Invest Like the Best with Patrick O'Shaughnessy - Savneet Singh - The Berkshire of Software - [Invest Like the Best, EP.79]

Episode Date: March 6, 2018

My guest this week is another in a recent series of people that makes me want to work harder, learn more, and do more for others. His name is Savneet Singh, and he has already accomplished a remarkable amount in the worlds of business and investing. He’s preferred to keep a bit of a low profile, but I’m hoping, for everyone’s sake, to change that a little bit. Savneet has invested in unique things like Spanish real estate, famous startups like Uber, cryptocurrencies before they were cool, and even websites. He founded and built a fintech company. And now, he both a partner at the wide-ranging investment firm CoVenture, with my previous guest Ali Hamed, and the co-founder of Tera Holdings, which is trying to become the Berkshire Hathaway of software companies. To say this conversation is wide-ranging is an understatement. What’s neat is that my favorite parts aren’t even on investing, but are instead on principles for living.                                                                                                     Savneet is one of the best people I’ve met in this journey. I’ve had several other conversations with him with shockingly low overlap with the one you are about to hear—a testament to his active and curious mind. I hope you enjoy learning from him as much as I have. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Links Referenced Ali Hamed podcast episolde The VERY simple bear case for bitcoin Owl Mountain Books Referenced Buffett: The Making of an American Capitalist The Gorilla Game: Picking Winners in High Technology   Show Notes 2:30 – (First Question) – How Savneet started thinking about Spanish real estate. 4:29 – Why Airbnb could be the most impactful and interesting of the companies like this 5:25 – Savneet’s early entrepreneurial ventures 6:42 – His big investing influences     7:02 – Buffett: The Making of an American Capitalist  7:40 – What did Savneet learn in his two years on the sell-side of Wall Street  8:50 – How the financial crisis impacted Savneet  10:11 – The entrepreneurial journey and GBI  11:40 – Savneet’s observations on the FinTech space and investing in it  16:22 – His thoughts on venture capital style investing  18:36 – Transition out of GBI into his partnership with Ali Hamed  22:13 – The impactful things that his parents did for him  23:23 – How Savneet thinks about justice in his life  26:19 – Why value investing struck a chord with Savneet   28:14 – Defining the proper long-term mindset when starting a company  31:21 – Knowing what he knows now, what does he think about Berkshire today  33:22 – The strategy behind Terra and how it came together 35:00 – His checklist for deciding to invest in a firm 41:38 – Why does Savneet think this is the space he wants to remain in for the long-term 44:39 – How they are thinking about pricing a company they invest in 47:03 – Lessons learned in sales and marketing that he can and will bring to the software world 52:05 – What Savneet has learned from Constellation 59:08 – What lessons has Savneet learned about taxes in their company structure 1:02:13 – How they think about capital sourcing 1:05:08 – His balanced view on crypto as an asset class 1:05:18 – The VERY simple bear case for bitcoin 1:09:45 – Savneet shares the Sikh philosophy with Patrick 1:13:21 – A look at Owl Mountain 1:15:59 – The Gorilla Game: Picking Winners in High Technology 1:16:42 – Any other areas that people are underestimating 1:17:22 – Kindest thing anyone has done for Savneet Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

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The views expressed in this podcast do not necessarily represent the views of CFA Institute. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com. Patrick O'Shaunisee is the CEO of O'Shaunicee Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunsi asset management.

This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy asset management may maintain positions and the securities discussed in this podcast. My guest this week is another in a recent series of people that makes me want to work harder, learn more, and do more for others. His name is Savnit Singh, and he has already accomplished a remarkable amount in the worlds of business. and investing. He's preferred to keep a bit of a low profile, but I'm hoping for everyone's sake to change that a little bit. So see the show notes for where you can read him and follow him. Savnit has invested in unique things like Spanish real estate, famous startups like Uber, cryptocurrencies before they were cool, and even websites. He founded and built a fintech

company. And now he is both a partner at the wide-ranging investment firm Coventure, with my previous guest Ali Hamad, and the co-founder of Tara Holdings, which is trying to become the Berkshire Hathaway of software companies. To say this conversation is wide-ranging is an understatement. What's neat is that my favorite parts aren't even on investing, but are instead on principles for living. Savnit is one of the best people I've met on this journey. I've had several other conversations with him with shockingly low overlap with the one

you were about to hear, a testament to his active and curious mind. I hope you enjoy learning from him as much as I have. Okay, so Savnit, we are going to, like my conversation with your partner Ali, range all over the place, but we're going to talk about a lot of interesting investing ideas, investing philosophy, your personal story. Thought a fun place to start would be Spanish real estate. How you started thinking about that and what you did in that area? Sure, I should preface that I am not a real estate expert by any means, but I'd say a year

and a half ago, two years ago, I and a couple friends, we bought a condo in Barcelona. And our thesis was that rates were really low still in Europe. And Barcelona was one of the few cities that was still very close to the 2009 bottom where every other city had rebounded. And it was really that simple. And we traveled around on a vacation, went across Europe, and realized two things. The first was the Airbnb trend was incredibly unappreciated. And what we meant by that was the ecosystem around it had just not developed, and people were underestimating just how large it would be. And so we said, hey, let's figure out what city has misprice Airbnb the greatest, and in what city it's legal. And we ended up in

Barcelona. And there was this really interesting legislation that happened where the government passed tourist license in Barcelona, where if a property had a tourist license, you could legally put it up for short-term rentals. And what we discovered was a property with a tourist license only sold for 10% more than a property with that one, yet the yield was 2 to 3x the price. And so we said, hey, let's go, this is just a personal investment, let's go buy a property. And overnight, we got rid with the tenants left, we put it all on Airbnb. And the yield is amazing. And fast forward a year, I had left the job I was working at, and I said, you know, this is working out really well. Let's go build a business around it. And so we raised a bit of money and started

and sort of became the distressed buyer of condos in Barcelona. And so I think if you talk to any of the brokers in the area, we are the fastest to move. We lock in interest rates at less than two and a half percent for 20-year fixed, and we are buying at replacement cost. And it's been amazing to sort of see a cash flow profile of a business firm broker and the next day be able to flip it to two and a half times by putting on a short-term rental site. Somewhere in our correspondence, you mentioned this idea that Airbnb might be the most impactful or interesting new company of this kind of wave of companies over the last 10 years. Maybe expand a little bit more on that and tied back to the idea that you think it was

underappreciated when you first started. Yeah, and so I think we've had a lot of transformative companies come out, Uber as an example. What I found interesting about Airbnb is if you think about the power of brand, I can take Uber, I can take Lyft, I can take Juno. but most people don't know what's beyond Airbnb. And what's powerful to me about that is Airbnb is already the biggest hotel company in the world. And if you ask most people over the age of 35, if they've ever been in an Airbnb, the answer is probably no. And so when you have this next generation that grew up in a shared economy, and they become the ones with wealth, they become the ones traveling for work, they'd be one traveling with their family,

we're just at the tip of the iceberg of the volume of people coming onto that market. And so I originally started looking, where the software plays here? What are the financing plays here? and ended up that there was a really great real estate play underneath it. I don't normally do this, but because there's such rich detail in the backstory here, I'd love to spend a little time on your very early life, especially given your and your brothers very entrepreneurial streak. And talk a little bit about your very first forays into business and kind of thinking about investing.

I grew up in upstate New York, and not from a business family. My mom's family was social workers and very much into social justice, and my dad was the doctor. But we had a lot of freedom as children. And so when we were young kids, we had a coy pond. Our dad had built when we were kids as like a father-son project. And one summer, the fish had babies. And my brother and I, I don't know how we got this idea,

we took a bunch of pictures of the fish and put it up on Craigslist and started selling fish on the internet. And a year after that, we eBay started to really grow. And we said, hey, we have all these baseball cards we bought. Maybe we can sell them online. And we sold them online and we said, wow, that was a little bit of money. But what if we made our own packs of cards? And so we started going to sports card stores dealing with people that were far older than us. and we were both sort of below, we were probably 14 or 15 years old.

And we buy these cards, take these packs and sell them on eBay. And slowly but surely, the business grew and business grew. And I joke, but when my brother was 15 years old, he had a BMW shipped to our house without telling our parents, and he couldn't drive yet. And so it was an amazing kind of experience to see that boom in the internet and capitalize it in some small little way. Talk about the transition from that into the earliest formation of your big investing influences. You've had some really interesting, almost like a tasting menu of different styles of investing

and influences. So what was the beginning of that chronology? I was a sophomore in college, and I sort of discovered I had like business. I didn't know what it was beyond that. And my father sent me the Roger Lowenstein book on Warren Buffett with a note saying, this guy reminds me of you and he really likes cherry Coke and burgers like you do. And so I read the book and I devoured it. And I started like, you know, I think part of being naive was I literally sent an email to

Seth Klarman and Dan Loeb and every Hedro Manor's that was a lot. value investor to get their view on how to learn to be a value investor. And so I spent most of college trying to understand the principles brand value investing. And that led me to investment banking, because as I talked to a number of those managers, they said, go spend two years on the south side, learn how to model, learn to see the different parts of Wall Street before you make that jump. And so I went from there into investment banking and really early on just a traditional two years banking, and then I worked at a big hedge fund. What do you take from those two years? It's a pretty standard path. I know a lot of people have gone through it. It's an arduous two years,

times people are completely burnt out at the end of it. How did that impact you? Did you enjoy it? What do you look back on and remember from that period? I loved it. I think so everyone complains about it because it's a lot of work and it's not a lot of, I think, intellectually satisfying work. But I loved it for a few reasons. I think the first was I had grown up in a small town and I had never really been exposed to like how this part of the country lives. And it blew my mind. And so that I remember I was 22 years old and I was on a flight to Japan and I was like, this is wild. I don't think my family, anyone in my family's ever been to Japan. And so I think that exposure was great.

The second thing that was super useful was you get exposure to all parts of Wall Street. So you're on the sell side. So you see the IPO process of meeting the buy side. You see the private equity side where you're selling deals to them. You see the capital market side. And so it's great exposure at a young age. And I think the last and probably maybe the most important is you're around really high horsepower people, far more than you were in college, far more than you were anywhere

else. And it was awesome to be challenged by people who, it was truly, I said this with no arrogance or hubas. It was the first time in my life I met people who could think faster than I could. And that is a really humbling and fun experience. So we come in now to a tough part of the story, I think, for you and just for the whole world, like 2008, the financial crisis. To the extent you're comfortable talking about, you know, what was a tough time personally,

would love to hear kind of that next stage, what happened and how it impacted, kind of how you think about life. Yeah, it was tough for a number of reasons. Obviously, it was an interesting time to learn to be an investor. You know, I think within like my first 12 months at a hedge fund, Lehman collapse, you had AIG. And at the same time, I'd lost my mother, and I had randomly gotten very sad. And all those experience at once kind of make you think about what you really want to do with your life. And I remember sitting my brother, who's had obviously a lot of influence my life. And he said to me, okay, imagine the job of your boss at your fund.

And imagine the job of being an entrepreneur, which I was sort of debating doing. He said, do you want your boss's life? And I was like, yes, I really want it. And he said, well, tell me why. And I was like, well, he's got this amazing house. He's got this great life. And he's like, okay. But think of like the day job, like what he does.

I'm like, well, it's great. He gets to interview company management. The sell side's always trying to give him. stuff. It's this really fun job. He's like, okay, now would you take that job if you were paid $35,000 a year? And I was like, nope, I would, I do not want that at all. And so that was a very amazing experience for me. I said, okay, you know what? I've been through all this trauma. I want to try to go build something because while I love value investing, I do, I had this entrepreneurial bug to create. And so it was a tough time. It was also probably the most former time in my life

of wanting to create something. So talk about the entrepreneurial journey. Talk about GBI a little bit, what that business was, how you got the seed for the idea. I know a lot of what you learned there has then formed more roots for what's come next. So a couple minutes on GBI would be fascinating. I and some partners who were actually far older than I were started brainstorming this idea of originally creating a platform for people to buy hard assets. And the idea was after the crisis, there would be a movement into, one, esoteric assets, but two, assets with less counterparty risk. And a simple example was when you buy your house, you buy it directly. You're not buying through someone that owns shares of a trust at a place you don't know that owns your house.

And so why are you doing that with your financial assets? And is there a way to create that? And we had this sort of macro thesis that precious metals would be a place to be. And so when we looked around the world, we were kind of surprised that gold is the oldest asset investment currency in the world, yet is not electronically traded anywhere. And it's kind of the backwater, this little backwater desk of most Wall Street firms. And so we said, let's go figure out how to tackle this market. And we went and built what's, I think, now one of the largest platforms in the world to buy trade and store precious metals.

And that journey, I think, was scary in that I always say that it was two parts of the journey. The first journey was building the company, which was convincing dealer desk by trading desk by sales desks to come join our platform, our exchange. And the second half, the journey was literally convincing all these banks to come onto a platform that was started by a 26-year-old. And it was amazingly lucky. The timing was great. The investors were great. And it was just at the beginning of this like FinTech, I don't know if you want to call it a revolution, but evolution. And we sort of were the right time, right place, and recruited a great team.

Let's talk about FinTech for a couple of minutes. So you were sort of in at the ground floor in in terms of watching a lot of these businesses be built because you were building a business at the same time in the same space. I know you've been an investor at some points, Angel investor or otherwise in the space. Talk about just a general take on FinTech companies, fintech investing, and the trend, any observations you have there. My best way of sort of talking about fintech today is like an example of the conversation you have with an entrepreneur. And so someone will come in and say, hey, I have this great idea that's going to disrupt life insurance. And you're like, wow, that's amazing. And so they sort of go through the pitch, and they're like, it's a great

user interface. It's a great user experience. And then the final answer is always like, and life insurance companies haven't changed in 100 years. And so this is going to be disrupted. And I used to always, and that's always like an exciting thing to say, something hasn't been disrupted in 100 years. But when I hear that, I'm kind of like, that just means it's a really good business. There's a reason why something hasn't been disrupted. It's not like there haven't been people that have been smart businessman before you. But if something has lasted for 100 years, that's like the definition of an amazing business. And so breaking that down, I think that's sort of been the problem with FinTech and that people have a poor user experience

and assume that it's easy to disrupt. And so you've had the first wave of FinTech be primarily customer acquisition businesses, get a loan online, get an insurance product online, but they haven't really created new products. And so I can now get a loan online. I can buy insurance on my phone, but it's still the same loan that I would have gotten from a bank, and still the relatively close to the same insurance product I would have gotten from a traditional insurance company. And so I think we're just at the cost of the second wave, which will be actually new products.

And that's where I think it actually gets really interesting. When can you loan to markets that couldn't get capital before? When can you insure a risk that didn't exist before that you couldn't cover before because there wasn't data to cover that? That's where I actually think you're going to have real businesses created. And that's why I honestly think the first wave of companies, while you've had some big brand names, they haven't actually had economic success. And so I think they've had VC success, but they haven't yet got to that level where they're really sustainable business models. Do you think any of those companies, I'll pick on one like a wealth front or a betterment where effectively, yes, it is a very nice user interface and a bunch of of technology on top of arguably commodity products, like an efficient frontier, you know,

passive market portfolio. Do you think that some of those companies might successfully transition into this second type and have some sort of first mover edge just in the fact that they've got a big team and they're well capitalized by venture capitalists and they know the players. So they have a, they have more of an edge and say like pricing some new insurance that we couldn't before. How do you think about sort of the fintech incumbents? It's funny saying that because they're all still private businesses. I think it's absolutely possible. I think. one of the great challenges of starting a fintech business is that it's a very long sales cycle. And so I imagine if you're sitting in the seat of the founder or owner of Wealthfront,

Betterment, one of these great companies, part of you is also like, gosh, it's really great that we're the size now, but it was really, really hard. And you almost start adopting the legacy mindset of that industry that you're trying to disrupt. And so I think the challenge is, are you able to continue to break that legacy mindset to create? And I think, listen, when you're a robo advisor with a hundred million of assets, you're not really anything yet. But when you have billions of dollars and you're registered and you have to, every marketing communication has to be approved by council and then by an outside council, you start looking more and more like the traditional incumbents. And so I think, I believe the Roboenvisor

market will work. I feel unfortunate for the founders of those companies because I think they become missionaries. And I'm sure they'll do well, but not nearly as well as they dreamed of when they started the company, given how much capital has to go into it. But I wouldn't bet they're the one that disrupt the product. Let's go back to some of these ideas of what actually might be a new product. So maybe we'll take insurance as the example. Could you give an example of something where this is potentially something that we can now get into business with that we just couldn't before and what the barriers were prior. I'll give you an example. I thought about, used to think about a long time ago, which was today, if you went to get life insurance and you had any form of cancer, you're not getting

life insurance. If you have diabetes, your rates are incredibly high. But it's sort of like a blind sort of like pool that you're in a box that you can't get coverage for anymore. And I think what's sort of silly about that is there are many forms of cancer that you still live a very, in air quotes, normal life. There are many times diabetes where if you take care of it appropriately, you can actually live a traditional lifespan. And so I think an area where you'll see some of this happen are in areas where you can actually have data now to reprice that risk to a way where it actually is beneficial to the consumer.

So instead of saying, hey, you've got this disease, I'm sorry, you can get life insurance, business costs you $200,000 a year for a million dollar policy. Now you can say, hey, we can price you at a relatively fair price, provided you act in a behavior, this type of behavior pattern, which allows us to price it that way. And so that's like an area. I think you'll see some, I don't know, disruptions, right word,

but product involvement. I think another area will be obviously the property and casualty world, like broadly. So cars will be different. I think being able to ensure my skis when I go skiing as opposed to always having to pay for insurance for that. You're just starting to see some of this stuff that's going to adapt to what I think will be the new world of insurance, the new world of traditional insurance products. What is your take from experience and just from thinking about it about venture capital style investing? So I know you've done some angel investing.

Maybe you could tell a couple of the really interesting stories there. As I've said many times on the podcast, I always have trouble disentank. skill, luck, timing, relationships, replicability of different venture strategies, given that you've done a lot and existed in that world, I would love your take on that style of investing. I've existed in that world in the sense of being just like anyone else who started a fintech company, you ended up being a bit of an angel investor. And I got, you know, I always joke, like the first deal I ever got into was Uber, and it was complete luck. How early was that? Like, what year was that? 2010 or 11. And we were, and I think, you know, the single lesson I've learned from venture,

which makes it so hard as an asset class is it's not systematic. When you break down why, so when I break down the successes I've had as an angel investor, there was no pattern. It was like, hey, I got to know Travis completely randomly.

I got into that, you know, so far because my friend was there and he was like a college roommate of mine. I got into some of these deals and there was no like pattern. I couldn't create the pattern for it. And I think that's why traditional allocators

struggle with the asset class in general. I think what's worked in the past is either saying there's a break, brand, whether it's a persona or a brand or a firm, and I think that works for some. I think it's challenged more in a world of angelist in the blockchain where anybody can be a VC now. This would be like a first round capital or something. First round capital, Sequoia Kleiner, or the persona around a figure in an industry. And so if I was to bet, I bet you what happens to the next way of venture capital will be a lot more

domain-specific venture capital. So I have a customer acquisition skill set. I'm just investing in companies that are trying to pick off Procter & Gamble brand. So I want the next dollar shave club. I want the next chewy. Because that's actually value. I know that skill set I can provide that to you. Or I am just the insurer tech guy because I can get connectivity for you here and there. And so I think you're going to have a lot more specialization as opposed to I'm going to invest in venture because I'm a really special guy and everyone comes to me. I think that model becomes more and more challenged over time. Are you still active in that world making angel investments, things of that nature?

I'm not. And it's purely because I just couldn't find the pattern. And so I always say I will do it in the event that it's one of people, someone in my network who I just think is 10 level smarter than I am. then, of course, you always throw that check, but it's not something I actively look at. So talk about the transition out of GBI. We can start to bridge to one of the favorite episodes of the show just based on the feedback I've gotten, which is with your partner, Ali, Hamad, co-venture. What's the next stage of the journey?

So Ali and I got to know each other many years ago, and just as friends. He was a sophomore in college, and I was speaking at a class that I knew the professor. And he came to me and said, hey, I've got six startup ideas that I'm launching right now. and I came back and said, hey, just do one of them. And then as GBI was growing, I started thinking about, hey, what happens next to my life? I have this large, illiquid asset that has value, but let's just say tomorrow I want to go do something else. There's no income stream from that. And so I started obsessing this idea of finding income streams. And so the Spanish real estate was a derivative of that. And one of the areas that I started investing in was finding really niche originators. And the idea

here was similar to what we just talked about in FinTech, that all the VC money had gone into, companies like Lending Club and SoFi and these great businesses that were figuring out, how do I make student loans easier, how to make consumer loans easier, how to make personal loans easier. But they weren't actually like lending and brand new markets. And what's really interesting is if you find a new segment that has not had credit before, you as the debt capital can lock in amazing terms for yourself. And traditional capital won't come in because there's not five years of history because it's new, because if you're a hedge fund with a billion dollars, like a $5 million check is just not really worth your time. No matter how high the

yield is you can't really, that analyst learning how to underwrite a produce loan is not useful elsewhere. And so I had gone to Ali and said, hey, I think this is an amazing place of the world for you to spend time. And I'll throw some money into it. And so it was a really fun journey. And so after I left GBI, I started thinking a little bit about what I wanted to do. And as I kind of mentioned, the area of the world that I was interested in was this sort of idea of being a value investor but being an operator. And one of the journeys of mine was figuring out what does the next Berkshire Hathaway look like. I and some friends five or six years ago went to the Brookshire Hathaway meeting and we all left there in awe. And I think obviously we're in awe of the

wealth and all that stuff. But we really expressed was like, gosh, Warren Buffett is really, really content. And he's way happier than our investors or the people we look up to or our bosses. And how do you recreate that? And so we can dig into an hour later, but it led to this sort of exploration of trying to build a holding company of really powerful assets. So let's hold off on Terra because that's the place where I'd like to spend, you know, a big chunk of time really diving through the thesis. I actually want to back up. I meant to ask early on about tennis early on. Okay. So maybe you could describe your career, however brief or long in tennis, and what you took from that. So I was, I loved playing sports as a kid, and I

discovered tennis a little bit later, I guess 10 or 11 year olds, 11 years old, which is a little bit late for sports. And I got really good, really fast. And my brother and I used to go, you know, fly around to these tournaments, these camps. And, you know, it was amazing. We got to play with Andy Rodic before he was Anderotic. And when we were, I think, 14 or 15, my dad sat me down and he said, listen, if you want to be anything in life, you really have to give it your all. So if you want to be a tennis player, you should drop out of high school and go move to a tennis academy and go do this full time. And I'll still say today, I think we both whisked out and said, no, dad, we want to go back

to school and we don't want to do this. But the thing that impacted me the most from that was the sheer fact of my dad giving me the option to do that, obviously showed that he believed in me. But it also created this mentality that you can do anything you want. And it was, it's so powerful now that I think about how much that impact had. I mean, my dad is one of those guys who did all sorts of experiments on us, but the tennis journey was beautiful because it taught us the ability of hard work, commitment to something. You know, you were 14 years old and you were waking up at 5 in the morning, going running with your dad, then you just have to go to go to school, then you go play tennis after. So I think that rigor of hard work. And then obviously, like, the empowerment

your dad telling you drop out of school to go chase something was really helpful as we got older. But there are other things that your parents did in particular that you feel had like a very high impact on the way you think about the world or the way you act or your character? I had dramatically different parents. So I think, I'll first go to my dad. One of the great things my dad did at a really young age was he involved us in big decisions. So I used to joke, like when we would go to the airport to go fly somewhere, he would go to me or my brother and say, you pick what time we leave. And, you know, we were still too young to really figure that out. And it was in my, and my mom hated it because, you know, we'd be late, we'd be late, we'd be on time. But he would give that responsibility to us. Or his, like, prizes for us, we'd be driving to visit two and a five hours away. He would make us memorize every single exit on the way there, all 40 or 50 of them, the names of the streets of every exit. And so he's always kind of challenging us to kind of like to be part of the conversation when we were far too young. And I think that always gave us a little bit of a chip on our shoulder. And we always felt very comfortable in awkward situations because of that. I think my mom, what I think actually is most influential on us is like this sense of like social responsibility and fighting for injustice.

And so I think both my brother and my sister, all of us are hardworking, successful in our careers. And none of us are really motivated by money. I think like none of us have big Instagram or social profiles. None of us look for that notoriety. but it's very much driven by trying to create justice for other people. And so it was a really interesting dynamic of two very different parents. Can you say more about justice? This sounds like a really interesting thread.

So how would you describe or classify that? I'm a Sikh American, and so I look very different. You can't see me, but I have a beard and a turban, and they do a double take if you saw me on the street. And I think coming from such a visibly minority community, you are more aware of the trials and tribulations of people who look different, who don't belong or whatever the proper word is. And I think that experience combined with a family

that was very much fighting for the rights of other people, grounded you in this idea that you were really lucky. And I often say, like, I've learned, like, two real lessons in life, and one of those lessons is, like, the power of circumstance. And I feel so lucky that I was born in America because I had, you know, that was nothing to do with me, and my dad decided to fly over here and take a risk. I had zero part of that, but it's been the most impactful thing in my life. And so from a young age, we would always, when I got my first paychecks, every job I had, my dad would make me give it away. When we had time in the summer, we were forced to go volunteer. When we were young, my dad would take us to third world countries and say, you know, let us be exposed to people that I think most people

don't get exposure to at a young age. And so we've always felt this kind of ship to like help other people. And so I think, I don't know why on a personal basis it always mattered. But when I'm bored, I go on like go fund me and I find campaigns of people doing real interesting things and I fund them. And so I think it starts for being a community that was very much part of our DNA to when you get older, sort of just realizing how lucky you are. What was the most memorable trip that you took? It's funny. I culturally Indian, but you know, born and raised, I had never really gone to India until I think when I was a kid, and I never really gone until I was 12 or 13 years old. And I remember I was in eighth grade, and our parents took us there for a month.

And, you know, when you're at that age, you can actually understand what's happening. And I remember just being shocked by the poverty. I remember our mom just, like, walking us around the neighborhood, and you just saw, I mean, it was amazing. It was just so sad and amazing that people can live like this. It was just complete happenstance. When we came back home, the first English assignment we had to say is why we're proud to be an American. And I was an incredibly quiet kid in eighth grade. I don't think I ever said a word.

And I remember we got this assignment and we were talking about it. And a few people just are like, I'm not proud of American America. It sucks. It's that. And I stood up and I, again, an incredibly shy, quiet kid. And I just went off for like 20 minutes of how lucky we were. And so I would say without question, that was the most impactful thing in my life. You mentioned that there are two key lessons that you've learned.

You mentioned, I think I would classify as randomness or circumstance luck as the first. What's the second one? Being in the arena, that Teddy Roosevelt quote of you have to take action. I think one of like the great lessons I've learned is that those that don't raise their hand, those that don't ask the girl, those that don't actually take that plunge, it never works out. And so I think the quote, I think, I'm going to butcher it, but I'd rather be the guy in the ground with blood, sweat, and tears than the shy and timid souls on the outside of the ring. And I always take that to mean, yes, you have to raise your hand, you have to jump into it, but it's actually the life experience of putting your all into something that's valuable. So you may go quit your job at Goldman Sachs and do a startup and fail, but that journey and experience of actually trying to pave your own path is so valuable from a life perspective.

Your financial outcomes may never be the same as they once were, but that journey is so, so valuable. Let's go back to the five or six years ago. You're at Berkshire with a group of friends. You had this kind of formative background reading about Buffett and Lowenstein's book. Value investing appeals to you. So first, describe what in particular about value investing so struck a chord. And then I'd like to talk about your evolution of thinking around this idea, the people that are famous for it, the idea itself, the kinds of companies that leads you to, and all of that will serve as sort of foundation for talking about Tara.

When I went to Berkshire in my study of it, I've never been able to define why it resonates. It just did. It was one of those things where I love the hunt to find the company that someone didn't know that was undervalued for whatever that reason may be. And I love the dynamic of trying to understand that something was undervalued or not.

It was just natural to me. I find sometimes I joke that if you live in an immigrant family, you're kind of taught to be a value investor at a very young age, and so maybe it was that, I don't know. But it just, it was naturally there for me. And as I sort of studied more and more, the more I just became obsessed with it. And so I would spend hours and hours with a group of friends just dissecting John Malone, dissecting Danaher, dissecting 3G, and trying to figure out where there are patterns that we could pull from these to educate our own lives.

Maybe we were talking about this at lunch, but it would be great to say it again on record. To talk about your observation of culture as a component of sort of the undercurrent that's important at some of these compounders. So everyone wants to find compounding companies and invest in them early. and it's very easy to look back and say, yeah, here are the compounding companies. Look how great John Malone is. Very difficult to have found that ahead of time. And it's a fairly small sample. But in studying those companies, what commonalities did you find?

Maybe what are all the commonalities with a special focus on culture? Because I think that's one that's talked about less. I think when we looked at a dozen, a dozen plus companies, it's very hard to find patterns. You know, I think some of them were in good industry. Some of them were just great allocators. Some of them were great operators. And the three things I think we saw uniformly through all of them was the first. was they had all had very long-term visions. They were not focused on the next quarter, the next

year, the next two years or three years. And that actually underlines everything that they've done. Can I pause there for a second? So I always struggle with, obviously, long-term, thinking long-term seems smart. And like that's the right thing to do. But I wonder if you could clarify even more what that might mean, because in my experience, let's say setting really ambitious long-term goals may not be the best policy. Because then you're kind of blinded to stuff that's happening along the way. it's almost self-limiting, the odds of you getting your goal go up. But I'm curious how you would define the proper long-term mindset. Well, so I think it differs by different persons.

But the way I look at it is as follows is your compensation for your team and your employees geared around what's happening tomorrow or the future. And as a result, is your culture then wrapped around how do you create value in the long run so that every person in that team is mentally wired to think what creates value five years from now, not tomorrow. And so the way you see things manifest is like recruiting. So one of the interesting things we discussed, in many of these companies was they all had really robust recruiting functions. And so it wasn't about

filling the spot with the guy with a quick resume. It was, we're going to wait to find the right person. I'll give you an amazing example. My brother works at one of these high-flying tech companies, and it's super fast-growing company, and they really needed someone for a hyper-fast-growing market. And the company literally waited six months for that hire because they needed to find the right person. And I always say, that's now so imbued in the culture of that business that they know we'll never sacrifice hiring. And so I think you look for signals like this that say, hey, we're trying to invest for five years from now or 10 years from now, not now. So come back to some of the examples of culture.

Yeah. We were talking about 3G. Maybe we could start there. The three things we observed were a long-term vision, very strong focus on being tax-efficient, and culture. And underneath culture is probably there's, maybe there's a fourth one or it's part of culture is this idea of adding operational value. And culture, I think, like you said, is by far the least talked about, but I think the most powerful.

In the simplest way, I define a company of the great culture is, will that company sustain after the leader that created that business leaves? can it sustain for generations? So, you know, Dana Hur's on his third CEO, nothing has changed. I think there's a great argument to be made that John Malone has created this culture of people who are very focused on X, Y, and Z. And so in the 3G example, everyone has a review on 3G, whether it's good or bad, but what I think I've learned the most is that they've created a culture that is sustainable. I imagine if you're the employee at 3G and you just saved a dollar on whatever it is, you feel really good about yourself because the culture rewards that, and it encourages that. It encourages that aggressive form of thinking. And that is something that lasts well beyond the founders of that business staying there.

And so the more you can define that culture, the more that you can write that culture and build it, the bigger the moat actually becomes over time because that becomes the defining process of that business. So as other examples are companies that really reward R&D and technology because that was the DNA of that business. That lasts well beyond the founder because they've recruited a team that believes in that, they've built processes that reward that and they encourage that. And so when you have an organization like 3G where the founders fly economy, I'm pretty, you know, when you're flying and you're uncomfortable flying from New York to San Francisco in an economy flight, you feel pretty proud because you're like, hey, the boss is happy that I did that.

When you are finding an extra dollar on the budget, you're saying, I'm not going to spend that. I'm going to send it back to the home office because that's what they really value. And that is like, it's hard to express, but it's so powerful for these companies lasting for generations. So when you, your initial admiration of Buffett and his, Buffett in particular in this case and his style, has anything changed about your opinion? I guess one way of asking the question would be, would you invest in Berkshire stock today relative to say the S&P 500. Yes, but I'm not sure how much of that is emotional versus logic. So here's what I'd say. So after we did this journey, and this is again, something we're just doing as friends on the

weekends thinking about what makes great company company business. We then went back to Berkshire and said, let's find the pattern of how he invests. So let's dig through the companies he's bought that with public filings. And let's look at every ratio. Let's look at every single we can find that gives us a logic to why he finds these companies. Maybe there's like something hidden there that you can copy. And the short answer is it's really hard to do that. Like there's truly some genius there that it's hard to figure out what it is. But the thing that I think that was more eye-opening for us is the few things that we could pull out of that, we actually felt a little bit challenged in today's world. So I'll give you an example. One of the great

questions Warren Buffett's asked in meetings is, find me a business other than a brand that can keep its margins for 30 years. And it's really, really hard. Because at some point, everything becomes commoditized, and that brand becomes the difference between a 10% margin and 30% margin business. And I've always thought that was just an amazing lesson for me to learn. But then if I like sort of think about today, a brand means a lot less today than it met yesterday. The brand of my father is probably not the brand of me. And then as I think as you look at the disruption of commerce in general, if I had a pet, I'd subscribe to Chewy. I'm not buying the brand that my family used to buy. When I'm buying clothes, I'm looking on Instagram. And so that idea that

the brand becomes the mode, I think, is a little bit challenging. I'm not saying it's over, but it's definitely a little bit challenged. I think the other lens, which I found challenging, or I think could be challenging for some, to repeat that, this sort of idea of Berkschchathaway tomorrow, is finding these businesses with high fixed costs that have reinvestment modes. So railroads are a great example. The utility business that you have has, you know, we're living in an area where there's like asset light businesses. And so building a skill set around that, I think it could be challenging.

And so in no way, whatever I ever say, don't invest in Berkshire Hathaway. I own it. I love it. I've learned so much. But I just think that Berkshire of tomorrow will be very different than the one of yesterday year. Couldn't have asked for a better transition into what I hope will take us some time to explore in a lot of detail, which is the idea behind Tara Holdings. So I think this was sort of the culmination of all this thinking, everything, basically all the

foundation we've laid thus far has now led to this very particular mission and journey where I think you spend a majority of your investing, thinking and time. So talk about the strategy behind Tara, how it came together. And then we'll get into all of the levers and the things that you think about. So after we did this analysis of, okay, can you copy Buffett and redo it? I think we left it being like, no. And so we started thinking about, well, what if you you just find the right pool to fish in and so that you could pick the horse and not the jockey. And I was running a technology business that had heavy bent on software. My friends were all software investors.

And we started saying, well, what if you created the Berkshire Hathaway of software? And as we sort of started to look through it, we started saying, well, let's first look at the biggest software companies in the world. And so we looked at a company like SAP, which is, I think, the oldest publicly traded software company in the world, one of the largest. And what's a fascinating about that business is every customer of SAP complains about SAP. There's no one that says, oh, my God, this is the greatest product ever. Nobody. Yet if I was to ask anyone on the street, what do you think the renewal rate of SAP is, you'd be shocked to find out it's like 98%. And if you remove bankruptcies and mergers, it's, you know, 99%. And so what that's implicitly saying is the average customer stays for 50 years. And as a result,

the market almost never lets that business trade below six times recurring revenue. And so we were like, wow, if Warren Buffett was 30 years old, this is all he'd be investing in because he has a business that has clearly has a moat because if your customer lasts for 50 years, it's almost definitely a moat. you can raise price every year, no one's going anywhere, and you have the ability to reinvest for growth. That sounds like an amazing place to be. And so we spent this time with public market and said, okay, wow, that's an amazing fact.

Software is great? But it's already priced in. So then we looked at private equity and said, hey, is private equity figured this out? And short answer is, you know, six of the top ten performing private equity funds have a very high focus on software. And so he said, okay, private equities figure this out.

Is there anything for us to do here? And so when I left my job and my partners later left their jobs, the first thing we sort of did was like an exploratory tool, a listening tour. We went around and we just started, calling software company after software company, private equity guy after private equity guy. And we said, listen, we're not private equity. We want to be the Berkshire Hathaway of software. So what does that mean for you? We want to buy your business and we never want to sell it.

We want to reinvest in it. And we want to create a transition so that your baby always stays, that the heritage, culture, and legacy that business never changes. And is that an opportunity? And what we discovered very quickly was it was a much bigger opportunity than we'd ever imagined. So while I think every company in the world has been called on by software, there are plenty of opportunities for businesses that don't desire to be sold through private equity and are excited at the opportunity to work with something different. So talk about some of the key features checklist, if you will. You mentioned you're out of venture because you can't find the threat or the pattern. It's not systematic.

So describe the systematic kind of checkpoints that you look for at the beginning of this journey now. So I think it's, I don't know how long this has been going, but we were talking earlier that, you know, you've at least visited, you know, dozens and dozens of software companies all over the place. So you've got a big enough sample now that I think you've started to refine really what it is you're looking for. So maybe go through some of those checkpoints and I might have some follow-up questions on this. And we can talk about sourcing too, which is an interesting dynamic in this world. But the key thing we look for in a business is the product, solution, or tool mission critical. Is it something that you can't live without?

The second is the retention rate very high. And if you can figure that part out, you pretty much figured out the business. And so any business with a high rate of recurring revenue and the retention rate being very high is a really, really good business. And I give this off an example of two, I think of businesses as apartment buildings. So if you have Building A, which is filled with doctors and lawyers, and you have Building B, which is filled with tourists, summer vacation counselors, startups, what building would you pay more for? You're always going to pay more for Building A because there's great visibility in that revenue. And I think sticky software is that.

So we look for businesses where the recurring revenue is very high, the retention is very high, the price point is high, NPS scores are very high, so the customers are happy with the product. We look for businesses that are integrated into many different points of a solution. So it's not just I use it for one thing. it's that one thing that integrates into 20 other parts of your business. And if you can get all that right, you have a business that can last, customers can stay on for 50 years. Let's talk about the counter arguments to this, all these great positive features.

Somewhere I saw a chart from you that basically shows the performance of some of those private equity vehicles that focus on software, sort of an index, if you will, of software companies in the public markets. And there are these, like, beautiful charts, right, that had you been in the beginning of the chart, would look phenomenal. You would have had great results. And I always just, someone that's worked with like back tests a lot, whenever I see something like that, I'm always just get a little uneasy and just think, well, okay, that's great. It's worked really well in the past. Like, what structurally is it about this? And maybe in the public markets you think it's been priced in and the future won't be the same. But with a company that's got really good profitability, 99% retention rates, it just makes me think, like, that's something that's right for competition, for someone to come in and try to take share from that. So how do you think about the defense ability? Yeah, let me add a little more color to that.

And so another key attribute we look at is the underlying asset that it's serving going to be around for a long time. So we look for companies at service utilities, service governments, service health care, service industries that last for a long time. A great example is dental practice software. Dentists have a 1% failure rate, the lowest failure rate of any small business in America. So if you're the software serving the dentist, you're probably going to be around a long time because that dentist is around for a long time. But if you're a marketing technology solution, the chance of you having a low turn rate is almost impossible, because the technology changes so fast and the end asset your servicing is changing so fast. So your product's probably not worth as much.

The other part of the thing that I was remiss not to mention was we look for business with small TAMs. So we're not looking for the $10 billion market that SAP, Oracle or Workday is trying to go after. We're going for like the $400 million tam where it's not really worth the time of the big guy to come in there. The other element I think that's important to sort of understand the risk of disruption is if you do a really great job with your customer, the desire for being disrupted is you don't want to deal with that. So think of the guy that runs the dental practice. He installs a software when he starts his practice.

It now does his billing, his scheduling, his accounts payable, his practice management, everything is in the software. And so if someone comes to him and says, hey, I'm going to give you a 25% discount if you take my product. There's almost a 0% chance that dentist is going to go for that. Why? Imagine the disruption of saying, what if I miss Pentex payroll? What if my billing gets screwed up for the week that you're changing the software? What if my schedule gets messed up and all my patients get canceled on? For a very incremental benefit of price, it doesn't actually make sense to switch because

the switching costs are so, so, so high. So we try to find these pockets of the world where you don't actually have to worry too much about the external competition, and instead you can spend that time creating a better product for that customer. You had this great chart that showed the average lifespan of a company in the S&P 500, which I've seen before, it's like kind of this chart that cascades down. The average expectancy now is like a little more than 10 years. It used to be 60. So it's changed a lot over the years. But what I had never seen before, which was really neat, was to break that down by sector. And you've mentioned some of the sector's utilities, materials, energy, telecom, etc. I'm curious if you then break that down anymore by like the cyclicality of those

underlying things. So let's take energy, for example. Obviously energy is hypercyclicals or materials. You have these like crazy high highs, these crazy low lows. And I totally agree as a person that runs a business that uses software for a lot of the solutions, more and more of it built in house, but some of it that's still third-party software, sort of under the subscription license or subscription model, rather, that, yeah, you don't want to switch. It's a total pain to switch when times are good. But when times go bad, it's actually something you're willing to put in the work to do, to tear out a system and install a new one.

So how do you think about cyclicality of the underlying customer base? It's huge. And so I think when you're doing that analysis, as an example, if you're the energy company and oil prices are down 40 percent, are you going to take away your accounts payable software? Probably not, because what are you going to do? And so you try to find those pockets. Another great example that we've spent a massive amount of time is in compliance.

So there could be another great sell-off on Wall Street. J.B. Morgan is not cutting compliance spend. And if they are, they're not cutting it on the product that they sort of depend to run their AML and KIC checks. And so you try to find these businesses that, yes, there are cyclicality in the end industries. You may not grow that as fast as next year, signing the next incremental customer that's moving from paper and pen to your software,

but that recurring base is so sticky that you're plenty good on your outcome. What have you done to kind of strengthen the foundations of your conviction that this is the space you want to play in? because one of the things we've talked about a bunch over the last couple of months as we've talked is a lot of the benefit of this software kind of holding company structure comes in the later dated years. So thinking long term that with these super low churn rates, the compounding magic really happens not in years one, two, and three, but in years, you know, five through 30 or something like this.

So that means that you need to be around still doing this in five to 30 years. You've done a ton, right? It seems like you've kind of experienced every kind of investing, entrepreneurship, business. So what are the core elements that make you think you'll definitely be focused on this for that long, to be able to take advantage of that structural feature of low-turned software? Yeah, and maybe I'll back up and actually give you like the typical profile of the person's company we're trying to buy because it probably helps put this in context. So we are not like going after high-flying 100% growth companies.

We're generally not finding venture back companies. I can give you the rationale behind that. We're generally not going after stuff that's sexy. We're going after the company that's been around anywhere from 10 to 30 years that's built a really, really sticky solution for an industry that it knows incredibly well. And the founder is generally somebody who's looking for one of two things. They're looking for a partner to help them grow and build that business, or they're looking for a really smooth transition. And for the latter, it's oftentimes I'm not looking to, I want to sell the business because I'm retiring and I want to go live on a beach. But I want to sell it to the right hands because I care about the employees, I care about my customers, and I really care about my life.

legacy and my name is on the fire department and I don't I wouldn't feel right if someone bought my company fired half the team and raised prices on the customers that got me in business and then flipped it three years later that didn't doesn't sit right with them it's a bit of that britcher halfway pitch and so in that bucket a lot of our value ad comes from listen we're long-term hands we're committed to it and more than anything else we're going to help we're going to be transparent of how we intend to build and grow the business with you on the former the ones we want to continue to build which is surprisingly the majority of the ones that we've come across recently is very much how do you add value and so to your point

the single biggest differentiator we have when we go sit down with the company is we come in with an incredibly detailed operational plan. We're not going there and said, hey, let us buy your company. Here's a big check where you say, hey, we'd love to buy your company, and here's our plan to build it, and here's exactly how we intend to do it. Everything from here's how we'd run sales and marketing to here's how we intend to create the culture of investment thinking. And oftentimes what happens in that conversation is it's not so much about, okay, what price,

it's like, well, talk to me how you're going to create that value. Talk to me how you're going to change the culture of the company. Talk to me about how that impacts the remaining equity stake I have in 20 years. And so you ground the conversation in the idea that you're adding a lot of value and you're not coming in there sort of extracting value. And it is really game-changing. I mean, I think we've had numerous discussions of people that will literally come to us and say, I have a bid at X from XYZ private equity from. Come in 20 percent and it's yours.

And it's been very powerful. So I think we ground the conversation day one and saying we intend to hold the thing for a long time. So if you're interested to flip it, we're not the right guys. We intend to actually help you build this business and we intend to grow it. And if you're okay for all that, let's go do this together. I'm sure I'm not the only one that's thinking about a ton of philosophical similarities to all the things that Brent BeShore and I have talked about, which is this very long kind of permanent capital type structure, a very specific investing thesis, a process, sort of a systematic way of thinking about sourcing and screening and doing due diligence on opportunities. I mean, a lot of it rings very true to that same style. One thing that's very different is the companies that you're going after. And the first thing that pops to mind is valuation. So instead of paying, you know, four or five times. trailing owner earnings, maybe you might be willing to pay more for a company that has the economic characteristics that software businesses have. So talk about your philosophy of price

and how you think about valuation as a key input into the success of the company. Yeah, it's a great point. I think the first time I met Brent, I joked. I love the price you buy stuff, but I'll pay more because my business will be around for 50 years. And I believe that. And so I think you pay more for that business. And so in software, I think maybe I'll back up. So software is broadly sold in two different ways. The license maintenance is, historically the way it's done, where you sell a dollar of software, and then you charge 20 cents for maintenance every year after that. And then you stack that maintenance revenue on top of each other, and that becomes your sticky recurring revenue base. And the other part of software is SaaS

versus subscription, where you're basically charging an annual fee the same price every year, and then hopefully if you're really good, you can raise that price and build that over time. And in both those models, the end-state recurring revenue generally has anywhere from 30 to 50% cash flow margins. And what's powerful about that is you can look at the type of software. you can understand the market they serve, and you can pretty quickly figure out, okay, when that company is steady state, it's going to have this type of margin. And so if you're willing to make that jump, you can end up buying these companies at, so the average software multiple of some of the companies we compare ourselves to our

acquiring these businesses for anywhere from one to three times recurring revenue. And everyone's like, that's crazy, three times revenue. I would never pay three times revenue, but if you believe the steady state and margins are 50%, you're really buying it a six times steady state cash flow. That seems like a pretty good deal, particularly on a business where you think you can raise the price every year. And so what we love about our model is we get, we think we get in, we definitely get in cheaper than traditional private equity given the story and what we commit. We think we can drive that value by helping them build that process. And so we oftentimes

say our advantages were the 3G of sales and marketing. We're not cost cutting, but sales and marketing. And then by having scale, you can sometimes centralize some of this value over time to create economies of scale across all the businesses. It reminds me of a question I meant to ask when we were talking about GBI, which is sales and marketing. So you've told me some great stories about just systematic thinking again about how to build a sales culture, how to build a process. So maybe talk about your experience and what you've learned there. It's sort of the aspect of every business, which is absolutely essential, but I think is probably the least understood. I certainly have struggled with it, right, thinking about sales and marketing.

So what have you learned in those two arenas that you think you'll bring to the floor in the software world? Yeah, it's probably best done it as an example. So we've been on 70 flights in the last six or seven months across the country meeting software businesses, and uniformly, everyone says I want help in sales and marketing. And remember, we're generally going more to enterprise software or not I'm selling to the end consumer. And you sit down with these businesses and so literally the first deal we're doing, it's in an interesting space. And the founders complaining to us saying, listen, the hard part is it's like a year before my customer says yes. And so how do I motivate the sales force? What do I do? And so we said, well, let us give you our plan on how to do that.

And so we gave them two playbooks. First, we gave them, here's our idea for leads. The problem is, when you have a guy on the phone calling to get leads for the guy that's on the field making that sales process, the guy on the phone is really focusing on the low-hanging fruit because he knows he's not going to get that commission for a year when his partner in the field closes that deal. And so he literally self-selects for what could be the possibly the lowest-hanging fruit, but not the thing that actually drives the most value, which is probably getting that long sales cycle customer that's worth a lot more than the small ones. And so an example of how we help this company grows, we said, listen, every day, if that outbound salesperson makes 30 calls for the entire week, get a 50-buck bonus. And we said, if they're successful, the process is you make the phone call, you set up a conference call, you set up a demo, you set up an in-person meeting, and then the

contract. And so instead of just commissioning that person on the final step, which is signing the contract, you said, okay, I'm going to compensate you on the quantity of calls, then the number of demos, and then I'm going to conference you on the number of in-person meetings. And it's a step function of difference. So if you're putting numbers, you'd say, okay, if you do your 50 calls, I'm giving you $50. But if you get four in-person demos, I'm giving you $1,000, and if you get those meetings to contract, I'm getting you $10,000. What you do is your person now on the phone is not just focus on what can make me the quick sale. He's like, listen, I just make the calls.

I'm going to get more meetings, more demos, and so they're incentivized to continue to grow that's better for the company. And so we've found this to be an incredibly powerful tool for those people to kind of build their businesses. Another example, and I think that's the one that you were referencing is sales territories. And so I've always struggled when we ran, I remember running GBI, the New York region was always the highest-prime reason. And even though I love the sales people, I always wondered, is that really the best sense? salesperson or is that because they have that territory? And I think if you talk to people generally in sales, you know, there's a few regions in New York, Chicago, you know, there's a few areas that are always the highest performing. And so in the same as that company, we said, give us all your sales data. And we had no

transaction with this business. And we said, listen, we took the data and we said, you know what, now going forward, you need to collect this information. For every meaning you have, you have to say, I met Patrick. He lives in New York. He's a really big Jets fan. He likes our product for reason why, and he hates our product for reason Z. And he says, married and he's got two kids and he went to an Ivy League school. And after you collect this data of attributes every single meaning you go to, you notice some interesting patterns. And so what you find is you say, hey, you're New York sales guy. You've done an amazing job. But did you know that your close rate on the Ivy League educated guy that lives in New York is like 90%?

But your close rate on women is like 2%. So guess what? You're no longer the sales guy for New York. You're now the sales guy for the guys that are just like Patrick and who like the product for the thesis that you're the best at selling at. And so we gave us a, gave us some way and that company after a quarter, it was a dramatic increase, a little bit of luck, and on the behold, we end up getting a deal out of that. And so we are incredibly data intensive about qualifying everything from the lead to the salesperson so that that random email you get has been tested hundreds of hundreds of times with the characteristics of what kind of response rate. Will the guy like your profile open or not? It's funny that a software

business isn't thinking in these terms, right, that this sort of structure that you're talking about. I guess in some ways this is like a CRM system. You could do this within a CRM. But I'm curious about like literally the nitty gritty of this. Like how were you doing this analysis? We're just doing an Excel. Was it something more complicated? Yeah. So we built an app where, so one of the funny things we did is we built, we worked with

them to build the app. And then if the salesperson did not fill in the app within 24 hours of meeting Patrick, he would not get that, he or she would not get that commission. And so you crate by in day one. And then you click this data and you're constantly analyzing to see different patterns. And some of the patterns are obvious. There are certain salespeople that are amazing at female but not great at male and vice versa. But the more subtle ones are, hey, do you know what Patrick's profile?

They don't like the cold call. They love watching the recorded webinar. Or the people that like our thesis for that reason X, they love our product for reason X. So let's feel that that guy gets the white paper, but the person that's doing it because you heard other people are doing it, let's send him a packet in the mail. And so you're constantly collecting data and optimizing for everything from your leads to your end-salespeople. And we've created just such robust playbooks behind that.

So when we're talking, if I'm trying to pitch you to sell your business and say, hey, let me buy 75%. You keep 25%. they can see that there's going to be value added from that process. So I'm sure you've thought a ton. I know you've thought a ton about Constellation Software, which is sort of the paradigmatic, like perfect software roll-up company that trades publicly. You know, it really hasn't needed to tap capital markets for funding.

It's sort of self-funding. It's just like incredibly virtuous cycle that happens, kind of in the way you're describing you hope to build Terra. So talk about maybe any lessons from watching Mark Leonard and watching Constellation and what the key differences are. My guess is one of them is central. I think Constellation basically buys companies and completely leaves them alone. But I'm curious what you've learned from Constellation as a capital allocation engine, as an acquiring engine,

and in software specifically. Discipline. So Constellation was started 23 years ago by a former venture capitalist who realized that the stack of maintenance revenue on software is really, really, really, really sticky. And so he said, I'm going to go buy these companies with high maintenance software. I'm going to keep the management in place, but I'm going to tell the management you have to get to 40% cash flow margins, and then you get a bonus. And so he would buy a company, get it to 40% cash flow margins, take the money that business spun off, and buy the next business. And it was very much the cigar-but-like scenario where you're milking the existing asset every single year. You're raising price 8%. You lose 8% of customers, so you lose 6% of customers, you still grow 2% a year,

and you're able to keep an amazing cashful engine to keep reinvesting. And what I think we have learned from studying Constellation and interviewing tons of people from Constellation, is they're the most disciplined buyer I have ever, ever. seen. If it's, you know, one penny above that, that, you know, there's a story of Warren Buffett and ABC, you know, if you're 25 cents above that price, you won't go. These guys are by the penny. And so they have an amazing structure there. I think the second thing that's sort of interesting about the way he's done it is it's a process. It is not we are experts in software. It is not that we have a vision of the future. It literally looks for, is your retention right here,

is your revenue here? And can we buy your company here? Okay, we'll buy you. And by making it completely process-based, you can hire hundreds of people to keep finding deals for you. And so when we look at that, we said we learned a lot that the model of buying recurring revenue at cheap prices works really well to compound capital, and particularly if you can reallocate it. But what we also said is that probably works less favorable when you have larger amounts of capital and when there's lots of people that have figured that out too. And that's where this operating lens came in for us, where we said, imagine if you had that power, that many businesses and the power that that has. But you said, guess what, 200 companies of ours? Here's this playbook for sales and marketing that's working for the company. Why?

And you're in the exact same space. why don't you try this too? And trying to figure out what are the best practices that we can apply across that. And then taking the talent to do that, which is another thing that I think most holding companies haven't gotten to are for good reason, but we're exploring it. I can't help but start to have my sort of like outside investor diligence hat on thinking about your process. And I'd love to hear about the top of the funnel that you've built. So you need to source, maybe talk about the universe. Like how many companies, software companies are there of size and type that fit your criteria? and then how do you get into see them? Like, how are they hearing about you?

Like, you've been all over the place meeting these people. Like, how's that happening? We think worldwide there's probably 100,000 software companies that are in the target range and size that we're looking for. And what's interesting about that number is it's growing. It's not, you know, think about the VC darling of seven years ago that caps out of $10 or $20 million in revenue. That's an amazing target for us.

And so that these cycles of venture capital are actually great for buying, quote, unquote, boring businesses later on because not everything becomes a unicorn, and so there's lots of great, so that pool is growing every single day. So we think that the market size is just enormous. And the way we source is as follows. We've built the database of 10,000 companies.

We literally went through every single company and put it in a bucket of, do you think it'll have the recurring revenue, the retention rate we want? Do you think it's in the size range we like? Let's go reach out to the founder. And so we, just as you can imagine, when we go into companies and give them the sales tool, we have the same type of analysis. And so if we're reaching out to a compliance software business, we have a science on what the highest open rate of that is.

But more than anything else, I think sort of when we do the Redux and talking to the companies after we've sort of become friends and got to know them, what we realize is they resonate with us because we're not coming in there as capital. We're coming there as like, listen, we're some operators. We start these businesses. We love to kind of help you build your business, and they respond. And the data here is pretty incredible. Our open rate on a cold email is 20 to 25%. And when we sort of interview our friends that work in private equity is closer to 5%. And so I think it's the combination of having all the science when we reach out.

but also more like just coming in. That first email, that first outreach is so deep. It's not just, can I have a cold phone call with you? It's like, I looked at your business. Here's what we think about it. We'll love to talk to you. What are the levers that drive that conversion do you think most? Is it the title of the email?

It's the depth of the sections. Like you said, there's a lot of science behind it. I think it's sincerity. So it's, you come off with a sincere interest in what they're doing and how you could add value. You know, another great example is of our, I think one of our biggest advantages in sourcing is when we go meet a company, we go in as ourselves.

We go in the same clothes that every time I've seen you. I wear jeans and a bun down shirt and a sweater, and I go meet a company, and I'm exactly going like that. And I make a joke that the person who sort of connected me and Roe, my partner in this endeavor, his younger brother works at one of the best software private equity firms in the world, and we happen to be going to seeing the same company one time, which is very rare. And I'm sitting there and he's 25 or 26-year-old. I love him, so I can make fun of him.

But he's going in with a pocket square in Armani suit, a fancy watch, and flying first class. And I'm pretty sure when he goes and meets that 65-year-old who's retiring and one, wants to sell his business, it's not the right impression. I don't know if you want the guy, that guy sitting there saying, wow, this guy is 26 years old, he's flying nicer than I ever have. He's got a nicer suit than I ever had. He's nicer luggage than I've ever had. And I think that relatability really helps us. We walk in the door and we come in with backpacks, and we say, here's exactly how we think your business. It's not just a pile of money. And that's been a huge advantage. The other two ways that we, so that's direct. So we just,

we are, I mean, we are ninjas at sourcing. We will find a nugget and chase that person down. Half these companies don't even have LinkedIn accounts. I mean, it's kind of amazing. and we get on the planes. We've been on 70 flights in six months, and we really try to meet them in person because I think that's how we can kind of show our value. The second way we look through is intermediaries, everybody looks at intermediaries, and we haven't really gone down that path because it's a bit harder to give our pitch, which is, listen, we're probably not the highest bidder, but we're going to be the most value-added person to you. And the last is venture. And we originally when we started, we said, hey, venture capital is the best place to be, because if I'm the GP of a venture

firm, and I have that company that I've owned for seven years and it's topping out at $15,000 or $20 million revenue, that's not going to return the fund. And every day that doesn't sell, it's probably going to hurt my IRA. And what we found, though, is the problem with taking venture money is you develop really bad hygiene. You assume that there's endless money. You assume that the problem is throwing money at it. And so I remember one of our first transaction we were excited about, we're sitting with the founder, and he was growing 100% a year, and then he started growing 15% a year. And it was a market size issue. It wasn't because the VC missed took the market size. And so we're saying, hey, we'd be a great alternative for you. We were going to

build this business. And he says, yeah, I need a hire a dozen more people in marketing because this marketing tool is working. And I'm like, well, where's the money come from that? He's like, we'll go raise another round of funding. And so you develop these really bad habits about throwing money at the problem. And the second problem is your talent doesn't want to stay anymore, because when you're no longer, your options aren't worth what you thought they were, you've got a complete redo of the employee base. And so I think VC will be a place to play it at some point, but right now I think that those two issues make it harder. You mentioned the holding company structure as kind of the way that you're going to go about doing this, and a middle piece of one of the

three common threads you found across compounders being taxes, thinking about taxes. So maybe talk a little bit about that angle, how you think about, I guess, keeping Uncle Sam out of the compound growth rate of Terrell Holdings. What lessons have you learned there? And how do you think about that? You know, it was a really big decision early on to try to be a holding company, not a fund. And obviously, you know, sort of like when you do something different, it's not always easiest to raise money. So what we decided early on was the beauty of these businesses is that recurring stream of cash flow. There is a stack of cash under each one of those recurring revenue streams. and it would be unfortunate to buy one company, take that money, divin it out, and then pay taxes on it, and not be able to reinvest it.

And so what we said is, let's create a holding company where if we have three companies in portfolio and two of them are not growing, but generating great cash, we could take that cash and reinvest it into a business that actually had better growth prospects or take it to buy the next business. And that allowed you to recycle the cash far more effectively than constantly paying it out to investors. and by nature of not having to charge carry, there was no impetus to make, you're not making money by selling the business. And so the original insight we had was, well, if you've got a great business, why do you sell it?

And the answer was, well, how do we make money? And for us, we said, you know, we're in this for like the 20-year game or the 50-year game. So we'd rather compound that wealth as opposed to charging fees for it. As you think about the portfolio itself, sort of diversification,

portfolio construction, something I'm trained to think about always when viewing even something like this that's very different from, say, a public market portfolio. How do you think about that, whether or not you want to intentionally drive, like, different kinds of businesses? Maybe you want some concentration in industrials and some in energy and some of the materials. How do you think about diversification? So I'd be lying if I said we've given it more than like a 2% thought. One of the things I think we're doing differently

is as we sort of started talking about this thesis in developing and building these playbooks, we had lots of money thrown our way. And we made this consciousness and said, listen, let us go figure this out ourselves. Let us go buy the first deal ourselves. Let us go spend that that time recruiting an amazing talent, recruiting, making this deal happen. And then we'll come back to you because we wanted to build the right muskleture around the culture. So as an example, our first hire was a Warren MBA who literally came on to work for free. And he had no interest at all besides learning. And so this is a guy who worked at, who has more years of software, private equity experience than I and my partner combined times five. Yet he was willing to come and work for free because he said, I love the vision of what you're building and I want to help do it. And so he does everything from making photocopies to, you know, getting on planes with that. us. And so that's something, if we were trying to buy 10 companies and create a portfolio, it would be harder and harder to create that type of culture day one. The second part is, because so much of our value is trying to create operational strength on these businesses,

you need time to build, again, that muskleture, that what works, what doesn't work, what sort of looks good on paper, what doesn't work. And so we are nowhere near the idea of having portfolio construction. I think in a dream world, of course, we'd have something except for industrials, whatever, telecom, etc. But for now, we're very much focused on what are the most defensible businesses that are just going to be there forever that have these stacks of cash flow underneath it. where there is massive inefficiency that we can help fix. How do you think about capital sourcing? So you've got your own capital, equity capital.

Let's say you've got the potential for outside investor capital, and then you've got different types of debt, seller debt and bank debt. If you've got those four options, how are you approaching that problem? You already mentioned you're starting by yourselves, but in the future, how will you think about those sources of financing

to get this thing going? So we are not scared of debt. I think, again, one of the differences we have with any of these big holding companies is, other than John Malone, most of them don't use lots of debt. I actually think software is a beautiful business to use debt because you have great visibility into that revenue. And so if you can lower your cost of capital by taking on debt, it's a beautiful thing. And so I think we intend to use lots of debt. We intend

to, in most of the deals we negotiate, there is a form of seller debt. And then I think over time, we will bring on investors because I think the opportunity set was so much larger than we expected. When we got going, we said, wow, there's a lot of private equity firms, there's a lot of search funds, there's a lot of people going after this space. And what we've been, I think, most excited by is how many people said, I will never sell the private equity. I really need to find a partner like you. And I mentioned this before, but every single deal we do, we're the only party at the table. There's no one competing on the other end because it's very much a partnership. Do you think that will change? Absolutely. I mean, I think we are, I think, similar to

Brent, in this time where we're able to build these very close relationships with the founders because we're spending so much time with them. Part of trying to spend the money to find really great young talent is that so we're not the only ones doing that. Over time, I think it'll be competitive. What I think won't change is the culture. And so I guarantee if you meet anyone who works with us, They will be no different than I. They'll say, listen, I'm in this not to make, I don't get a fee for closing my deal. I'm invested in equity that business to compound for a long period of time. Another great example is the average company we go to is about 100 employees. When you go to the founder and you say, how many, how many of those are engineers?

He'll very probably be like 80, 85 of them. And then you're like, well, how many of them are salespeople? I say two, and I'm one of them. And so in the beginning you're like, oh my God, this is crazy. Your lifetime values, a million dollars for your customer. Like, why don't you have 10 salespeople? But when you talk to 100 of these companies, you realize that they are culturally run by engineers. And so the reward for that culture of that organization was, let's create more widgets on a product.

And the reason I bring this story up is, so we coming in there, realizing that there's probably a mismatch and there's a cultural fix, you have to be able to be humble and relatable to the founder to convince them to make that cultural change. Where you're saying, listen, let's look at the data. You have a product. Your customers are using widgets 1 through 20? Why are you working at widget 300? Let's right-size the engineering department. let's build a culture on ROI in sales, and let's build something great. And that cannot be done by the stick.

You really need to work collaboratively to build that. And so we think a lot about how do we sort of create a culture, a quote unquote, the top that can pervade down through everybody else. Well, Tara is something that I'll certainly be watching closely and look forward to hearing about, you know, the various stages of the journey. Obviously, software is an incredible business done right. And I never stop thinking about that. Andres in Horowitz quote, you know, software's eating the world. I think that's like their mission statement or their motto or something. So a really powerful idea. Maybe we'll switch gears for the last 10 or 20 minutes and talk about some of the other topics that you've somehow got your hands into and learned a ton about. The first of which is crypto. So you wrote a piece that was, as far as I can tell, probably the most widely circulated bear case on crypto, you know, north of 100,000 people reading your arguments.

And I know you've got investments in crypto. So, and certainly a company like coventure has a crypto wing to it. So talk about your negative, but maybe even your balanced view on crypto as an asset class and its kind of prospective returns for investors. Sure. So maybe I'll break it to the bear in the bull case and then my overarching view. So, and again, prefacing that, you know, it was a little fortuitous that I got into crypto because I was in a business that sold gold. And a lot of gold bugs are at a time, Bitcoin bugs that became crypto bugs. And so I remember meeting some of like the early movers and shakers of the crypto space, you know, before there was anything. And now seeing them become billionaires. And so I say this all for the preface that, I, I,

I still believe there's reason to be bullish, but I'll give you the bear case. So the first is, I think the single most bearish thing about the crypto businesses is you're now 10 years into it, and there's still not an application that depends on a distributed ledger that anyone uses regularly or has any mission-critical part to it. And that is a little bit alarming to me. And so have we developed this amazing technology that just has no use case, potentially. The second thing that I just think was the original use case everyone thought was, hey, it's going to replace currency, it's going to be using Kenya and Zimbabwe in all these countries.

And I just think that was so short-sighted. If you're a country that has a weak currency, you are not incentivized as someone running that country to have another parallel currency. In fact, one of their greatest controls over you is forcing to use that currency. So India, China, Argentina, Zababwe, they do not want a parallel currency challenging the rule of government. And so the idea that a currency could be used, that it would be used to treat as currency, I think, is just that that argument is like out the window. The same reason why gold is not currency. The third reason I felt a little bit bearish, a little bit bearish on this market was it's a little funny to me and a little bit ironic that the biggest business in crypto is Coinbase. it's like the modern version of a bank. And so that was like the antithesis of what Satoshi was trying to create.

You know, he didn't want it to be a bunch of bankers and Wall Street guys come in, and essentially that's what we have. I think people making all the money are sort of traders and hoarders. And Coinbase surely charges me a lot more than my bank charges me. And then I think the last point, and this is one that I think taps into why crypto has been successful, is it came with the perfect time of like low interest rates, inequality, anti-establishment, anti-establishment, anti-bank, and lots of, intellect. And you had this combination of this desire to, like, be different. And so everyone thought that that cryptocurrencies were going to change the world because it was a great technology. And in reality, it happened, it won because of speculation. And so I always joke, how many people, when they were saying you should buy cryptocurrencies tell you it's because of speculation? Or do they argue, like, oh, the blockchain is going to disdemeanate every

industry in the world? It's more the latter. And that's, like, completely wrong. You know, the price action was right, but you were totally wrong in that thesis. And so I think that's just a bare case where you're winning not because you were intellectually accurate, you were winning because of speculation. And I think that was just, and that happened because you tapped into all these elements of society. And I'd tell you the funny last one is, after I wrote that article, and I have almost zero presence online,

the quantity of hate mail and Twitter hate and medium hate, and, I mean, it was mind-blowing. And I think any community that's so emotional is probably less logical than they need to be for success. On the other side, though, I think the bootcase at crypto to me is really threefold. The first is, I do think Bitcoin has created some store of value to it. I think there's a community that will always describe value to it.

And whether that value is $1,000, $10,000 or $20,000, I don't know. But there's some inherent value there. Just like gold, gold has very little utility, but it has value because you think it has value. I think it has value. And so the arguments of it should be worth as much as gold, I find that hard to believe. Gold's been around for 5,000 years. So every culture, religion, society ascribes value. Bitcoin is nowhere near that.

And so I think that's one reason to sort of, there's some bullishness. The second is just a thought experiment. So I went to you, Patrick, and I said, hey, the smartest engineers, in the world are all working on one project, the best guy from Google, Facebook, Yahoo, etc., are all working on one project. Do you want to invest in it? The chance of you saying no, even as much as you and I don't understand venture, is still probably pretty low.

We're probably going to still invest in that because it's just the way that our minds work. It's hard to price the existential. It's hard to price the exponential. And it's hard to figure out these things that you just like, you see such smart talent, and it's that foamo, it's that greed, that kind of hard, again, very hard to price. And I think the last thing, and this is, I don't know if this bullish for crypto or not, but I think it matters to me is the most amazing thing that's happened is force us to think like things can be better, things can be different.

Why do I have to wait two days for a wire? Why is it cost so much to send money to a different country? And so I don't know if that's great for the blockchain or not, but I do know that it's created this amazing feeling of these things can be better and that will create lots of innovation in the future. So I'm a philosophy junkie by background. That was sort of my first love and first passion. And I realize that this could be a neat opportunity to hear a little bit about the Sikh

philosophy. I really don't know anything about it, to be honest. I read a little bit in preparation. But I actually, I kind of cut it short because I figured it would just be more fun to hear it from you. So maybe you could outline kind of what the broad philosophy is, at least is how you interpret it, and the impact that it has on your behavior. We talked about sort of a charitable mindset earlier, so I know that's part of it. But if you could expand on that, that would be very interesting.

Sikhism evolved out of India 500 plus years ago, and it really rooted itself an idea of equality. India as a society is not one of equality. It's a caste system. Women are different, that are treated differently than men. and it sort of challenged the norm by saying everybody is equal. And so, illustrily, one of the funny examples is most Sikhs have the last name sing, and most women have the last name core. Singh means king or lion, and core means princess or queen.

And the idea was, your last name signified what caste you were and how you're treated in society, and the idea is if you remove last name from the society, then there's no telling difference being you and me. And so it was rudeness idea of equality, hard work, and giving back, which were, you know, interestingly, not traditional values of that time or that place. And I think what sort of happened over time was because it was different, it's gone through lots and lots of prejudice, lots and lots of genocide over time. And what that did to, like, the community, I think probably impact on me, although I've never thought about it in a deep way,

is it created this idea of resilience, that like psychic residue, whether you're religious or not, you hear these stories of people who've sort of fought for you to be here today. You've hear these stories of people who have done great service to others. And it just becomes part of your culture or part of who you are. And I always said, I felt really lucky that I was a Sikh person born in America because it's like the best place in the world to practice is faith. Everyone believes in equality. Everybody believes working hard and everybody believes in actually giving back. And those are actually the tenets we're taught from day one.

So it's a really unique faith. I think it's a very young faith. And so it's still finding its place in the world. But it's definitely been an interesting experience. Are there traditions that are common across the tradition that you partake in that have special significance for you? I again, don't know much about that. Yes.

But they're not, I wouldn't say there are traditions that are fairly different. And so most Sikhs go to the equivalent of the Ergadwar our temple once a week. Part of that is adjusting to, I think, Western society. One of the things I think that is rooted, very much rooted into the culture, is the idea of giving back. So Sikhs, you know, from day one are really taught that you should give back. In fact, on my right arm, you'll see that I have a steel bangle, and most Sikhs do. And it's literally a reminder every day to do good and to help others and to act in a righteous manner. And so a really interesting observation is if you sort of look around the world, you'll be shocked at how many politicians are Sikhs.

in countries where there are extreme minorities. 20% of the Canadian cabinet is Sikhs. And the observation is because it came from this culture that was rooted in justice and taking care of others that led for them to sort of follow that path. So I think, I don't know if there's a particular practice that's unique in any way, but I think culturally it's very much about serving others

and doing the right thing. Oh, I'm noticing the common theme across the whole conversation today is sort of these base level principles, whether that's culture within a firm, within a religious tradition, within an investing philosophy that's a little more systematic and very principled like Constellation and their discipline.

I just think it's, obviously, I'm extremely biased here, but I just think it's such a powerful way to live life. And it'd be hard to find the right set of principles. But if you find them, it seems like that's a great playbook for existing. In our business, we often say it's the combination of culture and process. We are obsessed with process, but if you don't have the culture underneath it, it becomes like process for the wrong reasons. And so combining the two is really, really powerful.

So we started with an interesting story of real estate in Barcelona, a sort of an arb, a regulatory arb or a market arb on Airbnb. It'd be fun then to bookend with another interesting story of Owl Mountain. Describe what Owl Mountain is. And then I'll also ask you if there's any other unique, weird, never before analyzed asset classes that people out there, enterprising people out there should consider. As I mentioned, you know, part of doing a startup is you build this big illiquid asset. And when I looked at investments outside of that, I said, hey, I've got this investment into my company, plus all these angel investments that I sort fell into, and I'm like, they're all valuable, but I can't really do anything with it. And so I became

obsessed, again, this idea of finding cash flowing businesses. And so when I was literally investing my retirement, I started thinking about, what if I just owned a bunch of small businesses that gave money? And that led me to this discovery that, I guess a little bit similar to Brent, you can find lots and lots of small cash-fowing websites online that are, interestingly, if you handle the right way, relatively sticky businesses that you can buy for three times earnings. So I and some friends that, you know, took a little bit of our retirement money, and we bought one site. And I did this like seven years ago. What was the site? What was that first site? It was a site that gave a directory of marinas. And it was a sort of, it's like literally like a miniature private

every story. The business has been around for a decade had never raised price. And so the way they made money is they put an ad. When you pull up to a marina, you can pick which place the dock into. They put ads there. The ad rates hadn't gone up in 10 years. And the website wasn't mobile friendly. And so those two enhancements and, you know, revenues up 50 percent. And, you know, it's a great little way to build a cash list stream. When I left GBI and sort of had time, I got some friends together and said, hey, let's scale this up. Let's actually make something of this because it's a pocket of the world where I don't think the next small business that you're going to hear about is going to be the corner deli anymore. I don't think it's going to be the gas station. I think it's going to be some online business. And so what Al Mountain does is we look for pockets of the world where you can, vertical is where you can sort of compound that knowledge. So in an example, Al Mountain owns a bunch of pet sites. And the reason why is if you have more traffic, you can get better rates from Chui or your affiliates.

Another area that I'm sort of excited about is, just like I think Airbnb is still underestimated, I think the ecosystems around Slack are, you know, Slack has become such a pervasive tool, and there are lots of tools that serve as Slack, and they're probably really neat little businesses to own because you have a beautiful secular trend behind that. Or Shopify, you know, I think the world sort of still underestimates the power of these e-commerce stores. And so if you're some widget on some Shopify store, like, that's a really great business. And so we try to find these places where we can acquire these businesses at really, really, really real price to cash flow, and then centralize all the technology marketing into one group that are just pros at that. And so it's still

very early. It's still very young. But it's been incredibly helpful as we think about Terra and some of the stuff that we hope to centralize over time to sort of just see another part of the world that we don't know. Have you ever read the book Guerrilla Game? I don't think so. All right. I got to send it to you. So it's really interesting because it gets into effectively waiting for certain types of, this is hardware technology, to be installed and become sort of the default on top, the platform on top of which like tons of other services are built, ancillary services are built. And I'm realizing, as you're describing a lot of what you've talked about today, that companies like Airbnb, probably certainly Airbnb more so than Uber, but maybe Shopify, I don't know much about Shopify, are these kind of new

platforms, software-based platforms that create all these little weird pockets of opportunity that are new and fresh and interesting to try to value or roll up. So just like Ali, the conversation with Ali a month or so ago, really interesting to hear about these unique pockets. Are there any other areas like that that I know you're focused on software now, but any other areas like that that you think people are underestimating or represent this opportunity to be sort of the first person in to even think about it. What I would say is the following. So I think whenever you have a new platform business, something that you talked about

a lot over time, everyone always runs to the platform and doesn't look at the ecosystem. And so in the way my mind works is sort of thing, okay, the obvious trade is, you know, I want to go buy Airbnb stock or buy shares of Airbnb. I'm sort of like, what are the derivatives of that that people aren't paying attention to? And so I have like seven ideas in the back of my mind that I would feel it feed to Ali and team to go operationalize. But, you know, today's mission is to sort of build this software powerhouse. So you know my closing question for everyone, which is for the kindest thing that anyone's ever done for you. You know, I knew we were going to ask that and I was struggling with it.

But during the beginning, it reminded me of a story. So it's really hard for me to say outside of my family, it's hard for me to say anything kinder than what my parents have done and my brother and my sister have done or my uncles or anything like that. But there's one story that just pops in my head that was, I think, one of the things that I'll always remember. I don't know if it's the kindest. and that was my mom passed away in 2008 and it had massive impact on all of us we were way too young and we'd gone through a lot of trauma before that and there was a close family

friend of ours who were always close with but we'd never been sort of spent lots of time together I remember it was six months later or a year later and they invited our family over for the weekend and they had three like amazing little kids who were lots of fun running around the house playing games and it was like the first weekend

that we as a family had like had fun since my mom passed away and it was like totally expect This wasn't a family we'd ever been to their house before. It wasn't someone that we always love them. They were amazing people. But I will always remember that for the rest of my life as like that was a weekend that we all sort of started to recover and be normal again.

Fantastic. Well, I knew I would learn even more than I've learned from you over the last couple of months. So thank you so much for all the time and insight. Great. Thank you. Hey, everyone. Patrick here again. To find more episodes of Invest like the best, go to investorfieldguide.

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