Alan Waxman - Building Sixth Street - [Invest Like the Best, EP.433]

Transcript from https://podmenti.com/t/f18418529b683656

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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.
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My guest today is Alan Waxman. Alan is co-founder and CEO of Six Street, one of the most unique investment firms with a go anywhere, do anything mandate across asset classes, geographies, and time horizons.
And over one hundred and ten billion dollars in AUM.
He describes his journey from CIO of Goldman Sachs Special Situations Group.
And the frameworks he brought with him to lay the foundation for six tree.
Allen details their famous investments like Spotify and Airbnb during challenging periods.
Their innovative sports partnerships with Real Madrid and F C Barcelona.
And their thirty billion dollar cow vehicle that allows them to write billion dollar checks while keeping individual fund sizes matched to opportunities.
We discussed hiring people without egos.
Enabling a true multi-strategy approach and six streets face the tiger philosophy.
Please enjoy this great conversation with Alan Waxman.
I don't know where to begin.
This one. Sixth Street is
So incredibly interesting.
In that it can do anything. It can go anywhere.
It's extremely opportunistic, extremely flexible, open mandate.
We'll talk a lot about the history and the different kinds of investing that you've done.
But I think a fun place to begin would be for you to tell us about your Goldman days and specifically the group of people that you were investing with back then.
Which I've heard described by you and others as the navy SEALs or special forces of finance.
Maybe describe that group in as much detail as you can and why it was so formative and impactful on you.
It was lucky that I even got into that group.
I met a gun on an airplane.
Basically, I was a international relations major at Penn.
No finance history, anything.
got out of school and I was basically working in the mailroom.
for a bond only management firm called Fisher Francis Trees and Watts.
And sponching books and all my
Friends, they all had jobs.
Basically at Penn, I had thirty five interviews.
Didn't have a job offer out of college. That's why I ended up in the mailroom.
But I was always interested in companies. I just didn't know a lot about it because I didn't have a corporate finance background.
I was on an airplane coming back from Texas, my home.
And I met a guy on an airplane.
Sky
by the name of Jody Lennassin. I was just asking him a bunch of questions.
I ask a lot of questions. My wife makes fun of me'cause I ask questions
All the time.
I go to dinner sometimes people say, Well, you asked me a thousand questions, I didn't get a chance to ask you. That's just how I am.
So I was on the airplane and this guy, Joe Donassa, who had started in this group.
He was reading like a
Research reports like thousand miles per hour.
processing speeds I'd never even seen before. So I just started to ask him questions about
What are you doing? And
What's your group? We just started talking on the airplane.
You'd came from Wachtel.
A principal investing group at Goldman.
That literally is
Highly flexible, could really do anything.
Which by the way is the predecessor to the group that was ultimately in.
We ended up forming a relationship just because what I learned is
The good thing about being curious is you know is
You learn a lot and it just creates opportunities.
See
ended up getting me an interview and I got into this group which
ultimately became the special situations group at Goldman.
That group was the largest principal investing
business at Goldman. It was the firm's balance sheet.
At its peak, I think we're like twenty five billion dollars the firm's balance sheet.
Our mandate was to basically you could do anything, different asset classes.
different sectors, different geographies.
different durations. So we could do stuff that were two three year investment horizon or
Tenure investment horizon, different return profiles.
Some of us ten percent return stuff, some of us twenty percent, thirty percent return profits.
Literally we could do anything.
But we couldn't lose money.
So what we learned at the time is this group
We are substantial.
amount of Goldman's income with a very small team for ten plus years.
What made that group tick? I'm curious about all aspects of it. The recruiting, the
culture, the investing style, the low loss rates.
Is really the ability to unitize risk award across different asset classes.
Geographies.
Sectors, return profiles.
Duration profiles.
Take a real state.
Type investment.
compare it to a US corporate loan, compare it to
buying a company compared to starting a company.
And we unitized risk units and return units, and we did that across
A bunch of different sectors, a bunch of different geographies.
NASA classes and just that skill being able to do that.
You constantly comparing relative risk units and return units.
And it gives you ability to find the best risk word at that time. And the key principle there.
And we warned this the hard way. So if you go back, Goldman was a bunch of fiefdoms of principal investing business. There were ten
fiefdoms different partners running investing businesses and none of them talk to each other.
They all had their own balance sheets never spoke to each other.
So during two thousand one, two thousand two.
A number of the businesses lost a lot of money.
For example, we had
In the US.
The business I was in, which is a US corporate investing business.
was pretty negative on fiber builds. If you remember Exocommunications or Williams, remember all the fiber.
Which was
Overbuild.
All that there was another group at Goldman who are great investors, but
They were all in on fiber.
Even though we were literally one floor apart.
one group lost a bunch of money and we were anti we didn't lose money.
And after that the firm basically said
Let's put all these disparate
Principal investing businesses. Again, we didn't have outside LPs.
put'em all under one umbrella, and that ultimately became
What was the special situation script which
became a substantial part of the firm's
Profitability. Can you say more about this notion of unitizing risk and return?
The literal tactical way that that happened.
So we think about the relationship of risk units and return units. So
Returning it's easy.
It's IR.
It's the race.
Risk units are a lot harder.
If you think about the two key variables of let's say evaluating any
company or security.
You basically got
the cash flows, the volatility of the cash flows, to the risk of the cash flows.
Growth.
So the way we think about it, and again, this has been refined over twenty five plus years.
Our framework is basically take three things.
First of all, what's the quality of the business? What's the quality of the sector?
The second thing is where do you sit in the capital structure? What we would say is
Your attachment points, and the last thing is documents.
We take that framework and we sort of run that framework through that across
sectors geographies and that's how we start to quantify risk units. So for example, if you take a
Consumer goods company that's a buyout of a consumer goods company.
Let's say a private equity firm buys it for
A twenty percent return.
Let's say they leverage 70%.
You take a hyper scale data center that's got, let's say, a fifteen year take or pay contract.
With an investment create counterparty.
That's gonna be a required lower return.
So that'd be an example. If you have a geography, let's say just as an extreme example.
If you've got a fifteen percent structured equity investment for a company
Exact same company, exact same sector in Australia.
If they were in Ukraine, you're probably gonna demand higher than
Fifteen percent.
Let's say we're a minority equity investor in a company.
And one, you've got the control party can literally do whatever they want. They can dilute you, they can put
Put your dead ahead of you.
That's one set of risk units. If you've got traditional, hopefully good minority protections.
That's another set of risk units. So we
Take all that.
W
Do that across the
Asked classes, sectors.
Geographies duration. So some stuff like our capital, we can do stuff that's
Ten to twelve percent returns.
Some of our stuff is twenty, twenty five percent, two to three times your money.
And our whole view of the world is the world is very dynamic.
It's always changing.
And
What happens is with investors, everyone thinks their baby's the prettiest. So if you're just a healthcare investor, you think you're
baby's the prettiest. You're just an energy investor, you think your baby if you're just in Europe, you think
Europe's only good. So we try to do a
Step back from that and then constantly as we go through economic cycles, credit cycles.
Secular cycles, giopolitical changes.
And we think about things on a real time basis. So what we do is
In Sixth Street, we have about
four hundred fifty to five hundred deals coming into Sixth Street every month.
Typically we have about fifteen to twenty five themes running through our firm at any one time.
And the key is, and this is what we learned at Goldman.
Is that
Any theme.
that is good as a shelf life of somewhere between twelve months and thirty six months, because ultimately there's a lot of smart people out there.
It comes in and it's a good theme, then it's a less good theme, then it comes a
Okay theme, then comes a bad theme and then
people are overcorrect and they start putting leverage on it and then you have a correction.
And our whole thing, and this is why we had the tracker we had coming out of Goldman and do at Sixth Street.
Is that we try to see through that.
And never get caught in that dynamic where the theme becomes less good.
We migrate to other things. So our average
Theme is a shelf life is
A year to three years. If you take our themes from
twenty twenty five.
And you go back to twenty twenty two.
The fifteen to twenty five themes might be a little bit over up, but most of them are different themes.
And that's why we always think of six street
We have to be a firm of entrepreneurs.
'Cause if you think about what we're doing, we're constantly migrating to the best risk units.
And return units, obviously also trying to be a value added partner to CEOs and management teams.
Because the world's always changing, we have to be constantly coming up with new themes.
And that's what we learned at Goldman.
How did you recruit people into SSG?
Was there any lesson on the on ramp?
First of all, back then
It was the
group to get into it was the hardest group to get into even sounds like special forces, SST. And when the Wall Street Journal called the group the Navy SEALs, I think that created a little bit of halo. So
It wasn't
finding people interested. It's finding the right people.
And for us what we were looking for back then and still today at Sixth Street.
It's first of all we want really nice people.
We have a saying at Sixth Street and it was true back then something we learned from the San Tony Spurs is
We want people that are over themselves.
The enemy of a multi-strategy investing businesses fiefdoms and silos.
And if you have people who don't want to be team players and share information
And share relationships.
The whole unitization of risk units and return units.
It all breaks down. So
Culture goes hand in hand.
with our investing style. So the first thing is did they fit in culturally?
And then the second thing, obviously, everyone's gotta be smart enough.
But we really wanted people that could think critically.
But also we're open to
The anti of my baby's the prettiest people. They don't fall in love with whatever they're spending time on. They have the ability to sort of.
Well, we would say it's six tree is to play tennis and like comparing to healthcare
senior security loan to
buying a healthcare company to uh
European real estate deal to uh
Asian infrastructure dollars
be able to sort of engage in what we call playing tennis to sort of compare
relative risk reward.
And sort of the backdrop of whatever we think the macro environment is as well. I never heard that phrase people that are over themselves.
I love that phrase. Anything else you learn from the Spurs?
So I started running business I think I was twenty five years at Goldman. We always said no politics, no BS.
No ego, nice people.
That's what we wanted to be around.
So I grew up in Austin, Texas and I was always a San Antonio Spurs fan. So I was always from afar.
A big fan of
Popovich and R C Buford is
Literally one of the best sports executives. He's
Unbelievable and
Almost like a brother to me now. He's an exceptional human being.
But
We went in there.
I was describing Sixth Street and R C based in one of our first discussions. So, yeah, we have a stand for that.
Popovich said the same thing.
Are you over yourself yet? I said, Why do you say that? He goes,'cause that is literally the ultimate expression is can't someone be a good teammate.
And I thought about deeply. We took no politics, no BS.
only nice people and we translated that to now we say
Are you over yourself yet?
If you think back to the SSG days, what was the investment or trade that you were most proud of that most encapsulates many of these ideas?
We obviously did really well. There were a bunch of investments. I think the thing that
Mor most proud of.
Is that
During two thousand six and two thousand seven when
Things were getting irrationally exuberant.
We actually started to pause
We didn't know what was gonna happen in the GFC.
We're I think the only principal investing group maybe there's one other that didn't lose money in two thousand eight.
on a lot of capital.
We didn't make any returns, but we protect the capital.
And it was all from that process that we went through.
Really comparing relative risk units to return units, and we started to see things that just didn't make sense.
We still invested
But we're investing in
different things that we thought would be very protective.
the party was gonna end, but it just was getting out of whack.
It's really what we didn't do.
Leading up to G S C is probably what I'm
Most proud of and quite frankly
Had that not happened, I don't think we could have
When we started six street raised the first fund we did.
had we not protected capital in two thousand eight,'cause so many
People in seats like mine.
blew themselves up during the GFC. Back then, did you think of yourselves as financiers?
doing a primary job.
for the person or group receiving the capital, or did it feel more like
arbitrageurs or something like that.
We love investing.
And it's really about trying to create solutions because our capital is so flexible.
We could go sit down with any CEO or any management team. We go in there and
We just listen. And this will sort of resonate we were talking about earlier is
One of our core skill sets is
Asking questions. So we just be
Asking questions and
We say the prototype deal at Six Street, but also back then is we can get on a whiteboard
With a CO management company.
They have an idea what they're trying to solve and we get up there and we start whiteboarding it.
And we come up with solutions. Maybe it's a
Structured equity investment.
Maybe we buy an asset, maybe we do a joint venture on one of their assets.
It could be anything, but we walk in there with a very entrepreneurial mindset, bespoke mindset.
On every deal.
That is a six street deal.
Whiteboarding with the CO or management team.
And we can do that at scale.
Back then, I mean, that was really
how we're thinking about things.
When I think about arbitrage that's short term.
We're long term investors. We're
Three years to ten year investors plus.
Arbitrust to me, that's more trading. We weren't traders.
We're terrible traders. That's not what we do, but
Thinking about fundamental value, but also trying to find the right management teams, the COs to back.
And then getting to those diets where we're really their partner and we're able to get on a whiteboard. That was the prototype deal for us. It's like a fundamentally creative process. It reminds me of Richard Rainwater and all you heard about how he would structure things and take all comers, lots of whiteboards in that office, apparently.
We always talk about we just had our offside, I talk about right brain thinking.
One of our core principles is
Don't group think.
That's why I benefit being out and see if it's'cause I live with all the AI tech guys that are all on your podcast and
I learned from them I'm like a fish out of water there, but
It's just that independent thinking. I mean that's why
I've never talked to competitors ever.
Not because
They're not super talented and great investors'cause I don't wanna be
infiltrated with their
thinking so I get into group think and that's why we try to
really think about things through that right ring lens because
That's how we start different businesses. That's how we find new themes and
We can't do our business if we're not using our right brain. It's a core part of
What we try to do.
One of the really cool things about your structure is this unit of risk concept.
Sure, you talk makes me realize that basically every investor takes their specific unit of risk for granted. It's the same every time.
And I find that fascinating.
When we came out of Goldman, I'd never talked to an LP before.
I didn't know how to talk to Nelpa, that's a whole other story.
One of my mentors and we call him the Godfather of Sixth Street, Jamie Gates.

was with a large sovereign welfare.
I'm like reading every word on every page. He's doing these hand signals like let's go, let's go, kick him in.
It was not good. We never talked to an investor, but I remember getting out when we first started talking to investors on sixth street.
We had a really hard time in the beginning because
If you think about the LP world, the way it's set up, it's very silo.
You have your private equity group. You have your
Fixed income group. Now you have your private credit group. You have your real escape infrastructure. So
We got lucky because David Viner was our CFO.
We had one L P so we were completely unconstrained and unside. We just couldn't
Lose money. You grew up in the world today, when I first got out, and we're talking LPs from
Let's say a very big pension plan. And at first and I'm describing what we do and they can't fit us in a bucket. They're like, Wait a second.
Are you in this bucket, are you in that bucket?
And then he said we need twenty percent returns.
I was like, Okay, how much leverage are you
Taking to get twenty percent of it.
It didn't matter. No one thinks about unit or tourists, they only think about nominal returns.
And that's why we've always talked about from beginning and I think
Many LPs have gotten a lot smarter on return units and risk units.
But
Nominal returns they're just underlying risk because there's so much leverage out there. People can make returns.
Whatever they want.
Through leverage, but it's not capturing units of risk. And at some point
The AI is gonna figure out
how to quantify units of risk for
Private capital?
That'll happen someday. That does not happen. People still think about
nominal returns versus just
The skill of investing.
Where I was going with it was
Typically it's not a line of question, walk us through your thinking about risk. Maybe they'll think about loss ratios, some basic stuff.
But not multi-dimensional thinking around risk in a given asset class.
And so I'm curious
Because that's all you've ever really done as an investor.
For you to teach us some of the surprising things about what you've learned assessing risk versus everyone spend so much time assessing return. What could this be? What could the return be?
Less time on the risk side. What would surprise people is the most important parts of that evaluation process.
Human beings get into behavioral patterns.
They look at the past and they just
Keep
Coin.
Direct money has oscillated between a really great time to invest and
Well less good time to invest.

Capital flows.
Somewhat recently you see a whole bunch of new money coming into let's say direct lending.
And I think people get caught in these tunnels.
And
have a hard time stepping back. Either they don't have the periphery to look at it.
Or they don't have people around them that have been through cycles, but they get in these behavioral patterns.
And they have an inability to look back. And I think
Whenever there's a crisis and people lose money, and we saw this in O one oh two. I saw a little bit
In August ninety eight.
Definitely saw it on GFC.
Saw it in Covid before the Fed billed everyone out and made
Some people that
shouldn't have looked smart, look smart, but that's a whole other thing.
I think people are surprised when that happens, but
It's all right in front of you.
In o six, oh seven.
You could have looked at what's happened. There's over a hundred percent loan to value loans to houses.
Anyone can get a mortgage. There are all these mortgage runners just pumping with no
consideration for credit quality and
I think just the tunnel vision of
Ignoring
Not only the risk units on that particular deal.
But the risk units of what's around you.
That's one of the biggest mistakes that
people make and I don't know if people are surprised by that, but it's very hard to evaluate risk units.
If you're only looking at through
One lens versus multiple lenses.
That's what we learned back in two thousand one, two thousand two.
We had all those ten disparate businesses.
Where no one was talking to each other, and that's why
They were actually put together. I give David Vinyer a ton of credit as
Probably the best CFO, in my opinion, ever on Wall Street.
He is
One of my mentors he is
Exceptional.
We're the biggest investor out there.
back in the late nineties and early two thousands
And
There was a bunch of loss making businesses from all these disparate principal investing businesses and that's why Goldman put them under one umbrella.
I think that pattern
Of not thinking about things in a silent way versus the overall periphery.
I think that's what we're gonna be talking about sometime here in the next two to three years.
To continue to contextualize this notion of units of risk today.
What do you think are some of the maybe overlooked
sources of risk in the system as you see it, since you get to see it from every angle.
This is early summer twenty five.
We have experts at Six Street, my partners
Marty Chavez, who's on the board of Google, and Adam Corn or Raine Goldman Sachs and June Bus who are experts on AI. So I'm not an expert in AI, but I think
One of the things that you've talked about on your podcast.
It's just
The whole transition
Once the productivity
Gains start to come.
There's obviously going to be
Job losses and just the transition to sort of
Remobilized capital.
How's that gonna work with the real economy?
I don't think enough people are talking about it. One of my good friends, Jeff Wiener.
Former CO of
LinkedIn he's the chairman. Him and I have been talking about this
for a while and I think for the first time anthropic.
CO actually came out and said something publicly. So what I'm worried about there is that
We're so focused on competing with the US stated against other countries specifically.
China
the Magistem, they're all focused on competing with each other.
And I don't think there's enough people talking about how we're gonna manage
This transition as
Again, there's
gonna be lots of productivity gains, which I'm all for. But
There's not enough talk about that.
It should be code red people talking about it and that's not happening. So I'd say that's one
I think the other thing, and I think it's an opportunity, look at the average
wealth investors, so the wealth channel.
They're underexposed to private alternatives.
relative to say a pension fund at forty percent.
an endowment at fifty percent. So at three to five percent, that's your probably
Go up?
But again, the transition
Everyone's all about the wealth channel. Everyone's
Talk about that.
The transition to do that in a way that's responsible.
to those wealth investors, those in market.
And I think
Getting to the right structures.
So that
That's done in a responsible way. I think that is something to watch out for.
Jamie Gates.
The Godfather of Sixth Street. One of the things he taught me early on is just'cause you can raise capital doesn't mean you should.
As a manager, just'cause you can raise it in the wealth channel doesn't mean you shouldn't. I would
Espouse that advice to
All of our
People in our industry.
So I wanna keep telling your story after Goldman, but before T P G what were you doing then?
I actually told David Vinyer, who was a mensch in March two thousand eight that
I wanted to basically rebuild
What we did.
At Goldman, but doing it more entrepreneurial.
Backdrop.
I stayed through two thousand eight just to make sure everything was well'cause I wouldn't have felt good if
the rails would have come off. There's no way I was gonna leave those guys at that time. And then I took six months off.
Got married.
When on a honeymoon.
But
before that really started constructing the idea of six street.
Which was formulated in a business plan called Project
Austin.
Project also laid out our values or culture.
Or investment philosophy.
all laid out our five year strategic plan, which is a big thing at Sixth Street. We're now in our fourth
five year strategic plan. We've been doing that since day one of the firm.
And that set out the idea of six street.
TPG, we're set up a little bit differently. So we were never employees of TPG. We never gave up control of our business. We always
controlled investments, hiring decisions, we're kind of a firm.
Within a firm.
T P G had a minority equity stick and we're great partners for
While we're together.
But that's how it all started.
Say more about these consecutive five year plans. How do you do that?
Our view on business building is if you don't have a compass
It's hard to know where you're going and more importantly, it's hard to get everyone on your team
matched up with that five year strategic plan.
We just finished our five year strategic plan. It's an eighteen month process.
was two hundred pages. I mean this is hundreds and hundreds of hours of all the partners
Debating trying to really narrow down
What it is the direction of the firm.
We first started our two thousand fifteen plan, what we wanted it to be.
And most recently our twenty thirty plan
We typically have eighty ideas.
We narrowed down to forty.
What we call subplanks.
And those are organized under five strategic
Planks.
We'd actually just present it to our entire firm.
But we try to do and this is something we're in to Goldman is
We basically take that five year strategic plan, we break it up into one year increments, and then we have every person at the firm do their own personal business plans. What we always say, and this is from day one, is that we want the summation of all those personal business plans.
to equal the five year strategic plan. So we're matching every single person in the firm.
With the clear mission of what we're trying to do.
And what we'd say in our parliaments climbing up the mountain together.
And that's just been a process and it's something that we take very seriously. I mean it's by we spend eighteen months and hours and hours of
Debating it and
thinking about what we wanna be and how we wanna go about it. But it's something we've been doing and it's our North Star, it's our compass, it's everything and
It's an important part of the process and the business building of Sixth Street.
Can you talk us through the opening chapter, chapter zero or the prologue and chapter one?
back in two thousand nine or so. Sure. And what was going on
What the biggest challenges were, I'm always interested in how these firms get started.
And what challenges they have to overcome,'cause often those are like the formative periods that then
Last a long time.
We're values driven firm.
Our values are
Number one
What we call our one life principle.
You have one life. Do you want to be average or great?
Everyone wants to be great. So that's the first thing.
We want people that are all in.
It's a competitive world out there.
We want people that are all wet.
The second thing and this goes back to one of the things we're talking about is
We want curious people that are constantly learning.
That are actually are constantly trying to grow.
If you think about the idea of having to develop new themes every year.
And new ideas.
We need entrepreneurial people.
And then the third thing is
A one team culture. So people that are over themselves
No politics, no egos, no BS, just so we can all talk to each other. So those are the values.
We always said we wanted to be the largest
startup in the industry. That's literally day one.
We want people that can play tennis so they can debate, not the
My baby's the prettiest type people.
And then the last one.
This is something my dad taught me about facing the tiger.
My dad's a crazy person. He's like a
Black belt.
Yells at the TV. He's probably listening to this, but
He's a pretty tough guy, but he always taught me growing up.
You gotta learn how to face the tiger.
By the way when you go to Six Street's offices literally you get off the elevator, there's
A big tiger just staring at you. And there's three elevators, and no matter what elevator you get off, it's staring at you. Sculpture? It's huge. Five feet. You got you'll come to office one day.
The idea on culture is that when something goes wrong or there's a challenge, you go through different things.
Most people are like pointing their fingers at other people or they're it's not my fault or they're running away.
It's six street, we're like, good.
Let's go.
And we say let's face the tiger together.
The first thing is defining values and culture and our investment philosophy.
Which we spoke about, but then what's our genetic code?
For us, the most important thing about our genetic code.
is we want to be an investor first firm.
We love investing. We love this idea, this process we go through. We love meeting CEOs and management teams.
Particularly today where it was starting to happen back then.
There's a little bit of acid aggregation now. It's a
Completely different thing.
Our ethos and what we want to be, we're investors.
If you talk to our partners the day we become not an investor first firm
We're not here.
That's literally number one is
Every review process
Every person we hire it's designed around.
people that love to be investors. So that
Multi strategy, so this idea of the world's dynamic, it's always changing.
Weighing that part out in terms of
being a multi strategy investing firm migrating the best
relative risk units and return units.
thinking about that. And then the last thing is that whole cross platform collaboration at scale because
Our business model doesn't work.
If we don't have that cross platform collaboration at scale because
Otherwise information and relationship
Get traft himself fiefdoms and silos.
Six year we have 10 investment platforms all organically built.
You all the people, the business leaders at each of our investment platforms.
They all talk to each other all the time.
We're all trying to think about where's the best place to think about comparing
risk units and return units and obviously places where we can be
Value added partners, the COs, the management teams.
What are the dimensions of facing the Tiger Well?
If you were teaching a college seminar on how to do this, what would you tell the students?
human beings natural reaction when there's a problem and you can see this
In so many facets of life.
The first thing is to run.
Particularly in our industry.
I saw this happen in other groups at Goleman. I've
seen this happen in different companies and I've
have friends that have told me stories all sudden there's a problem or there's a bad investment.
And all of a sudden everyone starts to try to distance themselves from that.
And try to
Point the finger at some so it's not
Damn.
Or some people
Freeze.
They start to get hyperactive and they start to make rash decisions.
And
For us.
Let's go. We're gonna do it together. There's one of our worst investments of all time.
It was a plastic bottle company.
Only time at six street, knock on wood, we got defrauded.
We made a structured equity investment, a company, I won't say which one, but a European company.
I'll never forget we were in the room in New York.
With thirty people, there was a bunch of different investors, a big company.
We figured out that they
defrauded not only us, other investors. And I'll never forget we went to
The burger.
And there were like five of us there and we went over there all from different groups.
We knew things were not going as well.
And we're like
Holy shit.
What is going on here?
And where I
Let's go.
Stephen Plus, you're gonna do this. Sam didder, you're gonna do this, I'll do this, Borner, you're gonna do this. And we just started doing we called on some other people. We literally had
A team of
twelve people all different parts of the firm.
doing everything we could. And the reality is
We ended up getting fifty cents on the dollar.
We should have gotten two cents, and it was all because it was just
Game on. And that's
What we do.
When things are going well, obviously you don't have to
Do that. But again, what we always say
That's what defines cultures and you have those moments of what are you gonna do in this situation? Are you gonna do the right thing?
Are you gonna come together? Are you gonna point your finger at someone else?
What are you gonna do? And our whole thing is
Let's face the tiger together and that's what we do.
I would love to tell the stories of the Spotify and Airbnb investments that you made.
People know those names, so it's very relatable.
But also I think are good examples in the mid twenty tens.
A little bit later with Airbnb.
of how you do business. So maybe start with a Spotify one and just tell that story.
We love Spotify as a theme. We love live music.
It's hard not to like live music when you grow up in Austin, Texas, but
Great product, great unit economics, but if you remember in two thousand sixteen
There was starting to be a lot of commentary.
About threats from
Amazon.
Apple, there's a cloud.
over the company at that time. A lot of people don't
Remember that
So there's a little bit of volatility in the markets, but more importantly
People were worried about the competitive threats.
When this came in as an opportunity, obviously we had a number of themes.
technology businesses or software businesses that we thought had really good unit economics. This was
One of the tops of the list.
That was at a time when they weren't producing cash flow, so they're still creating cash flow losses.
They need some liquidity. So our investor group stepped in.
We gave him a billion dollar financing.
a convertible instrument.
Obviously spent time with Daniel.
It takes
One second to figure out that guy's generational.
The rest of the team that Daniel put around him was great Barry McCarthy.
At the time was a CFO really smart guy, and then everyone we met on the management team
Mission a line.
They had values, they had a culture. It was very clear everyone was on the same page and
Sometimes in companies you go in and you talk to the CFO
What's the vision and that's different than the CEO, different than the head of revenue. And for them it was just very clear that they were just dialed in. They obviously had first mover advantage.
It ended up being a great investment for us.
But
It was a little bit contrarian when we made the investment.
Maybe say a little bit more about the security itself.'Cause you can operate at any part of the capital structure or whatever, like you said, um
I'm always curious the actual way you did it.
On that one, what they were trying to solve is at the time
They didn't want to raise common equity.
Because of the competitive threat from
Amazon and Apple are perceived, I should say.
Because the market volatility
They didn't want to sell equity'cause it was gonna be at a lower
Equity and then the last.
Round. So they were looking for more of
A whiteboard solution.
Literally Barry McCarthy.
Whiteboard.
What are we doing? He had certain principles, and we just tried to solve around those principles.
And that came up with it was a convertible dead instrument.
It had a cap. I think the cap was at
twenty five billion dollars.
It had a current yield component.
And then obviously the whole idea was to bridge them to get public. So it's like a pre-IPO security.
To bridge him through that and
ultimately it was successful and
Went way through the cap.
Which created a win solution for them because they got to their IPO, which they were very focused on doing for a whole bunch of reasons.
And for us it worked out.
It was almost like an engineering and whiteboarding and again
A lot of times the ideas aren't
Here's the holy grail idea. It's from just
Talking, playing tennis, asking questions and listening, and that's
What we do. That's what we train our team to do.
How to ask questions, how to listen, that's literary the process.
that we went through with the other investors. Before we get to the Airbnb story, can you talk about Tau and it the unique nature of this massive pool of capital that you've created that can do whatever it wants? I'm always fond of this idea that
What you end up getting from an investor.
reflects their capital base.
who it is, the duration, the terms. They then ship their capital base in the form of investments. And so I think understanding
Tao and the overall structure is important.
When we were setting doing Project Austin
We literally studied every GP.
We had case studies on every single GP. What they did right, what they did wrong.
We also spent a lot of time on figuring out
Some of the GPs that were
Big brand names and then just faltered away.
What we concluded, and this is a pretty obvious thing now, but
Where people get into trouble as they raise larger and larger funds in a strategy that maybe it's the right time to raise a larger fund.
But maybe it's not.
What's the opportunity set?
They kept raising larger and larger funds, and we didn't want to have that pressure.
And this is getting a towel.
We want to design our architecture six G, which is different than any GP out there, at least the ones that I know.
as an investor first architecture.
And what we did is although we have ten investment platforms at six street.
Each one of the platforms.
So think about our growth business.
If we didn't have to.
We'd probably raise an eight billion dollar fund'cause we wanna
Be able to do the larger deals.
But because we have Tal, we want to keep the fun sizes.
to the level of the opportunity.
But we also want to be able to do the largest deals in the market. I mean we wanna be able to do the billion, two billion. We're one of the
few handful of firms in the world that can consistently write
billion dollar plus checks across asset classes.
But architecturally
We keep our investment platforms funds at modest sizes.
match to whatever the opportunity is over
Whatever the investment horizon in that fund.
And then we have this vehicle called Tal.
On top, which is effectively, in our words was
When we first raised it the synthetic Goldman Sachs balance sheet.
Which can do anything.
obviously with the same principles that we've had for the last twenty five plus years we start investing at Goldman.
That gives us stability in a growth deal.
Let's say the the next Spotify deal comes and let's say it's a two billion dollar deal.
Well, if we only have a four billion dollar growth fund or three billion dollar growth fund
There's no way we're gonna be able to do that in the growth fund, but by having a thirty million dollar fund.
over the top.
Across the entire firm.
We have the ability to keep the fund size as small.
But at the same time speak to the larger deals.
And then also anything that doesn't fit within any of our investment platforms.
We have the flexibility to do that.
Tal is flexible from
Asset classes. So it's got
Everything in there real estate infrastructure.
private credit, growth.
Mostly private, but has the ability to be public.
It can go anywhere on the duration spectrum. So it could do
A two to three year investment, but we have investments in there. We have a strategic partnership with Real Madrid and
Also a strategic partnership with F C Barcelona or probably the
Only people in the world that share partners with
Realmetry and F C Barcelona'cause they
Trust us, but
Those extend further than ten years. So we
have maximum flexibility or unconstrained because again
That's what we learned at Goldman.
The world is dynamic.
It's always changing and you need that flexibility because you never know at that particular time or this particular environment.
Where's the best opportunity is gonna be? We always wanna have that flexibility.
to migrate to
Wherever the best opportunities are.
I think the most important thing about Towel is that it's
consistent with
Who we are as a firm and our ethos about
We want to be an investor first firm.
Now let's go back to Airbnb'cause I think this is like a classic early Covid example of
The returns to flexibility.
We were one of the few firms in the world playing offense at the beginning of Covid.
And the reason we're playing offense because we had a good defense.
Very similar to what we saw in O six, O seven.
We start to see those same dynamics.
tunnel vision of investing.
We started to see some of those same dynamics in
eighteen and nineteen.
We couldn't have called COVID, but
Things were getting skewed in a
Wrong way. So
Wait.
Protected the portfolio we're in a position to play offense.
Right when Covet hit.
We went around and said.
What are the best business models in the world that are most impacted by Covet?
Think about
Sixty people across six street working weekends.
All day, every day, trying to figure out or fifteen to twenty five things before COVID.
And what are our next fifteen to twenty five themes?
One of the themes there was
Best business models most impacted by Covid.
Airbnb
great business model. If you remember at the time
There's a lot of negative
press on Brian Chesky at the time, which was by the way unfair.
and unwarranted, but there's a whole bunch of stuff.
going on at the board.
That didn't deter us. So we literally started
calling into the board, people we knew on the board, calling in the bankers.
'Cause we didn't have a pre existing relationship.
With Brian.
But we knew people that were around them and
Ultimately
Came in and that was an interesting time because
The thing that Brian did that was really smart. He did a lot of things that were smart. The way he operated through that, and the first time we met him on a

Advisors and
Despite all that
His values
The mission.
The principals.
We're all the same.
Talk about a lot of special humans today, Daniel.
And Brian, David Vinyer, special humans, but
They wanted to fortify their balance sheet so they could play offense.
We and our friends over at Silver Lake.
Basically gave him a billion dollars.
was in a loan form.
Had some warrants attached to it.
In it up
Getting them through the period, obviously things started to get better, but the most important thing after that happened.
They were able to start playing offense versus playing defense. And I think the other thing it did
Is it really solidified?
What we already knew that Brian was such a great leader and he was able to get this done.
I'm curious again in your framework about what the unique units of risk were in that.
specific transaction relative to those returns. So
From afar we wanted to
Make sure that the business model what it was.
The second thing is
They wanted to get it done.
And
Seven days.
So we had a team at sixth street in Asia, a team at six street in the US, a team at six street in Europe.
So we had to do all that in a compressed time period. It was at the beginning of Covid.
There wasn't a vaccine or anything, so our view is for us it was as much about the fundamentals of the business.
As it was
How much liquidity runway can they have? And we had to make the bet.
With that liquidity runway.
Yeah.
There would be a cure, something would get better.
They obviously had a lot of leverage to manage the business, but
Gave him up to like four or five years of liquidity.
This led to another theme on sports and live entertainment,'cause we learned that we like experiences. Humans like experiences, but
That was our analysis. So the fundamental business analysis make sure everything in the unit economics were what we thought.
Making sure that the management scheme and the CO what we thought
But the other thing it was really a liquidity analysis and then making that
Not in the spread sheet judgment, which sometimes you have to do.
That was as much of a risk unit as anything is.
The liquidity analysis to make sure
How much runway do they have?
Do try.
Typically to boil things down to a simple bet like that so that you understand it.
In simple terms, you're not
Creating too much complexity where it doesn't
Well we like complex things, but in terms of the ultimate call, I mean we do all the fundamental analysis.
But ultimately.
Investments come down to three or four or five things.
I wouldn't say we simplify
the overall investment, but we try to simplify what are the three or four or five things that matter.
And we know those things inside out.
We also understand and this is the other thing investors do, people
Only think about explicit risks.
They don't think about implicit risk.
So we always try to put that lens on it. What are the implicit risks that we're
Assuming away, one of them in the case of Airbnb was
We're assuming in a way that
There will be a cure. We can't all be locked in our houses forever.
We're willing to take that risk, but we had to think about
That'cause that was part of the investment.
But ultimately it comes down to three or four or five things. So I'd say yes, simplify things.
But it always comes down to those three to five things.
When you think about
what success means for the whole firm from a return and risk standpoint.
How do you think about it? Is the ultimate comparable for units of risk and return like the S P five hundred or something?
Is there an explicit goal of
We exist to beat this thing or provide our investors with something more than this.
Our investors have expectations, but ultimately we're an absolute
Return investor.
Sometime if you just take an extreme example, let's say that every single asset class is flooded with liquidity.
Maybe that's not the right time to invest.
And sometimes the best thing you can do as an investor
It's not invest, but in terms of returns it
Really depends on
The level of risk units.
In two tausin сеvent.
We saw fifteen to twenty percent deals, but
It was too far out on the risk spectrum. So we said listen
That's too much risk, even though that return is there. And some people
Kept doing that and
Some of it worked out well until Covid.
But we try to think about the environment that we're in.
And what things are giving us.
Also, our investors have a set of criteria for each fund that we try to meet that expectation as well.
I'm very intrigued by the fact that some of the great go anywhere investors gravitate towards sports at some point.
Talk about the Real Madrid F C Barcelona transactions, what you're doing, why you're involved in the what you like about that space.
This was a theme coming off of
Coven.
sports and live experiences. So
Twenty twenty, a lot of the investments in sport teams, you weren't actually
able to do as an institution.
Once Covid happened and all these big franchises revenues went
to zero. People weren't going to games. They had still had some of their media deals.
But it went to zero, so for the first time ever.
They started to reach out to
Institutional partners.
Our whole thesis in sports is
The biggest global brands in the world.
And our whole thesis and sports and we can talk about live entertainment.
Is that these are historically local brands?
And because of technology
You can be on your phone and you can actually
watch anywhere in the world. You can be a
Dallas Cowboy fan, Australia watch or Real Madrid fan in China and watch.
That whole local to global
That was our thesis. So we literally just started
Through our relationships calling on the top global sports franchises in the world.
Now we've got
San Francisco Giants.
We're partner with the Dallas Cowboys and New York Yankees.
And then
Two of the biggest brands in the world, F C Barcelona and Real Madrid.
We started calling on building relationships. I mean the deal with Real Madrid was
They wanted to do business with us and we wanted to do business with them and it was
Again, a whiteboarding exercise.
That structure we did with Real Madrid where we basically formed a
Joint venture with them.
partner with them on their
Stadium renovation, which is the Burnabay.
That was the use of funds, but we formed like a company that sort of owned the stadium assets.
When they came to us.
They had an idea. We had an idea, and it was literally multiple whiteboard sessions.
to come up with that structure. And now a number of people have tried to deploy that structure elsewhere.
FC Barcelona again, because of Covid, it impacted their financials.
They needed to do something, Joan Laporta.
Incredible human as well as Fuerantino.
Two people I've become friends with through
The Real Madrid and F C Barcelona process.
They were trying to pull levers to basically be able to keep
the roster together because their view was
If we lose key components of the roster.
We won't be able to stay competitive and you can see how they've done
Since then.
But that's sort of how those deals came about.
The stadium one as an example. There's this
Interesting push and pull. They know the money they need and for what.
They're probably optimizing for giving up the least or finding great partners or whatever.
And there's some minimum return that you need to get interested.
What is that push and pull process like at the whiteboard? How do you communicate to them?
This are the things that we need.
First of all, what are they trying to solve? They say this is what we're trying to solve. We're investing a bunch of money into the Burna Bay Estadium. So this is the use of funds. So
What structures they didn't want to do debt, so we had to do effectively an equity joint venture with them.
We come up with solutions.
We price those solutions. We say, look, here's option A.
Here's option B, here's option C, they say
We kinda like a combination of option A and option B. We go back to the drawing board, we come back and we say
Here's a hybrid of option A and option B, which is what happened on that deal.
In those different options, what are the key levers.
They're different. If it's an equity deal, obviously price. If it's a hybrid deal where it's a convertible deal, there's a yield component and a strike component.
If it's just a private credit deal, it's just a yield component.
Sometimes when we're doing joint venture we're
Like what are the value added operations in that case?
One of our portfolio companies, Legends, is providing service to them that is helping them uplift their premium.
offering within the stadium. So we
underwrote that and put our money where our mouth was on that.
So in each deal the levers are different and that's
The thing it's a whiteboard because we've got a toolkit which we've been using for twenty five plus years, but
We feel like we can price anything that's not binary.
Stroke of the pen risk.
And then it's gotta work for them. Or if it doesn't work for them, we go back to the drawing board and try to construct something.
That does for work for them, but
In all these deals you see
Where it all takes place is
the whiteboard and it's not what we initially proposed to them or what they initially proposed.
It's that partnership with
COs and management teams.
So in this case, there's a stadium that's mapped onto a bigger organization that produces lots of revenue and has lots of streams of revenue, et cetera.
Are you always looking through to some underlying
holistic whole thing and figuring out how the joint venture that you own equity in benefits'cause the stadium by itself is just a thing.
So the ticket sales or something and the revenue associated with the stadium itself.
becomes the thing that the joint venture claim on that. In that case you got
Premium VIP Swiss. You have
Food and beverage, but premium offerings.
You have a museum.
If you've ever go to the Berna Bay, there's an incredible museum of all the all the history.
It's the premium tickets, but in all these deals
There's different
leverage depending on what it is. In this case it's a perimeter of assets, but it could be the whole company.
A firm Max Levchen's company.
We did a twenty billion dollar partnership with them.
Where we formed a joint venture with them so they could originate
more assets and have more operating leverage. So that one
My partner
Michael Dryden who runs our asset based finance business.
There's no max long time.
gets on a whiteboard, they start mapping it up. It's not like you can pull
It off the shelf.
Most of our deals you can't just pull off a shelf.
It's right brain, and that's why
When I say one of our core principles that independent thinking
Stay away from the group thing. Just think differently.
What is the process by which you develop the fifteen to twenty themes at any given point in time?
At any one time we have fifty to sixty themes bubbling through Six Street. Because remember, we have ten investment platforms to figure out each have a couple, yeah. We each have five so they're constantly bubbling. And then from that
There's really good themes, but they're not actionable.
So we've narrowed down to fifteen to twenty five things. Where those come from, it's from
Sector knowledge. We have sixteen different sector franchises. So each of those sectors is doing
Primary research about their ecosystems, thinking about
Not only what is that ecosystem look like today
But what's it gonna look like tomorrow?
There's research.
Some of it's we've got a whole bunch of longstanding relationships with
COs and management teams and
They'll call say, Hey, we're seeing this in our
sector, we're seeing this in our business, or we're seeing this. So
Hey, that's interesting. Let's follow it up.
Sometimes we're looking at a company and we're looking at
That's an okay business. And then we look at the supplier to that company like wow.
The supplier is actually more interesting than the company we're looking at or
We're looking at a company and this customers more interesting.
And then the last thing is just sometimes
All сад you start to see
Free deals.
Data centers.
Obviously that's not a good example'cause we started
doing data centers back in twenty seventeen with
Air Trunk, which we can talk about'cause that's a company we started
What if sorry the white sheet of paper.
Which is actually just got by Black Blackstone for I think.
Sixteen million dollars or something like that.
So we'll get a deal and it comes top down, bottom up, and sometimes we just have a view on something and
We'll start doing a bunch of primary research, but a lot of it's through primary research.
through relationships, but it comes from everywhere. It's not
One place. It's everywhere. And that's the whole point of our firm is that
Because there's no silos and no fiefdoms.
All those things get circulating up.
All sudden we see a theme from our
Power people.
Team that all they do is power.
our data comps people
Data communications.
And we see a con for our real estate people.
And this is what's going on with AI, the constraint of power, putting all those in one umbrella. I'm like, hey, let's have you guys all work together on
What are your favorite two or three themes right now? The ones that
personally animate you the most.
We have
twenty five themes run through the platform right now. I'll just give you a few of them.
Number one is
Partnering with
Big companies, big corporates, the
Help advance their business.
A firm we talked about
Thinking about partnering with asset originators.
And banks.
To basically help their origination.
Help their operating leverage. So that's a big thing in our asset based finance business.
А реалістий бізнес.
The idea of people getting older.
Wall tech. So we talked about
The well space.
The percentage of
private alternatives and wealth that's gonna go up.
There's a whole bunch of services and technology around it. So say wealth tech is one.
Sports and live entertainment. We've talked about we talked about the sports piece.
But again, live entertainment. The one thing we learned during Covid is that
People like experiences, they value experiences more.
As you know from the younger generations, I know from my kids.
They could care less about material things. They just want experiences. That is a big theme for us, and you'll continue to see us do more than that. Those are some of the bigger ones. Given how big this has all become.
Assets, number people, strategies, investments.
How do you spend your own time?
on individual investments versus on people and on teams.
Because obviously you love investing.
You know the
Investment by investment level detail.
But there's
Way too much for you to like keep in your head at any one point in time. So what does your week look like?
First of all.
My partners that run the 10 different investment platforms, they're great investors.
When we first started the firm
An investment committee. I was
Very vocal, probably twenty, thirty percent of the conversation, in some cases more than that.
And each year that's gone by
People just keep growing and again, these are great investors.
And I just less and less. And to the point now on investment committee, I have views
But
It's very rare.
Where there's some issue or something we're thinking about or some
way to create value in a particular company.
Where through the course of all the conversation with that committee, I can just sit there because
Everything that I would have said.
Or would have asked has already been asked and a lot of cases asked better than I would have asked and
I'm on the big investment committee. Some of the smaller deals I don't
Get involved with.
But again, I'm sitting there
Watching my partner's
It's kinda what David Vener used to do.
Watching a tennis match and again not only listening to the partners, but also
Some of the junior people or mid level people'cause sometimes the best ideas come from them. So
Some deals I'll get involved with. I'll get involved with one or two.
Deals here, like I do like Airbnb. I was the
Front person.
Deal like Real Madrid with my partner Rich Belatti.
The bigger deals.
I'll step in and get actively involved.
But in general, we have a great team not only with the partners, but
The next generation, the next generation.
In terms of running the business, obviously I think a lot about our strategic plan and executing the core strategic priorities. So
I try to think about
Big boulders and there's
five big boulders generally very related to our strategic plan maniacally
Focus on that. I got
excessive amount of energy as you might be able to tell. What I try to do is
Keep the culture.
Culture's everything.
If I see something not working the way it is, or some deal doesn't get passed.
to another group or some relationship doesn't do that in an unfettered way. It's so counterculture to like
Hive relationships or
not call people back or not help people, even though it's a deal not related to your particular sector. I'm trying to make that
Very counterculture.
If I see people
Acting with
Ego or something.
I'll pull them aside and I'll be like
That's not how we do it here.
And I'm maniacal about that because
It's not just culture and abstract, it's
how we actually execute our
Business model deliver great outcomes for LPs.
And then the last thing I try to do is what I call toggle like a hawk. So
They got the right people in the right seats. They bought into the culture.
They're good investors.
They're good managers and leaders.
They know what we're doing, they know what we're trying to solve, they're willing to
Work with other groups.
We have really good reporting, so that's one thing I learned at Goldman.
communication and not fancy reporting. So I always know what's
going on and then obviously I talked to
probably twenty or thirty people a day throughout the firm.
My average conversation's probably two or three minutes.
I literally talk to people all day all the time just to feel what's going on.
And if there's ever a situation where I need to go ten thousand feet deep.
I'll go ten thousand feet deep, but then I try to go back up.
So I can just see everything that's going on.
If I'm ten thousand feet
Deep every day I'm not doing my job.
And that's kinda how I think about it. But those are really how I spend my time. But the reality is we have great
set of partners. A lot of the partners we've worked together for
Twenty plus years.
We have shared values, first principles on doing business the right way. So
lot of those first principles are already in place'cause we've worked together
For so long, we all know what we're doing and
We all buy into the mission of what we're trying to do.
Keeping the culture the way it is and making
Those type of behaviors that's the life is too short.
I just try to protect that with everything.
All these fascinating stats that are coming out of Paul put out that stat about
the percent of companion of a hundred million of revenue that are private is ninety three percent or something like that.
It just seems like the private markets
And let's say the allocation of an average high net worth wealth advisor client or something is three percent and it's going to thirty percent or whatever.
Maybe they overshoot and that's the problem and then they have a liquidity crisis and that's the problem.
But I'm just curious for your commentary on
It's amazing to me how few
Net new
Pure public equity investors I interview.
It's kind of a dying breed.
It's kind of ironic when you step back and think about it.
You basically
Have all these public companies.
There's less public companies that's going on private.
But now you have all these trends of people trying to take
ETFs on private companies. So it's almost like a snake. It's a little bit it's a little bit circular.
That's really interesting when you start thinking about ETFs and
Now there's gonna be trading
Private capital. So all this stuff is a little bit circular, but it's a real dynamic, and I think it's something that
Anyone that's thinking about investing and thinking about
Capital allocation.
Needs the
Take real note of
These dynamics'cause they're real dynamics. And by the way, I think for some of the traditional
Sovereign wall funds and pension funds.
They've had unfettered access to GPs.
And I think
They've got more competition.
coming in from the wealth channel and insurance channel. So it's gonna be interesting to see
How all that
Plays out.
I think like anything, the very best GPs are a lot better than the average ones, just as the way the same the best companies are a lot better than the average ones.
It's an interesting point that the best LPs will have to compete for the best GPs in the same way the GPs do for companies. It's starting to happen. You're starting to see with some of the larger LPs.
that are the traditional sovereign wealth funds or pitch funds.
They're looking for access.
Because they're worried about access in the future because
They see what's happening. They see
All this wealth capital coming in. I mean there's not an earnings call where
People aren't talking about the growth of the wealth channel and how much money they're raising the wealth channel.
I was just seeing the insurance, so I think.
Access.
to your best GPs.
Those conversations are accelerating.
Because again, ultimately
Everything's a choice of alternatives, and I think that dynamic

Part of this.
In addition to the beautiful people that are over themselves, Spurs idea, are there other outside sources of inspiration that have really fueled your thinking?
People, mentors.
Icons like Popovich, anyone else that has cemented the way you view the world that we haven't talked about?
When I got to Goldman Sachs, I met
Jody on the airplane and I showed up to go and sex. I didn't know anything about finance.
And I remember going to the first
Analysts.
session with all these super smart kids.
Um
The best schools all four point oh's and super intimidating.
I had something very fortunate and also one of the most impactful things in my professional career happen is that
When I first started
There was a bank
called Amresco in Dallas, Texas.
And they were feeling.
And they needed to raise liquidity.
I got tasked.
And I literally knew nothing.

Weed.
The evaluation of buying a portfolio
of loans from a group called R T V Ventures.
So it's part of MRESCO is basically a bunch of loans to
radio and T V companies.
Back then, this is before direct lending or private credit.
Because
There was a lot of asset value to the radio stations and TV stations, but they had no cash flow.
A traditional bank
Couldn't finance them.
So what these guys had done, this is a little pocket in this big bank called Amresco.
They basically had gone out and given these companies firstly loans.
At like fifteen percent coupons.
And warrants for
Ten to thirty percent of
The company.
You can imagine it's breaking my brain.
They called it stick value, but they would take a radio station, a T V station
In these things traded, they were sold all the time of
Say two hundred million dollars and they would lend
The first fifty million dollars. So from their perspective.
Going back to sort of risk units.
They were the first twenty five percent of the value of the company in a first lien loan.
Which at the time
broke my brain. And the guy who ran that was a guy named Steven Plus.
Steven Plus, who's now Six Street's chief risk officer.
He's about fifteen years older than me.
We ended up buying the portfolio.
It's about four hundred million dollar portfolio.
And I was basically
in charge of the portfolio.
And Steven's this slow talking Texas guy.
You meet him and you're like
Is he gonna get out the sentence or not?
But he's one of the smartest guys out there. The fact I got a job at Goldman Sachs is
Pretty lucky.
Hey basically for
She taught me
Finance.
Taught me investing.
Taught me about risk units.
Taught me everything, taught me about how to go through documents.
I look back to it.
Now
He's fifteen years older than me. Here's some kid comes down from
Even though it's Texan, I was coming down from a
New York firm. Now I still had a little bit of my southern accent back then, which
got beat out of me by all my friends in college.
And here's this guy literally answering every week, every day.
Question after question. I used to have these yellow notepads.
And I literally would write down my ten questions for Stephen Plus for the day and I'd literally call him and ask him.
That whole process of him teaching me about investing in
How to think about risk, how to think about return, and just all that.
It literally led to what made
The start of my career at Goldman
Where I started running businesses when I was like twenty five years old.
Because that
Whole idea with Steven is
From that I started to say
Wait a second.
These are really high rates to return. And when I started to actually understand what it was, but
Couldn't you take other businesses that are good businesses?
That
Banks for whatever reason won't win to
'Cause they've got a very specific credit box.
And still earn a good return, but not that high, and then have a much bigger TAM.
Could you do that in the middle market and
I technically
wrote it, but Steven helped me write it, wrote a business plan when I was twenty
Three or twenty four years old.
And that business plan was basically to do middle market direct lending.
First of all, direct lending didn't exist. It wasn't a word.
And Goldman Sachs had never done anything in the middle market.
This is when I first met David Vinyer, but I just said, look, this could be new clients for Goldman. We could go out instead of earning on that portfolio, they were like thirty percent returns on first late.
Maybe it
Ten to twelve percent or thirteen or something.
Less than that, but again, doing something outside a credit box, but on
Good assets or good businesses.
And that business at twenty-four years old, I went to present to Hank Paulson, Lloydfeind, David Vander, the executive committee.
Now is the first
Time that
Goldman.
Ever got in the middle market.
It's through that.
By the way, that business Jew and Salisbury, one of my partners told me it's over fifty billion dollars now.
But it all happened because this guy Steven Plus
Took the time, answered all those questions would have never happened.
And that just taught me about developing people.
Cause I saw what happened to me, and that's how we put so much emphasis.
On developing the younger generation.
Age is just a number.
Get people that
Buy in the culture, work hard, that are in curious asked questions.
That really
changed everything, but it really taught me a commitment.
To developing couple of my partners.
Born a Mogbell and
Matt Tiller, they were associates
When they joined Sixtry on the first day and I've
Ben working with him every day since.
Whenever there's someone who I think at Six Street
Needs
development or could be better at reaching the potential.
Guess who I have work with?
Steven Plus. Pretty amazing.
It's incredible, but that was one of the most selfless acts and it changed my life. My friend Ravi Gupta has my favorite
framework for this development concept, which is demanding and supportive, is the orientation he wants to have towards people. How do you think about
The framework for
Developing people and talent.
That guy's a smart guy.
That podcast he did with him, I thought that was a great one. He's
Super talented. And for me it starts with
Karen.
You have to authentically care.
For that person.
And you have to authentically care for their development. That's
One, two, three.
And what I always tell
All our leaders all the time as
You gotta be proactively as part of your day.
And part of your week and part of your month, thinking about
How do I develop this person?
What are their strengths, what are their weaknesses how do we do that? And that's why we have this personal business plan that we make.
Everyone do, but it's not only that we have everyone in the firm do it.
Part of the process not only have him do it, the other part of the process.
It's having them go to their leaders and really sit down with them to sort of identify that.
So for me it's being intentional.
It's being deliberate.
But you gotta have a plan.
You can't do it in an abstract and gotta be very explicit. And the way I think about the personal business plans is
Every year you have a personal business plan. The format of everyone's personal business plan is the same.
The content's different.
You have five things or three things on your list you need to improve.
You knock down seventy percent of them.
That's part of your toolkit.
You leave the ones that you didn't knock down for the next year.
Those go to the next year and then you add two more.
I talk about future self all the time.
You go through that process.
You do that for twenty years.
And you're deliberate about it and you keep notes like you do on
The yellow notepad.
And you're intentional about it.
Those people by the kind to get to twenty
they're gonna be optimizing their return on time because they've such a wide
Toolkit.
to go through. And by the way, the correlator to that is allows them to spend more quality time with their family and their kids.
Oftentimes people try to skip steps.
And the whole purpose of these personal business plans is the intentionality.
To really knock'em off and be deliberate.
You're not on an island.
You're in partnership with whoever your leader of that particular investment platform is.
And that's how we think about we
Say look, shoot high.
'Cause if you're doing a hundred percent of your plan of what you're trying to work on.
You're probably not aiming high enough, but try to knock down seventy five percent.
And keep adding to it. And you'll wake up one day and your future self
Well thank you,'cause you get to spend more time
With your kids and go to all their
Sports games like I do today.
Is the retention crazy high at Six Street?
We've never lost a partner at six street.
Crazy.
And think that's all culture.
Maybe after this podcast we will, but'cause all you got so many listeners, but
You could argue maybe we should have lost some.
Maybe there's a criticism there, but
There's different forms of compensation. I think sometimes in our industry everyone thinks about
one form of compensation which is monetary.
But
There's who you work with compensation.
What's your culture like compensation?
Are you getting developed compensation?
There's opportunity. Do you have white space in front of you compensation? We try to take a more
Holistic
beauty to that and we coach that and people
Like to work there and we don't

We don't tolerate it. Will that pop up every w once in a while where two people get intense in a district?
That happens as long as it's
With respect and dignity. And again, people get intense, but
That's not what we're doing because again, our business model is predicated.
on people working together.
not having feet temps and silos so they all work together share information share relationships
That is literally the essence of our business model.
That's why we're so focused on it. Say more about this concept of future self.
I was very fortunate that my parents we didn't grow up with a lot, but they always spent a lot of time with me.
They were always present at all my sports games, they were just always there. So
When I started
Working it.
Goldman.
I had that in my mind.
Whenever I had kids, I didn't know when.
I wanted to be able to be
Very present with them.
My idea was
And it goes back to those yellow piece of paper is that if I build the biggest toolkit possible, if I invest all the time now.
Part of when I
I have kids and a family and a wife.
that I will be able to spend maximum time with them.
I had a bunch of motivations.
I was always thinking about my future self, not from a business perspective or career perspective.
But that I could spend more time with my kids.
These kids don't exist, by the way. So this is just like a future self. And my idea was it's all about return on time because investing is overwhelming. You could literally spend

Half deal. It never ends. So
I need to be able to be the most efficient at return on time. Do I want to be efficient at return on time?
No we like
Have the biggest toolkit possible, and I gotta build that toolkit as much as possible. That's why I started doing
My own personal business plans.
when I was just starting the business, but it was always with the mindset of my future self.
So that when I got to that point, I could be a good husband, be a good dad.
And be present like my parents were.
Always talk about think about your future self.
You gotta have fun, but
The more time you put in now when you don't have
A spouse and kids
You're gonna basically set yourself up.
Or you can spend more time. I think some people
mortgage the future of it by having too much fun where you could have a little bit
What's fun?
And
Spend more time building your toolkit so you could spend more time with
Your family won't happen and that was kind of always a motivation.
For why I was so focused on those yellow no pads and just
That future self and that moment. Again, just to be clear,'cause
I have friends probably listening.
I did have fun, but I was also thinking ahead.
About that.
Future self.
I apply future self to six street to the whole thing.
And you think five, ten years hence, something like that.
What do you hope it becomes that it is not yet?
I want to stay an investor first firm. Other people in the industry wanna be
Deployment factories.
There's nothing wrong with that.
All good.
But
That's not what
We want Six Street to be. That's number one.
Number two.
Is
Culture
Is everything
To me, there's two tests I'm gonna always run.
One test is that we have an off site every year in Austin, Texas.
where the whole firm comes and I go walk around, I meet a bunch of people and I'm like, did I meet any A-holes?
Did I meet people that
Don't ask questions or just talk about themselves.
And so far we're undefeated.
Sixteen and out.
But the other test I'm gonna run is when I'm an old man and eighty years old.
And I come back in the firm and I sit in a random investment committee or a random meeting.
Is that still true?
And to me, that's the ultimate test.
And would I introduce the people then to
My family to my grandkids or my kids,'cause that's the ultimate test.
We always talk about that when we're interviewing people.
First of all, are they over themselves yet?
Which again in our industry there's a lot of people not over themselves yet.
Maybe they'll listen to this and get over themselves.
That's a whole other topic, but
Would you introduce into a family member?
That to me is more important than anything is
Maintaining that and wherever that journey takes us.
That's where it will take us, but again, for our business, we're an investing business.
Those things are what make up us trying to
drive what we believe fundamentally religiously,'cause we've been doing it for
Twenty five plus years.
Great outcomes for LPs.
And if we can do that and ultimately
Serve your customer, which in our case is our LPs.
Are people
We do all those things.
That's where it will take us.
To be clear, we have five year strategic plans and very specific objectives.
But that's what I think about on the horizon and
I've shared that broadly.
our entire firm because it's how I think about it.
My friend Boyd Vardy has this great phrase, which is we don't know where we're going, but we know how to get there. I like that. I like that. Which sounds a little bit like you gotta be able to adapt because
Think about software engineers. Every
Mom and Dad and Palo Alto.
three years ago was telling their kids they got to do
software engineers and now tell them not to do.
Software things can change and you gotta be adapting when we're headed into
Interesting times here.
I'm fascinated by what you built. It's so interesting and fun to hear all about it. Its history and its unique aspects and
Where it's like you're such a fantastic conversation.
When I do these, I end with the same traditional closing question for everyone.
What is the kindest thing that anyone's ever done for you?
I think I'm gonna have to say the Steven Plus.
Being fifteen years older than me and taking time to answer all my questions.
In a lot of firms I think they would have gone around me and said, What are you doing? And
He took the opposite approach.
That's the kindest thing anyone's
ever done for me and probably the most impactful I wouldn't be
Where I am today without him.
Amazing. Thank you so much for your time. Thank you.

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