Invest Like the Best with Patrick O'Shaughnessy
· 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.
· Patrick O'Shaughnessy
[00:00:00] S0: That second piece, which is you're expected to make your colleagues better, how does that actually work in practice? What do people literally do, is it squishy, know it when you see it type stuff or is it more structured than that?
· Henry Ellenbogen
[00:00:00] S1: Look, I'll give you the measurement and then I'll give you how it really works. When we do 360 reviews at Durable, we actually ask everyone to give feedback on what their colleagues did to make them better. It's important and we're a really pleasant culture and we have high quality people, but it's not, Anouk helped me this year. And she's a nice person. It's if you are following DoorDash, it's that Anouk helped me understand DoorDash because of her knowledge about agentic commerce on Shopify really helped me. Or when we did an investment review as an investment team, she took a special interest and she followed up with me, or she went to a meeting that was important and gave me her perspective. We ask people to basically point to specific investments that they have. The second thing we do is I'm one of these people who believe if we want to have great people, we have to attract great people. We have to allow great people to be become great and provide the environment. But I also believe we have to have the right amount of process that enables true excellence and creativity. We, I think from an outsider’s perspective, probably do less or the same amount as other investment firms, but I think the impact is really high. I'll give you a simple example. We do the same investment meeting everyone else does on Mondays, but we do an additional meeting where we go through ideas that we're looking at and we gate them together. We're gonna go spend more time on an investment, everyone's in the room when we decide to go do it. So people start to learn what is it that's a good use of their time, what's not a good use of a time. And if it is, if we're gonna go look at something and I gotta go answer these couple questions in the next stage of investment due diligence, is there a colleague here who can help me do it? We get together on Fridays and by the way, we do it in the office. We have lunch as an investment team and we talk about insights. You don't prepare for this meeting, but this would be, hey, I had an interesting conversation with a CEO. Or maybe this week, I'm sure we'll talk about it, I listened to OpenAI Dev day, and this is what I thought was interesting, or maybe I thought about this, does anyone think about this? So we're trying to look for lateral insights to learn from each other.