Warburg Pincus CEO Jeffrey Perlman on navigating a trickier private equity environment
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Alison Massey: Welcome to another episode of Goldman Sachs Exchange's Great Investors. I'm Alison Massey, Chairman of Investment Banking in Goldman Sachs' Global Banking and Markets, and your host for this episode. Today, I have the pleasure of sitting down with Jeffrey Pearlman, the CEO of Warburg Pincus.

Warburg Pincus is one of the pioneers of private equity investing, having raised its first fund in 1971. Today, it has about $90 billion in assets under management, offices around the world, and a relatively new CEO. I'm excited to hear how Jeff plans to build on his firm's legacy amid all of the opportunities and challenges faced by private equity firms today. So, Jeff, welcome to the program. Thanks for having me.

Before I get to your career, I want to start with your firm. Take us back to 1971 when Warburg Pincus launched its first PE fund and tell us a little bit about what the investing world looked like then and what was the opportunity that your firm's leaders saw then?

Yeah, this may not surprise you, Allison, but that does predate me. But going back to that first fund, Lionel Pincus was really a visionary for the industry, really coined the term private equity. And when I look back in 1971, we raised at the time was a $41.5 million fund. I think the Wall Street Journal at the time said, I'm

Wow. Where is Warbird Pink is going to be able to invest all of this capital? That much money. And if you went back also, what was unique was we called all the capital on day one. Obviously today we all are used to capital calls, the capital being invested over multiple years. But candidly, no one trusted their investors in those days. It was a new product in that regard. So we called all the capital on day one.

Also, the limited partnership agreement, I think it was all of 10 pages, and it probably covers about 95% of what's in our documents today that now consist of about 1,000 pages. So the visionary elements that Lionel had, when you think about the structure of that vehicle, pretty much still holds today.

I think also when we go back to the 1970s, it was a very uneven decade in terms of performance for the markets. Markets were basically flat over almost the entirety of that decade. But like anything, you still find opportunities.

So I was going back in time and one of the great investments in that fund was we invested all of $5 million for a 10% stake in 20th Century Fox. Wow. Right before Star Wars ultimately came out. And so it was a great kind of example of a lot of noise, a lot of challenging times, stagflation, still find really interesting and compelling opportunities to invest in. Yeah. 1974 was one of those times.

years that I think when we were in business school, we studied what happened in the market. So you talk about the investment environment in 1971, but how does that compare with the current environment? There is a perception that higher rates and an uncertain geopolitical environment, and that's an understatement, not to mention a greater degree of competition, make this a really difficult environment for private equity investors. So what is your view of today's environment?

Yeah, first I'd say there's a tendency for investors to get caught up in the current moment as this is the most complicated that we've ever seen.

If you think about, again, the 1970s, or you think about when we're going through the fall of the Soviet Union, you weren't sure what it was going to look like on the other end. But ultimately, obviously, things continued to work out and that compounding in terms of positive growth continued. And look, I think we're living through a number of factors here. Chip Kaye, who's our chairman, who I succeeded in this role, Chip says he's been at the firm roughly 40 years. The first 25, he saw declining rates.

the last 15 he saw ultra low rates. And it's really the first time in 40 years that you're really seeing a structural step up in rates. And so I think that's first and foremost, the industry has to contend with that. The industry has to contend on top of that with really the most amount of inventory it's had at one point in time, right? We've got an average hold period now in private equity of over six years.

60% of the inventory has been around for over four years. So we've got to continue to work off the excess, especially of the 2021 vintage that existed. And then you've got potentially a little bit of a change or maybe a material change in what this economic order, you know, the U.S. architected going back the last seven or eight decades. So there's no question this is a challenging macro and geopolitical environment. And I think for an investor like us,

One of our defining features is our diversification. I think everyone likes to feel like they can predict the future. I think few have been able to demonstrate that they can do that consistently. And at the end of the day, it comes back to, are you diversified? And I think the firm is really well positioned in that regard to try to navigate through as we have for over 50 continuous years of investing. You're talking about diversification on your asset classes or geographically both?

I think when we think about diversification by design, we think about it by vintage. This is a very pro-cyclical industry. Everyone likes to invest a lot at the peak, and then they tend to underinvest during periods of stress. And then they wonder why do we end up below the benchmark? So I think A, vintage diversification is so important. Try to invest about the same amount year in and year out. Second is certainly geographic.

Third, sector diversification. And then the fourth, which is also overlooked, is also in terms of number of deals, right? Being sometimes too concentrated can really exacerbate one time you're in the top quartile, maybe you're in the bottom quartile. And one of the areas where the industry has really changed dramatically is really the persistence point.

Because if you go back in time, even 20 years ago to roughly around 2006, the percentage probability of a private equity fund who is in the first quartile to then be in the first quartile again in the next fund was over 40%. Today, it's less than a quarter. Wow. So there's been a big change. And I think those investors who can deliver that consistency and persistence of returns

I think are going to be even more valuable to their investors and to their LPs going forward. And I think because of this outperformance that we've seen in the public markets over the last handful of years, public markets have outperformed in the US their 100 year average by 50% up until obviously recently.

I think for RLPs, especially the big institutions, when they look out over the next decade, I think the value of private equity to them, the ability to generate that outperformance is going to be even more important in this next decade than it was in the previous decade of what was pretty strong public market performance.

So I want to pivot to talk about you. How did you find your way to Warburg Pincus? You know, it was a good question. At first, I didn't, when I was first going into investment banking, I didn't even know what that was at first when I was in the business school. None of us did. In the undergraduate business school at the University of Michigan. And my sister, who's three years older, had also gone to the Michigan Business School because my father gave us great advice growing up. Both my parents were lawyers, but my father told us, above all else, don't be a lawyer. And he said through

There's only 24 hours in a day. You can't bill your clients more than that. And he said, go into business. I've seen how well many of these companies that he'd advised and he could charge by the hour. They were benefiting from kind of that advice in the form of profits. And so he steered us that way. And so my sister was the first to take that advice.

She went to the undergraduate business school at the University of Michigan. Then she went into investment banking, and I just kind of wrote her coattails first to that. And lo and behold, we both ended up at the formerly kind of now defunct Credit Suisse or Credit Suisse First Boston at the time. And it just so happened when I was an analyst, I was working for

Even though I was in the real estate investment banking group, I was working for an individual in the financial sponsors group, really working for a number of sponsors. And it just so happened he was having a dinner with someone who had just joined Warburg Pincus, who was a good friend of his. And they were talking about dinner and the person who had just joined Warburg had mentioned that he really needed a good junior resource and did he know anyone, not thinking that he would know someone for real estate.

And the individual who's at CS in the sponsors group, and I'll leave on name, said, "Well, there's this one guy who does most of my work and lets me leave early all the time. So you should really kind of go have a conversation with him." And one thing led to another and then ended up at Warburg thinking that maybe I was going to go another year later, but they had just raised or were just raising a global real estate fund.

And it was their first foray into that space. And so it gave me an opportunity to come over right away. And what year was that? That was in 2006. 2006. So almost 20 years ago. Wow. So then what led you to Asia? So Asia was a little bit by happenstance.

There's some people who grow up and they're like, they're looking for that adventure and they want to get scratch that itch by kind of going to a place like Asia. I wasn't that person. I was probably more prototypical American in the Midwest. Probably my geography wasn't my strength. But right around the financial crisis, there was an opportunity that the firm was looking at in China. And again, it had real estate element to it. Chip, who had built our Asia business.

tapped me on the shoulder and said, "Hey, do you mind going out for a couple of weeks to go help with the team, help with the transaction over there?" So of course, I jumped at the opportunity to try to be helpful, went out to China. And in that period of time, just in those few weeks while I worked on that deal, I also happened to come across another opportunity. And really over a period of 12 or 18 months, the trips to China kept getting longer. To me, it was just fascinating, the opportunity set.

And as the trips got longer, as the opportunity set seemed to grow, as the US was navigating through the financial crisis at that point, I was smart enough to first propose to my wife. And then about a month later, I said to her, we'd probably see each other a lot more if we were in the same place. And so then propositioned, maybe we should go to Hong Kong. And Chip had been someone who was whispering in my ear that it was the best kind of six years of his career, the opportunity to go build

a real business and a franchise over there and I just saw how much opportunity there was. And fortunately my wife said yes on both fronts. And then we went to move to Asia more formally, kind of end of '09. That's great. So you talked about Chip setting up the business.

the previous CEO in Asia, and then you went in and significantly expanded the business, including the real estate business there. So were there any strategies that you found particularly successful in Asia to do that? One of the reasons why I liked real estate so much in an Asia context was

I felt it was one of the best ways to play emerging consumption at scale. Many of the other areas, whether you were at the time in China 15, 20 years ago, looking at a healthcare deal, it would be like a $30 million investment. Whereas because you're investing in hard assets, you had a huge opportunity. I also liked real estate because when you looked at the listed universe of real estate companies, in the US you would look and

home buildings like five or 6% of the total pie, you had office and retail and logistics and self-storage. And you looked in Asia, and at that time it was 98% comprised of home builders, of residential developers. And I looked at that, I said, there has to be an opportunity to go build leading players in each of these other areas. And so kind of marrying the private equity mindset of the firm with an understanding of the bricks and mortar of the real estate. And so we very much

went on to do that. We built the largest logistics real estate company, but one of the largest data center businesses, self-storage companies, so on and so forth over a long period of time. So I thought that was one that was very powerful. I also saw, and to Chip's credit, we were very early to go into China and India, right? We just celebrated our 30th anniversary in China. Next year will be our 30th in India.

And I really saw an opportunity to really, if you've been to the movie before, how can you leverage that in other markets? And we looked at Southeast Asia and you had obviously both the population, you had disposable incomes kind of hitting that inflection point of the ability to consume. And now it was almost 15 years ago, we really started that franchise by setting up the office in Singapore.

but actively investing in areas like in places like Vietnam, Philippines, Indonesia, etc. So I think those were two that really stood out. And I'd say really the third over time was really trying to build out a more diversified Asia business, because in my view,

So investors have woken up to the reality of China can be up, India can be down. India's up, China's down. Most are trying to look at and say, "Look, Asia's going to represent two thirds of global growth over the next decade." We want to try to find a diversified way to play that. And so really what we needed to do was take the success that we had more in emerging Asia and really start to build that out across mature Asia.

So you mentioned that you celebrated 30 years in China last year and are going to mark 30 years in India next year, talking about GDP growth. So talk about how those markets have evolved over the years from your perspective.

One of the unique angles, I guess, or lens that we've had because we've been there for so long is really the difference in, I'd say, the capital environment in both markets and how it's really then translated into what I would call the operational talent that exists in the markets. What I mean by that is if you take India, India has been in an environment where capital was always very expensive and it was less readily available. And it really forced

a bunch of entrepreneurs to really be very strong operators with their businesses. And we've seen that time and time again with the companies that we've invested in.

Whereas in China over the past 30 years up until really more recently, capital was readily available and in a way probably more subsidized. From the local banks. Yeah, at a lower cost. And so with that, you still have just such talented entrepreneurs in China, great vision and ability to kind of grow. But there was less operational focus and talent around how...

how do you manage the cost side of the equation and profitability? And so I think the challenge that I've posed to our teams there as we look going forward is,

Really, in China, I think the real test is going to be now the real private equity model. It's less momentum investing going forward. It's really going to be what we do here in the US and Europe and elsewhere. What can we do to grow earnings of this business and the value creation associated with that? And I think for me, the litmus test for the team in China is really threefold. One is we're investing in things that have to go with government policy, especially longer term government policy.

The second is, I believe for exit, we need to be able to make sure we're underwriting a sale to a domestic party. It's hard to say when the foreigners are going to show back up again and do it. I think over time they will, but it's going to take some time. And then the third is, I think you have to have control or significant influence in governance, specifically for the reason I mentioned. We've got to have our hand on the steering wheel to affect the value creation plan and really help the operational side of the businesses that in India

I feel like, again, you have such strong operators because they've always had to deal with a very high cost of capital in the market. And you think now there's more of an opportunity to have that majority ownership than there was. Yeah, and I think that's across Asia as a whole. I mean, in the early days, there were very few because these were first-generation entrepreneurs in a lot of instances. They were not looking to hand over control of their business. I think as we sit today...

I look back over the last even four or five years, over 70, 75% of our investments have been in majority control deals in Asia. That tends to surprise a number of our own investors of that. But that's how the market has continued to transform. Check sizes have gotten bigger. And again, the ability to get control, to be a majority investor, I think has grown considerably, even over just the last five years alone.

So you talked a little bit earlier about how Warburg Pincus has approached diversification. How has that approach affected your ability to return capital to shareholders, which so many LPs are now so focused on?

You know, I think it is the most important question as an industry. Well, I think private equity is one of the few financial innovations that has always delivered on its stated promise over time. It's delivered this outperformance versus the public markets over a long period of time. But when you look at the liquidity element of it, the industry has now gone three consecutive years at distributions over.

at 50% of its historical average, essentially 10% of NAV versus the historical 20% of NAV. And we've been very much the opposite of that, right? We've returned 50% more than we've invested over the last five years. That's extraordinary. You know, 45 billion distributed versus 30 invested, which Bloomberg reported over the last 12 months.

One is diversification is incredibly powerful because I can always find things to sell in the portfolio. Yeah, you have more flexibility. You have things that are uncorrelated that you can make sure you can find elements to sell. And then even in the first few months of 25,

We've sold three very large businesses, which Goldman has helped on as well, that are in totally different sectors. We sold a business in financial services, Kestra, a healthcare IT business in modernizing medicine, and an industrials business, Sundyne. So it just speaks to, again, the benefits that come from a diversified portfolio, things in pockets that are uncorrelated. I think the second is the alignment model we have. One of the benefits of being one integrated global partnership, a true kind of old school partnership,

is we're all in the same bucket. And so it encourages everyone to want to sell to kind of get money off the table. And I'd say the third is you have to have a top-down approach associated with pushing the importance of realizations. And one of the benefits that I've had and Chip had before me of spending the time in Asia is that the business cycles tend to be more compressed.

And what that means is you can't fall in love with your assets. You always have to find opportunities to get money off the table when you can. So I think for us, it's combining the core principle of diversification with alignment and the economic model that we have within the firm. Those two, I think, are a very powerful combination.

So in 2023, you came back to New York to serve as the firm's president. So what did you learn in Asia that helps you now as a global leader? I'd say a few things. One is what I just described, which is

You can't fall in love with your assets. You have to have a rigorous discipline on returning capital because you don't know when that next window is going to be there. I'd say the second is the importance of culture across the entirety of a firm, right? You can have culture in pockets, but ultimately, especially if you're one firm, you want to make sure whether the team's in India or China or Southeast Asia, US, Europe, everyone's representing the firm through one voice and one aligned message.

And I think being out there and seeing the differences that exist in these markets, different people, different culture, is making sure you can preserve that and enhance it as best you can. So I think that was another very big one. And I'd say the third is you're dealing in very complicated jurisdictions.

Right. These are I've always said, like, if you can build a successful business or franchise in a market like Asia, which is not one market, it's many different countries, it's different languages, laws, regulations, then I think you can pretty much do it anywhere. And.

To me, having seen that over a long period of time, different crises come up and how each of them kind of respond both with right policy or sometimes the wrong policy and how you try to navigate that, I think it's been invaluable for me is when I look at the firm through an entire lens. So you've talked about your relationship with Chip, Chip K. Is there one lesson, I'm sure he's taught you many things, but is there one lesson that you've learned from him that stands out?

Look, Chip's been a phenomenal mentor to me and really just a world-class individual. And I think is really representative of, you know, if I could bottle up Warbur Pincus almost in one person, I think Chip exudes that more than anyone I can think of. Has really been the importance of culture. He wears it on a sleeve every day. I think most would say that I think Chip knows every single person's first name in the firm. We're at a firm now we're approaching

1,000 people. That's not so easy. I'm going to have to challenge him on that next time. You should. You should. And probably he'd be the first to say that maybe that's why he was ready to hand over the reins, that it gets harder. He only knew 800 of the 1,000. It gets harder and harder as it goes on. And look, this is one of the big challenges, I think, for this next phase of the firm's future is

How do you preserve such a great culture? That's one of the defining characteristics of the place as you scale and as you grow. And I think that's where Chip has a lot of faith and trust in the next generation to go do that. But to me, his always kind of putting the firm first and preserving the culture of the place, I think is, again, one of the great differentiators for the firm and one we're going to continue to lean into going forward. Yeah. And you mentioned that all of the incentives are aligned.

to be consistent with that as well. So that certainly helps. So you were named CEO last summer and formally took the role on in September. So what is been the biggest surprise so far in being a CEO?

The transition was over a few years. So in a way, I was kind of commenting to someone the other day, you know, the day you kind of become CEOs, like when you have a birthday, someone asks you, do you feel you're older? And, you know, you're kind of like, eh, you know, it kind of feels the same. So to Chip's credit, I think it was a really well-managed, well-staged leadership transition. It's been hugely energizing both internally and externally. Look, I'd say from my side,

It's really just the prioritization. I think like anytime when you're your own deal partner, when your own group head, when you're running a region, you have the deals that are in front of you, you have the pipeline that's kind of coming behind. When you have something like a Warburg Pincus as a whole, there's so many things that we can be thinking about, both for the existing portfolio of 200 portfolio companies, as we think about new funding channels over the long term, there's so many things to be focused on.

At some point at the end of the day, you have to decide when's the time to just pour yourself a glass of wine and kind of call it a day because your mind is always thinking about the next five or 10 things you could be doing. And really the prioritization around that is to me the most important.

So you've talked about the leadership transition a little bit, but I think in your industry, Warburg has been a textbook case on seamless leadership transition, starting with Lionel Pincus, as you mentioned early on.

Are there any lessons that other firms can take from your example, meaning Warburg's example? Yeah. So, I mean, next year will be our 60th anniversary for the firm, and this is only our second leadership transition in that period. So I'm now the third representative of the third generation of leadership in the place. So, A, I think what Lionel first did

by looking out and seeing that in an investing firm, he fundamentally believed that you need continuity. And so if you're going to keep changing out leadership every five years, it's going to be very challenging, both with your investors and with the folks who are showing up every day to try to determine what's the right strategy for us to look at going forward. So I

So I'd say when he skipped a generation, it was quite unpopular at the time. But now you've seen many of our peers follow suit with that same kind of philosophy. And certainly, I think Chip and the other senior folks within the firm believed in that as well. I think second has been really

kind of architecting it early, signaling to the broader firm. This wasn't a situation where you see it in other places where you have a public competition of four people. One ultimately gets it, three don't, and then not surprisingly, the three feel that it's time to move on.

We haven't lost anybody in this transition. It's empowering to the next generation. They each have kind of a big role to play, and I'm just one piece of that. And I think that mindset has been permeated throughout the place by Chip, and I think that's been a big piece of it. And I'd say, look, the third is putting the institution above oneself. And this is where I give Chip enormous credit because

look, during his stewardship of the firm, AUM grew by over tenfold. And you could easily say that him and that senior partnership

should be able to go monetize the enterprise value that's certainly been kind of created. And Chip was the first to say as a non-founder that if you really want to have a successful investing institution, one that's going to stand the test of time, that ownership needs to be transient. It needs to reside with the people who show up every day to source the deals, to manage the deals, and ultimately to exit and realize the deals.

And so they never sat there and said, what can I do kind of for myself in the process? And also Chip is someone, and you know him well, that could easily have continued on to go do this. But he put the institution first by saying there's this great next generation of talent. And I think his defining legacy will be the depth of talent that he's built across the firm.

and saying, you know what, I got to give them their opportunity to go see what they can take the firm to the next heights and root for their success. Because that's your legacy as opposed to so many other instances where at times maybe a founder feels that to show how indispensable they are, they want to show how indispensable they are. And it's not necessarily empowering the next generation of leadership. And so I think each of those factors, and I'd say the last one, which is so important in our industry is

really being transparent in the communication with our investors. I mean, they're such important partners of ours. We were very open from the beginning. We walked through the stages of it, the plan around it. We consistently communicated throughout the process.

And look, stakeholders like overcommunication. And I think that was also an important feature of it. So it's interesting because I recently interviewed David Gross, who became co-managing partner of Bain Capital last year. And in 2022, I interviewed Joe Bay, who became co-CEO of KKR along with Scott Nuttall in 2021.

So, I have two questions based on that. What is it like to be part of this new generation of leadership running these private equity firms? And coincidentally, or maybe not coincidentally, all three of you spent the bulk of your career in Asia, which to me is fascinating. So, what is it about that trend and being out there that you think positioned you well for being the CEO of these great firms?

Just to touch on the second part, because it's an interesting observation and you're not the first to have kind of pointed out the fact that a number of us came from having spent time in Asia. And I think it goes back a little bit to what I'd said earlier, which is it's a very complicated part of the world. And if you can demonstrate an ability to build a franchise and to build a platform over there, you deal with so much complexity. Again, because it's not one market. It's a collection of many different markets.

I think that's one big element of it. I think, I know Chip's always believed this and I do as well, to really lead a global investing business, I think you need to have lived and invested outside of your home market, right? And I think it just opens up- That's a great point. It opens up your mind to, I think, either biases you may have or others that maybe you should adopt some of. So I think there is a real element to that. I think that's probably where the most maybe commonality comes from in that

I think the opportunity, I think, and I see this when I see Joe and others is, I think it's incredibly energizing. I've always thought I had a lot of energy. I've never been, I feel like, this energized. It's incredibly exciting.

we have the ability to shape the future. And as I said, because that older generation did not go ahead and try to monetize that, probably it would have been the expense of that, the subsequent generations thereafter. You could imagine how energizing it is, not just for me, but for the rest of the firm. And so I think, A, there's so much to do with the firm. And as a business builder, I'm excited about that element. And then I think also as someone who believes in the importance of

giving back to the community as well, I think from that perch, I think your reach is that much greater. And so to me, that's the other really energizing element of this as well. Yeah. I will tell you, as someone who deals with a lot of your partners around the world, it is very energizing for them to have a new generation of leadership. And your style is much more like one of their partners. And we see it from the outside in. As you look across the world today, what do you think are the greatest opportunities for a firm like Warburg? You

You know, look, everyone's going to be caught up in, as I said, the tariffs of the moment, and it's always the one that's in front of you. And I think one of the great strengths you have to have is to kind of see above the trees. And I look out and, as I said, there's so many different subsets of opportunities that are independent of that. Obviously, you look out at Asia, huge opportunity, two thirds of global growth is going to be there. Sure, tariffs are going to have a near term impact on

supply chains around the world and where some of the goods are kind of made. But ultimately, these are still rising populations that are becoming more affluent. Therefore, they'll be able to kind of consume more and more going forward. I think the second and the much more consequential one, I think even more so than tariffs, will be AI and the impact of what that can do in terms of the revenue side of our portfolio companies, the expense and cost optimization side of our businesses. Certainly, it can be as much

as it is an asset. But I think when we look at it, there's just huge opportunities that come from that. And I think with this next generation coming in place in the firm, I'm someone that's always been very focused on how do we bring technology into the investing process in the firm. I see it even right now, we're using it

for prospecting. So when our investment professionals, for example, go to Seattle to go see a company through our application, they can go immediately see who are dormant prospects, who are, if you're within three miles, five miles, 30 miles, who else can you set up meetings with that are in that sector, in that space?

The potential is significant. It's going to obviously have a number of second and third derivative impacts, but we really have an ability to architect how we want it to both apply to the firm, but ultimately to the portfolio and to the investment decision process. And to me, that's another very exciting area and huge opportunity.

Yeah, it is exciting. And you can learn AI and the implications from your children as well, who will know more than you quickly. Also very true. So in December, you and Mark Lipschultz, co-CEO of Blue Owl Capital, were honored at the Wall Street Dinner, a major fundraising event for the UJA Federation of New York, for your contributions to the Jewish community. So tell me a little bit about those causes that are important to you.

Yeah, it was something that was always incredibly important to my parents. They worked incredibly hard, but they always said they had their second job, which was what they were doing for the community. And so they really distilled that down to both my sister and me. And it's something that, as they always said, as you elevate in your roles, your opportunity to contribute grows that much more. And first and foremost, for me, the community element is so important. So I grew up in Detroit. The continued ability to support, I sit on the board of

The Detroit Children's Fund really helping kind of the school system in greater Detroit and trying to continue to elevate that and really bring opportunities across the board in terms of education, not just

to a limited subset of folks. But to me, children, education are so intertwined, so important in terms of kind of longer term success. So trying to do everything I can in the local communities, whether it's Detroit, whether it was New York, when we were in Asia, we were doing the same. Because I think each time you're living in a different place,

the community is giving you something. And so the ability to give something back to it, I think, is so important. So that's been a big one. And then the Jewish community has always been a close and important issue to me. And obviously, especially post-October 7th, it became even more important to really step up for the community. And Mark and I had the privilege of being able to represent the community that evening and

So it is something that we try to devote as much time as humanly possible. And as you know, there's only 24 hours in a day. Like your father told you? But exactly. But fortunately, he gave me the right advice initially, which really opened up the potential to contribute even more. So I'm grateful for that. So we'd like to end these sessions of the lightning round. So we're going to run through a couple of questions, just get a quick one word or two word answer. So what was your very first investment?

I think it was, at least professionally, it was investing in B-minus rental apartments in Southeast US, trying to make them into B, B-plus apartments. Was it a successful investment? It was okay. It was okay. Okay. We'll go on. So what do you think your greatest strength is as an investor?

I think it's being even-keeled. You can't get caught up too much in sometimes the hype, and at the same time, you can't get paralyzed by kind of the stress. You've got to, as I say, you've got to be able to see over the trees, and I think, and be measured in that approach, especially when you're sitting at the helm of a large investing institution. So I think that's a great strength of mine. So what's the best piece of advice you have ever received?

I'm going to say it in a lighthearted way, and it was Lionel Pincus when I joined the firm. And Lionel once said,

Because it was a very difficult environment. He said, "I've never met a rich pessimist." And you know what? We get so caught up in these uncertain and difficult and challenging environments. And when the start of COVID happened, when he went back to the GFC, when the tech bubble burst, it's so easy to think that, are we going to make it through to the other side?

And so, again, I think it's just a great reminder of don't get caught up in the moment. And yes, we are. Some of these are going to have much greater consequences than maybe anyone kind of imagined. But at the same time, you can't get paralyzed by that. And over time, the world's innovative. The best ideas usually tend to win.

And longer term, the power of compounding is pretty impactful. Yeah. And I think you're right. People like to work for optimistic people, not pessimists.

All right. So where do you spend your time outside the office? What are your most important recreations? When I'm not traveling kind of all over the world, you know, I have two young kids still. So my daughter just turned seven. My son just turned four. So they keep me very preoccupied on the weekends when I'm around. I try to fit in a run on the weekends, especially just it's a great way to kind of clear the mind and...

skiing does that too when you have the few opportunities to ever go out on the mountain if you don't pay attention you can fall and so it's a great way to kind of truly clear your mind and you gotta worry about your next turn exactly and it's rare because every every part of every other day is you're thinking about five other things at that one moment in time so i think that's an important piece but with younger kids the time is spent on them yep i get it

So finally, in particular, in the geopolitical environment we're in at the moment, what are you most excited about in the world right now? Look, I think...

It's what's to come. You know, it's less what's already happened. It's the ability to kind of shape the future. And this is where, again, I think you've had different technologies that have come at certain points in time, even in my lifetime and when mobile was established. And then there's been other things like IoT or the Internet of Things, which maybe didn't play out exactly as maybe people had hoped for. And then I think with Gen AI and the potential around it,

This will be transformational in a number of ways. And so trying to position ourselves to capture that, not to figure out what's going to be the winning language model. It's going to be how and what ways can we implement and apply this to our investing, to the companies that we invest in. To me, that's to me the most exciting part because that chapter is unwritten at this point. I agree. It is exciting. So Jeff, thank you so much for joining me today. Thank you for having me.

And thank you all for listening to this episode of Goldman Sachs Exchange's Great Investors, which was recorded on April 7th, 2025. I'm Alison Mass. If you enjoyed the show, we hope you'll follow us on Apple Podcasts, Spotify, or YouTube, or wherever you listen to your podcasts, and leave us a rating and a comment.

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