SoftBank’s man with the Midas touch

U.A.E.-based Akshay Naheta, 39, is the youngest executive to report directly to SoftBank Group founder Masayoshi Son (“Masa”). As CEO of SB Management and senior vice president, investments, SoftBank, he leads the conglomerate’s investments into publicly traded stocks and other securities. Naheta, an equestrian buff, in an exclusive conversation with Fortune India, decodes his stint at the investment giant. Edited excerpts:

A Global Citizen

From being born in Mumbai, to studying in the U.S. and later working in the U.S., Hong Kong, the U.K., and now the U.A.E.—how has the journey been?

I grew up in Mumbai during the 1980s and 1990s in a business family. I had a strong intellectual bent towards mathematics and was passionate about engineering, particularly with regard to automobiles, from a very young age. In 1999, I moved to the U.S. to pursue an undergraduate degree in engineering and subsequently enrolled in the Ph.D. programme at MIT, after graduating at the top of my class. All throughout, I yearned for a job as a venture capitalist in Silicon Valley post graduation.

As fate would have it, the lure of free pizza pulled me into a Deutsche Bank job seminar led by an MIT alumnus. I struck a personal rapport with him and at the end of the conversation he convinced me to drop out of my Ph.D. to pursue a career on Wall Street. I started as an associate with the bank in New York, and a year later relocated to Hong Kong where I ran the equity principal strategies business. In mid-2009, I relocated to London as a trader on the high-yield bond desk and decided to strike out on my own a few months later. In late 2010, I established my own asset management company and joined SoftBank’s Vision Fund in January 2017. The motivation to move away from my own venture to SoftBank was driven by my belief about the powerful network effects—ecosystem, ideas, and knowledge—that the scale of the Vision Fund’s resources would have perpetuated. With the benefit of hindsight, these network effect attributes have made me a better investor and entrepreneur.

My journey has moulded me into a highly adaptable global citizen. It taught me to be open-minded and flexible when confronted with the ever-changing dynamics of the business world.

You are at the forefront of SoftBank’s strategic shift to being an investment holdings entity. How did that thinking come about?

For nearly four decades, Masa has been at the forefront of investing in the technology industry. Since founding SoftBank in 1981, and well into the 2010s, he spent most of his time operating businesses. Chronologically, SoftBank has been focussed on software distribution, broadband, and telecoms, [with Masa] dedicating less than 5% of his time on the company’s investment activities. Masa has been a great operator, which I believe makes him a great investor. For example, in 1996, he launched Yahoo! Japan as a joint venture between Yahoo! and SoftBank, forming the first web search portal in Japan. It has witnessed many successes since its founding, has expanded its business lines, and is currently valued in excess of $35 billion.

However, based on the shareholder returns generated through Masa’s investment acumen, such as Alibaba, Yahoo!, and many others, he’s decided to focus primarily on investing on a go-forward basis.

Today, SoftBank is the largest strategic investor in transformative technologies that we strongly believe will enable the next stages of the Information Revolution. The group’s gross assets, including those of the Vision Fund, are currently valued in excess of $300 billion, a large portion of which is attributable to our stake in Alibaba. Although we remain bullish on the long-term prospects of Alibaba, over time we will increasingly diversify the portfolio by deploying our capital into other transformative technologies and businesses.

What has been your working relationship with Masayoshi Son?

Masa is one of the world’s greatest investors and for all of us working at SoftBank, there is a lot to learn from him. His ability to always focus on the long term and to generate insights on the next big drivers of technological change are unique traits which will ensure that SoftBank continues to be the global leader in investing in disruptive businesses.

Masa’s investment in Alibaba is a prime example of that, generating in excess of $150 billion worth of shareholder value on a mere $20-million investment! It is incredible that in one lifetime, he has consistently been able to predict the future and make big, bold bets on how it will evolve. Obviously as a thought leader, one will inevitably and occasionally experience stumbles, but the boldness, resilience, and perseverance with which Masa pursues his beliefs is something we can all learn from. I am privileged to be working so closely with him.

ARM’s acquisition by Nvidia could take over a year to complete and there are roadblocks emerging in various countries. How confident are you of the deal sailing through without any regulatory hiccups?

ARM is one of the most important computing architectures of our time as its technology underpins most smartphones globally and is increasingly prevalent across other applications. A transaction of the size and nature of the Nvidia and ARM deal was always going to be carefully studied by regulators.

Both Nvidia and SoftBank openly welcome the scrutiny by the relevant governments and regulators who are currently reviewing the details of this transaction. Jensen Huang, Nvidia’s CEO, has categorically emphasised his commitment to maintaining the integrity of ARM’s licensing model.

We continue to remain confident that ARM’s straightforward licensing model and widespread familiarity amongst developers will continue to prevail. It also is essential for both Nvidia and ARM to further enhance their ecosystems jointly from an opensource perspective for developers and firms. We are also confident that the combined business will present more choices, solutions, and opportunities to Nvidia’s and ARM’s customers and partners than ever before, creating a new platform to drive innovation in the age of A.I. SoftBank will become one of the largest shareholders of Nvidia following the transaction.

Cryptocurrency is the hottest space right now. Is a bubble building? And is it right for countries to ban cryptocurrencies?

The thing to keep in mind is that no one can accurately predict the existence of a bubble until after it has burst. Cryptocurrencies are still a new asset class, and I believe that applying traditional valuation methods to a technology that’s constantly evolving can be flawed. As is the case with any new technology, the robustness of these assets is yet to be fully tested and some level of scepticism is rationally warranted. As a firm believer in capitalism, I generally think that it should be left to an individual’s choice to assess which assets are right for them—assuming, of course, that it is not used to commit or support fraudulent activities—rather than having governments or regulatory bodies make decisions banning a particular asset class. In my opinion, governments are likely afraid of cryptocurrencies because they challenge conventional currencies and lack a centralised authority that can control the supply and demand of money.

The India Connection

Do Indian companies feature on the radar of SB Management?

SoftBank is one of the largest foreign investors in India’s digital economy, with investments of over $11 billion in the last few years. The Vision Fund, specifically, has been investing significant private capital into India’s emerging digital champions. Although SB Management has not yet made any investments in India, as these emerging digital champions go public, we hope to engage with them and participate in their IPOs or other offerings in the future.

I am also a keen observer of how India reforms listing norms to facilitate direct overseas stock market listings so as to attract larger global investors into its high growth companies. In my view, if an Indian company was to list on the Nasdaq, it has the potential of raising significantly more capital than it might in India. Although at the moment we do not have any specific Indian companies on our radar, I believe that in due course some opportunity will materialise—it’s just a matter of time.

The pandemic-induced lockdowns and subsequent stimulus packages by governments have resulted in a historic rally in global technology stocks. Will money flow back into core sectors?

As we witness a rise in interest rates, due to increased inflation expectations, technology stocks have recently corrected because investors are expressing optimism towards old economy businesses owing to various infrastructure-related stimulus bills by governments. In my opinion, large technology companies such as Google, Amazon, and Microsoft have become more of a utility and are completely inseparable from our daily lives. However, they continue to be at the forefront of innovation as they aggressively invest in R&D to invent new products and technologies. In summary, while it might be tactical from a short-term perspective to be investing in core sectors, if one is looking to generate exceptional longterm returns it is a statistical fact that those can systematically be generated only through investing in disruption.

SB Management has made some significant investments in the healthcare sector. Is this a key focus area for you, post-Covid-19?

The pandemic has underscored the centrality of molecular diagnostics to understand, diagnose, and treat emerging pathogens. Next-gen sequencing rapidly enabled the design of PCR tests and vaccination approaches to be implemented at a global scale. Yet, this concept of molecular resolution enabling precision interventions was a key premise in personalised medicine over the past couple decades. For example, the routine detection of somatic variants within individual cancer genomes has enabled a paradigm shift in how we first understand and then customise treatment for patients. Molecular tools enable us to move from guess-and-check medicine towards systems biology-based approaches that decipher the pathophysiology of disease and stratify cancers into molecular subsets to facilitate the development of personalised therapies and better patient outcomes.

Our investments in the healthcare sector focus on the multi-scale and longitudinal integration of diagnostics to inform the development and deployment of combination therapies. Critically, we aim to catalyse the step function changes in which the combination of scale, genomic breadth, and analytical depth of these longitudinal data sets increasingly lend themselves to exciting applications in machine learning and artificial intelligence. We are particularly excited by the feedback loops that molecular tools offer in measuring response to novel targeted and immuno-therapies. We are just beginning to appreciate the impact of clinical-grade long read sequencing by Pacific Biosciences and Invitae’s best-in-class genetic information services that inform healthcare throughout life.

Through our investments, we envision helping create a future where we will diagnose cancer at much earlier stages pre-symptomatically, treat and dose patients with genome-informed medicines, and precisely edit cellular genomes for curative applications.

Is India set for a smart recovery?

I believe that many countries across the globe will surprise us with their economic recovery over the next several months. This is largely attributable to the sheer level of monetary stimulus and deficit spending by governments. India’s recovery offers a great opportunity to recast its consumption and investment demand, which are critical contributors to its GDP growth. The main challenge for an economy the size of India’s is ensuring that the post-pandemic recovery is undertaken in an equitable manner whereby the growth dividends are distributed more evenly across the population. The pandemic has caused unimaginable challenges for humanity which absolutely should not be ignored by elevated stock prices.

(This interview appears in Fortune India's May 2021 issue).