Invest Like the Best with Patrick O'Shaughnessy
· Mitchell Green, Patrick O'Shaughnessy
[00:00:00] S1: My fundamental belief is that the models will commoditize, and that companies like Google and Facebook and Amazon and Apple have a competitive cost advantage. Companies like Amazon and Microsoft and Google have more data to train a model than these new model companies will ever have. And then oh, by the way, if you were all these Chinese models or European models, a bunch of these things cost a fraction of the cost to run and you can run them locally. Especially companies outside the US. Like, why would you pay that amount for OpenAI tokens or for Anthropic tokens when you can just run DeepSeek or one of these other 10 models? I think we worry the most about model commoditization. I have no clue when this will stop. It will probably go longer than people think. In '99 and 2000, people also thought we were in a bubble. People think we're in a bubble now, and it will just stop. Is it one of these monster IPOs happening and it just doesn't go like people think it does? I think this Anthropic round was kind of like an IPO. We're trying to hit doubles and triples. A lot of these companies we struggle with, they're either going to be 200x's or 100x's or zeros. That's the struggle for us. [00:00:00] S0: What kind of company in the AI center of the heat map – I know you're probably not investing in any of them because of multiples or whatever. What kinds of companies are the most interesting to you just as an enthusiast?
· Patrick O'Shaughnessy, Mitchell Green
[00:00:00] S0: What kind of company in the AI center of the heat map – I know you're probably not investing in any of them because of multiples or whatever. What kinds of companies are the most interesting to you just as an enthusiast? [00:00:00] S1: I think it's fascinating some of the stuff that's being done in infrastructure software. And actually agents appear to consume more resources than actually people. Some of these consumption-based models, the growth of companies. By dumb luck, we were very early investors in ClickHouse, which is a database company. We were early investors in Grafana Labs, an infrastructure company that competes with Datadog. I think Datadog's growing like high 20s, 30% a year at scale. It's those types of companies I think we find super interesting. I find them fascinating. I really struggle with the valuations, but the growth rates are like we've never seen, with very good economics. You see how much money a company like ClickHouse has raised, what they've burned is very little compared to what you might otherwise think. [00:00:00] S0: What do you think is the most surprising thing about you? I have a good sense of you – how you operate, persistence, enthusiasm, energy, process. What do you think if I spent 10 hours with you, I would be most surprised about?
· Patrick O'Shaughnessy, Mitchell Green
[00:00:00] S0: What do you think is the most surprising thing about you? I have a good sense of you – how you operate, persistence, enthusiasm, energy, process. What do you think if I spent 10 hours with you, I would be most surprised about? [00:00:00] S1: Probably how driven I am and how much I truly love what I do. And I just put my heart and soul into everything I do, whether it's like racing cars, which I race cars competitively. I was a nationally ranked ski racer. Or how I run Lead Edge. I probably sleep 5 hours a night, 4 hours a night. It's 'cause I love what I do. I'm insanely competitive. If you spent 10 hours with me, you'd be like, oh my God, this guy is the most persistent, competitive person I've ever met. [00:00:00] S0: Were you born that way? [00:00:00] S1: Yeah, I think I was born that way. [00:00:00] S0: Was it enhanced through formative early experience? [00:00:00] S1: Ski racing, skiing growing up as a kid, 100%. [00:00:00] S0: Can you make that tangible for us? What was it like?
· Patrick O'Shaughnessy, Mitchell Green
[00:00:00] S0: Can you make that tangible for us? What was it like? [00:00:00] S1: Process. Do these things and you'll get better. Do these things on video in a GS course and constantly analyze video and do these things the next run and change this. And you fell, get up and go do it 10 more times. I grew up on a ski hill that was 500 feet. I mean, Lindsey Vonn, one of the best skiers in the world, she grew up skiing on 500 feet Buck Hill in Minnesota and doing laps from 4:00 PM to 10:00 PM at night. Just repetitive. Mikaela Shiffrin is one of the best female skiers in the world. She views it as, her time on snow is limited. When you get off the chairlift, everything is a drill, constantly be trying to improve. I think that's it. At Lead Edge, what you would find in me is constantly trying to improve. What surprised me the most, actually, if you had to say like, huh, you started the firm 15, 20 years ago. I think I've been able to recruit and maintain, motivate, and build a really good team. I mean, very good to pick really good partners that treat other people really well, and that feeds on itself. [00:00:00] S0: Is there anything else from skiing – I'm not a skier – that you find visceral and helpful as an analogy for how to do things elsewhere other than reps and practice?
· Patrick O'Shaughnessy, Mitchell Green
[00:00:00] S0: Is there anything else from skiing – I'm not a skier – that you find visceral and helpful as an analogy for how to do things elsewhere other than reps and practice? [00:00:00] S1: Scott Booth, who ran Eastern – I asked him why he hired me – and this was early '08. He said to me, because when things get scary, you're gonna want to buy. And I didn't know what he meant. Because he's like, you go down a hill at 80 miles an hour. This isn't scary. This is like nothing. You can make a decision going down the hill at 80 miles an hour on what to do and what not to do and how not to fall. Then the fall of ‘08 happened, I was like, this isn't scary. Let's buy. It's eventually going to go up. Ski racing helped me really understand a very fine line in risk-adjusted and risk-return behavior. I just think being an athlete – whether you play basketball, whether you play hockey, whether you play golf – I think athletes just have a work ethic. If you're trying to find it in young people who have a drive, there are athletes that have incredible athleticism, but also have incredible work ethic like Michael Jordan. Those are the best of the best. Then you have people like Steve Kerr who are not very good athletically, but had a work ethic of Michael Jordan. They could be good, but then you have wasted talent. Which is like the Dennis Rodman's of the world where they were amazing athletes, but they didn't have a drive. And I think the same can apply to investing.
· Mitchell Green, Patrick O'Shaughnessy
[00:00:00] S1: Scott Booth, who ran Eastern – I asked him why he hired me – and this was early '08. He said to me, because when things get scary, you're gonna want to buy. And I didn't know what he meant. Because he's like, you go down a hill at 80 miles an hour. This isn't scary. This is like nothing. You can make a decision going down the hill at 80 miles an hour on what to do and what not to do and how not to fall. Then the fall of ‘08 happened, I was like, this isn't scary. Let's buy. It's eventually going to go up. Ski racing helped me really understand a very fine line in risk-adjusted and risk-return behavior. I just think being an athlete – whether you play basketball, whether you play hockey, whether you play golf – I think athletes just have a work ethic. If you're trying to find it in young people who have a drive, there are athletes that have incredible athleticism, but also have incredible work ethic like Michael Jordan. Those are the best of the best. Then you have people like Steve Kerr who are not very good athletically, but had a work ethic of Michael Jordan. They could be good, but then you have wasted talent. Which is like the Dennis Rodman's of the world where they were amazing athletes, but they didn't have a drive. And I think the same can apply to investing. [00:00:00] S0: Why did you choose to start the firm? Because you were quite young when you did it. How would you translate that experience into advice for someone listening that is thinking about starting a fund to decide whether or not they should do it?