Invest Like the Best with Patrick O'Shaughnessy
00:53:37 · Patrick O'Shaughnessy, Gabe Stengel
[00:53:37] S3: How do you do that? Is it like so you're a leader in a company that's very AI pilled that wanna make sure to... Yeah. Do you wanna do everything you guys said in rogo? And yet I'm sure there are areas that you're unhappy with the status of how much AI is used to do x y or z. How do you do it as a leader? [00:53:53] S1: Like how do you make sure that your company keeps doing this as a practice and habit versus like a one time or So I'll give you a very simple thing which is every month I have a report that gets sent to me that shows me every one of the company how much are they using the various different AI tools we have. Both the ones we've procured, the ones we've built internally, all of these different things. And I have a stack ranking within every division of the top five power users and the bottom five users. And we post that everywhere, and the bottom user in each division gets a printout with a dunce cap and we post it around the office. And it's hilarious, but people know it's coming. And by the way, as we get bigger and fewer people know me and know it's kind of a joke and I'm funny, they're actually terrified. And I hope they're not terrified, and I hope that changes. But it's a strong incentive function to actually make sure you're using these things. [00:54:44] S3: If you were to list questions, let's say there's someone sitting down that runs one of these firms that's been a great business, hard fought, but a great business.
00:54:44 · Patrick O'Shaughnessy, Gabe Stengel
[00:54:44] S3: If you were to list questions, let's say there's someone sitting down that runs one of these firms that's been a great business, hard fought, but a great business. [00:54:53] S1: And these businesses tend to be quite simple from an organizational and technical standpoint. It's mostly humans. Right? There's not a lot of overhead in lots of these businesses. Maybe they buy a lot of data or something. [00:55:04] S3: What questions would you encourage them to ask of themselves, of their business to stand the best chance of navigating this transition effectively?
00:55:04 · Patrick O'Shaughnessy, Gabe Stengel
[00:55:04] S3: What questions would you encourage them to ask of themselves, of their business to stand the best chance of navigating this transition effectively? [00:55:12] S1: If you knew for sure that right now 90% of your enterprise value is in your people. Your best investors, your best bankers are the people that bring in deals, bring in revenue, and actually that's what accrues enterprise value. And in ten years, the world's best investment firms, best banks will have 90% of their enterprise value, not in people, but in software and data and systems. What would you start doing? You would start trying to figure out how do you take all of what lives in the latent minds of your best people and putting it into a system that you own and operate autonomously. So that's a big one. The second thing I would think about is unpack every part of the deal life cycle. And in each one, try and chart where do you think you are invaluable or you have data or you have domain expertise that no one else has. And then be diligent about saying, okay. Do I actually have something that no one else has in this market? And is it a relationship? Is it context that no one else has? Or do I just think I'm smarter and better read on the subject area in the market? In which case AI is gonna obviate that. [00:56:11] S3: Have you seen anyone be the most cutting edge exemplar of this attitude in a big firm? Like is there a favorite example of a person that's just Oh yeah. There's a racing of the There's a...
00:56:11 · Patrick O'Shaughnessy, Gabe Stengel
[00:56:11] S3: Have you seen anyone be the most cutting edge exemplar of this attitude in a big firm? Like is there a favorite example of a person that's just Oh yeah. There's a racing of the There's a... [00:56:21] S1: It's the folks that today look the most prescient sounded crazy batshit two years ago. They were the guys that came in and said we need to record every conversation. You're gonna be able to pipe in this conversation directly into my company brain and there's gonna be a digital clone of me and then it's gonna spit out the game theory on exactly what the investment should look like. Two years ago, everyone listened to those kind of guys and were like, what the heck is Patrick talking about? One example is there's a co founder of firm Moelis, John Mamtazzi, who was just prescient about where it was going and he wanted digital clones of all their best bankers. He wanted systems that could basically show up to calls, speak on his behalf, know how he thinks, then ingest that context. And then he wanted to build a system such that anyone in junior levels of that investment bank could leverage his expertise and context and relationships immediately so that that context and that data wasn't just powering his ability to be revenue generating but it was powering the ability of every junior in that bank to be revenue generating. And so there are a number of folks who had their kind of move 37 moment where they realized wow, this is going to be so much more profound than anyone's expecting.
00:56:21 · Gabe Stengel, Patrick O'Shaughnessy
[00:56:21] S1: It's the folks that today look the most prescient sounded crazy batshit two years ago. They were the guys that came in and said we need to record every conversation. You're gonna be able to pipe in this conversation directly into my company brain and there's gonna be a digital clone of me and then it's gonna spit out the game theory on exactly what the investment should look like. Two years ago, everyone listened to those kind of guys and were like, what the heck is Patrick talking about? One example is there's a co founder of firm Moelis, John Mamtazzi, who was just prescient about where it was going and he wanted digital clones of all their best bankers. He wanted systems that could basically show up to calls, speak on his behalf, know how he thinks, then ingest that context. And then he wanted to build a system such that anyone in junior levels of that investment bank could leverage his expertise and context and relationships immediately so that that context and that data wasn't just powering his ability to be revenue generating but it was powering the ability of every junior in that bank to be revenue generating. And so there are a number of folks who had their kind of move 37 moment where they realized wow, this is going to be so much more profound than anyone's expecting. [00:57:30] S3: What to you feels the most uncertain about the future of your business?
00:57:33 · Gabe Stengel
[00:57:33] S1: I would say how quickly private markets actually do transform. If you think about why different types of asset classes have increased in transaction volume and have increased in liquidity, often it has to do with standardization because it gets easier than to track those assets and trade them. Private markets have been immune to standardization because there's so much unstructured data. AI should fix that. That said, is there gonna be a regulatory or a market force that forces some additional standardization that really accelerates the kind of transparency and liquidity you can have in private markets? That's a little bit out of my control. The other thing is it's still unclear to me how much alpha will be left in the human relationships. Right? I talk about that micro cap m and a. It's very hard to imagine that if you're a small business owner and you've been building a business for twenty years and you wanna make sure that if you hand that business off to someone else that you trust them, that you can shake their hand, that that can be fully automated. But for a lot of sponsor owned businesses or things like secondaries or private credit or GPLP secondaries, I do think it can be fully automated. But how long it takes for the long tail of all these small businesses, all these medium sized businesses that have to deal with generational turnover for them to get comfortable clicking a button to sell their business as opposed to shaking their hand to someone, that's a little up in there to me.