Invest Like the Best with Patrick O'Shaughnessy
· Martín Escobari, Patrick O'Shaughnessy
[00:00:00] S1: You're like, he's crazy. Look what he's built. In the dot com, it felt like the world was on steroids. In Submarino and only had we raised 80 million dollars within the first three months. Within one year, I was in charge of international. We open Submarino in six countries. With warehouses and customers and registrations and teams, it was done in one year. If you had told me how only it would take a normal person to do that, I would say three to four years going fast. And we were like, no, we have to do it. First move, moving will be incredibly valuable, we did it in one year. So it's this ability to move very, very fast to capture opportunities which are fleeting, which seem humanly impossible or actually not. [00:00:00] S0: This seems like a moment of that is happening again maybe on Mega-steroids. Think of a company like Cognition as a recent example that I know well, where the pace of growth of the business is just sort of hard to believe that it's possible. Serving developers maybe previously a company like Stripe, which is one of the great companies in the US in the technology world is a certain size. It's grown that size over 15 years and these things are growing at a pace that it's sort of hard to wrap one's head around. And so, I'm curious how you think about that in the current moment right now, but also, what lessons you learned about what it takes to go to put a ten-year plan into one year. What is different about the behavior in that compressed one-year period that makes that possible?
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: This seems like a moment of that is happening again maybe on Mega-steroids. Think of a company like Cognition as a recent example that I know well, where the pace of growth of the business is just sort of hard to believe that it's possible. Serving developers maybe previously a company like Stripe, which is one of the great companies in the US in the technology world is a certain size. It's grown that size over 15 years and these things are growing at a pace that it's sort of hard to wrap one's head around. And so, I'm curious how you think about that in the current moment right now, but also, what lessons you learned about what it takes to go to put a ten-year plan into one year. What is different about the behavior in that compressed one-year period that makes that possible? [00:00:00] S1: So this is like my fourth or fifth bubble and all bubbles are born out of a truly transformative technology. In all the previous bubbles, they promise it was spectacular. The short term was disappointing and the long term delivered more than expected. But in that process, a lot of fortunes were made and destroyed. So I think as a firm that General Atlantic has been around for 45 years. We try to make different mistakes in each bubble and I'm sure we're- [00:00:00] S0: Making your own this time. Yeah.
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: Making your own this time. Yeah. [00:00:00] S1: Our approach this time different from the internet has been to be incredibly aggressive at deploying AI in the portfolio. The promise of AI is clear to everyone. Let's see what's working in the real world and let's share Brecht's practices. And we have an incredible scale with over 200 portfolio companies. We have 100 people in our portfolio support, portfolio operations team. This year we'll do 500 projects with the portfolio. A third of them are AI projects. So we're seeing what works in the front lines. And as soon as we see a use case with real ROI and a real revenue to the provider of the service and you can sort of model what the economics and the cost to serve and what the long-term profitability maybe is of this exciting new market, then we pounce. The first one where we fell that has happened is co-generation. [00:00:00] S0: Yeah, Cognition and Cursor- [00:00:00] S1: And it just happened right now, in the last 12 months. [00:00:00] S0: It's crazy.
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: It's crazy. [00:00:00] S1: I mean based on public information, Anthropic revenues and co-chair went from 200 million to four billion in 12 months. In B2B, that kind of growth has not happened ever. And it's so exciting and it's working in real life and programmers are happy. And then all of a sudden, you've got this new reality where human programmers are hyper-productive and they're working alongside agentic programmers who have no moral north star and do not sleep. And how do you get them to work together to a common output, which is super sensitive to you, the client who's running on the software. Super exciting. That's one area. Marketing optimization. Obviously, it's machine learning on steroids, where investors in Liftoff which very much on this, where investors in a software company called Insider that does enterprise marketing optimization data, companies turbocharged with AI investors in an Israeli company called Via. There's so much ... it's super exciting, it's super risky. We're probably going to look back and say we weren't bold enough and going for the killer as soon enough, but we've been bold enough before and it didn't pay to go very early. And I think what's really interesting about GA, we've been around for 45 years through all these technological cycles and we've been international for 30 years. We've been in the emerging markets for 25 years. We take on a lot of risk, like macro risk. We take on a lot of technology risk because we are investing across what we call 18 power alleys that cut across five sectors. Guess what our loss ratio is?
· Martín Escobari, Patrick O'Shaughnessy
[00:00:00] S1: I mean based on public information, Anthropic revenues and co-chair went from 200 million to four billion in 12 months. In B2B, that kind of growth has not happened ever. And it's so exciting and it's working in real life and programmers are happy. And then all of a sudden, you've got this new reality where human programmers are hyper-productive and they're working alongside agentic programmers who have no moral north star and do not sleep. And how do you get them to work together to a common output, which is super sensitive to you, the client who's running on the software. Super exciting. That's one area. Marketing optimization. Obviously, it's machine learning on steroids, where investors in Liftoff which very much on this, where investors in a software company called Insider that does enterprise marketing optimization data, companies turbocharged with AI investors in an Israeli company called Via. There's so much ... it's super exciting, it's super risky. We're probably going to look back and say we weren't bold enough and going for the killer as soon enough, but we've been bold enough before and it didn't pay to go very early. And I think what's really interesting about GA, we've been around for 45 years through all these technological cycles and we've been international for 30 years. We've been in the emerging markets for 25 years. We take on a lot of risk, like macro risk. We take on a lot of technology risk because we are investing across what we call 18 power alleys that cut across five sectors. Guess what our loss ratio is? [00:00:00] S0: Tell me.
· Patrick O'Shaughnessy, Martín Escobari
[00:00:00] S0: Tell me. [00:00:00] S1: 4%. [00:00:00] S0: On capital or on- [00:00:00] S1: On capital, on capital, on capital. In venture and growth equity loss ratios of 20 to 40% are common, but there's something about the way we deal with risk that allows us to capture what we think are reasonably good returns, but that's surprisingly low risk ratio and it has to do, I think, with an appetite for risk. We don't take binary risk. For us, when we do this sort of the scenario planning of three to 1000 scenarios on one dozen in one mine like you do when you think of an investment, for us, a worst-case scenario, a company grows into the valuation we paid for it. And that limits what you do. It limits the timing of where you go into a new industry. You probably leave some money on the table, but you also leave a lot of risk on the table. And that product of reasonable returns with low risk is a great product. I have 95% of my net worth in that product and I sleep well at night. I have a vastly undiversified portfolio of two assets, GA and Treasuries. [00:00:00] S0: 45 years ago, the origin story of GA itself is so interesting, Chuck Feeney is such an interesting character. How does his spirit loom in the business and in your personal consciousness?