Opportunities for Digital Transformation Capital with David Roux

Barry Ritholtz speaks with David Roux, co-founder and executive chairman of BayPine, a private equity firm focused on digital transformation at core economy businesses. Previously he co-founded Silver Lake Partners and served as the chairman and co-CEO. David has also held leadership positions at Oracle, Central Point and Lotus Development. He currently serves on the boards of Bristol Seafoods and The Institute for Health Metrics and Evaluation at the University of Washington. On this episode, Barry and David discuss the tech investing landscape, AI's future development, and sectors of opportunity for BayPine's "digital transformation capital." See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  At K K R, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, K K R has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. K K R, understanding what matters. Visit K K R dot com slash what matters.

• 0:30Speaker 01

  When you're a business owner interested in expanding to new markets, there's a lot to consider and countless questions to answer before making the call. The most important one being, are you ready? That's where Chat G P T comes in. Give it a goal, add your files and ask chat to help you map out different scenarios for the future of your business. So when growth is on the table, you've got an expansion plan ready to implement. Get started at Chat G P T dot com.

• 0:58Speaker 01

  Bloomberg Audio Studios.

• 1:00Speaker 02

  Podcasts, radio, news.

• 1:05Speaker 02

  This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 1:12Barry Ritholtz?

  This week on the podcast, another extra special guest. David Rue is chairman of Bay Pine, a fascinating private equity firm. They are not interested in simply flipping companies or buying firms and then quickly selling them. What they do, much more involved than a consulting firm. They are experts at digital transformation across a wide variety of sectors in the investing world. And they essentially take companies as varied as tire manufacturers and industrial producers

• 1:55Barry Ritholtz?

  and retailers and find intelligent ways to use technology to make these companies more efficient, more productive, more profitable. And they're not, again, they're not just Consultants, they come in, they take a stake in a company. Sometimes it's a minority stake, sometimes it's a larger stake. And they help effect this massive change with great results. They're one of the few companies that specialize in this. Their track record has been very impressive. And the approach they bring to transforming old industry companies is absolutely fascinating.

• 2:39Barry Ritholtz?

  Previous to Bay Pine, David was one of the co-founders of Silver Lake Investors, a legendary firm from the 90s and 2000s. With no further ado, my conversation with Bay Pine's David Rue.

• 2:56Speaker 04

  Thank you. Pleasure to be here.

• 2:57Barry Ritholtz?

  It's a pleasure to have you. I've been looking forward to this conversation for quite a while. Let's start out with your background. Bachelor's from Harvard, Masters in Philosophy from Cambridge, and then an MBA from Harvard Business School. What was the career plan?

• 3:13Speaker 04

  You know, I originally wanted to be an architect.

• 3:15Barry Ritholtz?

  Really? I've always wanted to pretend to be an architect. That's an area I'm fascinated in. Why did you not go into that space?

• 3:24Speaker 04

  You know, I grew up building go-karts and treehouses and the like. But I think when I got to school, I found that I could make models, build software, maybe create organizations, and that it was as much fun as building a building.

• 3:52Barry Ritholtz?

  There's a different sense of creating a company versus creating a certain type of space inhabited by people. No doubt about that. So let's talk about some of those companies that you built. You begin at a few tech startups. You found Daytech, which eventually gets acquired by Lotus. What was the startup process like? This was mid 1980s, is that about right?

• 4:17Speaker 04

  Yeah, early 80s. You know, in business school, I realized this is the... Kind of early PC boom. And I realized from my academic work, you know, there were word processors, there were spreadsheets, but there was not very good database technology for PCs. They didn't have what the mini computers had and the mainframes had. So I saw an opportunity to create some software and also to be able to marry that up with data for people to use on their PCs. And that was the idea behind Daytext.

• 4:59Barry Ritholtz?

  So Daytext gets acquired by Lotus. Who eventually acquires Lotus?

• 5:03Speaker 04

  Lotus is eventually acquired by IBM. By coincidence, that was a relationship I managed, so I had a very good kind of ringside seat and all that. They were very interested in the company's suite of primarily communications technologies, CC Mail, Lotus Notes, because the sort of networking boom had already started up and they saw a world where all of these PCs would be interconnected.

• 5:33Barry Ritholtz?

  How did you end up at Oracle?

• 5:35Speaker 04

  I had met Larry Ellison during my Lotus days. I'd done another company, which we sold to Symantec. Larry had contacted me and said, "Look, we've got a tiger by the tail. The business is growing like crazy. I think there might be some M&A opportunities. We really don't have a corporate development function. Would you be interested to come here and build one?" That's how it happened.

• 5:59Barry Ritholtz?

  Oracle, especially in the 80s and 90s, became famous as a serial acquirer of all sorts of pieces, spinouts, rollups. How long did you stay at Oracle?

• 6:11Speaker 04

  I was there all through the 90s until 1999. It was really a terrific experience, extremely rapid growth. I ran the venture fund, did all the investing off the balance sheet. I also managed our, started and managed the M&A program. So, yeah, it was fantastic.

• 6:29Barry Ritholtz?

  Yeah, I can imagine. Oracle in the 90s, you were out in California, I would assume, right?

• 6:33Speaker 04

  Silicon Valley.

• 6:34Barry Ritholtz?

  Right, right in the heart of things.

• 6:36Speaker 04

  Ground zero.

• 6:37Barry Ritholtz?

  And I gotta think Oracle and Ellison, like I cut my teeth on them in the 90s. He seemed to have been everywhere. Oracle was consistently ranked best company to work, top 10 fasting growing companies. Like Oracle, I think people who just came into the market in the past 10, 20 years don't know what a powerhouse Oracle was and still is.

• 7:00Speaker 04

  Yeah, it has a remarkable history, you know, it's class of 86, meaning that's the same year as Microsoft, Sun, Apple. And so they've been at it and doing a great job for a while. You know, Larry's often thought of as a very aggressive and astute business mind, but I don't think he gets enough credit for his technical chops. If you look back, think about it, he has been fearless about betting the company on major new architectures.

• 7:41Speaker 04

  So, you know, he made the original bet around relational databases when everyone else was doing something else. He then made a major bet on Unix when it was a kind of obscure, you know, scientific operating system. He then made a huge bet around enterprise applications, big bet around client server. And then maybe the most courageous bet was in the mid 90s when Netscape had gotten the first browsers out, the internet boom had started. A great story, he came in one morning after a weekend, we all sat down at our, had a little executive committee call, and he says, "Look, I've been thinking, I think this internet thing

• 8:26Speaker 04

  is more important than most people understand. I would like to change 100% of what we're doing in development. I want to stop all of the client server work and I want to replatform everything that we're doing on a web architecture." 3,000 engineers, dozens, hundreds of products affecting, you know, thousands upon thousands of customers. And he very casually said, "And I'd like to do this by the end of the day."

• 8:52Barry Ritholtz?

  Sounds like that's a multi-year project. Was he talking about a plan?

• 8:57Speaker 04

  No, no, no. He was talking about, I want, he directed, turned to the director of engineering and said, I want this done by the end of the day.

• 9:04Barry Ritholtz?

  Just port it over to the internet.

• 9:05Speaker 04

  We're just gonna stop. We're not gonna write another line of client server code. It's done. This is gonna be the new architecture. This is the future of computing. This is what our customers are gonna want in two and three and five years' time. So, we need to start building it now for it to be ready then. It was really the thing, I mean, just a credibly gutsy bet, but a very good sense of his technical prowess and the confidence he had about the kinda what's coming next part.

• 9:36Barry Ritholtz?

  Huh. Sounds like Oracle was quite an experience. At the end of the 1990s, you co-founded Silver Lake in 1999. What led to that? You were at Oracle, you were like a 15-year veteran at Oracle? Is that about right?

• 9:51Speaker 04

  No, not quite, but I'd been there a while. And it was, you know, a fantastic experience. I had a great job. Really good relationship with Larry, rest of the team. You know, I was in my late 30s. I'd kinda come to realize that it was always gonna be Larry's business, rightly so, and that I was looking around and I saw what I thought of as, I've come to call it an OIPS, which is acronym O-I-P-S for an opportunity in plain sight. And I couldn't understand the following. I couldn't understand why investors were pouring money into venture firms,

• 10:30Speaker 04

  pouring money into growth equity, and not doing anything to invest in technology using a private equity format. Didn't make sense to me that it would be a good small company, it would be a good medium-sized company, and then all of a sudden it would not be an appropriate place for fiduciary capital. That didn't make sense. And I thought, gosh, that must be a huge opportunity. You know, we were right in the middle of the internet boom, so tech was, you know, front and center of the news.

• 11:00Speaker 04

  And yet, there was none of the, you know, traditional firms were there. In fact, they were actively avoiding it. You know, it was sort of not considered an appropriate place to invest that kind of capital.

• 11:14Barry Ritholtz?

  Why was that? Was it that people were just so distracted by the new hotness, by the dot-coms and the internet?

• 11:20Speaker 04

  No, no, no, I don't think so.

• 11:22Barry Ritholtz?

  Or were the public markets there for larger companies if they needed capital?

• 11:26Speaker 04

  No, no, I don't think that. Here's what I think. Because this is what they told us. I mean, I asked that exact question. The theory was this: you couldn't go write checks for hundreds of millions of dollars if you couldn't underwrite the technical innovation at the heart of these business models. If you didn't understand how the semiconductor worked, if you didn't understand how the software was built, one. Two, there was a theory that these businesses had volatile cash flows and therefore couldn't be leveraged, which was the, you know, the whole point of leveraged buyouts. And finally, that they were companies run by children, young, young folks. I was in the business, and when I

• 12:10Speaker 04

  heard all that, I said, you know, those guys in New York and the skyscrapers and the guy in London and those people in Munich and Tokyo, I don't think they really know what's going on here. These are actually really good businesses. The cash flows are unbelievable. Customer franchises are very, very durable. There's incredible organic growth here. This is a really big and attractive opportunity. I think someone's gonna, you know, make a great return by building a business here.

• 12:40Barry Ritholtz?

  And you don't need to underwrite the entire underlying technology. You're really just talking about that transition to whatever makes those companies that much more attractive. Is that a fair assessment?

• 12:53Speaker 04

  When you're doing what Silver Lake does and what it was built to do, you are making a fundamental bet, technology. It's like when people buy technology or enter into an agreement with a company like an Oracle or a Microsoft, you're not buying what they're selling you today. You're buying the promise that they will continue delivering. It's like buying a lot on a river. Now, you're not buying the water in front of your house. You're buying the promise that the water will continue to flow. And so you do need to have a point of view about how well positioned these companies are for the future.

• 13:33Barry Ritholtz?

  You co-founded Silver Lake with, this is some lineup, Glenn Hutchins, Jim Davidson, Roger McNamee. Tell us about your Silver Lake co-founders.

• 13:43Speaker 04

  Well, look, they're each enormously talented and capable in their own right. You know, we all lived near each other, knew each other professionally beforehand. We talked extensively about this opportunity and agreed that it was the next big thing. And I think that, you know, looking back on it, I've been very fortunate at Silver Lake and prior companies, when I started something, to do it with a group of people. And that it's always been great to have folks from different backgrounds, different styles, different professional experience. You know, it's very complimentary and, you know, it's not for everybody, but for me, it's the way I like to do business.

• 14:27Barry Ritholtz?

  They weren't at Oracle prior?

• 14:29Speaker 04

  No.

• 14:30Barry Ritholtz?

  How did the four of you come together?

• 14:31Speaker 04

  How do we all know each other?

• 14:32Barry Ritholtz?

  Yeah.

• 14:33Speaker 04

  Glenn and I have been college classmates, tennis partners, fly fishing buddies. He was previously at Blackstone. Jim Davidson and I are both big sports fans and shared season tickets for the Sharks and the Warriors. So we would spend a lot of time together. He was running the H and Q investment bank. And then Roger was my next door neighbor and very good friends with Jim. So, you know, it was a group of people already kind of knew each other, had some personal relationships to build on and, you know, came with a different set of experiences.

• 15:11Barry Ritholtz?

  What was Silver Lake like in 2000 as the dot coms all imploded?

• 15:16Speaker 04

  Well, you know, it was an interesting thing. I would jokingly tell people that we bought high, sold low, and made a ton of money. And, you know, it was a very challenging economic environment. The NASDAQ during that period fell 80%.

• 15:30Barry Ritholtz?

  Right, over 80%.

• 15:31Speaker 04

  From the front end of the fund to the back. The fund itself, in a very fundamental way, was set up as a counterpoint to the mania around the internet. And what we would tell people pointedly, we say, "Look, you're completely right to be excited about the technology sector. It's under-invested. It's underappreciated for its scale, it's underappreciated for its growth, it's underappreciated for the strategic value that it plays in the economy, but you're investing in the wrong companies at the wrong price." And I had a little chart that I would show them. So here's a thousand, approximately a thousand public tech companies at that time.

• 16:16Speaker 04

  These 10% are what's driving the entire valuation. They're trading at 10 to 30-plus times revenue.

• 16:27Barry Ritholtz?

  Not earnings, revenue.

• 16:28Speaker 04

  Not earnings, revenue. And I said, "I can just tell you, that is the wrong price. Not necessarily bad companies, but those are the wrong prices." I said, "But look at these other 90%. If you take the rest of the publicly traded technology companies, they're trading at one times revenue, which is the same as the S&P of the day."

• 16:50Barry Ritholtz?

  Pretty reasonable, more or less.

• 16:52Speaker 04

  Very reasonable. And they grow twice as fast. So you have an opportunity to buy growth at half-price. You've got this situation, there's sort of the fundamental insight at the heart of the Silver Lake value proposition is that technology, the entire tech sector was on sale, even at a time when people thought it was super-expensive, because 10% of the market was super-expensive, but most of it was not.

• 17:23Barry Ritholtz?

  How much of what's been going on in the 2020s has been a focus on that same top 10% of tech companies as being overly concentrated and wildly expensive? Do you think the same situation is starting to show up in the modern era?

• 17:42Speaker 04

  Well, there are some parallels and also some important differences.

• 17:47Speaker 04

  The parallels are that there is a concentration of interest. The difference is, is those companies are now huge businesses with gigantic levels of profitability, unprecedented levels of profitability, and growth rates that have never been achieved before by companies at that scale. So that's the part that's really different.

• 18:16Barry Ritholtz?

  Mm-hmm.

• 18:17Speaker 04

  Right? A lot of the things in internet time was highly speculative. The other thing that's different is that today, the companies with the most spectacular valuation levels are private. People aren't wrong to say they are a winner. The sort of the bet, of course, is are they the only winner?

• 18:39Barry Ritholtz?

  Right.

• 18:40Speaker 04

  Right? And so you have to believe that there won't be successful competition. You know, I would only point out that 40% of their sales go to four big vendors.

• 18:55Barry Ritholtz?

  Right.

• 18:56Speaker 04

  Each of whom has their own chip development program. And so I'm not saying they're going to build a better chip, but they're definitely going to build a cheaper chip.

• 19:04Barry Ritholtz?

  Right.

• 19:05Speaker 04

  And so there'll be some dampening, for sure, from that.

• 19:09Barry Ritholtz?

  And, you know, I'm around long enough to remember when it looked like Intel was impregnable, that they had a position in the ecosystem that nobody could touch, and now it feels like they're an also ran.

• 19:26Speaker 04

  Well, this goes back to the point that you raised earlier, which is if you're going to do tech investing, you need to have an opinion about the tech. It's not just that you can look at a series of financials and say, oh, they had a good quarter last quarter, they had good year-over-year numbers, I like the three-year trend, and say, fine. You have to separately underwrite the quality of the underlying architecture, what's going on in the industry, and believe that they're going to be able to keep going. And so like, if you like, go to Nvidia, let's talk about that. You can look at the financials and say, this is fantastic. You know, they're doubling and trebling and these are incredible numbers and growth and blah,

• 20:11Speaker 04

  blah, blah. The way they have gotten their improvements has been to go beyond what has been possible in any other chip manufacturer. The other chip manufacturers have gotten their productivity improvements around the physical geometry by making the chip smaller and smaller.

• 20:29Barry Ritholtz?

  More transistors.

• 20:30Speaker 04

  More and more transistors.

• 20:31Barry Ritholtz?

  Packing them on.

• 20:32Speaker 04

  Moore's law.

• 20:33Barry Ritholtz?

  Packing them on.

• 20:34Speaker 04

  Classic Moore's law.

• 20:35Barry Ritholtz?

  Down to ever smaller.

• 20:36Speaker 04

  Ever smaller.

• 20:38Barry Ritholtz?

  Right.

• 20:39Speaker 04

  These guys have stolen a march on the rest of the industry with their GPU chips by doing other things. They've gotten probably two or two and a half times, which is a lot, of improvement. But they're talking about improvements of things that are kind of eight, 10, 12, 16 times productivity improvement. So they're doing it other ways. They're doing it with algorithms. They're doing it with, you know, other approaches. And so you have to form an opinion as an investor about what is the likelihood they can keep doing that because it's been the key driver.

• 21:17Barry Ritholtz?

  And keep doing that for the next three to five years, not just the next quarter.

• 21:21Speaker 04

  Bingo.

• 21:22Speaker 00

  At KKR, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, KKR has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. KKR, understanding what matters. Visit kkr.com/whatmatters.

• 21:52Speaker 01

  With ChatGPT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, you need a clear view of the landscape before making any decisions. ChatGPT can help you prepare. Connect your Google Drive, point to relevant files and reports, and ask chat to research competitors, industry forecasts, and market signals. It can turn the findings into a strategic deck in your team's template that you can review before presenting to your leadership team. Growing a business is ambitious, and ChatGPT can help you do it with confidence. Get started at chatgpt.com.

• 22:29Barry Ritholtz?

  So let's talk a little bit about Silver Lake and how that eventually leads to Bay Pine. It feels like, and I don't know if my memory is correct, Silver Lake was one of the first buyout shops built around making technology investments or investments in technology companies. Is that a fair description?

• 22:50Speaker 04

  Several other deals had been done, but they were occasional and they weren't the central focus for anyone.

• 22:57Barry Ritholtz?

  Tell us some of your memorable investments at Silver Lake.

• 23:00Speaker 04

  Well, I think some of the investments that the firm is best known for out of the box first was Seagate, which was a hard disk drive manufacturer. It was, at the time, the number one producer of disk drives. They had the best technology, great management team, very complex but finely crafted, extended supply chain through Asia, and Wall Street hated them. It was hardware in the age of the Internet. So the other thing that traded really, really hot back then was any new telecom business.

• 23:35Barry Ritholtz?

  Right.

• 23:36Speaker 04

  Optical this, telecom that. One of the insights that we had as a group, and it stemmed from the fact that we were not finance people, but industry people with operating backgrounds, is we understood that the entire tech industry is an ecosystem.

• 23:54Barry Ritholtz?

  Right.

• 23:55Speaker 04

  It operates like your body, right? All the parts sort of need to fit together and they operate interdependently. And so, everybody at that time was talking about the information superhighway. And they were buying the highway, right? They were buying the telecom companies and they were buying all these new applications that you could do on the Internet. But people forgot that you couldn't have an information superhighway without parking lots.

• 24:22Speaker 04

  In other words, the electron, the bit, had to start somewhere and it needed to end somewhere. So if you believed that broadband was going to explode, then you must also believe that storage is going to explode. And so we were able to look at that kind of systemic arbitrage around the architecture and say, you know, the comms piece is overpriced. I don't think we should pay 10 and 15 times for a pipe when we can pay six times EBITDA, EBITDA, earnings for the number one storage company in the world. Now, there was a bunch of complications around things they owned and, you know, it was a public company, so

• 25:07Speaker 04

  it was a leveraged buyout and all the rest of that. But that was really the fundamental insight.

• 25:13Barry Ritholtz?

  So it sounds like a lot of the public market investors had a fundamental misunderstanding about the entire tech sector, the ecosystem, as you described it. What other things did people just not get, not understand, overlook, obvious investments in plain sight?

• 25:32Speaker 04

  Yeah. Well, I think in that, in that case, it was a hangover from the very real war of attrition that for the prior 20 years had preceded that moment in time where the industry went from 120 disk drive companies to six or seven.

• 25:54Barry Ritholtz?

  You had an idea who the winners were going to be?

• 25:57Speaker 04

  Well, and so the question was, is there going to be more blood in the water? Or have we arrived at an industry structure where everybody is going to do okay and the number one player is probably going to do better than most? That was one. The second issue is, could anyone figure out a way to, at the time, Seagate owned some shares in other software companies, and it wasn't clear to the market how they could sell those in a tax-efficient way. And that's one of the things that, with structuring, we were able to figure out.

• 26:35Speaker 04

  I'll give you another one where we bought Avago, Hewlett Packard's semiconductor division. In this tie frame, the early 2000s, it was very much the fashion to be out of semis. Semis were out of fashion, right? Right. The world was infatuated with the other end of the stack, not the, you know, I didn't want to hear, people didn't want to hear about semis, they didn't want to hear about sub-assemblies, they didn't want to hear about components, they didn't want to hear about computers. They wanted to hear about all the sexy, high-margin, no-cost-of-goods, no-capital-equipment, software, services, internet applications sounded wonderful, you know, this is the age of Pets.com. Right.

• 27:20Speaker 04

  That thing. And so, it wasn't wrong to say that software was good, but it didn't automatically follow that hardware is bad. And so, people had this idea, almost like a dialectic, which is that you couldn't believe in something that you like, that the other must be bad. And so, semis were completely out of fashion. Siemens spun theirs off, HP spun theirs off, IBM either closed or spun theirs off. You know, just, all these people who had, who had very significant capabilities and fabs that today would be worth fortunes, leave aside the intellectual property and the skillsets and the trained labor force, you know, choo, you know, off, all went off the back of the truck.

• 28:05Speaker 04

  So we bought this from HP, hired a great manager, CEO named Hock Tan, and built this up into a kind of highly specialized, in other words, we didn't buy it with the idea that we're going to go compete with Intel and try to dislodge them from the PC market, but rather with the idea that everything was going to have a processor. Cars, kids' toys, you know, your kitchen appliances, and that somebody was going to have to make all those processors. And so there was an exploding rest of market opportunity that Intel wasn't focused on, that people like Avago could be.

• 28:50Barry Ritholtz?

  Today, I think automobiles are the second biggest consumer of semiconductors. I don't know if that's still true. That was true a few years ago.

• 28:58Speaker 04

  I think that's right. In fact, the stat I often quote for people is that the semiconductor content in a car is more valuable than all of the metal, than all the steel and all the aluminum. And maybe more importantly, it is increasingly the case that what the semiconductors enable, the navigation, the...

• 29:24Barry Ritholtz?

  ABS, lane departure warning.

• 29:26Speaker 04

  All the features that really give the car kind of its identity are increasingly denominated by the, you know, digital capabilities.

• 29:37Barry Ritholtz?

  What about the rest of the world outside of PCs and automobiles? It was incredibly far looking to say in the early 2000s, by the way, there are going to be chips in everything, not just dishwashers and refrigerators, but toys and electric bikes and you name it, it's going to need a chip. That was a decade ahead of its time.

• 30:01Speaker 04

  You would have been very amused when we raised our first fund. You may remember the Furby Doll.

• 30:08Barry Ritholtz?

  Sure, of course.

• 30:09Speaker 04

  Which was a Christmas...

• 30:11Barry Ritholtz?

  A hot product. You couldn't get it when you...

• 30:12Speaker 04

  Very hot kids' product, little furry thing.

• 30:15Barry Ritholtz?

  The eyes batted.

• 30:16Speaker 04

  And it had in it a digital signal processing chip. That allowed it to make little cuddly noises and, you know, wiggle its legs. And I used to bring it with me to all of our fundraising meetings. I wouldn't say a word about it. I would simply take it out of my briefcase and I would put it on the desk between myself and the prospective investor. And I wouldn't say a word about it. You know, I'd launch into my talk about semiconductors and hardware and the evolution of the sector and so forth. And finally, sometimes it would be five minutes, sometimes 10, but it was never more than 30 minutes.

• 30:51Barry Ritholtz?

  Right.

• 30:51Speaker 04

  The investor would say, David, what is that doll? Why do you have that doll there? I go, oh, I'm so sorry. I forgot to mention it. That's a Furby doll. And I brought that for you because I wanted to illustrate in a simple way how the march of technology is going to go. I said, that Furby doll has more processing power than the lunar lander.

• 31:16Barry Ritholtz?

  I knew you were going to go that way.

• 31:17Speaker 04

  And I said, we're looking at a world where all of music is going to be digital, all of film is going to be digital, television is going to be digital, the way you do your phone is going to be digital. I said, so all of these analog things, as they become more digital, need this technology. And if you understand how the technology works, you will, not because you're kind of a big brain genius, but because you've played the game before and you understand what all the pieces do, you'll be in a really good position to identify those opportunities going forward. I'll give you another good example. The part that, and the little wrinkle that I think gave us a lot of credibility, and by the

• 32:00Speaker 04

  way, gives us credibility now, is to say, let's own the right technology, put it in the right companies, and the key part is at the right price. It is bringing an investment sensibility and financial discipline to the work that we do, right? We're not like technology zealots and I want to just own it to own it, right? It's not a prize. It's not a trophy. It's a, you know, would this be useful and would somebody else be interested? I'll give you another example. eBay came out of the blocks, super hot. They bought PayPal, and then they bought this thing called Skype. And Skype was the first software-based, peer-to-peer

• 32:45Speaker 04

  video conferencing capability.

• 32:48Speaker 04

  So long before Zoom, 20, 30 million people on at the same time, which was an amazing technical feat, wasn't exactly here what it had to do with auctions, even less clear what it had to do with PayPal, but eBay bought Skype. And it kind of noodled along in the Skype portfolio in the early 2000s for a year, two years. No one paid any attention to it at all. We said, my gosh, look, they've had three CEOs in two years. They're spread out all over the place. They haven't upgraded the product in two years. Maybe they'd be willing to sell it. Contacted them once, contacted them twice. Eventually, they said, yeah, we'd be willing to talk to you about that because we had

• 33:31Speaker 04

  a point of view about this is a really exciting market, but no one's paying any attention. So if we could carve that out, we went to eBay and said, keep as much of this as you want. We'll buy the rest of it at a full valuation, which we did. And it was a business that had nice growth despite really being a feral child.

• 33:53Barry Ritholtz?

  Right.

• 33:54Speaker 04

  And we said, look, get paid twice. We'll pay you once, what it's worth, and we're going to make this way more valuable than you possibly could because we can focus on it and make a bunch of changes. And it was, it was sort of a troubled, was complicated asset where, you know, there was some outstanding litigation, they hadn't upgraded it for a long time. Apple had just announced that they were going to be offering a, you know,

• 34:19Barry Ritholtz?

  Video.

• 34:20Speaker 04

  Video service.

• 34:21Barry Ritholtz?

  FaceTime.

• 34:22Speaker 04

  It became FaceTime. So there was, you know, Microsoft said they wanted to be in the business. So there was a

• 34:26Barry Ritholtz?

  Lot of competition.

• 34:27Speaker 04

  There was competition from very credible, large players.

• 34:30Barry Ritholtz?

  And if I recall correctly, around that time, all of the fat pipes and broad bandwidth that had come public in the late 90s, early 2000s were coming back up around pennies on the dollar. I recall Global Crossing and Metro Metta Fiber and all these companies. So the bandwidth was coming online at a cheap price that didn't exist that way in the 90s, which is very much right into the sweet spot of Of Skype.

• 34:58Speaker 04

  Yeah. And by the way, not so dissimilar from a the AI processing crunch that we have today where people are pouring a huge amount of super expensive stuff, which you do need, but which will be available three years and five years and 10 years from now.

• 35:14Barry Ritholtz?

  Much cheaper.

• 35:14Speaker 04

  Really, really different pricing.

• 35:16Barry Ritholtz?

  You end up buying them, if I recall correctly, uh, not much long after that, didn't Microsoft come along and scoop them up from you?

• 35:24Speaker 04

  Well, what happened is is that we bought it, completely upgraded the software, changed out the entire management team, developed a series of partnerships, built a business side of it because it had been very much a kind of B to C phenomenon. Trying to really opened up a product line around B to B. And it ended up being very attractive for Microsoft, sold it to them. You know, one of the foundation elements in what is Teams today and really helped them. I think it was a great, it was, it turned out to be a good deal for Silver Lake, but it also, I think, as all deals should be, a very good deal for the acquirers.

• 36:02Barry Ritholtz?

  Any other, any other memorable Silver Lake deals?

• 36:05Speaker 04

  Well, oftentimes, you know, I, I think the maybe two others that we are well known for, we're the largest investor in Alibaba before.

• 36:15Barry Ritholtz?

  Oh, really?

• 36:15Speaker 04

  Before it went public and that was a, you know.

• 36:19Barry Ritholtz?

  Explosive. That was.

• 36:20Speaker 04

  It was explosive, but it was a scary investment. It was a minority investment in a Chinese e-commerce company, you know, located on the other side of the world who's.

• 36:31Barry Ritholtz?

  Also, your co, your co-investor is the People's Republic of China, right? They own a chunk.

• 36:37Speaker 04

  Ultimate regulator, for sure.

• 36:40Barry Ritholtz?

  Owner slash regulator.

• 36:41Speaker 04

  And, you know, Masason and SoftBank are already large investors. But we liked the management team. We love the story and that turned out to be a, you know, very good. That was a very, very good investment. And then the, the last one, and really still very much in, in the news was Dell. Big, well-known, public company, uh, you know, eponymously named for its CEO who'd left, kind of like, you know, Charles Schultz left, came back, first went private where Michael rolled, in fact, essentially all of his, uh, ownership into it, made a very large personal bet. So it was a gutsy bet because it was at a time.

• 37:27Speaker 04

  Again, this is a place where the conventional wisdom was the PC was going away. We were going to use our phones, we were going to use iPads, somehow.

• 37:36Barry Ritholtz?

  Right.

• 37:36Speaker 04

  It was going to go away. We didn't think it was going to go away, and we thought that the market hadn't really appreciated how much work Michael had done building up a store of intellectual property around next generation computing, whether it's cyber, cloud computing, and you know, maybe it's like maybe a basketball franchise that has a bunch of draft picks.

• 38:08Barry Ritholtz?

  Mm hmm.

• 38:08Speaker 04

  You know what I'm saying?

• 38:09Barry Ritholtz?

  Right.

• 38:09Speaker 04

  Kind of young talent, which we thought was going to be very valuable because we had a point of view about the importance of cloud. We had a point of view about the importance of cyber, and we thought that those assets were undervalued because the whole of the company was getting valued like it was a commodity PC vendor.

• 38:27Speaker 01

  With ChatGPT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, you need a clear view of the landscape before making any decisions. ChatGPT can help you prepare. Connect your Google Drive, point to relevant files and reports, and ask chat to research competitors, industry forecasts, and market signals. It can turn the findings into a strategic deck in your team's template that you can review before presenting to your leadership team. Growing a business is ambitious, and ChatGPT can help you do it with confidence. Get started at ChatGPT.com.

• 39:04Barry Ritholtz?

  So let's talk about, what did you do post-Silver Lake in the 2010s?

• 39:10Speaker 04

  I'm a starter and a builder. I like backing social entrepreneurs and feel particularly passionate about conservation, biomedical research, and education. We took our foundation resources and focused it first on a

• 39:27Speaker 04

  Thing out in Seattle called the Institute for Health Metrics and Evaluation, stood that up. Bill Gates blessedly is doing most of the support now, but that's now, you know, 500 researchers and they focus on understanding in detail the global burden of disease so that we know how healthy or sick, you know, every country is and, you know, where to allocate our healthcare dollars. On the biomedical research side, became very active as the chairman of Jackson Laboratories, one of the largest independent institutes in the country focused on kind of the genetic causes of rare diseases. Were able to double the size

• 40:10Speaker 04

  of that, quadruple that endowment. And then, more recently, in the education space, I had this view that we were not appreciating how big artificial intelligence was going to be. And that as a consequence, as a nation, we are under-invested in advanced computer science. In other words, we've got programs at, you know, all the best universities, but they're graduating hundreds of people, tens of thousands, or maybe even hundreds of thousands that we need. Really? Yeah. Because what's happened is, is that the academics are focused on building the new platform, the so-called large language models. Right. When, think about that like it's a, you know, nuclear power plant, you know,

• 40:55Speaker 04

  complicated, high science. But we now, it now works. And it'll work a little better and they'll keep refining it and so forth, but it works. And that what we need next are application engineers. We need electricians. We need people to design appliances. We need to run wires. We need to change from steam to electricity. And we don't have those people. And so, we already know what we need. It's going to, by the way, it'll be 20 or 30 years of implementation ahead of us. So these will be great jobs for a lot of people. So we've built the first school. We spent, you know, a few years getting that organized, opened

• 41:35Speaker 04

  it in 20. We're now, I guess, four years in. We've got a thousand students, 200 corporate partners, and...

• 41:45Speaker 04

  Started or accelerated 94 companies, 400 jobs, you know, really exciting.

• 41:51Barry Ritholtz?

  You're doing this for a couple of years, you're standing up.

• 41:53Speaker 04

  I'm happy as a clam.

• 41:55Barry Ritholtz?

  Right.

• 41:55Speaker 04

  I'm making things, I'm helping people.

• 41:58Barry Ritholtz?

  Right, you're running the Rue Family Foundation, the Rue Institute, you're basically.

• 42:04Speaker 04

  I was not looking to start a new business, much less an investment firm.

• 42:11Barry Ritholtz?

  Right.

• 42:12Speaker 04

  What happened is, is that my very good friend, Anjan Mukherjee, we were talking about the future of private equity. During that conversation, we're saying, you know, this next generation of private equity needs to do something different. If we want to continue producing the supra-normal levels of profit that we've seen from the asset class.

• 42:35Speaker 04

  Because there's more competition, prices are higher, credit's more difficult. You're not, you can't count on multiple expansion, so you're going to have to make the business you buy better during the pendency of your ownership. There's only so much procurement improvements available, you can only upgrade management so far. My observation was this, which is, is that, I said, you know, this tech thing, it's only 10% of the economy. When you take all of GDP, when you take all of semis, all of computing, all of networking, all of software, all of social media, it's 10% of GDP. I said, what's going on right now is the other 90% of the economy is being digitized. Huge opportunity.

• 43:18Speaker 04

  Now, big difference is, is that now, the nature of technology is, is that it's the only capital good that really kind of decreases in price and makes itself smaller, right? So you think about what's the difference between now and 20 years ago? Now, the technology's much smaller, it's much more ubiquitous, it's much less expensive, and it's much easier to use. All of those things mean it's going to go everywhere. So we're talking about this, and we're getting ourselves lathered up about the fact that all of these analog companies, industrial firms. Consumer firms, healthcare firms, services companies, they all need to adopt more technology, but none of them know how.

• 44:02Speaker 04

  Opportunity in plain sight. It's dead obvious that they're going to do this, right? You think about the companies that you know in those kind of sectors that are doing well are almost always those that have adopted the technology earlier.

• 44:18Barry Ritholtz?

  Right.

• 44:19Speaker 04

  You know, JP Morgan and Finance, or Walmart and Retail. You know, those companies that get there early get a big leg up on their analog competitors. We said, "We could do, we could build an investment firm that not only could write a check, but could be your technology partner in helping you architect a business model future that would allow you to grow your company faster, perform better, you know, produce more profits, you know, and drive value."

• 44:53Barry Ritholtz?

  So, let me push back against one thing you said just a little bit.

• 44:57Speaker 04

  Please.

• 44:58Barry Ritholtz?

  This, this opportunity in plain sight.

• 44:59Speaker 04

  Yeah.

• 45:00Barry Ritholtz?

  If it was really in such plain sight, everybody would be doing it. But instead, it takes a couple of guys with a lot of technology experience, a lot of operational experience, and financial experience to make this real.

• 45:13Speaker 04

  I partially agree.

• 45:16Barry Ritholtz?

  Okay.

• 45:17Speaker 04

  All right. Here's the partial part. The partial part is, is that I think the opportunity is easy to see.

• 45:24Barry Ritholtz?

  Ah, the execution.

• 45:25Speaker 04

  I think the execution is hard.

• 45:26Barry Ritholtz?

  Is the challenging part.

• 45:27Speaker 04

  So, the way I oftentimes say it is, is that it's easy to describe, it's just really hard to do. And it's hard to do because you need to understand the technology itself, you need to know the vendors, you need to be able to set priorities, you need to have a realistic sense of time, and you need to know how to weave this new technology into the processes that already exist. It's not like these companies have no tech. Every one, any company of any scale has an ERP system, they have a bunch of databases, there's compliance issues, there's, you know, cyber, there's all kinds of things, so that

• 46:11Speaker 04

  you have to integrate into what's already there.

• 46:14Barry Ritholtz?

  So when I think of private equity, at least from the 90s, 2000s, even the 2010s, I think of them as a form of financial engineering to unlock value. What you're really describing is digital transformative capital, to steal a phrase from your website. So this insight is, hey, we don't need to just do financial engineering. If we could get these companies to adapt the latest, greatest tech in a way that's useful and productive, we can really unlock a lot of value. Is that what led to Baipine getting launched and you kinda coming out of retirement to try it again?

• 46:56Speaker 04

  Yes, I mean, that was sort of Anjun calling for the lefty from the bullpen.

• 47:00Barry Ritholtz?

  Right, right, let's get the lefty.

• 47:03Speaker 04

  Yeah. So. It started innocently enough, where it was really a conversation between two friends with a lot of mutual, you know, respect, where we had a similar, you know, 15, 20 year runs in private equity. So we were very current, highly topical understanding of what was going on. And we realized that we could take and put in one place, really, it's like a binary weapon, right?

• 47:37Speaker 04

  Where a mukergy quality, world-class private equity firm with fabulous diligence, great structuring, really thoughtful modeling, you know, great financial engineering, we don't want to throw that away, you know, those are all valuable lessons. But combine it with the operating prowess, tech insight, and extended personal network of relationships that would allow us to do things for and on behalf of our portfolio companies that simply wouldn't be possible, practical, or maybe even imagined by our

• 48:22Speaker 04

  competitors.

• 48:23Barry Ritholtz?

  It sounds like your competitors.

• 48:27Barry Ritholtz?

  Are the consulting firms who come in and you know, kind of seagull an event. They come in, they eat everything, they crap all everything, they fly away. As opposed to you guys, not only coming in with technology expertise, operational expertise, but capital, writing a check. That's a very different relationship than paying a consultant.

• 48:48Speaker 04

  Yeah, you know, it's interesting, the consultants actually play a very important role, and I wouldn't want to diminish it.

• 48:56Barry Ritholtz?

  Okay.

• 48:58Speaker 04

  Around awareness building. And when we go in to talk to a management team, they almost always have had a consulting encounter.

• 49:13Barry Ritholtz?

  Right.

• 49:14Speaker 04

  Right, and they'll have a stack of PowerPoint slides, which they'll kind of run to their office to show us, that says, "The consultant told me there are 16 things that I can do with technology, but I don't know which one I should do."

• 49:32Barry Ritholtz?

  Right.

• 49:33Speaker 04

  "I don't know what I should do first, I don't know who should do it for me, I don't know how much it should cost."

• 49:39Barry Ritholtz?

  They're not going to implement it.

• 49:40Speaker 04

  "I don't know how long it will take, I don't know how it integrates with what I've already got, and I particularly don't know what to do if anything goes wrong."

• 49:45Barry Ritholtz?

  Right.

• 49:46Speaker 04

  And so it's the, it goes back to the implementation part. And so what we like to see is a management team that has self-awareness and enthusiasm, but are not themselves technically fluent, where you know, we can bring that to the party in a way that can be catalytic for the management team, to give them confidence, because they have a willingness to act, they're just not sure what to do, and they don't want to do any harm, they don't want to do something harmful. And so having somebody who's done it before, been there, you know, is super useful.

• 50:31Barry Ritholtz?

  So, so let's talk about some of your portfolio companies and how they're engaging in digital transformation. We were talking about AI earlier. How are you guys looking at AI to facilitate taking some existing companies and making them more productive?

• 50:51Speaker 04

  Yeah.

• 50:53Speaker 04

  Well, first thing, we could spend a whole session on AI, but here's what I would say first. We believe it is actually, despite all the hype, and notwithstanding all the attention it's already received, bigger than most people think.

• 51:11Barry Ritholtz?

  Yeah, I'm with you on that. I'll give you a funny example.

• 51:16Speaker 04

  Please.

• 51:16Barry Ritholtz?

  So I'm in the midst of putting together a manuscript and the publisher, they're not keen on doing an index. Takes a couple of months, you're paying a person all this time to look up every name, everything, every that. For a couple of hundred bucks, there's an AI PDF indexer that will identify every proper name in 400 pages and create an index relative to, and I'm just imagining reproducing that sort of dumb mechanical work over and over and over again, and I know I'm just scratching the surface.

• 51:52Speaker 04

  Very well, it's a great, it's a great example. I think that right now, most people's experience of AI maybe is a chatbot. Right? You know, ChatGPT or, you know.

• 52:06Barry Ritholtz?

  Or any, go to any car company, you get that pop up and you know that's not a live person at 2:00 in the morning.

• 52:14Speaker 04

  What I always say is just imagine all the best AI, current ones today, and by the way, the ones that you're seeing today are the worst that you will ever see.

• 52:25Barry Ritholtz?

  Right, a little better every day.

• 52:27Speaker 04

  Worst you will ever see. They, they read, they write, they hear, they see, they can compose poetry, music in any genre, photorealistic images, they can create video. All of this today.

• 52:47Barry Ritholtz?

  Right.

• 52:47Speaker 04

  Right? This is all available today. They also write computer code.

• 52:56Speaker 04

  As well or better than most programmers. They can do complex mathematics. They can solve puzzles. They can play games. They can run factories. They can drive cars. It is really hard to overestimate what's possible. And we are standing, really for the first time after decades of discussion about it, on a, you know, on the brink of real white collar dramatic, white collar productivity gains. Really dramatic. Best example that I would use for you to kind of give you a framework for it is, is that

• 53:39Speaker 04

  you're going to see a lot of AI show up as features in products that you already use.

• 53:44Barry Ritholtz?

  Uh huh.

• 53:44Speaker 04

  Like, you know, all your Apple products.

• 53:47Barry Ritholtz?

  Right.

• 53:47Speaker 04

  We'll have it soon. The first thing you get with this probably a product will be agents, you know, something that works with you, like a partner, right? Like a writing partner that you would use, right? Sort of, you know, think about it as a more advanced version of what you were just describing.

• 54:01Barry Ritholtz?

  Right.

• 54:02Speaker 04

  The best thing out there right now to illustrate that is a product called Copilot from Microsoft, which works with a software engineer. You have it running on your machine and it's basically a programming buddy that will help you write code, suggest different options, you know, help you debug, track, blah, blah, blah. And it typically improves productivity 25 to 50% out of the box.

• 54:32Barry Ritholtz?

  Amazing. And then just gets better.

• 54:33Speaker 04

  And can be up to 100%.

• 54:35Barry Ritholtz?

  Right.

• 54:35Speaker 04

  Right? It all by itself has dampened the demand for computer programmers.

• 54:43Barry Ritholtz?

  Really?

• 54:44Speaker 04

  Because it's made the ones that we have so much better.

• 54:47Barry Ritholtz?

  You've just, you've, you've doubled the effective productivity.

• 54:51Speaker 04

  Up to, but think about it as. Very dramatic, right? You know, if you had five, maybe you need four. If you, you know,

• 55:00Barry Ritholtz?

  Right.

• 55:00Speaker 04

  It's just a really significant improvement, which makes it practical to imagine that you're going to be able to do this in law firms and accounting firms and consulting firms, where you take your average employee and make him as good as your best.

• 55:20Barry Ritholtz?

  So let's take an old economy company that's not traditionally tech oriented.

• 55:25Speaker 04

  Right.

• 55:26Barry Ritholtz?

  You guys own Mavis Tire Express Services?

• 55:30Speaker 04

  Yes.

• 55:30Barry Ritholtz?

  How does a consumer service business like that get digitally transformed?

• 55:35Speaker 04

  How do you monitor? CEO walks into our office and said, "I know everything in the world about tires. I know where to buy them, know how to store them, know how to put them on, know how to rotate them, I know how to balance them, I know how to align them. Nothing. I know everything about tires. I know nothing about technology. But I have a very strong opinion that technology could help my business and I just don't know where to start."

• 56:00Barry Ritholtz?

  Huh.

• 56:01Speaker 04

  I've got, he had talked to a bunch of consultants. He had lots and lots of ideas.

• 56:06Barry Ritholtz?

  And there are hundreds of these Mavis stores, right?

• 56:08Speaker 04

  Thousands.

• 56:09Barry Ritholtz?

  Thousands.

• 56:10Speaker 04

  There were a thousand Mavis stores when we first started chatting three years ago.

• 56:16Speaker 04

  So it's a, you know, it's a good size. It's a good sized business, very well run, nice growth, profitable. So it wasn't, not a business that's broken, but a business where the management team had a felt need around the opportunity to make it better and really steal a march on their competitors. And so what we did is sit down with them and say, "Look, here are six different use cases." That you know, you might want to think about. Here's a way around, you know, digital marketing. Here's a better customer experience. Here's what you can do around inventory management.

• 56:58Speaker 04

  Here's labor productivity and capacity utilization planning. Here's dynamic pricing. And we went through an entire kind of, you know, brainstorming session around that, produced a whole plan. So, you know, usually when you do a new investment, you'll do an underwriting. And we do a normal financial underwriting like everyone else. What's different is we also do, in addition, a separate digital underwriting where we talk with the management team to create, you know, a technology roadmap for the enterprise that integrates with their business model and extends it to create performance improvements.

• 57:39Speaker 04

  And what we did with them, sat down, we got better digital marketing so that the search engines optimized for if you're calling and writing in, I've got a flat tire and I'm in Poughkeepsie, then here's where you go. Improve the customer experience so you know, you know, when to bring your car in, limit wait times, accurate estimates of how long it is going to take, what it's going to cost, what your options are, dramatically improved kind of labor utilization in the shops, capacity utilization.

• 58:20Speaker 04

  Got the pricing right so that we manage margins and customer expectations appropriately. All of that, some of it, we could get done in two days or two weeks, but some of those things has taken us two years to put up. The end result, though, is that the business is now more than twice as big.

• 58:42Barry Ritholtz?

  Huh.

• 58:43Speaker 04

  Roughly twice as profitable.

• 58:44Barry Ritholtz?

  Wow.

• 58:46Speaker 04

  And that's not all due to the digital, but the digital is very fundamentally enabling of that growth, as you might imagine. If you're opening new stores, it's a lot easier to do if you do the same thing in every single store.

• 58:58Barry Ritholtz?

  Right. So, so let's do, talk about another portfolio company, Polywood.

• 59:03Speaker 04

  Yeah.

• 59:04Barry Ritholtz?

  High-density polythene outdoor furniture. How can technology improve that?

• 59:09Speaker 04

  You know, it's an interesting business. It's a specialty manufacturing company.

• 59:17Speaker 04

  That builds kind of very high quality, feels like wood. Outdoor furniture, very durable, colorful, but doesn't chip, doesn't fade.

• 59:31Barry Ritholtz?

  Doesn't need to be painted.

• 59:32Speaker 04

  Doesn't need to be painted, don't have to take it in during the winter, any of those things. So that's sort of the fundamental value proposition of the thing. But here's the difference, which is, is that we said, look, you guys are manufacturing guys. People who built it and they're really good at, because they use recycled plastic. So it's incredibly sustainable. You know, they drill the holes, they do the trimming, they just take the plastic waste, put it back on the top. So it's a zero waste, highly sustainable. Fantastic story. During COVID, they grew their online business a lot. They're not marketing people.

• 1:00:06Barry Ritholtz?

  Right.

• 1:00:07Speaker 04

  So we're able to show them how to significantly improve yield on their online, the e-commerce side of the business. We're able to, and we're able to do that, by the way, very quickly, almost instantly, around that, able to see how to get to new adjacent market areas, based on finding more people like the ones who are, you know, already buying.

• 1:00:34Barry Ritholtz?

  Once you identify a customer, you want to be able to identify more.

• 1:00:37Speaker 04

  Well, once you identify them electronically, then it's a lot easier to find that electronic signature.

• 1:00:42Barry Ritholtz?

  Similar people.

• 1:00:43Speaker 04

  And go look for it online, rather than waiting for people to find you. The other thing that we're doing there is, is that we have highly automated manufacturing. And so that we can, we can take the manufacturing and instead of manufacturing 20 or 200 chairs, putting them in a warehouse, sending them to a distribution center or a store, and hoping somebody buys them, we can instead take an order, build the chair, send it to them. So it's not just just in time, but it's real time that creates pull so that dramatic improvements in efficiency, but it also makes it harder easier to do custom things,

• 1:01:27Speaker 04

  improves turnaround time, you get your furniture much faster. Those would be good examples.

• 1:01:31Barry Ritholtz?

  Huh, really, really interesting.

• 1:01:32Speaker 01

  With ChatGPT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, you need a clear view of the landscape before making any decisions. ChatGPT can help you prepare. Connect your Google Drive, point to relevant files and reports, and ask chat to research competitors, industry forecasts, and market signals. It can turn the findings into a strategic deck in your team's template that you can review before presenting to your leadership team. Growing a business is ambitious, and ChatGPT can help you do it with confidence. Get started at ChatGPT.com.

• 1:02:09Barry Ritholtz?

  I only have you for a few more minutes, so before I get to my favorite questions, let me just ask you one last question. We talked about the Rue Family Foundation and Institute briefly. Tell us a little bit about what you focus on with the Rue Family Foundation.

• 1:02:25Speaker 04

  What we like to do is find social entrepreneurs, folks who are looking to make scale impact in education, particularly educational access, conservation, you know, kind of environmental things, biomedical research, and then a particular focus of mine is around helping support veterans and their families.

• 1:02:55Barry Ritholtz?

  Really, really good stuff. All right, so this will be our speed round. I have about four minutes, five minutes to get through five questions. Let's just do this quickly. What's keeping you entertained these days? What are you watching or listening to?

• 1:03:09Speaker 04

  Right now, my wife and I are watching The Lioness and The Diplomat.

• 1:03:17Barry Ritholtz?

  We're about halfway through The Diplomat, so no spoilers.

• 1:03:20Speaker 04

  Yeah.

• 1:03:20Barry Ritholtz?

  Season two.

• 1:03:21Speaker 04

  Good. We loved The Crown, and I am waiting anxiously for season two of Wolf Hall.

• 1:03:32Speaker 04

  The Henry VIII and Thomas Cromwell story. In podcast land, my current favorite is Fall of Civilizations by Paul Cooper.

• 1:03:42Barry Ritholtz?

  Huh, interesting. Tell us about your mentors who helped to shape your career.

• 1:03:48Speaker 04

  You know, I've had a couple. I've been very fortunate. Early guy was a guy named Chuck Glover, who was a newspaper guy who ended up running Cox Enterprises, the media company. He funded my, Cox funded my first company. He was a newspaper guy, and the key lesson from him was, look, I had to put out a product every day. And so, just getting in the habit of putting one foot in front of the other, making a little bit of progress every day, and just keep going was really valuable. The other guy who was great for me was Dr. Frank King. What I learned from Frank, he was the head of engineering at Lotus and had had a

• 1:04:33Speaker 04

  similar job at IBM before that. What I learned from him was that the people were more important than the products.

• 1:04:42Speaker 04

  And that building your organization, primacy of people, and particularly always being, you know, always recruiting, being kind of on the pro all the time was super valuable.

• 1:04:56Barry Ritholtz?

  Let's talk about books. What are some of your favorites and what are you reading currently?

• 1:05:01Speaker 04

  I, I'm a Mark Halpern fan. I love Paris in the Present Tense.

• 1:05:10Speaker 04

  I like Don Winslow. City on Fire is one of my favorite books. It's first in a trilogy with City of Desire and City of, City in Ruins. I like Anything by Dennis Lehane, Anything by Elizabeth Strout. And I'm currently, just finished The Magician by Edmund De Val.

• 1:05:32Speaker 04

  Just reading The Hair with Amber Eyes, also by Edmund Deval.

• 1:05:36Barry Ritholtz?

  Huh, interesting. Our final two questions. What sort of advice would you give a recent college grad interested in a career in either private equity or technology?

• 1:05:48Speaker 04

  You know, I always tell them the same thing. I always tell them to do something else first.

• 1:05:52Barry Ritholtz?

  Uh huh.

• 1:05:54Speaker 04

  And I say that because I'm a great believer in domain expertise. And so I usually counsel younger folks coming out of school to go learn an industry and/or learn a craft, learn a skill, you know, be good at marketing, be good at sales, you know, be good at finance. Pick something where you're really good at it because it gives you a cachet and a standing that you don't otherwise have.

• 1:06:24Barry Ritholtz?

  And our final question, what do you know about the world of private equity investing today that might have been helpful back in 1999 when you were first standing up Silverlake?

• 1:06:36Speaker 04

  I wish I knew how important it was to be first.

• 1:06:42Barry Ritholtz?

  Really?

• 1:06:44Barry Ritholtz?

  Huh, how interesting.

• 1:06:45Speaker 04

  I think as an operating person, I probably intuited it and understood it because I kind of saw it around me, the advantages that accrue to a, you know, a category leader. You just don't need to be as good. You know, think about, think about Elon Musk. You know, his first electric car was a bundle of borrowed parts and components. It barely worked. It was hugely expensive.

• 1:07:17Barry Ritholtz?

  Literally a Lotus Solon with laptop batteries.

• 1:07:19Speaker 04

  With laptop batteries in it, wired together with, you know, with soldering wire. Cost a fortune, incredibly uncomfortable to drive, totally unreliable.

• 1:07:30Barry Ritholtz?

  Got to start somewhere.

• 1:07:31Speaker 04

  But he was able to do that for years and years and years and learn and learn and develop, you know, an expertise and some skills. Same thing's true for, if you think about it, Jeff Bezos, right? Selling books that no one wanted.

• 1:07:46Barry Ritholtz?

  Right.

• 1:07:46Speaker 04

  Losing money hand over fist for a decade.

• 1:07:51Speaker 04

  But building infrastructure, building experience, learning lessons, you know, creating a team that became the basis for, you know, both of those things didn't work until they did. And boy, when they worked, they really worked great.

• 1:08:05Barry Ritholtz?

  They really worked. Thank you, David, for being so generous with your time. We have been speaking with David Rue. He is the executive chairman of Bay Pine, a private equity firm focused on digital transformation. If you enjoy this conversation, well, check out any of the 500-plus discussions we've had over the past 10 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcasts. And check out my new podcast, At the Money, short discussions with experts on specific topics involving your money, earning it, spending it, and most importantly, investing

• 1:08:47Barry Ritholtz?

  in it. At the Money, wherever you find your favorite podcasts and in the Masters in Business feed. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Annaluke is my producer. Sean Russo is my researcher. Sage Baumann is the head of podcasts here at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

• 1:09:20Speaker 05

  Empower is all about helping you invest well, so you can go out and live a little. And their Free Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals, and more. Whether you're saving for something big, want to treat yourself, friends, or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money, and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client paid or sponsored.

• 1:09:52Speaker 06

  Sponsored by GSK, the makers of Extenture, Depamocumab ULAA. If your asthma keeps interrupting... It may be time to try something else. Extensure is an ultra-long-acting prescription-maintenance treatment for severe asthma, eosinophilic type, ages 12 and older. It isn't for sudden breathing problems. Extensure is the first and only add-on treatment that can help deliver protection from asthma attacks with two doses a year. Just one dose every six months. That's a lot of time for everything in between. Serious allergic reactions can occur. Get help right away for swelling of face, mouth, tongue, or trouble breathing. Don't change or stop medicines, including steroids, unless told by your doctor. Report if you have a parasitic infection.

• 1:10:35Speaker 06

  Common colds, sinus infection, inflammation in the nose, flu or fluke-like symptoms, joint pain, or sore throat may occur. Carry on with fewer attacks and ask your doctor about Extensure. Learn more at Extensure.com or call 1-833-393-3678.