Antonio Gracias - Pro-Entropic Investing

**Patrick O'Shaughnessy** (0:00)
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**SPEAKER_2** (1:36)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:59)
Today's guest is Antonio Gracias, founder, CIO and CEO of Valor Equity Partners. Antonio is perhaps best known for his role at Tesla as the earliest institutional investor and director from 2007 to 2021 But he has a deep operating and investing experience having first acquired and managed a number of manufacturing and technology companies during his 20s.
It was during these formative years that Antonio and his team developed the skills that led to Valor, which provides operational expertise to high growth private companies they invest in. Our conversation is a deep exploration of the drivers behind Antonio's and Valor's success. We dive into his concept of proentropic investing, what he learned as a 25 year old running a manufacturing business. And trust me when I say you do not want to miss his answer to the kindest thing ever. Please enjoy my conversation with Antonio Gracias.
Antonio, I was trying to figure out where to begin this conversation. I always like to dive straight into the meat of some interesting idea, not do the childhood background stuff. We'll get to that later. And because of our conversations over the last many months, I think this idea of proentropic companies is one of the most interesting ideas that I have personally encountered maybe ever in investing and an ideal place to start. I would love you to walk us through this concept because I think it really defines your style of investing and is quite a bit different of a lens than I've heard from other investors investing at a similar stage.

**Antonio Gracias** (3:25)
Sure, Patrick, thank you. It's a word we use here internally in our investment framework. And we think about lots who will use the word resilient. And to us, resilient things, many companies are things that recover quickly. So when you talk to neuroscientists about the word resilient, they define it as you come out of homeostasis, something happens to you, the adrenaline goes up, cortisol, whatever, and then you recover quickly. You go back to homeostasis and make a decision. If you don't recover quickly, then you can't make a good decision. Proentropic, as you think about a company, if a company is resilient, it means that it recovers quickly when something happens. There's a crisis, management's good, they figure out a pivot, they figure out what to do.
For us, proentropic, it really is a company that is good at chaos.
So this kind of comes from our trying to understand and learn how to get better at not making mistakes and make great investments, right? So how do we figure out how to lower our errors and improve our successes?
And we started to identify this idea that the world's getting more chaotic, a lot more chaotic, almost 10 years ago now. And the chaos was driven by the idea that de-globalization was changing the world, technological structures changed the world, climate change changed the world, politics were changed in the world, demographics were changed in the world. So much was changing all at once.