Invest Like the Best with Patrick O'Shaughnessy
· Josh Kushner
[00:00:00] S1: The authenticity of our desire to be the most meaningful partner is a very important construct for us. Our desire to only partner with very few is driven by our core belief that in order for us to truly deliver the full value of ourselves, we can only commit ourselves to so many things. I remember we had just invested in Stripe at 50 billion. We had led OpenAI's investment. We had just got asked by Eric and Karim from Ramp to lead an investment in the company at a lower price than the round that was done in '21. We were getting absolutely eviscerated by everyone in the ecosystem. One of the people that I respect the most is Stan Druckenmiller. I called Stan up and I said, "Stan, I need to see you today." And he says, "Of course, come by." I drove uptown and I said to him, "Stan, we've been doing the exact same thing for a long time. We've always been concentrated in the businesses that we believe have the generational characteristics to compound on themselves for a very long period of time. We sold a lot in '21 and we've leaned in very meaningfully in this moment. And I feel like I'm running into a burning building, taking my most favored possessions and everyone thinks I'm crazy." And his response, which I'll never forget is, “That's always the right decision. You just better fucking pick right." Concentration is core to what we do. It puts a true burden on all of us to ensure that we need to be extremely disciplined and careful, both in terms of the fiduciary responsibility that we have to our limited partners, but also at the same time to the founders that we are committing ourselves to. We want to ensure that everyone knows that we are a hundred percent on their team, we are in their corner. There's only truth tellers and foxholes, and we try our best to be that person for the people that we work with.
· Patrick O'Shaughnessy
[00:00:00] S0: I want to talk about the huge transaction that you led in Stripe at or around $50 billion a couple of years ago. Stripe, by any account, is one of the most interesting, dominant franchises of this last cycle. John and Patrick are some of the best entrepreneurs alive. And yet, it was a really interesting time and round – back to our original premise of our conversation – one of the defining, shaping deals, investments that you've made. Maybe just say a little bit more about that process and that experience because it seemed to set the stage for Databricks and other deals like it that you've done since.
· Josh Kushner
[00:00:00] S1: There are the details of how the deal happened, but I think more importantly, the experience for us in terms of learning about how other people think in certain moments was probably the most transformational thing for the firm. So we had agreed to terms with John and Patrick at a $50 billion price, which was a 50% discount to what they had done a year prior. For us, it was very obvious. It's much easier to predict what is going to happen in the long term than it is in the short term. If there's one thing that I could predict between now and the day that I die, it's that people will buy more stuff on the internet every year. It was the largest check that we had ever written at that point. I think we invested about $1.8 billion. But as a result of the moment in the market, but also the size of check that we were writing, everyone asked to speak to us. And I think what was most interesting was the fact that everyone was so focused on the now. They were so focused on what Adyen’s multiple was. They were so focused on what the margin structures looked like in that very specific moment post-COVID. We've always had this idea of being long-term investors in what we believe to be category defining businesses run by the most exceptional people, but it was just really interesting to see how other people thought in that moment. When you have a very product and founder-oriented investment style, the capacity to have conviction is very much driven by people's ability to figure things out. And there will be bad quarters, there'll be bad years. But if you believe in the people who are running the business, ultimately everything will end up okay. Vince has this line that “John and Patrick went into founder mode before founder mode was a thing.” The idea that anyone could ever doubt Patrick and John is blasphemy.
· Patrick O'Shaughnessy, Josh Kushner
[00:00:00] S0: And a lot of people did doubt them in that moment. [00:00:00] S1: They should never be doubted. [00:00:00] S0: One is tempted after a deal like that – $2 billion check – I don't know what it's valued at now, probably back north of $100 billion, at least in secondary markets, to pat oneself on the back. Can you tell the Instagram story and the message that you got? You doubled your money on Instagram in like, days or something, in your original Instagram investment. Again, tempted to pat oneself on the back. What was the fun story after that?
· Josh Kushner
[00:00:00] S1: I feel very grateful to Kevin. Every time I see him or Mikey, I thank them because I think in many respects, they were huge contributors to Thrive being the firm that it is. Them giving us the shot to be a part of such a hotly coveted opportunity is something that I have enormous gratitude for. Thrive was a no name New York firm. We were pushing this agenda of being this opportunistic vehicle that was agnostic to stage, sector and geography. Instagram raised at $500 million. We had a $40 million fund. We put in $12 million between our fund and co-investment. It sold two days later. When the investment was announced, people were giving us a very hard time for investing in a company at a half a billion dollar valuation. But when a billion dollars was a lot for a company to sell for, we were starting to get recognized. And I remember vividly, I was standing in our office on a Sunday afternoon, and Jon Winkelried, who's now the CEO of TPG – he was spending time with us after his time at Goldman Sachs – called me. I was a 26, 27-year-old who had just done a transaction that was on the cover of the Wall Street Journal. I was expecting to get a congratulations, and John said to me, “I'm going to give you the greatest lesson that you'll ever get from me, which is never believe your own bullshit”. And I remember how piercing that was in the moment, but taking a step back, it was the right advice. I actually wrote it on Post-It Notes, I think Thrive was only 10 people at that time, and I put it on every single person's computer so that when they got into the office on Monday morning, they saw it. And we just talked about it. We're going to be right, we're going to be wrong, but it's really important that we recognize that in our world, we're trying to predict the future and anyone who convinces themselves that they are capable of doing so is not being true to themselves. It's our job to have the right conversations around these things, but intellectual honesty and self-awareness has been a huge part of the right decisions that we've made and I'm very grateful to him.
· Patrick O'Shaughnessy, Josh Kushner
[00:00:00] S0: Can you tell the story of Isomorphic and the creation of deals – which is creating a company in a deal that you didn't necessarily start but which you created out of thin air, which I think is so interesting and creative. The quote that I heard from Demis about the work you did with him to get Isomorphic as a standalone thing that you invested in out of DeepMind, was that he should "Stop being so British about it and get a little bit more aggressive." Maybe tell the Demis, Isomorphic story. [00:00:00] S1: We are very much oriented not towards transactions, but companies or ideas that we want to be a part of. I've known Demis for quite some time. After AlphaFold came out, I expressed to him that I would be very excited to support him in whatever way I could around his efforts within Isomorphic. A lot of the products that are being created within the AI ecosystem, whether it be around robotics or coding – are going to lead to tremendous transformation in the world that we currently live in. We view Thrive as enabling technology for the world that we wish to see. The idea of creating a company that's end goal is to cure disease is probably the most important thing that we could ever be a part of. I feel very honored and grateful to have the opportunity to partner with him and the rest of the Isomorphic team.