Invest Like the Best with Patrick O'Shaughnessy
00:42:16 · Cliff Sosin, Patrick O'Shaughnessy
[00:42:16] S1: Are about the future. And fundamentally, the plumber building that today is not making consumption today. He could be making today's present consumption. Instead, he's making a data center, which is future consumption. So one piece of a very complex puzzle that I thought a bit about is this idea that rates are higher because we're inducing people to save for the future. And the way you do that is you pay them. [00:42:36] S0: People would kill me if I didn't ask about your portfolio a little bit, which is so interesting to me. It's 80% Carvana, vacations, 5% meta is basically your portfolio. Rough justice, it's like five things. Sure. And one thing is 80%. So if you think about your portfolio and those companies, which obviously know extremely well, and you were advising them on how to think about using AI to transform their businesses. What's that speech look like?
00:43:01 · Cliff Sosin, Patrick O'Shaughnessy
[00:43:01] S1: It starts by making sure that everyone is vibe coding. Yep. Starting at the board and the CEO, everybody needs to have hackathons. And of course, I brought this to Carvana, and they said, yeah, we call them pizza parties. I don't mean the developers. I mean everybody needs to have hackathons. And it's not so much that you're gonna build hugely useful software necessarily that comes out of these hackathons, but instead you're gonna teach everybody what can be done. And that's going to change their expectations, I think, for what can be done. And then the second thing which I tell them is the CEO needs to basically turn to the head of IT and say something to the effect of, so I want my Grok bot, MetaMuse, agent, whatever, to be able to access every system in the company on a read only basis. Everything I could look up if I asked somebody, I want to be able to get that in a prompt. And the guy's gonna say that's really hard. We have umpteen trillion problems with that. He's gonna say that's my point. I want that. And that's a big process, and it's system by system and all the rest. But if you can get to that, then that gets you read only access. [00:44:02] S0: To the starting line.
00:44:02 · Patrick O'Shaughnessy, Cliff Sosin
[00:44:02] S0: To the starting line. [00:44:03] S1: Yeah. To the starting line. That that gets you read only access. And then the next logical thing is the CEO needs to use this everywhere, and everyone once is gonna get jealous. And you're gonna say, oh, can have it too, but we need to work out your permissions. And then that, in theory, percolates down, and now you've got permission to read only access. And then invariably, someone is gonna say something like, I'd really like to put data into the system. And you're gonna say, that's fantastic. We gotta work out write permissions. And then someone's gonna say, I'd love to change the system because we just did this vibe coding thing and I'm confident we could do it. And you're gonna say, that's also fantastic. We need to work out a process by which we're gonna manage changes to the system. And what I just described, sure, it's four bullet points. That's like... Years of work. It's impossibly hard. So the question is, are you in a business where you have time for that to happen before someone who starts with... [00:44:47] S0: Or the jump ball, someone else that starts from Go. [00:44:49] S1: Thanks. Exactly. And so it's good to have a really good business. [00:44:53] S0: It seems like one of the conclusions from that is it's the best time ever to start companies, both because of capital market conditions that people will fund at fairly low cost of capital, highly experimental things. But also just because with these tools, if you start without the baggage, you can go so far so fast. Do you think that's roughly right?
00:44:53 · Patrick O'Shaughnessy, Cliff Sosin
[00:44:53] S0: It seems like one of the conclusions from that is it's the best time ever to start companies, both because of capital market conditions that people will fund at fairly low cost of capital, highly experimental things. But also just because with these tools, if you start without the baggage, you can go so far so fast. Do you think that's roughly right? [00:45:12] S1: I mean, yeah, it's the best time to start a company until tomorrow. So I agree. It's amazing. I'd also just say that just thinking from my perspective, people are such a pain in the butt. If you're running a company, they're such a pain in the butt. And the idea that you have all these agents and stuff, it makes it... So you can do so much more with so many fewer people. Of course, one of the challenges always is if you can easily do something, then so can everybody else. So there has to be some wedge by which thing you build produces enduring value. Does it have a path where you end up with some sort of lock in or proprietary data? In this world where all the agents are happily changing providers every day, what gives you any enduring economics? But then, of course, then there's the further thing. There's obviously, if you do the thing where it seems like there's an obvious path to enduring economics, then you... That's a bad thing to do because everyone is trying to do that. So it's very competitive. And the really great outcomes are the ones that make no sense. You shouldn't do it at all. But then it turns out there is a path where the world turns.
00:46:12 · Patrick O'Shaughnessy
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00:47:50 · Cliff Sosin, Patrick O'Shaughnessy
[00:47:50] S1: I get the sense that a lot of these are appropriately weighted. I guess one interesting question I've had, two other questions. One is, if you think of corporate margins in aggregate, do they go up or down? [00:47:59] S0: Down like this. [00:47:59] S1: Right. Do they go up or down? And I think everything we're talking about would argue down. There's many businesses where they make margin because... More consumer surplus. More consumer surplus. Everywhere. Everywhere. What's interesting is if you go back and read a lot of the research reports from the nineties when the Internet was coming along [00:48:15] S0: They said they