Jan 9, 2023 · 58m · capital-allocators
Gregg Lemkau - The Evolution of MSD (Capital Allocators, EP.291)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Gregg Lemkau, CEO of MSD Partners and Co-CEO of BDT & MSD Partners, exploring his 28-year career at Goldman Sachs, MSD's institutional evolution, and the strategic rationale behind merging with Byron Trott's BDT Partners.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 15% of the talking time here. How this is scored →
Ted as informed peer 3.9 Guest teaching 2.8 Guest disagreement 0.3 Ted pushing back 0.0
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 30:24 Calling out hypocrisy in family office compensation
Gregg candidly criticizes investors who made fortunes charging two-and-twenty but refuse to pay market fees or carry when running their own family offices.
Hardest push from Ted ▶ 43:14 Pressing on loss of sole CEO autonomyTed directly challenges Gregg on why he agreed to become co-CEO with Byron Trott so soon after leaving Goldman Sachs specifically for autonomy and sole authority.
Biggest teaching moment ▶ 29:00 Explaining leveraged skin-in-the-game alignmentGregg educates the audience and host on how Michael Dell required MSD's founding team to take personal debt to invest equity alongside him, creating an asymmetric focus on downside protection.
Ted holds their own ▶ 42:05 Framing the tension between fee gathering and capital compoundingTed articulates the core structural challenge of balancing institutional asset management growth against preserving dedicated alignment for family capital.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| AlphaSense AI Platform Sponsorship Announcement | 0 | 0 | 0 | 0 | Sponsorship read for AlphaSense and standard show disclaimer monologue with no guest interaction. | |
| Guest Introduction: Gregg Lemkau and MSD Partners | 0 | 0 | 0 | 0 | Host intro monologue introducing Gregg Lemkau's background at Goldman Sachs and MSD Partners, alongside an announcement for Capital Allocators University. | |
| Dartmouth Athletics and Unconventional Path to Wall Street | 3 | 2 | 0 | 0 | Ted prompts Gregg on his early career path, leading to lighthearted storytelling about college soccer, paralegal work at Skadden, and joining Goldman Sachs. | |
| Rising Through Goldman Sachs: Tech M&A to Division COO | 4 | 3 | 0 | 0 | Ted asks about Gregg's trajectory within Goldman Sachs; Gregg describes moving to LA under Gene Sykes, launching tech M&A, switching to healthcare, and taking the COO role under David Solomon. | |
| Navigating the 2008 Financial Crisis in London | 4 | 2 | 0 | 0 | Ted asks for an illustrative anecdote from Gregg's time running European banking during the 2008 crisis; Gregg shares customs grilling and client meetings in France. | |
| Advising Elon Musk on Taking Tesla Private | 4 | 3 | 1 | 0 | Ted inquires about Gregg's experience with prominent tech founders, specifically Elon Musk; Gregg details advising Elon on the 2018 take-private Tesla proposal. | |
| Managing Uber and Travis Kalanick Boardroom Dynamics | 4 | 3 | 1 | 0 | Ted asks about managing the Uber boardroom crisis; Gregg describes navigating hostile negotiations between Travis Kalanick, Benchmark, and SoftBank. | |
| Goldman Sachs Culture, Teamwork, and Career Adaptability | 5 | 3 | 0 | 0 | Ted probes organizational lessons from Goldman Sachs and managing people; Gregg outlines adaptability and the value of blunt, constructive feedback learned from David Solomon. | |
| Departing Goldman Sachs and Michael Dell's Recruitment Pitch | 4 | 3 | 0 | 0 | Ted asks why Gregg left Goldman after 28 years; Gregg recounts Michael Dell's persistent recruitment process and top-ten list pitch. | |
| The Origin and Evolution of MSD Capital | 5 | 4 | 0 | 0 | Ted asks about MSD's founding history, DNA, and institutionalization mandate; Gregg explains aligning investor incentives through founder leverage on co-investments. | |
| Compensation Structure and Skin-in-the-Game Alignment at MSD | 5 | 4 | 1 | 0 | Ted asks about compensation alignment in family offices versus private equity; Gregg criticizes fund managers who refuse to pay real carry in family offices and highlights MSD's duration edge in real estate. | |
| Building Growth Equity and Leveraging Michael Dell's Founder Network | 5 | 4 | 1 | 0 | Ted explores how Gregg leveraged Michael Dell into growth equity and how MSD manages public equities; Gregg explains moving away from public markets because duration confers no edge. | |
| The Strategic Rationale for Merging MSD with BDT Partners | 5 | 4 | 1 | 0 | Ted asks about the strategic rationale behind merging MSD with BDT Partners; Gregg explains Byron Trott's family business network and aligned balance sheet investing versus chasing AUM. | |
| Balancing Franchise Growth, Returns, and Co-CEO Governance | 5 | 3 | 0 | 0 | Ted questions how Gregg balances building a fee-generating asset manager against investing returns, and how he feels sharing power as co-CEO after seeking autonomy. | |
| Michael Dell's Advisory Role in the BDT Combination | 5 | 3 | 0 | 0 | Ted asks about Michael Dell's counsel during the BDT merger and Gregg's forward allocation of time across client and founder advisory. | |
| In-Person Apprenticeship and Post-COVID Office Culture | 5 | 4 | 1 | 0 | Ted asks about integrating office cultures post-COVID and managing third-party external managers; Gregg emphasizes in-person apprenticeship and focusing on net returns over fee concessions. | |
| The Five-Year Strategic Vision for BDT & MSD | 4 | 3 | 0 | 0 | Ted asks about the 5-year vision for BDT & MSD, followed by personal questions about family success, golf, pet peeves, and mentors Gene Sykes and Michael Dell. | |
| Founder Alignment, Executive Blind Spots, and Compounding Capital | 4 | 3 | 0 | 0 | Ted closes with rapid-fire questions regarding executive blind spots, parental wisdom, and the power of compounding capital. |
Statements from this episode (34)
Lemkau considers Gene Sykes the best M&A banker across multiple generations
“I think is probably the best M&A banker of multiple generations and ended up being a mentor of mine.”
Lemkau, Robert Smith, and Mark McMorris launched Goldman's West Coast tech M&A
“It was a guy named Mark McMorris, who went on to go work at General Atlantic for a long time, and then Robert Smith, who eventually went on to go found Vista Equity, and me, the three of us went out there, all the same associate class, like three musketeers st…”
Persisting with hostile clients during financial crises builds enduring relationships
“Those early days of the financial crisis were scary, but it also ended up being incredibly character building because you go out there while you're probably the pariah to society and you go and build relationships with clients who are predisposed to not want t…”
Musk tweeted '$420 funding secured' before calling bankers to evaluate buyout
“And Elon put out his infamous tweet around four, 20 funding secured. Then he called the bankers, which was slightly out of order.”
Lemkau: Musk's genius and fortitude kept Tesla alive during crisis
“And you forget Tesla's now taken off in such an incredible way, but you forget there were moments there when it was really his genius and fortitude that kept that company alive and let it go on and thrive.”
Lemkau considers Uber founder Travis Kalanick the most impressive executor he's seen
“Travis, I'd say it's just the most impressive executor I'd ever seen. I mean, anyone who builds a business model at its core is taking on the taxi and limousine commissions in every single city and winning the guy's got to be able to execute and be relentless.”
SoftBank threatened to fund Lyft if Uber rejected its investment offer
“And so it was negotiating a deal with SoftBank, who in classic SoftBank fashion was saying, either you take all of our money or we're going to go invest it in Lyft and kill you.”
Lemkau invested in Travis Kalanick's next venture through MSD Partners
“And initially it actually began a relationship where after he and I for months had been at odds, have become friends in the subsequent world as I've gone on to MSD, actually become an investor behind him in his next venture because he, I do think he's a really…”
Reluctance to give direct, blunt feedback holds managers back the most
“Blunt talk, like giving real direct feedback. It's an amazing skill and a liberating skill, and not many people do it. I think it's actually one of the biggest things holding back people from becoming effective managers.”
MSD was founded in 1998 to diversify Michael Dell's concentrated wealth
“MSD started in 1998 as pure family office. It was diversify Dell family wealth away from Dell at the time. And it was started by two folks named John Phelan and Glenn Furman, who for 20 plus years ran it together.”
Capital duration allows investors to see through cycles without forced selling
“One of the great advantages I think we've had has been duration of capital, really taking the advantage to see through quarters, see through cycles, but also not be forced to sell because you're looking for Capital return, but being able to hold businesses for…”
Michael Dell plans to donate all his wealth during his lifetime
“At some point in his lifetime or shortly thereafter, his plan is to give all his money away and doesn't want that to cripple the firm.”
Leveraged co-investment forces managers to prioritize downside protection
“If you've got investors with leverage, they're focused on not losing money, number one. The leverage works both ways, and they're focused on really compounding wealth over the long term”
Investors who made wealth on 2-and-20 refusing standard fees is insane
“The number of people who made their money as investors with a two and 20 model who then start their own family office business and decide not to pay two and 20 is sort of insane to me.”
MSD employees are the largest investor across MSD funds outside the Dells
“Outside of the Dell family, if you look at the partners and employees of the firm, we are the biggest investor across all our funds”
MSD loses to Blackstone and Brookfield on price, competes on duration
“I don't want to go compete against Blackstone and Brookfield in real estate on price. We're going to lose all day long. But if we can compete on duration, we'll do that.”
MSD's first growth equity investments included Stripe, Fanatics, and Airtable
“Our first investment was in Stripe. We've invested in companies like Fanatics and Goodleap and Airtable and Service Titan.”
MSD spun out its last public strategy to focus on differentiated edge
“From a public market standpoint, when I got here, we spun out our last public market strategy, really great investor, good business. We actually took a stake in his GP and gave him a bunch of capital, but it just, in the theme of where are we differentiated an…”
Having a long duration capital advantage does not play in public markets
“If duration's our advantage, it doesn't really play in public markets.”
Michael Dell holds massive concentrated public equity exposure to Dell and VMware
“So he's got huge exposure to two big single stock positions. It was one with Dell. They then spun off VMware, which has announced it's merging with Broadcom, but really big public market exposure there.”
BDT Partners is raising a private equity fund exceeding $10 billion
“You get real scale and private equity that are in the process of raising a significant fund, ten billion dollar plus fund, that'll go alongside our similarly scaled credit and real estate businesses.”
Alternative asset managers increasingly chase AUM over maximizing investment returns
“I've just seen an increasing trend in the alts world of chasing AUM, and people feel like they're getting paid to raise money and deploy it as opposed to invest it.”
MSD aligns investor team wealth with carry rather than management fee generation
“Now, the vast majority of my investing teams here of the potential wealth creation is around their economics in the carry and their co-invest.
So that's what I still want.
I still want them focused on that as opposed to focus on generating fees.”
BDT and MSD's merger governance has no formal tiebreaker voting mechanism
“And it was fascinating as we were putting together the governance around the deal, everyone said, well, what happens if you guys don't agree?
We're like, we're going to agree.
Well, what if you don't?
We'll go in a room till we agree.
Maybe we'll ask Michael's…”
MSD tested BDT partnership by raising hospitality capital from BDT's LPs
“We'd created this hospitality vehicle with all of our High-end hotels, and stuck them in a permanent vehicle, and then raised capital into it, and we actually used BDT to raise that capital from their LP base, because we wanted to see their investors like our …”
BDT Partners advised the Patagonia family on their historic ownership restructuring
“BDT advised the Patagonia family on this recent thing they did, which is in the news.”
Technology founders are personally underserved by financial advisors for wealth diversification
“I think these founders themselves have been underserved in terms of advice. Their companies have been well served, but I think the founders themselves know how to think about wealth diversification, and deployment of capital, and philanthropy, and all the issu…”
Finance is an apprenticeship business requiring in-person collaboration for better performance
“This is an apprenticeship business in every way. So the more we can be together, the better.”
Legacy MSD Capital will be renamed Dell Family Office to avoid confusion
“So as part of the combination, we'll still peel out and have, I think the old legacy MSD capital, which we're going to rename Dell family office to avoid any brand confusion, but there'll still be investments that don't make sense in the funds.”
Allocators should prioritize managers who produce superior net returns over discounted fees
“Focus on the guy who's going to get you three or four X your money for whatever the fee is, as opposed to the guy who's going to get you two X for a discounted fee.”
BDT and MSD will avoid public mega-mergers and league table M&A advisory
“We're not going to go try to do big, massive public company merger. That's, we're not in the league table M&A business. We're in the, how do you provide trusted advice to families and founders?”
Playing four hours of golf reveals a person's temperament and ethics
“One, it teaches you someone's temperament because everyone hits a bad golf shot, so you see how they are. Two, it teaches you how they treat other people. How someone treats a caddy is very interesting and insightful. It's like how they treat a waiter. And thr…”
Investing businesses require strategic step-backs, unlike advisory market-share mindsets
“The classic investment banker mindset is do everything for anybody all the time, right? Solve their problems. Do more. There's an extra five minutes in the day. I can get one more client and actually trying to pull back from that natural temptation of being in…”
Compounding capital yields meaningfully different outcomes compared to maximizing pre-tax income
“Compounding capital can make a lot of difference. You spend your life in a world of maximizing pre-tax income, and you go to a world of actually compounding capital, if you think about it from an investment standpoint, and it's meaningfully different.”