Invest Like the Best with Patrick O'Shaughnessy - Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269]

Episode Date: March 22, 2022

My guest today is Gaurav Kapadia, founder of investment firm XN. Gaurav is a veteran of the investing arena. We cover his lessons while rising to partner at TPG Axon, co-founding Soroban Capital, and his decision to launch XN in 2020. We then discuss his approach to building XN around a culture of rigor and kindness, the importance of relationships in investing, and finding investments that are obvious in retrospect. Please enjoy my great conversation with Gaurav Kapadia.   For the full show notes, transcript, and links to mentioned content, check out the episode page here. -----   Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.    Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @patrick_oshag | @JoinColossus   Show Notes [00:03:05] - [First question] - What lead to kindness and rigor becoming pillars in XN’s company culture [00:05:30] - The types of situations where it’s hardest to be kind or rigorous  [00:07:58] - Asking one question that can stump a founder can be a display of rigor [00:08:58] - An example of looking at a situation and reducing the problem to a single variable [00:12:51] - How he trains investors and team members to consider outcomes that would be obvious in hindsight [00:14:28] - Developing the art of interacting with company management [00:17:54] - Dimensions that typically find their way into his presentations and what tends to create complexity  [00:21:13] - Whether or not rigor has declined in public markets over the years [00:21:55] - Why fewer talented people are going into public markets [00:23:01] - What it felt like when he first started XN and being successful at a young age  [00:28:58] - Being impressed with his peers and rooting for each other [00:30:33] - The nature of public versus private investing today writ large  [00:32:32] - How he gets to know a company when he’s never heard of them before [00:35:20] - Reasons he won’t invest from a personal policy standpoint [00:36:01] - Common problems he encounters that companies are dealing with [00:37:32] - Defining the strike zone of companies to invest in where he can be best-in-class [00:39:10] - The insane valuations of public markets in recent years especially in tech [00:40:42] - Why there are so few great businesses and common attributes of the great ones [00:44:12] - Biggest problems in the investment industry writ large   [00:45:48] - The most remarkable business he’s ever seen   [00:49:22] - How he would teach investors to deploy XN’s operating partner model [00:51:32] - His perspective and thoughts on diversity in the investing industry [00:56:58] - A business or institution he would own outright personally  [00:57:37] - What outside of investing most has his attention lately [00:59:50] - Key touchpoints of coming from Queens and going to Hunter [01:02:15] - What stands out looking back on his relationship with his parents and how hard they worked to build a better life for their family [01:04:10] - Two things that manifest in a system that is seemingly rigged towards the wealthy and the problem with generational wealth [01:05:29] - What has him most excited and optimistic about the future in the investing landscape today [01:08:16] - Investing mentors deserve gratitude for believing in their pupils [01:09:12] - The kindest thing anyone has ever done for him  

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Clients of O'Shaunice asset management may maintain positions and the securities discussed in this podcast. My guest today is Garof Kapadija, founder of investment firm XN. Garoff is a veteran of the investing arena. We cover his lessons while rising to partner at TPG Axon, co-founding Sorobon capital, and his decision to launch XN in 2020. We then discuss his approach to building XN around a culture of rigor and kindness, the importance of relationships in investing, and finding investments that are obvious in retrospect. Please enjoy my conversation with my friend Garof Kapadia. All right, so Garoff, we're going to start with a matrix that I've been thinking a lot about since you sent it to me first. It's a cultural touchstone here at XN, which is this twin notion of kindness and rigor.

Those are two terms in the investment world or maybe in the world that some people might think are at odds with one another, meaning if you're kinder, you're less rigorous. If you're more rigorous, you're more of a dick. And I think you're aspiring to have your activities and your firm's activities live in a unique quadrant in this matrix. So I'd love to spend quite a bit of time here to start. What's the story that led up to that decision of that as a cultural touchstone for what you're building here at XN? I think you're right. We strive to be in the upper right quadrant of kindness and rigor. I'll just take a step back, which is like you, I'm a student of so many investment organizations. And one of the things that I found in the best places that this stand the test of time is that they know what their culture is and it's all self-reinforcing. It kind of even goes back to our name, which is XN, which is if you see our logo, XN, which is if you see our logo, X,

the nth power, which is everything compounds. That goes with culture too, but you also have to have a rubric to communicate what that culture means and a touchstone for people. At our first offsite, after we decided to raise outside, capital, we said, like, how do we define who we are? How do we explain to internally and externally who we want to be? And there's so many micro examples. There's, I think we want to be the most ethical. We want to be the best partners. We want to be the most analytical. But how do you communicate that succinctly? And one of the things I found is exactly what you said. A lot of the most rigorous investment organizations have a reputation of being assholes for being unkind. And the kindest investment organizations or organizations in

general have a tendency to get soft. But I don't think there's a dichotomy there. I think if you keep a cultural backbone, you could be both. And if you're both, you're so differentiated that it creates a foundation for ongoing success. If you talk to anyone, investments we've made, people we interact with, we are a pretty intense organization. We have a lot of rigor. But you will always find that we treat people well, that we act like good partners. By the way, sometimes acting kind is telling the truth. It's not just appeasement. And over the long term, people realize that that is kindness as well. Honesty, compassion, really putting yourself in other people's shoes and really thinking of yourself as a partner. Maybe you could describe the aspects of each of those dimensions where

it ends up being the hardest, the types of situations in which it's the hardest to be rigorous or the hardest to be kind, because like any company values that might sit on someone's wall or on a poster or something, they're hard to disagree with ever. Like, they're always aspirational and sound great. And then are useless unless they're, as you've described, constantly in practice, at some point it's hard to do them. It's kind of the whole point. So maybe pick for each one, I'd love to do both, an example, an anecdote, whatever, when it was really hard. to stick to that standard? The first thing is people can sometimes confuse what rigor is and what kindness is.

Kindness doesn't mean just being unfalingly polite or it can conflate the issue or being non-confrontational. One of the kindest things people do, they tell you the truth. Getting people in that mindset, sometimes in the most difficult situation and the most complicated interaction, the kindest thing to do is to say, as an example, tell someone that it's unlikely they're going to be promoted here or make a career here for the long run. It hurts. I've had to do that many times. I'm crying. They're crying. But in the end, it ends up almost unfailingly, I get a call a few years later saying, like, you are totally right. That was the kind thing to do. And by the way,

thank you for following up with me along the way to make sure I landed in the right place and mentor me, give me a reference, whatever that is. That's a good example of things that are over the long-term kind, but feel cruel in the moment, just being honest and transparent as a measure of kindness. Rigger, I think people get rigor wrong in investing a lot, especially people who come through a specific analytical background. And it's not that you have to get your estimates or model perfect. That's actually almost like the table stakes. Like, of course, everyone we hire interview You can do that. What's the rigor around it, which is how do you put pieces together?

How do you take conclusions that are not obvious and stitch them together in a differentiated way? So that could mean chasing down some orthogonal competitor, going to a trade show. It could be looking at the end product. It could be just a different, more qualitative form of rigor. It doesn't need to be quantitative necessarily, but it has to inform the mosaic to make you a great investor. or a great colleague. Is it fair question around rigor to wonder for the person covering the security, whatever it is, the company, whatever it is you're looking at investing in, that you couldn't

stump them on the important aspects of like what's going on here with a business? I think that's right. And you always see that when people get more senior over time, they have this tendency to ask the one question that the analyst or colleague is just not prepared for. Our president, David Bronson, I started working for him when I was 22 at at BCG, he used to do that all the time to me. And now I see myself doing it to people. And closing that gap is almost part of the rigor example, which is everyone who starts as an analyst or a different colleague can get the baseline answer. It has to be. But to get the insight, which is really what delivers differentiated investment returns, is much harder. And it's usually their blind spot.

Now, if you ask the question enough time, they become anticipatory of the broader view. So I think that's a great way to put it. Our friend Faroze does this extraordinarily well where you'll see him listen and then ask like the one incisive, pick the variable that's going to determine the outcome and ask about that thing. What's an example of you doing that? And the topic I want to get to here is what fundamentally has made you a good investor. What is an example that comes to mind of you looking at a specific investment situation

and reducing the dimensionality of what will drive the investment outcome to as few is possible. What pops to mind? Organizationally, we have this ability to tie disparate pieces of information, block out the noise, and tie them together. And the way I've tried to define what that means for us as an investment organization or a firm is to try to find things that are obvious in retrospect. If there's two main characteristics that we, I think, have, it's that we like asymmetry. We think people have totally lost the thread for many years in a bull market. It's easy to do on what the downside versus upside skew looks like with the probability adjusted outcomes are.

With that, it's so easy to be stuck in the trenches that you don't take a step back and say, like, hey, what's going to be obvious in retrospect? And there's so many great examples, which now I'll say, like, will sound obvious in retrospect. But in 2011, 12, 13, or 14, when we made this huge investment in the cable industry, the whole debate was,

what's going to happen if people stop watching TV or move to Netflix or whatever it is. And we just kind of said, wait, hold on a second. They're the cheapest way to get broadband internet to your home. If you believe any of these things, and there's no regulatory pressure, the usage of broadband is going to go straight up. And your pricing power, because you basically have localized monopolies, which I know you're not allowed to say if you're a cable executive, but I can as cable investor,

is that you do have pricing power, mixed power, customer relationship. And then like, here we sit. And it's fully obvious in retrospect. Charter consolidated the cable industry. Comcast has done a fantastic job. Turns out the very low profit margins they made on TV, even though it was high revenue, was a sideshow. Another example is when we were making software investments

that are transitioning from a license to subscription, it was actually very controversial at the time. People are like, how are they going to cross the chasm? What about the cash flow degradation that happens with it? And now it's like, well, you have a vertical software monopoly. oh, yes, SaaS transition, I know how to do that. But at the time, it was hard to see. Even the way we built X-Ed as an organization, I am actually really lucky three of the former executives and CEOs that we actually invested with behind these obvious and retrospect ideas actually work with us now

as executive partners. And so I remember Autodesk, Carl Bass is one of our executive partners. People were so concerned that they wouldn't be able to make the transition between license, to subscription, they forgot that they basically have a lock on all architects domestically, maybe globally, that the bill of materials is very small as it relates to the total cost of an architecture job, and that we had the ability to tie in things that we were seeing, both on the software side, but also given how much work we do on the industrialism and construction side, data points there. And so it's one of those things. I actually prepared a slide presentation for the board when they were under attack by activists. Here's what we view your computer.

competitive position as. We believe this is going to be obvious in retrospect that you have a great position. And I remember we actually put out a free cash flow per share target for them. That was an interesting one because we were so convicted at the time. It felt very scary because there was a ton of volatility, a ton of disbelief. But in the fullness of time, it came out precisely to the right number. That was, I think, a reasonably fair example of how we tend to look at things. How do you architect a team around this concept of obvious in retrospect. I know you had an offsite recently. You said you gave like a presentation to the team. So I've got you standing up in front of a room in mind. What do you tell people or show people that allows them, not just you, as investors, to notice these sorts of things?

Like, how do you train for something like this? I believe investing is an apprenticeship model. I have the greatest luxury. I started as a professional investor when I was 23. And I had great friends, and mentors literally around me. We're sitting here in my office. If you look at the office we have here, you'll notice that we're open architecture. I sit with all of my colleagues. My hope, and we did this at Sorbon, and obviously I benefited from a TPG axon, is that you show by doing and not just by saying. And that's like a huge tenet of what we do here. Like I don't say one thing and then make everybody else do something else. The best way to do it is to show it. And we show it every day. I come here to the office every day, stand on my standing

desk with my colleagues around me. I'm in all the management team meetings. I'm on the road, all the time meeting companies, which I think is a really important piece of what we do with it, which has kind of gotten lost a little bit in COVID. Also, a lot of other things, which is we create a culture where you're not afraid to make a mistake. What that does is allows you to open the aperture as to what you look for. Because if you're so constantly afraid of being scolded, if you commit a foot fault, you can't allow yourself the intellectual freedom to look beyond the day to day, if that makes sense. What have you learned about the art of interacting with company management?

So if you spend a lot of time doing that and you want to show that to the team, if I compared you when you were 28 or something to you today in an important management meeting, how would you be different today and how you conduct those versus then? Interestingly, the 28 versus today, I don't think is that different. I was very lucky in that I had a huge accelerator and a huge mentor very early in my career. So instead of going to investment banking or private equity out of college, I went to a consulting firm, went to the Boston Consulting Group. And that was a really interesting experience because when you're 22, you have to interact

with senior management teams like immediately. And so that's a real trial by fire. One of the things that I decided and I observed is very few investors, public or private, view themselves as partners or advocates for the management team or companies. If you go to many meetings, they automatically start adversarial. They go, how much share are you going to buy back? Why do you miss your margins? We never start by it.

We lead with insight. We lead with work. We never go to a management meeting without tons of prep. almost always we have a significant prep document that we often share with the companies. So they know from the outset that we have the long-term interest of the company at heart, and then we're putting in the elbow grease to make sure that we understand what they're trying to accomplish. That alone has been a huge differentiator. Can you imagine 99% of investor interactions are like, why don't you do this for me lately?

Hopefully the ones with us are we see a lot of potential. we think the world's not understanding it. Help us understand it better. Can we help you understand how to communicate it better? What are we missing? How can we help? Do you need a customer introduction? That just changes the tenor of the conversation.

That started for me really early because I had this luxury of starting, I think, as a consultant. I worked for people my whole career who became successful very early in their own careers. And I was lucky to be able to do that too. So there's no like hierarchy of seniority. I would walk in, be prepped and hopefully be able to lead the meeting to ask important questions, develop a really good relationship. And it's actually interesting. So these three executive partners that I mentioned and a bunch of the executives

with I met Carl when I was 24. I met Jan when I was 23 and I met Rob when I was 28. That relationship still carries through. One of the most gratifying things for me is that it's not just me anymore. If you look across the whole organization, you know, look outside this conference room, everyone here brings that kindness and rigor, the insight, the management interactions that I really want to pride our organization around. They do it independently.

One of the really fun things I've been able to observe, because I have some of my colleagues here that I've known for 20 years, worked with five or 10, and seeing the really fun things, them grow and be huge and impactful leaders and partners is great. My favorite thing these days is when I talk to a CEO, they're like, hey, Gore, great to see you. I'm good. I'll talk to one of your colleagues. That's like a great way for me to measure success. Say a bit more about literally what a package that you might bring or send ahead of time to a company CEO or board or whatever might look like. Like what are the sorts of things that you like to, investigate? Is it product strategy? Is it market approach? What are the dimensions that will typically

find their way into one of those insight presentations? It really varies by type of company. Probably the modal outcome, though, is we like, you know, the analogy of if you had two runners to coach, one who looks perfect and runs a five-minute mile, the other one who looks clumsy and runs a five-minute mile? Who do you want to pick the second one? I say this with respect to all our portfolio companies on the public side in particular, but we often pick the second one. And so a lot of it is the companies themselves are so in the weeds. And investor attention is so diffuse these days that it's like, you have an exciting and important thing to communicate. First of all, are we understanding it correctly? Secondly, if we are, you should shout it from the rooftops.

That's the modal thing. There's a lot around controversies too, which we try to do outside in work to help companies understand on their own, which is there could be a concern. around competitive thread. I mean, cable is a great example, right? Because back in the early part of the last decade, people weren't doing the profit contribution of what TV was to the P&L of a cable company. And so we kind of armed them with that, which is, why don't you just tell people it's like a lot of revenue and not a lot of profit? And then people won't stress out about it. There's those aspects. We tend to find ourselves because we have this rigoror mindset. And I do believe to generate extraordinary investment returns, you have to go towards complexity.

But then to realize those extraordinary investment returns, you have to de-complexified. You have to simplify them in a way that you understand what the key value drivers are. And then you can hand that back to the company so they can do the same thing for their other shareholders. What creates complexity? What are the most typical sources of complexity in the way that you mean it? I mean, I think there's a couple of different sources of complexity. One is oftentimes companies that change points. So whether it is a new business model transition,

or M&A, divestitures, changes in the end market, those create a lot of friction that the management teams often feel like they understand, but the investors don't. I'll give you like an incredibly simple example. We have a portfolio company that announced that their margins are going to be lower on percent terms, and the whole market is freaking out about it. And really, when you double click into it, it's that they're adding incremental revenue that they never would have gotten, So it's dollar additive and percent margin dilutive. There's no reason to freak out. That's like a source of complexity that even something as simple as that the market flips out around.

Now, I do feel like over time, particularly in the public markets, to some extent the private markets, as the rigor has waned and the analytical capabilities of waned as there's been so many companies that are there to evaluate, simple wins the day for multiples. But whether it's people have forgotten to do NOLs or refinancings or so there's like financial complexity, business model transition complexity, end market incremental marginy complexity that we see pretty often. Has rigor declined, do you think, in general, in public market specifically over your career? 100%, not even close, in my opinion.

Or I think rigor is shifted. I think the rigor that you see on a short term basis, is like very high because as so much of capital is moved into organizations that are compensated on shorter term cycles as well as shorter term results, the amount of rigor, whether it's data science, analytical capability on that is like super high. The time horizon has shrunk a fair amount. Medium and long-term rigor has declined a ton and short-term rigors got up a lot, almost like what I think creates the opportunity for XN. Why are fewer talented people you think going into public markets? I think there's a couple of aspects to it. Number one, fewer talented people are going straight

into investing. And I think it's because there's a plethora of other great options that have been created that are also high paying and really intellectually interesting, right? You can work at a startup. You could actually just work at one of the large internet companies and get paid very well and have a great quality of life and do interesting stuff, which is actually different from like 10 or 15 years ago. I would say then within that public market organizations, I feel like their star has dimmed relative to how attractive venture growth, even LBOs are. So you end up having a lot of the talented people wanted to build their pipeline there. And I don't think that's actually necessarily irrational for the candidate because the probability adjusted outcome that someone's

going to be successful in the public markets is just pretty low because you have like an indexing option that actually works reasonably well. And so there's this existential risk against that that you don't have in some of these other investing capital pools. We haven't talked much explicitly about XN, how it came to be. We talked about the culture a little bit, but not the organization itself. And I think one of the most interesting aspects of it, it is as an entity, the thing that people talk about a lot, which is in an unconstrained world where you're just trying to make the best investments without a specific mandate.

That's what you do here. And so that spans public and private. it, you had the good fortune and the skill to be very successful, very young. So you had this what started as a family office in XN with a mandate to do what made the most sense, not because some, you know, institution hired you to manage their public, large value sleeve or something like that. You just do what made sense. So when you first began XN, what did that feel like? Did that change your mindset about where you spend your time, what you would go after? I obviously want to talk about publics versus privates and other things that you may be drawn to. But what was like the most

notable felt difference between just a purely unconstrained to your own capital to begin. I know that's more than your own capital now. What did that feel like when you began it? So I think that's worth maybe taking even a further step back, which is before I started extended to family office, I wanted to, for me, get back to the joy and purity of investing. And as the same friend that you referenced earlier, Froese, I went out to dinner with him because he obviously, when he left Tiger, he started Arena as a family office. And he said, you have to decide, Goro, if you want to be in the AUM Hall of Fame or the IRL Hall of Fame.

And I still tell everyone about that dinner. It was just before I was deciding to leave. And it was in my head. And I was like, you know what? It's a good thing to look in the mirror and figure out what you want to be. The book that I want to write about our investment organization is we want to be in the IRR Hall of Fame. The name XN popped into my head, X to the empath.

That's what I want. That's what it means to me. So we set up XN as a family office because I actually did not think it would be compatible to get back to the purity of investing to generate high returns with outside capital. I thought there would be too many constraints, even with the reputation and the relationships that I had to be able to do that effectively. So I set up my whole legal structure. You're sitting in the office.

That was my family office. I'm going to go from 196 LPs to one LPs. that's a pain in the ass, which is me. And then build the whole organization around that. And so, like, literally, I walked out the door at Sorabon. We renovated this office space. And roughly half the colleagues on the investment team worked with me in the family office. It was not a family office where I played golf every day. It's because I realized my passion was investing. I wanted to do it at a high level. I was 37 years old. Let's get after it. And then we did it for two years. And the couple of things are true. The joy

and practice and love of investing came back. I'm like as passionate as I've ever been and I don't have to worry about a lot of the constraints that other people have in the sense that I can really work for the love of the game. And the second thing is, I was like, man, we have something special here. Once you distill investing to the purity and you can make that machine run,

everyone looks around and says, this is awesome. And so we set a very specific set of guidelines. said, look, I will always be the largest investor in the fund. We're going to have mission-driven partners with us. Our goal is to compound capital for the long run. We have a very unusual structure, which has become less unusual over time, but where it's a commingled vehicle with the competition of capital across public and private, mandatory private allocation, very long duration lockups. That structure allowed us to keep the ethos of the compound philosophy on returns, not have any pressure on the AUM side, and work with our partners to

compound capital for the long run. And so that was the inflection point. Then we said we have this great team and really pour gasoline on the fire that we had ignited at XN as a family office. So that's how we created and that's how we expanded it. And I'll say if I was 80% sure was the right decision when we'd raise the outside capital. I'm like 110% convinced today because we have the greatest capital partners you could ask for. It has enabled us to think more creatively about the organization and investing than I think other organizations have the luxury to be able to do. So as a largest investor with a fair amount of outside capital, relatively long, a lot would say, like, how could public and private investing change? What should we do? How should we

tackle the problem? So let's take what we do to the family office and then let's add resources to it. So let's add these executive partners who can bring us diligence insight, authenticity, and operators mindset to evaluate public and private companies. That, I believe, still is we're one of the only or very few public, private-focused funds that is able to do that in such an authentic way. Let's take our fantastic investment organization. Let's supplement it with resources. So we have a diligence team, which is basically ex-consultants, help support the analyst team. We have a data analyst, and let's not get too big in AUM, so we have the ability, the resources of a $50 billion fund and deploy it to a much wider array of investment opportunities.

That's how it came to be, which is the outside capital to me was, is it going to be accretive to reputation and returns? I was not going to do it for a source of income or if it was modestly accretive to those things. But we saw this really interesting thing with some of the best investors in the world getting so big they couldn't focus on a big part of the market and that our team was revving and so special that I want to give them the fuel to get after the opportunities we were seeing. That's how we ended up with outside capital. When you and I were together at a mini conference with a group of some of the best investors in the world, I think people would certainly look at that room and say, yeah,

this is sort of the active Hall of Fame, if you will. What is your impression of a room like that, again today versus the course of your career, because a lot of those people now are doing crossover investing. They're doing publics and privates. What does that room like to you from this new perspective? That was a pretty uniquely good room. We kind of had a great crew together. I would say I'm very impressed with my peers. I think you're really seeing a separation in talent, franchise, et cetera, but I will say the tigers and the co-toos and the altimeters of the world have developed really great organizations and franchises. Now, we also are trying to do something different. There's a tendency to think of us all kind of the same, but I would say there's two things,

and you saw this. One is we're all rooting for each other. And that's, I think, one, endemic to the personalities of the people involved, but also that we realize that we're such a small part of such a big opportunity that you can root for your peers and colleagues without taking the knives out. And that's like a great place to be. Number two is at XN, because of our depth of industry expertise outside of just technology, the aperture widens a bit. And so we can take the same tool kits and apply them to a wider variety of areas. And that to me is also like a big opportunity.

If we were just doing SaaS investing or fintech, like I'd just pick up a hobby and give my money to somebody else. Say it now a bit more about the nature of public. versus private investing today in terms of whether or not really different things matter to you when considering opportunities in those two buckets. You said something earlier for your recording that I think the average market cap is fairly low of things in the portfolio like 15 billion or something. I think I'm getting that right. What is the tangible difference between the two? Is there a difference really? Do you care? I think there's less of a difference than other people do, honestly. The way I think about RXN is it's a research organization that can be,

monetize its research by being along public equity, being long private equity, and occasionally being short public equity. If you have that mindset, you have to apply the same skills throughout. There are other people who do it really well where they've kind of disparate investment processes against their public investing and the private investing. That's not the way we generally work. We like actual businesses that generate revenue, that are product market fit, that we think we have an insight into how they can grow, how their business model works, and then are kind of agnostic if it's and private. There's a lot of synergies between public and private. Now, in private markets, the competition ebbs and flows in a really interesting way. And so you have to be really careful

not to overpay at the wrong part of the cycle and believe a story. The other part of the second, now, one of the things that we infused at the outset is even as the world is becoming very rapid response private equity on the private side, we weren't going to play that game. We were just going to focus on insights, access, value ad, industry expertise, long-term duration, being able to hold when you're private to when you're public. And we're not going to participate in auctions. And we're not going to, like, be sold to story. And we did that at the very beginning, even as a family office.

And that has held us in good stead because that discipline, I think, will carry our private portfolio through what's been, I imagine will be a pretty complicated time from here on now. When you are approaching a new company for the first time, for some reason, Airtable is popping to mine. I know you're a investor in Airtable. How do you get to know a company when you've never heard of it before? Like if you're just approaching something for the first time, and I realize that as you've gotten more and more experience, there's more and more touch points to build a map around a business. But what is the personal process you have for getting to know a business from scratch? Well, the great thing is we have 35 people here in our areas of expertise

are always great spotters. We're never doing something really cold, even if you look at Airtable. It's a great example. I've admired the company. I've admired the product for a long time. I was lucky enough to get to know Howie, probably four or five years ago. And we kept in touch. I think one of the things that people find actually right after this, I have my catch up with Howie, is that everyone at the firm, including myself, is very accessible. You can call me. that's who you get. And that authenticity that you're dealing with the principle always helps. So there's two things. So you find a company, you have to diligence outside in, and you get to know the management team. I think one of the things you find is any individual is always dealing with

some problem, whether it's you, whether it's me. And if you can position yourself as a resource, whether or not you ever invest, to be able to talk that problem out, use your experience, bring that to bear, you end up being a huge. value-added partner, whether or not you invest. That's like a bit of the ethos of the rigor and the kindness, which is, Howie, I would have loved to invest in many points. We just developed a relationship. I really believed in him and the organization in a weird twist of fate of why it makes sense to always carry this kind and this ethos through the CFO of Airtable, and I started as tobacco analyst basically in 2004. Being a good actor for a long period of time pays lots of dividends,

which I tell the firm, the offsite, the speech I gave, that was like, remember, the IR person, the junior IR person is now the CFO of this company. It could be, in many ways, treat people with respect. So just on an individual level, I think we first are outside and try to identify the best in class companies or the themes in the verticals we care about. We exclude so much of the world. We don't do any health care. We don't do balance-shade heavy financials. There's so much that we exclude that we can really focus on the areas that we have very deep expectations. expertise in. And then it's an analytical, personal, and long-term-oriented relationship we strive to build with every company that we interact with. I would say the interesting thing is we're very selective.

We actually only have 21 private investments since inception, right? But our relationships and our shadow hopefully is a lot longer than that. And that's what we strive to build. What is the reason you mentioned the balance sheet heavy financials or health care, when there are things that sort of almost from a policy standpoint, you don't invest in, what are the reasons? It's very simple, actually, which is if I don't think we have a shot at being among the best, we don't do it. I don't think I'm going to be a better biotech investor than the Baker brothers,

so I'm not going to do that. And so that narrowing of focus really helps you build these deep vertical expertise and stops you from being a dilettom. What always kills people in investing is they go off-peased. They become like a dilettante in something because they're reaching for something to do. So we've eliminated that temptation. I absolutely love the notion of trying to figure out what problem each company or leader of a company is dealing with at a given moment and having that be the wedge of the initial

relationship. Is there a common pattern that you observe of those problems? What are the most common problems that you see people dealing with? One thing that investors don't often realize is the stock price or the, investor is often the last thing on the guy's list of all the stuff he has to deal with. He has like HR, he has an uprising at his company, he has unionization issues. So on the plethora of things they have to deal with, most likely the thing that's most important to you, it hasn't even crossed their mind.

And so being humble enough to know that is like half the battle. You really try to understand. And by the way, you've got to do the work. It's not like you just go and ask like nice questions. Our largest public position is a company called WabDek. It's a combination of three mergers. There's like a big NOL. There's a bunch of filings that you've got to tie through.

And once you do that, you kind of have an idea of what the issues are. How do I integrate this business? How do I go after these customers? What's this transition to green energy going to do for the locomotive business? And you focus on that. And that opens up the aperture. Once you really hit what the CEO thinks are the core issues of the business, it really opens up your understanding of what the current issues of the business are. They're not the same as

what the rank and file industrial or sell side report would say. Yeah, I love the idea that you are the bottom of the priority list or the person that you're meeting all too true all the time. What are the then features of the business if you have a sort of strike zone or an area of focus where you can potentially be that Jack Walsh best in class or whatever? What defines that strike zone? Investing is complicated in two ways. You have to get the business right and they've got the evaluation right. I think there's like people who are reasonably good at getting the business right. I think we're hopefully better and we're applying more analytical rigor and toolkits and because even on the public side of the portfolio, we only have 10 to 12 positions at any time. So we could go really

deep in them. We hold them oftentimes for years and years and years. So we really have a long, longitudinal history. And now we actually hold them from private to public. So we have all that data too. But so hopefully we're better at that. And so there's usually like a insight or a kernel that we see that the market doesn't see. Oh, the incremental margins are going to be so much higher. Actually, your market share in green locomotives is 20 points higher than your existing ones. And that's a positive mix shift or luxury is going to move online. What's the best way to capture that? So there's some business insight. You've got to marry, though, that business insight with asymmetry of share price in public or private. And so that's a lot.

That's really the art of investing. What you're trying to find, generally speaking, is a really good business that's valued as a poor business or a mediocre business that has the ability to compound through. That's what I think we excel at, is this asymmetry with the business analysis. And so what that often manifests itself is you end up having optionality on multiple expansion and compounded capital growth in terms of free cash flow per share or something like that in the public or the private side. With that in mind, what has it been like? for you watching the move from, we'll call it, 2018 through to today, sort of a round trip now of these insane valuations in public markets, especially in tech.

The funny thing is, to some extent, to our detriment, we never bought into it. There was this tendency, especially like you go to the beginning of 2021, where you're like, am I wrong? Am I missing something? Should everything trade a 25 times revenue? Like, is that what the baseline has to be? I think there's a couple of the insights that you have going back 10 or 15 years. The last couple of years for sure, there's a lot that rhymes with post-financial crisis

and also post-internet bubble, which is there are very few good businesses. And that's the thing that I think is really coming to four as we sit here today is people realize that actually most internet businesses are highly fragile. In many cases, you don't control your own destiny, whether it's through, IDFA or customer funnel or margins or it's an interesting thing because there's this tendency to go internet up. That's not universally the case. There's some great internet businesses, but the world is lured with mediocre and now bankrupt internet business. So that's the interesting thing to me, which is a lot of the high multiple businesses were never deserving of it. And COVID ended up

masking so much of it that it's coming back to Earth and it's going to lead to this differentiation, at least we think. If you step back for me, it's so strange to think of the idea that there are very few great businesses. Why do you think that's the case? It's a strange concept. If you look at any of the data, right, about how many companies are in the S&B 500, how long do they stay in there? It's just very few because everything is hard. Our business is hard. You know, what's hard, running General Electric is really hard. And keeping that sustainable competitive advantage going for as long while you have the pressures

being a public company and a private is very, very difficult. So when you really distill it, there's just very few scenes that you can mine without competitors coming through and really disrupting that business model in any significant, durable way. Are there common attributes of the great ones? Everyone talks about the same seven powers, five forces, like it's all the same kind of lingo around where defensibility might come from for a business. Do you buy all that? I buy it at a first order implication, of course, but really when you go down to it, if you look at a lot of the great businesses, they've created niche monopoly things. And no one likes to say it because you're not allowed to say it. But look, if you look at any of the great software businesses, they took a very specific vertical and they kind of said, I'm going to own this vertical. If you look at even at the great industrial businesses, because there's so many returns to scale, they say, this is a great vertical for me. I'm going to have 50 to 70% market share. And therefore my margin is going to be a lot better.

etc., etc. Look at aircraft engine manufacturers. People say, oh, they're broad industrious, but really they're a monopoly on narrow-boughty or wide-bought. And so I think people sometimes confuse themselves with what is a good business. And if the CEO talks in a shareholder-friendly way, is that a good management team? It's almost like the opposite in my experience, which I'm happy to talk about. But really, you have to see if the underlying business has a characteristic that's going to give them pricing power and volume growth in a way that's differentiated and protected from others. And there's many ways those moats could be network effects, of course, which obviously Bill Gurley talks about. But it could also be superior product that is really

hard to replicate. It could be patents. My favorite is like so many companies have started doing it's like whether it's the medical device companies or Autodesk giving their products away in grad school. So you become the de facto monopoly later. That's like a great strategy, right? But you have to figure out where those niches and seams are. Say more about that thing you just referenced around your experience is the opposite of posturing around shareholder friendly or whatever? Look, I think we've all seen it for many years, which is having someone talk to talk of an investor talk may in the short run lead to a high multiple. In my experience, you want someone, whether or not they're a founder, with a founder mentality

or duration and compounding mentality for the long run. And that is hard to find, but if you find it, you can look through the language they say, and really what they do and what they mean. So much of investing is getting to the truth and the core of what they're doing and not necessarily what they're saying. That's what I found to be amongst the most effective. There are some like rare cases where the management team has everything buttoned up. They say the right things.

They do the right things, et cetera. But I think those are generally the, I mean, Franks Lubin, who's just on, obviously a great example. Snowflake has internal metrics. They have a high degree of rigor. Put it mildly. They communicate very clearly, but those are generally speaking, the minority. What do you think are the biggest problems in the investment industry writ large? Part of the reason that we set up X-N the way we did, which is almost like impossible for us to get away from compounding being the biggest source of value. The principal agent issues are just

enormous in investing. I think it's particularly acute in private investing, but also public investing, which is you have principal agent issues all through the chain. The analysts have a principal agent issue with portfolio manager. You have the founders having principal agent issue with the investors. They're paid off of something that is or thought kind of correlated, but not directly with the objectives of the underlying institution. That leads to a very complicated set outcomes. And in the And principal agent issues always come to the fore. And so if you haven't specifically designed against them, it somehow corrods the investment organization, in my opinion, which is part of the reason why the investment organizations that I

respect the most, as many of them, they have that real founders mentality, compounding mentality as the driver of what drives them and not a fee-based mentality as the driver that drives them. I would also say the allocators themselves have their own principal agent issues that they have to deal with internally. And so it's like investing today, which is part of the reason why originally I thought family office is the only way it could work because the only way to get purity of principal agent issues is to be the principal and the agent. It's just like a long stream of conflicting interests. What is the most remarkable business that you've ever seen? Forget price and valuation, just the most remarkable business. I think Google's up there. Of course, I think people say all

classic ones like Visa MasterCard and Alphabet. I think those are reasonable. One of the great businesses, Hotel C-Corps. So Marriott and Hilton, as an example, they basically manage and run a royalty stream on all of the brands under their umbrella. It is one of the most beautiful businesses I've seen because other people spend all the capital. They come to you for branding. They come to you for management and then pay you a strip of revenues that is extremely high margin. So your return on capital is like extraordinarily high because

everyone else supplies the capital and you get a royalty, your long inflation. One of these really durable franchise businesses, in my opinion, I happen to like the hotels significantly more than say other franchise restaurant concepts are incredible. Long the consumer travel globally forever. All you have to do is invest energy in the brand. somebody else provides the CAPEX at a much lower cost capital than you. You get to ride that forever. On the private side, one of the things that has been really awesome for us is this intersection of physical and digital, where people are solving like really hard problems. And only in the last couple of years, due to machine vision or machine learning or distributed GPUs or whatever technological base loading that happened, they're able to apply it really effectively. Like one of our portfolio companies is a company called Amp Robotics.

They do machine learning and machine vision for recycling. We went out to visit them in Denver. It was like amazing. It was like an eye-opening experience. They had a flatbed just dump a bunch of garbage on a conveyor belt and sorted it. And if you think about who used to do that before, it was low-wage workers with high attrition, probably weren't living their best life, hard to keep in stock. If you look at what problem it solves for the world, think about our natural resource constraints, think about ESG, think about carbon footprint.

You're able to automatically, basically, at very low cost, sort and recycle trash at very high margins. I love this intersection of physical and digital. I also think that not a lot of people are paying attention to it. It's really hard. We have a team internally and with our executive partners who can evaluate these both on a technical and business model basis. Amp's really interesting because we have experience looking at the waste management companies. So we understand what the P&L they're plugging into. And we also see where tightening natural resources, commodity costs are going up.

It's a great way to earn the area under the curve while no one's looking. So we have a few investments in this regard, but that's something that is really, really, really interesting, where you can plug into an existing profit stream and business model, use technology to upend it, and there's returns to scale. Because with AMP, as an example, you're classifying all. sorts of garbage. And so your machine learning models are so much more advanced than anybody else. I believe today they can, for a given yogurt container, tell you which one has titanium dioxide and which one does it. And so then if you think about titanium dioxide is something that you want

to recycle or save, you can segment that separately. That's the level. In my house, we just go like paper or plastic or whatever. If you think about the implications of that and also the competitive note for that, that's going to be like incredibly compelling. If you had to teach other investment firms to successfully deploy this model of the operating partners that you mentioned earlier, the three that you're working with. What does that unlock? What do they do? What does that unlock?

How could others effectively run a program like that? The lessons that we learned were like, it has to be authentic. Everything we do is authentic here. It can't be like you want some guy's resume for a pitch deck. It has to be this is what our goals are. This is what our objectives are. And this is the relationship we have to build the foundation of trust. In the case of the three executive partners we have,

we obviously have known each other for a very long time. worked in the trenches together, which really helps solidify the relationship and make sure that there's real alignment and backbone into it. Originally when we started, we said there's probably two things, insight and access. So insight on any given, we're looking at a satellite internet provider. Rob Marcus has going to have a really good understanding of what the economics look like, etc. Or we need credentializing factors to be able to have access to like these really interesting public or private companies. And that's been very effective. I would say incremental to that, there's been two learnings.

One is our team benefits from the mentorship of these executives to see investing through the lens of an operator in a way that massively expands their horizons. Even the last couple off-sites, the executive partners are there. They're there the whole time. They're hanging out with us all night. The relationships that they build and understanding complex problems helps the analyst team really understand what the CEOs that they're interfacing with are dealing with. The second thing is if you're building a company, this is the golden age of entrepreneurship,

you often need mentors. And it turns out many of the entrepreneurs today reach out to executives who've gone through it all, taking a company public, did a complex integration, did a business model transition, being attacked by activists, et cetera. They seek out these teams as mentors. and that has allowed us interesting access to private things pretty early. I think the executive partners have helped really well with that. So a long way of saying it has to be a deeply authentic relationship in order for it to work.

One of the issues that I know you care a lot about in the investment industry, which just seems to have incremental improvement, but is still fundamentally broken, is just diversity of the people in the industry. Walk me through this issue from your perspective, what you think can be done about it, what's being done about it, something I know you take really seriously. I am so disappointed in our industry. I think whether it's ethnic diversity, gender diversity, in any part of the organization, we have just done an awful job.

And I will say, I don't think my eyes were fully open to it until the last few years. And I say that with the degree of disappointment to myself. We take diversity very seriously. Obviously, we have a DIY coordinator here. We try to live the values. One of the things that I feel like you have to unpublished. hack is, is it an authentic value or a check the box? Our industry is basically in check the box mode. You get a form, are you diverse? Yes or no. They put the form somewhere. No one ever sees it

again. We say we're going to go a complete other way. We're going to go full authenticity because it relates to our mission. So our mission does generate really good returns for our investors. We believe a diversity of opinions will help us generate superior returns. If you tie it into the business objectives, it becomes a lot easier. We're a majority-minority-owned. We have 60% people of color or women on the management committee. I'm proud of what we have done, but we're going to do a lot more. I think there's a few things that we're doing.

This spans not only at XN, but my role on investment committees outside of XN, and hopefully as someone takes seriously as an investor and as a civic leader. The number one framework I have is we're not going to let other people implicit bias become our implicit bias. So when you're in investment organization, you tend to hire people who've gone through some training steps. If that training step has an implicit bias, it'll affect you. We're going orthogonally, more creative to find different pools of candidates. Number two is one of the things I decided is I'm going to personally, not just run through our recruiting process, but particularly people of color and women, I'm going to do all the first interviews, seek them out

myself. And that has two impacts. One, people know I'm serious and that it's a comfortable place to be. That has actually been a hugely effective step we've taken. One of the things we're contemplating is actually doing things a little bit more seriously and not just LPs asking us what our D.I. plan is, but us asking them. The interesting thing right now is people feel so much tangential pressure that they just have people do a questionnaire. But a lot of times I look at the screen and the organizations themselves aren't diverse. So it would be helpful for us. us as an organization that actually doesn't need the capital that is doing it in service of a greater mission to understand if our partners are truly aligned with our belief that diversity

is going to improve them and improve us. I would say watch this space. We're contemplating along with a couple of partners, including large philanthropic institutions, endowments, taking a much more significant step because I think it's just a huge opportunity. I don't think anyone's heart is in the wrong place. I think everyone's heart is in the right place. So we have to stipulate that. Like, people really care.

But so many decisions are made by network. And so the only way you can break down existing network effects is with data. One of the big things that we're doing, both on the investment companies I sit on, my role is DEI, share a couple other places, and at XN, is to get the data and share the data. There's this weird perception that being diverse is going to hurt your returns. Obviously, all the data says the exact opposite. So let's help ship that data. Let's help inform that.

And then finally, I think sometimes it helps to have a bit of escape velocity. if you're a minority manager or woman manager that's really just hard to get. So some of the things that we're incubating is the little bit of capital outside extent, which is very de minimis. That goes to managers of generally people of color and women. Hopefully we get them a little bit of head start, a bunch of advice, reference calls, etc. With the goal of that, their returns are just as good. And if they have a little bit of escape velocity, they can become the next great investment organization.

You said earlier, one of the ideas behind kindness is just the truth, even if the truth is uncomfortable. I'm really interested in this notion of seeing the truth and speaking it being the best path to growth for anybody. And it seems like that same concept just applies here as well with getting the data, getting it out there. Like, it's not more complicated than that, but for some reason that doesn't happen enough. It doesn't because there's always this concern that you're making the wrong decision, whether it's the investment committee. And so it's just a lot easier. It's like no one gets fired for picking IBM, it applies to existing investment organizations as well. Now, when you really dig into the data, as far as I can tell, there's a lot more choices than are presented.

Some organizations, Cambridge Associates, All-Borne, et cetera, have done a decent job of mapping it out, but now you've got to take that empower investment committees to make an authentic decision around diversity. And the thing you don't want to do because it'll stab the effort immediately is take a check-the-box approach, because if you don't keep the mission of the organization in mind and how diversity is going to improve that, and it becomes a check-the-box exercise, the minute things falter, it goes away. And so that's what I think we'll see in the investment community has to push forward. This is kind of a strange way of asking a question, but if you could set aside IRA completely and not care about investment returns and could own any business or institution outright

yourself personally, what would you pick? any institution at all. Post office. It's like the ultimate turnaround. I'm just making this up. They have the best footprint in the U.S. by far. If you look at logistics as a growth area that's been taken by private sector, it's up and to the right.

Your cost of serves should be lower. Your cost of service should be lower. The ability to provide government and other services should be very high. My guess is one of the most undermonetized resources in the world. Maybe we'll put you in charge of that in the next life. What things outside of investing most have your intention today? D.I is high on the list. I'm not sure how much you know about me and how I grew up, but I grew up immigrant family,

first generation American, proverbial like my dad, lived at the YMCA, got off a flight to India, no one picked them up the airport and moved to the YMCA with like 20 bucks in his pocket. And in one generation, I've had the luxury of being me. There's so much to unpacking that. but to me it's essentially the American dream. And so I view a lot of my role, both at X-N but outside of X-N, is to help other people fulfill the American dream. And that means reducing barriers, increasing opportunity.

I care a lot about that. And you see that. We got to know each other a little bit, but there's a civic thread that runs through it. And the funny thing for me is it happened in such a weird way. I took a test when I was 11 years old. I got into the school called Hunter, and it changed my life. It totally changed everything, my opportunity set.

I got to go to an Ivy League school, all this stuff. And it was one test on one day. If I had a bad Saturday, it wouldn't have happened. And to me, I don't feel like the American dream should be that accidental. My wife and I are reasonably focused on increasing the opportunity set across those philanthropic areas. So that's a big focus. Hunter used to kick our asses in chess all the time. They were like the death star of eight-year-old chess.

That experience to me was a really interesting one. I went there, a kid from Queens, come to Manhattan. It was the most authentically diverse place I've ever been. Still, to this day, the interesting thing is it was test-based. We had a large black community, large Latino community, large Asian-American community, obviously 50-50 gender, and people say it can't be replicated outside. That's, to me, kind of confusing, given that the structure.

that I went through and witnessed. So that's a big part of my time outside of work. Obviously, you and I share this other passion, which is raising our kids, which is the most frustrating joy and most fun you can ever have. Can we talk a bit more about the tour-related kids and this notion, I'll call it on-ramps. For me, who's the born sliding into home American, the notion that we don't emphasize the opportunity for more immigration, for more opportunity, for more on-ramps is the most profoundly strange thing. If you just study our history, like what made the country? What was this phenomenon itself? And then there's this resistance to it. And I'm not a political beast, but this is like the issue for me that just drives me nuts. So I'd love to understand it from

your perspective and your story in a little bit more depth. So what did it feel like as a kid? Like what are the salient touch points of that experience coming from Queens, going to Hunter? What are the things that matter when you look back? In the 70s, when my parents came to America, America had a visa program that gave a green card to anyone who was a doctor, a lawyer, an accountant, or an engineer. So if you look at that generation who are basically my generation's parents, they came here, highly educated, big impact on the communities, and they're able to raise broadly a generation of successful people. To me, that seems like a very obvious immigration policy, right, when we're short-step. In fact, even Donald Trump endorsed it before he became anti-it when he was a private citizen.

And I think skills-based immigration programs and ability to draw community in as opposed to push people out, that inclusiveness is what made my experience in America great. I'd also say being an immigrant kid and there's a lot of them here is hard. I have so much respect for my parents, Indian accents, dress funny, keep their culture while raising an American family, both working, no internet or cell phones. And that definitely shaped a lot of who I am, which is keeping the core ethical compass of what you do, remembering where you came from, but also like even from an early age, remember you got to give back and do your best and try your hardest and drive that. And so one of the things that's interesting is I think the immigrant mentality, as people call it, is applicable to everybody.

The thing about the most successful people you know who are born on third base, they have that same grit, ethos, desire, ethical compass, intelligence to do it too. It's not some experience that necessarily caused it. You just got to remember to keep exporting it. This gets back to the notion of the relationship with kids. When you think back in your relationship with your parents during those formative years, what stands out? Because I do think there's anything we can do for the kids, we can probably create a certain type of relationship that ends up being very productive for them that doesn't leave them spoil little shits and lets them have this same mentality. So what, if you think back on your relationship with your parents as a barometer for that,

what stands out? Big part of like my ethos is remembering how hard my parents worked, how hard they tried, observing the values as it reflected hard work, but also how much they cared about their kids and their success is hard to balance. As we know as parents, how do you put my all into work, try to make ends meet? And so getting that balance right, it's like people always say, you only get it when you become a parent. How hard that is. One of the things that has affected me the most is now that I'm where I am, if I knew how rigged the system was, I would have stopped trying.

And one of the things that I think has propelled me and a lot of people here at the firm, my friends and colleagues, is this optimism that was imbued early on that America's a meritocracy. And so that's what I got for my parents. I left the city in India to come here because you can make it here. And so, like, you could be anything. When I was 10 years old, I was like, you can go to Harvard. I'm like, what's Harvard? You know, yeah. That optimism and excitement is very important to me to continue to give to my kids

that we can't make America a rigged system. We have to say that boundless optimism that we imbue to our children will allow them to not think there's any barriers, even if they were. I didn't even know there was a thing called legacy. I just assumed like I believe in school, they just take the best kids. Learning that, obviously, is like a little discouraging after you go to college. You have to keep that spirit alive, in my opinion. What are the ways in which you think that notion of rigged system are most manifest today? Like if we were to rip some of those things out. If I had to pick one thing, I would have like a 95% inescapable estate tax. And I think one of the things that compounds, obviously what

the cleverness of our estate planning techniques today is generational wealth leads to a decline in optimism and more strictures that become hardened, if you will. If you ask me one policy thing I would do is that lower the income tax and massively raise the estate tax, but people enjoy their life, but not for generations. What would number two be? I think there's a number of policy proposals, I know this is not supposed to be like, but that can actually increase inclusivity in the workplace. If you gave people the ability to deduct child care, that friction wouldn't exist because that post-tax pre-tax dollars. One of the things that we have, even when we hire people, women have often left the workforce whether or not they want to or not. And so because of this

choice that the government gives them of like, do you want to stay home? So I think there's an architecture to make it policy a bit more flexible to increase inclusivity. increase workforce participation. So that's the other idea that we've been kicking around. We're sitting here at the end of February 2022, just for posterity purposes. Looking forward from today, what has you most excited about, I'm kind of going back to the investing hat here, but like industry or the economy or what's being built, where are you the most optimistic based on what you see in the landscape today? Two or three things make me really optimistic and excited. Number one, I think one of the things that have happened through COVID is people have

realized that we've underinvested in our infrastructure. We don't have enough redundancy. So I think you're going to go through a cycle of people from a national interest perspective, i.e. semiconductors, but also from like a business interest perspective of like, hey, we should probably have more capacity and not have such a tight supply chain. So what happened in 2021 doesn't happen again. I think that's going to be a theme to invest behind very successfully. And it has all sorts of adjuncts, like how do you decarbonize things, how you just add more capacity, how do you de-bottleneck, how you automate. So if you look at a lot of our investments, everything from like the WabTech, which is going to generate locomotives

and vehicles for metals and mining, but also through our private investments that do a lot of things in robotics that take what's quote-unquote lower-skill jobs and automate them so people can have dignity and have better work. I think that's going to be a theme that's going to be around for a long period of time. I think as we sit here, one of the things that I also think it's going to be obvious in retrospect and excites me a lot is people are going to want to have fun again. It has been a two-year slog. I think next week is the two-year anniversary of me hiding out with my kids doing remote school.

The U.S. and us all have been fits and starts, and we've kind of, let's speak for me and my friends, kind of forgot to have fun a bit because it's been really strong. We got a global pandemic. We're worried about our kids. We're worried at our parents. We're about ourselves. Someone reminded me, we're sanitizing groceries. Amazon boxes with that stupid wipes. And I think when we come out of that, we're going to be really excited to have fun, see friends, take our kids to a theme park, stay in a hotel, think about what we were talking about before. That to me is like pretty obvious. I also think we are still in the super early innings of software infrastructure, productivity being massively enhanced. Software in particular,

vertical software, specifically tools that unlock productivity, I think are going to be a really fun spot to watch because a combination of people realize you can be remote, but be, even if you're remote, you've got to collaborate. You've got to be with your colleagues. And what are tools that help us push us in that direction or another investment theme. But I think those three things make me pretty excited. Is there anything we haven't talked about that's incredibly important to you? One of the things that I would just touch on is investing is such an amazing craft. It's so hard to do every day. People who have been mentors indirectly or directly to me or others deserve a ton of gratitude. Everyone from Nick Slee publishing his letters on the Nomad Partnership, who I've never met

Nick Sleep. I've learned a lot of-eat economy scaled. Yeah, to Warren Buffett, who both of us have been lucky enough to have dinner with, and he takes his role as a mentor so seriously, where it can be like proximate mentors who helped you along the way. I think in a business that's so difficult and apprenticeship-based, having people who are willing to teach be open-hearted has been one of the hallmarks in my career. And I hope we all celebrate those mentors as much as we can. That's definitely a great excuse to ask my traditional closing question. What is the kindest thing that anyone's ever done for you? If the mentorship you just described as sort of a general category of kindness, what's the specific answer for you personally? The hardest thing and the

most effective thing to do with kindness is believing in someone when they don't believe in themselves. That's not just believing in someone. It's like really giving them at the time, their darkest place where they feel less confident like the attaboy. My mom, I know everyone says that, but foundational in doing that, really believed in me when I really did not believe in myself the whole way through. I was very lucky. I had this teacher, Ms. Mangano.

I never spoke to her again. She was my first grade and fifth grade teacher. It encouraged me to take the Hunter test. That Hunter test changed my life. And then I showed up to Hunter with my bad fashion and, you know, acne and all this other stuff. And a teacher named Casimir Adler-Ivenbrook, who I will be forever thankful for,

taught me about economics, took me under his wing, and allowed me the foundation of success. And then finally, I met Deniker Singh, who founded TBG Axon when I was 23 years old. He believed in me and gave me the opportunities

so early in my, career and sat next to me for years to help me. And I have tremendous gratitude for all four of those people. Believing in someone when you don't believe in themselves at any given point is like the kindest thing that anyone's ever done for me. It was been so much fun. I knew it would be. It's been a pleasure getting to know you in the last several months. And I suspect we might do this, you know, every few years or something. Talk about the world. Thank you so much for your time. Thank you. Next, you will hear my conversation with Steve White from SW Investments. We cover how Steve incorporates

Teegas 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 Teegis and Bamsec, which are now under one umbrella, one company, but very different tools. 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. And I absolutely love that. You know, everybody in our business has Edgar bookmarked and that browser window open. 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. 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 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 it 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 Teagueis itself? I mean, obviously, I like the Edgar first tab open, last tab closed concept. It's sort of the primary material. And now this is a BAMSXA tool on top that

lets you parse through it much faster and easier. Teagueis 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 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 ad was because the things that Teegis does, I used to do all myself. 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, Tegis's 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. 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. in has gotten, had gotten worse and worse over the years. And so Teagueis had really kind of crack the code as acting as a credible middleman between the by side and some of these experts. And so

they took, almost like Bamsec, they took a process that was very clunky and they made it almost seamless. In Teegas's case, they were taking a process that had become almost impossible for me. And they've made it very easy. So once I realized what they were doing, it just became a no-brainer 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 TIGAS 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 coming in and, you know, 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. 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 joincollasys.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.