Invest Like the Best with Patrick O'Shaughnessy
· Martín Escobari, Patrick O'Shaughnessy
[00:00:00] S1: Talk to young people, surf TikTok, try different apps, try crazy things. Go to places where there are no old people. And you don't care, I don't care if someone calls me old, I'm just playing. Keep it fresh. Value is in the new, being the new always. Even if it turns out to be a dead end, most of what we do is dead ends, but it doesn't mean it was invaluable to try it. That's the hardest thing. [00:00:00] S0: There's been this wild transformation of our industry in the time that you've been a professional in it. What does a competitive dynamic feel like to you today?
· Martín Escobari
[00:00:00] S1: The universe of amazing companies that expanded, the number of $100 million revenue business is growing 40%, 50% has grown 10X because more technology, more people taking risk in more places. Unfortunately, we compete against 19,000 GPs. It was not very nice thing to say, but one of my competitors said there's more GPs than McDonald's in the United States, which it's one of those GPs that are smaller. They didn't feel like when you compare to my... But it's too many GPs and the industry is consolidating. It's becoming incredibly competitive. You have to have more clarity what is your competitive edge. How have we thought about our edge? Brand. We've built this brand about being good partners. This brand needs something. People get value from GA inside that tracks, helps them recruit talent, get clients, go public, scale to have muscles that small shops don't have. We have 100 people in operations. They can help you with pricing, sales force effectiveness, AI for customer serves, whatever you need, we got a team, it's there for free. We got an in-house human talent team that has taps into a database of 15,000 veteran executives. You need a CTO who'll send you a list tomorrow. We have eight guys in the area who we've worked with and I think fit, that's an area. And then, you have to be a specialist. Can't be a generalist anymore. So we've chosen what we call the GA Power Alleys. There are 16 Power Alleys, things like AI applications, value-based care, digital payments, 16 Power Alleys, check the website. In those Power Alleys, we think we're among the best in the world and we show up with 32 case studies. We've done this 32 times and yes, you can copy things that work, but guess what? You don't know the things that didn't work, that we tried, that were going to prevent you from trying. It's made it harder to compete, but I do think scale and experience helps provided you are deliberate at learning from the experience and focused on how you build capabilities with scale in areas that really matter, not just look good on a website.
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: If you're teaching a seminar about or for young investors who are only allowed to go invest in non-US companies, so everything but the US, what are the most important things for that crew to know about doing that well, that's distinct from what it would take to do well in the US? [00:00:00] S1: There's a lot more volatility. The frequency of surprises is much higher, so agility is super important. We're also low trust cultures, even though most of them are religious, doesn't mean we contrasted. So a higher percentage of the time, you may find yourself with a crook across the table. So the value of referencing is much more important and how to do a good reference is super important because people don't say bad things about other people easily. So that's another one. The third one, which is a positive one, which is the one great advantage of being outside the US is there's so many things that don't work well. [00:00:00] S0: Lower hanging fruit. [00:00:00] S1: Humongous lower hanging fruit, and if you provide a great service, you capture a lot of value for a really long time. [00:00:00] S0: How do you do a good reference? [00:00:00] S1: For an investment, you do it with a family that has given you money to make investments and you say, "João, we're about to invest $200 million in this entrepreneur. You know his father, you know his grandfather. Do you think we should take this risk?" And he's like, "João, no fucking way. He's a crook, son of a crook." Because he has money with you, he tells you the truth. If he didn't have money with you, he'd say, "It's fine."
· Martín Escobari, Patrick O'Shaughnessy
[00:00:00] S1: For an investment, you do it with a family that has given you money to make investments and you say, "João, we're about to invest $200 million in this entrepreneur. You know his father, you know his grandfather. Do you think we should take this risk?" And he's like, "João, no fucking way. He's a crook, son of a crook." Because he has money with you, he tells you the truth. If he didn't have money with you, he'd say, "It's fine." [00:00:00] S0: Of course he'd say, "I don't know, there's some noise. I would do my homework, or they're fine."
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: Of course he'd say, "I don't know, there's some noise. I would do my homework, or they're fine." [00:00:00] S1: For hiring, there's another hack which I learned, which is so important. So much of life is getting the right people on the bus. When you're going to do a reference on a hire and you call the person and you say, "Hey, we're considering David for this role. This role involves the following five challenges. This is a very important decision for my company because we can't get this wrong. It's also a very big decision for David because he's happy at his job, and if he gets this wrong, if we get this wrong, we've wasted time and he's out of a job. Help me assess if this is a good risk for me and David. And if you can have an honest discussion, if you don't feel comfortable engaging like this, let's not talk about it, but that's what I need the reference for." You'd be surprised. People are like, "Well, for that risk, David now, leaving there it is fine." But that is a genuine way to answer it because what I described is actually true. If this is a bad fit, David should not be taking this job. Reference calls are not, tell me about David. Is he a good guy? That's a waste of time. People say, "Yeah, he's a great guy." [00:00:00] S0: Very good guy. [00:00:00] S1: He's a great guy, very competent.
· Martín Escobari, Patrick O'Shaughnessy
[00:00:00] S1: He's a great guy, very competent. [00:00:00] S0: What have you learned about managing help manage the career success of investors, which is a very distinctive job from a career ladder in a company or something. Incentives matter a lot, I'm sure. I'm curious what you've learned about incentives. What mistakes have you made? If you think about you being responsible for other investors and you wanting them to thrive, what's the good, the bad, and the ugly that you've learned?