WEBVTT - Graham Weaver on Private Equity 0:00:02.000 --> 0:00:07.120 This is Mesters in Business with Very Results on Bloomberg Radio. 0:00:09.680 --> 0:00:12.600 This week on the podcast, I have an extra special guest. 0:00:12.800 --> 0:00:16.160 Graham Weaver is founder and partner at Alpine Investors, a 0:00:16.239 --> 0:00:22.000 private equity firm focusing on software and services. Graham has 0:00:22.040 --> 0:00:27.680 a really interesting background, both engineering at Princeton and essentially 0:00:28.360 --> 0:00:31.320 launching a PE firm while he was a graduate student 0:00:31.720 --> 0:00:35.559 at Stanford. Everybody knows the story about Michael Dell launching 0:00:35.880 --> 0:00:39.080 a computer business out of his dorm room in Texas. 0:00:39.680 --> 0:00:42.639 This could be the first PE firm I'm familiar with 0:00:43.159 --> 0:00:46.600 that got started in a dorm room. What makes Graham 0:00:46.720 --> 0:00:50.640 so interesting is while everybody else in the world of 0:00:50.680 --> 0:00:55.200 private equity is focused on the analytics and crunching numbers 0:00:55.240 --> 0:00:58.880 and creating econometric models that will tell you way to 0:00:58.960 --> 0:01:02.880 invest I think they've found a very different model that 0:01:03.000 --> 0:01:07.720 has been extremely successful for them, where the key focus 0:01:08.160 --> 0:01:11.280 is on talent. How do we find the best talent, 0:01:11.400 --> 0:01:15.880 put them in place running our investment companies, and allow 0:01:16.000 --> 0:01:19.880 them to generate the sort of returns UH that you 0:01:20.120 --> 0:01:23.800 don't really generate by just looking at a model. I 0:01:23.880 --> 0:01:27.160 found our conversation absolutely fascinating, and I think you will 0:01:27.200 --> 0:01:31.520 also with no further ado my discussion with Alpine Investors. 0:01:31.920 --> 0:01:36.600 Graham Weaver, let's jump right into this, starting with your background. 0:01:36.760 --> 0:01:40.920 When I hear someone has an engineering degree, I tend 0:01:40.959 --> 0:01:44.120 to think of venture capital, not private equity. Tell us 0:01:44.120 --> 0:01:47.720 a little bit, how you went the PE route instead 0:01:47.720 --> 0:01:51.280 of the VC route. Well, I actually started in private 0:01:51.280 --> 0:01:54.040 equity right out of undergrad. I really didn't know the 0:01:54.080 --> 0:01:58.240 difference between private equity or consulting or anything. I had 0:01:58.560 --> 0:02:01.800 zero knowledge of at and I was fortunate to end 0:02:01.880 --> 0:02:04.760 up in Morgan Stanley's private equity group. I loved it, 0:02:04.800 --> 0:02:07.160 and I've kind of been at it ever since. Really 0:02:07.160 --> 0:02:11.200 really interesting. So is it from Princeton to Morgan Stanley, uh, 0:02:11.280 --> 0:02:15.359 and then Stanford or am I getting the order? Yeah? 0:02:15.360 --> 0:02:17.000 I when I was at Princeton, then I went to 0:02:17.040 --> 0:02:18.920 Morgan Stanley and their private equity. Then I worked at 0:02:18.919 --> 0:02:21.160 it from called American Securities for a couple of years, 0:02:21.160 --> 0:02:23.560 and then went to went to business school after that. 0:02:23.720 --> 0:02:26.520 And somewhere in the middle of this, there's a pig 0:02:26.560 --> 0:02:30.240 farm in Missouri that I'm having a hard time figuring 0:02:30.280 --> 0:02:32.840 out what a pig farm has to do with with 0:02:32.960 --> 0:02:36.680 private acts. So the very first deal I worked on. 0:02:36.720 --> 0:02:39.280 So I come out of school, I'm wearing my cross 0:02:39.360 --> 0:02:42.040 pen and my lapel, and I'm like wearing a tie 0:02:42.120 --> 0:02:44.960 and well buttoned down exactly, and I think I'm a 0:02:45.000 --> 0:02:47.080 big shot being on Wall Street. And I get shipped 0:02:47.120 --> 0:02:49.760 out to this pig farm in Missouri, which was a 0:02:49.760 --> 0:02:53.720 deal Morgan Stanley had invested in. They'd invested a total 0:02:53.760 --> 0:02:57.480 of a billion almost a billion dollars of debt and equity, 0:02:57.639 --> 0:03:00.440 and it, suffice to say was not going well. So 0:03:01.360 --> 0:03:02.760 not that I was going to go save it as 0:03:02.800 --> 0:03:05.480 a twenty two year old analyst, but I got shipped out. 0:03:05.480 --> 0:03:09.240 I lived in the CFOs basement for about five months 0:03:09.360 --> 0:03:12.280 and we did everything we could, but it turned out 0:03:12.280 --> 0:03:14.400 not to not to be a great investment. So there's 0:03:14.400 --> 0:03:17.800 not big money and pigs. Well, it turns out hog 0:03:17.840 --> 0:03:21.760 prices are wildly cyclical. And you know there's the expression, 0:03:22.160 --> 0:03:25.280 how does uh six footman drown drowned in a river 0:03:25.360 --> 0:03:28.320 that averages five ft? You know it's because there's parts 0:03:28.360 --> 0:03:30.160 of the river that are deeper. Will you know, we 0:03:30.200 --> 0:03:32.919 build our whole model on hog prices being forty seven 0:03:32.919 --> 0:03:37.480 dollars and when we with that's what they average. But 0:03:37.560 --> 0:03:39.600 that doesn't tell you how much they swing up. And 0:03:39.760 --> 0:03:41.920 it turns out, yeah, they were. They went to eighteen 0:03:41.920 --> 0:03:45.000 dollars and we had seven hundred million a debt and 0:03:45.280 --> 0:03:47.920 that didn't that that didn't go well. So that's the 0:03:48.120 --> 0:03:50.000 that's the old joke. It's not the price, it's the 0:03:50.040 --> 0:03:53.040 volatility that it was. Yeah, it was rough, but it 0:03:53.120 --> 0:03:56.200 was a That was my introduction to the glamorous business 0:03:56.200 --> 0:03:58.640 of private equity. And you didn't turn around and say, 0:03:58.720 --> 0:04:00.880 I want nothing to do. I had the time of 0:04:00.920 --> 0:04:05.040 my life. It was so fun. Um, how is sleeping 0:04:05.040 --> 0:04:08.880 in the CFOs basement? What was his house on the 0:04:09.520 --> 0:04:13.160 it was it was the whole entire town smelled like 0:04:13.200 --> 0:04:17.359 a pig farm, and which was not especially delightful. It's not. No, 0:04:17.600 --> 0:04:19.560 it turns out and every and pretty much everyone in 0:04:19.560 --> 0:04:22.880 the town worked and had some affiliation with the pig farm. 0:04:23.200 --> 0:04:26.440 The CFO was also a Morgan Stanley guy, and he 0:04:26.480 --> 0:04:31.280 was probably twenty seven. So neither of us years of experience, you, 0:04:31.560 --> 0:04:33.240 neither of us had any clue what we were doing. 0:04:33.480 --> 0:04:37.000 And uh, but but it really wouldn't have mattered. When 0:04:37.040 --> 0:04:39.560 your revenue gets cut by like eight percent, there's just 0:04:39.600 --> 0:04:41.560 not a lot not a lot you're gonna do to 0:04:41.560 --> 0:04:44.840 turn that around. So so there's a cliche about tech 0:04:44.880 --> 0:04:47.880 firms being started in dorm rooms. How does a private 0:04:47.920 --> 0:04:50.240 equity firm start in a dorm room? So I I 0:04:50.320 --> 0:04:53.680 show up at Stanford and I'm in my first week 0:04:53.720 --> 0:04:56.359 of class, and then, similar as today, you have to 0:04:56.360 --> 0:04:58.720 take these core classes your first year, which are just 0:04:58.800 --> 0:05:01.279 not that you know there, just fundamental. They're they're not 0:05:01.360 --> 0:05:04.159 that exciting. So the first class, I sit down and 0:05:04.200 --> 0:05:06.800 there's this this twenty five year old who's never worked 0:05:06.800 --> 0:05:09.120 today in his life. He's a PhD student, he's never 0:05:09.160 --> 0:05:11.680 taught before, and he's kind of just reciting out of 0:05:11.680 --> 0:05:14.320 this strategy book. And I just thought to myself, Oh 0:05:14.360 --> 0:05:17.440 my god, what have I signed up for. So I 0:05:18.080 --> 0:05:20.279 had this idea that I was going to go try 0:05:20.279 --> 0:05:23.920 to buy a business, and I had you know, in 0:05:23.960 --> 0:05:26.160 your first three years as an analyst, you basically build 0:05:26.200 --> 0:05:29.039 a financial model. But I had the confidence of someone 0:05:29.080 --> 0:05:31.599 I thought I was much more, much better than I was. 0:05:32.120 --> 0:05:36.039 So I I convinced h an owner. I started cold 0:05:36.080 --> 0:05:38.839 calling companies in a sector that I had looked at previously, 0:05:39.360 --> 0:05:43.159 and I convinced this this owner to sell me his business, 0:05:43.160 --> 0:05:45.440 and and then I had to go raise the money, 0:05:45.800 --> 0:05:47.760 most of which was debt and the little bit of 0:05:47.800 --> 0:05:51.119 equity that was needed I financed with credit cards, right, 0:05:51.279 --> 0:05:53.600 So that was literally how I started, not your typical 0:05:54.120 --> 0:05:59.400 private equity founding story. How did that initial PE transaction 0:05:59.520 --> 0:06:05.400 work out? I did a total of uh three label 0:06:05.480 --> 0:06:09.680 deals with some add ons, lost money on one, made 0:06:09.720 --> 0:06:11.640 money on or made you know, lost a little bit 0:06:11.640 --> 0:06:13.720 of money on, lost made a little bit of money 0:06:13.760 --> 0:06:16.080 on the second one, and the third one. Third one 0:06:16.200 --> 0:06:19.039 was a total home run which actually just sold uh 0:06:19.080 --> 0:06:22.279 this year, twenty years later, so that that one turned out, 0:06:22.279 --> 0:06:26.480 well twenty years that's impressive. That's not the typical private 0:06:26.480 --> 0:06:28.719 equity holding period. Yeah, well it was just me. I 0:06:28.800 --> 0:06:31.320 was the it was just mine, so you could afford 0:06:31.360 --> 0:06:33.320 to be patient, and it was It was awesome. It 0:06:33.360 --> 0:06:36.160 was a great that one. What what what space was 0:06:36.200 --> 0:06:38.720 that it was? We had these companies that made these 0:06:38.720 --> 0:06:41.880 little labels that went on products like, for example, in 0:06:41.920 --> 0:06:45.160 Trader Joe's Trader Joe's Private labels things. We made all 0:06:45.200 --> 0:06:48.880 those labels. It's a totally unsexy business, but it was 0:06:48.960 --> 0:06:52.760 very consistent and it's profitable. It was really profitable, and 0:06:52.800 --> 0:06:54.479 no one wakes up and says, you know, I'm gonna 0:06:54.520 --> 0:06:56.720 be a hero because I'm gonna save half a cent 0:06:56.760 --> 0:06:58.920 on my label. So it tends to kind of like 0:06:59.000 --> 0:07:01.760 just clip along like a bond. So it turned out, 0:07:01.800 --> 0:07:04.359 it turned out well. But I mean I had absolutely 0:07:04.360 --> 0:07:06.560 no idea what I was doing, and uh, and so 0:07:06.600 --> 0:07:08.480 I made I made every mistake you can imagine, and 0:07:08.880 --> 0:07:12.160 it still worked out. When you launched in two thousand 0:07:12.160 --> 0:07:15.800 and one, you started with fifty million dollars something like that, 0:07:16.440 --> 0:07:19.440 and now it's up to eight billion, of course, eight funds, 0:07:19.800 --> 0:07:24.120 and your most recent fund just closed about two billion 0:07:24.120 --> 0:07:26.840 dollars more or less about two and two point four, 0:07:27.000 --> 0:07:29.440 all right, so that's that's real money two point four. 0:07:30.280 --> 0:07:33.680 Obviously you're doing something right. The track record has to 0:07:33.720 --> 0:07:38.640 be attractive. Is it the same investors rolling over or 0:07:38.760 --> 0:07:42.160 or new and different investors. Who's the clientele for this? 0:07:42.480 --> 0:07:45.040 In the very early days, it was a number of 0:07:45.080 --> 0:07:48.520 individuals because no institution was going to back at well. 0:07:48.560 --> 0:07:50.440 You have to have a certain track record, be around 0:07:50.440 --> 0:07:53.640 for certain length of period, be able to check all 0:07:53.680 --> 0:07:57.000 of their due diligence boxes, and that takes time money, 0:07:57.000 --> 0:08:00.600 And I checked zero of those boxes store room, check 0:08:00.800 --> 0:08:06.160 what else? What else we got? Check exactly? I checked 0:08:06.160 --> 0:08:09.000 no boxes. And that took me like almost a year 0:08:09.040 --> 0:08:10.960 to figure out. I went to all these institutions and 0:08:10.960 --> 0:08:13.640 I never got past the first meeting anywhere. And then 0:08:13.680 --> 0:08:18.360 I found a number two really two individuals who thank 0:08:18.400 --> 0:08:21.040 god there I still owe everything to these these two. 0:08:21.560 --> 0:08:24.320 UM one, I don't know if I can, you could 0:08:24.360 --> 0:08:26.960 say whatever. So UM one was Tom Styer who ran 0:08:27.040 --> 0:08:29.480 for president. Um he was one of the early ones. 0:08:29.520 --> 0:08:32.240 And then Doug Martin from the Stevens family, And they 0:08:32.240 --> 0:08:34.199 were just the two best investors you could ever have. 0:08:34.280 --> 0:08:37.960 And um they were supportive and most importantly they were 0:08:38.000 --> 0:08:40.439 supportive after Fund one, which was not a good fund. 0:08:40.480 --> 0:08:42.800 So that's the reason we're still in business. Why not 0:08:42.920 --> 0:08:45.959 a good fund? Just performance wise? Or was it because 0:08:46.200 --> 0:08:49.280 when you launch, you know, one, we're still in the 0:08:49.360 --> 0:08:54.880 early days of a massive downfall in technology, media, internet, 0:08:55.000 --> 0:08:58.480 straight across the board. Not you know, it's not unless 0:08:58.520 --> 0:09:01.440 it's a distress fund, that's not the ideal time to launch. Yeah. 0:09:01.800 --> 0:09:03.920 I would love to say that it was the market, 0:09:03.960 --> 0:09:07.360 but it wasn't. It was self inflicted. It was me 0:09:07.559 --> 0:09:12.040 making a lot of dumb mistakes, being overconfident, you know, 0:09:12.280 --> 0:09:15.880 and and just investing in companies that looked great in 0:09:15.920 --> 0:09:18.920 a spreadsheet and didn't. What looks great in a spreadsheet 0:09:19.280 --> 0:09:21.600 is low purchase price and a lot of leverage. That 0:09:21.640 --> 0:09:24.080 looks always looks good in a spreadsheet. But the the 0:09:24.120 --> 0:09:26.559 problem the qualitative, Yeah, the leverage is the problem. And 0:09:26.600 --> 0:09:28.960 the qualitative things about is it a quality business? Those 0:09:28.960 --> 0:09:31.480 things you can't model in a spreadsheet. And so I 0:09:31.520 --> 0:09:33.480 just made a lot of dumb mistakes and we will 0:09:33.480 --> 0:09:37.040 actually the whole fund overall loss money. I would highly 0:09:37.200 --> 0:09:40.760 bury not recommend having your first fund when you launched 0:09:40.760 --> 0:09:44.719 to lose money. It was probably not the best strategy. 0:09:44.840 --> 0:09:47.760 It was an anchor around our neck for pretty much 0:09:47.760 --> 0:09:51.120 a decade. So that raises the question, if the first 0:09:51.160 --> 0:09:53.440 fund was a bit of a stiff, how did you 0:09:53.520 --> 0:09:55.959 raise money for the second film? Well, thankfully, we were 0:09:56.000 --> 0:09:59.360 really I really communicated a lot with Doug and Tom, 0:09:59.440 --> 0:10:02.000 and they understood they could see us getting better, you know, 0:10:02.160 --> 0:10:05.360 they could see us making a lot of improvements, fixing 0:10:05.360 --> 0:10:08.800 a lot of things that we got wrong. And both 0:10:08.920 --> 0:10:11.240 both of them were pretty seasoned investors. Both of them 0:10:11.240 --> 0:10:14.440 had had mistakes they'd made before and so they you know, 0:10:14.480 --> 0:10:17.400 thank god, we're really supportive. And then and then it 0:10:17.440 --> 0:10:20.240 wasn't like immediately we started knocking out of the park either, 0:10:20.440 --> 0:10:23.880 but we started getting better and better and and and 0:10:23.920 --> 0:10:26.720 then and then really around the time of the recession 0:10:26.800 --> 0:10:30.760 was when we really completely transformed and became kind of 0:10:30.800 --> 0:10:33.400 the business that we are today. And it's a little 0:10:33.400 --> 0:10:36.120 bit of a cliche. They're not so much investing in 0:10:36.120 --> 0:10:38.720 a fund as they're investing in you as the manager. 0:10:39.200 --> 0:10:43.200 Obviously they saw something that was, hey, needs a little seasoning, 0:10:43.200 --> 0:10:45.480 but there's a lot of potential here. Yeah. They saw 0:10:45.559 --> 0:10:49.160 someone who was willing to literally run through walls and 0:10:49.559 --> 0:10:52.160 run through a burning building to make it work. And 0:10:52.160 --> 0:10:55.360 and I almost literally did. I mean it was it 0:10:55.440 --> 0:10:58.280 was that um we were and not just me but 0:10:58.320 --> 0:11:00.840 our whole team was was really committed to trying to 0:11:00.880 --> 0:11:02.280 try and make it work. And I think they saw 0:11:02.320 --> 0:11:05.439 that quite quite interesting. I have to talk a little 0:11:05.440 --> 0:11:08.959 bit about your growth rate. You began with fifty four 0:11:09.000 --> 0:11:13.760 million dollars all in your eight billion in assets totally 0:11:14.400 --> 0:11:17.440 Obviously a lot of that is not just growth but 0:11:18.240 --> 0:11:21.760 new investors coming along. But still that's a as a 0:11:21.760 --> 0:11:26.680 as an pe company Alpine has really seen quite a 0:11:26.760 --> 0:11:32.400 corporate growth trajectory. Tell us what led to this success rate. Yeah, 0:11:32.440 --> 0:11:35.680 So when when the recession hit, we were, uh in 0:11:36.000 --> 0:11:38.479 we're not well positioned. We didn't. Now, when you say recession, 0:11:38.960 --> 0:11:43.120 because some of our audiences, you know, older than twenty five, 0:11:43.440 --> 0:11:46.559 I'm assuming you mean oh, eight o nine crisis, Okay, 0:11:46.800 --> 0:11:50.520 not the one in not the one that maybe happens 0:11:50.600 --> 0:11:54.720 sometime in two and certainly not two thousands. So the 0:11:54.840 --> 0:11:59.240 great financial crisis. So great financial crisis happens. We were 0:11:59.360 --> 0:12:02.320 we invested the last dollar from our third fund two 0:12:02.320 --> 0:12:05.600 weeks before h two weeks before Lehman Brothers blew up, 0:12:06.240 --> 0:12:09.200 and so we were out of money and we had 0:12:09.240 --> 0:12:11.560 it took us forever to raise the next fund. But 0:12:11.800 --> 0:12:14.719 that period where we didn't have any money turned out 0:12:14.760 --> 0:12:17.679 to be the most important period for us. Why because 0:12:17.880 --> 0:12:19.880 we started deciding we were going to look at our 0:12:19.920 --> 0:12:22.280 own business, you know, kind of like, rather than working 0:12:22.640 --> 0:12:24.920 in the business, We're going to start working on our business. 0:12:25.400 --> 0:12:30.600 So I hired an executive coach, um and he helped. 0:12:30.960 --> 0:12:34.000 He he really helped me kind of redefined the business 0:12:34.080 --> 0:12:35.640 that I truly was in which I'll come back to 0:12:35.920 --> 0:12:39.360 we hired a consulting and coaching firm for our whole organization, 0:12:39.400 --> 0:12:42.520 and so we really started doing some soul searching for 0:12:42.600 --> 0:12:45.280 lack of a better word. And then and and from 0:12:45.320 --> 0:12:48.880 that we really you know, changed our strategy and developed 0:12:48.920 --> 0:12:51.640 kind of a new playbook. Um, so let me interrupt 0:12:51.679 --> 0:12:54.200 you there, because that you raised something that I'm fascinated by. 0:12:54.280 --> 0:12:57.840 So first, what leads you to say we need a 0:12:57.840 --> 0:12:59.560 pro to come in and show us how to do this? 0:13:00.040 --> 0:13:02.839 And second, how do you even go about finding an 0:13:02.840 --> 0:13:08.000 executive coach that sounds like man, that's a consulting field 0:13:08.080 --> 0:13:13.080 fraught with you know, let's polite and just say high risks. Yeah, 0:13:13.120 --> 0:13:16.720 it's it's it's a great question. And I am a 0:13:16.840 --> 0:13:20.920 huge fan of executive coaching. I have had a coach 0:13:21.000 --> 0:13:23.800 since two thousand and nine. I've talked to a coach 0:13:23.880 --> 0:13:26.280 every week or every other week since oh nine, No, Kidd, 0:13:26.520 --> 0:13:29.600 and we at Alpine have twenty three coaches that are 0:13:30.200 --> 0:13:33.000 part of our There their ten ninety nine folks, but 0:13:33.040 --> 0:13:35.400 they're part of our ecosystem that's available to our people 0:13:35.440 --> 0:13:37.920 at Alpine and our executives. So I'm I'm just a 0:13:38.000 --> 0:13:41.319 huge fan of coaching and Basically, what I love about 0:13:41.360 --> 0:13:45.480 coaching is you you create space away from the business 0:13:45.480 --> 0:13:47.960 of the day to day and you ask yourself a 0:13:47.960 --> 0:13:51.280 bunch of really important questions. You know, what do I want? 0:13:51.800 --> 0:13:54.520 What success look like? What do I want to you know, 0:13:54.559 --> 0:13:56.760 what's a five year plan look like? And you actually 0:13:57.080 --> 0:14:01.120 have to really burn some energy into thinking time thinking 0:14:01.120 --> 0:14:05.680 about um those answers, which are really hard answers, which 0:14:05.679 --> 0:14:08.160 most of us never spend time thinking about. What was 0:14:08.200 --> 0:14:12.079 it just in the midst of the crash and recession 0:14:12.080 --> 0:14:14.560 that you said, hey, maybe we just need a little help. 0:14:14.640 --> 0:14:18.480 We're not we we don't have the professional background to 0:14:18.960 --> 0:14:21.800 run the business. We know the investing side, but the 0:14:21.840 --> 0:14:24.200 business side is something very different. How do you get 0:14:25.120 --> 0:14:29.640 I mean, I think one of the benefits of face 0:14:29.720 --> 0:14:32.440 planning in your first fund is that you get some 0:14:32.560 --> 0:14:37.080 humility and you I've always just been open to learning 0:14:37.080 --> 0:14:39.160 from people that are smarter and better than I am, 0:14:39.200 --> 0:14:42.200 and so coaching was an extra back then in two 0:14:42.240 --> 0:14:44.400 thousand nine, it was not very well known, and it 0:14:44.480 --> 0:14:47.600 was definitely an exercise in humility of saying I think 0:14:47.640 --> 0:14:50.280 I need some help. That that's the old joke. Experiences 0:14:50.320 --> 0:14:53.640 what you get when you don't get what you want right, Yeah, exactly. 0:14:53.720 --> 0:14:56.200 So once you make the decision, Hey, we want to 0:14:56.200 --> 0:14:59.560 bring in a professional to show us ways to improve 0:14:59.560 --> 0:15:03.000 our busines, the methods. How does one go about finding 0:15:03.640 --> 0:15:07.000 a business coach? So I had an introduction from a 0:15:07.000 --> 0:15:10.080 friend and then we had a number of lunches, and 0:15:10.280 --> 0:15:12.920 his business wasn't going well in oh nine either. As 0:15:12.960 --> 0:15:17.800 you can imagine, who other than people doing distress debt 0:15:17.800 --> 0:15:21.720 investing whose business was going great knowing, yeah exactly nobody. 0:15:21.960 --> 0:15:24.360 So in short sellers, everybody else was in trouble. So 0:15:24.400 --> 0:15:27.280 we had this awesome conversation. I can still it's one 0:15:27.320 --> 0:15:29.520 of these conversations you can still remember where you are 0:15:29.600 --> 0:15:32.240 and which you know exactly the moment. So we had 0:15:32.360 --> 0:15:35.040 this is actually after I brought him on. We have 0:15:35.120 --> 0:15:37.960 this awesome conversation where I said, hey, I have to 0:15:38.160 --> 0:15:40.040 his name's JP Flam, and I said, hey, I have 0:15:40.120 --> 0:15:42.800 to cancel our our coaching engagement. I'm just too busy, 0:15:42.800 --> 0:15:44.880 which was like we'd already decided ahead of time that 0:15:44.880 --> 0:15:46.640 there was that was no go. I had to stick 0:15:46.680 --> 0:15:48.680 with it, like that agreement. So he he text back 0:15:48.680 --> 0:15:51.600 immediately says, no, we're having it. So I get on 0:15:51.640 --> 0:15:53.240 the phone. He says, well, what's you know, what's so 0:15:53.280 --> 0:15:55.720 crazy that you're so stressed? Oh my god, JP, you know, 0:15:55.760 --> 0:15:58.200 I gotta fly to Dallas and fix this. And then 0:15:58.240 --> 0:16:00.440 I gotta, you know, we gotta deal we're to lose. 0:16:00.440 --> 0:16:02.640 And then we lost a huge customer in Chicago. Then 0:16:02.640 --> 0:16:04.120 I got into d C, and then you know, I'm 0:16:04.120 --> 0:16:05.640 going on and on, and he said, okay, well, let's 0:16:06.000 --> 0:16:07.720 let's kind of slow down and chill out. Let's talk 0:16:07.720 --> 0:16:10.400 about Dallas. What's going on there? Well, we you know, 0:16:10.440 --> 0:16:12.480 we just missed our bank projections the second time. And 0:16:12.480 --> 0:16:14.840 I'm going on and on, and he starts saying, well, 0:16:14.840 --> 0:16:17.320 tell me about the CEO and Dallas. I'm like, what 0:16:17.320 --> 0:16:18.440 does that have to do with anything, you know, in 0:16:18.520 --> 0:16:20.240 the middle of the Great recession, like blah blah blah. 0:16:20.280 --> 0:16:21.360 But you know it's not it's you know, it's a 0:16:21.400 --> 0:16:25.360 markets or whatever. Anyway, he it comes to the point 0:16:25.360 --> 0:16:27.480 he says, well, eventually he says, well, how would you 0:16:27.480 --> 0:16:29.520 how would you rate that that CEO? You know, a 0:16:29.640 --> 0:16:31.280 B C. I was like, oh, you know, probably a B. 0:16:32.040 --> 0:16:34.040 He said, Well, Graham, at the one of our engagements, 0:16:34.040 --> 0:16:35.880 you said you wanted to build the greatest private ely 0:16:35.960 --> 0:16:37.440 from of all time. Are you gonna Are you gonna 0:16:37.480 --> 0:16:40.160 do that with a b CEO? And I just like 0:16:40.240 --> 0:16:41.640 hit me between the eyes. And then he asked me 0:16:41.640 --> 0:16:44.160 another question. He said, and Graham, if you're someone who 0:16:44.280 --> 0:16:46.920 keeps a b CEO, what does it make you? How 0:16:46.920 --> 0:16:49.480 would you rate yourself as a CEO? And I just 0:16:49.600 --> 0:16:52.560 I like, its stopped me dead in my tracks. And 0:16:52.600 --> 0:16:55.200 that was really this light bulb that went off that 0:16:55.360 --> 0:16:59.240 ended up having us having me realize I'm actually in 0:16:59.280 --> 0:17:02.400 the talent business us that's the fundamental business that I'm 0:17:02.480 --> 0:17:05.480 really in. And that was like oh nine that we 0:17:05.520 --> 0:17:09.760 came to that realization and then started completely redesigning our 0:17:09.840 --> 0:17:13.320 our firm to like build our companies around talent, build 0:17:13.320 --> 0:17:15.879 our firm around talent, build our investment strategy around talent. 0:17:16.240 --> 0:17:18.440 So that that was just a huge turning point. So 0:17:18.440 --> 0:17:23.040 so let's talk about that, because all of your investments 0:17:24.000 --> 0:17:29.560 eventually get a CEO that's been trained at Alpine and 0:17:30.640 --> 0:17:33.240 has the benefit of all of this coaching, all of 0:17:33.240 --> 0:17:36.880 this training, all of this expertise. It's not that you're 0:17:37.040 --> 0:17:42.000 just looking for attractive balance sheets. It's where can we 0:17:42.080 --> 0:17:46.040 put someone in charge to move the needle by taking 0:17:46.040 --> 0:17:49.320 our expertise and applying it to this business model. Is 0:17:49.359 --> 0:17:52.399 that what you mean by when you say you're in 0:17:52.440 --> 0:17:54.880 the talent business? Yeah, I think that's what I mean. 0:17:54.960 --> 0:17:57.560 There's two parts of it. One is our investment strategy, 0:17:57.640 --> 0:17:59.400 which is what you describe, the others how we run 0:17:59.400 --> 0:18:01.840 our own firm. But sticking with what you were talking 0:18:01.840 --> 0:18:06.399 about bury the investment strategy, we found that the single 0:18:06.440 --> 0:18:10.080 most important investment decision we make is the management team. 0:18:10.119 --> 0:18:12.320 And it's more important than the price we pay. It's 0:18:12.359 --> 0:18:14.800 more important than the leverage levels, it's more important than 0:18:14.840 --> 0:18:17.600 the prior growth rate. And so we just said, well, 0:18:17.640 --> 0:18:21.080 if that's really the most correlated, most effective, our most 0:18:21.119 --> 0:18:24.240 important criteria, you know, let's make sure we get that right. 0:18:25.000 --> 0:18:28.720 And so let's actually kind of build our own CEOs 0:18:28.760 --> 0:18:31.159 and and and and put our own CEOs in so 0:18:31.200 --> 0:18:34.480 that we can make sure that we're getting a world 0:18:34.520 --> 0:18:37.239 class person to run each one of our companies. So so, 0:18:37.280 --> 0:18:40.520 in some ways this is almost parallel in the public 0:18:40.600 --> 0:18:45.639 markets to activist investing, where they identify a very attractive 0:18:45.680 --> 0:18:49.919 business that isn't quite living up to potential, right, and 0:18:50.040 --> 0:18:52.240 they say, hey, with a few management changes, we can 0:18:52.240 --> 0:18:54.600 turn this into a really good business. On the private 0:18:54.600 --> 0:18:58.919 equity side, I'm assuming the conversation is something like, we 0:18:59.000 --> 0:19:02.840 want to either buy your business or your entire business, 0:19:03.119 --> 0:19:05.800 but regardless, we want one of our professionals to come 0:19:05.800 --> 0:19:07.560 in and manage it. Yeah, that's right. A lot of 0:19:07.560 --> 0:19:10.119 the companies were buying don't have management. You know, might 0:19:10.119 --> 0:19:12.199 be a corporate carve out, it might be a management 0:19:12.200 --> 0:19:15.920 team that wants to retire or exit, and and that's great. 0:19:16.080 --> 0:19:18.760 So there's never any conflict. We're totally transparent. We're not 0:19:18.800 --> 0:19:21.800 doing hostile deals, nothing like that. It's always the transaction 0:19:21.880 --> 0:19:24.200 that the seller wants to do is they want to retire, 0:19:24.520 --> 0:19:27.440 so it's always very friendly. But we there aren't a 0:19:27.520 --> 0:19:30.040 lot of private equity firms that want to go through 0:19:30.080 --> 0:19:33.160 the process of changing management because it's very very hard 0:19:33.160 --> 0:19:35.640 to do. And that's the value add that you guys, 0:19:35.680 --> 0:19:38.359 that's a big part of it. Yeah, that's really quite fascinating. 0:19:38.680 --> 0:19:41.800 So there's a quote of yours I have to lead 0:19:41.840 --> 0:19:46.800 with which I find really intriguing. Quote. People create returns, 0:19:46.960 --> 0:19:51.600 not deals, not price. That's a that's a huge statement 0:19:51.640 --> 0:19:55.560 considering most of the analyst community, especially private equity is 0:19:55.600 --> 0:20:00.040 so analytical and modern driven. You're saying, this is a 0:20:00.240 --> 0:20:04.600 people business. Barry Um. I think that if you want 0:20:04.600 --> 0:20:06.239 to do something different than people, you have to have 0:20:06.320 --> 0:20:09.000 some fundamental belief that's different than what other people believe. 0:20:09.040 --> 0:20:12.240 And our belief is that returns come from from people, 0:20:12.280 --> 0:20:15.480 they come from talent and and and I think maybe 0:20:15.600 --> 0:20:17.760 one of the reasons why people shy away from that 0:20:18.520 --> 0:20:21.680 is it's hard to analyze, it doesn't fit in a spreadsheet, 0:20:22.119 --> 0:20:26.360 and it's incredibly hard to manage. So it's a lot 0:20:26.400 --> 0:20:30.520 easier to manage the the hard numbers that the financial 0:20:30.520 --> 0:20:32.960 statements and things than it is to, you know, really 0:20:33.280 --> 0:20:36.080 manage a team of people. So we were talking earlier 0:20:36.119 --> 0:20:39.920 that you appoint a CEO at these these purchased businesses 0:20:39.960 --> 0:20:43.600 that you've trained Um yourself, tell us a little bit 0:20:43.600 --> 0:20:48.239 about what that in house training looks like. So a 0:20:48.240 --> 0:20:51.200 lot of the CEOs we're hiring, we're bringing right out 0:20:51.200 --> 0:20:56.280 of NBA programs, and they have five years of experience 0:20:56.320 --> 0:20:59.040 typically before they go into business school, and that could 0:20:59.080 --> 0:21:01.359 be anything that could be there in the military, they 0:21:01.359 --> 0:21:03.119 could have been a consulting firm, they could have been 0:21:03.160 --> 0:21:06.440 investment banking and we have success with any of those 0:21:06.440 --> 0:21:09.439 back any and all those backgrounds. So and they've just 0:21:09.480 --> 0:21:11.160 been in two years of business school, so we don't 0:21:11.160 --> 0:21:12.800