Special: Invest Like the Best on Acquired

Sweet. Nice. That was great. You guys do awesome, awesome preparatory work. That was 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. I'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? We have a very, very special guest episode we've been looking forward to, I think all of us to doing 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.

Other 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 O'Shaughnessy Asset Management thing? How did you come into this? You were 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 hesitant to do any of these because I'm scared of boring people with the same stories. But there's a mutual admiration 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 and 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 acquired.fm slash LP and all new listeners get a seven day free trial.

All right, listeners, 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. Yep. 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? So 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 drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lagora's bet 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.

And 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. Lagora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

Truly insane numbers. And that is the real test. Plenty 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 lagora.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 Invest Like the Best, as we'll get into the first iteration, there was O'Shaughnessy Asset Management, of course, where you are the CEO. But before that, there was O'Shaughnessy Capital Management. And that was started by your dad, right, Patrick? It was. Yeah. In 1990, I 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 hadn't, I think, still have a close relationship with RBC, right? The Royal Bank of Canada? We do. Yeah. So the Royal Bank is 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. They're our 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 in the first couple of years of my career in the times that I did get to see all those tiny corners of Canada. That's amazing. Okay. We definitely got to put a pin in that and come back. So Osana C capital management and the kind of core insight, as I understand it, that your dad had was that there was academic research around quantitative methods for investing and for screening and identifying equities. I believe equities are maybe all types of assets to invest in. And he was really a pioneer in kind of putting that. I mean, I guess, is it fair to characterize it as like a data driven approach to the old Ben Graham style, Graham and Dodd 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, we're value investors. We're not slaves to value. It just happens to be one of those things that has 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,

buying 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, 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 and, and just buying stuff for a lower price. And, you know, of course that strategy, like, 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, you know,

kicked off our entire journey as a company way back in the eighties with an incredibly simple by hand, you know, microfiche collected data set going back to the 1920s. What's the first time microfiche has come up on acquired? Powerful 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. You know, it's, it's often not the modeling exercise that matters. It's the information that you're able to access, clean, you know, normalize and, and control. And, uh, not a lot of people were at the library looking through microfiche.

Yeah. So this is, you mentioned library, the other, to my mind, at least kind of like key piece of, 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 quantitative 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?

It is. Yeah. It's, it's, um, I, I catch a lot of flack for the title. Like it's some corny, you know, rhymy title, which, 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, uh, his first book was called invest like the best and the whole premise. So this, this actually predated what became O'Shaughnessy capital was that he was hired by large pension funds to 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 the 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 cause I'm interested in getting them to share portable lessons with me and everybody else. So it'd 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, how, how it got named. But yes, there's a lot of continuity here around a commitment to, uh, I always call it learning in public. I feel like that's becoming a cliched phrase, but I can lay claim to using that, that, that very early on, but I do believe deeply in the power of doing that. So that first iteration capital management ends up bear Stearns ends up acquiring it. It becomes, I think the, the linchpin and biggest part of bear Stearns asset management practice right before, obviously before the financial crash in 2008, there's an intermediate step, which is actually quite interesting, which was, uh, in the late nineties, the team that was out of Shaughnessy capital began to build a business called net folio. Net folio was a version of like,

if motif investing and wealth front had a, had a baby, uh, it would have been net folio back in the late nineties, sort of an idea that was inevitable, but just ultimately too early for its time. So that whole team was building a, you know, effectively a robo advisor in the late 1990s was 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, um, cause 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 he, we never really talked about this. It was just sort

of implicit. It was this love of technology and this love of open research. It definitely, uh, carries through. Would net folio is the idea. Like, so, I mean, with today, if I go to wealth front, 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 net folio. Did it bring in that idea of the clone portfolios? Like, could I invest like my favorite value investor? You know, it never got far enough where all the different product ideas came to fruition. At first it was very simple versions of the same screens that were being run out of Shaughnessy 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 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, never quite made it there. So, so it's chassis was fairly straightforward, but it wasn't passive like, like wealth front and betterment are just, you know, 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 take the practice and spin it back out of bear. Right. And that's the birth of what we all know today, Ashana's the asset management, right? Yeah. And I can now speak to this from experience, not from, from story. Cause now I'm, now I've entered the picture. So we actually left in the year before the March blow up, 2008 blow up of bear Stearns in the summer of 2007. So technically the first day of OSAM was July 3rd, 2007, which we called OSAM Independence Day. It was just sometimes luck of the Irish helps.

We definitely were, we're lucky maybe in more ways than good. The plan had already been in motion long before the, the two structured high grade credit hedge funds that were sort of the canary in the great financial crisis. Coal mine began to blow up. Patrick, you were graduated in 2007 as well. I did. Yeah. I literally graduated two months earlier. Oh my gosh. I, so I did too. I started working in the analyst program at UBS in the TMT group there. And God, I remember when, whenever it was when those hedge funds blew up and JP Morgan acquired the assets of bear for $2 a share, somebody taped a $2 bill to the road. Do you remember this, the revolving door on a headquarters

in Midtown? I remember hearing the news in March again, like I started, and it sounds like you too, started our careers on wall street thinking like, wow, this is a great place to be. A market seemed to just kind of go up. You know, I didn't really have the 2000, you know, stain on my brain. My awareness of the market was Oh two to Oh seven, 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, I hadn't, I hadn't studied finance or business. I really didn't know anything. I saw the, the shit hit the fan. Um, so the, the famous thing that I remember,

cause we knew so many bear people was thinking that someone had screwed up the price that it wasn't too, it must've 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, that beautiful bear Stearns building, which, you know, was part of the deal when Lehman acquired bear that, you know, just that building alone was like a billion dollar building and they got it for nothing. So what a wild, and looking back, you know, it was, uh, the aftermath of the, of the crisis was, was really hard for me because it forced me to learn so much so quickly and in a

very stressful environment with clients that are angry and upset about, you know, losing a lot of money. Ultimately I was formative. I'm glad that I started my career with that sort of event better than having one, you know, late in one's career or, or after a rosy period. What does that look like when you take the firm and sort of spin it out of bear Stearns structurally? Like how do you do something entrepreneurial like that with existing assets of an asset management firm?

So 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 team members as dual employees of bear Stearns and O'Shaughnessy 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 hire. I was, 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 billions and billions of dollars and thousands of accounts and it was a rude awakening for what businesses is like and all about. It was as friendly as it could be, meaning they helped us make it continuous and, 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, but nonetheless have to treat it like a brand new business with all the, all the trouble that that, that, that, that entails. But it was a great education for me.

Again, I hadn't studied this stuff. So I had, I had to learn by doing, and I treasure those early days, even though it was stressful and hard. Okay. My, my plan here was to get right into the business model of, 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. Take 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 a 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. That 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, like I never looked back on scars with regret because they sort of form, they sort of form things later. So I assumed through stupidity and some arrogance and, and entitlement that I would get into the university of Notre Dame where my family has a long, deep history. I 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, I was rejected by each of those schools on the same day. So I got, I think six, you know, 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 guide my own education in a very distinct and unique way. And I just fell instantly in love with it because I, the professor was basically saying, go read anything you want and

make an argument to me. And I was like, Oh, that's, that's like what I do anyway. Like that sounds, that sounds great. And, and so when I went to Notre Dame, which at the time had the best, this 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 with some incredibly famous philosophers as, 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. Cause it was so, like I said, so self-directed. So that was the background story in, in philosophy that sort of reignited, or maybe even arguably ignited a love of learning that I, you know, I still have, I just love the topic. I could 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, that, that whole story played out the way it did, even though at times it was, it was pretty rough and stressful as a, 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 mean, I guess 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, 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. Things change. Wow. Coming out of Notre Dame, like had you been thinking all along, I'm interested in all this stuff my dad does in finance 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, you know, 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, go, go become a lawyer. And I just got lucky, right? The timing was just right that the 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 talk about it at home until after college. So when I say I knew nothing about investing, like

I knew nothing about investing when I graduated. Like I didn't know what an equity was. And I had never, I joke all the time, like I had never used Excel. Like I didn't even know what that was as a tool in college. Again, because I'm just reading, reading and writing basically. Which is amazing given like your dad tells stories of bringing piles of computers with him on family vacation to back test models against historical stock market trends. Like what was your view of that growing up?

My view that was that he was at the house, but we were body surfing and boogie boarding and, you know, in the waves and I didn't much care. Yeah. Again, like I think a gift that, that any parent can give their kid is tremendous support and 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, 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, uh, we were at the beach while he was doing that.

Yeah. 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, uh, analyst training, well, analyst training was fun, but my first couple months in the groups at UBS, French literature in college, French literature. Yeah. Arguably philosophy. Although I did more, uh, like theater and stuff, man, I'd never used Excel either. I just got hammered. Like I was, uh, bottom of the class, like for a long time, uh, just that learning curve. But, but like you said, 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 sink or swim.

You got to learn this stuff. And like having a liberal arts education and being prepared to learn got to just think like it ended up serving me super well. And, um, sounds like you too. I 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, um, versus some sort of push mechanism, which as I mentioned, just didn't work for me. I think that's the skill that really matters. And, 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, the only truly valuable thing that college or some other formal education can bestow on you. Man, 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 lecturer, we've 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. And a lot of ways, I think all three of us are constantly chasing that in how do we learn something new in such a complete and well-illustrated way that it's, it's thrilling and enjoyable to learn.

Could agree more. I mean, that's what everyone should be chasing early on in life, I think. Yeah. Well, and always. Okay. So speaking of learning, you had to learn, educate us and our listeners to what is the, this business you were setting up, O'Shaughnessy Asset Management. Like how does an asset management firm work period? And how, how do you guys work? Well, the thing about traditional asset managers is it's in many ways, the simplest business model on planet 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, whatever that might be. And you're given discretion over the assets. You're hired to transact and trade and invest on their behalf. And traditionally in a long-only context, you're paid a percent of those assets. That's quite small, you know, sub 1% 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-only managers that just buy stocks on the long side, just to hold them, will charge some flat asset management fee. And that's the entire business, right? So it's, it's a function of how much you manage. And the beautiful thing about it is that it's recurring.

So it's very SaaS-like in that sense. It's a recurring revenue stream. Also, there are no accounts receivable, right? So you, you tend to strip the, 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 model. So you obviously want to design strategies that can accommodate some assets, maybe not too much in assets because any strategy starts to 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, you know, in our case, a team of quantitative researchers building predictive models to buy stocks. That's the research function or product function. And then there's the distribution side of the house. So people talking to those investment advisors, telling them about our strategy, convincing them that we're better than, you know, the next guy, maintaining relationships, telling them about performance, all these sorts of things. And then there's the sort of operations and support functions 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 to, you know, financial advice of one shape, 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, or is it all just the, the asset management fee? It totally depends on the firm. Some, 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 and P by 10%, you get to keep, you 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, a man that's based on assets, but you can contractually do anything you want. And sometimes, 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. Why 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 as 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, you know, US large cap strategy, a billion dollars tomorrow, we'd execute it in a day or two, and we wouldn't move the stocks that, that we're trading. I mean, think of the challenge of putting

a billion dollars to work in, in almost any venture context. It's incredibly hard to do. There's just not enough capacity to go around. And therefore you need, you need to incentivize the managers with potential reward. And because the capacity is capped, you need to have that be something like an incentive fee, 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, 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 in public markets

could 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. Massively, massively increased prices. And like you say, it's hard to efficiently put a billion dollars to work in certainly private companies, but particularly venture. And like, you know, that, 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, you know, they have a blunt instrument in deploying these

billion dollar checks. That was one firm. Yeah. That literally impacted the whole market. I won't name names, but you know, 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, 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 it has on prices. Wait, absurdly, a lot of diligence or absurdly, not enough? Absurdly, not enough. If you're, if you're thinking about even the biggest hedge funds and the amount of work they would do to deploy, say a billion dollars into a business, it is crazy. Like I, I live more in the circle of public market analysts. Um, even though now we're,

you know, 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. Um, Charlie Songhurst described this as the East coast versus West coast mentality. Oh, that was such a good episode. You did a lot of one of the best. He's one of the best. And, and, and I think that the right answer is somewhere in between those two mentalities, but yeah, I think there's a lot to be learned from each for the other. Um, the West coast has had a nice run here. So, you know, it's hard to argue with, with the way they've been doing things given the results, but,

but I think the public market mindset applied to private markets as a powerful concept, but in, in the context of some of the biggest venture investors, I don't think, um, 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 AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI first world that doesn't hold up anymore. Yep. Your risk surface changes every week. Now a vendor turns

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Well, 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 just the last couple of years, which is our move to become much more of a software business. So we still are an asset manager in the sense of the business model. We charge people an 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, I'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. And so in 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. Chetan, 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 in 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 everyman asset manager. Patrick, you're on Acquired. Please walk us through the origins of that. Happily. So when 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 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 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. You know, 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 and 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, a TA. Started at Microsoft under Bill Gates. Right. And Jassy was Bezos' TA for, you know, in 2003 or whatever year it was. And then had this brilliant insight of, wow, let's repurpose the infrastructure we've built for our retail business and turn it into Amazon web services. So I talked to a lot of people at Amazon and I just like getting on the phone with people. Like I find them 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. And I thought, holy crap, you know, we have the same, obviously much smaller scale, but we have the same general type of opportunity. We're a quant firm. So we 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, you know, what would the product be? What would it look like? Let's go through that exercise. And we kind of poked and prodded on a couple of 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 through 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 advisors. So what we work on is software. So it's obviously client-facing, like end users. In my mind, it's client-facing. Our client are the advisors. So the people that use Canvas are themselves advisors?

Correct. So I'll make up a firm, RIA, 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 their estates and their investments. Those advisors typically today don't pick stocks themselves. They used to, well, decades ago. Then they moved to picking mutual funds, then to managers. It's evolved. But usually they outsource the function. That could mean 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 that's specific to the circumstances and preferences of the end client. Of each of your clients. Yeah, of the actual end investor, we'll call them. And that might be 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. This is awesome. It truly is an 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, right? So that much like, again, maybe Shopify is another interesting example that I've thought a lot about with merchants 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? So it's an interesting and ongoing question. I don't have a great answer to

this. I 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 Raboy, then at Kosa, now at Founders Fund, when he said all the money he had made in his 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 RIA 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 estate planning in particular. We're interested in investing. And so I think the role that we play is the right role to serve RIAs 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, you know, 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 thing you've built over the past couple years on your own and within OSAM. So your Keith or 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 kindest question, but you also ask people for book recommendations.

Have you stopped doing that or do you keep, are you still doing that? I 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, you know, a hundred 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. Ah, you should ask what, what podcasts you should listen to. So Keith's answer to the books was seven powers. And Keith was like, Hey, there's this book in the sky, Hamilton Helmer best kept secret in Silicon Valley. This is a fantastic book. And so I listened to that. I picked up the book that said to Ben, I was like, Ben, you got to read this book. And,

and we reached out to Hamilton and rest is 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 it's 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, uh, having skepticism there. Wow. I mean, just, just to pile on there. I mean, I was introduced to Hamilton through Daniel Eck.

And I think, I think that Daniel's the best strategist that I've spent personally spent time with. And he says the same thing about Hamilton. So, or something similar anyway. So, uh, that's two pretty good ringing endorsements there. I'll be it from a very similar business model, uh, in Spotify and Netflix. Well, one trying to be the other pretty quickly. Yeah. Yeah. So, uh, anyway, uh, yeah, seven powers is, is, is something I think about a lot.

It's now a whole section on the acquired show, which we're going to make you go through for Sam in a minute, but okay. So like invest like the best man, how did this happen? So you've wrote, you wrote this, 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 its timing, right? Like it started in 2016. So before this like mega boom of podcasts, you know, I think sometimes better just be earlier or have the right timing than good.

And that was definitely a component of it. I was probably one of the, one of the first couple, what I would call high end investing podcasts. And it was just lucky timing that my friend, Jeff Graham, um, who had just written a book, I think it was called Dear Chairman, which was a, a story of eight different activist 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 asked who, but we decided that we would record like an audio version of, 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 and who was a recent research friend, I'll call him at the time and a legend in the, in the research and equity investing business. And it just sort of took off. Like it was one of those things that I think had product market fit in week two and steadily has grown ever since. It turns out on the internet, like the more focused you are and the more wonky and niche you are, the bigger your audiences. Um, 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, 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 or let the past guest guide me to the next guest. And, uh, it grew organically from there. I never marketed it. I never did anything but tweet out a link to it. Um, still for the most part, although that's changed recently a little bit, uh, don't do anything extra. And that's kind of the whole boring story, to be honest, guys. Like there's not, there's not a whole lot more to it than that. I wish I should

probably start making up like, like all these founders that I should make up a much more like mythical origin story. We're walking in the woods and like, you know, yeah, it was, I just happened to be downtown one day in New York and that's where Jeff's offices were. And we recorded an episode and then the rest is history. How did you decide on seven and how did you decide I'm going to 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? Um, so I, I, you know, I asked on Twitter for somebody, I got lucky that my producer, Matthew Passy was, 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, just, I just have the conversations. That's my role. Seven weeks. I have no idea.

I probably made it up. I probably, it probably felt like enough that it wasn't a crazy commitment, but also enough that I actually had to think about, you 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, 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 10th of their length, most of them. And you can get multiple books, 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 in late 2000, at the very end of 2018. So we built it very fast. And I sort of think about it like having APIs at our, you know, at our fingertips, like we had already built so much

of the core infrastructure. So it was really just tapping 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 almost ever works. Like it, I feel like the best marketing is like a, how did this happen? Sort of

question, you know, after the fact and the podcast remains, you know, a critical marketing asset for everything I and we do, but it's never with the mind towards that. Like I'm never thinking, Ooh, 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 yes, 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 and 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 to a particular show, a particular guest that moved the needle in a big way or where you just like, we're like, Holy crap. Like this is, 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 middle eight twenties. And when it came out on Amazon, I remember checking the stupid Amazon, um, 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, he's my growth hack along with, with a few others. But yeah, I tried to, I tried to stay away from all that because again, like 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, just ignore it and trust that if I, if I'm curious, it will come across. If I'm doing something by rote, that will come across because the audience is so smart. So just, just don't do that. Yeah. At 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 has been with all its misery for so many people. We've, I've tried to take it as a, as a personal blessing as in as many ways as we can.

You know, the first of those blessings is the time I get to spend with my family now and not, I was traveling a lot for work and you know, I'm not, I'm at home. I'm sitting in my home office right now. My, 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. And that's the first blessing. The second is it just made, I think it made, it's made everyone realize the parts of what they were doing that were wasted effort or if not wasted things, they just didn't really enjoy doing. And I, 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, you have more persistence to get through hard times and so better outcomes are possible. So I kind of asked the question, like, what would the perfect alignment be between my own enjoyment and curiosity and, and, 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, is 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, and again, I think probably my legacy as a quant makes me think about everything like, what does the database schema look like for something like that? Like what is the atomic unit?

Like if I'm writing data to a knowledge database, like what is that? What does a unit of data look like? How does the database structured, you know, how is it accessed? What front end do I build on top of it? Like all these questions that I think anyone in software would understand trying to think about what I do through that same lens. And that's going to be my primary focus. Now that manifests in a couple ways. I like to be radically open with this stuff. So I'm going to publish a lot of those learnings as we go.

So we're probably going to open source that database in some, 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 cleanly with this 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 on those topics and somehow convincing them to share the lessons they've learned and just try to mimic, like be a human version of, of these companies. Like what's a good example, like a Shippo or

something, which is an API that sits on top of a bunch 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 who 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, 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 I 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 but I think that there's a 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.

To sort of paint a use case, which is like a thing that I often do as an investor when I'm hearing a 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 what format does this take that becomes really user friendly and useful. I've built and been part of products that no one wanted to use. And I don't, I try to be very allergic to that. So we'll, 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'm, when I look back at a given episode, you know, I even did it in preparation for this talk, just like looking at the episode title and saying, what lesson did that

episode contain? And it's, 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, 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, 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 and what 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 to me once, he's like, Hey, you know what you guys are, you're knowledge curators, like all the knowledge is out there.

Like this is the thing about the internet. This thing about acquired, just probably the thing about you too. Like all your guests have been on other shows. Like they've have interviews in other formats. They're on YouTube, um, 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? Yeah, there's, there, there certainly is a curation aspect, right? Like as, as the amount of information and knowledge explodes due to the internet, all of a sudden it becomes valuable to, to be able to compress that or curate it in, in a helpful way. So that's 100% the part of it, but, but part of it too, I guess is, 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 I'm just easily bored. And I've 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, I, by having a low tolerance for, for that sort of stuff, I think that's the second function. It's curation and

sort of like eking 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 and 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, and then you find something great. Yeah, exactly.

All right. Well, I have a, I have a management question on this. So you have these like multiple 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 a 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.

First, 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 I, 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, is an advantage. So that's part of it. The, 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, with my, in my relationships with other very successful people is they also have lots of other stuff that you just don't know about. So, so there's, there's a little bit of like transparency, making it seem like I'm doing more than others. When in reality, that's, it's really not the case in my experience of highly curious people who just tend to do a lot. And 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 in, in a productive way for the people that use us or something. So 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, you know, we know each other intimately well. They're all more talented in most ways, except for, you know, my talent, maybe as the scout function, they're all more talented than me in every other way. So, you know, work closely with them and I'm handing them stuff. That's part of it.

On the venture investing side, you know, I would actually argue that my trading 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 we're able to ask them about that. They look at us funny. Like they can, you can tell they've never been asked the question by 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 I'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, you know, solve problems with technology, not with people, right? So that my, my friend, Lior Avidar, the founder of Lob and now Alt, I love that answer that he gives to that question of what's a technology company. It's,

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. Well, 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, 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've got to do all the hard, you have to do the work. But 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, 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. And 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 it the right way. It benefits the companies too, right? Like you have a platform like XYZ person at XYZ firm does that and post it on the internet. It's like, okay, well, probably they would just start getting followers and traffic and fans and it 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 follow on funding. It all starts to work in this, 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 with some sort of, with some sort of expletive saying like, what the hell, like 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, or the hero. Just try to be the muse that, 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.

And so they get to as well. And then they're motivated to go apply those learnings, call that person, you know, engage with that company, whatever the case may be, whether that's as a customer, as capital, as talent, um, you know, or as a fan, like it's, it's a powerful flywheel that gets spinning and it speaks to, you know, it happens to also be a competitive advantage. Like, you know, we were going to talk about seven powers, things that are one of my favorite questions is what is hardest to replicate about any given person company thing. And good. I mean, with, I don't know how much money it would take to replicate acquired. I don't think you could do it.

You could, it's its own thing. So, and that's true of the best media properties, right? They're, they're very unique. So that comes from curiosity and authenticity. So if you ride that and let it right, 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 number, the numbers are enormous now, but the number was 571 people on the first episode, uh, for me, for me. So that's a great start. I think ours was 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, it is a nice side effect. Yeah. All right. Listeners now is a great time to thank our longtime friend of the show service. Now, if you are running a large enterprise, AI agents are likely spread across every team and deploying them is, uh, no longer the hard part.

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So 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. Should we jump into, uh, into seven powers? You tell me I'm game. I love this. I love this framework. So listeners probably to both of our shows know, 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 moat, you know, the Warren Buffett classic, uh, defensibility moat, 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 are counter positioning, scale economies, switching costs, network economies, process, power, branding, and 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 arbitraged away by competition. Yep. 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, uh, a web of businesses, and let's start with, uh, Oh, Sam to keep it simple to where do you derive power?

We're definitely going to have to extend our end time here. Cause you guys could get me going on this for a long time. You know, I'll just throw out examples. And, 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 relevant 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 high quality,

low variance outcomes. Like that's how I think about brand. Like, can you, can you just consistently deliver something really high quality so that you build trust with people, you know, trust takes time. Therefore it takes consistency. There needs to be a high minimum quality bar. Uh, I love that phrase from Toby Lutke. I think about that a lot. If 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.

And, and in many cases you can airdrop a brand. Maybe it's possible. Maybe dollar shave club did it. I think arguably that wasn't a good business. It had really low, low retention. And, um, you know, maybe wasn't, it was an amazing story in that like everyone wants a hack to like create a brand instantly. And it did, it was a good hack. Yeah. Yeah. There are exceptions or hacks, um, 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 a, is a ultimate barrier to entry for some of the highest quality brands. I love that. I hadn't thought about that brand is, uh, in, in specifically those terms of high quality, low variance and time. And you think about, of course, like we've talked about a bunch on, on our show and yours too, there's persistence in venture capital. What is that persistence due to it's, it's due to brand power of the top firms.

Well, what does that brand power do to it's due to high performance, low variance over time. Right. Um, so, so that's the first, maybe my favorite, and I know it's Hamilton's favorite too, cause he's always said that to me when we've talked about it, this counter positioning. And here, I just think it, it is that 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, uh, you know, an info at email address and nothing else. Basically the digital velvet rope, which, which I love. I'm close with a lot of these investors and, 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. I 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 going to, as an investor now, uh, say with positive sum, how am I going to beat one of these illustrious, incredible firms with track records and crazy brands and everything? It'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, 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, their attitude on this topic to say nothing of their behavior. Like they're just, they've been doing a certain thing a certain way for a long time. So, um, so that would be counter positioning. Do you think that, that OSAM 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

sort of incumbent that derives its power from what we would 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 skillset. This is a seriously complex problem that we're solving. I mean, it is, 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, there's quite a lot of like compute understanding that, that is required to make things happen fast. Like 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 maybe different business model. And their whole thing is that they're proprietary, you 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, it's an advantage sometimes to not be as fat and happy and have lived on a different business model. And so I think

we're very counter-positioned with canvas specifically against the firms that would most scare me to be competitors. Um, and, and it's a lower margin business, so I'm not worried about them. We're, we're not as up to speed on probably who those current people are in the bed, like talk about like 10 years ago, if SAC is like, we're building canvas, that would terrify you, but like, they're not going to do that because they make their money from performance, their hedge fund.

I'll use a salacious example. And SAC actually wouldn't be one of them, but 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, uh, you know, 40, 50% returns annually on their own capital. Like they're not launching a canvas competitor. Um, but they could, and it would be awesome. That's the sort of thing I mean, like the, 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 is an interesting one, which is through a program that we call research partners at OSAM, which is a very simple trade. We effectively give away our entire, uh, data library infrastructure and access to our team to independent researchers in order for them to do their own thing at their own pace, um, in whatever way they want, where the trade is we own, we own the intellectual property that gets created. For the most part, these are retired engineers, uh, people in completely different

fields. Uh, 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. Uh, not modest. Uh, Jesse Livermore is his name, although modest, a very close friend and actually, uh, next week's podcast guest. So Jesse, as he goes by is, has an engineering background of sorts, uh, 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 like months long, deep dives with our data and teaches us as he goes. And 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 cornered resource, which in your case may, may be fair because you're obviously the CEO and, and, uh, you know, major owner of the firm. But one of the things I love from the book and Hamilton's work is that people are not cornered resources. It has

to be like a, like what you're describing, like a, people are not cornered resources because somebody else can hire them. Like they're arbitrageable. It has to be non arbitrageable. And I love this, it's, it's, it's like a cornered resource plus counter positioning that you've, you've built this, uh, this practice up. I would argue, I don't know which you, maybe you guys could tell me which, where you would put this power, but the, I think of this more as just a flywheel than a power, but there's gotta be something in there. So, and, and traditionally like this flywheel would, 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, and, 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 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, that I, again, no amount of money I don't think could buy. Yeah. I've always thought about it not as a flywheel, but, uh, uh, and I think this is a Ben Thompson ism 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, uh, surmise our takeaways where if you wanted to, uh, 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, you texted this to me when it happened a couple of weeks ago of, uh, Taylor Pearson and, and Austin reef from, uh, morning brew, uh, talking about the investment business chemical office, 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, you know, um, you know, Turner Novak has done such a great job building a platform for investing on Twitter, you know, Blake 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, um, how do you think about that? Yeah. How do you think about this? You know, very often I think observations like this are benefit from hindsight and it happens to be a strategy that just has worked for a lot of people in the last five to 10 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. I love Red Bull as an example that, you know, Red Bull is just a 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 then do your version of that thing. I think it needs to just feel natural that like if you're having a strategy session about this once a week, it's probably going to suck.

Like you can't, you can't engineer your way to a good version of this. I think you just have to like 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. Like I, I type and delete a lot of stuff. I write a lot of stuff that never sees the light of day. I like 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 the 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. Diddle Google, diddle 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 is 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 entrance. And I think you've definitely seen this with your podcast. We've seen it with ours where because we had a call it four year headstart on the podcast mania and planted our flags in our,

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 to ask 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. And so I just think like, if you can just have that filter, you know, everyone was joking about these LinkedIn stories yesterday. When I, when I saw that, I was like, Ooh, like, 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. Um, and if the answer is no, you're probably onto something. I mean, that's like a perfect playbook for our discussion thus far. One thing I want to make sure we do is give it, 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 and your episodes over the years? Like as, 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 rapid fire some off to you. I'll just do that. So I'll just go down a mental list here. Um, Chathan Pudagunta 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 let the product mature because you then make a much stronger product that fits the market better and can handle the scaling.

Like one of the things that we've lived with canvas. I mean, we literally just, Chathan told us to do something and we just did it with, with canvas. And we didn't, 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. As 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. One of my all time favorite book is the systems Bible by John Gall. And one of my favorite lessons from that book is you can't just airdrop a complex system and have it work.

It's got to have evolved from a simple system. And so there's incredible wisdom in Chathan's advice to go very slow in the early days with enterprise software specifically and, and reach product maturity. That's one example. I'll never forget when I messaged Bill Gurley, Chathan's partner, and someone had raised this idea of creating a marketplace for obituary writers. And the idea was, can you, can you have obituary writers on one side and living people on the other side that commission the writers to write, you know, a really high quality, like retrospective obituary type thing on their, on their life because newspapers no longer really did this as much, um, as part of, as part of cost cutting. And I thought, wow, that's kind of, and the stories were amazing. Like

I read a couple of them that, that the person with this idea had produced and I was like, wow, like that, I would definitely buy that. And I said, I said, message, you know, Gurley is 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, um, 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. And I think he said, once you penetrate at a certain amount, the marginal supplier is not going to make the service better. And that's going to happen pretty early. So you're going to get this little bump and then a flat line. And that's not a good marketplace business. And so like, he then talks 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 Chathan's idea that, that open source as a business model is not about saving on R and 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, of the systems that let you move value through the system.

So there's no, there's not these like walled gardens. It's, it's creating like a, 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, you know, Silicon Valley is a terrible place to look for labor, but that's where everyone looks for labor that you should probably be looking in, 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 Lake's idea that, you know, the next, that legacy e-commerce, she's the CEO of Stitch Fix, 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. You know, 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, is not what the human brain is designed to process. Thinking about what a scale up looks like and getting around those corners as early as you can. There's this amazing story that a woman named Kat Cole, who was the chief operating officer for Focus Brands, which oversees Cinnabon and several other, you know, Carvel, Jamba Juice, and several other related big food brands. She told me this story about these guys. She was a Hooters waitress as 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. And 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, and from then on, they tipped well, they thanked her, you know, she, 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 challenging people by going right back at them is incredibly

powerful. I could probably do like a whole nother segment on everything Sarah Tavill has taught me. I mean, like everything she puts out is like a, a toolkit 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 going to 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 go to zero. Let's jump the line. So I think jumping the line on these directional arrows of progress is a really interesting way to generate business ideas. And in many ways, that's what we're trying to do with Canvas.

We've learned so much from covering China tech, well, Chinese companies period, but China tech on acquired. And that's one thing that really strikes me as a difference about the Chinese startup tech 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 is it going to end up? That's not as common here in the West, but should be. When you meet these people, I'm choosing one just for, I realized that wasn't brief, but, but like trying to just distill something down, you know, there's 10 of those per person often.

So, I mean, that's the most fun part of this whole thing is 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. Well, Patrick, I teed you up earlier to tell us about a new podcast laying on us. Yeah. So starting, I guess it will have already come out when, when this comes out on Thursdays, it'll be on the same feed as, as the invest like the best podcast, but we're, we'll call it like a mini series or a sub series, which is going to be called founders field guide. So from, 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, it'll often be a founder. What is, 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, 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, that we could take away for other people and, and trying to, again, like draw the lines between concepts and, and, and industries and, and ways of building things that are valuable to people. So we're really excited about that. It'll be every Thursday. Um, and then who knows where we go from there? I think we'll, we'll, we'll end up publishing a lot of audio content in a variety of different ways as we, as we do this learning process ever more transparently and in public.

That's awesome. Can't wait to listen. Well, let's move to grading as acquired listeners. No, well, Hey, 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, on how it's gone for situations that are still fluid. We predict, uh, scenarios in the future and paint the a plus versus the F scenarios five, 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 tenure over the last couple of years as OSAM CEO and what you've done, you know, how would, uh, 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. It'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 in a 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 longterm. So I think, you know, we're in a position now that we can benefit from technology versus being disrupted by it. And therefore there's, there's some points for that, but as with everything, it's all about execution and we're in the very early

days. So, 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. Um, I think that's hard to do. And, 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, uh, how many engineers do you guys have? So it's, um, I'm like ashamed 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, uh, 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 going to 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 how, what's the sort of scaling factor on that?

Yeah. So, uh, it's incredibly simple pricing, um, which I think people like it's dynamic. So it depends on the settings you choose. And 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 prorated 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. Um, 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, is lower than

what a lot of long only asset managers would charge. So it's, it's dependent on the settings you choose. Um, we don't charge for extras, you know, like everything is included in one, uh, asset based price. Clients have really liked that because it puts them in the driver's seat of if, if, if fee is a really important variable to them that it's under their control and, and we're a platform that fulfills that we don't dictate the terms so they can decide themselves. And that's worked really nicely. And, and in terms of scale, you know, again, we talked about this earlier.

The reason there's no performance fee in this is if 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, and in many cases it would be a, it would be a crap ton of work, but in many cases, you know, we would still end up owning a modest amount of these huge public companies, um, and, and hopefully not affecting their prices. So, so it scales extremely well to very large numbers and that's how we think about it. Cool. All right. So the future, what'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 half scenario?

Um, well, you know, I guess the F scenario is the easiest one to think about, right? That everything just stops working and we've, you know, the, the software fails or, or there's large errors or, you know, uh, technical problems or team problems or whatever. And others just do a better job than we do. Again, everything's execution. So the 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 infirmed 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 any more 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's that, that F scenario is not going to happen. That would be F. A 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 10 year goals. Personally, for me, they're wrong and dangerous. I'm much better at 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 to, 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? And that's always very present and near term and, and, and objective. And that's about as far of a goal as I'll set or, or, or try to reach. Uh, the rest is more about principles. And we've talked about all those things already. So public learning and clear value delivery, uh, customization for investors, a technology, flexible technology, chassis and platform. Um, 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 kindest thing that anyone has ever done for you? So it's so hard to answer. I've, I've done this a few times where I've been asked the question and I've 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 early in their lives that, or something, you know, family support. I love those answers.

Like whenever someone mentions some, you know, big wig making a huge bet on a 20 something year old, uh, with no real evidence of prior success, that just, that makes me feel really good. And that happened to me, God, so many times. The true answer is something my cousin did for me, which people can listen to in other podcasts. Um, he introduced me to my wife and my best man and several others in, 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 resulted. So I'm extremely

thankful to him. Uh, his name 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, uh, they're the real answers, but they're kind of boring. I've given them before. So I'll come up with, with a unique one that's business related. So actually we referenced it earlier and then we didn't circle back. And so I'll close the loop. So this has to do with the Royal bank of Canada. So when I was 20, let's see 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. Um, we manage money for everyday Canadian

citizens, right? Through mutual funds. And 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 that, so what happened was I was sent around all over Canada. We had all hands on deck and, and I was, 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. Um, and you're like 23 at this time. I was 23. Uh, 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, 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 this group that I traveled with from the Royal bank. Um, I'll do a special call out to a gentleman named Bill Hill. Um, 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, uh, explaining performance of this magnitude at this scale to a whole country at the time. I was legitimately scared.

Like I, I 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 an ordeal. 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, I forgot the quote in, 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 and learning a lot in a very compressed period of time because of that pressure. So, um, he didn't have to do that. He took a big risk by doing it. He, I could have sucked for all he knew. And thankfully I didn't, but I grew up a lot in that, you know, in that short period of time. And so I'm, I remain very thankful to Bill and the whole RBC team for, for kind of holding my hand through that process.

I can't imagine getting 50 presentations about, about that, uh, to rooms of 50 to a hundred people. You're a better, better person for it. I'm sure. Indeed. Yeah. Everything after that was, was, uh, was a little, a little more straightforward, but it was good, a 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 am, um, 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 is just hyper curious. And, and the episodes are as good or better than the main ones to say nothing of all the other stuff that, 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, um, that have done the same cause I've, I've sent them there and I would just encourage everyone listening to check it out. It's not a, 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, uh, you, 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 LeBron assist there. It is amazing. I believe, I believe in the LP. Oh, thanks Patrick. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig. Yes. Long time acquired partner. There is a reason why the best product teams at companies like OpenAI and Notion, Atlassian, Figma, Rippling, Brex, and more rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale.

Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next. Whether it's a feature tweak, a pricing change, a performance improvement, or an AI update like a model change or prompt adjustment, they're not relying on instinct.

They're measuring what actually moved engagement, retention, and ultimately revenue. And as more teams build with AI, that learning loop becomes even more important. Building with LLMs introduces non-determinism into your product experience. The same input doesn't always produce the same output, and behavior can shift in subtle ways in real world use. So doing offline evals will give you part of the picture, but you can really only understand the impact once your product is live with real users, and then you can measure how their behavior actually changes.

It's very different than the way that you would ship features in a pre-AI world where you knew exactly what the software was going to do in production. Yeah, exactly. So this is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. The result is a tighter feedback loop and learning that compounds over time so you don't just ship more, you ship better.

So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. Well, 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 percentage 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 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 Malbison, 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 listened, 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. Bye.