← How I Invest with David Weisburd
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- [00:00]
A
Jason, you built it into a platform that has six and a half billion dollars assets under management, going after an overlooked sector. Why do you think the markets underprice overlooked sectors?
- [00:13]
B
I grew up in the Midwest. Actually, I'm looking at, on the wall, you've got a license plate that says Fab 5. Actually played against Chris Weber in basketball in high school. I'm about 510 on a good day. So I decided I had to go into asset management. We've grown up, at least you and I, in a period of time when everybody's looking at the coasts. You're looking at Silicon Valley for what's coming out of it, technology wise. And now it's AI or you're looking at New York City where it's all finance. But nobody really paid attention to what's going on in the middle of the country, which happens to be most of the country. And what we saw in the middle of the country was industry. And the rhetoric that we're seeing today is that industry's been forgotten. And we started noticing industry and industrial assets about 15, 16 years ago when again, this was right when we were emerging from the financial crisis, when most everybody I knew was paying attention to their iPad and what app could they make. And we looked the other way and said, well, what's that thing rusting in the middle of the country and moving things around?
- [01:13]
A
Maybe you could unpack that from a capital markets perspective. Why does that translate into these opportunities?
- [01:20]
B
The industrial supply chain actually grew up with our country. Our rail system, our shipping system, our trucking system. It's incredibly flexible. But it grew up very regionally because our country grew up geographically regional. You had grain in the Midwest, you had the energy in Texas, you had lumber in the Northwest. So all of these companies and industries kind of grew up as mom and pop sectors. They kind of emerge and no one paid a lot of attention to them because it was hard. You had to be really involved in these businesses. As our country grew, you started seeing a little bit more conglomeration or aggregation of these companies. When we emerged from the financial crisis, my background's actually distressed buyout guy. And so I'm actually a contrarian by nature. And so again, as everybody was looking around toward the coast about what's the next great technology thing? We started looking at, well, what's the least volatile thing we could possibly imagine? And I started poking around at big balance sheet items, I started poking around at long term contracts, I started poking around at just really what is nobody paying attention to today?
- [02:22]
A
You have six and A half billion dollars under management. You're a minority owned by Blackstone, but you didn't start that way. Tell me the story about how you
- [02:30]
B
went from zero to one post financial crisis. I was investing in distressed companies. And distressed companies are actually, I don't think, very complicated as long as you focus on balance sheet and cash flow, right? So you've kind of have a burning building, something's wrong, but if you've got a good structure, you can go in and fix it. And then when we ended the financial crisis, I started looking around and thinking two things. One, there's behavioral change so there are no more distressed companies out there. And two, I was really worried about inflation, which I think I was right, but only 20 years too early. So then I started looking around and poking around at leasing companies because I wanted something that was what I knew, balance sheet and cash, but had no volatility. And I also kind of thought of myself as sort of a hybrid operator because I'd run some of the distress companies, even though I'm not really. So I was looking for something for a moat. And as I mentioned in the opening of the. When we started speaking, one of the things is I was just sitting by a train track and watching the train go by. It was, I think, oil tankers or hopper cars. And I started actually remember thinking, who owns these assets? Like, it never occurred to me. And then when it's actually kind of fun if you, if you drive around or look at things and just start thinking about who owns everything, there's all these little companies that own all different things. My partner, he kind of approached it from a different perspective. He was running an insurance company and he was buying fixed rate debt related to rail assets. And he started looking at the asset and the debt was generating about a 3 or 4% return for him. But when he really penciled it out, he saw the debt's five years. An average lease term was five or six years. The math seemed to indicate that the owner of the asset was generating 15 to 20% cash on cash yield. And so we both kind of triangulated and saw, well, this is a great asset. How come nobody's doing it?
- [04:19]
A
Saw the opportunity. How did you get started?
- [04:21]
B
My wife will tell you that. I tell her that I'm super clever all the time, but as clever as I think I might be, I didn't know a single thing about railcars. I looked at it and thought, oh, this is box. Like, how hard can it be? It turns out, by the way, it's incredibly hard. It's incredibly technical, incredibly customer centric. So we needed somebody who could guide us. I probably interviewed about 20 different people within the rail industry who to see if they could work with me. And I was really fortunate to meet a gentleman. He's now more or less retired. He's our chairman emeritus. His name is Jim Unger and he ran one of the largest rail car manufacturers and railcar leasing companies in North America under the Carl Icahn umbrella. Jim had just retired and he lives in St. Louis. And we flew out to visit him and talked with him and for reasons that I still to the life of me don't understand, he agreed to join us. And so Jim actually gave us instant credibility into the rail space. And I should say I should back up a little bit. This wasn't without a lot of research. I probably spent a year learning about the rail cars because I thought they were super interesting. And we saw an opportunity where what I saw was great cash flow, inflation, correlation, downside protection, tax efficiency. Actually if you're a taxpayer and no one was paying attention to it. And I tried to buy it myself, as did my partner, and we couldn't find any way to buy it. And so we thought, here's a really interesting asset, here's one that I would like to own because it seems like it's unique, but I can't get it if I want it, maybe other people want it. And so now we started thinking like, well, how do we build a business? And when we first started, we thought if we could just own a bunch of these would be a really fun investment to own. It was almost like our own little industrial VC company. We met Jim and he kind of gave us instant credibility within the marketplace. And then we saw an opening within the manufacturing base and started talking to manufacturers to solve what really was a cash flow and balance sheet problem. And so we went to manufacturers, we set up partnerships with them and just started buying rail cars off their balance sheet. We were fortunate that we went around to a bunch of friends and family, right? We'd made money for a bunch of people over the past decade or two. And we raised about $60 million to start. And we told them exactly what we're going to do. And again, just like Jim joining us, you had a bunch of intrepid investors who thought, well, you guys seem smart. I don't really understand what you're talking about half the time, but it seems like a clever idea. And we started just buying up rail cars and the model proved everything we said we were going to do actually happened. And so we raised $60 million in the first six months and then we deployed that and everything performed as expected. And then we raised quickly another $110 million. And then we just slowly started growing. In some respects, it's a little bit like VC like you and I were talking about before. I think we were lucky. We were a first mover. Advantage is enormous. I think that it allowed us to kind of grab a bunch of land very quickly when other people weren't looking. And that allowed us to then start putting our stakes in the ground and creating a moat around what we were doing. When we started raising capital, I had quit my job. I just had a second child. We had our first investor that was going to commit to us. I think it was $15 million. He told us everything was approved and ready to go on a Friday. I went to sleep Friday thinking everything was great. I woke up on Monday morning, called him and no answer. And then I still didn't hear him during the by noon I called my partner and said, huh, I wonder where this guy is. I hope he didn't get fired. Ha ha ha ha. And sure enough, I learned about two hours later they got fired. And so our first $15 million we were getting ready to go disappeared. And I remember sitting there like in a cold February, dark New York City night and what my second child was just there and thinking like, boy, this had better work because otherwise I'm going to have to go find another job or do something much more not quite as entrepreneurial.
- [08:30]
A
What were you thinking at the time?
- [08:31]
B
I was thinking at the time that I had a very forgiving wife. But it was one of those things where I think to be an entrepreneur you have to be so committed and you have to have unbelievable blinders on in order to do what you're doing. Because what you're really doing is you're starting something that everybody thinks is silly, right? Because if everybody didn't think it was silly, they would do it themselves. So you're starting something, you talk to people, they tell you no, you hear no a million times, and you just have to keep going constantly, constantly, constantly. So at that point in time, I probably myopically didn't think too much of it because I was so committed to just going, going, going. And I'd given myself like about two years to see if we'd get it. And we were pretty fortunate. We actually that $60 million in about six months, which was super fast. Then we raised the next 110 in about six months after that. So we started having a flywheel that started really going. I learned that subsequently. I asked people, why did they invest? And first they liked us. They liked the story. I think they liked my Midwest roots. Jim certainly gave us a patina of credibility. But also, I subsequently learned that we were a great cocktail party discussion. Like, everybody was talking about the different things that they were investing in. They all were fairly great, but maybe all sounded the same. And then someone said, well, have you heard about the railcar leasing business? And I think that actually gave us an enormous flow of folks that called us, if nothing else, just to hear something different. So it kind of helped us out a lot.
- [10:00]
A
Novelty is such an underrated aspect that human beings and smartest investors unconsciously look for. Everyone thinks they're immune to this novelty bias, but then they end up making these crazy investments when they had a perfectly good portfolio. So sometimes a little bit novelty could be great. I have a working theory on what you talked about. These blinders. I call it the V shaped ego of the entrepreneur. I think when you start as entrepreneur, paradoxically, you want to have a very high ego, almost to a point of arrogance, because why else would you start? And then a lot of people actually stop there, and they don't actually end up developing. And I think you need to go as quickly as possible to a low ego position and start to learn, start to iterate. And then as you scale, you have to go back to high ego position. Why? Because you have enough knowledge, but you want to keep on pushing the envelope. You want to keep on taking big bets. Now you start getting criticism. What do you think about this theory?
- [10:53]
B
I fully subscribe, actually. When my partner and I first started, I remember our conversation where he said, and his name's David, by the way. David said, listen, I'm not a great partner. I'm hard to get in touch with. Sometimes I kind of go off on my own, start thinking. And I said, that's great, because I don't want to listen to anybody. And I think there's an element of, like, I think to be an investor and to be an entrepreneur, you have to have an incredible amount of hubris to think that I know better than you.
- [11:20]
A
And especially when you go into an industry that you've never been in.
- [11:23]
B
Well, not only that, at least for my case, I was going into an industry that's been around for 100 years, right? So what can I possibly know that hadn't been discovered 100 years ago? It turns out we were approaching it. This industry needed new ideas. Frankly, I still think the rail industry stuck in the 80s or 90s, and we're trying to bring it into at least the early 2000s. You have to go in with such confidence in yourself, because you are going to. You got to make bets. And I think bet is the wrong word. You're making an educated guess based on the information you have. So it's a little bit. It's not gambling, but you are taking a shot that other people don't have. And then I agree with you, you're going to get real low. Because not only I define leadership as like eating a sandwich of like a. A garbage sandwich every day, you have to listen to what everybody's saying. People come to you with your problems all the time, and you have to just constantly just listen, listen, listen, and solve these problems. And so it actually is super low ego. But at the same time, you got to balance it with that hubris, which at the end of the day is, I know better. Which is a weird thing to have because you're raised, particularly in the Midwest, you're raised to have deference to your elders, deference to other people, deference to people who know. But sometimes you just have to go. I will say I learned that a couple of ways. And again, this is the hubris speaking right now and the ego speaking. But I learned early in my investment experience that when I was making investments in the distress space, I had a real conviction. But I listened to people that were older or had been doing it longer, and I thought, well, I should give them a deference. And what I found was that I was right. I didn't like the investment. I didn't raise my voice enough, I didn't sound the alarm bells enough, or I deferred. And I think you have to have those experiences where you learn, where you didn't follow your instinct, you didn't follow your gut, you didn't follow your knowledge, and you made a mistake. And then you just started having confidence in your own decisions. And then I got some great advice when I went to law school originally, and then I went to business school. When I graduated from law school, a senior partner from one of the large law firms, I asked him for some advice, and he told me two things. The first one is he said, just make choices. He said, most people don't make choices. And when you're young, you don't really appreciate that all the time. But as you get older, you realize how important it is and also how few people actually want to make decisions and want to make choices. So I'VE always tried to make choices and you don't have to be right all the time. You have to be right much of the time, but not all the time. And most of the choices you make, you can correct if you're wrong. So making those choices became incredibly important. The other thing he told me was to buy a saab. He said BMWs and Audis are too flashy when you're just starting your career. And Ford and G at the time this was in the 90s, they weren't making that good a car. So we said Saab tells everybody exactly. You're like conservative, thoughtful, but also making smart choices. Of course I never followed that because I'm from Detroit. So I have to buy Ford and GM cars. I don't know if Chrysler is a Detroit car anymore, but Ford and GM cars all the time. So I've had them ever since.
- [14:33]
A
Most investors don't lose because they lack information. They lose because they can't separate signal from noise. Every day, thousands of earnings calls, C filings, expert interviews, and market updates compete for your attention. The challenge isn't finding more research, it's finding the few insights that actually change your investment decisions. That's exactly what I unpack in my conversation with Ryan Fenerty. Instead of talking about AI in theory, we discuss how leading investors are using it to surface, differentiate research, move faster than competitors, and make more informed investment decisions. And if you're an investor looking to gain an edge through AI enabled insights, I think you'll find this conversation valuable. You can access this limited release episode by going to alpha-sense.com how I invest that's alpha-sense.com how I Invest Double clicking on this V Shape Theory One of the intricacies there is a lot of people think a lot of leaders are egotistical. And that's probably right because in order to get started, it's a barrier to entry. So everybody that is a business leader, that is build something big at some point, unless they had daddy's money, they had to basically start with some arrogant assumption. But the ones that really get to the other side, they need to have humility in order to integrate. And then at some point they need to reenter the egotistical position. Not because of entitlement or because thinking that they're the world's greatest person, but because they've gone through this arc of humility. They now actually do know better than the market.
- [16:02]
B
There's even more to that. I think that as you and I were speaking a little bit earlier, you find a Lot of entrepreneurs didn't come from much. I had a professor in college who was really encouraging me to be a writer. And I was better at math. I really liked writing, and I thought it was a very romantic thought to me. Like any college student I was, particularly in the 90s when there was a period of grunge. I was enamored by Jack Kerouac and like on the road and all those things. And I thought it was a romantic life, but I was better at math, so I went into finance and investing. But he also commented me that he saw a lot of students who came from kind of middle class or upper middle class backgrounds. And because they had a little bit to lose, or even a lot to lose, they were afraid to take chances. And I do think there's something where you don't have as much, where it gives you a lot more license to take chances. It's also kind of a funny thing. I did go to law school, and I remember there was a saying where the A students became judges, the B students became lawyers, and the C students became billionaires. And I think that also was the idea that the C students, like, didn't have the options open to them that the A students and the B students had. So they just, like, a little bit like Cortez, they just had to burn their boats and just head off into whatever direction they wanted to. And in fact, I remember a lot of my classmates, the ones that really struggled to get jobs, ended up with the most interesting careers because they had to take directions that other people didn't go. So all this gets a lot to the contrarian point of view, right? Where you're forced to make choices because other areas aren't open to you. From my perspective, I do ascribe to the confidence and arrogance technique. I just never really wanted to work for somebody. I felt like I had my own ideas. I felt like over time, you learn. I've got teenage daughters now, and I still say to them, you should really question everything that anybody over 30 tells you, because we're probably wrong. The world's changing so fast. And I was always questioning everybody and everything I actually put on my cubbyhole in my first job, I wrote. Why? Because every question I was asked and everything I was told to do, I asked myself, like, well, why am I doing this? And most of the time, you don't really know why you're doing anything. And so this gets to like, one, what are the paths open to you? Two, why are you listening to other people? You have to start thinking that you know a little bit better than them. You have to be young, I think, to do it too, because you have to have nothing to lose. It's obviously a lot harder to do when you get a little bit older. So my whole career and my whole path has been, frankly, moving around to try and not work for anybody else and start creating my own business. So you gotta have a lot of ego to do that. And then the second point that you said is, you gotta go in there and then you're gonna make mistakes, and you gotta be terrified. And I remember making some investments that I was convinced were the right investments. We actually did a take private of American railcar industries, which was a rail manufacturer with a really big rail car balance sheet.
- [19:01]
A
How big was that deal?
- [19:02]
B
That for us, that was a big deal for us. That was about $2 billion of enterprise value. And most of the value, like, we saw the value. We thought it was a public company. We thought it was the rail car. This is, again, folks, hadn't really focused on infrastructure and real assets, and we saw that. We thought that the balance sheet was undervalued. It was largely controlled by Carl icahn, which also makes you question whether you're making the right move or wrong move. It was a super fun negotiation to be able to negotiate against him and his firm. But we bought that business, and I had real conviction about it. And then every. And it had a small manufacturer, and when we took that business private, I would say 50% of my investors called me, really asking me, like, what right did I have to be buying a company from Carl icahn that also had a small manufacturer? Which was complicated. And I remember just being terrified, and I couldn't sleep, and I started questioning myself and thinking like, oh, I made the wrong decision. And my wife was very supportive. And then I started explaining it to my investors. They were still skeptical, but then we just started proving out the model and proving out what we were doing. And. And I think that ability to take criticism and then forge forward, I think is really important. Teaches you how to kind of manage through things. But again, it also kind of keeps your ego in check, because for a moment there, I thought I was really wrong. And I had all these smart people that were telling me that were critical of it. And I thought, oh, my goodness, I'm really wrong, and I'm going to take the responsibility of investing other people's money incredibly seriously. It's a trust business. You've got to be transparent and open, and you got to maintain that trust with them. All the time. And so I was worried that I'd kind of breached that trust, but it worked. But we were right and it was undervalued and we knew what we were doing and it proved outright. So I think that was a little bit of the humility piece. As you grow more and more, you have to maintain that humility. Because if you get over your skis and you get too confident, I think you do start seeing people go outside of what they're good at. The one area I would say the ego part is as you do this more and more, I think that you have to have confidence in your abilities and you have to know what you're doing and trust yourself. But I do think you have to get rid of the hubris and the ego that you started with because it's you're growing, it becomes harder and harder to manage. Humility is really important because I think if you want to grow your business and interact with people and continue with that trust, I think the humility to know that you're not always going to be right and the humility to know that you need other people to grow the business becomes ever more important. And the thing that I've learned the most as I've grown my business, and this is cliche, but I guess it's because cliches often are true, are that you really do need other people and you need other people to do their job. And I think that's really hard for a founder, by the way, to give them autonomy and give them choice and give them freedom to make their own mistakes. So I think you start high ego, you start questioning yourself a little bit, you work your way out of it, and then you have to be a little even keeled. I know a lot of tech CEOs and entrepreneurs are mercurial. And you read all these stories and there's a lot of movies made from them. Maybe it's industrial, so I'm industrial Midwest, so you gotta be a little more even keeled. But at least what I've found is that the humility is really important.
- [22:37]
A
The distinction there is. If once you're successful, you need to keep on using ego to push ideas on people, you probably have the wrong people around you.
- [22:43]
B
There's a difference between ego and inspiration, right? So I think as I've learned and as I hope I've grown as a leader, and it's funny, you probably hear this from a lot of your entrepreneurs. Like, I think I'm a good investor and I started with some good ideas and then I'VE grown and you end up doing less investing and more managing. It's unclear that any of us are really good managers. As I've grown more and more, I've learned that it's really important to kind of set direction and wave the flag. And you have to be really. At least my style is you have to be really transparent and really truthful, both with your investors and your employees and the companies that you are investing in or the people that you're working with. But you also have to kind of give the big vision, because I think that's really important. We all want to rally around a big vision, and I think that's really important. And that requires, again, getting back to ego. Like, enough ego that you feel confident to say, here's where we're going and here's what we're doing and here's why we're doing it. And. And again, we're going to do something different than everybody else. But then again, enough humility to say to people, come, follow me. But, like, we got to do it together. Like, and within my organization, the team orientation is. Is really critical and it's really important. I hate titles. I think titles are the worst possible thing because you end up having people work to their title or you have people managing title other people based on their title. When I was younger, and I'm sure you were the same, like, I wanted as much responsibility and I wanted to do as much as possible. I didn't care if I was an analyst and associate. So I think that it's important to kind of create a flatter organization where you have people give people the room to kind of reach and grow. That takes a lot of confidence, too.
- [24:30]
A
So you may hate titles. People love titles. And in theory, they're also cheap or free for you to give out. How do you balance those two things?
- [24:41]
B
I fight it tooth and nail, actually. Our firm is almost 15 years old. We've only had titles for about four years. We got to a point where we did need them largely for what you said, because people love them. We first started by having only three titles. We said associate director and managing director. In order to be a managing director, you had to actually manage somebody. So I kept fighting it. I thought titles should be descriptive of actually what you do. And again, that fails over time because people do want to get promoted. The cynical part is, which you've heard, actually my wife was working at one of the large banks and they promoted her, but. And gave her much more responsibility and a big title and no more money. And So I thought, oh, well, that's clever. Now we want everybody to make a lot of money and grow. But to your point, titles are a cheap way of recognizing people. But I do think you gotta put meaning around it because it should mean something. If we're gonna do it, it should mean something. And so the way that we approach it is you have to. It's almost like I remember learning how to ski in Michigan at a little hill. And you had to be able to do a certain turn, a stem turn and a certain hockey stop. So same thing with titles. We gotta make sure people can do the stem turn, we gotta make sure they can do the hockey stop, maybe they can hit the moguls properly. So that's kind of. That's how we approach it.
- [26:00]
A
Started with the $60 million in assets. You're now six and a half billion dollars and assets under management and 13 and a half billion and assets that you own and manage. What's been the biggest challenge in terms of scaling?
- [26:14]
B
The biggest challenge of scaling has been, I'll get back to leadership and management. Because the investments in the assets, like we're doing from an investment point of view, what I kind of preach to everybody is like, we should be like McDonald's. We should be doing the same thing over and over again. We don't need to reinvent the wheel once we get that flywheel going. That's hard to do, by the way, to get people to do the same thing over and over again.
- [26:45]
A
Because people, they seek that novelty again.
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B
They do seek. It's exactly right.
- [26:48]
A
How do you solve for this novelty that people need?
- [26:50]
B
You're constantly course correcting. I find it amazing. It's a little bit. I don't sail, but I imagine it's like sailing like you set your due north and you find that over time you've like drifted. It's. Even with investment presentations, we created a template. It's a simple template. Like, just fill the boxes in and put the things in there. And after about three or four months, the template looks nothing like we've given to people. They're kind of going all over the place, extrapolating. I can't read it quickly enough. And so then you just have to sit back and ask people to do it again and redo it. It's actually contrary to what you and I talked about, because we started these businesses with the idea that we're going to do something totally, totally different. And I actually think I almost liken being an entrepreneur. Like you're on a pirate ship and we're going to be the pirates, and we're going to sail to the different islands and we're going to raid and pillage and we're going to do all these wonderful things. But I really want a bunch of bean counters on my pirate ship who are just doing the same thing over and over and over again over time. You want also other pirates with you, because you can't really conquer new lands unless you have other pirates with you. It's this constant balance, and I think it's healthy, because if you don't bring other people that are coming up with new ideas and asking you to do things differently, then you're going to miss it, too. It's that innovator's dilemma, right? So you kind of have to balance it that way.
- [28:08]
A
Use the analogy of pirates and conquering new land. Use a baseball analogy. Is that a position issue, which is you want your pitcher to be extremely good at starting new products and you want your catcher to be really good at using these templates. Is that a positioning issue?
- [28:23]
B
It becomes a positioning issue. I think initially, as you're growing your business, you have a lot of utility infielders. And then over time, as you kind of move up the ranks in the majors, you realize that, like, okay, great, I need great starting pitcher, and I need a great shortstop, and I need a great center fielder. And so over time, you either have to train those utility infielders to become specialists or you have to bring in specialists. So I do think. And again, this gets to your question, going back to your question about what's the hardest thing? I think the hardest thing is, from my point of view, it's actually letting go and bringing in those specialists and not directing every single play to all those utility infielders, but being a manager who's sitting back and saying, okay, great, I've got my top starting pitcher that I frankly paid a lot of money for. He's really good. He knows or she knows what they're doing and letting them do their job. I think that's unbelievably hard to do. I find it very confusing because we all read a lot of books about what makes good managers and what makes good leaders. And I talk to a lot of great managers and great leaders to learn how they manage. And I find these two constant threads that are contrary to each other. The first is that these founders and leaders and managers know everything about their business. They can tell you the scheduling, the different small P and L items. They know all the minutiae. But at the same time, they're clever enough to hire really great people where they give those people the room to make their own choices. And I don't think that those two things don't always come together naturally, and they also seem like a bit contrary to me. So I'm very much in the details and know everything that's going on, but at the same time, I'm bringing on new talent and letting them kind of grow and run the business themselves.
- [30:18]
A
You mentioned that at some point you want to get that star pitcher. Does that kind of coalesce with the organization growth that at some point you're actually able to attract that star pitcher, or is it just a matter of it's not yet time to get that person?
- [30:30]
B
From a hiring perspective, one of the things that I've learned is that you got to hire one to two to three years out if you really want to grow and you really want to scale your business, you got to hire for the future, not for today. There's a couple things that come together. One, you have to think about tomorrow. Almost everything that we're doing, we don't think one year out, we think three, five, ten years out. So the same thing goes for hiring, same thing goes for organization structure. Two, you have to find people that agree with your ethos. And so, for example, what I tend to say to folks, and Blackstone's a great partner for us, and we work with a lot of these big banks, but if you want to go work for a big institution, you're probably not going to want to come work for us, right? So we're looking for those people that are really looking for a smaller, flatter, more organization that will think about things a little differently, will constantly feel pressure because we know the bigger folks are looking at us and could come at us. And so you gotta be a step ahead all the time. So I think it requires a certain type of person I think you gotta hire in advance. And then I think this is where the leadership comes in, which we talked about before, which is that I think you have to really paint them a vision that they believe in. Right? Because I have to believe in it and they have to believe in it. And I think people can tell when you're being genuine and they can tell when you're excited about it. So those three things come to play. And I think everybody that's joined us has been somebody who didn't want to go work for a large organization, particularly our leadership, didn't want to go work for a large organization, felt a little bit that they had Something to prove. And then also liked the idea of being a little bit on the pirate ship. And I think that's really important.
- [32:06]
A
You mentioned something that didn't surprise me, but the scale of it did surprise me. Hiring one to two to three years ahead. Maybe you could double click on why you do that.
- [32:15]
B
First of all, hiring is unbelievably hard. I did distress buyouts for about 10 years. And I think the number one thing that I learned is culture is everything. We came up with pithy sayings like, a fish stinks from its head, but culture is critical. And I saw more good businesses blown up because of bad leadership and bad culture. The cultural element was so important. So what we really look for are we hire and we think far ahead. We really look for people that are focused on teamwork, that are comfortable initially with a lack of a clear path. Because when you're creating a business and you're investing like we own, we started with rail, and now we own chassis and trailers and containers and tank containers. And we moved into aviation and engines, and we're doing some work in kind of port and infrastructure. All those things you have to kind of create yourself. So you have to have people that are really comfortable with working as a team, being collaborative, but also being a little bit uncomfortable about where the direction is going to go. Because it takes us a couple years to actually figure out what we're doing and where we want to go. So all of that boils down to, like, I spend a lot of time looking around. Like, I think one of my biggest roles is to find people, right? As a leader now, I think about growth. So it's people opportunities, and frankly, raise. In raising capital, the people parts the hardest. You meet a ton of people. It takes six to 12 months to find the right people. It takes another 12 months for those right people to actually figure out where the bathroom is half the time, like, where to go. So I'm already two years behind if I start now, right? So I'm starting now thinking three, four years from now that I'll have that person that's going to be working and doing the job by the time we need it. It's the same thing for investing, by the way. Like, if you're waiting for when the investment makes total sense, you're going to have missed it. You got to take a little bit of a leap about where you want to go.
- [34:17]
A
I wonder if a lot of that is when you bring in new people, they don't just fit into specific box. They bring a new way of thinking to the organization. And you need that new paradigm in order to grow. So the new person will come in with a different paradigm and say, holy, like, why aren't you guys doing this thing? And it pulls you in that direction versus just plugging an existing hole.
- [34:40]
B
I think that's right. But also on the flip side, we work with a lot of folks that come from big industry. We've found like the people that are our best leaders are not the investors. They're not people that come from the banks. It's people that come from industry because they understand the assets, they understand the industry, and they're going to approach it a little differently. But they've also come from really big organizations sometimes. And we want to make sure that they're not bringing in some of those big institutional habits, which I think can be dangerous.
- [35:09]
A
What's an example?
- [35:10]
B
I'll tell you, a funny one was really like, maybe this is a little simple, but we hired somebody and the first thing they said is, where's my ea? Where's my executive assistant? And I said, we have this saying, like, you got to screw in your own light bulb. And I said, we don't have executive assistance here. I think it was emblematic of like, we're in the weeds. We're doing our own work. You gotta do your own thinking. And it also is a cultural element of you. Like, we wanna be lean and hungry. That was just one area where we're not just managing. We're doing and we're managing. And I think that's a really important cultural element. So to me, that's always a red flag when people say, well, where's my executive assistant? Eventually we do need them because it's. It ends up wasting time. But we. We tend to eschew that.
- [35:58]
A
We really want people to talking about doing and managing. There's also this paradigm of great individual performance versus being a great teammate. How do you find people that have both?
- [36:09]
B
It's a balance of ego. It's the hardest hire. The best folks that we have hired are people that have succeeded and then failed and then succeeded again. And you can see it within their career path. And I don't mean failed, but they just were in inexperiences that were hard or terrifying or they made bad choice here and there. That is the experience that we found works well because they've got the confidence to move forward. They have been leaders before, but the humility again to know that they can't do it all themselves. I do think that comp. Structure, we're all incentive driven. At the end of the day, I think comp structure is incredibly important. So we do spend a lot of time thinking about compensation. So we've got a bunch of different verticals and we've got a bunch of different teams that are investing in those different verticals. But all compensation goes into one pool. And I think that folks are compensated in part by their own performance and part by the pool because we want people to be working with each other. So I'd say you've got to have the humility from past experience. You've got to have compensation aligned. And then I do think we spend a ton of time just breaking down walls. Like walls are constantly built up internally. People get focused, they get siloed, they want to do their own thing. And there's no great answer to this. We've hired somebody whose sole job was to make people talk to each other and make people go to lunch with each other and make people, like, do things with each other. We found that didn't work all that well. We started creating meetings with different groups just so they could share and talk with each other. I think that works to a degree, but too many meetings are too many meetings. So now we do create organizations where people periodically have to come together. And we create random groups that meet over the course of the year just to talk and share what they're doing, to just break down walls all the time. I think that's really important for teamwork.
- [38:12]
A
I've done now hundreds and hundreds and over a thousand of these conversations and how consistent human beings are across organizations. And I still can't figure out why there's such a natural inclination to silo yourself within organizations. How do you explain that?
- [38:29]
B
I can only speak for my organization as I watch it. I think one, within our organization, people work really hard. And I think people get really focused on what they're doing. And so I do think the siloing comes up because they want to do a good job. They are working to control what they can control. And so you end up. We all want people to be accountable, people to be responsible and people to take ownership. Right. Those are great employees and great leadership traits. So if you're going to do that, you tend to want to just own it and do it yourself, or bring in your team and run it and do it. You don't want to ask for help, so you end up building up these walls. The compensation is a big one. A lot of private equity funds, you get compensated based on what you kill. We don't do that. Only the most senior leaders of each group have a small part of their compensation based on what they kill. But it is really about what the whole pool is. So I think that the personalities, how they're driving and what they're doing, I do think it's, again, it starts from the top. I have a lot of confidence in my ability to direct traffic and drive where we're going, but I do spend a tremendous amount of time listening. To be a good leader, you have to be a really good listener. When I was younger and I used to see an email and I disagree with it, and I'd fire back an email really fast and say, this is wrong and this is why you should do it. And now I've learned, like, it's okay to take a beat and probably not send it back so aggressively. And I think that is really important because it sets the tone for everybody else where they can start to learn to be listeners. And, like, you're valued even if you're not speaking all the time. So I think it's their natural inclination is to own it. You kind of have to set compensation so that they're taught to kind of support other people. And then I think also from a leadership point of view, you have to be a good listener and bring people in as much as you can all the time. It's that truth transparency culture that we try and preach.
- [40:27]
A
And the downsides of your model of a lot of shared economics are pretty obvious. You don't have these kind of savages that go out and kill and bring in these big pieces of business that you're not at least compensating exclusively for that. What are the upsides of your model?
- [40:45]
B
I'll start with the downside, actually. The downside is that you do get a couple people that are, like, driving everything, right? You end up getting that. And you also get a couple. You do get a bunch of people that just think that I'm here and therefore I should just get it right. I'm always going to get paid. So I do think you have to be really vigilant about making sure that people understand their goals and their roles and, like, what defines success, because otherwise you do get a free rider problem. And I do think that we're really focused on making sure that we have great people working hard. In the flip side, we feel like we owe people the responsibility to care about their career, so. And care about their compensation and care about their family. So you got to work those two together. The upside is that I'm constantly told by folks that come into our office at how great our culture is. We have one advisor, he worked at an enormous asset management firm. And he comes in and he gives me some advice about how to grow firms. And he sits in the office and he meets people and he talks to people and he just kind of hears what's going on. And after the first week he said to me, this is a remarkably functional organization in ways that I've not seen from other investment firms. It's not to say that like many investment firms are very functional, but he was surprised and he said people seem to really like each other and I think it's really important. I also do think that people are pretty nice and I think that Wall street and particularly in investing, you can get really sharp elbowed. So I think the upside too is that people treat each other with a lot of respect. Again, I do think that comes from the top. I do think it's important to kind of acknowledge people and respect them and treat them well. And again, they have a lot of options about where they can work and how they can work. And I try not to lose sight of the fact that I've got a great responsibility for them to work with us and it's a privilege that they've chosen to work with us. So I think you got to kind of think about that as well. So the upside is really you get real camaraderie. I think people really try and care about each other. You have to find the right people. We've spun people out because they didn't fit the mold, they were too sharp elbowed. And again, the downside is you got to just make sure that you're constantly getting folks that are pushing to be the best, be the best, be the best. So it's hard to find those right people. But when you find them, you got to hold on to them.
- [43:10]
A
I just had the co head of private equity at Goldman Sachs and perhaps it's not a novel example, but what they've built this culture over so many decades of partnership. And I think their secret sauce really getting into the organization is just the bar to entry is just so high. You have to be so elite to come in that once you're in now you could be both compensated individually. But there's a collective aspect to it that works when you have the brand, when you have the partnership model. But you have to keep that entry so extremely high to make that sustainable.
- [43:43]
B
I think that's right. They've got a lot of friends that are partners or work there too. And I think Goldman is an amazing example of what you just said. There's a real prestige about being there and rising in the ranks and you become, you feel. My sense, and I've never worked there, is that you feel like you're part of something special and that if you feel like you have access to something unique and you'll even take less money for that. Right. And I think that. But you also think that you're working on the cutting edge and that's a real moat around why people want to work there. We try and do the same thing. We're obviously not Goldman Sachs, but I do think that people really have felt engaged that they've been working on something different. We're constantly told by our LPs or people that meet us that I've never seen anything like you before. And that's hard because people like to invest in what they know. Right. There's boxes and I don't mean that in a bad way. But it's also great because we do feel special and we're trying to explain to people and we're proselytizing and explaining why we're doing what we're doing. I think we've grown in a way that it does create that moat. It's really hard to replicate what we're doing. We've been doing this for 15 years. We're trying to take what Goldman does in a different way and say this is unique, this is special. We're doing things the way other people aren't doing. I try and paint a really big vision about where we're going. I believe in it deeply and also I think you can do quite well if we're successful.
- [45:10]
A
Part of what I believe Coleman Sachs's secret sauce is it's not only the high barrier to entry, it's also their self policing culture. If someone's a low performer, people will know very quickly. Have you seen these self policing behaviors in your own organization?
- [45:25]
B
It's worse, obviously smaller. We have about a little under a hundred people. I think Goldman is 10.
- [45:30]
A
A bit over.
- [45:31]
B
Yeah, a little bit over 100 people. It's again, this is the funny thing about the culture. I think that people always know when somebody's underperforming and I think people always know when someone is like not carrying the weight or is maybe a little bit cancerous to the culture. And we've had our own share of folks like that. I found that I was too slow to make a change. And I found within our culture like we preach this teamwork culture, we preach this collaborative culture. We preach this supportive culture. Like I don't think we're not a sink or swim culture. Like people are there to help you don't make the same mistake twice, but we're going to help you. And what I have found is that people don't raise their hand fast enough when they see problems. But when I do make a change, they come to me and say it was about time. And Goldman does a really good job of getting folks in that self policing way. I think that's something we're trying to work on because. And I'm trying to get people to kind of vocalize that, how you speed
- [46:34]
A
run that process also.
- [46:35]
B
It's on me too. I think this is the harder part of being a leader is that I was invited by one of my LPs actually to join a CEO organization. And I joke. They're all real people. I'm running a financial firm, they're running large organizations and industry. And one of the things that I've learned from them is you got to make choices, you got to make these decisions quickly and the longer you wait, everybody knows it. So I think it's also on my end to do things more quickly. And then I think then people will raise their hands more quickly.
- [47:06]
A
I have a master's in Business Administration, mba, but I also have a master's in psychology. And one of the things I think is highly underrated in human beings is not only how consistent they are, but how they look at these cues and these hierarchies. We've talked about a couple of those kind of very human traits. Ego, talked about titles. This is ingrained. I'm sure if apes evolved further, they would start to request titles as well. This is in our DNA. But also this highly underrated aspect where human beings want to be led and they're always looking at the tribal leader to see what he or she is doing.
- [47:47]
B
Yeah.
- [47:48]
A
So this mimetic copying of culture doesn't sound sophisticated. It sounds like human beings are closer to apes than some sophisticated people. But this is such an underrated aspect of great leadership.
- [48:02]
B
This is one of my favorite topics. I think that leadership and investing is more psychology than anything else. And again, it gets back to listening. I don't know that I have a lot of great traits, but I think I'm a pretty good listener. You have to spend a lot of time just sitting there and listening. And again, this gets back to leadership, which is also just sitting there and eating a garbage sandwich every day because you, you have to sit there and listen to everybody's issues and everybody's problems. And what you're listening for is a little bit of, like, what's driving them? Like, what do they care about? Why are they behaving the way they're behaving? It's the same thing for investing. We think that all investment decisions are completely rational, but they're not. Right? Like, behind all those decisions are a CEO or a seller. And they've got their own reasons for behaving the way that they're behaving. Like, why are they selling? Why do they care about these things? What's motivating them? And so being able to listen and frankly understand people, to me, is the most important part about both leadership and about investing. I think they go hand in hand. It's one of the things I've really tried to teach. Again, sounds too egotistical, but to demonstrate to folks within my organization about it's getting back to that question of why, like, why did they say that? Why are they agreeing to that? Why do they want to sell? Because once you understand all of that, it becomes a lot easier. And I do think there's an element where once you understand all that, too, you can point people in the direction. Like, you understand what their motivation is and why they're behaving the way they're doing. And then you can think about that and say, okay, great. Like, now I can use those and signal where we're going, both from a leadership perspective and from an investment perspective. So I spent a lot of time actually reading psychology papers about how people are behaving. I do think my wife is an executive coach. She was a lawyer as well, and then she morphed into an executive coach. And I've kind of listened and watched her and listen to kind of how she's coaching other people. And I think she spends similarly a lot of time listening and asking questions. I joke with her that what's that movie, Inception. She's doing a little bit of, like, slowly leading people where they want to go. In some respects, I suppose I'm doing the same thing by listening. So I think that part is. It's super fun and fascinating. And to your point, we're not that complicated. There's a couple. Like many things are. We joke around. It's a little bit of kabuki theater. Like, particularly when you're negotiating a transaction, you all know where it's going to go after the second or third turn of the card. But you still have to go through the motions and you still have to act out your role. You still have to do your piece because that's how you're going to get there. It's. And again, it's a little bit like poker. You have your cards, you see what other people are having, you're watching them and you kind of know where the betting is going to go, but you still got to turn the cards over.
- [51:16]
A
I learned this the hard way. Whenever I jump on zooms or meetings, I always start with rapport and how's your weekend? How's the weather? And one of these calls, I decided, well, I'm just going to skip that. I don't want to be performative. I don't care how their weather or how their weekend was. I'm not going to ask it didn't talk about it on the call. Lawyers ended up getting into each other. There was almost a lawsuit. I was immediately slapped. I'm like, okay, lesson learned. I will never not do the whole rapport Kabuki theater, to use your term. It's just such a critical thing. You have to do these machinations, as annoying as they are, on your point on listening and soft skills. My theory on this, I call it the birth canal of finance, which is the things that make you successful. The first five years in finance are not what makes leaders in finance successful 100%. And if you look at the top founders like yourself, but even the people managing Blackstone or managing Goldman Sachs, they all have extremely high eq. So why is it that so few people in the industry have high eq? And the answer, I think is because there's a adverse selection essentially at night EQ the first five years, what got you here won't get you there. I'm also unemployable. The only job I've ever had, three months at Jefferies. Great organization. But I knew very quickly it wasn't for me and I quit. People thought I was crazy as well. How could you quit such a prestigious bank? I knew it wasn't for me and I knew that I didn't have what it takes to make it those five years to be successful there. But maybe if I had stuck with it, I would be leading one of these organizations because I do have that eq. I just don't have that iq. So I have this theory that EQ is actually extremely useful. It just nobody really makes it through that birth canal.
- [53:11]
B
I just had a conversation with one of our, I would call it mid level employees who's super talented. And I explained to this person that in order to grow into the next phase, they have to start Communicating and they have to start listening and they have to start sharing information. And I explained to them that it's really the first five years, this person's working for five years. The first five years, their job was to do a great job, right? Their job was to own it, do a great job and like, prove that they were good at their job. And that is a very individualized sport. But then to elevate to the next level, you need to bring people in, you have to manage people. It becomes less of an individualized sport and again, it becomes a team sport. And so that requires an entirely different skill set of communication and team orientation, subsuming the ego again, and that's really hard. And you also. Wall street attracts people that are really good at math and really good at numbers and really good at working really, really hard. And a lot of times they really never were required to. Whether they can or can't, I have no idea. Were required to develop those skills where they needed to listen, they needed to lead, they needed to get people to follow them. So it's remarkable. A lot of these large organizations, I find it a really amazing, for lack of a better word, thing that they do where they're able to bring in talent and are able to figure out who the right people are, where they can start developing them into leaders. And it's why it's a pyramid, because I really think most can't do it.
- [54:53]
A
What's an example of an organization that has this talent development down well, again,
- [54:57]
B
getting to Goldman Sachs, just watching what they do. I think they. And also we of Blackstone's a minority owner of it. I'll say I've sat in meetings where I've watched the senior leadership of both those organizations talk to more junior but very talented folks and address issues about people, not about content. And I've watched them talk about, well, you should think about how you're managing or take time off. Like they were actually telling them, slow down and be a little bit more human. And so I think there's a real conscious thought around them about that and how you manage people. It's funny, again, I've referenced my wife a couple times on this, but when I was first starting the firm, it was a Saturday night and we were staying home. We had really young kids. And so my default was just to do email and to do work. And she. I think it was like 8 o' clock on a Saturday night and I was sending emails and she looked at me and said, what are you doing? And I said, well, I'm doing this, I'm sending emails. And she said, listen, there's only two people that send emails at 8 o' clock on a Saturday night. She said it's real jerks. She used a much more aggressive word. She said it's really a jerky person or somebody who has no life and I refuse to be married to either one of those. And so actually like it was a kind of a funny little thing but it actually made me realize like, okay, like just because I'm thinking it, I got to think about other people and like how they're receiving it and what they're doing. And I've watched Goldman and Blackstone and others kind of, that's really how they preach and think about how are you going to get the most out of folks? Giving them a little space to grow and to learn as they're elevating.
- [56:35]
A
What's the number one thing you've learned about developing people?
- [56:38]
B
The number one thing I've learned is that people don't change. And I think that we spend a lot of time being critical and trying to get them to change. When really again this gets back to listening. We have to think, think about what are they saying and how are they saying it and then how can we create the structure and the game and the organization where they can be successful. And so this gets a little bit to. You can't have one size fits all. And it also means really understanding and recognizing people's both their strengths and their weaknesses. What's that saying from Einstein? Like the definition of insanity is doing the same thing over and over again, expecting a different outcome. If you're asking somebody who just can't jump higher to jump higher, you're never going to get it.
- [57:32]
A
And the subtlety there is. People don't change, but they improve. But they don't left handed. They'll never become right handed, but if they're right handed, they could become better at being right handed.
- [57:41]
B
It's also like how they think about risk, how they approach. A good example is like I approach investors in a particular way. Again, I spent a lot of time listening to investors because I think it's really important. You want to hear what they're focused on, see if you can provide what they're focusing on. If you can't, you should let them know. I've also watched folks that work in my organization that don't listen. They just go and talk and talk and talk. They're actually effective too in a different way. And I spent a bunch of time kind of explaining to Them, like, well, you should listen to what they're saying. Like, they're not here to hear you. They're here to solve their problems. And I said that, like, over and over and over again, and they just. It didn't make a difference.
- [58:23]
A
They didn't listen to me.
- [58:24]
B
They didn't listen to me. They didn't listen to me. And so at some point, I just said, all right, well, that's just. That's just who they are. And if there's. As long as they're successful and crafting their own way to do it, then that's okay. And I think also just. It almost gets back to what we talked about, too, like, trying to get people to. To follow the rules. And we create templates for investment memos, and we create templates for, like, how we're communicating. And there's one person who's really talented, and I've been giving them the same thing over and over again, and they just, for the life of them, they cannot fill it out properly. They never ask the right question. They never, like, answer the questions that I'm always asking. But they do come up with other different things, different ideas, And I've tried to get them to form over and over again. I've tried to get them to, like, summarize it, dumb it down, be a little simpler, and they simply can't do it. But they're good at what they do. And so I just. At some point, I said, okay, we have to accept you for who you are.
- [59:16]
A
If you could go back to when you had just graduated Wharton's MBA program and you could give yourself one timeless piece of advice, what would it be?
- [59:26]
B
I'd go back even further than that, actually. Again, this is a cliche, but I do think that you have to do what's interesting to you. I think that life is long, it is uncertain. And I think if you follow a path that people tell you to follow, that you don't enjoy, you may make money, if that's your goal, but you're not going to be as successful as you can be, both personally and professionally. And I do think that's the most important thing I can give anybody advice on, which is you have to scratch your own itch, right? You can't scratch somebody else's itch. And there's two anecdotes. I remember I was in law school, and there was my contracts professor. He was a young guy, and I remember sitting with him, and he was an engineer by training, and he worked for Exxon. And then he went out to Alaska, and he was working in one of the, like an offshore drilling platform. And then he wrote a book, like, Totally Separate than that. And then he went to law school, and now he was my, my law contracts professor. And I said to him, like, I don't even understand your career path. And he said, you know, I just did what was interesting to me. And I was lucky enough. Listen, you have to have a lot of luck and you have to have intelligence. It doesn't work for everybody. But he said, I just did what was interesting to me and I ended up here. And I like this, and I'll see where it goes. I remember again, as a lawyer, it was my first transaction. This is well before, like, there used to be something called the printer. You would go to the printer's office and you were preparing a public filing and you'd spend 48 hours or 30, 72 hours up all night working to get these s, these s1s or shape. And everybody sat around all night and people thought it was fun. And I remember I was a first year attorney and I was talking to a senior partner from one of the major law firms. I think we were up for 48 hours. And he looked at me and said, don't you just love this? And I thought, oh, my God, I hate this more than anything else in the world. And then I realized I'm never going to beat this guy because he loves it. And all I want to do is go home. And so that made me realize you got to just scratch your own itch and you got to do what you find the most interesting. And I think we overvalue personal risk. And so if you follow what you like, don't overvalue your risk too much. I think you'll be successful.
- [61:53]
A
Jason, this has been absolute masterclass. Thanks so much for jumping on.