20VC: What it Takes to be Top 1% in Private Equity | Why the Best Companies are Talent Systems | Three Traits Required to Succeed in Private Equity | Marriage, Fatherhood and Sports Team Owner, What it Takes to Do It All, with Justin Ishbia, Founder @ Sho

22:45So like, this is my homework and others. And this is like a secret sauce, but like, but copy that. I think I wish others would do some things the right way to reinvest. And so if we're going to invest in ophthalmology platform, when we bought our first ophthalmology business, which is Atlanta, we bought it when it was roughly 10 revenue, roughly no, and a half, two million dollars, and even the homework on that was as follows. calling between five and ten other ophthalmologists in Atlanta and asking a following question. If your mother was gonna have a cataract surgery and she could not come to you who in town would she go to?

23:18Who'd you recend her to? And we asked that question all the time, and almost every business we require. And you have to recognize there's sometimes people in town that like thought like each other. There's a balance of like recognizing the Yankees and the Red Sox Hey, each other. So they'll never say no, that's good. But you want to hear that that the group you're buying and partnering with is on the list from a jointly group. And if everyone's saying, no, Dr. Harry is really good, you should go there. You ask who the four or five guys you girls you refer your mom to, that to me is about competition and the industry respect.

23:47And if you're going to invest behind a business, especially in a roll -up, you want the industry to respect. And there's no higher form of respect than allowing your mother or your child to go to that person for the services they're being offered. And so he's about industry expertise and competition. to me it's about local reputation and be able to identify a low winner in that town. Every industry, every town has the good guys and bad guys. I can't tell you I know them from afar, but I think we'll appear at time with process. We can zero in on a town of knowing who is the co -compensy and partner with the right ones.

24:20Over the last years, it seems that that and healthcare practices, whether it's laserized which we're chatting about, Alia, but have been like the dawning of a lot of P specialists. How do you think about when something becomes obvious, the price increases and the capital supply increases, and when's the time to depart a previously attractive space because of an increase in capital supply? Yeah, so I think two things occur. In the industry, things go from my opinion novos, which mean you open or greenfield new location to acquisition, and there's opportunity for both. And so industry may start out like the urgent care industry.

24:57We bought certain that sector 12 years ago All we would do the novos because there's only 8 ,000 U .S. tears on the 12 ,000 It was about green space. It was going to locations where no one's been and after the instrumented a little bit Well, it's relatively smaller ones up there. You want to you want to acquire those like a half that it and she goes through and It goes from the novo to acquisition and to industry optimization and for us we love investing in spaces where scale creates value by synergies, lowering of cost and increase price. Three areas we love a lot, we call healthcare light, which is veterinary med spawn orthodox, because there's no third party reversions, no Medicare, there's no Medicaid, there's no Blue Cross but a shield, and you can raise price there if you're the best person in town, because this isn't like rocket science, if you have a wait list to get in the seat of the provider, and you have a high MPS score probably can raise the price.

25:51So for me, yes, when you get out, it's when you feel like that the acquisition prices are unreasonable. You do not believe raising prices in a outside of the course makes sense and no longer can increase the margin of the business through scale of reducing the cost of your vendors. The most valuable businesses reaching consistently increase your pre -corporate margins by lowering the cost. And so like in orthodontics, the bigger you you get the lower you can buy and visline from, lower the cost. And so the bigger you get, the more valuable assets. So if Harry wants to sell his practice to us, if you call it paying a dollar, you then for the hardware or paying the cents, day one, you're more valuable upon our family.

26:30And if we're also buying from a cast and are shying the clubs and your, you know, your all sorts of other utensils, whatever, maybe your tools, they're cost a dollar, cost 70 cents with us. I love investing in sectors where we can make acquisitions where day one, but we requires more valuable. We call that a short cap, we call it light switch eva duck. It means by contract, I have something that when you come part of our family, you make more money to scotch and worth us period. Not to be operationally changed it, which we'll try to do. Not to make something better, but just by the very fact, you're part of our family.

27:02The cost from the vendor goes down, which increases your margin, and that's something that a lot of time thinking about. And the initial is more opportunity there is more of that. And the last part of that is also ancillaries. So you can be investing in the sector where a TPA sector, we're holding, you know, millions of dollars, hundreds of millions of dollars up as a custodian, when you're a relatively small player, you get almost no fees from a Wells Fargo or large bank. The bigger you get, you can start having some fees and credits and think become more valuable to develop an ancillary revenue stream.

27:30You can develop ancillary revenue stream that the small guy doesn't have that you have because of scale. I'm not a seller in those industries. I'm a buyer. And so I'm always thinking of ways where scale can give me an opportunity to be successful. And when you acquire, we are a buyer and build firm, gives you an opportunity to adding more to the team, to increase the value of home credit platform. Just know what they say in venture communities, network effect, I think it's a different way of saying it, but there is, by being probably platform, become more valuable. I think that's where I focus on.

27:57And then when we sell, I don't think that makes sense to you longer, or sometimes your management team has kind of runs course. And that's one of the things I think is hardest to heart and sell, but it's the right call. So I say, Harry, we partner together and we're gonna do a veterinary roll up and you take a chance on us in your first time CEO. About 75 or 80 % of our CEOs are first time CEOs. And I say, Harry, I'm gonna back you and we're gonna start over to leave it done. We get the 15 or 20 of EBITDA in four or five years to home run, then we've was exceeded. Let's say we're at 19 of EBITDA and I still see you run away ahead of us.

28:31But I see Harry, you kind of tapped out. I think it's the wrong call for an organization and for a firm and for investments in Harry. I'm letting you go and bring me in Peter tomorrow to be the new CEO. And that fact better or a seller because we've accomplished our goals. We said what we were going to do even though I said there's run away ahead of the opportunity. It's the wrong thing to do to the person and the organization to let here you go. You have accomplished our goals. And there's just a natural jaker. It's time for a new round of investment. It's time for a top -grating of the team.

28:59But I'm not going to let go of the guys who got me there if they've done the job they're supposed to do. You said they're about kind of, and you gave the Invisalign Buying Solution where you know, you buy out scale and then it obviously costs you the units comes down and then you have, have increased better pricing because of that. Can you talk to me about a time when you made an investment or an acquisition? And you had a belief that turned out to be wrong on scale in some way. What was that belief? And why was it not what you thought it was? I think we've made investment in another sector where we believe that scale mattered.

29:29There's another part of the dental industry, actually. We believe scale mattered, but the state -by -state regulation was so overbearing that the complexity of the new state was so challenging that it outweighed the value of scale. It was almost like you were running two separate businesses across state lines. The cost of goods sold and the vendor costs, that part was right, but the payment structure and the rules in that state were so different. So this is the wrong example, but in nurse practitioner works in Illinois, but does not work in Indiana, but in a mint Wisconsin, the nurse practitioner works, but it is only able to do A, B and C.

30:05So these are three states, with the exact same industry, you paid different rules, different training requirements, slightly ranked three businesses. So the efficiencies are sucked up with administrative burden to run three businesses the right way. And so I think that's where I would save my mistakes. So now we're we're so much more focused now on the early days on making sure that if scale and efficiencies is a big part of it, it's ensuring that as you grow to multiple geographies and states that the rules don't change the people way. To attain scale and the economies of scale, the benefits of scale, do you have to be high volume?

30:40I think though the multiple arbitrage and arbitrage for us is that you're oftentimes partnering. The bigger value is partnering with amazing people who are really good at one thing, pitching your eye from a cataract or wherever they may be. But they focus less on the business side house and they let a lot of the low -wing fruit go because they're doing quite well as it is. And so we focus on this kind of light switchy bed, where contractually we're better, where there's relatively low hanging fruit, but we've no we have executed before and we can bring new things to the table. So for example, if an ophthalmologist has a line out the door, what are things they can do to help the ophthalmologist?

31:16Well, we can hopefully bring nurse practitioners or PAs and to hopefully do the things that are more administrative or not what doctors should be doing. So we use the terminology of shortcap all of time, top your license. We believe people love working at the top of the license doing things only they can do. Cataract search is the only one who can cut your eye. At the follow -up visit for a standard procedure, the nurse practitioner trained the right way with the appropriate process, asked all the right questions and flagged as a problem, but each of the people that come back has no problem. So now I've taken away the follow -up visits from the doctor, unless the nurse practitioner says there's a problem, and he can go do more of the things that he or she loves to do.

31:55People love doing things that are the most complex their ability. And so we want to put people in those positions. We believe people excel at things they love to do and they love doing things that are complex and only they can do. I think that's where a company thrives or people are doing things that are always unique to them and always profession challenging and rewarding. How welcoming do you find these operators of your advice, wisdom, and passing? Often people are quite ingrained in the way that they do something. Are they welcoming always of, hey, we're going to improve how you run your business.

32:25We're going increased productivity with X, Y, and Z? How did they respond? So we won't partner with them if they are open to the things we want to do. One of the benefits of us starting with a board of industry experts, we're able to start in the front to know what good looks like in that industry. We're able to say, you know, this is what the industry metrics are. It's in the origin care industry. It's three visits per hour. I always tell people, how we think of short -capables, if you can't measure, you can't manage it. People say, prior to that, we can be, you know, tough and like, like, you know, fire people or that sort of stuff.

32:56No, that's not how we think about it. I'd be a private equity in the following way. We're a huge flashlight. We walk into a room that maybe dark, I'm shining the light everywhere. In the corners and the crevices, and what I found is those who are really good at their job, are like, shine it here. Like, look at me. No one's recognizing me what I've been doing for the last year. I'm performing at a really high level. They're super excited. And those who are maybe less than good at their job, curl up and kind of hide from that light. and we try and shine light everywhere. And so when we eventually exit our investment, the light's on the room and everyone can see everything, transparency and data, and pairing to your peers and having industry norms.

33:33I never want anyone to do anything that is not safe. We always say good medicine is a good business. I'm a big believer of shine the light, you can't measure, you can't manage it. It's more of just tracking it. Just by the very tracking of number of something per week or per month or per whatever it may be, people start comparing themselves to their peers. And my experience is the best one to propend it up. They go, I don't want to wait. Harry, no manufacturer, no eight, we just last week, and RRI, the manufacturer is six. Why don't I do one, fashion to us? And competitive people usually want to be guy next to them.

34:04And those are the people that issues thrive in our system. Those things we've learned in X industry and we go, wow, they're very, very, very amazing. We should port that over here. We call that lift and shift, where something has done really successfully somewhere. And we think you can apply somewhere else. And this one of the most valuable parts our platform is recognizing analogues and other industries and porting at somewhere else that can become helping other industries get their faster as in part of the platform. You mentioned that you like first time CEOs. We differ in this respect. My thinking is bluntly, there are so many mistakes that you make the first time that with the benefit of hindsight, you would never make again.

34:41It could be hiring, it could be pricing, it could be new market entry, whatever that is. So I always favor second time founders. Why do you like first time CEOs? Are you not concerned that they make many mistakes that can be avoided? Why do you think like this? It's probably so when I started short capital, I was in your account. So our first three or four platforms, I went out and found CEOs that were more experiences at Chris York 34 was very established. I felt like we had the experience established person. My biggest, I'd say, paradigm shift and investing is, give me that young hungry energy that wants to run through walls has yet to make it yet.

35:18They can make mistakes, but members, within a construct and a system, they're not alone. Sometimes the metric community, you're more a minority investor, touch base them four times a year, it's a little more hands -off. I try to build a system where we've aboard seven individuals on the table who are helping that CEO. Bringing a CFO, we have a lead director of a platform bringing in a whole team around them that, Yom and Hungry first time CEO, they have to make it work. It is their professional career on the line, and they also know that they succeed in our system. They become incredibly valuable round two.

35:51And so if you went from a four -week -odd -hour with us to 28 and accidentally made eight times your money, now you have a big voice calling. Black Sun wants the back youth to go to something all over again. So we're hoping, helping mint future really valuable CEOs for other ecosystems. systems that want to come to us for that part of it. And also our first time CEOs, they aren't 28 year old individuals very first time on. Sometimes a lot of times they are running a large division of a large company that's doing $4 million a revenue, but they've never had the CEO role. They've been present of the vision A, and now they're going to come down market to a $75 million or $50 million a revenue business and be CEO, which not yet to change.

36:30My view of CEO has three jobs. Set the strategy of vision for the firm, recruit, retain the best talent, hold it down and count. So bucket two, bucket three, the division of president is doing. Harry's the division president of a billion dollar company is running a $200 million P .N .O. You are probably recruiting and retaining the right way. You are probably holding your talent accountable in your division, if you're successful in that division. You probably have to do with set the vision. And by the way, I'm a board who will help you set that vision. We will line up the vision. It's going to look like what success looks like.

37:01What are the biggest mistakes that those first time CEOs face most commonly? What do they most come to you, the board, where do they go? I'm struggling. What is that like? They try to do to wash themselves. They think they have to be the CEO and they think they have to kind of do everything. I think they're hesitant to get to get too much. The best ones right away know my first job is to go higher, the best star of people around me and they're very aware of their own strengths and the weaknesses. I usually ask the CEOs, and interview them, can I comment on your questions? is, Gapik, one, are you a sales focus CEO or an ops focus CEO?

37:34Which one? The best CEOs? They can be the one, but they got to know what from they are, and they got to then say, I'm going to over index resources on what I'm not. Our best CEOs are able to say, I'm one of those two, or I lean more this direction, and I have some of my network I used to work with. I have high confidence in who is my, the young to my young, I'm going to go get her or him to join my team. Our best CEOs, they're consistently top -grade talent. I have a whole processor about how we get better talent in the organization and the best ones are always itching to top grade and add more of a team as we grow.

38:06We have a whole process with short count. We call our nine box analysis. If you haven't had a nine box before or no. No. So we use nine box analysis to do twice a year, but the y -axis is we call potential and the x -axis is performance and it's low medium high. So the top rate box, the ninth box and the upper rate corner is high performance high potential. We sit down with every CEO and we evaluate all of their reports. We call the CEO the word letter N like a Nancy. N is your CEO, the board is N plus one. The CEO's reports are the N minus one. So like a CFO is a N minus one. N minus two is a controller.

38:44It was like reports to the CFO is parts of the CEO. And so we sit down and we map out the whole entire C suite. The N and the N minus ones with the CEO. Usually the partner at the firm will do it on a zone and then we share it with home for a firm and then the CEO will do it on his or her own. They say, okay, where's my marketing person, where's my finance person, where's my sales person, where's my compliance person on this grid. We look at where we are in our investment. If we're 100 minute revenue right now in the goals 300 million revenue in four years, but my CFO is at his potential. I should perform me high, but he's as potential.

39:17When I triple size the business, what should we do about it? What are the questions I think their best CEOs are asked to go, hmm, well, he's at his potential or at her potential. I need to probably top right here. And you have to always try to think about the kind of culture and the ecosystem what you're doing with. But I think my best CEOs are always trying to get value. And so I'm a big sports fan. And like in sports, quarterback, it was a valuable position in football. The left tackle is probably the next most valuable position in football, America football. And the punter is probably less valuable.

39:44But my best CEOs are always kind of, I would say, jiriting to find the most valuable punter for the dollar. And they're always hustling to figure out how top -grade talent just a little bit everywhere. And in an appropriate way, I think those who ever get the most talent around them, and that nine box gets to the most upper -right portion, that's when we see things take off our businesses. Justin, a US sales or you're an ops focus CEO sales. I like to be able to hopefully share what we're trying to do and get people to buy into it. I think my job is to sell the vision and sell the best people to come work with us.

40:16I have a CEO over a shortcap, also a long time my best friend is a star and he's amazing and absolutely. I think my job is to make sure we do all of it well, but by the pick I'm sales. I need to over index and apart that you are not out there. You said that one of the core roles of the CEO also is building the best team around you. I love something you said before which is it takes a smart person 18 months to learn 90 % of a field. It takes them a further 5 years to learn the final 10%. Why does some people not learn the 90 % in the first 18 months? Yeah, so I think that's a question a couple of ways.

40:49First of all, we find the most important attribute is curiosity. People who are just naturally curious, Harry, I'm guessing, you know, you use a little bit, you read or leak and find, you listen to podcasts. You talk to somebody and they ask a question, pull a string. You're just naturally curious. I find that to be a really important attribute. I'm doing all sheet references. Curiosity the last eight meters high in my list to figure that out. Those who are curious and have a certain amount of firepower intellectually, they always get there. But people succeed in our organizations if three things are true.

41:19Number one, they have the mental firepower of the job. If they don't, shame on me for hiring you. Number two, they have the work ethic to the job. If they don't have the work ethic, shame on them for not having a hustle and bucket three, we train them properly. If you don't train them properly, shame on me. But if you have the mental firepower, You have the work ethic and we trade you properly. I am confident you will win in our system And I personally believe that the best organizations Created an amazing system. You can put it relatively average person into the system extraordinary results Example like to use is if you're a American football fan the new and patriots over the last 20 years Probably one of the most successful football organizations They had a system that was so successful that they would basically bring in relatively average players, and they'd be outperformers in that industry, in that team, and they'll leave, and they'll go somewhere else that they don't perform again.

42:09You create enterprise value, you create success by building that system where you can plug and play relatively average people into the system, and then you have a better and an outcome. You also look at plug -in superstars, like Randy Moss, for example, went into that system and even excelled even further. But then a lot of average running backs, for example, went into that system, performed there, and they paved and went somewhere else, and then that perform. And so I mean, my job at ShoreCathol is building a system where you can bring in talented people. I want to get as best as I possibly can.

42:39If I want people to do better here in the system than they can anywhere else, then for our portfolio companies, I did board being yesterday. I was sharing with the manager, he was like, your job is not to go find five of you. I can't afford five of you founder or she knows you. That old talent, I can't find over and over again. I can find you to build something where you can bring in relatively competent talented people that will thrive in your environment that you've created and they will be more successful because of what you've created and that to me is what a great business is. Smalls, work ethic, training.

43:09Where have you most often dropped the ball? I would say the work ethic. I've never read somebody and they said, yeah, I don't work so hard. It's hard to get a proxy for that and unless you have an off sheet reference from multiple people, you know it personally, it's really hard to get a read on that because, no, if someone calls you for an off sheet reference, you don't know them at all. And you like the person, I think Harry's a good guy. And Harry's a pretty, I say, Harry's a bee for me, a bee or a bee plus player in my team. And you left the right way and like, call me four years later and say, tell me about Harry.

43:37I'm not gonna say that Harry stinks. I think Harry's pretty good. He did a good job. And I think I like Harry and how does work. I think, no compared to what? So that's a harder one to get. I try best to get to it. But I think, yes, we're at air the most. That's why we're air the most that no one thinks they don't work hard. That's just a reality of it. And so you have to be able to know that bias and kind of figure out a different mechanism so it gets under -ventures. This is gonna be a little bit divisive. I don't think young people want to work that hard anymore. I think they want to optimize for it.

44:07And sorry, maybe we're gonna disagree here. I think they want to optimize for balance. I agree with what you said earlier, which is there's a time for balance. But dude, I work 18 hours a day. I kill myself to succeed. And that's why I've been successful. Not because of sports, but I don't find many want to go that 10 % further. Do you agree in the people who work hardest don't talk about it and you don't see it for 10 years. It's like it was like a butterfly. That caterpillar goes and that, that, that clut, whatever it is. And you can't see what they're doing for a long, long time. Their head is down.

44:38They're hustling. They don't, they do. And you know what? Eventually a beautiful butterfly comes out and people can see it. I tell people in your 20s, you're an apprentice. Go work for somebody who is a star, getting busy as sponge, and learn as much as you can. I don't want someone to burn out. To me, it's about, it comes with it. The drive of within. And I think a lot of times people have a ship I'm not sure that there's something they want to crew. Or it'd just be competitive with something. My brother and I are best friends. I don't have to be there, but always. I want to be better than everything I possibly do.

45:07And I think he does the same thing. And having somebody, I really believe that the best and most talented organizations and people have the rival they really respect. I think the red socks are better because they hate the Yankees cocapes Pepsi And they are better because other one exists as far as hard work I think I try to create the worms in my organization where people have a peer of it the brain cells I think those people who are best are gonna fight it out and I want category killers I want someone who is so much better than everybody else as a funnily obvious and those do exist Get those you come on early you reward them show them with praise give him what they want and it's not fair Everybody else I'm a firm believer that the top 0 .1 % are worth much more than the next 10 % Give me 1 .001 % individual over 10 people top 10 % and finding that one leader mover shaker I think also using sports as a analogy.

46:01There's some players are just so much better than everybody else It doesn't matter. You can get me the the next four best players on the field that one will lift up the rest if they have average or reasonable people around them as well. So I'm going to be believer of finding the guy or the girl as a meal mover and make sure you give them what they want and give them up. And when you find them, the most important thing is that you retain them. And from my stalking, you said before about your father's two lessons on retention. And one of them is people don't leave their friends and pay market comp.

46:32I just want to break those down. When you think about paying market comp, ensuring they see upside incentivizing the right way. What are your biggest lessons on bluntly financial incentivization that aligns with their career trajectory and keeping the best talent? I love giving more upside for performance. But also my dad taught me this and I do this all the time. I think it's important to have surprises for positive consistently. I'll give you an example. So at ShoreCafel, wherever we exit a business that has a return has been greater than three times your money, the showhors and all of them, but we call it a shore win.

47:08I'm a believer that when we win a whole firm wins from the most sugar person organization, the most sugar person, everyone gets paid a bonus outside of their current conversation package. So I say we sell business tomorrow for like five times our money, a friend desk person gets a bonus of ex dollars, the analyst why all the way up the chain, everyone wins as a firm. I think that creates camaraderie and culture because everyone's pulling for each other to win. You celebrate those ones where we have an exit all the money. We have a minister Stanley Cup. We take out my time. We celebrate. We have a horn that goes off that celebrates the win.

47:43Celebrates the wins. You catch people doing things right. You reward them in the moment. I think that because it culture people want to excel. We have a thing every morning morning we were meeting. We have a hall of fame. And so if some of the organizations see someone else who says it's really awesome. A process, a report, a judgment I mean, call that was awesome. It nominated for Hall of Fame. The public recognized them. I think it's no one factor, Harry. It's a system and it's many. They all pile up. They're all pennies. They all add up. You can just say, do one. It's a culture of success and rewarding success.

48:16Financially, I think people that be rewarded, public sort of praise. People want to feel good around the people that care about. I think all those things together, plus market comp, plus friends, but it's a system, I believe that matters. I think little and often is my biggest lesson. And what do I mean by that? It's like break apart title and then salary or finances. And then increase one of them little and often. So they continuously have hits. And this is like once every six months. Continuously have hits of progression, financial or career. And it retains them and makes them feel worthy in a way that I find it difficult to do otherwise.

48:51The best people want recognition. Whether that is compensation, title or something. There's lots of ways to do it. I think people also want responsibility. I think that's an important part of it I think that I think the best people want the ball early whether it's competency I bet you there are a lot of people out there that would trade off $20 ,000 in Christian compenso. The right to be the lead on the deal and be the ultimate decision maker on Certified the transaction because they would feel that experience incredibly valuable by the way I want that I want the guys and gals early in their career to have that ball That's why I started Short Capitalist 31.

49:26I craved the ball on my hands, makes a judgment call, and I think the best want that. That's why I have much systems and processes in place. To hopefully have guard rails, to well then, to make the judgment calls, is their judgment call on negotiating certain parts of transaction within a framework, and I think that is really rewarding on top of compensation, on top of a lot of things. And professional upside, they feel like they don't have a chance to be a leader, and a chance to make it. All of them are making it. Justin, the best often do you have egos. How do you think about willingness to accept them and if so ego management in teams?

49:58Yeah, so like I read about about Phil Jackson. He wrote a part of it something to the follow effect as soon as managing the Lakers He had Shaqil Neel on his team and Kobe Bryant on this team. We're probably two of the probably top 10 players all time roughly Meet up 24. Remember they were they're two great players and he said there's a point the game where both them said They're both on the ball. They both wanted the ego stroke They both wanted to be told they were the best and he said he would ask for a timeout basically step away from time out grab Kobe by The Jersey Kobe go over here. You're the best goddamn player on this planet.

50:29Go out there and you make sure you get this fucking next Really a second later turn around and she'll kill and you'll grab him by the jersey and say she killed get over here real quick You're the best goddamn big man I've ever seen in my life. Go be she's a ball score So both accurate and true But he has a little bit of nuance in both you did that you've to understand and what that person needs and what motivates them. Some people get motivated by silent pressure. Simple things like just take an article and post it in their office that says, no, the best deal done last year in your industry was done by another firm.

51:01Just take it on the wall, put it a little pin in it, and paper on someone's computer and walk in, they're like, that's bullshit. My deal is better than that. Other people need to be consistently talk to and praise. I think a manager's job is to meet the great executives where they are and where they want to be met and give them what they need to motivate them. And you always have to be honest, be truthful, but I think there are ways to manage, to be able to say similar things to the best people and my job is the best of each of them. That's by creating a system, giving them resources, also in the confidence that you are really good at what you do, go get it done, improve.

51:36You should have more responsibility and more upside. I think those who do that, my organizations get put a quicker and... Justin, if you have a thought that he failed some manager, I'm young and I make mistakes. I often feel like I fail a bunch of times. One that sticks out the most to me is, when we raised our first fund, it was a small fund, a hundred million dollar fund. I was so excited we had a, my view is the name brand LPs and I was really excited about and the very last week they left me at the altar. We were still not the focus of fun but I was frustrated that the people I thought were coming in didn't come in.

52:08So I'll get close that chapter. that was the framework for our next fund. We raised no like $250 million wherever it was. I told myself I'm not going to be in that situation again where someone wanted involved would leave me at the altar and we could be sure of what we needed. So I went out and made sure we had a bunch of interest and I had again way more than we needed. The mistake was I didn't communicate well to those LPs and all of them did their work and all of them came in. I didn't have room for all of them and the outcome was some frustrated LPs who had minimums they had to invest, I could do it to all of them.

52:39It's really a big warning lesson from me on expectation sitting. And I think I failed some of those LPs, this is about 10 years ago now, by letting go do their work, right? They're investing in memo, go do their thing, and then not have them come into the fund of the size they wanted. They asked about expectation sitting, and since then, of course, I've changed my approach and I'd be very clear and frontend. If you go do this work, you will have this opportunity. If you get there, if you don't, you won't tell, I won't double that up. I'll look at people, exactly where they're going to be and why.

53:06So, it was a big learning lesson from me on Expendation City and then it applies across the whole Tourism Association. Final one on the people on that, I just want to move to family quickly, which is, you know, you said people don't leave their friends. Inventually, we have been a dog Leonid, it's sort of a coer who famously says, so coer is a team that is not a family, really imbuing that performance above everything else. It kind of flew in the face of that when I heard that, you know, people don't need their friends. How do you think about people don't need their friends? I want a creep in environment where people want to be We're all fortunate enough in our life right now to pick where you work and have choices.

53:39And the best people have those options. And so I believe by working with Wormower, you have deeper relationships and friendships with people, I think it creates a better long -term success strategy. By the way, I'm not trading off one penny on one inch on quality or execution. So if they don't perform, then they don't have the opportunity. I have a really, really high bar who gets to a certain level of the organizations, vice presidents and principals and partners. If you're there, I think about this way. I'm giving you roles of vice president. I'm giving you a role for your career, unless you mess something up.

54:09That's how I really think about it. And I think, I mean, absent behavior which is a whole different conversation. The creating environment for friends and a place one behind each other. That's really, I think, an emphasis on the, I would say, the younger half of our organization where I think I wanna create the option where they wanna be on each other. They work on the bull plane late at night. They become friends with each other. And then when they go off of their own to go to So, business school or they go to, we're gonna accompany, they have context relationships. I think there's a more enjoyable workforce, and I think it creates more stickiness to those we want to be here.

54:40I love it when, no, where guys get married, and there's like 17 people from Shore Capital, the wedding, I think a lot of pride in that. When I got married, you know, I'm wearing every person's Shore Capital, so now, and by the way, I know Doug really well, and Doug is not the best investor I've ever met, or on the top handful for sure. And I think that his approach is very spot on. You have to keep your standards. I don't have standards at all for friends, but creating an environment for the organization where people are friends with each other. Little things, a little things that matter. In an example, I stole this from somebody else, I'll share it here and I think I wish others to let one thing do a short couple.

55:13I think it's really impactful that I think creates friendships and creates a lot of loyalty to the organization. It's super simple, but I think it's super valuable. We have a database that shows every employee at short -capital, their spouse's birthday, and the children's birthdays. Every spouse's birthday. There's flowers that come from a short cap of the spouse. For every child's birthday, there's a little cookie bouquet that goes to that child's for the birthday. It makes me nothing more happy to get a random text on a Tuesday morning with the child of my partner saying, thanks for the cookies yesterday.

55:41That's a great birthday. The loads of little things, I think, that add up all of the time. And it's a hard to implement that. That is a relatively easy thing to implement, but has, I think, an outsize impact and creates bonds across the organization. I think that's what I think is really focused on. God, you'll get. I thought I was good at it. I thought I was good at the little things. I can't be that friend of mine being done. If you gave me that, I'm gonna be rich and go, I can't be. Do you know what I do, which is the most impactful also, is like when someone has a child, it is one of the most impactful moments in their life, and so special.

56:11I will send a little baby grow with 20 VC logo, a short capital logo, and I'll say my daddy does pee, and then I'll put on the back, but my mum is the boss. You will have the love of that person and family for five years. time you can never forget that little thing. It cost me $22 per one. And it's bad because this effort, you think about it, people care about those things are supposed to a random blanket you buy off of x .com or whatever it's going to be like, you know, those things matter. And also, really important part of our culture is also, I think, people know we, people don't care, we should know what you care.

56:46And I care about my leaders spouss a little much. We invest a lot of effort into making sure they feel part of the family, they're involved. Because look, everyone has a bad day. No matter who you are, what you do, you have a bad day. And you come home from work, he or she comes home and they're frustrated and they complain their spouse. That just happens everywhere. Or my goals of relationship building over a long time is for that spouse to say that the person works at Shore Capital. Yeah. But they're really good guys. That right there diffuses. Many things people might may go down to a rabbit hole which one to go there.

57:16And so if they believe are really good people and they believe in you right by the organization, right by the person is always my mindset make it right. We had a mistake last year and benefited from something and so on. Had a problem. My answer to our team was make it right. I don't know what it cost. Make it right. If you know that over and over again, it adds up. It matters. It was funny also. There's nothing more powerful in pillow talk. When you get into bed with your partner and you go, I'm fed up of act sure, whatever it is. And they go, oh, but remember they did send acts, those cookies.

57:46And they really do care about us. And they've been great, the power of pillow talk can never be underestimated. 100 % in, by the way, it doesn't mean that someone gets off easier. They don't fall like, I'm tough. We have goals that we agree upon. And if you don't hit your goals, like, I'm relatively unforgiving. Like there's like processor and that sort of stuff. But the human side is always there. Again, it's not one thing. It's like we have days of service. We have the families and the kids. And we give back to the community. It can't be one thing. To me, it's a culture and ecosystem of many, many things together that add up to a place where we're I want to work wherever I want to spend my we spend more of our waking time at work than anywhere else And so how do I create a place where people like I have professional opportunity I like to play work with big of paid fairly for this and I think I feature upside and I have intellectual stimulation Give me all those things and I think you have a higher attention I want to discuss two more things and then and then we'll do a quick five But the first is fatherhood which we've touched on but the second is money first being fatherhood What does being a great father mean to you and how has your style of parenting changed over the years?

58:48It's great fathers and my dad. So like I got super lucky, having known the best fathers, and there's my best friend, mentor. I quote him all the time. I've learned more from him than anyone in the world. So, you know, he always had time and balance for me. And so like I'm early in fatherhood. My oldest is turning five in two weeks. My middle is turning three next week. And then I have a one and a half year old. So like I have a hard judgment feel to say, was like in so on 14 or 18. I'm not there. But my view is I have to be there for them. And my most important job, people say, I just don't even financially successful why do you work and my answer is you know like my kids have to see me grind They got to see dad get up every day and I'm jacket and hustle I think being part of the dad is showing them what if you love what you do it's not work and giving them all of them Finds that they have passion about and so as a dad.

59:35I think that's super important I'll be there on a coaster games. I'll be involved their life. I want to know their friends I want all the things that that dad should do but like unlike the more specific tactical things again I'm a goal person. So like goals at the age my kids are I put them down a lot. And so I have a goal for my my two oldest boys to literally be the one who puts them in bed 180 nights per year. So literally have a tracker that is no it comes down to be no expanse per month of 15 nights a month or so And I'm trying to be the person who is a personality puts them in bed. No roughly 180 nights.

1:00:06Yeah, I track it my mom's and a tracker That does that to me. It's like those type of things that have goals of you know So one -on -one time with them for a special, like, get away. And like, I think, rain those things down and measuring myself. So I always accomplish those goals, no? But then I have another goal really important thing. So until the years ago, and I tried to do it in my family, I never walk in my house after work on the phone. I walk in the door. I'm present. I may send a garage for 10 minutes finishing a phone call, but I won't walk in the door with the phone on my head. So I walk in, hey guys, and my favorite part of my day at a walk -in, I could just still young enough, they're like, Dad's home and runs to the door.

1:00:42That's like my number one thing, my dad, no, it tells me, you know, I say, older, said, that was a favorite part when I'm weird kids. And you also told me something's like, Justin, your kids are never gonna say, Hey, Dad, this is the last day I'm gonna run the door. And you guys enjoy it while you will. Because they're gonna want to stop running the door. So enjoy it while you got it. I remember I used to sit at the end of the street and wait for my father to come home because he'd get light off the bus. And you'd see him. And I think that's a pretty special moment. You also have a challenge just in if we're honest.

1:01:11I spent a lot of time talking to a dog, we only used to eat your Davi'd velas, isn't you, Bank, about bringing children up in very affluent families, which brings challenges. How do you ensure that they are humble and hardworking despite a lot of financial fortune? I think it's a super high priority to think through the challenges and create, again, on payment system, how do I create an environment where they know they have to work for what they get. The heaviest thing is I want to be passionate about something. I don't care what they love to do, but I think if a child or a person loves something, they'll be relatively successful at it.

1:01:46They put the heart behind it. And so my children will buy a more financial means the most. I've already told them like, it isn't your money. It's your mom and I's money. Love be given away. I will make sure you're never going to hungry. And I'll make sure you have education. But you have to earn your own place. And I think people know also, I'm still early on this journey. I've talked a lot of friends. It asks us question all the time. Now, what I've heard a lot back in friends is not allowing them to work for you early on. They must go get a real job somewhere else and a promotion somewhere else to fully come back to the family business.

1:02:16My business probably does not make sense. My business is a little bit different, but they don't fully understand at this age. They know we have a house, so we have a car. But we also have a pretty humble. I still drive a 2012 Range Rover. My parents, you know, still live in the house. They bought it in 1980 and still the same. My bedroom from there is still exactly the same. So I think it's how you raise them. I ran an article probably about 20 years ago that said the highest indicator of SAT success for a child was number of meals, dinners per week were both mother and father at the table. That stuck with me.

1:02:48How did you raise them? It tells me I had to be at the dinner table for five nights a week with my kids. And we asked that question every night. Even age five and three and one, what was the best part of your day? And I haven't talked. And so I'm sure as we get all the other changes that will come, but I realize you've said I had the answer here. I've had no silver bullets. I read about this sort of stuff, but it's a high priority for me to make sure you get this right because I will not raise kids for little breaths. That's something to hide my list. Didn't this to know they have to work for the yet?

1:03:13I don't think they have a rewarding uptry out of them. I interviewed one of the most successful finances in the last 50 years the other day. And aside, he said, the most important thing that you can do, Harry, is watch the National Geographic channel and I'll teach you what you need to know about parenting. I said, what? And they said, look at the elephants. They lead the way the young ones learn through watching the others do. And very much to your point earlier, I grind and I hustle because it gives them an example to follow. That was that biggest lesson to me and I I thought it was interesting and nice.

1:03:44I may still that my dad is to tell me kids do as you do not as you say. And so it's a very similar mentality. And so but the elephant one makes last instance to me also, I think that's right. You know, Justin, final one, I didn't grow up with money and I still struggle with actually relationships with money. I always tell myself, I probably shouldn't be this open, but fuck it, I'll be happy when, we happy when I get X amount of money. And it's a very hard thing because you realize when you get somewhere that's still not happy. Can you just advise me at sheer front? How should I be thinking about this?

1:04:17What have your lessons been on money? Money fell success. And so I guess my mind's it is focus on success and the money part will follow. You know, my partner Brad Moore has my partner is at Shore Capital. We met through YPO, we bonded, we were at an event together where they could go out of the room and say the word that most, you know, one word described your ethos and he went first and I went second. Well, the same word and the word was a win. I think about money. It's more about how do I win it? Everything I do at life. How do I have success first and money follows? There's different parts of a money journey.

1:04:47there's like, you know, when I sold our first company, you know, exiles made account, I literally looked at the guy, wow, I never thought I'd have that one should count, you know, that moment of time. And then it was on, but my personal view is that all studies say money helps enable up to certain point, but another friend of mine said, money's an amplifier. If you're a jerk, you have money, you can more with jerk. If you're a good person, and you have money, you can more of a good person. I try to think of it that way, and I've had a bit of a success and how do I do more good with some money out that we've been able to earn.

1:05:17And so I view money as an enableer and an opportunity to do more good and more opportunities. But if I folks on success part, I know what will all happen next. And so that to me is the focus of my energy and time. If you've had even more money, which is hard, is about me, you do differently. Someone asked me this the other day and I was like, by more trainers. Well, I didn't, I don't like traveling. I didn't, I didn't. And then my, my, my mentor was like, Harry, this is my point. Money is not your issue. You have other issues. Yeah, I don't think that would do much differently. To me, I would invest more.

1:05:47That's what I would do. That's I would invest more in my own deals. That's what I honestly do. And then the thing I struggle with on money part is like when do you give it away? And like what is there's trade off those things of like $500 right now. I'm confident I can turn $100 and $500 and $5 years is a better to give $500 away in five years. Or is it better to give $100 away right now? There's no answer to that question, right? because you have a hundred hours today to have a good cause and you end up supporting a child that does well and he's able to have some down -to -earth effects. Is that better?

1:06:14Or is it better to keep it for five years? Don't help that child. You can give 500 a way in five years. That's a struggle I personally. It's just both, I think, but there's really no way I should ask something I struggle with. One of my closest mentors and biggest ambassadors in my funds, said to me the other day, it's far harder to give money away efficiently than it is to make it. Like, I am still struggling on giving it away efficiently. I think that's the question that... I was in high school. I think I was going to have some money. Dad, I know you do okay financially. We don't go to like Galas or like charitable events in town and like, you know, you'd hear a sponsor for something.

1:06:47And he said, he looks at like the ratio of what the mission costs are and stuff. He said, I don't see the impact by giving you know, $5 ,000 to XY foundation. He said to me, still that I'm in and now we don't hear a short cap only said the building he works in. He didn't own it. We'll build me a work in. So there's janitors here. There's parking garage people that you meet and people here. You said what I do is every person that works here in the building that I see and touch every single day I pay for their children or grandchildren's summer camps and he goes It's had a huge impact and he goes I see it because that gender who may not be able to have their child or grandchildren close summer camp Now that they're going to do something that they never were doing before and have been able to Have an impact and I get a year back from my grandfather that my grandson that will no mingle with certain kids that were after you learned this, made a friend over here, and now he's going to come back to his house, he's learning how's like, wow.

1:07:38And so we do that here also, like you pay for those type of things. And the impact, yeah, start with your corner of the world. And I think, you know, the corner of our world is, and I have most contact with, is people in my office, and we're able to help, help those jadders, kids, or grandkids go to camp, they never gone to before. That's your word. Josh, you're good for these little tidbits. I feel like you could write a book on me, like lessons and like, no, you know what? Like, 70 people are like, oh, it's about great culture and then you unpack and it's like, what have you got for me? That you can actually instill today.

1:08:05And you actually have that. I love this. Listen, I'm conscious of time. I could do what you all day. Can I do a quick file with you? Let's go. Okay, what have you changed your mind on in the last 12 months most? I think the biggest thing is how to communicate with our portfolio managers. So I've always believed like, no, my role is one of the leaders of the chart cap, but I communicate to my partners and they communicate to the portfolio company, you know, as they communicate to like technologies change that. We use it simple at bomb bomb. I will now routinely record a formative video on something and I want me the answers both.

1:08:36Technology is day -liplicated. I'm going to communicate to my team, hey, go tell them that we're going to focus on audits this year. Here's a way we're auditing whatever maybe. And I'm going to record a formative video. I want the message to come directly for me because the telephone game gets in the way. So I can record the message, but hopefully efficiently, and get to where it's got to go. My partners and our colleagues can also was a minute both ways. So it's changed the most is there are a lot more direct communication at scale through videos, I think people want to see the face and hear the story.

1:09:03I want to hear my message and my words get crossed exactly and my partners love it their way also. So I think that's changed a lot for us from the last year. I like that a lot and I agree with you on the importance thing. It's so personal. Tell me, what's the biggest surprise of owning a sports team? The collaboration and the friendliness of the people, other owners. Now on the court, it's fierce competition, but another day like in the NBA, we are all a business partnership and gets to work pretty against other forms of entertainment. In reality, Harry has a hundred dollars to spend. He can go to the movie theater, he can go golfing, he can go race car driving, we can spend it on basketball.

1:09:38We as a group are collectively trying to get Harry's hundred dollars of entertainment to come to this and we are trying to do that together. Now, drafting a player or trading, I want that guy to do the worst for me to the best. But as far as the collaboration and friendliness that helped the business side and compete against other entertainment options, surprise me in that concept and I think it's really positive about that. What's the single hardest thing about owning a team? Injuries. In my day job, if I hire Harry to be my CEO, absent a major life instance, you come to work and playing on the field almost every day.

1:10:14If it's 20 visit days a month, Harry's playing 19 or 20 consistently. But that way in pro sports, rightfully, people get hurt and that's it. You can do everything right and then someone's ankle gets like, with injuries his contact and non -contact injuries. I can't plan for the contact injury, knee bumping and knee and that's really hard when you do the things right and you're in a really good position and someone has knee injury and all of a sudden the competition, which is so tight and so close. An injury to a one player changes the dynamic for team materially and so that's hard as a business person to like, I'm learning how to handle that.

1:10:49I don't know how they enter that at this point in time, but that's been a surprise at how impactful it is. No, I do, which is like we invest in solutions solve problems. And I think this is one of the biggest problems I interview a lot of sports owners and they all say this. And so I invest in the company called Oracle, which uses data for our intelligently and and blood markers to identify injuries ahead of time so you can never actually get injured properly. It's pretty cool, I'll send it to you afterwards. What's the best investment advice you've received? Never do a deal alone. I think it's really important to listen to your peers, have colleagues around you, never do a deal alone because you're not the smarts person in the room.

1:11:25Having people question you and judge you and professionally criticize the opportunity, I think that's really important. Never do a deal alone. How do you avoid group think? Because that's a challenge when you then introduce yourself. Yeah, so that's again, I'm a process person. And so whatever our investment committees, if you were in the meeting, there's a team we call the devil's advocate team, where you assign up to five people to be critical and kind of the jerk who is opposing the deal. Even if Harry loves the deal best in front of us, my my job to short -cap will I assign the devil's advocate team?

1:11:57I know Harry's really smart on this topic. I'll make sure Harry's on the devil's advocate team, and you're best friendly to leave the deal. We think this is a home run deal, But for the investment meeting for an hour and a half or two hours, your job is to be the devil's advocate It point all the things that could go wrong. I think that is a structural thing that goes in the fact that I think has really positive impacts And then the guy who's in the deal is a pissed at you that you're saying is deal stinks because he knows your job is to be critically Maybe they love to do after you can vote for it But while we're discussing it your job is point all the holes in it.

1:12:28What's the most common piece of investment advice you hear that you think's BS. I'm sure it's investment advice, but it's fund advice. I can't tell you how often I hear someone who's like 34 years old at a really large fund that says, I'm just going to spin out and raise a $2 million fund and start from there. Like I don't think people understand how hard it is to raise a $200 million fund. Unless people have things I never have seen, it is really really hard to do a first time of fun, especially in this environment, I think. It's so different as well being a fund manager versus being an investor.

1:12:59By IVU offices, founders and CEOs, very different to working in a big firm and being an investor. Very different. I'm CEO of Short Capital. That's my job. I also happen to invest. I love investing. I'm involved with that. But my job is to put the whole organization in position to succeed on investing and to do it from a fun perspective and have to do it scale traditional quality. You have to do both. And so I think it's only the same as spin out and do a two minute of thinkable work at large funds that raise 12 billion dollars and they have one friend at the and downwind and they talked to you and said, oh yeah, we'd back you guys.

1:13:31You know what? There's someone else that has, unless you have a personal issue with an individual family, my view is a whole institutional process. I have never seen large institutions invest eight figures without a material process, not a drug -hunting point to. I agree totally, by the way. Tell me, does Trump win and what's the impact? I don't know, it's not a way. I wish I do a good way. Let me grade them now. I'll say this. So, you know, I think people sometimes forget is, the United States is the best country in the world. and we're living the best time that's ever had. People are literally dying to move into this country.

1:14:03There's 360 years of us, three of the million, three of the million, especially the land of us, we're so fortunate to live here. Now the opportunity to live in the work with the most commercial market in the world, the most structured rules is the best place to build a business in the whole entire world. And people literally wanna come here from everywhere. So I don't know who's in the wind of the election, but I think sometimes we forget as Americans, how lucky we are. There's eight billion people on Earth, less than 5 % or born here and live here. We forget that we're the president is you know once that person is voted in I've been my job is supported Even though I may not like the president whatever may be once the president there are president not that part is president And so I don't really know in this election But I think it should be grateful for where we live and the opportunities and freedoms that we have and the rule of law that we know it exists That Americans might believe is most innovative country in the world over time we prevail and I would say this It's a little bit of warm buff of clothing never bet against American ingenuity and I'm very much believing that so So I don't really care the president.

1:14:58He's like, I do care. I don't know who the president's going to be, but I believe in the American system, I think that we will win for a long time. Are you worried about China? When you look at consumer app stores now, you have Shine, you have Teemu, you have TikTok. The penetration they have into US consumers is more than now than ever. Yes, I am worried about technology is changing the ability for foreign nationals with dubious behavior or desires to potentially do things that they can never do before. I'm worried about it. I also believe that again in American ingenuity and I think we'll put things in place that will structure.

1:15:31I think there'll be blips and there'll be times where we have to go through rough patches. Right, do believe. There'll be processes and regulations and things put in place to minimize. That would be perfect. There's always, I think that the young talent that will always be head of the curve from where the government will be. So as a parent and as a leader, I think it's mindful of that, but I do believe that it'd be mindful in aware of the the bad actors author. Respectfully, I heard you there and you said about the optimism, you know, we've got the geopolitical situation, you have China, you have climate change, you have massive civic societal challenges and divisions.

1:16:03Why am I wrong to be negative? Why are you optimistic at me not when I see all of these problems? I think people naturally point to all things going wrong. I'm aware of those things and they have to do a state of mitigate it, but I've from the American perspective, like, okay, if you can pick where in the world to live at natural boundaries, it's like too ocean on either side of you and friendly neighbors to North and South. As far as like economies, you know, I think we're the third largest economy in the world, like India or China, I think about it. Those are the options we're choosing to come here.

1:16:33I think like you see what's happening all across the world. Those with come here learn and train and they want to build businesses here. And so I think there's a lot of headwinds and challenges, but I don't think the challenge we're facing today are materially different than the challenges my father faced or my grandfather or great grandfather. I think it was a lot harder for my grandfather to come from Turkey to the US and no nobody with no hundred hours of pocket that is for people today and my kids to grow up in the American society have education and tools that are fear types. Final one, where do you want to be in tech?

1:17:04I know this is a classic interview question which is hilarious but you know sure couple in 2034 and you, where is that then I'm right here wording short capital. I love what I do. I'm in the second hitting a short capital. This is just beginning, but we're trying to build. You know, I love what I do. It's not work, and so I'm unfortunate. I have amazing people, great team members, and we're all relatively young. And so we're really part of it. We have fortunate that we started around to early age. We're built a team, and an ecosystem I think is built the last. And so I'm leading short capital.

1:17:34My dad's 76 holds still works every day, puts a tie every day. I will work till I die. And I love what I do. And to me it's about the thing I'm excited about is I love seeing the success my younger guys it took a bit on me 15 years ago they're success I love seeing that so hopefully I'm staying here in 10 years and people had joined us last year I haven't successed it guys during 10 years ago today. Justin I love doing this Peter told me it would be one of our best I think he was right thank you so much for doing this. Well thank you for the opportunity of an amazing show amazing following and looking forward to staying in touch and I'd never be helpful to you or your team ever please let us know and thank you for the opportunity to shoot the short -capital story.

1:18:11Honestly for me, shows like that are why I love what I do so much. Justin was just incredible. I thought the transparency and openness was also really so great to see. I love the discussion on parenting there and if you want to see more, of course you can by checking out 20VC on YouTube, simply search 20VC and you'll find that. But before we leave you today, Hyve is the marketplace for private stock, whether you run a fund, lead an investing syndicate, or invest solo, Hive gives you unparalleled access to some of the most exciting companies in the world, all before they go public. Think Flex, Sport, Reddit and AirTable alongside many other companies I've featured on the show.

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1:20:57Remote, opportunity is wherever you are. As always I sir appreciate this Paul and stay tuned for an absolute banger of an episode this coming Wednesday.