Investing Is a Long Game: JB Wautier on Patience, Compounding, and AI

Sean Mooney: [00:00:00] Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices, and real-time trends. I'm Sean Mooney, BluWave's founder and CEO.

In this episode, we have a fantastic conversation with J.B. Wautier. J.B. is the founder of the Wautier Family Office. He's a board member at Pershing Square Holdings. He's a board member at Howard Hughes Holdings. He's on the Wall Street Journal Board of Directors Council, and previously, he was the chairman of the investment committee and CIO of BC Partners.

Enjoy.

I'm super excited to be here today with JB Wautier. JB, thank you so much for joining us.

JB Wautier: Of course. Thanks for having me.

Sean Mooney: Yeah, this is one I've been looking forward to a long time for a variety of reasons. [00:01:00] One is just the depth and breadth and geographic length of experiences that you've had across investing in general, but also in private equity.

And then as well, some of the topics you and I talked about before I just think are going to be incredibly timely. So I think our listeners are in for a treat on this one.

So JB, this is going to be a really great conversation, and I'd love to just jump right in. And so maybe to start off, I think we'd all love to hear the story of you.

Can you share a little bit about where you grew up, formative experiences, college, and then how you got into PE?

JB Wautier: Of course.

So born and raised in France, as you may have gathered either from my accent or from my first name. People might be surprised, but I didn't really know what I wanted to do with my life, and certainly not interested in finance.

I didn't even know finance existed when I studied at college. So I was fascinated by everything; philosophy, economics, history, politics. So I went to [00:02:00] Sciences Po, which is a place in France where, if you're interested in social science, this is where you go. But again, just studying as a generalist, so mostly politics and economics, very high level, very, very academic.

My sense was maybe I should be an economist, and maybe I should teach economy of some sort. And then fortunately, I had a lecturer at the time who became a good friend, and he was a visionary, and he said to me, "Dude, you're not made to be an academic. You should work in business." And I had no understanding of the business world, let alone finance at the time.

There was no history in the family of any sort. So I went into audit. This is the early 90s. This is what you would do if you didn't know what to do in the business world. You would either go to audit or strategy consulting. I went to audit at Arthur Andersen. That's when I really discovered how companies actually operate.

My lecturer was right. I was made for the business world, but still no sign of finance at the time. [00:03:00] And then I was approached by a headhunter who had a big influence on my career because she was headhunting for Morgan Stanley at the time, investment banking division for the London office. I interviewed, I did my nine interviews.

I thought these people were crazy. I couldn't understand what they were talking about. But they made me an offer, and this headhunter convinced me to accept it. And still to that day, I couldn't really tell you what tilted it for me, why I decided to leave France and move to London, why I decided to go into the wonderful world of finance. But that was the right move. I absolutely enjoyed it.

So late 90s, lots of M&A activity, lots of cross-border. I was just loving it. And funnily enough, the same headhunter called me back. So I'd been four years, five years into the job. I was enjoying it, having my best life. And she said, "Now you need to move out of investment banking."

I was shocked. I was like, "What are we talking about? You placed me here. I'm happy. I'm [00:04:00] valued. I'm learning. I'm making a lot of money. What are we talking about?" She said, "Yeah, but you're not made to be an advisor your entire life. You're made to be a principal." Very abstract concept at the time. I was struggling to understand what she meant.

She was spot on, and now this is often the question I ask myself when people ask for guidance for their career or stuff like that. And so she had another search at the time for mid-market buyout funds, so that's now 2000. And I joined IK Investment Partners at the time to start the French team, and that was very entrepreneurial, because IK was a Scandinavian buyout shop.

They'd been very successful there and wanted to start on the French market. They wanted to become pan-European, and they decided they would hire two guys who'd never done any deals in their life, both coming from investment banking. One of them, it was me, and we had an amazing run. And then I moved to BC Partners, where I stayed 20 years, and was CIO for 10 years, and I've been enjoying the wonderful [00:05:00] world of investment.

So people look at my CV and say, "Oh, it's a remarkably planned career and remarkably planned steps." Audit, investment banking. You move to London, you go mid-market, then you go large cap. When you know the real story, it's it's serendipitous, but that's how it all happened.

Sean Mooney: That's such a good term, serendipitous.

Having the privilege of having these conversations with people who are as successful and accomplished as you have been has given me a real lens into how people become who they ultimately became. It's just this idea of, like, things happen for a reason, and I think we'll talk a little bit more about that.

But I love that story. There's some themes that I experienced in my own life about that. I grew up in Austin, Texas in the 80s and 90s. Wall Street was not a thing there, and certainly private equity wasn't, and I just so happened to live with some people in college who were from the New York and New Jersey and Connecticut area, and I just followed them, and that set me on my path.

But [00:06:00] similarly, I'd never really planned on leaving investment banking, and then I found my way into private equity as well.

I love the story of that. I love your choice of word of serendipitous, and we'll go dig more into that I think further in our conversation.

But maybe before we get to that, one of the things, JB, I'd love to ask everyone is: what is one of the things we'd know you better if we knew this about you, that might not be on your ordinary kind of CV?

JB Wautier: There would be lots of things, but I guess there is... I have one passion in life beyond my family and investing, which is sailing. And I think that, I mean, A) that's a true passion. I'm a different man when you put me on a sailing boat on any ocean on any day, irrespective of how strong the wind is or how good I'm on that day.

I guess it's a sort of a state of meditation. Sailing forces you to just think about your boat. You constantly need to think because you need to... not only you need to maneuver your boat, but you need to [00:07:00] anticipate the ocean, the wind direction, the other boats, the balance, the speed, lots of things.

So your mind is so busy with just sailing your boat that you can't be obsessing about any other thing that could potentially stress you out. But it's also, I just enjoy connecting with nature. It can be as simple as just watching a beautiful sunset, but sailing on the ocean, you really feel connected.

You feel connected to the ocean, you feel connected to the wind, you feel like you're part of a bigger system, and I guess that's... it's going to sound mystical, but it's just, yeah, feeling connected to nature and feeling at peace, and that's what sailing brings me. So that's probably something that reveals a bit more about myself.

Sean Mooney: I really appreciate that, and one of the things that I've gotten into over time is mindfulness meditation to slow the constant kind of hamster wheel in life in my head. As you think about that, as you're taking me to being on that boat, and you can't help but be present if you're sailing, right?

There's so many things that you have to [00:08:00] be mindful about if you're going to make all of these things and harness the power of nature and the ocean and the wind and all go to one place. And a lot of times you're going against the wind. It's,

JB Wautier: Yeah. Yeah ... more often than not.

Sean Mooney: And how did you get into sailing? Was that a childhood thing, or is it...

JB Wautier: Yeah, it was a childhood thing. My parents moved to Paris when I was young, but I was born in Normandy, and part of the family was in Normandy on the coast, and there the main leisure activity that you would do would be sailing. It was instant love. My first day on an Optimist, trying to as you say, sailing against the wind and trying to understand how you tack, I was like, "Wow, I just love this thing."

When I was a teenager, I was doing those regional regattas that you have during the summer. I guess there was also a competitive aspect, which I love in those regattas. But I love what you said about how to get from A to B, how to... And I guess there's also an element of: keeps you humble. People who go mountaineering on very high summits probably have the [00:09:00] same perception of, you just feel so small and so fragile compared to the ocean.

And so it's also a lesson in humility, which, especially if you've been successful in your life, you should always try and nurture. But that's how it came. Yeah, it was really a childhood thing.

Sean Mooney: Hey, as a quick interlude, this is Sean here. Wanted to address one quick question that we regularly get.

We often get people who show up at our website, call our account executives, they say, "Hey, I'm not private equity. Can I still use BluWave to get connected with resources?" And the short answer is: yes.

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So absolutely, you can use us as well. If you want to use the exact same resources that are trusted and being deployed and perfectly calibrated for your business needs, give us a call, visit our website at bluwave.net.

Thanks. Back to the [00:10:00] episode.

I mean, it's interesting. I obviously didn't have much sailing opportunity in Texas. But when I moved to the East Coast, first of all, my wife's father was a champion sailor.

JB Wautier: Oh, wow.

Sean Mooney: And so he would race these boats called Star Classes...

JB Wautier: Yeah, of course.

Sean Mooney: Which were little race boats pretty much essentially like... and so he traveled all over the world when he was younger, and so he would always encourage me to get into it. And then when we moved from New York City to Connecticut, as people will do to get to the suburbs, one of the things people do there was you join a yacht club, and particularly you do that because it's... particularly when you're younger, it's more affordable than a country club.

So if you want a, if you want tennis courts and a pool and access to water, that's what you do, and so we joined a yacht club. And one of the things that I had committed myself that I was going to do was crew and learn to sail.

And of course, when you're younger, you're constantly just chasing the next thing, and it's one of the regrets I have. I never did it, in part because I was probably admittedly a workaholic, and Saturdays and Sundays [00:11:00] were for work.

JB Wautier: It's never too late!

Sean Mooney: I always have that in my mind because I know I have so many friends that do sail. They're just so passionate about it.

JB Wautier: Again, it's never too late. You should try one day.

Sean Mooney: I think I have to. It'd be a great regret if I didn't, and so why not, right?

One of the things I liked about this is you're overcoming nature, and you have to be tenacious. You have to take the variables. There's competition about it. There's changing features of sailing.

Maybe this is a good way to talk about the next topic, is: I'm curious, someone with your depth and breadth of experience, can you walk us through something that was challenging that you had to overcome? How did you address it and find the will to get to the finish line in a successful way?

JB Wautier: Sure. There's many examples that come to mind because those journeys are never a straight line. But there's one deal in particular, I guess, which is a deal I had chased for a very long time. I was interested in animal health very early on. Like early 2000, I was convinced that this was an [00:12:00] under-invested industry, or poorly covered industry, because at the time it was still seen as the ugly bird of the pharma groups.

It's not R&D intensive. It's not growing fast. There's no big discovery. It's very generic. All true, but not good reasons, and it felt to me that it was a very attractive category, quite resilient, steady growth. On the pet side, humanization of pet was a real trend already at the time, so I could see a lot of attraction.

So I did a few deals in the space, and then I ended up finding this company, which at the time was called Allflex, and they were the leader in animal identification. That sounds very pompous, but they were just at the time manufacturing plastic tags that you put on cows' ears. So not super high tech, not super sexy, not the silly high barriers to entry at first sight.

But as I was digging into this company, I realized that their margins were just extraordinary, and that actually there were a lot [00:13:00] of macro trends playing in their favor, and that they'd built over time, not a dominant, but a very strong global market share, and it was very hard to dislodge them.

The cash conversion was fantastic. And so I convinced myself it was a great platform, but a platform to do something else. And my vision at the time was, this company touches five hundred million cows at birth a year everywhere. What if instead of putting a piece of plastic on the ear, they could put a chip and/or take a piece of DNA and then use that data to be better feeding them, healing them, looking after their wellbeing, etc.,

etc. And that could be potentially creating the... not the Google of animal, but you see the idea, something that would create a massive amount of data that then big animal health companies, big farm groups, etc., would be interested in. So that was the vision.

The company comes to the market. Everyone understands [00:14:00] what I understood about the barriers to entry and how attractive everyone can see the margins, can see the growth. So it's the most competitive auction I've ever been into. Only financial buyers, but like fifty-seven rounds of bidding, sealed bids in the end. It was a crazy thing.

We end up paying thirteen times the EBITDA, which was roughly nearly fourteen times EBIT, not a lot of CapEx, for a company that had been growing at four to five percent per annum historically. So everyone thinks I'm crazy, and that's 2013. I'm crazy. I overpaid. I over-levered. Ain't going to work.

And to be fair, from the outside, when you have forty-nine guys that were outbid by the fiftieth, of course, they think you overpaid . And I was convinced they were wrong because I was convinced you could do something else. If you were just continuing to clip your six percent per annum and do nothing to the business, they were right. It was overpaying. You were [00:15:00] never going to do a great return. But if you were able to reposition and make this business really digital, I was thinking the strategic value could be huge. And for the first four and a half years of the business, the business was flat as a pancake.

It was flat as a pancake because to make this pivot, you needed to completely rebuild the business.

First, you need to change the management team, because it was suddenly different skill set that you needed. Second, you need to change the routes to market. You need to change the organization. Then I had to invest another two hundred and fifty million dollars in technology, because that company has no tech.

So I had to find an incredible Israeli startup that was producing zero EBITDA. We ended up paying two hundred and fifty million dollars for a company with zero EBITDA. So people at that time, even some of my partners were starting to think, "Has he lost it?" I was convinced of my [00:16:00] vision, but there were moments where I was like, "Yeah, I mean, I can read the financials. I can see budget for next year. I can see how much we still need to invest to get there." And the only way this was going to work was if the terminal value and the exit were proving me wrong, because it was not with just the growth of EBITDA, the cash generation that you would make a good return.

Long story short, in year five, everything starts lining up. The business starts really taking off. Monitoring, which was this new product of measuring cow state, pet state, collecting data, giving advice to the farmer or the vet on how to treat that animal. Everything was coming together. It was an absolute revolution in the industry.

We put the company for sale year five and a half. So by that time, we had eighteen months of exponential growth, but we only had eighteen months. We had four years of flatline and eighteen months of exponential growth. And [00:17:00] we had more than twenty trade buyers, all of the leaders in animal health, all of the big tech giants at the time, the Googles, the IBMs and stuff.

And eventually, we sold to Merck, and Merck paid twenty-four times the EBITDA for this business, and we made a nearly two billion dollars capital gain on this thing. And it was just the most exhausting five and a half years, I think. To me, if you ask me to pick one, that would be the one. I had to stick to my vision.

I had to convince my stakeholders, I had to convince my investors, partners, etc., etc. And to be fair to them, there was nothing I could show for most of the first five years, except that we were making steps towards a vision. But would it be valued by the market eventually? The proof will be in the pudding.

So that's one way that really stuck with me. As if you ask me about tenacity and sticking to your [00:18:00] vision, that probably stands out.

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I think that'll resonate with every entrepreneur in the world that you've just shared, and give them comfort to keep on going. And the other thing I'd be curious about is, along that way, were there any meaningful pivots that maybe weren't in the original vision that helped you get to and fulfill the ultimate outcome?

JB Wautier: That's a great question I think there was one, which was how we completely changed the sales organization, the route to market, and the sales force eventually because we were hopeful that you could retrain, all of their sales rep and sales directors. They were people, they were part of the value of the business.

They'd been 20 years in the field. They had great relationship with regulators, with farmers, with locals. Again, it was part of the, the equity of the business, and yes, it's very different if you're selling five million tags to a farm or to a government, [00:20:00] one-off, and then you're done for the next five years.

It's a very different proposition than if you need to sell a tech solution, which is paid via subscription, where you're going to measure productivity over time, etc. So very different skill set, even very different personality and stuff. And so we tried and retrained the sales force. It was not working.

Eventually, we decided to change part of the team and part of the leadership team on the sales side, and that's what really unlocked it. And this pivot was not part of the base case because, again, I was convinced that the sales team was a key ingredient of the competitive nature and the competitive advantage of the business.

But thank God we did that, because I don't think we would have unlocked it otherwise. This was a hard pivot, just like sticking the course on delivering the vision. That was a hard pivot because you never really know, right? You just, at some point, you're throwing the dice and hoping for the best, and you hope that you're [00:21:00] neither wrong nor stubborn in the direction you're taking.

So I like the analogy you made with the entrepreneur, because it's the same loneliness in those decisions. But looking back, yes, that pivot was essential.

Sean Mooney: I'm glad that you brought that up, and I think so many people from the outside of business, whether you're an entrepreneur, a private equity builder, a CEO in a PortCo, when you're right in that seat, it never feels like it's just a straight up and to the right line.

It's more of a sine curve at angle, at an angle, right? And you're making progress, but inevitably there's lefts and rights, and you hit the brake, and you have to go back and go forward. You mentioned the terms like tenacity and grit and resilience. Like, that's so important, and I think it's a good lesson for anyone who's listening to this is, like, that return from the outside was a trophy return.

But in between, there was a lot of work and a lot of lefts and rights, and I think it's a great lesson for everyone listening to this is, you've got to stay at it. It's an American phrase, but it's: stay in the batter's box, [00:22:00] for baseball. Like, you've just got to keep on swinging, and then you're going to start hitting the ball.

Maybe, JB, with that in mind, what's maybe some of the piece of advice that you would give to investors executive business builders in general to successfully manage through a time like now? What's some of the things you think about that are good to keep in mind?

JB Wautier: There's a few things. If I look back, and I look at today, time can be a great healer of many things.

But also, as we just explained, you need to give time to certain things, and we're all conditioned to be over-performing every day, every week, every quarter. Elaborating on my previous example, like you could have said after four years of flat financials and investing a lot in the business, just, it's just pivot.

What are you doing? And so my first learning, at least, and I fully advise, for some people, is just embrace time. Changing a [00:23:00] culture takes forever. Bedding down a new management team takes years. Changing a strategy takes years. Pivoting a business like we did with the example I gave you, took five, six, seven years, and don't try and just optimize to the last quarter or be impatient, or try and time the market, for that matter, which is the other thing that you often see people do.

A) they don't give enough time for things to materialize or bed down. B) often investors try and time the market. I've been trying to time the market like everyone else, and realize that there's just no way you can do it.

I'm fortunate enough in the things I do to be working with the great Bill Ackman, and Bill would tell you the same thing, and he's probably one of the best public investors in Wall Street, if not globally.

You just can't time the market, so it doesn't mean you should be oblivious of the market moment you're in. You know pretty much when it's more a buyer's market, a seller's market, valuations are [00:24:00] elevated by historical standards. You know that if you are an experienced investor. So be cognizant that you are in a hot market, in a down market, yes, but don't try and time it.

What's going to save you eventually, if your timing was horrible looking back, is either you gave time to a good business to develop, and let the company grow into an okay price eventually, or that you've deployed consistently over time. And when I was at BC and trying to look at how we were pacing things at the fund level, that was always my obsession.

Guys, we just can't time it. We're cognizant of the market moment we're in, but we need to deploy at a steady pace. We have a four-year or five-year deployment horizon. Let's deploy twenty, twenty-five percent of the fund every year, come what may, and that's probably your best protection together with giving your time horizon some time.

And don't forget, still on this notion of time, the [00:25:00] power of compounding is, I would say, my third time lesson in investing. Again, it's something Buffett said it better than anyone else. Bill is a big advocate of compounding as well. I'm a big advocate. This is probably one of the things I understood early and, a human brain can't think exponentially.

So if you ask anyone, including you and I, who know what compounding looks like, "Okay, you're compounding at 15%, what is your multiple on cost in 10 years?" We always get the math wrong, and I invite everyone to do the math on the calculator and look at what it looks like, because you're going to be shocked when you look at 10 years, but you're going to be even more shocked if you look at 15 and 20 years.

And I bet that no one can really guesstimate, given the compounding rate, what this capital is going to be worth up to 20 years. Most people can't. It can bail you out as well, that compounding effect, but it's exponential. And so, [00:26:00] when our brain is going to think linear, its guesstimate is going to be pretty much okay the first few years, but it's going to be so wrong in the, in year 20, and suddenly that thing goes up, up, up.

We often forget that, and that's probably my importance of time lesson three is: never forget the power of compounding.

Sean Mooney: I think those are great pieces of advice. And time, what is it they say, time heals all wounds?

JB Wautier: Yeah, exactly.

Sean Mooney: And the more you're in the market, the better it's going to be over time. I think that's just another set of great advice that I think everyone needs to know.

It's like, this is a long race that we're in. It's not a series of sprints. And so realize that. It's so easy... And I find myself getting caught up in the moment. We talk about mindfulness, right? Like maybe too much in the present sometimes, right? But you realize, like, we're in a long race here.

Over time, things build tremendously. So, I think another tremendous piece of sage advice for every one of our listeners here.

So [00:27:00] JB, maybe then one of the next things I'd love to get your perspective on is what are some of the big opportunities you're seeing out there, and the nuances behind them? And so if you take your very successful career in investing, and you're looking at the landscape, and you're going to talk to other business builders out there, what do you think is maybe one of the bigger opportunities that people should be really thinking about today?

JB Wautier: It's going to be hard not to talk about AI when we talk about that, and I'm sure it's on most people's mind, but the reason why, to me, it's the thing that comes first, is because it might even be the biggest industrial revolution we've ever seen. I saw a video this morning of, I think it was Jon Gray from Blackstone, who was trying to explain what they see in terms of this AI revolution, and he was drawing the analogy with the US, and was talking, what's the average American in 1870 and what's the average American in [00:28:00] 1900?

That's only 30 years, and that's a technology that was slower than AI. But electricity and railways and the... it just completely transformed in 30 years how the US was producing, how the US, the GDP was multiplied by six or seven. Suddenly, big urban centers appeared. Everything had changed. And I think we are exactly in the same period, except that it could be shorter than 30 years.

It depends in part the pace of adoption by us humans. But I think I would look at any opportunity or risk in the light of AI today because it's... to me, it's even bigger than this revolution I talked about. It feels like the invention of fire or so. It's changing everything, not only on the work side, but also the way the society gets organized, what 'human' stands for, etc., etc.

So to me, that's where there is the biggest [00:29:00] opportunity, potential, and risk to incumbent businesses, and this is where I would spend a huge amount of time, and that's where I spend a huge amount of time as an investor trying to understand how wide-ranging it is. And that leads to another pretty wide-ranging consideration, which is, if I'm right about how big this revolution is, then what is the human special sauce that will remain in a world where AI will be everywhere?

And so suddenly, we realize that things like emotional intelligence, things like life experience, social interactions, social capital, could become much more important, much more central, because lots of things that we take for granted and that occupy us today would be better done by AI in a few years. So they're pretty wide-ranging considerations, but these are the things that would guide my thinking, whether I start a business, invest in a business, [00:30:00] try and look for the next opportunity set, because again, this is so vast, and this is so encompassing.

Sean Mooney: As you think about AI today and you look at the opportunities, how do you go about thinking about, for any business "Here's how we use it as an offensive capability where we can be really good," and then where do you think about, "How do we keep the human part in the business?" I think a lot of people are going through some ratio of utter excitement and total terror, and so how do you think about those two things?

JB Wautier: As a disclaimer, I'm an optimist, so I think it's Churchill who once said, "Why bother being anything else than an optimist?" I'm not looking at this thinking, "Oh my God, it's going to be an era of misery and unemployment and social unrest." I look at it more as a phase of abundance. I worry about the risk of bad actors and cybersecurity risk, and stuff.

I don't worry about the technology itself. I think the [00:31:00] technology, it can only bring better lives for everyone and abundance as opposed to misery. But back to your question. So I don't think there's anything that AI won't be able to do better than humans at some point, and maybe we're only a few years away from that.

The reason why I think that is because the very few things we understand about human intelligence is: neurons networks, which are exposed to words. That's how human intelligence develops, that neuroscientist, everyone is pretty much agrees on that. AI is just the same neural networks getting the same exposition to words, except it's getting trillions where we get billions.

And so AI is already able to solve some math problems that for a century we've been struggling with. AI is already winning math Olympiads. AI is already helping find new drugs. AI... So that's why I'm saying we're only a few years away. [00:32:00] And AI, yet again, is an exponential growth. So don't think that, okay, that's what it did in one year, therefore next year it's going to be there, because it's just growing exponentially, because its exposure to data makes it grow exponentially.

So I think there will be nothing that needs the form of intelligence that can't be done better by AI, therefore, it should do everything. Now, it doesn't solve our needs for human interactions, emotional intelligence, and things like that. It's going to be hard for AI to crack things that we don't even know where to begin how to understand them.

So the fact that, if you and I were in the studio together as opposed to being via our respective screens, we both know the energy would be different. We both know the... what we would feel. The discussion would probably be the same, but the way we would enjoy it would probably be different, more intense, more [00:33:00] connection, more stuff like that.

People continue to go to concerts, to live things. People continue to enjoy having meals together, having family time together, going on holidays together. So this, I don't believe can ever be replaced. So think about the day you go to a restaurant or a hotel. Yes, everything can be much more efficient. It's done by AI.

You check in, you're ordering. But would you like some human touch when you're being greeted to your room, you're being explained what your dish is about and how the flavors come together? You probably still want a human from time to time in all of these interactions. And so that's how I try and think the future economy, the future businesses, the future of companies is, okay, what is that human component?

What is that emotional intelligence, social interaction or connectivity that as a consumer I will still want to have?

I'll give you another example. [00:34:00] AI today does much better at reading scans and spotting for early tumors and stuff like that. And yet, the number of radiologists is continuing to increase.

Why? Two reasons. One, because the cost of a scan is coming down with the increase in market and quality of of results. Two, even though AI has come up with the answer, you still want to talk to a human if it's delivering bad news in particular. And so that's yet another example. AI is already better than any radiologist at reading that scan.

But if it's bad news, I'd rather talk to another human than talk to a screen or a chatbot, and I need that emotional connection. So here are three examples of healthcare, consumer, hospitality, where you will still want that human interaction because fundamentally we're social animals.

So it's not because AI will have [00:35:00] replaced a lot of things we do today, that there won't be space for humans, but we need to rethink what is that special sauce that a business can retain or that a consumer will look for.

Sean Mooney: I think that's very insightful and well said, and there's going to be things that every business can benefit from AI.

Just like, you know, an industrial revolution, right? There's a lot of things that rotating engines and equipment helped, like that helped us make things. And one of the things that I really is I think a lot about this, is, like, it's going to make a lot of part of our businesses better, but I think to your point, people still want the human in the loop.

Not necessarily everywhere, and so, you look at our business, where we're connecting all these kind of best-in-class third parties to PE firms and their PortCos. A large part of our business is driven by AI behind the curtain, but we very purposely keep the human in the loop up front. These are people on both sides of the equation that are at the top of the pyramid of what they do, and they want that human experience and someone to walk them through [00:36:00] the process.

JB Wautier: You're touching a subject on which I've been thinking a lot recently, with the debate about, should we slow down frontier models, blah, blah, blah. And that fear that, we don't really understand the risk. We don't really understand how fast it can become autonomous. And to me, it's exactly what you said.

So my answer to that is, what matters is understanding the incentives and the motives of AI, because the reason why we humans trust each other is because whenever we have an interaction, we're pretty clear about what motivates the other person. It's pretty clear. We understand why they're here, what's their incentive, what's their motivation.

And when I say that it's wide-ranging, it's just the pleasure of having a chat like we're having today. It can be hiring someone. It can be anything. But whenever there's a human deciding to cooperate with another human, there's a need for basic [00:37:00] trust, and that basic trust can only come from, "I understand why you're doing that, and I understand why you're here and why you're telling me we should do this together."

If we don't manage to get that from AI, and there's a risk that we can't, looking at the current debate and what frontier model companies are saying, you will also need a human that you can trust, that can tell you, "Yes, I'm using AI, but I'm in charge of controlling what AI does." So trust may only be attained by keeping humans that maintain the trust between each other because you will never be able to trust AI.

There's another element. Maybe it's going to sound legalistic, but if you try and think about it, you'll see that it's pretty broad. It's accountability. We live together in societies where if you make a mistake, if you do something bad, it's on you. There's always someone accountable for something going wrong, and sometimes it's [00:38:00] horribly wrong.

But there's always some form of accountability in the system. In a company, you have people who are accountable. The Board of Directors is accountable. The CEO is accountable. The management team is accountable. And what if AI does something that's gone horribly wrong, and has created tremendous damage to some people?

You need someone accountable. Are you really going to go and sue Anthropic or whoever will have produced that? You will need people accountable in the system that led to that particular thing. And that's where, again, unless we give identity and accountability to AI, which I don't think we're there yet , you will still need humans, not just for the trust, but also for the accountability.

So there's also that dimension of how society can function. I think the human-in-the-loop is the only way.

Sean Mooney: I think it's another excellent point. If you look at it, probably 80% of what we do on the back end is either AI'd or can be, but it's that core 20% where our humans-in-the-loop is like, "Wait a minute. We're going to discern between the [00:39:00] nuances. We're going to basically do the last mile, and together we're giving a much better experience."

And I think to your point is the humans aren't getting taken out of the loop. Philosophically, as I think through this, and I think we both knew what the internet felt like when it was coming through, and everyone had the same fears.

"Oh my gosh, we're all going to be... everything's going away." And then what we found out was we just all got 10 times as much done in the same 25 hours a day we were working as investment banking. So I think just the other thing that's going to happen is the speed of business is just going to get so much faster, which means we're going to need just as many humans because that competitive balance will normalize.

So I too am an optimist. I share the way that you think about this. So maybe as we wrap things up here, JB, I'd love to go back to introspection a little bit in terms of the wisdom that you've learned over time that will inform where we're going. And so if you could go back to your 22-year-old self, what might be one of the top pieces of advice that you'd give yourself that you wish you knew then?

JB Wautier: There's so many things I would [00:40:00] like to tell this 22-year-old, and he probably won't, either won't listen or won't understand, but I'll still give it a try.

I think the first one will probably be... and that ties back to the, to my own story, but is just: trust the system. What I mean by that is, you know what you said about serendipity and about how we... our lives end up getting built, and how it's twists and turns and how it's serendipitous?

If someone had told me that, I think it would have been hard to understand maybe. But I would tell myself, just, "The universe will find you. Enjoy the ride."

As you said earlier, it's a long game, especially in the world of investing and finance in general. It's a long game. There's going to be ups and downs. There's a lot of things that you don't control. Most of the things you don't control. Just trust that the universe will find you and put you on the right path. And all you need to do, back to what we were saying at the start of this conversation, is seize the moment, [00:41:00] understand the low-intensity signal, try and read the signs.

The universe will blink at you. Call it universe, or God, depending on your faith, but it's the same idea. And when it blinks at you, follow the guidance. And it's not going to be... you're not going to have a red sign blinking over your head, like in a cartoon and saying, "Go left," or, "Go right." But there's going to be some signs.

And if you just have this ability to understand that there's going to be moments like this. The Greeks had a fantastic notion for that. For time, they had two words. One was 'chronos', which is the time as we, we understand it, and the other one was 'kairos'. And kairos, you would translate it as time, but it was a very different notion.

It was about what's happening in the moment. And so this would be my advice is, it's a long game. Trust the universe. Just be very focused on when you have these moments of potential pivot, try and feel where the momentum is, where things are guiding you, and [00:42:00] try and take the right decision. That would be advice number one.

Advice number two, and that's what I tell my students all the time, is: it's not easy, but it's easier than advice number one. Try and understand what you're good at, and usually there's a good overlap between what you enjoy and what you're good at. And look at yourself as if you were a business. What's your competitive advantage?

What is it that... and it can be soft, it can be hard. It can be: I'm great with people. It can be vague things, because when you're young, you don't necessarily understand the world of business and various skills, but try and understand over time what's your special power, because this is the best way for you to take those decisions when they come up in terms of making the right choice careers, making the right pivots.

But if you haven't done that, you're more prone to make mistakes if you don't really understand who you truly are, and what you truly enjoy, and what you're truly good at. The third one will be, we've already [00:43:00] discussed at length about time, but I would put it on again and again and again.

It's a long game. It's a long game. Don't try and rush things. It's good to be impatient, but up to a point. Be impatient, but remember, it's a long game. That's the tension in which you should be. So many things will happen over the course of... a professional career is forty years, fifty years, sixty years.

The world's going to change ten times. You're going to make personal choices which are going to impact dramatically your professional life. You're going to decide to live somewhere. You're going to bump into someone. You're going to seize one particular opportunity, which is going to have dramatic impact. But this is over forty or fifty years.

Not, "Oh my God, if in six months I'm not promoted to this job, I'm out of here and I'm going to do this and I'm going to do that." Just that's not how life goes. Life goes, as you said earlier, very eloquently with twists and turns, but it's long, so give it time to unfold. And [00:44:00] by the time you are your age and my age, you'll understand.

I can't remember in which novel, I think it's Kundera, but I can't remember which one. But it says, life is... most of your life, it's like you have something over your head, over your eyes, sorry, and you can't see, and by the time you're towards the end, you take it off, and you can look back and understand what it all meant.

And it's does feel a bit that way. It does feel that you need to reach a certain stage to truly understand the trajectory. So if in the meantime you can be a bit patient and remember that you have 40 or 50 years ahead of you, that's going to help.

Sean Mooney: There's been, I think, so much wisdom in here that I've taken notes on, and I'll probably talk with my kids after this. I don't know if... they probably won't listen... but hopefully they'll listen to you.

But I think it's so important, like, life is, as you pointed out it's serendipitous. The universe is going to find you. It's going to take you. And the other thing that I think that you've done a great job pointing out during our conversation is, that there's going to [00:45:00] be these special moments in your life, but be aware of that.

That's something that I'm definitely taking away from our conversation, is yeah, you're on this journey, this river of life, it's going to take you to the right places, but also be aware of these key moments. Others, maybe they're on it and life takes them in the right direction, but if you're more aware about it, I think it really helps you as well.

It's a good journey, and I certainly find myself looking back going, "Wow, life is long, but it goes fast."

JB Wautier: It does.

Sean Mooney: Probably too often in my life I haven't paused to smell the roses and say, "This is pretty good." Just enjoy the moment.

JB Wautier: I agree with that.

And that's the way we are brought up and conditioned, and these are the societies we live in, where we always get the impression that, as we progress, humans have more and more control over their own destiny, and therefore, as a consequence, they should be in control of their own lives.

Now, whenever... regularly some of my students ask me, "What made you so successful at investing?" And this is not [00:46:00] false humility, I really mean it, I always tell them: the Fed.

And of course, they're very puzzled. They're like, "What, well, what do you mean?" I say, "Well, I've been deploying most of my capital when interest rates were zero, and quantitative easing was invented, and as a consequence of that, asset prices were going up every year."

And so yes, you still needed to avoid making mistakes, so it was not the whole of the performance. But you can take any successful investment between early 2000, but even more between the GFC, the end of the GFC and the start of COVID, take away the interest rates environment and the quantitative easing, I think you shave off a lot of pips of performance.

And so when I started in private equity, how could I plan that for 15 or 17 out of my 20-odd years, 25 at managing funds, I would benefit from [00:47:00] such a tailwind from a macro perspective, but also an industry that was growing, maturing, generating an amazing return as a consequence, attracting more and more funds, never have to take down prices or carry them, and fees were staying constant on assets under management that were growing.

These were glory days. But those key drivers, no humans was ever in control of them. I was just there when it all happened. This also ties back to some of the things that you said, and that's... you made me think of that, because that's also what people need to realize is, there's so many things that are not in your control, positive and negative, that you might as well enjoy the moment from time to time, because life is a way to learn acceptance.

In everything we do, we should remember that sometimes.

Sean Mooney: That's I think extremely well said, and I think a great way to put a period on our conversation here.

JB, thank you so much for joining [00:48:00] us today. I've learned all sorts of things that I wish I knew before, and I'm glad and fortunate to have learned them with you today.

So thanks so much, and I look forward to speaking again with you soon.

JB Wautier: Thank you. I really enjoyed it.

Sean Mooney: That's all we have for today. Special thanks to JB for joining.

If you'd like to learn more about JB Wautier, please see the episode notes for links.

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