Henry Ellenbogen - Man Versus Machine - [Invest Like the Best, EP.452]

Transcript from https://podmenti.com/t/89cf64092505314f

Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best.
This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money.
If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing.
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Patrick O'Shaughnessy is the CEO of Positive Sun.
All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Some.
This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of Positive Sum may maintain positions in the securities discussed in this podcast.
To learn more, visit psum.vc.
My guest today is Henry Ellen Bogan, founder and managing partner of Durable Capital Partners.
Henry built his reputation at T Row Price, where he led the New Horizons fund and turned it into one of the best performing small cap growth portfolios in the country.
Compounding nineteen percent annually and consistently beating benchmarks for nearly a decade.
In two thousand nineteen, he left to start durable.
His philosophy is grounded in a simple belief that great investing is about understanding people and change.
Henry has spent his career studying the rare one percent of companies that drive nearly all long term returns.
Businesses led by exceptional operators who turn moments of uncertainty into compounding advantage.
Dirbal's edge comes from that human judgment, from spending time with founders and the executives and learning to tell the difference between a company that is failing and one that is transforming.
Henry often talks about act two teams, founders who take the lessons from their first company and apply them to a new frontier.
Durbal itself is his act, too.
In our latest Colossus profile, managing editor Dom Cook traces Henry story.
And specifically how he became one of the most influential investors of the twenty first century.
having learned from founders like Jeff Bezos and John Malone in the early part of his career.
I always hear the same thing from founders who have met Henry.
They say he understood my business faster than anyone.
The thing that sticks with me from our conversation and Dom's profile is just how much he loves investing.
As you'll find, his passion is infectious.
Please enjoy my conversation with Henry Allenbogen, and if you haven't, I'd highly recommend reading the profile afterwards. You can find a link to that piece in the show notes below.

I thought a interesting place to begin would be with
You telling us the origin story of your investment philosophy.
We're gonna talk deep specifics about a lot of things in the world today.
So that people understand where you're coming from and how you came to your philosophy.
I just love to begin there.
the key ingredients of the recipe that's become how you attack and think about markets. Where did it come from? Where did it start?
There's probably a couple places that come from.
One was
Frankly, my own personal background.
So
I
Came.
Into investment.
Not
directly out of school. It's not like I went a finance pass. I I went into politics.
I wasn't an economics major, I was actually organic chemistry and the history of and technology.
Major
And I worked in politics for many years.
As I started to try to figure out
What I wanted to do.
professionally and eventually I started to think more about
investing and I got involved in it.
I started to think about
Investing.
Based on a lot of the same principles.
That I learned in science.
In particular biology, that
In order to have
Organisms that sustain
over a long period of time and persist.
Much like human beings, they have to be in balance with their ecosystem.
I'm a father.
of two boys and you see it today when
Children develop.
They gotta basically go through certain
curves
Child, adolescence, teenager.
Adult.
And they have to basically
be in balance. And if they are
They can thrive and do incredible things. And we as human beings, if we do that
Look at the all the success humans have had.
Relative to every other species.
I started to think about
why shouldn't investing follow the same
Rules we see in science.
So why shouldn't investing
mean that there should be a healthy balance between
Companies that
Invest in their
Customers.
their employees, their shareholders and
actually support their greater communities.
And
That really resonated with me and in many ways
I was lucky to
That
I ended up at your own price early in my career and the guy who became my mentor, Jack Laporte, this is what he believed.
He believed if you invest in small companies.
And they
were run by people who thought like owners, they woke up every day to make themselves better.
They gave their employees a good deal, they had good cultures.
allocated capital. Well, this is what created
Companies that could
grow and sustain. And that was how he had been so successful over the twenty five years he did what he did.
So
That resonated with me.
What happened to me though was a bit of good luck.
I was asked
halfway through my career.
T O price to basically
Go manage the new Horizon fund.
In doing so
I started reading all the shareholder letters.
At that point it it was turning fifty. So I actually went
Into the archives.
And basically read the shareholder letters and tried to understand
What drove the success?
Of this.
Fun over fifty years. At the time it was the oldest, but also most people would say it was the most successful.
From a performance fund.
Small cap growth fund in the country.
And in doing it, I started realize wow.
It was really only twenty stocks.
over fifty years that drove the performance.
And then coincidentally, Jack, or maybe purposely, Jack decided to have a fiftieth
birthday party for the fun and
All the fund managers came except for T Row Price himself, who had managed the fund, but was passed away. And in doing that, I talked to one of the managers who told the story of meeting Sam Walton.
on the IPO Road Show.
When Walmart first came public.
For those of you who don't know, Walmart came park
It was a super small company. It only had fifty stores.
And obviously Walmart.
became Walmart.
And
I went back and I looked.
And I was like, wow, this is definitely one of the twenty stocks that mattered.
But actually
Unfortunately was sold.
And the math at the time
was the retail fund, I think I was managing about eight billion dollars, which was the largest pool of small cap.
Growth money in the country.
And had the stake in Walmart not been sold.
The stake in Walmart would have been greater.
Then the sum total of everything
that I was managing. And
I'm not saying people had made bad decisions before.
But actually the math was one bad decision.
Where maybe you had to make that decision every day because the public markets are open every day, actually wiped out all these other good decisions.
mathematically than had done. And so what that caused me to do
Was at that point start to really study.
The history of the US public market.
Since then.
I think a lot of people
talked about the study that came out of Chicago. Yeah, the four percent thing. Right. And that's true.
But at the time when I did this, no one had actually
Ask the simple question.
In the history of the US equity market, which is to me representative of capitalism.
If there's four thousand average public stocks, how many of them truly are great?
And
The philosophy we have
Today is predicated that
Over a rolling ten year period, you have about forty stocks.
A compound wealth of twenty percent a year.
Or go up a little bit over six X.
So about one percent.
of the stock market are the validatorious.
And that's what we want to go do.
Like a lot of things in life.
You get through
Looking at
Lateral examples, biology.
And then you look at anecdotes. And then if you like to double click or you're you're maybe a geek on data, you start to really study it. And then
Obviously since then we've tried to
create an investment philosophy.
That maximizes the probability
of investing in those forty companies.
And the other thing.
That we have.
Basically found out.
Is
That was interesting is
About eighty percent of those companies actually start their compounding journey.
As small.
Cap companies.
And so
People always say, Henry, why do you love small cap companies? I was like, Well, I love them because I love the people side of the job, but I also love them because
Eighty percent of them.
of these great companies actually start as small caps.
That's what we're trying to maximize because we think that's what creates
long term wealth and economic growth.
What we have done is basically purpose built.
Investment philosophy.
And just as importantly tried to purposely
build an investment organization.
That can go do that.
I wanna ask about each your firm is literally named as an ode to this concept, durable.
durable long term compounding growth for the companies that you back.
Give us one more click of detail on
after that original insight. So you've identified that you want to be in this group of forty companies as best you can possibly approximate.
What are the common elements that you've discovered that fit your personal and your team style?
That
are indicators that you might have one on your hands. And I know you do late stage private investing as well. So you're looking at these companies when they're at or near their IPO.
We'll talk about going public later on and why that's valuable.
But what have you refined to be the most important signposts of a company that might be one of these
One percent valedictorians.
The first is
If you've been one before, you have a higher probability of being one again.
Which just sounds so simple, but is actually really interesting.
We look at who is actually
Done in.
And if we don't
really know the company and we haven't studied before.
We'll go double click.
And go.
Essentially study it, see if there's an opportunity, but if not, go do a case study on it.
So we want to go learn it.
One of my partners
An Uckdate basically.
Teaches a class.
She's amazing.
Business school of the value analysis program and
Partially this is our way of going back to school as an organization and partially is our way of giving back.
to our community, but
The class is based on this.
And the students literally do
about six case studies a year, but over time you build up a library of them. So I would say
You just start by basically studying
The ones who've done it. And then obviously trying to study the patterns.
Of those who've done it.
That's number one on how we do it.
Second of all
If you go look at the data
They're diversified across the economy.
So
Look, we're in a period of time where
What's going on in AI is so impactful.
My view on the impact of this is probably no different than a lot of the other speakers you've had.
I would say what I
think about when I think about the power of AI and really studying it. I don't only think about
The companies that
are the first or second derivatives, or maybe people were categorized as technology companies.
I also think about
the existing
diversified companies.
outside of the technology space.
that could be huge companies here. So
As an example.
When you go back and you look at the era of cloud and mobile
For sure.
You want it to go on Amazon.
In that period of time.
But actually if you look at retail
Once Walmart
And Costco really understood what Amazon was doing, but still had relative scale.
They leverage their advantages and since they basically
got on the same curve, sixty two percent of all retail.
has gone to those three.
So for sure one might have been better than the other.
But actually all three were good.
What was the best
Russell two thousand growth or for your investors who don't know benchmarks, small cap company.
over that ten year period in the two thousand tens, well actually it was Domino's pizza.
Which
was a modest growth company.
didn't average ten percent growth over the period of time. Why was Domino so good? Well
It turned out having gone back and studied dominoes from the beginning, but obviously owned the stock.
For some period of time.
If you look at
The pizza market in the United States.
When Domino started it's run.
You basically had a third of the market.
That was local.
So probably like a lot of
Listeners.
I have my favorite local pizza place and I like it because the pizza's great.
And then
The other third we know.
There's the nationals, Domino's, Papa John's, Little Caesars, others.
And then the middle third
There used to be in DC
This place called
Armands.
that had about thirty places and they had
local or geographic scale.
But they didn't have the scale of dominoes and they didn't have
Great pizza.
And what happened was when Domino's
started its run. Well, first of all, it started by basically making the product a little bit better.
But if you talk to Patrick Doyle
who was CEO at the time and you really study it.
What they started doing was
If there's three value equations in pizza, it's quality, value, and convenience.
And what they realize is if we really, really invest
Technology.
We can
make convenience a lot better.
And so they
Really invested in their app.
And they built a direct relationship with their customer.
Very early on they could then
target that customer more efficiently.
with couponing, what have you, drive scale.
Through that box.
And then when you do something well, you improve the product.
Probably was.
Slightly above average.
You really iterate on convenience and now you have a direct relationship with those customers.
All of a sudden actually the brand Halo started getting a little bit better because
People thought was with it and it started to really help the brand.
And you put all that together against a wonderful business model of a franchise business model.
Which is R O I light.
You end up with a great stock.
One of the things we think a lot about a durable
Is
Which of the companies
That are in
Distribution.
Trucking.
Healthcare.
Who are already good.
And maybe investing on a different curve.
have the ability to use AI.
to either substantially lower the relative cost advantage versus their competition.
gain more revenue scale and then reinvest that.
In a way where you create something that's permanent over the company's
that maybe get to this late if they ever get to it.
And often those are the best stocks when you go study the markets.
Because you're already in a physical world business where the
technology advantage transitions into a physical mode advantage or a distribution or scale advantage.
That's one of the patterns that we've observed. We call that
A good to great thesis internally.
The second way is people.
If I think about
The investments we have today.
We tend to be in business.
What certain people
We've known for twenty years now.
And maybe they're doing
the same thing or maybe doing the next thing, but we think these are the type of people
Who build
Great organizations.
And then obviously we have to meet new people too. So one of our largest
Honey stays duolingo.
So we
First
Spent real time with the CO.
Who's going on when
During Covid.
During the Covid era.
As the markets reopened, it went to highs and
the private markets were white hot.
In the zero interest rate environment. And
People were meeting people on Zoom and
I remember meeting Luis with my colleague Julio.
We got off
Zoom with Louise.
Like you often do back in the day.
I called Julio up and I was like, What do you think? And he was like Well, it's a super impressive business.
They're leading their market.
They're on the right side of their consumer and
The product's great.
And I said, Yeah.
I said, Luis reminds me of Toby from Shopify.
The last time I spent time
With someone.
that technologically strong.
Louise had been.
Head of
AI and ML at Carnegie Mellon.
But also has that much business clarity.
It is so
crystal clear at communicating. He can
A complex
Topics simple that even I can understand them.
was when I spent time with Toby when Shopify was private, and I said to Julio, We're gonna basically clear our schedule.
And whenever Luis will spend time in Pittsburgh.
We're gonna go spend time with them. And so
I think
For lack of better word.
The understanding of the patterns.
And having studied um
The understanding of
What
creates the environment.
Sequoia is famous for saying why now?
And what could
lead that not only on the technology side, but
Across the economy, but I think
The clarity you have.
When you spent time with
At this point, thousands of executives and you have seen the ones who've done it, you want to do more with them.
And then you have seen the ones.
who are trying to do it, but remind you so clearly of the ones who have done it.
Can you say a little bit more about this notion of act two teams and management teams and why that is an interesting concept to you when you're thinking about the relationship between an act two team and a potentially very durable?
Compounding company.
This is something that
Is so dear to me because when it's
Something we invest in.
But two, it's actually at the heart of durable itself.
And it's one of the reasons I think
Durable is just different.
than other investment firms because
We ourselves were an act two team.
The best way to explain it is by example.
At my part for my investment in work day.
When they were about at a hundred million dollars of revenue scale.
What was so interesting was that the two co founders of Workdale
Anil Bushri and Dave Duffield.
had basically
been the people who had pioneered
HR systems of record.
In the previous
Client server world.
They were literally the people who built people soft.
Scale people soft and then
Lot of history there, but there was basically uh
Very aggressive takeover by Oracle.
And so in many ways
They had felt they had an
frankly, completed their vision.
So they came together.
But what really also lit up
The vision was
Cloud.
Now this sounds so obvious today.
But two thousand and twelve when we invest in a work day.
I think a lot of the understanding of the cloud was not as obvious by investors in
Frankly, I'm not sure I fully understood it either.
But what I did understand was this was an act two team.
By that I mean
If
You understand HR.
systems of record.
There's a bunch of the stuff you have to build into the product.
That for lack of better word is
Exception management.
And if you don't understand that exception management because you have done it before.
you're gonna not properly be able to do it.
And because this was an act two team
They actually knew how to leverage.
The modern technology.
But also build the system of record in the way it tells.
With the edge cases at super scale.
And then obviously they also understood
what segment of the market to go after.
And then how to serve it.
That to me is
The image we have as durable.
When we look at
An entrepreneur.
Who has solved
And successfully won a product area.
Or an area of business.
But now wants to go do it again.
And there's huge advantage when you go do it again.
You are essentially solving
The same problem.
But with total clarity at the beginning. The other thing is if you've been successful.
It allows you
to align
All parts of the organization.
The people
the organizational structure.
The investors
Exactly how you want to go do it.
One of the examples of that
comes to mind is
Max Slevkin.
A lot of people know Max obviously is one of the co founders of PayPal.
We first invested in Max, actually
It's one of my first private investments in my whole career. We invested in Sly. And for many years until recently, we're now investors in a firm. I used to joke.
I'm the only investor in Macs.
But
With all jokes aside
Max.
To me
Represents.
The best of an act two entrepreneur.
For those of you who don't have the benefit of knowing Max, first of all
He truly understands technology.
And he really understands how it can be used.
In very complex systems to solve problems.
He can recruit exceptional people.
Because
He speaks their language.
He's also a very good leader.
And people believe in him.
He's also exceptionally resilient.
We could talk a lot more about a firm and we could talk a lot more about the relationship with Max.
And some of the things about how you transition to the public markets later, but I would say to us
Max is a perfect example.
Of Mac two entrepreneur.
That we had already been in business with.
If durable does anywhere from five to ten
New investments a year.
A lot of times it actually is with act two entrepreneurs.
And then
If we're lucky, and this happens because of compounding relationships for
Having done this for twenty years, a lot of times.
It's with people that actually we were investors in their previous act.
And I think that's also great.
Because they know us and we know them, we know each other's strengths.
And we know exactly how
We can help each other.
The maxes of the world get to do business with who they want.
But I think what it allows
Them to do is
with a clean sheet of paper decide who they want to be a business with, but obviously from our standpoint, we don't do a lot of new things.
And it allows us to basically really align our resources to support them.
What changed the most in your own act two? So as you structure durable itself to have the same features of the companies that you're looking at investing in, last a long time, do really well, be tightly aligned, all these things that you're referencing. What were the biggest
learnings that you took with you and that you jettisoned coming from
Your first act to your second act.
I almost named
Durable Act Two Capital, by the way. Oh wow.
It was such a prominent view.
And
What I was trying to do.
We talked a little about the investment philosophy. I mean, the investment philosophy is really simple. Let's invest in small companies.
That can compound over time and become
Large companies.
And
What's our advantage that we bring over other investors?
We think we're great at
People and understanding change.
So
Basically everything we do are durable.
Because we're an investment driven firm.
Is
In support of that investment mission.
First of all.
We
Essentially with a clean sheet of paper.
Said
If we were gonna go
Purpose build.
An investment vehicle to allow us to do this.
How would it actually be structured?
Essentially
the percent of capital that we put in the public markets and the private markets is a line against that.
And then
The second thing
We talked about is
Organizationally.
How are we gonna go a line against this?
The way we think about people.
is very purposeful. We really believe
That
Very few people.
Actually operate the way we do. We think durable is just different.
It's different because
My partner Catherine, who work with me when
We first under wrote
Figma in two thousand twenty.
And also when we led the investment round in twenty one was the same person
Who was at the all hands meeting
With Figma.
When Dylan announced to the company that they were going public.
And is still the person that basically looks at the company
when they announce their public earnings. I mean, that's just different.
So you have to have people
Who can
work with companies that
are valued at two billion and then are private and have thirty million of run rate revenue and now

billion two companies, a public company and can continue
to work on that and
Investment firms
aren't structured that way. So if you want to have people who can do that, you gotta develop them internally.
Second of all, it's
Time allocation.
In general.
At any point in time we probably have ten, fifteen percent of our capital in the private markets and the rest in the public markets.
But we have to be willing to spend
the appropriate time on new ideas. So when
We look at Duolingo.
And the right decision for Duolingo, maybe the right decision for us.
Is only to invest
twenty million dollars.
We don't look at it as a
twenty million dollar investment.
on a fifteen billion dollar vehicle.
We don't look at it as ten basis points or
twelve basis points. We actually look at it as
our future compounder.
Our investment memos are just fundamentally written different.
than other investment firms.
When we look at an early stage growth company that is not already
Competitively advantaged.
We
Write the memo.
That says his dualingo does what we think it can do over the next three years, not only do we make a fair return.
For the risk of the company.
But at that point in time we would want to buy more.
At these higher prices. And if we can't write the memo that we want to buy more.
At higher prices.
We can't buy the shares.
And our thesis can't be.
It gets bought.
Or our thesis can't be
It'd be a great
Talent acquisition by someone.
So that has to be aligned. And then
The investors were in business and we have incredible investors. We have to be transparent with them.
That in order to pursue this philosophy
We're gonna have
what people would say is monthly or quarterly volatility in our performance when they look at our performance. And that sounds so obvious, but
Increasing the market has changed.
Where capital is short cycle.
So many people are in one month.
Basically incentive models, not even yearly one month.
And so we have to have been
very transparent with our investors.
And told them what we're trying to do.
Deliver on those promises, but deliver on those promises over the right period of time.
I'm so intrigued by this dollar cost averaging up concept that you're not willing to invest in the first place if you're not excited.
to if it goes well invest more at higher prices.
Is that the right way to think about it, that the way you build a position over time is
Investing more as the price goes up.
to build your fullsome position.
Yes and no. So there's really two parts of our
Portfolio.
When we're looking at
what we call early stage growth companies. And it could be Dualingo as a private company.
Or it could be
Duolingo after it goes public.
But it's still
Not competitively advantaged. And at that point in time, it didn't have cash flow. It didn't have PE ratios. We still in our
view that as an early stage growth company where
We're saying in the future could be competitive advantage, the operating culture could be
clearly established where we could look back and see the excellence of it and the adaptability of it.
And then we could look at the growth formula and really understand it. And obviously
Along the way we've
really believe these are our kind of people who could scale organizations.
So when we look at something like that.
We have to believe.
That
When we look at the three plus three, we're underwriting it on a three year basis in general, not always.
If it does what we
Think it can?
Not like
It will. And I'm gonna speak to that in a second.
We would then wanna buy more.
as it in our lexicon gets bigger, but also de risks.
And then proves to be a competitively advantaged business and shows more resilience and
Shows the ability to
Financially balanced growth, profitability, innovation.
basically prove its ability in the case of Dolingo to become more of a power app.
Teaching
speakers a foreign language
For more self improvement.
That it starts to do it for
learning that basically increases educational ability to participate in the economic world.
They're obviously going to different subjects with chess. So as you progress.
As a business more towards
what we view as competitively advantaged business. That's for lack of a better word.
Big but still has growth.
We underwrite a view that if it does
That scenario, we would want to buy more.
And if not, we just can't get involved. Now
Of course.
In my career I've invested in over
A hundred private companies.
And I think I've been involved in over fifty IPOs.
How many of them do we still own? Well, we probably still own more than anyone else in the markets.
Even if I look at durable.
Among our largest positions
In the public markets are DoorDash firm
Toast.
Now Figma.
Warby Parker and we led those last private rounds.
T.
persisted and we bought more.
At different points on the curve.
I would say on a durable growth company.
Because of market volatility and
This agency principle that I think about that's forcing people to have short cycle view of the public markets.
Actually probably you're buying more of them when they're down.
One of our favorite entrepreneurs is a guy named
J Hannick.
Who essentially is CEO of Collyers.
But he was also the founder of First Service. And we own both of them. We're actually involved in a private investment with him also.
Back to
Act two entrepreneurs and also our belief that we do business with people and we're really good at people.

Sometimes multiple things well.
And look, in the case of Collyers, I think it's a very misunderstood company.
I think for sure the brand suggests.
It's a commercial real estate broker.
commercial real estate brokers
Don't do well.
In general, when interest rates are high.
That was the case last year.
But I think what's misunderstood about Jay, and he's done this time and time again.
It's because of his
Understanding of
He was really a disciple and his mentor was Peter Drucker.
His understanding of local incentives.
And the sharpness of capital allocation.
And the way he sets up
the partnership model, what he buys people. What people haven't realized.
He's he's built
An incredible business both in asset management on the real estate side in Harrison Street.
And also he's building a terrific consulting platform.
I think our insight there is starch with Jay.
But it starts with understanding actually the asset quality of callers.
Is not
The quality of a commercial real estate.
Fine.
That's sickle. It's actually
A really good
Real estate asset manager.
Emerging
really strong consulting firm.
So last year
When people were worried about the weak commercial real estate market and interest rates.
We bought a lot more of that company.
It sold off based on short term
Macro concerns.
So in that part of the portfolio, probably we're buying more of the companies.
When they go down.
You said something really important and interesting that I'd love to dived into, which is the principal agent.
Problem and
My question is a market structure question.
We've talked before about some
crazy percentage of just marginal volume that happens inside of the platforms, the Citadels, Millenniums, Balias, and these point seventy thors of the world.
How do you feel that?
And I'm curious just for your thoughts on changes to market structure in general, since you've been doing this.
how it contributes to that volatility, what opportunities it creates, what dangers it creates.
I started thinking a lot about it two years ago.
And in hindsight, I probably should have started thinking hard about it three years ago.
You don't get everything right.
There was a period in my career
where the quant funds really started to do great.
The two sigmas of the world.
One of the things we really stress at durable
is humility.
So we never look at a problem.
And assume we're right.
And the other person's wrong.
And we never assume we're good and the other person's bad.
We actually look at things and assume the other person's really smart.
And what we can go learn from them. And so
This relates back before
I found it durable.
But I went and I studied the quads.
And what I concluded was
The short term alpha game
is probably gonna be one
by the machines paired with the humans. At the time
It was when I was
For the first time
Computers paired with machines could be the best human chess player.
And this is obviously
When I went to spend time with the principal at Two Sigma, I learned
He was doing exceptionally well.
But
Anyway.
I got to know him and we talked a lot.
And I realized actually
There were real limitations to what the quads could do.
I started realizing if it's a repeat actor problem.
Based on known data. Actually the quants are pretty good.
So what does that mean at the time? Well it means is
If you're just a person who buys an industrial company
Because the PM I's down and historically when the PMI re rates and gets better and you make money.
That's not gonna work.
The machines are just gonna be better at that, you.
But if you're like what we were at the time, people who are really good at understanding people.
And really good at understanding change.
That was really advanced.
And I basically
At my old firm
I did a internal
Teaching.
On man versus machine.
And I said as a result
What the New Horizon Fund is gonna go do is we're gonna go double down on these two things.
And we're gonna get
Better at them.
We're gonna get more focus on what we do.
On the people side of our business, both in the public and private market, and we're gonna get more focused.
On where change
impacts both are
early stage growth companies and our durable growth companies.
And where we're investing
Well we're
Not advantage versus these machines.
Probably should have done it anyway, but we're gonna stop doing it. But we did it, of course, all within our investment philosophy.
And that's basically what we've done at Durable.
As we've gone and studied millennial senators first.
Let me be very clear.
Deeply respect those organizations. I think they're great.
Or what they do.
And I actually believe the people who work there are very talented.
And we start from the view that these are exceptionally talented people.
who are actually very good at what they do and are high quality people.
But what we have said is
What do they do?
And what is the limitation? And one of the limitations is if you work at a firm
That
Deeply measures your risk every day.
And then if you have a bad period of time measured
By a month, but certainly three months.
you get your capital cut back, there's a good chance you get let go.
It probably means you can't have a time horizon.
Longer.
than your career.
Horizon.
What we also have noticed because not only understands
Things anecdotally also study them.
If you look at
The last
public market earning season.
Which was companies reporting Q two.
This past year.
If you study earnings volatility
It was more volatile than any earning season since the financial crisis.
Even though during the financial crisis as we all know.
The fundamental banking system of the US was under question.
What's meant to be.
the economy and the markets as we know it.
Really had a wide dispersion of opportunity. And the markets tend to be a lot more volatile when they're making lows and making high. And yet.
This was the most volatile earning season. I think the reason for that
It's just basically the fact that
We estimate somewhere between eighty and ninety percent of the institutional flow.
Is driven either
By the
Firms that have one month and three month agency or the quants that have to take these price signals into account.
And then the their models are optimized for this. And so what we have said at durable is really simple. Let's go do less.
So we can do more.
Because if we're gonna accept volatility in stocks, we have to really understand the business and the people like we do at Collyers.
Such that
If
Call yours is down.
because people are worried about commercial
Brokerage.
Because of interest rates.
Actually the markets are probably right.
But probably right ninety percent of the time.
But if we understand what's unique about that culture, how they allocate capital, we understand deeply
how the quality of that Harrison Street is, because we've studied it for twenty years and we know the people who run it.
Well, that's a reason why we're willing to lean into that stress.
The same thing when I look at our early stage growth portfolio.
I spoke about Duolingo earlier.
They came
Public.
The last time the capital markets were really open to companies which was two thousand twenty one.
And there's been a lot written about the two thousand twenty one IPO class.
how they came public in a zero interest rate environment and
so many of these companies actually
we're gonna have a tough time getting to profitability and as interest rates went up in twenty two, I think
Correctly.
A lot of people said
Actually they just throw them all out.
The average loss making company in two thousand twenty two.
in the Russell two thousand growth went down over seventy percent.
Our view was
Makes sense. The market's probably right.
But
Not all these can't adapt.
U not all these don't have businesses that are good enough.
To make real economic returns.
Our view is not all these companies
Didn't have the discipline and the
Organizational fortitude to transition.
And become
successful companies in a world that actually required profitability.
Based on the change of interest rates.
Dolingo is an example of a company
That we actually bought more of the twenty two.
And there's an example of an early stage growth company that we dollar costs average down.
I think we're advantaged in because if you're rule based in what you do or you have a
one or three month time frame.
You just can't own Duolingo. You can't own more colliers.
You said people and change.
We'll talk more about both, but starting with change, we're in the midst of
Probably the biggest technology shift or change, maybe that any of us will ever see. You've invested and lived through several others, internet, mobile, cloud.
Can you put this one?
in frame of reference with the other ones that you've lived through.
And you mentioned so many times studying the past and studying history and seeing patterns.
What patterns do you think might apply this time and what
Patterns do you need to throw out?
And reunderwrite from first principles here.
So I started writing about AI in our shareholder letters in twenty two.
You know, and at the time I said
Having seen internet, cloud, and mobile
This is gonna be at least as powerful as internet.
And I said, We're gonna go approach this with humility.
Go spend time with the people who are closest to it.
And constantly be learning.
And then I also said durable's not a thematic investing firm or a compounding investing firm. So just because we think something's gonna be big doesn't mean our investment meetings aren't gonna be AI is gonna be big. Let's go buy AI companies. It's gonna be
Let's really understand change and then understand how the companies that we invest in.
Are gonna benefit from it or
Become better by it or at least
Not get disrupted.
I personally
I'll lay out in a second.
probably is more impactful.
than the internet was.
It's not only gonna affect
every technology company which you see in the markets, but it's also
gonna impact in this case, I think almost every
Company.
That needs white collar employee.
an IP employee to drive their work.
So
Let me let me start with the second one first, because I think less people have talked about that one.
As a student of business
I think
That by the end of the two thousand tens, everyone knew that if you were a product based business.
You needed to understand your China cost.
It was on the cover of every business magazine and then every popular magazine.
In the tens. And
All that meant.

In a global supply chain.
If there was a part of the world with huge scale and resources like China and the Far East.
That could make product.
Substantially cheaper.
When you landed it.
about your factory or to the consumer.
You had to understand it, and if you didn't leverage it yourself.
You were gonna go out of business.
That was the first derivative. The second derivative is actually there's a lot of businesses that are
Spread businesses.
You look at a lot of distribution businesses as an example.
If you distribute
Yeah. Talk about a great business like
H V A C
The industry tends to put a spread.
on the raw material.
If your H VAC unit basically inflates at three to five percent, that's good.
And if your HVAC deflates at three to five percent, that's bad.
And so if you were spread business on top of it, that was problematic.
Every company that was product based or derivative product based had to understand.
China costs.
I think the same thing applies to AI.
But I think it's not product based this time.
It's my P base. So let's go back to Max as an example.
A firm most people would think about
And correctly so.
As
The fintech company that empowers people
to get access to credit in a safe way and actually pretty compliant friendly way with no tricks and
He's doing even more than that now.
But at the end of the day, because he is regulated.
He has a lot of
Legal cost.
in the company.
He's got
Hundreds of thousands of contracts with merchants.
He's got to monitor his partners on how they communicate credit.
And that just requires a lot of people.
If you talk to him

He's got great
Believe.
Yeah.
A firm
Can grow at the rates it's growing at.
For a reasonable period of time.
In addition, they can do it without adding headcount.
And the reason for that, obviously he's gonna go
Lean out a lot of processes.
That were not possible to go do.
Before AI.
I'll tell you a really funny story with that. So I talked to him one day after he reports earnings.
And he explains to me, you're always asking me about how I'm using AI to become more efficient. I feel like I was late to the curb, but I finally figured it out. And so he says
I have this team
that goes around the company and understands processes.
And we start from not a cost standpoint.
But we start from a
Leaning out standpoint.
And I think um
making real progress there, and that's why I'm able to make this public pronouncement.
He's like, Isn't this great?
I say to Max.
Why don't you come

And let's go see Mitch Rails.
Because
Danaher.
Who he and his brother started.
And he's chairman of
has been doing this for forty years. It's called DBS.
And they basically brought
Kaisan.
Back to the US.
And they've started they're obviously more of a healthcare company now.
By going into factories.
Putting processes up in whiteboards.
Studying how they could lean them out.
leading them out and coming back in a month later to make sure
Because change is hard that the change is held. And then they basically built a whole business system
Which is basically
Not only help Bill Danner, but
There's over a dozen Fortune five hundred CEOs.
United States who started their jobs at Danaher, including the guy who just
have turnaround GE. So since you're so excited about this, let's actually go to the Godfather in the United States.
The reason I say that is
This is just so
profound, it's even hard to get your head around.
Mitch would say for forty years
Because at China
We've been able to really lean out.
Product based.
businesses, working capital
But
In many ways I feel like we're just getting started.
On
Processes
that are done by humans.
The second example that I'll talk about and I'm talking about things that
Haven't been talked about as much on the show.
When I first
really understood what was going on in the internet.
I ran a global TMG fund and my largest investment was Amazon.
We invested in that one. It was like a ten billion dollar company. So I used to go to Seattle
Twice a year.
So interestingly the things you remember because
It was far from Baltimore. No one would come with me.
And it was a small company and people thought I understood it. And I used to go
I've launched twice a year with Jet Pizos.
At the time.
I work for the firm that was his largest
outside shareholder and
It was obviously
My research position for the firm.
I learned so many things from those meetings, but one of the things I learned is the very best businesses
That leverage technology
leverage it in a way where they
Use it to lower costs.
And drive revenue.
That result
In them gaining thirty percent or more.
Incremental market share in their end market.
And then they take
That unity economic
advantage.
And they reinvest it in something.
That is persistent.
Even if their competition were to wake up tomorrow.
And do the exact same thing.
With people just as good as they are.
And to me
That's one of the definitions a durable of a
competitive advantage is if your competitor
does a competitive mode attack doing the exact same thing with people as well or
Doesn't matter. And as we all have come to understand with Amazon
They took that three to five percent cost advantage.
of getting that box to you and their ability to put more than one item in the box.
And they use that economic advantage to then go build
fulfillment centers that are physical.
To reinvest.
Into capital
and infrastructure that allowed them to go down that three to five percent cost curve for twenty years.
As I said earlier in the show, they woke up.
And the only people who could play their game.
When eventually everyone realized what they were doing.
Were the people who still had the scale and the customer relationships and the trust.
A Walmart and Costco. And then eventually when they figured out all three of them were great. Now the problem is the rest of retail was not so good.
That's what we think about here.
So if I say it back to you
We've seen through Mitch.
And others like him.
This forty year benefit of Kaizen brought to physical product world.
And that AI represents a sort of kick off.
of Kaizen to human work world.
And that that is gonna have lots of stories like the Amazon story you just said.
where someone gets on one of these curves early and they can't be caught.
And so you're trying, I'm sure, to find who those people might be.
So we're trying to do two things. We're trying to find the people who that might be.
And then we're trying to make sure we don't a company.
That based on last generation competitive risk.
was a great company and correctly we thought was competitively advantaged and had a good operating culture.
was led by high quality people who thought like owners.
But because discontinuous change
Change the world.
they weren't able to adapt. Now ideally what we go do is we go find
Those
Already advanced companies.
And then they leverage this to go from good to great.
If you think about all the people
That have navigated change as CEOs the best that you've worked with. I'm an investor with Dave Duffield and his latest company. And so he comes to mind because now he's tackling AI.
And the guy is incredible.
If you think about whether it's Mitch or Jeff or Dave or people like this that you've seen operate.
What methods
have impressed you the most of how they themselves adapt.
First their own mentality and then their teams to these fast changing circumstances. And this is a question for everyone out there that's running businesses that
It's facing the same
change that's at risk and an opportunity at the same time.
Let's go pick on Louise.
We talked about Luis earlier.
Dolingo has
A lot of opportunity with AI and a lot of risk.
And the stock, depending on the day, reflects it.
when open AI demos
How you can use open AI to basically do translation.
lot of times the stock goes down, or when Apple shows you how
AirPods.
Can be used to
In the physical.
Stuck goes down.
Actually I don't think the marker's wrong. No, it's probably wrong the magnitude, but I think what the market is saying is
There's a risk. There's a risk here.
So
That's probably in our portfolio one of the higher risk names, but what do we look for when Luis or Max or Dave Duffields? I think the first thing we look about is
A business that
Already.
is operating well.
Because
If you're not operating well.
When you have to deal with change.
You're
Not gonna be able to
Do two things at once. You can't
do a turnaround and do well. I think the second thing
We would say is a business.
That already was winning.
And it's
First and market.
All the definitions we would have about winning.
Substantially gaining market share.
driving real economic profit.
That allows it to reinvest.
In this next S curve.
And also
The other thing we really care about is
People.
We really
Stress resiliency.
Adorable?

Like so much investing in Act Two Managers.
We can go study their resiliency.
When you're an investor in Max
And you saw how resilient he was in slide.
And now you
understand how he's gotta be resilient.
to implement AI to lean out his costs and drive his revenue before his competition does. You're like
We've seen him.
under stress before.
I think you're looking for people who have a perspective.
Can execute, but also are humble.
Because
We at Dirable write down our views.
On AI
every six months and we update them and as we've gotten more into this
Period of change.
Probably were less wrong.
Our perspective is more informed, you would say, than it was.
As we change it every six months, but
We're s we're learning.
We have the benefit of having a job
That allows us to spend our time reading and thinking and talking to smart people. So even if these are really talented people.
Most likely they don't have as much time to go do it as we do. And we have to be very humble in our approach. So they have to have a perspective, figure out how to go do this.

have to be humble and constantly learning. And the last thing I think practically we have to think about as investors is back to the memo.
If you have a high risk situation
Which we would all agree Dual Lingo is
And you're really close to that.
part of the change.
Then you need to be compensated for the risk.
And so what we would tell people on Duolingo is yeah.
Like because of those risk, the discount rate has gone up.
But
Probably commensurate.
The opportunity has also gone up. We can articulate it.
Luis has talked about being twenty X Faxter.
And generating content.
We've already seen it.
He's publicly said
He developed chess.
Which is
Do incredibly well.
And my kids really love that product. I mean, they're addicted to it.
First it was two people for six months, and then he added another four people and he developed a product in nine months. That's the best product he's ever done. And if you ever talk to him, how long would it have taken the past? He's like, I don't know. I probably need
four to six X as many people and it would have taken them
Four times as long. And so you could say a startup could do that, but he's doing it. He's doing it on his platform.
That product is well over a million.
DAUs and it's growing
At astronomical rates.
And it's a great underserved end market. It could be
A huge business.
And so yes, the discount rate has gone up.
But this company was purpose built for AI. You actually have a
person who studied AI and taught it at a Carnegie Mellon and
has an organization of A players who are agile in his company.
And is humble and constantly learning.
a proof point on how it's making him faster.
than other people, it's driving real value.
And
Obviously that means
the probability of it going from a point solution or couple products to a suite is higher.
And so that's what we look for.
Can I stack a couple of the things that you said that interest me the most until a bigger question? If I take
physical kaizen and digital kaizen, just to shrink the concepts down.
If those were to have a kid, it might be robotics. And so I'm really curious.
how you approach
The potential
With an unknown timeline.
That
We might get a second wave of the physical labor economy is way bigger than the digital labor economy.
That we may get a second application of
Kaizen over the next forty years. The first one we saw from Mitch and Company. How do you think about that?
opportunity and potential change.
It's something we have really thought hard about.
Here's what we have tried to do.
First of all
We have tried to get smart.
By meeting with the entrepreneurs.
And talking to the companies
that we're involved in that we know.
That are leading.
This area just to try to learn.
We only recently
Did this with robotics. So if we started writing down our conclusions.
And then being humble that it could change every six months.
In AI.
In what you would say is more data businesses or
Did all business.
We only started doing this
literally in the last month where we documenting it for the first time.
I'm gonna do something that I don't love to do, which I know
Our views here are very early and probably
Deeply wrong.
But I'll I'll give you our initial conclusions, which is
In certain use cases it's pretty clear.
That
Already
The cost is lower.
than the equivalent analog process or
Physical labor process.
And yet
As we all know, this is the earliest and worst robotics gonna be.
And because machines are iterating with machines and it's being powered by general purpose models, not by specific purpose models.
This is riding a curve that is definitely geometric.
And so back to this mental model of Amazon that drives so much of what we think about durability.
What Amazon was able to do is ride
a cost curve where they were deflating
The cost
Of
Sending a box.
Oh at three to five percent.
A year for twenty straight years.
And the people who did not
leverage the right distribution infrastructure.
The right investment in robotics at that time. They bought Kiva.
the right ML models.
when they came into play about how to basically plan inventory and
deal with suppliers actually we're probably at a curve that
Probably inflated at three to five percent, but at best we're flat.
And that differential in a low margin business
You compound it over five years, honestly, that's all you need to know.
And
That's I think
what we're starting to get our heads around at durable, which is
If
In many areas robotics is
At parity.
Now, there's a lot of data that says it's lower cost in certain cases.
And the use cases are about to go up.
And the cost on the existing use cases probably don't go down at three to five percent at this point in the curve because of the scale brought in.
the human capital brought in, the IP bought on, and the fact that you're gonna be able to use these general purpose LLMs.
to power it, it probably goes down at more like fifteen to twenty percent, but maybe it's more law.
And it goes down even faster.
Well
Then we wake up in five years and the people who put themselves on one cost curve.
If they compete against the people who put themselves on the other cost curve.
Those could be power law businesses.
What we have thought really hard about is
Who's gonna go benefit from this curve?
Where there are competition, even if they woke up tomorrow.
Even if they put the same amount of money into this problem.
Even if they could hire the same quality people, which is unlikely.
Because they have not invested.
In
The distribution infrastructure
Or the
technological infrastructure to
compete on this curve.
At minimum.
It's probably two to three years behind.
And every day
That they wait, they're probably getting further behind.
It's apparent to everyone adorable. Why
Our understanding of change has been great.
for investments and
Duolingo and a firm and
Shopify.
But
Actually I think it's about to be
Really advantaged.
our understanding of people and change as we go invest in the
Other seventy percent of the economy.
If you think about all the businesses you backed, do you have a favorite kind
of competitive advantage of source of competitive advantage so much about
Your whole process is. Does it have it already? Is it on its trajectory to get there?
There's different kinds.
Scale, network effects, et cetera.
Are there favorites that you find yourself returning to as the best sources of long term competitive advantage?
I really love
Two and they're actually quite different.
I love physical
Real estate.
I love Amazon or
Were investors in Carvana, love their reconditioning, centers because at the end of the day
You can't spin those things up.
You can't spin those things up.
These things that are super messy.
You gotta acquire the land, you gotta put it in the right place, you gotta build the right network, then you gotta go stand it up.
With the right CapEx and the right systems, and then you have to have the right operating culture and
This is really, really hard.
If you put your
Real estate in the wrong place, then your cost of transport's more expensive and
This culture you gotta go build there is super hard.
So I deeply love.
These physical world motes.
That exists.
And really our portfolio has a lot of them in one way or the other. And that's why when you and I talked about
Robotics.
My mind went to distribution.

Where can robotics basically take already advantaged businesses and make them more advantaged?
The other thing I really believe
It's these soft things.
Yeah.
Incredibly hard.
I think about
the example of Dan or her so much because
What Mitch and Steve have done.
Stunningly hard to imagine.
That for nearly forty years you've compounded wealth.
At twenty percent.
In something that didn't have deep physical modes or didn't have data network effects.
Like a MetaMite.
Or Google Have or the people who believe deeply in open AI.
Those data network effects
Are amazing.
But
Uh
One's where
You're really sharp on human capital.
You're really sharp.
on what talent really means not the sticker of talent.
You're really sharp on your operating excellence.
The culture of it.
The constant improvement of it, the system behind it.
Like Kazan.
And then
You allocate capital
against your businesses to really hold them accountable.
Think it's amazing.
In our portfolio
Even though
If I were to walk you through the businesses that first service is in, which
Jay Hennex chairman of
And
What call yours has were he's CEO of he's
Largest shareholder both.
None of them actually have these
Super sharp.
Competitive advantage. But yet if you really have studied J
And you truly understand.
His human capital culture.
And how we
basically attracts and hold people accountable and
His ability to basically decentralize
Incentive so
People are aligned in businesses, everything from
Residential
Management of condos.
To
Roofing.
And restoration.
And then how
They allocate capital, how they sell things that don't have a path to be great.
and how they buy businesses, but they do it in a way
where it actually aligns incentives and consummate with them.
It's just super impressive.
The other thing is if we're gonna invest in small companies
Those companies by the time they form them tend to be pretty large.
We have to be pretty sharp.
at really understanding other competitive advantages.
You mentioned memo a few times, the memos you write internally. What did you learn makes for a fantastic
structure of an investment memo. What works for you.
We're writing culture.
Because at the end of the day
Human beings are
Innately human.
When we
are involved in something
It's very hard to have
that executive distance that you need to do to really
Hold
Your self accountable to what you thought.
And
actually hold the companies accountable.
Two
what you would like them to do.
Especially since we really do know the people we invest in.
And we invest in really high quality, interesting people, and we're deeply rooting for everyone to succeed.
Unlike a venture capital firm or private investing firm.
We have to be able to understand when things aren't working out.
So we could sell them.
But just as importantly
If we're gonna go invest in
Something that has real risk.
by dualingo. We have to understand when things
Like dueling or really inflecting.
And maybe we see it in other people who don't do.
So we can go buy more of it.
So we gotta be able to do both.
When we write an investment memo.
It's in service of our
Invest in philosophy.
Making sure we've done the work and we can clearly articulate
Why is a company competitively advantaged, or will it be? What would it have to do?
Why is this operating culture excellent?
Or why does it have the seeds of an excellent operating culture?
And why does this leader think like an owner?
Where they can basically make the business better.
Which we define as gaining market share.
Recycle?
And we think that they can
Allocate internal and external capital.
Such to both drive
More durable growth.
And also make their asset base more valuable over time.
That's our investment memo.
But then just as importantly
Through both.
Modeling.
But clearly spelling out
What we're tracking.
We have to then be able to when we do our quarterly
What are really our operating reviews at Durable, where we go through the entire portfolio.
With the entire investment team on
Every single investment.
We have to look how actually the companies are doing against
What we thought they would do. And then every single investment at durable.
If we own for three years, we actually do a three year look back.
On what we underwrote?
And what it did is that one
Like so many things in your career you wish
You would have known earlier.
The great thing about investing
And the great investors to me
Actually are better at seventy than they are at
Fifty and
Hopefully.
I'm in my fifties. I'm better than I was when I did this. This at thirty.
And you just learn.
You understand
Patterns better.
Hopefully you remain humble so you don't actually get too stuck in your ways. You surround yourself with smarter, better people, both internally and externally, but
One of them is you do better processes. And one of the processes that we only started two years ago.
What
We always did quarterly
KPIs or operating reviews, but we
Didn't go back.
And look at
that investment that we own for three years and just say
And when we do them, they're so simple. We say, Three years ago we thought they would do X.
And now they did why?
Now of course the conversation is
Where was it different and why?
But actually the preparation for that meeting.
Yes.
At least on the written side so simple.
It's two sides.
But then of course.
We're all human.
And even though we try to hold each other accountable, if you get together every quarter and something deviates
A little bit.
You tend to excuse it, of course, if it deviates a little bit.
for twelve straight quarters actually staring you in the face.
That's why I'm not going to be able to
We're such a big believer in investment memos.
I think in two thousand twenty two you went and did a tour talking to CEOs about the state of the market and
operating principles and things like this.
I'm curious to to hear you reflect on that tour, but
Even more interested to hear if you were to
do a tour of every CEO in the
portfolio today, and maybe you're doing this actively.
what the message would be today that's different than the message was in two thousand twenty two.
I felt in two thousand twenty two we truly had expertise to add to the conversation.
And that was
We
А та хаєс лево
And by the way, I don't say we versus us, we all.
Every CEO I talk to
Every
Investor I talk to.
And even durable, who is a fundamental investment firm.
That really values stuff on cash flow never felt money was gonna be free forever.
had made simplifying assumptions based on
Almoce decade.
Of free money.
If
Anyone who has been taught
How to value
companies understands at the end of the day all companies have to be valued
on free cash flow and organic growth.
At the time we got to a point where thirty percent
Of all treasury bills in the world.
actually had negative
Yields.
And relative to inflation, you were being paid to borrow.
Which basically means
It was logical for venture capitalists to value companies and not care about profitability.
At all.
It was logical for companies in the public markets to buy low quality businesses.
that could never own their cost of capital, but use cheap debt to go do it.
It was logical why if you sat on companies boards
You really wouldn't ask hard questions.
about trading off growth, profitability, and innovation.
Because you didn't have to.
And if you go back to the conversation we had when we eventually studied compounding.
We went back and we ran that study.

In the world of
positive real rates, which is
The entire history of the US equity market except for that
Short period of time.
Which I don't know if we're I will see again.
There's on average about forty compounders and during the period of time of free money.
There was a hundred and twenty.
So it was three times easier.
To do it. And then we asked ourselves the simple question, what patterns
Only exist.
When money's free.
So not surprisingly
Everyone would imagine the pattern.
Of driving growth and profitability is perennial.
And it actually works.
Regardless whether money is free or not.
The other thing that was really interesting, which was really important to us and gave us confidence to go buy more of the dual ego's in twenty two.
when we do this work, is that if you're a small company
You don't have to be gap profitable.
And you don't even have to have an ROI that is above your cost of capital.
But you do have to show progress.
in your path towards it.
And then
What doesn't work?
Well, a company that doesn't earn
Financial returns and is showing no progress.
And the other one that doesn't work, which we don't do a lot of
was go buy a low quality return business at a high price, but leverage really cheap debt.
So I felt strongly
Because we had
Seen cycles before.
And because
We truly had expertise.
And also because we're really are companies that we invest in a long term partner.
We wanna invest in companies that are private and still own them when they're public. We wanna help them with transition. I thought we had
Expertise and a perspective.
That many people had not gotten before. And so to reference
What this meant was we had these conversations.
With
A number of our companies
that were in this situation. And so we had some version of this conversation with them on a toast.
With Louisa Dullingo.
With Max.
at a firm.
And
All of them were a little different.
As an example with Luis
I had dinner with him.
And the CFO and his CFO is very talented, just like he is.
And I just presented them the data.
Knowing them.
I knew they would have a lot of questions on it and they asked a lot of good questions.
The other thing I said to them is look, Luis, when we invest in your company
One of the things I always ask people is we'll articulate what we're looking for in you.
But what are you looking for in us? And one of the things he said is I'm gonna be a first time CEO.
And my sense is you're gonna see things based on your experience that may be
I don't see because
This is new to me. And I said the reason I wanted to have dinner with you is not because I have all the answers, but I have a strong view.
That you're dominant in what you do.
AI is amazing for you.
Yeah, I was just getting started.
You have a very unique
Human capital culture.
But
If you're gonna communicate to people
this strength in the market. It doesn't mean you need to get to your long term margin targets.
at thirty percent, but you have to show progress.
Towards it.
With other companies.
We restrict the stock.
We spent more time with um
We help them understand what this means.
We even helped a bunch of them.
think about how to communicate what they were going to do in this path of this transition to their investors.
That to me is different than where we are in two thousand twenty five because I felt
We had real expertise there.
And something
To add to the conversation that a lot of these executives
Hadn't seen before.
as operators and frankly many of their board members
Had come of age.
In a period of time where money was free.
And frankly probably hadn't been in involved as many durable companies as we had been involved in.
So the answer is I think probably we're more
Back to
Morning.
And normal interaction than we are.
having a perspective that we're dying to explain to people.
I heard that in their early T Row days that you were studying media and you studied twenty or thirty years worth of media history and condensed it down to a very small three or four page report. Can you bring us back to that study and what you learned
About media.
I'm obviously interested in media.
I'm curious what you learned then about media and how that has evolved ever since.
I tend to want to do this. I always believe that if you really understand something
You can make it super concise. And where we are with robotics and
Less so with AI.
Our internal memos are probably too long.
Because frankly, there's too much unknown.
And so we can't be concise.
I was very lucky in media.
And it's something we try to do at durable with people because I was an outsider.
to the media industry, I think I brought fresh perspective to it.
When I was assigned
To be a media analyst.
This is so hard to believe, but
The companies that were viewed as
the darlings of balancing durability in terms of competitive modes and having
Strong
Growth.
were companies like
Comcast.
Time Warner.
Disney.
Buy a car.
I did a bunch of
work on the companies individually. And then I started to really think hard about it.
And I started to realize that
The best businesses inside of all of them.
Had been
The cable networks.
If you read about media back then.
The entrepreneurs that
became the most famous
Were the ones that
Launch cable networks. John Hendricks, Ted Turner.
Bob Johnson.
By the way, John Malone
Basically backed almost all these people, put the most investment. So John Malone was at the center of all this.
For twenty years, cable networks grew twenty percent with twenty
ROEs. So they were compounders. And that's how you had all these entrepreneurs
That had become billionaires. And that's how you had
Media companies that really fought.
over a balance of content and distribution so they could all get
their fair share of these economics.
And then when you went and you looked at
A bunch of the other industry it was like an average R O
A business. And that was what
The whole industry was.
But the whole thing, if you really thought about it at a systematic level, was predicated on a closed system.
Just so obvious today.
Well the closed system was predicated on
I'm only gonna show you.
the product or the TV show that you most want to watch.
When I can make the most money when you want to consume it. Even in a world of linear TV.
Even though the most people watched
T B on Sunday night.
the worst shows showed up on Sunday night.
Because people had spent their money on the weekend and they were going back to work and they weren't gonna go shopping and go out. And the best shows
Showed up on Thursday night.
Friends, the Cosby Show.
And in the movie business, obviously there was windowing.
I was like, Okay, so the best business is cable networks. That's why we have this fight over content distribution.
And then it's all predicated on this closed system.
What I
Believed at the time.
Which obviously proved to be true.
Was that this TMT bubble?
That had burned so many investors.
And
No one wanted to think anything good could come out of.
At the time.
It laid the seeds of the end of the durability of that industry.
Because
Even though people lost so much money on telecom infrastructure and
Laying the seeds of
Broadband.
What broadband was enabling eventually was things like YouTube and Netflix.
Which would break down this whole company.
This close system.
That was run like an oligarch boy.
That's what my memoir.
Summarized.
What
The riskiest thing is to own the durable asset.
And the safest thing to do is go by the next standard.
I mean, lots of people will say investing's an apprenticeship business, and you yourself have said the best investors are better at seventy than at fifty than at thirty.
I would love to hear a lot about
What you've learned about selecting
Great people.
When you don't know them as well, and then making them better.
as part of durable over time. Cause that's going to determine how well you do as a business. So it's a critical component. How do you do it?
One of the major goals I had when we started Durable was to actually build an investment firm.
That would be better the day
I left.
And the initial partners left.
Then
When we were the best
While we were there.
So I thought really hard about that.
I went on a listening tour and I went to see
firms that had a period of greatness.
And some of them.
Didn't get it done.
And then some of them actually accomplish that goal.
I learned a lot in that.
Part of it is how we have structured
durable incentives and the whole ethos we have internally.
But
It was really a reinforcement of
This go about
People.
You spent time with our team.
When you look at the senior people at durable
A nook.
Day one of my partners
Incredibly talented woman.
She started working with me at twenty six.
She had never worked in the investment business for uh she had finished her
Masters
at Oxford and she was working at a nonprofit.
Core Shall he started working with me.
Either twenty one or twenty two right out of
William and
Mary
And then
We have a host of other people who
Came out of the year.
Liberal arts.
Not rigorous.
I had to work at a bank and an investment firm or
Anytime I interview with people, I have to tell people since I was five.
It's basically what you have to do nowadays. You gotta tell people that ever since the age of five, I wanted to do exactly what you're doing.
But all jokes aside
We really believe
That you have to be an expert in what you do.
develop into it. There's a whole
Matrix we have about the development of security analysis. Excellent. And how is the journey?
We do our reviews based on it.
I tell people
Look.
On the sheet.
This is a journey.
I'm probably the most experienced
security analyst at the firm. And I still have a journey to go here. I gotta get better.
And then we also believe at the same time.
That the youngest person in the room
on our investment team actually can have the most valuable perspective.
So we have an investment team of twelve people.
And
In my career, a lot of times the best insight comes from the most junior person
Who's looking at something with a fresh set of eyes.
early in a Nook's career, when I was looking at consumer companies, she really helped
understand a millennial mindset and then we did a lot of work against it. And I think that led to some great investments both in the public private markets.
We were private investors in
DoorDash.
Worby Parker, some of the leading companies of the day.
Anyway, what do we look for?
We look for
Deep intellectual curiosity.
If you don't wanna constantly learn
That's just not
Who we are.
We want people who really want to learn.
We want people who
Compete.
But when I compete as a team sport.
We have a lot of athlete.
We have a lot of people who work their way through school.
Financially.
We want people who
Our resilient ourselves.
All of us.
Have periods of time where we get things wrong.
And then if you're gonna pass our style of investing in a world where
The market has such volatility, even on good companies like Colliers.
You have to live with the fact that
Sometimes your performance isn't gonna be good.
Sometimes you gotta be resilient and you realize you're right. You gotta
Believe in it and sometimes you gotta realize you're wrong.
All this is underlined obviously
By a level of desire
To be excellent at what you do, but make your colleagues better.
This is unique to durable.
And we're just different here.
So when people think about being excellent and durable
They have to think about being excellent in what they do.
And they have to be excellent at making their colleagues better.
It's gotta be both.
We're an and culture.
Then obviously we talked about
why what we do is different. Our ability to invest in Duolingo as a private company and still own it today, our ability to invest in Figma
when it's a thirty million dollar company and the same person balls a day, we have to have people
Who are
Both good at analyzing private companies that are early stage growth companies, and then understand scale durable growth companies and understand the subtleties.
And the nuances of
private markets and the relationships and the way governance work, but also understand truly being a minority investor in the public markets.
That second piece, which is you're expected to make your colleagues better. How does that actually work in practice? What do people literally do? Is it squishy no when you see it type stuff, or is it more structured than that?
Look, I'll give you the measurement and then I'll give you how it really works.
When we do three sixty reviews at Durable.
We actually ask.
Everyone to give feedback.
on what their colleagues did.
To make it better.
is important and we're a really pleasant culture and we have high quality people, but it's not
A nook help me.
This year and she's a nice person.
It's
If you're following DoorDash, it's at a nook help me understand DoorDash.
Because of her knowledge about agenda commerce.
On Shopify.
really helped me or when we did an investment review.
As an investment team, she took a special interest and she followed up with me, or she went to a meeting that was important and gave
Me her perspective.
We asked people to basically point to specific
Investments.
That they have.
The second thing we do
Is
I'm one of these people who believe
We want to have great people.
We have to attract great people.
We have to allow great people to become great.
And provide the environment.
But I also believe we have to have
The right amount of process.
That enables
true excellence and creativity.
We
I think
From an hour perspective, probably do less.
Or the same amount as other investment firms, but I think the impact is really high.
I'll give you a simple example. We do the same investment meeting everyone else does on Mondays, but we do an additional meeting where we go through
ideas that we're looking at and we gate them together.
We're gonna go spend more time on an investment.
Everyone's in the room when we decide to go do it.
So people start to learn
What is it that's a good use of their time? What's not a good use of a time. And if it is, if we're gonna go look at something
And I gotta go answer these couple of questions in the next stage of
Investment due diligence. Is there a colleague here who can help me do it?
We get together on Fridays.
And by the way, we do it in the office. We have lunch as an investment team and we talk about insights.
You don't prepare for this meeting, but this would be hey
I had an interesting conversation with a CEO or maybe this week, I'm sure we'll talk about it. I listened to
Open AI Dev Day.
And this is what I thought was interesting. Or maybe
I thought about this. Does anyone think about this? So we're trying to look for lateral insights to learn for each other and then
For sure. We do investment reviews where we do deep dive on stocks.
Multiple people look at this. I learned this from
You had Kelly on the firm Lone Pine, really. I I learned that from Steve.
I'm sure Lone Pine still does it.
We do
KPIs we call KPIs operator views where we go through the whole portfolio.
And every colleague reports to
Everyone else how they did.
And we do this not to basically be a session, Well, you're great or I got it wrong. It's more like
Here's clinically what happened and everyone can
Learn from it, but also when there are a lens because it's not
Great, bad. A lot of times it's subtle.
This thing was good, this thing was mixed.
People can have their lens.
And then we get together.
twice a year and we have off sites.
You can probably tell we have a lot of fun at Durable, but our
Off sights.
Don't look like other people's offsite. We used to do team building activities. Now you do KPI reviews. And now we don't do them.
Why don't we do them?
Because actually we're a group of people who likes learning from each other.
And like sharing insights.
And the activity we're gonna get together for three days is gonna be we're gonna basically
Do look back, we're gonna look at reviews, we're gonna go study an industry, we're gonna go talk to a CEO, and then we're gonna all learn from something such that we can all make each other better.
It must be very powerful when you're making an initial projection on a KPI or something to know that in the
Six months and year and two years and three years hence.
It's gonna be looked back upon.
You probably sharpen your pencil a little bit.
You do, but I think what's special about our culture, and I always tell this to people before they join
We tend to hire young people and develop them, but
If you've been anywhere else, you don't believe this.
People think
When we get together and we do KPIs or do three year look back.
Or we'll do a session sometimes where we'll look at reinitiations in the portfolio, things we sold before and then we
bought back and a lot of times if we did that, why'd we sell it in the first place? Maybe we got it wrong.
We don't do any of this in the spirit of
You made a mistake.
This is an environment where
You should critique yourself negatively. It's like, no, we should be intellectually honest, just like we want our executives to be. We want to be clinical in what we did.
But then we want to do it in the spirit.
To try to learn from it and get better.
Or put our data out there so we can learn from our colleagues who might have a
Valuable perspective to make us better.
And if we can take the attitude of intellectual honest self improvement
Humility.
That like that makes us better.
When you were doing your tour to learn about
the franchises that
were better at the end of the founders run and those that didn't make it. What did you learn?
I won't mention the names of those who didn't make it.
Because
The thing about
Is a little bit like
our investment memos when we invest in great people who are trying to build companies.
A lot of them do great things and they just don't make it.
In success there's a lot of good fortune.
I think what I learned was if you don't architect the system.
On day one.
For success.
then you end up with a lot of conflicts.
That sometimes undermine what you could have accomplished.
We try really, really hard a durable.
Not to make compromises.
If we go hire someone on the investment team
We want to go hire someone.
Who one day could be a senior partner.
Or one day go.
Basically manage.
The capital base.
Or if we were to ever launch a new product, go launch that product. We're looking for people
Who can be as good as
I am or Nook is or Corey's or Catherine. We want great people.
For sure.
You usually start
In our parlance as an associate.
You're gonna start supporting someone and you're truly gonna be
An apprentice in their way. And then even when you become an analyst the first three years.
You're probably doing real analytical work, but probably you're early.
In your journey.
But we don't want to hire you. We don't want to promote you.
Unless we think you can
Actually one day lead the investment organization and drive the firm.
And the reason
I feel that's so important.
Is
We just don't have that many
Slots. Just like the companies. If you don't believe it can get better, you don't do it.
Right.
That's hard.
The other thing that's hard
about it is
When I went and looked at these firms
I do think there is a level of growth
You have to pursue.
Durables.
A performance driven organization.
We break every tie.
In pursuit of investment excellence.
We haven't really
you know, market ourselves or try to get new investments.
Since two thousand twenty two.
And why is that? Well
I think we're performing really, really well, but I just believe
Markets are
Pretty
Full.
And we're a long only firm. We're not gonna short.
We're not gonna really try to tie markets, but
If you're gonna be our investor over time and we're gonna do well by you, we should probably take more of your capital.
When on balance the entry point is lower than higher.
We're gonna break everything.
We're gonna really understand
If we're gonna do less
What it means to be able on the public side.
To be able to own meaningful positions and companies.
To really be able to trade
If there's quarter oil volatility such that we can
Buy more when things are attractive.
Everything that if we're only gonna do
Maybe five. I think since two thousand twenty three, we've done fourteen new private investments. So we've back to doing five a year. If we're only gonna go do five.
And we're gonna start relatively small. A lot of times we start by investing ten or twenty million dollars.
It's gonna make an impact.
for our investors, right? We gotta be a performance driven organization and for our entrepreneurs.
We gotta be able to do exactly
What we've done for Luis.
We have to be able to do for Dillon and what I think we're doing for Dylan. We have to be able to support Canva and Bending Spoons and the next generation of those.
So
We gotta go do that.
With that said.
I do believe that
These investment firms that have
Persistent.
Actually have done a good job.
Of at some point in time.
While the initial team was at its
high performance and so had plenty of runway.
started to prove that other people could
participate in the investing process.
That's something that we started to do internally with with how we approach the private markets.
We gotta over time flush that out.
What is your pitch to all the great and emerging private companies out there that they should
soon or eventually be publicly traded.
This is controversial.
This is why
I love what we do.
Because first of all
The world keeps on adapting.
And when I
first started investing in private companies, it was highly controversial.
Then any late stage private company would be valued at above a billion dollars. We talked about workday earlier.
When we led the investment round it worked at two billion dollars.
Everyone thought we were crazy. We invested in Twitter.
At a billion dollars.
I was
Severely publicly critiqued.
Now people look back at that and it's just like wow, the idea that you would have a billion dollar private company, that's not even newsworthy anymore.
What has changed obviously in the private markets is that you can be a growth company
That loses money.
And that
Continues
Or be marginally profitable and not only be valued at a billion dollars, you can be valued at a hundred billion dollars.
And there's even a view, and I think it's thoughtful, I'm not criticizing it. There's even a view that you can be an indefinite
Private company.
SpaceX or something like that. Like SpaceX.
Maybe Elon is correct in SpaceX never has to go public.
That's really only happened in the last five years.
Some people correctly point it out.
This might be
An incredible path.
Certain companies.
And by the way, I think there's some truth in it.
In the ideal situation
You're not beholden.
to short cycle performance.
So you can basically
Drive growth.
Innovation and at the right point in time profitability and discipline in your business.
But you can do it on a time frame.
That lines up.
with your individual business or your own competitive reality.
And not have to deal.
with the public markets.
I get it. I actually think it's very thoughtful. Here's the good news about life. We're gonna actually run an experiment. We're gonna actually know the answer.
I'm not saying that's wrong.
Here's what I think.
First of all, I don't think it's for everyone.
But I believe the path
To building
A compounder or even what some people would say a generational company through the public markets.
Is
Prove it.
If you understand how to do it.
Actually very clear.
What you do.
Let's go back to the compounder studies and then I'll give you an example.
For two.
When you look at these compounders that were six X companies in ten years of forty of them.
The average one of them has a period of time
Where the stock goes down fifty percent, and it doesn't go down fifty percent.
Only when the market
It's down twenty.
They go down fifty percent.
when they go through transition. So I'll give you an example for my career.
Netflix.
Started as a DVD mail business.
Two Reed's credit.
He realized that streaming was the future.
And he wanted to tackle this offensively.
Like any transition.
It's a little messy.
First of all, he tried to split the company. He announced I remember, yeah. The he was gonna have Netflix and Flixster.
He had to go back because he violated customer trust and churn spiked.
And then the other thing that happened was
In that period of time.
He was buying Max Docket.
two hundred and eighty dollars and the stock went to seventy dollars. And now I remember this really well.
When I was a Tiro, I I let a pipe.
to recapitalize Netflix. And
Ree's a great entrepreneur for a lot of reasons and I remember calling him on a Saturday
Saying hey, Reed
Look, I could be reading this wrong, but there is scenario here
Where the market's right and you have to raise money.
And he said, Henry, what are you even talking about?
I said, Read.
I'm a huge admirer of what you're doing. I believe in what you're doing. I believe it's offensive.
But I also believe it's a tough financial transition. You gotta go from a variable cost business model.
where the studios rent you DVDs on a usage basis to a fixed cost business model where you gotta write
big checks to people like Discovery and Disney.
to acquire content plus the stuff he hadn't
Launched.
Any original, but you're investing in original programming and if you run the scenario that I'm doing
on the potential subscriber.
Losses in this transition.
You're gonna run out of cash.
Or at least the market's gonna think you're gonna run out of cash and your stock is gonna go down a lot more than seventy dollars.
To Ree's credit, he said, I have not thought about this as much as I should.
Let's talk tomorrow. I'll get the CFO on the phone.
You go through your scenario, we'll go through ours.
And I can learn.
At the end of the day, when he showed it our data, he's like, Look, I don't agree with your scenario on subs.
But yours is not.
out of the realm of reasonable thought process
And he ended up
Raising a pipe.
When I was a T Row in half of it.
And I did that and then
T C V, J Hogue.
Did the other half.
This to me is the classic example.
Of
A market leading company
Embracing a transition.
They obviously ended up winning. We did that pipe.
At four and a half billion dollars, look at the market cap of Netflix today.
Yeah, it was a little messy.
But it worked out well.
So what does the public market do? I think first of all it sent a signal to Netflix.
But actually
You're under a real transition here.
And maybe your assumptions on your financial model.
Are
You need to have a wider fan of scenarios.
Two.
If you work at Netflix.
You could say, Well, you had the pain of seeing your stock goat from two eighty to seventy dollars. By the way
People think that was a great investment. I always point out to people a year later it was in the fifties. So a year later did it look like a great investment.
But
I think what it does
You have to do this properly, you have to rear resilience, you have to have a culture.
But allowed read.
to basically align external and internal investments and actually get his entire senior team
Aligned on what they needed to do, but also realigned on incentives.
So I point out to people
I believe to build a great company you have to balance growth, profitability.
And innovation. I talked earlier about
If you're a growth company, you don't have to trade on a PE, but you have to show that path. Back to the conversation with Dolingo and
Toast and affirm in that transition.
And you're better off doing it sooner rather than later.
And two
If you gotta go realign your internal
Team?
Well actually realigning people to the right mark.
It's actually really helpful.
And the people who want to re up.
Re up.
And the people who do it.
Get handsomely rewarded.
And the people who don't obviously can move on. And I think that's really, really good culturally.
Could I correctly boil this down to the positive value of daily marks?
and the depth of public markets and their investors, that those two things in combination
Or the reason why being public might be valuable relative to the private alternative.
I think I I probably
Because I used the Netflix example when they were full of forum and they were just my company.
I also think that putting
Discipline into a company.
When your corporate culture
has already formed.
I don't want to use the word stasis, but
At a certain scale it's hard to change.
It's not good.
To run a company well.
You have to be in the and business, not the or business.
You have to drive growth measured by market share in the short term.
You have to drive innovation.
Or allocate capital well to position yourself better for the future.
And you have to basically
drive profitability. Partially profitability to invest, but profitability forces you to
drive efficiency and discipline through the organization and make sharp decisions on capital. And what I always tell people about this.
You should think about your CFO's function.
Not as a policeman.
But actually as someone who basically sells standards that forces you to make sharp decisions.
I think people realize this more today than they did a couple years ago. But a lot of times
When you
Poritze
And you focus on what really matters. Agility comes in and come in and you accomplish more.
And when you try to do too much
Essentially investment.
Has no cost.
A lot of times this lays in it's not sharp.
I feel like we've covered so much ground.
I'm curious if there's any other
Ingredient.
Uh
durable story or your story that that we haven't covered that you feel like is essential to understanding you and what you're doing and why you're doing it.
I think we wanna
Have fun.
And we actually root for everyone.
The reason I say this is I'm a huge sports fan.
I love studying sports.
To me, there's two types of competitive greatness.
And they both work.
There's Michael Jordan.
Who was such a fierce competitor.
That essentially if you didn't rise to his level
He drove you out of there.
And it works.
And those bulls
Show up.
With a chip on their shoulder.
Every game.
And it was amazing.
And they were great.
And then there are the people who
Play basketball.
And they say this game is great.
We wanna have fun and we wanna elevate the game.
And we wanna win.
And that people who
Compete with us.
We think they're great.
And we're rooting for them. Now, of course, if we're gonna play against them, we're gonna be competitive on that day and we're gonna win.
But we wanna actually have fun.
We believe everyone can win.
And I think that's durable.
That's really important to me.
When we invest in people, that's the kind of person we want to invest in.
When we do, we're public market investors at our core. If we have to and we did
We because we think it's right for our clients have to go sell a firm.
Which we did because we believe from a risk reward standpoint we have to go do it.
We're gonna go do it.
I would say it's not our money, it's our investors' money. We gotta be fiduciary first.
But when we did that
We want to see Max win.
And we never stop talking to Max.
In fact, I think he would tell you some of the
Things.
In our relationship where he learned from me more than I learned from him was in the period of time where we didn't own his stock.
Because we don't think about it as a stock. We think about it as we want to see Max win.
And even the investors
I don't think about us competing against investors. I mean, there's so many investors who I respect.
And honestly, if they're doing their craft well.
And they're high quality people, we want to see them win.
That is so core.
to the way we deal with people and the way we
Hold ourselves accountable.
Is that the Steph Curry Wizards at their peak approach to contrast against the Jordan approach or something like that? That's exactly how I think about the Warriors.
Steve Carr, I think is amazing.
John Wooden.
Amazing. I think John Wooden is the greatest coach of all time.
Think about what John Wooden wanted from his players. He wanted them to be great people.
He didn't necessarily believe they all had the same modes. I mean Karim Abdul Jabar.
And Bill Walton.
Maybe the two greatest college basketball players of all time.
in their eras, but definitely in the top five.
Totally different people.
And he accepted that.
But he wanted them to be great, not only as basketball players.
But as people
He was measuring U CLA.
Against
That's
And frankly
Of course the output of that.
Yes.
the success they had. And to me that was the Lakers with Magic Johnson.
You watch those guys play basketball.
And they just were having fun.
And they were elevating the game.
I remember going and seeing the warriors.
With staff and
Draymond and Clay were
Just coming up.
The energy of those people.
Was amazing, and they transformed the game, right? They changed the three-point shot. And then, of course, when you see greatness like that, you gotta go learn from it, and of course.
I've gone and understand the way
Steve Current.
And how
He cares about competitiveness, but he cares about mindfulness. He cares about fun. If you're gonna be a new warrior, he's gonna go visit you in your hometown.
to truly understand who you are as a person.
I mean that to me is great.
And
That to me is part of what being durable is.
It's a wonderful excuse to ask you my traditional closing question. What is the kindest thing that anyone's ever done for you?
I prepared for this one, Patrick. Because I do listen to your show.
So
I have to say it's my mom.
My parents got divorced when I was young and my mom raised me.
I learned so much from her.
The thing my mom did for me that
And hindsight was
So wise.
And proved to be so kind.
Was
I took a leave of absence.
From Harvard to go work on a
Campaign.
for state representative running for US House of Representatives.
And she was totally supportive of that.
And then
He was expected to lose and in a long story, I became his campaign manager and ended up winning.
You were nineteen? Yeah, I was nineteen.
And I came to her and I said, Mom
I wanna go to Washington, DC
And be
Chief of staff.
For Congressman Deutsch.
Wow.
You really want to do that.
And I said,
Yes. I said in order to do that.
I can't take another leave of absence from Harvard. They don't let you do that.
I have to drop out.
She was not on the Bill Gates or I guess future Zuckerberg belief in the world.
It was not her ethos.
But she was really accepting. She was very thoughtful and listened to me. And she said, Henry, if that's what you really want to do, it sounds like very thoughtful.
It's a very adult decision.
And if you're gonna go do that
I'm always here for you. I love you. I'll always be your mother. You come to me with anything.
But what it practically means
Is you need to be responsible.
For paying for your education.
Because you say you want to go back there, I'm gonna take you at your word.
But
You gotta go do this now as an adult because you're making real
Adult decision.
And I tell this story to my two sons.
Because I think it was
Very important, but also kind.
Because it taught me
That if you're gonna go make major decisions
You have to be thought about them.
Пипово супою.
But you have to be able to be responsible for the consequences.
Amazing, beautiful story.
Flavored than lots of these answers that I get. I love it. Henry, thank you so much for your time.
Thank you.
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