Invest Like the Best with Patrick O'Shaughnessy
00:41:03 · Patrick O'Shaughnessy, Vlad Barbalat
[00:41:03] S0: On this notion of branded capital, is it fair to say that a goal you have is that you wanna be one of those LPs that a GP thinks about as like a Yale or something where, okay, if Yale's backed this thing that says something about it, and that brings other capital, it reduces the risk in the eyes of other capital, and you wanna cultivate that and have cultivated that reputation as being like one of those ten, fifteen LPs that have that perimeter that is impactful on the partner. [00:41:31] S2: That's exactly right. I think we wanna be one of those institutions, but I would say we wanna be even more bold than that because there's a notion of a name being on the capital roster that allows others to come in. That's an asset you have as that type of LP, but we want be much more than that. We want to sustain that, maintain that, but we also want to be known for our creativity to structure solutions, for our creativity and willingness to take risks that some of those institutions with that halo of a brand just don't do. Not set up to do, that's not meant to be a negative. In certain cases, that's all that you need. In the case of let's say the venture ecosystem, which you're so familiar with, we're not gonna try to replicate that outside of our organization. That's where you're competing truly with other capital to get on the capital roster. In other places that's just not the game. The game is, are you creative? Are you quick? Can you take certain risks that others just don't even think about? The game's different across different types of exposures.
00:42:34 · Patrick O'Shaughnessy
[00:42:34] S0: This environment is so interesting because it feels as though geopolitics, the changing, shifting nature of global order and power structures, matters to investing outcomes for the first time in a long time. A whole generation of investors that is retiring right now didn't really have to think too much about this. There was relative global peace and stability post World War two. This like Pax Americana that everyone talks about, and that's changing. How do you think about that variable in all of this, in the top down system settings that you stick in there? How do you think about this?
00:43:08 · Vlad Barbalat
[00:43:08] S2: I love history, we talked about this before and so I'm particularly tempted to engage in these things. A couple of things I try to remind myself of, whatever it is that you are living through, we are living through, it feels particularly acute to us, it always feels like the sharpest moment, it probably isn't. If you go back and take people in our parts of life, they experienced things then and they thought it was the most acute thing. I also think about the fact that in my career I've now been through what I would say is more than enough of various crises. Some of them feeling like, could this really be that I'm alive during this period? I distinctly remember walking after a long day on Zoom in March or maybe April 2020. It was a rainy day, ten to eleven hour marathon on Zoom, needed to walk outside and I'm walking around and thinking, is it really possible that my life happened to coincide with this moment in humanity where a pandemic was going to completely upend society and human life as I know it. I told myself, odds are very small, it's very unlikely that that's going to be the case. And then I remind myself there were many pandemics before that would wipe out large parts of humanity, yet humanity goes on. It is true that if you're living in that period of time, your experience is actually quite different than the lens of history many years later. But I also find myself having those thoughts over and over again. I have those thoughts when it comes to the unbelievable moment in tech progress that we're living through, and that feels really real and very very different in a way that you can imagine society ten fifteen years from now that will look nothing what it looks like today. But that was also probably true during the Industrial Revolution for the people that looked back fifteen years after the steam engine became mainstream, society looked nothing like it did fifteen years before. Is it really that different, or is it just continuous progress? And And then I think about the geopolitics today, and they do feel like we are certainly breaking the order that had governed economic flow, security architecture across the globe that has been in place more or less since World War two.
00:45:17 · Vlad Barbalat
You can make the argument that along the way we had some really major shifts like the Berlin Wall falling, but it's been a period where certain norms in international relations and certain alliances held through all that, and it does feel like that's changing. That in itself, I don't think affects investing if you're focused in The US so much. What does clearly matter is that the economic architecture is changing. It's It's changing from an energy perspective, it's changing from a supply chain perspective, and there are real investing opportunities and risks that evolve from that. I continue to think that The US is endowed with inherent advantages, whether that's the ability to innovate, whether that is the energy abundance that we ultimately have, all those things continue to conspire for American exceptionalism. But we've also gotten quite accustomed to a world where just in time inventories were a thing, and now that's challenged. The ability to identify the cheapest pockets of labor or competitive advantages, like the economics book would say, that's going to potentially have structural impediments which has implications on inflation, on rates. How does all that balance with this, what I perceive as an incredibly deflationary impulse from technology? I'm not sure. I think we are reasonably good at identifying, by we I mean not LMI, but we, as people who like to think about these things, at identifying the variables that drive economic outcomes. What I think we're terrible at is assigning weights to them. That's why forecasting is next to impossible. You may get the right issues, but you don't know how they interact with each other, You don't know what people do within the system to adjust and mitigate all the different roadblocks that come up. I do think we're living through a moment. I do think it's a reset in the way Pax Americana governed, but I don't think it's a reset away from American power in the world, at least on a relative basis. The world continues to need America.
00:47:14 · Patrick O'Shaughnessy
[00:47:14] S0: The other side of the coin that you mentioned is the changing technology landscape. Arguably that's the bigger one than very unpredictable geopolitics. This seems more predictable. Ten years from now, there's gonna be a lot more stuff that's changed as a result of AI and all that it impacts.
00:47:28 · Vlad Barbalat
[00:47:28] S2: How does that filter through to your investing? And of course, get very tactical here. You think about software or things like that, but I'm also curious just more holistically, what are the conversations like inside of Liberty about this topic? I'm sure like everyone you're wondering what to do. What's super different about this technology than other versions of how this came about is it requires people to engage with it, get into a relationship with it, have agency. It's not a software package that the technology department's gonna install on your desktop, and then you're gonna put your workflow through. That's not what it is. It's a absolute superpower that's given to you to get the thoughts out of your brain, and have the superhuman assistant that is able to rationalize your thoughts, present them in a coherent way, interact with you. By the way, it makes you sharper if you go back and forth and jostle with it, and really become an editor, as opposed to just taking that first output that it gives you and saying, oh, good enough. Because that's where slop tends to live. If you just ask for something and you get it back, it will give you generalities, and it will drive everything to kind of an average. Right? That's what these models are. So in order to get the best out of them, you need to engage with your knowledge, your experience, your ideas and creativity. It is amazing what you get back. And so I think in the investing sphere, creativity is such an incredibly important part. The ability to take an obscure or well organized set of data and find insights that are not easily observed from it, that's the art of investing. And now you can iterate on that in such powerful ways. I find myself using AI every single day, more and more so, and frankly it raises other questions for me. The more I spend of my day with AI, I'm actually not spending it with my colleagues. I begin to worry about that now. How much are you taking from those messy relationships that are human relationships and messy ways of getting information into the super interesting, smart, and efficient way of interacting with artificial intelligence? I don't know how that part is gonna play out because it almost is if you take it again to the max, it's isolating.