S2 | Episode 6: Private Equity Needs a New Head of PR with Pete Stavros and Daryn Dodson

Summary

Capital Decanted Season 2, Episode 6: "Private Equity Needs a New Head of PR"

Hosts: John Bowman and Aaron Filbeck
Guests: Darren Dodson, Founder and Managing Partner of Alumin Capital, and Pete Stavros, Co-Head of Global Private Equity at KKR
Release Date: February 25, 2025

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Introduction: Challenging the Private Equity Narrative

John Bowman opens the episode by highlighting the pervasive and often negative perceptions surrounding the private equity (PE) industry. He underscores the necessity of addressing these stereotypes head-on to foster a more balanced and truthful understanding of PE's role in today's economy.

John Bowman [02:35]: "It's not something we can ignore. Like it or not, private equity touches all of us now."

The Current Reputation of Private Equity

The hosts delve into the harsh criticisms leveled against private equity firms, referencing sensationalist media portrayals and derogatory terms such as "vultures" and "asset strippers." John Bowman cites Alex Blasdell's balanced piece in The Guardian to emphasize PE's significant influence on various sectors of daily life.

John Bowman [05:45]: "Private equity touches all of us now. It's the water in which our lives are swimming every day."

Understanding the Criticisms

Aaron Filbeck elaborates on the primary criticisms of PE, including excessive leverage leading to bankruptcies, asset stripping, and a "growth at all costs" mentality. He presents data suggesting that PE-backed companies account for a proportionate share of bankruptcies and discusses high-profile cases like Toys R Us to illustrate these points.

Aaron Filbeck [29:30]: "Sale leaseback strategy was employed. However, the cash that was raised... ended up just funding a dividend recap."

Balancing the Narrative: The Positive Side of PE

John Bowman and Aaron Filbeck introduce the episode's central theme: showcasing positive case studies where private equity has been leveraged for social good. They emphasize the importance of moving beyond negative stereotypes to highlight genuine efforts within the industry to drive positive change.

John Bowman [06:14]: "The extremes are doing no one any favors. Performative tactics or heads in the sand further divide and deteriorate a much-needed public discourse."

Guest Insights: Darren Dodson and Pete Stavros

Darren Dodson – Combatting Racial Bias in PE

Darren Dodson discusses his work with Alumin Capital, focusing on addressing systemic racial biases in venture capital. He references a Stanford Spark study revealing that only 1.4% of $82 trillion in assets under management (AUM) were allocated to funds led by people of color, despite their constituting approximately 30% of the U.S. population.

Darren Dodson [61:02]: "This is just a fraction of the population. So this broadens the issues not just from a social and moral issue but also a fiduciary issue."

Dodson emphasizes the economic impact of ignoring diverse talent, citing that bias leads to missed investment opportunities and broader financial market inefficiencies.

Darren Dodson [63:36]: "If you think of other prosperous ecosystems... our financial ecosystem, on the other hand, is contaminated."

Pete Stavros – Promoting Employee Ownership

Pete Stavros shares his initiative, Ownership Works, aimed at broadening employee ownership to foster wealth creation and improve company cultures. He narrates the success story of Overhead Door, where employee ownership led to significant wealth distribution among workers upon the company's profitable sale.

Pete Stavros [73:16]: "When KKR bought Overhead Doors in 2015 and dispersed ownership to all employees, it resulted in payouts of $360 million to $800 employees."

Stavros highlights the broader community benefits of employee ownership, such as enhanced tax revenues and stimulated local economies, demonstrating how equitable wealth distribution can lead to sustainable economic growth.

Pete Stavros [74:32]: "Higher tax revenue, better schools, new businesses, dignified retirements... it leads to a more resilient economy and faster economic growth."

Regulatory and Governance Considerations

The discussion shifts to the role of regulation and governance in shaping the PE landscape. Both hosts acknowledge the need for updated regulatory frameworks to ensure transparency and fairness, referencing past regulatory shortcomings and their impact on public perception.

John Bowman [05:30]: "A comprehensive new rule book is long overdue... It's really about ensuring that there's this inherent understanding and deep appreciation by the private equity industry."

Combating Negative Perceptions: Strategies and Recommendations

Darren Dodson and Pete Stavros offer strategies to improve PE's public relations and overall reputation. They advocate for genuine, impactful initiatives over superficial PR maneuvers, emphasizing authenticity and meaningful contributions as key to reshaping the industry's image.

Darren Dodson [76:04]: "If it's not genuine, people will smell that in a second and you're going to get hit with greenwashing allegations so quick your head will spin."

Pete Stavros [77:59]: "Cynicism is a tool of the status quo... Let's all try and be open-minded."

Conclusion: Changing the Narrative through Action

John Bowman concludes the episode by reiterating that altering the private equity narrative requires consistent, genuine efforts to demonstrate the industry's potential for positive impact. He commends Darren Dodson and Pete Stavros for their pioneering work and encourages listeners to support and amplify such initiatives.

John Bowman [82:32]: "You change it by actually changing the nature of the industry. And it fits the whole reputation... by actually changing things and the social value, look, that should be enough."

Key Takeaways

1. Addressing Bias: The private equity industry must actively combat racial and gender biases to unlock untapped investment opportunities and enhance overall economic health.

2. Employee Ownership: Initiatives like Ownership Works demonstrate how fostering employee ownership can lead to substantial wealth creation, improved company cultures, and community benefits.

3. Authentic Change: Genuine, impactful actions are essential for improving the industry's reputation. Superficial PR efforts are ineffective and can lead to accusations of greenwashing.

4. Regulatory Evolution: Updated and comprehensive regulatory frameworks are necessary to ensure transparency, fairness, and sustainability within private equity.

5. Economic and Social Integration: By aligning private equity practices with broader social and economic goals, the industry can play a pivotal role in fostering inclusive and resilient economies.

Notable Quotes

• John Bowman [06:14]: "The extremes are doing no one any favors. Performative tactics or heads in the sand further divide and deteriorate a much-needed public discourse."

• Darren Dodson [61:02]: "This is just a fraction of the population. So this broadens the issues not just from a social and moral issue but also a fiduciary issue."

• Pete Stavros [73:16]: "When KKR bought Overhead Doors in 2015 and dispersed ownership to all employees, it resulted in payouts of $360 million to $800 employees."

• Pete Stavros [77:59]: "Cynicism is a tool of the status quo... Let's all try and be open-minded."

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Final Thoughts:
This episode of Capital Decanted provides a nuanced exploration of private equity's complex reputation. By featuring thought leaders like Darren Dodson and Pete Stavros, the discussion moves beyond superficial critiques to highlight actionable strategies for positive change. The emphasis on authenticity, governance, and inclusivity serves as a blueprint for the PE industry to reinvent its public image and contribute meaningfully to society.

Transcript

[Aaron Filbeck]

Foreign.

[John Bowman]

Welcome to Capital Decanted. In this show, we say goodbye to tired market takes and superficial sound bites. Because here, instead of skimming the surface, we dive into the heart of capital allocation, striking the perfect balance and exposing the subtleties that reveal the topic's true essence. Prepare to have your perspectives challenged as we open up the issues that resonate with the hearts and minds of those shaping capital allocation. We've enlisted the wisdom of visionary leaders in the industry. And just like a meticulously crafted wine, we'll allow their insights to breathe, unfurling their hidden depths and transforming our understanding. This is season two, episode six of Capital Decanted. Private equity needs a new head of pr. I'm John Bowman. And I'm Aaron Filbeck and we are your hosts. As always, a huge thank you to our returning title sponsor, Alternatives by Franklin Templeton. Obviously, we're so grateful again to have them back to partner with us for this season two. They've got over 40 years of alt investing and 260 billion of AUM. And their specialist investment managers have expertise across six different asset classes. Real estate, private equity, private credit, hedged strategies, venture capital and digital assets. And of course, all of them operate with the client first mentality that has always defined Franklin Templeton to help prioritize investment outcomes. So thanks so much as always to our friends and the team at Alternatives by Franklin Templeton. All right, Aaron, why in the world should we or the broader public care about the public relations, the reputation, the likability of the private equity industry? I mean, in one sense this is one of those scab picking topics. Definitely not good for ratings to say the least. So in your mind, before I give my view of this, why are we doing this?

[Aaron Filbeck]

Yeah, maybe I'll take the pie in the sky altruistic answer here, but I think it's important because private equity, private capital has just become a larger piece of our lives and society. And because of that, because it is so ingrained in all parts of our economy and all parts of our day to day living, I think there is a responsibility to do things right and we can wait for regulation to make that decision for us and they will. As things do go wrong and there are mishaps that do occur, or we can self govern to a large degree and try to do things the right way as this becomes a bigger piece of the pie moving forward. But what about you, John?

[John Bowman]

That's exactly where I was going because I think on the one hand you could ask the rhetorical question, does it really matter whether this industry is some collection of greedy sinners or enterprising saints and we'll toggle and opine a bit on that. They certainly don't need our help. Let's just be honest. And I mean, after all you could ask, isn't this just a fortunate few that live and operate in a parallel world, figuratively, literally. And I think, as you've just alluded to, Aaron, that's not true any longer. It's not true. It's not something we can ignore. Like it or not, private equity touches all of us now. It's the water in which our lives are swumming every day. Alex Blasdell, who is a journalist, I hope I got your last name pronunciation right. Alex penned a fantastic and I think frankly one of the more balanced pieces I read in preparation on this. He wrote for the Guardian In October of 2024 an article called Slash and Burn Is Private Equity out of Control? And by the way, I stole from Alex this idea of the sinners and saints phrase a moment ago. But Alex went on to describe, as I just mentioned, how PE with owns our lives now. He says, quote, it's not just that hundreds of millions of us interact with at least one private equity owned business every day. More and more people, especially the relatively poor, may live almost their entire lives in systems owned by one or another private equity firm. Financiers are their landlords, their electricity providers, their ride to work, their employers, their doctors, their debt collectors. Private equity firms and related managers increasingly own the physical as well as financial world around us. All of our lives are now part of their investment portfolios, end quote. So at a minimum, it's important we understand the role of the industry as this form of capitalism, as Alex has just described, this form of finances having an outsized influence on commerce, economics and the power dynamics as we've seen very publicly in the last few months in our society and our politics. But just as importantly, given the ubiquity of private capital today, we want to take a shot at cutting through the what I would call the playpen polarization of the industry to try to find some balanced truth to what is really happening here. That's what this episode is devoted to. It's addressing the seemingly rudderless, reactionary and definitely schismatic emotion that has defined what I would call the private equity brand in the public square and to try to understand how and why we got here and whether there is, if possible, a neutral or more objective pathway out of the current status quo. Now, listeners, decanters I mentioned yesterday To Aaron, as we were talking through final prep here, that this introduction was likely to offend everyone. I don't mean to. That's not why I'm here. I realize that throwing penalty flags all over the field is not going to win me any popularity contest, but Kai is here to advance the capital market system so it's more aligned and works for everyone as we talk about often and capital. Canton was always envisioned to provide a forum for long form conversation in a noisy world of sound bites and mudslinging. So we'd like to be the middle ground here. That's what our hope is. We're really here to challenge, respectfully but honestly, the extreme voices on both sides that have created what I would call such an emotional chasm that it blinds our ability to have an adult discussion about this because we talk around each other and so forth. You know how that story goes. So let me give you a few examples of these extreme voices. Some of the common descriptors and insults I read daily of the private equity leaders consist of vultures, asset strippers, a scourge, a plague of locusts. I don't know about you, Aaron, but these are probably not meant to be Terms of Endearment, I don't think.

[Aaron Filbeck]

I wouldn't say so. No, not at all.

[John Bowman]

In no context is that a compliment. Further, you would think two recent books, like in the Whole Industry to the famous pirate Blackbeard. I mean, one was entitled Plunder Private Equity's Plan to Pillage America, that was by former private equity prosecutor Brendan Ballou. And the other, these are the Plunderers How Private Equity Ruins and Wrecks America by New York Times columnists. So pretty direct in their thesis. I'm not sure you even need to read the book to see where they're going. So this is no longer the profiteering, the rent seeking, the high financiers of lore from the barbarians of the gate of the 80s. But this dramatic vocabulary has escalated to resemble something of, I don't know, an Assyrian war machine of marauders that would pillage and terrorize across the Fertile Crescent in the first millennium bc. Elizabeth Warren. Just to continue the theme here, the fiery Massachusetts senator has famously pushed her Stop Wall Street Looting act multiple times. I think it's resurrected again quite recently. But the most sensational of these narratives. Aaron, I'm not sure you saw this. It made me laugh out loud, honestly. It came from a freelancer who wrote a piece for the Nation, which is not a rag that I read very often in 2018, and I just need to read this so that you can all share in my strange joy here. The writing is outstanding, her use of prose is fantastic, but the level of hyperbole is simply off the charts. So here you go. Quote There are many, many different versions of the Vampire's tale, but in the most time worn Eurocentric telling, vampires are evil's upper crust beautiful blue blooded aristocrats draped in velvet, exuding idle menace. Dracula and his cursed kin are the undead 1% and act accordingly, terrorizing villages, murdering peasants, siphoning off others lifeblood and turning up their aquilene roses at the slightest hint of descent. Vampires, modern day counterparts are parasitic new money, vulgar, ugly and smug. Their wrists are cluttered with hideous statement watches, their torsos clad in power suits or worse, Aaron upmarket hipster threads. Some call them vulture capitalists after the great birds who feast on carrion. While catchy, this term doesn't quite fit, these monsters do not focus on the dead. They go after the living. They run hedge funds, trade stocks and manage private equity firms. Flush with generational wealth but always hungry for more. Instead of hot blood, these fancy fiends hunt for cold cash and much like their spiritual predecessors, care little for how others must suffer and their pursuit thereof. Unlike the vampires of old who secreted away the evidence of their cruelty in a dungeon, this new generation commits their plundering horrors in the open. End quote.

[Aaron Filbeck]

Wow. Poetic.

[John Bowman]

You've got shivers. I feel like we needed dramatic music to read that.

[Aaron Filbeck]

This is like a campfire late at night. Scare the kids before they go to bed?

[John Bowman]

No, Exactly.

[Aaron Filbeck]

Beautifully written as you said, wonderful writing.

[John Bowman]

But can we just say, jokes aside, unequivocally caricaturing an entire industry, an entire group of people. The name calling, the grandstanding, the clickbait articles. They're unhelpful at best. I would even say naively cruel at a minimum. But I'm going to get back to this shortly. The damage that this type of language does. But here's the thing and here's where balance is going to be very important for us here at Capitol Canton why we felt it was so important to address this topic head on. The private capital industry does need serious attention and a significant facelift. Some of it is in the self perpetuating structures and incentives that richly reward the few, leaving behind the many and some of it the near. Shake your head, fanning the flame behavior and quotes from the industry. Baloo, I just mentioned him. He's one of the authors we noted earlier, calls this the new Gilded Age, which I really liked that has gone hand in hand with the growing income and wealth inequality in our country. You could say the wealth gap has widened to a wealth canyon in the last several decades. The standard of living for middle class Americans has continued to decrease as real wages have stagnated for over 40 years, while the share of our nation's wealth going to the upper echelon has skyrocketed. And no one with a pulse and any moral compass thinks this is a good thing for the fabric of any society. And further, as we covered at length in our private market regulation episode last year, the industry and their trade groups really whiffed last year at an opportunity to find a middle ground with the SEC on a long overdue reform package for private equity. These were common sense modernizations that would have increased transparency on fees to investors, tightened GP's fiduciary duty and mitigated preferential treatment of certain LPs. And as we stated in our public support for the spirit then of what was called the Private Funds Advisor Rule, we didn't agree with everything in there and we don't think the original version had it all right. But we must be intellectually honest. We are no longer living in a world where these exemptions and apparatus and machinery for private investment companies imagined and written 90 years ago can in good faith be deemed the right guardrails for today's marketplace. So despite the critics, this was not regulatory fiat or overreach, but simply a necessary extension of regulations based upon what has been major market evolution over the last century. Much to the compliment of many of these players. They have deserved some of this success. We're simply asking that it works for everybody. So a comprehensive new rule book is long overdue on behalf of the greater good and the optics of what looked like a playground skirmish in an unwillingness to subject themselves to appropriate regulation was just poor judgment in our view. So additionally, and I think, Aaron, you're going to cover this in more depth when you have a growing number of very public horror story case studies from institutions that are what I would call providing basic human dignity social services, hospitals, nursing homes, prisons, low income housing. There's something wrong and these examples should bother us whether we want to argue, and I think both versions of this argument are legitimate, that they might be massive exceptions or systemic issues in PE portfolio companies. Either way, we shouldn't in good conscience just write these off as isolated incidents. They are hugely damaging to people's lives. So I think, however, making matters worse, and I mentioned this a bit, and the PR reputation more toxic and susceptible to even these unfair vampire claims is what appears to be a lack of acknowledgement or effort to own some of the unfair playing field and the shortcomings by the industry. I want to be careful not to cast motivation on anyone. I know a lot of these folks really well, but it seems some combination of indifference and maybe complete inability to read the room has led to a lot of self inflicted damage as well. And this is not just about being liked. I want to be clear. Many of the most successful actors, athletes, ultra wealthy, they are demonized almost by definition with all kinds of judgmental and unfair envious reasons. And I don't want to empathize with the thick skin that you need to have in that station when you're constantly slandered. But when it extends past thick skin to tone deafness, excessively lavish and ostentatious parties that would make Jay Gatsby squeamish and quotes like private equity is the highest calling of mankind. I mean, come on, help yourself. That just feeds the frenzy and validates, rightly or wrongly, the lampoon that some of these reporters and others have created. So as I've hopefully properly represented, the extremes are doing no one any favors. Performative tactics or heads in the sand further divide and they deteriorate a much needed public discourse, industry of form, regulatory overhaul. It is all needed. And the true culprit here is the lack of balance and civility in the public square and the popular press. We need to be searching for common ground and a more just and fair, fettered, you might say, form of capitalism. Not skewering the current products of the system, nor blindly self protecting. As I'm fond of saying, nuance is the adult form of dogma. But there's no easy answer here. Even arguably the most cynical and comprehensive tome written claiming the societal extraction goals of private equity. This was a 2014 book called Private Equity at Work. In a moment of honesty, even these authors admit that private equity probably saved the US steel industry in the early 2000s. That's a big deal. And while on paper many of us might argue that the longer time horizon, more aligned form of governance of private capital should create more enterprise and wealth creation versus schizophrenic public markets brethren, the academic research on job creation and economic benefit of private equity is very mixed. So in light of my rambling setup here to place these two extremes at odds, here's our plan of attack that admittedly is a bit of an impossible task I'm going to hand to Aaron in a moment who's going to cover a couple things here and really develop some of the things that I have just teased. And first he'll explain the differences in governance model incentives, alignment of public versus private capital and the resulting impact. And to be clear, these are all trade offs. One is not right, one is not wrong. It's important to understand the mechanics of why the private markets are growing and succeeding, you might say. And two, second, we need to properly assess the common criticisms and sometimes painful examples of the private capital model gone wrong. Where are these criticisms valid and where they perhaps exaggerate? We're going to try our best to be honest there. So before we get to our special guests, I'll return briefly to outline two examples where I think the inherently superior governance model of private capital is being wielded to actually improve things like wealth creation, inclusivity and racial disparity. Really inspiring stuff. And with those sparks of inspiration, we'll finally invite in our two guests to bring these two specific cases to life. And today we are thrilled to have Darren Dodson, founder and managing partner of Illumen Capital, and Pete Stavros, co head of Private Equity for kkr. All right, Aaron, with that big setup, with that divisive, I think moment, I'm going to hand to you to draw us into some common ground and compromise. So off to you.

[Aaron Filbeck]

Sounds good and I'll try my best to make my part as beautifully written as that article was before. So as John mentioned, I'm going to walk through a couple of things, particularly focusing on the differences between what we see in the public market and in the private market. And as we were talking about here at the beginning of the episode, the influence and importance of PE backed companies has grown pretty considerably over the past 20 to 30 years. So it may have been more of a one off opportunity for hedge funds. The GP community was much smaller many, many years ago, but today there's a lot more influence of private equity on everyone's lives today. So I'm going to highlight some of the because I think it'll set the stage for some of those criticisms and then John's segment on some of the ways that it can be used for good. But to illustrate this, I'm going to walk through a few differences including the size of both markets governance as John mentioned, and then I'll lightly touch on regulation as well. John alluded to some of that in his as well. So let's first talk about size of public versus private and the economic impact that both play on the economy. And I'm going to do this in three different ways. One, I'll talk about the number of companies and related to that, I'll talk about the market cap differences between the two and then I'll wrap up with total employment. But before I do that, John, pop quiz for you. Since you did this to me last time and I didn't prep you for this, we've talked a lot about the declining number of public companies over the past couple of decades. But there was a moment when the number of public companies versus the private equity backed companies switched to the point where we have more private equity backed companies than public. When do you think that happened?

[John Bowman]

Ooh, when it flipped.

[Aaron Filbeck]

When it flipped.

[John Bowman]

Okay, where I thought you were going. I know the peak of public companies in the US was 95, 96, mid-90s. But that doesn't answer your question. I'm going to say March 15, 2003.

[Aaron Filbeck]

Close, but not at all. So in terms of the number of companies, the answer is actually 2007. So we saw a pretty massive decline, as you said, in 95, really accelerated around the 2003 mark.

[John Bowman]

So there you go. You notice I picked the Ides of March.

[Aaron Filbeck]

That's good. Just wasn't right. That's fine, I'll continue on. But the trend did start far before 2007, really accelerating. Post tech bubble Visual Capitalist actually has a really nice visual that breaks this down of the number of publicly traded companies versus PE backed companies. And that flip happened in 07. But as of today, there are actually two and a half times more PE backed companies than publicly traded companies. So about 11,600 today versus 4,500 in the public markets.

[John Bowman]

Aaron, is that US data or global?

[Aaron Filbeck]

That is US data globally. It's a little bit more difficult to make that measurement, but we do have some market cap comparisons that'll be helpful. So from a market cap perspective, it's actually the exact opposite in terms of size. So despite there being more companies that are PE backed, the market cap of the public markets is far greater. So Hamilton Lane put out a chart late last year that actually shows the percentage of companies that are privately held versus publicly held. And only about 13% in the US, 5% in Europe and 17% are publicly traded companies relative to the rest which are all privately held. So just in proportion, and the number of companies is a little bit harder to measure, but in proportion, the vast majority of companies are privately held. Some of that's PE backed, some of that's not. But the universe is much larger from a market cap perspective. It's the exact Opposite of that proportion. So Dan Rasmussen at Verdad Capital put out a note that compares the market caps of public equity versus private equity. And his whole rationale was what's a good neutral allocation? That old market portfolio perspective, global public equity market cap sitting right around 100 trillion, whereas private equity is right around 11.3 trillion as we measure it. So roughly 10% of the market cap is PE backed. Now from an employment perspective, employment looks much more like the number of companies as opposed to the market cap. It is a little bit hard again to pin things down globally just due to reporting, but also multinational corporations. Companies like Walmart and Amazon have employees all over the world. But in the U.S. according to Eye, privately held companies employ just shy of 100 million people versus 28 million in the publicly traded space. So about 75, 25 when you do the split. Again, these are not all PE backed businesses, but the overwhelming workforce works for private companies. And so very important from a societal perspective as PE continues to grow and more and more companies are owned by private equity. I want to talk about governance for a second as well because I think one of the biggest opportunities and pitfalls as we'll talk about is in the differences in governance structure. So private equity backed companies can be a little bit more informal relative to public companies and that evolves as the life cycle continues. Typically, early stage venture has a very different governance model than much more mature buyout base. But you typically see this shift and evolve as the company matures. However, one of the biggest differences between public and private companies is how the principal agent conflict is addressed. We all learned this in Corporate Finance 101. The idea that principals or owners and agents or management are somewhat at odds with one another in the public market space in terms of maximizing shareholder value versus personal gain in the public markets. This is certainly true. You have thousands of shareholders and only a small percentage of them may actually be managing the business on a day to day basis. However, in the private markets we collapse that relationship quite considerably to the point where almost all of the owners are operators as well. So regardless of that life cycle, PE takes a much more hands on approach to managing the business. So as John will discuss, this can lead to some really positive and impactful outcomes. But as I'll talk about, it can also make malpractice much easier to accomplish. And then third and finally is on regulation. So regulation has played an important role in the growth of private equity in that regulators have not been able to enact comprehensive legislative policy on the industry as John mentioned there was some efforts to do so last year, but the public markets has seen a lot of regulation and increased regulation, particularly since 2002 with the introduction of Sarbanes Oxley coming after the collapse of the tech bubble and Enron. And we've seen some of the results of that again that acceleration of companies that are privately held versus publicly held, but that switch occurring in 2007. And we saw this happen further, particularly in the banking system with Dodd Frank and Basel III in the early 2010s. Now the purpose of these regulations of course is to protect investors from what's happened in the past and have led to some good outcomes, including greater transparency, stronger corporate governance and independence, and reduced financial stress, particularly in the banking system. But of course this has some drawbacks as well. Higher compliance costs, higher hurdles to go public, and less flexibility and sometimes less risk appetite for management just due to all those hurdles that exist. The final thing is, is that regulations are localized, so that can lead to some uneven competition on the global stage and even within different jurisdictions. For example, here in the US different states have different levels of regulation. So all of this has either led to or coincided with the growth of private equity, the decrease in public companies, and particularly in the small and the mid cap space. It's almost become a self fulfilling prophecy. When money is flowing into this private space and it's expensive to go public, why would you row against the current in order to do so? So I think this sets the stage well for our compare and contrast of some of the criticism against and then some of the ways that PE based models can actually do some good. Now there's several criticisms of the PE model, but I'm going to focus on the following. First I'll talk about leverage and bankruptcy. Second I'll talk about asset stripping and extracting value. And then third is this whole growth at all costs and some of the criticisms against that. So on the first criticisms on leverage and bankruptcy, biotransactions are heavily financed by leverage, which means that the clock begins ticking from day one to deliver financial results. And the common criticism here is that gps will lever up companies to juice returns and then extract as much cash as possible to pay down the debt that they've effectively forced upon that company. By doing this, GPs are starving companies of resources that can be allocated to running the firm, retaining talent or investing in other growth initiatives. And this was, as John mentioned, that barbarians at the gate mentality. This was a big argument in the early buyout days when most private equity shops would engage in Aggressive cost cutting measures to match, maximize returns and pay down that debt might involve buying a company with 95% leverage, laying off 80% of the employees, selling off all the assets to pay down the debt, and then flip the company a few years later. Now today there are still some financial engineers that are in place, but I would argue that as the industry has grown, the buyout world has evolved with it and many of these, while they still take on leverage, the level of leverage is much lower than what you've seen a couple of decades ago and sometimes even much more balanced between equity and debt. Additionally, there's much more operational engineering that's taking place on these PE firms take a much more hands on approach to managing the business and not just trying to rejigger the balance sheet in order to make it an attractive sale in a couple of years. However, related to this criticism is that much of the leverage leads to higher bankruptcy rates than if PE had not been around in the first place. So you'll often see headlines and as I was doing this research, you'll see a lot of headlines about the increase in PE or even venture capital backed companies filing for bankruptcy, showing how disastrous the model is and can you believe that they came in and this company went bankrupt? However, when you look at some of the data, even from the critics who are making these arguments, I was surprised to find that many of the PE backed companies only represented anywhere from about 5 to 15% of total bankruptcies that included public companies or companies that with publicly traded debt making up the balance. So really in proportion to the size of the market, it is in line to some degree. So again, 10% of the market cap and then in terms of the proportion of number of companies, it's actually much lower. So on the second point on asset stripping and extracting value, the second criticism here is that many PE firms will attempt to extract value by paying themselves in various ways to maximize their value, investor value, and doing so in other ways than improving performance. This is where the whole vulture capitalist comes into play that John mentioned. The circling a dying animal and getting ready to pounce once it's over. But there's a couple of examples of this that I think are worth highlighting. First, gps will charge fees directly to the portfolio company, typically as a way of charging for oversight and management. And these are different than charging LP fees by the way. You can almost think of this as the company paying salary to the GP or consulting fee, which is effectively the owner of the company. And the criticism here is that you're reducing the portfolio company's profitability and potentially introducing a new principal agency conflict that wasn't there in the first place. Maximizing short term gain for the GP against the long term value for the LP and importantly the other stakeholders, the employees and so on. Second, gps may put a company through what's known as a dividend recapitalization or a dividend recap. And this involves the company paying a one time dividend to its investors and replacing it with more debt. While this is more friendly to the LPs because they are getting something back than some of the management fees to the portfolio company, the use case really depends. So companies in the public and private markets go through recapitalizations all the time. This is not an uncommon method of optimizing the capital structure, making sure that everything is optimized and more efficient. Usually in the public markets this is through share repurchases, share buybacks. However, the criticism is the same. Is there a short term profitability motive here at the expense of longer term value creation? And then again, back to the leverage and bankruptcy perspective, are we just racking up more debt at the portfolio company level? So a good example of this was Hertz, the rental car company which filed bankruptcy in 2020 after being acquired in 2005. And multiple times throughout the history of owning Hertz, GPS engaged in these dividend recaps to the point where the leverage to the company made it financially vulnerable and eventually in 2020 went into bankruptcies. And then third, there are sale leasebacks. So this happens when PE companies sell assets, most often real estate, after an acquisition to another party, and then lease it from them. So this is the equivalent of selling your house that's fully paid off and then paying the new owner rent in order to continue living in it. So gps typically use this to increase the cash balance. Maybe the portfolio company owns this asset, but they're not cash rich and they need some of that cash. They can use it to pay down some of the debt, but in some instances they're also using it to pay special dividends to themselves, potentially through a dividend recap. Again, this can be used to remove some valuable assets and increase fixed and regular costs. So again, imagine you've paid your house off for many, many years and all of a sudden you're paying rent. Again, that can be a stress and a burden on the company. So there's numerous examples of gps using sale leasebacks. But one of the most iconic examples, and I'll make sure John doesn't get emotional on this one, was the Story of Toys R Us, which filed for bankruptcy in 2017.

[John Bowman]

Oh, Jeffrey the giraffe. This was an important part of my childhood. Aaron. This is going to be a hard one for me.

[Aaron Filbeck]

I can see the tears are starting to trickle down your face. But after being in business for several years, the company had stagnated and was eventually brought private through a leveraged buyout. And part of the strategy was to engage in a sale leaseback of Toys R Us stores. So in most cases, Toys R Us actually owned the real estate they were operating in and they needed cash. So sale leaseback strategy was employed. However, the cash that was raised from those real estate sales actually ended up just funding a dividend recap. So it didn't go back to the company, it went to shareholders and the stores was sold to one of the real estate gps that was part of the deal, who ended up charging rent to own the portfolio companies. So there's a little bit of double or even triple dipping that was taking place and a lot of this cash was extracted from the company in the process. And then third and finally is this whole growth at all costs. And John alluded to this in the beginning of this segment as well. And I think this is one of the biggest common criticisms and it's actually challenging to argue against it, which is PE backed firms that are encouraging or incentivizing employees to do some questionable or even unethical things to generate profits. And this typically is where healthcare as a sector comes into play. There's two recent examples that I'll highlight here. One story of a PE firm that specialized in dental offices and was encouraging their dentists to perform unnecessary surgeries in order to generate revenue. So imagine going into your dentist's office and getting a root canal when you didn't need one. Kind of challenging.

[John Bowman]

Root canals are not good when you do need them.

[Aaron Filbeck]

Exactly. And the other one being hospitals having a lack of proper sanitation due to lack of cash, trying to cut costs. And when this is a public good or a public service, you just don't want to see some of these different examples. And these are awful stories. Root canals aside, you get pretty upset when you read them and it does garner an emotional reaction. The human impact is really unfortunate and depressing in many cases. However, I would also remind us that these are not unique to private equity. We see examples of this in the public equity space as well. Whether you're looking at Twitter, Meta, Amazon, Apple, they all engage in these practices. They just happen to be disclosing it on a quarterly basis instead of Maybe an annual basis before I turn things over to John. I think my biggest takeaway just walking through some of these examples was that these are all tools that are used by private equity managers. They're even used by public equity as well. And so at face value, they're not necessarily inherently bad. However, whether it's taken to an extreme, there's conflicts of interest that are introduced, or it's just blatant value extractions, these tools can become pretty deadly pretty quickly. Sometimes it is necessary to restructure a company. Sometimes it's important to make some hard decisions to get a company back on track. And PE has the ability to do this much easier than the public markets, just given the relationship between ownership and operating the company. There's also an emotional element to many of these stories. So the Toys R Us got John a little emotional here, but it does get a lot of attention from people. I mean, these are companies that we've all grown up with and we engage with on a day to day basis. And so it does make for some good headlines. But in the example of Toys R Us, was this company doomed to begin with? Potentially. And you look at some of the studies, we'll link these in the show notes that really look back and say, look, private equity money did come in and there was some malpractice that may have taken place here, but this was the trajectory that Toys R Us was likely to go anyway. So a lot of the criticisms of the private equity model are criticisms that I might actually have about the public equity model as well. They're both byproducts of capitalism, which can sometimes lead to unchecked or unfettered capitalism in both arenas. In fact, I would argue that it's easier to blame PE because you have names attached to the ownership. Typically you're blaming the CEO, but if the CEO is the sole owner, it makes it much easier to make. I have mine. Whereas the public markets are much more broadly held. They're nameless and faceless in terms of the shareholders. So, John, with that, I'm interested to hear what you have to say. Maybe we can opine on your 80s love for toys R Us, but does any of this surprise you and any reactions you have? No.

[John Bowman]

I mean, those are just an iconic scratching of the surface of a few examples. I think you did a really good job. I think I would just underscore what you said at the end, which is these are inherently neutral tools that are utilized that frankly should be at the luxury of managers because they can be effective recapitalization capital structure, financing tools. You need to have levers to pull as a leader in order to position the organization and reposition and pivot the organization towards the reality of where the future goes. But I agree with you, as much as it pains me to say it, jokes aside, I think what people sometimes miss is that Toys R Us should have gone bankrupt. The model was broken. I hate to say it. That was an iconic emotional. I don't mean in a sad way like I am now, but there was an experiential moment of walking in as a kid in the 80s to a toys R Us. And with the. Obviously, we all know the story with the onset of Amazon and I would say proliferation of toy distribution and some of these hypermarket large department stores and the Target and Walmart explosion, there was just not a place for that. And that's okay. If anything, you might argue that these private equity firms maybe extended the Runway, the off ramp a little bit too long. And so they opened themselves up to some of this criticism as they tried to extract, whether it was for purposes of the company or themselves, we could argue, but extract value where frankly, the value had been wrung out maybe several years ago. So I think we need to be objective, as I've begun in this, and realize that these can be used for good or bad and probably many other levers that we're not talking about. I think the biggest issue here is that the public feels like they don't have control in checks and balances in the case of private equity. And that understandably can be viewed as unfair. And I get that completely. And that can cause frustration, especially when your neighbor or your sibling gets laid off. And there's really just doesn't feel like a recourse to sell the shares to put pressure on the organization to vote a proxy. These are different structures that you've outlined and that can raise emotions and it just places extra pressure on those fiduciaries to truly operate in a virtuous manner. And that, I think is what we're really getting at, is that this is not just about regulation, even though we think it's overdue. It's really about ensuring that there's this inherent understanding and deep appreciation by the private equity industry and their leaders that they put in place because you have a concentrated ownership that has so much influence over the economy now, not just their individual organization and society. So I think that's the big takeaway.

[Aaron Filbeck]

I would agree. And let's use dividend recaps as an example. Here is a dividend recap a bad thing as a tool? No, but if you're pulling out all the cash from the company to pay yourself a dividend and then going to new debt holders and saying, here you go, let's raise more debt, knowing that it's going to go bankrupt in a short period of time, is that right? And I would take the side of no.

[John Bowman]

Yeah, I think we know the answer to that. All right, well, that was fantastic, Aaron. Really good context for some of the tools and just a reminder of the importance of approaching these things with care and balance. So as we begin to shift attention to our guest segment, as I promised, I just want to provide a little bit of context for both Darren and Pete and their organizations and their activities. Because the purpose of the Q and A, as you'll see, is not necessarily to get the background on how they got to where they are, but rather to pick apart some of the topics we're discussing and pursue balance on why the PR is so poor and how we can possibly improve it partially through some of these case studies. So again, we're not here to sell you on a certain worldview of private equity simply to debunk and discourage the All Righteous poll and the All Villainy poll. What I can say is that you're about to hear from two individuals that are harnessing the power and advantages of private capital on paper to address some of the society's biggest challenges that we've talked about and the most nefarious outcomes of pe. That's claimed by the critics, Aaron, that you've mentioned making the rich richer, not caring for the overlooked narrow wealth participation. These are exactly what these two gentlemen are trying to confront, an authentic solution. And it's tremendously inspiring. So you don't need to endorse pe. You don't have to have come to a conclusion that PE is doing all the right things. We don't believe that. I would guess that these individuals that we're going to have on our guests don't believe that. But based upon their work, we can agree that these pockets of good do represent stories that are not told enough on the front pages. The vampire stories crowd them out, you could say, and they could be seedlings of high finance being mobilized to make real positive differences in the life of people in greater society. And we'd certainly like to see more of them, no doubt. So for each of them, quick background. Just so you go into this Q and A with the same level of information that we do. Darren Dodson. So Darren founded alumin in early 2017 Bay Area venture capital funded funds investment platform really intending to fund diverse black and Latino men and women, a set of entrepreneurs who are systematically underrepresented in traditional venture capital funds. So shortly after founding the organization, after a successful career in private capital, and before even raising their first fund in a lumen, they commissioned a study, a research study with the Stanford Spark, which is a think tank at the university, to test the following thesis, this idea that those that are black and brown and Latino are discriminated against, or at least biased against in due diligence for venture capital. And what they found was actually worse than they thought. So in the study, which was published in 2018 in the Proceedings of the National Academy of Sciences, they were led by a cast of academics and thought leaders. Again, it's shocking to me how Ashby Monk makes his way into this podcast almost every episode. So cameo extraordinaire Ashby was on this author list amongst others. And These academics tested 180 asset allocators for racial bias in their manager selection of VCs. And the headline, as I said worse than they thought was that of the 82 trillion of AUM allocated, only 1.4% of that went to people of color. 1.4%. So depending on the census data you look at, that compares with about 30% in the US that identify black, Afro, Latina or Latino. I realize not 30% are represented in the financial world or the VC world, but again that's part of the problem. So this is just a fraction of the population. A quick addendum by the way, from Crunchbase just a couple weeks ago by the way, has things getting even worse. Capital funding of diverse managers hit a multi year low of 0.4% in 2024. 0.4%. So it's getting worse even since Darren's study. But even more telling than the numbers were the inherent biases that were excavated through this study that were serving as the headwind for progress on those statistics. So the study found that allocators were more likely to leave money on the table than invest in high performing black LED funds. And counterintuitively this will blow your mind. The bias became even stronger as the performance improved. The better the returns, the harder the fundraising became for black and brown VC leaders. So in a podcast with Forbes, Darren summarized this. He said, quote, it was as if they made up stories to discount the founders ability to raise capital, outperform and flourish, therefore leaving them under capitalized versus other similar performance white LED funds. End quote. So in other words, I don't know if I can say it any more directly. Blackness was acting as a material subconscious risk is what this was suggesting. And the due diligence processes were enabling prospective VCs to get ding just based on their race. Now, beyond the inhumanity of course, of reducing someone's dignity based on the color of their skin, the results of systematically overlooking and underestimating an entire People group of VCs creates a broader financial market problem too. And Darren's really vocal about this. The reality is economics are being left on the table, so investors and their beneficiaries are being robbed of diversified strategies and in some cases better performance opportunities. So this broadens the issues not just from a social and moral issue, meaning what is right, but also a fiduciary issue. The blocking of smooth flow of capital to the optimal investment opportunities, which is the very role of the capital market system, is being compromised and so wealth creation and the larger social ecosystem are penalized. Here Darren said it well in our friend Ted Seides pod, which by the way, I'd commend the whole episode a few years ago, is that if you think of other prosperous ecosystems, think of a healthy garden in your backyard or an ocean having thriving biodiversity, he said, is what creates healthiness. And so this study suggests that our financial ecosystem on the other hand, is contaminated. So illumina is an impact investing mandate that not only is trying to solve and intervene in this race inequity, but also raise investor outcomes for everyone. So colloquially Darren has called Lumen a dojo for combating bias in building portfolios. I absolutely love that. So he's the Cobra Kai of vc, you could say. Now I'm going to start calling him that. All right, Pete. I've had the opportunity to spend time with Pete Stabros, see him on big and small stages including a ted talk in 60 minutes, the show for you young folks. That's probably not something that you're familiar with, but that was a big deal when I was growing up. If you're on 60 Minutes and the visceral and emotional motivation for his pursuits are always the same and always touching. They were driven by two experiences. First, observing his blue collar father as a kid wrestle with his lack of a voice and wealth participation in his construction job. And second, a research paper that Pete authored in 2002 as a grad student. And Pete talks in all of his moments in stage presence about what he calls the gold standard metrics for corporate performance. And it's all about people. Notably, the two that make the most difference are the quit rate and employee Engagement satisfied workforce is the pixie dust, you might say the secret sauce to higher productivity, lower turnover, higher EBITDA margins, market share growth. Pick your quantitative metric. It's actually pretty overwhelming how singular the cause and effect is. But if you believe that relationship, we have an existential problem. According to Gallup, 70% of people hate their jobs and 4 of 10 quit them every year. So we have this broken social contract between capital and labor that has exacerbated the wealth gap as we talked about earlier and amplified socioeconomic class division. And therefore we need a more inclusive and sustainable form of capitalism. And contrary to popular belief, and Pete is very vocal about this, the most important element of wealth creation is equity. For those of us again that were raised to pursue what we call the American dream in the west, we might have assumed that it's owning your home is the biggest avenue or ticket to wealth creation. Real estate actually pales in comparison to equity in building multi generation long term wealth creation. So that's where Pete comes in. He argues that broadening employee ownership in businesses is the single most impactful way to raise up workers and make companies stronger. And that injection of wealth participation across the employee base, he argues, fundamentally changes not just individuals lives, but a local community's economics. Higher tax revenue, better schools, new businesses, dignified retirements, more eateries. Pete finally had a petri dish to test all this thesis and this experience through his life. When KKR bought Overhead doors, famously in 2015, and he dispersed ownership to all employees. And when they sold the business for 10 times their purchase price a few years later, which by the way was their best deal in two decades, overhead doors, two decades. It resulted in payouts of 360 million to 800 employees. There were truck drivers that he talks about fighting through tears that received almost a million bucks. Just unbelievable. And Pete has since been normalizing this practice across KKR's funds with now over 44 portfolio companies, at least from the source I recently read. But even more impressively, his wife and he started a not for profit called Ownership works in early 2002, around the time KKR had this Overhead Doors experience. And Ownership Works exists to create 20 billion of employee wealth over the next 10 years. You talk about a BHAG. Jim Collins would be very proud of that big hairy, audacious goal. 20 billion over 10 years. Very clear, very ambitious. Through both ownership economics and importantly ownership culture. This is not just about distributing equity, it's about changing the way you behave and giving people a voice for all employees. They're building better businesses and changing lives. So the supporting organizations just a few years in at Ownership Works is truly a who's who of the private capital world. And it's also led by a very impressive full time staff that I recently had the honor to visit with in their offices a couple months ago. So really, really impressive. So I think I've stolen Aaron most of Darren and Pete's thunder at this point, but it's important to level set all the listeners going into this conversation because we're going to be rifle shooting a bit more on impact than we are talking about the larger context. So let's go ahead and without further ado, get them in studio. But listeners first, as always, a quick halftime break with our title sponsor Franklin Templeton. Stay tuned. Well, welcome back and I'm just delighted to be joined by Dave Donahue, head of US Wealth Management Alternatives for Franklin Templeton. Dave, thanks so much for joining us.

[Dave Donahue]

John, thanks for having us. Great to be back for season two and congrats to Kyle for all the great work you're doing. We're proud to be a part of this.

[John Bowman]

Well, Franklin Templeton is a big friend. We are extremely grateful that you are a partner and a title sponsor of this great show. So thank you again and good to spend some time with you. As you know, Dave, in the first season we talked to senior leaders of each of your asset class areas within alternatives. And I thought what we should do on this first halftime of season two is open back up that aperture a little bit and give you an opportunity to tell us a little bit about some of the structural trends and industry forces you guys are watching and what's changed in the last 12 months.

[Dave Donahue]

It's a great question, John. I would frame it as the industry trends that have gone on for the last five to seven years continue to have tailwinds at their back. If anything, they are accelerating. And to me, the biggest industry trend is what I would refer to as a manufacturing revolution, the product innovation and the technology innovation that is allowing GPS and alternative asset managers to take asset classes that historically were delivered in illiquid 8, 10, 12 year lockup funds, funds that had a high level of accreditation on them, meaning it restricted the amount of people that could use them, funds that had high minimums to invest. And what we're seeing is this massive evolution and adoption, not just in the US but around the world of what we refer to as semi liquid or perpetual alternative and private market products. That to me is the biggest trend in the space right now. And those products are doing a Handful of things. They are broadening access points. Often they have a lower accreditation standard for the type of client to invest. They are broadening not just from an accreditation standpoint but from a minimums you have to invest, broadening people's ability to use them strategically as a part of portfolio construction. And then the other thing they are doing is they are giving investors the opportunity to do things you could not do in a illiquid lockup fund like dollar cost average in the way in or subject to certain limits redeem capital at set frequency points.

[John Bowman]

Well, certainly we see the acceleration too and proliferation of that manufacturing process around the world as well and are responding as you know and have done some work with Franklin Templeton. So maybe turning that question of okay, we agree with that acceleration. Back to you Dave, as you sit back at Franklin Templeton and watch this flywheel keep spinning faster and faster and access and interest voraciously continuing to multiply. How are you guys responding from both an education and a product standpoint to this, this explosion in interest?

[Dave Donahue]

I want to start with education because from our firm's perspective that's always been paramount. If you think about the history of this organization, 80 year old firm, that the foundation of what we've done for decades working with advisors, working with bankers, working with RIAs has been not just to bring them product but importantly to help them understand when, where, why, how to use said production. And that hallmark of consultative selling and consultative relationship management that we've had for decades on the traditional side, we've brought to the alternative arena. So we have a terrific alternative education platform built by a gentleman I know you know well, Tony, David, Al and we're really, really proud of that. It's won some industry awards and we're excited to see our clients, most importantly using it to help make better decisions from a product perspective. Like many other alternative asset managers or GPs, we are very focused on developing products into the semi liquid or perpetual space. And I'll speak to our criteria for building a product in that area and this is strategically important to us. The first step is regardless of the asset class, whether it's real estate, private credit, private equity, where we have built product in semi liquid and perpetual wrappers across all of those asset classes. The first step is studying and evaluating if we take what we've done for decades in institutional illiquid 10 year ish lockup funds and we put it into a semi liquid wrapper where you have to let money in and out more frequently, where your leverage constraints depending on the asset class may be different where you have to update pricing in many cases more frequently. If we feel in any way, shape or form that bringing that capability into a semi liquid wrapper dilutes the core of what has made our managers, we think, really strong risk adjusted return managers for a long period of time, we're not going to do it. Once we get past that hurdle and make the decision that we can build with maintaining the core investment integrity we've had for decades in illiquid funds, a semi liquid or perpetual fund. We think a lot about what I call the operational alpha. What is the vehicle structure we should put this in that makes it as easy to use as possible for clients subject to not tripping. Rule number one, dilution of the investment integrity. And then the second part of that is how do we look at our product build, working with our biggest partners and looking at what others in the industry have built and differentiate ourselves. So I'd say for me those are two things. I'm very passionate about our firm, our CEO, top down, very passionate about doing this and doing it the right way.

[John Bowman]

John well, it certainly seems like you have echoed the rest of the industry in the first question on shifting up a few gears and we're excited to see what some of those conditions and that great set of workflow and decision trees result in manifest in as far as products coming from Franklin Templeton. Dave, it is such a pleasure always to check in with you and hear the latest on what's going on in the industry and at Franklin Templeton. And once again thanks for being a part of this and joining us for a few minutes.

[Dave Donahue]

Pleasure on my end. John, congrats. Good luck on season two and thank you for having me.

[John Bowman]

Well, welcome back to Capital Decanted. And as promised, we are joined in studio now by Darren Dodson, founder and managing partner of Alumin Capital and Pete Stavros, co head of Global Private Equity for kkr. Gentlemen, welcome to Capital Decanted.

[Darren Dodson]

Thanks for having us.

[Pete Stavros]

Great to be here.

[John Bowman]

Well guys, I'm always flattered to have the caliber of guests that we have in studio, but I really mean this. This particular episode, it's a true honor to spend some time talking to each of you as we spent outlining in the intro. These are two case studies and really beacons of inspiration that I think many can learn from. This was really the catalyst for why we wanted to do this particular episode and highlight really shine a spotlight on the good work that you're doing and you are everything that is good. As we'll talk about and unpack about private capital and the private capital governance model. So just thanks again for being part of this. It was just a joy to watch a lot of your interviews, study your backgrounds, understand that moment of insight when the light bulb went off for each of you. And I know that the listeners are going to be as inspired as I was. And Aaron was in that prep. So thanks again for joining us. I want to start with a couple questions to both of you just to set the stage because we frame this whole episode with this idea that there's this tension on Main street, as we say, with the brand of private equity, with the reputation of private equity, that it gets this bad press sometimes, perhaps some of it deserved, a lot of it exaggerated. And I guess I just want to start with from your perspectives at first of all, one of the largest firms in private capital and Darren, having started your own firm, really to combat some of that, frankly. Where does that come from and why does that exist? I have to imagine you guys think about this quite often. It's a bit of swimming upstream constantly, despite the amazing work as I mentioned that you're doing. So Pete, why don't I start with you? Why do you think this struggles to capture the attention and the good that it's doing?

[Darren Dodson]

Well, first of all, thanks for that intro. I feel like I'm almost certain to disappoint after that kind of an introduction. But it's great to be here. I appreciate the opportunity. And look, I would say if the topic is the ability of private markets to do things that are good socially and also benefit investors, I think the form of shareholding is honestly irrelevant if it's public or private. I could argue there's some advantages to the private markets, which I'll talk about. But look, factually, good and bad things have happened in both in the public market. Some of the greatest catastrophes in corporate America history, Exxon Lehman, WorldCom, HealthSouth have been in the public markets. Private markets certainly have had their issues too, as you say. I think some of it's deserved, some of it is exaggerated, but I think the form of shareholding is largely irrelevant. I think the advantages that private markets have and that people like Darren and I have is our governance structure is just simpler. Public company CEOs have usually big independent, complicated boards. They've got very distributed shareholder bases. They need to pretty carefully look at what's happening quarter to quarter. We've obviously got the luxury of very long term time horizons. One of our funds, our core private equity fund, we hold businesses for sometimes 20 or more years. And just our regular way flagship fund, our average holding period is between six and seven years. So I think the timeframe, the fact that we don't need to ask permission to do what we think is right, is a huge advantage. Take this employee ownership idea as just one example. It's considered still a little weird to share stock ownership with frontline workers. So it's probably a bit easier to do in a private context with our governance structure. But the last thing I'll say is, none of what I'm doing or what Darren's doing or others are doing, I would hope, is coming from a place of trying to manage perceptions or change perceptions. I don't think that'll work. I think what you need to focus on is doing something genuine that's meaningful. If it's not genuine, people will smell that in a second and you're going to get hit with greenwashing allegations so quick your head will spin. But I think as long as you're doing something, it's coming from the right place, it's meaningful, it's authentic. I think you'll be doing good for workers and for investors and over time the truth will win out.

[John Bowman]

I think that's well said. But you're right, the sniff test is somewhat on steroids, it seems. On the private equity side, as you've articulated, Darren, what do you think? Why does the profession suffer a little bit? It seems disproportionately more despite the ownership structure, the governance structure, as Pete said, maybe not really being the issue. Why is the reputation seem to suffer?

[Pete Stavros]

I definitely agree with Pete on the idea that the public and private markets both have structures in them that can move the needle in a variety of different ways around things that we're passionate about bringing to the world in an authentic way. I think one of the areas that we would note is that of the 1.4% of $82 trillion in capital that's managed in the asset management business is managed by women and people of color combined. So when we look at that number, that's all asset classes and when we look at within that, the private markets, to Pete's point, there gives us time to execute on a thesis to really drive some of the biases out within investment strategies and iterate rigorously and continue to leverage evidence over a longer period of time to bring some of the real valuable insights on how to address these biases that might lead to overlooking or underestimating certain areas of the market and indeed certain people because of investment biases. Of course, this isn't new. This is something that Thaler won the Nobel Prize in and Daniel Kahneman won the Nobel Prize in. And when we look at these heuristics and biases in the market, many have documented many different ways in which they show up in the public and private markets. But doing something to address them is part of the heart of what we do on the looming capital side and how we think about the importance of building something in the private markets. When we did our research with Stanford Spark, which you've covered at the top of the overview, one of the things that we did is we tested public equities, private equities, fixed income asset allocators for biases that would leave money on the table when they were evaluating high performing black LED funds. And we found that condition to hold across public and private markets just as a conceptual framework for our conversation.

[Aaron Filbeck]

So, Darren, and we did hit on this a little bit in the front end on some of the research that you've done. That delta of the population versus the assets under management or the ownership within the private capital space, there's a pretty wide delta, as you've talked about, between representation and actual ownership. Could you talk a little bit more about some of the things that you're doing at Alumin to try to combat some of this delta and maybe narrow that gap?

[Dave Donahue]

Sure.

[Pete Stavros]

So we have a private equity, venture capital and growth fund of funds and we invest in fund managers and we apply rigorous evidence based research to essentially help them address biases in their underwriting processes for investments, in their hiring, promotion and retention of talent processes for talent, and then finally in their board selection processes to ensure they're selecting the best board members rather than overlooking them or underestimating them because of their race or gender.

[John Bowman]

I think you actually described in one of the interviews, Darren, that you built a racial bias dojo, which was fantastic play on words. I told Aaron that you were the Cobra Kai of private capital as a result, which is a cool nickname I think I would like to have. So I hope that landed well. But I think you were also interviewed on a follow up study that I actually thought was pretty disappointing. I imagine you did too. I think it was from Crunchbase very recently, it was maybe January, February 2025 data. And it actually suggested, if I'm thinking of this time series that I've heard you talk about at length correctly, that diverse founders hit a multi year low as far as their funding percentage of 0.4, 0.4% in 2024. So I look at that and I go, Darren, with all this work, with more of an awakening around the unconscious bias that's poisoned every element of due diligence, how should we think about all this effort, seemingly not making much of a difference so far?

[Pete Stavros]

I think it's a great question. What I would say is that when we look at the history of this movement of capital and finding places where it's optimally allocated, like many investors, there are periods of times when people in the investment industry pull away from an area, and that has very little to do with the quality of assets in the area and a lot to do with perception and bias. So what we would note is during times of high inflation, during times of when you pick up the newspaper and it looks like a trade war might be happening every other day, or when there's high volatility in the market, we know from our social psychological friends at Stanford who published the paper with us that these are periods of time when people rely on heuristics and bias at higher rates than other times. So what we found is that there is a really important time to pay attention to these particular asset allocation decisions. And if you're managing a hedge fund or pension fund or a area of a foundation endowment where you're deploying capital, you're probably asking the question of if people are overlooking high performing managers because they're black or women, how can we address these biases to provide the best returns for our investors? And the question is to address these biases. And that's one of the really important aspects of your second question about the dojo. So we invite investors from around the country to understand some of the periods of history where these biases have really showed up in huge ways and then been pushed back against. For example, during the civil rights movement, when Martin Luther King switched from a civil rights framework to a economic rights framework, he was assassinated. So that's a form of pushback. With George Floyd, there is a perceived gain, although I don't think it was massive, because we're still at 1.4% of $82 trillion and some of that capital flow has decreased while the quality of the assets continue to remain very, very strong. And in fact, the word bias itself suggests that people may be missing opportunity, which is part of the reason why we focus our investment thesis, whether it's raining outside or whether it's sunny outside, on the same set of evidence based strategies to find these overlooked and underestimated entrepreneurs and fund managers.

[Aaron Filbeck]

And Darren, I think you alluded to this just now. I mean, talking about that trade off of there's a human element to this and then there's also an economic and a financial element to all this. And when you were doing your research and just mentioned this, there's a performance difference here of money being left on the table by ignoring some of these great managers. So as a fiduciary, you're ignoring a big part of the pie that could be a value add to the overall portfolio. Could you talk a little bit more about that and that financial element and that economic element relative to the human dignity element as well?

[Pete Stavros]

One of the things that I reflect on is the fact that Professor Lisa Cook is the first black woman in the 108 year history of the Federal Reserve to serve on the board there. And her research shows in depth in the periods of 1880-1956 how the United States has lost the equivalent of a mid sized European country in terms of GDP because of the period of racial terror which lynched 6,000 plus black people in the United States. But those that would have filed patents based on the innovations that they were created, which would have created the ability for them to continue to contribute to GDP is one of the core areas where she's added to the lexicon of academic research. So that's just an easy way to say that overlook talent during times of challenge. It's sometimes missed in terms of its overall GDP. I know the Latinx community currently adds about $3.2 trillion in the United States to the overall GDP. And for asset allocators that are not finding people in the fund management business or entrepreneurs that are growing at 10x the rate of their white counterparts in that area, there's a lot of work to do to address those biases to provide financial and economic outcomes for their beneficiaries and stakeholders.

[John Bowman]

I think that's so well said. I've heard you say some of this ugly stained black history is also economic history. And the multi generational headwind that came through things like what you've described and black Wall street and Tulsa really destroyed several generations of potential wealth creation. And I'm just so impressed by attempts to try to reverse that flywheel, if you will, and get it going in the right direction. And so I think that's really important. It's a difficult pill to swallow for all of us. But you're doing great work and so we appreciate those contributions. Pete, I want to switch over to you. You were kind enough to set up a recent meeting with me with the team over at Ownership Works, which is just a fantastic afternoon. The work that they're doing is inspiring as well. And when you set this up, as I recall, I think it was a few years ago, three years ago you had a lofty goal, the old Jim Collins big hairy, audacious goal of 20 billion of wealth in the next 10 years. It has a nice ring to it. You're a few years in, as I said. How is it going? Are you tracking towards that?

[Darren Dodson]

Well, thankfully we're tracking well ahead of schedule. So we've rolled these programs out now with I'm not sure the exact up to date number, but well over a hundred companies, I think we're approaching a couple hundred thousand frontline workers who have been granted stock ownership. And obviously those companies need to perform. But assuming that they do, we're estimating Frontline folks will make 8 billion of wealth in the programs that have already been rolled out. A half a billion of that has already been realized in cash. And we're accelerating our progress here. So I suspect we'll be well north of 20 billion at the end of 10 years. And look, that's one of the benefits of the private markets is the ability to scale. Each of these firms sometimes owns hundreds of companies. So if a investment firm decides, hey, we're going to join Ownership Works, we're going to roll out employee ownership, as I say, some of these firms are responsible for a million employees. So it can add up really quickly. We're increasingly taking our ambitions and making them more global. The most scaled companies in America today are truly global. 40% of the S&P 500 revenues ex us as an example. So we'll be making some announcements in the next 24 months about overseas offices of Ownership Works. We've been very blessed to get a lot of support and a lot of funding. We've raised about $70 million at this point. As you saw the office, we've got some very serious people at this nonprofit. We've been blessed to be able to attract partner level folks from places like McKinsey, Bain, BCG. And we've got almost 40 people at ownership Works today. So that's all going great. There's a separate effort underway to address public policy. This is an adjacent but separate effort to Ownership Works. It's called expanding ESOPs. And this is an opportunity to dig up the law from 1974 that established an ESOP, which is effectively a tax structure that gives companies tax breaks in exchange for sharing ownership with frontline folks. And we want to modernize that law and bring more ESOPs to more companies. That's how we could really in the US massively scale the efforts and not have an effort to maybe create 20 billion of wealth, but more like 200, 300 billion of wealth for frontline folks over time. The big dream is modernizing those old ESOP laws. But overall, things are going great at Ownership Works. To answer your question, we were blessed to find Annalisa Miller, who I know you met, an incredible person running Ownership Works. And the team's really shaped up and we're excited by where we're going.

[John Bowman]

Just a quick follow up, Aaron, before you jump in, if you don't mind. Pete, we told the story of your inspiration, this combination of watching your dad when you were a kid and then also the paper that you wrote while in grad school. So you experimented with this in your day job, as I recall, at kkr. Then you had this labor of love where you launch and formalize Ownership Works. I assume you've now systematized this back at KKR a bit. So correct me if I'm wrong, but how much progress have you made in the portfolio companies and funds of KKR as well?

[Darren Dodson]

Inside of kkr, we started something called the Human Capital center of Excellence, which I chair. And that is an effort to, as you say, standardize our efforts around human capital all over the world. So employee ownership is a part of that. And we've gotten to a place in the United States where we've got enough experience with this across all of our industry verticals over the past 15 years that we've committed to roll out employee ownership at all of our control investments. I think we're headed in that direction in Europe and Asia. Not fully there yet. We want the teams to have time to experiment with the model, the same opportunity we gave our US Partners. But that Human Capital center, that's what it's doing. It's propagating this model globally. And as I always try and make clear, it's not just about stock ownership. If it's just stock ownership, I think that'll only get you so far. I think it's gotta be a different ethos, a different way of running the company, which is why our Human Capital center is focused on teaching financial literacy, driving employee engagement, building the financial resilience of the workforce, standardizing things like employee emergency assistance funds and figuring out small dollar loan programs at all of our companies. There's a whole lot that goes into this, and that's what we're focused on, is stock ownership's great, but what we're trying to do is change the culture.

[Aaron Filbeck]

Pete, I Loved your TED Talk where you talk about some of the examples doing this. And one of the things I loved in particular is what you just said. The stock ownership is one part of this, but alignment culture, that is such a huge part of making sure that everyone's on the same page and creating value both for the stakeholders, but also in the day for all the owners that are owning these companies. How have you seen that ownership culture translate to tangible impacts? And are there any particular unintended consequences or trade offs that you've had to work through as you've rolled this out at different organizations?

[Darren Dodson]

From the worker perspective, the tangible impact is obviously wealth creation. So of course we track that carefully. But it's also their feeling of financial resilience. We measure financial literacy and financial stability. It shows up in engagement scores. So we use Gallup to measure employee engagement at our companies and that starts to get into the tangible benefit to companies. A more engaged workforce is much more likely to be more productive, to deliver better customer service, to reduce waste and scrap. In the case of a manufacturer, the other tangible gold standard metric from the company perspective is the quit rate. Are workers becoming less likely to quit over time? And if that happens, then the company is saving money on recruiting and training and onboarding and constantly replenishing the workforce. As you may know, the quit rate in America I would describe as out of control. It peaked recently at nearly 40%. It's gotten better, but for a period of time, companies were rehiring their whole workforce every two and a half years. I mean, what a tremendous waste for both companies and for human beings who are bouncing from job to job without building skills. So one example, make it again tangible. Ingersoll Rand Co. That was once known as Gardner Denver is a public company that we took private over the course of 10 years. And I always stress that took a decade. The quit rate dropped 90%. So they were literally hiring thousands of fewer workers every year as a result of the change in culture. And the engagement scores improved from something like the 19th percentile to the 91st. So totally different culture at the end of a decade. And along the way, workers earned a billion dollars of wealth for themselves. And by the way, that number is not included in the ownership works figures I presented earlier because we don't give ownership works credit for anything that happened prior to the start of the nonprofit. So if you were to include our historical numbers, those numbers I quoted earlier would be much bigger.

[John Bowman]

Just astounding. Fantastic stories. I want to push you maybe on another case study if I zoom out A bit. Because I've also, Pete, heard you talk about beyond the individuals changing lives, which is the emotional awesome part. I mean watching those overhead door presentations that there's several videos online is just emotionally amazing. I want to put that on repeat. But you've also argued that that is parlayed, that individual family wealth creation is parlayed into systematic community benefit in schools and new entrepreneurs, new businesses, tax revenue, restaurants, shops, commerce, so communities can actually change and grow and create wealth and find a new economic future. Can you talk us through an example of how this works?

[Darren Dodson]

Well, in that overhead door example you mentioned, there was something like $340 million of wealth dropped into this local community in central Illinois. We had truck drivers earn almost $1 million. Frontline workers who had been with the company for a significant period of time earned as much as a half million dollars. So life impacting amounts of money for individuals that then translated into community benefit because local tax revenue goes up, which benefits the school system. People redeploy the money into the local economy. Maybe they start a small business, buy a home, pay for their kids to go to college who might not have had a shot at a college education before. And that, as you say, to kind of zoom out from that one particular example, it's better economically for wealth to be more distributed. As we know, when wealthy folks get more money, they save. When working class folks get their first opportunity to build wealth, they spend, they buy a home, they put the money oftentimes back into the community. So it leads to actually a more resilient economy and faster economic growth. So I think there's all sorts of benefits to this. This isn't community specific, but economic labor productivity, which is what economists have been complaining about in America for a long time now, there's a real productivity benefit to changing these cultures and getting all employees involved and engaged in the business.

[John Bowman]

I think one of the stats, or maybe myths of growing up in the 80s, Pete, was just the American dream was all about owning a home. And that's where all wealth creation came from. And several fronts. I just want to reinforce what we replayed and remained stead steadfast and reminding the listeners in the intro was that it pales in comparison, I think, to use your words in one interview, to equity ownership. So what you're doing is giving them a lever, quite literally to create wealth creation that is unparalleled, even homeownership over the last four or five decades. So again, really exciting to see that proliferated through a company. And then as we said eventually into a community. So I want to close, as I promised, by bookending where we started. I mentioned in the intro that these are the headlines that I wish we saw more of. Why aren't more people writing about ownership works and what Illumina Capital is doing? That is the good virtuous story and versions of applying private capital in a way that really, to me is what this vehicle and structure and scheme can really do. What would you tell? What advice do you give to the larger industry? You guys seem like stewards to me. At Kaya, we talk a lot about professions and stewards and what it means to be a standard bearer or regent of something bigger than yourself. And you guys epitomize that. So maybe, Darren, I'll start with you with a slightly different version of, frankly, the same question we started with, which is with these two great examples. Why isn't there more being written like this and what can we do collectively to make sure that more of these stories bubble up?

[Pete Stavros]

I think one of the areas that we can look to is the edges of Hot Topic within the financial industry is AI. And I know that there have been a number of studies on ChatGPT that show that ChatGPT suggests that people charge 10 to 20% less for a car if they have a black sounding name. If they're selling it, the recommendation is 20% less than if they have a white sounding name. All things else being equal and part of what ChatGPT envisions, if you ask if a woman's name would beat a man's name in chess, is they consistently lean towards the man's name. Winning in chess so much, every time in terms of its ability to generate ideas. So thinking about these biases that are leveraged from human biases that are getting codified when we look at every frontline kind of worker at Moody's being augmented by AI systems and beginning to underwrite the debt of countries and cities and things of that sort. I think thinking carefully about the intersections of these important emerging areas and investment and addressing some of the biases at the ownership level, so at the deployment level and learning and committing to continue to learn about how to address one's biases and the biases of organizations so that we can create a set of investment strategies and investment community that looks at these biases collectively addresses them in order to unlock impact and returns across the ecosystem.

[John Bowman]

So that ecosystem is exactly what I'm getting at, Darren. And so Pete, I'm going to let you have the last word on this one. How do we encourage this ecosystem to tell more of these stories, to create more of these stories so that they can be told. What is holding the narrative machine back from speaking more about some examples like this?

[Darren Dodson]

Well, it's a good question. I would say for a long time, nonprofits, members of the press, government officials and others have been pleading with the business world, do better, do more, capitalism's burning down, et cetera. I don't think that has been effective. And I think what we need is a business case, which is what we're trying to prove around employee ownership and this idea that treating workers better is going to lead to better business outcomes. So I think it's on us to build the business case, hopefully prove this out. And then if I were to make a plea to people in the private markets, I would say, okay, not only is there a strong business case, but geez, you've got a huge opportunity to cascade change and make a difference. A large private equity firm has more responsibility for people than the mayors of most towns. Just think about the scale of some of these firms and how big of an impact that they can make. So that's like on creating the narratives, to use your word. And then in terms of telling the stories look positive, stories are not that interesting. I think that's been well proven. Human beings are drawn to negativity, which creates all sorts of problems. I'll tell you one of the more concerning conversations I've had on this general topic, not just employee ownership, but trying to move the needle on human capital matters, is with the guy who runs a major private equity firm. And he said, pete, I don't need to do this. We're under the radar. We're not kkr, so no one's coming after us. And if I stick my neck out, maybe they will. If I do X, Y, Z for workers, why not more? And God forbid something goes wrong, I'm going to get skewered. So I'm just going to pass. And that gets into. There's this great book by this psychologist, Jimmy Ozaki, it's called Hope for Cynics. And I would have read the whole book for this one quote. The quote is, cynicism is a tool of the status quo, which I think just really resonates with me. So I think to move the world forward, everyone's got to check their cynicism at the door and be open minded. And that's whether you're a company cynical about worker ownership or whatever the topic is of the day. And it's also for the press and the people commenting on the business community out there. Let's all try and be open minded. And I think we're all in this together. We're all Americans trying to make this place a little bit better.

[John Bowman]

Yeah, that's a wonderful sound bite to end on. Yeah, that quote is fantastic. I'm gonna have to use that one shamelessly, Pete. So thank you guys. As I open, it's a great honor to have you. You guys are doing amazing work. Keep at it. I must imagine that you feel like you're alone and off in a corner and not getting any notice, but great change is occurring and so I just know that Kaya is a fan, know that we are fans and you're doing exactly what private capital was meant to be doing and utilizing its advantages for the benefit of all stakeholders, which is really what this is all about. So, Darren and Pete, thanks for joining us on Capital Decanted and listeners, stay tuned for the Last Sip. Well, welcome back to the Last Sip. Aaron. I didn't want to let those two go. You can just feel the passion for what they've built, for what they've done, for the impact they're having. It is as genuine and as authentic as anything I've seen in private capital in the industry. It's just I enjoy every time I get to talk with Darren and Pete and the work they're doing. So that's the first time you've gotten to hear much of those stories, at least directly from them. I know you did a lot of prep and watched them, but what were the big takeaways or inspirations that you had?

[Aaron Filbeck]

It was the first time I had met them, but it's nice to see. Maybe the whole point of this episode is the whole use case being used for good and seeing some of those different examples play themselves out. There were probably two takeaways for me at the very end. Pete made a comment about the business case and not just do better, but actually show how it can be used for good. Clearly he's doing that with some of the employee ownership models that he's introduced with some of his different companies. So that's very interesting to hear that come from him. And then the second thing that I was thinking about is he was talking and Darren was talking and just going back to our intro and walking through some of these different tools that GPS use as part of their value creation process. I think where it all falls apart is the misalignment that tends to happen and that principal agent trade off that should theoretically be much closer together. When you look at Private capital. But when you start to drive wedges into that, that's where you get some of these horror stories that have taken place. And so I do wonder about the ability to. We'll use the employee ownership as an example. You've got all these people aligned, all of these people are owners. And so, yes, there may be tools that you can use for value creation, there's dividends and recaps, but everyone is participating in that. So you don't have as many horror stories that come out of it. So those are two takeaways. But how about yourself?

[John Bowman]

Yeah, there's more governors around it. I think that's just a check. Even if it's a cognitive check, it's a check because the impact's greater. I was going to mention the business case. I mean, I think that was a really good point. You can argue till you're blue in the face about doing good and how you're changing things and the social value and look, that should be enough. I think it is doing the right thing. But the language of our industry, rightly or wrongly, is business case, economic case. And if you can combine those two, as Pete closed with, and that is the holy grail of both convincing somebody and making a change. The other thing that struck me just the more we flowed through the course of the episode, and the Q and A in particular, is that while these two efforts and the pools that they're playing in, if you will, feel very different, ultimately what they're trying to do is exactly the same, which is, to use my earlier word, get a flywheel going on generational ownership. And that flywheel, in both cases spirals out to other stakeholders and community. And these are small ripples in the pond, but they then grow into something very, very powerful and visceral across families and communities and businesses. And that's what both are trying to do. And I like Pete's point too, and Darren touched on this as well, is you're not going to convince people by arguing. And I think you've just got to show it, you've got to demonstrate it, you've got to get this going. And both of them have really built a pattern and a track record that's starting to speak for itself. You don't need to fight the narrative. You change it by actually changing the nature of the industry. And it fits the whole reputation. It was a beautiful way to end. My tendency would be, no, defend, correct the exaggeration, correct the unnecessary negativity and demonization, and it's not going to make much of a difference? Why does it matter? Let's just make things better. So I give them a ton of credit. So, listeners, our fun question. We're going to close with Aaron. We grew up in different times, so these answers have very little risk of intersecting, I can tell you that. So what was your favorite TV show growing up?

[Aaron Filbeck]

So I actually grew up in a non TV household. So any of my TV was through buying through itunes, which may be a foreign concept to some of our listeners, depending on you grew up. But I loved all the Nickelodeon shows, so Drake and Josh was a household favorite. And by household, I mean secretly in my room. But I always loved those shows growing up. How about yourself?

[John Bowman]

I'm really torn on this. Alex P. Keaton from Family Ties. This is Michael J. Fox's big breakthrough. Really should have been our president. I mean, he was just a caricature of 80s conservatism, which again, was the water I swam in in my teenage years. But I think, to answer the question with that preface, very close tie between a team and Knight Rider. And I'm going to give David Hasselhoff and Kit his car, his AI car, way ahead of its time by about 40 years. The nod. I wanted to be David Hasselhoff. So there you go. Knight Rider.

[Aaron Filbeck]

That just explains so much, Sean. Explains so much.

[John Bowman]

It can't be shocking to you. Reruns are out. The ringtone of the opening of the show is what I hear every time you call me Aaron. So. Oh, good, it's still alive and well.

[Aaron Filbeck]

Good to know I learned so much about you in these episodes, John.

[John Bowman]

Well, I have to leave it there. I'm sure we've captivated the audience to great degrees as we closed, but that was fantastic. Really great ride. The preparation. I think listeners probably can tell by now the preparation really is where we dig deep and where a lot of these emotions and angles and themes arise and bubble up. And this was one that was, I think, more enjoyable than any we've done. So I was just excited and had a great ride. So, Aaron, thanks for that. And listeners, thanks for hanging with us. And we will see you on the next episode of Caplan Decant.