Investing Billions - E50: Founding GLG and Growing it into a $600 Million Revenue Powerhouse — Mark Gerson

Starting point is 00:00:00 Marketplace is one of the most difficult businesses, almost by definition, also one of the most valuable. You've grown it to 600 million in revenue, 2,000 employees. You have dozens of offices all across the world. How did you go about building the business from the ground up? Well, we started with the conception that there was knowledge to be exchanged between experts and the clients. You're the biggest player, but there are other companies that have emerged that are also somewhat significant, with AlphaSites, Tegas, others, a whole sort of expert network industry. Comment a little bit about how you've seen the industry evolve and where you see it going. GLG was the first and the biggest and the best from the day we started it

Starting point is 00:00:34 until today, just kind of relentlessly devoted to connecting people who want to learn with people who want to teach and people who have the capability to teach and people who have the aptitude to learn and to connect these two communities. You found a network for family offices called 3i. Tell me about why you went about founding 3i. We said, well, if we create a community of the best private investors in the world and then set up the systems, the processes and the structures to enable people to share deals, identify co-investors, and very importantly, educate each other about the deals, about their strengths, about their potential weaknesses, and basically be each other's investment committee.

Starting point is 00:01:12 For more ideas on how to raise venture capital in this market, make sure to subscribe below. Mark, I've really been excited about this interview. We've known each other for a couple of years. Teddy Gold made the formal introduction for the podcast. Welcome to 10x Capital Podcast. Oh, it's so good to be here, David and Eric. Thank you for having me. A lot of people know you as one of the founders of GLG, obviously the G. Tell us about how you went about founding one of those prolific kind of consulting agencies in the world. Thomas Lambert and I conceived the business in 1998. And originally it was going to be a publishing company, finished putting together what were going to be guides to how industries function.

Starting point is 00:01:47 That was the initial conception. One of the first people said, I don't want to read the books. I just want to talk to the authors. And we said, why do you want to do that? He said, my questions are usually specific. So I don't really care about this general stuff about how industries function. But I do care about the industries. And I have lots of specific questions about each of them.

Starting point is 00:02:02 And these authors certainly seem like experts. So how about just letting me talk to the authors? We went back to our office that day and we said, let's throw out all the books that we had written and instead just recruit more people like the authors, because that's clearly what investment professionals wanted to do. That was March of 99 when we jettisoned the publishing business and started what became the expert business. Conceptually, it's remained coherent ever since. A marketplace is one of the most difficult businesses, almost by definition, also one of the most valuable. You've grown it to 600 million in revenue, 2,000 employees.

Starting point is 00:02:30 You have dozens of offices all across the world. How did you go about building the business from the ground up? Well, we started with the conception that there was knowledge to be exchanged between experts and the clients who were in the initial days were investment firms. You guys really not just pioneered this model, but also pioneered this industry. You're the biggest player, but there are other companies that have emerged that are also somewhat significant with Alpha Sites, Tegas, others, a whole sort of expert network industry. Comment a little bit about how you've seen the industry evolve and where you see it going. GLG was the first and the biggest and the best from the day we started it until today, just kind of relentlessly devoted to

Starting point is 00:03:03 connecting people who want to learn with people who want to teach and people who have the capability to teach and people who have the aptitude to learn and to connect these two communities in whatever format is most effective, whether it's a survey, whether it's a consultation, whether it's a meeting, whether it's something else. We've been fortunate to have been very well received and have really terrific partners on both sides, the clients who are now far more than investment firms and experts all over the world in pretty much everything. End of 2021, you found a network for family offices called 3i. Tell me about why you went about founding 3i. It was in about late 2020 when Billy Libby, who's the founder and leader of Upper90, which is a really tremendous

Starting point is 00:03:40 specialty finance firm, we were saying to each other, where did the best deals that we had done in the previous several years come from? And by best deals, we specifically excluded venture deals where we were fortunate sometimes and lost much of the time. And we're really focused on those specialty finance deals that promise returns in the high teens to low 30s and delivered pretty much as they promised. Really no better, no worse, but dependably, reliably. These are the kinds of opportunities that we did well with and sought more of. And so we asked, where did they come from? And we said, well, they always came from somebody else, but the process of getting them from somebody else to us was really totally serendipitous. It was a product of who was thinking about us for a random reason

Starting point is 00:04:16 at that moment or who we had seen recently. And we said, well, this is no way to go about getting the kinds of investment opportunities that we want to perhaps pursue by investing in them. So we said, how can we turn a valuable but sporadic process into a valuable and regular process? And the answer was crowdsourcing. We said, well, if we create a community of the best private investors in the world and then set up the systems, the processes, and the structures to enable people to share deals, identify co-investors, and very importantly, educate each other about the deals, about their strengths, about the potential weaknesses, and basically be each other's investment committees.

Starting point is 00:04:48 Fast forward two years, right now we have around 400 members. Everyone's either started a company, sold it, or taken it public, runs a family office, or runs a fund. Everyone invests significantly, eclectically. Everyone's intellectually curious. What have been some of the learnings from building 3i? Well, one of the learnings from 3i was just how important community is. And this applies to the investment process and also more generally. Lots of members have said something to the effect of, I came for the deals and I stay for the community. Members know that when they consider an investment, they will do so along with others, several of whom have made their fortunes in the space and will have a lot of insights to shed. So that's one way the community has been very helpful.

Starting point is 00:05:26 But that's a very transactional way in the sense that this is helping people make investment decisions. You know, we're doing events at a run rate of pretty much every day somewhere in the world. And these events can be anything from, you know, a cigar night where people just build relationships. And the relationship building that goes on in these community events, so to speak, also has commercial benefits in the sense that once people really get to know each other more and trust each other, they'll think of each other first and they'll do business more fluidly. I'm very curious in business, do transactions lead to relationships or do relationships lead to transactions? It's a terrific question. The answer is both. You just reminded me of what the Torah says. If you give generously and with an enthusiastic heart,

Starting point is 00:06:06 you will be blessed in all you do. In other words, if you give, you will become wealthier. This is not prosperity gospel saying, if you give, you will become rich, but saying, if you give, you will become wealthier. So then the question is, why? When do people give? So I'm the chairman of two charities, United Hatzalah of Israel and African Mission Healthcare. But it's very few will give in response to direct mail. Most people give in relationship. Most people give through communities. Most people give among people they've met often at events that we curate. Well, if most people give in community and give through relationships, what else happens in those communities? Bonds of trust are formed. And when those bonds of trust are formed, people end up

Starting point is 00:06:44 doing business much more easily together. Let's talk about Africa Mission Healthcare. When did you start that? And tell me about the premise. My very close friend from college, John Fielder, when he graduated from the Johns Hopkins residency program in about 2001, he called me and he said, as you know, I'm a Christian and I feel called by my Christian faith to go serve what the book of Matthew calls the least among us, the people in greatest need. And these were people who were then just being ravaged by AIDS in Africa. John had an infectious disease specialty and he forsaked all of the luxuries, of course, but all of what we would consider necessities in the West to go serve the poorest people in the world. And he did so in Africa. So he went as an AIDS and infectious disease doctor to Kenya. He was on the ground as a physician when the president's emergency plan for AIDS relief, PEPFAR, was announced and implemented in 2003.

Starting point is 00:07:31 And by then he was one of the more experienced HIV doctors in Africa. So he was going around the continent helping implement PEPFAR and saving really huge amounts of lives with this great effort by the U.S. government of people who were dying of AIDS. Now, now people are not dying of AIDS in Africa nearly as much. It's now a manageable chronic disease, largely due to the work of the United States and PEPFAR. What John learned in the course of these travels throughout Africa implementing AIDS care was that the biggest humanitarian problem in the world is the lack of access to almost any health care for pretty much everybody in Africa. If your wife is going through a difficult birth, she's likely to develop a devastating birth injury if she survives childbirth.

Starting point is 00:08:06 If your daughter breaks her arm, probably not going to get any treatment. If you have a hernia, you're not going to be helped. All the things that we know that we can just walk right up the street or drive a few miles to get care for, you're not getting any care in Africa, which is just absolutely devastating. Africa right now, in many countries, and it varies significantly country to country, but many countries will have one doctor for every 30 to 50,000 people, which means there's not going to be a functioning healthcare institution nearby, and that most people aren't going to be able to get quality care. So who is doing the work to change this? Who is doing the work to assure that quality care is provided to some Africans and that more care is being provided on a continual basis so that the institution is getting better and better? There's only one group, and these are Christian missionary doctors. This is what John

Starting point is 00:08:47 learned when he was going throughout Africa, is that Christian missionary doctors at Christian hospitals were providing tremendous care to the poor, were doing training which amplifies care in the future. The problem is that they were completely underfunded, usually ignored, and utterly overlooked by almost everybody who would otherwise be interested in helping these people who are so deserving and so needy of quality health care. So we saw these Christian missionary doctors, a Christian hospital, providing this great care, but being completely under-resourced. So we stepped up and created African Mission Health Care with the idea that we would provide clinical care for the poor. We would enable lots of training of physicians and surgeons so that if this generation has one doctor for every 30,000 people in a particular place, there'll be one doctor for far fewer people in the future, and also building the necessary infrastructure. During COVID, lots of people

Starting point is 00:09:33 asked us in early to mid-2020, what can we do to help Africa in COVID? We said, well, there's not much that can be done because COVID, a COVID patient who gets treatment is oxygen consumptive, and there's no piped oxygen in any of these hospitals. There's no oxygen in African hospitals. When you tell an American surgeon that, they really can't believe you. I remember I was talking with my now late and beloved uncle about this. He was 89. And so I was talking to him, he was about 87. And I said to him, in all of your years as a surgeon, and he went to medical school right after college, he had a long career as a surgeon, but did you ever lack for oxygen? He said, no, what are you talking about? No Western doctor knows what it's like to lack for oxygen, but there wasn't any oxygen.

Starting point is 00:10:05 So we just built six different oxygen plants in Christian hospitals and arranged a system to take the pipe's oxygen and to bring it to outlying clinics all throughout their neighboring regions. We work very closely with each of our hospital partners to determine what do you need to deliver care in the most cost-effective, ROI-positive way now and into the future. You said ROI and measuring. You're famous in the nonprofit world for holding your organizations to effective care. Can you talk a little bit about that? Yeah, it's a great question. So those of us who are business people and investors,

Starting point is 00:10:36 we think about ROI all the time. The only question is, do we do it intentionally or intuitively? But every business person thinks, I'm gonna deploy some capital or time. How much capital or things am I gonna going to deploy some capital or time. How much capital or things am I going to get as a result of the time or money I put in? Everyone thinks that way.

Starting point is 00:10:50 It's the only way we think. But when it comes to giving money away, people lose the discipline completely and start thinking about things that are extraneous. Meanwhile, it's still money. So the same thing should apply. So when it comes to philanthropy, people should think about their money in exactly the same way they do when they deploy it commercially, which is how much output am I going to get for the dollars invested? The only difference is what's the output. The output in philanthropy should be one of three things. It should be life saved, pain ameliorated, or opportunities created for the poor. Those are the only three things. Everything else is not legitimate charity. Those are the only three things. How many lives have I saved? How much pain have I ameliorated? How many opportunities have I created for the poor?

Starting point is 00:11:24 And so at our work at African Mission Healthcare and at United Hatzala, ROI is baked into the discipline every bit as much as it is the most rigorous investment firms in the world. And just looking at some of the numbers right now, take our hospital in the Nuba Mountains, which is run by Dr. Tom Katina, who is one of the world's greatest and most courageous people. There's a movie about him. There's a great Nick Kristof column about him. I would encourage anyone who's interested, just go look up Tom Katina, New York Times, see the Nick Kristof article, watch the movie. He is a true hero, and it has been a blessing for my family and I to get to know him and support him.

Starting point is 00:11:55 So Tom's medical budget was $2.6 million a year. That excludes the food. For that, he was able to do 250,000 outpatient visits. He was able to do 7,500 admissions. He was able to do 3,000 surgeries. He was able to do several hundred difficult births, easy births don't come to the hospital, several hundred difficult births in addition to immunizations for everything from TB, malaria care, leprosy, and train 48 physician assistants and midwives, all this on a budget of $2.6 million. Every dollar that we can afford to do, we plow right in there because it's the best ROI in the world. You and your wife have donated more to Christian missionaries.

Starting point is 00:12:31 Your wife is a rabbi. You've donated $50 million to Christian missionaries. Some would ask why. Why are you donating so much to Christian missionaries? When you look at the ROI for philanthropy, the return investment, the amount of lives that are saved, the amount of payments ameliorated, the amount of opportunities that are created for the poor is extraordinary, unparalleled in the hands of Christian missionary doctors serving in Africa. We've been blessed to be able to put around $50 million in the hands of these Christian missionary doctors at Christian

Starting point is 00:12:57 hospitals. Some of it's again for clinical care, some of it's building infrastructure, some of it's training. It's always distributed through AMH's incredibly, African Mission Healthcare's incredibly efficient system of both knowing where the highest ROI is and delivering in the most efficient way to achieve that very high ROI. Anyone can go right now to the site WOTSI, which is a terrific charity. W-A-T-S-I, WOTSI was founded by Ron Conway and some other guys out in Silicon Valley. Terrific site. If anyone wants to give high ROI, just go to WOTSI or you can go to Google and do WOTC, African Mission Healthcare. So we at African Mission Healthcare supply their surgery cases for WOTC, which anybody can go and help crowdfund. And we take our daughter every Shabbat, every Friday night to WOTC to pick a case or two or three from AMH to pick an African surgery, someone who needs surgery in Africa and go fund her. But the other way to think about it is we think in terms of, and this isn't our term, this is a public health term which we adopted and use all the time, disability-adjusted life years.

Starting point is 00:13:48 So that woman, now, if she has a birth injury, she may have gotten it when she gave birth last month, or she may have had it for the last 50, 60 years. But let's say she's a relatively new mother. Let's say she has three kids at home. So she might be 28 years old. She has a birth injury. She has three other kids at home. So think of how many years of life a donor on WOTC funding an African Mission Healthcare case can enhance. So now she's going to live from 28 to say 68 or 78. That's another 50 or 60 years. All those children that are now going to have a healthy mother, how much is that going to enhance their lives and the amount of years left in their lives and the baby that's going to survive and thrive. And we're talking about hundreds and hundreds of years of significantly enhanced or saved lives for 350 bucks. It's a great deal. Disability adjusted life years. There's some

Starting point is 00:14:32 calculation around number of years and severity of injury. It's a very elegant idea because it basically says that, you know, if you help someone survive, take example, weed issues. If you help someone survive and thrive after a very difficult birth. So thrive means she's not going to have a sustaining birth injury, but survive a difficult birth and thrive afterwards. How many years of quality life is she going to have? A lot. And you can measure it. Like life expectancy 70 and let's say she's 25. OK, so 45, 45 years. But it's obviously a lot more valuable to help a woman with that kind of condition than somebody who stubbed her toe, to use the simplest example. So it has to be measured in some way, like how much more valuable.

Starting point is 00:15:12 And so disability-adjusted life years do. Death is the worst thing, and then disability-adjusted years step back and say, okay, if death is the worst thing, then 0.9x is something that's really bad, and 0.01x is something that's not so bad. Why do you think more people don't bring measurement to their nonprofit and to their giving? David, that is a fantastic question. I would say they should. And I would say that you're giving them the opportunity to do so because now we're socializing the idea is that people can give through ROI. So I would say this is great what we're doing here. Why don't they?

Starting point is 00:15:37 I just don't think people have been educated or for whatever reason they don't intuitively give with an ROI mindset. But if we realize that money has the same properties, whether it's deployed commercially from an investment point of view or from a profit point of view, then of course it'll be ROI. And I also think that the word charity confuses things because it lumps together a bunch of things that really have nothing in common. If you go to Watsi right now and you find an African mission healthcare case of a woman with a birth injury, you will have dramatically enhanced the life of a woman and her children and others in their community for $350. If you go to the website of some symphony or orchestra or opera or university right now, and you give the same $150, you will have done no good. But you'll have given a charity, according to our definition of

Starting point is 00:16:22 the word, in both cases. You can't measure the ROI on giving you the opera because there is none, but they're both considered charity. Categories are helpful to the extent they help us distinguish and treat like things like and unlike things not like each other. The word charity and the concept of charity really combines things that shouldn't be combined. Now, if one wants to get to the opera or the symphony or the university, go for it. It's just not charity. It's an entertainment good, a consumption good. What's interesting about ROI sort of applications to charity is it's one has to think about sort of charity in my city versus my state versus my country versus somewhere in Africa where people are struggling even more and sort of thinking about how to allocate based on where they think is the greatest need or where they care most.

Starting point is 00:17:02 How do you advise for people? Where can they make the impact that is most needed when they don't know how to pick between either on a locality or an issue? Because ROI in business, all dollars are fungible. In charity philanthropy, it's sometimes hard to compare. Just like people search all over the world for the highest ROI business opportunity, they should search all over the world for the highest philanthropic ROI opportunity. So, So if someone gets in the habit, and I emphasize habit because most of what we do is a result of our habits. So people get in the habit of giving. And once you get in the habit of giving, you'll love it. But when people get in the habit of giving, people who give locally end up giving more internationally. It's people who don't give at all. And there are lots of reasons, all of them

Starting point is 00:18:27 bad, why people don't give at all that won't give to either. Let's talk about United Hotsala. There's a premise behind that. And I believe there's a crowdsourced angle. Tell me about the business model from a charity standpoint. United Hotsala was the brainchild of Elie Bier, who is maybe the greatest social entrepreneur in history. I have been totally blessed to be his dear friend and partner for 20 years. Ellie's insight after working on an ambulance for two years is he said, I worked on an ambulance as a late teenager for two years and never saved anyone's life because I got to the victim who called the Israeli equivalent of 911 too late every time. Because if you're choking or having a heart attack or having a stroke or

Starting point is 00:19:05 bleeding, perhaps pursuant to an accident, you call 911, you have basically three minutes before you're dead. The problem is it will take the ambulance 10 minutes to get to you in the most advanced cities. It could be New York, Tel Aviv, Los Angeles, Chicago, doesn't matter. The most advanced city is going to take 10 minutes. Why? Because the ambulances are not going to be everywhere. They're too expensive to be ubiquitous and they're too big to be fast. And so they take time to get to the place. Once the ambulance gets to the place, the EMTs on the ambulance have to get upstairs. If it's an apartment building, it takes another three to four minutes or an office building, another three to four minutes. So it's entirely too much time to save anyone's life. So people die all day, every

Starting point is 00:19:39 day, everywhere in the world, waiting for an ambulance. Ellie's insight was there's nothing that can be done about that. And it's okay. Because a person who calls 911, a person who's choking, bleeding, have a heart attack or stroke, they don't need an ambulance right away. They need a trained and equipped first responder right away. So what we have now is we have 7,000 volunteers all throughout Israel. Every community of Israel, we have something like 583 Arab volunteers. We have Jewish volunteers who are modern Orthodox, who are totally secular. We have people from Orthodox rabbis to at least one guy who runs a swingers club in Tel Aviv. I mean, men, women, every member of the Israeli community is represented in some way. And they're

Starting point is 00:20:14 all united around saving lives by getting to the victims in the moments that separate life from death. We're able to save a lot of people every day. And the call volume is up after October 7th. It was 1,900 before October 7th. That weekend, it was 10,000. But now it's stabilized at about 2,200 a day. So 2,200 a day, according to an American EMS journal, 6.9% of 911 calls are potential life-saving interventions. So we're able to get to about 140 people every day who are wavering between life and death following a trauma. Are there any frameworks to think about how much people should give? Yeah, it's a great question, Eric. When people say, and Ellie Beer has taught me this.

Starting point is 00:20:51 Ellie Beer is the founder of Hatsali. I'm the co-founder. He's the real founder. But when people say, I'm going to give after my next deal, that means I'm never going to give. I would say it's important to instill the discipline of giving in one's children so that it just becomes a part of what one does from perhaps even before one can remember. So it becomes a habit, and a habit is something that's really hard to break, and it becomes part of who you are. I say people should start giving very young, even if the dollar amounts are small. And by the way, there's really no such thing as a

Starting point is 00:21:17 small dollar amount when it comes to a high ROI charity, because $350, a fraction of $350 will help a woman survive and thrive following a birth injury. For 3i, as an example of a business you've incubated, did you know that you wanted to do that? And we're looking for a team around it. Do you look at the market and say, hey, this is an opportunity, or this is where I have an unfair advantage? Or how did that come about as an example of something that you've started there? So at 3i, we knew there was a problem, right? Or an opportunity, really more, more an opportunity than a problem. we knew there was a problem or an opportunity, really more an opportunity than a problem. We knew there was an opportunity, which is that we knew that with the right crowd and the right tools connecting members of the crowd and the right systems all leading up into a community, people

Starting point is 00:21:55 could have the kinds of deal flow that would deliver them the kinds of results and returns that they thought on a consistent basis. So we knew the problem and the opportunity existed. We knew it could be solved by creating the systems to surface the opportunities and connect people in community. And then we were very fortunate before we launched to meet Teddy Gold, who is an incredible young CEO, really does everything that a young CEO does exceptionally well, truly everything. Under his leadership, 3i has, I think, the world's best platform for surfacing investment opportunities and enabling people to get together in communities, rigorously assess them before making their own decisions,

Starting point is 00:22:30 as well as just to originate business relationships, strengthen business relationships, deepen business relationships that often become great friendships as well. In preparation for this interview, I spoke with Daniel, your managing director of your family office, Teddy, and a bunch of people. And they said you have one of the most fulfilled lives. What advice would you have in terms of how to live a more fulfilling life? It's very nice. I would say marry a great person.

Starting point is 00:22:52 So I would say first, just marry a great person. I mean, the indispensable source of human fulfillment is marriage and children. So I would say get married and have children. You know, Eric's question about how much should I give? But you know, we can ask that question with how many kids should I have? No one ever turned 85 and said,

Starting point is 00:23:06 you know, my only regret is having that extra child. But plenty of people have turned 85 and said, I only wish I had one more, right? So have that extra child. And so human fulfillment is derived through relationships. The most sacred and abiding relationships are those of a spouse and a child. So get married and have children. Find a career that's rewarding. Find a philanthropy that is exciting, makes you enthusiastic, and gives you that high from making a contribution with demonstrable ROI. In terms of philanthropy, again, I'm just thinking of the great medieval finance minister of Spain and Portugal, Rabbi Don Isaac of Arbanel. And he was once asked, how much are you worth? So he gave some number. I don't remember what it was. He gave some number. And the person said, come on, I know you're much richer than that. And he was once asked, how much are you worth? So he gave some number.

Starting point is 00:23:47 I don't remember what it was. He gave some number. And the person said, come on, I know you're much richer than that. And he said, no, that's what I gave to charity this year. He said, because I could lose my money, but I can't lose the good that I did through those gifts. And how much truth of that is, you know, we can all lose money, but if you help a woman get surgery following a birth injury, she's going to be healthy no matter what. You can't lose that. So he's totally right. That's a great note to end on. I'm curious if you have any plugs for the audience, if there's any Teddy Golds out there who are listening and might be so inspired they want to work with you on something. Are there any projects that you're looking to actually start either philanthropically or on the business side that listeners should maybe get in touch about? Oh, thank you, Eric. What a nice opportunity. I would say absolutely,

Starting point is 00:24:23 just email me if anyone wants to talk about anything philanthropic or commercial, just email me at mark at markerson.com. Well, Mark, this has been one of the most fascinating interviews, me and Eric were texting about it, whether it's how you founded GLG, which has grown to 600 million in revenue, which I think only so many humans on planet earth can make that claim, or 3i with the family office group, or creating one of the greatest kind of missions, Africa Mission Healthcare, United Hatsala, which has been saving people in Israel. And just your philosophy, it's been truly a treat. And I really appreciate you jumping on the podcast. Oh, thank you, David. I really appreciate you. Thank you. By popular demand, the 10X Capital podcast has officially launched our newsletter,

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Investing Billions - E50: Founding GLG and Growing it into a $600 Million Revenue Powerhouse — Mark Gerson

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