Acquired - Special- Invest Like the Best on Acquired

0:00Sweet. Nice. That was great. You guys do awesome, awesome preparatory work. By far, the best one I've done. By far. Welcome to this special episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them.

0:26I'm Ben Gilbert, and I'm the co-founder of Pioneer Square Labs, a startup studio and venture firm in Seattle. And I'm David Rosenthal, and I am a angel investor and independent advisor to startups based in San Francisco. And we are your hosts. Now you'll notice this is a very abnormal episode for us. I didn't say a number. We didn't talk about a company in the intro. David, what is this episode that we were doing today?

0:50We have a very, very special guest episode we've been looking forward to. I think all of us to do it for a long time. We have Patrick O'Shaughnessy, CEO of O'Shaughnessy Asset Management, and also host of the Invest Like The Best Podcast, one of our very favorite shows here at Acquired, and so excited to have him on. So Patrick is a master interviewer, as we all know. And he gets these amazing guests, talks all about their businesses and their stories.

1:18Other than I think, like, the old episode you did with your dad, your audience doesn't get to hear about you. We want to hear about your business. What is this? So, Sean is the asset management thing. How did you come into this? You're a philosophy major. Now, you're running a quant fund. You have a venture fund. You've built this amazing podcast empire. We're going to dive all into it. Welcome Patrick. Thank you guys so much for having me. I'm always...

1:42hesitant to do any of these because I'm scared of boring people with the same stories but there's a mutual aberration society here of all the podcasts I listen to yours is the most regular so it's an honor to be here thank you for having me thanks for joining us well before we dive in If you love acquired and you want to hone your own craft of company building, you should join the acquired community of limited partners. You'll get access to the LP show where we dive deeper into the fundamentals of company building and investing in addition to our LP monthly calls where we talk with all of you directly. And of course, our book club in Zoom calls with the authors. So if you aren't already an LP, you can click the link in the show notes or go to acquire.fm slash LP and all new listeners get a seven day free trial.

2:25Listeners. Now is a great time to talk about a new partner of ours here on Acquired. LaGora, the agentic operating system that is redefining how the world's best legal teams work. Yup, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. LaGora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

2:54So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review where you.

3:14drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lagores Bed here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work, and this means that the pie can grow even as each individual task takes less time.

3:33And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves when they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries. And crazily, they went from one million to a hundred million in ARR in about 18 months. Truly insane numbers. And that is the real test.

4:26Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at logora.com slash acquired and just tell them that Ben and David sent you. And now onto our special with Patrick O'Shaughnessy of Invest Like The Best. All right. Well, before Invest Like The Best, There was, well, actually not before investing like the best is we'll get into the first iteration. There was Oshanasi asset management, of course, where you are CEO, but before that, there was Oshanasi capital management. And that was started by your dad, right, Patrick? It was, yeah, 1990.

5:14I guess technically in 1987, so it goes way back. For the first several years, it was a research firm, not an asset management firm. That might be a theme we referred to back and forth today, which is the combination of open research and open ideas and asset management and how the two interrelate. But technically it was 1987, but began as an asset management firm in 95, 96. You guys, how did I think still have a close relationship with RBC, right, the Royal Bank of Canada?

5:41We do, yes. So the Royal Bank is, it's a fascinating business, an incredible business that most people probably won't know. I've actually been lucky to be more places in Canada than probably all but a few Canadians love the country and love that company. There are largest, our longest standing client. They actually are the only outside owner of our business. They own a minority stake in our business. So a deep, long partnership with them has been a common thread through my career. There's an interesting story. Maybe we can come back to about a pivotal role they played.

6:11in the first couple of years of my career in the times that I did get to see all those tiny corners of Canada. Okay, we definitely got to put a pin in that and come back. So Osana, see capital management and the kind of core insight as I understand it, that your dad had was that there was...

6:29academic research around quantitative methods for investing and for screening and identifying equities, I believe equities, or maybe all types of assets to invest in. And he was really a pioneer in kind of putting that, I mean, I guess his fair to characterize it as like a data-driven approach to the old Ben Graham style, Graham and Dad value investing. Is that a fair way to characterize kind of the insight that he had? Yeah, I think a common misconception about Quants in general where I would count us is that we're value investors. We're not slaves to value. It just happens to be one of those things that...

7:02has worked really well historically. There are other things that are very different from value that work, too. But the original work was shockingly simple. And oftentimes, I find this is the case that no one had just gone to look at data to see what kinds of stocks with what kinds of attributes tended to do well. The original version of the research was literally the dogs of the Dow strategy, which is nothing more than taking of the 30 Dow stocks, the 10 stocks that have the highest dividend yield.

7:27buying them, holding them a year, redoing that same rule set a year later with a single trade. And he was, I think the first person to bring that research all the way back to the inception of the Dow 30. And what he found was, look, this incredibly, arguably stupidly simple strategy did better than the Dow itself. And that the two pillars of that were the discipline with which it was implemented. So you never deviated from a very, very specific process or rule set.

7:53and just buying stuff for a lower price. And, you know, of course, that strategy, like any strategy that gets discovered tends to fade in its significance, but not necessarily go away. So that was the original research that I think kicked off our entire journey as a company way back in the 80s with an incredibly simple byhand, you know, microfiche collected data set going back to the 1920s. What's the first time microfiche has come up on acquired?

8:19powerful set of stuff you can find. If you're willing to just go grind and put in the work and find differentiated data sets, maybe we'll talk about this too. It's often not the modeling exercise that matters. It's the information that you're able to access, clean, normalize and control. And not a lot of people are at the library looking through microfiche. Yeah. So this is your mental library. The other, to my mind, at least kind of like key.

8:47piece of even like super early in this first iteration of the firm that you guys, I think we're pioneers in is is marrying this, you know, investing and your approach and this whole quantity of approach with media and evangelizing too, right? So like, invest like the best that we all know and love today is the second iteration of invest like the best, right?

9:12It is, yeah, it's, I catch a lot of flack for the title, like at some corny, you know, rhymy title, which I suppose it is, you know, on face value. The reason I named it this was, so my dad's first book he's written for, his first book was called Invest Like The Best, and the whole premise, so this is actually predated what became Oshansi capital, was that he was hired by large pension funds.

9:36to effectively model their managers, the famous managers of the day, the Peter Lynch's of the world, for example, the John Templeton's. And what he did was create like clone portfolios by super simplifying their investment strategies into a rule set. And so the idea of the book was extract lessons from...

9:54the behavior and investments of very famous successful managers and have it as a tool that you can carry with you or even use directly in your investing. And so I just thought, oh, that's kind of cool. You know, I'm basically going to do a version of that where I'm talking to people because I'm interested in getting them to share portable lessons with me and everybody else. So it would be kind of a neat tip of the hat to my dad's original research. I thought about that for about two seconds. You know, it just popped into mind and that's how it got named. But yes, there's a lot of continuity here around

10:23a commitment to, I always call it learning in public. I feel like that's becoming a cliched phrase, but I can like claim to using that very early on, but I do believe deeply in the power of doing that. So that first iteration capital management ends up, bear sturns ends up acquiring it. It becomes, I think the, the linchpin and biggest part of bear sturns asset management practice right before, obviously before the financial crash in 2008.

10:52There's an intermediate step, which is actually quite interesting, which was in the late 90s, the team that was out of Sean C. Capital began to build a business called Netfolio. Netfolio was a version of if motif investing in Wealthfront had a baby. It would have been Netfolio back in the late 90s, sort of an idea that was inevitable, but just ultimately too early for its time. So that whole team was building effectively a Robo advisor in the late 1990s.

11:21was a part of that whole boom and bust cycle. I mean, it was like the quintessential story of tons of money raised and targeted at consumers, targeted direct to consumer. We'll come back to that when we talk maybe about Canvas later on, because we're doing something very different, but again, returning to our technology roots. If I was to credit any two patterns that are in common between me and my dad, even though we never really talked about this, it was just sort of implicit. It was this love of technology and this love of open research.

11:47It definitely carries through. Wouldn't Netfolio is the idea. So, I mean, with today, if I go to Wealthfront, it's very set and forget. I pick basically the amount of risk exposure I'm open to, and it does all the rebalancing for me. With Netfolio, did it bring in that idea of the clone portfolios? Like, could I invest like my favorite value investor? You know, I never got far enough where...

12:10All the different product ideas came to fruition. At first, it was very simple versions of the same screens that were being run at a Seanency Capital Management, which was all around the quantitative research that team had done. And largely from a book called What Works on Wall Street, which was sort of the book that created the asset management firm, which is kind of an interesting directional story. And that was about it. I think the plans may have been to expand types of strategies and make it more and more customizable, which I think would have been a powerful concept, one that we're playing with today, but never quite made it there. So it's chassis was fairly straightforward, but it wasn't passive, like wealth, rent, and betterment are just low cost index rebalancing. It did offer active strategies. So then obviously 2008 happens. It was like February 2008, a few months before Lehman. So then you guys

13:02Take the practice and spin it back out of bear right and that's the birth of what we all know today. I'll just honest yes at management right yeah I can now speak to this from experience not from from story because now I'm now I've entered the picture so we actually left in the year before the March blow 2008 blow up of Bear Stearns in the summer of 2007 so technically the first day of osam was July 3rd 2007 which we call the timing osam independence day it was just Sometimes luck of the Irish helps. We definitely were lucky, maybe in more ways than good. The plan had already been in motion long before the two structured, high-grade credit hedge funds that were sort of the canary and the great financial crisis coal mine began to blow up. Patrick, you were graduating 2007 as well. I did, yeah. I literally graduated two months earlier. Oh my gosh. So I did too. I started working in the analyst program at UBS in the TMT group there.

13:58And God, I remember, whenever it was when those hedge funds blew up and JP Morgan acquired assets a bear for $2 a share, somebody taped a $2 bill to the, do you remember this? The revolving door on his headquarters in Midtown? I remember hearing the news in March. Again, like I started and it sounds like you two started our careers on Wall Street.

14:19thinking like, wow, this is a great place to be a market seem to just kind of go up. You know, I didn't really have the 2000, you know, staying on my brain. My awareness of the market was O2O7, which was this just like up into the right scenario. And the first several months was more of that in my career. And so I was very green. I hadn't studied, you know, we'll talk about it. I hadn't studied finance or business. I really didn't know anything. It's all the shit hit the fan. So the famous thing that I remember because we knew so many bear people.

14:47What's thinking that someone had screwed up the price that it wasn't to it must have been at least $20 right like there's no way it could be $2 and so I'll never forget I'll never forget that that image of the $2 bill plastered up against that beautiful Bear Stearns building, which was part of the deal when Lehman acquired Bear that just that building alone was like a billion dollar building, and they got it for nothing. So what a wild and looking back, the aftermath of the crisis was really hard for me because it forced me to learn so much so quickly in a very stressful environment with clients that are angry and upset about losing a lot of money. Ultimately, I was formidable. I'm glad that I started my career with that sort of event.

15:27better than having one, you know, laden the one's career or after a rosy period. What does that look like when you take the firm and sort of spin it out of barester and structurally? Like how do you do something entrepreneurial like that with existing assets of an asset management firm?

15:46So it's complicated the way that we ultimately did it was highly unusual where we had a as as divorces go had the friendliest of possible divorces with bear There was literally a period where you know an asset management track records are everything and so track records break if they're not continuous So we actually had portfolio management management team members as dual employees of bare-sterns and Oshanasi asset management 14 people not including myself left bear and were the sort of foundation foundational team for Osam. I spent a big chunk of my, you know, that early summer calling the first tire. I'm technically the first employee, yeah. Also the first intern at first, although that didn't last long. So I spent a lot of my time transferring clients over. You know, we had...

16:31billions and billions of dollars and thousands of accounts, and it was a rude awakening for what business is like and all about. It was as friendly as it could be, meaning they helped us make it continuous and a good experience for the clients, or as good as we could make it. It's interesting to basically start a business that's already a fairly large going concern.

16:49But nonetheless, have to treat it like a brand-new business with all the trouble that that entails. But it was a great education for me. Again, I hadn't studied this stuff. So I had to learn by doing. And I treasure those early days, even though it was stressful and hard. OK. My plan here was to get right into the business model of sort of OSAM, since I think a lot of our listeners are not finance native. But we've touched a few times on your education now and how you didn't sort of come from this.

17:16Take us through how you decided what to study in college and did you intend to go into the family business or not? So I'm a big believer that hardship early on often shapes someone's personality and character later on. And one of my hardships early on in life was was completely self-imposed, which was I was a horrifically bad student in high school. I moved from a very small, very small class size school in eighth and ninth grade to an enormous 4,000 student public high school in Connecticut for high school. I had this realization that I could do effectively no work and get bees.

17:54That was a big change for me and basically meant I got to play more video games and hang out with my friends more and play Frisbee and soccer more. So, I did all those things. Probably more valuable to your life and career now, right? I mean, again, I never look back on scars with regret because they sort of formed things later. So, I assumed through stupidity and some arrogance and entitlement that I would get into the University of Notre Dame where my family has a long deep history.

18:21I didn't, and I also, because I had that thought, didn't apply to other schools that were safety schools. I applied kind of only to reach schools. So I was rejected by each of those schools on the same day. So I got, I think, six of those small envelopes that no college applicant wants to get all at once. I ended up going to a regional school that had a compatible curriculum with Notre Dame so that it would be easy for me to transfer there. When I went to that smaller school, which was in Minnesota where I'm from originally, I took the opportunity to reverse that course. I studied really hard. I declared as a history major. I was always interested. I was always interested in things. I just hated being told what to read or what to learn. And what I found in the first philosophy class I took at that school, the University of St. Thomas in Minnesota, was that philosophy let me...

19:07guide my own education in a very distinct and unique way. And I just fell instantly in love with it because the professor was basically saying, go read anything you want and make an argument to me. I was like, oh, that's like what I do anyway. That sounds great. And so when I went to Notre Dame, which at the time had the best, it wasn't by design, it was just luck had the best philosophy department arguably in the world. Despite being a religious school, it had an unbelievable, I'll call it secular philosophy department.

19:35with some incredibly famous philosophers as my professors. And that was my education. My education was, twice per semester per class, read a ton of stuff on a topic, synthesize it, and write a paper. And that was my schooling. I just loved that way of learning, because it was so, like I said, so self-directed. So that was the background story in philosophy that sort of reignited or maybe even arguably ignited a love of learning.

20:01that I still have, I just love the topic. I can talk about it all day. I still read a lot of philosophy. I think it's a great way to build a foundation for how to think. I'm very lucky that that whole story played out the way it did even though at times it was it was pretty rough and stressful as a teenager. Wow. What a great way also to prepare you for like the other part of your career now that like Nobody could have seen coming at that point. I'm going to get podcast existed. I remember downloading some to my iPod in college, but like I was I was very shy. You know, like as a kid, I actually think I've completely changed. I'm not shy at all now, but I was very shy and certainly like on the personality test would would test highly introverted. God, if you had told me I'd be doing this kind of thing in 10 years when I was, you know, 18, I would have told you you're out of your mind, but yeah, sure enough. Here we are. Thanks. Change. Wow.

20:51Coming out of noted to you, I'm like, well, had you been thinking all along? I'm interested in all this stuff my dad doesn't finances and like I might do like Yeah, how did you end up being employee number one at this? Startup the truth is I didn't think about it at all and I Delayed it and procrastinated this decision. I kind of thought I would go to law school Just because I liked arguing. I liked constructing arguments. I liked the competition of it. I liked being like a truth-seeking missile above all else. So that was kind of my default path that I would, you know, have a summer off and study for the LSATs and maybe go become a lawyer. And I just got lucky, right? The timing was just right that...

21:31the business was getting set up and I couldn't argue with the logic that it would be pretty smart to watch and help a business get set up like that's valuable experience no matter who you are and so I just jumped on it and that was it there was no more magic to it than that I don't think I actually even really read my dad's work or books we didn't ever even talked about it at home until after college so When I say I knew nothing about investing, I knew nothing about investing when I graduated. I didn't know what an equity was. And I had never, I joke all the time, I had never used Excel. I didn't even know what that was as a tool in college. Again, because I'm just reading and writing, basically. Which is amazing, given your dad tells stories of bringing piles of computers with him on family vacation to back test models against historical stock market trends. What was your view of that growing up?

22:19My view that was that he was at the house when we were body surfing and boarding and you know in the waves and I didn't much care Yeah again, I think a gift that that any parent can give their kid is Tremendous supporting care for their interest without imposing one's own interests onto their children And you know, that's something that I'll emulate and repeat with my kids So yeah, we just we weren't bludgeoned with it. It wasn't dinner table conversation it was maybe that strange now looking back on it given that's what his all his mind share was going to but but yeah we were just we were at the beach while he was doing that

22:54Yeah, it's so funny. I can relate so much to I mean obviously very different but so much of the story, you know Yeah, when I showed up man for analyst training Well, analyst training was fun, but my first couple months in the group CBS French literature in college French literature. Yeah, arguably philosophy although I did more like theater and stuff Man, I'd never used Excel either. I just got hammered like I was bottom of the class, like for a long time, just that learning curve. But like you say, like, you know, coming in with a fresh mind and just having that, it's a stretch to call it adversity. But like, hey, you got to think it's when you got to learn this stuff and like having a liberal arts education and being prepared to learn, gotta just think like it ended up serving me super well and sounds like you too.

23:45I think the best thing that can come out of any early education is just the feeling of what it's like to enjoy learning in whatever whatever area that happens to be it opens the door for you to be a high slope learner and other stuff like if you're if you're curious and let that be the the pull mechanism versus some sort of push mechanism, which as I mentioned just doesn't work for me. I think that's the skill that really matters. And you can figure Excel out if it's a means to an interesting and curious end for you and any other tool that we have at our fingertips. So I think becoming a high slope learner and like getting the experience of how fun that can be is really the only truly valuable thing that college or some other formal education can bestow on you.

24:24Man, you're reminding me of that I had this moment. I remember sitting in college physics freshman year. I sort of went the engineering route. But when I was sitting in that lecture and I remember connecting the dots between how orbit works and why I can't throw a baseball very far and understanding how that manifested in the equations we were learning, like this, this teacher, this lecture, weaved the most amazing narrative between the practice theory and those two concepts and putting them together. And I just remember, like I still remember the high that I had from the flow state of what a pleasure it was to learn that. In a lot of ways, I think all three of us are constantly chasing that. And how do we learn something new in such a complete and well illustrated way that it's thrilling and enjoyable to learn? I could agree more. I mean, that's what everyone should be chasing really on in life, I think.

25:18Yeah, well, and always. Okay, so speaking of learning, you had to learn, educate us and our listeners to what is this business you were setting up? Oh, Sean is the asset management. Like, how does an asset management firm work period and how do you guys work? Well, the thing about traditional asset managers is it's In many ways, the simplest business model on plan and earth and one arguably one of the best if you do it right. So it's literally as simple as you take control over other people's assets. You're given discretion to trade their assets on their behalf. This could be wealthy individuals working with a financial advisor. It could be a huge pension fund. It could be a corporate pension plan, whatever that might be. And you're given discretion over the assets. You're hired to transact and trade and invest on their behalf.

26:09And traditionally, in a long, lonely context, you're paid a percent of those assets that's quite small, you know, sub one percent of those assets these days, as an annual fee for your services. And it's just a management fee. And in hedge funds, there's the extra layer of usually carried interest, like you would see in venture capital firms. But the big, long, lonely managers that just buy stocks on the long side, just to hold them, will charge some flat asset management fee.

26:36And that's the entire business, right? So it's a function of how much you manage. And the beautiful thing about it is that it's recurring. So it's very sass-like in that sense. It's a recurring revenue stream. Also, there are no accounts receivable, right? So you tend to strip the fee that you're generating directly from the asset base that you control itself. So it's a very, very, it's an incredibly simple...

26:58model. So you obviously want to design strategies that can accommodate some assets, maybe not too much in assets because any strategy sorts of die as it gets too big. But in public markets, this can be billions and billions of dollars. And that's it. That's the entire business model. So The functions of the business are just like any other business. There's product, which is the investment strategy. That's run by a research team, a chief investment officer, in our case, a team of quantitative researchers building predictive models to buy stocks. That's the research function or product function. Then there's the distribution side of the house. People talking to those investment advisors, telling them about our strategy, convincing them that we're better than the next guy, maintaining relationships, telling them about performance, all these sorts of things. Then there's the operations and support

27:41functions inside the business like any other business. So it is in many ways the world's simplest business model. And arguably one of the oldest too, you know, financial advice of one way shape or form has been around literally forever. And that's how our business was structured, you know, out of the gate. Nothing, nothing complicated. Was there or is there also the equivalent of a carry component, a performance component, or is it all just the as a management fee?

28:09It totally depends on the firm. Some charge a performance incentive fee above and beyond the performance of a certain benchmark. So let's say you're hired to manage US stock portfolio. If you beat the S&P by 10%, you get to keep...

28:23you know, two of that 10% on a dollar basis. So sometimes managers charge that way. The much more common is just a flat asset management fee that's based on assets. But you can contractually do anything you want and sometimes big investors like to pay zero management fee and a generous incentive fee so that basically the only time you make money is if you do your job and beat the broad market.

28:46Why do you think it is that historically it's been common for long-only public asset managers to be fee-based and venture capital private equity hedge fund managers to have such a heavy performance component? Well, we could debate that's the latter part of that statement these days, but I think it's just capacity, right? The reality is that If you were to give me in our US large cap strategy of billion dollars tomorrow, we'd execute it in a day or two and we wouldn't move the stocks that we're trading. I mean, think of the challenge of putting a billion dollars to work in almost any venture context. It's incredibly hard to do. There's just not enough capacity to go around. And therefore, you need to incentivize the managers

29:28with potential reward. And because the capacity is capped, you need to have that be something like an incentive feel like carried interest. So there's a lot that we could talk about in this space and the alignment of incentives and how this should work. You could argue that someone that gets paid carry should not get be able to get rich on management fees. Obviously in practice, that's not always the case. And usually not the case for successful firms, they get rich both ways. But that's the primary driver is that I, you know, a strategy like ours and public markets going to accommodate billions tomorrow with no marginal real marginal cost to us and without affecting the market price. I mean, we've seen this experiment play out over the last 10 years in the private markets and in particularly in the quote-unquote venture flavor of the private markets, like billions of dollars have come in and they have impacted the market hugely. Yeah, they've massively, massively increased prices. And like you say,

30:22It's hard to efficiently put a billion dollars to work in certainly private companies, but particularly venture. That's why we got two and a half years of joking about the Softbank Vision Fund every time anybody was bringing up venture returns, because they have a blunt instrument in deploying these billion dollar checks. It was one firm that literally impacted the whole market. I won't name names, but I've heard from founders who have taken Softbank money about the absurdity of the process of diligence that went with that, and I just think it's crazy. I think that amount of money to put it to work, you have to be cutting enormous checks and doing so fairly liberally, so it's no surprise the impact that has on prices. Wait, absurdly a lot of diligence or absurdly not enough? absurdly not enough. If you're thinking about even the biggest hedge funds in the amount of work they would do to deploy

31:15say a billion dollars into a business, it is crazy. I live more in the circle of public market analysts, even though now I'm spending a lot of my time in the early stage markets. But sometimes I feel like I'm an alien on a different planet because the sort of work done on companies is just so different. Charlie Songhurst described this as the East Coast versus West Coast mentality. I think that's a good episode you did. He's one of the best. And I think that the right answer is somewhere in between those two mentalities.

31:44Yeah, I think there's a lot to be learned from each for the other. The West Coast has had a nice run here. So it's hard to argue with with the way they've been doing things, given the results. But I think the public market mindset applied to private markets is a powerful concept. But in the context of some of the biggest venture investors, I don't think I wasn't there. So I can't say for sure, but I don't think the same degree of rigor was applied to the work being done. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta.

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32:36Vanta's own research found that around 70% of companies have this, quote unquote, shadow AI running with no security review at all. Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap and the way that they close that gap is Vanta agent.

32:55Think of it as a GRC engineer that's governance, risk, and compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half. In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Curcer, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment. And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here. And literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get a thousand dollars off of Vanta at Vanta.com slash acquired. That's V-A-N-T-A dot com slash acquired for a thousand dollars off. And just tell them that Ben and David sent you.

33:53Well, thank you for illustrating sort of the vanilla asset management model particularly for long only public funds or long only public managers. How does Osam deviate from that and how has it sort of deviated over the years? So I would say the major deviation has happened in the last couple of years, which is our move to become much more of a software business.

34:18We still are an asset manager in the sense of the business model. We charge people in asset management fee based on the assets they have with us. But the way that we're accessed and the way we deliver our product, they'll call it, is now heavily through a piece of software that we call Canvas. If I'm good at anything, it's just collecting really good ideas and applying them liberally without a lot of second guessing from the smartest people I can find.

34:44In many ways, what we've done with Canvas is just borrowing some of the best lessons I've uncovered, and we've uncovered as a team. over the last three or four years, Chathan, who we both know really well, had a huge hand in this, which he knows, and I've told him several times in terms of our go-to-market strategy, so many others, a heavy hand at how we thought about product. But I think of us today as a software business that happens to monetize through asset management. Happy to walk into the origins there, but I would say that's the primary deviation between us and the every man asset manager. Patrick, you're on acquired. Please walk us through the origins of that. Happily.

35:20When I was kind of in the early days of the podcast, the podcast was nothing more than an open search for me after having really honestly maxed out my abilities as a quantitative researcher. The lack of statistics background caught up to me. I did a lot. I'm proud of the work I did, but you know, the team that's on our team today would, even the ones that are very young, absolutely run circles around me five times a day in terms of the actual work being done. So I had to find some new way to add value and and what I agreed to do with a couple of my friends was to do this very openly. And I tried like six or seven different things, different formats for doing this, the podcast is the one that stuck. And I was basically just looking for areas that interested me. What could I find that was applied to our business? I could understand, I felt like I could intelligently apply. And most of that ended up being around the world of software. So I got especially enamored of the early Amazon Web Services story.

36:16and the story of Andy Jassy and his TA stint, which is this program at Amazon where the senior team has sort of like a always, not maybe not always, but often have like a shadow staff member called a technical assistant at TA. Started at Microsoft under Bill Gates. Right. And Jassy was, was Bezos's TA for 2003 or whatever year it was.

36:38and then have this brilliant insight of, wow, let's repurpose the infrastructure we built for our retail business and turn in the dams on web services. So I talked to a lot of people at Amazon, and I just like getting on the phone with people. I find I'm pretty good at getting to the people with the right information and just getting them talking. And so I got a lot of context around how this worked in the early days.

37:01And I thought, holy crap, we have the same obviously much smaller scale, but we have the same general type of opportunity. We're a quant firm, so we've built all this crazy infrastructure, ripping third party vendors out one by one over 10 years, rebuilding a software solution internally to help us do our jobs. We had a full-time dev team that was just building internal tools. And so the question became, well, If this had a beautiful front end skin on it, what would the product be? What would it look like? Let's go through that exercise. We kind of poked and prodded on a couple different things and settled on the final model that we call Canvas, which does exactly that. It literally is our internal tools as a service to let you design extremely customized investment strategies.

37:41through a web-based portal, which we then do all the trading and implementation on, all the reporting on for the benefit of generally very high net worth individuals through their financial advisor. So what we work on is software. So it's obviously client facing end users. In my mind, it's client facing, our client are the advisors. So the people that use Canvas are themselves advisors? Correct.

38:09So I'll make up a, you know, for RIA, a registered investment advisor firm, we'll call it John Doe Capital. So John Doe Capital has five advisors, some support staff. They manage a billion dollars for 10 families. Let's just say they're really very wealthy families. Those families have outsourced their investment function to the advisor. They trust them. They trust them to oversee their states and their investments.

38:34Those advisors typically today don't pick stocks themselves. They used to, well, way decades ago, then they moved to picking mutual funds. Then to managers, it's evolved. But usually they outsource the function that could be hiring Vanguard to do it very low cost. It could mean hiring an active manager like us. And they make that decision based on a lot of research. What we do basically is say, well, we're going to do all that, but you don't just get to pick like option A, B or C. Instead, you get to design exactly the strategy that you want.

39:03that specific to the circumstances and preferences of the end investor will call them. particularities around their tax preferences or around what kinds of stocks they're willing to own, what sort of risks they have in their life, like arguably if you're a Facebook executive, maybe you want to route some of your investment risk in different parts of the economy, not double down on the same sector. So there's all these sort of variables. Everyone's life's a little bit different, and preferences are different. And this software allows advisors to show their clients something very unique that's totally tailored to them.

39:41is awesome. It truly is a AWS story. You guys were serving clients yourselves, and now you're serving clients yourselves, and other advisors who are serving clients. Correct. And our goal is to make the advisor central here, so that much like, again, maybe Shopify is another interesting example that I've thought a lot about with merchants as the as the North Star versus customers as the North Star that Amazon has built its business on. And you could think of advisors sort of like us building for merchants. We're building a platform that they can build an entire business on top of. And at the same time provide a really interesting solution to their clients. And so Patrick, I have the sort of vertical versus horizontal conflict question here brewing in my mind. How did you think about whether you should sell licenses to Canvas to OSAM's competitors or not?

40:35So it's an interesting and ongoing question. I don't have a great answer to this. I'd like one definition of a platform, which is that you're not using the same tools to compete against your clients. And there's a tension here like another one of my favorite little ideas from my podcast history was an observation from Keith Roboi. Then at Coastal, now it founders fund when he said all the money he had made in this career was building tools for the equivalent of merchants. Let's say having the merchants be too slow to adopt them and then using the tool vertically integrated to compete against the legacy merchants. Open door. I always have these opposing views in my mind, but we have a long history with the RA community. We love working with them. We were one of the first firms in the late 90s to work with that community. It's a fast growing segment of wealth management. And we generally like the wonky stuff and are less good at the end client experience and the rest of the package. You know, we're not interested in a state planning.

41:31in particular, we're interested in investing. And so I think the role that we play is the right role to serve RAs and advisors as our primary clients in that part of the business and not the end user. It's one of those perennial questions and decisions like, when you have a powerful product, it's a luxury to wonder, what all could we do with this? But I think ultimately the more you get distracted, the more you lose focus, the worse product you create. This is the perfect transition to talking about the other.

41:59I think you've felt over the past couple of years on your own within Osam. So your Keither Boy episode, fun acquired history here. So good. At the end of it, you were, I think you've stopped doing this as much, but you were asking, you have your kind of this question, but you also asked people for book recommendations. Have you stopped doing that, or do you keep doing it? Are you still doing that?

42:21I have stopped doing it mostly because I don't read books anymore for the most part, which is a strange departure given I used to read 100 a year. But because I've lost interest in books for the most part, nonfiction books, specifically, I actually don't ask the question anymore. You just ask what podcast do you listen to? So Keith's answer to the books was seven powers. And Keith was like, hey, there's this book in this guy, Hamilton Elmer.

42:47Best kept secret in Silicon Valley. This is a fantastic book. And so I listened to that, I picked up the book, said to Ben, I was like, Ben, you got to read this book. And then we reached out to Hamilton and rest his history. I was like, really, David, I've never heard of it. Like, I don't know. And he's like, look, Reed Hastings says is the best business strategy book. And he's like the best business strategy practitioner in the world. And I was like, okay, fine. It is amazing to be just flashing back. What was that six months ago? And, oh, my God. Having skepticism there.

43:15I mean, just to pile on there, I mean, I was introduced to Hamilton through Daniel Ack, and I think that Daniel's the best strategist that I've personally spent time with, and he says the same thing about Hamilton. So, or something similar anyway. So, that's two pretty good ringy endorsements there. All be it from a very similar business model. It's Spotify and Netflix. One trying to be the other pretty quickly. Yeah, yeah. So, anyway, yeah, seven powers is something I think about a lot.

43:41Wait, it's now a whole section on the acquired show, which we're gonna make you go through for, oh, say I'm in a minute. But okay, so like, invest like the best man. How did this happen? You've talked about your philosophy of growth without goals, which maybe you can get into here in a minute. This thing has taken on a life of its own. How did it start? Some of it's timing, right? Like it started in 2016, so.

44:04before this mega boom of podcasts. I think sometimes better just be early or have the right timing than good. And that was definitely a component of it. I was probably one of the first couple, what I would call high-end investing podcasts. And it was just lucky timing that my friend, Jeff Graham, who had just written a book, I think it was called Dear Chairman, which was a story of eight different...

44:29activist investment campaigns in public markets, including the letters that were written by the investor to the chairman. I mean, it's an awesome book. And Jeff was kind of marketing the book, and I can't remember who has to, but we decided that we would record like an audio version of the major topics covered in the book. That was the first episode. I told my producer, Matthew, that I would commit to doing seven of them, again, because if I don't have a habit, I don't do well. So I figured seven was like seven weeks felt like long enough. And the second episode was with Michael Mobison.

44:58and who was a recent research friend, I'll call him at the time, and a legend in the research and equity investing business. And it just sort of took off. It was one of those things that I think had product market fit in week two, and steadily has grown ever since. Turns out...

45:17on the internet, like the more focused you are and the more wonky and niche you are, the bigger your audiences. Because I think the internet rewards the edges of distributions. And I just happened to be really interested in one of those edges, which was like deep, wonky business and investing discussions. And so I've just done it ever since. And for the longest time I never really had any goal with it, I just wanted to talk to interesting people and let my own curiosity guide me to the next guest. We'll let the past guest guide me to the next guest. And it grew organically from there. I never marketed it. I never did anything but tweet out a link to it. Still for the most part, although that's changed recently a little bit. Don't do anything extra.

45:55And that's kind of the whole boring story, to be honest guys. There's not a whole lot more to it than that. I wish I should probably start making up like all these founders that I should make up a much more like mythical or just a typical origin story. You're walking in the woods. Yeah, I just happen to be downtown one day in New York and that's where just offices were and we recorded an episode in the rest of history.

46:17How did you decide on seven and how did you decide I'm gonna find a producer like right out the gate before I even know if I'm doing this thing or not I tried to edit the first one myself and literally got 45 seconds into it and said no effing way am I doing this so I you know, I asked on Twitter for somebody, I got lucky that my producer, Matthew Passy, was around to answer or something, and he's been my partner this whole time. So I've never touched the, you know, production or engineering side of this whole thing. Just I just have the conversations. That's my role. Seven weeks. I've no idea. I probably made it up. I probably felt like enough that it wasn't a crazy commitment, but also enough that I actually had to think about.

46:59you know, five more people after those first two and go get them and sit down with them and actually put in some effort and to see if it worked. And by the third episode, I was like, oh, I'm going to do this the rest of my life. Like, this is so much, this is so much fun. And talk about a cheat code as a way to get ideas and information. It's like, I always joke now, like, books should be one tenth of their length, most of them. And you can get multiple books and equivalent of insight in a single hour conversation. So why not just do that, especially if you can go get the best people in the world. So it's pretty concurrent with this whole new strategy and building canvas, right? Yeah, it preceded it. So 2016 was the fall of 2016 when I started the podcast. I took over OSAM in 2018. So there was a bit of a gap and then we really started building canvas in earnest.

47:50in late to that very end of 2018. So we built it very fast. And I sort of think about it like having APIs at our fingertips. Like, we had already built so much of the core infrastructure. So it was really just...

48:03tapping into the infrastructure. So even though people saw it and they're like, holy crap, you built this in three months, we said, well, really, we built it in like 10 years, but we were able to move very quickly. And part of the reason for that was the lessons I was picking up and my team was picking up along the way in those first two years. And with the podcast, was it an intentional strategy to attract capital for OSAM or then later on to attract customers for Canvas? Never. I don't believe intentional marketing.

48:31Almost ever works like it I feel like the best marketing is like how did this happen sort of question you know after the fact and the podcast remains You know critical marketing asset for everything I and we do but it's never with the mind towards that like I'm never thinking what can I how can I like subliminally design something to get people to you know call us on this it's never ever like that I think of it very much as brand versus direct response marketing so no never it was never part of a strategy session or something like that and never will be because we just know that that would That would pervert the whole reason I think it's interesting in the first place. And your listeners would see right through it. I mean, this is one of the biggest, the smartest group in the world. Exactly. The biggest key tenant that David and I have about acquired is assume the audience is brilliant. And not only will you then attract brilliant people, but it forces you to play at a higher level so that you get to keep engaging brilliant people. Yeah, I think that's so important. Like the second people smell sales. Like it has a stench.

49:36And I never want to fall in that trap. So it will remain driven by what's interesting to us, not what we think other people want to hear or not some backdoor into a business outcome that we're trying to achieve. Are there moments you remember from the last four years that were like, either like something happened a particular show, a particular guest that moved the needle in a big way?

50:02or where you just like were like, holy crap, like this is bigger than I realized. I tried to not check the metrics too often because when I wrote a book when I was, I was pretty young. I wrote a book when I was in my like mid to late 20s. And when it came out on Amazon, I remember checking the stupid Amazon, like ranking like so many times a day. It's like crack for authors. I hated that. And I was like, you know what? I'm not going to do that this time. So I would check After an amazing episode that I just knew was awesome I would check just out of curiosity and for sure there was like a steady organic growth rate with step function changes and I actually called this the Mobus and Bounce because I've had Michael on I think four or five times now and every time I do there's like a 10% audience increase that then doesn't disintegrate so he's my growth hack along with a few others but yeah I tried to

50:57I tried to stay away from all that because again, that's one of those feedback loops where I would feel like the listens were driving my thinking on what to do next versus just my curiosity. So I've really tried to stay away from that as much as I can, especially recently as the numbers have gotten very big. And just ignore it and trust that if I'm curious, it will come across. If I'm doing something by route, that will come across because the audience is so smart. So just don't do that.

51:25At the same time, it has taken on this life of its own. You're doing a bunch more stuff around it. Can you tell us about what's next both for the show and how it's bled into the investment business as well for you? Sure. So, you know, COVID's been with all its misery for so many people. I've tried to take it as a personal blessing in as many ways as we can.

51:52The first of those blessings is the time I get to spend with my family now, and I was traveling a lot for work. I've been home, I'm sitting in my home office right now. My kids are, I can kind of hear them in the background, and I get to see them and my wife Lauren all the time. That's the first blessing. The second is, I think it's made everyone realize the parts of what they were doing that were wasted effort, or if not wasted things, they just really enjoy doing.

52:16And I just believe that enjoyment aligns with good outcomes for the most part because you just have more energy for stuff. And if you have more energy, more persistence to get through hard times, and it's a better outcomes are possible. So I kind of ask the question like, what would the perfect alignment be between my own enjoyment and curiosity and effort in the business? And I think the way that shakes out is what I'm going to do the next 20 or 30 or 40 years, whatever it is.

52:42is just try to be like a cartographer. Just try to map the best knowledge in the business and investing world in a pretty formal way. And again, I think probably my legacy as a quant.

52:54makes me think about everything. What does the database schema look like for something like that? What is the atomic unit? If I'm writing data to a knowledge database, what is a unit of data look like? How does the database structure? How is it accessed? What front end do I build on top? All these questions that I think anyone in software would understand trying to think about what I do through that same lens. That's going to be my primary focus. Now that manifests in a couple of ways, I like to be radically open with this stuff.

53:22I'm going to publish a lot of those learnings as we go. We're probably going to open source that database in some interesting way. We are just in the process of launching our first early stage investment vehicle called Positive Sum that I'll be spending a ton of my time on because it aligns so clearly with the same exploration. So I kind of think about it as I'm just going to do one thing, like I'm just going to find interesting things to learn about. I think I'm pretty good at getting to the best people in the world.

53:51on those topics and somehow convincing them to share the lessons they've learned. And just try to mimic, like, be a human version of these companies like what's a good example, like a Shippo or something, which is an API that sits on top of other APIs, right? Like I just now, I'm a good router. So when I get a question, I'm lucky. I get to add. I get to rather than answer it, which cares about my answer. I get to go ask the smartest person in the world on that topic what the answer to that question is and do it pretty quickly. And so I'm trying to be a router, not not a originator. And that's going to be my goal. And it's going to manifest inside the business in a lot of different ways. I mentioned the new fund. The podcast will be expanding. I'm going to try to convince ever more of the calls that I do for my normal job to be recorded, which is kind of weird and radical. But

54:41I think really helps the general public as long as we're not doing any harm to any company or any individual, which we're very careful about, or revealing sensitive information or anything like this. But I think that there's an opportunity to just hit a button a little more often than not when having normal conversations that anyone would have in the investment business as they're doing diligence and research and be radically transparent and hopefully create a lot of value for other builders out there in the process.

55:09To sort of paint a use case which is like a thing that I often do as an investor when I'm hearing a startup pitch to try and echo back what I'm sort of conjuring up in my head, you could imagine a situation where you're doing research on businesses where there are scale advantages and where you can with a very large audience amortize the cost of something and you stumble upon Spotify and what they're doing with podcasting you stumble upon Netflix to keep the examples we've been talking about this whole episode. And then there are a few ways to click a play button where you get to hear various conversations between you and Daniel where we can sort of hear different insights about how he thought about that strategy from different times you've communicated with him. Is that sort of how you're thinking about it? Yeah, I think there's a question of what format does this take that becomes really user friendly and useful?

55:59I've built them in part of products that no one wanted to use, and I try to be very allergic to that, so we'll iterate around this. I know for sure that capturing these lessons in a more formal way is going to be, if only for our own benefit, very valuable, because when I look back at a given episode, I even did it in preparation for this talk, just looking at the episode title and saying, what lesson?

56:21Did that episode contain and it's amazing for many of them like I could just go through them right now and just tell you like here's what I remember and it's an incredibly powerful tool. It's easy for me because I'm the one that had the conversation. I think it's harder if you're listening you know like for a few of your episodes I could say yep here's the lesson I remember but it sure would be reinforcing and powerful if I could tap directly into that good stuff more directly and with more control. And so I think your example is a good one of, oh, I found this interesting. How do I keep pulling on the same string within the same ecosystem? So it's two tasks, right? Fill that database with good stuff and find like incentive structures to keep writing good data to that database and then find a way to make it navigable for interested people through technology and software. You called yourself your vision.

57:10what you want to do here being a router going forward to my mind that actually I think undersells a little bit what you've already been doing and the opportunity to do going forward. This listener said, um, To me, once you say, hey, you know, what you guys are, your knowledge curators, like all the knowledge is out there. Like, this is the thing about the internet, this thing about acquired, this probably the thing about YouTube, like all your guests have been on other shows, like they have interviews and other formats there on YouTube and various talks. The knowledge is out there. What you're doing is you're curating it and packaging it in the best, most consumable form. Does that resonate with how you're thinking about things?

57:51Yeah, there's certainly as a curation aspect, right? Like as the amount of information and knowledge explodes due to the internet, all of a sudden it becomes valuable to be able to compress that or curate it in a helpful way. So that's 100% the part of it. But part of it too, I guess, is helping others frame things in a novel or different way than they have in the past. Like if I'm trying to get better at anything, it's having just a really low tolerance for repetitious content with a person, like when I'm interviewing somebody that's done a lot of interviews, my goal is to have as much of it be novel. And to have their reaction be like, huh, like I never thought about that question before as often as I can. And I find the best way to do that is

58:36I'm just easily bored. And I have consumed so much content that if I've heard something before, I'm just bored. Like then I feel like I'm wasting my time. And so I have, by having a low tolerance for that sort of stuff, I think that's the second function. It's curation and sort of like eaking stuff out that hasn't been explained or revealed in that specific way before. And so that's kind of what I'm trying to do and be selfish about it. Like ultimately if you're selfish in solving your own problem, that's usually a good a good policy. And sometimes the questions I'm asking are I'm dealing with some problem in one of our businesses, and I don't know how to solve it. And so I asked somebody that's really good how to solve it. And then you find something great. Yeah, exactly. Well, I have a management question on this. So you have these like.

59:19Multiple concurrent initiatives, you've got sort of codifying business knowledge and making it more navigable. You've launched an early stage investment fund, which is a completely different operational animal and decision making framework than public long only equity investing. And then you've also got, which I think you should pitch listeners on this new podcast that by the time this is out, this will be launched that I think will be right up a lot of people's alley.

59:45First, what is that? And second, how on earth do you manage to do these three things concurrently while also running a large existing business? So it's the most common question I get. And the first part of the answer is that I work very hard and have a lot of energy for this stuff. And sometimes having more hours that are productive in a day is an advantage. So that's part of it. The second is I'm just ridiculously open about what I'm doing. So you know all my stuff. As does everybody else, I don't have any other stuff. What I generally find with my relationships with other very successful people is they also have lots of other stuff that you just don't know about. So there's a little bit of transparency making it seem like I'm doing more than others. When in reality, it's really not the case in my experience of highly curious people who just tend to do a lot.

1:00:36And the last piece of it, which is probably the most important and maybe interesting is the way I think about it is I actually only do one thing and it just happens to show up in a lot of different like outcomes or side effects. And that one thing is is this scout function. Like I am out trying to find what is the next interesting useful concept idea, market area, person, product, you know, whatever that can be emulated, borrowed, copied, mimicked, whatever it might be.

1:01:06in a productive way for the people that use us for something. That takes the form of handing lessons off to my team at OSAM. I work with a senior team there that I've been with for 14 years each, all four of them. So we know each other intimately well. They're all more talented in most ways, except for my talent maybe as the scout function. They're all more talented than me in every other way. So we're closely with them and I'm handing them stuff. That's part of it. On the venture investing side, I would actually argue that My training in public markets is awesome preparation for the time I'm now spending here. It is different. It's much more qualitative than quantitative, but quantitative still matters a lot. And what I'm finding when I'm talking to founders, especially around Series A, and especially if there's a data component or a modeling component to a product, which these days is more and more common. The kinds of questions were able to ask them about that. They look at us funny. Like you can tell they've never been asked the question,

1:02:05by other operators and practitioners like we are. And so I just think it all feeds on each other to let us ask better. It's all about asking better questions at the end of the day. That's the one thing I do. Like just ask better questions and ask them of the right people. And sometimes that manifests as a lead investment, a participating investment, an angel investment, an idea for a product, a podcast episode, like whatever it might be, those are the byproducts. Those are not the things themselves. The thing itself is get better. I guess they'll call it the art of conversation. Get better at asking questions that lead to interesting revealing answers. That's it. And that's really the only thing I try to focus on doing. And then just build systems.

1:02:49you know, solve problems with technology, not with people, right? So that my friend Leora Avidart, the founder of Lobb and Now Alt, I love that answer that he gives to that question of what's a technology company. It's a company that solves problems with technology. So we versus people. So we solve problems that way and try to build really efficient systems that let us do more of the thing we're good at, which in my case is, I think, asking good questions.

1:03:12Well, the good news for you, and you probably already know this, but that was what Don Valentine said. The number one most important job to be a great venture capitalist is learning to ask the right questions and then learning to listen to the answers. I don't think it's much more complicated than that. Like, there's a lot of then once you open the right door, then there's a lot of work that still has to happen. You got to, you have to underwrite the data. You've got to channel check. You've got to do, you know, you got to do all the hard. We have to do the work.

1:03:38But in my case, the work is the most fun part. Like, if I find a company that's interesting, going and talking to the 10 most relevant industry companies or players in that space is kind of the most fun part. And, you know, what a question I've been asking is like, what if I recorded those conversations and share them in some way, shape, or form, and not be too obvious, maybe publish on a lag and, again, never do any harm? That's what everyone does in investing. They're reading stuff, they're looking at information, and they're talking to people. That's it.

1:04:07And then they're synthesizing everything. So I'm going to do the same thing. But what if I'm just radical about the way in which I share the positive aspects of those things so that others can benefit passively and everyone's the better. And that's the question that I'm trying to answer. Well, and here's the thing you do at the right way. It benefits the companies too. Really. You have a platform like XYZ person at XYZ firm does that and post it on the internet. It's like, well, probably they would just start getting followers and traffic and fans would work, you could build it up. But you can make an argument to founders like, no, hey, like we're going to put this stuff out there. Like you're going to get a flood of attention to your company from customers, from talent, from following funding. It all starts to work in this. Well, hopefully work in this flywheel, right? We literally call it the flood. And the flood is typically the call we get the next day from whoever it was that was on.

1:05:02with some sort of, with some sort of exploitive saying like, what the hell? Who is this audience? Like, this is crazy. Another way to frame this would be just try to be the muse, right? Don't try to be the, don't try to be the visionary or the hero. Just try to be the muse that gets other people talking about interesting things because everyone then likes that. Like, that's why people listen to acquired. They're there because you guys love this stuff so much and you put a lot of effort into it and you're there to learn.

1:05:31and so they get to as well. And then they're motivated to go apply those learnings, call that person, engage with that company, whatever the case may be, whether that's as a customer, as capital, as talent, or as a fan. It's a powerful flywheel that gets spinning. And it speaks to, it happens to also be a competitive advantage. We're going to talk about seven powers. One of my favorite questions is, what is hardest to replicate about any given person company thing?

1:06:00and I don't know how much money would take to replicate acquired. I don't think you could do it. It's its own thing. And that's true of the best media properties, right? They're very unique.

1:06:13That comes from curiosity and authenticity. So if you ride that and let it run, you know, this is five years deep now. Like it took, it's the five years to be an overnight success story, right? Like the numbers are enormous now, but the number was 571 people on the first episode for me, for me. That's a great start. I think ours is about 28. Yeah. I mean, it's all it's all compounding right at the end of the day. So so it ends up, it ends up being a competitive advantage, which I think is an important point. It shouldn't be the reason you do it, but it is a nice side effect. Yeah. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part. Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making.

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1:08:24So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com slash acquired and tell them that Ben and David sent you. So we jump into into seven powers. You tell me I'm game. I love this. I love this framework. So listeners probably to both of our shows, no, you know, Hamilton Helmer's seven powers that he's identified of he would characterize a power as both a benefit and a barrier. Like, it's probably closest to the concept of a mode, you know, the Warren Buffett classic, uh, defensibility mode, uh, concept. But it, but it's also, it's like, it has to provide a benefit to customers and a barrier to competition of all types from coming in and eating your lunch. And so the seven, he's identified our counter positioning, scale economies, switching costs, network economies, process power branding.

1:09:17and cornered resource. And importantly here, the point I always try and make is this is what entitles you to generate profit in your business that doesn't just get arbitrage the way by competition. Yup. And in fact, that is his, he has a strict mathematical formal definition of power. And it is long term differential profit margin. So Patrick, the very easy question to you is in your web of businesses and let's start with, oh Sam, to keep it simple.

1:09:46To where do you derive power? We're definitely going to have to extend our end time here because you guys could give me going on this for a long time. I'll just throw out examples and this was maybe one case where Several years ago probably three years ago. I did literally sit down as I think probably everyone that reads seven powers does and say okay Which one of these can I do which one do I already have or which one can I engineer? So you know, I'll just take through ones that I think are irrelevant for one of the things that's going on in my world So I do think brand is is like the most straightforward one that I don't need to spend a lot of time on which is just like

1:10:20high quality low variance outcomes. That's how I think about brand. Can you just consistently deliver something really high quality so that you build trust with people? Trust takes time, therefore it takes consistency. There needs to be a high minimum quality bar. I love that phrase from Toby Lutke. I think about that a lot.

1:10:39If you can do that consistently with whatever it is that you do, you will build a good brand over time. Like the logo doesn't matter, you know, all this other stuff really matters less than just consistent high performance at a certain thing.

1:10:51And in many cases, you can air drop a brand. Maybe it's possible. Maybe Dollar Shave Club did it. I think arguably that wasn't a good business. It had a really low low retention. And maybe it wasn't. It was an amazing story. And like everyone wants a hack to like create a brand instantly. And it did. It was a good idea. Yeah. Yeah. There are exceptions or hacks which can be very useful. I'm not discounting them. But I think a hack should be on top of some steadily compounding trust equation with the end audience. So I do think we've established a brand, you know, what exactly it is we could argue over, but I won't say a whole lot more about that. And the barrier there is just, I think, time. Like, you know, if you want to establish the same brand that you see today, okay, well, we're five years ahead or 10 years ahead or 20 years ahead, depending on which of the brands you're talking about. So I think time is an ultimate barrier to entry for some of the highest quality brands. I love that. I hadn't thought about that brand is specifically those terms of high quality low variance and time.

1:11:50You think about, of course, like we've talked about a bunch on RCO in years two, there's persistence in venture capital. What is that persistence due to? It's due to brand power of the top firms. What is that brand power due to? It's due to high performance, low variance over time. Right. So that's the first, maybe my favorite, and I know it's Hamilton's favorite too, because he's always said that to me when we've talked about it, it's counter-positioning.

1:12:14And here I just think it is the radical transparency of the research process. I joke with a lot of my friends who run investment firms that have that classic, mysterious website that's just a logo and an info at email address and nothing else. Basically, the digital velvet rope, which I love, I'm close with a lot of these investors and indeed oftentimes they are literally the best investors. And so I respect the hell out of almost all of the people that have that website.

1:12:40I joke that one of my goals is to convince as many of those people as possible to come on this podcast, on my podcast, which I've done many a time and have many more in my sites on long sales cycles. But I do think there's an incredible counter-positioning there. I won't pick out a name, but how am I gonna, as an investor now, say with positive sum? How am I gonna be one of these illustrious, incredible firms with track records and crazy brands and everything?

1:13:06It's to do literally the opposite of that, right? To be the most open, the most non-proprietary investor on planet earth where I'm externalizing all the things that you're normally buying from them. Like if you get one of these great investors to be on your cap table, you're accessing this thing in their brain that they've built up over time. And I'm just saying, no, actually forget that. Like you're not getting my brain, you're getting the positive side effects of me externalizing that process in a radically transparent way. I think it would be very hard for most of those firms to completely change their attitude on this topic to say nothing of their behavior. They've been doing a certain thing a certain way for a long time. So that would be counter-positioning. Do you think that OSAAM today has counter-positioning, or do you think it's actually that it's vulnerable to counter-positioning, and that it's more of the incumbent that derives its power from

1:13:59What would you think branding and maybe scale economies? So I think it's very counter-positioned because to be able to build canvas, you basically need a heavy, quant background. Like firms that don't have that skill set, this is a seriously complex problem that we're solving. I mean, it is non-trivial to build. I mean, each of these things requires a complex modeling exercise. They all have to integrate. There's crazy optimizations that happen. There's quite a lot of compute understanding that is required to make things happen fast. This is a really complicated problem. Most of the firms that I would get scared to hear that they're launching a Canvas competitor are the most well-known quantitative hedge funds, not long-only firms, and they're a different business model. Their whole thing is that they're proprietary

1:14:48you know, research and insight and data that isn't shared. So it's like the Bezos thing when he, you know, was asked about, you know, other big tech competitors and laughing saying, you know, those guys are used to software margins. Like I'm a retailer, you know, like it's an advantage sometimes to not be as fat and happy and have lived on a different business model. And so I think.

1:15:09We're very counter-positioned with Canvas specifically against the firms that would most scare me to be competitors. And it's a lower margin business, so I'm not worried about them. We're not as up to speed on probably who those current people are in the bed like 10 years ago. If SAC is like we're building Canvas, that would terrify you. But they're not going to do that because they make their money from...

1:15:32Performance their hedge fund. I'll use a salacious example as they see actually wouldn't be one of them like like the most obvious example would be like Renaissance technologies right like that It's the most extreme example because it's absurd right they charge five and 50 or whatever it is and still and still produce You know 40 50% returns annually on their own capital like they're not launching a canvas competitor No, but they could and it would be awesome. That's the sort of thing I mean like the most sophisticated and advanced research shops, quantitative research shops just doesn't make sense for them to do this right now. And we'll have at least a few years head start. The other one I think about is you're going to get me going down all these now. There's kind of a fun one in in cornered resource, which Hamilton also acknowledges is the least common of the seven powers. But nonetheless, an interesting one, which is through a program that we call research partners, Edo Sam, which is a very simple trade. We effectively give away our entire

1:16:26data, library, infrastructure, and access to our team to independent researchers in order for them to do their own thing at their own pace in whatever way they want, where the trade is we own the intellectual property that gets created. For the most part, these are retired engineers, people in completely different fields. The most famous of them is an anonymous guy on Twitter who's I think probably the smartest person I've ever met in my life.

1:16:51Not modest, Jesse Livermore's his name, although modest, a very close friend and actually next week's podcast. So Jesse, as he goes by, has an engineering background of sorts, very technical background. Again, literally the smartest human being. Like, if I could stick a human being on understanding a complex problem, it would be him. And he does these months-long deep dives with our data and teaches us as he goes.

1:17:16And because we offer so much flexibility and we offer this data set for free, again, the thing that most firms like us keep as the most proprietary asset, they become contractors with us. And as a result, we've captured some of the most interesting people like this in the world and I think have the best value proposition to them. So that's a super tiny example of a cornered resource, but we have benefited tremendously from those research partnerships. And this is the one where I will admit to thinking about that program because of reading seven powers. So actually the power came before the implementation and that one's been a smaller scale success, but but a huge success nonetheless. I thought you were going to say the podcast was a corny resource within your case may may be fair because you're obviously the CEO and you don't major owner of the firm, but one of the things I love from.

1:18:03The book and Hamilton's work is that people are not cornered resources. It has to be like what you're describing. People are not cornered resources because somebody else can hire them. They're arbitrageable. It has to be non-arbitrageable. And I love this. It's like a cornered resource plus counter positioning that you built this practice of. I would argue, I don't know which, you guys could tell me where you would put this power. But I think of this more as just a flywheel than a power. But there's got to be something in there.

1:18:32And traditionally, like this flywheel would normally manifest as scale economies, but maybe it's network effect here. On the podcast side, it's something like every week, you get more listeners who are incredible, who can have a positive impact on the guest, which then helps you get ever more interesting guests who then help you grow the audience and you spin that flywheel. And therefore, the best guests are just going to every week have a better reason to do yours instead of someone else's with their precious time. And you just have to be patient with that. Like, I always talk about it. Like, someday, you know, I'll have, I'll have Bezos and, and, and Elon on, like, back to back weeks. Like, I'm just, I'm convinced I will. Like, I know how compounding works. And maybe it's two years from now. Maybe it's five years from now. Like, it's going to happen. That's, I think, something that is a,

1:19:19It's very hard to compete with. What power it should be assigned under, I have no idea, but it's something to do with that kind of growth flywheel that again, no amount of money I don't think could buy. Yeah, I've always thought about it not as a flywheel, but I think this has been Thompsonism laddering up where once you sort of have someone on some wrong, then they become a part of the way that you're able to describe the show to the next great guest. Well, let's move on to playbook. We've touched on several Sort of playbook themes here and I think we should introduce a couple of new ones and kind of surmise surmise our takeaways where if you wanted to Run a playbook similar to what Patrick has done over the various stages of these different businesses kind of what would it be David I'm curious you've got one here that we haven't touched Specifically on but I think it's just an awesome observation There was a really interesting exchange on Twitter. I think Ben you sent this to me

1:20:16you texted this me when it happened a couple weeks ago of Taylor Pearson and Austin Reef from Morning Brew talking about the investment business. Chemical is specifically VC or the investment business period. Obviously period for our purposes here. Really becoming the media business and I think, you know, referring to you Patrick and others as well.

1:20:40You know, Turner Novak's done such a great job building a platform for investing on Twitter, you know, like Robbins, Matthew Ball, so many people. And then Austin responded, it's not just the investment business. Every business is turning into the media business in some way, shape, or form. It wasn't premeditated. It sounds like for you to necessarily Patrick, but like, how do you think about that? Yeah. How do you think about this? You know, very often I think observations like this.

1:21:06are benefit from hindsight and it happens to be a strategy that just has worked for a lot of people in the last five to ten years and therefore feels tempting to go do the same thing. I don't know how long the runway is for this like, you know, learn in public orientation in the investing business or just in general in businesses. I think there's always an opportunity to have a content mindset.

1:21:30I love Red Bull as an example that Red Bull says the content media business that happens to sell this weird drink. I think that's really neat. And there are some businesses that just really the thing they actually do well is the media thing. And then the product is just like a value capture mechanism versus usually it's the other way around, right? We think of businesses as a product or service and then figure out how to distribute it or market it. So I do think that the internet has created this funny inversion where with no gatekeepers to reaching the end audience, it behooves you to create media or content because that's the way they're going to notice you, like you have to stand out. And the way to do that is to be as we discussed earlier at the tail of a distribution in some way. Don't be the Walter Cronkite solution that pleases the most people the most average amount. Like that's a recipe for death on the internet. Go study mischief. Go study the extreme version red bull. Go study the extreme versions of this that are sort of unapologetic about their uniqueness and and then do your version of that thing.

1:22:28I think it needs to just feel natural that if you're having a strategy session about this once a week, it's probably going to suck. You can't engineer your way to a good version of this. I think you just have to make a decision to be public about your thinking process and have a really high, I'll use Toby's phrase again, have a really high minimum quality bar for what gets shared. I type and delete a lot of stuff. I write a lot of stuff that never sees light a day. There needs to be that curation filter for people to continue to trust you. So if you can do all that, power to you. I think it's a great way to reach whoever your end audience is. I'm always hesitant when everyone's starting to agree that

1:23:09the one right way of doing things is x, y, or z because that's happened to work. Like any distribution channel, you know, Facebook in the early days was super cheap and it's not now. Did a Google did a everywhere. So so this was a really quote unquote cheap acquisition strategy for the last five or 10 years. Whether or not it will be in the next five or 10 is an open question that I don't have the answer to. Yeah. Really interesting thing.

1:23:33is once you're at scale so this is contrasted against Facebook and Google once you're at scale this channel continues to be cheap at least relative to new entrants and I think you've definitely seen this with your podcast we've seen it with ours where because we had a call it for your head start on the podcast mania and planted our flags in our respective niches and said this is the thing we're weird on the internet about come join us like if we had to sort of pay per listener and we were doing that you know, against anybody else who wanted to start a podcast for the same sort of reason, like, we don't have to do that because there's just so much organic goodness that comes out there from building that brand that's compounded over the years. Yeah, I think a great question asked too is like, do I personally already consume anything like what I'm contemplating putting out there? And when I started the podcast, the answer to that question was no, that it didn't exist. And it certainly didn't exist in the channel that I was going to do it in.

1:24:30And so I just think like if you can just have that filter, you know, everyone was joking about these LinkedIn stories yesterday. When I saw that, I was like, oh, like, I don't follow anyone on LinkedIn stories. And I'll bet you that I'm going to in, if it succeeds as a product in two years, there's going to be some, you know, some star there that has currently has zero, zero followers in that, in that venue. So when I see that sort of thing, I get kind of excited because it's, it's novel and you know, early, whereas right now, like I think it's an interesting question, if I were to launch this podcast with episode one tomorrow, would I get anywhere? Maybe not. Even though the quality is good. So I do think that like you want that mindset of, do I already consume a lot of stuff like this? And if the answer is yes, like good luck. And if the answer is no, you're probably on to something. I mean, that's like a perfect playbook for our discussion thus far. One thing I want to make sure we do

1:25:28is giving you know you're not starting with episode one tomorrow you've done four years of episodes we talked about this before the show um what are some playbook themes you've learned from your guests in your episodes over the years like as you look back the top things that have influenced you that have come out of your your episodes uh what stands out god i could literally just i could wrap and fire some off to you i'll just do that so I'll just go down a mental list here. Chathen put a good to taught me that in enterprise software, you want to take what he calls the go slow to go fast approach of picking very carefully your early customers and then patiently building for them well beyond what feels comfortable, meaning don't go get new customers beyond the original cohort before you

1:26:18let the product mature because you then make a much stronger product that fits the market better and can handle the scaling. One of the things that we've lived with Canvas, I mean, we literally just, Chathen told us to do something and we just did it with Canvas and we did not. I didn't question it. It made sense to me it was, I would have done the opposite naturally, which is like go up into the right as fast as possible. It was many customers as possible. And thank God we didn't because the system, any system is fragile right in the early days and it needs to have that slow organic growth.

1:26:47One of my all-time favorite book is The Systems Bible by John Gaul. And one of my favorite lessons from that book is you can't just air drop a complex system and have it work. It's got to have evolved from a simple system. And so there's an incredible wisdom in Chatham's advice to go very slow in the early days with enterprise software specifically.

1:27:05and reach product maturity. That's one example. I'll never forget when I messaged Bill Gurley, Trathon's partner, and someone had raised this idea of creating a marketplace for obituary writers. And the idea was, can you have obituary writers on one side and living people on the other side that commission the writers to write a really high quality?

1:27:27like retrospective or bituary type thing on their life because newspapers no longer really did this as much, as part of crosscutting. And I thought, wow, and the stories were amazing. I read a couple of them that the person with this idea had produced, and I was like, wow, like that, I would definitely buy that. And I said message, you know, girly, and I think it's one of the smartest guys on so many things, but marketplaces is one of them. And so I remember messaging him and saying, You know, what do you think? And he just drew this little chart conceptually, which was on one axis, the producer penetration. So what percent of obituary writers do you have signed on? And on the other axis was the benefit to consumers. As you, so basically conceptually think about it as does the service keep getting better as you penetrate deeper into the supplier pool? So that line should look straight.

1:28:17And I think he said, once you penetrate at a certain amount, the marginal supplier's not going to make the service better, and that's going to happen pretty early. So you're going to get this little bump in then a flat line. That's not a good marketplace business. And so like he then talked about that concept on your episode, right? I think so. Yeah. And so like that little concept of just that little plot in my every time I see a marketplace now, that's the very first thing I think of. I've had benchmark guys on and girls on recently. So I'm thinking about them. But Chathen's idea that that open source as a business model is not about saving on R&D, it's about building differentiated distribution among developers. Matt Ball's idea in media that if we reach a metaverse, it's not about, you know, Ready Player One, it's about the interoperability of...

1:29:00of the systems that let you move value through the system. So there's not these like Walt Gardens. It's creating like a common layer, a portable layer of information and value that would ultimately represent what a metaverse is. Charlie Songhurst's idea that the best way to think about labor is to search in uncompetitive markets that Silicon Valley is a terrible place to look for labor.

1:29:25But that's where everyone looks for labor that you should probably be looking at, you know, Bulgaria or something like this because there's talent everywhere. And, and yeah, just on the internet. And we've seen this have been gone fully remote. So go go to uncompetitive places when you're looking for stuff. I could do this all day. I love Katrina Lakes idea that, you know, the next that legacy e-commerce, she's the CEO of StitchFix, that legacy e-commerce was all about speed, convenience, and price, and that the future of e-commerce will be about personalization. It's the same concept we were talking about earlier, where early internet was the explosion of information. Now it's like, it's too much. We need to curate it down. Daniel X idea about seeing around corners as a company scales and having that felt experience of what you're going to need if you're growing 30% a month in six months is not what the human brain is designed to process. Thinking about

1:30:20what a scale up looks like and getting around those corners as early as you can. There's this amazing story that a woman named Cat Cole who was the Chief Operating Officer for Focus Brands, which overseed Cinebon and several other, you know, Carvelle, Jamba Juice, several other related, big food brands. She told me this story about these guys, she was a Hooters waitress, says her first job, and these guys kept giving her a hard time about chicken wings because they would order 50 and then insist when they ate all the bones that they'd only been given 45. They would give her a hard time every Friday. And so finally, one Friday, as they were nearing the end, she just showed up with 10 extra wings and sort of gave them hell about it. All the guys' buddies, you know, chastised them and for men on, they tipped well, they thanked her, you know. She just like, she completely like inverted this whole thing on them. And I find that that, I've seen that a lot of ways, like this inversion to deal with.

1:31:15challenging people by going right back at them is incredibly powerful. I could probably do like a whole nother segment on everything Sarah Tattle has taught me. I mean like everything she puts out is like a tool kit to be, you know, messed with and thought about. And maybe the last one I'll close with is one of my all-time favorites, which is another venture investor named Josh Wolf who runs Lux Capital and his idea of the directional arrow of progress, which is, I think, you know, one of the most obvious ideas after the fact that you can encounter which is basically just like a lot of these technology trends are plotting and you can sort of see what's gonna happen based on what's happened in the past in my world like the cost of a commission for a trade in a brokerage account is a great example of this like you can just see technology making that cost go down every couple of years and Robin Hood's genius was they said let's extrapolate this directional arrow to its end point and

1:32:10Go to zero. Let's jump the line. I think jumping the line on these directional arrows of progress is a really interesting way to generate business ideas. In many ways, that's what we're trying to do with Canvas. We've learned so much from covering Chinese companies period, but China tech on acquired. That's one thing that really strikes me as a difference about the Chinese startup.

1:32:32tech and venture ecosystem is like, that's the primary thing that I think people think about over there. Like, what's the trend? What's like, what's the plot? And where's it going to end up? That's not as common here in the West, but it should be. When you meet these people, I'm choosing one, just for, I realized I wasn't brief, but like trying to just distill something down.

1:32:53you know, there's 10 of those per person often. So, I mean, that's the most fun part of this whole thing. It's just trying to extract these ideas. Patrick, you really should start some kind of like knowledge platform to explore ideas with passion like that. Great idea. I might take you up on that. I love it. Patrick, I teed you up earlier to tell us about a new podcast. Lay it on us.

1:33:15Yeah, so starting, I guess it will have already come out when this comes out on Thursdays. It'll be on the same feed as the Invest Like the Best Podcast. We'll call it like a mini-series or a sub-series, which is going to be called Founders Field Guide. So, from that point forward, Tuesdays will be for conversations with investors and sort of miscellaneous other. Thursdays will be for conversations with Founders and CEOs and builders. Maybe builders is the right word. It'll often be a founder. What's interesting about this is that It's often quite hard to get investors talking. And that's a fun challenge. It's not hard to get founders talking. So the access and the depth of conversation so far has been exemplary. And I think we've already recorded maybe eight. You know, there's just going to be a wide, wide range of really interesting private and public markets, CEOs and founders that join us for that. And the whole idea will be lessons from building their stories, sort of portable things that they

1:34:11that we could take away for other people and trying to, again, draw the lines between concepts and industries and ways of building things that are valuable to people. So we're really excited about that. It'll be every Thursday. And then who knows where we go from there? I think we'll end up publishing a lot of audio content in a variety of different ways as we do this learning process ever more transparently and in public. That's awesome. Can't wait to listen to it.

1:34:38Well, let's move to grading. As acquired listeners know, we're not going to let Patrick out of here without doing some grading. But B, for acquisitions and companies and deals that is more of a history, we will render a grade, a definitive grade on how it's gone. For situations that are still fluid, we predict scenarios in the future and paint the...

1:35:02a plus versus the F scenarios 5, 10 years out. I think it'd be fun to do both of these with Patrick here. So the first spin on this is looking at your own 10 year over the last couple of years as I was saying, CEO and what you've done. How would you grade yourself? I think there's just always room for improvement. I think we have a platform now that has an extremely bright future and has a very large potential future.

1:35:32It's still very early. We don't share how much we're managing on that platform. It's a significant amount. This is Canvas Canvas. Yeah. That has put us into position again. That's just different from most long only asset managers. That's a sleepy business to be in. Like more of the market is just hiring Vanguard. So I wouldn't really want to be playing in that space long term. So I think we're in a position now that we can benefit from technology versus being disrupted by it. And therefore there's some points for that. But as with everything, it's all about execution and we're in the very early days. So I think I'll give us a tentative B-plus to give us lots of room for improvement, but because we have established something that we can really see building on for decades to come, I think that's hard to do. And the team, to be clear, not me. The team has done that building in insane fashion over the last 18 months. It's kind of wild what they built with a relatively small team. And how many engineers do you guys have?

1:36:30So it's I'm like a shame to admit it because we're trying to build this team out a lot You know, it's it's full-time engineers maybe five I think people that see it think we have 30 so These people are absolutely cranking the research team are very technical so that's been a huge help and they've been a huge part of this as well But it's a team that's gonna grow a lot to help us put some shape to the canvas business and you don't have to talk in numbers at all How do you price it, and how does that compare to the pricing of a traditional asset manager, and then what's the sort of scaling factor on that? Yeah, so it's incredibly simple pricing, which I think people like. It's dynamic, so it depends on the settings you choose.

1:37:12And all we're doing is we establish a minimum fee, which is very, you know, very competitive with whatever and low. So we won't go below that minimum fee. So if the settings are the most vanilla, we'll still charge that, that, that number. Above that, it's simply a pro rated version of our normal fee for our services. So if you're allocating more, kind of away from the very basic public market index portfolio. We do some of that too, a lot of that. But if you're allocating away from that, the more different you get, the higher fee you pay. And it's a sliding scale up to a max where even the max is lower than what a lot of long-only asset managers would charge. So it's dependent on the settings you choose. We don't charge for extras. Everything is included in one asset-based price.

1:37:59Clients have really liked that because it puts them in the driver's seat of, if fee is a really important variable to them, that it's under their control. And we're a platform that fulfills. We don't dictate the terms, so they can decide themselves, and that's worked really nicely. And in terms of scale, again, we talked about this earlier, the reason there's no performance fee in this is...

1:38:19If you told me we had to ingest a hundred billion dollars to use an absurd number into this platform, we could do it over the next year. And in many cases, it would be a crap ton of work. But in many cases, we would still end up owning a modest amount of these huge public companies and hopefully not affecting their prices. So it scales extremely well to very large numbers. And that's how we think about it. Cool. All right, so the future.

1:38:48What's the A-plus scenario for Osam and you over the next five years? What's keeping you up at night? What's the nightmare of scenario? Well, I guess the F scenario is the easiest one to think about, right? That everything just stops working. And the software fails, or there's large errors, or technical problems, or team problems, or whatever, and others just do a better job than we do. Again, everything's execution. So F scenario is that we fail, and no one uses our service. It's very hard for me to imagine a failure scenario in I'll call it the media side because I'm just going to keep doing this unless I get sick or informed or something like I think it will work to some degree. I guess the failure would be status quo, right, that it just doesn't change from what it is today. It doesn't help people anymore than it does today. It's no more interesting. It's no more navigable as we talked about earlier, but I can assure you that that that F scenario is not going to happen. That would be F.

1:39:46A plus is hard for me to talk about because of this growth without goals idea that I sort of live by, which is I really don't think about this sort of thing. We don't have five or ten year goals personally for me. They're wrong and dangerous. I'm much better putting one foot in front of the other and having really strong habits that we can hang our hats on. And so I try to engender that in our businesses as much as I can. The furthest I'll go is that I was a video game player growing up. The furthest I'll go is is think about them like boss battles like what like what's the next boss that we face?

1:40:16And that's always very present and near-term and objective. And that's about as far as a goal as I'll set or try to reach. The rest is more about principles. And we've talked about all those things already. So public learning and clear value delivery, customization for investors, technology, flexible technology, chassis, and platform. Those are all key things that I just want to keep getting better at. What that looks like in 10 years, I honestly have no idea. And I won't let myself speculate or think about it because I just think it gets me off course. Okay. Well, we got one last question for you that of course we have to ask Patrick, what's the kind of thing that anyone has ever done for you? So it's so hard to answer. I've done this a few times where I've been asked the question and I always want to give a new answer, right? I try to optimize for novelty. So the most common answers to these questions are people making a bet on other people.

1:41:16early in their lives that or something you know family support I love those answers like whenever someone mentions some you know bigwig making a huge bet on a 20 something year old with no real evidence of prior success that just that makes me feel really good and that happened to me got so many times the true answer is something my cousin did for me which people can listen to in other podcasts he introduced me to my wife and my best man and several others in a really interesting fashion in college where you know he's my cousin so he was obligated to bring me out for one night but he brought me out for like six months straight and just made it his personal mission to get me set up socially and my marriage was halted so I'm extremely thankful to him he was tim and then just the ongoing kindness of my family my wife my kids my my extended family those are the answers that are kind of they're the real answers but they're kind of boring I've given them before so

1:42:11I'll come up with a unique one that's business-related. Actually, we referenced it earlier and then we didn't circle back and so I'll close the loop. This has to do with the roadmap of Canada. When I was 23 or so, this is right after the financial crisis had happened, the market had crashed. Like I said, they were our largest client. We managed money for everyday Canadian citizens through mutual funds.

1:42:36And in many cases, 60% at the worst case, in the worst time, 60% of their money was gone. And we were the ones that were responsible for that money. Now the market obviously was down a lot, but so were we. That was painful. I mean, so what happened was I was sent around all over Canada. We had all hands on deck, and I was a free resource. So I was tasked with effectively going and explaining to a large chunk of Canada as a whole, why we sucked so bad. And you were at 23 at this time? I was 23. As I mentioned, I was introverted though, I was always a good public speaker. And so that's part of the reason they sent me. But I was green. I mean, I was really scared about being asked questions that I couldn't answer because I didn't know the strategies well enough. I went on like a three week tour. And so the kindest thing I think was

1:43:29this group that I traveled with from the Royal Bank. I'll do a special call out to a gentleman named Bill Hill. Bill was the one who was the head of a major group there at RBC at the time. He was with me the whole time and then it was a rotating band of other people. He took a big risk doing this. There was no other 23-year-olds explaining performance of this magnitude at this scale to a whole country at the time. I was legitimately scared, like I...

1:43:54I was really worried flying up to this trip. I brought like way too many suits and he made fun of me for having like a carry on suitcase and it was a nordeal. And Bill really held my hand through that whole process, coached me up in an extremely positive way after every presentation. I probably gave 50 presentations to rooms of like 50 to 150 people. And every presentation he would let me suffer through the bad parts. There was one time I tried to quote like a German philosopher and I forgot the quote, I forgot the quote in the middle. And he let me suffer through it. He didn't like try to come save me, like he let me get through it and then coached me afterwards. You know, if he ever listens to this, he'll be surprised that this is my answer. But it was very formative for me of just like gutting something out, getting better, realizing that like you just got to keep going.

1:44:46and learning a lot in a very compressed period of time because of that pressure. So he didn't have to do that. He took a big risk by doing it. I could have sucked for all he knew, and thankfully I didn't, but I grew up a lot in that short period of time. And so I remain very thankful to Bill and the whole RBC team for kind of holding my hand through that process. I can't imagine getting 50 presentations about that to rooms of 50 to 100 people. You're a better person for it, I'm sure.

1:45:16Indeed. Yeah. Everything after that was was was a little more straightforward, but it was good. Good trial by fire and a great kindness. I love it. Well, Patrick, I normally wrap the show up by letting folks know that if they like acquired and they want to go deeper, they can become an LP. Why don't I turn that over to you? And if you're open to it, let people know why they might think about that. Yeah. I'm a wholehearted supporter of this thing. You know, it's so simple, right? Which is this little deeper dive into what you guys have built that I think at least from my perspective is actually even more enjoyable than the main show. It feels special to me because I know that it's a group of people, like everyone listening to it has opted in and gone the extra mile to support you guys a little bit, but also it's just hyper curious. And the episodes...

1:46:05are as good or better than the main ones to say nothing of all the other stuff that comes with being an LP and so it's one of the best like little small chunks of money that I spend and I know a ton of these LPs that have done the same because I've sent them there and I would just encourage everyone listening to check it out. It won't break your wallet but but it will definitely expand your mind if you're interested in these topics that we've been talking about today and how businesses get built and how this how this investing business works. I think it's awesome. So you didn't coach me on this. That's that's entirely my opinion. And I highly encourage everyone. Go become an LP. Well, thank you for taking that ball. I passed you without letting you know that the past was coming. So it's like a promise. This there is amazing. I believe I believe in the LP. Thanks, Patrick. All right, listeners.

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1:47:56Well, thanks so much, listeners. If you like the show, feel free to subscribe. If you like Patrick's show and want to tell folks, hey, this is where you can get more background on Patrick. Feel free to share it from your favorite local social media hilltop or with a friend or coworker. Go subscribe to invest like the best. It is absolutely safe to say I've learned more from invest like the best than any other podcast. And it is the one that I have the highest.

1:48:19percentage likelihood to listen to any given episode just because I know and I have deep trust that if Patrick is having someone on I am going to learn something radical and new and if I even if it's a person I know like Jathan or that I've heard on 10 different talks because I'm obsessed like Michael Mobison There's always going to be a reason that you decided to have that person back on so it's an amazing show I know many of you already listen but but check it out if you don't Amen guys. Thank you so much for having me. This has been awesome I really appreciate it. Yeah, yeah. All right, listeners. Well with that, we'll see you next time. See you next time.