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We have to be a firm of entrepreneurs.
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We're one of the few handful of firms in the world that can consistently write billion dollar plus checks across asset classes.
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>> What made that group tick?
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>> It's easy to have a culture when things are going well, but cultures are defined when things go wrong.
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At Six Street, we're like, "Good, let's go.
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Let's face the tiger together. All right.
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I don't know where to begin.
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Sixth Street is so incredibly interesting in that it can do anything. It can go anywhere.
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It's extremely opportunistic, extremely flexible, open mandate.
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We'll talk a lot about the history and the different kinds of investing that you've done, but I think a fun place to begin would be for you to tell us about your Goldman days and specifically the group of people that you were investing with back then, which uh I've heard described by you and others as sort of like the Navy Seals or special forces of finance.
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maybe describe that group in as much detail as you can and why it was so formative and impactful on you.
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It >> was lucky that I even got into that group.
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I met a guy on an airplane.
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Basically, I was an international relations major at uh at Penn.
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No, no finance history, anything.
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Got out of school and I was basically working in the mail room bond only management firm called Fiser Francis Trees and Watts and uh was punching books and all my all my friends were you know they all had jobs.
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I you know basically at Penn I had 35 interviews didn't get have a job offer out of college that's why I ended up in the mail room you know I was always interested in companies I just didn't know a lot about it because I didn't have a corporate finance background and I was on an airplane coming back from Texas my home um and I met a guy on an
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airplane this guy uh by the name of Jody Lenass and I was just like asking him a bunch of questions and he was telling me like I always like I I think I've I've listened to a lot of your podcasts and you're a very curious guy I ask a lot of questions My wife makes fun of me because I ask questions all the time. >> By the way, on our first call when I was
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>> By the way, on our first call when I was trying to learn about you, it took a half hour to get me to ask you questions.
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So, I've been on the receiving end. I felt it.
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>> I go to dinner sometimes.
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People say, "Well, you asked me a thousand questions.
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I didn't get a chance to ask you." That's just how I am.
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So, I was on the airplane and this guy Joe NASA who had started in this group and uh he was uh he was reading like research reports like thousand miles per hour, like literally just processing speeds I'd never even seen before.
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course I just started asking him questions about what are you doing and what's your group and we just started talking on the airplane.
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He had came from WTEL a principal investing group at Goldman that literally was highly flexible could really do anything which by the way is the predecessor to the group that I was ultimately in anyways we ended up forming a relationship just because you know what I learned is curious you the good thing about being curious as you know is like you build relationships you learn a lot and it just creates opportunities.
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So anyways, he ended up getting me an interview and I got into this group which was, you know, ultimately became the special situations group at Goldman.
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And that group was the largest principal investing business at Goldman.
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It was the firm's balance sheet.
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We at its peak, I think we're like $25 billion of the firm's balance sheet.
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Um, and literally our mandate was basically you could do anything.
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um any theme, any ass we're you know we could do asset different asset classes different sectors different geographies different durations.
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So we could do stuff that were two, three year investment horizon or 10 year investment horizon.
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Different return profiles.
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Some was 10% return stuff.
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Some was 20% 30% return profiles.
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Literally we could do anything but we couldn't lose money. We couldn't lose money.
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That was basically the thing.
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So what we learned at the time is this group which you know I won't say the number what we were substant I was there not just because I mean there's a lot of super talented investors but we were substantial amount of Goldman net income with a very small team. Yeah.
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>> For you know 10 plus years.
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>> What made that group tick?
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Like I'm curious about all aspects of it.
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The recruiting, the culture, the investing style, the low loss rate >> is really the ability to unitize risk reward across different asset classes, geographies, sectors, return profiles, duration profiles, but literally take a real estate type investment, compare it to a US real estate investment, compare it to a US corporate loan, compare it to buying a company, compared to starting a company, and we unitize risk units and return units.
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And we did that across a bunch of different sectors, a bunch of different geographies and asset classes.
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And just that skill of being able to do that just it just you constantly comparing relative risk risk units and return units and it gives you ability to find the best risk word at that time.
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And the key principle there is that and this is one of the things we learned at Goldman and we learned this the hard way.
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Goldman was a bunch of FFTs of principal investing business.
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There were 10 FFTs, different partners running investing businesses and none of them talked to each other.
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They all had their own balance sheets, never spoke to each other.
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So during 2001, 2002, a number of the businesses, you know, a few of them lost a lot of money.
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Like for example, we had in the US like the business the the business I was in which is a US corporate investing business was pretty negative on fiber builds.
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If you remember like Exocommunications or Williams, remember all the fiber which was overbuild >> overbuild all that.
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There was another group at Goldman who are great investors, but they were all in on fiber.
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And even though we were literally one floor apart, one group lost a bunch of money and we were anti-w we didn't lose money.
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And after that, the firm basically said, you know what, let's put all these disperate principal investing businesses.
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Again, we didn't have outside LPs.
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Put them all under one umbrella.
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that ultimately became what was a special situation script which again became a you know substantial part of the firm's uh uh profitability.
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>> Can you say more about this notion of unitizing risk and return like the literal tactical way that that happened?
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>> So we think about the relationship of risk units and return units.
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So return units are easy it's it's irritation.
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Risk units they're a lot hard risk units are a lot harder.
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You know, if you think about sort of the two key variables of, you know, let's say evaluating any company or security, you've basically got the cash flows, the volatility of the cash flows, so the risk of the cash flows and growth.
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So the way we think about it and again this has been refined over 25 plus years is we take our framework is basically take three things.
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So first of all, what's the quality of the business?
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What's the quality of the sector?
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The second thing is where do you sit in the capital structure?
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what we would say is your attachment points and the last thing is documents.
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So we take that framework and we sort of run that framework through that across sectors, geographies and that sort of you that that's how we start to quantify risk units.
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So for example, if you take a consumer goods company that's a let's say a buyout of a consumer goods company and let's say a private equity firm buys it for a 20% return and let's say they leverage 70%.
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you take and you take a a hypers scale data center that's got let's say a 15-year takeer pay contract you know with an investment grade counterparty that's going to be a required lower return.
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So that'd be an example if you have a geography let's say just as an extreme example if you've got a 15% let's say structured equity investment for a company you know same let's say exact same company exact same sector in Australia if it were in Ukraine you're probably going to demand higher than 15%.
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Let's say we're a minority equity investor in a company and one you've got literally the the control party can literally do whatever they want. They could dilute you.
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They can put bunch of debt ahead of you.
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That's one set of risk units.
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If you've got sort of traditional hopefully good minority protections, that's another set of risk units.
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So we basically take all that.
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We we sort of do that across asset classes, sectors, geographies duration.
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duration. So some stuff like our capital we can do stuff that some of our capital some of our returns 10 to 12% returns some of our stuff is 20 25% two to three times your money and our whole view of the world is the world is very dynamic it's always changing um and you know what happens is with investors and I
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think this is they everyone sort of think everyone thinks their baby's the prettiest so if you're just a healthcare investor you think your your your baby's the prettiest you're just an energy investor you think your baby's the prettiest if you're just in Europe you think Europe's only Good. So we try to
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So we try to do is sort of step back from that and then constantly as we go through economic cycles, credit cycles, secular cycles, geopolitical changes and we sort of think about things on a real-time basis.
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And what we do is 450 to 500 deals coming into Six Street every month.
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Typically we have about 15 to 25 themes running through our firm at any one time.
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And the key is, and this is what we learned at Goldman, is that any theme that is good has a shelf life of somewhere between 12 months and 36 months.
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Because ultimately there's a lot of smart people out there and all a sudden it's a really good theme.
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>> It comes in and it's a good theme, then it's a less good theme, then it comes a okay theme, then it comes a bad theme, and then and then it basically people overcorrect, and they start putting leverage on it, and then you have a correction.
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And our whole thing and this is why we had the track record we had coming out of Goldman and and do at six street is that we try to see through that and never get caught in that dynamic where in a theme becomes less good we migrate to other themes.
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So our average our average theme has a has a shelf life of you know a year to to three years.
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So we're constantly if you take our themes from 2025 and you go back to 2022 the 15 to 25 themes might be a little bit over but most of them are different themes.
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And that's sort of why we always think of six street like when we founded the firm we said we have to be a firm of entrepreneurs because if you think about what we're doing we're constantly migrating to the best risk units and return units obviously also trying to be a value added partner to CEOs and management teams.
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So because the world's always changing we have to be constantly coming up with new themes and that's that's sort of what we learned at Goldman.
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>> How did you recruit people into SSG?
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Was there any lesson on the on-ramp?
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First of all, back then it was I mean it was the group to get into.
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It was the hardest group to get into.
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So we we had our sounds like special forces. >> Yeah.
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It was like that, you know, that when the Wall Street Journal called called the group the Navy Seals, I think that sort of created a little bit of halo.
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So it wasn't finding people interested, it's finding the right people.
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>> And for us, what we were looking for uh back then and still today at Sixth Street is first of all, we want really nice people.
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nice people. Uh we want people that you know we have a saying at Sixth Street and it was true true back then something we learned from the San Antonio Spurs is like we want people that are over themselves you know because if you think about a multistrategy investing business
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the the enemy of a multi strategy investing businesses is FFTs and silos and if you have people who don't want to be team players and share information and share relationships the whole the whole sort of unitization of risk units and return units it all breaks down. So
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So culture sort of goes handinhand with with with our investing style.
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So the first thing is like did they fit in culturally and then the second thing obviously everyone's got to be smart enough but we really wanted people that could think critically but also were open to that sort of you know the anti my baby's the prettiest people.
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They don't fall in love with whatever they're spending time on.
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They have the ability to sort of what we would say at six street is to play tennis and like comparing a healthcare in a a healthcare senior secured loan to buying a healthcare company to a you know a European real estate deal to a Asian infrastructure to be able to sort of engage in what we call playing tennis to sort of compare relative risk award and sort of the backdrop of whatever we think sort of the the macro environment is as well.
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>> I never heard that phrase people that are over themselves.
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It's a great I love that phrase.
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anything else you learned from the Spurs?
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>> So, I started running business a long time like tw I think I was 25 years at Goldman.
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We always said like no politics, no BS, no egos, nice people.
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Like that's that's what we wanted to be around.
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And when we started to get to know so I grew up in Austin, Texas and I was always a San Antonio Spurs fan.
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So I was always from afar >> a big fan of you know you know Papovic and RC Buford who's literally one of the best sports executives.
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He's unbelievable and almost like a brother to me now.
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He's an exceptional human being.
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But you know, we went in there.
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Um I was describing Sixth Street and RC based in one of our first discussions says, "Yeah, we have a saying for that."
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And so Papovic said the same thing.
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It's like, "Are you over yourself yet?" Why do you say that?
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He goes, "That is literally the ultimate expression is can someone be a good teammate?"
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And I thought about it deeply.
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So we sort of we took no politics, no BS, you know, only nice people and we sort of translated that to now we say are you over yourself yet?
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>> If you think back to the SSG days, what was the investment or trade that you were most proud of that most uh encapsulates many of these ideas?
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>> We obviously did really well.
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There were a bunch of investments.
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So I think the thing that we're most proud of is that during 2006 and 2007 when things were getting sort of irrationally exuberant we actually started to pause.
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We didn't know what was going to happen in the GFC but it's almost like what we didn't do and we were you know we're I think the only principal investing group maybe there's one other that didn't lose money in 2008 on a lot of capital.
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Now, we didn't we didn't make any returns, but we protected capital.
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And it was all from just sort of that process that we went through of really comparing relative risk units to return units.
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And we started to see things that just didn't make sense.
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We still invested, but we're investing in, you know, different things that we thought would be very protective because we did we didn't know when the party was going to end, but just it just was getting out of whack.
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And that I'd say that's it's really what we didn't do leading up to GSC is probably what I'm most proud of.
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And quite frankly, I think had that not happened, I don't think we could have when we s started Sixth Street raised the first fund we did had we not protected capital in 2008 because so many people in seats like mine, you know, blew themselves up during the GFC back then.
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Did you think of yourselves as like financeers like like it doing a primary job for the person or group receiving the capital or did it feel more like like arbitrageers or something like that?
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We love investing and it was really about just being like trying to create solutions because our capital is so flexible.
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We could go sit down with any CEO or any management team.
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One of our core skill sets is asking questions.
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So we'd just be asking questions and what we say that the prototype deal at Six Street, but also back then is we can get on a whiteboard with a co management company.
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They have an kind of an idea what they're trying to solve and we get up there and we start whiteboarding it and we come up with solutions.
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and we come up with solutions. we'll come up maybe maybe it's a you know a structured equity investment maybe we buy an asset maybe we do a joint venture on one of their assets it could be anything but we walk in there with a very kind of entrepreneurial mindset bespoke mindset on every deal and that is like if you talk to any of our
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investors like what is a sixth street deal that is a sixth street deal it's like just white whiteboarding with the CEO or management team and we can do that at scale so back then I mean that was really how we were thinking about things and we're arbitrage when I think about arbit arbitrage that's short-term like we're long-term investors. Like
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Like we're, you know, three to three years to 10 year investors plus.
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So arbitrage to me that's more trading.
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We weren't traders like we're we're terrible traders. That's not what we do.
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But thinking about fundamental value, but also trying to find the right management teams and CEOs to back and then getting to those D where we're really their partner and we're able to, you know, get on a whiteboard.
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That's kind of was a prototype deal for us.
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>> It's like a fundamentally creative process.
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It reminds me of Richard Rainwater and all you heard about how he would structure things and kind of take all comers.
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Lots of whiteboards in that office apparently.
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>> We just had our offsite.
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I talk about right brain thinking and we always say is like and one of our core principles is like don't group think. Stay away from water.
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That's why you know I benefit being out in San Francisco.
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I live with all the AI tech guys that are all on your podcast and I learned from them.
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I'm like a fish out of water there.
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But you know it's just that independent thinking.
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I mean, that's why like people who know me well, I never talk.
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I've never talked to competitors ever.
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Not because they're not super talented and great investors because I don't want to be sort of, you know, you know, infiltrated with their thinking.
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So, I get into group think.
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And that's why like we try to really think about things through that right brain brain lens because that's how we start different businesses.
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That's how we find new themes.
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And we can't do our business if we're not using our right brain.
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It's a core part of of what we try to do.
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Yeah, one of the really cool things about your structure is this unit of risk concept. Sure.
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Your talk makes me realize that basically every investor takes their specific unit of risk for granted.
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It's the same every time.
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And and I find that fascinating.
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>> When we came out of Goldman, I'd never talked to NP before.
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Like I didn't know how to talk to an LP.
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That's a whole other story.
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One of my mentors and we call him the godfather of Sixth Street, Jamie Gates, like our first fundraising meeting we went into, he's like, "Kick me on the tables with a large sovereign wealth fund. Kick me on the table.
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I'm like reading every word on every page."
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She's like literally like doing these hand signals like let's go, let's go, kicking me and it was not good.
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We never talked to an investor.
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But I remember getting out when we first started talking to investors on on Sixth Street.
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We had a really hard time in the beginning because it if you think about the LP world, the way it's set up, it's very siloed.
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You have your private equity group, you have your fixed income group, now you have your private credit group, you have your real estate infrastructure.
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So the only reason like we got lucky because David Vineyard was our CFO. We had one LP.
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So we were completely unconstrained and unsight.
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We just couldn't lose money.
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You know, you grow up in the world today like when I first got out and we're talk talking LPS, I'd be from let's say a very big pension plan and first and I'm describing what we do and they can't fit us in a bucket.
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They're like, "Wait a second. Are you in this bucket? Are you in that bucket?"
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He said, "We need 20% returns."
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I was like, "Okay, well, how how much leverage are you taking to get 20%?" It didn't matter.
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No one thinks about universal risk.
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They only think about nominal returns.
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And that's why we've always talked about from beginning.
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And I think many LPs have gotten a lot smarter on return units and risk units.
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But nominal returns, they're just underlying risk because there's so much leverage out there.
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People can make returns whatever they want through leverage.
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So, but it's not capturing units of risk.
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And at some point I think the AI is going to figure out how to quantify uni units of risk for private capital. That'll happen someday. That has not happened.
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People still think about just nominal returns versus just the skill of investing. >> Yeah.
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So where I was going with it was typically it's not a line of question like walk us through your thinking about risk.
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Like maybe they'll think about loss ratios, basics, some basic stuff, but not um multi-dimensional thinking around risk in a given asset class.
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And so I'm curious because that's all you've ever really done as an investor for you to teach us some of the surprising things about what you've learned assessing risk versus everyone spends so much time assessing return. What could this be?
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What could the return be?
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Less time on the risk side.
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What would surprise people most is the most important parts of that evaluation process.
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Human beings get into behavioral patterns and they look at the past and they just sort of keep going.
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Like I I'll give an an asset class like direct lending.
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Direct lending has oscillated between a really great time to invest and a less good time to invest.
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And it's all driven by sort of capital flows.
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you know, somewhat recently, you see a a whole bunch of new money coming in into, let's say, direct lending.
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And I think people get caught in these tunnels and have a hard time sort of stepping back.
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Either they don't have the sort of the the periphery to look at it um or they don't have people around them that have been through cycles, but they get in these sort of behavioral patterns and they have an inability to sort of look back.
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And I think whenever there's a crisis and people lose money, we saw this in 0102.
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I saw it a little bit in August 98.
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Definitely saw it on GFC.
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Saw it in COVID before uh before the Fed bailed everyone out and made everyone some people that shouldn't have looked smart look smart.
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But that's a whole other you know that's a whole other thing.
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I think people are surprised when that happens.
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But it's all right in front of you.
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front of you. It's like in 0607 you could have looked at what was happening like there was like over 100% loan to value loans to houses like like anyone could get a mortgage there were all these mortgage rers just pumping with no sort of you know consideration for
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credit quality and I think I think just the tunnel vision of ignoring sort of not only the risk units on that particular deal but the risk units of of what's around you and I think that's one of the biggest mistakes that people make and I don't know if people are surprised by that. But it's very hard to evaluate
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But it's very hard to evaluate risk units if you're only looking at through sort of one lens versus multiple lenses.
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That's what we learned back in 2001 2002.
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We had all those 10 disparate businesses where no one was talking to each other and that's why they were actually put together.
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I give David Vineyard a ton of credit as one of the probably the best CFO in my opinion ever on Wall Street. He is one of my mentors. He is exceptional. Like exceptional.
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But we're the biggest investor out there back in the late 90s and early 2000s.
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And you know there was a bunch of loss making businesses from all these disparate principal investing business and that's why Goldman put them under one umbrella.
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I think that pattern of not just thinking about things in a siloed way versus being able to look sort of the overall periphery.
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I think that's what we're going to be talking about sometime here in the next two to three years >> to continue to contextualize this notion of units of risk today.
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What do you think are some of the maybe overlooked sources of risk in the system as you see it since you get to see it from every angle? This is early summer 25.
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>> We have experts at Six Street like my partners Marty Chavez who's on the board of Google and Adam Korn and Rand Goldman Sachs engineering who are experts on AI.
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So, I'm not an expert in AI, but I think one of the things that you've talked about on your podcast is just just the whole transition from sort of once the productivity gains start to come, there's obviously going to be job losses and just the transition to sort of, you know, remobilize capital and just how's that going to work?
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How's that going to work with the real economy?
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I don't think enough people are talking about it.
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my one of my good friends Jeff Weiner, former CEO of LinkedIn. He's the chairman.
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Him and I have been talking about this for a while and I think for the first time Anthropic CEO actually came out and said something publicly.
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came out and said something publicly. So what I think what what I'm worried about there is that we're so focused on competing with uh the US stated against you know other countries specifically China um companies all the the the big
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hypers you the the the magazine they're all focused on competing with each other and I don't think there's enough people talking about about how we're going to manage this transition as you know again there's going to be lots of productivity gains which I'm all for But there's not enough talk about that. Like to me it's
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Like to me it's like it should be code red people talking about it and that's not happened.
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So I'd say that's I'd say that's one.
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I think the other thing and I think it's a um it's an opportunity.
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Look you look at the average uh wealth investor.
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So the wealth channel which I'm sure people have talked about on your podcast.
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you know they're relative to just a traditional in their private portfolios they're underexposed to private alternatives relative to say a pension fund at call at 40% or an endowment at 50%.
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So at 3 to 5% that should probably go up.
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But again the transition there's now everyone talks about everyone's all about the wealth channel everyone's talking about but the transition to do that in a way that's responsible to those wealth investors those in market and I think you know getting to the right structures so that um you know that's done in a in in a responsible way I think that is something to watch out for.
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Jamie Gates, Godfather, Six Street, one of the things he taught me early on is like just because you can raise capital doesn't mean you should.
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>> And I think that's, you know, just because you can ra I think as a GP, as a manager, just because you can raise it in the wealth channel doesn't mean you should.
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And I would espouse that advice to all of our people in our industry.
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>> So I want to keep telling your story.
24:50
So after Goldman, but before TPG, what were you doing then?
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I I actually told David Vineyard who was a mench in March 2008 that you know I just wanted to I wanted to basically rebuild what we did at Goldman but doing a more entrepreneurial >> backdrop.
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Um I stayed through 2008 just to make sure everything was well because I wouldn't have felt good if >> the rails would have come off like there's no way I was going to leave those guys at that time.
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And then, you know, I took six months off, uh, got married, went on a a honeymoon, but before that really started building our our basically constructing the idea of Sixth Street and which was formulated in a business plan called Project Austin.
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And Project Austin laid out our values, our culture, our investment philosophy, all laid out our five-year strategic plan, which is a big thing at Sixth Street.
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We're now in our fourth five-year strategic plan.
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We've been doing that since day one of the firm.
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And that sort of set out the idea of Sixth Street.
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Uh TPG, we're set up a little bit differently.
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So we were never like employees of TPG.
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We never gave up control of our business.
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We always controlled investments, hiring decisions.
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We were kind of a firm within a firm.
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Uh TPG had a minority equity stake and were great, you know, great partners for uh you know, while we were together.
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Uh but that's sort of how it all started.
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>> Say more about these consecutive five-year plans.
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How do you how do you do that?
26:16
Our view on business building is if you don't, you know, if you don't have a compass, it's hard to know where you're going.
26:21
And more importantly, it's hard to get everyone on your team matched up with that five-year strategic plan.
26:26
We just finished our 5year strategic plan.
26:27
It's an 18-month process, 200 pages.
26:29
I mean, this is like our hundreds and hundreds of hours of all the partners debating, trying to really narrow down, you know, what it is, the direction of the firm.
26:37
You know, back we first started our 2015 plan, what we wanted to be, and most recently our 2030 plan.
26:44
And you know we narrow it down.
26:46
We typically have like 80 ideas.
26:49
We narrow it down to sort of 40 you know really what we call subplanks and those are organized under sort of five strategic planks.
26:56
We'd actually just present it to our entire firm.
26:58
But we try to do and this is something we're learned at at Goldman is we basically take that fiveyear strategic plan.
27:04
We break it up into one-year increments and then we have every person at the firm do their own personal business plans.
27:10
And what we always say, and this is from day one, is that we want the summation of all those personal business plans to equal the five-year strategic plan.
27:17
So we're matching every single person in the firm with the clear mission of what we're trying to do and what we'd say in our parlance climbing up the mount mountain together.
27:26
And that's just been a process and it's something that we take very seriously.
27:30
Evidence by we spent 18 months and hours and hours of, you know, debating it and, you know, thinking about what we want to be and how we want to go about it.
27:39
But it's something we've been doing and it's our it's our north star. It's our compass.
27:43
It's everything and you know it's it's an important part of the process in the business building of Six Street.
27:49
>> Can you talk us through the opening chapter like chapter zero or the prologue and chapter 1 back in 2009 or so and and what was going on?
27:55
What were the what what the biggest challenges were?
27:59
I'm always interested in how these firms get started >> and um what challenges they have to overcome because often those are like the formative periods that then last a long time.
28:08
We're a valuesdriven firm.
28:08
So our values are, you know, number one, the what we call our one life principle. You have one life.
28:15
Do you want to be average or great?
28:16
Everyone wants to be great.
28:18
So that's the first thing.
28:18
But then what that's really for is like we want people that are allin.
28:21
Like it's a competitive world out there.
28:23
Like we want people that are allin.
28:25
The second thing, and this goes back to, you know, one of the things we're talking about is we want curious people that are constantly learning, that actually are constantly trying to grow.
28:34
If you think about the idea of having to develop new themes every year and new ideas, like we need entrepreneurial people.
28:40
And then the third thing is a one team culture.
28:44
So people that are over themselves, no politics, no egos, no BS, just so we can all talk to each other. So those are the values.
28:50
We always said we wanted to be the largest startup in the industry.
28:54
Like that's literally day one.
28:54
We want people that can play tennis so they can debate, you know, not the my baby's the prettiest type people.
28:59
And then the last one, we want people, and this is on culture, something my dad talked taught me about facing the tiger. My dad's a crazy person. He's like a black belt. Uh yells at the TV.
29:11
He's probably probably listening this, but he's he's a pretty tough guy, but he always taught me growing up like you got to learn how to face the tiger.
29:19
And this whole idea of like, you know, and by the way, when you go to Six Street's offices, literally, you get off the elevator, there's like a big tiger just staring at you.
29:26
There's three elevators and no matter what elevator you get off, it's like staring at it's it's staring at you >> a sculpture. >> It's huge. It's like five feet.
29:34
You got you'll come to our offices one day.
29:36
It's it's easy to have a culture when things are going well, but we the cultures are defined when things go wrong.
29:41
So, it's like when something goes wrong or there's a challenge, you go through different things.
29:47
Like most people are like pointing their fingers at other people or they're it's not my fault or they're running away.
29:52
At Sixth Street, we're like, "Good, let's go."
29:54
and we and we say let's face the tiger together.
29:58
Look the first thing is like defining values and culture and our investment philosophy which we spoke about but then for us like what's our genetic code we want to be an investor first firm you know we love investing we love this idea this process we go through we love meeting CEOs and management teams and you know particularly today where it was starting to happen back then like there's a little bit of asset
30:21
aggregation now it's a completely different thing our ethos and what we want to be like we're investors like if you talk to our partners the day we become not an investor first firm we're not here that's literally number one is like everything our every review process you know every person we hire is sort of designed around we want people that love to be investors so that multistrategy so this idea of like the world's dynamic
30:46
it's always changing laying that part out in terms of being a multi-strategy investing firm migrating the best relative risk units and return units thinking about that and then the last thing is just you know over overall you
30:58
know just that whole cross platform collaboration at scale because our business model doesn't work if we don't have that crossplatform collaboration at scale because otherwise information and relationship get trapped in FFTs and
31:12
silos like six we have 10 investment platforms all organically built >> you know all the people the the business leaders at each of our investment platforms they all talk to each other all the time you know we're all trying
31:24
to think about where where's the best place to think about again comparing sort of risk units and return units and obviously places where we can be value added partners the CEOs and management teams. >> What are the dimensions of facing the
31:34
>> What are the dimensions of facing the tiger?
31:36
Well, like if you were teaching a college seminar on how to do this, what would you tell the students?
31:42
>> Human beings natural reaction when there's a problem and you can see this in so many facets of life.
31:45
The first thing is to run.
31:48
First thing is to run particularly in our industry.
31:51
The second thing is like point like I've I saw this happen in other groups at Goldman.
31:56
I've seen this happen in different companies and I've have friends that have told me stories is like you know all a sudden there's a problem or there's a bad investment and all a sudden everyone starts to try to distance themsel from that maybe point the finger at them so it's not not them or some people get you know just they freeze they start to get hyperactive and they start to make rash decisions.
32:18
for us, you know, it's it's good. Let's go. Like, let's go.
32:22
We're going to do it together.
32:26
You know, there's one of our worst investments of all time.
32:29
It was a plastic bottle company.
32:31
And I'll never forget it was that it was the only time at Sixth Street, knock on wood, we got defrauded.
32:38
U we made a structured equity investment in a company.
32:40
I won't say which one, but a European company.
32:41
And uh I'll never forget, we were in the room in New York.
32:47
We're in a we're in like one of these rooms with like 30 people.
32:48
There was a bunch of different investors, a big company.
32:52
We figured out that they had like defrauded us and not only us, other investors.
32:57
And I'll never forget we went to PJ Clarks in New York. Is that the Hamburg?
33:03
>> And there were like five of us there and we went over there uh all from different groups because we all sort of we knew we didn't know there was like a real pro.
33:12
We knew things were not going as well and we basically went to PJ Clark's and we're like, "Holy what?
33:16
Like, what is going on here?"
33:20
And and we're like, "Okay, let's go.
33:22
Steven Plus, you're going to do this.
33:25
Sam Ditter, you're going to do this. I'll do this.
33:27
Born, you're going to do this."
33:28
And we just started doing we called in some other people.
33:31
We literally had a team of like 12 people, all different parts of the firm, like just doing everything we could.
33:39
And the reality is, you know, we ended up getting 50 cents on the dollar.
33:43
We should have gotten two cents and it was all because like it was just like game on.
33:47
And that's what we do now.
33:47
We when things are going well, obviously you don't have to to do that.
33:51
But again, what we what we always say, you know, that's what defines cultures and you have those moments of what are you going to do in this situation?
33:59
Are you going to do the right thing?
34:00
Are you going to come together?
34:02
Are you going to point your finger at someone else?
34:03
Like what are you going to do?
34:05
And our whole thing is like let's face the tiger together. and that's what we do.
34:09
>> I would love to tell the stories of the Spotify and Airbnb investments that you made because I I people know those names so it's, you know, very relatable, but also I think are good examples in the mid2010s of a little bit later with Airbnb of how you do business.
34:22
So maybe start with the Spotify one and just like tell that story.
34:26
>> So first of all, we love Spotify as a as a theme.
34:29
Uh, you know, there's a lot we we love live music.
34:32
Uh, I love love I grew up in Austin, Texas.
34:34
It's hard not to like live music when you grow up in Austin, Texas.
34:38
But, you know, great product, great unit economics.
34:40
But if you remember in 2016, there were starting to be a lot of commentary about threats from Amazon, Apple, and there was a little bit there was a cloud over uh over the company at that time.
34:54
A lot of people don't remember that.
34:55
So, there's a little bit of volatility in the markets, but more importantly, people were worried about the competitive threats.
35:00
And look when this came in as as an opportunity.
35:05
Obviously, we had a number of themes like, you know, technology businesses or software businesses that we thought had really good unit economics, this was like one of the tops of the list.
35:12
So, that was at a time when they were still going through they weren't producing cash flow.
35:18
So, they're still uh uh you know, still creating cash flow losses and you know, they needed they need some liquidity.
35:25
So, our investor group stepped in.
35:27
We gave them a billion dollar financing uh you know, convertible instrument.
35:32
You know, obviously spent time with Daniel.
35:33
It takes one second to figure out that guy is generational.
35:37
Um, the rest of the team that Daniel had put around him was great.
35:42
Barry McCarthy uh at the time was the CFO, really smart guy.
35:44
And then everyone we met on the management team, again, going back to what we talked about, Sixth Street, mission align, they had values, they had a culture.
35:52
Like it was very clear everyone was on the same page.
35:56
And by the way, it's sometimes in companies like you go in and you talk to the CFO and what's the vision and that's different than the CEO, different than the head of revenue.
36:04
And for them, it was just very clear that they were just dialed in.
36:08
They obviously had first mover advantage and at the time you obviously ended up being a great investment for us, but it was a little bit contrarian when when we made the investment.
36:18
>> Maybe say a little bit more about the security itself.
36:19
I'm just so curious how you because you can operate in any part of the capital structure or whatever.
36:23
like you said, I'm always curious like the actual way you did it.
36:26
>> So on that one, what they were trying to solve is at the time they didn't want to raise common equity because of the competitive threat from Amazon and Apple or perceived I should say it was ended up didn't turn out to be perceived because the market volatility they didn't want to sell equity because it was going to be at a lower equity than the last round.
36:46
So they were looking for more of like a a whiteboard solution and that's literally literally Barry McCarthy whiteboard what are we doing?
36:55
He had certain principles and we just tried to solve around those principles and that came up with it was a convertible debt instrument. It had a cap.
37:02
I think the cap was at $25 billion.
37:06
It had some a current yield component and then obviously the whole idea was to bridge them to get public.
37:10
bridge them to get public. So it was like a preipo security to bridge them through that and you know ultimately you know it it was successful and went way through the cap >> which created one a win solution for them because they got to their IPO which they were very focused on doing for a
37:26
whole bunch of reasons and for us it you know worked out but we just again it was you know it was almost like an engineering and whiteboarding and again a lot of times the ideas aren't we're giving them hey here's the holy grail idea it's from just talking, playing tennis, asking questions, and listening. And that's that's literally what we do.
37:43
And that's that's literally what we do.
37:45
That's what we train our team to do is how to how to ask questions, how to listen.
37:48
That's literally the process that we went to went through with the other investors.
37:52
>> Before we get to the Airbnb story, can you talk about Tao and the unique nature of this like massive pool of capital that you've created that can do whatever it wants?
38:01
Because I'm always fond of this idea that what you end up getting from an investor reflects their capital base.
38:06
um who it is, the duration, the terms like they then ship their capital base in the form of investments.
38:11
And so I think understanding TA and the overall structure is important.
38:14
When we were setting doing project Austin, which is our original business plan, we studied, we literally studied every GP like we had case studies on every single GP, what they did right, what they did wrong, and we also spent a lot of time on figuring out, you know, and I won't name them, some of the GPS that were big brand names and then just kind of faltered away.
38:32
faltered away. What we sort of concluded and this is a pretty obvious thing now but is that where people get into trouble as they raise larger and larger funds in a strategy that maybe it's the right time to raise a larger fund but maybe it's not it just it what's the opportunity set so they kept raising
38:52
larger and larger funds and we didn't want to have that pressure so the way we and this is getting to tal we wanted to design our architecture 6G which is different than any GP out there at least the ones that I as an investor first architecture and what we did is although
39:07
we have 10 investment platforms at Six Street each one of the platforms so think about our growth our growth business if we didn't have TA we'd probably raise an $8 billion fund because we want to you know we want to be able to do the larger deals but because we have TA we want to keep the
39:22
fund sizes to the level of the opportunity but we also want to be able to do the largest deals in the market I mean we want to be able to do the billion$2 billion we're one of the few handful of firms in the world that can consistently write billiondoll plus checks across asset classes. But
39:35
But architecturally, we keep our investment platforms funds at modest sizes.
39:40
So matched to whatever the opportunity is over whatever the investment horizon of that fund.
39:47
And then we have this vehicle called TAL on top which is effectively in our words was like the synthetic when we first raised it the synthetic Goldman Sachs balance sheet which could do anything.
39:58
Obviously with the same principles that we've had for the last 25 years when we started 25 plus years we started investing at Goldman.
40:03
But that gives us the ability in a growth deal.
40:06
Let's say a Spotify let's say the next Spotify deal comes and let's say it's a $2 billion deal.
40:10
Well, if we only have a $4 billion growth fund or $3 billion growth fund, there's no way we're going to be able to do that in the growth fund.
40:17
But by having a $30 billion fund sort of over the top sitting on across the entire firm, we have the ability to keep the fund sizes small but at the same time speak to the larger deals and then also anything that doesn't fit within any of our investment platforms, we have the flexibility to do that.
40:34
TA is flexible from asset classes.
40:37
So it's got everything in there, real estate, infrastructure, private credit, growth, mostly private, but has the ability to public.
40:44
It can go anywhere in the duration spectrum.
40:46
So it could do, you know, a two to three year investment, but we have investments in there like with Real Madrid.
40:51
We have a strategic partnership with Real Madrid and also a strategic partnership with FC Barcelona.
40:58
We're probably the only people in the world that actually have partners with, you know, Real Madrid and FC Barcelona because they trust us.
41:04
But we're, you know, those those extend further than 10 years.
41:08
So we have maximum flexibility.
41:10
You're unconstrained because again that's what we learned at Goldman.
41:14
The the the world is dynamic.
41:16
It's always changing and you need that flexibility because you never know at that particular time or this particular environment where's the best sort of opportunity is going to be.
41:25
We always want to have that flexibility to migrate to wherever the best opportunities are.
41:30
And that's kind of how we think about it.
41:32
But it's a really I think the most important thing about TAL is that it's consistent with who we are as a firm and our ethos about we want to we want to be an investor first firm. >> Okay.
41:42
Now let's go back to Airbnb because I think this is like a classic you know early co example of the returns to flexibility.
41:49
>> We were one of the few firms in the world playing offense at the beginning of co and the reason we're playing offense because we had a good defense and we had again very similar to what we saw in 0607.
41:58
We started to see those same dynamics going back to we talked about sort of tunnel vision of investing.
42:03
We started to see some of those same dynamics in 18 and 19.
42:05
You know, we couldn't have called COVID, but again, things were getting skewed in a sort of in a a wrong way.
42:12
So, we we protected the the portfolio.
42:15
We're in a position to play offense.
42:17
So, I'd say that's that's kind of the first thing.
42:21
The second thing is right when COVID hit, we went around and said like what are the best business models in the world that are most impacted by CO?
42:27
world that are most impacted by CO? And we did literally this is like think about 60 people across six street working weekends all day every day trying to figure out like where we what what what are our theme you know our 15 to 25 themes before co obviously we
42:43
threw that out the door and what are our next 15 to 25 themes and at the part of this was like one of the themes there was like best business models most impacted by co so Airbnb great business model if you remember at the time again another, you know, generational CEO and founder, Brian Chesy. There's a lot of
43:01
There's a lot of negative press on Brian Chesy at the time, which was, by the way, unfair and unwarranted, but there's a whole bunch of stuff, and this is all public going on at the board.
43:12
And that was that didn't deer us.
43:14
So, we literally started calling into, you know, calling into the board, people we knew on the board, calling in the bankers, like just trying to get anyway because we didn't have a pre-existing relationship with Brian, but we knew people that were around him.
43:28
And, you know, ultimately came in and that was an interesting time because that the thing that Brian did that was really smart.
43:35
He did a lot of things that were smart.
43:36
The way he operated through that and the first time we met him on a we were on like a Zoom call with like 30 squares or 25, I don't know.
43:43
He must had like he had a lot of advisors and despite all that he his values, the mission, the principles were all the same.
43:53
We talked about a lot of special humans today.
43:54
Daniel and Brian spey special humans, but um they wanted to fortify their balance sheet so they could play offense.
44:02
So we we and uh our friends over at Silverlake basically gave him a billion dollars um a billion dollar financing. It was in a loan form.
44:12
um this all public had some uh warrants attached to it.
44:15
Um and you know ended up getting them through the period.
44:21
Obviously things started to get better but the most important thing after that happened they were be able to start playing offense versus playing defense.
44:28
And I think the other thing it did is it really solidified I think what we already knew that Brian was such a great leader and he was able to get this done.
44:36
I'm curious again in your framework about what the unique units of risk were in that specific transaction relative to those returns.
44:42
>> First of all, we had to be right on the business model.
44:43
So look, we had a from afar, we wanted to make sure that the business model what it was.
44:49
Um the second thing is they wanted to get it done in seven days.
44:53
So we had a team at Sixth Street in Asia, a team at Sixth Street in the US, a team at Sixth Street in Europe, literally working >> handing off the work.
45:05
>> Handing off the No, no, really handing off the work. >> That's cool.
45:07
>> There wasn't a vaccine or anything.
45:07
So our view is for us it was as much about the fundamentals of the business as it was how much how much liquidity runway can they have?
45:17
And we had to make the bet with that liquidity runway that something, you know, there would be a cure, something would get better.
45:23
and basically gave him and they obviously had a lot of leverage to manage the business, but it gave them up to like four or five years of liquidity.
45:29
And our whole thing was like if we go to four or five our if we go to four if we if we go to three years of this like by the way this led to another theme on sports and live entertainment because we learned that we like experiences like humans like experiences.
45:44
But that was our analysis.
45:46
So the fundamental business analysis, make sure everything in the unit economics were what we thought.
45:51
Obviously the team making sure that the management team and the co were what we thought.
45:55
But the other thing it was really a liquidity analysis and then making that sort of you know not in the spreadsheet judgment which sometimes you have to do that was as much of a risk unit as anything is like the liquidity analysis to make sure that you know how how much how much runway do they have.
46:10
Do you try typically to boil things down to a simple bet like that so that you understand it in in simple terms and you're not like creating too much complexity where it doesn't >> well we like complex we like complex things but in terms of like the ultimate call I mean we do all the fundamental
46:28
anal you know fundamental analysis but ultimately investments come down to three or four or five things and we try to figure out I wouldn't say we simplify the overall investment but we try to simplify what are the three or four or five things that matter and we know those things inside out. We also
46:41
We also understand and this is the other thing investors do people only think about sort of explicit risks.
46:47
They don't think about implicit risk.
46:49
So we always try to put that lens on it.
46:51
What are the implicit risks that we're assuming away?
46:55
One of them in the case of Airbnb was like we're assuming away that uh that there will be a cure.
46:59
We can't all be locked in our houses forever.
47:02
We were willing to take that risk but we had to think about that because that was that was part part of the investment.
47:07
But ultimately it comes down to three or four or five things.
47:10
So I'd say yes, simplify things, but it it's really always comes down to those three or three to five things.
47:17
>> When you think about what success means for the whole firm from a return and risk standpoint, how do you think about it?
47:23
Like is the ultimate comparable for units of risk and return like the S&P 500 or something like what is there is there an explicit goal of like we exist to beat this thing or provide our investors with something more than this?
47:35
Look, our our investors have expectations, but ultimately we're an absolute return investor.
47:38
But sometime if you just take an extreme example, let's say that every single asset, this is every single asset class is flooded with liquidity.
47:47
Maybe that's not the right time to invest.
47:48
And sometimes the best best thing you can do as an investor is not invest.
47:52
But in terms of like returns, it really depends on the level of risk units.
47:57
You know sometimes like in 2017 we saw 20% 15 to 20% deals but they the risk was too far out on the risk spectrum.
48:08
So we said listen we're going to accept we that that's too much risk for even though that return is there and some people kept doing that and by the way some of it you know worked out well until co but we try to literally think about again the environment that we're in and what things are giving us and obviously you know also our investors have you know a set of criteria for each fund that we try to meet that expectation as well.
48:35
I'm very intrigued by the fact that some of the great go anywhere investors gravitate towards sports at some point.
48:41
Talk about the Real Madrid, FC Barcelona transactions, what you're doing, why you're involved in the what you like about that space.
48:48
>> This is a theme coming off of COVID live experience, sports and live experiences.
48:52
So 2020, everyone we obviously know what happened, but a lot of the investments in sport teams you weren't actually able to do as an institution.
49:01
So once COVID happened and all these big franchises, you know, their revenues went from to zero, like people weren't going people weren't going to games.
49:11
They had still had some of their media deals, but it went to zero.
49:14
So for the first time ever, they started to reach out to institutional partners.
49:18
Our whole thesis in sports is the biggest global brands in the world.
49:23
And our whole thesis in sports and we can talk about live entertainment is that these are historically local brands and because of technology because you can be on your phone and you can actually watch anywhere in the world.
49:35
You can be a Dallas Cowboy fan Australia and watch or Real Madrid fan in China and watch that whole local to global. That was our thesis.
49:44
So we literally just started through our relationships calling on the top global sports franchises in the world.
49:50
You know, now we've got, you know, San Francisco Giants.
49:52
We're partner with the Dallas Cowboys and New York Yankees.
49:56
The biggest brands in the world, FC Barcelona and Real Madrid.
49:58
We started calling on building relationships.
50:02
I mean, the deal with Real Madrid was they wanted to do business with them with us and we wanted to do business with them and it was literally again a whiteboarding exercise.
50:11
that structure we did with Real Madrid where we basically formed a joint venture with them or partner with them on their stadium renovation which is the Burnaba. >> Yeah.
50:21
So they that use of funds >> that was a use of funds but you know we formed like a real like a company that sort of owned the stadium assets but that was all again a whiteboarding exercise.
50:30
When they came to us they had an idea we had an idea and it was literally multiple whiteboard sessions to come up with that structure and now that structure you know a number of people have tried to deploy that structure elsewhere.
50:41
FC Barcelona again because of COVID that it impacted their financials they needed to do something.
50:48
Joan Leaporta again the Joan Laora in incredible human as well by the way as well as Florentino two people I've become friends with through the Real Madrid and uh FC Barcelona process they were trying to pull levers to basically be able to keep their roster together because their view was if we lose our roster dur like key components of the roster we won't be able to stay competitive and you can see how they've done since since then.
51:12
That's sort of how those deals came about.
51:14
So, if you think about like the stadium one as an example, there's this interesting push and pull like they know the money they need and for what um they're probably optimizing for, you know, giving up the least or finding great partners or whatever and there's some minimum return that you need to get interested.
51:32
>> What What is that like pushand pull process like at the whiteboard?
51:34
How do you communicate to them like this is what we ult are the things that we need to get there?
51:40
>> First of all, what are they trying to solve? >> Yeah. >> What structures?
51:42
They didn't want to do debt.
51:44
So, we had to do a a effectively an equity joint venture with them.
51:47
So, we come up with solutions.
51:50
We price those solutions.
51:53
We say, "Look, here's option A. Here's option B. Here's option C."
51:56
They say, "We kind of like a combination of option A and option B." Like, okay.
52:00
We go back to the drawing board.
52:02
We come back and we say, "Here's here's a hybrid of option A and option B," which is kind of what happened on that deal.
52:08
>> What are those levers like in those different options?
52:09
like what are the what are the key levers >> for every deal? They're different.
52:14
There's, you know, if it's a if it's an equity deal, obviously price, um if it's a a hybrid deal where it's convertible deal, there's a yield component and a a strike component.
52:23
If it's just a a private credit deal, it's just a yield component.
52:27
You know, sometimes when we're doing joint venture, we're we're like what are the value added operations?
52:33
In that case, we're one of our portfolio companies, Legends, is providing service to them that is helping them uplift their premium offering within the stadium.
52:40
So, we underwrote that and put our money where our mouth was on that.
52:44
So, in each deal, the levers are different.
52:46
And that's that's the thing.
52:48
It's a whiteboard because every deal we've got a toolkit, which we've been using for 25 plus years, but we can we feel like we can price anything that's not binary.
52:56
Stroke of the pen risk and then it's got to got to work for them.
53:01
or if it doesn't work for them, we go back to the drawing board and try to construct something that does work for them.
53:05
But again, in all these deals, you see it's like where it all takes place is the whiteboard and it's not what we initially proposed to them or what they initially propose.
53:15
It's that sort of partnership with, you know, CEOs and management teams.
53:19
>> So, in this case, there's a stadium that's mapped onto a bigger organization that produces lots of revenue and has lots of streams of revenue, etc.
53:24
Are you always kind of looking through to some underlying holistic whole thing and and figuring out how the joint venture that you own equity in benefits because the stadium by itself is just a thing.
53:34
So the ticket sales or something is the and the revenue associated with the stadium itself becomes the thing that the joint venture >> Yeah.
53:43
So in that in that case you got premium VIP suites, you have you know food and beverage but premium offerings.
53:50
Um, you have a museum like if if you've ever go to the Bernaba, there's an incredible museum of all the all the history. Yeah.
53:57
>> You know, it's the premium tickets, but in all these deals, >> there's different levers depending on what what it is.
54:03
In this case, it's a perimeter of assets, but it could be the whole company. Yeah.
54:06
you know, we did the uh a firm a firm, you know, Max Levchin's company, >> you know, we did a $20 billion partnership with them where we formed a joint venture with them so they could originate more assets and have more operating leverage.
54:20
So, that one again, my partner uh uh Mike Michael Dryden who runs our asset based finance business has known Max a long time gets on a whiteboard, they start mapping it out.
54:30
It's not like you can pull it off the shelf.
54:32
I mean, you all of most of our deals you can't just pull off a shelf. It's right brain.
54:37
That's why when I say one of our core principles that independent thinking stay away from the group think just think differently.
54:44
>> What is the process by which you develop the 15 to 20 themes at any given point in time?
54:50
>> At any one time we have 50 to 60 themes bubbling through six street because remember we have 10 investment platforms to figure each have a couple.
54:56
>> You each have you know five.
54:56
So they're constantly bubbling and then from that there's really good themes but they're not actionable.
55:03
A good theme is it's it's got to be it's got to be actionable.
55:05
So, so we sort of narrow it down to 15 to 25 things.
55:07
Where those come from, it's from, you know, sector knowledge.
55:12
We have 16 different sector franchise.
55:14
So, each of those sectors is doing primary research about their ecosystems, thinking about not only what is that ecosystem look like today, but what's it going to look like tomorrow?
55:24
So there's there's research, some of it's we've got a whole bunch of long-standing relationships with CEOs and management teams and they'll call say, "Hey, we're seeing this in our sector.
55:35
We're seeing this in our business or we're seeing this.
55:36
So, hey, that's interesting.
55:38
Let's sort of follow it up."
55:40
Sometimes we're looking at a company and investing in a company and we're looking at that's an okay business and then we look at the supplier to that company like, "Wow, that's actually, you know, the supplier is actually more interesting than the company we're looking at."
55:52
looking at." or we're looking at a company and this c one of the customers more interested and then the last thing is just sometimes like all of a sudden you start to see like three deals like data centers you start to see that and you're like what's you know what's obviously that's not a good example because we started doing data centers back in 2017 with with air trunk which we can talk about because that's a
56:13
company we started literally started with a white sheet of paper uh which is actually just got by Blackstone for I think I think $16 billion or something like that so it comes top down, bottom up and sometime we just have a view on something and we'll you know we'll start doing a bunch of you know primary research but a lot of it's through primary research through relationships but it comes from everywhere. It's not
56:32
It's not it's not one place. It's everywhere.
56:34
And that's the whole point of our firm is that because there's no silos and no fee dumps.
56:40
All those things get circulating up.
56:42
All a sudden we see a theme from our you know our power our power people.
56:45
We have team that all they do is power our our data comps people data communications and we see a comp from our real estate people.
56:53
And this is kind of just the what's going on with AI the constraint of power.
56:57
Putting all this under one umbrella like hey let's have you guys all work together on this.
57:00
What are your favorite like two or three themes right now?
57:04
The ones that personally animate you the most.
57:05
I >> we have 25 themes running through the platform right now.
57:09
So I'll just give you a few of them.
57:10
Um number one is you know partnering with big companies, big corporates to help advance their business.
57:18
So a firm we talked about you know thinking about partnering with asset asset originators and banks to basically help their origination help their uh their operating leverage.
57:29
So that's that's I'd say that's a big thing in our asset based finance business.
57:33
Uh our real estate business, you know, just again the idea of people getting older, wealth tech.
57:40
So we talked about the the wealth space.
57:42
Again, the percentage of wealth of private alternatives and wealth that's going to go up.
57:47
There's a whole bunch of services and technology around.
57:51
So I'd say wealth tech is one.
57:54
sports and live entertainment.
57:54
We've talked about we talked about the sports piece, but again, live entertainment, the one thing we learned during COVID is that people like experiences, they value experiences more, you know, as you know, from the younger generations.
58:05
I know for my kids, they could care less about material things.
58:08
They just want experiences.
58:10
So, that that is a big theme for us and you'll continue to s see us do more than that, but those are the bigger ones.
58:15
Given how big this has all become, assets, number of people, strategies, investments, how do you spend your own time on individual investments versus on people and on teams?
58:27
Like because obviously you love investing, you know, the investment by investment level detail, >> but there's way too much for you to like keep in your head at any one point in time.
58:36
So, what does your week look like?
58:38
>> My partners that run the 10 different investment platform, they're great investors. They're great investors.
58:41
investors. They're great investors. like they're like just being on when we first started the firm and investment committee I was very vocal probably 20 30% of the conversation you know again other maybe even in some cases more than that and each year that's gone by you
58:59
know people just keep growing and again these are great investors um and I just less and less and to the point now on investment committee I have views I have things but it's very rare where there's some issue or something we're thinking about or some way to create value in a
59:14
particular company where through the course of all the conversation investment committee I can just sit there because everything that I would have said or would have asked has already been asked and a lot of cases asked better than I would have asked and I'm on all the investment committees or
59:28
on the big investment committee some of the smaller deals I I don't get involved with but again I'm sitting there just watching my partners you know just listening I'm watching a tennis I'm watching David Vineyard it's kind of what David Viner used to do it's Yeah. >> Watching a tennis match and again not
59:42
>> Watching a tennis match and again not only listening to the partners but also some of the junior people or mid-level people sometimes the best best ideas come from them.
59:50
I'll get involved with one or two deals a year like a deal like Airbnb I was the you know the front person you know deal like Real Madrid with you know my partner Rich Botti I'll get get involved with.
1:00:01
So some of the deals like the bigger deals I'll step in and and and get actively involved.
1:00:06
But in general, we have a great team, not only with the partners, but the next generation, the next generation.
1:00:12
In terms of running the business, obviously, I think a lot about our strategic plan and executing the core strategic priorities.
1:00:19
So, I try to think about big boulders and there's, you know, five big boulders.
1:00:23
I'm always, you know, generally very related to our strategic plan.
1:00:27
I'm maniacally focus on that.
1:00:29
I got a lot of en excessive amount of energy as you might be able to tell.
1:00:36
What I try to do is first and foremost is keep the culture because without our culture, we don't have our culture is everything.
1:00:42
We don't have our investing business.
1:00:44
So I'm if I see something not working the way it is or some deal doesn't get passed to another group or some relationship doesn't do that in an unfettered way like it's so counterculture to like hive relationships or not call people back or not help people even though it's a deal not related to your particular sector.
1:01:02
It's so I'm trying to make that very counterculture.
1:01:04
If I see people like you know you know not acting which doesn't happen a lot like with ego which doesn't happen or something that's like not a team way I'll pull them aside and I'll be like that's not how we do it here and and I'm mania I'm like maniacal about that because again it's not just culture and abstract it's how we actually execute our our business model and deliver great outcomes for LPs.
1:01:29
And then the last thing I try to do is what I call toggle like a hawk.
1:01:33
So I got the right people in the right seats.
1:01:36
They bought into the culture. They're good investors.
1:01:39
They're good managers and leaders.
1:01:41
You know, they know what we're doing.
1:01:43
They know what we're trying to solve.
1:01:44
They're willing to work with other groups.
1:01:46
We have really good reporting.
1:01:48
So that's one thing I learned at Goldman is like just reporting reporting like just like communication and not fancy reporting.
1:01:54
So I always know what's going on.
1:01:56
And then obviously I talk to I talk to probably 20 or 30 people a day throughout the firm.
1:02:01
I'm constantly my average conversation is probably two or three minutes.
1:02:04
But I I literally talk to people all day all the time just to fill what's going on.
1:02:08
And if there's ever a situation where I need to go 10,000 ft deep, I'll go 10,000 ft deep, but then I try to go back up so I can s just see everything that's going on because if I'm 10,000 feet deep every day, I'm not doing my job.
1:02:22
And that's kind of how I think about it.
1:02:24
But those are really how how I spend my time.
1:02:26
But the reality is we have great set of partners.
1:02:30
A lot of the partners we've worked together for, you know, 20 20 plus years.
1:02:34
We have shared values like first principles on doing business the right way.
1:02:38
So a lot of those first principles are already in place because we've worked together for so long.
1:02:42
We all know what we're doing and we all kind of buy into the mission of what we're trying to do.
1:02:48
And I just again for me keeping the culture the way it is and making those type of behaviors that's life is too short you know that that that's one of the things I I just try to protect that with everything.
1:03:02
>> All these fascinating stats that are coming out of Paul put out that stat about the percent of companies north of 100 million of revenue that are private is like 93% or something like that.
1:03:09
It just seems like the the private markets and let's say the allocation um of an average high net worth, you know, wealth advisor client or something is 3%, it's going to 30% or whatever.
1:03:20
Um maybe they overshoot and that's the problem and then they have a liquidity crisis and that's the problem.
1:03:26
But I'm just curious for your commentary on it's amazing to me how few net new pure public equity investors I interview.
1:03:34
Like it's it's kind of a dying breed.
1:03:36
Well, it's kind of ironic when you step back and think about it.
1:03:40
You basically have all these public companies.
1:03:43
It's all going, you know, there's there's less public companies. It's going more private.
1:03:46
But now you have all these trends of people trying to take ETFs on private companies.
1:03:51
So, it's almost like a >> it's a little bit circular.
1:03:53
It's a little bit it's a little bit circular.
1:03:57
>> It's a little bit circular, but that that's that's really interesting when you start thinking about ETFs and now there's going to be trading, you know, private capital.
1:04:05
You start to see all this.
1:04:07
So all this stuff is a little bit circular, but it's a real dynamic and I think it's something that anyone that's thinking about investing and thinking about capital allocation needs to, you know, take real note of, you know, these dynamics because they're real dynamics.
1:04:22
And by the way, I think for some of the traditional sovereign wealth funds and and and pension funds, you know, they've had sort of unfettered access to GPS and I think that they've got more competition coming in from the wealth channel and insurance channel.
1:04:36
So, it's going to be interesting to see how all that plays out.
1:04:41
>> I think like anything, you know, the very best GPS are a lot better than the average ones.
1:04:45
This is the way the same the best companies are a lot better than the average ones.
1:04:48
It's an interesting point that they may have to compete.
1:04:49
The best LPS will have to compete for the best GPS in the same way the GPS do for companies.
1:04:55
>> It's starting to happen.
1:04:55
I mean, you're starting to see with some of the larger LPs that are the traditional sovereign wealth funds or pitch funds, they're looking for access.
1:05:04
They're looking for access because they're worried about access in the future because they see what's happening.
1:05:10
They see, you know, all this wealth capital coming in.
1:05:12
I mean there's not an earnings call where people aren't talking about sort of the growth of the wealth channel and how much money they're raising the wealth channel obviously seeing the insurance.
1:05:20
So I think access to your best GPS we're those conversations are accelerating because again ultimately everything's a choice of alternatives and I think that dynamic is an is is is the other part of this.
1:05:36
In addition to the the beautiful get over yourself, people that are over themselves spurs idea, are there other outside sources of inspiration that have really fueled your thinking?
1:05:44
Um people, mentors, um icons like Papovic, any anyone else that has really like cemented the way you view the world that we haven't talked about?
1:05:54
You know, when I got to Goldman Sachs, you I met Jody on the airplane and I showed up to Goldman Sachs.
1:05:59
I didn't know anything about finance.
1:06:00
And, you know, I remember going to the first, you know, analyst session with all these like super smart kids and, you know, from the best schools, all 4.
1:06:11
0's and, you know, just super, you know, just super intimidating.
1:06:17
And uh I had something very fortunate and also one of the most impactful things in my professional career happen is that when I we first started there was a bank called Amresco in in Dallas, Texas and they were failing and they needed to raise liquidity.
1:06:34
So I got tasked to basically lead the evaluation of buying a portfolio of loans from a group called RTV Ventures. RTV Ventures.
1:06:48
Uh, so as part of Amresco is basically a bunch of loans to radio and TV companies.
1:06:55
>> And back then, this is before like direct lending or private credit.
1:06:57
It was because there was a lot of asset value to the radio stations and TV stations, but they had no cash flow.
1:07:04
A traditional bank couldn't, you know, couldn't finance them.
1:07:09
So what these guys had done, this is a little pocket in this big bank called Amresco.
1:07:13
They basically had gone out and given these companies first lean loans at like 15% coupons and warrants for 10 to 30% of the company which was you know you can imagine it's breaking my brain and they called it you know stick value but the you know they would take a radio station a TV station where the stick value where these things traded they were sold all the time of say $200 million and they would lend like the first $50 million.
1:07:42
So from their perspective, going back to sort of risk units, they were the first 25% of the value of the company in a first lean loan, which at the time just it kind of broke my brain.
1:07:54
And the guy who ran that was a guy named Steven Plus.
1:07:56
And Stephven Plus um who's now Six Street's chief risk officer, he's about 15 years older than me.
1:08:03
We ended up buying the portfolio um and it's about $400 million portfolio and I was basically in charge of the portfolio and Stephen's this slow talking Texas guy who you meet him and you're like this guy is he going to get out the Senates or not and but he's one of the smartest guys out there and the fact I got a job at Goldman Sachs is just pretty pretty pretty lucky.
1:08:25
Uh and he basically for a year in ch really two years taught me finance, taught me investing, taught me about risk units, taught me everything.
1:08:40
Taught me about how to go through documents.
1:08:42
And literally I I I look back to it now.
1:08:44
He was 15 years older than me.
1:08:47
Here's some kid comes down from even though I was Texan, I was coming down from a you know a New York firm.
1:08:53
Now, I still had a little bit of my southern accent back then, which got beat out of me by all my friends in college.
1:08:59
And um you know, and here's this guy literally answering every every every week, every day 500, you know, just question after question.
1:09:09
I used to have these yellow notepads like this, but they were bigger.
1:09:11
And I literally would write down my 10 questions for Stephen Plus for the day, and I'd literally call him and ask him.
1:09:19
And literally that whole process of him like teaching me about investing and how to think about risk, how to think about return and just all that, it literally led to what made my career the start of my career at Goldman.
1:09:31
Um where I started running businesses when I was like 25 years old.
1:09:36
years old. Um because that that whole idea with with Stephen is you know from from that I said I I started to say like wait a second I know you're these are really high rates of return and when I started to actually understand what it was but couldn't you sort of take other
1:09:53
businesses that are good businesses that banks for whatever reason won't lend to because they've got a very specific credit box and still earn you know a good return but not that high and then have a much bigger TAM and could you do that in the middle market? And I
1:10:07
And I technically wrote it, but Stephen helped me write it.
1:10:12
Wrote a business plan when I was like 23 or 24 years old.
1:10:13
And that business plan was basically to do middle market direct lending, which at the time Goldman Sachs had never done, >> first of all, direct lending didn't exist. It wasn't a word.
1:10:25
And Goldman Sachs had never done anything in the middle market.
1:10:30
>> And that's when, by the way, this is when I first met David Vineyard.
1:10:31
But I just said look we this could be new clients for Goldman.
1:10:35
clients for Goldman. This could be again we could go out instead of earning a you know on that portfolio they were like 30% returns on first le maybe it's like 10 to 12% or 13 or eight you know something less than that but again doing something outside of credit box but on
1:10:52
good assets or good businesses and that business at 24 years old I went to present to Hank Pollson Lloyd Blankfine David Vayner the executive committee and that was the first time that Goldman ever got in the middle market is through that um by the way that business is now
1:11:09
I think it's over you know Julian Salbury one of my partners told me it's over $50 billion now >> wow >> but it all happened because this guy Steven plus >> took the time >> took the time answered all those question would have never happened and by the way most people in that situation
1:11:24
would have here's some kid coming down by the and and and that just taught me about developing people and that taught me the importance of development because I saw what happened to me and that's always put so much emphasis on developing the younger generation. You know, age is just a number. It's
1:11:39
You know, age is just a number.
1:11:39
It's like get people that buy in the culture, work hard, that are intellectually curious, ask questions.
1:11:46
But that whole thing and then that really changed everything.
1:11:50
But it really taught me a commitment to developing.
1:11:52
I mean, some of the, you know, a couple of my partners, Bornea Mogbell and Matt Dillard, they were associates when they joined six on the first day, and I've been working with them every day since.
1:12:05
And I love I love doing it.
1:12:05
It just taught me to do that.
1:12:07
And we try to do that across Six Street.
1:12:09
By the way, today whenever there's someone who I think at Sixth Street and people know they are that I feel like is could needs development or could be better at reaching their potential.
1:12:21
Guess who I had him work with? >> Steven Plus. >> Pretty amazing.
1:12:26
>> It's a it's incredible.
1:12:26
But that that was one of the most selfless selfless acts and it changed changed my life.
1:12:30
My friend Ravi Gupta has my favorite framework for this development concept which is uh demanding and supportive is like the orientation he wants to have towards people.
1:12:40
How do you think about the framework for developing people and talent?
1:12:44
>> That guy's a smart guy that that podcast he did with him.
1:12:47
That was I had like 20 people.
1:12:49
I thought that was a great one. He's a super talented.
1:12:50
Look, for me it's it starts with caring.
1:12:53
You have to authentically care for that person and you have to authentically care for their development.
1:13:01
development. Like to me like that's one two three and what I always tell you know all our leaders all the time is like first of all you got to care and I you got to be proactively as part of your day and part of your week and part of your month thinking about how do I develop this person what are their strengths what are the weaknesses how do
1:13:19
we do that and by the way that's why we have this personal business plan that we make everyone do but it's not only we have everyone in the firm do it part of the process not only have them do it but part the other part of the process is having them go to their leaders and really sit down with them to sort of identify that. So for me, it's like
1:13:33
So for me, it's like being intentional.
1:13:34
It's being deliberate, but you got to have a plan because that you can't do it in an abstract.
1:13:40
You got to be very explicit.
1:13:42
And the way I think about the personal business plans is every year you have a personal business plan.
1:13:45
Everyone's the format of everyone's personal business plan the same. The content's different.
1:13:51
You have five things or three things on your listing to improve.
1:13:52
You knock down 70% of them.
1:13:55
That's part of your toolkit.
1:13:57
You leave the ones that you didn't knock down for the next year.
1:14:00
those those go to the next year and then you add two more.
1:14:02
You do that for 20 years, you're going to have a and you're deliberate about it and you keep notes like you do on the yellow notepad and you're intentional about it.
1:14:10
Those people by the time they get to 20, they're going to be very they're going to be optimizing their return on time because they've such got such a wide toolkit uh to go through.
1:14:20
And by the way, the correlator to that is allows them to spend more quality time with their family and their kids.
1:14:25
their family and their kids. I think too many oftentimes people try to skip steps and the whole purpose of these personal business plans is the intentionality to really knock them off and be deliberate but it's not just you're not on an island you're in partnership with whoever your leader of that particular investment platform is and that's how we think about we literally run that
1:14:44
process every over and over and again we say look shoot high because if you're if you're doing a 100% of your plan of what you're trying to work on you're probably not aiming high enough but try to knock down 7 75% and keep adding to it and you'll wake up one day and your future self will thank you because you get to spend more time with your kids and go to all their sports games like I do today. >> Is the retention like crazy high at
1:15:07
>> Is the retention like crazy high at Sixth Street?
1:15:10
>> We've never lost a partner at Sixth Street. >> Crazy. >> Never lost a partner.
1:15:14
>> And think that's all culture.
1:15:15
>> Maybe after this podcast we will, but because all you got so many listeners, but u and you could argue, you know, may maybe we should have lost some.
1:15:22
You know, maybe there's a criticism there, but we just try to make it an envir there's different forms of compensation.
1:15:30
I think sometimes in our industry, everyone thinks about one form of compensation, which is monetary, but we always talk about there's like who you work with compensation.
1:15:37
There's like what's your culture like compensation?
1:15:42
There's like are you getting developed compensation?
1:15:43
You know, there's opportunity.
1:15:45
Do you have sort of white space in front of you compensation?
1:15:47
We try to take a more holistic view to that and we coach that.
1:15:51
And look, people like to work there and we don't have you know, we don't we don't we don't tolerate it.
1:15:58
Will that pop up every once in a while where someone gets really you two people get intense and then disagree?
1:16:03
That happens as long as it's like it's like with respect and dignity and again people getting intense but that's not what we're doing because again our business model is predicated on people working together not having fems and silos.
1:16:16
So they all work together share information share relationships that's our business.
1:16:19
I mean that is literally the essence of our business model.
1:16:22
That's why we're so focused on it.
1:16:25
>> Say more about this concept of future self.
1:16:27
>> When I grew up my I was very fortunate that my parents you know we didn't grow up with a lot but they always spent a lot of time with me. >> Yeah.
1:16:35
>> They were always present at all my sports games.
1:16:37
They were just always there.
1:16:39
So, you know, when I started, you know, working at Goldman, I had that in my mind from literally from the be vividly in my mind.
1:16:50
It's like whenever I had kids, I didn't know when, >> I wanted to be able to be very present with them.
1:16:56
And my my idea was and it goes back to those yellow piece of paper is that if I build the biggest toolkit possible, if I invest all the time now prior to when I when I when I have kids and a family and a wife that I will be able to spend maximum time with them.
1:17:13
>> So that was I had a bunch of motivations. There's a bunch.
1:17:15
But that was one of the things is like I was always thinking about my future self.
1:17:20
Not from a business perspective or career perspective, but that I could spend more time with my kids whenever that these kids don't exist by the way.
1:17:29
So this is just like a future self.
1:17:29
And my idea was like it's all about return on time because investing is overwhelming.
1:17:34
You could literally spend >> there's so much it never ends.
1:17:37
There's like you could spend all day on you know half a deal. Like it never ends.
1:17:41
So my idea is like I need to be able to be the most efficient at return on time.
1:17:47
The way I want to be efficient at return on time, sift through, know what know what you like, have the biggest toolkit possible and I got to build that toolkit as much as possible.
1:17:56
That's why I started doing my own personal business plans when I when I was, you know, just started in the business.
1:18:01
But it was always with the mindset of my future self.
1:18:04
So that when I got to that point, I could be a good husband, be a good dad, and be present like my parents were.
1:18:10
So that's what whenever I talk to you know our incoming associates or you know new people at the firm I always talk about it's like think about your future self like yeah go have you got to have fun but the more time you put in now when you don't have you know a spouse and kids you're going to basically you're going to basically set yourself up where you can spend more time.
1:18:30
I think some people, you know, mortgage the future a little bit by having, again, you got to have fun, but too much fun where you could have a little bit less fun and spend more time building your toolkit so you could spend more time with your family when it happened.
1:18:44
And that that was kind of always a motivation for why I was so focused on those yellow notepads and just that future self and that that moment.
1:18:52
Again, just to be clear because I have friends probably listen.
1:18:54
Just to be clear, I did have fun, but I was also like thinking ahead about that future self.
1:19:00
>> If I apply future self to Sixth Street, to the whole thing, >> and you think five, 10 years hence, something like that.
1:19:06
What do you hope it becomes that it is not yet?
1:19:10
>> I want us to stay an investor first firm. I don't care.
1:19:11
Other people in the industry want to be deployment factories.
1:19:16
By the way, there's nothing wrong with that. All good.
1:19:18
But that's not what we want Six Street to be. That's number one.
1:19:23
Number two is culture is everything to me.
1:19:28
There's two tests I'm going to always run.
1:19:31
One test is that we have an offsite every year in Austin, Texas.
1:19:35
Um where the whole firm comes and I go walk around, I meet a bunch of people and I'm like, did I meet any a-holes?
1:19:42
Did I meet people that, you know, don't ask questions or just talk about themselves?
1:19:46
And so far, we're undefeated. We're like 16 and0.
1:19:49
But the other test I'm gonna run is when I'm an old man and 80 years old and I come back in the firm and I sitting in a random investment committee or a random meeting like is that still true?
1:20:01
And to me that's the ultimate test and would I introduce the people then to my family to my grandkids or my kids because that's the ultimate test.
1:20:10
Like that's a test and we always talk about that when we're interviewing people like would you would you first of all are they over themselves yet?
1:20:17
Okay, which again in our industry there's a lot of people not over themselves yet.
1:20:21
Um maybe maybe they'll listen to this and get over themselves.
1:20:24
Um that's a whole other topic.
1:20:27
But um but also like what do you introduce into a family member?
1:20:29
And that to me is more important than anything is like maintaining that and wherever that journey takes us um you know that's where it will take us.
1:20:40
But again for our business we're an investing business.
1:20:44
Those things are what make up us d trying to drive what we believe fundamentally religiously because we've been doing it for 25 plus years great great outcomes for our LPS and if we can do that and ultimately you serve your customer which in our case is our LPs our people we do all those things that's
1:21:04
where it will take us to be clear we have fiveear strategic plans and very specific objectives but that's what I think about on the horizon and I've you know I've shared that like I said I've shared that broadly with our entire firm because it's how I think about it. >> My friend Boyd Vardy has this great
1:21:17
>> My friend Boyd Vardy has this great phrase which is we don't know where we're going but we know how to get there. >> Yeah, I like that. I like that.
1:21:22
>> Which sounds a little >> And you got to be able to adapt because you know think about like software engineers like every mom and dad in Palto you know three years ago was telling their kids they had to do software engineers and now none of them are telling them not to do software.
1:21:36
Things can change and you got to be adapting.
1:21:38
We're headed into >> you know we're we're headed into interesting times here. >> Yeah.
1:21:42
Well, I'm fascinated by what you built.
1:21:44
It's so interesting and fun to hear all about it, its history and its unique aspects and where it's led you.
1:21:49
It's so such a fantastic conversation.
1:21:52
When I do these, I end with the same traditional closing question for everyone.
1:21:55
What is the kindest thing that anyone's ever done for you?
1:21:58
>> I think I'm going to have to say that Stephen Plus, you know, just being 15 years older than me, taking time to answer all my questions.
1:22:05
By the way, in a lot of firms, I think a lot of they would have gone around me and said, "Hey, what are you doing?"
1:22:11
And he took the opposite appro approach.
1:22:14
And that that's that's the kindest thing anyone's ever done for me and probably the most impactful.
1:22:21
I wouldn't be where I am today without him. >> Amazing.
1:22:25
Thank you so much for your time. >> Thank you.