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Speaker 1: This is mesters in Business with very Results on Bloombird

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Speaker 1: Radio this weekend. On the podcast, I have an extra

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Speaker 1: special guest. His name is Steve Klinsky and he has

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Speaker 1: an absolutely storied history in the field of private equity.

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Speaker 1: He is the person who essentially stood up the lb

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Speaker 1: O department at Goldman Sachs when essentially there were half

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Speaker 1: a dozen or so private equity firms in the country.

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Speaker 1: He eventually goes to a Forceman Little where he's one

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Speaker 1: of the first five founding partners. They grew a business

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Speaker 1: where they eschewed junk debt. They very often were the

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Speaker 1: white knight fighting against the so called barbarians at the gate.

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Speaker 1: They believed in building businesses and far less focused on

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Speaker 1: financial engineering. Eventually, Steve takes his experience and knowledge and

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Speaker 1: stands up his own firm, New Mountain Capital, which is

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Speaker 1: one of the largest private equity shops in the world.

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Speaker 1: They have thirty seven billion dollars in clients and their

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Speaker 1: own funds, which they have invested across a variety of

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Speaker 1: disciplines from credit to strategic capital, as well as taking

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Speaker 1: companies private and helping them grow into something more substantial

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Speaker 1: than they've been in the past. I thought this was

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Speaker 1: a master class in how private equity works from somebody

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Speaker 1: who was there at the beginning, from Goldman to Forceman

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Speaker 1: Little to his own firm, and has pretty much seen

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Speaker 1: and done everything. I found this conversation to be fascinating,

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Speaker 1: and I think you will also with no further ado,

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Speaker 1: my conversation with New Mountain Capitals founder and CEO Steve Klinsky.

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Speaker 1: So let's talk a little bit about that. M B

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Speaker 1: A j D. That's quite a combination. What made you

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Speaker 1: pursue that? I come from the Detroit Er Mission and

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Speaker 1: I was a public school kid, went to university in

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Speaker 1: Michigan and studied both economics and philosophy. Sorry about the

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Speaker 1: theft of that last touch, and well, thank you, thanks

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Speaker 1: for the condolences. Uh and uh. You know, my family

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Speaker 1: had a business. My grandfather and grandmother had a store

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Speaker 1: for thirty years in Detroit called Alberts where they sold

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Speaker 1: women's clothes. And my we had been built into a

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Speaker 1: chain by my dad and my uncle. So I was

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Speaker 1: the youngest of five brothers and cousins, and they wanted

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Speaker 1: to go into the business. And I also had a

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Speaker 1: real love for constitutional law and political philosophy, so I

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Speaker 1: actually went to both, you know, kind of the business

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Speaker 1: school to kind of do a family obligation and the

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Speaker 1: law school because I really love constitutional law at that

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Speaker 1: point really interesting. Have you found one or the other

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Speaker 1: more interesting in your career in Pe? I'm a big

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Speaker 1: fan of both of them, and a big fan of

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Speaker 1: the j d NBA program, and I'm about with both

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Speaker 1: schools still today. You know. I thought the law school

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Speaker 1: is much more traditionally academic, so I thought I was

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Speaker 1: learning a lot there the business school. I was only

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Speaker 1: twenty one years old. I was like the age of

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Speaker 1: a college senior, and I didn't think I was learning anything.

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Speaker 1: In hindsight, I learned a ton of the business school

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Speaker 1: and at the law school both. I'm a big fan

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Speaker 1: of multidisciplinary, you know, approaches, so they've both been great

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Speaker 1: for me. So you do a senior thesis about what

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Speaker 1: was then the newly emerging field of private equity. Which

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Speaker 1: school did you do the thesis for? You do a thesis,

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Speaker 1: especially for the j D NBA program. You get it.

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Speaker 1: You get admitted into each school individually, but you've finished

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Speaker 1: in four years instead of five, and you write a

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Speaker 1: special thesis at j d NB A thesis that has

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Speaker 1: long business And what was interesting was the first leverage

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Speaker 1: by out of a public company happened when I was

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Speaker 1: in graduate school. KKR took a a stock exchange company

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Speaker 1: called Who Die Private and it was the first time

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Speaker 1: it was the first leverage by out of a public company,

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Speaker 1: and so it was a whole new idea. I found

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Speaker 1: it very interesting. You know, I had no work experience

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Speaker 1: in anything, so I thought, what an interesting idea and

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Speaker 1: a potent. We had sold the family business, maybe buy

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Speaker 1: another family business one day through a leverage buyout. So

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Speaker 1: I did my thesis on how leverage buyouts work from

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Speaker 1: the legal in the business side. And I might have

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Speaker 1: been the first person coming out of graduate school saying

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Speaker 1: I want to be a private equity specialists. So right place,

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Speaker 1: right time, and the right insight into what was then

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Speaker 1: a very novel field. So is that what ultimately leads

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Speaker 1: you to starting at Goldman Sachs Well, I decided I

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Speaker 1: thought about corporate law. I wanted to be a Supreme

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Speaker 1: Court justice, and then I realized John Roberts, who was

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Speaker 1: a year ahead of me, was the guy was gonna

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Speaker 1: Yeah he was one year You know, there were some

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Speaker 1: pretty smart dudes at Harvard Law School. So you see John,

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Speaker 1: and you say, right now, he was one year older

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Speaker 1: than me. So if I see John, I would say, hello,

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Speaker 1: Mr Justice Roberts, you don't know me, That's what I

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Speaker 1: would say to Mr Justice. But in school, but he

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Speaker 1: was one year I had. I'm just saying, you know,

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Speaker 1: I realized, you know, I had a picture of Oliver

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Speaker 1: Wendell Holmes above my desk, and I was incredibly earnest

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Speaker 1: and intent, and I said, well, you know, I'm alright,

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Speaker 1: but there's some really it's probably not gonna be me

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Speaker 1: as the Supreme Court justice. So I thought about, and

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Speaker 1: I did work for Larry Tribe and Kind Law for

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Speaker 1: really yeah, it was between corporate law and investment banking.

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Speaker 1: And I decided, if I was gonna be in corporate,

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Speaker 1: I'd rather be the client than the lawyer. And so

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Speaker 1: I joined Goldman in there. It was a twelve person

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Speaker 1: merger department and they were just in the days when

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Speaker 1: the the takeover wars were very hot, and Goldman was

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Speaker 1: the firm defending everyone against raids and Morgan Stanley was

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Speaker 1: doing the raids. So I joined Goldman in their merger department,

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Speaker 1: but said I'd like to be your lb O guy.

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Speaker 1: They said, we've never done it. Le they said, we've

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Speaker 1: never done one. You could be the LBL guy, as

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Speaker 1: like saying I want to be the wheat farmer on

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Speaker 1: the moon. There was no competition go ahead and uh so,

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Speaker 1: uh so there there was no LBO that had ever

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Speaker 1: been done at Goldman Sachs when I joined it. And

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Speaker 1: I came in with the idea because I had been

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Speaker 1: studying it as a student. So you stood up the

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Speaker 1: LBO division at Goldman. Essentially I helped bring it in

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Speaker 1: the idea. They were starting to get topical, and they

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Speaker 1: set up a two person group with a guy named

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Speaker 1: Fred Eckert as a vice president and me as the associate.

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Speaker 1: So we we were the original LBO group of Goldman Sachs.

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Speaker 1: And uh We're supposed to do three million of revenue.

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Speaker 1: We did thirty million. It just took off very fast,

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Speaker 1: you know. And what we were doing was basically advising

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Speaker 1: Goldman clients how to take their own family businesses back

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Speaker 1: off the stock market. We were more we weren't owning

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Speaker 1: businesses as much as we were advising families and stuff.

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Speaker 1: We I did work on the very first principal investment

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Speaker 1: that Goldman ever did. And Goldman was the size of

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Speaker 1: a law firm back that people forget how much the partnership.

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Speaker 1: We all fit in one room for the Christmas photo

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Speaker 1: every year, and I mean it was literally like the

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Speaker 1: size of a of a law from not a giant

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Speaker 1: global institution. And the first deal they ever did with

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Speaker 1: the partners own money was a company called Trinity paper Bag.

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Speaker 1: It was a twelve million dollar paper and plastic bag

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Speaker 1: company that the guy said, you know the bag and

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Speaker 1: Tootsie with the ice cream, that was my bag. He was,

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Speaker 1: you know, he's a great entrepreneur. And it was a

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Speaker 1: half a million dollar investment from the firm and I

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Speaker 1: worked on it, and the two CEO's of the firm

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Speaker 1: watched over me, the head of mergers and everyone watched

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Speaker 1: over me. There. Everyone was very concerned with this deal

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Speaker 1: because there was a half a million, half a million

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Speaker 1: of the partner's money. So it was very early days

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Speaker 1: and all this stuff. So it was a good time too.

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Speaker 1: It's like going to Silicon Valley the day transistors were

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Speaker 1: invented or something. That's very good time. So how long

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Speaker 1: does it take for the LBO group at Goldman to

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Speaker 1: build into something fairly hefty. Yeah, I started a Goldman

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Speaker 1: in a one doing you know, mostly raid work and

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Speaker 1: traditional merger and seller work. The LBO group was probably

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Speaker 1: started in eight two and it was already a big

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Speaker 1: success in eighty four when I got quartered away by

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Speaker 1: force a little they poached me away. So tell us

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Speaker 1: a little bit about that. You're effectively amongst the first

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Speaker 1: five founding partners. Is that a fair stay? Well, there

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Speaker 1: were only twenty private equity firms in the world in

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Speaker 1: four They are now over five thousand. I also just

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Speaker 1: finished being the chairman of the price of an equity industry,

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Speaker 1: something called the American Investment Council. But there used to

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Speaker 1: only be twenty private equity firms. KKR was the biggest,

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Speaker 1: with four dred million of assets and eight people, and

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Speaker 1: Forest my little was the second biggest, with two hundred

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Speaker 1: million of assets and four professionals. And they hired me

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Speaker 1: and as the fifth professional. And by nineties two guys

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Speaker 1: had left, so it was the two Forceman brothers, and

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Speaker 1: I was the most senior guy, you know in the nineties.

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Speaker 1: But it was you know, very small, very new, and uh,

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Speaker 1: you know, obviously a great time to enter. So even

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Speaker 1: back then when it was the size that you could

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Speaker 1: take a Christmas picture with everybody in one room. At

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Speaker 1: Goldman they're still doing investment banking, they're trading, their advising clients,

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Speaker 1: They're involved in a lot of different things. How is

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Speaker 1: it different when you moved to a shop with a

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Speaker 1: singular focus on private equity and LBO. Well, the the

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Speaker 1: key thing to me was the thing about being in

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Speaker 1: a private equity shop versus investment bank is that you

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Speaker 1: are the owner of the company. I mean, even when

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Speaker 1: I was at Goldman Sachs doing private equity work, it's

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Speaker 1: more equivalent or merger work. It's much more equivalent to

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Speaker 1: being a house broker than owning the house. So you

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Speaker 1: sell a lot of houses and you get commission on

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Speaker 1: what you sell. But when you're in private equity, you

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Speaker 1: own the business, you control it, you're responsible for it,

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Speaker 1: you have real ownership in it. As a member of

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Speaker 1: forcement Little I had true ownership in that company that

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Speaker 1: I never had as an investment banker Goldman Sachs. So

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Speaker 1: that was the attraction to how does the private equity said,

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Speaker 1: how does that affect your psychology? At what deals you consider,

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Speaker 1: what you skip? How does that change how you view them. Well, again,

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Speaker 1: it gives you an owner's mentality. A really good investment

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Speaker 1: banker has that mentality anyways because they just want to

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Speaker 1: give great, you know, wise advice. A bad investment banker

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Speaker 1: just wants to get deals done and doesn't care much.

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Speaker 1: But as a private equity owner, again, first of all,

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Speaker 1: you do invest heavily of your own money in the transactions.

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Speaker 1: Plus you have additional ownership through the you know, the

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Speaker 1: carried interests, the profits interests, and so I come from

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Speaker 1: a family business background, and private equity really is a

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Speaker 1: common if you do it right, as a combination of

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Speaker 1: the family business mentality of a small group of people

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Speaker 1: who own the business, but also the best aspects of

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Speaker 1: a big company where today we have tremendous resources that

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Speaker 1: a family could never have. But you do have that

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Speaker 1: family business mentality when you own a business, if you're

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Speaker 1: a good private equity firm, So you leave Goldman, you

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Speaker 1: end up Enforcement. How long did you stay at Enforcement?

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Speaker 1: Little and what sort of deals were you working on? Yeah?

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Speaker 1: So I joined in eighty four as a as a

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Speaker 1: younger version of a partner. I made as an associate partner,

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Speaker 1: I made full general partner by eighty six, and uh,

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Speaker 1: so I was there for their glory years of the

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Speaker 1: eighties and the nineties. I was there from eighty four

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Speaker 1: to ninety nine in their best best years, and so

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Speaker 1: I did live through things like Barbarians at the Gate.

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Speaker 1: I was a partner for that. I have online in

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Speaker 1: the book where I say Ross Johnson is totally insane

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Speaker 1: and leave the book. I actually spent about four months

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Speaker 1: night and day working on it. But I'm I'm happy.

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Speaker 1: My line was not pay anything, borrow anything. I'm very

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Speaker 1: happy with my line um on page two fifty nine

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Speaker 1: if your listeners want to check it out. And uh

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Speaker 1: we were also the uh the white Night. We were

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Speaker 1: the kind of the anti milk and junk bond guys.

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Speaker 1: So we were the white Knight on Revlon. We had

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Speaker 1: some great success in the eighties and the nineties were

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Speaker 1: even better. So I can talk more about that. But

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Speaker 1: so I was there for fifteen years. So let's talk

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Speaker 1: a little bit about l b O s in the

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Speaker 1: eighties and nineties. You mentioned the first l B O

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Speaker 1: of a publicly traded company took place in ninety nine,

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Speaker 1: and that led to your j D n b A

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Speaker 1: thesis about it tell us a little bit about what

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Speaker 1: the eighties and nineties were like when junk bonds and

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Speaker 1: lb os first began to ramp up and become popular. Well,

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Speaker 1: so just to give a little historical perspective on how

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Speaker 1: much things have changed, and there is an economic backdrop

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Speaker 1: to all of this up. So, my first day at

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Speaker 1: work was October one one at Goldman Sachs. The highest

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Speaker 1: interest rates in US history were literally the day before

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Speaker 1: I started work, September, I think the tenure treasury was

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Speaker 1: fifteen point eight four. So when we're you know, third

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Speaker 1: three point seven percent tenure treasuries, it is nowhere near

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Speaker 1: kind of the situation. There had been stag inflation where

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Speaker 1: the stock market was lower in eighty one than it

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Speaker 1: had been in nineteen sixty eight, and you know, incredibly

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Speaker 1: depressed market, super high interest rates. So the initial idea

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Speaker 1: of leverage biout's very high inflation was really was financial engineering, truthfully,

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Speaker 1: back in those days, because if you had ninety five

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Speaker 1: parts debt and five parts equity and ten percent inflation,

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Speaker 1: you know, you could triple your equity with no unit

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Speaker 1: growth at all. And interest rates were coming down after

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Speaker 1: Vulka and Reagan broke you know, inflation and the stock

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Speaker 1: market was going up. So that's where private equity start

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Speaker 1: did as it really was for investment bankers as a room,

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Speaker 1: having the nerve to borrow money when other people had

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Speaker 1: been kind of beaten down for thirteen years. Forcement Little started,

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Speaker 1: you know, around a little bit few years before then,

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Speaker 1: and they started without junk bonds. It used to be

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Speaker 1: the commercial banks would lend the senior debt and the

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Speaker 1: insurance companies like Credential would lend what was called the

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Speaker 1: mezzanine debt. There was no junk debt available in the market,

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Speaker 1: and Forcement Little created instead of going to insurance companies,

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Speaker 1: raised its own fund for the mezzanine debt that they

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Speaker 1: could have the banks themselves and then force some little equity.

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Speaker 1: So that's how it all started. The initial deals were

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Speaker 1: small in dollars, but incredibly high returns. Like we owned

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Speaker 1: a company called tops Chewing Gum back in the baseball

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Speaker 1: card craze, eighty million dollar deal with ten million of

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Speaker 1: equity that went up to eight hundred million of value.

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Speaker 1: So ten million became eight hundred million. It's eighty times

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Speaker 1: your money, which is not bad. It's not the five

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Speaker 1: trillion of gains. Private equity makes the day, but it

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Speaker 1: was very eye opening. Or William, you know there was

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Speaker 1: a very famous deal Gibson greeting cards where like a

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Speaker 1: half a million of equity went to forty million. I mean,

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Speaker 1: those were the that's what got people all excited. Numbers,

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Speaker 1: well that is it was kind of venture capital numbers

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Speaker 1: because the dollars were so small, so it was a

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Speaker 1: tiny compared to what private equity is today, but very

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Speaker 1: high returns. So that started everyone going into the field.

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Speaker 1: After the initial twenty firms, you know, Carlisle started, Blackstone started,

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Speaker 1: and they're very transparent. They saw the success of these

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Speaker 1: other firms and said, why can't we do that too,

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Speaker 1: So in the mid eighties lots of people started to

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Speaker 1: enter a new firms that became great and kept growing

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Speaker 1: milk and started junk bonds around the mid eighties saying hey,

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Speaker 1: and he had done I think serious academic work that

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Speaker 1: the credit ratings were too conservative and if you just

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Speaker 1: only went into triple as, you were giving up return.

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Speaker 1: And so he was creating that market and he both

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Speaker 1: lent to great companies like you uh, the cable companies

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Speaker 1: that grew to be giants, and to some people who

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Speaker 1: were kind of more questionable character who you know, gave

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Speaker 1: business a bad name. So, uh, that was the alternative.

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Speaker 1: And then for some little didn't use We were the

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Speaker 1: one from that didn't use milk, and we had our

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Speaker 1: own fund and so we were kind of the white

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Speaker 1: shoe alternative to milking and all those Let's get a

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Speaker 1: little granular, and you're the right person to dive into

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Speaker 1: this with both a j D and an n B A.

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Speaker 1: When we're talking about a structure of a financing and

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Speaker 1: the senior mezzanine and junk, essentially that's the payout order

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Speaker 1: in the event of a bankruptcy. Tell us a little

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Speaker 1: bit about why it's structured that way, the advantages of

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Speaker 1: each and the risks of each. Yeah, I mean, the

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Speaker 1: best way to understand private equity is just to think

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Speaker 1: about if you're buying a house. It's really using the

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Speaker 1: principles everyone used in real estate over in the corporate world.

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Speaker 1: So if you know, if you're a real estate guy

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Speaker 1: and you're buying a building, you would have a mortgage

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Speaker 1: and then put up your own money, or maybe you

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Speaker 1: would have a first mortgage and then a second mortgage

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Speaker 1: so you could put up less money, and if you're

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Speaker 1: really good at improving the building or you just get lucky,

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Speaker 1: that inflation raises the value of the building. You know,

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Speaker 1: by having used debt, all the gain goes to that

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Speaker 1: thin strip that is the equity. But of course if

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Speaker 1: the value drops, the first thing that gets lost is

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Speaker 1: the equity. So the senior debt is the safest thing

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Speaker 1: because let's say it's sixty cents out of a hundred,

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Speaker 1: until forty cents is lost, the senior debt is safe.

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Speaker 1: Then the junk debt or mezzanine debt maybe the next

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Speaker 1: twenty cents in the old days, and so if it's

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Speaker 1: worth eighty cents on the dollar, they're safe, and then

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Speaker 1: the equity is the bottom twenty. But if it goes

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Speaker 1: up to two dollars, they've made a dollar on twenty cents.

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Speaker 1: So it's just like real estate, but it was done

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Speaker 1: in the in the corporate world, and there's just different

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Speaker 1: risks and return possibilities. You know. The thing with debt

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Speaker 1: is you can only make your interest rate. With equity,

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Speaker 1: you're unlimited on how much you can make, but you're

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Speaker 1: the first person to lose money if you do a

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Speaker 1: bad that's a perfect explanation of that. So in the

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Speaker 1: nineties you have more companies entering the space ace. You

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Speaker 1: mentioned there were twenty pe firms back then. Uh, now

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Speaker 1: there's five thousand. How competitive was it to source steals?

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Speaker 1: Was there, you know, overwhelming luxury of choices or were

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Speaker 1: people scratching to get into the best deals. The truth

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Speaker 1: is it always feels competitive, no matter where you are

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Speaker 1: in history or any given time. It never feels that

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Speaker 1: easier or that. It's only in hindsight you realize how

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Speaker 1: wonderful or terrible the conditions were. And bad news usually

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Speaker 1: leads to good opportunities, and good news usually leads to problems.

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Speaker 1: I mean, so you just have to live through all

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Speaker 1: this stuff. I will say. When there were a fewer firms,

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Speaker 1: so I was effectively there had Ted and Nick Forceman,

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Speaker 1: Brian Little had retired from the firm. I was the

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Speaker 1: next senior. So for years I was kind of like

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Speaker 1: the Turkish merchant in the sock where the sellers would

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Speaker 1: come and lay all their goods out in front and

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Speaker 1: say you can look at this company and this company

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Speaker 1: and this company, and I say no, no, no, bring

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Speaker 1: them show me another company. Today, private equity is so

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Speaker 1: much more professional. And my firm, which is not as

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Speaker 1: famous as for us a little bit, but it's much

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Speaker 1: bigger in the industry, is much bigger. You know, we

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Speaker 1: have two hundred people were proactively super deep in specific

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Speaker 1: industries like life science supplies, where were incredibly knowledgeable. And

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Speaker 1: it's gone from kind of the small generalists to really

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Speaker 1: sophisticated business building organizations who use frankly, much less debt

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Speaker 1: as a percentage of the capital structure. Now you might

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Speaker 1: have six equity and debt not And how long did

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Speaker 1: that transition takes, because that's a very different structure. Obviously

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Speaker 1: interest rates have an impact, will get to that. I

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Speaker 1: think that transition has been steadily happening for the forty year.

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Speaker 1: I've been in private equity for forty years now, and

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Speaker 1: one thing I try to say is that private equity

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Speaker 1: has evolved from a form of finance into a form

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Speaker 1: of business. So in when interest rates were there and

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Speaker 1: everything was started, it was about you know, and I

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Speaker 1: was one of the four, for example, four investment bankers

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Speaker 1: having a lot of hood spun and saying let's borrow

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Speaker 1: some my and go for it. Today it's extremely differently.

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Speaker 1: My organization owns companies that employ I think sixty people,

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Speaker 1: we would be roughly eighty three and the Fortune five

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Speaker 1: if we were one entity. We use all that knowledge

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Speaker 1: to buy the next fairly small company and build it.

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Speaker 1: So it is so different from where I was with

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Speaker 1: Forceman Little, or where I was even when I started

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Speaker 1: my firm by myself, I didn't have the you know,

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Speaker 1: the strength. The key is to build. Think of private

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Speaker 1: equity as a business that builds businesses and make that

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Speaker 1: business engine stronger and stronger. And that's it's a better

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Speaker 1: form of governance because you're like a family business. Since

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Speaker 1: you don't have nine reporting, you don't have to worry

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Speaker 1: about third parties. You can be very rational, but you're

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Speaker 1: no longer constrained to just a few investment bankers. You

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Speaker 1: can now be a very strong operation. And that's been

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Speaker 1: a fourty year transition. So we're gonna talk about New

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Speaker 1: Mountain Capital and a bit. I want to stay in

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Speaker 1: the nine nineties. What sort of sectors and what sort

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Speaker 1: of industries were the hot memes back then? What did

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Speaker 1: you focus? Yeah, so the big long term story with

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Speaker 1: Force some Little as investors, and it was a great firm.

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Speaker 1: We were the second biggest firm, but I think we

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Speaker 1: had the highest returns was you know, in the eighties,

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Speaker 1: it was about kind of any company that looked cheap

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Speaker 1: with a lot of debt. You know, obviously there was

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Speaker 1: seven crash of the stock market, but there was a

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Speaker 1: recession in where what we could see was our high

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Speaker 1: quality companies that were market leaders did fine, and the

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Speaker 1: number three auto parts elastomer company lost all market share

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Speaker 1: to the number one guy and did terrible. And no

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00:20:33,960 --> 00:20:35,720
Speaker 1: matter how little you had paid for it, you had

403
00:20:35,720 --> 00:20:40,160
Speaker 1: paid too much. So as a firm, force little set look,

404
00:20:40,480 --> 00:20:44,640
Speaker 1: let's evolve into higher quality growth companies, not just by

405
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Speaker 1: things because they're low EBA D, but really picked companies

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Speaker 1: that can be great growth leaders. And the transaction that

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Speaker 1: I'm most proud of in the nineties was a company

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Speaker 1: called General Instrument that, you know, when we found it

409
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Speaker 1: was a very messed up can go armor at doing racetrack,

410
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Speaker 1: toe boards and defense electronics, but buried within it was

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Speaker 1: the best cable and satellite television equipment business in the world.

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Speaker 1: And people thought the Japanese were over going to destroy

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Speaker 1: all American electronics. We had a different opinion that I

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Speaker 1: can tell you why, that we could fight back, and

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Speaker 1: it went from about a billion of value to twenty

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Speaker 1: billion of value over the course of the nineties. And

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Speaker 1: that was what I worked closest on over the nineties,

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Speaker 1: and so the other great deals we did in the nineties, though,

419
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Speaker 1: Gulf Stream Jet, which Ted you know, personally loved and lead,

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Speaker 1: went through some tough times and being a huge success.

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Speaker 1: We had Ziff Davis Magazines that we sold to Mr

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Speaker 1: Sun and started massiocis Son's career. He bought it because

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Speaker 1: he had spotted it and got him kind of into

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Speaker 1: the Internet and all that through through us. Well he's

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Speaker 1: not fine, he's done. He did very well with it.

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Speaker 1: And uh so we had a lot of great We

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Speaker 1: had Department fifty six Christmas ornaments, We had all sorts

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Speaker 1: of deals. So it wasn't one specific end street, but

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Speaker 1: we went from kind of junkie cheap companies too. I

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Speaker 1: viewed the general instrument being the model for what force

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Speaker 1: model was about what's kind of interesting is you mentioned

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Speaker 1: a couple of times about what happens when you're in

433
00:22:17,119 --> 00:22:19,320
Speaker 1: the number three and number four company and they're getting

434
00:22:19,320 --> 00:22:22,639
Speaker 1: their lunch eaten by the number one in all of

435
00:22:22,680 --> 00:22:25,919
Speaker 1: these sectors. Is it very much a winner take all

436
00:22:26,359 --> 00:22:29,320
Speaker 1: where you really want to be in the top maybe

437
00:22:29,400 --> 00:22:32,040
Speaker 1: second company, but not much further beyond that. Well, what

438
00:22:32,080 --> 00:22:33,720
Speaker 1: I can say, and this is getting maybe ahead of

439
00:22:33,760 --> 00:22:36,040
Speaker 1: it to get into new mountain strategy. But when I

440
00:22:36,080 --> 00:22:38,920
Speaker 1: broke off to start a new mountain, it was really

441
00:22:38,960 --> 00:22:42,560
Speaker 1: based on two principles defensive growth and business building. And

442
00:22:42,640 --> 00:22:46,280
Speaker 1: what offensive offensive growth? This is like a defensive growth

443
00:22:46,280 --> 00:22:48,840
Speaker 1: in business building. What I mean by that even more

444
00:22:48,840 --> 00:22:52,560
Speaker 1: important than number one versus number three. There are some

445
00:22:52,640 --> 00:22:56,159
Speaker 1: industries that have the wind at their back, that have

446
00:22:56,320 --> 00:22:59,439
Speaker 1: secular growth for the next ten years, and there are

447
00:22:59,520 --> 00:23:03,720
Speaker 1: some into strees that are inherently subject to changing conditions.

448
00:23:03,720 --> 00:23:07,520
Speaker 1: Oil prices go up or down. Uh you know, fashion

449
00:23:07,600 --> 00:23:11,600
Speaker 1: retail goes in and out, unlike for example, selling an

450
00:23:11,720 --> 00:23:15,360
Speaker 1: ingredient for pharmaceuticals where they need the ingredient and your

451
00:23:15,400 --> 00:23:17,879
Speaker 1: spect in by the f d A and you know

452
00:23:17,920 --> 00:23:20,160
Speaker 1: they're so I mean, there are good industries and bad

453
00:23:20,200 --> 00:23:23,439
Speaker 1: industries that from the point of view of safety and growth,

454
00:23:23,480 --> 00:23:26,960
Speaker 1: and the biggest mistakes in private equity in my forty

455
00:23:27,000 --> 00:23:31,720
Speaker 1: years observation is when the industry melts underneath you. So,

456
00:23:31,760 --> 00:23:35,480
Speaker 1: for example, there were giant disasters. After I left for

457
00:23:35,640 --> 00:23:37,879
Speaker 1: some little forcement was doing great when I left. After

458
00:23:37,920 --> 00:23:41,640
Speaker 1: I left, they changed their strategy and went into what

459
00:23:41,680 --> 00:23:45,040
Speaker 1: we're called selex, these alternative telephone companies that were supposed

460
00:23:45,040 --> 00:23:48,200
Speaker 1: to That was a super hot theme in the year

461
00:23:50,160 --> 00:23:52,320
Speaker 1: and two thousand and so after I left to start

462
00:23:52,320 --> 00:23:56,440
Speaker 1: a new mountain, they migrated into that, and that whole

463
00:23:56,480 --> 00:23:59,719
Speaker 1: industry was very hot, and then blew up the idea

464
00:24:00,000 --> 00:24:05,000
Speaker 1: George Gilder telecosm. It was the idea that you could

465
00:24:05,000 --> 00:24:07,480
Speaker 1: go in against. There. There had been a regulatory change

466
00:24:07,520 --> 00:24:10,280
Speaker 1: that said the big Bell telephone monopoly is going to

467
00:24:10,359 --> 00:24:12,600
Speaker 1: share its equipment with the nice new entrant and be

468
00:24:12,800 --> 00:24:15,160
Speaker 1: very friendly and let the new entrant use its equipment.

469
00:24:15,520 --> 00:24:17,639
Speaker 1: And that sounded great. Let's go into the new entrant

470
00:24:17,640 --> 00:24:19,719
Speaker 1: and then lo and behold. For some reason, the equipment

471
00:24:19,760 --> 00:24:22,080
Speaker 1: didn't work for the new entrant as well as they

472
00:24:22,119 --> 00:24:25,000
Speaker 1: had expected, and so these things went from fifteen billion

473
00:24:25,040 --> 00:24:29,119
Speaker 1: to zero. There was exo communication and anyway, that was

474
00:24:29,240 --> 00:24:32,160
Speaker 1: because the industry, and once you've gone into that space,

475
00:24:32,840 --> 00:24:35,160
Speaker 1: there was no way to save it. Or the initial

476
00:24:35,200 --> 00:24:39,680
Speaker 1: Internet boom where if you own coffee cups dot com

477
00:24:39,720 --> 00:24:42,199
Speaker 1: as a name, you were worth a billion dollars and

478
00:24:42,240 --> 00:24:44,360
Speaker 1: you had no earnings and no revenue. Though I mean

479
00:24:44,720 --> 00:24:47,159
Speaker 1: there were things that just go away. I mean bitcoin,

480
00:24:47,359 --> 00:24:50,600
Speaker 1: and you know, a crypto could totally vanish, and if

481
00:24:50,640 --> 00:24:52,200
Speaker 1: you put your money in there, it's not how well

482
00:24:52,240 --> 00:24:54,240
Speaker 1: you manage your business, you're just in the wrong space.

483
00:24:54,640 --> 00:24:57,520
Speaker 1: So the idea of New Mountain was, and this is

484
00:24:57,600 --> 00:25:01,919
Speaker 1: kind of evolving from Force a little, was pick the

485
00:25:02,000 --> 00:25:06,640
Speaker 1: sectors that at least for ten years ahead, have clear, stable,

486
00:25:06,760 --> 00:25:11,280
Speaker 1: secular growth, and then buying at a reasonable price so

487
00:25:11,480 --> 00:25:13,520
Speaker 1: we don't use that much debt. My firm has never

488
00:25:13,640 --> 00:25:15,680
Speaker 1: had a bankruptcy, never missed an interest payment. In the

489
00:25:15,720 --> 00:25:18,800
Speaker 1: history of our private equity effort. We've generated over seventy

490
00:25:18,800 --> 00:25:21,800
Speaker 1: billion of enterprise value gains without one missed interest payment

491
00:25:22,320 --> 00:25:25,600
Speaker 1: and added over sixty one jobs about one missed interest payment.

492
00:25:25,960 --> 00:25:28,520
Speaker 1: So if you start safe, the question is how high

493
00:25:28,560 --> 00:25:31,119
Speaker 1: you can build it, how big a mountain you can build,

494
00:25:31,400 --> 00:25:34,600
Speaker 1: And that gets to operational skills. So it's those two things.

495
00:25:34,640 --> 00:25:37,399
Speaker 1: So the concept to make the parallel to real estate.

496
00:25:37,880 --> 00:25:41,560
Speaker 1: You're better off with the worst house in a great

497
00:25:41,560 --> 00:25:44,680
Speaker 1: neighborhood than a great house and a not so good name. Yeah,

498
00:25:44,680 --> 00:25:46,760
Speaker 1: I mean you know, if you go off. I guess,

499
00:25:47,119 --> 00:25:49,440
Speaker 1: I guess the equivalent would be instead of saying, I'm

500
00:25:49,440 --> 00:25:51,680
Speaker 1: going to go into the middle of the desert and

501
00:25:51,800 --> 00:25:56,440
Speaker 1: build a building and hope people come around me, which

502
00:25:56,480 --> 00:25:58,800
Speaker 1: may or may not work. If you're in a neighborhood

503
00:25:58,800 --> 00:26:02,280
Speaker 1: you know as rising values, and you search for the

504
00:26:02,359 --> 00:26:04,880
Speaker 1: right value and then you improve that house and you

505
00:26:04,680 --> 00:26:06,800
Speaker 1: and you know, you fix the plumbing and you painted

506
00:26:06,840 --> 00:26:08,920
Speaker 1: and you clean it up. You know, it's safer than

507
00:26:08,960 --> 00:26:11,960
Speaker 1: taking the speculation on whether people are going to move

508
00:26:12,000 --> 00:26:14,439
Speaker 1: to the jungle and create you know, the village in

509
00:26:14,480 --> 00:26:17,200
Speaker 1: the jungle or not really interested that. That's what we're

510
00:26:17,240 --> 00:26:20,040
Speaker 1: based on. So let's talk a little bit about your

511
00:26:20,040 --> 00:26:25,000
Speaker 1: experience enforcement little during the R j R And Nibisco takeover.

512
00:26:25,240 --> 00:26:27,960
Speaker 1: Tell us a little bit about that experience. What was

513
00:26:28,000 --> 00:26:31,040
Speaker 1: that like? Yeah, it was an amazing time. And just

514
00:26:31,080 --> 00:26:33,199
Speaker 1: to give some context to it, it was part of

515
00:26:33,200 --> 00:26:38,440
Speaker 1: a bigger, longer term battle, which was there was the

516
00:26:38,480 --> 00:26:41,760
Speaker 1: whole junk bond world building behind Mike Milk and who

517
00:26:41,800 --> 00:26:43,760
Speaker 1: I now like in respect and I think he's become

518
00:26:43,760 --> 00:26:46,199
Speaker 1: a great philanthropist. At the time, my firm was just

519
00:26:46,840 --> 00:26:50,960
Speaker 1: dead set opposed to anything doing battle with him, not

520
00:26:51,119 --> 00:26:53,440
Speaker 1: using his money. And you know, it was a famous editorial.

521
00:26:53,440 --> 00:26:56,000
Speaker 1: Ted Forceman wrote that I helped, you know, right, the

522
00:26:56,040 --> 00:26:59,040
Speaker 1: first draft of for him and all that. So uh,

523
00:26:59,080 --> 00:27:01,960
Speaker 1: And it was we had fought against junk bonds in

524
00:27:01,960 --> 00:27:05,119
Speaker 1: the Revlon situation. We had fought against junk bonds and

525
00:27:05,240 --> 00:27:08,400
Speaker 1: lear Siegler situation, and we were the alternative to junk

526
00:27:08,440 --> 00:27:12,080
Speaker 1: bonds as a firm. And Ted, who was a very colorful,

527
00:27:12,160 --> 00:27:16,680
Speaker 1: glamorous guy dating lady died bigger than life. Also was

528
00:27:16,760 --> 00:27:18,879
Speaker 1: kind of had grown up in a very white shoe

529
00:27:18,880 --> 00:27:20,760
Speaker 1: preppy way in Connecticut, and I think it was just

530
00:27:20,840 --> 00:27:23,600
Speaker 1: kind of offended by the whole junk bond world and

531
00:27:23,680 --> 00:27:27,600
Speaker 1: just opposed it. Didn't like it. They're barbarians, They're they're barbarians.

532
00:27:27,640 --> 00:27:29,600
Speaker 1: He's the one who said the barbarians at the gate

533
00:27:30,000 --> 00:27:33,159
Speaker 1: and some people. That was his line, you know, is

534
00:27:33,240 --> 00:27:36,240
Speaker 1: his line. And the book, by the way, is quite accurate.

535
00:27:36,720 --> 00:27:39,240
Speaker 1: The movie is a total joke. So the movie says

536
00:27:39,280 --> 00:27:41,080
Speaker 1: based on a true story, but it was written by

537
00:27:41,080 --> 00:27:43,480
Speaker 1: the guy comedy right who wrote mash And they have

538
00:27:43,600 --> 00:27:46,520
Speaker 1: Ted and Nick dressed up as Indians and with cowboys,

539
00:27:46,560 --> 00:27:48,879
Speaker 1: and you know, KKRE and so that was none of

540
00:27:48,920 --> 00:27:52,480
Speaker 1: that happened, but the book was quite accurate. And anyways,

541
00:27:52,480 --> 00:27:55,520
Speaker 1: Our j Are itself, you know, was going to be

542
00:27:55,560 --> 00:27:58,040
Speaker 1: a deal where kak Are was working with Ross Johnson,

543
00:27:58,040 --> 00:28:00,000
Speaker 1: the CEO of Our Jeri. Because the stock had fallen

544
00:28:00,119 --> 00:28:04,040
Speaker 1: so much. Then Ross Johnson decided not to go with

545
00:28:04,160 --> 00:28:06,639
Speaker 1: kke Are and he teamed up with Lehman Brothers and

546
00:28:06,680 --> 00:28:08,960
Speaker 1: Solomon Brothers, who had a giant a chance for four

547
00:28:09,320 --> 00:28:11,840
Speaker 1: millions of fees by doing the deal, which was astounding

548
00:28:12,280 --> 00:28:15,480
Speaker 1: amount of fees for Wall Street in the eighties, and

549
00:28:15,880 --> 00:28:19,000
Speaker 1: KKR felt, well that was a break of a word.

550
00:28:19,080 --> 00:28:21,320
Speaker 1: They that they were entitled to still go after the

551
00:28:21,359 --> 00:28:23,199
Speaker 1: company and it was very cheap by a lot of

552
00:28:23,200 --> 00:28:26,760
Speaker 1: measures when the whole thing started. And then Ross Johnson

553
00:28:27,280 --> 00:28:29,720
Speaker 1: and his investment bankers didn't have enough money in the

554
00:28:29,760 --> 00:28:32,800
Speaker 1: world to do the deal, and so they came to

555
00:28:32,880 --> 00:28:36,160
Speaker 1: force Himan Little as the second biggest firm after kke Are,

556
00:28:36,240 --> 00:28:39,680
Speaker 1: and said would you back us because we need your

557
00:28:39,720 --> 00:28:42,719
Speaker 1: capital to get the deal done. And this is why

558
00:28:43,360 --> 00:28:45,920
Speaker 1: you know, again in the book, there's a meeting where

559
00:28:46,000 --> 00:28:48,800
Speaker 1: Ross Johnson comes in to meet Ted. I'm a partner,

560
00:28:48,840 --> 00:28:51,080
Speaker 1: so Ted and I sit with him, and he says,

561
00:28:51,120 --> 00:28:52,680
Speaker 1: I wanted to the deal. I don't want to do

562
00:28:52,720 --> 00:28:55,280
Speaker 1: the deal. It makes sense it's to And Ted says

563
00:28:55,280 --> 00:28:56,640
Speaker 1: to me, after, what do you think of him? And

564
00:28:56,680 --> 00:28:59,800
Speaker 1: I say, I think he's totally insane? And again I

565
00:28:59,880 --> 00:29:01,800
Speaker 1: was and quoted again in the book. But we actually

566
00:29:01,800 --> 00:29:05,280
Speaker 1: spent you know, night and day for weeks working. You know,

567
00:29:05,520 --> 00:29:07,520
Speaker 1: we thought we should study it. I mean, it's a

568
00:29:07,560 --> 00:29:10,240
Speaker 1: huge opportunity. We should, you know, it's our job to

569
00:29:10,240 --> 00:29:12,880
Speaker 1: study as a good deal or not. We spent weeks,

570
00:29:13,320 --> 00:29:16,560
Speaker 1: night and day studying it. Decided it wasn't a good deal,

571
00:29:16,680 --> 00:29:19,600
Speaker 1: decided not to bid, which UM fine with. And then

572
00:29:19,640 --> 00:29:21,960
Speaker 1: when we decided not to bid at ninety, it eventually

573
00:29:22,000 --> 00:29:24,960
Speaker 1: went up to you know, a hundred and eleven or

574
00:29:25,000 --> 00:29:27,920
Speaker 1: something like that. But was interesting was the size of it.

575
00:29:28,040 --> 00:29:29,560
Speaker 1: I think it was with all the debt, like a

576
00:29:29,600 --> 00:29:33,000
Speaker 1: thirty five billion dollar deal, and at the time it

577
00:29:33,040 --> 00:29:35,800
Speaker 1: was the nineteenth largest company in the in the fortune

578
00:29:35,800 --> 00:29:38,040
Speaker 1: five hundred I think at the time, so it's it's

579
00:29:38,080 --> 00:29:40,760
Speaker 1: it would be like a three hundred billion dollar deal today.

580
00:29:40,760 --> 00:29:43,680
Speaker 1: It was just huge for the time. And I remember

581
00:29:43,720 --> 00:29:46,880
Speaker 1: literally sitting with the bankers at Manny Hanny, and we

582
00:29:46,960 --> 00:29:49,960
Speaker 1: went through every lending bank in the world. Every major

583
00:29:50,000 --> 00:29:53,120
Speaker 1: bank has said if they lend their full legal limit,

584
00:29:53,480 --> 00:29:56,360
Speaker 1: could we raise enough debt. It's like, we need twenty

585
00:29:56,360 --> 00:29:59,160
Speaker 1: billion of debt and if you know, Bank Santander will

586
00:29:59,200 --> 00:30:01,600
Speaker 1: lend three it. And And you know, we tried to total

587
00:30:01,640 --> 00:30:03,560
Speaker 1: it up and it barely got to the It was

588
00:30:03,600 --> 00:30:06,400
Speaker 1: just an astoundingly big thing. There's no way to do

589
00:30:06,440 --> 00:30:08,480
Speaker 1: this without junk bonds. There's no way to do it

590
00:30:08,520 --> 00:30:12,320
Speaker 1: without junk bonds. And they eventually used, you know, and

591
00:30:12,360 --> 00:30:15,520
Speaker 1: again they used something called reset notes, which said, well,

592
00:30:15,560 --> 00:30:17,280
Speaker 1: if the bonds aren't doing well, we'll pay you a

593
00:30:17,360 --> 00:30:20,040
Speaker 1: higher interest rate, which means, of course you're killing the

594
00:30:20,040 --> 00:30:23,120
Speaker 1: company even further, which so it's like a vicious cycle

595
00:30:23,160 --> 00:30:26,520
Speaker 1: of destruction. And it almost destroyed KKE Care. Kke Care

596
00:30:26,560 --> 00:30:28,440
Speaker 1: and to buying it, and it was kind of a

597
00:30:28,520 --> 00:30:32,280
Speaker 1: pyric victory because it was a very tough deal for them.

598
00:30:32,280 --> 00:30:35,200
Speaker 1: They've they've done grated getting through it and they're you know,

599
00:30:35,200 --> 00:30:37,200
Speaker 1: they're a wonderful firm today. But I would I don't

600
00:30:37,200 --> 00:30:39,720
Speaker 1: think it was a happy experience from KKE Care to

601
00:30:39,800 --> 00:30:42,520
Speaker 1: have bought it. And uh, you know, so We looked

602
00:30:42,520 --> 00:30:44,640
Speaker 1: at it very hard decided not to bid. So I'm

603
00:30:44,680 --> 00:30:46,200
Speaker 1: proud of our role in it. I mean, we we

604
00:30:46,240 --> 00:30:49,200
Speaker 1: gave it a hard study and said no. But it

605
00:30:49,280 --> 00:30:51,720
Speaker 1: was a wild time. And and the investment bankers at

606
00:30:51,720 --> 00:30:54,200
Speaker 1: the time, we're just every time we went to a

607
00:30:54,240 --> 00:30:56,240
Speaker 1: meeting on do Dillon side? Is this a good company

608
00:30:56,280 --> 00:30:58,120
Speaker 1: or not? All they wanted to do was talk about

609
00:30:58,120 --> 00:31:00,200
Speaker 1: the feet splits. Well, there's four hundred a fee. This

610
00:31:00,240 --> 00:31:01,720
Speaker 1: is what we said. No, we don't want to talk

611
00:31:01,720 --> 00:31:03,360
Speaker 1: about that. We're trying to fire out what are the

612
00:31:03,400 --> 00:31:06,120
Speaker 1: earnings of the business. You know that. Well, you guys

613
00:31:06,120 --> 00:31:10,720
Speaker 1: put your own capital. We look a little different. It's

614
00:31:10,760 --> 00:31:14,000
Speaker 1: totally calculus less about you have more r O I

615
00:31:14,080 --> 00:31:15,760
Speaker 1: than hey, what are the feast we didn't you have?

616
00:31:15,840 --> 00:31:17,960
Speaker 1: The fees were irrelevant to us. We were all about

617
00:31:18,040 --> 00:31:20,200
Speaker 1: we would have been investing our fund in a huge way.

618
00:31:20,600 --> 00:31:23,600
Speaker 1: And we couldn't get anybody even to like focus on

619
00:31:23,640 --> 00:31:27,400
Speaker 1: the business itself. Everybody was so focused on the you know,

620
00:31:27,480 --> 00:31:30,040
Speaker 1: the the arrangements around it. It was. It was. It

621
00:31:30,080 --> 00:31:33,200
Speaker 1: was a wild time. And so that obviously raises the question,

622
00:31:34,640 --> 00:31:38,400
Speaker 1: all right, right off the bat, junk bonds shift the

623
00:31:38,480 --> 00:31:41,520
Speaker 1: focus from hey, I'm risking my own capital and I

624
00:31:41,600 --> 00:31:44,600
Speaker 1: want it back to how big a fee can we

625
00:31:44,680 --> 00:31:47,200
Speaker 1: spin up? What are some of the other problems that

626
00:31:47,240 --> 00:31:50,920
Speaker 1: you run into when junk bonds allow you to engage

627
00:31:50,920 --> 00:31:53,520
Speaker 1: in that behavior? Well, I mean they can get out

628
00:31:53,520 --> 00:31:56,360
Speaker 1: of hand. So I mean in oh seven and oh eight, Uh,

629
00:31:56,440 --> 00:31:59,840
Speaker 1: you know what killed economy seven right where mortgages going down.

630
00:32:00,480 --> 00:32:06,480
Speaker 1: But those were even levels and levels on that. But

631
00:32:06,760 --> 00:32:10,480
Speaker 1: you know, lending was getting very effusive in oh seven

632
00:32:10,480 --> 00:32:13,400
Speaker 1: and O eight and again banks, whether junk bond or not,

633
00:32:13,440 --> 00:32:15,760
Speaker 1: we're saying, well, we're not even lending, we're syndicating, so

634
00:32:15,800 --> 00:32:19,520
Speaker 1: we don't have to worry about it. I would say today,

635
00:32:19,800 --> 00:32:22,960
Speaker 1: you know it is it is a much different environment.

636
00:32:22,960 --> 00:32:25,520
Speaker 1: Even though the so called junk bond markets are strong

637
00:32:25,600 --> 00:32:29,440
Speaker 1: and high yield is strong. Uh, there is much more

638
00:32:29,480 --> 00:32:31,960
Speaker 1: equity in companies than there used to be. From the

639
00:32:31,960 --> 00:32:34,040
Speaker 1: private equity firm. We have a lending arm at my

640
00:32:34,120 --> 00:32:36,520
Speaker 1: firm as well. We have you know, we have both

641
00:32:36,520 --> 00:32:39,080
Speaker 1: a public version called New Mountain Finance Company at private

642
00:32:39,160 --> 00:32:42,120
Speaker 1: versions and when we're lending to other people's deals were

643
00:32:42,160 --> 00:32:48,360
Speaker 1: usually undert loan to value, uh, you know, not to value,

644
00:32:48,400 --> 00:32:51,120
Speaker 1: which is what it was. That's pretty safe. You have

645
00:32:52,080 --> 00:32:54,800
Speaker 1: of losses etiot, right, and we think it's a good

646
00:32:54,800 --> 00:32:57,080
Speaker 1: company that we've studied, you know, we use our private

647
00:32:57,080 --> 00:32:59,280
Speaker 1: equity people to study the credit. So we say, look,

648
00:32:59,280 --> 00:33:02,360
Speaker 1: it's in a tofensive growth industry. It's a very good company,

649
00:33:02,400 --> 00:33:05,680
Speaker 1: it's a very good sponsor, and we're almost always under

650
00:33:06,520 --> 00:33:09,400
Speaker 1: of the value. So we've we've had a very good

651
00:33:09,400 --> 00:33:12,840
Speaker 1: safety record there. But it's a different mindset than the eighties.

652
00:33:12,880 --> 00:33:14,920
Speaker 1: I mean, it was a it was a much wilder

653
00:33:14,960 --> 00:33:17,760
Speaker 1: debt market in the eighties than it is today. It's

654
00:33:17,800 --> 00:33:19,960
Speaker 1: a very different industry and a lot of the political

655
00:33:20,000 --> 00:33:23,640
Speaker 1: criticism about private equity, I think is a holdover of

656
00:33:23,680 --> 00:33:25,840
Speaker 1: the eighties where you had you know, Michael Douglas on

657
00:33:25,880 --> 00:33:28,600
Speaker 1: the giant cell phone in Wall Street and stuff and people.

658
00:33:28,720 --> 00:33:31,000
Speaker 1: That's what people think private equity is today and it

659
00:33:31,080 --> 00:33:35,360
Speaker 1: just isn't anymore. So back then you had high rates

660
00:33:35,400 --> 00:33:40,080
Speaker 1: that were falling. Today we have still relatively low rates

661
00:33:40,160 --> 00:33:45,160
Speaker 1: that a rising. How does the various interest rate regimes

662
00:33:45,200 --> 00:33:49,400
Speaker 1: affect what structures of deal look like, especially if there's

663
00:33:49,400 --> 00:33:51,920
Speaker 1: a lot of debt involved. Yeah, well, absolutely absolutely, they

664
00:33:51,920 --> 00:33:55,840
Speaker 1: absolutely do affect it. So again, the reason leverage biouts

665
00:33:55,880 --> 00:33:59,240
Speaker 1: took off and became a wild stallion in the eighties

666
00:33:59,360 --> 00:34:02,200
Speaker 1: was because you at interest rates going down for the decade,

667
00:34:02,480 --> 00:34:04,600
Speaker 1: you had the stock market going up for the decade.

668
00:34:05,560 --> 00:34:09,640
Speaker 1: I was walking Goldman's floor when the market broke a thousand,

669
00:34:09,719 --> 00:34:11,960
Speaker 1: you know, the market was didn't get over a thousand,

670
00:34:12,000 --> 00:34:15,160
Speaker 1: util like one or eighty two, and now it's thirty thousand.

671
00:34:15,200 --> 00:34:16,520
Speaker 1: So I mean, I tell people I had to, I

672
00:34:16,560 --> 00:34:18,239
Speaker 1: show him the curve of the stock market. I had

673
00:34:18,239 --> 00:34:20,960
Speaker 1: a pretty good career, right, I mean, because my timing

674
00:34:21,040 --> 00:34:23,359
Speaker 1: was quite good pleasant. You know, I'm trying to I'm

675
00:34:23,400 --> 00:34:24,800
Speaker 1: trying to be good at what I do as well.

676
00:34:25,040 --> 00:34:29,520
Speaker 1: So that is what led to the use of high debt,

677
00:34:29,640 --> 00:34:33,640
Speaker 1: to all the enthusiasm for the field. I truly believe

678
00:34:33,760 --> 00:34:36,600
Speaker 1: things have evolved. When we get to a current day.

679
00:34:37,480 --> 00:34:40,440
Speaker 1: It you know, unit growth didn't matter because of inflation

680
00:34:40,480 --> 00:34:44,200
Speaker 1: and rising markets. I would say for any good firm today,

681
00:34:44,320 --> 00:34:47,680
Speaker 1: for the last ten years, is really about unit growth,

682
00:34:47,760 --> 00:34:51,520
Speaker 1: business improvement, making the business better, because you can't just

683
00:34:51,600 --> 00:34:55,640
Speaker 1: count on rising stock markets and falling interest rates anymore.

684
00:34:55,680 --> 00:34:58,640
Speaker 1: If you do, you're you're really bad. Private equity firms

685
00:34:58,800 --> 00:35:02,439
Speaker 1: so that's a giant end at everybody's back for three

686
00:35:02,520 --> 00:35:07,319
Speaker 1: or four decades falling rates? Was it eighty two two?

687
00:35:07,880 --> 00:35:11,480
Speaker 1: That's a pretty good run of the general trend is lower,

688
00:35:12,520 --> 00:35:15,960
Speaker 1: and you have equity markets from eighty to at least

689
00:35:16,000 --> 00:35:20,040
Speaker 1: through twenty one rising pretty substantially. Even with the two

690
00:35:20,040 --> 00:35:23,399
Speaker 1: thousand's being a pretty it's probably been a forty year

691
00:35:23,920 --> 00:35:28,000
Speaker 1: secular bullmarket after thirteen years of stagflation from sixty to

692
00:35:28,120 --> 00:35:31,680
Speaker 1: eighty one, it's been, you know, forty good years from

693
00:35:31,680 --> 00:35:34,120
Speaker 1: eight one to today. I'm glad you brought up that

694
00:35:34,239 --> 00:35:40,040
Speaker 1: term because I'm old enough to remember the seventies as

695
00:35:40,080 --> 00:35:43,280
Speaker 1: a kid going to get gas to mow the lawn

696
00:35:43,800 --> 00:35:46,360
Speaker 1: and having the guy the attendant asked me, do you

697
00:35:46,360 --> 00:35:49,680
Speaker 1: have an even number or odd number license plate? My

698
00:35:49,680 --> 00:35:54,000
Speaker 1: my answer was, I'm eleven. I don't have a license plate.

699
00:35:54,320 --> 00:35:56,960
Speaker 1: Just give the kid as down a guess. But whenever

700
00:35:57,040 --> 00:36:01,000
Speaker 1: people talk about, oh, today we have stag inflation, you've

701
00:36:01,080 --> 00:36:03,719
Speaker 1: experienced both. How do you compare this series to the

702
00:36:03,719 --> 00:36:06,279
Speaker 1: seven Well, this is this is what I tried to say.

703
00:36:06,320 --> 00:36:09,399
Speaker 1: My first day at work into ten year treasuries were

704
00:36:09,440 --> 00:36:13,719
Speaker 1: fifteen point eight percent versus three point seven at a

705
00:36:13,760 --> 00:36:17,520
Speaker 1: house mortgage could be people paying of the house mortgages,

706
00:36:17,800 --> 00:36:21,080
Speaker 1: and the stock market was I think six times net

707
00:36:21,080 --> 00:36:23,520
Speaker 1: income when I used to sit in the Goldman you know,

708
00:36:23,880 --> 00:36:26,200
Speaker 1: h merger department on like what we could sell the

709
00:36:26,280 --> 00:36:28,879
Speaker 1: company for, and we'd all sit around the table. I mean,

710
00:36:28,960 --> 00:36:32,319
Speaker 1: if we really stretched ten times net income, I think,

711
00:36:32,320 --> 00:36:34,000
Speaker 1: if we find the hot buyer, we can get the

712
00:36:34,080 --> 00:36:37,640
Speaker 1: ten times you know, with no adjustments, no trickery, after

713
00:36:37,719 --> 00:36:39,680
Speaker 1: tax net income. That would be a great price for

714
00:36:39,760 --> 00:36:41,960
Speaker 1: most businesses. Or I remember reading a book when I

715
00:36:42,000 --> 00:36:45,080
Speaker 1: was in graduate business school. Never pay more than tangible

716
00:36:45,120 --> 00:36:47,919
Speaker 1: book value for any business. I mean, if you did

717
00:36:47,920 --> 00:36:50,879
Speaker 1: that Amazon, you know, I mean, Google would be worth

718
00:36:50,920 --> 00:36:52,560
Speaker 1: the penny. Or so why would I want to sell

719
00:36:52,600 --> 00:36:58,040
Speaker 1: something for tangible? Why would I pay more than the

720
00:36:58,120 --> 00:37:01,400
Speaker 1: value of the accounts receivable? There's no So that's and

721
00:37:01,560 --> 00:37:05,200
Speaker 1: so it is totally different today. But also the skill

722
00:37:05,280 --> 00:37:07,920
Speaker 1: sets you know what what I again, when we get

723
00:37:07,920 --> 00:37:10,880
Speaker 1: into more new mountain. There are eight billion people in

724
00:37:10,880 --> 00:37:13,640
Speaker 1: the world who get up every morning trying to make

725
00:37:13,680 --> 00:37:15,799
Speaker 1: their life better, make the world better. And there are

726
00:37:15,840 --> 00:37:20,000
Speaker 1: pockets of innovation all at all times, including now where

727
00:37:20,040 --> 00:37:23,400
Speaker 1: things are getting better, cheaper, better, ways to do things.

728
00:37:23,760 --> 00:37:27,040
Speaker 1: And if you're part of those trends and you accelerate

729
00:37:27,080 --> 00:37:30,759
Speaker 1: those trends and improve those businesses, there's wonderful opportunities at

730
00:37:30,760 --> 00:37:33,880
Speaker 1: all time. But it isn't just a general be dumb,

731
00:37:34,040 --> 00:37:36,560
Speaker 1: lever things up, wait for things to rise. That is

732
00:37:36,840 --> 00:37:40,400
Speaker 1: like dumb private equity that's been isn't around anymore. I

733
00:37:40,440 --> 00:37:42,520
Speaker 1: think if it is, it's going to be bottom Quartel.

734
00:37:42,880 --> 00:37:45,239
Speaker 1: Let's talk a little bit about why you launched New

735
00:37:45,239 --> 00:37:50,239
Speaker 1: Mountain Capital. You were having fun at Enforcement Little. Why

736
00:37:50,680 --> 00:37:53,719
Speaker 1: set out and stand up your own shop? Yeah, you know,

737
00:37:53,760 --> 00:37:57,960
Speaker 1: I had had a great twenty years working with Goldman

738
00:37:58,000 --> 00:38:00,439
Speaker 1: Sachs enforce some little Force Mi Little is a top,

739
00:38:00,480 --> 00:38:03,920
Speaker 1: top performing place. It was a very quirky place. We

740
00:38:03,960 --> 00:38:07,400
Speaker 1: had eight professionals at the firm and more people flying

741
00:38:07,400 --> 00:38:09,640
Speaker 1: the jets and the helicopters and the working at the firm.

742
00:38:09,719 --> 00:38:12,600
Speaker 1: And and Ted was kind of a very large who

743
00:38:12,680 --> 00:38:14,440
Speaker 1: was a great mentor to me in a lot of ways.

744
00:38:14,560 --> 00:38:17,480
Speaker 1: Was also known, you know, he's passed away, was known

745
00:38:17,480 --> 00:38:22,160
Speaker 1: to be a somewhat difficult personality and uh life dating

746
00:38:22,239 --> 00:38:24,759
Speaker 1: lady Die, you know, flying in the Gulf streams and

747
00:38:24,800 --> 00:38:27,360
Speaker 1: all that. But it was always kind of a It

748
00:38:27,480 --> 00:38:30,399
Speaker 1: was not a calm, happy place inside. So I broke

749
00:38:30,440 --> 00:38:33,920
Speaker 1: off to start a new mountain, and uh, you know,

750
00:38:34,160 --> 00:38:36,319
Speaker 1: it's gone better than ever would have expected. And it's

751
00:38:36,360 --> 00:38:40,520
Speaker 1: been a great experience. Yes, So when you leave forceman

752
00:38:40,520 --> 00:38:43,160
Speaker 1: a little, are you thinking I'm going to just do

753
00:38:43,239 --> 00:38:45,520
Speaker 1: the same thing. Are you thinking I have a lot

754
00:38:45,560 --> 00:38:48,080
Speaker 1: of ideas that wouldn't have worked there that I want

755
00:38:48,080 --> 00:38:49,959
Speaker 1: to try out on my own. You know, I had

756
00:38:52,160 --> 00:38:56,360
Speaker 1: really enjoyed the General Instrument experience where we took it

757
00:38:56,360 --> 00:38:58,399
Speaker 1: from a billion of value to twenty billion, and had

758
00:38:58,440 --> 00:39:00,680
Speaker 1: we had I can imagine why it enjoy well. And

759
00:39:00,760 --> 00:39:04,000
Speaker 1: besides that the value went up. We had been the

760
00:39:04,040 --> 00:39:06,680
Speaker 1: first company in the world to propose an all digital

761
00:39:07,160 --> 00:39:11,680
Speaker 1: television standard. We helped pioneer cable modems, We created the

762
00:39:11,719 --> 00:39:14,719
Speaker 1: thousand channel cable systems on demand. It was really a

763
00:39:14,760 --> 00:39:17,880
Speaker 1: great experience for nine years just really building a business,

764
00:39:17,920 --> 00:39:21,520
Speaker 1: not just putting passive capital rock and it was it

765
00:39:21,600 --> 00:39:24,400
Speaker 1: was considered one of the first great kind of technological deals.

766
00:39:24,440 --> 00:39:26,160
Speaker 1: I used to go out to Kleiner Perkins and have

767
00:39:26,239 --> 00:39:27,960
Speaker 1: a regulation with them, so I mean it was a

768
00:39:27,960 --> 00:39:29,960
Speaker 1: really kind of a cutting edge deal. And other deals

769
00:39:30,040 --> 00:39:32,799
Speaker 1: were similar at FORCEM a little so the idea of

770
00:39:33,640 --> 00:39:37,399
Speaker 1: safety but growth, really growing businesses. The whole name New

771
00:39:37,400 --> 00:39:39,320
Speaker 1: Mountain comes to the idea of building new mountains and

772
00:39:39,400 --> 00:39:43,759
Speaker 1: industries where we invest and protect the downside first and

773
00:39:43,800 --> 00:39:47,360
Speaker 1: then really build something instead of levering things or risking

774
00:39:47,400 --> 00:39:50,359
Speaker 1: things was very attractive. And and the fact to build

775
00:39:50,360 --> 00:39:52,880
Speaker 1: a culture that was kind of more of a Goldman

776
00:39:52,960 --> 00:39:57,680
Speaker 1: Sachs family business culture. Plus that those approaches, you know,

777
00:39:58,239 --> 00:40:03,319
Speaker 1: we're compelling. So talk about building new mountains in You

778
00:40:03,440 --> 00:40:07,279
Speaker 1: executed a four billion dollar i p O for your

779
00:40:07,600 --> 00:40:12,000
Speaker 1: Avantur Life Sciences company, the largest healthcare related I p

780
00:40:12,160 --> 00:40:14,480
Speaker 1: O I think in history. Is that is that? Yeah,

781
00:40:14,480 --> 00:40:16,640
Speaker 1: we've had we've had some good I p O successes

782
00:40:16,680 --> 00:40:18,680
Speaker 1: and you know, and I'm only gonna tell you what's

783
00:40:18,719 --> 00:40:20,440
Speaker 1: in the public record because I don't want to try to,

784
00:40:20,680 --> 00:40:23,200
Speaker 1: you know, give returns or anything. We had bought a

785
00:40:23,200 --> 00:40:27,000
Speaker 1: business that was called JT. Baker for two million dollars

786
00:40:27,000 --> 00:40:29,280
Speaker 1: when it was going to be discontinued by Malan Kratt.

787
00:40:29,840 --> 00:40:33,400
Speaker 1: We renamed it avant Or change the management, change the strategy,

788
00:40:33,400 --> 00:40:35,640
Speaker 1: and built in from two nine million to twenty billion

789
00:40:35,680 --> 00:40:38,799
Speaker 1: plus and not fortunate, not to shabby, and it's now

790
00:40:39,880 --> 00:40:42,000
Speaker 1: you know, with Thermo Fisher, one of the two leaders

791
00:40:42,000 --> 00:40:44,920
Speaker 1: in lab equipment and life science supplies around the world.

792
00:40:45,320 --> 00:40:48,719
Speaker 1: We had another business like that called Signify, which is

793
00:40:49,200 --> 00:40:54,400
Speaker 1: in contract to be sold to CVS. What Signify is

794
00:40:54,440 --> 00:40:57,600
Speaker 1: the leader and sending doctors and nurses into the homes

795
00:40:57,760 --> 00:41:01,000
Speaker 1: for medical checks. And we took it from two fifty

796
00:41:01,080 --> 00:41:03,080
Speaker 1: thousand home visits a year to two and a half

797
00:41:03,160 --> 00:41:06,239
Speaker 1: million home visits a year and then CVS, if they

798
00:41:06,280 --> 00:41:08,440
Speaker 1: own it, could really do even better and save lives.

799
00:41:08,520 --> 00:41:11,640
Speaker 1: By combining CBS with what the doctor visits do, it

800
00:41:11,680 --> 00:41:13,880
Speaker 1: could be really a great thing for society if the

801
00:41:14,040 --> 00:41:17,359
Speaker 1: you know, if they buy it. So, uh, you know,

802
00:41:17,360 --> 00:41:19,239
Speaker 1: those are just some examples. We've had a bunch of

803
00:41:19,280 --> 00:41:22,880
Speaker 1: good successes. So this isn't pouring money into startups like

804
00:41:23,040 --> 00:41:27,120
Speaker 1: ventured does you look at existing companies that are either

805
00:41:27,920 --> 00:41:31,319
Speaker 1: undervalued or maybe misvalued is a better way to describe it.

806
00:41:31,400 --> 00:41:34,399
Speaker 1: But what we do is, uh, we have a whole

807
00:41:34,480 --> 00:41:37,359
Speaker 1: very formal, top down process for twenty years where we

808
00:41:37,480 --> 00:41:40,480
Speaker 1: choose the sectors that we think can grow with secular

809
00:41:40,480 --> 00:41:42,800
Speaker 1: growth for the next ten years. Those are defensive growth

810
00:41:42,800 --> 00:41:46,719
Speaker 1: sectors and we really become the best. We try to

811
00:41:46,719 --> 00:41:49,040
Speaker 1: become the best there is anywhere in those sectors. So

812
00:41:49,440 --> 00:41:54,360
Speaker 1: life science supplies healthcare, I T managing wind and solar farms,

813
00:41:54,760 --> 00:41:58,560
Speaker 1: uh niche software and consumer different things like that. We

814
00:41:58,640 --> 00:42:03,360
Speaker 1: buy a business that's already safe and stable but hasn't

815
00:42:03,360 --> 00:42:06,120
Speaker 1: figured all the ways to grow itself yet, and then

816
00:42:06,160 --> 00:42:09,040
Speaker 1: we grow it in every possible way. So we buy

817
00:42:09,120 --> 00:42:12,440
Speaker 1: businesses from you know, one million on up and we

818
00:42:12,480 --> 00:42:15,880
Speaker 1: add venture capital upside, but to a safe base. We

819
00:42:15,920 --> 00:42:18,120
Speaker 1: don't want to have the one big winner and a

820
00:42:18,160 --> 00:42:20,920
Speaker 1: bunch of losers. We we've never had a business again

821
00:42:21,160 --> 00:42:23,719
Speaker 1: go out of business or not paying interest payment, And

822
00:42:23,760 --> 00:42:26,360
Speaker 1: the question is, uh, you know how high we can do.

823
00:42:26,440 --> 00:42:32,439
Speaker 1: So it's different math than I need one winner vers yeah,

824
00:42:32,480 --> 00:42:34,759
Speaker 1: I don't have Coming from a family business, we say

825
00:42:34,800 --> 00:42:37,880
Speaker 1: we don't have portfolio theory. We have family business theory.

826
00:42:38,200 --> 00:42:40,760
Speaker 1: When we go into a company, we want to preserve

827
00:42:40,800 --> 00:42:43,520
Speaker 1: and protect it. We're responsible for it. If there's a problem,

828
00:42:43,560 --> 00:42:45,719
Speaker 1: we worked twice as hard to fix it. On the

829
00:42:45,719 --> 00:42:48,120
Speaker 1: other hand, a lot of these businesses, you know, the

830
00:42:48,280 --> 00:42:50,520
Speaker 1: entrepreneur had built it up to a certain size, had

831
00:42:50,560 --> 00:42:53,880
Speaker 1: never done an acquisition, had never built the sales force,

832
00:42:53,960 --> 00:42:58,040
Speaker 1: had never made technology investments in the full way, had

833
00:42:58,080 --> 00:43:02,279
Speaker 1: never gone international. So we take the business and then

834
00:43:02,480 --> 00:43:05,040
Speaker 1: take it up to the next level of growth. What

835
00:43:05,160 --> 00:43:08,359
Speaker 1: other lines of investment do you focus on? Do you

836
00:43:08,520 --> 00:43:11,480
Speaker 1: do credit, you do distress, that set real estate? Tell

837
00:43:11,560 --> 00:43:13,960
Speaker 1: us where else you focus. So the way we think

838
00:43:14,000 --> 00:43:17,840
Speaker 1: about it in these defensive growth sectors, our first choice

839
00:43:17,840 --> 00:43:20,759
Speaker 1: is to buy majority control and build the business. That's

840
00:43:20,760 --> 00:43:24,080
Speaker 1: our private equity fund. If the founder says, I love

841
00:43:24,120 --> 00:43:25,640
Speaker 1: you guys, you can add a lot of value. I

842
00:43:25,640 --> 00:43:28,240
Speaker 1: don't want to sell control. We have a non control

843
00:43:28,320 --> 00:43:31,560
Speaker 1: fund called strategic Equity to buy the same sort of

844
00:43:31,560 --> 00:43:33,960
Speaker 1: business as we just don't have control, but we're very

845
00:43:33,960 --> 00:43:37,480
Speaker 1: involved in building the business. If equities not for sale,

846
00:43:37,520 --> 00:43:39,719
Speaker 1: but we think it's a great, safe business, like a

847
00:43:39,760 --> 00:43:43,000
Speaker 1: great software business that someone else bought, we can lend

848
00:43:43,040 --> 00:43:45,640
Speaker 1: to them that we that's our credit arm which trades

849
00:43:45,680 --> 00:43:48,120
Speaker 1: publicly as New Mountain Finance Company, and we have private

850
00:43:48,239 --> 00:43:51,920
Speaker 1: versions and uh, you know, and since we've been so

851
00:43:52,000 --> 00:43:54,720
Speaker 1: safe at the equity level, we've been very very safe

852
00:43:54,719 --> 00:43:56,960
Speaker 1: at the debt level. And if they don't need a loan,

853
00:43:57,200 --> 00:43:59,160
Speaker 1: we can lease them their own building back in and

854
00:43:59,280 --> 00:44:01,920
Speaker 1: at least and have both the credit of the company

855
00:44:02,000 --> 00:44:05,680
Speaker 1: and the real estate is collateral. And that's like to us,

856
00:44:05,680 --> 00:44:07,759
Speaker 1: a very another high version of that. That was a

857
00:44:07,880 --> 00:44:11,840
Speaker 1: huge business for a while. The net least bacs is

858
00:44:11,880 --> 00:44:14,840
Speaker 1: that still as popular as it once was. It's always

859
00:44:14,840 --> 00:44:17,640
Speaker 1: been niche within real estate. There was one guy who

860
00:44:17,760 --> 00:44:21,160
Speaker 1: did it very aggressively, who bought every restaurant chain and stuff,

861
00:44:21,200 --> 00:44:24,960
Speaker 1: who overstepped the people have been doing. The long term,

862
00:44:24,960 --> 00:44:27,800
Speaker 1: it's been an extremely safe asset class and it's actually

863
00:44:27,840 --> 00:44:31,680
Speaker 1: I think kind of an undiscovered asset class. And uh,

864
00:44:32,000 --> 00:44:33,680
Speaker 1: you know, we had a very good run of it

865
00:44:33,719 --> 00:44:36,360
Speaker 1: so far. And a lot of private equity has been

866
00:44:36,400 --> 00:44:40,920
Speaker 1: focusing on private credit. What does New Mountain Capital do

867
00:44:40,960 --> 00:44:44,200
Speaker 1: in the space of private credit if anything? Yeah, so

868
00:44:44,480 --> 00:44:46,600
Speaker 1: that is our our private credit. We run about ten

869
00:44:46,600 --> 00:44:49,480
Speaker 1: billion of private credit. We have one of the largest

870
00:44:49,680 --> 00:44:52,080
Speaker 1: and oldest of the what's called the b DC, these

871
00:44:52,080 --> 00:44:55,439
Speaker 1: publicly traded credit arms. What's great about them is it's

872
00:44:55,480 --> 00:44:59,239
Speaker 1: floating rate debt, so as the interest rates have gone

873
00:44:59,280 --> 00:45:01,879
Speaker 1: up with inflation, and it's actually better for this type

874
00:45:01,880 --> 00:45:03,919
Speaker 1: of lending. It's not like owning a long term fixed

875
00:45:04,000 --> 00:45:06,920
Speaker 1: rate bond, you get all the advantages of inflation and

876
00:45:07,000 --> 00:45:10,680
Speaker 1: the higher interest rates. The key is to avoid defaults,

877
00:45:10,719 --> 00:45:13,719
Speaker 1: and we do that by focusing on the safe industries

878
00:45:14,360 --> 00:45:16,719
Speaker 1: and really knowing the businesses and being able to fix

879
00:45:16,800 --> 00:45:18,919
Speaker 1: them if we need to go in and fix them. Uh.

880
00:45:18,920 --> 00:45:21,359
Speaker 1: And net least is similar where what's nice about it

881
00:45:21,440 --> 00:45:25,160
Speaker 1: is you have rent escalators for twenty years that more

882
00:45:25,200 --> 00:45:28,520
Speaker 1: than cover inflation, and you have both the credit of

883
00:45:28,520 --> 00:45:30,719
Speaker 1: the business and the real estate if you need the

884
00:45:30,719 --> 00:45:33,520
Speaker 1: real estate. And so that we do the credit in

885
00:45:33,560 --> 00:45:36,000
Speaker 1: the net least for good, steady yield, and we do

886
00:45:36,080 --> 00:45:40,000
Speaker 1: private equity and strategic equity for you know, big returns.

887
00:45:40,040 --> 00:45:42,600
Speaker 1: So I know we're not going to talk about performance

888
00:45:42,640 --> 00:45:45,920
Speaker 1: and returns because of the normal compliance headaches. Do you

889
00:45:46,080 --> 00:45:51,120
Speaker 1: target specific returns for different types of investment? Credit, real estate,

890
00:45:51,640 --> 00:45:54,279
Speaker 1: business turnarounds? How do you think about those in terms

891
00:45:54,320 --> 00:45:57,320
Speaker 1: of what that can generate. Yeah, So an investment committee

892
00:45:57,360 --> 00:46:00,880
Speaker 1: for private equity or strategic equity, we have two questions.

893
00:46:01,040 --> 00:46:03,200
Speaker 1: Is it safe on the downside even if the world

894
00:46:03,200 --> 00:46:05,520
Speaker 1: goes bad, And do we think we have a fighting

895
00:46:05,600 --> 00:46:08,440
Speaker 1: chance to make thirty percent gross returns on the investment

896
00:46:08,480 --> 00:46:12,080
Speaker 1: or better? That's our over about a four year period,

897
00:46:12,320 --> 00:46:16,759
Speaker 1: so we're not annually were you know, compound over four years,

898
00:46:16,760 --> 00:46:19,520
Speaker 1: which is like a three or four bagger on investment.

899
00:46:19,600 --> 00:46:21,680
Speaker 1: That's kind of and again we've had better and we've

900
00:46:21,680 --> 00:46:24,520
Speaker 1: had worse, but you know we've that's kind of our

901
00:46:24,560 --> 00:46:28,640
Speaker 1: standard target in private equity and strategic equity, and then

902
00:46:28,840 --> 00:46:31,799
Speaker 1: in the credit and net least funds were trying to

903
00:46:31,840 --> 00:46:34,359
Speaker 1: have a current yield. It used to be it's about

904
00:46:34,440 --> 00:46:38,000
Speaker 1: eight hundred bases points over the base rates, so it

905
00:46:38,080 --> 00:46:40,920
Speaker 1: used to be kind of a ten percent type target.

906
00:46:41,000 --> 00:46:43,200
Speaker 1: And as rates have moved up, that target moves up

907
00:46:43,200 --> 00:46:46,160
Speaker 1: as well. So and that's supposed to be current yield.

908
00:46:46,440 --> 00:46:52,359
Speaker 1: Every you know paid out every quarter live war plus six. Yeah,

909
00:46:52,440 --> 00:46:55,120
Speaker 1: people do use live more so and again I'm not

910
00:46:55,160 --> 00:46:57,480
Speaker 1: talking about us specifically, but you know you might see

911
00:46:57,480 --> 00:47:00,120
Speaker 1: a thirteen percent type return on loans where you to

912
00:47:00,160 --> 00:47:03,719
Speaker 1: be last year, I mean, and and the interest rates

913
00:47:03,719 --> 00:47:07,120
Speaker 1: are still going through, working through because as the interest

914
00:47:07,200 --> 00:47:10,040
Speaker 1: rates reset from the borrowers. So I'm setting higher at

915
00:47:10,080 --> 00:47:13,440
Speaker 1: the moment. I've noticed some of the publicly traded private

916
00:47:13,440 --> 00:47:17,760
Speaker 1: equity firms UM have a tendency to say we're gonna

917
00:47:17,840 --> 00:47:23,440
Speaker 1: offer are all strategy funds, which is each of our

918
00:47:23,480 --> 00:47:27,200
Speaker 1: five strategies. Do you guys do anything We haven't. I mean,

919
00:47:27,200 --> 00:47:29,400
Speaker 1: it's not a bad idea to do that. We you know,

920
00:47:29,480 --> 00:47:32,799
Speaker 1: we want to let each limited partner choose just what

921
00:47:32,840 --> 00:47:35,680
Speaker 1: they want for themselves. We haven't done, you know, the

922
00:47:35,800 --> 00:47:38,399
Speaker 1: umbrella fund, but people can be We do have people

923
00:47:38,400 --> 00:47:41,919
Speaker 1: who are on multiple funds, but we've done it. Cart

924
00:47:42,200 --> 00:47:45,600
Speaker 1: and you mentioned your LPs. Who are your clients, meaning

925
00:47:46,040 --> 00:47:49,440
Speaker 1: what sort of investors in the private equity fund and

926
00:47:49,480 --> 00:47:53,480
Speaker 1: strategic equity fund. It's the big pension funds in the US,

927
00:47:53,600 --> 00:47:57,320
Speaker 1: it's the big Canadian asset plans. It's the sovereign funds

928
00:47:57,360 --> 00:48:00,439
Speaker 1: around the world in Europe and Asia, and in our

929
00:48:00,480 --> 00:48:04,440
Speaker 1: credit funds. On the public one, it's some institutions and

930
00:48:04,520 --> 00:48:07,239
Speaker 1: retail investors, just high net worth investors who are looking

931
00:48:07,239 --> 00:48:11,560
Speaker 1: for double digit yields. Also in net lease. That's kind

932
00:48:11,560 --> 00:48:15,200
Speaker 1: of the breakdown, really interesting. Before we get to our

933
00:48:15,400 --> 00:48:19,200
Speaker 1: favorite questions, I have a couple of curveballs to throw you,

934
00:48:19,360 --> 00:48:23,640
Speaker 1: and the first is you set up the Modern States

935
00:48:23,719 --> 00:48:27,720
Speaker 1: Education Alliance to look for solutions to the high cost

936
00:48:27,880 --> 00:48:32,080
Speaker 1: of college education. Tell us what that is, what motivated

937
00:48:32,120 --> 00:48:34,799
Speaker 1: you to do that and how's it going. Yeah, thanks

938
00:48:34,880 --> 00:48:37,200
Speaker 1: thanks for asking about that. That's a cause that's very

939
00:48:37,200 --> 00:48:39,359
Speaker 1: near and dear to my heart. So you know, I'm

940
00:48:39,360 --> 00:48:40,880
Speaker 1: proud of what New Mountain does in the way we

941
00:48:40,920 --> 00:48:44,000
Speaker 1: build companies. I'm also trying to do philanthropy alongside a

942
00:48:44,000 --> 00:48:47,080
Speaker 1: New Mountain. I've been very involved in education reform for

943
00:48:47,120 --> 00:48:49,839
Speaker 1: many years and after school centers I set up set

944
00:48:49,920 --> 00:48:52,279
Speaker 1: up the first charter school in New York State. I'm

945
00:48:52,320 --> 00:48:56,280
Speaker 1: the chair of Harvard's Public Education Policy Group. I succeeded

946
00:48:56,360 --> 00:48:59,560
Speaker 1: Jeb Bush there. And the cost of college has gotten

947
00:48:59,560 --> 00:49:02,880
Speaker 1: incredible expensive. The average college even at a state school

948
00:49:03,000 --> 00:49:06,400
Speaker 1: is thirty thousand a year all in there are And

949
00:49:06,480 --> 00:49:08,520
Speaker 1: so what we did at Modern States, and it was

950
00:49:08,520 --> 00:49:10,759
Speaker 1: an idea I had that we're now doing, is we

951
00:49:10,840 --> 00:49:13,400
Speaker 1: hired the best professors we could find in the country,

952
00:49:13,440 --> 00:49:17,800
Speaker 1: like Johns Hopkins math professors, to teach the basic freshman

953
00:49:17,960 --> 00:49:22,360
Speaker 1: courses online as a top quality online course. But instead

954
00:49:22,360 --> 00:49:25,000
Speaker 1: of charging which everybody does, we just give them away

955
00:49:25,000 --> 00:49:28,279
Speaker 1: for free. There like a library of free courses with

956
00:49:28,360 --> 00:49:33,120
Speaker 1: practice questions. They qualify you to take the College Board,

957
00:49:33,160 --> 00:49:35,719
Speaker 1: which does the s A T exams in advanced Placement

958
00:49:36,160 --> 00:49:38,480
Speaker 1: has a set of exams called the Clip exams that

959
00:49:38,560 --> 00:49:41,280
Speaker 1: anyone can take at any age, and if you pass

960
00:49:41,360 --> 00:49:45,200
Speaker 1: those exams, you get credit at almost any state school,

961
00:49:45,280 --> 00:49:48,120
Speaker 1: any community college. Almost you don't get it at Harvard

962
00:49:48,120 --> 00:49:53,640
Speaker 1: and Yale, but Michigan State, Penn State, Ohio State, you know, sowards.

963
00:49:53,680 --> 00:49:56,919
Speaker 1: You could do a year school essentially totally for free,

964
00:49:56,960 --> 00:50:00,440
Speaker 1: and we also pay the exam fees for you. So anybody,

965
00:50:00,520 --> 00:50:02,600
Speaker 1: if you were the poorest person in the world and

966
00:50:02,640 --> 00:50:06,560
Speaker 1: you have ambition, go to Modern States dot com or

967
00:50:06,600 --> 00:50:09,640
Speaker 1: dot org Modern States dot org. You'll see all the

968
00:50:09,680 --> 00:50:12,279
Speaker 1: courses laid out. All you gotta do is download them

969
00:50:12,360 --> 00:50:15,440
Speaker 1: like you would a Netflix movie. Well, when you pass

970
00:50:15,520 --> 00:50:17,560
Speaker 1: the course, we give you the voucher to pay for

971
00:50:17,640 --> 00:50:21,279
Speaker 1: the exam, and when you have those exams passed, every

972
00:50:21,280 --> 00:50:24,759
Speaker 1: admissions catalog will tell you which Clip exams I'll take

973
00:50:24,760 --> 00:50:28,120
Speaker 1: for credit. So we have over three thousand users. We've saved,

974
00:50:28,280 --> 00:50:30,080
Speaker 1: you know, tens and tens of millions of dollars for

975
00:50:30,200 --> 00:50:33,840
Speaker 1: people already, and it is so efficient because you know,

976
00:50:33,880 --> 00:50:36,520
Speaker 1: I spent we spent some millions to prepare the courses.

977
00:50:36,960 --> 00:50:39,440
Speaker 1: But it's like if you do The Godfather on Netflix,

978
00:50:39,440 --> 00:50:41,520
Speaker 1: and you have to do the Godfather every time. I

979
00:50:41,520 --> 00:50:43,760
Speaker 1: mean once it's on the site, it's on the site.

980
00:50:44,160 --> 00:50:46,480
Speaker 1: So if a million people use it, they can all

981
00:50:46,520 --> 00:50:49,239
Speaker 1: see the same course. It doesn't cost us anymore, and

982
00:50:49,280 --> 00:50:51,279
Speaker 1: we are paying the exam fees for as far as

983
00:50:51,320 --> 00:50:53,960
Speaker 1: we can keep affording it. It's just a great way

984
00:50:53,960 --> 00:50:56,480
Speaker 1: to save money. So like Perdue has made it a

985
00:50:56,560 --> 00:50:59,120
Speaker 1: key program at Perdue, they call it Perdue Fast Start.

986
00:50:59,120 --> 00:51:02,399
Speaker 1: They're encouraging every poor kid in Indiana to take these

987
00:51:02,400 --> 00:51:05,759
Speaker 1: courses and enter Produe as a sophomore. We're working with

988
00:51:05,800 --> 00:51:09,120
Speaker 1: all sorts of people. So it's my major charity cause

989
00:51:09,320 --> 00:51:13,680
Speaker 1: that's really intriguing. And then another curve ball. Your wife,

990
00:51:13,960 --> 00:51:19,520
Speaker 1: a former bear Stearns banker, published a book in Opening

991
00:51:19,600 --> 00:51:23,319
Speaker 1: Bell spelled with an Eon Bell, which is a fictionalized

992
00:51:23,320 --> 00:51:28,240
Speaker 1: accountable woman navigating the financial crisis here at Wall Street.

993
00:51:28,600 --> 00:51:32,000
Speaker 1: Tell us a little bit about that. I'm very blessed.

994
00:51:32,040 --> 00:51:34,920
Speaker 1: I have a beautiful, brilliant wife who was a managing

995
00:51:34,960 --> 00:51:38,080
Speaker 1: director at bear Stearns, lived through, you know, all the

996
00:51:38,320 --> 00:51:40,720
Speaker 1: me too movement before there was at me too movement,

997
00:51:41,560 --> 00:51:44,600
Speaker 1: got her masters in in Fine arts at Columbia, wrote

998
00:51:44,640 --> 00:51:46,480
Speaker 1: both a great book that's in a lot of school

999
00:51:46,560 --> 00:51:50,520
Speaker 1: libraries called Walls within Walls for like Harry Potter readers,

1000
00:51:50,760 --> 00:51:53,399
Speaker 1: and wrote a bestseller called Opening Bell for adults, which

1001
00:51:53,480 --> 00:51:57,880
Speaker 1: is about a woman named Bell who is uh working

1002
00:51:57,880 --> 00:52:00,080
Speaker 1: through Wall Street as the breadwinner with a husban and

1003
00:52:00,200 --> 00:52:02,920
Speaker 1: who's like an audio visual guy. So everybody thinks it's

1004
00:52:02,920 --> 00:52:05,279
Speaker 1: that I'm an audio visual guy who's lost his job.

1005
00:52:05,360 --> 00:52:08,440
Speaker 1: But otherwise it's a very accurate book, and it's a

1006
00:52:08,480 --> 00:52:10,840
Speaker 1: great book, and it was gonna be a Reese Witherspoon

1007
00:52:10,880 --> 00:52:12,680
Speaker 1: movie and it's still kind of out there, and so

1008
00:52:12,880 --> 00:52:16,400
Speaker 1: uh it was. I recommend anyone who wants to know

1009
00:52:16,400 --> 00:52:18,279
Speaker 1: what it's like to be a woman on Walster. All Right,

1010
00:52:18,360 --> 00:52:20,279
Speaker 1: I only have you for a limited amount of time,

1011
00:52:20,360 --> 00:52:23,799
Speaker 1: so let's jump to our favorite questions. And since you

1012
00:52:23,880 --> 00:52:28,040
Speaker 1: mentioned Netflix, let's start there. Tell us what you were

1013
00:52:28,080 --> 00:52:31,520
Speaker 1: watching during the lockdown? What kept you entertained well during

1014
00:52:31,960 --> 00:52:35,720
Speaker 1: during the lockdown? We of course had to watch Tiger

1015
00:52:35,840 --> 00:52:38,799
Speaker 1: King and when I was when we were stuck for

1016
00:52:38,880 --> 00:52:42,200
Speaker 1: months aging crazy at home with are We have young

1017
00:52:42,239 --> 00:52:45,359
Speaker 1: adult kids now who had their you know, significant others over.

1018
00:52:45,800 --> 00:52:48,160
Speaker 1: We once had a Tiger King dinner party where we

1019
00:52:48,200 --> 00:52:50,399
Speaker 1: all dressed up, and we were going so crazy under

1020
00:52:50,400 --> 00:52:52,520
Speaker 1: COVID that everybody said, look, let's all come down and

1021
00:52:52,520 --> 00:52:55,120
Speaker 1: have dinner as a tiger king. Characters that got us

1022
00:52:55,160 --> 00:52:58,320
Speaker 1: through COVID. These days though, uh, and I'm gonna not

1023
00:52:58,400 --> 00:53:00,719
Speaker 1: have to be locked down anymore these is it's uh.

1024
00:53:00,840 --> 00:53:04,480
Speaker 1: I love White Lotus too, and I love Succession. I'm

1025
00:53:04,480 --> 00:53:06,399
Speaker 1: waiting for a Succession to come back. So those would

1026
00:53:06,400 --> 00:53:09,680
Speaker 1: be the shows today. Um, I'm gonna give you a

1027
00:53:09,719 --> 00:53:13,279
Speaker 1: recommendation because I think this might intrigue you. We just

1028
00:53:13,320 --> 00:53:19,799
Speaker 1: started Kaleidoscope, which is like um, Money Heist, only it's

1029
00:53:19,880 --> 00:53:25,120
Speaker 1: I think it's limited to eight episodes and apparently you

1030
00:53:25,160 --> 00:53:28,680
Speaker 1: can watch them in any order. There's no chronology. Well

1031
00:53:29,760 --> 00:53:32,319
Speaker 1: that's very interesting. That's that's the thought process. Tell us

1032
00:53:32,320 --> 00:53:36,719
Speaker 1: a little bit about your mentors who helped shape your career. Yeah. Look,

1033
00:53:36,760 --> 00:53:40,040
Speaker 1: the biggest mentor in my life was my father and

1034
00:53:40,480 --> 00:53:44,160
Speaker 1: incredibly influential to me and a wonderful man. I read

1035
00:53:44,200 --> 00:53:46,400
Speaker 1: a ton of history, so every time I read a

1036
00:53:46,440 --> 00:53:50,200
Speaker 1: history book, whether they failed or succeeded, they're kind of

1037
00:53:50,200 --> 00:53:52,319
Speaker 1: a mentor. For Like, I'm just finishing a book now

1038
00:53:52,360 --> 00:53:56,080
Speaker 1: about Emperor Maximilian and Carlott in Mexico ended up getting

1039
00:53:56,120 --> 00:53:58,759
Speaker 1: you know, shot by our firing squad. And but you

1040
00:53:58,880 --> 00:54:01,520
Speaker 1: learn a lot and everything. And uh as far as

1041
00:54:01,560 --> 00:54:04,560
Speaker 1: investment mentors, I was very influenced by Goldman Sachs and

1042
00:54:04,640 --> 00:54:08,279
Speaker 1: its culture. Uh Ted Forceman and the Forcemen little guys

1043
00:54:08,320 --> 00:54:12,239
Speaker 1: were incredibly good investors and very thoughtful. And so I

1044
00:54:12,280 --> 00:54:15,160
Speaker 1: mean everybody's a mentor. I'm reading everything I can and

1045
00:54:15,200 --> 00:54:17,439
Speaker 1: I read a lot of nonfiction and Nitralia, let's talk

1046
00:54:17,440 --> 00:54:20,360
Speaker 1: about about what you're reading. Tell us what you're currently

1047
00:54:20,400 --> 00:54:23,360
Speaker 1: finishing up, and what are some of your favorites. Well,

1048
00:54:23,440 --> 00:54:25,319
Speaker 1: I mean some of the things I'm finishing up. Like

1049
00:54:25,360 --> 00:54:28,200
Speaker 1: I said, I'm finishing up this book about Maximilian and Carlotta,

1050
00:54:28,280 --> 00:54:30,920
Speaker 1: which is an old history book that I came across.

1051
00:54:31,040 --> 00:54:34,000
Speaker 1: I just I read Ship Wars, you know, which I

1052
00:54:34,000 --> 00:54:36,880
Speaker 1: thought was very good. About Ship Wars, It's about the

1053
00:54:36,920 --> 00:54:40,320
Speaker 1: semiconductor industry, is a great book. So I read a

1054
00:54:40,360 --> 00:54:44,040
Speaker 1: lot of nonfiction, and the best nonfiction I've read is

1055
00:54:45,600 --> 00:54:48,640
Speaker 1: Ron Turno has some great biographies. I love the Grant biography.

1056
00:54:48,719 --> 00:54:51,600
Speaker 1: I love the biography of Vanderbilt. I'm a big fan

1057
00:54:51,680 --> 00:54:55,440
Speaker 1: of George Washington and Winston Churchill and Lincoln and guys

1058
00:54:55,480 --> 00:54:58,080
Speaker 1: like this, a Churchill biography out that some people have

1059
00:54:58,160 --> 00:55:01,000
Speaker 1: been talking about. I just it's splendid in the vile

1060
00:55:01,160 --> 00:55:06,160
Speaker 1: like six months ago. And obviously the whole Manchester series

1061
00:55:06,239 --> 00:55:09,160
Speaker 1: was great. And so uh uh. You know, so I

1062
00:55:09,400 --> 00:55:12,080
Speaker 1: read a lot of I read mostly nonfiction. What sort

1063
00:55:12,080 --> 00:55:14,800
Speaker 1: of advice would you give to a recent college grad

1064
00:55:14,840 --> 00:55:18,680
Speaker 1: who was interested in a career in either private equity

1065
00:55:18,800 --> 00:55:22,000
Speaker 1: or investing. You know, I am a big fan of

1066
00:55:22,000 --> 00:55:24,400
Speaker 1: private equity. I don't think at all that it's too

1067
00:55:24,520 --> 00:55:27,239
Speaker 1: late or the golden days are done, because you know, again,

1068
00:55:27,280 --> 00:55:29,560
Speaker 1: the advantage of one of the great advantages of private

1069
00:55:29,600 --> 00:55:33,120
Speaker 1: equity is you can always move into the industry that's

1070
00:55:33,160 --> 00:55:35,360
Speaker 1: emerging for the next ten years. I don't have to

1071
00:55:35,400 --> 00:55:39,000
Speaker 1: be in my grandfather's store selling coats. I can be

1072
00:55:39,040 --> 00:55:43,440
Speaker 1: moving into you know, d N a sample preparation. I

1073
00:55:43,440 --> 00:55:47,120
Speaker 1: can be moving into proteomics or whatever, wind farms, whatever.

1074
00:55:47,200 --> 00:55:49,879
Speaker 1: So private equity is a great field. You should think

1075
00:55:49,880 --> 00:55:53,239
Speaker 1: of it as building businesses, not levering businesses. And if

1076
00:55:53,280 --> 00:55:55,840
Speaker 1: you think about it that way, it's a wonderful place

1077
00:55:55,880 --> 00:55:59,680
Speaker 1: to be. Uh and uh, I'm not a fan of

1078
00:55:59,680 --> 00:56:02,120
Speaker 1: stock market investing. I just find a two day difficult

1079
00:56:02,160 --> 00:56:05,240
Speaker 1: and arbitrary. I am a big fan of private equity

1080
00:56:05,239 --> 00:56:08,759
Speaker 1: and credit investing. And a final question, what do you

1081
00:56:08,800 --> 00:56:11,960
Speaker 1: know about the world of investing today? You wish you

1082
00:56:12,040 --> 00:56:14,479
Speaker 1: knew thirty or forty years ago when you were first

1083
00:56:14,480 --> 00:56:17,080
Speaker 1: getting started. Well, I didn't know anything about the world

1084
00:56:17,080 --> 00:56:20,719
Speaker 1: of investing thirty or forty years ago. I can tell

1085
00:56:20,719 --> 00:56:23,440
Speaker 1: you more about Supreme Court decisions than I knew about investing.

1086
00:56:23,560 --> 00:56:27,480
Speaker 1: And again, what I've learned, or I'm trying to get

1087
00:56:27,520 --> 00:56:31,960
Speaker 1: people to accept, is that good investing is owning and

1088
00:56:32,000 --> 00:56:36,000
Speaker 1: building businesses, not You're not the bookie in the stands.

1089
00:56:36,120 --> 00:56:39,440
Speaker 1: You're the player on the field and you're the coaching player.

1090
00:56:39,520 --> 00:56:41,920
Speaker 1: You control the play, you play better, and you can

1091
00:56:41,960 --> 00:56:45,720
Speaker 1: make money either gambling on the team or being the team.

1092
00:56:45,840 --> 00:56:48,560
Speaker 1: I think, you know, I think the best results and

1093
00:56:48,680 --> 00:56:51,240
Speaker 1: kind of the most fun is actually being the team

1094
00:56:51,239 --> 00:56:54,839
Speaker 1: owning the business, building the business, rather than betting from

1095
00:56:54,840 --> 00:56:56,520
Speaker 1: the outside on the business. And that's what I think

1096
00:56:56,520 --> 00:56:59,680
Speaker 1: that private equity is really quite fascinating. Steve, thank you

1097
00:56:59,719 --> 00:57:02,759
Speaker 1: for being so generous with your time. This has been

1098
00:57:02,800 --> 00:57:06,880
Speaker 1: absolutely fascinating. We have been speaking with Steve Klinsky. He

1099
00:57:07,120 --> 00:57:10,960
Speaker 1: is the founder and CEO of private equity firm New

1100
00:57:11,000 --> 00:57:15,080
Speaker 1: Mountain Capital. If you enjoy this conversation, well, be sure

1101
00:57:15,080 --> 00:57:18,080
Speaker 1: and check out all of our previous podcasts. You can

1102
00:57:18,120 --> 00:57:22,760
Speaker 1: find those at iTunes, Spotify, YouTube, wherever you get your

1103
00:57:22,760 --> 00:57:27,040
Speaker 1: favorite podcast from. Sign up from my daily reading list

1104
00:57:27,120 --> 00:57:30,520
Speaker 1: at Ridhalts dot com. Follow me on Twitter at Ridhults.

1105
00:57:30,880 --> 00:57:34,320
Speaker 1: You can follow all of the Bloomberg Family of podcasts

1106
00:57:34,840 --> 00:57:38,360
Speaker 1: at Podcasts on Twitter. I would be remiss if I

1107
00:57:38,400 --> 00:57:40,960
Speaker 1: did not thank the crack team that helps put these

1108
00:57:41,000 --> 00:57:45,360
Speaker 1: conversations together each week. Paris Wald is my producer. Steve

1109
00:57:45,440 --> 00:57:48,880
Speaker 1: Russo is my head of research. Batica val Bron is

1110
00:57:48,920 --> 00:57:53,680
Speaker 1: our project manager. Justin Milner is my audio engineer. I'm

1111
00:57:53,760 --> 00:57:57,640
Speaker 1: Barry Rihults. You've been listening to Masters in Business n

1112
00:57:57,640 --> 00:58:00,840
Speaker 1: Bloomberg Radio four