David Rosenthal: evaluation

Transcript context

…It’s such an interesting question. It’s complicated. There's the people equation and then there's also the business equation. I'll talk about the people a little bit and then we’re going to talk about the business fundamentals. The people, we already talked about a little bit. We just have a bias towards certain kinds of entrepreneurs, what we call the hedgehog versus the fox. There's nothing wrong with foxes and nothing wrong with amazing serial entrepreneurs. They're incredibly competent people. They will make money over and over again. But I call the great serial entrepreneurs just amazing people who just have not yet found their true life's calling. You could be a serial entrepreneur, have a bunch of fantastic hits but then you will find something and say, oh my God, this is it. I found what my life's purpose is. I'm here for the rest of my life. We're looking for that match—company founder fit. Sam Walton was like that. Sam Walton was a very successful serial entrepreneur, very successful even as a teenager. He was making all kinds of money. He was making thousands of dollars which is big money back in those days. Just like Buffett was a very successful teenage entrepreneur. He's always been fairly wealthy, fairly successful, but he did not start Walmart until age 46. He was already a wealthy, successful guy. At 46, he founded Walmart and that was it. That was it for the rest of his life, the one thing. We're looking for the people, the one thing. This is our true life's mission at this point in our lives. We're not looking for yet another deal to make money. Why would we do that? Don't show me another deal that just makes money. Show me an opportunity to build something really special with a special group of people that have a mission, their life's mission (hopefully) and how can we support them on that. Guess what, if you actually do that, the money will be there. Don't worry about making money, that cannot be the reason to do any deal. It's got to be because you want to work with these people and it’s got to because we have a chance to build something. It's about the people that's such a critical component. You’ve said a bunch to me and I love adapting a Buffett analogy, but you want to find people and I think you all think of yourselves this way in Altos. Where you're painting a masterpiece versus your painting by numbers. When you're painting a masterpiece, there is no formula and it's never done. Yeah. Every time it's just different. But Buffett calls Berkshire his painting, that's my painting. When he buys business from one of these great founders who became a billionaire, he tells them, you have this masterpiece. I want to hang it in my museum. I'm not going to touch it. I'm not going to rip it apart, sell it off in pieces. I'm going to hold onto it forever. It’s a beautiful masterpiece. Sometimes you do the painting and it turns out to be not so good. Sometimes it's a masterpiece, but it's just unique. It's just different every time. We're looking for an artist. There's a lot of people out there who want volume, they want scale and paint by numbers will do it. You could build a much, much bigger business that way. Certainly much more predictable and much more repeatable. There's a lot of people who want that.…

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