Bringing AI to the Real Economy | Alexander Taubman

22:33So owning the company is really valuable in a lot of ways, but not because we force people to use the tools. That was Larry Ellis' point. You can't force them. If we have to force someone to use our Nexus platform, then the platform's not good enough. We take an approach of the customer are our team members. And we're now going to have 30 ,000 team members operating globally across all these sectors. Wait, are you explaining this to me? We're 30 ,000 people working at— You said your customer are your team members? Yeah, we think of our team members, and we now have 30 ,000 of them globally, as our customer.

22:59And so the whole idea is we want Nexus to be so magical. 30 ,000 employees in the business of the general. That's right. Right. Okay. And we have to always convert. I love you, but you're like an East Coast finance guy. And I always have to convert the way you talk. We think of them as partners, you know, design partners, and that's our customer. And so the whole idea is we want it to be so magical that when you introduce the tools to them, it goes viral inside the company. And we've now seen that. And each we are, it's happening where as the models get better, as our products get better, and as our deployment playbooks get better, we're seeing the cohorts of adoption going crazy.

23:34Like it used to take us like maybe, I don't know, six months or something to activate a cohort. Now it's like you give them the tools and in like, you know, days. And wait a minute, hold on. Am I understanding this correctly? So you're targeting these services. So let's say HOA management, right? And let's say I work there and now I'm using Nexus and all the other tools that you guys are building, right? And we'll talk about how you got elite technical talent too, right? My job is now fucking 90 % better. That also protects you for retention. 100%. Because like another HOA service company doesn't have these tools.

24:03I'm going to go over there and work 90 % more? Yeah, no, you don't want to do that. This is a big part of our vision too, is that we really want to be a talent magnet. We want to be the best place to work in every industry that we operate in. And part of that is if you can build people the best tools, make them more productive so they can make more money and have a better job. And by the way, we have these amazing quotes now from our team members. They're saying like, I don't feel like I'm working anymore because there's so much mental friction that comes from that 30 % of work. that's, you know, this manual road, responding to emails, data entry, da-da-da-da-da.

24:36What they want to do is they want to focus on getting more customers, understanding that, you know, helping the customers more, interacting more with them. You know, there's a lot of fun parts of the job that keep people going. If we can do more of the fun parts, less of the dull parts, they love their job more, they can make more money. And so then think about having to leave a Long Lake partner company that has these tools and this setup and go to like, you know, a competitor down the street. You're not going to. It's going to become really powerful. We're already starting to see this. We're obviously only a couple of years in, but if you think forward and this flywheel, then if you then have the best people in every industry using the best tools, creates a much better customer experience.

25:13And then you grow faster, you retain your customers better, you make more money, you can pay your people more. That's the positive some, you know, vision of, for us of AI deployment is you can really create a better mousetrap in all these industries. Why should you be the one buying these companies? Right? So we'll talk about that in one second. So the way I think about it is like you have a ton of experience, right, in finance. What you were just telling me and my partner before we started recording, it's just like he blew his mind because he didn't even, he was thinking about the same thing you were thinking about.

25:42And you're like, hey, you didn't think about this other part, this missing piece, which we want to talk about. But like, that's another example. I've seen you do this a million times. And then with Zach, it's just like, he's going to be able to recruit the best technical AI talent in the world. And that's how I see the combination. Everybody's like, I want to do what Long Lake does. Yeah, but you're not Alex and you're not Zach. Am I wrong about this? Well, thank you for saying that. We've got an amazing team. We go back a long ways. Zach and I first met at Goldman when he was a summer analyst.

26:10I was an analyst. He introduced me to Rasmus, our co-founder and CTO, who he was at Oxford with at the same time as I mentioned, was a top student there. The sort of team came together through network. And so, you know, the first 20 people, I think, were all from, like, you know, network and people that we knew deeply from both an investment acquisition side as well as applied AI technology. We're growing much faster now. We're closer to 60. I mean, we're still small at Long Lake level. We're only about 55, 56 people now. We'll probably be, you know, closer to 100 people by the end of the year.

26:42It really is a world-class team. It's, you know, it's, I'd say 90 % AI engineers and operations deployment folks, and then 10 % sort of acquisitions, you know, M &A finance. But yeah, I do think you need to be able to do three things really world class to be able to deploy this technology. You need to be able to buy great companies well, so you need a great M &A function. You need to be able to build amazing world class technology. So you need world-class technology that rivals the labs or some of the best applied AI companies. And then you need change management operations. Because we were purpose-built and because we started with the big vision of we want to really kind of help change the whole economy, I think we were able to attract much better people.

27:28And that's been starting to compound now. And we still, I think, 75 % of our teams come from referrals, from in-network referrals. So we have a very strong, and it's a very tight filter, as you can imagine. I mean, I think this quarter, you know, we hired 3 % of applicants basically. And we saw, I don't know, close to a thousand applicants this quarter. So we have a very tight funnel, just like we do for deals. And, you know, I think one of my biggest learnings is just high bar in everything is really the key. And so high bar in talent, high bar in acquisitions, high bar in technology. And that's kind of what I think you need to make this work.

28:03What initially got you interested in finance to begin with? I just loved it. I grew up in a family of entrepreneurs. My grandfather, who was big inspiration for me, started a real estate business after World War II. He essentially invented the strip mall. Yeah, the shopping center. Yeah, yeah, yeah, exactly. He didn't actually do strip malls. Well, he did probably earlier in his career, but he eventually did. There's a great book that you gave me about him called Threshold Resistance. Yeah. And you talked about the idea. Why would it be called Threshold Resistance? Yeah, so the concept, by the way, it's a fun reference.

28:33We have it in our office. But basically, the whole concept of threshold resistance is you want the shopper to be more likely to go into the store. So he was sort of an early pioneer of retail. He just thought he could make things better. And actually, that was a big inspiration to me, try to make things better in life. And so one of the ideas was, you know, the threshold is the entrance to the store. And the more you had to step up steps or go down some dark hallway in order to get— and that's how stores used to be designed. There used to be these big windows with big, you know, with merchandising in them.

29:06And you'd have to go through the windows in some like dark alley in order to get to the door in the back. Nobody would fucking want to go in them. So his idea was bring the door to the front, have no threshold, have it be the same, you know, like that over there. You can't see, but that you want to walk through that. Because even a step, he broke it out almost like a math equation. Even like half a step up or reduced it by like 20, people coming by like 20%. Exactly. He did a lot of really creative things that I can tell you more about. He was very innovative, and he always brought this kind of continuous improvement mindset, similar to the Danaher continuous improvement concept.

29:39And honestly, it's all a big inspiration for me. You want to make it so easy and so magical for the shopper to go into the store that they'll go in and spend more money, ultimately, which is good for the store and all that. And actually, some of those principles, I think you can apply more generally. Like with technology, for example, we want to make Nexus so magical and so easy to use that our team members just love it and they can just use it. You want to minimize threshold resistance on AI adoption. This is exactly what you're talking about. It's like, hey, you know, the reason we can have this horizontal AI platform is because 70, 80 percent, it's like every business deals with the same shit.

30:08Yes. When you were just talking about this, I just recorded this crazy episode with Travis Kalanick from Uber. It was fucking crazy, sat exactly where you are. and we talked for hours and he was breaking down in like minute detail about even like the, every single page you would see at Uber compared to like Lyft and just like every single little thing. It's like, there's a thousand things I had to optimize that if you're just copying me, you're like, you copy what you see, but you don't understand the thinking behind it. It's exactly what you're talking about. It's like, this guy's just obsessed with shopping malls or shopping centers and realizing that, hey, I'm going to knock six inches off here and my bottom line, you know, my profit increases by 25 % or whatever.

30:43By the way, I think it's very much the same with technology and websites and, you know, Amazon that came later and things like that, which was just these little tweaks can really impact behavior. And, you know, just by making things better. It's why both my podcasts, like Founders has no intro. I just get right fucking to it. And this one has like a six second one. It's like, no one wants to sit through that shit. Yeah. Like I want, I'm listening to your podcast so I can hear some 30 second melody that you made. Like, no, this is not a concert, dude. Yeah. Get right to the point. Yeah, exactly.

31:10So I grew up in this family of entrepreneurs and my father and uncle ran that business for 75 years. And so one of the inspiration, we called the business Long Lake because that business was built and lived on Long Lake Road for the last 40 or 50 years in Michigan where I grew up. And there's actually a funny story. I know, I dismissively called you an East Coast biats guy, which you know I love you and we're friends. I was like, shit, I forgot he's from Michigan. Yeah. I basically just really grew up kind of with a tremendous respect for like the American entrepreneur. and growing up in Michigan, you know, I mentioned earlier, but, you know, all these incredible entrepreneurs in businesses you've never heard of, the people in Michigan and the community, the business community you looked up to, there was no financing there.

31:50There was no tech scene there. It was people that built, you know, these, these, what, you know, people might, people on the East coast might call unsexy businesses, but they're amazing businesses that you've built, you know, over 50 years or 75 years in the case of my family. And these people that built them extraordinary people, as you know, they're classic American founders and, you know, bootstrapped their way in, you know, to build what could be a huge business over time that provides an unparalleled service in that market. Like, you know, we partnered with an architecture business in Minnesota that's built 50 % of the K through 12 schools in Minnesota the last 70 years.

32:24I mean, they are like the McDonald's of, you know, architecture for schools. And this is why it's such a great country. You can go to any region in the country in any service line, and there's someone that spent 100 years obsessing over that product and service. And so growing up, you know, seeing this and around, you know, at the dinner table, meeting some of these people, and it was very inspiring to me. And so I think part of the reason that I was uniquely interested in this problem and mission was, how do we bring the best of the intelligence revolution and the best engineers in the world to help these sort of iconic, you know, American entrepreneurs across industries, you know, deploy AI into their business to make their team members, employees happier, make their customers happier, improve their bottom line, I mean, and grow faster.

33:14And by the way, if you do this in enough industries with enough businesses, you're eventually going to add up to really contributing to the economy in a big way. So I think there's a long-term over decades opportunity to make a meaningful contribution. I don't want to overstate our role in the intelligence revolution, but I think actually deploying the technology in the real world, driving real ROI, which, by the way, and I was sort of starting to get this earlier, but by driving real ROI, we're actually generating cash back into the system to scale the models. And so you actually need this flywheel.

33:44You need distribution. And so part of the mission of Long Lake was— Oh, your distribution for the labs. That's hilarious. Yeah, we generate ROI in the real economy on the intelligence to reinvest into scaling the models. That's funny. And someone's got to do this. And by the way, you're seeing the labs start to dabble and deploy codes and things like this. But I think somebody, you know, and many people, it's not going to be one company. You talked about, you know, other, you know, people. People often ask me about competition in the space, you know, people trying to do what Long Lake's doing.

34:12And I think it's great because I think to actually scale the models, we actually need to deploy this technology at scale, which is going to be, you know, this is a big economy. And by the way, it's a global economy too. And it's going to happen slowly. Like the technology changes way faster than human nature does and human behavior does. The bottleneck is changing actually what people do. And there are real hard technical problems. And, you know, like Rasmus and, you know, a bunch of our co-founders like Varun and founding engineers are, you know, Pratik, Taraz. These are some of the best engineers.

34:42They all, you know, any one of them could raise money from a top VC tomorrow to start their own company. Any one of them could go get offers at, you know, amazing, whether it's the labs or some amazing software company. You need people like that. These are really hard technical problems. And what they would tell you is it's really interesting work because it's not easy to figure out how to, you know, take 100-year-old businesses' systems and data and problems that are global with each customer having some different optimization that it needs, like in MXGPT, for example, and somehow scaling that with Nexus and diffusing AI into that whole stack.

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36:24Learn how they can help your business by going to deal.com forward slash Senra. That is deal.com forward slash Senra. Okay. So you're meeting all these entrepreneurs, you're growing up, you grew up in an entrepreneurial family. These are family businesses. When did you start paying attention to finance though, in that aspect of it? Yeah. So I knew I was really interested in business and I I wanted to learn about capital markets. And I started my career at Goldman. That's where I met one of our co-founders, Zach, who helped introduce me to Rasmus. And sort of all this ended up coming together through that.

36:54But when I was at Goldman, I worked in the internal investment unit, which was called Special Situations Group. And it doesn't really exist in the same way because of regulation now. But at the time, it was a very cool group, which I can talk more about. But I sort of just fell in love with this whole idea of capital allocation. And I had some really amazing mentors there. and the whole idea of putting resources of the economy into the highest and best use and the whole concept of capitalism, I just kind of fell in love with it and capital allocation across industries. That was one of the beautiful things about SSG at Goldman at the time was the pitch to young people coming out of school was you get to sort of invest right away.

37:32We invest up and down the capital structure from debt down to equity, public and private, across all industries. So I just got tremendous exposure at a young age to all these different types of businesses and ended up working on some really interesting investments there. Learned a ton by sort of not just observing, but also getting to manage risk at a young age, which was a very unique experience. Young age is what, early 20s? Yeah, I think I was like 22, 23. Okay. And actually, I had a great mentor there who I later partnered with and worked with at Oaktree, a guy called Patrick McKaney, who empowered me very early, I think in my first year, to basically manage like a couple of hundred million of invested capital.

38:12I mean, he was helping me, of course, and he gave me a lot of guidance, but he empowered me to like take real risks early in my career. And that was very formative for me. And I realized I just, I loved investing. I loved allocating capital and I loved businesses and learning about how the world works. To me, like understanding how these different businesses work and all these industries is sort of like really understanding how the economy in America really functions. And so I love that, the intellectual curiosity of just learning more about how different things work. So wait, then you go to Oak Tree.

38:41It's funny, you know, people ask me about Long Lake. I never could have told you at any point in time that I was going to be doing what I'm doing today. Did you think you were going to found your own company or you thought it was going to be a fund? Like, what'd you think it was going to be? I didn't know what I wanted to do. I was very focused on just continuing to learn and get better and improve my skills. So after Goldman, I went to business school and I actually, you know, what I was going to say is my favorite case was Danaher. I've talked about Danaher. They're a big inspiration for us.

39:08The idea of having that long-term compounding model where you have a structural advantage, you can operate the businesses better, you can have a better cost of capital, and you can have the best people and all that. Hold on, let's come back to Danaher. I want to hear about that. Danaher, which you and I have talked about before, but also the other people that you guys look up to and you emulate. But you go to business school. So I went to business school. I ended up interning. This is like, I'm just going chronological order, But I ended up interning at a holding company called Lucadia. So I was interested in holding companies.

39:39And then I spent some time hanging out with Josh at Thrive. So basically, I was always interested in technology and holding companies dating back 15 years. None of this clicked for me until much later. So I went to Oaktree after business school. I graduated. I decided I wanted to stick with investing and partnered with the guy I mentioned, Patrick. And we worked directly with Howard Marks and Bruce Karsh, two legends of the investment world, to build kind of some new businesses for them. We had started Oak Tree's first equity business. We ended up getting involved in some of their credit businesses and helping out with a few things and doing, you know, we started several different products there and worked very closely with Howard and Bruce.

40:19And just had a tremendous amount of fun, learned a lot from them. But the whole time I knew I was not sort of fully expressing myself. I eventually wanted to start something, but I didn't know what it was. As a founder, even if it was going to be a fund or an investment company. Yeah, I think I just knew I wanted to do something entrepreneur. I wanted to build something and I wanted to, you know, do something on my own. But I didn't really know what it was. But then, you know, when I started really thinking, after I was at Oak Tree for almost 10 years, I started really thinking and, you know, brainstorming with some of the early co-founders of Long Lake who we've talked about.

40:57And, you know, the ChatGPT moment came out and it just became very obvious to me. Like, this was going to happen. But wait, where was the Taubman Capital? When did that happen in your life? Yeah. So when I was at Oak Tree, you know, I mentioned, you know, my dad and grandfather's business. And I was helping working with our family to build out Taubman Capital, which is our kind of family investment business, which is all our own money. and we ended up partnering with, we did a bunch of these deals with investments in founder-owned companies. And we did, I think, close to 50 of them over that decade.

41:27So that's where you learned how to buy companies, do you think? Yeah, it was a combination of stuff I learned at Oak Tree and stuff I was doing with Taubman Capital. And Oak Tree stuff was generally larger companies, public companies. Yeah, but the returns you had at Taubman Capital, you don't like talking about this, but I'll just say it and we can cut it if you're embarrassed, but it was something like 70 % IR or some shit like that, correct? We had a very good run. We had a very good run. But yeah, it was an eye-opening experience for me because what I realized is we, you know, you know, there's some remarkable businesses out there.

41:54And just because something is a small or mid-sized business doesn't mean it's a bad business. Actually, I mentioned that, you know, business in Minnesota we partner with that's been building all, you know, most of the schools and entire state for the last like 70 years. It's an amazing business. And so my learning was there's some unbelievable entrepreneurs. Going back to my roots in Michigan, it really resonated with me to be able to partner with some of these folks and help them grow their companies. And so, you know, to your point, we had a very successful run in bringing sort of permanent flexible capital, which was our own internal balance sheet, a long-term horizon, being comfortable and not just comfortable, very encouraging of investing in growth.

42:31We don't, you know, we're not focused on short-term quarterly earnings. We're not over-levering the companies, you know, like a lot of private equity funds do. We basically are a long-term growth investor in great American businesses, partnered with great founders. And we can bring them things that they may not have. Like, for us, it was helping them get growth resources, helping them get M &A resources, helping them have capital. You know, a lot of folks have built an amazing business, but they've never done an acquisition before. And they may have tons of competitors that they could run the business better than.

42:59and we can help them go and consolidate that industry and become a bigger scale player and get the sort of industrial logic of that. And so we had a lot of fun. That was sort of nights and weekends for me over the 10 years, you know, when I was working at Oak Tree. So that was very formative experience as well. Long Lake, it all clicked. You know, it turns out I was always passionate about, you know, partnering with founders. I was always passionate about technology. Passion about capital allocation. Yeah. And then now you met the right people where you could actually build a unique partnership that very few people can match.

43:29Yeah, exactly. I got very lucky, super grateful to have incredible early investors. I think they've really pushed our thinking and level of ambition. And, you know, obviously our mutual friend, Rick, who's an extraordinary investor and been one of our biggest partners and Heymont at General Catalyst and Mark. And, you know, it's an amazing group of people, Elad Gill, and, you know, they've basically really pushed my thinking in a big way since the beginning. What Rick tells me about you is that you're unusually receptive to both new ideas and criticism. And a lot of founders, obviously, you know, are more like kind of headstrong and, you know, less, usually they'll listen, but they're running the ship, you know?

44:12Well, that's nice of him to say. I think feedback's a gift. We want to get better every day. Just like, you know, we want our companies to get better every day. We want our team to get better every day. I want to get better every day. And I have a tremendous amount to learn. That's why I love your podcast, actually. I learn, you know, more from you probably than from almost anyone from your episodes. And that's why I make everybody. I actually do. It's a true thing. I know this is true. Long Lake onboarding includes like half a dozen of your episodes. That's just smart. Okay. So I know you were working on a few deals.

44:40You and Zach were working on a few deals together before you found Long Lake. You guys are talking about this thesis for what? Six months, a year? Like how long does it actually take? And then we got to talk about the fucking crazy growth that you've had in the last three years. Yeah. So yeah, Zach and I, we go way back. We started at Goldman, as I mentioned, and we'd stayed friends a long time. And he's done some amazing things in technology, brought me into some of those things. That's an understatement. And then he was very inspiring on that. And then he was coming into some of our top and capital deals.

45:10and, you know, we, you know, buying, we did a funny thing where we ended up like, we built one of the largest go-kart track companies in America. We bought, we partnered with, you know, 20 different locally owned go-kart tracks and created a platform. And so Zach invested in that deal with us. And, you know, we, we realized, you know, there's some really great businesses out there that people don't spend a lot of time thinking about. And what if we could bring the world-class technology expertise of some of the, you know, some of the companies like, you know, ramp and cognition in the labs. And you could bring some of these, that type of world-class AI team to, you know, the main street American businesses and enterprises.

45:49And that was the idea. Was it that idea from the very beginning? It was that idea from the very beginning. So from that, the conversation you guys start having about this to shit, we're going to start the company to it's founded is what's the timeframe there? I think it was like nine months from the first conversation until we actually incorporated the company. I was still at Oak Tree at the time, so we were spending a lot of time thinking about it, meeting some of the early engineers who ended up joining us. And I think the thing that got me really excited was when I started to talk about this idea with engineers, there was a lot of palpable excitement.

46:21People were really excited to work on the project. I knew we could build an extraordinary team. Being able to build the right team at the right time to go and do this was a unique opportunity. I was very bullish on the company and very excited, but I think we just continue to get more and more, you know, excited about what's ahead. You know, our bar for what we want to build and what we want to do keeps going up. I've been there from like, I think day one, but this is like, when I heard about the Amex deal, I'm like, why am I not thinking like, like, I know these are my friends. I'm not even thinking like, I didn't even think it was a possibility that you would do a$6 billion acquisition.

46:59I was like, Dan, these guys are really good. Our vision is really big. I mean, it sounded kind of crazy when we were a couple of years ago when we were saying, you know, we want to deploy. It's not just your vision. Like the way you guys are executing is even better now. Like you're getting better. You guys are getting, you're already super impressive, but you are literally getting better. Yeah. I do think we're getting much better. This is partly why I value feedback from some of our smart friends and some of our investors is we want to get better every day. And I do think, I do think it's true.

47:26Can we talk about the story? You guys were thinking about like a few acquisitions and we don't have to talk about the prices or whatever. It was just like, well, we could do this one over here or we do this one or you do this one. And you told me the story and Rick's like, why not do them all? Exactly. Sometimes we like to say, you know, I think the greatest gift that you can have in a partner is someone who makes you more ambitious. And I think our, you know, our partners today really make us more ambitious. And when we started the company, we talked a lot about how, you know, if we do this right, we can really help change a lot of industries and change the economy.

48:02And it sounded kind of lofty. But now that we're operating in 15 % of the services TAM and, you know, with tens of thousands of team members, you know, it's starting to feel like it's coming alive. And so I think that's really exciting, which means we're able to, you know, it's much, I remember in the beginning, like convincing some of our earliest, you know, founding partners to leave their, you know, sexy jobs and technology. Like I was like talking to people's parents about why they should like drop out of school and come work on Long Lake and stuff like that. And it was like, you know, it was like a long process because I had to like explain all of this and, you know, but now it's getting much, much easier.

48:43So people have seen what we're doing. They're inspired by it. They want to join and be part of the mission. And so I think the team's getting better and better every day. Like our rule is the incremental hire has to make us better, raise the average. And we've been able to do that, which is really extraordinary. And so team's getting better. We're getting much more experience. We've now bought close to 40 companies across five industries. Like we've built a process. We built a playbook. We have the Nexus platform, which we can redeploy. So our ability to drive impact is better. Our team is getting better, you know.

49:11And so I do think our ambition level of like, if it's not Long Lake that buys MXGBT, like, who should it be? Like, it should be us. That's kind of how we think about it. And frankly, you know, we're thinking there could be other big things we can do. We're not going to stop, obviously. We want to keep doing this for the next 50 years. Give us some details about the size of the business today. We haven't disclosed, you know, valuations yet. We don't need to. You'll get the first exclusive at some point. But we, you know, I can tell you that including, you know, MXDBT is a big business and the scale of our other businesses is also compounding and getting meaningful.

49:44And so, you know, if you combine, you know, we're expecting to do over$4 billion of revenue next year. You know, it's amazing revenue base. It's very stable, you know,$100 % retention type business. You know, I mentioned, you know, we have a lot of employees now globally. and we're very profitable, as you highlighted, because our strategy is to buy established profitable businesses that already are making 20%, 25 % plus EBITDA margins. And so our view is, we actually never need to raise capital again, which is nice. We're going to be generating enough cashflow on our existing assets that we could compound just on internal reinvestment for decades to come.

50:23Yeah, we have a line of people out the door. We've had tremendous support and interest from investors. to help inspire us to do bigger and bigger things. I mean, one of the nice things about being able to access, you know, access capital is it's, you know, it allows us to think bigger and move faster. And I was at dinner last night with Rick and Zach and, you know, your main partners. And they made the good point where, you know, a lot of founders fuck up because they optimize for valuation. And, you know, Zach and Rick made the point. It's just like, well, if we're gonna be working together for 20 years, like you should be, this is a long-term partnership.

50:58Like you can't just, it's not a bidding contest. It's just like, who can you work with? And who actually, to your point, like now that you get along with, you actually want to do life with, because we're all going to have more money we could spend anyways. So it's like, who do you get to spend your time with? Like, doesn't, shouldn't that matter? And then the second part of that is, is like, are they actually helping you on your mission and increasing the size of your ambition? No, I, listen, I a hundred percent agree. I think it's about having the right partners. And so like, you know, I mentioned kind of growing up and, you know, in our, in our family, in the real estate business, my father and grandfather had partners for 50 years in some of their real estate deals.

51:32And so being a partner was like almost higher than being family. It was like someone that you treat with like the highest respect. You guys are loyal guys. This is what I like about you. You know what I mean? Like there's an army, like you're fucking way too humble and you're always gonna be like that. So nothing I'm gonna tell you today is gonna change that. But like there's an army of people trying to put more money into your company that would probably, you'd get obscene terms. And it's just like, yeah, but I like these guys. These are my already existing partners. My version of this is like every fucking company comes and it's like, do what you have with Ramp.

52:05We want that and we'll pay double. And I'm like, you think this is like a bidding thing? It's like, these are like some of my closest friends. They're the easiest people to work with. Like fucking they backed me and they did what at the time was the biggest deal in business podcasts is the partnership we had. This is like just because they had intuition that this is fucking valuable. You think I'm going to exchange and destroy that fucking relationship for money? Yeah. Come on. Exactly. I agree. I mean, it's one of the things we're super grateful for. When we first met with Hemant about this, and he was our, you know, GC led our first round of outside capital, gave us our first 100 million bucks, basically, when, you know, that was, you know, remember, this was three or four years ago.

52:41That was a lot of money back then. And, you know, and by the way, they've given us a lot more since then and been incredible partners. You know, from day one, they got the thesis. They believed in us almost in a way before we even believed in ourselves. And that's such a gift that we'll always be grateful for. And, you know, I just want to keep working with these guys, you know, our investors that we have. And obviously we like bringing more people into the mix. And there's been some extraordinary people that have come in recently, like many great people that you know. And so we want to keep building that.

53:10I do think like continuing to kind of expand our world a little bit is very valuable. Each time new people come in, they add a lot of value to our thinking and all that. But yes, it's about much more than capital. It's really about how do they help us execute and the biggest way to help us execute is by believing in us and, you know, inspiring us to move faster and think bigger. Does Long Lake have to be public? It doesn't have to be public. No. But I think the maximally ambitious path is to be public. Why? Why is that maximally ambitious? Because I think we'll have ultimately deeper and lower cost of capital, lower cost capital and just, you know, public markets are the biggest stage in terms of deepest pools of capital.

53:50And I do believe, and one of the things about some of the great holding companies and, you know, people like Henry Singleton and others and John Malone, they've all proven this over time, is that if you execute over a long period of time, you earn a currency that trades at a lower cost of capital. And then that allows you to do even more ambitious things. And so by getting, you know, access to that over time, we can think even way bigger. So I think there's some, you know, potentially to scale our impact to even larger and larger businesses and industries, you know, over time, I think having that currency will be very valuable.

54:22What else did you learn from Singleton? You and I have talked about Teledyne a bunch. Yeah, I mean, he's probably like of all the holding companies, one of the people that's inspired us the most. I mean, first of all, he was a math genius. He was on the Putnam team at MIT. He was an office of special services. I mean, you sent me the book, I think, Distant Force, which is a great book. One thing that people don't understand is Singleton compounded his earnings per share, like over 40 % a year for 20, 25 years. And Buffett always called him the best capital allocator in America and the best operator.

54:53And he was very kind of under the radar. The biggest learning from him, I think, is he used to say, stay flexible. His mantra was he didn't like detailed strategic plans. He preferred to stay flexible. He says, I prefer to steer the boat a little bit every day. It's a great quote. It was subject to all these outside forces. Yes. And nobody's smart enough to predict them. So you just need to come in and steer the boat every day. And so I think that's part of our whole philosophy of staying open to different industries. The, you know, the flexible capital allocation mantra of, you know, for example, we never would have said when we started the company that we wanted to do travel.

55:24It wasn't it just wasn't something I'd thought about. We eventually built a thesis on it, but that was because we had an open mind. And now we're doing I think it's one of the most exciting deals we've ever done. I mean, it's like an unbelievable, iconic business with a reputation for, you know, gold-plated customer excellence with one of the best, you know, AI opportunities to improve the service at a pretty reasonable multiple, actually, when you look at it. And had we not kept an open mind and stayed flexible about industries, we never would have looked at it. You know, I think that's a very inspirational principle to us that we try to embody.

55:57What about John Malone? Anything from him? Yeah, I mean, he was amazing. I was studying him at Oak Tree and actually we invested in a number of his stocks over the years. You know, I think just creativity on structuring and creativity on financing and things like that. He was kind of, you know, top of his class. And another thing, you know, I read in Cable Cowboy that he liked, he was a very first principles thinker, which, you know, he would do like ask why five times, get to the root cause. Like he was a big root cause thinker. And that's something we try to also embody in our, you know, in our investment process, now capital allocation process.

56:32We want to always understand why is a business good business? Because we do plan on doing, you know, you talked about permanent capital. We want to be doing this for decades. And so it's actually very hard to think out 20, 30 years on what's going to still be a great business, especially now. Yeah, especially now. So first principles thinking about why a business is going to be great post-AGI is really important. It's maybe the most important thing in capital allocation right now. I think stock selection, they used to say it's a stock picker's market, meaning there's going to be winners and losers, a lot of dispersion.

57:03I think there's going to be a lot of dispersion in the next 20 years between the best assets and mediocre assets in terms of a post-AGI. You think about how industries are going to shift. The gains of the winners is going to be even more extreme in a post-AGI world. Is that what you mean? Yeah, I think there's just going to be a lot of dispersion. I think the gains to the winners is going to be extraordinary. Yeah. And businesses that, you know, are well positioned, that are high quality services, that are going to preserve their place in the ecosystem and expand it, which we think our businesses all fit that mold, you know, can become orders of magnitude more valuable.

57:35But businesses that are lower quality, easier to disintermediate, aren't providing a sort of a enduring value added service and really are more of like a tax. Some of those are just going to go away. Yeah. And that's good for the economy, by the way. Less friction is good. but I think thinking through businesses holistically and sort of thinking about what makes a business sustainable or not, enduring or not. Have you guys bought any businesses that were weaker than you expected? And have you sold any of them or no? No, we've never sold anything and we don't plan to ever sell anything. You never say never.

58:06Yeah, of course. It's more about, are we adding value to the business? Is it a business that Long Lake should be in? I think that's the bigger question. You know, if you're going to invest all this time and energy to get into a great business with a great team, you know, build that partnership, deploy tech, build, you know, Nexus to deploy into that space, create the best technology in the space, the best people, the best team in the space, and then you're going to sell. Like that, you want to let it compound for a long period of time. So wait, I just had a thought, and I don't even know the answer to this question.

58:35You guys are acquiring businesses. Have you guys had any acquisition offers for Long Lake itself? Everybody knows we're not a seller, so we haven't really entertained or had any of those conversations. My plan is this is what I want to be doing forever. Okay, I'm on a run right now. So, Torsen, there's a bunch of these episodes that aren't even out. Torsen from Helsing, he sat in the same chair, and he's just like, he's legitimately mission-driven. He's just like, I'm building a great European defense company because he's already rich. Like, he was rich when he started the company, and he's just like, you know, because, like, Europe has to be able to protect itself.

59:05So, this is like, this is a mission-driven company. He's like, we're not for sale for any price. You know, Scott Wu, I push him on this a lot because billions are getting thrown in that guy's face. And he's just like, nope, not doing it. He has this great line. And he's like, oh, we'd sell if it was the maximally ambitious thing to do, which is obviously. Great line. Yeah, it's a great line, which is obviously his way of saying, no, I'm going to tell you some of the conversations I've had with him on the phone, which we, I was like, I can't put this in the podcast because he's like, you know, definitely like friendly UI, but conqueror spirit underneath that friendly UI.

59:33And then I just talked to Zach Dell and I was like, is this the last business? Because what I love about Kareem and Eric from Ramp, I asked them both the question, like, this is our last business. It's not like I'm going to fucking sell this and start another company. Like, this is it. This is the last one. and Zach Dell had the funniest thing because he wants to build something like you said, relatively young. He's like, I want to work on this for 50 years and go see how far I can take this thing. And he goes, and do you think I'm doing this for a paycheck? He's like, think about my background.

59:58I was like, yeah, good point. You're not doing it for a paycheck. So what would be the point of selling it again for more money that you're never going to spend anyways? So I just love this idea. But we never close the loop on your maximum ambition, which is like you guys could be building a trillion dollar company. I think we can, yeah. If you just think about the power of compounding, and this is one of the reasons that long-term thinking and not being a seller is so valuable, is that it's amazing if you just kind of can keep getting a little bit better every year, how that can add up to, well, then you're tripling the value of these businesses every five years.

1:00:32And if you just keep doing that for 20 years, you're a trillion-dollar company. I'm not trying to make that sound easy. That's really hard to keep executing that way over a long period of time, over decades, and, you know, avoid mistakes and continue to retain the best talent, best technology talent in the world and, you know, deliver the best customer service, customer excellence in the world across these service lines, that's really hard to do. But if you do it for long enough, you know, the pie here is just extraordinarily big. We're talking about the whole economy, basically. This is like the largest TAM imaginable.

1:01:01And so if we can just keep executing and doing what we're doing for a long enough period of time, I think, you know, the potential is pretty, is staggering. Well, I have to say as somebody that's been there, like been able to see this from, you know, almost the very beginning, I remember when the first time Long Lake got name dropped on a podcast and people were like, oh no, like, you know, because it was something relatively stealth, even though you guys were killing and buying everything and doing everything for you to now, you know, I know for a fact and firsthand knowledge that one of the 10 best entrepreneurs in the world, like you got their attention when you did the Amex deal and they're like, hey, what's going on with Long Lake?

1:01:35And how do I get involved in this? So just as a friend and a fan, And it's been wonderful to see you, man. And I really appreciate you trusting me with, you know, coming out and telling the history of Long Lake today. Thank you so much. Honored to be here. Yep. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.

1:02:08Thank you.