Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Henry Ellenbogen
[00:00:00] S0: Could I correctly boil this down to the positive value of daily marks and the depth of public markets and their investors? That those two things in combination, the reason why being public might be valuable relative to the private alternative. [00:00:00] S1: I think I probably, because I used the Netflix example when they were fully formed and they were just my company. I also think that putting discipline into a company when your corporate culture has already formed… I don't wanna use the word stasis, but at a certain scale, it's hard to change. It’s not good. To run a company well, you have to be in the and business, not the or business. You have to drive growth measured by market share in the short term. You have to drive innovation or allocate capital well to position yourself better for the future. And you have to basically drive profitability. Partially profitability allows you to invest, but profitability actually forces you to drive efficiency and discipline through the organization and make sharp decisions on capital. And what I always tell people about this is you should think about your CFO's function not as a policeman, but actually as someone who basically sells standards that force you to make sharp decisions. I think people realize this more today than they did a couple years ago, but a lot of times when you prioritize and you focus on what really matters, agility comes in and you accomplish more. And when you try to do too much, essentially investment has no cost. A lot of times it's lazy and it's not sharp.
· Henry Ellenbogen, Patrick O'Shaughnessy
[00:00:00] S1: I think I probably, because I used the Netflix example when they were fully formed and they were just my company. I also think that putting discipline into a company when your corporate culture has already formed… I don't wanna use the word stasis, but at a certain scale, it's hard to change. It’s not good. To run a company well, you have to be in the and business, not the or business. You have to drive growth measured by market share in the short term. You have to drive innovation or allocate capital well to position yourself better for the future. And you have to basically drive profitability. Partially profitability allows you to invest, but profitability actually forces you to drive efficiency and discipline through the organization and make sharp decisions on capital. And what I always tell people about this is you should think about your CFO's function not as a policeman, but actually as someone who basically sells standards that force you to make sharp decisions. I think people realize this more today than they did a couple years ago, but a lot of times when you prioritize and you focus on what really matters, agility comes in and you accomplish more. And when you try to do too much, essentially investment has no cost. A lot of times it's lazy and it's not sharp. [00:00:00] S0: I feel like we've covered so much ground. I'm curious if there's any other ingredient in Durable’s story or your story that we haven't covered that you feel like is essential to understanding you and what you're doing and why you're doing it.
· Henry Ellenbogen
[00:00:00] S1: I think we wanna have fun and we actually root for everyone. The reason I say this is I'm a huge sports fan. I love studying sports. To me there's two types of competitive greatness. And they both work. There's Michael Jordan, who was such a fierce competitor that essentially if you didn't rise to his level, he drove you out of there and it works. And those Bulls showed up with a chip on their shoulder every game. And it was amazing and they were great. And then there are the people who play basketball and they say, this game is great. We wanna have fun and we want to elevate the game and we wanna win. And the people who compete with us, we think they're great and we're rooting for them. Now of course, if we're gonna play against them, we're gonna be competitive on that day and we're gonna win. But we want to actually have fun. We believe everyone can win. And I think that's Durable. That's really important to me. When we invest in people, that's the kind of person we want to invest in. When we do—we're public market investors at our core—if we have to, and we did, because we think it's right for our clients, have to go sell a firm, which we did because we believe from a risk reward standpoint, we have to go do it, we're gonna go do it. I always say it's not our money, it's our investors' money. We gotta be fiduciaries first. But when we did that, we want to see Max win. And we never stopped talking to Max. In fact, I think he would tell you some of the things in our relationship where he learned from me more than I learned from him was in the period of time where we didn't own his stock, because we don't think about it as a stock. We think about it as we wanna see Max win. And even the investors, I don't think about us competing against investors. I mean, there's so many investors who I respect, and honestly, if they're doing their craft well and they're high-quality people, we want to see them win. That is so core to the way we deal with people and the way we hold ourselves accountable.
· Patrick O'Shaughnessy
[00:00:00] S0: Is that the Steph Curry Warriors at their peak approach to contrast against the Jordan approach or something like this?
· Henry Ellenbogen
[00:00:00] S1: Yeah, I mean, that's exactly how I think about the Warriors. Steve Kerr I think is amazing. John Wooden, amazing. I think John Wooden is the greatest coach of all time. Like, think about what John Wooden wanted from his players. He wanted them to be great people. He didn't necessarily believe they all had the same modes. I mean, Kareem Abdul-Jabbar and Bill Walton may be the two greatest college basketball players of all time in their eras, but definitely in the top five. Totally different people, and he accepted that. But he wanted them to be great, not only as basketball players, but as people. He was measuring UCLA against that. And frankly, of course the output of that is the success they had. And to me, that was the Lakers with Magic Johnson. You watched those guys play basketball and they just were having fun and they were elevating the game. I remember going and seeing the Warriors when Steph and Draymond and Clay were just coming up. The energy of those people was amazing. And they transformed the game, right? They changed the three point shot. And then of course, when you see greatness like that, you gotta go learn from it. And of course, I've gone and understood the way Steve Kerr is and how he cares about competitiveness, but he cares about mindfulness, he cares about fun. If you're gonna be a new Warrior, he's gonna go visit you in your hometown to truly understand who you are as a person. I mean, that to me is great. And that to me is part of what being durable is.
· Patrick O'Shaughnessy, Henry Ellenbogen
[00:00:00] S0: It's a wonderful excuse to ask you my traditional closing question, what is the kindest thing that anyone's ever done for you? [00:00:00] S1: I prepared for this one, Patrick, because I do listen to your show. So I have to say it's my mom. My parents got divorced when I was young and my mom raised me. I learned so much from her. The thing my mom did for me that in hindsight was so wise and proved to be so kind, was I took a leave of absence from Harvard to go work on a campaign for a state representative running for US House of Representatives. And she was totally supportive of that. And then he was expected to lose. And a long story, I became his campaign manager. He ended up winning. [00:00:00] S0: You were 19?