General Atlantic's $100bn private equity boss likes its "communist" compensation
Much ado has been made about electronic trading firm Jane Street and its “communist” compensation system. But it’s not the only firm in the industry to offer it.
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Martín Escobari, co-president and head of global growth equity at $100bn private equity firm General Atlantic, spoke to Patrick O'Shaughnessy, host of the podcast “Invest Like The Best”.
“We have a communist system of compensation,” Escobari said, by which he meant that “we all get a percentage of the total performance. Not our individual performance.” He said that he “hated” the system initially. “I was like, are you kidding me? I’m a spear fisherman, and I got some big fish left in me. Communism didn’t work in the Soviet Union.”
But the benefits became quickly apparent. “I saw how it changed everything. The level of collaboration is fantastic.” For Escobari, the way to “prevent the Soviet Union from happening” is simple. “If you’re not pulling your weight, you’re not on the boat.”
General Atlantic's communist ways therefore generate a purer meritocracy in Escobari’s eyes. “To be in this community where we all win together and lose together, we all have to be effective in bringing as much into the partnership as we’re taking out. That’s what keeps the health and the meritocracy of the system. But there isn’t an incentive to be hyper-productive… It’s much more about winning as a team than winning as an individual.”
Nonetheless, spear fishing is an individualistic endeavour. And Escobari explained that the best investors are like spear fisherman. “You don’t chase the fish. You wait… You drop down with no equipment other than the spear, and you hold your breath,” Escobari explained.
“For one minute, for two minutes. You let little fish go by, because you’re not there to hunt the little fish. You’re waiting for the big fish.” When the big fish arrives, you spear it, and you go up with a few seconds to spare. “It’s an exercise of waiting.”
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