The Exchanges

Q And then it's like, but wait a minute, it's the best time ever. And if you're an LP, there's enough material there to be like, actually they could be right. And so I have to keep going. Do you agree with that?

A I agree, and that is why we don't see fund sizes halving, because exactly of what you said, a lot of these opportunities are so capital intensive, because you suddenly have some interesting places to deploy. Now, it doesn't mean that the fundamental underpinning of what we all do, it doesn't matter whether it's venture or private equity. We are the answer to the demographic crisis that Elon Musk is putting his finger on. We have an aging society everywhere. People, Are retiring ever later, but they have to retire. They have ever fewer babies. So if we don't have a capital stock compounding and accumulating for the benefits of retirees, people cannot pay for their old age. Therefore, what is happening right now is a pretty narrow investor base, university endowments, you know, insurance companies, sovereign wealth funds, pension funds that underpinned our industry And yours are being complimented by ever-growing elements that were completely excluding alternatives so far, which is the four one K pensions, the individual investors. If you think about it, we have, I think it's a, it's a 192 trillion dollars of savings that are completely excluding alternatives that are in a high net worth and Kind of individual investor base. The innovation, you know, that was underpinning Norges Bank, right? The Norwegian, sorry, Relf Fund to allow them to participate in all of this long-term inv…

AI assessment note: “I agree, and that is why we don't see fund sizes halving”

Q What do you think was the boldest bet you made in that period? 40% is a lot. What do you think was the boldest?

A I thought that, um, well, as, as you know, that what we, what we do is we, we partner a lot with companies, right? We don't just buy outright. So the decision at that time, Coty, uh, was the holding company that owned Vela. And we had seen, again, I give my oldest daughter the credit for this, that one of the, uh, one of the Jenners had her, had her cosmetics brand just sold to Coty, which was an unbelievable Instagram success. And Cody got a little bit in trouble. They were over levered and we took a 10% stake in the company and then bought out the majority of Vela at the same time. So it was kind of a combined transaction. And that leap of faith to do that in the midst of the pandemic, uh, because they had in their mix also a travel retail business, for instance, which, you know, cosmetics, et cetera, you could ask, okay, when are these airports going to open again? That was a bold decision, because in conjunction, these two investments were very sizable in the fund.

AI assessment note: “we took a 10% stake in the company and then bought out the majority”

Q You said there about taking the risk. Another risk that you can take is market timing risk. I'm probably expected to take market timing risk more than you, given being much earlier. Do you, are you willing to take market timing risk and suspend disbelief, or do you need to see now is the time for this?

A Many people thought at KKR in Europe we were crazy when we leaned in and invested, I think a third, if not 40% of our current fund during COVID. So in 2020, we, um, made some pretty, um, you know, I would say a bold decisions because we don't know what that virus would yield, but I've learned a long time that you have to focus on what you can control. So I give you an example. Uh, we invested in Vela, uh, which is the, the other haircut brand with L'Oreal. And there were seriously people who questioned, well, once this pandemic is over, will people still go and get their hair colored? Having, uh, you know, three daughters and three sisters, I, I absolutely was convinced there's not going to be a problem. And so we invested and there's many more examples like this. So yes, those types of uncomfortable decisions we took and I'll tell you why. After the great financial crisis, we were pretty much like the rabbit in the headlight. We didn't invest anything. The only investment in 2009 we made was BMG. When I took the decision to invest, uh, you know, with Bertelsmann into music at a time, quite frankly, when music was in free fall, that was a great investment. In the end was a courageous, but probably I could only do it at KKR because we had, we didn't make any, any other investments. There was no large investments. But then the crocodiles, crocodile tears came later when we, we, w…

AI assessment note: “So yes, those types of uncomfortable decisions we took and I'll tell you why.”

Q really am a student of investing, I've loved it since I was 13, which is why I had no friends in school, but temporal diversification is everything, and actually really discipline in terms of deployment cycles is crucial. How do you feel about sticking true to temporal diversification and a three-year fixed-cycle adventure? I don't know what it is for you. Versus actually just moving faster and putting 40% out.

A It's an excellent question. What I told you is just a variety, it's a variance on the, on the theme of linear pacing, because we typically have five to seven year cycles. Now, on average, it's probably more like four or five, but we very much believe in, you gotta have the discipline of linear, a linear deployment, because it avoids that issue. So, even though COVID hit in 20, You know, if you have a four year cycle, you have to deploy of 25%, right? Most people didn't deploy anything. We took the decision to go 10, 15% above, but then we got lucky because in 21, we didn't invest almost anything. And as you know, my market went very exuberant when COVID gave way to that incredible wave of liquidity. But the answer to your question is, it's incredibly important, that discipline to deploy linearly over three year in your world and five, four, five years and ours.

AI assessment note: “we very much believe in, you gotta have the discipline of linear, a linear deployment”

Q a different world, and it's a world that I don't know as well, so it's like a real learning curve for me. So when we look at, I heard your other shows, and you said you spent a lot of time on portfolio construction, and I was like, great, that's a super place to start to understand where we're at. How large is the fund then as a starting point?

A So Europe for KKR is an eight billion dollar fund. It's the largest standalone investment fund in Europe. As you know, I'm a massive, um, voice for Europe. Uh, it's been not always easy. It's tough sometimes to, you know, make the case that we should invest in Europe, but it helps us to have that vehicle because it actually very much helps you in that discipline to say as a global investment firm, Europe is on the map. We got to deploy. Relative to a global fund, which can just make the decision to deploy in another geographies. In terms of your question on portfolio construction, it is so important because traditionally people didn't really think about themes, you know, they didn't think about growth versus cashflow. They didn't think about the underlying industries, um, the geographies. So we really very much Focus on that. And also, what's many people in my industry, and I know you, you're going to reflect on that in our conversation, sometimes lack is the discipline to say, hey, you know, of the, in a fund of eight billion, typically you have around 15 investments, ok? So of these 15 investments, you know, when you start selling some of them, when you start insisting That they should be better. And when do you just, um, keep them for the longterm because they're, they're your winners. Often, if you make that a work of love for the individual investors in the fund, you start…

AI assessment note: “Europe for KKR is an eight billion dollar fund.”

Q more risks than ever, given the volatility that now exists in the world on a daily basis? We were talking before about some tweets and events that happen that just kind of change everything with a tweet. My point being, the world seemed relatively stagnant or plateaued at certain points. And now it seems like it is more volatile than ever. Do you think we're taking more risks than ever?

A Well, you started this conversation with AI. You're right. I mean, AI is a fundamental transformation of all the assumptions that we had made around productivity, around the innovation cycles you need in certain industries like healthcare, uh, defense, et cetera. So that alone was already massive, right? And then at the same time, you have this incredible, um, pivot from the post-war consensus Of how everything works, right? After the Second World War, there was an institutional ecosystem built with the IMF and the World Bank and the United Nations, and there was a clear understanding of how everything works. And people had forgotten about the 1900 to 1930 period when it was much more bilateral, and it was much more nation states, and it was much more, you know, everyone for itself. People also thirdly had taken for granted the unique role of the US dollar as a reserve currency. Also that is being questioned now. Ray Dalio fourthly points out that when you have large amounts of debts accumulated, we are just one step away from a major crisis because debt bubbles at some point get resolved by internal strife, war, or massive transformations in the monetary system. So Well, my point is we have four disruptions at the same time, technology, geopolitics, monetary sphere, and at the same time, we have a huge demographic crisis we talked about, right? There's a feeling of unparallele…

AI assessment note: “So yes, we are investing against an unbelievable backdrop of Risk and volatility and uncertainty.”

Q Will KKR's Europe fund be twenty billion dollars in 10 years?

A I think that the answer is not the fund. If you ask me will KKR Europe's asset under management, ah, double and triple over the next 10 years, the answer is yes. Because the universe for what we do is radically expanding. You know, when I did the BMG deal, that was a one, one and a half billion deal for a 50% stake In that music company, you fast forward 10 years, and we had a ten billion deal to buy half of Axel Springer, which again was a fifty-fifty deal with the family. You can very easily see how that could scale further. The capital itself will be doubled and triple, but the source of it won't be necessarily a fund. It could be those retail funds that I mentioned, or it could be some part of the insurance capital, if you see what I, what I mean, yeah. So the funnel becomes much bigger. We are responsible for a much broader scope of capital to invest, and the demand for what we do in Europe is also growing much faster because more segments of the market want private equity investment.

AI assessment note: “The capital itself will be doubled and triple, but the source of it won't”

Q Gurley's statement of, you know, you got to play the game on the field, and I look at the very exuberant times that we have, say, largely fueled by AI and a huge amount of capital coming into our business, and I'm, I'm stuck between playing the game on the field, and retaining discipline on price, on cadence of investing, and How do you think about those seemingly opposing statements?

A So that's a very important point, and in fact, having invested through all these crises, it wasn't only the dot-com crash, it was the great financial crisis, the euro crisis, the pandemic, teaches us that we all just boil with water, if you will. So to have discipline, even in those times, yes, you want to deploy when there is incredible opportunity, but you need to set yourself Limits, right? There's just limits of how much you invest in a year, how many different, uh, types of in the theme things you back, because unfortunately, even if you are right, and these are fantastic teams, these are great ideas. These are scalable ventures. You don't know when the next missile hits or the next virus comes around. Things can just be out of your control. And therefore, as an investor, you just need to, you know, keep the humility, uh, Of what else could go wrong?

AI assessment note: “yes, you want to deploy when there is incredible opportunity, but you need to set yourself Limits”

Q really am a student of investing, I've loved it since I was 13, which is why I had no friends in school, but temporal diversification is everything, and actually really discipline in terms of deployment cycles is crucial. How do you feel about sticking true to temporal diversification and a three-year fixed-cycle adventure? I don't know what it is for you. Versus actually just moving faster and putting 40% out.

A It's an excellent question. What I told you is just a variety, it's a variance on the, on the theme of linear pacing, because we typically have five to seven year cycles. Now, on average, it's probably more like four or five, but we very much believe in, you gotta have the discipline of linear, a linear deployment, because it avoids that issue. So, even though COVID hit in 20, You know, if you have a four year cycle, you have to deploy of 25%, right? Most people didn't deploy anything. We took the decision to go 10, 15% above, but then we got lucky because in 21, we didn't invest almost anything. And as you know, my market went very exuberant when COVID gave way to that incredible wave of liquidity. But the answer to your question is, it's incredibly important, that discipline to deploy linearly over three year in your world and five, four, five years and ours.

AI assessment note: “it's incredibly important, that discipline to deploy linearly”

Q use this as a way to get better as an investor myself. But one thing that also I find really challenging is you have a failure or a mistake, and you let a past failure impact a future decision. So you invest in healthcare, lose money, and you go, ugh, all healthcare is shit. How do you think about retaining purity of mind despite success or failure impacting your mindset?

A Uh, rigorous analysis, and you want to reflect your rigorous analysis with as many great minds as you can, because on venture park, the mistake certainly wasn't to go into that space of combining capital with hands on scaling support. You see that with the numbers you mentioned, uh, Ollie and, and his brothers, they came a couple of years later and made a fantastic success out of it. So the space itself in our case, wasn't the problem. The space was, we were too early with the wrong investors and the Execution wasn't what it should have been. So to answer your question, gotta retain your enthusiasm that you originally had for a certain idea, and just go through that rigorous analysis what went wrong, and then build on that. There's nothing as helpful as a good failure. Without that good failure, you cannot become a world-class founder and investor.

AI assessment note: “just go through that rigorous analysis what went wrong, and then build on that.”

Q Gurley's statement of, you know, you got to play the game on the field, and I look at the very exuberant times that we have, say, largely fueled by AI and a huge amount of capital coming into our business, and I'm, I'm stuck between playing the game on the field, and retaining discipline on price, on cadence of investing, and How do you think about those seemingly opposing statements?

A So that's a very important point, and in fact, having invested through all these crises, it wasn't only the dot-com crash, it was the great financial crisis, the euro crisis, the pandemic, teaches us that we all just boil with water, if you will. So to have discipline, even in those times, yes, you want to deploy when there is incredible opportunity, but you need to set yourself Limits, right? There's just limits of how much you invest in a year, how many different, uh, types of in the theme things you back, because unfortunately, even if you are right, and these are fantastic teams, these are great ideas. These are scalable ventures. You don't know when the next missile hits or the next virus comes around. Things can just be out of your control. And therefore, as an investor, you just need to, you know, keep the humility, uh, Of what else could go wrong?

AI assessment note: “deploy when there is incredible opportunity, but you need to set yourself Limits”

Q more risks than ever, given the volatility that now exists in the world on a daily basis? We were talking before about some tweets and events that happen that just kind of change everything with a tweet. My point being, the world seemed relatively stagnant or plateaued at certain points. And now it seems like it is more volatile than ever. Do you think we're taking more risks than ever?

A Well, you started this conversation with AI. You're right. I mean, AI is a fundamental transformation of all the assumptions that we had made around productivity, around the innovation cycles you need in certain industries like healthcare, uh, defense, et cetera. So that alone was already massive, right? And then at the same time, you have this incredible, um, pivot from the post-war consensus Of how everything works, right? After the Second World War, there was an institutional ecosystem built with the IMF and the World Bank and the United Nations, and there was a clear understanding of how everything works. And people had forgotten about the 1900 to 1930 period when it was much more bilateral, and it was much more nation states, and it was much more, you know, everyone for itself. People also thirdly had taken for granted the unique role of the US dollar as a reserve currency. Also that is being questioned now. Ray Dalio fourthly points out that when you have large amounts of debts accumulated, we are just one step away from a major crisis because debt bubbles at some point get resolved by internal strife, war, or massive transformations in the monetary system. So Well, my point is we have four disruptions at the same time, technology, geopolitics, monetary sphere, and at the same time, we have a huge demographic crisis we talked about, right? There's a feeling of unparallele…

AI assessment note: “So yes, we are investing against an unbelievable backdrop of Risk and volatility and uncertainty.”

Q use this as a way to get better as an investor myself. But one thing that also I find really challenging is you have a failure or a mistake, and you let a past failure impact a future decision. So you invest in healthcare, lose money, and you go, ugh, all healthcare is shit. How do you think about retaining purity of mind despite success or failure impacting your mindset?

A Uh, rigorous analysis, and you want to reflect your rigorous analysis with as many great minds as you can, because on venture park, the mistake certainly wasn't to go into that space of combining capital with hands on scaling support. You see that with the numbers you mentioned, uh, Ollie and, and his brothers, they came a couple of years later and made a fantastic success out of it. So the space itself in our case, wasn't the problem. The space was, we were too early with the wrong investors and the Execution wasn't what it should have been. So to answer your question, gotta retain your enthusiasm that you originally had for a certain idea, and just go through that rigorous analysis what went wrong, and then build on that. There's nothing as helpful as a good failure. Without that good failure, you cannot become a world-class founder and investor.

AI assessment note: “rigorous analysis, and you want to reflect your rigorous analysis with as many great minds”

Q Do you not just find it ironic, though, that when we make a huge amount of money from European companies, that we just ship it back? To a load of people in the US.

A So first of all, I'm grateful for any capital that comes into Europe, regardless of the destination, because we need more capital in Europe. Mario Draghi is right. We need to invest 758 hundred billion a year alone to catch up with on innovation, AI, but also to complete in other industries, defense, uh, you know, uh, high tech, et cetera. Nonetheless, For the future, you're absolutely a hundred percent spot on. We got to wake up in Europe as for instance, Germany has now decided to invest 25% of its GDP and make sure when we make these investments, we build equity value. So in other words, we need to, you know, it's being done here in the UK with the mansion house complex. We need to professionalize together our pension systems and allow more investments and alternatives to build capital accumulation. Absolutely. And that means in 10, 20, 30 years, hopefully we retain a larger percentage of the value creation we, we make with alternatives investment.

AI assessment note: “Nonetheless, For the future, you're absolutely a hundred percent spot on.”

Q Will KKR's Europe fund be twenty billion dollars in 10 years?

A I think that the answer is not the fund. If you ask me will KKR Europe's asset under management, ah, double and triple over the next 10 years, the answer is yes. Because the universe for what we do is radically expanding. You know, when I did the BMG deal, that was a one, one and a half billion deal for a 50% stake In that music company, you fast forward 10 years, and we had a ten billion deal to buy half of Axel Springer, which again was a fifty-fifty deal with the family. You can very easily see how that could scale further. The capital itself will be doubled and triple, but the source of it won't be necessarily a fund. It could be those retail funds that I mentioned, or it could be some part of the insurance capital, if you see what I, what I mean, yeah. So the funnel becomes much bigger. We are responsible for a much broader scope of capital to invest, and the demand for what we do in Europe is also growing much faster because more segments of the market want private equity investment.

AI assessment note: “I think that the answer is not the fund. If you ask me... the answer is yes.”

Q a different world, and it's a world that I don't know as well, so it's like a real learning curve for me. So when we look at, I heard your other shows, and you said you spent a lot of time on portfolio construction, and I was like, great, that's a super place to start to understand where we're at. How large is the fund then as a starting point?

A So Europe for KKR is an eight billion dollar fund. It's the largest standalone investment fund in Europe. As you know, I'm a massive, um, voice for Europe. Uh, it's been not always easy. It's tough sometimes to, you know, make the case that we should invest in Europe, but it helps us to have that vehicle because it actually very much helps you in that discipline to say as a global investment firm, Europe is on the map. We got to deploy. Relative to a global fund, which can just make the decision to deploy in another geographies. In terms of your question on portfolio construction, it is so important because traditionally people didn't really think about themes, you know, they didn't think about growth versus cashflow. They didn't think about the underlying industries, um, the geographies. So we really very much Focus on that. And also, what's many people in my industry, and I know you, you're going to reflect on that in our conversation, sometimes lack is the discipline to say, hey, you know, of the, in a fund of eight billion, typically you have around 15 investments, ok? So of these 15 investments, you know, when you start selling some of them, when you start insisting That they should be better. And when do you just, um, keep them for the longterm because they're, they're your winners. Often, if you make that a work of love for the individual investors in the fund, you start…

AI assessment note: “So Europe for KKR is an eight billion dollar fund.”

Q I was chatting to Johannes, he was like, you've got to start with the Venture Park days. Uh, I was about probably four or five years old, uh, not to age you. That's a really unfair start, but, um, it was before the Sam was, and so I had to start here. What are your biggest takeaways from the Venture Park days in that really early Web One Point O?

A Yeah, just for your listeners to put this in context, you're absolutely right, Harry. This was 1999. So this was rock and roll days, the wild west of venture investing in Europe, really. And I had been a young kid at McKinsey in New York and I had encountered Thomas Middelhoff, who was that very visionary CEO at that time at Bertelsmann, who loved Idealab, you remember, which is still, Bill Gross is still going strong today. And really wanted somebody to back, to bring that to Europe. There hadn't been anything like this in Europe and there wasn't anything. And so we went there in 99, 2000. We raised a pretty big round. Uh, Goldman was our lead investors. There was a lot of people involved. And if you ask me today, what's the lesson? I think I'm sure Johannes will have, uh, spoken to you about this because he embodies it perfectly in bull markets. You just gotta keep Perspective and humility and not take yourself for a genius. So many of us back then, once we had raised whatever it was, a hundred million thought that was the end of it. I learned very quickly a few months later when the.com, uh, bubble crashed and the new, new market in Germany crashed that the most important thing really was the investors I had, uh, in, on my board, because there were two camps. One did this. To have a quick turnaround, to have a quick IPO, and the other ones wanted to do it literally for etern…

AI assessment note: “In bull markets. You just gotta keep Perspective and humility and not take yourself for a genius.”

Q What do you think was the boldest bet you made in that period? 40% is a lot. What do you think was the boldest?

A I thought that, um, well, as, as you know, that what we, what we do is we, we partner a lot with companies, right? We don't just buy outright. So the decision at that time, Coty, uh, was the holding company that owned Vela. And we had seen, again, I give my oldest daughter the credit for this, that one of the, uh, one of the Jenners had her, had her cosmetics brand just sold to Coty, which was an unbelievable Instagram success. And Cody got a little bit in trouble. They were over levered and we took a 10% stake in the company and then bought out the majority of Vela at the same time. So it was kind of a combined transaction. And that leap of faith to do that in the midst of the pandemic, uh, because they had in their mix also a travel retail business, for instance, which, you know, cosmetics, et cetera, you could ask, okay, when are these airports going to open again? That was a bold decision, because in conjunction, these two investments were very sizable in the fund.

AI assessment note: “that leap of faith to do that in the midst of the pandemic”

Q Do you not just find it ironic, though, that when we make a huge amount of money from European companies, that we just ship it back? To a load of people in the US.

A So first of all, I'm grateful for any capital that comes into Europe, regardless of the destination, because we need more capital in Europe. Mario Draghi is right. We need to invest 758 hundred billion a year alone to catch up with on innovation, AI, but also to complete in other industries, defense, uh, you know, uh, high tech, et cetera. Nonetheless, For the future, you're absolutely a hundred percent spot on. We got to wake up in Europe as for instance, Germany has now decided to invest 25% of its GDP and make sure when we make these investments, we build equity value. So in other words, we need to, you know, it's being done here in the UK with the mansion house complex. We need to professionalize together our pension systems and allow more investments and alternatives to build capital accumulation. Absolutely. And that means in 10, 20, 30 years, hopefully we retain a larger percentage of the value creation we, we make with alternatives investment.

AI assessment note: “For the future, you're absolutely a hundred percent spot on.”

Q Totally get it. So that's when, what about capital intensity? How much does that factor into your decision making about getting involved? You said that they probably won't need to raise more. I never met a company that needs, doesn't need to raise more. How do you think about the future cash burn of a business when investing?

A Yeah, it's extremely important. If you think about everything we discussed about the crisis, you have to sustain the discipline of capital allocation for the founders and the CEOs of these businesses. It's very interesting because you spoke to Henry. So Henry Kravis always tells the story about the team that, you know, was told, hey, you own 10% of the company now. And by the way, we want to now invest one hundred fifty million of capex in buying these things. And by the way, if you really want to do this, you know, uh, fifteen million is your, your, is your own money. And the reaction was, no, no, no, no. You don't understand. Uh, if that's the case, we don't need to make that cut back. So the idea, we come from the other side than you, right? You come from the side where the founders are the owners and you back them. We making those entrepreneurs that are in there or these, these CEOs or these families, we make them Owners again, right? Because many of them weren't originally the founders of these companies. And once, so where you and I meet is the owner mindset, where it's truly your baby and you truly care about the scarcity of capital and you say, okay, do I open France? Do I open Japan? Or do I rather open, do I rather launch another product? It's, these are real trade-offs. And so you are right, capital is always wanted, and we always invested, but the discipline of deci…

AI assessment note: “it's extremely important. If you think about everything we discussed about the crisis”

Q And then it's like, but wait a minute, it's the best time ever. And if you're an LP, there's enough material there to be like, actually they could be right. And so I have to keep going. Do you agree with that?

A I agree, and that is why we don't see fund sizes halving, because exactly of what you said, a lot of these opportunities are so capital intensive, because you suddenly have some interesting places to deploy. Now, it doesn't mean that the fundamental underpinning of what we all do, it doesn't matter whether it's venture or private equity. We are the answer to the demographic crisis that Elon Musk is putting his finger on. We have an aging society everywhere. People, Are retiring ever later, but they have to retire. They have ever fewer babies. So if we don't have a capital stock compounding and accumulating for the benefits of retirees, people cannot pay for their old age. Therefore, what is happening right now is a pretty narrow investor base, university endowments, you know, insurance companies, sovereign wealth funds, pension funds that underpinned our industry And yours are being complimented by ever-growing elements that were completely excluding alternatives so far, which is the four one K pensions, the individual investors. If you think about it, we have, I think it's a, it's a 192 trillion dollars of savings that are completely excluding alternatives that are in a high net worth and Kind of individual investor base. The innovation, you know, that was underpinning Norges Bank, right? The Norwegian, sorry, Relf Fund to allow them to participate in all of this long-term inv…

AI assessment note: “I agree, and that is why we don't see fund sizes halving”

Q You said there about taking the risk. Another risk that you can take is market timing risk. I'm probably expected to take market timing risk more than you, given being much earlier. Do you, are you willing to take market timing risk and suspend disbelief, or do you need to see now is the time for this?

A Many people thought at KKR in Europe we were crazy when we leaned in and invested, I think a third, if not 40% of our current fund during COVID. So in 2020, we, um, made some pretty, um, you know, I would say a bold decisions because we don't know what that virus would yield, but I've learned a long time that you have to focus on what you can control. So I give you an example. Uh, we invested in Vela, uh, which is the, the other haircut brand with L'Oreal. And there were seriously people who questioned, well, once this pandemic is over, will people still go and get their hair colored? Having, uh, you know, three daughters and three sisters, I, I absolutely was convinced there's not going to be a problem. And so we invested and there's many more examples like this. So yes, those types of uncomfortable decisions we took and I'll tell you why. After the great financial crisis, we were pretty much like the rabbit in the headlight. We didn't invest anything. The only investment in 2009 we made was BMG. When I took the decision to invest, uh, you know, with Bertelsmann into music at a time, quite frankly, when music was in free fall, that was a great investment. In the end was a courageous, but probably I could only do it at KKR because we had, we didn't make any, any other investments. There was no large investments. But then the crocodiles, crocodile tears came later when we, we, w…

AI assessment note: “So yes, those types of uncomfortable decisions we took and I'll tell you why.”

Q Totally get it. So that's when, what about capital intensity? How much does that factor into your decision making about getting involved? You said that they probably won't need to raise more. I never met a company that needs, doesn't need to raise more. How do you think about the future cash burn of a business when investing?

A Yeah, it's extremely important. If you think about everything we discussed about the crisis, you have to sustain the discipline of capital allocation for the founders and the CEOs of these businesses. It's very interesting because you spoke to Henry. So Henry Kravis always tells the story about the team that, you know, was told, hey, you own 10% of the company now. And by the way, we want to now invest one hundred fifty million of capex in buying these things. And by the way, if you really want to do this, you know, uh, fifteen million is your, your, is your own money. And the reaction was, no, no, no, no. You don't understand. Uh, if that's the case, we don't need to make that cut back. So the idea, we come from the other side than you, right? You come from the side where the founders are the owners and you back them. We making those entrepreneurs that are in there or these, these CEOs or these families, we make them Owners again, right? Because many of them weren't originally the founders of these companies. And once, so where you and I meet is the owner mindset, where it's truly your baby and you truly care about the scarcity of capital and you say, okay, do I open France? Do I open Japan? Or do I rather open, do I rather launch another product? It's, these are real trade-offs. And so you are right, capital is always wanted, and we always invested, but the discipline of deci…

AI assessment note: “Yeah, it's extremely important.”

Q get your guide, kind of similar to me in that respect. And now, you know, we have the most terrible challenges with energy, with defense, with infrastructure. You mentioned obviously your space company. I mean, we are woefully under equipped when it comes to space. Um, are you investing in a fundamentally different class of company? Given this need for capital in all of these very hard, but new industries.

A Mario Draghi is right. We are behind in defense, for instance, but look in scarcity and hours of need. Innovation kicks in and look at what happened because of the hour of need and that, and that innovation that we have in Europe have seen the US has done by saying 10% of the spend of the Department of Defense needs to go actually in the innovative ecosystem and space the same, right? Uh, you know, SpaceX was just the result of opening it up to the private, to the private sphere. That is coming here now. So let's not forget, we have had a terrible tragedy in Ukraine for years now, and they're still standing, and it's because of the innovative companies like Helsing that have supported them. So short answer to your question is, yes, um, innovation, what, you know, what you know best Is the answer to these, to these problems. But I wouldn't be so negative. They are coming now much faster than some people realize.

AI assessment note: “So short answer to your question is, yes”

Q Was it never about the money, or was it like me, wait, you think it is, but then it's not?

A I just stumbled into, so when I made the decision to leave a high-paying job at McKinsey, people thought I'm absolutely crazy, because I gave up the safety net for, for no certainty at all, and you know how it is to be a founder, you are one day You think on paper, a gazillionaire, and the other day you are broke. It's the most incredible experience that because you learn very quickly from that, that it's not the money that matters. It's the learning. When I went to KKI, it was a startup. Let's make no mistake, right? It was when I joined whatever, 39 people, and I had no idea what it means to build a career tracker in investing in funds. You know, it is the important, my job is to create, uh, results for all these pensioners and for what we do, but it's only an output, okay? It's not, it's not the, the main reason we do that. For me, at least, it's not. I mean, I enjoy every day speaking with people in completely different ways of life. You may know that I'm a crazy music fan.

AI assessment note: “you learn very quickly from that, that it's not the money that matters.”

Q get your guide, kind of similar to me in that respect. And now, you know, we have the most terrible challenges with energy, with defense, with infrastructure. You mentioned obviously your space company. I mean, we are woefully under equipped when it comes to space. Um, are you investing in a fundamentally different class of company? Given this need for capital in all of these very hard, but new industries.

A Mario Draghi is right. We are behind in defense, for instance, but look in scarcity and hours of need. Innovation kicks in and look at what happened because of the hour of need and that, and that innovation that we have in Europe have seen the US has done by saying 10% of the spend of the Department of Defense needs to go actually in the innovative ecosystem and space the same, right? Uh, you know, SpaceX was just the result of opening it up to the private, to the private sphere. That is coming here now. So let's not forget, we have had a terrible tragedy in Ukraine for years now, and they're still standing, and it's because of the innovative companies like Helsing that have supported them. So short answer to your question is, yes, um, innovation, what, you know, what you know best Is the answer to these, to these problems. But I wouldn't be so negative. They are coming now much faster than some people realize.

AI assessment note: “So short answer to your question is, yes”

Q Was it never about the money, or was it like me, wait, you think it is, but then it's not?

A I just stumbled into, so when I made the decision to leave a high-paying job at McKinsey, people thought I'm absolutely crazy, because I gave up the safety net for, for no certainty at all, and you know how it is to be a founder, you are one day You think on paper, a gazillionaire, and the other day you are broke. It's the most incredible experience that because you learn very quickly from that, that it's not the money that matters. It's the learning. When I went to KKI, it was a startup. Let's make no mistake, right? It was when I joined whatever, 39 people, and I had no idea what it means to build a career tracker in investing in funds. You know, it is the important, my job is to create, uh, results for all these pensioners and for what we do, but it's only an output, okay? It's not, it's not the, the main reason we do that. For me, at least, it's not. I mean, I enjoy every day speaking with people in completely different ways of life. You may know that I'm a crazy music fan.

AI assessment note: “you learn very quickly from that, that it's not the money that matters”

Q Does the model work in an AI world? And what I mean by that is when you look at, especially on the model side, these companies are just cash incineration machines. Regardless, when you look at anything like Harvey and Legal, which has raised A huge amount of money very quickly. They just require so much cash and so much more. Does the model still apply?

A It's fantastically, um, intellectually inspiring and interesting because we are the largest owner of fertility clinics in Europe, ok? So there we are expanding very, very quickly and very broadly in different geographies, in different areas. I mean, I know Elon likes talking about this, right? The demographic trends Are not great. People do not have children anymore, and we're extending lifespans. But to answer your question, those are businesses that will not be replaced by the AI models. These are, these are real businesses that still very much need the cash to open more clinics, yeah. So it's a long-winded answer to tell you, and I'm sure you'll ask me about some other things that are happening right now. I happen to be lucky, quite frankly. I'm super lucky because By pure luck, I've seen so many different cycles of this, and I'm, I know I sound like a younger version of Warren Buffett now, which is crazy, but he's right. Things are looking different often every five years, but the underlying, if you separate the noise from the reality, the underlying principles of capital allocation has to be very thought through and rational. It hasn't changed. You will have some AI models where you need lots of capital, it makes a lot of sense to invest in there, and you have some others which don't, so.

AI assessment note: “the underlying principles of capital allocation has to be very thought through... It hasn't changed.”

Q Does the model work in an AI world? And what I mean by that is when you look at, especially on the model side, these companies are just cash incineration machines. Regardless, when you look at anything like Harvey and Legal, which has raised A huge amount of money very quickly. They just require so much cash and so much more. Does the model still apply?

A It's fantastically, um, intellectually inspiring and interesting because we are the largest owner of fertility clinics in Europe, ok? So there we are expanding very, very quickly and very broadly in different geographies, in different areas. I mean, I know Elon likes talking about this, right? The demographic trends Are not great. People do not have children anymore, and we're extending lifespans. But to answer your question, those are businesses that will not be replaced by the AI models. These are, these are real businesses that still very much need the cash to open more clinics, yeah. So it's a long-winded answer to tell you, and I'm sure you'll ask me about some other things that are happening right now. I happen to be lucky, quite frankly. I'm super lucky because By pure luck, I've seen so many different cycles of this, and I'm, I know I sound like a younger version of Warren Buffett now, which is crazy, but he's right. Things are looking different often every five years, but the underlying, if you separate the noise from the reality, the underlying principles of capital allocation has to be very thought through and rational. It hasn't changed. You will have some AI models where you need lots of capital, it makes a lot of sense to invest in there, and you have some others which don't, so.

AI assessment note: “the underlying principles of capital allocation has to be very thought through and rational.”