Martín Escobari - Inside General Atlantic - [Invest Like the Best, EP.449]

My guest today is Martín Escobari. Martín is Co-President and Head of Global Growth Equity at General Atlantic. We talk about General Atlantic’s unique founding story and how its long-term structure, including permanent capital, a single P&L, and partnership culture, allows it to invest differently than other growth equity firms. We discuss the firm’s global perspective and particularly why the premium on U. S. equities is creating compelling opportunities across international and emerging markets. Martín has spent his career investing through bubbles, market cycles, and technological shifts. He shares his investing framework for balancing intuition with analysis, his approach to “spearfishing” for once-in-a-decade opportunities, and why he believes this is the best window for growth equity since 2009. Martín also reflects on his incredible personal story. He talks about growing up in turbulent Bolivia, and the role of curiosity and optimism in sustaining a long investing career. Martín’s infectious energy and genuine love for investing made this conversation both insightful and a lot of fun. Please enjoy my great conversation with Martín Escobari. For the full show notes, transcript, and links to mentioned content, check out the episode page ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠⁠.⁠⁠⁠⁠⁠⁠⁠⁠ ----- This episode is brought to you by⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Ramp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Ramp’s mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Go to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ramp.com/invest to sign up for free and get a $250 welcome bonus. ----- This episode is brought to you by ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠AlphaSense⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. AlphaSense has completely transformed the research process with cutting-edge AI technology and a vast collection of top-tier, reliable business content. Invest Like the Best listeners can get a free trial now at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Alpha-Sense.com/Invest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and experience firsthand how AlphaSense and Tegus help you make smarter decisions faster. ----- This episode is brought to you by⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Ridgeline⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. Head to ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ridgelineapps.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ to learn more about the platform. ----- Editing and post-production work for this episode was provided by The Podcast Consultant (⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://thepodcastconsultant.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠). Show Notes: (00:00:00) Welcome to Invest Like the Best (00:05:00) The Bold Move That Landed a Job (00:07:16) The Art of Spearfishing in Business (00:11:55) Navigating the Dotcom Bubble (00:15:18) Investing Through the AI “Bubble” (00:20:06) General Atlantic Founding Story (00:23:04) General Atlantic's Unique Investing Strategy (00:28:20) Lessons on Fundraising (00:30:48) Global Diversification and Market Insights (00:33:12) Understanding Chinese Entrepreneurs (00:35:27) Personal and Generational Traumas (00:39:10) Characteristics of a GA Investment and Martín’s “Educated Intuition" (00:43:55) Proud Investment Achievements (00:44:41) Lessons from CEO Bill Ford (00:46:15) Changes in Investing with Experience (00:48:52) Current Market and Future Predictions (00:54:55) Growth Equity’s Competitive Landscape (00:56:59) How to Invest Outside the US (00:59:44) How to Develop Investing Talent (01:01:50) Inside the Investment Committee Process (01:04:56) Why Growth Equity is Attractive Today (01:05:58) Martín’s Unfinished Business and Mentoring (01:09:33) The Kindest Thing

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

• 0:01Patrick O'Shaughnessy?

  Ramp is the only platform built to make your finance team leaner, faster, and better, saving businesses 5% annually on average, so you can stay focused on growth. Ramp just opened for business in the United Kingdom. So if you're running a business in the UK, you can now use Ramp's AI-powered finance platform to manage cards, expenses, bills, approvals, and accounting all in one place. I run my business on Ramp, and so should you. Learn more at ramp.com/invest. Rogo is the AI platform purpose-built for financial institutions, serving tens of thousands of bankers and investors at hundreds of leading firms worldwide. Rogo's AI agents autonomously execute large chunk of your firm's workflows. They can screen deals,

• 0:42Patrick O'Shaughnessy?

  draft SIMs, run buyer outreach, and do diligence on data rooms, all with full security and compliance handled. Every action feeds Rogo Intelligence, the firm's context layer, turning years of deal experience into a secure, governed institutional memory that makes each new transaction stronger than the last. To learn more, visit rogo.com/invest. OpenAI, Cursor, Anthy, and Vercel all have something in common. They all use WorkOS. To achieve enterprise adoption at scale, you have to deliver on core capabilities like SSO, SCIM, RBAC, and audit logs. Instead of spending months building these mission-critical capabilities yourself, you can just use WorkOS APIs to gain all of them on day zero. Visit workos.com to get started.

• 1:31Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review, along with all of our podcasts, at joincolossus.com.

• 1:56Speaker 01

  Patrick O'Neal is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.

• 2:25Patrick O'Shaughnessy?

  My guest today is Martín Escobarí. Martín is co-president and head of global growth equity at General Atlantic. We talk about General Atlantic's unique founding story and how its long-term structure, including permanent capital, a single P and L and partnership culture allows it to invest differently than other growth equity firms. We discuss the firm's global perspective and particularly why the premium on US equities is creating compelling opportunities across international and emerging markets. Martín has spent his career investing through bubbles, market cycles and technological shifts. He shares his investing framework for balancing intuition with analysis, his approach to spearfishing for once in a decade opportunities, and why he believes this is the best window for growth equity since 2009. Martín also reflects on his incredible personal story.

• 3:08Patrick O'Shaughnessy?

  He talks about growing up in turbulent Bolivia and the role of curiosity and optimism in sustaining a long investing career. Martín's infectious energy and genuine love for investing made this conversation both insightful and a lot of fun. Please enjoy my great conversation with Martín Escobarí.

• 3:25Patrick O'Shaughnessy?

  Alex, who introduced us from 3G, told me this incredible story about you getting a job after him telling you no and what you did to get it. Can you tell how sorry?

• 3:35Speaker 02

  I loved when he told it. Coming out of business school, I needed to say work to live. So I'm from Bolivia, Bolivia's too small. I was finishing eight years in the US. US felt too competitive. So I had to think somewhere else that had to be big, not too competitive, and have beautiful people because I was single at the time. So that was the criteria.

• 3:57Patrick O'Shaughnessy?

  So Brazil.

• 3:57Speaker 02

  Brazil, just a N of one, Brazil. So I look at the most exciting jobs in Brazil. And at the time, the 3G founders had a private equity shop, which at the time was the largest private equity shop in the emerging markets. This is 1997. And one of the partners has recently graduated from the same school was coming to town to interview Brazilians to hire one person. So I was like, this is destiny. This is for me. So I reached out to Alex Berry, who is now running 3G and has become a great friend. And I introduced myself as Bolivia, super smart. I really want to make it in Brazil. I hear you're doing a dinner. I'd love to come by if you'll have me.

• 4:40Speaker 02

  And Alex was super smart and tough. He's like, Martín, we're only hiring one person and it's not going to be a guy from Bolivia that doesn't speak Portuguese. So no, you can't come to my dinner. I was like, bummer. So that night, I show up to the dinner, introduce myself as Martine. And I say, don't worry, I'm not even gonna eat. I just wanna listen to you because I find you interesting. And I think he was taken back by my boldness. They did interview me and they did hire me, but they made one condition. I had to take some Portuguese lessons before I showed up three months later. And I said, I'm happy to do it as long as you pay for them.

• 5:18Patrick O'Shaughnessy?

  Yeah.

• 5:19Speaker 02

  And that's how I met my wife.

• 5:21Patrick O'Shaughnessy?

  She was your teacher?

• 5:22Speaker 02

  She was my teacher. I mean, she was technically a teacher. The way it really worked is I called my Brazilian friends and I said, can you find a very smart, very attractive Brazilian PhD master somewhere in the Boston area? And I have someone that will pay her to talk to me.

• 5:38Speaker 02

  So I'm still married 25 years later.

• 5:41Patrick O'Shaughnessy?

  What an amazing origin story. What have you learned from Alex and from his team?

• 5:46Speaker 02

  The founders of 3G, the original three founders are incredible people, whom I worked with in the beginning of my career. I once wrote a book. This is 2003. The company I had co-founded was going through trouble. I took some time off and I wanted to answer the question of how does one make money in countries with so much turbulence? Brazil in the 90s and in the first decade of the century was incredibly turbulent. Crisis after crisis after crisis. Very hard to make, to create wealth, to build companies with so little. It's like navigating through the fog. You move very slowly and there's things that can come at you from different ways.

• 6:28Speaker 02

  I partnered with this professor, this mentor of mine from Harvard College. And he was teaching at Harvard Business School, Don Sol. And what we did was a paired company analysis. Look at 10 very successful companies in Brazil that had made tremendous wealth creation in the crazy 90s, but look at their actions in contrast to 10 much less successful companies during the same period of time. And the test was, these were pairs of companies that looked similar in size and value at the beginning of the 90s, but by the end of the 90s, one was at least 5X more valuable than So that was the control group and that's how we studied it.

• 7:05Speaker 02

  When one of the companies is the beer company, Brahma, George Paulo Lehman and Marcel Teles and Betosse Kupir had bought in nineteen eighty nine. That was competing against the other beer company called Antarctica that was owned by the Germans and a foundation. Who in nineteen eighty nine was a better, more profitable, more valuable company. But by a decade later, when these two merged, the Brahma shareholders kept ninety five percent of the equity value. So it was ten X by the creation relative to the comparison twin. How did they do it? They're great spear fishermen. You don't chase the fish. You wait, you decide where you're going to anchor.

• 7:46Speaker 02

  You drop down with no equipment other than the spear and you hold your breath. For one minute, for two minutes, you let little fish go by because you're not there to hunt little fish. You're waiting for the big fish. And then when you're almost running out of oxygen, you got two or three seconds to get the big fish and then go up. As you're both feeling this lack of oxygen, he feeling a spear through his chest. But it's an exercise of waiting. Why do they say these are great spear fishermen? The step number one of spear fishing is deciding where you're going to anchor. In looking to buy their beer company, they started to think about it five years before. They were owners of the number one investment bank in Brazil, Banco Garantia.

• 8:31Speaker 02

  They were making tons of money out of volatility and inflation because in high inflation periods, you can make a lot of money if you are smart with math and finance. But they knew inflation would end one day. And they said, we want to buy a company that will benefit from a low inflation, rising consumption. Beer is one such company, but they waited five years for this company to come for sale. And it came for sale two weeks before an election when the Swiss owners got scared that a socialist was going to become president. Do the first time government and he was from the Workers' Party. And they called them and it says, can you do a deal in a week? We'd like to get out of town. We don't want to take the risk of a socialist president.

• 9:17Speaker 02

  And Georgia, I've been waiting for that big fish.

• 9:20Patrick O'Shaughnessy?

  Five years.

• 9:20Speaker 02

  Over five years, closed the deal in a week. And then he waited 10 years till Antarctica was in trouble. When the big devaluation and closed the deal in three months. And then he waited another seven years to do a deal with Interbrew. And then the biggest of all deals waited a following decade to do a deal with Anheuser-Busch. And basically, over this period, eighty million dollars. Initial investment in Brahma became a sixty billion dollar plus excluding dividends. But they're great fishermen and they wait for the big fish.

• 10:00Speaker 02

  And as a concept, that is something I've learned from them, which is every four or five years, there's a once in a generation opportunity that you have to be ready and be willing to move quickly to capture. And if you do, you can create disproportionate value for your company, for your investors, for employees.

• 10:20Patrick O'Shaughnessy?

  Do you have a story of your own that is the closest to a great spearfishing outing?

• 10:26Speaker 02

  As an entrepreneur, I wasn't an entrepreneur. I was set out by these three guys to go and find great entrepreneurial companies and invest five hundred million dollars in twenty companies. You got eighteen months, go. In month three.

• 10:38Patrick O'Shaughnessy?

  That was your mission.

• 10:39Speaker 02

  That was my mission. That was my mission, number one out of business school. Now that I was speaking Portuguese, I could, I could go. And by month three, I remember talking to a buddy of mine because we were benchmarking different models. And a buddy of mine had taken a job in the US, company that were public in the dot com era. Clearly a bubble, being valued at twenty times revenue, which sounds quaint by today's standards, but by nineteen ninety-eight standards. And I said, Dennis, it's a bubble. How does it feel to be in a bubble? And he said to me, grabbed my hand and said, Martin, it feels better than being outside the bubble. And I was like, he's absolutely right. I have to go into this bubble.

• 11:23Speaker 02

  I'm on the wrong side of the table. So very quickly left the fund and within, I think, three months, we had raised eighty million dollars to launch Submarino.com, which was the e-commerce, Amazon.com merged with Alibaba to take on Brazil. And that happened very, very quickly. A second time after we sold my business during the GFC, I was working for another fund briefly and looking to buy the sort of a fixed income exchange in Brazil. It's a dominant platform, eighty percent EBITDA margin business, a lot of competition. And then all of a sudden, the GFC happened and everyone dropped out, everyone. And I was like, no, double down. And we were able to

• 12:06Speaker 02

  buy a market dominant, high margin business at six times EBITDA. And we did it in two months. And people were like, well, what do you mean you're doing something with the GFC? And I said, if we're not willing to buy a dominant platform at six times EBITDA, we should shut down. The world, it means the world is ending and we should, the world's not ending. A dominant platform will always be worth more than six times EBITDA. And it's been, you know, every, every three or four years, there's one such unique distortion that you have to move very quickly. That's perhaps one of the learnings of being an entrepreneur in the dot com. Like I'm a rare investor that has been an operator. It's not just I had been an operator. What the dot com taught me, and I just realized this

• 12:50Speaker 02

  recently, you can do seven years of work in one year.

• 12:53Patrick O'Shaughnessy?

  Say more about what you mean.

• 12:55Speaker 02

  Elon Musk says, you know, do your 10 year plan and try to get it done in one year.

• 12:58Patrick O'Shaughnessy?

  Yeah.

• 12:59Speaker 02

  You're like, he's crazy. Look what he's built. In the dot com, it felt like the world was on steroids. In Submarino, not only have we raised eighty million dollars within the first three months, within one year, I was in charge of international, we opened Submarino in six countries with warehouses and customers and registrations and teams. It was done in one year. If you had told me how long it would take a normal person to do that, I would say three to four years, going fast. And we were like, no, we have to do it. First mover will be incredibly valuable. We did it in one year. So it's this ability to move very, very fast, to capture opportunities which are fleeting, which seem humanly impossible, are actually not.

• 13:43Patrick O'Shaughnessy?

  This seems like a moment of that is happening again, maybe on mega steroids. Think of a company like Cognition as a recent example that I know well, where the pace of growth of the business is just sort of hard to believe that it's possible. Serving developers, maybe previously a company like Stripe, which is one of the great companies in the US in the technology world, is a certain size, it's grown that size over 15 years. And these things are growing at a pace that is sort of hard to wrap one's head around. And so I'm curious how you think about that in the current moment right now? But also what lessons you learned about what it takes to go to put a 10-year plan into one year? What is different about the behavior in that compressed one-year period that makes that possible?

• 14:24Speaker 02

  So this is like my fourth or fifth bubble. And all bubbles are born out of a truly transformative technology. In all the previous bubbles, the promise was spectacular. The short term was disappointing and the long term delivered more than expected. But in that process, a lot of fortunes were made and destroyed. So I think as a firm, John Flick has been around for 45 years. We try to make different mistakes in each bubble. And I'm sure we're getting

• 14:54Patrick O'Shaughnessy?

  Making your own this time, yeah.

• 14:56Speaker 02

  Our approach this time, different from the internet, has been to be incredibly aggressive at deploying AI in the portfolio. The promise of AI is clear to everyone. Let's see what's working in the real world and let's share Brex's practices. And we got incredible scale. We have over 200 portfolio companies. We have 100 people in our portfolio support portfolio operations team. This year we'll do 500 projects with the portfolio. A third of them are AI projects. So we're seeing what works in the front lines. And as soon as we see a use case with real ROI and real revenue to the provider of the service, and you can sort of model what the economics and the cost to serve

• 15:39Speaker 02

  and what the long-term profitability maybe is of this exciting new market, then we pounce. The first one where we felt that has happened is code generation.

• 15:49Patrick O'Shaughnessy?

  Yeah, cognition and cursor and.

• 15:51Speaker 02

  And it's just happened right now, in the last 12 months.

• 15:54Patrick O'Shaughnessy?

  It's crazy.

• 15:55Speaker 02

  I mean, based on public information, Anthropic revenue and Cochia went from 200 million to 4 billion in 12 months. In B2B, that kind of growth has not happened ever. And it's so exciting and it's working in real life and programmers are happy. And then all of a sudden, you've got this new reality where human programmers are hyperproductive and they're working alongside agentic programmers who have no moral north star and do not sleep. And how you get them to work together to a common output, which is super sensitive to you, the client who's running on a software. Super exciting. That's one area. Marketing optimization, obviously, it's machine learning on steroids. We're investors in Liftoff, which very much on this, we're investors in a software company called Insider that does enterprise marketing optimization.

• 16:40Speaker 02

  Data companies turbocharge with AI. Investors in Israeli company called V I L. There's so much, it's super exciting, it's super risky. We're probably going to look back and say, we weren't bold enough in going for the killer app soon enough. But we've been bold enough before and it didn't pay to go very early. And I think what's really interesting about GA, we've been around for 45 years. Through all these technological cycles and we've been international for 30 years. We've been in emerging markets for 25 years. We take on a lot of risk, like macro risk. We take on a lot of technology risk. Because we are investing across, we call 18 power alleys that cut across five sectors. Guess what our loss ratio is?

• 17:25Patrick O'Shaughnessy?

  Tell me.

• 17:26Speaker 02

  4%.

• 17:27Patrick O'Shaughnessy?

  On capital or on?

• 17:28Speaker 02

  On capital, on capital, capital. In venture and growth equity, loss ratios of 20 to 40% are common. But there's something about the way we deal with risk that allows us to capture what we think are reasonably good returns. But that's surprisingly low risk ratio. And it has to do, I think, with an appetite for risk. We don't take binary risk. For us, when we do this, sort of the scenario planning of three to 1,000 scenarios, one dozen in one mind, like you do when you think of an investment. For us, a worst case scenario, a company grows into the valuation we paid for it. And that limits what you do. It limits the timing of where you go into a new industry. You probably leave some money on the table,

• 18:13Speaker 02

  but you also leave a lot of risk on the table. And that product of reasonable returns with low risk is a great product. I have 95% of my net worth in that product and I sleep well at night. I have a vastly undiversified portfolio of two assets, GA and treasuries.

• 18:31Patrick O'Shaughnessy?

  The 45 years ago, the sort of origin story of GA itself is so interesting. Chuck Feeney, such an interesting character. How does his spirit loom in the business and in your personal consciousness?

• 18:44Speaker 02

  He's the accidental billionaire. Got the idea of duty frees by looking at naval bases where commerce was free in the Pacific during the Korea War. Starts building these duty free shops, becomes a billionaire, sells to Louis Vuitton. And he's confronted with the question, what is the purpose of wealth? What do I do with this wealth? And his answer resonated really well with me. The purpose of wealth is to improve the human condition now, not tomorrow, now. Because present value of happier life for more people now is very valuable. So he wants to give it all away. Forget giving half away. He's like, my dream is my last check will bounce. I want to die a poor man and I want to give it all.

• 19:28Speaker 02

  But before I give it all, I believe you can create additional wealth by investing in innovation, by backing great entrepreneurs globally. And he said, you at GA, to the original founding team at GA, go back to the world's best entrepreneurs, be a good partner, and know that all the proceeds of our work will go to great causes. And we've been doing that for 45 years, backing great innovators. Everywhere we've invested in over 500 companies over the last 45 years. Half of our investments have been outside of the United States. And we've seen the power of innovation to create wealth globally. This is not a privilege just of the US, not a privilege just of the European.

• 20:11Speaker 02

  And this concept of what is the purpose of wealth is also meaningful personally. Like, I think when I think of the wealth I'm creating and the people that I work with are creating. We're all incredibly thoughtful of how we allocate our time and wealth to make the world better in the ways that are meaningful to us. And there's no right and wrong, but I find that accumulating wealth is, it makes you gloated and slow. Using your body and your life as a channel of, you know, wealth that comes, but it goes to places that can be made better. But it's a beautiful way to approach life. And particularly if you're in the profession of allocating other people's wealth into great innovators. It all makes sense. It all fits in internally consistent.

• 20:56Speaker 02

  And that's why we've been around for 45 years. There are not that many. You can count them in both hands, the number of firms that are investors in tech and innovation that have been around and have been successful this long. And I think it has to do with the internally consistent vision, mission and plan that Chuck had for GA.

• 21:16Patrick O'Shaughnessy?

  That's not a normal origin story for a firm like this. Usually it's really just purely commercial enterprise. Some young investors set off and build a firm. This was different. What else about that founding DNA makes the setup of the firm unique? How does his original vision and setup allow you to act differently than others do today?

• 21:34Speaker 02

  There's this phrase written into our founding documents, which is we're good partners to each other, to our founders and to our clients. The partnership ethos is fundamental. And when you look at 45 years of references of 500 people with, 500 companies, thousands of people we've partnered with, and you say, what do you think of GA? They're good partners. They're good guys. They're good people. They do what they say they're going to do. They put the company's interests first. Sometimes we're accused of being dolphins in a sea of sharks, and I'd love to be a dolphin. Dolphin. Who wants to be a shark? Dolphins have a much better life. I think that's a big part of the firm's DNA. So I'll give you an example. I ran our general athletics Latin America program for the first seven, eight years of my career at General Atlantic.

• 22:19Speaker 02

  And in all the diligence sessions, they ask, how did you do it? How did you make money in the one neighborhood that no one makes money? I say, the reason we do well in Latin America is we don't have a Latin America fund. Because if we had a Latin America. We're gonna put money in Latin America. We're gonna buy at the top and sell at the bottom. And you know what? If you wanna make money, you do the opposite. You buy at the bottom, you sell at the top. And they're like, oh, interesting. Why don't other people do it? It turns out it's really hard to do. To have a team in Latin America, or in China, or in India, or in Southeast Asia, compete for attention and money through one global IC is so hard to do unless your culture is about partnership.

• 23:02Speaker 02

  The culture demands good partnership. And the culture expels behavior that's not consistent with being a good partner. We're structured in a way that first, we are the largest investor in our own product by design. Right now, we have about, the employees of General Atlantic have eight percent of the funds we administer, it's over $5 billion of our own capital. This does not feel like managing other people's money. This feels, my day to day, I'm managing my family wealth first and foremost. And I'm doing it with care and with intention and purpose. The way we fundraise is different also. One of the problems with the industry is the five-year fundraising cycle.

• 23:47Speaker 02

  To be able to raise your next fund, you have to deploy at a certain speed and you need to return capital at certain cadence. Otherwise, you don't get to do the next fund. And if there's a winter of risk, like we've had for the last three years, you're out of dry powder, exactly at the time that things are unsafe. So the traditional fundraising five-year cycle creates lots of distortions and pain for our industry. We have an evergreen, a hybrid evergreen fundraising cycle. Meaning, yes, every two to three years, we have a normal fund. So if you want a normal fund, come to GA every two or three years. Perfect. But if you're a large institution and are willing to do a standard managed account, you can come in anytime. And the two structures invest that same portfolio from here forward.

• 24:31Speaker 02

  There's never conflict of mind, the legacy. But the advantage of that is there's no fundraising cliffs. We're always fundraising. It's always steady. There's no big jumps. There's no pressure to liquidate something to meet some artificial target. That makes our lives so much easier. And then the third component that I think is distinctive, which I hated initially, because we have a communist system of compensation, which is you all get a percent of the total performance, not your individual performance. I was like, were you kidding me? I'm a spear fisherman. I'm a spear fisherman. I got some big fish left in me. I mean, this communism didn't work in the Soviet Union. Why is that gonna? And then I saw how it changed everything in that the level of collaboration is fantastic.

• 25:16Speaker 02

  And the way you prevent the Soviet Union from happening is if you're not pulling your weight, you're not on the boat. So it's a meritocracy in that to be in this community where we all win together and lose together, we all have to be effective and bringing as much into the partners that we're taking away from it. And that's what keeps the health and meritocracy of the system. But there isn't a hyper incentive to be hyper productive, because if I'm hyper productive, I'll make more wins and I give them. No, it's much more about winning as a team as opposed to winning as an individual.

• 25:50Patrick O'Shaughnessy?

  That dual structure, which is unusual, not common. What are the negatives or trade offs associated with that?

• 25:57Speaker 02

  There's two very serious trade offs. First of all, it takes forever to explain.

• 26:03Patrick O'Shaughnessy?

  We'll do it at scale right here. They'll never have to do it again.

• 26:05Speaker 02

  And they're like, why do you have two series? Which one is better? Which one is worse? I can get it why this is good for you, but how is it good for me? So the sort of the onboarding experience is a painful experience. The other downside is fundraising is a perpetual activity. Whereas for a lot of my competitors, every five years, it's a six month sprint that all they do is fundraise. And then they can not fundraise for another four and a half years. Yeah. It's kind of like binge dieting. You only do it once every six years. And for us, it's a no brainer. That's a structure that leads to more productive deployment or cap.

• 26:44Patrick O'Shaughnessy?

  My friend John Kim, who is a very well-known fundraiser at General Catalyst, has this simple equation, which is that persuasion equals desire minus fear. What have you learned about fundraising, given that you've had to do it as a firm on a constant basis?

• 26:59Speaker 02

  I think most humans go from FOMO to fear. And one of the traps of our industry is you can only fundraise when things are very expensive, because that's when everyone's on FOMO.

• 27:10Patrick O'Shaughnessy?

  Have you been able to invert that fear to FOMO problem? So that you can, if you have been able to raise some money in the harder times, what is the key to doing that well?

• 27:20Speaker 02

  There's always someone in the world that has excess capital, even in a time of fear, and you go there. There's another, you'd be surprised. I do this, like in Brazil, one other of our tricks, our tricks, our strategies to navigate global complexity is in every geography we're in, we have the best families, the most entrepreneurial families become investors. And we cultivate them, not necessarily for their money, but for their insights around the country and around the entrepreneurs with which we partner. And it takes a really long time. And a lot of those families are typically entrepreneurial. They're like, no, no, I don't invest in funds. I invest directly because I created a business and I'm so good and I'm good at getting the big fish. And I'm like, I asked him a very simple question.

• 28:02Speaker 02

  I say, hey, what percent of your net worth you have in Brazil? And they're like, hmm, like liquid net worth? No, no, no, no, total net worth. And they're like, hmm, the number's typically between 90 and 95%. So that's very interesting. And I said, close your eyes. Imagine you're not Brazilian. You're a citizen of the world. What percent of your wealth would you put in Brazil? And they're like, oh, 3%. I'm like, yeah, how about I help you get a little closer to 3 than the 95 you're in? So I find that argument to be generally effective because it's genuinely in their best interest. And I think people have a natural tendency to overinvest in that in which they understand.

• 28:46Speaker 02

  And of course, those families understand what it is to invest in Brazil. But in doing that, they're massively undiversified. And the world has become really, really risky. And there's only one free lunch in Finas. Do you remember that from now?

• 29:00Patrick O'Shaughnessy?

  Diversification.

• 29:01Speaker 02

  Diversification is the only free lunch. So thinking strategically over how to diversify, with whom to diversify is hard, but super valuable if you want that free lunch.

• 29:12Patrick O'Shaughnessy?

  Speaking of diversification, maybe the most interesting dimension of that today is geographic. We were talking before we hit record about the incredibly wide gulf between the pristine US equity assets and basically everywhere else in the world. There was a time when you saw this chart between like the S and P 500 and the equity world, X E R S or something. And it was kind of back and forth and back and forth. And then the line has just gone like this for 20 years, where the US has just so completely dominated everybody else in enterprise value creation or some measure like that. How do you interpret that shift? Is it secular? Is it gonna be cyclical and go back towards the international markets? How do you think about that crazy bifurcation?

• 29:53Speaker 02

  The premium for US exceptionalism has never been higher. US public equities are trading at 26x earnings for a 4% forecasted growth, which is at the 97th percentile of the last 25 years. And the US dollar, despite a 10% depreciation this year, is pretty much two standard deviations away from the neutral state. So the US has never been this expensive. I love the US. It's still the number one economy. I still want to have half my assets in the US, but not 90% of my assets in the US. Not only is it very expensive, total debt to GDP is 125% of GDP. That is the highest of the OECD. It's higher than it was after World War II,

• 30:37Speaker 02

  when America levered to defeat the axis of evil. Current plans in place. Within five years, we're gonna be at 145% of GDP, which is higher than Greece and Italy. And the US has not had a recession since 2009. Are you sure you want to have 95% of your assets in the United States of America? I don't. If you look at the rest of the world, you can buy Europe at 14x earnings. You can buy Brazil at 9x earnings. You can buy Mexico at 10x earnings. We're finding Forty fifty percent growers at twelve times EBITDA, fourteen times EBITDA, as many of them serving dollarized clients. So the case for global diversification, the price for global earnings,

• 31:19Speaker 02

  the case has never been strongest, the price has never been lower on a relative basis. So I do think that in the next ten years, those who achieve some level of a diversification will be rewarded. Because I do think there's a little bit of froth in the US market and the opposite in a lot of the emerging markets. What have you learned on any recent trips to China? China is fascinating. I've been going to China for twenty five years and I've seen the development. It's the fastest change in terms of per capita GDP in modern history or any country at scale. It's an incredibly complex society, tremendous amount of innovation. And we were lucky, having been early in China as GA, we've been investing there for twenty five years.

• 32:03Speaker 02

  I am highly optimistic that tensions have stabilized and that market conditions are improving. And we've been underway China for the last five years. We just did two deals. We're going to pick it up a little bit. There's always binary risk around the geopolitics. There's just so much innovation, there's so much entrepreneurial zeal. The one thing I learned, I actually learned over drinks with a Chinese entrepreneur. So I've done business in nineteen countries and I love to connect on a human level with the entrepreneurs. So much, even at growth stage, so much of the assessment of the company and of the partnership is about chemistry. And it was very hard for me to build chemistry with the Chinese entrepreneurs.

• 32:47Speaker 02

  One night, I'm having a long dinner with lots of good food and alcohol with an entrepreneur who was an anthropology PhD of University of Arkansas. And I said, if someone can explain me the Chinese mentality. It's this man, he said to me, like any oversimplification, it's unfair, but there's a grain of truth. And he said, well, you have to understand about the entrepreneurs you're dealing with. He said, this generation of entrepreneurs, people who were in their thirties and forties, they're all children of the Cultural Revolution. Everything was taken away from this family, everything. And they are scarred and they have something to prove because they think something was stolen and they will get it back.

• 33:30Speaker 02

  So there's a level of drive and ethic, work ethic, that probably matches the refugees of World War II that came to the States and these great businesses of after World War II, or other people that have had hardship in their life. But this applies to 98% of the entrepreneurs. They side with their parents. So that's the other condition you should take into account.

• 33:52Patrick O'Shaughnessy?

  How do your ancestors show up in your life and values?

• 33:58Speaker 02

  Well, products of our traumas and our adventures and our dreams is my worldview. So what are my traumas? Some are personal and some are generation. Generational traumas. On my mother's side, Jewish family had to flee the Russian Empire through Romania, then Argentina, then Bolivia. So fleeing, leaving everything behind. From my father's side, very wealthy, landed oligarchy of Bolivia. In 1952, there's a revolution. They lose everything and their house and farms get burned down on the Amistad when my father was a teenager. So on both sides, there's a sense of loss and escape that is very present. And decide to become communists and doctors.

• 34:42Speaker 02

  They're both doctors in public hospitals in a little town in Bolivia. So that's their trauma, which I relate to the Cultural Revolution.

• 34:53Speaker 02

  And they are religious, not atheist. In my personal life, trauma comes from two places for me. One is I grew up in Bolivia in the eighties and that was chaos. Bolivia in the eighties, seven presidents in 10 years, including four coups d'états. We had inflation, you got 5% inflation.

• 35:09Patrick O'Shaughnessy?

  Yeah.

• 35:10Speaker 02

  We had 35,000% inflation.

• 35:13Patrick O'Shaughnessy?

  Thirty-five, thirty-five thousand.

• 35:15Speaker 02

  Time value of money, I understand, okay? Like, like the only time my mom ever punished me was one time she sent me to exchange her salary for dollars when she got it. And I took a one-hour break to visit a friend.

• 35:29Patrick O'Shaughnessy?

  And in the hour.

• 35:29Speaker 02

  And it lost half its value in that hour. I was grounded for a year because of that one hour. Break through the exchange. So anyways, and there was also a lot of violence, ethnic violence in Bolivia. So it was rough. It felt unsafe. It felt turbulent. And then I have a genetic disorder. I bruise very easily, very, very easily. So getting out of bed, deciding what activity to do is a risk reward trade off since the age of five. And that is a way of seeing the world that most people.

• 36:00Patrick O'Shaughnessy?

  Why is he for risk?

• 36:01Speaker 02

  Yes, I'm like, I know how to price risk. I'm like, ah, not worth it. My friends are like, why are you always thinking of the downside? Well, I have my reasons. So anyways, I find when trying to understand a person, I do it with entrepreneurs. Seeing what their trauma was is super useful because I find a lot of the most driven people are driven because of foundational traumas. It doesn't need to be rack the riches. It doesn't need to be a big disease. It could be one of my fiercest competitors. He was mowing the lawns of his buddies who were with the cute girls. And his entire life, he wanted to show them. I don't judge. That's a real trauma. Pain is pain.

• 36:44Patrick O'Shaughnessy?

  Yeah.

• 36:44Speaker 02

  And if you understand them and you're traumatized yourself, you can relate and empathize. But you also understand the intensity that drives them and whether they can manage it and channel it productively. But if you can, it is such a wonderful engine of transformation. And it's curative. It's healing to channel it in a positive way.

• 37:06Patrick O'Shaughnessy?

  How did you learn to harness it? Because the other end of the spectrum could be unharnessed and just chaos. How do you learn to harness or channel it to something productive?

• 37:17Speaker 02

  I believe managing one's emotions productive requires either therapy, writing a journal or meditating. You should do two of the three. I do two of the three. Trying to do the third one, but it's really hard.

• 37:29Patrick O'Shaughnessy?

  With meditation?

• 37:30Speaker 02

  Yes.

• 37:33Patrick O'Shaughnessy?

  Yeah, we're on the same page.

• 37:34Speaker 02

  Yeah.

• 37:35Patrick O'Shaughnessy?

  If I asked a bunch of people that knew you and the investments that you've made across your career, what is a you investment? Like, what are the characteristics where they see that company and they're like, oh, you know, he must have done that. How would they describe it? This is a funny story.

• 37:48Speaker 02

  When I got promoted to chairman of the investment committee, so elevated from a Latin American role all of my life to head of the investment committee of General Atlantic, this iconic global, I was lost. So I go to the two founders. Steve Denning was the CEO for the first 20 years. Army man, McKinsey man, Stanford MBA, structured. I say, Steve, how do I make decisions across so many geographies and business models? What's the framework you think I should apply to add value to my partners? And he said, you should develop a checklist that captures the characteristics of a winning GA deal. So go back and look at our 25 years or history. Our best deals all share a couple of characteristics.

• 38:31Speaker 02

  I give you the three Ms, but there are probably five Ps as well. Create a checklist. And I was like, yeah, checklist. Same day, I go to the co-founder, Dave Hodgson. He's just super good, but just the smartest guy in the room, always. And I asked him the same question. And the first thing he says, avoid the temptation to use a checklist. If it was as simple as a checklist, we wouldn't get paid millions of dollars to do what we do. And I was like, checklist, not checklist, okay. So whenever there is a paradox, there's an elegant unparadoxing of the paradox. So Danny Kaliman, Think Fast, Think Slow, checklist manifesto, built on work he did for the Israeli Defense Forces to create the checklist for the elite agents.

• 39:13Speaker 02

  Turns out the checklist work, but in applying the idea of checklist, there were these super interviewers that got even better results consistently than just the average interviewer. So there was something beyond the checklist that was statistically significant. And there's one interview of the super interviewer where she says, I do the checklist because I have to. But after I do the appraisal, I close it and I close my eyes and see how I feel. And I go with my gut. And she has perfect scores. So the framework I use for what's the perfect my team or GA deal is the combination of a checklist with my gut, which I call the educated intuition. What's in the checklist of things we like?

• 39:57Speaker 02

  Huge TAMs, business models that create economic value and have mode. Teams with the right go forward capabilities, situations where there's inorganic growth to get, and there's tremendous amount of strategic value, meaning someone will overpay to have this capability if we are successful. So those are the things that the checklist aspires. Me personally, in the deals I've led, they have to make the world better. I am so proud that I invested in the number one investing platform in Brazil, when there were only 80,000 people that own stocks in Brazil. And now 10 million people own stocks. What's it called? XP. It's publicly traded, $10 billion market cap. I invested when they were nothing.

• 40:37Speaker 02

  I am so proud that I went against every convention and invested on an ed tech company. Ed tech was a dark alley. We have power alleys. There are some places we don't touch. And I was like, no, no, no, this is different. This is different. This little company in the northeast of Brazil, which was creating K through 12 learning systems. Instead of using textbooks, you package everything in as a hybrid notebook with digital. Da, da, da. Went from 80,000 students to 8 million students. 8 million kids every day today use this platform. And it's world class. It's really good content and it's an amazing entrepreneur, son of a teacher. And we made money.

• 41:17Speaker 02

  We have a platform that 97% of financial institutions use for digital onboarding. Turns out Brazil is the world capital of online fraud. And this is the one company that catches it. And I'm so proud that I started mentoring this kid when his company was nothing. And I did it through Endeavor. It took me eight years before I had like, became investment for Jay and then we invested and now they're dominant and if they makes the world better, I you see, it's beyond money, it's energy.

• 41:43Patrick O'Shaughnessy?

  If the checklist is mind and the instinct is gut, have you met a great investor who's mostly heart?

• 41:51Speaker 02

  No, I think heart is super important if you want to be a leader of a large organization. Because you have to move the hearts of hundreds, thousands of people to row in the same direction with purpose and with effectiveness. And that is crucial. And the heart is so powerful. It overrides gut and brain. And to do it at scale, you see these people that are super good leaders. The energy is captivating and they are wizards of the trade. It's really hard to do all three. And part of being a good investor is to not fall in love. Because at the end of the day, you have a fiduciary duty to produce returns. And you have to make some tough calls. Love is a treacherous though.

• 42:33Speaker 02

  Funny story. So the one time that I didn't follow the checklist was for love. So obviously I had a checklist for the woman I'm going to marry. And when I met Daniela, my Portuguese teacher, she didn't score very high on the checklist.

• 42:47Patrick O'Shaughnessy?

  Where was she deficient?

• 42:48Speaker 02

  I won't say, but the things that are absolutely irrelevant to the task at hand. I had the wrong framework. And she was perfect in every way and she's been perfect in every way. So in matters of the heart, forget the checklist. But I don't think the three of them come together in the investment profession.

• 43:05Patrick O'Shaughnessy?

  You mentioned the two founders. What about Bill Ford? What have you learned from him?

• 43:09Speaker 02

  So much. I've worked with Bill for 15 years. I actually pitched Bill my startup. This is 1998, came in through New York. And I had heard a lot about General Atlantic and how they're different. They think long term and they're good partners and Chakravarti, that it's really hard to get the meeting. We give them the meeting. Bill and I really hit it off. I made the pitch. And he's like, uh, we're not ready for Brazil. I'm really sorry. I was heartbroken because I really wanted G A. And Bill was an amazing guy. Ten years later, after I sold my business and was working at another fund, he called me and he's like, remember me? I was like, yeah, I remember you. He's like, can we try this again? I said, yeah, we can try this again. But just for you know, you would have made eighteen times your money. You had said, yeah, I was like, what? So, yeah, yeah, I know, I know, I know. So come.

• 43:54Speaker 02

  Bill has an incredible ability to see around corners and be visionary in making bets before they're obvious. So going into Europe, going to the emerging markets, going into consumer, going into life sciences, pushing me now to go into robotics and humanoid is an incredible ability to look around corners. He also, in managing the partnership and us, has heart. Not for investment decision making, but in keeping our culture, the meritocracy of the firm, also with heart, has helped me develop as a leader of G A. And letting, speaking more a little bit from the heart. And he's an incredible moneymaker. So his mind is just.

• 44:36Patrick O'Shaughnessy?

  And it helps too.

• 44:36Speaker 02

  That helps too. That's a detail.

• 44:40Patrick O'Shaughnessy?

  As you've progressed in your investing specific career, what changes the most as you become more senior? How does it feel the most different doing it today versus doing it when you're a lots to prove young analyst?

• 44:52Speaker 02

  The hardest thing when you're young is developing patience and the conviction that you can wait a little longer for the big fish. You're young.

• 45:00Patrick O'Shaughnessy?

  You wanna get gone.

• 45:01Speaker 02

  You wanna get gone. You wanna get deal experience. You wanna get notches on your belt. And that's the completely wrong, wrong instinct. When you're older, you have a lot more range. You've seen a lot more and you got patience. You're like, haha, nothing scares me. I know a big fish will come. Calm down, no pressure. You are less in the front lines and more as a coach player, training young partners to do what you used to do. And initially, that can be very demotivating. Because Tom Brady likes to be in the field, not coaching or opining.

• 45:33Patrick O'Shaughnessy?

  Commentating, yeah.

• 45:33Speaker 02

  Yeah, maybe not, not so fun. Until you reimagine the game and you live vicariously through the people you are training and you enjoy their wins almost as much as you enjoyed your wins. That's been the mental flip that I had to do to enjoy this phase. Because of course, scoring goals is better than coaching. Unless you make the mental shift to live vicariously through them. The hard thing, and that's why there's not that many venture and growth equity investors over the age of 50. It's not just that we call in rich, or we get tired, or we develop new interest. I think our brain ages and stops being plastic. One of the great learnings from Beautiful Mind, Dave Hodson, who's aged beautifully, he's in his late 60s.

• 46:17Speaker 02

  And is very sharp and very much on top of the new trends. He defies the convention and I said, what is the secret? And he said, three things, the most important one is I refuse to think like an old man. My mind still plays. I still wonder, I'm still in awe. And I don't fall into the trap of thinking I have the answer to everything. I'm always learning, experimenting and play. And that's the hardest part because we have this illusion as we get older that there's no room for play. There's no room for play. There's always room for play.

• 46:50Patrick O'Shaughnessy?

  How do you inject that into your life?

• 46:52Speaker 02

  You just don't take yourself too seriously. I'm always laughing about everything, making fun of everything. Even when confronted with worst perfect storm where something happens. I start laughing and I say, what are the odds? So many bad things could happen all at once. This has never happened before. Seven things at the same time? Let's go through it. That attitude, I think, makes life full up.

• 47:16Patrick O'Shaughnessy?

  What do you make of this current bubble that we're inside, outside? Depending on the person, you mentioned humanoids, you mentioned bio a little bit, like there's all this exciting stuff happening. Probably all of which in the long run will be amazing for people. Be a lot of consumer surplus and all this. You want to make money through this process for yourself and your partners. How does it feel to you?

• 47:39Speaker 02

  This is more meaningful because it will touch a higher percentage of GDP. The internet was the other very meaningful one, but it changes how we interact with each other. This will change much more than that. An ambiguous recommendation, if you're in your twenties or early thirties, go work at AI. Because you're going to live through dog years. Meaning we're talking about dot com. Seven years of activity in one year. And regardless of whether the company does well or you make money, you're going to have compressed learning that only happens once every 20 years. So don't miss that opportunity. And when I say that age group, I mean that mental age group. You could be in your 50s and be in that mental after. Would you really take risks? Just go do it. If you have a young mind today, go work in AI because it's going to be so much fun. I think investing is risky.

• 48:24Speaker 02

  Our approach, which may prove to be too conservative, was to take it slow because it's not clear yet where the value is going to be created. It's not clear yet how much more powerful the large language models are versus others that are more efficient or how much of the value will be captured by the models versus the applications. So it's exciting to watch. I know we're going to have a moment where we're all going to wake up and say we've invested too much. I don't know if it's three years away or 18 months. I don't think it's happened. For sure it hasn't happened yet.

• 48:56Patrick O'Shaughnessy?

  You don't think so? You don't think there's a chance that we're in that moment already?

• 49:00Speaker 02

  No.

• 49:00Patrick O'Shaughnessy?

  Why not?

• 49:01Speaker 02

  It's not crazy enough. I was looking at some stats comparing the AI wave, let's not call it a bubble, waves to the dot com and to the railroads. And it's looking at the ratio of CapEx to revenue and what percent of GDP was involved in this and how was this CapEx funded? CapEx to revenue is still not crazy. New revenue streams are managing. And the biggest difference relative to railroads and dot com is the funds are coming from really rich companies. The magnificent six who are printing money out of their dominant positions are reinvesting a lot of this money into the CapEx that's powering all this innovation. So it's very healthy.

• 49:45Speaker 02

  It's not junk bond speculators or thin margin telecom companies that are levering up the wazoo with retail money to fund this wave of innovation. It's really profitable companies. So I think it's got more legs. Will it be bumpy? Yes. But the thing about predicting the future is it's really hard. Explain the past is a lot easier.

• 50:07Patrick O'Shaughnessy?

  So what do you think happens from here in markets? Predicting the future is impossible, but fun.

• 50:12Speaker 02

  I do think the IPO markets are opening up. The corporate media market is opening up. Emerging markets, which were dead for the last four years, are lighting up. So barring a black swan or an orange swan event or some other geopolitical surprise, I do think the next 18 months will be constructive. And it's a much needed shot of liquidity for our industry and a little more attention to the rest of the world. I'm generally optimistic. I do worry a little bit about the fiscal situation in the US. As the reserve currency of the world, you have so much time and so much permission to make mistakes. I think the real issue that we face that I think a lot about, I think politically globally, we're kind of screwed

• 50:57Speaker 02

  because neoliberal and centrist ideology can't get elected. We missed the main concept that prosperity needed to be shared for it to be electable. So now we're not just in the US, but across the globe, forced to choose between nationalist leaders, who are like we against the world, or socialist, which is, oh, we're all together and we're going to share and take away from the rich to give to the poor. Both are very suboptimal. And we need to find ways to create a center position that's neither socialist nor nationalist, but is one of shared prosperity. I worry that there are not that many people that are focused on that or investing in that. But the world needs that, not just the US. We needed a Brazil, we needed a Mexico, we needed across Europe.

• 51:42Patrick O'Shaughnessy?

  I'm always interested in this difference between risk, which I think of as sometimes quantifiable or imaginable, and pure uncertainty. We literally just don't know what's going to happen. And if you think about where you've made money, how much do you think came from the willingness to embrace uncertainty versus taking really calculated risks?

• 52:04Speaker 02

  You never invest a lot of money without a visibility of what you're doing. There is fog and different layers of fog. And what the fog does is it slows you down. But if you look pierced through, you see clarity. You see a monopolist at six times EBITDA. You see an opportunity to. It's not a shot in the dark and hope for the best. What you can't do is just shut down and say, this is too rast, too unpredictable. You just have to engage with the unpredictability until you see something before others and you strike for the fish.

• 52:40Patrick O'Shaughnessy?

  In an era like this, when it's all changing so fast and understanding the core technologies is important. How do you personally learn? What is your preferred method to stay abreast of what is going on and like stay in touch with reality?

• 52:52Speaker 02

  Talk to young people, surf TikTok, try different apps, try crazy things. Go to places where there are no old people. And you don't care. I don't care. Someone calls me old, I'm not, I'm just playing. Keep it fresh. Value is in the new, be in the new, always. Even if it turns out to be a dead end, most of what we do is dead ends. But it doesn't mean it wasn't valuable to try it. That's the hardest thing.

• 53:19Patrick O'Shaughnessy?

  There's been this wild transformation of our industry in the time that you've been a professional in it. What does the competitive dynamic feel like to you today?

• 53:29Speaker 02

  The universe of amazing companies has expanded. The number of $100 million revenue business growing 40, 50% has grown 10x. Because more technology, more people taking risk in more places. Unfortunately, we compete against 19,000 GPs. It was not a very nice thing to say, but so one of my competitors said, there's more GPs than McDonald's in the United States, which is one of those GPs that are smaller. They didn't feel like when you compare to McDonald's, but it's really too many GPs. And the industry is consolidating. It's becoming incredibly competitive. You have to have more clarity. What is your competitive edge? How have we thought about our edge? Brand. We've built this brand about being good partners. This brand means something. People get value from GA inside. Attracts, helps them recruit talent, get clients, go public.

• 54:14Speaker 02

  Scale to have muscles that small shops don't have. We have a hundred people in operations. They can help you with pricing, sales force effectiveness, AI for what customer serves. Whatever you need, we got a team. It's there for free. We got an in-house human talent team that has taps into a database of 15,000 vetted executives. You need a CTO who'll send you a list tomorrow of eight guys in the area who we've worked with and I think fit. That's an area. And then you have to be a specialist. Can't be a generalist anymore. So we've chosen what we call the GA power alleys. There are 16 power alleys, things like AI applications, value-based care, digital payments. 16 power alleys, check the website. In those power alleys, we think we're among the best in the world. And we show up with 32 case studies.

• 54:59Speaker 02

  We've done this 32 times. And yes, you can copy things that work, but guess what? You don't know the things that didn't work that we tried, that we're going to prevent you from trying. It's made it harder to compete, but I do think scale and experience helps. Provided you are deliberate at learning from the experience and focused on how you build capabilities with scale in areas that really matter, not just look good on a website.

• 55:23Patrick O'Shaughnessy?

  If you're teaching a seminar about or for young investors who are only allowed to go invest in non-US companies, so everything but the US. What are the most important things for that crew to know about doing that well? That's distinct from what it would take to do well in the US.

• 55:41Speaker 02

  There's a lot more volatility. The frequency of surprises is much higher. So agility is super important. We're also low trust cultures. Even though most of them are religious, doesn't mean you can trust them. So a higher percentage of the time, you may find yourself with a crook across the table. So the value of referencing is much more important. And how to do a good reference is super important because people don't say bad things about other people easily. So that's another one. The third one, which is a positive one, which is the one great advantage of being outside the US is there are so many things that don't work well. Lower hanging fruit.

• 56:25Speaker 02

  Shubhang is lower hanging fruit. And if you provide a great service, you capture a lot of value for a really long time. How do you do a good reference? For an investment, you do it with a family that has given you money to make investments. And you say, João, we're about to invest $200 million in this entrepreneur. You know his father, you know his grandfather. Do you think we should take this risk? And he's like, João, no fucking way. We're not, he's a crook, son of a crook. Because he has money with you, he tells you the truth. If he didn't have money with you, he'd say, of course, you'd say, I don't know. There's some noise. I would do my homework or they're fine. For hiring, there's another hack, which I learned, which is so important.

• 57:10Speaker 02

  So much of life is getting the right people on the bus. Hey, when you're going to do a reference on a hire, you call the person and you say, hey, we're considering David for this role. This role involves the following five challenges. This is a very important decision for my company because we can't get this wrong. It's also a very big decision for David because he's happy at his job. And if he gets this wrong, if we get this wrong, we've wasted time and he's out of a job. Help me assess if this is a good risk for me and David. And if you can have an honest discussion, if you don't feel comfortable engaging like this, let's not talk about it, but that's what I need the reference for. You'd be surprised. People are like, well, for that risk, David, no, it's leaving there. He's fine. But that is a genuine way to answer it

• 57:53Speaker 02

  because what I described is actually true. If this is a bad fit, David should not be taking this job. Reference calls are not, are not, tell me about David, is he a good guy? That's a waste of time. People say, yeah, he's a great guy.

• 58:06Patrick O'Shaughnessy?

  Very good guy.

• 58:06Speaker 02

  He's a great guy, very competent.

• 58:08Patrick O'Shaughnessy?

  What have you learned about managing, help manage the career success of investors? Which is a very distinctive job from a career ladder in a company or something. Incentives matter a lot. I'm sure. I'm curious what you've learned about incentives. What mistakes have you made? You think about you being responsible for other investors and you wanting them to thrive. What's the good, the bad and the ugly that you've learned?

• 58:30Speaker 02

  It's an apprenticeship business. Pairing them up with different people, different skills, different styles is super important. Helping them from a very young age to make recommendations. Don't just do the task. Answer this a lot. And ultimately say, what's my level of conviction in doing this investment? Don't rely just on this more senior people. One of the tricks I used to do with is I've been in three investment committees in my career. I'm three G at Venon. I would try to understand the mind of each investment committee member and predict what they're going to ask. So I would read the memo and say, George Apollo is going to ask this. Bill Ford is going to ask this. Juan Carlos Torres is going to ask this. And I'll also predict their votes.

• 59:14Speaker 02

  By the end of a year of doing this, I was up to eighty, ninety percent. And what was really interesting was forced me not only to have my own opinion about a deal. So I'd read the materials, but look at it from the perspective of someone who's really good at making these kind of decisions. And my ambition was to one day be completely unpredictable. When someone tried to do this with me in, when I became a senior person, because I was capturing learnings from thirty perspectives. It's not true. I'm, I'm actually pretty predictable by now. It's learning vicariously by forcing yourself to have opinions. And also putting yourselves in the minds of people who are proven investors is a way of the apprenticeship on steroids. And one of the things that we do at GA, which I'm really proud of, because it was culturally very hard to do.

• 59:59Speaker 02

  Our investment committees are open to everyone.

• 1:00:02Patrick O'Shaughnessy?

  The whole firm.

• 1:00:02Speaker 02

  The whole firm, the investment professionals. So every Tuesday, a hundred and ninety people sign up and there's no presenting. We come in directly to Shark Tank, just questions. And it's beautiful.

• 1:00:15Patrick O'Shaughnessy?

  Talk me through how that meeting works. So one person, like a sponsor is proposing a deal.

• 1:00:19Speaker 02

  So there's a deal team. The deal team is typically a combination of a sector and a geo put together. They've standardized materials with the checklist. It gets distributed by Friday. We, yeah, Tuesday, we come in. There's no presenting. The deal lead, there's always a deal lead, the main sponsor is there to answer questions. We have five investment committee members and the IC rope, which also opines. And we just ask you questions.

• 1:00:40Patrick O'Shaughnessy?

  What's the IC rope on?

• 1:00:41Speaker 02

  We've been training this sixth member of the IC based on forty five years of data. So she votes on all of her deals. We've been having her do this for the last three years.

• 1:00:51Patrick O'Shaughnessy?

  Is she any good?

• 1:00:52Speaker 02

  So we've backtested her and she's much better than humans. But it turns out someone who's been trained in the past is very good at the best. We only have three years of concurrent data. So we need to wait another four or five years. I'm hoping that by the time we retire, I retire about ten years, she'll be better than the humans.

• 1:01:10Patrick O'Shaughnessy?

  If I could somehow do that exercise with you, where I could predict the sorts of questions that you tend to ask about companies? What are they? Like, what are the big ones that you find yourself constantly asking sponsors who are promoting a deal?

• 1:01:21Speaker 02

  Getting in the mind of the founder. His or her motivations, why this is so special and the trajectory that got to this. I try to meet the founders outside the investment community process as a sponsor. Basis of competition, so true distinct competitive advantage and durability of the competitive advantage. And then I try to push people on the tails, both positive and negative. Six bad things happen. How bad is it? And how likely is it? Or if this amazing development happens, which could be amazing, how unlikely is it? And who else would benefit? I always find the tails to be the most interesting because if you look at the distribution of our returns, ten percent of our best deals, and we get lucky and they produce fifty percent of the return. So we lose money very little and then ten percent, we get five X plus.

• 1:02:07Speaker 02

  And these are really important. And these, all of them are better than the upside case in our memos. Because good things happen that we did not see coming, but God bless and thank God. So I always find like, where are the lottery tickets?

• 1:02:22Patrick O'Shaughnessy?

  How do you assess, it seems like, well, first of all, incredibly important, like all the data. We know how important the right tail is for investing outcomes. Well, worn truth at this point. How does one get better at assessing the option value embedded in a given business? That just seems so crucial. There's no book about that. There's no podcast about that. You've got 10 investments. How do you know which of the 10 has more embedded right tail option value?

• 1:02:46Speaker 02

  Pattern recognition from having seen winning lottery tickets gives you some help, right? If you've seen more of these, you begin to see where you, how you can get lucky. As important, in all those lucky scenarios, there was a spear fisherman at the top to capture an opportunity that was available to many, but they seized it. So it's a lot more about.

• 1:03:10Patrick O'Shaughnessy?

  Capital allocator at the top.

• 1:03:11Speaker 02

  The CEO, is he someone that can spearfish? And some people, it takes one to know one. Some people are really good at it. Some people are not spear fishermen.

• 1:03:21Patrick O'Shaughnessy?

  My final investing question is to wonder how growth as a part of the complex feels relative to other styles today. I'm US centric investor, but curious globally. I'm sure at different points in your history, growth versus say venture, early stage or pre-IPO or publics has felt distinctive, cheaper, more expensive, whatever, more opportune, less opportune. How does growth specifically today feel versus the other segments?

• 1:03:48Speaker 02

  Best window into growth equity since 2009.

• 1:03:52Patrick O'Shaughnessy?

  And why?

• 1:03:53Speaker 02

  Everything's on sale. There's so much pressure on GPs to post DPI that we're getting 40% growers at 15x EBITDA. It's 30 to 40% discount to the public comps. This is not normal and it has to do with four years of no IPOs. It has to do with four years with no strategic exits. So the engines of growth are undisturbed. The valuations are half or 40% discount. It feels incredibly attractive, as attractive as the post-GFC was.

• 1:04:22Patrick O'Shaughnessy?

  What is your unfinished business professionally?

• 1:04:26Speaker 02

  So does not, I could not think of a better activity than working in growth equity at General Atlantic for the next 10 years. Global growth equity in the middle of the AI revolution with the seniority that I have and the dry powder.

• 1:04:39Patrick O'Shaughnessy?

  Could be.

• 1:04:39Speaker 02

  Pinch me, pinch me because I hope I don't die on a plane crash because it's going to be great. After that, I think you have to start thinking. I've been active mentoring entrepreneurs through Endeavor, which is a not-for-profit. I'm on the board and I've been doing this for 25 years. I actually started mentoring, which is an interesting tidbit, when my business was running out of cash. Dot com sounds exciting, but there was a death, you know, the dark valley of death. And Linda Rottenberg, the founder of Endeavor, she's like, "It is precisely at your darkest moment that you mentor, because it's a sign of you have something to give in the darkest moment of the night." Which is interesting, because I hope AA, like I have friends who are in AA. The body system is so valuable, because even at your darkest moment, you have enough light to help someone.

• 1:05:24Speaker 02

  And that gives you the strength to make it through. So I'm a huge believer in mentoring. That's something I will do for the rest of my life. The unfinished business, I think as I get older, I want to help in higher education in the US. I think we've lost our way. And I saw the impact scholarship to Harvard, did to a young kid from Bolivia. I love that institution. I love education. And I think it's in a moment that it's lost its way, and we can find it back.

• 1:05:52Patrick O'Shaughnessy?

  Can you teach me mentoring? How does one mentor well?

• 1:05:56Speaker 02

  My strategy, there's many ways to do it. I don't have time to be someone's mentor for six years or to see them maybe as part of Endeavor, I'll see them twice. So I have to hurt them. For the mentoring to be impactful, I have to make it so obvious that it's so stupid. They haven't yet focused on this, that they're like, "Hush, show him." And then they act on it. My mentoring sessions are very uncomfortable. I do it with a smile on my face.

• 1:06:25Patrick O'Shaughnessy?

  Yeah, of course.

• 1:06:26Speaker 02

  But it works. It's like crash therapy, like three years of therapy, one hour. No time for bull. We're going directly for the sensitive points. And I've learned to do it in a way that's not damaging or disrespectful in any way. But it is very scathing and saying, "This is clearly an opportunity. Come on, wake up, smell the coffee." And sure enough, and now I have a couple billionaire friends who are like, "You really hurt me, but thank you."

• 1:06:53Patrick O'Shaughnessy?

  I'm always curious about like literal process. If you're meeting someone for the first time, is the format you ask them a bunch of questions? And then you quickly do the aggressive, why aren't you doing this thing?

• 1:07:02Speaker 02

  I'm married to a shrink, a psychoanalyst. And so as a condition to our marriage, I have to do psychoanalysis. And it's a wonderful thing I work. It's one of the things I work with, therapy and meditation. And one of my favorite, he's now deceased, but he was a philosopher, writer, incredible Italian Brazilian guy, very famous in Brazil. You would go to this one hour weekly session and he would look at you in silence. And if I didn't say anything after a while, you just say, in town. And town is translating, so I let you take it. The most powerful way to start a conversation with someone you're trying to get to know is silence. You tell me.

• 1:07:38Patrick O'Shaughnessy?

  What do you want to talk about?

• 1:07:39Speaker 02

  What do you want to talk about?

• 1:07:41Patrick O'Shaughnessy?

  Simple.

• 1:07:42Speaker 02

  I'll give you another one. I asked, what's the most important question you need the answer to from the universe? The answer to that question is so powerful because vocalizing that which you most want the answer to is liberating.

• 1:07:57Patrick O'Shaughnessy?

  My traditional closing question for everyone is the same. What is the kindest thing that anyone's ever done for you?

• 1:08:03Speaker 02

  Daniela taught me how to love. She says, as we established, my heart's not very developed. My gut and my brain are very developed and she's such a loving, wonderful woman. Being loved by her and learning from her how to love back. And then learning from her how to love our daughters and the way that they need to be loved. And she's so smart and loving me can sometimes be very hard.

• 1:08:32Patrick O'Shaughnessy?

  A beautiful place to close. Thank you for the reminder to laugh a lot in these conversations. Thanks for your time.

• 1:08:39Patrick O'Shaughnessy?

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