaire Steve Cohen’s Comeback”—for several weeks now. In 2013, Cohen’s his hedge fund firm SAC Capital effectively shut down after pleading guilty to insider trading charges. Since then, Cohen has been running his own massive personal fortune at his family office Point72, which manages $11 billion of mostly his own money, as well as some of his employees’. Now, Cohen has won the right to return to the hedge fund business in 2018 if he wants to, having settled a civil suit against him in January. And in the meantime has led a whirlwind expansion of his firm into new technology and markets around the world.

We’d confirmed the interview two days earlier. And though we’d met only once before, briefly, in late September, I’d already learned so much about Cohen from his colleagues and friends that in some ways, I already feel like I know him.

It’s his sense of humor that takes me by surprise. In his mild Long Island accent that makes words like “idea” sound almost like “idear,” he has a dry wit that sometimes makes it hard to tell if he’s being serious or not. But it also makes him approachable—giving him a sort of Everyman effect. Wearing his usual wire-framed glasses, he maintains eye contact. Sometimes he moves so quickly to the next thought that he barely finishes the first.

Below is a slightly condensed transcript of our conversation, which has also been edited for clarity.

Fortune’s Jen Wieczner: I hear your golf handicap is nine.

Steve Cohen: Actually what I play is around 10. Actually I play a decent amount. Not a lot of golf. But I’ll get out once a week, maybe. Maybe 27, maybe 9 holes on a Friday night and 18 on a Sunday.

You haven’t done an interview in a long time. So—?

Well no one asked! No one asked. I can’t believe. You’re the first one to ask. [Chuckling.]

I know that’s not true. But why now? What do you want people to know? What do you have to say?

It seemed like a nice time to do it—lots of good things going on in my family office, so it felt like a nice time to get out there and talk about what we’re doing.

What are you most excited about right now that you’re doing?

What I’m excited about is we have a team in place that believes in innovation, believes in talent, and so we have lots of little experiments going on in the firm. And some are going to work and some aren’t going to work. But that’s okay if it fails. It excites me when the firm is moving forward. I get restless. I just don’t like to stay stagnant. It’s my belief if you stay stagnant, or standing in place, you’re kind of dying. And this business, it’s so dynamic, you have to keep reinventing yourself.

Was there a time recently when you felt something was on the dying part of that curve?

I think when I changed my management team in 2013, and the reason I did it was because I felt like I needed a team that could execute on innovation. I felt strongly the business was changing, the technology was changing. I had a great team that could keep the trains on the tracks, but I wasn’t sure that we could innovate our way, or do what we needed to do, to move forward in this industry as it was changing so quickly.

I’m really excited about the team we have, I’m excited about some of the initiatives that we’ve taken. We developed Aperio, which is our data analysis unit. There’s so many public streams of data out there, and it’s important for us to stay on top of what’s going on. I mean, there’s so much data that you get on a real-time basis—which is so different than it was 10, 15 years ago. So it’s incumbent upon us to make sure that we’re accessing that stream of information, and to know what’s going on as it’s happening. And so I’m excited by that, it’s still not, it’s still a developing unit, and still not where I want it to be, but I think we’ll get there.

And then we just started a fintech unit, you’re probably familiar with the Quantopian investment. As an example of how the world keeps changing, now there are people doing quantitative work all over the world. And how do you access that talent? It isn’t all in New York. It isn’t all in London. And so for us, it’s another way of kind of thinking out of the box a little bit and doing things that are interesting, and different. And like I said, some are not going to work. But that’s ok. Because some might work, and if they work, I think there’s a real benefit to the firm.

Is any of it working for you yet—you use satellite data, credit card data, all sorts of other data. Is it working, for investing?

It’s so funny, when I speak to companies in VC, they always talk about, ‘And we’re going to monetize our data.’ Now, there are thousands and thousands of companies out there—they’re not going to all monetize their data! But they’re producing data on a daily basis, and it matters. We produce data as a firm. And we look at our data and we analyze it and it tells us a lot about what we’re doing well and what we’re not doing well. Our own data.

What turned you on to big data in the first place?

Well I’m glad you brought that up. Because, there was a portfolio manager of mine who wanted to hire someone who was starting to use data, and so we hired this individual, and I thought about it, and I said, you know, we should centralize that process in the firm. We can do this better, and we can do this in a more robust way. That’s a perfect example of how the best ideas come from within the firm! And you just have to listen. And make sure if people have a good idea, support it, which is what I like to do. So that was a germ of an idea, and now of a sudden we have a unit that does it. I don’t remember exactly what the data was, but it was probably in the consumer area. And so kudos to him for thinking about it, being innovative in his way—that’s the type of thing we like to see in our people, we like people who are entrepreneurial.

I hear you’ve been going out to Silicon Valley. What do you do there?

Yes. It’s fascinating. I’ve got to tell you. I mean, I’m like a kid in a candy store. It’s just amazing, because you sit down and have these lunches, dinners, meetings, with these younger entrepreneurs, and they’re all 31, 33, 28, and you can just see the passion and the energy. There’s like an ethos out there—like it’s ok to fail! I remember going to Google X, and they were telling me, they showed me the driverless car, and automated car.

Did you try it?

Nah, I didn’t try it, I’m not that dumb. [Chuckling.] It’s not ready yet. But it’s close. It’s actually a lot closer than people think. And he was telling me about how they reward people for failing, which is a really interesting concept—that kind of stuck with me. When you take risk, there’s no guarantee it’s going to work. Right? But if it doesn’t work, ok, so you failed—not the end of the world. And you move on, you try something else. And that’s what I want in my firm. I want people who are not afraid to risk and try things. And we’re going to support that. And in a industry where it’s gotten very competitive, I want people to know they can come to this firm and if they have an idea or something interesting, and we think it’s interesting, we’re going to support it.

I wish San Francisco was closer to New York. I’ve made some investments out there, and I’ll tell you one little story. These people are so passionate, so smart, so I would come back to New York and go to my guys, ‘You guys think you’re pretty smart. I’ll show you smart. They’re out there. [He points west.] I’ll show you a smart that you haven’t seen in a long time.’ San Francisco reminds me of the hedge fund industry 20 years ago. There’s an energy and an excitement that is really fun to see.

You used to ask prospective employees in interviews about a risk they took. Do you still ask that?

Oh yeah. I’ll even ask them, tell me the riskiest thing you ever did. And I’m not looking for, ‘I jumped off a bridge.’ ‘I bungee jumped.’ I’m looking for something that was out of the ordinary. A lot of people say, ‘Uhh, I got married.’ Come on, okay. A lot of people get married. I want to hear something unique. Something different. Something entrepreneurial. Because this is a risk-taking business to some degree. And you want people who are able to take a risk in a controlled way, but not afraid to. Not everyone’s a risk taker.

Do you remember someone’s “risk” that impressed you?

I’m trying to think. Well, I’ll tell you a story about myself. In college they’d have this week of events, spring fling. And so, I’m selling cotton candy and popcorn, and it was hot, I mean like really hot! And so nobody wants to buy our stuff. So then we decide, we totally switched it up 100%, getting a big bucket [of water], with a big wooden stick and just stirring it and making lemonade. And we killed it that weekend. [Bangs table.] But that’s an example of someone saying, okay, what am I going to do to make something happen? And so, it’s that type of commercial sort of entrepreneurial, and not everybody’s that way. It’s just an intangible that you hope that you can find in a person.

So let me put that question to you, then: What’s the biggest risk that you’ve taken—but in the last few years?

Wow. Biggest risk, I would say, making a management change at the time that I did. Hiring somebody from outside the industry [Point72 President Doug Haynes, formerly of McKinsey and the CIA]. There’s a general belief in the industry that oh, what we do is so special, and you need somebody from within, that they have to really understand it. And I didn’t buy that. And so I actually brought in people from outside the industry, and I think that’s why we’re innovating, I think that’s why we’re thinking differently. I think, especially at that moment, in 2013, that was pretty bold. And it turned out great.

Your president is Doug Haynes, who once worked in the CIA. And you have also hired several other people with government or law enforcement backgrounds.

Well, you’re looking at a former state attorney general right there [pointing across the table to general counsel Kevin O’Connor]. Certainly from a legal and compliance perspective, we wanted to send a message: We’re serious about what we’re talking about. We want to be a firm with the highest ethical standards. And so I’ve given my management team—Kevin, Vinny [Tortorella, Point72’s chief compliance and surveillance officer]—full mandate: You do what you have to do to protect this firm. And Vinny has a veto on anybody we can hire. I will not get in the way of it. As an example of meaning what I say.

The insider trading investigation was a trying experience for you. Looking back, what do you say about it?

Yeah. You know something, I feel I’m a very blessed person, a very happy guy, and when I look at my career in totality, I wouldn’t trade it for anything in the world.

Have you ever actually considered walking away? Doing something else?

Yeah, everybody thinks about that. Ok? I mean it’s just the way it is. But this is what I do. This is my platform. This gives me the opportunity to meet incredible people either in the firm or all over the world. So, I’m not going anywhere. This is what I do. And I enjoy it, still. If it got boring and stale, yeah I might consider maybe doing something else, but I’m not bored yet. So I’ll let you know when I get there. You’ll be the first to know. [Chuckling.]

What do you want the firm to be, ultimately—what are you going towards?

Well, we’re a family office right now, and I just want it to be a great asset management firm, where people can come and accomplish the things they want to accomplish in their career. And I’m the type of guy who’s really supportive, and I will help them any way I can to be what they want to be. And that’s not just true in the firm—even in VC investments I now talk to CEOs, budding CEOs, and talk about things, and help them think about where they’re going and why they’re going, and it’s something I enjoy doing. And I do it with my PMs [portfolio managers] and their analysts too. I do these breakfasts, where you know, I’m not sitting there talking to them about their ideas—I’m talking about how to help them be better at what they do. And I just listen, just listen to them. And they’ll tell you things. Which is really interesting. And so, and then I just sort of say, I might even repeat what they said, and say, Why’d you say that? And then we get into it a little bit, and hopefully it’s helpful to them.

There was one PM, he comes in, he looked terrible, he looked exhausted! And I’m looking at him, I go, ‘I have to tell you, you don’t look good. What’s going on?’ And he goes ‘Well, I’m not getting a lot of sleep.’ I go, ‘Well, how come you’re not sleeping? What are you doing?’ And he goes, ‘Well I’m watching Europe in the middle of the night, Europe trade.’ I go, ‘You don’t trade European stocks.’ And he goes, ‘No, but I watch it anyway.’ I go, ‘I’ll tell you what, here’s the deal: I want you to commit to getting a full night’s sleep. Not look at the markets in the middle of the night.’ Saw him a week later, looked great, and hopefully it impacted his performance—felt better during the day, made better decisions. So it’s as simple as that. Just someone noticing things, and then trying to help him. You know these guys, it’s tough, they’re young guys, they’ve never been in this type of responsibility before. I’ve been there, I know what it feels like, and I want to help ‘em.

Are there any particular lessons you try to impart to those portfolio managers when you have those breakfasts?

I’m a big believer in process. I’m a big believer in trying to analyze what you’re doing, why you’re doing it, and see if you can improve on it. I mean even today, I still learn new lessons. I always say, I’m so tired of learning a new lesson. I’ve been doing this forever. But there’s a lot to learn—there’s some mental game. And people find a way to kind of either sabotage themselves or don’t believe they’re as good as they could be. And so you want to get them into the proper frame of mind. It’s a little bit like a sports coach, almost. And get ‘em in a positive frame of mind, get ‘em in a frame where they believe they can accomplish the things they want to accomplish. Otherwise they can get into a rut. That happens. And get into a negative sort of state where you expect bad things to happen and then, bad things happen as opposed to being in a positive state of mind where you try to create and make things happen in a positive way. That’s why I brought in Gio [Valiante, a former sports psychologist to pro golfers who became Point72’s head performance coach in March]. I used to have another psychiatrist, Ari Kiev, who was very significant in my life. I feel it’s important that people have someone to talk to to help them deal with all the stresses, normal everyday stresses. This is a fast-paced job. And it’s important that they take the time to understand what they need to work on.

In terms of trading specifically, I’ve heard you’re always good at cutting your losses. Is that something you work with your portfolio managers on?

I would describe it as flexibility. The world is dynamic, it’s always changing. You could walk in one day and a policy change from a central bank changes sort of the way the markets are, and how people are thinking. Well, if you’re stubborn and refuse to acknowledge change, I’ve seen many an investor over the years get rolled over by markets, and the markets are a lot bigger than any one individual. So I believe flexibility is key. Doesn’t mean you shouldn’t have conviction—you should. But you have to, when things change, you have to change with it.

Every day you walk in, there’s something new. Sometimes they’re subtle. So you have to be aware. Somebody will say something in the news, and you could sit there and ignore, or say, well why’d he say that? Did he say it for a reason? And then maybe you can start thinking about why that is happening—a person on the Fed committee saying something that’s different than he said before. Huh, why’d he say that? Maybe he’s sending a signal. And so, it doesn’t have to be obvious, it could be very subtle.

Was there a particular day or time in the market this year that was memorable to you?

I’ll tell you one story, last year. This is, I mean, ridiculous. I never play in a two-day golf tournament, ever. So I sign up for it in June, and it’s in late August, okay. And it turns out to be a 10-hour round—we play 27 holes one day and 18 the next. So I’m out on the golf course, and it’s so slow, so it literally took 10 hours. The market is getting crushed the two days that I’m in this tournament. And they don’t allow cellphones on the golf course! So I have no idea what’s going on. I mean, it was almost comical. It was the last week of August, you figure it’d be quiet, and it wasn’t. In between nines, I went into the clubhouse just to check, and it was like, oh my, oh boy. [Laughing.] This isn’t good.

How’d you play?

I played fine. You say all right, I’m going to lose some money today, that’s the way it goes. [Laughing.]

Could you make any trades?

It was impossible. I was so removed.

Brexit day was also a memorable day in the market this year. How was it for you?

Well Brexit really was more of a Europe trade. By the time you came in it was already recovering. You really had to trade over night. I don’t like to trade overnight. You know, ‘cause I need my beauty sleep. [Chuckling.]

Did you stay up watching the results?

I think I watched it to about 10, 10:30 and then I went to bed. And then someone said, oh yeah, they were down another 50 S&P points. I said I don’t know, I slept right through it. Hey I’m tired, I’m going to bed! [Laughing.] But I guess that’s the difference between me today and me, if it were 15 years ago, I probably would have stayed up all night watching it. And now, I accept I’m just not going to be as tenacious in that way. I’m tenacious in other ways. But the idea of staying up all night and watching the markets, I’m not interested in doing that.

Speaking of tenacious, you bring your trading equipment even on vacation. So tell me, what is vacation like for you?

Well I’ll go on vacation, and you can’t pretend like your portfolios don’t exist, especially when you’re running billions and billions of dollars. So I have that option, if I want to trade I can trade. But you know, I’m pretty good on vacation. I set it up so that I can handle it. But the markets are different today—you don’t necessarily have to sit in front of the screens as much anymore, because a lot of time during the day markets are just meandering around. Actually I think the most important part of the day is the last hour of the day. But there’s times during the day when things are quiet, and so you don’t have to sit and watch, which is somewhat liberating.

I always have a setup wherever I go away just as an option. That’s why I like going to Europe, because the markets open later in the afternoon, so you have your whole day to enjoy it, and then you go from 3:30 to 9:30 if it’s a serious day, and then you go out to eat! It’s not a bad—it’s a nice day!

You settled with the SEC in January. And the big thing that came out of that settlement was that if you want to, you can take outside money again in 2018. Why was it important to preserve that ability for you?

You always want to create options for yourself. Right now I’m a family office and enjoying it, and 2018, we’ll figure it out when we get there. When we cross that bridge, we’ll get to it.

Point72’s stated mission is to have the highest returns while upholding the highest ethical standards. But you’re a family office, mostly managing your own money—why is it still important to have the highest returns?

Because I have high standards. I really don’t like mediocrity. I really don’t. It’s just not interesting. Listen, there may be firms out there that are happy being middle-of-the-pack and having modest returns, and maybe don’t work as hard as other people and are perfectly acceptable. That’s not me. You know, I mean. If I’m going to be mediocre—if I’m going to be mediocre, I’m going to question whether I should stay in this business. Ok, that’s just not acceptable to me. That’s just who I am.

How do you think about retirement?

You talk to people when they’re semi-retired or retired, and unless you really like, have lots of different interests, sometimes they look bored to me. I always say, if you can play golf every day, that’s not fun. You want to think about playing golf, but you don’t actually want to play it every day. I don’t know what I’m going to feel like at 75, 80, I can only speak to the way I feel at 60. I still got a lot of gas in the tank.

Your firm has changed so much in the past few years. Have you changed?

Well I don’t know if the firm has changed so much, ok. I think it’s changed. I think I’m pretty much the same guy. You know it’s funny, I’ve kept up with my friends from high school and college. And they say, they say you’re the same guy. Maybe I’m a little smarter than I was then, a little mellower maybe. But I’m pretty much the same person. It’s just—it’s who I am.

Did you feel misunderstood at any point, particularly when you came under fire and had some negative press a few years ago?

Listen, that was a strange time, but you know, I’m really happy about where we are today and I just consider myself a really lucky man. I have a great life. So I’m just going to continue to do everything I can to enjoy it and meet interesting people and move this firm forward and do my philanthropic stuff and enjoy my family and my kids, and it’s all, it’s just, it’s great. So no complaints from me.

As a trader, people compare you to Michael Jordan or Mickey Mantle. Is there any athlete to which you aspire?

Muhammad Ali. When he boxed, when boxing was really revered in this country, he was just incredible to watch, just—smooth, athletic, powerful. Some of the fights with Frazier were probably some of the greatest fights ever. Plus, he was an extraordinary man. I met him a couple times, and actually sat next to him at a dinner, and I remember him trying to steal my dessert. At that point, he had Parkinson’s and couldn’t speak much and just gave me a little wink.

Did you let him take your dessert?

He was still the champ!

Some people say with everything you’ve been through, now you’re trying to prove something by having best-in-class compliance and great returns. Do you feel like that?

I’m not trying to prove anything, ok. I just don’t want to ever go through—nor do I want my employees to go through—what we went through a few years ago. And so I’m going to do whatever I have to do to make sure that this firm is operating at the highest ethical standards.

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