0:02
I want to start with the fact that you just bought a public company. You took it private.
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0:06
It's over 100 years old and you paid what? 6. 5 billion for it. Yeah. This is Amex Travel. Yeah. Can you tell the story?
0:13
>> We announced that we're buying American Express Global Business Travel for $6. 3 billion.
0:17
And uh you know, it's just an unbelievable business.
0:21
We've always respected this business.
0:22
You know, it's it's 111-year-old company over a century of customer excellence.
0:27
And it was actually started in 1915 by American Express to help get their Travelers Trex customers out of Europe during World War I.
0:34
I've been a customer of this business. Most people have.
0:36
They they do, you know, they manage to travel for some of the most iconic customers and businesses in the world, close to half the Fortune 500, a huge percentage of the global 2000, a lot of the US government and military uh governments around the world.
0:51
It's a really remarkable franchise and the opportunity to partner with them, take the company private, invest in growth, invest in technology and bring AI into the travel experience for millions of travelers per year that they're supporting.
1:05
It's a big scale of impact for us to, you know, pursue the Long Lake mission, which is to deploy AI into the real economy.
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And, you know, travel's a huge multi-trillion dollar global sector growing better than GDP.
1:18
And we just think that we can have a massive uh impact here.
1:20
So, let let's step back because me and you have been friends for a long time.
1:23
Um, Long Lake has always been a company that it's like if you know you know thing where you know you guys had basically no public profile.
1:32
I don't even think you have a LinkedIn or anything [laughter] >> and true. Yeah. So, no public profile.
1:38
you I know everybody involved actively were like not seeking attention yet ton of people were starting to copy your your your idea and then I've seen some of their financials and they're just like copying it way worse than you guys are.
1:51
So like for the people that don't have never heard of Long Lake explain the thesis and explain why you think right now is the best opportunity to pursue that thesis.
1:58
We formed the company 3 years ago with the mission of basically bringing AI into the real economy.
2:03
economy. What we saw was incredible revolution happening on the intelligence frontier and you know dating back if you had if we had talked to each other four years ago after chat launched and you told me that four years from now back then if you remember the models were amazing but they couldn't do addition
2:18
and recently the last couple of weeks uh you know the models solved some of the 10 most difficult you know unknown math problems in history and may win a fields medal and if you had told me that that level of frontier intelligence was going to you know many people would have thought you were crazy. It couldn't
2:33
It couldn't happen that fast.
2:34
But uh a lot of people in Dorcash was talking about this um recently.
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You know, you would have thought in that world everybody would be using AI everywhere.
2:42
The economy would look totally different.
2:44
GDP would have doubled or tripled.
2:45
What we saw is we had been working a lot with small businesses and in the real economy prior to founding Long Lake.
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That was my history for 10 or 15 years working with founder owned businesses.
2:53
And deploying technology innovations in the real economy is actually really hard.
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there's tons of legacy systems, tons of legacy data, workflows, change management.
3:02
And so being able to deploy these innovations at scale in the economy is actually really hard.
3:08
And so we saw that with with Long Lake.
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And the mission of Long Lake was really to be, you know, to help pioneer the, you know, bringing those frontier intelligence innovations and breakthroughs into real businesses and partnering with real American entrepreneurs and important verticals and important businesses where we could help diffuse the technology at scale.
3:25
We never wanted much publicity.
3:28
we just want to be known for our work.
3:29
I think you know uh my chief of staff Kim who, you know, she was in a leadership program and the mantra of the leadership program was talk less, do more.
3:36
And so that's kind of been, you know, our ethos.
3:40
We just keep our head down and just focus on executing. It's a lot of work. It's really hard. Hold on.
3:44
I got to tell you a funny story about that.
3:46
So, uh I I've spent a few times with a lot of people that know like these European private family dynasties, right?
3:53
That never had like there's the companies aren't public.
3:55
They don't see publicity.
3:56
Like you just they're essentially hidden.
3:58
but they're extremely wealthy.
3:59
And somebody who told me one of their family mottos was um to be to not be seen.
4:03
[laughter] So like we want to be but not be seen. I just love that idea. Yeah.
4:07
I think look I was very inspired, you know, um growing up in in in Michigan in the Midwest.
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Like there's some unbelievable entrepreneurs and businesses that have been built that are worth, you know, billions of dollars doing, you know, unsexy things like construction or distribution or or whatever you might.
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And people are very low-key.
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They're to totally normal people.
4:29
You don't, you know, so so our view is we want to be the best possible partner to those kinds of business owners, you know, we want to they've built in many cases.
4:36
I mean, MXGBT is a great example.
4:38
It's a it's a iconic franchise.
4:40
It predates the invention of the airline.
4:42
That's the brand, you know, that that that we want to sort of partner with and let them shine.
4:45
Long Lake is just here to be sort of a a deep long-term permanent capital partner who's going to help you bring AI into the company, make your team members uh faster, better, smarter, make your customers happier.
4:58
>> But say specifically why you think there was such an opportunity even 3 years ago to bring AI into the real world.
5:04
>> The sort of diffusion problem is a really hard hard problem.
5:06
really hard hard problem. Several years ago there was this question of like will will intelligence work and obviously it's worked and we're seeing that now and to crazy levels and faster and and I'm super AI pill always have that's why I you know uh left my old job to co-ound the company but it's happened even better and faster than you know even I expected it's no longer a question of
5:25
does the technology work now it's a question of now the markets are very concerned about how are we going to finance all this and you know I think the real answer is we need to demonstrate you know you can borrow against future cash flows in order to finance of stuff and people, you know, now this running into the trillions of dollars of investment to be able to scale the models to to to really where we want them to be in 10 or 20 years. In
5:43
In order to finance all of that, you need to see a return in the real economy.
5:48
So actually one of the things Long Lake was formed to do is actually take those frontier innovations, deploy them with into really high ROI use cases, taking away toilsome work from our team members, you know, mundane work, data entry, you know, processoriented stuff that really a lot of people don't like to do.
6:06
And that taking that away and and freeing up human capacity for, you know, more impactful work, dealing with the customers, focusing on growth, that's super high ROI.
6:17
>> Focusing on growth is really important.
6:18
People are think, oh, you take some technologists, match them with some PE guys, they're going to buy a bunch of existing businesses, gut it, replace all the humans with AI, you know, essentially cut costs, and that's like the value creation.
6:30
And the that's not the thesis of what you guys are actually doing.
6:34
You actually think that and you you're demonstrating that you're increasing revenue growth and you're actually not cutting people. >> Yeah, absolutely.
6:42
So, this is like a contrarian take that we had in the beginning as well. for very positive sum.
6:47
You know, we really believe in this concept of like AI abundance.
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And if you look throughout history, you know, most innovations that lead to big productivity gains are actually good for the economy, good for wages, good for consumers.
6:57
And we think this is like, you know, just a sort of like a mega productivity gain.
7:03
It's going to be good for everybody.
7:04
And so what we're seeing in our companies, and we started in uh HOA management, and we've now bought, I think, 20 something companies in that space.
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Um we've bought close to 40 companies now in total.
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uh across this will travel makes it our fifth service line.
7:18
And what we're seeing across industries and in our businesses that we've owned for for longest like HOA management, what we're seeing is significant job growth.
7:25
We're actually adding heads because if you think about it, if your people are 50% more productive and can handle 50% more clients and with better customer service, so you're retaining customers better, you're growing faster, you know, so the people are much more valuable.
7:40
Do you want more of them or less of them?
7:43
You you obviously want more of them. It's like a salesperson.
7:44
you know, uh, if you have a salesperson with AI that's now doing 3x quota, do you want to have like one-third the sales people? No.
7:51
You obviously want, you know, as many of those people as you can have.
7:54
And so, I think this is all going to be very good for jobs and very good for US GDP and and the economy.
8:00
And that that's a big part of our mission as well is basically bringing this positive sum, you know, AI revolution to the economy, 20 trillion plus dollar services economy in the US and, you know, obviously, you know, millions of people.
8:12
Wait, so you said you're in five different verticals now? Yeah. What are they?
8:17
>> So, we started in homeowner association management, which is a actually really big business that people, you know, don't pay a lot of attention to, but there's tens of millions of homes managed in association.
8:27
And so, we're providing, you know, now market leading service, one of the fastest growing companies in that space.
8:32
We then moved into HR services, uh, specialty tax, uh, infrastructure services now is a big area for us.
8:40
So we have architecture, engineering, we're looking at other sort of uh businesses in that broader infrastructure space and now travel.
8:45
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10:57
So I hang out with you guys a lot.
10:57
We have a lot of dinners.
10:59
I basically drop in on your office every time I'm in New York.
11:02
I want to talk about the people that you've like pattern matched off of or that have inspired you.
11:05
or that have inspired you. I know so there we talked about some companies in the past too but people are like okay wait this this guy found his company 3 years ago how the hell did he just buy 110 year old company for $6 half billion uh we'll talk about like your crazy revenue growth you're obscenely
11:20
profitable and I mean obscene the deepest love I love obscene profits what I understand about you just from being your friend is that it's like you kind of have like a map of all how do you think about this is like the same way that Buffett you couldn't tell him about an asset and he'd be like surprised like, "Oh, I didn't know I wanted that asset." He's like, "No, I kind of like
11:37
He's like, "No, I kind of like mapped out everything.
11:38
Kind of just waited for the right time, you know, uh uh if if I could buy that company or could buy that asset.
11:43
Like, I already knew about I already studied it."
11:45
You guys do the same thing, correct? >> We do. >> Okay. Why? And explain this. >> Yeah.
11:51
So, we want to be doing this for a long time.
11:53
I, you know, I still relatively young.
11:55
I like to think I'm still young and uh, you know, our friend Zach tells us we're going to live to 150.
12:00
Um, so I hopefully I could actually be doing this for for for you know at least 50 years, maybe a hundred years.
12:06
So in the fullness of time, you know, we'd really we want we want to bring Long Lake and we want to bring AI to huge swats of the economy.
12:11
We're now operating in, you know, roughly $3 trillion of the $20 trillion TAM, so call it 15% of the economy in in the US and now we're global and we just want to keep adding to that.
12:22
So over time, we'd love to be, you know, have a marketleading business and platform in in in many more industries, but you know, there's moments in time when you can find a great asset uh with a great team at the right price.
12:33
And then there's other times where certain industries, you know, are not attractive for long periods of time.
12:38
And so we take a prepared mind, you know, approach where there's this sort of our top 15 or 20 industries that we think are industry interesting for our strategy at any given time.
12:48
We're constantly force ranking those industries based on what we learn, based on how, you know, market dynamics are evolving.
12:54
And the best way to learn about is look at deals in the space.
12:57
And so we've built a really powerful sourcing engine uh where we're seeing four or 5,000 deals a year uh across all these sectors and we'll literally do, you know, one or two new industries per year.
13:08
Um so it's a a big fil big funnel, very tight filter and I can talk to you about, you know, how we select industries and assets.
13:16
>> That's literally what I was saying.
13:16
And I was like, okay, when you're select, I assume this is operating at the founder level that like you guys are the ones selecting, okay, this is the industry, the next industry we're going to to enter. Correct.
13:27
>> It's more based on opportunities coming our way, you know, to to to go back to Buffett, like you know, the you better chance of getting a date if you're public and if you're bisexual, public and private, you know, that quote, if you're twice the chance of getting a date.
13:39
Um, so we like to kind of keep an open mind.
13:41
you know, if you if you're open to 20 industries, you're more likely to find a great business and and a great uh team to partner with.
13:45
We just keep that funnel going all the time.
13:49
We're constantly looking and we just when we see something, it's kind of like you know it when you see it.
13:52
If there's a great business like MXGBT with high 90s, you know, logo ret customer logo retention, 100 plus% kind of dollar retention with uh tremendous, you know, customer relationships with the best companies in the world, built, you know, average of 15-year relationship with their top, you know, a couple hundred customers.
14:12
Um, deep, deep embedded partnerships, uh, where we sort of manage, you know, a missionritical service for all these companies travel.
14:21
I mean, it's a small cost and it's mission critical.
14:22
You don't want to screw it up.
14:24
We talk about that century of customer trust, but it really means something in especially in travel, right?
14:28
If you have like thousands of people traveling in the Middle East and a war breaks out or you have like a huge snowstorm in Chicago and your entire team gets stuck in the middle of the night at 2:00 in the morning, like things have to work, somebody's got to be able to answer the phone and know what to do.
14:40
This is an amazing business.
14:42
You just kind of know when you see it.
14:43
>> So, wait, was Amex your first entry into travel? >> Yeah. >> Okay.
14:47
We had been building a thesis in that space for for like a year, meaning looking at several other assets.
14:50
It was on our whiteboard of industries that we thought was really attractive, you know, for reasons, you know, I'm happy to go into.
14:57
And >> yeah, I want to hear about this like what do you think AI is going to do to this business?
15:01
>> I think it's going to make the travel experience much more seamless.
15:03
I think things can be much more personalized, more proactive.
15:06
You know, right now there are a lot of legacy messy data issues and, you know, systems issues in the travel space.
15:14
you have like these, you know, supplier systems and customer systems and distributor systems and it's a long-standing industry.
15:20
So over over many decades and so it's kind of complicated but what one thing as an example AI is really good at this is like you know uh our friend Scott Woo obviously like is you know Devon and things like that integrating messy systems and this is what we've built Nexus to do.
15:35
So, Nexus and you know our our uh co-founder Rasmus Visman comes from like a data he's like with with uh was the top you know computer science PhD at at Oxford.
15:45
He won the prize for the best thesis and he's like amazing at building uh simplifying complex you know messy data structures and so Nexus our AI platform is built specifically for this use case and so we think about >> how do we make this better move on cuz I know what Nexus is the person listening might not explain what Nexus is. >> Yeah.
16:06
>> Yeah. So, Nexus is our horizontal uh AI platform that we've been building um you know across verticals and so we've been investing and part of the reason we're in multiple verticals is I think scales you know increasingly important in an AI
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world in general you're competing for the best talent being able to leverage innovation and building a platform across 5 10 you know 15 different scaled industries allows you I think every single industry we go into it makes Nexus better. we gain we add additional
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we gain we add additional capabilities better.
16:35
capabilities better. So as an example about 70 80% of the infrastructure is shared across the verticals and that's kind of like our you know it's our uh platform where on one side we we integrate with all the models we're model agnostic and we kind of use
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different models for different tasks or even one task might be using several models just to complete one task on the other side you integrate with the data you know the workflows and the um different software systems of the business and you have to build that deep integration. So Nexus sits in the
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So Nexus sits in the middle.
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A lot of that you know intelligent model routing security you know um sort of uh agentic orchestration layer things like that that's reusable across all the industries.
17:13
That last 20 or 30% which is embedding Nexus into the workflows of the business mapping the workflows integrating with these different data sources that is uh what takes it's a very hard technical challenge.
17:25
It's why you need like a world-class AI team to be able to actually use AI in the real world because you have all these systems. Hold on.
17:32
This is a really important part too because again I hear other people talk about Long Lake and I'm like, "Oh, they don't actually understand what you guys are actually doing."
17:37
Like, how many different states are your engineers operating in right now?
17:41
>> They're not [ __ ] just sitting in your >> Yeah.
17:42
I mean, we're operating in probably almost every state at this point.
17:45
And our engineering team will be, you know, I'm guessing 70% of the engineering team that today is probably sitting with a team member in the field across, you know, 15 or 20 states.
17:52
And they're working on that last 20%. >> Exactly.
17:57
Sitting with our team members, understanding the pain points, what's breaking, what's useful, what's not useful, and iterating.
18:02
And we we we you know, we um to to your point about learning from greatest history, his history's greatest entrepreneurs like Kelly Johnson very inspiring on this.
18:11
You know, the the skunk works like you want the engineer sitting in the factory.
18:15
And that's actually kind of what long leg is.
18:18
>> There's a book on the counter behind there that's unreleased.
18:20
It's all about like SpaceX.
18:22
was fascinating to me is I just did a episode of Founders on Kelly Johnson because in the preface of that unreleased book he talks about he's like if you just go back and read Kelly Johnson's like 14 points and the way he operated uh Skunk Works is like it reads exactly like what SpaceX is doing.
18:36
These ideas are not new over and over again.
18:41
>> The other great motto that I love is is is on this point is um from Danaher who was a big inspiration to us also the Rails brothers is they their motto was common sense rigorously applied. >> Yeah, it's excellent.
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And so if you b that's kind of what we do too.
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If you can take some of the world's best AI engineers, they can sit with your team members, understand the problems, and we can use common sense to fix them, it makes Nexus better.
19:01
So Nexus now integrates better with all those various systems and and each different industry needs different things.
19:07
So for example, in HOA management, it turns out a lot of the work is done in email.
19:12
So you're you're you're taking in emails from homeowners and boards and responding and they're complex emails.
19:17
It'll be like, you know, what's going on?
19:18
Uh, we need to find a snow removal company.
19:21
And so, it's not just a simple response.
19:23
You actually have to go map out here's the 10 other communities we manage. Here's the five vendors.
19:28
Here's what they charge you.
19:29
Here's how people reviewed them.
19:31
Here's the schedule that you might need to actually send an email to the vendor, get schedules, and then respond.
19:35
That email could take 45 minutes, you know, or an hour or longer to actually craft a thoughtful sort of response and proposal.
19:43
If Nexus has access to all that information and can draft an email for you before you even wake up in the morning, you you have a draft in your inbox to respond with an accurate with a 99% accurate and then you can just edit it as the manager.
19:54
So now instead of spending an hour, you spend 5 or 10 minutes, you know, putting it in your own voice.
19:59
And by the way, the voices are getting better and better now.
20:00
This is something we're working on to each of our managers now can have Nexus drafting emails in their own voice.
20:05
And you know, so this is like a capability that we built for HR management, but is now applicable to every other business.
20:13
Turns out pretty much every business works a lot in email.
20:14
Travel, for example, 55% of travel agent inbound queries from travelers is an email.
20:20
New bookings, changes, cancellations, it's all an email.
20:24
So, because we solved that problem in HOA management, Nexus is now better, has this tool built in.
20:29
It's going to day one have a huge impact in MXGBT.
20:33
And I could give you 10 other examples of this.
20:35
Has anybody tried to buy Nexus as a separate tool? You know, it's funny. We we do.
20:39
It's, you know, we because we haven't been very public, not a lot of people really know about what we're doing.
20:43
But a lot of our investors have asked us, can we can we can we partner to to to use Nexus and maybe for them we would do it.
20:50
But, uh, we've never wanted to sell software.
20:51
First of all, software obviously is a great business.
20:54
We partner with tons of software companies in all these industries and with the labs, etc.
20:58
But the the problem with selling software is you don't actually care about what happens in the outcome.
21:04
So, for us, we're very outcomes driven.
21:05
We want to really actually change the way these businesses operate.
21:08
Change the way these industries actually function.
21:10
And to do that, you need to be an owner.
21:12
You need to really be an owner operator.
21:14
And so taking Nexus, taking the AI breakthroughs that are happening at the frontier, deploying them into the businesses for real outcomes, i. e.
21:23
faster growth, better customer experience, better team member experience, being able to pay your team members more because they're more productive, and then ultimately to your point, shareholder returns.
21:31
That's what we're focused on.
21:34
And I think the vertical integration of owning your own platform and deploying it only into your own companies creates a lot of alignment.
21:40
We've talked a bunch about all these other founders episodes and I love that you're part of your uh onboarding and long lake is listening specific episodes of founders which I think obviously is [ __ ] genius but I'm biased on that.
21:49
But I think this is because I think again especially like on the investor side it's like oh yeah let's just sell the software.
21:56
It's just like well it's not a I go back to like Larry Ellison.
22:00
I've done like I don't know six episodes on him and he has this great line about this.
22:03
You know, he's the maybe the best in the world at understanding this.
22:07
He's like it's not a software program problem. It's a human problem.
22:10
It's like you can't like there's no point in me selling something if your work if the way you work doesn't change.
22:15
It's like then I can't build a good business uh around that.
22:16
And it's like okay, so how do you get over the human problem?
22:20
Well, you own the goddamn company.
22:22
[laughter] >> You control the workflow.
22:23
It's interesting because I there a slightly non-obvious thing with this is we don't actually force anyone to use our tools.
22:33
So owning the company is really valuable in a lot of ways but not because we force people to use the tools.
22:37
>> That was Larry Ellis's point. You can't force them.
22:39
>> If we have to force someone to use our Nexus platform, then the platform is not good enough.
22:42
We take a an approach of our the customer are our team members.
22:46
And we're now going to have 30,000 team members operating globally across all these sectors.
22:49
And so >> you explain this to me.
22:50
We're 30,000 people working at you said your customer or your team members. Yeah.
22:54
We think of our team members and we now have 30,000 of them globally as our customer.
22:57
And so the the whole idea is we want Nexus to be so magical.
23:02
>> 30,000 employees in the business. >> That's right. Okay.
23:05
And we >> I have to always convert I love you but you're like an East Coast finance guy and I always have to convert the way you talk.
23:11
[laughter] >> We think of them as partners, you know, design partners and that's our customer.
23:16
And so the whole idea is um we want it to be so magical that when you introduce the tools to them it goes viral inside the company and we've now seen that and each we are it's happening where as the models get better as our products get better and as our deployment playbooks get better we're seeing the cohorts of
23:33
adoption going crazy like it used to take us like maybe I don't know 6 months or something to activate a cohort now it's like you give them the tools and in like you know days and wait a minute hold on am I understanding this correctly so you're you're targeting these services. So let's say HO
23:45
So let's say HO management, right?
23:47
And let's say I work there and now I'm using Nexus and all the other tools that you guys are building, right?
23:52
Because you have and we'll talk about how you got elite technical talent too, right?
23:54
My job is now [ __ ] 90% better.
23:56
That also protects you for retention% >> because like another HOA service company doesn't have these tools.
24:03
I'm going to go over there >> and 90% more. >> Yeah.
24:08
No, you don't want to do that.
24:09
That's this is a big part of our vision too is that we want we really want to be a talent magnet.
24:12
We want to have we want to be the best place to work in every industry that we operate in.
24:15
And part of that is you if you can build people the best tools, make them more productive so they can make more money and have a a better job.
24:22
And by the way, we have these amazing quotes now from our team members.
24:25
They're saying like, "I don't feel like I'm working anymore because there's so much mental friction that comes from that 30% of work that's, you know, this manual wrote responding to emails, data entry, da da da."
24:34
What they want to do is they want to focus on getting more customers, understanding that, you know, helping the customers more, interacting more with them.
24:41
You know, there there's a lot of fun parts of the job that keep people going.
24:44
If we can do more of the fun parts, less of the of the dull parts.
24:47
They love their job more.
24:50
They can make more money.
24:50
And so then think about having to leave a Long Lake partner company that has these tools and this setup and go to like, you know, a competitor down the street. You're not going to.
25:01
>> It's going to become really powerful.
25:02
We're already starting to see this.
25:03
We're obviously only a couple of years in, but if you think forward and this flywheel then if you then have the best people in every industry using the best tools creates a much better customer experience and then you grow faster, you retain your customers better, you make more money, you can pay your people more.
25:17
That's the positive sum, you know, vision of for us of AI deployment is you can really create a better mousetrap in all these industries.
25:23
Why should you be the one buying these companies, right?
25:28
So, we'll talk about that in one second.
25:29
So the way I think about it is it's like you have a ton of experience, right, in finance.
25:33
What you were just telling me and my partner before we started recording, it's just like you blew his mind cuz he didn't even you he was thinking about the same thing you were thinking about and you're like, "Hey, you didn't think about this other part, this missing piece, which we'll we'll we won't talk about, but like that's another example.
25:47
I've seen you do this a million times."
25:48
And then with Zach, it's just like he's going to be able to recruit the best technical AI talent in the world.
25:53
And that's how I see the combination that like everybody's like, I want to do a long leg does.
25:56
Yeah, but you're not Alex and you're not Zach. Am I wrong about this?
26:02
>> Well, thank you for saying that.
26:02
We we we we've got an amazing team.
26:03
Uh we go back a long ways.
26:06
Uh Zach and I first met at Goldman when when he was a summer analyst. I was an analyst.
26:10
He introduced uh me to Rasmus our co-founder and CTO who he was at he was at Oxford with at the same time as you know I mentioned was top student there.
26:17
was top student there. the sort of team came together through network and so you know uh first 20 people I think were all from like you know network and people that we knew deeply from both an investment acquisition side as well as applied AI technology we're growing much faster now we're closer to 60 I mean
26:34
we're still small at long lake level we're only about 55 56 people now we'll probably be you know closer to 100 people by the end of the year it really is a world-class team it's you know it's I'd say 90% u AI engineers and operations and deployment folks and then 10% sort of um acquisitions, you know, M&A finance. But yeah, I do think you
26:54
But yeah, I do think you need you need to be able to do three things really world class to be able to to deploy this uh technology.
27:00
You need to be able to buy great companies well.
27:05
Uh so you need a great M&A function.
27:05
You need to be able to build amazing world-class technology.
27:09
So you need world-class technology that rivals you know the labs or some of the best uh you know applied AI companies.
27:14
and then you need uh change management operations because we were purpose-built and because we started with the big vision of we want to you really kind of help change the whole economy.
27:24
change the whole economy. I think we're able to attract you know much better people and that's been you know that's been starting to compound now and you know we still I think 75% of our teams come from referrals from in network referrals so we have a very strong and it's a very tight filter as you can imagine I mean I think this quarter you know we we hired 3% of applicants
27:43
basically and we saw I don't know close to thousand applicants this quarter so we have a very tight funnel just like we do for deals and you know I think one of my biggest learnings and is just high bar and Everything is really the key and so high bar in talent, high bar in acquisitions, high bar in technology and that's kind of what I think you need to make this work. >> What initially got you interested in
28:03
>> What initially got you interested in finance to begin with? >> I just loved it.
28:06
I grew up in a in a family of entrepreneurs.
28:08
My grandfather uh who was a big inspiration to me started a real estate business after World War II.
28:14
>> He essentially invented the strip mall. >> Yeah. The the shopping center. Yeah. Yeah. Yeah. Exactly.
28:18
He didn't actually do strip malls.
28:20
Well, he did it probably earlier in his career, but >> there's a great book that you gave me about him called Threshold Resistance.
28:25
Can you talk about the idea?
28:25
Why would it be called threshold resistance? >> Yeah.
28:28
So, the concept uh by the way, it's it's a you know, it's a it's a it's a fun reference.
28:32
Um we have it in our office, but basically the whole concept of threshold resistance is you want the shopper to to be more likely to go into the store.
28:41
So, he was he was he sort of a early pioneer of uh of retail.
28:43
He just thought he could make things better.
28:45
And it was actually that was a big inspiration to me, try to make things better in life.
28:49
And so one of the ideas was, you know, you don't the threshold was is the entrance to the store.
28:53
And you the the more you had to step up steps or go down some dark hallway in order to get and that's how stores used to be designed.
29:02
There used to be these big windows with big, you know, with um merchandising in them.
29:06
And you'd have to go through the windows in some like dark alley in order to get to the door in the back.
29:10
Nobody would [ __ ] want to go in them.
29:12
So his idea was bring the door to the front, have no have no threshold, have it be the same, you know, like like that over there.
29:18
You can't see but that that you want to walk cuz even a step he broke it down almost like like a math equation like even like half a step up or reduce it by like 20 people coming by like 20%. >> Exactly.
29:28
He did a lot of really creative things that you know I can tell you more about is he was very innovative and he always brought this kind of continuous improvement mindset similar to like the Dan her continuous improvement concept and honestly it's all a big inspiration for me.
29:41
You want to make it so easy and so magical for the shopper to go into the store that they'll go in and spend more money ultimately which is good for the store and all that.
29:48
And actually some of those principles like I think you can apply more generally like with technology for example we want to make Nexus so magical and so easy to use that our team members just love it and they can just use it.
29:59
You want to minimize threshold resistance on AI adoption.
30:02
>> This is exactly what you're talking about.
30:03
It's like hey you know seven the reason we can have this horizontal AI platform is cuz 70 80% it's like every business deals with the same [ __ ] Yes.
30:09
when you were just talking about this.
30:09
I just recorded this crazy um episode with Travis Kalanick from Uber. It was [ __ ] crazy.
30:14
Sat exactly where you are and we we we talked for hours and he was breaking down in like minute detail about even like the the every single page you would see at Uber compared to like Lyft and just like every single little thing.
30:25
It's like there's a thousand things I had to optimize that if you're just copying me like you copy what you see but you don't understand the thinking behind it.
30:31
It's exactly what you're talking about.
30:33
It's like this guy's just obsessed with shopping malls or shopping centers and realizing that, hey, I'm going to knock six inches off here and my bottom line, you know, my profit increases by 25% or whatever.
30:43
By the way, I think it's very much the same with technology and and websites and, you know, Amazon that came later and things like that, which was just these little tweaks can really impact behavior.
30:51
And, you know, just by making things both my podcasts, like founders has no intro.
30:56
I just get right [ __ ] to it and this one has like a six sixsecond one.
30:58
It's like no one wants to sit through that [ __ ] Like I want I'm listening to your podcast so I can hear some 30 secondond melody that you made.
31:05
Like no this not f this not a concert dude.
31:08
Like get right to the point. >> Yeah. Exactly.
31:09
So I grew up in this family of entrepreneurs and my father and uncle ran that business for 75 years.
31:14
And so one of the inspiration we called the business Long Lake cuz that business was built and and and lived on Long Lake Road for the last 40 or 50 years in Michigan where I grew up.
31:21
And there's actually a funny story.
31:24
>> I I dismissively called you an East Coast finance guy which you know I love you and we're friends.
31:28
I was like, "Shit, I forgot he's from Michigan." Yeah.
31:31
[laughter] I basically just really grew up kind of um with a tremendous respect for like the American entrepreneur and growing up in Michigan, you know, I mentioned earlier, but you know, all these incredible entrepreneurs that in businesses you've never heard of, the people in Michigan in the community, the business community you looked up to, there's no finance scene there.
31:49
There's no tech scene there.
31:49
It was people that built, you know, these these what, you know, people might people on the East Coast might call unsexy businesses, but they're amazing businesses that you've built, you know, over 50 years or 75 years in the case of my family.
32:03
And these people that built them are extraordinary people, as you know, they're they're classic American founders and, you know, bootstrap their way in, you know, to build what could be a huge business over time that had pro provides an unparalleled service in that market.
32:16
Like, you know, we we partnered with an architecture business in Minnesota that's built 50% of the K- through2 schools in Minnesota the last 70 years.
32:23
I mean, they are like the McDonald's of, you know, architecture for schools.
32:27
And this is why it's such a great country.
32:29
You can go to any region in the country and any service line and there's someone that spent a hundred years obsessing over that product and service.
32:38
And so, growing up, you know, seeing this and around, you know, at the dinner table, meeting some of these people and it was very inspiring to me.
32:45
And so I think part of the reason that I was uniquely interested in this problem and mission was how do we bring the best of the intelligence revolution and the best engineers in the world to help these sort of iconic, you know, uh, American entrepreneurs across industries, you know, deploy AI into their into their business to make their team members, employees happier, make their customers happier, improve their bottom line.
33:12
I mean, and and grow faster.
33:13
And by the way, if you do this in enough industries with enough businesses, you're eventually going to add up to really contributing to the economy in a big way.
33:19
So I think there's a a long-term over decades opportunity to make a meaningful contribution, you know, I don't want to I don't want to overstate our role in the intelligence uh revolution, but I think actually deploying the technology in the real world, driving real ROI, which by the way, and I was sort of starting to get this earlier, but by driving real ROI, we're actually generating cash back into the system to scale the models.
33:40
And so you actually need this flywheel.
33:42
You need someone you need distribution.
33:44
And so part of the mission of Long Lake was >> Oh, you're distribution for the labs. That's hilarious. >> Yeah.
33:50
We we we we generate ROI in the real economy on the intelligence to reinvest into scaling the models. >> That's funny.
33:57
>> And someone's got to do this.
33:57
And by the way, you're seeing the labs start to dabble in in the deploy codes and things like this.
34:01
But I think somebody, you know, and many people, it's not going to be one company.
34:04
You talked about, you know, other, you know, people.
34:06
People often ask me about competition in the space.
34:09
you know, people trying to do what Long Lake's doing.
34:11
And I think it's great because I think to actually scale the models, we actually need to deploy this technology at scale, which is going to be, you know, this is a this is a big economy.
34:20
And the glo by the way, it's a global economy, too.
34:23
>> And it's going to happen slowly.
34:23
Like the technology changes way faster than human nature does. Human behavior does.
34:29
The bottleneck is changing actually what people do >> and there are real hard technical problems and you know like Rasmus and you know a bunch of our co-founders like Verun and founding engineers are you know critiqued raz these are some of the
34:41
best engineers they all you know any one of them could could raise money from a top VC tomorrow to start their own company any one of them could go get offers at you know amazing whether it's the labs or some amazing software
34:52
company you need people like that these are really hard technical problems and they what they would tell you is it's really interesting work because it's it's not easy to figure out how to, you know, take a 100-y old business's
35:05
systems and data and problems that are global with each customer having some different optimization that it needs like in in in MXGBT for example and somehow scaling that with Nexus and diffusing AI into that whole stack. Deal
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36:32
So, you're meeting all these entrepreneurs. You're growing up.
36:33
You grew up in an entrepreneurial family.
36:35
These are family businesses.
36:35
When did you start paying attention to finance though in that aspect of it?
36:40
>> Yeah, so I knew I was really interested in business and I wanted to learn about you know capital markets and I started my career at Goldman.
36:46
That's where I met one of our co-founders Zach who who uh you know helped introduce me to Rasmus and sort of all this ended up coming together through that.
36:53
But when I was at Goldman, I I worked in the internal investment unit which was called Special Situations Group.
36:58
And it doesn't really exist in the same way because of regulation now, but at the time it was a very cool group which I you know I can I can talk more about.
37:05
But I sort of just fell in love with this whole idea of capital allocation.
37:08
And I had some really amazing mentors there and the whole idea of putting resources of the economy into the highest and best use and the whole concept of capitalism.
37:17
I just kind of fell in love with it and capital allocation across industries.
37:22
That was one of the beautiful things about SSG at Goldman at the time was the pitch to young people coming out of school was, you know, you can you get to sort of invest right away.
37:30
You get to it's we invest up and down the capital structure from from debt, you know, down to equity, public and private across all industries.
37:38
So I just got tremendous exposure at a young age to all these different types of businesses and ended up with, you know, working on some really interesting investments there.
37:46
really interesting investments there. uh learned a ton by sort of uh you know not just observing but also like getting to to manage risk at a young age which was which was a very unique >> young age is what early 20s >> yeah I think I was like 22 23 >> okay >> and actually I had a great mentor there who I later partnered with and worked
38:02
with at Oakree guy called Patrick McCain who empowered me very early I think in my first year to basically manage like a couple of hundred million of invested capital I mean he was helping me of course and you know he gave me a lot of guidance but he empowered me to like take real risks s early in my career and that was very formative for me and I realized I just I loved investing. I
38:20
I loved allocating capital and I loved businesses and learning about you know how how the world works.
38:26
To me like understanding how these different businesses work and all these industries is sort of like really understanding how you know the economy in America really functions and so I love that the intellectual curiosity of just learning more about how different things work.
38:38
So wait then you go to Oak Tree.
38:39
It's funny you know people ask me about Long Lake.
38:44
I never could have told you at any point in time that I was going to be doing what I'm doing today.
38:50
But if >> did you think you were going to found your own company or you thought it was going to be a fund?
38:53
Like what did you think it was going to be?
38:54
>> I didn't know what I wanted to do.
38:54
I was very focused on just continuing to learn and get better and improve my skills.
38:57
So after Goldman I went to business school and I uh actually you know what I was going to say is my favorite case was Danah.
39:05
I've talked about Dan her big inspiration for us.
39:07
the idea of like having that long-term compounding model where you have a structural advantage, you can operate the businesses better, you can have a better cost of capital and you can have the best people and and all that.
39:18
And >> hold on, let's come back to Dan here because I I do I want to hear about that Dan here which we you and I have talked about before, but also the other people that you guys look up to and you emulate.
39:26
But >> you go to business school.
39:29
>> So I went to business school.
39:29
I ended up interning, this is like I'm just going chronological order, but uh I ended up interning at a at a holding company uh called Lucadia.
39:37
So I was interested in holding companies and then I spent some time uh hanging out with Josh at Thrive.
39:43
So basically I was always interested in technology and holding companies dating back 15 years.
39:46
None of this clicked for me until much later.
39:48
So I went to Oakree after business school graduated.
39:52
decided I wanted to stick with investing and partnered with uh the guy I mentioned, Patrick, and we worked directly with Howard Marks and Bruce Kh, two legends of of of the investment world, to build kind of some new businesses for them.
40:04
We had started Oak Tree's first equity business.
40:08
We ended up getting involved in some of their uh credit businesses and helping out with a few things and doing, you know, we started several uh different products there and worked very closely with Howard and Bruce.
40:17
Um and just had a tremendous amount of fun, learned a lot from them.
40:21
But the whole time I I I knew I was not sort of um fully expressing myself.
40:28
I I I eventually wanted to start something but I didn't know. Yeah.
40:33
>> As a founder, >> even if it was going to be a fund or an investment company. >> Yeah.
40:36
I think I just knew I wanted to do something entrepreneur.
40:38
I wanted to build something.
40:39
Um and I wanted to, you know, do something on my own, but I didn't really know what it was.
40:45
But then you know when I started really thinking I after I was at Oak Tree for almost 10 years I started really thinking and you know brainstorming with some of the early co-founders of Long Lake uh who we've talked about and and you know the chatbt moment came out and it just became very obvious to me like this was this >> where was the Toddman Capital when did that happen in your life? >> Yeah.
41:04
So when I was at Oak Tree, um you know, I mentioned, you know, my dad and and and grandfather's business, and I was helping working with our family to build out Tobin Capital, which is our kind of family investment business, which is all our own money, and we ended up partnering with, you know, we did a bunch of these deals with investments in founder own companies, and we did, I think, close to 50 of them.
41:26
>> So that's where you learned how to buy companies, do you think?
41:29
>> Yeah, it was a combination of stuff I learned at Oak Tree and stuff I was doing with Toddman Capital.
41:31
And Oak Tree stuff was generally larger companies, public companies. >> Yeah.
41:35
But the returns you had at Tom and Capital, you don't like talking about this, but I'll just say it and we can cut it if you're embarrassed, but it was like something like 70% IR or some [ __ ] like that. Correct.
41:44
>> We had a very good run. We had a very good run.
41:45
[laughter] Uh, but yeah, it was an eye opening experience for me because what I realized is we, you know, um, you know, there's some remarkable businesses out there and just because something is a small or mid-size business doesn't mean it's a it's a bad business.
41:57
Actually, I mentioned that, you know, business in Minnesota we partner with that's been building all, you know, most of the schools and entire state for the last like 70 years.
42:05
It's an amazing business.
42:07
And so, my learning was there's some unbelievable entrepreneurs.
42:09
Going back to my roots in Michigan, it really resonated with me to be able to partner with some of these folks and help them grow their companies.
42:15
And so, you know, to to your point, we had a a very successful run in bringing sort of permanent flexible capital, which was our own internal balance sheet, a long-term horizon, being comfortable and not just comfortable, very uh encouraging of investing in growth.
42:30
We don't, you know, we're not focused on short-term quarterly earnings.
42:33
We're not overlevering the companies, you know, like a lot of private equity funds do.
42:37
We basically are a long-term growth investor in great American businesses, partner with great founders, and we can bring them uh things that they may not have.
42:46
Like for us, it was helping them get growth resources, helping them get M&A resources, helping them have capital.
42:51
You know, a lot of folks have built an amazing business, but they've never done an acquisition before.
42:54
And they may have tons of competitors that they could run the business better than, and we can help them go and and consolidate that industry and become a bigger scale player and get get the sort of industrial logic of that. So we had a lot of fun.
43:07
That was sort of nights and weekends for me uh over the 10 years, you know, when I was working at Oak Tree.
43:12
So that was very formative experience as well.
43:13
Long Lake, it all clicked, you know, it turns out I was always passionate about, you know, partnering with founders.
43:20
I was always passionate about technology, passion about capital allocation. >> Yeah.
43:24
>> And then now you met the right people where you could actually build a unique partnership that very few people can match. >> Yeah. Exactly.
43:29
I got very lucky, super grateful to have incredible early investors.
43:33
I think they've really pushed our our thinking and level of ambition and you know obviously our our mutual friend Rick who who who's an extraordinary investor and been one of our biggest partners and uh Hmont at General Catalyst and Mark and um you know it's it's an amazing group of people El Gil and you know they they they've basically really pushed my thinking in a big way since the beginning.
43:55
What Rick tells me about you is that you're unusually receptive to both new ideas and criticism and a lot of founders obviously, you know, are more like kind of headstrong and, you know, less usually they'll listen, but they're running the ship, you know.
44:13
Well, that's nice of him to say.
44:13
I think feedback's a gift.
44:14
We want to get better every day, just like, you know, we want our companies to get better every day.
44:18
We want our team to get better every day.
44:19
I want to get better every day and I have a tremendous amount to learn.
44:22
It's why I love your podcast, actually.
44:23
I learn, you know, more from you probably than from from almost anyone from from your episodes.
44:26
Um, and that's why I make everybody I actually do. It's a true thing.
44:31
Long Lake on boarding includes like half a dozen of your episodes. That's just smart. Um, okay.
44:37
So, the I know you were working on a few deals.
44:39
You and Zach were working on a few deals together before you found Long Lake.
44:42
You guys are talking about this thesis for what, 6 months, a year?
44:43
Like, how long does it actually take to And then we got to talk about the [ __ ] crazy growth that you've had in the last 3 years. >> Yeah.
44:50
So yeah, Zach and I, you know, we go way back.
44:52
We started, you know, in at Goldman, as I mentioned, and we'd stayed friends a long time.
44:55
And, you know, he he he's done some amazing things in technology, brought me into some of those things.
45:00
And then and then, you know, he uh he was very inspiring on that.
45:06
And and then he was coming into some of our top capital deals.
45:08
And, you know, we you know, buying we did a funny thing where we we ended up like we we built one of the largest go-kart track companies in America.
45:16
We bought we we partnered with uh you know 20 different locally owned go-kart tracks and created a platform.
45:22
And so Zach invested in that deal with us.
45:24
And you know we we realized you know there's some really great businesses out there that people don't spend a lot of time thinking about.
45:31
about. And what if we could bring the worldclass technology expertise of some of the you know some of the companies like you know ramp and and cognition and the labs and you could bring some of these that type of worldass AI team to you know the main street American businesses and enterprises and that was
45:50
the idea was it that idea from the very beginning >> it was that idea from the very beginning so from that the conversation you guys start having about this to [ __ ] we're going to start the company to it's founded is what's the time frame I think it was like nine months from the first conversation until we actually incorporated the company. I was still at
46:06
I was still at Oakree at the time.
46:07
So we were spending a lot of time thinking about it, meeting some of the early engineers who ended up joining us.
46:12
And I think the thing that got me really excited was when I started to talk about this idea with engineers, it was the there was a lot of palpable excitement.
46:21
People were really excited to work on the project.
46:22
I knew we could build an extraordinary team.
46:24
Being able to build the right team at the right time to go and do this was unique opportunity.
46:29
I was very bullish on the company and very excited, but I think we just continue to get more and more, you know, excited about what's ahead.
46:36
You know, our bar for what we want to build and what we want to do keeps going up.
46:42
>> I've been there from like the I think day one, but this is like when I heard about the AAX deal, I'm like, why am I not thinking like like I know these are my friends.
46:52
I'm not even thinking like I I didn't even think it was a possibility that you would do a $6 billion value or $6 billion acquisition.
46:58
And I was like, damn, these guys are really good.
47:01
>> Our vision is really big.
47:01
I mean, it sounded kind of crazy when we were a couple of years ago when we were saying, you know, we want to deploy.
47:05
We want to >> It's not just your vision.
47:08
Like you're you the way you guys are executing is even better now.
47:11
Like you're getting better.
47:14
You guys are getting you were already super impressive, but you are literally getting better.
47:18
>> Yeah, I do think we're getting much better.
47:19
This is part partly why I value feedback from some of our smart friends and and some of our investors is we want to get better every day.
47:24
And I do think I do think it's true.
47:26
>> We can we talk about the story?
47:26
uh you guys were thinking about like a few acquisitions and we don't have to talk about the prices or whatever.
47:33
It was just like well we could do this one over here or we could do this one or we do this one and you told me the story and Rick's like why not do them all. [laughter] Exactly.
47:42
Sometimes we like to say you know I think that the the the greatest gift that you can have in a partner is someone who makes you more ambitious.
47:50
And I think our you know our our partners today really make us more ambitious.
47:54
And when we when we started the company, we talked a lot about how, you know, if we do this right, we can really help change a lot of industries and change the economy.
48:01
And it sounded kind of lofty, but now that we're operating in 15% of the services TAM and, you know, with tens of thousands of of team members, you know, it's starting to feel like it's coming alive.
48:13
And so I think that's really exciting, which means we're able to, you know, it's much I remember in the beginning like convincing uh some of our earliest, you know, founding partners to to leave their, you know, um sexy jobs in technology.
48:28
Like I I I was like talking to people's parents about why they should like drop out of school and come and come work on Long Lake and stuff like that.
48:35
And it was like, you know, it was like a long process cuz I had to like explain all of this and, you know, but now it's getting much much easier.
48:43
So people have seen what we're doing.
48:44
they're inspired by, they want to join and be part of uh the mission.
48:46
And so I think the team's getting better and better every day.
48:49
Like our rule is the incremental hire has to make us better, make the I raise the average.
48:52
And we've been able to do that, which is really extraordinary.
48:55
And so teams getting better, we're getting much more experienced.
48:58
We've now bought close to 40 companies across five industries.
49:01
Like we've built a a process, we built a playbook, we have the Nexus platform which we can redeploy.
49:06
So our ability to drive impact is better.
49:08
our team is getting better, you know, and so I do think our ambition level of like if it's not Long Lake that buys MXGBT, like who should it be?
49:16
Like it it it should be us.
49:17
That's kind of how we we we think about it.
49:20
And frankly, you know, we're thinking there could be other big things we can do. We're not going to stop.
49:25
Obviously, we want to keep doing this for the next 50 years.
49:28
>> Give us some details about the the size of the business today.
49:30
>> We haven't disclosed uh you know, valuations yet, but we don't need to.
49:34
>> You'll get the first exclusive at some point.
49:36
point. Um but we you know I can tell you that including you know MHGBT is a big business and the scale of our other businesses was is also compounding and and getting meaningful and so you know if you combine you know we're expecting to do over 4 billion of revenue next year um you know it's amazing revenue
49:51
base it's very stable you know 100% dollar retention type business um you know I mentioned you know we have a lot of employees now uh globally and you know we're very profitable as you highlighted because our strategy is to buy established profitable businesses that already are making 20 25% plus, you know, uh, Ebida margins. And so our view
50:09
And so our view is, you know, we actually never need to raise capital again, which is nice.
50:14
We can, you know, we're going to be generating enough cash flow on our existing assets that we could compound, you know, just on internal reinvestment for for decades to come. >> Yeah.
50:23
We have a line of people out the door.
50:25
>> We've had tremendous support and and and interest from investors uh to help inspire us to do bigger and bigger things.
50:31
I mean, one of the nice things about being able to access, you know, uh, access capital is it it it's it's it, you know, it allows us to think bigger and move faster.
50:39
And I was at dinner last night with Rick and Zach and, you know, your your main partners and uh, they made the good point where, you know, a lot of founders [ __ ] up because they they um, optimize for valuation and and, you know, Zach and Rick made the point.
50:54
It's just like, well, if we're going to be working together for 20 years, like, you should be this is a long-term partnership.
50:57
Like you can't just it's not a bidding contest.
51:01
It's just like who can you work with and who actually to your point like not only do you get along with you actually want to do life with all money we can spend anyways.
51:08
So it's like who do you get to spend your time with?
51:10
Like doesn't shouldn't that matter?
51:11
And then the second part of that is like are they actually helping you on your mission and increasing the size of your ambition?
51:18
>> No, I I listen I 100% agree.
51:18
I think it's about having the right partners.
51:22
And so like you know mentioned kind of growing up and you know in our in our family in the real estate business.
51:26
My father and grandfather had partners for 50 years and in some of their uh real estate deals.
51:31
And so being a partner was like almost higher than being family.
51:34
It was like someone that you treat with like the highest respect. You guys are loyal guys.
51:39
This is what I like about you. You know what I mean?
51:41
Like there's an army like you're you're [ __ ] way too humble and you're always going to be like that.
51:45
So nothing I'm going to tell you today is going to change that.
51:46
But like there's an army of people trying to put more money into your company that would probably you'd get obscene terms and it's just like yeah but I like these guys.
51:57
These are my already existing partners.
51:59
My version of this is like every [ __ ] company comes and it's like do what you what you have with ramp we want that and we'll pay double.
52:05
And I'm like you think this is like a bidding thing.
52:08
It's like these are like some of my closest friends.
52:10
They're the easiest people to work for with like [ __ ] they backed me and they did the what at the time it was the biggest deal in business podcast is the partnership we had.
52:18
This is like just because they had intuition that this is [ __ ] valuable.
52:21
You think I'm going to exchange and destroy that [ __ ] relationship for money? >> Yeah. >> Come on. Exactly. I agree.
52:25
>> Come on. Exactly. I agree. I mean the the it's one of the things we're super grateful for when we first met with uh with Hmont about this and he was our you know GC led our first round of uh outside capital gave us our first hundred million bucks basically when you know that was that was you know remember
52:40
this was three or four years ago that was a lot of money back then and uh you know and by the way they've given us a lot more since then and been incredible partners you know from day one they got the thesis they believed in us almost in a way be before we even believed in ourselves and that's such a gift that we'll always be grateful for and you
52:57
know I just want to keep working with these guys you know our our investors that we have and obviously we like bringing more people into the mix and there's been some extraordinary people that have come in recently like many great people that you know and so we want to keep building that I do think like continuing to kind of expand our our world a little bit is very valuable
53:14
each time new people come in they add a lot of they add a lot of value to to our thinking and and all that but yes it's it's about much more than capital it's it's really about how do they help us execute and the biggest way they help us execute is by believing in us and you know inspiring us to to move faster and think bigger. >> Does long life have to be public?
53:32
>> Does long life have to be public?
53:34
>> It doesn't have to be public.
53:34
No, but I think the maximally ambitious path is to is to be public.
53:40
>> Why why is that maximum?
53:40
>> Why why is that maximum? because because I think we'll have ultimately deeper and lower cost of capital lower cost capital and and and just you know public markets are are the biggest stage in terms of deepest pools of capital and and I do believe and one of the things about some of the great holding companies and you
53:54
know people like Henry Henry Singleton and others and John Malone they've all proven this over time is that if you execute over a long period of time you earn a currency that trades at a lower cost of capital and then that allows you to do even more ambitious things and so by getting you know access to that over time we can think even way bigger. So I
54:10
So I think there's some you know potentially to scale our impact to even larger and larger businesses and industries you know over time I think having that currency will be very valuable.
54:23
>> What else did you learn from Singleton?
54:24
You and I have talked about Teladine a bunch.
54:26
>> Yeah I mean he's probably like of all the holding companies one of the people that's inspired us the most.
54:30
First of all he was a math genius.
54:32
He was on the Putinham team at MIT.
54:34
He he was an office of special services.
54:36
office of special services. is I mean you you you did you know you you you've read you you sent me the book I think distant force which is a great book one thing that people don't understand is singleton compounded his earnings per share like over 40% a year for 20 25 years you know people and Buffett always
54:50
called him the best capital allocator in America and the best best operator and he was very kind of under the radar the biggest learning from him I think is he used to say stay flexible his mantra was he he didn't like detailed strategic plans he preferred to stay flexible >> he says he he says I prefer to steer the boat a little bit every It's a great quote. It was subject to all these
55:07
It was subject to all these outside forces and nobody's smart enough to predict them.
55:10
So you just need to come in and steer the boat every day.
55:13
And so I think that's part of our whole philosophy of staying open to different industries, the you know the flexible capital allocation mantra of, you know, for example, we never would have said when we started the company that we wanted to do travel.
55:23
It wasn't, it just wasn't something I'd thought about.
55:24
We eventually built a thesis on it, but that was because we had an open mind.
55:29
And now we're doing I think it's one of the most exciting deals we've ever done.
55:32
I mean it's like a unbelievable iconic business with a a reputation for you know you know goldplated customer excellence with one of the best you know AI opportunities to improve the service at a pretty reasonable uh multiple actually when you look at it and had we not kept an open mind and stayed
55:50
flexible about industries we never would have looked at it you know I think that's a a very inspirational principle to us that that we try to embody >> what about John Malone anything from him >> yeah I mean he was amazing I was studying him at Oak Tree and We invested in a number of his his stocks over the years. You know, I think just creativity
56:04
You know, I think just creativity on structuring and and creativity on financing and things like that.
56:10
He was kind of, you know, top of his top of his class.
56:15
And another thing, you know, I read in in Cable Cowboy that he he liked he was a very first principal thinker, which, you know, he would he would do like ask ask why five times, get to the root cause, like he was a big root cause thinker.
56:26
And that's something we try to also embody in our uh you know, in our investment process.
56:30
Now capital allocation process.
56:31
We want to always understand why is a business good business cuz we do plan on doing you know you talked about permanent capital.
56:38
We want to be doing this for decades.
56:39
And so it's actually very hard to think out 20 30 years on what's going to still be a great business especially now. >> Yeah. Especially now.
56:47
>> So first principles thinking about why a business is going to be great post AGI is is really important.
56:53
It's maybe the most important thing in capital allocation right now.
56:55
And I think stock selection stock it's like a they used to say it's a stock picker market meaning there's going to be winners and losers a lot of dispersion.
57:02
I think there's going to be a lot of dispersion in the next 20 years between the best assets and mediocre assets in terms of you know a post AGI you think about how industries are going to shift the gains of the winners is going to be even more extreme in a post ai world.
57:16
So >> I think yeah I think there's just going to be a lot of dispersion.
57:19
to be a lot of dispersion. I think the gains to the winners is going to be extraordinary and businesses that you know are well positioned that are highquality services that are going to preserve their place in the ecosystem and expand it which we think our businesses all fit that mold you know
57:33
can become orders of magnitude more valuable but businesses that are lower quality easier to disintermediate aren't providing a sort of a enduring value added service and really are more of like a tax of those are just going to go away and that's good for the economy by the way less friction is Good. But I
57:48
But I think thinking through businesses holistically and sort of thinking about what makes a business sustainable or not, enduring or not.
57:56
Have you guys bought any businesses that were weaker than you expected?
58:00
And have you sold any of them or No.
58:02
>> No, we've never sold anything.
58:02
And we don't plan to ever sell anything. You never say never. >> Yeah, of course.
58:07
>> It's more about are we adding value to the business?
58:09
Is it a business that Long Lake should be in?
58:10
I think that's the the bigger question.
58:12
You know, if you're if you're going to invest all this time and energy to get into a great business with a great team, you know, build that partnership, deploy techn build, you know, nexus to deploy into that space, create the best technology in the space, the best people, the best team in the space, and then you're going to sell like that.
58:29
You want to let it compound for a long period of time.
58:32
>> I just had a thought and I don't even know the answer to this question.
58:34
You guys are acquiring businesses.
58:35
Have you guys had any acquisition offers for Long Lake itself?
58:38
Everybody knows we're we're not a seller, so we haven't really entertained or or had any of those conversations.
58:43
My plan is this is what I want to be doing forever.
58:45
Okay, I'm on a run right now.
58:47
So Torson, there's a bunch of these episodes aren't even out.
58:51
Uh Torson from housing, he sat in the same chair and he's just like he's legitimately mission driven.
58:54
He's just like, I'm building a great European defense company because he's already rich.
58:59
Like he was rich when he started the company and he's just like uh you know because like Europe has to be able to protect itself.
59:04
So this is like this is a mission driven company.
59:05
He's like, "We're not for sale for any price." You know, Scott, woo.
59:08
I push him on this a lot because billions are getting thrown at that guy's face.
59:13
>> And he's like, "Nope, not doing it." He has this great line.
59:15
He's like, "Oh, we'd sell if it was the maximally ambitious thing to do."
59:17
Which is obviously great line.
59:19
>> Yeah, it's a great line.
59:19
Which is obviously his way of saying no.
59:20
I'm even going to tell you some of the conversations I've had with him on the phone, which we I was like, I can't put this in the podcast because he's like, you know, definitely like friendly UI, but conqueror spirit underneath that friendly UI.
59:32
Um, and then I just talked to Zack Dell and I was like, "Is this the last business?"
59:36
Because what I love about Kareem and Era from Ramp, I asked them both the question like, "This is our last business.
59:40
It's not like I'm gonna [ __ ] sell this and start another company. Like, this is it. This is the last one."
59:43
And Zach Dell had the funniest thing.
59:46
Uh, cuz, you know, he wants to build something like you said, relatively young.
59:49
He's like, "I want to work on this for 50 years and and go see how far I can take this thing."
59:53
And he goes, "And do you think I'm doing this for a paycheck?"
59:55
[laughter] He's like, "Thinking about my background."
59:57
I was like, "Yeah, good point.
59:58
You're not doing it for a paycheck."
59:59
So what like what would the point of being you know selling it again for more money that you're never going to spend anyways.
1:00:04
So I just love this idea but we never close the loop on your maximum ambition which is like you guys could be building a trillion dollar company. I think we can. Yeah.
1:00:14
If you just think about uh the power of compounding and this is one of the reasons that long-term thinking and you know not being a seller is so valuable is that it's amazing if you just you know kind of can keep getting a little bit better every year how that can add up to well then you're you know tripling the value of these businesses every 5 years and if you just keep doing that for 20 years you know you're a trillion dollar company.
1:00:34
I'm not trying to make that sound easy.
1:00:35
That's really hard to keep executing that way over a long period of time over decades and you know avoid mistakes and continue to retain the best talent best technology talent in the world and you know deliver the best customer service customer excellence in the world across these service lines that's really hard to do but if you do it for long enough you know the pie here is just extraordinarily big.
1:00:56
We're talking about the whole economy basically.
1:00:58
This is like the largest TAM imaginable.
1:00:59
And so if we can just keep executing and doing what we're doing for a long enough period of time, I think, you know, the potential is is pretty uh is is staggering.
1:01:09
>> Well, I have to say as somebody that's been there like been able to see this from, you know, almost the very beginning, I remember when the first time Long Lake got name dropped on a podcast and people were like, "Oh, no."
1:01:19
like you know cuz it was it was something relatively stealth even though you guys were killing and buying everything and you know doing everything for you to now you know I I know for a fact and firsthand knowledge that one of the 10 best entrepreneurs in the world like you got their attention when you did the Amex deal and they're like hey what what's going on with Long Lake and how do I get involved in this?
1:01:35
Uh so just as a friend and a fan it's been wonderful to see you man and I really appreciate you trusting me with you know coming out and telling the history of Long Lake today. >> Thank you so much. Honored to be here. >> Yep.
1:01:47
>> I hope you enjoyed this episode.
1:01:47
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1:01:50
And make sure you listen to my other podcast, founders.
1:01:53
For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work.
1:02:01
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