Invest Like the Best with Patrick O'Shaughnessy - Mitch Rales: The Art of Compounding - [Art of Investing, Forever Episode]

Episode Date: May 2, 2024

We are excited to share a great conversation with Mitch Rales, the co-founder of Danaher and one of the living legends in the world of business and investing. Consider that Danaher has annualized at over 21% for four decades, resulting in an 1800-times multiple on invested capital! This is Mitch's first long-form interview of any kind, and he covers his entire history and business philosophy. Interviewing Mitch are Paul Buser and Rick Buhrman, who host the Art of Investing podcast on the Colossus network. Please enjoy this comprehensive discussion with Mitch Rales. Listen to more Art of Investing. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Passthrough. If you've ever filled out a subscription document to invest in a fund or worked with LPs to fill out their docs to invest in your fund, you know what a nightmare this exercise can be. Passthrough finally solves this problem. They configure custom workflows for your electronic subscription agreements and KYC & AML requirements to shrink the time for your investors to complete their sub docs. It's the best way to manage a critical part of your relationship with your LPs and is simply a drastically better experience for both investing firms and LPs alike. To learn more, go to passthrough.com. This episode is brought to you by Tegus, the only investment research platform built for fundamental investors. Whether you’re trying to get up to speed on a new market or keep tabs on a portfolio company, Tegus is the end-to-end investment research platform you need. With Tegus, you can quickly understand a company's business model, drivers, benchmarks, and management quality. To monitor an entire market, download our pre-built financial models — or update your own with the latest data using Tegus’ new Excel Add-In. Tegus gives you all of this and more, all bundled into a single software license. Find out why 95% of the top 20 global private equity firms are Tegus customers. Learn more and get your free trial at tegus.com/patrick. ----- Art of Investing is a property of Pine Grove Studios in collaboration with Colossus, LLC. For more episodes of Art of Investing, visit joincolossus.com/episodes.  Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes (00:00:00) - Welcome to The Art of Investing (00:05:32) - The Philosophy Behind Glenstone's Creation (00:12:57) - Benchmarking and Continuous Improvement: Lessons from Danaher and Glenstone (00:21:22) - The Influence of Mitch’s Father and Upbringing (00:28:43) - Transforming Danaher During The George Sherman (00:30:39) - Embracing Long-Term Vision and Patience (00:36:47) - The Role of Leadership in Navigating Change (00:42:21) - Danaher's Evolutionary Journey: From 1.0 to 4.0 (00:56:37) - Building a Culture of Internal Growth and External Innovation (00:58:42) - The Art of Successful Acquisitions and Integration Strategies (01:03:03) - Seeking Leadership Qualities and Business Traits for Long-Term Success (01:06:14) - The Journey from Personal Experience to Philanthropy (01:13:10) - Investment Philosophy: Concentration vs. Diversification (01:29:46) - Operational Expertise as a Catalyst for Company Growth (01:34:17) - Identifying and Supporting Talent in Business (01:43:02) - The Impact of Secular Trends on Long-Term Investments (01:49:53) - Revitalizing the Washington Commanders (01:57:36) - Engaging with Fans and Building a Winning Culture (02:05:16) - The Importance of Long-Term Vision

Today, we are excited to share a great conversation with Mitch Rails, the co-founder of Danahur and one of the living legends in the world of business and investing. This is Mitch's first long-form interview of this type, and he covers his entire history and business philosophy. Interviewing Mitch are Paul Bucer and Rick Berman, who host the Art of Investing podcast on the Colossus Network. If you enjoyed this interview, be sure to check out their whole feed via the link in the show notes.

Let's get to it. Please enjoy this comprehensive discussion with Mitch. We're thankful to him for his time and his insights. Hello and welcome to the Art of Investing, the pod class devoted to helping you more fully experience the joys of compounding in all its forms. I'm Paul Buser. And I'm Rick Berman. We are your hosts. In each session, our teachers will be some of the world's most compelling people from across the vast range of human achievement.

Take your seats. Class is in session. This show is brought to you by Pine Grove Studios in collaboration with Colossus. The host of the show, Rick Berman and Paul Buser, are the co-founders and co-Ceos CEOs. of Seda Grove Holdings and co-CEos of Sater Grove Management Company. All opinions expressed by any of Rick, Paul, or their podcast guests are solely their own and do not reflect the opinion of either Sater Grove Holdings or Sater Grove Holdings or Cedar Grove Holdings or Indoorings or Sater Grove Holdings only and should not be relied upon as the basis for investment decisions.

Stata Grove Holdings or clients of Sater Grove Management Company may maintain positions and securities discussed in this podcast. Our teacher today is Mitch Rails, one of the most iconic business builders and philanthropists of our time. Having co-founded Dan and her 40 years ago alongside his brother and best friend Steve, the Rails Boys have strung together a track record of compounding that might even make Buffett blush. Consider that Dan or her has annualized at over 21% for four decades, resulting in an 1,800 times multiple uninvested capital. And while the numbers are mind-blowing, the story of how it all went down is even more remarkable.

In this conversation, you'll learn from Mitch about the key inputs to his outlier success. Why greatness is a journey that takes an unusual time horizon. the role that benchmarking plays in standing up any winning organization. Why is essential to cultivate learning agility and embrace transformational pivots over time in order to adapt and thrive in an ever-changing landscape? How an uncommon commitment to continuous improvement and long-term thinking, both at the individual and corporate level, have fueled one of the most impactful companies of our time,

and also the qualities that Mitch looks for both in leaders and businesses he looks to support. More recently, Mitch has turned his focus to Glenstone, the foundation and museum he co-founded with his wife Emily, with a vision that emerged from their shared passion for three fundamental elements, art, architecture, and landscape, and seeks to be the preeminent foundation devoted to the visual arts in the world. Having signed the Giving Pledge, they've committed to building and investing for the benefit of mankind,

and you'll hear how this stewardship orientation started with Danahur, and now permeates through to every pursuit that Mitch takes on. While Mitch is a natural teacher, this is actually his first recorded long-form interview of any kind. And so we feel especially honored to share with you our candid conversation with someone who has shaped and transformed us and the business world in so many profound ways. In my opinion, this class is more than just shining a light on the anatomy of a compounding machine. It's learning firsthand the ideas and principles behind greatness

that are available for all of us to more deeply embrace and embody. With that, I hope you enjoy our class with our mentor and good friend Mitch Rails. Well, Mitch, welcome back to The Art of Investing. I guess this is our first time recording, but by now, with all the teaching hours you've put in on campus in Order to aim, you're pretty much a tenured professor. We're on a different campus, though, today, the beautiful campus of Glenstone Museum. Maybe it's appropriate to start here. I mean, this is such a remarkable place for those who haven't yet visited. I mean, the integration of nature and architecture and, of course, art, and this vision of building something preeminent in the world. around the visual arts. What's the Genesis story? Glennstone is obviously something that's near and dear to my wife, Emily, and my heart. The two of us co-founded this place, oh, I guess in September of 2006, with the whole vision and purpose of, number one, art is essential to life, and that we could create something very different that hasn't really been seen in the world today.

And what do I mean by that? We're about the seamless integration of art, architecture, and nature. We sit on a campus of about 400 acres where people can come and experience all three of these pieces of the equation in a slow, calm way that just isn't seen in the museum world anywhere else. we were aghast at many places that we visited over the years where you stand 20, 30 feet away from the picture, and you're taking a picture of the picture because there's 10 or 15 people in front of you. So you never get a chance to engage with an artwork in a way that you get to at Glenstone. We actually did a study. We wanted to dedicate about 350 square feet per visitor versus what happens at a famous New York Museum.

on a weekend where they allocate about 20 square feet per visitor. So it gives you a feel for the sense of calm that would be here and in a way that once again a visitor can engage with the artwork in a great way. They could stand in front of it for 10, 20 minutes if they want. And by the way, to get you started when you arrive at Glenstone, you come into our parking facilities. Each space has a tree. You're feeling the calm of nature as soon as you come in. It's not the traditional parking lot that you would see. You get out of your car. You go to our arrival hall and you check in and you then make a six, seven, eight minute walk through the landscape to get to the building, to get to the pavilions itself. So you have a chance to decompress along that walkway.

You'll see some monumental sculpture along the way. The building is kind of hidden until you start to approach the last couple of minutes of the journey itself. And when you actually get to the building, you're really ready to start to engage. You've left your negative thoughts about what's happening in the world, what's happening in your daily life, the hustle, the bustle that's going on. And you really do get a chance to decompress. So that's what we're about. We're on a mission. We're now 15 plus years in. We think we need another 15 plus years to really create something great here. We're good now, but we're not great. And greatness is a journey that takes time.

We hope that all the good decisions that we make at Glenstone in the years to come and in the years past will continue to compound on one another. So we'll talk about compounding a lot today, but Glenstone is compounding as well with the decisions we make every day and the learnings that we have and the things that we continue to do to try to up our game and create an experience for our visitors. It's just second to none. That's what we want, and that's the philanthropy that we're trying to create here. It's hopefully going to be one of the revered museums around the world in its day, and it's got a long-term endowment that's been put in place to sustain it in perpetuity.

in a way that will keep it unique to what we're trying to do. I think it's evident that some of the things that have been so important to the story of Dan or her, this ethos of continuous improvement, commitment to excellence, customer satisfaction, all of that, it's clear that those are elements that are also being integrated into Glenstone. But talk more about just you and Emily having that shared vision and that kind of dream. Talk a little bit about the first 15 years of execution, how you've gone about building it. Well, Emily and I have become disciples of the author Jim Collins, and he's written the book Good to Great, Built to Last, How the Mighty Fail, and the takeaways and learnings

that we've had from Jim over the years, by the way, he comes and speaks at our conference every four to five years for our businesses, have just been profound. And it all starts with creating a purpose statement, a set of core values, a vision statement of what you stand for, and a B-Hag, a big, hairy, audacious goal, which is what you really aspire to over a 20 to 30-year period of time. And for Emily and I, it all started about what we thought there. And we started with our purpose statement, which is art is essential to life. And we built a set of core values. that we live by every day. I mean, we even do interviews that we call core value interviews when we're hiring associates to come to work at Glenstone to see if their values are aligned

with the values of the institution itself. This helps make sure that you're hiring great people who have a shared purpose and vision that's similar to yours. It started there. And we can talk for hours about how we select an artwork, but it's very similar to the way we select a business. Do you want a business that's a C or a B minus? Hell no. You want businesses that are A-plus, that are anchor tenants, that are the defining type of businesses in the industries that they support. It's no different in the way we select art. We want the A-plus works of the most defining artists of the time when these works were created, and that compounds on its over the course of time as well. So there's 2,000 plus artworks in the collection now. We've made some

mistakes along the way, but we correct those mistakes, and we continue to up the game on the collection of art that we have as well. And the same thing has taken place in the architecture, the same thing is taking place in the care of the landscape. I mean, we want forested areas, we want pastures with flowers, we want people to be able to really wander and see lots of of different things. I mean, we've planted pretty close to 20,000 trees now. Some very, very large, some one-inch caliber. But we pay attention to all these details in what we do and how we've gone about it. And it's been a great journey for Emily and I to share. But we also think institutions of greatness aren't once again built quickly. You can't be great quickly. Great takes time and compounding.

This journey of 30 years to get to that point is what we're really after. And that's the B-Hag that we want. We want to create something that doesn't exist anywhere else in the world. We're lucky to be here, I think, just before Peak Dogwood blooming, we're beneficiaries of that vision. I'd love to dig in just a little more on those first couple of years because we're going to get into some learnings from your time at Dan or her and in so many other businesses.

is one of the key things that comes out of Danaher business systems. And what we've learned from you these past few years is this idea of benchmarking. And so before you enact that BHAG and that vision, there's a long period during which you find out what the other greats have done. And what they might have made mistakes on or what they've gotten right. Talk about benchmarking as it relates to Glenstone. Oh, it's a great question. And one that we spent a considerable amount of time on, not only Emily and I, but take our architects, taking our builder at times, the people that were going to be very active in

the build out of Glenstone as a whole. We actually benchmark 50 museums around the world. And we had great access to meet the teams. And we would sit down and have a nice conversation to get started with the team before we did the tour. And the first question we would ask is, so if you had to do it all over again, what would you do differently? And the stories they told us, were absolutely amazing. The learnings of what not to do was profound. And for our architects and our builders to hear these things, we got into the minutiae of things like loading docks. How would you do your loading dock differently than what you've done today? And how they created square footage for entertainment space rather than the artworks and how the sun would shine in

certain glass areas that was distracting and what you could do to eliminate that type of thing. There's 101 different learnings that came out of this, and we brought all of those back with us that became part of our architectural brief and how we wanted to build this place out. And I think we've created something pretty unusual. We made some mistakes along the way. I mean, if you want to know, as if for instance, our cafes were way too loud, we didn't look at the acoustics as properly as we should have. It was an expensive fix, but we were able to take care of that. We have perforated ceilings now that you can't even really see, but that take a lot

of the impact of sound out so that you can hear yourself, have a conversation over lunch with your friends. So plenty of things that we continue to learn, but you make a mistake, you correct it. Where did that commitment to benchmarking emerge? I know there is the at least early story of you and Steve dividing up the world and looking for benchmarking exercises at other great companies in the early days of Dan or Her. And I think it was Steve who drew Japan and came back with this concept of Kaizen that ultimately has evolved to being Dan Her business systems. Was that the early roots? That was the early roots. And that would have been 1985, 1986. When we were two young guys, we had made a series of acquisitions. And we kind of

I looked at each other and said, we don't know much about manufacturing. We better figure out how to run these businesses. And we did divide up the world. I went to Europe. Steve went to Asia, and we split North America. And when we looked at GM, Ford, Chrysler, Toyota, Volvo over in the Scandinavian countries, we learned a ton. And we saw something amazing in Japan or Steve saw it. I didn't actually see it. But what we learned was in watching GM change a two-ton die that took them six weeks to change that die over, and we watched Toyota change that same die in six hours. And we said, something is going on here that we need to understand. And what came clear was Toyota adopted the principles of a famous quality guru by the name of Edward Demi. And he had a bunch of principles,

10 or 11 different quality principles that he stood by. And he tried to sell his bill of goods to GM Ford and Chrysler at the time. They weren't buying it. And in 1959, Toyota bought in hook, line, and sinker to these principles. So what we like to say is all we were doing was, importing Edward Deming's principles back to America because he had exported them to Toyota. And when we learned what the Toyota production system was all about, it was clear that they were the best of the best of doing this compared to anybody else in the world. And we were able to adopt those principles and bring them back to America and start to integrate them into the business. And it started as Danahur as the Jacobs production system because we took it to one of our most

difficult manufacturing facilities that we had that was upside down with problems and introduced it there. It went and evolved from the Jacobs production system to the Danher production system. And over the course of time, as we learned how applicable all of these learnings were, not just to manufacturing, but to the business as a whole, whether it's accounts receivable, whether it's your call centers, whether it's things like contracts and the likes, you can continuously improve all of these things. So we were able to create a business system out of this, not just a production system. So that was at the root of what started to happen in 1985, 86, and that compounding journey

over the last almost 40 years now has served us well. It's a comment theme of this idea of finding a great idea. somewhere out there, somebody else's idea, adopting it or aspects of it, and then over time advancing it and improving it in the way that when we talk about Danaher business systems, I mean, I think even today, the concept of Kisen and lean manufacturing, really, it's usually prosecuted in a more narrow way, devoted only to the concept of, say, manufacturing, as opposed to the way in which Dan or her has allowed it to inform every aspect of the business, the culture, the talent.

think benchmarking is still a hidden art? How would you advise folks to think about bringing the concept of benchmarking into their business or lives more generally? Well, we have a Japanese concept known as going to Gamba. That means going to where the action is. So let me give you something real time. We were on with our CEO at Danahur yesterday, my brother and I. He took an hour out of his date to spend with us on some important things we needed to review with him. He's in Pensacola, Florida right now at one of our largest manufacturing facilities, leading what we refer to as a president's Kaisen. And many of our presidents from around the world this week are leading Kaisens. We have 2,000 of our associates engaged in Kaisens around the world

this week. So that's called walking the talk and making sure that you're setting an example at the highest levels of an organization, if Reiner-Belair shows up in Pensacola and dedicates a week of his time to a president's Kaysen, what do you think is going to happen with everybody else in the business? They know that that needs to be part of our culture, part of our DNA. They need to buy in and become part of this in a profound way that just is enabling. So I think the idea is you just have to get started and you have to be committed to it. And you can read a few books. You can learn a little bit about what a Toyota production system is,

or there's, God knows, a ton of information out there on what Dan Hurr is done. But you need to get the journey started. And it's a compounding journey. Once again, you're making little decisions and little changes every single day that add up to nickels and dimes and quarters become dollars. And these things add up over the quarter. of time to big money when you've been on it for 40 years and doing it over a prolonged period of time. When you look back to your pre-Danaher days, what do you reflect on as the most formative

experiences in people in your life? My dad would have to have been a very formative experience. He was a very humble guy. He grew up in New York City. His mom passed in childbirth of his youngest sister at the time, and his dad was a fruit vendor on the streets of New York City and couldn't care for the family. And as a result, he and several of his siblings were put into an orphanage. He went into Hebrew orphan asylum when he was 11 or 12 years old, left when he was 16 years old with a toothbrush and five bucks, saying, Norman, good luck. The world is all yours. And he always told the story, I believe the guy. Here's a guy in my dad who probably never finished his high school education and was a ditch digger, worked the carnival circuit, was on a boat at

some point in his life working that side of the equation, eventually settled in Pittsburgh with my mom and created a home improvement contracting business that did very, very well. But I think he had a hard time dealing with the complexities and personalities of home improvement salesman. And he ultimately said, I would rather sell to them product than have to manage these cast of characters. So he came, picked up the whole family and moved us to the Washington, D.C. area when I was 10 years old, and just decided he was going to start a wholesale building products distribution business. And he did. So here's a guy who wasn't scared to take risk, had the entrepreneurial spirit and drive.

And at the same time, created a business that he ended up selling. And what we are told was the first ESOP done in America, where he sold the business to the employees, because one of his themes is want to be a champion of the underdog. So the truck drivers got equity in the business as a result of this ESOP. And the business still exists to this day. I think when he sold it, it was about a 10. or $12 million business. He sold it to the employees. And by the way, they couldn't pay for it.

So he took a note back for 100%. So they paid him out over time for the business. And today, Mid-South building supply still exists. And I'm told it's a $150 million business and the truck drivers are millionaires. So how great is that? That's my dad. But what my dad didn't have in formal education, he had in what I referred to as the school of hard knocks and people ask me where I got my MBA. I said I got it from the Norman R. Rail School of Hard Knocks. And he understood the psychology of what it was like to be out there on the street, competing every day without a formal education and how to get things done. And I watched him with bankers over the years and how he maneuvered bankers and convincing them to give him loans when he didn't really deserve

to get loans and how he just managed people and how he sold. And, His nights at home were spent on the phone calling people, and we just were in the general vicinity of where he was making his calls. So we heard all the different things that went on. So I like to think the apple doesn't far too far from the tree, and he taught me the street smarts. And one of the stories that I never forget that he told was if you're in a poker game, and after three hands, you haven't figured out who the sucker is, you're it. It's really true in life just teaches you the different ways that people think and manage things. People draw conclusions from the same facts that are presented to different people that are opposite end of the spectrum. It's kind of amazing to see how people look at facts so differently, but they do.

And so you need to be prepared for that, just when you think and say, there's no way somebody could come to this conclusion, yet they do. You just need to be prepared to deal with things like that. So he's probably the one who's had the biggest influence on my life. Have you thought it all about how your dad's time in orphanage shaped him? I mean, just as somebody who has had a number of foster children ourselves and thinking about the ways in which children can often respond to that kind of early challenge, it can build tremendous resiliency and it can also be something that's very difficult. I think he came away with both.

I think the sense of accomplishment was my dad used to tell a story where he'd sneak out at the orphanage at night and he'd buy a pie for a nickel back in the 30s during the Depression area time. And then he'd come back into the orphanage and he'd slice it into eight pieces and he'd sell each piece for a penny. So he made three cents on a five cent purchase. He said, now Mitch, that's a pretty good margin. So he obviously learned at a very young age the hustle and the entrepreneurial spirit.

On the other side of the equation, I think he always dealt in his life with a sense of abandonment because he was put into an orphanage, not because of anything other than his father was incapable of taking care of the children. But that left a lasting imprint on his life as well. So there's good and there's difficult that come with situations. situations like this, and I saw it in his life until the day he passed at 89 years old. Incredible stories about your dad and all he did for your family and his employees. Shifting gears a bit, you mentioned earlier the work that Dana Heir's current CEO, Reiner Blair, and his team

are doing to continue to spread the Kaizen gospel at Danahur. And Reiner is the latest in a string of many leaders across the history of Daner. I remember last year, when you were with us in class, you told the story early on. It was many years in the Dan of her, but very early in the 40-year journey of you and your brother, Steve, in a way, having to transition to chief stewards of the business. And you met a gentleman named George Sherman. But can you tell that story? Maybe as an example of how you think about decentralization and harnessing talent and identifying talent. Well, yes. The story starts with the fact that I think Steve and I understood what we didn't know. We were not meant to be great operators. We tried. We did okay. But I think we understood

that we really needed to professionalize the business. We could create long-term vision and strategy and how to properly allocate capital. We were very good at those type of things. But the details of what you need to do to run a business day-to-day is a heavy lift that as a CEO of publicly traded company really requires you to be in 24-7, 365 days a year. And we're prepared to commit the time and the energy, but the details were something that really needed to be paid attention to. And so we like to say in 1990, we fired ourselves. And we hired a fellow by the name of George Sherman to become Dan Hurst's first real CEO outside of the business. He was actually an outside hire.

George came to us from what was known then as Black and Decker. Today, we know it as Stanley. Black and Decker, George was the C-O. And we had dinner with him one night. We thought we were going to be talking about deintegrating their drill truck manufacturing plant in South Carolina and that he was going to give us the business if we would take over the facility. We were ready to go and we had all of our ideas.

And what George said was I'm really thinking about leaving Black and Decker. I'm thinking about going to work for this organization. And I know you know these guys at this organization. What do you think? And I'm kicking Steve under the table and he understands exactly why I'm kicking him because we had always said to ourselves, the type of leader we're really looking for is George Sherp. Here it is.

He teased it up for us. didn't even expect it. And to make a long story short, 90 days later, we had a deal with George. He did extensive due diligence on the business. And remember, this is when Danaher was primarily a tool company and George was a tool guy. And George gave us a great 10-year run. He was an exceptional CEO. He professionalized the business. He brought processes in. He helped us roll out the Danahir business system in meaningful ways that were really important to becoming the culture of the organization, our DNA, and like I said, 10 great years with George and a seamless CEO transition to Larry Kulp as part of his exit was just pretty cool to see and watch and be part of.

Yeah, I think about whether it's the act of firing yourselves in the company that you founded or even just a practice of benchmarking. It does seem like those. are in some ways in service to something that we've observed about you and about everything that you involve yourself with, this dual commitment to ambition and patience. If you're only ambitious and you don't have that long time horizon, doing extensive benchmarking might seem like a waste of time or time that you don't have. But when you're thinking in terms of decades and even centuries, it reframes how you answer certain questions. I'm just curious to try to understand better where that long-term gene came from. Well, I'm not sure where

it came from, but it's there. And we don't think in terms of quarters or years. We really think in terms of decades. And in many cases, we like the concept of having an unlimited time horizon on our investments. And we've now been at it for 40 years with Danahar. It'll be 40 years in September of this year that Danahur was founded. And the power of compounding over that 40 years, tax-free, by the way, is what I refer to as the eighth wonder of the world. It's a phenomenal thing. And you don't really get started until you hit the 10-year mark. So we watch a lot of what's happening in the world of short-termism today, whether it's the day-to-day mark-to-markets that hedge funds have to go through, the three to five year cadence that PE and venture capital

are engaged in. It's really hard to build anything lasting that's great when you take those type of time horizons. It's why I said when we talked about Glenstone, I think we're on a 30-year journey to create greatness at the institution. It's no different in the business world. It just takes time and compounding, whether it's business practices or financial returns, it just takes time. If you want to get to the promised land, which is a hundred times outcome on your investment, you need 20 to 30 years to do it. And if you can't get to 10 times in 10 years, you have no chance to get to 100 times in 20 to 30 years. So everything that I think about is when I'm sizing up an investment or an opportunity with my private investing practices is, do we have the youth in place

that are talented enough and have the learning agility and the desire to become great? And if they do, can they give us that 20 to 30 year time horizon that we need? And will they be able to make the pivots at the right time that need to be made in every business? It's interesting to see this, but that's the way I'm thinking about things before we even really get started. If they're just a three to five year person, and it might be a very good return over three to five years, I still don't want any part of it. Because at the end of the day,

you've put a lot of time and effort in that you have to start all over again and do another three to five years on that journey. And for okay returns, but the real goodie basket starts post year 10, when you start to go from 10x outcomes to migrating to the chance at 100x outcome. You need almost that high-level vision like that in order to last decades and to pivot. And Dan Heur was a tool manufacturer. It's not that today.

It's a life sciences, key life sciences player across the world. Can you just talk about the idea of pivoting? And it's just so hard for people to conceive how much Daner and you personally have had to pivot over 40 years? And what advice do you have for people to actually embrace that? Change is a necessary phenomenon. And the world changes. We all go back to the 80s. The Japanese were going to take over the world on manufacturing. They were the de facto standard that we all wanted to live by. Look at what happened to Japan at some point. Events, globalization, new competitors, early stage businesses. Things happen that disrupt.

And you have two choices. You can be the disruptor or you can be the disrupted one. I prefer to be the disruptor, which means you have to be thinking constantly about what's happening to your businesses, per se. And we're now in the midst of Danahar, 4.0, which means we started at Ground Zero, which was Steve and Mitch. We had the Sherman era, which was 1.0. We had the Culp era, which was 2.0. the Joyce era, which was 3.0, and we're now on to 4.0 with Reiner. And it's interesting that these things tied to the CEOs because the idea was as one CEO pivoted out and another pivoted in, we had to make sure we had the CEO who was aligned with what the business needed to do to continue to reinvent itself for that next transformation. Each was required if we wanted to

continue the compounding journey and to change the nature and makeup of what we have. I really do believe that each business, whether it's Dan or her, whether it's our business at ESAB, which is our global welding business, or many of these early investment that I'm making today, everybody needs to think about transformation along the way. And do these CEOs have that intellectual learning agility to want to make the transformation that's necessary and see beyond what's happening in any given year. It's about thinking about what's going on out in the world that could change the nature of what's happening to you as a business

and make those adjustments now before you're forced to make them down the road. You mentioned intellectual agility. I think, at least from the outside looking in, these kinds of pivots are rare in any company. And it strikes me that it's likely that the way you and Steve evolved your role to be chief stewards and to give these leaders cover in order to make these pivots has been critical. We have the good fortune of not being in the day-to-day meat grinder that a CEO is in today.

Think about these poor souls. They're on the 90-day clock. They've got a report to investors every 90 days. and you hear the same questions from the investment community. All the questions are dealing with what happened during this 90-day period and what's likely to happen the next 90 days, rather than what are you doing today to preserve and protect and grow your investment for decades to come?

Nobody focuses on that. Zero. And it's hard for these CEOs. I mean, I'm really respectful of the challenge that they have. So what Steve and I can do is give them the air. air cover, particularly in the boardroom and with the outside investors, that we are here to support them in ways that really create a long-term vision for the company so that they can be also working on the long-term side of the equation, as well as having to deal with the complexities of what

happens quarter in and quarter-out with the business. And I think that's different than what you with most companies. We care deeply at the board level about how to help these folks navigate all of this. And I think investors have now learned that the board can play a very valuable role in helping to steward the business for the long term, rather than just thinking about the 90-day clock day in and day out. It's tough. What aspect of the Dan or her story is least understood from the outside that's most important to its history. I think the deeply ingrained culture of continuous improvement that we have in the company, I think once again, most investors are focused on the short term.

Think about this. The stock market marked to market you every day. It's a horrible way to think about a business. It marked to market you every day. So you need a culture of continuous improvement and long-term thinking that mitigates that thought process so that I don't want to personally think about day to day. I want to think about what we're doing for the next decade. This 4.0 pivot that we're in the midst of, Reiner's been working on for the last several years.

And we're not done yet, but we're closer to the finish line. We probably have another year or two to go. and then we'll let that pivot play out for years, but we'll start thinking about what 5.0 is going to look like. And I don't know the answer to that today. I really don't. But we'll have to start thinking about that as we enjoy the fruits of what that pivot was all about

for several more years. But something's going to happen, and we've got to get ahead of the curve and thinking about that. And having that space as founders and not being in, like I said, the meat grinder every day gives you a chance to really able to think longer term. But that culture, I think, of continuous improvement and long-term thinking, it's understood but not appreciated. You've referred to a co-founder twice with Steve and Dan O'Hur and Emily at Glenstone. And I know you have this predisposition to seek

out co-founder teams, not always, but often that you see value in that. Maybe you can just talk a little bit about your experience building alongside another individual. Maybe we could start just with Steve on the Danorher front. Well, Steve and I have been partners now since 1980. And obviously, Danahur was founded in 1984. So we've had a pretty good run. Interestingly, we've never had any debates of consequence about money. The debates have always been about what's the right long-term strategy for the business. And I think having respect for one another's opinions along the way, I mean, listen, he can complete my sentences today and I can complete his sentences today. And our roles have evolved a little bit differently from the early days to one where we're really

aligned. In the early days, he was working on strategy, big picture. I was working on the operating prowess of the businesses. Today, we're both aligned and thinking about long-term strategy. How do we want to allocate our capital? What's the right CEO succession that needs to take place in the business itself? And how do we make sure we proliferate our culture and our business system in perpetuity? That's what we deal with day in and day out. And while Steve and I live in very different parts of the country today, there's not a day that goes by where we probably We don't talk five times a day, and we're not together. We just have that alignment on what we want to do and where we want to go.

And it really all starts with what's the next 10-year journey going to look like and how do we participate in a way to help our teams really accomplish that. Maybe we could just take a couple minutes to tell the Danher vignettes from 1.0, 2.0, 3.0, and 4.0, however you think is most appropriate to share. Well, Ground Zero started with Steve and I coming off of a fishing trip in Montana together, constructing what we thought we wanted to accomplish with our lives in the business world. And we had this B-Hag before Jim Collins, you know, created the concept of B-Hag. We didn't realize it was a B-Hag back then, but what it basically was was,

God, wouldn't it be great if we could create a business in our lifetime that was 200, $150 million in sales doing 10% operating profit margin. Oh, this would be unbelievable. And we shook our heads and we shook hands with one another and we said, let's start this journey. And lo and behold, we didn't know any better. I mean, we lived in a period of time where leveraging assets, they were called bootstraps back then. They weren't called PE buyouts or high-yield bond financings, but you could borrow massive amounts of money. And our first deal came in 1981 when we bought a little vinyl siding manufacturing company called MasterShield for $6 million. We knew a little something about this. We did a little due diligence because I came out of my

dad's building supply business for a couple years. And one of the products that I was selling as a manager of the Baltimore facility was vinyl siding. And I knew that, this was a superior product of steel and wood and aluminum because it didn't chip. You didn't have to repaint it. Vinyl sightings become this standard de facto siding that people use to this day, but it was the hot and upcoming new product. We found this little company, had a parent company in bankruptcy, and they needed to sell it. So we went down and we looked at the facility and met Nick Martin, the guy running the business and a great guy still alive to this day in his mid-90s. we said, we're here to buy your company. He said, you're here to what? We're here to buy your

company. Well, where are you two young punk's going to get the money from to buy this? We said, we're going to borrow it. He said, how are you going to do that? And he said, well, we're going to borrow 80% against the receivables and we're going to borrow 50% against the inventory. And if somebody gives us an appraisal, we'll be able to get 30% against that. And when you do the math, there's five of the six million, Nick. And he said, well, where are you going to get the million of equity that you need for this business. We said, we're going to borrow it. He said, how are you going to do that? We said, we're not quite sure we'll get back to you on that one. To make a long story short, a banker in Maryland gave us a million dollar loan. And to this day,

the only way I think we got that loan was my dad probably secretly guaranteed the loan behind the scenes. And he went to his grave, never saying whether he did or he didn't. But we borrowed 100% of the purchase price, and it was a business that was doing 9 million in revenue at the time, 600,000 in operating profit. And three years later, was doing 40 million in revenue and 6 million in operating profit. And we were launched. This was the incubation of more deals to come. We bought the Mohawk Rubber Company in 1983 for $90 million, $88 million of which was bought. borrowed from General Electric Credit Corporation, $2 million of equity,

which came from the cash flows that MasterShield was producing. And we had the chance to ultimately take Mohawk and MasterShield and merge them into this defunct real estate investment trust called DMG and changed the name to Danahar. And so Danahur was born with the merger of these assets in September of 1984. and Ground Zero got started. The idea was we're just going to start buying more companies, and we bought a bunch of industrial manufacturing assets, mostly in the tools business. Think sockets, wrenches, ratchets. We produced 80% of the product for the craftsman line,

as if, for instance, back in its day, we were making a million sockets a day back in the 80s for craftsmen and others. And at this point, what's the division of labor between you and Steve. Steve's thinking about the high level and the strategy and how we continue to architect the business and I'm in there on the manufacturing floor, working with folks on how we make the businesses more efficient. That's what was going on. And I think, like I said earlier, in our conversation, we realized we could do it, but it wasn't what we were best suited to do. And so we went on a run for the better part of seven years running Dan O'Hur before George came in in 1990. And really, the George era of 1.0 was all about professionalizing the business, winning share in the tool business.

I mean, George took our share of non-powered hand tools from 20% to 40% over the course of the decade that he was in charge of the business. He also worked us into motors and controls and other interesting manufacturing products. We started to diversify a little bit with George. And so 1.0 was really about building these businesses in a way where we got real operating prowess associated with the business. We rolled out the business system. We diversified a bit, but stayed very much with our industrial roots. And when George retired in 2000, 2001 and turned the reins over to Larry, the business was about

$3 billion in revenue at the time. And we had created something that was pretty interesting. And then the culp era began. The idea was to continue to buy businesses that we thought were really good businesses with good brands in the industrial arena and expand our product offering significantly. All of which happened under Larry. The central theme that continued, more than anything, though, was the business system and the DNA and the culture. And you'll hear that continuously between each of the executives that went on to run the businesses themselves.

But we also dipped our toe under Larry's leadership into the healthcare space. And we bought a business in 2003 called Radiometer, which is blood gas analyzing. instrumentation for people in the ER or the ICU at hospitals. And this is critical testing that will give the doctors a very quick readout on what's happening in your bloodstream. So if you've come in with the potential for a heart attack, we can quickly tell you, was it a heart attack? What was the severity? Or do you just have indigestion and you're really not experiencing a heart attack? Once you get that quick readout, you can do much more testing that goes down to the central lab, but these are critical instruments that make decisions quickly for a doctor to diagnose what's going on.

And we learned the quality of what the secular trends are with a health care business. And this is where secular trend thinking started to develop for us and what are better businesses to own, less cyclicality, things that you don't have to tear apart when you go into a recession because your revenues have shrunk 10%, which is what happens for the most part in the industrial world still to this day. So here was a business that continued to grow. We could bring the business system to work. And gosh, when you're in a recession, you're still organically growing. We learned something from that.

That led us into Beckman-Coulter towards the end of 2009-2010 type of time frame. And so the birth of our interest in health care really started to form. So Larry's era took the business from $3 billion to $14 billion. We horizontally diversified extensively. But it was towards the end of Larry's tenure with Danaher in 2014 that I think we all became aware at the board level that we were too complex. and we learned that we were starting to lose a little bit of our capabilities. How do you do 50 strategic plans, 50 operating reviews, and go deep on these businesses and really understand them when you've got global competition that's come in?

So the idea and the pivot that we made with 3.0 and Tom Joyce is the leader was the start to resimplify the business and gain greater clarity. and focus. And under Tom's leadership, we divested by the way of a spin-off all of our original industrial businesses, the heavy-duty industrial apparatus. It was part of Danher. And out the door went about 25% of revenue, but 60% of the complexity of the number of opcos that we had. And we were able to change the face of what Fordov does. That's the name of the business that was created as a result of the spin-off and simplified Dan or her greatly to become much more healthcare-specific, especially in life science and diagnostics applications as a whole,

and start to spend our capital wisely at focusing deeply on those verticals. So Tom really did a remarkable job under 3.0 of changing the ins and the outs, give you, for instance, on that. Out went fordive with all the industrial businesses, by the way, done in a very tax-efficient way, and in a way that gave fordive a balance sheet investment grade to continue to reorganize itself for the long term as well. Out the door by way of spinoff as well went in Vista, which was our dental business. Dental was very different than life science and diet. diagnostics. And inbound, under Tom, came Sefid, the number one molecular diagnostics testing business in the world, IDT, which is oligos, number one in the world at oligose

manufacturing, and CITIVA. First, go back, Paul, which was an $11 billion transaction in filtration of biologics, and then CITIVA. So I think the number was something along the line of Tom did $43 billion worth of acquisitions that helped us become the leader in the biologics manufacturing space. If you were to look at our workflow today, we complete 80, 85% of the workflow that's necessary for biologics manufacturing with our product portfolio today, where our closest competitor maybe has 40 to 50% of that workflow covered. So the strategic thinking and the focus that went in under Tom's leadership was something. And I like to say that Tom embodied what

is through and through as a level five leader. Jim Collins defines level five as someone who is prepared to make all the difficult decisions, has great strategic acumen. And then when those decisions are implemented, gives everybody else the credit. This is what Tom did. And Tom also realized that he wasn't the right guy to implement 4.0, which was how do we go deep in life science and diagnostics and really create a strategic vision that incorporates early stage investing and understanding what's happening in life science and diagnostics today in that early stage world, which is going to tell us what the gold standard of business is going to be in the next 10 to 15 years and start to incorporate all of that thinking into the strategy of the business.

He knew, as did we, that Reiner Blair was the best person to architect 4.0. And Tom left the business earlier than he probably was. would have wanted to, but he didn't want to take the chance that we run the clock out on Reiner, and Reiner might decide to take a job somewhere else. So he put the enterprise ahead of himself, which was an incredible thing. I'm grateful to Tom to this day for making that level five leadership choice for the best of Dan or her rather than what would have been ideal for himself. I was just thinking about the level of dynamism through that story. And we've touched on Collins several times now, but hearing that from start to finish reminds me of the advice

you've given us and that we've heard you give to other founders, one of Collins' frameworks, about the value of experimentation and the value of shooting bullets when you don't have all the answers yet as a form of, in some way, self-discovery. And then as a clearer picture emerges, bringing out the canons and focusing more and more on those key priorities. As a company gets bigger, more people involved, how do you create that sense of co-ownership and that sense of principal orientation for all the people that are ultimately integral to building Dan or her, taking Dan or her, stewarding Dan or her to that next level from a 1.0 to a 2.0 to a 3.0. It all starts with talent acquisition or talent development. We have a process inside Dan o'her.

where we would like 75% of our hires to come from within, self-promotion from within the enterprise. These are people that understand our DNA, understand our culture, and we want to reward them in their careers for doing great work. So what's the best way to do that? Here's the next stage in your career. We mentor, we develop, and we work with people to try to help them improve their livelihood through career development. However, we need to go to the outside for 25% because you need that outside thought process. We for a minute don't believe we know everything within. Once you become 100% inward thinking, the beginning of the end will start to take place. We need that outside thought process, fresh thinking. I mean, Reiner Blair, our CEO, came to us from a chemicals business. This is a guy with

great learning agility. And he's probably as good as they come in the life science and diagnostic space today, particularly with a strength in life science. So as we recruit from the outside, we're looking for that learning agility. We're looking for people who have a problem solving mentality. We hire very specifically along the lines of what our DNA and our culture are, because we need that alignment. We need team building people. We can't have. somebody who comes in, who rules in an authoritarian way that just says, my way or the high way, you're out if you don't like it. That just doesn't work in the world that we live in today. We need to do a lot of our hiring for folks that share our principles and values and vision.

That's the way we go about it. Transformational thinking won't exist unless we do it that way. When you reflect back on the level of acquisition activity, obviously not Not every acquisition is going to work out perfectly, but can you generalize now looking back, what makes a successful acquisition and maybe what you'd want to avoid in the future through learnings over the decades? And Nanner, or ESAB, it's all about acquisitions that are led first by strategy, and they have to be strategically aligned with what we want to do with the business. And what do I mean by that?

Everything's about strengthening the core. I talk about workflows all the time as one of the great secular trends today. How do you increase your workflow? How do you become more important to the customer so that the customer wants to buy your product because you can, one, create a more seamless better outcome for them? Do it at a price point that's more affordable than your competitors because more integrated workflow give you greater flexibility with your customers. And so it all goes back to strategy first and foremost.

Then you need an integration process. And we've learned over the years the difference between OK integration and superior integration. And OK integration usually ends poorly. You need to quickly pivot to help those that are being integrated into the business become familiar with the culture. So what our leaders do right away is they go teach a concept known as policy deployment, which is how we run a business at Danor. It's really done off of a couple sheets of paper.

And it embeds what you need to do this year to basically be on the journey to make your longer term planned. It's actually a very simple process that takes the complexity out of all this crazy strategic thinking that goes on. What are the vital three things that we need to do right now to preserve and protect the business for the next 12 months and what are the vital few things that we need to be doing now to turbocharge the business for years to come. We don't want to work on anything else. Our leaders will go out and teach policy deployment right away and we'll also learn what those

businesses need right off the bat. By way of, for instance, Dan Her acquired a business a few years ago called out Devron, the gold standard in plasmid manufacturing in the world today. And we all know that everything in drug development in cell and gene therapy starts with plasmids, and they had a capacity area. We have a concept in our toolbox that's part of the business system known as Smed, single minute exchange of dyes. And what Smed is an enabler for you to do is ring out incremental capacity without putting capital dollars in. In the plasmid business, if you want to put capital in, not only. isn't a lot to build capacity, but it takes a long time. It could take you a couple years to add capacity. What Smed allows you to do is figure out how to more efficiently change your tooling

over, do different things that shrink the time to change from one therapy to another. And as a result, we wrung out 20 or 30% capacity for no dollars invested to help these guys service their customers better and more efficiently, because during COVID, lead times on plasmids went from what was the equivalent of six months to call it 18 months. It was very, very difficult. Somebody who's making a new drug in an early stage business, and you say to them, you've got to wait 18 months to get samples and a plasmid, you know, really going. It's not very appealing to the customer. Now, the whole industry was that way. Can we create competitive advantage by shrinking our lead times? I don't know the exact time frame now, but it's probably we're down to three or four

months lead time now from what was 12 to 18 months. And it's a real competitive advantage versus our set of other competitors out there today to be able to say to a young company trying to do this, we can get you your product a lot faster, for instance. Mitch, earlier you mentioned the role of intellectual agility in leadership, and we touched on level five leadership. Just curious, when you're out looking for founders, operators to back, are there any other traits of leadership that are top of mind that you like to seek? So number one, for me, it all starts with, does the business have a platform to do?

do something special over the course of time. If we understand that that's the case, then the first thing I want to do is I want to meet the CEO slash founder running the business. And I want to really size them or her up. And the thing I'm really looking for is, number one, can they give us a 20 to 30 year run? Do they have the learning agility to pivot when the business needs to pivot? And do they have the passion to want to create something great. If I see that in an individual, then I know that I can work with that individual to help them strategically with the business,

to help them figure out how to scale the business as they grow, to help them with organizational design, to help them with simple concepts like funnel management, channel management, policy deployment, single-minute exchange of dyes, all the things that I've had the good fortune to learn over the years that will help these businesses grow and scale with the course of time. But it really all starts with, what have we got in that leader?

And do they have that DNA that we're looking for, learning agility and duration of time and desire and passion to be great? If those are there, we've got something to work with. What about on the business characteristics front? Is there a shortlist of criteria that you think every business needs to master in order to have a good chance of being great? Well, one of the great secular themes that we like is recurring revenues. I forget the exact percentage of Dan or her that's recurring revenue today, but it's circa 70 or 80 percent where you work with a drug company. You supply a lot of the ingredients to the case.

or the drug itself, and you've got an annuity stream for 15 years once you get speced in to be the supplier of your products with the customer. We just love that. And it gives you the chance and the opportunity to be thinking about lots of other things as you've got that steady-state business come in. The same would apply to software, the recurring revenue themes of software, SaaS software businesses today. So I look at recurring revenues as a really great. theme for everything we want to do investing in our private side of the equation. And I think that's a learning that came from Dan O'Hur. And I think that's why you see so many people getting involved in software or everything digital today because of the recurring nature of the business.

Where did the impetus for philanthropy come from for you? We're sitting here at Glenstone, beautiful physical manifestation of what's possible with a multi-decade view on philanthropy and giving back to society. Just curious where that original inkling came from. Well, I can specifically tell you where that came from. It all started in 1998 when I went on an adventurous fishing trip to Russia. We flew into a town called Murmansk, famously known because it's where the Russian Navy fleet was based. So it was a military town of about 400,000 people. back in those days, they didn't even have computer technology in Russia. We were computerized, of course.

But when we got to the airport, they couldn't run your passport through a check, so they just kept your passport until you wanted to come back and leave the country. So they took our passports. We flew in one of these Russian-era helicopters to this fishing camp with myself and three other fellows that were good friends. And if you know anything about great Atlantic salmon fishing, when it's hot, the fishing's not very good. And we hit one of these hot streaks. And I tell you, we fished for four days of the seven and didn't have a nibble.

We looked at each other and we said, let's get out of here. Let's go back and explore Murmansk. We'll learn a little bit about the people, the town. We've never really experienced Russian culture. It'll be really interesting. Great idea, everybody says. So we charted a little bubble helicopter to come and take us out early. And we had about an hour and a half helicopter ride, but this helicopter didn't have the ability to go the full distance. So it had to stop and refuel. We stopped in this little village that was sustaining itself on hurting reindeer and catching salmon. And we sat down in the helicopter and this Russian dude comes with a big hose over his shoulder. to refuel, and he puts fuel piece into the tank and starts filling, and we're getting out of the helicopter, and as we're getting out of the helicopter, the fuel nozzle comes loose and starts spitting

fuel into the rotor plates, and the helicopter ignites and ultimately melts to the ground. And the fuel was spit on one of my great friends, Joe Robert, who was standing maybe three, three feet from me, but the wind was blowing away from him when the fuel hit him. And that's the only thing that saved him because the wind was blowing towards me. I didn't get douse with fuel, but I dove into a pit and ran away on all fours. And ultimately, what happened was the helicopter burned to the ground. The guy doing the refueling passed away as part of this because he was doused with fuel and he had a difficult ending. And the four of us tried to figure out how we were going to get out of this little village. So we asked, do you have cell phone? No, it's 1998. Nothing to really speak up.

Do you have a satellite phone? We don't have a satellite phone. There's obviously no wiring, so no hard lines. So how do we get a message out? Well, we have a World War II vintage radio. We went up, couldn't get the radio to work. But they got a Morse code message out. This is 1998. Emergency, emergency send a helicopter. About 12 hours later, another helicopter came in and took us out. We drank very heavily that night. I left Russia in a pair of gin shorts, a torn t-shirt, and the sandals I was wearing. He melted in the spot I ran out of them. And all our belongings were gone. So we went back to the border and remember, they kept our passports, which was a lucky thing. So we had a plane that took us back out, left Russia, I got home, and my dad said, so would you learn from this?

He said, what do you mean? He said, well, do you want to be the richest guy in the cemetery? I said, nope, not interested in that. And that's when the philanthropic side of Mitch was born. What am I going to do with all the good fortune that's been bestowed upon me? And I started thinking about what were the things I loved and what was important to me, and I love the arts. And so the idea of building a museum started to percolate in my head at that point in time and really started to take root in the early 2000s. And of course, I met Emily, and we talked about the story of how Glenstone was born.

But it all started right there. And with my dad also being a champion of... the underdog, arts education became important, general education became important. And there's no bad charitable cause, but you have to pick some things that you want to go deep within. And we try to bring the same operating prowess to how we give money away as we do to how we build businesses. It's hard work. You've got to roll up your sleeves and not all non-profits are made equal. You want to make sure the dollars are spent wisely and that they give great. return to those that it's spent on. So we've spent a lot of time my brothers and I trying to

figure out how we want to give money away an efficient, impactful way. That was how it was all born. And this stage of the game, you know, I'm investing for the benefit of mankind on a long-term basis because we've taken the giving pledge, Emily, and I've signed the giving pledge. 98% of our wealth will go for the benefit of mankind. Totally remarkable with Danaher. as a company through the various phases of its evolution. But what's doubly unique and fascinating is that you've invested the majority of your net worth and kept it alongside in Danahur that whole time. It's a super rare thing as we look out at the investing world in the world of company founders. Most everybody by year 5, 10, 15 would have diversified or divested those assets or

looked for other things to do. You're 40 years in and still the vast majority. isn't Danahur. Rick and I were looking at the track record of Dan o'her and it's extraordinary. I think Apple might be the only stock just by a tiny fraction that's outperformed Danor in the United States. The last 40 years, something north of 21% a year, which, based on Rick's extremely detailed Excel sheet, something like an 1800X, 180,000 percent return. And through everything we're talking about Danaherst only getting going in many ways. As you've started to think about the next couple decades ahead, and this is where maybe we've come in very fortunately and into the picture the last few years, we've had a lot of conversations around you're investing more broadly.

And you've had a lot of experience, whether it's on the boards of foundations and various endowments over time, you've seen that LP perspective. You've invested personally in a few different companies and funds, and that is expanding more recently. I love for you just to step back and reflect on what that's like to be so concentrated in one asset. And then what's going on right now in this transition to you looking for the next generation of founders out there? Well, that's a loaded question. There's a lot there. But let's start with Dan or her. Everybody told me, you're too concentrated. You need to diversify. Thank God I didn't listen to any of schmose that were encouraging that. And if you think who was encouraging it, it was investment advisors,

people who know know differently, who look at this with a traditional lens and it was just wrong. I mean, what better way to stay concentrated than to invest in yourself and what your beliefs and your convictions are on a long-term basis? So we didn't diversify. And obviously, that served us very, very well. During my lifetime, Danaher will always be a very concentrated position, because I don't know where to put that magnitude of dollars otherwise today. What am I going to do? Sell it, pay the tax, and put it in index funds? I mean, what fun is that? My net worth will be a lot less. We'd rather give it to the foundation and let them start the diversification journey over the long time. Mitch, I imagine that being a part of building something like Dan or her

in an intimate way for several decades could seem quite different from making new investments and younger companies that you haven't yet been involved with yet. As you've spread your wings as an investor, what are the problems and I guess the opportunities too in the investing world, the investing ecosystem that you've identified that our sub-operability? when it comes to company building and when it comes to ultimately long-term compounding. So we have to go back in time a little bit to say what was a great invention that took place in the investing world and what has happened to that invention today? And I think that a guy by the name of David Swenson, who is a Hall of Fame investor from Yale,

invented the asset allocation methodology some 30 plus years ago, where many people went to private equity and venture and real estate and oil and gas and lots of different things, hedge funds, and it was a brilliant strategy. And it was the new thing on the street, and people did extremely well pivoting away from the traditional U.S. equity, 60%, bond 40% strategy. And as that evolved over the ensuing decades, it started to feel like it was becoming broken to me. What do I mean by that? I think that short-termism became alive and well, as PE and venture were three to five-year type of players and hedge funds were mark-to-market on an hourly basis.

And the fee structures that were associated with these were, you know, the traditional two and 20 percent which take a lot of the benefits of compounding away from the investor because of the high fee structure that was associated with it. So I think the whole asset allocation methodology became co-opted by short-termism and fees and became a very broken process. And I started asking myself the question, what has to change to make this a real opportunity? And it's when I guess three summers ago, you guys helped me architect a paper that I wrote to myself and for the benefit of my foundation called reimagining the blueprint for the long-term investing model. And it all started with the thesis of how successful Sequoia was over the years.

And God knows they were extremely successful. Three in front of their 30% type of number in front of their compounding over a very. very, very long period of time, many decades. And I said, why can't we do that? What's the architecture necessary to accomplish something like that? Those are pretty outstanding returns. If they can do it, why can't we? And we started this imagination journey. And it basically went along the lines of, we want to find passionate and dedicated founders who can give you a long duration runway, I think 20 to 30 years, where you invest in businesses that have the chance to create a 50 to 100 times outcome over those 20 to 30 years, and stay the course. And private is better than public.

It doesn't mean they won't go public one day. The greatest thing about a private business is you're never worried about the short term. You're not marked to market on a daily basis. You're not on the 90-day clock of having to report to investors, and you don't have to worry about sitting on your hands and doing nothing when you own a public security. That's hard to do because you're watching the dynamics of the market every day, and certainly companies run into problematic times in their history and their journeys, and that's the worst time to sell.

But yet most people do. Oh, it's a problem. They're going to be stuck for the next two years. They forget about the next 10 or 15 years of good things that are going to happen as they work through. I mean, De Anahar went through this incredible journey of COVID that turbocharged our business, massive growth over a two-year period of time. And the last 18 to 24 months, we gave a little bit of it back because we went in from a pandemic to an endemic state.

And so a little growth went away. But did anything change on the long-term secular trends of Danaher being a high single-digit grower aspiring to become a double-digit grower? Absolutely not. Yet the market treated us like we were the plague. And can you imagine all the people that sold and paid the tax and they're going to miss all the goodbies that are starting to come now? So being private is a real benefit if you don't need access to big.

time capital dollars. The public markets are a beneficiary of being able to give you big time capital dollars if you need it. So that's the real pro of being a publicly traded company. But left to my own devices, I'd love to see these businesses stay private for as long as possible because you just make higher quality decisions in that type of framework. So finding these young entrepreneurs who can give you duration and you can put capital to work and you can help them scale and make high quality decisions day in and day out, whether it's, like I said before, organizational design, strategic planning, mecho map building. I could give you a list of 20 or 30 different things that we can help these companies with. And I get invigorated by working

with young entrepreneurs who want to be great. And I guess I'm just a business builder, rather than a business seller. And if we can find those shots on goal that give us a percent recreating something special, I think the returns will take care of themselves over time and we will recreate all the success that Sequoia was able to create over the course of time. We keep coming back to this concept of a time horizon arbitrage and it reminds me of a story from a few years ago that was extremely formative for Paul and I, when we were having a conversation around what's the appropriate disposition from a time horizon standpoint with the investments that one makes, and we have as a value that our time horizon is eternity.

And at one point, you said, boys, see what you're talking about with the eternal time horizon, but you Catholic guys and your eternal concept, can I just encourage you to think about one's approach to time and investing with an unlimited basis as opposed to an eternal basis, because the reality is that most things don't last forever. And there is a sense that the power in every investment is the optionality to have an extended time horizon when an extended time horizon is merited, when it's the best thing for the company, when there's more to build, when there's more to do. And so there's the early work of sourcing, and we've already talked a lot about just how you

think about underwriting people, how you think about underwriting businesses, apply the time horizon advantage to that. But I think the other really critical piece that we've been beneficiaries of and that we've learned from just observing you is this value ad orientation that you bring to every person or project or company that you commit yourself toward. And that is a very, very unique concept, at least in its practice in the investing world. Maybe say a little bit about the ways in which you come alongside a founder and the orientation you bring as a source of support, as a helper to them and whatever they're building.

We can talk about some examples of that, but I say this with great humility. I've seen a lot over the last 40 years. Why in the world would I not take advantage of everything I've learned and seen and pass on those judgments and that experience to others? That's a competitive advantage that we just have to take advantage of. I haven't seen it all, but I've seen a lot. And we can help these young founders in profound ways. It's just as important to avoid making the mistakes and learning from others as it is to make high. quality decisions. Everybody's going to make mistakes, but boy, we want to avoid the big ones,

and we can help these companies along the way not make these mistakes. And the whole goal is to get an option on duration. If you can go for 20 to 30 years, the compounding benefits, I mean, just look at Dan Heard today. If we're 1,800 times return, if we double the stock price, that means we're 3,600 times return. The compounding at this stage is crazy. And you want to get to these reasonable shots on goal. Now, stuff is going to happen. Death, divorce, partners not getting along,

the business running up against a death star that none of us could anticipate. Stuff is going to happen. But if we can get a handful of these duration models, of 20 to 30 years, it's all going to take care of itself in the overall returns for the bigger picture. It just takes a couple to change the dynamic for great outcomes to happen. So that's the way that I'm looking at it and thinking about it. But let's take an example like Arcadia. Our listeners will know Arcadia well already as we had Daniel and Paul in class

a couple months ago. So they've got a good foundation for their story. What we saw on Daniel and Paul, were the things that I talked about earlier. Learning agility, deep domain expertise in vertical market software, young, 20 to 30 year type of duration capability, a lot of the wonderful things. And I and others have had this thesis that one of the great companies, Constellation Software, could be reinvented. and we could build a better, more durable constellation for the long term based on some themes. Taking nothing away from constellation, one of the great compounding stories of all time.

But how do you build a better, more durable constellation over the next 20 to 30 years? The answer is you pay a little bit more. You buy growthy VMS businesses that are mission critical, and you do it around platforms. In other words, can we create an aviation platform? Can we create a small fintech platform? Can we create a platform around the rail industry? Can we create a platform around agriculture?

How do we go put a group of businesses together that can generate synergies from one another within a platform so that not only are you buying these things that, what do we call it, three times, ARR, or five times EBITDA, maybe you pay a turn more if they're really growthy, 20% type of businesses. But if you can put them into a platform and you create a $200 million platform out of these businesses over the next decade, and you've done that 10 or 12 different times, and you've got organic growth working for you in a meaningful way versus Constellation who doesn't really grow

organically, they just do it through M&A and they have a cookie cutter approach on their margins. But if you take the longer view and you can get organic growth and you have high gross margins to start over a 10 or 20 year journey, wow, you've created a turbocharged version of constellation that'll create enormous value. And what Paul and Daniel understood with the help of the board and the help of our long-term thinking and our strong-term thinking and our strategic thinking is how to pivot from the traditional constellation model to what I'll call the new and approved version of what we can create that constellation has done so well over the years. And that's something that I think is pretty special for these guys.

So we're helping them with policy deployment. We're helping them with funnel management uncertain of their businesses. We're helping them understand how to get synergies from within. We're pushing them to pay a little bit more. more for a highly strategic asset that makes the whole of that platform better than the individual pieces, which is really important because you wouldn't make that acquisition purely based on financial metrics, but if it's going to make the whole better for the long term, damn straight pay that extra few bucks to get it done.

I think for me, if I were zero in on a single superpower of yours, it's bringing the seasoned operator knowledge base to various situations and then knowing how to adjust priorities based on, say, the economic environment or based on the size of the company or based on the industry or the capabilities of the team and being able to speak into these different situations in a way that is extremely value add. And I think it's been a lot of fun to see how you are able to shape your support based on all of those environmental conditions and how they're coming together in a single situation. That's 40 years of experience talking where you've seen a lot. And just to pass those judgments on to others is what I consider the real opportunity that I can contribute to helping

these founders build their businesses over the course of time. We had to help Paul and Daniel unlearn, get rid of the muscle memory that they had of certain practices at Constellation. But once again, Mark Leonard at Constellation, has built a phenomenal business, one of the great compounding stories of all times. But it doesn't mean we can't build a better version of that for the long term. And we have a clean sheet of paper. What can we do that's better than what Mark has done over the course of time? He's gotten to the point where he's large. And so to turn the battleship or the aircraft carrier is hard. It's really hard for him, you know, at this stage of the game.

And he's looking at reinventing right now. I see some of the things that he's doing and he's trying some interesting things. We'll see what happens. But Paul and Daniel are a little PT boat right now that can turn on the dime and they are doing it. It's wonderful to see. We're doing this with a few other folks. We're working with Jan and his team at Chapters. on the operating prowess and strategic thinking and policy deployment and lots of different things

that are helpful to driving the business. And he's made enormous progress in a very short period of time. But he has enormous progress to continue to make in the journey as he gets things going. He's going to have to bring a different type of operating efficiency to these businesses than what Constellation does if he really wants to separate. over the course of time. But he's young in his journey. He's only a couple years in doing what he's doing right now. And so it'll be fun to watch the next 10 years, what happens with his business. Outside of your family, I mean, is this where you find joy, helping others build impactful companies?

I do. I find it thrilling. There's a lot of people who would like to play 18 every day when they get to retirement age, my definition of 18 every day is about 18 holes once a month, and I would rather be engaging with these young entrepreneurs. I get a lot of energy from that side of the equation in helping them and seeing them thrive over the course of time. A lot of personal enjoyment comes from that, and if we do it, the investment side just take care of itself. One of the other elements that I think is really important to your approach is just the way in which you generally will have a strong point of view on any situation in any one of these companies. And you have ideas, you bring ideas suggestions to teams, but you're always at the same time giving them room to maneuver and to develop their own insights or carry an idea forward. And it just hit me that really the 30 or so years of being this chief steward.

of Danahur with Steve probably shaped you into this really interesting source of support for a company that was both owner-oriented and long-term-oriented. And yet, you got comfortable not having your hands on the steering wheel. I think of other investing models and private equity in particular where a lot of change and a lot of strategy happens through control rather than influence. But it does strike me that you have this combination. of strong points of view and a sense for direction, and yet you're always ultimately deferential to those who are in the leadership seat. Well, running in business day to day is very different than what Steve and I do or what I do with my private investment activities. You find great

talent with great learning agility. You help them. You kick them in the butt if they get off the straight and narrow a little bit. You pat them on the back when they're doing great things, but you do not get in their way of running the day-to-day of the business. That's where the fault line starts to exist. If you get into the details of managing them on a day-to-day basis, then the relationship, it's the beginning of the end. How do you think about matching the characteristics you like to see in talent, and leaders, founders,

with the structure of, say, a recurring revenue business, but overall the battlefields or the secular... trends that are most attractive. I think we've been talking about vertical market software. There's many ways in which those all align. But what other big trends do you see over the next 10 or 20 years that get you excited just as places to look for founders or particular businesses that might fit the mold? I would say one of the great minds around this is Froese de Juan. He sees a lot of these trends. He's thinking about it day in and day out. Obviously, everything health care and efficiency related to health care is a secular trend that will last the rest of our lifetime.

So thinking about how you make health care more efficient, thinking about how you create things that allow people to live longer, healthier, happier lives. This is a secular trend that will go on the rest of our lifetime. Everything digital is healthy. happening in front of us, so whether it's vertical market software or other forms of software, invested in a wonderful business called DataCorps, which is vertical market software for industrial applications. Think about the chemicals industry, the food industry, anybody that's doing bulk processing, Data Core has terrific platform of software applications that work for those industries. So helping, whether it's healthcare or industrial efficiency is a great secular

trend that will go to the rest of our lifetimes. Every customer wants you to become more important. They'd rather deal with less suppliers than more, as long as you treat them fairly, with innovation and price and great service. If you can accomplish those type of things, It's wonderful, but the whole mapping of the workflow is really, really important. And understanding all the things that are near adjacencies to what your customers are doing in their own shops, whether it's a factory or a service center, whatever the case may be, if you can become more important to them, you're just going to do better. So we look at that as well, and I call that expanding into near adjacencies where there's some

synergy. It may come from the customer being there. It may come from adding products to the portfolio that drive efficiency. It could be geographic efficiency with certain of your businesses. There are all kinds of ways to look at the workflow as a whole and gain from it. What about stage of company, Mitch? I think one of the drivers of the short-termism that you referenced earlier that's such a problem in the investing industry came about by the fragmentation of the GP community. And I think it was really led by the LP community, but we've evolved into the state of the world where 99% of all investors will have their bucket that they invest in, whether it's seed in series A or only public companies in Europe or private growth

companies. How do you think about the stage of company you're comfortable with? I imagine if you're looking to make 20 plus year investments, part of this is having dexterity and learning how to hold companies and support companies through various stages, and you have a lot of experience with that. Well, the earlier you can go with competence, the better, because you'd like to get the companies when they're very young. We're in their infancy stage. You're dealing with venture capital with seed rounds in series A and even series B type of rounds. But when you find something, you want to do the seed, you want to do the A, you want to do the B, you want to do the C, You want to get access to part of the ownership of a public company.

So you want rights to buy stock in the public offering. You want to take the capital at all levels if you believe deeply in the business and just keep adding to the equation. We've done this now with chapters on multiple occasions. We're getting ready to do it again with Arcadia on another occasion. Data Corps, another business I'm invested in. There's another chance for incremental capital to go in. and you're doing it at higher valuations because these businesses are growing and thriving and they're getting better at what they do. But if you deeply believe in where the businesses will

continue to go, to continue to get capital to work and not worry about having to pay higher prices is a wonderful thing. Everybody remembers the cheap price they got for the seed stage round, but you've got to be realistic. Well, this is such an important disposition just to underscore here because it's actually the polar opposite of the average investor is at every year, next stage, generally the temptation or the pressure is to exit, to distribute capital. You've made a good investment. It's generated a reasonably strong outcome. You want to put points on the board. And yet, just thinking about how valuable this is, how critical this is to any business, any founder that's really looking to build for the long term, to have a capital provider that is not only

open-ended with their time horizon at entry, but is so long as the project is continuing in a compelling way to continue to support. And all the time that is wasted on going out and trying to recruit a whole other set of investors at a new stage, the complexity that comes with having investors that have had different entry points and have different expectations for the business and different points of view because their time horizons are different. And this seems like a really important feature. And I think the ideal is to just be there from day one, structure, be as supportive in helping to structure the battleship to get through anything and start that journey as early as possible. And when we talk to great GP friends of ours who may be focused more on stage

specific investing, I think most of them feel like it's a set of handcuffs that are put on them by their LPs. Because take early stage investing for an example. I mean, you may, you may make 50 early stage investments, you live with them for a few years, who, besides that investor, is in a better position to underwrite that company? At that point, you literally probably know the company better than any other investor. And yet, oftentimes, you're hamstrung from, say, bringing out the cannons. Let me tell you a couple stories here. First, Will Thorndyke did a great study that looked at PE, making an initial investment in a business, selling an investment to another P.E. who made more money than the first P.E., who sold to the third P.E., who made more money

than the first and the second combined. They've channeled a lot of capital in and out to get their fee structures or to get to the next fund or to return capital to their investors very inefficiently. They could have held it all that time and made it all on a tax-free basis for their investors, but that's not what the model subscribes. Another story that I just heard yesterday, the investor will stay unnamed as well the business, but they sold a business for many billions of dollars to a strategic publicly traded company. Five years earlier, and they've owned this investment now for 10 years, but five years earlier, they sold 80% of their investment to return money to their shareholders at a very nice profit, still retaining 20%. That 20% that just got sold was worth more

than the 80 that they sold it for five years earlier. And it's no fault of theirs. It's what the model requires to keep the engines greased and flowing. It doesn't mean we have to partake in that type of thing. I would have rather own the whole thing and then sold for the big dollars or continue to own the business. We earlier are talking about hunter baggers. And I think it's natural for some folks listening to say, oh, that's kind of crazy talk. How many hundred baggers are there really? But I think the example you just provided with three private equity players, for example, where each one earns five times their capital over the course of 25 years, if that original investor was able to maintain that investment rather than sell it at a 5X, that 5X theory became 25x

and then another 5X became your 125x. But whose purpose built to be able to be able to to hold on, structurally and temperamental. I don't know whether we're going to get 50 to 100 baggers on these vertical market software deals. We're going to get a lot of baggers one way or the other. And we're going to get great returns without massive amounts of risks. And if we get one or two, 50 to 100 baggers in there, the whole portfolio of vertical market software is going to turn into an credible investment as a whole.

One reflection that is vital here is that we're identifying people who are wired in this way who want to think long term, but also who are comfortable having the vast majority of their net worth in that company they're building in a very illiquid way. They're not looking for a distribution at year five or year 10 or year 15. If anything, by then it's de-risk and they want to double down what they have in it. And I just think it's a rare situation where, like Rick, you said, matching the temperament with the structure. My guess is there are a lot of founders out there who in theory want this. But because they usually structure their cap table in the more typical way, that ability

and that desire fades away by your five or ten, just because of your pressure to have some outcomes or maybe some cash flow come out. It's probably to many people becoming crystal clear how this focus on secular trends becomes more and more important the longer your time horizon is. You're looking to just kind of quickly get in and then out of something, dress it up a little bit, make a little bit of money, what's happening at the secular level is just not usually as important. But if you're investing 10, 20 year time horizon, you've got to be obsessed with this. Everything that you're talking about, I think that people would say, are areas of great importance,

impact, and mission criticality, health care, everything that we're doing together, at least in software and workflow efficiencies. These are things that help companies and help people ultimately with better, cheaper, faster outcomes. And then compare that to the evolution of Dan or her, helping to realize life's full potential and becoming a life sciences, global juggernaut. Is that coincidence, this convergence? I mean, I think we live in a world, and we see this all the time with our students, of increasing interest in impact investing, and ESG, and everybody wants to make their

Mark as an investor with a social component too. And yet it seems like embedded in these businesses that you tend to like the back that are secularly strong areas, they all have their own mission impact component to them. Oh, they have to. They have to. I mean, Sumas is obviously doing great work for people in desperate need of specialty health care and getting them access to the best doctors in the country virtually within a very short period of time, in many cases hours or a day or two, for a need, whether it be for an orthopedic surgery or a cancer diagnosis or some other form of disease for them to be able to deal with the best stocks in the country, I think is really an important thing. And they did it the smart way. They built the infrastructure first. And now the

challenge that Julian and his team will have is scaling the business. We'll help with investors bringing the right talent in that can help the businesses scale for the very needs that they have. But think about a recent Greg scene. We're talking about the intersection of health and beauty. Who doesn't want to look good and do it with healthy products? When you have the testimonials of people that come back and say, not only is my hair look great, but you're not only is my hair look great, you've solved my problem with Acme because we know the toxicity of a lot of these shampoos seep into the pores of different people and create massive Acme problems. Seeing eliminates that. And who doesn't want to have more hair on their head? God knows I wish I'd been using seen

earlier on. I might have a little more hair on my head than I have right now. I'm with you, Mitch. So many of these conversations with you around firing bullets, but then concentrating. In our class, We've had a lot of folks talk about biotech and life sciences. Same thing on vertical market software. More recently, Rick and I have been concocting an idea to convene all the best thinkers on vertical market software. Down our way, we'll throw a shameless plug out there, maybe in the November time frame near the Gulf Coast.

I think we've learned this from you, Mitch. Getting the best thinkers on a topic and spending most of our days in these areas and digging in is what's going to lead to these extraordinary outcomes. It's going to give us the confidence to double down on a number of these. these platforms and then hopefully on earth that next layer of talent who wants to build these because they know that maybe we have, Rick in my case, a limited experience. In your case, a lot of experience starting to work through some of these issues and areas of strategy. They really are universal. So think about this too. If we have half a dozen or more shots on

goal with vertical market software companies that we're invested in, what's going to happen here? We're going to learn from each other, and we're going to be able to pass those judgments on. This space is big enough for everybody to play without getting anybody's way. And if we can take those learnings and pass them on or even create a small corporate infrastructure or a learning center, for better words, how is AI going to impact these businesses? Who's doing the best thinking around that? How do we leverage all that thinking across the portfolio of these investments we've made? I think that we create potentially better outcome.

So we've shot these bullets. We've now gotten the cannon out in vertical market software. And we have a fiduciary responsibility to be ahead of the curve and thinking about what can happen to these businesses that are problematic and get ahead of that curve and be the ones that reinvent rather than get disrupted. All right. There's another area of compounding, benchmarking, leadership, excellence we need to get into. That's about the boys in Burgundy and gold.

You're wearing your commander's gear here as we sit and we're in draft season right now as we record. What lessons do you think you've been able to apply in your first year as an owner of the Washington commanders from your experiences, whether it's at Dan or her, Glenstone, or more broadly, that are really applicable to an NFL franchise in ways maybe outsiders wouldn't see. We have to go back to the beginning to understand why I made this investment and what the opportunity that we see going forward is. So the former Redskins, now the commanders, were a team I grew up with. I really don't have an interest in investing in sports other than this asset.

And it's a love for this team, and even more importantly, a love for what we refer to as the DMV, the District Maryland and Virginia, and bringing 10 million fans out of a horror movie that they've been in for the last 24 years. It's been a difficult run for this franchise, top five franchise in the country, and what arguably is the most important sport for sure in North America and maybe the world. And Josh Harris and I felt deeply passionate about creating a stewardship to rehabilitate this franchise to the iconic nature it had during the 80s and the 90s. And one of the lessons that you learn is with a brand like this, you can do a lot of nasty things to the brand. and the brand ends up surviving because of its strength. And that's what happens with NFL franchises in the top 10 markets.

So we look at ourselves as the stewards of rehabilitating this franchise. And the same principles apply to this asset as any of the other assets that we're talking about. First of all, the demographics are wonderful for the NFL, the powerful position that they have as an organization and the passion around the fan base of NFL teams is second to none. And it all starts with getting the right talent in place. And there was a talent migration that took place at the commanders because of the previous owner and the difficulty that he had with the community at large. And it was tough for him to find people that want to come to work every day. It shared the passion and enthusiasm to build the business without him getting in the way. Now, we could talk about lots of negativity, but for us, it all started with getting a great general manager in place.

We hired Adam Peters, going away the best candidate that was on the board for us to go get to help us sort through player personnel and building of the team. We hired Dan Quinn, former head coach for the Atlanta Falcons, was the defensive coordinator for the Dallas Cowboys. What I love about Dan is he's a humble guy, he's beloved around the league, and he wants to reinvent himself. And when he lost his job in Atlanta, he passionately tells the story about how he hired somebody to help himself diagnose everything that happened in Atlanta and what were the lessons learned, what more can you ask for from somebody than that? And why wouldn't you give a guy who's got a

chip on his shoulder now, a second shot because he wanted to learn and had the learning agility and the internal thought process to say, I need to go get some help to basically reinvent myself. This is a great human being, and I think he's going to do wonders. And he's proven out to be a talent magnet. That was part of our thesis and also hiring. Dan and Adam, is that these guys would attract great people around them. So we've now started to bring in proven veterans who have a locker room presence that are going to change the way people think about how they play the game. I mean, you bring a guy like Bobby Wagner in. He's going to be a first-round ballot Hall of Famer. He's only got a year or two, maybe three left in his capabilities.

but what he can do for the organization from a mentality standpoint, how you practice, how you play the game, how you think about leadership, and how you inspire others. We've got a lot of other bobbies that we've brought in as well. And so we've created a strategic vision for what we want a Washington commander to be. And Adam and DQ are executing upon that. It's going to be uneven along the way. We've got a lot of rebuilding to do. They call it recalibrating, and we'll get there. If we draft well and we get our quarterback, we're going to get there really fast. If it takes a little time, that's okay.

This is a rebuilding. I've said to them over and over again, we have to look at this as like we're building a house, brick by brick, layer by layer, until the house gets built the right way and can sustain itself. We can't guarantee Super Bowls, but we can't guarantee Super Bowls, but we're what we want to guarantee is that we're perennial playoff contenders. And when you make the playoffs on a regular basis, other good things are likely to happen in due course. So that's the way we're thinking about this. This will not go down as the greatest investment I ever made. I think we'll do just fine long term. But the idea here is more about a philanthropic mission to rehabilitate the 10 million fans and give them Sunday afternoon reasons to re-engage with football in the DMV.

And I think it's starting to happen. We feel it. We sense it. The building in Ashburn, Virginia, where our headquarters are and our practice facilities are, there's a different energy level right now in the building. And we're all crescendoing now that we finish free agency. And by the way, signing 20 new free agents and a handful of our own. own on top of that we re-signed is kind of unheard of, turning that much of the organization over.

So once again, talent, it's all about talent acquisition. And now we've got six choices in the top 100 of the draft, and Adam and DQ and the team need to choose wisely. But Adam has a history of pretty good selection. Comes from some pretty good places. He started in New England where he won a few Super Bowls. He went to Denver and recalibrated the organization there, and they won a Super Bowl with Peyton Manning. And he left for San Francisco, where he took another step up in his career, and ultimately was part of the organization that turned that franchise back around, obviously took them to the Super Bowl this year.

And he was ready. Adam was ready for prime time. Now he's our new general manager and so far so good. So this is going to be an exciting journey. I don't think the exposure publicity-wise is the thing that makes me very happy, but it's a necessary evil to go along with, I think, the work that we want to do to try to make 10 million people happy. Part of the commitment to benchmarking, you're a master of voice of customer and trying to understand, first of all, who your customer is and what they really truly want.

And I know you've spent a lot of time talking to fans. but also talking to the players, the talent, coaches as well. What have you learned about these elite athletes that have gotten to the absolute pinnacle of their profession? What is it that they have told you that they want to see? Well, they're everyday human beings. And one of the things that I did with Josh, as well as others, is last year, every week, I had a lunch sit down with 10 to 12 of the players. And we would go around the table and introduce ourselves.

and say a little something about ourselves, where we grew up, what our family history is, our collegiate careers and what we aspire to. And we all shared our stories. And then I always ask the question, so, guys, what is it that you see here that really we should be doing differently? One of the stalwart players who will stay unnamed,

but he's a great one, raises his hand. And he says, Mr. Rails. I said, no, no, no, no, no. Mitch, we don't go by Mr. around here. He said, one of the things that's really impactful to us is when we play a game in our home stadium, we have more fans rooting for the visiting team than we do our own team. And we have lots of negativity in the stands because of the former owner. And we actually like playing games on the road more than we like playing at home.

And I sunk in my chair and I said, oh, I'm. I'm so sorry to hear you say that, but I also understand. And I can't commit to you that we can get every fan for an opposing team out of the stands right away. But what I can commit to you is we will sell every one of these games out. We will get the presence of commanderism back into the stadium. And the first game of the season was against the Arizona Cardinals. And fortunately, we know Arizona fans don't really travel.

So when the guys came out of the tunnel for the first game to a sellout crowd, everybody wearing burgundy and gold, the emotions were off the chart. And wouldn't you know it? It's one of the few games that we won this year. But it's a testament to what can be done. And I think we'll sell every game out this year and we'll have less opposing team fans in the stands. Five years from now, we have very little opposing fans in the stands. Ten years from now, we won't be selling a ticket to an opposing fan, and it'll get back to the way it used to be in the 80s and the 90s

where there was a waiting list to buy tickets to come to the game. Nobody dare wanted to sell their seats to anybody else because they wanted to be at every game. And this is just a journey that's going to take time to come to grips with. but we also listened to them. They said, one of the guys said, you see this shampoo I'm using, head and shoulders? Can't we do better?

I said, wow, I didn't know that, but I do know a little something about shampoo. He said, how in the world do you know something about shampoo? I said, just trust me. So I made a little arrangement for Seen. Seen is now in the locker room, both at our practice facilities and at the stadium, and everybody is a happy scene shampoo user these days.

And now wouldn't you know it? They're saying, where do I get this stuff? I want my wife to have access to this. And now seen as a sponsor of the commander. So it's awesome the way this journey goes. It's little things, but it's asking the question and letting your customer tell you what matters to them. It really comes down to this unified vision around building a winning culture.

And I think the fans are naturally, after 20-something years, they're going to come around. But you've got to start with the organization. And purpose and values, and all of that is being developed as we speak. I've got a layout of all that that I would really like to see implemented here in the not too distant future that will come. We've lost a generation of fans. If you're eight years old to call it 25 years old, you learn to give your Sundays to other things other than NFL football in Washington. And we need to get those people back. But more importantly, we need to cultivate the next generation of fans.

I have this vision where every, call it third or fourth grader should come to a Hall of Fame that we're going to build, that will become part of our stadium complex or part of our new practice. facilities. We're not quite sure where we want to do that yet. But the commanders should pay for the transportation and the teachers and the lunch that's necessary for any kid in the third or fourth grade within 100 miles of the stadium to come to this Hall of Fame and see the history of the team. And if it's at the stadium, walk out onto the field and look up at the mass around. and daydream a little bit about coming to a ballgame and then leave with a hat and t-shirt compliments of the commanders

and hopefully we build fans for life. And that's what it's going to take over the course of time to really re-engage the community in a way that just hasn't existed for the last 24 years. Well, it's making the long-term investment, but it's this orientation that this is something bigger than ourselves and bigger than just football. There's only two places that I can think of in the world

where people of any color, any religion, any sexual orientation, and more can gather for a common cause. Those two places, stadiums and art museums. I happen to have the privilege of being associated with both now. Churches, synagogues, very homogeneous. If you don't get the mold, multidimensional, total, what the world looks like today in any one of those places of worship.

They're important places. But everybody gathers for a common cause at stadiums and museums. It's just different. And like I said, I'm privileged to be part of something like that. By the way, to show the change that's starting to take place, Dan Quinn, our new coach, when he had the first team meeting, he said, we're going to play some musical chairs here. And everybody kind of looked at him and he said, you offensive guys all sitting together? No, no, no, no, no.

You defensive guys all sitting together? No, no, no, no. Every offensive guy must sit next to a defensive guy and every defensive guy must sit next to an offensive guy and you guys got to get to know each other. There are no fiefdoms around this place. We're all in this together. To be a team, we got to rely on each other here. So when the offensive down a little bit, the defense got to pick it up.

vice versa. You guys got to lean on each other all year long. So let's get to know each other well. And that's very different than what happened under the last administration. As we're coming near the end of our time here at Glenstone, you mentioned art museums and stadiums. I wanted to throw out just one last story that I think epitomizes you, Mitch. And this was last fall on campus at Notre Dame. You flew in to teach our class. It was the Notre Dame USC weekend. Your singular focus was on teaching the students, passing along a lot of stories, lessons, what you would do in their shoes. And then it was, we had 50 yard line seats. We had great seats at the game. That didn't matter to you. It was, I want to go see inner workings of Notre Dame Stadium. I want to go down, see the freight elevator,

how the trucks come in. You were asking the same questions to the staff in Notre Dame that you were asking all those 50 museums around the world 20 years ago when you were designing Glenstone. So this is a word of warning to all the NFL owners out there. The benchmarking has begun. And it was amazing to see your passion for that real time. And we're so excited for what's ahead for the commanders for Glenstone for all the projects we're working on together. Well, thank you for that. By the way, we did do a tour of every stadium of an away game that we went to. We would arrive at the stadium at 10 and spend two hours touring around each of those stadiums asking the same type of question.

what are you doing that's really great? What would you do over and over again? What'd you miss along the way? And some of the learnings were just extraordinary. Good stuff. I want to just underscore, we've touched so much on the role that learning agility plays in a leader, and we didn't know you 40 years ago,

but I have to think that you're just one of those rare ones where your curiosity and your ability to change your mind and your interest in learning new things, it seems like it's only accelerating. I mean, we struggle to keep up with you, but it really is inspiring. And the underlying impact that these lessons have on these companies and ultimately on society, I'm sure it's not lost on you, but it's something that I think really deserves a light to be shined on it. And we're just really grateful to obviously be in your orbit, to learn from you directly, but also that you would be willing to step into this classroom and for the benefit of others,

whoever else is out there wanting to listen and learn to impart some of that wisdom. So thank you for your contribution today and also just for all that you're doing out there in the world to improve a lot of mankind. Oh, it's appreciated and these things compound on themselves. If we get enough of it going out there, it might change the short-term dynamic of the way people think into a long-term visionary thinking model. So we'll see what happens. I like to say I just got to live long enough to see the 20 to 30 year outcomes start to come in the years to come and be like a proud parent watching their kids grow up.

Thanks so much for showing up to class today. For more art of investing episodes and to explore all of the resources we mentioned today and more, check out staygrove.com. That's stay g-r-o-v-e-y-com. That's it for now and we'll see you next time.