1 00:00:10,080 --> 00:00:14,200 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,280 --> 00:00:17,800 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, you know, 3 00:00:17,840 --> 00:00:21,360 Speaker 1: I was thinking something with the Silicon Valley bank crisis 4 00:00:21,440 --> 00:00:23,880 Speaker 1: that you know, it's funny when we think of tech, 5 00:00:24,520 --> 00:00:26,599 Speaker 1: we think of like these companies that are growing like 6 00:00:26,720 --> 00:00:29,159 Speaker 1: super fast, shooting for the moon, trying to be like 7 00:00:29,200 --> 00:00:32,520 Speaker 1: the next Amazon or Google or Open Air Eye or whatever. 8 00:00:32,960 --> 00:00:35,440 Speaker 1: And when we think of banks, we think of these 9 00:00:35,440 --> 00:00:40,240 Speaker 1: companies that really should be about like protecting downside, like conservatism. 10 00:00:40,720 --> 00:00:44,840 Speaker 1: There's sort of like just first, steady, predictable deposit growth. First, 11 00:00:44,840 --> 00:00:47,200 Speaker 1: do not lose money. And I do think I wonder 12 00:00:47,240 --> 00:00:50,440 Speaker 1: if there's just like this inherent tension between like tech 13 00:00:50,479 --> 00:00:52,720 Speaker 1: and banking. It's so funny you mentioned that because I 14 00:00:52,760 --> 00:00:55,040 Speaker 1: was thinking about this, because if you think about the 15 00:00:55,120 --> 00:00:58,880 Speaker 1: venture capital model, it's basically throw a bunch of money 16 00:00:59,120 --> 00:01:02,560 Speaker 1: at different company as you kind of assume that some 17 00:01:02,760 --> 00:01:04,840 Speaker 1: of them are going to fail, but maybe one of 18 00:01:04,880 --> 00:01:08,119 Speaker 1: them will be the next Amazon or Google. And that 19 00:01:08,280 --> 00:01:12,000 Speaker 1: seems to be almost the polar opposite of the banking model, 20 00:01:12,080 --> 00:01:15,440 Speaker 1: which is you have a diversified portfolio, but you're really 21 00:01:15,440 --> 00:01:18,800 Speaker 1: hoping that all of them eventually pay you back. Yeah, No, 22 00:01:18,920 --> 00:01:22,040 Speaker 1: it's very it's a very different model. So here you 23 00:01:22,080 --> 00:01:24,440 Speaker 1: have this bank that you know, obviously was the chief 24 00:01:24,480 --> 00:01:27,720 Speaker 1: bank to startups and even in the best of times, right, 25 00:01:27,760 --> 00:01:30,200 Speaker 1: not in a rate hiking cycle. Now that you imagine 26 00:01:30,240 --> 00:01:33,800 Speaker 1: that like the majority of your clients are going to fail, 27 00:01:33,880 --> 00:01:36,920 Speaker 1: because most startups fail, it is sort of an interesting 28 00:01:37,319 --> 00:01:39,679 Speaker 1: tension that emerges, and it's like, well, how do you 29 00:01:39,720 --> 00:01:42,840 Speaker 1: like responsibly bank the tech industry is kind of an 30 00:01:42,880 --> 00:01:45,520 Speaker 1: interesting question even outside of right now. I think it's 31 00:01:45,520 --> 00:01:47,920 Speaker 1: a fascinating one. And I guess the other question that 32 00:01:47,960 --> 00:01:51,240 Speaker 1: goes right alongside that is our tech company is particularly 33 00:01:51,280 --> 00:01:54,080 Speaker 1: good at managing their own money. Yeah, that's also an 34 00:01:54,120 --> 00:01:56,560 Speaker 1: interesting question because you have a lot of companies like 35 00:01:56,800 --> 00:01:59,280 Speaker 1: start with some hacker or coder and they have three 36 00:01:59,320 --> 00:02:01,080 Speaker 1: people or five people. You know, if they don't have 37 00:02:01,160 --> 00:02:03,160 Speaker 1: they're not going to have a big like finance group, 38 00:02:03,480 --> 00:02:05,600 Speaker 1: And it is it unrealistic that they would even have 39 00:02:05,640 --> 00:02:08,520 Speaker 1: someone doing like treasury management. After they get their first 40 00:02:08,560 --> 00:02:12,320 Speaker 1: like seed check from like Sequoia or whoever. Everyone figured 41 00:02:12,360 --> 00:02:14,600 Speaker 1: out how to put their crypto in cold storage, but 42 00:02:14,720 --> 00:02:19,240 Speaker 1: not how to buy t bills. Through Schwab or Treasury Direct. Yeah, 43 00:02:19,040 --> 00:02:21,519 Speaker 1: that if only they had, then we wouldn't be talking 44 00:02:21,520 --> 00:02:24,240 Speaker 1: about this anyway. I do think there's some interesting questions here, 45 00:02:24,240 --> 00:02:26,560 Speaker 1: and I'm very excited about our guest because we're going 46 00:02:26,600 --> 00:02:29,680 Speaker 1: to be speaking to someone who's been involved in tech 47 00:02:30,000 --> 00:02:33,320 Speaker 1: finance for quite a while. It's sort of like pioneer 48 00:02:33,520 --> 00:02:36,680 Speaker 1: in sort of many aspects of whether it's like spacks 49 00:02:36,800 --> 00:02:41,919 Speaker 1: IPOs providing financial services to tech companies more generally fintech companies. 50 00:02:42,040 --> 00:02:44,239 Speaker 1: We're going to be speaking with Betsy Cohen. She is 51 00:02:44,280 --> 00:02:47,560 Speaker 1: the co founder and chairman of Cohen Circle and Investment Group, 52 00:02:47,960 --> 00:02:50,880 Speaker 1: and she founded a bank and done much more. So, Betsy, 53 00:02:51,000 --> 00:02:52,840 Speaker 1: thank you so much for coming on odd lots really 54 00:02:52,840 --> 00:02:54,880 Speaker 1: excited to have you here. Well, I'm delighted to be 55 00:02:54,960 --> 00:02:59,000 Speaker 1: here and thank you for inviting me before this whole crisis. 56 00:02:59,240 --> 00:03:02,680 Speaker 1: With this, you must have had numerous partners and clients 57 00:03:02,680 --> 00:03:05,560 Speaker 1: who have worked with Silicon Valley Bank for a long time. 58 00:03:05,720 --> 00:03:07,920 Speaker 1: How would you have characterized them? What didn't your view 59 00:03:08,360 --> 00:03:10,560 Speaker 1: made it so that they were so sort of like 60 00:03:10,680 --> 00:03:15,200 Speaker 1: influential throughout the valley and really throughout the entire industry. Well, 61 00:03:15,200 --> 00:03:18,720 Speaker 1: I think that's an interesting question. I think that they 62 00:03:18,720 --> 00:03:22,920 Speaker 1: were well located, certainly early on in terms of being 63 00:03:22,960 --> 00:03:26,560 Speaker 1: in San Francisco, which at the time was the only 64 00:03:26,680 --> 00:03:31,440 Speaker 1: of tech development, but that since changed. I think that 65 00:03:31,480 --> 00:03:35,040 Speaker 1: they had a deep knowledge of the industry, which made 66 00:03:35,120 --> 00:03:40,400 Speaker 1: them good lending partners for tech companies because you didn't 67 00:03:40,440 --> 00:03:44,480 Speaker 1: have to go through a whole description of what was technology, 68 00:03:44,520 --> 00:03:49,240 Speaker 1: what was a platform, etc. Etc. So having that expertise 69 00:03:49,480 --> 00:03:55,320 Speaker 1: was certainly helpful. I think somewhere along the line the 70 00:03:56,400 --> 00:04:03,920 Speaker 1: opportunity to move from simply being a traditional bank as 71 00:04:04,280 --> 00:04:09,360 Speaker 1: was described, slow moving one thing at a time, let's 72 00:04:09,400 --> 00:04:16,160 Speaker 1: not grow too fast, to seeing the opportunity because both 73 00:04:16,440 --> 00:04:22,160 Speaker 1: health tech and biotech and fintech we're all growing very quickly. 74 00:04:22,880 --> 00:04:27,920 Speaker 1: To take advantage of that opportunity to actually grow the 75 00:04:28,000 --> 00:04:32,839 Speaker 1: bank that quickly, it meant that they took their eye. 76 00:04:32,880 --> 00:04:38,200 Speaker 1: I think of what we're banking fundamentals, forget the tech fundamentals, 77 00:04:38,240 --> 00:04:43,160 Speaker 1: because within a portfolio alone, portfolio you do expect losses, 78 00:04:43,800 --> 00:04:48,880 Speaker 1: and whether they're due to a mortgage to an individual 79 00:04:49,120 --> 00:04:53,280 Speaker 1: who dies and there's no nothing to do about it, 80 00:04:53,480 --> 00:05:00,480 Speaker 1: or some other personal and probable event. It's why banks 81 00:05:00,560 --> 00:05:03,880 Speaker 1: do have provisions for loan laws. So it's not that 82 00:05:04,040 --> 00:05:08,440 Speaker 1: every tech company had to be successful, but they had 83 00:05:08,480 --> 00:05:12,719 Speaker 1: to have within their portfolio the appropriate provision. I think 84 00:05:12,760 --> 00:05:17,320 Speaker 1: what they really really didn't do as well as they 85 00:05:17,400 --> 00:05:21,960 Speaker 1: might have is, or are two things, and they're really 86 00:05:22,000 --> 00:05:25,360 Speaker 1: both banking one oh one. One is that they had 87 00:05:25,400 --> 00:05:30,359 Speaker 1: a concentration of industry. It should have given them. I 88 00:05:30,400 --> 00:05:34,960 Speaker 1: would have thought a better understanding of the current situation 89 00:05:35,040 --> 00:05:39,239 Speaker 1: of technology companies, that they were having difficulty raising money 90 00:05:39,240 --> 00:05:43,000 Speaker 1: and therefore would lean on their deposits more, but apparently 91 00:05:43,000 --> 00:05:48,000 Speaker 1: it didn't. And the other is really asset management, asset 92 00:05:48,120 --> 00:05:51,240 Speaker 1: liability management, and not so much in terms of the 93 00:05:51,360 --> 00:05:57,520 Speaker 1: quality of the underlying bonds that they made or the 94 00:05:57,600 --> 00:06:01,919 Speaker 1: underlying loans, because the both the loan and the and 95 00:06:02,200 --> 00:06:07,680 Speaker 1: the quality of the securities in their portfolio is pretty good. 96 00:06:08,640 --> 00:06:13,839 Speaker 1: But they had eighteen months during which interest rates were 97 00:06:14,000 --> 00:06:19,680 Speaker 1: rising at a very quick pace, and not to adjust 98 00:06:19,760 --> 00:06:25,120 Speaker 1: the portfolio, not to take on a duration basis of 99 00:06:25,240 --> 00:06:30,800 Speaker 1: the appropriate steps is just to me mind blowing. Yeah, 100 00:06:30,839 --> 00:06:34,880 Speaker 1: an asset liability duration mismatch. I was going to ask 101 00:06:34,880 --> 00:06:37,400 Speaker 1: you what you thought caused the collapse, but since you 102 00:06:37,480 --> 00:06:40,520 Speaker 1: already answered that, can you maybe just talk about I 103 00:06:40,520 --> 00:06:44,080 Speaker 1: should mention, we're recording this on March fifteenth, what's been 104 00:06:44,160 --> 00:06:49,080 Speaker 1: the experience or the mood in Silicon Valley over the 105 00:06:49,120 --> 00:06:52,080 Speaker 1: past week or so. You know, I assume that you're 106 00:06:52,120 --> 00:06:56,200 Speaker 1: talking to your various partners. What are they telling you. 107 00:06:56,560 --> 00:07:01,479 Speaker 1: I mean, it's your panic, and it's surprise, and it's disappointment, 108 00:07:02,520 --> 00:07:06,760 Speaker 1: and it's all of the things that go with having 109 00:07:06,839 --> 00:07:11,440 Speaker 1: a trusted partner not perform. I think that there are 110 00:07:11,520 --> 00:07:16,040 Speaker 1: companies that had credit lines. Let's just take a number 111 00:07:16,080 --> 00:07:19,440 Speaker 1: at random, one hundred million dollars credit line. They had 112 00:07:19,520 --> 00:07:23,920 Speaker 1: drawn sixty million dollars. They knew that they had forty 113 00:07:23,920 --> 00:07:27,400 Speaker 1: million dollars let's put this in quotation marks in the 114 00:07:27,480 --> 00:07:32,240 Speaker 1: bank in order to cover what was their ongoing period 115 00:07:32,320 --> 00:07:36,440 Speaker 1: of negative cash flow. So they felt pretty good about 116 00:07:36,480 --> 00:07:38,880 Speaker 1: themselves because they could see at the end of that 117 00:07:39,000 --> 00:07:43,800 Speaker 1: period they would be in a cash flow positive situation. 118 00:07:44,120 --> 00:07:47,200 Speaker 1: As is the case when a bank is taken over 119 00:07:47,320 --> 00:07:51,680 Speaker 1: by the FDIC, all loans are frozen, so that forty 120 00:07:51,680 --> 00:07:55,800 Speaker 1: million dollars is no longer available to them in our example. 121 00:07:56,320 --> 00:08:01,000 Speaker 1: Add that to the fact that whatever money they had raised, 122 00:08:01,200 --> 00:08:05,000 Speaker 1: and it's not true of all tech companies, but the 123 00:08:06,600 --> 00:08:11,520 Speaker 1: majority of them had a very comfortable feeling that Silicon 124 00:08:11,680 --> 00:08:17,080 Speaker 1: Valley Bank, at two hundred and nine billion dollars, was 125 00:08:17,400 --> 00:08:21,320 Speaker 1: the sixteenth largest bank in the country, was a very 126 00:08:21,400 --> 00:08:27,000 Speaker 1: safe place to put their deposits. You know, both it 127 00:08:27,040 --> 00:08:30,200 Speaker 1: looked like earlier in the week that both they were 128 00:08:30,200 --> 00:08:32,560 Speaker 1: not going to have access to their money through the 129 00:08:32,679 --> 00:08:35,600 Speaker 1: loan mechanism and they were not going to have the 130 00:08:35,760 --> 00:08:40,440 Speaker 1: uninsured deposits. So one piece of that has been resolved, 131 00:08:41,080 --> 00:08:43,800 Speaker 1: but the second piece has not, so there's a lot 132 00:08:43,800 --> 00:08:47,000 Speaker 1: of panic. I haven't heard as much about that line 133 00:08:47,000 --> 00:08:49,720 Speaker 1: of credit or evolving line of credit issues. So even 134 00:08:49,920 --> 00:08:53,840 Speaker 1: so it's like, okay, relief, you get your deposits back, 135 00:08:54,320 --> 00:08:57,839 Speaker 1: But that must mean that for a lot of companies now, 136 00:08:58,240 --> 00:09:03,480 Speaker 1: they're financial security is still impaired by this, simply because 137 00:09:03,840 --> 00:09:05,679 Speaker 1: I don't know, it's hard for me to I don't know, 138 00:09:05,720 --> 00:09:08,080 Speaker 1: it's hard for me to imagine some other bank right 139 00:09:08,160 --> 00:09:12,160 Speaker 1: now jumping up and start getting excited about offering startups 140 00:09:12,160 --> 00:09:14,600 Speaker 1: lines of credit in this environment. Well remember it's not 141 00:09:14,720 --> 00:09:18,600 Speaker 1: only started right, right, Yeah, So startups make a part 142 00:09:18,640 --> 00:09:24,200 Speaker 1: of it. And certainly customer loyalty was reinforced by the 143 00:09:24,240 --> 00:09:28,480 Speaker 1: willingness of the bank to make loans perhaps to earlier 144 00:09:28,640 --> 00:09:34,120 Speaker 1: stage companies than maybe other banks might see fit to do. 145 00:09:34,480 --> 00:09:41,040 Speaker 1: But it's really beyond that and the opportunity to have 146 00:09:41,280 --> 00:09:46,439 Speaker 1: another because everyone is swooping in, I mean, from hedge 147 00:09:46,440 --> 00:09:51,959 Speaker 1: funds to other banking institutions, and I'm sure that some 148 00:09:52,040 --> 00:09:56,679 Speaker 1: portion of the credit lines will then become available, but 149 00:09:56,720 --> 00:10:16,000 Speaker 1: that's not going to happen tomorrow. You know, we started 150 00:10:16,120 --> 00:10:20,280 Speaker 1: in the intro talking about how should tech companies or 151 00:10:20,360 --> 00:10:24,120 Speaker 1: startups be banked, and there's an implicit assumption there, which 152 00:10:24,160 --> 00:10:27,800 Speaker 1: is that that industry is somehow different to others. You 153 00:10:27,920 --> 00:10:32,760 Speaker 1: anticipated the next question. I'm sorry, So A, do you 154 00:10:32,800 --> 00:10:35,439 Speaker 1: agree with that? And B if that is true, if 155 00:10:35,440 --> 00:10:40,479 Speaker 1: there are some idiosyncrasies or some peculiarities around tech slash startups, 156 00:10:41,160 --> 00:10:43,320 Speaker 1: what is the ideal way that they should be banked 157 00:10:43,320 --> 00:10:45,040 Speaker 1: in finance? Well, and if I could just add on 158 00:10:45,080 --> 00:10:47,040 Speaker 1: a little bit to the question, I mean you were 159 00:10:47,040 --> 00:10:49,040 Speaker 1: early on this, I mean you started your career. You 160 00:10:49,040 --> 00:10:51,160 Speaker 1: were like one of the first like financial service at 161 00:10:51,200 --> 00:10:54,720 Speaker 1: partners like PayPal and so forth. So it presumably you 162 00:10:54,800 --> 00:10:59,880 Speaker 1: identified a gap in the existing banking infrastructure for us. 163 00:11:00,080 --> 00:11:03,000 Speaker 1: Certain type of like fast growing company and so what 164 00:11:03,240 --> 00:11:05,360 Speaker 1: is it that yeah, what is it that makes that distinct? 165 00:11:05,360 --> 00:11:09,440 Speaker 1: That we were not traditionally a lender to those companies. 166 00:11:10,080 --> 00:11:13,480 Speaker 1: We were providing a service what we call a bank 167 00:11:13,600 --> 00:11:19,240 Speaker 1: rapper for non bank fintech companies, so that they could 168 00:11:19,280 --> 00:11:25,400 Speaker 1: offer their customers a deposit service. PayPal is not a bank, 169 00:11:25,480 --> 00:11:28,679 Speaker 1: and so it needs to have a way and a 170 00:11:28,720 --> 00:11:33,080 Speaker 1: place to have access to the banking system. So we 171 00:11:33,080 --> 00:11:38,160 Speaker 1: were the window into the banking system. It's why today 172 00:11:38,320 --> 00:11:42,120 Speaker 1: I can say very proudly the banking model of Bankcorp 173 00:11:42,640 --> 00:11:45,600 Speaker 1: is as valid as it was twenty five years ago 174 00:11:45,640 --> 00:11:48,959 Speaker 1: when we started. That being said, we did do a 175 00:11:48,960 --> 00:11:53,920 Speaker 1: significant amount of due diligence on the companies with whom 176 00:11:54,120 --> 00:11:57,400 Speaker 1: we were going to partner on the bank rapper side. 177 00:11:58,000 --> 00:12:03,800 Speaker 1: So they were not only companies that had a product 178 00:12:04,080 --> 00:12:08,560 Speaker 1: that they were going to develop that might work, but 179 00:12:08,720 --> 00:12:13,920 Speaker 1: there was a great deal more depth of understanding of 180 00:12:14,040 --> 00:12:18,520 Speaker 1: where they were in their process. We didn't care whether 181 00:12:18,559 --> 00:12:22,840 Speaker 1: they grew to be a very large company or not, 182 00:12:23,080 --> 00:12:27,480 Speaker 1: as long as they could service their particular needs. That's 183 00:12:27,520 --> 00:12:31,320 Speaker 1: a very different position to be in than being a 184 00:12:31,440 --> 00:12:35,319 Speaker 1: lender to these companies where you're putting out your money 185 00:12:35,400 --> 00:12:40,920 Speaker 1: up front, and you are looking at the potential viability 186 00:12:42,400 --> 00:12:48,199 Speaker 1: of particular platform. It's sort of the middle ground between 187 00:12:48,480 --> 00:12:53,480 Speaker 1: equity and debt, or let me say equity and traditional debt. 188 00:12:54,480 --> 00:12:56,240 Speaker 1: Can you explain that what is it? Like? What is 189 00:12:56,280 --> 00:12:58,880 Speaker 1: it then? And so talking about like, Okay, it's not 190 00:12:58,960 --> 00:13:01,160 Speaker 1: quite equity, it's not quite dead. How should we think 191 00:13:01,200 --> 00:13:04,400 Speaker 1: about I guess venture dead or lending to these fast 192 00:13:04,400 --> 00:13:07,440 Speaker 1: growing companies, and that how why it doesn't quite fit 193 00:13:07,480 --> 00:13:11,160 Speaker 1: in your view into either category. I think that equity 194 00:13:11,720 --> 00:13:15,360 Speaker 1: is clearly a bet, maybe a good bet. It may 195 00:13:15,360 --> 00:13:18,040 Speaker 1: be a well researched bet. It may be a bet 196 00:13:18,040 --> 00:13:23,600 Speaker 1: based on prior performance of a particular company. But when 197 00:13:23,600 --> 00:13:26,320 Speaker 1: you make an investment, you're making a bet that a 198 00:13:26,400 --> 00:13:29,760 Speaker 1: product will be successful, that the management will be able 199 00:13:29,800 --> 00:13:34,840 Speaker 1: to manage through a variety of changes in the marketplace. 200 00:13:35,520 --> 00:13:39,559 Speaker 1: All of those things are in the nature of betting, 201 00:13:39,640 --> 00:13:44,720 Speaker 1: not gambling with a bad connotation, but bets with a 202 00:13:44,720 --> 00:13:49,360 Speaker 1: good connotation and with deep knowledge. You know, lending is 203 00:13:50,000 --> 00:13:56,319 Speaker 1: more akin to having predictability, and many of these companies 204 00:13:56,880 --> 00:14:02,840 Speaker 1: did not yet have the predictability that being said, a 205 00:14:02,960 --> 00:14:08,520 Speaker 1: bank like Silicon Valley bank which had deep knowledge of 206 00:14:08,559 --> 00:14:14,319 Speaker 1: the tech industry might make that judgment better than somebody else. 207 00:14:16,080 --> 00:14:20,960 Speaker 1: So Bangkor was providing private label banking services, but also 208 00:14:21,120 --> 00:14:25,920 Speaker 1: the underlying payments technology or additional payments technology as well. 209 00:14:26,520 --> 00:14:31,720 Speaker 1: What was it like doing that as a competitor to 210 00:14:32,440 --> 00:14:36,960 Speaker 1: traditional banks at that period of time? Was it? I 211 00:14:37,000 --> 00:14:39,560 Speaker 1: can imagine maybe to some extent it was a competitive 212 00:14:39,600 --> 00:14:42,960 Speaker 1: advantage because a lot of those larger banks tend to 213 00:14:43,000 --> 00:14:47,280 Speaker 1: move very slowly, especially on the payments portion of things. 214 00:14:47,360 --> 00:14:50,240 Speaker 1: But on the other hand, you know, you're talking about 215 00:14:50,800 --> 00:14:54,680 Speaker 1: giants of traditional financial services, and when they decide that 216 00:14:54,720 --> 00:14:57,280 Speaker 1: they care about something, they can throw a lot of 217 00:14:57,320 --> 00:15:01,120 Speaker 1: money at it. Yeah, the I remember we started in 218 00:15:01,160 --> 00:15:05,760 Speaker 1: two thousand. Nobody understood what we were doing, so that 219 00:15:05,840 --> 00:15:08,920 Speaker 1: was an advantage. We then had an advantage for a 220 00:15:09,000 --> 00:15:13,280 Speaker 1: couple of years because the big banks didn't think it mattered. 221 00:15:13,720 --> 00:15:17,560 Speaker 1: I mean, I remember attending a conference and I was 222 00:15:17,840 --> 00:15:21,320 Speaker 1: placed opposite I don't know a banker from a big bank, 223 00:15:22,000 --> 00:15:26,080 Speaker 1: and he was very clear that we would certainly fail 224 00:15:26,160 --> 00:15:29,440 Speaker 1: within the next period of time because we were not 225 00:15:29,680 --> 00:15:33,360 Speaker 1: offering the services that a big bank could offer. We 226 00:15:33,440 --> 00:15:38,920 Speaker 1: didn't have to, so we evolved into the dominant platform 227 00:15:39,000 --> 00:15:42,760 Speaker 1: with the deepest knowledge of how to do this, and 228 00:15:42,840 --> 00:15:46,800 Speaker 1: the banquet remains that in that position. Today there are 229 00:15:46,840 --> 00:15:52,520 Speaker 1: many who have tried to model themselves after the business 230 00:15:52,680 --> 00:15:58,160 Speaker 1: model that we developed, but nobody has had the length 231 00:15:58,200 --> 00:16:03,440 Speaker 1: of time, the relationships, the predictability, the depth of knowledge, etc. 232 00:16:04,280 --> 00:16:08,400 Speaker 1: That the Bancorp was hid. I want to sort of 233 00:16:08,600 --> 00:16:12,120 Speaker 1: zoom forward and bring to the present day for a second. 234 00:16:12,440 --> 00:16:16,560 Speaker 1: You were an innovator and early I don't know, sponsor 235 00:16:16,840 --> 00:16:19,320 Speaker 1: or active in SPACs for years. So we saw this 236 00:16:19,480 --> 00:16:22,920 Speaker 1: SPAC boom that started in twenty twenty, really like summer 237 00:16:22,920 --> 00:16:25,360 Speaker 1: of twenty twenty, right after the pandemic. Maybe it's there 238 00:16:25,360 --> 00:16:27,160 Speaker 1: are a few in the year before. I think like 239 00:16:27,280 --> 00:16:29,720 Speaker 1: Virgin Galactic was the year before, but you were like 240 00:16:29,760 --> 00:16:32,160 Speaker 1: several years before everyone else, and I think you've done 241 00:16:32,200 --> 00:16:35,080 Speaker 1: more than anyone else. Or maybe it's closed. Maybe it's 242 00:16:35,080 --> 00:16:37,800 Speaker 1: a time I'm not sure you can correct me. Then 243 00:16:37,800 --> 00:16:39,840 Speaker 1: a bunch of them collapsed and it did terribly Like 244 00:16:40,040 --> 00:16:43,080 Speaker 1: right now, like what is it? Just sort of your 245 00:16:43,200 --> 00:16:48,120 Speaker 1: sense of I don't know, investment appetite, Like how frozen 246 00:16:48,160 --> 00:16:52,000 Speaker 1: are things? I think very frozen is the short answer. 247 00:16:52,120 --> 00:16:54,760 Speaker 1: But remember that a SPACK is just a league legal 248 00:16:54,880 --> 00:17:00,640 Speaker 1: villa vehicle. It is designed to provide capital to an 249 00:17:00,720 --> 00:17:05,159 Speaker 1: industry that can't get capital through a straight on IPO 250 00:17:05,359 --> 00:17:11,960 Speaker 1: because there is some either gap in the development of 251 00:17:12,160 --> 00:17:15,800 Speaker 1: the company, so they don't have numbers from prior years. 252 00:17:16,160 --> 00:17:19,159 Speaker 1: If you look back, what you see is really the 253 00:17:19,200 --> 00:17:22,320 Speaker 1: beginnings of a company, and there was no way under 254 00:17:22,359 --> 00:17:26,640 Speaker 1: the traditional IPO to talk to investors about what might 255 00:17:27,280 --> 00:17:30,879 Speaker 1: come in the future. Having come out of the Bankcorp 256 00:17:30,960 --> 00:17:35,440 Speaker 1: fifteen years with all these fintech companies, I recognize that 257 00:17:35,520 --> 00:17:38,760 Speaker 1: some of them had reached a level at which they 258 00:17:38,800 --> 00:17:43,640 Speaker 1: could be predictable. They did have recurring income, they had 259 00:17:43,680 --> 00:17:49,000 Speaker 1: an opportunity to make acquisitions, and therefore they could use 260 00:17:49,040 --> 00:17:52,600 Speaker 1: a public currency. This was not for the whole portfolio, 261 00:17:53,800 --> 00:17:57,920 Speaker 1: but at the time the IPO market was open, which 262 00:17:57,960 --> 00:18:03,359 Speaker 1: it is not today. The IPO market, therefore, as a whole, 263 00:18:04,200 --> 00:18:11,280 Speaker 1: was receptive to a vehicle which provided capital to what 264 00:18:11,520 --> 00:18:16,000 Speaker 1: should be a public or could be a good public company. 265 00:18:16,200 --> 00:18:21,120 Speaker 1: And we always emphasize it's why our basket of spec 266 00:18:21,640 --> 00:18:25,119 Speaker 1: companies that are still trading that haven't been sold or 267 00:18:25,240 --> 00:18:30,600 Speaker 1: some other disposition are all trading very well. It's really 268 00:18:30,640 --> 00:18:36,040 Speaker 1: the discipline that we brought to and the deep knowledge 269 00:18:36,160 --> 00:18:39,639 Speaker 1: that we brought to the area that enabled us to 270 00:18:39,680 --> 00:18:44,560 Speaker 1: make these good decisions. Will there be I mean, if 271 00:18:44,600 --> 00:18:47,960 Speaker 1: we look back at the history of specs, they were 272 00:18:48,000 --> 00:18:52,399 Speaker 1: begun in the nineties when steel companies and other such 273 00:18:52,440 --> 00:18:55,320 Speaker 1: companies coming we were coming right out of a depression 274 00:18:55,800 --> 00:18:59,960 Speaker 1: in ninety two, did not have access to the capital 275 00:19:00,280 --> 00:19:05,040 Speaker 1: markets but needed capital. That was the first round. The 276 00:19:05,160 --> 00:19:08,920 Speaker 1: second round might have been for real estate companies following 277 00:19:09,040 --> 00:19:12,400 Speaker 1: two thousand and eight, where they were cut off from 278 00:19:12,440 --> 00:19:16,520 Speaker 1: the public markets but actually needed the capital. And the 279 00:19:16,680 --> 00:19:20,920 Speaker 1: third round was really in the tech area. I think 280 00:19:21,000 --> 00:19:25,479 Speaker 1: one of the things that happened is that people maybe 281 00:19:25,520 --> 00:19:30,640 Speaker 1: confused companies that either had a path to profitability which 282 00:19:30,760 --> 00:19:37,840 Speaker 1: was highly predictable, or had were in fact modestly profitable, 283 00:19:38,080 --> 00:19:42,399 Speaker 1: which had very experienced executives that were attached to the 284 00:19:42,440 --> 00:19:47,520 Speaker 1: company and could navigate and had differentiable products. I mean, 285 00:19:47,560 --> 00:19:50,639 Speaker 1: I think if you look at the electric vehicle area 286 00:19:50,920 --> 00:19:55,679 Speaker 1: or the biotech area, those are two areas in which 287 00:19:55,720 --> 00:20:01,680 Speaker 1: the predictability of performance is at the very nader. So 288 00:20:01,920 --> 00:20:05,920 Speaker 1: you know, the public markets are all about predictability, They're 289 00:20:05,920 --> 00:20:11,720 Speaker 1: all about reporting. Next this quarters and hopefully next quarters earnings, 290 00:20:12,280 --> 00:20:15,959 Speaker 1: and that's what the market responds to. Could you launch 291 00:20:16,160 --> 00:20:18,879 Speaker 1: a spack in the current environment or is the window 292 00:20:18,960 --> 00:20:23,040 Speaker 1: just closed? I think in the next couple of months 293 00:20:23,640 --> 00:20:26,760 Speaker 1: I would have said, prior to this upheaval in the 294 00:20:27,440 --> 00:20:30,800 Speaker 1: in the banking area, I would have said one Ndita, 295 00:20:31,000 --> 00:20:36,840 Speaker 1: I would say so today that one could launch a spack, absolutely, 296 00:20:37,400 --> 00:20:40,560 Speaker 1: but it would have slightly different characteristics. This spack is 297 00:20:40,600 --> 00:20:43,919 Speaker 1: not sitting there and out of space, It's sitting in 298 00:20:43,960 --> 00:20:46,680 Speaker 1: a spacks in space. Does have a good ring to it? Yeah? 299 00:20:46,720 --> 00:20:48,920 Speaker 1: It does? It does you know, just the next three 300 00:20:49,680 --> 00:20:55,479 Speaker 1: But in fact they are responsive to the current public market. 301 00:20:56,280 --> 00:21:01,240 Speaker 1: So would they be constructed differently probably so. Would there 302 00:21:01,359 --> 00:21:07,399 Speaker 1: be elements that were not needed in the prior iteration 303 00:21:07,520 --> 00:21:14,800 Speaker 1: of specs that wouldn't be inducive to the investor? Probably so, 304 00:21:14,800 --> 00:21:17,320 Speaker 1: so they would take a different shape, But it's a 305 00:21:17,440 --> 00:21:23,320 Speaker 1: shape that is responsive to external factors rather than to 306 00:21:23,440 --> 00:21:27,600 Speaker 1: the legal structure itself. Let me ask a broader question 307 00:21:27,840 --> 00:21:31,080 Speaker 1: on investing, and I think you did an interview last 308 00:21:31,119 --> 00:21:34,840 Speaker 1: year where you were talking about how tech valuations had 309 00:21:34,920 --> 00:21:36,840 Speaker 1: gone down quite a lot, and that meant it was 310 00:21:36,960 --> 00:21:39,520 Speaker 1: probably a better time to invest. There were a lot 311 00:21:39,560 --> 00:21:44,119 Speaker 1: of opportunities. Presumably, as we sit here today, valuations have 312 00:21:44,200 --> 00:21:47,880 Speaker 1: gone down even further. How are you feeling about the 313 00:21:47,920 --> 00:21:53,080 Speaker 1: investment landscape in general? I think valuation is only one 314 00:21:53,200 --> 00:21:58,040 Speaker 1: component of making a decision. Remember, since the time that 315 00:21:58,160 --> 00:22:04,080 Speaker 1: I probably gave that interview, the war in Ukraine evolved, 316 00:22:04,080 --> 00:22:10,400 Speaker 1: the several other large unnerving occurrences. Certainly the banking issues 317 00:22:10,440 --> 00:22:16,680 Speaker 1: of today give investors pause. You know, it's a matter 318 00:22:16,760 --> 00:22:19,920 Speaker 1: of looking at the whole package. I do think that 319 00:22:19,960 --> 00:22:24,920 Speaker 1: there are opportunities today. I think they're good opportunities, not 320 00:22:25,080 --> 00:22:31,520 Speaker 1: only because valuations are really rolled back in ten years, 321 00:22:31,800 --> 00:22:37,439 Speaker 1: but because there are companies that have reached a level 322 00:22:37,800 --> 00:22:43,800 Speaker 1: of both scaling and differentiation and have good executive and 323 00:22:44,040 --> 00:22:49,359 Speaker 1: internal corporate elements at place in place to be good 324 00:22:49,440 --> 00:22:53,720 Speaker 1: public companies or be good investments on the private basis. 325 00:22:54,000 --> 00:22:57,920 Speaker 1: You know, I'm not moving away from that. Looking at 326 00:22:57,920 --> 00:23:01,800 Speaker 1: it from the investor point of view, everybody is nervous. 327 00:23:02,560 --> 00:23:05,680 Speaker 1: You know. It's interesting sometimes when you talk to investors 328 00:23:05,800 --> 00:23:08,320 Speaker 1: in the background, I'm still excited, I'm still investing. We're 329 00:23:08,359 --> 00:23:11,000 Speaker 1: like excited about AI or I'm really excited about There's 330 00:23:11,000 --> 00:23:13,560 Speaker 1: still many opportunities. Do you think like that in terms 331 00:23:13,560 --> 00:23:17,160 Speaker 1: of like sectoral opportunities or because it sounds like what 332 00:23:17,200 --> 00:23:21,600 Speaker 1: you're describing is less about sectors per se and more 333 00:23:21,840 --> 00:23:25,840 Speaker 1: about patterns that you like to see among management teams 334 00:23:25,920 --> 00:23:30,920 Speaker 1: and financial operations regardless of the industry. I would say 335 00:23:30,920 --> 00:23:35,000 Speaker 1: it's the latter. That I think that there are elements 336 00:23:35,040 --> 00:23:40,880 Speaker 1: that are necessary in order to make a private company 337 00:23:40,920 --> 00:23:45,160 Speaker 1: a successful public company, and that has less to do 338 00:23:45,240 --> 00:23:48,119 Speaker 1: with the sector than it does have to do with 339 00:23:48,240 --> 00:23:54,240 Speaker 1: the business model and corporate profile of the company. That 340 00:23:54,320 --> 00:23:59,040 Speaker 1: being said, there is more opportunity to grow in certain sectors. 341 00:23:59,600 --> 00:24:02,280 Speaker 1: So that is a component of what you look at, 342 00:24:02,640 --> 00:24:05,560 Speaker 1: but it's not the only component. But it also did 343 00:24:05,600 --> 00:24:08,040 Speaker 1: sound in your one of your previous nistors to Tracy, 344 00:24:08,119 --> 00:24:11,560 Speaker 1: which I found interesting. The types of companies that came 345 00:24:11,640 --> 00:24:16,520 Speaker 1: public during the twenty twenty one spack boom. To your view, 346 00:24:16,720 --> 00:24:20,680 Speaker 1: many of them were just not appropriate for public markets 347 00:24:21,080 --> 00:24:25,040 Speaker 1: by dint of their extreme profitability uncertainty. So like an 348 00:24:25,040 --> 00:24:29,199 Speaker 1: early stage electric battery company, an early stage biotech a 349 00:24:29,400 --> 00:24:31,880 Speaker 1: company that makes you know, electric trucks, but it's still 350 00:24:31,880 --> 00:24:34,560 Speaker 1: never manufactured one. In your view, these were just like 351 00:24:34,680 --> 00:24:39,240 Speaker 1: never appropriate for like public market infestors. Absolutely, they weren't 352 00:24:39,240 --> 00:24:41,600 Speaker 1: appropriate at the time that they were brought to the 353 00:24:41,600 --> 00:24:45,080 Speaker 1: public markets. Maybe they will be in twenty four, twenty 354 00:24:45,119 --> 00:24:52,120 Speaker 1: five when they have actual contracts, actual manufacturing facilities, actual sales, 355 00:24:52,640 --> 00:24:57,560 Speaker 1: actual customers. But indeed, when brought to the public markets, 356 00:24:57,600 --> 00:25:17,440 Speaker 1: they were not appropriate. So one of the things about 357 00:25:17,520 --> 00:25:20,840 Speaker 1: tech is it's always evolving. It's always trying to solve 358 00:25:20,880 --> 00:25:27,240 Speaker 1: new challenges. And within your fintech expertise in particular, talk 359 00:25:27,320 --> 00:25:31,400 Speaker 1: to us about how you see that evolving now, not 360 00:25:31,440 --> 00:25:36,040 Speaker 1: just in response to the current interest rate environment and inflation, 361 00:25:36,520 --> 00:25:39,600 Speaker 1: but also maybe in response to some of what we 362 00:25:39,680 --> 00:25:45,080 Speaker 1: saw with SVP. I think that technology is evolving, and 363 00:25:45,320 --> 00:25:50,360 Speaker 1: we're at a crossroads in financial technology where we're moving 364 00:25:50,600 --> 00:25:56,720 Speaker 1: from one level to another level. We call it embedded finance, 365 00:25:57,520 --> 00:26:03,400 Speaker 1: but it's not a standalone phenomenal. It requires a partner. 366 00:26:03,680 --> 00:26:10,520 Speaker 1: One of the reasons that the financial technology industry was 367 00:26:11,080 --> 00:26:14,920 Speaker 1: slow to scale at the beginning of the two thousands 368 00:26:15,320 --> 00:26:17,560 Speaker 1: was really that there was nobody on the other side, 369 00:26:17,680 --> 00:26:20,919 Speaker 1: or there were fewer people on the other side. Consumers 370 00:26:20,960 --> 00:26:26,720 Speaker 1: were not sophisticated and knowledgeable about how to use their computers, effectively, 371 00:26:26,920 --> 00:26:30,640 Speaker 1: most of the computing work Internet work that they done 372 00:26:31,200 --> 00:26:35,919 Speaker 1: did was done it at work. Small businesses and enterprises 373 00:26:36,000 --> 00:26:41,920 Speaker 1: were not sophisticated about how to run their businesses on 374 00:26:41,960 --> 00:26:47,040 Speaker 1: the Internet. Today you have both elements crossing. You have 375 00:26:47,160 --> 00:26:52,400 Speaker 1: a more sophisticated technology capacity and you have a more 376 00:26:52,440 --> 00:26:58,160 Speaker 1: sophisticated and knowledgeable user. You know. One of the things 377 00:26:58,200 --> 00:27:01,840 Speaker 1: again going back to like that twenty twenty one, the 378 00:27:01,880 --> 00:27:05,639 Speaker 1: boom the boom years. In addition to taking companies public 379 00:27:05,680 --> 00:27:08,000 Speaker 1: that probably were not appropriate to public markets, which we 380 00:27:08,040 --> 00:27:12,199 Speaker 1: saw quite a bit of another phenomenon that existed in 381 00:27:12,280 --> 00:27:14,400 Speaker 1: a few years in the last few years is like 382 00:27:15,080 --> 00:27:19,119 Speaker 1: vcs in tech investors like talking to the public in 383 00:27:19,160 --> 00:27:21,760 Speaker 1: a way they never did before. A lot of like 384 00:27:21,840 --> 00:27:26,720 Speaker 1: promotion on Twitter and trying to get people into cryptocurrencies, etc. 385 00:27:27,160 --> 00:27:30,240 Speaker 1: Like do you think that tech investors in generally sort 386 00:27:30,280 --> 00:27:32,359 Speaker 1: of like need a little bit of a gut check 387 00:27:32,720 --> 00:27:36,840 Speaker 1: about what they're promoting publicly when it's public retail money 388 00:27:37,080 --> 00:27:39,320 Speaker 1: and getting people, Oh you should get excited about this, 389 00:27:39,400 --> 00:27:41,600 Speaker 1: or if you're not in this, you're missing out. How 390 00:27:41,640 --> 00:27:44,679 Speaker 1: reckless was that? And how much shaming should people have? 391 00:27:44,680 --> 00:27:47,479 Speaker 1: What's your what's your gut view of all that. I 392 00:27:47,480 --> 00:27:53,600 Speaker 1: don't know that it's shaming. Remember that social media, which 393 00:27:53,640 --> 00:27:59,520 Speaker 1: is what you're really talking about, and communication flattened the 394 00:27:59,640 --> 00:28:03,760 Speaker 1: kind of communication that was done. That was not limited 395 00:28:03,800 --> 00:28:08,480 Speaker 1: to technology companies. It's really right across the board. It's 396 00:28:08,640 --> 00:28:14,080 Speaker 1: what is driving meta to rethink their algorithms. You know, 397 00:28:14,160 --> 00:28:22,840 Speaker 1: it's all of those elements that have changed the way 398 00:28:21,920 --> 00:28:27,800 Speaker 1: in which in which we communicate. A company like Reddit 399 00:28:28,320 --> 00:28:32,440 Speaker 1: could not have existed ten years ago because there weren't 400 00:28:32,520 --> 00:28:35,800 Speaker 1: enough people who were interested and there were not enough 401 00:28:35,840 --> 00:28:42,480 Speaker 1: people who could access it easily, but not limited in 402 00:28:42,560 --> 00:28:47,160 Speaker 1: any way to tech promoters. I think part of this 403 00:28:47,280 --> 00:28:51,560 Speaker 1: back issue was that it always looked easy. It definitely did, 404 00:28:52,040 --> 00:28:56,160 Speaker 1: but it really was very hard. And so you know, 405 00:28:56,200 --> 00:28:58,960 Speaker 1: if you take our own group, where we have a 406 00:28:59,000 --> 00:29:02,200 Speaker 1: group of people who been in the public markets forever 407 00:29:02,400 --> 00:29:07,400 Speaker 1: through many many cycles and are disciplined in the way 408 00:29:07,400 --> 00:29:12,440 Speaker 1: that they approach companies and knowledgeable in their field. You know, 409 00:29:12,520 --> 00:29:16,000 Speaker 1: there were a dozen of those, you know, throughout the industry. 410 00:29:16,960 --> 00:29:20,880 Speaker 1: But most people who thought they could do a spec 411 00:29:21,080 --> 00:29:24,080 Speaker 1: because their brother in law had done a spec or 412 00:29:24,120 --> 00:29:26,040 Speaker 1: the guy at the country club had done a spec. 413 00:29:26,920 --> 00:29:29,280 Speaker 1: You know, it wasn't as easy as it looked. I 414 00:29:29,320 --> 00:29:31,240 Speaker 1: take the point about social media, but I just want 415 00:29:31,280 --> 00:29:33,600 Speaker 1: to issue one fact check, which is, I think Reddit 416 00:29:33,760 --> 00:29:36,320 Speaker 1: did exist ten years ago, because I'm pretty sure my 417 00:29:36,320 --> 00:29:40,760 Speaker 1: account was like thirteen. When I say it existed, it 418 00:29:40,880 --> 00:29:46,000 Speaker 1: did not have the prominence. True, that is very absolutely so. 419 00:29:46,320 --> 00:29:49,920 Speaker 1: I mean, Joe kind of asked you about should Silicon 420 00:29:50,040 --> 00:29:55,959 Speaker 1: Valley feel bad about fermenting fomo among a particular public 421 00:29:56,400 --> 00:29:59,560 Speaker 1: or retail investor base, and I guess I want to 422 00:29:59,560 --> 00:30:03,680 Speaker 1: ask you what you think the future of Silicon Valley 423 00:30:03,720 --> 00:30:07,040 Speaker 1: in general is. Now that it feels like we are 424 00:30:07,320 --> 00:30:11,080 Speaker 1: starting to see some of the excesses of recent years 425 00:30:11,120 --> 00:30:14,560 Speaker 1: of the low interest rate environment start to wash away, 426 00:30:14,760 --> 00:30:18,840 Speaker 1: I think it will be less fulsome the kind of 427 00:30:18,880 --> 00:30:26,280 Speaker 1: advice that was very easily given to start up companies 428 00:30:26,480 --> 00:30:32,360 Speaker 1: by very prominent people, very successful people that spend now 429 00:30:32,520 --> 00:30:36,080 Speaker 1: and grow now and then see where the chips full 430 00:30:36,360 --> 00:30:39,200 Speaker 1: will be less prominent. I think this is a moment 431 00:30:39,440 --> 00:30:46,160 Speaker 1: in which good management groups with a good product who 432 00:30:46,320 --> 00:30:49,920 Speaker 1: are willing to restrain themselves and grow it at a 433 00:30:50,640 --> 00:30:56,160 Speaker 1: moderated not necessarily moderate, but moderated base, will have success. 434 00:30:56,400 --> 00:31:02,120 Speaker 1: But if the organizational elements underlying the good product. They're 435 00:31:02,160 --> 00:31:05,320 Speaker 1: not there. I think they're going to be a lot 436 00:31:05,360 --> 00:31:08,640 Speaker 1: more failures. I want to actually go back to a 437 00:31:08,680 --> 00:31:10,840 Speaker 1: line you said about someone's brother in law at the 438 00:31:10,840 --> 00:31:13,719 Speaker 1: country club did a spack and made about Trainey. No, No, 439 00:31:13,720 --> 00:31:15,600 Speaker 1: there was no. I was fascinating that because we actually 440 00:31:15,640 --> 00:31:18,680 Speaker 1: did an episode during the spack Boom. We're talking to 441 00:31:18,800 --> 00:31:21,360 Speaker 1: Howard Lindzen, who had done at least one spack and 442 00:31:21,480 --> 00:31:23,080 Speaker 1: he like told I was like, we're this whole story. 443 00:31:23,080 --> 00:31:26,640 Speaker 1: He's like, oh, well we had a no remember you 444 00:31:26,680 --> 00:31:28,840 Speaker 1: said there was like oh, in twenty nineteen, we had 445 00:31:28,840 --> 00:31:33,120 Speaker 1: dinner with some folks at Your Bone and Moth was 446 00:31:33,160 --> 00:31:35,680 Speaker 1: doing a spack and everyone got excited. Can you talk 447 00:31:35,680 --> 00:31:38,400 Speaker 1: a little bit about how that dynamic works? Because I 448 00:31:38,440 --> 00:31:40,680 Speaker 1: find that fascinating. It's like you you see all the 449 00:31:40,720 --> 00:31:44,200 Speaker 1: fomo on social media, but like you're actually in those 450 00:31:44,640 --> 00:31:46,480 Speaker 1: in those rooms and you hear it. Like, can you 451 00:31:46,520 --> 00:31:48,640 Speaker 1: talk a little bit about your firsthand experience of like 452 00:31:48,680 --> 00:31:52,360 Speaker 1: the Foamo cycle and people hearing about your success and 453 00:31:52,560 --> 00:31:54,720 Speaker 1: what they do then and how they're like I gotta 454 00:31:54,720 --> 00:31:58,640 Speaker 1: get mine. Look, the Silicon Valley Mafia is one might 455 00:31:58,760 --> 00:32:03,080 Speaker 1: refer to them was from many years, because remember the 456 00:32:03,080 --> 00:32:05,840 Speaker 1: whole cycles only a twenty years cycle, and said, we'll 457 00:32:05,840 --> 00:32:11,080 Speaker 1: call it for many years. Was an in grown self 458 00:32:11,280 --> 00:32:16,000 Speaker 1: involved measuring your success by what the guy down the 459 00:32:16,000 --> 00:32:22,800 Speaker 1: street did. Environment. It's why maybe five years ago people 460 00:32:22,920 --> 00:32:28,920 Speaker 1: began to look for companies that were in Minnesota, that 461 00:32:28,960 --> 00:32:32,400 Speaker 1: we're in Kansas City, that you know, we're in places 462 00:32:32,440 --> 00:32:37,800 Speaker 1: that were more isolated. It's why John Templeton early on 463 00:32:38,560 --> 00:32:41,160 Speaker 1: moved from New York to Well this was not the 464 00:32:41,160 --> 00:32:44,400 Speaker 1: only reason to the Bahamas, because he didn't want to 465 00:32:44,440 --> 00:32:48,320 Speaker 1: hear the same stuff all the time. He wanted to 466 00:32:48,320 --> 00:32:52,000 Speaker 1: be able to think for himself. So there are cycles, 467 00:32:52,040 --> 00:32:59,040 Speaker 1: maybe the initial cycle and the stimulation of having a 468 00:32:59,160 --> 00:33:02,360 Speaker 1: one industree town, which is what it was. I guess 469 00:33:02,400 --> 00:33:06,240 Speaker 1: it would be like talking about Wheaton, Minnesota when General 470 00:33:06,240 --> 00:33:10,160 Speaker 1: Mills was there. You know that this is what happens. 471 00:33:10,240 --> 00:33:13,120 Speaker 1: I mean, the people that you're talking about, Howard and etc. 472 00:33:13,520 --> 00:33:23,600 Speaker 1: Are very smart, very knowledgeable folks, and wool Street, wider 473 00:33:23,600 --> 00:33:28,560 Speaker 1: than just the tech industry is really in many respects 474 00:33:28,640 --> 00:33:31,880 Speaker 1: like a group of sheep, if you'll excuse me, and 475 00:33:32,280 --> 00:33:38,960 Speaker 1: the tech community was no different. So you described earlier 476 00:33:39,000 --> 00:33:42,200 Speaker 1: the mood in Silicon Valley as want a panic, and 477 00:33:42,360 --> 00:33:46,560 Speaker 1: you know, maybe there isn't necessarily moral soul searching at 478 00:33:46,560 --> 00:33:48,720 Speaker 1: the moment, at least on some people's part, but there 479 00:33:48,840 --> 00:33:52,360 Speaker 1: is a general discussion over what to do from here. 480 00:33:53,000 --> 00:33:56,400 Speaker 1: What would be your best piece of advice for either 481 00:33:56,600 --> 00:34:00,720 Speaker 1: someone who is investing in the industry or perhaps running 482 00:34:00,720 --> 00:34:06,840 Speaker 1: a startup investing in the tech industry or the banking industry, 483 00:34:07,160 --> 00:34:10,440 Speaker 1: oh either, but I was thinking specifically of tech. I 484 00:34:10,480 --> 00:34:14,800 Speaker 1: think if you're talking about a public market investor, then 485 00:34:14,920 --> 00:34:17,919 Speaker 1: I think that this may be a time to take 486 00:34:17,960 --> 00:34:23,040 Speaker 1: a pause until one can see more clearly what the 487 00:34:23,120 --> 00:34:27,840 Speaker 1: general mood of the market is. I think in terms 488 00:34:27,840 --> 00:34:30,320 Speaker 1: of investing in tech, there are a number of ways. 489 00:34:30,480 --> 00:34:37,080 Speaker 1: They're all deeply infused with risk. So one of the 490 00:34:37,080 --> 00:34:41,040 Speaker 1: things that one might ask oneself is how much risk 491 00:34:41,040 --> 00:34:45,000 Speaker 1: am I willing to take? You know, thinking back over 492 00:34:45,040 --> 00:34:49,000 Speaker 1: the last few decades, I feel like right now, obviously 493 00:34:49,320 --> 00:34:52,239 Speaker 1: tech Silicon Valley isn't a slump, but it's been in 494 00:34:52,280 --> 00:34:55,640 Speaker 1: many slumps before, and so it's not like that itself 495 00:34:55,760 --> 00:35:00,480 Speaker 1: is not anything new, And it seems like the slumps 496 00:35:00,680 --> 00:35:03,880 Speaker 1: end in part when some like iconic company of the 497 00:35:03,880 --> 00:35:07,200 Speaker 1: era goes public. So, you know, you mentioned the recession 498 00:35:07,239 --> 00:35:09,239 Speaker 1: of the early nineties, and then I guess it was 499 00:35:09,360 --> 00:35:12,279 Speaker 1: ninety four there was the Netscape IPO, and it was 500 00:35:12,280 --> 00:35:13,960 Speaker 1: a little early, but that was sort of like a 501 00:35:14,040 --> 00:35:16,719 Speaker 1: turning point, I would say, And then we several years 502 00:35:16,800 --> 00:35:19,360 Speaker 1: later we got tons of tech IPOs, and then you know, 503 00:35:19,440 --> 00:35:22,239 Speaker 1: coming out of the dot com crash, I would say, 504 00:35:22,239 --> 00:35:25,400 Speaker 1: the Google IPO in two thousand and four, I think 505 00:35:25,440 --> 00:35:28,280 Speaker 1: it was was like a pretty big moment of like, okay, 506 00:35:28,440 --> 00:35:30,600 Speaker 1: tech is kind of back. There were some you know, 507 00:35:30,680 --> 00:35:35,240 Speaker 1: reasonably big IPOs of companies in the twenty tens, I 508 00:35:35,239 --> 00:35:38,200 Speaker 1: I guess, like nothing like Google quality, except we got Facebook, 509 00:35:38,200 --> 00:35:40,680 Speaker 1: which was obviously become one of the biggest companies. Do 510 00:35:40,680 --> 00:35:43,840 Speaker 1: you think it'll sort of be similar that? Like something 511 00:35:43,880 --> 00:35:47,160 Speaker 1: to watch for is when one of the I don't know, 512 00:35:47,280 --> 00:35:49,320 Speaker 1: like a Stripe or something, one of these companies that 513 00:35:49,360 --> 00:35:52,680 Speaker 1: people considered to be a sort of blue chip private 514 00:35:52,719 --> 00:35:55,719 Speaker 1: company decides, yes, we're gonna go for it's time for 515 00:35:55,800 --> 00:35:57,879 Speaker 1: us to make the jump to public markets. Is that 516 00:35:58,080 --> 00:36:01,440 Speaker 1: something to watch for? Absolutely lutely. I mean you take 517 00:36:01,480 --> 00:36:05,399 Speaker 1: a look at where Stripe is today, and they've had 518 00:36:05,440 --> 00:36:08,320 Speaker 1: a couple of opportunities to go public which they didn't 519 00:36:08,360 --> 00:36:16,120 Speaker 1: take and decided to raise this path, this current round privately. 520 00:36:16,400 --> 00:36:19,760 Speaker 1: If and I'm just using Stripe as an example because 521 00:36:19,800 --> 00:36:23,560 Speaker 1: you just used it, if the management of that company 522 00:36:23,719 --> 00:36:28,880 Speaker 1: were to decide that there is enough stability in the 523 00:36:28,920 --> 00:36:34,680 Speaker 1: market to go forward and do an IPO, it would 524 00:36:34,719 --> 00:36:39,960 Speaker 1: in fact take a specter off the market. But remember 525 00:36:40,239 --> 00:36:45,440 Speaker 1: you are talking about a series of events which occurred 526 00:36:45,560 --> 00:36:49,960 Speaker 1: three and five years apart, So maybe there is a 527 00:36:50,000 --> 00:36:53,480 Speaker 1: three to five year period before we get back to 528 00:36:53,560 --> 00:36:57,160 Speaker 1: what we thought about as being a normal I think 529 00:36:57,200 --> 00:36:59,920 Speaker 1: that's a great place to leave it. Let's see Cohen think. 530 00:37:00,000 --> 00:37:02,399 Speaker 1: Thank you so much for coming on odd lots. It's 531 00:37:02,480 --> 00:37:06,120 Speaker 1: my pleasure, and thank you for your good questions. Thank you, 532 00:37:06,560 --> 00:37:21,480 Speaker 1: thank you so much. Yeah, I was lovely having you, Tracy. 533 00:37:21,520 --> 00:37:26,000 Speaker 1: I thought that was a fascinating conversation. I really appreciate, appreciate, 534 00:37:26,120 --> 00:37:28,640 Speaker 1: like in a sort of crisis moment, getting to like 535 00:37:29,000 --> 00:37:31,800 Speaker 1: zoom out and talk a little bit of a broader history, 536 00:37:31,800 --> 00:37:34,680 Speaker 1: broader sweep. Oh absolutely, And I think Betsy was really 537 00:37:34,719 --> 00:37:37,879 Speaker 1: the perfect person to have that conversation with. I can't 538 00:37:37,880 --> 00:37:40,960 Speaker 1: believe I completely forgot about that, you know, starting spacks 539 00:37:41,000 --> 00:37:44,640 Speaker 1: with celebrity endorsers over dinner at Carbone moment. But I 540 00:37:44,920 --> 00:37:47,440 Speaker 1: do think, you know, when you look back on that 541 00:37:47,480 --> 00:37:50,440 Speaker 1: sort of low interest rate environment, those types of moments 542 00:37:50,480 --> 00:37:53,239 Speaker 1: are really going to be emblematic of some of the excesses. 543 00:37:53,800 --> 00:37:56,000 Speaker 1: I thought that was really interesting too, how it's like, 544 00:37:56,600 --> 00:37:59,360 Speaker 1: you know, intuitively, like part of the way some people 545 00:37:59,400 --> 00:38:04,000 Speaker 1: talked about spacks and the boom back then was that, well, 546 00:38:04,480 --> 00:38:07,480 Speaker 1: people want to be invested in like venture type companies 547 00:38:07,600 --> 00:38:09,400 Speaker 1: or something like that, or like this is a chance 548 00:38:09,440 --> 00:38:12,120 Speaker 1: to let the public in on earlier stage companies, and 549 00:38:12,160 --> 00:38:15,640 Speaker 1: maybe there is an opportunity, But that doesn't necessarily mean 550 00:38:16,040 --> 00:38:21,000 Speaker 1: that companies with incredibly uncertain outlook profiles and remember there 551 00:38:21,000 --> 00:38:24,120 Speaker 1: were tons of like alternative vehicle companies YEA with a 552 00:38:24,239 --> 00:38:27,360 Speaker 1: huge financing needs and highly uncertain path to like product 553 00:38:27,400 --> 00:38:30,040 Speaker 1: market fit or anything like that. Even an environment where 554 00:38:30,040 --> 00:38:33,839 Speaker 1: people want to take risks, etc. It doesn't necessarily mean 555 00:38:33,880 --> 00:38:36,560 Speaker 1: that they're ever really appropriate, like that they're ever going 556 00:38:36,600 --> 00:38:39,640 Speaker 1: to make sense for public investors, right, like the vehicle 557 00:38:39,719 --> 00:38:43,160 Speaker 1: doesn't automatically lend itself. Yeah to that, But I also, 558 00:38:43,239 --> 00:38:47,600 Speaker 1: I mean I took her point also about silicon Valley 559 00:38:47,680 --> 00:38:51,000 Speaker 1: kind of being inherently cyclical, but also sometimes just having 560 00:38:51,040 --> 00:38:54,680 Speaker 1: to stand back and wait for the uncertainty to kind 561 00:38:54,680 --> 00:38:57,560 Speaker 1: of play out well. And to her point, like Betsy, 562 00:38:57,640 --> 00:38:59,680 Speaker 1: I forget which words she used, but she said something 563 00:38:59,680 --> 00:39:03,000 Speaker 1: about how a stripe IPO would like lift something off 564 00:39:03,000 --> 00:39:06,440 Speaker 1: the market that might reopen capital markets. So I do 565 00:39:06,520 --> 00:39:09,120 Speaker 1: think that's like an interesting thing to watch for. Like, 566 00:39:09,440 --> 00:39:14,640 Speaker 1: will there be some moment in which suddenly, Okay, it's 567 00:39:14,640 --> 00:39:16,680 Speaker 1: like it's safe to go back in the water because 568 00:39:16,719 --> 00:39:20,120 Speaker 1: some company went and did it saved by the stripe. Yeah, 569 00:39:20,360 --> 00:39:22,040 Speaker 1: I guess we'll see. It can either be a good 570 00:39:22,040 --> 00:39:25,080 Speaker 1: thing or go badly, right, I mean, it seems like 571 00:39:25,160 --> 00:39:29,000 Speaker 1: the options right now are like pretty binary. But yeah, okay, 572 00:39:29,040 --> 00:39:30,879 Speaker 1: on that happy note, shall we leave it there. Let's 573 00:39:30,960 --> 00:39:33,600 Speaker 1: leave it there. This has been another episode of the 574 00:39:33,640 --> 00:39:36,520 Speaker 1: Odd Thoughts podcast. I'm Tracy Alloway. You can follow me 575 00:39:36,640 --> 00:39:39,759 Speaker 1: on Twitter at Tracy Alloway, and I'm Joe Wisenthal. You 576 00:39:39,800 --> 00:39:43,000 Speaker 1: can follow me on Twitter at the Stalwart. Follow our 577 00:39:43,080 --> 00:39:46,879 Speaker 1: producers on Twitter Kerman Rodriguez at Kerman Arman, and dash 578 00:39:46,920 --> 00:39:50,080 Speaker 1: Bennett at Dashbot, and check out all of the Bloomberg 579 00:39:50,120 --> 00:39:53,520 Speaker 1: podcasts under the handle at podcasts and for more Odd 580 00:39:53,520 --> 00:39:56,960 Speaker 1: Lots content than at Bloomberg dot Com slash odd Lots, 581 00:39:57,000 --> 00:39:59,759 Speaker 1: where we post transcripts of all the episodes Tracy and I, 582 00:40:00,440 --> 00:40:02,600 Speaker 1: and we have a newsletter that comes out every Friday. 583 00:40:02,880 --> 00:40:05,080 Speaker 1: Go there and sign up. Thanks for listening.