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Speaker 1: This is Mesters in Business with Very Results on Bloomberg Radio.

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Speaker 1: This week on the podcast, I have an extra special guest.

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Speaker 1: Graham Weaver is founder and partner at Alpine Investors, a

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Speaker 1: private equity firm focusing on software and services. Graham has

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Speaker 1: a really interesting background, both engineering at Princeton and essentially

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Speaker 1: launching a PE firm while he was a graduate student

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Speaker 1: at Stanford. Everybody knows the story about Michael Dell launching

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Speaker 1: a computer business out of his dorm room in Texas.

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Speaker 1: This could be the first PE firm I'm familiar with

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Speaker 1: that got started in a dorm room. What makes Graham

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Speaker 1: so interesting is while everybody else in the world of

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Speaker 1: private equity is focused on the analytics and crunching numbers

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Speaker 1: and creating econometric models that will tell you way to

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Speaker 1: invest I think they've found a very different model that

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Speaker 1: has been extremely successful for them, where the key focus

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Speaker 1: is on talent. How do we find the best talent,

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Speaker 1: put them in place running our investment companies, and allow

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Speaker 1: them to generate the sort of returns UH that you

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Speaker 1: don't really generate by just looking at a model. I

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Speaker 1: found our conversation absolutely fascinating, and I think you will

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Speaker 1: also with no further ado my discussion with Alpine Investors.

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Speaker 1: Graham Weaver, let's jump right into this, starting with your background.

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Speaker 1: When I hear someone has an engineering degree, I tend

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Speaker 1: to think of venture capital, not private equity. Tell us

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Speaker 1: a little bit, how you went the PE route instead

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Speaker 1: of the VC route. Well, I actually started in private

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Speaker 1: equity right out of undergrad. I really didn't know the

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Speaker 1: difference between private equity or consulting or anything. I had

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Speaker 1: zero knowledge of at and I was fortunate to end

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Speaker 1: up in Morgan Stanley's private equity group. I loved it,

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Speaker 1: and I've kind of been at it ever since. Really

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Speaker 1: really interesting. So is it from Princeton to Morgan Stanley, uh,

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Speaker 1: and then Stanford or am I getting the order? Yeah?

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Speaker 1: I when I was at Princeton, then I went to

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Speaker 1: Morgan Stanley and their private equity. Then I worked at

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Speaker 1: it from called American Securities for a couple of years,

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Speaker 1: and then went to went to business school after that.

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Speaker 1: And somewhere in the middle of this, there's a pig

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Speaker 1: farm in Missouri that I'm having a hard time figuring

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Speaker 1: out what a pig farm has to do with with

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Speaker 1: private acts. So the very first deal I worked on.

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Speaker 1: So I come out of school, I'm wearing my cross

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Speaker 1: pen and my lapel, and I'm like wearing a tie

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Speaker 1: and well buttoned down exactly, and I think I'm a

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Speaker 1: big shot being on Wall Street. And I get shipped

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Speaker 1: out to this pig farm in Missouri, which was a

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Speaker 1: deal Morgan Stanley had invested in. They'd invested a total

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Speaker 1: of a billion almost a billion dollars of debt and equity,

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Speaker 1: and it, suffice to say was not going well. So

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Speaker 1: not that I was going to go save it as

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Speaker 1: a twenty two year old analyst, but I got shipped out.

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Speaker 1: I lived in the CFOs basement for about five months

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Speaker 1: and we did everything we could, but it turned out

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Speaker 1: not to not to be a great investment. So there's

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Speaker 1: not big money and pigs. Well, it turns out hog

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Speaker 1: prices are wildly cyclical. And you know there's the expression,

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Speaker 1: how does uh six footman drown drowned in a river

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Speaker 1: that averages five ft? You know it's because there's parts

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Speaker 1: of the river that are deeper. Will you know, we

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Speaker 1: build our whole model on hog prices being forty seven

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Speaker 1: dollars and when we with that's what they average. But

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Speaker 1: that doesn't tell you how much they swing up. And

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Speaker 1: it turns out, yeah, they were. They went to eighteen

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Speaker 1: dollars and we had seven hundred million a debt and

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Speaker 1: that didn't that that didn't go well. So that's the

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Speaker 1: that's the old joke. It's not the price, it's the

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Speaker 1: volatility that it was. Yeah, it was rough, but it

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Speaker 1: was a That was my introduction to the glamorous business

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Speaker 1: of private equity. And you didn't turn around and say,

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Speaker 1: I want nothing to do. I had the time of

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Speaker 1: my life. It was so fun. Um, how is sleeping

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Speaker 1: in the CFOs basement? What was his house on the

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Speaker 1: it was it was the whole entire town smelled like

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Speaker 1: a pig farm, and which was not especially delightful. It's not. No,

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Speaker 1: it turns out and every and pretty much everyone in

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Speaker 1: the town worked and had some affiliation with the pig farm.

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Speaker 1: The CFO was also a Morgan Stanley guy, and he

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Speaker 1: was probably twenty seven. So neither of us years of experience, you,

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Speaker 1: neither of us had any clue what we were doing.

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Speaker 1: And uh, but but it really wouldn't have mattered. When

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Speaker 1: your revenue gets cut by like eight percent, there's just

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Speaker 1: not a lot not a lot you're gonna do to

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Speaker 1: turn that around. So so there's a cliche about tech

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Speaker 1: firms being started in dorm rooms. How does a private

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Speaker 1: equity firm start in a dorm room? So I I

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Speaker 1: show up at Stanford and I'm in my first week

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Speaker 1: of class, and then, similar as today, you have to

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Speaker 1: take these core classes your first year, which are just

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Speaker 1: not that you know there, just fundamental. They're they're not

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Speaker 1: that exciting. So the first class, I sit down and

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Speaker 1: there's this this twenty five year old who's never worked

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Speaker 1: today in his life. He's a PhD student, he's never

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Speaker 1: taught before, and he's kind of just reciting out of

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Speaker 1: this strategy book. And I just thought to myself, Oh

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Speaker 1: my god, what have I signed up for. So I

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Speaker 1: had this idea that I was going to go try

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Speaker 1: to buy a business, and I had you know, in

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Speaker 1: your first three years as an analyst, you basically build

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Speaker 1: a financial model. But I had the confidence of someone

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Speaker 1: I thought I was much more, much better than I was.

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Speaker 1: So I I convinced h an owner. I started cold

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Speaker 1: calling companies in a sector that I had looked at previously,

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Speaker 1: and I convinced this this owner to sell me his business,

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Speaker 1: and and then I had to go raise the money,

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Speaker 1: most of which was debt and the little bit of

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Speaker 1: equity that was needed I financed with credit cards, right,

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Speaker 1: So that was literally how I started, not your typical

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Speaker 1: private equity founding story. How did that initial PE transaction

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Speaker 1: work out? I did a total of uh three label

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Speaker 1: deals with some add ons, lost money on one, made

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Speaker 1: money on or made you know, lost a little bit

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Speaker 1: of money on, lost made a little bit of money

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Speaker 1: on the second one, and the third one. Third one

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Speaker 1: was a total home run which actually just sold uh

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Speaker 1: this year, twenty years later, so that that one turned out,

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Speaker 1: well twenty years that's impressive. That's not the typical private

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Speaker 1: equity holding period. Yeah, well it was just me. I

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Speaker 1: was the it was just mine, so you could afford

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Speaker 1: to be patient, and it was It was awesome. It

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Speaker 1: was a great that one. What what what space was

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Speaker 1: that it was? We had these companies that made these

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Speaker 1: little labels that went on products like, for example, in

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Speaker 1: Trader Joe's Trader Joe's Private labels things. We made all

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Speaker 1: those labels. It's a totally unsexy business, but it was

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Speaker 1: very consistent and it's profitable. It was really profitable, and

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Speaker 1: no one wakes up and says, you know, I'm gonna

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Speaker 1: be a hero because I'm gonna save half a cent

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Speaker 1: on my label. So it tends to kind of like

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Speaker 1: just clip along like a bond. So it turned out,

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Speaker 1: it turned out well. But I mean I had absolutely

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Speaker 1: no idea what I was doing, and uh, and so

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Speaker 1: I made I made every mistake you can imagine, and

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Speaker 1: it still worked out. When you launched in two thousand

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Speaker 1: and one, you started with fifty million dollars something like that,

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Speaker 1: and now it's up to eight billion, of course, eight funds,

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Speaker 1: and your most recent fund just closed about two billion

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Speaker 1: dollars more or less about two and two point four,

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Speaker 1: all right, so that's that's real money two point four.

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Speaker 1: Obviously you're doing something right. The track record has to

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Speaker 1: be attractive. Is it the same investors rolling over or

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Speaker 1: or new and different investors. Who's the clientele for this?

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Speaker 1: In the very early days, it was a number of

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Speaker 1: individuals because no institution was going to back at well.

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Speaker 1: You have to have a certain track record, be around

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Speaker 1: for certain length of period, be able to check all

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Speaker 1: of their due diligence boxes, and that takes time money,

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Speaker 1: And I checked zero of those boxes store room, check

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Speaker 1: what else? What else we got? Check exactly? I checked

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Speaker 1: no boxes. And that took me like almost a year

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Speaker 1: to figure out. I went to all these institutions and

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Speaker 1: I never got past the first meeting anywhere. And then

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Speaker 1: I found a number two really two individuals who thank

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Speaker 1: god there I still owe everything to these these two.

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Speaker 1: UM one, I don't know if I can, you could

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Speaker 1: say whatever. So UM one was Tom Styer who ran

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Speaker 1: for president. Um he was one of the early ones.

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Speaker 1: And then Doug Martin from the Stevens family, And they

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Speaker 1: were just the two best investors you could ever have.

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Speaker 1: And um they were supportive and most importantly they were

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Speaker 1: supportive after Fund one, which was not a good fund.

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Speaker 1: So that's the reason we're still in business. Why not

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Speaker 1: a good fund? Just performance wise? Or was it because

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Speaker 1: when you launch, you know, one, we're still in the

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Speaker 1: early days of a massive downfall in technology, media, internet,

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Speaker 1: straight across the board. Not you know, it's not unless

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Speaker 1: it's a distress fund, that's not the ideal time to launch. Yeah.

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Speaker 1: I would love to say that it was the market,

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Speaker 1: but it wasn't. It was self inflicted. It was me

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Speaker 1: making a lot of dumb mistakes, being overconfident, you know,

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Speaker 1: and and just investing in companies that looked great in

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Speaker 1: a spreadsheet and didn't. What looks great in a spreadsheet

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Speaker 1: is low purchase price and a lot of leverage. That

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Speaker 1: looks always looks good in a spreadsheet. But the the

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Speaker 1: problem the qualitative, Yeah, the leverage is the problem. And

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Speaker 1: the qualitative things about is it a quality business? Those

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Speaker 1: things you can't model in a spreadsheet. And so I

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Speaker 1: just made a lot of dumb mistakes and we will

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Speaker 1: actually the whole fund overall loss money. I would highly

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Speaker 1: bury not recommend having your first fund when you launched

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Speaker 1: to lose money. It was probably not the best strategy.

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Speaker 1: It was an anchor around our neck for pretty much

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Speaker 1: a decade. So that raises the question, if the first

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Speaker 1: fund was a bit of a stiff, how did you

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Speaker 1: raise money for the second film? Well, thankfully, we were

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Speaker 1: really I really communicated a lot with Doug and Tom,

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Speaker 1: and they understood they could see us getting better, you know,

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Speaker 1: they could see us making a lot of improvements, fixing

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Speaker 1: a lot of things that we got wrong. And both

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Speaker 1: both of them were pretty seasoned investors. Both of them

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Speaker 1: had had mistakes they'd made before and so they you know,

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Speaker 1: thank god, we're really supportive. And then and then it

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Speaker 1: wasn't like immediately we started knocking out of the park either,

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Speaker 1: but we started getting better and better and and and

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Speaker 1: then and then really around the time of the recession

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Speaker 1: was when we really completely transformed and became kind of

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Speaker 1: the business that we are today. And it's a little

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Speaker 1: bit of a cliche. They're not so much investing in

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Speaker 1: a fund as they're investing in you as the manager.

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Speaker 1: Obviously they saw something that was, hey, needs a little seasoning,

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Speaker 1: but there's a lot of potential here. Yeah. They saw

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Speaker 1: someone who was willing to literally run through walls and

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Speaker 1: run through a burning building to make it work. And

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Speaker 1: and I almost literally did. I mean it was it

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Speaker 1: was that um we were and not just me but

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Speaker 1: our whole team was was really committed to trying to

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Speaker 1: try and make it work. And I think they saw

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Speaker 1: that quite quite interesting. I have to talk a little

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Speaker 1: bit about your growth rate. You began with fifty four

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Speaker 1: million dollars all in your eight billion in assets totally

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Speaker 1: Obviously a lot of that is not just growth but

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Speaker 1: new investors coming along. But still that's a as a

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Speaker 1: as an pe company Alpine has really seen quite a

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Speaker 1: corporate growth trajectory. Tell us what led to this success rate. Yeah,

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Speaker 1: So when when the recession hit, we were, uh in

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Speaker 1: we're not well positioned. We didn't. Now, when you say recession,

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Speaker 1: because some of our audiences, you know, older than twenty five,

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Speaker 1: I'm assuming you mean oh, eight o nine crisis, Okay,

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Speaker 1: not the one in not the one that maybe happens

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Speaker 1: sometime in two and certainly not two thousands. So the

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Speaker 1: great financial crisis. So great financial crisis happens. We were

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Speaker 1: we invested the last dollar from our third fund two

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Speaker 1: weeks before h two weeks before Lehman Brothers blew up,

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Speaker 1: and so we were out of money and we had

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Speaker 1: it took us forever to raise the next fund. But

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Speaker 1: that period where we didn't have any money turned out

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Speaker 1: to be the most important period for us. Why because

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Speaker 1: we started deciding we were going to look at our

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Speaker 1: own business, you know, kind of like, rather than working

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Speaker 1: in the business, We're going to start working on our business.

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Speaker 1: So I hired an executive coach, um and he helped.

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Speaker 1: He he really helped me kind of redefined the business

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Speaker 1: that I truly was in which I'll come back to

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Speaker 1: we hired a consulting and coaching firm for our whole organization,

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Speaker 1: and so we really started doing some soul searching for

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Speaker 1: lack of a better word. And then and and from

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Speaker 1: that we really you know, changed our strategy and developed

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Speaker 1: kind of a new playbook. Um, so let me interrupt

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Speaker 1: you there, because that you raised something that I'm fascinated by.

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Speaker 1: So first, what leads you to say we need a

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Speaker 1: pro to come in and show us how to do this?

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Speaker 1: And second, how do you even go about finding an

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Speaker 1: executive coach that sounds like man, that's a consulting field

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Speaker 1: fraught with you know, let's polite and just say high risks. Yeah,

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Speaker 1: it's it's it's a great question. And I am a

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Speaker 1: huge fan of executive coaching. I have had a coach

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Speaker 1: since two thousand and nine. I've talked to a coach

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Speaker 1: every week or every other week since oh nine, No, Kidd,

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Speaker 1: and we at Alpine have twenty three coaches that are

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Speaker 1: part of our There their ten ninety nine folks, but

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Speaker 1: they're part of our ecosystem that's available to our people

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Speaker 1: at Alpine and our executives. So I'm I'm just a

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Speaker 1: huge fan of coaching and Basically, what I love about

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Speaker 1: coaching is you you create space away from the business

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Speaker 1: of the day to day and you ask yourself a

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Speaker 1: bunch of really important questions. You know, what do I want?

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Speaker 1: What success look like? What do I want to you know,

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Speaker 1: what's a five year plan look like? And you actually

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Speaker 1: have to really burn some energy into thinking time thinking

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Speaker 1: about um those answers, which are really hard answers, which

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Speaker 1: most of us never spend time thinking about. What was

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Speaker 1: it just in the midst of the crash and recession

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Speaker 1: that you said, hey, maybe we just need a little help.

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Speaker 1: We're not we we don't have the professional background to

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Speaker 1: run the business. We know the investing side, but the

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Speaker 1: business side is something very different. How do you get

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Speaker 1: I mean, I think one of the benefits of face

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Speaker 1: planning in your first fund is that you get some

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Speaker 1: humility and you I've always just been open to learning

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Speaker 1: from people that are smarter and better than I am,

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Speaker 1: and so coaching was an extra back then in two

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Speaker 1: thousand nine, it was not very well known, and it

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Speaker 1: was definitely an exercise in humility of saying I think

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Speaker 1: I need some help. That that's the old joke. Experiences

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Speaker 1: what you get when you don't get what you want right, Yeah, exactly.

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Speaker 1: So once you make the decision, Hey, we want to

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Speaker 1: bring in a professional to show us ways to improve

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Speaker 1: our busines, the methods. How does one go about finding

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Speaker 1: a business coach? So I had an introduction from a

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Speaker 1: friend and then we had a number of lunches, and

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Speaker 1: his business wasn't going well in oh nine either. As

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Speaker 1: you can imagine, who other than people doing distress debt

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Speaker 1: investing whose business was going great knowing, yeah exactly nobody.

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Speaker 1: So in short sellers, everybody else was in trouble. So

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Speaker 1: we had this awesome conversation. I can still it's one

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Speaker 1: of these conversations you can still remember where you are

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Speaker 1: and which you know exactly the moment. So we had

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Speaker 1: this is actually after I brought him on. We have

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Speaker 1: this awesome conversation where I said, hey, I have to

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Speaker 1: his name's JP Flam, and I said, hey, I have

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Speaker 1: to cancel our our coaching engagement. I'm just too busy,

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Speaker 1: which was like we'd already decided ahead of time that

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Speaker 1: there was that was no go. I had to stick

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Speaker 1: with it, like that agreement. So he he text back

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Speaker 1: immediately says, no, we're having it. So I get on

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Speaker 1: the phone. He says, well, what's you know, what's so

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Speaker 1: crazy that you're so stressed? Oh my god, JP, you know,

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Speaker 1: I gotta fly to Dallas and fix this. And then

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Speaker 1: I gotta, you know, we gotta deal we're to lose.

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Speaker 1: And then we lost a huge customer in Chicago. Then

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Speaker 1: I got into d C, and then you know, I'm

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Speaker 1: going on and on, and he said, okay, well, let's

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Speaker 1: let's kind of slow down and chill out. Let's talk

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Speaker 1: about Dallas. What's going on there? Well, we you know,

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Speaker 1: we just missed our bank projections the second time. And

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Speaker 1: I'm going on and on, and he starts saying, well,

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Speaker 1: tell me about the CEO and Dallas. I'm like, what

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Speaker 1: does that have to do with anything, you know, in

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Speaker 1: the middle of the Great recession, like blah blah blah.

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Speaker 1: But you know it's not it's you know, it's a

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Speaker 1: markets or whatever. Anyway, he it comes to the point

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Speaker 1: he says, well, eventually he says, well, how would you

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Speaker 1: how would you rate that that CEO? You know, a

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Speaker 1: B C. I was like, oh, you know, probably a B.

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Speaker 1: He said, Well, Graham, at the one of our engagements,

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Speaker 1: you said you wanted to build the greatest private ely

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Speaker 1: from of all time. Are you gonna Are you gonna

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Speaker 1: do that with a b CEO? And I just like

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Speaker 1: hit me between the eyes. And then he asked me

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Speaker 1: another question. He said, and Graham, if you're someone who

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Speaker 1: keeps a b CEO, what does it make you? How

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Speaker 1: would you rate yourself as a CEO? And I just

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Speaker 1: I like, its stopped me dead in my tracks. And

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Speaker 1: that was really this light bulb that went off that

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Speaker 1: ended up having us having me realize I'm actually in

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Speaker 1: the talent business us that's the fundamental business that I'm

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Speaker 1: really in. And that was like oh nine that we

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Speaker 1: came to that realization and then started completely redesigning our

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Speaker 1: our firm to like build our companies around talent, build

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Speaker 1: our firm around talent, build our investment strategy around talent.

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Speaker 1: So that that was just a huge turning point. So

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Speaker 1: so let's talk about that, because all of your investments

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Speaker 1: eventually get a CEO that's been trained at Alpine and

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Speaker 1: has the benefit of all of this coaching, all of

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Speaker 1: this training, all of this expertise. It's not that you're

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Speaker 1: just looking for attractive balance sheets. It's where can we

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Speaker 1: put someone in charge to move the needle by taking

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Speaker 1: our expertise and applying it to this business model. Is

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Speaker 1: that what you mean by when you say you're in

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Speaker 1: the talent business? Yeah, I think that's what I mean.

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Speaker 1: There's two parts of it. One is our investment strategy,

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Speaker 1: which is what you describe, the others how we run

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Speaker 1: our own firm. But sticking with what you were talking

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Speaker 1: about bury the investment strategy, we found that the single

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Speaker 1: most important investment decision we make is the management team.

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Speaker 1: And it's more important than the price we pay. It's

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Speaker 1: more important than the leverage levels, it's more important than

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Speaker 1: the prior growth rate. And so we just said, well,

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Speaker 1: if that's really the most correlated, most effective, our most

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Speaker 1: important criteria, you know, let's make sure we get that right.

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Speaker 1: And so let's actually kind of build our own CEOs

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Speaker 1: and and and and put our own CEOs in so

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Speaker 1: that we can make sure that we're getting a world

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Speaker 1: class person to run each one of our companies. So so,

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Speaker 1: in some ways this is almost parallel in the public

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Speaker 1: markets to activist investing, where they identify a very attractive

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Speaker 1: business that isn't quite living up to potential, right, and

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Speaker 1: they say, hey, with a few management changes, we can

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Speaker 1: turn this into a really good business. On the private

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Speaker 1: equity side, I'm assuming the conversation is something like, we

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Speaker 1: want to either buy your business or your entire business,

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Speaker 1: but regardless, we want one of our professionals to come

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Speaker 1: in and manage it. Yeah, that's right. A lot of

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Speaker 1: the companies were buying don't have management. You know, might

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Speaker 1: be a corporate carve out, it might be a management

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Speaker 1: team that wants to retire or exit, and and that's great.

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Speaker 1: So there's never any conflict. We're totally transparent. We're not

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Speaker 1: doing hostile deals, nothing like that. It's always the transaction

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Speaker 1: that the seller wants to do is they want to retire,

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Speaker 1: so it's always very friendly. But we there aren't a

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Speaker 1: lot of private equity firms that want to go through

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Speaker 1: the process of changing management because it's very very hard

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Speaker 1: to do. And that's the value add that you guys,

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Speaker 1: that's a big part of it. Yeah, that's really quite fascinating.

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Speaker 1: So there's a quote of yours I have to lead

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Speaker 1: with which I find really intriguing. Quote. People create returns,

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Speaker 1: not deals, not price. That's a that's a huge statement

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Speaker 1: considering most of the analyst community, especially private equity is

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Speaker 1: so analytical and modern driven. You're saying, this is a

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Speaker 1: people business. Barry Um. I think that if you want

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Speaker 1: to do something different than people, you have to have

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Speaker 1: some fundamental belief that's different than what other people believe.

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Speaker 1: And our belief is that returns come from from people,

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Speaker 1: they come from talent and and and I think maybe

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Speaker 1: one of the reasons why people shy away from that

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Speaker 1: is it's hard to analyze, it doesn't fit in a spreadsheet,

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Speaker 1: and it's incredibly hard to manage. So it's a lot

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Speaker 1: easier to manage the the hard numbers that the financial

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Speaker 1: statements and things than it is to, you know, really

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Speaker 1: manage a team of people. So we were talking earlier

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Speaker 1: that you appoint a CEO at these these purchased businesses

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Speaker 1: that you've trained Um yourself, tell us a little bit

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Speaker 1: about what that in house training looks like. So a

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Speaker 1: lot of the CEOs we're hiring, we're bringing right out

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Speaker 1: of NBA programs, and they have five years of experience

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Speaker 1: typically before they go into business school, and that could

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Speaker 1: be anything that could be there in the military, they

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Speaker 1: could have been a consulting firm, they could have been

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Speaker 1: investment banking and we have success with any of those

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Speaker 1: back any and all those backgrounds. So and they've just

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Speaker 1: been in two years of business school, so we don't

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Speaker 1: want to put them back in business school. But what

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Speaker 1: we're really teaching them, the fundamental thing we're teaching them

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Speaker 1: is how to hire, how to build their team, how

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Speaker 1: to set a vision, how to create priorities, how to

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Speaker 1: get everyone in their organization excited and aligned behind what

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Speaker 1: they're trying to do. Those are things that not a

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Speaker 1: lot of business schools um teach. It's one of the

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Speaker 1: things I try to teach in my class, but it's

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Speaker 1: something that we bring in. It's the biggest thing we

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Speaker 1: bring in that in that training program that we do.

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Speaker 1: Hiring has been described as the most difficult aspect of

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Speaker 1: building a company versus everything else. How do you teach

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Speaker 1: good hiring? You can actually, to some extent, make hiring

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Speaker 1: a science. UM and the simple I could talk for you.

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Speaker 1: I could talk for three hours about this, but I'll

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Speaker 1: try to do it in about two minutes, which is,

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Speaker 1: you build a scorecard for what you want that role

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Speaker 1: in that role, a specific list of outcomes you want

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Speaker 1: that role to do. And then as you're assessing a candidate.

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Speaker 1: You're looking for very specific evidence that they're going to

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Speaker 1: be able to perform against that scorecard. And you have

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Speaker 1: two things you're looking for, attributes and experience. Those are

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Speaker 1: the two different parts of the interview process. Well, we

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Speaker 1: all know what experiences define what attributes me. So attributes

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Speaker 1: is about who somebody is versus what they've done. So

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Speaker 1: an example for us, when we're hiring young people to

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Speaker 1: become CEOs, we're looking at, you know, do they have

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Speaker 1: a will to win? Do they have emotional intelligence and

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Speaker 1: self awareness that they can get along with people? And

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Speaker 1: then do they have grit? Can they Are they going

431
00:22:47,320 --> 00:22:49,640
Speaker 1: to be able to see things through after getting kicked

432
00:22:49,640 --> 00:22:52,080
Speaker 1: in the teeth, because they're gonna get kicked in the teeth.

433
00:22:52,400 --> 00:22:55,040
Speaker 1: So those are the three attributes that we're looking for.

434
00:22:55,560 --> 00:22:59,160
Speaker 1: Those are wildly more important than experience because they'll get

435
00:22:59,280 --> 00:23:03,439
Speaker 1: experienced quickly, and you can teach experience. You can't teach

436
00:23:04,040 --> 00:23:06,160
Speaker 1: those three things. You can't teach you know, the will

437
00:23:06,200 --> 00:23:09,040
Speaker 1: to win, Um, they're kind of coming to us with

438
00:23:09,080 --> 00:23:11,800
Speaker 1: that or they're not. That's a that's an intrinsic aspect

439
00:23:11,800 --> 00:23:13,840
Speaker 1: of the personality. You either have it or you don't.

440
00:23:13,840 --> 00:23:16,479
Speaker 1: There's no way you're gonna learn that, not in a

441
00:23:16,520 --> 00:23:19,040
Speaker 1: period of time, or we don't know how to teach

442
00:23:19,040 --> 00:23:22,560
Speaker 1: it if it is sable, really really interesting. So so

443
00:23:23,040 --> 00:23:26,600
Speaker 1: you mentioned your class, let's let's talk about the management

444
00:23:26,640 --> 00:23:30,359
Speaker 1: course that seems to be related to that CEOs and

445
00:23:30,440 --> 00:23:33,000
Speaker 1: Training to tell us about that. Yeah, so the CEO

446
00:23:33,000 --> 00:23:35,080
Speaker 1: and Training is the that's the name for the people

447
00:23:35,119 --> 00:23:36,480
Speaker 1: that were hiring. Did you want to talk about that

448
00:23:36,560 --> 00:23:41,119
Speaker 1: or the class itself? All right? So, um, the CEO

449
00:23:41,200 --> 00:23:42,800
Speaker 1: and Training is the name we give to those people

450
00:23:42,800 --> 00:23:44,760
Speaker 1: were hiring right out of business school. We're giving them

451
00:23:44,800 --> 00:23:47,880
Speaker 1: that experience training that I mentioned, and then we're putting

452
00:23:47,920 --> 00:23:50,480
Speaker 1: them right in. Um a lot of them are CEOs

453
00:23:50,560 --> 00:23:52,920
Speaker 1: on day one of add on acquisitions and they get

454
00:23:52,920 --> 00:23:56,840
Speaker 1: the reins and they're you know, they're off to the races. Um.

455
00:23:56,920 --> 00:23:59,520
Speaker 1: And and you know, there aren't a lot of positions

456
00:23:59,640 --> 00:24:02,640
Speaker 1: out of business school that you can become a CEO within,

457
00:24:02,920 --> 00:24:06,800
Speaker 1: you know, right when you graduate. So we're we've designed

458
00:24:06,840 --> 00:24:08,679
Speaker 1: that and it's been it's been a home run. We

459
00:24:09,480 --> 00:24:13,040
Speaker 1: I underestimated how amazing these students would do and the

460
00:24:13,160 --> 00:24:15,640
Speaker 1: roles that they've done, and uh, and it's it's it's

461
00:24:15,640 --> 00:24:18,720
Speaker 1: been fantastic. Do you end up hiring people right out

462
00:24:18,760 --> 00:24:22,320
Speaker 1: of your classes or yeah? I mean this is really

463
00:24:22,440 --> 00:24:28,439
Speaker 1: as recruitment. I don't interview anybody from Stanford period. I

464
00:24:28,440 --> 00:24:30,399
Speaker 1: don't even know if they applied. I keep a wall

465
00:24:30,440 --> 00:24:34,800
Speaker 1: between you know, my teaching and um and and recruiting.

466
00:24:35,200 --> 00:24:37,680
Speaker 1: But I will say probably teaching there has helped the

467
00:24:37,720 --> 00:24:41,200
Speaker 1: Alpine brand, uh and and help me and more importantly

468
00:24:41,240 --> 00:24:44,520
Speaker 1: helped me understand what students are capable of, which is

469
00:24:44,640 --> 00:24:47,480
Speaker 1: a lot, and what they want, which is they want

470
00:24:47,480 --> 00:24:50,159
Speaker 1: to be the boss right away. And I think so

471
00:24:50,200 --> 00:24:52,479
Speaker 1: it's helped. It's helped me learn a little bit more

472
00:24:52,520 --> 00:24:54,600
Speaker 1: about how to build a program that the students want

473
00:24:54,600 --> 00:24:57,440
Speaker 1: to actually do. So one of the things the c

474
00:24:57,600 --> 00:25:01,520
Speaker 1: I T program does is to try and increase underrepresented

475
00:25:01,600 --> 00:25:04,760
Speaker 1: individuals and pe tell us a little bit about what

476
00:25:04,840 --> 00:25:09,080
Speaker 1: diversity does for your business. Yeah, well it is. It's

477
00:25:09,119 --> 00:25:11,440
Speaker 1: it's awesome what we can do if you The great

478
00:25:11,480 --> 00:25:15,280
Speaker 1: thing about hiring for attributes over experience is that we

479
00:25:15,320 --> 00:25:19,120
Speaker 1: can actually have a huge impact on diversity. So, for example,

480
00:25:19,119 --> 00:25:21,359
Speaker 1: if I said we're hiring a CEO to run a

481
00:25:21,400 --> 00:25:24,040
Speaker 1: healthcare software business, and our criteria is they have to

482
00:25:24,080 --> 00:25:27,560
Speaker 1: have done it for twenty years. Then I'm that that

483
00:25:27,840 --> 00:25:30,080
Speaker 1: battle has been won or lost twenty years ago. And yeah,

484
00:25:30,080 --> 00:25:32,520
Speaker 1: I could hire someone who's a diverse candidate from one

485
00:25:32,560 --> 00:25:34,880
Speaker 1: of my competitors, but I haven't really created any value

486
00:25:35,520 --> 00:25:39,040
Speaker 1: if I hire someone right out of business school. Let's

487
00:25:39,080 --> 00:25:41,840
Speaker 1: just use women as an example, and and and and

488
00:25:42,119 --> 00:25:44,639
Speaker 1: and that woman wouldn't have necessarily seen a path to

489
00:25:44,680 --> 00:25:47,800
Speaker 1: become a CEO, and I can provide her a clear path,

490
00:25:48,200 --> 00:25:50,359
Speaker 1: then I can actually increase the number of women that

491
00:25:50,400 --> 00:25:53,119
Speaker 1: become CEOs, which is exactly what we've done. We have

492
00:25:53,520 --> 00:25:56,200
Speaker 1: over fifty of our CEOs and training that we've hired

493
00:25:56,920 --> 00:26:02,159
Speaker 1: have been women, About thirty have been underrepresented minorities, and

494
00:26:02,200 --> 00:26:04,720
Speaker 1: so we have we can have a we can really

495
00:26:04,760 --> 00:26:08,040
Speaker 1: move the dial on creating more you know, diversity and

496
00:26:08,160 --> 00:26:12,320
Speaker 1: CEO ranks. That that's really kind of interesting. Uh, let's

497
00:26:12,320 --> 00:26:15,360
Speaker 1: talk a little bit about software and services. Why focus

498
00:26:15,480 --> 00:26:19,160
Speaker 1: on those areas in particular. So one of the things

499
00:26:19,240 --> 00:26:22,040
Speaker 1: that we figured out, which probably took us way too

500
00:26:22,040 --> 00:26:24,760
Speaker 1: long to figure out, is if you if you buy

501
00:26:24,800 --> 00:26:28,000
Speaker 1: recurring revenue, there's just a lot fewer things that go wrong.

502
00:26:28,400 --> 00:26:32,360
Speaker 1: So we're not unique and focusing on um recurring revenue.

503
00:26:32,359 --> 00:26:35,080
Speaker 1: But that we we turned the dial in and around

504
00:26:35,080 --> 00:26:37,320
Speaker 1: that great recession time and decided that was all you

505
00:26:37,320 --> 00:26:39,560
Speaker 1: were going to do. And so it's less focused on

506
00:26:39,600 --> 00:26:42,280
Speaker 1: winning that one big sale and it's more about building

507
00:26:42,280 --> 00:26:46,320
Speaker 1: a business that has a fairly steady revenue stream. That's right.

508
00:26:46,359 --> 00:26:48,080
Speaker 1: And then if you marry that with what I was

509
00:26:48,080 --> 00:26:51,080
Speaker 1: saying before about putting young people to run them, recurring

510
00:26:51,119 --> 00:26:54,320
Speaker 1: revenues really helpful because in the first year they have

511
00:26:54,359 --> 00:26:57,280
Speaker 1: a big learning curve and you you know, they we

512
00:26:57,359 --> 00:26:58,840
Speaker 1: need them to have a little bit of a cushion

513
00:26:58,880 --> 00:27:01,520
Speaker 1: for them to get up the speeds. Recurring revenue helps

514
00:27:01,520 --> 00:27:03,560
Speaker 1: a ton because it does take them a little while

515
00:27:03,600 --> 00:27:06,400
Speaker 1: to learn how to be a CEO. That's really interesting.

516
00:27:06,800 --> 00:27:11,000
Speaker 1: Software obviously has been really hot over the past couple

517
00:27:11,000 --> 00:27:15,720
Speaker 1: of years. Any chance that that changes or slows down

518
00:27:15,880 --> 00:27:21,000
Speaker 1: or is software just the driver of the future. I mean,

519
00:27:21,280 --> 00:27:25,160
Speaker 1: I think software is the driver of the future. And

520
00:27:25,359 --> 00:27:28,080
Speaker 1: I think anything, even the driver of the future, can

521
00:27:28,080 --> 00:27:32,560
Speaker 1: get overpriced, and you can overpay for any asset. And

522
00:27:32,640 --> 00:27:35,560
Speaker 1: I think in the last few years, you know, people

523
00:27:35,600 --> 00:27:37,679
Speaker 1: have have gotten a little ahead of themselves with some

524
00:27:37,720 --> 00:27:40,560
Speaker 1: of the multiples that were paid. But I don't think

525
00:27:40,560 --> 00:27:43,280
Speaker 1: that changes is fundamentally that I think sufferers. You know,

526
00:27:43,320 --> 00:27:45,400
Speaker 1: softwers here for a long time, and it's and it's

527
00:27:45,400 --> 00:27:49,040
Speaker 1: got a lot of really exciting trends. I'm gonna ask

528
00:27:49,080 --> 00:27:51,760
Speaker 1: a question. I'm gonna have you put this back earlier

529
00:27:51,800 --> 00:27:54,080
Speaker 1: in the hiring discussion, because I missed something and I

530
00:27:54,119 --> 00:27:59,320
Speaker 1: want to come back to it. You've discussed episodic versus

531
00:27:59,440 --> 00:28:03,760
Speaker 1: program matic hiring. Explain the difference between the two. Yeah,

532
00:28:03,880 --> 00:28:07,840
Speaker 1: great questions. So I might have made up those two terms,

533
00:28:07,840 --> 00:28:10,320
Speaker 1: but well, that's why it jumped out at me. I'm like,

534
00:28:10,520 --> 00:28:13,960
Speaker 1: I don't know what I think. I think I did

535
00:28:13,960 --> 00:28:16,879
Speaker 1: make them up. But um, so, episodic hiring is what

536
00:28:16,920 --> 00:28:19,840
Speaker 1: everyone does. Okay, we need to seven opening fill this.

537
00:28:20,440 --> 00:28:24,040
Speaker 1: Go to LinkedIn and ad get me somebody here exactly,

538
00:28:24,160 --> 00:28:27,199
Speaker 1: or or yeah, we'll hire Russell Reynolds to get us

539
00:28:27,200 --> 00:28:31,560
Speaker 1: a CFO whatever. That's that's how everyone hires. Um. That

540
00:28:31,720 --> 00:28:36,720
Speaker 1: is two problems, a number of problems. One is its slow, uh,

541
00:28:36,760 --> 00:28:39,960
Speaker 1: and two is it's expensive, and three is it actually

542
00:28:40,000 --> 00:28:42,040
Speaker 1: doesn't even work that well. Like the higher the hit

543
00:28:42,120 --> 00:28:44,360
Speaker 1: rate is pretty low. Hit rate across the board and

544
00:28:44,440 --> 00:28:47,680
Speaker 1: hiring statistically is about fifty, but that's measured as are

545
00:28:47,720 --> 00:28:49,720
Speaker 1: they still there in three years, not did they were

546
00:28:49,760 --> 00:28:52,920
Speaker 1: they successful? So it's even worse than that. So that's

547
00:28:52,920 --> 00:28:56,719
Speaker 1: a problem with episodic hiring. So programmatic hiring is you're

548
00:28:56,720 --> 00:28:59,400
Speaker 1: going to hire the same role a lot, and so

549
00:28:59,440 --> 00:29:01,000
Speaker 1: how do you make that more of a program. So

550
00:29:01,040 --> 00:29:05,479
Speaker 1: for example, you know, we're hiring seventeen people from business

551
00:29:05,520 --> 00:29:11,560
Speaker 1: schools that start next month, or we're hiring seven undergrads

552
00:29:11,920 --> 00:29:14,960
Speaker 1: to be interns who will matriculate into full time roles,

553
00:29:15,480 --> 00:29:17,240
Speaker 1: and and then so there's a group of people that

554
00:29:17,280 --> 00:29:20,080
Speaker 1: are graduating, you can kind of have a class of folks.

555
00:29:20,160 --> 00:29:22,320
Speaker 1: You can give them way more training, you can build

556
00:29:22,320 --> 00:29:24,479
Speaker 1: a whole program using the pro you know, to use

557
00:29:24,480 --> 00:29:27,200
Speaker 1: the programmatic term around that, and it's just a lot

558
00:29:27,240 --> 00:29:30,160
Speaker 1: more effective. That's two roles that we do at Alpine,

559
00:29:30,200 --> 00:29:32,520
Speaker 1: the CEOs and training and the and then the analysts.

560
00:29:32,560 --> 00:29:34,720
Speaker 1: But then in our companies, you know, in some cases

561
00:29:34,760 --> 00:29:39,880
Speaker 1: that's engineers technicians where that's they're recurring higher that they're

562
00:29:39,880 --> 00:29:43,680
Speaker 1: doing and we're helping them build programs to to start

563
00:29:43,760 --> 00:29:46,000
Speaker 1: with people who don't know how to do those functions

564
00:29:46,360 --> 00:29:49,000
Speaker 1: and bring them up. You know, through training to to

565
00:29:49,000 --> 00:29:52,800
Speaker 1: to learn those really really quite interesting and you can excale.

566
00:29:52,840 --> 00:29:54,400
Speaker 1: You can just scale a lot better and you have

567
00:29:54,440 --> 00:29:58,240
Speaker 1: a way higher hit rate. So you're constantly maintaining a

568
00:29:58,320 --> 00:30:02,640
Speaker 1: pool of either potential hires or actual employees that you're

569
00:30:02,640 --> 00:30:06,400
Speaker 1: waiting to promote. Absolutely. Yeah, before we get into the

570
00:30:06,440 --> 00:30:11,440
Speaker 1: current market environment for private equity, I have to circle

571
00:30:11,520 --> 00:30:16,240
Speaker 1: back to you. Teaching at Stanford at the graduate school,

572
00:30:16,640 --> 00:30:18,960
Speaker 1: tell us a little bit about the courses you teach

573
00:30:19,000 --> 00:30:23,240
Speaker 1: and what students learned. So I I teach two courses there.

574
00:30:23,280 --> 00:30:26,160
Speaker 1: I teach. They're both they're both basically similar. One is

575
00:30:26,280 --> 00:30:27,960
Speaker 1: for first years and one is for second years, but

576
00:30:28,000 --> 00:30:32,280
Speaker 1: they're both centered around entrepreneurship. And the idea of the

577
00:30:32,280 --> 00:30:36,560
Speaker 1: courses is that there's lots of classes on analysis and

578
00:30:36,600 --> 00:30:39,760
Speaker 1: accounting and finance, and there aren't a lot of classes

579
00:30:39,800 --> 00:30:44,320
Speaker 1: around how to actually manage people, lead people. And I'm

580
00:30:44,320 --> 00:30:46,880
Speaker 1: talking the nitty gritty stuff of literally like what to

581
00:30:46,960 --> 00:30:49,400
Speaker 1: say if you have to fire someone. My students have

582
00:30:49,440 --> 00:30:51,080
Speaker 1: to rule that. My students will say, oh, I would

583
00:30:51,080 --> 00:30:52,640
Speaker 1: just fire that person. I said, okay, great, I'll be

584
00:30:52,720 --> 00:30:55,880
Speaker 1: them and fire me. And then they have to do it,

585
00:30:55,920 --> 00:30:58,640
Speaker 1: and they it's allow harder than it looks. So they'll say,

586
00:30:58,680 --> 00:31:02,760
Speaker 1: that's why people just cheat and send emails. Yeah, that

587
00:31:02,800 --> 00:31:05,960
Speaker 1: would not be uh, something we teach. We do not.

588
00:31:06,080 --> 00:31:08,000
Speaker 1: We do not teach people this. So tell us about

589
00:31:08,040 --> 00:31:09,840
Speaker 1: the role playing. What is that? So so we so

590
00:31:09,880 --> 00:31:13,240
Speaker 1: the student will actually play the protagonist in the case,

591
00:31:13,280 --> 00:31:15,800
Speaker 1: and I'll play the antagonist, for lack of a better word,

592
00:31:15,800 --> 00:31:18,480
Speaker 1: of the other characters. And then they'll fire me, or

593
00:31:18,480 --> 00:31:20,080
Speaker 1: they'll have to demote me, or they'll have to tell

594
00:31:20,080 --> 00:31:21,960
Speaker 1: me that they no longer want to be my partner

595
00:31:22,040 --> 00:31:24,200
Speaker 1: or whatever the situation is that they're trying to get through.

596
00:31:24,520 --> 00:31:26,560
Speaker 1: And then we'll play around with it and they'll realize,

597
00:31:26,840 --> 00:31:28,560
Speaker 1: you know, some things they do right, some things they

598
00:31:28,600 --> 00:31:32,320
Speaker 1: do poorly. And then the entrepreneur about whom we've written

599
00:31:32,360 --> 00:31:34,760
Speaker 1: the case is in the class, and so then they'll

600
00:31:34,840 --> 00:31:37,560
Speaker 1: chime in and say, well, wow, this is you did

601
00:31:37,560 --> 00:31:39,240
Speaker 1: this this way, This is why I didn't do that,

602
00:31:39,480 --> 00:31:40,960
Speaker 1: or I wish I would have done it that way

603
00:31:41,000 --> 00:31:43,720
Speaker 1: instead I did this. Um. So it's a really it's

604
00:31:43,760 --> 00:31:47,080
Speaker 1: a really really fun class. It's uh and and it's

605
00:31:47,080 --> 00:31:49,240
Speaker 1: something that they don't get anywhere else where. They actually

606
00:31:49,240 --> 00:31:51,240
Speaker 1: have to kind of implement the stuff they're talking about.

607
00:31:51,360 --> 00:31:54,800
Speaker 1: So aside from firing, what else do you teach them everything?

608
00:31:54,920 --> 00:31:57,360
Speaker 1: We we actually teach a lot on hiring. UM. We

609
00:31:57,440 --> 00:32:00,160
Speaker 1: have a whole uh modules and playbooks and video and

610
00:32:00,240 --> 00:32:02,160
Speaker 1: things I've made, and we do a class on that,

611
00:32:02,200 --> 00:32:07,160
Speaker 1: which is really important. We talk about uh complex partnership issues,

612
00:32:07,680 --> 00:32:10,479
Speaker 1: things with your board. They have to sell stuff, they

613
00:32:10,520 --> 00:32:13,680
Speaker 1: have the fund raise, UM, how to how to make

614
00:32:13,720 --> 00:32:16,360
Speaker 1: an offense and defense deck, to sell, to sell something,

615
00:32:16,680 --> 00:32:19,040
Speaker 1: and in a whole list of basically things that entrepreneurs

616
00:32:19,040 --> 00:32:21,920
Speaker 1: are gonna have to face in their life. Really intriguing.

617
00:32:22,200 --> 00:32:26,680
Speaker 1: I have to imagine having been a graduate student at Stanford,

618
00:32:26,800 --> 00:32:30,440
Speaker 1: it's deeply satisfying teaching there. It's a blast. UM. I

619
00:32:30,480 --> 00:32:33,400
Speaker 1: started off as a case guest where they wrote a

620
00:32:33,400 --> 00:32:36,080
Speaker 1: case about me buying stuff in my dorm room. And

621
00:32:36,120 --> 00:32:37,880
Speaker 1: I was a case guest and I kept I would

622
00:32:37,880 --> 00:32:41,000
Speaker 1: come home all energized, and it was my favorite day

623
00:32:41,000 --> 00:32:44,960
Speaker 1: of the year. And then when the orv. Grossbeck, who

624
00:32:44,960 --> 00:32:47,040
Speaker 1: wrote the case about me, who's a legend at Stanford,

625
00:32:47,360 --> 00:32:49,600
Speaker 1: when he called me one day and said, hey, you

626
00:32:49,640 --> 00:32:51,440
Speaker 1: know I'm gonna stop teaching this class. Would you want

627
00:32:51,480 --> 00:32:55,240
Speaker 1: to teach it. And and my first response was, um, no,

628
00:32:55,560 --> 00:32:57,680
Speaker 1: I have a job, you know, and I can. But

629
00:32:57,760 --> 00:32:59,680
Speaker 1: I didn't say that. I said, hey, I'll think about it.

630
00:33:00,040 --> 00:33:03,120
Speaker 1: And then thankfully everyone I was around was like, Graham,

631
00:33:03,240 --> 00:33:05,719
Speaker 1: you have to do this, and it's your favorite thing

632
00:33:05,760 --> 00:33:07,840
Speaker 1: you do, and and we we've figured out a way

633
00:33:07,880 --> 00:33:10,160
Speaker 1: to make it work. So it's it's a blast. That

634
00:33:10,560 --> 00:33:12,440
Speaker 1: sounds like that sounds like it's a lot of fun.

635
00:33:12,520 --> 00:33:15,040
Speaker 1: One more thing I would just add is, um, what

636
00:33:15,120 --> 00:33:16,920
Speaker 1: I realized that for a few years is I'll teach

637
00:33:16,960 --> 00:33:20,040
Speaker 1: students all about entrepreneurship and we have this great class,

638
00:33:20,560 --> 00:33:22,520
Speaker 1: and then they go take a job, you know, and

639
00:33:22,560 --> 00:33:26,120
Speaker 1: consulting or you know, investor making. They never become entrepreneurs,

640
00:33:26,360 --> 00:33:28,040
Speaker 1: even though that was what they wrote their essay about

641
00:33:28,080 --> 00:33:29,680
Speaker 1: and that was what they were excited about. So I

642
00:33:29,720 --> 00:33:33,400
Speaker 1: added to the class a whole part on Okay, wait

643
00:33:33,440 --> 00:33:34,840
Speaker 1: a second, what is it you really want to do

644
00:33:34,920 --> 00:33:38,239
Speaker 1: with your life? You know, what's holding you back? How

645
00:33:38,240 --> 00:33:39,800
Speaker 1: would you make a plan to go do that? What

646
00:33:39,840 --> 00:33:41,920
Speaker 1: are your limiting beliefs, what are the things? What are

647
00:33:41,960 --> 00:33:46,400
Speaker 1: your fears? So we have a whole thread probably of

648
00:33:46,440 --> 00:33:50,120
Speaker 1: the class is on those things. Because I'm like, what's

649
00:33:50,160 --> 00:33:52,480
Speaker 1: the point of teaching people to be entrepreneurs if they

650
00:33:52,480 --> 00:33:55,640
Speaker 1: don't become entrepreneurs. So so I've I've invested a lot

651
00:33:55,680 --> 00:33:58,760
Speaker 1: into like personal growth and uh and that's a really

652
00:33:58,760 --> 00:34:01,320
Speaker 1: really fun part. Well us too. Are any of those

653
00:34:01,360 --> 00:34:06,000
Speaker 1: skill sets transferable to consultants who are they'll be working

654
00:34:06,000 --> 00:34:09,719
Speaker 1: with other entrepreneurs and maybe haven't been exposed percent. It

655
00:34:09,760 --> 00:34:12,520
Speaker 1: wasn't so much that I have anything against consulting. It

656
00:34:12,560 --> 00:34:13,920
Speaker 1: was just that the student at the beginning of the

657
00:34:13,960 --> 00:34:16,200
Speaker 1: class said, my goal is to do X, and then

658
00:34:16,239 --> 00:34:18,319
Speaker 1: they don't do X. That was all. So tell us

659
00:34:18,320 --> 00:34:21,319
Speaker 1: a little bit about your approach. What's your process like

660
00:34:21,440 --> 00:34:26,799
Speaker 1: to finding a potential acquisition target? And since we look

661
00:34:26,840 --> 00:34:29,799
Speaker 1: at both private and public markets, what do you think

662
00:34:29,840 --> 00:34:31,960
Speaker 1: of in terms of valuation? How do you come up

663
00:34:31,960 --> 00:34:36,920
Speaker 1: with a number? Yeah, great questions. We we have a

664
00:34:37,000 --> 00:34:40,279
Speaker 1: large team that that looks for potential companies. We have

665
00:34:40,760 --> 00:34:43,799
Speaker 1: actually fifty two people at Alpine and in the in

666
00:34:43,840 --> 00:34:48,279
Speaker 1: our portfolio companies they are looking for deals. Um, so

667
00:34:48,320 --> 00:34:50,600
Speaker 1: that's a lot of people. How big is a firm overall?

668
00:34:51,520 --> 00:34:54,920
Speaker 1: Overall if you include the CEOs and training and um,

669
00:34:55,000 --> 00:34:59,759
Speaker 1: we have in your ten consultants. We probably have roughly two,

670
00:35:00,280 --> 00:35:02,400
Speaker 1: all right, So that's a that's a decent size. The

671
00:35:02,440 --> 00:35:04,880
Speaker 1: fifty two also includes a number of people that are

672
00:35:04,920 --> 00:35:06,960
Speaker 1: working at the company's doing sourcing, but they're doing the

673
00:35:07,000 --> 00:35:10,000
Speaker 1: same thing. They're calling companies looking for investments. So we

674
00:35:10,080 --> 00:35:13,000
Speaker 1: have fifty two people looking for deals and then a

675
00:35:13,040 --> 00:35:17,120
Speaker 1: lot of those conversations are directly with founders. And what

676
00:35:17,160 --> 00:35:19,600
Speaker 1: we're trying to do is figure out. The way we

677
00:35:19,640 --> 00:35:22,360
Speaker 1: think about it is we can pay a price that

678
00:35:22,440 --> 00:35:24,839
Speaker 1: we can hit our target returns, which I can't talk

679
00:35:24,880 --> 00:35:29,279
Speaker 1: about on you know, but we can hit our so

680
00:35:29,640 --> 00:35:31,040
Speaker 1: we we we can pay a price that we can

681
00:35:31,120 --> 00:35:34,240
Speaker 1: hit our target returns with like a seventy base case,

682
00:35:34,960 --> 00:35:37,640
Speaker 1: and then we need there to be a lot more

683
00:35:37,760 --> 00:35:39,960
Speaker 1: upside to that than downside. So we want there to

684
00:35:40,000 --> 00:35:42,760
Speaker 1: be like a case where we could hit many multiples

685
00:35:42,760 --> 00:35:45,200
Speaker 1: of our target returns, and so based on that we

686
00:35:45,280 --> 00:35:46,920
Speaker 1: kind of back into a price. And then where we

687
00:35:46,960 --> 00:35:49,960
Speaker 1: get in trouble or where things get turned down at

688
00:35:50,000 --> 00:35:54,000
Speaker 1: investment committee is when everything in the world has to

689
00:35:54,040 --> 00:35:57,080
Speaker 1: go perfectly to hit that target. Because I've I've been

690
00:35:57,120 --> 00:35:59,719
Speaker 1: in this business for twenty eight years, and when you

691
00:35:59,719 --> 00:36:04,200
Speaker 1: start pricing in perfection, that's a time when you realize

692
00:36:04,200 --> 00:36:09,080
Speaker 1: you're overpaying. So that that's that's it's that seventy probability

693
00:36:09,239 --> 00:36:12,360
Speaker 1: and lots of marginals safety thing that you really, as

694
00:36:12,400 --> 00:36:15,160
Speaker 1: someone who's like a little bit more senior at our firm,

695
00:36:15,640 --> 00:36:18,600
Speaker 1: I have to bring that to the to the discussions. Yeah,

696
00:36:18,640 --> 00:36:21,719
Speaker 1: that that perfect ten stuck the landing. Those are the

697
00:36:21,760 --> 00:36:24,800
Speaker 1: outliers you certainly can't rely on exactly. You can't underwrite

698
00:36:24,800 --> 00:36:26,360
Speaker 1: to that for sure. So when you look at this

699
00:36:26,440 --> 00:36:30,040
Speaker 1: macro environment, it seems to be pretty supportive of economic

700
00:36:30,120 --> 00:36:34,919
Speaker 1: expansion generally. How closely do you pay attention to things like, hey,

701
00:36:34,960 --> 00:36:37,920
Speaker 1: the Fed is raising rates pretty rapidly, maybe they're going

702
00:36:38,000 --> 00:36:41,880
Speaker 1: to cause a recession next year. We pay um attention

703
00:36:41,920 --> 00:36:44,239
Speaker 1: to it to some extent. If you go back to

704
00:36:44,320 --> 00:36:47,520
Speaker 1: the O eight crisis, Now that's a recession. Yeah, and

705
00:36:47,520 --> 00:36:50,319
Speaker 1: we're we're just in a very different position. Um. I

706
00:36:50,320 --> 00:36:52,960
Speaker 1: think we're way underbuilt on housing. So you know, I

707
00:36:52,960 --> 00:36:56,040
Speaker 1: don't while the underbuilt on housing, so I don't see

708
00:36:56,480 --> 00:36:59,359
Speaker 1: you know, I don't see things happen, you know, crashing there.

709
00:36:59,480 --> 00:37:02,719
Speaker 1: I think we have the consumer isn't as leverage as

710
00:37:02,760 --> 00:37:05,239
Speaker 1: they were back in two thousand eight, businesses aren't as

711
00:37:05,280 --> 00:37:08,120
Speaker 1: leverage as they were. I just think it's a lot healthier.

712
00:37:08,120 --> 00:37:10,400
Speaker 1: On the flip side, we also don't have the FED

713
00:37:10,760 --> 00:37:12,920
Speaker 1: can't print money like they did in O A because

714
00:37:13,040 --> 00:37:15,840
Speaker 1: of inflation. But I think generally it just feels like

715
00:37:15,880 --> 00:37:18,080
Speaker 1: we're a lot healthier than we were back then. You're

716
00:37:18,120 --> 00:37:20,440
Speaker 1: you're singing my song. I'm in the exact same place. I'm.

717
00:37:20,480 --> 00:37:24,520
Speaker 1: I'm kind of perplexed by all the recession chatter. I mean,

718
00:37:24,560 --> 00:37:27,320
Speaker 1: what are we two seven to eight million new jobs

719
00:37:27,480 --> 00:37:30,799
Speaker 1: in this year? That's not what usually see, although, to

720
00:37:30,960 --> 00:37:35,319
Speaker 1: be fair some past recessions, we were creating jobs right

721
00:37:35,400 --> 00:37:38,839
Speaker 1: until the moment it stopped and and the bottom dropped out.

722
00:37:39,360 --> 00:37:43,920
Speaker 1: But you know, it really depends on how aggressive the

723
00:37:43,960 --> 00:37:47,040
Speaker 1: powers that you're going to get about inflation. So here's

724
00:37:47,040 --> 00:37:50,160
Speaker 1: the question related to that, and oh eight oh nine,

725
00:37:50,840 --> 00:37:54,319
Speaker 1: Let's say the naysayers are are right and the end

726
00:37:54,320 --> 00:37:58,279
Speaker 1: of this year or we see something more than just

727
00:37:58,360 --> 00:38:01,560
Speaker 1: a mile sheallow recession, we see a real recession. How

728
00:38:01,600 --> 00:38:05,239
Speaker 1: does that affect the companies you look at and do

729
00:38:05,320 --> 00:38:08,800
Speaker 1: you start doing, for lack of a better phrase, distress

730
00:38:08,960 --> 00:38:11,640
Speaker 1: private equity invest Now you know, I think that what

731
00:38:11,680 --> 00:38:14,799
Speaker 1: we've been trying to do over the last fourteen years

732
00:38:14,880 --> 00:38:18,400
Speaker 1: is under age companies that would do well in a recession. Um,

733
00:38:18,480 --> 00:38:21,800
Speaker 1: So hopefully we're gonna our companies will hold up well

734
00:38:21,840 --> 00:38:24,480
Speaker 1: in that time in terms of what we look for.

735
00:38:24,560 --> 00:38:27,239
Speaker 1: It does open up the door when you know, when

736
00:38:27,239 --> 00:38:29,480
Speaker 1: there is a recession, there's a lot more different things

737
00:38:29,480 --> 00:38:32,000
Speaker 1: that are for sale at different prices. And I think

738
00:38:32,040 --> 00:38:34,960
Speaker 1: one of the great assets is if you have the

739
00:38:35,000 --> 00:38:37,560
Speaker 1: whole team of managers that you can put into run

740
00:38:37,600 --> 00:38:39,759
Speaker 1: distress things, you have a lot of options open to

741
00:38:39,840 --> 00:38:41,600
Speaker 1: what you can look at. So there, you know, there

742
00:38:41,640 --> 00:38:43,920
Speaker 1: will be a lot more interesting things to do with

743
00:38:44,160 --> 00:38:45,799
Speaker 1: you know, if that happens, certainly don't wish that on

744
00:38:45,880 --> 00:38:49,320
Speaker 1: the on the economy, on anybody else. And then finally

745
00:38:49,520 --> 00:38:53,000
Speaker 1: I have to ask about the way you score software

746
00:38:53,000 --> 00:38:56,759
Speaker 1: companies and services companies use a metric. I really am

747
00:38:56,760 --> 00:38:59,360
Speaker 1: not familiar with e NPS. Can you tell us a

748
00:38:59,360 --> 00:39:03,040
Speaker 1: little bit about Yeah, So, I think in general that

749
00:39:03,640 --> 00:39:09,440
Speaker 1: there are leading indicators and lagging indicators. Lagging indicator is revenue.

750
00:39:10,680 --> 00:39:13,239
Speaker 1: Those are lagging indicators. But yet a lot of managers

751
00:39:13,760 --> 00:39:16,640
Speaker 1: they try to manage to lagging indicators, it's like and that,

752
00:39:16,719 --> 00:39:19,279
Speaker 1: and that's just not very effective. So what we've tried

753
00:39:19,320 --> 00:39:21,360
Speaker 1: to do is develop what are the leading indicators that

754
00:39:21,360 --> 00:39:24,680
Speaker 1: are going to predict success. And the number one most

755
00:39:24,719 --> 00:39:27,400
Speaker 1: important leading indicator you're not going to be surprising to

756
00:39:27,400 --> 00:39:29,880
Speaker 1: hear me say, is talent. So if you tell me

757
00:39:29,920 --> 00:39:32,359
Speaker 1: I'm on the board of your business and and we're

758
00:39:32,400 --> 00:39:35,000
Speaker 1: starting to build the world class management team, I can

759
00:39:35,000 --> 00:39:37,720
Speaker 1: tell you in two years we'll have a home run investment.

760
00:39:38,280 --> 00:39:41,280
Speaker 1: So one of those leading two of those leading indicators

761
00:39:41,280 --> 00:39:44,640
Speaker 1: related to talent are employee net Promoter score, which is

762
00:39:44,680 --> 00:39:48,560
Speaker 1: the NPS, meaning how employees rate them exactly, would would

763
00:39:48,560 --> 00:39:51,680
Speaker 1: they would they recommend this company to a friend, um,

764
00:39:51,719 --> 00:39:54,160
Speaker 1: And we we measure that every quarter for every one

765
00:39:54,160 --> 00:39:56,360
Speaker 1: of our companies. We measure at Alpine, we measure it

766
00:39:56,400 --> 00:39:59,040
Speaker 1: for a whole bunch of different groups within Alpine. And

767
00:39:59,080 --> 00:40:01,360
Speaker 1: then retention is the other big one. So if we

768
00:40:01,400 --> 00:40:03,799
Speaker 1: can be managing those and getting those right, those are

769
00:40:03,880 --> 00:40:06,680
Speaker 1: leading indicators that are gonna help us set up you know,

770
00:40:06,760 --> 00:40:09,160
Speaker 1: the revenue E but dota come later, and those are

771
00:40:09,320 --> 00:40:13,880
Speaker 1: hard things to manage. Getting those those metrics right takes

772
00:40:13,920 --> 00:40:16,399
Speaker 1: a lot of work. That's Actually, where I spend most

773
00:40:16,400 --> 00:40:17,799
Speaker 1: of my time at out and believe it or not,

774
00:40:17,920 --> 00:40:21,200
Speaker 1: is making sure that we're creating an environment where the

775
00:40:21,200 --> 00:40:23,839
Speaker 1: best people want to be and stay. And most people,

776
00:40:23,840 --> 00:40:25,960
Speaker 1: again in the finance world, they don't think about kind

777
00:40:25,960 --> 00:40:28,879
Speaker 1: of squishy soft metrics like that, but they should be

778
00:40:29,520 --> 00:40:31,840
Speaker 1: well because they have a really outsize impact on the

779
00:40:31,880 --> 00:40:35,560
Speaker 1: performance of a company. Absolutely, that's my view is they

780
00:40:35,560 --> 00:40:38,840
Speaker 1: have they have the biggest impact. And my last question

781
00:40:38,880 --> 00:40:41,160
Speaker 1: before I get to our favorite questions we ask all

782
00:40:41,200 --> 00:40:43,359
Speaker 1: our guests. It's a little bit of a curve ball.

783
00:40:44,000 --> 00:40:47,560
Speaker 1: You were a captain on a national championship rowing team,

784
00:40:47,560 --> 00:40:53,080
Speaker 1: and so you look like you wrote so I uh,

785
00:40:53,160 --> 00:40:56,040
Speaker 1: I came to college not even knowing anything about rowing.

786
00:40:56,120 --> 00:40:58,680
Speaker 1: I didn't even know that the boats went backwards until

787
00:40:58,760 --> 00:41:02,920
Speaker 1: I got in a boat. Well, it's not that exactly.

788
00:41:03,080 --> 00:41:06,680
Speaker 1: I didn't even know that, um so I started as

789
00:41:06,719 --> 00:41:11,160
Speaker 1: a novice. I walk on the team and it seemed

790
00:41:11,200 --> 00:41:14,120
Speaker 1: like everyone else on the team had rowed before. So

791
00:41:14,200 --> 00:41:17,759
Speaker 1: I was horrible, absolutely horrible, got cut and then just

792
00:41:17,840 --> 00:41:20,600
Speaker 1: kept kind of and and so there's this funny story

793
00:41:20,600 --> 00:41:22,359
Speaker 1: where the coach says, Okay, these are the people who

794
00:41:22,440 --> 00:41:25,480
Speaker 1: go into boats. The rest of you are quote land warriors,

795
00:41:25,960 --> 00:41:28,360
Speaker 1: and your land warrior means you go on the rowing machines.

796
00:41:28,920 --> 00:41:31,080
Speaker 1: And so that that night when he kind of posted

797
00:41:31,080 --> 00:41:32,600
Speaker 1: the boats and I wasn't in the boat, he said,

798
00:41:32,960 --> 00:41:35,200
Speaker 1: all right, you know, so I did this calculus, and

799
00:41:35,200 --> 00:41:37,319
Speaker 1: I'm like, okay, well, gosh, all the land warriors gonna

800
00:41:37,320 --> 00:41:41,040
Speaker 1: show up before class. You know, classes first classes at nine,

801
00:41:41,040 --> 00:41:42,239
Speaker 1: so they're gonna show up at eight. But so I

802
00:41:42,280 --> 00:41:44,200
Speaker 1: gotta show up at seven. No, no, no, everyone's gonna

803
00:41:44,200 --> 00:41:45,880
Speaker 1: think that. So I'll show up at six. So I

804
00:41:45,920 --> 00:41:49,160
Speaker 1: show up the next morning, zero people, and one of

805
00:41:49,160 --> 00:41:51,759
Speaker 1: the guys like, hey, idiot. Land warrior is another way

806
00:41:51,800 --> 00:41:54,280
Speaker 1: to say you got cut, you know. But I still

807
00:41:54,320 --> 00:41:56,960
Speaker 1: stayed as a land warrior and kept getting better at

808
00:41:57,120 --> 00:41:59,480
Speaker 1: getting my Earth times better and better over time, and

809
00:42:00,080 --> 00:42:01,600
Speaker 1: it was one of the greatest things I ever did.

810
00:42:01,640 --> 00:42:04,759
Speaker 1: I I had, I had a great time. And and

811
00:42:04,800 --> 00:42:09,040
Speaker 1: when were the national champions my senior year, I was

812
00:42:09,320 --> 00:42:11,440
Speaker 1: so by then you're on the team. By yeah, by

813
00:42:11,440 --> 00:42:13,960
Speaker 1: my Syria, I was pulling one of the best times

814
00:42:14,000 --> 00:42:17,040
Speaker 1: in the nation. And rowing machine on the concept to

815
00:42:17,280 --> 00:42:19,600
Speaker 1: rowing machine that you see in the gym to actually

816
00:42:19,600 --> 00:42:21,880
Speaker 1: have a standard test which is two thousand meters that

817
00:42:21,880 --> 00:42:26,000
Speaker 1: which you submit, you know nationally, And by my senior year,

818
00:42:26,040 --> 00:42:28,239
Speaker 1: I had one of it maybe a few times, the

819
00:42:28,320 --> 00:42:31,799
Speaker 1: number one time in the country. And and I was

820
00:42:31,840 --> 00:42:36,000
Speaker 1: elected captain by my teammates of our team. And then

821
00:42:36,040 --> 00:42:38,640
Speaker 1: that year we were supposed to have a rebuilding year

822
00:42:39,160 --> 00:42:41,359
Speaker 1: because we lost all these seniors, and we actually won

823
00:42:41,440 --> 00:42:44,240
Speaker 1: the whole thing. It was awesome. Wow, that's really amazing.

824
00:42:44,480 --> 00:42:47,239
Speaker 1: Let's jump to our favorite questions that we ask all

825
00:42:47,280 --> 00:42:51,440
Speaker 1: of our guests, starting with what kept you entertained during

826
00:42:51,440 --> 00:42:56,239
Speaker 1: the pandemic lockdown? Tell us what you were streaming? Um.

827
00:42:56,280 --> 00:43:00,640
Speaker 1: I went on this whole Buddhist thing during the pandemic,

828
00:43:00,880 --> 00:43:04,640
Speaker 1: and I started reading a lot about Buddhism and streaming Buddhism,

829
00:43:04,640 --> 00:43:09,520
Speaker 1: and it was it was amazing meditating or meditating and

830
00:43:09,600 --> 00:43:13,080
Speaker 1: just kind of learning about Buddhism and you know, why

831
00:43:13,160 --> 00:43:16,560
Speaker 1: we all suffer and how to you know, how all

832
00:43:16,600 --> 00:43:19,640
Speaker 1: these thoughts we have in our head, our our own imagination.

833
00:43:19,760 --> 00:43:22,520
Speaker 1: And I went on this whole kick during the pandemic,

834
00:43:22,520 --> 00:43:26,480
Speaker 1: which was phenomenal, highly recommended. Uh and And basically the

835
00:43:26,880 --> 00:43:30,560
Speaker 1: concept is that your reality is going through a filter

836
00:43:30,840 --> 00:43:33,360
Speaker 1: and and everything that's happened externally, you're telling yourself a

837
00:43:33,480 --> 00:43:36,680
Speaker 1: story about what that means and whether that's good or

838
00:43:36,680 --> 00:43:39,919
Speaker 1: whether that's bad, and that that's really your reality isn't

839
00:43:39,960 --> 00:43:42,359
Speaker 1: what's happening, it's the story you're telling yourself, and that

840
00:43:42,400 --> 00:43:47,000
Speaker 1: you have complete control over that story. That's the classic narrative.

841
00:43:47,360 --> 00:43:49,560
Speaker 1: That's yeah, that's the narrative fallacy. And that's kind of

842
00:43:49,560 --> 00:43:52,720
Speaker 1: the fundamental premise of of Buddhism, which is your suffering

843
00:43:52,800 --> 00:43:55,279
Speaker 1: is coming not from what's happening, but the story you're

844
00:43:55,280 --> 00:43:57,759
Speaker 1: telling yourself. So I went on this long you know,

845
00:43:58,200 --> 00:44:01,640
Speaker 1: meditating and and eating and kind of journaling about that,

846
00:44:01,680 --> 00:44:03,400
Speaker 1: and that was that was a lot of fun. So

847
00:44:03,400 --> 00:44:05,840
Speaker 1: so that we had this whole joke about um. We

848
00:44:05,880 --> 00:44:09,120
Speaker 1: had a softball team here over in Central Park and

849
00:44:09,200 --> 00:44:13,080
Speaker 1: we had the Buddhists playing the Stoics and the game

850
00:44:13,120 --> 00:44:16,400
Speaker 1: never finished. Everybody just sat down and started having a

851
00:44:16,440 --> 00:44:20,960
Speaker 1: long conversation. But I'm right there with you. You mentioned

852
00:44:21,280 --> 00:44:23,960
Speaker 1: your UM two of your mentors who were some of

853
00:44:24,040 --> 00:44:27,080
Speaker 1: your earliest investors. Are there anybody else you want to

854
00:44:27,120 --> 00:44:31,359
Speaker 1: mention as mentors? The professor at Stanford you referred to us. Yeah,

855
00:44:31,640 --> 00:44:35,239
Speaker 1: I'll both of those, Tom, Tom Styer, Doug Martin, and

856
00:44:35,280 --> 00:44:39,080
Speaker 1: Irv Grosspec were super important in my life. I'll talk

857
00:44:39,080 --> 00:44:43,439
Speaker 1: about Irv. He is probably probably if you had there's

858
00:44:43,440 --> 00:44:46,319
Speaker 1: probably literally very a hundred people you could have on

859
00:44:46,320 --> 00:44:48,640
Speaker 1: this con on this podcast that would list Irv as

860
00:44:48,680 --> 00:44:52,080
Speaker 1: one of their most important real he was. He's a

861
00:44:52,080 --> 00:44:55,719
Speaker 1: professor at Stanford and just uh, you know, makes time

862
00:44:55,800 --> 00:44:58,680
Speaker 1: for folks. He built an incredible business and he just

863
00:44:58,719 --> 00:45:03,759
Speaker 1: has this you know, unwavering moral code. Um. He was

864
00:45:03,760 --> 00:45:05,560
Speaker 1: an early investor. He's the one who asked me to

865
00:45:05,560 --> 00:45:08,640
Speaker 1: teach at Stanford, and I just I just find the

866
00:45:08,680 --> 00:45:12,640
Speaker 1: way he's set up his life and his uh, just

867
00:45:12,640 --> 00:45:15,720
Speaker 1: just the way he treats other people. Um, you're always

868
00:45:15,760 --> 00:45:18,239
Speaker 1: the most important person in the world when you're with him.

869
00:45:18,280 --> 00:45:20,640
Speaker 1: And so I've I've I've definitely learned learned a lot

870
00:45:20,680 --> 00:45:23,880
Speaker 1: from him. Really interesting. Let's talk about books. What are

871
00:45:23,920 --> 00:45:28,040
Speaker 1: some of your favorites and what are you reading currently? Um,

872
00:45:28,160 --> 00:45:32,080
Speaker 1: I it's funny I end up rereading like the same

873
00:45:32,080 --> 00:45:35,200
Speaker 1: ten books. Uh. In terms of my favorites I read,

874
00:45:35,239 --> 00:45:38,080
Speaker 1: I have some I read currently too, but good too,

875
00:45:38,160 --> 00:45:43,120
Speaker 1: great Warren Buffett's biography, Snowball, Steve Jobs Biography by Isaacs

876
00:45:43,120 --> 00:45:46,839
Speaker 1: and Walt Disney's Biography by Neil Gabbler. UH Switch by

877
00:45:46,920 --> 00:45:50,640
Speaker 1: Danna chip Heath, Made to Stick Dana chip Heath buffets

878
00:45:50,600 --> 00:45:53,239
Speaker 1: annual letters like those are like I'm I reread those

879
00:45:53,520 --> 00:45:55,400
Speaker 1: and and every time I reread them, I get kind

880
00:45:55,440 --> 00:45:58,239
Speaker 1: of re energized. And We've modeled a lot of our

881
00:45:59,239 --> 00:46:02,520
Speaker 1: business and a lot of my life around some of

882
00:46:02,520 --> 00:46:04,279
Speaker 1: the things I learned in some of those books, and

883
00:46:04,640 --> 00:46:06,880
Speaker 1: a lot of those are required reading an Alpine I

884
00:46:06,880 --> 00:46:09,319
Speaker 1: can imagine what are you reading currently? And and right

885
00:46:09,360 --> 00:46:12,840
Speaker 1: now I started getting on this burnet brown kick. I

886
00:46:12,880 --> 00:46:14,440
Speaker 1: don't know if you've read some of her stuff, but

887
00:46:14,520 --> 00:46:18,120
Speaker 1: the The Gifts of Imperfection I'm reading right now, which

888
00:46:18,160 --> 00:46:21,880
Speaker 1: is just phenomenal. She is I actually download on an

889
00:46:21,920 --> 00:46:23,960
Speaker 1: audible so I get to hear her talk about it.

890
00:46:24,000 --> 00:46:28,360
Speaker 1: But she has um just this incredible way of talking

891
00:46:28,400 --> 00:46:32,400
Speaker 1: about UH about things that other people don't talk about,

892
00:46:32,480 --> 00:46:35,360
Speaker 1: like shame and how to um how to deal with

893
00:46:35,360 --> 00:46:37,160
Speaker 1: the things you're not good at, and how to be

894
00:46:37,280 --> 00:46:40,440
Speaker 1: intellectually honest and and admit when you don't know things.

895
00:46:40,480 --> 00:46:43,200
Speaker 1: And she's I love I love her work. What's the

896
00:46:43,239 --> 00:46:45,799
Speaker 1: title of the book. You're reading The Gift of Imperfection.

897
00:46:45,840 --> 00:46:49,319
Speaker 1: It sounds really it's phenomenal. It's phenomenal. Um before I

898
00:46:49,360 --> 00:46:51,839
Speaker 1: forget just as an aside, and you could edit this out.

899
00:46:52,440 --> 00:46:55,839
Speaker 1: So I went to law school with a guy named

900
00:46:55,920 --> 00:47:00,719
Speaker 1: Lawrence Cunningham who was the first person who recognized, Hey,

901
00:47:00,760 --> 00:47:05,160
Speaker 1: all these letters from Warren Buffett. They're really fascinating deep stuff.

902
00:47:05,200 --> 00:47:07,879
Speaker 1: He bound them. Yeah, I bought that book. I owned

903
00:47:07,920 --> 00:47:11,279
Speaker 1: that book. That book has been like a perennial bestseller.

904
00:47:11,600 --> 00:47:13,600
Speaker 1: And it's a you know, the old joke about the

905
00:47:13,600 --> 00:47:16,520
Speaker 1: two economists walking down the street. One says, is that

906
00:47:16,560 --> 00:47:19,560
Speaker 1: a hundred dollar bill on the floor, and the other says, no,

907
00:47:19,680 --> 00:47:21,200
Speaker 1: if it was a hundred dollar bills, someone would have

908
00:47:21,239 --> 00:47:26,080
Speaker 1: picked it up. It's the same. Yeah, these have been

909
00:47:26,080 --> 00:47:29,520
Speaker 1: around for literally, I mean I think he first started

910
00:47:29,520 --> 00:47:32,839
Speaker 1: in like ninety or nine two, something like that. And

911
00:47:33,239 --> 00:47:35,600
Speaker 1: Buffett had been around for thirty years. By an a radio,

912
00:47:35,719 --> 00:47:37,680
Speaker 1: twenty five years nobody had thought of doing. And you

913
00:47:37,719 --> 00:47:40,719
Speaker 1: know what, like it doesn't matter if it's crypto or

914
00:47:40,800 --> 00:47:45,520
Speaker 1: software valuations or the internet. The stuff but Buffett writes

915
00:47:45,560 --> 00:47:51,640
Speaker 1: about is still the right stuff. Fundamental sense to discount

916
00:47:51,640 --> 00:47:53,839
Speaker 1: the cash flows back and decide what you can pay.

917
00:47:54,120 --> 00:47:56,920
Speaker 1: You're gonna put a premium on the discount rate if

918
00:47:56,920 --> 00:48:00,200
Speaker 1: the stuff is a lot more uncertain. It's this is

919
00:48:00,280 --> 00:48:04,239
Speaker 1: exactly the right formula today, and it was fifty years ago,

920
00:48:04,280 --> 00:48:06,279
Speaker 1: and it will be fifty years from now. And any

921
00:48:06,320 --> 00:48:08,439
Speaker 1: time that there's something new where people says this time

922
00:48:08,440 --> 00:48:12,720
Speaker 1: it's different, you should be really skeptical. Alright, our final

923
00:48:12,760 --> 00:48:15,640
Speaker 1: two questions, what sort of advice would you give to

924
00:48:15,719 --> 00:48:19,480
Speaker 1: a recent college or business school graduate interested in a

925
00:48:19,560 --> 00:48:22,600
Speaker 1: career in private equity. Well, I'll start with the first

926
00:48:22,600 --> 00:48:25,320
Speaker 1: part just general advice, um, and then I'll go to the

927
00:48:25,280 --> 00:48:27,760
Speaker 1: the private equity. But you know, as you can imagine,

928
00:48:27,800 --> 00:48:31,160
Speaker 1: actually give this advice all the time teaching. But the

929
00:48:31,160 --> 00:48:33,360
Speaker 1: the first thing that I think a lot of people

930
00:48:33,400 --> 00:48:36,680
Speaker 1: graduating don't ask is like what they what do I want?

931
00:48:37,760 --> 00:48:40,400
Speaker 1: What is five years from now, ten years from now?

932
00:48:40,400 --> 00:48:43,160
Speaker 1: If I could, if I knew I wasn't going to fail,

933
00:48:43,960 --> 00:48:46,160
Speaker 1: what would I want to do with my life? And

934
00:48:46,200 --> 00:48:50,600
Speaker 1: they and start with that question and then start working

935
00:48:50,680 --> 00:48:53,479
Speaker 1: backwards from that about what job you should take now

936
00:48:54,000 --> 00:48:56,279
Speaker 1: and next year in five years from now. Instead, a

937
00:48:56,280 --> 00:48:58,640
Speaker 1: lot of people just think, oh, these firms are interviewing

938
00:48:59,040 --> 00:49:01,920
Speaker 1: on campus and I'll go here, I'll go here, and

939
00:49:02,200 --> 00:49:04,520
Speaker 1: that's okay. But if you know where you want to

940
00:49:04,520 --> 00:49:07,080
Speaker 1: be ten years from now, it'll inform which firm you

941
00:49:07,120 --> 00:49:09,120
Speaker 1: go to work and what skills you're trying to acquire.

942
00:49:09,640 --> 00:49:11,560
Speaker 1: So I think I think that would be My advice

943
00:49:11,640 --> 00:49:16,120
Speaker 1: is like, in ten years you will you can do

944
00:49:16,200 --> 00:49:18,920
Speaker 1: almost anything you set your mind to, and so give

945
00:49:18,960 --> 00:49:22,160
Speaker 1: yourself permission to really answer that question, what do I

946
00:49:22,200 --> 00:49:24,080
Speaker 1: want to do in ten years? Why does it matter

947
00:49:24,239 --> 00:49:28,839
Speaker 1: if you quote know you're you wouldn't fail, Yeah, just

948
00:49:28,920 --> 00:49:33,319
Speaker 1: to open the set of possibilities, or because yeah, I

949
00:49:33,360 --> 00:49:35,879
Speaker 1: always frame it as if you knew you wouldn't fail,

950
00:49:35,920 --> 00:49:40,040
Speaker 1: what would you do? Because without that people already jump

951
00:49:40,120 --> 00:49:44,720
Speaker 1: to I can't do this, like subconsciously in the big

952
00:49:45,280 --> 00:49:50,080
Speaker 1: fear failure so powerful even amongst really high performing talent.

953
00:49:50,200 --> 00:49:52,880
Speaker 1: I think it's I mean, Stanford graduate students, I have

954
00:49:52,920 --> 00:49:56,240
Speaker 1: to think that's the cross. In some ways, it's almost

955
00:49:56,320 --> 00:50:01,560
Speaker 1: more prevalent because they have had so much success and

956
00:50:01,640 --> 00:50:04,000
Speaker 1: they don't you know, they have this incredible track record.

957
00:50:04,360 --> 00:50:06,880
Speaker 1: But I would say the number one thing that Stanford

958
00:50:06,920 --> 00:50:09,680
Speaker 1: Business School students are are really just about anyone in

959
00:50:09,680 --> 00:50:13,000
Speaker 1: the world. It's the same thing, which is they they

960
00:50:13,040 --> 00:50:17,960
Speaker 1: they there, Their subconscious mind defaults to fear and fear

961
00:50:18,000 --> 00:50:22,160
Speaker 1: of failure. That's fascinating because when I have discussions like

962
00:50:22,239 --> 00:50:26,160
Speaker 1: this with colleagues or friends in Europe, the thing or

963
00:50:26,200 --> 00:50:29,399
Speaker 1: even Asia, The thing that makes the United States so

964
00:50:29,600 --> 00:50:34,640
Speaker 1: unique in the developed economy world is that failure isn't

965
00:50:34,680 --> 00:50:38,520
Speaker 1: a scarlet letter. Especially in Silicon Valley. It's almost a

966
00:50:38,560 --> 00:50:41,239
Speaker 1: badge of honor. Look at all the vcs that list all, Hey,

967
00:50:41,320 --> 00:50:44,240
Speaker 1: we missed Apple and Cisco, we invested money in pets

968
00:50:44,280 --> 00:50:46,880
Speaker 1: dot com. Look how terrible we are except for our

969
00:50:47,640 --> 00:50:50,480
Speaker 1: compounded returns. It's a badge of honor to say we

970
00:50:50,560 --> 00:50:54,080
Speaker 1: tried this, face planted, brushed yourself off, and moved on.

971
00:50:54,520 --> 00:50:57,320
Speaker 1: But when you're starting out your career and you don't

972
00:50:57,440 --> 00:51:00,600
Speaker 1: have anything to fall back on, and you haven't yet

973
00:51:01,160 --> 00:51:03,800
Speaker 1: had the success that you can look back, it's really

974
00:51:03,840 --> 00:51:07,239
Speaker 1: scary for people. And the thing that they miss is

975
00:51:07,280 --> 00:51:10,920
Speaker 1: they underestimate what they could really do in in ten years,

976
00:51:10,960 --> 00:51:14,040
Speaker 1: and they underestimate themselves. They forgot what got them that

977
00:51:14,080 --> 00:51:17,279
Speaker 1: seat at Stanford Business School, and they compare themselves to

978
00:51:17,320 --> 00:51:19,960
Speaker 1: you know, their roommate or their classmate or something. So

979
00:51:20,080 --> 00:51:25,239
Speaker 1: the other half of the question, um, advice about private equity. Yeah,

980
00:51:25,280 --> 00:51:27,000
Speaker 1: I would say I would say if if someone is

981
00:51:27,040 --> 00:51:29,160
Speaker 1: interested in a career in private equity, I would I

982
00:51:29,160 --> 00:51:32,720
Speaker 1: would say, all private equities not created equal, and there

983
00:51:32,719 --> 00:51:37,480
Speaker 1: are literally, like probably a thousand different models and figure out,

984
00:51:37,960 --> 00:51:39,600
Speaker 1: you know, go talk to a bunch of companies that

985
00:51:39,680 --> 00:51:42,400
Speaker 1: are doing private equity a whole bunch of different ways,

986
00:51:42,640 --> 00:51:45,440
Speaker 1: and figure out what resonates with you and your interests

987
00:51:45,440 --> 00:51:47,319
Speaker 1: and your superpowers and where are you going to line

988
00:51:47,400 --> 00:51:51,239
Speaker 1: up because it's it's a very diverse industry and you know, um,

989
00:51:51,239 --> 00:51:53,640
Speaker 1: there are some firms that are making their money based

990
00:51:53,680 --> 00:51:56,439
Speaker 1: on you know, hardcore fundamental analysis. You know, are we're

991
00:51:56,440 --> 00:51:59,280
Speaker 1: making our money on talent. There's others that are, um,

992
00:51:59,320 --> 00:52:01,319
Speaker 1: you know, doing us cutting. There's a whole bunch of

993
00:52:01,360 --> 00:52:03,480
Speaker 1: different ways, and one or more of those is going

994
00:52:03,520 --> 00:52:05,680
Speaker 1: to line up a lot better with what you're excited about.

995
00:52:06,160 --> 00:52:09,160
Speaker 1: And our final question, what do you know about the

996
00:52:09,200 --> 00:52:13,200
Speaker 1: world of software services in private equity today that you

997
00:52:13,320 --> 00:52:16,120
Speaker 1: wish you knew twenty eight years or so ago when

998
00:52:16,120 --> 00:52:19,240
Speaker 1: you were first getting started. Well, two things. The first

999
00:52:19,239 --> 00:52:21,200
Speaker 1: thing is I wish I knew that it was going

1000
00:52:21,280 --> 00:52:24,719
Speaker 1: to work out fine, you know, so I was so

1001
00:52:24,800 --> 00:52:28,960
Speaker 1: stressed and put so much pressure on myself that I

1002
00:52:29,000 --> 00:52:31,120
Speaker 1: wish if I could go back and tell myself anything,

1003
00:52:31,120 --> 00:52:33,560
Speaker 1: it would be like, hey, Graham, you know it's gonna

1004
00:52:33,560 --> 00:52:36,759
Speaker 1: be okay because I went through a lot. That's a

1005
00:52:36,800 --> 00:52:39,920
Speaker 1: really interest. That's a really interesting answer, because you know,

1006
00:52:39,960 --> 00:52:44,560
Speaker 1: we just don't realize how much we freak ourselves out

1007
00:52:44,800 --> 00:52:49,719
Speaker 1: and and very often unnecessarily. What's the second thing? The

1008
00:52:49,800 --> 00:52:52,719
Speaker 1: second thing would be, I would be I would if

1009
00:52:52,760 --> 00:52:55,320
Speaker 1: I could have realized earlier on just how important the

1010
00:52:55,600 --> 00:52:57,880
Speaker 1: world of talent is and how that was really the

1011
00:52:57,880 --> 00:53:01,279
Speaker 1: thing that drove drove formans, because that that would have

1012
00:53:01,320 --> 00:53:06,480
Speaker 1: saved me a a decade. Sounds really like, um, You've

1013
00:53:06,520 --> 00:53:09,120
Speaker 1: honed in on exactly what makes your business work and

1014
00:53:09,560 --> 00:53:13,280
Speaker 1: really quite fascinating. Graham, Thank you for being so generous

1015
00:53:13,280 --> 00:53:15,919
Speaker 1: with your time. We have been speaking with Graham Weaver,

1016
00:53:16,120 --> 00:53:20,680
Speaker 1: founder and partner at Alpine Investors. If you enjoyed this conversation,

1017
00:53:20,760 --> 00:53:23,240
Speaker 1: well be sure and check out any of our previous

1018
00:53:23,320 --> 00:53:26,919
Speaker 1: four hundred discussions that we've had over the past eight

1019
00:53:26,920 --> 00:53:32,120
Speaker 1: and a half years. You can find those at iTunes. Spotify,

1020
00:53:32,200 --> 00:53:36,640
Speaker 1: wherever you feed your podcast fix. We love your comments, feedback,

1021
00:53:36,680 --> 00:53:40,640
Speaker 1: end suggestions right to us at m IB podcast at

1022
00:53:40,640 --> 00:53:43,959
Speaker 1: Bloomberg dot net. Sign up for my daily reading list

1023
00:53:43,960 --> 00:53:45,839
Speaker 1: at rid Halts dot com. You can follow me on

1024
00:53:45,880 --> 00:53:49,360
Speaker 1: Twitter at rid Halts. I would be remiss if I

1025
00:53:49,400 --> 00:53:51,600
Speaker 1: did not thank the crack team that helps put these

1026
00:53:51,840 --> 00:53:56,600
Speaker 1: conversations together each week. Robert Bragg is my audio engineer.

1027
00:53:56,760 --> 00:54:00,640
Speaker 1: Atika Valbrun is my project manager. Sean So runs all

1028
00:54:00,680 --> 00:54:05,560
Speaker 1: of our research. Paris Wald is my producer. I'm Barry Ritolts.

1029
00:54:05,800 --> 00:54:11,400
Speaker 1: You've been listening to Masters in Business on Bloomberg radioa