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Episode is brought to you by T

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his first long form interview of this type

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philosophy. Interviewing. Mitch are pub use

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her and Rick Berman who. The Art

2:00

of Investing Podcast on the Colossus Network. If you

2:02

enjoyed this interview, be sure to check out their

2:05

whole feed by the link in the show Notes:

2:07

Let's. Get to it. Please enjoy this comprehensive discussion

2:10

with Match. Were thankful the him for his time

2:12

and his insights. Hello

2:14

and welcome to the Art of Invest

2:16

the Pot class devoted to helping you

2:19

more slowly experienced the joys of Compound

2:21

and all it's forms. I'm home users

2:23

and I'm requirements. we're your house. Any

2:25

sessions are teachers will be some of

2:27

the world's most compelling people from across

2:30

the vast range of humanity's. Take

2:34

your seats. Classes: Insects.

2:37

Shelf Hydra to collaboration with Off the

2:39

Shelf Reform and officer for a Competitive

2:42

Casinos has grown horns and customers have

2:44

so romantic other whole thing is expressed

2:46

my wrists all with such as death

2:48

or so we their own do not

2:50

reflect that Kenya either Citigroup buildings or

2:52

say the Romans were as much as

2:55

as intended for informational purposes Only listen

2:57

up your life on the basis for

2:59

investment Citizens Federal buildings a place said

3:01

agreement with the remaining key positions. As

3:03

dirty as. A

3:07

teacher today as Betrayals one of the most

3:10

iconic his daughters and philanthropists of our time,

3:12

Having cofounded dinner forty years ago one side

3:14

his brother and best friend Steve. The.

3:16

Wheels voice of Strung Together Track record of

3:18

compounding the might even make buffet blush. Consider.

3:21

The dinner her as a new over twenty

3:23

one percent for for decades. resulting.

3:25

In an eighteen hundred times multiple

3:27

on invested capital. And.

3:29

While the numbers are mind blowing, the story of

3:31

how it all went down is even more remarkable.

3:34

In this conversation you'll learn from Bitch about

3:36

The Key and puts to his outlier success.

3:39

Why? Greatness as a journey the takes an

3:41

unusual time horizon. The. Role that

3:43

Benchmarking plays and standing up any winning

3:45

organization. Why? Is essential to

3:47

cultivate learning, agility and embrace transformational

3:49

pivots over time. In order to

3:52

adapt and thrive and an ever changing landscape.

3:54

How. An uncommon community, continuous improvement and

3:56

long term sinking both A d individual

3:58

and corporate level have you would want

4:01

to most impactful companies of our time.

4:03

And. Also the qualities the Miss works for both

4:06

and leaders and businesses he was to support.

4:09

More. Recently Midges turned his focused a glance

4:11

on a foundation and museum he cofounded with

4:13

his wife Emily. With. A vision

4:15

that emerged from their shared passion for

4:17

three fundamental elements: art. Architecture

4:20

and Landscape. And. Seeks

4:22

to be the preeminent foundation devoted to the

4:24

visual arts in the world. Having

4:26

signed the giving pledge they've committed to building

4:28

in investing for the benefit of mankind. And.

4:31

You'll hear how this stewardship orientation started with

4:33

the in her. And. Now permeates through

4:35

to every pursuit. The mistakes on. While.

4:38

Me to the Natural Teacher This is actually

4:40

his first recorded one for interview of any

4:42

kind. And so we feel especially

4:44

honored to share with you or candid conversation. With.

4:47

Someone who is sheet and transformed us in

4:49

the business world and so many profound ways.

4:52

In. My opinion, this class is more than just shining

4:54

a light on the anatomy of a compounding seen.

4:57

It's. Warning first hand. The. Ideas

4:59

and principles behind greenness that are available for

5:01

all of us to more deeply embrace and

5:03

embodied. With. That I hope you

5:05

enjoy a class with our mentor and good

5:07

friend. Metrorail. S

5:10

Omits Will back to the are

5:12

investing a decisis or first time

5:14

recording but by now with all

5:16

the teaching hours you put in

5:19

on campus in order dame you're

5:21

pretty much a tenured professor. Run.

5:23

A different campus though today. the

5:25

beautiful campus of Cleanse. Don't busy

5:27

and maybe it's appropriate to starts here.

5:30

I mean, this is such a

5:32

remarkable place for those who haven't yet

5:34

visited. I mean the integration of

5:36

nature and architecture and of course,

5:38

art. And. Decision as

5:40

building something preeminent in the world

5:42

around the visual arts. What's.

5:45

The Genesis Story. Glenn.

5:47

Zone is obviously something that's near

5:49

and dear to my wife, family,

5:52

and my heart. The. Two

5:54

of us. Cofounded. This

5:56

place. Oh. I

5:58

guess in September two thousand and. It

6:00

was the whole vision and

6:02

purpose of. Number. One art

6:04

is essential to life. And.

6:06

That. We. Could create something very

6:09

different that hasn't really been seen

6:11

in the world today And what

6:13

I mean by that. More.

6:15

About the seamless integration of art

6:17

architecture in nature was sit on

6:20

a campus of about four hundred

6:22

acres where people can com and

6:25

experience. All. Three of these

6:27

pieces of the equation in

6:29

a slow. Com.

6:32

Way. That just isn't. Seen.

6:35

In the museum world, anywhere

6:37

else. We were aghast. At.

6:40

Many places that we visited over the

6:42

years where you stand twenty thirty feet

6:44

away from the picture and you're taking

6:46

a picture of the picture because there's.

6:48

Ten. Or fifteen people. In front of

6:51

you to you never get a chance to

6:53

engage with an art work in a way

6:55

that you get to a clan. So we

6:57

actually did a study. We. Wanted

6:59

to dedicate. About three hundred

7:01

and fifty square feet per visitor.

7:04

versus. What happens at a famous New

7:06

York Museum? On a weekend where

7:08

they allocate about twenty square feet. Per.

7:11

Visitor. So it gives

7:13

you a feel for the sense of

7:15

calm that would be here, and in

7:17

a way that. Once again,

7:19

a visitor can engage with the

7:21

artwork. Integrate. Away they could

7:24

stand in front of the for ten twenty minutes

7:26

if they want. Him by the

7:28

way to get you started. When you

7:30

arrive at Cleanse, don't you come into

7:32

our parking facilities. Each. Space

7:34

has a tree. You're. Feeling the

7:36

com of nature as soon as you

7:38

command. It's not the traditional parking lot

7:40

that you would say. You. Get

7:42

out of your car you go to our

7:44

arrival hall. And. You check in and

7:47

you then maker. Six. Seven

7:49

eight minute walk through the landscape.

7:52

To. Get to building. To. Get

7:54

to the salient itself. So.

7:56

You have a chance to decompress

7:58

along that. Walk. You'll see

8:00

some monumental sculpture along the way.

8:02

The building is kind a hidden

8:05

until you start to approach the

8:07

last couple of minutes of the

8:09

journey itself and. When. You actually

8:11

get to the building. Your really ready

8:13

to start to engage you've left me or.

8:16

Negative thoughts about what's happening in the

8:18

world, what's happening in your daily life,

8:20

the hustle and bustle that's going on,

8:22

and you really do get a chance

8:25

to decompress. So. That's what

8:27

we're about. We're on a mission

8:29

where now this team plus years

8:32

in. We think we need another

8:34

fifteen plus years to really create

8:36

something great. Here we're

8:38

good now. But. We're not great.

8:41

And greatness is a journey that

8:43

takes time. We hope that all

8:46

the good decisions we make a

8:48

cleanse stone. In. The years

8:50

to come and in years past will

8:52

continue to compound on one another. To.

8:55

Will talk about com pounding. allotted A

8:57

but. Glenn. Stone is com pounding

8:59

as well with the decisions we make every

9:01

day and the learnings that we have in

9:03

the things that we continue to do to

9:06

try to a bar game and created an

9:08

experience for our visitors has just to none.

9:11

That's. What we want and not stance

9:13

some land to be that were trying

9:15

to create here. It's. Hopefully

9:17

going to be one of the revered

9:19

museums around the world in its day.

9:21

and it's got a long term endowment

9:24

that's been put in place to sustain

9:26

it in perpetuity. In. A way

9:28

that will keep it. Unique. To

9:30

what we're trying to do. I think

9:32

it's evident that. Some.

9:34

Of the things that have been so

9:37

important to the story of danner her

9:39

this Isa says continuous improvement, a commitment

9:41

to excellence customer satisfaction. All of that,

9:43

it clear that those are elements that

9:45

are also been integrated into going Samba.

9:47

Talk more about just. You. And

9:50

Emily's having that shared. Vision and

9:52

that kind of dream. Talk a little bit

9:54

about the first sixteen years of execution, how

9:56

you've gone about building it. Will.

9:58

Emily and I have become. The Disciples

10:00

of the author Jim Collins.

10:03

And. He's written a book good to great. Deal.

10:06

To last how the mighty

10:08

sale and. The.

10:10

Take a ways in learning. Sit With

10:13

has from Gm over the years by

10:15

the way. he comes and speaks in

10:17

our conference every four to five years

10:19

for our businesses and just been profound.

10:21

And it all starts with creating. A

10:24

purpose statement. A set of

10:26

core values. A. Vision statement

10:28

of what you stand for. Anna.

10:32

Be. Had a big, hairy, audacious

10:34

goal which is what you

10:36

really aspire to over twenty

10:38

thirty year period of time.

10:41

And. For Emily and I it all started about.

10:43

What? We thought there and we started

10:45

with our purpose statement which is art

10:48

is essential to lies and we build

10:50

a set of. Core. Values that

10:52

we live by every day. I mean

10:54

we've and do interviews with that we

10:57

call core Value Interviews whom were hiring

10:59

associates to come to work at Glen.

11:01

So it's to see this their values

11:04

are aligned with of eyes of the

11:06

institution. Itself This helps make

11:08

sure that you're hiring great people

11:10

who have a shared purpose in

11:12

Beijing the similar to yours. It.

11:15

Started there and and we can talk

11:17

for hours about how we select an

11:19

artwork, but it's very similar to the

11:22

way we select a business. Do you

11:24

want a business is a C or

11:26

a be minus. Hell. No,

11:28

you want businesses that are a plus

11:30

that are anchor tenant in earth's the

11:33

defining type of businesses in the industry's

11:35

it dates support. It's no different. In

11:37

in the way we select art, we

11:39

want the a plus works of the

11:42

most defining artists of the times when

11:44

these works were created an. That.

11:46

Compounds on itself over the course

11:48

of time as well. So.

11:51

There's two thousand plus artworks in the

11:53

collection now. We've made some mistakes along

11:55

the way, but we correct those mistakes

11:57

and we continue to up the game.

12:00

On the collection of aren't we have as

12:02

well as. The. Same things taken

12:04

place in the architecture, the same things

12:07

taken place in the care of the

12:09

landscape. means we want for sit areas

12:11

we want. Pastors, With

12:13

flowers wheats want people to be able

12:16

to really wander and see lots of

12:18

different things me with planted. Pretty.

12:20

Close to twenty thousand trees now.

12:23

Some. Very, very large, some one

12:25

inch caliber so that we pay attention

12:27

to all these details in what we

12:30

do and how we've gone bad at

12:32

In. It's been a great journey for

12:34

Emily. A nice to share but. We.

12:36

Also think institutions. Of.

12:39

Greatness! Art once again built

12:41

quickly. He can't be great

12:44

quickly. Great takes time. And

12:46

com pounding. So this journey of thirty

12:49

years to get to that point. Is.

12:51

What We're really after? A nest of

12:53

be hag that we want. We want

12:55

to create something that doesn't exist anywhere

12:58

else in the world. Were. Lucky

13:00

to be here, I think just before. Geek.

13:03

Dogwoods booming move beneficiaries of now

13:05

visions. I want to dig in

13:07

just a little more. On.

13:09

Those first couple years because we're going to

13:12

get i'm Learning from your time at. Dinner.

13:14

Her and in so many other businesses.

13:16

One of the key things that comes

13:18

out in her business systems. and what

13:20

we've learned from you these past few

13:22

years is this idea of benchmarking. And

13:24

so before you you enact that be

13:26

hag in envision, there's a long period

13:28

during which you find out what the

13:31

other greats have done. And what

13:33

they might have made mistakes. honor with his

13:35

gun rights. Talk about benchmarking as a really

13:37

sick on Stone. Oh, it's

13:39

a great question and one that

13:41

we spent a considerable amount of

13:44

time on. not only Emily and

13:46

I but taking our architects, taking

13:48

our builder at times the people

13:50

that were gonna be very active

13:52

in. The. Bill Would out of

13:54

Gladstone is a whole. And we actually

13:56

benchmark city museums around the world.

13:59

And. The great access to meet

14:01

the teams. And we would sit

14:03

down and and have a nice conversation to get

14:06

started with the team before we did the tour

14:08

and the first question we would ask is. Sophie.

14:10

Had to do it all over again. What would you

14:13

do differently? And the stories

14:15

they told us or absolutely

14:17

amazing. The. Learnings of what

14:20

not to do, Was.

14:22

Perfect. And for our

14:24

architects and are builders to hear

14:26

these things, we got into them

14:28

a new So things like loading

14:30

docks? how would you do? you're

14:32

loading dock differently than what you've

14:34

done today and how they created

14:36

square footage for entertainment space rather

14:38

than the art works and how

14:40

the sun will shine in certain

14:42

glass areas that was distracting and

14:44

what you could do to eliminate

14:46

that type of thing. there's a

14:48

hundred and one different learning said

14:50

came out of this and we

14:53

brought. All of those backs with

14:55

this that became part of our

14:57

architectural brief when how we wanted

14:59

to build this place out and

15:01

I think we've created. Something.

15:04

Pretty. Unusual. We made some mistakes along

15:06

the way mean if you want to

15:08

know as a for instance or cafes

15:10

or way too loud we didn't look

15:12

at the acoustics as properly as we

15:14

should have. It was inexpensive sex that

15:16

we were able to take care of

15:19

that. We have prefer rated ceilings now

15:21

that you can even really see but

15:23

that take a lot of the impact

15:25

of sound out so that you can

15:27

hear yourself. Have. A conversation over

15:29

lunch with your friends to have plenty of

15:32

things that we continue to learn. But you

15:34

make a mistake. You cracked it. Where.

15:36

Did that commitment to benchmarking. Emerged

15:39

I know there is the at

15:41

early story of view and Steve

15:43

dividing up the world and looking

15:45

for benchmarking exercises in other great

15:47

companies in the early days of

15:49

Danner Her and I think it

15:51

was Steve who drew Japan and

15:53

came back with this concept of

15:55

Chi's and that ultimately has evolved

15:57

to being in her business systems.

16:00

Would that the early roots? And that

16:02

was the early roots In that would

16:04

have been Nineteen Eighty Five Nineteen Eighty

16:06

Six. When we were too young guys,

16:09

we had made a series of acquisitions

16:11

and we kind of looked at each

16:13

other and said we don't know much

16:15

about manufacturing. We better figure out how

16:17

to run these businesses and. We

16:20

did divide up the world. I. Went

16:22

to Europe, steve one to Asia and

16:24

we split North America. And.

16:26

When we looked at

16:28

Gm Ford Chrysler toy

16:30

our dog Valvo over

16:32

in the Scandinavian countries.

16:35

We. learned a ton, And. We.

16:37

Saw something amazing in Japan or Steve

16:40

side. I didn't actually see it but.

16:42

What? We learned was. In.

16:44

Watching Gm. Change

16:47

it to time, Die. That.

16:49

Took them six weeks to change that

16:51

die over. And we

16:53

watched Toyota. Change. That

16:56

same die and six years. And.

16:58

We said something is going on here

17:01

that we need to understand. And

17:03

what came clear was. Toyota.

17:06

Adopted the principles of the same as

17:09

quality Guru by the name of Edward

17:11

Demi. And. He

17:13

had a bunch of principles. ten

17:16

or eleven different quality principles as

17:18

he stood by. And he tried

17:20

to sell his della goods. To.

17:22

Gm, Ford, and Chrysler at the time.

17:24

They. Weren't buying it. And. In

17:27

nineteen, Sixty Nine Toyota. Body.

17:30

And hook line and sinker. To. These

17:32

principles to what we like to

17:34

say. Is all we

17:36

were doing was importing Edward

17:39

Damage principles back to America.

17:42

Because. He had export of them to

17:44

Toy Iota and when we learned what

17:46

the toy owed production system was all

17:48

about it was clear that they were

17:51

the best, the best a doing this

17:53

compared to anybody else in the world

17:55

and we were able to adopt those

17:57

principles and bring them back to America.

18:00

And start to integrate them into the

18:02

business and it started a down. Her

18:04

is the Jacobs production system cause we

18:06

took it to one of our most.

18:09

Difficult. Manufacturing. Facilities

18:11

that we had it was

18:13

upside down with problems and

18:15

introduced dare. It. Went and

18:17

evolved from the Jacobs production system

18:19

to the Dan Her Production System.

18:22

And over the course of time as we

18:24

learn how to clickable. All. Of

18:26

these learnings, we're not just a

18:28

manufacturing but to the businesses a

18:30

whole. Whether. It's accounts receivable

18:32

management. whether it's your call

18:34

centers, Whether it's things like

18:37

contracts and the likes, you

18:39

can continuously improve. All. Of

18:41

these sing. So we were able to

18:43

create a business system out of this,

18:45

not just a production system. So that

18:47

was it. the root of what started

18:49

to happen in in Nineteen Eighty Five,

18:52

Eighty Six, and that compound in Germany

18:54

over the last almost forty years now.

18:56

Has. Served us well. It's a

18:59

comedy. My this idea of signing

19:01

a great idea somewhere out there,

19:03

somebody else is idea adopting aid

19:05

or aspects of it and then

19:07

over time advancing it, Improving and

19:09

in a way. That's when we

19:11

talk about Dana her business systems.

19:13

I mean, I think even today,

19:15

the concept of Cousin and Lehman

19:17

factoring police. It's usually. Prosecuted.

19:20

In a more narrow way. Devoted.

19:22

Only to the concept of see manufacturing

19:24

as opposed to the way in which

19:26

Danaher has has allowed it to inform

19:28

every aspect of the business. the culture,

19:31

The. Talent I do think benchmarking is

19:33

still a hidden art. How

19:36

would you advise folks to think

19:38

about bringing because of benchmarking into

19:40

their business or lives more generally?

19:43

What? We have a Japanese concept known

19:45

is going to combat. That. Means

19:47

going to where the action is. So.

19:50

Let me give you something real time. We.

19:52

Were on with our Ceo Danaher yesterday.

19:54

My brother and I. He took

19:56

an hour out of his state to spend with

19:58

us on some important things we need. The review

20:00

with him. He's. In Pensacola,

20:02

Florida right now. At. One

20:04

of our largest manufacturing facilities.

20:07

Leading. What? We refer to as

20:09

a President Skies and. And many

20:12

of our President's from around the world

20:14

this week. Or. Leading Kizende as

20:16

if we had two thousand of

20:18

our associates engaged in Chi's and

20:20

around the world this week. So.

20:23

That's called walking the talk. And.

20:25

Making sure that. You're setting.

20:28

An. Example: at the highest levels

20:30

of an organization. If

20:32

Reiner Belair shows up in Pensacola

20:35

and dedicates a week of his

20:37

time to a President. Skies and.

20:39

What? Do you think is going to happen

20:41

with everybody else in the business? They

20:44

know that that needs to be part

20:46

of our culture, part of our Dna.

20:48

They need to buy in and become

20:50

part of this in a profound way

20:52

that just is enabling so. I

20:54

think the idea is you just

20:56

have to get started. And yeah,

20:59

have to be committed to it. And.

21:01

You. Can read a few box you can

21:03

learn a little bit about were Toyota production

21:06

system is or there's god knows it's kind

21:08

of information out there on would Dan

21:10

hurries time but you need to get the

21:12

journey started. And. It's company

21:14

journey once again. you're making

21:16

little decisions and little changes

21:18

every single day. That. Add

21:21

up to. Nickels, And

21:23

dimes and corridors become

21:25

dollars. And these things add up

21:27

over the course of time to big money

21:29

when you've been on it for forty years

21:32

and doing it over a prolonged period of

21:34

time. When. You look back to

21:36

your pre down her days when he

21:38

reflect on is the most formative experiences

21:41

and people's in your life. My.

21:43

Dad would have to have been a

21:45

very formative experience. It was a

21:47

very humble guy. He grew up

21:49

in New York City. His mom passed.

21:52

In. Childbirth of his youngest sister

21:55

at the time and his

21:57

dad was a fruit vendor

21:59

on this. The New York City. And

22:01

couldn't care for the family and as a

22:04

result. He and several of his siblings

22:06

were put into the northeast. He.

22:08

Went into Hebrew often assume him. When.

22:10

He was eleven or twelve years old.

22:13

Blessed. When he was sixteen years old

22:15

with a toothbrush and five bucks. Saying

22:17

Norm and good luck the world is

22:20

all yours And he always told the

22:22

story. I believe the guy. Here's.

22:24

A guy in my dad to

22:26

probably never finished. His high

22:29

school education and was a ditch

22:31

digger. For. The Carnival Circuit.

22:34

Was. On a boat at some point

22:36

in his life. working. That.

22:38

Side of the equation. Eventually.

22:41

Settled. Into expert with my

22:43

mom and created a home and

22:45

proven contracting business. The did very

22:48

very well. But. I think

22:50

he had a hard time dealing with

22:52

the complexities and personalities and home improvement

22:55

salesman. And. He ultimately said.

22:57

I would rather sell to them

23:00

products then have to manage these

23:02

cast of characters. So.

23:05

He came up. The whole family moved

23:07

us to the Washington D C area

23:09

when I was ten years old. And

23:12

just society, we can start a wholesale doting

23:14

products distribution business. And he did. So.

23:17

Here's a guy who's wasn't scared

23:19

to take risks. Bad: The entrepreneurial

23:21

spirit and drives. And

23:24

at the same time. Created.

23:26

A business that he ended up selling.

23:28

And. What we are told was the

23:30

first Aesop done in America where he

23:32

sold the business to the employees. It's

23:35

because one of his seems is want

23:37

to be a champion of the underdog

23:39

to the top drivers guy equity in

23:41

the business. As a result of this

23:44

east. And. The.

23:46

Business still exists to this day. I think

23:48

when he sold it was about a tenner.

23:50

told Million Dollar Business he sold it to

23:52

the employees and by the way they couldn't

23:54

pay for it. so he took a note

23:56

back for one hundred percent. So. They paid

23:58

him out over time for the. And

24:01

today, midsouth building supplies still exist and

24:03

I'm. Told it's a hundred fifty

24:05

million dollar business in the truck. Drivers

24:07

are millionaires, The. How great is

24:10

that? That's my dad but when my

24:12

dad didn't have the in formal education

24:14

he had and know when I referred

24:16

to as the School of Hard Knocks

24:18

and people ask me where I got

24:20

my M B A I said i

24:22

gotta from the norm and are rail

24:25

school of hard knocks and he understood

24:27

the psychology of what it was like

24:29

to be out there on the street

24:31

competing every day without a formal education

24:33

and how to get things done and

24:35

I watched him with bankers over the

24:38

years and how he maneuvered. Bankers and

24:40

convincing them to give him loans

24:42

when he didn't really deserve. To.

24:44

Get loans and how he just manage

24:46

people and how he sold and is

24:49

nice home were spent on the phone

24:51

calling people in we just for in

24:53

the general vicinity of where he was

24:55

making his calls so we heard all

24:57

the different things that went on. So

24:59

I like to think the apple doesn't

25:01

far too far from the tree and

25:03

she taught me the street smarts and

25:05

in one of the stories that I

25:07

never forget that he told was if

25:09

you're in a poker game and after

25:11

three hands you haven't figured out who

25:13

the soccer is your is this is

25:15

the as each true in life just

25:17

teaches you that different ways that. People.

25:19

Think and and managed things.

25:22

Can. People draw conclusions from the same

25:24

saxon presented to different people that

25:26

are opposite ends of the spectrum.

25:28

is kind of amazing to see

25:30

how people look attack so differently.

25:33

But. They do. And. So you need

25:35

to be prepared for that. Just when you

25:37

think and say there's no way somebody to

25:39

come to this conclusion yet they do. You.

25:42

See to be prepared to deal with things

25:44

like that, so he's probably the one who's

25:46

had. The biggest influence on my

25:48

life. Have. You.and all about

25:50

how's your dad's time in

25:52

orphanage sheets? Him. And

25:55

he just as somebody who has had a number

25:57

of foster children ourselves and thinking about the ways

25:59

in which. Children too often respond

26:01

to that kind of early challenge.

26:04

The can build tremendous resiliency and

26:06

and could also be something that's

26:08

very difficult. I. Think he came

26:10

away with both. I

26:12

think the sense of accomplishment was

26:15

my dad is tell a story

26:17

where he'd sneak god it's orphanages

26:19

night and he by apply for

26:21

a nickel back in the service

26:23

during the depression area time. And

26:26

then he'd come back into the orphanage

26:28

in the slices and eight pieces and

26:30

eat so. Each piece for a penny.

26:33

So. He made. Three. Cents on a.

26:35

Size. And purchase this enormous.

26:37

That's pretty good. Marge A Loss hosts

26:40

to a hockey so you learned at

26:42

a very young age. The. Hustle

26:44

and the entrepreneurial spirit on the

26:46

other side of the equation. I

26:48

think he always tells in his

26:50

life with a sense of abandonment.

26:53

Because. He was put into

26:55

an orphan, not because of anything

26:57

other than his father was incapable

26:59

of taking care of the children,

27:01

but that left a lasting impression

27:03

on his life as well. So

27:06

there's good and there's difficult than

27:08

com was situations like this, and

27:10

I saw it in his life

27:12

till the day he passed that

27:14

eighty nine years old. Incredible.

27:16

Stories about your dad. And

27:18

all he did for your family and his

27:21

employees. Shifting. Gears a

27:23

bit. You mentioned earlier, the

27:25

worked at Ten her current Ceo Runner

27:27

Blair. And his team are

27:29

doing to continue to spread decades and

27:31

gospel. A dinner. And runners

27:34

the latest in a string of many meters

27:36

across the history of Down Her. I.

27:38

Remember last year when you are with us

27:40

in class you told a story early on

27:42

it was many years and again or her

27:45

But very early in the for your journey

27:47

does you and your brother Steve. In

27:50

a way, having a transition to t stewards

27:52

of the business and you manage I'm an

27:54

aim toward Sherman, but to tell that story

27:56

maybe as an example how you think about

27:59

essential was a. And harnessing talent

28:01

in identifying talent. For. Yes,

28:03

the story starts with the fact that

28:05

I think Steve and I. Understood

28:07

what we didn't know, We

28:10

were not meant to be

28:12

great operators. We. Tried we

28:14

did okay. But I. Think

28:16

we understood. That.

28:19

We. Really needed to professionalize the

28:21

business week to create long

28:23

term vision and strategy and

28:25

how to properly allocate capital.

28:27

We were very good at

28:30

those type of things. But.

28:32

The details of what you need to

28:34

do. To run a

28:36

business. Day. To day is

28:38

a heavy list. There as a

28:40

Ceo, publicly traded company really requires you

28:43

to be. And twenty four seven. Six

28:46

five year. And we're prepared

28:48

to commit the time in the energy. The

28:51

details were something that really needed to

28:53

be paying attention to and so. We.

28:56

Like to say And nineteen ninety, we

28:58

fired ourselves. And we hired

29:00

of Salah by the name of Toward

29:02

Sherman to become Dan Hurst First. Real.

29:04

Ceo outside of the business.

29:07

He was actually an outside. Our George came

29:09

to us from what was known then as

29:11

Black and Decker. Today we know it is

29:14

Stanley Black and Decker. George was the C

29:16

O out. And we had dinner

29:18

with him one night. We thought we

29:20

were going to be talking about D

29:22

integrating their Throat Shock Manufacturing plant in

29:25

South Carolina and that he was gonna

29:27

give us the business if we would

29:29

take over the facility. We. Were

29:31

ready to go and we had all

29:33

of our ideas. And which or

29:35

said was i'm really thinking about. Leaving

29:38

Black and Decker, I'm thinking about going

29:40

to work for this organization. I know,

29:42

you know these guys at this organization.

29:45

Where do you think? And

29:47

I'm kicked in Steve under the table

29:49

when he understands exactly why and kek

29:51

nem cause we had always said to

29:53

ourselves the type a leader we're really

29:56

looking for is George Shirt. Here.

29:58

It is a tease it up for

30:00

whereas when we didn't even expect it's

30:02

And to make a long story short,

30:05

ninety days later. We. Had a

30:07

deal with George. He did extensive due

30:09

diligence on the business and remember this

30:11

is when Dan Her was primarily a

30:13

tool company and George was a tool

30:15

guy. And George gave us

30:17

a great ten year run. He.

30:20

Was an exceptional Ceo. He

30:22

professionalized the business he brought

30:24

process is an Sti, helped

30:27

us roll out the down

30:29

her business system in meaningful

30:31

ways. It were really important

30:33

to becoming the culture of

30:36

the organization our Dna. And

30:38

like I said, ten great

30:40

years with George and a

30:42

seamless Ceo transition to Larry

30:45

called. as part of his

30:47

accent was. Just pretty cool to

30:49

see and often be part of. The.

30:51

I think about whether see active, find yourselves

30:54

in the Company that you sounded works or

30:56

even just a practice of benchmarking. It

30:58

does seem like those. Are

31:00

in some ways. In service

31:03

to something that we've observed about

31:05

you and about everything that you

31:07

involve yourself with this duel commitment

31:09

to ambition and patience. If you

31:11

are only ambitious and you don't

31:13

have that one time horizon, doing

31:16

extensive benchmarking might seem like a

31:18

waste of time or time that

31:20

you don't have. But. When

31:22

you're thinking in terms of stuck

31:24

aids and even centuries. It. We

31:26

frames how you answer certain questions. I'm

31:28

just curious to try to understand. Better.

31:31

We're that long term gene. Came.

31:34

From. I'm not sure

31:36

where it came from, but it's

31:39

there and we don't think

31:41

in terms of quarters or years.

31:44

We. Really think in terms of decades and

31:46

in many cases we like. The. Concept

31:48

of happy and on a limited

31:50

time horizon. On. Our investments.

31:53

And. we've now been added for forty years was

31:55

down. It'll be forty years

31:57

in September of this year. The ten her.

32:00

Found it and. The. Power

32:02

of com pounding. Over.

32:04

That forty years. Tax

32:06

free by the way. Is what I

32:08

refer to as the eighth wonder of the world. Is

32:11

phenomenal saying. And you don't really get

32:14

started until you hit the ten year

32:16

mark. So we watch a lot of

32:18

what's happening in the world of short

32:20

termism today. Whether it's the day to

32:23

day mark to market, said hedge funds

32:25

have to go through. The. Three

32:27

to five year cadence said

32:30

P and Venture Capital are

32:32

engaged in. It's really hard

32:34

to build anything lasting. That's

32:36

great when you take those type of. Time

32:39

Horizons is why said when we talked about

32:41

clenched or I think we're on a thirty

32:43

year journey. To create greatness

32:45

at the institution. It's. No

32:47

different in that business world. It just

32:50

takes time. And compounding.

32:52

whether it's business practices

32:54

or financial returns, it

32:57

just. Takes. Time.

32:59

If you want to get to are the promised

33:01

land which is a hundred. Times. Outcome

33:04

on your investment. Uni. Twenty

33:06

to thirty years to do it, And it you

33:08

can't get to ten times in ten years. You

33:11

have no chance to get to a

33:13

hundred times and twenty to thirty years.

33:15

So everything that I think about is.

33:17

When. I'm sizing up an investment

33:19

or an opportunity. With. My

33:22

private investing practices is. Do.

33:24

We have the use in place. That.

33:26

Are talented enough and have the

33:28

learning agility. And the desire

33:30

to become great. And. If they

33:32

do, And they give us at twenty

33:35

to thirty your time horizon that we need

33:37

and will they be able to make the

33:39

pivots it the right time for that need

33:41

to be made in every business. Is

33:43

interesting to see this but. That's

33:45

the way I'm thinking about things

33:47

before we even really get started.

33:50

If. They're just a three to five year person.

33:52

It might be a very good return over

33:54

three to five years. I still don't

33:56

want any part of it. Because. At the

33:58

end of the day you. Put a lot of

34:01

time and effort in that you have to

34:03

start all over again and do another three

34:05

to five years on their journey and. For.

34:08

Okay returns, but. The real.

34:11

Good. He basket starts post year

34:13

Ten. When. You start to go

34:15

from ten x outcomes to. Migrate.

34:17

Into the Chance at one hundred X aka. You.

34:20

Need almost at the level. Vision

34:22

like that in order to last

34:24

decades. And pissed and can

34:27

her was a toy manufacturer. It's

34:29

not that today it's a life

34:31

sciences skill I scientists player the

34:33

across the world. cutest Talk about.

34:36

The idea of pivoting Asia so hard

34:38

for people to conceive how much dinner

34:41

and you personally have had to pivot

34:43

over forty years, and what device you

34:45

have for people to actually embrace. That.

34:48

Changes. And necessary phenomena. And.

34:50

The world changes. We. All go

34:53

back to the eighties. The Japanese were going

34:55

to take over the world on manufacturing. They

34:57

were the de facto standard that we all

34:59

wanted to live by. Look. at

35:01

what happened. To Japan

35:04

at some points advance

35:06

globalization, new competitors, early

35:09

stage businesses. Things.

35:11

Up and that disrupts and you have

35:13

two choices. You. Can be the disruptor.

35:16

Are. You can be the disrupted one. I

35:19

prefer to be the disruptor, which means

35:21

you have to be thinking constantly. About.

35:24

What's happening to your business is per

35:26

se. And we're now in the

35:29

midst of danaher four point. Oh, Which.

35:31

Means We started at Ground Zero which

35:34

was Stephen Met. We. Had

35:36

the Sherman era which was one point

35:38

out. We. Had a cop era.

35:40

Which. Was. Two point Know. We.

35:43

Had to joy Sarah which was three

35:45

point own we're now on to For

35:47

partner was Reiner and it's interesting that

35:50

these things too high to the Ceos

35:52

because the idea was as one Ceo

35:54

pivoted out and another pivoted in. We

35:57

had to make sure we had to

35:59

see. Yo. Who. Was

36:01

a line with what the business

36:04

needed to do to continue to

36:06

reinvent itself for that next transformation.

36:09

Each. Was required if we wanted

36:11

to continue the compound in journey

36:13

and to change the nature and

36:15

makeup of what we have. I.

36:18

Really do believe that each. Business.

36:20

Whether it's Dan or her, whether

36:23

it's our business city, sandwiches are

36:25

global welding business or many of

36:27

these early investment that are making

36:29

today. Everybody's. Think about

36:31

transformational on the way. And. Duty

36:33

Ceos have that intellectual

36:36

learning agility to want

36:38

to make the transformation

36:40

that's necessary. And see

36:42

beyond was happening in any given

36:44

year. It's about thinking about what's

36:46

going on out in the world

36:49

that could change the nature of

36:51

what's happening to you. have as

36:53

business and make those adjustments now

36:55

before you're forced to make them

36:57

down the road. You mention

37:00

intellectual agilely Yeah, I think at

37:02

least from the outside looking in,

37:04

these kinds of tibbets are rare

37:06

and any companies and it strikes

37:08

me that. It's. Likely. That.

37:11

The Way You It and Steve evolves your

37:13

role to be. Chief. Stewards

37:15

into gives these leaders cover.

37:18

In order to. Make. These pivots

37:21

has been. Critical. We.

37:23

Have the good fortune have not been in

37:25

the day to day meat grinder that a

37:27

Ceo is in today. Think about

37:29

these poor souls. Their. On the

37:32

ninety day clock. A. Gotta report

37:34

to investors every ninety days. And

37:36

you hear the same questions from

37:39

the investment community. All. The

37:41

questions are dealing with what happened during this

37:43

ninety day period and what's likely to happen.

37:46

The. Next ninety days. Rather,

37:48

Than. What? Are you doing

37:50

today to preserve and protect and

37:52

grow your investment? For decades to

37:55

come, nobody focuses on. The

37:57

Zero And it's hard for these

37:59

Ceos. I mean I really respect for

38:01

the challenge they have to with Steve and

38:04

I can do is give them the air

38:06

cover. Typically. In the

38:08

boardroom. And with the

38:10

outside investors, they we're here.

38:13

To support them in ways. That.

38:16

Really create a long term vision

38:18

for the company so that they

38:20

can be also working on. The.

38:22

Long term side of the equation as

38:25

well as having to deal with the

38:27

complexities of what happens quarter in and

38:29

quarter up with the disease and I

38:31

think that's different than what you see

38:34

with most companies. weeks hair deeply at

38:36

the board level. About how

38:38

to help. These folks. Navigate

38:41

All of this and I think

38:43

investors have now learned that the

38:45

board can play a very valuable

38:47

role. In helping the steward the

38:49

business for the long term. Rather,

38:52

Than just thinking about the ninety a

38:54

clock. says.

38:57

What? Aspect of the dinner her

38:59

stories is least. Understood.

39:02

From the outside, that's most important

39:04

to it's history. I

39:07

think the deeply ingrained

39:09

culture. Of

39:11

continuous improvement we have.

39:15

I think once again most investors

39:17

are focused on. A

39:19

shorter this the stock market mark

39:21

to market you every day. It's

39:24

a horrible way to think about a business. It

39:27

mark to market you every day. See

39:30

you need. A. Culture of

39:32

continuous improvement in long term

39:34

thinking that mitigates that thought

39:37

process so that. I.

39:39

Don't want to personally think about day to

39:41

day. I want to think about what we're

39:43

doing for the next decade. This four point,

39:46

oh, pivot that were in the midst of

39:48

Reiner's been working on for the last several

39:50

years. And. We're.

39:52

Not done yet, but we're closer to the

39:54

finish line. We probably have another year to

39:56

to to go. And then we'll

39:59

let that pivot. Way out for years

40:01

but will start thinking about what five point

40:03

I was gonna look like. And. I

40:05

don't know the answer that today. I.

40:07

Don't. But. We'll have to start thinking

40:10

about that as we enjoy the fruits of

40:12

with that. Pivot. Was all about

40:14

for several more years. But. Something's gonna

40:16

happen and we gotta get ahead of

40:18

the curve and thinking about that and.

40:21

Having that spaces founders and not been

40:23

in. like I said the meat grinder

40:25

every day gives you a chance to

40:27

really able to sink longer term but

40:30

that culture I think of. Continuous.

40:32

Improvement in long term thinking. It's

40:35

understood, but not appreciated. He

40:37

referred to a cofounder twice with

40:40

Stephen, Dan, Her, and Emily Eklund.

40:43

In I know you have this

40:45

predisposition to seek out cofounder team's

40:47

not always but often that. You.

40:49

See value in and any to talk a little

40:51

bit about your experience. Buildings. Alongside

40:53

another another individual. Maybe we could start to

40:55

swiss Steve on the day in her front.

40:59

Of Stephen. I've been partners now

41:01

since nineteen eighties, and obviously Tanner

41:03

was. Eighty

41:05

four to had a pretty good run.

41:08

Interestingly, We've. Never

41:10

had any debates of

41:12

consequence about. The.

41:15

Base of always been about

41:17

what's the right long term

41:19

strategy. For. The Business.

41:22

And. I think having. Respect.

41:25

For one and others opinions along the

41:27

way. I mean us and he

41:29

can complete my said this is today and

41:31

I can complete his senses today and our

41:33

roles have a balls a little bit differently

41:35

from the early days to one where we're

41:38

really. Aligned in the early

41:40

days, he was working on strategy

41:42

Big Picture. I was working on

41:45

the operating prowess of the businesses.

41:47

Today. We're both aligned and

41:49

thinking about long term strategy. How

41:52

do we want to allocate our capital? What's.

41:54

The right Ceo succession that needs to

41:56

take place. in the business

41:59

itself And how do we

42:01

make sure we proliferate our culture

42:03

and our business system in perpetuity?

42:06

That's what we deal with day in and day out.

42:09

And while Steve and I live in very different parts

42:11

of the country today, there's not a day that goes

42:13

by where we probably don't talk five times a day

42:15

and we're not together. We just

42:18

have that alignment on what we

42:20

want to do and where we want to

42:22

go and it really all starts with what's

42:24

the next 10-year journey going to look like

42:27

and how do we participate in a way

42:29

to help our teams really

42:32

accomplish that. Maybe we

42:34

could just take a couple minutes to tell the Dan Hervignettes

42:36

from 1.0, 2.0, 3.0

42:38

and 4.0, however you think is the

42:41

most appropriate to share. Well,

42:43

Ground Zero started with Steve

42:45

and I coming off of a fishing trip in

42:48

Montana together, constructing

42:50

what we thought we wanted to

42:52

accomplish with our lives in the business world. And

42:55

we had this B-Hag before

42:57

Jim Collins created

42:59

the concept of B-Hag. We didn't realize it

43:02

was a B-Hag back then but what

43:04

it basically was was, God,

43:06

wouldn't it be great if we could create

43:09

a business in our lifetime that was $250

43:11

million in sales doing

43:14

10% operating profit

43:16

margin. Oh, this would

43:19

be unbelievable. And

43:21

we shook our heads and we shook hands

43:23

with one another and we said, let's start

43:25

this journey. And

43:28

lo and behold, we didn't know any better.

43:30

I mean, we lived in a period of

43:32

time where leveraging assets,

43:35

they were called bootstraps back then,

43:37

they weren't called PE buyouts or

43:40

high-yield bond financings but you could

43:42

borrow massive amounts of money

43:45

and our first deal came in 1981 when we bought

43:47

a little vinyl

43:49

siding manufacturing company called

43:52

Master Shield for $6 million.

43:55

We knew a little something about this, we did

43:57

a little due diligence because I came

43:59

out. of my dad's building supply business for a couple

44:01

of years and one of the products that I was

44:04

selling as a manager of

44:06

the Baltimore facility was vinyl siding.

44:09

And I knew that this was a superior

44:11

product of steel and wood and aluminum because

44:13

it didn't chip, you didn't have to repaint

44:15

it. Vinyl siding has become

44:17

the standard de facto siding that people

44:20

use to this day but it was

44:22

the hot and upcoming new product found

44:24

this little company. Had a parent

44:26

company in bankruptcy and they needed to sell it.

44:28

So we went down and we looked at the

44:30

facility and met Nick Martin, the

44:32

guy running the business and a great

44:35

guy still alive to this day

44:37

in his mid-90s and we

44:39

said, we're here to buy your company. He

44:42

said, you're here to what? We're here

44:44

to buy your company. Well, where are you two young

44:46

punks going to get the money from to buy

44:48

this? We said, we're going to borrow it. He

44:51

said, how are you going to do that? And

44:53

he said, well, we're going to borrow 80%

44:55

against the receivables and we're going to

44:57

borrow 50% against the

44:59

inventory and if somebody gives us an appraisal,

45:01

we'll be able to get 30% against

45:04

that and when you do the math, there's 5

45:06

of the 6 million Nick. And he

45:08

said, well, where are you going to get the million of equity

45:10

that you need for this business? I said,

45:13

we're going to borrow it. He said, how are

45:15

you going to do that? We said, we're not quite sure. We'll

45:17

get back to you on that one. To

45:19

make a long story short, a banker

45:21

in Maryland gave us a million dollar

45:24

loan and to

45:26

this day, the only way I

45:28

think we got that loan was

45:31

my dad probably secretly guaranteed the

45:33

loan behind the scenes and he

45:36

went to his grave never saying whether he

45:38

did or he didn't, but

45:40

we borrowed 100% of the purchase price and

45:42

it was a business that was doing

45:44

9 million in revenue

45:46

at the time, 600,000 in operating

45:49

profit and three years later

45:51

was doing 40 million in revenue and

45:53

6 million in operating profit and

45:56

we were launched. This

45:58

was the incubation. of more

46:01

deals to come. We bought the Mohawk Rubber Company

46:03

in 1983 for $90 million, $88 million

46:08

of which was borrowed from General

46:11

Electric Credit Corporation, $2 million

46:13

of equity which came from the cash

46:15

flows that Master Shield was

46:17

producing. And we had the

46:19

chance to ultimately take Mohawk

46:22

and Master Shield and merge

46:24

them into this defunct real

46:26

estate investment trust called DMG

46:29

and change the name to Danner. And

46:31

so Danner was born with

46:33

the merger of these assets

46:35

in September of 1984 and

46:38

round zero got started. The

46:41

idea was we're just going to start buying

46:43

more companies and we bought a bunch

46:45

of industrial manufacturing assets

46:47

mostly in the tools

46:49

business, think sockets, wrenches,

46:52

ratchets. We produced 80%

46:55

of the product for the craftsmen line as a

46:57

for instance and it's day.

46:59

We're making a million sockets a

47:01

day back in the 80s for

47:03

craftsmen and others. And at

47:05

this point, what's the division of labor

47:07

between you and Steve? Steve's thinking about

47:09

the high level and the strategy and

47:11

how we continue to architect the

47:14

business and I'm in there on

47:16

the manufacturing floor working with folks

47:18

on how we make the businesses

47:21

more and more efficient. That's

47:23

what was going on. And I think

47:25

like I said earlier in our conversation,

47:29

we realized we could do it

47:31

but it wasn't what we were best suited to do

47:34

and so we went on a run for the

47:37

better part of seven years

47:39

running Danner before George

47:41

came in in 1990. And

47:43

really, the George era

47:46

of 1.0 was all about

47:48

professionalizing the business, winning share in the

47:50

tool business. I mean, George took our

47:53

share of non-powered hand tools

47:55

from 20% to 40% over

47:58

the course of the decade that he was in. charge

48:00

of the business. He also

48:02

worked us into motors and

48:04

controls and other interesting manufacturing

48:07

products and we started to diversify

48:09

a little bit with George. And

48:11

so, 1.0 was really about

48:13

building these businesses in a way

48:16

where we got real

48:18

operating prowess associated with

48:20

the business, we rolled out the

48:22

business system, we diversified a bit

48:24

but stayed very much with our

48:26

industrial roots and when George

48:28

retired in 2000-2001 and turned the reins over

48:33

to Larry, the business was about 3 billion

48:35

in revenue at the time and

48:38

we had created something that was pretty

48:40

interesting and then the call para began.

48:43

The idea was to continue to

48:45

buy businesses that we thought were

48:48

really good businesses with good brands

48:50

in the industrial arena

48:52

and expand our

48:55

product offering significantly, all

48:58

of which happened under Larry. The

49:00

central theme that continued more than

49:02

anything though was the business system

49:04

and the DNA and the culture

49:06

and you'll hear that continuously between

49:08

each of the executives that went

49:11

on to run the businesses themselves but

49:14

we also dipped our toe

49:16

under Larry's leadership into

49:18

the healthcare space and

49:20

we bought a business in 2003

49:23

called Radiometer which

49:26

is blood gas analyzing

49:28

instrumentation for

49:30

people in the ER

49:32

or the ICU at hospitals

49:35

and this is critical testing that will

49:37

give the doctors a very quick readout

49:39

on what's happening in your bloodstream. So,

49:41

if you've come in with the

49:43

potential for a heart attack, we can quickly

49:45

tell you was it a

49:48

heart attack, what was the severity or

49:51

do you just have indigestion and you're

49:53

really not experiencing a heart attack. Once

49:55

you get that quick readout, you can do much more

49:58

testing that goes down to the central lab. but

50:00

these are critical instruments that

50:02

make decisions quickly for a

50:05

doctor to diagnose what's going on. And

50:08

we learned the quality of

50:10

what the secular trends are with

50:12

a healthcare business and this is

50:14

where secular trend thinking started to

50:16

develop for us and what

50:19

are better businesses to own,

50:21

less cyclicality, things that you

50:23

don't have to tear apart when you

50:25

go into a recession because your revenues

50:27

have shrunk 10% which is what

50:29

happens for the most part in the industrial

50:31

world still to this day. So

50:34

here was a business that continued to grow,

50:36

we could bring the business system

50:38

to work and gosh,

50:41

when you're in a recession, you're

50:43

still organically growing, we

50:45

learned something from that. That led

50:47

us into Beckman Coulter towards the end of 2009-2010 type

50:49

of timeframe and so the

50:54

birth of our interest in healthcare really

50:56

started to form. So Larry's

50:59

era took the business from 3

51:01

billion to 14 billion,

51:04

we horizontally diversified

51:06

extensively, but it was

51:08

towards the end of Larry's tenure with Dan Her

51:10

in 2014 that I think

51:13

we all became aware at the board

51:16

level that we were too complex

51:19

and we learned that we were starting to

51:21

lose a little bit of our capabilities.

51:25

How do you do 50 strategic plans, 50

51:28

operating reviews and

51:30

go deep on these businesses and

51:32

really understand them when you've

51:34

got global competition that's come in? So

51:37

the idea and the pivot that we made with

51:39

3.0 and Tom Joyce as the

51:41

leader was the

51:43

start to re-simplify the

51:45

business and gain greater clarity

51:47

and focus and under Tom's

51:50

leadership we divested

51:52

by the way of a spin-off all

51:55

of our original industrial businesses,

51:57

the heavy duty industrial. The

52:00

route as it was part of. Their

52:02

her it out the door went

52:04

about twenty five percent of revenue,

52:06

but sixty percent of the complexity.

52:08

Of the number of octo

52:10

set we had and. We.

52:13

Were able to change the face

52:15

of what sort of dodge that's

52:17

the name of the business that

52:19

was created as a result of

52:21

the spin off and simplified Danaher

52:24

greatly to become much more health

52:26

care specific. Especially in

52:28

life science and diagnostics

52:30

applications as a whole,

52:33

And start to spend our capital.

52:36

Wisely, It focusing deeply

52:38

on those vertical Sir Tom

52:40

really didn't. Remarkable job under

52:42

three point, No. Of.

52:44

Changing the ends in the outs give

52:47

ya for instance on that. Out

52:49

when forward. As with all the

52:51

industrial. Businesses. By

52:54

the way down into very tax efficient

52:56

way and in a way they gave

52:58

ford of a balance sheet. Investment

53:00

Grade. To continue. To

53:03

reorganize itself for the long

53:05

term as well. Out.

53:07

The Door by way of spin off as well

53:09

when. And. Vista which was

53:12

are dental business dental was

53:14

very different and live science

53:16

and diagnostics. And. In

53:19

Down. Under Tom. Came.

53:21

Sassy had. Been. Number

53:23

one molecular diagnostics testing business

53:25

in the world. I.

53:28

D T. Which. Is

53:30

all a ghost number one in

53:32

the world that Oligos manufacturing. And.

53:35

Citing a. First. Go back.

53:38

Hall which is and eleven

53:40

billion dollar transaction in still

53:42

tracing of biologics. And

53:45

then site either. So. I

53:47

think the number was something along

53:49

the line of Tom did forty

53:51

three billion dollars worth of acquisitions.

53:53

It's that helped us become. The

53:56

leader in the biologics

53:58

manufacturing space. If. You

54:00

were to look at our work flow today. We.

54:03

Complete. Eighty eighty five

54:05

percent of the workload it's necessary

54:07

for. Biologics. Manufacturing with

54:09

our product portfolio today or

54:11

our closest competitor maybe has

54:14

forced. Percent cover. So.

54:17

The strategic sinking in the focus that

54:19

when he and under Tom's leadership. Was

54:21

something. And I like to say that

54:23

Tom. Embodied. What? Is.

54:26

Through and Through is a level five leader.

54:28

Jim. Collins defines levels. As.

54:32

Someone. Who's. Prepared to

54:34

make all the difficult decisions.

54:37

Has. Great strategic arguments and then

54:39

when those decisions are implemented, it

54:41

gives everybody else crack. This is

54:43

what Tom did. And

54:45

Tom also realized. That.

54:48

She. Wasn't the right guy?

54:51

To. Implement for know. Which.

54:53

Was how do we go

54:55

deep in life? Science in

54:57

diagnostics, And. Really? Create.

55:00

A Strategic Vision. That.

55:02

Incorporates early stage investing and

55:05

understanding what's happening in life

55:07

science and diagnostics today. In

55:10

that early stage world which is gonna tell

55:12

us what the gold standard a business is

55:14

gonna be in the next ten to fifteen

55:16

years. And start to incorporate

55:18

all of that sinking into this

55:21

strategy of the business. T.

55:23

New as did we that reiner

55:25

Blair. Was. The best!

55:28

Person. To architect four point

55:30

out. And Tom Less

55:32

the business. Earlier than he

55:34

probably would have wanted to. But.

55:36

He didn't want to take the chance. That.

55:39

We run the clock out on Rider and

55:41

Reiner might. Decide. To take a

55:43

job somewhere else. So she put the

55:45

enterprise ahead of himself. Which.

55:48

Was an incredible saying. I'm.

55:50

Grateful to Tom to this day.

55:53

For. Making that level five. Leadership.

55:55

Choice. For the best of

55:58

dan her rather than what. When

56:00

of an ideal for us. I

56:02

was you to get about the level of

56:04

dynamism to that story and we touched on

56:07

Collins several times now. but hearing that from

56:09

start to finish reminds me of in Vice

56:11

you've given us in that we've heard you

56:13

give to other founders. One. Of Collins

56:15

is frameworks about devalues experimentation and

56:17

devalues shooting bullets when you don't

56:19

have all the answers yet as

56:21

a form of in some way

56:23

self discovery and then. As

56:25

a clear picture emerges, bringing out the

56:27

can it's and focusing more and more

56:29

on those key priorities. As

56:32

a company gets bigger, more people

56:34

involved. How do you create that

56:36

sense of co ownership? In that

56:38

sense, it's principal orientation for all

56:40

the people that are ultimately integral

56:42

to. Building. Day in her taking Dana

56:45

her indiana her to that next level from a

56:47

one point out to a to point out with three

56:49

point of. It all starts

56:51

with talent acquisition or talent

56:53

development. We have a process

56:56

inside dan her where. We.

56:58

Would do like. Seventy. Five

57:00

percent of our hires to come

57:02

from within. Self promotion from

57:05

within the enterprise. These. Are

57:07

people that understand our Dna,

57:09

understand our culture and we

57:11

want to reward them? In

57:13

their careers for doing great work.

57:16

So what's the best way to do that? Here's.

57:18

The next a junior career. We.

57:20

Mentor we develop. And.

57:23

We work with people to try to

57:25

help them improve their livelihood to career

57:27

to battle. However,

57:30

We. Need to go to the outside for

57:32

twenty five percent. Because. You need

57:34

that outside thought process. We for

57:36

a minute don't believe we know

57:38

everything within. Once you become one

57:40

hundred percent in were thinking the

57:43

beginning of the and will start

57:45

to take place We need that

57:47

outside thought process. Fresh thinking. I.

57:49

Mean reiner Blair. Our

57:51

Ceo. Came. To us. From.

57:54

A chemical stasis. This.

57:56

Is a guy with great learning, agility,

57:59

And he's probably. The only As good as

58:01

they come. In. A life size

58:03

diagnostic. Space. With

58:06

strengths. And life science. So

58:08

as we recruit from the outside.

58:11

Were. Looking for that learning agility?

58:13

Are looking for people who have

58:15

a problem solving mentality. We sire

58:17

very specifically along the lines of

58:19

what our Dna in our culture

58:22

our because we need that alignment.

58:24

We. Need team building people. We can't

58:27

have somebody who comes in who rules

58:29

in an authoritarian way that she says

58:31

my way or the highway you're out

58:33

of you don't like that stuff. Work

58:36

in the world we live in today.

58:38

We. Need to do. a lot of

58:41

are hiring for folks it share

58:43

our principles and values and vision.

58:46

That's. The way we go about it.

58:48

transformational. Thinking more exist in my sweet.

58:50

Do it that way. When.

58:52

You reflect back on. The.

58:54

Level of acquisition activity. Obviously not

58:56

every acquisitions can work out perfectly,

58:59

but can you generalize? Now looking

59:01

back what makes a successful acquisition

59:03

and maybe what you'd want to

59:06

avoid and future to learnings over

59:08

the decades. And nana

59:10

her or he sad. It's. All

59:13

About Acquisitions. Better.

59:15

Lead first by strategy. And

59:18

they have to be strategically aligned with what we

59:20

want to do with the business. In what I

59:22

mean by that. Everything's.

59:24

About strengthening the core. I

59:27

talk about workflows all the time

59:29

as secular trends to the how

59:31

do you increase your workflow. How.

59:34

Do you become more important to the customer?

59:36

So. That the customer wants to

59:38

buy your product because you can

59:41

one create a more seamless, better

59:43

outcome for them. Do. It

59:45

at a price point. It's

59:47

more affordable than your competitors

59:50

because more integrated workflows give

59:52

you greater flexibility with your

59:54

customers. And so it all

59:56

goes back to strategy First and foremost,

59:58

the you need and. The Grayson

1:00:00

process and we've learned over the

1:00:02

years the difference between. Okay,

1:00:05

Integration and superior

1:00:07

integration. And. Okay,

1:00:10

integration usually ends. Poorly.

1:00:13

You. Need to quickly. Pivot.

1:00:16

To help. Those. That

1:00:18

are being integrated into the business. Become.

1:00:21

Familiar with the culture. So

1:00:23

what our leaders do right away as

1:00:25

they go, teach a concept known as

1:00:27

policy deployment. Which. Is how we

1:00:29

run a business. It dan Hurst really don't

1:00:32

offer a couple sheets of paper. And

1:00:34

in embeds what you need to do this

1:00:36

year to basically me on. Twitter.

1:00:39

Plan. Is actually a very

1:00:41

simple process. Takes complexity out

1:00:43

of. All his crazy strategic thinking

1:00:46

that goes on wouldn't have. I have read

1:00:48

things we need to do. right?

1:00:50

Now to preserve and protect the basis for

1:00:52

the next twelve months. And where

1:00:54

they're vital. Few things that we need to

1:00:57

be doing now. The turbo charged the business

1:00:59

for years to come. We don't

1:01:01

work on anything else. Our. Leaders

1:01:03

will go out and teach policy deployment right

1:01:05

away. And will also learn what

1:01:07

those businesses need right off the bat

1:01:09

by way of for instance down her

1:01:11

choir to business two years ago called

1:01:14

out deborah. The. Gold Standard

1:01:16

and Plasma manufacturing is the

1:01:18

world today. And we

1:01:20

all know that everything in drug

1:01:22

development and selling gene therapy starts

1:01:24

with plasmas and they had a

1:01:26

capacity area. We. Have a

1:01:29

concept in our toolbox that part of

1:01:31

a business system known as Smith. Single.

1:01:34

Men and exchange of dice. And

1:01:36

was smeared is an enabler

1:01:38

for you to do is

1:01:40

ring out incremental capacity. Without.

1:01:43

Putting capital dollars in. In.

1:01:45

The plasma business If you want to put

1:01:47

capital and. Nunnery. Is

1:01:49

it a lot? To. Build capacity.

1:01:52

But it takes a long time. He.

1:01:55

Could take you a couple years

1:01:57

to add capacity. Which.

1:01:59

Smelled allows you. to do is figure

1:02:01

out how to more efficiently change

1:02:03

your tooling over, do different

1:02:05

things that shrink the

1:02:08

time to change from

1:02:10

one therapy to another. And

1:02:14

as a result, we run out 20% or 30% capacity

1:02:18

for no dollars invested to

1:02:20

help these guys service their customers

1:02:23

better and more efficiently because during

1:02:25

COVID, lead times on

1:02:28

plasmids went from what

1:02:30

was the equivalent of six months

1:02:32

to call it 18 months. It

1:02:35

was very, very difficult. Somebody

1:02:38

who's making a new drug in

1:02:40

an early stage business and you say to

1:02:42

them, you got to wait 18 months to

1:02:45

get samples and a plasmid

1:02:47

really going, it's not very appealing to

1:02:49

the customer. Now, the whole industry was

1:02:52

that way. We create competitive advantage

1:02:54

by shrinking our lead times. I

1:02:56

don't know the exact timeframe now, but it's probably

1:02:59

we're down to three or four months lead time

1:03:01

now from what was 12 to 18 months. And

1:03:04

it's a real competitive advantage versus our

1:03:06

set of other competitors out there today

1:03:08

to be able to say to a

1:03:10

young company trying to do this,

1:03:12

we can get you your product a lot

1:03:14

faster, for instance. Jay Famiglietti Mitch,

1:03:17

earlier you mentioned the role

1:03:19

of intellectual agility in leadership and

1:03:22

we touched on level five leadership.

1:03:24

I'm curious when you're out looking

1:03:26

for founders, operators to back,

1:03:29

are there any other traits of leadership

1:03:31

that are top of mind that you

1:03:33

like to seek? So

1:03:35

number one, for me, it all

1:03:38

starts with does the business

1:03:41

have a platform to do something special

1:03:44

over the course of time? If

1:03:46

we understand that that's the case,

1:03:48

then the first thing I want to do is I

1:03:50

want to meet the CEO slash founder

1:03:53

running the business and I want to

1:03:55

really size her up. And

1:03:58

the thing I'm really looking for is... Number

1:04:00

One. Can. They give us a

1:04:02

twenty to thirty year run. Do

1:04:04

they have the learning agility? The.

1:04:06

Pivot when the business needs to

1:04:09

pivot. And do they have the

1:04:11

passion to want to create something great?

1:04:13

If I see that. Is

1:04:15

individual. Then. I know that

1:04:18

I can work with that individual. To

1:04:20

help them strategically with the business.

1:04:23

To help them figure out how to scale

1:04:25

the businesses a crow. To. Help

1:04:27

them with organizational designed. To.

1:04:30

Help them with simple

1:04:32

concepts like final management,

1:04:34

channel management policy deployment,

1:04:36

single minute exchange of

1:04:38

dies. All. The things that

1:04:40

I've had the good fortune to

1:04:43

learn over the years That will

1:04:45

help these businesses. Grow in

1:04:47

scale. With. The course

1:04:49

of time. But it really all starts

1:04:51

with. Would. Have we gotten that? leader?

1:04:54

And do they have that? Dna that

1:04:56

were looking for. Learning

1:04:59

agility and duration of

1:05:01

time. And desire and

1:05:03

passion to be great. Because

1:05:05

those are there. We've. Got something to

1:05:08

work with? What? About on the

1:05:10

business characteristics front is there a short

1:05:12

list of. Criteria. That

1:05:14

you think it every business needs to

1:05:16

master in were have a good chance

1:05:18

of being great. For. One at

1:05:20

a great secular schemes that we like

1:05:23

is recurring revenues. Forget

1:05:25

the exact percentage of Diana

1:05:27

her this recurring revenue today,

1:05:29

but it's circa seventy or

1:05:31

eighty percent. Where. You

1:05:33

work with a drug company. You

1:05:35

supply a lot of the ingredients

1:05:37

to the cake for the drug

1:05:39

itself and. You've. Got an annuity

1:05:42

stream for fifteen years when she

1:05:44

gets and. To. Be a supplier

1:05:46

of your products with the customer. We

1:05:48

just months. And. It gives you

1:05:50

the chance in the opportunity. To

1:05:52

be thinking about lot of other

1:05:55

things steadiest has come in. The

1:05:57

same would apply to. software

1:06:00

the recurring revenue themes of

1:06:02

software businesses today. So I

1:06:04

look at recurring revenues as

1:06:07

a really great theme for

1:06:10

everything we want to do, investing

1:06:12

in our private side of the equation and I

1:06:14

think that's a learning that came from Dan

1:06:17

Herr and I think that's why you

1:06:19

see so many people getting involved in

1:06:21

software or everything digital today because of

1:06:23

the recurring nature of the business. Where

1:06:27

did the impetus for philanthropy

1:06:29

come from for you? We're sitting here

1:06:31

at Glenstone, beautiful physical manifestation

1:06:33

of what's possible with a

1:06:36

multi-decade view on philanthropy and

1:06:38

giving back to society. Just

1:06:40

curious where that original inkling

1:06:42

came from. Well, I

1:06:44

can specifically tell you where that came from. It

1:06:47

all started in 1998 when

1:06:50

I went on an adventurous fishing trip

1:06:52

to Russia. We flew into a town

1:06:54

called Murmansk, famously known because it's where

1:06:57

the Russian Navy fleet was based. So

1:06:59

it was a military town of about

1:07:01

400,000 people. Back

1:07:05

in those days, they didn't

1:07:07

even have computer technology in Russia.

1:07:09

We were computerized, of course, but

1:07:12

when we got to the airport, they couldn't

1:07:14

run your passport through a check, so they

1:07:16

just kept your passport till

1:07:18

you wanted to come back and leave the country.

1:07:21

So they took our passports. We

1:07:23

flew in one of these Russian

1:07:25

era helicopters to

1:07:27

this fishing camp with myself

1:07:29

and three other fellows that were good

1:07:32

friends. And if

1:07:34

you know anything about great Atlantic salmon fishing,

1:07:38

when it's hot, the fishing's not

1:07:40

very good. And we hit

1:07:42

one of these hot streaks. And

1:07:45

I tell you, we fished for four days of

1:07:47

the seven and didn't have a nibble. We

1:07:50

looked at each other and we said, let's get out of here.

1:07:52

Let's go back and explore Murmansk. We'll

1:07:55

learn a little bit about the people, the town,

1:07:58

we've never really experienced. Russian

1:08:00

culture, it'll be really interesting.

1:08:02

Great idea everybody says. So we charted

1:08:05

a little bubble helicopter to come and take

1:08:07

us out early and we had

1:08:09

about an hour and a half helicopter

1:08:12

ride but this helicopter didn't have

1:08:14

the ability to go the full distance so it

1:08:16

had to stop and refuel. We

1:08:18

stopped in this little village that

1:08:20

was sustaining itself on herding

1:08:23

reindeer and catching salmon and

1:08:25

we sat down in the helicopter and this

1:08:28

Russian dude comes with

1:08:30

a big hose over his shoulder to

1:08:33

refuel and he puts fuel

1:08:35

piece into the tank and starts filling

1:08:37

and we're getting out of the

1:08:39

helicopter and as we're getting out of the

1:08:41

helicopter the fuel nozzle comes

1:08:44

loose and

1:08:46

starts spitting fuel into

1:08:49

the rotor blades and the helicopter

1:08:51

ignites and ultimately

1:08:54

melts to the ground and

1:08:56

the fuel was spit

1:08:58

on one of my great friends

1:09:00

Joe Robert who was standing maybe three

1:09:02

feet from me but the wind was blowing

1:09:05

away from him when the fuel hit

1:09:07

him and that's the only thing that

1:09:09

saved him because the wind was blowing

1:09:12

towards me. I didn't get doused with

1:09:14

fuel but I dove into a pit

1:09:16

and ran away on all fours and

1:09:18

ultimately what happened was the helicopter

1:09:21

burned to the ground, the guy

1:09:23

doing the refueling passed away as part

1:09:25

of this because he was doused with

1:09:27

fuel and he had a difficult ending

1:09:30

and the four of us tried

1:09:32

to figure out how we were going

1:09:34

to get out of this little village so

1:09:37

we asked do you have cell

1:09:39

phone? No, it's 1998 nothing

1:09:41

to really speak of. Do you have a

1:09:43

satellite phone? We don't have a satellite there's

1:09:46

obviously no wiring so no hard

1:09:49

lines so how do we get a message

1:09:51

out? Well we have a World War

1:09:53

II vintage radio we

1:09:55

went up couldn't get the radio to work but

1:09:58

they got a Morse code Nineteen

1:10:01

Ninety Eight Emergency Emergency Send

1:10:04

our Copter. Of twelve

1:10:06

hours later, another helicopter came in. And

1:10:09

took us out. We drank very

1:10:11

heavily that night. I. Left.

1:10:14

Russia. In a. Pair.

1:10:16

Of jeans, sorts of torn t shirt, the

1:10:18

sandals I was wearing, he melted in the

1:10:20

spot I ran out of them. And.

1:10:23

Our belongings were gone. So.

1:10:26

We. Went back to the border in remember that

1:10:28

kept our task force which was lucky sick. So.

1:10:32

We are plane. Took. Us back

1:10:34

out. Fluff. Rush I

1:10:36

got home and my dad says who would you

1:10:38

learn from this. Said. What do you mean

1:10:40

He says for you want to be the richest guy

1:10:42

in the cemetery. I. Said. No,

1:10:44

it's not interested in that and that's. The.

1:10:48

Philanthropic side of mates was born when

1:10:50

I could do with all the good

1:10:52

fortune has been bestowed upon me. And

1:10:55

started thinking about. What

1:10:57

were the things? I loved? him? What was important

1:10:59

to me And I love the arts. And

1:11:02

so the idea of building a

1:11:04

museum started to percolate in my

1:11:06

head at that point in time,

1:11:09

and really started to take root

1:11:11

in the early two thousand. And

1:11:13

of course, I met Emily and

1:11:16

we talked about the story of

1:11:18

how Grindstone was born, But it

1:11:20

all started right there and. With

1:11:23

my dad also been a champion of

1:11:25

the underdog. Arts education

1:11:27

became important. General education

1:11:30

became important. And

1:11:32

there's no bad charitable cause, but you

1:11:34

have to pick some things. it's you

1:11:36

want to go deep within and we

1:11:38

try to bring the same operating prowess

1:11:41

to how we get money away as

1:11:43

we do to how we build businesses.

1:11:45

It's hard work you gotta roll up

1:11:47

your sleeves and not all non profits

1:11:49

are made equal. You. Want to

1:11:51

make sure the dollars are spent wisely

1:11:53

and that they give great return to

1:11:55

those who has spent on so we've

1:11:57

spent a lot of time My but.

1:12:00

There's an eye. Trying. To figure

1:12:02

out how we want to give money

1:12:04

away When Assistant. Impactful.

1:12:06

Way that was how it was all born

1:12:08

and to say to the game. He

1:12:10

I'm investing for the benefit of mankind

1:12:12

on a long term basis. Chris with

1:12:15

taken the giving pledge Emily and I've

1:12:17

signed the given place. Ninety.

1:12:19

Eight percent of our wealth will go for the

1:12:21

benefit of mankind. Truly. Remarkable

1:12:23

within her as a company.

1:12:26

Through the various phases of it's

1:12:28

evolutions but was doubly unique and

1:12:31

fascinating is that use invested the

1:12:33

majority of your net worth and

1:12:35

kept in alongside Indiana Her. At

1:12:38

all times it's a super rare

1:12:40

thing as we will county investing

1:12:42

were on the world of company

1:12:44

founders most everybody by year five

1:12:46

ten fifteen. Would. Have diversified

1:12:49

or divested as assets are. Look

1:12:51

for other things to do your

1:12:53

forty years ends and still the

1:12:55

vast majority isn't den hurts rican

1:12:57

are looking at the track record

1:12:59

us down her and extraordinary addict

1:13:01

Apple my to the only stocks

1:13:03

just by a tiny fraction that

1:13:05

are performed entering the United States

1:13:07

the last forty years. something north

1:13:10

of twenty one percent a year,

1:13:12

which based on Rick's extremely detailed

1:13:14

Excel sheet something like an eighteen

1:13:16

hundred x hundred eighty thousand. Percent

1:13:18

Return Elements Everything we're talking

1:13:21

about. Dan. Hurst only getting

1:13:23

going in many ways. As

1:13:25

use started to think about the next

1:13:27

couple decades ahead and this is where

1:13:29

maybe we've come and very fortunately and

1:13:31

into the picture the last few years.

1:13:34

We've. Had a lot of conversations around.

1:13:36

You're investing more broadly and you've

1:13:38

had a lot of experience whether

1:13:40

it's on the boards of foundations

1:13:42

and various endowments. Over time you've

1:13:45

seen that L P perspective. You've

1:13:47

invested personally and a few different

1:13:49

companies in fines and that is

1:13:51

expanding more recently. I was

1:13:53

just a step back and. Reflect

1:13:55

on what that's like to be so

1:13:57

concentrated in one asset. And

1:13:59

then What? going on right now in this transition

1:14:02

to you looking for the next generation of

1:14:04

founders out there? Well, that's

1:14:06

a loaded question. There's a lot there, but

1:14:08

let's start with Dan or her. Everybody

1:14:12

told me, you're too concentrated. You

1:14:14

need to diversify. Thank

1:14:16

God I didn't listen to any of these schmoes that

1:14:19

were encouraging that. And if you think who

1:14:21

was encouraging it, it was investment advisors, people

1:14:24

who know no differently, who look

1:14:26

at this with a traditional lens

1:14:29

and it was just wrong.

1:14:32

I mean, what better way to

1:14:34

stay concentrated than to invest in

1:14:36

yourself and what your

1:14:38

beliefs and your convictions are on a

1:14:40

long-term basis. So we

1:14:43

didn't diversify and obviously

1:14:45

that served us very, very well.

1:14:48

During my lifetime, Dan or

1:14:51

her will always be a very concentrated

1:14:53

position because I don't

1:14:56

know where to put that magnitude

1:14:58

of dollars otherwise today. What

1:15:00

am I going to do? Sell it, pay

1:15:02

the tax and put it in index

1:15:04

funds? I mean, what fun is that?

1:15:07

My net worth will be a lot

1:15:09

less. I'd rather give it to the

1:15:11

foundation and let them start the diversification

1:15:13

journey over the long time. Mitch,

1:15:15

I imagine that being

1:15:18

a part of building something like Dan

1:15:20

or her in an intimate way for

1:15:22

several decades could seem quite

1:15:24

different from making new investments

1:15:26

in younger companies that you

1:15:28

haven't yet been involved with yet. As

1:15:31

you've spread your wings as an investor, what

1:15:34

are the problems and I guess the opportunities to

1:15:37

in the investing world,

1:15:39

investing ecosystem that you've

1:15:41

identified that are suboptimal

1:15:43

when it comes to company building and

1:15:45

when it comes to ultimately long-term compounding?

1:15:48

So we have to go back in time a little bit to

1:15:51

say what was a great invention that

1:15:53

took place in the investing world and

1:15:56

what has happened to that invention

1:15:59

today? And I think that

1:16:01

a guy by the name is David Swenson

1:16:03

who is a Hall of fame. Investors

1:16:06

from Yale. Invented

1:16:08

the asset allocation methodology some

1:16:10

thirty plus years ago. Where.

1:16:13

Many people went to

1:16:15

private equity and Sensor

1:16:17

and. Real. Estate and

1:16:20

Oil and Gas and lots

1:16:22

of different things Hedge funds.

1:16:24

And it was a brilliant

1:16:26

strategy and it was the

1:16:28

new saying on the street.

1:16:30

and people did extremely well

1:16:32

pivoting away from the traditional

1:16:34

Us Equity sixty percent on

1:16:36

forty percent strategy. And

1:16:38

as that a vault over the

1:16:40

ensuing decades started to feel like

1:16:43

it was becoming broken to me.

1:16:46

Or. Do I mean by that. I

1:16:48

think that short termism became alive

1:16:50

and well as p and venture

1:16:52

worth three to five year. Type.

1:16:55

Of Players and hedge funds

1:16:57

were mark to market on

1:16:59

hourly basis and. And. The

1:17:01

see structures that were associated with these

1:17:04

were you know, the traditional to and

1:17:06

twenty percent. Which. Take

1:17:08

a lot of benefits of compound the

1:17:10

away from. The. Investor because.

1:17:13

Structure. So.

1:17:15

I think the whole

1:17:18

asset allocation methodology became.

1:17:20

Co. Opted by short termism and

1:17:22

fees and became a very broken.

1:17:25

Process. And I started

1:17:28

asking myself that question: What has

1:17:30

To Change. To. Make this

1:17:33

a real opportunity And

1:17:35

it's when. I guess

1:17:37

three summers ago you guys helped

1:17:39

me architect. A paper that

1:17:42

I wrote to myself and for the

1:17:44

benefit of my foundation called Reimagine in

1:17:46

the Blueprint for the long term investing

1:17:48

model. And it all

1:17:50

started with the thesis. Of.

1:17:53

How successful Sequoia was over

1:17:55

the years. And God

1:17:57

knows they were extremely successful. Such.

1:18:00

The in front of their Thirty

1:18:02

Percent Type A number in front

1:18:04

of their compound in over a

1:18:06

very, very long period of time

1:18:08

Many decades. And.

1:18:10

See why can't we do

1:18:12

which the architecture necessary to

1:18:15

accomplish something. Like Atoms

1:18:17

are pretty outstanding. Returns to They Can

1:18:19

Do It Why can't we. And

1:18:21

we started this imagination. Juri

1:18:24

and it basically. Went.

1:18:26

Along the lines of we

1:18:28

want to find passionate and

1:18:30

dedicated founders who can give

1:18:32

you a long duration runway.

1:18:35

Think. Twenty to thirty years where

1:18:37

you invest in businesses that have

1:18:39

the chance to create a. Fifty

1:18:42

to one hundred times outcome over

1:18:44

those twenty to thirty years. And

1:18:47

stay the course. And. Private

1:18:49

is better than public. Doesn't mean they

1:18:51

won't go public one dates. The greatest

1:18:54

thing about a private business is you

1:18:56

never worried about a short. You not

1:18:58

marked the market on a daily basis,

1:19:00

You not on the ninety day clock

1:19:03

of having to report to. Investors

1:19:05

and you'll have to worry about

1:19:07

sitting on your hands and doing

1:19:10

nothing when you own public security.

1:19:12

Heart watching the dynamics of the

1:19:14

market every day. Certainly companies run

1:19:17

into problematic times in their history

1:19:19

and their journeys and that's the

1:19:21

worst time to sell. But.

1:19:23

Yet most people do the homeless problem.

1:19:25

They're going to be stuck for the

1:19:28

next two years. They. Forget about the

1:19:30

next ten or. Fifteen years of

1:19:32

good things that are going to happen as

1:19:34

they work. True, I mean, damn her! Went

1:19:37

through this incredible journey of. Cove.

1:19:39

It the turbo charged start

1:19:41

business. Massive growth over two

1:19:44

year period of time to

1:19:46

the last. Eighteen. to twenty

1:19:48

four months. we gave a little bit of attacked. Because.

1:19:51

we went in from a pandemic

1:19:53

to and endemic of state and

1:19:55

so of little gross went away.

1:19:57

But. Did anything change on the law?

1:20:00

term secular trends of Danaher being

1:20:02

a high single digit grower

1:20:04

aspiring to become a double

1:20:06

digit grower? Absolutely not. Yet

1:20:08

the market treated us like

1:20:11

we were the plague. And

1:20:13

can you imagine all the people that sold and

1:20:16

paid the tax and they're going to miss all

1:20:18

the goodbies that are starting to come now? So

1:20:22

being private is a real benefit

1:20:25

if you don't need access to

1:20:27

big time capital dollars. The

1:20:29

public markets are a beneficiary of being

1:20:31

able to give you big time capital

1:20:34

dollars if you need it. So

1:20:36

that's the real pro of being a

1:20:38

publicly traded company but left

1:20:40

to my own devices, I'd love

1:20:42

to see these businesses stay private

1:20:45

for as long as possible because

1:20:47

you just make higher quality decisions

1:20:49

in that type of framework. So

1:20:51

finding these young entrepreneurs who can

1:20:53

give you duration and you

1:20:56

can put capital to work and

1:20:58

you can help them scale and

1:21:00

make high quality decisions day in

1:21:02

and day out whether it's

1:21:05

like I said before, organizational design,

1:21:07

strategic planning, mecco map building, I

1:21:09

could give you a list of

1:21:12

20 or 30 different things

1:21:14

that we can help these companies with.

1:21:17

And I get invigorated by

1:21:20

working with young entrepreneurs who

1:21:22

want to be great. And I guess

1:21:24

I'm just a business builder rather

1:21:27

than a business seller. And if

1:21:29

we can find those shots on

1:21:31

goal that give us a

1:21:33

percent recreating something

1:21:35

special, I think the

1:21:37

returns will take care of themselves over

1:21:39

time and we will recreate all

1:21:42

the success that Sequoia was able to

1:21:44

create over the course of time.

1:21:47

We keep coming back to this

1:21:49

concept of a time horizon arbitrage

1:21:52

and it reminds me of a story from

1:21:54

a few years ago that was extremely

1:21:57

formative for Paul and I. conversation

1:22:00

around what's the appropriate disposition

1:22:03

from a time horizon standpoint with the

1:22:05

investments that one makes and

1:22:07

we have as a value that

1:22:09

our time horizon is eternity and

1:22:11

at one point you said, boys

1:22:13

see what you're talking about with the eternal

1:22:15

time horizon but you Catholic guys

1:22:18

and your eternal concept, can I just

1:22:20

encourage you to think about

1:22:23

one's approach to time and investing

1:22:26

with an unlimited basis as

1:22:28

opposed to an eternal basis

1:22:30

because the reality is that

1:22:33

most things don't last forever and

1:22:36

there is a sense that the

1:22:38

power in every investment

1:22:40

is the optionality to

1:22:43

have an extended time horizon when an

1:22:45

extended time horizon is merited, when it's

1:22:47

the best thing for the company, when

1:22:49

there's more to build, when there's more

1:22:51

to do and so there's

1:22:53

the early work of sourcing and we've already

1:22:55

talked a lot about just how

1:22:57

you think about underwriting people, how you

1:22:59

think about underwriting businesses, apply

1:23:02

the time horizon advantage to that but I think the

1:23:04

other really critical piece that we've been

1:23:06

beneficiaries of and that we've learned from

1:23:09

just observing you is this

1:23:12

value add orientation that you

1:23:14

bring to every person or

1:23:17

project or company that

1:23:19

you commit yourself toward and that

1:23:21

is a very, very unique

1:23:23

concept at least in

1:23:26

its practice in the investing world. Maybe

1:23:28

say a little bit about the ways in

1:23:31

which you come alongside

1:23:33

a founder and

1:23:35

the orientation you bring as a source

1:23:38

of support, as a helper to them

1:23:40

and whatever they're building. We

1:23:42

can talk about some examples

1:23:44

of that but I

1:23:46

say this with great humility I've seen a

1:23:48

lot over the last 40 years. Why

1:23:51

in the world would I not take advantage

1:23:54

of everything I've learned and seen and

1:23:57

pass on those judgments and that

1:23:59

experience? There's. No,

1:24:03

we just have to take advantage of

1:24:05

I'm seen dog and have seen a

1:24:07

lot and. We can help

1:24:10

these young founders a profound

1:24:12

ways is just as important.

1:24:14

To. Have swayed making the

1:24:16

mistakes and learning from others.

1:24:19

As it is to make sites on the

1:24:21

decisions. Everybody's gonna make mistakes Point:

1:24:24

We want to avoid the big ones

1:24:26

who we can help. These companies. Along

1:24:28

the way not make these

1:24:30

mistakes and. The sole

1:24:32

goal is to get an option on

1:24:35

duration. If. You can go for

1:24:37

twenty to thirty years the compound in

1:24:39

benefits and mean just look at Dan

1:24:41

her today if were eighteen hundred times

1:24:44

return. If we double the

1:24:46

stock price, that means we're thirty six

1:24:48

hundred times. Return the compounding. at this

1:24:50

stage. Is. Crazy.

1:24:53

And you want to get to

1:24:55

these reasonable shots on goal. Don't

1:24:57

stop is going to happen. Gas.

1:25:00

Divorce. Partners not

1:25:02

getting along the business running

1:25:04

up against test or that

1:25:07

none of us could s.

1:25:09

Stuff Discuss. But. If.

1:25:12

We can get a handful of. These.

1:25:15

Duration models of twenty to thirty

1:25:17

years. It's all going to take

1:25:19

care of itself. In the

1:25:21

overall returns for the bigger picture

1:25:23

it just takes a couple of

1:25:25

to change the dynamic for great

1:25:27

outcomes to happen so as a

1:25:29

way that I'm looking at it

1:25:31

and thinking about it. But let's

1:25:33

take an example like Arcadia. Our.

1:25:36

Listeners will know our katie out the

1:25:38

well already as we had Daniel Pollen

1:25:40

in class a couple months ago, so

1:25:42

the got a good foundation for their

1:25:44

story, what we saw and Daniel Paul.

1:25:47

With. The things that. I talk

1:25:49

to on who learning agility, Seat.

1:25:52

Domain expertise in vertical

1:25:54

market. Software. Young.

1:25:58

Twenty to thirty year type

1:26:00

of duration capability. A lot

1:26:02

of the wonderful things and

1:26:04

I and others have had

1:26:07

this thesis that. One.

1:26:09

Of the great companies

1:26:11

Constellation Software. Could. Be

1:26:13

reinvented, And. We could build

1:26:16

a better, more durable, Constellation.

1:26:19

For the long term. Based. On

1:26:21

some seems taking nothing away

1:26:23

from constellation one of the

1:26:25

great compounding stories of all

1:26:27

time. But honey a build

1:26:29

a better, more durable constellation over

1:26:32

the next twenty to thirty years.

1:26:34

The answer is you pay a

1:26:37

little before. You. Buy Grow

1:26:39

C. B. M S businesses

1:26:41

that are mission critical. And.

1:26:43

You do it around platforms. In

1:26:45

other words, Can we create an

1:26:48

Aviation platform? Can we create a

1:26:50

small syntax platform? Can we create

1:26:52

a platform around the rail industry?

1:26:55

Can we create a platform around

1:26:57

agriculture? Had a we go. Put.

1:27:00

A group of businesses. Together they

1:27:02

can generate synergies from one another

1:27:04

within a platform. So. That

1:27:06

not only are you buying these things

1:27:08

said what we call it three times

1:27:11

a are are. Five. Times

1:27:13

he bit off may be a

1:27:15

pay a turn more. They're really

1:27:17

proceed twenty percent type of businesses

1:27:19

but if you can put them

1:27:21

into a platform. And. You

1:27:23

create a hundred, two hundred million

1:27:25

dollar platform out of these businesses

1:27:27

over the next decade, And you've

1:27:29

done that. Ten or twelve

1:27:32

different times and you've gotten organic

1:27:34

growth working for you in a

1:27:36

meaningful way versus. Constellation doesn't really

1:27:38

grow organically, they just do it

1:27:40

too. Am an A, and they

1:27:42

have a cookie cutter approach on

1:27:44

their margins. But. If he takes

1:27:46

a longer view and you can get

1:27:49

organic growth and you have high gross

1:27:51

margins to start. Over ten

1:27:53

or twenty year journey.

1:27:55

Wow, You've created a

1:27:57

turbo version of constellation.

1:28:00

That'll create enormous value.

1:28:02

What Paul and Daniel understood

1:28:05

with the help of the board and the help of

1:28:07

our long-term thinking and our

1:28:09

strategic thinking is how to pivot

1:28:11

from the traditional constellation model to

1:28:14

what I'll call the new and

1:28:16

approved version of what we can

1:28:18

create that constellation has done so

1:28:21

well over the years. That's

1:28:23

something that I think is pretty special

1:28:26

for these guys. We're helping them with

1:28:28

policy deployment, we're helping them with funnel

1:28:31

management, uncertain of their businesses, we're

1:28:33

helping them understand how to get

1:28:35

synergies from within, we're pushing them

1:28:37

to pay a little bit more

1:28:39

for a highly strategic asset that

1:28:41

makes the whole of that platform

1:28:43

better than the individual pieces

1:28:45

which is really important because you wouldn't

1:28:47

make that acquisition purely based on financial

1:28:50

metrics but if it's going to make

1:28:52

the whole better for the long term,

1:28:54

damn straight pay that extra few bucks

1:28:57

to get it done. I

1:28:59

think for me, if I were

1:29:01

to zero in on the single superpower of

1:29:03

yours, it's bringing the

1:29:05

seasoned operator knowledge

1:29:08

base to

1:29:10

various situations and then knowing how to

1:29:12

adjust priorities based on say the economic

1:29:14

environment or based on the size of

1:29:16

the company or based on the industry

1:29:18

or the capabilities of the team and

1:29:21

being able to speak into these

1:29:23

different situations in a way that is extremely

1:29:25

value add and I think it's been a

1:29:28

lot of fun to see how you are

1:29:31

able to shape your support

1:29:33

based on all of those

1:29:35

environmental conditions and how they're coming together in a

1:29:38

single situation. That's 40 years

1:29:40

of experience talking where

1:29:42

you've seen a lot and just

1:29:44

to pass those judgments on to

1:29:46

others is when I consider the

1:29:49

real opportunity that I can contribute

1:29:51

to helping These founders build

1:29:54

their businesses over the course of

1:29:56

time. We had to help Paul

1:29:58

and Daniel unlearn. Get.

1:30:00

Rid of the muscle memory that

1:30:02

they had a certain practices constellation.

1:30:05

Once again Mark Leonard a constellation

1:30:07

is built a some nominal piss

1:30:09

is one of the great compound

1:30:11

in stories. Of. All types, but it

1:30:13

doesn't mean we can't build a better version

1:30:15

of that for the long term. and we

1:30:17

have a clean sheet of paper. What?

1:30:20

Can we do? This is better

1:30:22

than what Mark has done. Over

1:30:24

the course of time, she's gotten

1:30:26

to the point where he's large,

1:30:29

And so to turn the

1:30:31

battleship or the aircraft carrier.

1:30:33

His. Heart. Is. Really hard

1:30:35

for him in order to stay to the

1:30:38

game and he's looking at reinventing right now.

1:30:40

I see so many things it is doing

1:30:42

a nice try and some interesting things. We'll

1:30:45

see what happens but Com and Danny or

1:30:47

Low P T bo right now that in

1:30:49

turn on the diamond they aren't do. It's

1:30:51

wonderful to see. We're. Doing this

1:30:54

with a few other folks are

1:30:56

working with ya on and his

1:30:58

team at Chapters on the operating

1:31:00

prowess in strategic same gain and

1:31:02

policy deployment and lots of different

1:31:04

things that are helpful to driving

1:31:07

a business and he's made enormous

1:31:09

progress and a very short period

1:31:11

of time. but he has enormous

1:31:13

progress to continue to make in

1:31:15

the journey as he gets things

1:31:17

go and he's gonna have to

1:31:20

bring a different type of operating

1:31:22

assists in see. To these businesses

1:31:24

then when Constellation dies. If he

1:31:26

really wants to super eight over

1:31:28

the course of time, but he's

1:31:31

human, history is only a couple

1:31:33

years in doing what he's doing

1:31:35

right now, and so it'll be

1:31:37

fun to watch the next ten

1:31:39

years what happens with his business.

1:31:42

Side of your family. I mean is this.

1:31:45

Where. You find joy helping others builds

1:31:47

impactful companies. I do. I find it's

1:31:49

thrilling as a lot of people who

1:31:52

would like to play eighteen every day.

1:31:54

When. they get to retirement age

1:31:56

my definition of eighteen every day

1:31:59

is about 18 holes once

1:32:01

a month and I would

1:32:03

rather be engaging with these young

1:32:05

entrepreneurs. I get a

1:32:07

lot of energy from that side of

1:32:09

the equation in helping them and seeing

1:32:11

them thrive over the course of time.

1:32:14

A lot of personal enjoyment comes

1:32:16

from that and if we do it, the

1:32:18

investment side just takes care of itself. One

1:32:21

of the other elements that I think

1:32:24

is really important to your approach is

1:32:26

just the way in which you generally

1:32:28

will have a strong point of view on any

1:32:31

situation in any one of these

1:32:33

companies and you have

1:32:35

ideas, you bring ideas, suggestions to

1:32:37

teams but you're always at

1:32:39

the same time giving them room to maneuver

1:32:41

and to develop their own insights or carry

1:32:43

an idea forward. It just hit

1:32:45

me that really the 30 or

1:32:47

so years of being this

1:32:50

chief steward of Danaher with

1:32:52

Steve probably shaped you into

1:32:54

this really interesting source

1:32:56

of support for a company that

1:32:58

was both owner-oriented and long-term oriented

1:33:00

and yet you got comfortable

1:33:02

not having your hands on the steering

1:33:05

wheel. I think of other

1:33:07

investing models and private equity in

1:33:09

particular where a lot of change

1:33:11

and a lot of strategy happens

1:33:14

through control rather than influence

1:33:18

but it does strike me that you have this combination

1:33:20

of strong points of view and a

1:33:22

sense for direction and yet

1:33:25

you're always ultimately deferential to those who

1:33:27

are in the leadership seat. Well,

1:33:29

running a business day to day is

1:33:31

very different than what Steve and I

1:33:33

do or what I do

1:33:36

with my private investment activities. You

1:33:38

find great talent with great learning

1:33:41

agility. You help them, you kick

1:33:43

them in the butt if they get off

1:33:45

straight and narrow a little bit, you pat them on the

1:33:47

back when they're doing great things but you

1:33:49

do not get in their way of running the day

1:33:51

to day of the business. That's

1:33:54

where the fault line starts to exist

1:33:57

if you get into the details

1:33:59

of managing. them on a

1:34:01

day-to-day basis. And the relationship, it's

1:34:03

the beginning of the end. How

1:34:05

do you think about matching the characteristics

1:34:08

you like to see in talent,

1:34:11

in leaders, founders, with

1:34:13

the structure of, say, a recurring revenue

1:34:15

business, but overall the

1:34:17

battlefields or the secular trends

1:34:21

that are most attractive? I think we've been

1:34:23

talking about vertical market software. There's many ways

1:34:25

in which those all align.

1:34:27

But what other big trends do you see

1:34:29

over the next 10 or 20

1:34:31

years that get you excited just as places to look

1:34:34

for founders or

1:34:36

particular businesses that might fit the

1:34:38

mold? I would say one

1:34:40

of the great minds around this is Froze

1:34:43

Duan. He sees a

1:34:45

lot of these trends. He's thinking about

1:34:47

it day in and day out. Obviously,

1:34:50

everything healthcare and

1:34:53

efficiency related to healthcare is a secular trend

1:34:55

that will last the rest of our lifetime.

1:34:58

So thinking about how you make

1:35:00

healthcare more efficient, thinking

1:35:03

about how you create things

1:35:05

that allow people to live

1:35:07

longer, healthier, happier lives. There's

1:35:10

a secular trend that will go on the rest

1:35:12

of our lifetime. Everything digital is

1:35:15

happening in front of us. So

1:35:17

whether it's vertical market software or

1:35:19

other forms of software, invested

1:35:21

in a wonderful business called

1:35:23

DataCore, which is

1:35:25

vertical market software for

1:35:27

industrial applications. Think about

1:35:30

the chemicals industry, the

1:35:32

food industry, anybody that's

1:35:34

doing bulk processing. DataCore

1:35:36

has terrific platform of

1:35:39

software applications that work

1:35:41

for those industries. So

1:35:44

helping, whether it's healthcare

1:35:46

or industrial, efficiency is a

1:35:48

great secular trend that will

1:35:50

go the rest of our

1:35:52

lifetimes. Every customer wants

1:35:54

you to become more important. They'd rather

1:35:56

deal with less suppliers than more as

1:35:58

long as you treat them

1:36:01

fairly with innovation and price

1:36:03

and great service. If

1:36:05

you can accomplish those type of

1:36:07

things, it's wonderful. But the whole

1:36:09

mapping of the workflow is really,

1:36:12

really important and understanding

1:36:14

all the things that are near adjacencies

1:36:16

to what your customers are doing in

1:36:18

their own shops, whether it's a factory

1:36:20

or a service center, whatever the case

1:36:22

may be. If you can become

1:36:25

more important to them, you're just going to do

1:36:27

better. So you look at that as

1:36:29

well, and I call that expanding

1:36:32

into near adjacencies where there's some

1:36:34

synergy. It may come from

1:36:36

the customer being there.

1:36:39

It may come from adding products

1:36:41

to the portfolio that drive efficiency.

1:36:43

It could be geographic efficiency with

1:36:45

certain of your businesses. There are

1:36:47

all kinds of ways to look

1:36:49

at the workflow as a whole

1:36:51

and gain from it. What

1:36:53

about stage of company, Mitch? I think

1:36:55