E434: Warren Gibbon on How AI is Changing the Private Markets

Are private markets still positioned to outperform public markets? Warren Gibbon is a Multi-Family Office Chief Investment Officer with deep experience across asset allocation, equity research, and portfolio management. We discuss why investors may need to re-underwrite their assumptions about private markets, how higher rates and growing competition have changed private equity, and why public-market earnings growth may be underappreciated. Warren also explains why he is more constructive on venture, what he looks for in emerging managers, the risks created by passive investing, and how he would deploy $100 million of fresh capital today.

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

• 0:00David Weisburd?

  When you look at these companies plowing in these massive amounts of earnings into infrastructure, specifically data centers, what do you think about that?

• 0:10Speaker 01

  If you add up hyperscale investment this year, it's around 70% of total corporate US capex. It's an enormous number and it's probably going to increase next year, too. What I do wonder is that beneficiaries of the AI infrastructure to spend, chip companies, memory, I'd be careful about underwriting that. There's a massive bifurcation in venture where 12 firms are accounted for about three quarters of the fundraising this year.

• 0:34David Weisburd?

  You are not bearish on private equity today. Why? Most investors today still believe that the private markets will outperform the public markets. What do you think?

• 0:45Speaker 01

  I think investors today really need to take a hard look at that thesis. When I look at private markets, a lot of the data that people focus on is data that is really over the last 20 years, really over the last, say, 40 years. And one of the biggest things that happened in that period, as we all know, is we had a period of declining interest rates, which acted as a strong, I think, tailwind to returns. And more than that, we're looking at a period where equity markets had some volatility. I mean, one example I can give you is I've seen quite a few studies looking at the period 2000 to 2020, that 20-year, two-decade period. And obviously, you're really comping off an equity market that was very overvalued in

• 1:30Speaker 01

  2000 and then subsequently had pretty poor performance. Today, my number one recommendation for investors and how we're thinking about it here at BFA is re-underwrite what you're thinking as regards private investments, why you think it makes sense today, and really getting back to a first principles approach, which is what are my underlying securities? What are my underlying businesses I'm going to own? Why are they going to increase in value? Because if you're looking at the past and saying, that's what I hope is going to happen, I think that's going to be a disappointing strategy.

• 2:02David Weisburd?

  What's changed over the last five years?

• 2:06Speaker 01

  One is a real plethora of new players and the amount of capital that's gone into these markets is obviously very significant. One of the beliefs I have in investing is large sums of capital coming in is antithetical to go-forward returns. It gets much harder to generate the returns you kind of hoping for. When you think about the endowment model, which was popularized by Swensen and others, one of the reasons why it was so successful is that you had, they were the first movers in that thesis, you had an inefficient private market, you had a lack of sophistication to how you can create value.

• 2:47Speaker 01

  At the same time, you had some great tools in the toolkit to increase value at companies. You had the benefit of declining rates, which meant you could put more leverage on these businesses. And you had a lot of wind at your back. And so the amount of capital coming in was also driving returns, I think. And so now we've got a lot of capital in place, more firms chasing the same amount of deals. And you can see that most clearly in just multiples, right? We're looking at, let's say, 12x EBITDA for a typical middle market buyout. A few years ago, that was eight.

• 3:28Speaker 01

  Now, declining corporate tax rates have justified some of that expansion, but it is very tough today. And to underwrite the same kind of returns, you have to make some pretty aggressive assumptions. And that's what we do challenge GPs on today. They're going to be forced to really focus on the operational side, which a lot of them say they do, but I think we need to see more of that.

• 3:51David Weisburd?

  On the public markets, the multiples have also gone up.

• 3:54Speaker 01

  Absolutely, David. And I think if you think about what many large investors have, they've really adopted the endowment model, they've increased their allocation of private markets. And as we've got further into this decade, I think we've seen the fact that one of the corollaries of that is that investors have really underestimated the value generation of the public market. And yes, multiples are high, but the thing I think people are still really struggling to appreciate is the immensely powerful combination it has been for large tech public players to combine revenue growth with very, very strong profit margins and free cash flow generation.

• 4:39Speaker 01

  Today, that free cash flow has been used to fund the AI infrastructure to build out, and we can talk more at length about that. But investors have really underestimated. If you go back, David, to the middle of the last decade, we were coming out of the great financial crisis, we kind of had a jobless recovery, things didn't feel great, the economy was doing okay, but people were not particularly positive on the equity market. The valuation was somewhat high, it was unclear what the next real driver of Google and Meta were, were still relatively young companies, software was having a big change. And this has really been a game changer. And if I think, bring it right up to today, S and P earnings in the second quarter are up 29% year-over-year.

• 5:22Speaker 01

  Tech earnings are up 50%. And even outside of that, the rest of the S and P earnings are up 19%. So we have an earnings boom right now. And so if you just think about that, are we seeing the boom in earnings power of middle market buyout companies? Probably not. One area we are seeing a boom is late-stage venture tech, right? Some of those companies are doing fantastically well. That's been a great story. But that's one of the corollaries of the endowment model. I think investors have kind of missed what's happened in the equity market, and so have some public equity investors as well.

• 5:59David Weisburd?

  I want to get into private equity and venture capital in a bit. But first, you come from the public investing side. That's where you built your career. When you look at these companies plowing in these massive amounts of earnings into infrastructure, specifically data centers, what do you think about that?

• 6:21Speaker 01

  That's a great question, David, and we've debated that a lot internally. For us, we're more in the believer camp. I think there's three camps of investors right now. There's believers, there's sort of AI skeptics who think this is sort of a house of cards, and then there's just folks that don't really know what to think. I think right now, it does give me a lot of pause, the amount of money that's been invested. When you think about just the hyperscale investment today, if you add up hyperscale investment this year, it's around 70% of total corporate US capex. It's an enormous number and it's probably going to increase next year, too. The source of this is the free cash flow from those big tech companies, and that's being eroded, which in generally, if we look back in time, as you know, anytime you've

• 7:03Speaker 01

  seen these big capex booms, it has really been followed by some kind of bust, whether it's railroads, whether it's internet, more recently, the late 90s. And so I think we're right to be cautious here, be concerned about this. What I do wonder is that the beneficiaries of the AI infrastructure spend, so chip companies, memory, that I'd be careful about underwriting that, right? Because tech, well, there's so much incentive today to find better, more efficient ways to do things. And so that's something I'd be questionable. But I think the hyperscalers, my view is that they're in a very good position. And we saw that in the second quarter with hyperscale revenues were up 50% year-over-year.

• 7:47Speaker 01

  And they're really cementing themselves. They're right in the middle of everything we do and around AI. So however AI plays out, they will be in a good position. I think the broader question for public equities and private companies too, both private equity and venture, is how do we use AI? Revolutionary technology and what are the implications? What are the applications that we really haven't seen yet, haven't really probably thought of that in 10 years from now, 15 years, 20 years from now, is going to be changed kind of the way we do business in whatever sector? I think that's the thing that investors should be thinking about.

• 8:25David Weisburd?

  This episode is presented by Juniper Square, the operations partner for private markets.

• 8:32David Weisburd?

  I think the unknown variable is how far on the S curve we are, how much AI is going to really improve. There's a lot of views on that. Some people believe that we're going to have ASI, superintelligence, meaning that AI will be smarter than the entire collective intelligence of human beings. That's probably the most extreme view. And there's everything in the middle. But one of the things that's missed is that even if tomorrow China, US, and other countries decided to halt AI development, there would still be significant economic growth, just based on the models that are out there today.

• 9:05Speaker 01

  I completely agree. It's right to be skeptical on how AI is changing everyone's lives. I'm sure everyone listening and in their private conversations with friends and family is debating that. It comes up all the time. I've kind of resolved with some of my friends, I'm not going to talk about AI because we kind of default to that on every conversation. But I think that I do subscribe to the view that in the same way the internet and the digital transformation played out, we didn't really know all that we could do from our phones in 2004, 2005. And the same thing will happen here. I mean, I just think of the market for insurance, the way we purchase insurance policies and

• 9:48Speaker 01

  the way that gets plans acted. I mean, that is one area that could be completely revolutionized through AI agents, you know, doing that for you, essentially. We have a lot to navigate between there and here, which is around security, around how this all works. So there's a lot to be done, but I do think there's a lot of potential.

• 10:11David Weisburd?

  I want to get back to private equity. You are net bearish on private equity today. Why?

• 10:16Speaker 01

  What we see is unfortunately for GPs, a tougher environment. And that comes from the fact that real interest rates today are higher than they've been, and they're likely to move higher. In the last few days, we've seen high yields on long-term debt. And we'll see how that plays out. But clearly, that's a headwind, right? It's increasing the cost of leverage. It's increasing the discount rate on future earnings. So long-duration growth assets are going to be, you have some headwinds there. Going back to AI, it's both a threat and a potential beneficiary. I mean, I can see a world where companies could be revolutionized by the application of AI technologies, both on the revenue side and on the cost

• 11:00Speaker 01

  side. In a similar way that, say, outsourcing was in the 90s, or the digital transition was in the 2000s. The problem is that it can be very disruptive, as we've seen that now with software, right? Enterprise SaaS businesses. To be clear on that, I actually think some of those companies are going to be just fine. But

• 11:27David Weisburd?

  Oversold.

• 11:27Speaker 01

  A little bit. Yep. But clearly, there's a risk for disruption. So how are GPs navigating that? It's difficult, and it's going to be case by case underwriting. That's one thing that I've realized is that there is no substitute right now for really getting in the weeds, figuring out company by company what the thesis is. Because you could have two similar companies, similar kind of applications in different verticals. One could be great, one could be just replaced. So that is a tough, tougher environment. So overall, we remain cautious. That's not to say we're not allocating today, but we are. We just want to make sure we were re-underwriting everything, you know, in a kind of a rifle

• 12:11Speaker 01

  shot approach, rather than we're just filling an allocation sleeve with strategies.

• 12:19David Weisburd?

  When I look at private equity, and I want to figure out which managers are going to do well, you have to go to the underlying companies. So in many ways, a fund is just a wrapper on a portfolio of companies. So the question becomes which companies are going to do better and which companies are going to do worse post-AI. And I think it comes down to both the industry and the sector, but also a lot of times to the management. In other words, are the management integrating AI and will be the disruptors? Or are the managers not integrating AI and will be disrupted? And I think we're going to see a lot of consolidation across the field. One early example of that is Thrive Capital. They're doing this roll-up of CPAs, and they're making everything AI-generated. And obviously,

• 13:02David Weisburd?

  roll-ups in general have some favorable economics, but when you integrate technology into it, it's a whole nother game. And I think we're going to see a lot more roll-ups, a lot more consolidations in sectors that previously were highly fragmented.

• 13:14Speaker 01

  I completely agree with you, David. I think that's the right way to think about it. As an investor and as a GP, you have to have thesis around AI that is, these companies are going to be the winners of that process. So I think that the strategy that the Thrive team had there makes a ton of sense. And AI, we know, is most powerful in scaling a repeatable business process that needs a lot of data. And that accounting clearly is one of those areas. So I think that is what investors should be focused. I mean, we think healthcare

• 13:53Speaker 01

  is a sector that is also ripe for the application of AI. You know, we can debate, that's a whole separate podcast perhaps, but just, you know, the amount of money this country spends on healthcare versus healthcare outcomes, there's a lot of potential there. And so we'll look into some of those opportunities today. But it is about that. It's not about we're just going to buy a basket of businesses that are pretty well-run, and we're going to make some improvements, and we're going to end up selling it to another private equity company in five, seven years. I mean, that has worked. There is still a lot of capital on the sidelines, but I don't think that's what you should be underwriting today.

• 14:30David Weisburd?

  Going to the GP level, I had Thomas Scriben, head of private equity at University of Pennsylvania, and he had just invested in a manager, three former Palantir engineers, and they would be deployed into their portfolio companies. So they would be FTEs, literally deploying themselves. It's not the most scalable model, but I thought it's one of the most fascinating models. Have you seen any innovative GP models on the private equity side?

• 14:54Speaker 01

  We've seen one that we're actually invested in, which is similar to that, which is actually going in and fixing businesses in the software space and really taking over the business and operating the business. And I think they've got their hands full with what's happening in the software sector, but that is real operational. That is getting in there and changing the business, changing how a business develops new product, how they implement that, how they go to market, everything. I think that is what it's going to take, to be honest. It isn't going to be enough to say, we sit on the board and we make good recommendations and we hold management to account. That, I think, is going to be a risk. And so I do think it requires that kind of input.

• 15:37David Weisburd?

  Reminds me of a quote by Dr. Alex under Wisner Gross, which is, if you're not at the table, you're on the menu. There is no hold. In a world of AI, there's either disrupt or be disrupted.

• 15:48Speaker 01

  I think that's right. And it's a little bit scary from an allocator point of view because venture, maybe we can say we're a venture, but, you know, that is in the epicenter of this, right? Tech investments, you could have invested in a company three or four years ago with a great software application, with a great tool, and that's maybe looking less compelling today. You know, I always ask about GPs this. I say, how are you actually thinking about that today as you think about investing in a business? Is this going to be able to withstand some of the threats down there? And it doesn't mean, well, we do nothing, because that's the other mistake GPs will make, is they'll be too conservative, maybe. But that, I think, is the right way to think about it.

• 16:32David Weisburd?

  Speaking of venture, I've had a couple of guests on the podcast, Footwork and Early Bird, that are now redesigning themselves as AI-native. Footwork is a young firm, so they actually did this from the very beginning. And they have heads of AI, they have agenda, they have teams, managing agents, and they have all these new workflows. Do you see new workflows coming up in your venture managers as well?

• 16:56Speaker 01

  Yes, I do. I mean, certainly around diligencing businesses, getting to know startups are out there, widening the aperture, getting up to speed quickly, understanding a vertical. Because I think the way we've been thinking about it is, when I was at an AGM recently, outside of the very big names that we all have heard of, and by the way, obviously, as you know well, David, there's a massive bifurcation in venture, where I think, you know, so much is at the top end today. I think was one stat I saw, you know, 12 firms are accounted for about three quarters of the fundraising this year. So, but outside

• 17:35Speaker 01

  of that, smaller managers or who aren't focused as 100% on AI or AI infrastructure, I think there's an emerging opportunity there. What you find is it's businesses, startups, who are really attacking a very, very specific use case. One example is in the global logistics business, where you're really trying to optimize container rates and shipping rates. There's only a few companies that really will see the value from that, but they are seeing value there. There is real value. That can be a good strategy, but these aren't going to be 100x returns, right? These are going to be solid returns. And so for those

• 18:15Speaker 01

  GPs, if that's what you're doing, you're not attracting the next big-name startup out of the valley, it's more of a very specific use case, that's, again, that's hard work. You've got to do that, replicate that quite a few times. And so I think there's something there.

• 18:36David Weisburd?

  As we mentioned, you're net bearish on private equity, but you're more bullish on venture today. Why?

• 18:42Speaker 01

  Venture's always difficult because one of the things as an investor that I've appreciated in my career is that human beings are not good about really thinking about the long-term. Just the way that we're wired. And venture is such a long cycle business, as you well know. Obviously, even five years into a fund, you can legitimately state that it's too early to really ascertain.

• 19:10David Weisburd?

  You still don't know what quartile they're in.

• 19:12Speaker 01

  You still don't know.

• 19:13David Weisburd?

  Typically, it settles in about year seven.

• 19:14Speaker 01

  Yeah, exactly. And so really, what you're asking the investor to do is say, I'm going to commit this capital. I don't really know what kind of world we're going to be in seven years from now, but I trust you that you can build these companies and that we're going to have some great outcomes. And that's a leap of faith. And the data today shows that, it's better than I do, that it really is the top eight, nine, 10% of outcomes that really drive returns across the space. The rest of the investments are net to kind of a 1X, let's say. I think a couple of things come from this.

• 19:58Speaker 01

  One is, there's an LP today, and this is where you've done a lot of work on this to show that it really does matter what firm, because those top firms are driving the bulk of those big outcomes. And so I think I have a lot of sympathy for that view. You really need to be in those kinds of firms because they have the brands to attract the best founders. And those founders believe that they want those investors on, you know, with them. The one assumption you have to make, though, is that the next 20 years is going to have the same dynamic, that those big companies are going to get very, very big.

• 20:41Speaker 01

  And this transition we've had, or this change where companies are staying private longer, they're growing much, much bigger, they're coming to market later, you know, how is that going to play out? I don't think that's quite played out just yet, because I think there is a question mark in my mind around what public investors will pay for a company that is further along in its growth track. Let's say Google, you know, when it IPO'd, obviously had a ton of growth in front of it. So I think that's a question mark there. So I think people need to spend time there.

• 21:22Speaker 01

  And then I think, as kind of we alluded to earlier, that you've got this, you know, you can see it in the numbers, right? The fundraising that isn't at the big firms has fallen. And I think, going back to my capital, we discussed earlier, that gets me more interested, right? What opportunities are not being pursued today? What companies are not getting funded? Or they're just under the radar because they're not in that cohort of names?

• 21:51David Weisburd?

  The unsexiness of it immediately makes it sexy for you?

• 21:56Speaker 01

  Yeah, I always say to investors or people coming in the investment world, like, figure out what kind of person you are when it comes to investment. If you're enamored by and want to be in the high growth, don't try and pick value or stick with what, and I'm definitely, you know, I'm balanced, but I definitely lean towards thinking about where people may not be looking. And that, I think, is coming. And we're not quite there yet, but I think it's coming.

• 22:20David Weisburd?

  I had one of the most famous and successful investors really over the last 40 years, off the record dinner with him, three and a half hours. He's done multiple deals with Buffett. He would know him well. And he summed up his entire strategy, like, how did he deliver over 20% yearly growth for like 35 years? And he said, I like things that are boring and hard, and ideally both. It's one of these things that persists. What persists? Something that's boring and hard. Why? Because it's always underfunded.

• 22:47Speaker 01

  Right.

• 22:48David Weisburd?

  Things that are boring are perennially underfunded. Things that are hard are perennially underfunded. Why? Because people think, like, things that are sexy, and they like things that don't take a lot of work.

• 22:56Speaker 01

  Absolutely, David. I think I'd add to that by saying, we see it across all investment, you know, the pressure to show performance, right? Whether you're a GP, to show good performance of your most recent vintage, whether you're an allocator, show great performance in client portfolios or in the entity's portfolio. With a public investor, and it's, I mean, the best stocks, there's a lot of pressure on that. And I think it's underestimated by most folks. And it's very hard to say, no, we're actually not looking there anymore. We're looking over here. Because people might rightly say, why would you do that? There is so much value creation going on here. And you need framework to do that. I think there's a lot of truth to that.

• 23:40David Weisburd?

  Me and Ted Coning, who founded Monroe, just had this exact discussion about the incentives of asset managers as they go public. Not only are they being judged on a quarterly basis, but their investors are valuing them on their management fees. It's a direct conflict to the returns of their LPs. And I'm sure they would have an explanation for this, but when you come down to dollars and cents, if you're being judged on how much capital you deploy, that is, over a long enough period, directly in contrast to the returns you could provide. In fact, Warren Buffett has gone on the record and said, if you gave me a million dollars, I would return, I think, 40, 50% every year.

• 24:19Speaker 01

  One thing was, we founded BFA, explicitly founded the firm to be incredibly transparent on the way we fee and the way we're incentivized. And I think there was just a number of different motivations there, right? And, you know, Charlie Munger was often about showing me how people are incentivized, and I'll tell you the behavior you expect. But LPs today should just be focused on returns. I mean, it's easy to get away from that with other considerations.

• 24:44David Weisburd?

  One thing I've learned from talking to hundreds of investors is that great investment firms aren't built on investment returns alone. The firms under are great at the things most people don't see. Their operations, their relationship with LPs, and the quality of information they use to make decisions. And here's what AI has changed. Every firm now has access to the very same models, so the intelligence isn't the edge anymore. The edge is what you could feed it. A firm with its fund operations and data in one connected record can actually put AI to work. A firm running on disconnected systems simply can't. That's why thousands of GPs run their funds on Juniper Square. Juniper Square puts your fund operations, data, and administration together in one connected record.

• 25:25David Weisburd?

  That means less time managing disconnected systems and more time investing, working with LPs, and building your firm. This episode is brought to you by Juniper Square, the operations partner for private market GPs. Learn more at junipersquare.com/HowIInvest. That's junipersquare.com/HowIInvest. The best conferences do two things well. The content challenges how you think, and the people in the seats are the ones whose opinions actually move markets. Alpha Summit is AlphaSense's annual user conference, and it's built around both. Join me at the Glass House in New York City, October 5th through 7th, for sessions going deep on where AI, data, and human expertise converge. The room will bring together over 1,000 institutional investors, corporate decision

• 26:10David Weisburd?

  makers, and capital markets professionals from firms like Goldman Sachs, JP Morgan, and the top PE and hedge funds. If you listen to this show, you're already asking the right questions. Alpha Summit is where you go to stress test your thinking with the people working through the same problems at the highest level. Register at alphasummit.ai to secure your seat. And as a How I Invest listener, you will get 50% off. Check the show notes for your exclusive discount code. I look forward to seeing you there. When I think about public CEOs, I think about that movie scene where someone puts a gun to the general and says, push the button. He's like, no. He shoots him. And then another general, he's like, now you do it, until the person actually pushes the button.

• 26:51David Weisburd?

  And that is unfortunately, the incentives of the public markets, where even if somebody does resist, that person gets shot and gets fired until that person does what the shareholders do. And people end up realizing this, and they become, you know, what do you want me to do? You want me to get killed? And they end up, this becomes internalized into the entire public market on such an intrinsic level that it's impossible to separate once you go public.

• 27:14Speaker 01

  Yeah, 100%. This is why in the public markets, until this year, although active managers are still underperforming on the long only side, it's been very difficult being not in the S and P 500, right? Because why would you take a bet on XUS or SmallCap, or they've underperformed? And it seems to be changing a little bit, and I think there's some reasons for that. That's the whole reason, one of the big reasons, why the shift to passive, right? Because it's, there's just too much career risk to not, to stand in front of that. And people get wise after a while.

• 27:52David Weisburd?

  I had this wild podcast with Michael Green, who's PM at Teal Macro, who's Peter Teal's hedge fund. And I would have probably discounted a lot of what he was saying, except that him and Peter Teal has done some famous trades, and he's been contrarian and right. And he says that the entire market today, or most of the market, is driven by index inclusion and outflows, not actually underlying fundamental.

• 28:16David Weisburd?

  Value in the business. What do you think about that?

• 28:18Speaker 01

  I spend a lot of time thinking about that, David. I mean, if you look today, I think we're up to certainly over 60% of the equity market that's traded algorithmically, including

• 28:27David Weisburd?

  Only 60%?

• 28:28Speaker 01

  Well, I think it's above 60%. And then if you add in, and that's the other change that's happened more recently, is just the growth of retail investors, right? And I think this is a risk for venture in terms of those larger tech companies. We're in a market where retail investors are very engaged. They want to buy, they're willing to buy. We saw the SpaceX IPO, right? Large retail component there. And that isn't always the case. There's periods where people are just kind of down on stocks. They don't really see, but we're not in that period today for sure. So but getting back to your point, I think, yes, I mean, the passive active debate is something someone who ran a fund trying to beat the S and P 500.

• 29:07Speaker 01

  I know how hard it is. And, you know, but at the same time, philosophically, we hold the view that there has to be some perception of value, right? If you buy an index fund today, it is blindly buying the stocks in the index, irrespective of whether they're going to be good buys or not. And at some point, at least in my seat, I think you owe your clients a little bit better than that, which is, no, we have a view. We're not outsourcing everything because obviously the S and P has become much more concentrated. It's not a diversified basket of companies across corporate America. It's highly concentrated to the big tech names, which by the way, are generating the most profits.

• 29:51Speaker 01

  So there's a good reason for that. So at BFA, we have a mix.

• 29:54David Weisburd?

  The other thing that's wild, second order effect of everything being passive is that if a stock goes up, let's say, Apple goes up, now the index needs to put in more money into it. One could argue that the beta of stocks or the market has become more volatile than it was before. What do you think about that?

• 30:13Speaker 01

  Yeah, I think you're on to something. And I think academics today are very, there's been a ton of academic research about the impact.

• 30:19David Weisburd?

  It's one of the areas where academics are first before the traders.

• 30:22Speaker 01

  Yes, right. And that's why a lot of hedge funds are hiring these folks directly out of their PhD programs. But it's interesting to me, in my career, I could think back to around the COVID period where people were talking about peak passive, right? And this is, we've entered a tipping point. And to be clear, there's a lot of beneficiaries to the index approach, right? It's low cost, it's highly tax efficient. And the fact is that active, long only managers just weren't really doing a great job. And there may be some perils today in private markets, right? Where LPs are getting more discriminating about who is actually adding value because I'm not just gonna,

• 31:02Speaker 01

  I'm not buying your middle market fund, your large cap buyout, and I'm not buying your special opportunities strategy because you can't be good at all of that.

• 31:09David Weisburd?

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• 31:53David Weisburd?

  Perplexity Computer orchestrates leading AI models behind the scenes and automatically chooses the right one for each step. For a limited time only, you could try Perplexity Computer for free. Head to pplx.ai/invest. That's pplx.ai/invest to try Perplexity Computer today. Most AI tools are still answering questions while Perplexity Computer is completing full projects. Support for today's episode comes from Square, the all in one way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here.

• 32:36David Weisburd?

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• 33:15David Weisburd?

  And right now, you could get up to $200 off Square hardware when you sign up at square.com/go/howiinvest. That's S Q U A R E dot com slash go slash how I invest. With Square, you get all the tools to run your business with none of the contracts or complexity. Run your business smarter with Square. Get started today. Support for today's episode comes from Square, the all in one way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, running a boutique, or managing a service business, Square helps you run your business without running yourself into the ground. I was actually thinking about this the other day when I stopped by a local cafe here. They use Square and everything just works. Checkout is fast, receipts are instant,

• 33:59David Weisburd?

  and sometimes I even get loyalty rewards automatically. There's something about businesses that use Square. They just feel more put together. The experience is smoother for them and it's smoother for me as a customer. Square makes it easy to sell wherever your customers are, in store, online, on your phone, or even at pop-ups, and everything stays synced in real time. You could track sales, manage inventory, book appointments, and see reports instantly, whether you're in your shop or on the go. And when you make a sale, you don't have to wait days to get paid. Square gives you fast access to your earnings through Square Checking. They also have built-in tools like loyalty and marketing so your best customers keep coming back. And right now, you could get up to $200 off Square hardware when you sign up at square.com/go/howiinvest.

• 34:41David Weisburd?

  That's S Q U A R E dot com slash go slash how I invest. With Square, you get all the tools to run your business with none of the contracts or complexity. Run your business smarter with Square. Get started today. It's too expensive to pay for beta.

• 34:56Speaker 01

  That's right. Exactly. Well said. The index dynamic of effectively buying, you know, the index approach buys more as something goes up and it sells more as it goes down. If you just think, well, you know, I probably want to be more interested in something if it's cheaper and I'm less interested if it goes up. That's not the way it works. So I think it's a balance. We like active management today. That's, we've been more active in hedge funds, actually, long short equity, because we think expert investors in their sector can spot opportunities and we're willing to pay for that if they can show performance. But that's kind of one of the outputs of this.

• 35:36David Weisburd?

  My business partner, Curtis, keep track of all these things that LPs complain about, but yet do anyways. And one of those things seemed to be investing into these large hedge funds are charging in many ways crazy fees, but seem to be delivering real alpha. Do you see that in your business?

• 35:51Speaker 01

  You're referring to sort of the millenniums?

• 35:53David Weisburd?

  Yeah, the pod shops.

• 35:54Speaker 01

  Pod shops, yeah. We don't invest with them. We actually do have an investment with a much smaller firm that's kind of competing a little bit against that in terms of something they've built. We're attracted to the risk reward profile. The issue is fees, tax inefficiency. And even the pod shops, David, I mean, this is the other thing. Effectively, if you ask them, and really what they're doing is they're betting on the quarter, right? Is what those managers are doing. They're saying Exxon's gonna beat the quarter and Chevron's gonna miss the quarter. So I had that trade on. It's not really about, well, I think this is a good stock and I'm gonna own this stock because in, I see a year and a half.

• 36:33David Weisburd?

  It's not the Buffett way of investing.

• 36:34Speaker 01

  No, no. It's an alpha horizon that's pretty short. So you can add that to the algorithmic. And we've got a very short horizon in terms of how people are looking at the stock market today.

• 36:49Speaker 01

  So, you know, but that said, it's been challenging, right? It's been challenging. If you've been looking for longer term alpha, that's been a tougher place to be. And, you know, again, people vote with the dollars, right? One thing we've seen in markets, and I think we'll see again, and we've kind of just had an example of that, right? With a situation that's been in the news, liquidity, we will have deleveraging events. There'll be shocks to the system. And I actually think one message I have that's, I think, very important that we're thinking very seriously about today is liquidity and making sure that you are equipped to deal with shocks to the system. And that can be across a range of metrics, right?

• 37:31Speaker 01

  It's not just family by family, but entity by entity, thinking about your own funding commitment, thinking about what cash you have.

• 37:41Speaker 01

  You know, how can you deploy cash into weakness? Cause I do think there's going to be opportunities. And we actually in private, we do still like secondaries. We think if there could very well be more opportunity there has been, and I think could stay that way. So I think liquidity is something that's going to be, if people aren't already thinking about that, they should be paying close attention there.

• 38:07David Weisburd?

  Always curious about how to deploy this heroic trade in the next downturn. Have you thought about this and what's your game plan?

• 38:17Speaker 01

  If you look back, you know, we had a real, I would say generational time to buy tech stocks was at the end of 2022, when tech was out of favor, inflation was really ramping, interest rates moving up.

• 38:33Speaker 01

  And tech revenues growth dipped. That was a great time. And if you're on the lookout, you will get these opportunities. The tough thing right now is show me an asset class that's out of favor. And you may say, well, long-term treasuries, you know, maybe they need to get more out of favor. But yeah, I think this is one of the things that we're finding right now is what is really compelling or what, where do you hide out other than cash today to prepare for a bumpy time ahead?

• 39:08Speaker 01

  Yeah, so I think that's a good group of questions. We're definitely looking at strategies today, allocating strategies that can benefit from volatility in credit markets or in equity markets. And so that's how we think about some of the allocations we're making. And I think where the opportunities are going to arise, it could be AI, it could be tech, right? If we get a sequence of bad data points, a real scare, we sort of had that a little bit in July, you know, bounced back this month. There could be some opportunities there because the direction of travel is still pretty clear. We may have got over our skis here in the near term, but we're not going to be using

• 39:52Speaker 01

  less, less tech input in our lives in five to 10 years. So that could be an area to focus on.

• 40:00David Weisburd?

  See some of the smartest investors in the world deploying portable alpha in their strategy. What do you think about portable alpha?

• 40:08Speaker 01

  We haven't done a lot of that. I think what it really comes down to is how resilient is the alpha?

• 40:16Speaker 01

  And we, one of the strategies we actually allocate to today, they have that as a solution that they offer, and it's been tougher for them recently. So the alpha hasn't been there as much as it was. That's basically saying, look, I can get my cheap beta, but I'm going to find specific managers and I can just isolate that alpha and bolt that on to what I have. So I think in theory it holds. I think you need to, how resilient is the alpha? And then just operationally, can you implement that easily in a portfolio? Can you unwind it as well?

• 40:51David Weisburd?

  The way that portable alpha works, and at least a lot of these smart investors are taking equities, levering them so they only have exposure to the future. So that S and P goes up 5% or goes down 5% and then investing that into strategies that are uncorrelated to the S and P 500. And the idea being that instead of coming in and putting a hedge on your portfolio in case of a market crash, you actually get exposure to the S and P 500 on the way up and then on the way down, you're hedged. Is that kind of how you see being implemented?

• 41:25Speaker 01

  You're never going to get away from if we have a, let's call it a 2022 scenario of a, say a 20% drawdown in the S and P, you're going to, you know, you're going to experience that. But I think what that points to, what the example points to is the need today. And this is kind of the catch 22 is that allocators and investors today, you want what I'm going to call uncorrelated asset classes. Equity markets are high, have done very, very well. You know, bond markets have some risks.

• 41:54Speaker 01

  You know, you do want strategies in the portfolio that offer a different returns profile.

• 42:04Speaker 01

  So we're looking for that and everyone's looking for those. And so that's kind of the good news for GPs, right? That depending on where, where they're focused, if they can show that and fulfill that role in the portfolio, there's some real value there. Infrastructure is a place that's obviously seen a lot of interest rate as a more, now it's debatable because some of the thesis around infrastructure is related to, we need more power generation. We, you know, we're short for the AI build out. So there's a correlation there clearly.

• 42:35Speaker 01

  But I do think today that if you can have less correlated sources of return in the portfolio, that is clearly something that people should be looking at.

• 42:43David Weisburd?

  Going back to venture, you alluded these 12 firms, some say there's, you know, five to 10 firms start capturing 75% of LP capital. How do you invest in a market that's behaving in this way?

• 42:55Speaker 01

  We look to access those firms, but in a smart way. We have a good relationship with the firm that I think is in that group. So we see the opportunity there. And as I said earlier, it's about understanding it. Does that, what happened in the past, can you underwrite that for the future?

• 43:14David Weisburd?

  Persistence.

• 43:14Speaker 01

  Persistence.

• 43:17Speaker 01

  And so we've spent time really understanding where their next leg of opportunity is going to come from. And there's been some very big winners, you know, there are right now. And so how is the next vintage going to, you know, do?

• 43:36Speaker 01

  I think that's one strategy. The other strategies, as I said earlier, we discussed earlier, is looking outside of those biggest firms, thinking about what GPs are showing some traction. And you kind of alluded to it, David, which is we invest, obviously we spend a lot of time on track records, but if a manager's been showing reasonable performance from just their core business and everyone is super incentivized and their experience and their know-how has only increased, that could be very interesting because the net, you want to be in there when it becomes the breakout vintage.

• 44:17Speaker 01

  On the flip side, you can have goodbye numbers, but yeah, the firm has shifted a little bit. The senior people may be less focused, the younger people aren't quite ready, there isn't the drive there. That track record is, we want to think about that. Outside of some of those big AI driven names is of interest.

• 44:35David Weisburd?

  I have some strong opinions on venture. One is you referenced this, that venture, all this capital is going into the, these handful of firms.

• 44:48David Weisburd?

  Some people call venture capital an access class, that LPs are actually trying to access the best managers, not the other way. Every other asset class is not very capital constrained. They could always take in more LP capital. Venture capital managers are famous for saying no to LP capital, even in endowment capital, which is the most desired. But that access capital aspect goes down to the founders. So it's the founders that are choosing the GPs and the GPs that are choosing the LPs. Completely different than every other asset class. And the founders more or less have chosen to go with the top name brands past a certain stage, seriously at the series A, series B. Why? There's many different reasons.

• 45:33David Weisburd?

  One is branding, both for customers and recruiting. Two is just the capital itself is a moat, meaning if Andreessen invests $100 million into your company, most of the time they're not going to let it burn. There's this whole concept in venture where the top quartile companies, doesn't matter, they can raise from anyone, the bottom quartile are default debt, and then the middle 50% is where your capital partners matter the most.

• 46:02David Weisburd?

  One future that I think a lot of LPs don't think about is that venture capital may continue to persist. There's a famous, Professor Steve Kaplan's study on this, that 52% of top quartile funds in venture continue to be top quartile and 75% continue to be in the top 50%. So if you invest in these 75%, 75% of the time, you'll be better than the average historically.

• 46:30Speaker 01

  Yep.

• 46:31David Weisburd?

  What may end up happening is that the returns may continue to persist on a gross level, but the fees have gone so high, two and a half and 30 now at the top firms, some are even three and 30, that they may just be average on a net basis. So there's this world where they persist on the gross side, but don't persist on a net basis.

• 46:51Speaker 01

  It's a very interesting thought, David. I think the firm that we know pretty well, it's interesting, if you look at their track record, you know, I was talking to a client about it and you look at their net numbers and you're not sophisticated on venture and you haven't really been following this, they don't knock your socks off. I mean, it isn't a, oh my goodness, how on earth do I, can I get into this? They're good, they're good returns and there's going to be some.

• 47:20David Weisburd?

  Start tenax.

• 47:21Speaker 01

  It isn't. My question is, yes, exactly. And it is different if you're a large pool of capital pension fund, a large endowment, you have to make several of these checks. And I think they are always going to be looking at that cohort. It is a little different when it's a family office, a multifamily office, because you're not compelled to. It's really opportunity cost. And again, when you look at the net numbers, you know, is that something that isn't going to be too painful if you miss out on?

• 47:55Speaker 01

  Our view is that the portfolio approach within venture, you have to be looking there. And as I say, that you can think about other opportunities in smaller managers, more emerging managers, or whatever it may be. But that, I think, at least, there's enough data set there that we think you have to focus there. But, you know, going back to private equity and venture, I mean, that is something that hasn't happened. We haven't seen a lot of fee compression, right?

• 48:25David Weisburd?

  There's also an argument that you quote unquote, need venture in your portfolio. Why? Because although there's equity exposure and equity correlation, it is a different part of the market and it is in some ways uncorrelated to either private market or the public markets.

• 48:40Speaker 01

  Yes, exactly. And I do, we subscribe to that view, David. If you look at innovation, smart people, you know, trying to build something, that in itself is, and there's a clear evidence, right? That you have that in all cycles. And, you know, some great businesses have been founded in downturns, right? You do want access to that innovation drive and that value creation. That is something that isn't dependent on. Now, the later stage you get, obviously, there's going to be a large impact on exit multiples and what IPO market. But at the earlier stage, I agree. Yeah, and I think it is important to have that in the portfolio.

• 49:25Speaker 01

  And then you've talked about it on prior podcasts, but from a taxable point of view, you know, having QSBS recognition is important too, is valuable.

• 49:35David Weisburd?

  Sacred Cow, we're not allowed to talk about as DPI, the negative side of DPI. DPI is a taxable event for taxable investors. So if you get your capital return in two years and you're paying 35% tax as you are on the coast, sure, you get a print, but in contrary to institutional investors, you have to, that's a taxable print.

• 49:54Speaker 01

  You can't.

• 49:55David Weisburd?

  That destroys your compounding.

• 49:56Speaker 01

  Yeah, that's right. You're not compounding that. Yep, that's kind of maybe the one silver lining in the kind of a lower DPI environment.

• 50:03David Weisburd?

  That's what people in their 15th year of their fund cycle, that's the pitch.

• 50:07Speaker 01

  Right.

• 50:08David Weisburd?

  You mentioned emerging managers and looking at that part of the market. What are you looking for emerging managers today?

• 50:14Speaker 01

  Emerging managers is a very interesting space. We've spent a good amount of time there. A lot of our families and clients come from the GPs themselves, both at large and small managers. But I think for me, for us, it is about, we like specialists. We like experts in their field and they're just looking. And it's really, I think, on the allocator side to figure out, right? Does this make sense for now and the next 10 years? Can we underwrite that? And then if you do think that makes sense, are they the right manager? Can they do the job? And that we look at, obviously, you've spent a lot of time on track record, we spend a lot of team. And then just the thesis, right?

• 50:58Speaker 01

  Where is the value creation going to happen here? Because it's not about just riding a train of, well, we see a lot of expansion here and a lot of multiple expansion. One of the things we push at in meetings is what you can have a situation where a manager, maybe fund two, fund three, is doing very well. But then you actually look at what's driving that. And then how did that manager access or come to have those portfolio companies? And sometimes there's a certain randomness there, which is, well, we got introduced through prior founder that we know well. It's not, then if we're looking at a firm that's based in the Northeast, well, this company's in Texas.

• 51:41Speaker 01

  Well, yeah, we don't typically invest in Texas, but it's not quite the verticals we traditionally.

• 51:46David Weisburd?

  It's not as repeatable.

• 51:47Speaker 01

  Exactly, exactly. And so it's harder for us, for any LP to say, because that's the point of a track record, right? Is to indicate persistence, is to indicate skill, repeatability. And if, well, yeah, that was a good outcome. You had several, these are doing very well. How are we going to have that in the next portfolio? Well, I need to get lucky again because I need to have those kind of connections or whatever it may be. And so today, more than ever, you alluded to it, David, it's the number one question I ask emerging managers in venture is, how are you accessing the best startups? Why are they coming to you? And I think there is something around, well, we're expert in this field.

• 52:30Speaker 01

  So if you're in this field, you pretty much want to talk to us. Okay, there's something there, but you really need to think about why they're not going to, because if it's that good an opportunity, obviously, there's bigger, you can put a lot more capital in. And so that's the question we spend a lot of time pushing on.

• 52:52David Weisburd?

  What's oftentimes overlooked is check size contrary to value add. So I think there are some strategies, Switzerland strategies, pre-seed investor. I think it's up to probably about $250,000. You could get into almost anything. And those could be great strategies, they're just not large funds. But, and then as you deploy, let's say, $10 million fund like that, or maybe even less, seven and a half million dollars, and you might have a 5X. And then you go out and raise a 25 million, now you're writing 750K checks. Depending on the size of seed rounds at the time, it could be black and white in terms of the competitiveness of getting into these companies. And that's when you really need a right to win.

• 53:33Speaker 01

  The right to win is exactly right. I think there could be regional, right? It's like, we're looking in the Northeast markets, that's where we focus. We have great relationships with, you know, whatever field it's with, it's, you know, healthcare, biotech, or there has to be some right to win there. But I think there is a story to tell, which is, look, we're willing to roll up our sleeves for you. You're a small startup, you're not a big AI name. And if you're not a big AI name, you're going to be actually better off with us because we're really going to work hard for you, rather than being just another name on the portfolio somewhere else. I think there is something there. And I think, as I said before, this is leading up to the potential buying opportunity.

• 54:13Speaker 01

  Not that you can get tactical with venture because vintage diversification and pacing is so important as well.

• 54:20David Weisburd?

  How much do you think about your seed managers being feeders to the multi-stage firms?

• 54:26Speaker 01

  We do spend time in thinking about, if you can get in front of some of these bigger firms, have they heard of these other managers? That's a good, because if you can roll up your sleeves and really impact a startup and show that it's on the right track, that is something that's going to be of interest, right? For other firms. And I think that there is a lot of capital has to be put to work, right? And GPs want to de-risk everything as much as they can. And so coming through a venture manager that's pretty expert in, you know, a name known in their space, maybe not a household name, but known in their space, that I think can make sense.

• 55:07David Weisburd?

  My OG mentor, going back to 2015, when I made my first venture investment, Gil Panchina, he told me that he would underwrite a seed company that he knew would raise an A, almost regardless of the quality of the company. Now, it's provocative in nature, but I have thought a lot about this thought experiment. A, does that make sense on expected value if you had 100 of these companies? And two, how much of a company's success becomes reflexive in that it is now successful because a Sequoia or Andreessen or a founder's fund backed it? And I could tell you, it's not zero.

• 55:47Speaker 01

  Hmm, right.

• 55:48David Weisburd?

  Is it over, under 50%? I think it's hard to say because these are parallel universes. But there's something about if a seed manager has access to enough top investors where they have unlimited shots, as long as the business has a certain type of quality, it becomes reinforcing. And I think this is one of the reasons for persistence in venture, because of this reflexive nature of name brand funds investing into startups.

• 56:13Speaker 01

  Yes, I think that's right, David. I think there's so much force today, and you do hear this, right? You may have three or four startups in a certain field and they're all kind of on the same playing field, but then one just gets a little bit of traction, gets the right VC's support, and then is in a different stratosphere, and then they get more capital. And it's sort of a self fulfilling dynamic. And so I think there's a lot to that.

• 56:37David Weisburd?

  Tomorrow, Warren, you get a phone call, I just had $100 million liquidity in cash. I want to invest it today. How do you allocate that portfolio for that investor?

• 56:47Speaker 01

  That's always, the allocation from cash, we've actually been doing some of that recently at BFA. I think you want to be patient, right? There's the, I'm in the camp that you want to get, well, certainly you go through the process of understanding what the investment goals, objectives are, and the risk profile. But I think you want to get some exposure to the allocation you want. And then think about how you time that in the sense of, not trying to time markets, but just be patient. You don't have to be fully invested day one. And at least that's how we think about it. And I like having the ability to be, to deploy on weakness, right?

• 57:29Speaker 01

  If we see that, we have the portfolio, we have a good sense of how we would invest across public equities, across fixed income. And then in terms of the allocations on privates, I mean, I think today we would really emphasize these strategies today that can exploit bumps in the road. So whether it's in credit markets, so kind of an opportunistic credit, you know, opportunity vehicle. On the hedge fund space too, within credit markets, right? That those, some of these strategies have a proven ability.

• 58:03Speaker 01

  To be able to jump in when we see dislocations. And that's kind of the world we're in right now. I mean, if you'd asked me that question, David, a few years ago, we were much more optimistic on equity returns over the near term. And today, if you look at the three year rolling return of the market, it's pretty elevated historically. So that should give you some pause. So my experience of being in the seat is that there's times to lean in and there's times to just let things play out a little bit. So I think that's kind of the mindset we would have.

• 58:41David Weisburd?

  Patience is one of those things easier said than done, especially when you've had an entrepreneur that have built their career, taking risks, pushing forward. The best operationalization of this that I've seen is Frank McHale from North Dakota Land Trust. And he does not shy away from beta because he uses it as his alternative to any new investment. So he tries to find the beta in the public markets that mirrors the asset exposure he's looking to do. So for example, an evergreen fund for private equity. And then he goes out to meet private equity funds. And if and only if that private equity fund beats that beta, he sells the evergreen fund and he invests into that manager.

• 59:25David Weisburd?

  And I think that's such an underrated strategy, which is by default, you are invested in the market.

• 59:29Speaker 01

  Yes.

• 59:30David Weisburd?

  And you only look for things. So you don't have this desire to deploy quickly because the problem that a lot of people experience when they go in, when they make a lot of money. First of all, when you have a hundred million dollars to invest, you've built a billion dollar company. You're one of the most exceptional people in your space. And you're obviously extremely smart. That being said, the level of experience that you need to be good as investor into GPs, it's just a different skill set. It's like saying the best NBA player in the world is not going to be a world class surgeon. It's just a different skill set. So oftentimes you feel compelled to both move fast and also you deploy at the point of the highest ignorance. Alex Hermosy calls this ignorance debt.

• 1:00:10Speaker 01

  Yeah.

• 1:00:11David Weisburd?

  So you have the highest amount of ignorance debt you will ever have. And a lot of investment firms actually operationalize this into their funds as they don't let new investors make investments. They make them kind of take a hundred meetings or 500 meetings just to see what good looks like. So this is the best hack that I've found for kind of avoiding this bias to act and also avoiding bad mistakes early on in your investing career.

• 1:00:40Speaker 01

  That's a very well said. It's such an important part of a client relationship work with the advisor. Right. Because we see that too, right? You had entrepreneurs been very successful. They've worked extremely hard. They've crystallized value. And now they're aware of markets, they're aware of investments, but they haven't experienced that, right? Until you have created wealth and then you have it invested. And then suddenly we see people taking notice of headlines. They already wouldn't normally notice or take any attention to pay any attention to. But now it's okay, well, how could this affect this capital that I have? And so, yeah, it's really my job to walk clients through that. And it's a great point.

• 1:01:24Speaker 01

  We do that too, which is we get exposure that we want, that we're comfortable with. And then from that, we can think about how do we up? You could do that with ETFs, right? Passive, you can say, okay, we have some exposure, but as we allocate to the managers we want, we can pull that from there. I think getting the right beta exposure is key. And there are certain times there. And maybe today's one, right? Where beta is, we want to be careful there.

• 1:01:49David Weisburd?

  Going back to what we discussed about the index funds.

• 1:01:51Speaker 01

  Yes, exactly. And you're absolutely right also, there's two pressures, right? I mean, there's two risks. One is that you're under invested as things do well. And the client asks, well, why are you being patient? The other risk is that there's red ink, right? Where you put money to work and there's mark to market losses. Obviously, you know, that's, we talk to our clients about, we're long term investors. We're not really tracking it the next two weeks, two months. We're not building it to that. And so I think we like to find a way that manages that. You're absolutely right, though, that successful entrepreneurs, for the most part, are not people that, at least our clients, they expect 100% attention, 100% activity.

• 1:02:36Speaker 01

  They expect, you know, a lot of.

• 1:02:38David Weisburd?

  What are we paying you for?

• 1:02:39Speaker 01

  Yeah, absolutely. I think that's right. So communication is key. The way we built our firm is that we want to be very collaborative. You know, we talk people through what we're going to do before we, even though we have discretion, if we have discretion. Yeah, because our clients are partners. And that's kind of partly why they joined, you know, came to us. We're not the shop, which is like, hey, this, these are your numbers and let us know if you have any questions. And so, yeah, that's kind of the way we approach it.

• 1:03:11David Weisburd?

  If you go back and give yourself one time a piece of advice when you started your career, what would that be?

• 1:03:16Speaker 01

  The advice I would give my earlier self is that investing in many ways is a simple business. It's very hard to do well, but you don't need to overthink it. The best investment opportunities, the best investment ideas are actually pretty explainable and pretty simple. And if it needs more than three sentences to explain why you're doing it, then that may be a problem. There's a tendency for a lot of folks, and I think my earlier self, to overthink things, right? To look for that additional bit of information, that additional confirmatory signal. And at the end of the day, that's kind of a losing game

• 1:04:00Speaker 01

  because you need to understand the thesis. You need to corroborate it. You need to build it out and then you need to act. And then you can move on from there.

• 1:04:12David Weisburd?

  A lot of investment managers also act like they're lawyers, like they're being paid by the word. And oftentimes unnecessarily make things complex, maybe to justify their fees as we were discussing earlier. But this has been absolute masterclass. Thanks so much, Warren, for coming by.

• 1:04:28Speaker 01

  I appreciate it, David. I very much enjoyed it.