The Exchanges

Q So you grind out that second year, and then what?

A Then I, on the same day, ended things in a relationship that I was in. I quit my job and packed up this, 1986 Volvo that I had and drove out to Steamboat Springs, Colorado, where my Ex high school girlfriend was living. And this is true story on the drive out. There was an 18 hour drive. I listened to Tony Robbins for 18 straight hours. My cassette player in my car didn't work. So I had a boom box and I had a whole stack of D batteries just to get through the drive. And somewhere in the middle of Utah or something, I decided I was going to start a private equity fund. After getting all pumped up from Tony Robbins, I was like, how could I not do that? I have to go do this.

AI assessment note: “Then I, on the same day, ended things in a relationship that I was in.”

Q So in that process of setting that called the big carry audacious goal, and then that had a finite term, you're going to finish senior year, you're the valedictorian or you're not. How do you process not achieving the goal with the thought process that all you have to do is set these goals and strive toward them?

A The goal was so exciting and got me out of bed that even falling a little short was still pretty exciting. So for example, in rowing, I wrote down every day in the present tense, I am the best rower in the United States. Here's the three things I'm going to do. So my alarm would go off at 5:30 in the morning and never in four years did I turn it off because part of me assumed the identity of someone who's the best rower in the United States. And so the magic of that was just Like using this process to almost create an identity from your destination of where you want to go versus your past. And that was really the magic. Don't get me wrong. I wanted to achieve all those goals, but just the process of working toward them was really fun.

AI assessment note: “even falling a little short was still pretty exciting”

Q So when you get that initial insight, potential unlock, you mentioned you want to be the best private equity firm in the world. Since age 14, you've been laying out these goals. What were the goals that you had set for Alpine?

A So prior to that, I would say I had gotten away from that practice. And I think if I was being honest, my goal was stay in business. I did exactly the opposite of what I did in my early part of my career where I set these really aspirational goals. I actually had really low goals. And I think that really was Getting in our way. And so during the process of coaching, I can remember the coach would ask me, what do you really want? And I would give some answer like, ah, we want to generate attractive risk adjusted returns. The nonsense that everyone has on their website that meant nothing to me or anyone else. And at some point, I remember going back to this genie exercise that I talked about earlier and just saying, I'm just going to answer that. And my answer was, we wanted to be the number one performing private equity firm in the world. We want to make our firm the place where the best people Wanted to work and wanted to be a force for social good. Then we came up with those. 15 years ago, those are still our three tenants. But then as soon as I uttered those words, this whole flood of limiting beliefs comes in. Why you made all these mistakes. How are you going to be the best? You don't deserve this. You're not good enough. You're too young. You've made all these mistakes. All these limiting beliefs. And then coaching was really helpful at helping identify those and then star…

AI assessment note: “we wanted to be the number one performing private equity firm in the world.”

Q On the business side, what have you found, even if it's similar to other people, or the types of businesses you like to buy?

A First off, your first part you said is it's similar to other people. Almost the similar to other people is almost exactly what we try not to be. Because if every single person is doing X, X is probably overpriced and picked over. So at Alpine, we do software and services, but we probably have been migrating to do way more services. So We're in very prosaic industries. Some of our best deals are residential plumbing and HVAC, roofing, landscaping, home healthcare, IT services, revenue cycle management, basic, pretty prosaic things, but what they have in common is that they're big industries, they're fragmented, there's a lot of targets, they have pretty predictable revenue, they're mission critical, but they're labor intensive. The moniker I tell our team all the time is, We're gonna do the hard work operationally so the investing decision is easy. If we have a clear playbook about what we could do with an add-on, we think we can increase the EBITDA of this add-on by 50 to a hundred percent in the first 12 to 18 months because we've done the heavy lifting on all the elements of that playbook for that industry. The investment decision is really easy, but doing that at scale, ripping out the IT systems of a ten million dollar revenue business and putting in place your Common financial systems and ERP systems, and then putting a new leadership team in place, training that leader. I…

AI assessment note: “Some of our best deals are residential plumbing and HVAC, roofing, landscaping”

Q Why don't you take me back to early years growing up and what got you going down this path?

A So I mowed lawns in Perrysburg, Ohio, a rural suburb of Toledo, which has got to be one of the most boring jobs. You walk in a line and turn around and walk back. And then in the eighties, Sony came out with the Walkman. So I started listening to music that would make it pass a little faster. And then one time I went to the library and I was checking out some music and where you return the tapes, there was this big audio Tape cassette program that said, think and grow rich, which was Napoleon Hill's classic. And I started listening to that mowing lawns and I was hooked. It was like someone had opened up the answer key to a test where they talked about setting intention and creating goals. And I just started becoming a voracious consumer of this self-help genre. And then literally was brainwashing myself. Cause I'm walking back in a Straight line for hours and hours in the hot sun and doing these things on repeat because there were only like six of them, so I just listened over and over and over. And then that just really opened up a lot for me. The best exercise that I got from that was this one author, and I don't even remember who it was, but he said, imagine that you had a magic lamp and you rubbed this lamp and a genie came out and the genie said to you that I can't give you any wish, but what I can wish is whatever you throw yourself into with your life and career. It's go…

AI assessment note: “I mowed lawns in Perrysburg, Ohio... there was this big audio Tape cassette program”

Q And what was your experience like on the street in those early years?

A Oh gosh. It was probably like most people, maybe even today is still the same, but I got, I had this, I had this idea that wall street was this incredible thing. Like you see in the movies and it's fast pace and all this action. And it ended up just being you're sitting in a cubicle and you're working on Excel and you did that till two o'clock in the morning. And I just didn't learn that much. I learned for three months and then basically repeated building financial models for the next two years. I worked till two, three in the morning, mostly because the people that I worked for were just unorganized and they just would drop stuff on your plate at seven PM when they went home. And not one deal I worked on closed in two years, didn't work on one thing. So I could have not been there and had the exact same impact on Morgan Stanley as I did being there. And it just felt like a lot of wasted motion. Nobody there liked their job. And then everyone churned out after two years, which is the model. And I thought everything about that was crazy. I'm coming out of school. I'm ready to run through walls, take over the world. And that's the experience that I run into. And so did everyone else. So I tucked that away in my head, which would come out later when I started my firm.

AI assessment note: “it ended up just being you're sitting in a cubicle and you're working on Excel”

Q What did the executive coach bring to you that hadn't been a parent before?

A The very high level answer to that is imagine you want to go to the gym, but you're not really sure how to use the equipment and you hire a personal trainer and A, they're holding you accountable to go every week. And then B, they're teaching you some very basic fundamental things. That's what coaching was for me. So it was really like having intention and having someone hold you accountable for that intention, but let me make it more specific. So the very first coach I had, this guy named JP Flom, who I think is one of the best coaches in the world. We had this one coaching session in the middle of the recession and I tried to cancel because we had a weekly call and I was like, I can't make it. I'm stressed. He was like, no, we're doing it. You know, that's part of our engagement. So we have this 10 minute call. I tell him how stressed I am. I'm flying to Dallas to fix this problem. I'm flying to Chicago to fix this. Then I'm going to DC and we got this deal falling apart. By the way, the economy and all this stuff, and I'm going on and on and on. And so he does this root cause analysis and we start in Dallas and he's like, okay, so what's the problem? And then Ok, so you're missing your numbers a second time. Ok, well, how did you get the bank projection? It goes on and on and on. And at some point he asked me, what's the quality of the CEO there? And I was like, I don't know…

AI assessment note: “holding you accountable to go every week. And then B, they're teaching you”

Q The concept sounds great. Just hire a young person, train them, send them into a portfolio company, they do great. How do you train them?

A So basically they go on the same almost arc that I went on. And so there was one coach, it was a husband and wife team, Tom Vakola and Francis Fuji, and they coached basically me slash our firm for a year. And we had a whole program we went through, which was really basic stuff. Here's how you're going to do meetings. Here's how you're going to do off sites, that Kaizen program. And here's how you're going to process mapping and process design. Here's how you're going to come up with your priorities and roll those out. I mean, basic, basic stuff like that, but it was all stuff we weren't doing. So these basic fundamental paint by numbers, this is how you become a great CEO. So then we basically bought the intellectual property from them for that program. And we designed what's called the people first leadership program. So a young CEO from our program Comes out and they get paired with a coach slash consultant who specializes in that people first leadership program, who stands side by side with them for the first six months and offers that program to them. And then they also have a mentor, usually the CEO of the platform company as their mentor and then tour at Alpine as well. So they get a lot of support and coaching. They still are really in over their heads for the first year or so, and they have to be a little patient. So it's not perfect, but it definitely gets them up to …

AI assessment note: “we designed what's called the people first leadership program”

Q Are there anything decidedly different about how you look at and assess companies from how other people do?

A Our process goes like this. First, it's the industry overall, the structure of the industry, and it's whether we want to play in that or not. I would say our criteria might be a little different. We're looking for big fragmented things where we think we can develop a playbook that's going to be unique, but that's not maybe super unique. The second decision we're making is who's the leadership of that, which I think is pretty unique. And then where the magic really happens is when we start aggregating companies in the industry, because the way that we eventually figure out a playbook where the business we're buying from founders worth twice as much to us, because we can do Purchasing better. We can do marketing better. We can hire better. We can recruit better. We can train better. We can develop better. And that's really the magic. There's a lot of private equity firms who go around and they basically do this math. They say, okay, a platform company trades at 15 times EBITDA and I can buy the add-ons at nine, so I'm gonna make money. It's fine. Lots of people do that. That exists in our world too, but our world goes another layer where we say, okay, let's say we are paying nine. We want to have a playbook where we can blend that nine down to five times EBITDA within 12 months. That part for doubling EBITDA in a short period of time, that's super intensive. That takes a ton of w…

AI assessment note: “There's a lot of private equity firms who go around and they basically do this math”

Q So when you have this early backing from Doug and Tom, And you're making mistakes. You're losing money. How did you take that forward into what Alpine has become?

A I would say there were two phases. The first phase was, it was almost like you're in a dark room running into walls to try to find the exit. That was stage one. We were running hard and fast and we were learning and we were finding some holes, but it was a very Unscientific process, basing on really hustling and working hard, which we were doing, and we were making progress, and we were getting better. And then the recession hit in 2008, and that just flattened us. At that point, I hired an executive coach, and then that was really the next phase where it was a lot more intention, a lot more thought and practice. That was really the big turning point where we really took off.

AI assessment note: “I hired an executive coach, and then that was really the next phase”

Q Can you start breaking this down? And let's start with the people. To put your own people into the companies, you have to have them, you have to know what they're doing. How do you go about the process? We could just start with bringing those people into Alpine.

A We have this process that we actually took from Toyota lean production system, which is like the Kaizen process, which to keep it really simple, it's like you have a problem. You don't know the answer. You have a team that you assign to it and you do like a 90 day sprint on that problem. And we've done probably a 150 of those projects over the last 10 years. One of them was exactly what you just asked me. How do you put people in the companies? We don't know how to do that. So we built a Kaizen team. I actually led this particular team. And said, we're gonna figure out how to put people into these companies. And so, around this time, I had started teaching at Stanford Business School, and I was teaching a class on entrepreneurship, and I would go on walks with students, and the number one thing they said is, Graham, can you help me get a job? I want to become a CEO. And then we're staring at this other problem, which is, how do we get CEOs in our companies? One of my students, I said, okay, I'll tell you what, we'll put you through a whole training program, and we'll Put you into not a CEO role, but a really senior leadership role. And then in a short time, you'll become a CEO. So we hired the person, we put them on our payroll, and I literally couldn't get any of our CEOs to hire this person. Cause they said to me, okay, Graham, let me get this straight. I've got this really e…

AI assessment note: “One of them was exactly what you just asked me. How do you put people”

Q What's the structure of one of those projects?

A So the structure would be, you start off with a clear statement. So we'll use the one we were just talking about. How do we get leaders into our portfolio companies at scale? That would be a question. And then you set a team. So you have a leader, you draft a cross-functional team, and then they have a 90 day sprint that they go through to work on that. And they could do benchmarking. They could find other companies that have done it. It could be that at the end of 90 days, All they're offering up are a series of tests you're going to run to try things out. Or maybe they've solved it and you're going to actually launch a pilot of something. And then Jim Collins has this line, fire bullets first, then cannonballs. So we're always trying to have a way where we can fire inexpensive bullets at these things. So that's one. Another one would be process mapping. Take a very basic process. It could be, how do you recruit a CEO into a company? Sounds like it's really simple. If you actually map that out, it might have 37 steps. Starting with building a scorecard that's really clear about exactly what characteristics that person needs and attributes going through. Where would you source them? And then how would you sell them? And it's actually a pretty complicated process. And everyone would say, oh, we know how to hire CEOs in our process. But if, then if I actually watched five people …

AI assessment note: “you draft a cross-functional team, and then they have a 90 day sprint”

Q How do you think about the, called the multi-period game aspect of this? So there's an example, someone's doing great, they're tapping out, but you've got this large community of executives of maybe 80% of demonstrated skill. How do you bring that all together and allow it to sustain itself and compound organically?

A It's a tremendous amount of work. I mean, we have a team that that's literally all they do is manage our internal talent and they're looking at who's performing, how they're doing, do they need a new role that's bigger? And conversely, are there people that aren't performing that we need to maybe move into a different role? Our guiding principle is that if someone is willing to put in the work and be coachable and show up and really, really throw their soul into it, we probably have a role for them somewhere at Alpine. And that we want to have Alpen be a place where they could spend their entire career. That's our guiding North star. And then the mechanics of making that work are, it is hand to hand combat. It is bespoke to every single individual person. It's not cookie cutter because people are different and they're in different roles. And how do you compare across? So it's just a tremendous amount of work. And we have a whole team that is doing one-on-ones with people and they're doing reviews and they're looking across the portfolio for different opportunities. And so it's a tremendous

AI assessment note: “we have a team that that's literally all they do is manage our internal talent”

Q What have you found similar or different when you're teaching at Stanford?

A It's a super impressive group of people that I'm teaching at Stanford GSB. I mean, the acceptance rate there and the things that they had to do to get there is incredible, but it's the same thing. The class I teach is on entrepreneurship and how to become a CEO and how to build companies. That's the headline. That's why the university allows me to have a job. The thing that I really want to teach and what I do also teach in my class is Let's really decide what you want to do with your life. And let's decide from your heart and your soul, not from your head. Let's get in touch with that. Let's really figure out what that is that stirs your blood. What is your genie goal? And then let's work on your limiting beliefs and all the reasons you're telling yourself you can't do that. We actually go through and do exercises on overcoming limiting beliefs. And then let's make a plan to go do that because you got one life. I want you to leave Stanford Business School and go do the thing that you wrote your essay on and do it because it's the thing that tugs at your heart, not because it's something that your peers or social media or whatever says you should do. So that's the message that I am really excited about at teaching.

AI assessment note: “The thing that I really want to teach and what I do also teach”