The Exchanges

Q So you go from this early interest in investing, then you mentioned medical school. So what was that educational path?

A I did my undergrad in California and graduated in 1995 and came to Boston to do an MD-PhD program, so it's a combined program where you do two doctorates. My PhD is in chemistry. The nice thing about the MD-PhD program is that they give you a stipend, so you don't have to pay them to go to school, which I still think is absolutely amazing that you can get paid to go to school. The stipend at the time was around 10,000 dollars a year, which I was single at the time. That was more than enough to live on. Even in Boston, and I had a little bit left over, and so my mom said, hey, you should start to invest. So I looked at the options in terms of mutual funds that are available, and discovered that I couldn't really bring myself to invest in those mutual funds, primarily because you can see the top 10 holdings when you get their fact sheet, and I could see tobacco companies, gambling companies, things like that, and I just, I couldn't bring myself to Participate in that type of investing. So I almost threw in the towel, but my roommate at the time, he was doing his PhD at Harvard in economics, and he gave me a couple of Peter Lynch books, and he said, you should really read these books. I didn't actually know who Peter Lynch was at the time, but he became my mentor via books. The basic line that Peter Lynch hammers home is that There's a few disciplines you need to learn in terms of…

AI assessment note: “I did my undergrad in California and graduated in 1995 and came to Boston”

Q Why don't you take me back to your upbringing as a path to how you got into investing?

A I'm the son of immigrants. My parents came to the United States in 1973. I was born and raised in Southern California, and it was a fairly typical immigrant rags to middle class type story, so a lot of living, hand to mouth, having to pinch pennies, and I remember we didn't have enough money for retainers and braces and all that, and so we found a guy who was, happened to be as a part of our church, Who was the technician who knew how to make a retainer, and he kind of snuck us in the back office, and we got into the world of orthodontics through that. But the real lesson that I learned from all that was from my mom. My mom started off working at Bank of America as a teller, and she ended up working her way up to being a vice president at B of A. But in particular, one of the things that she did was she started to invest. And talked often about the power of compounding and how compounding over time can get you something like a deposit on a house that you can one day hopefully purchase on a mortgage. My parents did it, and so I was just an observer there, but it made a huge impression on me so that when I one day would go off to medical school, I called up my mom, and she was still my financial advisor, so to speak, And I followed her playbook, and that really brought me into the world of investing.

AI assessment note: “I followed her playbook, and that really brought me into the world of investing.”

Q Once you had those thoughts in your head, how did you actually make the transition and do it?

A I had never done any formal study of accounting or business or anything like that. I was basically just a self-taught investor by reading books, and so it wasn't an easy move there, and I applied to a variety of jobs and, frankly, got turned down by most of them, but there was a firm in Cambridge called Claris Ventures. It was later acquired and became Blackstone. They found me through a common friend, and they offered me the role after some interviews. I wish I could say it was my cleverness that got me the role, but it really wasn't. One of the nice things that venture capitalists are pretty good at is they're good at realizing that sometimes we have nonlinear paths into careers like investing, and they're willing to take a bet on someone who they believe has an aptitude or a talent there, even though they may be more raw or untrained. And it was a fantastic firm. I learned so much there, and I'm very grateful to the folks there for taking me under their wing. But then in parallel, what I did was said, okay, well, I want to try to raise some capital here for potentially starting my own business, and so went to just friends and family and said, here's an idea. What if we were to put together a company that would take the concepts that I have been honing over the years in terms of applying some basic screens to what we invest in, and then creating a product that would especiall…

AI assessment note: “there was a firm in Cambridge called Claris Ventures... raised about 800,000 dollars”

Q I'm curious in the competitive environment for these companies, take pricing as an example. You have a company who is not, let's say, maximizing what they might be able to do in the market. They're not trying to gouge consumers and they're competing against someone who is. How do you balance trying to do the right thing in a world where other people may not be?

A Ted, that's such a great question, and it's one that I think for so many people just dogs them in a hardball world. How does it look to actually compete and to be long-term successful? There's some very good examples of this that I'll point to here where doing the right thing, which has led to maybe short-term decisions that may not seem as profitable, have actually long-term redounded to the health of the company and the benefit of the company as well as Shareholders. So the example here that's a classic in my industry is that of ivermectin. So ivermectin is a medication that was discovered in the 19 seventies. Some scientists at Merck discovered that ivermectin was the cure for river blindness. So river blindness is a disease that affects particularly people in Africa and parts of Latin America. Terrible disease. It affects the poorest of the poor, people who can pay essentially little to nothing for their drugs. And so scientists at Merck figure out that one pill curing the condition is that good of a medication. And then all of a sudden realizing, wow, how in the world are we going to get people to pay for this? And they tried going through the WHO and other organizations and just didn't find funding for that. And Merck made the very interesting decision to actually give it away. They just said, you know what, we're out of the generosity of our heart, and even at a cost to …

AI assessment note: “doing the right thing, which has led to maybe short-term decisions... have actually long-term redounded”

Q Which two people have had the biggest impact on your professional life?

A First, my PhD advisor was a huge person in my life who formed me in very powerful ways. His name is Stuart Schreiber. I still feel very indebted to him. He's a legend in my field of chemistry and chemical genetics. What I learned from him was how important it was not just to be a great thinker and a great scientist, but how to communicate well, and I can still remember I thought I was a good writer before I Joined his lab, and I wrote my first paper, and I gave it to him, and he gave me back his comments, and the whole thing was marked up, you know, red, and all that, and I just thought, like, oh, man, and I had to rewrite that thing, despite what I thought was good at a first draft, and I realized that I wasn't as good of a writer as I thought, and he taught me a lot about communication and confidence and the value of integrating being a great communicator with being a great scientist, and if you don't have the communication side, it'll put a lid on your ability to succeed. The second person would be Nick Galicatos. He was one of the managing directors at Claris Ventures, now at Blackstone, and he was the person who really found me and took me under his wing in the realm of biotech investing. He's won the Midas Touch Award for biotech venture capital. He taught me how to diligence people and the value of people, so I learned from him that if you really want to diligence somebo…

AI assessment note: “First, my PhD advisor... Stuart Schreiber... The second person would be Nick Galicatos.”

Q Once you've built a portfolio, how do you think about ownership of those businesses consistent with the continued adoption of your values?

A Investing is ownership. Investing confers an ethical responsibility To the owner for the activities of the firm. Let's say I owned a corner store retail firm, and people found out that the employees were trafficked from some other country. Well, that would be horrible, and I would look bad, as I should, and I would get in legal trouble, and I, as the owner, would be culpable for the activities of that business. But then similarly, if I do really well, and I'm adding a lot of value, people love the store, and there's a sense of the community really appreciating it, Well, then that redounds back to me as well, and I get a positive benefit from that. One of the things that we want to do as investors is say, okay, let's think now as an owner of the firm, not just as an investor, but as an owner. And just because it's a publicly traded stock, it's not different than if it was you and your buddy owning the corner retail store. We as investors have a surprising amount of power over the direction of the company. You know, that phrase, the pen is mightier than the sword. Well, the wallet is even mightier than the pen. And people pay very close attention. Governments, communities, people recognize that business is the lifeblood of any country, of any community. So I'm very, very excited about this. We want to stay engaged and closely bound up with our companies. We want to meet with them…

AI assessment note: “We want to stay engaged and closely bound up with our companies.”

Q I'm curious, when you run an organization with this passion for investing combined with this passion for values, what is the culture of Eventide like internally?

A We are very proud of our culture. One of the things that I think is so important is that you want to hire people for mission fit and for mission alignment much more so than recruit people on financial generosity or something like that. You can do that, but in the end, what you're going to have is, to be somewhat crass, is a lot of mercenaries, people who are waiting for More pay at some other firm, and they're going to jump to there, and you're not going to get the kind of cohesive long-term family that you really want to have at a company. I'm really proud of the low turnover we've had, the fact that people can come here and have a great experience. We have done something which is from day one when somebody starts the interview process, we're going to be having a really interesting set of conversations around values and around real situations that we have faced. That it's going to be very illuminating. If you can get that fanatical belief in the mission of the company, if you can have people who rally around that as their first order, what gets them up in the morning, not so much going for a paycheck, then you will have a place where you are genuinely excited to be at. And I will say, to this day, here I am, 15 years into Eventide, I am as or more excited to come into the office than I have ever been before. And I'm Eager to get in. I'm eager to see my colleagues. I'm eager to…

AI assessment note: “cohesive long-term family that you really want to have at a company”

Q How do you think about integrating your assessment of management teams in that framework?

A That's a great question, and one of the things that I learned in my eight years of venture capital was the single greatest asset or liability of any company is its management team. The challenge for most investors is that management teams are selected because they're good presenters, and there's very few CEOs that aren't very talented presenters. He or she can get up At a cell site conference and wow people with how amazing their company looks. And so how do you really discern what true management excellent looks like in a world where even if you meet management, you're going to walk away thinking like, wow, this is a great company. It's really hard to do that well. So often what people fall prey to is the fallacy of receiving and taking at first value charts that are handed to you. So we all know there's a cherry picking bias and anybody who's published anything knows that you can choose the axes or Get the data in such a way that it looks really good. So the real challenge that we have as investors is to build up almost from a bottoms up perspective and to say, okay, if I didn't have all this data over here and I was just trying to reconstruct in my own ways using my own much more dispassionate, unbiased forms of analyses, what would I land at? And that actually is one of the most powerful tests for management integrity that you can find. It's really that gap between how they…

AI assessment note: “It's really that gap between how they present something and how you would present it”

Q What have you articulated as what those universal values of how the world operates that can ultimately result in better performance?

A That love your neighbor principle is the headline there, and it's asking the question for a given stakeholder, for a given neighbor, and so we would use neighbor and stakeholder nearly interchangeably, would that particular stakeholder or neighbor walk away and say, I was advantaged, or I'm somehow better off because of this business? So first, let's talk about who the neighbors are, and we have made the case that each business has fundamentally Six neighbors or six stakeholders, and it's easy to remember. We have this acronym CES squared. There's three internal and three external stakeholders. So the three internal are customers, employees, and supply chain, CES, and then three external communities where the business is located, the environment, and then broader society. So that CES, CES framework represents who the neighbors are. One of the great challenges that I think business is facing right now is we are very, very good at measuring financial capital. We have lots of powerful tools that can give us insights into what capital is doing in a financial sense. Where we are much worse off and still, I think in the early days of thinking, what do other forms of capital look like that are non-financial? So the word capital, Comes from the word caput, which means head, and it refers to originally heads of cattle, and it originally referred to particularly means of how you could tr…

AI assessment note: “That love your neighbor principle is the headline there”

Q How do you integrate your fundamental work management assessment into making decisions about what names will go into your portfolio?

A We'd like to hope that we're finding the best management teams, but it is certainly the case that there are fewer great management teams than there are companies. There's a lot of biotech companies that are run very poorly because management is just not very good, and so what you want to do is you want to try to identify those teams that have that dynamic combination of History of value creation with the right gifts and the right skills that are working in tandem and complementary one to another. And as you find those management teams, you grab hold of them and don't let them go. It is a rare find to find those kinds of companies that really are there. So when you find them, because they are so scarce, you want to concentrate as much as you can on those types of companies and let them compound over time.

AI assessment note: “when you find them, because they are so scarce, you want to concentrate”

Q So it sounds like you're filtering out investment opportunities. How do you then take that universe and start to decide where you want to dive in?

A We use a framework that we call avoid, embrace, engage. So avoid means we don't invest in these problematic areas, tobacco, pornography, gambling, et cetera. Embrace means we're trying to find positively The companies that are adding the most value, we believe, to its stakeholders, and we believe those will do the best by shareholders as well over the long haul. And then that third element, that notion of engage, is now that you're in the company, and we're often a top three shareholder, sometimes number one, have a unique position of authority, and you have the voice of the company in a way that many other people won't have. A void is In a lot of ways, the easier step saying no to a bunch of things, the harder part is finding what is excellence really look like in a particular company and how do you know who to put your dollars with over the long haul. There we have a framework that we have applied. We use a set of checklists here at Eventide that we try to keep our hands pretty broadly over the whole universe. So there's roughly 500 publicly traded biotech companies in the United States. And It's hard to keep up with 500 companies, but we've got, thankfully, a good team of people that do a good job of knowing the high level there, and what we are looking for here is what are some of these therapies or innovations that are coming down the pike that are going to be substantial …

AI assessment note: “We use a set of checklists here at Eventide that we try to keep”

Q So this integration of personal values and investing, something you hear a lot more about today, but something you started a long time ago. How did you frame out the values that you would then impose on your investing?

A That's a great question. First is the question of, do people want values in their investing? And it's not obvious that everybody even does. It's growing in popularity. But first, you have to have the conversation, why values? And you can think about this from a couple of different dimensions. First would be on the negative side, so certain areas you want to avoid. That's really important. And it's something that I don't think we think enough about. We sometimes use this analogy of a mafia wife. She's got the fur coat and the diamond rings and living this very lavish life, and she knows that something shady is going on on the other side of the door, but doesn't want to ask the hard questions because she's got the great lifestyle, and I think a lot of us can fall into something like that where we're participating in lots of investments, and we don't want to ask too many hard questions because maybe there's things we don't really want to know are actually happening, but that's not a comfortable place to be, and I hope More people want to be more holistic and integrated and just have a sense of peace there with their values. But then on the positive side to say, okay, business should be this amazing agent of provision and helping the world solve its major problems. And that's an exciting vision for business that I think we've lost. One of the tragedies in the modern world is that b…

AI assessment note: “You can think about this from a couple of different dimensions.”