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

25:57Perfect. But if you're a large institution and are willing to do a standard managed account, you can come in anytime. And the two structures invest that same portfolio from here forward. There's never conflict of mind, the legacy. But the advantage of that is there's no fundraising cliffs. We're always fundraising. It's always steady. There's no big jumps. There's no pressure to liquidate something to meet some artificial target. That makes our lives so much easier. And then the third component that I think is distinctive, which I hated initially because we have a communist system of compensation, which is you all get a percent of the total performance, not your individual performance.

26:37I was like, are you kidding me? I'm a spearfisherman. I'm a spearfisherman. I got some big fish left in me. I mean, this communism didn't work in the Soviet Union. And then I saw how it changed everything in that the level of collaboration is fantastic. And the way you prevent the Soviet Union from happening is if you're not pulling your weight. You're not on the boat. So it's a meritocracy in that to be in this community where we all win together and lose together, we all have to be effective and bringing as much into the partners that we're taking away from it. And that's what keeps the health and meritocracy of the system.

27:13But there isn't a hyper incentive to be hyper productive because if I'm hyper productive, I'll make more wins than I give them. No, it's much more about winning as a team as opposed to winning as an individual. That dual structure, which is unusual, not common. What are the negatives or trade-offs associated with that? There's two very serious trade-offs. First of all, it takes forever to explain. We'll do it at scale right here. Deliver us to do it again. And they're like, why do you have two series? Which one is better? Which one is worse? I can get it where this is good for you, but how is it good for me?

27:49So instead of the onboarding experience is a painful experience. The other downside is fundraising is a perpetual activity. Whereas for a lot of my competitors, every five years, it's a six-month sprint that all they do is fundraise, and then they can not fundraise for another four and a half years. It's kind of like binge dieting. You only do it once every six years. And for us, it's a no-brainer. That's a structure that leads to more productive deployment or cap. My friend, John Kim, who is a very well known fundraiser at General Catalyst, has this simple equation, which is that persuasion equals desire minus fear.

28:29What have you learned about fundraising, given that you've had to do it as a firm on a constant basis? I think most humans go from FOMO to fear. And one of the traps of our industry is you can only fundraise when things are very expensive, because that's when everyone's on FOMO. Have you been able to invert that fear to FOMO problem so that you can, if you have been able to raise some money in the harder times, what is the key to doing that well? There's always someone in the world that has excess capital, even in a time of fear. And you go there. There's another, you'd be surprised. I do this like in Brazil.

29:08One other of our tricks, our tricks, or strategies to navigate global complexity is in every geography we're in, we have the best families, the most entrepreneurial families become investors. And we cultivate them, not necessarily for their money, but for their insights around the country and around the entrepreneurs with which we partner. And it takes a really long time. And a lot of those families are typically entrepreneurial. And they're like, no, no, I don't invest in funds. I invest directly because I created a business and I'm so good and I'm good at getting the big fish. And I'm like, I asked him a very simple question.

29:39I say, hey, what percent of your net worth do you have in Brazil? And they're like, hmm, like liquid net worth? No, no, no, no, total net worth. And they're like, hmm, the number's typically between 90 and 95%. I say, that's very interesting. And I say, close your eyes. Imagine you're now Brazilian. You're a citizen of the world. What percent of your wealth would you put in Brazil? And they're like, oh, 3%. Oh, yeah. How about I help you get a little closer to three than the 95 you're in? So I find that argument to be genuinely effective because it's genuinely in their best interest. And I think people have a natural tendency to overinvest in that in which they understand.

30:22And of course, those families understand what it is to invest in Brazil. But in doing that, they're massively undiversified. And the world has become really, really risky. And there's only one free lunch in finance. Do you remember that from our... Yeah, diversification. Diversification is the only free lunch. So thinking strategically over how to diversify, with whom to diversify, is hard, but super valuable if you want that free lunch. Speaking of diversification, maybe the most interesting dimension of that today is geographic. We were talking before we hit record about the incredibly wide gulf between the pristine U.S.

31:00equity assets and basically everywhere else in the world. There was a time when you saw this chart between like the S &P 500 and the ACQUI world, XERAS or something. And it was kind of back and forth and back and forth. And then the line has just gone like this for 20 years where the U.S. has just so completely dominated everybody else in enterprise value creation or some measure like that. How do you interpret that shift? Is it secular? Is it going to be cyclical and go back towards the international markets? How do you think about that crazy bifurcation? the premium for U.S. exceptionalism has never been higher.

31:35U.S. public equities are trading at 26 times earnings for a 4 % forecasted growth, which is at the 97th percentile of the last 25 years. And the U.S. dollar, despite a 10 % depreciation this year, is pretty much two standard deviations away from the neutral state. So the U.S. has never been this expensive. I love the U.S. It's still the number one economy. I still have half my assets in the U.S., but not 90 % of my assets in the U.S. Not only is it very expensive, total debt to GDP is 125 % of GDP. That is the highest of the OECD. It's higher than it was after World War II when America levered to defeat the axis of evil.

32:17Current plans in place, within five years, we're going to be at 145 % of GDP, which is higher than Greece and Italy. And the US has not had a recession since 2009. Are you sure you want to have 95 % of your assets in the United States of America? I don't. If you look at the rest of the world, you can buy Europe at 14 times earnings, you can buy Brazil at nine times earnings, you can buy Mexico at 10 times earnings. We're finding 40, 50 % growers at 12 times EBITDA, 14 times EBITDA, as many of them serving dollarized clients. So the case for global diversification, the price for global earnings, the case has never been strongest.

32:57The price has never been lower on a relative basis. So I do think that in the next 10 years, those who achieve some level of diversification will be rewarded because I do think there's a little bit of froth in the U.S. market and the opposite in a lot of the emerging markets. What have you learned on any recent trips to China? China is fascinating. I've been going to China for 25 years and I've seen the development. It's the fastest change in terms of per capita GDP in modern history or any country at scale. It's an incredibly complex society, tremendous amount of innovation. And we were lucky having been early in China as GA.

33:37We've been investing there for 25 years. I am highly optimistic that tensions have stabilized and that market conditions are improving. And we've been underweight China for the last five years. We just did two deals. We're going to pick it up a little bit. There's always binary risk around the geopolitics. There's just so much innovation. There's so much entrepreneurial zeal. The one thing I learned, I actually learned over drinks with a Chinese entrepreneur. So I've done business in 19 countries. And I love to connect on a human level with the entrepreneurs. So much, even at growth stage, so much of the assessment of the company and of the partnership is about chemistry.

34:18And it was very hard for me to build chemistry with the Chinese entrepreneurs. One night, I'm having a long dinner with lots of good food and alcohol with an entrepreneur who was an anthropology PhD at the University of Arkansas. And I said, if someone can explain me the Chinese mentality, It's this man, he said to me, like any oversimplification, it's unfair, but there's a grain of truth. And he said, what you have to understand about the entrepreneurs you're dealing with, he said, these generation of entrepreneurs, people who are in their 30s and 40s, they're all children of the cultural revolution.

34:55Everything was taken away from these hammocks. Everything. And they are scarred and they have something to prove because they think something was stolen and they will get it back. So there's a level of drive and ethic, work ethic, that probably matches the refugees of World War II that came to the States and these great businesses after World War II or other people that have had hardship in their life. But this applies to 98 % of the entrepreneurs. They side with their parents. So that's the other condition you should take into account. How do your ancestors show up in your life and values? Anyways, we're all products of our traumas and our adventures and our dreams is my worldview.

35:41So what are my traumas? Some are personal and some are generational. Generational traumas, on my mother's side, Jewish family had to flee the Russian empire through Romania, then Argentina, then Bolivia. So fleeing, leaving everything behind. From my father's side, very wealthy, landed oligarchy of Bolivia. In 1952, there's a revolution. They lose everything. And their house and farms get burned down and they almost die, where my father was a teenage. So on both sides, there's a sense of loss and escape that is very present and decide to become communists and doctors. They're both doctors in public hospitals and a little town in Berlin.

36:23So that's their trauma, which I relate to the Cultural Revolution.

36:30And they are religious, not atheist. In my personal life, trauma comes from two places for me. One is I grew up in Bolivia in the 80s, and that was chaos. Bolivia in the 80s, seven presidents in 10 years, including four coups d 'etats. We had inflation. You got 5 % inflation. We had 35 ,000 % inflation. So time value - 35 ,000. Time value of money, I understand, okay? Like the only time my mom ever punished me was one time she sent me to exchange her salary for dollars when she got it. And I took a one-hour break to visit a friend. And in the hour. And it lost half its value in that hour. I was grounded for a year because of that one-hour break.

37:14So anyways, there was also a lot of violence, ethnic violence in Bolivia. So it was rough. It felt unsafe. It felt turbulent. And then I have a genetic disorder. I bruise very easily, very, very easily. So getting out of bed, deciding what activity to do, is a risk reward trade-off since the age of five. And that is a way of seeing the world. Why is he for risk? I know how to price risk. I'm like, eh, not worth it. My friends are like, why are you always thinking of the downside? Well, I have my reasons. So anyways, I find when trying to understand the person, I do it with entrepreneurs, seeing what their trauma was is super useful.

37:55because I find a lot of the most driven people are driven because of foundational traumas. It doesn't need to be racked to riches. It doesn't need to be a big disease. It could be one of my fiercest competitors. He was mowing the lawns of his buddies who were with the cute girls. And his entire life, he wanted to show them. I don't judge. That's a real trauma. Pain is pain. And if you understand them and you traumatize yourself, You can relate and empathize, but you also understand the intensity that drives it and whether they can manage it and channel it productively. But if you can, it is such a wonderful engine of transformation and it's curative.

38:40It's healing to channel it in a positive way. How did you learn to harness it? Because the other end of the spectrum could be unharnessed and just chaos. How do you learn to harness or channel it to something productive? I believe managing one's emotions productive requires either therapy, writing a journal, or meditating. You should do two of the three. I do two of the three. Try to do the third one, but it's really hard. With meditation? Yes. Yeah, we're on the same page. Yeah. If I asked a bunch of people that knew you and the investments that you've made across your career, what is a you investment?

39:18Like, what are the characteristics where they see that company and they're like, oh, you know, he must've done that. How would they describe that? This is a funny story. When I got promoted to chairman of the investment committee, so elevated from a Latin American role in my life to head of the investment committee of General Atlantic, this iconic global, I was lost. So I go to the two founders. Steve Danning was a CEO for the first 20 years. Army man, McKinsey man, Stanford MBA, structured. I say, Steve, how do I make decisions across so many geographies and business models? What's the framework you think I should apply to add value to my partners.

39:55And he said, you should develop a checklist that captures the characteristics of a winning GA deal. So go back and look at our 25 years, our history, our best deals. I'll share a couple of characteristics. I'll give you the three M's, but they're probably five P's as well. Create a checklist. And I was like, yeah, checklist. Same day, I go to the co-founder, Dave Hodgson. He's just super glued, but just the smartest guy in the room always. And I asked him the same question. And the first thing he says, avoid the temptation to use a checklist. If it was as simple as a checklist, we wouldn't get paid millions of dollars to do what we do.

40:34And I was like, checklist is not just okay. So whenever there is a paradox, there's an elegant unparadoxing of the paradox. So Danny Callum, Think He Fast, Think He Slow, Checklist Manifesto. built on work he did for the Israeli Defense Forces to create the checklist for the elite agents. Turns out the checklist work, but in applying the IDF checklist, there were these super interviewers that got even better results consistently than just the average interviewer. So there was something beyond the checklist that was physically significant. And there's one interview of the super interviewer where she says, I do the checklist because I have to.

41:12But after I do the appraisal, I close it and I close my eyes and see how I feel and I go with my gut. And she has perfect scores. So the framework I use for what's the perfect my teen or GA deal is the combination of a checklist with my gut, which I call the educated intuition. What's in the checklist of things we like? Huge TAMs. Business models that create economic value and have mode. teams with the right go-forward capabilities, situations where there's inorganic growth to get and there's tremendous amount of strategic value, meaning someone will overpay to have this capability if we are successful.

41:52So those are the things that the checklist of suppliers. Me personally, in the deals I've led, they have to make the world better. I am so proud that I invested in the number one investing platform in Brazil when there were only 80 ,000 people that own stocks in Brazil. And now 10 million people own stocks. What's it called? XP. It's publicly traded,$10 billion market cap. I invested when they were nothing. I am so proud that I went against every convention and invested on an EdTech company. EdTech was a dark alley. We have power alleys. There are some places we don't touch. And I was like, no, no, no, this is different.

42:27This is different. This little company in the Northeast of Brazil, which was creating K-12 learning systems. Instead of using textbooks, You package everything in a hybrid notebook with digital. Went from 80 ,000 students to 8 million students. 8 million kids every day today use this platform. And it's world-class. It's really good content. And it's an amazing entrepreneur, son of a teacher. And we made money. We have a platform that 97 % of financial institutions use for digital onboarding. Turns out Brazil is the world capital of online fraud. and this is the one company that catches it. And I'm so proud that I started mentoring this kid when his company was nothing.

43:09And I did it through Endeavor and it took me eight years before I had like became an investor in 4G and then we invested and now they're dominant. And if they makes the world better, you see, it's beyond money, it's energy. If the checklist is mind and the instinct is gut, have you met a great investor who's mostly heart? No, I think heart is super important if you want to be a leader of a large organization, because you have to move the hearts of hundreds, thousands of people to row in the same direction with purpose and with effectiveness. And that is crucial. And the heart is so powerful. It overrides gut and brain.

43:46And to do it at scale, you see these people that are super good leaders. The energy is captivating and they are wizards of the trade. It's really hard to do all three. And part of being a good investor is to not fall in love. Because at the end of the day, you have a fiduciary duty to produce returns. And you have to make some tough calls. Love is a treacherous thing. Funny story. So the one time that I didn't follow the checklist was for love. So obviously, I had a checklist for the woman I'm going to marry. And when I met Daniela, my Portuguese teacher, she didn't score very high on the checklist.

44:24Where was she deficient? I won't say. But there's things that are absolutely irrelevant to the task at hand. I had the wrong framework. and she was perfect in every way and she's been perfect in every way. So in matters of the heart, forget the checklist. But I don't think the three of them come together in the investment profession. You mentioned the two founders. What about Bill Ford? What have you learned from him? So much. I've worked with Bill for 15 years. I actually pitched Bill my startup. This is 1998, came in through New York and I had heard a lot about General Authentic and how they're different and they think long-term and they're good partners and Chuck Feeney and it's really hard to get the meeting.

45:01We give him the meeting. Bill and I really hit it off. I made the pitch. And he's like, we're not ready for Brazil. I'm really sorry. I was heartbroken because I really wanted GA. And Bill was an amazing guy. 10 years later, after I sold my business and was working at another fund, he called me and was like, remember me? I was like, yeah, I remember you. He's like, can we try this again? I said, yeah, we can try this again. But just for you to know, you would have made 18 times your money if you had said yes. I was like, what? So yeah, yeah, I know, I know, I know. So come. Bill has an incredible ability to see around corners and be visionary in making bets before they're obvious.

45:39So going into Europe, going to the emerging markets, going into consumer, going into life sciences, pushing me now to go into robotics and humanoid. He's an incredible ability to look around corners. He also, in managing the partnership and us, has heart. Not for investment decision making, but in keeping our culture, the meritocracy of the firm also with heart has helped me develop as a leader of GA and letting speaking more a little bit from the heart and as an incredible moneymaker. So his mind is just fantastic. That helps too. That helps too. That's it. D-tip. As you've progressed in your investing specific career, what changes the most as you become more senior?

46:23How does it feel the most different doing it today versus doing it when you're a lots to prove young analyst. The hardest thing when you're young is developing patience and the conviction that you can wait a little longer for the big fish. You're young. You want to get going. You want to get going. You want to get deal experienced. You want to get notches on your belt. And that's the completely wrong instinct. When you're older, you have a lot more range. You've seen a lot more. And you got patience. You're like, nothing scares me. I know a big fish will come. Calm down. No pressure. you are less in the front lines and more as a coach player training young partners to do what you used to do and initially that can be very demotivating because tom brady likes to be in the field not coaching or opining yeah maybe not not so fun until you reimagine the game and you live vicariously through the people you're training and you enjoy their wins almost as much as you enjoyed your wins.

47:21That's been the mental flip that I had to do to enjoy this phase. Because of course, scoring goals is better than coaching, unless you make the mental shift that live vicariously through them. The hard thing, and that's why there's not that many venture and growth equity investors over the age of 50. It's not just that we call in rich or we get tired or we develop new interest. I think our brain ages and stops being plastic. One of the great learnings beautiful mind, Dave Hudson, whose age beautifully is in his late 60s and is very sharp and very much on top of the new trends. He defies the convention.

48:00And I said, what is the secret? And he said three things. The most important one is I refuse to think like an old man. My mind still plays. I still wonder. I'm still in awe. And I don't fall into the trap of thinking I have the answer to everything. I'm always learning, experimenting, and play. And that's the hardest part because we have this illusion as we get older that there's no room for play. There's no room for play. There's always room for play. How do you inject that into your life? You just don't take yourself too seriously. I'm always laughing about everything, making fun of everything.

48:35Even when confronted with worst perfect storm where something happens, I start laughing and I say, what are the odds so many bad things could happen all at once. This has never happened before. Seven things at the same time. Let's work through it. That attitude, I think, makes life full up. What do you make of this current bubble that we're inside, outside, depending on the person? You mentioned humanoids. You mentioned bio a little bit. There's all this exciting stuff happening, probably all of which in the long run will be amazing for people. There'll be a lot of consumer surplus in all this.

49:10You want to make money through this process for yourself and your partners. How does it feel to you? This is more meaningful because it will touch a higher percentage of GDP. The internet was the other very meaningful one, but it changed how we interact with each other. This will change much more than that. Unambiguous recommendation, if you're in your 20s or early 30s, go work at AI because you're going to live through dog years. Meaning what we're talking about dot-com, seven years of activity in one year. And regardless of whether the company does well or you make money, you're going to have compressed learning that only happens once every 20 years.

49:46So don't miss that opportunity. And when I say that age group, I mean that mental age group. You could be in your 50s and be in that mental. After what you're ready to take risks, just go do it. If you have a young mind today, go work in AI because it's going to be so much fun. I think investing is risky. Our approach, which may prove to be too conservative, was to take it slow because it's not clear yet where the value is going to be created. it's not clear yet how much more powerful the large language models are versus others that are more efficient or how much of the value will be captured by the models versus the applications.

50:22So it's exciting to watch. I know we're going to have a moment where we're all going to wake up and say we've invested too much. I don't know if it's three years away or 18 months. I don't think it's happened. For sure it hasn't happened yet. You don't think so? You don't think there's a chance that we're in that moment already? No. Why not? It's not crazy enough. I was looking at some stats comparing the AI wave, let's not call it a bubble, waves to the dot-com and to the railroads. And it's looking at the ratio of capex to revenue and what percent of GDP was involved in this. And how was this capex funded?

50:59Capex to revenue is still not crazy. New revenue streams are are managing. And the biggest difference relative to railroads and dot com is the funds are coming from really rich companies. The magnificent six who are printing money out of their dominant positions are reinvesting a lot of this money into the capex that's powering all this innovation. So it's very healthy. It's not junk bond speculators or thin margin telecom companies that are levering up the wazoo with retail money to fund this wave of innovation. It's a really profitable company. So I think it's got more legs. Will it be bumpy?

51:36Yes. But the thing about predicting the future is, it's really hard. Playing the past is a lot easier. So what do you think happens from here in markets? Predicting the future is impossible, but fun. I do think the IPO markets are opening up. The corporate money market is opening up. Emerging markets, which were dead for the last four years, are lighting up. So barring a black swan or an orange swan event or some other geopolitical surprise, I do think the next 18 months will be constructive. And that's a much needed shot of liquidity for our industry and a little more attention to the rest of the world.

52:15I'm generally optimistic. I do worry a little bit about the fiscal situation in the U.S. As the reserve currency of the world, that you have so much time and so much permission to make mistakes. I think the real issue that we face that I think a lot about, I think politically, globally, we're kind of screwed because neoliberal and centrist ideology can't get elected. We missed the main concept that prosperity needed to be shared for it to be electable. So now we're not just in the US, but across the globe, forced to choose between nationalist leaders who are like we against the world or socialists, which is, oh, we're all together and we're going to share and take away from the rich to give to the poor.

52:59Both are very suboptimal. And we need to find ways to create a center position that's neither socialist nor nationalist, but is one of shared prosperity. I worry that there are not that many people that are focused on that or investing in that, but the world needs that, not just the U.S. We need it in Brazil. We need it in Mexico. We need it across Europe. I'm always interested in this difference between risk, which I think of as sometimes quantifiable or imaginable, and pure uncertainty. We literally just don't know what's going to happen. And if you think about where you've made money, how much do you think came from the willingness to embrace uncertainty versus taking really calculated risks?

53:40you never invest a lot of money without a visibility of what you're doing there is fog and different layers of fog and what the fog does is it slows you down but if you look pierce through you see clarity you see a monopolist at six times you see an opportunity to it's not a shot in the dark and hope for the best what you can't do is just shut down and say this is too rust too unpredictable. You just have to engage with the unpredictability until you see something before others and you strike for the fish. In an era like this, when it's all changing so fast and understanding the core technologies is important, how do you personally learn?

54:23What is your preferred method to stay abreast of what is going on and like stay in touch with reality? Talk to young people, surf TikTok, try different apps, try crazy things, go to places where there are no old people, And you don't care. I don't care if someone calls me the whole time. I'm just playing. Keep it fresh. Value is in the new. Be in the new. Always. Even if it turns out to be a dead end. Most of what we do is dead ends. But it doesn't mean it wasn't valuable to try it. That's the hardest thing. There's been this wild transformation of our industry in the time that you've been a professional in it.

55:02What does the competitive dynamic feel like to you today? The universe of amazing companies has expanded. The number of$100 million revenue business growing 40, 50 % has grown 10x because more technology, more people taking risk in more places. Unfortunately, we compete against 19 ,000 GPs. It was not a very nice thing to say, but one of my competitors said there's more GPs than McDonald's in the United States, which is one of those GPs that are smaller. They didn't feel like it compared to McDonald's, but it's really too many GPs and the industry is consolidating. It's becoming incredibly competitive.

55:35You have to have more clarity. What is your competitor? edge. How have we thought about our edge? Brand. We've built this brand about being good partners. This brand means something. People get value from GA inside. Attracts, helps them recruit talent, get clients, go public. Scale to have muscles that small shops don't have. We have a hundred people in operations. They can help you with pricing, Salesforce effectiveness, AI for what customers serve. Whatever you need, we got a team. It's there for free. We got an in-house human talent team that has taps into a database of 15 ,000 vetted executives.

56:11You need a CTO who'll send you a list tomorrow of eight guys in the area who we've worked with and I think fit that scenario. And then you have to be a specialist, can't be a generalist anymore. So we've chosen what we call the GA power alleys. There are 16 power alleys, things like AI applications, value-based care, digital payments, 16 power alleys, check the website. In those priorities, we think we're among the best in the world. And we show up with 32 case studies. We've done this 32 times. And yes, you can copy things that work, but guess what? You don't know the things that didn't work that we tried that we're going to prevent you from trying.

56:46It's made it harder to compete, but I do think scale and experience helps provided you are deliberate at learning from the experience and focused on how you build capabilities with scale in areas that really matter, not just look good on a website. If you're teaching a seminar about or for young investors who are only allowed to go invest in non-U.S. companies, so everything but the U.S., what are the most important things for that crew to know about doing that well that's distinct from what it would take to do well in the U.S.? There's a lot more volatility. The frequency of surprises is much higher.

57:23So agility is super important. We're also low trust cultures, even though most of them are religious, doesn't mean you can trust it. So a higher percentage of the time, you may find yourself with a crook across the table. So the value of referencing is much more important. And how to do a good reference is super important because people don't say bad things about other people easily. So that's another one. The third one, which is a positive one, which is the one great advantage of being outside the U.S. is there's so many things that don't work well. Lower hanging fruit. Shumungous lower hanging fruit.

58:04And if you provide a great service, you capture a lot of value for a really long time. How do you do a good reference? For an investment, you do it with the family that has given you money to make investments. and you say, João, we're about to invest$200 million in this entrepreneur. You know his father. You know his grandfather. Do you think we should take this risk? And he's like, João, no fucking way. He's a crook, son of a crook. Because he has money with you, he tells you the truth. If he didn't have money with you, he'd say, of course, he'd say, I don't know, there's some noise, I would do my homework, or they're fine.

58:43For hiring, there's another hack, which I learned, which is so important. So much of life is getting the right people on the bus. And when you're going to do a reference on a hire, you call the person and you say, hey, we're considering David for this role. This role involves the following five challenges. This is a very important decision from my company because we can't get this wrong. It's also a very big decision for David because he's happy at his job. and if he gets this wrong, if we get this wrong, we've wasted time and he's out of a job. Help me assess if this is a good risk for me and Dave.

59:17And if you can have an honest discussion, if you don't feel comfortable engaging like this, let's not talk about it, but that's what I need the reference for. You'd be surprised. People are like, well, for that risk, David, no, leave him there, he's fine. But that is a genuine way to answer it because what I described is actually true. If this is a bad fit, David should not be taking this job. Reference calls are not, tell me about David. Is he a good guy? That's a waste of time. People say, yeah, he's a great guy. He's a good guy. He's a great guy, very competent. What have you learned about managing, help manage the career success of investors, which is a very distinctive job from a career ladder in a company or something.

59:55Incentives matter a lot, I'm sure. I'm curious what you've learned about incentives. What mistakes have you made? You think about you being responsible for other investors and you wanting them to thrive. what's the good, the bad, and the ugly that you've learned? It's an apprenticeship business. Pairing them up with different people, different skills, different styles is super important. Helping them from a very young age to make recommendations. Don't just do the task. Answer this a lot. And ultimately say, what's my level of conviction in doing this investment? Don't rely just on this more senior people.

1:00:29One of the tricks I used to do is, I've been in three investment committees in my career. and the three cheat, Advent. And I would try to understand the mind of each investment committee member and predict what they're going to ask. So I would read the memo and say, Giorgio Paolo is going to ask this. Bill Ford is going to ask this. Juan Carlos Torres is going to ask this. And I'll also predict their vote. By the end of a year of doing this, I was up to 80, 90%. And what was really interesting, it was forcing me not only to have my own opinion about a deal, because I'd read the materials, but look at it from the perspective of someone who's really good at making these kind of decisions.

1:01:06And my ambition was to one day be completely unpredictable when someone tried to do this with me when I became a senior person, because I was capturing learnings from 30 perspectives. It's not true. I'm actually pretty predictable by now. It's learning vicariously by forcing yourself to have opinions and also putting yourselves in the minds of people who are proven investors is a way of the apprenticeship on steroids. And one of the things that we do at GA, which I'm really proud of because it was culturally very hard to do, our investment committees are open to everyone. The whole firm. The whole firm of investment professions.

1:01:41So every Tuesday, 190 people sign up and there's no presenting. We come in directly to Shark Tank, just questions. And it's beautiful. Talk me through how that meeting works. So one person, like a sponsor is proposing a deal. So there's a deal team. The deal team is typically a combination of a sector and a geo put together. They're standardized materials with the checklist. It gets distributed by Friday. Tuesday, we come in. There's no presenting. The deal lead, there's always a deal lead, the main sponsor, is there to answer questions. We have five investment committee members and the IC robe, which also opines.

1:02:15And we just ask you questions. What's the IC robe by? We've been training the sixth member of the IC based on 45 years of data. Yeah, yeah, yeah. So she votes on all our deals. We've been having her do this for the last three years. Is she any good? So we've back-tested her, and she's much better than the humans. But it turns out someone who's been trained in the past is very good at the best. And we only have three years of concurrent data. About sample data, yeah. So we need to wait another four or five years. I'm hoping that by the time we retire, I retire, about 10 years, she'll be better than the humans.

1:02:47If I could somehow do that exercise with you, where I could predict the sorts of questions that you tend to ask about companies, what are they? Like what are the big ones that you find yourself constantly asking sponsors who are promoting a deal? Getting in the mind of the founder. His or her motivations, why this is so special, and the trajectory that got to this. I try to meet the founders outside the investment community process as a sponsor. Basis of competition, so true distinct competitive advantage and durability of the competitive advantage. And then I try to push people on the tails, both positive and negative.

1:03:19Six bad things happen. And how bad is it? And how likely is it? Or if this amazing development happens, which could be amazing, how unlikely it is, and who else would benefit? I always find the tails to be the most interesting because if you look at the distribution of our returns, 10 % of our best deals, and we get lucky, and they produce 50 % of the return. So we lose money very little, and then 10%, we get 5X plus. And these are really important. And these, all of them, are better than the upside case in our memos because good things happen that we did not see coming, but God bless and thank God.

1:03:56So I always find like, where are the lottery tickets? How do you assess, it seems like, well, first of all, incredibly important, like all the data, we know how important the right tail is for investing outcomes. Well-worn truth at this point. How does one get better at assessing the option value embedded in a given business? That just seems so crucial. There's no book about that. There's no podcast about that. You've got 10 investments. How do you know which of the 10 has more embedded right tail option value? Pattern recognition from having seen winning lottery tickets gives you some help, right?

1:04:30If you've seen more of these, you begin to see how you can get lucky. As important, in all those lucky scenarios, there was a spear fisherman at the top to capture an opportunity that was available to many, but they seized it. So it's a lot more about capital allocator at the top. The CEO, is he someone that can spearfish? And some people, it takes one to know one. Some people are really good at it. Some people are not spear fishermen. My final investing question is to wonder how growth as a part of the complex feels relative to other styles today. I'm U.S.-centric investor, but curious globally.

1:05:11I'm sure at different points in your history, growth versus, say, venture or early stage or pre-IPO or Publix has felt distinctive, cheaper, more expensive, whatever, more opportune, less opportune. How does growth specifically today feel versus the other segments? best window into growth equities since 2009. And why? Everything's on sale. There's so much pressure on GPs to post DPI that we're getting 40 % growers at 15 times even that. It's 30 to 40 % discount to the public comps. This is not normal. And it has to do with four years of no IPOs. It has to do with four years with no strategic exits.

1:05:48So the engines of growth are undisturbed. The valuations are half or 40 % discount. It feels incredibly attractive, as attractive as the post-GFC was. What is your unfinished business professionally? So to say not, I could not think of a better activity than working in growth equity at General Atlantic for the next 10 years. Global growth equity in the middle of the AI revolution with the seniority that I have and the dry powder. Could it be putt? Pinch me. Pinch me because I hope I don't die on a plane crash because it's going to be great. After that, I think you have to start thinking. I've been active mentoring entrepreneurs through Endeavor, which is an offer for profit.

1:06:28I'm on the board and I've been doing this for 25 years. I actually started mentoring, which is an interesting tidbit, when my business was running out of cash. Dot com sounds exciting, but there was a death, you know, the dark valley of death. And Linda Rottenberg, the founder of Endeavor, she's like, it is precisely at your darkest moment that you mentor because it's a sign of you have something to give in the darkest moment of the night, which is interesting because the whole AA like I have friends who are in AA the body system is so valuable because even at your darkest moment you have enough light to help someone and that gives you the strength to make it through so I'm a huge believer in mentoring that's something I will do for the rest of my life the unfinished business I think as I get older I want to help in higher education in the US I think we've lost our way and I saw the impact scholarship to Harvard did to a young kid from Bolivia.

1:07:21I love that institution. I love education. And I think it's in a moment that it's lost its way and we can find it back. Can you teach me mentoring? How does one mentor well? My strategy, there's many ways to do it. I don't have time to be someone's mentor for six years or to see them maybe as part of endeavor, I'll see them twice. So I have to hurt them. For the mentoring to be impactful, I have to make it so obvious that it's so stupid. They haven't yet focused on this, that they're like, I'll show him. And then they act on it. My mentoring sessions are very uncomfortable. I do it with a smile on my face.

1:08:02Yeah, of course. But it works. It's like crash therapy, like three years of therapy, one hour, no time for bull. We're going directly for the sensitive points. And I've learned to do it in a way that's not damaging or disrespectful in any way, but it is very scathing and saying, this is clearly an opportunity. Come on, wake up, smell the coffee. And sure enough, and now I have a couple of billionaire friends who are like, you really heard me, but thank you.

1:08:30I'm always curious about like literal process. If you're meeting someone for the first time, is the format, you ask them a bunch of questions and then you quickly do the aggressive, why aren't you doing this thing? I'm married to a shrink psychoanalyst. So as a condition to our marriage, I have to do psychoanalyst. And it's a wonderful thing. It's one of the three things we've ever done, the therapy and meditation. And one of my favorite, he's now diseased, but he was a philosopher, writer, an incredible Italian-Brazilian guy, very famous in Brazil. You would go to this one-hour weekly session, and he would look at you in silence.

1:09:02And if he didn't say anything after a while, you just say, in town. In town is translating, so I let you take it. The most powerful way to start a conversation with someone you're trying to get to know is silence. You tell me. What do you want to talk about? What do you want to talk about? Simple. I'll give you another one. I asked, what's the most important question you need the answer to from the universe? The answer to that question is so powerful. Because vocalizing that which you most want the answer to is liberating. My traditional closing question for everyone is the same. What is the kindest thing that anyone's ever done for you?

1:09:40Daniela taught me how to love as we established my heart's not very developed my gut and my brain are very developed and she's such a loving wonderful woman being loved by her and learning from her how to love back and then learning from her how to love our daughters and the way that they need to be loved and she's so smart and loving me can sometimes be very hard A beautiful place to close. Thank you for the reminder to laugh a lot in these conversations. Thanks for your time.

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