The $1 Trillion Firm That Refuses The Private Equity Label | a16z

10 stocks right now in the US make up nearly 50% of the S&P, and they’re all levered to the same trend. The same thing is happening in the global fixed-income market. If you’re an investor looking for diversification, there’s no place to get it other than private markets. Great companies like Anthropic—all of them are private, collectively worth multiple trillions of dollars, and yet most investors have zero exposure to them.

He wrote this piece over a decade ago: “Why Software Is Eating the World.” That feels more true than ever as AI proliferates through all parts of the economy.

We operate under the assumption that every job is going to be replaced or enhanced. 2025 was proof of concept that data centers, chips, and energy were all needed.

Marc, thank you so much for joining us and for hosting us here at your office.

Nothing better. My absolute pleasure.

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

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

Yep.

What struck me about Drexel’s business, which was financing entrepreneurs and financing new companies, is that you didn’t really need to know all that much about finance. You needed to know a lot about business, because these companies were not the Exxons of the day or the top-notch companies of the day. They were companies where there were legitimately questions about the business model.

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

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

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

There were no leveraged loans. There were no ETFs. There was no real securitized product. All the products that we take for granted today did not exist. This forced you into clean-sheet thinking.

The whole notion of PIK, I believe, was created in one afternoon solving a problem. The notion of silver-backed or silver-indexed bonds solved another problem, and so on and so on. The notion of a highly confident letter and the notion of bridge financing—all of these things were basically problem-solution, problem-solution. That mentality of understanding the business, understanding the credit, but also having clean-sheet thinking is certainly what powers Apollo today.

I know Michael Milken has been a mentor for a long time. What are some of the most valuable lessons you’ve learned from him over the years?

They’re just innumerable. The story I tell about Mike is that I was a smart young guy. I had mastered my craft. I was well thought of. Every time the market went sideways, I would get a call from Mike, and Mike would say, “Could you come from New York to California?” I would, of course, ask when. This was Monday. He’d be like, “Tuesday.”

The immediacy of how you dealt with problems and the business-first mentality was definitely a Milkenism. I sat on the trading desk, and at the end of every trading day, Mike would walk by my desk. I was supposed to have all the answers because Mike was doing a million things; I was just doing one thing. Every day, he would ask me a question that I did not know the answer to.

He didn’t do it to provoke me or to show me how smart he was. He was showing me how to connect the dots. I do think that’s a big part of what goes on in our world today. Can you take what’s happening geopolitically? Can you take what’s happening in technology? Can you take what’s happening in financial markets? Can you take all the personalities and people, and can you put it together in a coherent way that makes for good relationships, good deals, and good partnerships—things that benefit the world?

I think that’s the primary lesson I took away. The pithiest thing is sometimes the most valuable. The thing that he said is, “You either accept change, or change is visited upon you.” We’re certainly in that moment where you either accept change, or change is going to be visited upon you.

Totally. You’ve shaped a lot of Apollo over the years, which I’m excited to discuss. Going back to 1990, can you talk through the origin story of starting the firm?

Sure. Think Lehman Brothers in 2008, because a lot of this audience will not know what was going on in 1990. 1990 was a global recession, a banking crisis, a Texas real estate crisis, a New York real estate crisis, and a savings and loan crisis. It was kind of a mess.

I went into my office—or I left my office—on Friday. I came back in on Sunday, and I left with all my belongings in a cardboard box. Drexel was out of business. A great lesson: financial services firms die from one of two causes—heart attacks or cancer.

A heart attack is funding risk. If you lend long and borrow short, you have funding risk. We saw this in Bear Stearns. We saw this in Lehman Brothers. We’ve seen this again and again. I will tell you that formative lesson: we will never see that at Apollo.

It is ingrained in our culture to understand this funding issue, this heart-attack risk. The cancer risk, of course, is the addition of bad assets over a long period of time, which we, as a principal-mentality firm, do not allow to happen. We admit our mistakes, we move on, we take our losses, and we don’t double down or triple down and do these other things.

But back to 1990: imagine being an unemployed investment banker in the midst of a global financial crisis. This is not a great situation for career employment. Fortunately, a group of us had been sharing office space. The demise of Drexel was so sudden that we were still working on transactions for clients without any hope of being paid and without a firm backing us. It was just what we did.

As happenstance would have it, we received a cold call from the government bank of France, Crédit Lyonnais, asking whether we would be interested in starting an M&A boutique under the mighty Crédit Lyonnais banner. What a terrible idea in 1990. There was no M&A; there was a total loss of confidence. I think, as a throwaway line, one of us said, “But this would be an awesome time to deploy capital.”

The gentleman said, “There’s a guy in Paris. He thinks exactly the way you think. Why don’t I set up a meeting?”

A few months later, we left with $800 million of the government of France’s money through Crédit Lyonnais, with a group of people who had never invested money before and from an institution that was not an investor. By the end of the year, we had $6 billion of the bank’s money.

Wow. And in 1990, no one had $6 billion.

Wow.

And we went on to become the largest profit center of Crédit Lyonnais. For the next few years, we regularly earned them $3 billion-plus a year. We were very, very popular in Paris, despite speaking nothing other than restaurant French. The movie rights to this story of us talking past each other are just off the charts.

Yeah, totally. But eventually, Crédit Lyonnais, the government bank of France, goes out of business from supporting French industry.

Interesting.

It really is.

In a desperate attempt to maintain its capital base, it sells its most profitable investment, Apollo, to its largest client, François Pinault.

François Pinault does not understand that he is not buying an investment firm. He believes he is buying Samsonite, Culligan, and Vail Resorts, because, after all, he’s an industrialist. The movie rights to the first meeting with François Pinault are also amazing.

Hilarious.

As luck would have it, we had a good enough track record that, over time, we not only made Pinault lots of money but began to diversify our business to US, European, and international institutions. The rest, as they say, is history. But it was a pretty contained history for about 18 years.

Totally. I think people still, incorrectly, I would argue, refer to Apollo as a private equity firm. You, more than anybody, have really transformed the business into a retirement services company and a large alternative asset management business. What did you see in Athene, and how do you view the firm today?

If I start backwards a little bit, the firm today is a little bit over $1 trillion in assets under management, which is just a measure. It is in 2 businesses: the retirement services business and the asset management business.

If you look at the assets under management, 80% of the assets under management are credit, and the vast majority of that is investment grade.

Mhm.

The other $200 billion, or 20% of it, is half what we call hybrid equity, partner-like equity, and half traditional private equity in a fund structure. It's a totally different makeup of a business than people expect when they say, “Well, Apollo is a private equity firm.” Well, actually, Apollo is mostly an investment-grade credit firm.

Totally.

And I think what we appreciate is that when you are a small firm, you can be a good deal shop. But when you want to get large, you have to serve a fundamental good. Otherwise, societal pressure, government regulation, and the forces around you constrain you. And so I always start with, what is the fundamental good we're doing, and then what are the drivers of the business?

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

Mhm.

The second is, we are the largest source of financing for this global industrial renaissance that is taking place across the U.S. primarily, but across Europe and Asia and elsewhere. And finally, we are diversification for public markets, and this is the least understood portion of what we do. 10 stocks right now in the U.S. are nearly 50% of the S&P, and they're all levered to the same trend.

Yep.

So far, that's been amazing.

Yep.

But we've levered most of the retirement system of the country to 10 stocks. We can question in hindsight the wisdom of that if things go poorly. And so the same thing, by the way, is happening in the global fixed-income market.

Dominated historically by 10 large banks, it's about to be dominated by 5 large banks and 5 large tech companies. As much concentration as exists in the equity market, that's how much concentration is going to exist in the fixed-income market. And so if you're an investor and you're looking for diversification, there's no place to get it other than private markets. Private markets are 80% of the action going on in the world.

And if you think about what's going on, great companies—Anthropic, OpenAI, SpaceX, Cognition, Cursor, and on and on and on—every one of those companies is private, with multiple trillions of dollars in value, and yet most investors have zero exposure to them. We're going to see the same thing happen with industrial companies. Lots of industrial companies are just going to decide to stay private longer for all the reasons we know.

And so when I think about the business today, it is serving those fundamental goods. But it is also built on trends. The trends are: the world is getting older, people have not adequately saved for retirement, and there's this massive retirement income gap that's driving our business forward. They need income.

Well, at the same time, corporations are borrowing money like every dollar since the invention of fire to build infrastructure, to build energy, to do energy transmission, to do next-generation manufacturing, to do AI, to do defense, to do data centers, and it's all happening at once. And so, mostly investment-grade borrowers—large companies against modern trends—are matching their needs for capital with the need for income of retirees, with us in the middle.

Totally.

Sometimes I feel like we're at First and Main and the traffic runs 24/7. You asked how I was. I said tired.

Yep.

Retired.

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

Exactly. I mean, there are a couple of different ways of coming at this, and it starts with a misconception of what success looks like in our industry. For a traditional asset manager, assets under management is a really good measure of success because if you give a traditional asset manager any amount of money, they will invest it because they have the ability to simply go to the public markets and buy what exists.

If you give us any amount of money, we will not invest it. We can only invest as fast as we originate, as fast as we create. And therefore, I believe that we should be judged by our capacity to create interesting investments. And I believe our capacity to create interesting investments is limited. We are not limited ultimately by capital. We are limited by our capacity to create.

So a couple of things come out of that. If every asset we create is what's in short supply, as a business owner, as a business builder, as a strategist, I want to make more money from each asset. So yes, I like running assets for a fee, but I also want to be a principal. I want to own the upside for as much of the asset as the market will allow me to do.

And the more interesting thing is, clients who are dabbling in private markets, who don't always have the same information that you have, who have, on a fiduciary basis or a non-fiduciary basis, asked you to manage their money—

They like the alignment.

There is nothing like being a partner with your clients, eating your own cooking, whatever the expression is. So for valid strategy reasons, if assets are in short supply, I want to earn more money; for external reasons, I want to be aligned with my clients.

Having a big capital base, I believe, is important, and I've started saying this: there's been this debate in our marketplace between capital-light and capital-heavy. I think we should be unapologetic because I look at the world that we're about to enter. Change is a constant, but this pace of change is even faster than we've ever had it in the world we're entering. What has value? On the one hand, I think brand and reputation have value.

Great.

The second thing is, I believe the ability to guarantee outcomes has value. Capital is key to being able to guarantee outcomes, both for issuers as well as for people on the insurance side or the retirement income side, where you're guaranteeing their insurance. So we've amassed a massive capital base, and it's going to get bigger.

Mhm.

It allows us to partner with our clients. I think that is the sweet spot of where we are in a changing world.

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

So what's happened so far is, if you think about our industry, which has only existed for about 40 years in a real industrial form, the entire industry was built out of one capital source. This was the alternative bucket of institutions, and essentially it was all in funds. It was all relatively slow-moving, and yes, there were private equity funds, but then there were real estate private equity funds and infrastructure private equity funds and credit, kind of private equity funds. It was all one business, and it was a pretty simple business.

And you did not need a lot of infrastructure because the same institutions were fine with quarterly reporting. Well, there are 5 new markets. We serve individuals. We serve insurance companies. We serve the debt and equity bucket of institutions. We serve traditional asset managers. And we serve 401(k)s.

All of these other 5 markets want nothing to do with a drawdown fund. They live in a public world. And so the notion that they are going to somehow conform to us is just hubris. We are going to have to conform to them if we want to serve them, if we want to exist in their world. But we also have to do it in a way that does not bastardize our products, that does not create unacceptable mismatches between risk and reward.

And so we're starting with our investment-grade private suite of products, and we will have daily estimated value by June 30. Value alone is not enough. We need standardized information, standardized CUSIPs or ICE IDs, standardized data warehouses, market making, regular disclosure of prices to other dealers. This is about creating an ecosystem. And by the end of September, this will be across the entirety of our credit business.

And I believe this is the direction of travel. I've never seen a market in the world where you have transparency and price discovery that is not 10 times its size and change, like everything else. It may be uncomfortable for people, but it's coming. And 5 other markets want it. Will it be perfect the first day? It will not. Will it get better every day? It will get better every day. And one day soon, maybe it'll even come for equity. But that's not this year's business.

I know you've also talked a lot about the press's very narrow definition of private credit being direct lending and BDCs. But from your perspective, how do you describe the broader private-credit ecosystem? And what separates the winners, from your perspective, from the rest of the market as this ecosystem matures?

So I do think it starts with a skill set of managing a credit book, because at the end of the day, managing credit is different from managing equity. In credit, you only get your principal and interest. You should not be around risk-taking as a rule. You should be fully diversified. In the equity business, you actually get paid for risk-taking.

Sure. And so that mindset difference perhaps is obvious, but it has not been obvious in people's actual performance and how they've constructed portfolios.

The second is you need a low cost of capital, or you need a variety of costs of capital. One of the reasons I think we've been so successful at this is that we are willing to match low-cost retirement liabilities with safe, long-term-yield assets—not risky, long-term-yield assets. That does not belong in a regulated balance sheet.

But if you think of the largest issuers of private investment-grade debt, it's Intel, it's Air France, it's EDF, it's AT&T, it's Meta, it's BP Energy, and so on and so on and so on. You're hearing lots of public companies. Public companies and public-company CFOs and CEOs now understand that there are 3 markets for financing.

One is the bank market. The bank market is the best source of financing on a short-term basis anywhere in the world. A bank borrows short deposits and lends short. A bank is the best short-term lender. It is not a good long-term lender.

Right?

The public market and private capital are both good long-term lenders. The public market does something very standard. If you want anything other than plain vanilla, you need to come to the private market.

And if you think again about the world we're in today, when we're building a data center that is marrying energy and chips and offtake, it is anything but simple. It can be creditworthy, but it is not simple. It is not a 10-year bond underwritten by a single issuer.

The ability and willingness to take brainpower and apply it to investment grade—which itself is not a great asset-management business—is important. We need the asset. In addition, once we originate an asset, it feeds our third-party credit business, because if we, as a large retirement-services insurance company, need the asset, other insurance companies need the asset. Pension funds need the asset. Endowments need the asset, and individuals likely will want this asset as well.

And that's what we've seen. Our underwriting risk as principal shows people the alignment that they need to get comfortable with this investment-grade underwriting.

One of my favorite lines—and it's a bit of a metaphor, maybe, for my career, but also an investment philosophy—is that opportunities live between fields of expertise. I like living at the intersections of things.

I'm curious—maybe we'll transition the conversation to some of the opportunities you see at the intersection of Apollo and a16z. Marc, Marc Andreessen wrote this piece over a decade ago that software is eating the world, and that feels more true than ever as AI proliferates through all parts of the economy.

As a result, we're finding ourselves funding more capital-intensive businesses in areas like defense, energy, robotics, manufacturing, and public safety. Ultimately, I think most of these businesses will need to graduate at some point beyond venture equity and likely become—and already are—clients or customers of yours. What do you see as the opportunities between our 2 firms?

Immense. There's only so much time in the day right now, but I'm going to first delve into this notion of intersections, because this intersection notion is actually what creates value in our business.

If you think about how institutions allocate capital, they allocate it into buckets. Some of those buckets they advise themselves if they have good investment teams. Some of those buckets they outsource to consultants or advisers, but they're still in buckets.

The traditional buckets are equity. What's in the equity bucket? Public equities. Fixed income—what's there? Public fixed income. Then there's sometimes a liquidity bucket, a real-assets bucket, and then there's this thing called alternatives. That's been most of the world for 40 years.

What do you do with the credit that is private and safe, but doesn't have a high enough return for alternatives? It doesn't have a home. It's neither. It's not public. It doesn't go into the public bucket. It's not an alternative. It's not a high enough rate of return, but its risk-reward is the best risk-reward. We call that hybrid for us. That's our fastest-growing business.

Again, this notion of private investment grade: Most things that are in institutions' fixed-income bucket are public. Therefore, they're not a source of capital. We have been able to originate and earn excess return because private investment grade is not a bucket.

Now, as we get bigger and bigger, we are changing the world, and we've seen institutions adopt this notion of a total-portfolio approach. We've seen family offices, and we see a general migration. So in between is almost always the best asset class, because there is poor capital formation.

Totally.

And there's no one who is assigned every day as their day job to this risk. This is exactly what's happening between our 2 firms.

Because you have an entire ecosystem of which your firm is a major player that has never been capital-intensive. For the first time, not only is it capital-intensive, but it is going to be capital-intensive on a scale that is unimaginable, because the amount of money that's going to be put into data centers, into chips, into robotics, into manufacturing, and into defense is, as I suggested, every dollar since the invention of fire that is not going to be financed with equity.

Yep.

Entirely because that is not efficient and the scale of it is not achievable, it is going to have to be parceled out into various risks, and that's what we're seeing happen right now.

If I look at the drivers of our business for this year, it is data centers. It is massive amounts of chip financing. What we're doing is parceling out the risks. On the venture side, on the equity side, there is the fundamental business underwriting of this company or that company.

Then on the infrastructure side, things that are reusable, things that have hard-asset value, are being offloaded into the credit markets at the appropriate rate of return and at the appropriate risk rating.

But I believe we're approaching a really interesting time. We've never really talked about the quantum of money. I think that's where we are right now. 2025 was just proof of concept that data centers, chips, and energy were all needed.

In 2026, the market is starting to recognize that if this continues, $800 billion of capex from just 4 public companies this year—not to mention the private companies—means that everyone who is an investor is going to be concentrated in certain names, and we're actually going to hit concentration limits. We're starting to see this across the board.

I think spreads are going to widen. I think really good entrepreneurs are going to end up in partnership with entrepreneurs of another type: those who are financial entrepreneurs who help to democratize credit assets, hybrid equity, and other types of things. I don't think the imagination is going to stop at chips, data, and energy.

The visits I've had out to the Bay Area, to Seattle, and elsewhere have shown me that robotics is a whole other thing.

The notion that once the world was able to solve the Waymo problem—

Which was a real problem: How do you solve a situation for self-driving in a constantly changing environment where safety is paramount and where you can't stop?

Well, therefore, the equation of doing this for construction equipment should not be as difficult as doing Waymo. The equation for doing this for other types of robotics should not be as difficult.

And we're just getting there.

Why should that all be financed with equity? We have a whole market for equipment rental.

Totally.

That is a much lower cost of capital than venture capital, and a much greater scale of capital gives us and people like us diversification, gives you the appropriate amount of leverage, and gives you the understanding of how to parcel out those risks.

The trust to partner on these risks, I think, is going to make sure that we spend a lot more time in your hometown.

Yep.

And vice versa. It's part of our physical strategy. Yes, we love being in New York. New York has certain constraints. This is not the podcast for that. We could go off in the political direction. Political help opened our New York office.

But we are committed to a second headquarters. We want access to a second talent pool.

Yep.

Something tells me that second talent pool is going to be much more focused on change, on challenger business models, and on making sure we partner with the growth ecosystem.

Yep.

The U.S. is the envy of the world, and we want to stay that way.

Totally. It's nice to hear you see that. Again, people ask, “Are you Silicon Valley or are you Wall Street? Are you an entrepreneur, investor, and operator?” I think the answer should just be yes. If it's too easily bucketed, it's too legible, and again, the opportunities sort of live at this intersection.

Look, now, for our industry, from 1990, our founding, until 2008, the firm was slightly larger, but it kind of did the same thing.

Almost all the firms in our industry that you know were $40 billion in 2008, and now we're a trillion dollars. Others are slightly larger, slightly smaller.

Yeah, and this is not good management.

I'd like to think there was some of that, but that is not the primary driver. The answer is that we're shaped by outside forces.

And those outside forces came out of the great financial crisis, moved into COVID, moved into the change in rates, and moved into product proliferation. Okay, what are the outside forces now shaping our industry?

Well, they're primarily coming from this shift in the economy.

We operate under the assumption that every job is going to be replaced or enhanced. Every single job. And I think that's what is going to happen. I mean, a world where GDP grows, where profit margins grow, where wages grow, but where employment does not, maybe is okay.

Maybe that's the consequence of having an older workforce, not having as many workers per retiree, or not having as much immigration. How we balance this as a country, how we balance this as a world, and how we balance this as a city, I think is going to be the interesting challenge.

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

Early-stage partner? I mean, this is who we are. The ability and willingness to focus on any one transaction for an entrepreneur is just about the 2 resources we have: time and money. Of those 2, time is the one that is in shortest supply right now. The ability to engage us and to paint a picture of not just where you are, but where you're going and how we can win together, I think, is where the world is going.

This is happening in places that require specialized knowledge—defense, where we're spending an awful lot of time.

Yep.

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

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

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

Awesome. I'm curious to dig into the value, or the residual value, that you see in this world of AI. There's been the SaaS apocalypse. You've been saying for months that a lot of the real problem in direct lending has been overexposure to enterprise software, and that ultimately AI is going to keep hurting that book of business. Where are we now, and where do you think we go from here?

I think there's no going back. I mean, this is our bias, and this is not exhaustive across the board. It does not apply to every company. But the notion that we woke up 8 to 12 weeks ago and figured out that AI was going to impact enterprise software—how could we, as responsible credit people, do this? Or as responsible investors?

The focus so far has been on credit. That's the most visible; that's where the press has focused. If credit is problematic, that means the equity is really problematic.

Totally.

Thirty percent of the private equity industry over the past decade has been devoted to enterprise software. I personally expect the returns from private equity in the aggregate to be disastrous, because so much of the exposure is to enterprise software.

This does not mean that enterprise software companies are going out of business. Far from it. It means that the prospects of selling them either to the public markets or to someone else are now simply reduced, just because the prices that were paid were too high. The price they paid reflected a future that did not have AI in it, and now there's AI in it.

Yep.

So there's a competitor. Again, it doesn't apply to every company, and it doesn't apply to every situation. But the scale of change is just off the charts. If people who are not as tech-focused are seeing this in their business day-to-day, I think about how we run the business here. Everyone at Apollo can envision how the job they do currently can change with the benefit of AI.

Mm-hmm.

A handful of people can actually envision, when data and software become free, how the business should exist versus how it does exist. There's still yet another part of this, which is how you envision how you start new businesses—the cost of starting a new business and the velocity of starting a new business.

We've seen more business startups than ever.

Totally.

Because challengers can now start from a much different place. This is why we're tired as well. It's why we're tired: We have to be established companies, including companies that are successful like ours, and we have to be really paranoid about replacement risk.

But change is taking place faster in places where there is a right answer. Why do we see coding in software? Because, at the end of the day, the AI can check whether the AI is right. So the rate of change is a vertical line.

Totally.

And that's what we're seeing. On the other hand, if you want an answer to what is the best Shakespeare essay, we're seeing improvement, but someone has to opine. There's no right answer. What is the best Shakespeare essay? We're going to see change, but not at that same rate of change.

This describes our business world perfectly. In some things that have a right answer—accounting, trade ops, and a number of other applications—we are going to see replacement.

Yep.

On the other hand, in things that require judgment and know-how, we're going to see augmentation or enhancement. Is this a permanent state of events? No, because none of us know how this ends or how good the judgment will eventually be.

So we need to continue to be paranoid and continue to be change-focused. But for the near term, I'm very bullish on businesses that adopt change and have a change mentality. I'm actually very bullish on wages.

I think we will see a cycling in employment. What I've said previously is that I think we're going to see a little bit of blue-collar ascendancy and white-collar decline. I think that's going to be a difficult spot for politics, which has not operated with that notion historically. It's going to be a difficult thing for blue cities, where much of this white-collar employment is focused.

But the faster we get on with this and create the new businesses and the new industries—which historically has always been the case—the better off everyone is going to be.

I guess, even stepping back, as a lender, how has AI shifted your perspective on the type of collateral you're willing to lend against, or what predictable cash flows look like, given that things are changing so quickly?

As a lender with a lender's hat on, we've always had that mentality: Change is a constant. If I go back and think about the year 2000 as a dividing line, people were worried that the entire digital infrastructure of the US would fall down on Y2K.

All right, we survived.

Yep.

But you go from there. In 2000, the market was still lending against something called the Yellow Pages. How could the Yellow Pages be replaced? After all, it was free, granular, and ingrained in culture. In this year's associate class, I use the term Yellow Pages and people raise their hand. They want to know what it was.

Yeah.

And so, it doesn't stop there. The value of TV stations and radio stations were once thought to be massive franchises. They've diminished. Other forms of content have come along and replaced them. They haven't disappeared, but they're diminished.

Cable television was, in part, the successor. That's now been replaced. Satellite television has been replaced. Mobile telephony has been replaced. You just look at the cycle of change.

As a lender, you know this: You are diversified, you are senior where you perceive risk, you look for hard collateral, and you accept that you can't make a decision for 20 or 30 years. You can make a decision for 3, 5, or 7 years in what we're doing.

There are good lenders, of which I think we're one. There are bad lenders. There are good banks. There are bad banks. There are good insurance companies. There are bad insurance companies. Credit is a skill and is not a skill that everyone possesses.

Yep. So I want to shift the conversation in a slightly different direction, really to moral leadership. One of the things that I've admired about you is just how passionate you've been about fighting anti-Semitism. Obviously, this came to a head after October 7 at your alma mater. I'm curious how you thought about being so vocal with university leadership in that moment.

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

What we were watching was not free speech. We were watching favored speech, preferred speech. In the initial foray with the university, ahead of its Palestine Writes Literature Festival, I wrote to the president of the university and said, “I’m a free speech absolutist. I believe this conference should go forward, but the university, as a 300-year-old moral institution, is funding it, promoting it, and requiring students who are Jewish to attend it during Jewish high holidays. You’ve outsourced the ownership of this conference, which had gone on for many years, to a known Hamas sympathizer and terrorist sympathizer. Other than that, I was fine with it.”

Right. Right. Exactly.

The inability to reflect on the role of a university in society was striking. What is the role of a university in society? Too many times, the question was amorphous. I don’t think our president at the time knew what the role of a university in society was.

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

Right?

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

Right?

Is it her social change? Is it what the trustees decided? Is it what the faculty decided? Was there a vote? No.

What had happened at our university is that we had developed this us-versus-them, anti-American, anti-capitalism, anti-merit approach on steroids. Israel-Palestine is not fully an antisemitic issue, and that’s not what I saw at these universities. I saw it as an anti-American, anti-system issue.

When it persisted, I believed that we should not support those things that violate fundamental moral principles.

Yep.

It turns out a lot of other people felt the same way, even if they weren’t saying it. The vast majority of donors decided to give the university $1 per year instead of whatever their donation was, and we got the university’s attention.

Yep.

Ultimately, the university presidents’ testimony in D.C., where the inability to actually call terrorism—you know, murder.

Yeah. And not just

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

Yep.

We saw it in our business community. We saw people fall on the DEI sword in some instances or on the climate sword. People became absolutists.

When I took over in 2021, one of the things I said is, “I want to be able to say the same thing in Texas as I say in California.” It’s too hard to remember a story. I would rather just be who I am.

If you look at what we did in climate, the rule was: make it better, not worse.

Sure.

That’s it. That didn’t work for some absolutists. Okay, we are who we are. We’re going to do what we’re going to do. We’re going to make it better, not worse.

Yep.

On the employment side, the notion that we would either admit people to an institution of higher learning or bring them into the workforce based on immutable characteristics sounds as anti-American as I could possibly imagine.

I agree.

And it never made any sense. And yet the business community adopted it, not us.

Yep.

We’ve stuck with the same formula: we hire for merit, adjusted for distance traveled. Distance traveled is not about your immutable characteristics. It is about you as an individual, not your class, not your group.

Show me the kid. Show me the individual who’s had to overcome something and still achieved.

Totally.

That’s who I want.

Totally.

That’s who we should want in our universities. That’s who we should want in our companies. That’s who we should want as our entrepreneurs. That’s who we should back.

This is not about concentrating power in an elite. This is about democratizing that, but also not destroying the notion of what I think makes this country great, which is everyone has a shot at it. Not based on your skin color, not based on your religion, your sexual orientation, your country of origin, or any other immutable characteristic. We don’t treat you as a group. We treat you as an individual. Apparently, that’s controversial, by the way.

Shouldn’t be.

Apparently, it is.

But I think that whether the team here agreed with what I did at Penn or not, whether the team agreed with the climate approach or not, and whether they agreed with what we did on employment or not, there was a resounding amount of positive feedback on moral leadership. It’s one of the principles that we have at Apollo: we do right over easy.

It was easy to have said no carbon or said nothing. It was hard to have said, “We’re going to make it better, not worse, but if that includes financing hydrocarbons, we’re going to finance hydrocarbons.”

Yep.

And it was easy to have said, “Yes, we’re going to sign up for this metric or that metric.” It was harder to have said, “Merit plus distance traveled.”

Totally.

But I hope that this is now ingrained in our company, and it hasn’t been cost-free. I don’t think it should be cost-free.

Sure.

But on balance, I would do it all again in exactly the same way. I think it does set us apart, and we’re not the only company that does it. There are others out there who do it, but anytime you raise your head above the parapet, there’s a cost to doing it.

But how many of us get to do this? It’s something I said to Marc when I visited him. We are the luckiest people in the world. We’ve achieved all we’ve ever wanted to achieve. It’s not about money. It’s now going not from success to success, but from success to significance.

What can we do to change the world? We’ve been given an opportunity. We can play golf. I don’t know; it’s not going to work for me. We can do whatever else is expected of us, or we can actually lead.

Totally. I think it’s a very natural segue into culture here at Apollo. How do you view Apollo’s culture? I know “playing to win” is one of the core ethoses. How do you maintain that entrepreneurial culture, which you’ve described throughout this conversation, as the firm continues to scale?

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

It’s been to answer a simple question: What makes Apollo Apollo? The good news or bad news is that it’s been a 6-month negotiation.

When we were a small firm, the culture was one culture. Everyone was brought up and onboarded in the same way. It was all visible. It was pretty straightforward. At 4,000 people in asset management and 2,000 people in retirement services, we now have to be really deliberate.

Plus, I’m going to do this for a long time, but I’m not going to do this forever. As a founder, I get some amount of leeway on culture, but I want to make sure that we are intentional about what we’re doing.

If we hire you as a young person, we teach you the business and we teach you the culture, and we do it really well. But if you are the 15-year person from another firm coming in to help augment our skill set—and there are now 500 of you—how do we teach you our culture?

We know how to make you successful commercially. If you work for me, you learn the culture one way. If you work for John Zito, another way; Jim Zelter, a third way; Scott Kleinman, and so on and so on. And so we’ve had a 6-month negotiation over what makes Apollo Apollo.

That negotiation is reflected in a work product. That work product is now on our website under Careers. It asks the question of what makes Apollo Apollo. It is really controversial and it is really honest, and it’s meant to be that way.

If you’re thinking about coming to work here, make sure this is for you. And if you’re already here and trying to figure out what our cultural norms are, this is for you.

Totally.

Now it’s up to us to hire this way, review this way, promote this way, onboard this way, and do it.

While there are 6 principles, it does come back to playing to win. You see this now, I’m sure, in all the growth companies. How do you keep a company that’s been really successful hungry and playing to win?

Most companies hit an arc.

Yeah.

And then they decline to mediocrity. Some actually descend into chaos. I saw your graphic of Blockbuster and MySpace.

Yep.

Look, those are the obvious ones, but most companies—the leadership, the senior team—in the Steve Jobs world, they say they mistake the product for the process. They think the process is what got them there.

In our world, the desire to win starts becoming overwhelmed by the fear of losing. People are afraid to make mistakes.

So how do we teach this? We basically say, even for me, I’m right 60% of the time, max. I fail quickly and fix it quickly.

You do not get fired here for making a bad decision. You get fired here for not recognizing it, not owning it, and not fixing it.

We have a wall of shame. Every senior professional here has lost money for the firm. If you haven’t, you’re just not doing enough. You’re not taking enough risk, or you haven’t done as much for the firm. And so we’ve normalized the notion of winning as a team and losing as a team.

We keep moving people around. We have a culture that is clean-sheet thinking. We have a culture that supports you through the moments in your life. But there's no one answer.

Yep.

You have to live it every day. What's interesting is that internally, this is really well known. People come here and they're like, “Oh my God, this is amazing. We're so happy to be here.”

Externally, it's really hard because we've gone from a world that was very media-resourced, where they really understood the companies and lived with us for 18 years as a private equity firm, and it was said, “You have sharp elbows. You do this, you do that, you do the other thing.” Well, okay, that may have been true. You might want to revisit the firm 20 years later and actually do it, and they are without resources to do it.

So part of it is overcoming the stereotypes that fit with our industry, as you started.

Yep.

Private equity is an amazing business. It's now $100 billion to $1.5 trillion.

Right, which is—

In 5 years from now, it'll be $1.4 trillion, $1.5 trillion, whatever the number is. It's still going to be the most important business from a generation point of view, from an idea point of view, from a change-agent point of view, from an impact point of view. But boy, there are a lot of other things going on here, and maybe it's worth a look.

Totally. This culture project is incredibly fun, too.

And now it's about bringing it to life.

Totally. No, and as I was reading the document, I saw a lot of similarities between our two firms. Again, we approach the world from very different places, but I think it's one of the reasons why I've always admired Apollo: this notion of building a firm more than running a fund. That's a contrast that I draw often as well.

It's what's happening. We are building a financial institution. If I characterize our industry, we all started as private equity firms, and then we decided to do some real estate, but it was really real estate private equity, right?

Then we did infrastructure private equity, right? And then credit private equity, right? Almost every firm in our industry has stopped there because the amount of wealth that's been amassed is off the charts. It's been a really good life. And if you're not building something to change, why aggravate yourself?

The next group of companies has aggravated itself somewhat by saying, “Oh, let's serve the retail marketplace,” and has developed strategies, infrastructure, and technology to do that. Most firms are stopping there.

Yep.

For us, we're looking at the world and saying, the world is short retirement income. The world is going to need more retirement income. The world is going to need a better source of financing for this global industrial renaissance.

Yep.

Let's build the structure, the products, and the infrastructure to do it. It's what drives us to enterprise, to daily pricing. It's what drives us to market-making, and it's what drives us to innovation.

I don't think the next 5 years are going to be passive. I think the firms are going to look more different 5 years from now than they have in the last 5 years, which has been a tremendous amount of change.

So, a culture that not only has the characteristics we've already talked about, but a culture that adapts—a culture that knows that change is coming, that accepts that change is coming, where people move around and do different things, just the way you have and others have in your organization. That's what we strive for.

Totally. And I guess maybe you've answered this, but if you look out 25 years from now—or maybe I'll say 40 years from now, because you're going to be doing this for a long time—what's the part of Apollo's culture that needs to survive you? What's the core piece of the business that you want to remain the same?

Look, there's a bunch of elements to this. Clean-sheet thinking: let's not try simply to improve. Let's ask the question of what the right answer is.

Informality. Informality in terms of intellectual insubordination, which I contrast with real insubordination.

Sure.

But an environment where the right answer wins, where we can treat each other as humans. Moments that matter. This is a lifetime job for people. The business ultimately runs on experience.

And that only lasts if your partners stay with you for their entire career. If they're going to stay with you for their entire career, we have to recognize they're going to have, outside their careers, a bunch of happy things that happen to them and a bunch of sad things that happen to them.

How we deal with people in these moments that matter—at 4,000 people, at 6,000 people, 2,000—it’s really important. It actually is almost more impactful than anything else we do.

And so, yeah, let's be really intellectually engaged. Let's have a challenged culture. Let's be really informal. Let's get to the right answer. Let's accept that the power hierarchy is at risk with technology, especially, but let's also be human. Let's deal with people as people.

How you balance those two and how you put them together, I think, is the magic. And the team that's around me, I wouldn't trade for the team anywhere. Maybe it's just because we know each other, but I really do think they're exceptional.

It's awesome, Marc. Thank you so much for joining us.

Absolute pleasure. Thank you so much. Great.