Raif Ali Dinçkök Student Forum at the Mehrotra Institute - Fireside Chat with Alex Sacerdote

0:00 One Alex is the founder, CEO, and portfolio manager of Whale Rock Capital Management, a Boston-based $10 billion global equity manager. I'm sorry about that. Uh focused on the technology, media, and telecom, also known as TMT space. Um Whale Rock invests in public and late-stage private investments and manages long-short, long-only, and hybrid equity strategies. Prior to founding Whale Rock in 2006, Alex was with Fidelity Investments um between the years of 1999 to 2006 as an equity analyst and sector portfolio manager, primarily focused on on TMT. Uh Alex received his MBA from HBS in 1999 and earned his BA from Hamilton College in 1994. Alex currently serves on the Board of Trustees and Investment Committee of Hamilton College and the Board of Trustees at the Steppingstone Foundation. Again, thank you so much for being here. Uh looking forward to learning a little bit more.

0:54 >> Gosh, is this video? >> Uh I think we both have mics. >> are thanks. Thank you, Greg, for that introduction. And Alex, thank you for being here. Um we have a lot to cover, so I want to dive right in. I want to take you back to your childhood. You grew up in New York City and your father was a long-time partner at Goldman Sachs. And when you were in the second grade, you wrote a report about the video game console market, which is relatively early for a lot of us here.

1:16 Can you tell us a bit about your upbringing and how your father shaped your early interest in finance? >> Um yeah, first of all, it's a super honor to be here. Um this fantastic organization, fantastic school, and thank all of you guys for for uh your interest. And uh I know you're very busy and um it's it's an honor to to get to be here and speak to you guys. Um yeah, I I grew up in New York City. I was kind of from a finance family. Um and so there was always a lot of, you know, talk about the stock market and stuff like that. I think uh I remember in second grade we had to do a report and at that point, Coleco Vision was the uh biggest console out there. And it was the the first time you could actually make charts of tickers, and I was able to do that, and it was you know, it was interesting to see what, you know, the popularity of this one console, you know, exploded and drove the stock, and that sort of semi-ignited my mind. And then, I remember early on, kind of uh Apple computer, this is before the iPhone, the iPod, or anything, when Apple computer PC came out, and uh you know, I had a I was able to buy like a couple shares of that, and then they the stock split, and that was so exciting. So, just growing up in New York, there's, you know, that was the primary industry, and uh you know, my father was an investor, and he he was also in corporate finance, so just hearing stories about that, you know, growing up. So, it was something I always thought I would be interested. I actually, during college and high school, I was I was very more interested in current events. I read, you know, read the New York Times every day from very early age. Was actually a political science government major at Hamilton College.

3:12 I spent a semester in Washington. I was like a young Republican. Um and uh and then I kind of sometimes internships are really good for knowing what you don't want to do. Um and so, I felt like uh that wasn't totally right for me, and also sort of the party was shifting in in ways that we all can see now that wasn't exactly what I wanted to do. Um so, then along the way, um I I did an internship at an investment manager in San Francisco.

3:51 Um and I did uh I did one actually at Goldman Sachs. And uh and then I really the thing to do out of college was investment banking. And you know, cuz that's where they hire the most people. And I um uh I worked at Smith Barney, which was sort of a mid-tier upper mid-tier bank. There's, you know, the bulge bracket. They were one level down. I worked in their TMT group. The tech group. And that's another important lesson I had is is sort of um you got the job, but then what group are you going to get into? And so, picking, you know, your industry and picking what you're going to be interested in um and picking what's going to be a growth industry is also important.

4:40 Actually, another side bar to that is I was also interested in journalism. And um you know, it you could kind of see that that was going to be a tougher a tougher career. And also, what do you value? I you know, I I think I always I you know, I was commercial and felt like also it's kind of a important It's nice if you can go to a career that that can be more lucrative. So, anyway, I went into finance.

5:08 Um Smith Barney and banking is an incredible boot camp. I mean, you do the 90-hour work weeks. It was pretty brutal. Um but you know, I was going on these road shows, taking companies public. You're the you know, you're the lackey carrying the bags. You got to pay your dues, but um you you know, you you go on the plane with the management team. You come up to Boston. And at that point, Boston was really the powerhouse of the buy side.

5:37 It was Fidelity, Wellington, Putnam. There were no hedge funds. The only hedge fund was Tiger. Not Tiger Global, Tiger original. And there were no Tiger Cubs. There was no SAC. There was no pods. There was no Citadel. It was basically the buy side, and Fidelity was the king of the buy side. And actually, Louis Salemi was here. I don't know if you have him as He He was When I went to Fidelity, he was a co-worker. Or he he Yeah, he was a PM there, but anyway, I recommend you guys take his class.

6:08 He He has to teach a class right now. Um but, you know, you're going around, and you spend three or four months working on this one IPO. Uh but then, you go walk into Fidelity, and there's a kid on the other side of the table who is basically knows the industry cold. He's asking the CEO all kinds of hard questions. And I spent 3 months on this company doing all the stuff, and I didn't really have to You know, you're just doing rote tasks, whereas that kid was like, he knew everything. He was asking the tough questions. He had had to Should we invest or not? And I was like, I want to do that. That is, you know, so it's important, um in career choices, to and you know, know what you're good at, know what what you can thrive in.

6:54 Um there's a lot of aspects of banking, um that are excellent as well, but I I I was always more of a sort of a thinker, a little more intellectual, very curious about how things in the world come together. And uh I felt pretty confident that that was more of what I wanted to do. So, I applied to business school. I got a sum I got a uh deferred it for a year, and worked for an internet advertising startup in New York City called Interactive Imaginations. It was one division was making online games for the internet. This is '97. So, like, internet year two.

7:37 And the other division was an internet advertising network. It was one of the first internet ad networks um around putting banners up on different sites. I was like VP of finance there and and that, you know, I was making good money as a banker. Um and and I was like what what should I do for for this year and and I took a huge uh pay cut to be like the VP of finance just to learn about the internet and that kind of changed my life, too, because um it really opened my eyes up to like the growth potential that's out there and I'd also been a little bit more of a regular value investor and just seeing the growth that was happening and what was getting unlocked from the internet was was amazing. And so, but I did know I wanted to get to the buy side. And so, I got into business school and another thing that changed my life is I got the summer internship at Fidelity.

8:40 And um I was like a kid in a candy store and they assigned there were like eight or nine of us and they assigned um uh the in the industries out and you know, one kid did furniture, another kid did auto parts, another kid did investment managers. And um they're like, "You cover the internet. There's this So, there's this new sector called e-commerce and our current analyst thinks Amazon's probably like a fraud, it's not making any money. So, why don't you cover Amazon and the other seven e-commerce companies?

9:18 Egghead.com, CDNow, Preview Travel, three uh three or four others, software.com. And um and then I got there and in the first two weeks Amazon went up 70% before I could get a rating on it. And um but I I scoured the country. I went to Amazon, visited them in um Seattle. And uh at their first investor days, had lunch in a small group with Jeff Bezos. And I basically figured out that this company that was just selling books that most people thought would get crushed by Barnes & Noble's um that was losing, you know, 40% operating margins, but growing really fast that that their business model was actually highly attractive and they were going to just add sector after sector and they were building the uh infrastructure.

10:16 And so you have to do an industry review at the end of your summer, you know, about this many people came. I'd never done public speaking. I was terrified, but I wrote this incredible report saying, "We got to buy Amazon and short everything else." And um that just got me totally hooked on investing and growth investing and tech investing. And in some ways that was the peak of my career, but I kind of thought it couldn't be the peak because you had this new sector that I knew a lot about.

10:47 And then in two or three years everybody else would know it and the world wouldn't really change that much. But tech has just been this amazing gift that just we call them S-curves, big trend after trend after trend and each of these trends from the PC to internet 1.0 to mobile to cloud and now to AI just creates this powerful, dramatic growth and change and newness that if you can learn about it, you can um you know, find it it it creates powerful growth, powerful disruption and and the ability to to find good stocks. And so that's kind of what I've devoted my career to doing and I spent 6 years at Fidelity.

11:41 It was a phenomenal place to learn. You get to meet with tons of tons of companies. There's so many brilliant investors. Will Danoff, I guess was here a couple years ago. He's one of their best. Peter Lynch who lives around the corner down there. Um he was retired but he would mentor younger kids and um you get access to the CEOs of all these companies. They give you a credit card, a computer and um anyway, so yeah, and so after I did 6 years of that and I ran money for four of those six and I was I produced very strong alpha in all four of the years that I ran money and and decided that Fidelity's great but they're training you to be a diversified PM. The big job there is to run Magellan which is against the S&P.

12:34 I I thought I was really good in tech and um and just I didn't even I knew tech would be good but I had no idea what was going to be ahead. So in '06 I started Well Rock which was before the iPhone was even started. Um so I just took a long time. You just covered my first three questions. I took a long time. >> But I want to take you back to your time at Fidelity.

12:57 >> Yeah. >> Um like you mentioned you were surrounded by some of the best investors in the world. Peter Lynch, Will Danoff, Louis Celemi who was just here. Um what role did mentorship play for you early in your career? >> Um Fidelity's a really um yeah, it's a really individualistic culture at least when I was there. So everybody had their own styles and you were an analyst um and yeah and a big part of the job also was, you know, you got to be an analyst but you have to communicate. Um And you know have to know how to present, and you had to market your ideas. Um Cuz there's like 40 PMs, and and you have to get time with them, get your stocks into the into the portfolio. Um So, there was a lot of communication.

13:43 But you And then you also learn by watching. Uh you learn by uh watching how does Danoff ask questions in a meeting? How does he pick stocks? What is he looking for? Um and then, you know, Peter Lynch would would sit down you'd have a one-on-one with him, and he'd he'd ask you all about his stocks, and then he'd just have story after story after story. And you read about his career and what he did, and I mean, he was so brilliant.

14:09 He had a photographic memory, a flexible quick thinker, but he worked his tail off. He he uh uh and he was so efficient with his time. He had a egg timer in his office. You go in, he turns the egg timer over, and you have, you know, 2 minutes to tell your story. But also, he would he would drive to work every day, including Saturdays, with a driver, but he would get carsick in so he got a flashlight so he could read reports. Um So, anyway, that was good. But they're all And you learned all different ways of skinning a cat and investing.

14:46 Um but it was it was just a a wonderful kind of environment. >> So, you went on to found We Rock at 106 along with your father. Um I believe it's called the Alex and Peter show early in the early days. What inspired you to go out on your own? What drew you to us a tech sector in particular? >> Yeah. Um Yeah, like I kind of mentioned, I mean, I think uh Fidelity was excellent. Um but um you know, I wanted to focus my career purely in tech because I I just I thought I was good at it. I I knew there was a huge digital wave ahead of us and frankly it was much bigger than I ever would have thought. And um I also thought it would it was good to short because so many times you'd be, you know, researching a stock and you're like, "Oh my god, they're totally screwed." And you can't uh benefit from that. So, the long short format's very good for tech.

15:44 Um so I just I saw a much better path there. And um you know, I'm super lucky. I was uh my father was a successful guy and he was going to be the first call for uh to put in some money and he said, "You know, I've been at Goldman for 40 years. Why don't I I become your chairman and uh you run the team and run the money out of Boston. You build the team and then I'll be the I'll help you raise money and I'll be the sort of gray hair oversight out of New York." And so, it was a great partnership for uh unfortunately only 6 years. He passed away in 2011.

16:23 Um at the age of 73 from cancer, but we it was just a wonderful time. And we, you know, we we had some tough times, but we never raised our voice or anything. Um so, he was just a And when he when he passed away, he he had a massive uh service and I got so many letters from people who worked with him that said he was just such a wonderful mentor. So, if I can be half the mentor that he was, um I'd be uh doing well. And he was just a he's whip smart, gentleman, Cornell electrical engineer, um super humility.

17:01 Um and that kind of old school kind of super smart banker, but not all bankers are good investors, but he was good investor, too. >> He seems like an incredibly human being. >> Yeah. >> Alex, um you're famous for your three-part framework: S-curves, competitive advantages, and underappreciated earnings power. Can you walk us through how those three lenses work together in practice? >> Yeah, thank you. So, at Fidelity, before Fidelity, when I was at the internet company, um you know, and and looking back to history, you know, you you saw these major wealth creating uh companies, particularly in technology, and if you looked at the Forbes 400, it was lined with, you know, tech wealth create, you know, the all the Forbes 400 or whatever, it's it's all from technology, there's so much. And so, how do you how do we capture that? How do we find the next Microsoft? How do we find the next Dell, the next Nokia, the next micros, you know, from those times? And they all have three things in common. And this framework is simple, uh but it's hard to kind of execute.

18:15 You know, Arnold Palmer said, "Golf is simple, but it's exceedingly, you know, complex to execute." But So, there's three things. The first is you want to be exposed to a very powerful trend, a theme, or a product cycle. And um and this can be a mega trend, a mini trend, but all technology follows the S curve of adoption, where you start slow. The internet was out for 20 years before Netscape came out. Okay, you know, it was all mainframes, you had to dial up, you had to be like little 10-year-old Bill Gates like hooking up to the modem. So, there were so many barriers to adoption, and then the browser comes out, and all of us could use the internet just like that. And so, it unlocks, and it goes from, you know, you're pushing that product, all of a sudden the whole world realizes what it can do, and how they can use it, and that ignites a massive adoption curve.

19:12 And I think when I was doing Amazon at that point, there were like 100 million internet users in the whole world, 100 million. And um there were 2 million e-commerce users. And part of it was like this is so just e-commerce, even if the internet didn't grow, you were going to grow from 2 million to to 50. And that's how I feel about AI now. Like AI, Claude has uh 15 million daily active users.

19:44 Just 15 million. And people use Claude are the ones using it for work. Like that's 20 basis points of the knowledge workers in the world. And what's that going to do? I mean, that 50 bit and then anyway. So, you look for a powerful trend or theme and you match it to the And you And the S-curve is how big is the market going to be? And then how fast is it going to be adopted? And that gives you a map into the future. So, not only when you get to that takeoff stage, does it create the fastest unit growth in the world, exponential, you know, 2% to 5% to 12% to 30%?

20:22 Um it also can be predictable. And Warren Buffett hates tech investing cuz it's so unpredictable. I don't know I know Wrigley's gum we're going to chew it for 100 years, but I don't know uh but an S-curve does give you a map into the next 5 years if you're can understand it. And And um so, like with smartphones, it's like you know, there are a billion feature phones sold each year and there are only 2 million smartphones sold each year.

20:51 So, and then you kind of predict the pace and then if you can go out, then you can predict Apple what they might be able to earn, what's their market share going to be. So, we're looking for these S-curves. And they can be mega, minor. It can be what's the kind of screen that's in the iPhone. It goes from LCD to OLED, so that's another S curve. Or flat panel or e-commerce penetration in Japan. We invested in a Japan apparel retailer online called What was it called? Um it'll come to me.

21:24 But anyway, so we look at these all over the world, sub S curves major and then okay, once you find a great S curve, who are the companies in that ecosystem that have an incredible competitive advantage? Cuz you can have the best S curve in the world, but if you don't have an airtight competitive advantage, you're going to be a zero. So in smartphone land, if your name wasn't Apple or Qualcomm, if you were your name was RIM, Palm, Nokia, HTC, Motorola, Ericsson, you were a zero in the biggest bull market of anything. But if you were Apple and you had brand as a moat, ecosystem as a moat, scale and cost as a moat, you you can take those units and convert them to profit per share.

22:15 So, um and that's the third thing. So, S curve, moat, and then don't just invest blindly when you find the leader, and invest when we model out what the earnings can do. And when you get the first two things right, the earnings don't go from a dollar to a dollar 25 to a dollar 50. That's nice. But they go from a dollar to $10. And very few people look beyond the next quarter, especially now. They it's hard for people to model out.

22:47 Everyone models the next year, but it's hard to model the year after, much less 3 years out. And so if you get good at doing that, you can buy amazing companies for ridiculously low PE ratios. So, when we bought Nvidia and I'm going to cherry-pick all our best stories. When we bought Nvidia in 2023 when when that S curve started unlocking cuz chat GPT happened in November 2022 we were paying four times the earnings they're going to do this year.

23:24 And we actually did it with Tesla. The EV S curve um in 2019 2020, we were the largest hedge fund buyer of Tesla. Everyone thought it was a short, but we thought it was four times earnings because we thought they could do 2 million cars with a 28% gross margin. We knew what the op ex was. We're only So, it goes up 100% was oh, it's still seven times earnings. And then say and and so yeah, and then if you get too expensive if you have your earnings number like four or five years out and then it's still expensive on that, then you you get away and you sell.

24:00 So, it's find a very powerful trend map, understand the S curve look in that whole ecosystem for companies with really strong competitive advantages. And then lastly, model out what you think they can earn. And if and very often they can be cheap on the two three year out number. Um >> And so, when you're assessing durable competitive advantages, are there any common frameworks you tend to gravitate towards? >> Yeah. So, what's great about tech like in earlier generations, people thought tech was very too fluid and changing all the time that nobody had a good competitive advantage.

24:42 But what we've seen is tech has some of the best competitive advantages in the whole economy. Because if you can become the operating system um if you're Microsoft or you can become Oracle, the industry standard database that all the other software is written to and all the database analysts know how to use it. There's versions of Oracle open source that are free. But they don't have the ecosystem. It's the they don't no one knows how to use it.

25:12 It's not the automatic thing you use. So there's you can have an ecosystem advantage. Tech also can move quickly with the internet. Amazon got big fast. What took Walmart, you know, 30 years to build scale, Amazon could build that scale in in two or three years. And so you can have a scale advantage is one of the classic competitive advantages. You're bigger, you can invest more. Um or you might just have critical intellectual property. Like Qualcomm owned the patents on 3G, 4G, and 5G. You couldn't make a phone without paying them cuz they had that intellectual property. Right now ASML, which you may have heard of, is the most important uh lithography. Uh they make the laser that prints the chip.

25:59 That was like the Manhattan Project to develop that. Nobody in the world can do that except for them. So that's critical intellectual property. TSMC know I mean it's extremely hard to put all these uh things together to make the chips. So there's some really awesome competitive advantages um in the tech world. And um yeah, doing a ton of work in assessing them and then seeing them emerge over time and you know, we I was actually doing a class at HBS yesterday and we were talking about Anthropic and and sort of being able to see the competitive advantages a little bit before the rest of the world cuz a lot of time, you know, a lot of people didn't see the competitive advantages of Amazon when they were a $2 billion book retailer.

26:49 Um so to to try and understand those. Yeah. >> And every year We're up gives out an award for excellence technology management. How important are management teams in your framework and what are the characteristics you look for in a super leader? >> Yeah, thank you for that. Good question. So, our framework was always these three tenants and people would ask us um well, what about management? And um and and management was always sort of a little bit it was always in the subtext and it takes a great manager to get into that position.

27:26 Um but we later we added a fourth tenant which is, you know, excellent management and and so in this case it's these um it's a combination of being um vis technology visionary and seeing how the world's going to unfold and identifying um a place with in that and then it's being a talent magnet you know, somebody that can attract and and and bring amazing people to the company.

28:00 And then it's rapid uh innovation and execution. And some companies are just so much faster. So, like Tobi Lütke at Shopify, you know, that guy he saw it, he's an incredible talent magnet and he that they move faster than anybody around. Um and and so, you know, if you're yeah, and then it's also important to like if a company is dominating one S curve, if you know they have great management uh maybe they have a good chance to like nail another one. And in the you know, 20 years ago people said, oh almost nobody was able to make the the jump from one product to the next. But like Tencent for example, now they're sort of a little bit of a legacy company, but they dominated China internet. They started out with just chat.

28:53 And then they went from chat um to they became the Visa PayPal of China. They also became the leading online video game of China. They became the Facebook of China. And cuz they had an incredible management and culture to to execute on the next thing after the next thing. Elon, obviously, has a lot of uh power. And then, you know, Bezos is incredible, right? Cuz he did online retail, one of the biggest S curves, and then he followed it up with AWS. And um that's totally attributable attributable to the management team.

29:31 Uh You know, then you and the culture. >> Sorry. And are there any management teams and leaders out there today that are especially underrated? >> Uh that's a good that's a good question. Um I mean, now people really get uh yeah, that's a good question. I think I we're really excited about Anthropic. And I think Dario from Anthropic is will go down as as sort of uh I I mean, I call the guy God or Jesus cuz he's like literally unlocking the fire of AI for the world. But and but he's a truth-teller, and everything he said that he's predicted is coming true. And he also, you know, he left OpenAI because he was disappointed. He brought his team. And you know how there's all these talent wars, where people are picking off people for 20 million or 100 million, and nobody's been able to pick off anybody from Anthropic. And so they've out of against many odds, they emerged as the dominant and best model.

30:44 And uh now they have the most explosive revenue and they're iterating at incredible pace and speed because their team and he had the right strategy of going after the enterprise and going after code. Um and now they're going to use the code AI to to train to train and build the model and and um any any uh yeah, any's got his principles whether you know, sometimes they're too much like as a shareholder like getting a fight with the DOD. But um but he's got his principles and that's that's important. So um yeah, I think he I would call him underrated. That's the one that comes to the name. Comes to the top of the top of my >> Any thoughts on Elon?

31:29 >> I mean Elon's incredible. Yeah, he's he's uh utterly incredible. Yeah, I mean what he did with Tesla. I mean he and and you know, the way he works and the and the way he um Tesla to SpaceX to um Yeah, you name it. I mean yeah, I think yeah, he's he's been he's been unbelievable and what he hopefully he can do it with robots. Um but you know, sometimes he he predicts things. Um it's always around the corner.

32:04 But it takes 10 years to do, you know, so um Tesla the stock flatline for 12 10 years until 2019 when they finally got the $40 $40,000 car out. And uh yeah. >> All right. So, tech is known to be brutally competitive and volatile. How do you conduct your research to keep conviction in the longer-term trend in short-term volatility? >> Yeah, that's really hard. And by the way, my colleague Sid Misra's here. So, you can talk to him after, but he he does uh software and other and Andrew and stuff like that for us.

32:43 Um what's hard is is you have these really amazing themes, but they're based on growth and um and they're also very secular. So, really no matter what happens to the economy, it's going to play out. However, uh they're they can be high multiple, particularly on the next 1 or 2 years. And, you know, uh even if there's a recession, you know, the tech stocks are going to get crushed. So, we have to live with and learn how to deal with volatility.

33:17 And um and to some extent we try and uh dampen that by having longs and shorts, but it's still, you know, we have to live with the tech is the most volatile sector, and we're in the growth end of that sector with some of the highest growth names. And so, we have a very high beta. And so, um yeah, we've had we've had some hard periods. I mean, in in in 2008, which was almost a depression, you know, our fund was down 35%. It was our third third year and uh um and then 2022 was really tough. And and then recently with Trump, his second when he did the tariff thing, um you know, we had all this conviction in AI, but then he was going to tank the global economy, and our fund was down, and we Sometimes you you sort of take off risk at the wrong time, and sometimes you you have the guts to to hold through it.

34:24 This time we knew and then, you know, very recently with his Iran thing, I I we're having a good good year cuz we're in the right AI stocks, but we were having a great year and then we lost 10 points in a in a matter of 1 month. Uh but this time we stuck we held through and in the last 2 days we've gotten like half of that back or more. Um so anyway, you have to have conviction in your ideas and then even when you have conviction your ideas, sometimes it can be painful.

34:54 Um but the biggest is having convictions in in the the company the S if we we find when we really understand an S curve and really understand the leaders and there is that valuation support at least 2 or 3 years out. Like when we have that right, we maintain our conviction and that's where we make most of our money. >> And what does your research process look like? >> Yeah. So we call it the Whale Rock Learning Machine and I it's me and nine or 10 analysts.

35:25 And um we do as many and I learned this at Fidelity. Um turn Peter Lynch would call it turning over rocks. Danoff would say meetings. We have a a cup plastic cups and we say I love meetings. We do 2,500 face-to-face meetings with management teams. We go to industry trade shows. The Nvidia GTC, the optical fiber conference. Said, what what are some of the ones you've been to lately? RSA's internet security conference. So we go to these trade shows, we talk to as many customers as we can. Um we meet with management teams here in Boston. We go to conferences to meet with them. We go to trade shows. We do Zoom calls. So even if it's a company you you won't think you're going to invest in, you can learn so much about what the industry structure is, who they compete with.

36:19 Peter Lynch always said, you know, ask about the competitors and like if they say something somewhat nice about one, you know that's a really good one. Um and so and then and then through these meetings trends will fall out of them and we'll understand and we say, "Oh my god, every company we talked to is moving to the cloud." And that was before cloud was even a big thing. Um or all the all the private companies are moving in the cloud. It's only a matter of time for when the So uh so we do tons and then we and then we have overarching themes that we think may or may not play out with AI. When ChatGPT came out, we like coalesced and said, "Holy this thing is huge." And and we put, you know, four of us did 24/7 AI and um and then we have our note system, we have our Slack system.

37:14 And then we also do, you know, PowerPoints um from time to time on our deep names. Then you get an idea. Um you do a one or two page page or sometimes we'll know the company, we can buy a little position. Then you do a simple model, then the model goes to a a much deeper model. We'll have called the company, we'll have talked to five or six competitors, we'll do channel checks and then, you know, we'll do our own work on the S-curve trying to understand it.

37:44 And then from there conviction can build. Or we can and >> So in 2013 you pitched SoftBank at JP Morgan's Robinhood conference highlighting its stake in Alibaba. And I think you touched upon this a bit earlier, but how important are these cross-border insights in your process? >> Yeah, I mean um especially in the internet um cross-border was huge because you could see it happen in the US and then you could play the various S-curves as they played out around the world. And so one of the biggest ones was seeing what happened in the US and then China, at one point in that in the 20 Was that 20 What year was that?

38:27 >> I think it was 2013. >> Yeah. Um we had a lot of our portfolio in China because China was just new to the internet, and um they basically kept the Americans out. So, they had all these local companies that were dominating, so that was a pure play. And at that point, the country loved their entrepreneurs, and they were more capitalist than the US was. And the the government was wanting people to make money, and they wanted to build this industry, and they had some of the best entrepreneurs in the world. And and you had the consumer economy in China going bananas with the internet kicker on top. And then you also had this uh fact of the leapfrog, where they didn't have professional retail. They didn't have Walmart. They didn't have Home Depot.

39:14 They didn't have Barnes & Noble. So, so e-commerce grew much, much faster, and it was a pure S-curve. And at that point, we hadn't done privates, and so the best way to buy Alibaba was through the SoftBank position. And it's pretty funny that SoftBank, you know, they've been right there with all these S-curves cuz internet 1.0, uh SoftBank made a ton and then lost 98% of their value when internet 1.0 crashed. And then he made it up catching Alibaba.

39:49 And he made a fortune, and then I think Baba crashed. Um and now he's showing up at the internet, and so let's hope he's not going to crash that or at the AI. I hope he's not going to crash that for us, but he's a visionary, too. But it it shows you about the volatility of the tech can have. >> So, SoftBank made headlines this week again, as you mentioned, with OpenAI, and I believe you are an investor there, too. How are you thinking about artificial intelligence at WeRock, and where do you see value accruing in the stack?

40:20 >> Yeah, good question. Um I mean, we're very bullish on on AI. I mean, I think that's seems like an easy statement, but although I will say it so many people on Wall Street are are super skeptical about AI. And so that's that's an advantage. Um but um so when AI hit um and ChatGPT came out, we were we correctly identified this was huge. It's the Netscape moment. It's the iPhone moment. And when you have a new computing paradigm a new stack emerges. So there's a stack for the mainframe.

41:01 Um there's a stack for the client-server market. There's a a stack for the cloud computing market and the mobile market. And then there's a a new stack for AI. And and and and usually um you know, at the bottom is the infrastructure and the chips and that and the physical infrastructure usually comes first. Like in the internet, you needed to wire the world for that. On mobile, you need the hardware, the handset first and the applications come later.

41:31 And that's same true. So we the first thing we did is what's the stack and it's chips and and and the semi-cap equipment at the bottom. And there's so many layers within the chips networking chips, GPUs, CPUs. And then then there's sort of the delivery layer like the clouds and the neo clouds. Then there's the models the foundational models. And then there's maybe another layer of some kind of new software infrastructure. And then above that is the applications.

42:04 And the applications can be written made by incumbent software companies like Microsoft or CRM or startup software companies like Sierra or open evidence or Harvey the law company. Or they can be from internet companies like Google or meta or perplexity as a startup. So, in the last 3 years we're like chips chips chips. We don't know who's going to win above, but we know they're going to need tons of compute. So, that's the first part of the S curve to inflect.

42:39 And we also we don't know the competitive dynamics and the moats that the other companies above might have, but we do know the moat of Nvidia. And we did know the moat of Advantest, which tests every Nvidia chip that comes off the line. We do know the note the moat of Broadcom, which makes all the networking chips and also makes the Google TPU chips. Um so, we've invested heavily there and we think that's still a really good place to invest.

43:10 But then and then at the foundational model company, you know, a year or two or three ago, people weren't sure. We weren't sure. Would it get totally commoditized? Would there be 20 foundational models that are all the same that everybody can use so nobody can get any pricing? Or would it be one model company takes off and wins the world? Or would it be like an oligopoly where kind of like the cloud now where there's AWS, Azure, and GCP?

43:42 And sort of over the last two and a half years, we started to real believe that it would be an oligopoly at the foundational model layer and that almost all the AI companies above would be buying tokens um from these three companies, which now we believe are Gemini, OpenAI, and Anthropic. And then Elon has Grok. If it wasn't Elon, that company would be dead, but it's Elon, so we'll give it we'll give it a chance. Um So we we And then in addition And then in addition to Open AI being a foundational model, they also were the leading consumer application for AI. So they have 90% of the consumer market. So Uh a year ago we invested almost exactly a year ago we invested in Open AI at the $300 billion valuation.

44:41 We're lucky. Well, we look smart, but we'll see what happens. Cuz they just closed a round at 850. So we'll see. We're a little nervous about Open AI right now. Um because Anthropic is doing so well. And Anthropic decided to focus on the enterprise market and and focus on code. Whereas Open AI was focusing on, "Hey, let's let's make a hardware device. Hey, let's do advertising. Hey, let's do consumer agentic commerce. Let's They were Let's make Sora. Let's make these video things."

45:21 And they didn't focus enough on what's actually going to be the bigger market, which is enterprise AI and coding and really replacing human labor uh versus, you know, doing TikTok stuff. And um it cuz how much is a consumer going to pay you for AI? Um Um whereas if you're writing a application for a major company, you would pay a lot for that. And so Anthropic is seeing their sales just We you know, we talk about S curves. This is an L curve. It's straight up. Straight up. Nothing's ever grown this fast.

46:01 Their sales Anthropic sales, went from 100 million to a billion to 9 billion, and we invested it August of of last year. And they we thought they'd get to the 9 billion. We're like, what what would they get to in 2026? Say, let's say 30 billion. We modeled 30 billion. And we the investment made sense on that. Turns out they're doing 30 billion right now.

46:34 So, in 2 months, in 3 months, maybe 25, they've added, you know, 15 billion of extra revenue, which is more revenue than like the entire software industry has added, and they did it in 2 months. And there's nothing holding it back. And as we use more Claude, which I am betting that all of you guys will be using more Claude, and if you're not, you're crazy. Um and then not to mention if you're really coding or whatever. Um so, anyway, um where was I going? So, we we we got convinced And then we started to say, what are the moats that these companies might have?

47:15 And um it turns out, you know, critical intellectual property like they have this coding that nobody's been able to copy or to do nearly as well, and they've tried. So, we'll see, you know, one thing that's hard about AI is it changes quickly versus some of the other S curves. But the the prize is so much bigger because you're going after IT is a $1 trillion market, maybe 1 and 1/2 trillion. But the labor market is for white collars 30 or 40 40 bil 40 trillion.

47:53 And that was like the hope of AI in the first couple years, but it hadn't really been proven out. But now it's getting it's proven at least in coding and it's going to happen to others. What does that mean? That the labor market of coding is two or three trillion. There's 20 million coders. They make 200 grand a year, you know, that's 4 trillion. And um we now see um coders are spending their entire salaries on on Claude tokens.

48:29 So that's like literally it's a could be a 4 trillion-dollar, but at a minimum it's going to be a half a trillion-dollar market, which is massive just for that one application. Um so yeah, so anyway, they've got critical intellectual property. Their models are better. And then we also saw fit, you know, so many companies tried to make these foundational models. Meta tried and failed. They did well and then they failed. Microsoft has tried and failed. Um Amazon tried and failed. There's like another 30, 40 startups that were credible that tried and failed. Elon we'll see. I think he's kind of failed on it. We'll see. You can't count him out, but he they have no revenue and they have no users.

49:16 Um And then they just tucked it into SpaceX and then everybody quit. Um so um yeah, and then, you know, Anthropic has the brand. They might have the scale. And then there's also a first-mover advantage where you get, you know, maybe their models just starts to train itself and they pull away. They're also have an ecosystem cuz or switching costs. So, you know, they have their software SDK. They have their MCP servers. They have their harness.

49:48 Um you start to build your own um agents within Claude. You start to download your information in there and you can move, but why would you? Kind of thing. So, they're building some pretty strong competitive advantages. We think. And um yeah, in a world where the coding market's half half a trillion, they already they have 80% share of the coding market. Maybe even if it drops to 50%, that's 250 billion in sales.

50:22 And then we unders- try and understand what the margin structure is, but the the margins are actually looking good. Um if they have 250 billion in sales, you know, at 350 billion valuation, that would be you know, 1.4 times sales, 1.5 times sales. Software companies that grow 30 or 40 or 50% trade at 10 times sales. Um could the sales here be half a trillion in three or four years?

50:54 Maybe easily. Um and and sort of the current growth rate does tell you a lot about the future cuz it's shows you the shape of that curve. Um and nothing's we've never seen anything grow this fast, which indicate cuz they're going after the labor and it you know, so they just need to get enough compute to produce these tokens, which then feeds back into our investments in the infrastructure. >> Alex, you had your internship at Fidelity. You famously pitched Amazon.

51:26 And your thesis was the leader grows bigger and faster and wins. Do you see a similar trend happening with the AI ecosystem today? Do you think value will accrue to the incumbents like the Mac 7 or the insurgents like the Open AIs and Anthropic >> Yeah. The world. It's a good question. So, it is pretty or there has been this recurring pattern that we've done, you know, the leader grows bigger, faster, and wins. It happens in e-commerce, it happens in internet. It happens a lot in software where you get to be the leader, you know, everybody knows you, you're the safe choice, or you're the leader, you have more customers, and you grow because your customers tell the other customers, and and you you can develop a network effect, and then you get scale, you can invest more in products, you can build more products. You're the leader in a new space, you know which products to build.

52:16 Um so that is a very common um trend um that we've seen repeating time after time. Sometimes it doesn't work. Um like AOL was the leader of internet dial-up, but then there was a change in broadband, and they got killed. Um so there is a worry, and that was part of our thesis on OpenAI was that the leader will grow bigger and faster and wins. And so hopefully they're still going to do well cuz we we did invest in them, but they they won kind of consumer, but that might not be the bigger prize.

52:53 So um and we really hope this is the case with Anthropic, and if it is, it's going to be um it's going to be great. So um yeah, these increa- you know, that these the thing about tech is sort of it does favor the the leaders, and they get more and more market share, stronger competitive advantages, more lock-in over time. So that's why you're seeing these major, huge trillion-dollar valuations, and I think that's going to continue cuz tech is very global, too. You know, retai- Walmart's amazing with 13% of the US retail, but they're just in the US. But almost all these tech companies are selling all over the world, and they have higher market share than the 13%.

53:40 In some cases, 95% like Google. Um so uh and then so the mag seven, I mean, I think at first, we thought uh AI would accrue to the incumbents and we thought maybe OpenAI was the exception. And incumbent chip companies, that's certainly going to be true for incumbent chip companies. There are some startups that are starting to do well in that, but but it's really incumbent world. And then we thought and then we thought we weren't sure what was going to happen at the model layer. We thought OpenAI would do well and Google we think is going to do very well. And then at the application layer, we actually thought the incumbent software companies were going to do well because they could use the same tools that everybody else had to build stuff, but actually the incumbent software companies have done terribly because they could be very getting disrupted from all these coding tools.

54:37 Um and it now looks like most of the applications will be from AI native startups. Um so we'll see. >> So you started investing in private markets in 2020. You backed several big names including you already mentioned OpenAI and Anthropic, but also Databricks, Stripe, and Revolut. What pushed you to private markets in the first place and how do you think about valuation discipline when price discovery's often limited and sometimes frothy? >> Yeah.

55:07 Um yeah, so my heritage, you know, is all in public market stock picking. Over time, um in tech, private company company started staying private longer for a variety of reasons. And so, you know, about 10 year or really with Alibaba, we had the chance to do private. We had never done one before. We didn't do it. We thought we could just buy it through um SoftBank. But we kind of changed our documents to to say, "Hey, if we see a good private, we'll do it."

55:41 And then, it took us a while, but A, we had to meet we we needed to meet know the private. So, if you're covering software like Sid does, you know, so many of the companies are private and they're big and you can't, you know, we were invested in Adyen, which is a Dutch cloud payments company. You can't invest in that company if you don't know Stripe like the back of your hand. And so, we we'd do all this work on Adyen and then we learned so much about Stripe and then we realized we wanted to make an investment in Stripe cuz that was, you know, and then I got a chance to meet the Collison brothers in 2019.

56:16 And I told I told the team we need to make this our biggest position that was private. So, we worked hard to try and get into that and and then in 2020, during COVID, a block of Stripe came up cuz there was a distressed seller. And we had done all the work already. And we were able to buy Stripe and then and then that sort of opened the floodgates and we invested in that year like Robinhood um and and a handful of other companies.

56:49 And then we raised more dedicated money for privates. And we did make definitely made some mistakes in 2021. It was very frothy markets. And of the six or seven deals we did in um 2020, like 90% of them went public. And so, we're like, "This is pretty easy." And then and then 2021 was was hard and we did a lot and we kind of lowered our our bar. And where we do best is when we find super iconic dominant winners that are late that it could be public that we really fit our framework perfectly. Kind of lowered the bar a little bit in 2021.

57:32 And and then lately we we've kept to that bar and so we've done Anthropic. And now we have we manage $11 billion and about 2 billion in privates and of those privates 80 to 85% is in OpenAI, Stripe, Revolut, which is amazing, fintech dominant in Europe, um Databricks, which is the leading data platform for AI, um Canva, which hopefully you guys all use, um What's the other and Anthropic, which is the biggest one. Anything else? Yeah.

58:08 Yeah. And um but we have we have like 10 11 dogs that we've written down. Um some have been steamrolled by AI. Um >> So SpaceX filed to go public today. OpenAI and Anthropic have flirted with the idea of going public later in the year. Um this would inject over $3 trillion of liquidity into the public market. How do you see the investment landscape changing as index funds get more concentrated?

58:38 >> Um index funds, yeah, the index funds are so popular and now represent almost 50% of the entire stock market. Um which is a good way for consumers to get access to the stock market. But in some ways it's been good for us because that capital used to have support huge research departments, um and people like me that were all trying to pick stocks and so now these passive funds don't do work at all and so um and and then another big trend is these pods from Citadel that manage tons of capital. And they're so short-term. So, I feel like if you're a fundamental investor with a long-term view, the market's actually become less efficient because there's fewer people looking at it.

59:42 I think it might become a problem if and it's starting to become a problem because um it it creates uh um less you know people there if some if a stock goes up a lot, you know, normally if there was active managers, they would sell it. You know, so the market's thinner and stocks can get pushed up and then there's no the passive funds, there's no one with a brain there to say this is crazy at 9,000 times sales. We should sell. So, it's creating a lot of volatility like that.

60:20 Um Yeah, and if the index is getting index funds get even bigger and passive gets even bigger, it could create a problem where there's really not true price discovery uh for some stocks. But, that that hasn't been the case yet. I'm I'm wondering what the threshold would be for that. Um I think it's interesting the these big IPOs that are coming, they it's such a huge I mean, the biggest IPO was Saudi Aramco at 30 billion.

60:54 Elon's talking about 75 billion. OpenAI's just did 110 billion 120 billion privately. So, their theoretically their IPO would be bigger. And um Anthropic's I bet they'll probably do more like 30-ish. Um I think Anthropic will be amazing. I think I think the other two, although I don't really have the numbers on SpaceX, but it it seems expensive. And then all you say liquidity, but they're going to try and raise these funds, but then also a lot of the shareholders who are in them for years, they're going to want to be selling. So, I think it's it could create a problem for the stock market. What they're trying to do is to get listed in the index right away.

61:41 So, then all those index funds would buy and support the IPO. Which is a little like cheating, but if I were them, I would I would do that, too. Um so, hopefully they'll do that because um I'd rather them be successful than not. >> All right. So, um you started your career during the dot-com bubble, launched WeWork a couple years before the GFC. We saw a massive sell-off in tech in 2022. I'm curious how you've navigated the volatility of the sector. And what are some mental models that have helped you stay focused and resilient?

62:14 >> Yeah, we were talking about this before. Um Yeah, we've had some serious highs and some serious lows. And um Yeah, and you know, in in hedge funds, when you go below you make it's great cuz you got this incentive fee. But when you go below your high-water mark, if you're down 35%, you got to come back like 70% or whatever the math is to come back. Um And so, we've we've had that happen twice to us.

62:46 Um And so, you you've got to And that's you know, that's when during 2020 or sorry, 2008 and 2022 even late in my career I was literally um in a pool I would wake up in a pool of sweat, and I'm not joking, like a pool of sweat for like 6 months straight. It's stressful, but separate from that stress, I was able to manage well. Like it's almost like a subconscious way. But one thing is you can't early on you you the highs are so great and it's so but you realize the lows are going to be tough so you can't enjoy the highs as much as you would and so the lows don't hurt you as much. And when you're at the top, you're never as smart as you are. Everyone wants to be your friend.

63:41 Um and and then at the lows you're not as dumb as you are but you just have to believe you're good. And then you also have to trust your process cuz we've we've been knocked off, you know, it's a full contact sport what we're doing and you know, you get hit crushed by I don't know, Gronk. And uh and then you got to get up and you have to believe in your process and and believe that your process work. And so we spent 3 years grinding out of '08 and uh rebuilding our track record and we spent the last 3 years uh thank thankfully with AI we executed on that and now we look smart again. Um but you you know, you have to have humility and and uh and trust in your process. And then you have to love what you're doing.

64:34 >> That's incredibly powerful. So over the last two decades, the hedge fund industry has become incredibly competitive. Everyone wants to be an investor or is one. Um we have fewer public comp and we've witnessed retail as well. Um how do you see WeRock evolving in the next decade? And what does an enduring investment institution look like to you? >> Yeah, thanks. Um Yeah, we um we kind of say we're turning 20 years old in May. And we've accomplished a lot. Um but in a lot of ways we're just like a 20-year-old and I made the analogy of my daughter is graduating college, and she's got her whole life ahead of her, and she's accomplished a ton.

65:18 But so, you know, we're 11 billion. I'd love to sort of grow and build this firm into a long enduring operation, which is hard hard to do hedge fund world. It's been extremely rare. Um so, develop the next generation of talent. Um build a diversified set of products and investment offerings and with a diversified base.

65:51 And we say our mission is twofold. It's to generate very strong returns from digital technology, and then second, to build an organization that that can sustain a high-performing organization that can sustain that going forward for decades to come. So, we're trying to make make the organization as durable as possible. >> Wow, that's incredible. So, Alex, just before we wrap it off, um what do you think is the most underrated skill as an investor, but the most important?

66:24 >> Um I mean, I think curiosity and you you have to love it, and you have to be super curious. And cuz there's so many people doing this. And if you if you really don't love the passion of researching something, figuring it out, building the model, getting that last insight to understand, oh my god, this thing is And if if if that's not fun And that it's kind of a weird thing maybe even to be fun. So, if if if you know, it it'll be a it'll be hard if you if So, if you know, so if you're going to go into this really, um if you if you feel like you love to use your brain, and you love to solve things, and talk to people and figure it out. Like that's super important. I mean don't go into it for the money. Um Uh yeah, and and there's you know, there's some things where investing it's it's a little bit introverted in some ways. And so there's you know, if you're really good with people and that's your main skill um you know, maybe you know, there's other ways or you know, just find out what what drives your own passion.

67:38 Um and if you don't, you know, love learning and picking stocks and you know, kind of the probability and sort of the thrill of it. You know. Um you know, I think that's important to do. And then the other thing for me, I think also is sort of left brain and right brain skill. And like, you know, we're all so I guess right brain's the one that's good at doing math. I think so.

68:08 So there's the artistic visual side and then there's the sort of And so I think the big money, especially when you're doing growth markets is is the the visual learner who can see the inflection points. Um so many economists are just doing the problem and the data isn't going to tell you what's happening in the future cuz that's past trends. And and so being able to connect the dots across many different um fields and ways of learning is is also really important. I don't know if that made sense, but >> Thank you. All right. Thank you so much for coming on. This is incredible. And it is an honor to have you. Thank you so much.

68:52 >> I don't have time I mean >> I think we have a mic going around for Q&A. >> do questions. I'm in no rush to get out, but I know we're over time. So people have other things to do, go. But if you want to stay >> Do we have a mic going around for Q&A? >> Yep, I think Chris is around. >> Hello. >> Ah. >> Uh hi. So, my name's Kurt and um I'm taking a credit analysis class right now, um which is kind of like the first step of taking into learning about investing.

69:23 >> Yeah. >> Um at least in a serious analytical way. And um our teacher has mentioned that one tough thing, especially for a lot of smaller funds when they start out, is access to management, and you mentioned that's one of your core tenants. So, I'm curious um if you know, you had to say a young analyst starting out at a small firm, how would you go about trying to >> Yeah. >> get a read on management when you might not have access to them?

69:48 >> Yeah. It's a great question, and what's what's awesome now is you know, um management team, well, podcast almost all of these companies that we're investing in, at least the big ones, they're doing podcasts. Um they're doing analyst days that are all broadcast. All their earnings transcripts, um also if they go to a conference and they're getting interviewed. So, it's great to have access to management, but um you know, I I know another super talented investor in Boston who's who you who is very connected and he he doesn't even do the one-on-ones as much anymore. He's like, I can I can I can get so much just from the So, I don't think it's a um it's a total uh it's definitely not a deal breaker at all, and there's a lot of ways around it. And and and and frankly, sometimes learning from people that aren't the management is better than talking to the management, and you can generally Yeah, so look, it's better if you can, but it's it's definitely not a deal breaker. And there's some companies that we don't get to talk to very much anymore, like Amazon doesn't really you talk to their IR, you know, you know, so we find our ways, but like uh it's it's it's not a deal breaker, so there's a lot of ways around, especially in the new world with podcasts and everything like that.

71:22 >> Hi, my name is Matei, and you mentioned you were cherry-picking high moments in Whale Rocks um history, and I was wondering if you could share with us some low points in Whale Rocks you know, recent journey and maybe in your personal life as well, in your like professional life as well. Yeah. >> Well, we never make mistakes, so I don't have any. We uh you know, we make we make so many mistakes, um you know, in in one time, you know, before Meta Glasses, I'm talking 10 years ago, there was Google Glasses, and if you remember, they had uh and we, you know, we we found a company called Himax, which they had a monopoly on the the way the monitor was made for the Google Glasses.

72:16 And um and we started to believe that the consoles would make these glasses, it would be an amazing S curve, and um and this company could earn tremendous amounts of money, and um it never happened, and it was that was a pretty big mistake. Sometimes we um you know, we we try and own the best companies over long periods of time, and um you know, in 20 14 through 2020, like you just needed to buy and hold, and um anytime we sold it would go up another 100% and then that made us a little bit complacent, especially post COVID, and stocks really got expensive and we held some stocks for too long. Like Shopify, for example, got to a valuation that was just you couldn't really justify it, but we held it anyway. Um, yeah, so you know, COVID post COVID was really hard. We knew there was a acceleration, a digital acceleration, and we and we owned stuff like Zoom and we actually owned Peloton. We knew those were going to have a massive COVID hangover.

73:33 Um, but we thought e-commerce and cloud adoption would stick and continue to grow, but they had a big hangover, too. So, we we should have been a little quicker on that to understand that. And at the same time, we knew rates would be going up. I mean, 2022 was really tough, uh, for us for those reasons and then also we knew rates would go up cuz there would be some inflation. Um, but we didn't expect it to like really cause like a 60% decline in a lot of these stocks. So, that was really hard. So, we're you know, I wish we were better at managing through that period, but you know, and then I'd say, well, what's the lesson? You want to be careful not to you know, change your process cuz that's a pretty unique period with COVID or or rate spiking in a 1,000, you know, 100-year once in a 100-year speed.

74:31 Um, are some of the mistakes some mistakes to think about. >> Do we have time for one more Q&A? >> Yeah. I can do more if you want. >> Hi Alex, thank you for talking with us today. My name is Kavya. I am in the health sector management MBA and since you're talking about tech, I was wondering how these topics you were talking about today translate to the biotech space as an extension of tech, but when you're deciding what to invest in biotech, decisions you make affect whether people live or die in some cases. So, how should we decide which companies are having strong narratives versus having durable company structures and how do you make those decisions?

75:20 >> I I don't do anything in healthcare. Um and I just I have no background in it. So, we've never done anything in in biotech of any sort. I have thought it is an interesting moral dilemma about um how a lot of these companies are structured because they're they're there to save lives and do things, but there's also a big commercial aspect and I know the commercial aspect is very important to keep the whole thing going, but yeah, that's one of you know, and then and then I really don't know anything about biotech or healthcare. So, I'm not a great guy to answer that. So, I apologize.

76:00 >> No problem. Thank you. >> Do you want to do one more? >> Keep it going. >> Okay. Hi Alex, thanks for your time. My name is Pedro and next year I'll be interning at Insight Partners. So, also within software business. Thank you very much. But I'm curious, you know, while still a student in a world where kind of all those technical skills are pretty commoditized, do you think there are still some particular classes or skills or majors that you think will prove themselves valuable going into the future?

76:31 >> I I think it might be Yeah, I think um you guys should all become experts in in cloud cloud co-work cloud and know how to use these tools. Cuz like we're trying to adopt them and like we're looking and if you can adopt these and master these and be one of the people that goes into Insight who's like really good at it, I mean you're going to be able to like be so much more productive than anybody else. And then you're going to be able to show your boss how to do stuff and you're going to be so So, my son is a freshman in college. He's like I think is it Deloitte has an anthropic uh course you can take to get certified.

77:20 I think it's pretty rigorous, but it's online and free. So, I mean I feel like that's the biggest no-brainer of all time is to get good at these tools, tinker, play, and you you got I mean I guess you know, we're all busy, but you might have some time to do it, you know, some more time than others. And and to get good at it and then and then it's going to keep on evolving. So, if you're already knowing how to do it and getting I think that would be awesome.

77:53 >> Um Yeah, yes. Um hi. My name is um Zahou and uh I well, I will say myself as I do um secondary markets, mostly focused on uh commodity futures. And as we talked about earlier, um some of the AI uh are coming from the fundamentals and like chips and basically industries. What do you think about the new technology brings to fundamental markets like commodities?

78:33 >> In terms of um trading them or in terms of uh adding AI to the industry to improve productivity of the industry? >> Um I'll say in terms of how um the industry is affected by AI. Yeah. >> Like commodities? >> Yes. >> Like say oil? >> Um let's say energy in general or >> Yeah. >> um metals in general because yeah.

79:03 >> Um I'm not a total expert on that, but but you know, I think applying AI to the the search for oil and the search for minerals and mining can be good. Um um I think it can probably be applied to efficiency of in many aspects of the business. Um huge data sets can be analyzed with AI. And I know a lot of those industries rely on seismic and big data, so you can apply that to figure it out. Um you know, Jeff Bezos is starting up trying to start a hundred billion-dollar company to apply AI to the manufacturing process.

79:47 Um so there's a lot there. But it's not an area I'm super deep on. >> I think we have time for one more question and then we we can just hang around and stuff. >> Want to go back there? >> Sure. >> Or over here? >> Is there Yeah, go ahead. >> Um yeah. My name's Joseph and thank you for your time, Alex. I was uh wondering how do you go about with external factors when it comes to having a position? So um outside of the business model. Like for example, like Carvana with the loans and stuff happening everyone like the rumors going around. Like how do you deal with the positions? Do you trim them? Do you buy into the fear? Do you maybe hold it out?

80:24 >> Yeah. Um so we it's Yeah, there's been Carvana's been a a very good and interesting name and a great company, but there have been a lot of negative reports about them. Um and and in yeah, similar with AppLovin, um which was one of our best stocks of all time that the short sellers go after those companies and and they create narratives um that look that can look pretty frightening.

80:55 Um so it's really important that you know what the bear cases are, you can articulate the bear case better than the bears, and that you really analyze, you know, the details of all these reports. And we've had excellent analysts on AppLovin and Carvana who have have gone in and and talked to people in the, you know, the credit markets that make these buy these car loans and such, and uh understand um the servicing market and and understand, you know, sometimes companies do have related party transactions, but it's you know, if you can understand everything about them and and the impact and the size.

81:39 Um so yeah, it's important. A lot of people got shaken out of AppLovin and it was you know, it was a 10-bagger in 2020. That was 2024. Yeah, for us. Um yeah, and then I think last year there were tons of short reports on that company, and it ended up going up 100%. Um that's AppLovin. And then Carvana, they've been after Carvana, you know, the whole entire time, and it's turning out to be, you know, one of the great as you know, the used car market's the second largest market after housing in the United States, and only, you know, 1 or 2% is online, and it's a much better experience than going to a dealer that has limited and they have no competition online either.

82:35 And um they have a tremendous scale, a tremendous brand. And um you know, the short sellers love to love to pick on it. So you So you have to if you don't know it as well, you'll get shaken out. So you really have to know what you own really well. >> All right. With the With that, Alex, thanks so much. >> Really enjoyed being here. Thank you for having me. >> Thank you. Thank you.