Alan Waxman - Private Credit and the Modern Financial System - [Invest Like the Best, EP.466] | Invest Like the Best with Patrick O'Shaughnessy

The conversation explores the evolution and current state of the financial system, focusing on guardrails, incentives, and market structures. Alan Waxman, founder of Sixth Street, outlines three systems: the post-Glass-Steagall era (1933-1999), the deregulation period leading to the 2008 GFC, and the post-GFC environment. A key argument is that the "factory model" of investing, characterized by the industrialization of fundraising and asset deployment, has led to asset-liability mismatches and increased risk. This model, incentivized by high FRE multiples, contrasts with an "artisanal" approach focused on investment returns. The discussion highlights the risks of wealth channel investments in illiquid assets and the need for recalibration towards prudent underwriting and wider investment apertures. Waxman emphasizes the importance of clarity of purpose, adaptability, and "facing the tiger" in navigating the current dynamic environment.

Outlines

Part 1: Sponsor Introductions

Part 2: Evolution of Financial Systems

Part 3: The Factory Model and Incentives

Part 4: Risks and Responsible Investing

Part 5: Strategy, Productivity, and Culture

Part 6: Personal Systems and Philosophy

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Alan Waxman - Private Credit and the Modern Financial System - [Invest Like the Best, EP.466]

Invest Like the Best with Patrick O'Shaughnessy

Part 1: Sponsor Introductions

RAMP: Automating Expense Reviews with AI for Time and Cost Savings

WorkOS: Streamlining Enterprise Adoption with Core Capabilities like SSO and SCIM

Rogo AI: An AI Platform Designed for Wall Street Bankers and Investors

Part 2: Evolution of Financial Systems

Introduction to Alan Waxman's Framework on Financial Systems and Incentives

The Wild West Financial System Before 1929 and the Emergence of System 1

System 1: Stability and Limitations of the Post-Glass-Steagall Era (1933-1999)

System 2: Deregulation, Leverage, and the Road to the Global Financial Crisis

Asset-Liability Mismatches and the Seeds of System 3

System 3: Basel III, Dodd-Frank, and the Rise of Private Capital

Vanta and Ridgeline Ad

Part 3: The Factory Model and Incentives

The Factory Model: Industrialization of Fundraising and Investment

The Primacy of the Liability Side and the Shift Away from Matched Assets

Underwriting Standards, COVID, and the Acceleration of the Factory Model

The Root Cause: The Change of Behavior Patterns of the Factory Model

The GP's Incentive and the Clarity of Purpose

Telltale Signs of a Firm in the Factory Model

Part 4: Risks and Responsible Investing

Asset Liability Mismatches and the Implications of Perpetual Private BDCs

The Range of Implications and the Need for Recalibration

Responsible Investing and the Evolution of the Goldilocks Scenario

Principles for Running Investment Firms and Building Sixth Street

The Future of Private Credit and the American Financial System

Ramp and Vanta Ad

Rogo, WorkOS, and Ridgeline Ad

Part 5: Strategy, Productivity, and Culture

Creative Destruction and the Opportunity Set Today

Team Development and Adaptability in a Changing Environment

Part 6: Personal Systems and Philosophy

Alan Waxman's One-Sheet System for Personal Organization

The Left Brain and Right Brain Sheets

Adapting and Prioritizing Time

The Major Eras of Building a Life's Work and Career

The Measurement of Success

Facing the Tiger and Approaching Change

Conclusion and Sponsor Mentions

Alan Waxman - Private Credit and the Modern Financial System - [Invest Like the Best, EP.466]

Invest Like the Best with Patrick O'Shaughnessy

Part 1: Sponsor Introductions

00:00RAMP: Automating Expense Reviews with AI for Time and Cost Savings

RAMP: Automating Expense Reviews with AI for Time and Cost Savings

00:30WorkOS: Streamlining Enterprise Adoption with Core Capabilities like SSO and SCIM

WorkOS: Streamlining Enterprise Adoption with Core Capabilities like SSO and SCIM

01:05Rogo AI: An AI Platform Designed for Wall Street Bankers and Investors

Rogo AI: An AI Platform Designed for Wall Street Bankers and Investors

Part 2: Evolution of Financial Systems

01:49Introduction to Alan Waxman's Framework on Financial Systems and Incentives

Introduction to Alan Waxman's Framework on Financial Systems and Incentives

04:02The Wild West Financial System Before 1929 and the Emergence of System 1

The Wild West Financial System Before 1929 and the Emergence of System 1

07:32System 1: Stability and Limitations of the Post-Glass-Steagall Era (1933-1999)

System 1: Stability and Limitations of the Post-Glass-Steagall Era (1933-1999)

09:21System 2: Deregulation, Leverage, and the Road to the Global Financial Crisis

System 2: Deregulation, Leverage, and the Road to the Global Financial Crisis

13:03Asset-Liability Mismatches and the Seeds of System 3

Asset-Liability Mismatches and the Seeds of System 3

14:18System 3: Basel III, Dodd-Frank, and the Rise of Private Capital

System 3: Basel III, Dodd-Frank, and the Rise of Private Capital

17:53Vanta and Ridgeline Ad

Vanta and Ridgeline Ad

Part 3: The Factory Model and Incentives

19:52The Factory Model: Industrialization of Fundraising and Investment

The Factory Model: Industrialization of Fundraising and Investment

21:25The Primacy of the Liability Side and the Shift Away from Matched Assets

The Primacy of the Liability Side and the Shift Away from Matched Assets

23:33Underwriting Standards, COVID, and the Acceleration of the Factory Model

Underwriting Standards, COVID, and the Acceleration of the Factory Model

27:36The Root Cause: The Change of Behavior Patterns of the Factory Model

The Root Cause: The Change of Behavior Patterns of the Factory Model

29:29The GP's Incentive and the Clarity of Purpose

The GP's Incentive and the Clarity of Purpose

31:17Telltale Signs of a Firm in the Factory Model

Telltale Signs of a Firm in the Factory Model

Part 4: Risks and Responsible Investing

32:44Asset Liability Mismatches and the Implications of Perpetual Private BDCs

Asset Liability Mismatches and the Implications of Perpetual Private BDCs

35:53The Range of Implications and the Need for Recalibration

The Range of Implications and the Need for Recalibration

37:53Responsible Investing and the Evolution of the Goldilocks Scenario

Responsible Investing and the Evolution of the Goldilocks Scenario

40:12Principles for Running Investment Firms and Building Sixth Street

Principles for Running Investment Firms and Building Sixth Street

42:54The Future of Private Credit and the American Financial System

The Future of Private Credit and the American Financial System

44:33Ramp and Vanta Ad

Ramp and Vanta Ad

45:01Rogo, WorkOS, and Ridgeline Ad

Rogo, WorkOS, and Ridgeline Ad

Part 5: Strategy, Productivity, and Culture

45:46Creative Destruction and the Opportunity Set Today

Creative Destruction and the Opportunity Set Today

47:46Team Development and Adaptability in a Changing Environment

Team Development and Adaptability in a Changing Environment

Part 6: Personal Systems and Philosophy

49:07Alan Waxman's One-Sheet System for Personal Organization

Alan Waxman's One-Sheet System for Personal Organization

52:02The Left Brain and Right Brain Sheets

The Left Brain and Right Brain Sheets

53:54Adapting and Prioritizing Time

Adapting and Prioritizing Time

55:16The Major Eras of Building a Life's Work and Career

The Major Eras of Building a Life's Work and Career

57:17The Measurement of Success

The Measurement of Success

59:15Facing the Tiger and Approaching Change

Facing the Tiger and Approaching Change

1:02:01Conclusion and Sponsor Mentions

Conclusion and Sponsor Mentions