This week on the podcast, my somewhat special guest, Jack Raines, is a venture capitalist and author. I've been reading his Substack for a couple of years and always found it quite entertaining and interesting. His new book, Young Money: A Field Guide to Wealth and Purpose in Your Twenties, is really interesting and wise beyond its years. I wish I had access to a book like this 100 years ago, when I was in my twenties. I thought this conversation was fascinating, and I think you will also. With no further ado, my interview of Jack Raines.
Jack Raines, welcome to Bloomberg.
I mean, extra special guest is way too kind, but.
So my special guests might, normally special guests. I wouldn't want to call him like, my young guest. My, you know, I painted myself into the corner with extra special guest.
That way you can never go back.
Here's my special guest. Really? What's wrong with Jack? He's a special. He's very cowboy hat. That's right. Well, we'll get into that a little bit. So let's roll back so many years ago to when you're an undergraduate studying finance and Spanish while playing football at Mercer. That was before you got your MBA from Columbia. Was there ever a career plan?
Like, not really. It was just, I don't know, I feel like basically every white dude ends up studying finance unless they're dead set on going like med school, law school or like computer science. So it was study finance, and then I was set to graduate in two and a half years because we had to take summer classes with football. And I was like, I should double major. Finance and marketing is stupid. I don't like computer science. Let's pick up Spanish, because it feels like that could be marginally useful. Living in the South. Spanish is very ICAC right now, but it's like sufficient. But there's no real career path other than figure it out from there.
That's intriguing. I'm cracking up because I have so many different ways to go with this. First gig out of school was corporate finance at UPS, which you described as mostly moving a mouse around the screen and trying to look busy.
Tell us about your experience in corporate finance.
Yeah. I mean, to set the stage a little bit. I graduated in December 2019, which was probably the worst possible date to graduate, given that Covid started like three weeks after that. So I moved to Atlanta in January or February of 2020 to start working for UPS. I'm in the office for three days. My computer isn't even fully online yet, and then we're told that we're going remote for one week and then one month, and then everybody had the same experience where a year and a half later, you're still remote. So I don't think it's great to be a 22 year old who's never had a real job, who's then told you're going to work from home while you have, like, your Xbox, and all of your friends are doing the same thing. And it was actually like a terrible environment to start learning how to be a worker. And yeah, it was just zoom calls, Excel sheets, like modeling out fuel cost projections and forecasts for UPS for like 2022. Yeah, I was honestly bored the whole time. And to build on top of that, I'd got into business school out of undergrad. So at Columbia I would have business school at Columbia. And they have a deferred enrollment program where when you're a senior in college, you apply and then you work a few years and go to business school. So I knew that I was going to go to grad school in like three years. Covid hit. I was super bored, working remote, just doing basically nothing. And it just kind of felt like I was at a work from home purgatory for about 18 months. So having that window where, hey, I know where I'm going to be 18 months from now. And in September of 2020, blank.
What led you to say, I think I'm going to quit and just buy a one way ticket to Barcelona and travel the world? Like that's a giant leap, which not a lot of people have the nerve to make. What led to that decision?
So, like when I was a kid, I always loved to travel and my grandparents would take me everywhere.
Your grandma took you on a crazy trip you describe in the book to Savannah in Africa?
Yeah, yeah, when I was 11, my grandma Mama Ruth, she... I'm the oldest grandkid in the family. And she hit me with the idea that she wanted to take me on a trip, like, anywhere in the world I wanted to go. I actually didn't know if she literally meant anywhere. I wanted to go somewhere crazy, like Africa, Asia. And we live in South Georgia. Initially, I pitched Costa Rica and she said, you can... Yeah. She said, like, that's like a three hour flight. And I was like, okay, Tanzania. I thought it'd be cool to go to the Ngorongoro Crater and see Mount Kilimanjaro and all this stuff. So she took me and we went on a two week safari, and it was awesome. And then in college, I studied abroad in Spain. One summer I went to France with my best friend from college. I did a service trip to Ecuador. Like I always loved leaving the U.S. and it was kind of a thing in the back of my head where I knew at some point in my 20s it would be really fun to do like a multi-month trip abroad with like no itinerary other than just see other stuff. And I was sitting there, it's like, you have this, you're working remote for 18 months and you're bored. And then I, for better or worse, had a fortuitous run trading SPACs and SPAC warrants during the pandemic, which gave me more money than I expected to have at 23 or 24. I was like, I mean, it wouldn't cost that much to just go hostel hopping Europe and Latin America for a year.
Yeah, I'm glad you brought that up. You're not a trust fund baby by any stretch of the imagination.
You scrape together some money, you fly coach, you're staying in hostels. You have ten roommates in these flights, eating like McDonald's or euros or whatever every day.
It was the best. I mean, I got food poisoning one time. It was fun. It was fun.
The more recently you wrote a story about going to someone's wedding in, I think it was India, and a bunch of people got food poisoning.
Yeah, it was hilarious. It feels a little bit like India right now in New York. It's like the air quality today as of recording is pretty similar. It's Canadian fires are made. You walk out, it smells like a Barbie that's like yellow. It's like we're microdosing New Delhi air right now. It's great. It's good stuff.
Only without the E. coli that you described.
But let's bring it back to your career. So you do this trip, you go through a couple of dozen countries, you meet people that you're still friendly with. It was really fascinating. And you get to business school. How do you adjust? How do you make that transition?
Yeah. It was interesting. Like in the back of my head, I kind of knew I had this start date moving to New York in August of 2022. So I eventually quit my previous job, first job out of college, in August 21st. I was kind of like, all right, let's spend a year and just have as much fun as physically possible. Knowing that then we're going to go to grad school, then we'll do our career in New York and yada, yada, yada. It was funny because at first it was weird, like, I spent basically a full year out of the country jumping around a lot. And then you're in New York and you have like a home base and business school is not a particularly strenuous thing, but you do have a set schedule where you have classes and stuff. I loved it, though. I mean, I love Columbia, honestly. I love New York in general. Best city in the world, particularly in your 20s. And it took a couple of months to really get in the flow of like living here and then also like you're meeting hundreds of new people like that, but actually getting integrated. Not hard. It felt like a perfect fit.
Really, really interesting. So I'm curious, you learn a lot of things in both your office career or remote work from home career and business school. What did you learn about finance, money, time while you were traveling?
I mean, the biggest thing that really jumped out was it's something I write about a lot in the book, like the... I call it the stage specificity of life, but by that I mean that it's pretty easy to conceptualize money, like what you're taught from like in high school, how money compounds over time. If you invest and it's, you know, you should be frugal and save up money. But what you miss is like, what's the optimal time to spend that money on different things? And the example that I give a lot is like, I was 24 and like sleeping in a bunk bed in a hostel with 12 roommates or whatever, and it was actually just a hilarious setup, like it's just a bunch of nonsense. You have a French guy here and then like a Mexican girl here, and it's like half the dorms are coed, and it's like summer camp for young adults. But then occasionally you meet somebody in their early 30s staying in the same hostel, and it's like you can almost tell that they notice they're like probably 6 or 7 years too late to have done that type of trip. And like the biggest takeaway from traveling was like, if I really wanted to do this trip, this was the right one to do this. Like, I optimized that phase of my life correctly for somebody who wanted to do that type of thing. And that's kind of what stuck with me the most after is not just being aware of what you want to get out of life, but like what things have deadlines where like if that window of opportunity closes, you're just not going to be able to maximize your fulfillment or enjoyment or utility from that experience. Like basically everything you do in life has an expiration date for when you would enjoy it the most.
You can go cheap and cheerful in your 20s, maybe even early 30s, but not correct. So you were also writing before the trip and during the trip. Tell us a little bit about your experience, what you discovered about yourself as you're writing, and why you thought that might be a career path.
So like hilariously, when I was doing the whole SPAC trading thing in 2020 and 2021, I had a burner Reddit account called Barcelos Anthony. It's a play on words on Carmelo Anthony and Xanax bars. It was the name of my college group. We all had edgy, like drug related famous person combination names. I was writing so much stuff about like, oh, like Apollo changed the background header of their website from oil rigs to windmills. I think they're going to take an EV company public through a SPAC, and then they announce a deal with Fisker Automotive three weeks later. It was like borderline conspiracy theory stuff, but it worked. A lot of it worked. Yeah. So I always liked just writing about stuff I was seeing going on in markets. And then when I was traveling, I tried to get hired by Morning Brew, The Hustle, a few different like kind of upstart-ish media companies. Nobody would hire me for lack of professional writing experience. So I just started writing. Like, I just launched a Substack and started writing a newsletter, and it was like half investing and finance and half travel blog, like detailing everything I was doing day to day, who I was meeting, and I just enjoyed it. Like, writing is something I've always found fun. I've always found it a bit cathartic, like putting your thoughts on paper, and it's a good, I don't know. I think it's like a good exercise for anybody to really like distill what you think about a thing is try to sit down and put pen on paper.
So Daniel Boorstin, the Librarian of Congress, has a famous quote: I write to figure out what I think.
And besides that though, at that hour the bars are all closed.
So I, you know, until you put it down, until you put pen to paper or fingers to keyboard, it's sort of nebulous and not distinct. Once you write it, there it is, black and white.
So you come out of Columbia, what's the first gig you're doing while you're... Well, you're a new grad, so sort of step back a little bit.
When I was still in business school, I kind of have this like, I think investing in financial markets are interesting. I really like writing. I had monetized my newsletter fairly well selling ads, and I was kind of trying to figure out which way I wanted to lean with it. And then I had some publishers who were like loosely interested in me maybe writing a book. So I wanted to leave the book writing door open. And I interned for a venture capital fund called Redpoint Ventures my first year, helping them with like building up a newsletter and like editorial strategy and all that stuff. It was like, loved the team there. It was great. My takeaway from that was I should either like go to media or I should like push to get in like an investing seat somewhere, not split the middle and do like the marketing arm of an investment group. So going into my second year, Sam Lessin, friend of the show, he was like contracted by Robinhood to help them with the hiring for, they were building out a media subsidiary called Sherwood News. We grabbed coffee, and he was like, I don't know what your plan is after business school. I think it'd be a good fit with what they're building here. And he started telling me about it, and it checked a lot of boxes of like, on one hand, it was kind of an upstart new media thing with like I would have a lot of autonomy. On the other hand, we were surrounded by the structure of like a big fintech company. So like, media is a tough business these days. There was a lot more stability there from like financial backing. He told me about having a media outlet attached to a large fintech or data services company. The entire pitch was just trying to like basically make a new age Bloomberg.
Sorry. The truth. Did you guys get any Hood stock?
Not terrible. I mean, the issue is I only worked there for a year, so it's not like I got that much, but like it... Yeah. Like, I wish I would have gotten more and I wish I would have stayed longer had I gotten more, is the takeaway from that. But yeah, I ended up joining them for my second year. I signed a book deal for that book the summer after I graduated. So about two years ago now. And then I was sitting there and I just like everything was fine. But I realized after working in a like more structured media environment, I actually like writing a blog. I like kind of free range putting stuff on the internet, but like I didn't like the actual, I can call it 9 to 5 employed version of like financial media. And it kind of clicked in my head when I was at that point of investing thing versus like media, I actually probably should have gone investing track, but I was so hyper focused on like I don't want to kill potential book deal momentum and this and that that I took the other one and I had like a total career panic like almost two years ago, like fall '24.
And there is something to be said about the Daily Beast that must be fed when you're on a regular deadline. Like it's tough.
Yeah, no, it's brutal. And it's why there's so much content that's so useless because hey, there's minutes and hours to fill and column inches and the infinite more of the internet.
I mean, it just never stops.
So that's why we have this firehose.
So you had done Young Money as a Substack. You had done Sherwood for Robinhood. I'm kind of fascinated by an essay you did: How I Lost $150,000 in a Day Trading SPACs.
Tell us about your ramp up in the SPAC world. And then the blow up.
It was, I mean, it was awesome. Like, I don't know if you would have checked my pulse or stress levels at that point, they were through the roof. But like it was crazy. So it's like right when the pandemic hit, I thought I was like the next Michael Burry. I had like $10,000 in my checking account, threw it all in SPY puts, they tripled because obviously the market was going to tank and I was like, yeah, I'm him. And then you know, Bill Ackman a week later was like crying on CNBC saying the world's going to hell. And I was like, S&P is going to a thousand. Let's do it again. Let's buy more puts. You know, I actually, having not really been an adult during '08, I completely underestimated like the Fed and quantitative easing and how that could work and how fast that turned. Like my face got melted off, I shorted the actual bottom. And then I basically round-tripped $10,000 to 30 back to 10. My tail tucked between my legs, I was like, I'm never trading.
Did you ever feel the need to reach over the wastepaper basket and throw up?
No. But like, if it had been bigger numbers, maybe. So I'm like, I'm never going to trade stocks again. I put $6,000 and I open like a Roth IRA, do my one contribution first year as a, you know, adult working. And I don't look at it for a month. And then in May, my friend Jake, buddy from undergrad, was like, do you know what a SPAC is? I say, no, and he's like, well, if you buy this Diamond Eagle SPAC, it'll turn into DraftKings stock in like two months. And I was like, this is like an IPO. And he's like, I don't know, dude, I just saw on the internet, if I buy this, you own DraftKings. And I was like, okay. I went down the rabbit hole. I was looking at it and it's like, and it's at par, it's before it comes out. It was trading and it did trade up, it was trading. So the par for most SPACs is like 10. Then it was trading like 12 or 13.
Maybe 15. But the warrants have like doubled or tripled.
Because all the warrants have a strike price of 11.50. So then I had traded options enough I understood like strike prices, expiration dates, whatever. And the thing that jumped out was that warrants don't expire for five years and they have an 11.50 strike price. So I was doing the math and now I watch DraftKings. After the merger happened, it ran up to 28. The warrants ran up to 8 or $9. Even if it doubled on the stock, you would have made like nine out of the warrants if you bought them at a dollar, like at peak pandemic collapse. So I was like, okay, if this is easy. Well, I was just like, SPACs obviously kind of seem like a bubble right now because there have been like Nikola Motors that announced a SPAC and there were a couple of others, and I was just like, I bet that this thing is going to be a game for a little while. And if I can just pick the SPAC warrants early, I bet I can make money. So Nikola warrants traded for $3. I bought $6,000 worth. I made like 12 grand a couple weeks later, and then I just kept rinsing, repeating SPAC warrants and like six months later, I got from six grand to 150 grand. And I was like, this is so easy. So then I...
By the way, that should immediately set bells off.
I doubled down, though. It didn't set off any bells because then I was like, okay, it did set off one bell. I was like, warrants are risky. And if any of these deals collapses, the warrants go to zero. I should start buying the shares as close to NAV as possible. So I was in like an online Discord chat with a lot of other anonymous people. We built some web scrapers that would pull every SPAC SEC filing. So as soon as a filing hit the press, like trading halts when news comes out for SPACs, I would get a push notification, open up the deck, skim it. If it was electric vehicles, marijuana, outer space, sports betting or renewable energy, I would go all in unless the valuation of the deal was just egregious. I would go all in and I knew that the stock would probably pop like at least 30 or 40% because they just did every time. So you'd get an 11, your max loss is probably like 5% on any trade. And you sell at 14 or 15. So you're basically risking 5% to make 40%, a symmetrical risk reward. That's what you want. And I did that like seven times in a row. And then I went from 150 to 400. And like I only risked on any given trade like 5% of my portfolio. And they didn't all hit, but like enough did that it didn't matter. And my dad, obviously, I kept telling him what I was doing and I hit like it was February 2021, and he called me and he was like, you should probably just sell and just put it in like an index fund. And I was like, I can do this two more times. I'll have a million at 24, I'm pretty sure I can get there.
That should have been the screaming... There's the bell ringing, that.
And then when he and his brother were talking to me about potentially managing some of our family's money, you shouldn't have your 24 year old kid who just made $600,000 trading SPACs touching your grandparents' retirement money. I did not, thankfully. I said, I don't feel comfortable doing that. I'm okay. I was self-aware enough to know that that would have been a bad idea. So getting to how I lost the money at this point was way too many SPACs. Shaquille O'Neal has a SPAC, Paul Ryan has a SPAC, like everybody and their mother has a SPAC. And the bubble didn't pop. It just stopped bubbling because there was kind of this pool of money that was chasing every hot SPAC. And then there's like a hundred of them on the market. Somebody announces a deal. The terms are getting worse and worse, and you're watching this decay in real time.
And it was like by April, May of that year, it's getting tougher. And like a deal to get announced might jump 10%, but you're just... I was like, I was addicted to the rush. So there's a buy now, pay later company called Katapult. And 80% of the revenue came from Wayfair. Obviously a pandemic darling. And this is at the time when Square bought Afterpay for like $30 billion. Crazy price. Affirm went public at like a $30 billion valuation. And like these companies were growing slower than Katapult because Katapult was just a derivative of Wayfair, which was a pandemic darling. They were less profitable, and I was just like, Katapult's earnings are in August, they've had no sell-side coverage. I just need like one analyst from like Morgan Stanley or whatever to initiate like a buy. The stock is going to double. I'm going to buy a bunch of warrants at like .50, they're going to rip. And then this thing, I'm going to make a million on this trade. This thing had already gone public through a SPAC, but there was no floor that deals close at like a normal company.
So not your traditional SPAC trades that you've been doing before.
It had gone public through a SPAC. And it's just like a normal company at this point. And I just went into it with like 300... I think I had like $330,000 at that point. Just went all in. And it started like inching down and spiked back up leading up to earnings. Like I had four different times I could have gone out with like a 10% loss. And I was just like, I was just pot committed. So like, this is going to be the millionaire trade. They missed earnings so badly the stock fell... I think the stock fell 20% before market opened on like August 11th. And the warrants immediately got cut in half by 50%. And that's 150 grand.
And I'm just looking at it and I'm looking at the like level two trading data. And there's a big buy for like 100,000 warrants at a dollar or whatever. And then the floor collapses under it. And I was like, I'm just going to sell to that entire bid and just eat it. I'm like, I'm getting out before like the whole thing is rug pulled, which was the right move because I basically liquidated my position pre-market, went from like $300,000 to like 150 or whatever. And I was just like, man, that sucks. Put it in the S&P and then just went to the gym and worked out for like a real self-loathing workout, three hours.
You know, that sort of big loss is a rite of passage of anybody that's ever worked on a trading desk. I don't care if you're at a Jane Street or if you're day trading from home. Those losses are just so seminal and so instructive. And focus you on, hey, what's my risk management? What's my edge here? What am I really doing swinging for the fences? Am I really putting 50 or 100% of my portfolio into one trade? That seems kind of like... You could read that in the book, but until you've lived it, it's really...
And the issue for me was like the plan I had initially of like buy SPACs at your NAV, sell when they pop, was like a good strategy. And if I had stuck with that, even if it stopped working, it's like, okay, the downside is de minimis. We made a bunch of money. This trade doesn't work, just like park it in the index fund.
Yeah. And then like either come up with something new or just stop. The issue was I was so used to going up, I was kind of willing to bet the house on doing it one more time. Then I'm confident I hit a million, I would have walked away, but that was like a benchmark number.
Oh, you should know that when you hit it, I wouldn't... you would not have walked away. Junkies don't say one more hit and gamblers don't say I just need this parlay to come in.
And then I'm good because you're always looking for the dopamine hit. For the adrenaline.
I would have found something else to speculate on, but I think I would have stopped trading SPACs had that happened.
Coming up, we continue our conversation with Jack Raines, discussing Slow Ventures and investing in creators. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio. My somewhat special guest is on how you want to be... That how you described it? Marginally. My marginally special guest, Jack Raines, is here. He is an associate at the venture capital firm Slow Ventures and the author of the book Young Money, which we'll get to in a few minutes. So I'm kind of fascinated how you pivoted into VC work. You joined Slow Ventures in San Francisco?
Did you relocate to San Francisco and then come back to New York?
So I kind of get the sense you're bicoastal.
I try to make it look bicoastal occasionally on Twitter. No, I mean, the funny thing was they were hiring in New York and San Francisco, and I applied for the New York job. I met with the partner in New York first and then one of the GPs in San Francisco, Sam Lessin. I got introduced to him by the guy in New York, and we're on a Zoom call. He'd like just come from the gym super sweaty and like disheveled looking. And five minutes in, I had to say that and say, okay with that. I think he would agree with it. Five minutes out of the call, he said, what do you think of San Francisco? And I said, fentanyl and homeless people. And he was like, it's a crazy ask for somebody to find a job in San Francisco. And I was just like, I didn't like... I applied for the job in New York, and he was just kind of like, well, I thought I was interviewing you for an SF seat. And I was just like... he told me to like take a beat and like think about it, and I can't riff. I told him on the call or just texted him right after, but I was like, honestly, dude, I mean, I want the job. So I didn't know this is what I was applying for. But if you hire me, I'll move to San Francisco. And he was like, have you ever visited? And I said, no. So but I've been to 25 other countries and 50 other cities. I'm sure I can figure it out.
The only difference is San Francisco has so many more AI startup advertising on some of the billboards and have Waymos, which are awesome. But yeah, like I mean, and they are everywhere. You just go a few months ago, they're so sick.
