#389 - Imran Khan - Founder @ Proem Asset Mgmt - Investing In The Fourth Industrial Revolution

Chris Powers: Imran, thank you for joining me on the show today. It's a pleasure to have you on. 

Imran Kahn: Thank you for having me. I really, really appreciate it. 

Chris Powers: I wanted to start back in the early days, and I don't mean to brag on you right out the gate, but there was a time where you were rated by institutional investors, I believe one of their magazines, the second best research analyst in the investment world. And so, I wanted to start by saying, what did you do that made you great at it? And are the same things that mattered back then in research, do those matter today? 

Imran Kahn: Oh, great question. So long ago. I think what got the attention of... So, Institutional Investor was a magazine, it’s still around and they still do this survey. They go back to all these by-side investors like Fidelities of the world and the hedge funds of the world and ask for who the top analysts are in different sector categories. And I think what got me the attention of a lot of the investors, I was very young and for a couple of reasons. I had some really good stock called right off the gate. I think in 2004, I had a great call on a company called InfoSpace. They're making mobile ringtones, and cell phone was growing and the mobile ringtone business was growing really, really well. And I recommended the stock. InfoSpace was a stock, if I remember correctly, it was a really hot company in 2000, 1999, 2000, and then the company blew up in 2001 and went back to a very, very low price. And then they got into this mobile ringtone business. And I started recommending the stock. Stock, the ringtone... I don't know what's the average age of people who are listening to this call, but 20 years ago, ringtone was a big deal. You would add up this music ringtones, and people would pay 99 cents to download this music, a ringtone. And so I recommended that stock, so we made a lot of money for a lot of clients. And the interesting thing is, I think, again, if my memory is correct, we got the stock right on both sides because I downgraded the stock. And because my thesis was, we were moving on from the ringtone business was becoming more digital ringtone, and on that, you have to pay a higher royalty share with the music labels. And there was this famous call with me and the CEO, exchange in an earnings call. I was probing him on this margins issue that, hey, your gross margin is going to go down. And he... What I found, that whenever a CEO makes fun of you or is mean to you, that means you're pushing something that they are- close to their heart. And he made a statement saying that, hey, something like that, Imran, I know you're very smart, and you probably went to a top business school, you focus on margins, but I take the gross profit dollar all day long. But I was very right because the margins squeezed and it's really hard to stop. So, I think at first, to answer your question, got attention by the stock call. But the second thing is also to become a good analyst. In addition to stock call, you have to have a good analysis, you have to have a good model, and you also have to be good at client services. Because clients are investors who are investing in a public market. You want to be available for them when they need to talk to you. So, you need all of those things to become- get ranked. And the answer is true even today, like good stock call, good analysis, and good research report, and good marketing, talking to your clients regularly and be available when they need you, makes you a good sales side analyst. 

Chris Powers: Okay, you mentioned gross margin. You talked about this before. Why are gross margins hard to control? 

Imran Kahn: Yeah, so I think, it's really, I always say that if somebody hires me as a CFO and the board or the founder mandates me to, hey, go improve margins, so I would probably first focus on sales and marketing. If it's a B2B business, focus on how can we improve the revenue target for salesperson and really focus on productivity of the sales team. I would focus on the marketing dollar we're investing. Are we getting ROI on that marketing dollar? And also, there's a lot of ways to improve your sales and marketing margins. And then there's a lot of ways to improve your G&A. Early days of Amazon, they would have like a small desk so that they can fit in more people at the desk. You cut your office space, you cut – a lot of people are going to hate me for saying that – a great way to improve your G&A margins is by increasing insurance deductibility, things like that. So these are all controllable and can do it. But it's really, really hard to improve companies' gross margins because your cost of your business- cost of your product is the cost of your product. So you need some really step function improvement to improve your gross margins, or something has to fundamentally change if your gross margins go down dramatically. So when the companies have step function improvement in their gross profit margins on both upside or gross step function decline, that is something fundamental going on in the business. And understanding that helps you identify good stock or bad stock. 

Chris Powers: Okay, I want to go back to research real quick. So maybe the question is, what is your process? But how do you know you've done a good job researching a company? 

Imran Kahn: I think that has changed a lot over the years. 

Chris Powers: Because you've learned more along the way or because the world's changed? 

Imran Kahn: The world's changed. So, 25 years ago, when I was a young analyst, to learn a company, you have to go to user conferences, analyze it, try to talk to their customers, talk to their suppliers, talk to all sorts of different people. It's very labor intensive. Nowadays, you don't have to go anywhere, because thanks to all the social media, all this information is in public. People are debating about a stock in X, people are debating about a stock on Reddit. There's a lot more public information available. SSE is now on the public website. I don't think SSE was as website-friendly in 2000. And now you have AI tools. You can ask AI tools to go look at and ask the agents to look for what you're looking for. So the research has become much more easier and accessible. And I think that's why you're seeing the retail, real strong growth of retail investors, because I think there was a divide between institutional investors and retail investors. Because institutional investors would get access to the management meeting, they would get talked to people like sales analysts like me, who is talking to the company and following the companies a lot. Now, a person who is financially literate, and a lot of people are like that, who can actually study and research a company without paying anybody a dime. And there are a lot of really, really smart people who are not in a finance business as a job, because they are either not from the Northeast, because a lot of people in finance are from the Northeast, because- or they didn't go to the target school where they were recruited, or for a variety of reasons. They were not- like, I was from Bangladesh. I didn't know about Wall Street till in my sophomore year in college. A lot of people don't get the exposure. But they're very good at what they do. And they read a lot of books and they are becoming very good investors. And I think if you look at the recent drawdown we saw in the market in March and April, institutional investors lost out to the retail investors. Again, this is anecdotal. If you look at institutional investors, basically [?], but the retail kept buying, at least the data I saw from third party broker dealers. And it seems like they were right on catching the recovery. So, I think it's really brought interesting dynamics in the market that small investors, the retail investors, are in many cases quite smart and they're having healthy debate in social media. So, it's actually made the conversation about stock and research much more exciting than it was before because you only had to talk to professional investors who are paying attention to the market. 

Chris Powers: Do you think they're smarter? Do you just think they have a higher risk tolerance than in previous generations? 

Imran Kahn: I think both. I think they're smart because they're technology native. Because if you look at who got the crypto right, it's not a lot of big institutions. A lot of the small people, individuals, so they're technology savvy, so they know... I think I look at it, why I was good at internet in the early days, because in 2001, I was 24 years old. I was digitally native. I was using Google. A lot of people were not using Google. Now, all this new digital product that's coming up, these are young people, they are more technology savvy. And so, they understand these companies better than a lot of other people. 

Chris Powers: Okay, you've been covering call it the internet and technology since the early 2000s. And one thing our mutual friend Fernando just talked about was you probably understand the inner workings of this industry as well as anybody. Okay, the 2001 bust, maybe we could characterize that as these businesses that weren't really making any money, there was a big dream being sold. And so, they pretty much went out of business because they really weren't creating a ton of value at that point. We're now 25 years later. Are there any similarities to what's going on in the world today that you could go back and say these are similar to 2001 as it relates to like AI or some of these breakthrough technologies where you could see massive bubbles forming? 

Imran Kahn: Yeah, I think I fundamentally believe there's always a bubble somewhere and there's always a bubble bursting somewhere. And the reality in the market is people always get more excited than they should be. And people always get disappointed faster than they should be. I also think there is a lot of FOMO, fear of missing out in the market. You see something going up, people chase it. You see something going down, people get scared and then dump it. That's the human nature. I always think, if I look at the last 25 years and also the last six and a half years of me managing money, I think what makes you a great investor, obviously your stock picking, but also your stomach and your conviction. Testing your conviction, I would say. Because sometimes you're right, you might be a little early or it takes a little bit longer for your thesis to play out. So having strong conviction is really, really important. But I think to answer your question, I think there are bubbles now also happening. I think a lot of stocks are people thinking about the future and they're getting overexcited about the future. The thing is that anything that's 10 years, 15 years out, or even 5 to 10 years out, in technology, it's very, very difficult to predict what's going to happen 10 years from now. And maybe you might be right saying that, hey, there will be more people going to use internet, that was my thesis in 2000, and then in 2010, then in 2000. Yeah, of course I'm right. But the companies that were benefited by that were completely different companies than I thought that would be in 2001. So here we're sitting here, for example, AI, we're talking about AI, AI will be a fundamental shareholder, it's a fourth industrial revolution. And I think that is accurate. AI will be incredibly- it will change our life forever. And we're going to live in a completely different world than we are used to 10, 15 years from now. It's like thinking about, I was in a dinner last night and this gentleman was talking about how life was different in 2000 when cell phone was not prevailing and how camera phone changed the life. And so, I think in 15, 20 years, the world will be completely different. We'll see things that we probably can envision, like self-driving cars and lots of other things, more people are probably going to go to space and all sorts of good stuff. But who will be the winner, it's very hard to say sitting here. So, I think a lot of excitement happens about this future potential in a few companies, and that creates a bubble. And so you've got to be careful. Not everybody is going to win and be a winner. And you've got to figure it out. And so that's how the boom and bust cycle gets created. 

Chris Powers: So, when you think about AI, do you think about investing it through a lens of how AI could make, for example, Tesla a better company, and that's kind of your bet on AI, is that Tesla has massive tailwinds if they get self-driving cars right? Or do you think about it more from investing in companies like Nvidia or OpenAI or companies that are directly building the products that make AI happen, if that makes sense? 

Imran Kahn: Yeah, I think the value creation of AI will be many, many places. People who are making it happen, people who are making chips, people who are building applications, people who are building hardware devices. I think the way I have to think about it is that, one, what is the opportunity? And then you have to think about, okay, who is going to be winner at that opportunity. And then the third, you have to think about it, how much you are willing to pay for the risk that this company may or may not be able to execute. Because execution is key. You can have the best idea in the world. If you cannot execute, it will not be great. So as a public market investor, you are sitting in a backseat. You're an observer of what's happening. So whether the management team will execute or somebody will outsmart them, you just cannot predict that. So you have to take the risk. And you have to think about it that, yeah, while I believe in AI, a few things I cannot predict. Timing, between 10 years and 20 years, it's a long, massive difference in your IRR, what your investment rate of return is. You cannot predict exactly who is going to be the winner and how that's going to play out. So I think being sensitive about the valuation, how much you're willing to pay for it, is incredibly important. And then the other thing I love is I like to call it AI arbitrage. Because I think if you look at what makes an AI business be successful is you need a lot of data. You need a lot of distribution. This podcast could be the world's best podcast, but if we don't have the distribution, nobody will hear about it. So you need to have a good product. Also, you need to have a good distribution, and you need to have good data. So there are a lot of companies that are sitting on a lot of data. There are a lot of companies who have this great distribution and maybe they're building the product or they should be building a product. I love those kind of ideas because that potentially can create, I call it AI arbitrage. 

Chris Powers: Do you think there is a further battle, and maybe I'm getting a little bit ahead of where I wanted to start on as it relates to China, but when you think of things like DeepSeek and it came out earlier this year, is there two different games being played or is there an unfair advantage that America has over China or China has over America in this kind of race to AI? 

Imran Kahn: I think China and US are very competitive. I think both countries have incredible talent pools, massive talent pools. 

Chris Powers: Whose is better? 

Imran Kahn: I don't know. I think the US has better universities, but China has- but US has more bigger universities. I think our capital system is incredibly beneficiary because we reward success. We have less government oversight on those kind of things. But then on China's case, I think not to get too political, I think our education system is probably lacking in high school and middle school on a STEM side. And I grew up in a third world country. Grade matters. And now we're trying to be less focused on grade and more focused on other stuff. I think that's probably not... if you want to build the best engineers, you've got to build the best... you have to be the best at STEM. So, I think academic rigorous in the country is very, very important, and you cannot compromise that. And I think, look, all the other things that we care about, they're important. It's not like they're not important, but it cannot be a zero-sum game. So that's one area. So, I think that’s what Chinese understands, all these things that we do really, really well. So, I think I don't know if we can say good or bad. But I think China will be very, very competitive and compared to like a lot of the other countries. And they also have a big domestic market to support it, which also helps them. But I think the US has a competitive advantage in my opinion at this point because we have the chips that they don't. We have the capital system that they don't. So, I'm a big believer in America and I think ultimately the US will win, but China will be a formidable competitor. And it's not about winning and losing. They're going to be a big player in this space, in AI. And honestly, that will probably make us better. 

Chris Powers: Do you think there's a different set of goals, or is it just... Like you said, it's not winning and losing, but do you think we have different goals than they do, or they have different goals than we do, or we're both kind of fighting for the same thing? 

Imran Kahn: So I think AI is all about productivity improvement, and if you can improve productivity, that will drive GDP growth. So that's one big area. I think both countries want that. China, probably on top of, both China and US, is also going to be a very important play for defense. I think AI will be a very, very important play for defense. So that's obviously very important for the United States and [?] China. It feels that way. The other thing, hopefully, we're not going to see in the Western world, but probably going to happen in China, the way they use the digital to create surveillance of the population. AI is probably going to create more surveillance of the population. And that's probably not a great thing. But hopefully that doesn't become the case in the Western world. 

Chris Powers: Can you tell me a story? You've said two things that lead me to want to talk about the Alibaba IPO, and then we'll tie it back to China. But can you just describe to me or tell me the story of how you got to know Joe and how you got to working on what became the world's largest IPO at the time, Alibaba? 

Imran Kahn: Yes. China was obviously, post-WTO was really opening up to the Western world, and the country was going incredibly fast, and they had a lot of young people 30 years ago. And so, I got really excited about China because the internet was all about having a lot of number of people and a lot of micro transactions. Like if you have a large country with a lot of people, a lot of young people who are adopting digital and they're doing micro transactions, you will generate a lot of revenue and it's going to be a bigger revenue. Like, listen, I don't think in 2000 I thought the internet would be what it would become today. I didn't realize that six or seven companies will represent half of NASDAQ. But we knew it's going to be big. How big? We didn't. I don't think anybody realized that. So, I was like, okay, which other country has... obviously, the US was growing really fast, which other country, and we saw China was growing really fast, so we started going there. And the other thing was the US companies were going to China at that time. Yahoo went there, eBay went there, Amazon I think also went there. So, given it's such a big market and I was covering those stocks, so I went there. So in 2005, I think, I went to China, took a group of investors, and we met Joe at that time. I think Alibaba was doing 80 or 90 million dollar revenue at that time. It was valued at 4 billion dollar market cap because of Yahoo. They just did a deal with Yahoo and everybody was saying, wow, they're paying like 50 times revenue multiple. But he's a great guy, very thoughtful, and that's how we met him for the first time. 

Chris Powers: And did he, after that meeting, invite you to work on the IPO, or was that just a relationship that built, or is that just where you were at Credit Suisse, and it just so happened to fall in your lap? 

Imran Kahn: No, no, that's the relationship builder. And the interesting thing is, at that time, all these Chinese founders, they were- and I'm sure it's even today, they are very mesmerized by Silicon Valley's innovation. They're very envious of it. And so they would read all the sell side research analyst reports. I don't know if they do it now, but at that time, there's not much research available on the internet. If you want to learn about Google and Yahoo, you have to read Goldman research, JP Morgan research, Credit Suisse research. Going back to my earlier point, how the world has changed, and the research was just not available. So, they would read my reports, and so we would sometimes talk about it and try to learn what's going on in their business. And so in 2010, he called me up and said, hey, I really like how you think about the world. Would you consider to go become a banker? Because then maybe you can help us do some transactions and things like that. If you're an analyst, we can't really work with you. So that's how I ended up going to banking. And ultimately, they became one of my clients. 

Chris Powers: Is China as investable today as it was back then, or have things changed? Like if you were doing the Alibaba IPO today, would it be radically different just based on where we are geopolitically and just kind of how China's evolved? 

Imran Kahn: Yeah, for sure. China always had the risk. They had this VIE structure. [?] people who don't know, when an investor is buying a Chinese stocks, oftentimes you're not buying the company, you're buying a Cayman Island company who owns 100% entity of the Chinese company, because the Chinese digital licensing rights, those are not allowed to sell to foreign investors. So, there's always the risk of the VIE structure for these Chinese companies. And some of the VIE structures are better than other VIE structures. And you have to read through the S1 document and things like that. So, there's always a risk, but there was always that, you know what, Chinese government will always protect the international investors's interest. They will not do something that is so arbitrary that could potentially impact investors' trust in investing in their business. I think at the end of the day, investment, I always tell everybody, when somebody gives you money, they give you their trust. And it takes a long time to build trust, but when you break the trust, it's very hard to recoup that trust. And so they build that trust. But I think over the last five years, what happened in many different instances, the way the decisions were made, at least that was very opaque to the foreign investors. So I think rightfully, a lot of foreign investors lost trust on the Chinese government that do they have the interest to protect foreign investors. And so that made the investment challenging itself. And then obviously on top of that, you have a geopolitical risk that is incredibly heightened now than it was 15 years ago. 

Chris Powers: Knowing what you know about China, do you have any thesis on how this plays out or how this, even maybe from an investment standpoint, do we end up on solid ground with China? Is this prolonged? Is this a longer thing? For someone that just knows the inner workings of China as well as you do, how do you think about it? 

Imran Kahn: Yeah, like I don't know if I know inner workings that well. I know the companies, but I don't know that government at all. So, it's kind of... by any means, I'm the expert of the CCP or Chinese government or Chinese foreign policy. So it's kind of hard for me to answer the questions. I know the businesses well, how those businesses work. But the risk with those businesses is that that was not at least as profound 15 years ago. I don't think you can be completely sure that when you invest in Chinese businesses, your rights will be protected the way it was protected 15 years ago. There are at least unwritten rules that the rules should be not that arbitrary or as opaque. And then the second is obviously, it is now much more clear and much more in people's forefront of their mind than it was 20 years ago that China is a much more adversary relationship with the United States than it was 15, 20 years ago. And so, a combination of those, it makes it very difficult. I don't see anything changing anytime soon. So, I always say on the investment that you always have to think about what futures look like, but you also have to understand the future changes very quickly. So, you have to have an open mind about it. Sometimes being overconfident about the future could destroy your performance significantly. 

Chris Powers: Is the entrepreneurial spirit though kind of alive and well in China from knowing the businesses and knowing the founders? Or has it been kind of, again, these are headline things, but I think of Alibaba, I think of Jack Ma and kind of what happened to him, or I don't even really know what happened to him, I know he just kind of disappeared, but that seemed to send a signal to the rest of the country that entrepreneurship's great up until a certain point. 

Imran Kahn: Yeah, I would think so. I haven't been to China for six years because it's less of a focus for the reasons I kind of identified to you. I would have to think so. I'm a big believer over government regulations is not good for a sector to grow. So, I think it cannot be good for the entrepreneurship that if you're successful and if you speak up or if you're trying to say things, that the consequences is that harsh. 

Chris Powers: All right, so you leave Credit Suisse and you go and you have a, at some point along the way, Evan Spiegel from Snap calls up and says, Imran, we need to have a meeting or something of that nature. Can you give any color to what you guys talked about the first time you met and what kind of the vision and the goal is he set that attracted you to Snap? 

Imran Kahn: Yeah. So, it's a funny story. I got an email to go meet Evan, and I was 37 years old. Alibaba went public I believe the third week of September. And then a week later, I got an email to meet with Evan. And I was 37. This is 2014. I was not using Snap. I don't think anybody at my age was using Snap, anybody. If you're using Snap, it was probably a questionable behavior. But I heard about Snap, obviously. It was in the paper all the time, and it was very popular. So, I remember I got the email, and I was in a taxi going to the office, and so I went to the office and asked all the first-year and second-year analysts. So these are the people who just graduated from college. I said, hey, do you guys use Snapchat? And 100% of the first-year and second-year analysts raised hands and said, yes, we use Snapchat. I was like, wow. If 100%, and these are smart kids, graduated from top schools, coming to investment banking, are using the product, there must be something to it. So, I called them up and said, hey, show me how to use the product, just a messaging app and people would send pictures. But in a consumer, it's really hard to build a product that has that kind of vitality. So, when I went to Evan, I think what I was really impressed by him was how mature he was. He was 24 years old at that time, we have 13 years age gap, and he was incredibly mature for a young founder and how thoughtful he was. And he had a lot of great insights. To build a consumer product, you need an incredible insight where the... consumer product is really, really hard. Because if we built a B2B product, you can go to a customer and say, hey, do you want to take this product? What needs to happen to have this product? And we get one or two or three customers and then you can scale that. But a consumer product, you have no idea whether it's going to work or not. So you have to have an incredible insight what consumers will like or not like. And I remember Evan liked to walk, and we went for a walk and he walked really fast, and I'm a little heavier so I walk slow. So it's kind of hard. 

Chris Powers: Hey, slow down. 

Imran Kahn: But it was pretty clear that he had an incredible insight and understanding of his generation and the consumer insight. And that is very, very rare. And it's really hard to find a [product?] who has a great product mind like him. And so that really attracted me, and that's really what led me to join. 

Chris Powers: Okay, this is a dumb question, and this is... so you could say he had a credible and customer insight. Was his customer insight that young people love sending disappearing messages, or was there something he said that you recall that was like he really gets it? It had to have been way deeper than that at that point. 

Imran Kahn: His insight was that the generation of people who grew up with Facebook, they understood the consequence of Facebook. So you post something, it never goes away, and ultimately it can harm you. So his insight was that you need a communication method that you can... it's not forever. Not everyday life has to be perfect. So Facebook is, at that time Instagram was not there. Facebook was, Facebook is your bragging platform, which kind of is what Instagram is, but Snap is your everyday platform that you can talk. So that was one insight. His second insight was, Facebook is for your friend that you met once in your life or twice in your life, but Snap is for your closest friend. The number he showed was that average Snapchat users at that time were opening the app 24 times a day. And so that was a very interesting insight. Third, his big insight was that the communication, because of that time, remember, you and I, I'm assuming your age, so forgive me, but you and I grew up in a pre-cellphone era, and then the cell phone came along. That's not the camera phone. Now, this is, you are meeting a guy in 2014, he is 24 years old. He grew up in a world when iPhone came out when he was 17. And he grew up in LA, which is more people are adopting that. So, he understood the power of camera on the phone and how that would change the communication, the value of the video and the messaging. That was not so obvious either. So those are some of the insights that he had that was really, really interesting, that really drove this product creation. 

Chris Powers: So, you go on that walk or you meet that time. How quickly between then and you actually taking a role there, was it pretty quickly thereafter, or was it a lot of back and forth? 

Imran Kahn: Evan moves very quickly. But as soon as I got out of the meeting, I called my wife and said, hey, maybe I'll take this Snapchat job. It sounds super interesting. I think he’ll offer me a job, and I think I'll take it. And my wife was like, whatever, why are we moving to LA? We were living in New York. Yeah, it happened very quickly, I think within a month. Because... we got the email end of September, I think I met him sometime in mid-October, and he gave me an offer by mid-November. Yeah, and then I joined. 

Chris Powers: Okay, and what was the job? What did you have to do to be successful there? 

Imran Kahn: Yeah, so that was great. My official title was Chief Strategy Officer, and I was like, what does a Chief Strategy Officer do in a 50 or 60-people company? It's interesting. My title doesn't really reflect what I did. At the beginning, my first role, job was to go, we had to raise some money for the company. We raised like $1.8 billion... at that point, in January 2015, we had zero revenue. So I was responsible for growing our revenue. So, I ran all revenue and revenue product because we have to build that, what the ad product will look like. I would like to say that with Evan's direction, we built the ad product that is now the standard. Because in 2015, if you had ad product on your mobile phone, those horizontal ad creatives that you see on YouTube where if you're holding the phone, you'd see blank space at the top, blank space at the bottom. And Evan said, why does the ad unit have to be like that? Because when people take videos, that's a full screen. The ad needs to be full screen. So we had to create those ad units, and I had to go convince Madison Avenue that that is the right ad unit. And it was a tough one, because advertisers don't want to do extra work. But then I ran all revenue, revenue product, revenue partnerships, overall company partnerships, strategy, HR, real estate, all sorts of stuff. Yeah, so it was quite a run. And we went from zero revenue, and then I think the quarter I left, the Q4 of 2018, we did $400 million quarterly revenue. So, $1.6 billion annualized revenue. 

Chris Powers: Can you still sell ads the same today after Apple's update? I know a lot of it was talked about, Facebook was having trouble tracking people the way they used to, so ad sales weren't as appealing. Is that the same case for all the consumer apps? 

Imran Kahn: Yes. I think that is still the same way. There was tracking that changed, but it's still the same way. 

Chris Powers: Why did you decide to leave and start your own firm? Was it you'd gone public, your job was kind of done by that point? 

Imran Kahn: No, I love- I feel like after being an analyst, like I was an analyst as you pointed out, and I love stock. I always loved stock. I always wanted to start a hedge fund, and I never just had the time. Because 2008 was the global financial crisis. And as we kept coming out of the global financial crisis, I ended up becoming a banker. And then after the banking, I was going to go start the fund, but then Evan came along. And it's really interesting. I was talking to Joe Child, my client, about this Snap job offer, and I said, I really want to go become an investor. So, I don't know if I want to- should I take it or should I go become an investor? And he said, listen, you should go take the job because it'll make you a better investor. And so, I talked to a lot of other people also. And so, I held off starting the fund for four years. But after that, I feel like I owed it to myself to go start a fund. And I like investing. I like stock. And Snap's success gave me some financial freedom. So, I'm like, you know what, let's just go do it. 

Chris Powers: Have you structured your fund differently from most funds? Do you have different incentives or different time horizons? Or is it a typical type of hedge fund structure? 

Imran Kahn: No, I think, one, we're long-term investors. So I'm very upfront with the market that, hey, we're long-term investors. We're not those market-neutral funds, not the Citadels of the world. Which I have a problem with because I think, listen, those are great. But to me, those feel like a fixed income substitute. You run a market-neutral fund, instead of 4%, you get 8, 9%. But if you look at the technology world, the amount of innovation that is happening, you've got to be long-term, and it might come with a little bit higher volatility, but you can generate so much higher return. And I run a... long-term investor, and I also believe that a hedge fund manager should get paid unless they beat some sort of hurdle rate. And so, we do have those kinds of stock. 

Chris Powers: You've mentioned you have 30 to 40 kind of check marks that you'll look for. We don't have to go through all 30 or 40. Are there one or two that stand out that's like, hey, this is something I look for that most people don't? Maybe that's proprietary, you can't share it. Or is there something that comes to mind that you must check that maybe a lot of people don't think about? 

Imran Kahn: So one gross margins thing we talked about. I love companies that have strong pricing power and raise prices. I love when the competition decreases. I love when the revenue growth accelerates because it's really, really hard for mature business revenue growth acceleration. I love new product upgrade cycles because if you have a big install base and a premium product upgrade cycle, your sales force has more product to sell. I always say, always invest with government. Government is the world's biggest monopoly. So, if the Fed is cutting interest rate, that's good. They want to stimulate the economy, invest with government. If the Fed is saying the economy is too hot, you don't need to be trying to be questioning the Fed. Or I think the market sold the same thing. When President Trump was saying that, hey, we have to have a hundred years view, it's fine to have a recession because we're trying to turn things out, we saw what happened to the market. So government is the world's biggest monopoly. So you got to invest with government. 

Chris Powers: What's the world's biggest monopoly telling us right now? It's a bit chaotic right now. 

Imran Kahn: It's a bit chaotic now, but I think, they clearly- I don't know if the intention has changed or not... at least the communication has changed. That's definitely much more pro-market and pro-market sensitive, which is a good thing, and I think that's what you saw. The market has recovered quite a bit. 

Chris Powers: I want to go through a few things that you've said just on investing that I thought just was interesting. You said having a good relationship with the management team is a terrible thing or not a good thing. Is that because you can get drawn to bias? 

Imran Kahn: 100%. We all have biases. And I always talk about it. Think about it. And by the way, I want to correct you. It's not a good relationship with management. Of course, you should have a good relationship with management. It's like talking to management all the time to invest is a terrible idea. Because think about it. Who are the founders? People who are incredibly charismatic. Because nobody gives a young 22-year-old money if they're not charismatic. You have to be charismatic to, at age 24, 25, 26, 27, 30, to raise money from a bunch of investors who are always worried about losing money. So, you are incredibly charismatic. You're incredibly convincing about your vision. Who becomes the CEO? Again, somebody who's very charismatic, who can... So, when you go hang out with those people and keep hearing their person, you will be influenced by their charisma and you will be influenced by their convincing ability. So, obviously, you want to spend time with them and you want to have a good relationship with them to understand their vision. But you really have to understand the vision versus execution is a completely different thing. If you look at Hollywood, I'm in LA today, everybody in Hollywood has a movie script. Forrest Gump is my favorite movie, made once a decade. So great movies don't need- not only a good idea, you need a great team, you need great execution, you need great timing, a lot of things have to come together. So you need to have a good relationship with the management team. You need to, once in a while, talk to them. But spending too much time listening to the management team is the fastest way to lose money. So, I actually don't really... I never really request one-on-one meetings with any management team. I like listening to what they're saying publicly. I like going to the group meetings, conferences on what they are saying, as opposed to- because I don't want their charisma rubbing at me. 

Chris Powers: On hiring teams, mercenaries or missionaries? What are the differences, and why does it matter? 

Imran Kahn: Definitely missionaries because the thing is that life is not linear. It's never linear. You look at, I wish life was linear, like I had so many hard years. And you need people who really love the mission of the business, like the way you want to marry somebody who really likes you. So, I think it's really important that people are missionaries about their business, about their ideas, and things like that. So I think the problem with mercenaries is they will jump the ship as soon as you hit a bump. So I think having missionaries is important. Now, time to time in some areas, mercenaries are helpful. So, if you want to move something really fast, or you want to have a sales force, building a sales force, you drive. But you’ve got to be careful with those mercenaries, because one, they will leave you when they hit a bump. And number two, you also got to make sure those mercenaries have good ethics. Because nothing can ruin your business when you don't have a good ethical standard. So I'm a big believer of go hire the best missionaries as possible. But listen, if you're building a 10,000 people company, 20,000 people, you're going to end up getting some mercenaries and that's life. And you’ve got to know how to use them, and you've got to be careful with them. 

Chris Powers: Mercenaries would tend to be maybe a little more pessimistic also and maybe bring a different attitude to the team, whereas, I think sometimes of missionary as like you believe so much in the mission that you're willing to overlook basic blocking and tackling of business and basic rules of of business because you're so in love with the mission. 

Imran Kahn: Yeah, I agree with that. And I think that's why having people who are not completely... who have a healthy dose of skepticism, I want to emphasize a healthy dose of skepticism, is a good thing. 

Chris Powers: You said the market likes to fool the greatest number of people. 

Imran Kahn: Yeah, I don't think it's my line. It's someone else's line that I'm copying... Somebody else said that, but yes, that's accurate, I believe that. 

Chris Powers: But what does that mean? 

Imran Kahn: It means that if everybody believes something, that’s probably not going to happen. 

Chris Powers: So, if everybody believes that rates are going to stay higher for longer right now, you think rates possibly could come down? 

Imran Kahn: Yes, exactly. And there's nuances. If everybody believes that AI is going to happen, I actually think it is, but it might take longer or shorter. Or it might be in a different form. So, I think the key thing is that... one of the reasons is, actually let's take a step back, one of the reasons is that if everybody believes the same thing, it is more than reflected in the price. So by default, it's not everybody's wrong. If everybody believes something, it is by default, it is completely reflected on the price. So if any time some sort of divergence happens, you're going to see a correction. And that will make that market likes to make fool of the greatest number of people. So it's not like everybody's wrong with something. If everybody is wrong, everybody is believing something, then that security or that whatever, it's a real estate or security, could be asset, it could be whatever, if everybody believes that one arc is going to crush it, that arc price is going to reflect at a price point that has built in zero risk. And so, any kind of times there's any kind of bump, things that have zero risk will correct significantly. And that's how the market likes to make a fool of the greatest number of people. 

Chris Powers: Is there, besides AI, is there anything that's obvious to you right now? Just personal conviction? 

Imran Kahn: No, listen, I think AI will happen. It's fundamentally going to change the people. And I don't even know if everybody believes what I believe on AI. So I don't know if the market completely [?]. But yeah, there are areas. I don't think there's prevailing things, but the rate thing you talked about, like everybody thought there would be a recession two months ago now, we're [?] now. So it happens time to time. There's no prevailing idea I'm seeing. 

Chris Powers: You just said something, I have to ask. Is there something, what do you believe about AI that maybe everybody else doesn't? Or is it just more you've studied it and know more about it, or do you actually have a different kind of thesis? 

Imran Kahn: No, I think the average person is probably not thinking about how AI will completely change their life. I think the world in 20 years will be completely different. How you do work, how you go to office, how everything will change, how you interact with meetings. And it's not like I know what is going to happen. But I know a company that's building AI tools that can do this podcast instead of me. So you will have my agent doing this podcast saying the exact same thing I say, it's the way exactly I say. Now, is it going to happen? I don't know. But there's a lot of innovation that's happening. It's going to be chaotic. And sometimes, a lot of exciting things are going to come out of it. 

Chris Powers: Okay, I want to finish on private versus public. Do you think that we've gotten too ahead of ourselves in private market investing, and there's going to be a swing back to public, more liquid type of investing? 

Imran Kahn: I completely agree with that. I've been very vocal about it. I think one of the things, again, listen, I'm a small potato, relatively newer investor, doing it for six and a half years. But my observation, talking to a lot of allocators, is that there is this big swing to the [world?] that they all want to avoid volatility. So, I'm going to go invest in public, private market, I'm going to get the same kind of return as a public market, but I don't have the volatility. And that's how the market neutral funds became very big also. But the risk is when everybody starts doing the same idea, that good idea becomes a bad idea. So I feel like there's too much money going to private, and I've already seen that. As a result, the power has shifted from investors to founders. And God bless them. And the reality is, you never want to be in a situation that you are in a relationship, you are in a disadvantageous position. Like I can challenge you, when XAI or SpaceX is raising money, investors have zero power, all the power lies to corporate. And in a situation like that, one company, two companies, it might work out. But if a thousand companies are doing that, the outcome cannot be great. And that's why you are seeing that returns are, like companies are not, investors are not getting their capital back. It's taking way longer to get capital back. And the other problem is, if a company is staying private, the risk goes up significantly because you can predict what's going to happen in three years, four years, five years, but it's very hard to predict what's going to happen in 12, 13, 14 years. 

Chris Powers: Is the reason why most private companies aren't going public is just because being a public company kind of sucks, like it's just got a lot of demands on you and extra governance? Or is there other reasons for it, and people need to get comfortable going public quicker? 

Imran Kahn: No, that's the case. But it used to be it was worth going public because you would get liquidity and your valuation was higher. But now it's opposite. You go to public, you cannot sell your stock because investors don't like founders selling stock, so you can't sell that much. And then the second is you get higher valuation in the private market. So why would you go public? God bless the founders. And you can get the liquidity now through secondaries. All these companies are doing secondaries. And I just think that's not a great place as an investor when you don't have choices. So, any kind of investment, you at least have to have equal footing with the counterpart. And ideally, better footing, but at a minimum, equal footings. And I just don't think that's the case in private because there's so much money going to the public market. 

Chris Powers: So if you just happened to have a crystal ball, how does this kind of private super cycle end? People just start allocating money into publics or a lot of these, just the mentality shifts? Like how do you get out of this cycle and kind of normalize it back to where it should be? 

Imran Kahn: I think at some point people have to get cash back, and if they don't get the cash back, at some point people have to write some of these zombie unicorns down. I think there's 2,000 companies in the US capital market in between NASDAQ and NYC, over 2 billion market cap, something like that, and you have 2,000 private companies over a billion dollars in the venture industry. That doesn't even take into consideration somebody's building an elevator and his company's earning 100 million dollars EBITDA, that's totally fine. But just in the venture industry, it has 2,000 of them. So it just doesn't make sense. 

Chris Powers: All right, Imran, this was great. Thank you for your time today. 

Imran Kahn: Oh, I appreciate it. Thanks. Really enjoyed the conversation.