Forcing AI adoption through comp, and cross-border M&A traps

Forcing AI adoption through comp, and cross-border M&A traps

The Carry · August 9th. 6 min 25 sec.

Cold open

You build a beautiful, airtight buy and build model in New York or London. Then you try to run it in Brazil. The currency swings. Your operational alpha evaporates overnight. The standard Western playbook completely misfires when it hits complex cross border realities. It leaves your integration stranded. Your returns get wiped out. You have to adapt. Fast.

Intro

This is The Carry for August 9th. I went through the top private equity podcasts this week so you do not have to. Here is what actually mattered. I am West. Let us look at the structural realities breaking your standard playbooks.

Cross Border Realities

We need to talk about what happens when your standard Western playbooks collapse in complex cross border markets. Tim Chamberlain broke this down perfectly on Fund Shack. He explained how a standard growth equity vintage in Brazil can lose absolutely all of its operational alpha when the Reais depreciates from two to five against the dollar. Direct hedging costs way too much because of the interest rate gaps. Sophisticated players are walking away from standard growth equity. They are backing distressed asset managers instead. They are solving complex corporate impediments to crystallize returns on day one. That decouples the actual return from macro currency swings. Think about that. You remove the macro risk by diving straight into the micro distress. The friction extends all the way down to basic back office operations. Jennifer Lipshultz detailed this exact nightmare on M and A Science. Acquiring an entity in India requires a full legal amalgamation process just to open a local bank account. You heard that right. A full legal process. Just to park cash. Then you look at Sweden. Employee expense rules are so complex they practically require a PhD. Any gap between corporate reimbursement and government per diems instantly becomes taxable income. Assuming your US or UK playbook translates to new geographies leaves your integration stranded in legal and tax purgatory. The local realities will eat your spreadsheet margins every single time.

Forcing Cultural Change

Engineering organizational behavior requires structured mandates. We saw two brilliant examples of this playing out on the cultural integration side. Jennifer Lipshultz brought this up on M and A Science regarding ECI Software Solutions. ECI forces acquired company leaders to rate proposed integration changes. They run mandatory change engagement sessions. Why. Because most people take their cues from their direct managers. They compel the acquired leaders to transparently explain the strategic why behind the new corporate direction. Transparently addressing employee anxiety is absolutely mandatory when you shift legacy behaviors. You have to drag it into the light. Earlybird took a similarly aggressive approach to mandate software adoption among seasoned venture capitalists. Andre shared the details on How I Invest. Building proprietary AI tools to automate data aggregation was the easy part. The technology always is. The actual hurdle was senior cultural resistance. You have partners used to doing things their way. Earlybird broke that bottleneck by linking platform usage directly to investor performance reviews and compensation. They tied the tech stack to the carry. You cannot engineer venture alpha through software if you leave adoption optional. You have to force the behavior through structural incentives. They built a system where opting out of the AI tools literally costs you money. That explicit restructuring of internal roles and rewards provides a distinct operational moat. It moves the firm beyond mere tool usage into entirely new organizational rituals.

Andre, How I Invest

Andre dropped a fascinating observation on How I Invest regarding the exact moment Earlybird transitioned into an AI native venture platform. He was watching elite investors burning hours on basic data aggregation and told his team, I cannot believe that such smart people around here spent a whole day doing stupid stuff like that, this can be easily automated. That frustration is the genesis of real structural alpha. Highly paid professionals manually scraping data is a massive misallocation of capital. Automating the grunt work forces your talent up the value chain. You pay your partners for judgment. You build software to handle the ingestion.

Ross Butler, Fund Shack

Ross Butler unpacked a massive structural irony regarding private capital on Fund Shack this week. He pointed out the true foundational architecture of the asset class, noting that because private markets are built around partnerships, negotiated governance, ownership, control, and profit sharing, they may actually have less need for some of the infrastructure on which public markets depend. Here is why that matters to you. Capital is highly commoditized. Your distinct structural advantages are your last remaining moats. Operating in volatile regions marked by institutional gaps is exactly where private capital shines. You bring the governance with you. You create the institutional stability through direct control.

Jennifer Lipshultz, M and A Science

Jennifer Lipshultz brought a dose of hard reality to M and A Science when breaking down the ECI Software Solutions integration playbook. She was dissecting why full absorption M and A strategies break during the initial transition phase, pointing out that acquired employees retain only a fraction of verbal day one instructions. They are completely overwhelmed. The pure anxiety of the moment blocks basic comprehension. That means rigorous written onboarding structures are your only defense against post close chaos. You have to document every single expectation. Relying on an inspiring town hall speech to align a new acquisition is a recipe for absolute operational disaster. Get it in writing.

The bottom line

Whether you are navigating volatile emerging markets, forcing software adoption across a venture firm, or acquiring complex cross border assets, standard operating procedures will fail you. Assuming your old playbooks will magically scale into new environments is the fastest way to wipe out your returns. You have to restructure the incentives and the operations from the ground up. That is The Carry. See you next Sunday.