Invest Like the Best with Patrick O'Shaughnessy
00:39:08 · Vlad Barbalat
[00:39:08] S2: You've used this term branded capital. But what is branded capital? Branded capital could mean literally for one reason or another, you're viewed as someone that a GP should engage with and that can mean many things. If you're a mega fund and you're coming to raise through your fundraising cycle, branded capital could be a large state pension which will always write the big check. That's not what we do, that's not what we are, so that's not our brand. Our brand is to come and help you build a business. Our brand is to be quick in the way we ingest information, ultimately come back with how we want to or don't want to participate so that we don't waste your time. We operate much more like a GP in that way, and frankly look to hire people that come from GPs or operators rather than just a traditional LP background. Of course, we compete in a variety of spaces, but our reputation continues to build on the way we show up. Any single one of our people that goes out into the world can do tremendous damage or bring tremendous benefit in the way they engage. Because, as you know, if you do great things with 10 business partners, the next 10 things are gonna be easier because at least a few of those are gonna come from that network. And we find ourselves well beyond that. We are a hub of incredibly interesting relationships and we've tried to make sure that we approach that with all the care and diligence and thoughtfulness. What I mentioned before, if I can identify a way we can be helpful to two of our partners or three of our partners and not be involved, we're always gonna do that, we're always gonna think that way because we feel that these are valuable business relationships, friendships, we're rooting for all our business partners. We know that one way or the other that's gonna help our business in the long term, and that's part of our value proposition.
00:41:03 · Patrick O'Shaughnessy, Vlad Barbalat
[00:41:03] S0: On this notion of branded capital, is it fair to say that a goal you have is that you wanna be one of those LPs that a GP thinks about as like a Yale or something where, okay, if Yale's backed this thing that says something about it, and that brings other capital, it reduces the risk in the eyes of other capital, and you wanna cultivate that and have cultivated that reputation as being like one of those ten, fifteen LPs that have that perimeter that is impactful on the partner. [00:41:31] S2: That's exactly right. I think we wanna be one of those institutions, but I would say we wanna be even more bold than that because there's a notion of a name being on the capital roster that allows others to come in. That's an asset you have as that type of LP, but we want be much more than that. We want to sustain that, maintain that, but we also want to be known for our creativity to structure solutions, for our creativity and willingness to take risks that some of those institutions with that halo of a brand just don't do. Not set up to do, that's not meant to be a negative. In certain cases, that's all that you need. In the case of let's say the venture ecosystem, which you're so familiar with, we're not gonna try to replicate that outside of our organization. That's where you're competing truly with other capital to get on the capital roster. In other places that's just not the game. The game is, are you creative? Are you quick? Can you take certain risks that others just don't even think about? The game's different across different types of exposures.
00:42:34 · Patrick O'Shaughnessy
[00:42:34] S0: This environment is so interesting because it feels as though geopolitics, the changing, shifting nature of global order and power structures, matters to investing outcomes for the first time in a long time. A whole generation of investors that is retiring right now didn't really have to think too much about this. There was relative global peace and stability post World War two. This like Pax Americana that everyone talks about, and that's changing. How do you think about that variable in all of this, in the top down system settings that you stick in there? How do you think about this?
00:43:08 · Vlad Barbalat
[00:43:08] S2: I love history, we talked about this before and so I'm particularly tempted to engage in these things. A couple of things I try to remind myself of, whatever it is that you are living through, we are living through, it feels particularly acute to us, it always feels like the sharpest moment, it probably isn't. If you go back and take people in our parts of life, they experienced things then and they thought it was the most acute thing. I also think about the fact that in my career I've now been through what I would say is more than enough of various crises. Some of them feeling like, could this really be that I'm alive during this period? I distinctly remember walking after a long day on Zoom in March or maybe April 2020. It was a rainy day, ten to eleven hour marathon on Zoom, needed to walk outside and I'm walking around and thinking, is it really possible that my life happened to coincide with this moment in humanity where a pandemic was going to completely upend society and human life as I know it. I told myself, odds are very small, it's very unlikely that that's going to be the case. And then I remind myself there were many pandemics before that would wipe out large parts of humanity, yet humanity goes on. It is true that if you're living in that period of time, your experience is actually quite different than the lens of history many years later. But I also find myself having those thoughts over and over again. I have those thoughts when it comes to the unbelievable moment in tech progress that we're living through, and that feels really real and very very different in a way that you can imagine society ten fifteen years from now that will look nothing what it looks like today. But that was also probably true during the Industrial Revolution for the people that looked back fifteen years after the steam engine became mainstream, society looked nothing like it did fifteen years before. Is it really that different, or is it just continuous progress? And And then I think about the geopolitics today, and they do feel like we are certainly breaking the order that had governed economic flow, security architecture across the globe that has been in place more or less since World War two.
00:45:17 · Vlad Barbalat
You can make the argument that along the way we had some really major shifts like the Berlin Wall falling, but it's been a period where certain norms in international relations and certain alliances held through all that, and it does feel like that's changing. That in itself, I don't think affects investing if you're focused in The US so much. What does clearly matter is that the economic architecture is changing. It's It's changing from an energy perspective, it's changing from a supply chain perspective, and there are real investing opportunities and risks that evolve from that. I continue to think that The US is endowed with inherent advantages, whether that's the ability to innovate, whether that is the energy abundance that we ultimately have, all those things continue to conspire for American exceptionalism. But we've also gotten quite accustomed to a world where just in time inventories were a thing, and now that's challenged. The ability to identify the cheapest pockets of labor or competitive advantages, like the economics book would say, that's going to potentially have structural impediments which has implications on inflation, on rates. How does all that balance with this, what I perceive as an incredibly deflationary impulse from technology? I'm not sure. I think we are reasonably good at identifying, by we I mean not LMI, but we, as people who like to think about these things, at identifying the variables that drive economic outcomes. What I think we're terrible at is assigning weights to them. That's why forecasting is next to impossible. You may get the right issues, but you don't know how they interact with each other, You don't know what people do within the system to adjust and mitigate all the different roadblocks that come up. I do think we're living through a moment. I do think it's a reset in the way Pax Americana governed, but I don't think it's a reset away from American power in the world, at least on a relative basis. The world continues to need America.
00:47:14 · Patrick O'Shaughnessy
[00:47:14] S0: The other side of the coin that you mentioned is the changing technology landscape. Arguably that's the bigger one than very unpredictable geopolitics. This seems more predictable. Ten years from now, there's gonna be a lot more stuff that's changed as a result of AI and all that it impacts.