Private Markets, Software Repricing and Capital Allocation | Marc Rowan on a16z

In 1990, Marc Rowan walked out of Drexel with his belongings in a cardboard box. Within a year, Apollo was managing $6 billion. David Haber speaks with Marc Rowan, Cofounder, CEO, and Chair of Apollo Global Management, about building Apollo into one of the world’s largest alternative asset managers and how private capital is reshaping the global economy. The conversation covers the rise of private credit, and why Rowan believes private markets are becoming increasingly central to financing the real economy. They also discuss AI, data centers, robotics, and the growing intersection between venture-backed technology companies and large-scale private financing. Along the way, they reflect on leadership, institutional culture, and why enduring organizations must adapt rather than protect the status quo. Timestamps: 00:00 - Intro 00:52 - Drexel, Milken & the Origins of Clean Sheet Thinking 04:55 - The Apollo Origin Story: From Unemployed to $6 Billion 08:46 - How Apollo Became a Trillion-Dollar Retirement & Credit Firm 13:00 - Permanent Capital, Origination & Why Assets Are the Scarce Resource 16:08 - Democratizing Private Markets: Daily Pricing & New Capital Channels 22:04 - Where Venture Meets Credit: Financing the Industrial Renaissance 30:01 - AI, Enterprise Software & Why Every Job Will Be Replaced or Enhanced 38:52 - Moral Leadership: UPenn, Merit & Doing Right Over Easy 46:02 - Apollo's Culture: Playing to Win & Building to Outlast the Founder Resources: Follow David Haber on X: https://x.com/dhaber Learn more about Apollo Global Management: https://www.apollo.com Stay Updated: If you enjoyed this episode, be sure to like, subscribe, and share with your friends! Find a16z on X: https://twitter.com/a16z Find a16z on LinkedIn: https://www.linkedin.com/company/a16z Listen to the a16z Show on Spotify: https://open.spotify.com/show/5bC65RDvs3oxnLyqqvkUYX Listen to the a16z Show on Apple Podcasts: https://podcasts.apple.com/us/podcast/a16z-podcast/id842818711 Follow our host: https://x.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see http://a16z.com/disclosures.

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

• 0:00Speaker 00

  Ten stocks right now in the U.S. are nearly 50% of the S and P, and they're all levered to the same trend. The same thing is happening in the global fixed income market. And so if you're an investor and you're looking for diversification, there's no place to get it other than private markets. Great companies, Anthropic, OpenAI, SpaceX, Anduril. Every one of those companies is private, multiple trillion dollars. And yet, most investors have zero exposure to them.

• 0:25David Haber?

  Andreessen wrote this piece over a decade ago that software's eating the world. And that feels more true than ever as AI proliferates all parts of the economy.

• 0:32Speaker 00

  We operate under the assumption that every job is going to be replaced or enhanced. 2025 was just proof of concept that data centers and chips and energy were all needed. 2026, the market is starting to recognize that if this continues, everyone who is an investor is going to be...

• 0:50Erik Torenberg?

  In 1990, Marc Rowan walked out of Drexel with his belongings in a cardboard box. Within a year, Apollo was managing $6 billion. What started as a distressed investing firm in the aftermath of a financial crisis eventually became one of the world's largest alternative asset managers, spanning private credit, retirement services, and financing for some of the largest industrial and technology shifts underway today. Now, another transition is happening. AI, robotics, energy infrastructure, and data centers are creating enormous new capital demands, forcing finance and technology to converge in ways that barely existed a decade ago. A16Z's David Haber speaks with Marc Rowan about building Apollo, the evolution of private markets,

• 1:35Erik Torenberg?

  and financing the next industrial era.

• 1:40David Haber?

  Mark, thank you so much for joining us and for hosting us here at your office.

• 1:43Speaker 00

  Nothing better. My absolute pleasure.

• 1:45David Haber?

  I thought we'd start by maybe going back in time. You joined Drexel coming on Wharton, I believe, in 1984. What did you see in the firm at that time?

• 1:53Speaker 00

  It was an interesting thing. Everyone who had come out of my program at Wharton had basically gone to Goldman Sachs.

• 1:59David Haber?

  Yep.

• 1:59Speaker 00

  And what struck me about Drexel's business, which was financing entrepreneurs, financing new companies, is that you didn't really need to know all that much about finance. You needed to know a lot about business. Because these companies were not the Exons of the day or the top-notch companies of the day. They were companies where legitimately there were questions on the business model. And I was always much more interested in business than I was in the nuances of finance and public offerings and things like that. And I was not disappointed. It was awesome.

• 2:31David Haber?

  Yeah, I mean, one of the most remarkable things about kind of the diaspora from Drexel, especially in that period is just, I mean, you can almost trace every major credit firm back to that kind of cohort of people. Was there something about the culture, maybe the focus of your clients at the time that sort of shaped that sort of incredible kind of diaspora talent?

• 2:49Speaker 00

  Look, this business-first mentality and really understanding the business is ultimately about making credit decisions. These companies were not investment-grade. They were below investment-grade. It really forced you to understand the fundamentals of their business, not to rely on third parties. But also, a whole market was being created. There were no high-yield bonds. There were no levered loans. There were no ETFs. There was no real securitized product. All the products that we take for granted today that exist did not exist. This forced you into clean sheet thinking. The whole notion of PIC, I believe, was created in one afternoon, solving a problem. The notion of silver-backed or silver-indexed bonds, solving another problem, and so on. The notion of a highly confident letter,

• 3:33Speaker 00

  the notion of bridge financing. All of these things were basically problem, solution, problem, solution. And that mentality of understanding the business, understanding the credit, but also having clean sheet thinking is certainly what powers Apollo today.

• 3:48David Haber?

  And I know, you know, Michael Milken has been a mentor for a long time. I guess, what are some of the most valuable lessons you've learned from him over the years?

• 3:56Speaker 00

  They're just innumerable. But the story I tell about Mike is I was like a smart young guy. I had mastered my craft. I was well thought of. And so every time the market kind of went sideways, I would get a call from Mike and Mike would say, could you come from New York to California? I would, of course, ask when. This was Monday. He'd be like, Tuesday. So the immediacy of how you dealt with problems and the business-first mentality was definitely a Mike-ism. And I sat on the trading desk, and at the end of every trading day, Mike would walk by my desk, and I was supposed to have all the answers, because Mike was doing a million things. I was just doing one thing. And every day, he would ask me a question that I did not know the answer to. And he didn't do it to provoke me or to show me how smart he was. He was showing me to connect the dots.

• 4:42Speaker 00

  And I do think that that's a big part of what goes on in our world today. Can you take what's happening geopolitically? Can you take what's happening in technology? Can you take what's happening in financial markets? Can you take all the personalities of people and can you put it together? In a coherent way that makes for good relationships, good deals, good partnerships? Things that benefit the world? And I think that's the primary lesson I took down along with. The pithiest thing is sometimes the most valuable. And the thing that he said is you either accept change or change is visited upon you. And we're certainly in that moment where you either accept change or change is going to be visited upon you.

• 5:19David Haber?

  Totally. And you've shaped a lot of Apollo over the years, which I'm excited to chat about. Maybe just going back to 1990, can you kind of talk through the origin story of starting the firm?

• 5:28Speaker 00

  Sure. Think Lehman Brothers 2008 because a lot of this audience will not know what was going on in 1990. But 1990 was a global recession, a banking crisis, a Texas real estate crisis, a New York real estate crisis, a savings and loan crisis. It was kind of a mess.

• 5:44David Haber?

  Yep.

• 5:45Speaker 00

  And I left my office on Friday. I came back in on Sunday and I left with all my belongings in a cardboard box and Drexel was out of business. A great lesson. Financial services firms die from one of two causes. Heart attacks or cancer. Heart attack is funding risk. If you lend long and borrow short, you have funding risk. We saw this in Bear Stearns.

• 6:08David Haber?

  Sure.

• 6:09Speaker 00

  We saw this in Lehman Brothers. We've seen this again and again. I will tell you that formative lesson. We will never see that at Apollo. It is ingrained in our culture to understand this funding issue, this heart attack risk. And then the cancer risk, of course, is the addition of bad assets over a long period of time. Which again, we as a principal mentality firm do not allow to happen. We admit our mistakes. We move on. We take our losses. We don't double down and triple down and do these other things. But back to 1990, imagine being an unemployed investment banker in the midst of a global financial crisis. This is not a great situation for career employment. Fortunately, a group of us had been sharing office space.

• 6:50Speaker 00

  The demise of Drexel was so sudden that we were still working on transactions for clients without any hope of being paid or without a firm that was backing us. It was just what we did. And as happenstance would have it, we received a cold call from the government bank of France, the Credit Lyonnais Bank, asking whether we would be interested in starting an M&A boutique under the mighty Credit Lyonnais banner. What a terrible idea in 1990. There is no M&A. There's total loss of confidence. And I think as a throwaway line, one of us said, "But this would be an awesome time to deploy capital." And the gentleman said, "There's a guy in Paris. He thinks exactly the way you think.

• 7:35Speaker 00

  Why don't I set up a meeting?" A few months later, we left with $800 million of the government of France's money through the Credit Lyonnais Bank with a group of people who had never invested money before from an institution that was not an investor. And by the end of the year, we had $6 billion of the bank's money. Wow. And in 1990, no one had $6 billion. Wow. And we went on to become the largest profit center of the Credit Lyonnais Bank. For the next few years, we earned them regularly $3 billion plus a year. We were very, very popular in Paris despite speaking nothing other than restaurant French. The movie rights to this story of us talking past each other are just off the charts. Yeah, totally.

• 8:19Speaker 00

  But eventually, the Credit Lyonnais Bank, as the government bank of France, goes out of business from supporting French industry. Interesting. And in a desperate attempt to maintain its capital base, it sells its most profitable investment, Apollo, to its largest client, François Pinault. Interesting. Nice. And François Pinault does not understand that he is not buying an investment firm. He believes he is buying Samsonite and Culligan and Vale Resorts because after all, he's an industrialist. And so the movie rights to the first meeting with Francois Pinault are also amazing.

• 8:53David Haber?

  Hilarious.

• 8:54Speaker 00

  But as luck would have it, we had a good enough track record that over time, we not only made Pinault lots of money, but began to diversify our business to US and European and international institutions. And the rest, as they say, is history. But it was a pretty contained history for about 18 years.

• 9:12David Haber?

  Totally. And I think people still incorrectly, I would argue, refer to Apollo as a private equity firm. But you, I think, more than anybody, have really kind of transformed the business into a retirement services company and a large alternative asset management business. I guess, what did you see in Athene in 2008? And how do you sort of view the firm today?

• 9:31Speaker 00

  So if I start backwards a little bit, the firm today is a little bit over a trillion dollars in assets under management, which is just a measure. And it is in two businesses. It's in the retirement services business and it's in the asset management business. And if you look at the assets under management, 80% of the assets under management are credit, and the vast majority of that is investment grade. And the other 200 billion or 20% of it, half of it is what we call hybrid equity, partner-like equity, and half of it is traditional private equity in a fund structure. It's a totally different makeup of a business than people expect when they say, well, Apollo is a private equity firm.

• 10:09David Haber?

  Totally.

• 10:10Speaker 00

  Well, actually, Apollo is mostly an investment-grade credit firm.

• 10:12David Haber?

  Totally.

• 10:13Speaker 00

  And I think what we appreciate is, when you are a small firm, you can be a good deal shop. But when you want to get large, you have to serve a fundamental good. Otherwise, the societal pressure, the government regulation, the forces around you constrain you. And so I always start with, what is the fundamental good we're doing? And then what are the drivers of the business? And so they overlap. The fundamental good is, we are the largest provider of retirement income anywhere in the world.

• 10:45Speaker 00

  The second is we are the largest source of financing for this global industrial renaissance that is taking place across the US primarily, but across Europe and Asia and elsewhere. And finally, we are diversification for public markets. And this is the least understood portion of what we do. Ten stocks right now in the US are nearly 50% of the S and P, and they're all levered to the same trend. Yep. So far, that's been amazing. Yep. But we've levered most of the retirement system of the country. Yep. To 10 stocks. We can question in hindsight the wisdom of that if things go poorly. And so the same thing, by the way, is happening in the global fixed income market. Dominated historically by 10 large banks.

• 11:30Speaker 00

  It's about to be dominated by five large banks and five large tech companies. As much concentration as exists in the equity market, that's how much concentration is going to exist in the fixed income market. And so if you're an investor and you're looking for diversification, there's no place to get it other than private markets. Private markets are 80% of the action going on in the world. And if you think about what's going on, the great companies, Anthropic, OpenAI, SpaceX, Cognition, Cursor, Anduril, on and on and on, every one of those companies is private, multiple trillion dollars of value, and yet, most investors have zero exposure to them.

• 12:15Speaker 00

  We're gonna see the same thing happen with industrial companies. Lots of industrial companies are just gonna decide to stay private longer for all the reasons we know. And so when I think about the business today, it is serving those fundamental goods, but it is also built on trends. The trends are, the world is getting older. People have not adequately saved for retirement. There's this massive retirement income gap that's driving our business forward. They need income. Well, at the same time, corporations are borrowing money, like every dollar since the invention of fire, to build infrastructure, to build energy, to do energy transmission, to do next-gen manufacturing, to do AI, to do defense, to do data centers. And it's all happening at once.

• 13:00Speaker 00

  And so mostly investment-grade borrowers, large companies, against modern trends, matching their needs for capital with the need for income of retirees with us in the middle. Sometimes I feel like we're at first in Maine and the traffic runs 24/7. You asked how I was? I said tired.

• 13:16David Haber?

  Yep.

• 13:16Speaker 00

  Retired.

• 13:18David Haber?

  You know, I think it's maybe worth just doubling down on kind of like the permanent capital base of the firm because it's really unique kind of in the alternative asset management ecosystem. And, you know, I recall you saying this once in a dinner that we had, which was, you know, a lot of the business sort of boils down to, you know, cost of liabilities and creating sort of excess return per marginal unit of risk. And it's about sort of like widening that kind of spread over time. Is that, is that how you, is that sort of a distillation of how you view the business?

• 13:46Speaker 00

  It's exactly. I mean, there are a couple of different ways of coming at this and it starts with a misconception of what success looks like in our industry. For a traditional asset manager, assets under management is a really good measure of success because if you give a traditional asset manager any amount of money, they will invest it because they have the ability to simply go to the public markets and buy what exists. If you give us any amount of money, we will not invest it. We can only invest as fast as we originate, as fast as we create. And therefore, I believe that we should be judged by our capacity to create interesting investments. And I believe our capacity to create interesting investments is limited. We are not limited ultimately by capital.

• 14:31Speaker 00

  We are limited by our capacity to create. And so a couple of things come out of that. If every asset we create is what's in short supply, as a business owner, as a business builder, as a strategist, I want to make more money from each asset. So yes, I like running assets for a fee, but I also want to be a principal. I want to own the upside for as much of the asset as the market will allow me to do.

• 14:59Speaker 00

  And the more interesting thing is clients who are dabbling in private markets, who don't always have the same information that you have, who have, on a fiduciary basis or a non-fiduciary basis, asked you to manage their money, they like the alignment. There is nothing like being a partner with your clients, eating your own cooking, whatever the expression is. And so for valid strategy reasons of assets are in short supply, I want to earn more money. For external reasons, I want to be aligned with my clients. Having a big capital base, I believe to be important. And I've started saying this, you know, there's been this debate in our marketplace between capital light and capital heavy.

• 15:41Speaker 00

  I think we should be unapologetic because I look at the world that we're about to enter. And change is a constant, but this pace of change is even faster than we've ever had it. In the world we're entering, what has value? On the one hand, I think brand and reputation have value.

• 15:58David Haber?

  Agreed.

• 15:58Speaker 00

  The second thing is I believe the ability to guarantee outcomes has value. Capital is key to being able to guarantee outcomes, both for issuers as well as for people on the insurance side or the retirement income side where you're guaranteeing their insurance. So we've amassed a massive capital base and it's going to get bigger. It allows us to partner with our clients. I think that is the sweet spot of where we are in a changing world.

• 16:26David Haber?

  I know you've made the argument, you were beginning to talk about this earlier, that the sort of distinction between public and private markets is a lot more nuanced maybe than it's been projected in the past. You know, public historically has been seen as liquid and safe and private as illiquid and risky. But, you know, I saw that you recently announced you were going to do, you know, daily mark to market, you know, across a bunch of your products. I guess, how do you sort of see the democratization of private markets, you know, into the broader kind of retirement ecosystem or wealth ecosystem, you know, broadly?

• 16:58Speaker 00

  So what's happened so far is if you think about our industry, which has only existed for about 40 years in a real industrial form, the entire industry was built out of one capital source. This was the alternative bucket of institutions. And essentially, it was all in funds. It was all relatively slow moving. And yes, there were private equity funds, but then there were real estate private equity funds and infrastructure private equity funds and credit kind of private equity funds. It was all one business and it was a pretty simple business. And you did not need a lot of infrastructure because same institutions, quarterly fine. Well, there are five new markets. We serve individuals, we serve insurance companies, we serve the debt and equity bucket

• 17:40Speaker 00

  of institutions, we serve traditional asset managers, and we serve 401K. All of these other five markets want nothing to do with a drawdown fund. They live in a public world. And so the more, the notion that they are going to somehow conform to us is just hubris. We are going to have to conform to them if we want to serve them, if we want to exist in their world, but we have to also do it in a way that does not bastardize our products, that does not create unacceptable mismatches between risk and reward. And so we're starting with our investment-grade private suite of products and we will be daily estimated value by June 30. Value alone is not enough.

• 18:25Speaker 00

  We are standardized information, standardized QSIPS or ICEIDs, standardized data warehouses, market making, regular disclosure of prices, other dealers. This is about creating an ecosystem and by the end of September, this will be across the entirety of our credit business. And I believe this is the direction of travel. I've never seen a market in the world where you have transparency and price discovery that is not 10 times its size and change like everything else. It may be uncomfortable for people, but it's coming. And five other markets want it. And will it be perfect the first day? It will not. Will it get better every day? It will get better every day.

• 19:08Speaker 00

  And one day soon, maybe it'll even come for equity, but that's not this year's business.

• 19:12David Haber?

  You know, I know you've also, you know, talked a lot about, you know, maybe the press's sort of very narrow definition of private credit being kind of, you know, direct lending and BDCs, but you know. I guess, from your perspective, how do you describe kind of the broader private credit ecosystem and what separates kind of the winners from your perspective versus the rest of the market as this ecosystem matures?

• 19:35Speaker 00

  So I do think it starts with a skill set of managing a credit book because at the end of the day, managing credit is different than managing equity. In credit, you only get your principal and interest. You should not be around risk-taking as a rule. You should be fully diversified. In the equity business, you actually get paid for risk-taking.

• 19:56David Haber?

  Sure.

• 19:57Speaker 00

  And so that mindset difference perhaps is obvious, but it has not been obvious in people's actual performance and how they have constructed portfolios. The second is you need a low cost of capital or you need a variety of costs of capital. And so one of the reasons I think we've been so successful at this is we are willing to match low-cost retirement liabilities with safe, long-term yield assets. Not risky long-term yield assets, that does not belong in a regulated balance sheet. But if you think of the largest issuers of private investment grade, it's Intel, it's

• 20:38Speaker 00

  Air France, it's EDF, it's AT&T, it's Meta, it's BP Energy, and so on, and so on, and so on. And you're hearing lots of public companies. And so, public companies, and public companies' CFOs and CEOs now understand that there are three markets for financing. One is the bank market. The bank market is the best source of financing on a short-term basis anywhere in the world. A bank borrows short, deposits, and lends short. A bank is the best short-term lender. It is not a good long-term lender.

• 21:13David Haber?

  Right.

• 21:14Speaker 00

  The public market and private capital are both good long-term lenders. The public market does something very standard. If you want anything other than plain vanilla, you need to come to the private market. And if you think again about the world we're in today, when we're building a data center that is marrying energy and chips and offtake, it is anything but simple. It can be creditworthy, but it is not simple. It is not a 10-year bond underwritten by a single issuer. And so the ability and willingness to take brain power and apply it to investment grade, which itself is not a great asset management business, but we need the asset. In addition to, once we originate an asset, it feeds our third-party credit business.

• 21:59Speaker 00

  Because if we, as a large retirement services insurance company, need the asset, other insurance companies need the asset, pension funds need the asset, endowments need the asset, and individuals likely will want this asset as well. And that's what we've seen. Our underwriting risk, as principle, shows people the alignment that they need to get comfortable with these investment-grade underwriting.

• 22:22David Haber?

  You know, one of my favorite lines, and it's a bit of a metaphor, maybe, for my career, but also an investment philosophy, is that opportunities live between fields of expertise. You know, and I like kind of living at the intersections of things. You know, I'm curious. You know, maybe we'll kind of transition the conversation at some of the opportunities you see kind of at the intersection of Apollo and Andreessen. You know, Mark, our Marc, Andreessen, wrote this piece, you know, over a decade ago, that software's eating the world. And that feels more true than ever as kind of AI proliferates, you know, all parts of the economy. And as a result, you know, we're finding ourselves funding more capital-intensive businesses, right? In areas like defense, in energy, in robotics,

• 23:06David Haber?

  in manufacturing, in public safety. You know, ultimately, I think most of these businesses will need to graduate at some point beyond venture equity and likely become, and already are, you know, clients or customers of yours. I guess what do you see as the opportunities kind of between, you know, our two firms?

• 23:26Speaker 00

  Immense. There's, it's only about time in the day right now. But I'm going to first delve into this notion of intersections because this intersection notion is actually what creates value in our business. So if you think about how institutions allocate.

• 23:41Speaker 00

  Capital. They allocate it into buckets. Some of those buckets, they advise themselves if they have good investment teams. Some of those buckets, they outsource to consultants or advisors. But they're still in buckets. And so the traditional buckets are equity. What's in the equity bucket? Public equities. Fixed income. What's there? Public fixed income. Then there's sometimes a liquidity bucket, a real assets bucket, and then there's this thing called alternatives. That's been most of the world for 40 years. What do you do with the equity that is private, safe, but doesn't have a high enough return for alternatives? It doesn't have a home. It's neither, it's not public. It doesn't go into the public bucket.

• 24:26Speaker 00

  It's not an alternative. It's not high enough rate of return. But its risk reward is the best risk reward. We call that hybrid. For us, that's our fastest growing business. Again, this notion of private investment grade. Most things that are in institutions' fixed income bucket are public. Therefore, they're not a source of capital. We have been able to originate and earn excess return because private, but investment grade, is not a bucket. Now, as we get bigger and bigger, we are changing the world. And we've seen institutions adopt this notion of total portfolio approach. We've seen family offices, and we see a general migration.

• 25:06Speaker 00

  So in-between is almost always the best ask class because there is poor capital formation. Totally. And there's no one who is assigned every day as their day job for the risk. Totally. This is exactly what's happening between our two firms. Because you have an entire ecosystem, of which your firm is a major player, that has not, never been capital intensive. And for the first time, not only is it capital intensive, but it is going to be capital intensive on a scale that is unimaginable. Because the amount of money that's going to be put into data centers, into chips, into robotics, into manufacturing, into defense, is, as I suggested, every dollar since the invention of fire. That is not going to be financed with equity.

• 25:51Speaker 00

  Yep. Entirely, because that is not efficient. And the scale of it is not achievable. It is going to have to be parceled out into various risks. And that's what we're seeing happen right now. So if I look at the drivers of our business for this year, it is data centers. It is massive amounts of chip financing. And what we're doing is we're parceling out the risks. On the venture side, on the equity side, there is the fundamental business underwrite of this company or that company. And then on the infrastructure side, things that are reusable, things that have hard asset value, are being offloaded into the credit markets at the appropriate rate of return and at the appropriate risk rating.

• 26:35Speaker 00

  But I believe we're approaching a really interesting time. We've never really talked about the quantum of money.

• 26:44Speaker 00

  I think that's where we are right now. The 2025 was just proof of concept that data centers and chips and energy were all needed. 2026, the market is starting to recognize that if this continues, 800 billion of CapEx from just four public companies this year, not to mention the private, that everyone who is an investor is going to be concentrated in certain names. And we're actually going to hit concentration limits. We're starting to see this across the board. I think spreads are going to widen. I think really good entrepreneurs are going to end up in partnership with entrepreneurs of another type, those who are financial entrepreneurs,

• 27:28Speaker 00

  who help to democratize credit assets and hybrid equity and other types of things. And I don't think the imagination is going to stop at chips and data and energy. The visits I've had out to the Bay Area and to Seattle and elsewhere, robotics is a whole nother thing. The notion that once the world was able to solve the Waymo problem, which was a real problem, how do you solve a situation for self-driving in a constantly changing environment where safety is paramount and where you can't stop? Well, therefore, the equation of doing this for construction equipment should not be as difficult as doing Waymo. The equation for doing this for other types of robotics should not be as difficult.

• 28:12Speaker 00

  And we're just getting there. Why should that all be financed with equity? I mean, we have a whole market for equipment rental.

• 28:19David Haber?

  Totally.

• 28:20Speaker 00

  That is a much lower cost of capital than venture capital and a much greater scale of capital gives us and people like us diversification, gives you the appropriate amount of leverage. And the understanding of how to parcel out those risks, the trust of how to partner on these risks, I think is going to make sure that we spend a lot more time in your hometown.

• 28:41David Haber?

  Yep.

• 28:42Speaker 00

  And vice versa. And it's part of our physical strategy. I mean, yes, we love being in New York. New York has certain constraints. This is not the podcast for that. We could go off in the-

• 28:55David Haber?

  I helped open our New York office.

• 28:57Speaker 00

  The political direction. But we are committed to a second headquarters. We want access to a second talent pool.

• 29:05David Haber?

  Yep.

• 29:05Speaker 00

  And something tells me that second talent pool is going to be much more focused on change.

• 29:11David Haber?

  Yep.

• 29:12Speaker 00

  On challenger business models and on making sure we partner with the growth ecosystem.

• 29:16David Haber?

  Yep.

• 29:16Speaker 00

  The US is the envy of the world and we want to stay that way.

• 29:20David Haber?

  Totally. It's nice to hear you say that. I mean, again, people ask, it's like, are you Silicon Valley? Or are you Wall Street? Are you an entrepreneur, investor, an operator? I think the answer should just be yes. You know, like if it's too easily bucketed, it's too legible. You know, and again, the opportunities sort of live at this intersection.

• 29:38Speaker 00

  Look, for our industry, from 1990, our founding until 2008, the firm was slightly larger, but it kind of did the same thing. Almost all the firms in our industry that you know were 40 billion in 2008. And now we're a trillion dollars, others are slightly larger, slightly smaller.

• 29:57David Haber?

  Yep.

• 29:58Speaker 00

  And this is not good management. I'd like to think there was some of that, but that is not the primary driver. The answer is we're shaped by outside forces.

• 30:05David Haber?

  Hmm.

• 30:06Speaker 00

  And those outside forces coming out of the great financial crisis to moving into COVID, moving into the change in rates, moving into the product proliferation. Okay, what are the outside forces now shaping our industry? Well, they're primarily coming from the shift in the economy.

• 30:22David Haber?

  Hmm.

• 30:23Speaker 00

  We operate under the assumption that every job is going to be replaced or enhanced, every single job.

• 30:30David Haber?

  Hmm.

• 30:32Speaker 00

  And I think that's what is going to happen. I mean, a world where GDP grows, where profit margins grow, where wages grow, but where employment does not, maybe is okay.

• 30:43David Haber?

  Hmm.

• 30:44Speaker 00

  Maybe that's the consequence of having an older workforce or not having as many workers per retiree or not having as much immigration. How we balance this as a country, how we balance this as a world, how we balance this as a city, I think is going to be the interesting challenge.

• 30:59David Haber?

  Totally. You know, a lot of our audience, you know, obviously are entrepreneurs kind of in the tech ecosystem, you know, many of whom maybe haven't had experience working with Apollo yet. You know, how should entrepreneurs listening to this think about when and how to engage with you?

• 31:15Speaker 00

  Early and partner-like. I mean, this is who we are. The ability and willingness to focus on any one transaction for an entrepreneur is just about the two resources we have, time and money.

• 31:26David Haber?

  Mm-hmm.

• 31:27Speaker 00

  And of those two, time is the one that is in shortest supply right now. And so the ability to engage us and to paint a picture of not just where you are, but where you're going and how we can win together, I think is where the world is going. And this is happening in places that require specified knowledge, defense. We're spending an awful lot of time.

• 31:51David Haber?

  Yep.

• 31:51Speaker 00

  You do not get to come out and just show up in defense. You have to know a lot about the ecosystem, the environment and everything else. But it's also showing up in the whole notion of capital being limited.

• 32:02David Haber?

  Hmm.

• 32:04Speaker 00

  Great entrepreneurs who have created things of value have had a choice historically, which is wait to the public markets as their exit. Now, the world is changing so fast, maybe what they want to do is to have an interim private liquidity event where they then get to recycle their capital back into the much higher rate of return and participate with the private capital event going forward and eventually getting to a public exit or getting to a full monetization. We're seeing all different manner of this take place across our ecosystem. The number of partnerships, I believe, that are going to sprout up, whether it is the OpenAI ecosystem that they're building to be able to democratize their LLM, or is it

• 32:45Speaker 00

  the Anthropic ecosystem that is being built to democratize their way of doing things? I think it's the beginning of the proliferation of growth and finance partnerships.

• 32:58David Haber?

  Awesome. I'm curious to dig into maybe the value or kind of residual value that you see kind of in this world of AI. You know, there's been kind of the SaaS apocalypse. You've been saying for months that a lot of the real problem in direct lending has been overexposure in enterprise software and that ultimately AI is going to keep hurting that kind of book of business. I guess where are we now and where do you think we go from here?

• 33:25Speaker 00

  I think there's no going back. I mean, and this is our bias and this is not exhaustive across the board. It does not apply to every company. But the notion that we woke up eight, 12 weeks ago and figured out that AI was going to impact enterprise software, really?

• 33:44David Haber?

  Right.

• 33:45Speaker 00

  Like, how could we, as responsible credit people, do this? Or as responsible investors? And so the focus so far has been on credit. That's the most visible. That's where the press is focused. And if credit is problematic, that means the equity is really problematic.

• 33:59David Haber?

  Totally.

• 34:00Speaker 00

  And 30% of the private equity industry over the past decade has been devoted to enterprise software. I personally expect the returns from private equity in the ground. To be disastrous. Because so much of exposure is to enterprise software. And this does not mean that enterprise software companies are going out of business, far from it. It means that the prospects of on-selling it, either to the public markets or to someone else, are now simply reduced. Just because the prices that they paid were too high and... The price that they paid reflected a future that did not have AI in it, and now there's AI in it. Yep. So there's a competitor. And again, it doesn't apply to every company. It doesn't apply to every situation. But the scale of change is just off the charts.

• 34:44Speaker 00

  And if people who are not as tech-focused are seeing this in their business day to day, you know, I think about how we run the business here. Everyone at Apollo can envision how their job they do currently can change with the benefit of AI. Mm-hmm. A handful of people can actually envision, when data and software become free, how the business should exist versus how it does exist. Well, there's still yet another part of this, which is, how do you envision how you start new businesses? The cost of starting a new business, the velocity of starting a new business. We've seen more business startups than ever. Totally. Because challengers now can start from a much different place.

• 35:28Speaker 00

  This is why we're tired as well. It's why we're tired, which is, we have to be established companies, including companies that are successful like ours. We have to be really paranoid about replacement risk. But change is taking place faster in places there are a right answer. So why do we see coding and software? Because at the end of the day, the AI can check whether the AI is right. So the rate of change is a vertical line. Totally. And that's what we're seeing. On the other hand, if you want an answer to what is the best Shakespeare essay, we're seeing improvement, but someone has to inform, there's no right answer. What is the best Shakespeare essay? And so we're going to see change, but not that same rate of change.

• 36:12Speaker 00

  This describes our business world perfectly. In some things that have a right answer, accounting, trade ops, a number of other applications, we are going to see replacement.

• 36:24David Haber?

  Yep.

• 36:25Speaker 00

  On the other hand, in things that require judgment and know-how, we're going to see augmentation or enhancement. Is this a permanent state of events? No, because none of us know how this ends or how good the judgment will eventually be. So we need to continue to be paranoid, to continue to be change-focused. But for the near term, I'm very bullish on businesses that adopt change and have a change mentality. I'm actually very bullish on wages. And I think we will see a cycling in employment. What I've said previously is I think we're going to see a little bit of blue-collar ascendancy and white-collar decline. And I think that's going to be a difficult spot for politics, which has not operated with that notion historically.

• 37:10Speaker 00

  It's going to be a difficult thing for blue cities where much of this white-collar employment is focused. But the faster we get on with this and create the new businesses, the new industries, which historically has always been the case, the better off everyone is going to be.

• 37:24David Haber?

  I guess even kind of stepping back, you know, as a lender, you know, how has AI shifted your perspective of, you know, the type of collateral you're willing to lend against or, you know, what sort of predictable cash flows look like, you know, given things are changing so quickly?

• 37:40Speaker 00

  So a lender, with the lender's hat on, we've always had that mentality, which is change is a constant. If I go back and I think about the year 2000 as a dividing line, people were worried as to whether the entire digital infrastructure of the US would fall down on Y2K. All right, we survived.

• 37:56David Haber?

  Yep.

• 37:57Speaker 00

  But you go from there, in 2000, the market was still lending against something called Yellow Pages. How could a Yellow Pages be replaced? After all, it was free, it was granular, it was ingrained in culture. In this year's associate class, I use the term Yellow Pages, and people raised their hand, they want to know what it was.

• 38:14David Haber?

  Yeah.

• 38:15Speaker 00

  And so, but it doesn't stop there. The value, TV stations and radio stations were once thought to be massive franchises. They're diminished. Other forms of content have come along and replaced them. They haven't disappeared, but they're diminished. Cable television was in part the successor. That's now been replaced.

• 38:34David Haber?

  Yep.

• 38:34Speaker 00

  Satellite television's been replaced. Mobile telephony's been replaced. Fiber's been replaced. You just look at the cycle of change. As a lender, you know this. You are diversified. You are senior where you perceive risk. You look for a hard collateral. And you accept that you can't make a decision for 20 or 30 years. You can make a decision for three or five or seven years. And what we're doing. There are good lenders, of which I think we're one. There are bad lenders. There are good banks, there are bad banks. There are good insurance companies, there are bad insurance companies. Credit is a skill.

• 39:07David Haber?

  Mm-hmm.

• 39:08Speaker 00

  And is not a skill that everyone possesses.

• 39:10David Haber?

  Yep. So I want to kind of shift the conversation in a slightly different direction. Really to moral leadership. You know, one of the things that I've admired about you is just how passionate you've been about fighting antisemitism. You know, obviously, this came to a head after October 7th, you know, and at your alma mater. I'm curious how you thought about, you know, being so vocal with the university leadership kind of in that moment.

• 39:40Speaker 00

  Well, if I had thought about it more, I might not have done it. But I am a passionate person. But I will say, the whole thing struck me as just incredibly unfair and incredibly ill-advised.

• 39:52David Haber?

  Hmm.

• 39:53Speaker 00

  What we were watching was not free speech. We were watching favored speech, preferred speech. And in the initial foray with the university that I had ahead of their Palestine Rights Conference, I wrote to the president of the university and I said, "I'm a free speech absolutist. I believe this conference should go forward. But the university, as a 300-year-old moral institution, is funding it, promoting it, requiring students who are Jewish to attend it during Jewish High Holidays. And you've outsourced the ownership of this conference, which had gone on for many years, to a known Hamas sympathizer and terrorist sympathizer."

• 40:34Speaker 00

  Other than that, I was fine with it. Right, right, exactly. And the inability to reflect on the role of a university in society. What is the role of a university in society? And too many times, the question was amorphous. I don't think our president at the time knew what the role of a university in society was. Is it academic excellence and research? Or is it social change? Right. And if it's social change, who's social change? Right. Is it her social change? Is it what the trustees decided? Is what the faculty decided? Was there a vote? No, what had happened in our university is we had had this us versus them,

• 41:18Speaker 00

  this anti-Americanism, anti-capitalism, anti-merit on steroids. Israel, Palestine is not fully an anti-Semitic issue. And that's not what I saw at these universities. I saw it as an anti-American, anti-system issue. And so when it persisted, I believe that we should not support those things that violate fundamental moral principles. And I said so. Yep. Turns out, a lot of other people felt the same way, even if they weren't saying it. Vast majority of donors decided to give the university a dollar per year versus whatever their donation was. We got the university's attention. Yep.

• 42:03Speaker 00

  Ultimately, the public voila at testimony in DC, where the inability to actually call terrorism, you know, murder Yeah, and not just as reprehensible was too much for the public to bear and for the powers that be to bear. And ultimately, the chair and the president of the university resigned. But we're seeing that in a lot of places in society. Yep. We saw it in our business community. We saw people fall on the DEI sword in some instances or on the climate sword. People became absolutists. And when I took over in 2021, one of the things I said is,

• 42:45Speaker 00

  I want to be able to say the same thing in Texas as I say in California. It's too hard to remember a story. Sure. I would rather just be who I am. And so if you look at what we did in climate, One rule, make it better, not worse. That's it. That didn't work for some absolutists. Okay. We are who we are. We're gonna do what we're gonna do. We're gonna make it better, not worse. Yep. On the employment side, the notion that we would either admit people to an institution of higher learning or bring them into the workforce based on immutable characteristics sounds as anti-American as I could possibly imagine. I agree.

• 43:29Speaker 00

  And it never made any sense. And yet, the business community adopted it, not us. Yep. We've stuck with the same formula. We hire for merit, adjusted for distance traveled. And distance traveled is not about your immutable characteristics. It is about you as an individual, not your class, not your group. Show me the kid, show me the individual who's had to overcome something and still achieved. Totally. That's who I want. Totally. That's who we should want in our universities. That's who we should want in our companies. That's who we should want as our entrepreneurs. That's who we should back. This is not about concentrating power in an elite. This is about democratizing that, but also not destroying the notion of what I think

• 44:13Speaker 00

  makes this country great, which is everyone has a shot at it, not based on your skin color, not based on your religion, your sexual orientation, your country of origin, or any other immutable characteristic. We don't treat you as a group. We treat you as an individual. Apparently, that's controversial, by the way. It shouldn't be. Apparently, it is. But I think that whether the team here agreed with what I did at UPenn or not, whether the team agreed with the climate or not, whether they agreed with what we did on employment or not, a resounding amount of positive feedback on moral leadership. And it's one of the principles that we have at Apollo, which is we do right over easy.

• 44:59Speaker 00

  It was easy to have said, no carbon. Or said nothing. Or said nothing. It was hard to have said, we're gonna make it better, not worse, but if that includes financing hydrocarbons, we're gonna finance hydrocarbons. Yep. And it was easy to have said, yes, we're gonna sign up for this metric or that metric. And it was harder to have said merit plus distance traveled. Totally. But I hope that this is now. Ingrained in our company. And it hasn't been cost free. But I don't think it should be cost free.

• 45:31David Haber?

  Sure.

• 45:32Speaker 00

  But on balance, I would do it all again in exactly the same way. I think it does set us apart and we're not the only company who does it.

• 45:41David Haber?

  Yep.

• 45:41Speaker 00

  There are others out there who do it. But anytime you raise your head above the parapet, there's a cost to doing it. But how many of us get to do this?

• 45:51David Haber?

  Yep.

• 45:51Speaker 00

  It's something I said to Mark when I, and recently when I visited him. We are the luckiest people in the world. We've achieved all we've ever wanted to achieve. It's not about money. It's now going not from success to success, but from success to significance. What can we do to change the world? We've been given an opportunity. We can play golf. I don't know. It's not going to work for me.

• 46:15David Haber?

  Yep.

• 46:15Speaker 00

  We can, you know, do whatever else is expected of us, or we can actually lead.

• 46:20David Haber?

  Totally. I think it's a very natural segue into culture here at Apollo. How do you view Apollo's culture? You know, I know playing to win is kind of one of the core ethos is. And how do you sort of maintain that entrepreneurial culture, which you've described throughout this conversation? You know, as the firm kind of continues to scale?

• 46:36Speaker 00

  It's, it's the best question of the day and it actually is what occupies most of my time. So the greatest amount of effort of any project we've done in the past year has been on culture. And it's been to answer a simple question. What makes Apollo Apollo? And the good news or bad news, it's been a six month negotiation. Because if you think about what's happened, when we were a small firm, the culture was one culture. Everyone was brought up, everyone was on boarded in the same way. It was all visible. It was pretty straightforward. At 4,000 people in asset management and 2,000 people in retirement services, we now have to be really deliberate. Plus, I'm going to do this for a long time, but I'm not going to do this forever.

• 47:21David Haber?

  Yep.

• 47:21Speaker 00

  As a founder, I get some amount of leeway on culture. But I want to make sure that we are intentional about what we're doing. And so if we hire you as a young person, we teach you the business and we teach you the culture and we do it really well. But if you are the 15 year person from another firm coming in to help augment our skillset and there are now 500 of you. How do we teach you our culture? We know how to make you successful commercially. And if you work for me, you learn the culture one way. If you work for John Zito, another way. Jim Zelter, a third way. Scott Climon, and so on, and so on. And so we've had a six-month negotiation over what makes Apollo Apollo. And that negotiation is reflected in a work product.

• 48:06Speaker 00

  That work product is now on our website under employment. It asks the question of what makes Apollo Apollo? It is really controversial and it is really honest. And it's meant to be that way. It is, if you're thinking about coming to work here, make sure this is for you. And if you're already here and trying to figure out what our cultural norms are, this is for you.

• 48:27David Haber?

  Totally.

• 48:28Speaker 00

  And now it's up to us to hire this way, review this way, promote this way, onboard this way.

• 48:34David Haber?

  Totally.

• 48:34Speaker 00

  And do it. But while there are six principles, it does come back to playing to win.

• 48:42Speaker 00

  And you see this now, I'm sure in all the growth companies. How do you keep a company that's been really successful hungry and playing to win?

• 48:51Speaker 00

  Most companies hit an arc.

• 48:53David Haber?

  Yeah.

• 48:54Speaker 00

  And then they decline to mediocrity. Some actually descend into chaos.

• 48:58David Haber?

  I saw your graphic of Blockbuster and like Mason.

• 49:01Speaker 00

  Look, those are the obvious ones. But most companies, the leadership, the senior team, you know, in the Steve Jobs world, they say they mistake the product for the process. They think the process is what got them there.

• 49:13David Haber?

  Yep.

• 49:14Speaker 00

  In our world, the ability, the desire to win starts becoming overwhelmed by the fear of losing. People are afraid to make mistakes. And so how do we teach this? Well, we basically say, even for me, I'm right 60% of the time, max. I fail quickly and fix it quickly. You do not get fired here for making a bad decision. You get fired for not recognizing it or not owning it and not fixing it. We have a wall of shame. Every senior professional here has lost money for the firm. If you haven't, you're just not doing enough.

• 49:52David Haber?

  You're not taking enough risk.

• 49:53Speaker 00

  You're not taking enough risk, or you haven't done as much for the firm. And so we've normalized the notion of winning as a team and losing as a team. We keep moving people around. We have a culture that is clean sheet thinking. We have a culture that supports you through the moments in your life. But there's no one answer.

• 50:10David Haber?

  Yep.

• 50:10Speaker 00

  You have to live it every day. And what's interesting is it's internally, this is really well known. And people come here and they're like, oh, my God, this is amazing. We're so happy to be here. Externally, it's really hard because we've gone from a world that was very media resourced, where they really understood the companies and they lived with us for 18 years as a private equity firm. And we're said, you know, you have sharp elbows, you do this, you do that, you do the other thing. Well, okay, that may have been true. You might want to revisit the firm 20 years later and actually do it. And they are without resources to do it.

• 50:51Speaker 00

  So part of it is to overcome the stereotypes that fit with our industry. As you started.

• 50:58David Haber?

  Yep.

• 50:58Speaker 00

  Private equity is an amazing business. It's now 100 billion of a trillion 50.

• 51:03David Haber?

  Right.

• 51:04Speaker 00

  In five years from now, it'll be 100 billion of a trillion four, a trillion five, whatever the number is. It's still going to be the most important business from a generation point of view, from an idea point of view, from a change agent, from an impact. But boy, there are a lot of other things going on here. Maybe it's worth a look.

• 51:23David Haber?

  Totally.

• 51:23Speaker 00

  This culture project incredibly fun, too. And now it's about bringing it to life.

• 51:28David Haber?

  Totally. No, and as I was reading the document, I saw a lot of similarities, you know, between our two firms. You know, again, we've kind of approached the world from very different places. But I think it's one of the reasons why I've always admired Apollo. It's just sort of the notion of building a firm more than running a fund. Something I, sort of a contrast that I draw often as well.

• 51:46Speaker 00

  It's what's happening. We are building a financial institution. And if I characterize our industry, we all started as private equity firms. And then we decided to do some real estates, but it was really real estate, private equity.

• 51:58David Haber?

  Right.

• 51:58Speaker 00

  And then we did infrastructure, private equity.

• 52:00David Haber?

  Right.

• 52:01Speaker 00

  And then credit, private equity.

• 52:02David Haber?

  Right.

• 52:03Speaker 00

  And almost every firm in our industry has stopped there because the amount of wealth that's been amassed is off the charts. It's been a really good life. And if you're not building something to change. Why aggravate yourself?

• 52:14David Haber?

  Mm hmm.

• 52:15Speaker 00

  A next group of companies has aggravated themselves somewhat by saying, oh, let's serve the retail marketplace and has developed strategies and infrastructure and technology to do that. And most firms are stopping there.

• 52:26David Haber?

  Yep.

• 52:27Speaker 00

  For us, we're looking at the world and saying, the world is short retirement income. The world is going to need more retirement income. The world is going to need a better source of financing for this global industrial beneficence.

• 52:38David Haber?

  Yep.

• 52:38Speaker 00

  Let's build the structure, the products, the infrastructure to do it. It's what drives us to enterprise, to daily pricing. It's what drives us to market making, which what drives us to innovation. I don't think the next five years are going to be passive. I think the firms are going to look more different five years from now than the last five years, which has been a tremendous amount of change. And so a culture that not only has the characteristics we've already talked about, but a culture that adapts, a culture that knows that change is coming, that accepts that change is coming, where people move around and do different things, and just the way you have and others have in your organization, that's what we strive for.

• 53:18David Haber?

  Totally. And I guess, you know, maybe you've answered this, but if you look out 25 years from now, you know, you're going to be doing this, maybe I'll say 40 years from now, because you're going to be doing this for a long time. What's the part of kind of Apollo's culture that needs to survive you? What is the core piece of the business that you want to kind of remain the same?

• 53:36Speaker 00

  Look, it's, there's a bunch of elements to this. Clean sheet thinking. Let's not try simply to improve. Let's ask the question of what the right answer is. Informality. Informality in terms of intellectual insubordination, which I contrast with real insubordination.

• 53:54David Haber?

  Sure.

• 53:55Speaker 00

  But an environment where the right answer wins, where we can treat each other as humans. Moments that matter. This is a lifetime job for people. The business ultimately runs on experience. And that only lasts if your partners stay with you for their entire career. If they're going to stay with you for their entire career, we have to recognize they're going to have, outside their careers, a bunch of happy things that happen to them and a bunch of sad things for them. How we deal with people in these moments that matter?

• 54:26David Haber?

  Hmm.

• 54:28Speaker 00

  At 4,000 people, at 6,000 people, 2,000, it's really important. It actually is almost more impactful than anything else we do. And so, yeah, let's be really intellectually engaged. Let's have a challenge culture. Let's be really informal. Let's get to the right answer. Let's accept that the power hierarchy is at risk with technology especially. But let's also be human. Let's deal with people as people. And how you balance those two and how you put them together, I think is the magic. And the team that's around me, I wouldn't trade for the team anywhere. Maybe it's just because we know each other, but I really do think they're exceptional. That's awesome. Mark, thank you so much for joining us. It's an absolute pleasure.

• 55:13Speaker 00

  Thank you so much.

• 55:16Erik Torenberg?

  Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or a review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our Substack at A16Z.substack.com. Thanks again for listening, and I'll see you in the next episode.

• 55:42Erik Torenberg?

  As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com/disclosures.