The Big Picture

10 Thursday AM Reads

My morning train WFH reads:

The Myth of the Stock-Picker’s Market: Investors, be warned: Hope springs eternal, but outperformance is rare. (Morningstar)

Brokerages Battle to Win Over Active Investors. Trading Platforms Are the New Arms Race. They’re launching more-powerful trading tools and surprising new features in hopes of attracting more of these highly profitable customers. (Barron’s)

Trump says inflation is dead. Most data says: Not quite. The White House points to a seven-month snapshot showing low inflation, but economists say prices are closer to 3 percent. The shutdown delays fresh data. (Washington Post)

How China Took Over the World’s Rare-Earths Industry: Beijing used bare-knuckle tactics in multidecade effort to consolidate control over supplies. (Wall Street Journal)

Down and Out on the Crypto Frontier: In Wyoming, the Delaware of cryptocurrency, industry players celebrated their fortunes and said everyone will benefit. But workers haven’t seen it. (The American Prospect)

What it looks like in the world’s data center capital: Among cemeteries, baseball fields and homes, these Northern Virginia buildings power the internet. (Washington Post) see also Renewable Energy Is Booming Despite Admin’s Efforts to Slow It: With federal subsidies ending or becoming hard to claim, companies are racing ahead with solar, wind and battery projects. (New York Times)

Brains Remember Stories Differently Based on How They Were Told: Telling the same story in different ways can change the brain networks that the listener uses to form memories  (Scientific American)

Will Trump Do It? It Pays to Bet ‘No’: Polymarket data shows wagers against Trump taking action would have yielded returns similar to the S&P 500. And gambling that he’ll actually follow through was a losing proposition. (Bloomberg)

The most (and least) entertaining NBA teams to watch this season: Before the new NBA season tips off, we ranked all 30 teams to help you decide who is worth tuning in to see. (Washington Post)

How Kevin Costner Lost Hollywood: On-set brawls. Courtroom battles. Epic bombs. Why the world’s most bankable cowboy is suddenly shooting blanks. (Hollywood Reporter)

Be sure to check out our Masters in Business interview this weekend with Liz Ann Sonders, Chief Investment Strategist, Charles Schwab & Co.  Named “Best Market Strategist” by Kiplinger’s Personal Finance, she is also on Barron’s “100 Most Influential Women in Finance” every year since the list’s inception.

 

Turns out economic data *does* matter for stock traders

Source: Financial Times

 

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At The Money: How Big Can Active ETFS Get?



 

 

At The Money: How Big Can Active ETFS Get?  (Dave Nadig , October 22, 2025)

 

Full transcript below.

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About this week’s guest:

Dave Nadig is President and Director of Research at ETF.com, and he shares with us how investors should navigate all of these new products. Dave helped design and market some of the first exchange-traded funds. He is the author of  “A Comprehensive Guide to Exchange-Traded Funds” for the CFA Institute.

For more info, see:

LinkedIn

Twitter

Substack

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Find all of the previous At the Money episodes here, and in the MiB feed on Apple PodcastsYouTubeSpotify, and Bloomberg. And find the entire musical playlist of all the songs I have used on At the Money on Spotify

 

 

 

TRANSCRIPT:

Intro: Pump it up, When you don’t really need it. Pump it up, Until you can feel it

When we think about ETFs, we tend to think about large, cheap passive indexes. After all, those are the biggest ETFs from places like BlackRock, Vanguard, and State Street.

But when we look at all the new ETF launches, they tend to not be passive indexes, not be cheap, and not come necessarily from those three big companies. They’re active and they are involved in all sorts of different areas, that are off the beaten path.

To figure out what this means for you and your portfolio, let’s bring to figure out what this means for your portfolio. Let’s bring in Dave Nadig. He is the President and Director of Research at ETF.com and an ETF structural expert, really since the inception of the entire sector.

Dave, we’ve seen an explosion in the growth of not just new ETFs, but primarily active ETFs in all sorts of niches. What are you seeing in this space?

Dave Nadig: Well, you know, for a long time ETF meant cheap index, right? I mean you go back to SPY and then the first iShares products, and then even when we started getting into the big expansion of the two thousands, it was all just index, index, index. Then we got some smart beta where we tried to be a little bit more clever and it wasn’t really until the late 2010 cycle where Kathy Wood at Ark Invest, launched ARKK and really put herself out there as the portfolio manager in a way that I don’t really frankly remember seeing since the dot-com boom, right?

It’s been a long time since we’d had superstar managers on CNBC talking about, you know, pounding the table for a single stock. And Kathy did that and obviously had enormous amounts of success, has had some performance hiccups along the way, but that sort of went a little bit dormant during some of the pandemic when people really discovered trading.

What we’ve seen now is this resurgence – particularly to folks I’d mentioned Dan Ives Wedbush, people know him;  and Tom Lee from Fundstrat with his Granny Shots ETF, both of which have pulled in huge money,

Barry Ritholtz: Billions of dollars?

Dave Nadig: Billions and billions of dollars. And for the reasons you would expect because you’ve got smart people talking on podcasts and TV and on their own air and their own newsletters telling you why they own what’s in the fund. I know that sounds so dumb, but that’s why people love superstar managers because they can look and they can see Tom Lee on screen and he can sit there and say, yeah, this is why we like Bitcoin here. Here are the three firms we have in our fund because of it. We might be wrong, we might be right.

There’s a level of authenticity to that that I think is really appreciated. I also think the fact that they’ve doubled the S&P this year doesn’t hurt.

Barry Ritholtz: So to put some flesh on the bones here, Kathy Woods during 2020 was a huge Tesla and Bitcoin bull. The fund arc put up giant numbers, triple digit gains. Dan Ives has been an apple and an Nvidia bull, pretty much for as long as I can remember. He’s been a whole lot more right than wrong, and Tom Lee has been very constructive exactly when it paid to be constructive and stay bullish.

All three of those managers have really big followings. What does the resurgence of brand name active managers mean for the ETF space?

Dave Nadig: Well, first of all, I think it’s great for the ETF space because I think the dichotomy that we’d had where people thought of active as being a thing that happens somewhere else and ETFs were only passive, wasn’t helpful. I think we are moving towards a world where all of your exposures, for the most part are gonna be in an ETF wrapper. So by all means we should get active managers as part of this mix. And now we’ve got lots of them. You know, we’ve got a bunch of active funds from PIMCO was early, we’ve got lots in the bond space. You know, everything from Cumberland advisors to State Street with the double line and, and Jeff Gundlach. Lots of active managers in lots of different areas. I think that’s very healthy for the industry.

For the individual investor, it doesn’t necessarily make your life easier because as much as I happen to, like all the people we have talked about, Dan, Dom Lee and Kathy – personally as people I would have dinner with, the math is not on their side as an industry, right?

Barry Ritholtz: Why is that?

Dave Nadig: As an industry, we have to point out active managers categorically underperform over time. Doesn’t mean they all do, but it means that you’ve gotta be the special person who managed to pick the right active manager at the right time. That is a tough business and even the active managers running these funds will tell you trying to time when to get in and out of their own funds is gonna be tough. So that’s the problem is

that active management is tough to evaluate.

Barry Ritholtz: Yeah, and to put some numbers there, half of all active managers underperform in any given year. You go out to 10, five years, it’s 80% underperform; at 10 years it’s 90%. So it’s a tough road to hoe

But let’s talk about what makes active ETFs somewhat different than active mutual funds. And that data I referenced where all mutual fund data, mutual funds have to do a regular filing each quarter about their largest holdings, there has been a lot of back and forth about

how transparent active ETFs have to be versus other active funds. What’s the state-of-the-art today? What is the regulatory environment?

Dave Nadig: So there are solutions if you’re an active manager and you don’t want to tell everybody what you’re doing every day. There are solutions and there’s plenty of funds that have been launched on them. Fidelity has their versions. T Rowe Price has been one of the more successful funds out there. They have a pretty popular blue chip strategy called T Chip, which isn’t semi-transparent, meaning they’re not telling you the whole portfolio every day. They’re telling you once in a while and they’re giving the street just enough information to make a good market, not knowing all the information. So it’s sort of a, a clue, a bit of a hack to be semi-transparent.

This solves a problem for some asset managers. It doesn’t solve a single problem for an individual investor, right? So like I’ve never heard an individual investor say, golly, I wish I knew less about what I owned. Right?

Barry Ritholtz: Let’s talk about why it’s a problem for fund managers. Fund managers don’t buy a stock on a Monday and then they’re done. If they say, “Hey, we like XYZ, they’re buying that stock trying to take advantage of drawdowns buying it over days, weeks, even months. So there is a price advantage to the investor if the fund manager can be a little less transparent. Fair, fair description.

Dave Nadig: That’s the, that’s certainly the argument that the active management industry who does not wanna disclose what they’re doing would give you.

So you have articulated that side of the argument. Well, my counter to that would be if your strategy requires you buying securities where your action is going to move the market absent disclosure or absent, you know, obfuscation, then that strategy probably doesn’t belong in an ETF because you’ve got bigger problems, right? That means that you are in something small or a liquid or micro cap, at which point already, my question would be how do you plan on running a $10 billion ETF with that strategy?

Because you can’t really close an ETF. So if you are a special situations manager, if you are a really sort of obscure nichey finding those stocks, nobody else knows about manager, you do not belong in the ETF industry. I’ll just flat out say it as simple as that. The mutual fund structure or even better, a liquidity cap structure like a CEF or an interval fund is actually a better structure for those kinds of investments. Everybody else, CEF, honestly there’s so much liquidity. I think it’s tough to argue that somebody like Tom Lee is being particularly hurt by being transparent. He’s double, he’s at 30% for the year. The S&P500 is up 15%

Barry Ritholtz: CEF stands for closed end funds as opposed to ETFs.

Dave Nadig: Yes.

Barry Ritholtz: So, let’s talk about some other varieties of active funds that are a little bit out there. We see funds with options, futures, derivatives, inverse leveraged, and along with some wild income promises in an ETF wrapper. Tell us about some of those products.

Dave Nadig: Yeah, the, the interesting thing about those is most of them are very mechanical, right? So if you’re running a leveraged strategy, you’re not making any decisions, right? I’ve got Apple, I need 2X Apple, I’m gonna go to my swap counterparty overnight and they’re just gonna settle up my two x swap. That’s the whole management process.

But technically that’s gonna be an actively managed fund because you can’t just automate that whole process. Somebody still has to make a call about whether or not you’re teeing up the swap at this rate or that rate.

Same thing with almost anything in the option space, because the options are constantly changing and constantly repricing and constantly rolling off. It’s very difficult to create solid index product around actively or high frequency moving positions in the options market. So for convenience as much as anything, almost all of those type products you mentioned are listed as active products.

I refer to them as AiNOs — Active in Name Only, because they’re really, there’s no Tom Lee saying I really want Apple options today. There’s some guy generally Jay, pastor Elliot at title, sitting on a desk somewhere pushing a button to say yes, we want those options because the model says we need to roll. And that becomes active management.

And consequently, I mean it is active management, it has higher costs associated with it for a reason. Some of that is the profit that the issuer wants, but some of it is legitimately you need a trading desk with a bunch of people doing work.

Barry Ritholtz: So let’s talk about another niche. Illiquid alts, things like private equity, private credit, private debt, real estate. Are we gonna see those asset classes that really don’t trade on their own — because they’re not public – are we gonna see those in an ETF wrapper?

Dave Nadig: We’re starting to, we’re starting to the, the canary in the coal mine here was some products from State Street, the big ones, priv, PRIV for private, which has a bunch of Apollo private credit in it. Generally pretty short maturity stuff, two, three year kind of things and, and fairly straightforward, understandable private credit. Intel needs to bill a fab in Ireland. They go get a loan, Apollo gives ’em the loan, you get a slice of it.

Nothing super complicated, nothing super interesting either. I mean, it’s not, you’re not getting 20% yields out of or anything like that. You’re getting some marginal increase in the yield you would get if you were simply investing in say, junk or short term co corporates.

So those products are starting to come to market. The concerns I have about them is they’re just gonna be untested. We’re not gonna really know how they’re going to perform when the markets go hinky, right?

And, and also what does that even mean? Like if we had a corporate bond blowout and we saw a bunch of triple C stuff start defaulting, I have no idea what the impact on Apollo private credit issued in Ireland to Intel is going to be when that happens.

I also have no idea how they’re gonna respond if half the fund decides they want out on that Tuesday and now you’ve got a bunch of illiquid stuff, which can be up to 35% of the portfolio that literally the only buyer is Apollo.

Technically they’ve got answers to all those questions. I’m, and I read all the answers to those questions and I’m sort of not convinced, but it’s one of those things that if you wanna be, if you wanna be out there on the edge, by all means go ahead. But I think the private securities in the daily liquid vehicle has not really been through the ringer yet, so I remain very skeptical.

Barry Ritholtz: So let’s talk a little bit about crypto and, and how that’s going to impact in both investor behavior and portfolio construction. Last year, BlackRock, was it last year or this year, BlackRock introduced IBIT. 2024. So it’s a year ago coming up on a 100 billion dollars in assets, probably the fastest ETF ever to do that. What does this mean? And explain the concept of tokenization.

Dave Nadig: Yeah, so what it means is all of these assets are going to be more and more available to the average Joe like us who’s just trading in their Schwab account or something like that. And because the SEC has said they’re gonna make it very easy very soon, we’re gonna have every major coin that people know about a Solana and Avay whatever. There’ll be a sleeve of that in an ETF that you’ll be able to trade. That’s all great.

Then having those building blocks is awesome, also because it will now allow portfolio managers to create portfolios of those individual securities, which right now you can’t even do, you can’t even buy an index right, of the top 10 coins because there isn’t a target for the top 10 coins to invest in. So that will be fun when we get that, and I suspect you’ll see firms like Bitwise and BlackRock who’ve got some real bonafides in the crypto management space, start bringing pretty institutional active management products there. That’s probably a 2026 side.

Long term though, if we wanna talk 10 years from now, that’s when crypto starts becoming an interesting competitor to the ETF space. I think we will eventually end up in a world where how you move your ownership of Apple around is going to happen. Not by going to the New York Stock Exchange and exchanging ledger entries to move around your Schwab account. Instead, you’re gonna have an actual token. You’ll be able to look at the serial number of it, you’ll be able to put it in a wallet and say, “Oh no, this is worth a hundred shares of Apple.” And that wallet will be able to directly move that security to your wallet without any exchange being part of the process.

Most of it will happen, like crypto happens now on giant exchanges because price discovery. But just like with Bitcoin, I could walk up to you when we could engage in a direct transaction, you’re gonna start seeing that with other securities.

It’s happening more in bonds and real estate now. To do it in equities is gonna require some actual legislation and we don’t make so many laws these days. So that may take some time. Instead, what we’ll do is we’ll wrap a lot of stuff. So you, you’ll probably hear about things like Wrapped Apple and wrapped Cisco and what that’s gonna be is a token that owns the security in some sort of trust pool. That’s a baby step, but that’s what we’ll start hearing first. So be skeptical when people say we’re tokenizing everything ’cause it’s gonna be a decade.

Barry Ritholtz: I had a conversation with Jose Minyana who is the head of wealth strategies at investment Giant BNY (Bank in New York) and he was saying, Hey,

we went from T+3 to T+1, meaning it used to take three days to settle a trade. Today it’s gonna take one day. If we wanna get to T+0, we have to really have confidence in both sides of the transaction. And theoretically, tokenization solves that problem.

Dave Nadig: It does. Although think about how many big transactions in the world that we could be doing easier. We deliberately put breaks on, think about buying a house…

Barry Ritholtz: Wiring money?! 

Dave Nadig: BarryRight? So it, there’s, you know, the, there’s escrow, there’s secondary inspection processes, there’s separate contracts around just the intention to buy and sell. So the bigger and more interesting a transaction gets, the less T zero is actually a good idea, right? I mean, I, the, the thing I always say about T zero is, did you really want T zero during the flash crash in 2010? Like, did you really want no recourse for that? That fat fingered billion dollar pennies on the dollar trade? No. You wanted this ecosystem that protects you from a bad actor spoofing something into the system. So we we’re gonna have a lot to evaluate as a market, what we actually want. The idea of slowing down markets has actually gotten a lot of traction, like speed bump markets, things like that, that, that are actually pushing against this idea of instantaneous settlement for anything. I don’t even want instantaneous settlement for my bank account. I like knowing that I’ve got somebody I can call when something goes wrong.

Barry Ritholtz: So, so you’ve written about volatility and liquidity laundering. Explain what this is and are these really gonna be ETFs?

Dave Nadig: They already are, man. So volatility laundering is simply moving volatility from one bucket to another and charging something for the privilege of doing that. Right Now you can buy something like MSTY, which will give you a hundred percent income return on a MicroStrategy position through the magic of options, right? And it creates a synthetic long position. Then it does a synthetic covered call against the synthetic long position, and then it does a whole lot of return of capital to give you your money back and promises you this endless stream of high distributions, a high percentage distributions that is volatility laundering.

Because what you are actually doing is you are trying to sell other people the volatility of MicroStrategy, which is probably not a fantastic idea because it, the vol of all is high in those cases. So you are being the person picking up the, in this case, quarters in front of the steamroll, not the pennies, but you’re still exposed to MicroStrategy collapsing and going to nothing. That volatility laundering is what all of these options strategies are really doing.

Barry Ritholtz: So really to wrap this up, the bottom line is bring the same level of common sense and scrutiny to new ETFs that you would to any financial product.

Make sure you understand what the product is, how it generates gains, the sort of risks you’re incurring, especially with these exotic products — And the costs. Are these products worth spending 75, 100, 125 basis points more than what you would get for a plain vanilla passive index that seems to be dominating the asset allocation space and the space for ETFs? Be smart, be thoughtful, do your homework.

I’m Barry Ritholtz. You’ve been listening to Bloomberg’s at the Money.

 

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Find our entire music playlist for At the Money on Spotify.

 

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Transcript: Henry Ward, Carta Chief Executive Officer

 

 

The transcript from this week’s, MiB: Henry Ward, Carta Chief Executive Officer, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, SpotifyYouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

 

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00:00:02 [Speaker Changed] Bloomberg Audio Studios, podcasts, radio News. This is Masters in business with Barry Riol on Bloomberg Radio this

00:00:15 [Speaker Changed] Week on the podcast. Yet another extra special guest, Henry Ward, is CEO and co-founder of Carta. They’re the company that keeps track of cap tables, compensation, valuation, liquidity for over 50,000 private companies. They work with 8,500 investment firms and over two and a half million equity holders to track all of this crucial information. It’s kind kind of hard to imagine that they were doing this manually with stock certificates before Carta came along and digitized everything and put it all on the cloud. Fascinating company. Fascinating guy. I thought this was really a great conversation. With no further ado, the CEO and co-founder of Carta Henry Ward, welcome to Bloomberg.

00:01:03 [Speaker Changed] Thanks for having me.

00:01:04 [Speaker Changed] Well, thanks so much for doing this. It’s been a crazy week with the UN and everything, so I’m glad you, you guys fought your way over. But I wanna start talking a little bit about your education and background. A bachelor’s in mathematics and computer science from University of Michigan, go Blue and MSC in market finance from E-D-H-E-C. I am less familiar with Ed Heck than I am with Ish. What was the original career plan?

00:01:35 [Speaker Changed] You know, I went to University of Michigan originally to be a math major. Technically, my, my degree on my transcripts has a bachelor’s of general studies. ’cause at that time to get a math degree, you were in the literature of Science and Arts College and you had to take two years of a foreign language. And I failed Japanese three times, tried Spanish, failed that twice. And my counselor was, and at the time I was supposed to go in the Marines and they said, look, I said to my counselor, you, I just need to graduate. And they said, well, look, if you switch to a general studies degree, you can, you can graduate. ’cause you have enough credits. It’s kind of a generalist degree. ’cause you took a bunch of math, computer science and linguistics and you can graduate next year. And, and I said, let’s do that. So it was me and 13 football players that graduated with a general studies degree that year. But, but the, my passion had always been math. I thought I’d be a mathematician. My roommate was a computer scientist. He got me into computers and, and then I went into software engineering.

00:02:35 [Speaker Changed] So two questions. First, did you end up in the Marines?

00:02:39 [Speaker Changed] I joined the Marines out of high school as an enlisted man. I, I went to Paris Island and then I later went into what’s called Platoon Leaders course, which is like the Marine Corps version of rotc. I did that. But when I finally graduated, and sometimes I, I regret this, you know, you kind of look back at old decisions and at the time, four years, four more years and the Marines seemed like an eternity. Right now it seems like nothing book of an eye

00:03:04 [Speaker Changed] Would be, it would be gone, right?

00:03:05 [Speaker Changed] Yeah. I ended up deciding to pay back my, my GI bill because this was 2000. I graduated in 1999. My signing bonus paid off my entire college debt at the time, and I decided to go that route. So I, I never

00:03:20 [Speaker Changed] Where was the signing bonus? Where’d you go?

00:03:22 [Speaker Changed] I went to a company called Trilogy out Austin, Texas. And it was an incredibly formative experience for me. I it was a very smart company. They, they were gonna be the Google of the South for a variety of reasons. It didn’t quite work out for them. They, the CEO is still there though, running Trilogy and it’s a great private privately held company. But yeah, that’s what took me into, into Texas.

00:03:43 [Speaker Changed] So I, I hear you saying you didn’t do well with languages with Japanese, with Spanish, but am I reading this correctly? Did you get your masters, your MSC in France?

00:03:52 [Speaker Changed] Yeah, I did because the, the business schools in France are mostly taught in English. Huh. And English is hard enough for me. So I had to, I had to stick with, with an English business school. The plan was never to go to business school. I, I wanted to ride my bicycle in southern France. It was a big tour to France. Watch here. I loved riding my bike. My fiance now, ex ex-wife was like, well, hey, if we’re gonna go, I convinced her to come with me. We’re gonna be productive. Let’s go to business school while you train for the Iron Man and do all those things. And,

00:04:23 [Speaker Changed] And you did all of that?

00:04:24 [Speaker Changed] Yeah. So we, we, but it was a French business school, so there wasn’t a lot of work. There was a lot of riding, a lot of, a lot of eating bread. It was, it was a great couple years.

00:04:33 [Speaker Changed] So that’s a kind of fascinating mix of technical, financial, financial training, Marines and overseas study. How did that experience shape the way you think about building companies?

00:04:47 [Speaker Changed] You know, I, I realized pretty quickly, I, I, I’m not good at the military. My father was an army officer for a long time, and he used to tell me, you know, and the difference between military life and civilian life is in military life, you’re, you’re judged on the, the worst thing you do in civilian life, or certainly in startups. You’re judged on the best thing you do. And, and I’m very much, I do one or two things really well versus I do many things, you know, not wrong. And so I quickly realized the military was not not the right place for me. Investment banking was not the right place for me. I, I went to an investment bank after grad school, and then I discovered entrepreneurship sort of accidentally. And I, I realized this is what I was meant to do. Successful or unsuccessful. This is what I was meant to do.

00:05:32 [Speaker Changed] So, so let’s talk about the predecessor firm to Carta second site, a portfolio optimization platform. You launched that not long after grad school. How did that experience influence how you approached the next venture? How did it affect what your plans were for scaling Carta?

00:05:52 [Speaker Changed] So, I, the idea for second site was, it was like a wealth front or a betterment, one of these robo-advisors. But you know, Andy and Josh did a, a much better job than I I did, my company failed. And what I, what kind of rose outta the ashes of that was, and I got through the tr of depression after closing. It was, I couldn’t imagine doing anything else as a completely failed founder. I just wanted to do it again. And Carta came out of that experience. And it, it was one of these interesting things where the conventional wisdom for founders is you fall in love with a problem and entrepreneurship is a vehicle with which to that solve that problem. I was different. I fell in love with entrepreneurship. I fell in love with building a startup, and I just needed a problem. The problem was a vehicle with which to be a, a founder.

00:06:41 And that really shapes how Carta is today. We’re a heat seeking missile going after any problem we can find to solve to keep the business moving forward. And, and I, I talk a lot to early stage founders about this, is which one are you, are you in love with the being a founder? Are you in love with the problem? And both come with strengths and weaknesses. If you’re in love with being the, in the problem, you know, you’re passionate about the problem, you’ll grind through the, the bad stages of being a founder to solve this problem. The, the downside is if the problem isn’t actually that valuable, you kind of get stuck entrenched in this problem, right? And many founders burn and crash in that. The other side for me is, you know, because I’m not, I’ll do, I’ll work on any problem to, to move the company forward. There’s often not a coherent strategy. It’s like, I’ll grab a problem over here, I’ll grab a problem over there. And, and you can see it in the kind of diversity for, for a $500 million business, we have a, a large number of SKUs and business lines. And it’s because we shoot at a lot of different targets.

00:07:37 [Speaker Changed] So, so let’s talk about the initial target. How did you come up with the idea, hey, these cap tables, all the data around comp and valuation and VC investing. No one is really tracking this in a consistent, intelligent way. Like, what was that aha moment?

00:07:56 [Speaker Changed] I was working with Manu Kumar over at Canine Ventures on the, my previous company. And when we shut that down and, and we were talking about what am I gonna do next? He pointed out this cap table problem and, and was like, Hey, this is a real problem. I think you should solve it. Really? Yeah. Yeah. That’s fascinating. I’ll, I’ll invest in it. And, and he, he gave me this, this problem set to go after. And I, I spent a few months working on it and learning about it. What was really interesting was the first version of it was not cap table. So that’s what everybody knows us for. The first version actually was PayPal for equity. It was, instead of, back then you used to mail a paper stock certificate, just like we used to do with the railroads, right? And it cost $50 in FedEx fees and a hundred bucks for the paralegal to print it.

00:08:40 And, and somebody had to file it in a cabinet. And we were like, we said, Hey, why are we email or, you know, FedExing paper stock certificates, let’s just email it. And, and that was the initial idea. And we realized companies didn’t care that much. We thought the competition was FedEx. They didn’t care that much about it, but they said, well, hey, if you’re, you’re emailing all this stuff, can you just put all of it into a table and show it to me? And we’re like, yeah, we can do that. That sounds pretty good. And that was the thing that had product market fit, was just showing them everything we issued. And then once you had the cap table of the company, my, my heat seeking missile instincts were like, well, what else could we do? And then we launched four nine A and stock option expense accounting and employee management and cart total compensation and QSBS. And suddenly you could do so many things around this core system of record called the Cap Table. Huh.

00:09:29 [Speaker Changed] So fascinating. What was it like scaling that? What sort of technology issues did you run into? How much of the data you were finding? Was it all hand assembled or was there any mass amount of data that made it easy to navigate? What, what were the next few steps like, you

00:09:47 [Speaker Changed] Know, I often tell earlier stage founders, you know, being a, you know, we’re about 2000 employees now. The problems I deal with are no different than the early stage. They’re just bigger, faster, harder. But they’re the same, same set of problems. I I do the same thing every day than an early stage founder does. And it’s really simple. It’s talk to customers, figure out their problems, solve the product, build the product to solve their problems and make them happy. And that’s just it. It is just rinse and repeat. Everything else is just, you know, overhead to building a, a a, building a company. And so these days, you know, I’m in New York for, for a few days, half my meetings are our customer meetings.

00:10:28 [Speaker Changed] So this isn’t just obviously public companies. This is public and private companies. How do they differ? My assumption is it’s easier to track and access public companies data. What do you do on the private side?

00:10:44 [Speaker Changed] So public company data and, you know, Bloomberg’s a a great, you know, example of this is, is so ubiquitous and it’s how do we manage this incredible set of data across massive ecosystems and networks in the public markets. Private markets is very different. It’s, it’s private there, there’s no central place to access all this data. We have a lot of the data on what’s happening in the private markets, particularly around venture capital and private equity. But because it’s private, we can’t share it. And that is the very unique interesting thing about what we do is we track all the much of the same data that like a Bloomberg would track, but we can’t share it with anybody. And that’s the, that’s, many people have asked me, Hey, how come you haven’t done blockchain? You know, blockchain seems like an obvious thing for a cap table to be put on. And the reason is our, our customers pay us to fix things when they’re broken. And don’t tell anybody about, tell, don’t tell anybody about it. And blockchain is immutable and public. And that’s, that’s the big difference between private and public.

00:11:48 [Speaker Changed] Really. Interesting. What was the hardest problem in assembling a private market set of data and cap tables across the whole technology ecosystem?

00:12:00 [Speaker Changed] The, the big issue we had early was what I’ll call the dematerialization of, of private stock. So the, the model that we think we look at is when Nixon pulled us off the gold standard, he dematerialized cash. You know, now the Federal Reserve could just create cash because cash was now put into the cloud. They could create money, they could do what, they could move money around without actually moving physical inventory. They dematerialized cash and gold and put it in the cloud. And this was in the seventies. We think of us as doing the same thing. Was everything in private markets until Carta was, was cash, it was paper equity, it was contracts, it was PDFs, it was documents. And we dematerialize that. We put it all in the cloud. So now everything could be moved around seamlessly. Getting the ecosystem of venture capital to believe in the dematerialization of private, private equity and private capital was the hardest part. ’cause it sounds crazy today, but in 2012 and 13, lawyers were like, no, but you, you have to have a, a green stock certificate with an embroider around it. Like that’s what we’ve been doing literally for 200 years. I, I would like, who are you to change this? I,

00:13:14 [Speaker Changed] I would’ve thought if anybody would be amenable to let’s go from physical paper to digital, it would be Silicon Valley venture capitalists. They were pushing back or their lawyers were pushing back. The

00:13:25 [Speaker Changed] Lawyers are pushing back. But, but even the venture capitalists, ’cause the, the venture capitalists are, they’re very interesting because they are stewards of what the future will be and prognosticators of it, but they’re not users of it. And it’s one of these things I I say a lot about AI is everybody thinks AI will change everybody’s job except their own. And, and venture is the same. Like, oh, you know, all the companies should be using technology, but, but we don’t because we’re

00:13:54 [Speaker Changed] Just, we’re the professionals. We don’t need it. Exactly. We’re smarter than everybody else. Exactly. What was the aha moment where that ecosystem that was kind of pushing back said, oh, this is really useful and helpful. Yes, let’s dematerialize, let’s go digital.

00:14:10 [Speaker Changed] It was the grassroots, the the way we got it going was the grassroots efforts of startups saying, Hey, they, they didn’t understand that they were buying into a dematerialization model, but what they understood was, Hey, I can track my cap table cheaper, faster, better on Carta than anything else. And so they just came, came to us. That was the wedge, the net, the kind of the golden phrase is, you know, come, come for the tool, stay for the network. So the tool, the wedge was just better cap table management for one 10th of the cost. And then the network is, once everybody started converging on the cap tables, it became the new standard. So now it’s a weird world, just like, it’s a weird, weird, weird world to say that, you know, know we had paper stocks there to give it and that was the right way to do it. It is now a, a, a weird world to say, oh well why wouldn’t we put it in the database on the cloud?

00:14:58 [Speaker Changed] And that becomes a self-reinforcing flywheel. You get a critical mass and then you could go out in, in all sorts of directions from from there.

00:15:06 [Speaker Changed] That’s right. And nobody knows that better than, than Bloomberg and Mr. Bloomberg. ’cause that’s exactly what Bloomberg did.

00:15:11 [Speaker Changed] That That’s exactly right. Started with the data coming up. We continue our conversation with Henry Ward, CEO and co-founder of Carta, talking about how a simple cap table management became an essential part of the startup world. I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.

00:15:44 I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest today is Henry Ward. He is the CEO and co-founder of Carta. They help manage cap tables and so much more when it comes to both public and private corporate data. So let’s talk a little bit about this. You start with a simple capital table management kind of unglamorous, but sounds important, essential. Hey, I need to know how many shareholders I have, who owns what, what VCs, what, what employees own, how much stock, like I would’ve thought that was around for 30, 40 years. How has nobody been doing that for, you know, you could practically go back to, you know, the launch of Intel 40 years ago. How has this not been a thing?

00:16:37 [Speaker Changed] The one of the most common questions I got when I was raising money in the early days for this idea was, hey, this sounds kind of obvious. Why has nobody done this before? Right. And I, I, my answer was somewhat cheeky. And I, I always would say, how, how would I know I’m doing it? And you know, I’m the last person in the world that would know the answer to this. You should ask the SE 6.9 billion other people in the world that haven’t done it. Who chose not to, right. Who chose not to. And I’m, I’m a least qualified person. I, I think it’s just one of these inner innovator dilemma problems that the people that should have solved this should have been the investment banks. That should have been the ne the stock VCs. Stock exchanges vc, sure. Maybe even the VCs. Yeah. Somebody, somebody should have solved it, but you know, who’s going to do paper stock certificates? Like it just, it’s so somebody

00:17:29 [Speaker Changed] Had a clerk had to have a clerk or a junior researcher putting this together somewhere and had to realize there was some value to both the firm and various outside startups for, it’s kind of shocking

00:17:44 [Speaker Changed] For, for sure. But, but the, your, your point so well made, Barry is the kind of person that would be filing paper stock certificates would never come up with the idea of replacing them. And so you, you need this, this is the magic of a, a founder, a visionary founder is, is you need that connection of they, they know enough about technology to, to know what technology can do, but they don’t know enough about the current process that they think it’s unchangeable. And that’s the, you, you know, there’s certain level of intelligence and a certain level of stupidity that you need to get that, that chemical quotient. Right.

00:18:18 [Speaker Changed] So, so how did you convince investors that, hey, this is worthwhile, this should exist. It doesn’t, please invest in this. It’s worth building.

00:18:27 [Speaker Changed] Most investors said, Hey, the, the even I believe you can build a cap table product and make some money and sell it, but it, the, the market size is too small. How many cap tables can you actually sell? And the, the pitch was, well, hey, this is, this is a two-part story. Part one is win the cap tables. Part two is if you win the cap tables, then we can go build at the time what we called the NASDAQ for private markets. The, the stock exchange to trade the, these, these shares. And our thesis then was the reason why there were many stock market companies before us, but none of them had actually owned the settlement. They hadn’t owned the cap table itself. And so they had to connect, match, and settle these things offline. And by owning the cap table, we could digitize the entire settlement process for these companies. But we, you had to do the hard work of winning the cap table business first. We were wrong. It turned out the cap table business was way bigger than we and investors thought. Today it’s a $350 million business. Wow. But the, the stock market that everybody thought was gonna be, you know, a billion dollar business is zero for us.

00:19:37 [Speaker Changed] That, that’s unbelievable. Yeah. The, you know, VCs love to toss around tam, total addressable market. Again, kind of shocking that people right in the middle of this surrounded by tens of thousands of companies in California and Silicon Valley completely underestimated the total addressable market. Yeah. That, that’s just shocking to me. Let’s talk about the, the income stream you set up in the beginning. This was a fee per stock certificate business. You guys changed this to a subscription model. Tell us about the factors that drove those changes and how it affected the steadiness of your income stream.

00:20:19 [Speaker Changed] Yeah, so we, we thought we were competing against FedEx. And so instead of paying $60 to FedEx to FedEx a stock certific, you’ll pay us $20 to email it. It worked. People would pay for it. What was really hard about it though is it’s a transactional business. It’s very hard to, to manage the transactional business. And it was very volatile. And we also quickly realized that we wanted to move to a subscription based business. ’cause we needed to bundle other things that were, were more subscription based, like 4 0 9 a valuations and expense accounting and other services we were doing. But we were, we were two years in and, you know, at the time I think we had maybe 2000 customers that were all paying us 20 bucks. And we realized this was like a, a crucible moment for us. If we didn’t change the business model, we wouldn’t, we wouldn’t survive.

00:21:06 And we emailed all of our customers from me. I emailed all 2000 customers and I said, Hey, I made a mistake. I I priced this wrong for you and I I need to change from the $20 per certificate to, you know, X dollars per year. And, and everybody had a, a price that they, we custom already set up for them. So we didn’t even ask ’em, we just said, we’re moving you starting next month to the subscription model. And it was a very scary, scary thing to do. ’cause you don’t know what your customers are gonna do. Right? You, you literally changed the agreement in the mid-flight. And I, I explained in this long email, I said, I, I made a mistake. If I keep charging you this way, I’m gonna go outta business and I need to move you over to this. And I’m very sorry I made this mistake. I hope I understand if you decide to leave us, but I hope, I hope you won’t. And it was remarkable. We lost almost no customers. Wow. And I, I have some of these saved and framed where customers came back and said, you know, we’re so glad you did this ’cause we were wondering if you were gonna run out of business. Like we thought, you know, this pricing was wrong. It didn’t make any sense making,

00:22:19 [Speaker Changed] So the subscription model allows them to just keep doing repeat business and no one has to track, oh, we did these six companies and it’s however much it is. No, here’s our monthly fee and we can do as many companies as we have to work

00:22:33 [Speaker Changed] With. They, they have a monthly ex annual fee for most of them. They pay annually, they, they renew and based on the size of the cap table at that renewal, they, they just get a renewal notice. And, and it’s interesting, you know, eight years ago we were 10 x cheaper than the lawyers. Now we’re still eight x cheaper than the lawyers. But now it’s, it’s just a different, different world. People are used to software now. And it’s, it’s that, that, you know, 10 years ago is a, is a weird thing for these companies to pay a subscription fee for legal software. And today it’s super, super common. Do

00:23:06 [Speaker Changed] You really think about this as legal software? It, I mean it obviously has ramifications in law, but it really seems more like it’s a combination of hey, it, it’s business, it’s investing, it’s accounting. How, how do you contextualize what space you’re actually in

00:23:26 [Speaker Changed] It? It’s a great question. I I think we started as legal software and people thought of us as legal software. I think over the first five years we transitioned the concept of cap table from a legal solution to a financial solution. So we sort of categorize ourselves in the FinTech world. I think today, when you look at cap tables, our fund administration and fund accounting business, our LP business and all the, the, the software that we sell as a platform into private, private equity, private credit venture capital. I, I think of us now as a, as a software infrastructure business, you know, we, we, we sell, we’re we’re more similar to a NetSuite or even a Google suite than we are to a legal tech company or a

00:24:12 [Speaker Changed] Makes a lot of sense and save on legal fees. So, so back, let’s call it about eight years ago you were called e shares, which kind of intuitively makes a lot of sense. What was behind the rebranding? Why did you go from eShares to Carta in 2017?

00:24:31 [Speaker Changed] The, we liked eShares because it, it was an electronic share, you know, instead of paper. And it made a ton of sense. In 2017, we kind of realized we wanted to do way more than electronic shares. So we knew we needed a new name. We were also pushed on it because we didn’t own eshares.com. We owned eShares inc.com and there was a domain squatter on eshares.com.

00:24:55 [Speaker Changed] What did they want for it?

00:24:57 [Speaker Changed] They wanted, initially I think it was a million bucks when we had, we had $2 million raised total. And then as soon as we raised more money, it became $10 million. Oh really? And so it was just every single time we were trying to get more and we just couldn’t, couldn’t do business. And so we decided we needed to change the name and we came up with Carta and we were able to buy it for I think 75,000 bucks. And it was great.

00:25:21 [Speaker Changed] Wow. That’s fantastic. Did, did eShares ever get sold?

00:25:25 [Speaker Changed] I don’t think so. It is a great question. I don’t know if it’s still, I haven’t been there in a long time. It

00:25:30 [Speaker Changed] Just goes to show you, you know, you have to leave a little bit on money on the table if you try and squeeze every last penny end up with nothing. Exactly. So you guys, I mentioned in the original introduction, Carta serves 50,000 companies, 8,500 firms, millions and millions of equity holders. Starting out with that first $2 million raise, it appears that you’ve scaled from a, a little niche solution to a giant platform for private companies. What was the biggest growth pains in in that scaling that up?

00:26:04 [Speaker Changed] It’s all of them. We scaling a company, I, I think I, I love Jensen at Nvidia and I got to see ’em speak and you know, someone was asked him about would he do it again? And, and you know, he’s one of the most successful entrepreneurs of our generation. And he goes, if I knew what it would take, I wouldn’t have done it again. Really. And yeah, and you know, it’s, I think Mark Andreessen calls it, it’s, it’s eating glass until you, you enjoy the taste of your own blood. So it, it’s, you know, ev every day I, there’s sort of this funny thing where people are like, well what was it like to scale? And I’m like, I’m still doing it. Like, like we’re, you know, and, and it’s, you know, getting in at, you know, 10 o’clock last night from a 4:00 AM start. It’s, you know, talking to customers, it’s hiring, firing, you know, uncomfortable conversations, you know, board mechanics. It’s, it’s all the same. It’s just more harder, faster.

00:26:59 [Speaker Changed] Is andreessen’s quote eating glass till you like the taste of your own blood? Is that accurate? Or is it a little hyperbolic?

00:27:06 [Speaker Changed] You know, I think, so I talk a lot to founders about this, where the, the founders that want to be founders for the money, we all know that the expected value of being an entrepreneur is, is below pursuing a career far, far below the better business bureau

00:27:22 [Speaker Changed] Actually well sold such a large percentage fail Exactly at the gate. So that’s exactly, we all the survivorship bias of, we see the ones that have succeeded. That’s just the top of the iceberg. You don’t see everything below the waterline. A

00:27:33 [Speaker Changed] Hundred percent. And then when you see the ones that succeeded, sort of by definition the ones that succeeded, made it look easy, right? Because it’s like we’re on podcasts doing, doing all of these things. They

00:27:44 [Speaker Changed] Found the right niche, they pivoted appropriately. They built what was needed and the market rewarded

00:27:49 [Speaker Changed] That. That’s exactly right. How hard could it be? That’s exactly right. And and when I look at my history, I know how lucky I got. Like there’s so many forks in the road that, boy, if I had flipped heads instead of tails, I would not be here. And I had, I had to flip, you know, I had to flip tails 32 times in a row to get to, to where I am.

00:28:08 [Speaker Changed] I’m gonna, let me interrupt you a second ’cause I just have to share this. So I’ve done oh 550, 600 of these and I have heard that exact thing over and over again. And the first couple of times I heard it, especially from billionaires, I’m like, yeah, yeah, false humility. But then when I start hearing it from more people, from guys like you who are in the trenches chewing on glass, it’s like, and my own experience as an entrepreneur, you really smart and hard work is just table stakes. You really have to get lucky. And people don’t understand how the role of serendipity in, in how things work out.

00:28:46 [Speaker Changed] One, one of my favorite other quotes is Bo bo Durham, the comedians said, you know, don’t take advice from successful people. ’cause it’s, it’s like listening to Taylor Swift say, follow your dreams. You know, or, or the lottery winner goes, you know what you should do, sell everything you own and buy lottery tickets. That’s right. And

00:29:04 [Speaker Changed] That’s an XKCD. They told me I would never win, but I kept at it. That’s right. And here I am today. Exactly. No, it’s, it’s a hundred percent true. Listen, there’s so much more signal in the failures than there are in the successes. ’cause success. Maybe it was skill, maybe it was luck. We don’t know.

00:29:20 [Speaker Changed] Yeah. And I, what I try to coach like in my angel investments is it, I call it, you know, the love of the game. And so, you know, you see founders that I wanna be successful, I wanna be a successful founder. I wanna make the money. You know, and, and what I always tell ’em is like, hey, the, the problem with money doing this for the money is most of your journey, if not all, you’re poor, right? You’re seed stage, early stage, you’re just poor. And so if you’re doing it for the money, you, you kind of quickly lose motivation. ’cause you’re poor for years, right? And then let’s say you’re one of the lucky for you to get successful. Well, well now you’re rich. And so if you do it for the money now, now you just, you have no reason to do it anymore. ’cause you’ve got the money and the, the, the people that that, that are successful over time in this business, do it for the love of the game. Like I, you know, I do it because I love chewing glass.

00:30:09 [Speaker Changed] My, you know, my wife and I were having a conversation the other day about when we were poor and I mean really poor. And the really challenging thing is when you’re in the thick of it, you don’t know that it’s gonna work out. You have no idea, Hey, am I gonna get that lucky break? Is the right client, partner, customer gonna come along and and give me that critical mass to go to the next level? So not only are you poor, but the outcome is wholly unknown. And so if you don’t love it, then what are you, what are you doing?

00:30:42 [Speaker Changed] That’s right. You’re poor and you’re, it’s an you’re living in constant uncertainty.

00:30:46 [Speaker Changed] Uncertainty. Absolutely.

00:30:47 [Speaker Changed] And I think what people forget is, you know, I, I’m not poor anymore, but I still live in uncertainty and, you know, I don’t know what’s gonna happen. You know, I’m trying to build a bigger business, you know, and, and the water watermark keeps going up. And so like, if, if in three years the watermark isn’t higher, I I will feel like I failed the last three years. And I, I think that’s the, you know, that’s the essence of being entrepreneur is the watermark keeps going up and you keep going up.

00:31:11 [Speaker Changed] Huh. Really quite, quite fascinating. I want to dive into the world of, of private companies and alts, but before we do that, I just had to ask you a data question. My, my assumption is accessing reliable and clean data has to be the lifeblood of what you’re doing. How challenging is that? How many different inputs do you guys have to track at Carta?

00:31:37 [Speaker Changed] I have a perspective on, on software and data businesses that might be a bit provocative, which is, I’ll make this statement that software businesses cannot be data businesses. And the reason is, if a software business has customer data, they get that customer data by selling software and and service to this customer. And if they monetize that data on the other side, if their left hand is, we will keep, keep your data confidential and as part of our software service to you. But then with the right hand they’re selling that data, it cannibalizes their software business. ’cause the customers won’t trust them now ’cause they’re now giving ’em their data. Which is why Carta does not have a data product. We have tons of data. We do not have a monetizable data product. Huh, interesting. We only sell workflow or business operation software. The, the, it’s hard to think of a business that sells actual software and also sells data. I I can’t think of any, even Bloomberg started really as a data data business. The, the non-existent, non-existence of something is not proof that it cannot exist. But my my best example of why my theory that software businesses and data businesses cannot coexist in one company is Salesforce. If anybody would launch a data product,

00:32:55 [Speaker Changed] So funny. That’s who exactly it would be

00:32:56 [Speaker Changed] Salesforce was thinking of. And in 30 years they have not. And I don’t think they ever will. And I think the day Salesforce launches a successful data business, I I will be eating my words and I will be wrong, but I don’t think software businesses can become data businesses. I

00:33:11 [Speaker Changed] I would imagine that, so we use, in my shop, we use Salesforce as our CRM very customizable. And they have specific industries that they, they market towards and and customize. But the moment it feels like your data is being reused, every single one of their competitors would say, we keep your data safe. We don’t monetize the data. Give ’em up on them. Come to us where we respect privacy. I mean, I think the moment anybody tries that their competition is all over that.

00:33:43 [Speaker Changed] And, and you would agree because suddenly you’re now on every list of every vendor trying to sell software to bury and they know everything about you. ’cause Salesforce gave them your data.

00:33:52 [Speaker Changed] Not only that, but it’s not quite hipaa. But the SEC has privacy requirements. Things you’re not allowed to share when you, you’re supposed to know your client. You have all this data. And if one of your vendors is reusing that, repurposing that data for their own ends, like, wait, not only are you violating our privacy agreement, you’re putting me underwater with the SEC, they may come yell at me. I I don’t need that. Totally. I’m I’m gonna go to your competition. Kind of interesting. So, so let’s, let’s pivot towards the private markets. ’cause it’s so interesting. You’ve testified before Congress that’s startups and growth companies backed by private capital. That’s where most of the new job growth comes in the United States. Explain.

00:34:37 [Speaker Changed] Yeah. You know, public markets is, is actually a shrinking industry. You know, there’s fewer public companies today than there were 10 years ago by, by quite a big margin. But the number of private companies is growing astronomically and be, that’s largely fueled by there’s a lot more private capital than there used to be to fund these businesses. And there’s less reasons to, to, to go public now. So I think, I think that will continue to be true. I think it’s structurally true. When I go to the, to the hill and, and talk to our legislators, the, the common response is, well, we just have to push more companies to go public. I, I think it’s like what the, their, their belief is the public markets is a great product for everyday Americans to access growth equity. And I think they’re right. It, it is a good product for it. The problem is it’s not the, it’s a shrinking product and most of the growth is being hap is happening in the private markets. And there are attempts to get these companies to go public so that there can be retail access to them is isn’t working. It’s a little bit like, you know, the river’s coming and you’ve got like one tiny little dam trying to hold the water back. Let,

00:35:46 [Speaker Changed] Let me share a data point that I bet a lot of listeners are not familiar with the US is something like four to 5% of the global population where something like 24, 20 5% of the global economy, global market cap we’re over half. I mean, we are wildly disproportionate in our public markets. How much bigger does Congress wanna make that? I mean, what you’re describing makes a lot of sense. The public markets are enormous. Let’s let the private markets grow and see where they go.

00:36:16 [Speaker Changed] Yeah. And that’s certainly the, the, the message that that, that we’re pushing, we still have to solve the problem of, of retail access because as the number of public companies is, is shrinking. That’s less, less and less options for your everyday American to invest their money in their retirement. I don’t think the answer is to try to push more companies to go public. I think the answer is to create safe access for everyday Americans into private capital. And that’s what we spend a lot of time lobbying for in Congress.

00:36:45 [Speaker Changed] Huh. Really quite, quite fascinating coming up. We continue our conversation with Henry Ward, CEO and co-founder of Carter, talking about the rise of private company investing. I’m Barry Riol, you’re listening to Masters in Business on Bloomberg Radio.

00:37:16 I am Barry Reho. You are listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Henry Ward. He’s the CEO and co-founder of Carta. They help manage the cap tables for tens of thousands of private companies, thousands of investment firms and millions of equity holders. They do a number of other things in terms of tracking, compensation, valuation, liquidity, all these really fascinating issues. So there are a number of companies that bring liquidity to private companies. Sometimes it’s it’s private equity or, or some form of a private fund. Other times it’s individuals who wanna participate in companies before they go public. What are your thoughts on the future of secondary liquidity, both for the investors and employees of startups and for the rest of the investing public that wants to participate in these privates?

00:38:13 [Speaker Changed] Yeah, so I am, I think I’m one of the maybe top five people in the world that have worked on private market liquidity. I, I spent the, the last 10 years working on the, on the problem. And I, I’m of the view now that that at least venture startup liquidity will, will never happen. And, and at least a, a secondary exchange in the, in the sense that we think of public market exchanges, the private markets are so different from public, it’s really kind of the upside down world. You know, in, in public markets, the the price is set by the last buyer, not the first in private markets. It’s set by the first and not the last. And public markets, it’s easier to sell one share than a hundred million dollars worth of shares in private markets. Easier to sell a hundred million dollar block than it is to sell one one share. You know, in public markets the distribution outcomes is mostly Gaussian normally distributed in private markets. It’s it’s power law. So all the math that exists to, in modern portfolio finance theory in public markets doesn’t work in private. So it, it is just, it’s a very different market infrastructure. I I think all the attempts they try to create liquidity in the, in the venture world are, are, will be failed attempts. But I hope I’m wrong, I hope I’m just old. I

00:39:27 [Speaker Changed] Mean, equity Zen seems to have figured this out a while ago. They seem to have put together a way to do secondaries for creating some liquidity for, for insiders or employees at companies. But it’s not like they’re a trillion dollar platform. It’s, it’s a little bit of a niche specific focused. And there are other companies like that. I just happen to be thinking of them recently. But really what you’re saying is there’s a gulf between trillions and trillions of dollars in public equity and private stock and, and never the twain shall meet. So

00:40:05 [Speaker Changed] In, in public markets liquidity begets liquidity. And so it centralizes on two exchanges in the US and most regions it centralizes on one in, in private markets. What’s happened is there’s equities and there’s many others. There’s many, many small niche businesses doing secondaries. It does happen, but liquidity does not. But beget liquidity, the, as soon as one of these companies starts to scale, all the competitors come around and they devolve back down to a niche business. And and that’s just the, the, the market structure is that any company that actually starts to scale in their private markets, it actually the it degenerates there. The, we’ve seen so many examples of com of private market liquidity providers, you know, come in hot, get really a quick start and then, and then once they hit scale it falls down. And so you see so many of these small businesses that will always stay small businesses. I don’t think there’s an opportunity for someone to consolidate the market.

00:41:03 [Speaker Changed] There’s been so much focus on privates and alternatives. D does this intensity of interest, does this surprise you at all or you’ve been up to your chin in this for, for a decade and what took everybody so long?

00:41:17 [Speaker Changed] We, we’ve been in this up to up to up to my chin as you say, for for a decade plus. So it’s, it’s not surprising. What I think is really, we’re in a moment of time in the speed that it’s happening, especially with the current administration. We’re liberalizing a lot of the rules for private market access. You know, there’s a lot of work being done around can retail investors access private equity firms? Private credit firms. I think that will continue to happen and I think that’s a big tailwind for, for Carta. And I think the, the, the US economy and and GDP because so much of this capital is being now deployed in, in useful ways. I think that will continue to be true in the next administration. Hopefully they will continue that legislative policy. I think it will, it will be weird in 20 or 30 years, it will be weird that we locked out 99% of Americans out of private capital.

00:42:14 [Speaker Changed] So when I look at who’s being aggressive in terms of moving from, how do we get more people onto the alternatives and private side, it’s everyone from Blackstone to BlackRock, Carlisle, Apollo, Goldman Sachs go down the list. I’m assuming you’re working with some or most of these companies.

00:42:33 [Speaker Changed] We we know them all and we’re we’re huge fans. I I was lucky enough to spend an hour with Rob Goldstein, the, the COO over at BlackRock and, and he was telling me kind of the vision of, of BlackRock and their, their perspective on private markets and you know, he, he made this very salient point, which was, you know, when they talk to their customers, they, they might look at a customer and they, they spend, you know, $25 million a year on public market infrastructure and technology for their public market asset allocation software. And they might spend, you know, 300, you know, $350,000 on their private market stuff. A fraction, a fraction, right? With BlackRock. But they might spend a million dollars total. So 350 k is with BlackRock and 700 K is with a bunch of other vendors. And his team is like, oh, we should go after that 700 k and we’ll win the whole, you know, million dollars that they send in alts. And he goes, no, no, no, no. What we need to do is figure out how to get that million dollars a year they spend in alts to be $25 million a year. Right. And then we’ll capture half of that. And, and that was the, the mental mind shift that I think BlackRock is so smart at, which is we’re trying to grow the market, not not our percentage of the market. Right.

00:43:50 [Speaker Changed] That makes, that makes a whole lot of sense. So they’re looking at an adjacent market to their public market dominance. They’re the biggest investment firm in the world at around $12 trillion. How do you decide what adjacent markets are attractive? And you might wanna enter them if you started with cap tables, you’re doing all sorts of other data analytics. How do you figure out what’s adjacent?

00:44:15 [Speaker Changed] We, we have a really strict framework on it because we spend a lot of our time thinking about where we can expand. And we have really two, two criteria. So one is do we have a a right to win? So what gives us competitive edge that we can do that nobody else can do? And second is, can we, can we win that market quickly? Because we’re very much a software business. Like if, if you can win a market, but it takes a long time. We’re a growth growth company, so it’s gotta be fast. So you have to have a very aggressive customer acquisition model that, that creates a flywheel. That the more customers you get, the more customers you get. And so if those two things are true, we’ll we’ll go after it. And it it, it leads you to really funny things where you wouldn’t actually attack adjacent markets that are obvious adja that have obvious adjacencies. So the example I love is cap tables and four nine A cap tables was a legal service when we entered it done by lawyers. Four nine a valuations was a valuation service done by valuation providers. Nobody thought of them as similar. What we realized is by having the cap table, we could do valuations faster, cheaper, smarter. And so we just started doing valuations. Well,

00:45:21 [Speaker Changed] Well, you know, the tomba number of shareholders, you know what the last transaction or funding was. It sounds pretty basic math, right?

00:45:27 [Speaker Changed] Totally. It’s just math on the cap table. But they’re a completely different industry. So if you think about from a market perspective, they’re different. But you think about it from where we have competitive edge, they’re the same and the same with fund accounting, fund administration, fund accounting software. Very different industry than cap table management. But we’re able to connect the cap tables to the funds and that gave us unique competitive advantage that nobody else could do. And so now we’re in the fund admin business and that’s, that’s our our second biggest business line.

00:45:54 [Speaker Changed] You, you guys also do compensation analytics. How did you find your way into that space?

00:45:58 [Speaker Changed] We realized we’re the only ones that could do benchmarking for both salary and equity for startups. Oh, of course. Nobody else can do it. And so Right.

00:46:06 [Speaker Changed] Without the equity, the salary may not be that significant.

00:46:09 [Speaker Changed] That’s right. But to, to have start at a priority and go, we’re gonna do cap tables and that’s gonna lead us into compensation didn’t make a ton of sense. And that’s the, we have a a a a flywheel of this is how we entered these industries.

00:46:21 [Speaker Changed] You are the perfect person to ask this question. I’m gonna go off script. So I spoke at an event in June in Silicon Valley. It was a kind of funky hotel that was turned into this really interesting space right on the edge of trying to remember exactly where it was about 45 minutes outside of San Francisco. But anyway, it was an employee benefits conference with all sorts of people. And I was there to talk about my book at the time. And I heard over and over again from all these people who, the 401k people, they’re employee compensation consultants, they’re health benefit consultants, all these people who were telling me that there’s this sort of misalignment amongst Silicon Valley employees who were more interested in the dollars than they are in the equity. Which just completely sounds upside down to me. Am I just looking at a weird corner of the world or is that a thing that, hey, you can’t pay your rent with equity. I have to at least make x What do you see out there in terms of how startup employees are thinking about equity versus cash payments for comp? Yeah,

00:47:40 [Speaker Changed] We, we’ve spent a lot of time thinking about this and I’ll, I’ll I’ll frame it. As you know, wealth management financial advice is a well established industry in the public world and the, I’ll call it the liquid world, right? You pay, you know, 1% or half a percent of a UM to your financial advisor and they, they help you manage your assets. There is no equivalent in the private world. Like if I’m a employee and I make, you know, $150,000 a year in cash, but I’m sitting on a million or $2 million of equity, illiquid equity, how, how do I think about that? How, how do I work on it? And there is no industry for that. The financial advisors don’t know how to work with that in part ’cause they don’t understand the, the private market, you know, illiquid asset piece. But also they don’t have, they don’t have any way to monetize $2 million worth of private stock.

00:48:29 You can’t, you know, you can’t charge one basis point or a percent of a UM on it. And so, so we’ve wrestled with this question of if an industry were to be created, not wealth managed but but wealth management for illiquid people for high net worth, but illiquid asset holders, what would that industry look like? And so we’ve been thinking a lot about that problem. And, and we, we recently launched a partnership with Morgan Stanley where we’re last year we posed this problem to them and we said, Hey, we think it’s worth solving wealth management for illiquid holders. How would we do that? And they’re, you know, the largest wealth management firm in the country. They do this extremely well. And now we’re creating a motion to basically help these employees who are like, I would just want the cash ’cause I don’t know what to do with this equity. I don’t know, I don’t understand it. I I don’t know when it’s gonna be liquid. And can you create a financial advisory industry to help those people?

00:49:26 [Speaker Changed] Hmm. That, that’s really fascinating. I was genuinely shocked. Maybe because I’m, I’m more risk seeking than risk averse and the thought of equity is so, you know, attractive to me. But I guess when you’re in the thick of it and you’re grinding a hundred hour weeks, hey, I’m working my butt off and I still have to worry about paying my rent. I I don’t wanna go that way. That was the only explanation I could come up with. But it was, it was really quite fascinating. I only have you for a limited amount of time. Why don’t we jump to some of our favorite questions that we ask all of our guests starting with, and you’re a good person to ask this. Tell us about your mentors who helped shape your career.

00:50:08 [Speaker Changed] Yeah, I, I don’t think I’ve had just one. I I think I pulled together a lot of people that have that helped me with little different things. And so, you know, everything from my boxing coach in high school and college that, that, you know, boxing’s an interesting sport ’cause it’s one of the very few sports that if you’re tired and you’re in pain and you have to let off the gas a little bit, it hurts more, not less. And

00:50:33 [Speaker Changed] You gotta dig

00:50:33 [Speaker Changed] Deep. That’s right. And you know, there’s, it’s literally in the corner and you know, from, from perseverance from him, from the marines, from, you know, mark Andreessen who helped me figure out, you know, NetSuite, what we call ERP for private capital at a breakfast to, you know, John Waldron, who I had to got to have a lunch with him, who’s the president at, at Goldman, who explained to me why bankers make more money than I do. And it’s ’cause of the regulatory defensibility. And so you just pick up these nuggets from these very smart people and, and you, you hold ’em as a treasure trove.

00:51:11 [Speaker Changed] Let’s talk about books. What are some of your favorites? Are you reading anything currently?

00:51:15 [Speaker Changed] We just read Amp It Up as a, as a leadership team. So we, last month we, we took 60 of our top leaders at Carta and, and on an offsite. And every time we do an offsite at Carta, we pick a book to read and everybody has to read it. And we do a discussion group. And it was very timely for us. We’re, we’re in very much an acceleration mo motion and so, so everybody at, at Carta right now is, is reading Amp It up and, and talking about it.

00:51:41 [Speaker Changed] Hmm. Really interesting. What about streaming? What are you listening to in terms of podcasts or watching on Netflix or Amazon? I kind of get the sense you’re not a big couch potato kind of guy.

00:51:51 [Speaker Changed] I’m not, I I don’t really watch TV except I have an 11-year-old boy and I recently got him into Arrested Development, which is a classic, classic. I absolutely mean it’s some of the best comedy ever done. And, and we’re watching it together and we’re loving it. And now he, he hits me with the lines and you know, dad, I, I’ve made a huge mistake and we’re having a great time with it

00:52:14 [Speaker Changed] Narrator. It wasn’t, yeah, right. That’s, I mean, that’s where that comes from. People use it all the time, but it all goes right back to, I, I like his podcast, smartless is always kind of fun. Our final two questions. What sort of advice would you give to a recent college grad who is interested in a career in fill in the blank entrepreneurship, startups, private companies?

00:52:41 [Speaker Changed] You know, I, I just did a talk at Waterloo yesterday to a bunch of soon to be grads there and, and I, I said, you know, they were computer science grads and, and I said, you know, there’s, you know, they know of this algorithm called the Hill climbing algorithm, which is basically, if you’re trying to find a global maximum versus a local maximum. What I mean by that, the analogy I use is, let’s say you’re an a French, you know, you’re climbing in the French Alps as a mountain climber and you’re trying to find the tallest mountain in the French Alps, but there’s cloud cover. You can’t see, you can’t see the tops of these. How would you find the, the highest mountain? And you would, you would do it by picking a mountain, climbing to the top, recording how high you are, and then randomly jumping to another mountain and climbing and recording that.

00:53:22 And there’s all this math around, you know, how many random jumps to mountains do. You have to have to have a 90% probability of finding the global, the global maximum. And I, I say it’s a great analogy for a metaphor for, for early careers, which is most of us unfortunately are taught. You go through kindergarten to high school to college, you pick a career at 19 or a specialty, you then become a, a finance analyst, an associate, then you become a senior associate, then you become a man and you just, you kind of walk this track and you, you never ask the question, am I on a local opt hill or a global optimal hill? And I encourage people early to, to jump mountains to figure out which, which mountain they want to be on. And I think one of the reasons many people my age are very unhappy in their careers is they look back and they realize, oh, I got to the top of the mountain, but it was the wrong mountain. And I encourage young people to, to mountain jump.

00:54:17 [Speaker Changed] I, I, I love that metaphor. Mountain jump is a great, great line. What do you know about the world of entrepreneurship, startups, et cetera today might have been useful 20 or so years ago when you were first starting out?

00:54:31 [Speaker Changed] Idea matters. It matters a lot. ’cause I’ve had a lot of great ideas that did not work and I worked hard, hard at it. I also think there’s this counterintuitive, I guess, thesis that’s happening right now, which is the more entrepreneurs there are, the harder entrepreneurship gets. But people think the opposite, right? Oh, so many’s do, so many people are doing it. I can do too. The number Michael

00:54:58 [Speaker Changed] MOBAs not calls that the paradox of skill, the more skillful players there are in sports, the more luck matters because everybody’s playing at such a high level.

00:55:08 [Speaker Changed] A hundred percent. And I think it’s one of these funny things where like, not many people, you know, dream or move to Atlanta to be a hundred meter, you know, sprinter. ’cause I, you know, I think I can be the greatest a hundred meter sprinter in the world. And it’s because there’s not a lot of luck. I mean, there’s luck around, you don’t get injured and all of those things, but like, we pretty quickly can tell who’s good and who’s not good. That’s

00:55:32 [Speaker Changed] Your skill outcome.

00:55:33 [Speaker Changed] Yeah. And, and the, it’s a little bit like acting like so much of it is luck that because so much of it is luck. People think anybody can do it and it, it’s actually worse. You actually have to be a super skilled, you know, a hundred meter sprinter and you have to be lucky to do one of these startups. And I think a lot of people are like, oh, you know, a lot of it’s luck. So if it’s luck, anybody can do it. It’s, it’s, you gotta have both. It makes it actually harder, not easier.

00:55:59 [Speaker Changed] I love the expression, table stakes. Smart, hardworking, that’s just to enter the arena. Then you gotta luck. Get lucky on top of it. That’s right. Un unbelievable. Henry, this has been absolutely fascinating. We have been speaking with Henry Ward. He is the CEO and co-founder of Carta, helping to manage much more than just the cap table for tens of thousands of companies, investment funds and investors. If you enjoy this conversation, well check out any of the 565 we’ve done over the past 11 years. You can find those at Bloomberg, iTunes, Spotify, YouTube, wherever you get your favorite podcast. And be sure to check out my new book, how Not to invest the ideas, numbers, and behaviors that destroy wealth and how to avoid them. How not to invest at your favorite bookstore.

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Ritholtz Wealth Management Coming to DC! Nov 17-18

 

 

Ladies and gentlemen, Ritholtz Wealth Management is coming to Washington, D.C., on November 17 & 18th.

If you’re interested in talking to me and our wealth management team about how we solve complicated wealth management and investing problems, now is your chance!

Whether it’s tax, estate planning, business succession, concentrated stock, multigenerational wealth, or general investment management and financial planning, we’re heading to DC to talk to you.

I’ll be traveling with my co-founder, Kris Venne, our 3 financial planners, and members of our family office and tax team.

Please email info@ritholtzwealth.com, add subject line “DC” to set up a time to talk to us about your situation.

Can’t wait to see you in Washington!

 

 

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10 Monday AM Reads

My back-to-work morning train WFH reads:

Volatility Is Back in the Stock Market. Here’s the Zen Way to Handle It. The S&P 500 fell 2.7% this past Friday, ending a 33-day streak without a 1% move and highlighting renewed market volatility. Diversification beyond the S&P 500 is recommended, with international stocks up 26% year to date versus 13% for the S&P 500. (Barron’s)

Apple’s biggest iPhone overhaul in years ignites upgrade frenzy: Extended wait times and generous trade-in deals signal surging demand for newly redesigned device. (Financial Times)

How Palantir’s CEO forged a connection with investors by writing spicy shareholder letters that quote philosophers and skewer ‘technocratic elites’. Somewhere along the way, Karp changed his tune. He has done the earnings calls since Palantir went public, and about two years after that, Karp started carving out additional time to pen lengthy missives in the form of shareholder letters. Alongside the company’s financial results, Karp fills the letters with the sorts of topics most executives bend over backwards to avoid: global politics, philosophy, or even religion. You may not like what Karp has to say, but one thing is guaranteed: It’s going to be interesting.(Fortune)

More Working-Class Americans Than Ever Are Investing in the Stock Market: For the first time, a majority of low earners have an investment account, and more than half of those new investors entered the markets in the past five years. (Wall Street Journal)

Robinhood Is Banking on Babies and 401(k)s to Get Everyone Trading: After making its name on millennials and meme stocks, the popular brokerage app is riding its Trump bump into the S&P 500 and beyond. (Bloomberg)

Setting the record straight: The truths about index fund investing: Index fund investing has numerous benefits, including lower costs, diversification, tax efficiency, and relative return predictability; The increased adoption of index fund investing has heightened emphasis on the binary labels of “passive” and “active,” as if all index funds can be described as a monolithic, homogeneous strategy. This has led to many faulty assertions about index fund investing; Our analysis dispels assertions tied to the growth of index fund investing and offers evidence that refutes key misperceptions. (Vanguard)

Mad Libs: just fill in the blanks. the upshot is that 12-15 House seats could conceivably switch parties before the midterm elections, although the actual number is likely to be less than that. (JPM)

Shohei Ohtani just played the greatest game in baseball history: On a night of legendary excellence, Ohtani hit three home runs and pitched six-plus scoreless innings to lift the Dodgers to the National League pennant. (Washington Post)

The Exercise That Takes Off 20 Years: There are several simple tests that can be done at home in order to check our current strength level and to show us where we may need to improve. (Vogue) see also Wait, Are Carbs Actually Awesome? The carb is 180-years old this year. Why are we still so scared of it? (Men’s Health)

Be sure to check out our Masters in Business interview this weekend with Henry Ward,  CEO and co-founder of Carta. The firm works with more than 50,000 companies, 8,500 investment funds, and 2.5+ million equity holders to manage capitalization tables, compensation, valuations, and liquidity, tracking over $2.5 trillion in company equity.

 

Like Greenspan in late 1998 (LTCM), Powell cut rates even as the S&P 500 was soaring to new highs and sentiment was getting frothy

Source: LinkedIn

 

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10 Sunday Reads

Avert your eyes! My Sunday morning look at incompetency, corruption and policy failures:

How America Got Hooked on Ultraprocessed Foods. The earliest processed foods promised ease and convenience. They filled the bellies of soldiers at war. But now, the evolution and explosion of ultraprocessed foods has become one of the greatest health threats of our time. How did we get here? Let’s take a tour through history. (New York Times)

Western executives who visit China are coming back terrified? Robotics has catapulted Beijing into a dominant position in many industries. (The Telegraph) see also China Has Overtaken America: And Trump’s policies guarantee that we will never catch up (Paul Krugman)

Short sellers blame retail investors for worst returns since 2020: Rally in heavily shorted stocks comes as AI hype and hopes of lower rates push S&P 500 to record highs. (Financial Times)

Congress Thinks Hiding Fund Fees Is Good for You: Even if fund expenses seem to disappear, they’re still the biggest drag on your returns. (Wall Street Journal)

How Crypto Became a Trump Trade: It’s primarily a vehicle for crony capitalism now. (Paul Krugman)

Microplastics are everywhere. You can do one simple thing to avoid them. The biggest sources of microplastics have one thing in common, scientists say. Here is how to avoid them. (Washington Post) see also Homeopathy is a scam that causes real harm. Not a single homeopathic “medicine” is FDA-approved. These expensive sugar pills have zero science behind them. (Immunologic)

The hidden way using a rewards card can cost you more: Starbucks tracked my every purchase — then gave me fewer deals. It’s called surveillance pricing, and it’s yet another reminder that Corporate America is filled with bad actors. (Also, Starbucks sucks worse than ever). (Washington Post)

‘I love Hitler’: Leaked messages expose Young Republicans’ racist chat: Thousands of private messages reveal young GOP leaders joking about gas chambers, slavery and rape. (Politico)

The Shadow President: From the wholesale gutting of federal agencies to the ongoing government shutdown, Russell Vought has drawn the road map for Trump’s second term. Vought has consolidated power to an extent that insiders say they feel like “he is the commander in chief.” (Pro Publica)

Earth’s Climate Has Passed Its First Irreversible Tipping Point and Entered a ‘New Reality’. The second Global Tipping Points Report warns that the world has crossed a key threshold as ocean heat devastates warm-water reefs. (404)

Be sure to check out our Masters in Business interview this weekend with Henry Ward,  CEO and co-founder of Carta. The firm works with more than 50,000 companies, 8,500 investment funds, and 2.5+ million equity holders to manage capitalization tables, compensation, valuations, and liquidity, tracking over $2.5 trillion in company equity.

 

Average tariff rate on U.S. goods imports for consumption

Source: J.P. Morgan

 

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~~~

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The Motley Fool Interview: How Not to Invest

 

 

I spoke with Andy Cross and Jason Moser at The Motley Fool about HNTI. It was a surprisingly fun conversation with MF, a firm that built its business on stock picking.

I got to explain why professionals are very good stock buyers, but terrible stock holders and sellers…

See transcripts here or here.

 

Source:
The Motley Fool Interviews Barry Ritholtz: How Not to Invest
By Andy Cross and Jason Moser
Motley Fool  (Oct 13, 2025)

 

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10 Weekend Reads

The weekend is here! Pour yourself a mug of Danish Blend coffee, grab a seat outside, and get ready for our longer-form weekend reads:

Inside the Credit Card Battle to Win America’s Richest Shoppers: The fierce fight between Amex and Chase is playing out over higher fees, extravagant events and every perk imaginable. (Bloomberg) free. 

How mega batteries are unlocking an energy revolution. These might look like shipping containers in the desert, but they are actually the key to unlocking a clean energy revolution. Across California, installations of mega batteries store power from renewable sources and distribute it when people need it most. The sun provides most of California’s electricity during the day. But it is a different story at night. Batteries provide the answer. (Financial Times) see also AI Data Centers, Desperate for Electricity, Are Building Their Own Power Plants: Bypassing the grid, at least temporarily, tech companies are creating an energy Wild West; ‘grab yourself a couple of turbines’. (Wall Street Journal)

•  YouTube Just Ate TV. It’s Only Getting Started: In two decades, the app has grown from a user-generated circus into the most powerful platform on earth. CEO Neal Mohan on his $100 billion vision for YouTube’s future and the disruption it’s left in its wake. (The Hollywood Reporter)

Hetty Green: The Witch of Wall Street: Hetty Green was the richest woman you’ve never heard of. In the late 1800s, she built a fortune worth billions today in a world designed to stop her. Women couldn’t vote, couldn’t own property, and weren’t even allowed on the stock exchange floor. (Farnam Street)

The Rules of Investing Are Being Loosened. Could It Lead to the Next 1929? A group of financiers is trying to convince the public to invest heavily in private equity and crypto — a risky gambit with some real 1920s vibes. (New York Times) see also The Lesson of 1929: Debt is the almost singular through line behind every major financial crisis. (The Atlantic)

Why Some Americans Don’t Invest in the Stock Market: While about half of Americans report owning stocks either personally or jointly with a household member, a substantial portion of the population remains without stock investments. Why don’t more people participate in the stock market?  (Federal Reserve Bank of Philadelphia)

Everything Is Television: A theory of culture and attention.(Derek Thompson) see also The last days of poptimism: The new stars are old-school cool (Unherd)

A Chat with A. Lange & Söhne CEO Wilhelm Schmid about Numbers, Community, and Luxury Retail: From production insights to the ever-shifting landscape of luxury retail, Schmid offers a candid glimpse into the brand’s ethos and his personal odyssey as the leader of one of horology’s most esteemed names. (Watchonista)

These 2 quick tests can tell you if you’re as fit as an 80-year-old elite athlete. Measure your strength, power and coordination with these two simple fitness checks.  (Washington Post)

Thousands Of Words About The Bearer Bonds In DIE HARD: You will learn things from this blog post! (Calm Down)

Be sure to check out our Masters in Business interview this weekend with Liz Ann Sonders, Chief Investment Strategist, Charles Schwab & Co.  Named “Best Market Strategist” by Kiplinger’s Personal Finance, she is also on Barron’s “100 Most Influential Women in Finance” every year since the list’s inception.

 

AI is already having a massive impact on the economy. Specifically, investment, i.e. spending on AI-related hardware and software

Source: Carson Group

 

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~~~~

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MiB: Henry Ward, Carta Chief Executive Officer

 

 

This week, I speak with Henry Ward, Chief Executive Officer at Carta, a technology company that provides capitalization table management and valuation software for startups. They discuss founding a business, the growth of private markets, and his lobby efforts for retail investors to access private markets.

The firm manages cap tables, compensation, valuations, liquidity, amidst an assortment of other data for more than 50,000 companies, 8,500 investment funds, and over 2.5 million equity holders’ $2.5 trillion in company equity; they help facilitate $13 billion in secondary sales.

His current reading is here; A transcript of our conversation is available here Tuesday.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, SpotifyYouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business interview this weekend with Liz Ann Sonders, Chief Investment Strategist, Charles Schwab & Co. Named “Best Market Strategist” by Kiplinger’s Personal Finance, she is also on Barron’s “100 Most Influential Women in Finance” every year since the list’s inception.

 

 

Favorite Books

 

 

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10 Friday AM Reads

My end-of-week morning train WFH reads:

Revisiting “Intelligence Drift” Why AI models still feel like they’re getting dumber. Anecdotal but widespread experience of LLMs seeming great at first, then getting progressively “dumber” over time. With models like GPT-4 and Claude 3.5 Sonnet, users reported worse answers, incomplete responses, and outright refusals to work. (Artificial Ignorance)

Your Emotions Can Throw You Off Your Investing Game. A Vanguard Pro Explains How. The head of investor research at the fund giant outlines how early market experiences can shape investors’ risk tolerance. (Barron’s) see also Staying Focused Through Volatility: The Long-Term Case for this Bull Market: All these factors suggest that we’re still in a multi-year growth phase. Is this an opportunity to create “generational wealth?” Will AI create more millionaires in 5 years than the internet did in 20?   Stay focused on the strongest growth stocks, stay focused on the bigger picture, but also take profits along the way. (Joe Fahmy)

What the graduate unemployment story gets wrong: People with a degree are faring better, not worse than their non-graduate counterparts. (Financial Times)

Why a Traditional Investment Portfolio is Better than Real Estate: If you want to invest in real estate because you want passive income, keep this in mind: There is no kind of investing that produces income more passively than a traditional investment portfolio. (Flow Financial)

The 25 Most Interesting Ideas I’ve Found in 2025 (So Far): Charts and history lessons—across culture, politics, AI, economics, health, science, and the long story of progress. (Derek Thompson)

It’s the Internet, Stupid: What caused the global populist wave? Blame the screens. (Persuasion)

The Very Hungry Microbes That Could, Just Maybe, Cool the Planet: They feast on bubbles of methane seeping out of the ocean floor. Could their appetites be harnessed to slow climate change? (New York Times)

Everybody Around Trump Hates the Unhinged Laura Loomer. Except Trump. She has zero qualifications, zero experience, zero talent except self-promotion. So how’d she get the national security adviser fired? (New Republic)

They Call it ‘Magic Brew’—and It Makes MLB Stars Play Like They’re Completely Hammered: When opposing teams face the Brewers, something weird happens: highly-paid professionals seemingly forget how to throw and catch the ball. (Wall Street Journal)

The Astonishing Versatility of Diane Keaton: Keaton wasn’t just a gifted performer; she also proved to be a fine director. She took wonderful photographs. She could sing, in a fine, clear voice with the charm of a robin’s warble. She adopted children in her early 50s. She never married. She always looked great, expressing radical, rapturous individuality with her clothing, her eyewear, her retro jewelry. But most significantly, she was one of the most sparkling actors of her generation, and though many people associate her mostly with the brainy doodle of a performance she gave in Annie Hall—a brilliant one—she was astonishingly versatile. (Time)

Be sure to check out our Masters in Business interview this weekend with Henry Ward,  CEO and co-founder of Carta. The firm works with more than 50,000 companies, 8,500 investment funds, and 2.5+ million equity holders to manage capitalization tables, compensation, valuations, and liquidity, tracking over $2.5 trillion in company equity.

 

3% pullbacks occur every 1-2 months on average and 5% ones every 3-4 months. We’re currently at 6 months. There have been 14 longer runs since WWII without a 3% sell-off.

Source: Jim Reid, Deutsche Bank

 

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