Chapter 1: What was Marc Rowan's journey from Drexel to Apollo?
Ten stocks right now in the U.S. are nearly 50% of the S&P, and they're all levered to the same trend. The same thing is happening in the global fixed income market. And so if you're an investor and you're looking for diversification, there's no place to get it other than private markets.
Great companies, Anthropic, OpenAI, SpaceX, Anderol, every one of those companies is private, multiple trillion dollars, and yet most investors have zero exposure to them.
Andreessen wrote this piece over a decade ago that software is eating the world. And that feels more true than ever as AI proliferates all parts of the economy.
We operate under the assumption that every job is going to be replaced or enhanced. 2025 was just proof of concept that data centers and chips and energy were all needed. 2026, the market is starting to recognize that if this continues, everyone who is an investor is going to be replaced.
In 1990, Mark Rowan walked out of Drexel with his belongings in a cardboard box. Within a year, Apollo was managing $6 billion.
What started as a distressed investing firm in the aftermath of a financial crisis eventually became one of the world's largest alternative asset managers, spanning private credit, retirement services, and financing for some of the largest industrial and technology shifts underway today. Now another transition is happening.
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Chapter 2: How are private markets reshaping the global economy?
AI, robotics, energy infrastructure, and data centers are creating enormous new capital demands, forcing finance and technology to converge in ways that barely existed a decade ago. A16Z's David Haber speaks with Mark Rowan about building Apollo, the evolution of private markets, and financing the next industrial era.
Mark, thank you so much for joining us and for hosting us here at your office. Nothing better.
My absolute pleasure.
I thought we'd start by maybe going back in time. You joined Drexel coming out of war, I believe, in 1984. What did you see in the firm at that time?
It was an interesting thing. Everyone who had come out of my program at Wharton had basically gone to Goldman Sachs. And what struck me about Drexel's business, which was financing entrepreneurs, financing new companies, is that you didn't really need to know all that much about finance. You needed to know a lot about business.
Because these companies were not the exons of the day or the top-notch companies of the day. They were companies where legitimately there were questions on the business model.
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Chapter 3: What role does AI play in the evolution of finance?
And I was always much more interested in business than I was in the nuances of finance and public offerings and things like that. And I was not disappointed. It was awesome.
I mean, I think one of the most remarkable things about kind of the diaspora from Drexel, especially in that period, is just, I mean, you can almost trace every major credit firm back to that kind of cohort of people. Was there something about the culture, maybe the focus of your clients at the time that sort of shaped that sort of incredible kind of diaspora talent?
Look, this business first mentality and really understanding the business is ultimately about making credit decisions. These companies were not investment grade. They were below investment grade. It really forced you to understand the fundamentals of their business, not to rely on third parties. But also a whole market was being created. There were no high yield bonds.
There were no levered loans. There were no ETFs. There was no real securitized product. All the products that we take for granted today that exist did not exist.
Chapter 4: How does Apollo manage risk in a changing economic landscape?
This forced you into clean sheet thinking. The whole notion of PIC, I believe, was created in one afternoon, solving a problem. The notion of silver-backed or silver index bonds, solving another problem, and so on. The notion of a highly confident letter, the notion of bridge financing. All of these things were basically problem solution, problem solution.
And that mentality of understanding the business, understanding the credit, but also having clean sheet thinking is certainly what powers Apollo today.
And I know, you know, Michael Milken has been a mentor for a long time. I guess, what are some of the most valuable lessons you've learned from him over the years?
They're just innumerable. But the story I tell about Mike is I was like a smart young guy. I had mastered my craft. I was well thought of. And so every time the market kind of went sideways, I would get a call from Mike, and Mike would say, could you come from New York to California? I would, of course, ask when. This would be Monday. He'd be like, Tuesday.
So the immediacy of how you dealt with problems and the business-first mentality was definitely a Mike-ism. And I sat on the trading desk, and at the end of every trading day, Mike would walk by my desk, and I was supposed to have all the answers, because Mike was doing a million things. I was just doing one thing. And every day, he would ask me a question that I did not know the answer to.
And he didn't do it to provoke me or to show me how smart he was. He was showing me to connect the dots. And I do think that that's a big part of what goes on in our world today. Can you take what's happening geopolitically? Can you take what's happening in technology? Can you take what's happening in financial markets? Can you take all the personalities and people and can you put it together?
in a coherent way that makes for good relationships, good deals, good partnerships, things that benefit the world. And I think that's the primary lesson I took down, along with the pithiest thing is sometimes the most valuable. And the thing that he said is, you either accept change or change is visited upon you.
And we're certainly in that moment where you either accept change or change is going to be visited upon you. Totally.
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Chapter 5: What are the challenges and opportunities in private credit?
And you've shaped a lot of Apollo over the years, which I'm excited to chat about. Maybe just going back to 1990, can you kind of talk through the origin story of starting the firm? Sure.
Think Lehman Brothers 2008, because a lot of this audience will not know what was going on in 1990. But 1990 was a global recession, a banking crisis, a Texas real estate crisis, a New York real estate crisis, a savings and loan crisis. It was kind of a mess. Yeah. And I left my office on Friday.
I came back in on Sunday, and I left with all my belongings in a cardboard box, and Drexel was out of business. A great lesson. Financial services firms die from one of two causes, heart attacks or cancer. Heart attack is funding risk. If you lend long... and borrow short, you have funding risk. We saw this in Bear Stearns. We saw this in Lehman Brothers. We've seen this again and again.
I will tell you that formative lesson, we will never see that at Apollo. It is ingrained in our culture to understand this funding issue, this heart attack risk. And then the cancer risk, of course, is the addition of bad assets over a long period of time. Which again, we as a principal mentality firm do not allow to happen.
We admit our mistakes, we move on, we take our losses, we don't double down and triple down and do these other things. But back to 1990, imagine being an unemployed investment banker in the midst of a global financial crisis. This is not a great situation for career employment. Fortunately, a group of us had been sharing office space.
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Chapter 6: How does Apollo's culture adapt to growth and change?
The demise of Drexel was so sudden that we were still working on transactions for clients without any hope of being paid or without a firm that was backing us. It was just what we did. And as happenstance would have it, we received a cold call from the Government Bank of France, the Credit Line Bank, asking whether we would be interested in starting an M&A boutique.
under the mighty Credit Lyonnais banner. What a terrible idea in 1990. There is no M&A. There's total loss of confidence. And I think as a throwaway line, one of us said, but this would be an awesome time to deploy capital. And the gentleman said, there's a guy in Paris. He thinks exactly the way you think. Why don't I set up a meeting?
A few months later, we left with $800 million of the government of France's money through the Credit Lyonnais bank.
Hmm.
with a group of people who had never invested money before from an institution that was not an investor. And by the end of the year, we had $6 billion of the bank's money. And in 1990, no one had $6 billion. And we went on to become the largest profit center of the Credit Linea Bank. For the next few years, we earned them regularly $3 billion plus a year.
We were very, very popular in Paris, despite speaking nothing other than restaurant French. The movie rights to this story of us talking past each other are just off the charts. Yeah, totally. But eventually, the Credit Line Bank, as the government bank of France, goes out of business from supporting French industry. Interesting.
And in a desperate attempt to maintain its capital base, it sells its most profitable investment, Apollo, to its largest client, Francois Pinot. Interesting. And Francois Pinot does not understand that he is not buying an investment firm. He believes he is buying Samsonite and Culligan and Vale Resorts, because after all, he's an industrialist.
And so the movie rights to the first meeting with Francois Pinot are also amazing. But as luck would have it, we had a good enough track record that over time, we not only made Pinot lots of money, but began to diversify our business to U.S. and European and international institutions. And the rest, as they say, is history. But it was a pretty contained history for about 18 years.
Totally. And I think people still incorrectly, I would argue, refer to Apollo as a private equity firm. But you, I think, more than anybody, have really kind of transformed the business into a retirement services company and a large alternative asset management business. I guess, what did you see in... Athene in 2008, and how do you sort of view the firm today?
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Chapter 7: What moral responsibilities do leaders have in today's society?
And so we're starting with our investment-grade private suite of products, and we will be daily estimated value by June 30.
value alone is not enough we are standardized information standardized qsips or ice ids standardized data warehouses market making regular disclosure of prices other dealers this is about creating an ecosystem and by the end of september this will be across the entirety of our credit business And I believe this is the direction of travel.
I've never seen a market in the world where you have transparency and price discovery that is not 10 times its size. and change like everything else. It may be uncomfortable for people, but it's coming. And five other markets want it. And will it be perfect the first day? It will not. Will it get better every day? It will get better every day. And one day soon, maybe it'll even come for equity.
But that's not this year's business.
You know, I know you've also, you know, talked a lot about, you know, maybe the press's sort of very narrow definition of private credit being kind of you know, direct lending and BDCs.
But, you know, I guess from your perspective, how do you describe kind of the broader private credit ecosystem and, you know, what separates kind of the winners, you know, from your perspective versus, you know, the rest of the market as this ecosystem matures?
So I do think it starts with a skill set of managing a credit book. Because at the end of the day, managing credit is different than managing equity. In credit, you only get your principal and interest. You should not be around risk-taking. As a rule, you should be fully diversified. In the equity business, you actually get paid for risk-taking.
And so that mindset difference perhaps is obvious, but it has not been obvious in people's actual performance and how they have constructed portfolios. The second is you need a low cost of capital. or you need a variety of costs of capital.
And so one of the reasons I think we've been so successful at this is we are willing to match low-cost retirement liabilities with safe long-term yield assets. Not risky long-term yield assets. That does not belong in a regulated balance sheet.
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Chapter 8: What future trends should we anticipate in capital allocation?
Therefore, they're not a source of capital. We have been able to originate and earn excess return because private but investment grade is not a bucket. As we get bigger and bigger, we are changing the world. And we've seen institutions adopt this notion of total portfolio approach. We've seen family offices. And we see a general migration.
So in between is almost always the best class because there is poor capital formation. And there's no one who is assigned every day as their day job for the risk. This is exactly what's happening between our two firms. Because you have an entire ecosystem of which your firm is a major player that has not never been capital intensive.
And for the first time, not only is it capital intensive, but it is going to be capital intensive on a scale that is unimaginable. Because the amount of money that's going to be put into data centers, into chips, into robotics, into manufacturing, into defense is, as I suggested, every dollar since the invention of fire.
That is not going to be financed with equity entirely because that is not efficient. and the scale of it is not achievable, it is going to have to be parceled out into various risks. And that's what we're seeing happen right now.
So if I look at the drivers of our business for this year, it is data centers, it is massive amounts of chip financing, and what we're doing is we're parceling out the risks. On the venture side, on the equity side, there is the fundamental business underwrite of this company or that company,
And then on the infrastructure side, things that are reusable, things that have hard asset value are being offloaded into the credit markets at the appropriate rate of return and at the appropriate risk rating. But I believe we're approaching a really interesting time. We've never really talked about the quantum of money. I think that's where we are right now.
The 2025 was just proof of concept that data centers and chips and energy were all needed. 2026, the market is starting to recognize that if this continues, 800 billion of CapEx from just four public companies this year, not to mention the private, that everyone who is an investor is going to be concentrated in certain names. And we're actually going to hit concentration limits.
We're starting to see this across the board. I think spreads are going to widen. I think really good entrepreneurs are going to end up in partnership with entrepreneurs of another type, those who are financial entrepreneurs who help to democratize credit assets and hybrid equity and other types of things. And I don't think the imagination is going to stop at chips and data and energy.
the visits I've had out to the Bay Area and to Seattle and to elsewhere, robotics is a whole nother thing. The notion that once the world was able to solve the Waymo problem, which was a real problem, how do you solve a situation for self-driving in a constantly changing environment where safety is paramount and where you can't stop?
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