Invest Like the Best with Patrick O'Shaughnessy - David Rubenstein - Life, Leadership, and LBOs - [Invest Like the Best, EP. 270]

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Starting point is 00:02:32 this podcast. My guest today is David Rubenstein, co-founder of the Carlisle Group, one of the largest private equity firms in the world. David has worked in the White House, built a $300 billion investment institution, become a prominent philanthropist, published books, and even host his own TV show. It was a thrill to sit down with him and cover the whole spectrum of his experience as a father, investor, historian, and Titan of American business. Please enjoy this great conversation with David Rubinstein. David, as you review all the things you've done with your life, one of the underlying themes that's very consistent is I would classify you as an American patriot of sorts that so much of your interest in work and writing and interviews has been in and around the American system itself. And we sit here today at a very interesting time for that system, given that we're all talking and thinking about the war in Ukraine with Russia, the Chinese system, which is very distinct from our own. And I would love to just hear your perspective on the world today. which seems to be much more maybe chaotic and volatile or the right words than if you compared it to the last 40 years, given your unique set of experiences, but also the clear interest

Starting point is 00:03:41 that you have in the American experiment in the American system overall. Well, thank you very much for inviting me. I'm honored to be on your show. Russia, Ukraine is something that's top of mind for me because as the global economy is beginning to recover or was beginning to recover from COVID, we now feel. find ourselves in a free fall a bit in terms of the global economy. We're seeing a dramatic decline in obviously the Russian economy and obviously the Ukrainian economy, but it's spilling over in the European economy and to some extent in the U.S. economy. And so until that issue is resolved, I don't think we're going to really know how the global economy is going to perform over the next

Starting point is 00:04:23 year or so. My own view is that Putin made a miscalculation. Obviously, he thought this would be a walk in the park, and it turned out not to be. And as a result, he now is scrambling, in my view, to negotiate the best possible position for himself from which to negotiate an exit or an off-ramp. In other words, he's not going to conquer Ukraine, almost certainly. And he certainly can't hold Ukraine, even if he could conquer it. So he now realizes this is not what he once thought, and his economy is collapsing. Whether it will collapse before Ukraine is beaten to a pope, not clear. He's clearly using higher level weapons than he was before, and he's trying to gain other people's support, getting mercenaries to come in, getting China to try to come in to support

Starting point is 00:05:08 them with military equipment. My own view is that within next two weeks or so, some kind of truce is likely to occur because I think the Russian economy is collapsing so quickly that I think he's afraid that he will not be able to sustain what he's doing much longer. And I think he'd want to make sure he can control of Russia and not lose control of Russia. So I think he'd I think he'll work out some deal, but I don't know that the deal will be one that is so wonderful from what he thought he was going to get. Obviously, the toothpaste is somewhat out of the container, as it were, because you can't undo what's happened in Ukraine so far. What do you think the implications of this are longer term for just like the spheres of influence or the state of sort of global powers? This has changed everything in this respect.

Starting point is 00:05:51 It's always dangerous, say, this time is different, or this is the most important thing has happened since, whatever. That's always dangerous, and people like to always make it sound like they're living through the greatest tragedy or greatest triumph of all time. The truth is, the reason this is very important is this. One, this is the first time since the Cold War, where you've had a chance where Russia and the U.S. and Russia and NATO countries could militarily be in a conflict. We're coming very close to that. I mean, Russia bombed something just a few miles from Poland the other day, and they do something in Poland if they were to bomb Poland by accident, or maybe not by accident, under Article 5 of the NATO agreement, we'd all require to go in and fight. But we never have had a war against a nuclear power, a physical war in this way. So how do you deal with all that? Nobody really knows.

Starting point is 00:06:42 Another thing that's very important is this. If you put your money in a bank, you assume certainly since the FDIC came along that your money is going to be good, at least to the amount of money you put in, and nobody believes that the banks of the United States are going to be. be completely collapsing or that you won't get your money back. The countries have the same view. So Russia took two-thirds of its foreign reserves and put them in banks in the United States and around the world. Well, now that money's frozen, so they don't have that money. So now for the first time, countries are saying, wait a second, maybe my money isn't secure. Suppose you're China and you're saying, well, maybe we do want to look at Taiwan or maybe we do want to do something. They have $2 billion in U.S. Treasury bills, $2 trillion. Two trillion. So are they going to look at those $2 trillion is being safe and they can get it anytime they want, suppose the world finally comes

Starting point is 00:07:27 together and says, we're going to do this again. So it's going to change the way people look at depositing their money in places. It's also going to change the way people look at the U.S. dollar, I think. The dollar has been the reserve currency, but it clearly is not a currency that's as favorable to Russia and China as it might be to the United States or Western Europe. So we're going to see a lot of changes, but how nuclear powers can fight with each other and how close we come to actually using nuclear weapons is a real issue. What are you most concerned about or thinking about most as it pertains to the U.S. specifically their role in all of this, the system settings that we have, the rule of law,

Starting point is 00:08:02 the natural resources, et cetera, in terms of how we're positioned in this kind of new, radically different world? In this world, we've done something that was good, you might argue, depending on your point of view. We've tried for years to get NATO to be stronger militarily and NATO to be more united. Putin managed to do that. He united NATO in a way that no president's been able to do it. He's gotten the Germans to increase their defense spending in ways that nobody else has been able to do it. So in that sense, there's been a positive, which is the say, assuming they keep with it, you've got NATO and the United States more closely aligned before, and we've now shown that the world

Starting point is 00:08:36 can move quickly to isolate somebody in a way we've never seen before. No country as so big as Russia has ever been so isolated from the world economically and financially as we've now seen. So in that case, we've learned a lot. In terms of the impact on the U.S. economy, though, whatever the outcome is, and let's assume there's some outcome negotiated the next couple weeks or so, clearly the U.S. will be involved in some kind of help to rebuild Ukraine, it'd be my guess, along with other people. And I also think that many people are going to look at whether the U.S. economy is now going to be needing some stimulus in some ways. We're increasing interest rates. The Fed will this week increase interest rates for the first time in quite some time. much more can they increase and not hurt the U.S. economy because the U.S. economy stalled a little bit. It was growing back after COVID, but now it's going to be stalling a little bit because of Russia. Let me give an example. Right now, it's very difficult to do certain things, even though politically world is united. You can't have overflights over Russia. So if you're an American airline and you want to fly from Europe to China, you can't do that right now. If you want to ship certain things

Starting point is 00:09:43 from some parts of the world. You're going to have a hard time going across certain borders. It'll have some impact on our economy for sure. And we've now also learned how interrelated the global economy really is in the last couple of years through COVID and this. And now increasingly, I think the U.S. economy is going to try to be more insular and not be so dependent on supply chains all over the world and be so dependent on things that we can't control.

Starting point is 00:10:06 That's definitely part of the answer to my next question, which is what will happen to people that are just doing business here in the U.S.? Like what kinds of behavior will we start to see in response to their concerns over things like inflation, over things like reduced globalization, maybe not de-globalization. How do you think this impacts behavior for businesses in the U.S.? Inflation is coming back for the first time. And since I was in the White House, we had inflation in mid-teens in those days. I think it's probably going to peak this year.

Starting point is 00:10:34 The annual inflation rate this year, when it's all said and done, will probably be somewhere around 5%, 6%, it's obviously higher right now, but that's a bit of a temporary phenomenon because of what's going on in Russia. But by the end of the year, I think when you look back, will probably be at maybe 5 or 6%. And so people who haven't had to ever worry about inflation are now going to need to do so. People will change their conduct. They may buy things in advance in greater quantities because they're afraid prices will go up, ask for higher salaries and wages because they think that their cost of living is going up. Businesses will have to respond to that, and the price of everything you buy day to day

Starting point is 00:11:08 a day is probably going to go up. And what you find with inflation is that if somebody says, well, I have to increase prices because of inflation, people say, well, no, you don't have to. You don't really need to. People understand it. And therefore, you get a consensus that,

Starting point is 00:11:21 yes, I will pay more for this product at McDonald's or, yes, I will pay more for this show that I have to go see or I want to go see. It builds into the system. Paul Volcker used to say that once inflation gets into the system, it's very, very difficult to get out of it. We're talking about now, for example, the inflation rate, let's say, is right now, month over month, last

Starting point is 00:11:40 month it was close to 8%. The Fed is going to increase interest rates on Wednesday by 25 basis points. But that is a drop in the bucket compared to what Paul Volcker did. Paul Volcker increased interest rates by 200 basis points in one weekend, one weekend. And, you know, obviously had some deletary effects on the global economy and on our own economy. I don't suggest that we should do something like that. And I think the Fed is doing the right thing. But you should recognize that, as we do begin to increase interest rates, it will slow down the economy. And when you have inflation and high interest rates, that's not a good combination. Is it fair to say that you think inflation is fundamentally a reflexive phenomenon? Inflation expectations are what drives inflation in the way

Starting point is 00:12:21 you just described? It's a self-fulfilling thing. If you think there's inflation and you read there's inflation, then you all of a sudden you can act like there's inflation. So yes, it does have that impact. But when you go to the gasoline pump and see that gasoline is now $4.50 a gallon or $5 or $4, you see it every day right in front of you. So it does make you think differently about inflation for some time. For 25 years, our inflation rate's been more or less 2% or less. And we couldn't get inflation. We couldn't buy inflation. We thought that we wanted more inflation. We couldn't get it. Now we don't have that problem. But now it's getting the point where people are nervous about it. And that will have an impact on the way everything is priced in this economy.

Starting point is 00:12:57 As I studied the way that you seem to learn, which very much seems to be after my own heart, It seems like in many projects, your default or bias is to go to the best people in the world that have differing viewpoints that have had a lot of success and sort of form a synthetic view of a given topic. You've done this a lot of times in books and shows that you've done, I'm sure, at Carlisle, through business, through your whole career. What is the source of that style of learning? If you had to trace that thread all the way back to its beginning, talk me through that.

Starting point is 00:13:25 When I was growing up, there's a Yiddish word. The Yenish word is called Yenta. Yenta is a busy body. He wants to know everything. And I think my mother always would say, when we have guests coming out of house, my mother would say, don't ask them all the questions all the time. You're being a yes. It's not of your business.

Starting point is 00:13:38 So I think I probably always had that curiosity. And then I think I've always had an intellectual curiosity because I always want to know more. And so I'm always reading things. And just like you, you want to read as much you can, learn about as much you can. Now, because of the position I'm in, I can get some of the best leading people in any given sphere. I can ask them questions and I get access to them. And so I like to take advantage of it. Just as you on this podcast,

Starting point is 00:14:00 can get almost anybody you want to come on and you can ask them questions. I am in a similar position sometimes and I can ask people a lot of questions. I take advantage of it and get the best expert to tell me what's going on. When you're with somebody, what is your method? And maybe what's changed about that method over time? I generally ask people questions that I'm seriously interested in, but I don't try to get in arguments with them and say, okay, tell me what you know. And by the way, you're wrong. I listen to them and try to learn. I give them my points of view, but I don't try to get no arguments and tell them that they're wrong or they don't know what they're doing. I try to get as much information from them so that I can learn more.

Starting point is 00:14:34 Maybe that's it. I have a way of asking people questions, as you do, that lets people talk. In other words, as you probably know, being a good interviewer means that you let the interviewee be the star of the show. Don't be the star of the show if you're the interviewer. Some people who have been interviewers try to dominate the questioning, and therefore they don't let the interviewee feel that he or she can really speak. freely or a long period of time. So you get more information. We let the interviewee talk as you obviously do. One of the things I've loved that you've done is start to cluster these interviews around specific topics. And maybe the one that seems the most relevant in the world today is about

Starting point is 00:15:10 leadership. And what you did was people should go read the book. It's awesome. I'm curious if there's audio versions of those interviews, I'd definitely love to consume them all. But I'd love you to describe the source of your interest in this topic. Again, maybe back to its earliest days. And then I have several questions about what you learned through that exercise of talking to some of the world's best leaders in a variety of different interesting categories that you carve them up into in the book. When you were in grade school, there was somebody that was probably the principal or the teacher's favorite or he or she was the best athlete or the best student. And you always say, why is this person the leader? Because I always in the same situation. Why is this person the leader?

Starting point is 00:15:46 What are their skill sets? How do they get this way? How do they become a leader? And so I'm always looking up to people and saying, how did they become a leader? And so I'm always looking up to people and saying, how did they become a leader when I was not so much of a leader? And gradually, as people more and more began to see me more of a leader, I began to say, as I got older, I wasn't such a great leader earlier. How come I became a leader now? And I have a tortoise and hair theory that if you're really a hair and you're great in high school, you might peter out and you might say,

Starting point is 00:16:11 I don't need to work so hard. You take back to your grade school or your high school. I don't know whether you were first in your class or not. I was a terrible student. So let's take whoever was first in your class, president of student government, and captain the football team, what happened to those people? Well, I've often gone back and tried to find out these things because surprisingly, it's very rare to have somebody be a great student leader, a great person in the middle part of their career, and then in the latter part of their career, they're still a great leader. That happens occasionally, but rarely. I've gone back, in fact, in my high school, I went to a large public high school, and there were 1,500 people in my

Starting point is 00:16:45 class. And there was only one person who got in the Harvard. He was student body president, all-American, all-state lacrosse player, good-looking guy, everything you want. And then what happened to him? He went to Harvard, and apparently he dropped out. He now is selling, I think, Tai Chi exercises for $125 an hour somewhere in upstate New York. But somebody who was nothing in high school, I was barely anything. You know, I got luckier in life.

Starting point is 00:17:09 So you never know what's going to happen. I am interested in leadership because I'm interested in what makes people a leader. And why should we want to have leaders? Why not have everybody a follower? Well, the seven-half billion people, everybody was a follower and nobody was a leader, you wouldn't get as much done. So leaders are the ones in business, in politics, in engineering, in entrepreneurship, who really make the world a better place, I think, because they take people where they

Starting point is 00:17:31 maybe want them to go. So I am interested in leadership. And on my audiobooks, what I do is this, I tape record my interviews. When we do an audiobook, we actually use the actual voice of the person. Very often, audiobooks, you have professional readers who read. what was in the book. I don't do that. I have my voice and the interviewer's voice. So if you want to listen to the audio book, you're actually to hear what the person said as they said it. Amazing. Tell me the story of the time that you've been most personally in awe of a leader and something

Starting point is 00:18:01 they were doing. When I was a little boy, I was looked up to John Kennedy, he was President of States. I was in awe of him. When I went to work in the White House, I was only 27 years old, and the President of the United States' office is not that far from mine. And so I guess I was in all of him. There are many people that I have met over the years who I've been extraordinarily impressed with. And when you meet people that are famous and you get to see them up close, you kind of say, okay, they put their pants on one leg at a time if they're a major or something like that. And you realize everybody has their own story. Everybody is, with some exceptions, a reasonably likable person you can have a conversation with. So, for example, this weekend,

Starting point is 00:18:36 I did an interview from my TV show of somebody I'd never met before, really. I was intrigued by Sylvester Stallone. Now, here's a guy that. it started Rocky and he's Rambo and great dialogue with him about all that stuff. So I'm always looking at interesting people that I can interview. And earlier this week, I also interviewed Lionel Ritchie, who I'd never had a chance to interview before. I find it intellectually challenging to get ready to prepare to interview them because I have to read about them and get my mindset ready to do the interview.

Starting point is 00:19:04 Obviously, there's lots of different kinds of leaders. You boil it down to visionaries and builders and transformers and commanders. There's lots of these different interesting categories. I'm curious how you came to those. even those categories, do you think that there are any sort of most basic, almost like the primary colors of leadership, most basic ingredients in any leadership recipe? Number one, have a vision of what you want to do. In other words, you can't just sit around in your office say, I don't really want to do anything, and all of a sudden you're going to be a

Starting point is 00:19:33 leader. You have to say, I want to do something, accomplish something, have a vision. Bill Gates had a vision. Steve Jobs had a vision. And so whatever it is, second, you've got to persist because whatever you say you want to do, there'll be inevitable resistance to it because it was such a great idea. Somebody would have done it already. So you've got to persist because people are going to tell you no. And then at some point in your career as you're persisting, or maybe before you started this new idea, you have to fail. You have to learn what it means to be a failure. I've met a few people in life who were so charming and so good-looking and so wonderful that they never failed at anything. And then when they got later in life and they found a challenge,

Starting point is 00:20:07 they didn't know how to deal with it. You have to learn how to fail. Failing earlier is better than failing later. You also have to know how to communicate with people. How do you actually persuade anybody to follow you? You have to be able to be an oral communicator. You don't have to be Martin Luther King, but you have to be able to speak in a very effective way so you can get people to follow you. Or you have to be able to write an effective way. You don't have to be Thomas Jefferson, but you have to write in a way that people will read what you say and then they'll follow you. Or you lead by example. Those are important things. You've got to get followers and you know how to communicate. with them. You'll have to share the credit. Obviously, there's some leaders that tell everybody how great they are, but they're not the leaders you want to admire. The ones that share the credit. Turns out, a lot of business stars, superstars, had partners when they started these companies.

Starting point is 00:20:50 They didn't really do it by themselves. Sometimes they share the credit. Sometimes they don't. And then also, I think great leaders are people that rise the occasion. If you're in a business and your business are about to go bankrupt and you rise the occasion and you survive and make it turn around, that's great. Or if you are in a war, we probably never would have. heard of Abraham Lincoln if the Civil War hadn't arisen, or FDR would have been seen as a modestly competent person if World War II hadn't arisen. When occasion occurs, you rise to take President Zelensky of Ukraine. He would have been seen as a comedian who happened to get elected by accident as the president of Ukraine had this war not come along. Now he's going to go down and certainly today's period

Starting point is 00:21:28 of time as one of the great heroic leaders of our age because he stood up to the Russian machine. I often get this question of who the best interviewers are and one of the people that always comes to mind as Oprah, who's one of the people that you interviewed in the category of visionaries. What did you learn from her? Oprah, I've known a little bit because when I became the chairman of the Kennedy Center, we gave her in a Kennedy Center honor that first year, and I kind of met her. And I remember the story. My mother had told me, I'm from Baltimore.

Starting point is 00:21:52 And when I went out to college, my mother would tell me that we have a great newscaster in Baltimore now, Oprah Winfrey. I said, really? And she said, yeah, and she's going to go somewhere nationwide. She's too big for Baltimore. I said, no Baltimore newscaster's ever going nationwide, so I don't think so. Later, I told Oprah that story when she became, you got the Kennedy Center Honors. Oprah said to me when I interviewed her, look, I'm not a great interviewer, she said about herself,

Starting point is 00:22:15 but I'm a good listener, really good listener. And she's right. To be a good interviewer, you have to listen to what the person says and then play off of it. When the FBI comes by and does a background interview of me for somebody else, maybe you've had this, somebody wants a background check. The FBI will typically have a checklist of 12 questions. You could say in response to question number three, the person's actually an ax murderer, and I know where they bury the bodies. They're just going to question number four. They don't listen to what you say. They just go on the next thing. They get their checklist time. So you have to listen and then play off of what the person's saying. And that makes the interview more effective.

Starting point is 00:22:49 Is that your method, too? Have you borrowed that in your style? My style is this. Here's what I do. It's not a secret. Everybody has their own style. You have yours. I have mine. What I do is I do as much research as I can. and then I put it in my brain and I sit down and I type up what I would like to have as the questions. Introductory things to kind of have grand overspanding, arching questions, then go through the trajectory of the person's life and then have some overall larger questions. And then I send a question to the person. I do that. They're asked me sometimes, but I'd like to do it because I want to make sure they realize

Starting point is 00:23:25 I'm not trying to embarrass them. I'm not 60 minutes in the old days and trying to embarrass people. I'm just trying to have a nice, light, reasonably intelligent. conversation. When I have the conversation, I don't use those notes. I kind of memorize them because I wrote them, so I know about 80, 90 percent of it. And then I start through the interviews, and then I listen to the people, and then as they depart from what I think they're going to say, or they say something, I think they're going to say, but I think they might be a humorous moment. I try to intersperse humor. And one of my techniques you may have observed is I'd like to use humor a bit because I think

Starting point is 00:23:55 humor relaxes people. It makes the audiences feel better. So I'm not a Mike Wallace 60 Minutes kind of person. I never try to embarrass anybody. I never try to do anything other than make them feel good. And the people that I interview generally feel good about it. And so that's my style. Now, you can criticize me by saying you shouldn't give the questions in advance. A serious journalist wouldn't do that. I'm not a serious journalist.

Starting point is 00:24:16 You should say you should ask tougher questions and be meaner to these people. Okay, people can do that. That's just not my style. I do what I'm comfortable with. And people seem to like it. And what was your leadership style when you were running Carlisle for all those years, given that you've studied leaders so much? Where do you slot in?

Starting point is 00:24:31 Well, I tried to focus on what I knew best. I mean, the way I built Carlow, I didn't really have investment skills as a background. I didn't go to business school. I was a lawyer. So I brought in people that actually knew what they were doing about investing. And so I let them take care of that. And I decided to figure out what was my comparative advantage. And it was that I was willing to go on the road and raise money and ask people for money, what you have to do if you're going to be in the investment business. I was willing to go recruit people. I was pretty good at convincing people to join us and I came up with a strategy of building out a global firm and the way we did it. So I was really focused on what I knew how to do better. And I deferred to my partners in their

Starting point is 00:25:09 area. So I would rarely say, this deal you guys want to do is terrible. I'm against it. I'm going to block it. I didn't usually do that. I would give them my questions and my concerns, but I wouldn't try to block it just so they wouldn't try to block what I was trying to do. And it kind of worked out. I've always been fascinated in the stories of the big investment institutions and how they're built. If you imagine a book, a definitive, incredibly accurate book written about Carlyle's whole history up through the present. To what do you think that author would attribute Carlisle's success most? What were the key variables that drove what's obviously been a phenomenal outcome for the business overall?

Starting point is 00:25:43 We were based in Washington, D.C. And by being based in Washington, we were out of the gunfire of people in New York who would have said, you don't have investment banking background. You're not qualified. Secondly, by being based in Washington, I could recruit people who wanted to stay in Washington or be connected to somebody in Washington. So Jim Baker, Frank Carlucci, George Herbert, Walker, Bush, Dick Darmann, Arthur Levin. There are people that were in Washington or connected to Washington. So I had an advantage and I could get people that people in New York might not have otherwise hired or thought of hiring. Third, I came up with an idea, was kind of my idea, that sort of work, which is to say this. When private equity firms started, they were mom

Starting point is 00:26:19 and pop firms. You had one fund and a small amount of people and they might have a fair amount of money, but not that many people. KKR did the RJRD on 1989. They only had seven or eight investment professionals. And that was the biggest buyout of all time. I had about $24 billion. I decided what I would do is I'd have a buyout fund. But after I had that, I would go raise a growth capital fund, a venture fund, a real estate fund, a debt fund, and have multiple funds and then take advantage of that by building up my back office. So I would centralize the administrative and use it for all the various funds and then get people to buy into the brand name of Carlisle, and then if they were happy with Fund One, they would go into Fund Two and Fund

Starting point is 00:26:56 Three and so forth in different areas. And then I decided to globalize it by doing something that had not been done before. Go to Europe, go to Asia, go to Japan, Middle East, and build teams in these places so we would have a global thing. And then, of course, the track record was good. My partners were responsible for investing the money more than I was. And so the track record was good. And so that was a combination of it, but also willingness to work hard and then not trying to make enemies. And we always put our investors first. Jeff Bezos is famous for saying, put your customers first. That's always the most important thing. And we in effect did that. We always would put the investors first. If we made a mistake, we try to make it up to the

Starting point is 00:27:31 investors. In the early days, we could basically say, well, we'll make you a hole somehow or do something that would make up for a mistake we might have made. Is it true that you almost ended up with a major stake in Amazon in its early days? We did. What happened was Baker and Taylor was a company we own, which is the second largest book distributor in the United States, not a very profitable company, never had been, but it was kind of a break-even. And apparently Jeff Bezos went to Baker and Taylor and asked if he could rent their bibliography of books in print because he was going to sell books over the internet. And I didn't really hear about it at the beginning. But our guy later told me that he offered, I think it was 20% of the company in return for using the bibliography. And our guy said,

Starting point is 00:28:08 no, we want cash. We ultimately agreed to $100,000 a year for five years. And so when I heard about all this, about two years into Amazon's existence, I flew out to meet Jeff and said, look, I think we would take some startup capital now because you're going to do well, and I think we now made a mistake. So can we get our 20 percent? And he said, well, I don't really need you so much anymore because the company's now two years old, but I'll give you 1% of the company in return for tearing up the deal we have. Thank you for helping me get off the ground. So we took that 1% and we ultimately sold it at the IPO. It was stupid, but we did. Fascinating. If you think about Carlisle's brand, which obviously is like a key sterling part of the story in the way you describe

Starting point is 00:28:47 institution building around the world. What ways were effective in terms of the investment made in the brand itself? I think even today, if you ask people to brand associate or something, they'd say the things you want them to. And I know that's hard to do. So how did you do that? Branding, Carlis, we were obviously well known for being in Washington. So therefore, people thought we understood government better than people elsewhere. And so very often, and when I was meeting investors, I would explain to that what's going on in Washington. People were fascinated all over the world about what is going on in Washington, D.C. So I would often talk about that, and I could talk about the president's policies or politics reasonably well. So people were interested in that. People also thought our brand was

Starting point is 00:29:25 that we were not at the cutting edge of doing the most out of things, where we were pretty cautious and careful, and we had a pretty respectable track record, and that we basically were people that didn't have our egos out of control. We didn't come from Wall Street. We weren't really focused on fees how much we're focused on good investment returns. And the combination of all these things, plus working very hard to develop investor relationships all over the world, paid dividends at some point. I think it was Bill Janeway that first got me so interested in the relationship between government and business, in his case, most specifically in the world of venture capital. But I'd love to hear your take on that. I think we often mistakenly think of business and government as separate things,

Starting point is 00:30:02 but obviously they're inextricably intertwined. How should a new or up-and-coming investor think about this relationship between government and business. Look, the truth is, many of the great fortunes are made because people observe that government has developed a policy, had a policy or has a new policy that will encourage one industry versus another industry. And so people take advantage of it. Don't think of almost any company. They're probably going to take advantage of something the government has done to make it possible for them to do what they've done. The government has incentives in one type of another, or it does certain things that are politically popular and you might want to take advantage of it. So government has a gigantic impact on what you do in the business

Starting point is 00:30:42 world. And I think it was a mistake for some of the technology companies to ignore Washington early on. Now they are spending a lot of time here because they realize government can really affect their business. And maybe for the better, take Amazon as an example. Amazon's biggest profits really are not from selling books over the Internet or anything over the Internet. It's from AWS. That's where the biggest margins are. People recognized they were a leader in this when the CIA gave them a contract years ago, people said, wait a second, the CIA is giving a contract for cloud work to Amazon. What is Amazon doing in this business? And people didn't realize it. And then people began to dig into it and realize it's good enough for the CIA. It's good enough for me. And so the

Starting point is 00:31:20 Amazon business at AWS grew to be the biggest in the world. How have you seen businesses best interact with government? Is it through lobbying and traditional means like that? And maybe it's just idiosyncratic to every company in its needs. But are there common traits of businesses that understand and interact with government best? Well, it depends on different business, but I think it's very effective. The lobbyists have some impact for sure because they know the members and all that. But nothing beats having employees or workers come into Washington and talk to members of Congress because these are the workers in their districts, or their states, or having

Starting point is 00:31:55 at a more senior level, having a CEO come in and meet with the President of the United States and having the CEO really know what he or she's talking about. That's very effective. And that's why a lot of CEOs spend a lot of time in Washington these days because government policy can really make or break them in many ways. So what major government policy today is not going affect business in one significant way or another? I noticed that in the book on leadership under the category of builders, there are actually some investment leaders, Robert Smith, Ken Griffin, maybe even more than that. Phil Knight was in that category. Obviously, it's a traditional builder.

Starting point is 00:32:26 What did you learn in that leadership in the style of builders that you think is most portable for other people out there. Sometimes people might be an innovative genius and they come up with a brilliant idea and they may not be a great administrator, a good operator, but the idea itself ultimately takes on and they had other people help them. Sometimes you get people that might not have thought of something for the first time, but they really built it in a way that's better than anybody else did. Let me give you an example on the ones you just mentioned. I just interviewed Ken Griffin recently and as you know, he's built two successful companies. One is a hedge fund, but another one is his market maker, Citadel Securities.

Starting point is 00:33:01 And there are other market makers out there, but they built a company that is just incredibly in the market making business. And he just sold a piece of it, $21 or $22 billion valuation to Sequoia and Paradigm. He's a builder. He built something. It wasn't the first person that had the idea of being a market maker, but he kind of built something in that area that was quite impressive, and is quite impressive. Is the common trait there just people that are more nose to the grinds down,

Starting point is 00:33:24 like know what's going on in the operation side of things? Is there something different than the Jeff Bezos? Maybe Bezos is a bad example because he seems to be good at everything. My experience is that most people, there may be a few people who have wonderful ideas, but their head is in the sky and they don't really get down to brass tax and build the company. The people that are successful entrepreneurs, building companies, you can call them builders or visionaries, are really into the details. Steve Jobs was into every detail, as we know.

Starting point is 00:33:50 Bill Gates was into every detail. And Ken Griffin and others, people that build great companies actually, they mastered the details. And it's not just having a vision of something and let somebody else do it. That can happen occasionally, but that rarely is the case. The last category I was really interested in in this idea of leadership is, I think you called it masters. I was interested because it was sort of an atypical category relative to, you know, some builder of a big institution. So examples were like yo-yo Ma, a performer, coach Kay, who just retired, Jack Nicholas, single player in a sport. What was your interest in this

Starting point is 00:34:21 category of what you called masters? And what did you learn from them? masters are people who are they didn't invent golf or they didn't invent basketball, but they perfected it in a way that almost nobody else did. How did they become a leader? How did you perfect the skill of being a basketball coach or being a great golfer? There's no one skill that anybody can say is the way to do it. But practice, practice, practice makes a big difference. And then learning how to communicate with other people very often like Coach K, you have to communicate with young teenagers if you're going to be a great coach in a college world. in Yo-Yo Ma, it's just practice. I mean, he's very talented for sure, but practice, practice, practice.

Starting point is 00:34:58 So to become a great master, it's something you have to just give up other parts of your life and really practice it and perfect that skill over and over and over again. If you go back to your job as the leader and builder of Carlisle specifically, I've got a few areas of interest just because, again, I'm so interested in money management institution building. The first is around talent. Obviously, it's a very people, heavy business, those with the best talent, investing talent, client talent, et cetera, tend to win. What did you learn about being able to fairly compensate and

Starting point is 00:35:28 retain the highest caliber people, given that often they have options to go start their own firm or whatever? One of the advantages we had in the beginning of Carlisle was we were based in Washington. There weren't a lot of other firms like ours that could steal people away if people want to stay in Washington. We obviously built that other office and then now have more people, probably professional investors in New York than we have in Washington. I would say that everybody wants to feel that they're part of a healthy culture. Everybody wants to enjoy where they work. If you build a culture where people think that you care very much about them, you compensate them fairly, but you tell them maybe you can make money elsewhere even more than you're making with me,

Starting point is 00:36:04 but you feel like you're part of something, you enjoy going to work, you enjoy your colleagues. That can make a big difference. So in building our firm, we really wanted to make sure that there was a culture, of friendliness, culture where people felt that working together was helpful. And in the end, if they worked together, they would make a really good compensation out of it and then be fairly rewarded. And in terms of giving your focus on opening these office, building the relationships with investors, raising money, et cetera, what defines great there? So there's lots of people that try to do that function. What do you think is special about how you did it in terms of building relationships with LP investors? Well, in your meeting with investors and you have investors,

Starting point is 00:36:41 you have to be honest. If you make mistakes, explain it, tell people up front what went wrong and be honest about it. If you do a good job, don't brag about it so much and tell people how wonderful you are. People will read the material and they'll figure out you've done well if you've actually done well, but also making people feel like they're part of a club. They're part of an organization where you really care about them, not just their money. I think that's very helpful. I think making investors feel that they're more than just a number and more than just a client and building an organization around the world, when you're recruiting people, you want to make them also feel like they're part of something different and something that's, you know, is going to

Starting point is 00:37:15 be enjoyable to be part of and that they're not going to be embarrassed by being involved with it. I think people would be amazed just doing some Googling at the prolific nature with which you've attacked, I'll call it the media part of your life, books, another book, I think maybe your fourth or fifth coming out in the fall called How to Invest, How to Lead we talked about. We'll talk about the American stuff later on. You've done an incredible amount of media. What have you learned there? Like, what has surprised you about your foray into media in terms of what works? What do you wish it worked better? I'm just curious to hear your lessons given you have been prolific in the last 10, 15 years? I'm not Mr. Handsome. I'm not Mr. Charming. I don't have all the

Starting point is 00:37:52 attributes of a wonderful television host or something. So I wasn't sure that I could pull off all of this. And I'm not writing books that Darwin would have written or something like that. I mean, these are nice books, but they're not going to win Nobel Prizes for literature or anything like that. But they're easy to read and I think enjoyable. So I basically learned that try to focus on what you're working on at a time, try to make something really good. Don't try to do something that's half-assed, make it really, really good, and then people will maybe respond to it, and then it's learned along the way. I'm better today at talking with you this way than I was five years ago or 10 years ago, just as you're probably better at doing this podcast than you were

Starting point is 00:38:31 when you first started. You learn, in terms of media, I would say I'm still on a stone age, because while I do have some of the things you mentioned, I don't know how to do Instagram. I'm not that good at that stuff. I should learn how to do it, and it's clear to me that, you know, I meet people sometimes and they tell me, well, I have 20 million followers on Instagram. I think I might have two followers on Instagram if I started. The reason I don't do some of that stuff is I'm embarrassed to how few followers I would have. I'm fascinated that you went the direction for your next book of how to invest. I mean, it seems to be something probably you didn't need a ton of training on.

Starting point is 00:39:01 And yet you went to the trouble of going to meet people. How did you approach that? When you're building that project, how did you decide kind of like the categories you created for leadership? Did you do the same thing here? Are you created categories of investing? What were you hoping to get out of this sector? Because I'm in the investment world, I know a lot of people, so I wasn't that difficult to get these people to let me interview. I'm that's always a trick, as you know, get people to let you get into their lives.

Starting point is 00:39:24 Secondly, I put it in the three categories. You can have an infinite number of categories. Basically, I said, I had what I'll call mainstream, so people that do traditional stocks and bonds and things like that, real estate. Then I have alternatives, which is private equity, venture capital, hedge funds, and so forth. And then I have something I call new, which is something that's relatively even newer than private equity. And that's things like cryptocurrency, SPACs, things like that, that are relatively new infrastructure. And the hardest part is this. I interviewed a lot of people, but the publisher doesn't have enough space for all the interviews. So now I have to go to some people and say, well, you didn't make the book, but you're really good and I'm going to use it somewhere else, or I'm going to put you in the audio version of it, or my publisher's the bad person.

Starting point is 00:40:12 and I wanted you in, but the publisher didn't. It's not easy. I know you're paying there. With that experience, do you think you would be good at picking money managers? Like if your whole job was to be a fund of funds or something, do you think you'd be good at it? I do that in effect now, but I have people help me. I've set up a family office. Declaration, it's called, right? Declaration. We have a part of it that does invest in funds and things like that. And, you know, I have people working on it, of course, but I do have a reasonably good intuition of things, but I'm not perfect. I make a lot of mistakes. And so I would say I'm okay. But I tend to rely a little bit more on my gut than on enormous amounts of due diligence. So people working in declaration, they spend much more time on

Starting point is 00:40:50 due diligence that I would have the patience to do. But the truth is, if you're putting money out with people, the best people are going to be people that probably don't have the longest track record because the best people starting new funds are going to be people that are building the next Blackstone or Carlisle Apollo and they're young and they're hungry and they're ambitious to prove themselves. If you go into somebody's fund who's been there doing it for 20 years, it may or may not be as good. If intuition, and I totally understand the notion there is key when evaluating somebody, what do you think the intuition's onto? What about them do you think excites you most commonly across the people that you've backed or partnered with?

Starting point is 00:41:26 Looking for people that are reasonably intelligent. Geniuses are tough to back because sometimes they get a little crazy. But reasonably intelligent, hardworking, have a vision of what they want to do, this is their life. They're putting up whatever they have in money in terms of alongside you. They are available to answer questions. They can explain what they're doing. If somebody can't explain what they're doing to me, I get nervous. If you really can't explain it, I wonder whether they really understand or whether it's going to be something I'm going to understand when they make a mistake, what they really did wrong. Those are some of the things. I also like people that have

Starting point is 00:42:00 reasonable educational backgrounds, so I recognize that everybody goes to the famous schools. And I like people that are, I think, focused on the business. At the time, later in life, they can focus on philanthropy. They can focus on all kinds of other personal things. But I'm looking for somebody that's really focused in their 20s or 30s on building this business. You get all those qualities together and generally get a good idea. What goes wrong with geniuses? Why that has a station, that's interesting. Geniuses are very, very hard to manage, for one thing. I've hired a few people that Some people might say are geniuses, but they usually didn't work out. And that's not always the case.

Starting point is 00:42:37 But geniuses are coddled for a bit by people telling their whole life how brilliant they are. And when people tell you how brilliant you are, you believe so much in your ideas that you are maybe not going to listen to other people. You're going to be tone deaf about certain things. Now, some people you would say are Steve Jobs was a genius. You could argue or you could argue Bill Gates was. And they worked out. But for every Steve Jobs and Bill Gates, there are plenty of people you don't hear of who just

Starting point is 00:43:01 were brilliant, but they didn't get. anywhere. The other key theme through all your work is this interest in American history. You did the same thing you did with leaders and you're doing with investing with historians in a book called The American Story that's really, really interesting. The American Experiment being another work on this same topic. What are the key big, interesting aspects to you hear about American history? Like, why have you spent so much time learning about, obviously you're in Washington, you have the sort of geography in your favor yet again. But what is it about our history as a country that has you so incredibly interested? I work in the White House as a young man. So when you work in the White House as a young man, you do get a sense of history. You're working in the same places, a lot of famous people. Secondly, I've stayed in Washington, and therefore you see all the monuments, memorials and so forth from time and time. The book you referred to, the first one, I basically started a program to educate members of Congress about American history where I interview a great historian in front of members of Congress once a month. I did that for about five years because of COVID. We stopped, but we're starting again tomorrow night. I'm going to interview Susan Eisenhower who wrote a book about her grandfather.

Starting point is 00:44:01 present eyes and hour. And I think it's an interesting thing to kind of educate other people about American history. So it's something I'm interested in and I tell people to find things you're interested in and pursue them. If you told me I had to educate people about nuclear physics, I don't think I could do that very well because I don't understand it. If you think about the key drivers of American outcomes, what are they in your mind? Like, is it the original bill of rights? Is it property and rule of law? Like, what have been the key ingredients that have allowed the experiment to sustain? This country succeeded in part because, We have a constitution that's worked reasonably well, only 27 amendments in 250 years, which is pretty good.

Starting point is 00:44:37 It's got lots of flaws. Slavery was the biggest flaw and not having the right for women to vote was another major flaw. But it's worked reasonably well with the amendments. Secondly, the capitalist system has tick hold in this country. It's an improvement on the capitalist system that operated in Western Europe when we started our country, and we've refined it. Entrepreneurial activity is another part of our culture. and that's really one of the things that made this country, I think, work pretty well. Having a two-party system has worked pretty well and keeps of keeping the government,

Starting point is 00:45:07 I think, more stable than it would have been in a multi-party kind of system. The immigration has been an important thing because we get fresh people that are ambitious and hardworking and so forth. They come here believing in the American dream and they try to execute it. Those have been some of the most important things we've had in our country. And also there's certain freedoms that we have in the Bill of Rights. that'll let people say what they want to say or worship the way they want to worship. These are the kind of things that have been part of our culture.

Starting point is 00:45:33 I've called them our genes, but that's really part of our culture. What do you think are the biggest areas of potential improvement for America in those same system settings today? The principal flaws we have today are income inequality is getting worse, not getting better, and lack of social mobility is getting worse, not better. I grew up in a modest blue-collar background, but, I believe in the American dream. I was white. I didn't have prejudice against me. I was Jewish, but the prejudice wasn't as apparent as if you were black. I worked hard, as you no doubt out did and

Starting point is 00:46:08 worked your way up. I think today many people don't believe in the American dream. Immigrants believe in it more than people who are born in this country in many cases. If I had the answer to income inequality and lack of social mobility, I would have been in Iowa and New Hampshire many times running run for president. I don't have the answer. There's no easy answer. But one answer that I think is something we should focus on literacy. Right now, 14% of Americans cannot read past the fourth grade level. If you're functioning illiterate, which is what that definition means, if you can't read past the fourth grade level, you have no chance of succeeding in our country or in any country. We let 1.7 million people drop out of high school every year. We don't really, I think, train people to read

Starting point is 00:46:48 as well as we should. 80% of the people in the juvenile delinquency system are functioning illiterate. So until you solve literacy, you have no chance as a person in the social underclass of right. up, in my view. That's a big problem. What lessons did you learn navigating that mobility yourself? So you went from very humble beginnings to obviously incredible personal wealth and tons of philanthropy. We'll talk about that in a minute. A lot of people burn up through that process or have it go very badly. It seems like yours has gone quite well. What lessons did you learn about navigating that? Or maybe I have her own. I try to maintain some humility, trying to recognize that I wasn't gifted in many areas. So I had to work harder than other people. Trying to learn from

Starting point is 00:47:27 from people that could be mentors or could educate me, trying to make as many contacts as I could who you never know who might call you up with some good idea someday or help you with a job. Many of the jobs I got I got because I had some random contact I didn't think it would lead to anything, but it ultimately did. Ultimately, I think for anybody listening to this who wants to kind of rise up, I think trying to read as much as you can, learning how to perfect your oral skills, learning how to write reasonably well is very important, learning how to network with people, retaining some humility, sharing the credit. These are the things that I thought I did along the way, and I got lucky, too. How did you teach your kids about this topic?

Starting point is 00:48:06 The hardest thing in the world to do is raise children. Even harder than raising children is raising children if you're wealthy or famous, because we've all seen examples where that didn't result in such wonderful offspring. I've tried to be a role model a bit by doing things that I think they would be proud of and try to not spoil them by giving them undue money, but make sure they have a good education. As of this moment, I've never told my children, I'm giving you X dollars when I die, or they're going to get a large amount of money before I die. I help them a bit around the way, along the way, and help them with their education. But none of them are sitting back and just saying, well, I can't wait that my father dies. I'm going to

Starting point is 00:48:44 inherit a billion dollars. All of my kids are well educated, and they all have MBAs, and they're all in mankind's highless calling, private equity. The extent to which you've seen it go wrong with friends or colleagues or acquaintances or whatever with their kids. What are the reasons that can go wrong? I'm not citing myself as a perfect parent. I'm not. One is not putting enough time into it, making your kids think that there's a higher priority than

Starting point is 00:49:10 them, not listening to them when they have a problem, not trying to nurture them in things that need nurturing, giving them too much when they don't really earn it. all your kids are in God's highest calling private equity. What do you think of the state of that industry today? What is its best and highest function? What do you think attracted them to it? Obviously, your background, but private equity, I mean, the American sense of private investments and so forth. So one is doing venture, one's doing growth capital and so forth. I think that they all got MBAs from really good schools. Maybe they saw me as a bit of a role model. I don't know. Maybe I should have nurtured their creative skills and had them be artists or

Starting point is 00:49:50 or poets or playwrights. It just didn't work that way. I'm not sure why they drifted into it, but they did. And maybe I encouraged them somewhat, but I didn't force them to go into that business, for sure. And what do you think about abstracted away from them, just the state of things today? Do you think it's a good time? We're in a good time for this kind of investing, a bad time. Obviously, the prices have been extraordinarily high in the last two or three years. What do you think? For the last 40 years, people have said, look, private equity is about to fall apart. Private equity can't keep doing what it's doing. And for the last 40 years, and every year, in the last 40 years, private equity has outperformed everything else because in the end,

Starting point is 00:50:25 economic incentives are staggering, 20% of the profits, if not 30% of the profits, and the ability to fix companies. If you make a mistake, sometimes you're in a private setting, you have an opportunity to fix it before the public realizes the mistake that you might have made. You tend to attract a lot of very talented people, too. There's no doubt the economic reward system is very good, and so you attract a lot of talented people, hardworking people. Private equity returns may come down because there's so much money in it now. But the basic ingredients of private equity, which is the economic incentive system, fixing things, being more aligned with their workers and the managers, I think that does tend to produce pretty good rates of return, and we'll probably be here

Starting point is 00:51:01 for quite some time. What's been your experience in this new category, maybe crypto is the right place to start since it's the obvious one to ask about? As you viewed new versions of this same thing, where those same economic incentives tend to exist in the new category, certainly in crypto they do, often it's 30, not 20 percent of the upside. What have you learned? And what is your impression of that strange new world? Well, I was skeptical of crypto in the beginning because I figured there's nothing underlying this. But it's clear to me now that many younger people don't think that there's much underlying the dollar or the euro or other currencies. So they think I really can't get gold for my dollar anymore. So maybe the government's promised that make it valuable isn't maybe there

Starting point is 00:51:41 when you have so much money you're borrowing and you're inflating your way out of the value of the currency. So I think many people like the fact that it's private. You can't really know how much somebody owns. They like to be able to transfer around the world. And look, if you're in Ukraine or you're in Russia and you want to have some assets and your country has got lots of challenges, having some cryptocurrency probably enables you to feel better that you can have something that's outside of the government's control and it's not dependent on a bank opening up its doors to you. Another factor, seeing people make money in this and therefore they tend to go where people has made money. I have not bought cryptocurrencies, but I have bought companies that service the industry because I think the

Starting point is 00:52:20 genie is out of the bottom, and I don't think the industry is going to go away anytime soon. It seems like another thing in common across all of your career has been very often being the chair of different kinds of institutions, whether those are arts or political or business or what have you? Why are you always drawn to that role and gotten better at it over time? What makes for a good chairman or chairwoman? I'm not quite sure. I used to think a lot of boards, and eventually I wind up as a chair. maybe it's because the other people are smart enough to know that being a chair takes a lot of time and you want the job. So no, but maybe I got it because I was the only person not in the room when they were voting on the chair.

Starting point is 00:52:52 I don't know. When I get involved in a nonprofit, I try to make a difference. So if I say, look, I'm going to be the chairman of the Kennedy Center. There I said, I want to build a new building there. I'm going to make a difference. Try to make something happen. So I don't want to be a chair just to preside. I want to do something that makes the organization better for my having been the chair. And obviously, sometimes that takes leadership. Sometimes it takes money. I do enjoy it. and I actually enjoy running meetings,

Starting point is 00:53:15 and I think I have a good sense of humor so I can make the meetings go less painful than non-probable board meetings might otherwise be. How do you run a good meeting? This seems like a skill under-discussed and very worthy skill. Call on people to ask their views, try to make sure you have people going to present who have some interesting things to say,

Starting point is 00:53:34 but listen to what people have to say and then try to have some good things to talk about each time and also end on time. Good one. what is the most interesting system, I'll call it political or otherwise, outside of the U.S. that you've spent time in and observed? Singapore is an incredible country. It's very small, maybe 5 million natives and maybe 2 million expats or something like that. Works extremely well. It's very honest. No corruption that I'm aware of. And it's a really intellectual centers. I think it's pretty good. I think Israel has a government that you could say is very Noah's Ark-like.

Starting point is 00:54:11 It just has so many different parties in it. It doesn't kind of work as well as I think our system works. But Israel has an incredible entrepreneurial culture in the country and quite impressive, in my view. I'm impressed with another of other countries that have had to survive in very difficult situations. Clearly, Ukraine has now a poster chaffer how to survive bombardment. I assume they'll emerge from this stronger than they otherwise would have been. Obviously, I wish they hadn't gone through this tragedy. But there are a lot of nonprofit organizations that I think have done a really good job of managing problems.

Starting point is 00:54:43 I'm a member of the Board of the World Economic Forum, which is the Davos Group. And I think they've done a wonderful job as well, trying to bring people together from all over the world and try to listen to them and have some good solutions come to enormous problems. Did you ever meet Lee Kuan Yun in Singapore? Oh, yes. What was your impression of him? Well, many people would say who knew him better than I did. I know his son, who's the prime minister now, much better. Lee Kwang-you, I met through President Bush and some others when I was there, a brilliant man

Starting point is 00:55:11 who many people would have thought would have been one of the most powerful people in the world had even had a country that was as big as China or the United States. Very smart, very brilliant, a great leader, built a country from nothing. I mean, he took over that country in the early 60s and built it into an incredible thing. Malaysia didn't want Singapore. They kind of gave it away. And all of a sudden, he's built this great powerhouse. Obviously, it's part of you giving back.

Starting point is 00:55:34 You've given money to tons of different academic institutions, non-profit institutions, etc. You're giving pledge signer. What have you learned about doing that well? I mean, it seems like you've really spread it around, not just a one cause giver or anything like this. What precipitates you giving a major gift? Like, what are the conditions?

Starting point is 00:55:51 I have four standards for my philanthropy. Number one, start something that wouldn't otherwise get started. So building in the Kennedy Center, they wouldn't have done if I didn't want to do it or fixing Monticello, it wouldn't have gotten done if I didn't want to really put up the money to do it, or building at the University of Chicago that I just built, and that's now open for the university conference center. So I try to start something that wouldn't otherwise get started. I try to finish something that otherwise wouldn't get finished. Third, I try to find something I'm going to have an intellectual interest in so that I'm willing to be involved, not just by writing a

Starting point is 00:56:24 check, but being involved on the board or in other ways. In other words, it's my view, that philanthropy is derived from an ancient Greek word that means loving humanity, and it doesn't mean just rich people writing checks. And the thing that's the most valuable is your time. You can always make more money. You can't make more time. I want something I'm going to put time into. And the last standard is I want to see some progress during my lifetime. Now, that's a selfish thing. And I should maybe give more money to global climate change things. But I don't think I have enough money to have an impact. I don't think I'm going to see enough progress in my lifetime. and I know for other people working on. I'm trying to find things that there aren't as many

Starting point is 00:56:59 of people doing as I'm interested in doing. There's two physical things, literally physical, as in Adams, Monicello and the Magna Carta, which you bought in, I think, lent to the National Archives. When is the physical interesting to you? What is it about physical artifacts or things with meaning that piques your interest? Put it this way. I buy a lot of historic documents. I put them all on display, and I just bought a rare copy of the Bill of Rights, and it'll also be going on display at the National Archives. The reason I do that is because I'm trying to remind people of the history and heritage of our country. And when people go to see the original of the Magna Carta, they're more likely before they go while they're there or afterwards to read about it and learn

Starting point is 00:57:39 more about it. If you just look on a computer slide, you can find out what the words are of the Magna Carta, but I think when you actually see something in person, it makes a difference. The human brain may evolve in the next thousand years or maybe even a hundred years. So if you look at something on a computer slide, it has the same impact as seeing an impression. person. We're not there yet. And so that's why I think it's important to kind of preserve these things. And secondly, same with Monticello, preserve certain historic buildings for the same reason. People in this country don't really know much about the history and heritage of our country. We don't teach history and civics as much as we used to. So one small part of what I'm trying

Starting point is 00:58:13 to do is remind people of history and heritage of our country as a way of saying, look, we don't want to make the mistakes of the past. Let's realize what we did wrong before and let's try to fix it. That's what civilization is all about, progressing and fixing the mistakes we made in the past and progressing forward in a Darwinian way. What is the legacy of the Magna Carta? Why is that an interesting document to you? Well, the Magna Carta was a document that was the inspiration for the Declaration of Independence. It had more impact in many ways in this country than it did in England.

Starting point is 00:58:41 More or less the first document of its type, which basically guaranteed certain rights. Now, the rights were guaranteed to barons, not the average people. Certain people were excluded from the benefits of it for sure, and it has lots of flaws in it. It's a symbol of people being able to get certain basic rights, like the right to trial by jury, or a right to have a punishment proportionate to the crime or the right to be represented when you're being taxed and so forth. It's a symbolic beginning to the idea that people really are more important than the rulers. Just this weekend I read Teddy Roosevelt's speech, citizenship in a republic. It's where the man in the arena concept that he's famous for comes from.

Starting point is 00:59:19 The longer speech is actually arguably even better. one of the things as I was reading it that I thought was I cannot imagine a modern day American politician giving a speech like this. And that sort of bummed me out. I'm wondering if you agree with that. Maybe you could argue some of Obama's speeches were on that level or something. Why do you think that is? It just seems so much more connected and specific and intense and opinionated than we see today. The most effective speeches like Teddy Roosevelt's are speeches which do not promise to do anything. They are not speeches. which lists legislation. They're not ones that have the word I. So let me take three famous speeches. The Kennedy inaugural address, the Martin Luther King, I Have a Dream speech, and the Gettysburg Address. In those speeches, they basically don't use the word I virtually at all. They all end with the use of the phrase God at the end. They don't say, I'm going to pass this bill, I'm going to take this step. It's all about theoretical things, and it tries to inspire people to be better about themselves. And so that's what that Teddy Roosevelt speech is about is getting people to be in the

Starting point is 01:00:25 arena, trying to do something useful. I think great speeches are ones that have a theme to them. They're not too long. The Gettysburg Address is 272 words. If you read inspirational speeches, you'll find many things in common, but generally they don't brag about how great the speechmaker is. Do you agree that the nature of that has changed in politics? Like, are you unimpressed as I am with kind of the current landscape? Today, you get people who have to spend 40% of their time raising money. And when you have to raise that much money, you don't have time to give in the arena kind of speeches. Very few people write their own speeches. Barack Obama was a pretty good writer, and he did write a lot of his speeches, though when you're president, you can't spend your time writing

Starting point is 01:01:04 speeches the whole time. But in those days, with Teddy Roosevelt or others, people didn't have speechwriters so much, and they actually could spend the time to write things. They didn't have to be interrupted by tweets all the time. They were responding to the emails all the time. You did see that. I would say it's harder today to get people to write their own speeches that are going to be meaningful. If you had to write yet another book after How to Invest comes out, maybe even titled How to, what would it be? What's the next thing that has your interest? I've thought about writing a book on how that be an interviewer because the interview business itself is an interesting phenomenon. We don't have interviews of Thomas Jefferson. There's no interviews of Abraham Lincoln, George Washington. Why is that? Because the interview format, as we now know, it came about is kind of a form of entertainment. education in the 1950s on the Tonight Show and then other spin-offs on daytime talk shows and so forth. I've thought about doing a book where I would interview people that are no longer alive

Starting point is 01:01:58 and get people who are experts in them to play that role, asking William Shakespeare, tell us the truth, who really wrote those plays? You couldn't have done it all by yourself. Or asking Henry the 8th, why don't you just get a pre-nup and not have to chop the heads off of your wives? Or ask Cleopatra, who's really a better lover, Mark Antony or Julia Caesar? I thought about doing that, but I don't know if I'll do that. Anyway, I think the interview format is a relatively novel concept in the grand span of history. If you had to do it in the same format as the investing or leadership book and interviewers that are active today, who pops to mind?

Starting point is 01:02:31 Maybe not learn the most from in a sense of emulation, but just respected the most. I think Oprah's a good interviewer. Mike Wallace was a good interview, too, a different style. But Chris Wallace is a good interviewer. He's now passed away. but when Tim was on Meet the Press, I think he was a great interviewer. There are a number of other good interviewers. The trick in being a good interviewer on TV today is you've got to press somebody but not offend them.

Starting point is 01:02:54 And it's sometimes hard to do because you're on timeframes and so forth. My next book I'm thinking about is probably going to be something like giving back to America, what it means to give back to America and give examples of people who have given back to America and then talk to people who have had relatives who have given what Lincoln, called the last full measure of devotion, obviously giving their life, or talk about people who've been wounded, have lost two limbs or three limbs in a war. It's an interesting phenomenon. When you were growing up, you might have heard this. I know when I was growing up, I heard it, that my country is the greatest country in the world, and I'm prepared to give my life for it. And now when you think

Starting point is 01:03:30 about it, is anybody prepared to give their life for their neighborhood, for their little league team, for their state, for their school? People don't say that. But people often say, I'm prepared to give my life for my country. Why is that? It's an interesting phenomenon that so many people are willing to give their lives to protect the way that we have our life in this country. Something I'm interested about. I put it in one of my most recent books. I interviewed somebody who was prepared to give his life in Vietnam and almost did, and he won the Congressional Medal of Honor for it. What do you think it is? What is the line between maybe you'll choose like, I'm not going to give my life for Connecticut, but when it comes to the U.S., it changes somehow. What is it? I think there's a sense

Starting point is 01:04:07 that your country is your way of life. You're protecting your children. and it's just a different phenomenon. But for example, if I said to you today, somebody said to me, look, you have a chance to go to Ukraine and fight for the U.S. Army if we're going to go there. And let's suppose the U.S. Army goes into Ukraine. And you're going to go there and you're going to fight for your country in Ukraine. Or we're going to give you citizenship to live for the rest of your life in Switzerland. What do you want to do? You can move your family to Switzerland or you can give your life and we know you're going to be shot and killed if you go to Russia and Ukraine.

Starting point is 01:04:38 What would you really choose? Would you really choose to give your life? to fight for Ukraine, or would you rather just go to Switzerland and live there? I don't know. I think it says something that I certainly don't jump immediately to giving my life. I think more about my responsibility maybe as a dad with two young kids than I do about going to fight. If somebody said to you today, look, your children need your body parts. We're going to take your body parts out, but you're going to die. Each one needs a kidney. You've got two kidneys. So, well, obviously, everybody's prepared to give their life for their children. It's

Starting point is 01:05:09 interesting phenomenon that be prepared to give their life for their children, and that nobody doubts that, I think, with very few exceptions. Yeah, it's an incredible, interesting line to play with, and I'm curious how it's evolved over time. I mean, obviously, the American experiment, as you titled the book, the experiment worked by kind of any measure, like it seems to have worked out, so it's worth fighting for along the way. I think so. And when you reach a certain age, you're younger than me, but you reach a certain age to say, okay, I've had a reasonably good life. I'm now prepared to give up my life to protect my children, my grandchildren, and so forth. I think almost most people would probably do that.

Starting point is 01:05:41 You're young. So that's a Sophie's choice for you. For example, if we were attacked militarily today by the Soviet Union, would you go volunteer and knowing that volunteering and getting the military, you would be almost certainly killed? I guess you would say for the purpose of this, yes, but you'd obviously probably think about a little bit more. But my father's generation, they were prepared to go in the World War II. They did, so-called greatest generation, and people didn't think twice about going in.

Starting point is 01:06:08 In fact, they're embarrassed not to go in. What do you think looking back is the period of your career where you felt the most alive? When you get an award that is meaningful, but I think the thing that I've probably the most, when your mother calls you up and says she's proud of what you've done with your life. When I was making a lot of money, Carlisle, my mother never called me and said,

Starting point is 01:06:28 Carlisle's making a lot of money, you're really rich and so forth and so on. But when I started giving away a lot of money, she'd say, I'm really proud of what you're doing. And when she'd passed away a few years ago, I went through all of her possessions, and the stuff that she saved all the articles about me were the ones where I gave away money, not the things about how much money I'd made. What can be more fun than making your parents proud of you? That was something I felt good.

Starting point is 01:06:49 And when I do some things I've done to honor my parents, I redid the I I Ouijaima Memorial. My father was a Marine to honor him, or I did some things in Washington to honor my mother. Those are things that you really feel good about. What did you learn from your mom? Well, my mother was not educated person. and she dropped out of high school to get married. She was a person who was always very giving. She didn't have any money.

Starting point is 01:07:10 When I got wealthy, I gave her everything she would take. She didn't want much money because she thought it would change her life if I gave her too much money. After she passed away, I got her mailing address sent to my house. And all of them, her mail came to me. And every day, I get like 25 different philanthropic things that she would participate in by giving $10 of this one, $5 this one, $25. And these people are now, I get hundreds and hundreds of them. And they're saying, well, you haven't given anything any year.

Starting point is 01:07:35 I said, well, she's died four years ago. She was giving to everybody, and she couldn't resist any appeal. She was very giving person. Amazing. And how about your dad? My father was a former Marine. He worked in the post office his entire life. He was a typical blue collar worker. You don't work more than a minute overtime without getting paid.

Starting point is 01:07:54 As soon as you can legally retire at 55, you retire because that's what you do. He didn't have a lot of intellectual interests. I was their only child, so they put a lot of energy. into trying to help me get somewhere. Well, David, I'm very inspired by your ongoing energy and just the prolific nature, as I said, of all the different things that you've done with obvious energy and curiosity and interest and impact.

Starting point is 01:08:17 I ask everybody the same traditional closing question. What is the kindest thing that anyone's ever done for you? Well, the kindest thing anybody's ever done for me, I guess, is, of course, aside from your parents raising you and trying to help you and other relatives helping you along the way, is basically people introducing me to philanthropic opportunities where I can really make a difference. And a lot of people have introduced me to really good philanthropic opportunities that I've now pursued. And I've really been pleased with it.

Starting point is 01:08:43 And of course, people have introduced me to people that help make my career and a lot of good introductions to people. So I'm indebted to a lot of people. Wonderful. David, thank you so much for your time. My pleasure. Thank you very much. Congratulations on all you've achieved. Next, you'll hear my conversation with Steve White from SW Investments. We cover how Steve incorporates Tegas and BAMSEC from sourcing to monitoring his portfolio. To hear my full conversation with Steve, make sure to check out our episode with Eric Mandelblatt. Maybe you could talk us through the specifics of how you use Tegis and BAMSEC, which are now under one umbrella, one company, but very different tools.

Starting point is 01:09:18 What are the ways that you use those things actively in the process? I use these tools every day. So I first came across Bamsec through, I think somebody mentioned it on Value Investors Club on a message board. And I went and checked it out, got a free trial. And I think within the first five or ten minutes of using it, it was like the biggest no brainer to me. I think it was something like $30 a month. And I was like, you got to be kidding me. This is the easiest 30 bucks I'll ever spend.

Starting point is 01:09:45 And I absolutely love that. You know, everybody in our business has Edgar bookmarked and that browser window open. And basically it's like the first browser window you go to in the morning. And Edgar's fine and all. We've all been there. We all used it for many years. But I just love anything that takes sort of a clunky or cumbersome or not perfect process and just makes it easy. And that's what I immediately discovered with BAMSEC, where they just had this great interface and this great organization around this publicly available information that we all see every single day.

Starting point is 01:10:17 And then they were able to add some higher value services on top of it. like quarterly call transcripts and some other things like insider buying and these other things. So what I found is that it had replaced Edgar for me. It was open. It was one of the first browser windows I opened in the morning. It was when the last browser windows I closed when I shut down my computer at night. And I just sort of love that it could make it easy. Anything that made my life easy, I'm happy to plunk down money, especially because as you know, like with the one man band, I'm a little bit time constrained. I'm conscious of how I spend my time and where I spend it. And I don't want to be spending my time copying and pasting a million things from an

Starting point is 01:10:58 SEC filing into some sort of separate note-taking tool like Word or Excel or OneNote or whatever it happens to be. So I've been a huge fan of BAMSEC for a long time. In fact, I was always happy to give them feedback on product improvements. And I was involved with them when they were rolling out some beta features, and I've loved to do all. All they've done is made that site much more robust as they've added more features, including things like global search functions, which I find myself using all the time. So I was really impressed with the product and the thought that they put behind it and how they were rolling out new features. It's been a part of my daily process since I've used it. How about Tegas itself? I mean, obviously, I like the Edgar first tab open,

Starting point is 01:11:41 last tab closed concept. It's sort of the primary material. And now this is a Bamsex tool on top that lets you parse through it much faster and easier. Teegas itself is something much different, but adjacent, obviously really important. How does that get used in the process relative to Bamsec, let's say? Yeah, it's funny. A friend of mine had told me about Teegas a few years ago. And he strongly recommended it. And I didn't quite understand the concept of what he was talking about until I went to the site and spoke to somebody who got a free trial. And I instantly I recently understood what it was that they were doing, and I thought it was brilliant. And one of the reasons why I think I kind of quickly picked up on the value add was because the things that Tegis does, I used to do all myself.

Starting point is 01:12:23 So I used to do in the hunt for fundamental research in Scuttlebutt, I would be on LinkedIn searching for former employees of companies or searching for employees and competitors that might have something interesting to say. I'd be going to their company websites and I would look at things like white papers that they would publish and you'd find the author or people that were quoted in it because you'd assume, oh, gee, well, they probably might be a little bit more willing to share some insights as to this company. And so it was actually funny. I was living in Chicago, Teague is a Chicago company. I had been reaching out to them just casually. And they invited me to come over to the office. And I was sitting down with some of the team and the founders. And I was sort of laughing about them.

Starting point is 01:13:06 I was like, you know, I know exactly what you guys are doing. Only you guys are having a thousand times more success with it than I ever had because I found myself increasingly running into non-responses. Reaching out to somebody with a cold, direct message on LinkedIn has gotten worse and worse over the years. And so Teegas had really kind of cracked the code as acting as a credible middleman between the by side and some of these experts. And so, they took almost like BAMSAC, they took a process that was very clunky and they made it almost seamless. In Tegas's case, they were taking a process that had become almost impossible for me and they had made it very easy. So once I realized what they were doing, it just became a no-brainer

Starting point is 01:13:55 for me and it became ingrained in part of my daily process. I get their morning emails where they say what all the new transcripts are. I like doing that. I've actually started using Tegas as sometimes a screening tool, actually a starting point for the research process, because I get very interested, for example, in companies where if I see it's a new transcript and it might be the only transcript that's ever been done on a particular company, rather than the 50th transcript that you see come in and you go, well, I don't know if this is going to be that helpful. When I see a new one, I start thinking, oh, this is interesting.

Starting point is 01:14:29 Maybe there's some hidden gem company that somebody else is doing some work on. And I get to piggyback on that a little bit. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.

Invest Like the Best with Patrick O'Shaughnessy - David Rubenstein - Life, Leadership, and LBOs - [Invest Like the Best, EP. 270]

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