Invest Like the Best with Patrick O'Shaughnessy
· Daniel Schwartz, Alex Behring
[00:00:00] S2: I think it goes awry when, to Alex's point, just doling out stock awards to everybody, and it becomes an expectation. It also goes awry when you try to be "fair." And this concept of "fair" is really tricky. Because if you want to operate as a meritocracy, definitionally, a lot of people aren't going to think you're being fair. They're going to think that they're being underpaid, and other people are getting overpaid. And I learned this from the folks here at 3G, that I felt I was being fair. I think I was doing what was right by the people, but I did not allocate stock equally to people. I gave certain people multiples of what other people got, based on our thoughts of people's existing and potential future contribution. And not everyone does that. Even as CEOs, there's a lot of pressure to – and if you give equal amount, it's political. [00:00:00] S1: It gets political at times. [00:00:00] S2: I always tried to learn from these guys, just never be political. If you genuinely think certain people can contribute more, give them outsized grants or outsized equity awards. [00:00:00] S1: One of the things you learn from this compensation arena that's tough, but it's true – is whatever it is that you ultimately do on compensation, you're not going to make everyone happy. So you shouldn't try to do that because it's quasi-impossible. You should try to do what you think is fair from a meritocratic standpoint. And explain it as well as you can.
· Alex Behring, Daniel Schwartz, Patrick O'Shaughnessy
[00:00:00] S1: One of the things you learn from this compensation arena that's tough, but it's true – is whatever it is that you ultimately do on compensation, you're not going to make everyone happy. So you shouldn't try to do that because it's quasi-impossible. You should try to do what you think is fair from a meritocratic standpoint. And explain it as well as you can. [00:00:00] S2: I think it's a common mistake a lot of CEOs make. And I think because we don't do that, I think that allows us to get some of the best people, especially in the early days, that allowed me to attract some of the best, best people. Because I was willing to pay people outside of the normal, whatever preset pay curve and preset systems that we had. If there was a superstar, I would make an exception. I reserve that right as CEO to do that. [00:00:00] S0: Can you talk about the very top of that talent funnel and the things that you have done and still do that are the most effective at finding people when they're very young? I'm interested down to the granular level of what questions are you asking them when you first meet them? What is that very top of funnel for the early mid-20-something talent?
· Patrick O'Shaughnessy, Daniel Schwartz
[00:00:00] S0: Can you talk about the very top of that talent funnel and the things that you have done and still do that are the most effective at finding people when they're very young? I'm interested down to the granular level of what questions are you asking them when you first meet them? What is that very top of funnel for the early mid-20-something talent? [00:00:00] S2: I'm a step before you. The question is, how do you meet them? And it's, generally speaking, word of mouth and being willing to open as many doors as you can. Someone made an offhand comment to me when I was in Hong Kong passing through an investment firm about this superstar analyst who had just left. His name is Josh Kobza. Took note and then cold-called Josh. And Josh was like, "How did you get my number?" "Don't worry about it, Josh, it's fine." Anyway, brought him to Miami. We hired him on the spot. And I would, and I've said this in the past, we'd go to Wharton and HBS and get the resume book. Cold email people who had impressive resumes. And if they seemed like they were really passionate, and they were looking for a project and not just a job, I'd offer people jobs on the spot. Which again, was unheard of. And I'm sure you have some examples in your world.
· Daniel Schwartz, Alex Behring
[00:00:00] S2: I'm a step before you. The question is, how do you meet them? And it's, generally speaking, word of mouth and being willing to open as many doors as you can. Someone made an offhand comment to me when I was in Hong Kong passing through an investment firm about this superstar analyst who had just left. His name is Josh Kobza. Took note and then cold-called Josh. And Josh was like, "How did you get my number?" "Don't worry about it, Josh, it's fine." Anyway, brought him to Miami. We hired him on the spot. And I would, and I've said this in the past, we'd go to Wharton and HBS and get the resume book. Cold email people who had impressive resumes. And if they seemed like they were really passionate, and they were looking for a project and not just a job, I'd offer people jobs on the spot. Which again, was unheard of. And I'm sure you have some examples in your world. [00:00:00] S1: The two comments I would make are when you look at those resumes and when you talk to people, you're trying to identify the people that achieved a lot for their age on the young cohort, because that's indicative of them being hardworking and ambitious in a positive way. I find that speaks volumes, in terms of them having a chance of really succeeding. Because, when I look here at the firm, at cohorts of analysts and young people that we recruited over a long time, and then I try to think, what is it that makes, in hindsight, some of the better ones – what made them stand out from the rest? I think they really, really, really, really, really wanted it.
· Alex Behring, Patrick O'Shaughnessy
[00:00:00] S1: The two comments I would make are when you look at those resumes and when you talk to people, you're trying to identify the people that achieved a lot for their age on the young cohort, because that's indicative of them being hardworking and ambitious in a positive way. I find that speaks volumes, in terms of them having a chance of really succeeding. Because, when I look here at the firm, at cohorts of analysts and young people that we recruited over a long time, and then I try to think, what is it that makes, in hindsight, some of the better ones – what made them stand out from the rest? I think they really, really, really, really, really wanted it. [00:00:00] S0: One of the comments I heard, I don't know why I was reminded of this. Maybe there's somewhat of a relation here, which is the concept that when you bought BK originally, that the brand was way bigger than the business. And I just thought that was like, an interesting framing. And I'm curious for you to say a little bit more about that insight or that concept. And whether or not that's become something that you keep your eye out for, where a brand is bigger than a business.
· Patrick O'Shaughnessy, Alex Behring, Daniel Schwartz
[00:00:00] S0: One of the comments I heard, I don't know why I was reminded of this. Maybe there's somewhat of a relation here, which is the concept that when you bought BK originally, that the brand was way bigger than the business. And I just thought that was like, an interesting framing. And I'm curious for you to say a little bit more about that insight or that concept. And whether or not that's become something that you keep your eye out for, where a brand is bigger than a business. [00:00:00] S1: Listen, I grew up in Brazil, as you know. I used to come to the U.S. since I was seven years old, and I was just crazy for Burger King and for Whoppers. Which, every time I mentioned that, people thought I was being untruthful about it just because our investment was so successful. And I found proof on this letter that I just gave you, that shows that I wrote this in 1975, meaning I was seven years old. You can see my handwriting. [00:00:00] S2: Some nice handwriting for a seven-year-old. [00:00:00] S0: Very nice handwriting.