“You don't see many 60-year-olds walking in from financings into a venture capital firm. It just doesn't happen… I actually read three studies, which said that 60 year old entrepreneurs were twice as successful in starting up businesses as those who are 30.”
With a 50-plus year career in venture capital, Alan Patricof has been instrumental in growing the venture capital field from a base of high net-worth individuals to its position today with broad institutional backing, as well as playing a key role in the essential legislative initiatives that have guided its evolution. Alan founded Apax Partners, leading global private equity advisory firm, and co-founded Greycroft, venture capital firm focusing on investments in the internet and mobile markets.
When investing venture capital, there are often not a lot of numbers to go off of. This often requires evaluating the people running the business, their past work and the team they bring on as the surest indicator of a company’s success. With the responsibility of investing in companies with other people’s money, an emphasis on bottom line should be maintained instead of simply focus on revenue growth. “At some point a company has to have a bottom line, and a lot of companies have lost sight of that today.”
Having lived alongside a loved one in need of extensive at-home medical care and recognizing the massive need to address chronic diseases that older Americans face, Prime Time Partners was formed. Venture capital will be targeted towards entrepreneurs over 60 in order to support start-ups addressing the later-in-life costs, an age group and industry relatively neglected up to this point.
LISTEN AND SUBSCRIBE
SPEAKER
Alan Patricof
Co-Founder
Greycroft
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:08)
Hello, everyone. Welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are a digital interview series we've been doing during the work from home period, to provide our audience a window into the minds of subject matter experts who are leading investors, creators, and thinkers. Our goal with these talks is also to provide a platform for what we think are big, exciting, world-changing ideas as well as great investment opportunities. And we're extremely excited today to welcome Alan Patricof to SALT Talks. With a 50 plus year career in venture capital, Alan Patricof has been instrumental in growing the venture capital field from a base of high net worth individuals to its position today, which has broad institutional backing, as well as playing a key role in the essential legislative initiatives that have guided its evolution.
John Darsie: (01:04)
Alan founded APAX Partners, a leading global private equity advisory firm, and then he co-founded Greycroft later on, which is a venture capital firm focusing on investments in the internet and mobile markets. His latest venture, as he's calling his third act, is a company called Primetime Partners, which is a seed and early stage venture capital fund, investing in companies transforming the underserved and trillion dollar global sector of the aging population. He's helped build and foster the growth of numerous major global companies, including among others American Online, we had Steve Case in an earlier SALT Talk, Office Depot, Cadence Systems, Cellular Communications Incorporated, Apple Computer, which you may have heard of, Four Systems, NTL, Interlinks, Audible, Axios, and Wondery. We're very excited to learn more about his next chapter with Primetime Partners, as we mentioned, in what Alan refers to as the silver tsunami.
John Darsie: (02:02)
A reminder to our audience today, if you have any questions for the great Alan Patricof, enter them in the Q and A box at the bottom of your video screen. Conducting today's interview will be Anthony Scaramucci, who is the founder and managing partner of SkyBridge Capital, which is a global alternative investment firm. Anthony is also the chairman of SALT. With that, I'll turn it over to Anthony for the interview.
Anthony Scaramucci: (02:24)
Alan, it's great to have you on. We really appreciate the time you're taking today. People get mad at me, my son in particular, when I ask these background questions, but I actually don't care because I find them fascinating. What is something we could learn about your background that's not on Wikipedia, it's not something that's been written about you, maybe it's something about your parents, maybe it's something about the way you grew up, maybe it was the realization that you made that you were going to go into this story career of entrepreneurship?
Alan Patricof: (02:57)
What do people not know about me? I don't know. I guess from a very young age, I really was entrepreneurial in my own way. I mean, I was brought up in a middle class background on the West Side of New York. I'd say lower middle class. We didn't have servants, we traveled by bus and subway. I didn't know what a taxi was until I was out of college. Family trips were all by car, not by planes. I sold the Saturday Evening Post standing by the 103rd street subway stop, with one of those bags around my shoulder at age six or seven. And during the war I sold war bonds, I collected scrap and newspapers for the war effort. So I would say those were probably good indications that I was a hustler from very, very early on.
Alan Patricof: (03:54)
And when I went to school, I went to Ohio State, not because I really intended to go to Ohio State. I got there by accident. I almost went to Brandeis, but I panicked when Brandeis was in its second or third year. And I went to one of those preliminary college interviews. And when I walked in, everybody had black hats and long beards and long black coats. And I said this wasn't right for me. Of course, Brandeis is a totally different place today, but in those days, it was very, very ethnic. And I just came home, put a label on my trunk. In those days you had a trunk, you didn't have a suitcase. It was Railway Express, Railroad Express which became American Express. But in those days, it was the way you shipped everything around was not in the Amazon cartons, but in trunks.
Alan Patricof: (04:55)
And I sent my trunk out to Columbus, Ohio. Next day, got in the car and went out to Columbus. And even while I was at Columbus, I sold ties. I sold favors. I wrote for the Columbus Citizen. I did a market research for the Brown Shoe Company. So I guess you'd say I started at a very early age trying, like many of us, probably like you. You had to do something to supplement your family's income, which was limited. I'll finish with the background. When I tell you when I came to New York, I had no job. There was no recruitment effort at Ohio State. If there was one, it was at Harvard, Yale, and Princeton, it certainly wasn't at Ohio State for undergraduate. So my alternatives were going to Caterpillar Tractor in Des Plains, Illinois, as I recall, or the National Bank of Detroit, or to go work for AID down in Brazil.
Alan Patricof: (06:01)
And at the last second I said, "I gotta go home." And I don't think I would have made it at Caterpillar. And I went to New York and the way I got a job was I walked Wall Street. Because I knew I wanted to be on Wall Street, and I walked the street literally. And those days you would get into the building, which you couldn't do today. It's a joke. And I would go into an elevator, to the top floor, go to the secretary, open the door and say, "Any jobs available?" That's honestly how I did it. And I'd go from the top floor down to the bottom floor. I started at 110 Wall Street, and fortunately I got a job on the 35th floor of 63 Wall Street with a great firm. So that's how it all started. From there, it's been one great success after another, I have to say,
Anthony Scaramucci: (06:56)
Well, it's an amazing story. I think it's one of the reasons why we like each other so much. I had a paper route, was making $35 a week at age 11. I was giving 20 to my mom and I was keeping 15 for myself. And my first job coming out of Tufts was at One Wall Street. So I had the same idea you did.
Alan Patricof: (07:15)
The other end of the street.
Anthony Scaramucci: (07:17)
I went to the Irving Trust building. I rode up to the 28th floor and there was a law firm there called Hughes, Hubbard and Reed. It was named after Charles Evans Hughes. And I asked them for a job that summer, and they put me in the paralegal area. So we have a lot in common that way.
Alan Patricof: (07:33)
And what was my first salary, because believe it or not, people don't realize, you can go to Social Security and ask for a printout of every year and what you contributed to Social Security. So my first year was 1955. I made $55 a week. So that was $2,700 a year or whatever.
Anthony Scaramucci: (07:54)
Well I was more fancy pants than you. The guy offered me $8 an hour, Alan. Being who I am, I said, "Could you make it 10?" He goes, "What are you, crazy?" I said, "Yeah, please. I need the money."
Alan Patricof: (08:06)
That was good money.
Anthony Scaramucci: (08:06)
I had to pay off all that school debt. What's that? That was good money in 1986. You know, I worked on the Continental Airlines merger with People's Express. I spent the whole summer of 1986 in that office working on that merger. But I want to go to your-
Alan Patricof: (08:23)
Was Freddie Laker around then?
Anthony Scaramucci: (08:24)
Yes, absolutely. Yeah.
Alan Patricof: (08:27)
I remember meeting with Freddie Laker, going out to his hangar out in New Jersey, big cavernous hanger. For those who remember, Freddie Laker was like the guy who really started cheap travel.
Anthony Scaramucci: (08:38)
He really started the whole concept of mass transit in the air. And Frank Lorenzo, you may remember Frank, he's living up in Nantucket now, he was running Continental Airlines at the time, and he bought People's Express, which is the reason why United airlines has all those hubs over in Newark. [crosstalk 00:08:56]
Alan Patricof: (08:56)
So I remember my famous story with Freddie Laker, was I went to meet him at his corner office. And I said something, somehow we got into the idea of board meetings and he said, "Well, I have board meetings." He said, "I'll show you how I have a board meeting." He goes out into the hallway, a long... Remember it was a hangar. And he calls out whatever his partners one, and I won't do it, he screams out, "Hey, Hey, Jimmy," and Jimmy comes out the other end of the hall. He said, "Let's have a board meeting." I always remembered that. That was Laker airlines board meetings were in the hallway [crosstalk 00:09:33]
Anthony Scaramucci: (09:33)
There you go. The true symbol of entrepreneurship. Right? It's an amazing story. So you're one of the pioneers. I mean, you've had this amazing life and you've always been able to see around a corner. So take us back to the early part of your career, venture capital, private equity. What were you thinking in those early days about directionally where you were going in your career and that industry specific?
Alan Patricof: (09:59)
Well, my father had once said, when my father was a stockbroker in his later career, the only real guidance he gave me, he says, "Always be a buyer, not a seller of investments." In other words, not be a stock broker was really what he was saying. So my career has always pretty much been on the buy side. I mean, I worked for a development capital firm. I worked for an investment counseling firm, as they were called then, like Scutter Stevenson Clark or Fidelity is today much bigger than private management. And then I went and ran a family's money. And then I worked for a guy, Ben Hidaman and Mickey Newman. Mickey Newman was the son of Jerry Newman. Jerry Newman was the partner of Ray Newman, who was the great professor at Columbia who wrote the famous book that everybody in Wall Street, if they haven't read, should read. And I'm shocked at the number of people today who haven't read it. He worked for one of the firms I have which is called Security Analysis by Graham and Dodd, I think a first edition is worth, you have to pay $3,000 to $5,000 to get the first edition, but the firm was Graham Newman. And I was involved with that.
Alan Patricof: (11:16)
And I had a lot of experience with families and I saw that families manage their big portfolios of stocks. You know, we talked about the Whitney's and the Rockefeller's and the Phipps is, and many, many other families that you wouldn't have heard of, including the family I worked for, which was the Godeson family who made their fortune in the paper business. And they would do private investments, but they didn't know what they were doing. Someone, Andre Maeir, who was head of Lazard, or Gus Levy, who was head of Goldman Sachs, or John Lowe from Lowe Rhoads would call up and say, "I'm putting you in for $500,000 in this, or I'm putting you in for a million in this or 200 of that." It was an old boys kind of club, and family offices were putting up money for that. And we did our share and I was the one, because I loved that, that became the person who ran that file drawer with all these private investments.
Alan Patricof: (12:12)
And it was while I was there that we made an investment in New York Magazine and we made an investment in another company called Datascope Corporation. New York Magazine, I had the tender age of 30 something, became president arbiter from Low Rhoads was chairman. Clay Felker was the key guy who built the built New York Magazine. And we started a company and I got the taste of really what it was like to be on the frontline of running a business. And in the case of Datascope, it was a medical electronics company, which we started with $50,000 on a kitchen table, with a very clever technology for cardiac monitoring. And I said, "This is much more interesting than buying IBM and General Motors and The National Paper Stock." And having it go up or down two or three or five points in a day, and no one could really tell you except some psychological event that happened. Some extraneous events someplace in the world would affect that price. I also went that time into a firm called Lynn Broadcasting, on behalf of Central National. So I said, "There's really a business out there to manage high net worth families private investments who aren't like the Phipps, or the Whitneys, or the Rockefeller's who had their own private investment activities.
Alan Patricof: (13:44)
And so I started a business in 1970 called Alan Patricof Associates, which became APAX many years later, we changed the name to Alan Patricof Associates International, because we were in 12 countries at that point. And started managing investments for private families, of their non-public securities on a very modest basis. I forget, I think I was at a retainer at $25,000 a year and the carry was 10%, not 20. And that gradually grew and got bigger. And eventually we started taking institutions, and got bigger and bigger. Our first one was two and a half million. And when I left APAX, there's no exact date, because I was in APEX's office until about 2008 or '09 physically, but I decided around 2002 after the bubble, that we had become too much of a private equity firm, we'd gotten so big. Our last one had been, I think, 10 billion. From two and a half million to 10 billion. We weren't doing the same kind of investments. So I spent three years helping the World Bank pro bono and the IFC, and looking at small and medium sized enterprise development around the world, primarily in Africa.
Alan Patricof: (15:15)
So I probably traveled to a lot of countries. And around 2006, I said, "This is not satisfying enough for me." I was 71 or 72. I said, "I want to go back in the venture capital business, pure venture capital." And I started Grey Croft, which is a pure venture capital firm. We are not a private equity firm. So far. The temptation is enormous to get bigger and bigger, Grey Croft is now in it's... I started out with a small fund, 75 million, which was small. And our most recent fund, we really kept ourselves constricted. So it will be under 300 million, which may sound large, but it's really small for the way funds have grown. We could be a lot, lot, lot larger. We've had six funds and three growth funds, which takes the second phase after the early stage A and B rounds. But I've been consistent and sticking with private investing companies that were early stages in their development, whether they were startups or growth rounds. Been an exciting career, I have to say.
Anthony Scaramucci: (16:29)
Yeah. Amen. And I think your career is just getting started. We're going to go to the silver tsunami here in a second, but I want to ask this question before I go in that direction. You have this wonderful knack. It's one thing to read a PowerPoint presentation or a business idea, but it's another thing to understand that you have a management team that can intersect with that idea and execute the idea. So we have a lot of young people on this SALT Talk listening. What are some of those qualitative and quantitative factors and gut instinct that you bring to the table, to see that opportunity at such an early stage in the business process?
Alan Patricof: (17:10)
Well, in all fairness, in the venture, that pure venture are and the startup area, you really don't have a lot of numbers to go from. There's a little bit of this. I mean, you can't avoid it. So it has to be based less on numbers and more on the people. And we've learned consistently that people who start businesses, who have been in previous businesses that are similar and that have left them to do something similar, and more importantly, have attracted people from that previous activity to join them, is a very high indicator of success. Because those are the people, they know more about this leadership than we could possibly know. And they're betting with their careers, as we're investing with our money, which is fungible to a great extent, except for what we have invested in our own funds, is other people's money.
Alan Patricof: (18:11)
And while it hurts and we are fiduciaries, somehow that's a very high predictability of success. And the second is someone who really understands the economics of the business that they're going into, even though they can't prove it at that point, but they understand that they have to make a profit. At some point a company has to have a bottom line, and a lot of companies have lost sight of that today, but if you just start out with a theory that all you have to do is build revenues and they will come, I don't think that makes sense. I think people have to understand the factors that go into making a bottom line profit, and how long that will take, and how much capital that would take, I think is a critical aspect.
Alan Patricof: (19:04)
I think understanding the market they're going into, not what we call, they use the word Tam, the total address market, but they think of the total address market as being that big, instead of thinking of it as this big, which is the real market they're going after. I think someone who really understands the size of the market they're going into themselves. So if you take those combinations of people, product, market, and are you investing on a risk reward rate of relationship that justifies taking the risk? And I say all of this, because it's very important at the beginning, and the beginning, you don't have as many answers or proof points in that point that I brought up, but most critically, when you go to the follow-on rounds, this is where it really becomes important, I think it's very, very important to have the discipline to say, "Did the people develop as I expected? Did the product make progress at the timeframe that they said it was going to make? Is the market that I thought was there, is it really there? Or has it been taken away by someone else who beat us to the punch? And is the round we're going into, does it justify a potential reward based on comparables, the risk we're taking and making that financial investment?"
Alan Patricof: (20:49)
And I think, in my opinion, that unfortunately today we have too many companies out there, and I'm not going to name them, because everybody knows them, that have gone along through multiple, multiple rounds of financing, and are not yet near profitability. And yet can continue to generate ,raise new capital, that do not exercise that discipline of understanding that at some point, shareholder capital cannot totally finance a company forever. At some point it's where are the emperor's clothes?
Anthony Scaramucci: (21:32)
Right. Well, I think it's well said. I want to switch over to Prime Time Partners, which is your new venture capital firm. And obviously it's targeting older Americans, early stage startups. You're calling it the silver tsunami, which I guess no one's getting their hair dyed like me, obviously, because why would you call it the silver tsunami if you had hair dye involved. But what is the investment thesis of Prime Time? And why are you doing this now?
Alan Patricof: (22:03)
Don't tell me you normally have my color hair.
Anthony Scaramucci: (22:06)
My hair's whiter than your hair actually.
Alan Patricof: (22:08)
Oh my god.
Anthony Scaramucci: (22:09)
But it looks terrible on television. I told Sean... Look at Sean Hannity. Now he's got so much snow on the roof. I told him, "Come on." But I mean, you look very distinguished with that hair. I still have that baby face.
Alan Patricof: (22:21)
My barber once, about 15, 20 years ago, tried to talk me into lightening it. I said, "Once you start, you can't stop. I mean, it's impossible. It's only going to go one way." So I gave up.
Anthony Scaramucci: (22:33)
I'm going the way of Joan Rivers. Let's just put it that way, but I want to go back to silver tsunami.
Alan Patricof: (22:38)
I want to go more than you do. Let me say, I have never, in my 50 years in this business have been more excited about anything I have done. I came to this, honestly, because my wife has Alzheimer's and she's had it for 11 years. And the last three years have been pretty brutal in a sense of 24 hour caregivers. And she's lost all the functions that people have. She's still at home. She'll be at home until the end.
Anthony Scaramucci: (23:06)
I'm sorry about that.
Alan Patricof: (23:08)
Yeah. But during that process, I have gotten to know what problems are for people with chronic diseases. I've gotten to meet a lot of doctors, how to modalities and looked at a lot of technologies and looked at all the support structures you need from the standpoint of caregiving, the standpoint of feeding, standpoint of changing your house around, all those things.
Alan Patricof: (23:33)
And they're not just for people with chronic diseases, although God knows there are plenty of those around, not just with Alzheimer's, with all other kinds of diseases, whether it's hip replacements, having repair, or you see the people around with walkers and wheelchairs, they're not just Alzheimer's victims. But people in general getting older and what maybe some of your 211 people on this call don't realize it, the fastest growing segment of the population today are the people over 60. In this country, in China, in Japan and in Europe, not in the Middle East. And these people all need different things than they did when they were part of the millennial generation.
Alan Patricof: (24:23)
And there's been, ironically, while it's the fastest, and I think it's like 24% of the population, but they're the fastest growing part. I don't want to be [inaudible 00:24:36] but I believe less than 10% of the marketing dollars is spent against this segment of the population, which actually has the most money to spend on products and services and everything else you can think of. And they've been neglected honestly. By the same token, venture capitalists, we're all terrific people, but you don't see many 60 year olds walking in from financings into a venture capital firm. It just doesn't happen. As I looked at this market and I also read more than one study. I actually read three studies, which said that 60 year old entrepreneurs were twice as successful in starting up businesses as those who are 30. And that really shook me. These were not just statements. These were full academic studies, and you can refute it or not, but they exist and you can get ahold of them yourself.
Alan Patricof: (25:30)
And the reason was, someone at 60 has a lot bigger Rolodex. He has more battle scars, or she, has more battle scars. They know more about the industries, they have more contacts, and in my opinion, if they want to start a company that's in the similar business and they have the energy that I have, and they want to do it again, they are a darn good bet at putting money behind them, because they know where to find the people to work for them. They know where to find the customers. They have the relationship with the customers. The probability of their success... And it's logical, but people have not thought that way. They'd rather back, including me and Gray Croft and APAX. We'd rather back the 22 year old, who has no Rolodex, who has no experience of the business, but has lots of fire in their eyes and excitement and attracts a lot of other young people, and a lot of them are successful. But the fact is that older people are successful.
Alan Patricof: (26:34)
So I had been thinking about this, and my son came to me in November. And he said, "You know dad, Abby Levy," who was the founding president of Thrive Global, which was Arianna Huffington is her latest company after the Huffington post, which I was an investor in it. And I was an investor in Thrive Global. Abby was there for two years and she left. I was very, very disappointed. She went to Soul Cycle, and I didn't keep in touch with her except to see her. She stayed on the board and I see her at board meetings, but we never talked about anything. And my son came to me. He said, "You know Dad, Abby has been spending the last year focusing on this wellness and aging population. She's got all this, what you're doing, but she's going to do something about it."
Alan Patricof: (27:27)
So we got together two days later and together with a firm on the New York Stock Exchange called Welltower, which owns 1600 senior living facilities. They became the strategic partner, which all it meant was they would try out ideas that we might find, in one of their homes where, because they were looking for innovation and they became in effect our partner with no economics, just purely interested in what might come out of it for a fund like ours. And we said, "Let's go for it." And we were all ready to raise money in January and COVID hit. And we sat around and in May we said, "Let's go for it now, whether or not there's COVID." And in 45 days we raised, we filed with over 30 million.
Alan Patricof: (28:21)
And in the course of the last couple of weeks, we've had a bunch more investors who proactively have contacted us and we've tapped it out. It's going to be a small fund, but I will tell you, we have a pipeline now of 80 companies, we've invested in four, and people don't realize this. And I'm hoping to be more venture firms started up in this area, because there are a lot of people around who got lots of good ideas, whether it's a nutrition. Now we're not investing in pharmaceuticals or drugs or senior housing, but all the products and services, you just don't think of the things that change as people get older. And if Anthony is going to live, I'm going to live to 114. Anyone on this program who knows me, knows that I've been saying this for 10 years.
Anthony Scaramucci: (29:10)
I had that as the under for you Patricof.
Alan Patricof: (29:10)
People say 150? I said, "No, you made a mistake. It's 114. I'm not changing." It was based on a speech I'd heard it at Mount Sinai about 10 or 15 years ago, about the probability that age gets offset by all the things that happen during life. And I just heard recently that they are now saying that you could live to 120, but I'm not changing. 114. Well, if you're going to live to 114 or 100, read the obituaries every day, notice all the people who were over a hundred, who are living. Those people are going to need the lots. There are going to be lots more of them, who are going to need lots of different things. And they are going to need new companies to create, to service them. I mean, a company just got sold yesterday called Rebundo, which got sold for $17 billion to Teladoc or tele... One of the tele-medicine companies.
Alan Patricof: (30:13)
Which is in the food area of feeding older people. You see on television every day, A Place For Mom. I don't know how big it is, but it's big. There are all kinds of ideas happening and I am totally excited. Abby and I are having a great time. We're recruiting. If anyone has healthcare or venture experience, we're looking for someone right now with a principal or senior associate role. It's a wide open field. I mean, we have been able to find two or three other small venture firms. We want to be the leader in this field. And by doing the way we did it, announcing the fund on an embargoed basis on July, whatever it was, two weeks ago, we ended up with coverage in every media major stories.
Alan Patricof: (31:10)
We intended to do that. And I intended to do just what I'm doing now, to get on a soap box and say, I'm 85. If I could start my third business at 85, I started my second business at 72. There's no reason why other people can't. So we're hoping we're going to invest in product services, technology. And in parallel, if we can find some older entrepreneurs, older, meaning they want to start a second career, 55, 60, 65. We'd like to find a few of those that don't have to be servicing the older community, but they want to do the same thing again. And they have the energy and brains to do it.
Anthony Scaramucci: (31:54)
Well, we know it's going to be successful. We wish you a great success. I want to turn it over to my colleague, John Darsie. We've got a ton of questions that are populating. And so go ahead, John. Let's take some questions from the audience.
John Darsie: (32:08)
Thank you, Anthony. And maybe you have a business idea, Anthony. I know you're in the senior citizen category, so maybe you have a couple of new business ideas you might want to launch.
Anthony Scaramucci: (32:16)
Well, mine are all going to be in beauty and Botox, John, okay? Go ahead.
Alan Patricof: (32:21)
Well, it can be done, Anthony. Don't think those aren't categories.
Anthony Scaramucci: (32:25)
Trust me. I'm a big consumer, Mr. Patricof. I'm a big consumer.
John Darsie: (32:31)
Well, Alan. Thanks again for joining us. We had a couple of questions about, you've had some commentary recently regarding the big tech giants and how they're sort of utilities that are in need of some form of regulation. There's a great book out recently by David Day, and who's actually speaking on SALT talks next week, called Monopolize that covers this exact subject. Can you talk further about these recent congressional hearings that we've seen and also your views on big tech and how we allow them to grow and innovate, but we don't allow them to be destructive in a way that some monopolies have been throughout the course of American history?
Alan Patricof: (33:04)
Well, I'm glad I have this opportunity. I have spoken out the past year on this subject and I'm sure you've read the book Zucked, which was by someone venture business who had been at Facebook and invested in Facebook and profited from it, but told the reality. Let's face the reality, the four companies under attack if you will, Facebook, Google, Amazon, and Apple is thrown in there, have accumulated an enormous amount of data. And every time they make an acquisition, they get more data. And that data is very, very valuable. It knows that all of us are right now on the SALT conference light on Zoom. It knows when you're going to be buying something, when you're selling something, what you're reading, what sites you're going up to. And they have been able to use that in a, I hate the word use the word monopolistic, but in a fashion that has given them a substantial advantage over anyone who wants to compete with them.
Alan Patricof: (34:25)
And we've all heard the argument from particularly Google, but Facebook as well of saying... And Amazon where you can put your product, they're handling third party sellers, but the fact is they've come out with their own products that compete with these sellers. They have the ability to give priority listing to it. They have the ability to control the ad market now. I mean, I don't know. Those on this line have had companies where overnight Google will change the algorithm. And all of a sudden your traffic go down by 10 or 20%.
Alan Patricof: (35:05)
When I grew up, I grew up with a basis that if someone had control over something, where you could not avoid it, that's called a utility. I mean, that's why utilities are regulated. That's why the railroads are regulated. That's why the phone companies were regulated. That's why we had monopoly laws in the late 1800's and the early 1900's. And I'm not antiquated, but those laws applied to people who are combining oils, steel frames to raise prices. And they monopolized industries. Today, we have a different kind of monopoly, it's data. And there has to be found a way to make this data available on a ubiquitous basis, in my opinion, so that everybody has access to it. And if it's accumulated by someone, they're entitled to make money from that data but making it available and create a more level playing field. If not their data accumulation builds up by the nanosecond.
Alan Patricof: (36:15)
And it's inevitable that these companies have to get stronger and stronger and stronger as they stay alive. And they can use every argument in the book. I think that, I'm encouraged by the congressional hearings now that, I never can pronounce his name Seciligo who's a Congressman I think from Rhode Island, who has led the fight, and done very well at it, by the way. He had the four Kings in a couple of weeks ago for a hearing. I mean, it's ridiculous to have a five-hour hearing for this subject, but that's what was allocated. There's a lot of work that's been done in the background. There are committees that have informed their non-profits, the Open Market Institute which was originally run by Sarah Miller and now has spun off into another activity, and her successor is doing a great job of preparing position papers.
Alan Patricof: (37:22)
I think it is appropriate that the government is looking into this. There's no other way we're going to come out with answers. I am not speaking out in favor of breaking off the companies. I honestly, I think it's a very tough job at this point. But every day, you know, we saw yesterday Fitbit's being bought, more data. I saw Facebook bought a company called Brainwaves, now they're going to have control of the brain. We don't have enough elements of our eyes and touch and everything else. So I want to make one disclaimer, I do not think that any of these people that we're referring to, so [inaudible 00:38:13] or Mark Zuckerberg, or certainly not Steve Jobs when he was there had any thought about being monopolous, about controlling, power. It's an inexorable growth where they're allowed to buy 50, 60 companies and combine the benefits of some of these companies. And it all gets down to data.
Alan Patricof: (38:39)
Take away the data from them, put it in a data repository and let everybody bid on it. And it'll be a different business, I think. And it's hard to make this argument, because everybody likes to get faster, cheaper. And you know, when you have an Amazon package in front of your door every day, who doesn't like to get it that way. And if we have a discussion here before we got on the phone, Anthony asked me about someone, whether he was alive or dead and I couldn't quite get to it. But what do I do? I go to Google. I mean, that's where it is. I mean, they've got 92% of the search traffic. So when you have that dependence on one thing, that is, in my opinion, a utility, and if you're a utility, you should be regulated.
Anthony Scaramucci: (39:28)
So I want to follow up on that comment you made about Amazon, and we've had a couple of our tech speakers, Steve Case, Chamath Palihapitiya talk about how technology is improving the world, but it's also creating a deflationary supercycle, whereby goods and services are cheaper, but it's also cannibalizing jobs for low and middle income Americans. Could you talk about that a little bit? Do you agree with them and what do you think the long term impact is?
Alan Patricof: (39:52)
Absolutely. Absolutely. I mean, why do you think all these retail stores are going out of business? I mean, they can't compete. It's impossible, they can't compete with the pricing, and as Amazon proved, they didn't have to make money for a long time because shareholders kept beating them with money, and they fed them to the point where they were able to put a lot of other people out of business with their low prices. And prices are not quite as low as they used to be, and they've got their formulas of knowing how to price merchandise. Those are tough people to compete against, both for selling hands and selling merchandise, and for delivery.
Anthony Scaramucci: (40:36)
We have a few questions about what-
Alan Patricof: (40:38)
Like for Apple, it's a tollbooth for an app.
Anthony Scaramucci: (40:41)
Yep.
Alan Patricof: (40:42)
You want to go through the tollbooth, that's it.
Anthony Scaramucci: (40:45)
An increasing percentage of their profits are coming from their services sector and they're trying to keep people captive in that ecosystem.
Alan Patricof: (40:52)
Right, and of course Amazon was able to start AWS. I mean, just another nail in the coffin.
Anthony Scaramucci: (41:02)
So we have several questions from members of our Asian audience about whether you look at that market at all, silver e-shoppers, especially in the Asian markets are very strong. And are you seeing commerce solutions that are tailored to that market? And part of that question that I'm combining into one, is Japan has an older population, China has things like a mandated retirement ages, where very successful executives who are then going to have extra time and money on their hands. Are you looking at the Asian markets at all? Or is this more of a US based play?
Alan Patricof: (41:34)
We're the new guy on the block, we're trying to build a position for ourselves in the industry. I will say that one of the companies we looked at, which was early on, has been in the sensing area, which is a key area, remote sensing for conditions that exist in senior living facilities or at home. And this particular company was a US company, but was selling in Japan because the healthcare reimbursement for this type of activity was so much greater, because the demands were so much greater in Japan than here. We would be certainly open to any other country investment that fit our criteria, although we are both in New York, both in our homes on Zoom. We're more likely to have a portfolio that has a preponderance of US companies. But I definitely would not leave out the possibility of having a European investment or a Japanese investment. Even possibly a Chinese investment. But we would certainly only do that with a partner, we would not do that on our own.
Anthony Scaramucci: (42:49)
Alan, we're going to leave you with one last question. It is a political one if you don't mind. I know you've been very active in the Democratic party. What are your thoughts on a Biden presidency? Again, I don't want to make it overly political, but I'm just curious. Because of your wisdom and your life experience, a Biden president, is he good for the market? Is he good for venture capital?
Alan Patricof: (43:16)
You know Anthony, you and I have had a very nice relationship since we met at the Florida convention, I don't know, 20 years ago now, I can't even count the years. And I have been a strong Democratic supporter. I have got to believe that Joe Biden is going to be good for the economy. I've got to believe he's going to be good for the country. I believe, I can't avoid being political, I believe that things that have been done to our Democratic system in these last several years have been so devastating. We're at an accelerated pace, I am deathly concerned with the November to January period this year of what further damage can be done. I believe that Joe Biden is solid. I know him. I've known him for a long time.
Anthony Scaramucci: (44:21)
You think Joe Biden will win this?
Alan Patricof: (44:25)
You're not allowed to be overly confident, but I'm convinced that the country in general, based on everything I read and see, is getting to the position that I am, that we can't continue with a Trump presidency for another four years or we're going to decimate all the institutions we've got. Let me give you an example. When a new administration takes over, you have normally 4,000 positions to fill that are political positions, from cabinet level down to Schedule C employees. People don't realize that. I don't know the facts, but my sense is that no more than half or two thirds of those positions had ever been filled.
Anthony Scaramucci: (45:18)
It's about two thirds, yep.
Alan Patricof: (45:20)
By the Trump... [inaudible 00:45:22] is not wrong. And of those two third, how many of them have been changed multiple times due to resignations or firings? A new administration coming in has an enormous challenge to, in effect, fill those positions, and fill them with adequate people and for those who haven't been in government before, to get trained with a [inaudible 00:45:49] who really perhaps is in a position to train other people. It's going to be an amazing challenge, but I want to finish this political thing with one thing.
Alan Patricof: (46:01)
The market doesn't like surprises. I have been shocked by the market we've had in the last three or four years under Donald Trump, because it has been a good market, good stock market, in the face of daily surprises, and that confounds me. Because investors like to plan, they like to be able to project, they want consistency. I believe in a Biden presidency, we're not going to have an irascible person who you just don't know what's going to happen when you open up the papers or listen to the [inaudible 00:46:43] overnight, and I think that stability of he and the kind of people he'll have around him. I know the big concern on Wall Street is tax rates. I read the op-ed this past week about the specific, concern about the income rate going up to the levels that they're talking about. I believe that's why we have a Congress, I think everything will be moderated, I think the people who have made extraordinary amounts of money recognize that they probably have got tax benefits that were excessive in view of the world where it's at today, and income inequality and all the other issues in the world.
Alan Patricof: (47:33)
Most people I know who have been successful financially have a sense of responsibility, are not totally selfish and believe there's got to be fairness in the system. If fairness also brings a more equanimity to the populace, if we have people who feel that things are fair, there's an equal playing field, I think that will permeate itself down to every level. And I think there will be more concern for care giving. One of the things about Joe's program is his Cares Act, which he wants people having to care for their elderly parents, having to care for their children, all the issues that are really front and center, and I don't mean to bring it back to Primetime, but certainly going to, I'd hope, benefit Primetime in a way. It has nothing to do with it, but I think it [inaudible 00:48:35] well for people being concerned about their parents. I mean you're concerned about your parents today, everybody on this line is. The ones who are older are concerned about themselves.
Anthony Scaramucci: (48:47)
Amen. Listen, we got to look after each other. Alan you had an amazing career, you're a great friend, you're a great American, we didn't get a chance to go into all of your charitable giving, which has also been amazing, and it's a great honor for me to have you in my life and thank you for sharing your time. You have to accept my invitation to come back, because I understand that you have written a book which is about, somewhat of a memoir, but also somewhat of an emotion about what you see in the country and our lives today, and so you have to promise me you'll come back so we can talk about that book when it's done.
Alan Patricof: (49:25)
As soon as the publisher agrees to publishes it.
Anthony Scaramucci: (49:27)
Agreed. All right. Well, amen. Okay, well that's a deal, and stay safe and healthy, and I look forward to watching your third [inaudible 00:49:36] success unfold.
Alan Patricof: (49:37)
And meeting up in person at your favorite club.
Anthony Scaramucci: (49:40)
Yeah, amen. Exactly. Got to get back into the city you and me.