Toby Carrodus

Investor

Toby’s high school years were spent in a single mother household on government support in a regional area of Australia. Despite this, he managed to excel at school, becoming school captain (class president) and at sport, becoming a sponsored competitive skater. After finishing high school, his determination and hardwork saw him receive multiple university scholarships which took him from Cairns to Canberra and Adelaide in Australia, Freiburg im Breisgau and Berlin in Germany and even Havana, Cuba! Toby graduated with a B.Econ., B.A. (Pol Sci) from the Australian National University and M.Sc.Econ. from the Humboldt-Universität zu Berlin. Having graduated in his mid 20’s with a negative net worth of -$20k, Toby set his mind to learning how to invest and trade successfully. With grit and perseverance his investing prowess saw him become a multi-millionaire in his early 30s. Toby’s career began by breaking into the elusive world of institutional asset management, starting off at PIMCO before working as a trader at a boutique hedge fund. After several years in the industry, he saw the coming wave of technology and automation replacing many roles. Rather than see this as an existential threat, Toby saw this as an opportunity and taught himself to program by consistently getting up at 4:30am before work each day for several years and completing night school. This eventually paid off, with Toby being hired by Winton, one of the world’s most elite, quantitative hedge funds. In recent years, Toby has been focused on systematic, higher frequency proprietary trading. Toby currently resides at Bondi Beach in Sydney, Australia, with his wife and 2 young kids, where he enjoys surfing in his free time.

What does your typical day look like and how do you make it productive?

I generally wake up early, between 4:30am-5:15am (depending on the night before). I usually make myself a coffee and take 15 minutes to myself before starting some work. I find this is a golden time of the day to get work done and plan the day. Some of my most productive and creative work happens at this time as there are zero distractions – it is dead quiet. This peace lasts until my kids wake up at 7:00am. Once they’re up I usually have breakfast with them before starting some more work at 8:00am. Then around 10:00am I’ll do an intense 75 minute workout. I like to go around 10:00am each day as I avoid the early morning and lunchtime peak periods at the gym. I really like to push myself during these workouts as I find it sets me up with energy for the rest of the day. I religiously make exercise part of my routine Monday to Friday. After my workout, I’ll start my next work sprint until having some lunch around 12:30pm. I keep lunch quite brief as I find I am still buzzing from my exercise and don’t need a break from work until around 3:00pm. I generally grab a coffee at 3:00pm to keep me going and make this break social by joining work colleagues or friends in the industry. If I have to have meetings, I prefer to have them scheduled some time from 3:30pm-5:30pm as the first part of my work day is generally filled with deep thinking, research and producing output, whereas the end of the day is more social and interactive. Then around 5:30-6:00pm I am done for the day and it’s family time! I have young children so most evenings are at home but I do try to go out one night a week during the working week as I find it important to stay in touch with industry colleagues and friends.

How do you bring ideas to life?

Generally, ideas come to me when I’m not thinking about them. This happens often when I’m at the gym, going for a run, floating on my surfboard in the ocean, driving on the freeway or even getting out of the shower! When this happens, I take a mental note of it until I can write it down. I think it is important to write your ideas down so you have a record of them and also it forces you to articulate your thoughts succinctly. Sometimes when I go to write an idea down I realize it doesn’t make sense, which is also beneficial. I ruminate on the idea for a while. After having thought about it deeply, I start to share it with others around me and discuss it. If it’s a work environment and I have conviction in it, I will make some notes and if needed, a presentation, set a meeting time and get everyone in a room to present it. My two primary aims for a presentation are to generate excitement and solicit constructive criticism. I think it is good to present the idea to a mix of people with and without domain knowledge. People without domain knowledge tend to ask what subject matter experts might consider the ‘dumb questions’ but these are oftentimes exceptionally insightful questions! (There are of course no dumb questions). After refining the original idea, it is then a matter of creating a plan consisting of concrete tasks with deadlines and allocating resources to them.

What’s one trend that excites you?

Strangely enough, one thing that presently excites me is inflation! I think it has the potential to really shape a new dynamic across the world. People have become too complacent since the Global Financial Crisis in 2008 due to the money printing extravaganza of central banks and the fiscal largesse of governments. There are many companies out there now that are only profitable because central banks have artificially suppressed interest rates (so-called ‘zombie’ companies). So much debt has been accumulated over the last decade that when interest rates rise to combat inflation I think there will be market crashes in stocks, bonds, real estate and crypto. While it may sound distressing to some, this is exactly when real wealth is generated! Such volatility presents remarkable opportunities and one needs to be ready for them. What worked over the last decade is unlikely to work over the next decade and the winners from the last decade can end up as the losers over the next decade. I believe the dynamics that inflation brings to global markets have the potential to generate a big shake-up that changes not only the world order but also the types of companies that prosper.

What is one habit of yours that makes you more productive as an entrepreneur?

First, I want to clarify that I am classified as more of an ‘intrapreneur’ rather than an ‘entrepreneur’. An intrapreneur is someone who acts like an entrepreneur within a company and takes responsibility for turning an idea into a profitable new source of revenue. They essentially think like an owner. Most employees think and act like employees and wonder why they don’t get ahead. Thinking like an owner changes your behavior, especially in terms of generating revenues, saving costs, allocating resources and thinking long-term. Intrapreneurs can do very well – Steve Ballmer with a net worth of over $40bn is a great example. Having said that, I think the role of a trader is akin to that of an entrepreneur, as you’re constantly taking risks, navigating a changing landscape and responsible for generating profit.

Now that we’ve clarified that, I think one thing that has tremendously boosted my productivity is having a disciplined exercise routine where I exercise at the same time each day Monday to Friday – no excuses. Modern entrepreneurship has been associated with ‘hustling and grinding’ 24/7 and no days off, but this is not sustainable and also not going to foster the mental clarity needed to make sensible decisions in a pressured environment. I have found that some of my best thoughts, strategies and ideas come to me either during or immediately after exercise. I believe this happens for two reasons. First, you have removed yourself from the work environment which can influence your decision-making. This gives you some space by not consciously thinking about a topic. Second, exercise gets the blood pumping which affects your state of being and is oftentimes a better state to be in for idea generation than sitting at a desk staring at a screen full of distractions. Going at the same time every day also offers some structure to your day and allows you to maintain your momentum, as colleagues generally know you will be unavailable at that time each day.

What advice would you give your younger self?

Don’t stop prioritizing exercise. Make sure you take some time each day to clear your head, whether it be rhythmic running at a steady pace, meditating or going for a walk, it is more important than you realize. Your future position will be determined by the culmination of all your cumulative decisions and the quality of your decisions improves with a free and clear mind.

Tell us something that’s true that almost nobody agrees with you on.

This is an intriguing question – and one that I heard Peter Thiele asks candidates in interviews. One thing that I believe is true that not many people agree with me on is that we should be rid of the government monopoly on the money supply. This is a strange feature of modern market economies where almost all government monopolies have been dismantled and subject to the forces of market competition (e.g., airlines, oil refineries, automobile manufacturers, etc). I find it remarkable that we have a committee of unelected bureaucrats deciding on the price of money (the Fed Funds rate) based on their subjective opinions when we have markets determining the prices of almost everything else! I felt so swayed by this topic that I actually wrote a paper on it: It’s Time To Review Our Central Banks by Toby Carrodus :: SSRN.

As an entrepreneur, what is the one thing you do over and over and recommend everyone else do?

It sounds cliche, but I think it is really important to have a diary of quotes, lessons and anecdotes on hand so that you can consistently refer to them. This could be a physical notepad or the notes section in your phone. Modern life is so noisy as we’re constantly ‘plugged in’ and connected to so many people and websites/services with their own agendas that compete for our scarce attention. I have found that keeping a small diary allows me to separate the ‘signal from the noise’ and I refer to it daily. I don’t use it as a diary in the sense of writing down how my day was, but I write down key lessons and fundamental principles I have learned that I want to be reminded of. Looking at my diary in the notes section of my phone now I see the last things I wrote were: “things don’t need to be difficult – they can be as simple or complex as you make them”, “focus on the people” and “relationships are key.” Some of these may sound trite, but I like to be reminded of these lessons and principles as otherwise I seem to learn the same lessons again and again. I think the people aspect is tremendously important and often underestimated, particularly in the world I have been operating in (trading). In the high pressure world of trading, we’re taught to focus on the numbers and not to take things personally, but if you truly want to be successful in this field you need to be able to relate to and motivate those around you. By reviewing my diary periodically, it reminds me of the most important things instead of getting swept up into day-to-day life. Other things I keep in my diary are quotes to keep me inspired when things get hard (e.g., Calvin Coolidge’s famous quote on persistence).

What is one strategy that has helped you grow your business?

Again, I would like to point out that I am more of what you would call an intrapreneur, but what an intrapreneur and entrepreneur both have in common with being a trader is assertive risk-taking and innovation. I always make sure I am aware of the overarching objective and targets for my team – ie what is my mission? As long as I am clear on this, I can make informed decisions when the unexpected arises and operate on an “it’s easier to ask forgiveness than it is to get permission” basis. This is what has allowed me to generate higher revenues by taking calculated risks. As an example, I recall one of my colleagues saying “there is a special place in heaven for anyone who can figure out how to trade this asset” in reference to a new asset market. This caught my attention and I started looking at this market despite having other regular action-items on my to do list. I had been involved with elements of this market elsewhere in the past, so I used my prior learnings to rapidly develop ways to incorporate this new market. By being very clear on the mission-critical objective of my team, I knew that reprioritizing on-the-fly to access this new market was the right choice. Ultimately, it became an important new source of revenue. Operating like this requires a level of trust that takes time to build, but it has served me well in my career.

What is one failure you had as an entrepreneur, and how did you overcome it?

My biggest failure stemmed from not committing 100%. Some time ago, I was transitioning between ventures. My heart and mind were set on the new venture but my risk-aversion led me to hang-around at an old venture for too long. I had 2 young children, a tremendous mortgage and a wife who wasn’t working at the time and I was responsible for providing for them, which made me hesitant to take the risk of moving on to the next venture before I had my ducks in a row. In the end, I stayed longer than I should have and it all came burning down, with a falling out of the old venture, which jeopardized the new venture. In the midst of all of this I had to sell my house, which is what I feared most! In the end, what I had feared came to fruition not because I took a risk but because I didn’t take a risk! It reminds me of Formula 1 drivers, who are taught not to look at obstacles because they tend to gravitate towards them and risk crashing if they do.

My key lesson here was that once you make a decision, commit 100%, even if things aren’t quite clear yet. If you really want something, put yourself in a position where you have to succeed, along the lines of “if you want to take the island, burn the boats.” Some good did come of this unfortunate situation though, as it highlighted to me how important good people are and how important my beautiful wife and kids are. By having what I thought was so important taken away from me (our family house), it showed me how life goes on. I can always buy another one. Money comes and goes and at the end of our lives, no matter how rich you are, you can’t take any of your trophies or riches with you when you die! What matters most is people and experiences. A decade after you die, it is likely no one will remember you even existed – so whatever you’re worrying about today likely doesn’t matter in the grand scheme of things. We’re all going to die one day, so you may as well go after what you want in life without fear. Once you make a decision, go all in and commit!

What is one piece of software or a web service that helps you be productive?

I am a prolific user of Python. Learning Python changed my life. It is such a powerful programming language and best of all it is free! There are countless Python packages freely available that specialize in a wide variety of fields ranging from basic time series analysis through to the latest machine learning techniques, as well as simple automation tools like schedulers and reporting tools and even website and GUI design! They are all open source and well-maintained by a global community of developers. It still blows my mind that humankind has reached this point where decentralized collaboration could occur on a global basis and is for free for anyone. Only several decades ago such software would have been prohibitively expensive for the individual and available only to large corporations.

What is the one book that you recommend our community should read and why?

The Almanack of Naval Ravikant: A Guide to Wealth and Happiness. I personally love how succinct and clear many of the statements in this book are. It is the sort of book you can pick up for 5 minutes, read any page and walk away feeling like you’ve learned something or that your horizon has been expanded. Naval has a great way of breaking things down into their core principles and creating general – sometimes abstract – statements that really make you think.

What is your favorite quote?

“What stands in the way, becomes the way” – Marcus Aurelius

Key Learnings:

  • Once you make a decision, go all out and commit to it 100%. Give it everything you’ve got!
  • Make the time to form disciplined exercise habits – it will benefit your physical and mental health and boost your productivity
  • The early hours of the day are a great time to get uninterrupted work done
  • Keep a diary on you to make notes of new lessons you’ve learned and remind you of lessons you’ve already learned