Graham Weaver - Building Alpine - [Invest Like the Best, EP.425]
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Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review along with all of our podcasts at joincolossus.com.

Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To

To learn more, visit psum.vc. My guest today is Graham Weaver. Graham is the founder of Alpine Investors, a large private equity firm targeting an interesting market inefficiency. Alpine focuses on the thousands of $20 million or so revenue businesses whose baby boomer owners want to retire but lack succession plans. Alpine buys companies and installs 28-year-old military veterans and top MBA graduates as CEOs.

leveraging 25 years of intellectual property on how young executives can successfully run established businesses. Alpine's CEO and training program is now the most applied to job at Harvard, Stanford, and Kellogg Business Schools.

In this conversation, we discuss the past, present, and future of their unique approach. Please enjoy my conversation with Graham Weaver. I think the place to begin would be to just understand what you are trying to build and why. Great question. We have three North Stars at Alpine. One is to be the number one performing private equity fund in the world as measured by MOIC. Our specific goal is 5X.

on every fund. Number two is we want to be the best place to work for the top talent. So we want it to be a place where the very best people can come and have just an amazing career. And three is we want to use this platform as a force for good. And really everything that we do fits under one of those three and usually all three. When you think about 5x MOIC, why do you care about that? Why that number? Where did that come from? We went through a really tough period in the recession. We didn't

We didn't have a fund for a number of years. So we had three years to kind of work on our business and really do some deep thinking. I hired some executive coaches. We can talk more about that. But part of that was kind of the questions you're asking. Why are you doing this? What's your goal? What are you waking up every day to do? And I think we wanted to create something that was going to get us just jumping out of bed in the morning. And so we said, hey, we want to be the number one performing fund of all time. So we looked at all the data that was public online.

on some of the pension funds websites and information. And we said, hey, if we could deliver 3x net consistently on every fund, that would put us in the conversation. We've been outperforming that. So we increased our goal a little bit. What's underneath it? You're probably a person that could build a whole variety of different kinds of businesses. Why is high performing private equity one that's interesting to you? I never knew what private equity was until I graduated from college. So I didn't have this background.

This was never a goal of mine when I started, but when I got recruited out of college to go into private equity, I just thought it was, I had a real burning interest in business. And I thought once I learned what private equity was, I was thinking, wow, this is the best expression of building businesses. We get to do it over and over and over across a bunch of businesses. In terms of why I try to be the best, I guess,

Ever since I was pretty young, I just never thought about doing anything other than trying to be the best in the world at it. It's like, there's a great quote by Daniel Burnham who says, make no little plans for they have no power to stir one's blood. What's the earliest that you can remember having that sensation or feeling? So I was 12 years old. My parents went through a really bitter, ugly divorce. We changed schools to a new school, so I didn't really have friends.

So the ground beneath me was pretty unsettled. Grew up in a small town in Ohio, like in the Rust Belt outside of Toledo. And I mowed lawns. I mowed lawns about six hours a weekend to make money. That was the best paying job. I had a Sony Walkman and I started to listen to books on tape. For whatever reason, our library had this self-help section. So I had these books like Think and Grow Rich by Napoleon Hill and Lead the Field by Earl Nightingale, Universal Laws of Success and Achievement by Brian Tracy. So there were only like three of them, three or four.

So for the next X years, I just would six hours a weekend walk back and forth. Literally brainwashed myself walking back and forth in the hot Ohio sun. And these authors, thank God, just had incredible content that I really needed at that. I was this young, impressionable kid that was having a lot of trouble in my life. And I had these frameworks to just hang my life on, for lack of a better word. And there were really kind of three big ones that came from that. One was

"Hey, you don't get to be a victim. "Yes, you have things that have happened to you, "and they're not necessarily your fault, "but you walking around blaming people "and thinking, 'Whoa, it was me,' "that's not gonna serve anyone. "You gotta take control of your life." Now, that sounds probably really obvious to you and me right now, but back then, that was a new concept for me, grabbing control of your life. And then they were huge about deciding what you want and writing down your goals, and I got really into that. I would write my goals down three or four times a day.

literally all through high school. And then the third one was, you got to make some choices. So you can have kind of any goal you want, but you can't have 20. So you pick the one or two that you're really excited about. And then you have to kind of draw a bright line and give yourself permission to not do goals three through 30. Those are really the three concepts. I'm summarizing thousands of hours of lawn mowing. So then what happened, to answer your question, why I felt the first time I started feeling like this,

I started applying this to really small things like getting an A on a test or running a faster mile or something like this. And it just worked exactly like all the authors said.

I just kept pushing the boundaries of what I thought I could do, and I never really ran into, and I still probably have yet to run into boundaries that you couldn't blow through. - So you said it worked. Like what specifically worked? Just writing it down and working hard or something more tactical? - Well, the very, very first major thing that I ever tried to do was right after the summer when I started listening to these tapes, and it was to this day the hardest thing I ever did. So I wrestled, I was on the varsity team my sophomore year,

And I wrestled at 155. I had a starting position. The captain dropped down to my weight class. I looked up and down the lineup and the only guy I could beat was at 125. So I'm six feet tall and I dropped 30 pounds and I wrestled 125. I was eating 900 calories a day. I was going on runs in the morning. It's like nine degrees outside. And I just powered through that. And all of a sudden I was like, wow, if I could do that, at least the other goals I set, I was able to eat. And so

I just got to feel this incredible power of being able to really change the trajectory of your life by just deciding you wanted to. It was really cool. I just got done reading the stories that Dan Gable, is that the guy's name? Yeah, he's incredible. What is it about wrestling? Like it seems, we'll talk about rowing too, which I know you did a lot of as well. What is it about, maybe those two are similar, the extreme nature of those sports, it seems like?

It has a lot to teach, maybe even more so than other sports. Dan Gable is one of my favorites. He has a great quote. He says, once you've wrestled, everything in life is easy. I think that's dead on. It's dead on. So I think that wrestling is just the most primal sport. In our high school, wrestling was a big sport in the Midwest, in Ohio. They would turn a mat light on. The gym would be packed. People are yelling and screaming. There's a mat light on. The lights are off in the whole area.

arena, and it's just you and one other person, and you're trying to defeat the other person. I mean, it's crazy. It's a pretty intense sport. And then the weight loss and the training and everything, hardest thing I ever did. I think it's something about just the primal nature of that.

Can you say maybe one degree more about this idea that you can just choose? It sounds so simple, but I've experienced that same thing. And every time I do it, I'm amazed how powerful it can be. But I want to understand the contours of it from your perspective. What does that mean? What does it feel like to choose? What did you choose? What was the process? Whatever else you can say about this. The first thing I'd say is that if you watch most people

they're kind of asleep or unconscious. I am too sometimes. Imagine you get up, whatever your routine is, you brush your teeth, you get ready for work, you commute to work, you have a tough commute, you get to work, you have a couple of meetings, some Zoom calls, then you eat, then you return some emails, you have a few more meetings, you get home, return some emails, watch some Netflix, go to bed. There's all this busyness. You're just kind of doing today what you did yesterday, you're doing tomorrow what you did today, and you're stringing together that and calling it a life.

So there's this real level of unconsciousness about it. So the first part is step back and just make space. And I do this with an executive coach. You can do this with a journal. You can do it with a friend. But just step back and just make space and then ask really powerful questions in that time.

My favorite question of all time is, what would you do if you knew you wouldn't fail? I'll actually build it up a little bit better. On one of the audio tapes I heard, this guy said, okay, imagine there's this genie that comes out of this magic lamp and he says to you, hey, Patrick, I've only been in here like a thousand years, so I can't give you the traditional three wishes. But what I can give you is that whatever you throw yourself into with your career, your life, vocation, like it's going to work out amazingly well. And you'll have ups and downs. It'll take a long time, but I'll be here to bless you with that. What would you wish for?

And then the punchline is go do that thing. That's your life path. That's what your soul really wants to do. And that's what you would do if you get out of your head and get out of your fear of failure. So that's one great question. Another one would be like, if you didn't have to worry about the how, so relax the how you're going to do it. The coaching quote is the how is the killer of all great dreams. Make space, ask these really provocative questions. And it's not like you're going to answer them right away, but you might two days later in the shower, you might answer that question. And then you'll really know you're going to feel it when you really know it. And then

And then it's really, really tough to go do it. It takes a lot of courage and sometimes the path isn't clear. But I think that's where the real fun of life is, is really trying to get in touch with what your answer is to some of those questions. So maybe pick another thing in your high school or early years, something you wanted, and then the steps you went through. Yeah, sure. Yeah. Just picture you walking around with this ball and you're like, I want to make sure I drop on the point.

Because I thankfully turned on to these tapes early, I did really well in high school and I got to go to Princeton. So I was, I think, the first kid in my school to ever even apply there, let alone go. So I go to Princeton and all of a sudden, I literally felt like Forrest Gump in that scene where his braces come off and he's running. Because I didn't have to be like at my mom's house from this time and my dad's here and high school at this time and all this. I had like all this...

space. And so I literally was like, oh, wow, now I can really let go with these goals. I set three goals going into Princeton. I was going to be the valedictorian. I was going to be the number one rower in the United States, even though I'd never rowed before. I didn't even know that the boats went backwards. And third, I was going to start a business to pay for school. To skip to the end of the story, I didn't actually achieve any of those goals, but I came really close on all three

And so rowing is probably the simplest one to explain. So I show up, I'm a novice, I'm 130 pounds from the wrestling, you know, and I got my ass kicked because there's kids who'd rowed for six years and they knew how it worked. So I got cut my freshman year, but they didn't cut anyone. Instead, they said, okay, if you don't make a boat, you're going to be a land warrior and you can use the rowing machines. I still remember when they posted the boats and my name wasn't on there.

I did the math and I said, okay, women's, heavyweight, light, I was a lightweight, lightweight. And I did the math on how many people got cut and how many rowing machines there were. And so I was like, okay, I got to get here really early because all these people are going to be using the rowing machines. I show up the next morning. I worked all the way back. I talked myself into getting there at like 5.30 in the morning. You know, the punchline. I get there, there's nobody there. There was no one there at 5.36, 7. No one ever showed up because Land Warrior was a euphemism for you just got cut. You got cut. I stayed in road and I met this guy who was training for the national team.

Mike Tatey and he and I were the only two guys in the morning at the Princeton Boathouse and he ignored me. He's a legend. He coached the U.S. Olympic team. He went on to coach the U.S. Olympic team to a gold and I didn't know any of this at the time. I just saw this tall skinny guy just hammering this erg and eventually he kind of took me under the wing a little bit. After I showed up at 5.30 in the morning for like three weeks in a row, he's like, okay, this kid really means he

He really is going to do this. And he taught me a little bit. So anyway, progress forward, I get better, a little bit better my freshman year, better my sophomore year. By my junior year, I had one of the top times, maybe the top time on the 2K rowing machine on the team. And then by senior year, I was captain, we won nationals. And so it was just, everything came together. But it was just a really linear expression of if I put in a certain number of hours, this is what Mike Tatey said. He said, here's the formula. It's really simple.

sit on this machine and row as long as you can, slightly below your aerobic threshold. Basically, you'll hit your goals. I was like, that's it? He's like, yeah, that's it. He was very simple. And I just did that. And it worked. It just required a lot of hours. Is there anything else between ages 12 and 22 that without which you would be a wildly different person? I'll just say a couple things about my dad real quick.

So my dad started a veterinary practice about the time I was born. He and his father went in. My grandfather's a veterinarian too. They started this practice called Weaver Animal Hospital in our hometown.

And they had a falling out of some kind. I don't know what happened. I never heard the whole story, but my dad like stormed out. Well, he has a mortgage and three kids and we have no money. The only money we had coming in was he would take emergency calls at like two in the morning. So his little beeper would go off and he would get up, drive to the office, fix the dog's leg and go back. And he did that.

for 25 years. And I think the bad news was he was really never around. We didn't have a great close relationship when I was growing up. But I think that ended up having a big impression on me because if you were to ask him about his practice, he ended up building this really, really successful veterinary practice, but he just did it one emergency call at a time over a long period of time.

And I think that really stuck with me. I don't think I realized that at the time, but that was a lot of what Alpine looks like. He would say it took way longer than he thought, and he built something much bigger than he thought. And I would say almost the exact same thing about my business. I never really put that together until many, many years later that I was watching that as a kid.

What was the story for between graduation and starting to tell the story that leads to Alpine? Why did you get interested in this field? What was it about investing or business that called you?

graduate from college. I never once thought about my job. I never had an internship because I was always rowing during the summers. I got recruited from Morgan Stanley, which had an in-house investment bank. And to my knowledge, they were the only ones that recruited in 1994 directly into private equity. The guy who recruited me was this guy, David Ramsey. And he kind of explained to me what private equity was and the way he described it. He couldn't see any reason to do anything else ever. He thought it was the greatest business and he had a pretty compelling case. So I

So I was really just fascinated by how you could buy these companies and build them and be a part of so many businesses. I just thought it was the coolest job I'd ever heard. I couldn't believe that you got a blank piece of paper from investors to go buy things. So I was fascinated. However, I come out of college and I'm just ready to run through walls. Patrick just had this incredible experience in college and I show up, I get this job on Wall Street. You know, I've seen the movies and everything and I think it's going to be this incredible experience.

I learned how to build a financial model in the first three weeks. And then I do that for two years. That was all I did. That's all anyone undergrad ever did. And then we did it, by the way, 80 to 100 hours a week. The culture wasn't great. And I just remember thinking like, is this what work is like? Is this what you do when you graduate? I've been in school 16 years and this is my big moment. And it was incredibly disappointing. And that would end up being a really, really foundational part of Alpine was just that kind of feeling of

wow, I have so much more to give to this place. Why am I only using like 3% of my capacity? My friend Jeremy Giffon has this really funny idea for two models of success that he dubs the Peter Thiel model and the Arnold Schwarzenegger model. The Peter Thiel model being like a lot of maybe public and market investors that I know who kind of sit around and think and then make infrequent decisions on the back of like a special insight that leads to great returns.

And then the Schwarzenegger model is just brute force, like more reps, more push. I have an early guess as to which camp you might fall into, but maybe react to that. Do you think of private equity as the ultimate open tapestry for performance, almost for its own sake?

Like the ability to push and drive outcomes versus have insights that lead to good returns, which might be the other paradigm. I mean, I think you can have investors in private equity that have the Peter Thiel model. They make few large investments and they sit around and think, and it looks like that. That's not really us. That's not how we're wired. The way I like to think about it is I like to think about the world in like

endogenous, winnable games, and then ones that might be a little more exogenous and or unwinnable or hard to win. And so I don't want to just go full on brute force in a non-winnable game. So for example, in private equity today, it wasn't like this in 1984, but today, if you have a big business, you're going to hire an investment bank, you get the game, you're going to show it to 55 private equity funds.

For me to just go brute force in that red ocean as there's a great book called Blue Ocean Strategy. So they would call that a red ocean. For me to go brute force in that, I think isn't a good exercise. If I have 100 units of energy, I want to use 25 of those units to go try to find a winnable game to play. And then the other 75 would be like the brute force endogenous path. So maybe using that, I like that framework. If we think about today's private equity landscape where...

where there are many, many funds that command huge sums of assets. My understanding, it's not the style of investing I'm in, but my understanding is if there's a good high quality asset, it's an auction process in many cases. It's a bidding war. And there are lots of great, highly professional, super talented investors and firms that can buy private business. Maybe describe the state of the market and what the characteristics might be of like winnable games within that broader market. I mean,

I mean, I think there's 5,500 private equity funds at any given great high-quality business like you're describing, particularly like take just extreme high-quality business, ERP subscription software business. I mean, it doesn't get any higher quality than that. There's a lot of people that can buy that. There's a lot of people that can see what that's worth and do some calculation and come up with a value for that. And by the way, it doesn't necessarily go to the smartest person. It goes to the highest bidder. So it's a little bit different where...

That doesn't mean that they were the smartest person necessarily. It's just a really, really tough game. And conversely, the winnable game that we're engaged in, and we learned this over the first 10 years of Alpine when we were really hands-on with these businesses, is we're going and finding a $20 million revenue plumbing company in

in Ball, Louisiana, where the owner's retiring and they need a new management team. There's just not a lot of people that want to sign up for that game. It's a lot of work. I mean, we're putting in a new CEO in a small company. We're putting in new IT systems. We have a whole new playbook we're putting in. Godspeed if you want to play that game, particularly at scale. That's an endogenous, winnable game where it's just a ton of work. But then the investment decision ends up being pretty easy.

When someone brings a deal to you and they say, "Okay, here's a business you're paying eight times EBITDA. With the playbook that you have, you can blend that down to five times EBITDA. You can borrow at five and a half, and your platform's going to trade at 18." The investment committee decision there is not the hard part. The hard part is getting the CEO in place and IT systems and all that. So maybe walk us through the earliest days right before and right after the start of Alpine. What was going on? What was your goal in your journal?

Give us this window into that period of time. I was at Wall Street and then I got into Stanford Business School. I deferred for a year. I eventually went. I show up. And once again, I had that feeling of being unshackled again where someone wasn't telling me where to be when, when I was at business school. So I decided I was going to start buying companies out of my dorm room. That was really the beginning. And my dad, he always wanted to name his company something that started with an A because of the yellow pages.

and start with an A and come before the word American. And so Alpine was a great, I thought a great name. And I lived on Alpine Road. Funny story about that. One time I sent a letter to a banker and I had my address and he said, oh, wow, they named the street after you. Meanwhile, it's like one guy, you know, with no money. Anyway, so we didn't have class on Wednesdays at Stanford. So I'd take a red eye flight Tuesday night and then go visit these little manufacturing businesses in the Midwest.

and then go to bank meetings and try to get them financed and then fly back and then try to take my exams and stuff. So that was kind of how I spent the two years at Stanford. Keep the story going. So you come out of that. Did you buy anyone while you were there? Yeah, I bought a total of three companies. I was 25.

So I had no idea what I was doing. And that's not false humility. Where did you get the money to buy them? So these were like half a million of EBITDA businesses that I bought for 2 million. The seller would finance 1 million. They had some equipment. So I get the equity, literally get the equity down to like 100 grand, which I also didn't have.

So part of it was I had some people on Wall Street who put in 10,000 here, 5,000 there. And then at this time, Capital One was just starting. Get an envelope in your mailbox and say, write yourself a check for $25,000 and pay no interest for two years. And I did that. I was like, okay, great. That was where I contributed my equity to those deals. And then later on, thank God, you get another one that said, roll your balance and pay no interest for another 12 months. So I was playing a very high wire act.

which I do not recommend. Did those three businesses work? No, they didn't. Those three collectively ended up at a one X. I had one deal I did right after business school in the same industry that worked out really well and thankfully helped fund a bunch of the early part of Alpine. But the first three were, I did literally everything wrong. So what did you most learn from those three? And then the one that worked right after?

They were in the label printing business, which was a good business because label might cost a penny on a $5 bottle of shampoo, but it contains all the product information. So no one's going to wait. No purchasing manager is going to be a hero by saving a fraction of a penny on the label. Had very good predictable revenue. I missed two things. One is you were really underwriting the underlying customers. You had to go a level deeper and look at how recession. So the companies in the Midwest, when a recession hit in 01, their clients got destroyed.

The revenue went down significantly. That was the first thing I missed. The second thing was, I didn't understand how important management was. And this would become a huge part of our philosophy later on. The founder would retire and then the number two person was there. I just backed them. And they were absolutely not backable. I wildly underappreciated how much the management team mattered. And I made that mistake three times before realizing I had made it. So in the next one, next label business,

The underlying customer, the biggest customer we had was Trader Joe's, which was just like the best customer ever in the early 2000s. They just grew 15%. Yeah, 15% a year every year. They paid in five days. They allowed their vendors to have great margins. So it was just, it was a home run deal. I owned it for 22 years and it paid. Oh, wow. Yeah, I just sold it a couple of years ago, actually. It paid dividends along the way. Thank God.

So now you've got a successful deal under your belt coming out of business school. It sounds like, obviously, at this point, you would have said, this is the thing I want to do. Is that right? Or was there still searching to be done? Oh, gosh. It was 100% what I wanted to do, and I still chickened out. So if you'd asked me any time in the two years, I was like, I know exactly what I want to do with my life. As graduation starts approaching and all my classmates are getting jobs in private equity, I'm getting a little fomo, and I'm also scared.

I take an interview, which turns into a job at an institutional private equity fund. And I knew in my soul it was not what I wanted to do. And I showed up and a little bit of me died the day I started. And I did that for a little bit of time. And then I actually had a close friend of mine around that time, around my age, had passed away. I just took a little time off.

And I just realized, hey, when am I going to do the thing I really want to do if not now? And so I walked in a couple of days later and quit. I didn't have anything to land on. I didn't have a fund. I didn't have investors. I didn't have anything. But I was like, I got to give this a shot. It seems like so many of these stories, when they go this way, they start small and modest. SPVs or single deals or whatever. So is that how yours was chained together before Alpine? Totally, yeah. A bunch of single SPVs to buy one company. Exactly.

What advice would you give people that hear that and they're like, yep, that's what I want to do. I want to find a company, put together money, make it happen, start to build a track record. I'd say a few things. First is I'd say pick one industry. Don't go do three deals in three different industries because you're not really going to know that much. In my case, I had that fourth deal was successful because I had done three and learned what really mattered. So I'd say try to stay in the same industry if you can. Pick a good industry. Secondly, I'd

I'd say pay yourself. Sounds really obvious, but I didn't do that. So when I, that was part of the pressure that I had about why I didn't go do that full time. So carve out enough that you can live reasonably comfortably, even if that cuts into your total upside or something. Duration is more important over the long period of time. I made so many mistakes, Patrick. Everything you could imagine.

But I also got in the game when I was 25. So I just sit around thinking about it, overthinking it. I got to get in the arena. That would be my third piece of advice is go get in the arena. What did you learn about raising money for deals when you really didn't have a track record and you were 25?

Okay. I started off trying to sell my track record, which was a catastrophe because what I didn't realize is these people are seeing phenomenal track records. And then they're comparing me to that. I was on the plane in the Denver airport going to San Francisco to visit what would turn out to be my largest investor. And I read this little book and I don't remember anything else this book said. It was a little book of selling it was called, but they had this line that said,

People buy the salesperson, not the product. And on the plane ride from Denver to San Francisco, I completely changed my presentation and was like, okay, I'm going to sell myself as someone that will figure this out and is going to be trustworthy, reliable, kill myself to make this work. And that pitch landed a lot better than, hey, here's my three label deals. They just read that book at the right time.

So then we fast forward to the chapter where now you have Alpine. You have a private equity firm. You're starting to raise bigger and bigger funds. What are like the foundational core beliefs of the business, how it runs that are most distinctive from other firms of its type, would you say? There's a number of them. The first one I would say is what's your objective function? Our objective function is MOIC. We have a specific number we put on that. We're trying to do 5X on a fund.

Have you done that historically? We've done 5X in our last four funds. We have it marked at 5X in our last three. And the fourth one is

Well on its way. Yeah. And so we have a objective function that is specifically net MOIC. And I think cascading from that is how long you want to hold businesses, how you're going to invest in them, how you're going to build them, what's your objective function, I think matters a lot, what's your goalpost. And I think a lot of people use IRR maybe, or they're trying to raise their next fund or something like that. And I think it can muddy up, you know, are you selling your best companies quickly so you can raise the next fund and have higher R's or what are you doing? And I think the objective function matters.

Another belief that we have is the way that we're really going to create alpha is through talent. That's probably the foundation of Alpine is just, we think that incredible leaders, CEOs, management teams are going to create amazing results. We'll look at B plus industries that other people really don't look at as much.

But we've paired that with an A-plus team. We found that to be just a great combination. We won't overpay for the A-plus industry. We'll go down a little bit and I can talk more about that. That's number two. And then number three would be, I'm a huge fan in...

thinking slash using your imagination. We schedule time outside of the office. In the Great Recession, we were spending a full day outside the office just really thinking, mapping out what do we want to build? What are the capabilities we want to have? Using time to work on the business. The expression I use is we're planting seeds of oak trees that will yield us shade five years from now. And if you can do that consistently, you can always create

effectively, but it takes a lot of discipline in the middle of all the crazy stuff you're working on to actually take time out to work on something that's important but not urgent, and that's the imagination and innovation. When I do my asking around, I'm always curious if you condense everything down to asking someone, what is Alpine known for? What is the thing? You only get one thing. What you hear a lot is young talent development and relationships

relying on 20 something CEOs to run sometimes very large companies and the search and development process of that young talent, those young CEOs. So maybe you can like explain when did you plant that acorn seed? Why, how has it grown? We can spend as much time as we want on this thing because it does seem to be like a elemental part of the sauce. Yeah, that's right, Patrick. That is core. So the way it came about was in the early days, we were doing all kinds of things.

a number of businesses going well. So one of us would go out and run the company. So Dan Saner, one of my partners today, we moved to Detroit for like a year. Will Adams moved to Maine for two years to run this horrible business. And a guy named Mike Duran was in Chicago. I ran one of our companies, a slot machine business for a while.

We got in when we were in the recession and we had all this time to kind of look back at our track record. The best deals that we did were always ones where we put in either us or someone just like us to go run this business who knew nothing about the industry, but had these raw talent and also coachability to like say, Hey, I don't know everything. So who do I learn from? Not this grizzled veteran that's already knows everything about the industry, but I'm going to look at things differently and fresh. And by the way, I'm going to just run through walls and

Those were our very, very best deals. Mike Duran ran one, a guy named Josh Greenberg ran one, and then Mark Straub ran one. At one point, I can still remember where I was when we had this conversation. Those were also, by the way, the most fun, most fun board meetings. So you're sitting literally with your friend talking about how you're just going to just crush this prank. And you know when you walk out of that meeting, they're going to do it. It's not like the founder who says, oh yeah, oh, great idea, Patrick, and they're writing it down. You just know it's never going to happen. It's the opposite of that.

And it was so much fun. And so at one point we just said, let's just do that every time. From this point forward, let's just, let's put our own team in a hundred percent of the time. And we burned the boats, brutal to burn those boats because bankers don't sell companies that don't have management teams. So we had to rebuild an entire sourcing engine to do that. We had to

change our brand in the market. We're the brand now, if you don't want to continue, you call Alpine as opposed to the other private equity firms that will back the founder. So it was really, really brutal to make that change. But yeah, we made that change around 2010. So is it true now today that you will not do a deal where you're not installing your own team?

In a platform company, we install our own team pretty much 100% of the time. Every rule can have an exception. Sure, someone could be amazing. Yeah, exactly. So if they're coachable and they want to run through walls and meet our criteria that we would have otherwise, certainly that would even be easier. But historically, we've last, I don't know, four funds, we've replaced the management 100% time. And we're super upfront going in. We're saying, hey, you want to cash out and go hang out on your boat and whatever? Great. Yeah.

And then probably 80% of the time in the add-on investments, we're changing management. Can you give us like a platform architecture or a platform building class, like 101 or 201? Does platform mean roll up? That's a word you hear a lot in private equity. Like what is a platform? How do you build one? What are the steps? So for us, it means roll up and I'll use our best example. So we started off in plumbing and HVAC and

We had this, a guy named- It's always HVAC. Yeah, exactly. This guy, AJ Brown was a CEO in training. We put him in to be CFO of one of our companies. He did great there. We sold the business. We repatriated him. We said, okay, you're ready for prime time. They're going to be the CEO of a platform. And then we paired him with another CEO in training that was just coming in, this guy, Will Mattson. So they become president and CEO or CEO and CFO initially. We picked HVAC. We had a little experience in that space.

They were excited about that space. And then we started just going and visiting tons of companies. And when you go visit 20 companies in the space, you learn more in one three-hour management visit than you do in three weeks in a conference room. And then what you're picking up in those meetings is what does great look like? And what's cool about it, each company probably does one thing great. The company does recruiting great. This company does

purchasing, training, marketing, IT systems they use and how sophisticated they are with them. But if you add that up across 20 companies and you grab every single piece of that playbook, you have the best playbook in the world. So you're starting to architect what does that look like before you even have bought a company. So we're hiring the CEO, getting the industry right, we're getting part of the management team right, and then we're getting the playbook right before we've ever even written a check.

Then we start going and buying companies. The first couple we tried to buy pretty small. I think our first deal here was $8 million of EBITDA. And we learned a ton. And we bought another one that was like two of EBITDA building along the way. And then we're also building our holdco. So we're building out the CEO, CFO, chief people officer. That's the platform. That's the platform. Yeah, the holdco is the platform.

Our best companies, we've really over-invested early in those platforms. It's really expensive to do that. And we have platforms that are pretty young that have a $15 million hold co expense, but that's really your foundation going forward. - And where does that $15 million come from? That comes from the fund? - Yeah, yeah. - So you're just putting the money, capitalizing a new company, that's the central platform. - But it's not quite that bad because we're pretty quickly buying companies that have EBITDA that we're using to fund the businesses. So they're cashflow positive pretty quickly.

So this particular deal, one of the early things we figured out is you said there's a lot of HVAC companies, but we figured out that every competitor in HVAC was doing the same thing. They were buying the five to $10 million EBITDA business that had a great management team. They were all buying the same company.

It turns out 90% of the market is below that and management wants to leave and cash out. And so we said, why don't we build a system to go buy that company? And that included talent was a huge lever. So I give AJ and Will a ton of credit, but they tapped into the veteran market. They built their own CEO and training program because they came through with Alpine's program. And they said, this is amazing. The company's called Apex. They built their own Apex. One of the early people they brought through was this guy named Brad Schwartz. So his

His resume is West Point, Green Beret, Wharton Business School, and he comes in to run this

I think $8 million revenue business. And fast forward, he's running a $500 million division today. The business we initially bought was 40 million, I think of revenue and eight of EBITDA. This year it'll do 3 billion of revenue. We haven't put any more equity in. They've just been accumulating these small little businesses. So the business has gone from, we put in 50 million of equity. This year it'll do 500 million of EBITDA and we put in no additional equity. And it's just been an

an exercise in just really having each business that we acquire putting in incredible talent. We rip out their IT systems and we put in a financial package, an ERP system, a business intelligence system. And then every single company we buy has to literally input every job they do exactly the same so we can compare all the data across all the companies. And then we have a training school now for the military veterans. I think that we have 80 companies

military veterans as general managers of that company. They've been phenomenal. That's an example of starting literally with a blank piece of paper, which is how we do each thing. We form a pod of people to go assess a bunch of different industries. We design the playbook

and then hopefully repatriate someone from our system into the leadership team. And we have a lot of the key decisions already made and evaluated. We have plenty of time and patience before we ever have to wire money. So if I think about, if I step all the way back on like what service Alpine has and will render in the market, it's, I have this visualization of decades of small businesses being built by the baby boom and Gen X generations or whatever.

There's tons of them. I don't know how many there are, probably a gazillion HVACs alone. True for like every industry.

The problem is that there's nothing to do with them when those people want to retire. And basically your solution is solve that with talent. That was like the unique insight and thing that you've built up relative to other private equity firms or something. Yeah. And I would say at a headline, it's solve it with talent. And underneath that is a whole bunch of intellectual property about how to make that person who goes into that company on day one be really successful. Because if you just

change management, it's really hard and it can go really badly. We've learned that the hard way. We have a lot of intellectual property on like

What does that CEO actually do on day zero and the first 30 days and 60 days and 90 days? We have intellectual property on the systems and how we're measuring it and literally how they're hiring. It is what you said, Patrick, but then underneath that, there's a lot of intellectual property about how to actually do that. Without giving away all the secrets to us, can you give us like a flavor of that IP and like some of the things that you've learned? Sure.

I'll give you a couple things. So first is we have about 30 coaches in our ecosystem that are versed in this playbook. And so they get paired up with this first-time CEO, and they've been through it a lot of times, and they're doing this specifically the Alpine playbook. So they can- Those coaches are full-time employees? They're 1099s, but they're probably spending- Tight partners. Yeah, they're probably spending 70% of their time on Alpine. So they have that intellectual property. They're literally partnering with this first-time CEO and going through this first-

six months of paint by numbers what they're going to do. But I'll give you an example. CEO walks in day zero. They make their big announcement. People are upset because Joe's plumbing, Joe's retiring. They've been working with Joe for 15 years. Here's this 28-year-old that doesn't know the industry. They're not thrilled on day zero, which is understandable.

The first move for the first 60 days is listen. They sit down with the key employees and say, hey, tell me about your role. What do you do here? What's going well? What else? What else? What else? What's not going well? What else? What else? Hey, if you were me, what would you be focused on? What should the top priorities be? What are we working on that's a waste of time? What should I be worried about? What are the biggest opportunities we have right now? Biggest problems?

They're going and doing that. And they're meeting with, depending on how big the business is, they might be meeting with 20, 30 people in the business. Without a doubt, without fail, one of the first biggest things people say is, I've worked here for 15 years and no one's ever asked me my opinion before.

in a very short period of time, we're really engendering trust. And then we're using that and we might say, hey, I heard that your number one, hey, Patrick, I heard your favorite idea was that we're going to expand internationally. We're not going to do that this quarter, but we did hear you. You don't have to do everything they say, but they have to feel heard. So they do that with the employees. They do that with the customers. And then from that, they're

kind of enrolling the top people and designing the plan. Here's what we got to do. Here's what the low-hanging fruit is.

And usually the fruit is so low and it's so obvious when you get through that. I know because I did this. I took over a business at one point. I remember thinking, how did they not do all this stuff? They just talked to their own people. One of my executive coaches had this great quote, the answer's always in the room. You don't have to go hire McKinsey. If you go hire McKinsey, they're going to go do what I just said. They're going to go interview your people and then repeat back what you just heard. And you do that with the customers as well. And then the customers will tell you about the product or

the service or whatever. Yeah. So I was going to say like one beneficiary, presumably this is the end customer. Like you're not going from 50 to 500 of EBITDA if someone's not happy at the end. Yeah. A hundred percent. Just work backwards. I think the two biggest under appreciated leading indicators of success are the net promoter score of the customers and the net promoter score of the employees. We go in and we measure the net promoter score of employees right when we buy the business. In other words, before we came in the business, I

how engaged and happy our employees. And then we measure every six months going forward. And we publish that across all of Alpine. And we hold CEOs accountable for two reasons. One is I think it is probably one of, if not the most important leading indicator of success for the business. And two, going back to being a force for good, it's probably the thing I'm the proudest of in terms of the impact that we have is...

40,000 employees are having an experience that they enjoy coming to work more, significantly more after we buy the business. And I just think about, okay, you're a single mom and you're working at a call center in one of our companies or something. Before we come in, maybe you're clocking in, you're clocking out, you're not that excited. You're spending half your waking hours doing this. Maybe the people don't know your name or whatever. And then how would you show up in your community? And 70% of people

and this is true across any industries in the U.S., you can replicate this study, but 70% of people dislike their job or they're disengaged from their job right now today. And if we can flip that, you know, and have 70% of people feel really engaged, it's not just that it's good for business, but I think it makes a big difference in these employees' lives. And so we take that really seriously. And it's something that it's probably one of the things I'm the proudest of, of all the things that we've done. I want to come back and spend a lot of time on the

searching, selection, training of this young, talented 27-year-old that takes one of these things over, like what that whole system looks like. But before we do that, I just want to close the thinking on the financial outcome associated with this strategy of building one of these platforms. So again, going all the way back to your 5X MOIC target objective function or whatever for the funds, what does that mean you need out of these platforms? Where does the return come from? Is it multiple expansion? Is it fundamental growth?

Simply, those are the two simplest areas that can come from. How do you think about like what you need to get for one of these things to be a success? So the way we think about it is we're underwriting typically an individual deal to a, let's say a 3x net outcome. And that will typically not have multiple expansion. It'll have, you're buying the business, you're leveraging it with whatever the debt multiple the company is. And then you're

growing it, we should be able to get to kind of a 3X, 3.5 gross in five years. So that's kind of our typical standard underwriting. Where the 5X comes into play is you have these asymmetric outcomes where things go right, organic growth kicks in better than you thought, and you can hold the business longer than you thought. You can kind of portfolio your manager, your way to a 5X through a bunch of getting on base and then good things happening. If we underwrote an individual deal to 5X, we would never close a deal. So...

That's kind of how we think about it. If you look back at the, now that you have all this data and all these funds, is it true in most of the funds that it's one platform or deal that dominates the returns? Yeah, there's definitely an asymmetry for sure. One of my favorite things, I remember I used to read every word that Buffett ever wrote in his annual reports, and I'm going to get this a little bit wrong, but it'll be directionally correct. I want to say in like 1988 or something, he'd made

half of all of his money on two stocks, Geico and the Washington Post. He had tons of businesses he bought and sold and everything, but 50% of it, yeah, there's like asymmetry. And yeah, we tend to have at least one real outlier deal per fund.

As we're learning, we're figuring out the ingredients of that outlier better and better and better so that we're hoping that each seed that we're planting at least has the potential to be that outlier. We want every shot on goal to at least have that upside. They won't all hit that, but...

We're getting better at identifying the ingredients of that outlier, which is, hey, build a real company, build a real hold co with a phenomenal team in a large industry, really spend the time to get the playbook right and give yourself some breathing room. And if we're doing that again and again and again, we're now starting to have a lot more consistent businesses that are these outliers. In our more recent funds, it's not one company. It's, in fact, in our most recent fund,

I'm biased, but I think just about every company has that potential as of now to be a real outlier. Let's go back to the talent. It almost sounds like what you've built is like a captive search fund business. Yeah, that's right. No, that's a good analogy. It's all the same stuff. That's a really good analogy. Personal attributes, time of their life. So one question I have is on incentives. How do you incentivize? Like in a search fund, it's really tight and clean. Like you're buying a business. If it does phenomenally well, you as the searcher CEO are going to do phenomenally well.

What have you learned about incentivizing the people that get installed to run these businesses? You know, using your search fund analogy, let's say that you're the kind of person that wants the ball.

early. That's the search fund person. They want to be CEO early. I love that. I was 25. I wanted the ball. I appreciate that characteristic. So they want the ball early. And if you think about what they want the ball to do, it's to go run a business. That's what they want. In the search fund world, they first have to go build a private equity firm to find and close. And if you actually look at the data, I used to invest in search. I don't know, I've invested in 70 search funds or more. They usually mess up that first part.

Investing is a pattern recognition business. Bankers don't want to sell to them because they're only going to ever do one deal with that banker. They have a clock ticking. So there's a lot of stuff wrong with that first part. And then the other thing that's kind of doesn't really work is they don't have really any support. They're like, yeah, you get the ball, good news, but you don't know what to do with the ball. So we're trying to say, hey, we have, I think, one of the greatest sourcing engines in private equity. We're going to find phenomenal businesses in

Plus, we're going to have a whole team that's going to help you evaluate the industry and make sure we're getting those right. We want you to play a winnable game. We want to give you a platform where you're going to win based on your talents and hiring and firing and all those things not missing on the industry. You're not going to figure that out when you're 28. We're very good at that part of the business. And then once they buy the business, we want to have, and we'll get into the training, we want to say, hey, look, we have 25 years of intellectual property that

of how to be a CEO, but not just how to be a CEO, how to be a 30-year-old CEO going into a really established business and getting that team on your team alongside you and going forward. That's the specific intellectual property that we have.

And it's not super complicated, but we might as well start you off 25 years in year 26 rather than in year zero. So where do you find these people? Where do they come from? How did that start? I'm sure it's much easier now. You've got a reputation like this can be a place you go do this thing. It was a very inauspicious start, Patrick.

At the time we started the CEO and training process, I was a guest lecturer at Stanford Business School. And I would meet with students for coffee and stuff. And the class I was a lecturer for, it was an entrepreneurship class. And so the students wanted to be a CEO. And they'd say, hey, how do I go do this? And search fund was an option. And

They didn't like some of the elements I mentioned earlier. And so I didn't really have a good answer. So finally, one student, I said, hey, why don't you join us? We'll teach you how to be a CEO and we'll put you in one of our companies. That sounded great. So we hired this guy and we weren't going to put him in a CEO. We're going to put him in like CFO or COO in one of our companies. We couldn't get anyone to hire him in our portfolio because they said, okay, let me get this straight, Graham. You've got someone who's got no experience

is a little bit entitled and super expensive. Like, how about no? So we couldn't get that first person place. He left. The next year we had this woman, Laura Walsh, and same thing. But although this time I said to this particular CEO, I said, listen, hire her. And if she doesn't work out in a year, I'll reimburse you her salary from the management company.

So like a money back guarantee. And she knocked it out of the park. And he's like, I want three more. And then it kind of took off from there. And when I say took off, then the next year we had two and the next year we had three. And it took a long time. And it also took us a while to really figure out what kind of business they would be successful in and where their blind spots were and what they could do and not do. We made every mistake you could make. But thankfully, we made that on smaller classes of CEOs. And now we have it a little bit more dialed in. And we're still learning. I mean, I'm not declaring victory at all.

What are some of the, especially extra points for surprising attributes that have made these young people successful? I like the surprising one. Obviously hard work and smart. Okay. So I'll say some, and then I'm not sure how many of these are surprising. So the number one attribute is will to win. I'm going to take this project or business or whatever, and I'm going to put it on my shoulders and run it through this burning building.

And you just see that show up in their life. Historically, they've done that. There's this ownership and drive. And that's number one. Number two, which is probably 1A,

is grit. So they've been knocked down, they got up, they've been knocked down, they got up, because that's going to happen as a CEO. And I think the great thing about getting knocked down and getting up is at some point, you just have the belief that you're going to get up and you have the expectation you're going to get knocked down every now and then. And that one is actually more rare than you would think. At some of the schools that we're recruiting from, that grit isn't as common. And we've made that mistake many times.

Third is I'm going to mash a whole bunch of stuff together, but it's like emotional intelligence, self-awareness, ability to get along with people. We've also got that when we've had big failures, we've missed that one. So those are probably the three big ones. Surprising one would be probably just a bias for action. So getting in the arena, trying stuff, it fails, try again versus this analysis paralysis.

If you think about marketing to these people, like how you get, obviously you would want to monopolize people that have that trait to come on one of your companies. That would be a great virtuous cycle. How do you do that? Is it just word of mouth? Are you more deliberate about it? The answer is it's word of mouth. One of the students goes and has a great experience running a business.

Their friend hears about Alpine, calls them and says, hey, is this real? And the friend says, I am having the absolute time of my life. Like I didn't even know this exists. I can't believe this even exists. And it is as or better than advertised. And that word of mouth. So the best thing we can do is just deliver on the experience, starting with giving them a winnable game and a lot of support. I think last year, this would be surprising probably to you, but Alpine was the number one most applied to job ever.

at Harvard Business School, Stanford Business School, Kellogg Business School, the Alpine CEO and training program. Yeah. I mean, you've literally like short-circuited the front part of that search fund process. Yeah, exactly. Which is a pain in the butt. It is a pain, yeah. Yeah. It's also so interesting that in that process, like you said, you said it as they have to build a private equity firm and then abandon it. Exactly, yeah. They don't get to reuse the skill that they built. Build it to do one deal. And, you know, the other thing is they can just do something on a way bigger scale. They're going to run something much bigger in this and they're going to

hopefully get there a lot faster. Yeah. Can we spend a while talking about your class at Stanford? So I think you took Irv Grossbeck's class over, who was the father of search funds and

Yeah. Maybe first talk about him, anything you learned from him, the nature of this class. And then I have lots of questions about how you run it. I would say Irv is one of the most influential people in my life. And I would also say there's probably literally without hyperbole, probably a thousand people that would say that same thing. I don't know anyone else that that's true of. And you sit down with Irv and you

You are the most important person in the world for that period of time. He remembers everything from your last conversation. He later told me he takes notes afterwards and then reviews them before he meets you again. He just cares, right? So he remembers everything from your last conversation. He's always the voice of, you've got this. Yeah, you've got this. I've seen all these students. I've done all this.

Let me just tell you, it's going to be okay. It's like your older version of yourself could come back and give you advice. He's that person. And I can't tell you how many times in my career where I've been down and out and gone and met with him and just, he just gives me a shot in the arm that I needed at the right time. And from someone that you believe it when he says it. So he's incredible. So my experience was I was a case guest in his class and the case was about buying companies in my dorm room.

and all the stuff that went wrong. And I don't think Irv would say this, but I think I was like the token failure case in the quarter where it was like, you know, all these people are this parade of champions. And I'm this like 28 year old that just gets my teeth kicked in again and again. So he probably wouldn't say that. But now that I teach there, I think that's the role I played in the curriculum. One funny story too, when I first started teaching his case, I was

I was young. I was 29. I knew a lot of people in the class because I'm basically the same age. One of the students told me like in the wrap up of my case, one of the takeaways was, as you can see from Graham, you don't really need to have charisma or be articulate to be a CEO. That was one of the takeaways. I was so nervous and

stumbling over my words and stuff. But anyway, so yeah, I mean, the class was amazing. And then I was a case guest in his class for 12 years. And then he was going to go start a new class. And he called me one day and was like, hey, Graham, do you want to teach my class? I was almost immediately going to say no, because I'm like, yeah, I already have a full-time job. But I thankfully said, I'll think about it. I thought about it for a week. And I was like, I light up every time I'm in that classroom. And I don't think I'll ever have this chance again. And I ended up teaching.

I know it's like one of the or the most popular classes there now. How did you build it? Same set of questions kind of is for Alpine as for the class. What do you hope the class does for the students and how do you architect it to achieve that goal? In the first four years, I just wanted to learn how to be a professor and teach. I had so many limiting beliefs, like thinking I'm not a professor, I've never taught. And so I just was probably the first four years I was just trying to

be like a B plus in that. And the curriculum is largely around how to be a CEO, things like hiring, firing, having difficult conversations. It's not big strategic things. It's kind of like

at the one foot level. Like you're going to have a conversation with an employee about getting demoted or whatever it is. And we're going to role play that actual conversation. So it's really like granular people stuff. It is the important stuff as a CEO. So it was a great class. So I did that for four years. And then what I realized is students love the class.

but they weren't doing it. They were like, oh, that was a great class. Thanks for that. And then their dream was to go run something and they didn't go run something. So I said, I need to add something else to this class. I want to help students figure out what their dream really is and spend a bunch of time on that. And so we talked about this a little bit earlier, but a big part of the class is really giving the students some space and asking questions and having them do exercises, visualizations,

and some other exercises to truly figure out what the thing is that they're excited about. Like if they could do anything over the next 10 years, what would that be? And that takes some time. We spend a bunch of time on that. They have to keep a journal and we have a bunch of classes and visualizations. And then when they get kind of clear on that, immediately they're going to have all these doubts and fears and limiting beliefs. Their head's going to talk them out of it. And so we go right at that. Hey, what are the obstacles? How do we overcome that? How do we design a path to go do that? So that's probably 25% of the class now. And I think

That's probably the students remember the most. Yeah. You've told me before some of these incredible framing questions to like expand the mind beyond incremental thinking into more like blank sheet thinking. One of the ones you told me that I liked best that I've thought about a lot since is imagine you have nine lives. You're just going to do this life. What do you want to do in the second life and the third life and like really like make it feel bigger, more expansive? Yeah.

Are there other questions like that one that you've found to be the most effective to get people to like give you the real answer to what you're trying to help them find, which is like the thing that's burning inside them? Yeah, what's cool about the nine lives exercise is I think people get really intimidated by saying you got to find your passion.

and then I got one thing and they get in their head and I'm like, okay, let's say you had nine. They can rattle them off like right away. Okay, I'll do this. You know, I'd be a professor and I'd be a law author and I'd start this business. I'd do a nonprofit. They could come up with them like right away. And then I'm like, good news. Yeah, good news. Your thing is in there somewhere. And then we try to take those nine and talk about which ones they have the most energy for. Who are they going to meet along the way? How are they going to grow? I mean, a great example is a student of mine. One of their lives is

the thing they did before school, they were going to be a convertible bond salesperson. Life number three was run a business. And as they started learning, how are they going to grow and learn, the convertible bond one wasn't as interesting, even though they were going to make more money doing that initially. You can dig into those nine lives and then it's just a lower stakes way to kind of get them to something they're passionate about. And the secret is you can have all nine at some point in your life, just not all at the same time. And then other questions...

We do visualizations, which you go out 20 years and we spend some real time in this. You're meeting your future self 20 years from now and your future self has just been incredibly successful and everything's worked out and you really spend some time on like, what does that look like? And then you come back and say, well, what advice did that future self have for you now?

The advice is always go do this thing or hey, relax, it's gonna work out or don't stress about these things. So we do exercises like that. Some of the key questions are what would you do if you knew you wouldn't fail? Relaxing the how, not worrying about how to get there, the nine lives, you know, there's a whole bunch of those. - Incredibly powerful.

And I'm curious how you've learned to administer them. Do you personally have to do it one-on-one with the student or is it more scalable than that? It's both. So there's a lot we can do in the class and then they can break out into groups and do some one-on-one stuff. Earlier in the quarter, I have a class just on coaching where they learn how to be like a good enough executive coach for each other. We have a whole class on that. So then throughout the quarter, when they have to coach each other, they have some core skills. So I can do that for an entire group. And

And then I do tons of one-on-one meetings. My one-on-one meetings are typically, they're almost always the same. The student comes in and says, they ask the same question, which is like, what should I do with my life? Number one question I get asked. Great question. And then they say, okay, I have path A and I have path B and I'm torn. I spend a few minutes with them asking some questions. In 10 minutes, it's clear that their heart wants to do B, but their head's talking them out of it. And A is the kind of

safe thing. And then we just spend the rest of the time trying to unpack how they can do A in a lower risk way and that sort of thing. And that's the framework I use in the class as well. How has being a teacher changed you personally? What are the takeaways that you have? Like, how are you different as a thinker, as a person?

Because of this experience that you've had with all these students, hundreds, I'm sure, of students, thousands. Every quarter I learn the most. I try to make each class and each quarter be a reflection of the best I've got. This is my 12th year teaching this year. I spent more time preparing than I did in year one.

I'm trying to like use it as a way for me almost like to personally share my latest and greatest frameworks and thinking on really everything from everything from running a company to personal growth to spirituality. You know, I'm trying to bring everything I can. So it's a forcing function that,

almost makes me download an entire year of reflection into 19 classes and bring the best that I can. So just the process of that reflection and having to codify it has made me learn it better. And the other thing is I have to practice it. I can't stand up in front of class and say, if you're running this business, you can't have B plus people in your key roles in your executive team. And then I

Look in the mirror and I'm thinking, okay, I got two B plus, you know. Follow your own advice. Yeah, I do. I do follow. I have this thing where I really can't stand up in front of the class and say something either I'm not doing or don't believe. And then sometimes it's a good mirror to look at my own life and make sure I'm living that way. What is your relationship with the students like after the fact? Do lots of them come work for you? This is a very common story you hear, especially at Harvard and Stanford, it seems, and other schools too.

of someone teaching and that they're doing it usually for the right reason, but it ends up being tremendous fuel for their business because of the talent. Have you had that happen to you? The way it became a fuel for talent isn't because I was going out and recruiting my students. It was because I was meeting with enough students to learn what they really care about, what they're passionate about. And then that helped me design a role at Alpine in

That was directly catering to the things that students wanted at the level that the students were. Cool. Because I understood that really well. So that's how it was helpful is that I could say, wow, there's all these MBAs who want to be CEOs. They have this skill set, but not this skill set. And it just happened to marry up really great with our strategy, which has like

all these 12 to $20 million revenue pieces. I mean, you couldn't ask for a better training ground. That's how it was helpful. Mechanically, it works out really well because we do all of our recruiting at Alpine in the fall. So by the time my class comes around in the winter, students either have a job or they don't at Alpine. So they're not, my class is not a job interview, which is really important to me. I draw a line. I never interview students. I don't even ever give feedback on students. When I'm teaching, I'm really just there to be their professor.

The calendar works out that I can do it that way. Your whole affect and the story and the setup, it just so rings of athletics. And you said personal growth. Somehow in the world of sports, it seems obvious and cool that LeBron would have 25 coaches and spend all this money on his body and do all this stuff to get better. Like, not our heads. Like, it sounds obvious.

And then somehow in the professional world, there still seems to be like a stigma of sorts associated with personal growth and executive coaching. Why do you think that is? The two aren't fundamentally that different, but there doesn't seem to be the same appreciation for the potential value of something like coaching. The first coach I had in 2009, I sat across the table from him. His name is JP Flom. And he pitched me on being an executive coach. And I remember thinking, what the hell is an executive coach? What are you going to do?

And to this day, I don't even know why I signed up. I think he was just a really compelling person. Bought the salesman, not the product. I bought the salesman. Yeah, I bought the salesperson. I think most of the people that probably have negative things to say have actually never done it. I don't think I've ever met anyone who actually hired a very high quality coach and had anything negative to say about the process. So, and they probably just don't really know what they can get out of an experience like that.

- So if you think about the reason you do it or have done it and have all these coaches that are part of your business or whatever, can you define personal growth? Like what does that actually mean? - So for me, a number of different coaches I use for different things, but I'll give you a couple of real examples. So I have a coach named Mandy Shoemaker and just to have a call with her, I have to fill out a form that says, what are your one year goals? What did you say you were gonna do last week? What'd you do and what are you gonna do this week? And what's the outcome of the call?

And just filling that out every week, if I never even talked to her, would be a great accountability. And then obviously she's an amazing coach. She came up through the Tony Robbins system. So for her, it's like a personal trainer for your goals and your life. What better investment is there than that? I don't need a personal trainer to go to the gym, but I actually do need a personal trainer to grab me and say, what are your goals? Are you sticking to them? Are you on track? I think that's really valuable. I'm not able to get there by myself without a coach.

Then I have another coach I use. We will set aside four hours and this will be like really blue sky, messy thinking. Sometimes nothing comes out of it. We ask big questions like, what do we want Alpine to be 10 years from now? What do you want your life to look like 10 years from now? Where are you getting on track, off track? If you were going to achieve your 10-year goals in six months, what would be true? Just these really big questions.

Sometimes amazing things come out of that. Sometimes amazing things come out of that three days later in the shower. But I like making space to have that. And I just enjoy that too. So it's like a way to put space on my calendar. You activate different parts of your brain when you talk than when you think or read. So just the act of having another coach, you're actually lighting up more of your brain. So then I have another coach, Rachel.

Rachel Lockett, who helps with the org chart of Alpine. I haven't, at every step of the way, I'm running a business that's bigger than I've ever run before. She's run, she's been the chief people officer at really large companies. So she can help guide me through like, hey, this org chart makes no sense. And here's some ways you could be thinking about it. I want to come back to the definition question again. Personal growth. What does that mean? Let's see, it's get better. What does better mean?

I'll go like a little bit deep here, but I think that ultimately each of us has most of the answers inside of us in our intuition. Like I think we have this compass and you could call it your intuition, your soul, whatever that is. That's incredibly powerful. It's like our own LLM. It's taken every experience and every input we've ever had and it's storing all this and it has all the answers.

And so I think a lot of personal growth is understanding what that intuition is telling you and spending the space and time to really understand what it's saying and getting out of your head, which is a lot of times confusing things, and then having the courage to go do what it says. That's probably my highest level of personal growth because I think if you can do that over and over, you'll self-actualize.

and become the best version of yourself, for lack of a better word. And then there's a whole bunch of things underneath that to try to make that happen. What are some of those things? Some of those things are designing, being really intentional about your life, figuring out what does a successful life look like for you in all your different areas, and really spending time on that and designing it, and then having a practice where you're working toward that

almost on a daily basis. Is there an episode of the second part of the description courage? It's a key word, it seems like, that stands out in your memory. What does that mean in practice for you? What's a time that you felt like a thing your intuition told you and then it required courage, which is a big word? I'll tell you a really early one. This is the first one that came to mind when you just asked the question, but it was an early one. I'm in Toledo, Ohio,

And to be the popular and be the cool kids, they didn't care at all about school. A lot of them were drinking, doing drugs. Some of them just really weren't nice kids. They were bullies. In many cases, they were like the athlete group. I just remember that took a lot of courage for me to separate myself because I could have been in that popular group. I chose a different path. And at 12 or 13, for me, that took a tremendous amount of courage and isolated me. And then I think

in a very short period of time, realized that that was the right call and that that gave me just so much confidence in listening to that gut from then on. I still try to tap into that, but I think at a pretty early age, I just got a sense of how powerful it was to just listen to that voice. If we have this amazing onboard intuition, LLM, and then courage we can learn or something over time, it seems like the other key step here is asking the right question. Yeah.

of the intuition. I'm curious about two things, what you've learned about that part, like how to get to good questions. And then I'm also curious, zoom into today, what those questions are for you today. Your head is a really powerful tool. It'll talk you out of a lot of things, three really simple ones. So first off, to get into your intuition, a lot of times it's

meditating, breath work, really being still and quiet and getting out of your mind, and a lot of things that people have talked about for thousands and thousands of years. So that's a part of it is to try to get yourself in that state where you're silencing your mind or separating yourself from your mind as much as you can, which is kind of the core principle of meditating. But if you had to jump to just questions, which is a form...

as well. It's some of the ones we talked about, like, what would I do if I wasn't afraid? What am I afraid of? How is fear playing into my life right now? There's a great Carl Jung quote, where your fear is, there is your task. Usually look at where something is holding you back that you're afraid of and go into that and toward that thing. Your work going to be in there versus running away from it. A good question to

just using kind of your future self. Okay, I have this decision to make going left or right. And right now I'm in the fog of war and it's scary. And

gosh, it's going to be really hard to go either direction, but stepping out and saying, okay, if your 10 years older version of yourself were to give you advice right now, what would they want you to do? And so you're getting out of like the immediate fog of war. And a lot of times the answer is super clear. So those are all just a few questions or tools that might help. The point on fear and being afraid or whatever makes me realize we talked about an amazing deal. What was like a terrible early deal? We had a lot of deals that just didn't go well, but probably the worst deal we did...

was this slot machine business that we owned. It was the worst deal. It wasn't economically the worst deal, but

It just was so consuming. So we put money in the slot machine business. Made them manufacture. They made basically software that went into slot machines and then they assembled the slot machines somewhere else and put them in casinos. They put them in a rev share. So we give away the machine for quote free and then we get 20% of the win. So it had a recurring revenue element to it. It was on paper a good business. We sold the Native American tribes, which was exploding at the time. This was probably the early 2000s.

Native American tribes were just growing their gaming presence. So all those fundamentals are the reason we did it. But there was just something, and I'm sorry, I'm going to probably offend a lot of people here, but there's just something about that industry where there was still an undercurrent of some people that weren't playing by the rules. A few things were tough about that. Number one is we just had way too much money in it. We had

co-invest in the deal. We were in a $68 million fund at the time, and we had $170 million in the business, including co-invest. So it was just like too big to fail. So we had to make it work. I became CEO of the business. One of my partners was basically the CFO. We had technology, we had customer concentration, we had CapEx.

We had product obsolescence. It was a very hard business to run. And then there was just, again, this element of like, you're competing with some people that don't follow the rules or the law. It was just this undercurrent. It just didn't feel right a lot of the time.

And I still remember this one time someone would ask me about it and I'd say, oh, you know, it's just entertainment and the median income of people who play slots is actually higher and they can afford it. And I'd have all those things I'd say. And then I remember this one time I walked, we had these like local casinos. I remember one time walking in and there was this five-year-old girl sitting outside with a coloring book and her mom was in there blowing her paycheck. I just was like, I don't want to be in this business.

It consumed a lot of our time. That was probably the worst deal we ever did. It set us back quite a bit. - How did you work it out? What was the end of the story? - We saved the deal because we read that Illinois was going to open up and put slot machines in bars. And Illinois is like the fifth or sixth most populous state in the US. We were like, "Oh my God, this is gonna happen." It was gonna happen in like a year, then it was two years and three years. But in the meantime, we went around Illinois and made deals with all the bars.

They had no money coming in. These bars weren't making any money. So we'd pay them X dollars to have the rights to put slots in their bars. And we were like three years ahead of time, ahead of people. So then when the, thankfully the law finally passed and the games came out, we were the largest or second largest supplier in that market. And then we were able to sell the business on the back of that. Did you earn a return on the equity on the 170? Initial equity was about a 3X. And then some of the late equity was like a 1X.

Everybody, the banks got paid back. Every one of our investors made their money. Plus we had some preferred equity. They got all paid. So it was like we did escape, but yeah, we'd never want to bet our business on one. So in addition to the concentration lesson is the other key lesson. Just don't back businesses where you're not a fan of the core product or service. Yeah. For us, you know, I want to think that we're having a, I mean, it sounds cheesy, but we're having a positive impact. The world's a little better because we're building this company. And if I'm being honest, I don't think that was true in that business.

What are you most afraid of today? I told you this when we talked the other day, but my two boys went off to college and it was like the end of a chapter that was really one of the first times I felt like I needed to start facing my mortality. And I think that's the thing I'm the most afraid of is how long do I have? And like, am I going to be able to do all the things that I want to do in this lifetime? And this is the only one that I know that we have. And am I doing that right now? Or am I going to look back and have any kind of regrets?

That's probably the thing I'm the most afraid of. What have you done about that? I'm in the process of it, honestly. Like, I think one of the things I've done about it is I try to, whatever I'm in at the moment, just be 100% fully on and fully present and just be all in with a thousand percent of my energy, each thing, and actually ironically not overthink it. And I think that's been the thing that I guess has allowed me to feel the best about the mortality.

Is there anything I think of like pillars supporting the ability to do that day in, day out as like a human biological thing that has limited energy or whatever? This could be anything, what you eat, what you do, whatever the pillars are. What are those pillars for you that let you do that?

I think one of the pillars is that you have spent the time being intentional and spent the time getting in touch with your intuition so that you just know the things you're working on are the things and you don't have to be hedged at all. You're not spending your time, am I in the right job? Am I in the right relationship? Am I living in the right place? You've already answered those questions, so you can just kind of relax into those things. So a lot of the work that I do on that has allowed me to relax.

in those things. I think the physical part is massive. I think the most highly correlated thing to having a good day is if I feel good physically. That starts with sleeping well. And then there's a whole lot of things you back up from sleeping well. So I don't drink alcohol. I don't drink caffeine. I don't take sleeping pills. I have a nighttime routine. I try not to schedule stuff early in the morning that's going to stress me out. I think that is so underrated. How you feel physically matters a ton.

If I go back to our Teal versus Schwarzenegger analogy, my experience with the Schwarzeneggers of the world is that the structure of their days matters a tremendous amount, typically a lot more than the Teals. Maybe could you give us like a day in the life? Let's say a normal day of work or something, a Tuesday. In some detail, what does a day in the life look like? A normal day...

I'm waking up with no alarm, hopefully sleep in eight hours. So maybe I go to bed at 10 or 9.30, getting up at 5.30 or 6. I'm having a somewhat relaxed morning that's going to include at least 15 minutes of meditating and then a workout. And I try to work out really hard. I try to- I'm shocked. Yeah. I try to like ease into my workout enough and warm up that at some point in that workout, no matter what it is, I'm going hard for at least something. Because it just-

I don't know, it has some kind of impact on me that I enjoy. And then if I'm successful, I have my day start a little later, like nine or 10, so that I have a little time in the morning to just kind of gather myself and get organized. And then like, I have this habit I've done since I was 12. I write out what are the three most important things you're doing this year? And what are the three things you're doing today to move toward those things? I write that list. Every day. Weekends? Probably not weekends, yeah. Weekdays. Weekdays.

I have it all on one note. And then I try to just compare my schedule to that. I look at the things I have on my calendar. Hopefully I'm prepared for those things. And then I try to just be present throughout the day. And in that day, if I think about the archetypes, a second like pairing of archetypes for people running investment firms, you have a category of...

investor-focused people and more like what I would call CEO, running a business that happens to do investing as its thing versus people that are like doing the deals. So like very famously, like Schwarzman or the KKR founders, they were kind of CEOs from day one. They didn't really like deal people. They were, of course, involved. It was more about building the machine than executing the individual deals. And I know you've done both. But if you think about the day in the life today, like if I looked at your meetings- Yeah, my calendar. How does it break down between-

Wow, we're making this huge equity investment. Let's talk about the company versus talking about Alpine. That's an awesome question. I'm just going to go back for a second on that question, which is I worked at four private equity firms before I started Alpine. The leader of every single one of those firms looked at their job as being a deal person, trying to close deals. And in many ways, they almost were competitive with me and like, my deal's better and I'm going to grab your analyst because whatever. And they

And they spent virtually no time, if any time, saying, how do I make this the place where the best people want to stay? And I remember the last place I worked, if they'd spent 25% of their time doing that, they'd probably have the best returns. And so I remember thinking that, tucking that away in my head and thinking, gosh, so to answer your question, I think that's the most important part of my job is, is Alpine the place where the best people want to come and work and spend their lives and their careers? That's the most important part of my job. And then specifically,

And similarly with our portfolio companies, which are really an extension of us because we're putting our own teams in there. Are those a place where we can attract the very, very best people? I spend a lot of my time on that. How are we structuring the deal teams? What does career advancement look like? How are we recruiting, meeting with world-class people on our team and trying to say, hey, how are things going? What's working well? What's not? And then that's a big part of my day. But to answer your question specifically,

I have gone through periods where I'm doing, I mean, the first 10 years at Alpine, I just did deals. And then I've gone through periods where I wasn't working on deals and wasn't on boards. I think for me, the right balance is to probably spend around 25% of my time in the action because I think it's good for me to keep one hand in the action so I can know what it's like building one of these companies and what problems they're facing. I don't want to be totally out of that. And then I'm spending probably 75% of my time working on Alpine itself.

Where do you think private equity is going? It's a very interesting time in the news because...

Yale and others have just sold these big secondary interests and a whole bunch of their private equity exposure, venture exposure. It is an industry. I mean, it is professionalized, mature, huge. There's huge public companies that do this. When you started Alpine, it was very much still in its, you know, whatever, earlier innings, let's say. How would you describe it today? What does it kind of feel like to you having been in it a while? Where do you think it might go? Well, if you go back to...

to when I started, say 1990, I started 94, but let's say 1990, I think the 10-year treasury was around 8%. Then you watched over the subsequent 30 years from 90 to 2020, interest rates steadily went down. I mean, they had a little few spikes, but they went basically from eight to zero over a very steady period of time throughout that. And that had two massive impacts. One is

The pension funds pretty much all underwrote their pensions at 8% or 9%. I don't know why they picked that number, but they all did. And all of a sudden, your risk-free rate's at zero. You have to find alternatives. And so over that same period of time, that last 30 years, you had allocations just steadily increasing.

It was a biggest tailwind. I mean, over that time, CalPERS probably went from a 0% allocation to, I don't know, 20% allocation. That's a lot of money. Multiply that by foundations, endowments, and everybody. And so you had this just massive tailwind. And then the second one, the obvious one is debt was really cheap. And so that's a big part of the private equity model and borrowing was cheap. And so you had multiple expansion. Over that entire period of time, I don't care what anyone says, there was multiple expansion. Yeah.

I mean, we were buying the same companies in 1994 at five times that we're paying 13 times for now and excited about to do so. So you had that trend going on over that same period of time and therefore returns were good, generally speaking.

Today, you fast forward, there's 5,500 private equity funds. It's very efficient. Interest rates are going the other way. That's dynamic one. And then dynamic two is there's eight dynamics very early and it's tiny dollars, but individuals are starting to be able to go into private equity through their wealth management, which didn't used to be a thing. I think the impact of all that is that the people who are putting up

median returns and felt like they had this God-given right to raise their next fund and it was going to be bigger, I think that's not going to work out very well in the next decade or so. I think you're going to have to be pretty differentiated or

The really, really massive firms that are able to collect the money from the individuals, which is the new tailwind coming in, I think they're going to be able to amass assets. But I think it's hard. It's gotten harder every single year I've been in it for 31 years. I think it's going to get even harder just given some of the potential headwinds of interest rates.

One of the themes here has been between your class and Alpine and the talent program, all these things requires that you see the best in people. What have you found are the keys to doing that specific thing well? I think one of my probably favorite things is when I went back, when I was telling you earlier about Irv Groesbeck and how at certain times in my life,

I would walk in and ask for his advice. And he would tell me, hey, I've seen a lot of students, I've seen a lot of people, you got this. Coming from him, I would believe it. It would matter that he said that. I think a big part of it, Patrick, is we get to be that force now for these MBAs who are coming in and saying, hey, look, here's been your track record. We've done this a lot. You're going to be awesome at this. You're ready. We're going to help you go do that. And then

it becomes somewhat self-fulfilling. The students believe it and they start behaving as though it's true and that kind of becomes true. So I think seeing the best in people is, it's really one of my favorite things about Alpine. Our passion statement at Alpine is unleashing heroes. And so we think that the people we're bringing on at Alpine and our companies really are heroes and they haven't had the arena yet to really like fully be the hero that they can be.

If you think about the industry as a big participant in it, are there any parts of it that really bother you? Are there features of the private equity investing style, landscape industry, whatever, that you think are messed up?

Yeah, there's a lot. I think that, gosh, there's so much money in the business that it's just very, very hard to not get distracted by that. So if you really think about, I was talking about before about the objective statement and how much that matters. I think if you watch what firms do, maybe not what they say, but what they actually do, their objective statement is go raise the next fund, go raise a bigger fund. I think that that makes sense. That's

That's how they stay in business. But I think it can lead to the wrong behaviors. Specifically, you cut your flowers and water your weeds. You show these great realized returns and you're compounding your stuff that's not great. It leads to a lot of people that come in the industry and maybe are in it to make money as opposed to build things or don't always show up the best way sometimes. Anything we haven't talked about that you feel like is an essential part of your story, Alpine's story,

ingredients of success as this style of investor that we haven't? I mean, I think probably the biggest thing is it just took a long time. Through the first 14 years at Alpine, I had seven years of private equity before that. So I'm 21 years into the industry.

I think we managed $400 million or something like that. And we had a huge team and weren't really paying ourselves. 21 years in. 21 years in. I mean, 21 years in, my salary was $100,000. That's a fact. And we hadn't yet had a carry check because our European waterfall. And so waiting for the last company, which was our best one, it just took a long time.

I think Alpine is a success story. A lot of it is because we just stayed with it for a long period of time and we're constantly growing and learning through that entire time. I think that's something that at least my students and I think a lot of people miss is they probably hear people on your show who sound really successful because they are, but they may not really understand that it doesn't just happen. It takes a long time. And I think

giving people the perspective going into starting a company that it's going to take a long time and be ready for that ride. So pick something you're excited about that you want to stay with for a long time, because if you're in it to make money and exit, you're probably going to be disappointed.

Doesn't that pair beautifully with your questions for your class, though? The lifetime questions or whatever that for you to go 21 years and be making a hundred grand, obviously you love part of it. Like you wouldn't have kept going otherwise. Yeah. It seems like there's quite a nice pairing. Absolutely. I mean, again, not to get too philosophical, but the real journey, the real part of your life is the journey, the building, not knowing how it's going to turn out and the challenges you face.

When you look back, that's all the fun stuff. And so you wouldn't even want it to go great in the first year because I think you'd be depressed. I think you want it to take a while and you want to learn because what's happening along the way is you're growing and you're learning who you are and you're building your own confidence and your own resolve. And I think the 30 secret is that's actually what it's really about. That's really why we're here.

I was reading some of my old Alan Watts notes this morning around philosophy. I found this quote, which was so good, which is the point of dancing is not to get to a particular spot on the dance floor. I love that story. He talks about dancing is so awesome. And he says, you're not rewarding the fastest dancer, right? He says that in that quote. When I do these, I always ask the same traditional closing question. What is the kindest thing that anyone's ever done for you?

First thing that comes to mind was last year, my wife's out of town and I have my middle son, Blake, and Lily were at home. So it's just the three of us. We had these crazy power storms going on. I get up in the morning early. I drive down to Stanford and Blake calls me and I'm like, oh no, what's happening?

And he says, hey, school's canceled. There's no power. And I said, okay, no problem. Just, you know, make sure you drop your sister off somewhere she can drive, you know, before you go wherever you're going to do. Just make sure she's okay. And he's like, no, dad, Lily and I want to come down and watch your class. I just remember thinking, wow, you know, these two teenagers who could have done whatever they wanted on their day off, they're going to drive an hour and a half and come hang out with me at Stanford. And I don't know, it just really, really moved me. And

Yeah, it meant the world to me. Amazing. Amazing place to close. It's so cool how you've built what you've built with some simple ideas just taken very, very seriously over long periods of time. I think that lesson is especially powerful. So thank you for telling us the entire story and so cool what you built. Thanks for doing this. Patrick, I love your podcast. I've listened to so many episodes. I learned so much. So I'm really honored to be here. Thanks so much. Pleasure's mine. Thank you.

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