The Exchanges, every show

Q my god, we're getting eaten alive by Tiger and SoftBank in every deal. Can I ask, what did your internal discussions look like when SoftBank and Tiger We're running rampage on growth and actually winning good deals often, but beating a lot of, I'm sure they didn't beat GA, but, you know, beating a lot of great growth players because of speed and price. What did those discussions look like?

A In growth and in emerging markets, which are new markets, right? Growth markets are new markets and emerging markets are new markets. You often get tourists. Tourist capital shows up when it's sunny. And they're very excited. They're very loud. But as soon as it gets a little rainy, they always leave. So we knew this was a temporary phenomenon, uh, but we didn't know how long it's going to be. And we lost to them. You know, I, you know, here's a sort of wise, seasoned manager that adds lots of value, but requires three months of due diligence and pays 40% less than a guy that gives you a check in three days. Hard to compete. So it, it, it, it was humbling and we did lose some, some, some opportunities, some great opportunities, but the damage that these tourist capital do is twofold. They encourage, and again, this has happened before in history, they encourage a mentality of growth at any cost, which is not healthy for the development of companies. Um, because If you grow measured in a measured way and focus on unit economics and focus on fundamental, the feedback loops are, come in time so you can fix your strategy and make your company even better before you spend all your capital. But when you're doing things so quickly, that feedback loop is, is, is noise and you just burn through the a hundred million dollars without having the benefit of learning and companies lose thems…

AI assessment note: “we knew this was a temporary phenomenon... was humbling and we did lose some”

Q Can one person lead a deal? Do you need the team behind you? How does the consensus versus conviction work for you?

A So we have a four person investment committee. You need three, three people to, uh, vote yes out of the four. And it's the co-president, the co-president and the CEO. Deal teams are staffed trying to get the best of the local, uh, expertise with the global expertise. We're the most global of all investment organizations I've come across. Because more than half of our people and more than half of our assets are outside the United States, but we partner in every deal. The sector experts typically in the US or Europe partner with the global teams. So we get the local and the, um, and the global sector expertise. We all get paid out of the same pot. So no one gets paid of their individual performance. We get paid out of global performance, but more importantly, we have a culture of extreme transparency. We go to the investment committee not to sell the deal, but with the three things that are keeping up at night. It's like, guys, you saw the memo, and the memos are standardized, and the checklists are standardized, but like, these are the two, three things I struggle with. Let's make this decision together, and it's typically two partners on a deal plus the four of us in the committee, and we discuss things three, four times at committee, and it's hard.

AI assessment note: “Let's make this decision together, and it's typically two partners on a deal”

Q So the reason I don't like thesis driven investing is because I fear that it's exactly what you just said, which I mean respectfully, but it's like you have an opinion and then you find data that supports your opinion and leads you to confirmation bias. Do you not worry about that? If you start with the conviction and the opinion, I agree with the statement you made.

A But we love thematic investment. But I'll tell you how thematic investing works. We look at a trend, and I'll give you an example of a trend. The banks ought to be disintermediated in this distribution of retail financial products. Because they're doing a horrible job in the United States in the nineties. That was the theme. And then we went to market and said, who's going to benefit from this idea? Who's got the best mousetrap to eat this business away from the banks? And we landed in E-Trade, and E-Trade multiplies market by the 27 times, and the banks, what, 80% share in the United States went to 10% share in ADEC. The same theme in Brazil 12 years ago, a company you should meet, XP, Market cap went up from three hundred million to twenty billion, doing the exact same thing E-Trade did, except in a market where the banks were at 99% and now are at 82 and dropping. So that thematic investing does work. Now, being more granular, saying the way you're going to disrupt the cyber industry is by doing this type of technology, and I think we should find a company that does this type of technology? No. Decide that cyber is going to become more important because systems are more interconnected and bank actors are getting more sophisticated. Go out and meet the people who are on the front lines who are really doing that. And then you invest. So it's, it's, it's, you need a macro theme…

AI assessment note: “you need a macro theme, not a micro theme.”

Q ask, I heard that you are a master of negotiation as well, so while we're on price, it was also all of your founders that told me what a brilliant negotiator you are, so clearly, uh, you won. Uh, but, uh, my question to you is, what is the art of successful negotiation? What are your tips? Just talk to me about how you think about getting the best deal.

A So first of all, you're not trying, it's not a win-lose game. It's a dance to get to a fair price and begin to build the partnership. The fair price, when you were competing against SoftBank and over the last three years, and you've talked to people who've become partners of GA over the last three, four years, which was crazy. La la land. We looked like tough negotiators because we were pricing things, 20, 30% below the, the tourists. And to get there, it's hard, and you have to convince them, and you have to be tough, and you have to be resilient, and we were that. Right now, it's the opposite. If you do the same interviews three years from now, because all the tourists have left, and it's just us, we're overpaying for assets all across the world, because we're the only ones, not only ones, but the prices have been adjusted, and we're still paying the fair price. It's just, it looks a little more rich now than it did before. So I don't think I'm particularly, Good negotiator. I am committed to getting to only doing things that are a fair price. And something that really helps is, um, at GA, we meet 10,000 companies a year. We invest in 50. So we say no a lot. At GA, our most valuable resource is our time. I mean, my time is so precious. Your time is so precious. We're on earth for so few years. We're at the peak of our capacity for even a small fraction of those years. If we w…

AI assessment note: “It's not a win-lose game. It's a dance to get to a fair price”

Q ask, I heard that you are a master of negotiation as well, so while we're on price, it was also all of your founders that told me what a brilliant negotiator you are, so clearly, uh, you won. Uh, but, uh, my question to you is, what is the art of successful negotiation? What are your tips? Just talk to me about how you think about getting the best deal.

A So first of all, you're not trying, it's not a win-lose game. It's a dance to get to a fair price and begin to build the partnership. The fair price, when you were competing against SoftBank and over the last three years, and you've talked to people who've become partners of GA over the last three, four years, which was crazy. La la land. We looked like tough negotiators because we were pricing things, 20, 30% below the, the tourists. And to get there, it's hard, and you have to convince them, and you have to be tough, and you have to be resilient, and we were that. Right now, it's the opposite. If you do the same interviews three years from now, because all the tourists have left, and it's just us, we're overpaying for assets all across the world, because we're the only ones, not only ones, but the prices have been adjusted, and we're still paying the fair price. It's just, it looks a little more rich now than it did before. So I don't think I'm particularly, Good negotiator. I am committed to getting to only doing things that are a fair price. And something that really helps is, um, at GA, we meet 10,000 companies a year. We invest in 50. So we say no a lot. At GA, our most valuable resource is our time. I mean, my time is so precious. Your time is so precious. We're on earth for so few years. We're at the peak of our capacity for even a small fraction of those years. If we w…

AI assessment note: “it's not a win-lose game. It's a dance to get to a fair price”

Q You think we're in the peak of the storm?

A Um, the reason I think this is an interesting time, a funny anecdote. So growing up in Brazil, I saw Brazil progress and then Brazil had good, 20 years when I was there. Uh, and I dreamed of convergence. Between the US and Brazil. Both countries are made of immigrants, same land mass, rich in natural resources, and I thought they would converge. Convergence has happened, but in the opposite direction than I hoped. The US has become a lot more volatile than it used to be. If you look at the VIX, it's at three times. The VIX is the volatility index. Three times the average. There's another index which I look a lot, which is the policy uncertainty index. What's the level of uncertainty of the rules of the game? The US is at an all time high. So we live in a moment of extreme turbulence with two hot wars, one in Europe, one in the Middle East,

AI assessment note: “we live in a moment of extreme turbulence with two hot wars”

Q I'm sorry for being personal here. Often as you age and gain experience in venture, you also become more financially successful. And the drive to get on that plane at six AM or 10 PM or chase every person that you think is world class goes down. How do you retain both for yourself and for your partnership, um, the same drive and hunger when you don't need it anymore?

A You hopefully will find very quickly that you satisfy your material needs with relatively modest amounts of capital. And they are diminishing returns to spending more money in material goods. Because it turns out it's kind of A pain to maintain infrastructure that's expensive. Owning a boat sure sounds very, very fun to some people, but once, once you talk to people who own boats, it's a pain in the rear. You have to think of what your purpose is. If your purpose is impacting thousands of people, making the world better, finding shining lights in the emerging markets that create world-class companies, that drives you. It's not the extra 100,000 dollars. It's the passion. And then of course the money comes, but if you think of yourself not as a vessel that's accumulating money and there's money just spewing over, but as a tube where you're, you're getting money, but you're allocating to the great causes that are meaningful to you through philanthropy or through investing, then there's never an overflow of money because you're just a vessel through which Money is energy. Energy is just passing through you, and it's just endless, and it's beautiful, and think of yourself as a vessel, not a kettle.

AI assessment note: “It's not the extra 100,000 dollars. It's the passion.”

Q Can I ask, how does GA make decisions? You mentioned the 50 investments there. The eighty billion under management, the big team, the global team. How do you make decisions?

A So this is a good story. So when, um, Bill, our CEO invited me to be chairman of the IC, I mean, I got the imposter complex. I am a little guy from Bolivia. I've been faking it. I could, I could trick the Brazilians, but I'm not going to trick the New Yorkers. I go to New York and I interviewed the founders of our firm, Steve Denning and Dave Hodgson. And, uh, Steve is Chairman Emeritus and led the firm for the first, you know, 25 years of its history. Former Navy man, McKinsey guy. And, and I said, Steve, help me Think through decision-making of such a complex global organization. And he said, you need to create a checklist. Look at our, you know, at that time it was 35 years of data. Look at our best performance years. Come up with the checklist and make sure that everyone uses the positive and the negative checklist. I was like, checklist? Oh, obvious. We should all use the checklist to simplify notes. Ok, good, good, good. And then I go to Dave Hodgson, same day. And I say, Dave, you know, same question. And he says, the first thing he says, resist the temptation to use a checklist. And I'm like, Dave, you guys were partners for 30 years. You made decisions that were brilliant. The IRR was through the roof and you can't agree how to make investment decisions. So I was like, this is paradoxical. Uh, and then it turns out when you do the academic research, uh, you know, I don…

AI assessment note: “Steve, help me Think through decision-making of such a complex global organization”

Q Can I ask, how does GA make decisions? You mentioned the 50 investments there. The eighty billion under management, the big team, the global team. How do you make decisions?

A So this is a good story. So when, um, Bill, our CEO invited me to be chairman of the IC, I mean, I got the imposter complex. I am a little guy from Bolivia. I've been faking it. I could, I could trick the Brazilians, but I'm not going to trick the New Yorkers. I go to New York and I interviewed the founders of our firm, Steve Denning and Dave Hodgson. And, uh, Steve is Chairman Emeritus and led the firm for the first, you know, 25 years of its history. Former Navy man, McKinsey guy. And, and I said, Steve, help me Think through decision-making of such a complex global organization. And he said, you need to create a checklist. Look at our, you know, at that time it was 35 years of data. Look at our best performance years. Come up with the checklist and make sure that everyone uses the positive and the negative checklist. I was like, checklist? Oh, obvious. We should all use the checklist to simplify notes. Ok, good, good, good. And then I go to Dave Hodgson, same day. And I say, Dave, you know, same question. And he says, the first thing he says, resist the temptation to use a checklist. And I'm like, Dave, you guys were partners for 30 years. You made decisions that were brilliant. The IRR was through the roof and you can't agree how to make investment decisions. So I was like, this is paradoxical. Uh, and then it turns out when you do the academic research, uh, you know, I don…

AI assessment note: “So this is a good story.”