Invest Like the Best with Patrick O'Shaughnessy
· 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?
· Martín Escobari
[00:00:00] S1: This is a funny story. When I got promoted to chairman of the investment committee, so elevated from a Latin American role all of my life to head of the investment committee of General Atlantic, this iconic global, I was lost. So, I go to the two founders, Steve Denning was the CEO for the first 20 years, army man, McKinsey man, Stanford, MBA structured. I say, "Steve, how do I make decisions across so many geographies and business models? What's the framework you think I should apply to add value to my partners? And he said, you should develop a checklist that captures the characteristics of a winning GA deal. So, go back and look at our 25 years or history, our best deals. I'll share a couple of characteristics. I give you the 3Ms, but they're probably 5Ps as well. Create a checklist." And I was like, "Yeah, checklist." Same day I go to the co-founder, Dave Hodgson. He's just super good, but just the smartest guy in the room always. And I asked him the same question and the first thing he says, "Avoid the temptation to use a checklist. If it was as simple as a checklist, we wouldn't get paid millions of dollars to do what we do." And I was say, "Checklist not just, okay." So, whenever there is a paradox, there's an elegant unparadoxing of the paradox. So, Daniel Kahneman, Thinking, Fast and Slow, Checklist Manifesto built on work he did for the Israeli defense forces to create the checklist for the elite agents. Turns out, the checklists work, but in applying the IDF checklist, there were these super interviewers that got even better results consistently than just the average interviewer. So, there was something beyond the checklist that was statistically significant. And there's one interview of the super interviewer where she says, "I do the checklist because I have to. But after I do the appraisal, I close it and I close my eyes and see how I feel, and I go with my gut." And she has perfect scores. So, the framework I use for what's the perfect Martin or GA deal is the combination of a checklist with my gut, which I call the educated intuition. What's in the checklist of things we like? Huge temps, business models that create economic value and have mode, teams with the right go forward capabilities, situations where there's inorganic growth to get and there's tremendous amount of strategic value.
· Martín Escobari, Patrick O'Shaughnessy
Meaning, someone will overpay to have this capability if we are successful. So, those are the things that the checklist suppliers. Me personally in the deals I've led, they have to make the world better. I am so proud that I invested in the number one investing platform in Brazil when there were only 80,000 people that owned stocks in Brazil and now 10 million people own stocks. [00:00:00] S0: What's it called?