OCERS Molly Murphy: The Public Pension Approach To The Innovation Economy

(upbeat music) - Hello and welcome to the Don't Get Fired Podcast. We're back and I think Daniel, this is season number two. - You know, Ashby as professional podcasters, we deserve an off season as well. - We do. - Yeah. - When are we gonna rest the vocal cords? When are we gonna assemble the wardrobe? Like these are the things I worry about. So no excuses here. This is season two. - Season two of the Don't Get Fired Podcast is live. Today's episode is brought to you by the day Friday, like Sesame Street. It is Friday today. I love Fridays. It's also my kids have spring break next week. So I'm looking at a bunch of mornings without drop off. So it's feeling pretty good. - Daniel, I'll just say who I am for a second. Then you can remind people who you are 'cause now that we're into a new season, we probably need to let everybody know who we are. I'm Ashby Monk. I am the executive and research director of the Stanford Research Initiative on long-term investing among other things. And Daniel, who are you? - Well, Ashby, I was, as you know, born a small child in Atlanta. - I do. And I am currently the founder and co-CEO of Collective Global. - Interesting. - Which is something you're gonna hear more about on this podcast. I also am a father of three in Connecticut, a form of philosopher, which sometimes can interrupt the flow of this program. - Daniel, I am a doctor of philosophy. I wanted you to know that. So I too could get philosophical with you if you need to. And I would just wanna let you know, every time I hear Collective Global, which we're gonna hear a few times, I have to think about Prestige Worldwide, which was a fake business from the portion of the show that contended out. - I don't know. I might leave this in. You don't know what's gonna happen. But there's a very good 60 minute commercial they did for Prestige Worldwide where they're on a boat. Anyway, if you can tell, Daniel, I'm a little nervous about today's show because our guest is so powerful. In fact, CIO Magazine named this individual to the power 100, the most powerful, the most powerful chief investment officers. And this individual is flashing the three fingers to tell me three times, 'cause I actually only thought it was two times, but it is three times. - And there's the CIO of the year award and the Innovation Award. So this is a person who knows how not to get fired and to innovate. Good thing we had that off season to prepare for this moment, Daniel. Do not underestimate the power of Molly Murphy. Molly Murphy is the chief investment officer of the Orange County Employees Retirement System. And today we're gonna talk with her about how she managed to transform. Maybe with your help, Daniel, we'll get to that. The venture capital industry and as of yet, not get fired, 'cause that is the theme here. We want people to innovate inside pension funds and not get fired. And then we wanna teach the world how to do it. Molly, we've been talking and you've been staring. Now's your chance. Welcome to the Don't Get Fired podcast. - Well, thank you both for having me. (laughing) And I feel like I have to have a philosopher root somewhere. So I am Irish and every Irishman is a philosopher especially if they have an average in their hand. I was gonna ask that name, Molly Murphy. It does maybe perhaps ring Irish a little bit. - Well, we could go down a really long rabbit hole about ancestry 'cause I'm a hobbyist. And I do not come by my name and heritage lightly. I am full of honor. - Interesting. - So. - All right, give us one fact, Toyd. Tell us about the Murphy's. - Oh, the Murphy's. Well, I will tell you, I am 99% Celtic and a tiny little bit Viking. So, you know, I'm from a very small place in the glove there. - Well, I remember when those, yeah, I read about those Vikings coming to Ireland. So it's not that surprise that you got some percentages. - Yeah. And so Murphy means sea warrior, so buckle up. - That is fascinating. I did not know that. That's a great anecdote. Sea warrior. Love it. - And how big is Ossers? And what's your role there? And how long have you been there? Just give us a little bit of onboarding here to your world. - So Ossers is almost 80 years old as an organization. I joined seven years ago. We are about $23 billion. The interesting fun fact about Orange County that I didn't even know as I was coming on board is that until about 18 months ago, we were cash flow positive, which is a unicorn, basically in the world of US pension plans. So we have enjoyed the ability to compound capital without worrying about distributions for quite a long time in our history. And we are just getting to the place where we have to think about income. But really, we will not be the income-oriented pension plan that most US pension plans are today for another 10 years. So we have a long runway. And I know we're gonna talk a little bit about venture capital, but that ties back into why Ossers can be in this conversation, maybe a little differently than some US pensions. But more similar to the cash flow characteristics you would see in Australian supers or Canadian plans where they are taking in more money right now than they're delivering out in pension benefits. So we're kind of unique in the pension space in the US. That is unique. And it's actually really valuable. 'Cause a lot of what we wanna do is understand the environment that allowed you to do this innovative thing, not just where you work, but what the capital incumbrances are, what the governance is like, all those kinds of things. So it sounds like you actually have the ability to take e-liquidity risk beyond your peer set. - Which I would say we do. We have not exercised that because liquidity is still important. There are pension plans in the US that have much more private equity and liquidity than we do currently, but we have been building it over time. So we still have a little bit that we could add. - Okay. - But we also need to stretch, is what I'm saying. Like we don't need to take illiquidity just because the math says we can. - Yeah, I getcha. - We are trying to create a persistent return stream that meets and exceeds our actual area of rate of return expectations so that we are a fully funded plan. And we are on a path to be fully funded within 10 years. - Fabulous. Are your benefits still open? You're still, there's still people inside Orange County earning defined benefit pensions right now. - We have the expectation we will be open generationally for a very long time. - Oh, that's amazing. Cool. So the way we run these, Molly, is we jump into a specific case study of innovation and we kind of probe around it. We try to understand the problem that you were trying to solve with the innovation. Then we talk about the innovation. Then we talk about how you actually managed to implement it. Before we jump in, Daniel, is there anything you want to reflect on before we go into the case? - I want to listen to Molly. (laughing) - Well played. Molly, we're going to talk about venture capital. And before we jump into the innovation that you created, maybe you could just for a second talk about the challenges of venture capital from the perspective of a public pension fund CIO. - So I have not always been a public plan CIO. So I think my perspective started when I arrived, meaning I had been a CIO at a nonprofit large health system in the Midwest. And we did venture capital and other private markets. And healthcare as an industry, some things are barged like, but some things are sweetboat like. And there's always new developments in medical technologies, in biotech, all these areas that are part of the ecosystem of the healthcare delivery system model. And so there's always been that little flavor of innovation. So here I am sitting on a pool of capital, smaller than I run today, but a sizeable pool capital. And I'm getting courted by venture capitalists, especially the healthcare variety. And they're thinking, I'm a strategic partner, I'm smart money, I'm somebody that's additive to what they do. And so I leave there and I end up in Orange County and all of a sudden, no one in the venture community wants to take my money and nobody wants to talk to us. They're worried about us being too public, information getting out about what they're doing. They're worried about how I look on their LP list, because pension plans are, I think unfairly painted, sometimes as being bureaucratic or dumb money almost, investors that are behind the times, not in front of the times. And I couldn't figure out how I was smart one day and not smart the next day, just by changing where I lived. So I was on a mission to figure out how to court my own prospects that I had from all these years of doing venture capital, because I've been doing it in some way, shape, or form, since 2005, almost 20 years ago. years. Okay. Wow. And so I go and I'm meeting people walking up in Downs, San Hill Road and knocking on doors and you know I really had to work to overcome the image of where a pension plan. And in my head though I was thinking I'm looking at all of the flows of funds and I'm thinking healthcare has a very vicious business cycle and there's points in times where healthcare companies are literally just a sieve. You know the money is not working because of what's happening either legislatively or COVID or all these other things that really drain the system and they just look at their investment programs and just like use them as an ATM machine. How do you do how do you do venture capital when you need on-demand capital is really hard. I look at in Downs and foundations and they have their own challenges you know you're seeing the endowment models being really tested by donors refusing to follow through on their donations, clawbacks on their gifts. They want more control over the money even after they gift it. At least they want to have a voice in it. There's a lot of stuff that's happening but interestingly pensions, sovereign wealth funds, especially pensions like us that are more positive cash flow. We're in it for the next century. Like we have the longest investment horizons. Yeah. And we have enormous pools of capital and I kept sitting there thinking to myself venture capital is the longest-lived investment that we invest in. It takes the longest to mature and get your value out. It takes someone with an equally long investment horizon that's not going to need on-demand capital. Pensions, we know are distributions. They're actuarially predicted for us. There's no surprise in our distribution model. So we're very unique in that we match up in that way and yet the pool of capital and the one that needs capital are not talking to each other for some biases I think that are in the market. So my first thought was I just need to break down these biases. But then as I kept thinking about it, there was the one big bias that was really hard to break which was size is the antithesis of return. And so the bigger of V.C. gets they think they're going to get a moderated return and I'm not saying they won't. So how then can these pools of capital that are keep growing and getting larger and larger and larger come into this ecosystem? And that was really kind of a challenge. That is the problem we hear about the most Molly which is that this is an asset class that doesn't scale. And so how do you know how do you deal with it? Well so the interesting part was though AI and we can branch out into this but my firm has had a focus on AI. My CEO has had an AI committee internally for more than three years and we are working on the administrative side and also the investment side to put in AI applications across our whole platform. But as I was getting more learned in the space maybe faster than some in my chair, I was realizing that AI needs capital. These strategies need a lot of capital and this revolution is a revolution. It's not a flavor of the day. And so if you do believe that then I believe then that means that V.C. has to get bigger. And so all of this was percolating in my head and the question becomes like okay how do we do something that joins these two powerful ecosystems together in the right way. Now you can't boil the ocean. So how do you then figure out how to do it in a way that at least starts the conversation. And that's when I started having conversations with Daniel while he was still at another platform and saying I want to solve this. I think I have some like little ideas but I have no execution partner. I have no buddy that really wants to take this up and wants to fill sit windmills so to speak with me. And so that was an assist for where we are. And you know as far as what O Cers has lovely board members who are engaged in their own parts of innovation. California is the perfect place for this to actually happens. That's right. When you've got innovative board members in their own personal and professional lives on your board it makes things a lot easier to get this type of stuff launched seated the first movers as long as you find the right execution partners. Perfect. So we're gonna come to the enablers in a second which is kind of what I would say engaged board members to me is like a luxury that you have that many other plans might not have. Right. But the problem sounds pretty clear to me. We've got a bias against public pension plans. Some of that might be to do by the way with transparency rules. And that venture capitalist hate. There's a scale issue. Many plans by the way only invest in third and fourth time funds and so and by the way the general partners don't even know how to find you most of the time. There isn't like a website that's like oh if you're a new GP here the LPs that back you pitch book does some of this. There's a few others that do it but it's pretty poor. And so that problem coming together then leads you in Daniel together to invent something. Let's talk about the innovation now. Oh yeah. Jump in here Daniel. I actually I want to pause on the problem statement for one minute more. Yeah. The birth of the birth of any great business is usually solving a big big problem. Yeah. And you framed it very well and of course Molly framed it very well. You've got a hundred trillion or so of institutional capital on one side of the notion and you've got the innovation economy on the other side of the ocean. And there just isn't a great bridge. You know you can go through a fund of funds and pay a double-air fees and get your face ripped off. You can grab a tin cup and walk up and down Sandhill Road and beg for allocation and try to overcome the biases. Absolutely. It can be done but but that goes to the next issue which is not every organization has a person who could do what what you did in that case and actually go court the exposure to venture. Let alone you know build an office that has a team with you know venture expertise or even an office in San Francisco. It's been done but that's a 20-year game. How do you connect acid owners on the one hand and the innovation economy on the other and the thing that just jumped up at me and I wait for ideas to come along. I like to say jump up and write me in the notes. Right because if it's not that good it's like writing a PhD thesis as you're with. You don't love it at the start. You're not going to finish it. So it has to be just it's got to hit you with an incredible punch at the start and the moment here in venture is also very important. So you've got SVB going under you've got TVPI marks coming down in a hurry. You've got venture funding dropping off a cliff dropping 67% LP funding into venture firms between 22 and 23. So the bridge all of a sudden which has been necessary for institutions to go from their continent over to the innovation economy is now maybe necessary in the other direction too. So venture managers are waking up and thinking you know I'd like to have some of these long-term capital behemoths some of these innovative giants on my team too. How do I build that bridge back? So that was where I thought gosh let's iterate on this. One thing that from my seat I go to a lot of heartions where I rub elbows with my peers and we are in closed sessions behind those closed doors where we're brutally honest about our governance issues and our staffing issues and compensation and bad-preas and legislative issues like every single thing we are brutally honest with each other as an ecosystem of sharing and what that gave me inside into to is who are the pensions and sovereign wealth funds are different beasts but they come into the equation because they're trying to accomplish the same thing which is deploy a lot of capital and innovate but pensions specifically in the US we all know like that pensions DNA is in conservative credit that pensions DNA is in real estate that pensions DNA is in really large buy out the not-get-fired names this one is the one who's going and digging up the nichy stuff we all kind of know the DNA of each other so from my seat I could see ten or twelve US pensions that this would work for and then you talk Canadian you talk Aussie that are just trying to absorb the cash flow that they're getting and build these programs for their generations to come they're so early they're only 30 40 years into their development they haven't gotten to the state where the demographics start to bite them you know they've got run way too but they to Daniel's point they can't sit in Australia and figure out what's going on in Silicon Valley very easily the Europeans well they have great private markets venture is up spot where they really have not done well it is just in the last ten years the venture has really started to have a decent sized footprint in Europe so everyone has to get to the US it has this kind of thing has to be started by somebody in the US to my mom and then find those people who are like-minded. And to Daniel's point also, the VCs don't have the, they're not a quick for this. They have one IR person if they're big they have two. They have to boil the ocean in a different way to go find their investors. And so this makes sense that we're bringing the capital to them. They're not going to have to go one off chase it. And then we're figuring out how to really expand a partnership to solve their problems whether it's GP issues they have. They need to get to their target or their hard cap on their fundraising and a hard fundraising environment. They need capital for their portfolio companies because they'll do God knows how many rounds with in one fund vintage. And they'll need big pools of capital behind that. And so I think the opportunities to have different agendas but shared outcomes is very big. And this moment to Daniel's point is the moment in my mind. Beautiful. I think we have a good sense of the problem. And also the catalysts here. This innovation economy needing capital, the venture investors becoming interested in partnering the size and scale of the AI, tech investment, all these things coming together. So then Molly let's shift gears from the problem and the catalyst into the solution. Describe to me what you guys have built with Daniel. And so Daniel, I feel free to jump in here. I feel like you're kind of almost part interviewee on this one. But Molly will let you lead and let Daniel jump in as needed. Well, I think you know, I know I did not build this. I was part of conceptually building problem and solution. But Daniel built this. He's the one that's executing on this. So I think he should really talk about how it got built and what is happening there. But I think the fact that Orange County was saying from the jump, we will be seed capital. You anchored it. And we will anchor this so that we can get some of a proof statement on this is, you know, what I could bring to the table from my seat. And just to be clear, that is a very material commitment to give the momentum behind the platform. So I know Daniel executed, but having lived in this space for a long time to have an osters behind you with a commitment to anchor that is innovative. And I'm glad you didn't get fired for it, but it's very innovative. All right, Daniel, talk about what you guys built. Well, let's start with the blueprint and then, you know, what was the castle on the sky that we dreamed up and then that only ground. So if you start, I like to start from the end product and then work back. So the end product, this bridge that we've been talking about between institutions and the innovation economy. And we haven't talked about GP stakes as part of this. If you imagine a group of 20 or 30 leading venture firms in all of the areas that we care most about in the innovation economy, whether that's AI, which we've discussed, healthcare, we've discussed, other verticals. That's on one side of the bridge. On the other side of the bridge, you have a diverse group of asset owners, not limited partners, right, not defined by the word limited, but defined by their time horizon, as Molly has said, their vision, their ability to take entrepreneurial risk in building something like this. Their desire to be aligned with people who are innovating and it doesn't take very many groups across multiple countries, multiple comments to pull together two or three percent of all of the capital in institutional hands in the world, in trillions of dollars, right. That becomes then a very powerful strategic coalition to approach venture capital managers, who by the way are inclined towards destructive innovations to begin with, who like to think big picture, how to build their business and are now thinking about their businesses as businesses in some ways for the first time. They need to do for themselves what they've done for their portfolio company. So you have a group coming to them as a strategic saying, think about your cap table in a new way. Think about it as a way of growing your venture firm. Who do you want to align with? And I would hold out to you that in this particular moment in time, aligning with your ultimate investor base in the right way through a GP stake is a win win. So that's what we've been building. And we just had our first transaction that was announced this week. We have a consortium. We had eight pensions and sovereigns that came together for a kickoff, that Molly hosted for us from six countries. So it is moving and it's really exciting to see the actual progress that we're making. So let me take a stab at saying a summary, which would be pooling aligned long term capital into a vehicle seeking to build ownership positions in these businesses called venture capital funds and deepening this relationship between the biggest pools of capital and the call it innovation economy through a novel set of structures. But at the core there is owning slices of GPs and anchoring GPs. Yes. Okay. And then what does that do for you? Right. That gets you in to the then you're in the room where it happens, right? Then you're getting the co-invest. Then you're getting the follow on commitments. Then you're actually understanding. Yeah. Go ahead. Well, I was going to say notoriously venture capital is bad for co-invest because of the power law. So you're actually and by that I mean for those that are not inside baseball, like venture capital, it's usually the top two or three companies in a fund that deliver everything. And so unless you're getting those as your co-invest, you're making bad investments. And so if you own a piece of the GP here, my guess is you can guarantee you're getting those great deals as co-invest. Well, and one of the important things from my standpoint, having done BC long enough and having real friends in the business, not just people who want to market to me, I would say that the biggest hesitation on the VC side was, well, what am I getting out of it? You're getting a piece of me. What am I getting from you after this transaction? You know, you mentioned the winners. Well, what normally happens is a VC runs out of money and gets diluted over time on their winners. Now they may say we don't need anymore. That's a different discussion. But oftentimes, they can't maintain the pace and they end up diluted. They could put together an SPV and use the coalition behind collective to not own it directly in their fund, but still have participated and kept others out of the cap table or however they want to think about it. They can also launch a growth platform that does the later stage stuff and have the coalition that's behind collective. Get first look at that and maybe help launch that or seed that platform. You know, every to Daniel's point, these are now people that aren't just putting together a portfolio companies, they're running businesses. And we're seeing more and more GPs or VCs rather, I should say, to use the proper term. We're seeing more of them go through their generational transitions and the younger cohort in that organization wants to put up the same fantastic returns that the founders did. And so these are real businesses now. They're not just founder, capital and a little fund business on the side anymore. So Molly, let's jump into how you got it done. Did you guys have experience at OSERS, seeding managers or in the seeding ecosystem that gave you comfort or was there something else here that motivated you and helped you get it done? So we're not, I would say in the fund one business, so to speak, I have done fund ones previously mixed results as all fund one kind of stuff is. But we have to write big enough checks that matter. I mean, we're not looking at fund ones dismissively as bad ideas. It's like, I just can't write a big enough check to make it matter in my $3 billion program. It just becomes time management prohibitive, I would say. But what have we done in a sort of tangential way? We are about building partnerships and helping people grow their business. So we have done, we have taken a stake and done a product extension launch for someone and gotten a stake from that commitment. We have taken lessons from sort of the collaborative model that counselors likes to employ a Florida SBA, bought a stake in Lexington. So the concept being more, if we're going to see something we want to have or if we want to do something that we can't build internally, we have to go buy it, so to speak, that buy build decision. Why not offer capital to our execution partner so we can not pay for that experience? They become an extension of us through that investment. I love it. And so we are thinking that way and trying to figure out how to disintermediate fees in a good way, not in a looking for fee discounts for first close, not looking for like all these little like pennies in front of a steamroller thing. We're looking for the things that are going to actually matter to us. So it's deepening co-investment relationships It's buying, staking. It's getting Real discounts by being seed capital, but not on a fund one without anything else like an extension where we know the Business is stable already so we don't want to take the business risk of a fund one green launch But we'll take a fund one with a stake off somebody who's already got a 10 year history enough at adjacent business so we do things like that awesome and You've mentioned your board a few times as being engaged in my experience the delegation frameworks the decision-making process is often a critical part of getting these done Can you just give us a little bit of that layout for osurs? How you actually manage this process to making a commitment and what is a first-time fund? Yeah, this is actually our first time fund lot you know So when I just said we don't do it. We just did it so there's that You said you said you have done first-time things, but yeah, not a not a full fund But but you've done it here. So how did you get it done? Well, I did take a little extra tender care with communicating to my board chair my I see chair But osurs has had delegated authority since 2018 so The internal staff as long as the consultant that is part of that part of the portfolio overseas that we have three different consultants So it's split up. We love consultants in the US, right? I know I'm not disparaging them there. We work with great consultants, but You know not everyone subscribes to the US model, but as long as our consultant gives a positive approval memo To the committee it is Staff that does all the decision-making and so okay cool myself Specifically, but you know, I have a full team behind me, but I would say what does that mean? We can do innovative things we can also do things quickly We do I do work a lot on communication because I have to make sure that That consultant is not going to see the world differently and if there's something like collective global that's truly different I do take the time to not in session It doesn't have to go to committee, but in these one-on-one conversations with my I see chair and my board chair They're kept apprised. I'm not I'm not asking them for their approval I'm not they're not consulting to the to the idea. They're just apprised I would know if I crossed a bright red line will say it that way So we're taught this is a chance to go deep on a topic for the first time Which is how you navigate consultants to do something really innovative Because I can tell you exactly how to do it through a board, but the critique of consultants is often It's not in the best interest of the consultant and their business model to take on Little manager Dilligences because you do the diligence the you write the report you don't get to resell that report because the manager's small it's a first time The critique of consultants is often they'd much prefer to do a do diligence on a $15 billion dollar platform and resell that report 100 times so how do you navigate that consulting ecosystem and and get something innovative done? So you find the right consultants first. I mean it does start with The DNA of the consultant needs to match the DNA of the investor now To your point on they don't get to maximize their time because they can't put this across their whole platform I would say that is true and I fight that on a daily basis because I Like to push the envelope into the white space of this business, you know like I am not like Set it and forget it walk down the fairway don't look left and right kind of person I'm always looking for something that intrigues me and I'm willing to At least listen to all the possibilities with an open mind before you know it you get to the go no go But I am pushing my consultants to not be close-minded So we have had discussions that I have delegated authority and they have to write a memo But it's not their portfolio. It's Ocer's portfolio and What I'm asking them is Keep me out of jail and keep me out of trouble and keep me out of the poor house if you see anything that's going to Put legal risk business risk or you identify an investment risk I have just been blind to raise your hand and scream But if this is just not something that everyone in your client base is gonna like I'm gonna push you to do it anyway So we have Conversations about this. I love it. I love that perspective A quarter to a third of the portfolio of Ocer's portfolio gets sourced by my team So we we collectively we have meetings with our consultants each one of the three Once a month and we go through their pipeline and our pipeline and we call it down to a combined Pipeline with agreement to follow through on all of it. I know it's a weird question and it's a bit inside baseball But do you kind of need a different style of contract with the consultants to allow you to draw down their time in a and kind of like an on-demand way? I mean we're on we do Ocer's does retainer contracts some people do project work-based contracts So they pay for whatever they're doing as they go some skinny it down to the point where It's a pain point for the consultants and they really don't want to do any more work And is actually scoped in the document in in a very narrow way. I always tell our consultants that if we succeed at Ocer's and you are our consultants You're gonna get some mileage with that when you go to bid other work And I will be your best reference because if our relationship is strong I'm going to have a glowing reference when someone calls me so Let's just all row in the boat in the same direction and again it comes down to personally fit You know like I'm not gonna be the right fit for every consultant nor will they want Ocer's That's fantastic Molly. This has been really useful in fact This is the first lens. I think our listeners out there will have to that American model which is Sometimes less driven by the board and much more driven by a relationship between a CIO and a consulting firm To get deals done innovative things Daniel. We're about to do the deep thoughts here and I'm just you know I'm really looking forward to this because this is a domain for which your thoughts should be particularly deep. Are you ready? I'm ready. I should all right. All right, my friend You're gonna do the deep thoughts and then Molly will come back to you for some final words. So listen I've just loved hearing the Perspectives of how Molly actually got this done and I couldn't agree with you more ashby that purge To be the first mover to take the risk when you see the opportunity To know that there's a reason this podcast is titled don't get fired. There's also a reason why Molly is an innovator a CIO of the year You have to have courage. You just have to know when to do it That's that's where the judgment of the great CIO should come into play is deciding when to To take that leap. So the deep thought is There is something that has always bothered me about our industry. I'm just gonna be start with this It pisses me off at some level and I'm just gonna get on my self-ox here for a moment Stand up at the asset owners the pensions the sovereigns the folks that are Working for you know my mom's pension and my dad's pension etc When they put money into you know a big PE firm or venture firm You think of any firm that comes to mind like we just named some of the public ones blackstone car lily all areas etc And then those companies eventually IPO their businesses The pensions and sovereigns that built them with their investment capital don't see any of the enterprise value They don't get any of the the value of the business that it's been built. I Just think that there's something worth pausing about on that as we think about a hundred trillion dollar industry And in the form of pensions and sovereigns that has given rise to about 11 trillion of enterprise value That's held in hands outside of their own. Yeah rough numbers here. That's a big redistribution of capital away from asset owners and Indescent managers and I think we can use GP stakes partly as a tool to create better alignment between those two sides Of the pot so to speak so that's that's a deep thought it is But I want to bring it back to the today's conversation in terms of ventures specifically why GP stakes because GP stakes have become ubiquitous in private equity I'd say more than half of PE firms at this point have sold a GP stake. It has not yet come to venture So venture GP stakes is genuinely a new concept only like 2% of the top 250 venture firms have sold a stake So why should this exist? I think let's meditate on that for a moment one reason is that GP stakes actually are uniquely positioned to be that bridge that we talked about at the beginning Nobody does a PEGP stake in order to get access to PE. They already have access to PE. They've been doing it for 30 years. That's the nature of being a pension. But there are a lot of big pensions and sovereigns that simply don't have good access to venture. I've met a pension that shall remain nameless and sweetened that only does Swedish pension. A pension in the UK that only does British venture. A pension in Australia that only does Australian venture. That's just obviously not the right solution. I think we can all agree. We need to bridge into the global innovation economy. And if you own a GP stake of venture managers, what do you get from that? You don't just get co-invest flow. You don't just get essentially negative fees and care. Because ultimately you're owning part of the business. You get the right to commit to their funds as a GP, which is to say fee-free carefree. So, all of a sudden, you're not facing a double layer of fees. You're coming into the fund fee-free carefree. You're coming into a co-invest that based on the power law might be one of their top performers that's now too big for their fund. You're coming into that and into a fee-free carefree STV. But that's also a win for the manager. Because now they can turn around to their founders and say, "We're going to be there with you along the whole ride from a pre-seed CED series A all the way through an IPO because we on our cap table have this network of asset owners that can get you there." So, I think this technology of GP stakes is actually, even though it doesn't exist in venture, is uniquely suited to both sides of the equation in the world of venture. Well, I congratulate you both, Daniel and Molly, for coming together to try to fix an industry that really has been difficult for the pensions and sovereigns to penetrate. I myself have worked on this project multiple times for a Canadian pension plan once, for a Middle Eastern sovereign wealth fund, and then later for an American endowment/pension fund to try to invent new access points. And to me, it sounds like you've built a fabulous one, and it's taking courage. And the fact that you've done your first deal and you own some venture managers now, it's clear that it's possible. So it's fabulous to see you too. So, Molly, any final words after the deep thought? I don't think I could get deeper than that. It goes deep on this podcast, Molly, but that's okay, because we're trying to bring some foundation to the innovation. Oftentimes in this industry, it's just a strong leader, which you clearly are, by the way, Molly. It's just, let's be honest. It's a higher taste, yes. But I have to tell you, as an observer of this industry, some might even say astute observer. I often see innovation as a pure function of leadership. Are you bold enough to solve the problem in front of you? Recognizing, as one of our prior guests said, that he, I think he said, I sought to get fired. Wasn't that what Prabhu said? I wanted to get fired, what I did. No, no, no, no, we're not trying to teach people how to seek to get fired. We want you to do your job and keep your job, because we want more innovation. So, with that, I will simply say, this has been a fabulous episode. It's been a long episode, but we love it, because we went deep on a topic that I'm passionate about, venture capital and pensions. So, Molly, and Daniel, in this case, thank you both for sharing your amazing insight, and have a lovely weekend. Amen, brother. And thank you, Molly. Wonderful. Thank you both.