Private Markets and The Future of Capital Allocation with Marc Rowan | The a16z Show

1. 0:00 – 0:52

   Intro

   1. MRMarc Rowan0:00

      10 stocks right now in the US are nearly 50% of the S&P, and they're all levered to the same trend. The same thing is happening in the global fixed income market. And so if you're an investor and you're looking for diversification, there's no place to get it other than private markets. Great companies, Anthropic, Anduril, every one of those companies is private, multiple trillion dollars, and yet most investors have zero exposure to them.

   2. DHDavid Haber0:23

      Andreessen wrote this piece over a decade ago that software's eating the world, and that feels more true than ever as AI proliferates all parts of the economy.

   3. MRMarc Rowan0:30

      We operate under the assumption that every job is going to be replaced or enhanced. 2025 was just proof of concept that data centers and chips and energy were all needed. 2026, the market is starting to recognize that if this continues, everyone who is an investor is going to be-

   4. DHDavid Haber0:50

      Marc, thank you so much for joining

2. 0:52 – 4:55

   Drexel, Milken & the Origins of Clean Sheet Thinking

   1. DHDavid Haber0:52

      us and, and for hosting us here at your office.

   2. MRMarc Rowan0:54

      Uh, nothing better. My absolute pleasure.

   3. DHDavid Haber0:56

      I thought we'd start by maybe going back in time. Um, you joined Drexel coming out of Wharton, I believe, in 1984. Um, what did you see in the firm at that time?

   4. MRMarc Rowan1:07

      You know, it was an interesting thing. Um, everyone who had come out of my program at Wharton had basically gone to Goldman Sachs.

   5. DHDavid Haber1:13

      Yep.

   6. MRMarc Rowan1:14

      And what struck me about Drexel's business, which was financing entrepreneurs, financing new companies, is that you didn't really need to know all that much about finance. You needed to know a lot about business.

   7. DHDavid Haber1:25

      Hmm.

   8. MRMarc Rowan1:26

      Because these companies were not the Exxons of the day or the top-notch companies of the day. They were companies where legitimately there were questions on the business model.

   9. DHDavid Haber1:34

      Hmm.

   10. MRMarc Rowan1:35

       And I was always much more interested in business than I was in the nuances of finance and public offerings and things like that, and I was not disappointed. It was awesome.

   11. DHDavid Haber1:45

       Yeah, I mean, I think one of the most remarkable things about, uh, kind of the diaspora from, from Drexel and that, especially in that period, is just, I mean, you can almost trace every major credit firm, you know, back to that kind of cohort of people. Was there something about the culture, maybe the focus of, of your clients at the time that sort of shaped, you know, that sort of incredible kind of diaspora of talent?

   12. MRMarc Rowan2:05

       Look, th- this business-first mentality and really understanding the business is ultimately about making credit decisions. These companies were not investment grade. They were below investment grade. It really forced you to understand the fundamentals of their business, not to rely on third parties. But also a whole market was being created. There were no high-yield bonds.

   13. DHDavid Haber2:25

       Mm-hmm.

   14. MRMarc Rowan2:25

       There were no levered loans. There were no ETFs. There was no real securitized product. All the products that we take for granted today that exist did not exist. This forced you into clean sheet thinking. The whole notion of PIK, I believe, was created in one afternoon-

   15. DHDavid Haber2:41

       Hmm

   16. MRMarc Rowan2:41

       ... solving a problem. The notion of silver bo- silver-backed or silver index bonds, solving another problem.

   17. DHDavid Haber2:47

       Hmm.

   18. MRMarc Rowan2:48

       And so on and so on. The notion of a highly confident letter, the notion of bridge financing. All of these things were basically problem, solution, problem, solution, and that mentality of understanding the business, understanding the credit, but also having clean sheet thinking is certainly what powers Apollo today.

   19. DHDavid Haber3:06

       And I know M- you know, Michael Milken has been a, a mentor for a long time. I guess, what are some of the most valuable lessons you've learned from him over the years?

   20. MRMarc Rowan3:15

       They're just innumerable, but I, I... The story I tell about Mike is, um, I was, um, like a smart young guy. I had mastered my craft. I was well thought of. But, and so every time the market kind of went sideways, I would get a call from Mike, and Mike would say, "Could you come from New York to California?"

   21. DHDavid Haber3:33

       Hmm.

   22. MRMarc Rowan3:33

       I would, of course, ask when. This would... "M- Monday." He'd be like, "Tuesday." So, uh, the immediacy of how you dealt with problems and the business-first mentality was definitely a Mike-ism. And I sat on the trading desk, and at the end of every trading day, Mike would walk by my desk, and I was supposed to have all the answers, 'cause Mike was doing a million things. I was just doing one thing.

   23. DHDavid Haber3:53

       Hmm.

   24. MRMarc Rowan3:53

       And every day he would ask me a question that I did not know the answer to.

   25. DHDavid Haber3:57

       Hmm.

   26. MRMarc Rowan3:57

       And he didn't do it to provoke me or to show me how smart he was. He was showing me to connect the dots.

   27. DHDavid Haber4:03

       Hmm.

   28. MRMarc Rowan4:04

       And I do think that that's a big part of what goes on in our world today.

   29. DHDavid Haber4:07

       Hmm.

   30. MRMarc Rowan4:07

       Can you take what's happening geopolitically-
3. 4:55 – 8:46

   The Apollo Origin Story: From Unemployed to $6 Billion

   1. MRMarc Rowan4:55

      Lehman Brothers 2008-

   2. DHDavid Haber4:56

      Okay

   3. MRMarc Rowan4:56

      ... 'cause a lot of this audience will not know what was going on in 1990.

   4. DHDavid Haber5:00

      Sure.

   5. MRMarc Rowan5:00

      But 1990 was a global recession, a banking crisis, a Texas real estate crisis, a New York real estate crisis-

   6. DHDavid Haber5:07

      Hmm

   7. MRMarc Rowan5:07

      ... a savings and loan crisis. It was kind of a mess.

   8. DHDavid Haber5:10

      Yep.

   9. MRMarc Rowan5:11

      And I went into my office, or I left my office on Friday, I came back in on Sunday, and I left with all my belongings in a cardboard box, and Drexel was out of business. A great lesson.

   10. DHDavid Haber5:22

       Hmm.

   11. MRMarc Rowan5:22

       Financial services firms die from one of two causes, heart attacks or cancer.

   12. DHDavid Haber5:27

       Hmm.

   13. MRMarc Rowan5:28

       Heart attack is funding risk. If you lend long and borrow short, you have funding risk.

   14. DHDavid Haber5:34

       Mm-hmm.

   15. MRMarc Rowan5:35

       We saw this in Bear Stearns.

   16. DHDavid Haber5:36

       Sure.

   17. MRMarc Rowan5:36

       We saw this in Lehman Brothers. We've seen this again and again. I will tell you that formative lesson, we will never see that at Apollo.

   18. DHDavid Haber5:43

       Hmm.

   19. MRMarc Rowan5:44

       It is ingrained in our culture to understand this funding issue, this heart attack risk. And then the cancer risk, of course, is the addition of bad assets over a long period of time, which again, we as a principle mentality firm do not allow to happen. We admit our mistakes, we move on, we take our losses. We don't double down and triple down and do these other things. But back to 1990, imagine being an unemployed investment banker in the midst of a global financial crisis.

   20. DHDavid Haber6:10

       Hmm.

   21. MRMarc Rowan6:10

       This is not a great situation-

   22. DHDavid Haber6:12

       Sure

   23. MRMarc Rowan6:12

       ... for career employment. Um, fortunately, a group of us had been sharing office space. The demise of Drexel was so sudden that we were still working on transactions for clients-Without any hope of being paid or without a firm that was backing us-

   24. DHDavid Haber6:29

       Interesting

   25. MRMarc Rowan6:29

       ... it was just what we did. And as happenstance would have it, we received a cold call from the Government Bank of France, the Credit Lyonnais Bank-

   26. DHDavid Haber6:38

       Hmm

   27. MRMarc Rowan6:39

       ... asking whether we would be interested in starting an M&A boutique-

   28. DHDavid Haber6:42

       Hmm

   29. MRMarc Rowan6:43

       ... under the mighty Credit Lyonnais banner. What a terrible idea in 1990. There is no M&A.

   30. DHDavid Haber6:48

       Sure.
4. 8:46 – 13:00

   How Apollo Became a Trillion-Dollar Retirement & Credit Firm

   1. DHDavid Haber8:46

      still, uh, you know, incorrectly I would argue, you know, refer to Apollo as a private equity firm. But, you know, you I think more than anybody have, have really kind of transformed the business into a, you know, re- retirement services, you know, company and an altern- you know, large alternative asset management business. I guess, what did you see in Athene in 2008, and, and how do you sort of view the firm today?

   2. MRMarc Rowan9:08

      So I- if I start backwards a little bit, the firm today is a little bit over a trillion dollars in assets under management, which is just a measure. Uh, and it is in two businesses. It's in the retirement services business, and it's in the asset management business.

   3. DHDavid Haber9:21

      Mm-hmm.

   4. MRMarc Rowan9:21

      Um, and if you look at the assets under management, 80% of the assets under management are credit-

   5. DHDavid Haber9:27

      Mm-hmm

   6. MRMarc Rowan9:28

      ... and the vast majority of that is investment grade.

   7. DHDavid Haber9:30

      Mm-hmm.

   8. MRMarc Rowan9:31

      And the other 200 billion, or 20% of it, half of it is what we call hybrid equity, partner-like equity-

   9. DHDavid Haber9:37

      Mm-hmm

   10. MRMarc Rowan9:38

       ... and half of it is traditional private equity in a fund structure.

   11. DHDavid Haber9:41

       Mm-hmm.

   12. MRMarc Rowan9:42

       It's a totally different makeup of a business than people expect when they say, "Well, Apollo's a private equity firm."

   13. DHDavid Haber9:48

       Totally.

   14. MRMarc Rowan9:48

       Um, well, actually Apollo's mostly an investment grade credit firm.

   15. DHDavid Haber9:51

       Totally.

   16. MRMarc Rowan9:52

       And I think what we appreciate is when you are a small firm, you can be a good deal shop, but when you s- when you want to get large, you have to serve a fundamental good, otherwise the societal pressure, the government regulation, the forces around you constrain you.

   17. DHDavid Haber10:12

       Mm-hmm.

   18. MRMarc Rowan10:12

       And so I always start with what is, what is the fundamental good we're doing, and then what are the drivers of the business?

   19. DHDavid Haber10:17

       Mm-hmm.

   20. MRMarc Rowan10:17

       And so they're, they overlap. The fundamental good is we are the largest provider of retirement income anywhere in the world.

   21. DHDavid Haber10:24

       Mm-hmm.

   22. MRMarc Rowan10:25

       Um, the second is we are the largest source of financing for this global industrial renaissance that is taking place across the US primarily, but across Europe and Asia and elsewhere.

   23. DHDavid Haber10:35

       Mm-hmm.

   24. MRMarc Rowan10:36

       And finally, we are diversification for public markets, and this is the least understood portion-

   25. DHDavid Haber10:42

       Hmm

   26. MRMarc Rowan10:42

       ... of what we do. 10 stocks right now in the US are nearly 50% of the S&P, and they're all levered to the same trend.

   27. DHDavid Haber10:50

       Yep.

   28. MRMarc Rowan10:50

       So far that's been amazing-

   29. DHDavid Haber10:52

       Yep

   30. MRMarc Rowan10:53

       ... but we've levered most of the retirement system of the country-
5. 13:00 – 16:08

   Permanent Capital, Origination & Why Assets Are the Scarce Resource

   1. DHDavid Haber13:00

      just doubling down on, on kind of like the, the permanent capital base of the firm, 'cause it, it's really unique kind of in the alternative, you know, asset management ecosystem. And you know, I recall you saying this once in a, in a dinner that we had, which was, you know, a l- a lot of the business sort of boils down to, you know, cost of liabilities and creating sort of excess return per marginal unit of risk, and it's about sort of like widening that kind of spread over time. Is that, is that how you... Is that sort of a distillation of how you view the business or-

   2. MRMarc Rowan13:26

      Uh, it, it's exactly. I mean, there are a couple of different ways of coming at this, and it, it starts with a misconception of what success looks like in our industry. For a traditional asset manager, assets under management is a really good measure of success.

   3. DHDavid Haber13:40

      Mm-hmm.

   4. MRMarc Rowan13:40

      Because if you give a traditional asset manager any amount of money, they will invest it, because they have the ability to simply go to the public markets and buy what exists.

   5. DHDavid Haber13:47

      Mm-hmm.

   6. MRMarc Rowan13:48

      If you give us any amount of money, we will not invest it. We can only invest as fast as we originate-

   7. DHDavid Haber13:55

      Mm-hmm

   8. MRMarc Rowan13:55

      ... as fast as we create, and therefore, I believe that we should be judged by our capacity to create interesting investments.

   9. DHDavid Haber14:03

      Mm-hmm.

   10. MRMarc Rowan14:04

       And I believe our capacity to create interesting investments is limited. It... We are not limited ultimately by capital. We are limited by our capacity to create, and so a couple of things come out of that. If every asset we create is what's in short supply, as a business owner, as a business builder, as a strategist, I wanna make more money from each asset.

   11. DHDavid Haber14:27

       Mm.

   12. MRMarc Rowan14:27

       So yes, I like running assets for a fee, but I also wanna be a principal.

   13. DHDavid Haber14:33

       Mm-hmm.

   14. MRMarc Rowan14:33

       I wanna own the upside for as much of the asset as the market will allow me to do. And the more interesting thing is clients who are dabbling in private markets, who don't always have the same information that you have, who have, on a fiduciary basis or a non-fiduciary basis, asked you to manage their money-

   15. DHDavid Haber14:53

       Mm

   16. MRMarc Rowan14:54

       ... they like the alignment. There is nothing like being a partner with your clients, eating your own cooking-

   17. DHDavid Haber14:59

       Yeah

   18. MRMarc Rowan14:59

       ... whatever the expression is.

   19. DHDavid Haber15:00

       Sure.

   20. MRMarc Rowan15:01

       And so for valid strategy reasons, if assets are in short supply, I wanna earn more money. For external reasons, I wanna be aligned with my clients.

   21. DHDavid Haber15:11

       Mm.

   22. MRMarc Rowan15:11

       Having a big capital base I believe to be important, and I've, I've started saying this. You know, there's been this debate in our marketplace between capital light and capital heavy.

   23. DHDavid Haber15:20

       Mm.

   24. MRMarc Rowan15:21

       I think we should be unapologetic-

   25. DHDavid Haber15:22

       Mm

   26. MRMarc Rowan15:23

       ... 'cause I look at the world that we're about to enter, and change is a constant, but this pace of change is even faster than we've ever had it. In the world we're entering, what has value? On the one hand, I think brand and reputation have value.

   27. DHDavid Haber15:38

       Mm-hmm. Agree.

   28. MRMarc Rowan15:38

       The second thing is I believe the ability to guarantee outcomes has value. Capital is key to being able to guarantee outcomes-

   29. DHDavid Haber15:47

       Mm

   30. MRMarc Rowan15:48

       ... both for issuers as well as for people on the insurance side or the retirement income side, where you're guaranteeing their insurance.
6. 16:08 – 22:04

   Democratizing Private Markets: Daily Pricing & New Capital Channels

   1. DHDavid Haber16:08

      you were, you were, you know, beginning to talk about this earlier, that the sort of distinction between public and private markets, uh, is a lot more nuanced maybe than it's been projected in the past. You know, p- public h- historically has been seen as liquid and safe, and private as illiquid and, and risky. But, um, you know, and I saw that you recently announced you were gonna do, you know, daily mark-to-market, you know, across a bunch of your products. I guess, how do you sort of see the democratization of private markets, you know, into the broader kind of retirement ecosystem or, or wealth ecosystem, you know, broadly?

   2. MRMarc Rowan16:39

      So what, what's happened so far is, if you think about our industry, which has only existed for about 40 years in a real industrial form, um, the entire industry was built out of one capital source. This was the alternative bucket of institutions.

   3. DHDavid Haber16:52

      Mm-hmm.

   4. MRMarc Rowan16:52

      And essentially, it was all in funds. It was all relatively slow-moving. And yes, there were private equity funds, but then there were real estate private equity funds, and infrastructure private equity funds, and credit kind of private equity funds. It was all one business.

   5. DHDavid Haber17:06

      Mm-hmm.

   6. MRMarc Rowan17:06

      And it was a pretty simple business. And you did not need a lot of infrastructure because same institutions, quarterly fine. Well, there are five new markets. We serve individuals. We serve insurance companies. We serve the debt and equity bucket of institutions.

   7. DHDavid Haber17:22

      Mm-hmm.

   8. MRMarc Rowan17:22

      We serve traditional asset managers, and we serve 401 [k] . All of these other five markets want nothing to do with a drawdown fund.

   9. DHDavid Haber17:30

      Mm.

   10. MRMarc Rowan17:31

       They live in a public world, and so the more... The notion that they are gonna somehow conform to us is just hubris.

   11. DHDavid Haber17:40

       Mm.

   12. MRMarc Rowan17:41

       We are going to have to conform to them if we want to serve them, if we want to exist in their world, but we have to also do it in a way that does not bastardize our products, that does not create unacceptable mismatches between risk and reward.

   13. DHDavid Haber17:54

       Mm-hmm.

   14. MRMarc Rowan17:55

       And so w- we're starting with our investment grade private suite of products, and we will be daily estimated value by June 30. Value alone is not enough. We are standardized information, standardized CUSIPs or ICE IDs-

   15. DHDavid Haber18:10

       Mm-hmm

   16. MRMarc Rowan18:11

       ... standardized data warehouses, market making, regular disclosure of prices, other dealers. This is about creating an ecosystem, and by the end of September, this will be across the entirety of our credit business.

   17. DHDavid Haber18:24

       Hmm.

   18. MRMarc Rowan18:26

       And I believe this is the direction of travel. I've never seen a market in the world where you have transparency and price discovery that is not 10 times its size.And change, like everything else, it may be uncomfortable for people, but it's coming.

   19. DHDavid Haber18:40

       Totally.

   20. MRMarc Rowan18:40

       And five other markets want it. And will it be perfect the first day? It will not. Will it get better every day? It will get better every day. And one day soon, maybe it'll even come for equity. But that's not this year's business.

   21. DHDavid Haber18:53

       You know, I, I know you've also, you know, talked a lot about, uh, you know, maybe the press' sort of very narrow definition of private credit being kind of, you know, direct lending and BDCs. But, you know, I guess from your perspective, how do you describe kind of the broader private credit ecosystem, and, um, you know, what separates kind of the winners, you know, from, from your perspective versus, uh, you know, the rest of the market as, as this ecosystem matures?

   22. MRMarc Rowan19:16

       So I, I do think it starts with a skill set of m- of managing a credit book, 'cause at the end of the day, managing credit is different than managing equity. Um, in credit, you only get your principal and interest. You should not be around risk-taking as a rule. You should be fully diversified.

   23. DHDavid Haber19:32

       Mm.

   24. MRMarc Rowan19:33

       In the equity business, you actually get paid for risk-taking.

   25. DHDavid Haber19:36

       Sure.

   26. MRMarc Rowan19:37

       And so that mindset difference perhaps is obvious, but it has not been obvious in people's actual performance and how they have constructed portfolios. The second is you need a low cost of capital, or you need a variety of costs of capital.

   27. DHDavid Haber19:52

       Mm.

   28. MRMarc Rowan19:53

       And so one of the reasons I think we've been so successful at this is we are willing to match low-cost retirement liabilities with safe long-term yield assets.

   29. DHDavid Haber20:06

       Mm-hmm.

   30. MRMarc Rowan20:07

       Not risky long-term yield assets. That does not belong in a regulated balance sheet. But if you think of the, the largest issuers of private investment grade, it's Intel, it's Air France-
7. 22:04 – 30:01

   Where Venture Meets Credit: Financing the Industrial Renaissance

   1. DHDavid Haber22:04

      uh, lines, and it's a, a bit of a metaphor maybe for my career, but, but also an investment philosophy, is that, um, opportunities live between fields of expertise, you know? And I, I like kind of living at the intersections-

   2. MRMarc Rowan22:15

      [laughs]

   3. DHDavid Haber22:16

      ... of things. Um, you know, I'm, I'm curious, um, you know, maybe we'll kind of transition the conversation at, at some of the opportunities you see kind of at the intersection of Apollo and Andreessen. Um, you know, Marc, our Marc, uh, you know, Andreessen, wrote, wrote this piece, uh, you know, over a decade ago that, that software's eating the world, and that feels more true than ever as kind of AI proliferates, you know, all parts of the economy. And, and as a result, you know, we're finding ourselves funding more capital-intensive businesses, right, in areas like defense and energy and robotics and manufacturing and public safety. You know, ultimately, I think most of these businesses will need to graduate at some point beyond venture equity, um, and likely become, and, or already are, you know, clients or customers of yours. Um, I guess, what, what do you see as the opportunities kind of between, you know, our two firms?

   4. MRMarc Rowan23:06

      Immense. There's... It's only about time in the day right now, but I'm gonna first delve into this notion of intersections, 'cause this intersection notion is actually what creates value in our business.

   5. DHDavid Haber23:16

      Mm.

   6. MRMarc Rowan23:17

      So if you think about how institutions allocate capital, they allocate it into buckets. Some of those buckets, they advise themselves if they have good investment teams. Some of those buckets, they outsource to consultants or advisors.

   7. DHDavid Haber23:31

      Mm-hmm.

   8. MRMarc Rowan23:31

      But they're still in buckets, and so the traditional buckets are equity. What's in the equity bucket? Public equities.

   9. DHDavid Haber23:37

      Mm-hmm.

   10. MRMarc Rowan23:39

       Fixed income. What's there? Public fixed income. Then there's sometimes a liquidity bucket, a real assets bucket, and then there's this thing called alternatives. That's been most of the world for 40 years.

   11. DHDavid Haber23:50

       Mm-hmm.

   12. MRMarc Rowan23:51

       What do you do with the equity that is private, safe, but doesn't have a high enough return for alternatives?

   13. DHDavid Haber24:00

       Mm.

   14. MRMarc Rowan24:01

       It doesn't have a home. It's neither... It's not public. It doesn't go into the public bucket. It's not an alternative. It's not high enough rate of return. But its risk/reward is the best risk/reward. We call that hybrid. For us, that's our fastest-growing business.

   15. DHDavid Haber24:17

       Mm.

   16. MRMarc Rowan24:18

       Again, this notion of private investment grade. Most things that are in institutions' fixed income bucket are public.

   17. DHDavid Haber24:24

       Mm.

   18. MRMarc Rowan24:25

       Therefore, they're not a source of capital. We have been able to originate and earn excess return because private, but investment grade, is not a bucket. Now-As we get bigger and bigger, we are changing the world, and we've seen institutions adopt this notion of total portfolio approach. We've seen family offices, and we see a general migration. So in between is almost always the best asset class because there is poor capital formation-

   19. DHDavid Haber24:53

       Totally

   20. MRMarc Rowan24:53

       ... and there's no one who is assigned every day as their day job for the risk.

   21. DHDavid Haber24:57

       Totally.

   22. MRMarc Rowan24:58

       This is exactly what's happening between our two firms.

   23. DHDavid Haber25:02

       Mm-hmm.

   24. MRMarc Rowan25:02

       Because you have an entire ecosystem of which your firm is a major player that has not never been capital intensive. And for the first time, not only is it capital intensive, but it is going to be capital intensive on a scale that is unimaginable.

   25. DHDavid Haber25:18

       Mm-hmm.

   26. MRMarc Rowan25:19

       Because the amount of money that's gonna be put into data centers, into chips, into robotics, into manufacturing, into defense is, as I suggested, every dollar since the invention of fire. That is not going to be financed with equity-

   27. DHDavid Haber25:32

       Yep

   28. MRMarc Rowan25:32

       ... entirely because that is not efficient, and the scale of it is not achievable. It is going to have to be parceled out into various risks, and that's what we're seeing happen right now. So if I look at the drivers of our business for this year, it is data centers.

   29. DHDavid Haber25:49

       Mm.

   30. MRMarc Rowan25:50

       It is massive amounts of chip financing. And what we're doing is we're parceling out the risks. On the venture side, on the equity side, there is the fundamental business underwrite of this company or that company. And then on the infrastructure side, things that are reusable, things that have hard asset value are being offloaded into the credit markets at the appropriate rate of return and at the appropriate risk rating.
8. 30:01 – 38:52

   AI, Enterprise Software & Why Every Job Will Be Replaced or Enhanced

   1. MRMarc Rowan30:01

      coming from the shift in the economy.

   2. DHDavid Haber30:02

      Hmm.

   3. MRMarc Rowan30:04

      We operate under the assumption that every job is going to be replaced or enhanced, every single job.

   4. DHDavid Haber30:11

      Hmm.

   5. MRMarc Rowan30:12

      And I think that's what is going to happen. I mean, a world where GDP grows, where profit margins grow, where wages grow, but where employment does not maybe is okay.

   6. DHDavid Haber30:24

      Hmm.

   7. MRMarc Rowan30:24

      Maybe that's the consequence of having an older workforce or not having as many workers per retiree-

   8. DHDavid Haber30:29

      Hmm

   9. MRMarc Rowan30:30

      ... or not having as much immigration. How we balance this as a country, how we balance this as a world, how we balance this as a city, I think is gonna be the interesting challenge.

   10. DHDavid Haber30:39

       Totally.You know, a lot, a lot of our audience, you know, obviously are, are entrepreneurs kind of in the tech ecosystem, you know, many of whom maybe haven't had experience working with Apollo yet. Um, you know, how should, how should entrepreneurs listening to this think about when and how to engage with you?

   11. MRMarc Rowan30:55

       Early and partner-like. I mean, this is who we are. The ability and willingness to focus on any one transaction for an entrepreneur is just about the two resources we have, time and money.

   12. DHDavid Haber31:07

       Mm-hmm.

   13. MRMarc Rowan31:07

       And of those two, time is the one that is short, in shortest supply right now. And so the ability to engage us and to paint a picture of not just where you are, but where you're going, and how we can win together, I think is where the world is going, and this is happening in places that require specified knowledge. Defense, where we're spending an awful lot of time.

   14. DHDavid Haber31:31

       Yep.

   15. MRMarc Rowan31:32

       You do not get to come out and just show up in defense. You have to know a lot about the ecosystem, the environment, and everything else. But it's also showing up in the whole notion of capital being limited.

   16. DHDavid Haber31:43

       Hmm.

   17. MRMarc Rowan31:44

       Great entrepreneurs who have created things of value have had a choice historically, which is wait till the public markets as their exit. Now the world is changing so fast, maybe what they wanna do is to have an interim private liquidity event where they then get to recycle their capital back into the much higher rate of return and participate with the private capital event going forward and eventually getting to a public exit or getting to-

   18. DHDavid Haber32:08

       Mm-hmm

   19. MRMarc Rowan32:08

       ... a full monetization. We're seeing all different manner of this-

   20. DHDavid Haber32:12

       Hmm

   21. MRMarc Rowan32:12

       ... take place across our ecosystem. The number of partnerships I believe that are going to sprout up, whether it is the OpenAI ecosystem that they're building to be able to democratize their LLM, or is it the Anthropic ecosystem that is being built to democratize their way of doing things, I think it's the beginning of the proliferation of growth and finance partnerships.

   22. DHDavid Haber32:39

       Awesome. I'm, I'm curious to dig into maybe the, the value or kinda residual value that you see kind of in this world of AI. Um, you know, I, you know, there's been kind of the SaaSpocalypse. You know, you've been saying for months that, uh, you know, a lot of the real problem in indirect lending has been overexposure in, in, uh, in enterprise software, um, and that ultimately, you know, AI is gonna keep hurting that kind of book of business. Um, I guess where are we now, and where do you think we go from here?

   23. MRMarc Rowan33:07

       I, I think there's no going back. I mean, and this, this is our bias, and, uh, this is not exhaustive across the board. It does not apply to every company. But the notion that we woke up 8, 12 weeks ago and figured out that AI was gonna inter- impact enterprise software, really?

   24. DHDavid Haber33:25

       Right.

   25. MRMarc Rowan33:26

       Like, how could we as responsible credit people do this, or as responsible investors? And so the focus so far has been on credit. That's the most visible. That's where the press is focused. And if credit is problematic, that means the equity is really problematic.

   26. DHDavid Haber33:40

       Totally.

   27. MRMarc Rowan33:41

       And 30% of the private equity industry over the past decade has been devoted to enterprise software. I personally expect the returns from private equity in the ground to be disastrous-

   28. DHDavid Haber33:52

       Hmm

   29. MRMarc Rowan33:53

       ... because so much of exposure is to enterprise software, and this does not mean that enterprise software companies are going out of business. Far from it. It means that the prospects of on selling it, either to the public markets or to someone else, are now simply reduced.

   30. DHDavid Haber34:06

       Just because the prices that they paid were too high and... Yep.
9. 38:52 – 46:02

   Moral Leadership: UPenn, Merit & Doing Right Over Easy

   1. DHDavid Haber38:53

      So I, I wanna kind of shift the conversation in a slightly different direction, um, really to, to moral leadership. Um, you know, one of the things that I've admired about you, um, is just how passionate you've been about fighting antisemitism. Um, you know, obviously this came to a head after October 7th, you know, and at your alma mater. Um, I'm curious how you thought about, you know, being so vocal with university leadership kind of in, in that moment.

   2. MRMarc Rowan39:20

      Well, if I had thought about it more, I might not have done it. But it, it... I am a passionate person, but I, I will say the whole thing struck me as just incredibly unfair and incredibly ill-advised.

   3. DHDavid Haber39:33

      Hmm.

   4. MRMarc Rowan39:34

      What we were watching was not free speech. We were watching favored speech, preferred speech, and in the initial foray with the university that I had ahead of their Palestine rights conference, uh, I wrote to the president of the university and I said, "I'm a free speech absolutist. I believe this conference should go forward, but the university as a 300-year-old moral institution is funding it-

   5. DHDavid Haber39:57

      Hmm

   6. MRMarc Rowan39:58

      ... promoting it, requiring students who are Jewish to attend it, uh, during Jewish high holidays."

   7. DHDavid Haber40:04

      Mm-hmm.

   8. MRMarc Rowan40:05

      "And you've outsourced the ownership of this conference," which had gone on for many years, "to a known Hamas sympathizer and terrorist sympathizer. Other than that, I was fine with it."

   9. DHDavid Haber40:16

      [laughs] Right, right, right. Exactly.

   10. MRMarc Rowan40:17

       And the inability to reflect on th- the role of a university in society. What is the role of a university in society? And too many times the question was amorphous.

   11. DHDavid Haber40:30

       Hmm.

   12. MRMarc Rowan40:30

       I don't think our president at the time knew what the role of a university in society was.

   13. DHDavid Haber40:35

       Hmm.

   14. MRMarc Rowan40:36

       Is it academic excellence and research, or is it social change?

   15. DHDavid Haber40:42

       Right.

   16. MRMarc Rowan40:43

       And if it's social change, whose social change?

   17. DHDavid Haber40:45

       Right.

   18. MRMarc Rowan40:46

       Is it her social change? Is it what the trustees decided? Is it what the faculty decided? Was there a vote? No, what had happened in our university is we had had this us versus them, this anti-Americanism, anti-capitalism-

   19. DHDavid Haber41:02

       Hmm

   20. MRMarc Rowan41:03

       ... anti-merit on steroids. Israel, Palestine is not fully an antisemitic issue.

   21. DHDavid Haber41:12

       Mm-hmm.

   22. MRMarc Rowan41:13

       And that's not what I saw at these universities. I saw it as an anti-American, anti-system issue. And so when it persisted, I believe that we should not support those things that violate fundamental moral principles, and I said so.

   23. DHDavid Haber41:28

       Yep.

   24. MRMarc Rowan41:29

       Turns out a lot of other people felt the same way, even if they weren't saying it. Vast majority of donors decided to give the university a dollar per year versus whatever their donation was. We got the university's attention.

   25. DHDavid Haber41:43

       Yep.

   26. MRMarc Rowan41:44

       Ultimately, the public faux pas at testimony in DC where the inability to actually call terrorism, you know, murder-

   27. DHDavid Haber41:55

       Yeah, and not just p- I mean-

   28. MRMarc Rowan41:57

       ... as reprehensible was too much for the public to bear and for the powers that be to bear, and ultimately the chair, uh, and the president of the university resigned. But we're seeing that in a lot of places in society.

   29. DHDavid Haber42:10

       Yep.

   30. MRMarc Rowan42:11

       We saw it in our business community. We saw people fall on the DEI sword in some instances, or on the climate sword. People became ap- absolutists.
10. 46:02 – 55:04

    Apollo's Culture: Playing to Win & Building to Outlast the Founder

    1. DHDavid Haber46:02

       a very natural segue into culture here at Apollo. How do you view Apollo's culture? You know, I know playing to win is kind of one of the core ethoses. Um, and how do you sort of maintain that entrepreneurial culture which you've described throughout this conversation, you know, as the firm kind of continues to scale?

    2. MRMarc Rowan46:16

       It's, it's the best question of the day, and it actually is what occupies most of my time. So the greatest amount of effort of any project we've done i- in the past year has been on culture.

    3. DHDavid Haber46:28

       Hmm.

    4. MRMarc Rowan46:29

       And it's been to answer a simple question. What makes Apollo Apollo? And the good news or bad news, it's been a six-month negotiation. Because if you think about what's happened, when we were a small firm, the culture was one culture.

    5. DHDavid Haber46:43

       Hmm.

    6. MRMarc Rowan46:43

       Everyone was brought up, everyone was onboarded in the same way. It was all visible. It was pretty straightforward. At 4,000 people in asset management and 2,000 people in retirement services, we now have to be really deliberate. Plus, uh, I'm gonna do this for a long time, but I'm not gonna do this forever.

    7. DHDavid Haber47:01

       Yep.

    8. MRMarc Rowan47:01

       As a founder, I get some amount of leeway on culture. Um, but I wanna make sure that we are intentional about what we're doing. And so if we hire you as a young person, we teach you the business and we teach you the culture, and we do it really well. But if you are the 15-year person from another firm coming in to help augment our skill set, and there are now 500 of you, how do we teach you our culture?

    9. DHDavid Haber47:28

       Hmm.

    10. MRMarc Rowan47:28

        We know how to make you successful commercially, and if you work for me, you learn the culture one way. If you work for John Zito, another way. Jim Zelter, a third way. Scott Kliman and so on and so on. And so we've had a six-month negotiation-

    11. DHDavid Haber47:40

        Hmm

    12. MRMarc Rowan47:40

        ... over what makes Apollo Apollo.

    13. DHDavid Haber47:41

        Hmm.

    14. MRMarc Rowan47:43

        And that negotiation is reflected in a work product. That work product is now, uh, on our website under employment. It asks the question of what makes Apollo Apollo.

    15. DHDavid Haber47:53

        Mm-hmm.

    16. MRMarc Rowan47:53

        It is really controversial, and it is really honest.

    17. DHDavid Haber47:56

        Mm-hmm.

    18. MRMarc Rowan47:57

        And it's meant to be that way. It is... If you're thinking about coming to work here, make sure this is for you.

    19. DHDavid Haber48:03

        Mm-hmm.

    20. MRMarc Rowan48:03

        And if you're already here and trying to figure out what our cultural norms are, this is for you.

    21. DHDavid Haber48:08

        Totally.

    22. MRMarc Rowan48:09

        And now it's up to us to hire this way, review this way, promote this way, onboard this way-

    23. DHDavid Haber48:14

        Totally

    24. MRMarc Rowan48:15

        ... and do it. But while there are six principles, it does come back to playing to win. And you see this now, I'm sure, in all the growth companies. How do you keep a company that's been really successful hungry and playing to win? Most companies hit an arc-

    25. DHDavid Haber48:33

        Yeah

    26. MRMarc Rowan48:34

        ... and then they decline to mediocrity.

    27. DHDavid Haber48:36

        I see.

    28. MRMarc Rowan48:36

        Some actually descend into chaos.

    29. DHDavid Haber48:38

        I saw, I saw your graphic of put- you know, Blockbuster and, you know, like Mason and... [laughs]

    30. MRMarc Rowan48:41

        Look, those, those are the obvious ones.

Episode duration: 55:23