Ken Griffin on Building Citadel, AI & Independent Thinking

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Transcript Provided by Kensho

00:00:12

Joe Cass
Hello and welcome. My name is Joe Cass, senior director at S&P Global Ratings and the host creator of The Leaders Podcast. So today on this episode, we have Ken Griffin founder and CEO, Citadel, and Martina Cheung CEO and president of S&P Global. Quick reminder that the views of the external guests are their views alone, and they do not represent the views of S&P Global. Ken, Martina, you so much for joining me today.

00:00:38

Ken Griffin
It is great to be here today.

00:00:41,808

Joe Cass
Ken, we're going to start with you today, Citadel. It's one of the most powerful forces in global finance. But taking you back to 1991, what was the most brutally hard part of building Citadel?

00:01:01

Ken Griffin
So in 1990, the the toughest challenge was hiring talent. I mean, I was 21 years old, attracting attracting people with experience and trading and investing. That was going to be a pretty tough lift for somebody who was 21. So the the focus back in our early years was really about trying to find from college campuses people who were extraordinarily commercial and ambitious and bright and who really were excited about a career in finance. So that was that was the biggest challenge in the early days, was was really creating the nucleus of talent around me, that that became the story that was written as Citadel.

00:01:46

Joe Cass
Martina would you be able to kick us off just by talking about your experience growing up. Did you ever think you'd become a CEO, and also was finance part of your childhood? Generally?

00:01:58

Martina Cheung
My parents are, they were entrepreneurs. We had a small family business. All the kids worked in the business. And I think growing up it was very important in terms of lessons and, you know, quality and service and focusing on the customer and really trying to do the right thing by the customer. And my parents held those views very strongly. And I think I, I think I have managed to retain all that. And it helps me to, be a better leader, I think, today.

00:02:25

Joe Cass
Ken, what do you think is the most misunderstood force shaping markets, say over the next decade.

00:02:33

Ken Griffin
The most misunderstood force shaping global markets? I think I think the the single greatest question that markets are grappling with today is what is going to be the impact of generative AI machine learning? Will this be, will this be the the the salvation for the need for productivity growth in the West? Or will this fall short? But the biggest question right now, hands down. The impact of AI on the economy at large over the next decade.

00:03:09

Joe Cass
So Martina, as a CEO of a company who measures risk globally, what's one form of risk that financial systems maybe fail to measure that well?

00:03:20

Martina Cheung
An obvious one that I hear about all the time from clients and financial ecosystem would be private markets. Lots of conversation right now around trying to, quote unquote, democratize and provide access to the wealth segment, to the retail segment. We get those kinds of things coming in in multiple parts of S&P Global. But one example of the types of conversations that we're having are, can we somehow create an index or an ETF that sort of is a blend of public and private, and the risks that, the customers want to understand as we engage in conversations are interesting. It's like liquidity risk, in the form of, asset liquidity, but also in the form of redemption, liquidity. And so it's really interesting, certainly a little bit new. I think we're going to go through some iterations in the market before we have something that really kind of unlocks, you know, and kind of scales very quickly. And then the other area that we're having a lot of conversations about and it's it's, timely in the sense that the new administration in the U.S. has a deep interest in it is around digital currencies. So a couple years ago, we had I know you're familiar with this. We launched a, an assessment of stablecoins out of our credit ratings team. And it looks at some nontraditional risk areas to the point that you made. So we look at the governance of stablecoins. We look at the technology integrity, and then we look at other things like liquidity risk, credit risk around them as well. So those are kind of some of the areas we're seeing new risks pop up. I wouldn't characterize it as a failure. I would say more. It's kind of an opportunity to say, here's how, here's how we can get some transparency around the risk.

00:04:53

Joe Cass
Ken. We’ve seen kind of incredible volatility in markets recently. Do you think the worst is over? And also what's a longer term path forward from where we are right now.

00:05:07

Ken Griffin
So obviously this year has been characterized by, I'd say far more volatility than most people expected. And as the president tries to re-architect the terms of trade around the world with America, to protect the interests of American businesses and American workers in doing so, that that bold effort is really disrupting the ability for market participants to to price assets. And what we'll find over the course of the next, hopefully next several weeks, if not months, is clarity on where we will land on the terms of trade.

00:05:46

Joe Cass
Martina, how has S&P Global been impacted by this volatility and market’s uncertainty? What are the clients interested in right now and how are we helping them?

00:05:56

Martina Cheung
We are actually a really key resource for our customers. So making sure that we provide all the data that we can, we within probably 12 to 24 hours of the tariffs being announced in early April, we stood up a new section of our website where we put a lot of our paid for content in front of the paywall so that our customers could actually access a lot more stuff across all of the divisions, from S&P Global. And we've had massive increases in the amount of, of users accessing that content to help them. But we've also had a huge amount of interest in and use of the products that we have today. So I think for a four of our main platforms, we had like a something like a 23% increase year over year in Q1 usage compared to Q1 last year, which is just tells you that they need the information to try to figure out how to make decisions. And that can be supply chain information. It can be, you know, pricing reference data for fixed it can be all kinds of, stuff that they're, tackling. And, and I think, you know, most importantly, we obviously, on a real time basis are doing things like surveilling credit risk and credit rating agency We're monitoring prices for commodities out of our commodity insights division. So just really our customers really need us to continue doing what we're doing at the highest level of execution possible. That's really the the best thing that we can do to support them. And, we, you know, we pay particular attention to making sure that we can do that in times like this, as well as in times when things are very benign.

00:07:21

Ken Griffin
Yes, I mean, it's clearly we're in a moment where people are very focused on re underwriting their research decisions.

00:07:27

Martina Cheung
Yeah.

00:07:27

Ken Griffin
And and having access to timely information is so critical at this moment. And there's much focus on on the bond markets and the equity markets. But the commodity markets this year have also been a wash and volatility due to both changes with OPEC's policies, changes domestically in terms of the administration's focus on encouraging domestic production. And then, of course, the backdrop of what will GDP be with a trade war unfolding?

00:07:55

Joe Cass
Martina, just more broadly, when you think about leading through these kind of uncertain times, what's going to be maybe a differentiator between those who succeed and those who maybe fall short?

00:08:08

Martina Cheung
Yeah, I'm sure you have a very unique lens on this yourself. and I, I think, generally speaking, very, very many organizations developed a muscle around leading through a crisis, through Covid, for better or worse, it's become something that people have, let's say, are more adaptable around, a bit more flexible, at this moment in time. I think the important thing is it's not just the geopolitical, it's not just the macro economic things that are happening. It's also the point that you made, which is the rush and the speed at which the generative AI technology or even quantum is coming down the pike. You can't you have to really increase the speed at which you move in response. I like to think that we can, on behalf of our customers, like skate where the puck is going so we can get there before they get there, and we can be ready to help them. And, you know, inform their path. They're also that requires us as a team to really, you know, move as quickly as we can. I think that's the thing for us, that will be the key differentiator.

00:09:08

Ken Griffin
And like you said, the puck is moving quickly. And when the puck moves quickly with matters like generative AI or quantum, I think people view that as part of the advancement of humanity and the advancement of markets. When the puck is getting pushed around by geopolitical changes, that's really disorienting because investor professionals don't view themselves as geopolitical analysts. They generally take policy as given and say, given this policy, what's the right portfolio to own? And how do I think about the unfolding impact of AI or quantum? But this has been a been a difficult year for most of us professionals, because we're seeing we're seeing moves around the world, not just in America, where geopolitical decisions are having huge ramifications on asset prices.

00:09:56

Joe Cass
Yeah, sticking on that kind of theme AI, Ken how does one preserve a true independent thinking in an environment where data, consensus and AI models increasingly just converge into a blob?

00:10:11

Ken Griffin
Well, you know, we spoke earlier about how people are accessing S&P’s research now more than ever. And that's because humans are far more able to project future outcomes than AI technologies. Your AI technologies are rooted in the ability to, in some sense, navigate the tree of the history of humanity, right? They read the internet. They read books that have been published, they read work that has been completed, but they're not designed to project the future. And that's where investment professionals really do create value is their ability to forecast what's going to happen. You know, I always tell my colleagues, if you'd asked a generative AI model in 2004 or 5, how would how would mobile impact e-commerce? Or if you asked a machine learning model to explain the impact of mobile on e-commerce, you would have gotten nothing. And now here we are, roughly 20 years later, and if you don't have a robust mobile strategy as a as a retailer, you're probably out of business. So I think it's a it's a great example to just think about how underlying shifts in how we live our lives transcend the reach or understanding of your machine learning models.

00:11:34

Joe Cass
Excellent, Martina. How crucial is high quality data in financial markets in ensuring the AI doesn't just generate more speed, but also better outcomes?

00:11:47

Martina Cheung
Well, I think it's, it's critical. I mean, it's the key to unlocking the value you have to get accuracy out of the models. And so being able to, we call it sort of like grounds the models in the right context. In this case, financial context or commodity markets context, for example. That's really going to be the differentiator in actually getting to something that really delivers value for for our users. And even for our own employees. And so obviously, we're a data benchmarks analytics company. I think we have lost count maybe between 950 and 1000 sort of commercially available data sets. And then it's many more if you look at combinations thereof. So we wanted to think really proactively around this about six months ago, which coincided with the launch of the new leadership team. When I came in as CEO, we put all of our data together in an enterprise data office, with the idea being, let's connect it, standardize how we think about it, standardize how we link it, and then let's go to town on applying technology to it. And so we've made some really interesting strides on that. I mean, in just six months since the journey, but the team has essentially, created LLM APIs that are powered by Kensho, our internal AI engine, and that's allowing our data 460 to actually get into new ecosystems such as Microsoft Copilot, for example, where we have our commodity data. Now, they're also looking at, the power of, of this sort of like financial context or like the S&P global context. And so developing what we're calling grounding agents that are smaller discrete models that are, that are grounded in, in S&P global data. It's really it's not just the importance of having the static data available to train the models, but it is as much around how does the technology change the way a user will actually interface and interact with your data. And so it's we're trying to solve for multiple things with it. But early days but it's really, really exciting.

00:13:50

Ken Griffin
But I think I cannot emphasize enough the access to high quality data is really important in moments like this. If you have a data vendor that doesn't dot the I's and cross the T's when it comes to data quality, and there's a mistake in moments like this, it's actually a huge setback in terms of confidence. And right here is when investment professionals want to feel confident about the bedrock or the foundation from which they're making decisions because with so many moving parts. If you find out that part of your decision making is being driven by erroneous information, it's a huge setback at a moment in time where you're already anxious about what to do.

00:14:32

Joe Cass
Yeah, absolutely. So, Ken, how do you think the next generation of market participants will define edge? And what will be the most important skills for investors to cultivate?

00:14:43

Ken Griffin
Look, you know, we still view at the core what we do at Citadel is we engage in research. That's what we do. And when we through our research, uncover a differentiated view from market consensus. That's where we monetize our research by investing in the markets. I think that that many great investors for decades to come will view their core job as being a research job. Now, a handful of people are very gifted at also understanding how markets will incorporate changing information. They're in some sense less research driven, but they're very agile in incorporating changes in information into changes in asset prices. That's a gift that that we find to be very rare, but that will be a gift that will continue to to bear fruit for decades to come.

00:15:38

Joe Cass
So, Ken, I want to take you back to 2013. So you were giving a speech to the Economic Club of Chicago, and one specific section stood out to me, and I'm going to play it now.

00:15:54

Clip

We bought the entire portfolio solved so it's crisis. Which brings me to a quote that describes the ethos of Citadel. Things may come to those who wait, but only those things left by those who hustle.

00:16:12

Joe Cass
So things may come to those who wait, but only those things left by those who hustle. What does the quote mean to you, and how has it shaped the culture and citadel?

00:16:23

Ken Griffin
So I think that's a it's one of my favorite quotes. Do you happen to know who it's from?

00:16:27

Joe Cass
Lincoln.

00:16:28

Ken Griffin
It's Abraham Lincoln, right? Would you ever think.

00:16:31

Martina Cheung
No. That's amazing.

00:16:31

Ken Griffin
One of the greatest presents of the United States would have said something with such a commercial bent. But he really was an extraordinary leader. Look, you know, often it's it's the investment professional that goes the extra mile who comes to the right conclusion. And, and that's that's grit. It's perseverance, it's determination. But it's it's making the effort. And I think that one of the things that really we emphasize amongst our team is what do you need to do, what extra steps you need to take to get to the right conclusion faster than those who we compete with? And if and if you do hustle, you will find those great investment opportunities. And and that's that's what we've been doing now for for 35 years is is going that extra step.

00:17:22

Joe Cass
Fantastic. So, Martina, what's a moment in your journey when maybe no one was watching that still defines who you are today?

00:17:30

Martina Cheung
Realizing I had to hustle, I wouldn't have phrased it that way, but, but now that I think about it, that's what it was. So I had been in the U.S. for a year. I'm from Ireland originally, it was around the dot com bust the dot com bust, and I was a strategy consultant with Accenture, which I think was around the time that it was changing its name. Andersen Consulting, then Accenture. And, the work was kind of drying up and people were getting laid off. And if I got laid off, I would have lost my visa. And I didn't want to go back to Ireland. And, so I basically trained myself in, you know, a whole bunch of areas of tech not to necessarily to be an engineer in coding, but, you know, more like, tech strategy, architecture, process re-engineering, you name it. I went deep on, like, late nights, early mornings, all in the interests of having skills so that if my name came up, I wasn't going to be on the bench. I could be staffed on a project. And I went through the entire crisis time period like over 100% allocated in terms of, you know, in terms of being staffed and ended up, you know, picking up skills that I would never have have really thought about had it not been for, you know, necessity, sheer necessity, being the mother of invention.

00:18:47

Ken Griffin
But I do love the hustle. Right. And like you said, when there was a there was a consulting opportunity that came in. You hustled, you had the skills to do the job, and somebody else who hadn't worked as hard or hadn't created those skills. Well, they were they were on the back bench waiting.

00:19:04

Joe Cass
I love those kind of stories. Ken, I basically always try and shoehorn in at least one question about soccer? And because I love it into this podcast and I know that you're actually a fan and also an ex-player, a midfielder from what I, I've read. So a couple of questions are you looking forward to the World Cup next year? Who do you support? And crucially for me, have you ever heard of West Ham United?

00:19:33

Ken Griffin
So so first of all, I, I played soccer for about and you would call it football.

00:19:38

Joe Cass
Yeah

00:19:39

Ken Griffin
35 years and and you know, one of one of the highlights of my life was all the time I've spent on the field. And I think that team sports are really critical to the development of our youth, because it puts you in a position where you have to learn to play to your strengths, accept your weaknesses, and play to the strengths of your fellow teammates. Right. And if I think of the story of Citadel and our success, it's been our ability for us as a leadership team to know each other's relative strengths and weaknesses and to put the best players on the field in the best position to win every day. So I think I think team sports are really critical in teaching our youth really important life skills. Loved playing for 35 years. I probably played beyond my skills. I've had several knee surgeries, so I'm off the field these days. Most of the time, a bit of a fan. Let's be clear. World Cup, some of the games will be Miami. The United States is thrilled to be a host country for the World Cup. Miami will be a great city for the World Cup and I'll be wearing one jersey, and one jersey only. That's team USA.

00:20:49

Joe Cass
Yeah, great. And Martina, any football allegiances from your side?

00:20:53

Martina Cheung
Yeah. Well, I grew up with three older brothers and a father, all of whom were obsessed with soccer, football. And, we used to joke, actually, that my dad would be cursing at the TV in, in Chinese when there were soccer matches. On if it was a team he didn't like.

00:21:11

Ken Griffin
In Chinese?

00:21:12

Martina Cheung
Yeah, he's from Hong Kong, so he didn’t particularly like Man United as you're, like, shaking his fist at the TV. So his, his, team was Arsenal and it was sort of like two of my older brothers and he used to go to matches and stuff like that. So I have a six year old who's playing soccer at the weekends, and I got him some of the Arsenal new Arsenal kit last weekend. Get him in his, his, his kit that Pa would love. So, yeah. We're Arsenal fans. Overall, I would say.

00:21:42

Joe Cass
I got my daughters. I got two daughters, Leo and Krista, who are eight and three, and I got them, West Ham tops. And they kind of wore them for a photo. And I've never been worn again. No, just a politely kind of. Thanks, dad. And that was it. Great. Ken, if you could recommend just one book for those guys who are starting out in their careers, what would it be?

00:22:04

Ken Griffin
Jim Collins’ Good to Great. You know, it's a number of really important vignettes that one must understand in running a business. So, for example, one of the key parts. The book is around building your team. Going back to that very first question, getting the right people on the bus, getting the wrong people off the bus. Once you've got the right people around you, you can take that bus anywhere. And he's got a number of very important, readily digestible vignettes that I think help people to understand the essence of what it takes to build a great business.

00:22:39

Joe Cass
Great.

00:22:40

Ken Griffin
And then then the second thing I would say is, what book should you read? You should read books that speak to the domain knowledge of the job. you have. You spoke about in your early days at Accenture. You self-taught yourself a number of skills to make yourself more valuable, more important. I can't tell you. We hire endless numbers of really bright undergraduates. Some of them have this belief that when you graduate from college, you're done reading textbooks, and nothing can be further from the truth. Like, it's really important to always, always be immersing yourself in the literature, whether it's published literature on on the academic networks you get access to through Google Scholar. I can't tell you how many S&P books I've read over the years and how to think about credit risk, because we've we've invested in credit for 35 years. It's always just trying to stay current in the body of knowledge that represents the career you've chosen. And by the way, if it's not interesting to you, you picked the wrong career like it's that simple. So if you're early in your career and you find yourself not interested in reading the books about the domain you're in, you know what? Pick a new career. And in America in particular, that's that's totally fine. Like no one will judge you from going from one career to a radically different field throughout your 20s.

00:24:08

Joe Cass
Great. Martina, was there have you or have you experienced kind of a mic drop moment from early on in your career? So something that maybe accelerated your growth or just set you apart as a leader?

00:24:20

Martina Cheung
I'm not sure if it's set me apart as a leader, but it was definitely a mic drop moment, which I think grew me by by virtue of the situation. So I was in my mid 20s, I think had been in the US maybe three years, something like that, mid to late 20s, and I was consulting for a very large American bank, and I had a particular skill going back. This was, a reason why I had been staffed on a particular project, and the news had gone to the COO of this bank that there was a woman on the project team who could brief him on this particular topic. This bank wanted to invest in B2C consumer financial portals, which at the time, if you remember, was very popular. And I got a call saying, rice, you're going to have to get on the jet. He's going out to the West Coast and you can brief him on the way. And I thought, oh my gosh, I have arrived in America. This is incredible. I can't believe it, you know? So that was definitely a mic drop moment. But it's sort of like the power of it goes back to like the power of that that you're saying about just immersing yourself in subject matter and how important it is to, you know, to be the person who's got, like, access to the facts. You know, it's it's it's so critical.

00:25:31

Ken Griffin
And I'll make one more point. You didn't ask what your schedule was. You're like, I will be on that plane. Right. And that that goes back to the hustle point, right? Like the worst thing you could have done is like, well, well, I've got to commitement with friends or this or that.

00:25:46

Martina Cheung
You step into it, you step right into it.

00:25:48

Ken Griffin
You step right into it.

00:25:49

Martina Cheung
Right. Absolutely.

00:25:50

Ken Griffin
And there are moments where you have to you have to just step into the moment. And these are very important moments in one's career because they often open new doors. They established those those relationships where people rise, like, if I have an issue, I have a problem. I have a challenge I can rely upon. I can rely upon you, to get the job done. And those are really important moments. Step up your game.

00:26:13

Joe Cass
Martina, If you could share just one piece of career advice to young people watching listening, what would that be?

00:26:19

Martina Cheung
Collect experiences, not promotions. It's, it's a bit of a weird catchphrase, but I do think that there there's a little bit too much pressure to have this sort of, like, ladder kind of upward trajectory. And, and for that to be kind of a measure of success and I've often thought that the moves that I made that were more about building horizontally and strengthening either my expertise in an area or my leadership capabilities, those were the things that were as valuable as anything else, quite frankly. And so I sort of think of it's not so much a sort of a ladder. I think of it is more of almost like a rock wall or something. You may have to kind of, you know, angle one one direction or another, but, you know, you get, you get better. And if upward momentum or trajectories is what you want, you'll get there as well. But I think it's going to be a better outcome.

00:27:11

Ken Griffin
Well, maybe we can reframe it. It's that the the experiences that one needs to lead a global business. Are experiences. You're not likely to gather if you're in one narrow vertical your whole career.

00:27:24

Martina Cheung
That's great. Great way to frame it.

00:27:26

Ken Griffin
Right? So when you when you go abroad, when you switch to a different area, you need to learn new skills. Those are really important moments that you demonstrate to those who make decisions about who will that you have the agility and flexibility to take on new challenges and new problems.

00:27:44

Martina Cheung
It's great way, great way to put it.

00:27:47

Joe Cass
Ken, Last question for you, if the 19 year old Ken Griffin, trading in his Harvard dorm room with a satellite dish story, could see the life you've built today. What do you hope would surprise him the most?

00:28:00

Ken Griffin
Yeah, well, I would be most surprised I didn't do private equity because when I was in my dorm room  and I was 19 years old, like Henry Kravis was my icon and I wanted to do private equity and I, I have yet to get there in my journey.

00:28:18

Joe Cass
 Fantastic. Well, that's it. Thank you so much, Ken and Martina for joining me today on The Leaders Podcast. For everyone watching everyone listening, see you next time on The Leaders Podcast.

00:28:27

Martina Cheung
Great. Thanks Joe.

00:28:29

Ken Griffin
 Thank you, Joe. Thank you so much.

00:28:30

Martina Cheung
Thank you.