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Gaurav Kapadia

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2022-03-22

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2022-03-22

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1. “Finally, I met Dinaker Singh. Founded TBG Axon when I was 23 years old. He believed in me and gave me the opportunities so early in my career and sat next to me for years to help me. And I have tremendous gratitude for all four of those people, believing in someone when you don't believe in themselves at any given point is like the kindest thing that anyone's ever done for me.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

2. “The hardest thing and the most effective thing to do with kindness is believing in someone when they don't believe in themselves. That's not just believing in someone. It's like really giving them at the time their darkest place where they feel less confident like the Attaboy. My mom, I know everyone says that, but foundational in doing that, really believed in me when I really did not believe in myself the whole way through. I was very lucky. I had this teacher, Ms. Manganero. I never spoke to her again. She was my first grade and fifth grade teacher. It encouraged me to take the hunter test. That hunter test changed my life. And then I showed up to Hunter with my bad fashion and acne and all this other stuff. And a teacher named Kazmare Adler Ivanbrook, who I will be forever thankful for, taught me about economics, took me as under his wing, and allowed me the foundation of success.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

3. “To Warren Buffett, who both of us have been lucky enough to have dinner with, and he takes his role as a mentor so seriously, or it can be like proximate mentors who helped you along the way. I think in a Business that's so difficult and apprenticeship based, having people who are willing to teach be open hearted has been one of the hallmarks of my career. And I hope we all celebrate those mentors as much as we can.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

4. “One of the things that I would just touch on is investing is such an amazing craft. It's so hard to do every day. People who have been mentors indirectly or directly to me or others deserve a ton of gratitude. Everyone from Nixley publishing his letters on the Nomad Partnership, who I've never met Nick Sleep. Shared economies.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

5. “And I think when we come out of that, we're going to be really excited to have fun, see friends, take our kids to a theme park, stay in a hotel, think about what we were talking about before. That to me is like pretty obvious. I also think we are still in the super early innings of software infrastructure, productivity being massively enhanced. Software in particular, vertical software, specifically tools that unlock productivity, I think are going to be really fun spot to watch because a combination of people realize you could be remote, but be, even if you're remote, you got to collaborate. You got to be with your colleagues. And what are tools to help us push us in that direction are another investment theme. But I think those three things make me pretty excited.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

6. “Lower skill jobs and automate them so people can have dignity and have better work. I think that's going to be a theme that's going to be around for a long period of time. I think as we sit here, one of the things that I also think is going to be obvious in retrospect and excites me a lot is people are going to want to have fun again. It has been a two-year slog. I think next week is the two-year anniversary of me hiding out with my kids doing remote school. The US and us all have been fits and starts. And we've kind of speak for me and my friends kind of forgot to have fun a bit because it's been really stressful. We had a global pandemic. We're worried of our kids. We're worried of our parents. We're worried about ourselves. You know, someone reminded me we're sanitizing groceries.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Or three things make me really optimistic and excited. Number one, I think one of the things that have happened through COVID is people have realized that we've underinvested in our infrastructure. We don't have enough redundancy. So I think you're going to go through a cycle of people from a national interest perspective, i.e. semiconductors, but also from like a business interest perspective of like, hey, we should probably have more capacity and not have such a tight supply chain. So what happened in 2021 doesn't happen again. I think that's going to be a theme to invest behind very successfully. And it has all sorts of adjuncts, like how do you decarbonize things? How do you just add more capacity? How do you de-bottleneck? How do you automate? So if you look at a lot of our investments, everything from like the WAP tech, which is going to generate locomotives and vehicles for metals and mining, but also through our private investments that do a lot of things in robotics that take what's quote unquote.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

8. “I think there's a number of policy proposals. I know there's not supposed to be like that can actually increase inclusivity in the workplace. If you gave people the ability to deduct childcare, that friction wouldn't exist because that post-tax pre-tax dollars. One of the things that we have, even when we hire people, women have often left the workforce whether or not they want to or not. And so because of this choice that the government gives them of like, do you want to stay home? So I think there's an architecture to make it policy a bit more flexible to increase inclusivity, increase workforce participation. So that's the other idea that we've been kicking around.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

9. “If I had to pick one thing I would have like a 95% inescapable estate tax. And I think one of the things that compounds, obviously with the cleverness of our estate planning techniques today is generational wealth leads to a decline in optimism and more strictures that become hardened, if you will. If you ask me one policy thing I would do is I'd lower the income tax and massively raise the estate tax, let people enjoy their life but not for generations and generations.”

   2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

10. “10 years old, man. I was like, you can go to Harvard. I'm like, what's Harvard? Yo, yeah, that optimism and excitement is very important to me to continue to give to my kids that we can't make America a rigged system. We have to say that boundless optimism that we imbue to our children will allow them to not think there's any barriers, even if they work. I didn't even know there was a thing called legacy. I just assumed like Ivory League School, they'd just take the best kids. Learning that obviously is like a little discouraging after you go to college. You have to keep that spirit alive in my opinion.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

11. “Big part of my ethos is remembering how hard my parents worked, how hard they tried, observing the values as it reflected hard work, but also how much they cared about their kids and their success is hard to balance, as we know as parents. How do you put my all into work, try to make ends meet? And so getting that balance right, it's like people always say, you only get it when you become a parent, how hard that is. One of the things that has affected me the most is now that I'm where I am, if I knew how rigged the system was, I would have stopped trying. And one of the things that I think has propelled me and a lot of people here at the firm, my friends and colleagues, is this optimism that was imbued early on that America is a meritocracy. And so that's what I got from my parents. I left the city in India to come here because you can make it here. And so you could be anything.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Keep their culture while raising an American family, both working, no internet or cell phones. And that definitely shaped a lot of who I am, which is keeping the core ethical compass of what you do, remembering where you came from, but also like even from an early age, remember you got to give back and do your best and try your hardest and drive that. And so one of the things that's interesting is I think the immigrant mentality, as people call it, is applicable to everybody. Think about the most successful people you know who are born on third base. They have that same grit ethos, desire, ethical compass, intelligence to do it too. It's not some experience that necessarily caused it. You just got to remember to keep exporting it.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

13. “In the 70s, when my parents came to America, America had a visa program that gave a green card to anyone who was a doctor, a lawyer, an accountant, or an engineer. So if you look at that generation who are basically my generation's parents, they came here highly educated, big impact on the communities, and they've been able to raise broadly a generation of successful people. To me, that seems like a very obvious immigration policy, right? When we're short-stepped. In fact, even Donald Trump endorsed it before he became anti-when he was a private citizen. And I think skills-based immigration programs and ability to draw community in as opposed to push people out, that inclusiveness is what made my experience in America great. I'd also say being an immigrant kid, and there's a lot of them here is hard. I have so much respect for my parents, Indian accents, dress funny.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

14. “That experience to me was a really interesting one. I went there, a kid from Queens, come to Manhattan. It was the most authentically diverse place I've ever been. Still, to this day. The interesting thing is it was test-based. We had large black community, large Latino community, large Asian American community, obviously 50-50 gender. And people say it can't be replicated outside. That's to me kind of confusing given that the structure that I went through and witnessed. So that's a big part of my time outside of work. Obviously, you and I share this other passion, which is raising our kids, which is the most frustrating joy and most fun you can ever have.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Change my life. It totally changed everything, my opportunity set. I got to go to an Ivy League school, all this stuff. And it was one test on one day if I had a bad Saturday, it wouldn't have happened. And to me, I don't feel like the American dream should be that accidental. My wife and I are reasonably focused on increasing the opportunity set across those philanthropic areas. So that's a big focus.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

16. “DI is high on the list. I'm not sure how much you know about me and how I grew up, but I grew up immigrant family, first generation American, proverbial, like my dad lived at the YMCA, got off a flight to India. No one picked him up at the airport and moved to the YMCA with like 20 bucks in his pocket. And in one generation, I've had the luxury of being mean. There's so much to unpacking that. But to me, it's essentially the American dream. And so I view a lot of my role both at XN but outside of XN is to help other people fulfill the American dream. And that means reducing barriers, increasing opportunity. I care a lot about that. And you see that we got to know each other a little bit, but there's a civic thread that runs through it. And the funny thing for me is it happened in such a weird way. I took a test when I was 11 years old. I got into the school called Hunter.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

17. “Any institution at all. Post office. It's like the ultimate turnaround. I'm just making this up. They have the best footprint in the US by far. If you look at logistics as a growth area that's been taken by private sector, it's up and to the right. Your cost assured should be lower. Your cost of serve consumers should be lower. The ability to provide government and other services should be very high. My guess is one of the most undermonetized resources in the world.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

18. “It doesn't because there's always this concern that you're making the wrong decision, whether it's the investment committee. And so it's just a lot easier. It's like that, no one gets fired for picking IBM. It applies to existing investment organizations as well. Now, when you really dig into the data, as far as I can tell, there's a lot more choices than are presented. Some organizations came to associates Allborn, et cetera, have done a decent job of mapping it out, but now you got to take that empower investment committees to make an authentic decision around diversity. And the thing you don't want to do, because it'll stab the effort immediately, is take a check-the-box approach. Because if you don't keep the mission of the organization in mind and how diversity is going to improve that, and it becomes a check-the box exercise, the minute things falter, it goes away. And so that's what I think we'll see in the investment community has to push forward.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

19. “Reference calls, et cetera, with the goal of that their returns are just as good. And if they have a little bit of escape velocity, they can become the next great investment organization.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

20. “I think it's just a huge opportunity. I don't think anyone's heart is in the wrong place. I think everyone's heart is in the right place. So we have to stipulate that. Like people really care. But so many decisions are made by network. And so the only way you can break down existing network effects is with data. One of the big things that we're doing, both on the investment committees I sit on, my role as DI, chair a couple other places and at XN is to get the data and share the data. There's this weird perception that being diverse is going to hurt your returns. Obviously, all the data says the exact opposite. So let's help ship that data. Let's help inform that. And then finally, I think sometimes it helps to have a bit of escape philosophy if you're a minority manager or woman manager that's really just hard to get. So some of the things that we're incubating is the little bit of capital outside extent, which is very de minimis. That goes to managers of generally people of color and women. Hopefully we get them a little bit of head start, a bunch of advice.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

21. “People of color and women. I'm going to do all the first interviews, seek them out myself. And that has two impacts. One, people know I'm serious and that it's a comfortable place to be. That has actually been a hugely effective step we've taken. One of the things we're contemplating is actually doing things a little bit more seriously and not just LPs asking us what our DI plan is, but us asking them. The interesting thing right now is people feel so much tangential pressure that they just have people do a questionnaire, but a lot of times I look at the screen and the organizations themselves aren't diverse. So it would be helpful for us as an organization that actually doesn't need the capital, that is doing it in service of a greater mission to understand if our partners are truly aligned with our belief that diversity is going to improve them and improve us. I would say watch this space. We're contemplating along with a couple of partners, including large philanthropic institutions, endowments, taking a much more significant step.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

22. “If you tie it into the business objectives, it becomes a lot easier, where majority, minority owned, we have 60% people of color or women on the management committee. I'm proud of what we have done, but we're going to do a lot more. I think there's a few things that we're doing. This spans not only at XN, but my role on investment committees outside of XN. And hopefully as someone takes seriously as an investor and as a civic leader, the number one framework I have is we're not going to let other people's implicit bias become our implicit bias. So when you're an investment organization, you tend to hire people who've gone through some training steps. If that training step has an implicit bias, it'll affect you. We're going orthogonally, more creative to find different pools of candidates. Number two is one of the things I decided is I'm going to personally not just run through a recruiting process, but”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

23. “I am so disappointed in our industry. I think whether it's ethnic diversity, gender diversity in any part of the organization, we have just done an awful job. And I will say, I don't think my eyes were fully open to it until the last few years. And I say that with the degree of disappointment in myself. We take diversity very seriously. Obviously, we have a DI coordinator here. We try to live the values. One of the things that I feel like you have to unpack is, is it an authentic value or a check the box?”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

24. “Executive partners have helped really well with that. So, long way of saying it has to be a deeply authentic relationship in order for it to work.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Benefits from the mentorship of these executives to see investing through the lens of an operator in a way that massively expands their horizons. Even last couple off sites, the executive partners are there. They're there the whole time. They're hanging out with us all night. The relationships that they build in understanding complex problems helps the analyst team really understand what the CEOs that they're interfacing with are dealing with. The second thing is If you're building a company, this is the golden age of entrepreneurship. You often need mentors. And it turns out many of the entrepreneurs today reach out to executives who've gone through it all, taken a company public, did a complex integration, did a business model transition, being attacked by activists, et cetera. They seek out these teams as mentors. And that has allowed us interesting access to private things pretty early.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

26. “Lessons that we learned were like it has to be authentic, everything we do is authentic here, it can't be like you want some guy's resume for a pitch deck. It has to be, this is what our goals are, this is what our objectives are, and this is the relationship we have to build the foundation of trust. In the case of the three executive partners we have, we obviously have known each other for a very long time and have worked in the trenches together, which really helps solidify the relationship and make sure that there's real alignment and backbone into it. Originally we started, we said there's probably two things. Insight and access. So insight on any given, we're looking at a satellite internet provider. Rob Marcus is going to have a really good understanding of what the economics looks like, et cetera. Or we need credentializing factors to be able to have access to these really interesting public or private companies. And that's been very effective. I would say incremental to that, there's been two learnings. One is our team.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

27. “This regard, but that's something that is really, really, really interesting where you can plug into existing profit streaming business model, use technology to upend it, and there's returns to scale. Because with AMP as an example, you're classifying all sorts of garbage. And so your machine learning models are so much more advanced than anybody else. I believe today they can for a given yogurt container tell you which one has titanium dioxide and which one doesn't. And so then if you think about titanium dioxide as something that you want to recycle or save, you can segment that separately. That's the level. In my house, we just go like paper or plastic or whatever. If you think about the implications of that and also the competitive note for that, that's going to be like incredibly compelling.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

28. “Who used to do that before? It was low wage workers with high attrition, probably weren't living their best life, hard to keep in stock. If you look at what problem it solves for the world, think about our natural resource constraints. Think about ESG, think about carbon footprint. You're able to automatically, basically, at very low cost, sort and recycle trash at very high margins. I love this intersection of physical and digital. I also think that not a lot of people are paying attention to it. It's really hard. We have a team internally and with our executive partners who can evaluate these both on a technical and business model basis. AMP's really interesting because we have experience looking at the way. So we understand what the P&L they're plugging into. And we also see we're tightening natural resources, commodity costs are going up. It's a great way to earn the area under the curve while no one's looking. So we have a few investments.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

29. “Travel globally forever. All you have to do is invest energy in the brand. Somebody else provides the CapEx at a much lower cost capital than you. You get to ride that forever. On the private side, one of the things that has been really awesome for us is this intersection of physical and digital, where people are solving really hard problems. And only in the last couple of years, due to machine vision or machine learning or distributed GPUs or whatever technological base loading that happened, they're able to apply it really effectively. Like one of our portfolio companies, there's a company called Amprobotics. They do machine learning and machine vision for recycling. We went out to visit them in Denver. It was like amazing. It was like an eye-opening experience. They had a flatbed just dump a bunch of garbage on a conveyor belt and sorted it. And if you think about...”

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30. “Google's up there. Of course, I think people say all the classic ones like Visa, MasterCard, and Alphabet. I think those are reasonable. One of the great businesses, hotel C Corps. So Marriott and Hilton, as an example, they basically manage and run a royalty stream on all of the brands under their umbrella. It is one of the most beautiful businesses I've seen because other people spend all the capital. They come to you for branding. They come to you for management and then pay you a strip of revenues that is extremely high margin. So your return on capital is like extraordinarily high because everyone else supplies the capital and you get a royalty, your long inflation. One of these really durable franchise businesses, in my opinion, I happen to like the hotels significantly more than, say, other franchise restaurant concepts are incredible.”

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31. “Principal agent issues always come to the fore. And so if you haven't specifically designed against them, it somehow corrodes the investment organization, in my opinion, which is part of the reason why the investment organization that I respect the most, many of them, they have that real founder's mentality, compounding mentality as the driver of what drives them and not a fee-based mentality as the driver that drives them. I would also say the allocators themselves have their own principal agent issues that they have to deal with internally. And so it's like investing today, which is part of the reason why originally I thought family office is the only way it could work, because the only way to get purity of principal agent issues is to be the principal and the agent. It's just like a long stream of conflicting interests.”

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32. “Of the reason that we set up XN the way we did, which is almost like impossible for us to get away from compounding being the biggest source of value. The principal agent issues are just enormous in investing. I think it's particularly acute in private investing, but also public investing, which is you have principal agent issues all through the chain. The analysts have a principal agent issue with portfolio manager. You have the founders having principal agent issue with the investors. They're paid off of something that is or thought kind of correlated, but not directly with the objectives of the underlying institution.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

33. “Look, I think we've all seen it for many years, which is having someone talk the talk of an investor talk may in the short run lead to a high multiple. In my experience, you want someone, whether or not they're a founder with a founder mentality or duration and compounding mentality for the long run. And that is hard to find, but if you find it, you can look through the language they say and really what they do and what they mean. So much of investing is getting to the truth and the core of what they're doing and not necessarily what they're saying. That's what I found to be amongst the most effective. There are some like rare cases where the management team has everything buttoned up. They say the right things. They do the right things, et cetera. But I think those are generally the, I mean, Frank Slootman, who's just on, obviously a great example. Snowflake has internal metrics.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

34. “And volume growth in a way that's differentiated and protected from others. And there's many ways those modes could be network effects, of course, which obviously Bill Gurley talks about, but it could also be superior product that is really hard to replicate. It could be patents. My favorite is like so many companies have started doing this, like whether it's the medical device companies or Autodesk giving their products away in grad school. So you become the de facto monopoly later. That's like a great strategy, right? But you have to figure out where those niches and seams are.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

35. “I buy it at a first order implication, of course, but really when you go down to it, if you like, look at a lot of the great businesses, they've created niche monopoly things. And no one likes to say it because you're not allowed to say it. But look, if you look at any of the great software businesses, they took a very specific vertical and they kind of said, I'm going to own this vertical. If you look at even the great industrial businesses, because there's so many returns to scale, they say this is a great vertical for me. I'm going to have 50 to 70% market share and therefore my margin is going to be a lot better, et cetera, et cetera. Look at aircraft engine manufacturers. People say, oh, they're broad industrials, but really they're a monopoly on narrowbody or wide body. And so I think people sometimes confuse themselves with what is a good business. And if the CEO talks in a shareholder-friendly way, is that a good management team? It's almost like the opposite, in my experience, which I'm happy to talk about. But really, you have to see if the underlying business has a characteristic that's going to give them pricing power.”

    2022-03-22 · Invest Like the Best · Gaurav Kapadia - Everything Compounds - [Invest Like the Best, EP. 269] · IDENTIFIED FROM THE TRANSCRIPT · source

36. “Look at any of the data, right? About how many companies are in the SP 500, how long do they stay in there? It's just very few because everything is hard. Our business is hard. You know what's hard? Running General Electric is really hard and keeping that sustainable competitive advantage going for as long while you have the pressures of being a public company and a private is very, very difficult. So when you really distill it, there's just very few seams that you can mine without competitors coming through and really disrupting that business model in any significant durable way.”

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37. “That's not universally the case. There's some great internet businesses, but the world is littered with mediocre and now bankrupt internet business. So that's the interesting thing to me, which is a lot of the high multiple businesses were never deserving of it. And COVID ended up masking so much of it that it's coming back to Earth and it's going to lead to this differentiation, at least we think.”

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38. “The funny thing is, to some extent, to our detriment, we never bought into it. There was this tendency, especially like you go to the beginning of 2021 where you're like, am I wrong? Am I missing something? Should everything trade at 25 times revenue? Like, is that what the baseline has to be? I think there's a couple of the insights that you have going back 10 or 15 years. Last couple years for sure. There's a lot that rhymes with post-financial crisis and also post-internet bubble, which is there are very few good businesses. And that's the thing that I think is really coming to fore as we sit here today is people realize that actually most internet businesses are highly fragile. In many cases, you don't control your own destiny, whether it's through IDFA or customer funnel or margins or it's an interesting thing because there's this tendency to go internet.”

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39. “Of share price in public or private. And so that's really the art of investing. What you're trying to find, generally speaking, is really good business that's valued as a poor business or a mediocre business that has the ability to compound through. That's what I think we excel at is this asymmetry with the business analysis. And so what that often manifests itself is you end up having optionality on multiple expansion and compounded capital growth in terms of free cash flow per share or something like that. In the public or the private side.”

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40. “Investing is complicated in two ways, when you have to get the business right and then you got the valuation right. I think there's like people who are reasonably good at getting the business right. I think we're hopefully better and we're applying more analytical rigor and toolkits. And because even on the public side of the portfolio, we only have 10 to 12 positions at any time. So we could go really deep in them and we hold them oftentimes for years and years and years. So we really have a long longitudinal history. And now we actually hold them from private to public. So we have all that data too. But so hopefully we're better at that. And so there's usually like a insight or a kernel that we see that the market doesn't see. Oh, the incremental margins are going to be so much higher. Actually, your market share in green locomotives is 20 points higher than your existing ones. And that's a positive makeshift or luxury is going to move online. What's the best way to capture that? So there's some business insight. You got to marry, though, that business insight with asymmetry.”

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41. “Once you really hit what the CEO thinks are the core issues of the business, it really opens up your understanding of what the core issues of the business are. They're not the same as what the rank and file industrial or sell side report would say.”

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42. “One thing that investors don't often realize is the stock price or the investor is often the last thing on the guy's list of all the stuff he has to deal with. He has like HR, he has an uprising at his company. He has unionization issues. So on the plethora of things they have to deal with, most likely the thing that's most important to you, it hasn't even crossed their mind. And so being humble enough to know that is like half the battle. You really try to understand. And by the way, you got to do the work. It's not like you just go and ask like nice questions. Our largest public position is a company called WABT. It's a combination of three mergers. There's like a big NOL. There's a bunch of filings that you got to tie through. And once you do that, you kind of have an idea of what the issues are. How do I integrate this business? How do I go after these customers? What's this transition to green energy going to do for the locomotive business? And you focus on that. And that opens up the...”

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43. “Very simple actually, which is if I don't think we have a shot at being among the best, we don't do it. I don't think I'm going to be a better biotech investor than the Baker Brothers. So I'm not going to do that. And so that narrowing of focus really helps you build these deep vertical expertises and stops you from being a dilettante. What always kills people in investing is they go off pieced. They become like a dilettant in something because they're reaching for something to do. So we've eliminated that temptation.”

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44. “We care about, we exclude so much of the world. We don't do any healthcare. We don't do balance sheet heavy financials. There's so much that we exclude that we can really focus on the areas that we have very deep expertise in. And then it's an analytical personal and long-term oriented relationship we strive to build with every company that we interact with. I would say the interesting thing is we're very selective. We actually only have 21 private investments since inception, right? But our relationships and our shadow hopefully is a lot longer than that. And that's what we strive to build.”

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45. “Or not you ever invest to be able to talk that problem out, use your experience, bring that to bear, you end up being a huge value added partner, whether or not you invest. That's a bit of the ethos of the rigor and the kindness, which is Howie, I would have loved to invest in many points, but we just developed a relationship. I really believed in him and the organization in a weird twist of fate of why it makes sense to always carry this kind and this ethos through the CFO of Airtable and I started as tobacco analyst basically in 2004. Being a good actor for a long period of time pays lots of dividends, which I tell the firm, the offsite, the speech I gave, that was like, remember, the IR person, the junior IR person is now the CFO of this company. It could be in many ways treat people with respect. So just on an individual level, I think we, first outside and try to identify the best in class companies or themes in the vertical.”

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46. “Well, the great thing is, we have 35 people here in our areas of expertise are always great spotters. We're never doing something really cold, even if you look at Airtable. It's a great example. I've admired the company. I've admired the product for a long time. I was lucky enough to get to know Howie cry four or five years ago, and we kept in touch. I think one of the things that people find actually right after this, I have my catch up with Howie, is that everyone at the firm, including myself, is very accessible. You can call me. That's who you get. And that authenticity that you're dealing with the principle always helps. So there's two things. So you find a company, you have to diligence outside in, and you get to know the management team. I think one of the things you find is any individual is always dealing with some problem, whether it's you, whether it's me. And if you can position yourself as a resource, whether”

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47. “Now, one of the things that we infused at the outset is even as the world is becoming very rapid response private equity or on the private side, we weren't going to play that game. We were just going to focus on insights, access, value add, industry expertise, long-term duration, being able to hold when you're private to when you're public. And we're not going to participate in auctions and we're not going to be sold a story. And we did that at the very beginning, even as a family office. And that has held us in good stead because that discipline, I think, will carry our private portfolio through what's been, I imagine, will be a pretty complicated time from here on out.”

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48. “Think there's less of a difference than other people do, honestly. The way I think about RXN is it's a research organization that can monetize its research by being long public equity, being long private equity, and occasionally being short public equity. If you have that mindset, you have to apply the same skills throughout. There are other people who do it really well where they've kind of disparate investment processes against their public investing and the private investing. That's not the way we generally work. We like actual businesses that generate revenue that are product market fit that we think we have an insight into how they can grow, how their business model works, and then are kind of agnostic if it's public or private. There's a lot of synergies between public and private. Now, in private markets, the competition ebbs and flows in a really interesting way. And so you have to be really careful not to overpay at the wrong cycle and believe a story.”

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49. “Was a pretty uniquely good room. We kind of had a great crew together. I would say I'm very impressed with my peers. I think you're really seeing a separation in talent, franchise, et cetera. But I will say the Tigers and the Kotus and the altimeters of the world have developed really great organizations and franchises. We also are trying to do something different. There's a tendency to think of us all kind of the same, but I would say there's two things. And you saw this. One is we're all rooting for each other. And that's, I think, one endemic to the...”

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50. “Income, or if it was modestly accretive to those things. But we saw this really interesting thing with some of the best investors in the world getting so big they couldn't focus on a big part of the market. And that our team was revving and so special that I want to give them the fuel to get after the opportunities we were seeing. That's how we ended up with outside capital.”

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