Providing Capital to Tech Companies: Masters In Business with Ann Berry

Barry speaks with Ann Berry, founder and managing partner of Threadneedle. They discuss her path from Goldman Sachs M&A and private equity to running a hospitality services company through the pandemic. They also discuss Ann's early-stage bets on AI and deepfake detection, and surveying the expanding IPO landscape. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

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

• 0:00Speaker 00

  At K K R, we've spent fifty years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, K K R has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. K K R, understanding what matters. Visit K K R dot com slash what matters.

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• 0:56Barry Ritholtz?

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• 1:30Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 1:35Barry Ritholtz?

  This week on the podcast, what can I say, another banger. Anne Berry has a fascinating background in everything from startups to private equity to M and A L B Os. She was at Goldman. She's worked at a number of really fascinating places. Her firm Threadneedle specializes in early-stage technology, industrial and investment platform investments. She's had just, both in New York and London and around the world, such a unique perspective on the world of of startup investing as well as mature company investing. I found this conversation to be absolutely fascinating, and I think you will also.

• 2:19Barry Ritholtz?

  With no further ado, my sit down with Threadneedles, Anne Berry.

• 2:33Barry Ritholtz?

  Anne Berry, welcome to Bloomberg.

• 2:35Speaker 03

  Thanks for welcoming me in, Barry. Great to see you.

• 2:37Barry Ritholtz?

  Great to see you. So so I want to talk about your career and the state of the world today. But before we do, I have to dive into your background.

• 2:48Barry Ritholtz?

  Double first in economics at Trinity College, which is in Cambridge.

• 2:52Speaker 03

  Yeah.

• 2:52Barry Ritholtz?

  What is double first? What does that mean?

• 2:55Speaker 03

  It means I was a complete geek, super nerd and studied all the time when I was at Cambridge University.

• 3:00Barry Ritholtz?

  Okay.

• 3:01Speaker 03

  It's it's the equivalent here of summa cum laude, but then within that.

• 3:04Barry Ritholtz?

  Double first, got it.

• 3:06Speaker 03

  Yeah, exactly.

• 3:06Barry Ritholtz?

  Then you go from from economics at Cambridge to Harvard Business School. Was the original career plan always finance and investing?

• 3:14Speaker 03

  You know, it wasn't. If you had asked me as a kid, I would have said I was going to be Indiana Jones and I was going to be an archaeologist. And then I sort of had the astronaut phase, which we all do.

• 3:23Barry Ritholtz?

  Right.

• 3:23Speaker 03

  And.

• 3:24Barry Ritholtz?

  No paleontologist phase?

• 3:25Speaker 03

  No paleontologist. No, it's a great question. No, I didn't actually go there.

• 3:29Barry Ritholtz?

  Yeah.

• 3:29Speaker 03

  I did want to be a journalist, which I can come back to because it really demonstrates a passion for storytelling. But I'm very honest about why I went into finance. I came from a family, we had absolutely no money whatsoever. I grew up with government assisted housing as my home and I was the first in my family to go to college. And so I really felt the importance of finding financial stability. And growing up in London, I looked around and thought, where could I find that? And the career and financial services seemed to me the clearest and nearest path to try and get there.

• 4:03Barry Ritholtz?

  Huh. So so interesting. I never had the astronaut career path, but the fighter pilot career path was always out there intriguing.

• 4:11Speaker 03

  Really?

• 4:12Barry Ritholtz?

  Yeah.

• 4:12Speaker 03

  Was that a lot of Top Gun?

• 4:13Barry Ritholtz?

  Um, not so much Top Gun as as the World War Two planes. By the time we get to the modern era, yeah, it's push a button and the missiles take care of everything.

• 4:23Speaker 03

  So you like the Spitfires?

• 4:24Barry Ritholtz?

  Oh, for sure. Absolutely. Mustang Spitfires, a hundred percent. So your first gig out of school, was that, did you start at Goldman Sachs?

• 4:32Speaker 03

  I did. I started mergers and acquisitions at Goldman in London.

• 4:35Barry Ritholtz?

  All right. How long were you in London and when did you come to New York?

• 4:38Speaker 03

  So I spent my first two years in London at Goldman in mergers and acquisitions. And then I moved over, still in London, still within Goldman, to private equity. And that's when my career in investing started, doing European leverage buyouts.

• 4:51Barry Ritholtz?

  So so that's an interesting trend, transition going from advising on transactions to actually being responsible for the investment.

• 4:59Speaker 03

  Yeah.

• 4:59Barry Ritholtz?

  Itself, how much of the L B O M and A translated to P E? We'll have fun with acronyms today.

• 5:06Speaker 03

  Yeah.

• 5:07Barry Ritholtz?

  And how much of it was like, oh, this is a whole different world?

• 5:10Speaker 03

  Well, you know, mergers and acquisitions provided unbelievable training. And I was very lucky because I was at a Goldman Sachs in a period of time, which was still very much the old school apprenticeship model. Senior people really focused on making sure that very junior entry level people were learning. And so meticulous attention to detail became core to what I was doing every day. Independent thinking became core to what I was doing. But I decided pretty quickly I did not want to be, you know, advising only. I really wanted to be closer to the action when it came to decision making. And I'll come back to that because I wanted to get even closer to becoming the decision maker ultimately. But that was my transition from the advisory side to the private equity investing side. And there was a lot of technical overlap in some of the basic skills.

• 5:56Speaker 03

  The mindset was very different. And the level of curiosity I found I'd needed to have to be in private equity was a step up from where I was previously.

• 6:04Barry Ritholtz?

  Did you end up at Cornell Capital next, or was there something in between?

• 6:07Speaker 03

  No, after my three years at Goldman in London, I crossed the Atlantic, I came to America. And I'd always wanted to be in New York. But a mentor of mine at Goldman said, before you decide to go and try to conquer the Big Apple, why don't you consider going to business school? And at the time, Barry, Brits weren't really going to business school en masse.

• 6:28Barry Ritholtz?

  Really?

• 6:29Speaker 03

  And so when I said I'm going to do this and I'm going to go to America for business school, some folks I worked with, two fabulous women, I'll always remember this, Teresa Teague and Kira Danilchik I was working with at the time, both were graduates of Harvard Business School. And they said, go, go have a life experience, meet interesting global people, broaden your horizons, understand what other people your age have been doing by way of their professions. It's not all finance out there, so go. And you can decide to go back to finance, but it doesn't need to be now and you can go to New York afterwards. So I was lucky. I was lucky to have those voices and that encouragement because it was an unbelievable experience for me.

• 7:07Barry Ritholtz?

  So what was the first gig right out of H B S?

• 7:09Speaker 03

  Well, I have a great knack for graduating into recessions.

• 7:12Barry Ritholtz?

  Yeah.

• 7:13Speaker 03

  So coming out of Harvard Business School, I graduated into the financial crisis. So I came to New York in two thousand and eight. I was very lucky to have a job Goldman honored their offer to me, which had been extended to me in two thousand and seven.

• 7:25Barry Ritholtz?

  They ended up doing pretty okay during the financial crisis. Some some companies did a little better, a lot did a whole lot worse.

• 7:32Speaker 03

  Yes, yes.

• 7:33Barry Ritholtz?

  But it was definitely a lot of stress. What was it like starting your career right in the middle of that storm?

• 7:41Speaker 03

  So to paint the picture, I joined Goldman at a time and every couple of weeks, people would just disappear from the cubes around me. And I'm pretty sure I was kept because I was just very cheap, right? Because I was really entry level coming out of business school. And the stress levels were incredibly high, incredibly high. And I remember Lloyd Blankfein, who was C E O at the time. I remember he was actually very good about sending out frequent voicemails. It was a big voicemail culture. And you'd see your phone bleeping, your desk phone bleeping, and his voicemails would start, this is Lloyd, with an update. And those would come around pretty frequently and I learned.

• 8:17Barry Ritholtz?

  Weekly, daily?

• 8:18Speaker 03

  Sometimes several times a week, particularly if the headlines were rolling, just to clarify what was going on. And I will say, I was very impressed that while I'm sure the senior folks were incredibly stressed, both personally and professionally, I will say the people I worked with did a pretty good job of emanating at least a feeling of calm that things will be all right. And no one was under any illusion that things were going to be easy. And there was always a question around which of the banks would survive. I remember the moment that Goldman became a bank holding company. Lots of people who'd grown up at Goldman weren't particularly excited about that. But there was a sense that Goldman would figure it out. So I was lucky to be there at that time. And I learned a lot, by the way,

• 9:01Speaker 03

  from my portfolio companies, the businesses, because I was in private equity at Goldman in oh eight, the things you have to do to help companies survive. And I'll just plant one because it became very important later in my career, Barry. I inherited an oilfield services company.

• 9:17Barry Ritholtz?

  Meaning someone else at the firm was responsible.

• 9:19Speaker 03

  Had made the investment, had made the investment. And I joined the team. So I was supporting a senior person. And this business had struggled, as many did, had a lot of leverage on it. But it had the wherewithal to pull down on its revolver to max out its cash balance right as they could see the problems were coming. And I was tasked with go figuring out where to cut cost, how to reserve that cash, was very operational, it was unusual for private equity. And it's a lesson that I held on to when fast forward to COVID. I was CEO of a business where all of my clients were hotels. So a lesson that I learned and carried with me and it came out to be important.

• 10:00Barry Ritholtz?

  People don't realize during these big crises, it's a tremendous learning.

• 10:04Speaker 03

  Fabulous learning experience.

• 10:06Barry Ritholtz?

  Amongst the wreckage and the tragedies, there's a lot of opportunity for, for learning, for growth. It's always reminds me of Robert Deval and Apocalypse Now. One day this war will end, son. And it's like wistful longing for a unique opportunity. You have to just really be present for that. All right. So post Goldman, post MBA, you go to Cornell Capital. Was that the next stop along the line?

• 10:36Speaker 03

  Right. So post business school, I spent about nine-ish years at, I think it was nine years at Goldman in New York, in the merchant bank, as it was then called, doing private equity investing. So leverage buyouts, some structured credit across a number of sectors. And I had a mentor at Goldman, who was the vice chairman of this group. And he retired from Goldman Sachs and decided that he loved investing too much and wanted to, to get in there and have his own funds. So I left Goldman. I actually tried to think about what I wanted to do and actually started to dip my toe into live television at that point in time, which we can come back to. But ultimately I joined Cornell Capital and became a partner, a deal partner there, member of the investment committee. And continue to do what I'd been doing before at Goldman.

• 11:21Speaker 03

  But now in a much more sort of entrepreneurial environment, because when you're out there hustling to find deals and to work with management teams and you don't come from a big brand like a Goldman Sachs, it's really different crash course in business development, which was great for me, suited my personality.

• 11:35Barry Ritholtz?

  So that was New York and Hong Kong, focusing on consumer, financials and business. Curious, moving from a big organization like Goldman to a smaller, smaller firm. How do you source opportunities? How do you make decisions in a much smaller shop? You mentioned you have to hustle for deals. It can't just be that simple. It has to be very, very different experience.

• 12:02Speaker 03

  Well, you don't have brand recognition, but what you do have when you go from a big place like a Goldman, where you've been there, at that point I'd been there for nearly 12 years in the aggregate, and go to somewhere new, is you do have a repository of relationships that you've tended over time and you have your own reputation. So I didn't have a completely standing start, right? There were management teams I've worked with, boards I've served on, CEOs I knew. Other private equity firms, I'd done deals alongside or opposite over time. And a lot of bankers who are the gateways to a lot of these LBO opportunities. And they were very good to me. I will tell you, Barry, when I left Goldman, I wondered who would take my calls.

• 12:39Barry Ritholtz?

  Right.

• 12:39Speaker 03

  Right. Who would call me back? And you figure out who those people are. And I'll give you one example. Pretty early in my time at Cornell, there was one investment I wanted to make and it was to buy an industrial services business. And it was an auction process. And the lead banker selling the business, I'd met briefly beforehand. And this business was owned by a number of families. Sponsor, but really the families had a vote. And I said, let me get on a plane and go meet all of the families and the operators. And let me walk the floor and tell them my story. And if we like the business, we'll get it done really quickly, like in four weeks, if you give me exclusivity.

• 13:24Speaker 03

  And he did it. And he was as good as his word and I was as good as my word. And that deal got done.

• 13:29Barry Ritholtz?

  So that leads me to something, smaller firm, a little more nimble, faster decision making, a whole lot.

• 13:37Speaker 03

  Yes.

• 13:37Barry Ritholtz?

  Ability to not take six months to do something that should take six, six days, six weeks.

• 13:42Speaker 03

  Yes. Now, it's not true of every small firms, because a lot of it has got to do, size itself doesn't dictate pace. I've seen that in a number of different places. But I think the right people with the right mindset, and in this case, these were very entrepreneurial folks at Cornell Capital, didn't want to give up quality of work, but they were much happier to lean into speed. It was a much flatter organization.

• 14:04Barry Ritholtz?

  So you hinted at past media experience. Somewhere along that run was NBC Universal doing digital media corporate development. What you was at, was that pre-GFC or after?

• 14:18Speaker 03

  That was during my summer at business school. So that was my summer internship back to relationships. So I had a fabulous mentor at Goldman in London, Gordon Dial, who was senior in the M and A group. And I'd worked with him in my first two years on a big deal. And when I applied to business school, he was gracious enough to write some of my recommendations. And then gracious enough to put me in touch with GE, which you may remember owned NBC at the time. So I spent my summer there. And I look back now and sort of join the dots on the signs that media was going to play some sort of role in my life. But actually, in terms of going on screen, I was on gardening leave after I left Goldman Sachs at the end of 2016, trying to figure out what to do next. And a dear friend of mine is Jessica Tarlov,

• 15:01Speaker 03

  who is the liberal host on The Five for Fox. Just wrote a new book, I Disagree. And at the time, she was sort of making her way up through Fox and she said, have you thought about media? I said, well, funnily enough, the BBC had just put out a call to try and find more business experts. I think I might give it a shot and run down to the stock exchange and send a video. Jessie was very kind and her father at the time, helping me try to do a demo tape. And we sent it in, Barry, and I didn't even get a response confirming that it'd been received. And Jessie, being a very dear friend and loyal friend, I think was so personally affronted by this, and she was now invested in it, that she put me in touch with Fox and I started doing Fox Business News at, you know, five o'clock in the morning.

• 15:45Speaker 03

  And then my TV appearances started talking about the markets.

• 15:48Barry Ritholtz?

  Not just Fox, but you eventually start doing Bloomberg, CNBC, CNN.

• 15:53Speaker 03

  Yeah.

• 15:54Barry Ritholtz?

  The whole run.

• 15:54Speaker 03

  That's right.

• 15:55Barry Ritholtz?

  How did you end up at Jimmy Kimmel's media platform, Wheelhouse?

• 16:00Speaker 03

  So after Cornell Capital, well, there's, there's a chapter within Cornell Capital which meant a lot to me. I became the CEO of one of the largest portfolio companies in their company called Purestar. And.

• 16:12Barry Ritholtz?

  That was during the pandemic, right?

• 16:14Speaker 03

  It was during the pandemic. It was an investment that was made in 2018. I became CEO in late 2019 and ended up running the business.

• 16:21Barry Ritholtz?

  Through the lockdown.

• 16:23Speaker 03

  Through the lockdown.

• 16:24Barry Ritholtz?

  And this is the hospitality company where you're working with hotels and restaurants, which are all suffering tremendously when their guests can't show up.

• 16:33Speaker 03

  Well, let me tell you a story for how it became clear things were going to get tough for that business, which by the way, is doing incredibly well today.

• 16:42Speaker 03

  I always remember this. It was early 2020. And Vegas had just had CES, the Consumer Electronics Show, big deal. Vegas, an important market in hospitality, and I was out there. And I'll always remember this, Barry, I was sitting in the office. And several generations of one family had grown up in this business, starting at the age of 17. And they came to me and they said, Anne, something's going on. Our clients are seeing mass cancellations. I said, what do you mean? Where are they coming from? From Asia? This was February 2020.

• 17:16Barry Ritholtz?

  That's later already.

• 17:17Speaker 03

  This is February 2020, but much earlier than we had the lockdowns come and the shutdowns come. And I said, when, you know, when have you seen something like this? And he said, the last time we saw something like this was avian flu. I got it. Fast forward. My antenna's up, so I decided not, not to come back to New York. I stayed in Vegas to try and see what was going on. And then fast forward, when it was clear that the country was going to have to go on some kind of shutdown, I went back to the same group and said, we need to get ready. We need PPE. We need sanitation equipment. And they said, we've got this. We did this already. Because we've seen this before, we've stocked up. And that was a lesson to me, Barry, and listen to the people on the front lines.

• 18:00Speaker 03

  And make sure you have relationships with the workers doing the really hard work. Don't just sit on Mount Olympus where all the C-suite are when you're running a business and you need to get in there and you need to know your people and they need to be comfortable coming to you with their ideas and observations.

• 18:13Barry Ritholtz?

  You never know where that early insight is. And, and there's a quote, you and I were chatting about quotes earlier. There's a quote that everybody misunderstands, which is the, and the plural of anecdote is not data, is the quote everybody uses. But the guy who originally coined that is a professor, I want to say Caltech, I can't swear by it, who, who taught statistics. And the original quote was, the plural of anecdote isn't data, but it should be the starting point for further research. Because a series of anecdotes might end up being totaling up to data.

• 18:53Barry Ritholtz?

  So those guys have seen it before. They start to see anecdotal cancellations.

• 18:59Speaker 03

  Absolutely.

• 18:59Barry Ritholtz?

  And suddenly, hey, are these anecdotes or are we seeing a data wave that's going to lead us to a, a, a interesting conclusion? So how did you end up taking over as CEO? The, the family just said, hey, you seem to know what you're doing. Why don't you come in and run this so we can go out and do our thing?

• 19:18Speaker 03

  Well, it was sponsor owned when the business was, was acquired and when it came into our portfolio. And it was just a case of a fantastic business in its core. Outsource laundry, so hotels, you need it like you need a utility. You send your sheets and towels out on a truck.

• 19:34Barry Ritholtz?

  Linens, tablecloths.

• 19:35Speaker 03

  You got it. Exactly. Sheets and towels for the most part. So it's really in the, in the bedroom. You need them, right? They're so cool to the experience. So a truck would come up every day, drop off the clean ones, take the dirty ones. It doesn't sound the most glamorous business, but I got to tell you, I fell in love with it as a passionate traveler myself. I sort of understood the need and the importance it had. And it was a fabulous business. It just wasn't legging into growth and fulfilling its potential in the way that we at the investment committee knew that it could. So, so I end up sort of in the seat and quickly got to work, traveling around to most of the, at the time, 30-ish locations, talking to people in the frontline. And doing something, Barry, which I believe is really important, and I'll explain why.

• 20:18Speaker 03

  Trying to identify talent that could do more, but no one had given them the opportunity yet, which is something I'd been very blessed to experience in my career on Wall Street. I'd deals I'd worked on, mentors I'd worked with through Goldman, who gave me outsized opportunity to lead. And I wanted to find those people here to see if that was a way to unlock growth, to flatten the reporting lines. And in a way, it's almost a tech startup kind of mentality, right? It's how you really empower folks to come forward and give the best talent the chance to run, even if it's in unorthodox spots.

• 20:53Barry Ritholtz?

  So picking up and washing and delivering towel sheets, linens, tablecloths, you said not sexy, but that that's a media construct. I'm looking at some of the investments you've made.

• 21:07Speaker 03

  Yeah.

• 21:08Barry Ritholtz?

  You've hair color technology.

• 21:10Speaker 03

  Yeah.

• 21:11Barry Ritholtz?

  Airship software for service contractors.

• 21:14Speaker 03

  Yeah.

• 21:15Barry Ritholtz?

  Um, allure beauty concepts, Reality Defender. None of these are, maybe Reality Defender, deep fakes, and that is a little sexy, but most of this is block and tackling.

• 21:25Speaker 03

  Yeah.

• 21:27Barry Ritholtz?

  Why should it matter if something is sexy? And we were talking about quantum before and fintech. If it makes money and it's ignored by the rest of the market, does it really matter?

• 21:40Speaker 03

  And the thing, you know, the irony here is I'm invested in the glamorous stuff too. I'm in a sports league, I'm in unrivaled, I'm in some pretty glamorous AI businesses. I was lucky to invest behind Yann Le Cun in his latest world models business, AMI. So I'm in those two. But what I find glamorous, what I find sexy is great execution. And really solving a problem in a way that doesn't have to be the most off the charts or, you know, the most out of the box, but is executed against with real intention and real discipline and rigor. And the businesses that I've invested in and run or on the boards of are super focused on execution. And nothing gives me more joy, Barry, than rolling up my sleeves to participate in the execution and then putting my money where my mouth

• 22:24Speaker 03

  is and my time is with my capital.

• 22:27Barry Ritholtz?

  You're on both sides of the trade. Sometimes you're an advisor, sometimes you're an investor.

• 22:31Speaker 03

  Yeah.

• 22:32Barry Ritholtz?

  Sometimes you're actually part of the company doing management. How do each of those three roles reinforce and cross pollinate each other?

• 22:42Speaker 03

  So I came to learn this. There's a story I'll share with you. I strongly believe that operating and being inside a company makes one a better financial investor. And I say this as someone who, you know, for the first big chunk of my career, traditional Wall Street, right? In the spreadsheets.

• 23:04Barry Ritholtz?

  Right.

• 23:04Speaker 03

  Doing the typical diligence. It's all rather desktop until the day you're actually inside one of these businesses and actually doing the doing and being held accountable and as part of the management team. And I'll tell you the story, Barry. I was in Vegas and it was the depths of the pandemic. This was probably April or May. And there was a moment when it was clear thousands of the team would have to be furloughed to keep the company able to survive this and get through to the other end, which it did do. And I'd been very lucky because while I'd been at Goldman, I'd been Goldman's representative on the board of a number of the businesses I'd been investing in with the teams there. And I had good relationships with many of the CEOs. And there's one in particular, Mike

• 23:49Speaker 03

  Greby, who had been the CEO of a company called Interline Brands, which ultimately we sold to Home Depot. And I stayed in touch with Mike Greby. And I called him from the empty parking lot of a hundred thousand square foot facility in Vegas, empty because unfortunately, you know, we'd had to do these difficult things to keep the business alive. And I said, Mike, it's Anne Berry, he said, and he always takes my call. I said, I am retroactively apologizing to you and every other CEO whose board I sat on as a mid-level private equity person, piping up during board meetings with comments I thought were adding value based on insights from my spreadsheets. It must have been so annoying for you because life,

• 24:31Speaker 03

  actually doing it is different. It's about the people, it's about the rhythm of the business. And he laughed and he was very gracious and said nice things. And I called others and they all appreciated it. Life is different. Having been in the seat makes me a better board member, much better investor. I know what to look for in diligence, makes these conversations more fun. I could speak to you, Barry, because you operate your own business. And I think that experience is incredibly underrated.

• 24:58Barry Ritholtz?

  Huh, really super interesting. Coming up, we continue our conversation with Anne Berry, founder and managing partner of Threadneedle, talking about making the leap from private equity to operating an investment firm. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 25:18Speaker 00

  At KKR, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, KKR has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. KKR, understanding what matters. Visit kkr.com/whatmatters.

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• 27:25Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. Anne Berry, founder and managing partner of Threadneedle, is my extra special guest this week. The firm provides capital and advice to high-growth private companies and investment platforms. So let's delve into a little bit providing advice and capital. Why both? Why not just write a check?

• 27:50Speaker 03

  Because I think the most interesting problems or the most interesting opportunities for change for companies at a point of inflection, Barry, comes from having real operational value add. There's a lot of capital out there. You know, you've got a lot of capital. You're a capital provider. There's a lot out there. But combining that with operational help is what gets me really excited. And where I thought I could differentiate myself in this world of private.

• 28:16Barry Ritholtz?

  So I'm really curious. Every startup is different, or are they? Every era is a little different than the one before. Are there some patterns you begin to see? Are there some similarities across sectors, across eras that allow you to pull out a gem of wisdom and share it? Or is it case of first impression each and every time?

• 28:40Speaker 03

  Well, it's interesting because you really called out the earlier-stage investing. I do early-stage investing. But one of the reasons I decided I wanted to have my own firm, having been at Goldman, then Cornell, then at a place called Wheelhouse, which you called out, which was solely focused on early stage, I didn't want to leave behind the world of mature businesses. I think that there's a ton of opportunity with companies that are, you know, been around for a long time, their business services, outsourced businesses, business services, industrial companies, which to me have just as much exciting growth opportunity as some of the early-stage businesses that I look at. And the thing that is common to all of the ones I choose to get involved with, Barry, is that there

• 29:22Speaker 03

  is a leader, an executive team, that I have a high level of conviction, will be able to execute, get the goals of the business achieved. And those goals may change over time, which I started to talk about, but come hell or high water, they are going to find a way to make this work. And they are going to achieve an outcome that I would deem acceptable from a return perspective.

• 29:46Barry Ritholtz?

  So you've invested across so many different stages. I want to define them. I want to have you define them.

• 29:53Speaker 03

  Yeah.

• 29:53Barry Ritholtz?

  For listeners, everything from friends and family to seed to A round, to an established company, private or public, that needs help integrating a new process or a new technology that'll unlock a whole lot of value. Tell us about the different stages that you consider.

• 30:13Speaker 03

  So from the fund perspective, the earliest I would get to is the seed stage.

• 30:16Barry Ritholtz?

  Meaning after friends and family.

• 30:18Speaker 03

  After friends and family.

• 30:19Barry Ritholtz?

  Yeah.

• 30:19Speaker 03

  I mean, I do those two. I do my own angel investing. I am friend and family to some of those in whom I've invested. And some of those have worked out incredibly well. But in terms of where the real rigor and the discipline of the pattern spotting and looking for the repeatable themes, it's that sort of series A onwards, sometimes the seed, through to very mature companies. And the thread, as I just said, is always looking for businesses where I do believe that there is a cultural focus on execution. And quite frankly, the ones where I've become involved and taken on operating role have been businesses with the potential to be great, but don't yet have that focus on executional excellence. And where I've dropped in is actually to bring that to the table in the blocking and

• 31:03Speaker 03

  tackling day to day. Now, there are a couple of other things that I do look for. I do focus on cash, even for the early-stage businesses. A little unusually, a lot of venture capital folks, it's all about top-line growth. The cash burn rate isn't as much of a focus for them. Even from the get-go, I'm focused on can this business be cash flowing? Fairly quickly, relative again to others.

• 31:26Barry Ritholtz?

  Define quickly, is that three months, a year?

• 31:29Speaker 03

  For the very early stage businesses, I'd like to see free cash flow within about two years. Which for that sort of early stage is is pretty quick. As we know, there are public companies in the tech space that have gone public IPOed without having necessarily line of sight to free cash flow. But I can't help myself on private equity, girl, it's how I grew up. So I like to understand that level of financeable cash flow. The other thing that I would say, Barry, is I do like to understand with real precision what specific problem this company is solving. Because one thing I do see in my deal flow, I know you probably do too. There's some very exciting and interesting technologies out there and they're fabulous science experiments and great ideas. But is there a way to actually commercialize it?

• 32:14Speaker 03

  Is there a real business that can come out of it? And I've actually been surprised at how many young companies have been able to raise some money, often from friends and family. Because there's a novelty to what they're producing. But I haven't been able to get my mind around their ability to scale. Similarly, at the opposite end, when even it's investing in one of these mature businesses, I want to know what the next chapter of growth can be for this company. It's not enough for it to just have stasis. What is it that it can do to transform its trajectory?

• 32:43Barry Ritholtz?

  So you co-invest along with Alex Ohanian, seven seventy six. Ohanian was behind Reddit, if I remember.

• 32:52Speaker 03

  He was a co-founder of Reddit and what seven, just to clarify, seven seventy six is his VC fund. The fabulous Serena Williams, yes. Seven seventy six had a program called the Titans Program. And so what seven seventy six did very graciously was write a check to me and said, you have full discretion on how to invest this.

• 33:12Barry Ritholtz?

  Wow.

• 33:13Speaker 03

  So it truly is backing with a capital B. And so the investments I've made there have been very interesting. It includes a business called Teal Health, which is an at-home cervical cancer test. So that women don't need to go to their doctors and have those very uncomfortable tests. They can do it in home. It provides access, by the way, to women in rural areas where there aren't enough doctors locally to help them. That's an example of a consumer health business that I invested in. Another one is a deep fake detection company called Reality Defender. That actually, that was an investment I made before deep fakes were grabbing the headlines. So I was lucky to invest in that business, which originally was backed by Eric Schmidt. Those are the kinds of examples of the technology businesses that I've invested behind.

• 33:56Barry Ritholtz?

  I'm trying to remember, there was a professor at Dartmouth that did a deep fake detection company. I don't know if that's Reality Defender or.

• 34:04Speaker 03

  This is, this one's a little different. But it's been around for about six years. It's done incredibly well at signing some big corporate partnerships. Gartner identified it as the leader in terms of the emerging technology companies looking to tackle this space. And it's just getting more and more important.

• 34:22Barry Ritholtz?

  So when you're looking at a private investment, either a startup or a private equity investment. How do you separate where the value creation is going to come from? Is it improving the businesses? Is it leverage? Is it a higher exit valuation? There are so many different ways capital and advice can improve a situation. Are those all distinct? Is it all, you know, door-to-door combat? Every just, every investment is somewhat different?

• 34:52Speaker 03

  Every investment is somewhat different. I would say within the buckets that you just described, the days to me of financial engineering and only financial engineering have been gone for a long time. There has to be a clear value creation plan. There has to be an operational plan that provides line of sight. What is it you can do to drive incremental revenue growth? What is it you can do to streamline overhead? What is it you can do to get your margins up? What is it you can do about your value proposition? And how you articulate it to your clients to make sure that you can take price in a consistent way? What are you doing to try to make sure that you're finding adjacencies that you can move into to expand your addressable market? All of those are critical. Yes, you need the right financing. Yes, you need to structure it appropriately.

• 35:35Speaker 03

  But I don't think we're at a point anymore, Barry, that higher valuations at exit can be expected. Unless you've actually done something to the business fundamentally to justify the change in that valuation outlook. Which to me comes back to the operational enhancements and the execution needed to deliver on them.

• 35:51Barry Ritholtz?

  You know, I'm a couple of decades older than you, so I have very vivid recollection of seeing various companies pop up in the nineties. And then either get steamrolled by Microsoft in some cases. Or just newer technology, better technology that bypassed whatever they were doing. And I've started to notice the same thing happening with AI.

• 36:16Speaker 03

  Yeah.

• 36:16Barry Ritholtz?

  That these new companies come along and we're going to do this. And it's like, no, no, Claude does that. I don't, I don't need you. Or here's our value proposition and you go to chat. Hey, can you do something in this space? A hundred percent. How challenging is this environment if, if AI, artificial intelligence? Potentially is so disruptive to what looks like promising startups?

• 36:45Speaker 03

  Back to why I still love those mature businesses that have been around from what seems like the dawn of time. Look, I think from the startups, there are still real opportunities. I mentioned I've invested in Yann Le Cun's recent startup, AMI. And he's focused on world, are you familiar with world models, Barry?

• 37:02Barry Ritholtz?

  Bigly.

• 37:03Speaker 03

  So in a nutshell, if we think about ChatGPT and we think about Claude, which I use enormously, as I'm sure you do. These large language models have been trained for the most part on written text.

• 37:14Barry Ritholtz?

  Right.

• 37:14Speaker 03

  Yes, we've also now in the world of generative AI and visuals and pictures and videos. But text has really been the core. That's why they're called L L Ms. World models move into the idea of AI being able to understand the three-dimensional or multi-dimensional physical world.

• 37:32Barry Ritholtz?

  For robotics and things like that.

• 37:33Speaker 03

  Exactly right. And I was lucky that several years ago, I sort of heard enough about world models that I was actually looking actively for an opportunity to start investing in them. And I'd invested with the group behind this particular raise back in twenty fourteen, before AI.

• 37:51Barry Ritholtz?

  Wow.

• 37:51Speaker 03

  Was a thing. It used to be called predictive analytics, right? You remember big data?

• 37:56Barry Ritholtz?

  Sure.

• 37:56Speaker 03

  And none of that truly meant AI in terms of the same kind of ability to generate. But the idea of the merits of huge repositories of data and inference and prediction have been around a lot longer than the last five years.

• 38:08Barry Ritholtz?

  Well, we could go back to, what was it? Big Blue and the chess competition?

• 38:12Speaker 03

  That's right.

• 38:13Barry Ritholtz?

  What was the model behind the Jeopardy?

• 38:17Speaker 03

  Go, Go is a big one.

• 38:18Barry Ritholtz?

  Go was a giant one, which is a simple but very nuanced, complex game. So versions predecessors to AI have certainly been around for decades. It's just become, it is the future Star Trek promised fifty years ago.

• 38:34Speaker 03

  In a format the consumer understands.

• 38:36Barry Ritholtz?

  That's right.

• 38:36Speaker 03

  And that's what's caught mindshare and that's what's caught attention. And that's what's caused proliferation that people get behind, I think. It's not just B to B anymore. Or it's not just a nerd like me getting excited about what this data could be. But to go back to your original question, Barry, there's absolutely space, space for play, for startups who can move faster. Who could be more nimble, can be quicker in using AI to create, I think, niche products. And then they become fabulous targets, acquisition targets for some of the bigger scaled players. Where I find opportunity exists. And I'm frustrated that not all big companies have capitalized on it.

• 39:18Speaker 03

  So many businesses are sitting on huge troves of data on their hardware. Not everyone's in the cloud, right? It's sitting there on the on-premise ERP systems that haven't gone to the cloud yet. Or we can take something that is more virtual and it's a public stock that's frustrated me, PayPal. It baffles my mind that PayPal with its scale and its first mover advantage has not done more faster. With the sheer amount of historical transaction data consumer immersion to sitting on. That's the kind of business.

• 39:51Barry Ritholtz?

  What happened with Stripe and with Square and which is, I think, is now Cube and.

• 39:55Speaker 03

  And BNPL came out, right?

• 39:57Barry Ritholtz?

  A whole bunch of things kind of leapfrogged over. I, I mean, I remember when they were just the processor for eBay.

• 40:05Speaker 03

  Yeah, that's right.

• 40:06Barry Ritholtz?

  It feels like, yeah, so sometimes you, you can become a victim of your own success. Hey, isn't that the, uh, crossing the chasm? Isn't that the innovator's dilemma that your success plants the seed for your eventual failure?

• 40:22Speaker 03

  It can anchor you. That being said, if you have success and you have the wherewithal to figure out how to use that success as a way in which to leapfrog the next person. I think that that's where there's opportunity. You know, in January twenty twenty two, Barry, I wrote a piece, I published it on LinkedIn, I talked about it on CNBC. And the name of the piece I wrote was a tech stock by any other name as Walmart.

• 40:47Barry Ritholtz?

  Right.

• 40:47Speaker 03

  Okay, so January twenty twenty two. And the reason I wrote that was I was starting to see in Walmart's filings, it's a business I've been obsessed with for ages.

• 40:55Barry Ritholtz?

  Right.

• 40:55Speaker 03

  Starting to talk about this ad business that was sort of hiding inside it. That Walmart in its transcripts and its filings was starting to talk about all of the data it was getting from its e-commerce platform. And growing demand by brands to figure out how to get in front of clients or consumers beyond just social media, because it was getting expensive now just to have campaigns or campaigns on Facebook or Instagram. And so I wrote this piece to call attention to here is Walmart. Some call them a dinosaur, a dinosaur many people love. But it had woken up to the fact that it had a gem inside of its massive business, which was data. Fast forward to today, it's a nearly six and a half billion dollar revenue part of the business.

• 41:36Speaker 03

  And it moved its listing to NASDAQ to really hammer home the idea that Walmart believes itself now to be a tech company.

• 41:44Barry Ritholtz?

  That's really interesting. I used to think of them as a logistics company.

• 41:48Speaker 03

  Yeah.

• 41:49Barry Ritholtz?

  Were they chasing what Amazon had done in that space prior? Or was it truly their own innovation? By the way, my favorite data point on Walmart is they are the single biggest deployer of solar panels.

• 42:03Speaker 03

  Yeah, that's interesting.

• 42:04Barry Ritholtz?

  Because they just have endless giant flat stores, giant flat warehouses. Primarily, at least they used to be primarily in the sun belt, they've expanded obviously everywhere. But the single biggest consumer of solar energy, which dramatic reduction in energy consumption costs.

• 42:23Speaker 03

  It's interesting too. I, I remember researching virtual reality headsets and Oculus. And someone should fact check me on this, but the time I looked at this a couple of years ago. Walmart had trained a million store associates using VR headsets and Oculus for things like role play, dealing with a difficult customer, or figuring out how to stack shelves more safely.

• 42:43Speaker 03

  Talk about adopting technology at scale. That's the kind of thing where, you know, these big companies, they may be in danger of being leapfrogged. But they're also there with the potential to grab new technology and do new things with it if they had the wherewithal to do so.

• 42:58Barry Ritholtz?

  So I'm curious about the potential backlash, and I'll give you two examples. One is, you know, I was an Amazon customer since I got my first gift certificate from a college roommate in the late 90s. But now, like Walmart, advertising is a giant business, and it's completely degraded the experience as a consumer to the point where I'm searching for a specific lithium battery for key fob, and I have the model number 7435. Why are you showing me an ad? Like, it used to be, you would click on the first thing that pops up, and that's 7435 BMW key fob, or whatever it was at the time.

• 43:43Barry Ritholtz?

  And like, your advert, okay, so great, you got 11 cents for that ad. I ordered this, it's the wrong one, and if I'm searching for 7435, and I'm gonna return it, because I want you to, it to cost you money, so you stop serving the wrong ads. Generally speaking, there's literally an entire book, Crapification. And I'm using the-

• 44:08Speaker 03

  That's not actually the title of the-

• 44:10Barry Ritholtz?

  I'm using the-

• 44:11Speaker 03

  That's polite, yes.

• 44:12Barry Ritholtz?

  PG-rated version, and Crapification. At what point is there a backlash brewing to that sort of stuff? And then perhaps the more modern, and I think the ad stuff is already 10 years old, the more modern example of that is, are we just gonna have an arms race between stuff like dynamic pricing, where, oh, we can read your zip code off your license plate, and we're gonna charge you more for a Big Mac? Ever since we started seeing a lot more of that with a company like Uber, all right, it's the same car, it's the same driver, I'm gonna take a lift, and it's 40% less. What is the risk?

• 44:55Barry Ritholtz?

  There was just, Torsten Sloot of Apollo just wrote, hey, how long is it gonna be before various agentic, like, like Facebook's Muse and other agents are gonna say, hey, find out where the highest paying money market is. My big money center bank gives me a quarter percent interest. Move the money to Schwab or Fidelity, wherever, get me 5%. And as soon as this is competitive, move it back. I mean, at a certain point, some of these games are just gonna alienate customers or force an arms race.

• 45:32Speaker 03

  So there's a lot, there's a lot to unpack, then, there's lots of questions within that.

• 45:36Barry Ritholtz?

  Yes.

• 45:37Speaker 03

  So let's start with the last one. Because what you just described is businesses with dynamic pricing. The, the not favored word for that is price discrimination.

• 45:48Barry Ritholtz?

  Right.

• 45:49Speaker 03

  Or the ultimate expression of personalization, which is something consumers have long believed to be wanting to have. Well, you just described, Barry, though, if you had an agent that you could deploy to look around for you and find the place to stash your money that's going to get the highest return for you, I don't think you're gonna have a, I don't think you would have a backlash against that use of AI. Is that fair to say?

• 46:13Barry Ritholtz?

  As a consumer, for sure, absolutely.

• 46:14Speaker 03

  As a consumer, you wouldn't. So that's a case where AI could be proven to help the consumer. Different from the first example you, you gave of the, quote, and Crapification-

• 46:23Barry Ritholtz?

  Right.

• 46:24Speaker 03

  -of things like ads, where in that instance, the AI is not working to serve up what you want. And I think there's, I think, two different issues. I think there are companies out there, I invested in one of them, actually, a business called Vodi, which went to one of the big e-commerce platforms and typed in on their search engine, I want to find, you know, a red sofa, or a red sofa with buttons. And the quality of the feed, the search results that came back, was just really, really poor. And what its founder, Stephanie Horbicheski, did was build this company, Vodi, to work with retailers to say, you've gotta get your platforms better. Consumers don't want to be served up the wrong answer to their searches. They want you to understand what I mean.

• 47:06Barry Ritholtz?

  Well, if we can monetize it through ads, that seems to be like, search and advertising have an inherent conflict with, we want people scrolling through pages, results, and ads being served alongside it, or we're gonna show you whoever pays the most for an ad-

• 47:22Speaker 03

  Yes.

• 47:23Barry Ritholtz?

  -which may not be the best fit for what you're searching for. How do you resolve that? To me, like, I'm gonna bet that some states, probably California, New York, and then it spreads, are gonna outlaw dynamic pricing in supermarkets. When you buy a price, a dozen eggs, it shouldn't be able to figure out who you are, what you drive.

• 47:47Speaker 03

  Your credit score, right.

• 47:48Barry Ritholtz?

  Right. There was something Walmart was working on, a thing that they'll charge you more for mayonnaise if the cart you're driving around with senses, you already have tuna fish in your cart. That sort of stuff, this is what the Consumer Finance Board that was, Protection Board that was more or less gutted this presidency was supposed to stop. If you think inflation is bad now, wait till these license plate readers and AI maxing out, it's gonna add 30, 40% to the price of goods, unless there's either legislation or an arms race with consumer AI saying, no, thank you.

• 48:32Speaker 03

  And people vote with their feet.

• 48:33Barry Ritholtz?

  Yeah.

• 48:34Speaker 03

  And they say, I don't wanna deal with this. There is a backlash.

• 48:36Barry Ritholtz?

  But inertia is, eventually, but there's still, look, I, I think that a lot of people discovered there are retailers worth sharing your credit card with during the pandemic. For the longest time, Amazon was clearly the low-price provider. Not only is that no longer the case, it's not even remotely close to the case. But I, I had, I, there was a TV I wanted to buy that I thought was kind of exorbitant. And Claude just alerted me, hey, it's on sale $500 less at Amazon.

• 49:12Speaker 03

  Yeah.

• 49:13Barry Ritholtz?

  Hey, fantastic. Are we gonna have dynamic pricing versus agentic consumer apps?

• 49:19Speaker 03

  I don't think it's one versus the other necessarily. One of the things I will share with you, which was interesting, I was moderating at the World Department Store Summit in Mexico, in Mexico City, earlier this year.

• 49:33Barry Ritholtz?

  By the way, where they're building giant data centers along the border.

• 49:37Speaker 03

  Yes, huge, huge data centers. And one of the things that the CEO of Liverpool, which is a big department store there, talked about was how consumer products companies and retailers are going, have to figure out how to market to agents in the same way that they've been figuring out how to market to consumers. Isn't that fascinating?

• 49:57Barry Ritholtz?

  That is absolutely fascinating.

• 49:58Speaker 03

  Because exactly using the example you gave, Barry, if an agent is now purchasing on your behalf, how do you make sure the agent can find the product that the product producer wants to have found quickly? So I think we've got that coming. I think we've got a shift in how we see the retailers and the consumer product companies think, figure out how are they gonna be found the quickest with the data that they want to control and relay by these agents who are doing shopping on the path for consumers.

• 50:26Barry Ritholtz?

  It, it truly is fascinating. I mean, you live in interesting times is considered a curse, but I find interesting times are utterly fascinating, and there's always something new and, and different to, to learn about. Coming up, we continue our conversation with Anne Barry, founder and managing partner of Threadneedle, talking about the current venture and IPO landscape. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.

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• 53:32Barry Ritholtz?

  I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio. Anne Barry is the founder and managing partner at Threadneedle. They provide both advice and capital to high-growth companies at various stages of their life cycle, from C to A and B rounds, to private equity, to established companies. So we've been talking about AI, I'm legally obligated to discuss these things, but I'm fascinated by it. You cover very heavy AI infrastructure spending on your show all the time, on your podcast.

• 54:10Barry Ritholtz?

  Um. How do you respond to all these accusations of? Hey, this is a bubble, or it's circular financing, or the spending isn't justified? Like, what's your reaction to those sort of commentaries?

• 54:23Speaker 03

  My reaction is they're all legitimate concerns. And I raise that when I'm having interviews with CEOs of big companies in the space, Barry. And the reason I feel that way is not because I don't believe in the promise of AI. I absolutely do, because I said in the early stages, the most innovative, innovative to, to the most scaled. But as somebody who also spends a lot of time looking at public markets, trained by the discipline of looking at return on investment that comes from growing up in the private capital world.

• 54:58Speaker 03

  When you go and look at the earnings transcripts, or listen to the earnings calls, or look at the presentations, or even read the analyst research. There is just not a ton of rigor at the moment in being able to wrap one's arms around what is the real return that's being expected to these capex dollars. Now, the analogy that people give is the internet age, right? The dawn of the internet.

• 55:19Barry Ritholtz?

  It's a terrible comparison.

• 55:20Speaker 03

  Tell me why you say that.

• 55:21Barry Ritholtz?

  Well, these are real companies with, you talk about path to cash flow.

• 55:26Speaker 03

  Yeah.

• 55:28Barry Ritholtz?

  Like pets.com is the epitome of that space. And 20 years later, you have Chewy, which is what pets.com could have been. It, it, it just was too costly then. Now, these companies, they have scale, they have revenue, some even have profits. It feels, plus the internet. You know, we had a sense of what the internet was gonna do, and it was connected. But we had print and we had video, when we had other related things that the internet just made a whole lot more accessible. This feels very much like an order of magnitude, like an industrial revolution-like change that's happening 100x faster.

• 56:10Barry Ritholtz?

  It, it just seems, and of course, there'll be misallocation of capital, like there always is every

• 56:16Speaker 03

  Yeah.

• 56:16Barry Ritholtz?

  tech innovation. But a lot of things got funded during the internet. It wasn't just that they didn't work out, they were barely wisps of an idea. It seems that what's getting funded are real things with real potential. And in many cases, actual revenue. We can argue about $2 trillion market caps. Clearly, that's a giant number. For a technology that we don't know how profitable it'll ultimately be.

• 56:46Speaker 03

  And that's my point, right? That, that is my point, Barry, which is there are, we are in the world of tangible market caps, these are tangible numbers being tied to non-tangible, at least right now, returns. We know that there is gonna be an outcome that's tangible, it's the measurability that we're not able to see. That's, that to me is where the concern lies. It's not whether the underlying technology will be transformational. I believe it will be. But how transformational and when is where the math becomes very difficult to unpack when you start looking at these valuations. I just want to finish thought. The one place I am seeing discipline is actually with these earlier-stage companies. If you roll back, do you remember 2021, 2022? Anything that was an NFT or Web 3, they were getting crazy valuations.

• 57:30Speaker 03

  I'm not seeing that lack of discipline right now, if I, which, which I do take some comfort from when it comes to the early-stage investing.

• 57:38Barry Ritholtz?

  OpenAI and Anthropic and arguably SpaceX. You know, there's a great chart floating around that shows those three IPOs are gonna be more, worth more than every technology IPO from 1980 to 1925. So that really raises a question, and, and sure, you have to inflation adjust it, but even still. Especially given the open source models that are out there. Yes, there's a concern that they're from China and there's our security issues. How long is it gonna be before a couple open source models gain traction that are domestic, found in the US

• 58:21Barry Ritholtz?

  by former Anthropic AI, Microsoft, Google, whatever? And what does that mean to the profitability of these mega companies? If, now, Google Docs were free, they never got rid of Microsoft Office. There were a whole bunch of open source operating systems. I mean, Linux underlies a whole bunch of stuff. But Microsoft Windows and seem to have done okay over the years. So I don't know if open source is a genuine threat to these, but it's certainly a factor you have to think about.

• 58:55Speaker 03

  I think overseas, open source is something to look at. And, you know, I travel extensively globally. And it's always interesting to me to look at technologies that are being received a certain way in the US. And then look overseas to see how they're being adopted. And which international, non-US companies are gaining scale outside the US market? So for example, if you go to Mexico City, or you go to parts of Africa, it's Chinese EVs everywhere. Right? If you go to parts of the world that are not Europe or the United States, DeepSeek and the Chinese models are getting rapidly adopted. Because it's free. Right? And even the paid versions are, are gonna be cheaper.

• 59:38Barry Ritholtz?

  Much cheaper.

• 59:38Speaker 03

  Much cheaper than the paid versions being produced by OpenAI and Anthropic and, and Google. So.

• 59:46Barry Ritholtz?

  So I, I know I wouldn't wanna give DeepSeek access to my investing or bank account.

• 59:52Speaker 03

  But you would give it to Claude?

• 59:54Barry Ritholtz?

  I would be more inclined to give it to Claude. So if I'm gonna give, so Claude now has access to my calendar and email. I let it create drafts, not send it out.

• 1:00:05Speaker 03

  Instead of Gemini?

• 1:00:07Barry Ritholtz?

  Gemini, I use, I use Notebook.

• 1:00:09Speaker 03

  Okay.

• 1:00:09Barry Ritholtz?

  If I wanna upload a PDF of a book or something and say, so the way, this is a whole nother conversation, but the way I like to use AI is to do the first draft myself. And then to ask it independently for a draft. And then to combine the two and say, take the best of both. And it's still like 80, 20, or 70, 30 me. But I've watched it shift. I've watched it go from mostly human to collaborative. I try not to be transactional, I try to be collaborative with it. So I use Notebook, which is a Google product for, here's a 400-page PDF. Give me the best data points, give me the best quotes from the author or anybody author quotes.

• 1:00:51Barry Ritholtz?

  And I've read the book, what do you think is the most interesting theme that comes out of this? And sometimes you get a really intelligent answer, and sometimes you get, oh, you still don't understand the nuances here.

• 1:01:03Speaker 03

  Right.

• 1:01:04Barry Ritholtz?

  But it continues to improve every, every time. It's a little better, a little better.

• 1:01:09Speaker 03

  Well, you're training it.

• 1:01:10Barry Ritholtz?

  Yes.

• 1:01:10Speaker 03

  You're getting it there. And at least I understand.

• 1:01:11Barry Ritholtz?

  I've been training these for, well, Claude for a year and Gemini for, I don't know, Notebook for six months, I think, I start over the summer. And yeah, they, it's, I'm training it, but they're also improving very rapidly.

• 1:01:28Speaker 03

  Well, I think to, to your question on can there be a new company that comes out of one of the behemoths that we see today and leapfrogs? I think what we're seeing, Barry, is they're getting scooped up and acquired pretty quickly.

• 1:01:40Barry Ritholtz?

  Right.

• 1:01:41Speaker 03

  Right? So when I talk about the world models thesis that I have, I believe in this for robotics, I've invested in industrial tech for a while. Fei-Fei Li had her world models company just bought by AMD. Right?

• 1:01:55Speaker 03

  The ability of the OpenAIs and the Anthropics to raise capital, because at the end of the day, there's almost a flight to scale.

• 1:02:01Barry Ritholtz?

  Right.

• 1:02:02Speaker 03

  I wouldn't call it safety, but there's a flight to scale. Is arming these folks with war chests that they're using to go out and scoop up, I think, anything that could be a contender.

• 1:02:10Barry Ritholtz?

  Enterprise.

• 1:02:11Speaker 03

  Flight to enterprise, yeah.

• 1:02:12Barry Ritholtz?

  Yeah.

• 1:02:12Speaker 03

  Great way to put it.

• 1:02:13Barry Ritholtz?

  You know, when we look at the concentration in the Mag 7 that everybody complains about, it's not seven companies, it's a thousand companies, they've been doing acquisitions

• 1:02:26Barry Ritholtz?

  for 25 years. Really, we haven't seen the sort of antitrust enforcement since Reagan was in office that would have prevented all that happening. So now it's just a whole different business sector that's scaling up. Look at how many businesses Google owns, YouTube owns, uh, Google owns YouTube. Look at Microsoft, look at Apple, and, and then look at this giant media acquisition.

• 1:02:52Barry Ritholtz?

  Can you still get innovation from these behemoths? Is it just gonna bubble up and these companies get acquired? What does that mean for the innovation economy? What does that mean for the startup economy? And most importantly, what does it mean to you as an investor?

• 1:03:05Speaker 03

  Well, as an investor, I can start by saying I find it exciting because it means your exit opportunity feels at the moment to be pretty robust.

• 1:03:13Barry Ritholtz?

  Not an IPO, more likely.

• 1:03:15Speaker 03

  Not an IPO, correct. And we've still see, we've got corporations that still have big cash balances. That's been true for a while. Some have given their capital back to shareholders through buyback programs or hiking their dividends. But they want to buy. And you know what's so interesting, Barry? When I interview CEOs and CFOs of these big public tech companies, I can't help myself. I ask the question, what is your criteria for doing an acquisition? And I hear everything. The technology is the right fit. There's product adjacency. It's got a great team. It's gonna fit our culture. Boom, boom, boom, boom, boom. I don't hear price till I ask about it. I don't. I have to say, but what about valuation? Well, you know.

• 1:03:54Barry Ritholtz?

  Let me, let me name drop a second.

• 1:03:56Speaker 03

  Yeah, please.

• 1:03:57Barry Ritholtz?

  So I got to, got to interview Mark Andreessen eight, 10 years ago.

• 1:04:02Speaker 03

  Yeah.

• 1:04:02Barry Ritholtz?

  In their Palo Alto office. And I asked about valuation. And he's like, you know, we're, we're in the business of, of lots of failures and the occasional home run.

• 1:04:17Speaker 03

  Right.

• 1:04:17Barry Ritholtz?

  And so he goes, people thought we were crazy when we put all this money into Facebook. We could have paid double. Wouldn't have made any difference.

• 1:04:26Speaker 03

  Difference, right.

• 1:04:27Barry Ritholtz?

  If you're looking for

• 1:04:28Speaker 03

  That's right.

• 1:04:28Barry Ritholtz?

  A 50 to 100x.

• 1:04:30Speaker 03

  Yeah.

• 1:04:30Barry Ritholtz?

  Well, at a certain point, and maybe $2 trillion for an IPO is that point? I don't know. But at a certain point, it seems the valuation, if you're a $100 billion and up company, what's 50 or 100 million dollars here or there? It almost is irrelevant. Is that, am I overstating the

• 1:04:52Speaker 03

  No.

• 1:04:52Barry Ritholtz?

  valuation?

• 1:04:53Speaker 03

  I don't, I don't think you are. And, and these are companies that have historically been known for discipline, right? Defined as a very clear sense of what their return on investment has to be with these acquisitions. And they're now saying being in the game is more important than valuing the game. The other place we're seeing this, Barry, which I find fascinating, is some of the biggest venture capital firms in the United States now are corporates that are investing their balance sheets into startups. And in some cases, it's paid off. You know, Nvidia is a big, has a big stake in SpaceX. You know, last earnings season, there was a lot of coverage. You see the news, you know, the FT was covering what proportion of these companies, public companies' earnings were coming from the markups, the write-ups and the valuation of some of these, you know, AI businesses as they prepare to go public.

• 1:05:37Barry Ritholtz?

  Which are really one-time.

• 1:05:38Speaker 03

  Which are one-time bonds. That's right.

• 1:05:40Barry Ritholtz?

  Or one-time markups as opposed to ongoing. You can't, you can't do one of those a week. There's only so much.

• 1:05:45Speaker 03

  There's only so many. But you look at Nvidia, you look at Salesforce, you look at the balance sheets of these companies and you see how much they have invested in startups. Even take out the markups and just look at the underlying, the cost basis, billions of dollars deployed in funding young companies in their ecosystems. I mean, it's absolutely extraordinary. And by the way, a smart M and A tactic, right? Because you're basically looking at a potential acquisition target as it grows up within your sphere of influence.

• 1:06:12Barry Ritholtz?

  Before I get to my favorite questions, I just have to ask you a little bit about the media background that you do. Not only that you host a podcast and, and have been writing about stuff for years, but how has the platform built around Jimmy Kimmel, Wheelhouse? How did that kind of nudge you into looking at media a little different, almost as an extension of what you do as an investor?

• 1:06:41Speaker 03

  Yeah. So at the time that I joined Wheelhouse and Jimmy was much more involved there than he is today. So I should just clarify that. It was at a moment in time, this was 2021 when I joined, and the words creator economy were really taking flight. Do you remember this, Barry?

• 1:06:58Barry Ritholtz?

  Sure.

• 1:06:58Speaker 03

  Everyone was talking about, one version was Kim Kardashian wanting to raise a private equity fund. Another was NFTs. You're grimacing as I say that, Barry.

• 1:07:08Barry Ritholtz?

  The Finfluencers is just.

• 1:07:11Speaker 03

  Well, that's a different, we're happy to talk about that too.

• 1:07:14Barry Ritholtz?

  But a creator, but a part of the creator economy.

• 1:07:16Speaker 03

  The creator economy. And so for the, the short period of time that I was there, it was a really excellent education on how important content is now for so many businesses. But you have your own business, Barry. I've no doubt the fact that you host this wonderful podcast is helpful to you.

• 1:07:35Barry Ritholtz?

  We have a giant media footprint

• 1:07:36Speaker 03

  Exactly.

• 1:07:37Barry Ritholtz?

  that my partners and myself have built over 10 years. And it's, for, for, for us, we started out with my media footprint and clients coming to us as opposed to the other way around. And it worked. So we just continually built on that.

• 1:07:55Speaker 03

  I do, I saw there at Wheelhouse, and I think they were ahead of the curve in thinking about this. And I've seen since then with my own media endeavors, there is a flywheel that content builds an audience. Now, an audience does not necessarily translate directly into a consumer, by the way. And we're speaking.

• 1:08:14Barry Ritholtz?

  It's a process.

• 1:08:14Speaker 03

  It's a process. It doesn't always work. So we're speaking one at a moment in time where Scarlett Johansson has just announced that her beauty brand is shuttering. Right? So that's an example of where celebrity and an audience and fandom does not necessarily translate into consistent consumer purchasing habits. But enough of it does exist in some places that one of the things that I now look at in terms of execution, to come back to that, if I'm investing in a consumer facing business, I do want to understand what their content strategy is. Not just traditional paid media, you know, not just the same old campaigns on social media.

• 1:08:49Barry Ritholtz?

  Right.

• 1:08:50Speaker 03

  Is the founder story being told? Should it be in a way that's not a big distraction for the founder from running their business? Are there collaborations that should be done with content creators to amplify them? Is the marketing team thinking more creatively and expansively about what it is to put together their marketing campaign, which includes working with creators? So it was incredibly good period working with Wheelhouse to get educated and to learn about what works and what doesn't in the world where it overlaps.

• 1:09:20Barry Ritholtz?

  Super interesting. I only have you for another 10 minutes. So let's jump to our speed round. Starting with, you've mentioned some of your mentors. Tell us about the people who helped shape your career.

• 1:09:33Speaker 03

  Can I go back to high school? It's a slightly quirky one because.

• 1:09:37Barry Ritholtz?

  You go back to wherever.

• 1:09:38Speaker 03

  Wherever. Because you're very well read, Barry. And I think you'll appreciate what I'm about to say. When I was a couple of years into my career on Wall Street, I actually wrote a letter to my high school English literature teacher, a woman called Naomi Rich. And said, I was always good at math and I, I really enjoyed English Lit. And I said, actually, if I look at what was the best training for my career in investing, hands down, it was English literature.

• 1:10:02Barry Ritholtz?

  Oh.

• 1:10:03Speaker 03

  Having to look at a poem I'd never read before, or a, a piece of prose I'd never read before, or a book, what you have to do is decide what you infer from what you're reading, come up with a point of view around how it's resonating with you, and then articulate in a structured way in an essay, beginning, middle and end, how it's landed for you, why, cite elements, use quotations, prove your case. Doesn't that sound to you like putting together an investment committee memo?

• 1:10:32Barry Ritholtz?

  That is a classic syllogism where, hey, look at this set of data, facts, words. Figure out what the theme is and then apply it to this new situation.

• 1:10:43Speaker 03

  And be persuasive to someone.

• 1:10:45Barry Ritholtz?

  That's true across so many different fields, 100%. So you're high school English Lit.

• 1:10:50Speaker 03

  Yeah, as one. And in an unexpected way. But there are others. When I was starting out in private equity, Goldman in London, you know, I mentioned some other Goldman folks I worked with. Sanjay Patel was co-running the group I was in, the merchant bank in London. He went on to run Apollo International. And he was a great influence. You know, he said, go to business school, have fun, don't mess up, have fun. And he said something interesting to me. He said, you know, people who go to graduate school wanting to network intentionally, they get it all wrong. Don't be that person with a blackberry, the blackberries then, you know, with, you know, there are people like that giving up business.

• 1:11:26Barry Ritholtz?

  Let it be organic, not forced.

• 1:11:28Speaker 03

  Make friends.

• 1:11:28Barry Ritholtz?

  Yeah.

• 1:11:29Speaker 03

  I was 24 years old. It's like, go have a blast, make friends, do your studies and take it seriously. He said, because you'll be surprised, 20 years after graduation, people are still going to remember, were you a clown in class? Or were you actually a serious person who they actually wanted to listen to in class? Which I thought was very interesting. So.

• 1:11:46Barry Ritholtz?

  Very interesting.

• 1:11:47Speaker 03

  He, he also gave me great career advice. Gail Mandel was on my board when I was running the laundry business. She was the CEO of Wyndham Destinations. Unbelievable woman, fabulous execution, grown up as a CFO. And during a crisis, was there every second of every day. Very senior and hands on. And then I do want to shout out Larry Bossidy.

• 1:12:09Barry Ritholtz?

  Of course.

• 1:12:10Speaker 03

  Who is the CEO of Allied Signal. And he too was an advisor when my first CEO gig. And Barry, he was unfailingly in my corner. He would call me every week like clockwork.

• 1:12:24Barry Ritholtz?

  I'm not being rude, I'm checking something.

• 1:12:26Speaker 03

  Please do. He sadly passed away last summer, which I was devastated by. But unbelievable execution, cared about his people, was a great mentor to me. Constantly pushed me with the question, two questions. Are you still growing? And I say, Larry, no, I'm still five foot two. Last time you saw me. And when I was thinking about a new endeavor, including when I was thinking about doing more in media or starting my own business, he said, do you think it will be successful? And he was unbelievably good about framing. What does success mean? And what would it take for something to achieve the predefined success? And he was very generous with his time and wisdom with me.

• 1:13:08Barry Ritholtz?

  Let's talk about books. What are some of your favorites? What are you reading currently?

• 1:13:11Speaker 03

  So one of my favorites, so I read it a couple of years ago, but I always have it close by. Andrew Roberts's biography of Winston Churchill. I mean, I carried around the hard copy of that book to the beach, Barry. I was so devoted to reading it. It was a great book, which I really... Well, but it's a fabulous read in any location, so I recommend that one. There's a book by a Bloomberg journalist who I admire greatly. Katrina Manson wrote a book called Project Maven, which is about the use of AI in the Pentagon and the way in which AI has been adopted by the military. Fabulous read that came out this year, which I strongly recommend. And Sebastian Malaby, because I know you're Mr. AI.

• 1:13:50Barry Ritholtz?

  Sure, I've had him on a couple of times.

• 1:13:51Speaker 03

  Yeah, The Infinity Machine, great read. And I think the challenge is AI is moving so quickly. The book cycle, publication cycle, doesn't quite keep up with how quickly the tech's moving. But I think they're good foundational pieces. So I would start there. There's one other book too, The Algorithm by John McNeil.

• 1:14:09Barry Ritholtz?

  I've heard of it.

• 1:14:10Speaker 03

  John McNeil was the president of Tesla. He wrote a book called The Algorithm that talked about how a business like Tesla was able to move at such speed with such scale. And it's all about execution.

• 1:14:21Barry Ritholtz?

  Besides books, since you host a podcast, I'm curious. What podcasts do you listen to outside of finance? Or anything else you're streaming, Netflix, Amazon, what have you?

• 1:14:34Speaker 03

  Well, I listen to a lot of Bloomberg. It's my go to for news. So congratulations to you for contributing to that here, Barry. I got to tell you, and it's an awful confession to make, but I'm going to make it. For someone who appears on content and invests around it a lot, I spend most of my time with people in real life, if I'm honest. I travel a lot for both passion and work. And for me, listening to a podcast, I'm going to have a conversation with a person.

• 1:15:03Barry Ritholtz?

  Right, right. You're not the first person in our space that said that, because you're doing research, you're prepping, you're running your day job.

• 1:15:11Speaker 03

  I'm absorbing business content all the time.

• 1:15:14Barry Ritholtz?

  Right, so it's like, I always have cues on my phone of pods to listen to. And it's, when it becomes homework, I just start deleting it. But it's hard to access that when you're so busy doing other stuff and creating your own content.

• 1:15:32Speaker 03

  The algo is smart, though. It feeds me, even on Netflix or Apple. It feeds me fictional stuff that seems to tie in with my business perspective. So have you watched Silo? It's fantastic.

• 1:15:42Barry Ritholtz?

  I can't get my wife to sit down and watch it. We've tried.

• 1:15:46Speaker 03

  Well, tell her it's a can do woman who's getting things done and leading in a way that you wouldn't.

• 1:15:50Barry Ritholtz?

  Same with Pluribus on Apple.

• 1:15:52Speaker 03

  Which I haven't seen yet.

• 1:15:53Barry Ritholtz?

  I haven't seen either, but everybody who recommends Silo has said, oh, and if you like that, you should.

• 1:15:58Speaker 03

  And The Diplomat's the other one, of course.

• 1:15:59Barry Ritholtz?

  Well, that's fantastic.

• 1:16:00Speaker 03

  Because I'm nylon, I'm New York.

• 1:16:02Barry Ritholtz?

  There's a fourth or a fifth season coming out.

• 1:16:04Speaker 03

  I think it's been green.

• 1:16:05Barry Ritholtz?

  Of It's That, and there's one other that's similar. I don't remember if it was The Agency or The Dipl... But some of our go tos.

• 1:16:13Speaker 03

  They're coming back.

• 1:16:15Barry Ritholtz?

  Right, September, October, November, they're coming out. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either M and A, venture and startup investing, private equity, or media?

• 1:16:31Speaker 03

  I would say go get your hands dirty with AI. And frankly, that extends, Barry, to any young person now trying to get into the workforce. And just to tell you a quick story, this applies to everybody. You know, there's one company I'm on the board of, and I said to folks, you encourage, what are you doing in AI? And I got some feedback. I said, here's what's going to happen. Everyone has to do their Claude 101 certificate and send it back to me. Because I could just tell that some very senior folks weren't getting their hands dirty. They were waiting for someone else to tell them, this is what it looks like and this is what it can do. I think a young person in college now is such an advantage because I think they're probably more innately wired to experiment with these tools,

• 1:17:14Speaker 03

  intuit what they're capable of, to see into the future and what they're able to do. I would say go master them and be ready to come in and teach your colleagues how to use it and be the go to person on adoption.

• 1:17:25Barry Ritholtz?

  Our final question. What do you know about the world of startup, venture, private equity investing today? Would have been useful 20, 25 years ago when you were first getting started.

• 1:17:36Speaker 03

  I would come back to what I've said, which is get experience in the broader world. You know, finance is a pretty narrow place, at least the skills that you learn starting out. You tend to be in one organization, you're looking at one deal at a time. You're learning almost one skill at a time. AI will change that. But it wasn't frankly, until I got to graduate school and I met people who'd served in the military. Or I went from having lots of finance only friends to people who'd run big P and L as marketing managers at consumer packaged good businesses. I would say go out there, be curious, travel, meet lots of different kinds of people. Try to work inside a company to learn what it is truly like to be accountable

• 1:18:18Speaker 03

  inside and beholden to your capital providers. And then come back to finance or go into finance, knowing that the numbers are just a representation of the world out there. And get that context.

• 1:18:30Barry Ritholtz?

  Huh, really super interesting. And thank you for being so generous with your time. We have been speaking with Anne Berry. She's founder and managing partner at Threadneedle. If you enjoy this conversation, well, check out any of the 672 we've done over the past 12 years. You can find those at Bloomberg, Apple, Spotify, YouTube, wherever you find your favorite podcasts. I would be remiss if I didn't thank the crack staff that helps put these conversations together each week. Sam Denzinger is our video producer. Anna Luke is my audio producer. Noah Friedman as my podcast producer.

• 1:19:13Barry Ritholtz?

  Sean Russo is my head of research. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio. Bloomberg Radio.

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