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("Another Horizon" by Pierre Perez-Vergara) [ERIK RAGATZ] Well, I am a proud member of the class of 2001. I know there's a bunch of you out there right now, yeah, which means this is my 25th reunion weekend as well. So I'm looking forward to participating in all the events this weekend like you. That's not, however, why I'm here. I am here in my capacity as a lecturer at the GSB. After a 25-ish year career in private equity, mostly as a partner with Hellman & Friedman, I joined the faculty here at the GSB last year. I took over and stepped into some giant shoes. I'm teaching Jack McDonald's class.
Jack literally. It is intimidating, but it's also an amazing tale. The community of support and such is phenomenal, including, by the way, Jack's widow Melody is in every class. She still comes to every class, and that's really a point of just how much of a family it really is in Jack's community. So I'm here as part of that, and as part of that role, I'm also helping with the initiative investing. So thank you all for coming and hearing a little bit about that. I want to do two things here this morning, in addition to leave some time for Q&A, which is one, I'm going to go through a few slides just on what is the initiative for investing?
What is investing at the GSB, and where are we going with all this? And then I want to turn it over to our panel, and I'll lead a panel discussion here with three of my colleagues from the GSB, Henry Gao, David Singer, and Scott Brady, to try and bring it all to life for you. So with that, given we've got 50 minutes and given I want to leave some time for Q&A, let me just get into it. So the Initiative for Investing is relatively new at the GSB. Some of you have probably heard of it, some of you probably haven't. But let me just start by saying, investing is for sure not new to the GSB. In fact, it's deeply embedded in the overall curriculum and culture of the GSB.
20% of our students today come from investing backgrounds. More than 90% of students take an investing class of some form or fashion. I think it's actually part of the course, so it's probably 100, if I'm honest. And then more than 33% of people actually go into investing over time. And if you go and look at some of the labels, the logos of some late-stage companies. This is public and private equity. We've got founders, we've got meaningful managing partners of all of these firms here who've really not just grown great firms, but really had a big influence on asset management generally. And.
The initiative does include venture as well, and to say that the GSB has played a role in the venture community is probably the biggest understatement I'll make here today. When you think about these firms, and it may look like I just pasted a bunch of colored squares up there. These are actually the logos of VC firms, which maybe we can ask Scott and David around those. But Kleiner Perkins, Khosla Ventures, Accel, Benchmark, Andreessen Horowitz, I mean, these are all firms filled with GSB grads that are literally changing the world. It goes back even further. You go back to some of the research, some of the academic roots of the GSB, and you'll see names like Bill Sharpe.
Myron Scholes, former dean Mike Spence, who've all played a really meaningful role in influencing the intellectual landscape around investing. Has anyone received stock options? Maybe a few? You can thank Myron Scholes for that. I'm just kidding. But anyone who's actually expensed stock options on their P&L can thank Myron Scholes for that as part of the Black-Scholes piece. What people probably don't realize is how much the investing landscape of the GSB has changed, since many of you were here.
There really has been an explosion of classes that have come. When I was here, so this is that '99 to '01 period, Investing at the GSB was Jack's class. It's a little bit of exaggeration, but that's really what I thought of. And you'll see here, we literally have dozens of classes taught by great professors, great practitioners, leading real practical and frontline judgment formulation. I mean, you can see how, who wouldn't like to take a class from two partners from TA and Anne Beyer around what a good business is, you know, Buffett-style investing?
How about Hanno Lustig and the CIO of the Hewlett Foundation talking about institutional investing? Jonathan Coslet's a great investor. I mean, I'd love to take Mike Harmon, who's a former Oaktree Partners, restructuring class. Not because any of my companies need restructuring, but, you know, for a friend. And it's just a great landscape. And of course, Jack's class is still part of that landscape, here after, I think it's now been over 65 years that this class has been taught, and it's still about fundamental investing.
You know, Jack was a real innovator when he brought that to the GSB in the '60s, and the class is still growing strong. The basic pedagogy of Jack's class remains, which is we bring in 20 amazing, now full GSB alum, investors who come in and talk about their craft. They talk about how do they assess risks on the front lines? How do they make judgments? How do they build firms? And it's really that mosaic that we then have added to, which is some teaching notes and some other curriculum that really gets to the heart of, ultimately, when Warren Buffett says "Buy wonderful businesses at fair price."
Like, what does that actually mean and how do you actually do that? And that's really the kind of the curriculum. You can see the parts of that. This never has been a class really just for investors. It's really-Jack stressed this, and we really believe this, that even if you don't want to be Warren Buffett or you don't want to be another type of investor, this is a super important leadership class. We talk about judgments in uncertain worlds, allocating scarce capital as really the role of the investor. I think that applies to anyone who's a leader in business, making decisions in uncertain times.
Buffett's got a quote that I think really speaks to this, which is, "I'm a better investor because I'm a businessman, and a better businessman because I'm an investor." And that's something that we fully believe, and it's really part of why the initiative of investing is coming forward. Despite all of that, Investing's always been the redheaded stepchild of entrepreneurialism at the GSB. We've had great firms that have been founded, but it just hasn't had the precedence. When people think about the GSB, it's entrepreneurship, entrepreneurship, entrepreneurship, and I don't want to take any of that away. And frankly, if you look at
some of the best businesses that have been built out of the GSB, a lot of those are investing firms. And so I think these approaches come hand in glove. Jack's class, anyone know what the formal name of Jack's class is? No? Investment management and entrepreneurial finance, and it really does play into this whole theme of entrepreneurship actually dovetails into investing in a very meaningful way. So enter the Initiative for Investing. And I'm very pleased to say this initiative will become a center in February of 2027.
It'll become one of the three big pillars of the GSB, along with CES and the Leadership Institute. And with that, we'll be looking to continue to educate Train the next generation of leaders. We'll be looking to make connections. The alumni community here is such a big part of Jack's class, as you all know, but I think really, especially in investing, where we think of it as sort of a seven-year apprenticeship, that mentorship from a broader community is a huge part of it, and then obviously thought leadership that comes with being part of the Stanford.
We'll rely on the three big pillars of the GSB for that. And as I mentioned, students, alums, and faculty, and the practitioners who are partnered in so many of these classes is such an important part of that. One of the things we're doing right now, and Henry will talk about because he's been a big part of this, is really thinking first principles about the curriculum framework. You can see here just kind of the asset classes that we're covering in the initiative for investing. It's much broader than just public and private equity and venture capital. And a surprising part of this may be to some is that
we're for sure focused on the investment craft. You know, how do you make good investments? How do you take good risk? But it's also the business of investing. How do you form firms? How do you compensate talent? We'll talk to David Singer a little bit here, who actually teaches a class on compensating talent. So both of those are really core pillars of the initiative. Here's the crackerjack team that's really running the initiative on a day-to-day basis. Amit and Peter are the faculty sponsors and leaders here.
Gina and Judy really run the day-to-day. And then we've got three investors in residence, which again, Henry will tell you a little bit about what that actually means here. And I'll just say, look, we're off to a great start. Last year was the first investor summit. For the GSB, we had a fabulous turnout, filled this room, and we're oversubscribed. Lots of great investors coming in there. We've had a summer internship program for some emerging fund managers who might not otherwise be able to have GSB interns that has been sponsored. And then a whole bunch of other work around
kind of just planning for the initiative. And there's lots more to do. We've got the second summit that's coming up in February of this year, and a bunch of programming around emerging fund managers and family offices that people will see around that. We've got a new Leaders in Investing speaker series. It used to be that the great investors, the Buffetts, the Mungers would come to Jack's class. Given the broader curriculum, we're really expanding that now. Partly with a gift from TA Associates, we're bringing in some of the world's great investors to come probably once a month into the GSB to really talk about their craft.
So think about View from the Top. But purely focused on investing. So I'm really excited about that. And those will be interviewed by GSB alumni practitioners as well, so you get a little twofer in that. And then I want to get to our panel, and so I'm just going to really put this up and not really speak to it, but I would just say if any of what I've said interests you, come on in, the water's warm. The alumni community is such an essential part of everything we do at the GSB, but as I said, more so even with the investing community. And as someone who's relatively recent, into the community here, I would just say it's also amazingly fun.
You know, the energy that you're experiencing this weekend, actually, at least in my experience, does not dissipate. The intellectual rigor of this place, and frankly, the students are pretty smart and force you to be on your toes. So it's actually been amazingly generative to me for my own investment thinking to come back to first principles. You know, what's the med school adage? See one, do one, teach one. That actually really is part of the learning process in my experience here. So with that, let me pause there.
We are going to leave time at the end for questions, so I think we'll just jump right into the panel now, and then hopefully leave a bunch of time at the end for questions. Take my seat for this. Okay, well, let me start out by just giving a quick intro of my fellow panelists here. First of all, thank you all for joining us here. To my left, we have Henry Gao. As you saw, Henry's an investor in residence at the Initiative for Investing and actually a current student still. He already completed his MBA but is finishing up his MA in education, and so he's going to speak a little bit to the student experience.
Next to Henry is David Singer, who's a lecturer here at the GSB as well. In his day job, I guess is maybe the right way to put it, He's the managing partner of Maverick Ventures. He's a founder and former CEO of three healthcare companies and a member of the Midas List. Pretty good person to be learning from. And then if anyone was here for AI, you've already met Scott, And what I'm gonna tell you in my blurb here is not gonna do Scott nearly justice, but Scott is a lecturer at the GSB. He's the faculty advisor for AI at GSB's Applied AI Initiative.
Did I get that right? And he's a founding partner of Innovation Endeavors, so another venture capitalist, so we're going to get, I think, an interesting venture capital conversation going here between Scott and David. And he's a founder and former CEO of multiple technology companies. And I'll just say, this is the quality of faculty that we've got at the GSB right now, and it's really amazing to be part of that community, but also, I think, for the students and learning. So Henry, let me start with you here. You have a unique perspective as part of the initiative and doing some of the curricular work, but also as a student.
Let me ask you to put your student hat on first, and let me ask you a question that I think probably you hear a lot from folks, which is, as an investor, you were at Goldman and then at TPG before coming to the GSB. Why come to business school? Why come to Stanford at this point? What is the value that you thought you would get out of the GSB? [HENRY GAO] Yeah, thank you, Eric. Great to be here. It's a great question. I think the golf course definitely played a role in convincing me to come here.
[ERIK RAGATZ] You forget, this is the generation where that actually really was true. [HENRY GAO] Sorry for taking up your tee times. But I'll be candid. I think for me, it wasn't like a perfectly Thought-out reason, and it really came down to the people at GSB, I think. I remember back in college, I was somewhat anti-business school. I didn't really see the point. I was in a career that didn't need business school to progress. But I think really as I met more alumni from GSB, especially at my old firm at TPG, great shout-out to David Trujillo, Peter McGoohan, Andy Doyle,
like all alumni of the GSB. I think that really convinced me. Like it's a really special cohort of folks who have Great careers, but also genuinely interesting and nice people outside of work. So I think it was kind of an emotional decision, as like, I want to be part of this cohort, and I was just also very convinced that I think by meeting these people, being on this journey with you guys, I'm really going to create a lot of variance and broaden the fan of outcome for my career and for my life. And to me, that was exciting, and that's why I came here. [ERIK RAGATZ] Yeah. Spoken like a true investor. And was it worth it?
[HENRY GAO] Yeah, definitely. I cannot promise you that my handicap improved meaningfully, but it was definitely worth it. I think, thinking back, it was pretty silly for me to hesitate. Yes, there's a little bit of FOMO about missing out on Interesting transactions, like opportunities in AI, but I do think, like, especially in times of change, I think there's actually a lot of value in stepping aside and it's like think and kind of see more of the forest and the trees. And I think that's kind of like really what I did.
I think for me, it really came down to three things that I think collectively really helped me clarify, like, what I want to do, like my next steps in my career and my life. I think number one is around, like, soft skills and like just emotional maturity. I came from like a pretty typical path, like banking, private equity, and I think the GSB really pushed me out of the comfort zone. Like, I applied and became an Arbuckle Fellow. That was not on the bingo card of a PE bro, I guess. I ran for a student government, was elected to serve as the CFO for my class, and I think those experiences really pushed me to mature not as like a
professional, but also just as like a person. I think number two is around scratching that like operating and entrepreneurial itch. I knew I love investing, but part of me is like, okay, what if I like operating more? Can I give it a try? And I think the GSB really gave me that opportunity. I helped, actually, a classmate run an education company that has hundreds of millions of revenue globally. I was serving as the chief strategy officer, as well as the country manager for Canada. So.
Owning a sales and marketing org, owning the service delivery, and really just say drinking from a fire hose. Like, what is operating, how to run a business. I loved it, not as much as investing. So I think that really confirmed my interest. It's like, okay, I still want to do investing, but perhaps in a more entrepreneurial manner. And then the last thing for me was, it's kind of like an opportunity to reconnect with the world outside of the US. Like, I came to the US from Canada over ten years ago, and The GSB became like the perfect platform to reconnect internationally.
Like I went on a study trip to Ethiopia, Tanzania. I did a GMIX internship in Japan. I led the Stanford Tsinghua Exchange Program in Beijing. And also with my friends, we designed the first ever Saudi Arabia and Oman study trip. So I think without the GSB, it was really hard to kind of step out, kind of reconnect with more of like that international upbringing that I had. [ERIK RAGATZ] Yeah, yeah, terrific. [ERIK RAGATZ] Well, a lot of that resonates. Let me just then ask you to put your investor-in-residence hat on. Maybe first off, explain what the role is, for everybody here. And then touch on briefly, if you wouldn't mind,
just kind of as you see it sitting in that chair, what are the top two or three priorities you see for the initiative? [HENRY GAO] Yeah, absolutely. So we kind of see the initiative for investing also as like a startup. Like it's an experiment. We're trying to figure it out. And the investor-in-residence role is a one-year fellowship that we really kind of see as a continuation of the investing education at the GSB. It has two parts. So part one is to work and support Gina and the team on all the strategy and the programming of the initiative, which will soon become a center, as you guys know. So.
Example projects will include, well, sitting here with you guys, talking about the initiative, Designing and planning the investor summit in February. We are reorganizing and coming up with a curriculum framework to think about investing. We also launched a research survey about AI's impact to investing. And I think for me, as I pursue my master in education, this opportunity to see what is it like to work in higher ed has been very special. So that's part one. And part two is to really give a platform for.
Students or recent graduates who want to pursue investing to really kind of stress test and build their thesis. Say, for instance, during GSB, I've actually built a thesis and strong conviction about the Middle East and the GCC countries, the economics and social transformations, the region's becoming a capital of capital, its position in evolving geopolitics. So the role has actually given me a lot of Latitude and resources to not just say stress testing, but actually like start operationalizing some of those ideas, so which has been really great. Yeah. [ERIK RAGATZ] Space that you wouldn't have had if you were working at TPG.
[HENRY GAO] Exactly, yeah. Well, I do get paid more, but like less latitude. [ERIK RAGATZ] At TPG. [HENRY GAO] Yeah. And yeah, and I think in terms of priorities going forward, I think there are two things that we're pretty excited about. I think one is, I'm sure like Scott probably will talk about this. Like, I remember at the GSB, we always talk about We don't teach entrepreneurship. We study it. And I think that's the exact same spirit we want to bring to the Center for Investing, is that I was a philosophy major in college. I developed a passion for investing through this small value investing club. At TPG, I worked on control buyouts, but also digital infrastructure, special situation credit and some growth equity.
And I think I've always seen myself as a student investing. How do I Study the craft and how do I get better? And I think that's something we want to bring to the center as well. It's like working in collaboration with faculty, alumni, students, really understand what does it take to be an effective investor across strategies, asset classes, market cycles, environments. So I think that's one. And I think the second one is about shedding more of a light on the business investing, right? We are at a business school, investing is a beautiful craft, it's one of the most intellectually stimulating professions, but It's also one of the most opaque area of the business world.
So even for me, I think having worked on special projects like launching new products, like strategies and acquiring other funds, Coming to the GSB, I was still very clueless about fundraising, operations, all of that stuff that makes the investing craft work. So. Putting more of a spotlight on the business and investing, I think, is another priority of ours. [ERIK RAGATZ] Yeah, that makes sense. Well, we're fortunate to have your perspective coming up into the curriculum development, so thank you. Scott, let me turn it to you next.
David, I'm gonna come back to you. I think a lot of people, when they think about investing at the GSB, think about late-stage investing. You know, the Jim Coulters, the Bill Fords, the Mark Stodds of the world. Not because VC is not an important part, but because I think people associate VC with the Center for Entrepreneurial Studies here. But VC is important, important, important part of this. And as I mentioned, VC has been a huge impact area for GSB alums. It is sort of a cross-listing, if you will, now with CES.
Let me ask you a couple questions about the venture world, which is, start with, for a young person who wants to be a venture capitalist, what is the right way to develop those capabilities? And. Maybe I'll even say, as a late-stage guys, what is the right capability to be a great venture capitalist? And what does the GSB add to that? [SCOTT BRADY] Yeah. So, similar to Eric, I was very fortunate to fill the shoes of two legends from the GSB. So, one of the second-year classes I teach is one of the capstone entrepreneurial classes, Formation of New Ventures.
That was Irv Grousbeck and Chuck Holloway. And I think you nailed it. Philosophically, I think the GSB is different than most places. I don't think we set out to teach entrepreneurship. I think we broadly study it and observe it. And that's largely through the arc of a startup. It's really understanding the team formation, ideation, execution, scaling, all these fundamental inflective moments that you see in the entrepreneurial process. And I think, in many of our classes, we observe that sort of uniquely through the
eyes of an entrepreneur. But I think from an investment perspective, you think about all the other really extraordinary things we do here. We teach the core foundations, everything from cap tables to options to governance. These are things that students are able to go deeply in and ruminate in. And I think really the intersection of how we think about both the entrepreneurial process- I teach in the Center for Entrepreneurial Studies- but also think about the intersecting with the investment process. They're really the same thing, looking at them from different sides. So being able to both observe what
Ideation and creation looks like, and then being able to fund it is really just being ambidextrous. It's being able to do both. And I think what you'll see is many of our students actually do, in fact, experience both. Many of them, like me, will go off and be entrepreneurs. And when I founded our firm with Eric Schmidt and Dror Berman, all of us came from deep operating backgrounds with an intense desire to support what we thought was the really disruptive process that was happening, specifically around some of the areas of computer science, like generative AI. And then I think if you look more broadly across the GSB, one of the other classes I teach is one of our new research classes,
really equipping our students with the tools to be able to do first-party research If for the purposes of creating a hypothesis about the future. And what I would argue to you is, as an investor, you're investing in what will be possible in the future. And I would also argue, as a entrepreneur and as an investor, you really need to have that core hypothesis. So I think one of the benefits that GSB has is really the plurality of the different things we can offer students so that they can find their way through this journey, both rooted in principles, but also rooted deeply in observation. And then having extraordinary people, that come into Eric's class, come into my class, that share
their journeys in a way where we can allow our students to truly make original mistakes in what they do, not recreate the mistakes of the past, but stand on the shoulders of people that come before them. So I think it's a unique environment, and I think the pace that- we're going to talk about this probably in a little bit- the pace of change is extraordinary. And that means that our students have to be extraordinary and uniquely positioned to be able to be relevant at this moment in time. [ERIK RAGATZ] Yeah, I love that. I take away people, empathy. Really investing is not a theory. It's what needs to happen on a real operational level.
Well, let's run with your comment there at the end, which is I think there's sea changes going on in the venture world. You're closer to it than I am, but obviously AI is part of that. But later stage funding, bigger funding rounds, more private, time private, all that sort of stuff. Does that change the formula for what we're teaching, what people need to know coming out? How do you see the changes rippling through? [SCOTT BRADY] Yeah, I think you rightfully spoke to some of the legends of traditional private equity. I think the world is changing.
I think it's very likely a few years from now you'll be talking about the legends of venture capitalists, but that's an aside. So let me give you what I see in the market. I'll give you the data, and I'll sort of give you maybe the bare metal of what we're seeing. So one, The asset class has changed. Venture capital, the asset class has changed dramatically. In Q1 of this year, 73% of all venture capital was invested in five companies.
Okay? So you might ask why. Well, why is because, when I first started the firm with Eric almost 17 years ago, we would underwrite opportunities believing that we could create billion-dollar outcomes. Now we see exemplars of trillion-dollar outcomes. Think about someone like Anthropic. In '24 they had 9 billion in revenue. Then they got to 30-plus billion. Then this year they got to 65 billion and targeting getting to 100 billion. They achieved revenue in three years that took someone like Salesforce 30 to achieve. And historically we've been competing for software budgets, and now we think about labor.
The world spends about a trillion dollars on software. We spend 60 billion dollars on labor. So in fact, the opportunity is orders of magnitude larger than it was. If we look more broadly across venture capital, I think it was this year, the amount of venture capital invested in early stage, excluding the craziness I just spoke about, The actual dollars have gone up by 41%, and the actual number of companies has gone down by 25%. So we're seeing both consensus, but we're also seeing a huge amount of capital. And the question that everybody's playing with is, are these the potential to be what we would historically consider venture outcomes,
or are they the ability to deliver what is something unique now, which is perhaps a trillion-dollar outcome? And if you think about it, we now have multiple private companies that are approaching that valuation. If you're a public market investor, if you're, in some cases, a late-stage private equity investor, you would never participate in these. The other crazy statistic is that if you look at all of the capital in venture capital. I was at a StepStone conference. Roughly 66% of all the capital has flown into 10 companies. So you're seeing an entirely new asset class that is attacking maybe the highest growth opportunity in the history of humanity, but they're doing it with
a quantum of capital that's unprecedented, and quite frankly, with a type of company that has a voracious appetite for capital, but also a voracious appetite to build value. So. The other initiative I lead is the Applied AI Initiative. Having our students at the intersection of where all of this is happening, I would just argue to you, uniquely positions them to not just be prepared, but to have a prepared mind around what's actually happening. And it's forced people that have been in the industry for a long time to radically rethink how we think about this craft, how we think about this industry, largely because we're dealing
with outcomes that are orders of magnitude different than what we had considered previously. [ERIK RAGATZ] Yeah. Man, it strikes me listening to you that the importance of first principles [SCOTT BRADY] Yeah. [ERIK RAGATZ] is critical, which I think is what we're all about here. Well, David, I was going to turn to you to talk about the business of investing, but that's a fascinating discussion. [DAVID SINGER] Yeah. [ERIK RAGATZ] You're in that world. What do you want to maybe comment on? Are you seeing the same things?
How does that impact your business? [DAVID SINGER] Yeah. [DAVID SINGER] I think that it's a perfect description of what we're seeing out there, and it's. It's exciting and it's problematic because it challenges some of our assumptions about everything. We are very early-stage investors, so I admit to that being my lens. I think it has certainly tactically changed the pace of deals, the dynamics of how much cash you need to deploy to be important to the firm you're investing in, even at the earlier stages.
I am not sure that the existence proof of a few trillion-dollar companies means that everyone is gonna be a trillion-dollar company, right? I mean, the world's economy is only so big. And the other thing That I don't really have an answer to. It's just an observation, is that entrepreneurship and these great ideas, they all start really small. Like, I think they start with a few people with a novel insight that they think might have a chance of being turned into products where there's good product-market fit and you can extract value from them for your shareholders. And I don't think that changes.
And I think what we'll see is what we've seen throughout history, which is just like this sorting of risk-return. And it feels like at any one point in time that can be out of whack, but that the graph just comes back to- snaps back to where it is. [ERIK RAGATZ] Yeah, yeah. Well, David, I want to turn it to Q&A here momentarily, but let me ask you one question on the business of investing, which is, I mean, you bring A wealth of experience as a founder. You've chosen to focus those talents at the GSB around a business of investing. [DAVID SINGER] Yeah. [ERIK RAGATZ] Compensating talent, I think is the term.
[DAVID SINGER] Yeah. [ERIK RAGATZ] Do you wanna maybe just explain to folks both what the class is and then why you chose that as kind of the focal point for your- [DAVID SINGER] Yeah. [DAVID SINGER] Like most things in life, I chose it for selfish reasons. So I'll tell you the origin story of it. So the origin story is, going from an operating environment where the compensation issues were sort of a single thread, if you will, and there was a lot of muscle memory, that I ended up in the venture business, and as we grew, Our compensation got more complicated just within the partnership.
I was sitting on boards of companies that were far larger than anything I'd ever run. And so I was dealing with a lot of compensation issues, and I kind of said like, "Oh, I need the first principles. Where do I find them?" Well, it's easy. I'll just go to the GSB and I'll get the syllabus for the compensation class. And there was no syllabus. And I looked at Harvard, Darden, Tuck, Wharton, SOM at Yale. And no one had a class in compensation, and it was treated kind of in one unit in an HR class or something. And that just struck me as the most absurd thing I'd ever heard.
Like, most of the people that go to business schools are capitalists. It is the biggest tool in a capitalist's tool belt, and someone ought to teach it. So I wrote the dean a letter outlining what I just said and offering to fund the course's development, which was one of the more idiotic letters I've ever written, because what I should have written was, "Hey, if someone wanted to fund a course, how much would it cost? Just ballpark." Because it was a lot more expensive than I thought. And to Dean Levin's credit, to his skills as a leader, we had this dialogue for six months.
George Parker was super helpful, and finally he said to me, "You know, we're going to do this, but we want you to teach it." Because we found someone at the school to teach it, but he'll only teach it if you teach it, which is of course what he told Iván Marinovic, who's my co-teacher, and we've been doing this for seven years. So that's the selfish origin of the course. I just wanted to learn about it. And it's basically a museum of compensation, if you will. We go through kind of the basics of what incentives are, which incentives might work, which might not. And as you can imagine, throughout history,
there's a real range of opinions on that and examples to validate each of those opinions. We talk about cash compensation. We talk about both salaries, how to set them. And we say to people the first day of class, we say, if you're coming to our class, To get paid more, you are in the wrong place. Like, this is a class about compensation from the view of the firm. And so that's what we're trying to give people, students, is the tools to think about compensation where they go work.
We talk about. Variable compensation and cash, ways to measure it, make sure you don't pay for luck, some of the risks and benefits of all the schemes I'm sure many of you have participated in your careers. We have a whole section on equity compensation and taxes related to that, which most people don't think about, but actually matter when you want to go buy a car or a vacation house, like the tax man's in the middle of that. And then we talk about sort of situations. We do a class on sports, we do something on partnerships. And we have a bunch of stuff.
We talk about transparency and compensation. Is it good or bad? And so we've been on this journey, and every year it gets a little bit better. And so it's been really exciting. And when I go into class, I'm as nervous because I'm dealing with the quality of students that I was when I got to the GSB the first day in class, just totally nervous about who my colleagues were going to be and could I stand up. [ERIK RAGATZ] Fantastic. Well, let me end there. I think we can keep going with that. I guess the one theme that for me comes out of all this is we talk a lot about, well, what is the GSB's role in the investing landscape?
And there's other- Harvard Business School, Wharton obviously has programs, Columbia. I want you to hear the people centricity of everything that we're talking about here across all of these things. You know, we say businesses are ultimately collections of people, getting the incentives right for those people, understanding how those people work. Those are lived frontline pieces of wisdom that I think this model does really well with. So with that, let me turn it to questions.
I think we've got mic runners here, so if you want to raise your hand, looks like we've got one up here. Maybe we'll start and then we'll come down to you. Hi there. Thank you for wonderful panel. In investing, my impression is that the academic community is Oriented towards fundamental analysis in the sense that there's a buy and sell in investing. They're focused on the buy side and not so much the sell side, the sell side being perhaps more charts and technical analysis, whereas fundamentals are a little late to class when it comes to the sell side.
I wonder what your experience is in that arena. As it pertains to the GSB [ERIK RAGATZ] Yeah. And teaching investing and addressing investing. [ERIK RAGATZ] Well, I'm happy to start, and then chime in. So let me say a couple things that are come to mind, some may more tangentially related. So what we talk about in Jack's class is fundamental investing. and by fundamental investing we mean businesses are worth the future value of their cash flows. It's intrinsic value-based investing is what we teach.
Lots of ways to make money. That's certainly not the only game, but we talk about picking your game, and the game that we teach is fundamental investing here. Most of it is around company analysis, business assessment, of the upfront things that you're talking about. We do spend time on, we have a module on ownership, is what we would call it, which includes both, what does it mean to be a good board member and steward of capital, as well as how do you think about selling? Now, that selling perspective is also a very fundamental perspective, and what we would say is actually
Every day that you are choosing to hold the stock, you're effectively rebuying that stock. So, by the way, all the stuff that we taught you about buying is applicable at today's market price that you could sell it at. Is it a fit for what you're doing? Does it match your circle of competence still? Can you earn your rate of return? Does it fit your risk profile? All of that sort of stuff is kind of how we come at that question here. So it is very much balanced towards the upfront, but we think that perspective is also relevant for the selling perspective.
There are other classes that are more trading perspectives that play a different game, teach a different game on all that, that I can't really speak to on that. But I don't know. Anything? [HENRY GAO] Yeah, I think that's one of the motivations we have around designing the curriculum framework, right, to cover the bases. For you to be a fundamental investor in the public market, you should also understand the other players in the market, right? What are the quant shops doing? What are some systematic patterns that will emerge that might not jive well with your fundamental way of thinking? So there's a class on Alphanomics, and that's focused on more of the quantitative
lens through public equity investing. So I think it is our motivation to Encourage students who are interested in investing to not just study about what they're interested or what their strength is, but to really have a more holistic view about how the investing landscape functions, because different factors and players also play a role in how you're going to perform. [ERIK RAGATZ] I feel like I half answered your question. Why don't we chat afterwards, if that's okay? Another. One right here. Okay.
Thanks. Another question for Henry, actually. As a student now, a more recent student, how does it feel to come in, or from your classmates' experiences, to feel to come in as an investor into the GSB and be confused with everything going on in AI and tech? Are people kind of holding the line? Are they continuing to kind of hunker down on the original plan of staying and investing? What's the experience like on that front? And yeah, basically. [HENRY GAO] Yeah, thanks for the question and putting me on the hot spot again.
It's a really good question, I think. I don't think I was the only one coming in, in my class or the class above and below me, with an investing background, coming in thinking that we'll just go back to our private equity firm. We'll be sponsored. I think there's a lot of that kind of default thinking, but I think there's something magical about the GSB is that once you come here, your view of the world just expands, and then we start thinking about more, First principle, right? It's like, what exactly is happening? Is the FOMO we have about these AI deals, these interesting transactions, is that real?
Is it a moment in time? And to really think about what exactly do we want to do in this investing career, right? There are so many different shapes or forms, how to do investing. And I think one thing that, including myself, a lot of my peers that once we came to GSB, we felt very inspired is that Like all the logos that we saw, like there's so many incredible investing firms that were like founded at the GSB. Like Marc Stad is like a great example, right? I think he was at TPG, he came to the GSB, and then that kind of launched him into this trajectory, like starting something that is quite differentiated, right?
Like that strategy didn't really exist back in the time, and it was like around concentrated bets in like growth-stage companies. It was like not really private equity. It was not really VC. So. Yeah, so I think it's like a mix. I think people coming in with an interest in investing, with some doubts about, do I really want to do investing with all these crazy exciting things happening around? But then through that soul-searching process of kind of reaffirming their, interest and passion for investing. So at least that's kind of my experience.
[ERIK RAGATZ] Maybe I'll just add one thing to that, and I'm going to actually bring my class of 2001 perspective to this, which is that meant I was here from '99 to '01. Which was that internet bubble. And, you know, we had a lot of people, I swear my classmates can correct me here, but I think literally daily there would be an GSB unofficial note saying, "Please drop out of school and help me write my business plan for this dot-com." And we had people do it. Jeff Fluhr, who's over here, left to go start StubHub. There were some amazing businesses that were built out of that time period.
It feels like that pull again. I know there was a number of first years who didn't come back for the second year. How much is cyclical? There's a lot of dot-coms that probably people shouldn't have left to go do, but also amazing companies get built. It has that sort of energy again, though, of the pull. Yeah, maybe right here. [EVENT STAFF] Final question. Hi. There's been a lot of talk today about AI, and we've talked about the poll.
90% of the money going into AI or to 10 firms or so on and so forth. What about non-AI? I'm personally in life science. I know several companies that actually have succeeded in their trials and had trouble getting funding. And it just seems to me that if you go out past AI in the broader space where there's more variability, as you might have mentioned, like. There are a lot more opportunities. Is that being studied, or it just feels like the entire focus of everything is AI? And if you're not in AI directly or can't somehow get it into your deck, it's very difficult to get funded. And I'm just curious, are you guys actually
studying that, or is it just right now we're focused on AI because that's the thing? [DAVID SINGER] I can't speak to studying, but I can speak to that question. Yeah. Yeah, I think just to back up, like we at our place, we have At the firm, people fall into two basic camps, which is, "Oh, that's an incredibly hot deal. We heard a buzz on it. We got to figure out a way in it." And we have another camp, which is, "That's an incredibly hot deal.
Why would I want to go anywhere near it? It's perfectly priced. I'm going to have to make a decision quickly. Right? Doesn't make any sense." And so I do think there's more of the former than the latter in the world right now. And I think some of these places, which are super exciting, And obviously gonna come back at some point. I mean, history is gonna repeat itself in this and biotech. The public market indices are a good example of it creeping back up, but still in the privates, there are enough things where they're gonna be wonderful companies built and good returns to be had as a result.
I do think there's a lot of pressure from limited partners. on firms to be in AI, for very good reasons and sort of window dressing reasons that all get mixed up. But I'm hopeful that will start to swing a little. [ERIK RAGATZ] I'll just add to that from my perspective. The class that we have this coming Thursday is Terry O'Toole, who's maybe actually be here. I think it's his 40th reunion, who's a Goldman PIA guy from many years back, is teaching Insilco, is a buyout from the 1980s. So don't confuse what we're talking about here, and this does get a lot of initiative, but you know, we're ultimately focused on first principles, on coming back to the lessons that are time-tested,
and those remain a core part of at least what we're teaching. [SCOTT BRADY] Yeah, I guess I feel like the poster child for AI up here, but. and so it's probably not surprising what I'm about to say, but you know, I think that broadly. When we think about AI, I think the footprint is much broader than what most of you think. You think about knowledge work. I think where we're seeing the most profound changes in AI is actually in physical AI and in science. In our firm, we have a computational life sciences team.
We have a team that does work in quantum and core frontier-level AI. Most of these things, these highly dimensional problems, are changing fundamentally, quite frankly, because of the technology we have. The ability to both mine existing data, to create synthetic data, to do simulation. We're in just a prolific time. Where I don't think there will be an industry, quite frankly, that will be unaffected by what's happening. It's a catalyst, and I think it's a catalyst that we funded the Nobel Prize winner from Berkeley, who's using new forms of sensing to be able to cure cancer.
We have entirely new modalities that If you think about what changed this year is, one, machines began building for machines. This idea that suddenly now we have an agentic capability that's capable of generating code, If you extrapolate beyond that, think of the basic limitations we had previously. We had humans that would do design, build, test, learn. So that was a sequential process that took time, and generally speaking, virtually everything we did was designed for ingestion by humans.
We would take complex data, we would dumb it down, we'd put it in a chart, we put it in various types of things allowed them to do it. Now we have sensors that can extraordinarily capture the world, and we now have models that can interpret that in ways that humans can't even understand. I would just posit to you that we're on the precipice, and I don't think this is hyperbole, that most of these traditional physical and science-based industries are gonna go through radical changes. And the intersection of computer science with traditional
science is something that is actually happening right now. [ERIK RAGATZ] I'm gonna call that an upbeat note. So let's end on that upbeat note here, and thank you all for coming. [PARTICIPANT] Good job. Well done.
