Private Equity Chased Software. Big Tech Is Chasing AI. Dan Rasmussen on If They Are Making the Same Mistake Twice

Dan Rasmussen, founder and managing partner of Verdad Advisers and author of The Humble Investor, joins Kai Wu to examine the unraveling of private equity, the rise of private credit, and how AI is reshaping software, labor, and the economics of technology investing. They also explore the massive AI CapEx boom, why value investing has struggled in the intangible-heavy U.S. market, the unusual opportunity in Japanese small caps, and how investors can quantify intangible value in biotech.Subscribe on Spotify⁠⁠⁠⁠⁠⁠Subscribe on AppleTopics covered:Why private equity became a consensus trade and why exits are now cloggedHow leverage and high debt costs threaten private equity returnsWhat publicly traded private equity funds reveal about true volatility and NAV discountsHow private equity shifted from old-economy buyouts into software and healthcare technologyWhy AI may have erased code as a software moat while strengthening other intangible advantagesHow ARR lending helped private credit finance software buyouts and created an obsolescence mismatchWhat AI is doing to hiring, junior roles, productivity and the composition of workWhy the AI CapEx boom may be a crowded, path-dependent overinvestment cycleWhy traditional value metrics work better in Japan than in the intangible-heavy U.S.How Tokyo Stock Exchange reforms, buybacks and dividends can unlock value in Japanese small capsHow R&D spend, specialist ownership and short interest can help quantify biotech valueTimestamps:00:00 Intro04:03 Why private equity's debt burden changes the equity math09:24 How private equity became a software momentum trade13:29 Why code may no longer be a durable software moat17:48 How private credit enabled software buyouts through ARR lending23:56 AI productivity, jobs and why displacement is slower than expected30:23 Why the AI CapEx boom may be the market's most crowded risk34:29 Rational overinvestment, leverage and the timing risk in AI38:46 Why consumers may capture more of AI's value than investors44:07 Japan's below-book-value reform and the return of old-school value51:03 Quantifying biotech value with R&D, specialist ownership and short interest55:08 Dan's non-consensus views on private markets and JapanLearn more about the Excess Returns podcast network:https://excessreturns.coNo information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.