The Exchanges

Q You mentioned sort of getting to 90%, and that is, that's sort of the target you want to get to, and you want to do 10 deals. How do you think about de-risking deals? Do you isolate particular variables, or how does that work?

A So much of what we do at Brookfield is, um, de-risking different business activities in such a way That we can turn the construction of a project or the operations of a project into a long-term inflation-linked stream of cash flows. We are very comfortable taking execution risk, operating risk, development risk. We don't like to take market risk, and we work very, very hard to structure our deals or execute in such a way that we're, we're not taking market risk. And I'll give an example of that. When you, uh, build a renewable power plant, let's just say a solar farm, there's really four key drivers, uh, of what your end return is going to be. It's your construction cost, it's your revenue offtake, your power purchase agreement, it's your EPC and your financing. We are very fortunate to have built one of the largest, um, renewable power operating and development platforms around the world, Whenever we build a new project, we do not like to put capital in the ground unless we lock in our CapEx contract, our off-take contract, our EPC contract, and our financing contract all at once. Because if you lock in those four things and you execute, it doesn't matter if interest rates go up or down, you've locked in long-term financing. It doesn't matter if power prices go up or down, you've locked in a long-term contracted revenue project. It doesn't matter if inflation goes up or down, …

AI assessment note: “we do not like to put capital in the ground unless we lock in”

Q How do you think about leverage? I look at what's going on in real estate today, and so much of that seems to be people got a little bit over their skis, which creates an opportunity for you, but how do you think about going into that with leverage, where you're sort of trading off a little bit of financial return for survivability over market variations?

A I like the way you said that. There's two things about how we finance our businesses around the world. One is just the approach we take. We focus on asset level, Non-recourse, long-term fixed rate financing. It's sometimes not the cheapest financing, uh, but it has some features that we really like. It takes away that market risk that we talk about, about interesting interest or financing cost changes over time. And the other thing is we like to do asset level non-recourse financing. That by choice is harder. You're doing a lot more individual financings rather than just grouping huge Portfolios of assets and putting a debt facility over the top of them, but what it really ensures for us is if you ever run into something unforeseen, and I say something unforeseen to the downside or equally something unforeseen to the upside, everything that you have to work through is done on an individual basis, and you're never, um, tainting, if you will, An entire portfolio with the dynamics of an individual asset. And obviously people will focus on if you have an asset goes bad, it's nice if that doesn't taint a broader, but it's the same on the upside. If you get an incredible bid for a single asset, but it's stuck in a debt facility that won't let you release it, that inflexibility is not helpful to running your business. So the first thing we do is focus across all of our platforms, non-…

AI assessment note: “We focus on asset level, Non-recourse, long-term fixed rate financing.”

Q I think the story is you were told to go to renewables, not necessarily asked. How did you feel about that?

A So this was in Concurrent with that move, I, I switched teams, and, uh, people always say, oh, did, did you want to join renewables? The, the honest answer is, no, I didn't have some weird desire to, or some strong, specific desire to go to renewables, but Bruce and, and Cyrus Madden, who built our private equity business, asked if I would, and I, of course, said yes, and if they'd asked me to go into infrastructure or real estate, I'd probably have a different business card today. I love the firm, and, I do whatever they asked me to. Again, I was very fortunate that I joined the renewables team, you know, in the early innings of what has been one of the largest and fastest growing industry builds in history.

AI assessment note: “I didn't have some weird desire... but Bruce and Cyrus Madden asked”

Q There's two paths I want to follow here. One was, you mentioned consensus, but the example that came to mind for me was Westinghouse, which seemed like a very non-consensus idea, at least from the outside. Looking at, now it's proved out to be very correct, but how do you think about taking bets that are maybe non-consensus?

A Westinghouse is probably a good example of, sometimes we get asked, what's an investment committee process, or what's that iterative process like? We focus a huge amount of time, the vast majority of the discussion will be focused on the downside. We like to believe that if you buy high quality businesses in good markets that have strong downside protection, If you underrate the worst case scenario really, really well, the base case or the expected case will end up being very attractive. And, and Westinghouse was a great example of that. You know, when we initially invested, it was not an in favor sector by any means, but it was a market leader. It was critical to the global supply chain of nuclear power, which at the time was not growing, but had a very, very Long life tale to it, of which Westinghouse was a critical supplier, and we felt it was an industrial operating business that could be run better using some of our operational expertise in other industrial businesses that could, could be brought to bear, and I can tell you we spent all of our time focused on the downside, and what was interesting is that proved out to be right, you know. Westinghouse is a market leader. It is absolutely critical to the supply chain. We were able to drive, drive significant operating efficiency within that business. All of that would have led to a, a very good outcome. And then we got the …

AI assessment note: “We focus a huge amount of time, the vast majority of the discussion will be focused on the downside.”

Q One thing I'm curious about is your meteoric rise. You went from CIBC, jumped into Brookfield, and you've just been on this trajectory that is hard to imagine. What do you think contributed to that? Like, what did you have that other people didn't have?

A At least part of the answer has to be good fortune, uh, of course, and, uh, good fortune in that, um, was fortunate to work on some transactions and initiatives that were very successful. Good fortune to, uh, in a few different places, be right place, right time. Things more tangible, however, I had incredible mentorship, first and foremost, and the obvious one that jumps out there is Bruce, but it goes so much beyond that. You know, right from the first boss I had at Brookfield, that gentleman was, you know, as much boss as, as mentor and friend to me and really helped me develop. And while it was early in my career, I think a lot of the things he taught me paid huge dividends down the line.

AI assessment note: “At least part of the answer has to be good fortune... I had incredible mentorship”

Q high quality counterparty, because one of the things that strikes me when I read these headlines anyway is, you know, a hundred billion dollar contract over 10 years or something. You really have to Like, there's a lot of embedded risk in that. The headline numbers are great, but can people pay, like, five years from now? What if it's a depreciating asset? Like, how did, what if it changes?

A So, so two things that are interesting there. One, um, the amazing thing about, we'll call it AI infrastructure today, is who are your counterparties? These are literally the greatest companies in the world, the highest credit quality counterparties in the world, the large tech companies. Um, They're the greatest companies in the world today. They're almost undoubtedly the greatest companies of all time. That is the corporate credit counterparty risk you are taking, which is as good as we've ever seen. The other point that, that's perhaps interesting is sometimes we get asked, why do things get turned down during an investment process at Brookfield? And of course, there's a pretty wide range of things, but I would say of deals that we choose to pursue, but then, you know, in diligence or in structuring decide to walk away, there's two reasons that Are most common. One, we don't like the revenue construct or the corporate credit counterparty that backstops that revenue construct. That would be reason one. Or reason two, it's too much construction or development risk relative to the return that the opportunity generates. I would say those across our infrastructure business, across our real estate business, across our power business, those are Absolutely the two most common reasons we choose not to do a deal after initially reviewing it.

AI assessment note: “These are literally the greatest companies in the world, the highest credit quality counterparties”

Q What do you look for personally that's like non-obvious? And I'll give you an example. I was listening to an interview the other day when I was doing research for this, actually, and the guy, uh, said, I look for obsessive psychopaths, and it stood out to me. It was memorable. Uh, what are the non-obvious things that you look for?

A It's funny. I'm going to give you the same answer, but sometimes we, we get it to a different question, which was, what, what is the, um, What are the attributes of Brookfield's culture or the people that do the best at Brookfield? The line I sometimes use is we like people who, who, who are almost kind of nerdy, and I don't mean they're, they're nerdy in that they aren't enjoyable to hang out with or can't carry a conversation, but they're intellectually curious in that they like to look at a hard problem that other people have struggled to solve, and they're willing to kind of roll up their sleeves and put in the hard work to, to try and solve it To generate an outsized positive return or an outsized positive outcome for, for the business. We like those people who are intellectually curious and, and kind of the derivative of that is, um, hardworking and willing to tackle hard problems and put in the time and effort to solve things that others can't. That would be one. The, the other one is, this is always a people business. We, it is very, it is impossible To get ahead in this business. If, if you can't work well with other people, it doesn't matter how talented someone is. They're not more talented than the entire team of people you can put around them. And therefore having people that are exceptionally good at different, uh, aspects of the job, but equally can work with oth…

AI assessment note: “we like people who, who, who are almost kind of nerdy”

Q What does it look like in health and safety in the same way that you sort of gave an example with what it looks like for preventative maintenance? Like how does it look?

A Some of this is actually using the, the technology. Some of this is a forcing function, if you will. Um, in, in some of our infrastructure businesses where people are constantly building different assets in multiple places, What we, we have a program where when a worker shows up on site, they have to use the camera on their phone to scan the site, and the, the, the program will say, here are 10 health and safety risks that we've identified. Now, candidly, experienced workers probably would have identified those, but it's a great forcing function that one, they have to do it, two, they're reminded of it, Three, now they're thinking about those things. It's, health and safety is incredibly important in the businesses that, that, that we own, and, and this is a great way of using one of the greatest technologies in the world to, to drive one of our most important initiatives.

AI assessment note: “when a worker shows up on site, they have to use the camera on their phone”

Q That's sort of like the, the, Pattern of bubbles, right, is that there's this, uh, hype. In the short term, it always, uh, disappoints people. In the long term, it always exceeds the hype, but it's, can you survive long enough to get the benefit out of it? Because people make fortunes, but people go broke.

A It's funny, exactly that dynamic, and again, we like to think we are one of, if not the, the leading investor in AI infrastructure around the world, which, Huge sums of capital are being invested in on a global scale. And, um, we often get the question, will there be overbuilt? Absolutely, unequivocally, yes. There's overbuilt in almost every product, in every asset class, everywhere in the world, in every economic cycle. But the really important thing is, is that overbuilt is not random. In our business, we only build against long-term contracts with, with high credit quality counterparties. Uh, we don't build on spec. And, and two, we're very thoughtful about where we build. We want to focus in tier one markets where there's multiple end users and multiple sources of demand such, even at the end of that 20 year contract life, there will be multiple options to, to use that facility or to recontract that facility. Um, To your point about the, these cycles almost have a recurring, um, trajectory to them. Uh, we, we see that in ours, and, and we think there's incredible things that we can do, uh, while participating in this growth to avoid the, the boom and bust that, that, uh, sometimes happens in, in, in other asset classes.

AI assessment note: “we only build against long-term contracts with, with high credit quality counterparties”

Q I understand. What deal's been the most fun for you to work on?

A There's been so many. Uh, I, I, And I don't, I think you're supposed to love all your children equally. Uh, I, I don't, I think it would be very tough to pick one. Some that stick out. One of the very first deals, I, I was fortunate to, to be part of the deal team. We made a very small cold storage business, uh, investment in Canada early in my time in, in private equity. It was a small business. It was a great business. It, it was underperforming when we bought it. It turned out to be a fantastic investment. This is not diminishing the incredible work that was put in. It was a somewhat simple business in what the value drivers were, so it was a nice one to, to really learn on. It was nice because it was a good one to learn on, and it was successful, so in hindsight, it, you know, I, I reflect very positively on it. Some of our first investments right after moving to Europe when we were trying to build out that, that European power business, um, those I remember being really fun because we were Somewhat of a, uh, a young, almost scrappy team trying to build something from scratch. But in hindsight, we, we did a few very good deals and that were quite foundational to what we were fortunate to build over the next six, eight, 10 years. And then, you know, some of the big deals, Westinghouse, uh, Oak Tree, um, those have been fun because of their scarcity, their size, the, the, the…

AI assessment note: “Some that stick out... Westinghouse, uh, Oak Tree, um, those have been fun”

Q What happens after you acquire a business? You know, I think Brad said, if you're, Brad Jacobs told me, if you're not improving the business, then you're just really moving money around. So what does that playbook look like when you go in? What are the variables that you're really focused on? What's that first 120 days look like?

A It's funny. Brookfield is a unique in the alternative asset management space. Uh, we come from a background, uh, Of being direct owner operators of businesses. I don't know if everyone knows this. Brookfield and its predecessor companies were founded around 1900. And for the first hundred years of our history, we were not an asset manager. We were essentially an industrial conglomerate directly owning and operating businesses ourselves. And that history really informs our approach today. We like High quality businesses that would be, we'd be comfortable owning directly over the long term. Uh, we tend to be slightly longer term holders of assets. We take a very hands-on direct owner operator approach to our investments. I would say this, we, um, there's not an investment around the world today where part of our return bridge, if you will, doesn't come from operational improvement. And then the third thing is, as a function of Our history, where we used to be a hundred cents of every dollar we invested, today the largest investor in Brookfield products is still Brookfield's balance sheet. So your question, what does that look like? We've built a platform where we like to think we have best-in-class industry and geographical expertise in the asset classes we invest in. Um, take power, for example. We have people In every region around the world that we operate, that are experience…

AI assessment note: “when we buy a business, we bring that expertise to bear.”

Q Take me behind the scenes of Oak Tree. What happened? How did that acquisition come about? How was the internal process around it? I want to hear the story.

A So, within Brookfield, um, there, there are lots of individuals who, who are very good at generating ideas, and what's great is we have 1300 investment professionals to, to filter through those ideas, and, um, I will tell you, quite early in my career, I, I was very fortunate. You taught, we spoke earlier about having very good fortune. I was asked to look at another alternative asset manager. This is 13 years ago, and, and this manager had run into some stumbles and some hard times and, and was in need of some capital. And what's funny is, I'll, I'll tell you, this was probably my first or second year at Brookfield. I really struggled to understand the right way to underwrite and figure out this business. And then one day the light bulb went on, I said, well, If I can understand how Brookfield works, uh, I can probably understand how this business works, and it was very fortunate early in my career to have the opportunity to really understand how was Brookfield growing? Where was it making money? Where was it, um, seeing the greatest growth trajectory and, and the greatest value creation? Um, because of that initial process, we've just began to track Uh, the other large alternative asset managers and how we were doing relative to them, how we were trading, how we were growing, etc. And one of those other managers at the time was, was Oak Tree. And I remember in beginning of 20…

AI assessment note: “we felt Oak Tree was this amazing business that wasn't fully appreciated”

Q Where would you say you're different from him?

A There's no question, you know, he, he's been doing it for 20 years longer than I have. Um, in, in a lot of ways, I think we, we've found each other to be very complementary. The job is, of course, we run a very large investment organization, and therefore, the most important thing we do is deploy capital at exceptional returns. That is the bedrock. That is the foundation of our business. That is always what we're going to be known for. But in order to do that at an increasing scale and over a long duration of time, you have to be better at so many other things as well. You have to be very good at building teams. You have to be very good at communicating strategy, communicating and interacting with your clients, your LP partners, your counterparties. It's that breadth beyond just the investment role. And Uh, been very fortunate to watch how Bruce excels in, in all of that, and, and, uh, hopefully absorb some of it over, over the last, you know, 12 plus years of working together.

AI assessment note: “he's been doing it for 20 years longer than I have. Um, in, in a lot of ways”

Q We were talking before we started recording about dispersion of talent and how in some industries it makes a big difference. Where does talent matter the most at Brookfield and where would, where, where does it matter the least?

A Within our asset management business, our, our most important assets go up and down an elevator every day. You know, we, we are a, a, a people business, and therefore, uh, talent is hugely important. One thing we believe is, is, um, talent doesn't fit a perfect stereotype. We need lots of talent in different capabilities in different places across our business, and it would be Unrealistic and unpragmatic to expect people All the incredible talents we need to be rolled up in a single individual man or woman. You know, we can have some people who are incredible judges of risk and return and incredible analyzers of businesses. We can have other people who are very good marketers who can explain what we're doing in a way to an investor who isn't living, um, day by day, 20 hours a day in deals. Every day of their life. Um, we need people who are very good leaders and, and team builders and builders of platforms. What differentiates us over the longterm is some mixture of the talent we have. And therefore we spend a lot of time focused on developing it and retaining it, but then also creating a culture that can extract the best out of the, the, Talent within the suite of people that, that work for Brookfield.

AI assessment note: “We need lots of talent in different capabilities in different places across our business”