Situational Awareness The 5 Years Ahead

Good morning everybody and welcome to situational awareness the next five years with me. I'm privileged to have some of the most distinguished investors leading global figures and I'm so pleased that they can join us here this morning. So Chris, Robert, Todd, it's great to see you. Thank you so much for joining all of us here at Abu Dhabi Finance Week. So the next five years, trends, risks, but there's so much to talk about, but let's start if we can with core principles guiding long-term vision [clears throat] and success.

So Chris, I'll start with you. very successful delivery of percentages over 21 years. What are the core principles guiding your long-term vision and success?

Thanks. So we've been successful from using a fundamental strategy, not a a a buy and hold very long-term average company in a portfolio we've held for eight years and several 14 years. So, which is unusual in public markets where most investors are very short-term holding stocks for under a year. So, we're um we're taking what I would say is a private equity approach in the public markets to find companies that dominate their industries, usually monopolies or duopolies with tremendous pricing power, which means they can grow revenue uh profits more than revenue. And we're not looking or interested in the next five years.

We're looking for the next 30 years.

30.

Yeah. Because the value of a company is not within a fivey year period.

Yeah. You can't buy a company on five times earnings. And so if the company isn't around in five years, it's it's it's it's the maths doesn't work. now. But the only companies that you can have confidence can be around in 30 years, you have to have insurmountable barriers to entry.

And that could be physical um assets, airports, toll roads for example, where it's sort of obvious that they'll be around and and uh successful or companies with huge long-term installed bases like aircraft engine manufacturers where the latest innovation won't be able to disrupt for another 20 years. So that's this the essence of of the strategy.

And Robert, what about the strategy at Vista? Do you agree with Sir Chris's vision in terms of long-term?

Uh for us, again, we're we're in the private markets principally. Uh we invest in enterprise software. So these businesses are mission critical, business critical. Um, enterprise software has been the most productive tool that's been introduced in our business economy over the last 50 years. Uh, the interesting dynamic around enterprise software of which there are many.

Um, one is it's 97% private companies kind of point number one. Um, point number two, you know, the these companies typically have to go through their own innovation cycles. You know, technology constantly gets introduced into our markets. uh companies have to be able to embrace uh in many cases the dynamics of change and the technology and we believe a big part of our role is to enable our companies access to the newer technologies the ecosystems the set of partners and relationships that enable them to grow. In some cases the partners and relationships are capital partners in some cases it's technology partners.

Um when we went through the early transitions going from onrem to cloud the first partnership we struck was with AWS because they had the ability to provision cloud compute at a size and scale and this is when Andy and his team were doing a billion dollars in revenue. They know what $30 billion a quarter now. Um and so we were able to to secure that sort of access. Well, we have a new platform generative AI and creating the partnerships like we have now with Microsoft and Google and others and anthropic and open AI enable us to deliver a different set of resources and capabilities to our portfolio companies so they can evolve uh to their next state. So from our perspective, the basic fundamental principles are building the right partnerships.

Yeah. Which can be capital partnerships. Part of our partners are you know in all over the world, many wonderful partners here in in in Abu Dhabi. Um technology partnerships and then of course it enables us to partner with our executives, our senior executives, our CEOs, our founders. And we found that that you know being able to deliver a set of resources that others can't is uh highly differentiated in our marketplace.

So getting those those principles right makes a ton makes a tremendous amount of difference.

And Robert, we'll delve more into AI later because I know we've got some differing views here which will be very interesting. Todd, can I ask you what guides your approach across such diverse industries that you're invested in sport, media, finance, entertainment?

Well, thank you very much for for having us uh here today. I think when we look at how we think about, you know, the the direction and where the world's headed, uh I think the intellectual property is something that we've uh been big believers in. And as we've watched kind of cost of distribution go down, uh we continue to believe that intellectual property will continue to to go up in in value. And right now, when we look at one of our TV and film production companies called A24, Yeah. Right.

The same movie that they would have uh made an animation three years ago that costs 80 million uh is now about 12 million.

Welcome to Mr. Sajuani. Welcome to the panel.

Sorry, my apologies.

No, of course.

Accident in Dubai.

We're so happy you're here. he was too busy selling Chelsea branded real estate, but [laughter] no, we've did a great partnership with uh he with hosting and he did a really nice job marketing and showing the potential of the Chelsea brand. So, thank you.

Thank you.

So, um but it really plays nicely into the intellectual property discussion. But, you know, I think right now the a movie that 824 would have made Yeah. uh you know three years ago in animation that cost 80 million. Right now we're going to do it for close to 10. So you know what that means to us is now the opportunity to acquire intellectual property that has an audience embedded in it and then being able to drive your cost down really means that you know the the business models can explode.

Uh so intellectual property is is certainly one. Uh we also like bar businesses that we think have uh barriers to entry. We're the second largest private travel business that we built with uh uh Flexjet. We're the only travel company that's ever descertified a union. Uh so now we can offer services and products that no one else can offer in the industry.

Uh we're the only one that has the G700. So if uh you're interested in a G700, we can talk after. Um but you know we're looking for for big strong businesses that are have elements to them that make it going to be really sustainable and um you know I think for for us uh that's one of our our themes

and Mr. Sajuani welcome to the panel thank you for joining us. I've just been asking your fellow panelists, what core principles remain important to you in your long-term vision? What is the strategy at Damak?

As you appreciate, we've been 42 years old company. We are in the property about 27 years. I think we done reasonably well. We've been one of the leader in the property of plan business. uh our biggest volume and sale come from Dubai.

I think Dubai in the coming 10 years going to remain a very vibrant global city. Uh everybody wants to come to Dubai. There's a huge growth and we are well positioned to take advantage of that.

We also have gone into the data center in the last four years.

Yes.

And today we are in 12 countries. We have more than 30 data center under construction and some of them ready. Uh we see a huge growth in the data center business. We also formed another company in the AI where we will be uh selling computing power. So we're quite excited about this future of the data center.

Thank you so much. And Todd, what's influencing your investment strategy right now? what are the some of the biggest opportunities on your radar? And I'm going to ask Robert and sir Chris as well. Well, I think uh globally one of the places I'm most excited about is what's going on, you know, in the middle corridor in this part of the the area where we're getting a lot of uh you know, goods and capabilities and products and stuff out of Central Asia and um spending a lot of time in Baku where I think that we have uh you know a real interesting geographic advantage uh and I think there's going to be a lot of investment in that part of the world to be unlocked as America starts to think about critical minerals and supply chains and and really making sure you know because in 1983 America ran off its uh critical mineral supply reserves and really kind of hadn't been focused on it for a while.

So, I'm pretty bullish about that central corridor because, you know, northern traes go through Russia, southern routes go through Iran. Uh so I think the strategic positioning and the piece that they just announced with Armenia I think creates a lot of business case studies uh in in worlds where you can actually put together transactions that are almost like structured finance because you know what your offtake is and you know what your costs are going to be uh and then you do it with global partners at scale. So I'm pretty excited about you know what we're seeing in that part of the world right now.

Fantastic. and Robert

for us again you know that we we now have a new player in this game called generative AI and we have a number

yes

of of companies bringing literally trillions of dollars of capacity um you know we say you know history doesn't necessarily repeat itself it often rhymes uh what we're seeing again is you know that that capacity is bringing a a new enablement of enterprise software companies to to create agentic enterprise solutions which are highly productive. And to give you some construct, uh in the early days of when we were converting from on-rem to cloud, we were seeing about two and a half to three times economic rent pickup uh in the efficiency of operating in that state. Um now we have 30 companies that we've gotten through our agentic factory. We're seeing you know 20x so an order of magnitude higher uh in economic pickup. Um there is it is non-trivial.

uh there's some work you have to do. Less than 1% of the enterprise data actually exists in these foundational models. Um but as you uh build this capacity and have the ability to underwrite to these transformations uh we're seeing a massive opportunity for us to create agentic enterprise solution sets that go into specific markets, specific industries and deliver a tremendous amount of value to the customer sets. And now again we are now in the in the process of doing the implementations actually seeing the results seeing results not only for our companies but seeing the results for our customers. It's early in that game because we're just now getting access uh and actually building these solution sets uh so that you have the precision in the enterprise very different than the consumer.

You know can deal with you know 90% precision in the consumer whereas the enterprise you need a much higher precision set. So there's a different architecture a different orientation you have to bring to that environment. very exciting opportunity for us and folks who have actually what I call maintained the sovereignty and dominion of workflows and data sets in the enterprise. Robert, it's so interesting because you talk about agentic AI AI of course and that's so much a part of of of the core of what you're doing. There was a headline a few months ago when you had said that actually 50% of jobs would be taken over by agentic AI if I can remind you that you said that.

Do you really believe that? Is that going to happen?

Headlines don't represent what you say necessarily as we all know. Um the point is the the productivity from these tools uh will create a massive displacement in certain segments of the marketplace uh that we are all going to have to deal with uh on a societal basis. Um we're seeing in certain businesses that know there will not be a need for certain categories uh in other cases it's going to create an augmentation of of of capability. You know again we we are seeing the ability these you know agents when you have them operating effectively in an enterprise workflow again work 247 365 higher precision higher output uh than what you will see in a human worker and in some cases you know augmenting the the the human intelligence will be essential in some cases replacing replacing it so you can actually get to a higher order of work higher order of thinking is going to be the output but each one is a specific case in some cases it is you know an amount of knowledge and information that otherwise didn't have access to and in some cases it's removing you know wrote task work that's orchestrated and you can do it at a much higher precision than human workers can do.

So Chris are you in agreement with that because I believe you've been heard to say that you feel that AI is actually going to be a bubble.

Well I didn't say that but um [laughter] the headlines

but I'll say but I'll say it now. It could well I don't

it could be is what you said.

People who know more than me say AI is real. Could there be companies and and and and and investments that that that don't make any sense? Certainly. But the um the applications are real. Um, I was watching the documentary u on Dennis Habibis that just came out and they showed how he mapped protein folding and and and and the huge applications for drug discovery.

So I I I do think AI will be disruptive but it will take much longer than probably we assume for companies did to deploy it. It's going to take time. Uh but what does that mean for investors? It it means that the forces of disruption are increasing at a at a rapid pace. And one of my principles of investing is that investors underestimate the forces of disruption and competition.

And most companies eventually get disrupted. And that's a big problem for investors um because it means your universe is limited. Your investment universe is limited and decreasing. You know, if I say the maths of investing means that you have to have a long-term conviction, but technology is disrupting and so so then the um you know that the the implication is that most investments are going to be worth less than you think, maybe a lot less. and your uncertainty and risk factor is off the charts and so it's even more important to have try to have conviction on sustainability of barriers to entry.

So you asked you know what are the themes where so if there's very few places you can go where where where could you go and um and in in in in because in fact it's easier to see the losers than to identify the winners. That's what people have understood. But one place we one industry we like very much is aerospace and European defense. Um because the IP intellectual property of making an aircraft engine is huge and AI is not going to disrupt that because there's process engineering and and experience and installed bases and regulations and uh trust and you know uh multiple barriers to entry that mean this is an industry where we haven't had a new entrant aircraft engine manufacturer. It's um two Jopies.

We haven't had a new entrance for 50 years. There's no Chinese competitor. Every single manufacturing business, this is the other disruptive factor, is now dominated by Chinese. Yep. They're completely commoditizing every manufacturing industry.

So um that's a a niche where we see structural demand and sustainability of the barriers.

Todd, what about the impact of AI at Eldridge across your portfolio?

Yeah, I think obviously we've talked a little bit about A24 and driving the cost of goods down. Uh so that's a direct correlation to improved use of technology and AI. We had a gentleman who was running AI for Adobe come over and drive our AI at A24. Uh I think that you know the state of the insurance industry is going to be very different. Um I think if you look at what insurance is, it's just a series of kind of transactions and promises.

Uh, and I think if you look at the the legacy insurance world, um, in America, there's more hundred-year-old insurance companies than any other industry. So, they've had these giant moes which have made it so customer service isn't really something that's a priority. And thinking about, you know, other opportunities with the the client has never been a priority. And ultimately insurance is really just a product within a portfolio of products that people should have. Uh so I think we're going to watch that industry reform.

Um you know it's got a regulatory u protection. Uh that you know is is uh you know one of its uh strengths for the incumbents. Um but I also think that you know in the end this is just you know digits moving around and it shouldn't be as expensive as it is to operate and you should be able to generate you know more rate of return in the products as you take kind of the costs of operation you know down to zero are very low uh because really all you're doing is recordeping in the end and I think that you know I think that when you see opportunity unities like that and you look at the size right I mean Birkshire Hathaway is a trillion dollars now in '92 it was 11 billion you add up all the asset managers and they don't get to the trillion and that's just one you think about Metife New York life mass mutual so the size and scope is enormous and I also think that you know insurance is going to become a bigger part of everyone's savings plans you know around the world you know so for example the the superanuation vehicles in Australia when they make distributions, what happens with those distributions? Because all that money's been run professionally for so long and that's why if you're in Australia right now, you know, and you start a job as a 25 year old, you'll know by the time you retire, you have, you know, three million bucks, right? So the strength of that savings pool, uh, you know, is really something special.

So when you start to think about what are the opportunities that come off as a result of those forces that are driving you know I think annuitization and insurance globally is pretty exciting. And Hussein, if I can ask you, you were saying of course that you know we've been in the property business for a long time and we looked at diversification and I found data center not far away from the property because end of the day we buying a piece of land We building a building. Yes, more complicated building. It has more specifications. Uh but it's not far away from the uh property business.

To highlight another point, the impact on the AI on our property business. We formed the transformation department in the company about four four and a half years ago and today is really paying as well. So our CRM number of employees were 240. We're going to be down to 40 people in the coming few months on the collection, on the marketing. Uh we saved a lot of money by implementing the AI.

And my advice is for the people, individual, companies and governments, they need to move on that very fast because things are moving very fast. And I'm very proud to say UAE has taken the initiatives at a very early stage.

I knew this would happen. We're running out of time already. I think we've got time for two more questions. I just want to ask each and every one of you about managing risk and volatility in this current climate. So Chris, the [clears throat] there's really only two prices that matter.

The price you buy, the price you sell. Everything intervened in in between only matters if it impacts your behavior. And so I think a lot of people investors waste a lot of money caring about volatility. Okay? If you've got long-term capital, you shouldn't care about the daily quote, whatever that might be.

And so if you spend half your return or more trading or hedging, yeah, you haven't actually done your investors um any service. And I think that's something that the private markets have had an advantage in in in in uh because they're not swayed by that and they can take a longer term approach and um so the biggest point I would say is you know does it matter?

Yeah.

Okay. I sometimes say very few things matter and most things don't matter at all and volatility is one of those things short-term vility that really shouldn't matter to long-term investors

Robert does it matter and what's influenced your strategy for managing risk at

yeah you know again being in the private markets I think about it in a as a function of diffusion um you know what is the diffusion rate of a a technology a new techn technology into the markets that you care about. You know, our markets typically in enterprise software, they have been winner take all, winner take most. Uh this new technology because of the capability of it. If you convert users to agents, you know, our math in terms of as we've now pushed our companies through our agentic factory, converting 750 million users of software globally to about 10 billion agents. If you think about that, that's twice the size of the actual workforce on the planet.

These agents are very discreet in what they do. uh but they have a high frequency of engagement uh in managing with partners like like uh uh and others hopefully low latency um high capacity um you'll be able to actually manage the diffusion rates in these industries uh with with some control and as I'm instructing my teams I think it is truly a he he or she who gets there fast first will actually be able to capture even more economic rent uh in the marketplaces because as you unleash this sort of capacity in specific industries, if the competitors do not have anything to answer in a short period of time, uh it will create a a a a market where their companies will will will will be affected quite dramatically, quite quickly, and your companies will have the ability to capture again more and more economic rent, economic share. Now with all of that, one of the things that Todd said I think that people are are not factoring in completely is it actually will have a little bit of a deflationary effect. I think cost of goods will ultimately come down. There's going to be a process till we reach that new set of equilibrium.

But the manufacturing and the cost of goods as you bring this productivity at the scale that that that we're kind of acing and b estimating uh will create actually a lowerc cost living environment which we're all going to have to deal with as as well in in a different way.

Thank you Robert and Tom. How do you define an acceptable risk in a new venture?

It's just about price. you know, price and risk need to correlate and sometimes it's better to buy businesses and sometimes it's better to build businesses. So, we've built businesses from scratch when that's the smarter thing to do and everything is trading really tight because of course that's a good time to procure working capital to be able to build businesses. And then when markets give you kind of opportunities to create businesses at prices that are uh you know compelling then that's what we want to do and and I also think so many of our strategies are income strategies that you know we care more than just about the price that we enter and the price that we exit. We care about what happens you know in the middle because so much of what we're doing is secured financing equipment leasing.

So I think really it just comes down to the opportunity.

We have one minute left. Just your final [snorts] thoughts. What trends and moves will define the next five years? Hussein will start with you.

For me volatility is there. What is most important thing for me are two things. Your cash flow your leverage. And I was lucky to see 09 where my sale dropped 98% my collection dropped 96% and that gave me a very good lesson every week and every three months we do a stress test. So you do your stress test like for your heart you survive.

Todd,

um I think Chelsea will win the Premier League.

Yes. As a Chelsea fan, that's music to my ears. We're going to win and then Champions League after that. My my sons will be happy to hear that. Uh,

fantastic, Robert.

I think for for us it's really going to be the diffusion rates of agentic AI uh in the industries globally. I think those are going to be things we'll have to to monitor. And the final word from Sir Chris.

I think the world will wake up that climate change is an existential risk for the planet, for poor countries in particular, and hopefully start to care and take actions on climate change which are inadequate at the moment.

So Chris Hong, Robert Smith, Todd Bowley, and Hussein Sanwani, thank you so much for joining me here today. Absolute pleasure. Thank you.

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