Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy
[00:00:00] S0: What have you learned on any recent trips to China?
· Martín Escobari
[00:00:00] S1: China's fascinating. I've been going to China for 25 years, and I've seen the development. It's the fastest change in terms of per-capita GDP in modern history or any country at scale. It's an incredibly complex society, tremendous amount of innovation, and we were lucky, having been early in China, as GA, we've been investing there for 25 years. I am highly optimistic that tensions have stabilized and that market conditions are improving, and we've been underweight China for the last five years. We just did two deals, we're going to pick it up a little bit. There's always binary risk around the geopolitics. There's just so much innovation, there's so much entrepreneurial zeal. The one thing I learned, I actually learned over drinks with a Chinese entrepreneur, so I've done business in 19 countries and I love to connect on a human level with the entrepreneurs. Even at growth stage, so much of the assessment of the company and of the partnership is about chemistry, and it was very hard for me to build chemistry with the Chinese entrepreneurs. One night, I'm having a long dinner with lots of good food and alcohol with an entrepreneur who was an anthropology PhD from University of Arkansas. I said, "If someone can explain to me the Chinese mentality, it's this man." He said to me, like any oversimplification, it's unfair, but there's a grain of truth, and he said, "What you have to understand about the entrepreneurs you're dealing with," he said, "This generation of entrepreneurs, people who were in their thirties and forties, they're all children of the Cultural Revolution. Everything was taken away from these families, everything, and they are scarred and they have something to prove, because they think something was stolen and they will get it back. There's a level of drive and work ethic that probably matches the refugees of World War II that came to the States, and these great businesses after World War II, or other people that have had hardship in their life, but this applies to 98% of the entrepreneurs. They side with their parents, so that's the other condition you should take into account."
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: How do your ancestors show up in your life and values? [00:00:00] S1: We're all products of our traumas and our adventures and our dreams is my worldview. What are my traumas? Some are personal and some are generational. Generational traumas, on my mother's side, Jewish family, had to flee the Russian Empire through Romania, then Argentina, then Bolivia. Fleeing, leaving everything behind. From my father's side, very wealthy, landed oligarchy of Bolivia. In 1952, there's a revolution. They lose everything, and their house and farms get burned down, and they almost die when my father was a teenager. On both sides, there's a sense of loss and escape that is very present, and decide to become communists and doctors. They're both doctors in public hospitals in a little town in Bolivia. That's their trauma, which I relate to the Cultural Revolution. They are religious, not atheist. In my personal life, trauma comes from two places for me. One is I grew up in Bolivia in the '80s, and that was chaos. Bolivia in the '80s, seven presidents in 10 years, including four coup d'etats. We had inflation. Now you got 5% inflation? [00:00:00] S0: Yeah. [00:00:00] S1: We had 35,000% inflation. [00:00:00] S0: 35,000.
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: 35,000. [00:00:00] S1: Time value of money, I understand, okay? The only time my mom ever punished me was one time she sent me to exchange her salary for dollars when she got it, and I took a one-hour break to visit a friend... and it lost half its value in that hour. I was grounded for a year because of that one hour break through the exchange. So, anyways, and there was also a lot of violence, ethnic violence in Bolivia. So, it was rough, it felt unsafe, it felt turbulent. And then I, I have a genetic disorder. I bruise very easily, very, very easily. So, getting out of bed, deciding what activity to do is a risk reward, trade-off since the age of five, and that is a way of seeing the world that most people... [00:00:00] S0: Wires you for risk. Absolutely, yeah.
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: Wires you for risk. Absolutely, yeah. [00:00:00] S1: In fact, I know how to price risk. I'm like, "Ah, not worth it." My friends are like, "Why are you always thinking of the downside?" Well, I have my reasons. So, anyways, I find when trying to understand the person I do it with entrepreneurs, seeing what their trauma was is super useful, because I find a lot of the most driven people are driven because of foundational traumas. It doesn't need to be rag to riches, it doesn't need to be a big disease. It could be one of my fiercest competitors. He was mowing the lawns of his buddies who were with the cute girls and his entire life, he wanted to show them. I don't judge, that's a real drama. Paying his pain. And if you understand them and you traumatize yourself, you can relate and empathize, but you also understand the intensity that drives them and whether they can manage it and channel it productively. But if you can, it is such a wonderful engine of transformation and curative, it's healing to channel it in a positive way. [00:00:00] S0: How did you learn to harness it? Because the other end of the spectrum could be unharnessed and just chaos. How do you learn to harness or channel it to something productive? [00:00:00] S1: I believe managing one's emotions productively requires either therapy, writing a journal or meditating. You should do two of the three. I do two of the three. Try to do the third one, but it's really hard. [00:00:00] S0: With meditation? [00:00:00] S1: Yes.
· Martín Escobari, Patrick O'Shaughnessy
[00:00:00] S1: Yes. [00:00:00] S0: Yeah, we're on the same page. Yeah. If I asked a bunch of people that knew you and the investments that you've made across your career, what is a U investment? What are the characteristics where they see that company and they're like, oh, he must have done that? How would they describe it?