Invest Like the Best with Patrick O'Shaughnessy
· 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.
· Patrick O'Shaughnessy, Daniel Schwartz
[00:00:00] S0: Just don’t bother. [00:00:00] S2: It's negative payback. You're giving them a lot more than they're giving you. Those people 15 years in now run the business. Or France. The first couple of few years in France, the amount of money we had to invest to get things going, the amount of time we had to spend. As I mentioned before, there was one restaurant in the south of France that was open. You only do that if you're taking a long-term view. And so even though it wouldn't pay back in the next six months or a year, or a few years, we knew if we're going to be long-term owners of this business – fast forward, 10-15 years, we'll be well-off, having this 2 billion plus euro sales business. And you see this in the family businesses, especially these multi-generational family businesses, where you look at David Sonnenberg buying small businesses 10-15 years ago, which wouldn't make a dent on the size of overall Hunter Douglas back then, but today contribute hundreds and hundreds of millions of dollars in sales. Those are some very tangible examples of the benefits of thinking long-term.
· Daniel Schwartz, Patrick O'Shaughnessy
[00:00:00] S2: It's negative payback. You're giving them a lot more than they're giving you. Those people 15 years in now run the business. Or France. The first couple of few years in France, the amount of money we had to invest to get things going, the amount of time we had to spend. As I mentioned before, there was one restaurant in the south of France that was open. You only do that if you're taking a long-term view. And so even though it wouldn't pay back in the next six months or a year, or a few years, we knew if we're going to be long-term owners of this business – fast forward, 10-15 years, we'll be well-off, having this 2 billion plus euro sales business. And you see this in the family businesses, especially these multi-generational family businesses, where you look at David Sonnenberg buying small businesses 10-15 years ago, which wouldn't make a dent on the size of overall Hunter Douglas back then, but today contribute hundreds and hundreds of millions of dollars in sales. Those are some very tangible examples of the benefits of thinking long-term. [00:00:00] S0: My friend David Senra, who runs the Founders Podcast, is obsessed with this style of entrepreneurship, this lifelong commitment, "exit strategy is death" type builders. What are these people like as people? You've engaged with so many of them, not just the ones that you've bought their businesses, but dozens and hundreds more, probably that you haven't bought the business. How are the people themselves characteristically most different from other people and entrepreneurs?
· Patrick O'Shaughnessy, Alex Behring, Daniel Schwartz
[00:00:00] S0: My friend David Senra, who runs the Founders Podcast, is obsessed with this style of entrepreneurship, this lifelong commitment, "exit strategy is death" type builders. What are these people like as people? You've engaged with so many of them, not just the ones that you've bought their businesses, but dozens and hundreds more, probably that you haven't bought the business. How are the people themselves characteristically most different from other people and entrepreneurs? [00:00:00] S1: Just how deeply they care about the business. Business is part of their lives, their persona, their families, their pride, their aura, everything. They really have that relationship with the business that they created and that they developed. And I think it's something you need to understand if you're going to engage with them. You need to understand where they're coming from on that. [00:00:00] S2: Yeah. Well said. I mean, they're passionate about the business. They genuinely care. You hear this in Senra's podcasts all the time. [00:00:00] S0: Do you feel like there's anything major that we've missed about what makes 3G 3G that's important to cover? Or do you feel like we've covered it well?