Neil Mehta - Finding Future S&P 500 Companies - [Invest Like the Best, EP.419]

Hello and welcome everyone. I'm Patrick O'Shaughnessy, and this is Invest Like The Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and wanna go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review along with all of our podcasts at joincolossus.com.

Today is a special episode. My guest is Neil Mehta, founder of Greenoaks Capital. In two thousand twelve, at age twenty-seven, Neil left D. E. Shaw to start Greenoaks with his friend Benny Perez. One of their first investments was in Coupang, a South Korean e-commerce company led by founder Bom Kim. Neil was so convinced of Coupang's potential that he invested forty percent of their initial fifty million dollar fund into that one company, a bet that eventually returned about eight billion dollars. Over its first thirteen years, Greenoaks has backed legendary companies like Figma, Wiz, Carvana, Stripe, Discord, Rippling, and Toast, generating over thirteen billion dollars in profits with a thirty-three percent net IRR to LPs. Henry Kravis, one of Neil's early investors, describes him as extremely disciplined with exceptional timing who has gone against the tide many times. Greenoaks operates with remarkable concentration. Just fifty-five core companies across nearly fifteen billion dollars in assets managed by only nine investment professionals. Their approach reflects their singular pursuit, finding companies that will become a meaningful part of the S&P five hundred. In our wide-ranging conversation, Neil shares this mission along with his framework for identifying exceptional founders, his concept of jaw-dropping customer experiences, and how his grandfather's gun shop in India shaped his appreciation for builders of all kinds. Once you've heard directly from Neil, I highly recommend you read our in-depth profile of him. Neil gave our editor-in-chief, Jeremy Stern, unprecedented access to his life, investment philosophy, and the work that has made him one of the most successful and unique figures in modern investing. The outcome is a brilliant profile about a phenomenal investor. Find the profile on our website, joincolossus.com, and in the show notes of this episode. Now, please enjoy my excellent conversation with Neil Mehta.

I think I have to ask about your grandfather first.

Yeah.

Whoever taught you the artisan craftsmanship of gunmaking. Can you start with that story?

Yeah. My parents moved here in the 1970s. My grandparents are both from India. Both sets of my grandparents are from India. I was particularly close to my dad's side, my grandfather in particular. My dad was busy and traveled a decent amount. He and my mom would tell you that my grandfather raised me just as much as they did, especially when I was young.

My dad was hardworking. He's my best friend. He's an amazing influence in my life. He's still considered my best friend. My grandfather was the opposite of my dad. He was very calm. He meditated for an hour or more every day.

Mm.

The culture I grew up in is Jain, which is a subset of the various Indian cultures, or Indian religions. Jainism, a little bit like Buddhism, has a lot of tenets around meditation. He's the most peaceful, calm guy. And so, when I was growing up, I just knew him to be this very calm, straightforward, deeply equanimous person.

It was only when I was 8 or 9 years old that I learned he owned a gun shop, which was sort of counterintuitive to the guy he was. We would go back to India, to Bombay, or Mumbai, every year—at least once a year, sometimes even twice a year. When we got there, his house was tiny. It was 1 or 2 bedrooms, a kitchen, and then literally just a hole in the ground for the toilet.

It was a pretty run-down piece of property, with dirt everywhere and very little flooring. But what he did have in that house was an amazing gun collection. It was astonishing, and it came from the stores that he used to have. It was not really—you think about a Bass Pro Shop as a gun store, but it was not that. It was really collector's items that he had found his way to collecting and selling over the course of many decades.

I'd hang out at the shop all the time, and the people who would come in included everyone from English gentry looking for a place to hunt in India. They knew him well. His name was Dharichand. They'd say, “Dharichand, what about this gun versus that gun?” And he'd sit there and opine for 10 minutes on which gun was better than the other gun.

It wouldn't be about the millimeter casings or the pullback. It would be about the design and the craftsmanship that went into each part of the gun. It was an appreciation for the artistic craftsmanship that went into this beautifully designed piece. It was a little bit like talking about art. In fact, there was almost no relevance to what the capability of that gun would be.

I would just spend hours with him in the shop, and the passion he had for it was deeply infectious. My brother and I would spend all our time studying every gun and asking every question. By the end of the summer, I could usually run down whatever was in that shop and tell whoever was in there about it.

Can you tie the feeling of that appreciation for craftsmanship to what you do now? Is there a direct line? Do you think that, had you not seen those guns, that appreciation would have been that impactful? Or would you have come to it a different way?

It's hard for me to know what it might have been like if I hadn't experienced that. But having experienced it, there's no question in my mind that I developed an appreciation for humans creating beautiful work for other humans in particular.

If you think about the business I'm in today, it's evaluating founders building what we think are generational companies and being a partner to them. I do think there's an artistic form to it. We oftentimes internally at Greenoaks describe a company as an artist painting a painting.

I tell a lot of our young team, “If you're in the business of evaluating painters, you've got to study the types of tapestry you could use, the paints they use, and different forms. You study all the great artists of every generation through history. You talk to artists all the time.” Companies are just founders painting in many ways.

I think I certainly got an appreciation from that for what quality can look like, on a comparative basis, versus something that's just not as good quality.

Could you describe this acronym, JDCE, which I know is a key part of the early Greenoaks story and something I'm sure you still think about a lot? Maybe pick an example and go as far down as you can on what made for a JDCE in a company or product that you were evaluating.

Yeah. JDCE stands for jaw-dropping customer experience. If you put 5 drinks into everybody at Greenoaks on a Friday night and you're just like, “Tell me about your life,” they just talk about jaw-dropping customer experiences and JDCs. It's like we have it tattooed on our arm.

If you step back, there's a fundamental tenet at Greenoaks, which is that a very small number of the world's founders are going to produce a significant proportion of the value that humans enjoy. They're going to move the world forward through the products they build and the companies they build, and everything else is just a shell game along the way.

There are some tenets around building those remarkable businesses at scale that we think are really important. One of them is building a jaw-dropping customer experience. It's really hard in the world of capitalism to build something that delights humans at a differential rate from what anybody else on Earth can do.

Think about when you pick up your iPhone, or the first time you might have used Uber, or, if you're a developer, the first time you used Stripe for payments. If you're a trader, maybe you opened Robinhood. Capitalism is basically full of a sea of businesses that are not really doing anything that difficult. They're just me-too products swimming in the river of beta, if you will.

I think the steps to creating a JDCE, a jaw-dropping customer experience, usually start with breaking trade-offs. It usually starts with doing something very difficult, either technically or operationally, that would usually give competitors nightmares. You have to do something that was borderline impossible, or perceived to be impossible, before.

You have to do it from a customer-centric perspective. You have to really figure out what the customer pain points are. You could ask some customers, but usually customers can't even articulate all the pain points they're facing.

They just know they're frustrated or that the experience is suboptimal. We're lucky at Greenoaks. Over the last 12 or 13 years, we've been lucky enough to partner with a number of companies that have built jaw-dropping customer experiences. I'll tell you where we created the word. I created the word after spending a lot of time with Coupang right at the beginning of Greenoaks.

In the case of Coupang, Bom started a business that was just starting to sell products like any other online site would sell products. It was really a marketplace. He made the decision in 2013 or 2014 that he would start to transition that to building a 1P capability, meaning that he could pick, pack, ship, and deliver a wide variety of SKUs—everything from soap to tissue paper to golf clubs to fresh groceries over time.

In the early days of that, if you asked people around Korea, they would tell you, “We don't need faster delivery. Everything shows up here on 2.5 to 4 days. It's great. It's totally fine.” His view was that it should be consistent, reliable, fast delivery: You get the stuff you ordered on time, usually within 12 to 24 hours. That sounds obvious today. You order something, and 12 or 24 hours later, it shows up at your door. Now it's called the Rocket Experience at Coupang.

At the time, building that sounded easy: Open a warehouse, put a bunch of stuff into that warehouse, hire a bunch of drivers, work with those drivers to fill up their trucks, deliver to the door, and drop it off. There are a bunch of things that break when you actually try to build that experience step by step. The first thing is that the unit economics completely break.

Mm-hmm.

Second, to actually drive throughput through these, do you buy from manufacturers? How much do you buy from manufacturers? What do you do about your inventory turns? How do you surface the right stuff on a website? It is extraordinarily hard to go build all that stuff, and it took years. It took 2 to 4 years to really start to build that flywheel so it worked.

What did it entail to build a jaw-dropping customer experience? It took new technology. Coupang built not just a new warehouse management system, but everything from what the consumer touches on a website all the way down to new routing software. FedEx famously never wants a driver to take a left turn, as it takes a little bit more time. It was that kind of optimization.

It was infrastructure. It was building warehouses that were the size of football fields in a place that doesn't have a lot of space, by the way, in Korea. It was building delivery camps and localized distribution points where you have thousands of apartments, to make sure you could have people run up and down the apartment buildings to deliver something. It was making sure that you had the right packaging so that you didn't get stuck with lots and lots of boxes.

It came down to figuring out where to leave something outside someone's door so you don't wake them up when you deliver it at 6 AM, and to make sure it's safe. When you add all those things together—actually, the way we came up with the term is that Bom would show us—you'd see in the cohort behavior that average retention in pre-1P delivery was probably in the 30s overall for the market, not for Coupang specifically. Coupang's 1P capability, which was eventually called Rocket, had retention in the 60s on a cohort-retention basis. So it was clearly working.

But that wasn't the coolest part about it. The coolest part is when we would ask customers about their experience. We'd do these video recordings, and Coupang would do them as well. I remember multiple videos where the woman—the mom of the house—was crying because the diapers were showing up that morning, and she didn't have to carry these giant boxes home from the store. She was like, “If you took this away from me, I don't know what I would do. Please don't take this away from me.” That is not an NPS score of 9. That is a jaw-dropping customer experience. That is incredible.

When you think about Bom, a person like that whom you met early, I think you led 5 of the 8 rounds in Coupang.

Yeah.

Maybe tell the investment side of that story. That's what Bom is doing for one aspect of creating this incredible, loyal customer and fan base. Meanwhile, you're doing something very differently through Greenoaks. Typically, a company like yours would invest, maybe lead the Series A and participate in the rest of the rounds, and own 5% or something at IPO. The way that you've always done it is very different. You're very, very concentrated.

Maybe just talk step by step through the 5 of the 8 rounds that you led. How much did you end up owning? Talk us through the numbers, the position, and this as an investment case study. Obviously, it's an important one for Greenoaks, but it's indicative also of the kind of investing that you do and how it's different from other firms of your type.

We think of ourselves as very long-term investors. If you really want to understand how long-term we are, I've been on the board for about 15 years, and this is public information: Just last quarter, we were buying more shares.

Yeah.

So it tells you—

More than just 5 of 8 rounds.

That's exactly. We're still actively investing and helping where we can in the company. I consider Bom's development of Coupang and my development of Greenoaks to be intertwined. It was one of the first investments we made, and I joined the board pretty quickly. It was a seed investment.

Greenoaks is probably best known for its growth investments. We like to lead growth rounds in companies that we think will be a meaningful part of the S&P 500 over time. When we invested in Coupang, Greenoaks barely existed. When I was telling Bom about Greenoaks, he was like, “I've never heard of Greenoaks.” And he's like, “Don't worry, nobody's heard of Greenoaks.”

It's me.

He's like, “You're hearing about it for the first time, and I just made it up.” He was kind enough to bring us in as an investor.

It's hard to start anywhere but the founder, which in this case is Bom. I would say Bom possessed a lot of the tenets we look for in any great founder. It starts with focus. Bom had this unique ability early on to identify what was the most important thing in the company and focus all his time on that, to the exclusion of everything else.

It wouldn't be unusual if you looked at Bom's calendar on a Sunday night: Everything the next week—Monday through Friday—would just be blocked out with one single thing he was trying to accomplish. If it was negotiating cost of goods sold in the diapers division in mid-2014, there'd just be 2 weeks—

For diapers.

—to just do that for six hours a day, five hours. He would assemble a team and go deep on that and let everything else burn if needed. That kind of focus is just extremely unusual.

People like to say they're focused. They don't really understand what focus means. Focus means saying no to everything else—everything else—at the cost of doing what the single most important thing is. There's 2 parts to that. It's the ability to prioritize what is most important. You have to practice it to be able to intuitively grok what is most valuable and most important, and then the ability to maniacally do that at the cost of everything else is an intestinal fortitude that not a lot of people have.

Second, just the ambition. There was a lot of clarity reasonably early on that by building this 1P capability, Bom could build the best e-commerce experience in the world. Not the best in Korea, not the best in Asia—the best in the world. Better than Amazon, better than anywhere else on Earth. He has done that today, but at the time, that didn't just ring hollow.

There are a lot of people who say that. You meet founders all the time who have very lofty ambitions, but there's a credible aggression to it that you're sort of able to validate along the way. I've never met a founder who doesn't want to climb the tallest mountain. Of course, I want to climb the mountain. It's the ability to demonstrate that they've mapped out their route, they've shown you how they're going to ration materials, and they're going to show you what trade-offs they might have to make along the way.

They'll tell you how they built the team to make sure they get there. They'll tell you the steps of what's going to happen along the way. They've maybe even tried a few paths and come back and said, “Okay, now I'm going to go this way.” There's a credible aggression to it that I think is unique to just pure aggression.

Many of the rounds we led in the company were a result of Bom attacking this mountain. The building of Coupang was over 10 or 15 years to where it is today, and there are beds in every delivery camp. Bom was sleeping on the floor. There were points where I talked to Bom more than most anybody else in my life—I mean, other than Benny and my wife, Ash.

Still?

Oh, yeah. Still to this day, I talk to him a tremendous amount. Back then, I don't think there was an hour a day where I hadn't talked to him. 2 AM, 3 AM, 4 AM, 3 PM, 10 AM. His cycle times were 24 hours. There were points of enormous exhaustion for him and the team.

So if you think about those rounds that you led, I always struggle a little bit with trying to understand whether you're a more founder-centric investor or a more business-model-centric investor. I guess the answer is both, but I'm sure at different stages of those 8 rounds, you were investing for different reasons.

Is that often the case that at some point you might be backing really just the founder and what they're capable of, and at other points you're really focused on the unit economics? Is every single investment idiosyncratic in that sense? Because I don't remember a conversation with you about a company that didn't include a pretty hardcore quantitative angle. But so much of what's made you successful is that you've backed some of the best founders. Help us square what matters when.

I have a controversial statement, which is I don't think there are many truly amazing founders who are building bad businesses. I've maybe run into 1 or 2, but they figure it out pretty quickly. I think that truly remarkable founders think in terms of jaw-dropping customer experiences. They think in terms of competitive moats. They think in terms of scale, getting to large TAMs. So every once in a while, I run into a founder who hasn't figured all that out yet, but usually they're very young, and the learning curve is very steep.

It always starts with founders for us. Now, I'm going to come to business models in a second, but if you believe what Greenoaks believes, which is, I don't know, there's been what, 100 billion people on Earth that have lived, and something between 10,000 and 100,000 have affected the technological progress of humankind, our job at Greenoaks is to find a few hundred more that can join the pantheon of great humans who have driven humanity forward. Then we're squarely focused on that first.

I think that where we can generate alpha, where we're sometimes differentially great partners, is by having a deep understanding of the business model. In the case of Coupang, and in the case of most of the businesses we invested in multiple rounds, it's never up and to the right. Oftentimes in internet and technology, good businesses are hidden in bad P&Ls. Not everything works right away, but things are going really fast.

People sometimes think Greenoaks is looking for momentum or progress. Actually, we're happy with volatility. It's kind of counterintuitive. Volatility is something we're very open to, and we're open to it because when there are moments of high volatility, it's a lot harder to understand what's happening to a business and what's happening to a market. So we will follow great founders into their businesses, and there'll be moments where the businesses do not feel all that great.

There's been, I think without exception, most of the businesses we've been invested in for more than 5 years have gone through a rough patch or 2, where the fundamental premise of the business and the quality of the business are being questioned. And I think if you could see through it, sometimes that's right to be questioned. We were wrong. But every once in a while, you could sort of see through that and see the other side—that this is just 1 step along the way of building a great business.

So in Coupang, just to close out that case study, over how many years—from the first one through today, so the whole time—did you invest? How much did you invest at each round? How much did you end up owning of the business? Bring some meat to it.

We invested a little bit under $1 billion in total capital across 10 years. Led five VA rounds. We invested almost every other year, if not every year, in the company for 10 years until it went public. And since it's gone public, we've bought more shares maybe 2 or 3 of the years.

I want to get into your deep belief in growth, not just from an investment standpoint, but from an almost deeper economic or even philosophical standpoint. Why do you care so much about the concept of growth? It seems like that is the thing underpinning all of your behavior.

We're big believers in capitalism. The microphones we're in, the chairs we're in, the view outside—it's all built with capitalism. As far as I'm concerned, this has been the greatest invention humans have ever had. I believe it is our job to further our journey as humans within the framework of capitalism.

When we started Greenoaks, we described ourselves as a growth... We actually never used the term “growth.” We just said we like to invest in great businesses that are going to be a meaningful part of the S&P 500. To this day, I still have a list of the S&P 500 companies on my desk. I stare at the list all the time, and I just try to figure out what companies are not on that list today that will be on that list tomorrow, and then how do I work tirelessly to become the single most important partner they have?

To be honest with you, I've been surprised that people think there's other large-scale ways to invest besides growth. I think this is by far the most interesting way to invest. A couple of reasons why: I mean, you could go back to the 1960s, and you could talk about companies like AMD and Intel that were around in the 1960s. You could go to the 1970s, where you had Apple and Microsoft. You could go to the 1980s, where you had Dell and ASML. You could go to the 1990s, where you of course have Google. In the 2000s, you have Facebook.

The small number of companies—I think 1% of the S&P 500—make up 90% of the value, and most of those were growth. All of those were really growth companies. They were companies that over the course of many decades reappropriated free cash flow away from these legacy incumbents, moved it into their own purview, and became the staple for how consumers and enterprises work in the world.

To me, that is such an enjoyable way to spend your time: to find founders who are hell-bent on trying to create 1 of those S&P 500 companies that delight customers at scale. It's also the most rewarding financially. I think the companies that we invest in will capture the lion's share of new economic value in the world. Everything else is just a shell game around it.

I have lots of friends who figure out what's happening quarterly with Netflix. It doesn't matter to me at all. I'm much more interested in figuring out whether Netflix is a great compounder that's going to grow over 20 or 30 years.

It seems like one of those things where it's, “Oh, high is good. When is it not?” Just refining the hidden costs of really high growth.

There's going to be a lot of people who disagree. Growth is an output, not an input, and growth for growth's sake makes no sense. But one of the unique things about our industry and about great companies, if you historically look at the growth rate of many great technology companies, is that they were very high for a long time. They had a lot of growth persistence as well, or growth endurance is another way to put it. The next year, was it in the 80% or 90% range of the previous year? The best companies have extraordinarily high growth persistence or growth endurance.

I am a believer. There's this meme that's come out that too high of growth destroys companies. I think very high growth is very good for companies. I think unreasonably high growth is very good for companies. The Mario Andretti quote—“If everything's under control, you're not going fast enough”—type of thing.

Mm-hmm. Mm-hmm.

It is healthy in my mind. In the businesses I've been involved in, it's healthy to let a few things break here or there in order to keep pushing, and that results in high growth. And especially for software companies, or bits companies rather than atoms companies, I think it's good.

Do you have a favorite anecdote or story of a company growing really fast from the history of Greenoaks that kind of makes that point?

A lot, yeah. And by the way, what's interesting is almost every company in our portfolio that's been successful has had many 100%-plus year-over-year growth rates. Wiz is a great example.

When the war started more recently, when Hamas attacked Israel, some disproportionate share of the people involved in Wiz on the go-to-market team and the engineering team went to serve their country. Our natural reaction—I think it was around Q3, or it was October—was, of course, “This is the right thing, and of course we should just absolve—”

Slow down, yeah.

—the company of any expectations for November and December. Just forget even reporting. Just worry about your people and worry about the country. I think they had 1 of their best quarters. They're just like, “That doesn't mean we're going to slow down. We're going to keep going.”

Having unreasonable expectations is a competitive advantage. Another example of this is Bom Kim, who grew the business incredibly fast at Coupang for a long time. And oftentimes, when you have strong product-market fit, it is your moral obligation to drive it as fast as possible.

Mm-hmm.

But things break along the way, especially if you're in the atoms business, too. At points, we had stockouts and were constrained by what we could offer consumers. We had to hire more drivers. We had to build more warehouses.

We had a year that was like 18% year-over-year growth, and there were people involved in the company who were telling Bom, “Oh, that's good. You don't need to take it back up. Just leave it. You know, Amazon never grew more than 30% year over year. That's fine. You're good. Just get back to 30%.”

I remember having this conversation with Bom, and I said, “I think 1 of the hardest things you'll ever have to do is convince everybody at the company to be a high-growth company again, to try to take that growth rate well above 30% and start to bring a growth mindset, a growth culture, back to the organization.”

He commented to me many years later. He said, “It was 1 of the hardest things we did.”

“I’m so glad we did. So glad we became a high-growth firm again.”

I want to come back and really talk in detail about this process. I like the way you framed it: this search for the next potential S&P 500 company, with everything else a footnote. There are all those famous studies about 4% of the companies delivering 95% of the returns through equity history. It just seems like that’s always been the case and probably always will be.

How does that impact how you run a first meeting with a company? What are the sorts of things going through your head when you’re wondering from the start, “Can this be a company that everyone in the world has heard of and used?” Because these things all start small. How do you evaluate that question even at the Series B or C or whatever, versus if you were just saying, “Is this company going to make me a nice return, but maybe it’s never going to end up in that list?”

I think it starts well before a first meeting. I think it starts with figuring out why you want to meet someone. Why are you differentially great for that person to meet? What do you understand about that business? What do you understand about that opportunity?

For the vast majority of what happens in our market, we are not the right people to have that first meeting with. But there are a select number—I don’t know how many meetings happen in our markets; it’s tens of thousands at this point. There are probably 200 that happen a year where we think we’d be a differentially great partner to that person, and we know it well in advance.

And so we prepare an incredible amount before that first meeting. I don’t mean just going on the website and using the product a little bit. Our first meeting should feel more like a fifth or sixth meeting with a founder rather than a first meeting. It allows us to go much deeper in that.

The things I’m looking for—someone just asked me, so I’m going to give you a tangential aside. Usually, I like to visit a company rather than have them come to us, which is also counterintuitive because you can do fewer meetings if that’s the case.

Yeah, yeah.

So I’d love to go visit. I’ll give you a battery of things I’m looking for. But if you put a gun to my head and said, “There’s only one thing you could ask this company or people at this company,” and I never actually ask it, but I always think about it right away, it’s this: when I visit a company and watch people and meet people, I’m trying to evaluate just one thing. If you polled everybody at this company and asked them, “Are your best days ahead of you or behind you?” what proportion of people would say each—and especially the most important people?

It’s not year-over-year growth, it’s not margins, it’s not strong-form competitive advantage, it’s not JDC. All of those things matter. But if I had to pick one thing, very early on—even in a startup—you could tell if the energy isn’t there, if people aren’t more excited about the future.

I was just in Europe a couple of weeks ago. The vast majority of people, for what seems like 40 years, have believed the best years are behind them, not ahead of them. If you were running a company, that’s the one statistic you should care about more than anything else in the world.

When I spend time with a founder and I’m talking to them about their business, I’m trying to figure out: are they high-focus, high-ambition, and determined? Do they have divergent thinking that allows them to see something in the world and in their business that other people would vehemently disagree with, but that is right?

So it starts with the founder, the personality of that founder. I haven’t been able to sit down and write it on a piece of paper, but I think every great founder looks approximately the same. Every bad founder looks different.

Yeah, the dot-com people, yeah.

Yeah, exactly. This is controversial. I do believe there’s an archetype for a great founder, and I think that once you see it and learn it, it’s a repeatable process. I think some of the things I mentioned are part of that.

I think that you’re usually looking for someone who’s built a jaw-dropping customer experience. That’s why we invest at the stage we invest in.

Because it takes some time.

It takes some time. It takes some time to get that experience right, especially in things like infrastructure SaaS, where at the beginning, the infrastructure product is just not that good.

Yeah.

It just takes time to get the product to a performant level where it could actually delight customers. Consumer is a little bit different. You can feel it right away.

We’re looking for defensibility in that. What technical or operational trade-offs have you broken that allow you to have the early signs of a moat? We’re looking for competitive advantage. Do you have network effects, shared skill economies, counter positioning, hoarded resources?

These are just adjectives we use to describe the characteristics of a business that allow it to produce unfair amounts of free cash flow over a sustained period of time. I tell this to our team all the time: I think with Buffett, you could sell 30 points of IQ and still be great. I think with us, you could sell 40 to 50 points of IQ. It is not complicated. It is the discipline of only looking for those types of businesses and those types of founders. There is no secret sauce. It’s just consistency—doing that over and over and over again across thousands of companies.

Is it true that you are doing pretty much the first meetings almost every time with these founders?

Yeah.

That is strikingly different from the industrial complex of private growth-stage investing that has emerged around you during the time that Greenoaks has been alive as a firm. Maybe highlight all the other ways in which you feel you and your process are the most different from what has emerged as the normal way of investing for your peers, let’s say.

I think what’s happened over the last 10 years in particular, but it’s been happening for a while, is that when I grew up in the industry and you drove down Sand Hill Road, there were like 6 firms. The way the process worked is you’d walk into someone’s office—usually someone was famous, you’d be a no-name entrepreneur—you’d tell them your idea, they’d kick it around for a while, and they’d do 3 more meetings or maybe 4 more meetings.

There’s this great Elon Musk quote, which I won’t get exactly right: “Every manufacturing process is wrong, every production process is wrong, every design process is wrong. It’s just a question of how wrong.”

Because the likelihood that we could have envisioned all the available capabilities that we have today when we designed that process is zero. So many things have changed. I think our industry is a little bit like that.

We’ve gone from a process where people would take a little bit of time and wouldn’t really know your company when you walked through the door to now having gone from a cottage industry into a large-scale asset class. And I think there are a lot of firms, correctly so, that believe venture—at-scale venture with lots of capital, lots of companies, lots of coverage, lots of AUM, lots of people—is the right way to prosecute it.

And I think they’re right. I’ll get to why we’re doing it differently, but I think they’re right because why should people have earned 35% net IRRs over the course of many decades? That’s too high for any asset class.

Mm-hmm.

It should be in the teens. Usually, you could deploy a lot more capital and a lot more people and bring it down to the teens and still have lots of people excited about the way you invest. I think that has resulted in essentially the private-equitization of our industry.

I would think of a lot of our brethren—and these are friends of mine. I really like them, and I think they’re doing a great job—but they essentially have a matrix. They have industries on the top and, I don’t know, maybe geographies—

Stage.

—or stage on. Whatever their matrix is, something comes into their firm, they’ll send it to that part of the matrix. That little box of people goes and chases after it.

What they’ve done is they’ve said, “Listen, everybody has a slide which says, ‘What are the Series A, Series B, or Series C companies that happened this quarter, and what percentage coverage did we have?’”

What they’re explicitly telling you is, “We are optimizing for coverage. There’s too much happening. There are too many ways to make money. The world’s a big place. We have 5 offices and all these great people, and we are a factory that’s able to produce it.”

Now, I think that’s actually the right end state for a vast majority of our industry. I think 90-something percent of our industry should work that way. But I think for the 10 to 15 best founders each year, that’s precisely the wrong way to work.

What you should definitely not do is meet someone in that little matrix, have it elevated to a senior partner at the firm, or maybe—most of these firms are not founder-run anymore anyway—have it elevated to someone at the firm, and then chase it all down, bring some people in, and try to win it. You become one of 35 or 40 investments they make that year.

I think it reduces the purpose of venture capital, which is a little bit of validation, a little bit of actual company building and partnership, and a little bit of speed and velocity. And so I think if you’re one of the 10 to 15 best founders, people like us should be able to find you before anybody else finds you. You shouldn’t have to explain what you do all that much. We can understand from the outside in better than most anybody else when we hear it.

And you should get all of Greenoaks—not a little bit of Greenoaks, all of us. And because we know that there aren't more than 10 to 15 people we want to really meet each year, we don't need to bifurcate our firm into multiple layers and have investment committees or any of that. We should be laser-focused on the vital few and basically leave alone the trivial many.

One of the coolest things about Greenoaks—I've seen the reports, I've talked to you about companies, and so I've seen it firsthand and know that it's true—is the sheer amount of information that you said you gather on a company even before you meet them. How has that process evolved? Talk us through that machinery, because it's very distinctive relative to other firms that I've encountered.

When I call you, you tend to know more about the company than anyone else that I talk to about the company, which sounds very non-scalable in some way. If your customer is one of these 10 people each year, it sounds like one of the guns in your grandfather's store, not a mass-manufactured Smith & Wesson or something. So how do you do both of those things? How can you have so much information about these companies and still have it feel to them like artisanal or something, or high-touch, or it's you in the meeting, it's not some junior associate? The 2 seem a little bit at odds, but I've seen the work, so.

I don't think there's any secret to it. I think it's highly replicable. One thing to note is that we started Greenoaks when I was 27. We've come a long way. We have no beach houses. We like being in the office 80 hours a week. We like working with each other. We're extremely high-performing, and we love understanding companies. There's nothing else. We're not on Twitter. We like basketball. We don't have to go to any games. By just being ultra-focused on this, to the exclusion of anything else, it's surprising how much you can get done.

In this process, are there common negative things that you hear about people that actually excite you?

Yeah. Oh, man, what a great question. Tons. It's funny; we learned the hard way on this, too. Early on, when we were building Greenoaks—this is like GCL 1—we had heard some amazing things about Elon Musk at SpaceX, obviously. He was already Elon Musk at SpaceX. He had Elon Musk at Tesla. He was already the guy.

Yeah.

But we had some mentors, some people in the venture capital industry. It's actually the biggest mistake we've ever made at Greenoaks, this mistake I'm about to tell you about: we had heard that he fires people quickly, that he's hyper-aggressive, and that he manages down to the nth layer. He micromanages people like crazy. He disappears for large swaths of time, comes back in, and changes everything. And we're like, “Wow, this guy sounds like he's doing too much.” And we had mentors and friends of ours who were like, “He's not backable.”

Yeah.

We were like, “Oh, well, I guess we can't back him.” And we didn't do the primary work ourselves. We actually outsourced that work. This is one of our big learnings. If you looked at the feedback we got, it read like it was much worse than it actually was. I'll never let that happen again.

Some of those characteristics are exactly what we look for in a founder. We like micromanagers. We like people who are in the weeds. We like people who fire fast. Oftentimes, we read about founders who have such divergent thinking that their team thinks one thing, and they are hell-bent on going another way. They have some data to back it up, but they're hell-bent on going another way.

What have been the hardest moments in building Greenoaks, the firm itself? You said before none of these companies are up and to the right. There's always these existential moments. Have you had truly existential, scary moments in Greenoaks' history?

The thing about our business is that the barriers to entry are very low, but the barriers to excellence are really high. We care a lot about being excellent at Greenoaks, and so I think a lot of the challenges—anybody who starts a business has tons of challenges—haven't always felt like that because we have a lot of fun with the way we do things. But I could give you, in order, the number.

Actually, I was just looking out the window, and Benny and I, when we first came out here, didn't have a seed deal or anybody who was going to back us when we left D. E. Shaw, and we had to do it all on our own. We raised our first $50 million of capital. I remember we came out here, and we stayed at the DoubleTree on Lexington. I don't know if it's still there, but they give you the cookies.

We stayed in 1 room with 2 double beds. I don't know if it's still there, but Blackstone used to be across the street. We were too cheap to go to a Kinko's and print out the decks, so we'd have our friends at Blackstone print out all our Greenoaks decks in the printing room. Then we'd staple them together, and we'd go up and down here. We had some amazing investors who joined us.

Who was in that $50 million?

Oh, gosh. Henry Kravis was one of our first investors. I should talk about a couple of them because you always hope to get to a point in your life where you get to pay it forward.

We went to see him at his old office at KKR, and we walked in. We didn't know we were supposed to wear ties. I maybe wore a suit jacket, but I was dressed probably something like this—the way I dressed every day for 15 years. We walked in, and Henry was in a tie. He walked into his conference room. It was breakfast, and he looked at us. He was like, “Nobody told you about the dress code?”

I remember it felt terrible. He was a legend to us already. He sat down, and he listened to every word. He asked incredible questions. At the end of it, he was like, “I'm in. I'm committed. I'm going to invest with you at Greenoaks.” Then he offered a number of other introductions, which I'll come to in a second.

Not only that, about 6 months later, he came out to Greenoaks. He came to our office just for our team to meet Henry Kravis. I remember he came into our bullpen, and he was like, “I hope you guys are making me some money,” and walked away. To do that for a young team, a young fledgling organization that looked up to someone like Henry Kravis was incredible.

By the way, the best part about that story is that I'm not the only one who has that story. I think there are a few dozen—

Very similar.

people who have that story about Henry, which is just incredible.

What was your pitch to him? What was the original Greenoaks pitch?

Yeah. I'd have to get back to some of the hard things we've gone through. That was one of the good things.

When you're 27 years old, there are 2 ways you could walk into a meeting like that. Well, maybe on a spectrum. One end of the spectrum is, “I'm 27. I'm really smart. I don't know what I'm going to do, but just trust me. I'm going to figure it all out and make a lot of money.” The other way is, “I have a set of ideas, and these are ideas that I think are really interesting. Some portion of the money you give me is going to go into these ideas, and the rest is going to go into ideas like this.”

I was very much in the latter camp. I was describing what we were seeing at companies like Palantir, which was one of our first investments, in a tiny amount. There was also Flipkart, a company called OYO Rooms, and Coupang. I was starting to say, “Look, these are the kinds of ideas we're seeing. This is what I like to be investing in. I've invested a de minimis sum of money in these businesses today. I'd like to invest a lot more tomorrow.”

It was driven by 3 things. It was driven by the teams. It was driven by the quality of the businesses that I thought those companies were building, and it was driven by returns math. My view was that this is the beginning of a 20-year, 30-year opportunity ahead of us, and I articulated that over the course of maybe 30 or 40 minutes.

And how much of that was, “The legendary internet businesses are being built, and we're going to back them”? Did it feel that simple at the time? I want you to tell the D. E. Shaw–Tencent story at some point there, as a key moment of realization, I think, for you in your history. But was that the gist of the story—that this new enabling layer of technology is getting digested by the global market, that's going to take 20 years, and we're going to back that?

Yeah, it was.

Is it true at that time that you deleted your personal email?

Yes. I don't have a personal email to this day.

We all do 1 thing.

Which probably is a compliance issue somewhere. But yes, I just have a Greenoaks email. I really felt at the time, and I feel this today, that this is what I wanted to do for the rest of my life. I was lucky enough to figure it out pretty early, and nothing was going to stop me from doing it.

Just to set the initial fertile soil or whatever, tell the story of being with D. E. Shaw.

D. E. Shaw and encountering Tencent and—

Yeah.

What that episode taught you.

I was at Kane Anderson in LA buying software companies, and I had a great mentor and a great boss named Adam Fisher, who was at D. E. Shaw. He ran a small group there, which was financed by a parent company called OPG. It was in New York, and then he moved out to Hong Kong. When I got out to Hong Kong, this was 2007.

And you moved there on a whim.

I moved there on a whim. This is a great story. Adam called me, and he's like, “Hey, I want you to come join me.” And I was like, “Great, I'm happy to do it. I'm wrapping up here, probably another 6 months, and we can start to talk about it.” He's like, “No, no, I mean Monday.” And I was like, “Well, I probably need to figure it all out, but I guess I could just be in the office in New York on Monday.” He's like, “Well, I need you out in Hong Kong on Monday.” And I was like, “Wow, that's fast.”

I got out there, and it was like we were looking for office space. It was not well organized. We were figuring it all out from scratch, and it was an amazing time to be out there. At 24 or something like that, to be out there was amazing. It was an incredible experience, and China was taking off.

It was a special situations group, so I actually spent none of my time on internet companies. I spent all my time looking at Macau real estate, Chinese real estate, and India real estate. Distressed debt came later. I'll give the most favorable interpretation: If Adam were sitting here, he would describe it as, “I was a benevolent but negligent boss, and I let Neil spend time on things that were interesting to him at the cost of spending time on things that were important to me.” I'm very grateful to this day for allowing me to do that.

I remember going out to Guangzhou to look at real estate. It was 2007, and I got out there. Guangzhou was nothing at the time—just a couple of buildings. There was no Google Maps out there at the time, so you'd land and say, “Hey, I have to go through this apartment building. I have to look at potentially buying this new high-rise apartment building that's just coming up, built by a developer, a spec developer. I get to buy it, and I rent it out. The yields might be in the 12% to 15% range. Pretty good yields.”

Nobody would know how to get to this apartment building because the road didn't exist 6 months ago. So you'd have to pay some guy on a motorcycle to take you out there. They'd take you out there to the high-rise. You'd sit down in a chair, and they'd auction off the apartment building. I'd be sitting there competing with a guy who was wearing a wifebeater and smoking 3 cigarettes. I was like, “Who is this guy? I represent a multistrategy, $30 billion-plus investment manager. Who is this guy?”

There are moments in life where you realize there's the top, and this was one of them. This guy just had 100% LTV financing from some bank that would eventually have to wash the NPL through its balance sheet. But at the time, I was blown away. I was like, “Wow, this is a pretty crazy world.”

They would take out their phones and start using them for things. I had a BlackBerry at the time, in 2007. The iPhone came out in March of 2007, I think, and the App Store came out in 2008. It hadn't really gotten to China in any way whatsoever. The Beijing Olympics were in 2008, so I went out to Beijing, and it was really at the Beijing Olympics where I started to flip into what could be happening in technology.

Michael Phelps won all those medals at the Beijing Olympics, and the lights would go down in the Water Cube, and they would spotlight the swimmers. The first time they did that, nobody's phones were out. The last time they did it, everybody had that little glow on their face, and the BlackBerry just didn't have that same glow.

I would look over and ask my friends, “What are you guys using?” And they were like, “Oh, we're using QQ,” which was the predecessor to WeChat. I remember going home and thinking, “QQ, what is this thing?” I'd look it up and study as much of it as I could. I remember finding a stat: QQ was adding something like 30 million subscribers a month, which is still a crazy number, by the way.

Mm.

But at that time, that was unheard of. It would eventually turn into WeChat. At the time, Adam was asking me to look at distressed banks in Europe that had been around 150 years and had 30 million total deposit holders. This company was adding 30 million people a month, and I was like, “I want to spend all my time on Tencent. I don't want to spend any of my time on some distressed bank in Europe. This isn't interesting to me.”

Much to his chagrin, frankly, and thanks to his support, I ended up being able to do a little bit of that there. I left at the end of 2010, beginning of 2011, and moved back to San Francisco to start Greenoaks purely because this is all I wanted to do.

Can you tell me everything about Benny?

Oh, sure. I don't know what I can tell you. I could tell you a lot about Benny.

Tell me a lot about Benny.

Someone asked me a couple of days ago—they were starting a firm, and they asked me, “How do I find someone like Benny?” And it's like, how do you marry well?

How do you get married?

Yeah. It's like an impossible statement. I wish upon anybody in their life to have a partner and a partnership like the one I have with Benny. I think if Greenoaks was an abject failure and we screwed everything up, I would still be grateful for the journey I had with Benny.

By the way, I should highlight: Benny is my true partner. I talk to him more than I talk to my wife, Josh, actually, by a fairly large margin. Josh would agree with that, and so would Cheryl, Benny's wife.

It has been 20-plus years. We fight all the time, but there's never been a single day where we've actually been frustrated with one another. I met Benny when we were both still in college. He was between his freshman and sophomore year, and I was in my junior-to-senior year, working in investment banking as an intern. I was working on a financial transaction. It was actually a really interesting financial transaction.

It had to do with cruise line ships, and the way you would finance some of these cruise line ships is you would find a country that was willing to give you 100% LTV financing. In Germany, they're called like a KD or KG structure. In Korea, they're called something else. But these countries would do it in order to give jobs to their local citizens. The shipyards would be full, and they'd make it very tax-efficient for doctors and dentists in these countries to invest.

You have to really be steeped in strange financing structures in your late teens to be interested in this stuff. So I was telling my younger brother, who was at Penn—I think he was a freshman—about this financing structure. It was during Spring Fling. My brother couldn't care less; this is not what he's interested in.

Benny, who was his roommate, was sitting on the couch, and I was like, “Oh, KD or KG financing structures.” I was like, “This kid knows.” I was one of these older brothers who thought all their younger brother's friends were goons. These are not serious people. I perked up and I was like, “Who is this?” It was love at first sight.

Benny and I became close friends. Right away, I knew Benny's zero-to-one clock speed was the fastest I've ever seen to this day. I've never seen someone look at a business or look at a model or think about a situation and so quickly get to the jugular. He's astonishing.

The second thing I'd probably tell you about him that's unique is that he's able to extend our time horizon as a firm pretty consistently. Sometimes, when things are moving really fast and you're in the fog of war, you can find yourself constraining your time horizon. You're trying to make decisions that are optimal in the short term just to make sure that's the corner you can see around.

Benny is so good at stepping back and reminding everybody, including myself—especially myself—what we're trying to optimize for over the fullness of time. Really, really astonishing. He is the most clear and concise thinker one could have as a partner.

So often, I describe a situation that I'm thinking through. We talk about everything at Greenoaks, down to when you walk in and what the lighting is in our office. We are micromanagers to the max. When we talk about investments at Greenoaks, it's not atypical for us to sit around as a team and talk for 3 or 4 hours about a single company.

Then we go home, put our kids to bed, and I'll call Benny, and we'll talk from 9:00 p.m. to 1:00 a.m. We almost do that every night. I've talked to Benny already 4 times this morning.

How do you process AI? Do you sit with Benny and the team and think through—you talked about yesterday, the genetics of the model companies just weren't good when you first encountered them. How do you do that on an updated basis to make sure that whatever opportunities emerge because of this technology, you're most on top of? Do you form some core view on it? Are you obsessively looking at the benchmarks when DeepSeek-R1 comes out? Is that the sort of thing that you're doing?

We do a lot of that. If you just step back and look at AI, we're invested in a bunch of different companies across a bunch of different industries.

What is the common thread? And there's this great—I forget the name of the book—but it was about the Wright brothers figuring out how to get a plane in the air. There were all these people trying to be the first ones to fly. Of course, you look at a bird and they flap their wings, and you're like, “I have to replicate that.”

Mm.

And the Wright brothers were like, “Wait a second. The laws of aerodynamics are the laws of aerodynamics. You're not going to change the laws of aerodynamics. You just have to figure out how to make fixed-wing flight work.” And, of course, they made it work. I think business is the same. Much like the laws of great businesses—

Mm.

—the laws of great businesses.

Mm. We know how this works.

Did you delight customers? Do you break trade-offs to create something operationally or technically really great? Do you have a competitive advantage? Is it a large market?

Whenever we've screwed it up at Greenoaks, it's usually been because we ignored the laws of business. Like crypto: “No, no, you don't need a board in crypto. Don't worry about it. No, no, you don't need an auditor. It's not a thing that you need. You don't need to delight customers. It has nothing to do with customers. It has something to do with price movement and fund flows.” You're like, “This makes sense to me, but I guess the laws are different this time.” They never are.

And so we absolutely look at evals and the R1 benchmark and figure out, wow, DeepSeek figured out a way to deploy a model at a 35× reduction for input-output tokens on a comparative basis to OpenAI's reasoning models. That's a pretty impressive feat. What are the takeaways in terms of competitive advantage for OpenAI's model on a comparative basis to others? That's a really interesting question.

But what we try not to do at Greenoaks is get excited about that development and then deploy our time and effort, eventually investing a lot of capital, just based on that. We try to bring the abstraction level back up to, “What does this mean for customers?” And then we work backward from that.

So when we talk about the model companies, our reaction has been these large CapEx spends. My feeling has been—and, by the way, I've been wrong if you look at the valuations of these businesses—that the investment that you have to make versus the payoff you get, and then the fact that you have to make that investment 12 months later, with a pretty fast catch-up, just didn't strike me as being in the laws of business as a great business model. Of course, ChatGPT has proven that you can build a consumer business on top of it.

I'm curious how you would characterize the changing nature of competition. You're not the only person looking for these 10 outstanding people every year. There are other really talented players in this game and on this playing field. When they meet one of these 10, I'm sure lots of them move heaven and earth to try to be the partner of choice.

Early on, you probably faced less competition. The industry was less industrialized. How has that changed over time? What have you had to do to have your win rate stay this high when you want to win? If it has changed, what have you had to do to keep the win rate as high?

I used to think about this a lot, especially when we were starting, because in our first many funds, people would ask us. They'd have a list of other firms they'd ask us about, and they'd be like, “What about these guys? What about these guys?”

I found that, first of all, if we're going to screw it up or lose, it's usually something we're going to do internally. It's almost always that we've internally messed something up that has led us astray. Just getting the stuff right internally is hard enough. So I don't spend that much time anymore thinking about the competitive dynamic in our industry.

I would actually argue it has become much less competitive. It's counterintuitive. Think about what we're doing. We're scouring the world for founders that we think are going to build future S&P 500 companies, to the exclusion of everything else. But if you think about the job to be done in our industry, it's been layered. People have added complexity in ways that are so counterintuitive.

There are firms whose only job is to do fintech in Brazil. There are firms whose only job is to do everything that comes out of Y Combinator. Their only job is to do New York City consumer startups. It's become this specialization of our industry.

That goal I mentioned, that's Greenoaks' goal. Of course, I don't think everybody would agree that that may be their end-state goal, but they may have a different job to be done on a day-to-day basis.

Our industry is more like—I think this is investing generally. Investing is a game of reducing complexity. It's a game of reducing noise. There's too much noise. And I find the people that are willing to have the intestinal fortitude to dramatically reduce the noise, make their job extremely simple, and have the temperament to allow it to be so simple—to know that you only need 110 points of IQ to do this—the number of people that I feel we compete with on that is very, very low.

I want to get as far into this as you possibly can. Again, I won't name specific firms or names or anything, but really, really, really drill into why it's less competitive today. Because naively, I would say it's different—the supply and demand.

If I just think about it, there's a unit of transaction here. Some cash is going into a business for equity in that business. The supply-and-demand dynamics of how much supply of cash there is for a limited amount of equity in great businesses have gotten way out of whack relative to when you started. There's way more cash.

These are 100 times. I think it's—

Yeah, yeah.

—it was $2 billion when Don Valentine did NVIDIA, and now it's $200 billion or something like that.

So naively, you might say it's way more competitive, and the expected returns—to your point—used to be 35, but they don't need to be 35 now; they're 15. All this cash is driving down that return.

So really walk me through in lots of detail why the nature of firms, who's leading them, the partners at those firms, and all the dynamics that happen make it possible for your statement to be true—that it's less competitive today for you than it was 10 years ago or something.

Two things are allowed to be true at the same time: our space has too much capital, and it's actually less competitive for great companies. I'll try to explain those.

A lot more companies are getting funded. Thousands of companies will get funded by really great investors. And if you look at the matrix we just described—you divide by sector, you divide by industry or whatever it is, geographies, stage—by and large, people are doing investing. It sort of looks like painting by numbers or something like that.

You're looking for certain types of characteristics around growth rate. And, by the way, venture capital didn't invent this. Summit and TA have been doing it on the growth side for a long time. Insight's pretty good at it. On the private-equity side, the entire industry works this way. If it's a 21% IRR, you do it. If it's in bulge-bracket private equity, if it's a 21% IRR, you do it. And if it's an 18% or 17% unlevered return, you don't. Maybe that's even changing. But those are kind of the numbers.

I think the mistake people are making is that this is not the private-equitization of our industry. These are founders building companies. With private equity, it goes to the highest bidder. Every company essentially goes to the highest credible bidder that can move fast and be straightforward.

In our industry, I can't think of a single company in our portfolio—not one. Tell me if you can think of one in yours—that took the highest valuation only. They took some combination of the partner, the brand, the speed, the understanding, the capability of that firm, and valuation.

Now, that doesn't mean you could be the lowest valuation. That's certainly not what I would claim. In fact, I think in some cases we are the highest valuation too. But we have differentiated insight into why we are willing to pay that without sacrificing returns, and that comes from understanding.

If you are driving for coverage—if your job is to make sure you don't ever miss a Series A, and you're doing that by hiring a very large number of people—then what you're sacrificing is fidelity and insight. It's impossible. You can't scale that within the entire organization across multiple individuals.

I've never met a firm that's had more than a few good investors. It's so hard. So you end up just doing a lot more, and it's not clear to me that any firm is that good at figuring out what's good and what's truly exceptional immediately. You figure it out over time.

I was looking back at a lot of our Series B investments. Most of what we do are Series Bs and onward. I was looking back at every round that we had done for the better part of 13 years. Every single one of those had some other company operating in its sphere of competition that traded at approximately the same terms within the same 12 months.

Isn't that crazy? The best companies and the worst companies at the Series B or Series A trade at approximately the same multiples. There are exceptions here and there, but by and large, very few people could actually tell the difference between the two.

Now, if you and I were evaluating Coca-Cola, you might know 10 times more than I know about Coca-Cola. If we both had to figure out what earnings per share were in 10 years, we wouldn't be that far apart. It doesn't matter that much.

But in our industry, at the Series B, we could both look at 2 companies that are kind of competitive, both doing $30 million in ARR, growing 100% a year.

There's a chance that the one you invest in is worth many billions in enterprise value in the future, and the one that I invest in is borderline insolvent in 5 years. There's a huge spread, but yet it's most likely that at the Series Bs, those trade at approximately the same multiple, same terms. And so I think having a system that allows you to build differentiated insight in a targeted way can yield better results. I can't promise it, but it's also just a much more fun way to live life.

Now again, for the 3,000 founders that'll get funding, the market is large-scale. I'm glad our industry is going from a cottage industry to becoming this large asset class. It's actually great for Greenoaks for the later rounds too. There are some of those companies that might be very interested in us down the road. But for the 10 to 15 best founders that care about that relationship, they care about speed, they care about fidelity, and they care about price, I think we are a much better experience.

Do you care about the enterprise value of Greenoaks?

No, not at all.

Zero?

Zero. Doesn't matter to me. I have no plans to sell my painting. I have no plans to—

You don't even have an email. What would you do?

Yeah, I have no other hobbies. This is it. This is all I wanna do for the rest of my—

I mean, as long as I can, and as long as investors allow me to, and the founders we work with allow me to, yeah.

If you think about the ways most recently that you've improved your craft, what comes to mind? Even today versus 2 years ago. What are you doing better today than you were 2 years ago in this craft of finding and courting the 10 best each year?

Yeah.

At the highest level, we have got much better—not a little better, much better—at separating the vital few from the trivial many. There's a version of Greenoaks 2 or 3 years ago where not just me, everybody at Greenoaks, would do 12, 15, 20, 30 meetings a week. We used to show this slide to our investors: Here's how many Series Bs happen, and we had 92% coverage. Aren't we great? We'll never leave a stone unturned.

It's the way I grew up. I grew up believing that the way you generate great returns, the way you find undiscovered opportunities, there are really only a few ways to make money in the world. One is speed. You just move faster than everybody else. Citadel may be a version of that. That's really interesting.

Our favorite combination is when you have the same speed and the same information, but you have differential insight. I think what we've become much better at, at Greenoaks, is increasing the speed and velocity of our information asymmetry and being able to generate differential insight that matters to long-term enterprise value.

Putting those things together with a small team and building a flywheel for doing it over and over and over and over again every day, that has been a sea change in the last couple years.

The ability to write a $500 million check—maybe we should tell the Carvana story at this point or something—and move really fast in real, huge size on something that you're not gonna have a full written memo about. You have to act quickly.

Yeah.

It seems like that's a great answer to your earlier point about it being less competitive, because you could probably rattle off other investors that could do that same thing today—

Yeah.

—without an investment committee meeting or without this, that, or the other thing. I remember the Robinhood story that Mickey Malka from Ribbit Capital told me—

Yeah.

—which rings like a similar—

Yeah.

—it’s like a guy making a couple calls to make something happen. Maybe talk a little bit more about that. Carvana could be the example here, but pick a different one if you'd prefer. I'd love an example of weird, high-conviction, fast action that would be impossible in a committee structure.

I'll give you 3.

Great. Let's do them all.

So let me start with Navan, which was formerly called TripActions. TripActions, for those that don't know it, is a travel management company. It does your corporate travel and expense management end to end. It's a company I'd been following for a little while, and COVID came. As a travel management company, that's not a good thing to have happen to your business.

TripActions, which is what it was called at the time, saw its revenue go from $100 million down to zero. It happened overnight. Remember, Trump, in his first term, went on TV and shut down all the flights from Europe, and it felt like Lehman Tuesday or Wednesday or whatever, but I think it was a different day. And I felt like, "Oh—"

This is not good.

"This is not good. This is real." I called them a week later, and I was like, "I know your revenue just went to zero, but I have conviction that you are the right end-state solution for this market. And I think instead of battening down the hatches and preserving all the capital you have, I think you should be aggressive in capturing flow share, and we'll write an unlimited amount, up to $500 million, for you to go do that."

It ended up being less than that, but we offered up to $500 million for you to go do that. It took us 4 days or something like that, and TripActions dramatically accelerated its market-share leadership over the course of COVID. Over those 2 years, it went from number 4 or 5 in the industry, maybe even number 8 in the industry, I think, to the top 2 in the industry, and was able to be aggressive at a time when other people were nervous.

Another example is the SVB weekend with Parker and Rippling. We've been investing in the business for a long time. It has always helped us to have a prepared mind, and when we have these moments of volatility, it doesn't change the end state all that much.

So, the SVB weekend—you remember, it was Wednesday and Thursday when it started to have some trouble. Friday morning, Parker called and said, "SVB looks like it might go into insolvency or be taken over by the Treasury or by the Fed."

And people make this mistake. People think that Rippling was having financial troubles. It's the opposite. Rippling used SVB for essentially plumbing—the pooling of capital that would then be dispersed to employees for its customers. And so it was just like rails that it was using.

And by the way, credit to Parker. There's a lot that's been said about Parker from his previous company, and I have to say, he's one of the highest-integrity people I've ever met in the world. Just to talk about customer centricity, the reason he called me on Friday morning wasn't because Rippling was in trouble. He called me because he wanted to make sure that on Monday morning, his customers weren't in trouble.

All of his customers got their money. There were other payroll companies that were planning to send an email out on Monday that was like, "Sorry, given what's happening with the U.S. financial system right now, payment to your employees will get delayed." That was not an okay solution for Parker.

So Parker called me on Friday morning. It took us about 30 minutes to agree to invest $500 million. Credit to his team, by the way: they spent the entire weekend, day and night. It wasn't 18 hours; it was 2 blocks of 24 hours—48 hours of straight work.

And by the way, Sunday, another credit to Parker. Sunday looked like everything was gonna be okay, and Parker was like, "Just in case, this is the right thing to do. We're gonna do this." We shook hands on a deal. We're doing the deal. What an amazing partner to have in Parker. Monday morning, every Rippling customer got their money on time as scheduled.

True.

Carvana is a funny one because it was public. Carvana is a company we'd been following for a long time. It never took venture financing; it was earning a little bit. He was out in Phoenix. He was building a customer experience that we always thought very highly of.

Whenever you talk to customers about Carvana, they would talk about how much they liked Carvana at a differential rate to CarMax. It makes sense. You could buy and sell a car easily. You get it delivered to your door. There's a much larger selection.

It's like the Bom Kim story a little bit. It rhymes with it.

Yeah, a little bit of hard work operationally, hard work technically, doing it out in the middle of nowhere on behalf of customers that you wanna serve differentially well.

Similar dynamic in Carvana's case: you have all these local competitors that have a limited selection. Usually, they're wearing leather jackets. It's not a great experience to buy from them. Carvana was making that a much better experience.

I only got to know Ernie when COVID came. The stock was maybe a $100 stock. During COVID, it went down to the thirties. I called Ernie. We're like, "Ernie, now is the time to take some money from us." He's like, "Great. Love to do it."

We got very close. For Greenoaks reasons, we ended up not proceeding with the investment. I think it was gonna be about $500 million in the business at the time. It would've been a great investment. I would've talked about it as one of our big mistakes.

It went from maybe $35 or $40 a share up to $300 a share, whatever it was, over 2020 and 2021. We have these moments at Greenoaks where you're like, "Ah, now it is well-recognized as this amazing used-car experience. It's gonna be dominant. People understand it's the Amazon of cars." And it was maybe at 450,000 units sold each year. And Ernie did this big acquisition, which was ADESA, ramping up.

He used quite a bit of debt to do that. I think he financed all of it with debt, and so added a bunch of debt to the balance sheet. When things started to slow in ’22, everybody’s excitement about the fact that he was building infrastructure to go to 1 million or 2 million cars went the other way. People became very nervous about the business surviving, and the stock went from $300 a share at its peak to eventually down to $5. How many companies can you name that went from a $70 billion market cap to $1 billion and weren’t a fraud? Zero.

After you and I had this conversation, we actually looked it up. The answer is none.

It is none. As it started to go from $70 billion, or $300-plus a share, down to $50 a share, we actually—at $100 a share, we started to become very interested in it, and there were 2 questions. The first question was, the market was getting killed. I think it was one of the largest peak-to-trough drops in used cars in the last 30 or 40 years. Was this a one-time thing? Was this going to reverse?

The second was that his unit economics were terrible. I don’t think he’d mind me saying that. He was losing $3,000 a unit on an EBITDA basis. If that wasn’t enough, he had about $2,000 of interest payments per unit, so he had $5,000 per unit in costs. The question was not if, but when this company was going to go bankrupt. And so the stock went from $100 to $50. We started to buy around then. Of course, we started to buy all the way down to about $5.

My partner, Ben, doesn’t feel great when you start to buy at $50, then at $30, and then at $20, and then $20 goes down to $5. Ben has a great line, which is, “What’s the difference between being down 95% and 97.5%?”

It’s half.

And so that was a tough moment at Greenoaks. We invested a substantial amount, became one of our largest investments in our fund, and we had a view. Our view was that Ernie had a decent amount of runway. There were things he could do operationally to fix the business fairly quickly, and we did what any investor might do at the time. We went line item by line item. We said, “Here’s where he needs to cut. Here’s what he needs to change.”

Much to our chagrin at the time, Ernie didn’t do any of those things. The stock kept going down, and he just didn’t do anything. It wasn’t until later—I’ll come to a couple of stories—that I realized there are certain CEOs who might react immediately in order to placate the market. What he was doing was running a bunch of A/B tests internally to figure out what the right things to cut were, to make sure that he could manage the company through it and grow on the other side, which takes a lot of intestinal fortitude.

Mm.

There are a bunch of really good stories about Carvana. As the stock started to drop and we started to buy more, not everybody was thrilled with us, but we thought we fundamentally understood that he would be able to reverse the unit economics on a per-unit basis. There were things he could do to not just stave off bankruptcy, but be an ongoing concern with a strong capital structure.

The second part of that is the debt side was really reflexive. If you’re right on the first part, you’re kind of right on the second part. So it’s a 2-part investment for us. One was that the company wouldn’t go bankrupt. Second, was this a business that could go from 400,000 or 500,000 units to 2 million, 3 million, or 5 million units over time? Used cars are about 40 million units a year or something like that.

I remember this was a big debate for us, but it really always comes back to founders. I went out to Phoenix and sat down with him for dinner. I got on the plane, I was reading the papers, and 4 of the articles were about Ernie and how terrible Ernie was. It was like, “He’s a crook. He’s awful. The company’s terrible. They can’t pay their bills. It’s about to go bankrupt. Employees are leaving in droves.” It was like he was left for dead.

I remember.

You remember this. I remember getting out there and sitting down with him. We talked about the business and all the things, but I remember the first thing I did was say, “Boy, you’re in the papers a lot nowadays. How do you feel?”

He didn’t talk at all about himself. He was almost down to tears. He was talking about his team. He was talking about what it’s like for employees of his who had been at the company for a long time to have their kids go to school and hear that their parents’ company was going bankrupt. He was going into enormous detail about this, and you could feel the pain.

It wasn't on the articles about him. It wasn't even on Billy to manage cuts. It was that he was trying to balance getting through this with making sure that his team felt good about how he got through it. There are very few CEOs who, in the fog of war, when things speed up and people start to make snap decisions very quickly, would do that.

What impressed me most about Ernie at that moment in time was how he just slowed everything down. I remember at the dinner, the waitress came by, and she said, “Would you like to use your Marriott gift certificate card?” And he said, “Oh, yeah.” He searched for 10 minutes to find his gift certificate card. I thought, “Wow, you’re supposed to be in a hurry, but you really care about this gift certificate.” Points off or something like that.

When we went through it, operational step by operational step, it was so clear to me that there was a spread between where the market thought he was. That happens all the time in our industry. The spread between perception and reality for private businesses and public companies can be quite significant.

As you go back to the early days, you had this first fund that was so successful—a huge multiple on money. How did you decide how much money to raise in subsequent funds all the way through to today? This is constantly a question for—

Yeah.

—every investor who’s ever been really successful. They tend to have the opportunity—you certainly did—to raise probably as much money as you wanted to raise, given your past results. How did you choose the amount through time? How would you teach, if you were Kravis giving money to the next you—

Yeah.

—what coaching would you give them on how to answer this question?

I think you have to decide whether you want to be in the Hall of Fame of Returns or the Hall of Fame of AUM. And by the way, every LP is like, “Shut your ears,” but that’s an okay answer for a ton of people.

The Hall of Fame of AUM is a well-trafficked game, with lots of buildings in New York that have the names of people who have been in the Hall of Fame of AUM. That’s a great way to live life, not to take away from that. I think Benny and I—maybe it’s because we had some success early and we’re large investors in our own fund—think it’s just a more interesting way to try to be in the Hall of Fame of Returns by partnering with the kinds of companies we like to work with.

If that’s the case, then you’d want to reach the right limit where you can invest without reducing returns. For us, our largest investments are $500 million to $1 billion-plus in size, and we do that with some regularity. We want the founders we work with to call us and say, “We want $500 million to $1 billion.” We are thrilled to get that call, and we want to make sure that we can always answer that call and be the partner.

That number may move up over time, but that number has served us pretty well. At least a couple of times a year, we’ll get a call asking, “Can we get $500 million to $1 billion from you?” We want to be able to answer that call. So that’s kind of determined how we think about our funds. They’ve gone from, I guess, the tens of millions to the billions. But it hasn’t really been a function of the number of companies per fund. That has not changed at all. In fact, it’s gone down.

How many is it, roughly?

Like 10 to 12.

Yeah.

We’ve had as high as 15 historically, but our numbers have actually come down quite a bit. We only have 55 companies across $15 billion of AUM at Greenoaks. I could talk to every single one of our founders in half a day and still have tons of time.

Have you ever thought about other structures for Greenoaks, like making it some sort of permanent capital base, like Berkshire-style, or all this creativity with Apollo and Athene, like having some sort of insurance? God, it seems like every great investor reaches a point in their career where they want an insurance company for a permanent capital base or a balance sheet.

Have you ever thought about that side—the asset side of the business, where the money comes from, how it sits, and its structure?

Yes, we have. In fact, Greenoaks started with the idea of an alternative capital structure.

What was it?

It was a holding company that owned insurance businesses.

Okay.

Frontier and emerging-market insurance companies.

Okay.

Benny and I had spent a lot of time at D. E. Shaw studying insurance businesses in places like Ping An in China, Dongbu in Korea, Qualitas in Mexico, Silamko in, uh, SCB in Thailand, Silamko in Sri Lanka, businesses like this.

And actually, the cool thing was that if you study these P&C businesses, they all follow the same kind of curve. You could draw an X/Y axis. You could put GDP per capita on the X-axis, and then on the Y-axis, you could put insurance penetration as a percentage of GDP. It follows this S-curve, and the S-curve is basically that a rich country has 10% insurance penetration.

The exception to this, by the way, is found in the Middle Eastern countries. They get really rich on oil and then don't have insurance penetration. The really poor countries are at the bottom: they have very low GDP per capita and low insurance penetration.

Mm-hmm.

Our view was that if you believe in a country's GDP-per-capita growth, a levered investment is to buy the best insurance company—the P&C consumer insurance company.

Sure, okay, yeah.

So we did this, and it was a phenomenal investment for Dongbu, Qualitas, and SCB. They were really good investments. When we started Greenoaks, we had a traditional fund structure. Our idea was, let's start a holding company where we buy anywhere between 51% and 100% of these insurance companies. We suck up those premiums, and we can invest them in a wide variety of different assets.

It's a phenomenal idea on paper. In fact, we did it right when we started Greenoaks. So we went around and raised $150 million of capital from some great investors, many of our longtime investors, and we started a holding company.

Mm.

Now, I don't think one person asked us whether we'd been to Africa or Pakistan or any of these places, but we hadn't. Then we took a small team out of McKinsey's insurance practice, which was known for helping some of these insurance companies. Our idea was: you can't buy Ping An in China—it's too big. But you can buy the frontier and emerging-market insurers in places like Pakistan, Rwanda, or Nigeria.

So the first thing we did was get on a plane and go to these places. We went to Nigeria. I have so many fun stories about this.

I love this.

It was the craziest thing. We decided to start a holding company. It's called GGH. The punchline here is that it went terribly. It's the single biggest mistake we've made at Greenoaks, I think. It's a funny story.

We took a team out of Zurich, Switzerland. That was our operating team. We had about 12 people, and they were working with local teams. The first trip we made was to Nigeria. Before I got on the plane to Nigeria, I was in London. There was this late-night flight, and we had assembled a list of businesses that we might potentially want to buy. The list was only 6 or 7 companies.

We had a banker on the ground that we were working with who only did insurance banking. We'd known him for a little while, and we'd been studying our approach for maybe 6 months or so. The flight arrives at 10:00 p.m., and our banker calls. He's like, “Hey, I'm so excited about the trip. I can't wait for you guys to get into town.”

I'm like, “Well, great. I can't wait to get there.”

And he's like, “I've got to tell you, though: I have to skip dinner with you guys tonight when you get in.”

I'm like, “Why? We're really excited about our dinner.”

He's like, “I had a long night. I was up all night. It was crazy.”

We're like, “What happened?”

He says, “I had a guy from London here last night. He flew in. I was going to do it with you guys. He stays at the same hotel. I dropped off his bags, took him out to dinner, and we went out to this great dinner and had a bunch of drinks. He goes back to his hotel.”

He proceeds to tell us the following story: this English banker goes up to his room and checks in. There's a guy sleeping in his bed. The English banker says, “What is going on here?” He closes the door, goes downstairs, and tells the person at the check-in desk, “There's someone sleeping in my bed. You must have double-booked the room. This is a huge problem.”

The guy says, “No, no, no. That's not possible. I'm sure...” He reissues him a key and says, “This is your room number. Go on.”

The banker goes in, and the guy is still sleeping in his bed. The banker goes downstairs, goes to the front-desk counter, and says, “You've got to come up with me. This is crazy. There's a guy sleeping in my room. I just want a different room.”

The front-desk person goes up with him. Sure enough, there's still a guy sleeping in his bed. The front-desk person checks his pulse. He's cold. There's a dead guy in the bed.

Our friend is telling us this story, and we're listening to it thinking, “Where is this going to go?” The banker is furious. He's like, “This is crazy. I just want to go to sleep. It's 2:00 a.m. I have a big day tomorrow.”

There's a corpse in my bed.

They're saying, “I don't know what's going on, but just figure this out.” The front-desk person says, “I don't think you understand. I have to call the police. There's a dead guy in the bed. You have to stay right here.”

The police come. Sure enough, there's a dead guy in the bed, and the banker is furious. It's now 3:00 a.m. He's like, “This is crazy. You've got to get me—”

The police are like, “No, you're a suspect now. We have to take you to the police station.”

He is freaking out. He's like, “What do you mean? I don't know who this guy is. I don't know what happened. I just came into my room. There are cameras. You can check.”

“Nope, we're taking you to the police station.”

They put him in the back of the car. They tell him he can make a call. He takes out his phone and calls our banker, whose name was Balaji.

Balaji's like, “Ugh, this happens. Don't worry. How much money do you have on you?”

He's like, “I have $1,000 on me.”

“That's not enough. You probably need $10,000. Can you get a wire to them in the morning?”

He's like, “I don't even know how to get a wire.”

“Don't worry. I'll take care of it. I'll get you out by 5:00 a.m.”

Balaji is up all night figuring it out. The banker gets out at 5:00 or 6:00 a.m. and gets back on a plane to London right away. So Balaji says, “I was up all night figuring this out.”

We're like, “This is where we're flying in an hour? This is terrifying.”

So that was our first experience going out there: hearing this story. It was incredibly fun. We bought 75% to 100% of an insurer out there. We bought 75% of an insurer in Pakistan. Benny is Jewish, I'm Indian, and we're both American. It was the first time I'd gone to Karachi. Benny's like, “I'm not going. You have to go.”

Yeah.

So I was going out there. We were about to close this transaction, and my mom, who's from India, was crying. She's calling my wife. She's like, “He can't go to Karachi. It's too dangerous.”

It was a phenomenal experience, and we had an amazing partner in Pakistan. He did a fabulous job with the business. I have nothing but incredible things to say about him, the country, and our business there.

This is a great story about Rwanda. We bought the leading P&C insurer. We also owned a large real estate portfolio because the insurer owned all this real estate. So we're in Kigali. We buy this business. We're growing it.

None of these businesses had great solvency laws. This was very early in the life cycle of how insurance worked in these countries. But our view was, if you read about Rwanda, it's like the Singapore of Africa. We get on the ground. Our insurance team is there. This business is terrible. For every dollar of premium we get, we lose $1.80, which, in the insurance business, you can't make up with investment returns.

We're in a bad position, and we were the best of all of them. Why isn't everyone else bankrupt?

Well, it's a funny thing. Nobody really audits these companies, and as long as you continue to write more premiums the next year, you can make it work.

I'm like, “Well, that's not going to work for us.” So we decide we might not want to be in this business.

As we make that decision, we get a claim from a wealthy family with some political connections. It turns out that someone we insured died in a car accident. It was a terrible thing.

There's a pretty systematic way to think about P&C insurance globally. There's a table for how to think about life. I hate to put it that crudely, but that's how it works. I fly out to Kigali. We've got to take care of this claim. It's a big claim.

I'm like, “We have to prosecute the claim because that's too much. That's outside of the table for how to think about the value of this accident.”

So we go to court. The guy who shows up as the defendant in the claim isn't the lawyer for the claimant; it's the claimant who died in the car accident.

We're like, “Case closed. The guy's right there. This is all done.”

Lo and behold, there's this performative jury that's like, “Ah, you know.”

I'm like, “This is out of bizarro world. This is crazy.”

So we're saying, “This is not a country we want to be operating in.”

That experience of building this insurance company made us realize there was no winning here. It taught us a lot about the kinds of founders we want to partner with, the kinds of markets we want to be in, and the way we want to spend our time. It cost us real time and money and years. We haven't lost that zeal to build something really special.

I'm so freaking glad I asked about the holding company thing. You're in one of these positions where, if you wanted to, you could just do this with your own capital. I think you're the largest LP in the funds. You've had the success that all the investors chase. Why still have outside partners? You've made that choice, obviously. What is it about working with great LPs?

I know your LP base is super concentrated, too. It's a very consistent theme in your life that you're really concentrated. But having achieved that level of success, your balance sheet could just be the holding company, like Berkshire, making the marginal investments. How do you think about that trade-off, that choice?

I have friends who sometimes complain about their LPs, all the updates they have to do, or the conversations they have to have—

You just love this stuff so much.

And they might make different decisions if they didn't. Ben and I have structured our lives in such a way that I really enjoy the people we spend time with. I have a WhatsApp chat with my LPAC. I talk to them a decent amount, and I talk to some of my investors. They're like friends of mine.

I get to do this with people I really love, admire, and respect. Oftentimes, our best ones have given us courage when we might have even lacked a little bit of it. I think about them as partners and shareholders in our business, and I think there are 3 reasons why. The first is that I enjoy them. That's the most obvious one. I really do.

If they never invested another dollar with Greenoaks, I'd still be good friends with most all of them, and that's becoming increasingly true every year at Greenoaks. The second is that we're competitive. We're deeply competitive, and it really bothers us if we're not amongst the best-returning investment opportunities for our LPs. I remember there was a table that came out in 2021, and it had the endowments by return. I was really proud of the fact that, for the 3 or 4 top ones, we drove some real performance for them. But that matters to me.

If I were to do a great, complete, anonymous, ubiquitous survey about you and Greenoaks, and I were to find the critics, to the extent that they exist, what do you think they would say?

I'm sure we have tons of critics. I actively try to seek it out, so I think I can opine on some of it.

Yeah.

Although, feel free to add in. I just had a dinner where I met a bunch of young people, and I asked them this specific question. I said, “What are the most negative things you can say about Greenoaks?” And I'll give you each comment—

Great.

—because I thought all of them were valid.

Yeah.

So the first was, “Greenoaks was wildly successful early, but as of late, what have they done?” I think that's such a healthy attitude, frankly. You're only as good as your next day. My pushback was, it takes time. The stuff you're judging us on 10 years ago, there's stuff you will judge us on in another 10 years that we did today, but it just doesn't show. So that would be the first.

The second would be some higher-priced rounds that look really crazy on the outside. They don't make any logical sense. Why did you do them? We have some logic for why we did them, but we could be wrong. Benny and I, as founders, have pushed our organization really hard. One of the other pieces of feedback might be, “Are you pushing too hard?” We can't always hire well. We can fire fast. We run a very tight team, and we're reasonably intense in the way we run that team.

You can make an argument that you should not run at this intensity level. You could run at 70 percent of this intensity level, and things would be just fine. I just don't think we'd be that happy if we did it, so it probably is the right feedback, but I don't value that much.

Who do you think the greatest of all time is?

I'm going to have a controversial answer. I think it's Yuri Milner. The easy answer is Masa. Most people, I think, would say Mike Moritz and—

Yeah.

Peter Fenton are phenomenal investors. It's hard to argue against Masa. I will in a second. Have you spent time with Masa?

No.

He gets made fun of a lot. He is incredible. First of all, sit back for a second. This guy came from Japan when he was in his teens. He didn't speak a word of English, was ostracized for not speaking a word of English, studied his butt off, and went back to Japan, where he created one of the largest enterprise-value companies in Japan over the course of 20-plus years.

Along the way, he decided to become an accidental investor. At one point, he was the richest man in the world. One thing I think is underrated is that Silicon Valley is a fairly insular culture and has never really been that nice to Masa.

They make fun of his PowerPoint slides.

They make fun of his PowerPoint slides. They make fun of the investments he makes. There's almost a twinge of—I don't want to call it racism, but xenophobia—toward him, of, like, “What is this guy doing coming out of nowhere?” The guy's made multiple $100 billion returns. I remember when he invested in Arm. I have a lot of respect for Masa.

I don't think Greenoaks should emulate the way they invest. I think Masa's an N of 1. But when he invested in Arm, I had a friend of mine who runs a large investment bank call and say, “Could you believe how stupid this guy is? I can't believe he bought Arm. That thing is tanking. It's never going to work.”

Mm.

This guy had his semiconductor analyst on the call with me. The semiconductor analyst ran out a list of reasons why this investment was never going to work. Masa, another entrepreneur, and I were on the call, and I decided I was going to give him all the reasons. I said, “Here are all the reasons this semiconductor analyst from one of the big investment banks thinks you're going to fail on Arm.” I listed them: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10.

He's like, “Ah, but he fails to realize that the market's growing.” And he was right.

Yeah.

I've seen him multiple times. By the way, he's underrated for how great he is with entrepreneurs at times. He's come up and stepped up to the plate. Sometimes you can measure investors not by figuring out where the momentum is going, but by how they stand up for entrepreneurs when the going gets tough, and I've seen him—

Mm.

—3 or 4 times step up to the plate in a meaningful way. whether it's Tony at DoorDash, whether it's Bomba, Coupon, pay off most times, not all the time, most times. I think that's really remarkable.

The reason I say Yuri is that when I was at D. E. Shaw and Yuri made the investment in Facebook, I didn't know you were allowed to make investments like that. I remember going to my boss and saying, “Are we allowed to invest in money-losing Internet companies at $10 billion in enterprise value that are still private?”

I knew growth investing as buying things at 4 times revenue when it's a software company and adding a couple of bolt-ons to it. That, to me, was growth investing and private equity in growth companies. Yuri broke that mental model for me, and he was the first one I remember making a large-scale, category-defining investment in a category-defining company that was so obviously going to change the world.

The way he built DST, the number of correct decisions he's made compared to the number of bad decisions he's made, is a remarkable ratio. I can't name—I think the total impairment in all of DST is very low. The quantum of money they've made as a firm, and then also with his personal investing in things like ByteDance and Xiaomi—you just take one of those, and that's all of the firm's returns. By the way, who do you think is the best?

Well, I'll tell you the answer that most people give, which is Moritz.

Yeah. I've only gotten to know Mike a little bit better recently, and not a lot of people would know this. I don't know if he would describe us as a competitor when we were coming up, but I certainly think about them that way. I think they're an amazing firm.

Mike recently retired. When I was going through all the San Francisco stuff, when politicians were holding my face on a picket sign, Mike emailed me, and I was like, “Can I help you a little?” I said, “Any help—what have you got?”

He recommended that I write an op-ed, and he's like, “I know you don't want to do anything publicly. I know you wouldn't like this, but I think it's the right thing to do. You should be transparent and direct about what you're doing.” And I was like, “Sure, I'll try doing it.” He helped me. He was on the phone with me helping me.

Outside of this conversation, it would have gone unsaid. What a remarkable thing to do for a young kid that he doesn't need to help in any way whatsoever. He's a really amazing human being.

Since we're at the end of a long session, I'm curious to hear a little bit about where your instincts for understanding the world have brought you outside of investing. Are there other places that you apply this same instinct, where your curiosity pulls you into a world where you're not investing huge sums of money?

I think the thing—if you were with us at Greenoaks and you just sat with Benny and me for a day—I think the thing you'd probably be most surprised about is how much we care about beauty. We love spending time on a P&L, but the reason we like this so much is that we like beautiful businesses, we love beautiful relationships, and we care about beauty in the world.

We want to make the world a little bit better tomorrow than it is today, and we think Greenoaks can be driving enormous impact by doing that. That's why we invest in the companies we invest in. That's why we don't care about finding a software company in Minnesota, buying it at 3 times revenue, and flipping it at 5 times. We don't care about that at all. It's probably a better business than the one we're in. We're okay leaving that on the cutting-room floor.

That manifests in a bunch of different ways. I'm born and raised in San Francisco, so I dedicated a reasonable amount of money to trying to fix just my street in San Francisco.

Tell us that story.

And so—

I'd love to see it.

Oh, gosh. It's not a story I expected to have come out or ever talk about, frankly. Maybe you and I talked about it off the cuff once.

We did, yeah.

But I was just quietly doing it, and I did it as a nonprofit because it's a terrible financial investment. Just to walk through the financial math, I'm buying buildings on one street called Fillmore Street.

It’s in Pacific Heights. It’s a street I grew up on. I’m buying stuff at, like, a 5.25 cap, which Treasuries were at 5.25 when I was buying this stuff. And I’m buying illiquid, small, rundown commercial real estate that usually has no tenant, or the tenant’s leaving, which is why the person is selling me the building.

Then I’m putting in a mom-and-pop restaurant at a 3 cap, which barely pays its rent, and I have to do all the TI. It’s a terrible financial investment. So people are like, “Oh, you’re so good for doing this.” No, it makes no sense to do it any other way besides as a nonprofit. So I started a nonprofit with a good friend of mine named Cody Allen.

You came out to San Francisco during COVID. I think San Francisco is a really important city. I think it’s important for America. I think it’s important because it’s ground zero for a lot of the most interesting people all over the world to come and build their version of the future.

It’s different from New York, and it’s different from the finance and real estate and other industries, which are a little bit more—I don’t know—rent-seeking is maybe the right word I want to use. But I think there’s something about tech and the aspirational nature of company building that San Francisco harnesses uniquely well. I don’t think there’s anywhere else on Earth that’s anything like it. Tel Aviv may be getting close—

Mm.

—but it’s really San Francisco. And I think losing that—and we’ve tried really hard to kill it. We’re anti-business. We’re anti-growth. We have high taxes. We’re anti-family. A lot of things are going in the wrong direction.

My view was these were eminently fixable, and if we fixed them, it could make San Francisco great for a long time. I don’t think you could take these things for granted. You go back to the 1920s, even earlier, to the Hungarian physicists in Budapest, and you had all these great people—the von Neumanns of the world—all living there in Budapest.

World War II came along, and Hitler came along and wiped them all out, and they all dispersed to different parts. That group of physicists was the foundation for modern physics for 100 years. String theory, all the atomic weapon work that came out—it was all from that small group in Budapest.

And so I think losing San Francisco to some of the progressive causes that have plagued the city would be pretty bad. This was one part of my little corner of the world, starting to invest and make it better. But it came from a place of wanting to make that street beautiful.

If we can make that one street beautiful, then you could maybe do that across other parts of the city, and you can make the city livable for families and have people still there. I started on that process about a year ago. I was just doing it quietly because what was there to share?

Yeah.

San Francisco has this funny progressive bend, which is that we’d rather have empty buildings than have someone own them whom they deem to be too wealthy to own.

They don’t like mysterious investors.

Yeah. And there was a guy, Aaron Peskin is the guy’s name. He was a politician. He’s out of office now. He had picket signs with my face on them, marching down the street: “Billionaire taking over city.” I wasn’t doing any of that.

I think they thought I was trying to develop the city. They never reached out or called or talked about it, but I was just trying to preserve that street and make them into restaurants. And I think what I take a lot of joy from is that it has a very similar feel to Greenoaks, which is that I’m backing other people who are building great restaurants, putting in a new theater. There’s a bunch of cool stuff happening on the street.

It’s 3 or 4 blocks now. It’s really remarkable what will be done on that street. But I’m enabling other entrepreneurs to go build something that will delight people. This is at a little smaller scale than what we do at Greenoaks, but it’s been so much fun.

I don’t spend all that much time with it. I have a great team that runs it on a day-to-day basis. But I was just on the street yesterday, and it was so fun to walk down and be like, “Oh, this is where this coffee shop’s going in, and we’re doing an all-day diner and rebuilding the theater with a great partner. It’ll be really fun.”

You said you don’t like any of the attention. Is there any kind of attention you do like? You’ve walked the walk here, by the way. I’m so excited to do this with you, but something tells me this is going to be the one you do, and then we’ll see you again in 10 years or something. You’ve walked this walk of focusing on the work, which makes me curious.

I think it can be distracting. I think that maybe one of the flaws I have at Greenoaks, and Greenoaks has in general, is we find that when we make it not about the work, when we talk about the work, it can diminish our ability to do our jobs well.

I’ll give you an example. We write letters. Historically, I would write letters where I talked about an investment we made or something I was excited about. And the moment I wrote it down, it became a perspective that I had to defend.

One of the flaws, maybe, at Greenoaks is that I change my mind all the time. I’m willing to try on an opinion like a sport coat, and if it doesn’t work, I’ll throw it off. I have no pride in authorship or ownership.

The ability to move opinions around as we talk about things, without any touchstone of “it must be true,” has helped me. I find that whenever you start to say things publicly, then it becomes part of who you are, and we haven’t felt the need to do that.

Patrick O’Shaughnessy

I think that’s a really interesting and compelling place to wind down. I love that you don’t want to get attached to things, that fundamentally what you’ve done at Greenoaks is always search for the next person, even if that person's Baum over and over and over again, which is so cool to have these special relationships.

You know the last question I ask everybody: What is the kindest thing anyone’s ever done for you?

A defining moment was that I went to public school, and then I went to a private high school. I was a pretty cocky 14-year-old. I came in, and I had a great mentor named Joe Rosenthal, who took me under his wing, just liked me, and was like, “You know, I’m going to just get to know you.” He was an administrator at the school.

He would come to watch my soccer games every now and then. In one of our soccer games, I scored a goal, and I did what any 14-year-old hooligan would do. I put my shirt over my head, spread out my arms, and started flying around on the field. I celebrated like we had just won a championship. I think we actually lost the game, by the way. It was really embarrassing.

After the game, Joe pulled me aside and said, “Don’t ever do that again.” I’m like, “What do you mean? I scored a goal. I’m going to do that every time I score a goal.”

“Don’t ever do that again. Have some class. Know that you have teammates who helped you score that goal. Know you have people who passed. Know that you have a coach who trained you. You’re better than that. Don’t ever let it happen.”

I never did anything like that again, and it sticks with me to this day. I think about it with kids. It was the kindest thing. Man, it stuck with me forever.

Patrick O’Shaughnessy

Neil, thanks so much for your time. If you enjoyed this episode, visit joincolossus.com where you'll find every episode of this podcast, complete with hand-edited transcripts. You can also subscribe to Colossus Review, our quarterly print, digital, and private audio publication featuring in-depth profiles of the founders, investors, and companies that we admire most. Learn more at joincolossus.com/subscribe.