Ben Savage – All Things Fintech Investing

**Patrick O'Shaughnessy** (0:04)
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, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_1** (0:24)
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** (0:48)
My guest today is Ben Savage, a partner at Clocktower Technology Ventures. Ben is focused on financial technology or fintech investing, which is the topic of our conversation.
I've been making the fintech rounds of late and plan on making a few of these conversations public. Ben is the first in what might be a mini-series because of the sheer amount of information I learned in our discussion.
We cover all aspects of the fintech ecosystem. I hope you enjoy. So Ben, we were just having a conversation. We figured we'd just hit record here, which was about sort of the future state of what we think about, maybe thinking first from the perspective of an institution as the market portfolio. So maybe you could just recap what you just told me about how this might evolve and how that relates to maybe investment opportunities today in the financial technology stack.

**Ben Savage** (1:36)
Sure. So I think an interesting way to think about markets and think about investing is always to kind of push things in time to extremes.
And so if you imagine the world 100 years ago, 200 years ago, what did markets look like then?
And by contrast, what do they look like today? What's different? It seems unlikely to me that there's something fundamental that's changed about human nature over those 200 years. And so while capital markets might have changed, it feels less likely that that change is deeply foundational and it's got more to do with just some curiosity of the rules essentially shifted. And you can do the same thing by imagining kind of 100 years forward or 200 years forward. And one of the telling departures, I think, over the past 100 years or so is the idea of public and private markets, which I don't think would have been a sensible distinction to somebody investing 100 years ago or 200 years ago or Isaac Newton kind of thing.
It's really an artifact of a regulatory regime that got created following the Great Depression, which was such an outlier in human history, the degree of suffering that occurs in the Great Depression relative to what was at that point known by economists and regulators was so extraordinary that we said, wait a second, let's put some rules around how markets are going to work because essentially the great crash destroyed the US economy. And it was this feedback loop from markets that had not really been seen in that kind of way before. So we created a regulatory architecture in the United States that stabilized capital markets but also stabilized the economy through the creation of the Fed. And once you get sort of stable economic volatility from the Fed, which essentially says we're going to dampen the economic volatility, and you get a statutory regime around markets, which dampens market volatility, you get the creation of what we think of today as public markets, which are really just liquid and exchange traded markets. And I think it's a useful reference frame to stop talking about public and private markets and talk about liquid or illiquid markets on one axis and then regulated and unregulated markets on the other. And so today, we have liquid regulated markets as public markets, and it's a huge industry and it's created a spectacular amount of wealth for a lot of people and it's transformed the way Americans ultimately save and invest for themselves and their families over time. And it's done wonders for capital formation in the United States. There's no sort of disagreeing with that. But if you imagine on sort of a different end of the spectrum, you have venture capital, which is essentially a less liquid historically and less regulated historically market. And venture has also done a pretty good job of capital formation and driving innovation in this country. And I think broadly in the future, the world is going to move away from liquid regulated markets to what have historically been less liquid and less regulated markets.