From HOA Management to $4B in Revenue & $6.3B Deal for Amex GBT | Alexander Taubman, Long Lake
Long Lake’s announced $6.3 billion take-private of American Express Global Business Travel is a bet that century-old customer trust can become a scaled distribution channel for AI. The 111-year-old company serves close to half the Fortune 500, much of the Global 2000, and government and military customers; Taubman sees a chance to invest in growth and technology across a multi-trillion-dollar travel market growing faster than GDP.
Taubman argues that the binding constraint on AI returns has shifted from model intelligence to deployment inside the real economy. Legacy data, fragmented systems, embedded workflows, and change management make diffusion difficult, even as frontier capability advances rapidly. Because trillions of dollars of future model investment ultimately require real cash returns, Long Lake aims to be “distribution for the labs.”
Long Lake’s thesis is productivity-led growth, not the familiar private-equity playbook of replacing employees and cutting costs. If AI makes a worker 50% more productive, improves customer retention, and creates capacity for 50% more clients, Taubman’s response is to hire more of that worker: “If you have a salesperson with AI that’s now doing 3x quota,” one-third the headcount is plainly the wrong conclusion.
Nexus, Long Lake’s internal AI platform, turns ownership across five service verticals into a shared technical advantage. Roughly 70-80% of its routing, security, and orchestration infrastructure transfers across industries; the difficult final 20-30% requires engineers embedded with frontline employees. An HOA email workflow that can take 45 minutes to an hour or longer can be reduced to 5-10 minutes, and the capability can now address travel, where 55% of agent inquiries arrive by email.
Ownership supplies the alignment needed to change workflows, but Long Lake still refuses to mandate adoption. Taubman describes roughly 30,000 global team members as Nexus’s customers and design partners: “If we have to force someone to use our Nexus platform, then the platform is not good enough.” Adoption that once took about six months can now happen in days, strengthening employee retention as well as customer service.
The combined business is expected to exceed $4 billion of revenue next year while retaining the economics of established, profitable service companies. Long Lake targets businesses already producing 20-25%+ EBITDA margins, and Taubman says existing cash generation means it may never need to raise capital again. Amex GBT adds high-90s logo retention, 100%+ dollar retention, and roughly 15-year relationships with its leading customers.
Long Lake combines an enormous opportunity set with an unusually selective capital-allocation process. It reviews 4,000-5,000 deals annually across 15-20 force-ranked industries but enters only one or two new sectors a year; it has acquired close to 40 companies and has never sold one. Taubman believes public markets could eventually provide the lower-cost acquisition currency for the “maximally ambitious path,” while acknowledging that compounding toward a trillion-dollar company would require decades of unusually consistent execution.
1. Amex GBT is a $6.3 billion bet on trusted distribution
Taubman says Long Lake has announced the $6.3 billion acquisition of American Express Global Business Travel, a 111-year-old business founded in 1915 to help American Express Travelers Cheques customers leave Europe during World War I. The objective is to take it private, invest in growth and technology, and bring AI into the experience of millions of travelers.
The franchise serves close to half the Fortune 500, a large share of the Global 2000, and numerous US and foreign government and military customers. Its strongest relationships average roughly 15 years, with high-90s logo retention and 100%+ dollar retention: evidence that its “century of customer trust” is operational, not ornamental.
Travel is a multi-trillion-dollar global sector growing faster than GDP, but its supplier, customer, and distributor systems carry decades of fragmented data. Taubman sees that complexity as the opportunity: AI could make service more seamless, personalized, and proactive without weakening the human support required when travel goes wrong.
2. The intelligence frontier has outrun the real economy
Taubman’s starting contrast is deliberately extreme: roughly four years ago, impressive chat models still struggled with addition; he says that if someone had predicted then that, four years later, models would solve some of history’s hardest unsolved mathematics problems and may win a Fields Medal, many people would have thought it crazy. Even he, already “super AI-pilled,” did not expect frontier capability to advance this quickly.
Yet GDP has not doubled or tripled, and most businesses still operate conventionally. His explanation is the diffusion problem: legacy systems, legacy data, workflow redesign, and human change management make deployment “actually really hard,” especially in businesses built long before modern software.
The financing loop matters to the thesis. As model investment moves into the trillions of dollars, future cash flows must justify today’s infrastructure spending; Long Lake’s role is to convert intelligence into high-ROI operating improvements, then generate cash that can flow back toward further scaling. Senra’s realization: “You’re distribution for the labs.”
3. AI productivity should expand payrolls, not gut it
Senra explicitly rejects the caricature of technologists and private-equity buyers acquiring service companies, removing employees, and booking cost savings. Taubman calls Long Lake’s view “very positive sum”: remove data entry and process-heavy toil, free people for customers and growth, and let higher productivity expand the business.
The operating math is straightforward. If one employee can support 50% more clients with better service, retention rises and growth accelerates; that makes the employee more valuable, not redundant. Taubman’s sales analogy is sharper: when an AI-enabled salesperson reaches 3x quota, “you obviously want as many of those people as you can have.”
Long Lake began in homeowner-association management, where it has acquired more than 20 companies, and has since added HR services, specialty tax, infrastructure services such as architecture and engineering, and travel. Across close to 40 total acquisitions, Taubman says the older businesses are showing meaningful job growth.
4. A wide search funnel produces concentrated conviction
Long Lake maintains a changing list of roughly 15-20 attractive industries, continuously force-ranked as markets evolve. It sees 4,000-5,000 deals annually but enters only one or two new industries per year—a “big funnel, very tight filter” designed to preserve flexibility until an exceptional business appears.
Taubman borrows Buffett’s joke that being open to both public and private assets doubles the chance of getting a date. Travel was not in Long Lake’s founding plan; after about a year of studying several assets, Amex GBT’s combination of customer durability, mission-critical service, and AI potential made the answer feel obvious.
The mission-critical test appears during disruption. If thousands of employees are traveling in the Middle East when war begins, or a snowstorm strands a company’s team in Chicago at 2 a.m., someone must answer and solve the problem. Travel may be a small corporate cost, but “you don’t want to screw it up.”
5. Nexus turns cross-industry ownership into reusable infrastructure
Nexus is Long Lake’s horizontal AI platform. On one side it connects to multiple models—Long Lake is model-agnostic and may combine several models for one task—and on the other it connects to each company’s data, software, and workflows.
Roughly 70-80% of Nexus’s infrastructure, including model routing, security, and agentic orchestration, is reusable across verticals. The difficult final 20-30% is mapping real workflows and integrating messy operational systems; every new industry therefore both consumes the platform and adds capabilities to it.
Taubman estimates that roughly 70% of Long Lake’s engineering team is sitting with team members in the field across 15-20 states. The model echoes Kelly Johnson’s Skunk Works principle that “you want the engineer sitting in the factory,” paired with Danaher’s maxim: “Common sense rigorously applied.”
In HOA management, a request for a snow-removal vendor may require comparing communities, prices, reviews, and availability before drafting a response—a 45-minute-to-an-hour-or-longer job. Nexus can assemble a reportedly 99%-accurate draft overnight, reducing the manager’s work to 5-10 minutes and increasingly matching that manager’s own voice.
6. A solution built for HOA email transfers directly into travel
The HOA workflow became a cross-vertical asset because most businesses still run heavily through email. Taubman says 55% of inbound traveler requests to agents—new bookings, changes, and cancellations—also arrive by email, giving Amex GBT an immediately applicable capability rather than a greenfield experiment.
Long Lake has declined to turn Nexus into a conventional software product despite interest from investors. Taubman’s objection is alignment: a software vendor can ship a tool without controlling whether workflows change or outcomes improve, whereas an owner-operator is accountable for growth, customer experience, employee experience, compensation, and shareholder returns.
Senra frames this as a human problem rather than a software problem, but Taubman adds an important qualification: ownership does not justify coercion. “If we have to force someone to use our Nexus platform, then the platform is not good enough.” The product must earn adoption through usefulness.
7. Employees are Nexus’s customers and Long Lake’s retention moat
Taubman describes roughly 30,000 team members globally, whom he calls team members, customers, and design partners. Nexus is meant to feel “so magical” that it spreads virally; deployment that once took perhaps six months for a cohort can now occur within days.
Better tools also create an employment moat. Employees describe losing the mental friction associated with the roughly 30% of work spent on repetitive email and data entry; they can instead serve customers, pursue growth, enjoy their jobs more, and potentially make more money.
The resulting flywheel is positive-sum: better tools attract better people; better people produce better customer experiences; higher retention and faster growth generate more profit; and greater profit supports higher pay and further investment. Leaving for an unequipped competitor becomes increasingly unattractive.
8. Long Lake’s organization concentrates on three scarce capabilities
Taubman says the strategy requires three world-class functions simultaneously: acquiring great companies, building technology competitive with leading applied-AI companies or labs, and executing operational change management. Excellence in only one or two leaves the deployment problem unsolved.
Long Lake itself remains small—about 55 or 56 people at the time of recording, with an expectation of approaching 100 by year-end. Roughly 90% work in AI engineering, operations, and deployment, while only about 10% focus on acquisitions, M&A, and finance.
Hiring mirrors deal selection. About 75% of the team has come through referrals, and Long Lake hired roughly 3% of nearly 1,000 applicants in the referenced quarter. Taubman’s central operating lesson is “high bar in everything”: talent, acquisitions, and technology.
The founding network dates to Goldman, where Zach was a summer analyst and Taubman an analyst; Zach later introduced CTO Rasmus, an Oxford computer-science standout. Their early history also included combining roughly 20 locally owned go-kart tracks into a platform.
9. “Threshold resistance” connects Taubman’s family history to AI adoption
Taubman’s grandfather built a real-estate business after World War II and treated retail design almost mathematically. Stores once hid entrances behind display windows or dark passageways; Taubman says even half a step at the threshold could reduce the number of people entering by 20%.
That idea became Taubman’s analogy for Nexus: remove every bit of “threshold resistance” until using AI is effortless. The name Long Lake honors the Michigan road where his family’s business operated for roughly 40-50 of its 75 years, linking the new company to an older culture of continuous improvement.
Michigan also taught him to admire low-profile entrepreneurs in “unsexy” sectors. One Long Lake partner, a Minnesota architecture firm, has built about half the state’s K-12 schools over 70 years. His mission is to bring elite engineers to precisely these enduring businesses while letting their brands and operators remain the protagonists.
10. An investing apprenticeship produced a permanent-capital model
At Goldman’s Special Situations Group, Taubman gained exposure to public and private investments across the capital structure. A mentor, Patrick McCan, let him help manage a few hundred million dollars of invested capital at roughly 22 or 23, giving him unusually early responsibility for real risk.
After business school—and time at Leucadia and with Josh at Thrive—he spent nearly a decade at Oaktree, working with Howard Marks and Bruce Karsh to develop equity, credit, and other investment products. He loved capital allocation but felt he was not “fully expressing” an entrepreneurial impulse.
In parallel, his family investment vehicle completed close to 50 partnerships with founder-owned businesses. Senra cites returns around a 70% IRR; Taubman declines to validate the number beyond saying, twice, “We had a very good run,” preserving the distinction between the host’s claim and the guest’s confirmation.
The lesson was that smaller companies can be extraordinary businesses. Permanent, flexible capital could fund growth and acquisitions without excessive leverage or quarterly earnings pressure, helping founders consolidate competitors they understood better but had never before possessed the resources to acquire.
11. Flexible capital allocation supports a trillion-dollar ambition
Including Amex GBT, Long Lake expects more than $4 billion of revenue next year, with a stable revenue base and roughly 100% dollar-retention-type economics. Its acquisition strategy targets established companies already producing 20-25%+ EBITDA margins, so Taubman believes existing cash generation could fund compounding for decades without another capital raise.
External capital still increases speed and ambition. An early partner who served as Long Lake’s general counsel, led its first round of outside capital, and provided its first $100 million was among those who believed early. Taubman values partners who challenge the team and ask “why not do them all?” He and Senra agree that enduring partnership matters more than optimizing each financing round’s valuation.
Going public is not required, but Taubman calls it the “maximally ambitious path”: deeper capital pools and a lower-cost public currency could finance progressively larger acquisitions. He invokes Henry Singleton, who compounded earnings per share by over 40% a year for 20-25 years while preferring to “steer the boat a little bit every day” rather than follow rigid strategic plans.
John Malone’s first-principles habit—asking why repeatedly until reaching the root cause—frames Long Lake’s post-AGI underwriting. Senra argues that well-positioned businesses can become orders of magnitude more valuable while lower-quality intermediaries disappear. Long Lake has never sold a company and does not plan to, though he retains the hedge “never say never.”
The outer ambition is a trillion-dollar company: tripling value every five years for 20 years can produce staggering outcomes across a market encompassing much of the economy. Taubman refuses to present that as easy; it requires decades of avoiding major mistakes, retaining elite talent, improving technology, and sustaining customer excellence across every service line.
Full transcript
I want to start with the fact that you just bought a public company. You took it private. It’s over 100 years old, and you paid what—$6.5 billion for it? This is Amex GBT. Can you tell the story?
We announced that we’re buying American Express Global Business Travel for $6.3 billion. It’s just an unbelievable business. We’ve always respected this business. It’s a 111-year-old company with over a century of customer excellence, and it was actually started in 1915 by American Express to help get their Travelers Cheques customers out of Europe during World War I.
I’ve been a customer of this business. Most people have. They manage travel for some of the most iconic customers and businesses in the world: close to half of the Fortune 500, a huge percentage of the Global 2000, a lot of the U.S. government and military, and governments around the world.
1. Bringing AI to the real economy
It’s a really remarkable franchise. The opportunity to partner with them, take the company private, invest in growth, invest in technology, and bring AI into the travel experience for millions of travelers per year is a big-scale impact for us to pursue the Long Lake mission, which is to deploy AI into the real economy. Travel is a huge, multitrillion-dollar global sector growing better than GDP, and we think we can have a massive impact here.
2. Why going public could expand Long Lake’s ambition
Let’s step back, because you and I have been friends for a long time. Long Lake has always been one of those “if you know, you know” companies. You guys had basically no public profile. I don’t even think you have a LinkedIn or anything.
And true.
Yeah. So, no public profile. Everybody involved was actively not seeking attention, yet a ton of people were starting to copy your idea. I’ve seen some of their financials, and they’re just copying it way worse than you guys are.
For the people who have never heard of Long Lake, explain the thesis and why you think right now is the best opportunity to pursue that thesis.
We formed the company 3 years ago with the mission of bringing AI into the real economy. What we saw was an incredible revolution happening on the intelligence frontier. If we had talked to each other 4 years ago, right after ChatGPT launched, and you told me that 4 years from then—if you remember, the models were amazing, but they couldn’t do addition—the models would have solved some of the 10 most difficult unsolved math problems in history and may win a Fields Medal, many people would have thought you were crazy. That level of frontier intelligence couldn’t happen that fast.
A lot of people were talking about this recently. You would have thought that in that world, everybody would be using AI everywhere. The economy would look totally different. GDP would have doubled or tripled.
What we saw was that we had been working a lot with small businesses and in the real economy prior to founding Long Lake. That was my history for 10 or 15 years, working with founder-owned businesses. Deploying technology innovations in the real economy is actually really hard. There are tons of legacy systems, legacy data, workflows, and change management. Being able to deploy these innovations at scale in the economy is actually really hard.
We saw that with Long Lake. The mission of Long Lake was to help pioneer bringing those frontier-intelligence innovations and breakthroughs into real businesses and partnering with real American entrepreneurs in important verticals and important businesses where we could help diffuse the technology at scale.
We never wanted much publicity. We just wanted to be known for our work. My chief of staff, Kim, was in a leadership program, and the mantra of the leadership program was, “Talk less, do more.” That’s been our ethos. We just keep our heads down and focus on executing. It’s a lot of work. It’s really hard.
Hold on. I have to tell you a funny story about that. I’ve spent time with a lot of people who know these European private family dynasties, where the companies aren’t public and they don’t seek publicity. They’re essentially hidden, but they’re extremely wealthy.
Someone told me that one of their family mottos was “to not be seen.” We want to be, but not be seen. I just love that idea.
Yeah. I think, look, I was very inspired growing up in Michigan in the Midwest. There are some unbelievable entrepreneurs and businesses that have been built that are worth billions of dollars doing unsexy things like construction or distribution. People are very low-key. They’re totally normal people.
Our view is that we want to be the best possible partner to those kinds of business owners. They’ve built, in many cases—I mean, Amex GBT is a great example—an iconic franchise. It predates the invention of the airline. That’s the kind of brand we want to partner with and let shine.
Long Lake is here to be a deep, long-term, permanent-capital partner who’s going to help you bring AI into the company, make your team members faster, better, and smarter, and make your customers happier.
But say specifically why you think there was such an opportunity, even 3 years ago, to bring AI into the real world.
The diffusion problem is a really hard problem. Several years ago, there was this question of, “Will intelligence work?” Obviously, it’s worked, and we’re seeing that now at crazy levels and faster than expected. I’m super AI-pilled. I always have been. That’s why I left my old job to co-found the company. But it’s happened even better and faster than I expected.
It’s no longer a question of whether the technology works. Now it’s a question of how we’re going to finance all this. I think the real answer is that we need to demonstrate that you can borrow against future cash flows in order to finance this stuff. People are now running into the trillions of dollars of investment required to scale the models to where we want them to be in 10 or 20 years.
In order to finance all of that, you need to see a return in the real economy. One of the things Long Lake was formed to do is take those frontier innovations and deploy them into really high-ROI use cases, taking away toilsome work from our team members: mundane work, data entry, and process-oriented stuff that a lot of people don’t like to do.
3. Why greater productivity can mean more jobs
Taking that away and freeing up human capacity for more impactful work, dealing with customers, and focusing on growth is super high ROI.
Focusing on growth is really important. People think, “Oh, you take some technologists, match them with some PE guys, and they’re going to buy a bunch of existing businesses, gut them, replace all the humans with AI, essentially cut costs, and that’s the value creation.”
That’s not the thesis of what you guys are actually doing. You think—and you’re demonstrating—that you’re increasing revenue growth and you’re not cutting people.
Yeah, absolutely. This was a contrarian take that we had in the beginning as well. We’re very positive-sum. We really believe in this concept of AI abundance. If you look throughout history, most innovations that lead to big productivity gains are actually good for the economy, good for wages, and good for consumers. We think this is a major productivity gain that’s going to be good for everybody.
We started in HOA management, and we’ve now bought, I think, 20-something companies in that space. We’ve bought close to 40 companies now in total. This will make travel our fifth service line.
What we’re seeing across industries and in the businesses we’ve owned the longest, like HOA management, is significant job growth. We’re actually adding heads because if your people are 50% more productive and can handle 50% more clients with better customer service, then you’re retaining customers better and growing faster. The people are much more valuable. Do you want more of them or less of them? You obviously want more of them.
It’s like a salesperson. If you have a salesperson with AI who’s now doing 3 times quota, do you want one-third as many salespeople? No. You obviously want as many of those people as you can have.
I think this is all going to be very good for jobs, very good for U.S. GDP, and very good for the economy. That’s a big part of our mission as well: bringing this positive-sum AI revolution to the economy, to the $20 trillion-plus services economy in the U.S., and to millions of people.
Wait, so you said you’re in 5 different verticals now? What are they?
We started in homeowner association management, which is actually a really big business that people don’t pay a lot of attention to, but there are tens of millions of homes managed by associations. We’re now providing market-leading service and are one of the fastest-growing companies in that space.
We then moved into HR services, specialty tax, and infrastructure services, which is now a big area for us.
We have architecture and engineering. We’re looking at other businesses in that broader infrastructure space, and now travel.
I hang out with you guys a lot. We have a lot of dinners, and I basically drop in on your office every time I’m in New York. I want to talk about the people you’ve pattern-matched off of or who have inspired you.
We’ve talked about some companies in the past, too, but people are like, “Okay, wait. This guy founded his company 3 years ago—how the hell did he just buy a 110-year-old company for $6.5 billion?” We’ll talk about your crazy revenue growth. You’re obscenely profitable—and I mean obscene. I love obscene profits.
4. A prepared mind and a tight acquisition filter
What I understand about you, just from being your friend, is that you kind of have a map of everything. How do you think about this? It’s the same way that Buffett—you couldn’t tell him about an asset and surprise him. He wouldn’t say, “Oh, I didn’t know I wanted that asset.” He’s like, “No, I’ve kind of mapped out everything and waited for the right time. If I could buy that company or that asset, I already knew about it. I had already studied it.” You guys do the same thing, correct?
We do.
Why? Explain this.
We want to be doing this for a long time. I’m still relatively young—I like to think I’m still young—and our friend Zach tells us we’re going to live to 150. Hopefully, I can actually be doing this for at least 50 years, maybe 100 years.
In the fullness of time, we want to bring Long Lake and AI to huge swaths of the economy. We’re now operating in roughly $3 trillion of the $20 trillion TAM, so call it 15% of the economy in the US. Now we’re global, and we just want to keep adding to that. Over time, we’d love to have a market-leading business and platform in many more industries.
There are moments in time when you can find a great asset with a great team at the right price. Then there are other times when certain industries aren’t attractive for long periods of time. We take a prepared-mind approach. We have a list of roughly 15 or 20 industries that we think are interesting for our strategy at any given time, and we’re constantly force-ranking those industries based on what we learn and how market dynamics are evolving.
The best way to learn is to look at deals in the space. We’ve built a really powerful sourcing engine, so we’re seeing 4,000 or 5,000 deals a year across all these sectors. We’ll literally do 1 or 2 new industries per year. It’s a big funnel with a very tight filter, and I can talk to you about how we select industries and assets.
That’s literally what I was saying. When you’re selecting, I assume this is operating at the founder level—that you guys are the ones selecting, “Okay, this is the industry. This is the next industry we’re going to enter.” Correct?
It’s more based on opportunities coming our way. To go back to Buffett, you have a better chance of getting a date if you’re bisexual—public and private. You know that quote: You have twice the chance of getting a date.
We like to keep an open mind. If you’re open to 20 industries, you’re more likely to find a great business and a great team to partner with. We just keep that funnel going all the time. We’re constantly looking, and when we see something, it’s kind of like—you know it when you see it.
If there’s a great business like Amex GBT, with high-90s logo retention and 100%-plus dollar retention, along with tremendous customer relationships with the best companies in the world and an average 15-year relationship with their top couple hundred customers, that’s special. These are deep, embedded partnerships where we manage a mission-critical service for all these companies.
Travel is a small cost, but it’s mission-critical. You don’t want to screw it up. We talk about that century of customer trust, but it really means something, especially in travel. If you have thousands of people traveling in the Middle East and a war breaks out, or you have a huge snowstorm in Chicago and your entire team gets stuck in the middle of the night at 2:00 in the morning, things have to work. Somebody has to be able to answer the phone and know what to do.
This is an amazing business. You just kind of know when you see it.
Was Amex GBT your first entry into travel?
Yeah.
We had been building a thesis in that space for about a year, meaning we were looking at several other assets. It was on our whiteboard of industries that we thought were really attractive for reasons I’m happy to go into.
What do you think AI is going to do to this business?
I think it’s going to make the travel experience much more seamless. Things can be much more personalized and more proactive. Right now, there are a lot of legacy, messy data issues and systems issues in the travel space. You have supplier systems, customer systems, and distributor systems. It’s a longstanding industry that has developed over many decades, so it’s complicated.
One example of what AI is really good at is integrating messy systems. Our friend Scott Wu is obviously behind Devin and things like that, and this is what we’ve built Nexus to do. Our co-founder, Rasmus Vismann, comes from a data background. He was a top computer science PhD at Oxford, won the prize for the best thesis, and is amazing at simplifying complex, messy data structures.
Nexus, our AI platform, is built specifically for this use case. We think about—
5. Nexus and the AI platform behind Long Lake
How do we make this better? Move on, because I know what Nexus is. The person listening might not. Explain what Nexus is.
Nexus is our horizontal AI platform that we’ve been building across verticals. We’ve been investing, and part of the reason we’re in multiple verticals is that scale is increasingly important in an AI world. In general, you’re competing for the best talent. Being able to leverage innovation and build a platform across 5, 10, or 15 different scaled industries allows you to improve Nexus with every single industry we enter. We add additional capabilities and make it better.
As an example, 70% to 80% of the infrastructure is shared across the verticals. That’s our platform. On one side, we integrate with all the models. We’re model-agnostic, so we use different models for different tasks. Even one task might use several models to complete it.
On the other side, we integrate with the data, workflows, and different software systems of the business. You have to build that deep integration. Nexus sits in the middle, and a lot of that intelligent model routing, security, and agentic orchestration layer is reusable across all the industries.
That last 20% or 30%—embedding Nexus into the workflows of the business, mapping the workflows, and integrating with these different data sources—is a very hard technical challenge.
6. Put the engineers where the work happens
It’s why you need a world-class AI team to be able to actually use AI in the real world, because you have all these systems.
Hold on. This is a really important part, too, because again, I hear other people talk about Long Lake and I’m like, “Oh, they don’t actually understand what you guys are doing.” How many different states are your engineers operating in right now?
Yeah. I mean, we’re operating in probably almost every state at this point. Our engineering team today is probably 70% sitting with a team member in the field across 15 or 20 states, and they’re working on that last 20%.
Exactly. Sitting with our team members, understanding the pain points, what’s breaking, what’s useful, what’s not useful, and iterating. To your point about learning from history’s greatest entrepreneurs, Kelly Johnson is very inspiring on this. The Skunk Works idea is that you want the engineer sitting in the factory. That’s actually kind of what Long Lake is.
There’s a book on the counter behind you that’s unreleased. It’s all about SpaceX. What was fascinating to me is that I just did an episode of Founders on Kelly Johnson, because in the preface of that unreleased book, he talks about how if you go back and read Kelly Johnson’s 14 points and the way he operated Skunk Works, it reads exactly like what SpaceX is doing. These ideas are not new, over and over again.
The other great motto that I love on this point is from Danaher, which was a big inspiration to us, and the Rales brothers. Their motto was, “Common sense rigorously applied.”
Yeah, it’s excellent.
That’s kind of what we do, too. If you can take some of the world’s best AI engineers, have them sit with your team members, understand the problems, and use common sense to fix them, it makes Nexus better. Nexus now integrates better with all those various systems, and each different industry needs different things.
For example, in HOA management, it turns out a lot of the work is done in email. You’re taking in emails from homeowners and boards and responding to complex emails. It’ll be something like, “What’s going on? We need to find a snow removal company.” It’s not just a simple response. You actually have to map out the 10 other communities we manage, the 5 vendors, what they charge, how people reviewed them, and the schedule. You might need to actually send an email to the vendor, get schedules, and then respond. That email could take 45 minutes, an hour, or longer to craft a thoughtful response and proposal.
If Nexus has access to all that information and can draft an email for you before you even wake up in the morning, you have a draft in your inbox to respond with that’s 99% accurate. Then you can just edit it as the manager. Instead of spending an hour, you spend 5 or 10 minutes putting it in your own voice. The voices are getting better and better, too. This is something we’re working on: each of our managers can now have Nexus draft emails in their own voice.
This is a capability that we built for HOA management but is now applicable to every other business. It turns out pretty much every business works a lot in email. Travel, for example: 55% of travel-agent inbound queries from travelers are by email. New bookings, changes, cancellations—it’s all email. Because we solved that problem in HOA management, Nexus now has this tool built in. It’s going to have a huge day-one impact in Amex GBT. I could give you 10 other examples of this.
7. Why own the businesses instead of selling software?
Has anybody tried to buy Nexus as a separate tool?
You know, it’s funny. We do, because we haven’t been very public, and not a lot of people really know about what we’re doing. A lot of our investors have asked us, “Can we partner to use Nexus?” Maybe for them we would do it, but we’ve never wanted to sell software.
First of all, software is obviously a great business. We partner with tons of software companies in all these industries and with the labs, et cetera. But the problem with selling software is that you don’t actually care about what happens in the outcome. For us, we’re very outcomes-driven. We want to actually change the way these businesses operate and change the way these industries function.
To do that, you need to be an owner. You need to really be an owner-operator. Taking Nexus and the AI breakthroughs that are happening at the frontier and deploying them into the businesses for real outcomes—faster growth, better customer experience, better team-member experience, being able to pay your team members more because they’re more productive, and ultimately, to your point, shareholder returns—that’s what we’re focused on. I think the vertical integration of owning your own platform and deploying it only into your own companies creates a lot of alignment.
We’ve talked a bunch about all these other Founders episodes, and I love that part of your onboarding at Long Lake is listening to specific episodes of Founders, which I think is obviously genius, but I’m biased on that. I think this is especially true on the investor side, where it’s like, “Oh, yeah, let’s just sell the software.” It’s just like, well, it’s not a software-program problem.
I go back to Larry Ellison. I’ve done, I don’t know, 6 episodes on him, and he has this great line about this. He’s maybe the best in the world at understanding it. He’s like, “It’s not a software-program problem. It’s a human problem.” There’s no point in me selling something if the way you work doesn’t change. Then I can’t build a good business around that.
How do you get over the human problem? Well, you own the goddamn company.
8. Build tools people want to use
You control the workflow. There’s a slightly non-obvious thing with this: we don’t actually force anyone to use our tools. Owning the company is really valuable in a lot of ways, but not because we force people to use the tools.
That was Larry Ellison’s point. You can’t force them.
If we have to force someone to use our Nexus platform, then the platform is not good enough. We take the approach that our customers are our team members. We’re now going to have 30,000 team members operating globally across all these sectors.
You explain this to me. You said you have 30,000 people working there, and you said your customer is your team member?
Yeah. We think of our team members—and we now have 30,000 of them globally—as our customer. The whole idea is that we want Nexus to be so magical—
30,000 employees in the business?
That’s right. And we—
I always have to convert the way you talk. I love you, but you’re an East Coast finance guy.
We think of them as partners, design partners, and that’s our customer. We want the tools to be so magical that when you introduce them, they go viral inside the company. We’ve now seen that happening. As the models get better, as our products get better, and as our deployment playbooks get better, we’re seeing the cohorts of adoption go crazy. It used to take us maybe 6 months to activate a cohort. Now you give them the tools, and within days—
Wait a minute, hold on. Am I understanding this correctly? You’re targeting these services. Let’s say HOA management, right? Let’s say I work there, and now I’m using Nexus and all the other tools you’re building, because you have elite technical talent, too. My job is now 90% better. That also protects you for retention, because if another HOA service company doesn’t have these tools, I’m going to go over there and make 90% more.
Yeah. No, you don’t want to do that. That’s a big part of our vision, too. We really want to be a talent magnet. We want to be the best place to work in every industry that we operate in.
Part of that is, if you can build people the best tools and make them more productive, they can make more money and have a better job. We have these amazing quotes now from our team members. They’re saying, “I don’t feel like I’m working anymore,” because there’s so much mental friction that comes from that 30% of work that’s manual and rote—responding to emails, data entry, and so on.
What they want to do is focus on getting more customers, understanding them, helping them more, and interacting more with them. There are a lot of fun parts of the job that keep people going. If we can do more of the fun parts and less of the dull parts, they love their job more and can make more money. Think about having to leave a Long Lake partner company that has these tools and this setup and go to a competitor down the street. You’re not going to.
It’s going to become really powerful. We’re already starting to see this. We’re obviously only a couple of years in, but if you think forward, this flywheel means that having the best people in every industry using the best tools creates a much better customer experience. Then you grow faster, retain your customers better, make more money, and can pay your people more. That’s the positive-sum vision for us of AI deployment: you can really create a better mousetrap in all these industries.
9. A high bar for talent, acquisitions and technology
Why should you be the one buying these companies? We’ll talk about that in one second. The way I think about it is that you have a ton of experience in finance. What you were just telling me and my partner before we started recording blew his mind, because he was thinking about the same thing you were thinking about, and you said, “Hey, you didn’t think about this other part, this missing piece,” which we won’t talk about. But that’s another example; I’ve seen you do this a million times.
With Zach, he’s going to be able to recruit the best technical AI talent in the world. That’s how I see the combination. Everybody’s like, “I want to do a Long Lake deal.” Yeah, but you’re not Alex and you’re not Zach. Am I wrong about this?
Well, thank you for saying that. We’ve got an amazing team. We go back a long way. Zach and I first met at Goldman, when he was a summer analyst and I was an analyst. He introduced me to Rasmus, our co-founder and CTO, who was at Oxford with him at the same time. As I mentioned, he was the top student there.
The first 20 people, I think, were all from our network and people we knew deeply, from both the investment and acquisition side as well as applied AI technology. We’re growing much faster now. We’re closer to 60 people—I mean, we’re still small at Long Lake. We’re only about 55 or 56 people now, and we’ll probably be closer to 100 people by the end of the year.
It really is a world-class team. I’d say 90% are AI engineers and operations and deployment people, and 10% are in acquisitions, M&A, and finance. I do think you need to be able to do 3 things really well to deploy this technology. You need to be able to buy great companies well, so you need a great M&A function.
You need to be able to build amazing, world-class technology. You need technology that rivals the labs or some of the best applied AI companies. Then you need change-management operations. Because we were purpose-built and started with the big vision of wanting to help change the whole economy, I think we’re able to attract much better people, and that’s starting to compound now. I think 75% of our teams come from in-network referrals, so we have a very strong and very tight filter. I think this quarter we hired 3% of applicants, basically, and we saw close to 1,000 applicants this quarter. We have a very tight funnel just like we do for deals. One of my biggest learnings is that a high bar in everything is really the key: a high bar in talent, a high bar in acquisitions, and a high bar in technology. That’s what I think you need to make this work.
10. What his grandfather taught him about removing friction
What initially got you interested in finance to begin with?
I just loved it. I grew up in a family of entrepreneurs. My grandfather, who was a big inspiration to me, started a real estate business after World War II.
He essentially invented the strip mall.
The shopping center. Exactly. He didn’t actually do strip malls. Well, he probably did earlier in his career, but—
There’s a great book that you gave me about him called Threshold Resistance. Can you talk about the idea? Why would it be called Threshold Resistance?
The concept—it’s a fun reference, by the way. We have it in our office—but basically, the whole concept of threshold resistance is that you want the shopper to be more likely to go into the store. He was an early pioneer of retail. He just thought he could make things better, and that was a big inspiration to me: trying to make things better in life.
One of the ideas was that the threshold is the entrance to the store. The more steps you had to go up or the more you had to go down some dark hallway to get in, the less likely you were to enter, and that’s how stores used to be designed. There used to be these big windows with merchandising in them, and you’d have to go past the windows, through some dark alley, to get to the door in the back. Nobody would want to go in them.
His idea was to bring the door to the front, have no threshold, and have it be the same as that one over there. You can’t see it, but you want to walk in. He broke it down almost like a math equation: even half a step up could reduce the number of people coming in by 20%.
Exactly. He did a lot of really creative things. He was very innovative and always brought this continuous-improvement mindset, similar to the Danaher continuous-improvement concept. Honestly, it’s all a big inspiration for me. You want to make it so easy and so magical for the shopper to go into the store that they’ll go in and spend more money, which is good for the store and all that.
You can apply some of those principles more generally with technology, for example. We want to make Nexus so magical and so easy to use that our team members just love it and can use it. You want to minimize threshold resistance on AI adoption.
This is exactly what you’re talking about. It’s like, 70% or 80% of it is the same—every business deals with the same shit. I just recorded this crazy episode with Travis Kalanick from Uber. It was fucking crazy. He sat exactly where you are, and we talked for hours. He was breaking down, in minute detail, every single page you would see at Uber compared with Lyft, and every single little thing.
There were a thousand things he had to optimize. If you’re just copying him, you copy what you see, but you don’t understand the thinking behind it. It’s exactly what you’re talking about. It’s like this guy is obsessed with shopping malls or shopping centers and realizing, “Hey, I’m going to knock 6 inches off here, and my bottom line—my profit—increases by 25%, or whatever.
I think it’s very much the same with technology and websites, and Amazon, which came later, and things like that. These little tweaks can really impact behavior. Both my podcasts are like that. Founders has no intro; I just get right to it, and this one has a 6-second one. No one wants to sit through that shit. I’m listening to your podcast so I can hear some 30-second melody that you made? No, this isn’t a concert, dude. Get right to the point.
Exactly. I grew up in this family of entrepreneurs, and my father and uncle ran that business for 75 years. One of the inspirations for the name Long Lake was that the business was built and lived on Long Lake Road for the last 40 or 50 years in Michigan, where I grew up. There’s actually a funny story.
I dismissively called you an East Coast finance guy, which—you know I love you, and we’re friends. I was like, “Shit, I forgot he’s from Michigan.”
I basically grew up with a tremendous respect for the American entrepreneur. Growing up in Michigan, I mentioned earlier that all these incredible entrepreneurs and businesses you’ve never heard of were the people in the business community you looked up to. There’s no finance scene there. There’s no tech scene there. It was people who built what people on the East Coast might call “unsexy businesses,” but they’re amazing businesses that were built over 50 or 75 years in the case of my family.
These people are extraordinary. They’re classic American founders who bootstrapped their way in to build what could become a huge business over time, providing an unparalleled service in that market. We partnered with an architecture business in Minnesota that built 50% of the K–12 schools in Minnesota over the last 70 years. They’re like the McDonald’s of architecture for schools.
This is why it’s such a great country. You can go to any region in the country and any service line, and there’s someone who has spent 100 years obsessing over that product and service. Growing up seeing this, meeting some of these people, and talking about them around the dinner table was very inspiring to me.
Part of the reason I was uniquely interested in this problem and mission was to figure out how to bring the best of the intelligence revolution and the best engineers in the world to help these iconic American entrepreneurs across industries deploy AI into their businesses—to make their team members and employees happier, make their customers happier, improve their bottom line, and grow faster.
If you do this in enough industries with enough businesses, it’s eventually going to add up to really contributing to the economy in a big way. I think there’s a long-term, decades-long opportunity to make a meaningful contribution. I don’t want to overstate our role in the intelligence revolution, but I think that by actually deploying the technology in the real world and driving real ROI, we’re generating cash back into the system to scale the models.
And so you actually need this flywheel. You need someone; you need distribution. Part of the mission of Long Lake was—
Oh, you're distribution for the labs. That's hilarious.
Yeah. We generate ROI in the real economy on the intelligence to reinvest into scaling the models.
That's funny.
And someone's got to do this. By the way, you're seeing the labs start to dabble in deploycos and things like this. But I think somebody—and many people; it's not going to be 1 company—you know, people often ask me about competition in the space, people trying to do what Long Lake's doing. I think it's great because to actually scale the models, we need to deploy this technology at scale, which is going to be—this is a big economy. And it's a global economy, too.
And it's going to happen slowly. The technology changes way faster than human behavior does. The bottleneck is actually changing what people do.
And there are real, hard technical problems. Rasmus and a bunch of our co-founders, like Varun, and our founding engineers—these are some of the best engineers. Any one of them could raise money from a top VC tomorrow to start their own company. Any one of them could go get offers at amazing companies, whether it's the labs or some amazing software company.
You need people like that. These are really hard technical problems, and what they would tell you is that it's really interesting work because it's not easy to figure out how to take a 100-year-old business's systems and data and problems that are global, with each customer having some different optimization that it needs, like in Amex GBT, for example, and somehow scale that with Nexus and Diffuse AI into that whole stack.
Okay. So you're meeting all these entrepreneurs. You're growing up—you grew up in an entrepreneurial family. These are family businesses. When did you start paying attention to finance, though, in that aspect of it?
11. Learning capital allocation at Goldman Sachs and Oaktree
Yeah, so I knew I was really interested in business, and I wanted to learn about capital markets. I started my career at Goldman Sachs. That's where I met one of our co-founders, Zach, who helped introduce me to Rasmus, and all of this ended up coming together through that.
When I was at Goldman, I worked in the internal investment unit, which was called the Special Situations Group. It doesn't really exist in the same way because of regulation now, but at the time it was a very cool group, which I can talk more about. I just fell in love with this whole idea of capital allocation.
I had some really amazing mentors there, and the whole idea of putting resources of the economy into the highest and best use, and the whole concept of capitalism—I just fell in love with it: capital allocation across industries. That was one of the beautiful things about SSG at Goldman at the time. The pitch to young people coming out of school was, “You get to invest right away. We invest up and down the capital structure, from debt down to equity, public and private, across all industries.”
So I got tremendous exposure at a young age to all these different types of businesses and ended up working on some really interesting investments there. I learned a ton by not just observing, but also getting to manage risk at a young age, which was very unique.
Young age is what—early 20s?
Yeah, I think I was around 22 or 23.
Okay.
Actually, I had a great mentor there who I later partnered with and worked with at Oaktree, a guy called Patrick McCan, who empowered me very early—I think in my first year—to basically manage a couple hundred million dollars of invested capital. He was helping me, of course, and he gave me a lot of guidance, but he empowered me to take real risks so early in my career. That was very formative for me, and I realized I loved investing. I loved allocating capital, and I loved businesses and learning about how the world works.
To me, understanding how these different businesses work and all these industries is really understanding how the economy in America functions. I love the intellectual curiosity of learning more about how different things work.
So wait, then you go to Oaktree.
It's funny, people ask me about Long Lake. I never could have told you at any point in time that I was going to be doing what I'm doing today.
Did you think you were going to found your own company, or did you think it was going to be a fund? What did you think it was going to be?
I didn't know what I wanted to do. I was very focused on just continuing to learn, get better, and improve my skills. After Goldman, I went to business school.
Hold on, let's come back to Danaher here, because I do want to hear about that Danaher, which you and I have talked about before, but also the other people that you guys look up to and emulate. But you go to business school.
So I went to business school. I ended up interning—I'm just going in chronological order—at a holding company called Leucadia. I was interested in holding companies, and then I spent some time hanging out with Josh at Thrive.
Basically, I was always interested in technology and holding companies, dating back 15 years. None of this clicked for me until much later. I went to Oaktree after business school, graduated, decided I wanted to stick with investing, and partnered with the guy I mentioned, Patrick. We worked directly with Howard Marks and Bruce Karsh, 2 legends of the investment world, to build some new businesses for them.
We started Oaktree's first equity business. We ended up getting involved in some of their credit businesses and helping out with a few things. We started several different products there and worked very closely with Howard and Bruce. I had a tremendous amount of fun and learned a lot from them.
But the whole time, I knew I was not fully expressing myself. I eventually wanted to start something, but I didn't know what it was.
As a founder, even if it was going to be a fund or an investment company?
Yeah. I think I just knew I wanted to do something entrepreneurial. I wanted to build something. I wanted to do something on my own, but I didn't really know what it was.
12. Buying founder-owned businesses with permanent capital
Then, after I was at Oaktree for almost 10 years, I started really thinking and brainstorming with some of the early co-founders of Long Lake, whom we've talked about. The ChatGPT moment came out, and it just became very obvious to me. This was—
Where was Taubman Capital? When did that happen in your life?
When I was at Oaktree, I mentioned my dad and grandfather's business, and I was helping my family build out Taubman Capital, which is our family investment business. It's all our own money, and we ended up partnering with people and doing a bunch of these deals, with investments in founder-owned companies. I think we did close to 50 of them.
So that's where you learned how to buy companies, do you think?
Yeah, it was a combination of what I learned at Oaktree and what I was doing with Taubman Capital. The Oaktree investments were generally larger companies, public companies.
Yeah. But the returns you had at Taubman Capital—you don't like talking about this, but I'll just say it, and we can cut it if you're embarrassed—were something like 70% IRR or some [__] like that. Correct?
We had a very good run. We had a very good run. But yeah, it was an eye-opening experience for me, because what I realized is that there are some remarkable businesses out there. Just because something is a small or midsize business doesn't mean it's a bad business.
Actually, I mentioned a business in Minnesota that we partner with that's been building most of the schools in the entire state for the last 70 years. It's an amazing business. My learning was that there are some unbelievable entrepreneurs. Going back to my roots in Michigan, it really resonated with me to be able to partner with some of these folks and help them grow their companies.
To your point, we had a very successful run bringing permanent, flexible capital, which was our own internal balance sheet, a long-term horizon, and a willingness—not just comfort, but real encouragement—to invest in growth. We don't focus on short-term quarterly earnings. We're not overleveraging the companies, like a lot of private equity funds do. We're basically a long-term growth investor in great American businesses, partnering with great founders, and we can bring them things that they may not have.
For us, that meant helping them get growth resources, M&A resources, and capital. A lot of folks have built an amazing business, but they've never done an acquisition before. They may have tons of competitors whose businesses they could run better than, and we can help them consolidate that industry, become a bigger-scale player, and get the industrial logic of that.
We had a lot of fun. That was nights and weekends for me over the 10 years when I was working at Oaktree, so it was a very formative experience as well. Long Lake all clicked. It turns out I was always passionate about partnering with founders, always passionate about technology, and passionate about capital allocation.
Yeah. And then you met the right people where you could actually build a unique partnership that very few people can match.
Yeah. Exactly. I got very lucky, and I'm super grateful to have incredible early investors. I think they've really pushed our thinking and level of ambition. Obviously, our mutual friend Rick, who's an extraordinary investor and has been one of our biggest partners, Hemant at General Catalyst, Mark, and Elad Gil—it's an amazing group of people. They've really pushed my thinking in a big way since the beginning.
What Rick tells me about you is that you're unusually receptive to both new ideas and criticism. A lot of founders are more headstrong. Usually they'll listen, but they're running the ship.
Well, that's nice of him to say. I think feedback's a gift. We want to get better every day, just like we want our companies to get better every day. We want our team to get better every day. I want to get better every day, and I have a tremendous amount to learn.
That's why I love your podcast, actually. I learn more from you, probably, than from almost anyone through your episodes. That's why I make everybody listen. I actually do. It's a true thing. Long Lake onboarding includes half a dozen of your episodes.
13. How the Long Lake team came together
That's just smart. Okay, so I know you and Zach were working on a few deals together before you founded Long Lake. You guys were talking about this thesis for 6 months, a year? How long did it actually take? Then we have to talk about the crazy growth that you've had in the last 3 years.
Yeah. Zach and I go way back. We started at Goldman, as I mentioned, and stayed friends for a long time. He's done some amazing things in technology and brought me into some of those things. He was very inspiring on that. Then he was coming into some of our deals.
We did a funny thing where we ended up building one of the largest go-kart track companies in America. We partnered with 20 different locally owned go-kart tracks and created a platform. Zach invested in that deal with us. We realized there are some really great businesses out there that people don't spend a lot of time thinking about.
What if we could bring the world-class technology expertise of companies like Ramp and Cognition, and bring that type of world-class AI team to Main Street American businesses and enterprises? That was the idea from the very beginning.
I've been there from, I think, day 1, but when I heard about the AAX [?] deal, I thought, “Why am I not thinking like this? I know these are my friends.” I didn't even think it was a possibility that you would do a $6 billion valuation or a $6 billion acquisition. I was like, “Damn, these guys are really good.”
Our vision is really big. It sounded kind of crazy a couple of years ago when we were saying that we wanted to do this.
It's not just your vision. The way you guys are executing is even better now. You're getting better. You were already super impressive, but you're literally getting better.
Yeah, I do think we're getting much better. This is partly why I value feedback from some of our smart friends and some of our investors. We want to get better every day, and I do think it's true.
14. The best partners make you more ambitious
Can we talk about the story? You guys were thinking about a few acquisitions. We don't have to talk about the prices. It was, “We could do this one over here, or we could do this one, or we could do this one,” and you told me the story. Rick said, “Why not do them all?”
Exactly. Sometimes we like to say that the greatest gift you can have in a partner is someone who makes you more ambitious. I think our partners today really make us more ambitious.
When we started the company, we talked a lot about how, if we do this right, we can really help change a lot of industries and change the economy. It sounded kind of lofty, but now that we're operating in 15% of the services TAM, with tens of thousands of team members, it's starting to feel like it's coming alive.
I think that's really exciting. It means we're able to do much more. I remember, in the beginning, convincing some of our earliest founding partners to leave their sexy jobs in technology. I was talking to people's parents about why they should drop out of school and come work on Long Lake. It was a long process because I had to explain all of this, but now it's getting much easier.
People have seen what we're doing. They're inspired by it, and they want to join and be part of the mission. I think the team is getting better and better every day. Our rule is that the incremental hire has to make us better and raise the average. We've been able to do that, which is really extraordinary.
The team's getting better, we're getting much more experienced, and we've now bought close to 40 companies across 5 industries. We've built a process, we've built a playbook, and we have the Nexus platform, which we can redeploy. Our ability to drive impact is better, and our team is getting better.
I do think our ambition level is, “If it's not Long Lake that buys MXGBT [?], who should it be?” It should be us. That's how we think about it. Frankly, we're thinking there could be other big things we can do. We're not going to stop. Obviously, we want to keep doing this for the next 50 years.
15. More than $4 billion in projected revenue
Give us some details about the size of the business today.
We haven't disclosed valuations yet, but we don't need to. You’ll get the first exclusive at some point. I can tell you that, including MXGBT [?], it's a big business, and the scale of our other businesses is also compounding and becoming meaningful.
If you combine everything, we're expecting to do over $4 billion of revenue next year. It's an amazing revenue base. It's very stable, a 100% dollar-retention-type business. I mentioned that we have a lot of employees globally now, and we're very profitable, as you highlighted, because our strategy is to buy established, profitable businesses that are already making 20%–25% plus EBITDA margins.
Our view is that we never need to raise capital again, which is nice.
We can generate enough cash flow on our existing assets that we could compound on internal reinvestment for decades to come.
Yeah. We have a line of people out the door.
We've had tremendous support and interest from investors to help inspire us to do bigger and bigger things. One of the nice things about being able to access capital is that it allows us to think bigger and move faster. I was at dinner last night with Rick and Zach, your main partners, and they made the good point that a lot of founders fuck up because they optimize for valuation. Zach and Rick made the point: if we're going to be working together for 20 years, this is a long-term partnership.
You can't just—it’s not a bidding contest. It's about who you can work with and who, to your point, not only do you get along with, but you actually want to do life with. We have all the money we can spend anyway, so who do you get to spend your time with? Shouldn't that matter? The second part is: are they actually helping you on your mission and increasing the size of your ambition?
No, I listen, I 100% agree. I think it's about having the right partners. Growing up in our family in the real estate business, my father and grandfather had partners for 50 years in some of their real estate deals. Being a partner was almost higher than being family. It was someone that you treated with the highest respect.
You guys are loyal guys. This is what I like about you. You're way too humble, and you're always going to be like that. Nothing I'm going to tell you today is going to change that, but there's an army of people trying to put more money into your company. You'd probably get obscene terms, and it's just like, "Yeah, but I like these guys. These are my existing partners."
My version of this is, every fucking company comes and says, "What you have with Ramp, we want that, and we'll pay double." I'm like, "You think this is a bidding thing? These are some of my closest friends. They're the easiest people to work with. They backed me, and they did what, at the time, was the biggest deal in business podcasting—the partnership we had. They had the intuition that this is fucking valuable. You think I'm going to exchange and destroy that fucking relationship for money?"
Yeah. Come on. Exactly. I agree. One of the things we're super grateful for is that, when we first met with him about this, he was our general counsel, led our first round of outside capital, and gave us our first $100 million, basically. Remember, this was 3 or 4 years ago. That was a lot of money back then.
By the way, they've given us a lot more since then and been incredible partners. From day 1, they got the thesis. They believed in us almost before we even believed in ourselves, and that's such a gift that we'll always be grateful for. I just want to keep working with these guys, our investors that we have.
Obviously, we like bringing more people into the mix, and there have been some extraordinary people who have come in recently—many great people. We want to keep building that. I do think continuing to expand our world a little bit is very valuable. Each time new people come in, they add a lot of value to our thinking and all that. But yes, it's about much more than capital. It's really about how they help us execute, and the biggest way they help us execute is by believing in us and inspiring us to move faster and think bigger.
Does Long Lake have to be public?
It doesn't have to be public. No, but I think the maximally ambitious path is to be public.
Why is that maximally ambitious?
Because I think we'll ultimately have deeper and lower-cost capital. Public markets are the biggest stage in terms of the deepest pools of capital. I do believe—and one of the things about some of the great holding companies, and people like Henry Singleton and John Malone, is that they've all proven this over time—that if you execute over a long period of time, you earn a currency that trades at a lower cost of capital.
16. Henry Singleton and staying flexible
That allows you to do even more ambitious things. By getting access to that over time, we can think even bigger. I think there's potentially a way to scale our impact to even larger businesses and industries over time, and I think having that currency will be very valuable.
What else did you learn from Singleton? You and I have talked about Teledyne a bunch.
Yeah, I mean, of all the holding companies, he's probably one of the people who has inspired us the most. First of all, he was a math genius. He was on the Putnam team at MIT. He was in the Office of Strategic Services. You sent me the book Distant Force, which is a great book.
One thing that people don't understand is that Singleton compounded his earnings per share by over 40% a year for 20–25 years. Buffett always called him the best capital allocator in America and the best operator. He was very under the radar. The biggest learning from him, I think, is that he used to say, "Stay flexible." His mantra was that he didn't like detailed strategic plans. He preferred to stay flexible.
He said, "I prefer to steer the boat a little bit every day." It's a great quote. The boat was subject to all these outside forces, and nobody's smart enough to predict them. You just need to come in and steer the boat every day.
I think that's part of our whole philosophy of staying open to different industries and having a flexible capital allocation mantra. For example, we never would have said when we started the company that we wanted to do travel. It just wasn't something I'd thought about. We eventually built a thesis on it, but that was because we had an open mind.
Now we're doing what I think is one of the most exciting deals we've ever done. It's an unbelievable, iconic business with a reputation for gold-plated customer excellence, along with one of the best AI opportunities to improve the service at a pretty reasonable multiple, actually, when you look at it.
Had we not kept an open mind and stayed flexible about industries, we never would have looked at it. I think that's a very inspirational principle for us, and we try to embody it.
17. John Malone and the businesses that will endure
What about John Malone? Anything from him?
Yeah, I was studying him at Oaktree, and we invested in a number of his stocks over the years. I think it was just creativity in structuring and creativity in financing and things like that. He was at the top of his class.
Another thing I read in Cable Cowboy is that he was a very first-principles thinker. He would ask why 5 times to get to the root cause. He was a big root-cause thinker, and that's something we try to embody in our investment process—now, our capital allocation process.
We always want to understand why a business is a good business, because we do plan on doing this for decades. You talked about permanent capital. We want to be doing this for decades, and so it's actually very hard to think out 20 or 30 years about what's going to still be a great business, especially now.
Yeah. Especially now.
So first-principles thinking about why a business is going to be great post-AGI is really important. It's maybe the most important thing in capital allocation right now.
I think there's just going to be a lot of dispersion. I think the gains to the winners are going to be extraordinary. Businesses that are well positioned, that are high-quality services, that are going to preserve their place in the ecosystem and expand it—which we think our businesses all fit that mold—can become orders of magnitude more valuable.
But businesses that are lower quality, easier to disintermediate, aren't providing an enduring value-added service, and really are more of a tax, are just going to go away. That's good for the economy, by the way. Less friction is good.
18. Why Long Lake doesn’t plan to sell
I think thinking through businesses holistically and thinking about what makes a business sustainable or not, enduring or not, is important. Have you guys bought any businesses that were weaker than you expected? Have you sold any of them, or no?
No, we've never sold anything, and we don't plan to ever sell anything. You never say never.
Yeah, of course.
It's more about whether we're adding value to the business and whether it's a business that Long Lake should be in. I think that's the bigger question.
You know, if you're going to invest all this time and energy to get into a great business with a great team, build that partnership, deploy technology, build a nexus to deploy into that space, and create the best technology, the best people, and the best team in the space, and then you're going to sell? You want to let it compound for a long period of time.
I just had a thought, and I don't even know the answer to this question. You guys are acquiring businesses. Have you had any acquisition offers for Long Lake itself?
Everybody knows we're not a seller, so we haven't really entertained or had any of those conversations. My plan is—this is what I want to be doing forever.
Okay, I'm on a run right now. Torsten Reil from Helsing—there are a bunch of these episodes that aren't even out yet—sat in the same chair, and he's legitimately mission-driven. He's like, “I'm building a great European defense company,” because he's already rich. He was rich when he started the company, and he's like, “Europe has to be able to protect itself.”
This is a mission-driven company. He's like, “We're not for sale at any price.” Scott Wu—I push him on this a lot because billions are getting thrown at that guy's face.
And he's like, “Nope, not doing it.” He has this great line: “We'd sell if it was the maximally ambitious thing to do,” which is obviously a great line.
Yeah, it's a great line, which is obviously his way of saying no. I'm even going to tell you some of the conversations I've had with him on the phone, which I was like, “I can't put this in the podcast because he's definitely friendly on the outside, but there's a conqueror spirit underneath that friendly exterior.”
Then I just talked to Zach Dell, and I was like, “Is this the last business?” Because what I love about Karim and Eric from Ramp, I asked them both the question: “This is our last business. It's not like I'm going to sell this and start another company. This is it. This is the last one.”
And Zach Dell had the funniest thing. Because he wants to build something, as you said, relatively young, he's like, “I want to work on this for 50 years and go see how far I can take this thing.” And he goes, “Do you think I'm doing this for a paycheck?” Thinking about my background. I was like, “Yeah, good point. You're not doing it for a paycheck.”
So what's the point of selling it again for more money that you're never going to spend anyway? I just love this idea, but we never close the loop on your maximum ambition, which is that you guys could be building a trillion-dollar company.
19. Could Long Lake become a trillion-dollar company?
I think we can. Yeah. If you just think about the power of compounding—and this is one of the reasons that long-term thinking and not being a seller is so valuable—it's amazing if you can keep getting a little bit better every year, how that can add up to, well, then you're tripling the value of these businesses every 5 years, and if you just keep doing that for 20 years, you're a trillion-dollar company.
I'm not trying to make that sound easy. That's really hard: to keep executing that way over a long period of time, over decades, avoid mistakes, continue to retain the best technology talent in the world, and deliver the best customer service and customer experience in the world across these service lines. That's really hard to do, but if you do it for long enough, the pie here is just extraordinarily big.
We're talking about the whole economy, basically. This is the largest TAM imaginable. And so if we can just keep executing and doing what we're doing for a long enough period of time, I think the potential is pretty staggering.
Well, I have to say, as somebody that's been there—been able to see this from almost the very beginning—I remember when Long Lake first got name-dropped on a podcast and people were like, “Oh, no,” because it was relatively stealth, even though you guys were killing it, buying everything, and doing everything.
Now I know for a fact, from firsthand knowledge, that one of the 10 best entrepreneurs in the world got their attention when you did the AmEx deal, and they were like, “Hey, what's going on with Long Lake, and how do I get involved in this?”
So, just as a friend and a fan, it's been wonderful to see you, man, and I really appreciate you trusting me with coming out and telling the history of Long Lake today.
Thank you so much. Honored to be here.
Yep.