Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Alex Behring, Daniel Schwartz
[00:00:00] S0: It's ubiquitous in Canada. [00:00:00] S1: It's just so, so large, the brand in Canada and so important for the Canadians that this information about a deal coming out the wrong way at the wrong time, could have killed it after all these six months. So you asked him, when is it that he was nervous? But this is when I, in spite of my then already abundant gray hair, was nervous. [00:00:00] S0: How did it ultimately get done? And what was the reason that he was slow and quick in his initial two responses? [00:00:00] S1: So apparently – I mean, we were not privy to all the details, but the board dynamic there between him and the prior CEO that was chairing the board and whatnot. There was some genuine doubt about the deal and they were discussing it intensively. [00:00:00] S2: Yeah, I think if you rewind a bunch of years earlier, it was a subsidiary of Wendy's. [00:00:00] S1: That's right. That's what drove the... [00:00:00] S2: They were like, "Do we really want to be attached to a burger brand again?" But ultimately, I think we were able to convince them that this was going to be great for everybody, that this was going to be a portfolio of brands, that we would take Tim Hortons international. And that, most importantly, the brand would retain its independence, and independent management, and focus in Canada.
· Daniel Schwartz, Alex Behring, Patrick O'Shaughnessy
[00:00:00] S2: They were like, "Do we really want to be attached to a burger brand again?" But ultimately, I think we were able to convince them that this was going to be great for everybody, that this was going to be a portfolio of brands, that we would take Tim Hortons international. And that, most importantly, the brand would retain its independence, and independent management, and focus in Canada. [00:00:00] S1: And also, I think that what sealed the deal for them – of course, the financial proposal – but it was also the reassurance on our part that our owners in Canada, our Tim Hortons owners, which were the heart and the core of the brand, would really thrive under our ownership. That was key for them. They really cared about that. There were thousands of owners in Canada. They made the brand into what it is. [00:00:00] S0: The franchisees, you mean? [00:00:00] S1: The franchisees. Which in the case of Tim's, they call them owners. I think that was key for them. Once we disclosed what our plans were, why we thought that they would work out and so on, and so forth. That went a long way with them as well, because that helps dismiss their concerns about what happened in the past. This wouldn't repeat itself. [00:00:00] S0: You mentioned the call with Warren on this one in particular. Over the years, what have those calls been like? What could we all learn from the sorts of interactions you have with him at the really high level about a potential asset, a potential investment?
· Patrick O'Shaughnessy, Alex Behring, Daniel Schwartz
[00:00:00] S0: You mentioned the call with Warren on this one in particular. Over the years, what have those calls been like? What could we all learn from the sorts of interactions you have with him at the really high level about a potential asset, a potential investment? [00:00:00] S1: We learned a lot just by virtue of spending so much time with him. And I think Warren had this uncanny ability to quickly identify whether a business is good or not, and really, really have clarity around that. A little bit of this encyclopedic knowledge of business that he has is something that, of course, we're nowhere near having here at the firm. But we do try to emulate some of that around the stable of companies that we follow over a long period of time and the relationships that we build. That's the other thing we learned from him. He really sort of values these relationships; he builds them often when there's no business to talk about, and he's always respectful and mindful and great around that. And I think those are the two things I took personally to heart from all these interactions with him. [00:00:00] S0: Anything you'd add? [00:00:00] S2: Warren never compromises on business quality, and that takes discipline. And I think what we do here – and we like to think that we emulate him in that capacity, that we will never compromise on business quality. We'd rather do nothing than buy a business we don't think is great.
· Daniel Schwartz, Patrick O'Shaughnessy
[00:00:00] S2: Warren never compromises on business quality, and that takes discipline. And I think what we do here – and we like to think that we emulate him in that capacity, that we will never compromise on business quality. We'd rather do nothing than buy a business we don't think is great. [00:00:00] S0: I want to come back to this young talent thing. I have a 3G story that I don't think I've told either of you, which is in my prior investing business, when I was running a quantitative investing firm, we'd be pitching pension funds all the time. And I actually pitched them Kraft Heinz. And then we ended up managing money for the pension, you know, a big slug of money. And I remember going to the finals meeting, that's like this formal bake-off between us and others, and thinking at the time, I'm like, wow, these guys are like my age. I was late 20s or something like this. And they were all late 20s. And I was like, well, who are you guys? And it was like, the CFO, the Treasurer and whatever, you know, it was "run by children." I hate to throw it back at you. [00:00:00] S2: Let me throw it back at you! You were qualified in your late 20s to manage the money. So why wouldn't they be qualified to run the business? [00:00:00] S0: Totally agree. But I want to hear about the roots of how you built this empowering, very talented younger people into positions of not just importance, but control and ownership and all these things. What is the legacy of this feature?
· Alex Behring
[00:00:00] S1: It's predicated first and foremostly on this desire to be a great place for the best talent. And one of the things that we think is appealing to this sort of cohort of people is to go to a place where they know that there's a decent chance that someone is going to make a bet on them early. Earlier than probably anywhere else. Then, of course, just making a bet on them earlier than anywhere else is not good enough if they don't have a real chance of succeeding. And the real chance of succeeding comes from surrounding them well when you make these bets. For instance, as Dan said, when he was running Burger King, I was there as an executive chair for him. I had done it before. I was trying to help him everywhere, each and every way I could. And also, we brought people on the team at Burger King that had been involved in prior instances, at the brewery and the railroad and other places, in senior operating functions on sort of the same processes or things that we wanted to implement there. So that sort of, that combination of things sets you up for success. Nothing guarantees your success and you have to be prepared, but some of these things will not succeed. Some of these risky promotions won't succeed. But you have to maximize the chances that they work. So my co-founders, who were on the board of the railroad and were still helping me. One of them was on the board, Beto, and taught me a lot in that period of time. And my other co-founder, Marcel, gave me all these people from the brewery that were well-trained that could help me. So that's a key element into attracting some of the very best people – that you're going to make these early bets and you're going to maximize the chances that they will succeed. And from there, some of them will have, actually, a shot at becoming investors again. Some won't. Some will prefer to be at a company. But that's a key element of our modus operandi, if you will.
· Daniel Schwartz, Alex Behring
[00:00:00] S2: We're lucky because I think we both grew up, work-wise, in these extremely pure meritocracies, that genuinely valued talent over tenure. And I think Alex benefited from that when he led the acquisition of the railroad and the co-founders gave him a shot to be the CEO of the largest railroad company in all of Latin America at age 30. So that was normal to him. And after working together for, I guess, what, five plus years or six years. He knew me, he trusted me, and he knew I'd give everything that I had, and I wouldn't let Burger King fail, which is why he was comfortable similarly giving me a shot as CFO and CEO – because someone gave him a shot. And when I was in that role, I spent a disproportionate amount of my time focused on recruiting, and recruiting who I believed would be the best, best, best people. Not the best people who would be willing to go to work in a burger chain in south Florida, but just the best people, period. And whether it's like the rising star at McKinsey, or at Blackstone, or Goldman Sachs, or at another company, I'd want the best, best, best people. And I, similarly, was willing to give them shots way earlier than they get elsewhere. Both more responsibility and more economics. And one of the early examples of that was Josh Kobza. Josh was 25, and when Alex promoted me to be CEO at 32, I think Josh became CFO at 26. [00:00:00] S1: Over time, people like Sami Siddiqui... [00:00:00] S2: Sami, who was the next year, and Thiago, and David. [00:00:00] S1: All these guys.