Sixth Street Partner and Vice Chairman Marty Chavez discusses the current state of tech, market volatility, the next big area of innovation, and enabling diversity in large corporations.

Video Transcript

- The tech sector is firmly in the red and fraught with regulation issues, layoffs, and hiring freezes, as inflation and market uncertainty take their toll on the sector. Here to make sense of the tech landscape and the surrounding global economic picture is Sixth Street Partners Vice Chairman Marty Chavez. Marty, good to see you again. Look, we've been talking all morning long about the selloff in social media stocks, of course, Snap top of mind there. Help the average investor understand what is happening, and when might it end?

MARTY CHAVEZ: Well, I found it helpful as an investor, and just for my own peace of mind, to keep my eyes on the long term trends. And there's a lot going on. I don't think I can add to it. There's certainly a lot of macroeconomic news. And there's the announcement that we all read yesterday. I would just say this is the nature of tech. It is risky. It is growth. It is volatile. It has been on a very long trend. And it was easy and fun to get used to that trend.

Who knows where that's going to go in the future? But if you step way back and just look at the long term trend, I think there's very few predictions that I will make with absolute rock solid confidence. And one of them is that there's going to be more software in the future than there is in the present. And so long term, this is the same. And there's a lot of ups and downs on the way.

- That prediction tracks, Marty. Appreciate that here this morning. You also have a unique position of sitting on the board at Alphabet as well. With that in mind, you know, I just wonder, what is the next transformative technology that's really going to be the changing kind of factor for consumers and as well for some of the companies that we cover on a daily basis?

MARTY CHAVEZ: So one thing that you get to say if you've been at the same thing for a long time is you live long enough, you get to be considered a pioneer. And so a long time ago, I was working on AI in medicine. And this is back in the late '80s and the early '90s, and the compute power was just way too low.

And I remember back then, there were people working on neural networks. And we used to think, OK, that doesn't seem like that's ever going to work. Well, that has worked unbelievably well. So I and many other people were just dead wrong about neural networks.

And what we are able to do, we've all seen, with neural networks is amazing. We are just at the very, very beginning of an incredibly exciting upswing in what we're going to be able to do with AI across the board, whether it's drug discovery, climate change. We're at the beginning of actually being able to do amazing, really miraculous things with AI.

- So that's the future. But right now, you're also looking at this environment, where even as we were looking at Snap's earnings and really reading through where they're impacted as a result of operating system privacy changes that many social media companies have been hit by because of the changes that Apple had put forward, there is another OS that's out there. In fact, there are a few other ones.

And one of the other major competing ones is the Android OS. Why is it that there has been more of an impact to the social media companies derivative of privacy changes from the Apple operating system than from any privacy changes because there's also a private push within the Android OS as well?

MARTY CHAVEZ: Well, I think all companies need to step back, and the regulators doing this as well, and look at what privacy means, how to define it, and what we actually want and to get ready for it. And there's just a whole range of outcomes. This is a huge global, social, political decision that we all have to make. And there's so many moving parts. I'd love to predict it.

But I would just say to all companies, you have to ready yourself for a large number of different regulatory outcomes. The question is we know what is possible with AI. What does society want us to do with it? And that is a very big decision that's happening right now. There's no one route. It depends on operating systems. It depends on policies. It depends on choices that consumers and companies make. And nobody knows what's going to happen. So you just have to be ready for a variety of outcomes.

- Marty, when the market gets a sense the Fed is done raising rates for this cycle, what will that mean for the M&A market?

MARTY CHAVEZ: Well, so I am somewhat infamous for not making timing predictions. And I think I don't make them because I'm terrible at them. And also causality is hard, like knowing this happens, and that's going to happen next, and predicting the timing of it. There is M&A happening. There are in every economy, including the one that we currently have, there are difficult spots. And there are bright spots.

Again, back to AI, if you're looking at financing and at acquisitions and combinations of all kinds, in that area AI, that is booming, just like probably better than ever. And so there are bright spots, green shoots, even now in certain sectors. And AI is certainly one of them.

- Marty, we only got about 30 seconds left, but I'd love to know, especially as so many companies are making changes when it comes to diversity, equity, and inclusion, whether that be at the entry level, mid-management, all the way up to the board, what is the step that a company can take right now in order to ensure that even in the midst of macroeconomic uncertainty, that they are retaining those values?

MARTY CHAVEZ: Well, so the companies have the right values, in general. I'm not going to make a blanket statement. But really, it comes down to what are you actually doing day to day in your recruitment and you're filling the pipeline in understanding connected to managing your people? And so companies are doing a much better job at the entry level, though it's still hard, in reflecting the demographics of the cities and the environments where they operate.

Really, the hard part is as people become more senior in their careers, how do we continue to make them want to be here, as opposed to some other place? And how do we actively manage their careers through mentorship and sponsorship? Those are the things that all companies need to be doing in a disciplined, process-oriented way every day through every market cycle.

- Sixth Street's Partner and Vice Chairman. Thanks so much for joining us, Marty Chavez. Appreciate the time this morning.

MARTY CHAVEZ: Pleasure. Be well.