How Factory Underwriting Shows Up

Alan Waxman describes the telltale underwriting concessions that signal factory behavior, especially in credit where capped upside cannot justify weaker protections.

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Episode notes

My guest today is Alan Waxman, co-founder and CEO of Sixth Street, a $130B global investment firm.

Private credit is one of the most discussed topics in markets right now, and there is a lot to make sense of. The current discourse is almost entirely focused on symptoms. Alan Waxman has spent the time diagnosing the root cause.

Alan thinks about the financial system the way a historian would, studying the incentives, guardrails, and market structure that determine how things play out.

In this conversation, he traces the evolution of American finance from the 1929 crash through Glass-Steagall, the GFC, and Basel III to explain how we arrived at what he calls the factory model, the industrialization of liability-gathering and asset deployment that he believes is the root cause of everything happening in private markets today.

This is my second conversation with Alan, our first one is one of my favorites from last year.

For the full show notes, transcript, and links to mentioned content, check out the episode page ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠.

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Timestamps

(00:00:00) Welcome to Invest Like The Best

(00:02:43) Intro: Alan Waxman

(00:04:35) Financial System Guardrails & Incentives

(00:05:56) System 1: Pre-1933 to 1999

(00:07:39) Glass-Steagall Legislation

(00:10:46) Deregulation & Rise of System 2

(00:12:27) Leverage, GFC, and System 2's Collapse