Altimeter (with Brad Gerstner)

1. 0:00 – 2:52

   Cold open, Season 10 framing: crossover investing and why Altimeter matters

   1. BGBen Gilbert0:00

      All right, well, hopefully AirPods don't screw things up too bad. Can look like humans on air, and if we ever end up in a situation with microphones that are out of frame, it'll be game-changing. It'll be just like we're talking to each other. [laughing]

   2. SPSpeaker0:12

      [upbeat music] Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Hm. Is it you? Is it you? Is it you? Sit me down, say it straight, another story on the way. Who got the truth?

   3. BGBen Gilbert0:29

      Welcome to Season Ten, Episode Four of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

   4. DRDavid Rosenthal0:43

      And I'm David Rosenthal, and I am an angel investor based in San Francisco.

   5. BGBen Gilbert0:49

      And we are your hosts. We've done Sequoia, we've done Andreessen Horowitz, but we have not gone deep on one of the biggest stories in venture right now: crossover investing. We are watching hedge funds like Tiger Global and Coatue come all the way down to seed investing, and we're simultaneously seeing classically early-stage venture capital firms like Sequoia completely reinvent their structure to hold on to their winners longer, even as they become public companies. And today, we wanted to analyze one of the firms that pioneered this dual approach of operating a hedge fund and a venture capital firm simultaneously, Altimeter Capital.

   6. DRDavid Rosenthal1:32

      There has been so much change in venture in the last few years. More change, I think, in the last few years than in the decade that I was doing venture, than watching it before. [chuckles]

   7. BGBen Gilbert1:43

      And listeners, to tell the story right, we are joined today by Brad Gerstner, the founder of the firm, and actually, to tell you the truth, he is joined by us. We actually recorded this episode in person, even with video, stands, microphones, everything, at the Altimeter office on Sand Hill Road. And for those of you who don't know, Brad has had an unbelievable career, starting five companies, so he's got a very different mentality than your sort of classic hedge fund guy. On the investing side, he led the Series C in Snowflake and still owns a massive stake of the company. He's led large investments and sat on the board of companies you know, like MongoDB, and Roblox, and Zillow, and Plaid. He led the SPAC that took Grab public in Southeast Asia, and he is widely known as one of the most knowledgeable people in the world on the business of online travel after his involvement in Expedia, Orbitz, Uber, and many others.

   8. DRDavid Rosenthal2:43

      And you forgot maybe the most important part: I think he's the number one bestie guestie on our- [laughing] ... friends over at the All-In Pod.

2. 2:52 – 6:07

   Sponsors + show housekeeping before the interview (Vanta)

   1. BGBen Gilbert2:52

      I think that's probably right. It's probably right. Well, listeners, before we dive in, we wanna thank the presenting sponsor for all of Season 10, Vanta, the leader in automated security and compliance. Vanta brings a fascinating approach, truly, to the whole compliance process, SOC 2, HIPAA, GDPR, and more. And back with us today to help analyze her own company, we have CEO and co-founder Christina Cacioppo. All right, so Christina, I know from our previous conversations that using Vanta to get SOC 2 certified can actually help startups grow faster than they otherwise would have been able to. What do you mean by that, and do you have an example?

   2. SPSpeaker3:34

      Yeah, so one example I really like are, it's kind of looking at smaller, generally fintech startups and, you know, canonical example here is, you know, a company like Modern Treasury, right? They're moving money. They need deep bank relationships to even launch their product. And so, again, part of even launching their MVP or building it is going and signing a partnership with a large bank. Today, a lot of large banks sort of won't, you know, take your email, take your call, unless you are SOC 2 compliant. And so we actually work with a lot of... I mean, Modern Treasury is much larger now, but started working with them when it was sort of three founders on a couch. And again, they needed a SOC 2 in order to even build their MVP, let alone get customers. So that's on the very early side of the spectrum, but actually, we have, we have a lot of, again, early fintech customers that just need one of these certifications in order to even build their product.

   3. BGBen Gilbert4:30

      So is it fair to say that this journey you're on right now of enabling earlier-stage companies to get a SOC 2 certification actually is one of the big forces behind the fintech wave?

   4. SPSpeaker4:43

      Yeah, I mean, I think there is just a, a leveling of the playing field here, right? And this is a, you know, compelling startup theme and investment theme, but I think Vanta is very much a part of taking something, in our case, compliance certifications, that had been onerous, and making it accessible for the, you know, two or three founders on a couch to go and do, and let them accelerate their business and also just honestly, like, compete with the, like, larger incumbents who are able to have the fifty-person compliance team that, you know, goes and looks at screenshots every week to make sure everything is in good shape.

   5. BGBen Gilbert5:18

      Thank you to Vanta, the leader in automated security and compliance software. If you are looking to join Vanta's two thousand-plus customers to get compliance certified in weeks instead of months, you can click the link in the show notes or go to vanta.com/acquired. Get that sweet ten percent discount.

   6. DRDavid Rosenthal5:35

      Thank you, Vanta.

   7. BGBen Gilbert5:37

      Well, we will cut over to our interview with Brad now, but please do know ahead of time that, uh, you can discuss this episode and everything else in the tech world afterwards with us at acquired.fm/slack. Join eleven thousand smart, thoughtful people like yourself, and we have some awesome new LP Show content out there. You can search Acquired LP Show in the podcast player of your choice. And, uh, lastly-... This is not investment advice. Do your own research. And now over

3. 6:07 – 11:34

   Brad’s origin story: entrepreneurship, real risk, and the cost of failure

   1. BGBen Gilbert6:07

      to Brad Gerstner from Altimeter Capital. Tell us about your family and your dad's experience with entrepreneurship.

   2. BGBrad Gerstner6:17

      Well, I grew up in a, in a small rural town in northern Indiana, near Notre Dame, first-generation college. My dad had, you know, classic immigrant story. His parents had kind of given up everything in order to help put their only child through college. He started at Northwestern. They couldn't afford to finish there. You know, ended up at, at Bradley in, in Illinois, got an engineering degree. And long story short, 1977, I was born in '71, so 1977, he becomes a general manager of a auto parts manufacturer in, you know, this small town that employed most of the people in the town.

   3. BGBen Gilbert6:57

      Was it a, like a GM, uh-

   4. BGBrad Gerstner6:59

      Yeah, it was, it was a supplier to GM, a supplier to Ford at the time. And remember, our auto industry was under assault by the Japanese auto manufacturers. You had double-digit interest rates and inflation, which, for the first time in 30 years, is all of a sudden a topic of conversation again.

   5. BGBen Gilbert7:16

      With the Fed under, under Volcker?

   6. BGBrad Gerstner7:18

      Yeah, under Volcker. We had, you know, you remember stagflation at the end of the '70s, which was low growth, high inflation. And for some reason... You know, so there was an acquirer that came along to buy this plant. They needed to get my dad and then the workers to go along, you know, with the deal. My dad said he could deliver the workers so long as they agreed not to lay anybody off. Of course, they said they would do that. You know, three months later, they were gonna lay off all these people, and in this small town, you know, your word's your bond, and my dad just couldn't live with himself with that outcome. And so in a fit of, of lunacy, decided that he was going to start a competitor. Um, he knew nothing about starting a business. There was no such thing in that part of the world as venture capital. All he knew is that he knew how to make these parts, and he knew he could inspire these men and women to join his cause, and, and it was a crusade, and it was a, you know... I look at it, and I'm sure I look at it through rose-colored lenses, but it was a valiant crusade. Unfortunately, he had to borrow money from the town bank.

   7. BGBen Gilbert8:26

      In a typical Acquired episode or a typical tech story-

   8. BGBrad Gerstner8:28

      Yeah

   9. BGBen Gilbert8:28

      ... it's like, "This is the hero's journey," and, like, he wins, right? [chuckles]

   10. BGBrad Gerstner8:31

       Right. [chuckles]

   11. BGBen Gilbert8:31

       And, like, you go off on this, like, amazing, you know, entrepreneurial journey, and you're like, "This is awesome."

   12. BGBrad Gerstner8:37

       Right.

   13. BGBen Gilbert8:37

       "I'm gonna go do the same for the..." That's not what happens, right?

   14. BGBrad Gerstner8:39

       I, I, I wish, I wish the story ended that way, um, you know, for his sake. I mean, he borrowed money from the bank, mortgaged the house, mortgaged the car. And the punchline is, there are moments in time where the deck is so stacked against you, notwithstanding all your best effort, notwithstanding all the extraordinary sacrifice of the team, or maybe even the brilliance of the idea, it's not meant to be at that moment. And, um, in venture capital, if you fail, the risk is largely on the venture capitalist. I mean, in Silicon Valley, failure is, on the part of the founder, so long as you conduct yourself in a way that's honorable, it's a badge of courage that you gave it a go. And we have an institutional structure where the venture capitalists can withstand that loss because they have a portfolio that they can, you know, cushion that with. So I often, you know, young founders will come in and say, "Well, I just don't know if I can take the risk." You know, they just graduated from Stanford. They have no student debt.

   15. BGBen Gilbert9:40

       Yeah.

   16. BGBrad Gerstner9:40

       You know, they're getting money from a venture capitalist. If they fail, they don't have to pay the money back. If they win, they get, [chuckles] you know, huge upside.

   17. BGBen Gilbert9:48

       If they're at the stage where they're actually taking money from a venture capitalist, and they have a term sheet, and that, you know, that's gonna happen for them-

   18. BGBen Gilbert9:55

       You've already won

   19. BGBen Gilbert9:55

       ... the personal risk there is extremely low.

   20. BGBrad Gerstner9:58

       I say there's, there's no risk. What, what risk are you talking about? The risk is, have a young family, mortgage your house, mortgage your car, double-digit interest rates and inflation. The business goes under. My dad loses his health. He loses his house. He loses his marriage, right? That's risk.

   21. BGBen Gilbert10:20

       Yeah.

   22. BGBrad Gerstner10:20

       Right? And the beautiful thing about this country is, you know, we have created a system where we encourage risk-takers. Unfortunately, in 19, you know, 80, in the middle part of the country, in a small town, my dad refused to declare bankruptcy. He would work the rest of his life trying to pay back that money because it was his word that he gave to the people who lent him the money. And so I think about that when I hear from entrepreneurs or when I even think about the risk associated with starting Altimeter-

   23. BGBen Gilbert10:50

       Yeah

   24. BGBrad Gerstner10:50

       ... or starting the other companies I started. It's really not risk relative to the risk he undertook. So I grew up around an entrepreneur, but it was not a heroic entrepreneurial story. And my grandfather, my father's father, basically forbade us from becoming entrepreneurs. And he said to the four grandchildren, "You can become professionals, you know, doctors, lawyers, architects, but please don't become entrepreneurs." And so I, you know, I, I felt like I owed that to him, even though I felt I was always kind of starting little enterprises in high school and thinking that way, and my brother did in college. Um, but I went to law school.

4. 11:34 – 18:45

   From public service ambition to business school: avoiding the ‘ask for money’ trap

   1. BGBen Gilbert11:34

      And you thought you were going to go into politics, be, you know, a leader in government. Uh, how far did you get on that path?

   2. BGBrad Gerstner11:43

      That was programmed pretty early. I had studied, uh, in '91, '92 at Oxford. I came back and worked for the US senator from Indiana, Dick Lugar.

   3. BGBen Gilbert11:53

      Hmm.

   4. BGBrad Gerstner11:53

      He was chairman of the Foreign Relations Committee at the time. We were denuclearizing Russia at the time. It was a pretty heady moment in time with a senior statesman, Rhodes Scholar, incredible human being. Honored to work with him, stayed close with him. And so when I graduated from law school, and I went to work for a big law firm, I got a call from Senator Lugar asking me, I don't know, I must have been 26 or 27, if I'd accept an appointment as deputy secretary of state in Indiana.... Evan Bayh, who went on to become governor and senator from Indiana, started there. So it's kind of a known launching pad into Indiana politics. So I, I became deputy secretary of state, and, you know, faced this fork in the road, that I was either gonna run for secretary of state or I was going to go try to make some money. And I concluded, having grown up around a family that struggled for money... In fact, my grandfather said, "We don't have money problems, we have lack of money problems." I've heard you talk about this before. Is it, is it fair to say that, um, you, you didn't wanna go raise money to run a political campaign? The idea of groveling for the rest of my career for money just didn't sit well with me. Kind of a loon, but somebody I admired was the 1991 campaign of Ross Perot. And he, you know, spent tens of millions of his own money to go on television in kind of a goofy way with poster boards and rail against the national debt, and I thought, "Nobody owns this guy." And Perot, [chuckles] people forget, he dropped out of the campaign three weeks before the election, and I think he still got 17 or 19% of the vote.

   5. BGBen Gilbert13:34

      He was an entrepreneur himself, right? He started-

   6. DRDavid Rosenthal13:37

      EDS.

   7. BGBen Gilbert13:38

      EDS, yeah, Electronic Data Systems.

   8. BGBrad Gerstner13:41

      And I wouldn't say I... You know, there, there's a lot about Ross Perot I don't know, and it's not an endorsement-

   9. BGBen Gilbert13:46

      Yeah, yeah, yeah

   10. BGBrad Gerstner13:46

       ... of, of his politics, but it was-

   11. DRDavid Rosenthal13:49

       But seeing that-

   12. BGBrad Gerstner13:50

       Yeah

   13. DRDavid Rosenthal13:50

       ... of like, "Nobody owns this guy."

   14. BGBrad Gerstner13:51

       It was a reminder to me. It was like, "Okay, I can either shake a tin can for the rest of my life..." Um, but like others who came before me, I said, "Hey, I'll go back to business school. Maybe I can make, you know, a little bit of money." And so the plan was go back to HBS.

   15. DRDavid Rosenthal14:05

       How did you decide on wanting to go to HBS? Did somebody inspire you or, or encourage you to do that?

   16. BGBrad Gerstner14:09

       It's slightly embarrassing story. Like, I didn't really do much research. I remember taking the, you know, the entrance exam, like, the last day, scrambling to fill out the application. In fact, I didn't even finish the application because I, I ended up getting an interview, and I remember the person who interviewed me said, "This is a unique situation. I can't say that I've ever interviewed somebody who didn't have time to complete the application." And so he started with, "Why didn't you have time to [laughing] complete the application?"

   17. DRDavid Rosenthal14:38

       [laughing] You're like, "Well, I'm deputy secretary of state right now."

   18. BGBrad Gerstner14:40

       "Well, yeah, well, I, I went through, I went through it," and it wasn't... Y- you know, it's just I decided late, and I was, I was working my ass off, but I said, "Now's the time," and we went through it, and-

   19. DRDavid Rosenthal14:51

       So you know that's a different outcome to the same story for Warren Buffett of he wanted to go to Harvard Business School, and he was so sure he was gonna get in, he didn't complete the application, was sure he was gonna get in. Of course, he didn't get in, and then he had to scramble, and that's how he ended up at Columbia, and of course, the rest is history.

   20. BGBrad Gerstner15:06

       Uh, when I was in high school, one of my first... You know, I worked and was, was going to school at the same time, and this was after this episode with my father. And the part of Indiana that I'm from, they make all the RVs and conversion, like, vans in the, in the, in the country. So I ended up with a job as kind of the right-hand, little chief of staff, go do anything I ask, of a guy named Pete Legal. And Pete Legal was starting a RV company, and I worked for two years for Pete. He had me doing everything, you know, in the accounting department with the CFO, you know, out on the line, helping to run purchasing for the Sierra RV line in 1987. Here's the interesting thing: Pete went on to build the largest RV company in the world, that he sold to Warren Buffett. And Warren has written a lot in his annual letters about Pete, who's just a legend of a human being, was a great inspiration to me. And it was funny because ultimately, I became fond and friendly with Ted Weschler, who works alongside Warren, and we worked on some deals together, and, you know, the world really-

   21. DRDavid Rosenthal16:17

       Oh, we're gonna talk about a deal that you worked on together in just a little bit here. [laughing]

   22. BGBrad Gerstner16:20

       [laughing] It really came full circle.

   23. BGBen Gilbert16:22

       I have the same personality characteristic that you do around an aversion to asking people for money.

   24. BGBrad Gerstner16:27

       Mm.

   25. BGBen Gilbert16:27

       And in fundraising for politics, I can see how that would be especially hard. I mean, you, you've raised, I think, literally billions of dollars over the years for Altimeter. What is it about the way that you fundraise now that hits differently in your psyche?

   26. BGBrad Gerstner16:42

       You know, I had the feeling at the time, and maybe it's just because at that point in time, I didn't believe in myself perhaps the way I believe in myself now, but it felt like a very personal ask. Like, "Give me money for my campaign." You know, now I am a steward. I am a fiduciary on your behalf, and I believe I'm gonna make you a lot of money, and we have made a lot of money for our LPs. And if you could see the letters we've received from university endowments, from foundations, from family offices, and the transformative things they outlined that we allowed them to do: free education, you know, dramatically more scholarships. You know, whether it's the environmental causes, whether it's immigration causes, whether it's inner-city schools. So to me, I think there is, you know, the great causes, I think, as somebody else coined the phrase, that we can work on behalf of in a way that's great for, uh, entrepreneurs, in a way that's great for our economy, and in a way that helps to, you know, really transform some underlying causes. So it's, it, it's an easier ask for me because it doesn't sound... It doesn't feel quite so personal.

   27. BGBen Gilbert17:51

       And even though when you're running for office, you know, it's in public service, it kind of felt to you more like, "Hey, do this thing for me, and I can't totally see the ROI for you as a citizen, but-

   28. DRDavid Rosenthal18:03

       Well, it's kind of a problem if you can see the ROI for you for giving me the money to [chuckles] invest, like...

   29. BGBrad Gerstner18:08

       No, I think, I think that's right. Uh, listen, I've gone on to raise a lot of money for people in politics, to... for a lot of other great causes. It's really easy for me to ask for others. It's a more difficult ask when I'm a beneficiary of the ask.

   30. DRDavid Rosenthal18:25

       And at 26, even with the support of your mentor, it's not like you had the broad network to-
5. 18:45 – 23:30

   Learning markets early: day-trading, the ‘no secret’ of investing, and discovering the internet

   1. BGBrad Gerstner18:45

      Quite the opposite, but, um, I love them both dearly. E- let me rewind just a little bit before that. 1989, I really start, you know, getting enamored with email networks, working in Prodigy, and following AOL in, in the '90s, really interested in investing. 1996, I'm graduating from law school. Now, my grandfather, who I mentioned, left me $25,000 when he passed away, and I day-traded that $25,000 to put myself through law school and business school. And I took the Series 7 because I thought, "Man, maybe there's something these people know that I don't know. I wanna know the dark secrets-" [laughing]

   2. DRDavid Rosenthal19:24

      [laughing]

   3. BGBen Gilbert19:24

      [laughing]

   4. BGBrad Gerstner19:24

      "... of investing." And then I realized, wow, none of these people know anything. [chuckles]

   5. BGBen Gilbert19:27

      That's the dark secret. [laughing]

   6. BGBrad Gerstner19:28

      Right? The dark secret is there is no secret. So 1996, when I'm graduating from law school, I also have this aha moment, like so many people did, with the Netscape browser, and I said, "This changes the game on this thing called the Internet," wh- which was just these computers talking, and email, and networks, and it felt wonky and inaccessible. And I remember gathering in the law school library, a group of my friends, including the guy sitting in there who's now my general counsel, and I said, "You gotta see this." So from 1996... Then I go back, work for this law firm. We started getting litigation claims of people who were doing domain squatting in 1996, while nobody in this 600-person law firm knew anything about the Internet, or domains, or anything else. So I raised my hand. I said, "I'll take all of that." You know, I helped them build the firm website, and I quickly became known as the internet guy. But I was thinking, "So if I go back to business school, like, I've gotta find my way to Silicon Valley." When I was graduating from law school, I actually came out here because there was an innovative law firm out here called VLG, the Venture Law Group-

   7. BGBen Gilbert20:37

      Oh, yeah.

   8. DRDavid Rosenthal20:37

      Oh, yeah

   9. BGBrad Gerstner20:38

      ... that was taking equity stakes at the time for doing work for companies. So I literally got on a plane. I flew out here. The office was right next to the Rosewood, across the street. I just walked into the- their offices and said, "Hey, I'm looking for a job." Now, they didn't have a job for me, but, you know, it started to demystify this place for me, and business school was going to be my pivot, my off-ramp, to coming out here. So I go to business school in 1999. I mean, this is-

   10. DRDavid Rosenthal21:06

       Peak. Peak

   11. BGBrad Gerstner21:06

       ... this is peak peak, right? And, you know, McKinsey and Goldman couldn't get anybody to show up at their interviews at HBS in 1999.

   12. BGBen Gilbert21:15

       'Cause all your classmates are just so gaga for internet.

   13. BGBrad Gerstner21:17

       Every classmate is gonna start a company. Every classmate's gonna work for a startup. Consulting firms were, you know, being started that were Internet-only.

   14. DRDavid Rosenthal21:26

       [chuckles]

   15. BGBrad Gerstner21:26

       Um, it was, it was, it was really an interesting moment in time. Now, again, I'm day-trading CMGI out of the back of my finance classroom-

   16. DRDavid Rosenthal21:35

       [laughing]

   17. BGBen Gilbert21:35

       [laughing]

   18. BGBrad Gerstner21:35

       ... knowing that this thing's going to zero, but I'm gonna ride it while I can to put myself through business school.

   19. BGBen Gilbert21:40

       And is that, like, E-Trade, or how are you day trading at that point, in the back of the room?

   20. BGBrad Gerstner21:43

       Yeah, we had Bloomberg Terminals right outside the classroom.

   21. DRDavid Rosenthal21:45

       Uh-oh.

   22. BGBrad Gerstner21:46

       I had a Fidelity account, actually, and I would do my research on the Bloomberg, and then we'd place trades. Listen, I was what's known as a poet. I mean, I'm a lawyer from Indiana.

   23. DRDavid Rosenthal21:57

       [laughing]

   24. BGBrad Gerstner21:57

       Show up, I had never run a spreadsheet in my life, and I show up, and I have all these guys who've worked for hedge funds, private equity firms, venture firms, Wall Street guys, investment bankers. And so all of a sudden, I'm huddled around, you know, these machines with folks who knew a lot more than me.

   25. BGBen Gilbert22:13

       Is poet in finance the same thing as, like, a fish in poker?

   26. BGBrad Gerstner22:17

       [chuckles] Exactly. [laughing]

   27. DRDavid Rosenthal22:18

       [laughing]

   28. BGBrad Gerstner22:19

       I- let's put it this way: we were transitioning to taking exams on computers, and there were two of us who took our finance exam with a calculator and a pen, and the rest did it with a spreadsheet. I remember myself and a classmate of mine, uh, who was a doctor, Chris Gilligan.

   29. DRDavid Rosenthal22:35

       And look at you now. [chuckles]

   30. BGBrad Gerstner22:36

       Um... [chuckles]
6. 23:30 – 27:14

   Building in the dot-com era: an online travel infrastructure company and the IAC/Expedia deal

   1. BGBrad Gerstner23:30

      It was called NLG, National Leisure Group, and basically, what we were trying to build was the infrastructure, think Shopify in some ways, the infrastructure, uh, that would power Expedia, Travelocity, Yahoo!, others who were selling travel. They were selling air tickets. They were plugged into these global distribution systems, but there was no GDS for selling vacation packages, cruises, and all these other things. So we said, "Let's go build the GDS effectively for that," and we partnered with SoftBank. We raised, must be 50 million bucks for that business. We bought a little business to give us kind of the kernel. Uh, we built a digital layer on top of it, and while the rest of the world was imploding, we found ourselves in a pretty enviable position. We built the business to over a billion in gross bookings. Think it had over 1,000 employees at the peak, and-

   2. DRDavid Rosenthal24:20

      That was all, like, within a year, right?

   3. BGBrad Gerstner24:21

      That was within 18 months because, again, it worked. Like, people were actually buying this stuff online, right? And we were plugging into existing pools of demand. We weren't going out and having to create demand. So Expedia launches, you know, a cruise or a vacation package booking engine, and the next day, a lot of people are actually buying it, and we're kind of the Shopify, if you will, inside.... And so Rich Barton, who ran Expedia, said, "Hey, we wanna buy the business." And then we ran into Dara Khosrowshahi, who was running M&A for Barry Diller at the time, and he said, "You know, I wanna buy the business."

   4. BGBen Gilbert24:56

      And to be clear, this is pre-IAC buying Expedia.

   5. BGBrad Gerstner25:00

      Correct.

   6. BGBen Gilbert25:00

      So these are two completely different entities bidding against each other for your company.

   7. BGBrad Gerstner25:04

      Correct, and I said to Dara, "Well, we already have an interested party that we're talking to." And so he goes, "Well, let me talk to Barry."

   8. BGBen Gilbert25:12

      [laughing]

   9. BGBrad Gerstner25:12

      And so he talks to him, and they come back, and he said, "Well, who is it?" And I said, "Well, I can't tell you that, but it's one of the big online travel players." And he goes, "Well, I think Barry wants to buy them, too." [laughing] And that's ultimately what went down. Between, um, October of 2000 and May of 2001, uh, we put together a deal where USA Networks would be renamed IAC, bought both NLG, uh, and Expedia.

   10. BGBen Gilbert25:39

       Oh, those were concurrent?

   11. BGBrad Gerstner25:41

       Concurrent deals, announced together. Uh, I remember being in the back of a limousine in Hollywood on my way to Barry Diller's house with Rich Barton, and we looked at each other and we were like, "Strange world. How'd we end up here?"

   12. BGBen Gilbert25:53

       [laughing]

   13. DRDavid Rosenthal25:54

       This was the beginning of Barry transforming from a media guy-

   14. BGBrad Gerstner25:58

       Mm

   15. DRDavid Rosenthal25:58

       ... into a media and technology-

   16. BGBrad Gerstner26:01

       Yeah

   17. DRDavid Rosenthal26:01

       - guy and, and building IAC. You know, yeah, it was USA Networks, and it became IAC.

   18. BGBrad Gerstner26:06

       Well, I would say two things about that real quickly. First, Barry was early to understand transactional commerce through a screen.

   19. DRDavid Rosenthal26:17

       Mm.

   20. BGBrad Gerstner26:17

       Okay?

   21. DRDavid Rosenthal26:17

       Because of Home Shopping Network.

   22. BGBrad Gerstner26:18

       Because of Home Shopping Network. He also acquired Ticketmaster, and he also acquired an, an asset called 1-800-HOTELS, and he also acquired some catalogs. And what they all had in common was transaction... You know, they were all e-commerce-based business models, and they were through various mediums, the biggest being Home Shopping Network, which is through television. So for him to squint a little bit and to see how all these transactions were gonna move to the internet was not that difficult, and the commerce engine, the commerce flywheel that was flying the fastest for him, was 1-800-HOTELS, that he would rename Hotels.com. So he was doing extraordinarily well in travel, understood that that would be a big category of online commerce, and I remember very distinctly him talking about, you know, commerce through all the screens, and that was in, you know, 1999, 2000, before most people saw it.

7. 27:14 – 32:33

   Post-bubble lessons: unit economics, risk premium shocks, and why fragile models die

   1. BGBen Gilbert27:14

      I think this is such an important thing to realize about the dot-com bubble. 'Cause everyone looks back at it and makes jokes, but the consumer behavior was there. It was a objectively better way to transact in all these different mediums, and the bubble burst because it was a speculative asset bubble, and capital went away if you didn't have a business model. But for those who did and who could, you know, be free cash flow positive, this is where all the demand was going, and that never went away, right? Could you feel that in the moment, of like, "People still wanna do this as long as..."

   2. BGBrad Gerstner27:47

      I can't say that I did. I, I, you know... Like, I was really worried about... You know, you gotta remember, the, the size of the bubble bursting, the change in risk premiums, right, and then the events of September 11th, 2001, they were all so compressed. It's the fog of war, right? I think about all we really knew for sure is this internet thing wasn't going away. There are gonna be real businesses built around it. But it was very unclear when you would have the capital required to build the businesses, where the capital was going to come from. You know, and in hindsight, it seems pretty simple, but I would say 2001, 2002, 2003 turned out to be a gift, but that's a slog, right, when you're going through it.

   3. DRDavid Rosenthal28:33

      Yep.

   4. BGBrad Gerstner28:33

      I look at business models today that have, you know, negative unit economics, negative gross margins, raising money at super high valuations. I have post-traumatic stress from that period. Because if you are a high-burn business with negative unit economics, and you fly into a world where risk premiums change, it doesn't matter how good you are, you cease to exist.

   5. BGBen Gilbert28:56

      Mm-hmm.

   6. BGBrad Gerstner28:57

      Right? And so-

   7. BGBen Gilbert28:57

      And, and they will change eventually. I mean, that's the thing, that-

   8. BGBrad Gerstner29:00

      Uh, just look at what's happened over the course of the last eight weeks, right? Um, growth multiples are down 50%. Risk premiums have changed dramatically. There are a lot of businesses that are in the category I just described that aren't gonna make it.

   9. DRDavid Rosenthal29:12

      So the natural thing to decide after all this is that you're gonna go be a public markets investor-

   10. BGBrad Gerstner29:17

       [laughing]

   11. DRDavid Rosenthal29:17

       ... right? [chuckles] Like, uh, this is part of why we wanted to-

   12. BGBrad Gerstner29:19

       Yeah.

   13. DRDavid Rosenthal29:20

       Hey, it's a great story.

   14. BGBrad Gerstner29:21

       Yeah.

   15. DRDavid Rosenthal29:21

       But also, like, what Altimeter ultimately becomes, and this... You know, you guys, I think, are maybe the purest play example, certainly one of the first, if not the first, life cycle investor. You know, it was just not at all obvious that you should go-

   16. BGBrad Gerstner29:35

       Mm

   17. DRDavid Rosenthal29:35

       ... join a hedge fund at this point, right? [chuckles] Like, how did that happen?

   18. BGBrad Gerstner29:38

       Well, yeah, I mean, so there's a little bit more in between. You know, so September 11th happens, which is, you know, a really catastrophic event, particularly for our company that was an online travel company, and so we negotiated kind of this soft landing with IAC. I won't take you through all the trials and tribulations, but it was a good outcome for General Catalyst. I thought I was gonna go back and join David and Joel. I knew they were two extraordinarily special human beings, and they were gonna build something really big. But I'd kind of been bitten by the startup bug. A friend named Beje Josemiah, who now runs Lightspeed in India, uh, and Southeast Asia, had an idea, and it effectively was... Think of Yelp, pre-Yelp. And so Beje and I started this business. Um, we bootstrapped it, had a bunch of venture capital term sheets. For a variety of reasons, didn't take them, and we sold that business, uh, a couple years later to a public company in Seattle. And again, in the first transaction, you know, I'd worked really hard at NLG, and I think I walked away, after being the CEO and helping put the deal together, with a million dollars, which, for a poor kid from Indiana, that was game-changing. But by Silicon Valley standards today, people would be like, "Well, well, well [chuckles] you know, are you-

   19. DRDavid Rosenthal30:49

       Poor Brad. [chuckles]

   20. BGBrad Gerstner30:50

       ... are you, are you clueless?" There was a lot of work that went into that. The second business I started with Beje, I think I owned 40% of the business when we sold it. That was four or five X the outcome. And then-... when I thought about what I wanted to do, I had two competing ideas. One, one was another operating business. Like, if you're an entrepreneur, you have these ideas, you have to get them out of your craw. But what I really thought that I was better suited for was investing. And a person who made this clear to me was Rich Barton. And, um, Rich one day sat me down, and he said, "I don't think you're a great entrepreneur." And I said, "Rich, that's so insulting. [laughing] Why?"

   21. BGBen Gilbert31:29

       [laughing]

   22. BGBrad Gerstner31:29

       And he said-

   23. BGBen Gilbert31:29

       Especially from Rich, like, the consummate entrepreneur.

   24. BGBrad Gerstner31:32

       Yeah, right, right, right. And, you know-

   25. DRDavid Rosenthal31:32

       Well, he keeps it real. [laughing]

   26. BGBrad Gerstner31:33

       And, um-

   27. DRDavid Rosenthal31:35

       Apparently

   28. BGBrad Gerstner31:35

       ... And he said, "You know, being an entrepreneur is the art of the possible," right? "You have to will things into existence." And he said, "You know, you constantly think about what can go wrong. When you're an entrepreneur, oftentimes you have to suspend disbelief and just think about what can go right." And he said, "But as an investor, investors think about distribution of probabilities, not possibilities." And he's like: I've always, you know, kind of observed you, like, your training as a lawyer, how you think as an investor, like, you're gonna make a great investor. And so I was like, "You know what? He's right." And the best investment business model, right, is kind of this venture capital hedge fund business model. I thought there was gonna be a lot of disruption occur in that business model. And so when you say-

   29. BGBen Gilbert32:23

       Also, when you say this, this business model, this venture capital hedge fund business model-

   30. BGBrad Gerstner32:26

       [chuckles]
8. 32:33 – 38:52

   Apprenticing at PAR Capital: concentrated public investing + early private bets (Zillow, Google, Priceline)

   1. BGBrad Gerstner32:33

      Correct. I'll hit that in just a second, but I wanted to start a business, and I said, "I will start... You know, I think I can build a better version of this model." At the time, if you really rewind the clock, Warren Buffett, right? I, I don't know what year it was, 1955, when he started his hedge fund. He did both publics and privates, right? He didn't distinguish. He, he just sought out great investments. Paul Reider, who started PAR Capital, was doing private investments before Brad Gerstner showed up. Seth Klarman at Baupost was doing private investments, you know, before we coined the term crossover, right? David Abrams in Boston. So I had a lot of legendary investors I looked up to, that they never thought of the world in crossover, but they thought the world... You know, there wasn't this artificial constraint that I can only invest if you're pre-IPO or you're post-IPO.

   2. DRDavid Rosenthal33:25

      What did private investments mean to them? Did it mean what we think of, or did it mean something else?

   3. BGBrad Gerstner33:29

      Well, I would say for them, private investing was maybe buying auto dealerships, or newspapers, or textile companies, or whatever the case may be. And as you know, in value investing, which was really the rage of that couple of decades, was, "I'm gonna bu- find a company with a bunch of free cash flow. I'm gonna use that free cash flow to go invest in things that actually have higher returning characteristics." Paul invested in that first company, NLG. He was on the board. We got to know each other quite well. He saw me day trading in companies like Priceline, and he thought, "This is interesting, a CEO who actually is also an investor." So, you know, I remember him saying to me, "You ought to come work with me someday." And so after we sold that company, OpenList, I showed up and I said: "Hey, I wanna come work with you. I can run the technology part of the business. You don't have a technology business. I'll build a technology business, both public and VC, okay? Which is consistent with historically what you've done." And I said: "If I like the business, I'm gonna start my own, so you don't have to pay me. Make me an apprentice. All I ask is that we have lunch together every day, and you teach me the hedge fund business."

   4. DRDavid Rosenthal34:43

      Yeah, you'd made a, you know, couple million dollars at this point, so let's see.

   5. BGBrad Gerstner34:46

      Right. Right. So I mean, I didn't have a lot of money, but again, like-

   6. BGBen Gilbert34:48

      And did he take you on that deal? He said, "Oh, great, you can, you can, quote, unquote, 'work here' with... And I, and I won't pay you"?

   7. BGBrad Gerstner34:54

      You know, the funny thing is, he did say, "Kind of come apprentice."

   8. BGBen Gilbert34:58

      Yeah.

   9. BGBrad Gerstner34:59

      And I think I was two weeks in, and he said, "This is ridiculous." [laughing]

   10. DRDavid Rosenthal35:02

       [laughing]

   11. BGBen Gilbert35:02

       [laughing]

   12. BGBrad Gerstner35:02

       You know? Um, he said, "Okay, I'm gonna pay you. You're gonna do this." And I will say, it was one of the most extraordinary mentor-mentee, you know, journeys over the course of the next two and a half years. He's a legend. He doesn't get the credit he deserves. And he gave me the autonomy to, on the public side, you know, go invest in my entire book in Google, and Priceline, and, you know, a couple great companies, and then to go make some venture capital investments, like leading the series, you know, B in Zillow. And I remember at the time thinking, "This is so easy." You know, I had such deep conviction in Google, and I didn't have to have this highly diversified book, and if it, if it went down, Paul would come into the office and say, "What do you think?" I'd say, "Buy more. I'm heading to yoga." [laughing]

   13. DRDavid Rosenthal35:50

       [laughing]

   14. BGBen Gilbert35:50

       [laughing]

   15. BGBrad Gerstner35:50

       Right? It was just like... And, uh, and so but we had a, we, we had a really great run together.

   16. BGBen Gilbert35:57

       I didn't realize that you, that was with Paul when you led the Series B in Zillow, because you, you were a Zillow board member from that point on-

   17. BGBrad Gerstner36:04

       Yeah

   18. BGBen Gilbert36:04

       ... for quite a long time. Did you stay on the board of Zillow, sort of as an independent, even after leaving Paul's firm and starting Altimeter?

   19. BGBrad Gerstner36:13

       No, I, I, I, I left the board. I don't know if it was e- e- exactly contemporaneous, uh, to that, but about that time. You know, by the end of 2000... I mean, listen, I learned so much from Paul. And all kidding aside, the idea of portfolio management, risk management, uh, Paul didn't call it essentialism, but, you know, running a simplified, concentrated portfolio around your best ideas was something that I absolutely... I may have been constitutionally predisposed to believe that anyway, but we were just very symbiotic in our thinking about how to manage portfolios. He couldn't have been more supportive, and so I learned through some pretty heady times with him. And then by two- at the end of 2007, I, you know, kind of said to him, "I, I think I wanna do my own thing."

   20. DRDavid Rosenthal37:00

       You led the Series B in Zillow as a crossover hedge fund.... the idea of crossover, you know, existed, as you said, in, in not necessarily in tech and other, you know, domains, but also in tech with TCV and, and others.

   21. BGBrad Gerstner37:14

       Yeah.

   22. DRDavid Rosenthal37:14

       They were not leading Series Bs [chuckles] in companies at that. Like, that was-

   23. BGBen Gilbert37:17

       'Cause a Series B at that point in time is what? 10, $15 million? I mean, it's not a 50 or 100.

   24. BGBrad Gerstner37:22

       Yeah, that's right. I think... I'm trying to think the, the check size. We may have put in 20 to 30 million bucks, and if I recall, it was a couple hundred million dollar valuation. Listen, to his credit, and another OG, Jay Hoag, who started TCV, was already in Zillow by the time I came into Zillow, [laughing] right?

   25. DRDavid Rosenthal37:40

       Wait, he came in in the A with Benchmark?

   26. BGBrad Gerstner37:42

       He came- yeah. I m- maybe it's, uh, you know, the nomenclature. I don't know if one was a C and an A and a B, but those were the first three rounds of institutional capital. And, you know, Jay had a relationship with Rich from his days at Expedia.

   27. DRDavid Rosenthal37:54

       Yep.

   28. BGBrad Gerstner37:55

       I obviously had a relationship with Rich. We, uh, we knew he was a special entrepreneur. I knew Bill as well, and so it was a big idea. It was a special collection of people out of Expedia, led by Rich and Lloyd. Um, but I remember at the time talking to Jay about, you know, like, technology, crossover ventures. [laughing]

   29. BGBen Gilbert38:16

       [laughing]

   30. BGBrad Gerstner38:16

       Like, you are the guy-
9. 38:52 – 45:24

   Founding Altimeter into the 2008 crisis: launching with tiny capital and huge conviction

   1. DRDavid Rosenthal38:52

      Okay, so it's 2008. [chuckles] Two- end of 2007, beginning of 2008. You tell Paul you're gonna-

   2. BGBrad Gerstner38:57

      Yeah

   3. DRDavid Rosenthal38:57

      ... go out on your own, uh-

   4. BGBen Gilbert38:58

      You just keep nailing this timing.

   5. DRDavid Rosenthal38:59

      Yeah, you're just, like, really [chuckles] --

   6. BGBrad Gerstner39:01

      I know.

   7. BGBen Gilbert39:01

      Like, mm, the whole world's going go, go, and just in case it falls off the edge-

   8. BGBrad Gerstner39:04

      No, I, I wish, I wish I was nailing it. I got married at the end of '07. We had our first child on June 3rd of 2008. I remember, y- y- you know, the world cracks were shown in August 2007. Like, uh, whenever you look at these stock graphs, they look at like they're generally stable, but man, the number of days of lost sleep. But I remember saying to Michelle... You know, we didn't have that much money. We were living in a few thousand square foot, kind of, subterranean apartment in Boston. We were having our first child, and it was clear the world was getting tougher by the summer of 2008, and I said, "I think I'm starting... You know, I'm, I'm gonna start my own firm. I'm gonna tell Paul." And let's just say that when you're nursing a baby- [chuckles]

   9. DRDavid Rosenthal39:46

      [chuckles]

   10. BGBrad Gerstner39:47

       ... in September of 2008, October 2008, I have CNBC on, it's like you just want to find the wastebasket to get sick in, and I'm launching with no money.

   11. DRDavid Rosenthal39:59

       'Cause you had a bunch of commitments, and they dried up, right?

   12. BGBrad Gerstner40:01

       Right. So at the end of '07, you know, the track record had been, had been good, and, you know, so I talked to some university endowments, foundations. Now, I didn't know this world at all. Like, I didn't know the world of LPs at all. Um, but I talked to a few people, and they're like, "Hey, we'll give you some money," and so I thought I was gonna launch with 100 to 200 million bucks. But it was clear by September, October 2008, people thought the financial world might be over forever. And it's hard now-

   13. BGBen Gilbert40:29

       It's been a good century or two, but-

   14. BGBrad Gerstner40:30

       It's hard, it's hard now to, like, put ourselves back in those shoes, but when, when you think, like, people thought Lehman, Morgan Stanley, Goldman Sachs were all going to collapse, right? And nobody knew the contagion effects of that. Nobody knew the impact on the dollar. Nobody knew the impact... You know, the thought was it was going to be a very deeper depression, and so it's interesting just to put in the mind of the founder. People say to me, "Oh, you picked a really great time to launch." [chuckles] Okay, I can assure you-

   15. BGBen Gilbert40:57

       I was saying it, no, like, the, like, uh, sarcastically.

   16. DRDavid Rosenthal41:00

       Yeah.

   17. BGBen Gilbert41:00

       Like, I was not-

   18. BGBrad Gerstner41:01

       It's a... I mean, it was... In fact, one of my advisors, who runs a big hedge fund-

   19. BGBen Gilbert41:06

       What's a big hedge fund to you?

   20. BGBrad Gerstner41:07

       Well, he ra- he, he ran a multibillion-dollar hedge fund at the time.

   21. BGBen Gilbert41:10

       Okay.

   22. BGBrad Gerstner41:10

       A- and it... I just had an informal group of advisors, and he said, "You've made a huge mistake. Go back to Paul and see if he'll give you your job back-

   23. BGBen Gilbert41:18

       Whoa

   24. BGBrad Gerstner41:19

       ... and don't do this," right? And because I had organized my life in a really humble way, I didn't need money, and I had started a few other companies, and when I started them, I started them basically from scratch. I knew what it felt like. I knew that feeling, that founder feeling on day one. It was, was exci- exciting and terrifying, and I was like, "I got this." Like, "The horse has left the barn. I'm doing this." And, and to Paul's credit, Paul was like, "You got this." You know, and he had started PAR with less than $3 million in the S&L crisis in 1991, and I had a roadmap, and I had a mentor who believed, and I had a clear vision as to where I was going to go, and I knew I was gonna do it for a really long time.

   25. BGBen Gilbert42:06

       And you also had about $3 million, if, if-

   26. BGBrad Gerstner42:08

       Right

   27. BGBen Gilbert42:08

       ... our research is right.

   28. BGBrad Gerstner42:09

       Yeah, I had... I think on my day-one investors, not to out them, but Paul was one of them. My brother was one of them. Now, my brother, so my brother, oldest brother, is about 15 years older than me. The side note is he's an architect. He had saved his entire life a million bucks, like, worked I don't know how many years, 15 years to save a million bucks or something, and he invested [chuckles] it all in a hedge fund. I don't know why I laugh. Put it in a hedge fund in LA, and the guy stole all 200 million of this money that he raised.

   29. DRDavid Rosenthal42:41

       Oh, my God.

   30. BGBrad Gerstner42:42

       So my brother literally worked 15 years-
10. 45:24 – 51:34

    Making crossover real: why private stays private longer and how Altimeter structured dedicated long-duration funds

    1. BGBen Gilbert45:24

       Why was it by 2007 that people had started adding these private companies to hedge fund portfolios?

    2. BGBrad Gerstner45:31

       So the observation I had, probably in 2004, 2005-

    3. BGBen Gilbert45:36

       Yeah

    4. BGBrad Gerstner45:36

       ... was, and I was a securities lawyer by training. I had done a bun- worked around a bunch of IPOs. Um, maybe that helped, but i- you know, I was like, companies, the private markets are becoming way deeper, way more liquid.

    5. BGBen Gilbert45:51

       Hmm.

    6. BGBrad Gerstner45:52

       Companies are gonna scale faster because the internet provides a network upon which they can scale, and they're gonna stay private longer because there are deeper pools of private capital, and we've made it more difficult for them to go public post-2000. Okay?

    7. BGBen Gilbert46:07

       And then certainly post-2008.

    8. BGBrad Gerstner46:09

       Correct. And TCV was there. Chase had started Tiger. Philippe had started Coatue. So we started to see examples of hedge funds that were really smartly, I think, starting to do some private investing, and I thought, "I wanna build the best crossover fund in the world that's based in Silicon Valley, built by a founder." Right? And I thought that was my differentiator, right? That I had a network in Silicon Valley. You know, most of the other hedge funds were in New York or Boston. Most of them were stock pickers, not founders. And so I thought, "I can do this, you know, in a way that's really more empathetic and more closely aligned with founders, like true venture, but that could scale all the way into the public markets." And so i- it was delayed in 2008 because nobody wanted commingled funds, but by 2010, we had... We got off- We had a great start in 2008, 2009, 2010, and by 2010, people were like, "Okay, now we'll let you, you know, start to, uh, undertake your vision." And so 2011, we started putting together the first dedicated pool of capital. 2012, I moved to Silicon Valley, and that first dedicated pool of capital-

    9. BGBen Gilbert47:25

       Dedicated for venture investing versus the single pool?

    10. BGBrad Gerstner47:28

        Right. So, so, so, so we had a public pool of capital, which was long-short technology, effectively. We also became pretty well known for doing a lot of travel-related investments. Um, but in that pool of capital, we could also do a certain amount of private investing.

    11. BGBen Gilbert47:45

        Hmm.

    12. BGBrad Gerstner47:45

        But we realized that for the venture and growth opportunities that we saw, we needed a longer duration pool of capital.

    13. DRDavid Rosenthal47:52

        The strategy makes sense, and history has obviously shown that. But how do... Yeah, how do you trade off, like, if you're running a public book, you probably wanna be pretty close to fully invested. For privates, you need dry powder. [chuckles]

    14. BGBrad Gerstner48:05

        Mm-hmm. Mm.

    15. DRDavid Rosenthal48:06

        Uh, how did you solve that? Is that by raising these dedicated pools?

    16. BGBrad Gerstner48:10

        Like any entrepreneur founder, right, you have to see some market changes that give an opening for a new entrant.

    17. BGBen Gilbert48:17

        Mm-hmm.

    18. BGBrad Gerstner48:17

        Right? Because the incumbents have advantages, right? And so I believed that the very nature, the three things that I mentioned, IPOs harder to do, companies scaling faster, deeper private pools of capital, but I also believed that that was going to lead to the industrialization of venture, right? That this thing w- the, like, the winners were gonna look different than the previous generation, and this was an industry that was only a generation or two old.

    19. BGBen Gilbert48:41

        Venture capital.

    20. BGBrad Gerstner48:42

        Venture capital.

    21. BGBen Gilbert48:43

        Yeah.

    22. BGBrad Gerstner48:43

        And so we needed a long-duration pool of capital. We needed a product that suited our public market investors, so we raised that first pool of capital. Now, when I raised it, there was the requisite level of skepticism, like, "How, uh, you know, how do you think you're gonna compete with Sequoia? How do you- how are you gonna compete with Kleiner? How are you gonna compete..." And we made very clear that, um-... I thought that the business building journey that started in that first institutional raise was different than what we intended to do, right?

    23. DRDavid Rosenthal49:15

        Yeah.

    24. BGBrad Gerstner49:15

        Like, I had raised a lot of money, three different companies, right, as a founder, and so-

    25. BGBen Gilbert49:21

        Which if, if it's two or three raises per company or more, and think 30 firms you talked to, to, to get one term sheet, like-

    26. BGBrad Gerstner49:28

        Right

    27. BGBen Gilbert49:29

        ... you knew hundreds of venture firms at this point.

    28. BGBrad Gerstner49:31

        Right. And, and had deep relationships with people who we had made money together.

    29. DRDavid Rosenthal49:36

        So I assume your answer to that question of how you're gonna compete with Sequoia at that moment in time was, "We're not."

    30. BGBrad Gerstner49:41

        We're not.
11. 51:34 – 56:04

    The Snowflake bet: cloud security turning point, ‘ARR isn’t equal,’ and investing by doing the work

    1. BGBen Gilbert51:34

       When you led the Snowflake round, do you remember what the share price was?

    2. BGBrad Gerstner51:38

       I don't remember what the exact share price was. I think the enterprise value at the time was somewhere around $175 million.

    3. DRDavid Rosenthal51:46

       Okay, so that was 2012.

    4. BGBrad Gerstner51:49

       I... Well, the fund was 2000... vintage 2012, 2013, I think. I, I'm not sure when that first round of Snowflake was.

    5. DRDavid Rosenthal51:55

       Yeah, that might have been-

    6. BGBrad Gerstner51:56

       '13, '14.

    7. DRDavid Rosenthal51:57

       14.

    8. BGBrad Gerstner51:57

       Yeah.

    9. DRDavid Rosenthal51:57

       But at that moment in time, did you have some insight that you felt nobody else had at that moment, or was it the right time? Like, how-

    10. BGBrad Gerstner52:05

        Well, I, I... A, a few things. Number one, I did have confidence that, you know, I was a decent investor, right? So we worked really hard. We're blue-collar. There's different ways to prosecute the strategy. I think there's some people who work the cocktail circuit, and, you know, we really were, were students of... We're anthropologists about, like, where things were going and what was going to be big. And at the time, there was a lot of pessimism, frankly, about cloud computing. Salesforce, you know, had some quarters where they saw more deceleration than people thought, and there were really kind of these obstacles. One was the cost of compute in the cloud versus the cost in a data center, but the big one was this perception that, like, "I'll never put my customers' data in the cloud," right?

    11. DRDavid Rosenthal52:57

        Mm.

    12. BGBrad Gerstner52:57

        It was really a security issue.

    13. BGBen Gilbert52:58

        Which then, like, let's just review history. Like, everyone that decided, that was not a tech company, that they needed to maintain an on-prem data center got hacked and leaked customer data-

    14. BGBrad Gerstner53:07

        Yeah

    15. BGBen Gilbert53:07

        ... or lots of them, and everyone who shifted to the cloud, you know, "Ooh, do we really trust Microsoft and Amazon?" They're pretty good at that.

    16. BGBrad Gerstner53:14

        Right.

    17. BGBen Gilbert53:14

        That was a great decision.

    18. BGBrad Gerstner53:14

        And they had thousands of people working on security versus your data center that had two consultants. And, um, but it was really the Sony hack, if you remember that.

    19. DRDavid Rosenthal53:24

        Oh!

    20. BGBen Gilbert53:24

        Oh.

    21. DRDavid Rosenthal53:24

        Oh, yes. Do we ever?

    22. BGBrad Gerstner53:25

        The, the, the So- the Sony board hack, where I think it was Colin Powell, if memory serves me correct, his email was hacked, and in his email was the target list for Salesforce's M&A, uh, activity.

    23. DRDavid Rosenthal53:39

        Ah.

    24. BGBen Gilbert53:39

        Whoa!

    25. DRDavid Rosenthal53:40

        There was so much that came out in that hack.

    26. BGBrad Gerstner53:41

        You know, and, and so like that-

    27. DRDavid Rosenthal53:43

        All the Snapchat stuff.

    28. BGBrad Gerstner53:44

        There was all the, all the, all the stuff that got leaked. And so if you were a board member or you were a CEO, you immediately said, "What if my email was hacked?" And that was, like, a game-changing moment. But I would say for us, we had-

    29. BGBen Gilbert53:56

        For, for all of cloud, to, like, ex-

    30. BGBrad Gerstner53:59

        For all of cloud.
12. 56:04 – 1:20:30

    Shifting tech eras: from the ‘decade of search’ to mobile, and how winners/losers change

    1. BGBen Gilbert56:04

       This is an interesting thing to talk about here 'cause it's kind of a second pillar of Altimeter. Like, if I think about where you were first successful, it was really realizing that the Internet is an amazing place to transact. People wanna transact there, and they wanna buy stuff, and overwhelmingly, they're originating that journey on Google.

    2. BGBrad Gerstner56:24

       Mm-hmm.

    3. BGBen Gilbert56:25

       And you sort of went down the list and said, "Okay, what interesting businesses could people buy stuff from when they click through from Google?"

    4. BGBrad Gerstner56:31

       Yes.

    5. BGBen Gilbert56:31

       And so, you know, you've got Expedia, you've got Priceline, a lot of-

    6. BGBrad Gerstner56:35

       Amazon

    7. BGBen Gilbert56:36

       ... Yeah, a lot of travel, Amazon. But then there's this, like, second, I don't know if it's still an emerging thesis since you did, uh, Snowflake in the sort of mid-2010s.

    8. BGBrad Gerstner56:45

       Mm-hmm.

    9. BGBen Gilbert56:46

       When, when was this?

    10. BGBrad Gerstner56:46

        Yep, 2013, 2014.

    11. BGBen Gilbert56:49

        It's totally separate. It's this sort of like B2B, you know, we're gonna need the rising tide to power all these businesses. Are there other sort of core pillars of areas where you look for, where you're like, "Oh, this is, you know, multi-trillion dollar opportunity, where we wanna have several bets in the portfolio on that?"

    12. BGBrad Gerstner57:05

        Yeah, yeah. You know, one of the things you correctly identify, which is, I think that unless you have an architecture, unless you have, you know, u- unless you deconstruct what's going on in the world and try to understand the theme, the human behavior that's driving these events, then you just have a bunch of data points that are disconnected. And as an investor, our job is to look at these complex fact patterns and try to make sense out of them. So one of the things that was very clear to me in early 2000s is, you know, the Internet is the most fabulous thing in the history of the world. It connects all these people, it unleashes all this productivity, but it's chaotic.

    13. BGBen Gilbert57:44

        Mm-hmm.

    14. BGBrad Gerstner57:44

        How the hell can you find anything? [chuckles]

    15. BGBen Gilbert57:46

        Mm-hmm.

    16. BGBrad Gerstner57:47

        Right? And so those who could organize it... So if you think about that decade, that decade was the decade of search, horizontal and vertical search, right? Booking.com was a vertical search company. Kayak, vertical search company. Zillow, vertical search company. Google, horizontal search business. Baidu, horizontal search business. And then there were these e-commerce businesses that were the beneficiaries, right? They learned how to tuck into the underbelly of the discovery engines.

    17. BGBen Gilbert58:16

        Mm-hmm.

    18. BGBrad Gerstner58:16

        Right? So that was an investable theme for a decade, right? Google's desktop search, I think, didn't go negative until 2012, maybe the fall of 2012. That's when there were fewer people searching on desktop, you know, on a year-over-year basis because people were switching to their mobile devices, okay? So-

    19. BGBen Gilbert58:34

        Which has a totally different entry point.

    20. BGBrad Gerstner58:36

        100%. So what, as the anthropologist, what did we do in 2010? I said, "Whoa, this whole search thing is gonna get disrupted by this phone thing. Now, I don't know exactly how this is gonna go down, but, like, the way that we enter these phones is not through search as our principal metaphor," right? And so then it became, how do I become one of these icons, right, on the front of this iPhone? There was, if you re- as you recall, you know, Facebook famously, you know, building, you know, an HTML5-

    21. BGBen Gilbert59:11

        Oh, yeah

    22. BGBrad Gerstner59:12

        ... not, not building their, you know, not building an app. I remember Facebook became our largest investment in 2012 when it went on the cover of Barron's at $17 a share post-IPO.

    23. BGBen Gilbert59:21

        Yeah, when it-

    24. BGBrad Gerstner59:21

        Because-

    25. BGBen Gilbert59:21

        ... broke through its IPO price.

    26. BGBrad Gerstner59:22

        Yeah, because everybody said they'll never be able to monetize this. And if you did the work, and I remember being at Google Zeitgeist in Arizona at the time, talking to all these CMOs, and they were like, "Oh, my God, the sandbox for Facebook, like, they're crushing it. Like, this is-

    27. BGBen Gilbert59:37

        Mm

    28. BGBrad Gerstner59:37

        ... going to monetize better, not worse."

    29. BGBen Gilbert59:39

        Hmm.

    30. BGBrad Gerstner59:39

        Right? Mobile device, the stream on the mobile device, targeting on mobile devices, you know. And so if you had a decade of search, you had to understand all search, all the companies that benefited from being in the underbelly of search, the Yelps and TripAdvisor, uh, by 2012, they had to be in your too-hard bucket.
13. 1:20:30 – 1:27:42

    Capital markets as a product: IPOs, direct listings, SPACs, and Altimeter’s ‘third door’ thesis

    1. DRDavid Rosenthal1:20:30

       So you had mentioned earlier, but talk to us about the capital markets business, 'cause that feels like something that, like, again, if I'm a... If I'm a Dmitry at Modern Treasury, like, that's something that, you know, even as the early-stage guys are adding later-stage operations, like, that you can really bring in a way and have for Roblox, for Plaid, for-

    2. BGBrad Gerstner1:20:50

       Yeah

    3. DRDavid Rosenthal1:20:50

       ... so many, you know, others. How did that start, and what is that-

    4. BGBrad Gerstner1:20:53

       Yeah

    5. DRDavid Rosenthal1:20:53

       ... business?

    6. BGBrad Gerstner1:20:54

       Well, I think it's, uh, you know... So I'm, I'm talking to a, you know, well-known venture capital firm's LP meeting tonight about capital markets, what's going on in the public markets, what does it mean for, you know, their venture portfolio, et cetera. Uh, that's just fundamentally different, right? And I'm an IPO lawyer, spent 20 years in the public markets. We've worked on, uh, you know, participated in over 100 IPOs, right? When the equity syndicate desk at Goldman Sachs and Morgan Stanley need to sell an IPO, they call us, right? They call Long Onlys. And so we've been in and around that market for a long time. Bill Gurley and Rich Barton and I, going back 20 years, um, were fascinated with how inefficient that market was, with mispricings in that market, with, you know, uh-

    7. DRDavid Rosenthal1:21:40

       It's crazy

    8. BGBrad Gerstner1:21:40

       ... you know, Combrick.

    9. DRDavid Rosenthal1:21:40

       It's just like when you step back and look at it, it's nuts.

    10. BGBrad Gerstner1:21:43

        Right. Combrick and Quest were innovating with, you know, the modified Dutch auction around the Google IPO. I mean, lots of fascinating stuff. So if you're just, like... If you're a student of this game and you're an IPO lawyer like I was, like, you pay attention to it. I helped Bill put on the Direct List conference a couple years ago, which, you know, we've seen a lot of, of, of progress on. Again, just giving choice to entrepreneurs. At the end of the day, right, if there's competition for the bank IPO, the bank IPO will be better, and now there is, right? The direct list is an alternative for some companies, a better fit for some companies. And the reason SPACs were interesting to me is, if you really just close your eyes, it's just a third door into the public market, and we go help you build a book. We help you price the security. We help you sell it to Capital Group and Fidelity and T. Rowe. All three of these things are the exact same exercise. You're selling 10% of your company, you hope to sell it to great public market investors, and you hope, with the least amount of pain and distraction, to step into the public markets, right? And so I think this innovation in the public markets is a, you know, a terrific thing for founders. Um, it's fun to be a part of. But last year, we participated, we anchored direct lists like Roblox, we anchored IPOs like Confluent, we anchored our own IPO, like Grab-

    11. DRDavid Rosenthal1:23:00

        Mm-hmm

    12. BGBrad Gerstner1:23:00

        ... uh, by way of SPAC.

    13. BGBen Gilbert1:23:01

        I saw on your website, yeah, you don't call it a SPAC. You call it the Altimeter...

    14. BGBrad Gerstner1:23:04

        Yeah, Altimeter IPO. I mean, part of what we're trying to do is we're trying to demystify the transition to the public markets for CEOs and boards. Because frankly, I've done it over 100 times, but most founders will do it one time in their life.

    15. BGBen Gilbert1:23:19

        Right.

    16. BGBrad Gerstner1:23:19

        Right?

    17. BGBen Gilbert1:23:19

        And they just don't want to mess it up.

    18. BGBrad Gerstner1:23:20

        Right, they-

    19. BGBen Gilbert1:23:20

        Like, at that point, it's their baby.

    20. BGBrad Gerstner1:23:22

        Exactly.

    21. BGBen Gilbert1:23:22

        Why on earth are you ever doing anything but the standard?

    22. BGBrad Gerstner1:23:24

        Right. And, and, and again, you know, I think [chuckles] Goldman and Morgan Stanley is maybe where my friend Bill Gurley and I have slightly different religions on this. At the end of the day, this is really about pricing, and if we price these things efficiently in any three of these doors, then they can be great outcomes for the company. And if you have a bad sponsor, if you have a bad bank in a, in an IPO, and it goes poorly, then, like, that's a busted process.

    23. BGBen Gilbert1:23:50

        Yeah.

    24. BGBrad Gerstner1:23:50

        Right? If you have a bad sponsor in a SPAC, you know, and you shouldn't be public, that's just a busted process. If you try to take a company... You know, try to direct list a company, and you, you have a reference pricing round that's too high for where the business is at, it's gonna be a busted process. So we spend a lot of time. I hired Chris Conforti out of Goldman. He ran the equity syndicate desk at Goldman, so he was the one selling all the IPOs for Goldman for a really long time. What we said we wanna do is, just as a value add for all the private companies that we talk to, that we look at, is to really be able to give them the inside scoop.

    25. DRDavid Rosenthal1:24:24

        Mm-hmm.

    26. BGBrad Gerstner1:24:24

        Right? Like, we're not a bank, but we'll tell you all the dirty secrets, right, about a traditional IPO, a direct list, or a SPAC. You can't have credibility telling those secrets unless you've lived them, which we have in each of those doors, and now we can offer what I think is the best insights to these founders. And we have no economic finger in the scale because I can partner with you. If you wanna do a traditional IPO, great, we can anchor it or just participate. Direct list, we can anchor it or participate. You know, you wanna go... You wanna partner with us, and, and we'll build the book for you, great, we'll do a SPAC. And there are different prototypes-

    27. DRDavid Rosenthal1:25:01

        Mm, mm-hmm

    28. BGBrad Gerstner1:25:02

        ... right, different archetypes for which each of those fit. Um, and I think among the folks who are doing this, we're probably, you know, um, might be first among equals in terms of our insights into how to get public.

    29. BGBen Gilbert1:25:13

        It's the old Mungerism, right? You show me the incentive, and I'll show you the outcome. And in this case, you coming from the perspective of, "Hey, you realize when the banks are trying to sell an IPO, they come to me to buy the IPO." So having sat on that side of the table and not yet having an incentive, I can talk to you about how this would get marketed to me, so you at least have that transparency. And then I can tell you how I want to play in that process, and you can give me feedback and tell me where I belong in your process.

    30. DRDavid Rosenthal1:25:41

        Yeah. Yeah, I, I, I think... Listen,
14. 1:27:42 – 1:35:50

    Lifecycle investing—bull/bear case: competition, industrialization, concentration, and the NPS scoreboard

    1. DRDavid Rosenthal1:27:42

       Okay, so as we move into the kind of the analysis section here, there are two... We, of course, want to do grading, and ask you-

    2. BGBrad Gerstner1:27:49

       Yeah

    3. DRDavid Rosenthal1:27:49

       ... to paint, you know, the what, what is your... You know, when you go to bed at night and you dream your, your best dreams of an A-plus scenario for Altimeter in three to five years, versus, you know, a C-minus of, like, "We survived, but-

    4. BGBrad Gerstner1:28:01

       Yeah

    5. DRDavid Rosenthal1:28:01

       ... we missed some stuff." We'll get to that. Maybe first, if you have thoughts on kind of like a bull versus bear case on the lifecycle investor model-

    6. BGBrad Gerstner1:28:11

       Yeah

    7. DRDavid Rosenthal1:28:12

       ... And, and that probably leads into grading. What are the risks to, like, what you have pioneered and are, and are doing?

    8. BGBrad Gerstner1:28:19

       Yeah.

    9. DRDavid Rosenthal1:28:19

       Like-

    10. BGBrad Gerstner1:28:19

        Yeah, well, it... Listen, I think that I certainly, I, I appreciate the credit as a pioneer. I don't think of myself as a pioneer. Like I said, in many ways, it's back to the future, right? Warren Buffett was my hero. He- if you asked him, "Why do you do private investments?" He'd just say, "I do great investments." Right? He d- like, it's not private versus public. In many ways, it's the LP community who want to put people in buckets, right? And so I think in order to generate alpha and above a- average returns in probably the most competitive market in the world, okay, you have to be extremely passionate, right? There, there are big sacrifices and trade-offs to be great in this business. And for me, if you said, "Brad, you can only do public market investing," that wouldn't scratch my itch. If you said, "You can only do venture investing," that wouldn't scratch my itch. And so, for me, it starts from the premise of like, what do I want to do? What can I be most passionate doing? And the reason I think we attract some of the best analysts in the world is because most analysts don't want to leave their, you know-

    11. DRDavid Rosenthal1:29:15

        Mm

    12. BGBrad Gerstner1:29:15

        ... thinking cap at the IPO door, right? They're like, "I spent all this time on this company, and now you're telling me I can't make any more money on it? I can't bet on it? I can't invest in it? Like, what, what's that about?" I think that the maturation of the venture growth business model is here to stay. We saw it in LBO, we saw it in private equity. That was a highly fragmented industry. You now have a handful of global platforms-

    13. DRDavid Rosenthal1:29:40

        Mm-hmm

    14. BGBrad Gerstner1:29:40

        ... right, that are prosecuting that strategy. In venture, highly fragmented industry, we're still in the, the middle of a lot of creative destruction. You got solo GPs attacking, you know, venerable early-stage firms. You got a lot of firms that are vertically integrating upwards. You got hedge funds who all say, "This venture capital stuff is easy, I'm gonna go do it." You know, at the end of the day, what I love about this business is there's a scoreboard.

    15. DRDavid Rosenthal1:30:08

        Mm-hmm.

    16. BGBrad Gerstner1:30:09

        Right? In the hedge fund, it's a painful scoreboard, right? It's like every day. Uh, and in the venture business, there's a lag. But at the end of the day, your reputation among founders... I, I say a two-sided marketplace, right? What's my NPS score among founders, and what's my NPS score among funders, the people who entrust me with their capital?

    17. DRDavid Rosenthal1:30:29

        Mm-hmm.

    18. BGBrad Gerstner1:30:29

        And I get up every day thinking about, "How do we build the best product for both of those folks?" Because if we do, and we deliver the returns, then we have a great business that I actually think is serving, you know, a really important part of the, uh, of the capital process.

    19. DRDavid Rosenthal1:30:43

        It's really interesting, the analogy to... A, totally agree. Uh, but the analogy to the LBO business-

    20. BGBrad Gerstner1:30:52

        Mm

    21. DRDavid Rosenthal1:30:52

        ... and market, you're absolutely right. I mean, I remember coming up being an investment banking analyst [chuckles] as you were starting Altimeter in those same days.

    22. BGBrad Gerstner1:31:00

        Yeah.

    23. DRDavid Rosenthal1:31:00

        And, uh, the LBO market was vastly more fragmented than it is now, and it has consolidated around, like, some, some major... But and there are niche players, and there's lots of strategies-

    24. BGBrad Gerstner1:31:09

        Right

    25. DRDavid Rosenthal1:31:09

        ... that can work, but yet we are-

    26. BGBrad Gerstner1:31:10

        Right.

    27. DRDavid Rosenthal1:31:10

        I hadn't quite thought about it. We are, I think-

    28. BGBrad Gerstner1:31:12

        And the thing-

    29. DRDavid Rosenthal1:31:12

        ... seeing the same thing in venture.

    30. BGBrad Gerstner1:31:13

        Right, and y- y- if you think about what's happened in, in the private equity LBO world, right, you have some global, now public, platforms. Their cost of capital goes down, and we've seen a compression in terms of returns, right? Because the market got more efficient. And as the market got more efficient, returns went down, right? What do I expect that, y- you know, will happen over the full arc of time in venture, right? We're going to compete away returns.
15. 1:35:50 – 1:45:42

    Invest America: universal ownership accounts to close the participation and wealth gap

    1. BGBen Gilbert1:35:50

       I really wanna talk to you about Invest America, 'cause I think it's a fascinating concept, and you, you mentioned... We, we chatted about it when we were sort of preparing for this. What is the idea there?

    2. BGBrad Gerstner1:35:59

       So rewind the clock. I was definitely on the outside looking in, right? I was not part of the ownership society. You know, I didn't know what stocks were, and, uh, but, you know, all else being equal, you know, I never really felt deprived. The Industrial Revolution in many ways was a great equalizer, right? My grandfather was a welder. He worked on the Manhattan Project. He was a brilliant guy, self-educated, read textbooks, but he could earn a, a wage and save that allowed him to leave 25,000 bucks for a grandkid who would go on to put himself through law school and business school. The technology revolution will have even more positive impact on humanity, but it naturally tends toward concentration.

    3. DRDavid Rosenthal1:36:42

       Mm-hmm.

    4. BGBrad Gerstner1:36:43

       Right? It is not an equalizer in terms of, you know, wealth, so far as I can see, and the data, I think, you know, works against that.

    5. BGBen Gilbert1:36:49

       It doesn't seem to have played out that way, certainly.

    6. BGBrad Gerstner1:36:51

       Right, and because if think about it, it's logical, right? Mark Zuckerberg can have three or four billion customers for his product. Even Carnegie and Rockefeller couldn't have billions of-

    7. BGBen Gilbert1:36:59

       Software and then the internet on top of that kind of compounds that-

    8. BGBrad Gerstner1:37:02

       Right

    9. BGBen Gilbert1:37:02

       ... advantage.

    10. BGBrad Gerstner1:37:03

        And so, you know, to me, you know, the social contract that we're going to have to have is gonna have to evolve, right? And I think this country is better positioned to evolve that social contract than just about anyone, but part of it is first just making people feel, right, that they're part of the game. And, you know, the start of COVID really drove this home for me because we had massive government intervention. I went on CNBC on March 26th, the bottom, um, 2020-

    11. DRDavid Rosenthal1:37:31

        I remember watching you.

    12. BGBen Gilbert1:37:32

        I read that this was gonna be the bottom.

    13. BGBrad Gerstner1:37:34

        Yeah, it was, it was, uh, like an extraordinary day, but at the end of that day, I had, I literally had grandmothers, fathers, doctors, lawyers, just email our website-... generic email saying, "Will you protect me? Will you take my money? Will you do this?"

    14. BGBen Gilbert1:37:51

        Oh, wow!

    15. DRDavid Rosenthal1:37:51

        Wow.

    16. BGBrad Gerstner1:37:51

        Right? There's just extraordinary fear in the world. And I'm from Indiana. Most of my friends didn't go to college, you know, in the, in this small town, and what happened when the government intervened is the stock markets ripped, okay? Because the Fed went all in, Congress went all in. But a lot of those, my friends working in those RV ma- manufacturing plants were unemployed, right? Lost their jobs. And so we can't have a system where the owners win, right? Because of the government intervening, but we only have 30% of people who belong to the ownership society.

    17. BGBen Gilbert1:38:23

        And that's the public stock market.

    18. BGBrad Gerstner1:38:25

        Right.

    19. BGBen Gilbert1:38:25

        That's not even, like, accredited investors, which is this tiny slice-

    20. BGBrad Gerstner1:38:28

        Tiny, tiny

    21. BGBen Gilbert1:38:28

        ... you talked about earlier.

    22. BGBrad Gerstner1:38:29

        Yeah.

    23. BGBen Gilbert1:38:29

        A small percentage of America that owns any equities.

    24. BGBrad Gerstner1:38:33

        Right. So I, I- a very simple idea that I floated, Chamath and I were on CNBC. I'd been thinking about it for a long time. I, I've abhorred the accredited investor laws, uh, for as long as I can remember, because as a securities lawyer, you know, I remember studying securities law in law school and saying to myself, "Hold on. You mean to tell me that we've rigged the game so only rich people can invest in the best companies?"

    25. BGBen Gilbert1:38:59

        Well, they have to be protected, Brad.

    26. BGBrad Gerstner1:39:01

        Right. And so, like, what, what, what's this all about?

    27. DRDavid Rosenthal1:39:04

        Investments.

    28. BGBrad Gerstner1:39:04

        Because the proxy for intelligence was money, right? Jason Calacanis has talked about having an investor test, but I knew- [laughing] I knew-

    29. DRDavid Rosenthal1:39:15

        Jay Cal loves that investor test idea. [laughing]

    30. BGBrad Gerstner1:39:17

        And by the way, like, I've seen dumber ideas.
16. 1:45:42 – 1:53:10

    Where to follow Brad and Altimeter + episode wrap-up and calls to action

    1. BGBen Gilbert1:45:42

       Brad, before we wrap here, anything that you wanna point listeners towards? Or where could they find out more about you or Altimeter on the internet?

    2. BGBrad Gerstner1:45:52

       Yeah, I would say follow me at altcap on Twitter. I encourage all of our analysts to be on Twitter. I think they're incredible brains and thought leaders and, you know, being online and sharing content... Like, I don't like to be a cheerleader on Twitter, um, but I do like and encourage our analysts to pressure test their ideas, right? Whether it's, you know, Jamen talking about what's going on in, you know, in software, or whether it's Vivek talking about what's going on in, you know, internet marketplaces or crypto, or Frida talking about what's going on in China. And so I think I always say to people, if they're interested in learning more about Altimeter, just follow, uh, this incredible group of analysts on Twitter. But all of this said, we're truly lucky, you know, to be doing what we do. You guys are doing this incredible podcast about founders and entrepreneurs. This is a rather new experiment in the history of the world, and I think it's yielded... You read the Bill Gates annual letter at the end of every year, and, uh, you know, we live in the most peaceful, notwithstanding Ukraine, we live in the most prosperous, we live in the healthiest period of time in the history of humanity. And, you know, one of the things that scares me is, you know, that people, during periods like this, they'll turn against capitalism, or they'll turn against, you know, technology, or they'll turn against whatever. But it's very clear to me, like, I'm gonna fight for that and fight for those founders. And I think when we look back at this system in 10 years, it's gonna be more vibrant, more capital, more access, more ideas, and I think the secular curve around creative destruction and innovation has never been steeper, and the ideas over the course of the next 10 years are gonna dwarf the size of the ideas that emerged over the last 10. So super optimistic and-

    3. DRDavid Rosenthal1:47:33

       In a, in a way, Ukraine, I think, has, uh, for me at least, helped, uh, remind me of that. Ben and I were talking at dinner last night that, like, you know, the old saying that I think, uh, has become forgotten a little bit in recent years is that capitalism is terrible. It's the most terrible system, except for every other system [chuckles] that has been tried in the history of humankind.

    4. BGBen Gilbert1:47:51

       Right, it's, uh, uh, about democracy, but it, it definitely applies to capitalism, too. [chuckles]

    5. DRDavid Rosenthal1:47:55

       Yeah. [chuckles]

    6. BGBrad Gerstner1:47:55

       Right. Well, I don't think it's the only thing, right? I don't think it's the only thing in life, but I think it's an enabler for everything. You know, somebody reminded me the other day, Julian Robertson, after, you know, an incredible track record in 1999, obviously got hit hard, money redeemed, and they said, "You know, are, are you bummed to, to no longer be in the public markets?" Uh, and-

    7. BGBen Gilbert1:48:16

       He was the founder of Tiger Management.

    8. BGBrad Gerstner1:48:17

       Founder of Tiger. And apparently, he, he's reported to have said, "You know, I didn't wanna die looking at a quote on my Bloomberg for the yen anyway." [laughing]

    9. BGBen Gilbert1:48:25

       [laughing]

    10. BGBrad Gerstner1:48:26

        Um, so, uh, you know, yes, in this firm and in my life, my friends, my family, my kids, there are a lot of things, you know, that resonate, you know, as, as more important, but I am a staunch defender of, you know, this beautiful system. I tell you, it's a hell of a lot better than having to mortgage your house. You think about the velocity of money. If the risk you run, if you start that, you know, auto parts company, is you lose your... Y- you know, y- y- you lose your health, and you lose your house, there's not gonna be a lot of risk-taking, and risk-taking is the engine that moves humanity forward.

    11. BGBen Gilbert1:48:58

        Business creation and experiments without personal guarantees are an incredible thing, and it's amazing that we have a system that actually allocates a, a big slice of capital to go toward that.

    12. BGBrad Gerstner1:49:10

        But think about that. That's a modern experiment. I don't know, modern capitalism's been around for five, six hundred years. Like, that's a 30-year-old experiment, but you think about the impact that global sovereigns who are trying to effectively take fossil fuel dollars and turn them into technology dollars. We have more dollars moving into this. Uh, you know, you mentioned we have very few people who have access, okay, to the private markets. I, I heard this statistic the other day, uh, you know, endowments and others have reaped the benefit, which makes me happy, but retail investors and the average investing public has not. A 1% increase in penetration of the retail investing public to alternatives, I heard, is a trillion dollars. Like, I haven't run the math myself, but it's an extraordinary number.

    13. BGBen Gilbert1:49:57

        Yeah.

    14. BGBrad Gerstner1:49:57

        And if you look at the retail channel-... the accredited investor retail channel through Goldman, through Morgan Stanley, through these other aggregators, as a percentage of the fundraise for Tiger, for Coatue, for Altimeter, it's going up dramatically relative to traditional-

    15. BGBen Gilbert1:50:14

        Mm-hmm

    16. BGBrad Gerstner1:50:14

        ... LPs. And so we'll do another episode, and we'll talk about how we're gonna unshackle ourselves from the accredited investor rules.

    17. BGBen Gilbert1:50:21

        I love it. Would you ever consider a future for Altimeter where your LP capital is more directly from people?

    18. BGBrad Gerstner1:50:29

        For sure. For sure. I mean, like, it, it... You know, our aspiration is not to be the biggest, but our aspiration is to, uh, have the scale, to have the level of impact that we can to drive the highest NPS among founders and funders. Like, we wanna deliver for both of those, uh, folks in that network, and I think it's inevitable that an increasing percentage of these dollars can, and will, and should come from willing retail investors who want exposure to this incredible asset class.

    19. BGBen Gilbert1:51:02

        All right, listeners, hope you enjoyed our interview with Brad. He is, uh, he's unbelievable. I mean, what a journey the last 20 years have been for him, building Altimeter and, and really helping to shape this industry.

    20. BGBen Gilbert1:51:15

        Totally.

    21. BGBen Gilbert1:51:16

        And personally, I'm pretty excited about his sort of idea with Invest America, and we'll definitely be watching to see where that goes.

    22. BGBen Gilbert1:51:25

        Totally, totally.

    23. BGBen Gilbert1:51:26

        Well, listeners, to round us out, you know the drill. Join us in the Slack, acquired.fm/slack. We're gonna be talking about this episode and everything else. We've got the Limited Partner Show, where, uh, recently we've had awesome episodes with the folks from NCS Capital coming back to talk about the state of the markets. David Christina Melas Kyriazi joined us to talk about fintech. Uh, we've recorded two more episodes that we haven't dropped yet to the general public that are rolling out to paid Acquired limited subscribers, and, uh, those folks can join at acquired.fm/lp to get two weeks early access. We've got a job board and some really great stuff on there. I just added a couple the other day from Vanta after we got to spend time with them, uh, at their office, met their head of engineering, uh, spent some time with the team, so really cool companies. Go check those out. And, uh, lastly, if you enjoyed this episode, share it with a friend. You don't need to shout super loud from social media hilltops. We like that high-affinity, one-to-one stuff, so, uh, share it with a friend. Think of someone that has kind of talked about some of these concepts with you, and see if they'll, uh, take a listen, and, and they might enjoy it just as much.

    24. BGBen Gilbert1:52:39

        Indeed.

    25. BGBen Gilbert1:52:39

        With that, thank you so much to Vanta, Vouch, and our friends at SoftBank Latin America Fund. And listeners, we will see you next time.

    26. BGBen Gilbert1:52:49

        We'll see you next time.

    27. SPSpeaker1:52:51

        [singing] Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Huh! [upbeat music]

Episode duration: 1:53:10