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Magic Leap stacked its new leadership team with insiders and fresh talent led by a former Microsoft exec. Meet the 9 people now working to save the startup's future.

  • After a disastrous few months, Magic Leap is embarking on a new phase under a new CEO – former Microsoft exec Peggy Johnson.
  • Joining her for the ride is a newly formed leadership team, made of insiders and new hires. Some existing employees have been given new titles and responsibilities as part of the restructuring.
  • Here's who's on the team, and what you should know about them.
  • Are you a current or former Magic Leap employee? You can contact this reporter securely using the encrypted messaging app Signal (+1-628-228-1836) or encrypted email ([email protected]). Reach out using a nonwork device.
  • Visit Business Insider's homepage for more stories.

Magic Leap is in a bad state. The augmented reality startup, once flush with cash and bursting with hype, has spent the past year laying off employees and restructuring its business.

In May, CEO Rony Abovitz announced he would step down and help the board search for his replacement. Just over a month later, Microsoft executive Peggy Johnson was appointed to charter a new course for Magic Leap that will be focused on enterprise.

But she won't be alone. As Magic Leap enters its new phase, it's stacking its new leadership team with long-term insiders and outside talent. Johnson has also introduced a more traditional set of corporate titles, Business Insider has learned.

We've identified nine key people leading Magic Leap as it attempts to recalibrate and recapture some of the hype.

Peggy Johnson – Chief Executive Officer

Peggy Johnson has leapt over from Microsoft, where she served as its vice president of business development. She officially took the reins in August, and in the time since has been rounding out her new leadership team while charting a new course for the company.

Johnson was well-recognized for her work forming (and sometimes repairing) Microsoft's business relationships, and will refocus Magic Leap's goal in the enterprise space.

"Magic Leap is getting one of the most impressive business leaders I have seen, and it will be a hole for Microsoft," Wedbush Securities analyst Dan Ives told Business Insider.

Previous CEO Rony Abovitz remains on the Magic Leap board and is currently working on a new project focused on content for smartphones and augmented reality devices, Bloomberg recently reported.

Paul Greco – Chief Technology Officer

Paul Greco has been with Magic Leap since 2013, and has served most of his years there as  SVP of hardware engineering and programs.

The company confirmed Greco is now getting his title bumped up to Chief Technology Officer. Most of Greco's duties remain unchanged, however software has now been consolidated under Greco in the restructuring, Business Insider has learned.

Before the recent changes, Greco was helping lead work on a new headset that was smaller and lighter than the current one, as Business Insider previously reported.

Sources also told Business Insider that Magic Leap had plans for a headset that was closer to a pair of glasses in design, and hoped to launch it in 2023.

After the company's widespread layoffs this year, then-CEO Rony Abovitz told Business Insider the company was "working intensely" on ML2, referring to the next headset. It's not clear if the roadmap has changed since he stepped down.

Prior to joining Magic Leap, Greco was a VP of engineering at Tessera, and director of engineering at Motorola before that.

Walter Delph – Chief Business Officer

A cofounder of Boston Consulting Group's Digital Ventures, Delph brings plenty of experience in growing businesses.

He was previously CEO of Adly, where he had a strange run-in with Charlie Sheen, and did a stint as senior VP of News Corporation. He's also on the board of advisors for the Los Angeles Kings hockey team.

Addressing Magic Leap's first failed attempt at launch, Delph told Forbes recently: "Virtual reality was initially seen as a consumer-focused technology, but I think enterprise is now going to be a more lucrative opportunity in the short term."

With its new team in place, Magic Leap is focusing on selling to businesses, and with remote very much the norm for the time being, it could be an opportune moment for the company, Delph suggested.

"This awful pandemic has accelerated changes in the way people do business," he told Forbes. "We are very well positioned to take advantage of that."

Jose Baltazar – Chief Transformation and People Officer

Baltazaar was formerly Magic Leap's VP of mission control operation. His new role will encompass human resources, diversity and inclusion, culture, and other elements that will be crucial as Magic Leap transitions into its new phase.

"Jose has been an integral part of many of the company's internal and external successes, played an important role in supporting fundraising and investor activities, and has been a driving force in creating operating plans for the company," the company states on its website.

Before Magic Leap, Baltazaar was a project leader at Boston Consulting Group. He has a PhD in Chemical Engineering from Georgia Tech.

Ana Lang – Chief Legal Officer

Ana Lang, previously Magic Leap's senior VP of legal and compliance, now has the title of chief legal officer, the company confirmed.

Lang, who got her law degree from Chapman University, joined Magic Leap in 2015. Before that, she was an attorney at Perkins Coie.

"Coming in and learning about software and how a device operates was a huge challenge for me," she said in an interview with Profile in 2018.

"I was surprised by the level of in-depth requirements from a knowledge perspective. When you work here, you become a brand ambassador."

Henrik Vliestra – Chief Operating Officer

Hendrik "Henk" Vlietstra joined Magic Leap in 2013 and was appointed chief operating officer in 2018.

A graduate of Tshwane University of Technology in Pretoria, South Africa, Vliestra's responsibilities include Magic Leap's program management office, international operations, and security. 

John Doherty – Chief Financial Officer

John Doherty is another outside hire, filling a role that has remained open since Magic Leap's prior CFO Scott Henry stepped down late last year. 

The key clue to Doherty's hiring came in a statement from Magic Leap, which noted that the CFO has spent "more than 30 years in financial leadership positions directing substantial growth, corporate realignment and leading the turnaround of underperforming operations for businesses globally."

Before joining Magic Leap, Doherty held the same CFO title at Interxion, a colocation data center provider.

James Temple – Chief Design Officer

James Temple, preciously Magic Leap's "chief experience officer," is now chief design officer.

Temple has also absorbing a broader range of responsibilities across hardware and software at Magic Leap, and is based out of London, UK.

In a statement, a spokesperson said Temple is responsible for teams "including Human Factors, Industrial Design, OS Design, Solutions Design and Brand Design."

Before Magic Leap, Temple was chief creative officer at digital agency R/GA, where he worked on the design and marketing for Beats Music prior to it being acquired by Apple.

David Lundmark – Chief Patent Officer

Magic Leap's longtime lawyer has a new title, but his duties remain largely the same.

Lundmark's name made the news in 2016, when Business Insider reported that Magic Leap was embroiled in a huge legal dispute with two former VPs. Documents and emails filed in the case revealed all sorts of secrets and drama going on internally.

Insider Inc.’s parent company, Axel Springer, is an investor in Magic Leap.

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World News

With limited access to travel and events, Americans are spending discretionary dollars on winter sporting goods. Here's why that's good news for outdoor retailers like REI.

  • As winter nears, Americans are stocking up sporting goods like skis and ice skates in an effort to stay active and social outside as the pandemic continues. 
  • At REI, the outdoor retailer has seen "significant increases" in demand for items like snow shoes and cross-country skis, with sales of the latter nearly tripling year-over-year.
  • "With bikes, camping gear, and sport utility equipment being sold out and back-ordered for months, we should expect nothing less as we head into the winter sports seasons," Durk Stelter, chief revenue officer at Linc Global, told Business Insider. 
  • Visit Business Insider's homepage for more stories.

Concerns over a second wave of the coronavirus haven't stopped Americans from finding ways to stay both social and active as winter nears. 

Similar to sales of fire pits and disposable campfires, cold weather sporting gear and apparel are in high demand. This includes skis, ice skates, snow boots, and puffer jackets, according to retailers like REI. And as traditional brands look to cash in, emerging niche outdoor brands are also hitting the market, looking to capitalize.

At REI, the company is experiencing "significant increases" in demand for snow shoes, at rates currently four times higher than the same period last year. At the same time, demand for cross-country skis has nearly tripled year-over-year, according to data provided to Business Insider. 

In preparation for cold-weather activities and extended periods of time outside, items like parkas are also flying off shelves. According to the retail analytics firm Edited, the sell-out rate for parkas has grown by 89% year-over-year in the US, while items like leather jackets are selling out at a rate 136% higher than last year in the UK. 

The demand comes amid uncertainty surrounding whether venues like ski resorts and lodges will be able to open safely this winter. Many have announced tentative opening plans with significant modifications and restrictions. Earlier this summer, some companies began offering discounted advance passes to members, while devising health-conscious strategies like introducing new ski lift loading methods and minimizing or closing indoor dining. 

According to Durk Stelter, chief revenue officer at customer experience automation company Linc Global, retailers can expect to see demand for outdoor activity gear to continue to grow into the winter months, much as it did during the summer — causing shortages on everything from bicycles to rollerblades. 

"As we have seen throughout the pandemic, the need for outdoor equipment has increased dramatically," Stelter said. "With bikes, camping gear, and sport utility equipment being sold out and back-ordered for months, we should expect nothing less as we head into the winter sports seasons."

Stelter added that he expects heightened spending on outdoor equipment and sporting gear this holiday season, especially as the $450 billion spent by consumers during the 2019 holiday season on services like food, travel, and sporting events — activities and experiences that have all been severely limited during the pandemic — is now "up for grabs." 

"This holiday, we should expect shoppers to invest more in outdoor winter equipment, such as skis and snowmobiles, as more people look for ways to stay outdoors in a socially-distanced environment," he said. "The good news is manufacturers have had more time to position for increased inventory, but it is still to be seen if they were able to overcome covid restrictions to meet the unexpectedly high demand."

A man uses Ski Skates.Ski Skating

Meanwhile, emerging companies like Ski Skates — which boasts "the shortest skis in the world" and "the only skis that fit into your backpack" — are also seeing an influx in interest. Created in the Czech Republic in 2019, Ski Skates operates "like ice skates for snow" and functions as an attachment to snow boots that blends the acts of skiing and skating. 

Though the company is still in its nascent stages, a company spokesperson said Ski Skates has already sold thousands of pairs of its flagship product, Snowfeet, and is preparing to launch a crowdfunding campaign in November. The spokesperson added that the primary draw of Ski Skates is they can be used at ski lodges and resorts or alternative locations amid the coronavirus outbreak.

"Skiskates are perfect for use when all the ski resorts are closed during the pandemic because you can use them not only on ski slopes, but on sledding hills or hiking trails as well, and have fun with your family and friends," the spokesperson said. 

Do you have a personal experience with the coronavirus you’d like to share? Or a tip on how your town or community is handling the pandemic? Please email [email protected] and tell us your story.

Get the latest coronavirus business & economic impact analysis from Business Insider Intelligence on how COVID-19 is affecting industries.

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Markets

'I'm extremely concerned': A former Goldman Sachs hedge-fund chief says a flood of troubling signals shows the stock market is teetering — and warns a small correction could soon morph into something much larger

  • Raoul Pal, the former Goldman Sachs hedge-fund manager who founded Real Vision, sees the S&P 500 carving out "a potentially large top pattern."
  • Pal says the global economy is working it's way through three distinct phases in the wake of the coronavirus-induced rout: liquidation, hope, and insolvency. He says we're currently transitioning into the latter.
  • Time is a crucial component of Pal's call. He says the longer the global economy remains downtrodden, the more likely it is that a negative snowball effect hits global markets.
  • "Be careful, keep your eyes open," he says.
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Raoul Pal, the former hedge-fund manager who founded Real Vision, has never been one to sugarcoat his perspectives.

In fact, if you take a stroll down memory lane, at the beginning of the coronavirus-induced fallout, Pal was early in his appraisal, saying "the whole world's f—ed."

One stock bear market, a double-digit unemployment reading, and a 30%-plus annualized drop in GDP later, and it doesn't seem like a stretch to say his evaluation was sufficient. 

To bring you up to speed, Pal retired at 36 after quitting jobs at Goldman Sachs and GLG Partners. He lives comfortably on a 140-person island in the Cayman Islands and spends his days writing market research, which comes with a hefty price tag of $40,000 per year.

Although the landscape is much calmer than it was at the beginning of the unwind, it's safe to say that Pal's apprehensiveness has persisted.

"I'm extremely concerned by the potential for this to unravel rather fast, because, as you know, everybody's one side of the boat — and that side is V-shaped recovery and growth," he said in a recent Real Vision webinar. "When large parts of the market, including the truthfulness of the bond market, is whispering at you ' Hey, that's not right; they're all going bust."  

Underpinning Pal's thesis is something he refers to as: "The Unfolding" — a framework he leans on to make sense of the fallout and gauge the overall environment. It all comes down to three phases: liquidation, hope, and insolvency. In theory, Pal expects the phases to play out consecutively, and says they already have to an extent.

Here's how he denotes each:

Liquidation: The Federal Reserve and global central banks step in to provide "massive liquidity" into paralyzed markets. Then, fiscal stimulus comes in to "paper over the cracks." According to Pal, this phase has already occurred.

Hope: Pal says this phase is "very typical in extended bear markets or recessions." In a nutshell, it's a time period where investors prematurely declare victory and sentiment shifts to a more sanguine outlook. Pal provides examples of the 1929, 2001, and 2008 market crashes to bolster his thesis. In each scenario, investors experienced a brief reprieve before enduring a deeper drawdown.

Given the stock market's torrid recovery from multiyear lows back within shouting distance of record highs, Pal sees equities currently being set up in the same manner.

Insolvency: This is where the rubber meets the road, and when markets have to face the underlying economic reality associated with pandemic, which has caused a contraction in global growth.

To him, time is a crucial component of the equation that "really worries him." The longer it takes for the global economy to recover, the worse. Business start closing, more workers are laid off, and that effect snowballs creating structural problems within the entire economy. 

In Pal's mind, the transition from the hope phase to the insolvency phase is playing out as we speak — and the repercussions will be widespread.

Trouble on the horizon

When it comes to sniffing out potential warnings signs, Pal leans on a unique duo — banking stocks and heavily indebted companies — to take stock of the situation. 

Pal constructed a propriety index of equities that embody the lion's share of triple-B bonds — or issues with investment-grade creditworthiness that sit just one rung above junk. When he compares this index to the performance of banking stocks, what he finds is a stark pattern that's roughly the same.

"They're all telling you that the economy is slow," he said. 

Pal continued: "You see, what we're starting to see — and this is what the banks are picking up and the bond market is picking up, and the BBBs are picking up — is that corporate cash flows are impaired; household cashflows are impaired; small enterprises and medium-sized enterprises are all impaired. The rising NPLs [non-performing loans] are now becoming evident across the United States."

His comments echo those made by Scott Minerd — the global chief investment officer at the $270 billion financial-services firm Guggenheim Investments — back in March. The CIO expressed similar concerns of financial contagion stemming from BBB-rated bonds, saying as much as $1 trillion worth of high-grade bonds could head to junk status if the economy remained weak, in a vicious a "domino" effect.

Pal says that's creating a precarious scenario that's manifesting itself in the equity market.

"Up until recently, I kept the equity markets off my screen because I just didn't want to involved," he said. "But we started carving out what could be — could being the key words — a potentially large top pattern."

Pal notes that when he zooms out and looks at the S&P 500 on a monthly interval, he sees a "megaphone top" pattern — a marking that he says generally proceeds a reversal in trend. 

"If we're going to find a top, it might be here," he said. "This is exactly the point where the Fed have stopped stimulating. It's exactly the point where most of the checks have stopped being mailed. It's exactly the point where the structural unemployment is starting to become a problem. It's exactly the point that the US election paralyzes parts of the system. That's interesting to me."

To Pal, that's creating "a gap of uncertainty" — and markets hate uncertainty.

"Now, I'm looking for what I call the GMI crash pattern," he said. "There's one, a smaller version of it playing out in front of our eyes today." 

Pal denotes this pattern as follows: A market that drops quickly, retraces about 50% to 75% of the initial plunge, then succumbs to pierce through the inaugural low.

"If I look at the magnitude of it, it still looks like a relatively small one so it could be just a corrective move — something I've been expecting," he said. "But I think it could morph into something bigger."

Pal is clearly intrigued by this series of red flags, but he's quick to note that his call is by no means a guarantee. So far, his hypothesis has been somewhat accurate, but no one has a crystal ball.

Outlier status

With everything that's been laid out above, it's important to note that Pal's outlooks are markedly more pessimistic than those held by major Wall Street institutions.

From the perspective of stocks, while the median 2020 year-end S&P 500 price target for all Wall Street equity strategists is slightly below current levels, their forecasts certainly don't suggest a major market crash.

Further, their consensus S&P 500 earnings-per-share forecast for 2021 would mark a roughly 17% year-over-year increase, according to Bloomberg data. Considering profit expansion has historically been the biggest driver of stock gains, that's a positive sign.

On the economic front, the International Monetary Fund recently boosted its 2020 global growth forecast. In addition, Deutsche Bank said global to return to pre-virus levels by mid-2021, while Goldman Sachs upgraded its third-quarter GDP forecast due to encouraging labor-market data.

But none of that is damping Pal's skepticism. He offers a final warning:

"Be careful, keep your eyes open. I think The Unfolding is still unfolding, and the insolvency phase is to come."

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Monday.com's cofounders turned their software startup into a $2.7 billion business. They listed out 5 lessons learned from their errors along the way.

  • In 2014 Roy Mann and Eran Zinman launched the remote work software Monday.com after each of their earlier startups failed.
  • During the COVID-19 pandemic, Monday.com has hired over 200 people reaching 620 employees and a valuation of $2.7 billion. McDonald's and Walmart are among its clients.
  • Mann and Zinman told us about how they learned from the mistakes they made along the way.
  • Visit Business Insider's homepage for more stories.

The path to building a successful startup is full of challenges, from raising money to facing outside competition.

To help entrepreneurs work their way through some of these challenges, we asked the cofounders of remote work software firm Monday.com, Roy Mann and Eran Zinman, for their take on the biggest mistakes they made.

In 2014 Zinman and Mann launched Monday.com, a project management tool that helps companies manage tasks, teamwork, and projects.

The company now employs over 620 people — 200 of them hired during the COVID-19 pandemic — and has more than 100,000 paying teams including Adobe, Walmart, and McDonald's.

The company has offices in Tel Aviv, New York, Sydney, London, San Francisco, and Miami and has raised $234.1 million to date from investors such as Sapphire Ventures, Hamilton Lane, and Stripes Group.

The business is now worth $2.7 billion. 

"I made every mistake you can make as an entrepreneur … but I've learned a lot from that experience," Zinman said. 

Both Zinman and Mann failed to get their startups off the ground before joining forces for Monday.com, and say failure was key to Monday.com's current success. They have created a podcast to share some of these past failures.

Here are the five lessons Mann and Zinman learned from the mistakes they made:

Don't be afraid to fail 

"I tried too hard not to make mistakes and be successful, but that's a great example of how not to become successful," Zinman said.

Embrace failures and learn from them. "That is the main thing to take from starting a company," he said.

Don't accept everyone else's advice as 'absolute truth'

Doubt people's advice and understand the logic behind it, because "people give you advice out of their own context … and it's up to you to figure out what led them to give you certain advice," Zinman said. 

When Mann and Zinman first started, they were told they were operating in an overcrowded market, that the company wouldn't have worked without a sales team, that bottom-up adoption wasn't the right way to go, but they listened to their instincts and found their own way to success.

"It's really hard to have that confidence in yourself as an early founder," Zinman said, but entrepreneurs should "always try to take things with a grain of salt and see what makes sense to them."

Being pessimistic can make you sound clever, but the real winners are optimistic

Take every day with an open and good outlook, they said. Entrepreneurs should be kind to themselves and surround themselves with a positive team. 

"It's easier to be worried and pessimistic, but if you believe in it, that's half the battle," Zenman said.

A simple trick both Mann and Zinman use is whenever somebody says something negative, they try to come up with something positive to counter.

Really invest the time learning how to raise money

"The process of raising money is a skill," Zinman said. Spend time doing research on potential investors, speak to friends or experts who have previously raised venture capital funding, and don't be afraid to ask for tips. 

Mann and Zinman said they have learned how to fundraise by failing and reviewing their mistakes. "Many preconceptions on how to raise money aren't true," Mann said. 

One of their mistakes was thinking that they had to have the product ready before starting to raise money, but "if you feel the product is ready, it means that you waited for too long," Zinman said. 

Understand if customers are ready to buy the product: Use a PowerPoint and share it with a few potential buyers and understand if they would spend money on the product or service. If that's the case, try to raise money. Having five to ten people caring about the problem that a product or service is solving is enough to build on and grow as a business, Mann said.

Ignore people who tell you you can't do something

As a young founder or employee, it's hard to have self-confidence, but "ignore people who tell you you can't do something … this isn't advice, but fears." It's about people being afraid to make mistakes, Mann said.

If it comes with authority, try to "swallow it up", take it as a challenge and improve at it, he said. Any advice that instills fear won't help, so don't listen. Instead, understand what led them to that thought or what process they went through. "That's something I am still working on today," Mann said.

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Business

How a former Target executive overhauled the innovation team at non-profit hospital chain Banner Health to push projects like a new emergency room chatbot

  • When long-time Target exec Christy Anderson joined Banner Health as the executive director of its innovation program, the team was divided based upon insurance type. 
  • She quickly reorganized the cohort into an internal innovation lab, an external venture arm, and a team dedicated to aligning goals to the overall business strategy. 
  • Anderson also figured out a budgeting strategy that enabled the unit to cover the early costs of implementing and scaling new projects, like a successful emergency room chatbot. 
  • "Doors were opened for and with us, we didn't have to pound a lot of them down," she told Business Insider. 
  • Sign up here to receive updates on all things Innovation Inc.

When long-time Target executive Christy Anderson left the retailer in spring 2017 to join non-profit hospital chain Banner Health as executive director of its innovation group, she quickly made some key changes that helped the unit flourish. 

At the time, it was structured into three different cohorts based upon insurance type, including private providers and federal programs like Medicare. The framework didn't make sense to Anderson, because all the teams were developing applications that could serve a wide variety of patient needs, regardless of their insurance.

So she reorganized the department, keeping the basic framework of three distinct teams but changing the focus of each. She now oversees an internal innovation lab that aims to build products to solve problems within Banner and for its patients, a venture group that looks for external solutions to invest in, and a team focused on overhauling the organization's culture and aligning its IT goals with the overall business strategy.

This kind of transformation is an increasingly common one across corporate America as companies look to formalize and centralize their innovation efforts instead of managing a patchwork of bespoke initiatives that may only be catered to one specific business unit or customer base.

Alongside overhauling the team, Anderson also brought to Banner a retail-oriented mindset she learned during her 16 years at Target that helped lead to one of the group's biggest successes to-date.

Within both the internal lab and venture arm, she instructed employees to focused specifically on customer insights, with a mandate to figure out the key issues clients were experiencing. While such research is common in the retail industry, Anderson says it's less prevalent in health centers.

That feedback helped lead Anderson's team to focus on improving the emergency room experience: Often one of the first interactions a patient may have with the hospital. The unit developed a chatbot that, among other things, alerts users to how long they may need to wait between each step in the process.

The tool quickly came in handy during the COVID-19 crisis and functioned as something of a virtual waiting room to help manage the influx of patients coming through the door.

"We kept patients out of the hospital waiting rooms and they could wait in their cars when appropriate," said Anderson. "The technology in-and-of-itself was certainly not new, but the application in healthcare is where the innovation was happening."

How Anderson overcame challenges like budget constraints 

Anderson attributes Banner's success in navigating what can be a very difficult overhaul to support from the top: namely, the organization's board of directors.

"Doors were opened for and with us, we didn't have to pound a lot of them down," she told Business Insider, something which unfortunately isn't always the case: "People say they want to do innovation, but when it comes time to actually do the work and execute, and think through it, it becomes the last priority."

Another key to Anderson's success was figuring out one of the trickiest challenges for corporate innovation teams: the budget.

It's not uncommon for business heads to jockey intensely for the limited dollars that the C-Suite is open to doling out each year. That can get even more difficult when the team in question is pursuing something as ambiguous as innovation — even when the unit has a mandate to pursue revenue-generating projects, as was the case at Banner. Some executives even label it the biggest problem facing programs designed to push legacy organizations to adopt next-generation technology.

After considering a range of options, Anderson settled on a solution under which her team would pay for the pilot stage out of its existing budget — which typically means the first year that projects are implemented and scaled across the company — but would receive funding once it had proven its success.

"At the end of the day, the last thing you want is money to get in the way of a business-driving innovation," said Anderson. "You wouldn't want a short-term funding conversation to get in the way of long-term revenue and margin driving opportunities."

“Digital

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World News

A day in the life of Upfront Ventures managing partner Mark Suster, who wakes up without an alarm, leaves his phone in the bathroom at night, and got into the best shape of his life when the pandemic started

  • Mark Suster is a venture capitalist and managing partner of Upfront Ventures, one of LA's largest VC firms that's backed major tech unicorns like Bird and Ring.
  • He shared with Business Insider daily hacks that are helping him stay on top of his professional and personal goals during the pandemic. 
  • He lost over 65 pounds in 15 months, thanks to massive changes in his lifestyle, diet, and fitness routines.
  • He credits his success to getting a full night of sleep, tracking his health stats, avoiding his phone at bedtime, exercising every morning, and devoting his full attention to breaks and family time.
  • Visit Business Insider's homepage for more stories.

At the end of January, Mark Suster's life was big, fast, and bursting with fireworks as he hosted the glitzy Upfront Summit, an annual gathering of Hollywood celebrities and tech power players that included JJ Abrams, Reese Witherspoon, John Legend, Tyra Banks, Paris Hilton, Wolfgang Puck, Meg Whitman, and Steve Ballmer.

But weeks later, when the stock market crashed and coronavirus started to shut down the world, Suster knew the party was over. As managing partner of Upfront Ventures, one of LA's largest venture capital firms and backer of tech unicorns like Bird and Ring, he got busy warning startups that COVID-19 was the "black swan" event that would change everything, he told Business Insider. Over the months that followed, as he advised CEOs on their pivot strategies, he began to undergo a stunning transformation himself.

After a 20-year battle with his weight in what he referred to as "a yo-yo of entrepreneurship," he suddenly found himself in the best shape of his life, having dropped 65 pounds over a 15-month period, nearly half of which he's dropped since March.

He credits the cancellation of just about everything and grounding of travel for giving him the gift of time to reform his daily routine. Being able to wake up later, eat in moderation, enjoy an active lifestyle, and spend special moments with his family has been life-changing, he said.

As he rides out the pandemic in his Pacific Palisades home in Los Angeles with his wife Tania and two teenage sons, Jake, 17, and Andy, 14, he shared with Business Insider the top hacks he's using to master life under lockdown.

6:45 a.m. to 7 a.m.: He wakes up (without an alarm)

Suster sleeps for around six-and-a-half hours a night, striving for seven hours.

"Oura Ring changed my life," he said, referring to the sleep tracker he wears on his finger. "It provides me with valuable data that helps me manage my sleep. For example, I learned I get most of my deep sleep at the beginning of the night, which is important for muscle repair, and I get most of my REM sleep in the morning (5 a.m. to 7:30 a.m.), which is important for creativity and long-term memory."

Before the pandemic, he said, he was going to sleep at 12 a.m. or later and using an alarm to wake up at around 5:30 a.m to drive his kids to school.

Now armed with the data needed to optimize his sleep, he's adjusted his schedule. "With everyone at home, I no longer need to set an alarm and can wake when my body wants to," he said. "I no longer set meetings before 8:30 a.m. to avoid the risk and anxiety of oversleeping. This has made an enormous difference for me."

7:15 a.m.: He tracks his health stats

Sustaer said he doesn't sleep with his phone by his side, but instead leaves it in his bathroom overnight. This helps him get out of bed in the morning.

When he wakes up, he walks into the bathroom to check his sleep stats on the Oura app on his phone. Then he checks his blood pressure with a Withings blood pressure monitor and his weight with a Withings scale.

7:30 a.m.: He drinks coffee

He then goes downstairs to make coffee, which he said is essential to start his day. "I drink coffee every morning," he said. "The caffeine helps me concentrate." But he limits himself to two cups a day and never drinks coffee past 12 p.m., he said.

He added that as part of his morning ritual he enjoys doing the dishes. "I'm 100% the dish guy," he said. "I do them after we eat every night and put them away every morning."

7:45 a.m.: He exercises

He finds his work schedule dictates when he can exercise, but makes a point to work out seven days a week for 30 to 90 minutes a day.

"If I don't have meetings until 9:30 a.m. or 10 a.m., I'll work out first thing," he said. "If I do have morning meetings, I'll work out in the afternoon before dinner."

He said he does 100 push-ups daily followed by core, then cardio indoors on either his treadmill or Peloton bike, or goes on a bike ride or run through the neighborhood.

8:30 a.m.: He starts work

His work day is filled with back-to-back Zoom meetings and varies by day.

"I'm in board meetings throughout the week, partner meetings every Monday from 12:30 to 4:30 p.m., a company wide meeting on Wednesdays at 2 p.m., and so on," he said.

10 a.m. to 11 a.m.: He eats breakfast

He tracks all of his eating and exercising in the MyFitnessPal app, a daily diary of calories consumed and burned. Doing the math, the app calculated he could eat up to 1,800 net calories a day to lose 65 pounds in 15 months. Now at his goal weight, he targets 1,800 to 1,900 net calories a day and on average he is eating 2,300 to 2,500 calories a day and burning 500 to 1,200 calories a day, he recently reported on Twitter.

Meal times vary depending on his work schedule, but he prefers to eat breakfast later in the morning. He said that he finds the later he eats, the less he eats.

"Once you start consuming food, you start craving food," he said. On mornings he works out early, he aims to eat breakfast from 10 to 11 a.m., but if he has meetings first, he'll eat from 8 to 9 a.m. and exercise later in the day.

Before the pandemic, he didn't cook at all — now he said he cooks a lot. "I typically make eggs for myself like egg and avocado, egg and cheese, or egg and vegetables," he said. He may also go for a half of a bagel or a slice of cinnamon raisin toast.

"Nothing is off limits," he said. "I eat ice cream and will have a beer or glass of wine once or twice a month. Everything in moderation, as long as I write it down."

12 p.m. to 9 p.m.: He snacks, takes an afternoon walk, and eats dinner and has family time

He'll typically eat lunch and snacks while he works. To ensure he makes good choices when hungry, he keeps prepared meals stocked in his freezer. "I'm a really big fan of Daily Harvest, I just love the company," he said. "It gets me through the day with healthy food and helps reduce the number of decisions I need to make."

When he can break from Zoom, he enjoys outdoor meetings with close contacts where he can go for socially distanced walks. If he missed his morning workout, he'll use this time to exercise before dinner but not later, as he finds it disruptive to sleep.

"Before COVID we rarely dined together, but now we enjoy family time five nights a week, four nights with Blue Apron, the meal-kit service," Suster said about dinner. "For fun, we'll occasionally do take-out at places like Vespertine, which is a Michelin-starred restaurant that offers a 10-course meal."

Although date nights on the town haven't been possible during COVID-19, he and his wife make time for after-hours adventures through the neighborhood to walk off dinner. When they return, they enjoy a show with the kids and then settle down to watch one of their favorites together. On the top of their list are "Schitt's Creek," "The Morning Show," and "The Vow."

9 p.m.: He signs off of work

He makes a point of signing off work by 9 p.m., admitting "in the old days, it was never."

11 p.m.: He goes to bed

A minimum of 30 minutes before drifting off, Suster leaves his phone in the bathroom and ends screen time.

"Email and news carry into your sleep, so I'm careful not to check," he said, adding that he reads himself to sleep with a physical book, not a tablet. High on his list are "Americana: A 400-Year History Of American Capitalism," "The Warmth Of Other Suns," and "All The Light We Cannot See." 

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Here's how customers like Burger King and Tencent are using wildly popular open source projects from Intel and hot startup Anyscale to build powerful AI apps

  • In the past year, the open source project Ray, which was created by the cofounders of $95.6 million startup Anyscale to run powerful AI applications on distributed computers, has grown substantially in contributions, its community, and popularity.
  • Intel now uses Ray for its own internal AI and big data applications to help customers in turn.
  • Burger King uses Ray and Intel's open source project Analytics Zoo to power recommendations in its app.
  • Tencent Cloud, the Chinese cloud giant that also builds WeChat, uses Ray and Analytics Zoo for forecasting, modeling, and predictions based on its data.
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Anyscale, founded last year by a team of researchers at UC Berkeley, has seen rapid growth in the past year. That growth has led it to a $95.6 million valuation and a partnership with Intel, with the two teaming up to serve major customers like Burger King and Tencent Cloud.

Anyscale's cofounders are known as the founders of Ray, an open source software project that makes it easier for developers to build applications that are distributed across multiple computers — useful for machine learning tasks that require more memory and overall processing power than any single processor can handle. 

As for Intel, it had been developing an open source big data and AI project called Analytics Zoo. But its engineers saw the potential of Ray, and started using it to build advanced AI-powered applications.

It was a natural fit, in some ways: Intel already has an active collaboration with UC Berkeley's RISELab, home to the Ray development team. In fact, Intel used Apache Spark, an open source data analytics tool borne of UC Berkeley's AMPLab, to build much of Analytics Zoo. And so, Intel approached both labs to figure out how to bring Analytics Zoo and Ray together.

"We immediately jumped to this chance given our collaboration history and the popularity of Analytics Zoo," Ion Stoica, Anyscale cofounder and executive chairman and a computer science professor at UC Berkeley, told Business Insider.

The Intel/Anyscale partnership comes as Ray itself sees a boom in popularity. Ray has doubled in users over the last year, Stoica says, and it now has 13,000 stars, or likes, on code repository GitHub, establishing itself as both popular and well-loved in the open source community.

Anyscale's star has risen, too: Late last year, Anyscale announced that it had raised $20.6 million in a funding round led by Andreessen Horowitz. In September, Anyscale released a major new version of Ray, stoking the enthusiasm around the software.

"If anything, the need for distributed languages and these workloads got much much stronger now," Stoica said. "What happened with Ray last year, the popularity of Ray increased a lot."

All this helped set the stage for Intel to work with Ray to help its customers. 

Working with Burger King and Tencent Cloud

For Intel, the appeal of Ray is that its distributed approach means that it can run more powerful AI applications, including personalized user recommendations. Ray also has a certain appeal to developers, thanks to its support for popular AI software frameworks like Google's TensorFlow and Facebook's PyTorch, lending flexibility in the engineering process.

All of that computing power is being put to work in Burger King's mobile app, which uses Intel and Anyscale technology to recommend meals to customers based on their history. To make it all work, the app needs to process historic transaction data from the user to figure out what the customer might be in the mood for, and when.

This can pose some challenges. For example, customers' preferences can change depending on where they are, what time it is, and the current weather conditions. Customers usually don't buy frozen drinks on rainy days or kid's meals at midnight, Stoica said.

With Ray, Spark, and Analytics Zoo, this app can take into all these factors to provide "context-aware" recommendations to customers.

"That's why we are excited about our mission and very excited to collaborate with other people," Stoica said. "We're supporting more and more of these sophisticated AI applications."

Read more: These Berkeley PhD students and the co-founder of buzzy $6.2 billion Databricks are tackling the next really hard problem for big data programmers

Intel is also working with Tencent Cloud, the cloud computing arm of Chinese tech titan Tencent, known as the creator of the the popular chat and commerce app WeChat.  Tencent Cloud uses AutoML, a prediction toolkit for developers that's built on top of Ray, and that's also part of Analytics Zoo.

With AutoML, Tencent can make forecasts and build models based on data observed sequentially in time, such as analyzing network quality, gathering data on manufacturing equipment at factories, and the like.

"Building machine learning applications takes a lot of effort," Jason Dai, CTO of big data technologies at Intel, told Business Insider. "We try to build a more general tool that can help you automate the process."

Got a tip? Contact this reporter via email at [email protected], Signal at 646.376.6106, Telegram at @rosaliechan, or Twitter DM at @rosaliechan17. (PR pitches by email only, please.) Other types of secure messaging available upon request. 

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SPACs have generated a $39 billion frenzy in the US this year. The executive behind their first ETF explains how retail investors can use them to level the playing field with Wall Street titans like Warren Buffett.

  • US SPACs have raised $39 billion year-to-date and accounted for one-third of all US IPO activity since the start of 2019, according to Goldman Sachs Global Investment Research. 
  • This SPAC frenzy reached the exchange-traded fund industry when the first US SPAC ETF — the Defiance Next Gen SPAC Derived ETF — started trading on October 1. 
  • Paul Dellaquila, president of Defiance ETFs, breaks down why he believes a SPAC ETF can provide retail investors with access to IPOs once reserved only for institutional and high-net-worth investors.
  • Other market participants point out the high-risk and high-reward nature of the asset class and suggest that retail investors proceed with caution and conduct their own due diligence. 
  • Visit Business Insider's homepage for more stories.

Special-purpose acquisition companies have made a comeback. 

According to Goldman Sachs research, US SPACs have raised $39 billion year-to-date, tripling the $13 billion they raised in all of 2019. 

Known as blank-check companies, SPACs raise capital from investors by listing shares on a public exchange. They then seek to merge with a private company within 18 to 24 months, thus taking the company public in a much shorter and less onerous process compared to the traditional IPO.

A total of 134 companies have gone public this year by merging with a SPAC, according to SPAC Research.

Birth of the first US SPAC ETF

In a sign of the SPAC frenzy hitting the exchange-traded fund industry, the Defiance Next Gen SPAC Derived ETF started trading on the New York Stock Exchange on October 1. 

But the firm behind the first US SPAC ETF — Defiance ETFs — reserved the catchy ticker "SPAK" in August last year, according to Paul Dellaquila, a former iShares executive who is now the president of Defiance.

"The reality was the market at that point was probably still a little too mature to go forward," Dellaquila said.

An encounter with index provider Indxx at the Inside ETFs conference in January this year reactivated their plan and the two teams went to work. 

Eight months later, the end product is an ETF that tracks a basket of 36 holdings — with 80% of them being stocks of companies that have already gone public via SPACs and 20% of them being newly listed SPACs. 

What first led Dellaquila and his team to the idea of a SPAC ETF was "the closed-off environment of the traditional IPO process."

"Investment banks, underwriters and high-net-worth people like Warren Buffett get to participate in hot IPOs like Snowflake and they got in at $120 a share," he explained. "However, mom-and-pop investors and the average Joe got access to Snowflake at $240 a share and that's just on the first day."

"So it doesn't leave a lot of meat on the bones for individual investors to pay almost 100% premium on what high-net-worth investors got," he said. 

With SPACs, retail investors can buy the publicly-traded blank-check company and wait for them to acquire or merge with their partners of choice. 

"If the IPO is successful and it goes through, you participate in that just like everyone else. I think that is the appeal to investors," he said, pointing to DraftKings (DKNG) as an example.

The sports-betting company, which was the fund's largest holding at almost 18% and went public via a merger with SPAC Diamond Eagle Acquisition in April, has gone up over 380% year-to-date. 

But not every one of these SPAC mergers is going to work or generate crushing returns, Dellaquila warned. 

"That's why an ETF makes sense because you're getting exposure to a well-balanced portfolio diversified across pre-SPAC IPOs as well as IPOs derived from SPACs," he said.

Retail investors seem to agree. The fund traded 566,000 shares and picked up 21 creation units on its first day, making it a nearly $15 million ETF launch, according to Dellaquila. 

"That's a good start for a new ETF, indicating there's strong retail demand," said Todd Rosenbluth, head of ETF and mutual fund research at independent research firm CFRA. 

Rosenbluth said that several recently launched thematic ETFs such as the Roundhill Sports Betting & iGaming ETF, Global X Telemedicine & Digital Health ETF, and the Direxion Work From Home ETF have all "come out of the gate strong providing exposure to a unique strategy."

"Many advisors and institutional investors will hold off buying a new ETF, but retail investors will often latch on to a compelling story," he said. 

High risk, high reward

However, part of what makes SPACs a compelling investment is also a source of risk, warned Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. 

By merging with a SPAC instead of filing for a traditional IPO, companies face much less regulatory scrutiny. While that may speed up the IPO process, it also leaves individual investors with less information for due diligence. 

"In some ways, what is positive for the company maybe can leave investors a little bit less informed," he said. 

The risk is not lost on Julian Klymochko, the CEO and chief investment officer of Accelerate Financial Technologies, a Calgary, Canada-based ETF shop that claims to have launched the "first and only SPAC-focused ETF."

"The SPAC structure has allowed regular retail investors to access late-venture-capital type of deals taking place in the public markets," said Klymochko. "But you need to be aware that late-stage VC deals are very risky."

"It's a different type of investment that certainly opens up access, but you need the expertise to do anything in investing and that requires due diligence."

Klymochko's Accelerate Arbitrage Fund, which trades under the ticker "ARB" on the Toronto Stock Exchange, utilizes a SPAC arbitrage strategy where it aims to buy shares of pre-acquisition SPACs at a discount to net asset value and sell at a premium to NAV after the SPACs announce deals.

If a SPAC fails to reach a deal before its deadline, or if too many investors redeem in the case of a bad deal, the SPAC will liquidate and distribute $10 per share plus accrued interest to investors, Klymochko explained. 

"SPAC presents what I call equity upside with treasury bond risk. It's a really interesting risk-reward dynamic such that I consider it a separate asset class," he said. "Owning pre-deal SPACs means you can capitalize on not only the upside participation on the deal, but more importantly the downside protection."

Unlike "SPAK" which tracks the Indxx SPAC & NextGen IPO index, "ARB" is an actively managed fund that currently has 60% of its portfolio allocated to SPACs, according to Klymochko.

"Historically, post-SPAC equities have had relatively poor performance on average," he said, adding that this is where he takes issue with Defiance's SPAC ETF that has an 80% weighting to post-SPAC stocks. 

"They are these new companies and there's no more redemption in the future with accrued interest," he said. "So the risk-reward changes dramatically such that it converts from this T-bill with equity upside type exposure to just a straight post-SPAC stock," he said. 

To be sure, the Defiance SPAC ETF has a 20% allocation to pre-deal SPACs. Dellaquila, who had spent over 10 years with BlackRock's iShares unit, said he believes in strict, rules-based investing. 

"Active managers, they are going to make bets. Sometimes it's going to go well, sometimes it's not," he said. "We are going to give you a diversified approach."

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'The largest financial crisis in history': A 47-year market vet says the COVID-19 crash was merely a 'fake-out sell-off' — and warns of an 80% stock plunge fraught with bank failures and bankruptcies

  • David Hunter, the chief macro strategist at Contrarian Macro Advisors, thinks we may be on the cusp of "the largest financial crisis in history."
  • Hunter breaks his apocalyptic forecast into two phases. Each one is distinct and aligns with different timetables.
  • He expects a massive "melt up" rally to take place in the next few months, ultimately setting the stage for an 80% stock crash.
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When it comes to market forecasts, David Hunter, the chief macro strategist at Contrarian Macro Advisors, doesn't beat around the bush.

"I think we're going to see something that includes a very large financial crisis — probably the largest financial crisis in history — including major bank failures, not so much here, but Europe, maybe Asia banks, and also a lot of involuntary debt liquidation," he said on "The Contrarian Investor Podcast."

"The first phase started in March," he added.

Hunter — a 47-year market veteran — separates his ominous call into two phases, both of which are part of the same overarching "bust."

There are many facets to Hunter's forecast, so it's important to account for each properly. Here's how he divvies it up: 

Phase 1: Includes a "melt up" scenario for stocks. During this time, Hunter thinks the S&P 500 could rally to anywhere from 4,200- 4,500, alongside a Nasdaq composite which, by his estimate, could touch 15,000.  

Catalysts include: Central bank liquidity, the passage of a stimulus package, shifts in sentiment, and bullish momentum begetting bullish momentum.

Timeline: Potentially, the next two to three months.

Phase 2: The unwind. In this period, Hunter's forecasting a swath of bankruptcies, bank failures, involuntary liquidations, an 80% stock crash, and a massive expansion of the Federal Reserve's balance sheet to as much as $20 trillion in response.

Catalysts include: A central bank misstep, lack of government assistance, immense debt build-ups, and time (remember, some businesses have been closed and sans revenue since March).

Timeline: 2021

A 'fake-out sell-off'

The way he sees it, the original fallout stemming from the coronavirus was a "fake-out sell-off."

"So I was a little taken by surprise by the sell-off — the magnitude of sell-off," he said. "I expected a 10% pullback from the highs of February, and we obviously got 30% plus. But I took a look at the work and said, 'No, this does not take away the melt up scenario.' In fact, this is kind of a fake-out sell-off."

Although it coerced his forecast to the fast track, that episode, in his mind, was a mere blip on the radar of a much larger, debt-and-leverage-fueled trend that's been building for years. It's a phenomenon he's previously referred to as a "super-cycle," which stretches from one economic depression to the next.

In the near future, he thinks the colossal amount of debt and leverage that the financial system is predicated on will start to falter. After all, large percentages of the global economy are running at a fraction of their normal capacity.

That's why Hunter thinks it's too soon to give the all-clear. What's more, add in a few trillion of government and Federal Reserve stimulus into the equation, and now we're even deeper in debt. 

The Fed's role

To him, the bridge between the two phases has been supported by Federal Reserve liquidity — and he thinks it's bought the market a few quarters of reprieve. That's why things in the market are relatively calm — for now.  In the next few months, Hunter sees the S&P 500 rallying hard to around 4,200- 4,500, forming a secular top in the process.

Interestingly enough, although the Fed seems to have commandeered a heroic role in uplifting markets, Hunter thinks it may serve as the catalyst for the impending downfall. 

With financial markets now awash in capital, and the prospects of a viable vaccine rising everyday, Hunter thinks that the Federal Reserve — and potentially other central banks — may have to rein in investor exuberance. If that happens, and the Fed pulls the rug out from under the market, Hunter thinks it'll kick-start a series of cascading failures.

"So — the second phase of the bust — you've got, still, an awful lot of fragility in the system, big chunks of the economy that are nowhere near getting the benefit of the recovery, and all those things start coming back at you," he said. "And if the Fed pauses, I think this thing could unwind very fast. And let's remember, this is a global bust. So it may not even be the US that's the main problem next year."

When this happens, Hunter sees the Federal Reserve expanding its balance sheet to as much as $20 trillion to try and frantically save the financial system and quell markets. However, he thinks those efforts will ultimately be ineffectual. To put things in perspective, the Fed's balance sheet resides around $7 trillion today. This time last year, it was about $4 trillion. 

"And when people say, 'Well, if you think the Fed's going to print money, why can't they just stop the bust?'" he said. "And I go, if you look at the history of the Fed, the Fed is reactionary. It's not anticipatory."

He continued: "I have no doubt that they're going to react. I have no doubt that they will get there, but it won't be to head it off. It will be in reaction to, rather than in anticipation of." 

Clearly, Hunter thinks that by the time the Fed tries to hamper the unwind, it'll be too little, too late. He's repeatedly said "There's a lot of things you can't reach with money, and a lot of things you can't fix," in previous interviews, in reference to this exact issue.

In the end, Hunter thinks the pressure will be too much for the financial system to bear when the confluence of debt, bankruptcies, and leverage finally come home to roost. 

"We've got two historic events ahead of us just in the next year: the melt up and then the bust," he said. "And both of those are bigger than anything we've seen in the post-World War II era." 

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'A paradise for growth investors': A Baillie Gifford fund manager overseeing almost $2 billion explains why investors are underestimating Japanese stocks — and shares his 3-part strategy for picking winners

  • Warren Buffett's investment in Japanese trading houses reinforces misconceptions about Japan being a value country, Baillie Gifford fund manager, Praveen Kumar, said.
  • But Japan is, in fact, a "paradise for growth investors", Kumar said, having been recently nominated for the rising talent award for fund management by Morningstar for his role in Baillie Gifford's Japan Trust.
  • "People need to mentally disentangle a [Japanese] economy and a [Japanese] stock market," Kumar said. He shares his simple stock-picking strategy for finding high growth Japanese stocks.
  • Visit Business Insider's homepage for more stories.

Despite being nominated for the rising talent award for fund management this year by fund tracker Morningstar, Baillie Gifford portfolio manager Praveen Kumar doesn't have any trade secrets in his stock-picking strategy. 

It's very "simple", Kumar said.

After starting his career as a computer scientist and management consultant, Kumar switched careers into investment fund management. 

In his first year on Baillie Gifford's rotational program, he remembers being recommended to read "Common Stocks and Uncommon Profits" by Phillip Fisher.

Now 13 years on, Kumar manages  £612 million assets for the Baillie Gifford's Shin Nippon investment trust, which focuses on small Japanese companies. He also deputy manages £924 million assets for  Baillie Gifford's Japan Trust, which focuses on medium- to smaller-sized companies.

According to Morningstar, on October 7, both funds have outperformed their benchmarks in 1-year trailing returns. Baillie Gifford's Shin Nippon investment trust's net asset value per share has risen 27.57%  compared its benchmark, MSCI Japan small cap index, which has only risen 2.07%. Baillie Gifford's Japan Trust NAV per share has risen 14.25%  compared to the benchmark, TOPIX index, which has only risen 3.33%.

But despite this, investing in Japan isn't on many investors' radar. Kumar hopes to change that perception by demonstrating the long-term returns that can be driven through high-growth stocks in the country.

More attention has turned to investing in Japan within the last month. Morningstar recently reported eight of the 10 best-performing funds in September were Japanese-focused and, separately, Warren Buffett invested $6 billion in five Japanese trading houses.

However Kumar doesn't think Buffett's investment will change the perception on investing in Japanese stocks.

"Japan is very much seen as a very dull economy, mature economy, not much growth to be had," Kumar said. And it's almost seen as sort of a value kind of market. And obviously, now with Mr. Buffett's investment in a bunch of trading companies, it's sort of reinforced that idea."

In fact, Japan is the polar opposite, Kumar said. Japan is a "paradise for growth investors", with a whole layer of fast growing businesses being ignored by investors, Kumar said.

Misconceptions about investing in Japan

Kumar highlights there is a lot of evidence that the stock market and economy are not connected. He urges investors to think about this when considering whether to invest in the Japanese stock market.

"People need to mentally disentangle an economy and a stock market. So just because Japan is a very mature economy, it's GDP growth isn't exactly spectacular, probably 0.5% per annum to 1%," Kumar said. "That has nothing to do with how much money you can make in the stock market. So you still have these kinds of exceptional growth companies in Japan that you can invest in, a lot of them small caps."

As some countries in Europe as well as states in the US have seen a rise in COVID-19 cases. Some investors are starting to view Japan as a safe haven. Especially as the news flow around the US election has started to intensify and create volatility in the market.

Kumar disagrees with the concept of Japan as a safe haven.

"I always struggled with this idea of safe haven, because when the proverbial hits the fan, there are no safe havens," Kumar said. "I mean, basically, people sell everything," 

However, Kumar notes that Japan could present opportunities to those who have made money in the US market and are looking for alternative options because Japanese stocks have gone up.

"If you look at the US and chart, the S&P versus the TOPIX, it's a catalyst for more money coming into Japan in the next few years," Kumar said.

Stock Picking Strategy

To find high growth companies, there is no trade secret, Kumar said. He just looks at three core attributes.

1) Industry background

The first category Kumar looks at is the industry. He wants to see companies operating in large, preferably expanding, industries that have a large runway for growth.

"I look for companies that can grow at very fast rates, at least for five to 10 years. And by fast rate, I mean, typically 20% plus sales growth kind of range," Kumar said.

2) Business model

The business model is also important because Japan is a country with many long-standing traditions and corporate habits of not adopting technology, which has created inefficiencies and problems, Kumar said. He is looking for companies that will disrupt existing processes and exhibit an interest in problem solving.

"There is this massive opportunity, where we can just cut through all of this fat, and make the whole system a lot more efficient," Kumar said. "So just try and look for companies that sort of fit that profile, genuinely different business model, trying to solve a problem, and growing quite fast in the process."

3) Company Management

In addition to the business model, the management team behind the business are just as important.

"I place quite a lot of emphasis on looking for companies where the management is young, dynamic, entrepreneurial, and especially where companies, where management, they're not afraid of taking risks."

And a final piece of advice for investors….

To understand more about investing in Japan, Kumar recommends reading Asian Godfathers by Joe Studwell and The Japanese Company by Rodney Clark. And for general investing, he recommends reading Warren Buffet's and Jeff Bezo's shareholder letters.

"So, the broad message is keep it simple. Invest in stuff that you understand, look for consistency, a good long term record," Kumar said.

This story was originally published by Morningstar.

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