用一张没有外部投资者的1200亿美元资产负债表进行投资

Insurance is one of these industries that serves so many different purposes. We're not in the business of predicting the future. We're in the business of being prepared for all its eventualities. The market's changing, the world's changing, and we need to have the liquidity to always react.

We need to be flexible, but at the same time have permanence and stay with some of these businesses, because that's what makes you a good partner. You will likely have trillion-dollar companies in 2030 that currently don't exist. And you probably have trillion-dollar companies, or many hundred-billion-dollar companies, that will not exist. We're starting to see that, right?

This is going to be a fascinating conversation, given that you sit in one of the most interesting investment seats probably in the world. I think, to give people context, the right place to start is for you to describe the platform: how much money you manage, how it's managed, and why that platform is unique and different.

The seat itself is so interesting to me, and then we'll go on to all the things that you've learned sitting in the seat and building the platform. But first, just ground us in what the thing is. How big is it? How does it work?

1. Liberty Mutual’s $120B Balance Sheet

What is the thing? The thing is the balance sheet of one of the largest insurance companies in the world—one of the most diversified insurance companies in the world, Liberty Mutual Group—which has, I would say, 2 primary insurance businesses that ultimately feed the investment platform.

First is the one that probably most are familiar with: the Liberty Mutual jingle, which is our personal-lines business, one of the largest in the US. That, of course, is the home and auto component of our business. Then there is the business that is much more global in nature and really serves a sophisticated set of companies, brokers, and partners, providing commercial and specialty insurance across many domains of business.

Those 2 insurance businesses ultimately seed an investment platform that takes the reserves, as well as the surplus capital, of Liberty Mutual Group and invests it for the benefit of our balance sheet, ultimately for the benefit of our policyholders, so that we can ensure that our promises are always met and have the financial strength behind them. We are about $120 billion in capital.

What's interesting about our platform is that it allows us an incredibly unique way of behaving as investors. We are focused not on any form of third-party capital, which has lots of benefits but also lots of challenges when you manage money. It allows us to think about investing from a long-term perspective, and it allows us to do the right thing, not the expedient thing. It allows us to maintain what I would describe as investment hygiene. That is one of the most difficult things to do when you're managing other people's money.

The other part that's really quite unique is the ecosystem that we're in, which allows us to grow our capital base in the service of our policyholders. We are not driven by shareholders, for example, whose priority is return on capital in the form of dividends and buybacks. That's not part of our structure, and it allows us to again think about making decisions that are the right decisions, not expedient decisions.

2. Immigration and American Agency

Maybe explain one level more why the insurance idea is so powerful. Very famously, Buffett built a big chunk of Berkshire's success on this idea that if you have a sort of insurance part of your business, you control this float—he would call it float—and that that's this magic access to capital and creates this permanence that allows you to do things others can't do.

Maybe build that bridge between the Buffett way of thinking and how it feels to actually operate this thing.

What really is interesting to me is how insurance is one of these industries that serves so many different purposes. The way I like to think about it is that one side of our business, and one side of our balance sheet, is all about protecting and syndicating that risk, allowing risk to be taken by the people in the world.

We have a very appropriate way we think about that at Liberty. We say we want people and businesses to embrace today and confidently pursue tomorrow. That's what the insurance part of our business does. When we sell those promises, when we take in those premiums, we then move them to the other side of the balance sheet and do something else that's really interesting for the economy and society.

We invest that float, as Buffett would say it, but ultimately invest our policyholders' premiums in order to grow the economy, support the economy, invest in critical infrastructure, fund entrepreneurs, and create jobs. Where we sit in the economy is quite a unique place. We do things on both sides of our business that allow us to protect and now create, really, the foundation of commerce and, at the same time, grow the economy. That's a unique spot.

Coming back to this unique combination: you're providing the value through insurance, hedging people's risk when we think about it. That creates this pool of capital—$120 billion—that you can then, at least some portion of it—we'll get into that—invest and use to support the growth of the economy, the creation of jobs, and so on.

Break down the $120 billion for us. How much of that is tightly controlled and has to be a certain way because it's heavily regulated? How much of that is more open? For the open portion, how do you think about how to allocate it?

It's a lot of money. It's one of the bigger investment platforms in the US, so something that's going to move the needle for you needs to be pretty big. I'm curious how you think about that. Break down the $120 billion for us.

$120 billion is a snapshot. I think that number will be bigger the next time we talk, a couple years from now.

Than the last time we talked, yeah. Exactly.

Let's talk about the $120 billion. I would say you could probably think of roughly $70 billion to $75 billion of that as reserves. That could be described as tightly managed, again going back to this notion. Of course, you want to make sure that whatever happens in the investment portfolio, you will always be in a position to fulfill that sacred promise of writing an insurance policy to your policyholder.

I would say even there, I think we have quite a unique approach. We are not just buying investment-grade bonds, putting them in the drawer, and waiting for that coupon to come once a quarter and then, ultimately, for maturity. That could be a sleepy, boring way—frankly, the way this type of capital pool was managed historically.

We're quite innovative. We do lots of different things that allow us to be a liquidity provider into that marketplace. But that's about $75 billion. We can talk more about the unique things we do there.

I would say you could think about the rest as broken out between what we describe as growth credit and growth equity. Those 2 pools of capital are growing as a function of our surplus, and to your point, they are a way we can really be a full-service investment-capital provider into all parts of the economy.

What we've done with our credit business is take an approach not of public versus private, which currently, of course, gets lots of headlines, but really of asking what our levered corporate credit business is, and we've put those parts together. Our public-credit, high-yield, and leveraged-loans business sits with our capital-solutions business, our direct-lending business, and our partnership structure that's focused on credit. All of them sit together and have 1 platform and 1 reporting structure because we believe the expertise, frankly, is what matters.

And you'll do direct deals, manager allocations, big partnerships—whatever?

100%. The way I like to describe that is that people very often start with a product. You could say direct lending, public high yield, or whatever else you want to take. I think we ask the question: What exposure do we want in the totality of our business?

When you ask that question, the next question is, assuming you could figure it out and have the ability to build that portfolio of risks and exposures, what's the best way for me to get those risks? The options are many. The challenge is that most organizations don't have options.

You could take, perhaps, an organization that really has 1 way, which is to be an LP. Then you are going out, meeting managers, and ultimately allocating capital. You have people who are direct originators of that risk and pursue that. Perhaps that's a GP, and many more.

Our toolkit is vast. Once we determine what exposure we want, we've got lots of different ways of getting that exposure. This is really critical because, as an investor that sits in our platform, you have the choice set that very few investors have. You can figure out, "Do I want that in direct form? Do I want that as a co-investment? Do I want that in some kind of club format with other sophisticated investors? Do I want to be an LP because, frankly, the particular risk is so difficult to access, so specialized, that I have no aspiration or ambition of trying to replicate that? I view that as an extension of my workforce, and that's the way I'm going to get that exposure."

The same applies in our growth-equity portfolio. Multiple businesses are housed there. One is private equity. The second is real estate. The third is energy and infrastructure. The fourth is what we describe as alternative credit. I just talked about the corporate-credit business.

Alternative credit tends to be all forms of asset-backed finance where you're lending not against corporate balance sheets but against, ultimately, some pool of collateral. The same concept applies. We've got many different ways we can go to market and get that exposure.

That totality of a toolkit has led to a very, very broad and interesting ecosystem in itself. You mentioned the nexus of where we sit. We get to talk to lots of different people with very interesting approaches to the marketplace, and our job is to be competent across all those choices because, if we are, we naturally become a hub—a hub of both interesting transactions that come our way and opportunities to participate in really unique off-market things.

So, especially as you think about the risk portion of this total pie, you mentioned earlier that you start with where you want exposures and then you fill the exposures. How do you do that?

One way to think about this is that you're just a giant asset manager and you've got all these different ways you can express yourselves, but it starts with—I don't know what it's called—a house view or something like that. How does the house view get developed, and how often does it change?

3. Preparing, Not Predicting

Let me first tell you what it's not. It is not an attempt in any way, shape, or form to predict the future. In fact, one of the sayings we have at Liberty Mutual Investments is, “We're not in the business of predicting the future; we're in the business of being prepared for all its eventualities.”

A house view that tries to predict the way Europe or any of that stuff will go—I’ve been a macro trader. I just think that game hardly works and certainly doesn't work for an institution like ours. God bless those who keep playing it and those who are successful at it.

Our house view is much more about what long-term businesses and franchises we want to be in. The notion of being in a business like private equity, by the way, that's not a 1-, 2-, 3-, or 5-year business. It has very little relevance to what our feelings may be on the environment in the next 2 years.

What I want to always be is in a position to be valuable to our partners, deploy capital into interesting opportunities, and structure our risks—coming back to your actual original questions—in a way that is always, always cognizant of our obligations to Liberty Mutual Group.

Those are not only through the lens of making sure we meet those policies. That's sacrosanct, but Liberty Mutual Group is a large enterprise that can decide, for example, to add businesses to its structure. It can acquire, and we need to be in a position to always have the right balance of liquidity versus the long-term investments that we make, which allows us to do all that.

I'd say liquidity management is actually an incredibly important component of how that broader portfolio gets constructed. We know that credit is going to be a large component of our business, and we want to make sure that, in anything we enter, we have the right level of expertise.

For example, things we have not really done: We have not expanded much into the European market, largely because we don't think we have the right relationships in place there or the right expertise. Even though that particular region is more interesting than it has been in the past, given all the geopolitical dynamics, it is not a place where we are spending our time.

Despite the size of the book and despite the growth, we continue to identify opportunities in the U.S. that we feel a lot more comfortable with. That's one way to think about it: largely U.S.-focused asset classes and different parts of the capital structure.

It's a multidimensional view that gets both developed and constantly refreshed at the top of the house for sensibility. There isn't a notion of, “We have to be this and we have to be that.” The market's changing, and the world's changing. We need to have the liquidity to always react. We need to be flexible, but at the same time have permanence and staying power in some of these businesses, because that's what makes you a good partner and a good investor in some of them.

Let's put the hat of the originator on, whether that's a GP or someone that has a specific deal or something.

Someone that needs capital and has an idea.

Yep. And they come to you because you've got the reputation you do for being one of these big, stable, and flexible partners that likes novel stuff.

Yep.

What are the attributes? What gets your attention and your team's attention? What are the attributes of an originator, their strategy, or the idea that tends to get you engaged?

4. Branded Capital

Above all, I think if you're coming from a place of a newish idea, you've got ideas and you're looking for capital partners, one thing is that we always want to get that phone call. By virtue of what I've described before—our approach to the way we partner with people—I would say these kinds of things come as referrals rather than a barrage of cold calls, and that in itself is super helpful.

What are we interested in? There's a very wide waterfront of things that we do, and we already know that. If something falls outside the waterfront, there's obviously going to be a higher burden of proof on that. We may not have the expertise, and we may not be able to assess or find a fit in the book, but that's more rare.

I think what's more interesting is the unique proposition that's being brought forward. Those are not frequent. It's not easy to be original in many of these industries and subindustries.

We're willing to back people. We're willing to take a risk on people we believe in. If we see integrity, if we see an idea that makes sense, and if we can find a true partnership that has the ability to serve both the originator, in this case, and Liberty for the long run, we're interested.

That links to something very interesting that's been very important to me in my time in this role. We used to say, “What possesses a professional sitting at a stable, large insurance asset manager to take entrepreneurial risk?” That's a cultural dynamic and one that shouldn't be taken for granted, because the easy answer is, “This falls outside my area of comfort. Why in the world would I take the risk?”

We have been incredibly purposeful in developing a culture where people have the incentive, are the types of people who would be curious and interested, and have the governance structure in place to actually take those risks. I view that component of the organization as one of the largest and most important responsibilities I have: to make sure that we have the people who will actually engage the right way.

The first time someone turns that call away or behaves in a manner that doesn't demonstrate curiosity and entrepreneurial spirit, those referrals that I talked about earlier will dry up, because the reputation is built on that entrepreneurial spirit.

Why take the risk at all? If I think about the $120 billion again, there's a long history of insurance being pretty sleepy, investing in bonds, earning a small spread on the float, and no one gets fired and nothing goes wrong. You can still be a great insurance provider.

Why bother applying your craft and your career in this space versus a more traditional asset manager? Why is the juice worth the squeeze?

5. Building a Fortress Balance Sheet

I really do believe what I described before, which is that it's a really unique place to sit in the financial system and in the fabric of the economy. You sit and support the economy in 2 different ways.

Specifically, why not just invest the whole thing in a bond portfolio and go away? That would prevent you from ultimately being a balance sheet that can adopt new technologies, because that's obviously a constant in our world. It is a balance sheet that is able to adapt to the evolution of the economy.

Risks are evolving all the time. The risks that insurance companies took on 25 years ago are very different from what they are today, and for sure they will be different tomorrow.

Let me give you an example: data centers. This is a totally different scale of asset and value than an asset that has existed before. Insurance balance sheets aren't large enough to just absorb that. That's why you have an extension into all forms of third-party capital coming in.

But that's an example of where, if you build a fortress balance sheet, you're able to do things that others will not. How do you build that fortress balance sheet? Through 2 main engines of profitability. One is the underwriting part, but that's a thin-margin business. And then through the asset side, where if you simply take the approach of, “Let me buy a 4% investment-grade bond or 5% investment-grade bond,” versus trying to achieve a 7%, 8%, 9%, or 10% return on the totality of your portfolio, it's all the difference in the world.

And so it is a competitive business where the amount of capital you have will dictate the opportunity set that is available to you, both on the liability side and the asset side.

But in a mutual, I'm especially interested—where there aren't shares—I would totally understand it if I were an equity shareholder. You can invest this at a high rate of return, and that's good for me.

Yep.

Maybe close the loop on why that's good for the holistic thing.

I would actually reverse that. I think as a public insurer, you're not likely to be able to pursue what we're doing because if you're a shareholder of a public insurer, you can bifurcate these 2 things and say, “You have historically not been a sophisticated investor. You've been much more conservative. And so what I ask of you, management, is to deliver me a very consistent margin on the underwriting. And I'd like to get as much capital back from you in the form of dividends or buybacks.”

I don't need you to recreate an investment firm on the asset side of your balance sheet, because if I wanted you to do that, well, instead I could just take that investment and do it myself. That's a classic example of conglomerates. Shareholders don't generally welcome that approach.

And it's especially difficult if you're starting from scratch. Why should you have the right to build a world-class investment organization if you're not really starting there? So I think the public sphere therefore operates differently and is held to a very, very tight standard on the underwriting side.

Now, the flip side of that is, if you're a mutual, you don't have the forcing function of shareholders to ensure that you are operating at your best. But that's an optional feature of mutuality. That's not a requirement. The only requirement is that you can't raise equity.

And so I think we've made the choice that we want to be an exceptional operator. And that includes exceptional underwriting results and an exceptional investment organization. How does it benefit our policyholders? First and foremost, we are going to be there through thick and thin when inevitably trouble strikes.

The other component I mentioned is that our insurance businesses are incredibly diverse. If you think about other large insurers, take a company like Progressive—an incredibly successful company, with lots to admire—but they're very focused on a particular vertical: motor in the U.S. They're incredible at it. Those risks require a certain type of balance sheet. They're not particularly long-tailed.

If you think about our mix, we have risks that can come back from 20 or 30 years ago and be very fat-tailed. So it is really, really important to differentiate the balance sheet that a company like Progressive needs versus a company like Liberty Mutual. Our tails are fatter, and our balance-sheet requirements are very different.

So that goes back to what we describe as a flywheel. If we do well for our policyholders in terms of underwriting efficiently, creating various products that tailor and suit their risks, and then investing our capital well, we can perpetuate the strength in the service of our policyholders.

So if I were to sum that up, success on the investment side unlocks product or service quality for policyholders.

Product breadth, future risks that currently may not be visible to you but are going to evolve. We can be your partner in solving those.

You can underwrite those when maybe others couldn't because of the nature of the balance sheet.

That's right.

Got it.

I would say, at the most extreme, you can think of Berkshire as being that. People think about Berkshire's insurance operations. The most visible, obviously, is GEICO, the original, but they are the insurer of last resort very, very often. The reason they can do that is because they've got this incredible balance sheet.

Again, I think Berkshire is in a universe of its own, particularly in the way shareholders have regarded Berkshire by not asking for capital back. But that's an extreme example of what you can do when you have a balance sheet like that.

I had lunch with Ajit Jain one time, the savant who has run Berkshire's insurance business forever. He described what he did when you really dig in on, “Well, literally tell me what a month looks like in your life.”

It was exactly the same as how I would describe investing, which is, he literally said, “I wait around and sit and wait for the phone to ring.” People call me with the craziest propositions, the craziest risks that I can price and underwrite, and then I price risk. It sounded much more like Warren's job of waiting for fat pitches, as you know how he would describe it.

And as you said, it's sort of the extreme version of this—not this programmatic auto insurance, but wacky stuff that nobody else in the world could do. So it sounds like part of what you've built and are building is something that moves more out in that direction and isn't just this rote, repetitive, single kind of underwriting.

Exactly. We are incredibly diversified in our insurance businesses, and you're spot-on in the way you've just described, I guess, what Ajit said. But we think about the similarity between not all our insurance lines, but particularly those that are more esoteric or really in the commercial and specialty space, as very similar in spirit to the practice of investing, which is deploying capital into uncertainty to achieve a return. That's true across both.

Yeah.

And the risks tend to be not 6-month and 1-year risks. They tend to be multi-year risks. And so the same disciplines and the same conceptual framework apply. How do you manage your reserves? How do you manage your liquidity? These concepts go back and forth between the balance sheet.

Let's be clear: these businesses operate in their own spheres and ecosystems, with not a lot of operational synergy, but definitely strategic synergy.

One of the things that you and I have talked about many times, which I think is so important for the context that you bring to the job, is the power of America and the American system.

I have found this phenomenon that the people who love America most often weren't born here. They're immigrants. They saw some other system, and they came to this one. You have an incredible story in this regard. Can you tell that early-life story in whatever vivid detail you're able to? And maybe put a finer point on this thing that I've noticed, that the people who appreciate this system the most came from outside of it?

Yes, I do love America, and we're going to celebrate America's 250th birthday this summer. Look, I think when you're born outside the United States, you are exposed to a way of life that is very difficult to actually understand for those who are fortunate enough to be born in the United States.

You take certain things for granted that you assume are like gravity because they just exist. But they're not. So I was born in Moldova, a former republic of the Soviet Union and currently an independent country right outside of Ukraine. I was very, very fortunate that my parents decided to uproot their lives in 1990 and make the journey to the United States.

Now, to be clear, this wasn't a difficult decision. This was something that people could only dream of. And we were very fortunate, for a number of different reasons, to take the path that we did, which was a direct path to the United States.

I think what is true in the U.S., always has been true, and is still true today, despite all the many ways you could criticize America, is that the level of agency you have as a citizen of the U.S. or as a resident of the U.S. is unparalleled anywhere else in the world.

It is a vast country with vast amounts of regional and cultural differences along the way. We have done an incredible job of ultimately integrating people into our society. And if you have talents and motivation, there are an infinite number of ways you can define what success is, define how you will contribute, and ultimately live a life where you have the option to thrive.

Not everyone thrives, but you have the option to, and that option is not available to the vast majority of humanity because you'll be burdened by your family's history, your ethnicity, your religion, your government's oppressive system, and your inability to move up the socioeconomic ladder because of the way the economy is set up.

All those things, and versions or combinations of them, are present just about everywhere. But in the U.S., you have an opportunity.

And I think I had a chat before about one of the ways I describe the fascinating thing about America: believe it or not, through the lens of a croissant. I remember as a kid in the Soviet Union, at about 6 years old or so, my mom would send me to go get bread.

And the way you get bread is you go there—there's a bread store. There are really one, maybe two, types of bread, and there'd be lines outside of it. You'd get the bread. I never went hungry, so I don't want to trade those impressions.

But the view was very simple: bread is bread. So why would you need more bread? You get your loaf and go have your calories. In the U.S., we take the exact opposite view. If you want to reinvent the croissant, which exists in a thousand different ways right around Union Square, you can do that. And if you can figure out a way to make it special to you, it's your customer; there'll be a market for that. That is human creativity. That is humans iterating and perfecting and continuing to apply themselves and to express themselves on something that doesn't necessarily need a different way of consuming calories, but it's beautiful. It's what drives, I think, people in general in the United States: to constantly make little tweaks that make things better, and we all benefit from those. So, I could go anywhere else with that, but that's

I'm curious what else the experience was like in that first decade of life, like the bread story. The bread story is very illustrative of the power of a market system and permissionless innovation and all these things that you and I talked a lot about. But what else? Paint a little bit more of a picture of what it was like to spend the formative decade of your early childhood there and maybe draw the contrast to what your experience was then in the U.S.

Well, at the highest level, you're not given permission to dream. You're born to survive. You're born with an attitude and a notion of, “I need to navigate these ways of life so that I can survive.” I don't think it's worth getting into all the other components. Like I said, I experienced really difficult persecution for being Jewish in the Soviet Union.

What did that look like?

That looked like being called out in school. Look, I was a 9-year-old kid, and I still have memories of that. My parents experienced that in much starker ways. As a Jew, you were not allowed to pursue certain professions, or there would be hard quotas on how many people would be allowed to be in those professions. You would be assigned where you lived. There would be university quotas, and so on and so on.

I didn't experience those things, obviously, but I experienced a society where that was normal, and Jews were persecuted. Many other types of groups were persecuted. The point is, that was normal behavior. It was overt, explicit persecution, bullying—all those things were part of the social fabric. And so, when you're born into that, you are consumed by this notion of, “Okay, this is my reality. How do I navigate it and survive?” Never mind iterating on innovation; I'm just trying to survive.

At the same time, I was a kid. I was a reasonably happy kid, because when you accept those things as part of your life, you don't dwell on them. You don't think of yourself as a victim. You just accept them as they are, and you form the rest of your life around them as constants.

I have both kid memories—I was going to say happy, but really, happy kid memories—as well as some of those stark moments of grayness, of just a society that has no spirit, a society that has no real art. That's not a statement about the people. That's a statement about the way society is constructed and suppresses those otherwise natural human traits.

When you come to the US, you experience literally the inverse of that, right? This notion of individualism. It's the opposite of what you would experience in a place like the Soviet Union, but I would argue many other societies as well. Like everything else taken to its excessive corner, you would probably find all sorts of issues with individualism as the way to construct a society, and we wrestle with those in the US.

But what it does do is free a person to pursue their talents, pursue their interests, and pursue a network of friends they want to be associated with in a way that's just impossible elsewhere.

I'm sure it all shaped your worldview to a huge extent, seeing the contrast.

Yeah.

6. Risk Taking and Craft

How does that all map back onto this activity of investing? How does it affect the culture you want to build, the types of people you want to partner with, and the types of deals that you're interested in? I'm sure there's a connection. Back to immigrants, maybe.

Yeah. Yeah. Well, no, I wouldn't put it that way, but first I would relate it to this other notion of risk-taking: not assuming and not taking anything for granted, and not being entitled to anything. This is a fundamental trait that immigrants share.

When you come with nothing, just looking for a life, you don't think of yourself as entitled to anything. I think that carries, no matter how your life in the United States ultimately evolves. You know you're not entitled to anything. No one owes you anything. And that, I think, permeates the spirit of, frankly, the way I go through my life.

Now, we talked about entrepreneurship—a culture of, “Why do this at all?” Well, why not? Why wouldn't you want to make something better? I think we've tried to have that culture at Alteryx, where we don't say, “This is good enough.” That's not a good way to live. If you're passionate about your work, really interested in what you do, and care about your craft, you're going to continue to iterate because it's what you do. And that leads to better results.

It's no different in my mind from that silly act of trying to create a better croissant. It exists in its current form; it's great, but you can make it better. So we do that. Culturally at Alteryx, we try to make things better, whether it's our internal process, the way we engage the world, or the way we're willing to experiment with technology and move fast. All of that is part of our culture.

In terms of the investing activity, or this notion of whether we would back a certain type of investor, what I would say is that we look for traits of entrepreneurs—people who are eager to make the world better through the lens of whatever it is that they're doing. And you know this so well: I think the best investors are obsessed with their craft, not because they're financially driven. So I think we look for that in our partners.

We look for people who are incredibly passionate and good at what they do, are able to communicate it and make it come across, and who are clear about what they're trying to accomplish. Because if you can't communicate a brilliant vision, it stays in your head and unfortunately doesn't get realized. Lots of different things go into it, but passion for your craft is really important.

Going back to the composition of the portfolio that you've built, how much—and I'm especially focused on the risk portion, the credit and growth equity—ends up being a specific company that you invested in versus persistently backing a GP that you're just a constant investor in, versus a one-off partnership with a GP? How does it then break down once you get down to that granular level?

Well, it has evolved. Through time, we've created much more of those options. Historically, depending on how far you want to go, the primary way would have been to back a GP. That's a pretty narrow path—perfectly good one—but I'd say we've been very focused on that same thing I described before. We want to have as many ways as we can to engage and help our business partners.

The first question is, what's the exposure, and then how do we best get that exposure? The mix today is dramatically different from what it would have been 5 years ago. That's expressed both in the types of exposure and in how we get it.

For example, we used to have a meaningful amount of exposure in natural resources. We have much less today. One could have looked at that and said, “Well, natural resources are a way to get exposure to energy, let's say, or perhaps an inflation hedge, if you wanted to put that lens on.” But the way we were getting it was not serving us well, both because of our capabilities—we just didn't have the capabilities to be operators of some of these energy businesses—and because they were quite narrow.

The second you're focused on an operating business, that can be swamped against the backdrop of macro that says, “Okay, energy prices are up, but why is this thing not providing me with what I thought it would?”

Instead, today, as I mentioned, one of the verticals we have is energy and infrastructure, which is both a credit and equity business. We, in many cases, choose to own certain assets or have ownership in certain assets, but not operate them. We invest capital across the capital stack and provide solutions that allow us sometimes to do things like provide credit but have upside exposure via warrants or things like that.

We certainly back partners where appropriate in parts of the industry that are quite technical, where we would never seek to reproduce that kind of insight and capability. That is an example of diversification in our portfolio. Are we benefiting in the moment from that exposure to energy? Absolutely. Would we have gotten the same level of exposure and benefit from our previous way of expressing that? No.

That is really, really important: having that diversity of different businesses and different exposures. But I keep coming back to how you acquire that exposure. That difference can mean the difference between it actually being effective and not.

Do you find yourself selling yourself as a differentiated partner to GPs because of all these ways that you can support them, to try to win more allocation to their funds or whatever, up against other partners that they might choose? And if so, what’s that like? What’s the pitch? What is your pitch to GPs?

You’ve used this term, and I’ve used it ever since I heard you say it: branded capital. But what is branded capital?

Branded capital could mean, literally, that for one reason or another, you’re viewed as someone a GP should engage with. That could be many things. If you’re a mega-fund and you’re coming to raise through your fundraising cycle, branded capital could be a large state pension that will always write the big check. That’s not what we do. That’s not what we are, and so that’s not our brand.

Our brand is to come and help you build a business. Our brand is to be quick in the way we ingest information and ultimately come back with how we want to—or don’t want to—participate, so that we don’t waste your time. We operate much more like a GP in that way and, frankly, look to hire people that come from GPs or operators rather than just a traditional LP background.

Of course, we compete, I’d say, in a variety of spaces, but our reputation continues to build on the way we show up. I would say any single one of our people that goes out into the world can do tremendous damage or bring tremendous benefit in the way they engage. Because, as you know, if you do great things with 10 business partners, the next 10 things are going to be easier, because at least a few of those are going to come from that network.

We find ourselves well beyond that. We are a hub of incredibly interesting relationships, and we’ve tried to make sure that we approach that with all the care, diligence, and thoughtfulness that I mentioned before. If I can identify a way we can be helpful to 2 of our partners or 3 of our partners and not be involved, we’re always going to do that. We’re always going to think that way, because we really do feel that these are valuable relationships—business relationships, friendships—and we’re just rooting for all our business partners.

We know that, one way or the other, that’s going to help our business in the long term, and that’s part of our value proposition.

On this notion of branded capital, is it fair to say that a goal you have is that you want to be one of those LPs that a GP thinks about like Yale or something? If Yale’s backed this thing, that says something about it, brings other capital, and reduces the risk in the eyes of other capital. You want to cultivate that and have cultivated that reputation as being one of those 10 or 15 LPs that have that imprimatur, which is impactful to the partner?

Yes, that’s exactly right. I think we want to be one of those institutions, but I would say we want to be even bolder than that. There’s a notion of a name being on the capital roster that allows others to come in. That’s an asset you have as that type of LP. But we want to be much more than that.

We want to sustain that and maintain that, but we also want to be known for our creativity to structure solutions, and for our creativity and willingness to take risks that some of those institutions with that halo of a brand just don’t do or aren’t set up to do. That’s not meant to be a negative. We want to be more than just that.

In certain cases, that’s all that you need. In the case of, let’s say, the venture ecosystem, which you’re so familiar with, we’re not going to try to replicate that outside of our organization. That’s where you’re competing truly with other capital to get on the capital roster. In other places, that’s just not the game.

The game is: Are you creative? Are you quick? Can you take certain risks that others just don’t even think about? The game is different across different types of exposures.

This environment is so interesting because it feels as though geopolitics, and just the changing, shifting nature of global order and power structures, matters to investing outcomes for the first time in a long time. A whole generation of investors that is retiring right now didn’t really have to think too much about this. There was relative global peace and stability post–World War II, this Pax Americana that everyone talks about, and that’s changing.

7. Geopolitics and American Power

How do you think about that variable in all of this, and the top-down system settings that you stick in there? How do you think about this?

I love history. We talked about this before, and so I’m particularly tempted to engage in these things. But I would say a couple of things I try to remind myself of. Whatever it is that you are living through, we are living through, it feels particularly acute to us. It always feels like the sharpest moment, but it probably isn’t. If you go back and take people in our parts of life, they experienced things then and thought it was the most acute thing.

I also think about the fact that in my career, I’ve now been through more than enough of various crises, some of them feeling like, “Could this really be that I’m alive during this period?” I distinctly remember walking after a long day on Zoom in March or maybe April of 2020. It was a rainy day, and it was a 10- or 11-hour marathon on Zoom. I just needed to walk outside, and I was thinking, “Is it really possible that my life happened to coincide with this moment in humanity where a pandemic was going to completely upend society and human life as I know it?”

I told myself the odds were very small. It was very unlikely that would be the case. And then I remind myself there were many pandemics before that would wipe out large parts of humanity, yet humanity goes on. It is true that if you’re living in that period of time, your experience is actually quite different from the lens of history many years later.

I also find myself having those thoughts over and over again. I have those thoughts when it comes to the unbelievable moment in technological progress that we’re living through. That feels really real and very, very different, in a way that you can imagine society 10 or 15 years from now looking nothing like what it looks like today.

But that was also probably true during the Industrial Revolution. For the people that looked back 15 years after the steam engine became mainstream, society looked nothing like it did 15 years before. So, is it really that different, or is it just continuous progress?

Then I think about geopolitics today, and they do feel like we are certainly breaking the order that had governed economic flow and security architecture across the globe, which has been in place more or less since World War II. You can make the argument that along the way we had some really major shifts, like the Berlin Wall falling, but it’s been a period where certain norms in international relations and certain alliances held through all that. It does feel like that’s changing.

That in itself, I don’t think, affects investing if you’re focused in the U.S. so much. What clearly matters is that the economic architecture is changing. It’s changing from an energy perspective, and it’s changing from a supply-chain perspective. There are real investing opportunities and risks that evolve from that.

I continue to think that the U.S. is endowed with inherent advantages, whether that’s the ability to innovate or the energy abundance that we ultimately have. All those things continue to conspire for American exceptionalism, but we’ve also gotten quite accustomed to a world where just-in-time inventories were a thing, and now that’s challenged.

The ability to identify the cheapest pockets of labor or competitive advantages—that, as the economics people would say, is going to potentially have structural impediments, which has implications for inflation and rates. How does all that balance with what I perceive as an incredibly deflationary impulse from technology? I’m not sure.

I think we are reasonably good at identifying—I mean not LMI, but we as people who like to think about these things—the variables that drive economic outcomes. But I think what we’re terrible at is assigning weights to them. That’s why forecasting is next to impossible.

You may get the right kinds of issues, but you don’t know how they interact with each other. You don’t know what people do within the system to adjust and mitigate all the different roadblocks that come up. So, I do think we’re living through a moment. I do think it’s a reset in the way Pax Americana governed, but I don’t think it’s a reset away from American power in the world, at least on a relative basis. I think the world continues to need America.

The other side of the coin that you mentioned is the changing technology landscape. Arguably, that's the bigger one than very unpredictable geopolitics. This seems more predictable: 10 years from now, there's going to be a lot more stuff that's changed as a result of AI and all that it impacts.

How does that filter through to your investing? Of course, you can get very tactical here, like when you think about software or things like that, but I'm also curious, just more holistically, what are the conversations like inside of Liberty about this topic? I'm sure, like everyone, you're wondering what to do.

8. AI and Investing

What's super different about this technology than other versions of how this kind of thing came about is that it requires people to engage with it, get a relationship with it, and have agency. It's not a software package that the technology department is going to install on your desktop, and then you're going to put your workflow through. That's not what it is.

It's an absolute superpower that's given to you to get the thoughts out of your brain, and it has a superhuman assistant that's able to rationalize your thoughts, present them in a coherent way, and interact with you. By the way, it makes you sharper if you go back and forth and jostle with it and really become an editor, as opposed to just taking that first output that it gives you and saying, "Oh, good enough." That's where slop tends to live.

If you just ask for something and get it back, it will give you generalities and drive everything to an average, right? That's what these models are. In order to get the best out of them, you need to engage with your knowledge, your experience, your ideas, and creativity. It is amazing what you get back.

I think in the investing sphere, creativity is such an incredibly important part. The ability to take an obscure or, frankly, a well-organized set of data and find insights that are not easily observed from it—that's the art of investing. Now you can iterate on that in such powerful ways.

I find myself using AI every single day, more and more so. Frankly, it raises other questions for me. The more of my day I spend with AI, I'm actually not spending it with my colleagues.

I begin to worry about that now. How much are you taking from those messy relationships that are human relationships and messy ways of getting information, and moving into the super-interesting, smart, and efficient way of interacting with artificial intelligence? I don't know how that part is going to play out because it's almost as if, if you take it to the max, it's isolating.

What are the biggest debates? Maybe this is one of them, but if I think about the team that you've built—you plus the heads of the various parts of the organization—what are you guys debating and discussing most right now in this combined, interesting environment of geopolitics, AI, and everything else that's going on?

I would start with one of the newer ones that's really interesting: the notion of how do you think about valuations across not just software. Software, I think, has been the most talked-about one. How do you think about the valuation of businesses in a world where the future is increasingly invisible?

It was perhaps always invisible, but you could get comfortable that certain things had a lot more staying power through thick and thin than others. Whenever you have that dynamic, you could put a higher multiple on things. That's how you rationalize paying a price for an asset.

I think today you've got to ask, "Do I really know which businesses will thrive 10 years from now or 15 years from now?" I think that's really difficult, and that could be everything from, yes, software, but maybe perhaps even Home Depot or John Deere—things that are not obvious in the AI crossfire. That leads you to the question of whether multiples should actually be lower across the board.

I don't think I've experienced a question like that in my career, where you question multiples based on macroeconomic variables, like, "Oh, inflation's higher, rates are higher, therefore multiples should come down," or some version of that. This is very different. You're literally saying, "The future is so unpredictable, how can I possibly place a higher multiple on something?"

That's a really fascinating question because it comes against the backdrop of possibly very favorable macro, which historically would have just said higher multiples. It can come against a backdrop of an expanding economy. Another way to put it is, you will likely have trillion-dollar companies in 2030 that currently don't exist, and you probably have trillion-dollar companies, or many hundred-billion-dollar companies, that will not exist.

We're starting to see that, right? We're starting to see, therefore, more volatility. That's the next extension of that: there's a multiple question. Now, you also have potentially structurally higher volatility. You combine that with some of the tactical stuff, like perhaps the SEC will not require quarterly earnings, so you can make an argument that volatility is just going to be structurally higher going forward.

The other part of that is everything I've talked about so far is through the equity lens. In the credit space, the same kinds of concepts apply. Am I worried about 4-year paper in most of the software names? Probably not. I mean, they're contracted out. This is not a 4-year issue. That paper should be money-good.

Salesforce.

Would I be worried about holding 30-year credit on Salesforce or Oracle or any of these things? I just think that it's a much, much riskier proposition. It would feel like that should drive steepness in credit curves. If that's a structural shift that takes place, that will change capital market behavior.

Again, I go back to the fact that I have not experienced a framework or a time in my career—and I can't really go back through history and identify something similar—where it's not really the macro conditions per se, although you can maybe call this macro, that are driving potential repricing of equities and long-duration credit and volatility, all because it's just uncertain as to how this technology will evolve and change the fabric of the economics.

We've had things that change the fabric of the economy, but it would be a slow burn. It would not be something that you need to think about today. Salesforce is a company that's embedded in the vast majority of large companies in the United States and maybe globally.

To me, the first question was, "Are people just going to buy or code their own CRM?" No, of course not. I sit in a large enterprise. That's absurd. That's not the question. The question is: Will the trillion-dollar company I mentioned before, that isn't even around today and is still an idea somewhere, ever use Salesforce as part of its ecosystem?

If the answer is no, that should absolutely be a massive headwind to the valuation of Salesforce, even though every Fortune 500 company may use Salesforce into perpetuity. It's just going to be a different business. It's a cash cow business. It deserves a different multiple. That's what I think the markets are wrestling with in the public sphere, which has its own cascading effects into the private sphere.

Yeah, I was going to ask that specific question. If you've got this rise and fall of the trillion-dollar—if a new Mag 7 is emerging or something like this—the question of public versus private seems really important. This is an important question no matter what. The 3 or 4 biggest companies in private markets, if they go public this year or next year, will be 3 of the 10 biggest companies in public markets. That's never happened before.

How do you think about this? What is this debate like internally about how you should allocate to the public part of the market versus private, especially interested in the equity piece?

I think public markets are substantially more difficult to hold than private markets. Many parallels to this, right? You don't think about the value of your house every day, even though it changes hourly every day, but if you own a public REIT, real estate, you'll probably look at it every day and have some kind of feelings from it.

Fundamentally, equity exposure is equity exposure. We don't think about moving between the two based on this dynamic. It comes back to what we own in private markets.

I think the more significant reason private markets have evolved the way they have in the past decade is that you went public historically for very specific reasons. You needed to raise a certain amount of capital that was simply unavailable in private markets. They were just not robust enough, and if you wanted to grow your business, you would have to go to the public markets.

There was a clear element of prestige with going public. It was a milestone in a company's history to go public. That was a thing. The trade-offs would be that you give up a significant amount of control and the ability to make decisions for longer horizons and sit through difficult moments, because public markets punish you. Shareholders react, boards react.

Private markets have more or less addressed those challenges, right? You can now raise gigantic amounts of capital, so the capital need has been solved. The prestige and milestone thing has gotten diluted. These companies have grown so large; we all know what they are.

Now, the cost of being public is actually quite high, whether that is the literal cost of the amount of compliance required or people being really careful about saying, “Do I want the kinds of pressures that are naturally present in public markets in the way I'm going to run my company? What is it that my company does? Can I operate on more of a quarter-to-quarter or maybe year-to-year basis, or is my business really going to suffer if I have to operate that way? I really need that 3–5-year window, which public markets very rarely give.”

I think that's what's driven the growth of private markets. Some of those things may mean-revert, so maybe the regulatory burden reverts. That's at least fixable, but the main reason—the availability of capital to you as a private company—I think that stays. This balance will persist.

If you are an equity investor, you should look at the equity risk first and then decide what is the best way to get it. We have not stopped by any means investing in the private markets. There are other reasons why our balance sheet specifically is probably not best suited for public-market exposure. That is specific to our balance sheet. It doesn't mean we don't participate, and it doesn't mean we don't take opportunities when they look particularly compelling. But we will continue to largely focus in the private space for our equity exposure.

You and your senior team came from Goldman.

Yeah.

What cultural crossover happened there? What did you take with you? What did you leave behind? It's a very distinctive culture. Obviously, Goldman, especially when you were there, had a very distinctive culture.

Goldman's one of these places where, when you're there, you're amongst such talented and driven people. It's a hard place to be and a thrilling place to be, but you are particularly appreciated once you're not in it because of all the things that you didn't know you were learning that you were, in fact, learning.

I think we brought a drive for excellence with us. I'd say that's the most overarching theme. I find it implausible to just sit still, to take something and say, “This is good enough. Why should we do this? This involves risk.” It's just this motor that I think people who come from and have been reasonably successful in all of these organizations have inherently: they are always pushing forward, even though another person may look at that and say, “Why do you bother?”

Why is that enjoyable? Why is excellence enjoyable? What is it about excellence that's fun or rewarding?

I think about this a lot. I clearly don't know the answer to it, but as I've gotten older, I think about this in a very existential way.

When you have a family, when you think about the incredibly important lens that provides, particularly through the lens of your kids, you could split your identity in so many different ways. If you overswing to one or the other, something suffers. Everybody's got their own equilibrium.

I've continued to find that I get an incredible amount of personal satisfaction from building and being part of an organization that is making progress, that is making things better. By “things,” I can mean product, customer experience, or the careers of the people that are in my vicinity.

My God, it's one of the most satisfying things in the world to help other people progress through their careers. You don't think about that when you're younger, but it is truly satisfying. I've gotten more comfortable through time with spending more of myself at work than I have before.

Before, I would be very wary of that because I didn't want to have my kids somehow see less of me because I am a workaholic. But my whole frame around that is that I don't think I'm a workaholic. I am obsessed with making things better and being part of this organization and team. It's not about you; it's about the organization as a whole and how it can continue to get better. It gives me real satisfaction.

I have 3, so inevitably I want to set an example for them as best I can, through my experience, of what it means to be a productive human being, what it means to be a good father—unbelievably important—and what it means to show them love, support, and care. I try to do that as best I can every single day.

I think they would find that they get a healthy balance, and that balance moves through time. My 17-year-old, my firstborn, literally needs a lot less of me today than he did 10 years ago. I think that's less of something he thinks about because it's so natural. It's something that I think about and grapple with: Is it okay that we interacted for 10–15 minutes? It was maybe a high-quality interaction, but it was all of 10–15 minutes. I go to bed thinking about that sometimes.

But I also think about this: This is a forever thing. You think about your parents a lot less than they think about you. That will forever be true. It's true of your kids. It's true of the way you probably interact with your parents. Your parents probably think about you much more than you think about them. It's just reality.

9. Permanent Capital and Pragmatic Optimism

I would close by asking about 2 concepts that I think are so powerful and that you've alluded to a bunch. One is permanent capital: what it's actually like. Everyone talks about this as a nice thing to have, but what is it actually like managing it? You're not permanent. Nobody's permanent. Ideally, if you do a great job, this thing will go far beyond you. Careers are not permanent; they're transitory.

The second thing is this notion, related to the question of where you came from and where you grew up, of what I think you call “pragmatic optimism.” These 2 concepts are interesting to me in combination, and I thought it would be a fun place to have you riff as we wind up.

The downside of permanence is that people change. Even though the capital may be permanent, people come through the organization ultimately, and you're always dealing with some version of, “Another team made that investment,” or, “There was a decision made in the past.” You can dwell a lot on that. Usually, the ones you're discussing are the difficult ones, and not the good ones that people are happy to absorb into their window of time.

Let me actually come back to that. What I have found about managing your own balance sheet, as opposed to managing third-party capital, which is inherently not permanent, is that it completely changes what you think about.

When you're in a fund cycle, when you have to deliver returns to a fund and to your investors and then think about the next one, you are consumed by the business that you're running. Investment outcomes are a product that you sell, but you are ultimately running a business, and so your business strategy is always going to dwarf your investment process.

No matter how many times you can talk about your long-term horizon or whatever else, ultimately, the time comes when new funds need to be raised. If you're a public alternative-asset manager, you care about how the market will give you the highest multiple, which will then drive the way you structure your business. The craft of investing is inherently diluted one way or the other. It just is.

It doesn't mean that there aren't excellent, excellent investors, but they have to think about other things. In some cases, that really does take the business away from the bespoke nature. In some cases, people stay small—there are many examples of that—and ultimately try to deliver truly outsized returns because of how they approach that problem.

When you don't have to think about any of that, and all you're thinking about is, “How do I take my capital, deploy it into the world, get the right rate of return on it, and see the fruit of what that capital does?” it's just inherently different.

You are able to sustain what I describe as much better investment hygiene. You don't have to react. You don't have to worry about doing an investor update where some of your investors may have circumstances or priorities that differ from those of other investors in your fund, therefore creating tension and polluting your investment process with the nature of the business.

We just don't have that. We are singularly focused on being in the service of our policyholders, in the service of our balance sheet, and doing the best we can to deploy capital for the right opportunity at the right rate of return. The other part that you mentioned is very real.

There's a downside to having that permanence because you can make the argument that it makes people a little bit more complacent about this notion of the long term. I mentioned that before, and I always am careful with saying we can make long-term decisions that others can't. I think when people say that, for the most part—and I do mean the most part—what you end up with is some form of excuses as to why, sure, this is not great, but it will be if you wait long enough.

Especially, like you said before, the volatility that might—

Yes.

Rising uncertainty.

Yes. So I've always almost had this strange fixed-income version of my thinking around long term versus short term. It's like the 10-year rate is just a series of shorter rates that build up to it. So, yes, you can talk about the long term. The long term is constructed of a bunch of short terms, and so you have to actually hold both truths.

The ability to make long-term decisions and focus on the long term is really valuable. But if it becomes a crutch and an explanatory variable as to why you're either inconsistent or things are not going the way that you'd like them to go, then it's not very useful. In fact, that's an impediment. I would just add one more thing, because this is really important.

I think all businesses have a constraint of an annual calendar. We all do; that's just the way we've structured ourselves. Some have it very acutely, with quarterly constraints. But the annual one is important for everybody. Everybody has some notion of a financial plan or objectives they're trying to hit on an annual basis.

But very few businesses actually have those horizons. And so this is another one where you have to hold both truths, particularly when you're responsible for the organization. Your business is not a 1-year business. We know this. Anything can happen in a 1-year window, and yet you know that that 1-year result has importance to your stakeholders.

So the way I therefore try to navigate that is, 1, to be cognizant of the calendar year, but try to establish some 3- to 5-year targets and put yourself on the hook for those in a much more meaningful way than the 1-year. Or at least say more people in this organization really are on the hook for the 3- to 5-year period than they are for the 1-year period, and be explicit about what that is.

The other part is all businesses that have this dynamic require a great degree of transparency from all your stakeholders in order for you to ride those waves. Because if your business is opaque, not understood, and volatile, that's a recipe for ultimately not being supported through difficult times. And so I try to always remind myself and my leadership team that transparency is what allows you to have autonomy. No transparency, no autonomy. Critically important, difficult to deliver, and people don't always focus on it.

I love doing this with you. I love your story. I love the way you built this thing. I think it's extremely distinctive. It truly is one of those 10-figure, branded-capital LPs that I think everyone out there wants. It's so interesting to me.

Maybe I should make this a series or something, to really help the world understand how each of these huge pools of capital thinks and works. I think my traditional closing question for everyone is: What is the kindest thing that anyone's ever done for you?

This is the one question I knew was coming. I've thought about it. I had so many thoughts on who I should describe. I've been fortunate to have many. I'm going to come back and maybe do something that I haven't seen others say on your podcast. I'm going to come back and say the kindest thing is this group of people that have fought for, constructed pathways for legal immigration to the United States.

So my gratitude is to America. And my gratitude is to the people who, for reasons they didn't have to, allowed people like me to come to America to have a very, very, very different life than I would have otherwise had. They allowed me to have an impact on people that are in my vicinity and surroundings, hopefully a positive one, and to find a way to learn from that gratitude and continue to have pragmatic optimism that America is essential to the world.

It is still the shining city on a hill, and I want to do whatever I can to remind people of that, to contribute to it, and every single day be grateful for being an American citizen.

Beautiful. First answer of its kind, which is hard to do 500 of these in. Thanks for the great answer and for your time.