Invest Like the Best with Patrick O'Shaughnessy
· Henry Ellenbogen, Patrick O'Shaughnessy
That to me is different than where we are in 2025 because I felt we had real expertise there and something to add to the conversation that a lot of these executives hadn't seen before as operators, and frankly many of their board members had come of age in a period of time where money was free, and frankly probably hadn't been in involved as many durable companies as we had been involved in. So the answer is I think probably we're more back to learning and normal interaction than we are having a perspective that we're dying to explain to people. [00:00:00] S0: I heard that in the early T. Rowe days that you were studying media and you studied 20 or 30 years’ worth of media history and condensed it down to a very small three or four page report. Can you bring us back to that study and what you learned about media? I'm obviously interested in media. I'm curious what you learned then about media and how that has evolved ever since.
· Henry Ellenbogen
[00:00:00] S1: I tend to wanna do this. I always believe that if you really understand something, you can make it super concise. And where we are with robotics and less so with AI, our internal memos are probably too long, because frankly there's too much unknown and so we can't be concise. I was very lucky in media, and it's something we try to do at Durable with people, because I was an outsider to the media industry. I think I brought fresh perspective to it. When I was assigned to be a media analyst—this is so hard to believe, but the companies that were viewed as the darlings of balancing durability in terms of competitive moats and having strong growth were companies like Comcast, Time Warner, Disney, Viacom. I did a bunch of work on the companies individually and then I started to really think hard about it. And I started to realize that the best businesses inside of all of them had been the cable networks. If you read about media back then, the entrepreneurs that became the most famous were the ones that launched cable networks. John Hendricks, Ted Turner, Bob Johnson—by the way, John Malone basically backed almost all these people and put the most investment in. So John Malone was at the center of all this. For 20 years, cable networks grew 20% with 20 ROEs. So they were compounders and that's how you had all these entrepreneurs that had become billionaires, and that's how you had media companies that really fought over a balance of content and distribution so they could all get their fair share of these economics. And then when you went and you looked at a bunch of the other industry, it was like an average ROA business, and that was what the whole industry was. But the whole thing, if you really thought about it, a systematic level was predicated on a closed system, which is so obvious today. What the closed system was predicated on, I'm only gonna show you the product or the TV show that you most wanna watch when I can make the most money. Not when you wanna consume it. Even in a world of linear TV, even though the most people watched TV on Sunday night, the worst shows showed up on Sunday night because people had spent their money on the weekend, and they were going back to work and they weren't gonna go shopping and go out. And the best shows showed up on Thursday Night Friends, the Cosby Show.
· Henry Ellenbogen, Patrick O'Shaughnessy
And in the movie business obviously there was windowing. I was like, okay, so the best business is cable networks. That's why we have this fight over content distribution and then it's all predicated on this closed system. What I believed at the time, which obviously proved to be true, was that this TMT bubble that had burned so many investors and no one wanted to think anything good could come out of at the time it, had laid the seeds of the end of the durability of that industry. Because even though people lost so much money on telecom infrastructure and laying the seeds of broadband, what broadband was enabling eventually was things like YouTube and Netflix, which would break down this whole closed system that was run like an oligopoly. That's what my memo summarized, was the riskiest thing is to own the durable asset and the safest thing to do is go buy the next standard. [00:00:00] S0: I mean lots of people will say investing's an apprenticeship business, and you yourself have said the best investors are better at 70 than at 50 than at 30. I would love to hear a lot about what you've learned about selecting great people when you don't know them as well and then making them better as part of Durable over time, because that's gonna determine how well you do as a business. So it's a critical component. How do you do it?
· Patrick O'Shaughnessy, Henry Ellenbogen
[00:00:00] S0: I mean lots of people will say investing's an apprenticeship business, and you yourself have said the best investors are better at 70 than at 50 than at 30. I would love to hear a lot about what you've learned about selecting great people when you don't know them as well and then making them better as part of Durable over time, because that's gonna determine how well you do as a business. So it's a critical component. How do you do it? [00:00:00] S1: One of the major goals I had when we started Durable was to actually build an investment firm that would be better the day I left and the initial partners left than when we were the best while we were there. So I thought really hard about that. [00:00:00] S0: That's a hell of a goal.
· Henry Ellenbogen
[00:00:00] S1: I went on a listening tour and I went to see firms that had a period of greatness and some of them didn't get it done and then some of them actually accomplished that goal. I learned a lot in that. Part of it is how we have structured Durable's incentives and the whole ethos we have internally, but it was really a reinforcement of this goal about people. You’ve spent time with our team. When you look at the senior people at Durable, Anouk Dey, one of my partners, incredibly talented woman, she started working with me at 26. She had never worked in the investment business before. She had finished her master's at Oxford and she was working at a nonprofit. Corey Shoal, he started working with me either 21 or 22 right out of William and Mary. And then we have a host of other people who came out of liberal arts, not rigorous. I had to work at a bank, at an investment firm or anytime I interview with people, I have to tell people since I was five is basically what you have to do nowadays. Go work at uh, most investment firms or banks. You gotta tell people that ever since the age of five I wanted to do exactly what you're doing. But all jokes aside, we really believe that you have to be an expert in what you do, develop into it. There's a whole matrix we have about the development of security analysis excellence and how it’s a journey. We do our reviews based on it. I tell people, look on this sheet, this is a journey. I'm probably the most experienced security analyst at the firm and I still have a journey to go here. I gotta get better. And then we also believe at the same time, that the youngest person in the room, on our investment team, actually can have the most valuable perspective. So we have an investment team of 12 people. And in my career, a lot of times the best insight comes from the most junior person who's looking at something with a fresh set of eyes. Early in Anouk’s career, when I was looking at consumer companies, she really helped understand a millennial mindset and then we did a lot of work against it. And I think that led to some great investments both in the public and private markets. We were private investors in DoorDash, Sweetgreen, Warby Parker, some of the leading companies of the day. Anyway, what do we look for? We look for deep intellectual curiosity.
· Henry Ellenbogen
If you don't wanna constantly learn, that's just not who we are. We want people who really wanna learn. We want people who compete, but want to compete as a team sport. We have a lot of athletes, we have a lot of people who work their way through school financially. We want people who are resilient themselves. All of us have periods of time where we get things wrong. And then if you're gonna passionate, our style of investing in a world where the market has such volatility, even on good companies like Colliers, you have to live with the fact that sometimes your performance isn't gonna be good. Sometimes you gotta be resilient and you realize you're right, you gotta believe in it, and sometimes you gotta realize you're wrong. All this is underlied obviously by a level of desire to be excellent at what you do but make your colleagues better. This is unique to Durable and we're just different here. So when people think about being excellent at Durable, they have to think about being excellent in what they do and they have to be excellent at making their colleagues better. It's gotta be both. We're an and culture. Then obviously we talked about why what we do is different. Our ability to invest in Duolingo as a private company and still own it today, our ability to invest in Figma when it's a $30 million company and the same person follows it today. We have to have people who are both good at analyzing private companies that are early-stage growth companies, and then understand scale durable growth companies, and understand the subtleties and the nuances of private markets and the relationships and the way governance works, but also understand truly being a minority investor in the public markets.