Key Takeaways
- Scott Wilson expanded the Washington University in St. Louis endowment from under $8 billion to nearly $20 billion, generating $17 billion in gains across nine years.
- WashU cut all 36 of its hedge funds to redeploy capital into direct co-investments like SpaceX and discounted international assets.
- European non-tech businesses with solid operational performance trade at low earnings multiples, while equivalent US peers trade at steep price-to-revenue multiples.
- Sovereign risk is not unique to China; the UK abruptly raised taxes on northern offshore energy assets from 25% to 75%.
- WashU maintains an active office in Shanghai to source deals directly rather than relying on US media sentiment.
Multiples on Earnings Beat Multiples on Revenue
Most American venture capital chases the same handful of Silicon Valley deals. That pack mentality drives valuations to absurd heights, where early-stage software companies trade on high multiples of forward revenue rather than actual cash.
Wilson took the opposite path at WashU. When evaluating European markets, he noticed that high-performing non-tech companies trade at bargain valuations relative to real earnings. As Wilson put it: “Price is what you pay. Value is what you get. And it's very subjective and I think you have to be pragmatic about valuation.” (play from 49:27)
In Europe, businesses producing dependable cash flow often get ignored simply because they lack a tech label or a California address. If a company generates real profit and dominates its niche, paying a single-digit or low double-digit earnings multiple offers downside protection that 30x revenue valuations never provide. Wilson recognized that market indifference created a massive margin of safety.
Western Sovereign Risk Is Real
American allocators routinely treat emerging markets like China as uninvestable due to political danger. Meanwhile, those same investors treat developed Western economies as completely safe havens. Wilson views that assumption as lazy.
He points to Western regulatory interventions that destroyed private market value overnight. “We've seen worse behavior on very developed markets like in the UK where there was offshore oil and energy assets and they took the tax rate from 25% to 75%,” (play from 51:26) Wilson observed. Norway executed similar aggressive tax shifts on aquaculture and natural resources.
Political risk exists everywhere capital pools. In developed nations, governments facing debt deficits target corporate profits through sudden windfall taxes. In China, geopolitical tensions dominate the headlines, but the operational realities on the ground tell a different story. If you price in political risk correctly, heavily discounted Chinese assets can offer far superior risk-adjusted returns compared to Western assets with hidden regulatory liabilities.
Boots on the Ground Beat Media Sentiment
WashU does not trade Chinese assets from a desk in Missouri based on news cycles. The university runs a dedicated office in Shanghai to track local companies, regulatory developments, and market sentiment directly.
“We don't have a ton in China. We have an office in Shanghai, so we cover that region really well,” (play from 49:58) Wilson explained. “We've added a decent amount of capital and I think China was one of those markets, the geopolitical risk was always there.” (play from 50:16)
When US capital fled China due to headline anxiety, asset valuations collapsed. Wilson saw an opening to acquire high-quality businesses at steep discounts. Having local analysts on the ground allowed WashU to distinguish between real operational threats and political noise that did not affect underlying business cash flows.
What to Do With This
Audit your competitive benchmarking sheet this week. Pull the five most expensive US vendors or acquisition targets on your radar and compare them to equivalent European operators. If an offshore competitor delivers 80% of the output at one-third the cost or valuation multiple, shift your expansion or vendor spending abroad immediately.