2023 Top Episode #5: Gregg Lemkau – The Evolution of MSD, EP.291

21:14I'd say if a place like Goldman Sachs, I'd say if you asked anybody there, everyone there would tell you their top quartile, which is mathematically impossible. But it's probably because they've all been told their top quartile. And David would not do that. David would give you direct feedback on what you did well, on what you did poorly, what you could do better. I saw him do it with me. I saw him do it with other people. It was, at the first instance, it's jarring, and then it's liberating to actually hear it. And I remember the person who ended up taking the job after me, that COO job, it was sort of a rotational job.

21:41She asked me for advice. She said, well, do you think about it? I said, listen, it's an amazing experience. You're going to learn a ton. If you're the kind of person who needs positive reinforcement, hire someone to do that for you. Like when you get home from work, just hire someone at the door who's going to say, you did a great job today, because you're probably not going to get that from David. But if you actually want to get much better at what you do, he will be incredible in terms of giving you direct feedback and then teaching you how to do that. As I've gone on in my career and managed people, people would much rather know where they stand, what they're good at, what they're not good at, as opposed to kind of get smoke blown at them.

22:09And so I'd say above everything, it was that ability to talk straight and give real feedback that was quite helpful. After three decades at Goldman, why leave? Opportunity more than anything else. So I wasn't looking to leave. I truly loved what I was doing. My last role there probably was, I don't know, I keep debating what the best job at Goldman Sachs is. It's either running investment banking or running M &A. It might've been running M &A, because that was super fun. It was really about being with clients more so than managing people. And I was running it with a guy named Dan Dees, who's still there today.

22:37And he and I had started as analysts together in 1992, had gone through these crazy paths and were running the business together. And we were really close friends. So it was fun. I wasn't looking to leave. In May of 2020, I got a call from Michael Dell. And Michael had gotten to know and respect as a client. We spent a bunch of time together when he took the company private. He then did the EMC deal. He then did VMware, squeezed out, went back public. We had a battle with Carl Icahn. We spent lots of time together. And then I also happened to have a home near his home in Hawaii. And so we'd spend some personal time together.

23:05So I'd gotten at least know him and his family a little bit, all of which is helpful if you're thinking about aligning with an individual as opposed to purely an institution. Anyway, he calls me out of the blue. We weren't in the middle of a deal, so it caught me by surprise. And he said he had this business MSD, which I knew about. It's gone from a family office to this institution. He thought it could be a lot more and he wanted to get new leadership in to take it to what it could be. And he'd spent a bunch of time thinking about it and talking to different people. And it kept coming back to me and he thought I was the right guy to run it.

23:30And I very politely said, that's really flattering. Thanks, but no thanks. I've got a job. I love what I'm doing. I'm okay. And in classic Michael Dell fashion, he's not afraid of awkward silence. He paused for a while. And then he said, I don't think you're actually listening to what I'm telling you. So I'm going to go through it again. I'm going to tell you why it's a good opportunity. And I want you to listen to it and go away and think about it. So he went through it again and I listened more. My head was still saying, I'm going to be polite because he's a client. And so I listened and then I was about to hang up the phone and he said, wait, wait, I've actually got a top 10 list as to the 10 reasons you should join.

24:01And I kind of laughed. He said, no, I really do. And it was 14 reasons. I just got to go find it somewhere, but it was great. So he texted it to me, clearly put a lot of thought into it. So I said, I'll take it seriously. And I went away and I still wasn't initially inclined to do it. And then I stepped back and thought about, all right, I was at Goldman for 28 years. I'm not going to be there another 28 years. At the time I was about to be 51. And of all the different things that had come across my desk. This was an opportunity to take an investment platform at scale with a great reputation and great people, be the CEO day one, not be the CEO in waiting or the co -head with someone whose name was on the door, but be the CEO of a business and have a growth mandate, because Michael wanted to really build this.

24:40Not just have the mandate, but have the capital that the Dell family was going to put behind the growth strategy. And then I'd say most importantly, have this great business builder in Michael Dell as a partner and a thought partner. And that combination, I just couldn't imagine being replicated anywhere else. So I took the leap. I said, gosh, this is so interesting. I have the chance to go build a business with a guy like Michael, with a great team, become an investor, which seems like a relevant life skill, especially at the age of 50, and go have a 15 plus year run doing something different, like a real full second act.

25:12So I jumped. What was on that top 10 list? Autonomy, authority. He said, listen, running a big business at Goldman Sachs is interesting, but really being the person who's got the authority and the accountability around decision -making. It's the right stage in life to be doing that. He had a comment about more control over your life, which I think is accurate, except as my own boss, I'm a bad boss because as my wife said to me, she said, God, I think you work harder now than you did at Goldman. And you worked really hard at Goldman. Are you just not good at your new job? And I said, thanks, honey.

25:41By the way, possibly. That's one of the options. I'm hoping the option is no, I'm just pouring myself into the new job. He had a whole bunch of things, including around thinking about becoming an investor, building wealth, building a business, all those kinds of things. And so it was pretty compelling. What was the history of MSD before you got here? So MSD started in 1998 as pure family office. It was diversify Dell family wealth away from Dell at the time. And it was started by two folks named John Phelan and Glenn Furman, who for 20 plus years ran it together and did a phenomenal job building wealth for the Dell family, really diversifying away.

26:14There were multiple iterations of public strategies, private strategies. About 10 years in, they formed MSD Partners, which is a registered investment advisor, which allowed them to take outside capital. He had a whole bunch of friends of Michael along the way who were saying, hey, you built this thing. Can we invest alongside you? As a family office, you couldn't. As an RIA, you could. So it really began to build up as an investment firm, largely with Dell Family Capital, but other family capital. And then over time, as they built out different investing verticals, in particular in credit, institutional capital.

26:43So by the time I'd gotten here, it was a meaningful investment business with a really big credit business with a great credit team, a real estate business, a private capital business. And there were still a handful of public strategies, which had been a big part of the business, but was a dwindling part of the business by the time I got here. Was there an investment DNA? The core thing at MSD has always in my mind, just been hardcore investors. Value oriented, but it doesn't have to be four times EBITDA, But the tagline, which I love, is long -term partners in a short -term world. And the world is, I'd say, in the 25 years of MSD has gotten increasingly short -term.

27:18So one of the great advantages I think we've had has been duration of capital, really taking the advantage to see through quarters, see through cycles, but also not be forced to sell because you're looking for capital return, but being able to hold businesses for a much longer period of time. What was your mandate when you came in? So when I got here, what Michael and I talked about was continue the evolution of this family office to institutional firm. He said, just go build a world -class firm. He almost said, I don't even know what that means you do, but make it something my family and I will be proud of.

27:48What I always said to myself, it was institutionalization without bureaucracy, trying to figure out how to get this thing in the right foundation so it can continue to grow without putting in all the bureaucracy you see at some of the bigger firms. So step one was build a great firm, which was kind of a fun, cool mandate. Step two was make sure you've got enough scale and capability that the Dell family can invest meaningfully more capital over the next 10, 20, 30 years as they diversify away from Dell and VMware and think about diversifying wealth and building capital to give to the foundation ultimately.

28:19And then step three was at the same time, diversify the investor base with other LPs that are like -minded, so who want the same kinds of investments that the Dell family and our existing investors want, which is risk -adjusted returns, downside protected compound capital over time, but ultimately build an investor base where those LPs become bigger than the Dell family because at some point in his lifetime or shortly thereafter, his plan is to give all of his money away and doesn't want that to cripple the firm. So you want to build an institution that is going to last and be durable. And so it was really those three elements strategically that I set out to try to think about for the next phase of MSD.

28:54What have you found that building a world class investment organization means? Most importantly, I think the thing that MSD had, which I give credit to Michael and the founders, is this unbelievable sense of aligned investing. I mean, from day one, I think when Michael gave John and Glenn Capital to invest, he said, here's the deal, go diversify my wealth. But anything you put me in or you invest me into, I want you guys in. You have to put your own money into. And I think they looked at Michael and said, well, we don't really have any money. And he said, I'll lend you money. So I'll give you leverage, but you got to put equity in.

29:23I'll allow you to get leverage for me. I don't know if it was luck or genius, but if you think about what Michael was trying to accomplish, which is compounding capital over time, staying rich, protecting the downside. If you've got investors with leverage, they're focused on not losing money, number one. The leverage works both ways. And they're focused on really compounding wealth over the long term, which is exactly what he was focused on doing. So mission one for me in the world -class investment firm was keeping that hardcore investing DNA and keeping that sense of aligned investing. And then the second piece was making sure incentives were aligned in a way to really build a firm and to build businesses that were going to be successful across platforms.

30:00And so making sure people weren't just focused on the actual investment they were making, but their business and not just their vertical, but the firm, and just trying to reorient a sense of ownership at the firm around trying to build something together. How do economics, compensation, alignment work in an organization? A lot of times in family offices, people don't think about the competitive wage if there was an independent private equity firm hedge fund. Another thing that MSD got right from the get -go is paying real fees and carry. And it's amazing. Now that I've been in this family office world for a couple of years, you see all sorts of models and people either thinking, well, they didn't raise the money and I'm giving them the money so we don't have to pay them as much.

30:37By the way, the thing that's most amazing is I'd say the number of people who made their money as investors with a two and 20 model who then start their own family office business and decide not to pay two and 20 is sort of insane to me. You see all sorts of things, but Michael was always prepared to pay fees and carry to the team in a competitive way and then created this opportunity for people to borrow money against their equity to invest. And so everyone was really heavily invested. And I think one of the things that was critical to our business is outside of the Dell family, if you look at the partners and employees of the firm, we are the biggest investor across all our funds.

31:09And so it's very different than the world where I think alternatives and private equity has gone, which is a little bit of the other people's money and you're paid to deploy capital as opposed to paid to invest capital. The mindset here has always been investing capital because you've got more of your skin in the game than any of our investors do from a personal wealth standpoint. So you're really focused on making great investments. As you start thinking about this as a business, in addition to the investment side, where do you think your competitive advantage lies? The thing I said really from the time I got here is there's a lot of capital out there, and there's a lot of really smart people.

31:42So we've got to figure out what our edge is, and we should only be investing where we've got, what I like to say to the team, we have a right to win. And so there's a handful of places I think we do have a right to win. We talked about duration, but duration of capital makes a real difference. And being able to hold something for 10 years, not five years, or forever, not for 10 years, makes a meaningful difference. And I think the world has gotten more and more short -term, in particular in the alts world of trying to get capital returned to shareholders quickly. And so going to a family business owner or to a founder of a company and say, listen, we can hold you for 10 years, or we can hold you forever, makes a meaningful difference.

32:13Duration is an advantage. I would say our credit business, just our credit team is actually our edge. They've been together for 17 plus years, all six of them together, sourcing deals, investing deals, underwriting, and with that same risk -adjusted mindset where they're just not losing money. And so Michael calls our credit business his stay -rich business. So that team, I think we've got a real advantage and we should be continuing to deploy capital across that business effectively. In real estate, I'd say we have two advantages. One is duration. We bought an asset last year. It's called Sierra Square.

32:42It is a building in downtown Philadelphia. It used to be the post office, I believe. It's the current headquarters for the IRS. It's right by where Drexel and Penn and the Children's Hospital all converge. And everybody who looked at this business said, man, it's a perfect place for life sciences lab. It's got big ceilings and biotech is going crazy. Then the one issue is the IRS had seven or eight years left on their lease. So anybody with a 10 -year fund couldn't invest in it. By the way, anyone who just wanted to take a coupon, it was too short -term. And our view was we have forever capital, so why not buy it?

33:10We'll collect coupons from the IRS for seven or eight years. I'm pretty sure they're going to have the money, so there'll be money good on their rent. And then in seven or eight years, we've got the flexibility to then go develop it as a life sciences lab. Or by the way, if that doesn't make sense in seven or eight years, we can develop it how we want to. And so that's a place. I don't want to go compete against Blackstone and Brookfield in real estate on price. We're going to lose all day long. But if we can compete on duration, we'll do that. Same thing we've done on the hospitality side. We've got a bunch of great high -end hotels that we know how to run that we always call our Hold Forever assets.

33:37And we've now structured them in a vehicle that we can hold them forever. And then just the affiliation with the Dell family, which really resonates with founders and with family -owned businesses, partly because of the duration, but partly because you see this iconic founder who's been now at the head of Dell for 38 years running a business. People want his capital, and they want access to him and exposure to him. We've really tried to use that. Then the last piece is just trying to use Michael. I think for a long time, Michael was pretty busy running Dell. I think he's still pretty busy running Dell, but back to my view of lots of capital in the world, lots of smart people in the world, one Michael Dell.

34:08So I've tried to slowly pull him into the business, recognizing he has a day job, but use him to get his insights on businesses he knows, to leverage his network of their places he can be helpful to us. He's unbelievably additive whenever we get him involved. And I just try to be somewhat disciplined around it because he's also running a pretty big company. So you mentioned credit business, real estate. You think of Michael Dell as a tech entrepreneur. How are you thinking about your background and the tech ecosystem and Michael in terms of investment strategy? So one of the first things I'd said to Michael was, hey, this is great.

34:40This whole thing's amazing you've built, but there's no growth equity. There's no real tech business here. And he's like, yeah, we were sort of focused on diversifying away from that. And I was like, okay, that was in 1998. That was a very different world. And you're kind of well diversified. And there's a whole lot more going on in growth equity than PCs and servers. And on top of that, you're Michael Dell. You're this iconic founder that all of these founders will want to have capital from exposure to. So we really built over the past couple of years, a really impressive growth equity business.

35:07And the focus had been on great founders, late stage businesses, proven business models, and the kinds of businesses you want to own for 10 plus years. Our first investment was in Stripe. We've invested in companies like Fanatics and Goodleap and Airtable and Service Titan. That's been incredible. And that's another place where we've leveraged Michael. We did a dinner down at Michael's house around the Formula One in Austin last year and invited 10 tech founders to come to his house for dinner. And And I think we went 10 for 10, not surprisingly. But it was fascinating because you have all these founders who've done incredibly well in their lives, but they don't have someone like Michael to talk to.

35:40Even the VCs can't really do it. So we had a good little discussion. How'd you found your business and what's it all about? And then you get to dessert. And someone said, well, what was your first hire from outside your founding group and did it work or not? And you kind of ended up going around the table. And it was like, I don't know, 50 -50. It worked and it didn't work. And then it was, how do you raise your kids with wealth? Do you let them fly private? Do you make them fly commercial? How do you deal with personal security? And all these founders were just pouring themselves out and all the questions they always wanted to ask, but you really couldn't.

36:07It was fascinating in really having that expertise of someone who's only 57 years old, but it's been at it for 38 years in the tech world as a mentor to these founders is amazingly powerful to us as an investor, but it's just powerful to us as a firm. How have you thought about public market investing? It's hard. If you look at the last 15 or 20 years, it's hard to beat the market. I think given the move around indexes and all the fund flows and electronic trading, I think it's been hard. And I'd say that if you look at the history of MSD, for a long time, it had been a value investor and a public market investor.

36:39Again, before my time, there'd been a bunch of work done that effectively said, does it really make sense to pay 2 in 20 or 1 in 15 or whatever it is to a bunch of really smart people who are going to consistently underperform the S &P? No, it doesn't. So we are no longer doing that. But from a public market standpoint, when I got here, we spun out our last public market strategy, really great investor, Good business. We actually took a stake in his GP and gave him a bunch of capital. But it just, in the theme of where are we differentiated and where do we have an edge as MSD, it didn't make sense.

37:07We're doing the same thing with a little part of our credit business now. Great investors, great business. But if you think about the theme of what we're trying to build of places where we have an edge, that public market investing is really tough. And so we've backed away from it. There are others who can excel in it. But again, our view is if durations are advantaged, it doesn't really play in public markets. When you think about Michael's balance sheet as a whole, how do you think about allocation across these different strategies? So he's got huge exposure to two big single stock positions.

37:34It was one with Dell, and then spun off VMware, which has announced it's merging with Broadcom, but really big public market exposure there. We still have kept some public market exposure more broadly in passives and S &P indices. Now we're trying to figure out risk -adjusted returns with the rest of the portfolio. So that's why the big focus on credit, I mean, it is heavily structured, securitized, downside protected, compounding, low double digits. That's a great business for him. The same thing on the private equity side. Our private equity has been these founder -led businesses in things that have really been away from tech that have compounded over time.

38:05Our real estate assets, they've got some tax advantages. There's good cash flow and they're different asset class. And so these hospitality hotel businesses have been a great diversification away. And then growth is getting a little bit more upside in the portfolio. we've kind of gotten to the point you can take a little bit more risk and get a little bit more upside. But if you looked at it, it's not your standard 60 -40 asset allocation. I used to joke with the team, I think when I got here, asset allocation was more of an output than an input. I'm trying to make it be a little bit of an input and a little bit of an output, and you can massage the two of them.

38:34We're getting there. So you're now sitting on a bunch of capabilities. Michael's assets are being managed. And then there's an announcement that you're merging with BDT. Why don't you explain how that fits into the mandate and the vision that you have. Yeah. So BDT, it's a phenomenal firm and a phenomenal business built by a former partner of mine at Goldman Sachs named Byron Trott. And he left, I think, in about 2009. And with the original backing of Warren Buffett and then a number of family -owned businesses, he started at BDT as a merchant bank, really trying to serve closely held businesses, family -owned businesses or founder -led businesses, giving them advice.

39:12It advises broadly, not just the regular way investment banking of IPOs or sell -side, but trust in estate or generational planning or thinking about philanthropy or all the issues that these family -held businesses have. And if you look at these family -owned businesses, they spend all their time on their family and their family -owned business and almost none of their time on their wealth. And Byron's background was a private wealth manager originally, and then an investment banker to these businesses. And what he realized is they want the same kind of things everyone else wants, which is risk -adjusted, downside -protected, compounding capital.

39:41And he created a model where they raised the fund and they were investing in other businesses like theirs. So they weren't going out and buying stuff in competitive auctions from other private equity firms. They're investing in other family -owned businesses. And to the business owner, they know they've got someone just like them who's driving a business and building a business and pouring their blood, sweat, and tears into it. They'd much rather invest in that than go try to trade the public markets or go try to go to a regular way of funds. So we've sort of built a phenomenal network of families, which has now grown well into the triple digits of both investors, clients, and then portfolio companies.

40:10It's a fascinating business. If you go back to what we talked about in terms of my objectives at MSD, evolve to be a world -class firm, get enough scale and capability to invest across asset classes, and then broaden the LP base. The magic of the combination with BDT was it really did all of those at once. We get a scale business with other world -class talent, and importantly, people I've known for 30 plus years. You get real scale and private equity. They're in the process of raising a significant fund, $10 billion plus fund, that'll go alongside our similarly scaled credit and real estate businesses, in our emerging growth business.

40:43So you've got now multi -asset classes at scale to deploy capital for the Dell family. And then you've got 150 to 200, I keep saying mini Michael Dells, but some of them aren't so many, of other family -owning LP businesses who are looking to invest not just in the private equity business, they invest into a BDT, but they like our credit business, they like our real estate platform and our growth platform. So really interesting synergy without overlap on that front. And then I'd say the most important thing as we thought about putting these firms together was the culture of aligned investing. So I'd referenced earlier that outside of Michael Dell, the partners and employees of MSD are the biggest investors across our funds.

41:17And that real sense of alignment of we're investing our own money and investors investing alongside us really drives a focus on returns. BDT has the same thing. Their balance sheet and their partners and employees of the firm are the biggest investor across their funds. So it's the same mindset of alignment. And I think that to me is critical in this world. As I look at our LPs, I've just seen an increasing trend in the alts world of chasing AUM, and people feel like they're getting paid to raise money and deploy it as opposed to invest it. It's a distinction maybe not everyone appreciates, but I don't know.

41:48Do I really care about getting a 20 % return versus an 18 % return if my goal is just to invest money? Not really. We care about the 20 % return. Every extra basis point matters. So we're trying to be very careful not to go to be the biggest or try to chase AUM, but really try to be the best investors across asset class. I'd love to learn more about how you think about balancing this idea of kind of a business versus investing in that there's already a large amount of money with Michael's money. Now you're talking about many Michaels who aren't that many potentially investing. You're trying to build so you can support Michael's eventual withdrawal of that capital.

42:22How are you thinking about the business side of it? It is the ultimate tension. I think you highlight it well. So we're trying to build a business partly because I want everyone aligned around building franchise value. I'm thinking about what the combined BDT, MSD can be and begin to distribute actual ownership of the firm in a way that hadn't been done before. So people feel that they're actual owners of the firm. So there's potential value creation in the equity we're building. So we do charge fees and carry. So there's value in economics. Now, the vast majority of my investing teams here of the potential wealth creation is around their economics in the carry and their co -invest.

42:56So that's what I still want. I still want them focused on that as opposed to focused on generating fees. But we try to still build a business that'll steadily grow. And my hope is we do grow it steadily based on really good returns and people keep investing their capital back into us as opposed to running around the world and chasing too much capital. But it's a tricky balance. How have you felt about coming here to have the authority and autonomy to run a business and in a relatively short period of time being co -CEO again? It wasn't something I was looking to do, but I found the person that was easy to do it with.

43:26And so Byron's amazing. I've known him for 30 years. He's about 10 years older than I am. And so he was another mentor along my way at Goldman. We spent some time working together when we were there. We'd spend some time talking after I'd left. But understanding what he wants for his business, what we want, and how aligned the cultures were, it became very easy. And if you go back to my career at Goldman, while I was the sole CEO here, I think almost every job I had at Goldman was co -headed. It's just so ingrained in the culture that even before Goldman had turned public, it was run by two people for a long time.

43:54So I think we both grew up in that culture and have the ability to figure out how we're going to divide and conquer. and it was fascinating as we were putting together the governance around the deal. Everyone said, well, what happens if you guys don't agree? We're like, we're going to agree. Well, what if you don't? We'll go in a room till we agree. Maybe we'll ask Michael his view or we'll poll the partners, but there's no you vote, you vote. There's a just figured out. I feel like we're like -minded in the vision for the firm and doing the right things by our clients broadly and our investors that will sort through anything.

44:21You'd mentioned earlier that one of the great aspects of having the seat is having Michael as this great business builder. What did Michael say about that merger? So when I first raised the idea with him, he said, that sounds really interesting. How do you even merge a family office with a, like, how does it even work? I said, honestly, I don't really know. I'm not sure. Let me get back to you on that one. But he was really intrigued by the potential and what it could do strategically as he thought about the goals we'd all laid out together. And then we spent time together. He's been through a lot of mergers in his career.

44:49So he was an incredible sounding board for both of us. How are you guys going to run it together? How are you going to think about it? Do BDT people think of themselves as merchant bankers and MSD as investors? How are you going to align those cultures, which actually ended up aligning relatively easily? And then he said, are there ways you can test it to make sure their investors will like it and make sure our assets appeal to them? Byron had polled his investors and they said they wanted more access to credit and real estate and growth. So we knew we had that basis. But we'd created this hospitality vehicle with all of our high -end hotels and stuck them in a permanent vehicle and then raised capital into it.

45:21And we actually used BDT to raise that capital. from their LP base because we wanted to see their investors like our stuff and did it work and it worked great. So we got a handful of their key investors aligned alongside Michael across that portfolio. And then we just spent time together. And the more we spent time together, the more it became clear we were aligned. And Michael was just a great thought partner as we put these things together and really a great resource for Byron and me as we think about how do you want to actually go out and run this and build this company together. So now that you've spent a lot of time over the last year putting this together.

45:52You had a path at Goldman where you really wanted to spend as much time with clients, the entrepreneurs, the founders, the businesses. How are you going to spend your time now? That's a great question. First and foremost, trying to get the firms integrated in as clean and crisp a way as we can. Now, the beauty of the combination is there's little points of actual integration. We've got our growth equity, our credit, and our real estate business that are standalone private equity. There's actual integration and that team will have to figure out how to engage. And on the LP relations side, there's some actual integration, but there's not a ton of two -person, one -job things going on.

46:23So I think that part is helpful. But really spending time with the people and making them all feel like they're part of one firm. We said the sooner we get to no one saying, well, I'm a BDT person or I'm an MSD person, the better. And I think culturally we're heading that direction. And then I wanted to spend as much time as I can with the core clients. It's interesting being back in a client business. I used to call them investors, but these families are clients. we could be advising them on philanthropy, on investing. They could be investing in our funds. We could be advising them on M &A. And so thinking holistically about how we can help these families, BDT advised the Patagonia family on this recent thing they did, which is in the news.

46:57And so now that's a fascinating topic to any founder that's out there. And so it's really interesting to be able to go back and engage again with clients on issues that are important to them and finding out how we can solve them. And it's actually different than showing up and saying, hey, can I invest in your company? And they say no, and you have to leave. But it's like, what are your issues? How can I help solve your issues? And I think one of the potential opportunities for the combination is if you think about where BDT built their core LP base to begin with, it was really Midwest industrial consumer businesses.

47:24And it's obviously expanded across the country and industries into different geographies outside the US. But if we can take that model of really serving these family -owned businesses and broaden it to the technology world of serving these founder -backed businesses, I think there's a massive opportunity. I think these founders themselves have been underserved in terms of advice. Their companies have been well -served, but I think the founders themselves to how to think about wealth diversification and deployment of capital and philanthropy and all the issues that they face. Michael's an amazing bridge both generationally and geographically around those two worlds.

47:54As we're coming out of this COVID period with virtual work, BDT's presence is in Chicago, yours has been in New York. What have you learned from that period of time that's either made it easier or harder to take these two businesses and effectively merge them together? I am a huge proponent of in -person. By the way, I live in Bedford, New York. My commute's a pain in the ass. There's nothing better than actually not commuting for a couple hours a day and working from home. But as our COO, Brendan Rodgers says, the magic happens when you're together. And this is an apprenticeship business in every way.

48:24So the more we can be together, the better. And that's on a standalone basis, even more so on a combined basis. Now, the good news is BDT has a pretty big presence in New York. Chicago is still their biggest presence. The objective is really to get the two New York offices together as quickly as we can. And that will then become our biggest presence. So if we can get those teams together quickly and then begin to travel around and start to make it feel like one firm, that'll be the key. What I've tried to do, I've seen all of the fits and starts around work from home and return to office. And I don't think anyone has gotten it right.

48:52And I've seen it go wrong in a bunch of places. And what I've tried to tell the team is it's an apprenticeship business. We're better when we're together. Sometimes you're going to be traveling. If you have a doctor's appointment, you want to work from home one day, or you got your kid's school play, like I'm not going to take attendance. But if you're at home, you're not on the road for business, come to the office because we're better together. And yeah, it's a bit of a pain to go commute, but if you want to teach the next generation and collaborate and have meetings that aren't starting and ending every half an hour by Zoom, you'll do much better together.

49:16I think that's what we've really tried to push here. And I'd say for almost every David Friday, I think we got it. Michael's capital historically, you've had these internal teams. There's also been investing in other managers. And as you've seen that full spectrum, how do you think about those trade -offs and where you'd want to allocate to his capital in this case? So as part of the combination, we'll still peel out and have, I think, the old legacy MSD capital, which we're going to rename Dell Family Office to avoid any brand confusion. But there'll still be investments that don't make sense in the funds.

49:47There'll still be a big cash position. There'll still be exposure to passives and exposure to some earlier stage growth through third -party managers. We don't really have that much exposure to commodities. We can do that through third -party managers. So there's still great use and value in third -party managers. My aspiration is that the combined BDT -MSD will be the alts platform of choice for Dell Family Office because we think we've got great investment opportunities that align with what he likes after knowing it for 25 years, but we won't be able to provide everything. And then I'd say my view, and everyone has a different view, is focus on net return.

50:18Find the best investors and focus on the best net return. So you got to be cognizant of fees, but I think so many people are so focused on, how do I get a discounted fee or how do I get fee free or how can I get free co -invest to weigh down my fees? I think they're missing the bigger picture. Focus on the guy who's going to get you three or four X your money for whatever the fee is, as opposed to the guy who's going to get you two X for a discounted fee. I think there's a lot of that, especially as some of these businesses have gotten so institutionalized and there's consultants on top of the institutions.

50:43Everyone has a little job to fill out their spreadsheet and is missing the opportunity to step back and figure who's going to give me the best actual risk adjusted returns on a net basis. You've mapped out the business plan for combined MSTBDT over the next whatever it is, five years. What are you aspiring to create in terms of the business? I think we want to create something where the best long -term oriented investors, and I think that's going to be mostly, but not exclusively, mostly family offices or founders or individuals. We have a handful of really important strategic partners on the institutional side as it is BDT.

51:14That class of investors wants to come to us to be their solution provider across whatever asset classes we think we have the right to win in, which day one will be long -term private capital, credit, real estate, and growth equity. We may build more, but I think that's kind of enough and it sticks to our knitting day one. And then where any family -owned business or founder -led business says, these guys know how I think. They've worked with 200 other families that see all the same problems I have. I want to be part of that network and part of that world. And so I can ask family X or family Y how they did it.

51:44I can ask the BDT, MSD team to give me advice on whatever faces me and really think that they know how to put themselves in my shoes. Someone said, well, you're going to be an investment banker again. I said, no, we're just focused on this little niche of family -owned businesses. And then under my breath said it's about 98 % of the businesses in the world, but it's this little niche over here. But that's where we're focused. We're not going to go try to do big, massive public company, public company merger. We're not in the league table M &A business. We're in the, how do you provide trusted advice to families and founders?

52:10And that could include capital, and it could include anything. Well, Greg, I want to ask you a couple of closing questions. And I want to start with one that's a little bit different, because I know you have a sister that's sitting at the top of JP Morgan. Was there anything in your upbringing that you've tried to instill in your kids to have that kind of trajectory across the family? So my sister runs the wealth management business at JP Morgan. My other sister runs all the events and conferences for Mike Bloomberg at Bloomberg. And then my brother's been a 20 plus year wealth management advisor at Goldman Sachs.

52:40If you went to our house in the 1980s, there is zero, zero that would have indicated any of us were going to have any success. I think we were sitting around throwing stuff at each other after school watching the Brady Bunch or something like that. I don't quite know what happened. Now I say that my mom is going to get mad at me. My parents were awesome. They were great parents. They inspired us without pushing us. They kind of let us do what we want. They let us figure things out. I think it was fun being part of a big family, but it wasn't like we were sitting there watching Wall Street Week and grinding out math models or something like that.

53:07And as we've gone through life, again, back to the random walk of luck or skill and the sliding doors, we've each found a path that has been great. And we are each, interestingly, I'd say at the same time, supportive of each other, but quite competitive in a fun way. When my sister was at J .P. Morgan, I was at Goldman, we'd have some fun jousting back and forth. What's your favorite hobby or activity outside of work and family? I'd love to go out and play golf, and I'm not particularly great at it, but it's a great way to go spend four hours outside. I'm fortunate enough to be able to do it in really beautiful, interesting places, and almost often with really interesting people.

53:41It's also an amazing tool in business, and it amazes me how few people understand it. But I'd say in 28 years at Goldman Sachs, I don't care how brilliant I might've been in any meeting, never once the client said, God, remember that time we flipped through that blue book and you took me through that DCF and wasn't that magical? And I was like, that never happened. But the amount of times, I remember that time we spent four hours at this golf course or that golf course. And the other thing that's fascinating is it teaches you three things. One, it teaches you someone's temperament because everyone hits a bad golf shot.

54:07So you see how they are. Two, it teaches you how they treat other people. How someone treats a caddy is very interesting and insightful. It's like how they treat a waiter. And three, can they follow the rules? Not everyone actually follows the rules on a golf course. Do they cheat? Do they treat a caddy well? And do they have a bad temper? And you very quickly can figure out a lot about a person on four hours on the golf course. What's your biggest pet peeve? People who walk slowly in front of you drives me crazy. And people who don't know how to spell, which is getting worse and worse and worse with text because I think you're allowed not to spell.

54:35And then I just see people who were mailing it in. If you don't want to be all in doing something, I'm just going to do something else. Which two people have had the biggest impact on your professional life? I would say Gene Sykes, who we talked about earlier. I mean, really, in the early days, taught me how to be a trusted advisor. And the thing that was fascinating about Gene, I still don't know how he did it. But you'd go to a deal and invariably be a tax issue and a legal issue and a business issue and something about the industry. And somehow he knew more about the tax issue than the tax guy, like the industry than the CEO.

55:04It was amazing. And he did it effortlessly. And then the most important thing is every deal you'd end, both sides would want to hire him next. And that never happens. He was great in terms of teaching you disposition and client service and how to become a trusted advisor. And I'm now going to be torn. I'd say David Solomon did teach me a ton as a manager, but Michael Dell taught me a ton as a business builder. And I feel like I'm in that mode of trying to build a business now. His ability to really just rise up out of all the day -to -day BS and think strategically. Even when he was sitting down with Byron and me one time, we were talking about how we're going to divide all the tasks.

55:34I said to Byron, how many important decisions do you make in a day or a week? And Byron's like, I don't know, 30 or 50? And Byron's like, you're doing it wrong. He was like, what do you mean? He's like, I make six to 12 a year. All that other stuff that you think is important, number one, isn't important. Number two, someone else can be doing it for you and freeing up your time. We do now think about how we want to run this business and divide up the world and have the most impact on this combined client base. It's been a great lesson for both of us to figure out where you can let go, where you can get other people working with you to do their highest and best use and focus on the big picture.

56:06So that's been a great lesson because the classic investment banker mindset is do everything for anybody all the time, right? Solve their problems, do more. There's an extra five minutes in the day I can get one more client and actually trying to pull back from that natural temptation of being in a market share business to being an investing business where you actually need more time to step away and think and be strategic. What type of investment or deal do you gravitate to like a moth to the flame? Interesting founders more than anything. I always start with the people and then grind into the business model.

56:35But people who are really trying to build something interesting and special is where I go to. Now, thank goodness my credit guys will go to just businesses that pay off cash flow. So I'm glad those guys are doing what they're doing. Get me an interesting, compelling founder and have she or he talk to me about what they're trying to build. That's what I like to do. What are your biggest blind spots? Not pushing people enough to give constructive feedback up. People sit there and tell you how great you are all day long, and that's great. It feels good. You go home feeling great about yourself. but really trying to improve yourself.

57:01And it's the more you go up, the fewer people there are above you to tell you the stuff you're doing wrong. So really trying to make sure you're getting that feedback. I say, one of the things I feel great about here is I walked into an incredibly fortunate situation at MSD with a couple of senior people who'd been here a long time that just from day one, I could trust. That was the part I was worried about. And day one, they really became business partners of mine. But without that, it's hard. And I don't say the corny, it's lonely at the top, but it's hard to get real constructive feedback from anyone, except my wife.

57:28She's good at it. But from anyone else, it's hard to get it. So the blind spot is believing all the bullshit. What teaching from your parents has most stayed with you? Treating people well. They were focused on being success -oriented, achievement -oriented, but not at all costs. They'd be more proud if I got the sportsmanship award than the MVP. And maybe that's because I got the sportsmanship award, not the MVP. I don't know. I think they pretended they would have always been more proud. I think it's just how you treat people, not in a business sense, but in general, the importance of family.

57:55All right, Greg, last one. What life lesson have you learned that you wish you knew a lot earlier in life? Compounding capital can make a lot of difference. You spend your life in a world of maximizing pre -tax income, and you go to a world of actually compounding capital, if you think about it from an investment standpoint, and it's meaningfully different. Again, I wouldn't go back and change anything, but I do think it is an interesting perspective as you look back over 30 years. Greg, thanks so much for taking the time and sharing this great adventure. Thanks, Ted. Super fun. I appreciate it.

58:25Thanks for listening to the show. If you like what you heard, hop on our website at capitalallocators .com where you can access past shows, join our mailing list, and sign up for premium content. Have a good one and see you next time.