Gaurav Kapadia has deliberately avoided publicity throughout his career in investing, which makes this conversation a rare window into how he thinks. He now runs XN, a firm built around concentrated bets on a small number of companies with long holding periods. However, his education in judgment began much earlier, in a two-family house in Flushing that his parents converted into a four-family house. It was there where a young Gaurav served as de facto landlord, collecting rent and negotiating late payments at age 10. That grounding now expresses itself across an unusual range of domains: Tyler invited him on the show not just as an investor, but as someone with a rare ability to judge quality in cities, talent, art, and more with equal fluency.
Tyler and Gaurav discuss how Queens has thrived without new infrastructure, what he’d change as “dictator” of Flushing, whether Robert Moses should rise or fall in status, who’s the most underrated NYC mayor, what’s needed to attract better mayoral candidates, the weirdest place in NYC, why he initially turned down opportunities in investment banking for consulting, bonding with Rishi Sunak over railroads, XN’s investment philosophy, maintaining founder energy in investment firms and how he hires to prevent complacency, AI’s impact on investing, the differences between New York and London finance, the most common fundraising mistake art museums make, why he collects only American artists within 20 years of his own age, what makes Kara Walker and Rashid Johnson and Salman Toor special, whether buying art makes you a better investor, his new magazine Totei celebrating craft and craftsmanship, and much more.
Watch the full conversation
Recorded October 8th, 2025.
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TYLER COWEN: Hello, everyone, and welcome back to Conversations with Tyler. Today, I’m very pleased and honored to be speaking with Gaurav Kapadia. I was introducing Gaurav at another event not too long ago, and I think I said something like, he is the most underrated anonymous person I know of, or maybe I could have said, he is the most anonymous underrated person I know of. He is a New Yorker and, has lived here most of his life.
He runs an investment firm called XN. I described him recently to someone else as one of our generation’s Warren Buffets. Gaurav has very much shied away from publicity, so we’re very happy to have him on our show. You can think of him as a generational investor, but he does much more than that. He is intricately involved in the affairs of New York City. He is an avid collector of contemporary art.
He serves on the boards of trustees of the Mellon Foundation, the Whitney Museum of American Art, the Trust of Governors Island, the Institute for Constitutional Advocacy and Protection, and he’s a member of the Council on Foreign Relations. In my introduction to that other event a while back, I think I also said that Gaurav is someone who is unique, that he has this eye for judging quality in a deep sense, that he can apply to cities, to hires, to artworks, and also to investments, and that breadth across the board is something quite remarkable about him. Gaurav, welcome.
GAURAV KAPADIA: Thank you, Tyler. I am blushing.
On Queens and NYC’s geography
COWEN: We’re going to get to you, but I always love hearing you talk about New York City because you think so clearly about it, and you know so much about it. You grew up in Flushing, Queens, right?
KAPADIA: I did.
COWEN: A very simple question I have. As far as I can tell, Queens’ GDP has gone up a great amount since you were a kid, but there hasn’t been much new infrastructure. Everyone’s telling us, “Infrastructure, infrastructure.” How has Queens done so well?
KAPADIA: I think one of the reasons Queens has done pretty well, first of all, it’s, obviously, New York has done very well. One of the very logical outgrowths is, people moved to the outer boroughs. While there’s not been a lot of new infrastructure, there has been a pretty decent amount of existing infrastructure. The 7 train is obviously how you get to both the US Open and Shea Stadium. It’s also the train I took to get to school every day. Around transit hubs, you end up having a lot of development. Flushing is one of the closest cities in an outer borough to the center of Manhattan. That, I think, is a big part of its success.
COWEN: Let’s say we make you dictator of Flushing. What would you change to make it even better?
KAPADIA: I haven’t been to Flushing as much as I probably should since I left Flushing, but I think one of the most important things you can do everywhere in New York City is build more housing. I think Flushing, in the periods where it grew very quickly, they added a lot of housing stock via buildings and tearing down old single-family homes that were past their prime. That has stalled, as it has everywhere, but I think increasing density would be the best thing to do.
COWEN: Those old Archie Bunker–style homes — they should mostly be gone, and we need to change the laws for that to happen?
KAPADIA: Yes. It’s funny. Actually, I grew up in one of those Archie Bunker-ish–style homes. My relation to New York City is pretty unique and pretty chaotic, as I like to say. My parents — when they moved to America, they decided rather than pay rent, they would, what’s now called, house hack. They ended up buying a two-family home, very small. They lived in the basement, and they rented out the other two apartments.
Over time, they turned that two-family home into a four-family home. As my family gained more and more wealth, we moved up in the floors. I think that’s a really interesting thing because you took something that was actually really zoned for two, basically four people, and actually 15 people were living in it. We saw that density firsthand.
COWEN: Now, as someone who grew up in New Jersey, the borders of New York City have never made that much sense to me. I look at Brooklyn — I think by some measures it might be, what, the fourth-largest city in the US, if it were alone. I look at Staten Island — it feels like it should belong to us, not to you.
KAPADIA: I agree.
COWEN: How would you redo the borders?
KAPADIA: I think the other thing that’s missing is, it’s an unnatural end from Long Island to Queens. There’re no natural borders. Now, on the flip side, I think, to some extent, New York City is much more logical than other cities, where they just have urban sprawl. In Manhattan, you have the rivers on both sides. The five boroughs have a great deal of both identity but connectivity to one another, which is one of the reasons I think New York is amazing.
COWEN: Let me tell you another hypothesis, and I’m myself often torn. If you look at the ratio of largest cities in a country to the size of the country, New York is actually remarkably small, given that America —
KAPADIA: — is so big.
COWEN: — is so big. Whether it’s New York or LA, they’re both pretty small compared to, say, Vienna as a fraction of Austria, or pick almost any other country. So should we be aiming for an outcome where New York City is just much bigger to meet this regular relationship? Or are we optimally relatively small?
KAPADIA: I think the best thing for America would be actually New York is smaller in proportion.
COWEN: Smaller in proportion.
KAPADIA: Smaller in proportion.
COWEN: And give away Brooklyn. Make Brooklyn —
KAPADIA: I wouldn’t say that. I would say maybe strengthen the middle of the country, creating much more population density, higher GDP across America would serve all of America well. New York’s pretty crowded as it is.
COWEN: Robert Moses — hero or villain, or both?
KAPADIA: Both.
COWEN: Where do you side on the debate? What margin do you want to push people on, to like him more or like him less?
KAPADIA: Probably like him less.
COWEN: Why?
KAPADIA: Look, on one hand, it was a master class in wielding power, of course, power broker. There’re so many interesting things there, but the lack of due process as we go 50 years later, 100 years later, is starting to show in where infrastructure is built, ability to expand, et cetera. So, from that perspective, I think a balance would have been more appropriate.
COWEN: So, more due process.
KAPADIA: Slightly more.
COWEN: If we want to make it easier to redo Queens and we have more due process, aren’t those two things at odds against each other?
KAPADIA: They are at odds at one another. I would say, though, having one person decide the taste for the whole city is also probably not the best use of time. Of course, it’s a balance between the two. As you know, one of my big focuses is reducing regulation, reducing administrative burden where it doesn’t make sense, but keeping it where it does make sense. I think, as an example, parks and highway systems — having some thought as to where they go is very logical.
COWEN: Now, sometimes I hear from my right-leaning New York City–skeptical friends that the city relies heavily, fiscally, on some quite small number of taxpayers. Sometimes the number 200 is cited, and that if some fraction of them left, everything would fall apart. Is that true, not true?
KAPADIA: I think it is. Let’s take a big step back. New York is amazing to me in many ways because it is the only major city, really, that I know of in America that’s not a company town. Everyone thinks it’s their company town. The financial elites think it’s their company town. Artists think it’s their company town. Musicians think it’s their company town. Broadway actors think it’s their company town. That, I think, is one of the great strengths of New York.
Now, as you point out, we have the highest number of high earners of any city in New York as well. Obviously, given how high the tax rates are, there’s a disproportionate impact on the city’s finances as people stay.
I’ve heard, also, numbers like 200 and numbers like 400 or 1,000 people drive a vast preponderance of revenue. I would say, though, that is actually better than some of these other cities that rely on just one or two people. New Jersey, obviously, very famously, when David Tepper left, they ended up having a budget shortfall. I think Bentonville would probably have a problem if Walmart left. While it is, of course, quite narrow, I think that the city has much more of a stable base than people realize.
On New York City mayors and electoral politics
COWEN: Who’s been the most underrated New York City mayor?
KAPADIA: Mike Bloomberg by a country mile. If you look at his popularity, it’s actually quite low, but the amount of impact that he’s had on the city is extremely high. I would say, in certain circles, he’s extremely highly rated. In popular imagination in New York, he has pretty low ratings, and that always has surprised me.
COWEN: Why is he not more popular?
KAPADIA: I think people take for granted the long-term initiatives he put in place and assume they would have just shown up anyway, but it took a lot of hard work to get there.
COWEN: Now, I don’t intend this as commentary on any particular individual, but what is it that could be done to attract a higher quality of candidate for being mayor of New York? It’s a super important job. It’s one of the world’s greatest cities, arguably the greatest. Why isn’t there more talent running after it?
KAPADIA: It is something that I’ve thought about a great deal. I think there’s a bunch of little things that accumulate, but the main thing that happens in New York City is, people automatically assume they can’t win because it’s such a big and great city. Actually, the last few presidential elections and also the current mayoral election have taught people that anyone could win. I think that, in and of itself, is going to draw more candidates as we go forward.
What happened as an example, this time, people just assumed that one candidate had the race locked up, so a lot of good candidates, even that I know, decided not even to run. It turns out that that ended up not being the case at all. Now that people put that into their mental model, the new Bayesian analysis of that would be, “Oh, more people should run.”
The second thing: New York has a bunch of very peculiar dynamics. It’s an off-year election, and the primaries are at very awkward times. I believe there’s a history of why the primary shifted to basically the third week of June, in which there’s a very low turnout. The third week of June in New York City, when the private schools are out and an off-year election. You’re able to win the Democratic nomination and therefore the mayoral election with tens of thousands of votes in a city this big. That is absolutely insane.
A couple of things that I would probably do would be to make the primary more normal, change the election timing to make it on-cycle, even number of years. You’d have to figure out how to do that. Potentially have an open primary as well.
COWEN: If we apply the Gaurav Kapadia judgment algorithm to mayoral candidates, what’s the non-obvious quality you’re looking for?
KAPADIA: Optimism.
COWEN: Optimism.
KAPADIA: Optimism.
COWEN: Is it scarce?
KAPADIA: Extraordinarily scarce. I think there’s much more doomerism everywhere than optimism. At the end of the day, people are attracted to optimism. If you think about the machinery of the city and the state, having a clear plan — of course, you need all the basics. You need to be able to govern. It’s a very complicated city. There’re many constituents.
But I think beyond that, you have to have the ability to inspire. For some reason, almost all of the candidates, over the last couple of cycles, have really not had that — with the exception of probably one — the ability to inspire. I think that is the most underrated quality that one will need.
COWEN: I have my own answer to this question, but I’m curious to see what you say. What is, for you, the weirdest part of New York City that you know of that doesn’t really feel like it belongs to New York City at all?
KAPADIA: The weirdest part? It depends on how you embrace and define New York. I embrace it and define it as super weird from time to time, so I think everything belongs. I don’t have a “Bay Ridge doesn’t belong,” or “Gowanus doesn’t belong,” or “Staten Island doesn’t belong,” in that way. I think it’s all part of the same soup.
COWEN: City Island — to me, it feels like New England. People don’t go there. It’s formally part of the Bronx, but it’s past the Bronx. It’s almost vaguely maritime.
KAPADIA: I would agree with that. I don’t spend a lot of time in City Island, but I think that’s a totally sensible perspective.
COWEN: I thought I was in New Bedford or something.
KAPADIA: I can see that.
COWEN: Most underrated part of New York City?
KAPADIA: The most underrated part of New York City is the Bronx. I think people think about it for Yankees games outside of the Bronx, but there’s a huge cultural identity. There’s great cuisine. I think the whole borough of the Bronx is super underrated.
COWEN: A lot of music has come from there, right?
KAPADIA: For sure.
On building a career in investing
COWEN: Now we’re sitting here at your investment company, XN. I have quite a few questions about investing and about you. Just to start, how good an investor were you at age 23?
KAPADIA: I thought I was way better than I was. I started my investment career when I was 23 years old, but I have had the passion and DNA of an investor since I was probably 9, 10, 11, 12 years old. I mentioned my parents, and I grew up in a two-family house that became a four-family house. I actually became the de facto landlord, collecting rent checks, negotiating late payments, all this other stuff, very early — 10, 11, 12 years old.
COWEN: With the people renting?
KAPADIA: With the people renting in the homes. You really have a great sense of humanity when you are a landlord in Queens in transition. I also very quickly had both an entrepreneurial instinct and a curiosity and analytical instinct. When I was 23, obviously, I didn’t know anything, but I thought I knew enough. The great thing I had was a combination of hard work and enthusiasm and knowledge, but also mentors who would constrain that quality in me and make sure it channels in the right way.
COWEN: You were very wise in picking mentors. That was a big advantage you had?
KAPADIA: I think I was very lucky that the mentors picked me.
COWEN: But that’s endogenous, right? The mentors see something in you, and you do something for the mentors to see that. What was your key insight in how to get these very good mentors?
KAPADIA: One, by nature, I’m an extremely curious person. That actually attracts a certain type of person who really likes engaging in curiosity. It happens to, I think, attract great mentorship as well. If you’re deeply engaged and always want to know more and pull the thread, people have a reason to engage with you. So, that is an interesting thing.
I think both on mentors and mentees and peers has been a significant quality. I think I have a passion for a lot of things, but especially investing, that really does come through when people spend time with me. It’s not like I could have been a doctoral candidate, a management consultant. I think it’s pretty clear that being an investor is a very logical outcome, and people are attracted to that.
COWEN: You were in Boston Consulting Group for a little while, right?
KAPADIA: Right.
COWEN: That was frustrating?
KAPADIA: There’s an important reason I was in Boston Consulting Group, which probably a lot of people don’t know. I studied finance at Wharton because I knew I wanted to be an investor when I was 15. Then I said, “Well, what’s the best place to go? The best place to go was Wharton. I applied early, went there, and actually had a wide variety of experiences through my college career. I worked at the State Department on economic sanctions policy, of all things. Still have my security clearance. I worked at an investment bank.
At the end of that period, I interviewed at a bunch of places. I was lucky enough to get offers from Goldman, Blackstone, and BCG. After thinking about it for a long time, I made a decision that basically no Wharton student would have made at that time — to go work at BCG. They paid one-third the amount of money, but there’re a couple of reasons why. One, I had a lot of finance experience through my college career and through my internships. I realized that I didn’t really know how the world worked or how businesses work in any reality.
So, I took it as a detour on purpose to learn more about how corporate environments work, how leadership functions, because I thought it would make me a better investor. Now, the funny thing is that I remember this almost like it was yesterday. The Goldman person — I called and said, “Hey, by the way, I’m going to go work at Boston Consulting Group.” He told me at that time, “You are making the worst mistake of your career. I hope you remember this phone call,” which, of course, has been ironic. Then the BCG experience worked out incredibly well to some extent.
COWEN: So, you learned how things work.
KAPADIA: I learned how things work. I learned how corporations work, which, if you’re an investor like me, it’s actually a really important thing because investors have this handicap where they just assume that what’s on a spreadsheet is how organizations work. That’s obviously not how organizations work. There’s much more complicated dynamics around how to do that. Now, of course, being a strategy consultant is not the same as being an executive. It just gave me a slightly different lens, which I believe actually ended up accelerating my competitive advantage early in my investing career.
COWEN: That’s when you met Rishi Sunak? You worked with him?
KAPADIA: We didn’t work together, but I think it’s one of these interesting things. Both Rishi and I were analysts roughly at the same level at two different firms that were very interesting and long-term focused. Rishi and I became close through that interaction of looking at the same companies. In that case, back in ’05, ’06, we were both heavily involved in the railroad industry in the first railroad renaissance. We ended up spending so much time at rail yards and meeting the management teams of these companies. Then, as I like to say, he made something of himself.
On XN’s investment philosophy
COWEN: XN — a few years ago, I think you all reported you had only 21 investments. The number is still close to that now?
KAPADIA: Yes. XN is, I think, a phenomenal place and a weird place for that reason. We do two things. We do concentrated public-markets investing. It rhymes with what Buffett has done. Then we do, I would say, opportunistic, best-in-class private investing. That’s about a third of our capital. On the public side, we rarely have more than 10 or 15 investments because there are very few good ideas, and so we concentrate capital on that. That has always been a consistent.
COWEN: There are sectors you won’t invest in because you don’t understand them?
KAPADIA: Yes. My goal in everything — and this goes well beyond investing — is to be the best at what we do. There’re a few things I just don’t think it would be possible for us to be the best at what we do. Healthcare, as a very broad statement, which is actually a huge percentage of the global GDP — we basically say there’s just no chance in the world that XN is going to be able to be the best healthcare investor in the world because of the combination of regulatory and scientific research that you need. So, we basically just exclude that.
COWEN: At a conceptual level, what makes a sector relatively transparent to you?
KAPADIA: Where you can use a combination of business analysis, logic, and valuation, and tie things together in a way that allows you to generate differentiated conclusions than what consensus would be. Oftentimes, the thing I like to say about our investments is that they’re obvious in retrospect. At the time, they’re really hard to make. If you can almost write the narrative in advance and say, “In a few years, it’ll be very clear that we’re going to need a lot more power for data centers,” or that “We’re massively short housing stock,” or things of that nature.
When you can do that with certain sectors and certain industries. I think industrials in particular, media in particular, lend themselves really well to that, some areas of technology, to be able to, with high fidelity, plot the future.
COWEN: You invested in Figma pretty early on.
KAPADIA: Well, not so early on, but we did invest in Figma.
COWEN: It’s gone well, right? What can you relate about your thoughts at the time?
KAPADIA: I would say there’re lots of different ways to be a good investor. There’s what people like Citadel do, which is very short cycle, very short-oriented, which I think is excellent, which is having very high fidelity on short-term data points. There’s what great private equity firms do, which is having really good long-term signal and financial leverage on LBOs.
What we do is a little bit different, I would say. I think Figma will play a part in it, but honestly, there’re so many investments, whether it’s General Electric, which has been one of our larger investments over the years, which is basically, can you articulate an extremely good risk reward where the downside is relatively bounded and the upside is potentially unbounded, but you can forecast what that looks like?
I think Figma was particularly interesting at the time we made the investment because the antitrust authorities had just blocked their acquisition by Adobe. So, for roughly half the price Adobe was going to pay, with a significant break free on the balance sheet, you got a best-in-class asset with an extraordinary founder mode leader that was compounding earnings at a very high rate and that had one foot in the future.
The asymmetry was very attractive. You had a significant net cash balance sheet, you had a very high confidence of what the growth rate was going to be, and you also had confidence in the leadership that they’d be able to navigate a complicated environment.
COWEN: Now, you don’t have to name the company, but if you think of a case where you didn’t invest, but almost was going to, could you talk us through what leads you at that final moment to pull the plug and say, “No, we’re not going to do that.”
KAPADIA: Yes, and look, by the way, I think the important thing about investing is that there are way more mistakes than wins, and you almost need to be comfortable with that from the outset. Otherwise, you’ll never be able to be comfortable with yourself.
There’re two types of errors. There’re the investments you didn’t make that did really well, but oftentimes they went really well for the wrong reasons, so you pulled the plug because you didn’t have confidence in your thesis. But some other thesis shows up, and the stock does extremely well. Honestly, I don’t lose one second of sleep over those because that was unpredictable. For us, we have to focus on our process, and that process will engender really good outcomes.
The mistakes I lose sleep over are where they are more passive decisions than active decisions, where we’re really close, but for whatever reason, we decided not to engage on a given topic, and that is something that we’re always continuously trying to improve in our process.
COWEN: Because you don’t know enough about the topic or the sector.
KAPADIA: Or we get distracted, or things are busy. There’re lots of reasons why.
Remember, as I mentioned, we only own 10 to 15 public positions at a given time. We own even fewer private positions at a given time, so the bar is extremely high. If you think about our holding period plus how few positions we own, we’re only adding one or two or three ideas in the corpus every year or so. So, we keep a super high bar, which I think is really important in investing, but then you can’t have FOMO about the things that you missed. We’re never going to get everything right. We just have to make sure the things that we get are right.
On founder energy in investment firms
COWEN: In the tech world, one hears all the time about founder energy or the founder mode. Does that apply to investing companies?
KAPADIA: Oh my gosh.
COWEN: Tell us how.
KAPADIA: Look, I think there’s something in the water where people feel that investing companies aren’t entrepreneurial. I think the best investment organizations are obviously entrepreneurial. I think, though, because there are such low barriers to entry in investing, there’re a lot of mediocre investment organizations that don’t have that founder entrepreneurial energy against it. One of the things that I try to do every day is to make sure we have that entrepreneurial energy against it.
But if you look at all of them, Sequoia has a ton of entrepreneurial energy. Andreessen Horowitz has a great deal of entrepreneurial energy. Blackstone has so much entrepreneurial energy. It’s actually surprising how commercial and entrepreneurial people are. I think we are somewhat unique, though, in our industry, as we have a maniacal focus on getting better and reinvention and having that founder-led culture of innovation and open-mindedness.
COWEN: How do you hire to stop your company from becoming too soft or too complacent? Everyone wants smart people. There’s a lot of competition in finance, also from the tech world.
KAPADIA: Yes, I would say it has to start with the founder. One of the things about many organizations — this could happen to any professional service organization, investment firm, or law — is the top gets lazy, so that culture seeps all the way through. The number one thing you have to do is keep the rope tight. We have this cultural mantra around rigor and kindness. We keep that always.
If I ever slow down, everyone will see it. The number one thing I do is surround myself with people who will tell me the truth to make sure that if I am slowing down, they will say, “Hey, you have to remember the commitment we all made to each other,” and keep that energy high.
The other thing is, I think too many investment firms select purely by resume and financial modeling skills, and GPA. I think obviously that’s important, but David Chang has this amazing concept —
COWEN: This is Chef David Chang, the Momofuku David Chang?
KAPADIA: The Momofuku David Chang.
COWEN: He’s great, right?
KAPADIA: He’s the best. One of the great things I’ve learned from David is, he has this concept of you have to be good enough, and then you have to have something special on top. What that means — the average investment firm will pick someone who has a 4.0 from Wharton or Harvard and then went to Blackstone and then is ready for their next challenge, and they’ll be fine. But what we end up doing — that, of course, we do, but we look for that extra spark, that extra gear, that extra curiosity, that extra ingenuity.
By the way, we look for that at every position at the firm. We have a little less than 50 people. Of them, 10 to 12 are investment professionals. The rest are non-investment professionals. They help support the investment process. The other mistake that a lot of organizations make, in my opinion, is they lower the bar for the non-investment side. We keep the bar high on everyone. That creates an energy and a culture and a dynamism about what we do that I’m very proud of at XN.
COWEN: You have an open-plan office here.
KAPADIA: Yes.
COWEN: People claim that’s bad. I’ve never been persuaded, but defend an open-plan office. Why is it good?
KAPADIA: I always knew it was going to be good. We’ve had one forever. I think it’s particularly good today, in where investing is going. The world is way more interconnected than ever. Very simply, who would have thought of a world — 5 years ago, 10 years ago — where you have to have a conversation about software, power, and semiconductors all together?
The open plan allows the organization to basically use the Socratic method, talk to one another. Create sparks of curiosity that we can pull the thread on. If we all worked in individual offices, I think you end up with a much more complicated way to analyze companies, much more siloed. I think we as a firm — but the world at large — is becoming much more connected.
COWEN: For a brief while, you retired from investing, right? Then you came back. What’s that story?
KAPADIA: I had an incredibly fortunate early part of my career. I was a young partner at a place called TPG Axon, which was an incredible hotbed of talent. I think some of the best investment talent I’ve ever met all worked there. Then we all ended up doing our own things. I started a firm called Soroban with a partner. Then I ended up leaving that firm. I wouldn’t say I retired from investing. I retired from managing outside capital, which is a very different thing.
This office that we’re sitting in today, XN, was the name of my family office at the time, because I actually loved investing. I just wasn’t sure if we had a path to doing it as successfully as I wanted with outside capital.
For a couple of years, myself and my colleagues here — we managed basically my money with the same philosophy that we run XN in. That was incredibly satisfying because the spark and the purity of the intellectual challenge of investing came back to me. To be honest, towards the end of my time at my previous firm, I was less enthusiastic about the process and the excitement of investing than I certainly am today. Going through that family-office process really helped underscore and bring me back to the joy of investing.
On the sociology of finance in NYC, London, and the UAE
COWEN: Sociologically, how does New York City finance differ from London finance? You’ve done things in both worlds, right? There’s a feel to it in London. It’s different.
KAPADIA: Yes, it’s a little more buttoned up and much more banker-like than entrepreneurial. America — I would say New York and California have a little bit less of the banker energy and more the swashbuckling investor energy. Even in New York — a lot of the history of the finance in New York were pure swashbucklers.
You have a little bit of that energy, even though we don’t do the same thing at all. I don’t do the same thing as Paul Tudor Jones at all. I don’t do the same thing as Henry Kravis at all. Taking really big bets, being out there — it seeps into the culture here, whereas in the UK, almost the opposite is true, or had been true when I was there.
COWEN: How is UAE finance evolving in that regard?
KAPADIA: I think it’s evolving extremely quickly. It, of course, started with the large sovereign wealth funds, but now, because of the amount of wealth that’s being created, you’re having a much higher . . . Well, there’re two things that are happening. The very favorable tax regime — relative to the UK and European tax regime — are attracting non-US citizens in droves to the UAE. Basically, no income tax and no capital gains will do that. We obviously, as Americans, can’t do that.
The second thing is there’s a tremendous amount of wealth being created in the region. So, you have this influx of talent, and then you have this influx of capital and this maturation of capital. I had never been to the Middle East prior to three or four years ago, and I’ve been many times since then. It changes dramatically every single time I’m there. There is a very high degree of optimism and entrepreneurial energy there now.
On how AI reshapes investing
COWEN: How does AI affect how you think about investing, companies, sectors? There’s a good chance it spreads everywhere, right? How do you take that into account?
KAPADIA: I would say Tyler’s been almost my coach in this because he has really encouraged me. I think we’re a very modern organization, and I’m a pretty modern person, but to really embrace the max case of what AI can do . . . I’m pretty optimistic as to what AI can do in an investment organization, but going back to, I think you need a lot of entrepreneurial energy to force it through. SEC-regulated investment firms — there’s just a ton of detritus within it. The thing about AI is you have to push forward and push through it.
Now, I think there’s going to be a couple of proximate effects. I would say investing and running an investment management organization are two different things. The proximate effects, I think, on investing — it’s going to allow better, faster, more in-depth analysis much more quickly. So much of our analysts’ time is spent on initial evaluations of companies. I expect that in the next very short run — within the next year — to be able to have a lot of leverage from AI.
That actually allows our analysts and myself, and other partners here, to spend most of our energy applying judgment and taste to the corpus of facts. One of the things I always like to say is, if Julian Robertson came to my office and opened up my desktop, he would know exactly what to do. It’s Bloomberg, it’s Excel, et cetera. I think that’s about to change really dramatically with custom tooling, custom analysis, et cetera. That’s on the investing side.
I think one of the other things that is also non-intuitive is that a lot goes into running an investment organization. Legal — the compliance burdens are off the charts — operations, tax, et cetera. I think there’s a huge opportunity in making the quality of life and accuracy much better there. I think there’s going to be a twofold impact. But I also think most investment organizations do not have the wherewithal to go through change.
COWEN: But it’s because yours is in founder mode that you think they do, hope they do.
KAPADIA: Yes, and there’re other organizations that are in founder mode. I think they will thrive as well. I think a lot of organizations will that have embraced this. But if you look at the history of our subindustry within — public markets investing, some private investing — the general industry pressures encourage you to not innovate. So, it really takes a lot of effort to innovate. Founder mode, I think, is going to be really important in that.
COWEN: There’s a headline I read, I think yesterday: J.P. Morgan is going to spend some large amount.
KAPADIA: $2 billion to get $2 billion in savings.
COWEN: $2 billion.
KAPADIA: Yes.
COWEN: When you read that, what do you think?
KAPADIA: Nothing.
COWEN: That is the headline.
KAPADIA: Yes, I think nothing. I will say a couple of things. A lot of people — and this is not J.P. Morgan, obviously; it’s an incredible organization — but a lot of people are in the headline-generating business. As we talked prior, we’re in the results-generating business. In periods of technological change, that separates a great deal. There’re a lot of headlines I would ignore.
I would also say it’s very early. We are way earlier in the evolution of AI, so I’m very skeptical that a lot of companies, like financial institutions, are spending as much as they claim to be yet, because the use cases and the integrations are still very early in process to do.
COWEN: What do you use AI for personally?
KAPADIA: One of the ways I’ve historically learned is, I’ve always been a really curious person about more than just finance, so quite a lot of things. I used to hire tutors. If I wanted to learn about art, I’d email the art history department of the local university, and they’d send me a masters student. I’d pay them, and they’d create a custom curriculum for me. I felt like I didn’t know enough about Shakespeare, so I did the same thing.
I think, already, using AI as a knowledge augmenter is amazing. That’s how I personally use AI right now. If I want to go in-depth in a subject matter — general or specific — it’s my first port of call.
On how museums are run
COWEN: Now, I have many questions about museums and art. I know you’re on the board of the Whitney, so I’m not asking you about the Whitney because it might be awkward for you to speak about that on the record, but if I go to most art museums, and I see the gift shop and the restaurant, it used to be those are always too small. Are we now at the point where those are too large? What’s your opinion?
KAPADIA: There will never be a museum gift shop too big for me, is my general opinion. No, I think it varies deeply by institution. One of the things, as an example, MoMA has done, via the MoMA Design Store, is, they’ve taken the sensibilities of the museum and brought it to a lot of other places. I think that’s one of the core purposes of a museum. No, first of all, I haven’t been to a gift shop or restaurant that’s not extremely crowded, so it seems like they should be bigger.
COWEN: They still should be larger. What’s the most common fundraising mistake that art museums make?
KAPADIA: I think it’s worthwhile . . . When I was looking at the Marginal Revolution comments, I think people may not understand how museums work and operate. One of the ways I think about my schema of the way museums work is that they’re a public good that’s largely financed by private capital. Almost all museums operate at an operating deficit. That’s the number one thing that I think people should realize, which is, these amazing cultural institutions all over the world are financed by people who want to bring that more into the world.
It’s not a for-profit endeavor. It really is a part of a public good. Within that, there’s obviously fundraising that you need to do. That pressure has gotten way more acute over the last, I would say, previous administration, but just in general. Inflation has taken a toll. Admissions are a relatively small portion of the operating budget. There’s going to be more and more pressure on doing a few things, including deaccessioning work, so selling works that are in the collections, raising capital from large donors.
I think the biggest mistake a museum could make, especially a public institution, is to have fundraising override the mission. To have donors, including donors like me — who I think my judgment is pretty good in these matters — overly influence program, overly influence community. I think that is the biggest mistake that institutions make, and over time, they always regret it.
COWEN: Should museums put more works out on the walls? I see so much blank wall space, and I know it’s low status to put pictures on the way to the men’s room, but I want them to do it. Should they do it?
KAPADIA: I think you bring about, I would say, a broader question, which is, 1 percent of most museums’ archive is ever on display. I think, personally, that is a tragedy.
I think there is a huge opportunity in a digital world and an increasing physical world to take more of your work and bring it out to the masses. I think the best museums are working really hard to create interactive things online so you can see and study lots of works. I think what the V&A did — I’m not sure if you’re familiar with what the V&A Museum did with their storage in the UK. It’s outside of London.
COWEN: Yes.
KAPADIA: They created a beautiful site, a museum unto itself, of storage. I think that’s a brilliant idea. Should they put more works on the wall? Above my pay grade. Should the museums be using their very significant archives and collections and bring it more out into the world digitally and physically? Absolutely.
COWEN: How will AI reshape art museums and the world of art? Putting aside AI-generated images.
KAPADIA: Actually, in quite a number of ways. I think one of the really interesting use cases that I’ve seen is allowing any-language visitor to have their own personalized, in-depth tour of the museum. There’re so many museum experiences where you just go and walk in a circle because it’s too crowded. You can’t engage. You don’t know as much about the art or the artist. The captions are too small, all this stuff. Or you don’t speak the language of the museum or whatever the case may be.
I think there’s going to be an amazing set of promising instruments, which is, you can use AR plus AI to understand the context of a work much more broadly.
COWEN: About the Whitney, what is the biggest or most important strength of the Whitney that, say, even people who go might not know about?
KAPADIA: Their commitment to community. Community access, and really, they’re extraordinarily principles-driven. Really a big believer in artistic freedom. A really big believer that the museum should be for everybody. Anyone under 25 can show up and go to the museum for free. That’s amazing. I think there’re cultural tenets. They have a very specific mission. It’s the Whitney Museum of American Art. It’s almost all contemporary art. It’s very different than the Museum of Modern Art. They hew very closely to the mission, but they also hew very closely to the principles.
On favorite artists
COWEN: Now, we’re sitting in a room with the wonderful work by Kara Walker. She’s a favorite contemporary artist of mine. How would you articulate what makes this Kara Walker special? There’s a lot of Kara Walker that I like, but it’s a bit generic. I feel I could see the same thing 200 times. Maybe you do over time. Some works really stand out. How do you think about why this one is amazing?
KAPADIA: The je ne sais quoi of what makes an art piece stand out in someone’s practice is something that I’ve been trying to refine my engagement of since I’ve been collecting. I think in this particular work, it is so meticulously crafted. It is so clear what the point is. It is so beautifully put together, even though it’s a really complicated subject matter. It’s visually arresting. I think, in this case, that’s what works here.
COWEN: What to you think is special about the work of Rashid Johnson?
KAPADIA: Rashid is a really incredible person. I know there’re a lot of questions about art. Maybe I’d just clarify a little bit about my approach to art collecting because I want to make sure people understand. I certainly try not to be the cliche of the finance guy who gets into art. I actually fell in love with art before I fell in love with investing. I have been collecting since I was broke, very early.
When I got serious about collecting, I was 29 years old. I made a really specific decision. The number one thing I identify is as an American, and I wanted to collect American art. The second thing I did was I wanted to collect artists of my generation. When I was 29 years old, when I started really collecting, I decided I’m going to have a really specific collection. That collection is going to be artists my age — 29 at the time, 44 today — plus or minus 20 years. I wasn’t collecting any nine-year-olds, but I wanted to keep that criteria going all the way through.
Rashid obviously fits really squarely within that. We’ve been very lucky to become really good friends over time. One of the most amazing things about his work is that, in addition to being visually arresting, it is so intellectually complex that it stays with you. It is a portrait of a lot of feelings, a lot of anxiety, a lot of insecurities that I think we all have. Then it keeps coming back to you. There’re so many things I love about him as an artist and as a person, but I think his ability to take risks and exploit the really uncomfortable, rise to the top.
Talking about someone who could coast — Rashid could just make anxious audience paintings for the rest of his life and live a very comfortable living. He’s decided not to do that. Myself and a few of our friends, went to see — he put on a production of The Dutchman in a sauna in New York City. He directed a play, amazing. That’s a real risk for an artist that’s a painter. He’s making these really complicated installations. That’s also a real risk. He’s making movies. He’s pushing his practice. He’s making himself uncomfortable, and as a viewer of the art, you also feel a lot of that energy.
COWEN: Does buying art and evaluating art make you a better investor in companies?
KAPADIA: One hundred percent, in a different way than you think — or maybe I don’t know exactly how you think, but here’s how I think about it. It does a couple of things. I don’t believe in art as an asset class. I never have, never will. I believe it is ultimately intellectual exercise that exercises the right side of my brain and gives me more context about the world around me.
I think investing is ultimately about judgment and developing your own taste. Art collecting or any collecting or any connoisseurship is the same way. It forces you to really examine what’s important. To really examine what makes something outstanding. To not just take somebody else’s judgment and taste and apply it to yourself, but to develop your own. All of these soft skills that you develop along the way, I think, help in all domains.
COWEN: Salman Toor — why is he an interesting painter?
KAPADIA: Salman Toor, for those of you who don’t know, there’re two articles I’d encourage. There’s a New York Times article about his work, and there’s a New Yorker article about his work. Salman, I find both interesting in a general manner and a very specific manner as well. I am very drawn to virtuosity and excellence, and I think he is technically one of the most talented painters ever. He’s incredible.
The second thing is, I’m fascinated by his practice. He paints and draws entirely from memory. He does not use a reference image. It’s all in his mind’s eye. He takes this technical virtuosity and puts it on canvas or wood in a way that’s almost mind-boggling. The level of detail, the level of excellence, the level of precision. It’s really refreshing to see someone almost with the technique of an old master’s working on a contemporary work. I think he’s extraordinarily talented in a general artistic manner.
I would say, for me, it’s actually also been really meaningful because I’m Indian American. The first work I saw of Salman Toor — he had a series called The Weary Traveler or The Traveler, which was basically about people who look like me going through TSA post-9/11. If any of you have traveled with me through TSA, it’s not the most pleasant experience, or it certainly wasn’t post-9/11. Just seeing the feelings that I often felt on a painting were absolutely crazy to me.
COWEN: Now, there’s something in Jain philosophy that emphasizes the importance of multiple perspectives. Do you think you got any of that from your upbringing?
KAPADIA: I don’t think I got a lot of it — that specific thing — from Jainism, but I got a lot of that from my mother. My mother — I guess now that I think about it, I’m a lot like her, but she would be very interested in being an expert in a variety of fields just because she thought it would make her a more complete person.
She started as a data scientist. When she retired, she started a jewelry company. From that, she actually moved to China when she was, I think, 68 years old. She moved to a random city in China without telling us and went to art school there. There’s a lot of that that runs through my veins. Maybe she got it from her Jainism and her Jain upbringing, but I think that’s where I got it from.
COWEN: To go back to this finance idea of the trade you didn’t make, what’s an example of an artist who has a good reputation, who fits the criteria where you collect, but you haven’t bought a work from that artist? And how do you think about why you haven’t?
KAPADIA: Mark Grosjean probably fits that criteria pretty well. It’s just, with art, in my experience, it’s not just buying the criteria. The criteria narrows the funnel, but then you have to say, “What does it mean? Do I get it? Do I love it? Can I live with it? How do all of these things add up together?” Mark’s work — I know people love it, it just never stuck with me.
There’re so many other artists that I think are harder for other people. That goes back to, one needs to develop their own taste and judgment about whatever the topic is. Whether it’s investing, whether it’s art, whether it’s real, whatever the broad topic is, you need to put on clothes that are comfortable for you. For me, I’ve developed a confident sense of what I like, what I’m drawn to, what I love, so I stick with that.
On tastes in art and how the canon will evolve
COWEN: How is the artistic canon going to evolve? Someone asks you about the 1960s. You say Andy Warhol, Roy Lichtenstein, Frank Stella, and so on and so on. Whether or not we all agree, it’s pretty clear there’s a list of names from that period. If you think about today and the generation you’re collecting from, is the canon just going to stay a mess? Or is there going to be a winnowing, where 20 years from now there’ll be 7 to 10 names who stand out above all others? How’s that —
KAPADIA: First of all, I’m not an art historian.
COWEN: No, you’re in it. You have skin in the game.
KAPADIA: I have skin in the game.
COWEN: You really care.
KAPADIA: If you look at every period, in that period, it was unclear. There’s always a winnowing. There’s always almost like a Cambrian explosion that winnows down into the people that were most important. I think you’re actually starting to see it now, where artists, more and more, when you separate the commercial aspect of someone’s art and the critical aspects, they are coalescing around a smaller group of names than you would have started with 10 or 15 years ago. I expect that to continue, but honestly, my ability to predict who those names are — I’ll have educated guesses, but I’m not going to be perfect at it.
COWEN: Let’s say I ask you for one, and it’s not that you’re saying they’re your favorite, but most likely to end up in the canon 20, 30 years from now.
KAPADIA: I think Dana Schutz. I think Dana Schutz is a really important painter, really pushed boundaries, very smart, very cerebral, very talented. I think she’s likely to end up in the canon. It’s probably underrated today vis-a-vis that. I think Rudolf Stingel is not underrated, but I think he is highly likely to be an extremely important artist, as is Christopher Wool. I think you are starting to see more and more of that. I would bet Rashid and Salman, who you referenced, end up there as well.
COWEN: What makes the Rubell Collection amazing?
KAPADIA: I didn’t say it was amazing.
[laughter]
COWEN: The museum in Miami is very good, I think.
KAPADIA: It is very good, I would say. I haven’t spent enough time at the new Rubell, but my favorite place that no longer exists in Miami was the de la Cruz Collection, and it was both accessible and exciting. It was not too intimidating. It’s such a tragedy that it closed.
COWEN: The new branch of the Rubell — it opened with a great exhibit, and what’s in there now — it’s not very good at all. I’m, I suppose, bearish on it at the moment.
KAPADIA: One thing also: there’s a lot of bad art. This is not a comment on the Rubell, but I think any institution that shows a lot of art — there’s often a lot of bad art.
COWEN: Do you think there is what you might call an arbitrage in current art markets? Some people say, “If you love textiles, they’re really much cheaper than paintings, and you can get more aesthetic value for the dollar you spend.” You may or may not agree, but that’s just an example of a claim about an arbitrage in art markets. Though some people say drawings. Do you see one?
KAPADIA: Some people say Old Masters. I think Tom Hill famously bought ancient bronzes to complement his contemporary art collection. The one thing I would just say about the art market right now — we’re in a mega reset as a lot of the mediocre works and mediocre galleries exit stage left, and you’re left with just higher fidelity work.
I do think this concept of what is the best value is complicated in art. I’m not sure that should matter. In the pursuit of art, if you don’t think of it as an asset class — I view it as an intellectual pursuit — the dollars are less important. You’re not trying to arb the Dana Schutz drawing versus the Dana Schutz painting, which theoretically, one could do.
COWEN: But maybe you can afford only one of them, right?
KAPADIA: Yes, but I think it’s also okay if you can afford none of them, if you can appreciate them, which is, obviously, the vast majority of people. That being said, I do think there’s probably a tremendous . . . this may be controversial, but I think there’s a whole amazing group of white male artists that are probably overlooked, and there are huge values, if you care about that, that I think will be very, very important in art, where there is a lot of value in the contemporary art market.
COWEN: Now, we have some mutual friends, and I won’t name names, but believe it or not, they somewhat scorn contemporary art —
KAPADIA: I believe it.
COWEN: — although they’re highly, highly intelligent. What is it you think they’re missing? How would you articulate that?
KAPADIA: It’s interesting. I think some of the friends you’re talking about, and not even the specific people, but if you broaden, are essentially Silicon Valley futurists. I would say, broadly speaking, they have been both disdainful and confused about the attraction of contemporary art. Some of them are even disdainful or confused — especially much younger ones — about the role of institutions and cities, as an example. I’d say a couple of things. One, not everyone needs to like everything, which is the most important thing.
COWEN: I feel everyone does need to like everything, but go on.
KAPADIA: I think it’s important to channel some creative energy into something that’s more meaningful for the person. Now, the interesting thing, of course, you’ve seen in Silicon Valley is a lot of the OG dot-com founders have found themselves in the very deep end of contemporary art all of a sudden. As they have evolved and their lifestyles have evolved — Jeff Bezos and others — went from relatively low participation in the art market to extremely significant participation in the art market. Maybe it’s just an evolution in a point in time.
That is definitely one theory of the case. I think a more accurate theory of the case is, if you look across all culture, over all time, art was an important part of certain aspects of society, but not all aspects of society. I think you’re just seeing that because you and I live also between two worlds, so we just get the magnified version of it.
On Totei, a new venture
COWEN: You have a new project. It’s called Totei, Tell us about it.
KAPADIA: I love craft and craftsmanship. It’s one of the things I’m passionate about. Very simply, Totei is a magazine that celebrates craft and craftsmanship. There’re a lot of questions there. A) why do you care about craft and craftsmanship? B) why would you start a magazine in a completely digital age? I have a few theories that I wanted to exploit and that led to Totei. One is, while not everyone appreciates contemporary art, almost everyone at a high level that I know appreciates dedication and craft. I think there’re just far fewer resources in exploring the art of craft, the art of dedication, the art of engagement and getting really good at something in a very broad way.
So, I wanted to create a forum to make sure a lot of craft . . . That’s not necessarily, but it’s not necessarily not like quilt-making in certain regions. It means stand-up comedy. It means design. It means anything where you put in a huge amount of effort to get better to create a great product at the end.
I was thinking about how to express that. I had a few ideas which we were exploring. Then I said, “We should create a magazine. We should create both a digital and physical version of a celebration of craft.” So, that’s what we started. It’s going to be a pretty serious endeavor. It’ll launch in digital format later this year and physical format in the beginning of next year.
COWEN: Late 2025.
KAPADIA: Yes.
COWEN: It will appear regularly or be —
KAPADIA: The digital piece will appear regularly. The physical piece will probably be two to three times a year. It’s a pretty heavy lift to do it. Of course, if you are doing a magazine on craft and craftsmanship, it better be a really good magazine, so the amount of effort we put into every issue is extremely high.
COWEN: If someone just Googles T-O-T-E-I by the end of the year, it’ll be there for them.
KAPADIA: Yes. You can go to totei.com now. Sign up for the early versions of the newsletter. I think it’s going to be fun. The interesting thing — as I put it out into the world, it’s super resonant with people, all sorts of people — college students, comedians, artists, investors — who take great pride in their craft. My craft is investing. I take great pride in how we do that craft. Everyone feels seen when you put a spotlight on another craftsperson.
COWEN: If we think about the general public, I hear a lot of pessimism about the general American public, even the educated side. Will people read less or they know less about certain things? If you think of their artistic literacy, whether it’s in craftsmanship or contemporary painting, or just art museums in general, whatever else might be in New York City, what’s your assessment of where we’re at? Is it dire? Is it great?
KAPADIA: You’re at a positive inflection point is my read of the situation. There’s a shocking amount of aggregate pessimism everywhere right now. I think part of it is still aftereffects of COVID. Part of it is, we have a complicated economic environment where there’re haves and have nots. There’s a lot of complexity. It’s obviously a really turbulent time in the world, and that all feeds into, I think, some of the pessimism out there. People are reading less. They’re in fewer relationships, all of those things.
I think by and large, as I look at it somewhat dispassionately, there’re huge reasons for optimism, especially as an American, where, while it is complicated, there’re a lot of great things happening here. The reason I think we’re at a positive inflection point is, some of the ways to make it better versus just complain have started to make its way into the ether.
It’s interesting. I was at a conference recently, and there was so much doomerism about AI, as an example. But I think one of the main proximate effects is highly optimistic, increased knowledge, decrease in doing tasks that are not joyful, et cetera, so I think we’re about to see a series of innovations that drive from pessimism to optimism, or at least I hope so.
COWEN: Final question. Other than craftsmanship, what is it you hope to learn about next? It can be a sector, a painter, a part of New York City, anything. What is it you wake up some Sunday morning, and it’s, “Yes, I’ve got to learn about this.”
KAPADIA: Oh, that’s a great question. What will I learn about next? I want to spend a lot more time . . .This is going to be super nerdy, but digging into how — I’ve done some of this, as you know — how we can make practical policy, like understanding how the guts of things get done in local and statewide government and federal government, so we can push the ball forward.
Going back to our Robert Moses conversation, there’s probably a lost art of making things work that I want to re-engage in, so myself as a concerned citizen, others can make things a lot better. That’s probably a technical boring thing that you can engage in but be very excited about.
COWEN: Gaurav Kapadia, thank you very much.
KAPADIA: Thank you.
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