Mitch Rales: The Art of Compounding - [Art of Investing, Forever Episode]

Transcript from https://podmenti.com/t/5582a479c58809da

I know firsthand how complex the tech stack is for asset management firms.
And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount, and more risk.
Ridge line offers a better way forward, one unified platform that automates away the complexity across portfolio accounting.
Reconciliation, reporting, trading, compliance, and more, all at scale.
Ridge line is revolutionizing investment management, helping ambitious firms scale faster.
Operate smarter and stay ahead of the curve.
See what Ridgeline can unlock for your firm. Schedule a demo at ridgeline.ai.
Today we are excited to share a great conversation with Mitch Rails, the co-founder of Danaher and one of the living legends in the world of business and investing.
This is Mitch's first long form interview of this type, and he covers his entire history and business philosophy.
Interviewing Mitch are Paul Bucer and Rick Berman, who host the Art of Investing podcast on the Colossus Network.
If you enjoyed this interview, be sure to check out their whole feed via the link in the show notes.
Let's get to it. Please enjoy this comprehensive discussion with Mitch. We're thankful to him for his time and his insights.
Hello and welcome to the Art of Investing.
The podcast devoted to helping you more fully experience the joys of compounding in all its forms. I'm Paul Buzer.
And I'm Rick Berman.
We are your hosts.
In each session, our teachers will be some of the world's most compelling people from across the vast range of human achievement.
Take your seats.
Class is in session.
This show is brought to you by Pine Grove Studios in collaboration with Colossus.
The hosts of the show, Rick Burman and Paul Bezer, are the co-founders and co-CEOs of Sata Grove Holdings and co-CEOs of Sata Grove Management Company. All opinions expressed by any of Rick, Paul, or the podcast guests.
are solely their own and do not reflect the opinion of either Stator Grove Holdings or State of Grove Management Company. This podcast is intended for informational purposes only and should not be relied upon as the basis for investment decisions. State of Grove Holdings or clients of State of Grove Management Company may maintain positions and securities discussed in this podcast.
Our teacher today is Mitch Rails, one of the most iconic business builders and philanthropists of our time.
having co founded Dannerher forty years ago alongside his brother and best friend Steve,
The Rails Boys have strung together a track record of compounding that might even make Buffett blush.
Consider that Danaher is annualized at over twenty one percent for four decades.
Resulting in an eighteen hundred times multiple on invested capital.
And while the numbers are mind blowing, the story of how it all went down is even more remarkable.
In this conversation.
You'll learn from Mitch about the key inputs to his outlier success.
Why greatness is a journey that takes an unusual time horizon.
The role that benchmarking plays in standing up any winning organization.
Why it's essential to cultivate learning agility and embrace transformational pivots over time.
In order to adapt and thrive in an ever changing landscape.
how an uncommon commitment to continuous improvement and long term thinking, both at the individual and corporate
have fueled one of the most impactful companies of our time.
And also the qualities that Mitch looks for both in leaders and businesses he looks to support.
More recently, Mitch has turned his focus to Glenstone, the foundation and museum he co founded with his wife Emily.
With a vision that emerged from their shared passion for three fundamental elements art.
Architecture and landscape.
and seeks to be the preeminent foundation devoted to the visual arts in the world.
Having signed the giving pledge, they've committed to building and investing for the benefit of mankind.
And you'll hear how this stewardship orientation started with Danaher.
and now permeates through to every pursuit that Mitch takes on.
While Mitch is a natural teacher, this is actually his first recorded long form interview of any kind.
And so we feel especially honored to share with you our candid conversation.
With someone who has shaped and transformed us and the business world in so many profound ways.
In my opinion, this class is more than just shining a light on the anatomy of a compounding machine.
It's learning firsthand.
The ideas and principles behind greatness that are available for all of us to more deeply embrace and embody.
With that, I hope you enjoy our class with our mentor and good friend, Mitch Rails.
Well Mitch, welcome back to the Art of Investing. I guess this is our first time recording, but
By now with all the teaching hours you put in on campus in Notre Dame, you're pretty much a tenured professor.
We're on a different campus though today. The beautiful campus of Glenstone Museum.
Maybe it's appropriate to start.
Here.
I mean this is such a remarkable place.
For those who haven't
yet visited. I mean the integration of nature
and architecture and and of course art.
And this vision.
Of building something preeminent in the world.
Around the visual arts.
What's the Genesis story?
Glenn Stone is obviously
something that's near and dear
to my wife, Emily, and my heart.
The two of us.
co founded this place.
Oh.
I guess in September of two thousand and six with the whole
vision and purpose of
Number one, art is essential to life.
And that
we could create something very different.
that hasn't really been seen in the world today. And what do I mean by that?
We're about the seamless integration of art, architecture, and nature. We sit on a campus of about 400 acres.
Where people can come
An experience.
All three of these.
pieces of the equation.
In a slow
Calm.
Way.
That just isn't
seen in the museum world anywhere else.
We were aghast.
at many places that we visited over the years where you stand
twenty, thirty feet away from the picture.
And you're taking a picture of the picture because there's
Ten or fifteen people.
In front of you.
So you never get a chance to engage with an artwork in a way that you get to it cleanstone.
We actually did a study.
We wanted to dedicate
about three hundred and fifty square feet per visitor.
Versus what happens at a famous New York museum.
on a weekend where they allocate about twenty square feet.
per visitor.
So
It gives you a feel for the sense of
calm that would be here.
And in a way that
Once again.
a visitor can engage with the artwork.
in a great way. They could stand in front of it for ten, twenty minutes if they want.
And by the way.
to get you started when you arrive at Clemstone, you come into our parking facilities.
Each space has a tree.
You're feeling the calm of nature as soon as you come in. It's not the traditional parking lot that you would see.
You get out of your car, you go to our arrival hall.
And you check in.
And you then make a
Six, seven, eight minute walk through the landscape.
to get to the building.
to get to the pavilions itself.
So you have a chance to decompress along that.
walkway. You'll see some monumental sculpture along the way. The building is kind of hidden until you start to approach the last couple of minutes of the journey.

And
when you actually get to the building.
You're really ready to start to engage. You've left your
negative thoughts about what's happening in the world, what's happening in your daily life, the hustle, the bustle that's going on.
And you really do get a chance to decompress.
So that's what we're about.
We're on a
Mission.
We're now fifteen plus years in.
We think we need another fifteen plus years to really create something great?
Here?
We're good now?
But we're not great.
And
Greatness.
is a journey that takes time.
We hope that
All the good decisions that we make at Glenstone.
in the years to come and in the years past we'll continue to compound on one another.
So we'll talk about compounding a lot today, but
Glenstone is compounding as well with the decisions we make every day and the learnings that we have and the things that we continue to do to try to up our game and create an experience for our visitors. It's just second to none.
That's what we want.
And that's the philanthropy that we're trying to create here.
It's hopefully going to be one of the revered museums around the world in its day.
And it's got a long-term endowment that's been put in place to sustain it in perpetuity.
in a way that will keep it
Unique.
to what we're trying to do.
I think it's evident that
Some of the things that have been so important to the story of Daner, this ethos of continuous improvement.
commitment to excellence, customer satisfaction, all of that
It's clear that those are elements that are also being integrated into Glenstone, but talk more about just
You and Emily having that shared.
vision and that kind of dream.
Talk a little bit about the first fifteen years of execution, how you've gone about building it.
Well, Emily and I have become
disciples of the author Jim Collins.
And he's written the book Good to Great.
Built to last.
How the mighty fail.
And
The takeaways and learnings that we've had from Jim over the years, by the way, he comes and speaks at our conference every four to five years for our businesses.
have just been profound. And it all starts with
Creating
A purpose statement.
A set of core values.
A vision statement of what you stand for.
And uh
Bhagag, a big hairy, audacious goal.
which is what you really aspire to over a twenty to thirty year period of time.
And for Emily and I it all started about
what we thought there and
We started with our purpose statement, which is
Art is essential.
And we build a set of
core values that we live by every day. I mean, we even do interviews.
that we call core value interviews when we're hiring associates to come to work at Glenstone to see if their values are aligned with the values of the institution.
itself.
This helps make sure that you're hiring great people who have a sharp and vision that's similar to yours.
It started there.
And
And we can talk for hours about
how we select an artwork, but it's very similar to the way we select a business. Do you want a business that's a C
Or a B minus?
Hell no.
You want businesses that are A plus, that are anchor tenants, that are the defining type of businesses in the industries that they support. It's no different in in the way we select art.
We want the A plus works of the most defining artists of the time when these works were created and
That compounds on itself over the course of time as well.
So there's two thousand plus artworks in the collection now.
We've made some mistakes along the way, but we correct those mistakes and we continue to up the game.
on the collection of art that we have as well. And
The same thing has taken place in the architecture, the same thing has taken place in the care of the landscape. I mean, we want forested areas, we want
pastures with flowers. We want people to be able to really wander and see lots of different things. I mean we've
Planted.
Pretty close to
twenty thousand trees now.
Some very, very large.
Some
one inch caliper. But we pay attention to all these details in what we do and how we've gone about it. And it's been a great journey for Emily and I to share, but
We also think institutions
Of greatness.
Art.
Once again built.
Quickly.
You can't be great quickly.
Great takes time.
And compounding. So
This journey of thirty years to get to that point.
is what we're really after. And that's the B Hag that we want. We want to create something that
doesn't exist.
Anywhere else in the world.
We're lucky to be here, I think, just before
Peak.
Dogwood Blooming were beneficiaries of
That vision.
I'd love to dig in just a little more.
on those first couple of years because we're gonna get into some learnings from

Danaher.
And in so many other businesses.
One of the key things that comes out of Dan or Business Systems and what we've learned from you these past few years is this idea of benchmarking. And so before you you enact that BHAG and that vision,
There's a long period
During which you find out what the other greats have done.
And what they might have made mistakes on or what they've gotten right
Talk about benchmarking as it relates to Glenstone.
Oh, it's a great question.
And one that we spent a considerable amount of time on. Not only Emily and I
But taking our architects?
picking our builder at times, that people that were gonna be very active in
the build out of Glenstone as a whole.
And we actually benchmark 50 museums around the world.
And we had great access to meet the teams.
And we would sit down and and have a nice conversation to get started with the team before we did the tour. And the first question we would ask is
So if you had to do it all over again, what would you do differently?
And the stories they told us.
were absolutely amazing.
The learnings of what not to do?
was profound.
And for our architects and our builders to hear these things, we got into the minutiae of things like loading docs.
How would you do your loading dock differently?
than what you've done today. And how they created square footage for entertainment space rather than
the artworks and how the sun would shine in
certain glass areas that was distracting and what you could do to
Eliminate that type of thing.
There's 101 different learnings that came out of this. And we brought all of those back with us that became part of our architectural brief and how we wanted to build this place out.
And
I think we've created
Something
Pretty unusual.
We made some mistakes along the way. I mean, if you want to know.
As if for instance our cafes were way too loud. We didn't look at the acoustics.
as properly as we should have.
It was an expensive fix.
but we were able to take care of that. We have preforated ceilings now that you can't even really see.
But that
take a lot of the impact of sound out so that you can hear yourself.
have a conversation over lunch with your friends. So plenty of things that we continue to learn, but
You make a mistake, you correct it.
Where did that commitment to benchmarking?
Emerge. I know there is the
At least early
Story.
Of
You and Steve dividing up
the world and looking for benchmarking exercises at other great companies in the early days of Dan or her and I think it was Steve who drew Japan.
And came back with this concept of Kaizen.
That ultimately has evolved to being Dan Her business systems.
Was that the early roots?
That was the early roots, and that would have been nineteen eighty five, nineteen eighty six.
When we were two young guys, we had made a series of acquisitions and we kind of looked at each other and said,
We don't know much about manufacturing.
We better figure out how to run these businesses.
And
We did divide up the world.
I went to Europe, Steve went to Asia, and we split North America.
And when we
Looked at
GM Ford Chrysler Toyota
Volvo over in the Scandinavian countries.
We learned a ton.
And
We saw something amazing.
in Japan or Steve saw it.
I didn't actually see it, but
What we learned was
In watching GM
Change it two ton die.
that took them six weeks to change that die over.
And we watch Toyota.
Change that same die.
In six hours.
And we said, something is going on here that we need to understand.
And what

Toyota adopted the principles of a famous quality guru by the name of Edward Demi.
And
He had a bunch of principles, ten or eleven.
Different quality.
principles that he stood by.
And he tried to sell his
Bill of goods.
to GM Ford and Chrysler at the time.
They weren't buying it.
And
In nineteen fifty nine.
Toyota
bought in hook line and sinker.
to these principles. So what we like to say
Is all we were doing was
Importing
Edward Deming's principles back to America.
Because he had exported them to Toyota. And
when we learned what the Toyota production system was all about.
It was clear that they were the best of the best at doing this compared to anybody else.
in the world and we were able to adopt those principles and
Bring them back to America.
and start to integrate them into the business and
It started as Dan Hurst, the Jacobs production system'cause we took it to one of our most
Difficult.
manufacturing facilities that we had that was upside down with problems and introduced it there.
It went and evolved from the Jacobs production system to the Danaher production system.
And over the course of time as we learned how applicable
All of these learnings were
not just to manufacturing, but to the business as a whole.
whether it's accounts receivable management, whether it's your call centers, whether it's
things like contracts and the likes you can continuously improve
All of these things so
we were able to create a business system out of this.
Not just a production system.
So that was at the root of what started to happen and
in nineteen eighty five, eighty six, and that compounding journey over the last almost forty years now.
Has served us well.
It's a comment theme I this idea of
finding a great idea somewhere out there, somebody else's idea.
adopting it or aspects of it and then over time advancing it and improving it in a way that
when we talk about Dana Hurt business systems. I mean, I think even today the concept of kaizen and lean manufacturing really
It's usually
Prosecutor in a more narrow.
Way.
devoted only to the concept of, say, manufacturing as opposed to the way in which Dan or her has
has allowed it to inform every aspect of the business, the culture.
The talent.
I do think benchmarking is still a hidden art.
How would you advise folks to think about
bringing the kinds of benchmarking into their business or lives more generally.
Well, we have a Japanese concept known as going to gamba.
That means going to where the action is.
So let me give you something real time.
We were on with our CEO at Danaher yesterday, my brother and I.
He took an hour out of his day to spend with us on some important things we needed to review with him.
He's in Pensacola, Florida right now.
at one of our largest manufacturing
Facilities.
Leading
What we refer to as a president's kaizen.
And
Many of our presidents from around the world this week.
our leading kaizen, and we have two thousand of our associates engaged in kaizen's around the world.
This week.
So
That's called walking the talk.
And making sure that
You're setting
An example.
at the highest levels of an organization.
If Reiner Belair shows up in Pensacola.
and dedicates a week of his time to a president's kaizen.
What do you think is going to happen?
with everybody else in the business.
They know that that needs to be part of our
culture, part of our DNA. They need to buy in.
and become part of this in a profound way that just
is enabling. So
I think
The idea is you just have to get started.
And you have to be committed to it.
And
You can read a few books, you can learn a little bit about what are
Toyota production system is, or there's God knows a ton of information out there on what Dan or Her has done.
But you need to get the journey started.
And it's a compounding journey. Once again, you're making little decisions and little changes every single day.
That add up to
Nickels and dimes and quarters.
Become dollars.
And these things add up over the course of time to
Big money when you've been on it for forty years and doing it over a prolonged period of time.
When you look back to your
Pre Danaher days. What do you reflect on as the most formative experiences in people?
In your life.
My dad would have to have been a very formative experience.
He was a very humble guy.
He grew up
In New York City, his mom passed.
in childbirth of his youngest.

And
His dad was a fruit vendor.
on the streets of New York City.
And couldn't care for the family.
And as a result.
He and several of his siblings were put into an orphanage.
He went into Hebrew Orphan Asylum.
When he was eleven or twelve years old.
Left when he was sixteen years old with a toothbrush and five bucks.
Saying Norman, good luck.
The world is all yours.
And he always told the story.
I believe the guy.
Here's a guy and my dad.
Who probably never finished.
his high school education.
And was a ditch digger.
Work the carnival circuit.
was on a boat at some point in his life working
That side of the equation.
Eventually.
Settled in Pittsburgh with my mom.
and created a home improvement contracting business.
That did very, very well.
But I think he had a hard time dealing with the complexities and personalities of home improvement salesmen.
And he ultimately said
I would rather sell to them.
Product.
then have to manage these cast of characters.
So
He came.
picked up the whole family and moved us to the Washington, DC area when I was 10 years old.
and just decided he was gonna start a wholesale building products distribution business. And he did.
So here's a guy who
Wasn't scared to take risk.
had the entrepreneurial spirit and drive.
And at the same time.
created a business that he ended up selling.
And what?
we are told was the first ESOP done in America where he sold the business to the employees because one of his
Themes.
Is
Wanna be a champion of the underdog?
So the truck drivers got equity in the business as a result of this Esau.
And
The business still exists to this day. I think when he sold it, it was about a ten or twelve million dollar.
business. He sold it to the employees and by the way, they couldn't pay for it, so he took a note back.
For a hundred percent.
So they paid him out over time for the business.
And today mid south building supply still exists and I'm
Told it's a hundred and fifty million dollar business and the truck drivers are millionaires.
But how great is that? That's my dad.
But what my dad didn't have in formal education
He had in the what I refer to as the school of hard knocks and
People ask me where I got my MBA. I said I got it from the Norman R. Rails School of Hard Knocks.
And he understood the psychology of
what it was like to be out there on the street.
competing every day without a formal education and how to get things
Done and
I watched him with bankers over the years and how he maneuvered bankers and
Convincing them.
To give him loans when he didn't really deserve.
To get loans and
how he just managed people and how he sold and
His nights at home were spent on the phone calling people and we just were in the
general vicinity of where he was making his calls. So we heard
all the different things that went on. So I like to think the apple doesn't far too far from the tree and he taught me the street smarts. And you know, one of the stories that I never forget that he told was
If you're in a poker game.
And after three hands you haven't figured out who the sucker is?
You're it.
It's really true?
In life.
Just teaches you the different ways that
People think and
And manage things.
Can people draw conclusions from the same facts that are presented to different people that are
opposite ends of the spectrum. It's kind of amazing.
To see how people look at facts so differently.
But they do.
And so you need to be prepared for that just when you think and say
There's no way somebody could come to this conclusion, yet they do.
You just need to be prepared to deal with things like that. So
He's probably the one who's had
the biggest influence on my life.
Have you thought?
It all about how your dad's time in orphanage
Shaped him.
I mean just as somebody who has had a number of f foster children ourselves and thinking about the ways in which
children can often respond to that kind of early
Challenge.
It can build tremendous resiliency and
And it can also be something that's very difficult.
I think he came away with both.
I think the sense of accomplishment was my dad used to tell a story where
He'd sneak out an orphanage at night.
and he'd buy a pie for a nickel.
Back in the thirties.
during the depression area time.
And then he'd come back into the orphanage and he'd slice it into eight pieces in each cell.
Each piece for a penny.
So he made
Three cents on a
Five cent purchase.
He said, now Mitch, that's pretty good margin.
You know, so he obviously learned at a very young age.
the hustle and the entrepreneurial
Spirit.
On the other side of the equation I think he
always dealt in his life with a sense of abandonment?
Because he was put into an orphanage, not because of anything other than his father was incapable of taking care of
The children.
But that left a lasting imprint on his life.
as well, so there's good and there's difficult that
Come with situations.
Like this, and I saw it in his life till the day he passed at eighty nine years old.
Incredible stories about your dad.
And all you did for your family.
And his employees.
Shifting gears a bit.
You mentioned earlier
the work that Danahurst current CEO, Reiner Blair.
and his team are doing to continue to spread the Kaizen gospel.
The Danner her.
And Riner is the latest in a string of many leaders.
Across the history of Dan or
I remember last year when you were with us in class, you told the story
Early on, it was many years in the Danaher, but
very early in the forty year journey.
Of you and your brother Steve

transition to chief stewards of the business. And you met a gentleman named George Sherman, but can you tell that story maybe as an example of how you think about
decentralization and harnessing talent and identifying talent.
Well yes.
The story starts with the fact that I think
Steve and I
understood what we didn't know.
We were not meant to be great operators.
We tried.
We did okay.
But
I think we understood.
That
We really needed to professionalize the business. We could create long-term vision and strategy and how to properly allocate capital.
We were very good at those type of things.
But the details of what you need to do.
To run a business.
Day to day
is a heavy lift.
that as a CEO of a publicly traded company really requires you to be in twenty four seven.
Three hundred and sixty five days a year.
And we're prepared to commit the time and the energy.
But the details.
something that really needed to be paid attention to. And so
We like to say in nineteen ninety we fired ourselves.
And we hired a fellow by the name of George Sherman to become Dan Hurst's first.
Real CEO outside of the business.
He was actually an outside hire. George came to us from what was known then as Black and Decker. Today we know it as Stanley.
Black and Decker George was the COO.
And we had dinner with him one night. We thought we were going to be talking about
deintegrating their drill truck manufacturing plant in South Carolina and that he was gonna give us the business if we would take over the facility.
We were ready to go and we had all of our
Ideas.
And what George said was um
Really thinking about
Leaving.
Black and Decker.
I'm thinking about going to work for this organization and I know you know these guys at this organization.
What do you think?
And I'm kicking Steve under the table and he understands exactly why I'm kicking him,'cause we had always said to ourselves
the type of leader we're really looking for.
is George Sherman.
Here it is, he tees it up for us, and we didn't even expect it. And
To make a long story short
Ninety days later.
We had a deal with George. He did extensive due diligence on the business and
And remember, this is when Danaher was primarily a tool company and George was a tool guy.
And
George gave us a great
Ten year run.
He was an exceptional CEO.
He professionalized the business. He
Brought processes in, he helped us roll out the Danaher business system in meaningful ways that
were really important to be coming.
the culture of the organization, our DNA and like I said, 10 great years with George and a seamless CEO transition to Larry Call.
as part of his exit was
Just pretty cool to see and watch and be part of.
Yeah, I think about whether it's the act of finding yourselves in the company that you founded or or even just a practice of benchmarking.
It does seem like those
Or
In some ways
In service to
something that we've observed about you and about everything that you involve yourself with, this dual commitment to
Ambition and patience.
If you're only ambitious and you don't have that
Long time horizon.
Doing extensive benchmarking.
Might seem like
A waste of time or time that you don't have
But when you're thinking
in terms of decades and even centuries.
It reframes how you answer certain questions.
I'm just curious to try to understand
better wear that long term gene.

I'm not sure where it came from.
But it's there.
And
We don't think in terms of quarters or years.
We really think in terms of decades and in many cases we like
The concept of having an unlimited time horizon.
On our investments.
And we've now been at it for forty years with Danaher.
It'll be forty years in September of this year that Danaher was founded and
The power of compounding?
Over that.
Forty years?
Tax free, by the way.
is what I refer to as the eighth wonder of the world.
It's a phenomenal thing and
You don't really
Get started.
Until you hit the ten year mark.
So we watch a lot of what's happening in the world of short termism today, whether it's
the day to day mark to markets that hedge funds have to go through.
the three to five year cadence that PE and venture capital
are engaged in. It's really hard to build anything.
That's great.
When you take those type of
Time horizons. That's why I said when we talked about Glenstone, I think we're on a thirty year journey.
To create greatness.
At the institution.
It's no different in the business world. It just takes time.
And compounding whether it's
Business practices
Yeah.
Financial returns it just
Takes
Time.
If you want to get to uh the promised land, which is a hundred
times outcome on your investment.
You need 20 to 30 years to do it. And if you can't get to 10 times in 10 years.
You have no chance to get to a hundred times and
twenty to thirty years. So
Everything that I think about is
When I'm sizing up an investment or an opportunity
with my private investing practices is
Do we have the youth in place?
that are talented enough and have the learning agility.
And the desire to become great.
And if they do
Can they give us that 20 to 30 year time horizon that we need?
And will they be able to make the pivots at the right time that need to be made in every business?
It's interesting to see this, but
That's the way I'm thinking about things before we even really get started.
If they're just a three to five year person, it might be a very good return over three to five years.
I still don't want any part of it.
Because at the end of the day.
You've put a lot of time and effort in.
that you have to start all over again.
And do another three to five years on that journey and
For
Okay returns, but
The real
Goody Basket starts post year 10.
When you start to go from ten X outcomes to
migrating to the chance at a hundred X outcome.
You need almost that high level vision like that in order
To last decades.
And to pivot. And
Dan Hur was a tool manufacturer. It's not that today.
It's a life science is a very good thing.
Key life sciences player across the world.
Can you just talk about
The idea of pivoting.
to conceive how much Danner and you personally have had to pivot over forty years and what advice do you have for people
To actually embrace that.
Change is a necessary phenomenon.
And the world changes.
We all go back to the eighties. The Japanese were going to take over the world on manufacturing. They were the de facto standard that we all wanted to live by.
Look at what happened.
To Japan.
At some point.
events globalization
New competitors, early stage businesses.
Things happen that disrupt.
You have two choices.
You can be the disruptor.
Or you can be the disrupted one.
I prefer to be the disruptor.
Which means you have to be thinking constantly
About
What's happening to your businesses per se?
And we're now in the midst of Danaher 4.0.
Which means we started at ground zero, which was Steven Mitch.
We had the Sherman era, which was 1.0.
We had the call era.
Which was
Two point oh?
We had the Joyce error, which was three point oh, and we're now on to four point oh with Reiner. And it's interesting that these things tie to the CEOs because the idea was
As one CEO pivoted out and another pivoted in
We had to make sure we had the CEO.
who was aligned with what the business needed to do.
to continue to reinvent itself for that next transformation.
Each was required.
If we wanted to continue.
The compounding journey.
and to change the nature and make up of what we have.
I really do believe that each
business, whether it's Dan or her
whether it's our business at ESAB, which is our global welding business, or many of these early investment that I'm making today.
Everybody needs to think about transformation along the way.
And do these CEOs have that intellectual
Learning agility.
To want to make the transformation that's necessary.
and see beyond what's happening.
in any given year. It's about thinking about what's going on out in the world that could change the nature of
what's happening to you of as a business and make those adjustments now.
Before
You're forced to make'em down the road.
You mentioned intellectual agility. I I think, at least from the outside looking in, these kinds of pivots are rare in any company and
It strikes me that
It's likely
That the way you and Steve evolved your role to be
Chief Stewards and to give
these leaders cover.
In order to
Make these pivots has been
Critical.
We have the good fortune of not being in the day to day meat grinder that a CEO is in today.
Think about these poor souls.
They're on the ninety day clock.
They got to report to investors every 90 days.
And you hear the same questions from the investment community.
All the questions are dealing with what happened during this ninety day period and what's likely to happen.
The next ninety days.
Rather than
What are you doing today to preserve and protect and grow your investment?
For decades to come.
Nobody focuses on that.
Zero.
And it's hard for these CEOs. I mean, I'm really respectful of the challenge that they have.
So what Steve and I can do is give them the air cover.
Particularly in the boardroom.
And with the outside investors.
They we are here.
To support them in ways
Mm.
really create a long-term vision for the company so that they can be also working on
the long term side of the equation, as well as having to deal with the complexities of
what happens quarter in.
and quarter out with the business. And I think that's different than what you see with most companies. We care deeply at the board level.
About how to help.
These folks.
navigate all of this. And I think investors have now learned that
the board can play a very valuable role.
in helping to steward the business for the long term.
rather than just thinking about the 90 day clock day in and day out.
It's tough.
What aspect of the
Dan or her story is least.
Understood from the outside.
That's most important to its history.
I think the deeply ingrained culture.
Of continuous improvement.
that we have in the company.
I think once again
most investors are focused on
The short term. Think about this.
The stock market mark to markets you every day.
It's a horrible way to think about a business.
It mark to mark at you every day.
So you need
a culture of continuous improvement and long-term thinking.
That
mitigates that
Thought process so that
I don't want to personally think about day to day. I want to think about what we're doing for the next decade, this 4.0 pivot that we're in the midst of.
Reiner's been working on for the last
Several years.
And
We're not done yet.
but we're closer to the finish line. We probably have another year to two to go.
And then
We'll let that pivot play out for years, but we'll start thinking about what 5.0 is going to look like.
And I don't know the answer to that today.
I really don't.
But we'll have to start thinking about that.
As we enjoy the fruits of what that
pivot was all about for several more years.
But something's gonna happen and we got to get ahead of the curve and thinking about that. And
Having that space as founders and not being in, like I said, the meat grinder every day.
gives you a chance to really
able to think longer term.
But that culture, I think, of
continuous improvement in long term thinking.
It's understood, but not appreciated.
You've referred to
a co founder twice with Steve and Danaher and Emily at Glenstone.
And I know.
You have this predisposition to seek out
co founder teams, not always, but often that
you see value in that. Maybe you could just talk a little bit about your experience
Building alongside another
Another individual, maybe we could start just with Steve on the Dan or Her front.
Well Steve and I have been partners now since nineteen eighty.
And obviously Danher was founded in nineteen
Yeah.
So we've had a pretty good run.
Interestingly,
We've never had any debates of consequence about money.
The debates have always been about
What's the right long term strategy?
For the business.
And
I think having
respect for one another's opinions along the way.
I mean listen, he can complete my sentences today and I can complete his sentences today and our roles have evolved a little bit.
Differently from
the early days to one where we're really
aligned. In the early days he was working on
strategy big picture I was working on.
the operating prowess of the businesses.
Today we're both aligned and thinking about long term strategy.
How do we want to allocate our capital?
What's the right CEO succession that needs to take place?
in the business itself.
And how do we make sure we proliferate?
our culture and our business system.
in perpetuity.
That's what we deal with.
Day in and day out.
And
While Steve and I live in very different parts of the country today, there's not a day that goes by where we probably don't talk five times a day.
And we're not together.
We just have that alignment on
What we wanna do and where we wanna go and it really all starts with
What's the next ten year journey?
gonna look like and how do we participate in a way to
Help our teams.
really accomplished that.
Maybe we could just take a couple of minutes to tell the Danhar vignettes from one point oh, two point oh, three point oh, and four point oh, however you think is most appropriate to share.
Well, ground zero started with
Steve and I coming off of a fishing trip.
in Montana together.
Constructing what we thought
We wanted
to accomplish with our lives in the business world.
And we had
This Bhag before Jim Collins.
You know.
created the concept of B Hag. We didn't realize it was a B Hag back then, but
What it basically was was
God, wouldn't it be great?
If we could create a business in our lifetime that was$250 million in sales doing 10% operating profit margin.
Oh, this would be unbelievable.
And we shook our heads and we shook hands with one another and we said, Let's start this journey.
And
Lo and behold
We didn't know any better. I mean, we lived in a period of time where
leveraging assets.
They were called bootstraps back then. They weren't called
PE buyouts or high high yield bond financing.
But you could borrow massive amounts of
money and our first deal came in nineteen eighty one when we bought a little
vinyl Siding Manufacturing Company.
called Master Shield.
For six million.
dollars. We knew a little something about this. We did a little due diligence because I came out of my dad's building supply business for a couple of years and one of the products that I was selling.
as a manager of the Baltimore facility
was vinyl side.
And I knew that this was a superior product to steel and wood and aluminum.
Because it didn't chip, you didn't have to repaint it.
vinyl sighting to become the standard de facto.
sighting that people use to this day, but it was the hot and upcoming new product we found this little company.
had a parent company in bankruptcy and they needed to sell it.
So we went down and we looked at the facility and
Met Nick Martin, the guy running the business, and
A great guy still alive to this day in his mid nineties?
And we said we're here to
Buy your company.
So you're here to what?
I'm here to buy your company. Well, where are you two young punks gonna get the money from?
To buy this.
We said we're gonna borrow it.
He said, how are you gonna do that?
He said, Well we're gonna
borrow 80% against the receivables, and we're going to borrow 50% against the inventory. And if somebody gives us an appraisal,
we'll be able to get thirty percent against that. And when you do the math.
There's five of the six million, Nick.
And he said, well, where are you going to get the million of equity that you need for this business?
We said we're gonna borrow it.
I think
How are you going to do that? We said, we're not quite sure. We'll get back to you on that one.
To make a long story short.
A banker in Maryland.
Gave us a million dollar
Lone.
And
To this day.
The only way I think we got that loan.
was my dad probably secretly guaranteed the loan behind the scenes and
He went to his grave, never saying whether he did or he didn't.
But we borrowed a hundred percent of the purchase price.
And it was a
Business it was doing nine
million in revenue at the time, 600,000 in operating profit.
And three years later.
was doing 40 million in revenue and six million in operating profit.
And we were launched.
This was the incubation.
Uh
More deals to come. We bought the Mohawk Rubber Company in 1983.
for ninety million dollars, eighty eight million of which was borrowed from General Electric Credit Corporation.
two million of equity, which came from the cash flows that MasterShield.
was producing and
We had the chance to ultimately
take Mohawk and Master Shield and merge them into this defunct real estate investment trust called DMG.
And change the name to Dan or
And so Danaher was born.
with the merger of these assets in September.
of nineteen eighty four.
And
Gro got started.
The idea was we're just gonna start
Buying more companies and we bought
Bunch of industrial
manufacturing assets, mostly in the tools business.
Think sockets, wrenches, ratchets.
We produced 80% of the product for the craftsman line as a for instance.
Back in its day, we're making a million sockets a day.
back in the eighties for craftsmen and and others.
And at this point, what's the division of labor between you and Steve?
Steve's thinking about the high level and the strategy and how we continue to architect.
The business and
I'm in there.
on the manufacturing floor.
working with folks on
how we make the businesses more more efficient.
That's what was going on. And
I think like I said earlier in our conversation
We реаліз
We could do it.
But it wasn't what we were best suited to do.
And so we went on a run for
The better part of
Seven years running Dan Aher.
before George came in in nineteen ninety.
And really
Do
George Air of one point oh.
was all about professionalizing the business.
winning share in the tool business. I mean George took our share of
non-power hand tools from twenty percent to forty percent.
over the course of the decade that he was in charge of the business.
He also worked us into motors and controls and other interesting manufacturing products. And we started to diversify a little bit.
with George.
And so one point oh was really about
building these businesses in a way where
We got real operating prowess.
associated with the business. We rolled out the business system. We diversified a bit, but stayed
very much with our industrial roots and
When George retired.
And
two thousand, two thousand and one and turn the reins over
to Larry, the business was about three billion in in revenue at the time.
And
We had created something that was pretty interesting and then the call era.
Began.
The idea was to continue to buy
businesses that we thought were really good businesses with good brands in the industrial
Arena?
And
expand our product offering.
significantly.
All of which happened under Larry.
The central theme that continued more than anything, though, was the business system and the DNA and the culture.
And you'll hear that.
continuously between each of the executives that
went on to run the businesses themselves.
But we also
dipped our toe.
Under Larry's leadership.
into the healthcare space.
Um
We bought a business in two thousand and
Three called radiometer.
which is blood gas analyzing instrumentation.
For
People in
The
ER or the ICU at hospitals?
And this is critical testing that will give the doctors a very quick readout on what's happening in your bloodstream. So if you've come in with
the potential for a heart attack, we can quickly tell you.
What's it lower
Heart attack?
What was the severity?
Or do you just have indigestion and you're really not experiencing a heart attack?
Once you get that quick readout, you can do much more testing that goes down to the central lab, but these are critical.
instruments that make decisions.
quickly for a doctor to diagnose what's going on.
And we learned.
The quality
of what the secular trends are with a healthcare business. And this is where
secular trend thinking started to develop for us and
What are better businesses to own, less cyclicality.
things that you don't have to tear apart when you go into a recession because your revenues have shrunk 10%.
Which is what happens for the most part in the industrial world.
still to this day.
So here was a business that continued to grow.
We could
Bring the business system to work.
And gosh, when you're in a recession.
You're still organically growing.
We learn something from that.
That led us into Beckman Coulter towards the end of 2009, 2010 type of time frame.
And so the birth of our interest in healthcare really
started to form.
So Larry's era took the business from three billion to fourteen billion.
We horizontally diversified.
Extensively.
But it was towards the end of Larry's
tenure with Dan or in two thousand and fourteen.
that I think we all became aware at the board level.
That we were too complex.
And we learned that we were starting to lose a little bit of our
Capabilities.
How do you do 50 strategic plans, 50 operating reviews?
and go deep on these businesses and really understand them.
when you've got global competition that's come in. So the idea and the pivot that we made with three point oh and Tom Joyce is the leader.
was the start to
Resimplify.
the business and gain greater clarity and focus. And under Tom's leadership,
We
Divested by the way of a spin off.
All of our original.
industrial.
businesses, the heavy duty industrial.
apparatus it was part of
Danher and out the door went.
About twenty five percent of revenue, but sixty percent of the complexity.
of the number of opcos that we had.
And
We were able to
change the face of what Ford of does. That's the name of the business that was created as a result of
The spin off?
And
simplify Dan or her greatly to become much more
Healthcare specific.
Especially in life science and diagnostics.
applications as a whole.
And
start to spend our capital.
wisely at focusing deeply on those verticals. So Tom
really did a remarkable job under three point oh.
of changing the ins and the outs.
Give you a for instance on that.
Out went fortive.
with all the industrial
Businesses.
by the way, done in a very tax efficient way.
And in a way that gave Ford of a balance sheet.
investment grade.
To continue
to reorganize itself for the long term as well.
Out the door by way of spin off as well, when
Investor.
which was our dental business.
Dental was very different than life science and diagnostics.
And inbound.
Under Tom.
Came Shafiid.
The number one molecular
diagnostics testing business in the world.
IDT
Which is
Oligos, number one in the world at oligos manufacturing.
And sitiva.
First go back.
Pull.
which was an$11 billion transaction in filtration of biologics.
And then Saitiva.
So I think the number was something along the line of Tom did$43 billion worth of acquisitions.
Yeah.
Helped us become
the leader in the biologics manufacturing space.
If you were to look at our workflow today.
We complete
eighty, eighty five percent of the workflow that's necessary for
biologics manufacturing with our product portfolio today.
where our closest competitor maybe has forty to fifty percent of that workflow covered.
So
the strategic thinking and the focus that went in under Tom's leadership.
Or something.
And I like to say that Tom
Embodied what
is through and through as a level five leader.
Jim Collins defines level five.
As someone
who is prepared to make all the difficult decisions.
Has great strategic acumen.
And then when those decisions are implemented.
Gives everybody else the credit.
This is what Tom did.
And Tom also realized
That
He wasn't the right guy.
to implement 4.0.
Which was how do we go deep in life science and diagnostics?
And really create
A strategic vision.
that incorporates early stage investing.
and understanding what's happening in life science and diagnostics today.
in that early stage world.
which is gonna tell us what the gold standard of business is gonna be in the next 10 to 15 years.
and start to incorporate all of that thinking into the strategy of the business.
He knew
As did we, that Reiner Blair
was the best
Person to Architect 4.0
And Tom left the business.
earlier than he probably would have wanted to.
But he didn't want to take the chance.
that we run the clock out on Reiner and Reiner might
decide to take a job somewhere else.
So he put the enterprise ahead of himself.
Which was an incredible thing.
I'm grateful to Tom to this day.
for making that level five.
Leadership choice.
for the best of Dan or her.
Rather than what.
would have been ideal for himself.
I was just thinking about that.
level of dynamism through that story.
And we've touched on Colin several times now, but
Hearing that from start to finish reminds me of the advice you've given us and that we've heard you give to other founders.
One of Collins's frameworks about
The value of experimentation and the value of
shooting bullets when you don't have all the answers yet.
as a form of in some way self discovery and then
as a clear picture emerges, bringing out the canons and focusing more and more on those key priorities.
As a company gets bigger
More people involved.
How do you create that?

principal orientation for all the people that are ultimately
integral to
building Danaher or taking Danaher, stewarding Danaher to that
Next level from a one point oh to a two point oh to a three point oh.
It all starts with
Talent
acquisition or talent development.
We have a process inside Danaher where
We would like
75% of our hires to come from within.
Self promotion from within the enterprise.
These are people that understand our DNA, understand our culture.
And
We want to reward them.
in their careers for doing great work.
So what's the best way to do that?
Here's the next stage in your career.
We mentor, we develop.
And we work with people to try to help them improve their livelihood through career development.
However
We need to go to the outside for twenty five percent.
Because you need that.
outside thought process.
We for a minute don't believe we know.
Everything within.
Once you
become a hundred percent inward thinking, the beginning of the end will start to take place. We need that outside thought process.
Fresh thinking.
I mean Reiner Blair.
Or CEO.

From a chemicals business.
This is a guy with great learning agility.
And he's probably as good as they come.
in the life science and diagnostics space today particularly
Where the strength and life science.
So as we recruit from the outside.
We're looking for that learning agility. We're looking for people who have a problem solving mentality.
We hire very specifically
along the lines of what our DNA and our culture are because we need that alignment.
We need team building people. We can't have somebody who comes in who rules in an authoritarian way that
Just says my way or the highway you're out if you don't like it.
That just doesn't work in the world that we live in today.
We need to do a lot of our hiring for folks that share our principles and values and vision.
That's the way we go about it.
Transformational thinking won't exist unless we do it that way.
When you reflect back on
The level of acquisition activity. Obviously not every acquisition is gonna work out perfectly, but can you
Generalize now looking back.
What makes a successful acquisition and maybe what you'd want to avoid.
in the future through learnings over the decades.
And Nanaher or Esab.
It's all about
Acquisitions.
that are led first by strategy.
And they have to be strategically aligned with what we want to do with the business. And what do I mean by that?
Everything's about strengthening the core.
I talk about workflows all the time as one of the great secular trends today. How do you increase your workflow?
How do you become more important to the customer?
So that the customer wants to buy your product because
You can one
create a more seamless better outcome for them.
Do it at a price point that's more affordable than your competitors because
More integrated workflows give you
Greater flexibility with your customers.
And so it all goes back to strategy first and foremost.
Then you need an integration process.
And we've learned over the years.
The difference between
Okay.
Integration.
And
Superior integration.
And
Okay integration usually ends.
Poorly.
You need to quickly
Pivot.
Two
Help.
those that are being integrated into the business.
become familiar with the culture.
So what our leaders do right away is they go teach a concept known as policy deployment.
Which is how we run a business at Daner. It's really done off of a couple of sheets of paper.
And then it beds.
what you need to do this year to basically be on the journey to make your longer term.
plan. It's actually a very simple process. It takes the complexity out of
all this crazy strategic thinking that goes on. What are the vital few things that we need to do?
Right now.
to preserve and protect the business for the next twelve months.
And what are they?
vital few things that we need to be doing now.
The turbo charge the business for years to come.
We don't want to work on anything else.
our leaders will go out and teach policy deployment right away.
And we'll also learn what those businesses
Need right off the bat.
By way of for instance.
Dan Her acquired a business a few years ago called Al Devron.
The gold standard in plasmid manufacturing.
in the world today.
And we all know that everything in drug development
in cell and gene therapy starts with plasmids and they had a capacity area.
We have
a concept in our toolbox.
It's part of the business system known as SMET.
Single minute exchange of dice.
And what SMED is an enabler.
For you to do.
is ring out incremental capacity.
Without putting
capital dollars in.
in the plasma business, if you want to put capital in.
Not only
Isn't a lot.
to build capacity.
but it takes a long time.
It could take you a couple of years to add.
capacity.
What Smed allows you to do is figure out how to more efficiently
Change your tooling over.
Do different things.
that shrink the time to change.
From
one therapy to another.
And
As a result, we wrung out twenty or thirty percent capacity.
For no dollars invest it.
To help these guys service their customers.
better and more efficiently because during COVID
Lead times.
On plasmids.
What was the equivalent of
Six months to call it.
Eighteen months.
It was very, very difficult.
Somebody who's
Making a new drug.
In an early stage.
business and you say to them, you gotta wait 18 months?
To get samples and
and a plasmid, you know, really going, it's not very appealing to the customer. Now the whole industry was that way. Can we create competitive advantage by shrinking our lead times?
I don't know the exact
time frame now, but it's probably we're down to three or four months lead time now from
What was twelve to eighteen months, and it's a real competitive advantage versus our set of
other competitors out there today to be able to say to a young company,
trying to do this, we can get you your product a lot faster.
For instance.
Mitch.
Earlier you mentioned
The
role of intellectual agility.
in leadership and we touched on level five leadership.
Just curious when you're out looking for
founders, operators to back
Are there any other traits of leadership
That are top of mind that you like to seek.
So number one
For me.
It all starts
With does the business
have a platform to do something.
special over the course of time.
If we understand that that's the case.
then the first thing I want to do is I want to meet the CEO.
slash founder.
Running the business.
And I want to really size him or her up.
And the thing I'm really looking for is number one.
Can they give us a 20 to 30 year run?
Do they have the learning agility?
to pivot when the business needs to pivot.
And do they have the passion?
To want to create something great.
If I see that
In an individual.
then I know that I can work with that individual.
to help them strategically with the business?
To help them figure out how to scale the business as they grow.
to help them with organizational design.
To help them with
simple concepts like funnel management, channel management, policy deployment.
single minute exchange of dyes.
all the things that I've had the good fortune to learn over the years.
that will help these businesses.
Grow and scale.
with the course of time.
But it really all starts with
What have we got in that leader?
And do they have that?
DNA that we're looking for.
Learning agility.
And
Duration of time.
And desire.
and passion to be great.
If those are there.
We've got something to work with.
What about on the business characteristics front? Is there a short list of
Criteria that you think
Every business needs to master in order to have a good chance of being great.
Well one of the great
secular themes that we like as recurring revenues.
I forget the exact percentage of Dan or her that's recurring revenue today, but it's
Circa.
Seventy or eighty percent?
Where you work with
A drug company?
You supply a lot of the ingredients to the cake or the drug itself.
And
you've got an annuity stream for 15 years.
Once you get spec'd in.
to be the supplier of your products with the customer.
We just love that.
And it gives you the chance and the opportunity.
to be thinking about lots of other things as you've got that steady state.
business come in. The same would apply to
Software.
the recurring revenue themes of software sa software businesses today. So I look at recurring revenues as a really
Great theme for
Everything we want to do.
Investing in our private
side of the equation. And I think that's a learning that came from
Danaher and I think that's why you see so many people.
getting involved in software or everything digital today.
Because of the recurring nature of the business.
Where did the impetus for
Philanthropy.
Come from for you. We're sitting here at Glenstone.
beautiful physical manifestation of
What's possible with a multi decade view on
Philanthropy and giving back to society.
Just curious where
That original inkling came from.
Well I can specifically tell you where that came from. It all started in nineteen ninety eight.
when I went on an adventurous fishing trip to Russia.
We flew into a town.
called Murmansk.
famously known because it's where the Russian Navy fleet was based. So it was a military town of about 400,000 people.
Back in those days.
They didn't even have computer technology in Russia. We were computerized, of course.
But when we got to the airport
They couldn't run your passport through a check, so they just kept your passport.
Till you.
Wanted to come back and leave the country.
So they took our passports.
We flew in one of these.
Russian era helicopters.
to this fishing camp.
With
myself and three other fellows that were
Good friends.
And
If you know anything about Great Atlantic salmon fishing.
When it's hot.
The fishing's not very good.
And we hit one of these hot streaks.
Um
And I tell you we fish for four days of the seven and
Didn't have a nibble.
We looked at each other and we said, Let's get out of here. Let's go back and explore Murmasque.
We'll learn a little bit about the people, the town.
We've never really experienced Russian culture.
It'll be really interesting.
Great idea, everybody says. So we
charted a little bubble helicopter to come and take us out early.
And we had about
An hour and a half.
Helicopter ride, but
this helicopter didn't have the ability to go the full distance, so it had to stop and refuel.
We stopped in this little village.
that was sustaining itself on herding reindeer and catching salmon.
And we sat down in the helicopter and this
Crushing dude.
comes.
With a big hose over his shoulder.
To refuel.
And he puts fuel piece into the tank and starts filling and
we're getting out of the helicopter and as we're getting out of the helicopter
The pure nozzle.
Comes loose.
And starts spitting fuel.
into the rotor plates.
And the helicopter ignites.
And ultimately
melts to the ground.
And
The few
was spit on
One of my great friends, Joe Robert.
who was standing maybe three feet from me, but
The wind was blowing.
away from him when the fuel hit him. And that's the only thing that saved him because the wind was blowing towards me.
I didn't get Dallas with fuel, but I dove into a pit and ran away on all fours.
And ultimately
What happened was
Helicopter burned to the ground.
The guy doing the refueling passed away as part of this because he was doused with fuel and he had a difficult ending.
And
The four of us
Try to
figure out how we were gonna get out of this little village.
So we asked.
Do you have
Self out.
No, it's nineteen ninety eight.
Nothing to really speak up.
Do you have a satellite phone?
We don't have a satellite phone.
There's obviously no wiring, so no hard lines.
So how do we get a message out? Well we have a
World War Two Vintage.
Radio.
We went up.
Couldn't get the radio to work.
But they got a Morse code message out.
This is nineteen ninety eight.
Emergency emergency send a helicopter.
About twelve hours later another helicopter came in.
And took us out.
We drank very heavily that night.
I left
Russia.
And I
pair of gin shorts, a torn t shirt and the sandals I was wearing.
It melted in the spot I ran out of'em.
And
All our belongings were gone.
So
we went back to the border and remember they kept our passports, which was a lucky thing.
So
We had a plane that's not.
Choke.
Back out.
Left Russia got home and
My dad said, so what'd you learn from this?
Said, What do you mean? He says, Well
You want to be the richest guy in the cemetery.
I said
Nope.
Not interested in that. And that's when
Doof.
philanthropic side of Mitch was born.
What am I gonna do with all the good fortune that's been bestowed upon me?
And
started thinking about
What were the things I loved and what was important to me and I love the arts.
And so
The idea
of building a museum.
started to percolate.
in my head at that point in time.
And really started to
take root in the early two thousands and of course I met Emily and we talked about the story of how Glenstone was born, but it all started right there and
With my dad also being a champion of the underdog.
Arts education became important.
general education became important.
And there's no bad charitable.
cause, but you have to pick some things that you want to go deep.
Within and
We try to bring the same
operating prowess to how we give money away as we do to how we build businesses. It's hard work. You gotta roll up your sleeves and
Not all nonprofits are made equal.
You wanna make sure the dollars are spent wisely and that they give
great return to those that it's spent on. So we've spent a lot of time
My brothers and I
Trying to figure out.
How we want to give money away.
An efficient.
impactful way.
That was how it was all born in this stage of the game.
You know, I'm investing for the benefit of mankind.
On a long term basis,'cause we've taken
The giving pledge, Emily and I've signed the giving pledge.
Ninety eight percent of our wealth will go for the benefit of mankind.
Totally remarkable with Daner.
As a company
Through the various phases of its evolution.
But what's doubly.
unique and fascinating is that you've
Invest
Majority of your net worth.
and kept it alongside in Danaher.
That whole time.
It's a super rare thing as we look out at the investing world and the
The world of company founders, most everybody by year five, ten, fifteen.
would have diversified or
divested those assets or looked for other things to do.
You're forty years in, and still the vast majority.
Rick and I were looking at
The track record of
Dan her.
And it's extraordinary. I think Apple might be the only stock
Just by a tiny fraction.
that's outperformed Anaher in the United States the last forty years.
Something north of twenty one percent a year, which
Based on Rick's extremely detailed Excel sheet.
Something like an eighteen hundred X.
Hundred eighty thousand percent return.
And then when through everything we're talking about.
Denhurst.
Only getting going in many ways.
As you've started to think about
the next couple of decades ahead. And this is where maybe we've come in very fortunately and into the picture the last few years.
We've had a lot of conversations around
you're investing more broadly. And you've had a lot of experience whether
It's on the boards of foundations and various endowments over time. You've seen that LP perspective.
You've invested
Personally in a few different
companies and funds and that
Is expanding more recently.
I'd love for you just to step back and
Reflect on what that's like.
To be so concentrated in one asset.
And then what's going on right now in this transition
To you looking for the next generation of founders out there.
Well, that's a loaded question. There's a lot there.
But let's start with Daner.
Everybody told me.
You're too concentrated.
You need to diversify.
Thank God I didn't listen to any of these shmoes.
that were encouraging that. And if you think who was encouraging it, it was investment advisors.
People who know no differently.
Who look at this.
With it.
traditional lens and
It was just wrong.
I mean, what better way to stay concentrated than to invest in yourself?
And what your beliefs and your convictions are on a long-term basis.
So
We didn't diversify.
And obviously.
That served us very, very well.
And during my lifetime.
Danher will always be a very concentrated
Position.
Because
I don't know where to
put that magnitude of dollars. Otherwise
Today. What am I gonna do?
Sell it, pay the tax.
And put it in index funds?
I mean, what fun is that?
my net worth will be a lot less. We'd rather give it to the foundation and let them start the diversification journey.
Over the long time.
Mitch, I imagine
That
Being a part of building something like Danaher.
In an intimate way for several decades.
Could seem quite different from
Making new investments and
younger companies that you hadn't yet been involved with yet.
As you've spread your wings as an investor
What are the problems and I guess the opportunities to
In the investing
world, the investing ecosystem.
That you've identified that
are suboptimal when it comes to company building and when it comes to ultimately long term compounding.
So we have to go back in time a little bit.
to say what was a great invention that took place in the investing world.
And what has happened to that invention.
Today.
And I think that a guy by the name of David Swenson who
is a hall of fame.
investor from Yale.
invented the asset allocation methodology some thirty plus years ago.
Where many people
When to
private equity and venture and
real estate and oil and gas and lots of different things, hedge funds.
And it was a brilliant strategy.
And it was the new thing on the street and people did extremely well.
pivoting away from the traditional
US equity sixty percent, bond forty percent.
Strategy.
And as that
Evolved over the ensuing decades.
it started to feel like it was becoming broken to me.
What do I mean by that?
I think that shorttermism became alive and well.
as PE and Venture were three to five year
type of players and hedge funds were.
Mark to market on an hourly basis and
And the fee structures that were associated with these were
You know, the traditional two and twenty percent.
which take a lot of the benefits of compounding away from.
the investor because of the high fee structure that was associated with it. So I think the whole asset allocation methodology became
co opted by short term and fees.
and became a very broken.
Process.
And I started asking myself the question.
What has to change?
To make this
A real opportunity.
And
It's when
I guess three summers ago.
You guys helped me architect.
a paper that I wrote to myself and for the benefit of my foundation called Reimagining the Blueprint for the Long-Term Investing Model.
And it all started with the thesis.
Of how successful Sequoia was over the years.
And God knows they were extremely successful. Three in front of their
A thirty percent type of number in front of there.
compounding over a very, very long period of time, many decades.
And I said, why can't we do that?
What's the architecture necessary to accomplish something?
Like that. Those are pretty outstanding returns. If they can do it, why can't we?
And
We started this imagination journey.
And it basically
Went along the lines of
We wanna find
passionate and dedicated founders who can give you
Along?
Duration runway.
Think twenty to thirty years.
Where you invest in businesses that have the chance to create a
fifty to a hundred times outcome.
over those twenty to thirty years.
And stay the course.
And private is better than public.
doesn't mean they won't go public one day. The greatest thing about a private business
is you're never worried about the short term.
You're not marked to market on a daily basis. You're not on the ninety-day clock of having to report to
Investors.
And you don't have to worry about sitting on your hands and doing nothing when you own a public security.
That's hard to do because you're watching
the dynamics of the market every day and certainly companies run into
problematic times in their history and their journeys.
And that's the worst time to sell.
But yet most people do.
Oh, it's a problem. They're gonna be stuck for the next two years.
They forget about the next ten or
fifteen years of good things that are gonna happen as they work through.
I mean Danher went through this.
Incredible journey of
Covid.
The turbo charged our business.
Massive growth over a two year period of time.
And the last
18 to 24 months we gave a little bit of it back.
Because we went in from a pandemic to an endemic state.
And so oh
Little growth went away.
But did anything on the long term secular trends of Danaher being a high single digit?
grower aspiring to become a double digit grower?
Absolutely not. Yet the market.
Treated us.
Like
We were the plague.
And can you imagine all the people that sold?
And paid the tax.
And they're gonna miss all the good bees that are starting to come now?
So
Being private is a real
Benefit.
if you don't need access to big time capital dollars.
The public markets are a beneficiary of being able to give you big time capital dollars if you need it.
So that's the real
pro of being a publicly traded company, but left to my own devices, I'd love to see these businesses stay private for as long as possible because you just make higher decisions in that type of framework.
So
Finding these
Young entrepreneurs who can give you duration.
And you can put capital to work and you can
Help them scale and make high quality decisions day in and day out.
Whether it's like I said before, organizational design, strategic planning, MECO map building.
I could give you a list of
twenty or thirty different
things that we can help these companies with.
And I get invigorated by working with young
Entrepreneurs.
Who wanna be great.
And
I guess I'm just a business builder.
Rather than a business seller?
And
If we can find those shots on goal.
Yeah.
Give us a percent.
Recreating something special.
I think the returns will take care of themselves over time and we will recreate.
All the success that Sequoia was able to create
over the course of time.
We keep coming back to this concept of a time horizon.
Arbitrage and
It reminds me of a a story from a few years ago.
That was
extremely formative for Paul and I.
When we were having a conversation around what's the appropriate
disposition from a time horizon standpoint with the investments that one makes.
And we have as a value that our time horizon is eternity. And
At one point you said boys
I see what you're talking about with the eternal time horizon.
But you Catholic guys
In your eternal concept.
Can I just encourage you to think
About
One's approach to time and investing
With
in a limited basis as opposed to an eternal basis because the reality is
That
Most things don't last forever.
And there is a sense
That the power
In every investment.
Is the optionality.
Two
have an extended time horizon.
when an extended time horizon is merited, when it's the best thing for the company.
when there's more to build, when there's more to do.
And
So there's the early work of sourcing and we've already talked a lot about just
How you think about underwriting people, how you think about underwriting businesses, apply the time horizon advantage to that. But I think the other really critical piece that we've
been beneficiaries of and that we've learned from just observing you is
This
value add orientation that you bring to every
Person.
or project or company.
that you commit yourself toward.
And that is a very, very
unique.
Concept.
At least in its practice.
in the investing world.
Maybe say a little bit about
The ways in which
You come alongside.
A founder.
And the orientation you bring as a source of support, as a helper.
to them and whatever they're building.
We can talk about some examples of that, but
I say this with great humility. I've seen a lot over the last 40 years.
Why in the world would I not take advantage?
Of everything I've learned and seen.
and pass on those judgments and
That experience.
to others. That's a competitive advantage.
that we just have to take advantage of.
I haven't seen it all, but I've seen a lot.
And
We can help these young founders in profound ways.
It's just as important.
to avoid making the mistakes and learning.
From others.
as it is to make high quality decisions.
Everybody's gonna make mistakes, but boy, we want to avoid the big ones, and we can help these companies.
Along the way.
Not make these mistakes. And
The whole goal is to get an option on duration.
If you can go for 20 to 30 years, the compounding benefits, I mean, just look at Dan or her today. If we're 1800 times
return.
If we double the stock price, that means we're 3,600 times return.
The compounding at this stage.
Is
Crazy and
you want to get to these reasonable shots on goal.
Now stop is gonna happen.
Yeah.
Divorce.
Partners not getting
along the business running up against a death star that none of us could anticipate.
Stuff is gonna happen.
But
If we can get a handful of
These duration models?
of twenty to thirty years, it's all gonna take care of itself.
in the overall returns for the bigger picture.
It just takes a couple to change
the dynamic for great outcomes to happen. So
That's the way that I'm looking at it and thinking about it, but
Let's take an example like Arcadia.
Our listeners will know Arcadia well already, as we had Daniel and Paul on
In class a couple of months ago.
So they've got a good foundation
For their story.
What we saw in Daniel and Paul
Were the things that
I talked about earlier. Learning agility.
Deep domain expertise in vertical market.
Software.
Young
twenty to thirty year type of duration capability.
a lot of the wonderful things and
I and others have had this thesis
That
One of the great
company's constellation software.
could be reinvented.
And we could build a better
More durable.
constellation for the long term.
Based themes.
Taking nothing away from Constellation, one of the great compounding stories of all time. But how do you build a better
More durable.
Constellation over the next

The answer is
You pay a little bit more.
You buy growthy.
VMS businesses.
That are mission critical.
And you do it around platforms.
In other words.
Can we create an aviation platform? Can we create a small
FinTech platform. Can we create a platform around the rail industry? Can we create a platform around agriculture?
How do we go?
put a group of businesses together that can generate synergies from one another within a platform.
So that not only are you
buying these things at
What do we call it? Three times ARR.
Five times Eba.
Maybe you pay a turn more if they're really growth 20% type of businesses.
But
If you can put them into a platform
And you
create a hundred, two hundred million dollar platform out of these businesses over the next

ten or twelve different times.
And you've got organic growth working for you in a meaningful way versus constellation who doesn't really grow organically, they just do it.
through M<unk>A and they have a cookie-cutter approach on their margins.
But if you take the longer view and you can get organic growth and you have high gross margins
To start.
Over?
ten or twenty year journey.
Wow.
you've created a turbocharge version of constellation that'll
create enormous value. And what Paul and Daniel understood
With the help of the board and the help of our
our long-term and our strategic thinking is how to pivot from the traditional constellation model to what I'll call the new and approved version of
What
we can create that Constellation has done.
so well over the years.
And that's
something that I think is pretty special.
for these guys. So we're helping them with policy deployment. We're helping them with
funnel management on certain of their businesses. We're helping them understand how to get synergies.
from within, we're pushing them to pay a little bit more for a highly strategic asset.
that makes the whole of that platform better.
than the individual pieces, which is really important because
You wouldn't make that acquisition purely based on financial metrics.
But if it's gonna make the whole better for the long term.
Damn straight pay that extra few bucks to get it done.
I think
For me
If I were
Zero in on a single superpower of yours.
It's bringing the seasoned
operator knowledge base.
to various situations and then knowing how to adjust priorities based on, say, the economic environment or based on
the size of the company or based on the industry or the capabilities of the team.
And being able to speak into
these different situations in a way that is extremely value add
And I think it's been a lot of fun to see how you
are able to shape your
Support.
Based on
all of those environmental conditions and how they're coming together in a single situation.
That's forty years of experience.
Talking.
Where you've seen a lot.
And just to pass those judgments on to others is
What I consider the real
opportunity.
That I can contribute.
They helping.
Nice.
Founders built there.

course of time. We had to help Paul and Daniel unlearn.
get rid of the muscle memory that they had of certain practices of constellation.
Once again, Mark Leonard at Constellation has built a phenomenal business. One of the great compounding stories.
of all times, but it doesn't mean we can't build a better version of that for the long term and we have a clean sheet of paper.
What can we do?
That's better.
than what Mark has done over the course of time. He's gotten
To the point where he's
large.
And so to
turn the battleship or the aircraft carrier.
is hard.
It's really hard for him.
You know, at this stage of the game. And he's looking at reinventing right now. I see some of the things that
He's doing and he's trying some interesting things.
We'll see what happens, but
Paul and Daniel are a little PT boat right now that can turn on the dime, and they are doing it.
It's wonderful to see.
We're doing this with a few other folks. We're working with Jan and his team at chapters on
the operating prowess and strategic thinking and policy deployment and lots of different things that
are helpful to driving the business and he's made enormous progress.
in a very short period of time, but he has enormous progress to continue to make.
in the journey.
as he gets things going, he's gonna have to bring a different type of operating efficiency to these businesses than
what constellation does if he really wants to separate.
over the course of time.
He's young in his journey. He's only a couple years in.
doing what he's doing right now. And so
It'll be fun to watch the next ten years what happens with his business.
Outside of your family. I mean, is this
Where you find joy?
Helping others build.
Impactful companies.
I do.
I find it thrilling.
There's a lot of people who would like to play eighteen every day.
when they get to retirement age.
My definition of eighteen every day is about
eighteen holes once a month.
And I would rather
be engaging with these young entrepreneurs.
I get a lot of energy.
From that side of the equation.
and helping them and seeing them thrive over the course of time, a lot of personal enjoyment.
comes from Madden.
If we do it, the investment side just takes care of itself.
One of the
the other elements that I think is really important to your approach is just the way in which
You generally
Will have a strong point of view on any situation.
In any one of these companies.
And you have ideas, you bring ideas suggestions to teams, but
You're always at the same time giving them room to maneuver and to develop their own insights or carry an idea.
forward and it just hit me that
really the thirty or so years of being this
Chief Steward of Danaher with Steve.
probably shape you into this really
Interesting.
source of support for a company that was both owner oriented and long term oriented.
And yet you got
comfortable not having
Your hands on the steering wheel.
I think of
other investing models and private equity in particular where
A lot of change and a lot of strategy happens through control.
Rather than
Influence.
But it does strike me that you have this
combination of strong points of view and a sense for
Direction and yet
you're always ultimately deferential to those who are who are in the leadership seat.
Well running a business day to day.
is very different.
Then what?
Steve and I do.
or what I do with my private investment.
Activities.
You find great talent.
With great learning agility.
You help them.
You kick them in the butt if they get off the
the straight and narrow a little bit. You pat'em on the back when they're doing
great things, but you do not get in their way of running the day to day.

That's worth
the fault line starts to exist if you get into the
details of managing them on a day to day basis and
the relationship. It's
The beginning of the end.
How do you think about
Matching
The characteristics you like?
To see in talent.
And leaders, founders.
with the structure of say a recurring revenue business
But overall the battlefields or the secular
Trends.
That are most attractive.
I think we've been talking about vertical market software. There's many ways in which those
All line. But what other big
Trends do you see over the next
ten or twenty years that get you excited just as places to look for
founders or
particular businesses that might fit the mold.
I would say one of the great minds around this is froze to one.
He sees a lot of these trends. He's thinking about it.
Day in and day out.
Obviously
Everything healthcare.
and efficiency related to health care is a secular trend that will last the rest of our
Our lifetime.
So thinking about how you make healthcare.
More efficient.
thinking about how you create things that allow people to live longer, healthier.
happier lives.
It's a secular trend that will go on the rest of our lifetime.
Everything digital is happening in front of us. So whether it's vertical market software or other forms of software.
invest in a wonderful business called Data Core.
which is vertical market software for industrial applications. Think about the chemicals industry, the food industry, anybody that's doing bulk processing.
Data core has
terrific platform of software applications that work for those industries.
So helping
Whether it's healthcare or industrial efficiency is a great secular trend that will go the rest of our lifetime.
Every customer wants you to become more important. They'd rather deal with less suppliers than more, as long as you treat them fairly.
with innovation and price and
Great service.
If you can accomplish those type of things, it's wonderful, but the whole mapping of the workflow is really, really important.
And understanding
all the things that are near adjacencies to what your customers are doing in their their own shops, whether it's a factory or a service center.
Whatever the case may be.
If you can become more important to'em, you just
gonna do better.
So we look at that.
as well. And I call that
expanding into near adjacencies where there's some synergy. It may come
From
The customer being
There it may come from adding
products to the portfolio that drive efficiency. It could be geographic efficiency with certain of your businesses.
There are all kinds of ways to look at the workflow as a whole and gain from it.
What about stage of company, Mitch? I think one of the drivers of the shorttermism that you referenced earlier.
It's
such a problem in the investing industry.
Came about.
by the fragmentation of the GP community.
And I think it was really led by the L P community, but
We've evolved into this state of the world where
Ninety nine percent of all investors will have their bucket that they invest in, whether it's seed in series A or only public companies in Europe or private growth companies.
How do you think about
the stage of company you're comfortable with. I imagine if you're looking to make
twenty plus year investments you
Part of this is having dexterity and
Learning how to
hold companies and support companies through various stages and you have a lot of experience with that.
Well, the earlier you can go
With competence, the better.
'Cause you'd like to get the companies when they're very young or in their infancy.
stage if you're dealing with venture capital.
with seed rounds in series A and even series B type of rounds.
But when you find something
You want to do the seed.
You wanna do the A, you wanna do the B, you wanna do the C.
You want to get access to part of the uh
ownership of a public company, so you want rights to
buy stock and the public offering. You want to take the capital at all levels if you believe deeply.
in the business and just keep adding to the equation.
We've done this now with chapters on multiple occasions. We're getting ready to do it again with Arcadia.
on another occasion. Uh
Data core, another business I'm invested in. There's another chance for
incremental capital to go in and you're doing it at higher valuations because these businesses are growing and thriving and they're getting better at what they do, but if you deeply believe in where the businesses will continue to go to continue to get capital to work and not worry about having to pay higher prices.
is a wonderful thing. Everybody remembers the cheap price they got.
For the seed stage round, but
You gotta be realistic.
Well this is such an important
disposition just to underscore here because it's actually the polar opposite of the average investor is
At every s next stage.
generally the temptation or the pressure
Is
To exit.
to distribute capital.
You've made a good investment.
it's generated a reasonably strong outcome, you wanna
Put points on the board.
And yet
Just thinking about how valuable this is, how critical this is to
Any business, any founder that's really looking to build for the long term to have a capital provider.
That is not only
open ended with their time rise and at entry, but is
So long as
the project is continuing in a compelling way.
to continue to support.
And all the time that is wasted on going out and trying to recruit a whole nother set of investors at a new stage, the complexity that comes with having
investors that
have had different entry points and have different expectations for the business and different points of view because their time horizons are different.
And this seems like a really important feature. And I think the ideal is to just be there from day one, structure, be as supportive and helping to structure.
The battle ship.
to get through anything.
And start that journey as early as possible. And when we talk to great GP friends of ours who maybe
Focus more on stage
specific investing, I think most of them feel like it's a set of handcuffs that are put on them.
By their LPs.
Because
take early stage investing for an example. I mean
You make fifty
early stage investments, you live with them for a few years.
Who
besides that investor.
Is in a better position to
Underwrite.
That company, at that point, you've literally
probably know the company better than any other investor, and yet oftentimes you're hamstrung from say
Bringing out the cannons.
Let me tell you a couple of stories here. First, Will Thorndyke did a great study that looked at
Pee
making an initial investment in a business, selling an investment to another PE who made more money than the first PE.
Who sold to the third PE, who made more money than the first and the second combined.
They've channel a lot of capital in and out.
to get their fee structures or to get to the next fund or to return capital.
to their investors very inefficiently.
They could have held it all that time and made it all on a tax free basis.
for their investors.
But that's not what the model subscribes.
Another story that I just heard yesterday
the investor will stay unnamed, as will the business, but
They sold a business for many billions of dollars.
to a strategic
publicly traded company.
Five years earlier.
And they've owned this investment now for ten years, but five years earlier they sold eighty percent of their investment.
to return money to their shareholders at a very nice profit.
still retaining twenty percent.
That twenty percent that just got sold.
was worth more than the eighty.
that they sold it for.
five years or earlier.
And
It's no fault of theirs.
It's what the model requires.
to keep the engines greased and flowing. It doesn't mean we have to partake in that type of thing. I would have rather own the whole thing.
And then sold for the big dollars or continued to
Own the business.
We earlier are talking about hunterbaggers and I think it's natural for some folks listening to say, Oh
That's kind of crazy talk. How many hundred baggers are there really?
But I think the example y you just provided with three private equity
players, for example, where each one earns five times
their capital over the course of twenty five years.
If that original investor was able to maintain that investment rather than sell it at a five X.
that five X theory became twenty five X and then or another five X became your hundred and twenty five X.
But who's purpose built to be able to hold on structurally and temperamentally.
I don't know whether we're gonna get fifty to a hundred baggers on these vertical market software deals.
We're gonna get a lot of baggers one way or the other.
And we're gonna get
great returns without
massive amounts of risks. And if we get
One or two?
fifty to a hundred baggers in there, the whole portfolio of vertical market software.
is going to turn into a credible investment as a whole.
One reflection that is vital here is that we're identifying people who are
wired in this way, who want to think long term.
But also who are comfortable having the vast majority.
of their net worth in that company they're building.
In a very eliquid way.
for uh distribution at year five or year ten or year fifteen.
If anything, by then it's de risked and they want to
double down what they have in it and
I just think it's a rare
situation where, like Rick you said, matching the temperament with the structure.
My guess is there are
A lot of founders out there who
In theory, want this.
But because they usually structure
their cap table in the more typical way.
That ability and that desire.
fades away by year five or ten just because of your pressure to have
some outcomes or maybe some cash flow come out.
It's probably to many people becoming crystal clear
how this focus on secular trends becomes more and more important the longer your time horizon is.
You're looking to just kinda quickly get in and then out of something, dress it up a little bit, make a little bit of money.
What's happening at the secular level is just
not usually as important, but if you're investing 10, 20 year time horizon, you've got to be obsessed with this.
Everything that you're talking about.
I think that people would say are areas of great
Importance
Impact.
And mission criticality.
Healthcare.
Everything
that we're doing together, at least in software and workflow efficiencies.
These are things that help companies and help people ultimately.
With better, cheaper, faster outcomes.
And then
Compare that to the evolution of
Danaher.
we helping to realize life's full potential and
Becoming a life science is
Global.
Jug or not.
Is that coincidence?
This convergence. I mean, I think we live in a world, and we see this all the time with our students of increasing interest and an impact investing and ESG, and everybody wants to.
make their mark as an investor.
with a social component too, and yet
It seems like
embedded in these businesses that you tend to like the back that are secularly strong.
Areas
They all have their own mission impact.
component to them.
Oh, they have to.
They have to. I mean, Sumas is obviously doing
great work for people in
desperate need of specialty health care.
And
getting them access to the best doctors in the country virtually.
Within a very short period of time.
in many cases hours or a day or two.
for a need whether it be for an orthopedic surgery or
cancer diagnosis or some other
form of disease for them to be able to do it.
to deal with the best stocks in the country I think is really
an important thing and they did it the smart way. They built the infrastructure first.
And now the challenge that Julian and his team will have is scaling the business.
will help with investors bringing the right talent in.
that can help the businesses scale for the very needs that they have.
But think about a recent Greg scene.
We're we're talking about the intersection of health and beauty.
Who doesn't want to look good?
And do it with healthy products.
When you have the testimonials
Of people that come back.
and say, not only does my hair look great, but you've solved my problem with acme.
Because we know the toxicity of a lot of these shampoos seep into the pores of different people and create massive acme.
Problems?
She eliminates that.
And who doesn't want to have more hair on their head? God knows I wish I'd.
been using seen earlier on. I might have a little more hair on my head than I have right now. I'm with you, Mitch.
So many these conversations with you around
Firing bullets but then concentrating.
In our class we've had a lot of folks
Talk about biotech and life sciences.
Same thing on
Vertical market software more recently, Rick and I have
been concocting an idea to convene.
All the best thinkers on vertical market software.
Down our way. We'll throw a shameless plug out there, maybe in the November time frame.
near the Gulf Coast.
I think we've learned this from you, Mitch. Getting the best thinkers on
A topic.
And spending most of our days in these areas and digging in is what's going to lead to these extraordinary outcomes. It's going to give us the confidence
to double down on a number of these platforms and
And then hopefully unearth that next layer of talent who wants to build these because they know
Then maybe we have
Make in my case a limited experience. In your case a lot of experience.
Starting to work through some of these
Issues and areas of strategy that really are universal.
So think about this too.
If we have half a dozen or more
shots on goal with
vertical market software companies that we're invested in.
What's gonna happen here?
We're gonna learn from each other.
And we're gonna be able to pass those judgments on. This space is big enough for everybody to play without getting any
Anybody's way.
And
If we can take those learnings and pass them on or even create a
small corporate infrastructure or learning center.
For better words.
How is AI going to impact these businesses?
Who's doing the best thinking around that? How do we leverage all that thinking across the portfolio of these investments we've made? I think that we created potentially better outcomes. So
We've shot these bullets. We've now gotten the cannon out in vertical market.
software and we have a fiduciary
Responsibility.
to be ahead of the curve and thinking about what can happen to these businesses.
That
are problematic and get ahead of that curve and be the
Ones that reinvent.
Rather than
Yeah.
Disrupted.
All right. There's another area of
Compounding.
Benchmarking, leadership, excellence we need to get into.
That's about the boys in Burgundy and Gold. You're wearing your
Commander's gear.
Here's we sit, and we're in draft season right now, as we record.
What lessons do you think
You've been able to apply in your your first year as an owner.
Of the Washington Commanders.
From your experiences, whether it's at Denher, Glenstone
Or more broadly, that are really applicable
to an NFL franchise in ways maybe outsiders wouldn't see.
We have to go back.
to the beginning.
to understand.
Why I made this investment.
And what
The opportunity.
That we see.
Going forward is.
So the former Redskins now the commanders.
or a team I grew up with. I really don't have an interest in investing in sports other than
This asset.
And it's a love for this.
Team?
And even more importantly, a love for what we refer to as the DMV, the District Maryland in Virginia.
And bringing ten million
Fans.
out of a horror movie that they've been in for the last 24 years.
It's been a difficult run.
For this franchise.
Top five franchise in the country.
And
quite arguably
Is the most
important sport for sure in North America and maybe the world.
And
Josh Harris.
And I
felt deeply passionate.
A dog.
Creating a stewardship.
to rehabilitate this franchise.
to the iconic nature.
it had during the eighties and the nineties.
And one of the lessons that you learn
Is
With a brand like this.
You can do a lot of
nasty things to the brand.
And the brand ends up surviving because of its strength.
That's what happens with
NFL franchises and
The top ten.
markets.
So we look at ourselves as the stewards of rehabilitating franchise. And the same principles apply.
to this asset.
as any of the other assets that we're talking about.
First of all the demographics.
Are wonderful.
For the NFL.
The
powerful position that they have as an organization.
and the passion around the fan base of NFL teams is
Second to none.
And it all starts with getting the right talent in place and
There was a talent migration that took place.
At the commanders.
Because of the previous owner?
and the difficulty that he had with the community at large.
And it was tough for him to find people that want to come to work every day.
It's shared.
The passion.
and enthusiasm to build the business without him getting in the way.
Yeah.
could talk about lots of negativity, but for us.
It all started with
Getting a great general manager in place. We hired Adam Peters.
going away the best candidate that was on the
board for us to go get.
To help us.
sort through personnel and building of the team.
We hired Dan Quinn.
Former head coach for the Atlanta Falcons was the defensive coordinator.
For the Dallas Cowboys.
What I love about Dan is he's a humble guy. He's beloved around the league.
And he wants to reinvent himself.
And when he lost his job in Atlanta.
He passionately tells the story about how
He hired somebody to help him self-diagnose everything that happened in Atlanta and what were the lessons learned.
What more can you ask for from somebody?
Than that.
And why wouldn't you give a guy
Who's got a chip on his shoulder now, a second shot.
because he wanted to learn and had the learning agility and the internal
thought process to say, I need to go get some help to
basically reinvent myself.
This is great human being and I think he's gonna do
Wonders and he's proven out.
To be a talent magnet.
That was part of our thesis in also hiring Dan and Adam is that these guys would attract
great people around them. So we've now started to bring in
Proven veterans.
who have a locker room presence that are gonna change the way people think.
about how they play the game.
I mean you bring a guy like
Bobby Wagner in.
He's gonna be a first round ballot hall of famer.
He's only got a year or two, maybe three left.
In his capabilities.
But what he can do for the organization
From a mentality standpoint.
how you practice, how you play the game.
How you think about leadership.
And how you inspire others.
We got a lot of other bobbies.
that we've brought in as well. And so we've created a strategic vision for what we want a Washington
commander to be.
And Adam.
and D Q are executing upon that.
It's gonna be uneven along the way.
We've got a lot of rebuilding to do. They call it recalibrating.
And we'll get there.
If we draft well
and we get our quarterback, we're gonna get there really fast.
If it takes us a little time, that's okay. This is a rebuilding.
I've said to them over and over again, we have to look at this as like we're building a house.
Brick by brick.
Layer by layer.
until the house gets built the right way and can sustain itself.
We can't guarantee Super Bowls.
But what we want to guarantee is that we're perennial playoff.
Contenders.
And when you make the playoffs on a regular basis, other good things are likely to happen in due course.
So that's the way we're thinking about this.
This will not go down as the greatest investment.
I ever made?
I think we'll do just fine.
long term.
But
The idea
Here is more about
A philanthropic mission to rehabilitate.
The ten million fans.
And give them.
Sunday afternoon.
Reasons to re engage with football.
in the DMV and I think it's starting to happen.
We feel it, we sense it.
The building.
in Ashburn, Virginia, where our headquarters are and our practice facilities are, there's a different energy level.
Right now in the building.
And we're all crescendoing now that we finish free agency.
And by the way, signing twenty new free agents?
And a handful of
Our own on top of that, that we resigned.
is kind of unheard of.
Turning that.
much of the organization over. So once again.
Talent?
It's all about talent acquisition. And now we've got
six choices in the top one hundred of the draft and Adam and DQ and the team.
Need to choose wisely, but
Adam has a history of
Pretty good selection.
comes from some pretty good places. He started in New England where he won a few Super Bowls. He went to Denver.
and recalibrated the organization there and they won a Super Bowl with Peyton Manning.
And he left for San Francisco?
where he took another step up in his career and ultimately
was part of the organization that
Turn that franchise back around.
obviously took them to the Super Bowl.
This year?
And he was ready, Adam was ready for prime time. Now he's our new generation and so far so good. So
This is gonna be an exciting
Journey.
I don't think the exposure publicity wise is the thing that
Makes me
Very happy, but
It's a necessary evil to go along with
I think the work that we want to do to
Try to make ten million people happy.
part of the commitment to benchmarking your
You're a master of
Voice of customer.
And trying to understand
First of all, who your customer is and what they really truly want. And I know you've spent a lot of time
Talking to fans, but also talking to the players.
The talent.
Coaches as well.
What have you learned about these elite athletes that have gotten to the absolute pinnacle of
their profession.
What is it that they have told you that
They want to see.
Well, they're everyday human beings and one of the things that I did
With Josh.
as well as others is
last year.
Every week.
I had a lunch sit down with ten to twelve of the players.
And we would go around the table and introduce ourselves and say a little something about ourselves.
Where we grew up.
Our family.
History is
Or collegiate.
careers and what we aspire to.
And we all shared our stories and then I always asked the question.
So guys, what is it that
You see here.
Okay.
Really
We should be doing differently.
One of the Star Wars players.
Who will stay unnamed.
But he's a great one.
Raises his hand and he says Mr Rails I said No no no no no no
Mitch, we don't go by Mr. around here.
He said.
One of the things that's really impactful.
Gosh is
When we play a game
In our home stadium.
We have more fans rooting.
For the visiting team.
And we do our own team. And we have
Lots of negativity in the stands because of the
Former owner and
We actually like playing games on the road more than we like playing at home.
And I sunk in my chair and I said, Oh.
I'm so sorry to hear you say that.
But I also understand.
And
I can't
Commit to you.
That we can get every fan.
for an opposing team out of the stands right away.
But what I can commit to you is we will sell every one of these games out.
We will get the presence of
Commanderism.
Tak.
Into the stadium.
The first game of the season was against the Arizona Cardinals and
Fortunately, we know Arizona fans don't really travel.
So when the guys came out of the tunnel
For the first game to a sellout crowd.
Everybody wearing burgundy and gold.
The emotions were off the chart.
And wouldn't you know it?
It's one of the few games that we won this year. But it's a testament to what can be done.
And I think we'll sell every game out this year and we'll have less.
Opposing.
Team fans.
In the stands.
Five years from now, we'll have.
Very little opposing.
fans in the stands. Ten years from now.
We won't be selling a ticket to an opposing
fan and it'll get back to the way it used to be in the eighties and the nineties where
There was a waiting list.
to buy tickets to come to the game. Nobody dare wanted to sell their seats.
to anybody else because they wanted to be at every game. And this is just a journey that's going to take time to come to grips with.
But we also
Listen to him. They said, one of the guys said.
You see this?
Shampoo'em.
Using head and shoulders.
Can't we do better?
I said
Wow.
I didn't know that, but I do know a little something about shampoo. He said, How in the world do you know something about shampoo? I said, just trust me.
I made a little arrangement.
For scene.
Seen as now.
In the locker room.
Both.
at our practice facilities and at the stadium.
And everybody is a happy scene.
Shampoo.
user these days. And now wouldn't you know it, they're
Saying, where do I get this stuff? I want my wife to have access to this. And now scene is a sponsor.
of the commander. So it's awesome the way this journey goes.
It's little things, but it's asking the question and letting your customer

Matters to them.
It's really comes down to this unified
vision around building a winning culture.
And I think the fans are naturally after twenty something years they're gonna come around, but you've gotta start
With the organization.
And purpose and values and all that is being developed as we speak. I've got a layout of all that that
I would really like to see
implement it here in the not too distant.
Future.
That will come.
We've lost a generation of fans.
If you're
eight years old to call it.
twenty
Five years old.
You learn to
give your Sundays to other things other than NFL football in Washington.
And we need to get those people back.
But more importantly, we need to cultivate the next generation of fans.
I have this vision where
Every
Call it third or fourth grader.
should come to a hall of fame that we're gonna build.
that will become part of our stadium complex or part of our new practice.
facilities, we're not quite sure where we want to do that yet.
But the commander should pay
But the transportation.
And the
Teachers.
And the lunch that's necessary.
For any kid
in the third or fourth grade within a hundred miles
of the stadium.
To come to this hall of fame.
And see the history of the team.
And if it's at the stadium.
Walk out onto the field.
and look up at the mass around.
and daydream a little bit about coming to a ball game.
And then leave with a hat.
And T shirt.
Compliments of the commanders.
And hopefully we build fans for life.
And that's what it's gonna take.
over the course of time to really
re engage the community.
In a way.
Yeah.
just hasn't existed for the last twenty four years.
Well it's making the long term investment.
But is this orientation that this is something bigger
than ourselves and bigger than just football.
There's only two places that I can think of.
In the world.
Were people of
Any colour.
Any religion.
Any sexual orientation.
And more.
can gather for a common cause.
Those two places?
Stadiums.
And art museums.
I happen to have the privilege of being associated with
Both now.
Churches?
Synagogues? Very homogeneous.
You don't get the multi-dimensional
Total.
what the world looks like today in any one of those
Places of worship? They're important places.
But everybody gathers for a common cause at stadiums and museums. It's just
Different. And I'm like I said, I'm privileged to be part of something like that.
By the way.
To show the change that's starting to take place, Dan Quinn, our new coach.
when the had the first team meeting, he said, We're gonna play some musical chairs.
Everybody kinda looked at him.
And
You shouldn't
You offensive guys all sitting together?
No, no, no, no, no. You defensive guys all sitting together. No, no, no, no.
Every offensive guy must sit next to a defensive guy and every defensive guy must sit next to an offensive guy and you guys gotta get to know each other.
There are no thiefdoms around this place.
We're all in this together.
To be a team, we gotta rely on each other here.
So when the offense is down a little bit, the defense gotta pick it up.
And vice versa.
You guys gotta lean on each other all year long. So let's get to know each other well. And that's very different than what happened under the last administration.
As we're coming near the end of our time here.
At Glenstone. You mentioned art museums and stadiums. I wanted to throw out just one last

Epitomizes you, Mitch. And this was last fall.
On campus at Notre Dame.
You flew in to teach our class. It was Notre Dame US C weekend.
You're
Singular focus was on
Teaching the students
Passing along.
A lot of stories, lessons, what you would do in there.
Choose and then it was
We had fifty yard line seats. We had great seats of the game. That didn't matter to you.
It was I want to go see
I wanna go down.
See the freight elevator.
How the trucks come in, you were asking the same questions.
to the staff in Notre Dame.
That you were asking all those fifty museums around the world twenty years ago when you were
Designing Glenstone.
So this is a word of warning to all the NFL owners out there.
The benchmarking has begun and it was amazing to see your passion for that.
Real time and we're so excited for what's ahead for the commanders for Glenstone.
For all the projects we're working on together.
Well, thank you for that. By the way, we did do a uh
tour of every stadium of of an away game.
that we went to we would arrive at the stadium at ten and spend
Two hours.
touring around each of those stadiums asking the same type of questions.
What are you doing that's really great?
What would you do over and over again?
would you miss along the way and some of the learnings
were just extraordinary.
Good stuff.
I want to just underscore
We've touched so much on
the role that learning agility plays in a leader and
We didn't know you forty years ago, but I have to think that
You're just one of those rare ones where your curiosity and your
ability to
change your mind and your interest in learning new things.
It seems like it's only accelerating. I mean we struggle to keep up with you. But it really is inspiring and
The underlying
impact that
These lessons
have on these companies and ultimately on society
I'm sure it's not lost on you, but it's something that I think really deserves a light to be shin on it and we're just really grateful to obviously
be in your orbit to learn from you directly, but also that you would be willing to step into this classroom and for the benefit of others, whoever else is out there.
Wanting to listen and learn.
to impart some of that wisdom. So thank you for your contribution today and and also just for all that you're doing out there in the world to improve the lot of mankind.
Oh, it's appreciated and these things compound on themselves if we get enough of it going out there.
it might change the short term dynamic of the way people think into a long term visionary thinking model. So we'll see what happens.
I like to say I just gotta live long enough to see the 20 to 30 year outcome start to come in the years to come and be like a proud parent watching their kids grow up.
Thanks so much for showing to class today.
For more Art of Investing episodes, and to explore all of the resources we mentioned today and more,
Check out staygrow.com. That's sta-g-e-y.com.
That's it for now, and we'll see you next time.