Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
Speaker 2: This week on the podcast Well strap yourself in for
Speaker 2: yet another fantastic conversation. Martine Escobari has an amazing background
Speaker 2: that ultimately led him to be co president, head of
Speaker 2: Global Growth Equity and head of the investment Committee at
Speaker 2: private equity giant General Atlantic. They run over one hundred
Speaker 2: billion dollars. The background in the story is fascinating, from
Speaker 2: duty free shops to the Atlantic Philanthropies. Those were set
Speaker 2: up in nineteen sixty nineteen eighty, respectively, and over the
Speaker 2: ensuing forty five years, they just have carved their own
Speaker 2: path and created their own expertise. They're kind of unique
Speaker 2: amongst the global private equity or even domestic private equity players,
Speaker 2: and that half of their people, half of their capital
Speaker 2: has invested overseas, kind of unusual in that space. Martin
Speaker 2: has just an amazing background. Born in Bolivia, built a
Speaker 2: company in Brazil, educated in the United States. Just really,
Speaker 2: there are a few people better situated to describe what
Speaker 2: it's like being a growth equity investor, meaning you're not
Speaker 2: investing in startups you're investing in companies that have started
Speaker 2: to develop some scale and perhaps are turning profitable and
Speaker 2: taking them to the next level. I thought the conversation
Speaker 2: was fascinating, and I think you will also with no
Speaker 2: further ado my conversation with General Atlantics Martin Escobodi.
Speaker 3: Perry. It is an honor and a privilege to be
Speaker 3: here with you.
Speaker 2: Well, thank you so much for coming. I've been looking
Speaker 2: forward to this in part because what you do is
Speaker 2: so interesting, but also because your background is a little different.
Speaker 2: You're born and raised in Bolivia. Tell us a little
Speaker 2: bit about your upbringing and your experiences.
Speaker 3: The odds of me being here with you today are
Speaker 3: about one in a million, right, I mean, I was
Speaker 3: born in a town of ten thousand people. My parents
Speaker 3: were communists and had disdain for capitalism. They spent their
Speaker 3: life saving children's lives in public hospitals, and to them,
Speaker 3: business people were so less, meaningless lives, and they expected
Speaker 3: something very different from me. So that's sort of the
Speaker 3: first set of unusual circumstances.
Speaker 2: I have to ask what was their response when you said, mom, Dad,
Speaker 2: I'm going to Harvard.
Speaker 3: What is Harvard.
Speaker 2: Still? God and I been talking about the Business School knowledge. Yeah,
Speaker 2: didn't register with them.
Speaker 3: And the accident that led me to Harvard is interesting.
Speaker 3: I had a neighbor who was a school teacher at
Speaker 3: the American School who became my mom's lifetime best friend.
Speaker 3: I talked her into putting me in the American School,
Speaker 3: and by chance, there was a very good American school
Speaker 3: because some oil companies were funding great education for the kids.
Speaker 3: And I got a great education. And then I got
Speaker 3: a scholarship to Harvard and that is where I sort
Speaker 3: of entered Hogwarts Academy of Wizardy and the doors of
Speaker 3: the universe opened to me, and I was the first
Speaker 3: Bolivian in three hundred and fifty years. Is that go
Speaker 3: to Harvard College?
Speaker 2: Yeah, oh my god, that's amazing. So economics BA, and
Speaker 2: then you get the NBA from the business school. What
Speaker 2: was the career plan?
Speaker 3: So listen, I've up until recently been very disciplined about
Speaker 3: setting up five year plans for myself and I keep them.
Speaker 3: And if you looked at my five year plan when
Speaker 3: I was in college, I was destined to go work
Speaker 3: at the World Bank, help solve big problems in emerging markets.
Speaker 3: One day get called back to my country to be
Speaker 3: finance minister and then if I did a good job,
Speaker 3: maybe have a shot at running Bolivia. That was the
Speaker 3: plan coming out of college. I stumbled into business, I
Speaker 3: fell in love, and that's how business school came about.
Speaker 3: And then that's what I've been doing for thirty years.
Speaker 2: Finance Minister of Bolivia is fairly ambitious. But before we
Speaker 2: get to that, you co found Submarino or Submarna. How
Speaker 2: do you pronounce that? Submarino Submarno really one of the
Speaker 2: earliest online retailers in Brazil. Tell us a little bit
Speaker 2: about your experience there and what it was like being
Speaker 2: an entrepreneur in Brazil in the nineteen nineties.
Speaker 3: So I believe each generation will have one giant wave,
Speaker 3: one giant disruption that will catch us in our twenties
Speaker 3: or thirties. For me, it was the Internet. Later, it
Speaker 3: was the mobile Internet, the cloud. Now it's AI and
Speaker 3: biotech revolution.
Speaker 2: But that sounds like four waves.
Speaker 3: That hit me in my twenties was the Internet, and
Speaker 3: I had this realization that this is my one shot.
Speaker 3: I don't know if you listened to the Hamilton musical,
Speaker 3: there's my shot, the scrappy immigrant that's waiting for the
Speaker 3: revolution where it's a level playing field and you're all
Speaker 3: trying to catch this giant wave and the internet felt
Speaker 3: at this amazing life changing opportunity, and I said, I
Speaker 3: can't miss this adventure. And to me, together with two
Speaker 3: other colleagues from the private equity group I was working
Speaker 3: on out of business school, from the three g guys
Speaker 3: said we're in the wrong side of this revolution. We
Speaker 3: shouldn't be financing the startups, we should be creating the startups.
Speaker 3: And we set out to build the Ali Baba or
Speaker 3: the Amazon dot Com of Brazil. And it was seven
Speaker 3: incredible years because it started great. We raised more money
Speaker 3: than we could ever dream We almost went public, the
Speaker 3: market shutdown, we almost went bankrupt. We had to sell
Speaker 3: the pieces, we had to get the profitability, and then
Speaker 3: we came back. So it was a compressed, you know,
Speaker 3: thirty years of life into seven. But I felt I
Speaker 3: did not miss the revolution of my generation.
Speaker 2: So New York City, in my recollection during the nineteen
Speaker 2: nineties was just. There was a fire hose of cash
Speaker 2: and capital over everything. It was a party. Apartment prices
Speaker 2: were going up, restaurants, clubs, everything was just. It was
Speaker 2: the Roaring twenties. All over again. You launched this in
Speaker 2: Brazil in nineteen ninety nine, What was the economy like,
Speaker 2: what was your experience like?
Speaker 3: So listen, the macro was horrible, but the technology was overwhelming,
Speaker 3: and the sources of capital recognized that this was a
Speaker 3: global opportunity. So we raised two hundred and fifty million
Speaker 3: dollars as a private company, So before the correction of
Speaker 3: March of two thousand, money was raiding. There was no infrastructure.
Speaker 3: You had to build everything from zero. Everything was one
Speaker 3: hundred times more difficult. But the advantage of Brazil is
Speaker 3: we had not developed the brick and mortar retail infrastructure.
Speaker 3: There were no superstores. The Brazilian consumer was starved variety
Speaker 3: because all the supermarkets carried very limited assortment. So the
Speaker 3: opportunity of e commerce, we believed, was ten times bigger
Speaker 3: than in the US or Western Europe because we were
Speaker 3: leapfrogging a whole stage of evolution of the retail format.
Speaker 3: And it came to be. E Commerce in Brazil now
Speaker 3: twenty five years later is close to twenty percent of
Speaker 3: all trade. It is a vibrant, dynamic industry and there
Speaker 3: are no category killers. We skipped that whole toys, r
Speaker 3: us and babies are us and bad and bond phase
Speaker 3: and that's good for the environment. So I was part
Speaker 3: of a transformational moment together with my co founders, and
Speaker 3: it was exciting, it was scary, and ultimately when we
Speaker 3: sold it producing good returns for the investors, it was
Speaker 3: very fulfilling.
Speaker 2: So what did that experience as an entrepreneur duty how
Speaker 2: did that impact you years later as an investor? What
Speaker 2: do you carry forward from that?
Speaker 3: So I've been an investor for twenty odd years. The
Speaker 3: main lesson is the profound realization that the heroes of
Speaker 3: the journey are not the investors, are the people that
Speaker 3: are in the front lines and the trench lines. It
Speaker 3: is so hard to create out of nothing something that thrives.
Speaker 3: It is in human level of sacrifice that these people
Speaker 3: go through. And I have so much respect for the
Speaker 3: heroes of the journey, and I remind my colleagues we're
Speaker 3: just the supply lines.
Speaker 2: They're on the front lines. You're just supriy and you're
Speaker 2: just supplying the AMMO and the material to do what
Speaker 2: they have to do. That's really interesting. So let's discuss
Speaker 2: some of the things you've talked about. When you discuss
Speaker 2: investing in entrepreneurship. One of the themes that keeps coming
Speaker 2: up that I've read in some of your notes is
Speaker 2: the unpredictability of the world. How do you think about
Speaker 2: making investments for five or ten years out when the
Speaker 2: world is just so unpredictable.
Speaker 3: So I grew up in Bolivia in the eighties. It
Speaker 3: was chaos, chaos that it's hard to internalize. So in
Speaker 3: my teenage years ten years, there were nine presidents. In
Speaker 3: my teenage years, there was thirty five thousand percent inflation.
Speaker 3: What that meant is halfway through my teenage years, we
Speaker 3: changed currencies from the peso Boliviano to justin Boliviano by
Speaker 3: chopping off six zeros. Wow, one million US dollars becomes
Speaker 3: one American. That happened when I was fifteen, So I
Speaker 3: get I grew up with chaos, and I got comfortable
Speaker 3: with chaos. And what the main lesson of chaos is
Speaker 3: it's never as bad as it seems, and it's always
Speaker 3: dark right before the sun is going to come out,
Speaker 3: and you have to believe the sun is going to
Speaker 3: come out and plan for the sun. And as it
Speaker 3: relates to a world that's highly unpredictable. Remember, the sign
Speaker 3: is going to come out and stay through to first
Speaker 3: principles and what makes great businesses, and who are great
Speaker 3: entrepreneurs and who's solving real world problems and lean in
Speaker 3: when everyone else is scared.
Speaker 2: So I want to talk a little bit more about
Speaker 2: your upbringing, but I want listeners to understand the genesis
Speaker 2: of General Atlantic and where it comes from. So let's
Speaker 2: talk a little bit about Chuck Feeney, which I had
Speaker 2: no idea about when I started doing my homework here.
Speaker 2: So in nineteen sixty in Hong Kong, he founds the
Speaker 2: first duty fee shop in the airport in Hong Kong.
Speaker 2: Right now, to the US travelers, duties aren't a big deal.
Speaker 2: Buy makeup, we buy it, booze, whatever it is, it's
Speaker 2: more or less the same price at home. But if
Speaker 2: you go to Europe, if you go to parts of Asia,
Speaker 2: there are like substantial taxes, and buying these things at
Speaker 2: the airport duty free real substantial savings in money. So
Speaker 2: he launches duty free Shops dfs in nineteen sixty. By
Speaker 2: nineteen eighty, it's so successful that they have to set
Speaker 2: up General Lannik to manage the philanthropy that he's now doing.
Speaker 2: Tell us a little bit about Chuck Feeney and how
Speaker 2: GA was established.
Speaker 3: Chuck is one of the most impressive people I've ever
Speaker 3: got a chance to meet. He stumbled into the duty
Speaker 3: free idea as a soldier because he was mesmerized by
Speaker 3: the vibrant trade that happened in the American bases in
Speaker 3: the Pacific. So you could buy cigars, liquor appliances half
Speaker 3: off because it wasn't America, and it wasn't the Philippines.
Speaker 3: Was no man's land in this area, and the taxes
Speaker 3: were very high in those regions, so there was a loophole.
Speaker 3: He created the world due to free business, which thrived
Speaker 3: to a major business. He landed upon a level of
Speaker 3: wealth he was not ready for, to say the least,
Speaker 3: and he questioned, what is the purpose of my wealth?
Speaker 3: And he thought about it for a long time. And
Speaker 3: I've heard him tell the story. He's now diseased two
Speaker 3: years ago, and he says, the purpose of my wealth
Speaker 3: is to improve the human condition today, not tomorrow, not
Speaker 3: one hundred years from not through foundation today. And he
Speaker 3: created General Atlantic as his family office, or the vehicle
Speaker 3: to manage his family wealth. He wanted us to invest
Speaker 3: in innovation and entrepreneurship globally, and he wanted all the
Speaker 3: proceeds of our investment activity to go finance the great
Speaker 3: causes anonymously. He was the originator of the giving pledge,
Speaker 3: except it wasn't fifty percent, it was one hundred percent.
Speaker 3: He famously said, I want my last check to bounce.
Speaker 3: Almost succeeded it when he died. He donated nine billion
Speaker 3: dollars over his lifetime, most of it anonymously, and at
Speaker 3: the later stages of his life he says, I actually
Speaker 3: need to tell my story because it maybe it motivates
Speaker 3: other people to follow this incredibly rewarding path, which is
Speaker 3: to spend my life giving away my wealth. And that
Speaker 3: he did, and he set us off on this incredible
Speaker 3: forty five year journey of backing innovators wherever they may
Speaker 3: be in the world. And that's what we are today,
Speaker 3: and that's what we've been doing for forty five years.
Speaker 2: And to fill in some of the blanks that some
Speaker 2: people may not be aware of. Duty Free Shoppers Limited
Speaker 2: is now owned by Luxury Giant LVMH and General Lannik
Speaker 2: evolved from his family office to manage money for the
Speaker 2: philanthropies to a leading growth and innovation investor with now
Speaker 2: more than one hundred billion dollars in assets under management.
Speaker 2: Tell us a little bit about what General at Atlantic
Speaker 2: has been doing for the past forty five years to
Speaker 2: build up those returns to that degree. I'm assuming there
Speaker 2: are lots of distributions along the way as well.
Speaker 3: Yes, yes, So we started investing in technology in the
Speaker 3: United States and soon discovered that technology is not just
Speaker 3: changing the technology sector, but it's changing the healthcare sector
Speaker 3: and the financial services. Then we discovered that this is
Speaker 3: a global opportunity. We opened up Europe thirty years ago,
Speaker 3: we opened up the emerging markets twenty two years ago,
Speaker 3: and now we've built what we think is the most experienced,
Speaker 3: scaled growth equity investor in the world. Now, growth equity
Speaker 3: has become incredibly competitive. It's now a two trillion dollar
Speaker 3: asset class. Why is it so large because there are
Speaker 3: more companies that are growing thirty forty percent. Why because
Speaker 3: they're embracing technology to change their business and that allows
Speaker 3: for faster growth at cost efficient metrics. How do we
Speaker 3: compete in this highly competitive world? We have more experience
Speaker 3: forty five years of track record, great brand, five hundred
Speaker 3: investments over the last forty five years. We have scale.
Speaker 3: We have two hundred and fifty investment professionals. We have
Speaker 3: ninety operators in the Operators group. We have tech enabled sourcing.
Speaker 3: We meet seven thousand entrepreneurs every year to pick the
Speaker 3: best twenty five. So this is a scale game. We
Speaker 3: have this scale, and then we also have specialization. There
Speaker 3: are sixteen strategies we call them the GA Power Alleys,
Speaker 3: where we've developed ten and twenty year track record. That's
Speaker 3: a huge source of competitive advantage. And then we have
Speaker 3: nineteen local offices throughout the world. In every local market,
Speaker 3: we are more local than the local players, and we
Speaker 3: have the advantage that we are plugged into this global
Speaker 3: network of knowledge and accumulated experience that the GA infrastructure
Speaker 3: provides thro all our local partners.
Speaker 2: So let's start out why we're even having this conversation.
Speaker 2: Not only did Chuck Feeni make most of his donations
Speaker 2: anonymously and gave away billions and billions of dollars with
Speaker 2: no name attached, but GA has historically been kind of
Speaker 2: a low profile shop, so I think listeners may not
Speaker 2: really know some of the details of how the firm
Speaker 2: invests and the key areas you focus on. So let's
Speaker 2: start out talking about those five sectors, which are technology,
Speaker 2: consumer services, financial services, healthcare, and life sciences. And I
Speaker 2: know you get into a lot of specific details, and
Speaker 2: each of those five sectors have tons of subsectors. Tell
Speaker 2: us a little bit about the areas GA focuses on.
Speaker 3: Listen, the sectors of how we are organized internally. What's
Speaker 3: more interesting is what are the trends changing our world today.
Speaker 3: There are four mega trends that define the opportunity set
Speaker 3: for growth equity. First is the digital transition. Ninety percent
Speaker 3: of the world's transactions are going digital. Four trillion dollars
Speaker 3: of capitalists invested every year in this digital transition, in
Speaker 3: the invest in AI in cloud computing. This is a
Speaker 3: trend that's twenty years in the making. It's been accelerated
Speaker 3: by AI massive wave. The second one is health care innovation.
Speaker 3: Huge challenges in the West. Healthcare is too expensive and ineffective.
Speaker 3: The only way to address that is through technology to
Speaker 3: drive better health outcomes. In parallel, there's a new generation
Speaker 3: of health care innovation that is using the advances of
Speaker 3: it to apply it to the cell and creating the
Speaker 3: next generation of life sciences therapeuties which will dramatically change
Speaker 3: our health span. So that's another mega wave that's very relevant.
Speaker 2: By the way, I love the phrase health span as
Speaker 2: opposed to lifespan. Of course, the idea is to not
Speaker 2: just live long, but be healthy for as long as
Speaker 2: you possibly can.
Speaker 3: I'll give you one scary statistic. Ninety five percent of
Speaker 3: Americans die in hospitals. Only three percent of American doctors
Speaker 3: die in hospitals.
Speaker 2: Huh.
Speaker 3: It's not about the quality of your death, it's the
Speaker 3: quality of your life and your health span. As you said, Okay,
Speaker 3: so healthcare innovation huge area, our biggest, one of our
Speaker 3: biggest sectors energy transition. To get to our decop organization targets,
Speaker 3: we will need to spend north of six trillion dollars
Speaker 3: a year. That's a huge opportunity. The whole ecosystem around
Speaker 3: this trend to net zero. And the fourth major mega
Speaker 3: trend is the rise of the new consumer. The sort
Speaker 3: of younger middle class rising and purchasing power in the
Speaker 3: rest of the world will mean six trillion dollars of
Speaker 3: extra consumption by twenty thirty. In this emerging new middle class,
Speaker 3: these four mega trends define the growth equity opportunity set.
Speaker 2: I find it interesting that you're discussing mega trends that
Speaker 2: are global, in large part because I think this is
Speaker 2: an accurate statistic. Is General Atlantic the only private equity
Speaker 2: growth shop that has half of its assets and half
Speaker 2: of its people abroad? Like, only half of your capital
Speaker 2: and people are in the.
Speaker 3: Are you the only one among the top ten in
Speaker 3: the world. Yes, we are more global than anyone else.
Speaker 3: Why are we more global than anyone else? I'll give
Speaker 3: you two statistics. Half the unicorns, the sort of billion
Speaker 3: dollar companies in the world, are born outside the United States.
Speaker 3: More interestingly, half the unicorns in the United States are
Speaker 3: founded by immigrants from other parts of the world. So
Speaker 3: seventy five percent of value creation is for people that
Speaker 3: were in this world, people not born in US. Talent
Speaker 3: is sprinkled around the eight billion souls that inhabit the earth.
Speaker 3: We got to go where the talent is, and in
Speaker 3: our case, it means half of what we do is
Speaker 3: in the US and half is outside the US. And
Speaker 3: our activities outside the US have been a creative to returns.
Speaker 2: So let's talk about some of the other areas that
Speaker 2: are outside you come from South America. But let's talk
Speaker 2: generally emerging markets. Where do you look around the world
Speaker 2: for this talent.
Speaker 3: Listen, we have presence all over the world. We have
Speaker 3: three offices in China, we have offices in India, we
Speaker 3: have offices in Singapore, two in Latin America. We opened
Speaker 3: offices in two of three offices in the Middle East.
Speaker 3: What's exciting right now? And India. We've been in India
Speaker 3: for twenty two years, and India did not have its
Speaker 3: moment in the sun. Digital India wasn't ready. India infrastructure
Speaker 3: wasn't ready. It has been ready for the last five years.
Speaker 3: The business models, the digital business models that we saw
Speaker 3: transform industries in China and Brazil in Mexico had not
Speaker 3: yet done that in India. Over the last five years,
Speaker 3: India did a couple of reforms. First demonetization taking currency
Speaker 3: away and simplification of the tax code. Meant the informal
Speaker 3: economy went from fifty percent to twenty five percent.
Speaker 2: When you say informal economy, we not black market, we
Speaker 2: just not paying taxes. Just cash economy.
Speaker 3: Gosh economy, you don't have a credit, you don't it
Speaker 3: doesn't count.
Speaker 2: Kind of reminds me of the study they did in
Speaker 2: Greece where you have to pay tax on the pools
Speaker 2: and satellite images show there's something like twenty x number
Speaker 2: of pools. Then there are people paying taxes exact. So
Speaker 2: that was a modi change.
Speaker 3: That was a modi change. Second change is the transformation
Speaker 3: of digital India, which is Internet access was expensive and
Speaker 3: not very available. The telecom sector restructure around GEO, which
Speaker 3: is a great telco company, and now sixty percent of
Speaker 3: Indias have low cost wireless broadband. In parallel, the government
Speaker 3: created a national biometric identity database that enabled fraud free
Speaker 3: digital transactions from your phone, and now sixty percent of
Speaker 3: all transactions are in India are digital. All of a sudden,
Speaker 3: you have one of the most digital economies in the world.
Speaker 3: The final missing link their own capital markets, domestic saving
Speaker 3: gone up. They have certain restrictions around foreign domestic savings
Speaker 3: for individuals investing abroad, so they're investing in their local markets.
Speaker 3: The best IPO market of the last two years in
Speaker 3: the world has been India. So now you have the
Speaker 3: confluence of three factors that create what we think will
Speaker 3: be a virtuous next ten years for India, which is
Speaker 3: about time. Latin America is seven hundred million inhabitants, rising
Speaker 3: middle class, trading at all time low multiples. You can
Speaker 3: buy the entire country of Brazil at ten times earnings. Mexico,
Speaker 3: there is no better candidate or beneficiary of the trend
Speaker 3: to French shoring than the Mexican economy. The Chinese per
Speaker 3: hour worker is thirty percent cheaper than the Chinese worker
Speaker 3: and their next door.
Speaker 2: The Mexican workers. The Mexican cheaper than China.
Speaker 3: Than China today and their next door and they're your friends.
Speaker 3: They're not a geopolitical challenger to the US. So I
Speaker 3: see another great decade for Latin America in the next
Speaker 3: in the next years ahead.
Speaker 2: So you mentioned the IPO market in India doing so well.
Speaker 2: I got to ask, We've seen in two going on
Speaker 2: three years of pretty mediocre IPO offerings and very few
Speaker 2: IPOs actually come in to market. How do you look
Speaker 2: at this environment? What do you think happens with the
Speaker 2: IPO pipeline here?
Speaker 3: So, the growth equity opportunity set is the cheapest it's
Speaker 3: been in twenty five years. The price for growth that
Speaker 3: we're being asked to at to pay is the cheapest
Speaker 3: I've ever seen in my career, and I've been around.
Speaker 3: Why is it to cheap? Exactly for what you just said, Berry,
Speaker 3: We've gone three and a half years without a vibrant
Speaker 3: IPO market in the United States. That is really long.
Speaker 3: This is the longest period in recorded history. The second
Speaker 3: longest this century was eighteen months starting in March of
Speaker 3: two thousand. We estimate there's about three thousand companies waiting
Speaker 3: to go public. This is about eight hundred globally. Globally right,
Speaker 3: more than half in the US. But it is a
Speaker 3: backlog of eight hundred billion dollars of stock that hasn't
Speaker 3: been able to move. And that's why we're seeing such
Speaker 3: attractive pricing in the growth equity space. It's mostly hunting
Speaker 3: in these tired cap tables, pressure gps that need to
Speaker 3: show DPI and companies that aren't able to go public. Now,
Speaker 3: what does it take for the IPO market to open up?
Speaker 3: Historically you need three things. One is you need positive
Speaker 3: S and P five hundred performance for the trailing two years.
Speaker 2: So we have that.
Speaker 3: We have that. We need low and stable, relatively low
Speaker 3: and stable VIX check.
Speaker 2: Well, not so much this quarter this quarter.
Speaker 3: A little up. Maybe maybe some headroom there when some headwinds.
Speaker 3: The third one is you need six IPOs that pop.
Speaker 3: We haven't had that, but I think you know, conditions
Speaker 3: are set for the market to open at some point
Speaker 3: in this year, and when they do, it will unlock
Speaker 3: a lot of value. Now, this location is going to
Speaker 3: take a while to flow through because a good IPO
Speaker 3: market moves about two hundred billion dollars of stock. I said,
Speaker 3: there's eight hundred billion dollars of backlog. It will take
Speaker 3: two to three years to for pricing conditions to normalize.
Speaker 2: And you mentioned the third thing you mentioned that we
Speaker 2: need is six IPOs to pop. What happens does it
Speaker 2: just shift the psychology and suddenly people.
Speaker 3: Aren't Fomo replaces fear.
Speaker 2: Hmm, that's really interesting, Fomo replaces fear. What about the
Speaker 2: current political climate is it conducive? You know, the current
Speaker 2: president got elected, the expectation was, hey, we'll have some
Speaker 2: tax cuts, there'll be some capital gain tax cuts, there'll
Speaker 2: be some deregulation. That feels like it was sort of
Speaker 2: put on the back burner while we're dealing with tariffs
Speaker 2: and doze and everything else. And mister market hasn't been
Speaker 2: especially happy about that. Is this just a temporary setback?
Speaker 2: What do we have to do to get to that
Speaker 2: IPO pipeline that awaits us?
Speaker 3: Listen, there's more uncertainty in the world than usual, and
Speaker 3: predicting that macro is hard. When faced with uncertainty, Diversify globally,
Speaker 3: diversify and focus on the highest quality companies, and the
Speaker 3: uncertainly becomes less determinant to your faith. Predicting the US
Speaker 3: politics for the next four weeks is impossible. For the
Speaker 3: next six months is virtually even harder. So please don't
Speaker 3: take me there. The solution to the uncertainty is diversification.
Speaker 2: And quality makes a lot of sense. You have described
Speaker 2: your favorite business model to invest in as we like
Speaker 2: beautiful business models. What makes a business model beautiful?
Speaker 3: Yeah, you have to capture gross margin. You have to
Speaker 3: sell the unit you produce at a markup to what
Speaker 3: the cost of production is. The bigger the margin, the
Speaker 3: more beautiful you are. Now the beauty that's a picture
Speaker 3: of beauty. What's really relevant about beauty is is lifetime beauty?
Speaker 3: Is that gross margin pencible or will it be eroded
Speaker 3: away by the competitors that see your beautiful gross margins.
Speaker 3: And the real question about it is the durability of
Speaker 3: the beauty. And you get durability when you have moat,
Speaker 3: and you get moat when you have economies of scale,
Speaker 3: economies of scope, learning externalities, network effects, agility. What are
Speaker 3: the conditions that this team has to create gross margin
Speaker 3: and have and build a humongous, beautiful moat that allows
Speaker 3: us to be a lifetime gross margin hopefully an increase
Speaker 3: in gross margin?
Speaker 2: How do you evaluate those things? A lot of those
Speaker 2: items you checked off don't show up in a balance sheet?
Speaker 2: How do you figure out what managers or models are agile?
Speaker 3: It helps when you're specialized in a business model. So
Speaker 3: one of our power allys is investment management. And I'll
Speaker 3: tell you one long story to bring a power alley
Speaker 3: to life. In the late in the mid nineties, we
Speaker 3: looked at the wealth management industry in the United States
Speaker 3: and it was eighty percent concentrated retail banks. The guy
Speaker 3: that was selling you the mortgage the checking account was
Speaker 3: also selling your four oh one a K and your brokerage,
Speaker 3: and the fees were high and the service was poor.
Speaker 3: We took the bat that eighty percent would come down
Speaker 3: and Sure enough, of the following decade, eighty percent came
Speaker 3: down to ten percent. They were disrupted by Schwab a Merritrade,
Speaker 3: e Trade, Fidelity Vanguard. We invested in e Trade twenty
Speaker 3: seven times multiple within seven.
Speaker 2: Years, sold to Morgan Stanley, eventually.
Speaker 3: Sold tomorrow after long after we were gone twelve. In
Speaker 3: twenty twelve, when I started ATJA, we looked at the
Speaker 3: Brazilian market and the four retail banks had ninety nine
Speaker 3: percent share, and we said, this smells like something we've
Speaker 3: seen before. We backed one of the disruptors. Ninety nine
Speaker 3: percent dropped to seventy eight percent. This company multiplied itself
Speaker 3: that one hundred times. We've done the same thing in
Speaker 3: India with IFL Wealth, in China with food Too. We're
Speaker 3: doing it again in Mexico with clar So. A lot
Speaker 3: of this future telling is pattern recognition, and the more
Speaker 3: you have done in a power alley, the easier it
Speaker 3: is to recognize these patterns.
Speaker 2: So I'm fascinated by not only general ATLANTICX global footprint,
Speaker 2: but your international experience. How did your upbringing in Bolivia
Speaker 2: and your entrepreneurship in Brazil influence this career path you've taken.
Speaker 3: Bolivia taught me about chaos. Brazil taught me about profiting
Speaker 3: from chaos. So one of the interesting experiences is at
Speaker 3: the darkest moment of the night, when so Money was
Speaker 3: almost bankrupt, I decided I had almost lost hope at
Speaker 3: emerging markets investing, and I decided, like I typically do,
Speaker 3: to treat it like a research project. And I convinced
Speaker 3: a professor from Harvard to do a project with me
Speaker 3: where we studied ten incredible Brazilian companies that had thrived
Speaker 3: in the nineties and become multi billion dollar corporations and
Speaker 3: compare them to ten competitors of theirs that didn't thrive.
Speaker 3: And we took it. We did five hundred interviews, We
Speaker 3: wrote this book, which I gave you a copy of,
Speaker 3: and I hope you'll enjoy it. And the big inside
Speaker 3: is that in moments of chaos, there is a once
Speaker 3: in a generation opportunity to do a transformational change to
Speaker 3: your business. And the masters of this, and there's ten
Speaker 3: examples in the book, but the masters of this is
Speaker 3: the Three G guys. And what the Three G guys
Speaker 3: set out to do is what I call spearfishing, and
Speaker 3: they actually physically are spearfishers. They go on the weekend.
Speaker 3: And the beauty of spearfishing I've done since is you
Speaker 3: don't swim towards the fish. You choose an area full
Speaker 3: of fish. You dive down without a tank, just you
Speaker 3: under your spear, and you hold your breath for three
Speaker 3: to five minutes waiting for the fat fish, and then
Speaker 3: when he appears, you have two seconds to make the kill.
Speaker 3: And that's what they do. And their journey was so
Speaker 3: they're investment bankers. They had the number one investment bank
Speaker 3: in Brazil. Too much cash. They wanted real assets. They
Speaker 3: were hunting for a large asset that had characteristics of
Speaker 3: an industry that would benefit once inflation stopped. That was
Speaker 3: their bed and they the weight it. And a week
Speaker 3: before a momentous election, the Swiss owners of the number
Speaker 3: two beer company panicked and they sold their business in
Speaker 3: two days. They bought it Big Fish. Then they waited
Speaker 3: ten years. They made that business really profitable, really efficient,
Speaker 3: and then another crisis, when the number one beer company
Speaker 3: was in difficulties, they pounced again. And they did it
Speaker 3: again twenty years later when Anheuser Bush was in the
Speaker 3: Great Crisis of the Great Financial Crisis, and they struck
Speaker 3: globally creating the So this idea that in moments of chaos,
Speaker 3: there's opportunities to do once in a generation ten x
Speaker 3: bets is an insight that has allowed me to navigate
Speaker 3: the volatility in all the emerging markets, because chaos visits
Speaker 3: more frequently the emerging markets.
Speaker 2: So we've seen some growth in emerging markets over the
Speaker 2: past few years. What are the areas. I know you're
Speaker 2: focused on some of the mega trends, but what parts
Speaker 2: of the world are you looking at? What's attractive outside
Speaker 2: of the United States for the half of general nic
Speaker 2: that's not domestic.
Speaker 3: Yeah, listen, what we've tried to do in the emerging
Speaker 3: markets is to focus on the big problems. Turns out
Speaker 3: there are bigger problems in the emergent markets, and if
Speaker 3: you can find a digital solution to a big problem,
Speaker 3: you're likely going to be able to build a beautiful
Speaker 3: business with gross margin that has a mote. So renting
Speaker 3: an apartment we were just talking before about the rental market.
Speaker 3: It's hard in the US. In Brazil, it's almost impossible
Speaker 3: because eighty percent of the listings are fake. They're they're
Speaker 3: just a broker trying to get you. Oh that one
Speaker 3: just sold, but let me show you three other ones
Speaker 3: that I have. Buying a used car is hard in
Speaker 3: the United States. In Mexico, you may discover what you
Speaker 3: bought is not actually a car. So if you create
Speaker 3: a platform that creates a transactional platform education, huge problems
Speaker 3: in education. If you create a supplier that provides a
Speaker 3: digital curriculum, we now have a company in Brazil that
Speaker 3: teaches three million kids a day or with a digital
Speaker 3: curriculum that's self learning using AI blah blah blah. So
Speaker 3: big problem, big solution. Another one, for example, turns out
Speaker 3: Brazil and Mexico and number one and number two in
Speaker 3: the world and fraud an identity fraud. We are absolutely
Speaker 3: world class fraudsters. In my neck of the woods, we
Speaker 3: have two companies, one focused in Mexico, one focused in
Speaker 3: Brazil that use biometrics to zero out all fraud with
Speaker 3: tremendous impact on financial inclusions. So our north star for
Speaker 3: most of what we do in the emerging markets is
Speaker 3: to find digital solutions to these big problems and hopefully
Speaker 3: profit that way.
Speaker 2: I'm fascinated by the concept of biometrics of fraud and
Speaker 2: digital solution and I want to roll back to what
Speaker 2: you said previously about India, and it sounds like the
Speaker 2: government putting in a set of biometric standards and then
Speaker 2: building out a digital mobile solution. Not only does it
Speaker 2: put some power in the hand of the consumers, at
Speaker 2: the same time that's very trackable and they could collect
Speaker 2: taxes on whatever's going on. Is that the model for
Speaker 2: what you're seeing in Mexico and Brazil or are they
Speaker 2: you know, very different issues.
Speaker 3: Same issue. Private solution, not a public solution, but it
Speaker 3: addresses to one of the core beliefs I have, which
Speaker 3: is a lot of the inefficiency and poverty outside the
Speaker 3: US is there is no meritocracy. Biometrics allows for a meritocracy.
Speaker 3: You can have a track record, you pay your taxes,
Speaker 3: you show your formal you can borrow against it. If
Speaker 3: you pay your loans, it is trackable, your interest rate
Speaker 3: comes down. If your interest rate comes down, you can borrow,
Speaker 3: and you can send your kid to a better college.
Speaker 3: So this idea of you know, taking friction away and
Speaker 3: bringing meritocracy forward is so mission critical and so unlocking
Speaker 3: of value that it's very exciting to be able to
Speaker 3: back the rails of that. And India has been a
Speaker 3: role model on this.
Speaker 2: All right, So we've talked about India, We've talked about Mexico,
Speaker 2: We've talked about Brazil. What other parts of the world
Speaker 2: look interesting? Do you do stuff in Asia? What do
Speaker 2: you do in Africa?
Speaker 3: Listen, Africa is the next frontier. We've done two initial
Speaker 3: investments in Africa. It's still ten years away from growth, equity,
Speaker 3: the rule of law still needs to work. We just
Speaker 3: open offices. In the Middle East, the golf economy is vibrant,
Speaker 3: entrepreneurship is thriving. Southeast Asia is having a pickup. We're
Speaker 3: beginning to do more work in Japan. Japan, the next
Speaker 3: generation of Japan is rediscovering its innovation routes that it
Speaker 3: had in the nineties but lost for thirty years. So
Speaker 3: all these places are very exciting. Now. The US is
Speaker 3: incredibly exciting. It's half of what we do. It is transformational.
Speaker 3: It's leading the AI revolution. AI is the defining, incredible
Speaker 3: revolution of this generation of twenty five year olds, and
Speaker 3: that's also very exciting. It's probably one of the most
Speaker 3: exciting new power allies is what we see going on
Speaker 3: in Ai.
Speaker 2: It makes sense that Africa is still not quite where
Speaker 2: it needs to be, but I'm kind of intrigued by
Speaker 2: other parts of Asia and Japan. Japan just feels like
Speaker 2: it's years ahead of everybody. It just feels like the
Speaker 2: future has arrived in Japan before it makes it to
Speaker 2: everywhere else. What sort of opportunities are you seeing in Japan.
Speaker 2: They feel like a prettymature, Western style, democratic brand of capitalism.
Speaker 3: Yeah, somehow Japan lost its innovation edge it had in
Speaker 3: the nineties, and it had to do with a generation
Speaker 3: that was not embracing of rapid change. And there's a
Speaker 3: new generation of managers that are embracing rapid change. They
Speaker 3: don't yet have a growth equity industry, but the great
Speaker 3: in software, they're great in financial services, they're great in gaming.
Speaker 3: So I think it's early, but I do see a
Speaker 3: lot of innovation out of Japan and Southeast Asia. Vietnam
Speaker 3: is super exciting. It's a net beneficiary of supply chain
Speaker 3: diversification away from China. It is incredibly entrepreneurial, it's incredibly young.
Speaker 3: We've made investments in the financial services sector where right
Speaker 3: now looking at something in the healthcare sector that's also
Speaker 3: very exciting.
Speaker 2: So for a long time, every time Japan comes up
Speaker 2: someone always brings up they have big demographic problems they
Speaker 2: can't get out of the way, And I'm hearing similar
Speaker 2: things about China. How do you look at those issues
Speaker 2: which are large and macro and somewhat intractable.
Speaker 3: That's a tough one. I think the aging of the West,
Speaker 3: it creates a number of opportunities for healthcare services the
Speaker 3: mission critical, and I think we have to invest in
Speaker 3: making sure we work on the health spent issue. How
Speaker 3: they solve those issues. My crystal ball is not perfect.
Speaker 3: I am a big believer in immigration. The reason the
Speaker 3: United States is not suffering from the same issues is
Speaker 3: we've had very healthy legal immigration for the last thirty
Speaker 3: years and that's refreshed and populated half the unicorns. So
Speaker 3: I suspect part of the answer of the sort of
Speaker 3: West that's aging is flexibilizing immigration.
Speaker 2: Right We've been pretty receptive to it. It looks like
Speaker 2: we know Japan has almost no permanent resident immigrants, the
Speaker 2: UK is turning away from it. Is this going to
Speaker 2: just be an opportunity for countries that open up their
Speaker 2: doors to the best and the brightest, or is this
Speaker 2: an ongoing source of political fodder for left versus right.
Speaker 3: So this is a topic my sister cares really a
Speaker 3: lot about. She dedicated her life to it. She was
Speaker 3: most recently at the National Security Council focused on immigration. Yes,
Speaker 3: I was just in Dubai two weeks ago. It's a
Speaker 3: different Dubai. Some of the brightest minds of Europe have
Speaker 3: moved to Dubai, attracted by the vibron metropolis that's setting
Speaker 3: up there. They're low tax jurisdictions, low bureaucracy, whereas the
Speaker 3: rest of Europe is taxing and making immigration harder and
Speaker 3: ending than on THEMB Some countries like Dubai, like Singapore,
Speaker 3: are opening up to the world and attracting the world's
Speaker 3: best talent. Soon enough, we'll wake up and say, hey,
Speaker 3: the United States can't lose this edge. I hope it does.
Speaker 2: I'm kind of fascinated by the transition that's taking place,
Speaker 2: not just in Dubai but through large parts of the
Speaker 2: Middle East that seemed to be shifting from you know,
Speaker 2: oil regimes and plutocracies to much more I don't want
Speaker 2: to say open societies, but certainly economic, freer societies than
Speaker 2: they've been in the past. What is going on in
Speaker 2: the Middle East to drive these changes.
Speaker 3: Brilliant governance, and the advantage of some having seen so
Speaker 3: many natural resource rich countries squander it away with Dutch disease.
Speaker 3: I think they've they got religious disease. Remember they got religion.
Speaker 3: And they're making the right levels of investments and there's
Speaker 3: so much innovation. We just invest in a company called Kayali.
Speaker 3: It's a it's a perfume brand. It's a beautiful entrepreneur
Speaker 3: who's created this concept which was new to me. It
Speaker 3: turns out the gen z likes to do layering of perfumes,
Speaker 3: which is to combine three, four five perfumes and create
Speaker 3: your own blend. And this has built her whole brand
Speaker 3: around this. That's and it's a global brand born in
Speaker 3: the Middle East. How exciting is that? So I think
Speaker 3: we're going to see more and more innovation in out
Speaker 3: of the Middle East. And I think they're doing a
Speaker 3: lot of things right.
Speaker 2: Some of the investments you've made over the years almost
Speaker 2: sound like venture capital investments as opposed to private equity.
Speaker 2: So social media, perfume, consumer goods, Like what is the
Speaker 2: line between VC and growth equity?
Speaker 3: Yeah, we come in when you're profitable and scaled and
Speaker 3: the risk we're taking is not whether you have product
Speaker 3: market fit, but whether you can really scale to your
Speaker 3: full potential. Our loss ratios, the sort of percent of
Speaker 3: the time in which we lose money is three to
Speaker 3: four percent.
Speaker 2: For the last so it's the opposite.
Speaker 3: The adventure is thirty forty percent, So I.
Speaker 2: Think it's even higher than this, even higher.
Speaker 3: So we come in when you are a late teenager,
Speaker 3: not when you are a thriving young kid.
Speaker 2: A wizard kid, gotcha. So it sounds like, given that
Speaker 2: half of your investing is outside of the United States,
Speaker 2: you think there are tailwinds for growth markets, for emerging markets.
Speaker 2: What are going to be the big drivers for gains
Speaker 2: in these companies receives and in emerging markets?
Speaker 3: Listen, I think AI is the revolution that we were
Speaker 3: talking about. Unlike the Internet or the mobile internet or
Speaker 3: the cloud, this one is truly transformational because they will
Speaker 3: touch about eighty percent of GDP. The previous waves touched
Speaker 3: between ten and twenty percent. This is a four x
Speaker 3: bigger wave. Every process we throw AI too, gets thirty
Speaker 3: to forty percent more efficient in today's version of AI,
Speaker 3: which will be outdated in about three weeks, so programmers
Speaker 3: are more effective online marketing teams spend thirty percent less
Speaker 3: call centers don't need any humans. Decision making enhanced with
Speaker 3: a bot is better. So the proof points are already there,
Speaker 3: and we're asking all our businesses, how will AI fundamentally
Speaker 3: change your business model and get ahead of it investing AI,
Speaker 3: which is one of the things we're doing. We stayed
Speaker 3: away from the infrastructure layer sort of data in the
Speaker 3: growth equity program, data centers, large language models, chips, capital intensive,
Speaker 3: some technology risk that's hard to price. We've been focused
Speaker 3: on the application layer sort of software companies that are
Speaker 3: using proprietary data and AI to provide a new service.
Speaker 3: And for the last four years we met eight hundred
Speaker 3: companies and it was venture stage and evaluations were growth
Speaker 3: equity stage, so bad combination. Finally, in the last six
Speaker 3: months their growth equity stage. And we've just done three
Speaker 3: major investments on AI, and I think we'll do dozens.
Speaker 2: Give us what are the three investments you've just made
Speaker 2: in AI?
Speaker 3: So let me tell you about this company called Insider.
Speaker 3: It's a software company enterprise marketing software companies. It helps
Speaker 3: companies deliver the right message to the right person at
Speaker 3: the right time, in the right media. This company was
Speaker 3: founded in Turkey. Turkey has two things going for it.
Speaker 3: Number one, huge gaming community and huge gaming programmer community,
Speaker 3: so there's lots of programming talent. And because it's kind
Speaker 3: of in Asia, but it's also in Europe, its population
Speaker 3: uses we chat and what's Up. So they developed great
Speaker 3: software that really worked with instant messaging for both the
Speaker 3: West and the East, and they use this edge to
Speaker 3: develop clients in Europe and in Asia. It's now one
Speaker 3: hundred and thirty million dollar business is growing very fast, profitable,
Speaker 3: the huge opportunities the US market. Turns out, the US
Speaker 3: market is only now discovering instant messaging. We still send
Speaker 3: emails to companies to inquire about our orders. The rest
Speaker 3: of the world does not remember what it's like to
Speaker 3: email a company.
Speaker 2: Really.
Speaker 3: That's so we all use we chat or what's Up.
Speaker 3: Now there's an we think a window to bring insider
Speaker 3: to the United States. US is half the market, but
Speaker 3: only seven percent of insider sales. We're really strong in
Speaker 3: the United States. We're going to help them grow. So
Speaker 3: that's Insider. Another company's via Labs using AI for behavioral interventions,
Speaker 3: helping the diabetics state of their medication, helping gym goers
Speaker 3: go to the gym, reducing churn, all using AI to
Speaker 3: provide behavioral nudges. Is ready entrepreneur in the US, building
Speaker 3: in the US. And the fourth one is a Chilean
Speaker 3: founder scholarship kid to n y U is created a
Speaker 3: text to video program. You describe a scene, it produces
Speaker 3: the video. He unlike JGBT, he trained it with permission,
Speaker 3: so he has copyright right, which turns out if you're
Speaker 3: in the image business, kind of important taking off like
Speaker 3: fire and a super friendly, energized community builder of a team.
Speaker 3: And it's a company called Runway dot Ai, which I
Speaker 3: think will change the industry.
Speaker 2: Runway dot ai. All right, So those are three pretty
Speaker 2: big investments, it sounds like. And you've specifically said, you're
Speaker 2: not doing chips, you're not doing data centers, you're not
Speaker 2: doing all the capital intensive things. You know. I've been
Speaker 2: fond of saying it's not the Magnificent seven, it's the
Speaker 2: other four hundred and ninety three companies in the SMP
Speaker 2: five hundred that are going to see benefits from this.
Speaker 2: So far, it seems like it's kind of few and
Speaker 2: far between. How long does an innovation like AI take
Speaker 2: to make its way out into the broader economy. The hope,
Speaker 2: the wishful thinking is hey, everybody becomes more productive, more efficient,
Speaker 2: more profitable, supports higher stock prices. What is the timeline like?
Speaker 2: And I know you don't have a crystal ball, but
Speaker 2: you're immersed in this. How do you see this unfolding?
Speaker 3: It's rapid, it's accelerating. But it's human nature to be
Speaker 3: disappointed by the short term trajectory and wowed by how
Speaker 3: deep it is five years from now. Like any exponential
Speaker 3: we lose, we have a hard time imagining the power
Speaker 3: of exponentials in five years it is going to be
Speaker 3: massive and penetrated. Where the next twelve months disappoint, I
Speaker 3: am sure they will disappoint.
Speaker 2: That's really interesting when you're thinking about a disruptive technology
Speaker 2: like AI and making investments. Is it about the addressable market?
Speaker 2: Is it about how global it can be? What's on
Speaker 2: your checklist?
Speaker 3: Funny you mentioned checklist. So we do have a checklist,
Speaker 3: But let me tell you a story of the GA checklist.
Speaker 3: So when I became chairman of the Investment Committee seven
Speaker 3: years ago, I felt grossly unqualified because my experience is
Speaker 3: primarily emerging markets, and you know most of half of
Speaker 3: what we do is develop markets. So I went to
Speaker 3: the co founders of the firm, Steve Denning and Dave Hodson.
Speaker 3: Incredible minds. These guys ran the firm for the first
Speaker 3: twenty five years, incredible returns, geniuses. And I went to Steve,
Speaker 3: and Steve was CEO for twenty five years. He's a
Speaker 3: former Navy captain, McKinsey train, very very structured, and he says, Martin,
Speaker 3: to build a checklist. Look at our deals, our best
Speaker 3: performing deals. I'll share the three ms, and we'll talk
Speaker 3: about the three ms and other characteristics, and then look
Speaker 3: at the money losers and create a negative checklist. And
Speaker 3: for God's sake, please produce the GA checklist. It was okay, checklist.
Speaker 3: Same day I go to Dave Hodson. Dave Hodson PI
Speaker 3: Beta Kappa dar Mud Stanford programmer, genius two hundred a
Speaker 3: Q plus. Every time he speaks, I have to shut
Speaker 3: my eyes and try to make sure I capture what
Speaker 3: he's saying. And the first thing he says is resist
Speaker 3: the temptation to have a checklist. If it was as
Speaker 3: simple as a checklist, we wouldn't be paid two and
Speaker 3: twenty to make the application of the checklist. And I
Speaker 3: was like, oh my god, the two guys around the
Speaker 3: firm for twenty five years can't agree on how to
Speaker 3: make an investmentation through this. And I did some research
Speaker 3: on this. You know, thinking fast, Sinking slow is the
Speaker 3: checklist manifesto. But even the author of Shinking Fast and
Speaker 3: Danny Callman, he came up. He stumbled into the checklist,
Speaker 3: creating the checklist for interviewers for these really the French
Speaker 3: Force elite units, and he used the checklist. But after
Speaker 3: I found out and it was not in the book purposely,
Speaker 3: there were these super interviewers that applied the checklist and
Speaker 3: had not only eighty five percent accurateate, but a ninety
Speaker 3: nine percent accurate. It turns out that's a big difference.
Speaker 3: And it's best captured by this woman who was sort
Speaker 3: of the master prognosticator. And what she would say is listen,
Speaker 3: I do the work, I do the checklist, and before
Speaker 3: I make a decision, I closed a notebook and see
Speaker 3: how I feel in my gut. So the educated gut
Speaker 3: is the way to make complex decisions.
Speaker 2: So you and I have talked about this in the past,
Speaker 2: but let's bring that up. You know people talk about
Speaker 2: investing as part art, part science. What you've said is
Speaker 2: it's a combination of the gut and the brain, which
Speaker 2: I think is roughly the same. How do you know
Speaker 2: when you're using your brain and when you have to
Speaker 2: defer to your gut. We talked about George Soros's back
Speaker 2: pains as effectively his gut overrunning his brain. How do
Speaker 2: you balance the two?
Speaker 3: Listen, You have to ignore the gut until you do
Speaker 3: your homework. Do the work, do the analysis, do the
Speaker 3: customer segmentation, the financial duets, do the market survey, do
Speaker 3: this competitor service, do the cost analysis. After you fed
Speaker 3: the gut with all that data, then you listen to
Speaker 3: the system one gut, which is three million years old,
Speaker 3: because it's likely to lead you in the right direction.
Speaker 3: The gut is wise if you give it the right inputs.
Speaker 3: If you let the gut guide you before you do
Speaker 3: the work, you're likely to make mistakes.
Speaker 2: So let me throw you a couple of curve balls
Speaker 2: before we get to our favor for questions. What drew
Speaker 2: you to Lincoln Center? How do you contribute to its mission?
Speaker 2: You also work with Primary Chance and with the endeavor
Speaker 2: mentorship tell us a little bit about those sort of interests.
Speaker 3: So listen. I believe wealth is a unit of energy,
Speaker 3: and if you just hoard it, you feel stuffy, slow,
Speaker 3: and it's not good energy.
Speaker 2: It's got to be in motion.
Speaker 3: It's got to be in motion. So I run a
Speaker 3: concentrated book. In my philanthropy, I put my time and
Speaker 3: my wealth on a couple of things. I care deeply
Speaker 3: about education, scholarships. I care deeply about entrepreneurship, and I
Speaker 3: care deeply about music. Why do I care about music.
Speaker 3: The cancer of our generation is tribalism in society, and
Speaker 3: combat tribalism. I don't believe we should censor hate speech,
Speaker 3: but we should promote love speech. And the best form
Speaker 3: of love speech is live music. We're in a room
Speaker 3: vibing to the same tune, breathing the same air, listening
Speaker 3: to the o's, the ads, and the singing to the
Speaker 3: same artists. We're all together. There's no racial there's no
Speaker 3: income differential, there's no country differential. We're all vibing to
Speaker 3: the same music. So mid Lincoln Center is about music
Speaker 3: with endeavor, It's about promoting entrepreneurship across the globe. By
Speaker 3: creating role models and mentorships. And I've been doing that
Speaker 3: for twenty two years. I'm now in the global board
Speaker 3: trying to make take this into even more countries and
Speaker 3: then scholarships, premier chance and I do it also with Harvard.
Speaker 3: I do it also with my high school in Bolivia.
Speaker 3: Talent is sprinkled globally find those perils wherever they are.
Speaker 3: Premier chans is quite interesting. It turns out the Bolivion,
Speaker 3: the Brazilian public education system, test kids in the math
Speaker 3: Olympics when they're thirteen, and they only use this data
Speaker 3: to provide five kids to come meet the president and
Speaker 3: they all get met live. Yeah, they choose five. There's
Speaker 3: a lot of data about some other kids. So what
Speaker 3: Primitra Chansi does is it goes to rule Northeast. This
Speaker 3: is the poorest area of Brazil, the most unfair in
Speaker 3: the world, finds these thirteen year old geniuses and helps
Speaker 3: them get into good high schools in major cities and
Speaker 3: eventually get into great colleges. So that's one of the
Speaker 3: interventions on the education sector.
Speaker 2: Huh. My last curveball question had something has to do
Speaker 2: with something you said about when you were an undergraduate
Speaker 2: picking up some extra cash bartending, and you actually bartended
Speaker 2: at a Harvard Business School reunion. Tell us a little
Speaker 2: bit about that experience. I kind of really like that story.
Speaker 3: So I was eighteen years old. I bartended at all
Speaker 3: sorts of reunions, and the most interesting reunions were the
Speaker 3: twenty fifth and thirtieth reunion from both the college and
Speaker 3: the Business School, because in both I used to have
Speaker 3: a name tag and it said my name Bolivia and
Speaker 3: how old I was. I think there were like thirty
Speaker 3: people that came up. Some of them drunk look at me.
Speaker 3: Some of them touched my cheek. I said, you're so young,
Speaker 3: please enjoy it. Soon you'll be me, and it will
Speaker 3: be a flicker of a turn of an eyelid. It
Speaker 3: will be a second and you'll be me. And I
Speaker 3: had forgotten this story. It was odd at the time.
Speaker 3: I thought it was a little awkward. I was at
Speaker 3: my thirtieth reunion and there was this young woman from
Speaker 3: Finland who was seventeen years old, and I went up
Speaker 3: to her and said, oh, please do enjoy your life
Speaker 3: because it flows by in a second. And then I
Speaker 3: remembered I was heir a second ago. The big insight,
Speaker 3: and it takes us to get to the old age
Speaker 3: to fully appreciate it. If you take stock, what percent
Speaker 3: of your mental time are you in the past and
Speaker 3: are you in the future. And for a lot of
Speaker 3: young people, seventy percent of their time is not in
Speaker 3: the present. And if you want to savor life and
Speaker 3: breathe and savor the air you're breathing, you need eighty
Speaker 3: percent of your mental time to be here now, today
Speaker 3: with you and the sooner you get there. I mean
Speaker 3: Confusion says this a great line. He says, every man
Speaker 3: has two lives. The second one starts when you recognize
Speaker 3: you only have one. And I just wish people get
Speaker 3: to that realization in their thirties, not in their fifties,
Speaker 3: when they're going to their thirtieth three union.
Speaker 2: Huh. Really interesting that the days are long but the
Speaker 2: decades are short, exactly. I've always been a fan of that.
Speaker 2: All right, So let's jump to our favorite questions that
Speaker 2: we ask, starting with what's keeping you entertained these days?
Speaker 2: What are you watching or listening to?
Speaker 3: White Lotus is a household favorite. I love Mike White.
Speaker 3: He is a sophisticated storyteller.
Speaker 2: This so far seems to be the best season of
Speaker 2: the three. I don't know what your experience was. I
Speaker 2: know people love the first season.
Speaker 3: I love the second season. I got the Latin flair
Speaker 3: going for me right, But this one is keeping up.
Speaker 2: This one just feels to be no spoilers. I hated
Speaker 2: the ending of the second season, not the outcome, just
Speaker 2: the way they did it. They could have reached the
Speaker 2: same conclusion in a less annoying fashion. But especially Thailand
Speaker 2: is so fascinating the way this is unfolding. But it's
Speaker 2: been really interesting.
Speaker 3: It's gorgeous, and I'm a big fan of Mike White.
Speaker 3: A great way I connect with my teenage daughter is
Speaker 3: watching Saturday Night Live, not just the current but the old.
Speaker 3: Lorne Michaels is a genius. He stayed fresh for fifty years.
Speaker 3: And a great way to cross the intergenerational gap is
Speaker 3: to show that us old people were once young and
Speaker 3: our humor was actually kind of edgy. We're not just
Speaker 3: these old parts that were to be grown to be.
Speaker 3: Once upon a time, our generation had its shot. So
Speaker 3: that's something else I spend time.
Speaker 2: Every generation thinks that people came before them didn't have
Speaker 2: a childhood, and then suddenly it's like, oh, I get it.
Speaker 2: You have to kind of live it to realize. Oh okay,
Speaker 2: I was a little quick to judge back then exactly.
Speaker 2: Let's talk about mentors who helped influence and shape your career.
Speaker 3: Listen, I've had the pleasure of working with six great investors,
Speaker 3: the guys at three G, some people at Advan, Steve Dave,
Speaker 3: and Bill Ford at GA, and having sat in three
Speaker 3: different investment committees. There's a game I used to play,
Speaker 3: which is every unique investor has a perspective that frames
Speaker 3: their worldview. I would try to learn and predict what
Speaker 3: they're going to say in the investment committee. And the
Speaker 3: moment I got to eighty percent accuracies, Okay, I get it.
Speaker 3: I got it. I get it how Steve Denning thinks,
Speaker 3: I get it, how Bill Ford thinks. And my investment
Speaker 3: style is a mixture of all these six great investors
Speaker 3: that had the honor of working with. And I hope
Speaker 3: I am utterly unpredictable when someone tries to do this
Speaker 3: to me, because I hope my worldviews fluid enough that
Speaker 3: it doesn't cannot be predicted at the eighty percent accuracy
Speaker 3: level that that I was able to do.
Speaker 2: So let's talk about books. What are some of your favorites?
Speaker 2: What are you reading right now?
Speaker 3: So there are three books that change my life as
Speaker 3: a twenty year old. I read Tony Robins Awakened the
Speaker 3: Giant Within. I know it's cheesy, I know it's help.
Speaker 3: It is a fabulous people love it. It is fabulous.
Speaker 3: It's about controlling your emotion and charting your own destiny
Speaker 3: as a hungry twenty year old. It calmed the hell
Speaker 3: out of me, really that it was life changing, and
Speaker 3: I am forever grateful for to Tony, and I am
Speaker 3: a big proponent and he's an incredible human being.
Speaker 2: I am reluctant to call things cheesy where there is
Speaker 2: a ground swell of support and just endless testimonials like
Speaker 2: you just gave that said, hey, you may not love this,
Speaker 2: but this really helped me through this challenge and I'm
Speaker 2: better for it. So I don't know, I think it's
Speaker 2: a little too blase, too glib to just say, oh,
Speaker 2: it's cheesy. What did that book sell? Like ten million?
Speaker 3: A million copies? And if you've never met him, see
Speaker 3: I'm not your guru. At Netflix, and you'll get a
Speaker 3: chance to feel his energy. Oh really, he's amazing. You
Speaker 3: should totally see that.
Speaker 2: I'm not your guru. Al Right, I'm going to put
Speaker 2: that on my list. What are the other two?
Speaker 3: So Victor Frankel meant in search of purpose? I read
Speaker 3: it five times in my list. My purpose keeps changing.
Speaker 3: And then we talked about this. I really am a
Speaker 3: fan of Gentis kanon The Making of the Modern World.
Speaker 3: It was a super interesting book because it defied the
Speaker 3: stereotype that this was a savage, ruthless conquer He was
Speaker 3: an incredibly sophisticated man that built the largest empire, built
Speaker 3: in bigger than the Roman, bigger than the Roman, bigger
Speaker 3: than the Ottoman. Only the British had a bigger empire,
Speaker 3: and he had rule of law. He was married toocratic
Speaker 3: He embraced diversity, He invested in the arts, he was portrayed.
Speaker 3: He was pro interchange of ideas and built something unheard
Speaker 3: of at the time before technology. It was seventeen percent
Speaker 3: of the world's land under one empire. That a single man,
Speaker 3: an orphan, a nomad built in the twelve hundreds.
Speaker 2: Beautiful, arguably not just a military genius, but a governmental
Speaker 2: societal genius, able to not just conquer, but keep the
Speaker 2: empire together, which is always the challenge. The Romans spread
Speaker 2: themselves too thin. You could say the same about the
Speaker 2: Spanish Empire or the British Empire. He managed to maintain
Speaker 2: this throughout his entire life.
Speaker 3: And lived through the right page of sixty five twice
Speaker 3: the life expectancy of his era.
Speaker 2: Which is pretty impressive. Our final two questions, what sort
Speaker 2: of advice would you give to a recent college grad
Speaker 2: interested in a career in either growth, equity or investing,
Speaker 2: or anything along those lines.
Speaker 3: As I think of the twelve junctures where I had
Speaker 3: to make life changing career choices, I always took the
Speaker 3: most adventurous route, choose the most adventurous route, and don't
Speaker 3: do it alone.
Speaker 2: Bring someone, don't play it safe.
Speaker 3: Don't play it safe. At the end of the day,
Speaker 3: he who has the best stories wins.
Speaker 2: And you were before I interrupted, you were about to say,
Speaker 2: bring someone along with you.
Speaker 3: Bring someone along, And that's what There's two points like
Speaker 3: Robert Frost and Walt Wildman. Roberts Frost's journey, the road
Speaker 3: less travel is a lonely journey. Walt Whitman's is about
Speaker 3: opening the road you know and bringing, extend out a
Speaker 3: hand and give you my he says, I give you
Speaker 3: my love. Bring someone you love along. And the most
Speaker 3: important decision of a man's life or a woman's life
Speaker 3: is who your life partner is. Bring someone along on
Speaker 3: this adventure because it's twice as fun if you can
Speaker 3: reminess in your old age about all the great twists
Speaker 3: and turns that life throws me in.
Speaker 2: You And our final question, what do you know about
Speaker 2: the world of investing today? You wish you knew thirty
Speaker 2: or so years ago when you were first getting started.
Speaker 3: From Warren Buffett. You only have tw twenty slots in
Speaker 3: your life? Was your investor wait for the big fish,
Speaker 3: don't waste them on marginal opportunities. You don't eat mark
Speaker 3: to market, only cash on cash counts. And the final one.
Speaker 3: If you think like the crowd, you're destined to mediocrity.
Speaker 2: You're destined to perform like the crowd.
Speaker 3: Exactly.
Speaker 2: Huh really interesting? Thanks Martin for being so generous with
Speaker 2: your time. We have been speaking with Martin Escobari. He
Speaker 2: is co president and head of Global Growth Equity at
Speaker 2: General Atlantic. The firm manages over one hundred billion dollars
Speaker 2: in assets If you enjoy this conversation, we'll be sure
Speaker 2: and check out any of the past five hundred and
Speaker 2: fifty we've had over the previous ten and a half years.
Speaker 2: You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever
Speaker 2: you find your favorite podcasts. And be sure and check
Speaker 2: out my new book, How Not to Invest The Ideas,
Speaker 2: numbers and behavior that destroys well out now wherever you
Speaker 2: find your favorite books. I would be remiss if I
Speaker 2: did not thank the Crack team that helps with these
Speaker 2: conversations together each week. Steve Gonzalez is my audio engineer.
Speaker 2: Sean Russo is my head of research. Anna Luke is
Speaker 2: my producer. I'm Barry Retults. You've been listening to Masters
Speaker 2: in Business on Bloomberg Radio.