Invest Like the Best with Patrick O'Shaughnessy
· 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.
· Henry Ellenbogen, Patrick O'Shaughnessy
And then, for sure we do investment reviews where we do deep dives on stocks. Multiple people look at this, I learned this from, you had Kelly on from the firm Lone Pine, really I learned that from Steve. I'm sure Lone Pine still does it. We do KPIs, we call KPIs the operating reviews where we go through the whole portfolio and every colleague reports to everyone else how they did, and we do this not to basically be a session and where “you’re great” or “I got it wrong”, it's more like here's clinically what happened and everyone can learn from it but also lend their lens because it's not great, bad. A lot of times it's subtle. This thing was good, this thing was mixed. People can add their lens. And then we get together twice a year and we have offsites. You can probably tell we have a lot of fun at Durable, but our offsites don't look like other people's offsites. We used to do team building activities. [00:00:00] S0: Now you do KPI reviews? [00:00:00] S1: And now we don't do them. Why don't we do them? Because actually we're a group of people who likes learning from each other and likes sharing insights. And the activity we're gonna get together for three days, it’s gonna be, we're gonna basically do lookbacks, we're gonna look at reviews, we're gonna go study an industry, we're gonna go talk to a CEO, and then we're gonna all learn from something such that we can all make each other better.
· Henry Ellenbogen, Patrick O'Shaughnessy
[00:00:00] S1: And now we don't do them. Why don't we do them? Because actually we're a group of people who likes learning from each other and likes sharing insights. And the activity we're gonna get together for three days, it’s gonna be, we're gonna basically do lookbacks, we're gonna look at reviews, we're gonna go study an industry, we're gonna go talk to a CEO, and then we're gonna all learn from something such that we can all make each other better. [00:00:00] S0: It must be very powerful when you're making an initial projection on a KPI or something to know that in the six months and year and two years and three years hence, it's gonna be looked back upon. You probably sharpen your pencil a little bit.
· Patrick O'Shaughnessy, Henry Ellenbogen
[00:00:00] S0: It must be very powerful when you're making an initial projection on a KPI or something to know that in the six months and year and two years and three years hence, it's gonna be looked back upon. You probably sharpen your pencil a little bit. [00:00:00] S1: You do. But I think what's special about our culture, and I always tell this to people before they join, and we tend to hire young people and develop them. But if you've been anywhere else, you don't believe us. People think when we get together and we do KPIs or do three year lookbacks or we'll do a session sometimes where we'll look at reinitiation in the portfolio, things we sold before and then we bought back. And a lot of times if we did that, why'd we sell it in the first place? Maybe we got it wrong. We don't do any of this in the spirit of “You made a mistake; this is an environment where you should critique yourself negatively.” It's like, no, we should be intellectually honest just like we want our executives to be. We want to be clinical in what we did, but then we wanna do in the spirit to try to learn from it and get better or put our data out there so we can learn from our colleagues who might have a valuable perspective to make us better. And if we can take the attitude of intellectually honest, self-improvement, humility; that makes us better. [00:00:00] S0: When you were doing your tour to learn about the franchises that were better at the end of the founder's run and those that didn't make it, what did you learn?
· Henry Ellenbogen, Patrick O'Shaughnessy
[00:00:00] S1: I won't mention the names of those who didn't make it, because the thing about not making it is a little bit like our investment memos when we invest in great people who are trying to build companies. A lot of them do great things and they just don't make it. In success, there’s a lot of good fortune. I think what I learned was if you don't architect the system on day one for success, then you end up with a lot of conflicts that sometimes undermine what you could have accomplished. We try really, really hard at Durable not to make compromises. If we go hire someone on the investment team, we want to go hire someone who one day could be a senior partner, or one day go basically manage the capital base. Or if we were to ever launch a new product, go launch that product. We're looking for people who can be as good as I am or Anouk is, or Corey is, or Kathryn. We want great people. For sure, you usually start in our parlance as an associate, you're gonna start supporting someone and you’re truly gonna be an apprentice in that way. And then even when you become an analyst, the first three years you're probably doing real analytical work, but probably you're early in your journey. But we don't wanna hire you, we don't want to promote you unless we think you can actually one day lead the investment organization and drive the firm. And the reason I feel that's so important is we just don't have that many slots. [00:00:00] S0: It's just like the companies, if you don't believe it can get better, you don't do it.