Invest Like the Best with Patrick O'Shaughnessy
· Alex Behring, Patrick O'Shaughnessy
[00:00:00] S1: Yeah. [00:00:00] S0: As you think about the broader world again today, and the sorts of business models that have become the most exciting to people. How do you think about technology and its role in the businesses that you buy and in the opportunity set in general? It's probably not by accident that all of these have a large, hard physical component to them. Harder to disrupt atoms, that's for sure. But in that most market headlines are about bits, how do you think about using it, ignoring it? How do you relate to it? [00:00:00] S1: Think about the restaurant business, which you would think in principle, it's all about burgers or pizza, or other types of sandwiches and whatnot. And look at what Patrick Doyle accomplished at Domino’s. [00:00:00] S0: Yeah, amazing. [00:00:00] S1: Look at what he drove there. It's one of the most successful stories of all time. And we're lucky to have Patrick with us now as exec chair at RBI. And he basically took so much share from other large players. [00:00:00] S0: Built a tech business. [00:00:00] S1: He built a tech business. That's exactly right. And he took so much share from the other large players and from the small mom and pop players because he built a tech platform. So that's probably the best example you're going to find. And that's true for every other consumer business.
· Alex Behring, Daniel Schwartz, Patrick O'Shaughnessy
[00:00:00] S1: He built a tech business. That's exactly right. And he took so much share from the other large players and from the small mom and pop players because he built a tech platform. So that's probably the best example you're going to find. And that's true for every other consumer business. [00:00:00] S2: Yeah, I'd say we like businesses, as we mentioned before, well-moated businesses, where technology can help improve the business, not disrupt the business. So if it's the case of Skechers having a better e-commerce experience, or case of Hunter Douglas having AI tie-in to decide when the blinds should go up or down depending on the weather and things like that. Or with the restaurant businesses, several of the restaurant businesses are now experimenting with AI-enabled voice drive-through. So we like types of businesses that could be improved by technology, and we and our teams embrace that. Just not the businesses that a new technology is going to completely change and remove. You're going to wear sneakers tomorrow, regardless of whatever technology is out there. [00:00:00] S1: Hopefully you’re even going to eat a burger every now and then. [00:00:00] S0: Yeah, of course. I'll walk it off in my new Skechers. What are the most misunderstood or surprising things about 3G, do you think, from the outside?
· Patrick O'Shaughnessy, Alex Behring
[00:00:00] S0: Yeah, of course. I'll walk it off in my new Skechers. What are the most misunderstood or surprising things about 3G, do you think, from the outside? [00:00:00] S1: I think people, again, may not perceive how focused we are on business quality first and foremostly. If you were to participate in investment discussions here, for instance, what proportion of those meetings is dedicated to determining whether a business is really good or not? The bulk of it. Versus talking about what the cost opportunity is, that's secondary to that, and it's secondary to the quality of the business and the growth potential. I think that may surprise some people, frankly, that look at us from the outside in. I think they might be surprised how lean we are as a group of people, given the size and global footprint of some of these businesses. I don't know what else, Dan.
· Daniel Schwartz, Patrick O'Shaughnessy
[00:00:00] S2: Maybe just to compound on Alex's answer, a few years ago, we had hired a new person to come into our restaurant brands. And we do these annual team offsites, where each of the brands goes through and talks about the plans for the next year, the big strategic projects that they're focused on. And I remember after the meeting, the person came up to me and said, "Look, you know, I didn't know what to expect here. Everybody talks about you guys. You've got a bunch of cost cutters." There were like 800 pages of content at this offsite. 10 of them covered the costs, and the other 790 were related to growth, and bettering operations, and opening up new restaurants. And I think it's kind of on us to maybe tell our story and get the truth out there. The other thing that I really think would surprise people here is the level of some combination of groundedness and humility that exists within this organization. That starts with the co-founders and Alex and myself and our team here. Everyone is deeply intellectually curious and wants to grow, wants to learn. And despite some of the success that senior partners and co-founders have had here, they are some of the most humble people you will ever be around. And they are not afraid to ask anyone basic questions. And there's zero arrogance, zero. And just this ultra, ultra-high level of humility. [00:00:00] S0: Is there anything you hope that 3G becomes that it's not yet?
· Patrick O'Shaughnessy, Daniel Schwartz, Alex Behring
[00:00:00] S0: Is there anything you hope that 3G becomes that it's not yet? [00:00:00] S2: The last two transactions that we did were essentially family businesses. We were viewed as a great home, a great long-term home for iconic, founder-led family businesses. And so I’d like, over time, with the success of those two investments, for us to hopefully be known as a great home for founder-led and family-controlled businesses. [00:00:00] S0: That's very Buffett-coded. Is that by design, or is it just the nature of what's worked for you and what you enjoy. [00:00:00] S1: It's also a function of the kinds of businesses that we like, which are successful businesses that have been around for a long time. And more often than not, you find that those are still owned, or somewhat controlled, or influenced, or managed by the founding family. [00:00:00] S2: And it's linked. Because if you have an owner who really cares about his or her business and will make the right long-term decisions, as opposed to maybe the public company quarter-to-quarter, those decisions positively compound on themselves over decades. And so that's one of the reasons why some of the time, these family businesses tend to be much, much better than their public company equivalents. [00:00:00] S0: I'd love to say one more word about that. So everyone says, "think long-term." [00:00:00] S2: Everyone says it. [00:00:00] S0: Right. No one does it. [00:00:00] S2: Very few people do it.
· Daniel Schwartz, Patrick O'Shaughnessy
[00:00:00] S2: Very few people do it. [00:00:00] S0: What are the features of businesses that make them better when they're built very slowly over time than they could be if the same business had been built quickly? [00:00:00] S2: If you're long-term, and you're thinking long-term, and the decisions that you're making are around long-term, you will make different decisions than if you are short-term. And a couple of very simple examples would be with our restaurant business on people. We spent a disproportionate amount of time recruiting, developing, growing some of this young, special talent, who in the first many years with us – if we were in it for a two, three, four, five year flip… [00:00:00] S0: Just don’t bother.