Invest Like the Best with Patrick O'Shaughnessy
00:42:28 · Patrick O'Shaughnessy, Christina Cacioppo
[00:42:28] S0: What are the big trade offs that you struggle with right now? You can't do everything. You got to make decisions. The stakes are higher than ever. It's easier to build than ever. It seems like a cool time to be doing what you're doing, but there must be big trade offs that you struggle with. What are those [00:42:42] S1: for I rent mean, one conversation have had and have is we have tried over the last year to build in such an agent forward way. [00:42:51] S0: What does agent mean? [00:42:53] S1: I don't know. You get two x revenue multiple if you say agent. It's like three x if you say harness. I have to... I can say harness more. Prompt file, like, minus three x. We've tried to build such a great harness. Yes, that's true, guys. Tried to build such a great harness for our customers. But actually... And not build a bunch of SaaS UI. Oh, you want reporting? We'll have our agent go make charts for you on demand based on all our data. We're not gonna put Tableau inside of Vanta, which is probably what we would have done in 2022, 2021 if we had been building it then. And we believe in this, in like a short term customer outcome sense, but also in a medium to long term, like this is what software will look like. And no one is going be putting Tableau inside their products. [00:43:41] S0: So there's an aspect of this diffusion thing is just scary because maybe the tractor company takes ten years. And in the meantime, you were right, but early and if we're wrong.
00:43:41 · Patrick O'Shaughnessy, Christina Cacioppo
[00:43:41] S0: So there's an aspect of this diffusion thing is just scary because maybe the tractor company takes ten years. And in the meantime, you were right, but early and if we're wrong. [00:43:51] S1: And if we're wrong, you're kind of betting on the time horizon there. The other version of this big enterprises were working with The US enterprise trying to close. And they basically were like, hey, maybe we want your AI features, maybe we won't, but can you turn them off for now? Ugh. Why? The answer is because it's a way easier to get a non AI tool through procurement. And we want your... Turn it on after we're in. Right. And like we don't really give it off switch on, you know, you're like, oh, can we go build that? But you're like, gross. We don't want to build that. Hopefully, we don't have to use it. We'd so much rather take that time and effort and build something actually useful. Anyway, we're not gonna build this off switch, it's just one of those trade offs. [00:44:30] S0: If you were an investor, which you used to be, where would you be focused right now? [00:44:35] S1: Well, you not envy the job at all right now. [00:44:39] S0: Why? Why don't you envy it?
00:44:39 · Patrick O'Shaughnessy, Christina Cacioppo
[00:44:39] S0: Why? Why don't you envy it? [00:44:40] S1: As much as I can critique and make fun of on the company side, the like, oh, I think people are miss thinking about some of these businesses in a like very short term way. I think the FOMO and what are your returns. I saw this tweet. If you haven't invested in a lab or an inference provider in the last four years, you should just shut down your firm because like what are you doing? It feels like more acute on the investor side than the company side. However hard I think my life is. My life's not hard to be clear. Whatever these trade offs are that we're facing, it feels like more echo chamber y, more judged on incremental returns and paper returns on the VC side than the company side. [00:45:27] S0: So what would you do? Where would you hunt? [00:45:29] S1: The labs and the inference providers apparently. No. Those feel a little... Well, we can debate. Okay. It played out. But like high entry places. It feels like the discourse and kind of the certainty around the open source model providers. And then like the tooling and the companies around them, feels sort of disconnected. It's... Oh, we've all decided the open source model will be very real. And then the ecosystem around them is so much less built out than the big labs. And that just feels off to me. You probably have a What better [00:45:55] S0: do you mean by ecosystem around them?
00:45:55 · Patrick O'Shaughnessy, Christina Cacioppo
[00:45:55] S0: do you mean by ecosystem around them? [00:45:57] S1: If you think that a lab or is it long life? Is that what it's called like these, were basically just gonna go deploy Can this technology and put AI in these you build one of those around the open source providers? Of course, yes. But can you really grab one of those models the way OpenAI is grabbing its own stuff and just replicate that playbook? Basically a bunch of the lab playbooks seems like they should apply to the open source models. [00:46:23] S0: And it's just like mature. And so there's more to [00:46:25] S1: do there. Exactly. [00:46:26] S0: Yeah. [00:46:26] S1: What am I missing on that? [00:46:28] S0: I think it's just like a pace thing. Anything where these things can go... It's kind of like ironically private equity or something, what private equity promised to do, which was to shape businesses up. Now they can much more easily. And so probably everything will get way more efficient if it can. And the return will come from higher margin, more efficient operations, whatever. That's like an efficiency thing, a generative thing. I guess what I'm more curious about as you watch your peers and people around you is where are the green shoots on the generative side?
00:46:28 · Patrick O'Shaughnessy, Christina Cacioppo
[00:46:28] S0: I think it's just like a pace thing. Anything where these things can go... It's kind of like ironically private equity or something, what private equity promised to do, which was to shape businesses up. Now they can much more easily. And so probably everything will get way more efficient if it can. And the return will come from higher margin, more efficient operations, whatever. That's like an efficiency thing, a generative thing. I guess what I'm more curious about as you watch your peers and people around you is where are the green shoots on the generative side? [00:46:59] S1: Bunch of people starting security cyber companies, both because the environment and like I see proportionally more of those than other things. A bunch of people attacking RevTech, like go to market technology, which I think makes ton of sense. Some of the old SaaS RevTech providers, they should be building all this stuff, but it doesn't seem like they are. And actually they're running more PE bench spoons sort of playbooks, is, again, a choice. Like maybe a reasonable choice. Robotics is probably underplayed, somewhat hot and hype y. That's not a novel area, but it's still definitely underweighted compared to all the software stuff. Models are also getting real damn good there to state the obvious. So probably spend time there. [00:47:41] S0: What else do you feel like you know because of your unique path that others don't yet fully appreciate?
00:47:41 · Patrick O'Shaughnessy, Christina Cacioppo
[00:47:41] S0: What else do you feel like you know because of your unique path that others don't yet fully appreciate? [00:47:48] S1: Over the past couple of years, Vanta has spent more time with government, Federal, state, local levels, inside The US, outside The US. There is an appetite for modernization. Big stated priority of the current US administration, but again exists outside of The US too. The AI piece has created more FOMO in government officials. Where they may have always known they did not have modern processes or modern software, but it feels more of an imperative now than it used to. There's something there. Here's a broader answer. All of the conversation around AI and the technology has changed the priority and upped the priority of a lot of modernization. Sometimes it's within governments. Sometimes it's within enterprises. You see this with actually a lot of the cyber stuff and the CISOs we talk to. Their jobs are changing because of AI. And they're saying, oh, given AI and like the risks from the agents, I would like to overhaul my enterprise risk program. And I would like budget for that. And I think if they said I want budget for my enterprise risk program three years ago, we were like, we'll talk about an AOP. Maybe. And I think because of the attach to AI, they're much more likely to get that budget today. So there is more of a buying motion. [00:49:07] S0: What would be your big pitch to come work at Vanta right now?