we've always said that duration is our single biggest Advantage but it's never felt more prominent and powerful than it is in today's market structure I love to compete I love a scorecard there's a very distinct culture that characterizes and underpins companies and that matters immensely the opportunity to do that at scale on a topic that is I think transformational not just for the
markets but for society is just intoxicating honestly [Music] this year's presenting sponsor for invest like the best is ramp ramp has built a command and control system for company's finances you can issue cards manage approvals make vendor payments of all kinds and even automate closing your books all in one place we did an incredibly Deep dive on the company and
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that started them and run them I've always loved the idea that Apple was really just Steve Jobs with 10,000 Lives having gotten to know Rams Founders well I can tell you that they are absolutely maniacal about their mission to save people time as far as I can tell they do not stop working or thinking about the product and how to make it better I'm
sure they're proud of what they've built built but all I ever hear when I'm with them is them talk about what they can do to improve and expand what ramp does for its customers I used to joke that this podcast should be called this is who you are up against I often have that same thought when I'm with ramp's Founders Kareem and Eric I would not want to compete with these guys I wish all the
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this year I'll be speaking at ridgeline's private breakfast event on March 11th Ridgeline gets me so excited because every investment professional knows this core challenge you love the core work of investing but operational complexities eat up valuable time and energy that's where Ridgeline comes in Ridgeline is an all-in-one operating system designed specifically for
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what the experience can be like with a single platform visit Ridgeline apps.com to schedule a demo so Kelly maybe the fun place to begin is the playing field of investing as you see it I'm especially curious about how it feels the most different not in terms of AI and like where the opportunities are but just like the structure of the market itself and the game of investing large
dollars is trying to earn excess return in the structure that you do it in how you feel that has most changed from the beginning of your career doing it to through to today running you know a very large one of the largest pools of capital at one of the most storied firms what is most distinctive about today versus the past when you just think about the playing field itself it's
interesting I mean when I zoom out and think about starting as a summer intern in the summer of 2001 uh during business school and then returning full-time to the public markets in 22 the industry was really different one you know there were a lot more fundamentally oriented directional duration oriented investors who were doing deep research with you know three four five year time Horizon
there were few many fewer levered pods and and certainly passive wasn't a thing yet and it felt like the marginal dollar of volume on the exchanges was dictated more by what Fidelity or Capital were thinking or maybe even sometimes a large hedge fund versus what was happening at Citadel or what was happening with pods or what was happening with passive and so in
addition to that you know when I think about uh organizational structure and how we did our jobs the or structure was I think most fundamental firms pretty siloed right you could cover Industrials you covered consumer you covered financials and you were doing that uh with a peer set really of people outside of your firm who you developed a network
with over time who you were sharing meetings with going to conferences with um and the level of conversation amongst peers was just not as informed because people were operating in sort of sector silos right in terms of knowledge and coverage and expertise and network in addition to that the tools with which we used to do our jobs were pretty different you would meet with companies
you would read filings you would go to conferences you would try to do some proprietary research but things like credit card data and expert networks and all of these tools that we all now use to supplement our fundamental researcher as a part of our fundamental research didn't exist and so the ways to do the job and the ways to differentiate yourself I I think were were different
and and um the tools were different certainly that were available to you in addition to that I would say at the portfolio level when I look back and obviously I wasn't managing a portfolio at that point in time but looking up to my portfolio managers the tools to think about portfolio construction risk portfolio analytics none of these things really existed and so as a fundamental
investor you were really going Bottoms Up single Stock Building a portfolio that way and obviously looking at things like you what acted in in concert with one another correlations things like that but um it was a different job so that's sort of like a snapshot of 25 years ago let's say fast forward to today and obviously Market structure has evolved meaningfully as a function of
where the dollars are being traded and obviously the emergence of passive and pods has been sort of the giant sucking sound in the public markets for a long time and I feel feel like the marginal dollar being dictated by fundamental decisions that are long-term oriented by the capitals the fidelities the tal prices of the world is just less meaningful on how stocks actually trade
and the the uh new Behavior it feels is more around what we call kind of setup Dynamics and that is um a function largely of the dissemination of a lot of this third- party data creating setup Dynamics around events quarters conferences companies you know having speaking investor days um and how those events are being previewed as a function of what thirdparty data is suggesting or
what the sort of litany of sales Traders at the banks are sort of prompting buide people with in terms of where the whisper numbers are and so forth and so that creates just a different trading dynamic in terms of how you execute the job right um in in addition obviously what I mentioned earlier we do now have as portfolio managers a lot of tools to help us think through risk differently
portfolio construction differently and then how that then manifests itself is how we express sort of the fundamental sauce of what we do which is the fundamental research right and so we were saying earlier we talking before we started about just our trading volume has clearly gone up over time on a dollar basis less so on a name basis because you get these outsized reactions
that are often non-fundamental in nature to events quarters and so forth and so um all of those you know the tools are different the resources are different and then the last piece would be just the collaboration different and contrast to what I described earlier of kind of a siloed coverage model inside of a firm is not uncommon for us to show up at a
company's headquarters for a meeting with four five six analysts because there's people covering things that are adjacent to the topic at hand and the company at hand and so often there's insights to be gleaned and questions to be asked that have implications for things that are outside of with purview of the conversation of that day and that is super helpful and we meet as a group
twice a week as a research team and are sharing information constantly across our organization because obviously five brains is better than one and people have thoughts because they're in the periphery of what we're actually discussing often with their own coverage areas and so the notion even of a coverage area we kind of shy away from at this point because we have so many
people opining on different ideas and themes across the portfolio because they have their own insights from their own work if I think about the Spectrum in my mind on the one end maybe is like Buffett and Buffett could care less about you know whatever's happening with Coca-Cola on a given day and it's going to hold Forever on the other hand is like my friends who run Pods at Citadel
and their lives revolve around these events this kind of event structure that you're talking about investor days quarterly earnings etc etc and you're probably somewhere in between is this healthy this focus on like this extraordinary extreme focus on the dissemination of information at a couple discreet moments like in a quarterly calendar like is that a good thing for
markets is it is that even the right way to think about it like how do you think about meing efficiency right is it a good thing for markets hard for me to you know be the judge of that I would say for us you're right we sit somewhere in the middle and I think the onus or the responsibility is you know to look across both ways right we want to be positioned in a way to capitalize on
non-fundamental dislocations and lean into duration right so when those setup Dynamics are tricky or complicated and everyone's lined up one way I want to line up the other way right and have the duration in the capital basee to do that and so that's I think we've always said that duration is our single biggest Advantage but it's never felt more prominent and powerful than it is in
today's market structure having said that you know sometimes there are tricky things in the short term there's a data point that we feel like the market hasn't fully absorbed there's a risk factor in the short term or there's an investment cycle coming on something we love on a three or four or five year look but we might be sized differently going into that event doesn't mean we're
going to go in and out of positions we rarely would that but we might be positioned differently and I think the other thing I should have mentioned earlier in terms of just the difference of today versus before is and and this comes through at the portfolio level is we are definitely running lower gross exposure as a firm than we did for the first probably 15 to 17 years of our
existence as in deference to this Dynamic right so we want room to be adding to things when we think there are non-fundamental reactions that don't make sense or overreactions to things that we think aren't that big a deal right and so so for the first bunch of years of our existence we ran more like 170 by 200 gross and we've been consistently for the last you know six
to eight years we've been running more kind of 150 by 180 gross to give ourselves that room to breathe so that we can not have to play defense at the wrong time and it can actually lean in when everyone's leaning out and vice versa people that really love investing and I know you're one of them seem to get the most excited during periods of extreme change we were talking before we
hit record about mobile being last like massive thing just upended the world and now we're living through another one that might be the biggest one that any of us ever see in our careers what's that like for you like it it would be one thing if you were just starting into this but you're managing a big existing thing a big pool of capital and probably
expressing a lot of what you're learning about the world through some of the biggest companies in the world not necessarily through like early stage startups or something what is that like just talk me through what it's been like so far to process this it's makes us kind of giddy if I'm being kind if I can geek out for a second uh I mean why when I think about why did I get into this
field in the first place I think there's two sort of defining characteristics that I have that positioned me well to to to do this job one is that I'm a wildly competitive human being I was a junior tennis player my entire Junior career before going to college I played in college um I love to compete I love a scorecard right that's just um who I am as a human the second is that I'm an
incredibly curious person who is very focused on growth and growth in lots of ways I mean growth in terms of learning about new things challenging myself I play instruments I you know there's lots of things I'm interested in as a human um and these this is a I feel so lucky to have found a career where I get to actually learn a lot and then put that knowledge to the test by measurement
right we can make we can put Capital behind those those learnings and those insights and see if we're right because there's a there's a weighing mechanism every day right that that gives us a score card um so for me the opportunity to do that at scale on a topic that is I think transformational not just for the markets but for society is just intoxicating honestly as as a as a
notion as a concept and the fact that we can do a tremendous amount of fundamental research and also have the flexibility the capital based the nimbleness to evolve our views as we learn is incredibly interesting it's also really fun as a manager to have a team of incredibly talented people who are both just professionally and personally engaged in this topic and so
the amount of trial and error and the amount of testing that's going on on the weekends by our analysts who are downloading all these products and sharing sharing through to the you know email distribution system their learnings um to help inform how we're thinking about just what's happening because things are changing so quickly and there's so much dynamism around this
topic um is incredibly interesting right right and so are the flip side of that is you know I've seen a lot of bubbles in my career and so there's the appropriate amount of skepticism around where will the profit pools evolve and that's an ongoing live conversation inside of our firm and everyone's got different opinions and over what time frame and where is their fake Ai and
where is their real Ai and where is the value ultimately going to be created and harvested and realized and so we debate that constantly and I would tell you that we think different things today than we thought three months ago six months ago and 12 months ago and they will be different I can assure you from what we will think in three months six months 12 months and so that level of
change and dynamism just as an investor is is gold I mean that's why we do this right may maybe drill into that like what do you think today is the most important place that Winners will emerge like based on what you know obviously subject to tons and tons of change but like this is what's fun to talk about I mean you've had people on this podcast who are far more informed on this topic
so I feel humbled by even attempting to answer the question but I would say at a high level you know obviously we have been um of the view or questioning of the view from the beginning I would say just stepping back that llms would not be where the value was ultimately probably largely created and that there the fact that there are six seven eight of these today would likely consolidate
over time down to a few and so our view going back really from the beginning was that probably most of the value would be created at the application l player right and so that's part of why we have such a large position in meta and have for the last bunch of years as we feel like that's the most real life example at scale of commercializing a lot of the
capabilities in core products today right and you can see it kind of in their results and they're talking to you about it when they speak on their calls and so forth um however there aren't a lot of opportunities yet to realize that in the public markets I think a lot of those businesses are first probably being funded in the private markets right now or in the last you know
handful of years in the same way that when the mobile transition happened and the iPhone came out um the Spotify and Shopify and door dashes and all these amazing companies that came out of that generation of of startups came after right and so that those generations and cohorts of companies I'm sure are being formed and have been formed the last couple of years we don't invest
typically at that stage in the private market and certainly many of them are not public yet and so our positioning has been more really around picks and shovels with the view that like let's see how the ecosystem evolves let's see where profit pools are going to be created over time but in the meantime what we do know is that there are constraints and what those constraints
are are shifting obviously they started on the semi side now it's more on the power side the next piece we'll see where that goes to and so that's more what we're tracking right in terms of where are the constraints where are the profit pools being generated that we believe are sustainable that are not a function of Supply demand dislocation and then how do we want to be positioned
behind those right and so that's the framework that we've kind of used and obviously we're doing doing an incredible amount of research speaking with as many people as we can in every part of the ecosystem to to inform obviously the inputs to that to that thought process I'm curious about it just the literal Machinery of the firm so like how many analysts are there uh
what do they do how does that feed into something else what do you do on top of it how do you size stuff how do you do leverage like just like literally like the assembly line that ends in a finished product that is a portfolio Okay sure so we have currently 15 uh people on the research team inclusive of Steve Dave and and me and in and interestingly in the 19 years I've been
at the firm we've been sort of between 13 and 19 and that's sort of where we live in terms of Team size with the view that more people is um not necessarily better we want to run a relatively concentrated portfolio of 25 to 30 Longs um as that's kind of a best idea as portfolio and we want a lot of collaboration and so we want everyone to fit around a table to have a
conversation and our research meetings and be a part of the conversation and when you start to get into 20s and 30s then you have a very siloed research team we don't that's not sort of how we're oriented and culturally not how we work um how it works is um and maybe the best way to start is s sort of how someone gets ingested into the firm on the research team right so a new person
joins typically they're younger 25 to 30 let's say and come with some level of experience and they've got the analytical toolkit built already somewhere else sometimes in private Equity sometimes in in banking sometimes in business school and typically they Apprentice with someone senior for some period of time that can be 6 months it could be two years and they will kind of
coover a bunch of things together and that person is not doing what we call like the grunt work they are going Soup To Nuts from being on the calls working on the models going to the conferences going to see the companies being in all of our meetings and what we find is that person's voice tends to start to get louder after kind of six eight months right because they've been around
they've seen how we work they're asking questions they're they're you know iterating they're learning from other analysts um and when I know it's time for them to sort of spin out and cover their own stuff is when they start disagreeing with the person that they're apprenticing with right and so um which is to me like okayy you found your voice amazing and now let's put you on a bunch
of other stuff that you can just run after and then you know serve up to us basically and so that's how people get sort of absorbed into the culture and see how we work at that point obviously they have an appreciation for our process how we approach companies how we talk to companies how we conduct research I maybe segueing to that part of the how how the sausage gets made um
you know we're doing all the things I think a lot of fundamental research firms are doing we're reading all the public filings we're reading all the transcripts we're listening to podcasts we're going to conferences we're doing a lot of deep Channel work in terms of talking to Partners and former employees we're employing you know talking to people in the expert networks we're
reaching out to our own network um as an institution right 27 years later having done a a lot of investing globally we have a lot of people who we talk to who are former CEOs former board members who have a lot of thoughts because they're still pretty connected to the spaces in which they worked and so we are leveraging all of those resources on a fundamental basis and then we have a
three-person data team and the data team's role is a is is a couple different things they are our interface with third party vendors on the outside and internally with our research team they sit in on every single meeting they know what we're working on what's in the Pipeline and they are bringing external resources to Bear to say we're trying to
answer these three questions on x stock or X sector these are the resources that we think can be helpful in helping you answer those questions from a data perspective right so they are another tool in the kit in terms of how to approach market research and they work really closely with our analysts to help them solve problems that's um a newer capability in the last call it four or
five years I think has been super additive to how we work they occasionally will call out something that they're seeing in various data sets that we get in terms of like something funky is happening this you may want to look into this but that's really less of the role they play they're really there to be a supportive arm for fundamental research and answering key questions
that's just sort of how the ideas get generated researched process we as an organization meet um two days a week Mondays and Thursdays the Monday meeting is a new ideas meeting and a portfolio updates meeting so we're buying this stock here's the thesis at that point it's not news to anybody because we've talked about it probably in a research meeting many times before or it's you
know we're selling this and here's why or I met with this company so just updates Thursday is a couple different formats it's either um a spaghetti against thewall ideas like what are people hearing we're just coming out of earnings what what are you hearing what's interesting you know what are people excited about that's that's one two is um what are things that have
generated meaningful like outsized alpha or massively underperformed on a trailing 90-day basis and those get served up you know every week for us to consider and we pick one or two to review or three something that's pretty far along in the pipeline of being worked on and we're thinking about actually beginning to transact in it and we want to kind of surface it to the
group and debate it so that's the Thursday meeting so again all of this conversation is meant to Foster dialogue debate like people sharing their points of view asking hard questions pushing each other um that's the essence of sort of our our process right and then when we're ready to transact it's you know collaboration with the trading desk which has five people on it um to your
resources question and the questions there are you know what is Max position size liquidity you know we've already had the conversation as a PM group with the analysts around like you know how does this compare to the rest of the portfolio what's the you know what what's the irr we've gone through the numbers how does it you know price Target one-year price Target threeyear
price Target what are the near-term factors we want to be thinking about if any um so that's all the conversation that's happening before we actually begin to put an order in so that's sort of the sort of the upward flow of ideas and research and like structure of how we do things um the other thing that happens on Mondays is and this is all day Monday is that Dave and I have
sector meetings with all of the teams every on every other week basis th that meeting is everything from what are you working on what are you trying to figure out what resources are we deploying to help figure out those questions to it's earnings who's reporting this week what are we expecting to hear what would make us sell what would make us add what could what could surprise the market
either way kind of thing um so that's on Mondays that's sort of the structure of how we work as a team and um the portfolio is helped I think by something additionally new which is we have a risk function now that we didn't have going back you know five or seven years ago which is somebody who used to run our Funda funds which we had back in the day and shut down a number of years ago who
has built an incredible expertise and knowledge base around studying managers and so when we shuted down our our fund of funds we said to him Frank why don't you come study us and help us get better and so he's gone back using a lot of the new tools that we' referenced earlier to think about you know where do we get ourselves in trouble where have we made
a lot of money helping us understand the mistakes we make what are the patterns around those mistakes what are the patterns around the huge successes how do we trade do we add value by trading I mean all these things that are sort of portfolio analytics and then also he's sort of our external lens on factors and you know all the things that we have to talk about now that were never a thing
and the parlament of running a fund 10 or 15 years ago but that you know are again never prescriptive but another set of tools in the kit and he is sort of the where that resides and so we meet with him and the risk team periodically and are getting reports sort of constantly to make sure we're thinking about gee there's a bunch of unearned Alpha and these three names you know the
multiples just gone from 15 to 25 times like we still love it here should we be trimming it right so again never prescriptively but just another set of prompts and tools to think about you know balance in the book and where returns are coming from and how how the composition is evolving as you approach this whole thing I'm curious if there is a fixed or fixed is investment
philosophy that has always guided you that you feel like no matter what happens even in Rapid pace of change will continue to guide you like is there something that's unchanging about the philosophy and maybe just like articulate your sure I mean I don't think we have a a guiding principle around it I would say the way that we discuss it internally is how much
exposure do we want to this theme and I think what's challenging about this one is it cuts across a number of different things right there are companies that are not um leaning into this technology that are not benefiting from the proliferation of this technology today who will um and who are probably uniquely positioned there others who are you know in the AI is a problem for
their business category right there's several uh industries that would fall into that camp um I think we keep having the conversation of how much exposure do we want because there's a recognition like we saw in the valuation bubble bursing of late 2122 that there are nuanced bets here that are distinct but that if there's a problem in AI so to speak and we can Define what that may
look like these are all going to trade like one stock right and so what is the draw down we are willing to sustain or endure if and when that happens right and so that's I think the risk framework on top of this is the most exciting Dynamic thing and we can all you know talk for hours and hours and days about all the opportunities it's going to create and then I think there nothing is
a straight line right and so I think there's the this is the benefit of having done this for a long time is that there's it's two steps forward one step back right and so the Deep seek thing last week was interesting right in terms of being like oh whoa what what is this and does this mean what does this mean and what does this mean for llms did they have access to gpus like what do we
know what do we not know right and I think we're still trying to answer those questions and I think there was a knee-jerk reaction from the market we will have more of these right that is just part of this and so that's not a reason to not be involved but it does make you think about sizing and um we always want some measure of balance in our portfolio and we want several things
that we're excited about that have idiosyncratic drivers that some of which may be tied to AI some of many of which are not right and there are many thematics in our portfolio that we're super excited about um and and our job is to think to be thoughtful about portfolio construction and make sure that all of our eggs are on in one basket or things that we we believe are
discret bets then ultimately trade like one right and so that's part of our challenge another way to think about it is there are certain investors that I would argue are playing a different game and there are certain investors that are playing the popular game best right like they're sort of competitors in an existing game where do you think Lone Pine Falls in in that Spectrum it's a
really good question um somewhere in the middle and I think we want ultimately the flexibility to Pivot right I think that's what we've learned and experien over doing this for a a long time is that there are certain Market backdrops that are conducive to certain styles of investing where you want to be more concentrated there are certain you know backdrops where you
want to be less concentrated there are times to go big on a bet when we feel like it's really underappreciated there's times to recognize that a lot of we excited about the world's excited about and so we probably shouldn't be as big as we were and so the I would say the flexibility um to recognize when we're in a very short-term oriented Market or when there's when there's duration right
and and part of that and I think one of the things that's changed is if I rewind the clock to 10 or 15 years ago sitting in our research room and around around internal meetings we didn't talk about macro at all like it was just like we're fundamental investors you know we are focused on what's Happening inside of sectors who's winning who's losing what
who are the best teams who's executing and to do that in 2025 and ignore macro is it's not possible so I I want to be clear macro is not prescriptive in terms of what we do but it is a tool in the kit and something that has to be considered and so there are moments in time when it feels like the market is extending in duration and then we can reflect some of that in how we're
positioned and how we're constructing the portfolio and how we're sized in certain things and there is times and I would argue to we're in one of them right now where there's a lot of uncertainty and appropriately so right and so the market is it feels much more short-term oriented much more data point driven um you know the Tariff thing over the weekend is a good example and
there's there's a bunch of announcements and then some of that gets walked back on Monday and so how does this all get implemented and executed I think is an open question and so in that type of environment you're going to see more knee- jerky type reactions to things and that's just an awareness we're not going to radically alter what we're doing or
how we're positioned but it's just it it sort of focuses Us in different ways can you maybe the cariff is a perfect excuse cuz it sort of like happened and then unhappened you know very quickly may unen maybe unhappened who knows U but it's like a live thing just bring us into the room as much as you can on okay the the the announcement comes out like what literally happens at Lone Pine like
who is talking to who about what in what settings leading to what decisions like like give us like a super zoomed in example here of how you process some big piece of news so we all see the news starting to come out towards the end of last week and over the weekend Dave my co- C and I who I also refer to as my work husband um we've worked together for 21 years so long time we're emailing
back and forth like okay so now what do we do right like this is these are Big announcements um these are Big Numbers we start to see the responses from some other countries in terms of what they're saying I mean to be totally Frank there was the conversation's like I'm not really sure what we're supposed to do about this right like we going to like
radically alter our portfolio I mean is this even going to go through what's going to happen on Monday right and we are in a moment right now of obviously very elevated we're in an announcement cycle that seems to be accelerating with Pace right and so um we sort of had a back and forth a few times over the weekend okay does this change anything for us let's let's come in Monday and
see what happens so Monday morning we sit down as a PM group every Monday and every Thursday and we're talking obviously all the time but as a you know and Steve joins that meeting and we sort of went back and forth and said okay what does this mean what are the industries that are let's assume it goes through let's play this out both ways right let's assume it goes through what
are the industries that are this is a huge problem for and we sort of tick through what some of those are autos and others right um what will the retaliatory actions look like probably walk through that um and then the other side is like let's assume that the stock gets walk back right and how much it's going to and things are trading and C crazy levels in the premarket on Monday
morning right that that are theoretically exposed to to these level of tariffs um we walk through that and so the net of that is a lot of conversation and decision to do nothing I mean literally zero orders came out of this conversation right and some that's not uncommon but like for an event in a news cycle that is Meaningful and somewhat anticipated I would argue um
and also I think with the approach with the appropriate amount of skepticism in terms of what ultimately gets implemented um a lot of debate not doing anything about it right and so I think it's a conversation that's live right and so I don't want to like all of this you know all the AI stuff these are all very live conversations that you know live inside of meetings but are
constantly being you know pushed forward via email and constant communication that we're all in um so this one I would say is consternation what are we supposed to do about it not going to react live and learn like let's keep let's keep following what is it that gives you personally the energy is it is it Discovery is it un of understanding is it a great company a great product a
great mispricing like what what is the thing that like is your fuel or energy source searching for so it's some combination I would say for us a lot of our process revolves around people yeah so it's the people who are running the businesses and um I think that companies are in some ways like families uh there's a very distinct culture that characterizes and underpins companies
and that matters immensely I think for how a company operates functions hires retains grows invests all of the things that drive sort of ultimately how they perform and execute and so getting to know the people what motivates them are they looking around corners and thinking about the thing that can disrupt them are they trying to disrupt themselves are they attracting and empowering
people that they are hiring into their companies and retaining them by giving them a lot of responsibility and a lot of autonomy and a lot of voice and decision- making um so I think that's where it starts for us and one of the our favorite um sort of themes in investing which is not a sectoral theme but sort of a a change theme is around new people right you change a people you
change a company um and so there are lots of examples of in our history of businesses that are good to Great businesses that we feel have been undermanaged and then somebody comes in who we know from a prior life or a prior existence or we do a bunch of work on that person if we don't and get super excited about their ability to transform and to me Nirvana is when you have a
company that is so deficient in a certain functional area and then you bring in a leader who is an expert in that in that functional area and it's like that's magic and we've seen this a bunch of times and so those opportunities I think are super interesting um two I would say is just companies who are innovating at such a rapid clip and you see what's happening from a product pipeline
perspective right they have a great Monopoly incumbent business ideally right or something that has incredible unit economics and they are using using a lot of that profit and power to invest and plant seeds in a bunch of other areas and you see some of those fre seeds starting to come to fruition in terms of new products new lines of business new distribution channels
whatever it may be relative to the company we're talking about and seeing that secret sauce is not just the single thing that made them great but their ability to then recreate and innovate at like at scale I think is is super exciting to us it is is something like Starbucks like the perfect example of the first thing you said where you know it's sort of this story that people are
worried about skeptical about you know there's things going wrong and then I don't I don't know him but by all accounts the new CEO is like some Mega Allstar you know person so is that like the kind of general gist of the very good example yeah um another one from our past which we you know did really well with and which was a great example of this was Ulta when Mary Dylan took it
over this is was at the time a small company I think it was maybe a three billion dollar market cap when when she joined and she's a you know was a consumer products expert marketing expert and this was a largely membership you know loyalty driven business around Cosmetics where almost the entire employee Bas is female that had great product curation but not a great culture
inside the company and really hadn't built a great marketing muscle and she came in and added all of that to the to the sort of the formula on the UN economics of the business they always had great four walls as a retailer but really added something different to sort of the the go to market and the proposition to the customer and how the company was run who she hired and and
like that's a great example like a very strong business that could even be could man be managed even better by somebody who had the expertise that they La how did you know like in her case as an example is it is it kind of arms length are you spending lots of time with her direct one-on-one is it we knew her because this again like we track people
right we follow people who we think are great and when we own McDonald's many years ago she was the CMO so I met her for the first time at a meeting at corporate headquarters you where they roll in five or six different Executives and she came in and I didn't know who she was and and she spoke for you know and answered a bunch of questions and was super thoughtful and insightful and
she walked out and I was like who is this person and I like Googled her and like saw her background and she was used to work in in cpg which tends to be great training ground for analytical thinkers um and then we kind of followed her and I knew Ulta and and we were sort of dazzled by their for their for four wall economics and done a bunch of work on the company but the execution had
been uneven I would say prior to her arrival and there were things we thought were missing in terms of sort of how the business was being run and so when when the board announced her hiring we were like oh my God this is kind of perfect because she's exactly the Right leader for the opportunity this comp this company has and you know has the right skills to kind of really lift what's
happening here and so what would be the other end of the spectrum like a like a Buffet ham sandwich business where not to pick on them but like these are MasterCard where the business model is just so ridiculously good that like I'm sure they're awesome I don't know them either but you never hear about like people at these or Mastercard it's not it's not like a cult of personality it's
like we just have the best business like how do you process something like that with your people centricity how do you think about a business that's just so damn good you know you probably still want to always has to be room for them in the portfolio right because those are the great compounding businesses I mean we owned both those companies at their
IPOs and had meaningful positions and you know with the benefit of hindsight never should have sold I mean they would have gone to very large positions over time so of course they would have trimmed but um look that's why a portfolio is such an interesting entity because it's a balance of a lot of different things and so the people thing is hugely important for us and we we
always want to know who we're lined up with and what their incentives are and all the things I mentioned but there's also a lot of room for owning just fantastic businesses that to your point whether you have an A+ CEO or an A minus I'm not sure it really matters that much on the margin we just want to make sure we're not paying too much for them right
so that's I think always the key too in those situations as we want to own a stable of great businesses particularly when there's a moment of dislocation or a question of doubt about something or there's a perception of a competitive threat that we think is sort of being overplayed in the market um those often give us the opportunity to own great businesses um at at more reasonable
prices but those I think are really about understanding the internals of the business and what drives the business and the duration of what we think the opportunity set looks like for that business to just own them right and those are a different flavor what's so interesting is the idea of following people applies to you too you you're in the midst of a big succession and you
know it's so interesting because in in this business you can count on kind of a few hands the number of like really successful transitions that have happened at firms like yours that are less like big industrial complexes and more like small teams what what works what what has worked what's been hard like the degree to which you're willing to kind of share the nitty detail of it good good bad and
ugly I'm curious how it's gone and how you thought about it so look it starts with Steve our founder and how he set the firm up when he started it you know 27 years ago which was with an orientation to succession and I think that's the first really differentiating aspect of our company versus many of our peers is that he was focused from the beginning on the company outling him and
and you know he comes out of the Goldman Sachs partnership back in the day and I think that was in many ways the model in his brain of like you know you you do well you rise up you own a lot of the company and then ultimately as partners you go you know go Limited in the case of Goldman or you start to give away your Equity to the Next Generation right
and that's his what his vision was and that by the way extends not just to the investment team but to the entire company you know it is the responsibility of every functional leader in our company whether you run the tax department HR or it to understand and be be mentoring who your successor is right and that's the culture of the firm and has been from the beginning and so Steve has been
steadily handing off portfolio responsibility by sector kind of within the first couple years of launching the firm with the view that there will be moments where it is clear that there are certain people on our investment team who know more about this sector than I do who are effectively making all of the decisions anyway and so let's deputize them to actually make those decisions
right and have the insights and so that's been the culture of Since since the beginning you know what we have been doing with you know him officially stepping back to really just kind of a chairman type of role and Dave and I taking over as co-cio was to really transition what we call kind of a 2.0 of Lone Pine and um that's been if I'm being honest a heavy lift right because
and that is a function to some extent of you know how we were set up at the beginning and then how much the market has changed right we had a great group of investors who were with us from day one who were largely kind of North American endowments and Foundations and some high net worth you know family outdour family office types and high net worth people and they gave us money day
one and they just compounded for a long time and so our orientation was heads down put up numbers we didn't really have an outbound effort and nor were we open for the first almost 15 years of our existence right we didn't really launch a bunch of new products after the long only launch in 2004 we had a quick stint with a long only Emerging Markets
product that we quickly realized didn't scale and we folded that into our long only business and haven't really come up with a new product since then and so there really wasn't a a need to have a big outbound effort right and so we've always had an investor Services effort which is great but um that's one example two is um you know the emergence of a lot of technology and a lot of products
and capability we built all our systems homegrown because when we launched in 1997 a lot of this stuff didn't exist that was off the shelf right and so there's been an opportunity to modernize how we do things from a process perspective I think across a lot of different parts of the organization three I think given the nature of collaboration that we talked
about earlier with regard to sector coverage and how we work together that's a slightly different human in terms of who's going to be good in that type of role and who who who who succeeds who communicates really well there always obviously a premium on communication in our industry um and the ability to synthesize a lot of information into a couple of key questions but people who
are collaborative who are really team oriented who are creative in terms of you know tools they employ to do fundamental research um the premium on those is even higher I would argue than it was before and so I think we've evolved over time the types of people we hire we've learned from who's really succeeded inside of our culture and who hasn't done as well and try to kind of
evolve how we think about the types people we want to bring into the organization Dave and I are very focused now on kind of the Next Generation right you know I'm 50 Dave's I believe 54 maybe he's 55 I'm not sure if I'm in this seat in 10 years that's probably not the best outcome for our LPS right you know there is I think a life cycle of doing this and Dave always says and I
think this is right you know when I'm less excited to jump on the plane to Singapore for two days it's kind of how I know right I'm still excited to jump on the plane to Singapore and so is he so we're in the right seats but we're equally focused on who is the next Generation how do we expose them to the things they need to get to get exposed to you know teach them how to manage
people how to think about portfolio how to learn the areas outside of the areas they cover and they've grown up covering they've proven themselves to be very successful analysts how do they make how do we develop them to become you know great portfolio managers right and so that's a big part of our time now which is different for me than probably 5
years ago um and then the last piece is obviously just Shoring up the organization for a different world right and so whether that means different you know strategies around products we've had kind of a one-size fits-all we are a long only firm we are a long short firm what does that mean in 2025 right you know what a hedge fund is or what it what it represents to the market in 1997
looks pretty different than what that term means today today it probably means more like a pod shop right that's what a hedge fund is not we're a long short fund right and a long only fund and we're fundamental investors and that means something different in 2025 than it did in 1997 we never had a PR effort we never had a website until a few years ago right we wouldn't do things like
this probably five or 10 years ago it wasn't the culture of the company but the world's changed and so the onus is on us to communicate our story communicate how we've changed how we've grown what we've learned how we've developed what we're focused on right and so that's a different orientation for a firm that culturally was set up to be let's just perform and everything
will take care of itself yes we absolutely need to perform that's jobs one two and three but there's other things we need to be doing to continue to develop and grow our business I would love to hear the very first time you remember feeling your competitive Instinct in your life like going back as early in your life as possible um my sister will laugh at this if she
listens to this so I was probably 6 years old and um my parents belonged to like a little pool Club at our town and they played tennis and I had started to play and didn't take lessons and wasn't allow to take lessons till I was older but the way to be able to play on the backboard at our little pool Club was there was you know competition like you to get the back
access to the backboard you had to beat the people who were waiting around to play in the backboard and so I figure this out and I'm watching these two boys who are I think like 10 or 11 play each other and whoever wins gets to you know practice for 20 minutes and someone else the next person gets to challenge them and so I'm like I'm I'm going to challenge this person right and so
watching like sitting waiting for my turn to play like my heart rate just started like escalating and I was not cuz I was nervous cuz I was excited and then I beat whoever I played and that moment of like winning and and like internalizing that I now had access for my myself to the backboard for the next 20 minutes until the next person was going to challenge me was something that
made me feel very energized and excited and I feeling that I wanted to replicate what has it always been excited has it ever been nerves sure of course so what what when was it first nerves oh when when expectation comes along right when you realize you're actually good at something or could be good at something or have potential right and so um was that tennis 2 where you first ten 2 for
sure right because um I think I was this probably when I was 11 years old so I was I had very high rankings when I was very young and um that pressure of being seated in a tournament right you go to a tournament and you're the first seed and it's like everyone's gunning for you right that's anxiety provoking for sure did you have experiences where you sort of broke
through an understanding of what you're capable of like where where something happened and on the other side of that thing you like almost like a snake shedding its skin or something like you you up leveled your own assessment of yourself that happened in competition indirectly yes I would say wasn't in a match or in a particular setting but um I burnt out in junior tennis so my you
know I started playing Nationals when I was 10 years old I played every summer until I went to college most weekends were spent traveling to tournaments around the tri-state area Thanksgiving Easter Bowl every summer like it's it was a lot and I think they've since scaled back like they I don't think they have the 10 and under category anymore but they did then um and when I got to
my junior year the end of my junior year of high school I was just I was done like I just was so burnt out I didn't really want to practice for three hours every day after school I was interested in other things I was interested in school um and at the time um the NCAA rules for tennis I'm not sure if they've changed cuz now they're different I feel
like for every sport but coaches weren't allowed to call you until July 1st of your Junior Summer right and I'll date Myself by saying that we had an answering machine with a with a cassette at the time uh and so I didn't want to go to Nationals that summer and I said to my mom like I'm just done I don't want to go I don't I just I'm I'm done with the sport like I can't play anymore
I don't I don't want to do this and she said I've never made you do anything in your entire life but I'm actually going to make you go because you've worked so hard for the last 10 years at this Sport and you spend so much time and put so much of yourself into it let it do something for you it's going to get you into college and if you never want to play again that's fine but like
I'm going to make you go and I went and I Kicking and Screaming but I did I went and I played and I got home from the tournaments and you know our cassette tape was broken from all the coaches that had left messages which was super exciting and then I literally did not pick up a tennis racket for my entire senior year of high school wow um I applied to Harvard early I was lucky
enough to get in I got recruited and I played basketball for my high school and softball for my high school cuz I love sports Sports and I love to compete um and I went to college with a very different orientation which was we'll see how this goes right like I don't I don't know how I'm going to play I don't know how I'm going to feel I don't know how being on a team is going to feel
relative to being such an individual Sport and it's a great story for me about just seeing something different from an experience which was it really became about the team like my freshman year we were terrible I played first singles we were last in the ivy league I lost most matches that I played so as did we as a team and it really became a about rebuilding the team and the
camaraderie of the people on it that provided me such like enjoyment and so much fun and such an important part of my college experience and so tennis became for me something very different in college I didn't think was possible and so I saw the opportunity to reshape something for myself um that was so seminal and had become so almost Toxic by the time I was finishing High School
to something that was such a gift of and some of my closest friends in the world came from that experience my best friend on the planet we met with we were seven she played at y played at Harvard you know so there's so many things tennis has given me and has shown me so much about kind of the kind of person I want to be and taught me so many lessons about not just competing but
Independence and hard work and all the things that I would like to instill in my daughters um come from that experience and then allowing it to become something else for me I love that moment with your mom what was the kind of the same question more investing Centric what was the first formative experience you can remember that made you realized that both the competition
and the pursuit of Excellence that you seem to care a lot about was possible in this field you know it's funny like I think it takes a while in this field to figure out if you're any good at it right and so in the first handful of years that I worked in public markets I definitely got more things right than wrong but I I wouldn't say I came out of that feeling like I got this
right um when I got to Lone Pine I was super excited about being in a a culture of excellence and a culture of research that was really what drew me to the firm and I knew Dave because we overlapped on a bunch of Investments and when I was in Prior firms uh we shared meetings and want to see companies together and really got to know each other and figured out that we thought about the
world in a pretty similar way and we're attracted to the same types of Industries and companies um when I got to alone Pont I worked a lot with him and Steve was obviously sort of this super impressive you know figure who loomed large over the research Department given obviously his tenure and and and his success and about a year into being at Lone Pine um the person
whove been working most closely with him and consumer left the firm to start his own firm and Steve comes into my office and he says all right so you're taking over all this all the stuff you know retail luxury all the hotels casinos all these things and you're going to be working mostly with me and I was like okay this is super exciting and super intimidating um and I remember um a few
years into working with him there was something I forget I think it was the Gap um Glenn Murphy was running it and he was in the process of turning it around at the time and i' done a bunch of work on it it was a pretty controversial idea because people thought the Gap was sort of a mature business and the brands were all starting to lose market share and so
forth and I went into his office and the way things work with Steve when he used to be a portfolio manager was it was sort of a conversation there there wasn't a memo there wasn't you know a deck that you put together and presented to an investment committee you'd go into his office and say Hey I want to talk to you about X and he'd sit down and kind
of hash it out and then like usually if you're effective you walk out and like he puts the order in right just turns around at his little desk and puts the order in and so I go on talk to him about the Gap and I said hey I want to talk to you about the Gap and he's like it's a short right and I was like I actually think it's pretty interesting and he's like he makes a face like are
you crazy and so I walk him through my thinking and he's like he asked me a bunch of questions and it's a 20 30 minute conversation at the end he looks at me and he's like yeah that makes sense and he turns around and just writes to and I was like okay maybe I actually know something because he knows more about this whole space than body on the planet in our world you know who's
living and investing actively at that moment in time in the public markets and like I just convinced him and it ended up being right which was great but more importantly I think just the confidence to come in and take the other side on something again somebody who I had so much respect for and then be right in that name was just like a tiny example but I think illustrative of how this
this job and and is so much about confidence and how you're feeling and it it's cumulative right and so yes I'd had success but that moment was sort of stands out in my brain and I I joke internally at Lone Pine and I and I say this with intent and and intention because I want the analyst to challenge us all the time that's how we all get better is like I kind of made a career
of disagreeing with Steve right and like look where I'm sitting now it's like I think it kind of worked out I want you to do the same yeah right that's so cool if you think about the leader business leader that is the most driven to win that you've ever gotten to know about or know personally well who who comes to mind I want to pull apart like the the the pieces of drive to win and then
apply it to the people that you know on your team and also that you recruit I mean it's probably Mark Zuckerberg and what do you see like what does that teach you like what what is it huge Focus big bets willing to be wrong and pivot quickly when realizing that they are wrong meta um it's having knowing when to be bold and when to be humble attracting challenging you know motivating a really
talented organization um and vulnerability and when you think about all those characteristics how do you sus them out in someone that might come work for you especially if they're young and like there's not like I I say all the time that you know what I can glean from a 30-minute interview is pretty Limited in terms of someone's ultimate ability to do this
job well so that's why we have a summer internship program for mbas because it gives us kind of 8 to 10 weeks to evaluate them and and vice versa right to figure out if there's a fit how this person Works um how they think so for me I look for a couple things um it won't surprise you to hear that I love hiring competitive athletes um who have competed at a high level I don't care
the sport um it could be an instrument uh that's great too but people who understand hard work failure disappointment achievement what that all feels like two people who have had to juggle things in their lives right so they had to work a couple jobs while they were in college they had some sort of Misfortune in their life you know a relative a sibling or something that's
happened to them that they've had to pick themselves up and work through um people who are interested in lots of things because they're curious right people who love to learn that is ultimately we said this earlier foundational I think for being successful on this job is never being complacent and thinking that you know more but recognizing and being humbled
by the fact that there's always more work you can do but the companion skill to that is knowing when you know enough to make a decision right because I think you can get into you know uh analytical paralysis around like there's more to do there's more to do there's more to do and like we're in the decision-making business right and so um that balance of curiosity and pursuit of knowledge and
learning learning and growth the self-awareness to admit when one is wrong which is an incredibly important part of what we do um and the willingness to take some level of risk or offer some kind of contrarian thinking that um often can position us really well to to make money so who do you view as your competition is it firms is it just the whole Market is it it's so funny because
the firms that we're always um lined up against in the Press are are some of my closest friends and none of us view it competitively at all um in fact several former guests on your show are super close friends of mine and uh in some ways I view our competition honestly is as ourselves like we need to be better and do better and I think that's the bar we hold ourselves to is
that we you know have the unique position of having been around for 27 years which is increasingly rare in what we do um and obviously being a directional um fundamentally oriented public equities firm with duration is increasingly rare at scale I would say relative to when I first started in the business and so I don't think of the pods as our competition I
mean the market is obviously we're benchmarked in one of our products and so that's obviously our competition and how we evaluate ourselves but um you know I think we had many years of very very strong performance we're sort of hopefully back on that track track now with I think a lot of learnings and a lot of insights from mistakes we've made and a lot of growth that we've all
experienced as an organization and so I don't I don't have like a Target on my wall of XYZ firm or someone's numbers that I'm tracking to say oh we did better than that person um it's it's actually sort of the opposite which might be counterintuitive is that I root for a lot of my friends and when we do work on something and someone else calls us and they own it or they do work on a
we pass and it works and they do well I think that's awesome right we want the industry to do well we want people who leave our firm and start their own firm to do well that is good for the industry right and that matters um and so I don't I don't have a zero sum game attitude towards our industry or root against certain people I really don't I I feel
like having done this for a long time part of what makes it makes this really fun is the relationships of 20 plus years of going to see companies with the same people and exchanging ideas and debating ideas and challenging each other on our thinking and then getting to know their talent people who work for them who've done the Deep Dives on a bunch of different names and introducing
them to our talent and all of us getting on zooms and hashing it out like that's what's really fun about doing this job is that Network and I that has surprised me I think when I first entered the industry many years ago I thought it would be more sharp elbowed and competitive and instead it's been the exact opposite and maybe it starts with how we were talking earlier about sector
coverage and my initial pure Network being outside of the firm so you sort of find like minded thinkers or people that you respect or who you think ask good questions in meetings with companies to then have conversations with about the sector and then that grows up into you know the these become friends so that's been a real surprise I would say about the industry and maybe a little bit of a
Wander from the question that you asked but it's one thing I think is super interesting and maybe not really well understood outside in I'm curious how much more or less you feel like leadership matters than early on in your career like a couple of the examp you've given is that a single person can really massively alter the trajectory of a business even a very established one
with lots of features that are independent of the person there's the like great person theory of History versus the sort of you know less emphasis on the individual has the point on that spectrum that you personally lie changed over time like do you believe more or less in leadership I guess more more just because I've seen so many reps right that's the business we're in the
pattern recognition business as as a field I say and what's also interesting is to see it across Industries across geographies like you know we used to be big investors in China many years ago and seeing how a lot of the entrepreneurial businesses there the 10 cents the alib Babas got built and the leadership inside of those companies mwan um I look at someone like Marcato
Libre and what Marcos has built there over time and the team largely being the same since Inception and like they've executed against competitors who came in and tried to disrupt their markets were much bigger you know well resourced much bigger global companies and defeated them and I I just there's something to the magic that happens when you have I think strong leadership great teams you
know a lot of um collaboration across those teams and a lot of like ups and downs that everyone experiences together that is creates so much resilience um I just I I've seen that play out time and time again and it and you know it's interesting today's actually investing climate with we've been saying a lot like with the cost of capital coming back and largely going to persist we can
debate at what level you're seeing just winners and losers across Industries in ways that we have not seen for a really long time which is super exciting obviously for us as you know uh really actively engage research oriented investors who both own stocks and and short stocks because execution is mattering right and the free lunch of the zero interest rates and there's
money for everyone almost forever it felt like for many many years um that ER is over and so you see it across all kinds of categories and you see you know whether it's Boeing versus Airbus or you know Aires and lbmh versus carrying and berbery or you know we can go door Dash versus everyone else in that space basically right Uber versus lift and we you know there's there's so many
examples of um winners and losers getting way more pronounced and and a lot of that's strategic decision a lot of that's leadership honestly and execution and I think those things are all really really tied together maybe just like like bullet list like enumerate the things you seeing the winners of those pair wise examples you just gave doing versus
the losers because in some of those categories like some Airline you know some aircraft manufacturers or something it's not like they you know they're pivoting to some random like they're still making airplanes Uber's still driving people around lift is too so so what is what are yeah list those things like what are the winners doing in a in a real cost of capital environment that
the losers aren't so I think it's it's a bunch of things um number one there's really clear strategy in terms of what are we focused on right I think so many companies have eight different initiatives that are simultaneous and there's a lack of understanding when you talk to people inside of a company of what actually matters what are we driving towards right that's one to
there's a culture of accountability and measurement right some companies have it it seems so obvious right like people are bonused off of a certain thing they they do you know forward-looking plans and budgets every year and they hit them or they don't but there's some companies that are religious about you know having those be thoughtful exercises and accountable exercises and ones that are
not right and I think that shows through a lot three is companies who treat their consumers well whether that's a B2B Enterprise a b Toc Enterprise is you you when you talk to customers and we do this all the time right as part of our research you hear how they are treated and it is different they are there's someone for them to pick up the phone and call their needs
are being met they don't feel like they're being aggressively raised like their price is not being used as a weapon against them they're not they're being serviced um it's just different there's again back to accountability and sort of a level of operating standard that is the expectation of how things are done I think the other thing is um there's a long-term orientation that I think
some companies lose their way around particularly when you have a lot of turnover and the matter back to people you have a lot of turnover incentives get set whether that's tied to a stock price or the metrics that drive compensation and people's incentives are not aligned right and and that doesn't promote long-term strategic thinking or orientation that filters down to the
culture so now people are cutting owners they're trying to make numbers make budget that's a very different way to live as a company than it is around we may miss a quarter but this is the right investment to make right and so companies that I think do a good job of balancing short and long term one and two are able to communicate to the market you know a a a consistent level
of execution right we we joke a lot internally that and I say this a lot to management teams every time you open your mouth to report your quarter your Stock's up or down 20% % what that tells me is you are not doing a good job communicating your business you don't have good visibility around your business because you are surprising the market every time you speak good and bad
that's not like multiple enhancing for your company over time right and so that comes from how the internals of how a business is run what are the incentives what are the metrics What's the culture what's the retention all of these things I think are such important glue that distinguish the better executors from the poor executors do you think the best that do it understand the concept of
cost of capital really well and and drive it and if they do what what do the best do to drive down the cost of their capital I think of it like from the perspective of like tradeoffs and a budget meeting right and so in the era of zero interest rates and the market the public markets for years rewarding growth at any cost um I think the disciplines inside of a lot of companies
really went away and everyone was just motivated to find new ways to grow regardless of the cost and what is clear in today's era and you have seen this from a lot of the big platform companies particularly in the Internet space um there is just a new religion around cost where when you sit in a budget meeting or even an engineering meeting um and you are putting forth two or three
initiatives that you want to get funded you are being asked how to fund them from your budget right which is just a very different orientation of this is this is not an open pie that is is Limitless in terms of dollars that can flow to you and if you want to do something you have to like you know it's like a Sophie's choice right it's like one of the things that you've already
been approved for needs to be sacrificed because then you're going to feel the pain and it it's going to really pressure the decision-making around solving for the best thing or the best two things right or if you want more resources on a project like convince me why right that cultural orientation to me is sort of the business translation of driving down cost of capital people
understanding that there are there are costs associated with every resource inside of a company and how to think about those in a way that is personal right I I always say that when we look at our budgets every year for our thirdparty data sources and all the things that our analysts want to use there's a lot of nice to haves but what are like the must haves and I always say
to say to our management team what if we made them pay for them themselves what would they actually keep and what would they say you know what this is a nice to have I don't need to have right we would actually Force thinking around what's let me look back what's actually informed the decisions that I've made and has helped me make better decisions
versus like an input that was one of 10 that didn't actually change anything for me right what has been the worst period of returns that you've experienced at Lone Pine and what like tell me about that era and what you learned from it sure I mean we'll put aside the financial crisis because I think that was just like a so Universal yeah a universal thing for sure it was the end
of 21 and the first few months of 22 um and and we learned a lot um you know tell me everything so you know referencing what I just said about a period in time where the market was consistently rewarding um the best positioned companies who had great Unity economics but were investing meaningfully ahead of their growth rates and the market was forgiving and and encouraging actually of that level of
investment such that many of these companies were funding extraneous things burning cash um that didn't matter as long as you know the growth rates were continuing to accelerate and people were comfortable that the underlying unit economics were sound right so what happened I think was a lack of accountability around valuation and no near-term valuation
support because everyone was looking at multi-year out normalized you you know margin structures to then discount back and say this is a fair price to pay for an equity instead of looking at if something changes and something goes bump in the night you know on a next 12 or next 24 months earnings or cash flow basis is our valuation support and the regime changed I think very quickly when
people started to realize ourselves included um that the Fed was behind um and we started having this conversation in the fall of 21 really in the spring of of 20 of 21 owning a lot of these businesses that were the leaders and by the way with the benefit of hindsight from a 2025 perspective are the winners right a lot of the companies we owned we they were the right ones to own we just
paid too much for them right and when the regime changed and it was clear that we were going to need to be getting into a hiking cycle uh quickly and aggressively we pivoted but not quickly enough right and so we took some of that high growth exposure down that had been some of the most profitable exposure for us on the prior 24 months but not enough
and not fast enough and so when we came into 2022 you know as you remember like it was just kind of the market was down it it was and was super quick and it was like a repic mechanism that happened very very quickly and we weren't quick enough to react and to the point earlier around believing we owned different bets in payments or e-commerce or software
when the regime changed none of that mattered and that Nuance was lost and they all traded like one stock right and so we had too much exposure we had lost balance in the portfolio and you know part of that I forgive to some extent because the market had been rewarding that for many years prior but we didn't we didn't act quickly enough and and respond quickly enough to a conversation
we were having as well as the market was having at the same time around sort of a different a different regime from a macro perspective an interest rate perspective and so that was the huge mistake um we spent you know a lot of time internalizing the lessons studying all the mistakes you know points in time when we had this conversation and didn't make change earlier a year earlier 18
months earlier and that was the right decision and then the conversation with we were having at the time and the decision to move some Capital but not enough and not quickly enough and really memorialized I think a lot of that thinking and learning um around reinforcing that there are lots of ways to make money in the market and we just got really narrow in our purview I think
and and and lost our lost the perspective on balance and so I think the the changes we made in the first quarter of 22 and sort of resetting the book to a much more balanced book that has lots of different flavors of things in it um again not top down prescriptively but I think really prioritizing that in a different way and going back to honestly a lot of sectors
where we had a lot of domain expertise where we' had a lot of success historically that we kind of got away from because you know the sex of the high growth internet oriented kind of tech stuff had been so intoxicating I think for not only ourselves but lot a lot of investors who are attracted to growth businesses that are creating value we we didn't own Nvidia we didn't
you know wasn't three stocks that drove the whole portfolio and they're across a number of different Industries and so the breadth that is driving our performance is very lone pinees to me and something that we got away from and that's the mistake I think a couple decades into studying companies yeah can you describe the perfect business I mean it's all the things we're we're all
searching the globe for right we want incredible leadership really strong unit economics a really good Moe around a business in terms of something that is different um incredible value proposition to the customer whoever it may be the ability to grow organically without investing meaningful Capital um and a huge runway for growth that can last for many many
years without being disrupted if we're doing our jobs right and in terms of the management team of the company that's running it and and maybe like an adjacent question is the perfect investment because I suspect that when one of those exists the world kind of knows it so I think um it's change in leadership it's a new product that the market doesn't appreciate fully in terms of its
capability how big it can be how accretive it is to margins and returns how little Capital it requires um ways to Leverage The Core IP of a business uh in new channels in new products um the value of distribution to the earlier conversation and how that's under appreciated in certain businesses and the ability to flow other products other services in into that or you know
sometimes it's just the benefits of scale the companies get to a certain size and then their Market power step functions right and what they and then that somehow improves the value proposition and the flywheel of what they're doing in a way that the market doesn't fully appreciate and we see this now I would say like in the alts space for example where these businesses are
now you know they're all mostly public and that's new correct yeah KKR or Aries and their ability to offer unparalleled customer service product Innovation opportunities for talent development um new channels of growth is just it's spinning on its own in terms of this flywheel right in a way that I don't think anybody could have really anticipated and what's interesting about
these is you know the bare case on them because they're a new asset class as public companies we haven't really been through like a big cycle so how do they how will they perform and then the other piece I think the market struggles with is how do you value the carried interest part of their revenue model right everyone can value management fees and make a projection around how a will grow
but how what do you pay for that right and so that's interesting to me because that we can do work on that we can have a point of view on that we can look across cycles look across products how they're growing and think about how funds perform and have a a thoughtful analytical answer to that question but the mark there is an in answer to that question yet and these are still under
owned relative to like all of the big you know institutions that have to index that have to own these things and will'll continue to have to own them in bigger size as they grow and so the idea of like a new asset class is sort of interesting to me even though it's you know me black stes in public for a while but all these companies are newly public
in the last decade and I think the world is still figuring out how to analyze and value them as public companies I I love the idea of the investment opportunities coming around change I was with John zto from from Apollo who just made co-president of Apollo last night and it's so interesting because I don't know probably the stock price of Apollo doesn't really reflect all the things
that John might do in the future amazing guy yep and so it's it's getting into that like changing thing where the opportunities come from forine it sounds like I'd love to do apply that idea to a couple different like sectors so you mentioned kind of a broader purview getting back to some of the things that you know made the firm originally obviously Steve was a consumer analyst
and Retail analyst and so so uh so cool to talk to him about that space What would be like the top three would you say outside of like big TMT which we can talk about too sure um but outside of of those big companies what are like the top three sectors that you find yourself spending your time in now we own a lot of one-off ideas in in non-bank financials so the alts is one example of
that but um we have a number of positions of single stock not thematic companies that are doing really interesting things one is around transformative m&a at scale one is around product Innovation one is around AI That's not an AI business but is using AI to thoughtfully do things inside of its sector so that's an area where I feel like we typically don't do a lot with the banks um not an area
where we feel like we can really add value there's regulatory risk and all the and we don't think you know those are not sort of don't really measure against our quality filter as businesses um but there's a number of pockets inside of financials that we think are not very well covered that are pretty interesting and we've got a great team doing research there so I think that's
one area we have been investors for really two decades almost and continue to be in the Aerospace uh Market both OEM and aftermarket and continue to love those businesses they have you know all of the attributes of businesses we like great organic growth great pricing power you you know a lot of as people fly more planes get used more there's a need for
replacement parts um they get specked in to to to planes as are being built and so they're typically single sourced or Soul sourced um and they are super low cost as a percentage of the overall um plane and so they're just recurring Revenue businesses with a lot of pricing power and very little Capital against those businesses to grow organically and you know feel like there's a pretty good
open-ended structural story around people traveling more and valuing experiences so that will continue to I think be a very productive area for us and we've there's a bunch of different names that we've owned in that ecosystem and will continue to own likely over time so I think those that's another big area those are two I mean consumer is harder I would say most businesses were
more active there on the short side than the long side at this point just because there's just an inherent maturity to I think a lot of those businesses um and the ones that are the really scaled winners you even just watching the revaluation of Walmart in the last 18 months has been super interesting as they've really emerged as a more consistent executor and Doug's done a
fantastic job I think with that business but that I mean Walmart's now trading at a pretty hefty multiple and cost Coast Trading really I mean these are the best you know executors in the space and they're really expensive so I don't I think the market has sort of figured out that they are the winners um and so less to do there in my mind in terms of
runway for long growth that's underappreciated or maybe fairly valued relative to the actual level of growth it's one of the things we de a lot honestly is in areas like healthcare this happens in certain sectors and also in certain geographies where there's very few companies that have high growth or have exposure to a thematic that the market is excited about because of a
geography or because of a sector focus and we like those businesses too but they tend to trade at valuations with don't stack up against businesses that we see across the portfolio that are more compelling so even though we'd love lots of companies around the world and would love to own them we're always waiting for like a a wall or a dislocation or a perceived competitive
threat to give us our chance to own them um because they don't stack relative to owning more of a lot of the compounding businesses that we love if you think about the whole industry what do you think is the biggest problem facing the investing world I mean certainly the funds flows of the last bunch of years would tell you that active management is undervalued relative to our our
understanding and execution of that value right the the move to passive this idea that like just just own the mag 7 and I can do that myself and why do I need you has become a little bit of a cocktail party chatter at this point and you know we are obviously huge Believers in active management and huge Believers in the value of doing fundamental analytical work on companies and not
indexing and that the the premium for that is is undervalued relative to its worth and I think you know part of what makes that I think a difficult conversation right now is the short-term orientation of the market and how it takes you know we're focused on compounding over a very long period of time right we are the largest single investor in our fund a third of the
assets is internal Capital so what I wake up every day really excited to do is compound my money alongside of our LPS right I think that's a pretty compelling proposition to a potential client for our firm um and that doesn't happen in a day or a week or a month and I'm not my investment underwriting doesn't tie to that time Horizon right and so we want to be judged over a year
not quarters and we're increasingly in a market that is evaluated by forget quarters weeks and months per the pods conversation earlier and a lot of PODS you know if you don't put up you know we we laugh at the the activity in the market in the last few days of every month because if you're not having a bad month you're going to get your Capital yanked so you take risk right or you
have to have deoss or these activ this never existed right five or 10 years ago but this is the Market Force at work and so again great for us long-term investors I want to lean in when they're leaning out and vice versa but the value of doing that and the benefit of that capability takes time to reveal itself and isn't going to show itself in a quarter or a year and I think that's
what the Market's missing so say one more click about how the pods work from your perspective and the weird the weird incentives in there I mean you have inside of these shops 20 30 40 desks or pads as they call them covering a sector right and they all look at the same data and they sit in the same meetings and on the same calls and of course they talk
to each other because you have a peer Network so they can start your own firm and so often and I have never worked at a PO but have several friends who have still do and have come out of there you know you you can see what how everyone's lined up and you'll have 20 25 books long a stock into a print of a quarterly a quarterly earnings estimate and and a quarterly conference call and the
numbers come out and it was better but it wasn't better enough because the whisper number the data was suggesting they were going to beat by three points and then only beat by two points point and so the Stock's actually going to sell off right the game of you hand me an earnings release and I'll tell you what the Stock's going to do was actually a fundamental game that we were
pretty good at a decade ago now it's like coin toss what's the setup you tell me what's the whisper number what are the how are the pods line up are they long us are they short it because that's going to dictate the trading action the day of and the opening Market reaction versus what happens over the course of the day is everyone's covering the short
because it was bad but it wasn't worse right and that's like this is what happens all the time right and so that requires different muscles from us in terms of how we position ourselves and respond to that but I think that's what is happening and these people are on they have draw down limits of where they can draw down on a monthly or quarterly basis their Capital gets pulled and
that's that's it's that's the lives they lead and so you see what you see in Market action in terms of reactions to events is a function of those incentives and those structures this has been so incredibly fun it's so neat to hear how the whole machine works and just about your career and the competitive nature and the tennis it's just an amazing amazing story I always ask the same
traditional closing question what is the kindest thing that anyone's ever done for you so the summer after my freshman year of college I taught tennis at a camp in in Florida and there was a golf camp at the same Resort and I became friendly with the golf pro and we'd meet after my I was done teaching for the day and he taught me how to play golf atot summer which I don't play anymore but I
did at the time and and at the end of the summer the last night we had dinner together before I went back to school and he said to me um can I tell you something he was probably I was 18 and he was 32 and he said you know you are so driven and you're so intense and I I just can tell that like I'm super excited to follow your life because it's going to be really interesting is my
sense he said but you're also an incredibly Soulful person and your um relationships clearly matter to you he said so my piece of advice for you would be figure out who in your life matters to you figure out what matters to them and then show up for them in all the ways that matter to them and that will be a rewarding life for you cuz he's like I think he got the professional
part down which was super sweet and so I take that to heart and work really hard on relationships and the people that show up for me to be there for them for the things and for the people that matter for them one followup because a beautiful closing thought how have you gotten better at that like if if everone say here's that simple method like I want to do that right what are the
tactics of getting better at that that you've learned uh making sure it's mutual I think relationships change people's lives change um I think you recognize I'm I just turned 50 that um some friendships and relationships that have duration in your life are more a function of circumstance and you wouldn't necessarily choose some of those relationships today and the ones
that are the inverse of that that are are have the duration and are still the most meaningful are the most valuable so it's the concentration theory of both investing in your highest and best ideas and the concentration theory of just the people who are incredibly meaningful to you because they've seen you grow up and seen you grow and change but then also the last piece or the postcript would be
leaving room for new because new I think helps us all grow and and and we're we're different than we were when I certainly am when I was 20 and the new is the reflection of like who you meet and connect with today which wouldn't be the same thing as it was 30 years ago so beautiful closing cloud Kelly thanks so much for your time thank you enjoyed it [Music]