My First Million - We asked a $18.9B Investor how to survive the AI bubble

Transcript

Intro

**** · 15 years ago, we set an objective to become the number one performing private equity. Since we set that goal, the four funds we invested after that have all done 5x or better.

**** · How do you do 5x in 6 years? Well, you go get Navy Seals to run plumbing companies. It's that makes perfect sense to me.

**** · Yeah, it works pretty well.

**** · In your world, there's a bunch of AI rollup. We're going to buy a company. We're going to throw AI in it. It's going to be awesome. Is that a good strategy? These venture-backed apps, they'll have 2 million of revenue and a $500 million valuation and they're going to go to zero.

**** · How do you see the world in the market?

**** · Where do you see opportunity? Where do you see destruction? And where do you see overhype?

**** · Okay. I'll start with overhype. How about that?

**** · Well, listen. we have Graham Weaver here today. You've seen this guy all over YouTube, Tik Tok, wherever you've been seen. What I'm interested in is I would have always loved to go to Stanford and go to Stanford Business School. There's probably a lot of people listening to this that wonder what would it be and that would be cool to be able to go learn from the best at one of the best schools. Well, we get to do that today. We have somebody who not only is out in the field. You've got a private equity fund that has almost 20 billion in assets under management, but you also teach at Stanford. And I think today it'll be fun if we get to hang out and pick your brain and be students we're in your class.

**** · I love it. looking forward to it.

**** · what's funny is you I've watched your talks for a long time and they're they're amazing. How to live an asymmetric life was a really good one. How to live your full life. I think that wasn't the exact title of one but that was my takeaway from another talk and I was doing research on you and I'm I didn't even realize this guy had a PE fund and it's and I think that's great that your ideas are what you're known for more than your work. So are you besides the talks can you explain with your fund ho how successful are you beyond just the talks about 15 years ago we set an objective to become the number one performing private equity fund in the world as measured by netic the return on capital and our last since we set that goal the four funds we invested after that have all done 5x or better or the fourth one's on track to do that so it's been it's been it's all the all the content that I try to bring to my talks or to the students at Stanford. I to think they're really based in stuff that really works. There's a lot of a lot of amazing people that are have a lot of really good motivational content. I to try mine out in the real world a lot and see what what works. And I've and I think that, the stuff that I try to talk about is exactly what we what we do at Alpine. But yeah, we've had a really great run and I'm really proud of how we've done it, too. We've done it, with people, treating people really well. We built our entire business around the people at Alpine and the people, the entrepreneurs in our portfolio and try to be a force for good. The three goals are be the top performing fund, be a force for good, and be a place where the best people want to come and works and spend their careers. And I think hopefully we've done it that way. So you you just said we you set a goal to be the number one performing private equity fund in the world. no big deal.

**** · That's **** · So and you said 5x which is multiple uninvested capital. So and that's over 10 years or what's the time frame are we talking here?

**** · from the day the first dollar comes into the last dollar goes out. Yeah. Maybe it might be it it's probably easier to talk about a probably averages about six years of the average investment is probably about six years.

**** · That's pretty remarkable. So, you normally, rule of 72, you put your money in the S&P 500. In seven years, you should double your money. So, you should get 2x if you're there. And you're you're in roughly the same time frame trying to get a 5x, So, you're really trying to outperform. Can you in plain English, cuz Sam knows this, I spent the last two days having I had 40 private equity meetings and I'm half the time I'm just they're "Yeah, we're a small fund, a billion and a half under management." And I'm that was the story all day. I was how much money do you guys have? And what the hell do you guys do?

**** · So, can you give me the simple, what the hell do you guys do? Are you guys buying HVAC companies? Are you buying software companies? So, private equity is a very broad classification. There's lots of different strategies. So, I'll tell you specifically what we do. I know there's a lot of talk around AI buy and builds, which we can dive into in a little bit, but we do primarily buy and build. So we'll we'll take a we'll find a really amazing CEO that a lot of times has worked with us in a smaller capacity. Maybe they were the CFO of a company we had or they came through our training program and then we'll back them. We'll go find an industry that we think is really interesting. We the prosaic industries the ones you mentioned, plumbing, HVAC. We also do software too because there's a number of strategies where roll-ups in software can be really attractive. So we it's a small part of what we do though smaller than the services stuff and but a lot of these really prosaic industries are massive. the plumbing and HVAC industry you mentioned is it's a$170 billion industry. So it's so if you get it and you figure it out you can you can grow almost forever because you just don't run out of run out of TAM which is why we to buy and builds because we'll get it once and then we'll stamp it out a number of times. The other thing that's really cool about buying bills is it really is plays to our core competence which is just talent, So we're the buy and build strategy the way we do it really is a talent strategy. we're in a lot of cases we're putting high attribute military veterans in to go run these a plumbing business and they're just incredible leaders. And so our secret superpower is really training these awesome leaders and giving them an opportunity to do something they might not have had the opportunity to do otherwise. Sam, is isn't that hilarious, Sam? You could be how do you how do you do 5x in six years? It's well, you go get Navy Seals to run plumbing companies. It's that makes perfect sense to me.

**** · That's That's that's a pretty simple simplified expression. Yeah. Have Navy Seals run plumbing companies. It's It works pretty well. Yeah. The deck is only one slide.

**** · I it.

**** · The Navy the Navy Seal is the pro a very common background of our of our leaders in these businesses.

**** · And how big of companies are you buying?

**** · So the add-on acquisitions, which is primarily what we do, the I think the average deal we did is $30 million. So the company might have 15 to 20 million of revenue, something that.

**** · Oh, it's pretty small. Do you And do you do you borrow money to And do you borrow money to buy it?

**** · Yeah, we do. So, we'll we once we get it going, we can usually finance all the acquisitions with cash flow and debt. So, we don't have to put in any more equity. That's important. Obviously, if you're if you're trying to have a high MOIC, the not putting money in part is a big part of that.

**** · The the main part of your model that's I would say differentiated is you I don't know if it's not a search fund exactly, but you start with a an operator or a CEO in house, which most private equity guys don't do, ### The buy and build strategy

**** · They're mostly we buy you. We hope the management team really stays on. That's really important. Or we're going to later install and do a search for an executive to run the company. But what you guys are doing is you start with the person. You run a search with them. It seems Tell me what I get wrong. Is it not what's different about it than a search fund?

**** · They come in house is the difference.

**** · No, Sean, you nailed it. It's a search fund where we try to improve on the search fund model. if you think about a search fund and for those who may not know, search fund is you're backing a young person to go buy a business and then they're going to go run it. But the thing where it falls down is the first part which is someone has to go source and buy a business. They have to go build an entire private equity firm to buy one company. So we do all that ourselves because we are obviously doing this repeated on a repeated basis. But the general part about having a really high attribute person betting their career on a business is a great formula. Probably a lot of what you talk about on this podcast. it's it's the greatest formula there is. So, we love the that part of the DNA of a search fund model.

**** · We're hiring very similar high attribute people, maybe a little bit older than the search fun, a little more experienced, bigger businesses, but generally it is what you just said, Sean. It is it is a superpowered search fund model.

**** · So, this episode is all about excellence. A while back, I shared my personal framework for building excellence in my own life, and the team at HubSpot turned it into a 30-day operating system you can check out now. It breaks down the systems it took me 10 years to figure out and shows how I use them day-to-day. These are systems that genuinely changed my life. So, if you want to build a good life, scan the QR code or click the link in the description. Now, let's get back to the show.

**** · So the simplified way of thinking about this is you find a really high attribute person. We'll call them the Navy Seal for now. Just say, somebody who's clearly a go-getter, a winner, organized, effective individual who's willing to work really hard for five, six years to create life-changing wealth for themselves and build and own their own business without having to come up with a great idea from scratch.

**** · You go with that. You're already looking at whatever hundreds of deals. You have thesis around stuff. You go and you buy the best deal you can find there. And then you do add-ons. So, you go buy the plumbing company. It's already a good business. That person should operate it maybe to be a better business, grow it organically. And then you're going to buy maybe more tuckin plumbing businesses to grow the thing using the cash flow from the first business.

**** · Exactly.

**** · And then the other thing is once you bought 10 plumbing companies, what it looks to run the best in the world cuz this one company might do really well on training. This other company does great on customer acquisition. This other company has a purchasing advantage. This other one has a training.

**** · Steal the superpowers of each.

**** · Exactly.

**** · you grab and usually that's true. Usually each company has a superpower. But after let's just say 10 deals, you've got all the superpowers, and now your next deal, your 11th deal has 10 superpowers. Often you can improve that business dramatically really fast just because you take that playbook and the reason you can make that playbook consistent is because you're putting your own people in to run it. This took me 10 years to figure out, but we would we would back founders and then say, "Hey, we have all these great ideas."

**** · And the founders would just smile and write stuff down and never do anything, and that's not that we don't love founders, but you can't you're not going to buy a guy who's run a plumbing company for 35 years and be a and then, come in and tell him how to run his business. That doesn't work.

**** · So, Sam, should we do Graham a favor and make him likable? because you're too hateable. You're happy. You're good-looking. You're super successful.

Mowing lawns

**** · You're "We just got this model that prints. This is amazing." And I'm going to do you a favor here because that's the end point, but that wasn't where you started. the start of your story is you're mowing lawns in Ohio, listening to self-help tapes on, in your earbuds while you mow lawns to try to figure out what the hell you're going to do. And I my understanding, you tell us the fun part of the story, but my understanding is you in college bootstrapped this with credit cards and went through the financial crisis, a bunch of stuff that. So, can you can you bring it down a notch and get go to the part that makes us root for you?

**** · what's what's hard about this?

**** · Yeah.

**** · Well, first of all, thanks for the kind words. I appreciate them. But, I grew up in a small town in Ohio.

**** · Went to a public school and it was a bluecollar town outside of Toledo called Parisburg. Nothing special about it. And I was I was probably just average in just about everything. athletics, school, and this isn't false humility. this is I didn't make the basketball team. I got cut, from the wrestling team. I just wasn't really and I was I was okay at grades, not nothing special. And just as you said, Sean, I was mowing lawns and I start the Stony Walkman came out and I started listening to tapes by guys Brian Tracy and Tony Robbins and Earl Nightingale and guys that. And so you're imagine you're a 14-year-old kid and you're and figuratively brain I'm brainwashing myself with this content because I listen to so many hours of it in the walking back and forth. And the two big concept the first concept they that they said was you're either going to be your own best friend or you're gonna be your own worst enemy. So fig you figure out you first you think that the world's happening for example you think you got cut from the basketball team and you all this stuff happened externally but really it's it's and that was a very hard message to hear because I was wait what do you mean? I had all these excuses lined up I wasn't tall enough and I hadn't started playing early enough and my parents didn't get me in wrestling early enough and all this stuff. It's nope, you don't get to have any of that stuff. You got to it's let you got to you got to get rid of all that and just you got to accept total accountability for your life. And that was absolutely brutal. And I realized they were talking about me and I wasn't doing that. And I was I was exactly who they were talking about. So if the first thing is get out of your own way, the second one was figure out what you really want. And I give Brian Tracy the most credit for this about how to set goals. And I think he maybe the best, at least back then was the best in the world at setting goals. And so I would write down my goals every single day, multiple times a day, in high school. And it was just incredible the combination of those two things. It's pretty undefeated formula, get out of your own way and don't allow yourself to make excuses and then write down what you want. Be super clear and then and obviously you got to go do the stuff you write down. But that formula was really powerful and there was just something in me I guess that wanted more than what I had. And so I so I just kept plowing through and then and then the story is definitely not even close to linear. everything you could imagine goes wrong, I I wasn't great at wrestling. I cut a ton of weight in wrestling. I was 125 lbs at 6 feet tall. do that math. And then and then with Alpine, our first fund lost money, drained my savings account. then we started clawing our way back, got smacked by the Great Recession, drained my savings account again. it was so it's it's definitely not been a linear story at all. But I think that the story is just one of being clear about what you want and then just this crazy amount of persistence.

**** · I love that. I want to switch gears and ask about AI. So what the hell? What are we supposed to do? So 5 years ago if you if I was advising my cousin on what to do, I'd be go study computer science. the technology curve is only going this way. Learn to code. You'll be you'll be set. Now they're graduating and they're probably yeah, hate their uncle now because Uncle Sean told them to go learn to code and maybe that maybe that's irrelevant. Maybe it's super powerful. We can't tell either way yet.

What’s the overhype with AI

**** · And so there's all these there's all this uncertainty. I want to hear from you how do you see the world in the market? where do you see opportunity? Where do you see destruction? And where do you see overhype? I want those three categories from you. Opportunity, destruction, and overhype.

**** · Okay, I'll start with overhype. How about that? I I was I graduated from business school in 99, which was it felt this exact time now, but it was the dot era.

**** · That was the time when you had petfood.com and Web Van and all this nonsense. I think the I think there were 400 companies that went public and the only one that I'm aware of that survived was Amazon, maybe eBay. but it was it was a blood bath and so people were that the internet's going to transform the world. Look at us now. We're on a podcast having, over Wi-Fi.

**** · And by the way, I can order Door Dash just Web Van might have wanted to do. Instacart, Even the ideas might have not have been terrible, but the way they were burning money and that wasn't and you think about today, your mobile phone and you think about imagine just your Wi-Fi doesn't work for a week. Good luck. that. So, it transformed the world more than people could even imagine back then, but there was a lot of false starts and hype that people didn't really know where to place it and they misplaced it. I think that's where we are in AI.

**** · And my example of I'll just to back up, I think there's four places you could play in AI. You could be in the infrastructure layer which is really all the chips and data centers and energy and that's a very exciting area that's going to have growth for as long as we can see. Then the next is the large language models.

**** · There's really not a lot of those. So I don't know that you can really play there unless you're a big business even investing in those you're already paying a price that assumes success for those. So I don't think that's really that interesting.

**** · Then there's the app layer which is where all the most of the venture money is going. And then there's the use case layer which is you're a customer a HVAC company and you're going to use AI and I think and and that's that's why I think a lot of these venture firms are jumping into these AI rollups because they're realizing that the first three layers are tough and they're going to play in that fourth one. But where the hype is the third one which is the apps. I'm gonna be an app that I'm gonna help law firms settle their cases faster or I'm gonna make call center software that's going to allow you to not use humans or I'm gonna whatever. there's a million of those applications. I think that's where a lot of the hype is. We see all these companies as vendors to our businesses. So, we they're they're pitching us all the time, these venture-backed apps, and they'll have 2 million of revenue and a $500 million valuation, and they're going to go to zero. they're going to be worth absolutely zero, but a lot of them aren't. A lot of them are getting huge revenue fast. Are you saying that you think some of those guys are gonna also go to is it is the churn going to be so high they're going to go to zero?

**** · I think that you have to say ultimately what's the barrier and what's the moat that they're going to be able to build? There are there will be apps that will be successful just there were dotcoms that were successful but they're going to get attacked by above and below. they're getting attacked below from the companies that can have now they can build their own stuff. They're getting attacked also from the LLMs who are introducing interfaces and new products that are just taking the business of some of these apps. So, there's going to be this constant pressure on them. I think if you can build proprietary data sets, which is harder than it sounds, or you can build really deep interfaces with your customers, which is also harder than it sounds, those are those are modes you can build. But really, I think sometimes what you're really, you might be six months ahead of where the LLMs are going to ultimately go and that you can make a lot of revenue for a short period of time. Again, use going back to the internet. There was a ton of businesses in the ear in the, 90s where it was get your marriage license online and those business made a fortune and they grew really fast.

**** · Hundreds they were growing at 100% plus a year. they were until Google just absorbed all those rents. it's that. And that's a little bit of the analogy of the LLMs, I think, absorbing a lot of the rents. So, I'm not making a blanket statement that all apps are going to fail. I just think that's you asked where I think things are overhyped. I think that's where they're overhyped.

**** · And what about in your world there's a bunch of AI rollup. So, it's oh, let's go buy these service businesses, smash in some AI, baby. let's put some AI in the front door. Is there a back? Let's put some AI back there. Let's lift the shove some AI under there. It's it's me with a Thanksgiving plate.

**** · I'm just trying to put mac and cheese everywhere. There's we're going to buy a company. We're going to throw AI in it. It's going to be awesome. Is that a good strategy?

**** · I think the reason that people are approaching the strategy is because they're probably seeing a little bit of what I was describing about the app layer and saying, gosh, I'd rather be the person using the AI than someone, developing it. So I think that's why they land in these AI roll-ups. I think you got to be careful.

**** · we've been doing roll-ups for 15 years and AI is a huge thing. It's important depends on the industry of course some industries are AI is a much bigger factor than others. But the other basics of getting the talent getting the companies integrating, doing the transition management, having your workforce stay on, doing training, recruiting, those are really the core elements. the technology here's probably a hot take I think the technology in many industries is going to be is going to be commoditized I'll give you an example I'll give you a real example in property manage we happen to be in property management I know there's been a bunch of AI native rollups launched by venture firms in property management what techn what's their real advantage are they going to have technology that's better than anyone else I would say the answer is no so what's the what's the mo And exactly the moat in property management is all the stuff I was mentioning before hiring well building good cultures retaining recruiting but the technology at least in that particular segment's going to come through the I think the software companies are going to and so we're we're all going to have access and this is this is my take this isn't there can be other opinions on this but I think ultimately I think most people are going to have access to the same technology So, it'll be a tool and it'll help everybody, but it's not going to be the thing, it's not going to be the real differentiator. and so, so I still would go back to say if you want to win in AI roll-ups, you got to win in all that other stuff I was saying.

**** · Yeah, that makes sense. I think what some people are doing and which is not really the rollup part of it but you go buy a property management company that does six million a year in IBIDA and then you use AI to make the business more efficient and now it's doing 8.5 million in IBIDA and you're priced at a 5x difference you've created 10 million 15 million of value just by running it more efficiently and even though another property manager might be able to do the same exact thing doesn't really matter plus most property managers are going to be slower to adopt AI than you might be if you're really bullish on this.

**** · I I think that's the thesis what you just described is the thesis and we'll we'll see how it plays out. We'll see I'm I'm sure there will be some people that execute really well and have some version of what you said. It probably won't be as dramatic and then it's just where the rents go and do that, just how much that rents ultimately get passed down to the consumer. I don't know that you necessarily win on technology per se.

**** · So, you must get this all the time. If you're teaching at Stanford, I'm sure somebody's raising their hand and saying, "Hey, I graduate, next semester. What should I go do?" "Where should I go? I'm a smart, hungry person who wants to be successful. You see the landscape and what's going on. Where should I be going? What should I do? What's the opportunity?"

Where’s the opportunity

**** · I would say, if I were graduating now, knowing everything I know now, I would go do a services roll up because I know how to do that. It works really well. I think it I think AI is a tailwind. I do that in an industry where you can build real moes and stickiness with the customers. Not all industries allow that.

**** · What does that mean? services. You're talking about pest control.

**** · What are we talking about here?

**** · take wealth management for example.

**** · if you go into that business, you're "Okay, I'm helping people buy stocks or whatever." But what if you were helping people buy stocks and you were doing their trust and you were doing their taxes and you were helping them with all their estate planning and and and that's your mode against AI. It's old-fashioned stuff.

**** · It's it's your mode against AI is the deep relationships with your customers. So I would say go into something where you can really build those customer modes and then AI is nothing but a tailwind for you because you're the customer doesn't care how you're doing your backend, **** · But I would just be playing around with that. I think it's it's going to be a language that I would advise anyone no matter what age you are, but it's certainly if you're a young student graduating you want to know that language extremely well. you want to speak that language cuz that'll also allow you to look at an opportunity and say okay I know I could do this with it because I'm so fast all in these tools.

**** · So I think so Sean and I have both started companies and without sounding too grandiose I think that sometimes we view ourselves a little bit artisty and creative more so than good or even interested in financial models and things that. And because of that, I think it's partially because I was jealous and partially because it's true that I thought that PE was nonsense.

**** · Not and I thought it was very effective, but I thought well, buying a company and firing a bunch of people, that's not the only value creation is that is for the owners of the PE firm, not necessarily the betterment of the world. which there's a million examples of why that's totally wrong. But I think what's interesting about you is you're the antithesis of that where you're putting out this content that's quite soulful and when I talk to you and when I see your talks I'm this guy's got it. He makes me feel good and yet he's in the most soulless industry because you got to be good at both, must be great at the ruthless analysis of business and finding the levers, cranking out that gross margin and doing all of that stuff while still clearly not getting not becoming what the caricature that Sam's painting.

Ruthless PE

**** · Yeah.

**** · if I had to keep it really simple, I would I would say let's pretend for a second that I wasn't interested at all in being a force for good and I was just interested in generating returns. I'd run my business exactly the same way. A lot of it is for me is it's it's having the confidence in building something that's going to be durable and and enduring. So I'll I'll use a real example. Let's say that I have this strategy. I won't use any names, but let's say I'm a I'm a software buyout firm and my strategy is I go into a business. I buy a software company. I fire people and I double price. I'll make money in the short term. But you look at a time now where AI is coming you really want the companies that are going to win in software have incredible teams that are on top. They're making agentic products on top of their software and they're going to they're going to they're going to have AIB this incredible tailwind for them. And if you if you just destroyed your your team and your cost structure, you're going to get attacked from both sides, from your customer side and from, the LLM. So, we found that building things is a lot more durable than ripping things apart because you can make one and a half times your money or maybe even two times your money ripping stuff apart if you're lucky, if you time the exit just But if you build something, time's your friend and it could be you can make a hundred times your money. And so I do think a lot of it is time horizon. I think underneath that is even deeper.

**** · why are you in this business in the first place? if your goal to be in the business is to make money and you want to do it as fast as possible, then maybe that behavior does flow from that. But in terms of just being good at private equity, I don't think ripping things apart, I don't think you're going to be the best in the world, doing that.

**** · What's the best deal you guys have ever done? What's the hero deal?

**** · we've had we've had a few really good ones that rhyme with what I'll describe, but you picked the plumbing and HVAC example at the beginning. That's one of our best deals. we back two people that we hired out of business school. They joined our CEO and training program. They went through that program. They became the eventually the co-CEOs of the business.

Hero deal: $8M to $500M

**** · We bought a small plumbing and HVAC business that had $8 million of earnings. This year that business will do $500 million of earnings.

**** · How long How many years did that take?

**** · It took six years.

**** · Six years to $500 million. You have to break that down. How $500 million of earnings, not Yeah. three billion of three billion of revenue, 500 million of earnings. And we I think importantly that happened without us putting in any additional money.

**** · Wow. So an initial buy of what 30 million or something that. How much was that?

**** · We put in a total of 50 in the first deal. We might have put in that first year another maybe nine or so that first year and then that was it. Then we never put in anymore.

**** · What was going on? Was it that you just you guys just went on an acquisition spree and picked up all the mom and pops or was it that they weren't doing any sales? They didn't know what they didn't have a good website. what was what was missing that you guys added?

**** · We got we got fortunate that the third deal that we bought, we partnered with this guy. So the CEOs are named AJ Brown and Will Matson. And then the third deal we did, we partnered with this guy named Ira Puit who was the grizzled HVAC veteran and just this wonderful guy. He had seven of his kids in the business and and he gave us a lot of the playbook levers and then the next deals after that we were adding to that playbook. So eventually we just ended up with this amazing playbook about how to run those businesses and then we began that talent program we were talking about earlier where we started attracting a lot of incredible leaders. a lot of, not all of them, but a lot of them veterans. And then that allows to go buy businesses that other people can't buy because really the line of people that wants to go buy a $12 million revenue plumbing business in the middle of Louisiana that requires a management change is short.

**** · It's a short line.

**** · Can you have to address this? So, you just you described one of the guys, I forget his name, as a grizzled HVAC guy, which in my head I have a I have a picture in my head of what that is. So, I Googled So, I looked up the company you're talking about is called Apex Service Partners, I assume.

**** · Yeah.

**** · And I looked up Will Matson. Sean, go ahead and look up Will Matson. And yeah, he probably looks the opposite of a grizzly is a babyfaced guy. Honestly, he looks and he might be 28 years old. I think he looks very young and he worked at JP Morgan. He went to Wharton and worked at McKenzie.

**** · So the grizzled guy is named Ira Puit and the combination of AJ Will and Ira is amazing. So that's what I want to ask about. I want to ask about what makes this such a high functioning team to go from 8 million to 500 million in profit. teach me what makes such a powerful team and what attributes are needed in order to grow a business that fast because these guys look the fairly odd couple.

**** · They are they are an odd couple. So the combo in this in this in this particular instance the combo is AJ is incredibly focused on the talent and he's the one that rallies the Navy veterans and flies around and gets them excited. Will is does the finance and the M&A and a lot of the hold co- functions and then IRA is the one that's hey this is this is how you run a plumbing business here's the playbook we got to implement so that's what how the combination works what they all have in common and then to answer your question what we look for in these leaders number one is just this white hot will to win and that's more important for us we found that to be way more highly correlated than any other factor IQ or background or experience, but each one of these three in some version of their life has just demonstrated this crazy will to win. We learned this from a book called Who, which was the sequel to the book called Top Grading. And it's about how to hire. And so we do a threehour interview and you start with the person in in high school and you go through yesterday and you're just walking through their background. It's a conversation just this. It's not it's not super formal, but you're you're collecting data on this person and you're in AG and Will's case, you or Ira or really any anyone that had gone through our program, you're just going to see example after example of hey, this thing went really wrong and it was a bummer. And I here's how I handled it. I got I got up, I plowed through, I put my shoes boots back on and I kept marching forward. And you're going to see that again and again and again. We always say if it'll leap out of that interview and if it doesn't then they probably don't have it.

White hot will to win

**** · So speaking of deciding what to do in a bunch of your talks it's I call it my rich life. It's how to live a rich life. You call it an asymmetric life and you've done a bunch of different talks on similar topics. You have this cool thing called the genie question which I forget exactly how you phrase it but it's what would you do if you couldn't fail? And it's an exercise to get people to decide truly what they want because a lot of people listening to this, Sean and I included, we're ambitious people and sometimes we'll be we only listen to where the where's the money or where can I fit into some traditional sense of success along with a lot of your Stanford guys. They all think the same thing where or fear talks us out of something.

**** · Yeah.

**** · I can't do that. I was supposed to go to business school. I got to go to Mackenzie and then I got to do this. I can't do this other thing.

**** · So, you have this question of what would I do if I couldn't fail? What would you say is the most common reason why people are really bad at answering that question? So, there's a few a few things I'd say. First is I think people don't ask the question. So, that's that's probably 90% of people. It sounds crazy, but they never ask themselves what do I really want? and they haven't given themselves the permission to even think about that or or I think it's almost the highest form of self-love is to trust yourself enough to say I'm going to be on the path that excites me.

The blank page

**** · You're asking why people fail. I'd say so I'd start with people haven't given themselves the permission to even think that. So let's let's assume now you have done that. But I would say for your audience give yourself that permission, to re you matter. what you what you get excited about in this world matters. What are some example answers to that question? You've obviously helped a lot of people go through this process, I assume, at your when you teach at Stanford.

**** · I'll give you a couple just from my class in the last couple of years. Last year I had a student who's building a theme park in Dallas in Texas. a theme park. Let's give a shout out dream.

**** · What's that called?

**** · Yeah, I think it's called Texas Land. I'm not sure. Maybe they haven't finalized that as the name, but that was her thing and she's going and doing it. I have a student this year who is he is brilliant. He could go to any consulting or finance firm. He's going to India where his family's from to help them build free hospitals. And that is his thing. it's super clear that's that's his answers to the question. I give him so much credit that he has the courage and commitment to go do that and it's going to be very hard but that's his answer. what you guys are doing. you guys are building a podcast that's really helping people and you can just tell from being on this podcast you guys love it. You're having a blast. you're doing it you're you're doing the thing that you followed that energy and gave yourselves permission to be "Hey, that's a good place." And but I but I almost hate saying it that way because I don't want people to think that there aren't doubts yelling at us or anyone who's successful all the time because I think in another talk, maybe the same talk, you were I do this exercise and Alpine is a $20 billion fund. And I think you said for the first 14 years you thought it was going to fail or you weren't confident that I forget the phrasing, but you weren't confident that it was going to be a home run.

**** · Yeah.

**** · I think all of us have these crazy limiting beliefs that run through our minds all the time that are beating us up with I shouldn't do this. I have to do this. I should do that. I might fail. Oh no. And the thing about that is that's very normal. having that fear and that those doubts is 100% normal. Everyone has it.

**** · It's just what what do you do with that? And I think one of the things I try to help my students do is we have an exercise where we spend an entire class writing all that down. we empty your mind of all the limiting beliefs that are getting in your mind. Just let them flow out. Okay, I might fail. I might run out of money. This no one might watch my podcast. Alpine might not make it. AI might not work. Whatever it is, write all that stuff down. And then and then once it's down on paper, you've removed it. it does the most damage to you when it's in your subconscious and you don't even realize you have it.

**** · So if you're if you're walking around with some fear and you don't even know you have that fear, it just looks inaction and paralysis and I'm not going to go forward and I'm going to say stay stuck. But once you have it down on paper, let's say one of your things is I want to start a company but I don't know how I'd pay myself or pay my loans or whatever. Okay, so fine. You for if that's in your head, you're just not going to start a company. But if you write it down, you're you can rephrase it and say, "How would I start this business in a way that I could service my business school loans and still pay my rent?" and now that's a problem to be solved as opposed to a fear that is creating complete paralysis. And so I the act of just going at your fears, doubts, and limiting beliefs.

**** · That's a it's a great exercise. I highly recommend that. I also just think the, you have the blank page and there's a lot of things you could do with the blank page because I think you said it I think 90 is low. Probably 99% of people don't really take the time to examine their life or think about what they really want and go answer that hard question because it's a lot easier to scroll. It's a lot it's a lot easier to worry about what's going on in Iran and what's going on in the market and what's going on everywhere else besides here because those are those are arms length away whereas it's very personal to be here for the person who's I want to build the theme park in Texas awesome I want to build the hospital in India sounds great I've been in that position before where it's I'm ready to have that answer but I have no idea and I'm I'm saying one out loud it doesn't even feel I'm just making it up and I had to I've taught myself to go through this process of dabbling just take this mentality of a dabbler how do I go and run either lightweight experiments or brainstorm or just not feel I needed to commit away but go try to see where the energy is. How do you advise people to if they don't have the answer of oh this is the thing that would light me up maybe you don't even know where do you go to figure that out?

**** · Yeah

**** · I love that. Well, here's an here's one idea is maybe don't have one thing.

**** · Make a list of nine things that would light you up, Okay. I I think I'd to go to India. I also think I'd to start a podcast. Maybe I really want to I don't know, become a DJ, I don't know. Write down your things. And then, you said, keep your day job and devote x number of hours a week to testing those things out. Maybe you're going to do some work on it. Take some classes.

**** · You're going to start hanging out with people that do it. Maybe you're gonna get trained. Maybe you're gonna do podcast in nights and weekends and see if it's as fun as you thought it was. And you're not looking there for, this is what I think is really important.

**** · You got to you got to be careful that you're not going to get a false negative on the outcome. So a student who says, "Okay, I want to start a company, so I'm going to spend five hours a week this quarter and if I get traction, I'm going to do it." no, no, no, no, no. You're going to get no traction.

**** · five hours a week. If you could build a business in 5 hours a week, it wouldn't be worth bill, So, it's not that you're looking for does it light you up? It in that five hours a week, was that the five hours you were looking forward to that all week or was that five hours where you were oh man, I got to do five hours on this thing, that's what I think you're looking for in those experiments because by and large if you are lit up and you you plus being lit up plus a long time frame there's very few things that won't yield to that and that was me at Alpine. You mentioned it took 14 years for us to know was going to succeed. Yeah. But I was fired up. I was willing to do it for a long time and I was and I was excited and most things will yield to that formula with enough time.

**** · Was that in year 14? Were you still h TBD if this is going to work and what were the numbers? Can you say what your numbers were then? Cuz I would think you would you were financially successful at that point. No.

**** · Well, we lost money on our first fund. so fund one was 2001. We lost money.

**** · That mean how'd you get a second fund when you lose money on the first?

**** · Well, we were we were very transparent with our investors about what was going badly, what we were fixing, what we were learning. So, they were very they were "Okay, we see you're on the trajectory. You're transparent.

**** · at one point that fund was marked at 40 cents. We ended up returning 95 cents." So, they appreciated that and they gave us another shot. Thank God, and but what I was going to say is so we had fund one was it we had that anchor for more than a decade cuz these business you have to go in you buy the companies you run the companies you sell the companies it takes probably 10 years and then fund two comes along and so it was another 10 years after that after fund two where we had some success where we could have the outcome of that fund pro proving out that it was working and so that's the 14 years I talk about. But to give you the numbers, we were 14 years in I want to say managing maybe two or three or $400 million, something that.

**** · That sounds and it might sound a lot, but we're trying to run an entire team and we have all these portfolio companies and Well, let's ask the question. So, we called the podcast My First Million. And when we started, there was a tradition.

**** · We would always ask every guest when and yeah, when and how did you make your first million? And we to really put that reference because a lot of times the answer was longer than people think. you try to get, when you're 20 years old, you think it's going to be when you're 20 and a half, you think it's there and it takes a lot longer. It took me, I was 30 when it happened. It took Sam, I think, same thing, 30, 31. And so, it takes a little longer. And also, we talk about how did it feel what did anything change and what changed?

**** · I That's such a great question. All those are such awesome questions because it's so not what I thought it was going to be.

**** · So, a couple different ways to answer the question. One thing to be a millionaire on paper, it's another thing to have a million dollars in the bank.

**** · Yeah.

**** · They're different. They're different feelings as you as you guys probably know.

**** · Yeah. One pays the rent, one doesn't.

**** · Yeah. So, I'll say a million dollars in the bank cuz I think that's the that's when I felt I had a million dollars.

**** · Yeah.

**** · And that was the that was year 14. That was when we Oh, [ __ ] That was year 14 of start. So, I'm I was 29 plus for So, yeah, I'm in my 40s, I guess, when I when I made my had a million dollars in the bank.

**** · But, but to put that in context, by the way, that is pretty slow. Love having a having a PE firm, your job is to get good returns and to not having that.

Graham’s first million

**** · Well, yeah. I want to I want to say what we had what's called a European waterfall which means we have to return all the money in the fund plus an 8% return before we take any profit and so we had to we had to first of all fund one generated no carry at all and then fund two we needed to sell it was really the very last business in that fund that we sold until we got paid so it was that's what I was saying the part about pay on paper versus in the bank I was I was a millionaire on paper before that but in the bank it was it was 14 years but I want to I want to talk about wealth for just one second.

**** · The interesting thing is I felt wealthy way before that because my denominator is has always been small.

**** · So there's two parts of wealth. There's the numerator which is what you make and your denominator and what you spend. The biggest mistake and this is something everyone who listens to this podcast can benefit from. The biggest mistake people make is the denominator and they so they go here's a perfect example. I really want to start a business. I'm going to go take this other job first and then I'm going to make some money and then I'm going to and then I'm going to start my business. Okay, that's what they say.

**** · never happens because they go take that job, then they get a new house, then they get a new car, then they move to this other city, then they have kids, then they have kids schools, then blah blah. And their denominator is keeping pace or even surpassing their numerator and they're never they're never feeling wealthy. And ironically, they're creating less freedom every year, because there's fewer and fewer things they could do to maintain the lifestyle. And there's no way they could they could start that business. And so probably one of the most underrated things that happened in my life is my wife I married my wife who was an elementary school teacher and made $18,000 a year pre-tax and our first apartment that I think was 900 a month, she thought it was the Taj Mahal, and so we never I never Does the IRS just send you money if you're making $18,000 pre-tax? Do you just get a bunch of money every April? That's awesome.

the biggest wealth mistake

**** · They should. They should.

**** · she would drive around for 30 minutes to save, $2 on parking. I was "Okay, well, we got to not do that." But but that so yeah, the denominator I so I felt wealthy way before that because I just had a big cushion between my what I earned and my expenses. So there's this story and I don't think at this point that this is true, but it's Ruben Carter. Have you guys heard that song the Hurricane by Bob Dylan?

**** · Yeah. It's about a boxer who Great movie, too.

**** · Yeah.

**** · It's a a black boxer who is in incorrectly imprisoned for triple murder. And he didn't do it, but it was a racist thing. And there's a story that's part of this that I at this point I think it's fake where he was I don't belong in prison and I'm going to take cold showers every day just to remind myself that this ain't home. I'm only here for a minute, but I'm going to get out eventually. And I said, I don't think it's real anymore, but I heard about that story when I was 15 years old. And so when I moved to San Francisco to start things and I remember making a little bit of money sometimes and then I would go for long droughts where I wouldn't make any money because I was trying to start something and I was when I when the money comes in I still got to take cold showers cuz I can't get used to this.

**** · I'm not out of it yet. And so I was always reminding myself take cold showers. We're not home yet. Do not get used to this. But I remember there was freedom in that.

**** · I love that. I love that. And the freedom part is so true Sam. the steepest curve of utility with money was going from the first one was having peace of mind of not having to worry if I had to fix my car or whatever, some unexpected expense happened, but I've got money saved away and I don't have to stress. That was that was very steep because that wasn't always true for me, my car would break, I'd be "Oh no." and and then the next the next curve that was really steep was I have enough money to do what I really want to do with my life. how magical is that? that's really where the utility it's flattened out after that, So, that's really where the utility of money comes for me. But when you're giving advice to your students, what do you tell them that number is?

**** · For example, some people say that financial freedom is 25 times your annual spending. Some people have some people will say as long as you have six months of savings, that you're good. is there a a threshold that you There is I would say having three to six months of savings is level one which is the peace of mind because then I said you have some unexpected expense and you're you're fine. You don't you don't lose sleep over that. you don't have to decide if you're going to pay your rent or fix your car. That's 3 to 6 months of savings. That doesn't sound much. It's dramatic. It makes a hu huge difference in your life. And then the next one I think it's lower than that. when I say freedom, I don't mean the okay, I'm going to live off the interest of my money I have in treasuries, that okay, sure, that's nice if you get there.

**** · But I'm not even talking about that level. I'm talking about I'm spending I'm still working, but I'm spending my day doing something that I enjoy. That is the job that I want to have. I think that's probably 9 to 12 months of savings. It's not It's not that. So I I think both of those are really within people's grasp. People who are "Oh, I really want to get to the you money where I never have to work or anything." And then what then what are you going to then what are you going to do? And I want to go back to the other question you asked. Did it feel the same that you thought it was going to feel? No, it did not. So when I had wealth and I'd worked and I go back all the way back to the lawnmowing and the all the sacrifices I made and getting good grades and getting to the school and then getting the job and then suffering through fun one and then finally getting on the other side and then finally getting this big liquidity event. It was it was the most disappointing and it because I thought it was going to change everything. It didn't really change hardly anything. And what was still there was the maybe the thing I've been running from which is I'm not enough, well so what what career milestone since everyone listening to this is interested in business but it could and family is too easy to answer.

**** · but what career milestone did move the needle on happiness? If it wasn't a financial thing, is there anything else? for example, you probably have hundreds or thousands, I don't know how many employees you have, whatever it is, you've created an institution, has that made you feel good? What what teaching at Stanford, what career milestone have you had that a listener can be okay, that's a cool idea on how act he got happy via career. Good question. There two ways to answer it. First is you could one answer is you're not going to solve an internal problem with the external outcome. So if I feel I'm I'm going to be enough when whatever you answer that with is going to be disappointing to you, So that on that answer, it's you can't get there with the career and you have to at least for me, I had to do a lot of internal work, therapy, coaching, journaling, meditation, and start to just let go of this, I'm not enough part. And that's that's probably created more happiness and peace of mind than the than the career probably the career achievement that I remember the most. It wasn't even really an achievement. And it'd be my three partners and I up in Napa, together working through something where I would just have the self-awareness to look around and just be "Wow, this is this is really special." these are people I really love. We're doing something we love and we created this together. And it so it wasn't a big wire came through or something. It was more just these little moments. Can we get some secondhand smoke therapy from you? So, you talked about doing the work internal work therapy, coaching, reflection, introspection, all that good stuff. a lot of people either haven't had the time or don't have the guts, they don't make enough time to do that thing. But I think, if they're listening now, we can benefit them.

**** · I remember we had Daniel Negrano, one of the great poker players, come on the pod, and he told us nothing about poker.

**** · I don't remember anything about poker, but I do remember he said the most impactful thing in my life was a mentor, a lawyer guy who I really I thought he lived life well. He told me I should go to this event and I went to the self-help event. I hated every minute of it. But they made us do this one exercise about total radical accountability where you write the worst thing that ever happened to you. And you rewrite the story where you are the cause of all of that thing and you own the the entire thing yourself. You don't blame anybody. Rewrite the story and he's that changed my life. And so I almost secondhand got the benefit of going to that seminar just understanding that principle then then taking it and doing it myself. I'm curious were there any breakthrough really important realizations or exercises or questions or conversations you had anywhere along the way that we would benefit from?

**** · Yeah

**** · 100%. And I'll give you a couple things that I learned. so one is almost all your battles that you have are you against you.

second-hand therapy from graham

**** · it's true. It seems this whole thing is happening out there and you're you're winning this or you're doing this and but you're remember all that stuff that happens goes through this filter which is called the story you're writing about it. then it goes internal and you can you can ch the easiest part of changing your life is to change that filter. it's it's way easier than changing what's going on out there. It's a lot easier to change how you're interpreting it. And so you can either be your own worst enemy or you can be your own best friend. And I can tell you that I was my own worst enemy. I it did it almost didn't matter what was going on out there. I would look for what was wrong. I would have a bad story about it. I would beat the crap out of myself.

**** · And then I would tell myself another story, which is me beating the crap out of myself is why I'm successful. Total [ __ ] it was just what made me miserable. It's running through life with your foot on the brakes. So, one is just that awareness that, wow, I'm I'm having more to do with my peace of mind, meaning, success, happiness than anything that's happening external. I think if you really think about it, you'll realize that's true.

**** · And then the and then the formula for programming, changing that. I finally understood in a simple way why to meditate and how to be how to be how to make it work and how to have it impact your life. So you go to the gym and you work your bicep and your bicep you break it down, it gets stronger and then it regrows and is bigger.

**** · So meditating is very similar except the muscle you're working is your your mind and your self-awareness your presence. So you pick your meditation, you're counting your breath. that's simple one, You just close your eyes, you count your breath, and then your mind starts going off and talking about thinking about whatever, I messed up this conversation or I should do this or I got tomorrow I got to do this, whatever.

**** · And then you notice that and you it might take you a while, but you notice that your mind just took off and you bring it back to your breath and you do that again. And then happens again, you notice that, you bring it back. You're building this muscle.

**** · You're building a muscle. The muscle is I'm going to two things. One, I'm separating from my thoughts. I'm realizing those thoughts that are happening aren't me. I'm creating this muscle of observing my thoughts versus just, succumbing to them. And second, and even more powerfully, I'm building the muscle of being present.

**** · if you want to have a great life, be present. if if everyone in the world was present and here here all the time and not in their head people would be in this great state of joy and so building that muscle of watching your thoughts coming back and being present is the same muscle of being your own best friend because you're because you're you're you're seeing oh wait I see that this thing happened and I maybe I didn't answer this question really well or I could let that thought go and just be here, and doing that over and over.

**** · Well, it's a great reframe, **** · Because normally if you meditate and then you're you're sucking at it, your mind is drifting, you're not doing it, you're not having fun with it, you're I'm I'm bad at this.

**** · This is not working. It's going to the gym and you pick up a weight that those last three reps are hard, but you're at the gym, oh, that's great. I did exactly the thing I was supposed to do. I was building the muscle. If I if I just went and I did curls with a three lb dumbbell, I wasn't doing anything then. I shouldn't have even been here.

**** · And so reframing the meditation, the failure in meditation as more of great, I'm building the I'm building this practice, this muscle. I'm getting better at doing that. And how do I get better by failing at it?

**** · Hey, can I ask you really quick before we wrap up about parenting? I saw that you've got three kids. You blogged about how one of your kids went to college. Do you put do any of these exercises with your children? And at what age did you start doing that? Or were they "You're my dad. I ain't listening to you no matter what."

**** · All of the above. My kids are definitely "You're my dad." it's funny because in most circle worlds, I'm I'm, I'm a professor or I'm running a firm or whatever. At home, I'm I get, I have teenagers they're ruthless, They make fun of everything I do. and I I do it in a in a way that's not maybe as obvious, but I'll give you a real example. It's easier. my son was trying to decide his f he had a really tough year his freshman year and he was deciding if he was going to play lacrosse the next year cuz he had a tough season. It didn't go how he wanted and it was brutal. And so, we I did a exercise with him and we said, okay, I said, "Okay, Blake, let's go through and talk about I want you to play out your next three years as though you didn't play lacrosse. let's go through it. I want you to really think through, okay, you get home from school, here's what you do, here's lacrosse season comes along, your friends are playing, you're doing this. Now, I want you to go through and you go through the season, but it's hard. You do this." And after that he's I definitely want to play lacrosse. I know for a fact that's what I want. by the end, when I get done with my se my four years, I want to have gone through that. And so, yes, I use these tools, but it's it's more letting them it's in service of their lives and it comes up more as when they ask almost when they ask for it versus me saying, "Okay, it's Tuesday.

**** · We're going to sit down and do this." Having said that, my kids also watch. your kids watch what you do more than they listen to what you say. And so, my kids have goals. They work hard. They write down their goals. They they try their best, I to think. But I think a lot of that just comes from osmosis.

**** · What about your employees? Because when I listen to your stuff, I listen to your stuff because I'm looking to change my behavior. Most people don't change their behavior, though. And you talked about hiring these these operators, these people who have these wonderful backgrounds and who have a track record to where they have this will white hot will to win. Are you able to change any of their behaviors ever when you hire someone? Or are you looking for someone who already has it? So, I'm definitely not looking to teach someone how to be motivated or to care or to run through walls. I can't teach that. However, we've bought 800 companies. I've been doing I've been in private equity 31 years. We built some incredible businesses. So we have incredible frameworks and tools and playbooks that we use that have been battle tested and they're if one of the things we're screening for is are they do they have a growth mindset? Are they open to learning? So our if you look at our companies that we have in our portfolio, there is a pretty much a 100% correlation between how much of the playbooks they're running and how successful their businesses are. So they're coming into Alpine wanting to say, "Hey, look, I'm 32 years old. I want to run through walls, but I don't know how to run a business. Can you help me do that?" And that's a great partnership because we have so many great tools now. Now they will take our playbooks and they'll make them their own. So five years from now they've added to it. They've they've changed it. They've they've they've made them better and they made them work for them. But we're definitely providing a lot of the foundation of here's some amazing tools we have Kaizen projects we run. We have process mapping. We have a onepage planning tool we use. Have you ever published this? And can I have it?

**** · Is this Colonel Sanders chicken recipe or is this Yeah, I'd be h I'd be happy to share with you. It's probably come through in some of my materials, but but yeah, we've we've we've we've definitely codified a lot of this and over the years and yeah, I'm happy to happy to share with you.

**** · That's awesome, man. You're you're you're wonderful. I don't want to compliment you too much because I' I've I don't want to make you uncomfortable, but Sean and I have this we have this joke where we call it the total man where we interviewed all these amazing people.

**** · We've interviewed people who are decka billionaires. We've interviewed people who whatever. And we're always 19-year-old just sold his company, the whole spectrum, the whole spectrum. And we're always looking for someone who's this combination of a good parent, a good husband, a good business person, is interesting, looks seems they have fun in life and is kind to one another. And I think you've checked a lot of the boxes. and it's really cool talking with you because you I think you're a good inspiration of what a person should aspire to be.

**** · Oh, thanks Sam. That really means a lot. I really appreciate that and I really admire you guys a lot and I've I really enjoy your podcast and this has felt to me just how you said it would, which is just hanging out and talking about fun stuff that we all really are excited about. And I'm really grateful you had me on. happy to come back anytime. It was really fun.

**** · Awesome. Thank you so much for doing it.

**** · Where should people Where do you want people to follow? Is YouTube your main spot or Instagram or Tik Tok or what?

**** · yeah, probably probably Instagram.

**** · and I'm on all the platforms, but I'm Graham C. Weaver at I think that's my that's all of them. I think I'm the same per same username at all of them. So yeah. Well, badass brother. We appreciate you coming on. That's it. That's the bod.