能“做任何事”的投资机构｜Sixth Street CEO Alan Waxman

We have to be a firm of entrepreneurs. We're one of the handful of firms in the world that can consistently write billion-dollar-plus checks across asset classes.

What made that group tick?

It's easy to have a culture when things are going well, but cultures are defined when things go wrong. At Sixth Street, we're like, “Good, let's go. Let's face the tiger together.”

All right. I don't know where to begin. Sixth Street is so incredibly interesting in that it can do anything. It can go anywhere. It's extremely opportunistic, extremely flexible, and has an open mandate.

1. The Formative Goldman Sachs Experience

We'll talk a lot about the history and the different kinds of investing that you've done, but I think a fun place to begin would be for you to tell us about your Goldman days, and specifically the group of people that you were investing with back then, which I've heard described by you and others as sort of like the Navy SEALs or special forces of finance. Maybe describe that group in as much detail as you can and why it was so formative and impactful on you.

I was lucky that I even got into that group. I met a guy on an airplane. Basically, I was an international relations major at Penn. I had no finance background or anything. I got out of school and was working in the mail room of a bond-only management firm called Fischer, Francis, Trees & Watts, and I was punching books.

All my friends had jobs. I had 35 interviews and didn't get a job offer out of college, which is why I ended up in the mail room. I was always interested in companies; I just didn't know a lot about them because I didn't have a corporate finance background. I was on an airplane coming back from Texas, my home, and I met a guy on the airplane by the name of Jody LaNasa.

I was just asking him a bunch of questions. I think I've listened to a lot of your podcasts, and you're a very curious guy. I ask a lot of questions. My wife makes fun of me because I ask questions all the time.

By the way, on our first call, when I was trying to learn about you, it took a half hour to get me to ask you questions. So I've been on the receiving end. I felt it.

I go to dinner sometimes, and people say, “Well, you asked me a thousand questions. I didn't get a chance to ask you.” That's just how I am.

I was on the airplane, and this guy, Jody LaNasa, had started in this group. He was reading research reports at a thousand miles per hour—literally just processing at speeds I'd never even seen before. Of course, I started asking him questions: “What are you doing? What's your group?” We started talking on the airplane.

He had come from WTEL, a principal investing group at Goldman that was highly flexible and could really do anything. By the way, it was the predecessor to the group that I was ultimately in. We ended up forming a relationship because what I learned is that the good thing about being curious, as you know, is that you build relationships, you learn a lot, and it just creates opportunities.

He ended up getting me an interview, and I got into this group, which ultimately became the Special Situations Group at Goldman. That group was the largest principal investing business at Goldman. It was the firm's balance sheet. At its peak, I think we were like $25 billion of the firm's balance sheet.

Literally, our mandate was that you could do anything: any theme, any asset class, different sectors, different geographies, and different durations. We could do things that had a 2- to 3-year investment horizon or a 10-year investment horizon. We had different return profiles. Some was 10% return stuff; some was 20% to 30% return profiles. Literally, we could do anything, but we couldn't lose money. We couldn't lose money. That was basically the thing.

So what we learned at the time is that this group—I won't say the number—was substantial, not just because there were a lot of super-talented investors, but because we were a substantial contributor to Goldman net income with a very small team.

Yeah, for 10-plus years. What made that group tick? I'm curious about all aspects of it: the recruiting, the culture, the investing style, and the low loss rate.

It's really the ability to unitize risk-reward across different asset classes, geographies, sectors, return profiles, and duration profiles. You could take a real estate-type investment, compare it to a U.S. real estate investment, compare it to a U.S. corporate loan, compare it to buying a company, and compare it to starting a company. We unitized risk units and return units.

We did that across a bunch of different sectors, geographies, and asset classes. That skill of being able to do that meant you were constantly comparing relative risk units and return units, and it gave you the ability to find the best risk-reward at that time.

The key principle there is that—and this is one of the things we learned at Goldman, and we learned this the hard way—Goldman was a bunch of fiefdoms of principal investing businesses. There were 10 fiefdoms, with different partners running investing businesses, and none of them talked to each other. They all had their own balance sheets and never spoke to each other.

So during 2001 and 2002, a number of the businesses—a few of them—lost a lot of money. For example, in the U.S., the business I was in, which was a U.S. corporate investing business, was pretty negative on fiber builds. If you remember XO Communications or Williams, all the fiber that was overbuilt, there was another group at Goldman who were great investors, but they were all in on fiber.

Even though we were literally one floor apart, one group lost a bunch of money, and we were anti it, so we didn't lose money. After that, the firm basically said, “You know what? Let's put all these disparate principal investing businesses under one umbrella.” That ultimately became the Special Situations Group, which again became a substantial part of the firm's profitability.

2. Unitizing Risk and Return

Can you say more about this notion of unitizing risk and return—the literal, tactical way that happened?

We think about the relationship between risk units and return units. Return units are easy; it's arithmetic. Risk units are a lot harder.

If you think about the 2 key variables of evaluating any company or security, you've basically got the cash flows, the volatility of the cash flows—the risk of the cash flows—and growth. The way we think about it—and again, this has been refined over 25-plus years—is that our framework is basically to take 3 things.

First of all, what's the quality of the business? What's the quality of the sector? The second thing is, where do you sit in the capital structure? What we would say is your attachment points. The last thing is documents.

We take that framework and run it across sectors and geographies, and that's how we start to quantify risk units. For example, if you take a consumer goods company that's, let's say, a buyout of a consumer goods company, and let's say a private equity firm buys it for a 20% return and leverages it 70%, you take that and compare it to a hyperscale data center that's got, let's say, a 15-year take-or-pay contract with an investment-grade counterparty. That's going to require a lower return.

That would be an example. If you have a geography—let's say, just as an extreme example, you've got a 15% structured equity investment for a company, the same exact company in the same exact sector in Australia—if it were in Ukraine, you're probably going to demand higher than 15%.

Let's say we're a minority equity investor in a company. In one case, you've literally got the control party, which can do whatever they want. They could dilute you. They can put a bunch of debt ahead of you. That's one set of risk units. If you've got traditional, hopefully good, minority protections, that's another set of risk units.

We basically take all that and do it across asset classes, sectors, geographies, and duration. Some of our capital generates 10% to 12% returns; some of our stuff is 20% to 25%—2 to 3 times your money.

Our whole view of the world is that the world is very dynamic and always changing. What happens with investors—and I think this is true—is that everyone thinks their baby's the prettiest. If you're just a healthcare investor, you think your baby's the prettiest. If you're just an energy investor, you think your baby's the prettiest. If you're just in Europe, you think Europe is the only good place.

What we try to do is step back from that and constantly, as we go through economic cycles, credit cycles, secular cycles, and geopolitical changes, think about things on a real-time basis. We have 450 to 500 deals coming into Sixth Street every month. Typically, we have about 15 to 25 themes running through our firm at any one time.

3. Facing the Tiger: Culture and Values

The key is—and this is what we learned at Goldman—that any theme that's good has a shelf life of somewhere between 12 months and 36 months. Ultimately, there are a lot of smart people out there, and all of a sudden it's a really good theme.

It comes in and it's a good theme, then it's a less good theme, then it becomes an okay theme, then it becomes a bad theme, and then people overcorrect. They start putting leverage on it, and then you have a correction.

And our whole thing—and this is why we had the track record we had coming out of Goldman and at Sixth Street—is that we try to see through that and never get caught in that dynamic. When a theme becomes less good, we migrate to other themes. Our average theme has a shelf life of 1 to 3 years. So we're constantly—if you take our themes from 2025 and go back to 2022, the 15 to 25 themes might be a little bit over, but most of them are different themes.

That's sort of why we always think of Sixth Street—when we founded the firm, we said we have to be a firm of entrepreneurs. Because if you think about what we're doing, we're constantly migrating to the best risk units and return units, obviously also trying to be a value-added partner to CEOs and management teams. Because the world's always changing, we have to be constantly coming up with new themes, and that's sort of what we learned at Goldman.

How did you recruit people into SSG? Was there any lesson on the on-ramp?

First of all, back then, it was—I mean, it was the group to get into. It was the hardest group to get into.

Sounds like special forces.

Yeah. It was like that. When The Wall Street Journal called the group the Navy SEALs, I think that sort of created a little bit of a halo. So it wasn't finding people interested; it was finding the right people.

For us, what we were looking for back then, and still today at Sixth Street, is, first of all, we want really nice people. We have a saying at Sixth Street, and it was true back then, something we learned from the San Antonio Spurs: We want people who are over themselves. Because if you think about a multistrategy investing business, the enemy of a multistrategy investing business is fiefdoms and silos. If you have people who don't want to be team players and share information and share relationships, the whole unitization of risk units and return units breaks down. So culture goes hand in hand with our investing style.

The second thing, obviously, is that everyone's got to be smart enough, but we really wanted people who could think critically and also were open to the anti-“my baby's the prettiest” mentality. They don't fall in love with whatever they're spending time on. They have the ability to play tennis—to compare a healthcare senior-secured loan to buying a healthcare company, to a European real estate deal, to Asian infrastructure—and to engage in what we call playing tennis, comparing relative risk-reward against the backdrop of whatever we think the macro environment is as well.

I never heard the phrase “people that are over themselves.” It's a great phrase. I love that phrase. Anything else you learned from the Spurs?

I started running businesses a long time ago. I was, I think, 25 years at Goldman. We always said, “No politics, no BS, no egos, nice people.” That's what we wanted to be around.

I grew up in Austin, Texas, and I was always a San Antonio Spurs fan. So I was always, from afar, a big fan of Gregg Popovich and R.C. Buford, who's literally one of the best sports executives. He's unbelievable and almost like a brother to me now. He's an exceptional human being.

We went in there, and I was describing Sixth Street. Based on one of our first discussions, R.C. said, “Yeah, we have a saying for that.” Popovich said the same thing: “Are you over yourself yet?” I asked, “Why do you say that?” He said, “That is literally the ultimate expression: Can someone be a good teammate?”

I thought about it deeply. We took “no politics, no BS, only nice people,” and translated that to what we now say: “Are you over yourself yet?”

If you think back to the SSG days, what was the investment or trade that you were most proud of, that most encapsulates many of these ideas?

We obviously did really well. There were a bunch of investments. I think the thing that we're most proud of is that during 2006 and 2007, when things were getting irrationally exuberant, we actually started to pause. We didn't know what was going to happen in the GFC, but it's almost like what we didn't do. We were, I think, the only principal-investing group—maybe there was 1 other—that didn't lose money in 2008 on a lot of capital.

We didn't make any returns, but we protected capital. It was all from that process that we went through of really comparing relative risk units to return units. We started to see things that just didn't make sense. We still invested, but we were investing in different things that we thought would be very protective, because we didn't know when the party was going to end. It was just getting out of whack.

I'd say that's really what we didn't do leading up to the GFC, and that's probably what I'm most proud of. Quite frankly, I think had that not happened, I don't think we could have, when we started Sixth Street, raised the first fund we did, had we not protected capital in 2008, because so many people in seats like mine blew themselves up during the GFC.

Did you think of yourselves as financiers—doing a primary job for the person or group receiving the capital—or did it feel more like arbitrageurs or something like that?

We loved investing, and it was really about trying to create solutions because our capital is so flexible. We could go sit down with any CEO or any management team. One of our core skill sets is asking questions. We'd just be asking questions, and what we say is that the prototype deal at Sixth Street, but also back then, is that we can get on a whiteboard with a company. They have an idea of what they're trying to solve, and we get up there and start whiteboarding it, and we come up with solutions.

Maybe it's a structured-equity investment, maybe we buy an asset, maybe we do a joint venture on one of their assets. It could be anything, but we walk in there with a very entrepreneurial mindset, a bespoke mindset, on every deal. If you talk to any of our investors and ask, “What is a Sixth Street deal?” that is a Sixth Street deal. It's whiteboarding with the CEO or management team, and we can do that at scale.

Back then, that was really how we were thinking about things. When I think about arbitrage, that's short-term. We're long-term investors. We're 3- to 10-year investors, plus. Arbitrage, to me, is more trading. We weren't traders; we're terrible traders. That's not what we do.

We're thinking about fundamental value, but also trying to find the right management teams and CEOs to back, and then getting to those deals where we're really their partner and we're able to get on a whiteboard. That was kind of a prototype deal for us.

It's like a fundamentally creative process. It reminds me of Richard Rainwater and all you've heard about how he would structure things and kind of take all comers. Lots of whiteboards in that office, apparently.

We just had our offsite. I talk about right-brain thinking, and one of our core principles is: Don't groupthink. Stay away from watercoolers.

That's why I benefit from being out in San Francisco. I live with all the AI tech guys that are all on your podcast, and I learn from them. I'm like a fish out of water there. But it's just that independent thinking.

People who know me well know I've never talked to competitors, ever. Not because they're not super talented and great investors, but because I don't want to be infiltrated with their thinking, so I get into groupthink. That's why we try to really think about things through that right-brain lens, because that's how we start different businesses. That's how we find new themes. We can't do our business if we're not using our right brain. It's a core part of what we try to do.

Yeah, one of the really cool things about your structure is this unit-of-risk concept. Your talk makes me realize that basically every investor takes their specific unit of risk for granted. It's the same every time. I find that fascinating.

When we came out of Goldman, I'd never talked to an LP before. I didn't know how to talk to an LP. That's a whole other story.

One of my mentors—and we call him the godfather of Sixth Street, Jamie Gates—was with us at our first fundraising meeting. He said, “Put me at the table with a large sovereign wealth fund.” I'm reading every word on every page. He's literally doing these hand signals, like, “Let's go, let's go,” kicking me under the table, and it was not good.

We'd never talked to an investor. I remember when we first started talking to investors about Sixth Street, we had a really hard time in the beginning because, if you think about the LP world, the way it's set up, it's very siloed. You have your private-equity group, your fixed-income group, now your private-credit group, and your real estate and infrastructure groups.

They're like, “Wait a second. Are you in this bucket? Are you in that bucket?” He said, “We need 20% returns.” I was like, “Okay, how much leverage are you taking to get 20%?” It didn't matter. No one thinks about universal risk. They only think about nominal returns.

And that's why we've always talked about this from the beginning. I think many LPs have gotten a lot smarter on return units and risk units. But nominal returns are just underlying risk because there's so much leverage out there. People can make returns whatever they want through leverage, but it's not capturing units of risk. At some point, I think AI is going to figure out how to quantify units of risk for private capital. That'll happen someday. That has not happened. People still think about just nominal returns versus the skill of investing.

Yeah. So where I was going with it was, typically, it's not a line of questioning like, “Walk us through your thinking about risk.” Maybe they'll think about loss ratios, basics, some basic stuff, but not multidimensional thinking around risk in a given asset class. And so I'm curious, because that's all you've ever really done as an investor, for you to teach us some of the surprising things about what you've learned assessing risk, versus everyone spends so much time assessing return: What could this be? What could the return be? Less time on the risk side. What would surprise people most? What are the most important parts of that evaluation process?

Yeah. So where I was going with it was, typically, it's not a line of questioning like, “Walk us through your thinking about risk.” Maybe they'll think about loss ratios, basics, some basic stuff, but not multidimensional thinking around risk in a given asset class. And so I'm curious, because that's all you've ever really done as an investor, for you to teach us some of the surprising things about what you've learned assessing risk, versus everyone spends so much time assessing return: What could this be? What could the return be? Less time on the risk side. What would surprise people most? What are the most important parts of that evaluation process?

Human beings get into behavioral patterns, and they look at the past and just keep going. I'll give you an asset class like direct lending. Direct lending has oscillated between a really great time to invest and a less good time to invest, and it's all driven by capital flows. Somewhat recently, you see a whole bunch of new money coming into, let's say, direct lending. I think people get caught in these tunnels and have a hard time stepping back. Either they don't have the periphery to look at it, or they don't have people around them who have been through cycles, but they get into these behavioral patterns and have an inability to look back.

I think whenever there's a crisis and people lose money—we saw this in 2001 and 2002. I saw it a little bit in August 1998. I definitely saw it in the Global Financial Crisis. I saw it in COVID before the Fed bailed everyone out and made some people who shouldn't have looked smart look smart. But that's a whole other thing. I think people are surprised when that happens, but it's all right in front of you.

In 2006 and 2007, you could have looked at what was happening. There were over 100% loan-to-value loans on houses. Anyone could get a mortgage. There were all these mortgage brokers just pumping with no consideration for credit quality. I think just the tunnel vision of ignoring not only the risk units on that particular deal, but the risk units of what's around you, is one of the biggest mistakes that people make. I don't know if people are surprised by that, but it's very hard to evaluate risk units if you're only looking through one lens versus multiple lenses.

That's what we learned back in 2001 and 2002. We had all those 10 disparate businesses where no one was talking to each other, and that's why they were actually put together. I give David Viniar a ton of credit as one of the best CFOs, in my opinion, ever on Wall Street. He is one of my mentors. He is exceptional—exceptional. We were the biggest investor out there back in the late 1990s and early 2000s, and there were a bunch of loss-making businesses from all these disparate principal-investing businesses. That's why Goldman put them under one umbrella. I think that pattern of not just thinking about things in a siloed way, versus being able to look at the overall periphery, is what we're going to be talking about sometime here in the next 2 to 3 years.

To continue to contextualize this notion of units of risk today, what do you think are some of the maybe overlooked sources of risk in the system as you see it, since you get to see it from every angle? This is early summer 2025.

We have experts at Sixth Street, like my partners Marty Chavez, who's on the board of Google, and Adam Korn, who ran Goldman Sachs engineering, who are experts on AI. I'm not an expert in AI, but I think one of the things that you've talked about on your podcast is the whole transition: Once the productivity gains start to come, there's obviously going to be job losses, and just the transition to remobilize capital. How's that going to work? How's that going to work with the real economy? I don't think enough people are talking about it.

One of my good friends, Jeff Weiner, former CEO of LinkedIn—he's the chairman—and I have been talking about this for a while. I think, for the first time, the Anthropic CEO actually came out and said something publicly. What I'm worried about there is that we're so focused on competing with the United States against other countries, specifically China. Companies—all the big hyperscalers—are focused on competing with each other, and I don't think there's enough people talking about how we're going to manage this transition. Again, there's going to be lots of productivity gains, which I'm all for, but there's not enough talk about that. To me, it should be code red, people talking about it, and that's not happening.

I'd say that's one. I think the other thing is an opportunity. Look at the average wealth investor. The wealth channel, which I'm sure people have talked about on your podcast, relative to a traditional institutional investor, is underexposed to private alternatives in its private portfolios—relative to, say, a pension fund at, call it, 40%, or an endowment at 50%. At 3% to 5%, that should probably go up. But again, the transition—everyone talks about the wealth channel; everyone's all about the wealth channel—but the transition to doing that in a way that's responsible to those wealth investors and those intermediaries in the market, and getting to the right structures so that that's done in a responsible way, is something to watch out for.

Jamie Gates, the godfather of Sixth Street, taught me early on: Just because you can raise capital doesn't mean you should.

And I think that's right: Just because you can raise capital doesn't mean you should. I think, as a GP, as a manager, just because you can raise it in the wealth channel doesn't mean you should. I would espouse that advice to all of the people in our industry.

So I want to keep telling your story. After Goldman, but before TPG, what were you doing then?

4. The Genesis of Sixth Street

I actually told David Viniar, who was a mentor, in March 2008, that I just wanted to basically rebuild what we did at Goldman, but on a more entrepreneurial backdrop. I stayed through 2008 just to make sure everything was well, because I wouldn't have felt good if the rails had come off. There was no way I was going to leave those guys at that time.

Then I took 6 months off, got married, and went on a honeymoon. Before that, I really started building and basically constructing the idea of Sixth Street, which was formulated in a business plan called Project Austin. Project Austin laid out our values, our culture, our investment philosophy, and our 5-year strategic plan, which is a big thing at Sixth Street. We're now in our 4th 5-year strategic plan. We've been doing that since day 1 of the firm, and that sort of set out the idea of Sixth Street.

At TPG, we were set up a little bit differently. We were never employees of TPG. We never gave up control of our business. We always controlled investments and hiring decisions. We were kind of a firm within a firm. TPG had a minority equity stake and was a great partner while we were together. That's sort of how it all started.

Say more about these consecutive 5-year plans. How do you do that?

Our view on business building is, if you don't have a compass, it's hard to know where you're going. More importantly, it's hard to get everyone on your team matched up with that 5-year strategic plan. We just finished our 5-year strategic plan. It's an 18-month process, 200 pages. This is hundreds and hundreds of hours of all the partners debating, trying to really narrow down what it is—the direction of the firm.

When we first started, we had our 2015 plan, which laid out what we wanted to be, and most recently, our 2030 plan. We narrow it down—we typically have about 80 ideas—and narrow it down to about 40, what we call sub-planks, organized under 5 strategic planks. We actually just presented it to our entire firm.

What we try to do—and this is something we learned at Goldman—is we basically take that 5-year strategic plan, break it up into 1-year increments, and then have every person at the firm do their own personal business plans. What we always say, and this is from day 1, is that we want the summation of all those personal business plans to equal the 5-year strategic plan. So we're matching every single person in the firm with the clear mission of what we're trying to do and what we'd say, in our parlance, climbing up the mountain together.

That's just been a process, and it's something that we take very seriously, as evidenced by the fact that we spent 18 months and hours and hours debating it and thinking about what we want to be and how we want to go about it.

But it's something we've been doing, and it's our north star. It's our compass. It's everything, and it's an important part of the process in the business-building of Sixth Street.

Can you talk us through the opening chapter—Chapter 0, or the prologue—and Chapter 1, back in 2009 or so? What was going on? What were the biggest challenges? I'm always interested in how these firms get started and what challenges they have to overcome, because often those are the formative periods that then last a long time.

5. COVID-19: Playing Offense

We're a values-driven firm. Our values are, number 1, what we call our one-life principle: You have one life. Do you want to be average or great? Everyone wants to be great. That's the first thing.

What that's really for is that we want people who are all-in. It's a competitive world out there, and we want people who are all-in. The second thing—and this goes back to one of the things we're talking about—is that we want curious people who are constantly learning and actually trying to grow. If you think about the idea of having to develop new themes and new ideas every year, we need entrepreneurial people.

The third thing is a one-team culture: people who are over themselves, with no politics, no egos, and no BS, just so we can all talk to each other. Those are the values. We always said we wanted to be the largest startup in the industry. That's literally day 1. We want people who can play tennis so they can debate—not the “my baby's the prettiest” type of people.

And then the last one is that we want people—and this is about culture—who understand something my dad taught me about facing the tiger. My dad's a crazy person. He's a black belt, yells at the TV, and is probably listening to this, but he's a pretty tough guy. He always taught me growing up, “You've got to learn how to face the tiger.”

By the way, when you go to Sixth Street's offices, you get off the elevator and there's a big tiger just staring at you. There are 3 elevators, and no matter which elevator you get off, it's staring at you.

A sculpture.

It's huge. It's about 5 feet. You've got to come to our offices one day.

It's easy to have a culture when things are going well, but cultures are defined when things go wrong. When something goes wrong or there's a challenge, you see different things. Most people are pointing their fingers at other people, saying it's not their fault, or running away. At Sixth Street, we're like, “Good, let's go.” We say, “Let's face the tiger together.”

Look, the first thing is defining values and culture and our investment philosophy, which we spoke about. But for us, what's our genetic code? We want to be an investor-first firm. We love investing. We love this idea, this process we go through. We love meeting CEOs and management teams. Particularly today, where it was starting to happen back then, there's a little bit of asset aggregation. Now it's a completely different thing.

Our ethos and what we want to be is that we're investors. If you talk to our partners, the day we become not an investor-first firm, we're not here. That's literally number 1. Every review process and every person we hire is designed around wanting people who love to be investors.

Then there's the multi-strategy idea: the world's dynamic and always changing. Laying that part out in terms of being a multi-strategy investing firm, migrating the best relative risk units and return units, and thinking about that. The last thing is, overall, that whole cross-platform collaboration at scale, because our business model doesn't work if we don't have that cross-platform collaboration at scale. Otherwise, information and relationships get trapped in fiefdoms and silos.

At Sixth Street, we have 10 investment platforms, all organically built. All the people—the business leaders at each of our investment platforms—they talk to each other all the time. We're all trying to think about where the best place is, again comparing risk units and return units, and obviously identifying places where we can be value-added partners to the CEOs and management teams.

What are the dimensions of facing the tiger? If you were teaching a college seminar on how to do this, what would you tell the students?

Human beings' natural reaction when there's a problem—and you can see this in so many facets of life—the first thing is to run, particularly in our industry. The second thing is to point. I've seen this happen in other groups at Goldman. I've seen this happen in different companies, and I've had friends tell me stories: all of a sudden, there's a problem or a bad investment, and everyone starts to distance themselves from it, maybe point the finger at someone else so it's not them. Some people freeze; they get hyperactive and start to make rash decisions.

For us, it's, “Good, let's go. We're going to do it together.” One of our worst investments of all time was a plastic bottle company. I'll never forget it. It was the only time at Sixth Street—knock on wood—that we got defrauded. We made a structured equity investment in a European company. I won't say which one.

I'll never forget: We were in a room in New York with about 30 people. There were a bunch of different investors—a big company. We figured out that they had defrauded us and other investors. We went to P.J. Clarke's in New York.

Is that the hamburger place?

There were 5 of us there, and we went over there, all from different groups, because we knew there was a real problem. We knew things were not going as well, and we basically went to P.J. Clarke's and were like, “Holy crap, what is going on here?” Then we said, “Okay, let's go. Steven Plus, you're going to do this. Sam Dittmar, you're going to do this. I'll do this. Borna, you're going to do this.”

We just started doing everything we could. We called in some other people. We literally had a team of 12 people, all from different parts of the firm, just doing everything we could. The reality is, we ended up getting 50 cents on the dollar. We should have gotten 2 cents, and it was all because it was just game on.

That's what we do now. When things are going well, obviously you don't have to do that. But, again, that's what defines culture. You have those moments of, “What are you going to do in this situation? Are you going to do the right thing? Are you going to come together? Are you going to point your finger at someone else? What are you going to do?” Our whole thing is, “Let's face the tiger together,” and that's what we do.

6. Spotify and Airbnb Investments

I would love to tell the stories of the Spotify and Airbnb investments that you made, because people know those names, so it's very relatable. But I also think they're good examples—in the mid-2010s, and a little bit later with Airbnb—of how you do business. Maybe start with the Spotify one and just tell that story.

First of all, we love Spotify as a theme. We love live music. I grew up in Austin, Texas, and it's hard not to like live music when you grow up in Austin, Texas. It's a great product with great unit economics.

But if you remember, in 2016 there started to be a lot of commentary about threats from Amazon and Apple, and there was a little bit of a cloud over the company at that time. A lot of people don't remember that. There was a little bit of volatility in the markets, but more importantly, people were worried about the competitive threats.

When this came in as an opportunity, we had a number of themes, like technology businesses or software businesses, that we thought had really good unit economics. This was at the top of the list. That was at a time when they were still going through losses—they weren't producing cash flow. They were still creating cash flow losses, and they needed some liquidity.

Our investor group stepped in. We gave them a $1 billion financing, a convertible instrument. We spent time with Daniel Ek. It takes 1 second to figure out that guy is generational. The rest of the team that Daniel had put around him was great. Barry McCarthy, at the time, was the CFO—a really smart guy.

Everyone we met on the management team, again going back to what we talked about, was mission-aligned. They had values and a culture. It was very clear that everyone was on the same page. Sometimes in companies you go in and talk to the CFO about the vision, and that's different from the CEO's vision, which is different from the head of revenue's. For them, it was very clear that they were all dialed in.

They obviously had first-mover advantage, and at the time it ended up being a great investment for us. But it was a little bit contrarian when we made the investment.

Maybe say a little bit more about the security itself. I'm just so curious how you did it, because you can operate in any part of the capital structure or whatever. As you said, I'm always curious about the actual way you did it.

On that one, what they were trying to solve was that, at the time, they didn't want to raise common equity because of the competitive threat from Amazon and Apple—or the perceived threat, I should say. It ended up not turning out to be perceived because of the market volatility. They didn't want to sell equity because it was going to be at a lower valuation than the last round.

So they were looking for more of a whiteboard solution, and that's literally Barry McCarthy's whiteboard: “What are we doing?” He had certain principles, and we just tried to solve around those principles, and what came up with was a convertible debt instrument. It had a cap—I think the cap was at $25 billion. It had a current-yield component, and then, obviously, the whole idea was to bridge them to get public. So it was like a pre-IPO security to bridge them through that, and ultimately it was successful and went way through the cap.

7. The Flexibility of TAO

Which created a win-win solution for them because they got to their IPO, which they were very focused on doing for a whole bunch of reasons, and for us it worked out. But, again, it was almost like engineering and whiteboarding. A lot of times, the ideas aren't us giving them, “Hey, here's the Holy Grail idea.” It's from just talking, playing tennis, asking questions, and listening. That's literally what we do. That's what we train our team to do: how to ask questions and how to listen. That's literally the process that we went through with the other investors.

Before we get to the Airbnb story, can you talk about TAL and the unique nature of this massive pool of capital that you've created that can do whatever it wants? Because I'm always fond of this idea that what you end up getting from an investor reflects their capital base: who it is, the duration, the terms. They then ship their capital base in the form of investments. And so I think understanding TAL and the overall structure is important.

When we were setting up Project Austin, which is our original business plan, we studied every GP. We literally had case studies on every single GP: what they did right and what they did wrong. We also spent a lot of time figuring out—and I won't name them—some of the GPs that were big brand names and then just kind of faltered away.

What we sort of concluded—and this is a pretty obvious thing now—is that people get into trouble as they raise larger and larger funds in a strategy. Maybe it's the right time to raise a larger fund, but maybe it's not. It just comes down to what's the opportunity set? They kept raising larger and larger funds, and we didn't want to have that pressure.

So the way we—and this is getting to TAL—we wanted to design our architecture at Sixth Street, which is different from any GP out there, at least the ones that I knew as an investor. Although we have 10 investment platforms at Sixth Street, each one of the platforms—think about our growth business. If we didn't have TAL, we'd probably raise an $8 billion fund because we want to be able to do the larger deals. But because we have TAL, we want to keep the fund sizes to the level of the opportunity, but we also want to be able to do the largest deals in the market. We want to be able to do the billion-dollar to $2 billion deals. We're one of the few handfuls of firms in the world that can consistently write billion-dollar-plus checks across asset classes.

Architecturally, we keep our investment platform funds at modest sizes, matched to whatever the opportunity is over whatever the investment horizon of that fund. And then we have this vehicle called TAL on top, which is effectively, in our words, like the synthetic Goldman Sachs balance sheet when we first raised it, which could do anything. Obviously, it operates with the same principles that we've had for the last 25 years, since we started investing at Goldman.

That gives us the ability, in a growth deal—let's say a Spotify, let's say the next Spotify deal comes, and let's say it's a $2 billion deal. If we only have a $4 billion growth fund or a $3 billion growth fund, there's no way we're going to be able to do that in the growth fund. But by having a $30 billion fund sitting over the top across the entire firm, we have the ability to keep the fund sizes small but, at the same time, speak to the larger deals. Then, also, anything that doesn't fit within any of our investment platforms, we have the flexibility to do that.

TAL is flexible across asset classes. It's got everything in there: real estate, infrastructure, private credit, growth—mostly private, but it has the ability to go public. It can go anywhere in the duration spectrum. So it could do a 2- to 3-year investment, but we have investments in there like with Real Madrid. We have a strategic partnership with Real Madrid and also a strategic partnership with FC Barcelona. We're probably the only people in the world that actually have partnerships with Real Madrid and FC Barcelona because they trust us. Those extend further than 10 years, so we have maximum flexibility.

You're unconstrained because, again, that's what we learned at Goldman. The world is dynamic. It's always changing, and you need that flexibility because you never know, at that particular time or in this particular environment, where the best sort of opportunity is going to be. We always want to have that flexibility to migrate to wherever the best opportunities are. That's kind of how we think about it.

But I think the most important thing about TAL is that it's consistent with who we are as a firm and our ethos: We want to be an investor-first firm.

Okay. Now let's go back to Airbnb because I think this is like a classic COVID example of the returns to flexibility.

We were one of the few firms in the world playing offense at the beginning of COVID, and the reason we were playing offense is because we had a good defense. Again, very similar to what we saw in 2006 and 2007, we started to see those same dynamics. Going back to what we talked about, sort of tunnel vision of investing, we started to see some of those same dynamics in 2018 and 2019. We couldn't have called COVID, but, again, things were getting skewed in a sort of wrong way. So we protected the portfolio and were in a position to play offense. I'd say that's kind of the first thing.

The second thing is, right when COVID hit, we went around and said, “What are the best business models in the world that are most impacted by COVID?” We did this literally—think about 60 people across Sixth Street working weekends, all day, every day—trying to figure out what were our themes, our 15 to 25 themes before COVID. Obviously, we threw that out the door. What are our next 15 to 25 themes? Part of this was one of the themes: best business models most impacted by COVID.

Airbnb—great business model. If you remember at the time, again, another generational CEO and founder, Brian Chesky. There was a lot of negative press on Brian Chesky at the time, which was, by the way, unfair and unwarranted, but there was a whole bunch of stuff—and this is all public—going on at the board. And that didn't deter us.

So we literally started calling into the board, calling people we knew on the board, calling the bankers—just trying to get in any way, because we didn't have a preexisting relationship with Brian, but we knew people that were around him. Ultimately, we came in, and that was an interesting time because the thing that Brian did that was really smart—he did a lot of things that were smart. The way he operated through that, and the first time we met him, we were on a Zoom call with 30 squares or 25, I don't know. He must have had a lot of advisors, and despite all that, his values, the mission, and the principles were all the same.

We talked about a lot of special humans today. Daniel and Brian—special humans—but they wanted to fortify their balance sheet so they could play offense. We and our friends over at Silver Lake basically gave him a billion dollars, a billion-dollar financing. It was in loan form. This is all public; it had some warrants attached to it, and it ended up getting them through the period. Obviously, things started to get better, but the most important thing after that happened was they were able to start playing offense versus playing defense.

I think the other thing it did is it really solidified, I think, what we already knew: Brian was such a great leader, and he was able to get this done.

8. Analyzing Risk and Business Models

I'm curious, again, in your framework, about what the unique units of risk were in that specific transaction relative to those returns.

First of all, we had to be right on the business model. So, look, from afar, we wanted to make sure that the business model was what it was. The second thing is they wanted to get it done in 7 days.

We had a team at Sixth Street in Asia, a team at Sixth Street in the US, and a team at Sixth Street in Europe, literally working—

Handing off the work.

Handing off the—no, no, really handing off the work.

That's cool.

There wasn't a vaccine or anything. So our view is, for us, it was as much about the fundamentals of the business as it was how much liquidity runway they could have. We had to make the bet with that liquidity runway that something would happen—there would be a cure, something would get better—and basically gave them, and they obviously had a lot of leverage to manage the business, up to 4 or 5 years of liquidity.

Our whole thing was, if we go to 3 years of this—by the way, this led to another theme on sports and live entertainment because we learned that we like experiences. Humans like experiences. But that was our analysis: the fundamental business analysis, making sure everything in the unit economics was what we thought. Obviously, the team—making sure that the management team and the CEO were what we thought.

But the other thing was really a liquidity analysis, and then making that sort of not-in-the-spreadsheet judgment—which sometimes you have to do—was as much of a risk underwrite as anything. The liquidity analysis was to make sure how much runway they had.

Do you typically try to boil things down to a simple bet like that, so that you understand it in simple terms and you're not creating too much complexity?

We like complex things. In terms of the ultimate call, we do all the fundamental analysis, but ultimately investments come down to 3, 4, or 5 things. We try to figure out—I wouldn't say we simplify the overall investment—but we try to simplify what are the 3, 4, or 5 things that matter, and we know those things inside out.

We also understand—and this is the other thing investors do—that people only think about explicit risks. They don't think about implicit risk. So we always try to put that lens on it: What are the implicit risks that we're assuming away?

One of them in the case of Airbnb was that we're assuming away that there will be a cure. We can't all be locked in our houses forever. We were willing to take that risk, but we had to think about that because that was part of the investment.

Ultimately, it comes down to 3, 4, or 5 things. So I'd say yes, simplify things, but it really always comes down to those 3 to 5 things.

When you think about what success means for the whole firm from a return and risk standpoint, how do you think about it? Is the ultimate comparable for units of risk and return the S&P 500 or something? Is there an explicit goal, like we exist to beat this thing or provide our investors with something more than this?

Look, our investors have expectations, but ultimately we're an absolute-return investor. Sometimes, if you just take an extreme example, let's say that every single asset class is flooded with liquidity. Maybe that's not the right time to invest. Sometimes the best thing you can do as an investor is not invest.

In terms of returns, it really depends on the level of risk units. Sometimes, in 2017, we saw 15% to 20% deals, but the risk was too far out on the risk spectrum. So we said, "Listen, we're going to accept that that's too much risk," even though that return was there. Some people kept doing that, and by the way, some of it worked out well until COVID.

We try to literally think about, again, the environment that we're in and what things are giving us. Obviously, our investors also have a set of criteria for each fund that we try to meet, so we try to meet that expectation as well.

9. Investing in Sports and Live Experiences

I'm very intrigued by the fact that some of the great go-anywhere investors gravitate toward sports at some point. Talk about the Real Madrid and FC Barcelona transactions—what you're doing, why you're involved, and what you like about that space.

This is a theme coming off of COVID: live experiences, sports, and live entertainment. In 2020, everyone obviously knows what happened, but a lot of investments in sports teams weren't actually able to be done institutionally. Once COVID happened and all these big franchises had their revenues go to zero—people weren't going to games—they still had some of their media deals, but revenue went to zero. For the first time ever, they started to reach out to institutional partners.

Our whole thesis in sports is that these are the biggest global brands in the world. Our whole thesis in sports—and we can talk about live entertainment—is that these are historically local brands. Because of technology, because you can be on your phone and actually watch anywhere in the world, you can be a Dallas Cowboys fan in Australia and watch, or a Real Madrid fan in China and watch. That whole local-to-global idea was our thesis.

We literally just started, through our relationships, calling on the top global sports franchises in the world. Now we've got the San Francisco Giants. We're partners with the Dallas Cowboys and the New York Yankees—the biggest brands in the world—as well as FC Barcelona and Real Madrid. We started calling on them and building relationships.

The deal with Real Madrid was that they wanted to do business with us, and we wanted to do business with them. It was literally, again, a whiteboarding exercise. The structure we did with Real Madrid was that we basically formed a joint venture with them, or partnered with them, on their stadium renovation, which is the Bernabéu.

Yeah. So that was the use of funds?

That was a use of funds, but we formed a real company that sort of owned the stadium assets. That was all, again, a whiteboarding exercise. When they came to us, they had an idea and we had an idea, and it was literally multiple whiteboard sessions to come up with that structure. Now, a number of people have tried to deploy that structure elsewhere.

FC Barcelona, again, because of COVID, was impacted financially and needed to do something. Joan Laporta—an incredible human, by the way—as well as Florentino, two people I've become friends with through the Real Madrid and FC Barcelona process, were trying to pull levers to basically be able to keep their roster together. Their view was, "If we lose key components of our roster, we won't be able to stay competitive." You can see how they've done since then.

That's sort of how those deals came about.

So, if you think about the stadium as an example, there's this interesting push and pull. They know the money they need and what it's for. They're probably optimizing for giving up the least, finding great partners, or whatever, and there's some minimum return that you need to get interested. What is that push-and-pull process like at the whiteboard? How do you communicate to them, "These are ultimately the things that we need to get there"?

First of all, what are they trying to solve? What structure do they want? They didn't want to do debt, so we had to do an equity joint venture with them. We come up with solutions, price those solutions, and say, "Look, here's Option A. Here's Option B. Here's Option C."

They say, "We kind of like a combination of Option A and Option B." We go back to the drawing board and come back with, "Here's a hybrid of Option A and Option B," which is kind of what happened on that deal.

What are those levers like in the different options? What are the key levers?

For every deal, they're different. If it's an equity deal, obviously, it's price. If it's a hybrid deal, where it's a convertible deal, there's a yield component and a strike component. If it's just a private credit deal, it's just a yield component.

Sometimes, when we're doing a joint venture, we ask, "What are the value-added operations?" In that case, one of our portfolio companies, Legends, is providing services to them that are helping them uplift their premium offering within the stadium. So we underwrote that and put our money where our mouth was on that.

In each deal, the levers are different. That's the thing: it's a whiteboard because, in every deal, we've got a toolkit, which we've been using for 25-plus years, but we feel like we can price anything that's not binary—stroke-of-the-pen risk—and then it's got to work for them.

If it doesn't work for them, we go back to the drawing board and try to construct something that does work for them. But again, in all these deals, where it all takes place is the whiteboard. It's not what we initially proposed to them or what they initially proposed. It's that sort of partnership with CEOs and management teams.

So, in this case, there's a stadium that's mapped onto a bigger organization that produces lots of revenue and has lots of streams of revenue. Are you always looking through to some underlying, holistic whole and figuring out how the joint venture that you own equity in benefits? The stadium by itself is just a thing, so the ticket sales and the revenue associated with the stadium itself become the thing that the joint venture owns?

Yeah. So, in that case, you've got premium VIP suites, food and beverage, and premium offerings. You have a museum. If you've ever gone to the Bernabéu, there's an incredible museum of all the history. It's the premium tickets.

There are different levers depending on what it is. In this case, it's a perimeter of assets, but it could be the whole company. We did an Affirm—Max Levchin's company—$20 billion partnership with them, where we formed a joint venture with them so they could originate more assets and have more operating leverage.

That one, again, my partner Michael Dryden, who runs our asset-based finance business and has known Max a long time, gets on a whiteboard and starts mapping it out. It's not like you can pull it off the shelf. Most of our deals—you can't just pull them off the shelf. It's right-brain.

That's why, when I say one of our core principles is independent thinking, we stay away from groupthink and just think differently.

10. Developing Investment Themes

What is the process by which you develop the 15 to 20 themes at any given point in time?

At any one time, we have 50 to 60 themes bubbling through Sixth Street, because remember, we have 10 investment platforms and each has a couple.

We each have 5. So they're constantly bubbling, and from that, there are really good themes, but they're not actionable. A good theme has to be actionable. So we sort of narrow it down to 15 to 25 things.

Where those come from is sector knowledge. We have 16 different sector franchises, and each of those sectors is doing primary research about their ecosystems, thinking about not only what that ecosystem looks like today, but what it's going to look like tomorrow. So there's research.

Some of it is that we've got a whole bunch of long-standing relationships with CEOs and management teams, and they'll call and say, “Hey, we're seeing this in our sector. We're seeing this in our business, or we're seeing this.” So, hey, that's interesting. Let's follow it up.

Sometimes we're looking at a company and investing in it, and we're thinking, “That's an okay business.” Then we look at the supplier to that company and say, “Wow, the supplier is actually more interesting than the company we're looking at.” Or we're looking at a company and one of the customers is more interesting.

Sometimes all of a sudden you start to see 3 deals, like data centers, and you're like, “What's going on?” Obviously, that's not a good example, because we started doing data centers back in 2017 with AirTrunk, which we can talk about, because that's a company we literally started with a white sheet of paper. It was actually just bought by Blackstone for, I think, $16 billion or something like that.

It comes top-down, bottom-up, and sometimes we just have a view on something and we'll start doing a bunch of primary research. But a lot of it is through primary research and relationships, and it comes from everywhere. It's not one place. It's everywhere.

And that's the whole point of our firm: because there are no silos and no fiefdoms, all those things get circulated up. All of a sudden, we see a theme from our power people. We have a team where all they do is power, our data communications people, and we see a comp from our real estate people. This is kind of just what's going on with AI—the constraint of power. Putting all this under one umbrella is saying, “Hey, let's have you guys all work together on this.”

What are your favorite 2 or 3 themes right now—the ones that personally animate you the most?

We have 25 themes running through the platform right now, so I'll just give you a few of them. Number one is partnering with big companies, big corporates, to help advance their business. A firm we talked about is thinking about partnering with asset originators and banks to basically help their origination and their operating leverage. I'd say that's a big thing in our asset-based finance business.

In our real estate business, again, there's the idea of people getting older: wealth tech. Again, the percentage of wealth in private alternatives is going to go up. There's a whole bunch of services and technology around that. So I'd say wealth tech is one.

Sports and live entertainment. We've talked about the sports piece, but again, live entertainment—the one thing we learned during COVID is that people like experiences. They value experiences more. As you know, from the younger generations—I know for my kids—they could care less about material things. They just want experiences.

So that is a big theme for us, and you'll continue to see us do more of that. But those are the bigger ones.

11. Personal Development and Firm Culture

Given how big this has all become—assets, number of people, strategies, investments—how do you spend your own time on individual investments versus on people and teams? Because obviously you love investing, the investment-by-investment level of detail, but there's way too much for you to keep in your head at any one point in time. So, what does your week look like?

My partners who run the 10 different investment platforms are great investors. When we first started the firm and the investment committee, I was very vocal—probably 20% to 30% of the conversation, maybe even more than that in some cases. Each year that's gone by, people just keep growing, and I'm less and less involved, to the point now where, on investment committee, I have views and I have things, but it's very rare that there's some issue or something we're thinking about, or some way to create value in a particular company, where, through the course of all the conversation in investment committee, I can just sit there because everything that I would have said or asked has already been asked, and in a lot of cases, asked better than I would have asked.

I'm on all the investment committees, or on the big investment committee. Some of the smaller deals I don't get involved with, but again, I'm sitting there just watching my partners, just listening. I'm watching a tennis match. I'm watching David Viniar; it's kind of what David Viniar used to do.

Again, not only listening to the partners, but also some of the junior people or mid-level people. Sometimes the best ideas come from them. I'll get involved with 1 or 2 deals a year—a deal like Airbnb, where I was the point person, or a deal like Real Madrid with my partner Rich Botti. So some of the bigger deals, I'll step in and get actively involved.

But in general, we have a great team, not only with the partners, but also the next generation. In terms of running the business, obviously I think a lot about our strategic plan and executing the core strategic priorities. I try to think about big boulders, and there are 5 big boulders. They're generally very related to our strategic plan. I'm maniacally focused on that. I've got an excessive amount of energy, as you might be able to tell.

What I try to do, first and foremost, is keep the culture, because without our culture, we don't have our investing business. Our culture is everything. If I see something not working the way it is, or some deal doesn't get passed to another group, or some relationship isn't handled in an unfettered way, it's so countercultural to hoard relationships, not call people back, or not help people even though it's a deal not related to your particular sector. I'm trying to make that very countercultural.

If I see people acting with ego, which doesn't happen a lot, or something that's not a team way, I'll pull them aside and say, “That's not how we do it here.” I'm maniacal about that because it's not just culture in the abstract; it's how we actually execute our business model and deliver great outcomes for LPs.

And then the last thing I try to do is what I call “toggle like a hawk.” I've got the right people in the right seats. They've bought into the culture. They're good investors. They're good managers and leaders. They know what we're doing. They know what we're trying to solve. They're willing to work with other groups.

We have really good reporting. That's one thing I learned at Goldman: reporting, reporting—just communication, not fancy reporting. So I always know what's going on.

And then obviously I talk to probably 20 or 30 people a day throughout the firm. I'm constantly doing that; my average conversation is probably 2 or 3 minutes. But I literally talk to people all day, all the time, just to feel what's going on. If there's ever a situation where I need to go 10,000 feet deep, I'll go 10,000 feet deep, but then I try to go back up so I can just see everything that's going on, because if I'm 10,000 feet deep every day, I'm not doing my job.

That's kind of how I think about it. Those are really how I spend my time. But the reality is, we have a great set of partners. A lot of the partners we've worked together for 20-plus years. We have shared values, like first principles on doing business the right way.

A lot of those first principles are already in place because we've worked together for so long. We all know what we're doing, and we all kind of buy into the mission of what we're trying to do. And for me, keeping the culture the way it is and making those types of behaviors happen—life is too short. That's one of the things I just try to protect with everything.

All these fascinating stats that are coming out—Apollo put out that stat about the percentage of companies north of $100 million in revenue that are private; it's like 93% or something like that. It just seems like the private markets and, let's say, the allocation of an average high-net-worth wealth-advisor client or something is 3%, and it's going to 30% or whatever.

Maybe they overshoot, and that's the problem, and then they have a liquidity crisis, and that's the problem. But I'm just curious for your commentary on this. It's amazing to me how few net-new pure public-equity investors I interview. It's kind of a dying breed.

Well, it's kind of ironic when you step back and think about it. You basically have all these public companies. There are fewer public companies; it's going more private. But now you have all these trends of people trying to take ETFs on private companies.

It's a little bit circular.

It's a little bit circular, but that's really interesting when you start thinking about ETFs and now there's going to be trading in private capital. You start to see all this. So, all this stuff is a little bit circular, but it's a real dynamic, and I think it's something that anyone that's thinking about investing and thinking about capital allocation needs to take real note of, because these dynamics are real.

And by the way, I think for some of the traditional sovereign wealth funds and pension funds, they've had sort of unfettered access to GPs, and I think that they've got more competition coming in from the wealth channel and insurance channel. So, it's going to be interesting to see how all that plays out.

I think, like anything, the very best GPs are a lot better than the average ones. It's the same way the best companies are a lot better than the average ones. It's an interesting point that they may have to compete. The best LPs will have to compete for the best GPs in the same way the GPs do for companies.

It's starting to happen. You're starting to see some of the larger LPs that are the traditional sovereign wealth funds or pension funds looking for access. They're looking for access because they're worried about access in the future. They see what's happening. They see all this wealth capital coming in.

There's not an earnings call where people aren't talking about the growth of the wealth channel and how much money they're raising in the wealth channel, obviously seeing the insurance channel. So, I think access to your best GPs—those conversations are accelerating because, again, ultimately everything's a choice of alternatives, and I think that dynamic is the other part of this.

In addition to the beautiful get-over-yourself idea, the people that are over themselves, and the Spurs idea, are there other outside sources of inspiration that have really fueled your thinking? People, mentors, icons like Gregg Popovich—anyone else that has really cemented the way you view the world that we haven't talked about?

When I got to Goldman Sachs, I met Jody Zuckerman on the airplane, and I showed up to Goldman Sachs. I didn't know anything about finance. I remember going to the first analyst session with all these super-smart kids from the best schools, all 4.0s, and just super intimidating.

Something very fortunate, and also one of the most impactful things in my professional career, happened when we first started. There was a bank called Amresco in Dallas, Texas, and they were failing and needed to raise liquidity. I got tasked to basically lead the evaluation of buying a portfolio of loans from a group called RTV Ventures. The portfolio was basically a bunch of loans to radio and TV companies.

Back then, this was before direct lending or private credit. There was a lot of asset value in the radio stations and TV stations, but they had no cash flow. A traditional bank couldn't finance them. So, what these guys had done—this was a little pocket in this big bank called Amresco—they basically had gone out and given these companies first-lien loans at 15% coupons and warrants for 10% to 30% of the company, which, as you can imagine, was breaking my brain.

They called it stick value. They would take a radio station or a TV station where the stick value—where these things traded, they were sold all the time—was, say, $200 million, and they would lend the first $50 million. From their perspective, going back to risk units, they were the first 25% of the value of the company in a first-lien loan, which at the time just broke my brain.

The guy who ran that was a guy named Steven Plus. Steven Plus, who's now Sixth Street's chief risk officer, is about 15 years older than me. We ended up buying the portfolio. It's about a $400 million portfolio, and I was basically in charge of it.

Stephen's this slow-talking Texas guy. You meet him and you're like, "Is this guy going to get out the sentences or not?" But he's one of the smartest guys out there. The fact that I got a job at Goldman Sachs was pretty lucky.

He basically, for a year—and really 2 years—taught me finance, taught me investing, taught me about risk units, taught me everything, and taught me how to go through documents. I look back at it now: he was 15 years older than me. Here's some kid coming down from a New York firm, even though I was Texan. I still had a little bit of my Southern accent back then, which got beat out of me by all my friends in college.

I used to have these yellow notepads like this, but they were bigger. I would write down my 10 questions for Stephen for the day, and I'd call him and ask him. That whole process of him teaching me about investing, how to think about risk, how to think about return, and all that literally led to what made my career—the start of my career—at Goldman, where I started running businesses when I was 25 years old.

That whole idea with Stephen led me to say, "Wait a second. I know these are really high rates of return, but couldn't you sort of take other businesses that are good businesses that banks, for whatever reason, won't lend to because they've got a very specific credit box, and still earn a good return, but not that high, and then have a much bigger TAM? And could you do that in the middle market?"

I technically wrote it, but Stephen helped me write it. I wrote a business plan when I was 23 or 24 years old. That business plan was basically to do middle-market direct lending, which at the time Goldman Sachs had never done.

First of all, direct lending didn't exist. It wasn't a word. Goldman Sachs had never done anything in the middle market.

And that's when, by the way, I first met David Viniar. I said, "Look, this could be new clients for Goldman. We could go out—instead of earning 30% returns on a first-lien loan, maybe it's 10% to 12% or 13%, or 8%, something less than that—but again, doing something outside of the credit box on good assets or good businesses."

That business plan, at 24 years old, I presented to Hank Paulson, Lloyd Blankfein, David Viniar, and the executive committee. That was the first time that Goldman ever got into the middle market.

By the way, that business is now, I think—Julian Salisbury, one of my partners, told me—over $50 billion.

Wow.

But it all happened because this guy Stephen Platt—

Took the time.

Took the time and answered all those questions. It would have never happened. And, by the way, most people in that situation would have said, "Here's some kid coming down from a New York firm," but that just taught me about developing people. It taught me the importance of development because I saw what happened to me, and that's why I've always put so much emphasis on developing the younger generation.

Age is just a number. Get people that buy into the culture, work hard, are intellectually curious, and ask questions. That whole thing really changed everything, but it taught me a commitment to developing.

A couple of my partners, Borna Moghadam and Matt Dillard, were associates when they joined Sixth Street on the first day, and I've been working with them every day since. I love doing it. It taught me to do that, and we try to do that across Sixth Street.

By the way, today, whenever there's someone at Sixth Street who I feel could use development or could be better at reaching their potential—people know who they are—guess who I have them work with?

Pretty amazing.

It's incredible.

That was one of the most selfless acts, and it changed my life.

My friend Ravi Gupta has my favorite framework for this development concept, which is demanding and supportive. That's the orientation he wants to have toward people. How do you think about the framework for developing people and talent?

That guy's a smart guy. That podcast you did with him—I had 20 people tell me about it. I thought that was a great one. He's super talented.

For me, it starts with caring. You have to authentically care for that person, and you have to authentically care for their development. To me, that's 1, 2, 3. What I always tell all our leaders is, first of all, you've got to care, and you've got to proactively make it part of your day, part of your week, and part of your month to think about: How do I develop this person? What are their strengths? What are their weaknesses? How do we do that?

By the way, that's why we have this personal business plan that we make everyone do. We have everyone in the firm do it as part of the process. The other part of the process is having them go to their leaders and really sit down with them to identify that.

For me, it's being intentional. It's being deliberate, but you've got to have a plan because you can't do it in the abstract. You've got to be very explicit. The way I think about the personal business plans is that every year, you have a personal business plan.

Is the format of everyone's personal business plan the same?

The content's different. You have 5 things or 3 things on your list to improve. You knock down 70% of them. That's part of your toolkit. You leave the ones that you didn't knock down for the next year. Those go to the next year, and then you add 2 more.

You do that for 20 years, and you're deliberate about it and you keep notes like you do on the yellow notepad and you're intentional about it. Those people, by the time they get to 20, they're going to be optimizing their return on time because they've got such a wide toolkit to go through.

And by the way, the corollary to that is it allows them to spend more quality time with their family and their kids. I think too often people try to skip steps, and the whole purpose of these personal business plans is the intentionality to really knock them off and be deliberate.

You're not on an island. You're in partnership with whoever your leader of that particular investment platform is, and that's how we think about it. We literally run that process over and over again. We say, “Look, shoot high, because if you're doing 100% of your plan of what you're trying to work on, you're probably not aiming high enough. But try to knock down 75% and keep adding to it, and you'll wake up one day and your future self will thank you because you get to spend more time with your kids and go to all their sports games, like I do today.”

Is the retention crazy high at Sixth Street?

We've never lost a partner at Sixth Street.

Crazy.

Never lost a partner.

And I think that's all culture.

Maybe after this podcast we will, because you've got so many listeners. You could argue maybe we should have lost some. Maybe there's a criticism there. But we just try to make it an environment where people like to work.

There are different forms of compensation. I think sometimes in our industry, everyone thinks about one form of compensation, which is monetary. But we always talk about “who you work with” compensation. There's “what's your culture like” compensation. There's “are you getting developed” compensation. There's opportunity. Do you have white space in front of you? Compensation. We try to take a more holistic view of that, and we coach that.

Look, people like to work there, and we don't have a-holes. We don't tolerate it. Will that pop up every once in a while, where 2 people get intense and then disagree? That happens, as long as it's with respect and dignity. Again, people getting intense, that's not what we're doing, because our business model is predicated on people working together, not having fiefdoms and silos. They all work together, share information, share relationships. That's our business. That is literally the essence of our business model. That's why we're so focused on it.

Say more about this concept of future self.

When I grew up, I was very fortunate that my parents—we didn't grow up with a lot, but they always spent a lot of time with me.

Yeah.

They were always present at all my sports games. They were just always there. When I started working at Goldman, I had that vividly in my mind. It's like, whenever I had kids—I didn't know when—I wanted to be able to be very present with them.

12. The Future of Sixth Street

My idea was that if I built the biggest toolkit possible, if I invested all the time now, prior to when I had kids and a family and a wife, I would be able to spend maximum time with them. I had a bunch of motivations, but that was one of the things. I was always thinking about my future self—not from a business perspective or career perspective, but so that I could spend more time with my kids whenever that happened. These kids don't exist, by the way, so this is just like a future self.

My idea was that it's all about return on time, because investing is overwhelming. You could literally spend all day on half a deal. There's so much; it never ends. My idea was that I needed to be able to be the most efficient at return on time. The way I wanted to be efficient at return on time was to sift through, know what you like, have the biggest toolkit possible, and build that toolkit as much as possible.

That's why I started doing my own personal business plans when I just started in the business. It was always with the mindset of my future self, so that when I got to that point, I could be a good husband, be a good dad, and be present like my parents were.

Whenever I talk to our incoming associates or new people at the firm, I always talk about it. Think about your future self. You've got to have fun, but the more time you put in now, when you don't have a spouse and kids, you're going to set yourself up so that you can spend more time with them.

I think some people mortgage the future a little bit by having too much fun. Again, you've got to have fun, but you could have a little bit less fun and spend more time building your toolkit so you could spend more time with your family when it happened. That was always a motivation for why I was so focused on those yellow notepads, and on that future self and that moment.

Again, just to be clear, because I have friends probably listening: I did have fun, but I was also thinking ahead about that future self.

If I apply future self to Sixth Street, to the whole thing, and you think 5 or 10 years hence, something like that, what do you hope it becomes that it is not yet?

I want us to stay an investor-first firm. I don't care. Other people in the industry want to be deployment factories. By the way, there's nothing wrong with that. All good. But that's not what we want Sixth Street to be. That's number 1.

Number 2 is culture is everything to me. There are 2 tests I'm always going to run. One test is that we have an offsite every year in Austin, Texas, where the whole firm comes, and I walk around and meet a bunch of people. I'm like, “Did I meet any a-holes? Did I meet people that don't ask questions or just talk about themselves?” So far, we're undefeated. We're 16–0.

But the other test I'm going to run is when I'm an old man, 80 years old, and I come back to the firm and I'm sitting in a random investment committee or a random meeting. Is that still true? To me, that's the ultimate test. Would I introduce the people then to my family, to my grandkids or my kids? That's the ultimate test.

We always talk about that when we're interviewing people: first of all, are they over themselves yet? In our industry, there's a lot of people who aren't over themselves yet. Maybe they'll listen to this and get over themselves. That's a whole other topic. But also, would you introduce them to a family member? That, to me, is more important than anything: maintaining that. Wherever that journey takes us, that's where it will take us.

Again, for our business, we're an investing business. Those things are what make us and drive what we believe, fundamentally, religiously, because we've been doing it for 25-plus years, with great outcomes for our LPs. If we can do that and ultimately serve your customer—which in our case is our LPs—and our people do all those things, that's where it will take us.

To be clear, we have 5-year strategic plans and very specific objectives, but that's what I think about on the horizon. I've shared that broadly with our entire firm because it's how I think about it.

My friend Boyd Varty has this great phrase, which is, “We don't know where we're going, but we know how to get there.”

Yeah, I like that. I like that.

And you've got to be able to adapt, because think about software engineers. Every mom and dad in Palo Alto, 3 years ago, was telling their kids they had to be software engineers, and now none of them are telling them to do software. Things can change, and you've got to be adapting. We're headed into interesting times here.

Yeah. Well, I'm fascinated by what you built. It's so interesting and fun to hear all about it—its history, its unique aspects, and where it's led you. It's such a fantastic conversation.

13. The Kindest Thing

When I do these, I end with the same traditional closing question for everyone: What is the kindest thing that anyone's ever done for you?

I think I'm going to have to say that Steven Plus, just being 15 years older than me, took the time to answer all my questions. By the way, in a lot of firms, I think they would have gone around me and said, “Hey, what are you doing?” He took the opposite approach.

That's the kindest thing anyone's ever done for me, and probably the most impactful. I wouldn't be where I am today without him.

Amazing. Thank you so much for your time.

Thank you.