Legendary Kyle Bass updates us on the threat of war from China and their potential invasion of Taiwan. We discuss the criminal activity alleged against crypto exchange Binance and CZ, and the Trojan horse that is TikTok. Kyle also gives advice to new hedge fund managers starting out and explains how times have changed with much higher risk.
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Ryan: [00:00:00] One. Thank you for joining us today, Kyle, you're one of our most popular guests ever. I think the only episode that came close was what about like the SV banking crisis? So it took a banking crisis to get close to your popularity and streams.
Kyle Bass: So,
Ryan: So the first thing I wanted really talk to you about though, is a little bit of an update on all the amazing work that you're doing. And we, before we started recording, what I was talking about was like, how it's almost like. The perfect business. It seems too good to be true. You're saving the world, you're helping endangered species.
You're an environmentalist at heart, and you're able to bridge that with your background in finance, I'd really like to hear about this black rail bird habitat that you guys are creating and how that came to be. If you don't mind talking a little bit about that for the audience.
Kyle Bass: Yeah, sure. So, you know, o one thing that that I would say people I was not aware of throughout most of my life is when you have development and mostly industrial, but you could also be commercial and or residential. But typically when you are developing [00:01:00] something that has a large footprint, whether it be an LNG export facility or SpaceX or.
Or you're widening a port or anything that you're doing, building highways down, near down near coast coastal areas invariably you're gonna be impacting and sometimes ruining habitats of endangered species or even endangered species migratory PA pathways. The ocelot cat looks like a links or a bobcat, and it, and it migrates.
Through South Texas in New Mexico. And if you were to build a highway let's just say longitudinally across that habitat, invariably those those cats are gonna have to cross a highway, which is a terrible thing. So there are a lot of things that the, the impactors, whether it be the Highway department or the industrial impactor, when they have to build such roads or such facilities, US Fish and Wildlife and the Army Corps of Engineers, two federal agencies have to come in and decide.
much of that habitat you might be ruining. And if you ruin those habitats you either have to go [00:02:00] build habitat nearby and permanently conserve it or leave it to the experts that build those things and permanently conserve them. And those experts will sell you credits. So the, the beauty of this is you get to charge the impact or a pretty penny for their impact, and you create more of the habitat than that's being destroyed.
So it's a pretty good. It's a pretty good way that our government keeps ahead of habitat destruction.
Ryan: And for the listeners that may not know, so you guys are some of those experts and you have on your property, chocolate bay is where we're speaking about the black rail bird habitat that you'll be creating. So these are, this is an endangered species and when it's an endangered species, can you talk a little bit about how that works and how it's gonna work in chocolate bay?
Kyle Bass: Sure. So, at US Fish and Wildlife, basically determines what, what an endangered species is in this particular. Again, this, we're making a big deal out of this bird. It is a, it is, it is one species of many that are on the [00:03:00] endangered species list. But the populations do. The number of factors, including habitat loss and destruction, like we just talked about, coastal flooding, and popula populations of this particular bird have dropped 90% over the last few decades.
And so when it, when they get to a certain number they make it on to the endangered species list and, and It was, this was added at the end of 2020 to the endangered species list, which then once it's on that list, it requires an impact to be mitigated or handled through the US government. So again, it's just a way that the government tries to protect species from going instinct.
Ryan: And, you know, you, you and your team of experts, could you walk us through a little bit about how that would work at Chocolate Base? So you guys would create a, basically a habitat that would encourage their species to continue to thrive.
Kyle Bass: That's right. So, you know, we have you've been to the property Ryan. We've got about 5,000 acres of both upland and wetland area. And it's, it's one of the [00:04:00] largest privately owned wetland areas that's still left on the coast, anywhere near Houston and the Houston Ship channel. And that particular piece of property, what you do is you bring us fish and wildlife out you make the case that yes, this is a habitat for black rails, or it could be because it meets all the specifications of that particular bird, and you need an expert on that bird to come out and tell you whether or not the habitat is, is Is, is, is identical or let's say amenable to that species.
And then once they agree, they agree, we work closely with them to, to basically determine the various, how, how that needs to be architected, what it needs to look like, what we need to do in, in, from an improvement perspective to create that habitat. And the, they, they come out and measure our progress along the way.
And then when we're, when we're finished with it, . We will then put a permanent conservation easement on the area that we build for the black rail. And [00:05:00] once that's codified and, and legalized they will release credits to us that we better are then transferrable to people that are impacting that habitat.
Ryan: Wow.
That's incredible. Sounds too good to be true. And, and at this current state, is there a potential impactor that could. Affect the species and then have to pay you guys credits
Kyle Bass: Oh, I mean, they're everywhere. Basically you know, any, anyone, anyone expanding an L n G or, or train on the coast? The port. Expanding the port facilities or port landing facilities? The highway department building highways, as we mentioned. of those players are gonna be forced, to mitigate their impacts by buying these credits.
And so, you know, it's an interesting supply and demand scenario. You can't create a credit in near Houston and sell it to an impact or downward. SpaceX is in Boca, Chica, you know, hundreds of miles away. It has to be in the same. geographic region is defined by by the regulator. So [00:06:00] again, it's very specific.
You have to, you know, as you know, land prices have gone up a fair amount along with everything else on the inflation side of things. So you have to have the balance sheet, you have to have the capital, you have to have the know-how, you have to have the relationships with the regulators. It's, it is not an easy thing to do, but my partner, Terry Anderson, has been doing things like this for three decades.
and he and, and the rest of our call it on ground team, a biologists and foresters know what they're doing.
Ryan: Yeah.
he's a legend. When I met him, he was really passionate about what he's doing and he's incredible. So I love that you're working together on that. Could you tell me, are there any other updates around Chocolate Bay? You know, you're spending a lot of time in Houston there. Have there been any new updates regarding, you know, the infrastructure bill was a benefit for you guys?
Has there been any updates regarding
Kyle Bass: You know, things move slowly from the perspective of, of the Inflation reduction Act. Some things are moving quickly, like carbon sequestration and some of the new federal tax credits. Some things move a little slower. There were a lot of [00:07:00] grants for coastal wetlands improvement in conservation and preservation in the Inflation Reduction Act.
You know, you have to find grant writers. You have to be deeply, Ingrained in that kind of partnership, either with a local conservation authority or municipality. There's so many things that you need to do to get to the finish line there, and we are we're doing what we can. those, along those lines.
But where we're spending the majority of our time on Chocolate Bay Ryan is, we are trying to get to the finish line on the finalization of the, the envelope and the geographic outline of the, RIS Johnson wetland mitigation bank. As you know, we're, we are looking to do put together over 2000 acres of newly built and existing wetlands into a big.
Wetland mitigation bank where we put a permit conservation easement on it. The Galveston Bay Foundation is our neighbor. They own 5,000 acres immediately adjacent to us. They will be the overseer of said easement. And once we [00:08:00] get that in place we will be one of the few very large private wetlands left, and we will be able to sell those credits to people that are, that are impacting wetlands in the area.
Ryan: Well, it's such a beautiful property and like I think people don't even realize how stunning and massive it is until you go up in the helicopter like we did when we were there to see how expansive and how much wildlife actually is there. There are even birds that were constantly, I forget what the name of that species was, but they, it was, I think they were coming back.
Now that you guys are rehabilitating,
Kyle Bass: Yeah, the, the, we had a, we had, when you were there, we had a, a pair of whooping cranes, which are you and I, I didn't set eyes on them. I don't know if you did on your independent flights, but. The caretakers of our, of the property down there had seen them and those are endangered species as well.
And those ha we have their habitats on property because they were living on property I think you and I also saw those amazing pink birds. They looked like flamingos, but they were pink spoonbills by the thousands, and that was, that was phenomenal
as well
Ryan: Yeah. it's, it's so amazing the work [00:09:00] that you guys are doing and the fact that you're able to merge finance and that as well together is, is incredible. And next, well, I wanted to get into a little bit of, you know what, you know, you're pretty famous for talking about on Twitter right now.
You recently changed your avatar on Twitter to the Taiwan, I think Navy logo. It's a pretty amazing image. Can you tell us a little bit about what that image means and what it, why you wanted to change your logo
to that
Kyle Bass: Yes, sure. So, so at at, at the cost of a blue check mark. I, I think you noticed I guess the new, the new, the new laws or the new laws and regulations on Twitter are, if you change your profile photo, Twitter has the right to review that photo. So they, it costs you your blue check mark until they review.
So at some point in time in theory, they'll give it back. But I just, I saw a story about how the Taiwanese Navy and Air Force. Are sewing these patches on. So this isn't, this is not Taiwan government issued patchwork, but this is something that someone came up with in Taiwan. [00:10:00] And, and the, the funny thing about it, as you know, in China, anything related to Winnie, the poo is banned because there's a famous picture of president, she walking with President Obama.
And someone made the comment online that it, that it looked like Winnie the poo walking with Tigger. You can Google this and look it up. But ever since then, related to Christopher, Robin, Winnie, the Poo, a hundred acres, anything that has that kind of genre of animal is completely banned.
It is not allowed on anything in China. It's not on why.
Ryan: sounds like this guy's got a pretty sensitive ego. He has. He's a leader of one of the biggest countries in the world, and he's got offended
Kyle Bass: Yeah, so, so when you look at that particular patch, the, the, the funny thing when I immediately saw it, it, first of all, it's generating a lot of camaraderie and, and positivity amongst the. know, the forces of Taiwan, which are dwarfed by the forces of, of China. It's the Da David and Goliath battle. But it's, it's a very rare black Formosa bear. And Taiwan, [00:11:00] as you probably know, used to be called Formosa. So it's a black bear punching Winnie the poo in the face. and I just got a, a huge kick out out of all of the symbolism and, and all of the, let's just say all of again the, the epic battle thought that, that everyone has that unfortunately in a very dark situation, people find light and finding that light.
Put a smile on my face.
Ryan: Yeah, it's an incredible image when, we'll, we'll post it in the edit for people to see, and it's a, and it also says Fight for freedom scramble. So,
Kyle Bass: Well, there's another, there's another one too that says Open 24 7. Bring it when you're ready. Which is, which is pretty also pretty funny.
Ryan: So from your perspective, the, a lot of the, there's a lot of camaraderie around resisting any sort of attack from China, and you mentioned something recently in some press that you did where. You mentioned that in the last six years, and if you listen to anti X's p, sorry, X Jinping's speeches that he's always talking [00:12:00] about war and that we're on, that he's on the brink of war, especially in his most recent speeches that he gave.
Wh why do you think we're ignoring that so much? Or are we, and we're just not talking enough about it? And how close do you think we are to an invasion of Taiwan right now? Like how much has that changed in the last couple months?
Kyle Bass: Yeah. Great. That's a, that's a fantastic question. Um, Look, I, I've been following very closely, what Xi Jinping has, has been saying. What he's been writing in, in some of the official work papers for the the 19th Party Congress, which happened back in, in 2017. As you know, the party Congress has happened every five years. Uh, And then the two sessions, call it annual meetings happen, happen each year. And so when, when you look back to what he said in 2017, he talked about the. you know, the peaceful reunification of Taiwan. then from that day forward, things got less peaceful. And in fact they, they outlined in 2017 what would be [00:13:00] a triggering event for a Chinese invasion of Taiwan.
And, and back then it was the Declaration of Independence by any anyone in the Taiwanese cabinet. I, if, if any of the leadership says, we are declaring ourselves independent of China that would precipitate an invasion. What's interesting is you probably can, can imagine that as time goes on, the, the, the Chinese are moving the gold post.
Xi Jinping and the 20th, 2020 party Congress, the 20th party Congress, so sorry, 2022 is the 20th party Congress. He changed the rules of engagement and, and the triggering event to a simple refusal. of China's outreach to reunify i e if you're the, if you're the, if you're this, the let's say the girlfriend of the boyfriend that wants to break up with the. the abusive spouse, or partner, and you say, I just don't want to be with you. That in itself is enough for attack now, so you really move the goalpost in a major way. The most interesting thing to me was [00:14:00] about four weeks ago, three and a half weeks ago, was, was the end of the two sessions or the, the annual, meeting of the, of the central committee. of the, of the of the op, call it the operating Government of China. And it, she gave four speeches in that two week period, of Wall Street and the media were expecting. She to really focus his speeches on the the, the the. Making the economy a re an an economic restart, a a a a stimulus to get the Chinese economy moving again. And all of the four speeches were directing the central committee and the people of China to prepare for war. All four of them.
Ryan: Wow.
Kyle Bass: One of them talked about building 18 new air raid shelters in the Fuji Province. Fuji is, is the province directly across the Taiwan stra, from Taiwan? Well, they're building the largest combat hospital in the history of ti of, of China on the coast.
They're, so, they're building air raid shelters, a [00:15:00] combat hospital, and they just passed a law at the bottom, at the back end of the two sessions whereby stating that if you're an incarcerated criminal in China and any of the Chinese prisons the new law stipulates that you'll be, you will have your sentence commuted if you fight on the front lines of the great war.
Well, what great war are they talking about?
Ryan: They're calling it a great war
Kyle Bass: It's crazy if you just take the time to listen carefully or read carefully what's being said, that the timeline for the war has been, has been basically playing out since 2017. really it hit, it hit a high gear in 2020 where they amended a, a national security law that makes it that gave Beijing the legal ability to foreclose or, or take foreign assets whether it be investments or pp and e in China, in, in special circumstances, including war. My, their words, not mine.
Ryan: [00:16:00] So they're already looking at ways to fund their, their great
Kyle Bass: Yeah. And they, and she, in the middle of May of 2020, instructed his entire banking system to, to risk test their system for under extreme US sanctions. Well, what would cause the US to sanction the Chinese banking system? Well, that would pretty much just be a war, because we all know that the, that Wall Street has a very large interest in China. and that there's no way we would be sanctioning their banking system and removing them from swift unless something really went sideways.
Ryan: Why do you think that we're not talking more about this or why some of the news pundits aren't talking more about this and reading in between the lines? Like you're, in most cases you're not even reading in between the lines. You straight up saying, we're going to go to war, and people aren't. Do you think we're not taking it seriously enough?
Kyle Bass: Yeah, I mean, there is no doubt in my mind that the press and Wall Street, Brit large don't want to talk about this. [00:17:00] And because look, when negative they look. None, none of us want negative things to happen. I don't want World War II to happen. That's the last thing I want. I've got three kids. We have a lot.
We have lives to live. We don't want life to get much more difficult. But you also. right? As, as a position that, that, that we're in, we have to call the balls, balls and the strike strikes. And that's our job is to be objective in our analysis and in, and in this case all of the writing, if I, if you just put it all up on a whiteboard, Ryan, it is clear as day what's happening.
Think back to World War ii. Think back to what Churchill was saying between World War I and World War ii. was screaming at the top of his lungs. should not be lending billions of dollars. The the allies, meaning the uk, the us, and our allies. We lent Germany billions of dollars to help rebuild after World War I, because we felt bad about the the Weimar Republic and the hyperinflation of 1923 and ruining wiping out the savings of [00:18:00] Germany. Well, guess what happened? rebuilt Hitler's army for him. We rebuilt the German Air Force Army, Navy.
Ryan: Mm-hmm
Kyle Bass: Our money was used against us. It is exactly what's happening right now. Money is building the Chinese military civil fusion. They, we are, our dollars are building their. Fighting forces, and they do it under the auspices of being open, and we need an economic relationship with them. And yet their global belligerence as evidenced by what they did in Covid. What did they do? They, they, they, they, they lied about human to human transmissibility. pulled all their research off the internet that was at the Wuhan lab, and they won't let scientists into this day to study the crime scene like they are.
They are an irresponsible global actor that doesn't share any of the same values that the United States and the rules-based order and our allies share. [00:19:00] the only reason we would interface with them, Ryan, is because we, we, we keep chasing that Chinese El Dorado. At the end of that 1.4 billion person rainbow, we have to figure out how we can sell things into China and, and use them as our factory floor to make cheap things. And China has played us like a fiddle and it's easy to see that they're on war footing and we are marching ourselves straight into a war.
Ryan: is there anything at this point that we can do, do you think? Would a stop in any sort of cooperation with them from a business standpoint help this situation at all? And is it mostly Taiwan that they're after?
Kyle Bass: So I think, I think the misconception is that Taiwan is the prize. If you, if you read unrestricted warfare written by two Chinese admirals they talk about they're securing the first island chain, which includes Taiwan, the second island chain, which includes [00:20:00] Japan and, and out to Guam and then, and then the rest of the world.
Taiwan is a simple stepping stone. If, if we allow Taiwan to be taken what that means is everyone in Southeast Asia will have to either submit to China's iron fist or. Gear up and fight. And that also includes Oceana. When you think about Southeast Asia, on the northern side, and Oceana like, well, you know, Fiji, the Solomon Islands and Marshall Islands, all the rest of those on the island nations in the Southern Hemisphere.
I, I just think this is what, this is a misnomer. I just think Taiwan is the first of many. And you even saw the the Chinese ambassador to France said some crazy things over the weekend, right? They said that. He said that, that, that the, the the Baltics have no sovereign boundaries that are, that are recognized by China because they used to be owned by Russia.
Therefore, they're Russian. I mean, saying crazy things like that. Macron should send that [00:21:00] ambassador home, right? I mean, that person was saying World War III is around the corner. because as we all know, Latvia, Lithuania, Estonia are NATO nations. And he was saying that, that they didn't have individual sovereignty, which is just in insanity. And it again I think you see we have something coming and we're whistling past the graveyard, and you ask why. don't see it coming. And I just think the negativity associated with such an invasion would be so many concentric circles, right? You'd have a global GDP decline of somewhere between three and a half and call it 7%.
We'd be in a global recession to a global depression. We'd have to retool in real time. We'd have to immediately retool our supply chains that haven't been retooled yet. And.
Ryan: on them for so much
Kyle Bass: Yeah, but at the same time, like we are the most adaptive nation in the world. We would adapt very quickly. We have the best education system, we have the best entrepreneurs. would and will adapt if this happens. And you know what? [00:22:00] The history, history isn't all puppy dogs and rainbows, right? There are hinges in history where the world goes into very dark places. And I believe that we're, we're at one of those hinges in history right now.
Ryan: If we brought all those jobs over here from China, imagine the, well, the, the benefit they would create for a lot of people here.
Kyle Bass: I mean, you know, the net beneficiaries, if this happens, the net beneficiaries will be the US and Europe. And, and I guess more importantly, places that are more third world countries like like Mexico South America where you'll see, you know, some of that manufacturing will come and be reshored in the US and some of those will be reshored in places like Maki, LAORA and, and in the industrial sector of Mexico, which is a good thing for North America, writ large and, and Canada as well, right? So again, no one wants this, no one wants a global recession slash global depression. But the people that have money invested in China, if they leave it there, they end up losing everything, then unfortunately they deserve it because all of the writing is on the wall.[00:23:00]
Ryan: It seems foolish to have any of your money over there right now, and especially when a lot of people can't get access to their money while it's in China. I'd, I'd love to get your thoughts and thank you so much for ringing the alarm bells on a lot of this stuff and your, seems like you're one of the few publishing.
Really good information on Twitter and being, you know, appearing on CNBC and as many news channels as you can to, to speak about this. We don't have enough people speaking about it. I'd love to get your thoughts as well on the Binance CZ situation. You know, he's been reported to have some connections to the CCP and there's like a lot, Binance seems like it's about to collapse any minute now, and that could have greater repercussions for crypto in general.
What are your general thoughts on cz and the, you know, that, that we've heard that they've had some, they've been funding criminal activity and their connections to the ccp.
Kyle Bass: So if you remember, there was a Russian living in China operating a company based in Hong Kong that, that we were able to grab. Basically if you, if you read the indictment, that the, the US Department of Justice, brought against [00:24:00] Anato, like Mon with, with the company his crypto company, biz Lato, what I found interesting about that indictment is it named the number one counterparty for let's just say all for seven up to 700 million of their kind of dark web transactions happen to be Binance.
And so they named Binance in the indictment of bis Lato and, and the, the DOJ minced no words in that indictment. they talked about it just being a entire criminal enterprise. And it became a safe, the result was that Bis Lato became a safe haven for criminals, drug dealers and ransomware groups.
That's what the Do Chase said Breon piece, the US attorney in Brooklyn, they knew that when the police traced their funds into bis, Lato, bis, Lato would not be over to turn its users and true identities so that they hid there. But Biz Lao's, number one counterparty was CZI and Binance. now, you know, the, the rumors have it that cz lives in [00:25:00] Dubai his wife and his mistress and his mom Now,
Ryan: my God.
Kyle Bass: Apparently there's, there's all kinds of unpacking to do in that statement.
And I'll, I'll stay away. I'll stay away from the unpacking. Let's just, let's just say that there's a lot more to the story from, from what I hear in, in international circles than meets the eye.
Ryan: It sounds
like there is and it sounds it
sounds especially like when we, we saw the c e O of TikTok recently speak to Congress, and he couldn't answer simple questions like, are you con being controlled by the ccp, or does the CCP have any connections to your business? And he wouldn't really answer it,
Kyle Bass: That was, that was one of, that was, yeah, that was one of the worst appearances before Congress that I've ever seen. The guy, the guy was terrible it's clear as day where he's coming from and they, they've already admitted to. You know, the data being breached by Beijing and the C C P, and now they're saying that well, they'll move the data to the [00:26:00] United States shores or to, to Oracle or, or wherever those servers are gonna be.
But they, the, the Chinese Communist, the C C P has said, if we require the algorithm to move, they will shut the company down. And you say, wait a second. Whose company is this is, I thought it was a private company. What do you
mean
Ryan: Clearly it's not if the, the government is actually making demands. What is your thought? What, what's your thought on the latest on that? And we saw Montana was the first state to ban TikTok.
Kyle Bass: yeah. I mean, outright. Yeah. I mean, I think Montana took the lead here. It's, there's no doubt in my mind that it is the digital Trojan horse. it is in our kids' bedrooms. The algorithm has direct implications or it can even lead the thought processes of our children. It is that we've allowed this to happen. We must unwind it. And, you know, look, bite dance owns a lot of companies. TikTok, U s A is like a billion of 15 billion of free cash flow. [00:27:00] Just think about that
Ryan: Wow. I didn't even know they did
that
Kyle Bass: Is so if, if I were them, and I realized they have the digital Trojan horse in the gates and they hired a hundred lobbyists or more to, to try to drive a wedge between our political parties to try to keep it alive. In the end, it must be either completely sold, the algorithms gotta move to the us, the data's gotta move to the US in all ties to China have to be severed. Or it has to be shut down.
Ryan: which it seems very unlikely that they would be able to just move everything and then ch check the code. How do you know that the code doesn't have something secretly hidden in it? And there's, so it seems like pretty unlikely we'd be able to just fully move it from them or sell it from them.
Kyle Bass: And again, now, now I'm gonna speak way out of my way, way
Ryan: it when you do
Kyle Bass: Myoi, but I, but I've read, I've read enough about this, that there was a, a, a great press run on this where they talked to a number of developers that use the soft, the software development kits of different apps. Apparently they're [00:28:00] 20,000. Apps that use the software development kit, the sdk that, that TikTok gives 'em, and they're all with the same call it ccp, malware, and gates. So even if you were able to remove TikTok from your device, if you've got other, any of those 20,000 apps on your device, you have the same doorways to the ccp. that are built in. And so unfortunately, unfortunately, everything's compromised in, in my mind. Again, I'm speaking out of term because I'm not a software developer and I know nothing about exactly how tech works. So you take that with a grain of salt.
Ryan: wow. Well, again, thank you again for ringing the bell in a lot of these situations and like I see so many like friends of mine who are on TikTok and the way that it's been able to infiltrate daily trends in their lives it almost happens instantaneously. So it's like a, a drug that a lot of them Americans are hooked on right now. B. Before I let you go, there's a couple couple questions I wanted to ask you. One thing that Prometheus is trying to do is make it easier for [00:29:00] smaller hedge fund managers to do their job effectively. C, if you could think back to when you were starting out as a hedge fund manager, would you be able to tell me a couple of the biggest pain points that you may have experienced when you were starting out, or if you had advice for small hedge fund managers that are starting out there, or any fund manager in general?
Kyle Bass: Yeah.
You know, I, I think you have to, you, you have to bifurcate this idea of small into two, two kinds of people. Let's say you were at working at you know, Duquesne understand, or let's say you're working at, at any of the big hedge funds, let's say you're working for Dan Lobit Third Point, or Bill Ackman somewhere.
Let's just say you were working for someone. That had institutional relationships with investors and you had that back and forth with an investor. If you're leaving the start a new small fund you are gonna find it much easier than, so two kids coming outta college, super smart, let's say, you know, one 60 plus IQs and it's two kids in a Bloomberg. Those days are all but over.[00:30:00] Given the new compliance regulatory environments, given the institutional reluctance to in new startups that where there's no pedigree and no history I think it's just much harder for those, for those people. But let's assume you, you do get launched and you are small. I think that a, you need to have a huge portion of your own net worth invested. Just so that your money is where your mouth is. Some, some of the biggest pitfalls are trying to put together a track record where you have low to no monthly drawdowns and un you know, under these, this model, these models where all these managers try to live in a, in a market neutral delta adjusted neutral, not no lose environment, then that means you're never gonna win a lot. So I, I just think that being yourself, keeping position limits in your own, under your own let's just say compliance programs as opposed to someone else's is really important because you know that Warren [00:31:00] Buffet has bad days and he has bad months and bad years, just like the rest of us do.
And, and trying to ensure yourself against low-vol and no drawdowns is, is a way toure yourself out of business. So, you know, my advice is you know, believe in yourself, set your own risk limits, and be careful with short positions, right? One thing we've learned. the, in the expansion of M two that we saw in 20 20, 20 21, and the you know, let's, let's call it the the game stops of the world. You know, if you have a 2% short position that goes up 600%, you lose 12% of your fund. So you have to be very careful sizing things on the short side.
Ryan: Do you think that's why those days are limited now, where you could, you were, you know, you were a small fund at one point and you know, just you and your Bloomberg. Do you, why do you think some of those days are limited now for people?
Kyle Bass: I just think that that with Dodd-Frank and with the enormity and the complexity of the [00:32:00] K Y C A M L rules, the know your customer anti I money laundering rules and the rules regarding. Chief Compliance Officers and Compliance Oversight, you know, it's really hard run staffing levels where you need to staff them and pay those positions.
You know, chief Compliance Officers don't come cheap guys. And when you're running, again, two people in a Bloomberg and trying to make a name for yourself, that's a massive negative cash flow you have to put together. So all I'm saying is it's much, much harder today than it was 25 years ago.
Ryan: Kyle, thank you again for being part of the show today. Incredible as always. And your thoughts on macro China and what's going on in the world today and the amazing work you're doing with Chocolate Bay and your new project is just amazing. So thank you again
Kyle Bass: It's been a pleasure, Ryan. Thank you.