Beating the Market: Connor Teskey, CEO Brookfield Asset Management

25:15Shane Parrish:I'm curious about what type of information flows up. So does that committee have a name? Whatever information flows up into the small group of people who are deciding where to allocate capital. And then how do you take that information and disseminate it? So you learn things in one part of the world. And how do you apply that in another part of the world? There's two things there. We obviously have an investment committee process that's important because it substantiates approvals and things like that. And it's a process that's communicated to our LP partners. And we, of course, adhere very closely to that.

25:56But the one thing I would stress is we don't treat our investment committee like a single discrete one-time event where an opportunity is going to be presented for the first time and then ruled upon all in a one-hour meeting. Our investment teams around the world, through the life cycle of the investment, they are constantly iterating with not only the members of the investment committee, but the leaders of that platform to get feedback along the way, make sure they're building consensus. No deal is perfect. There's always unique dynamics or nuances. They're making the appropriate men and women aware of those, getting feedback.

26:39A lot of our businesses have a process where there is a very, very detailed review, you know, three to four weeks ahead of the final investment committee with very senior individuals. And the goal of that almost preliminary meeting, whether sometimes it's called a capital committee or something like that, is that's where you can get really good feedback on an opportunity. You can draw on the experience of the whole business, but you still have time to take that feedback away, maybe do a little bit more diligence, maybe tweak the deal a little bit well before you go for a final investment committee approval.

27:18Shane, the other thing you mentioned there, I always give this example is Brookfield really runs like a partnership. And I've been fortunate to have helped build the power business over the last 10 years and led it for the last five. I'll give this example. On a day-to-day basis, when I was just starting to lead the power business, I didn't necessarily have a whole lot to do day to day with our real estate business. But if I hadn't talked to Brian Kingston, who's one of the senior guys in our firm who was leading our real estate business at the time, one of us would phone each other every two or three weeks.

27:58What are you seeing? What's working in your business? What isn't working? Where are you seeing demand? Where are you seeing capital flows? There is that constant interaction. The business does not operate in silos. Despite operating in four verticals from almost a product perspective, it's incredibly collaborative with almost immense effort put in to consciously ensuring that we're always sharing information and perspectives.

28:26Shane Parrish:So the committee is not like a vertical. It's not like, oh, this is real estate committee. You have other people sitting on that from different. For sure. But even if they aren't, You would pull their expertise in. I think one of the unique things about our approach is there really are no walls at Brookfield. And we really, in tone from the top in how we develop people, even in how we compensate people, we really encourage collaboration such that when the firm has an opportunity, it doesn't matter what someone's title is or what region they work in or what investment strategy they spend the majority of their time on.

29:12If there is an individual within the organization that can be additive to an investment we're trying to do or an initiative within the company, we pull them in. Even if it's a private equity investment, if there's someone within our infrastructure business that can bring value, they get looped in. It doesn't matter what the job description on their business card is.

29:34Shane Parrish:There's two paths I want to follow here. One was, you mentioned consensus, but the example that came to mind for me was Westinghouse, which seemed like a very non-consensus idea, at least from the outside. Now it's proved out to be very correct, but how do you think about taking bets that are maybe non-consensus? A Westinghouse is probably a good example of sometimes we get asked, what's an investment committee process or what's that iterative process like? We focus a huge amount of time. The vast majority of the discussion will be focused on the downside. We like to believe that if you buy high-quality businesses in good markets that have strong downside protection, if you underrate the worst-case scenario really, really well, the base case or the expected case will end up being very attractive.

30:26And Westinghouse was a great example of that. When we initially invested, it was not an in-favor sector by any means, but it was a market leader. It was critical to the global supply chain of nuclear power, which at the time was not growing, but had a very, very long life tale to it, of which Westinghouse was a critical supplier. And we felt it was an industrial operating business that could be run better using some of our operational expertise in other industrial businesses that could be brought to bear. And I can tell you we spent all of our time focused on the downside. And what was interesting is that proved out to be right.

31:12Westinghouse is a market leader. It is absolutely critical to the supply chain. We were able to drive significant operating efficiency within that business. All of that would have led to a very good outcome. And then we got the upside, which is there was a complete revitalization of the nuclear power generation sector around the world. And Westinghouse was absolutely at the forefront of that. So we focused on the downside. We made sure our downside was protected. Our base case of an attractive return was delivered by things within our control. But there was asymmetric upside if some uncontrollable things that we thought or hoped would happen did, but we didn't need them to to have a good outcome.

31:58In that case, we had a very, very good outcome.

32:00Shane Parrish:What happens after you acquire a business? You know, I think Brad said, Brad Jacobs told me, if you're not improving the business, then you're just really moving money around. So what does that playbook look like when you go in? What are the variables that you're really focused on? What's that first 120 days look like? It's funny. Brookfield is a unique in the alternative asset management space. we come from a background of being direct owner operators of businesses. I don't know if everyone knows this. Brookfield and its predecessor companies were founded around 1900. And for the first hundred years of our history, we were not an asset manager.

32:42We were essentially an industrial conglomerate directly owning and operating businesses ourselves. And that history really informs our approach today. We like high quality businesses that we'd be comfortable owning directly over the long term. We tend to be slightly longer term holders of assets. We take a very hands-on direct owner operator approach to our investments. I would say this, there's not an investment around the world today where part of our return bridge, if you will, doesn't come from operational improvement. And then the third thing is, as a function of our history, where we used to be 100 cents of every dollar we invested, today, the largest investor in Brookfield products is still Brookfield's balance sheet.

33:31So your question, what does that look like? We've built a platform where we like to think we have best-in-class industry and geographical expertise in the asset classes we invest in. take power for example we have people in every region around the world that we operate that are experienced in operating technical development power marketing tax legal regulatory compliance and when we buy a business we bring that expertise to bear most of the time that expertise we have doesn't actually go into the company it sits above the company and is simply there to support the business from above. In certain cases, and depending on the extent of the turnaround or the operational improvement that we're seeking to do, sometimes we will put our own people into a business to drive change.

34:30You made the comment, what does the first 100, 120 days look like? Very important. There are certain standards that we like to implement, you know, 100 days, probably too long. Our health and safety standards, our global standards around certain processes and procedures, those are non-negotiables. Those get rolled out right away, but they're generally things everyone can buy into. You know, you acquire a business as a new equity investor and, you know, a Brookfield representative shows up on site and says, we're proud to be the new owner of the business. We're going to look to drive some changes as you made it.

35:10Understand the first one we always focus on health and safety and people that get health and safety, right. Tend to be the best operators long-term.

35:19Shane Parrish:How do you think about quickly getting capital out as a means of de-risking? So you buy a business and you put all this capital out and then how much of that first year or two is like, how much capital can we get out quickly? So we do risk this deal? It's an interesting comment. I would say it's very deal specific. When we think back over the history of Brookfield, you know, I joined Brookfield about 14 years ago. I remember back then we used to say there were really almost two different types of investments we would target. You would either want to buy high-quality businesses at an attractive value or a fair value, or you would consider buying a lower-quality business at an exceptionally discounted price.

36:13What's interesting today is our business has really focused increasingly on the former. We want to buy extremely high-quality businesses where you have incredible visibility into their long-term cash generating profile. And you can have a lot of conviction that that cash flow will be there one year from now, three years from now, five years from now, 10 years from now. Because of that, I think there is less stress about trying to extract a bunch of cash in the near term. If you had a lower quality business where it's subject to increased competition, it's subject to perhaps some market variations that aren't in your control.

36:53Yeah, you want to de-risk that really fast. Obviously, we'll pull capital out of our businesses whenever we can, but given the types of things we focus on, we can take an approach of doing it very prudently.

37:06Shane Parrish:How do you think about leverage? I look at what's going on in real estate today, and so much of that seems to be people got a little bit over their skis, which creates an opportunity for you. But how do you think about going into that with leverage, where you're sort of trading off a little bit of financial return for survivability over market variations. I like the way you said that. There's two things about how we finance our businesses around the world. One is just the approach we take. We focus on asset level, non-recourse, long-term fixed rate financing. It's sometimes not the cheapest financing, but it has some features that we really like.

37:45It takes away that market risk that we talk about, about interest or financing cost changes over time. And the other thing is we like to do asset level non-recourse financing. That by choice is harder. You're doing a lot more individual financings rather than just grouping huge portfolios of assets and putting a debt facility over the top of them. But what it really ensures for us is if you ever run into something unforeseen. And I say something unforeseen to the downside or equally something unforeseen to the upside. Everything that you have to work through is done on an individual basis. And you're never tainting, if you will, an entire portfolio with the dynamics of an individual asset.

38:34And obviously, people will focus on if you have an asset goes bad, it's nice if that doesn't taint a broader, but it's the same on the upside. If you get an incredible bid for a single asset, but it's stuck in a debt facility that won't let you release it, that inflexibility is not helpful to running your business. So the first thing we do is focus across all of our platforms, non-recourse, asset level, long duration, fixed rate financing. The other thing, which probably isn't as obvious is we are huge believers that liquidity is almost consistently undervalued. Liquidity is this funny thing, which is every time it's overvalued when you don't need it, and it's incredibly undervalued when you do need it.

39:22And therefore, we like to prudently finance all of our businesses, but we always like to ensure that we have some excess capital for something unforeseen. And again, that unforeseen thing could be a positive or a negative. The negative, maybe your business plan isn't going quite the way you expect. Having a little bit of capital to ensure that you can keep your covenants on side and give you that run rate to get your business plan back on track, hugely valuable. Similarly, having excess capital for growth, perhaps when others don't, has probably been one of the biggest differentiating factors for Brookfield over cycles and over decades.

40:04Shane Parrish:That comes when sort of the market, we'll say crashes or there's a panic or capital gets really tight and then you have capital, you're available to deploy it. Absolutely. And we feel that one of the truly enduring competitive advantages of Brookfield and something we spend a lot of time focusing on is always ensuring that we have tremendous access to capital. Because again, when times are great and everyone has access to capital, that doesn't seem as important, but having access to capital when others or not all market participants do, that is incredibly valuable and has proven to be valuable to us across asset classes, geographies, cycles.

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41:20Shane Parrish:On your site, in store, in their feed, or right inside their inbox. The less they think, the more they buy. Businesses that sell more sell on Shopify. If you're serious about selling, the tech behind the scenes matters as much as the product. Upgrade your business and get the same checkout that I use. Sign up for your$1 per month trial period at shopify.com slash knowledge project, all lowercase. Go to shopify.com slash knowledge project. Upgrade your selling today. Shopify.com slash knowledge project. How do you maintain that without having lived through it? And I say this, you know, there's the 2000 sort of dot-com crash.

42:02Shane Parrish:Then there's the housing sort of crisis of 2008. But you haven't been deploying capital during those periods. And it's very rare that people have that perspective having not lived through it. It's almost like you have to live it to get the, I don't know. Talk to me about your thoughts. 100%. There's two things. One, this is where I think culture within an organization is so valuable. We really instill these principles day in, day out across our business to, you know, the young man or woman who's just come out of school who doesn't have any investing experience. This is what we do across market cycles.

42:45This is our approach. This is why we do it. You haven't experienced it yet, but here is why it is valuable. And here are examples of when it was very valuable to us and why we do it across the cycle, even if it doesn't seem super important today. The other thing which just goes to an incredible dynamic within Brookfield is we're constantly as an organization mixing what I would say young, energetic, I always use the term, individuals who can run super fast and jump super high, but mixing them with experienced people who have lived through those cycles, who have made investments, who have significant lessons learned that they can share.

43:31A big part of our culture is mixing that kind of experienced, more senior perspective with young, energetic, fast-moving capability.

43:40Shane Parrish:Sort of what you had when you came in almost in that way. Yes. We were talking before we started recording about dispersion of talent and how in some industries it makes a big difference. Where does talent matter the most at Brookfield and where does it matter the least? Within our asset management business, our most important assets go up and down an elevator every day. We are a people business and therefore talent is hugely important. One thing we believe is talent doesn't fit a perfect stereotype. We need lots of talent in different capabilities in different places across our business. And it would be unrealistic and unpragmatic to expect all the incredible talents we need to be rolled up in a single individual man or woman.

44:34You know, we can have some people who are incredible judges of risk and return and incredible analyzers of businesses. We can have other people who are very good marketers who can explain what we're doing in a way to an investor who isn't living day by day, 20 hours a day in deals every day of their life. We need people who are very good leaders and team builders and builders of platforms. What differentiates us over the long term is some mixture of the talent we have, and therefore we spend a lot of time focused on developing it and retaining it, but then also creating a culture that can extract the best out of the talent within the suite of people that work for Brookfield.

45:24Shane Parrish:Go deeper on the extracting the talent out of the people who work there. Because I often think about, you know, we were talking about sports before. Like I think about the NFL, right? And the NFL is a great example of like we have this incredibly talented person and then we put them in this environment that we're trying to match. Like it's highly structured, it's highly organized, and it's all geared towards that person performing on Sunday. Yeah. It's funny. I think I love sports and I feel like football is an incredible example because one of the things I love about, I live in London, so American football, is you've got people that all play different positions.

46:01You've got offensive linemen who don't worry about catching the ball. They don't worry about running the ball, but their job is hugely important. Then you've got wide receivers who don't worry about throwing the ball but want to be best in the world at running routes and catching it. Brookfield's no different. uh we want people who we want to to your term extracting the best value or the best talent out of our people we want to find the things that we need to do as an organization raise capital invest capital manage business product development work with our teams build platforms we want to find the things that our people are the best at and allow them to really focus on those things and And if you've got a wide receiver who's great at catching the ball, you can support them with people who are good at other functions.

46:55And then there are a handful of people who need to be able to sit above it all and oversee everything, whether that's your coach, your football analogy, your coach, your quarterback, your ownership, and that's your executive team.

47:10Shane Parrish:I'm curious how you go about identifying talent. Excellent. That must be like such a hard thing because I think in finance, maybe I'll add some context to this and I want to spend a few beats on it. There's people who talk like they know what they're doing and then there's people who know what they're doing. It's not obvious the two. And the other thing that stuck out to me is you mentioned that it always doesn't fit in a box. So there's no central casting about what to look for. One of the things I love about Brookfield, I think a lot of people who work at Brookfield love about our approach is it is a complete meritocracy.

47:45We really don't care what your background is, where you were born, how you were raised, who you pray to, who you love. It's really about what value can you add to the firm. And again, that value can come in lots of different ways, but there is no stereotype that we are looking for. And it really all just boils down to how much value can you add to the firm. As an organization, one thing we do, and perhaps different than other organizations, is we do identify young talent very early. We like to try our best to identify young talent very early and give them perhaps more responsibility and accountability than they would sometimes get in different environments.

48:40And when it works, it works incredibly well because you get these fantastic men or women in their early 30s who've been in the workforce for 10 years but have the equivalent of 20 or 25 years worth of deal reps or people management or product marketing that they would have had somewhere else. And those are incredibly valuable individuals to our organization. we obviously need to make sure we're very proficient in identifying that talent. And we also always need to check and make sure we are coaching that talent up over time. It's not a straight up into the right line for everyone.

49:27Shane Parrish:What do you look for personally that's like non-obvious? And I'll give you an example. I was listening to an interview the other day when I was doing research for this actually. and the guy said, I look for obsessive psychopaths. And it stood out to me. It was memorable. What are the non-obvious things that you look for? It's funny. I'm going to give you the same answer, but sometimes we get it to a different question, which was what are the attributes of Brookfield's culture or the people that do the best at Brookfield? The line I sometimes use is we like people who are almost kind of nerdy. And I don't mean they're nerdy in that they aren't enjoyable to hang out with or can't carry a conversation, but they're intellectually curious in that they like to look at a hard problem that other people have struggled to solve.

50:18And they're willing to kind of roll up their sleeves and put in the hard work to try and solve it to generate an outsized positive return or an outsized positive outcome for the business. We like those people who are intellectually curious and kind of the derivative of that is hardworking and willing to tackle hard problems and put in the time and effort to solve things that others can't. That would be one. The other one is this is always a people business. It is very – it is impossible to get ahead in this business if you can't work well with other people. It doesn't matter how talented someone is.

50:58they're not more talented than the entire team of people you can put around them. And therefore, having people that are exceptionally good at different aspects of the job, but equally can work with others where they can complement other individuals or be complemented by other individuals to get more out of the broader team. Those are the people that succeed the most.

51:22Shane Parrish:What does that look like inside when it goes wrong, the ability to work with other people? Well, rather than say it as a negative, I'll say it as a positive. One of the things I've always said about Bruce is it always seems like he cares more about the success of others than he does about himself. He's always more concerned about ensuring that other people get the credit or other people are positioned to continuously develop. What's interesting is you see that in a leader who built an amazing organization. You also see that in very junior people. those that just want to contribute to a good team outcome and aren't really worried about who gets the credit i'm thinking back to the previous question you know sometimes one of the things one of the ways i describe culture at brookfield is we like those individuals who maybe they do a great deal or or they complete an initiative that was very successful um the non-brookfield thing to do would be, you know, go on a three-week victory lap telling everyone what you just accomplished.

52:28The Brookfield thing to do would be to come back the next day and say, okay, what are we working on now? And I do think you see that in very young people as a really redeeming and enduring quality. And when people don't have that, I would generally say they don't ascend or they don't last within the business as much as the ones that do. Does it need to be perfectly proportional? No, I don't think so. Are you guys using AI internally? Absolutely. How are you using it? So it's interesting. I always think there's three ways to play the AI theme, if you will. One is to invest in the models. You invest in chat GBT or Anthropic and we don't do that.

53:13To be clear, there are some people doing it and being wildly successful. It's just not our area of expertise. The second way is to build the infrastructure that supports the growth and increased utilization of AI. And that, at a simple level, is the data centers and the power that supports them. And that is the largest and fastest growing investment theme at Brookfield. And it really brings together our digital infrastructure expertise, our power expertise, our real estate expertise, we feel we are market leading in that regard. The third area is using AI within our business. And we are doing this very, very actively.

53:57And I think it's a fascinating topic. People say, how are you rolling out AI in our business? What's interesting is we own 500 companies around the world. We have encouraged all of them to use AI within their business, trial and error different AI applications that you think will enhance the efficiency, productivity, growth of your portfolio company, the only thing we ask is you share the results of that process. So if you find a solution that is very additive, it doesn't matter if that's in a infrastructure business in Australia, if they find a great AI application that is very additive to our business.

54:41We've created a structure whereby that information can be shared across the entire company so we can use it elsewhere. Similarly, if that company tried that application and it didn't work, share that information such that 499 other companies don't try and have it fail. It's interesting. We're really seeing, we're very early days, but the impact is amazing. And there's two that would jump out. One is there's some places where AI is having a very discreet and very meaningful, positive, transformative near-term impact. Our private equity businesses really focuses on industrial companies and critical services.

55:28We're using AI to help with pricing models. We're using AI to re-evaluate how some of our shop floors and factories are configured, questioning processes that have existed for 20 years, and some of the efficiency and productivity improvements that are coming out of those exercises is amazing. That would be point one. There are two places across, I would say, almost a trillion dollars of assets where AI is having a huge benefit, and maybe it's not as exciting, but it is very intuitive. One is preventative maintenance on a trillion dollars of real assets around the world, and the other is health and safety for the 300 ,000 operating professionals we have in those 500 portfolio companies.

56:20The ability for a computer to look at a piece of machinery that only gets serviced every three or five years, but can just look at an infinite number of data points and use pattern recognition to say something doesn't look right. I know that piece of machinery is not supposed to be serviced for two more years, but somebody should go look at it. Sure enough, we send someone out to go look at it and a bolt is loose or something is leaking and we can preserve a lot of value. Similarly, just letting a computer that can run a million simulations instantaneously help people address health and safety concerns in different environments around the world.

57:03The factory floor one is much more discreet. Those two, preventative maintenance and health and safety, working in the vast majority of our businesses.

57:13Shane Parrish:What does it look like in health and safety in the same way that you sort of gave an example with what it looks like for preventative maintenance? How does it look? Some of this is actually using the technology. Some of this is a forcing function, if you will. in some of our infrastructure businesses where people are constantly building different assets in multiple places what we we have a program where when a worker shows up on site they have to use the camera on their phone to scan the site and the the the program will say here are 10 health and safety risks that we've identified now candidly experienced workers probably would have identified those, but it's a great forcing function that one, they have to do it to their reminded of it.

58:03Three, now they're thinking about those things. It's health and safety is incredibly important in the businesses that, that, that we own. And, and this is a great way of using one of the greatest technologies in the world to, to drive one of our most important initiatives.

58:19Shane Parrish:Is there any other examples that come to mind where you're like, oh, that's so cool and it's giving you a competitive advantage? One of the things that we're seeing as we use AI in our business is it feels like sometimes there is this fear, oh, AI is going to take everyone's jobs. That's not what we're seeing as much in our business. And that's a 30 ,000-foot statement. AI will cause some structural turnover in certain occupations. But really what we're seeing is it causing the same man or woman that you employed yesterday, they're getting two or three hours of their day back to focus on higher value parts of their job.

59:07And therefore, the same person who you liked and were supportive of, all of a sudden, they're just more productive. And it's kind of taking the top off in terms of what we can expect out of our people and what we can expect out of our teams going forward. And it does feel like we are still in the very early innings of this. If you asked us more large scale, where do we think AI has a bigger impact? We think the role that robotics can play in so many production functions and industrial functions around the world, now that that robotics can be reinforced by computers that can think and run a million simulations in real time, like everything, what's the term?

59:59it will happen slower than people expect, but have a bigger impact than people expect. We very much see that dynamic playing out in the use of robotics.

1:00:08Shane Parrish:That's sort of like the pattern of bubbles, right? Is that there's this hype. In the short term, it always disappoints people. In the long term, it always exceeds the hype. But it's, can you survive long enough to get the benefit out of it? Because people make fortunes, but people go broke. It's funny, exactly that dynamic. And again, we like to think we are one of, if not the leading investor in AI infrastructure around the world, which huge sums of capital are being invested in on a global scale. And we often get the question, will there be overbuilt? Absolutely, unequivocally, yes. There's overbuild in almost every product and every asset class everywhere in the world in every economic cycle.

1:01:00But the really important thing is is that overbuild is not random. In our business, we only build against long-term contracts with high credit quality counterparties. We don't build on spec. And two, we're very thoughtful about where we built. We want to focus in tier one markets where there's multiple end users and multiple sources of demand such even at the end of that 20-year contract life, there will be multiple options to use that facility or to recontract that facility. To your point about these cycles almost have a recurring trajectory to them, we see that in ours and we think there's incredible things that we can do while participating in this growth to avoid the boom and bust that sometimes happens in other asset classes.

1:01:57Shane Parrish:I'm curious when the last time Brookfield was the underdog. The way we, I would say as an organization, approach the job or approach the opportunity is really, we try to be balanced every time, come in neutral. And we're very fortunate that we are at the forefront of some very, very large investment trends and investment themes and some very, very large asset classes to invest in such that while we may invest at very significant size, there's always the opportunity to do more. And therefore, we're always looking to, can we invest more at attractive risk-adjusted returns? We don't spend a lot of time thinking about what have we done in the past.

1:02:49It's a very forward-looking organization from that perspective.

1:02:53Shane Parrish:I remember, you know, Michael Jordan in The Last Dance, he said something that stuck out to me about the whole underdog thing. He's the best in the world at basketball at the time. And he would, like, make up stuff just to make himself the underdog. And I always thought that was interesting. Yeah, I don't know if it's that extreme, but, you know, it is a very enjoyable thing that we're fortunate to wake up in a business and investing in themes where the question is not, can you grow? It's how much can you grow and can you do the right growth? And therefore, it doesn't matter if we've done two, three or 10 deals already.

1:03:34if the 11th deal is very attractive, we want to do that one as well.

1:03:38Shane Parrish:I'm curious how you think about your ambition over the next 20 or 30 years. The first thing that comes to mind when I hear that is it is amazing what Bruce and the senior leadership team has built over the last 25 years. It's truly an incredible platform that's very differentiated. And I would say somewhat underappreciated in terms of its scale and its ability to produce very attractive returns, but on a scale and a consistency that very few, if any, can match. That is truly the incredible value proposition of Brookfield is not just the returns we generate, but how consistently we do it and at what scale of capital deployment.

1:04:31And the amazing thing about the platform we have is it's got such an incredible organic growth trajectory that is very visible and goes out 5, 10 years into the future where we have complete control over our success and that growth. What gets, I think, myself and others who are coming up in the business very excited is can we continuously keep pivoting that trajectory above that incredible status quo that's been passed down?

1:05:06Shane Parrish:If you look at it, I think the plan that you guys made public was$2 trillion by 2030. Yeah. Is that accurate? So if we were to go to 2050, like hypothetically, what is that ambition? Is it that we're in the right places? Is that we're managing a significant percentage of the world's capital? What is the? Maybe I'd come at it from two perspectives. From an investment perspective, what has helped build the business into what it is today is really two things that are going to look different in the future but are very repeatable in the nature of what we need to do. One is that point of we're very consistent in the asset classes and the types of deals we focus on, but we spend an incredible amount of time thinking about where is the market going?

1:06:03What are the critical goods and services and assets that are going to make up the backbone of the global economy five years from now, 10 years from now? We absolutely need to keep doing this and we need to continue to be as good about that in the future as we have in the past. And if we do that, the breadth of what we invest in is going to keep expanding. There's going to be some things that we think are going to be big opportunities today that will become big opportunities in 5 or 10 years. There's going to be some things 10, 15, 20 years from now that nobody is even thinking about today that as they approach, we want to identify them, capitalize on them, and then invest in them when they become large and attractive opportunities.

1:06:48So that would be point one. And the other thing that I think is really going to drive growth over, let's say, a 20 or 25-year period is alternatives are in a really exciting point today. They've grown tremendously over the last two decades, essentially on the back of increased and growing institutional allocations to the space. And that's going to continue. The institutional allocations to alternatives are going to double from where they are today over the next 10 years. So that would drive tremendous growth in our business if we only focused on institutions. But there is this new, very large, but long-term new growth avenue for our business, which we refer to as the individual investor.

1:07:36That's your retail and high net worth investor. That's your annuity and insurance policyholder. That's your 401k and retiree market here in the United States. That market is actually bigger. The individual market is actually bigger than the institutional market today. and it has almost zero penetrations from alternatives. And therefore, the ability to take that disciplined investing approach that we've delivered to institutional investors for the last 20 years, keep doing that over the next 20 or 25 years, but also find ways to deliver that same approach that gives you those strong returns at a consistency and a scale, deliver it to the individual market.

1:08:22If we do that, we should be able to replicate, if not exceed the growth profile of the last two decades.

1:08:30Shane Parrish:One thing that strikes me as super interesting around retail is a lot of retail investment has, you know, if we take an S &P 500 ETF, for example, a lot of growth in that is you're capturing companies coming in and you're riding that wave up. You might not be able to identify them in advance, but you get all that growth. And now for possibly the first time in history, we have these incredibly large companies that grow outside of retail access. And I'm talking about like SpaceX or OpenAI. And you've created or Stripe would be another example. You've created$100 billion, a trillion dollars of, we'll say, value.

1:09:10Shane Parrish:We'll use that term a little loosely. But you've created that. And now retail hasn't captured any of that when traditionally they would have been in the S &P 500 and rode that up. There's absolutely that dynamic. But there's another one as well, which is in today's public market where index inclusion is such a big driver of demand, we're increasingly seeing larger companies do really, really well in the public markets. But companies that, for whatever reason, can't get index inclusion struggle more in public markets. And as a result, your S &P 500 is increasingly a large or super large cap index where so many businesses around the world, in fact, the majority of businesses around the world are, I would say, medium to large size.

1:10:03But it's actually increasingly difficult to get exposure to those types of businesses in the public markets. And therefore, what we think alternatives can do as part of a appropriately mixed and diversified portfolio is just ensuring that those individual investors can get exposure to the breadth of the market that they want to and different asset classes or sizes of companies that maybe is tough to do if you're simply looking at public equities.

1:10:34Shane Parrish:Take me behind the scenes of OakTree. What happened? How did that acquisition come about? but how was the internal process around it? I want to hear the story. So within Brookfield, there are lots of individuals who are very good at generating ideas. And what's great is we have 1 ,300 investment professionals to filter through those ideas. And I will tell you, quite early in my career, I was very fortunate. We spoke earlier about having very good fortune. I was asked to look at another alternative asset manager. This is 13 years ago, and this manager had run into some stumbles and some hard times and was in need of some capital.

1:11:23And what's funny is, I'll tell you, this was probably my first or second year at Brookfield. I really struggled to understand the right way to underwrite and figure out this business. And then one day, the light bulb went on, I said, well, if I can understand how Brookfield works, I can probably understand how this business works. And it was very fortunate early in my career to have the opportunity to really understand how was Brookfield growing? Where was it making money? Where was it seeing the greatest growth trajectory and the greatest value creation? Because of that initial process, we've just began to track the other large alternative asset managers and how we were doing relative to them, how we were trading, how we were growing, etc.

1:12:12And one of those other managers at the time was Oak Tree. And I remember in beginning of 2018, we felt Oak Tree was this amazing business that wasn't fully appreciated in the public markets because it was very counter-cyclical. It performed really well when markets went down, but its growth and its profits maybe began to plateau off when markets got really strong given its leadership in opportunistic credit. Especially back then, opportunistic credit was a very large component of their business. It's broadened out a lot since then. And I remember at the beginning of 2018, going to Bruce and saying, this company looks very undervalued.

1:13:01And he gave me one very simple piece of feedback, which was, you're right, it looks undervalued. But what would be amazing is, could we do something strategic with them? They're incredible market leading in credit, which is an area that we didn't have a lot of exposure at the time. Is there something strategic we could do with that organization? And we took that away into our little lab and came up with this idea of essentially buying out the public and partnering with the founders and senior management of Oak Tree. And we presented that idea to them in the latter part of 2018 and did a transaction in the early part of 2019.

1:13:41Shane Parrish:It's so interesting because, you know, public markets have basically, with the exception of the COVID dip for a little bit there, they've gone up and up since then. So the counter cyclical, yeah, they haven't really had a down market in order to give that benefit that you sort of are betting on. How do you think about it? Well, this is where that organization is exceptional in really two ways. One, they've broadened their product offering the same way we've broadened at Brookfield. Oak Tree's done an incredible job broadening their business. They have incredible performing credit strategies, as well as they've found some niche areas of the market, certain asset classes, certain securities where they are unique and can consistently outperform.

1:14:34That's point one. But two, within their opportunistic credit strategies, they do an exceptional job of constantly being ready when those market opportunities do exist. So I'll give the example. we made the initial investment, the initial partnership in 2019, they were incredibly active during COVID. The business took an incredible step change. That wasn't a particularly long period of market downturn, but it was that brief, almost cyclical opportunity for them to drive a step change of growth in their business. And they did it very, very well.

1:15:17Shane Parrish:I want to come back to working hard again for a second. There's something I meant to ask as a follow-up there, which is you give 100 % 100 % of the time. Then you had kids. Talk to me about that and how you harmonize between work and life. There's two things that come to mind when you hear that question. One is there's two things that matter to me in life more than anything else, and they're miles ahead of third place. One is my family and two is Brookfield. And that's where I spend 150 % of my capacity. Now, let's be clear. I have great friends and we get out and have a good time. But really my priorities, 99 times out of 100, are my family and Brookfield.

1:16:07One thing that being very honest and transparent, parent, we have a young family. We're fortunate to have a very great and amazing young family. I remember when we were thinking of starting our family, and I don't know if I'm crazy to say this, but you question, how am I going to have time? And will I still have the ability to care as much about the job, which was very important to me after we start our family? And there's two conclusions, and I'm not sure if everyone goes through this learning process. One is there is no limit in the capacity about how much you can care about things. I care more about my family than I could have ever imagined.

1:16:57I don't think I care any different about Brookfield than I did before and after we started our family. And then secondly, you do find ways to become more efficient. Obviously, time with the family is incredibly important to me. Other stuff did fall off the plate. But what's funny is you don't miss it. You know, you find stuff that you were spending time on. But when it's gone, you don't miss it because it's been replaced by something you value so much more.

1:17:25Shane Parrish:It's a forcing function for prioritization. The best forcing function in the world because I felt like there was no space. I felt like there was no time. And now we have this amazing young family that I'll go to incredible lengths to make time for. And it doesn't feel like I had to give up anything on the work front. But some things fell away that I don't even really can tell you what they were. When you want your spring break to feel like. And your kids pool day to feel like. And your hotel bed to feel like. Ooh, and room service to feel like. Because at Hilton, hospitality feels like. Your cabana's ready.

1:18:13Shane Parrish:Would you like fresh towels? It matters where you stay. Book now at Hilton.com. Hilton, for this day. This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed-sponsored jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate C. According to Indeed data, sponsored jobs have four times more applicants than non-sponsored jobs. So go build your dream team today with Indeed. Get a$75 sponsored job credit at indeed.com slash podcast. Terms and conditions apply. How do you allocate your time?

1:18:54Shane Parrish:And I mean this specifically in the how do I bring outside information to my life? How do I, what do you read? What is the stuff that you consume? And then how do you allocate your time at work? Are there certain priorities that get more or less? It's interesting. I read a lot at work. I'm a big believer if someone in the organization emails or sends a deck to be discussed, you read it before you start that conversation. It leads to a more informed conversation. You can think more thoughtfully reading it to yourself than you can trying to read and listen at the same time. So I like to read almost everything that's been sent.

1:19:41And when at all possible, I like to read it ahead of a discussion. I also read a lot of news. Sometimes people say, what's the last book you've read? I'll tell you, I don't have a lot of time for reading pleasure books. But I do read a lot of content about our business or news about the themes that we invest in.

1:20:04Shane Parrish:What does that give you? Is it organized for you by somebody else? Is it like you're scanning the newspapers every day? And what do you get out of that? Yeah, it's an interesting question. One thing I do quite enjoy is getting almost a daily update of in different services, do it for different asset classes. These are the 15 relevant headlines in infrastructure. And you read the headlines and maybe you click on one of them to get more information. But just reading the 15 headlines gives you a little bit of a sense or a pulse of the direction of travel. But if there's one that's more relevant or more interesting, you do a little bit of a deeper dive on that.

1:20:46I certainly don't sit there and read publication XYZ cover to cover every morning. Different people have a different approach. I don't do that.

1:20:55Shane Parrish:I understand. What deal's been the most fun for you to work on? There's been so many.

1:21:04I think you're supposed to love all your children equally. I think it would be very tough to pick one. Some that stick out. One of the very first deals, I was fortunate to be part of the deal team. We made a very small cold storage business investment in Canada early in my time in private equity. It was a small business. It was a great business. It was underperforming when we bought it. It turned out to be a fantastic investment. This is not diminishing the incredible work that was put in. It was a somewhat simple business in what the value drivers were. So it was a nice one to really learn on.

1:21:43It was nice because it was a good one to learn on and it was successful. So in hindsight, I reflect very positively on it. Some of our first investments right after moving to Europe when we were trying to build out that European power business, those I remember being really fun because we were somewhat of a young, almost scrappy team trying to build something from scratch. But in hindsight, we did a few very good deals and that were quite foundational to what we were fortunate to build over the next six, eight, 10 years. And then, you know, some of the big deals, Westinghouse, Oak Tree, those have been fun because of their scarcity, their size, the broader impact they've had on the organization.

1:22:29So it'd be tough to pick one.

1:22:33Shane Parrish:When are you happiest at work? Great question. I would not say I am happiness happiest when everything is going perfectly. It's almost one of those things where you want to have enough on the go that you feel a little bit stretched. One of the things I really like about this job, and sorry if this is a tangent, is I used to play a lot of sports. And one of the things I love about this job is the competitiveness of it. And therefore, I like that exercise of trying to figure out the next thing or improving something that is imperfect or if target is X, try and do X plus one. And I'm not happiest when everything is perfect and under control.

1:23:23It feels good when we feel like we're within our culture of discipline and methodical, but we feel like we're trying to continuously grow and continuously improve. And we're really pushing to do that.

1:23:40Shane Parrish:A lot of people I interview say they're best in a crisis. And I'm curious as to why you think that would be true. Why are some people better in a crisis than others? And can you predict who in your organization is going to be good in a crisis or does a crisis have to happen? And what would be the indicators of that? I do think you could predict it. There is an incredible positive attribute in being able to digest information somewhat unemotionally and make the best decision at that point in time. earlier in the conversation I mentioned that the organization is is very balanced very measured and very forward-looking I always like when when things move and generally when you're making this reference it's when markets move negatively there's some of the most incredible conversations we have as a business and one thing that that always shocked me is we don't spend the first 30 minutes of a 60-minute conversation discussing the negative impact on what we have, we spend all 60 minutes saying, one, how can we mitigate, protect, ensure that the value of what we have is preserved?

1:25:00But then how can we look to capitalize or capture on the opportunities that this crisis or this downturn may have created?

1:25:11Shane Parrish:This has been an amazing conversation. I want to thank you for your time today. Well, thank you for having us.