00:08:47 · Jenny Johnson
[00:08:47] S1: I was running the technology group, there was something that Gartner had called the, it was kind of the exuberance curve or something. I can't remember exactly. It happens over and over. New technology. This is the greatest thing ever. It's gonna be the greatest thing. It goes all the way up. It's so great. It's so great. Boom. And everybody's disillusioned by it. It's terrible. And then it comes back up to where it sort of should be. Mhmm. So the question is, where are we on that curve? It certainly feels like there is a frothiness in some areas. So personally, if you're betting on the needs for energy based on today's technology, both on the manufacturing of chips as well as the production of energy, you're assuming that for the next twenty or thirty years, it doesn't change dramatically. Mhmm. But that's pretty unusual. When you get a demand, people innovate and you find, you know, tremendous advances. So my instinct is if I were to finance, I still... We like the financing on the shorter term because these are still big cash flowing companies. These are not Internet bubbled companies that didn't have revenue. These these companies have significant earnings, so they're gonna be able to pay their debt. Would I go on the longer term of the financing on things like data centers? Personally wouldn't because I just think you're betting on today's technology and that we won't entertain inundate quickly. And we see what's happening with AI. It's solving math problems that we've never been able in history to solve. So I think you have to be a little careful on that. And I think Ken's probably right on that piece of it. We've talked a little bit about the accounting side. It's a little unclear on some of these revenue and how is it apples to oranges when you compare companies. So you have to be really careful. Know your stuff as you're making those investments. Having said that, just yourself playing and probably preparing for this podcast, you probably leveraged AI. I know when I'm going go prepare for something, I literally have a conversation back and forth, which opens up new thoughts for me that would be difficult. And usually what I then do is hand it to my team of experts and say validate these things, right? Because you can't necessarily just take it for what it is, but it can lead you to how you think about stuff.
00:11:11 · Jenny Johnson, Molly O'Shea
So I think we all get a sense for how incredible this tool is and the opportunity with it, but it will take time. And when it happens in companies and sectors, the leaders could leave behind others in those sectors. I think that's how quickly this stuff is moving. It seems [00:11:28] S0: to be the quote unquote whatever kind of metric you want to use for revenue that we're seeing from Anthropic and OpenAI are unseating a lot of incumbents and people that you'd think would be kind of winning in this day and age. Now their IPOs are getting delayed, who knows why, and all these kinds of reasons. Maybe it's because they say things they don't mean, or maybe they do mean them, and we should listen. But I think this was really interesting because this this part, I told you, I did a lot of prep going into this. I listened to a lot of your interviews on podcasts, like on the news, all over the place. And there was one really interesting one that kind of like opened up this other realm of Franklin Templeton I didn't really know, but I kind of knew, right? And it was when you were talking about the upcoming SpaceX IPO back in July or whenever it was, and you were talking about how Franklin Templeton got in to late stage investments. So do you want to tell that story? I mean, think it's just like so... It's like a good kind of encapsulation of how Franklin Templeton runs.
00:12:28 · Jenny Johnson, Molly O'Shea
[00:12:28] S1: Yeah. So we're headquartered in Silicon Valley, so we have a growth equity team there. And honestly, as we all know, companies are waiting much longer to go public. And so, you know, some of the PM said, boy, these IPO kickers we used to get were not... That that were a kicker to our performance. We're not getting those. We should do some late stage venture because it's really late stage ventures what used to be you were underwriting at the IPO level. And so a mutual fund can open or an ETF can can hold up to 15% illiquid assets in there. You don't tend to run it at 15% because you'd have a breach if the market moves, but you could do 678%. And so we started to invest in late stage venture deals and then actually had some clients seeing the deals that we're in and said, Hey, could you set up a fund? So we actually now have a venture group, but they will often go into investment both with the venture fund, as well as some of the traditional portfolio managers who want to have exposure to late stage venture. [00:13:28] S0: So I found out that you guys had exposure to SpaceX. [00:13:31] S1: We did, Anthropic, a bunch of them. Yes, exactly. If you're there and you have connections with the entrepreneurs, with the other venture community, and being headquartered there, you know, you've to remember, your kids tend to go to school with these people, they're in the neighborhood, they're community people, and you get to know them, that allows you to have access to those deals.
00:13:54 · Molly O'Shea
[00:13:54] S0: This episode is brought to you by Brex, my favorite. You become what you spend on, and I refuse to spend my time on work that shouldn't exist. Expense reports, receipt chasing, and manual closes. The companies building what's next from Vercel, OpenAI, Anthropic, Granola, and Deepgram all made the same call. They all run on Brex. Brex is the intelligent finance platform that combines cards, expenses, and banking into a single stack with agentic finance built in. AI agents that handle expenses automatically, enforce policy before spend happens, and close your books in minutes. That's why Sourcery runs on Brex, so I can spend time on building and not busy work. It's time to get Brex AF! Learn more at brex.com/sorcery. That's brex.com/sourcery. Bye. From Handshake to Signature Faster, Harvey, the AI platform built for legal work, is trusted by 80% of the Am Law 100 and over 20% of the Fortune five hundred. Learn more today at harvey.ai. That's harvey.ai. AI needs more than chips. It needs power, land, and infrastructure. Zone develops next generation data center campuses, partnering with AI companies, site developers, and technology leaders to bring compute online faster and at scale. Zone is building the foundation of the AI frontier. Visit zonefrontier.com to learn more. That's zonefrontier.com to learn more. SpaceX is particularly interesting name because they came to the market sooner than anyone else, and they have quite the diversified strategy, and more often than not, they're trying to label themselves as an AI company. And we were talking about this earlier, the makeup of that revenue, whether it was getting these data center contracts right before the IPO, the Starlink angle to this, getting to the consumer side of things, and then the launch costs that will then kind of bring down the economics of everything else. So for a company like SpaceX, what are you trying to watch out for? Do you think that this one will become I think Elon tweeted it will become the most profitable company on Earth by an order of magnitude.
00:16:16 · Jenny Johnson, Molly O'Shea
[00:16:16] S1: So there's a lot in there. Let me first address one thing. Maybe we should in history, every time everybody renames their business based on an AI or a .com, and we just changed our parent company name from Franklin Resources to Franklin Templeton. And when I said to my dad, Why were we ever called Franklin Resources? He said, Oh boy, in the 1970s, you couldn't sell it. The stock market was terrible. You couldn't sell anything, but you could do gold investing because there was high inflation. So if you had resources next to your name, that helped you in the stock market. There you go. Right? Buddy, this is a trend that people do all the time. They'll grab it. So what I always say is, know, stick to your knitting and say what you are. Having said that, look, I've used Starlink for... I have a place in Montana, and I gotta tell you, it was a game changer for me because I could never get good high speed Internet, And the portable Starlink is amazing. And so I think that everybody I've talked to who uses Starlink is a huge fan. So Starlink's in there. We've seen and if you read Walter Isaacson's book Elon, you'd recognize how much he has actually changed space investment and travel, and really fought the system that was sort of gumming itself up. So all about innovation, cost efficiency. I honestly believe that and Elon seems so focused on getting to Mars. The thing is, he makes these statements and we all say, Oh, that's ridiculous. And maybe he doesn't get there right on time, but he often delivers them. [00:17:53] S0: Like flying cars.
00:17:53 · Molly O'Shea, Jenny Johnson
[00:17:53] S0: Like flying cars. [00:17:54] S1: Exactly, although I saw a very funny flying car company who said, Welcome to the race! Whatever. You know, the work he's doing in robotics is amazing. You know, all of which are needed to his vision to colonize Mars. So, you know, I think it's quite possible. I think your only risk there is you have a lot of key man risk with Elon. We all have to hope he stays healthy and can continue to innovate. [00:18:26] S0: He's a man of mystery. So I want to shift a little over to more of your career and coming into the as CEO. So you came into the seat as CEO, and immediately were leading one of the firm's largest deals. This was the Legg Mason deal for $4,500,000,000 and this also doubled your AUM. So walk me through that process and why you had the conviction and what the reasoning was with that. And then I definitely want to talk through your acquisition strategy, because I heard and I saw that you guys have done 17 acquisitions in the last six years.