Masters in Business

Financial Products for Hedging with Vest Co-Founder Jeff Chang

February 27, 2026

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  • Jeff Chang prioritizes grit, influence, creativity, and intelligence, in that order, as the essential characteristics for entrepreneurial success, contrasting with his parents' focus on academic intelligence. 
  • Chang's diverse career, including military service, a failed flat-screen TV venture, and roles in finance through the 2008 crisis, informed his belief in the critical importance of risk management and having 'FU skills' like accounting. 
  • Vest was founded on the principle of solving the painful problem of counterparty risk and the need for downside protection in investing, leading them to utilize the Silicon Valley ethos of iteration while maintaining Wall Street's focus on precision and avoiding failure in client capital management. 
  • The current wave of highly successful AI companies is largely in startup mode, often originating from incubators like Y Combinator (YC) and exhibiting extremely high month-over-month revenue growth. 
  • Jeff Chang credits his older brother, a high-achieving engineer at Tesla (involved with the Dojo Project) and founder of Density AI, as his primary mentor, driving his own career through competitive motivation. 
  • Developing portable, valuable skills, embracing failure, taking chances, and focusing on solving painful problems are crucial pieces of advice for recent college graduates entering asset management or entrepreneurship. 

Segments

Jeff Chang’s Background and Career Pivot
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(00:02:30)
  • Key Takeaway: Chang’s initial career plan in the Navy was derailed by a medical discharge, leading him to pursue an MBA and an entrepreneurial path starting with a flat-screen TV company.
  • Summary: After a medical discharge from the Navy, Jeff Chang pursued an MBA at Georgetown and immediately started a business OEMing flat-screen TVs from China in 2012. This first venture failed due to commoditization and razor-thin margins, teaching him the necessity of building businesses with hard skills that create a value-add. Consequently, he studied for and passed the CPA exam to build skills ensuring he would not be beholden to others.
Entrepreneurial Success Factors
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(00:06:04)
  • Key Takeaway: Successful company building requires prioritizing grit, influence, creativity, and intelligence in that specific order, valuing resilience over pure intellect.
  • Summary: Chang believes that successful entrepreneurs must optimize for grit—the ability to persevere after failure—as the number one trait. Secondarily, influence, the ability to sell a dream to investors and employees, is crucial for building anything significant. Intelligence is considered the least critical factor when compared to the foundational need for resilience and the ability to inspire others.
Formative Financial Market Experiences
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(00:09:41)
  • Key Takeaway: Experiences trading mortgages during the 2008 crisis and witnessing the Flash Crash reinforced the lesson that markets fluctuate and excessive leverage is fatal.
  • Summary: Military service instilled a strong work ethic in Chang, which he later applied to finance roles where he learned about market mechanics and pitfalls. Trading during the 2008 financial crisis provided a front-row seat to systemic failures, emphasizing that risk management is paramount when managing other people’s money. This experience directly informed Vest’s focus on creating products that act as ‘pants’ when the tide goes out.
Founding Vest and Y Combinator
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(00:14:43)
  • Key Takeaway: Vest was launched in 2012 to bring downside protection structures, similar to those in the complex structured note market, directly to investors via ETFs, cutting out intermediaries.
  • Summary: Chang and his co-founder Karan Sud were motivated to start Vest after observing the failures in the structured note market during the 2008 crisis, particularly Lehman Brothers’ role as a major issuer. They sought to offer downside protection products directly, avoiding the counterparty risk that became evident when Lehman failed. Joining Y Combinator in 2015 helped bridge the gap between Wall Street’s regulated environment and Silicon Valley’s innovation culture.
Buffer Fund Mechanics and Tax Efficiency
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(00:33:04)
  • Key Takeaway: The introduction of in-kind creation and redemption for options in 2019 enabled Vest to launch tax-efficient buffer ETFs, overcoming prior structural limitations in mutual funds.
  • Summary: Buffer strategies, like the flagship BUFR fund, offer protection on the first segment of downside (e.g., the first 10% loss on the S&P 500) in exchange for capping upside potential. This strategy is designed for the ‘stay-rich game’ by diversifying risk management beyond traditional stock/bond correlation, which failed in 2022. The ability to use in-kind redemptions for options, introduced in late 2019, was crucial for the tax efficiency of their ETF wrapper.
Income Generation Strategies via Options
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(00:45:30)
  • Key Takeaway: Vest generates significant yield (often double-digit) across various asset classes, including equities, high-yield bonds, gold, and Bitcoin, by systematically writing covered calls.
  • Summary: ETFs like KNG (Dividend Aristocrats) and HYTI (High Yield Bonds) use covered call writing to boost their distribution yields significantly above the underlying asset’s base yield. For KNG, the distribution yield reached over 8% by covering about 20% of each underlying position weekly. This strategy monetizes volatility, which is particularly effective when implied volatility exceeds realized volatility, allowing investors to earn income without needing to time market peaks.
Missing Market Perspectives
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(01:01:04)
  • Key Takeaway: The market is still largely thinking two-dimensionally (stocks/bonds) and is missing opportunities to diversify risk management beyond simple asset allocation, similar to the dot-com bubble where the ultimate winners were still emerging.
  • Summary: Investors often miss opportunities to shape returns through hedging and income generation across different asset classes, remaining focused only on traditional stock and bond diversification. Chang draws a parallel between the current AI boom and the late 1990s, suggesting that the ultimate market winners are likely still in startup mode, perhaps at Y Combinator, and are not yet the established large-cap names.
AI Startup Growth and Future
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(01:02:51)
  • Key Takeaway: AI-driven startups at YC show double-digit month-over-month revenue growth, suggesting future market disruption.
  • Summary: Many highly successful companies poised to emerge from the AI sector are currently in startup mode, with approximately 80-90% of Y Combinator companies being AI-driven. These companies are demonstrating revenue growth exceeding 10% month-over-month, sometimes even week-over-week. The speaker suggests the next company to challenge Nvidia’s dominance might still be in high school.
Mentors and Family Influence
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(01:04:02)
  • Key Takeaway: The speaker’s older brother, an engineer at Apple and Tesla, served as a primary, competitive mentor shaping his career path.
  • Summary: Jeff Chang identifies his older brother, four years his senior, as his main mentor, noting the pressure of being known as ‘Bill Chang’s brother’ in school. The brother worked at Apple and Tesla, serving as the chief architect of the Dojo Project, Tesla’s AI system for self-driving. This competitive dynamic, rather than ’tiger parenting,’ motivated the speaker’s hard work.
Influential Books and Reading
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(01:06:16)
  • Key Takeaway: Foundational finance and psychology texts like ‘The Intelligent Investor’ and ‘Influence’ were highly formative for the guest.
  • Summary: Influential books cited include ‘Liar’s Poker,’ ‘Influence’ by Robert Cialdini, and ‘How to Win Friends and Influence People.’ For finance specifically, ‘The Intelligent Investor’ by Ben Graham was noted as a cornerstone text.
AI Learning Techniques
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(01:07:02)
  • Key Takeaway: Prompting ChatGPT to explain concepts beyond human comprehension, tailored for a 16-year-old level, unlocks deep learning rabbit holes.
  • Summary: The guest uses a specific prompt in ChatGPT, inspired by Matt Bellamy of Muse, asking what the AI has learned recently that is beyond human comprehension. He instructs the AI to explain complex topics, like quantum entanglement and the time dilation difference between one’s head and feet due to gravity, as if speaking to a 16-year-old. This method encourages exploration of advanced concepts while maintaining accessibility, though one must guard against AI hallucinations.
Advice for Aspiring Finance Grads
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(01:12:24)
  • Key Takeaway: Success in asset management or entrepreneurship requires developing portable skills, seeking out painful problems to solve, and maintaining a sense of humor.
  • Summary: Recent college graduates should focus on developing portable skills that make them independent of any single employer. Aspiring entrepreneurs must distinguish between founders (creativity) and entrepreneurs (grit/influence) and actively look for painful problems they possess the skill set to solve. Ultimately, not taking oneself too seriously is vital to prevent burnout.
Value of Ignorance in Founding
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(01:14:12)
  • Key Takeaway: Not knowing the full scale of the challenge ahead—the ‘mountain’—was a superpower that enabled the guest to launch his venture.
  • Summary: If the guest had known upfront that he would not receive a salary for over four years, he likely would not have quit his job to start Vest. Seeing the entire scope of the challenge would have been discouraging, whereas operating under a cloud of partial visibility allowed him to keep moving forward toward success.