#1069 Adam Kurkiewicz On How To Invest Like The Best Performing Endowment

Adam Kurkiewicz is the Managing Director of Investments for the Washington University In St. Louis Endowment. In this conversation, we discuss endowments, asset allocation, portfolio construction, how they know when to buy and when to sell, and his views on alternative assets like cryptocurrencies. ======================= Crypto wallets and browser extensions are outdated, limited in features, and don’t meet the needs of today’s Web3 users. Core, the free, non-custodial browser extension built by Ava Labs, is more than just a wallet. Core is packed with features that give Avalanche users a more seamless, and secure, Web3 experience. Did you know you can also bridge Bitcoin natively across the Avalanche Bridge, and take advantage of the thriving DeFi ecosystem on Avalanche? This is just one of the innovative properties that make Core so powerful, giving users an all-in-one operating system that brings together Avalanche apps, Subnets, bridges, and NFTs in one high-performance browser experience. With Core, any crypto user can easily swap assets, display NFTs in a beautiful interface, and store your assets in a Ledger-enabled wallet. Plus you can put real dollars in your Core wallet in just a few clicks. Go to www.core.app to access the full power of Web3 on Avalanche! ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= Valour (formerly DeFi Technologies) represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U. S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at valour.com =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Adam Kirkowitz is the Managing Director of Investments at Washington University in St. Louis. Adam and I had a fantastic conversation. We talk about endowments, asset allocation, portfolio construction, when they know to buy, when they think it is time to sell, how he thinks about looking at alternative assets like cryptocurrencies, venture capital, and many other things. This conversation with Adam was really fun, and I also learned a ton. I hope that you guys enjoy it just as much as I did. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by Avalanche. Crypto wallets and browser extensions are

• 0:46Anthony Pompliano?

  outdated, limited in features, and don't meet the needs of today's Web3 users. Core, the free, non-custodial browser extension built by Ava Labs, is more than just a wallet. Core is packed with features that give Avalanche users a more seamless and secure Web3 experience. Did you know you can also bridge Bitcoin natively across the Avalanche Bridge and take advantage of the thriving DeFi ecosystem on Avalanche? This is just one of the many innovative properties that make Core so powerful, giving users an all-in-one operating system that brings together Avalanche apps, subnets, bridges, and NFTs in one high-performance browser experience. With Core, any crypto user can easily swap assets, display NFTs in a beautiful interface, and store your assets in a ledger-enabled wallet. Plus,

• 1:30Anthony Pompliano?

  you can put real dollars in your Core wallet in just a few clicks. Go to core.app to access the full power of Web3 on Avalanche today. This episode is brought to you by LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet, underscored by 100% uptime track record through volatility spikes. They leverage LMAX Group's liquidity relationships and ultra-low latency technology. LMAX Digital is the market-leading solution for institutional crypto trading and custodial services. LMAX Digital features a central limit order book that streams various cryptocurrencies, and it's all paired with US Dollar, Euro, and Yen. They also allow you, over the internet, Execute your crypto trading strategy with precision.

• 2:13Anthony Pompliano?

  LMAX Digital, you may have never heard of them. It's because they only serve institutions, but they're secure, they're liquid, and they're trusted. You can learn more at lmaxdigital.com/pomp. Again, check it out at lmaxdigital.com/pomp. This episode is brought to you by Valor. Valor represents what's next in the digital economy. They provide simplified trusted access to crypto, decentralized finance, and Web 3 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols through a single stock purchase on a regulated exchange. They're currently listed on the OTC at DEFTF and on the Canadian NEO exchange at DEFI.

• 2:56Anthony Pompliano?

  For more information or to subscribe to receive company updates and financial information, you can visit their website at valour.com. That's V A L O U R dot com. valour.com. Go check them out today.

• 3:09Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:33Anthony Pompliano?

  All right, guys. I've got Adam here with me. I'm very excited about this conversation. I think that we talked to tons of investors. We talked to tons of founders, but we don't really talk to that many kind of institutional asset allocators. So maybe let's start with just like, what is an endowment? People have heard that term. They know that it's important, but it's a very unique type of asset allocator. So how would you describe what an endowment is?

• 3:53Speaker 02

  Yeah, absolutely. So an endowment is basically a, at a university, a separate pool of capital from operating funds that's generally funded by gifts over many years. So in Wash U's case in St. Louis, the university's founded in 1853. The endowment today is about 14, 15 billion dollars. Now, a lot of that, it's not like there's 14 billion dollars of gifts. A lot of that is small gifts over many, many, many decades that compound over many, many, you know, at a moderate rates over extremely long periods of time. The purpose of the endowment is at a high level to be a permanent source of income, uncorrelated to tuition, grants, hospital revenue for universities that have affiliated

• 4:38Speaker 02

  hospital systems to support whatever mission the university has. So the vast majority of those funds are actually earmarked for specific purposes. So if you wanted to give to your alma mater and say, I want to have the awesome business podcast professorship at the business school, they might come to you and say, okay, that's going to cost a million of CapEx or annual operating expenses to fund that. The endowment pays out about 5% of its asset a year to support those initiatives. So you've got to give 20x that effectively to create the income from that asset to support that initiative. So that's effectively what it is. It's not used, again, it's separate from operating funds. It's not used to pay electricity

• 5:19Speaker 02

  bills, salaries, things like that. It's generally for very long-term stuff to support specific research initiatives, tuition relief. Some of it is unrestricted. You could give a gift to your alma mater and say, use it however you want. I don't care. But the vast majority, certainly of Wash U's, but I think most institutions is restricted for specific purposes.

• 5:38Anthony Pompliano?

  Given that this is permanent capital, very long-term oriented, endowments are different types of investors. What would you say the main differences are between the way an endowment approaches investing versus maybe other types of market participants?

• 5:51Speaker 02

  Yeah. I mean, if you think about our objective with this pool of capital, we pay out about 4% to 5%, and this is similar for most endowments, pay out about 4% to 5% of the assets every year. We have an inflation rate, a long-term inflation rate, ignore the current inflation environment for a second. That's actually higher than what historical CPI or PCE has been for broad consumers. So call it 4% to 5%, 3% to 5%, something like that. And if you want to have real growth on top of that, you're talking about double-digit types of outcomes. So we have to take an amount of risk that allows us to meet those annual cash distributions, the university, but also enables us to generate

• 6:34Speaker 02

  significant long-term performance so that we don't spend down the real purchasing power of that pool of assets over time. So basically, the portfolio is, it has an amount of fixed income and cash that can support a couple of years of distributions back to university. We have some medium-term assets that take a little bit less risk, so that if you were in extreme drawdown scenario, you would, what you don't want to do is sell risk assets at depressed prices. So you have some kind of medium-risk assets, whether that could be real estate, cash generating assets, lower net exposure hedge funds, those types of things would be the typical things that an endowment would have in that kind of bucket. And then the rest is going to be

• 7:17Speaker 02

  risk, effectively. I would say Wash U is a little bit different, and we can, we can get into that even from other endowments, but generally speaking, you know, endowments are, are kind of allocating a lot of their capital to alternative asset classes, you know, venture capital, increasingly crypto, private equity, real estate, things like that, where you can have more idiosyncratic or outlier types of assets. A significant part of our capital is also invested in public markets. But zooming out to like, relative to pensions, insurance companies, family offices, to get to your question, I would say we're more risk-oriented. Those organizations often look very similar to one another, and it's a matter of how much risk broadly defined, they take. So with a pension or an insurance

• 8:01Speaker 02

  company, your liabilities are contractual. Wash U has some control over what the distribution rate from the endowment is every year. So, but if you're a pensioner, like, you are, you are legally entitled to a certain dollar payment on a certain date for a fixed schedule. So those institutions just structurally have to take less risk than, than say, an endowment, where we can, we can actually cut our spending rate a little bit if we have to, in a down environment.

• 8:27Anthony Pompliano?

  I don't think a lot of people quite understand how big these endowments are. Obviously, Wash U, 14, 15 billion. I'll say this so that you don't have to. You guys are one of the best endowments in the world in terms of asset allocation and investment. A lot of the capital is derived from the gifts and kind of from a university focus, but obviously you guys have done a great job investing over the last few decades. There's other endowments that are even bigger, right? Some are 20, 30, 40 billion dollars. In size as well. Many of those endowments are well known on kind of a similar way of they had gifts, but then they also have been great stewards of that capital. You mentioned having more of an appetite for risk. And one of the things that's really interesting is if you look at a number of endowments, they basically look at diversification, they're trying to protect

• 9:11Anthony Pompliano?

  the capital that they have and grow it, right? It's concentration builds wealth, diversification protects it. But risk is a very interesting way to look at why endowments are different, because in some ways, diversification should provide that protection. But if you diversify into a bunch of risk assets, then you know, how do you kind of think about diversification, but also overlaying it with risk assets?

• 9:33Speaker 02

  Yeah, this kind of gets into, I think, how WashU's application, the endowment model is a little bit different than how it's been done historically. I would say if you look at, if you were to actually look at most endowment institutional portfolios and actually look through, so you're primarily investing, just zoom out a little bit real quick, the way you're really investing is we're finding what we think are the world's best investors that operate in any asset class or geography that we think will reliably produce good returns. We're trying to find those that are well aligned with us, where there's reasons that they should continue to be able to outperform and try and concentrate into those, you know, as much as possible.

• 10:15Speaker 02

  Sorry, I forgot where I was going with that.

• 10:17Anthony Pompliano?

  In terms of, we can edit.

• 10:19Speaker 02

  Yeah.

• 10:23Anthony Pompliano?

  Picking like risk versus diversification?

• 10:25Speaker 02

  So actually, if you look at most of these portfolios, they're way over diversified. So if you were to actually look through all these funds across these different asset classes and geography and look at your dollar exposure to every company that you're getting, you're massively over diversified and you're overlaying all this active performance fees on top of all that. So the ones that do really well, you're paying out a big portion of the profits to them in fees. And the ones that don't, they don't, they don't cross collateralize one another, right?

• 10:53Anthony Pompliano?

  What are the dangers with too much diversification?

• 10:57Speaker 02

  Yeah, it's that you can't generate alpha. I mean, we have, just the math is unforgiving. You're going to pay out 5%, you've got a 4% or 5% inflation rate, and we want to grow that in real terms. Like, in a zero-interest rate environment, I mean, that's not the same today, but like, generally speaking, that's a really high bar. And these markets are super competitive. So Yale is the prototypical endowment that pioneered this model in the 1980s. They've done an exceptional job. And you can actually look at the dollars that they've added. It's pretty amazing. But when they were first starting that, and every endowment and institution copied them after that, it's not like there were 10,000 venture managers around the world, 10,000 buyout funds.

• 11:40Speaker 02

  There was kind of aggregate alpha to be had. There were opportunities that weren't getting funded in each of those areas that more capital coming in catalyzed.

• 11:50Speaker 02

  You can't really quantify that, but I would argue that's not the case today, where you have too much capital in each of these areas, too much competition. There are great ideas, but there's a lot of money chasing each of those. So I think the danger today is over-diversifying. Like, there are fewer great ideas relative to the amount of capital. That ratio is not in your favor anymore. And so you really have to find ways to concentrate capital into the best ideas. The bigger you are, obviously, you mentioned we're 14, 15 billion. Harvard, Yale, Princeton, MIT, they're all bigger than us. Like, scale is already a massive challenge for us. And so I think finding idiosyncratic opportunities that have convexity, that have upside, that can scale to a portfolio of our sizes is a challenge.

• 12:35Speaker 02

  And so, but over-diversification is a much bigger risk than under-diversification. Like, you know, a lot of people, we're much more concentrated than the average endowment. I don't think we're anywhere close in any statistical sense of being under-diversified, you know, not having enough assets to kind of offset one another when they do poorly.

• 12:55Anthony Pompliano?

  How do you think about concentration, right? To say, hey, we're more concentrated. Is that like, they have 200 managers, we have 100, and still 100 is pretty good diversification? Or like, how do you think about that?

• 13:05Speaker 02

  Yeah, it's a couple of different things. So, one way that makes us different, if you just look at how our assets are allocated and look at others, you'd say, well, it's not different at all. It looks the same. You're in private equity, you're in venture, you're in real estate, you're in all these types of things. What's different about our model is that our board doesn't give us prescriptive guidelines at a very granular level. They don't say, ex ante, we think you should be 7% in real estate. We all know those are kind of made up numbers based upon backward looking data. What they basically say is if we were to fire you all and replace you with a passive exposure, here's how much risk equity versus diversifying assets we'd be comfortable with. That's roughly a 70 30 portfolio.

• 13:45Speaker 02

  So within our risk allocation, the guidance that we have is pursue value based upon the opportunity set. Don't, don't pursue it based upon some sort of category that you place on a fund or an asset. Go after value where it is and avoid investing capital where it clearly doesn't compete very well. So as a result of that, we're all generalists. So we each have areas of specialization. Like I've, I've spent a lot of my time historically in venture and things like that. You don't discard that expertise where, when someone has it. But the difference is a lot of places will say, Pop, you're a venture guy. Go out, meet every venture fund and come back and tell us what you found. And we don't have any way to calibrate what you're saying. We're just trusting you.

• 14:28Speaker 02

  So we have to bring each other along for the ride. And the conversation that we tend to have around the table is, why do we need this? What, what does this give us that we don't already have? We don't want to have 10 early stage enterprise SaaS VCs. If there's one really great one, great, let's justify that. And that's, that's our exposure to let's find a way to scale that over time. But those are, those are some of the things that, that make us quite a bit different. We also, you know, a lot gets made, I think of our, our co-investing and the, the scale of that, that we've done. Part of that is, is just a way to express our conviction in our partners and their best ideas to a way that kind of normalizes our denominator for theirs.

• 15:09Speaker 02

  So when we're looking at, at a manager, we're generally looking for someone whose capital base is smaller versus larger, who manages one fund versus multiple strategies, who invests cash dollars alongside of us and who can't get rich on management fees. They have to get rich if we do well above and beyond, you know, some sort of market benchmark. So that's really what we're looking for. But a lot of times, just a made up example, say we're $150 million of a $500 million public equity fund. And they are pounding the table on one position. This is the best idea we've ever had. It's 30% of the fund. We say, great, put 100% of the fund in it. We don't care. It's 150.

• 15:50Speaker 02

  It's 1% position on our endowment. Now, even the most well-aligned manager is probably not going to take 100% position. But for us, we look at that, we've got 45 million of exposure. Like, we would actually much rather, if you say that's a 3 to 5X, and we independently underwrite that, and kind of concur with the investment thesis, and that it's differentiating relative to other assets we have in the portfolio, we want more than 45 million bucks. So can we solve that by letting your investors opt into a side vehicle or an SPV that allows you to choose your level of concentration in the overall portfolio? So that's, that's, you know, part of the answer to your question, I think.

• 16:28Anthony Pompliano?

  It's unique because you have 14, 15 billion dollars, but you're looking for asset managers that have smaller funds. And so is the difference made up with a lot of direct investing and a lot of kind of SPVs via these managers?

• 16:40Speaker 02

  Yeah. I mean, the, the way that we're, you could almost think of it as, as kind of a scout program, a global, multi-asset class, best-of-breed, global scout program where, but it's almost in reverse, whereby, you know, if you were an early-stage VC, and, you know, a lot of firms have these scout programs now, where they put 1% of their capital and allow, you know, these, you know, engineers or executives to use their network to make really small investments. Ours is kind of the opposite, where the bulk of our assets, say, 2/3 of our assets, 3/4 of our assets are invested in these scouts. We're investing in them because, all those characteristics I mentioned, we think they're world-class investors, operating,

• 17:20Speaker 02

  you know, fishing in ponds that we think will produce trophy fish. And we want to scale up their best ideas, let all those best ideas across those diverse areas compete for co-investment dollars, so that the top part of our portfolio is really concentrated and really idiosyncratic in, call it, you know, 1% to 3% to 4% or 5% positions at the endowment level. So size them in a way that can really produce a lot of tracking error. We want to deviate from our benchmark and our peers and that's going to be great in some years and it's going to be super painful in other years, but we think you can't have your cake and eat it too. You can't hug your peers and your benchmark and materially outperform them over long periods of time. You can minimize the risk of underperforming in a given year

• 18:05Speaker 02

  and minimize your career risk, or you can take that and make sure that your governance structure buys into that strategy and can can see it through, you know, the good years and the bad. So that's kind of, that's kind of where we look to make those co-investments have an impact.

• 18:22Anthony Pompliano?

  Explain this more. So if the entire peer group is plus or minus, you know, five, seven percent from each other, and you all are willing to deviate from that in either direction, is that because you're willing to do things they're not willing to do from a investment opportunity standpoint? Is it you just take more risk? Is there leverage? Is like, what is giving you the ability to deviate whereas maybe they don't want to do?

• 18:44Speaker 02

  Yeah, I think part of it stems from because we're generalist, I feel like my sense is that we do less things than we would do if we had specialists on the team. You know, if you tell someone, hey, go develop expertise in oil and gas, like they're going to do that and they're going to come and pound the table and tell you they've got a great idea. So I think over time, you end up being more diversified in those types of portfolios where you have specialists that go off, boil an ocean by themselves and come back and say, here's, here's my best idea and no one can really calibrate those opportunities. So I mean, we're investing in early stage venture in the US, you know,

• 19:26Speaker 02

  in Asia, in Latin America, we're investing in, we have crypto dedicated funds, we have hyper concentrated public markets investors in the US and frontier markets in Sub-Saharan Africa. So like calibrating those things against one another, high quality investment opportunities, it doesn't really work in a spreadsheet. You kind of all have to be there and be sharing and part of the conversation to understand how these things fit together. It's kind of a, you know, finger in the air type of exercise, but you just have to get reps doing it. So.

• 19:59Speaker 02

  You know, it can be, it can be a challenge at times, but I think overall, we differentiate, one, by just not doing a lot of things that you do in a more specialized model. Like, we just, we can do private credit, or real estate, or real assets, but we just don't do very much, because when a team of generalists looks at them, you have a better sense of your opportunity crop, opportunity cost across those different areas, versus if you're just a specialist looking in one direction, you're gonna have a harder time calibrating whether what you think is the best idea really is the best idea.

• 20:30Anthony Pompliano?

  Let's use this as an example. So, real estate or private credit, if you were to evaluate those, and let's say that you all said, "Hey, it's interesting, but it doesn't fit what we're trying to do." Is it more likely to get written off as an investment opportunity because it doesn't provide enough upside? There's too much risk? Is it a combination of both? Like, what are some of the major reasons why you would avoid investing in a certain strategy or market?

• 20:52Speaker 02

  Yeah, it's a great question. A simple way to put it would be, they don't really have that much convexity. You know, the return distributions tend to be much more normal. Real estate, and private credit in particular, like, you tend to have income-oriented investors that are willing to pay a higher price than someone who is letting it compete against something in venture. And we're willing to accept a lower, you know, expected return, you know, if there are tighter bands around it, but only to a certain degree. And so, you look at some of those assets, like, you know, JP Morgan may have, they have a strategic non-financial reason to own XYZ building in New York. It's like core to their business.

• 21:33Speaker 02

  Like, we're not gonna compete with, that's an extreme example. Pension investors want to, like, match assets and liabilities, and are willing to lend to things or fund things at a lower rate of return than we would, when it's competing against all these different assets that have, you know, more upside. So, we tend to be more focused on things that have absolute upside, and they may have higher levels of risk, higher probability of permanent loss of capital, but they're uncorrelated with other assets in the portfolio. So, and, when I mean uncorrelated, I don't mean on a day-to-day, month-to-month basis. I'm talking about overall. Time horizon, whether the, you know, space launch company versus the Brazilian fintech versus

• 22:15Speaker 02

  the, you know, biotech, you know, platform, the Asian e-commerce business, those things, they can be affected, their prices can move in tandem with each other based upon GDP prints and inflation and, you know, macro shocks and Russia invading Ukraine and all this type of stuff. But over a five, three, five, 10, 20 year time horizon, that stuff kind of washes away for the most part. So I would say that's, that's kind of a key aspect that goes into those decisions for us.

• 22:48Anthony Pompliano?

  Given that the team is all generals, which is rare, when you see a new market or you see a new potential strategy, what's the process to actually underwrite it, right? It's not like you're saying, hey, we have oil and gas opportunity in Mexico. Let's go get our Mexico oil and gas experts to go underwrite it, right? So given some of it will be simple. Hey, it's venture capital. We've underwritten 100 different funds and, you know, we understand how to do that. But when you see something new, what is the process that you all try to pursue to get your heads around it?

• 23:21Speaker 02

  Yeah, I think ultimately, we're trying to get at the underlying assets. We're almost trying to abstract away certain aspects of the investment thesis at the manager level and get to what are the underlying assets this is going to give us exposure to? If we're going to be able to directly invest in something, what are those opportunities going to look like? Does that, does that fit our needs for our absolute, you know, return goals? Is it different than something that we already have? Is it better? I would say a couple of things, especially in venture and crypto and things like that, the world's best founders, the world's best executives, owners, managers, always have

• 24:02Speaker 02

  a choice of who to partner with, right? If you're like, you go to market and you effectively choose your cap table. So we always have to answer the question in those situations. Well, why would a critical mass of founders that kind of fit these characteristics choose their capital over 10,000 other people that would choose to give it to them? Can be a harder question to answer, but we do spend a lot of time talking to founders. We really plumb the WashU alumni network as much as we can. There's tons of great alums at venture capital firms that are software developers. We spoke with one yesterday that works for a company in town here. You just get really high fidelity information on like, well, who did you raise from? What was that like? Who did you talk to? Who did you not talk to? What partner did you know? That can be really valuable and insightful.

• 24:47Speaker 02

  So I would say, generally speaking, the underwriting process is case study driven. Like, we just want to understand soup to nuts. How did you find this company? What was interesting about it? What did the negotiation process look like? Do you understand the business? What does it do? What is your expectation for what the company? How the company is going to perform? What metrics are you watching? And how it's going thus far? So it can be a little bit different in, say, early-stage venture versus public markets versus real estate where there's maybe a redevelopment opportunity or something like that. But for the most part, our entire underwriting process is case study driven. And that continues after we invest with a manager as well.

• 25:31Speaker 02

  Like, we actually don't spend much of our time looking at new potential partners. We have a pretty small number. We think we're better off getting to know a smaller number of partners' best ideas really well and creating a prepared mind for there's a washout in the market, there's a co-investment opportunity, and we've already done some work to know whether we think this is interesting. We're a $15 billion pool of capital, but we only have a small amount of incremental dollars available at any point in time to invest. So we kind of have to have a good sense of what in our portfolio is interesting, because I'd much rather be able to deploy $50 million in a single asset that we know alongside a partner that where we already have trust than spend my time boiling the

• 26:15Speaker 02

  ocean for an incremental partner who's probably just going to add diversification to the portfolio. So we tend to spend time with our partners and their companies. We were in Boston last week, spent two days with a company. We're heavily co-invested in early-stage venture firm. You know, we own almost 20% of the company directly and indirectly. And we're effectively treated like a board member. So we just think that's a much better use of our time than continuing to ocean boil.

• 26:44Anthony Pompliano?

  How do decisions get made, right? There's some venture capital funds that say, actually, we don't want consensus. We want any one individual partner to be able to make a certain decision up to a certain amount. And maybe if there's a bigger decision, you need some, but not all. Other venture capital funds are hell-bent on, we need consensus in order to do it. How do you all make decisions?

• 27:04Speaker 02

  Yeah. I would say the generalist model has actually been really helpful for that. So anything that, the way it kind of works is we all go out and it's undefined. Hunt for things that you think might be interesting. So find where the Venn diagram between portfolio need and absolute, you know, interesting overlaps. And go spend time there. So the way I typically approach it is I will do a lot of intro calls, meetings by myself. Or if I'm traveling with one colleague this week, you know, we'll meet a few, a few groups.

• 27:38Speaker 02

  And then you slowly kind of say, that was interesting. Let's do another call and walk through one or two case studies, you know, in greater detail.

• 27:48Speaker 02

  And then you just kind of essentially repeat that with a broader cross-section of the team. So everyone just hears directly, right? And then we were constantly traveling together or meeting together in kind of a team format. And the conversation just unfolds over whatever the underwriting period is, whether it's a couple of weeks or six months or whatever the case may be. A lot of times the gating factor is more like, this is actually really interesting. We just, we don't have capacity to do this. Like, or we just don't need another venture firm in the portfolio today.

• 28:15Anthony Pompliano?

  Is the default no? And you have to be convinced, yes?

• 28:18Speaker 02

  Absolutely. Yeah, yeah. I mean, you know, we really have, the way I count it is we have roughly 30 partners across early-stage venture, late-stage venture, public markets, in every geography around the world.

• 28:31Speaker 02

  You know, crypto, real estate, real assets, everything buyout that we can invest in, it's a pretty small number. So yes, the default position is no. And we, when we do look at new opportunities, like we could all sit back and never leave St. Louis and spend all day meeting with partners who are asking us for money. And we just think it's a much better use of time. You get higher fidelity information to just go out and hunt and travel, especially in emerging and frontier markets, to spend a ton of time on the ground in those places. You just meet more interesting people. You develop better trust with people. You meet people that you otherwise wouldn't. The conversations are richer in person than they are on Zoom

• 29:13Speaker 02

  or something like that, breaking bread, all that, all that type of stuff. And really, honestly, the alumni network has been, has been a really interesting thing as well. And that's just, it's just better in person. So I would say the, the direct answer to your question is, it just evolves from a conversation of everyone being involved in the underwriting process. We're trying to be better about, you know, killing things early, you know, we want to have a really good anti-portfolio. It's okay to say no to good things. And you just have to be comfortable with that. There's way more interesting people and strategies out there than, than we want to have positions in the portfolio. Because again, we, we want to have enough partners that

• 29:55Speaker 02

  are world-class investors in every area, but not so many that we can't pay attention to what they're doing.

• 30:00Anthony Pompliano?

  Walk me through like an emerging market, right? So do you send part of the team there to travel? You just walk around? Do you try to get introductions to people? Like, how does it work in terms of, you're literally going geographically somewhere different, but there also may be a difference in types of investment opportunities, capital structure? I always tell the story that I traveled to India a couple of years ago, and every founder I met was like, I have 100,000 users. And I was like, oh my God, that's like incredible. And then they were like, no, that's like equivalent of like a thousand in America. So, you know, there's some kind of society and cultural things that may just be different. Like, how do you break that down?

• 30:34Speaker 02

  Yeah, typically, again, we're leaning on our partners. So we had, I wasn't on this trip, but we've done this before. We had a team go to Brazil this spring. You know, markets are melting down. Brazil in particular is getting absolutely hammered. So we have multiple partners that are, that are active investors across both public and early-stage venture in, in Brazil, in Latin America generally. And so we'll reach out and say, hey, we're looking to go. If you all are planning to be there, we'd love to travel with you and do some meetings with you. So oftentimes we'll try and center it with a partner, travel hand in hand, go to meetings with management teams with them, and then add in other meetings. So we may, I think in that particular case, we traveled with one of our kind of public crossover

• 31:19Speaker 02

  partners that's done a lot in Brazil, met, kind of re-underwrote every single publicly traded, beaten up fintech name out there. And then leaned on some of our early-stage venture partners that have assets in the region and met with a bunch of those companies as well. Like, hey, if we had slots for three meetings, who are three management teams that you'd be comfortable introducing us to that you think are really high conviction bets for you? So that's, that's kind of the way that we do it. And then you just network grows. We know some family office LPs down there, so you get some market color and things like that. There are other venture firms we haven't invested in that are always happy to take meetings and just get market color. So that's kind of the framework.

• 32:01Speaker 02

  I would say an anchor tends to be an existing portfolio company or partner. And increasingly, especially in markets like this, it's really helpful to travel with them. And it increases our, well, hopefully it increases our conviction in what they're doing and their relationships with the management teams and ability to assess the business, things like that.

• 32:17Anthony Pompliano?

  In some ways, it's no different than if a journalist wants to write a story, they kind of go and they start to network. If you're an individual who's trying to sell into a corporation, hey, who do I know who can introduce me to somebody, to somebody? And so in some ways, you're just investigating, right? The market and trying to understand it, is that fair?

• 32:35Speaker 02

  It's a very good analogy. I hadn't really thought about it that way.

• 32:37Anthony Pompliano?

  Yeah. It's fascinating to think about that. I guess maybe even like the police trying to do an investigation or something would kind of be similar. Yeah. I don't know. It's like you're on this journey and you almost don't even know what the answer that you're looking for is yet, but just go learn.

• 32:51Speaker 02

  That's exactly right. And it's like that with sourcing. It's like that with trying to spend our time on the existing portfolio versus the prospective portfolio, fund managers versus companies. All of it is unknown. There is no playbook. The markets are constantly changing. The interesting thing about our portfolio too is there's always a cycle somewhere. So a lot of our, you know, partners when might show us co-investment opportunity or something like that. And it's, it's the best idea that they have and they're really pounding the table. But we have this interesting perch where if we're doing our jobs well, we have a really good sense of how that best idea and that opportunity set competes with what's going

• 33:33Speaker 02

  on in Brazil or just, you know, China, something like that. So our, our actual opportunity cost is from a different opportunity set, you know, than most of our partners. And so it's an interesting place to be. It's hard to stay, you know, on top of all of it, but we really have to lean on our partners and just be quick and reflexive. And again, prepared mind is a word that you hear a lot, or a phrase that you hear a lot in our office. Like, how are we preparing for what could

• 33:59Anthony Pompliano?

  come? Explain prepared mind.

• 34:01Speaker 02

  Yeah, I would say proactively investigating things in our portfolio that, like, the prototypical example would be, it could be private or public, but a business that we've gotten to know over a period of time that is organic in our portfolio through one of our partners, where we have some reason to believe that, and it could be a bunch of different situations, that this could be a really big position for us if we position ourselves correctly to participate in a future financing. You know, there could be tender offers and things like that. There could be secondaries, or it could just be the stock is getting decimated in the public markets,

• 34:40Speaker 02

  right? And so we're always trying to have a, I don't want to say a shopping list, but have a good sense of where the most interesting opportunities are. We don't want to wait for, you know, a global pandemic to hit and everything to wash down and then be starting from square one in terms of, oh, well, we have capital to rebalance. Like, we could just buy equities, but we could also like load up on individual assets that really have convexity or are misunderstood by the markets. So the initial COVID drawdown was a pretty good example of that. We actually were fortunate to go into that with significant both cash and fixed income, but also, you know, in a perfect world, we'll always have some passive equities as well.

• 35:23Speaker 02

  Just a few points that can always, you know, serve as a source of funds for idiosyncratic opportunities. You're happy to trade passive for active exposure if you find the right active names. We went into that drawdown. With a lot of firepower and in hindsight, you wish you would have used more of it, but I think we did a pretty good job of using a lot of it. But that was, and we're all transitioning to work from home, right? And basically on Zoom 24/7 can't travel, stuck in your homes, but re underwriting the entire portfolio. And you know, there were some cases where so this market is just really beaten up. Let's just add to this fund or this name in particular is totally misunderstood as to how this is going to affect it. Let's put some capital into this individual name alongside one of our partners.

• 36:09Speaker 02

  So that's the kind of environment that you want to be prepared for.

• 36:14Anthony Pompliano?

  So explain this more. So COVID is probably a great example. You guys have some dry powder, right? That's sitting there and you don't expect COVID to happen, but you're just kind of, hey, if something happens, we've got some money. As that unfolds, you've already done some work or maybe even a lot of work. How do you decide what is the best opportunity? Cause, cause that was a unique situation where the macro environment was uncertain. There was also uncertainty around how certain assets would respond. Was the Fed going to step in? Were they not public health? How would be affected? You're not allowed to go to the office, right? There's a lot of moving parts, but it's the quintessential, like when there's blood in the streets.

• 36:49Speaker 02

  Yeah.

• 36:50Anthony Pompliano?

  Lean in and get greedy. How did you guys kind of think through what actually to do there?

• 36:55Speaker 02

  Yeah. Yeah, it's a good question. I mean, I think in, especially in that environment, it's almost hard to put yourself back in those shoes. Even we lived it in, in.

• 37:04Anthony Pompliano?

  It was easy, right?

• 37:05Speaker 02

  Right. Yeah. Exactly. But at the time, I mean, we had one of our buyout partners who buys really small, like local services businesses calling us and saying, I mean, kind of in panic mode, like I might have to mothball these businesses and how do we come out on the other side? And what do we, how do we pay people and keep the business intact? Cause all of our weak competitors are going to go away if we really shut down for 18 months or two years. And that didn't really, didn't really happen. But you just didn't know. And so I think in that environment, whatever decision you make, you have to not necessarily be as aggressive as you, you might want to be. You have to, you have to hold, you have to have some humility about the whole thing and what you can know and what's knowable and all those types of things.

• 37:48Anthony Pompliano?

  I think I know who that partner is. I think I've heard him publicly talk about that exact conversation.

• 37:52Speaker 02

  Brent, be sure.

• 37:53Anthony Pompliano?

  Yeah. And so maybe like Brent's actually probably a pretty good example where I had heard that story from his perspective, which was, hey,

• 38:01Speaker 02

  He's been public about it, so it's not news.

• 38:03Anthony Pompliano?

  There was uncertainty. I called, you know, somebody who I thought was a trusted partner and was like, essentially just like, what do you guys think? Help? What do you, you know, how should I think about this or whatever? And from his side, it was like, they were really great partners. Right? I think was like the takeaway from the way he told the story. And you've used that word partner a number of different times. How important is that partnership? And how do you think about when you first enter it and then also almost like deepening the partnership and trust over time?

• 38:32Speaker 02

  Yeah. I mean, I think people respect people that do the work and we try and do the work and we try to not, you know, I think LPs can have a reputation of you come in, you know, you invested with someone, say, what's the update? You know, you haven't done any work. You're just in consumption mode. You're not really invested in the portfolio. One, there's a lot of disadvantages that come with our size. One of the advantages is that you tend to be one of the bigger partners and you tend to be a higher profile partner and people, you know, want to do well. It's reputationally bad if you sour on them or redeem from the, you know, those types of things. So it's extremely important to us. I mean, everything's a relationship business, right? And it's amazing how small these worlds are. You just have to treat people, you know, really well. And it comes back to you in

• 39:16Speaker 02

  direct and very indirect ways. So partnership is very important to us. We're only as good as our partners. I mean, we're generalists in every sense of the word. Like, we're fluent in business models and how to underwrite a business, but we're generally, starting with a stacked deck when we do that, in terms of we already have what we think are the world's best investors curating an idea for us. And we're more validating that and seeing how it fits with our overall portfolio. So the way that we, you know, the way that we build is we try and be there early. You know, we're not investing in the mega global cap, you know, global, you know, private equity or public equity firms. We're generally trying to find people that are young, people that are

• 39:58Speaker 02

  hungry. One of our partners uses this in reference to management teams looking to back, but record and runway. We want people who have long runways, but also have, you know, a track record or credibility or some sort of reason, but they also have a chip on their shoulder. So, you know, we've done a few first time funds this year. In both cases, it was people that had been investing at other firms and decided to go out on their own and do something a little more specialized. Absolutely love that because, you know, they always get the, the problem of like, well, are you actually good? Or is it just that you worked for that firm and that's it? And, you know, so they're, even though they have a track record, they're, I wouldn't want to say insecure, but they're eager to prove themselves,

• 40:39Speaker 02

  right? So absolutely love that. And they're all young. They're in 30s, you know, things like that. So if it works, we can be there for a long time. But we want to be there early, want to be there first. We want to develop that trust and just support them along the way. Like, if you've ever met Scott, Scott, it doesn't get rolled over on terms, doesn't, doesn't lay down, is an extremely hard negotiator and gives very blunt feedback. We all do, but that's our MO. Like, hey, we're going to tell you if what you, we think you're doing is a bad idea, whether it's a company that you're investing in, or something you're doing with fundraising, or fee structure, or something like that. But that's your decision to make and you know, we're here, we're here to support you.

• 41:21Speaker 02

  So I think we differentiate ourselves just by doing the work, by coming into a meeting and, skipping over right to the things that really matter and getting into actually, we want to underwrite these businesses alongside them because that's what we're signing up, that's what we're getting is exposure to the companies that they invest in. And that's what they're going to show us in return is an opportunity to size up in one of those things on occasion.

• 41:44Anthony Pompliano?

  Yeah, one of the things that's fascinating to me is Warren Buffett obviously gets a lot of credit for being one of the best investors in the world and people think that living in Omaha is like this great advantage. You guys being in St. Louis, how important is that to having such a great track record? Or is that just kind of not, maybe not as much causation as people want to?

• 42:05Speaker 02

  It's interesting, on the investment team anyway, we don't have anyone native to St. Louis, but most of us are Midwest. I'm from Wisconsin, Mike's from Chicago, Andrew is from Iowa, Scott's from Alaska. So it's a very kind of like midwestern-y, you know, kind of, kind of interface. I think where it helps is that, and I'm not, I'm not, I haven't lived in an office and mid, worked in an office in Midtown Manhattan, but there's a high volume of things you can look at that just come through your door. And people come through St. Louis. It's a big enough town, there's enough institutional capital where companies and managers come through St. Louis. But for the most part, it does create an extra incentive to go out and hunt.

• 42:48Speaker 02

  And so we can't just sit back and if we do, it's just adverse selection all day long, right? And so we have to get out of St. Louis. It's a pain in the butt to travel from St. Louis. You can't travel direct anywhere, you know, you can't even travel to San Francisco direct anymore. So I think it just creates, you know, more of a, you know, front foot forward, you've got to be in an athletic stance, you've got to be, you know, going after things. So that is definitely a cultural element to us and I, I just don't know whether that exists or how differentiated that is versus, versus other peers, but we definitely don't get a ton of noise in St. Louis. So there is a little bit of, you know, aspect. Of why Warren thought being in Omaha was was an advantage.

• 43:30Anthony Pompliano?

  As generalist, what kind of background do folks have when they join the team? Is it, I'm a generalist that was just at another endowment and I'm coming over? Or do you go find people who, you know, are working some random job and say, hey, do you ever thought about being an investor?

• 43:43Speaker 02

  Hey, yeah, um, we have done some of that, but it's it's different. I probably, myself and Mike Dorr on the team, probably have the more traditional backgrounds. Out of, you know, school finance economics, uh, worked in asset management or institutional investment consulting, something like that. And found endowment management as a more interesting place to allocate capital within that broader ecosystem. No sales, no marketing, you're just going to work for one institution where you know the fruits of whatever you bring. You know what it's going for. Like, that's a pretty, you could make more money, probably a Goldman or something like that, but who cares? Like, that sucks.

• 44:21Speaker 02

  But other than that, Scott is really interesting. You you heard some of his background, if you've heard him on other podcasts, but he's from Alaska, went to school in Iowa, played basketball. Incredibly smart, uh, very, um, very sharp intellect, very good with numbers. But went off and ran derivatives trading desks in San Francisco, Chicago, London and Tokyo. Like, lived in Tokyo, speaks fluent Japanese. He would say it's not fluent, but it's pretty good. His kids were all born in Tokyo and then moved back to Iowa to take a senior investment person job in Endowment. Had never worked in Endowment, never thought about it, got the call, didn't really know, but that was his alma mater. So he's interesting because Cornell was much smaller in terms of assets, small team.

• 45:05Speaker 02

  So you had to be a generalist. There were no choice but to be a generalist. But because he wasn't kind of bogged down with the way we've always done things, you know, mindset. He would have done it that way regardless. And so he's, he's really kind of discarded a lot of these, you know, institutional norms and mores that that that you're supposed to do in this environment and just said, well, that doesn't really make any sense. Why would we invest in this even though it's a bad idea? Because it fits in this bucket and we need to fill this bucket. Like, let's not do that. So there's a whole bunch of of stuff like that, that I think, you know, to whatever extent Washi's model is is interesting or different. That's what a lot of it is driven by, by having someone who's really sharp.

• 45:51Speaker 02

  Very talented investment mindset that didn't kind of grow up in that environment.

• 45:57Anthony Pompliano?

  Yeah. Talk to me about Bitcoin and cryptocurrencies. You guys have obviously done some stuff there. There are some endowments or other types of institutional asset managers who think crazy things in sliced bread. Let's go put a bunch of money and yeah, there's a lot of convexity and like, we're all going to get, you know, great kind of pats on the back because we're so smart. We invested in crypto. Others have 180 degree different mindset and like, we're going to lose all our money. Let's stay as far away from this as possible and like, this is going to end in disaster. What was the process like in terms of you all just evaluating the market and then what have you chosen to do there so far?

• 46:29Speaker 02

  Yeah. I mean, one thing that is very fortunate about our model in allocating through what we think are the world's best investors is they can educate us. They can be the first line of education for us on our behalf. So going back to 2014, 2015, we had one kind of generalist, I'd say mid-stage global VC partner, really concentrated, very different, not, not, not very high profile on purpose, that kind of got the Bitcoin maxi bug very early on. Participated in the US Marshals auction, bought a boatload at whatever that was, 700 a coin or something like that.

• 47:12Speaker 02

  That was kind of our start of like, okay, I don't know. It sounds stupid. It sounds interesting. We maybe we should learn a bit about, a bit more about it. So they were very invested in that ecosystem. And I'd say my sense is similar to you, although I don't, I don't know quite as well, like very bullish on kind of just the store of value, digital gold, you know, type of long-term thesis for, for something like Bitcoin. And open to, you know, Ethereum, Solana and you know, things like that and use cases, but maybe that, that's not the majority of it, right? So that's the use case I have high conviction in, going to hold it, never going to sell a coin. That investment was actually made not out of a traditional fund, but like a permanent capital

• 47:54Speaker 02

  vehicle where we were shareholders who weren't limited partners and the design, the goal was it was supposed to be around forever. Small number of investors are on the table. You could imagine, and this is at Bitcoin 5,000 or something, it grew to be like a very significant percentage of the fund.

• 48:09Speaker 02

  And not everyone liked it equally. And so there was some conflict in terms of, you know, should we have this? Should you sell it? Like, this is, you know, bull crap. They were having trouble getting an audit. This is before the auditors figured everything out and how to do this. Like, I remember hearing a story like, and they have a very sophisticated, this is before institutional custodians, really before nighting and things like that existed, or were super prominent, anyway. You know, doing this private key ceremony for these KPMG or whoever it was, one of the big four auditors, something just like blank stares like, I don't get it. Like, we can't do it. A lot's changed since then, but that was kind of the start of our educational journey.

• 48:53Speaker 02

  Eventually, that particular conflict became big enough where they said, fine, like, we don't want to manage this for you if you're so intent on hating it. So you have a choice. You can, we can either liquidate it for you and send it to you in cash. Give us your wallet and we'll send it to you and you custody it yourself. Or you can opt into our private custodial solution that we've set up and we can walk you through all that and all that stuff. So we said, well, what are you going to do? They said, same thing we're always going to do. We're never going to sell any of it. We said, great, just hold it for us. We've since diversified custody, but that, I mean, it's obviously come down quite a bit, but like, not a material part of our portfolio, you know, at, It's Bitcoin.

• 49:34Speaker 02

  Yeah, at Bitcoin was Bitcoin. And since it's still a very material position, haven't sold any of it. I really highly doubt we will. And we've had other partners that have organically had material positions in it. Some of them have traded a little bit more and liquidated and distributed it. So that was kind of the start. I would say also, was it like 2017, the ICO boom? It was actually helpful timing for that to happen because our prior CIO left at the end of 2016. That was the year they hired Scott and Scott was getting on board. And so there's all this stuff going on. You're really not going to invest in it when you've got, especially something like that. You have a new CIO coming in who may love crypto or may hate it. You just don't know. So that stuff wasn't going to happen, but it was a great time to just investigate.

• 50:18Speaker 02

  So met every single manager that was out there, spent a bunch of time diving into the ecosystem. Really, I think, started to understand the potential here. Wasn't obvious what the real world use cases were, what was actually working and being used and solving a real problem, but you started to build it. Some of those relationships that we met then have converted into, you know, actual relationships today where over time, we've just gotten gotten there. So we've had a couple of other generalist firms that have gone down various rabbit holes and we've done some directs. It's typically been infrastructure, picks and shovels types of things, maybe an exchange

• 51:00Speaker 02

  outside the US, something in kind of gaming, you know, vertical applications, things like that. So I would say, I didn't, I haven't run the numbers recently, but including those types of things, custodians, exchanges, the gaming, infrastructure, picks and shovel stuff. It's multiple, multiple points of the endowments.

• 51:21Anthony Pompliano?

  Yeah, that's pretty aggressive, right? In the sense of, again, going back to kind of the start of our conversation where it's a new area, there's convexity to it to some degree. And it's either going to end up going really well and you're geniuses, or you end up losing a lot of money. And that helps pull you away from kind of the peer group, right? Either direction.

• 51:42Speaker 02

  It's very clear, though, a lot of, like I said earlier, a lot of the conversation around our table is like, why is this interesting in an absolute sense? Like, how could this go really well and provide material alpha at the endowment level? And how is it different from other things in the portfolio? And it's actually pretty clear, you know, in in this case, that that this is different, this is diversifying over a long-term time horizon. I think where we struggle with a lot of this stuff is even if you believe, and there are a whole host of different personal opinions on our team, even if you believe, yep, blockchain, crypto is going to eat the world, JP Morgan's gone, you know, all the exchange, like, it's just going to take over everything. I think where we want to be compensated, we want to be thoughtful about it is, what's

• 52:26Speaker 02

  gonna, when is that going to happen? And what do you have to believe the adoption curve is in these different verticals? Fun size matters a lot, I would say, like, you know, and and and the stage at which you're investing. So you have to believe to invest in. You know, billion plus dollar fund that's going to deploy in 18 months and they own five to 10% of 50, like the math is pretty unforgiving in terms of what you need to believe in terms of market cap creation to generate a 5X or whatever the number is on that fund. So we have done some dedicated crypto funds. They've tended to be smaller, tend to be earlier stage. Because we don't want to have to believe that to be true for that to be a great return.

• 53:10Anthony Pompliano?

  Yeah. How do you balance, you meet somebody that has a small fund today, 10, 20, maybe 30 million dollars. They find success. So kind of it validates, hey, we made a good decision here. And it looks that we're going to drive some returns. They then go out and they raise the 50 to 100 million dollar fund. Fund three is, you know, 100 to 250. And the next thing you know, they're on their fund four and you're oriented in a way where you want to build long-term relationships with partners. But to your point, the financial kind of potential return on a 500 million dollar fund is a lot different than on a 20 million dollar fund. And so how do you kind of think through maybe continuing to invest with great partners where you've got a lot of conviction and you've built a great relationship versus are

• 53:55Anthony Pompliano?

  there times where you say, hey, we love you. 500 million or a billion or 5 billion or, you know, we've seen 100 billion dollars, whatever type of funds. Like at some point, do you tap out and say, look, we just can't get there in terms of how the math gives us a great return?

• 54:08Speaker 02

  Yeah, absolutely. And it happens. It happens a lot. And we have to balance, you know, there can be the anchoring, you know, well, 60 million is three times 20 million. So, you know, is that, is that material? So you kind of have to look, it looks, it looks like a lot in terms of percentage increase, but you have to understand like, what are they investing in? What could they have invested with the same, you know, value proposition to founders in the case of crypto or venture or whatever, you know, being kind of a, you know, fill out a round check in a seed or series A is a lot different than

• 54:50Speaker 02

  leading a series A is a lot different than leading a series C and the kind of analytical frameworks versus, you know, backing a founder and some qualitative, you know,

• 55:01Speaker 02

  You know, market oriented things at that stage. So you really, we really have to step back and do the bottom up. What do we think they're good at? What does that imply about the number of investments? The size investments that they can make? And you may be able to, there are many cases where you're investing in something early and you're saying, hey, we actually think if they do the same thing, they can, they can raise a $500 million fund and still do a great job. And this is more of a proof of concept. You can think about the first couple of funds as maybe one, you know, kind of bigger fund to prove the thesis, you know, in a staged manner. But a lot of times it just becomes an asset gathering exercise. And you can just look at the, the management fee dollars based upon the, the, the legal documents of these funds and say like,

• 55:45Speaker 02

  okay, this is a profit center now. And it changes, it can change the dynamic, right? So you want to have those people that are, that are super hungry, that, that are not taking whatever management fee dollars they get and, you know, buying vacation homes and things like that, but are investing in the team.

• 56:03Anthony Pompliano?

  Do you ever ask? Oh, like, did you guys ever like, as part of the diligence, are you ever trying to get at like, we see you raised a $500 million fund, there's a 2% fee. We're not mathematicians, but like, we've had to do that math. Uh, where's that money going? And how much of it is like being reinvested into the firm versus going into people's pockets? Like, how does that conversation happen?

• 56:23Speaker 02

  Yeah, I mean, you can just ask it, right? And just have a conversation about it for sure.

• 56:27Anthony Pompliano?

  What's the craziest thing someone's ever said back?

• 56:29Speaker 02

  Um, yeah, that's a, I don't know. I don't, I don't want to reveal too much, but yeah.

• 56:35Anthony Pompliano?

  Are there, are there like crazy things people have responded with? Like almost like extreme honesty? Or is it usually just like, eh, that's not exactly what we wanted to hear and so?

• 56:44Speaker 02

  Yeah.

• 56:46Anthony Pompliano?

  It sounds like there's a really ridiculous story that you're thinking, so don't say it.

• 56:49Speaker 02

  Maybe over lunch, I guess, but.

• 56:52Anthony Pompliano?

  All right.

• 56:53Speaker 02

  Yeah.

• 56:54Anthony Pompliano?

  My last question for you is just long-term orientation of endowments in general. What is long-term for the endowment itself, right? Like the endowment technically is forever, right? How do you measure that? But you have a team and it's amazing to think that everyone's going to be there forever. And let's say, okay, everyone's going to be there forever. But that's 30 year, maybe 40. If you're really lucky, you all are working together for 50 years, right? Which would be incredible.

• 57:21Speaker 02

  Right.

• 57:23Anthony Pompliano?

  But even 50 years versus forever is still somewhat short-term. And so how do you think about what is the timeline that when you think of long-term orientation? Is that a five-year, 10-year, 20, 30, 50? Like, how do you think?

• 57:36Speaker 02

  Yeah, I mean, I, I think it's, you know, three plus years, I guess, would be the, I think you have to be honest about what you can know and how far into the future you can know it. And so, you know, where this kind of comes into play in our conversation a lot is particularly if you have like a director, say a size up in a publicly traded company and it rips and runs. You know, it's very easy to say, hey, we're permanent capital investors. Just let, let your winners ride, you know, all that type of thing, all those types of things. And that's true. But I think we try our best to balance like, okay, yes, great business, but let's be honest, what we underwrote initially, what our partner underwrote initially.

• 58:18Speaker 02

  Like, let's take some money off the table because we always have, we have this great opportunity set and very high opportunity cost where if you can redeploy, you know, three X your basis and something that that's up, you know, five X or 10 X and keep your, your costs in the business and fund another investment that's earlier and it's investment thesis playing out, we have to be, be honest about those things. I mean, there's.

• 58:43Speaker 02

  You know, there's only so many incremental dollars we have to deploy every year. So I think we're always, this has been an interesting environment as well, just simply because so much has been pulled forward. And so it's, it's very tempting to think, yeah, everything's going to be up and to the right forever. And it's like, well, I don't know, this is like 2026 types of stuff that already happened. And so I think, I think we did a good job, probably not, we'd probably, again, in hindsight, you can always look back.

• 59:10Anthony Pompliano?

  Everyone wished they sold more Q4.

• 59:12Speaker 02

  Yeah, exactly. But we have this kind of infinite buffet line problem where you have a limited amount of plate space and you have this, you don't want to fill up on, on salad, you know, because there's prime rib at the end, but you don't really know when it's coming. So we always have to be taking chips off the table where we can and reserving room for something that we haven't seen yet that comes down the table. The, the worst thing that we can possibly do, maybe not the worst thing, but a bad scenario for us is having an exceptional five, 10x opportunity with a high conviction partner and not have the capital to be able to invest in it. So we want to always make sure that, that we have that while also maintaining that long-term orientation.

• 59:57Speaker 02

  So I think it comes down to just being reasonable and conservative about what, and you just have to recognize too, that like market cycles are super violent. And so take some, take some chips off the table and that's where the big debate tends to come in.

• 1:00:11Anthony Pompliano?

  Yeah. I mean, which is a rational view of the world, right? Where can we send people to find you on the internet? Or if they want to get in touch with, with you or your colleagues, where could they go?

• 1:00:19Speaker 02

  Yeah. I mean, all of our emails are on endowment.wustle.edu. I'm on Twitter as well. AJKurki, A J K U R K I. So always reach out there. It's been a, a great place for us to find new ideas.

• 1:00:30Anthony Pompliano?

  What was the URL? The URL to send folks? Endowment.

• 1:00:34Speaker 02

  Endowment.wustle.edu, W U S T L at edu.

• 1:00:37Anthony Pompliano?

  Awesome. Well, I appreciate it very much.

• 1:00:39Speaker 02

  Thanks for having me.

• 1:00:39Anthony Pompliano?

  I'm incredibly impressed by what you guys have done and unpacking the thought process behind it usually is a good way to prove, although some people may not agree, it's not luck, right? That there is some intentionality.

• 1:00:53Speaker 02

  Yeah.

• 1:00:53Anthony Pompliano?

  And so excited to see what you guys do next.

• 1:00:55Speaker 02

  Appreciate it. Thanks, man.

• 1:00:57Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to transition into a brand new job in the Bitcoin or crypto industry, we've got you covered. Head over to thecryptoacademy.io. My team and I have been working with the top HR teams in the industry to develop an intensive three-week training program with over 50 live events. We teach you exactly what you need to know to break into the industry, including live interview prep and resume review. Our students have been hired at over 75 of the world's best Bitcoin and crypto companies. Go to thecryptoacademy.io to learn more. Again, that's thecryptoacademy.io. If you enjoyed today's episode, make sure you share it with your friends, and I'll see you all for the next episode.