Alan Waxman - Private Credit and the Modern Financial System

**Patrick O'Shaughnessy** (0:00)
Most software companies try to maximize your time on their app to juice engagement. Ramp does the exact opposite. Ramp understands that no one wants to spend hours chasing receipts, reviewing expense reports, and checking for policy violations. So they built their tools to give that time back, using AI to automate 85 percent of expense reviews with 99 percent accuracy. And since Ramp saves companies 5 percent, it's no wonder that Shopify runs on Ramp, Stripe runs on Ramp, and my business does too. To see what happens when you eliminate the busy work, check out ramp.com/invest. OpenAI, Cursor, Anthropic, Perplexity, and Vercell all have something in common. They all use WorkOS. And here's why. To achieve enterprise adoption at scale, you have to deliver on core capabilities like SSO, SCIM, RBAC, and audit logs. That's where WorkOS comes in. Instead of spending months building these mission-critical capabilities yourself, you can just use WorkOS APIs to gain all of them on day zero. That's why so many of the top AI teams you hear about already run on WorkOS. WorkOS is the fastest way to become enterprise-ready and stay focused on what matters most, your product. Visit workos.com to get started. Every investor should know about Rogo because Rogo AI's platform is not just another generic chatbot. Instead, it was designed to support how Wall Street bankers and investors actually work, from sourcing, diligence, and modeling to turning analysis into deliverables. For me, three key things differentiate Rogo. First, it connects directly to your system so it can work with your actual data. Second, it understands your workflows, how work really happens across a deal or an investment. And third, it runs end-to-end and produces real outputs the way the best people do, auditable spreadsheets, investment memos, diligence materials, and slide decks that match your standards. This all comes from the fact that Rogo is built by finance professionals for finance professionals, and it's already being adopted by some of the most demanding institutions in the world. To learn more, visit rogo.ai/invest.
Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at colossus.com.

**SPEAKER_2** (2:15)
Patrick O'Shaughnessy is the CEO of PositiveSum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of PositiveSum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of PositiveSum may maintain positions in the securities discussed in this podcast. To learn more, visit PSUMVC.

**Patrick O'Shaughnessy** (2:43)
This is a unique conversation. It's my second with Alan Waxman, the founder and leader of Sixth Street. One of the largest private capital investment firms in the world. Him and I have been going back and forth about the history of financial guidelines and incentives and how those systems through time shape the system that we live in today and shape outcomes in the financial markets. We thought it would be a neat opportunity to walk through in great detail what he calls System 1, 2 and 3, going all the way back to 1933 and the initial regulation Glass-Steagall, which kicked off System 1 We then go through System 2 from 2000 to 2008 and the global financial crisis and then go into great detail for the system that we're living in today. The reason all this history is interesting to me is that ultimately it's about the incentives and the ways that investors and investing firms make money. We have this great conversation about what Alan calls the factory model of investing defined by the industrialization of both raising money and deploying money through the opposite of the old school artisanal investment model that's entirely focused on earning outstanding investment returns. His historical perspective and lens on what's driving outcomes I think is useful information and history for all of us as we try to navigate one of the most dynamic periods of creative destruction in capital markets history. Please enjoy my second conversation with Alan Waxman.
We're facing one of the most interesting capital market setups of all time alongside one of the most interesting just world environments, geopolitics, technology, and you and I have talked a lot about the shaping forces that will determine how things play out from here. One of those things that I want to start with, we'll talk about AI, we'll talk about geopolitics, some other big things that might be shaping the world. But there's one that is probably under discussed that you are in a very unique position to teach us about, which is what you call the guardrails and the incentives of the financial system itself. The reason we're doing this today is so much discussion of private credit, direct lending, things happening in private markets, that's getting a lot of attention in the news. You can see it in stock prices of certain companies. I think the whole world is grappling with this, trying to figure out what the hell is going on and what to expect. You are a deep historian of this topic. I thought it would be a really cool opportunity just to have you teach us all about this important factor in what's going to happen in the future. What is your general frame for the financial system and how it impacts the world?