Nicolai Tangen on Managing $2 Trillion, AI Bubbles, and Contrarian Investing

Nicolai Tangen

The thing to lean against, if you really want to do the opposite of everybody else, would be to do less AI-related investment and more real estate.

Nicolai Tangen

That's a very tough one. But it's not very popular, and I see that a lot of big investors are reducing their exposure to real estate. That's probably a good sign that there are better times ahead.

Nicolai Tangen

It's very bad. In a way you've had a perfect crisis there. COVID meant more people were working from home. You had some trouble with part of the banking system. You had rates being relatively high. So you had a few factors impacting it negatively all at once.

Nicolai Tangen

We have been very low for a very long period. I think there are structural issues which mean they'll probably be a bit higher than they have been. One factor people don't talk much about just now is the impact of climate. Climate is affecting harvests and prices for a lot of raw materials, particularly on the food side — chocolate, coffee, and so on. Then you get fires. You get a lot of impacts from climate on pricing structures, and it hits insurance rates too. Now, the thing pulling in the other direction is of course efficiency gains through AI — you'll have much more intelligence at cheaper levels.

Nicolai Tangen

Well, that's the trillion-dollar question, right?

Nicolai Tangen

It's pretty hot — I think we can agree on that. Take Jensen Huang, the CEO of Nvidia. He goes to Korea, hangs out with the guys at Samsung, and they have some deep-fried chicken. When they're photographed in this chicken restaurant, the share price of that chicken chain goes up like 20%. The company that breeds the chicken goes up a lot, and the company that makes the robotic arms to deep-fry the chicken goes up a lot too. That just indicates to me that this is a very, very hot sector when things like that happen.

Nicolai Tangen

For the bubble, you'd look at valuations, at circularity in terms of ownership, at vendor financing — these types of things. You'd look at news coverage. You'd look at what happens when they eat chicken at a restaurant. You just look at how frothy a sector is. On the other side, it has huge ramifications for how we live our lives. In our firm we're increasing productivity probably by 20% just by using it more. We're stuffing it in wherever we can, and it's making a huge impact.

Nicolai Tangen

It shows up in that we do more with the same number of people. We're keeping headcount flat and just producing more, and producing better quality.

Nicolai Tangen

A slower world economy. AI leading to more productivity gains. Humanoids — increased use of robotics, which is just a cheaper labour supply.

Nicolai Tangen

No. There is always a human in the loop, but it's helping us. It's supporting our decision-making.

Nicolai Tangen

Not in our place. But clearly in some places — you have fully automated investment models in a lot of places.

Nicolai Tangen

Interpersonal skills — the ability to talk to people, the ability to listen, and empathy. These things have always been important, but they're even more important now, and I'm seeing it in so many places. It's really interesting.

Nicolai Tangen

That's a tough one. You can point out to people that they talk all the time and don't listen. But it needs to come with some curiosity, because if you're not curious you're not going to listen. Generally you should listen twice as much as you speak — that's why you've got two ears.

Nicolai Tangen

They're just processing and can't wait to get to their next question. There's very little listening. I spoke to a scientist called Saul Perlmutter, who got the Nobel Prize in physics. He said: Nicolai, we're now at the stage in the world where, for the first time, we can solve all the problems. We know how to solve the climate problem. We know how to feed everybody in the world. We have the technology, we have the science. It's just that we don't talk to each other, we don't listen, we don't work together properly.

Nicolai Tangen

One of the biggest problems now is that we close up. If you look at the golden ages we've had — Rome, Venice, the Song Dynasty, the Netherlands — these places that did really well were open economies with free trade and free movement of labour and thought. What they all have in common at the end of the golden ages is the closing of free trade, tariffs, the end of immigration, the end of free thought, the rise of the strong man, an attack on freedoms of all types. And we're seeing that in many places of the world.

Nicolai Tangen

All of the above. You need new ideas — you need to rejuvenate countries and societies. But clearly free speech is important. How do you see the difference between American and European mindsets?

Nicolai Tangen

This is super interesting. I'm in New York for a month now, and wow — the energy here, the entrepreneurship, the drive. The level of ambition is super high. Versus Europe, which is a fantastic place too, for different reasons — culturally incredible, the food pretty good in many places — but with less ambition. The thing with ambition is so interesting: if you have really high ambitions, you achieve great things even if you fail. If you have low ambitions, you achieve nothing even if you succeed. And then, of course, you work much harder in America. That's just a fact — you get less holiday.

Nicolai Tangen

I think it's both. Good for some things in society, and not so good for the people involved.

Nicolai Tangen

Absolutely. In a way, Norway is the opposite of Wharton, because in Norway everybody's supposed to be the same. You have this thing called Janteloven — don't think you're fantastic in any way, shape or form. So I sit there in a class and it's, hey, what do you guys want to achieve in life? And one of my fellow students puts his hand up: I just want to conquer the world. That's a totally normal statement at Wharton, but it's not particularly normal where I'm from.

Nicolai Tangen

I don't think you can change a nation. But you can change it in your own company — you can work on the corporate culture in the firm you work in — and you can change it with yourself, your family, and your friends. To change the ambition level of a whole country, I don't think you can do that.

Nicolai Tangen

I never do politics, because my job is totally non-political. But if I were prime minister for a day, and my only job was ambition, I would inject AI everywhere. I'd go all in. In Sweden in the 80s they had something called the home PC — they bought 800,000 PCs and put them in people's homes, and it just increased the digitalisation of the country. So now you have Spotify and all these things. Is it directly linked? Probably not, but they increased the digitalisation. Now they're doing the same with AI. In Iceland they just announced a cooperation project with Anthropic where they're basically going to stuff it into all the schools. I think it should be perfect for Norway — a highly digitalised country where people think it's nice to have a lot of spare time, and AI helps you with that. You read the book about Nvidia, and Jensen Huang talks about a once-in-a-lifetime opportunity. This is a once-in-a-lifetime opportunity for people, companies and countries to pull apart. If you don't do it, you're going to be left behind.

Nicolai Tangen

I don't know why people wouldn't do it. They should do it. They so should do it.

Nicolai Tangen

I don't have just one or two data sources. I read a lot of newspapers, and what's going on in the world now is so incredibly fascinating. I wake up at 5 and spin out of bed — I can't wait to get out of bed to read the papers: the Financial Times, the Wall Street Journal, the New York Times. The stuff that goes on now is incredible — things you didn't think were possible a year ago are now happening. A few weeks ago I was up in a forest with seven of my best friends, and we were predicting what's going to happen over the next 12 months. We tape-recorded it, and then we played our predictions from last year. These are really clever people — and how do you think we did? Terrible. We were 80% wrong. We didn't predict that Trump would win the election a few weeks later. We didn't think about tariffs, or the relationship between the US and Europe, or what's going on in India and China. We had no clue. So trying to predict in this world is more and more useless. What you need to do is work on speed and agility.

Nicolai Tangen

Speed is a mindset. Going back to New York — I buy an egg-and-ham roll every morning, and the speed with which they wrap it is incredible. Speed comes to a first principle: things shouldn't take longer than they need to take. You save time by being fast. If I send you an email and you answer within one minute, how long does that email need to be? Two words. And I'm impressed, because you answered quickly. If you answer the next day, it needs to be a paragraph. A week later, it needs to be a page. So you save time by being quick.

Nicolai Tangen

I try to build urgency into most things. In my office I have a clock that counts down the number of days I've got left in the job. It's not because I look forward to stopping — I love my job — but I have this thing on the wall. So someone comes in and says, hey, we're going to work on this, I'll sort it by January. And I say, January? Look here — I've got 1,765 days left. We need to do it now. And he says, oh really, you only have 1,765 days left? Let's do it now. You build urgency into these tasks.

Nicolai Tangen

The most important thing to have in investing is that you need to be stubborn, but you need the ability to change your mind. Very few people have that combination — somebody like Stanley Druckenmiller has it, but it's rare. You need to be stubborn to do the opposite of everybody else. And when you make these contrarian investments, there will be periods where everything goes against you and it's stressful, but you need to hang in there.

Nicolai Tangen

To a certain extent. It's easier as you get older, because you've seen more cycles. But it's difficult to find people who are really contrarian, because you need to live in a space where people don't agree with you — and in today's world everybody wants to be liked, to have a hundred likes on Facebook. So when I give presentations at universities, I ask: anybody here who thinks differently from other people, who thinks they're weird, that nobody understands them — hands up. Typically less than 10%. I say, you guys, you're great, we'd love to hire you. Can everybody else put a hand up? The other 90% — sorry guys, you're just like everybody else, you're never going to make much money. But there's hope. You can change. I hope they go out of that room thinking, you know what, I want to be different. It's something we should treasure.

Nicolai Tangen

You don't have to be disliked even though people disagree with you. In my mind, life is not a popularity contest. My wife says only people without friends say that — but I don't think so. Life is for sure not a popularity contest.

Nicolai Tangen

No. But I also don't read the positives. And I don't believe them. I don't believe the positives, I don't believe the negatives.

Nicolai Tangen

I go through the headlines and then drill down if it's something I'm interested in, or something I know I should know more about, or if I'm going to meet somebody interested in that field — then I pass it on to somebody else.

Nicolai Tangen

That's where I think we can be better, by using more of a scientific method. I do think there is something called an objective truth — something which is correct, and we need to find it. I have much more of an open mind now than I had in the past. I listen to more different types of input and opinion, and I try not to jump to conclusions.

Nicolai Tangen

I don't run money myself now — I run a company where a lot of people run money. But for sure it makes you a better investor if you take more of the different opinions into the equation. If you're long something, you listen to the shorts, and vice versa. There really is a truth.

Nicolai Tangen

I would like to think so. How we get at that truth is by listening to different types of people.

Nicolai Tangen

Of course. Then you link in analysis and pattern recognition, and hopefully you get to something which is correct.

Nicolai Tangen

It's a difficult one. In some ways I've probably become more risk-averse. On the other hand, there are some risks I take more of now than in the past. People's risk appetite depends on many things. Everything else being equal, men take more risk than women — which is why we crash our cars much more. Young people take more than older people. Extroverts take more than introverts. It's geographically based — American people take more risk than, say, Asian people. I'm not the one who invented this — I did a degree in social psychology, and one of my papers was on exactly this: how risk appetite is linked to the big five personality traits. As you get older you take a bit less risk on average, but as you build wealth you sometimes take a bit more.

Nicolai Tangen

Risk is interesting. If you do private equity and interview somebody like Steve Schwarzman, it's really important not to lose money — you need to look at the downside. In venture capital, it doesn't matter if you lose money on a lot of stuff, as long as you capture the really big winners. You can lose nine out of ten as long as you get the one that goes up like a rocket. The issue is that the entry ticket for the rocket, which was $1 million in the past, is now $500 million. So that rocket better go up.

Nicolai Tangen

We are very index there. We got a really great investment mandate from the minister of finance. It tells us roughly how we're going to be positioned, gives us a risk budget, and we stay pretty close to that. That's important, because it also limits how much money we can lose. About 20% of the capital we run in a very active way, and the other part does smaller tweaks.

Nicolai Tangen

The inflows are monthly. You get the money on a particular day, and then you have to think about when to deploy it into the market — a bit beforehand, a bit afterwards, a bit before and after. We use AI to optimise those kinds of decisions.

Nicolai Tangen

Yeah.

Nicolai Tangen

Everything has gotten harder. What's getting easier is research, because of the deep-research functions in some of the models — you get an incredible amount of knowledge within five seconds, well structured, and you can play around with it. That's just phenomenal. It would have taken ages before.

Nicolai Tangen

The pro is that it's cheaper — people don't pay that much in fees, and it's difficult to beat the market. The negative is that it tends to perpetuate bubbles: with more passive money going into stocks that have done historically well, it perpetuates the moves.

Nicolai Tangen

Relative to the index. We're measured against a reference index constructed by the ministry, and we try to beat it. Historically, over close to 30 years, we've had 25 basis points of outperformance. You'd say that's not much — but if you have a lot of money, it ends up being pretty big absolute amounts.

Nicolai Tangen

The worst mistake was during the financial crisis. We were in a subprime lender, and it turned out there was accounting fraud. It was a big position, and it's the worst investment I've ever made. What I learned was that you don't want to go into dubious business models. Is it ethical to lend money to people who are in a tough situation in life? I don't know — but it certainly was a really bad investment, and I wouldn't invest in that type of company now.

Nicolai Tangen

It's the business model. I just don't think you should profit from people who are having a tough time.

Nicolai Tangen

I don't think there's a good counterargument. It's how you do it and what you charge for it. It shouldn't be usurious rates.

Nicolai Tangen

Totally, I did a postmortem. And you come back as long as you don't make the same mistake. Why make the same mistake when there are so many new ones to find? The interesting thing is that most people take less risk when they lose money, even though you should take the same amount. So we use a sports psychologist. I sail, and I did a lot of competition when I was younger, sailing with some of the British Olympic sailors. I asked them why they were so good, and they said two reasons: a really good debrief system, and working with a sports psychologist on mental strength. In sailing, you can be number one, and then the wind direction changes and suddenly you're last. The next race you need to take the same risks — you cannot let it affect you. It's the same with investing. I did a podcast with the chess player Magnus Carlsen, and I asked what happens when he loses a game — he takes more risk in the next one, which I find interesting, because normally people take less.

Nicolai Tangen

It was my dream job. I'd set up an investment company called AKO Capital, and after about 15 years I thought it was time to pass it on to the next generation and do something else. I wanted to go back to university, and I'd just done a degree in social psychology and organisational development. When this job came up, it combined asset management — the most interesting thing you can do, because it's about everything that moves, everything you eat, where you drive; it's about psychology, markets, greed and fear, macroeconomics, geopolitics, defence — with organisational development, and the chance to take this organisation somewhere it hadn't been before and do something great for the country. All my interests came together in one job.

Nicolai Tangen

I'm too humble to advise anybody in that field. What has worked well for Norway is a sovereign wealth fund with broad political anchoring — the political parties generally agree on the big decisions, so when the government changes, you don't change the way the fund is run. Then transparency: we're the most transparent fund in the world, and there's actually a world championship in that, run by a Canadian company called CEM in Toronto, and we've won it three times in a row. And the last thing is a spending rule — the politicians spend a maximum of 3% of the fund every year. Broad political anchoring, transparency, and the spending rule are three really important factors.

Nicolai Tangen

The fund is 25% of the state budget. But the whole idea is that the fund should not be political.

Nicolai Tangen

That's not politically decided. We have a group of very experienced people who look at the votes. For instance, we look at pay packages — are they structured in a way that aligns with our interests, are they long-term enough, are they equity-based enough, those kinds of things.

Nicolai Tangen

I'm aware of the big ones, but I deliberately do not make those decisions.

Nicolai Tangen

The team thought it was too big and didn't have the right alignment with shareholders — and the fact that it was dilutive. We own shares in 9,000 companies. If all the CEOs were going to have a billion dollars, that would be pretty expensive for us.

Nicolai Tangen

I think so.

Nicolai Tangen

It's very difficult, because people want to do things. Wealth is basically created by owning one or two really good assets and then holding on for the very long term — that's how the really big pockets of wealth have been created. So you make money by doing as little as possible in terms of changing ownership stakes. But imagine you're a portfolio manager. You come home on Monday and your husband asks how your day was — I did nothing. Tuesday — nothing. Wednesday, Thursday, Friday, the same. It's not intuitive that that's easy. Very often the most difficult thing is not to do anything. One way to look at it is what I call the inertia analysis: you take the portfolio from January 1st and see what the result would have been if you'd made not a single change, then compare it with your actual results. So often you've actually detracted from your performance by the things you've done.

Nicolai Tangen

You have to figure out your time horizon. Ideally, with a wealth fund, we should think 50 years ahead. But that's tough, because you haven't got a clue what the world will look like in 50 years. We don't even know what it'll look like in three years — three years is probably the maximum you can look into the future. So it's very tough to be long-term in what you do.

Nicolai Tangen

I did that quite a lot. If your gut feel is good — and people don't believe in gut feel, but if you call it pattern recognition, more people believe in it — if your pattern recognition is good and you see something interesting, the probability of it being a good investment is well over 50%. By taking a position, you create urgency in the research process, and it's also easier to add to the position if it goes up, because you already have some shares. So mentally it's a bit easier to get going.

Nicolai Tangen

No, you can't. But you gain it with time. I did a research project when I studied social psychology, interviewing the 20 best asset managers in Europe about pattern recognition. First of all, if you call it gut feel, nobody believes in it; call it pattern recognition and a lot of people do. You only believe in your own gut feel, not anybody else's. And you can't apply it when you're young, because nobody believes in it — you can't go to your boss and say, I think we should buy a hundred million worth of Apple, and when he asks why, say it's just a gut feel I have. You need to be pretty senior, ideally the boss. The best people use a combination of pattern recognition and analysis, depending on the situation. If you're pressed for time, you're more likely to use pattern recognition; and if it's a really complex situation where it's difficult to put numbers on the outcome, pattern recognition matters more.

Nicolai Tangen

His gut feel gives him three different moves, and then he analyses them for five or ten minutes — but beyond that he doesn't need more time, because it doesn't add to the outcome. We overanalyse a lot of things, and by overanalysing you often don't improve the outcome, but you make yourself more confident about it, which is also not always a good thing.

Nicolai Tangen

I'd argue you get feedback all the time in investing, because the share price tells you something.

Nicolai Tangen

It depends. It can be either.

Nicolai Tangen

Generally, the share price going against you is an indication that you may be wrong. But of course you don't know for sure.

Nicolai Tangen

First you have to create an environment where people are okay to disagree with you. You need to listen and take what they say into consideration. In the beginning, people didn't disagree with me — they all agreed, and that's not very good. Now they disagree all the time, which is really good. We put the disagreement into a physical object to take it away from the person. We have these pucks on the table — here's a straight puck, I disagree with what you say, I think you're wrong. So it's not personal. Now we have a straight-puck award: the people who properly disagree with me get one.

Nicolai Tangen

You just have to work on getting a feedback culture. It's not easy to give feedback and it's not easy to receive it, so you have to do it all the time. I'm getting better at it — I'm more of a straight talker now, I tell people when I disagree, and I try to give feedback straight afterwards. But it's not easy; people are very sensitive.

Nicolai Tangen

You can pack it in a touch, but I think you just want to be pretty straight. It's also age — young people are very sensitive, in the Nordics we're hyper-sensitive, and in the public sector they're very sensitive.

Nicolai Tangen

Absolutely.

Nicolai Tangen

Curiosity, intelligence, integrity, drive.

Nicolai Tangen

What are you trying to learn now? What have you learned lately?

Nicolai Tangen

Because you want people to come by and talk to you. I've got a sofa next to the ice cream box, and I hang out there quite a bit. People come by for an ice cream and say, hey, what are you working on? And they tell me. Sometimes I say, have you spoken to this person, I think they're doing the same thing? So I learn a lot. The payback on that ice cream box is probably a thousand times over.

Nicolai Tangen

I had 140. This is something I learned from a man called Albert Benny, who ran a Swiss company called Geberit and another called Lonza. When I got the job I thought, what do you do when you get a new job? So I rang all the best CEOs I'd ever met and asked how to approach it. You have a lot of conversations, and you do them before you start, because after you start you won't have any time. People need to get to know you, you need to get to know them, and you need more data points to make your decisions. So I sat down with 140 people and just asked, what's on your mind? By the time you've had half of them, you get the general gist of what you need to do — you've triangulated, the same things come up over and over. I do the same now: I'm in New York for a month, sitting down with everybody in the firm here, about 100 people — what's on your mind — and a pattern emerges.

Nicolai Tangen

I do, but I probably should do it even more, because we all do things that don't make sense. We make reports nobody reads, that kind of thing. So you distil down: of everything I've taken from these 140 conversations, what are the three most important things? Then you put together a leader group and execute those three things, and you take the time it takes. Leaders who fail try to do too many things too quickly. In the beginning we moved too quickly twice, then we got the message and slowed down.

Nicolai Tangen

First, you need to execute change as a combined leader group. If you try to do something on your own, you'll trigger the immune system of the organisation — it just wants to have you out, and it often succeeds; you get isolated and don't get things done. The organisation needs to feel this is a combined leader group, so there's no point resisting the change, because it's coming — I might as well accept it. Then you prioritise, keep to not too many things, and overcommunicate. The thing with overcommunication is becoming clearer and clearer: you think you've said it, you think they've heard it, but they haven't. It's very tough to get something to really permeate an organisation. You think, I've said it ten times, I'm so bored of myself — but then you're only halfway. You just need to keep going.

Nicolai Tangen

It's difficult to see before they've been in the position. Most people I see are competent — otherwise they wouldn't have got the job; they know their stuff, they know the company. But are they good communicators, are they good at executing? That's tough to see from the outside. To change a culture is a 10-year project. I've been in the job for five years now, and I think I'm roughly halfway.

Nicolai Tangen

If you do it faster, you need to lay off people and change the people. In some businesses you can do that, but in Europe it's difficult — and also we have amazing people, an incredible line-up of very able professionals. There are just a few things we'd love to change: we want more feedback in the system, we want to move a bit faster, we want a bit less fear.

Nicolai Tangen

That's really to the credit of the politicians. When they found oil back in '69, they decided to put it into a fund, and in '96 they set it up. The first deposit was relatively small, and now it's grown a lot. The politicians were really foresighted, and they've been good ever since about being true to the principles.

Nicolai Tangen

Lots of things. I feel I know so little. I'm looking at the podcasts I'm doing over the next few months, and I need to learn about all these things anyway, but that makes it urgent. Next week I need to know more about networks. I need to read up on crypto. I need to read up on the IMF. There's just so much I need to learn.

Nicolai Tangen

No, we don't. But I'm talking to somebody in that space, and I just don't understand it, so I need to learn. We have some ownership stakes in some of the infrastructure, because it's in the index, so we'd own it in a more passive way.

Nicolai Tangen

I work all the time, but it's not work. It's like Jensen — although he works a lot more than me, because he works every holiday, every Saturday and Sunday. I tend to wake up at 5, read the papers to understand what's going on in the world, and then start firing off emails. I have a notepad by my bed, because if I wake up in the middle of the night I typically have some ideas, and if you don't get them down on paper you forget them. Then I do meetings, and I read in the evenings and check the papers for the next day. But it's not work — it's life. Michael Ovitz gave me this phrase: so many people fight their job, so it's more of a transaction than an integration between work and life.

Nicolai Tangen

Lots of people — I speak with as many as I can. The funny thing about asking people for advice is what they think of you afterwards: they think you must be very clever, because you understand how clever they are and therefore want their opinion.

Nicolai Tangen

Everything that goes on geopolitically. But that makes life interesting. You can do one of two things: if you don't like what's going on, you can be really depressed about it, or you can put on your student hat and think, I can't believe I'm alive to see these things. Everything is coming together at the same time — the technology development now is totally phenomenal. Only a couple of weeks ago, AI made the first bio advance that humans hadn't made, on cancer research; they tested the hypothesis and it was true. I thought, this is like Neil Armstrong stepping on the moon. This is the first stage of the first real thing.

Nicolai Tangen

Success is to make an impact on other people's lives in a positive manner.

Nicolai Tangen

Thank you.