Invest Like the Best with Patrick O'Shaughnessy
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.
00:58:53 · Patrick O'Shaughnessy, Gabe Stengel
[00:58:53] S3: If you had several new young founders here with us and they were curious about how to navigate and interface with private markets investors, what would you teach them? What would you tell them to do, to not do? [00:59:05] S1: My style for fundraising might not be everyone's style. I'm super direct. I'm super transparent about what I'm worried about, where I wanna go. But then you have to be very headstrong on that end state. And then I would say it's about reps and relationships. And the folks who come out of nowhere and lead the series c or the series d are the folks that I met at the seed and then the a and then the b and the c and they passed every time for all sorts of reasons but they gather a lot more data on me and the business. [00:59:32] S3: Anything that you would encourage people to not do?
00:59:32 · Patrick O'Shaughnessy, Gabe Stengel
[00:59:32] S3: Anything that you would encourage people to not do? [00:59:35] S1: I think there's a lot of the fake it till you make it and you need to have the bravado and the confidence in what you're doing even if you're not fully confident. And I'm a deeply paranoid, deeply insecure, deeply scared person, but you need to put on the face and and say that you are confident about where you're going even in the moments where, you know, it's the ebb and flow. It's the ebb and flow. And I think people can misinterpret that sometimes as like they need to pretend there's something they're not. I think that's not true. You need to believe that that 5% likelihood that you can be in a $100,000,000,000 business is likely. And you don't need to pretend it's a 100% likely, but you should be able to delineate with very clear roadmap and strategy how it is possible that you can become a $100,000,000,000 business. And then have confidence that if those things play out, you will be. [01:00:22] S3: Why are you scared and insecure?