Nicolai Tangen: Managing the Largest Sovereign Wealth Fund in the World | E1122

Intro (00:00:00)

• Nicolai Tangen expresses his excitement to be on the show and mentions that he has a countdown clock in his office showing the days left in his 5-year job.
• He explains that having a sense of urgency helps him make faster decisions.

Childhood Background (00:00:31)

• Nicolai describes himself as a slightly introverted child who didn't have many friends.
• He enjoyed reading and didn't feel the need for many friends.
• Despite feeling like a loner, he had self-assured confidence.
• He loved school and was quite good at it.
• His teachers described him as studious, concentrated, and ambitious.

Discovering a Passion for Finance (00:01:21)

• Nicolai developed an early interest in making money.
• He saw making money as a way to prove his worth and overcome feelings of inferiority.
• He engaged in various money-making activities, such as collecting empty bottles for refunds and selling flowers at restaurants.
• His first real money came at the age of 32-35 when he joined a hedge fund.
• Nicolai believes that money doesn't directly bring happiness, but it provides freedom to pursue what makes one happy.
• He took time off after making money to study art history, which made him happy.
• He emphasizes that happiness comes from within and not from external possessions or achievements.
• Nicolai acknowledges that he was a bit of a loner as a child.
• Over time, he became more social and outgoing.
• He attributes this change to moving away from a religious part of Norway and embracing a more social lifestyle.

Biggest Needle-Moving Moment (00:03:50)

• Nicolai Tangen considers his entry into hedge funds as the biggest needle-moving moment in his career.
• He was inspired by the ambitious environment at Wharton, where he studied finance, which contrasted with the more reserved culture in Norway.
• Tangen recalls a classmate expressing a desire to conquer the world, which resonated with him.

Advice on Pursuing an MBA for the Next Generation (00:04:42)

• Tangen does not strongly believe in the necessity of an MBA unless it is used as a means to change career direction.
• He views an MBA as a useful tool for individuals who feel they are in the wrong career and need a significant shift.

Shift to CEO Role (00:05:06)

• Tangen's decision to join the Sovereign Wealth Fund as CEO was not particularly difficult as he was already planning to transition out of his hedge fund.
• He had been running the hedge fund for 15 years and felt the learning curve had plateaued, leading him to consider moving on and pursuing further education.
• The opportunity to combine his interests in asset management, organizational development, and contributing to the country's well-being made the CEO role at the Sovereign Wealth Fund appealing.
• The process of obtaining the position involved applying, undergoing numerous interviews, and facing skepticism from local media due to his lack of recognition in Norway.
• Tangen acknowledges the enormity of the fund but states that he does not dwell on its size as it is almost unreal.
• He highlights the popularity of the fund's real-time value ticker on the website, which he initially thought could promote short-term thinking but recognized its importance as a symbol of transparency.

Market Expectations Amid Lackluster Returns (00:07:05)

• Nicolai Tangen manages expectations by openly discussing the potential for lackluster returns in the coming years due to the current economic environment.
• He believes there will be tougher times ahead and it will be difficult to generate returns, emphasizing the importance of managing expectations.
• Tangen highlights several factors contributing to the challenging environment, including geopolitical tensions, underlying wage increases, climate effects, and increased production costs.
• He suggests that these inflationary pressures could persist for an extended period, potentially lasting for the next 5-10 years.

Investing in Unchanging Favorites (00:08:51)

• Tangen recommends adjusting investment strategies in response to the challenging market environment.
• He suggests focusing on long-term investments, quality companies with compounding potential, market share gainers, and contrarian opportunities arising from volatility.
• Tangen admires Warren Buffett's investment style of focusing on things that don't change over time, such as consumer favorites like Mars bars, ketchup, Coca-Cola, etc.
• He believes that certain market share gainers, such as cosmetics companies that consistently gain market share, are less threatened by technology.
• Tangen argues that some products and industries, like cosmetics and elevators, are not significantly threatened by technological advancements and will likely continue to be in demand.
• He acknowledges that successful creator brands may eventually be acquired by larger companies, as seen in the spirits industry.

What’s on Nicolai’s Mind? (00:11:02)

• Nicolai emphasizes the importance of not magnifying small problems while also ensuring that significant issues receive adequate attention.
• He highlights the need to be conscious about time management, focusing on important matters and avoiding wasting time on trivial concerns.
• Climate change is mentioned as a pressing issue that requires more attention and action.

Challenges in Long-Term Investing (00:11:56)

• Nicolai discusses the concept of time and how our perception of it changes as we age.
• He observes that younger individuals tend to be more impatient, while older individuals become more patient, despite having a shorter life expectancy.
• Nicolai suggests that younger individuals should adopt a long-term mindset and recognize the benefits of patience in achieving success.
• Speed of execution is highlighted as a crucial factor in distinguishing successful organizations from unsuccessful ones.
• Nicolai employs a countdown clock in his office to instill a sense of urgency and encourage faster decision-making.
• The pros and cons of a 5-year tenure are considered, with Nicolai acknowledging both positive and negative aspects.
• Nicolai expresses that he would feel pressure regardless of his tenure due to his personal drive and commitment to his role.

Praises for Sovereign Wealth Fund Approaches (00:14:24)

• Nicolai Tangen praises various sovereign wealth funds for their approaches.
• He specifically mentions the Canadian funds for their long-term thinking and strong institutions.
• He also admires the transparency of GIC in Singapore.
• Tangen emphasizes the importance of transparency in establishing trust and ensuring everyone is on the same page.
• He believes that more transparency is better, allowing everyone to know the facts and make informed decisions.

Key Economic Metrics for CEOs (00:15:40)

• Fair can be measured through the VIX Index and the amount of media coverage on bad news.
• Greed is more difficult to measure but can be gauged by observing societal behavior and sentiment.
• Greed is not inherently bad but can become problematic when it leads to excessive risk-taking and a disregard for fundamentals.

Future of Data in Central Banking (00:19:12)

• Central banks have been slow to increase rates, which has been widely acknowledged.
• Alternative data sources, such as speaking to CEOs about their expectations, could improve central bank decision-making.

Nicolai’s Content Consumption (00:20:08)

• Nicolai consumes a lot of newspapers and listens to podcasts.
• He also learns from the podcast he hosts as it forces him to prepare for various industries and CEOs.
• He gets help from analysts but also does his own preparation during the weekends.
• Nicolai acknowledges that tech firms are highly concentrated, with some individual companies surpassing the market capitalization of entire countries.
• He doesn't view this as inherently good or bad but rather a function of the platform economy.
• He believes that while incumbents can be challenged, the current tech giants have significant advantages in terms of data and scale that make them different from previous dominant companies like Nokia.

US Tech Firm Concentration Insights (00:22:32)

• The development cost of new AI models favors big companies, leading to a winner-takes-all dynamic.
• Nicolai Tangen's investment approach closely follows the index, with significant positions in tech giants like Microsoft, Nvidia, AMD, and Alphabet.
• Sam Altman's insights into the future, particularly in the tech industry, are highly regarded by Tangen.
• Tangen aims to improve the fund's productivity by 20% in the next 12 months, focusing on better analysis, follow-up with companies, and voting.
• Tangen believes the chip shortage will resolve itself as commercial players introduce faster chips, and he trusts Adam Smith's invisible hand mechanism in this case.

Qualities of The Best Investors (00:25:35)

• The best investors combine stubbornness to hold positions with agility to change when facts change.
• Willingness to be lonely in beliefs and sit in discomfort is crucial for successful investing.
• Tangen acknowledges feeling discomfort in less obvious or lonely positions, but recognizes that such discomfort often indicates value.
• Given the fund's representation of a country, seeking extremely unpopular investments becomes more challenging.

Evaluating Regulatory Concerns in Europe (00:26:48)

• Nicolai Tangen expresses concern about increased regulation in Europe, particularly around mergers and acquisitions and liquidity.
• He acknowledges that regulations are necessary to prevent bad actors and financial crises but believes that excessive regulation can hinder innovation and economic growth.
• Tangen compares Europe's regulatory environment to that of the United States, suggesting that Europe's slower growth rate may be partly attributed to its more restrictive regulations.
• He highlights the different attitudes towards risk and ambition in Europe and the US, with Europe being more risk-averse and less ambitious.
• Tangen agrees with Larry Summers' characterization of Europe as a "museum," Japan as a "nursing home," and China as a "jail," suggesting that there may be some truth to these perceptions.

When Will NBIM Hold Bitcoin? (00:28:25)

• Nicolai Tangen confirms that the Norwegian sovereign wealth fund (NBIM) will not hold Bitcoin as it is not within their mandate and they do not fully understand its implications.
• He acknowledges the negative sentiment towards Chinese companies but is unsure if it has reached its lowest point.
• Tangen observes that sentiment is very high in the US offices and real estate sector, while it is very low in China and US tech.
• He expresses uncertainty about the persistence of negative sentiment towards China, citing their deflation, slower growth, and hardworking population.

Psychology & Confidence in Investing (00:29:43)

• Nicolai Tangen emphasizes the importance of confidence in investing and the need to balance stubbornness with insecurity.
• He stresses the need to constantly question oneself and be aware of various factors that can impact investments, such as inflation, valuations, technological innovation, politics, and geopolitical risks.

Climate Costs & Investment Strategies (00:30:47)

• Climate change is a major concern for the fund due to its potential impact on the value of investments.
• The fund engages with the companies it invests in to encourage them to address climate change risks.
• The fund votes at AGMs and has a fixed policy on climate change.

Why People Are Investing in Norway (00:32:24)

• The fund is an investment fund that safeguards the wealth of future generations.
• The fund can be used to support the state budget during times of need, such as during the COVID pandemic.
• The fund provides funding for various public services, including hospitals, schools, and road construction.

Work & Life Balance Insights (00:33:18)

• Nicolai Tangen believes in working insanely hard, but he also believes that if you love what you do, it doesn't feel like work.
• He works every day from 5 am to 9 pm, including weekends and holidays.
• He relaxes by doing what he loves.

Fatherhood & Parenting (00:34:27)

• Nicolai Tangen believes that great fatherhood involves showing unconditional love, spending time with children, and listening to them.
• His parenting style has changed over time, from being hands-on when his children were young to being more hands-off as they have grown older.
• He credits his wife for spending a lot of time on the upbringing of their children.

Building a Culture of Open Communication (00:35:19)

• Admitting mistakes creates a safe environment for others to do the same.
• Admitting mistakes builds trust, even if it seems counterintuitive.
• Vulnerability and leadership are positively correlated, but there is a limit to vulnerability.

Most Memorable Meetings with CEOs (00:36:31)

• Nicolai Tangen found Albert Bein, the chair of Lonza and Givaudan, to be a memorable CEO.
• Bein advised Tangen to:
  • Talk to people at all levels of the organization to gather data and build relationships.
  • Decide on a few key changes to focus on and work on them with the leadership team.
  • Avoid moving too quickly and overwhelming the organization.
• Nicolai Tangen believes in transparency and showing the Norwegian people what they own through his podcast.
• The podcast provides:
  • Insight into the companies owned by the Norwegian sovereign wealth fund.
  • A platform for CEOs, students, and the general public to engage with the fund.
  • A successful recruitment tool, increasing applications for positions in New York and London.
• Nicolai Tangen acknowledges that he has improved as an interviewer over time.
• He emphasizes the importance of:
  • Feeling natural and engaging in the natural flow of conversation.
  • Following up with questions while keeping the conversation moving forward.

Quick-Fire Round (00:40:50)

• Nicolai Tangen, the CEO of the world's largest sovereign wealth fund, advocates for long-term thinking and contrarian investing, emphasizing the importance of being willing to stand alone in the face of criticism.
• Drawing from his personal experiences, Tangen highlights the unconditional love and significance of mothers.
• Reflecting on a significant investment mistake during the financial crisis, he stresses the need for ethical investing and avoiding unethical companies.
• Tangen advises young professionals to adopt a long-term perspective, embrace their individuality, and work diligently to achieve success.
• In a world influenced by AI, he emphasizes the value of human qualities like empathy, empowerment, and encouragement.
• Tangen expresses optimism about the future and believes in unlocking human potential through trust and responsibility.