Celtics Owner Steve Pagliuca: What Went Wrong with the Chelsea FC Acquisition | 20VC #976

1. 0:00 – 2:00

   Steve’s Arrival to Duke

   1. SPSteve Pagliuca0:00

      What is this, your... I'm in your top 2,700 now or w- w- what, wh- which, which interview is this?

   2. HSHarry Stebbings0:04

      2,697. Yeah. We, we, we've been-

   3. SPSteve Pagliuca0:07

      Okay. I'm only three short of the 2,700 mark. (laughs)

   4. HSHarry Stebbings0:10

      (laughs) (instrumental music) Steve, I am so excited for this. I've heard so many great things from Niv and Moshe at Shrug, so thank you so much for joining me today.

   5. SPSteve Pagliuca0:18

      It's great to be here, Harry. It's, uh, fan- fantastic acro- across, across the seas.

   6. HSHarry Stebbings0:22

      Across the pond. Listen, I was listening to your fantastic talk at, I think it was a Goldman event, and you were talking about rocking up to Duke for your first day with nothing but a green duffel bag. And so I wanted to start on that. Tell me about that moment, and just take me there 'cause I love that story.

   7. SPSteve Pagliuca0:39

      Oh, that seems like yesterday. It's a long time ago, but it was a very sunny day. I, I'd never been to Duke University, and I was amazed when we pulled up. I had, uh, offered to load up a truck, a moving van, with furniture. I'd, I'd worked there in the summer. And they said they would give me a ride to college. So we loaded up the truck, a 45-foot truck, all sorts of furniture, and the very last thing was my one duffel bag. That was 100% of what I owned at the, at the time. I think I had a lamp in there and, and three pairs of jeans and, and a Dopp kit, and a green duffel bag, army duffel bag. And so we pulled up to Duke and all these people were pulling up. My, my, my family had moved to Tokyo, so I was kind of on my own. He opened up the back of the truck and people were staring at us. It was a 45-foot van. And I pulled my duffel bag out and I looked around and I said, "I'll get the rest of the stuff later." And, uh, I proceeded down to the dorm. So, so that was my, my, my grand entry into Duke on a moving van.

   8. HSHarry Stebbings1:28

      Can I be really, um, intrusive and ask you... I, I've had situations like that before and I felt out of place. I felt like maybe I didn't belong. Di- did you at that moment? And, and how was that for you as a student when there were the wealthy students taking all their things out and you, you were saying, "I'll, I'll pick it up later"?

   9. SPSteve Pagliuca1:44

      Oh, you know, I, I thought it was just funny. I, I, I, I, I, I don't really judge anybody, and I had a very good, good upbringing and, and, uh, great, great parents. And so it was just another day in life basically.

   10. HSHarry Stebbings1:55

       Can I ask, when you look back to, like, those days and your early days,

2. 2:00 – 4:35

   Did you always know you would be a success?

   1. HSHarry Stebbings2:00

      did you, did you always believe that you would be a success? Did you know that... You may not know then how, but did you know that you would be a success?

   2. SPSteve Pagliuca2:07

      Well, it's not, it's not clear that I'm a success yet, so I, I think that's only measured, you know, probably when you're, when you're gone, and it's probably measured by the people who, who, who, uh, who you impacted. But I would say that my, my mother was a very fundamental, uh, influence on me, and she always had a, a big belief in me. She, she believed I could do anything. And, and, and that's a great lesson learned as she gave me a lot of confidence. So I didn't know I'd, I'd be successful, but I thought I had a chance and, and they got me a great education and, and, uh, and, and she was always supportive till the day she died at everything that I was doing, whether it was Bain Capital or charity events or, or, or anything like that. So it's, it's great to have a mother like that.

   3. HSHarry Stebbings2:44

      Did she impact how you think about parenting with your children?

   4. SPSteve Pagliuca2:47

      Yeah, absolutely. Both my parents did. And, and, uh, uh... You know, it's a crazy business of investing, as you know-

   5. HSHarry Stebbings2:53

      Yeah. (laughs)

   6. SPSteve Pagliuca2:54

      ... as an investor, things don't always don't go to plan and, and you have to be certain places and be all over the place. But I think the major thing I try to do i- is, is get back on the weekends at least and, and I'm, I'm most proud of the fact that I think I've been to almost every, 99% of, uh, my, my children's, four children's, basketball games, soccer games, uh, hockey games, school plays. Um, I've, I've a great track record of that. And I've actually coached over 100 teams that they've been on. So, so you really have to make it, you know, a priority and be there. I think I could have done better looking back because you get wrapped up in this crazy deal world. But, uh, but, but I've tried very hard.

   7. HSHarry Stebbings3:31

      I did have this, you know, beautifully crafted schedule, but I'm too fascinated. I struggle with that work/life balance, and I always say, "When you're doing well at work, you're doing terribly at home. And when you're doing well at home, you're doing badly at work." Do you agree with that or would you say actually that's-

   8. SPSteve Pagliuca3:45

      You know, I remember, I remember, uh, vividly my first day at, uh, at Harvard Business School. They had Jack Welch come in, who was the famous CEO at that time of GE. I think he'd been CEO for, for, for one year. They asked him the same question you're asking and "What advice would you give the graduates?" And he said, you know, "Really spend time with your family." Um, yeah, I real- uh, I really... And then, then he went on to say he regretted that he hadn't done enough. So, so, so we were all given the speech, uh, and the question is you gotta... He kind of tried really hard to make it a reality. So I agree with you. You can just get wrapped up in, in the deal business, it's all-encompassing and helping lots of people, but you gotta make it a priority.

   9. HSHarry Stebbings4:20

      You said very humbly, and, you know, Niv and Moshe both told me how humble you are, um, and, and she said of Matt at Bain, but what you... You said very humbly you don't know if you're a success yet. Um, my, my question to you is we all have big breaks in careers, or we hope

3. 4:35 – 6:32

   Steve’s Big Break

   1. HSHarry Stebbings4:35

      for them. When you look back at your incredible career, what would you say was your, your really big break?

   2. SPSteve Pagliuca4:40

      Well, clearly my biggest break was, uh, in the summer of, uh, 1981. I applied for a, a summer job at Bain & Company, the consulting firm at the time. There was no Bain Capital at the time. And, uh, I did that because I was actually getting a, uh, trying to get a, a doctorate in economics at Harvard. Um, I was gonna try to be a teacher, s- so I... But I couldn't afford it, so I, I needed to get a summer job. I looked down the list and the highest paying job was, was Bain & Company. I didn't even know what it, what it did.

   3. HSHarry Stebbings5:07

      (laughs)

   4. SPSteve Pagliuca5:07

      Um, so I did the interviews and they were, they were great people and they hired me for the summer. And that was really transformational for me because I was kind of off the turn. I'd been a furniture mover, I'd been an accountant, um, and, and, uh, and, and I came to, to, to Harvard with, with, with that. Um, but the folks at Bain really opened my eyes to business transformation, uh, the latest techniques. Back then, it was very exciting, the experience curve, growth share matrix. Um, and so I, I, I really had a fantastic summer, and they convinced me, um, to come back and said they would help fund my, my doctoral program later. I could work there for three or four years and then go back and get a doctorate, just get the MBA. And so I accepted that offer. So that was very transformational to me. And, and I had two fantastic bosses, um, who are still mentoring me today, Ha- Harry Strachan and Mike DeMatto, so I feel very blessed they taugh- taught me all the ropes. And I, I still call on them today when there's a really important problem or question. I still call both of them and say, "You know, what do you think about this?" 'Cause they were incredible mentors.

   5. HSHarry Stebbings6:06

      Can I ask you? You mentioned Harry and Mike there. I, I have some incredible mentors, too.Uh, if you were to say, there's like one or two things that stuck with you from that mentorship, is there any that ring true? And what I mean by that is like, you know, one of my mentors is Michael Mark Evans, he once told me, "You're never wrong to do the right thing." So whenever I have a decision, I, I always think, "What's the right thing?" And even if it's hard, I'll do it. Are there any one or two takeaways that you really remember from Harry and Mike?

4. 6:32 – 8:44

   Lessons from Steve’s Mentors

   1. SPSteve Pagliuca6:32

      The main things that I remember from both of them is, is, is they were, they were, um, critical but not judgmental. So they had that same quality of e- e- I knew they wanted me to succeed. And even when I, uh, messed some things up, you know, they would, they would, they would, uh, uh, kind of, kind of criticize in the right way saying, "You know, you meant to do this, but you did this." And, and I... You know, just their- the way about them. And M- Mike D'Amato always used to say, "Well, you could be perceived as, as being too aggressive in a certain thing." So it w- wasn't that you really were too aggressive, you were perceived. Uh, he used the word perceived a lot. Um, so, so it was more their, their, their, their kind of confidence in you, and the way t- they, they handled, uh, making you a better person and, and, and, and really giving you their constructive feedback.

   2. HSHarry Stebbings7:21

      I mean, that is an amount of elegance and élan, that is just beautifully put. Now, I think that what I love so much about, you know, your history and your success is actually the integration of sport and business. And so a question that I wanted to ask as we add onto the business discussion is when we think about high performance, what does that mean to you when I say the words high performance?

   3. SPSteve Pagliuca7:41

      Well, I, I don't want to digress, but one other thought came to my mind out- out of that question. Um, the, uh, the, the... H- Harry Strachan said to me, and this is like your mentor, he s- he said to me, "The one thing you really have to learn about it is that all the world's a stage." Uh, and, and, and, and I- I've given that advice to, to generations of Bain Capital people. People judge you by how you, how you treat other people. So when people come in and, and, and, and le- and talk to your assistant, and they don't talk to them i- in a great way, you know, people are watching that. So I advise all of my mentees that they have to carry themselves in, in, in... with respect and, and in appropriate ways with people, because all the world's a stage, and that comes from, from your side of the pond with William Shakespeare.

   4. HSHarry Stebbings8:26

      I, I, I love that. Can I ask you as you... I'm sorry. (laughs) We'll come back to the performance stuff. Um, as you became more and more successful, how did you not gain an ego? How did you retain humility? I think it's easy to say and difficult to do. It's something I've struggled with over the years. Um, how, how did you do that?

5. 8:44 – 10:14

   How to Retain Humility

   1. HSHarry Stebbings8:44

   2. SPSteve Pagliuca8:44

      Well, I, I, you know, look, I have an ego just as anybody else. You can't be successful in this business without an ego. So, so, uh, uh... But, but I would say that my grandfather was a, was a, was a shoemaker. Uh, he made $8 a week, and you know, came out and worked on our yard, uh, worked with my father. So I grew up in a, in kind of an Italian family, immigrant family, and I don't, I don't think I've kind of ever left that mentality. They had a depression mentality. The reason I- I was an accountant was because my father and grandfather said, "You have to be an accountant when you go to school." And I didn't like accounting, um, because they were, were the only people employed during the Depression. So every year of my life, uh, probably until they died, they thought the depression was coming. They, they, they thought the depression was right around the corner, but I would be employed because I was an accountant. So y- when you come from that background, I don't, I don't, I don't... I think it's, it's, it's hard to, uh, to kind of think you're better than everybody else. And I, you know, I've always viewed the world, it's a world of opportunity and there... Every, every... And Harry told me the same thing. There are so many smart people out there that they're, they're just as smart as we are, but we've just had, we've just had opportunities and serendipity and, and luck. A- and I think the Bain culture, the Bain & Company culture, when I came to Bain & Company, we always treated the clients... Bill Bain always said, "You need to treat the cl- clients with great respect. Uh, from the person who opens the door all the way to the CEO, you gotta be very respectful of the client." So, so that, that kind of, kind of, I think ethic has stuck and it e- even, even translated over to Bain Capital. It's, it's a lower key, uh, people-oriented, uh, private equity firm.

6. 10:14 – 12:15

   Downside Protectionist Mindset

   1. SPSteve Pagliuca10:14

   2. HSHarry Stebbings10:14

      You mentioned that mentality, seeing your grandfather, you know, making $8 a week and you know, working with your father. You know, m- my family lost everything when I was young, and it really shaped my mindset on safety and security to the extent that I think it negatively impacted how I ran the media company 'cause I didn't invest in it. I took cash off the table because you, you know, safety for your family is everything. And that was the most important thing, but it was a mistake, and I still have trouble today investing in the business because that's dollars out of my family's pocket. (laughs) Um, did you have that downside protectionist mindset? Because you-

   3. SPSteve Pagliuca10:50

      Yes, yes. Uh, uh, uh, we're, we're two peas in a pod in that, uh, that respect. So I, I struggle so- so- sometimes to spend money. (laughs)

   4. HSHarry Stebbings10:59

      (laughs)

   5. SPSteve Pagliuca10:59

      Because it... Yeah, it's just that it's highly ingrained that the w- you really gotta feed your family and you gotta be secure. That, that definitely has impacted my life.

   6. HSHarry Stebbings11:07

      (laughs) But then you buy sports teams, Steve. Like, help me understand that juxtaposition.

   7. SPSteve Pagliuca11:13

      Well, that, that, that, that's, that's an investment. You know, that was a labor of love. Th- there was a, a community asset, the Celtics, and they weren't doing that well. And Wyc Grousbeck, who was a good friend, called me and said, uh, you know, he had a, he had a line into buying the Celtics, would I like to be his partner? And I've been a lifelong basketball fan and sports fan and, and go all, all sports and... So I thought that was a potential dream come true. And I did, I did struggle with the decision. I, I, I talked to my wife Judy and, and said, you know, "Should we do this? You know, should, should we, should we, should we invest in this team?" And, uh, I decided I was passionate about it, that I, that I overcame that fear and I invested in the team, and it's one of the best things I've ever done. It's just been, been a fantastic run. It's been 20 years now.

   8. HSHarry Stebbings11:55

      I, I, you know, I- I spoke to a mentor the other day, and he said, "You should... When you have allocation decisions like this, you should spend time with your CFO, with your accounting team, really analyze it."And then you should go home to your wife and whatever she says you should do. (laughs)

   9. SPSteve Pagliuca12:08

      There you go.

   10. HSHarry Stebbings12:08

       (laughs)

   11. SPSteve Pagliuca12:08

       There you go.

   12. HSHarry Stebbings12:09

       Um, I, I love that. You mentioned the Celtics there. You know, speaking of, uh, going back to what we said,

7. 12:15 – 13:00

   What does “high performance” mean to you?

   1. HSHarry Stebbings12:15

      high performance. What does high performance mean to you, both with the business and the sports mindset hat on?

   2. SPSteve Pagliuca12:20

      High performance means, uh, uh, you know, leaving it all out on the field as they say. Doing the best you possibly can. Going the extra mile. The high performance teams at Bain and at the Celtics, the teams we've had, they look at every detail. If, if you ask them for a, you know, a two-slide presentation, they bring you a five-slide presentation. High performance teams go above and beyond.

   3. HSHarry Stebbings12:39

      So if high performance teams go above and beyond, when we look at your investing track record, it is one of, you know, the best tracks. Um, and so I wanted to ask, when you think about your investing style today, this could be in sport where it's passion and investment led, it could be purely when you think about investing, but how would you analyze or describe your investing style

8. 13:00 – 13:58

   Steve’s Investing Style

   1. HSHarry Stebbings13:00

      today?

   2. SPSteve Pagliuca13:00

      My investing style today is, it, it's, it's, it's a, it's always a balancing act between the facts and, you know, coming from, from Bain & Company and Bain Capital, the whole ethos, uh, of Bain Capital and Bain Company is, is fact-based analysis. I would analyze e- every... look under e- every, every stone. Figure out the markets, figure out the market share. I've built incredible models. It's just, it's just, it's just a fantastic way of investing, you know. You know, really, really deep due diligence, uh, primary customer research. And then the other side of it is, is, is the people side. You know, who are the people running the business? Do you trust them? What is, what is their passion? What are they trying to accomplish? You make investments decision both on the facts, but just as importantly, the people involved that have to drive it forward. And so that's been our style to look at both of those aspects, uh, over time.

   3. HSHarry Stebbings13:49

      Can I ask you on people... It... (laughs) I'm, I'm d- literally using this as a counseling and a learning session, so you should invoice me afterwards. Um,

9. 13:58 – 14:55

   Full Trust vs No Trust

   1. HSHarry Stebbings13:58

      do you start with full trust or do you start with no trust and it's there to be gained?

   2. SPSteve Pagliuca14:03

      I'm a believer in people, so I believe in the full trust model until, until proved different. Pro- until it's proved wrong. And most people are very trustworthy. But in the due diligence, uh, you, you know, it's, it's always great to, uh, meet somebody personally, but you gotta get references. And, and so we do a lot of work in, in, uh, in, in checking out, you know, management teams and, and what are their values and w- who are they really as people? That sometimes is, is missed at that level of depth, is missed on investments and you really need to get that right. Certainly learned that over time.

   3. HSHarry Stebbings14:34

      Niv & Moshe said I had to ask this, but you mentioned the people and you mentioned the diligence there. With the excess supply of capital that we saw, you know, in 2022 and 2021 in particular, we saw not that much diligence done, but quite a lot of capital flowing into some companies. Uh, Niv & Moshe asked, "What do you think will happen to these companies that have very little to

10. 14:55 – 17:48

    Recession Predictions

    1. HSHarry Stebbings14:55

       show, but huge balance sheets and huge valuations?"

    2. SPSteve Pagliuca14:59

       Well, you know, we've seen this... So, um, you know, I've, I've been doing this, uh, for, uh, close to four decades now, and you know, the, the crash of '87, the '99, you know, tech crash, the internet back, back in those days, the financial crisis, um, and it just seems like the world goes through periods of exuberance and then, you know, per- periods of doom. And we certainly have had an exuberant period here where the model was flipped on its, its head. Uh, and in fact it worked. It worked in several cases. A company like Amazon lost money for years and years and years until it made a lot of money. But then in capitalism sometimes there's that, that overexuberance and irrational behavior to say, "Okay, every company can do that." And we basically have come out a phase of, of, of that happening for probably the last, you know, 10 or so years. Um, and it reminded me back in '99. In '99, uh, with the internet, people would come in with a term sheet and say, "Uh, you have, you have a day to decide. Here's our terms and we're going to the other people, so you have 24 hours to decide." And, and many venture firms backed companies like that and some were successful, but most weren't and there were a few, few winners. So we're really coming out of a period now where, uh, over a long period of time because of low interest rates, because of the success of the, of some of the unicorns, Amazon and Alibaba, there was an investment mentality that said, "We can lose lots of money forever and there'll be a pot of gold at the end of the rainbow." Unfortunately, that is for a very few specific circumstances. There are not that many unicorns that will be created. And so now you're seeing a lot of companies that have to go back to basics and figure out how to deliver profits or have a plan that will deliver profits. There's just been a lot of over-investment in that philosophy saying a horde of cash and buying market share can get you a great business at the end. And, and that is just not true for 90% of the businesses.

    3. HSHarry Stebbings16:49

       Steve, you mentioned the four decades that you've kind of, uh, i- invested and lived through. Um, my question to you is, how does this compare? Is this as bad as the media seem? I think we have a tendency to dramatize, especially if we haven't seen it before. You know, me, y- you know, Nivs and Moshes as well, we've never invested through a crash. Like, how does this compare?

    4. SPSteve Pagliuca17:07

       The positive side of this is this is all equity dollars mainly invested. The, where you go to a real problem, the crash of 2008 was, you know, based on, on just too much leverage everywhere. When that leverage gets pulled out, you have a crisis. Equity dollars are just lost. You're not loaning it to, to somebody else, you just lose your equity dollars. So there'll be a carnage of, of, of some firms that, uh, you know, overinvested in this overexuberance, but, uh, that will not move the needle like the crash did in, in 2008 because that was driven by, you know, debt which has a multiplier effect.

    5. HSHarry Stebbings17:39

       You mentioned Amazon and Alibaba there. I'm intrigued from your perspective, I think you learn a lot investing-wise from your biggest wins and also your biggest misses.

11. 17:48 – 25:02

    Steve’s Biggest Win/Loss

    1. HSHarry Stebbings17:48

       When you think about your biggest win, what, what is it? And what, how did that change your investing mindset?

    2. SPSteve Pagliuca17:54

       You know, I, I, I, I, I... It'd be like picking one of your children. I've had, I've had several, you know, great, depends on how you measure a biggest win. Is it, is it, uh, the growth of the company? Is it, is it deliver the most profits on a, on a large investment or a small investment? But one investment that I'm very fond of and I'm still involved with today...Uh, it was actually this, I think, the second or third investment I did in my, in my career in 1991. It was called The Gartner Group, and you, you may know it. It's a, it's an information services company. It's, uh, it provides, um, data about technology and which technology you should buy and how they work. And back in 1991, that was a, uh, kind of 50, $60 million sales company. It was owned by an advertising agency in the UK, Saatchi & Saatchi.

    3. HSHarry Stebbings18:34

       Yeah.

    4. SPSteve Pagliuca18:34

       A non-core business, and it was losing money, and they had their own issues so they had to sell it. And, uh, uh, uh, we, we actually came in and Information Partners, Bain Capital, and, and bought the company with the management team. Today, that company has, it's, it's basically gone from a 70 ... I think we bought it for 70 million, it's worth over 20 billion today. And I'm still, I'm still on the board.

    5. HSHarry Stebbings18:58

       Mm-hmm.

    6. SPSteve Pagliuca18:58

       So it's been an incredible, incredible run. It's had, uh, we've had three great CEOs over that period and because technology has grown, the, the, the need for technology information has grown, and they've had a great culture, a great management team, but basically built that business from, from, uh, 70 million in sales to, uh, you know, multiple billions now and, and, uh, and over 20 billion market cap.

    7. HSHarry Stebbings19:20

       I'm ashamed to say I did not know it was a Saatchi & Saatchi business. My mother's first job was at Saatchi & Saatchi, so I hope she's not listening.

    8. SPSteve Pagliuca19:26

       (laughs)

    9. HSHarry Stebbings19:27

       Um, but, uh, my question to you is how did that shape your, your mindset on investing?

    10. SPSteve Pagliuca19:32

        Well, it really taught me that, uh, um, there's huge value to investing in companies that have a growth path. Our thesis in investing into Gartner was that technology was gonna get more and more complicated, that people would need more information before they bought computers and they bought software, and at the time, the company was mainly selling to a few companies in, in the New York or New England area. We thought it could explo- expand globally. We thought it should have thousands of salesforce people instead of the few, few, uh, 25 that they had. And so that, that thesis panned out. There's a misnomer about private equity because way back when in the, when it first started in the '70s, it wasn't called private equity. It was called leveraged buyouts. Um, a lot of those deals were taking companies that had, uh, generous pension programs and were too, way too, way too fat companies that had jets and cost reducing. And so, the, there was a mental model that, that, that's what private equity was. Actually, it's, it's really hard to do that because companies are well-run today and have been well-run, you know, since, since the '80s. And really where you, where you do well in private equities, you identify growth opportunities. So Bain Capital has been highly focused, you know, for the last 30 years on, on can we build and grow companies and can the company be different 10 years from now than it is today? Can it, can it, uh, uh, develop new products? Can it go to Europe? Can it go to China? Can you expand it? And the next investor, the public, or whoever buys the company from you, they're looking for growth. So you can't just come in and ha- and cut costs out and, and cut benefits and then s- and then actually make money on the investment because people don't want something that, that is, is declining in sales. So the lesson I learned from Gartner very early on is, is, uh, if you can find a growth opportunity, that's very valuable and look for a growth company. So I focused on technology and medical, both of which have been, has been growth areas for the last 40 years.

    11. HSHarry Stebbings21:23

        Does that focus not change with macro cycles and sentiment? And what I mean by that is, like, now we're seeing a much bigger focus on profitability, capital efficiency within organizations, and less of a concern about your level of growth rate. Does that hold true across market cycles, that focus on growth? Or is it cyclical?

    12. SPSteve Pagliuca21:43

        It, it, it does hold true. Um, so, so I think the trend you're talking about is we're moving, people are moving away for, for companies who require losses of big capital investment losses for, you know, seven or 10 years, ala the Amazon model, the weight of money model. They're moving away from that, uh, but once you move away from that, you still want a company that's gonna grow the top line because that's where the value is created, uh, that you, you want a long-term grower. So I think table stakes now are gonna be companies have to have a clear plan for profitability. What profitability really communicates is, is that you have a good product that someone is willing to give you a fair profit on. But then within that, the ones that are gonna win are the ones that can grow for a long period of time.

    13. HSHarry Stebbings22:28

        Yeah. I also think people forget the value of compounding, you know, growing 40% a year when you're at 10 million, in 10 years that's a-

    14. SPSteve Pagliuca22:36

        It's a big, comes out to be a big number.

    15. HSHarry Stebbings22:37

        Yeah. It's a big number. On the flip side, we all have made mistakes investing. I certainly have done. Um, tell me, what's been your single biggest, like, investment loss and, and how did that change your mindset? 'Cause I feel that really changed mine.

    16. SPSteve Pagliuca22:52

        Uh, you, you know, I invested in a company back around the period, maybe a little after Gartner, called PQC, which was, was Physicians Quality Care. We had done a study and, and found that there was a market developing where physicians would band together and you could deliver better service or better quality to patients if you centralize the equipment and the X-ray equipment you needed. If you centralize purchasing, the, the physicians would do better and the patients would do better and you could schedule them with software use. So the, the economy of scale of putting physicians together was, I thought, a great, a great idea. We thought a great idea. We did a white paper on it and we found a group in, uh, in Baltimore to, to invest behind, uh, that looked very promising. But it turned out back in the day, whenever that was, 1992 or '93, they really couldn't work together. They, they, they couldn't, uh, uh, centralize things. The software wasn't there to, to make it happen. And so we, we, we ... It, it was basically venture, venture investment gone bad. What I learned from that is, is it was a, it was a great idea but it was ahead of its time and it was really hard to execute that idea. In fact, 20, 30, 20, 30 years later, now there are large doctor, you know, good collaborates. All, all the things that were in that paper are true. It just took another 20 years, you know, for, for the technology and the infrastructure be there for it to happen. Um, so it was an idea ahead of its time.

    17. HSHarry Stebbings24:09

        Do you really think about market timing now when making investments?

    18. SPSteve Pagliuca24:13

        I wouldn't call it market timing. I, I would call, I would call it, um-... stepping back an- and saying, you know, "What is the macro trend? What's the macro trend?" And Bain Capital, we've always been micro-economists. We take a business and, "What can we do with the business an- and- and how can we change it for the positive?" Um, and I think we've learned in the- in the last, uh, 20 years, we've been b- much more looking at, okay, that's what we could do from a micro basis, but what's gonna be the macro effect upon it?

    19. HSHarry Stebbings24:39

        I totally agree, and I- I almost think actually some of the best venture investors are both macro and micro economists at the same time when I reflect on some of the interviews Absolutely. ... that I've done. Um, ca- can I ask you, when we think about, like, Bain itself, when you think about one or two of the elements that made Bain so successful over such a long period of time, what do you think are the one or two elements that made Bain so successful, with reflection?

12. 25:02 – 28:11

    3 Reasons Bain is Successful

    1. HSHarry Stebbings25:02

    2. SPSteve Pagliuca25:02

       Well, I- I think the first element was the idea of taking the consulting skills developed at Bain & Company and applying that to, uh, actually- actually owning the businesses. Bain & Company had been a very successful consulting firm, growing great businesses and great clients, uh, uh, globally. And the idea that Bill Bain had was, well, if we could own those companies, we could do that even faster and better and p- and- and help them with these analytic resources. We're- we're a huge tool to these companies, and it turns out that, you know, that- that philosophy worked really, really well. In fact, most of the industry's adopting that now. They hire Bain & Company and McKinsey to do what we do se- internally at- at- at Bain Capital. Um, the second, uh, piece- piece, uh, critical piece was alignment with investors. So when Bain Capital was formed, most of the inve- a lot of the investment came in from the Bain partners, the people themselves, and we've do- we've really held firm to that today where, uh, let's see, our- our last $12 billion fund, over a billion of capital has come from all the people in the company. And that- and that is, uh, you know, 100 times more in terms of percentage than most of- of the- of the- of the investment firms out there. So- so high alignment with our investors was- was- was a second- a second aspect of it, and then I think- I think a third aspect was- was really, uh, working in a team environment as we had in consulting. So- so we've developed a global team network that can apply these resources, you know, globally, um, at a moment's notice to he- to help any business. So those three things, I think, have- have propelled the success of Bain Capital.

    3. HSHarry Stebbings26:36

       I- I- I love those in terms of those three segments. Uh, I, all things great are done in threes, I find. Um-

    4. SPSteve Pagliuca26:43

       Absolutely.

    5. HSHarry Stebbings26:44

       (laughs) Hey, h- okay, so if that's what, like, was critical to the success, if you had a magic wand and you could change a couple of elements that you did, strategic decisions, what would you change that you think negatively impacted the course or trajectory of Bain?

    6. SPSteve Pagliuca26:57

       Oh, I- I- I think the course has been- been, uh, a- a great course, so- so, uh, what I think we maybe could've done is- is applied the model earlier globally. You know, we recognized the value of a global network and we, and- and I think in, uh, Bain Capital started in '84 and we really didn't take the model globally until 2000 or so where we opened up in- in, uh, in- in London. So we- we formed an office in London, uh, uh, the whole group over, and I- I was involved with that. I got an apartment in London, and it was very exciting times. We thought the model of improving companies, of building companies would apply to other geo- geographic areas, and turns out it did. I think we could've done it earlier, and it turns out that that global network i- is of great competitive advantage because, uh, you can have expertise in- in Europe in industrial chemicals and we can apply that expertise to a company here in the US. Or we have our Asian operations, uh, a company in Asia that wants to sell a product in the US, we could- we could help them set up with retailers in the US. So- so the value has been huge of creating that global network, and, you know, could we have created it earlier? In hindsight, yeah, maybe we could've.

    7. HSHarry Stebbings28:03

       You mentioned that global network. I- I heard you say on the GS talk about going from a local business to a mid-market buyout and going global,

13. 28:11 – 31:47

    Biggest Challenge in Scaling to $160B AUM

    1. HSHarry Stebbings28:11

       and, you know, we looked at the scaling to, I think it's 160 billion AUM, you'll probably correct me, but roundabout, um, 160 billion AUM. What are the one or two biggest challenges that one faces in scaling a firm to that proportion?

    2. SPSteve Pagliuca28:24

       It's maintaining the investment discipline and- and- and the culture of the firm, um, and the way we've done that, we have a- an investment committee that- that basically looks at every investment, whether it's an investment in a company in Rhode Island or a- a company in Malaysia. So we try to maintain that- that discipline and the culture of- of really trying to do good investments and build companies and- and have- have a high performance culture. So that's the thing you've really gotta, you know, keep- keep the reins on. You don't wanna view yourself as an asset gatherer, just, the, you mea- if you measure yourself by the amount of money you put out the door, uh, we believe it causes real trouble. You wanna measure yourself by the performance and the value th- the value that you create investing that money.

    3. HSHarry Stebbings29:03

       Can I ask, with- with the concentrated power of those ICs, does it not mean that they become a bottleneck? When you think about the speed of decisions that need to be made, especially in markets today, you'd be meeting every day for your IC, given the size of these vehicles. How do you not be a bottleneck but have that decision-making structure?

    4. SPSteve Pagliuca29:20

       Well, that's a great question, uh, um, uh, u- unfortunately that involves, uh, a lot of late-night work and a lot of work at, Bain Capital has a huge work ethic, and, uh, and so, uh, I- I would honestly say that we have never lost a deal because of an IC bottleneck. We have a culture of being extremely responsive, extremely creative, and if we need to have an IC at, you know, two in the morning on- on- on, uh, Monday morning or- or Sunday night, we will never have a system... Now, the- the good news is, most of those deals that come have already been through their own process in Europe or in Asia so- so they're pretty fully baked, and so it- it makes it a very efficient process because it's not starting at square one.

    5. HSHarry Stebbings29:59

       Steve, what makes an effective IC, and how do you ensure that it feels safe for newer/younger partners to really share how they feel, to challenge, to champion, to be themselves?

    6. SPSteve Pagliuca30:12

       That's a really great question, and- and that's something we- we, uh, we really pay a lot of attention to. I- I think- I think our firm is- is- is really exemplary of that because w-We foster an active discussion on the key and major issues. The worst thing you can do, uh, in investments is politicize it so that you say, "Well, I don't wanna upset that partner because I wanna vote for his investment." So we, we kind of hammer that in, in, in the culture and I, I know one investment that, that I brought to committee that I thought we were going to do, I won't mention the name of it, but, uh, one of the, one of the, uh, actually one of the, one of the principal analysts in the room raised a question about how we were looking at, at the valuation and that if you looked at it on a cash EPS basis versus the EBS basis, it would be shaky. And he was compelling enough that we, we basically shut the whole investment down, and I thought when I walked into that thing, there was about a 90% chance we were gonna do it, and we didn't do it. And then... and that, that upset a few people on the team. I was on that team (laughs) ... because it upset me. But, but, uh, but actually it turned out to be a very good decision and we used that as an example to say, you know, the- the- the- the, uh, speaking up and, and, and saying the right thing, that's what we want you to do. We... uh, we want dissention. We, we also don't have to have 100% of the people, um, you know, for the investment 'cause you don't wanna have a situation where, where one, uh, you know, view, view dixies but we want those one views because they actually help us also in designing the plan for how you're going to build the company going forward. So, so people that could poke the holes in it, if we're gonna still do the investment, it's good to identify those holes and then fix them as soon as you get.

14. 31:47 – 32:31

    Disagree and Commit

    1. SPSteve Pagliuca31:47

    2. HSHarry Stebbings31:47

       Can I ask, do you think disagree and commit works? People often say it, but I find when someone disagrees, they kind of quietly dis-commit, where they might do it, but they'll do it the day after. They might say they'll do it, but they give it 50% because they never really agreed that it was a good investment. So do you agree disagree and commit works?

    3. SPSteve Pagliuca32:09

       It, it's worked, it's worked for us. I, I, I think we, we, uh, we kind of make it... it's, it's like a basketball team, you know, you make a decision, you call a play, and sometimes it works and sometimes it doesn't, but, but you have to go out there and execute the play.

    4. HSHarry Stebbings32:20

       I, I, I love the sports analogy. It takes me brilliantly to, you know, bluntly this very important part of sport in your life. When we think about, you know, owning sports teams and then obviously, you know, business building as we've discussed with Bain,

15. 32:31 – 36:15

    Building Business vs Building Sports Teams

    1. HSHarry Stebbings32:31

       how does it compare when you think about building a sports team and a franchise and compare that to building a business? Like, what's the same? What's different?

    2. SPSteve Pagliuca32:39

       There's a lot of similarities. One of the similarities is we went into the Celtics, we had a strategic plan and it, it had three components as, as you pointed out before-

    3. HSHarry Stebbings32:47

       Correct.

    4. SPSteve Pagliuca32:47

       ... there's always three components in consulting. And the first component was fundamental to build a championship team because Boston wants championships and, and, and that's how you... how you, how you drive engagement. The second was to be... we knew it was a community asset and it was to be the best community asset, uh, that it could be and so we formed the Boston Celtics Shamrock Foundation and, uh, used the power of sports to actually give millions of dollars to charities and, and kids things and that, that's created a virtuous, uh, circle because our fans love the fact that we're supporting, uh, kid- kids that need support and, uh, and the, and the players go out and go to the hospitals and go to the educational institutions and put in technology centers so they get ho- highly involved. And then the third component of, of the plan was to make it a better fan experience. When we, uh, purchased the, the club, they really didn't have even emails, you know, fan engagement. Uh, th- there was no internet at- to speak of at that point, but, uh, they weren't engaged with the fans so we, we wanted to make it a much better fan experience, so we brought in music, we brought in, uh, um, dancing teams, all those kinds of things to make it a better experience for the fans. And in fact, we did win a championship five years later which is the most important thing. But that's very similar to the investment process where you say there's, there's two or three things you need to do to transform a company to make it a better company five years or 10 years from now than it is today.

    5. HSHarry Stebbings34:07

       What's different?

    6. SPSteve Pagliuca34:08

       The huge difference is that when we're working at Gartner Group or one of the great companies to make them great, we are not under, uh, media, uh, radio and television and, and now Twitter and ins- Instagram scrutiny every five seconds for everything, everything that you do. So if you do the slightest thing in a sports team, it get ma- it gets magnified and, and criticized and promoted a thousand different ways so you really operating under the spotlight and, and, and the... and I would say if I advise other sports owners, when new owners come in, I say, "The, the worst thing you can do, with all due respect to, to you, Harry, the media, the worst thing you could do is, is run your team based on the media or based on what the media is saying that you should do." And unfortunately, a lot of times people come in and say, "Okay, we've got to win. We want action." So they'll, they'll pay $20 million for a player who's 35 years old that might have, you know, six months left of, of, of decent play and they win a few more games, but then the next year everything go, everything goes down and they're losing even more money because, because you paid that player. So what we try to do with the Celtics is we've taken the same approach as, as being kind of what Groesbeck, who's a great CEO, rough... uh, and partner and owner, um, who, who ru- runs the club, basically we've only had, I think, three coaches in 20 years and, and we've had the same general manager for 19 years till he re- he, he retired and we replaced him with a coach who was Brad Stevens so we have continuity. So we've had the most continuity of any sports franchise and, and we've had the same, uh, uh, CFO and head of marketing of the whole, the whole 20 years. So that consistency of, of, of really having a strategy and backing the A-players works. If you start deviating because you were driving down the highway and they said, "Oh, oh, oh," you know, "the Celtics made a terrible decision. They got this guy." Or, "They shouldn't get that guy." And you start to listen to that, that's when, that's when you're gonna have a problem. So the media scrutiny is that the big thing in sports.

    7. HSHarry Stebbings36:04

       Can I be very blunt here which is, you know, I'm sitting in the UK, I'm a big Chelsea fan and Todd is, is getting a lot of scrutiny, um, right now. My question to you is, have

16. 36:15 – 37:58

    Dealing with Media Scrutiny

    1. HSHarry Stebbings36:15

       you had the similar scrutiny at any point in your ownership of Atlanta, of the Celtics?And, and how did you deal with it? And how would you advise other media... or, uh, sorry, other sports owners when they are getting slammed?

    2. SPSteve Pagliuca36:28

       Well, that's a great question here, and, uh, a- a- a- absolutely we've had that, uh, uh, uh, it's very... I have a very vivid memory of that in... I'm trying to go back to what year that was. Uh, it was probably three years into our ownership, so 2006 or 2- 2007. Um, one of our star players, Paul Pierce, got hurt and he was, you know, 30% of the offense, and so we ended up losing, uh, something like over 50 games that year, so we won, like, 30 games out of 82. The media, the fans were calling for us to fire Doc Rivers, to fire Danny Ainge, the general manager and the coach. And we had a meeting and, and we, we looked at the metrics and, and how the coaches were coaching and, and how Danny was doing his job, and we said, "These guys are A+ players." And so we said, "There's no way... you know, there's no way we're, we're gonna fire them." Then you look up, a year and a half later, we win the championship. You know, had we, had we fired those guys, we'd be nowhere, um, and those guys went on to be in the fi- be in the conference finals and, and th- they're two of the best people in, in the business. So, so I always remember that when there's a big headline, you know, "These guys are idiots. Fire the coach." Um, and I said to them, "It means that we should, you know... if, if, if we, if we keep losing like this, we should fire the owners. You know, not, not, not the coach and not, not the general manager because they're, they're doing an absolutely fantastic job."

    3. HSHarry Stebbings37:47

       Speaking of the owners, you know, we've seen over the last few years this incredible rise of abundant US PE firms and just US owners, uh, into European sports organizations and franchises.

17. 37:58 – 41:32

    Why Money from the US is Pouring into European Sports

    1. HSHarry Stebbings37:58

       Can you just help me understand, Stephen, and I'm probably very naive here, why is so much money pouring in from the US, both PE firms and individuals, over the last few years?

    2. SPSteve Pagliuca38:07

       I think they recognized, uh, uh, it, it, it's been probably over the last 10 years where they recognized the growth potential. I, I would call it the globalization of sports.

    3. HSHarry Stebbings38:15

       Hm.

    4. SPSteve Pagliuca38:16

       So, so, so the new media, um, Instagram, Twitter, uh, the ability to stream on demand anything now with, with streaming companies out there like Delta Trey that we've invested into, it's changed the whole landscape so that a fan can be a global fan. We used to measure fan counts in the hundreds of thousands or millions and now they can be measured in hundreds of millions. Uh, you know, Chelsea has 4 or 500 million fan- Manchester United, 4 or 500 million fans out there. And you're especially seeing that in the global sports like basketball and, and the, and you would call it football/ soccer. And that dynamic, you know, has led to more revenues, giant increases in media contracts, and more value, and, and those investment firms have invested behind that successfully. Secondly, there's been a dynamic with so much money coming into the system, all what I'll call, uh, artwork type assets, you know, scarce assets. Many scarce assets have, have really gone up in value because, because there's a lot of money out there chasing those scarce ass- assets. So, so a component of, of the value of sports teams have been the great performance and, and the technology that's allowed it to have a bigger fan base, more monetization, higher revenues, um, and that ongoing, plus money coming into the system that's caused scarce assets to go up in value has been... made, been a very, very attractive way to invest in sports.

    5. HSHarry Stebbings39:37

       I am fascinated. You said about the globalization of fans there, and totally with you where, like, normally it would just be local fans who support it, and now you have, you know, Taiwanese fans who support Chelsea and you name it. Um, my question to you is, does this not create kind of the concentration of wealth? And what I mean by that is, it's like any business, especially like the creator economy of which I'm in, but like the top 1% earn 99% of the money. Do we not see that in sports, though, which is like the globalization is concentrated fan bases where Lewis Hamilton in F1, Chelsea, Real Madrid, Barcelona, and the wealth really concentrates like never before. Do you think it's like that or is it a more even distribution?

    6. SPSteve Pagliuca40:14

       I think it's an issue and what the organizations, the leagues have to do is really come in with... and, and they are doing this, come in with a set of rules to, to have competitive balance. So the real issue is competitive balance. Uh, you're, you're, you're gonna get that concentration if you have no competitive balance and, and eventually that, I think, diminish the value of all the teams because, uh, y- you know, no one wants to see one team win everything, you know, every year. Uh, so you, so you've got to have some competitive balance, and so they're putting in financial fair play rules in, in, in football. It's go-... That's going in the right direction. Uh, the NBA has a fantastic partnership with the players where the players are, are guaranteed half the revenues and the, and the owners get half the revenues. Uh, that's been a very succ- successful deal 'cause the... 'cause every, uh, uh, every time we increase revenues, the players benefit by that, so we've had very little strikes and, and we've had, we've had, uh, uh, pretty good competitive, competitive balance. But that's the key for these leagues, for the long-term value, is to come up with systems that are fair to players and, and, and f- and, and fair to fans, but come up... allow every team to compete.

    7. HSHarry Stebbings41:19

       You mentioned the appreciation and value of some of these kind of rare assets. You know, we're seeing some of these franchises and clubs at two billion to, to six billion. Um, where does this go from here, Steve, do you think? Like, is there still room for it to run further?

18. 41:32 – 43:03

    Will we see $50B football clubs?

    1. HSHarry Stebbings41:32

       Will this be 25 billion, 50 billion dollar clubs? H- h- how should we forecast this out?

    2. SPSteve Pagliuca41:37

       Well, it's been, uh, you know, really high up into the right, uh, for now. So the question is, can you go up 10 times from a three billion valuation to 30? It may be possible, but I think they'll still have a, a good run but, but y- you run in... you run into this multiplier effect with that much money so that much capital, uh, to buy a team. How many people could buy a team for, for, for 30 billion? You run into that... the... it's the same thing with artwork, you know, the, the scarcity value is, is only driven by the amount of money that can come in to, to buy the asset. So is it, is it inconceivable? No. Will it keep going up? I think it'll keep going up because there's fundamental globalization and more modernization and more fan base being created as long as the leagues can keep that competitive balance and keep the product exciting, and so that, that's gonna be the dynamic tension.

    3. HSHarry Stebbings42:23

       Can I ask you, I view this a bit like growth investing now, which is like, yeah, the br- you know, inherently it's a little bit capped. You might get your three to five acts if you do it well, but, like, the upside is capped. So does the option not go earlier? Do a Ryan Reynolds, you know, take Wrexham at, whatever, $5 million, and actually if he turns it into a billion-dollar club, which he could do with his distribution channels, that's a $995 million net gain. It's pretty good. Is it not just go earlier, Steve?

    4. SPSteve Pagliuca42:50

       It's definitely, it's definitely a potential strategy. A lot of people, people are doing that and, uh, you know, looking, looking at, at certainly the system in Europe, where you can, you can buy a division three or division two team and move it up, there's a lot of value there. Yeah.

    5. HSHarry Stebbings43:02

       No, I

19. 43:03 – 46:22

    Steve’s Plan to Buy Chelsea FC

    1. HSHarry Stebbings43:03

       totally get you. Can I ask you, on Chelsea, uh, I, I'm a Chelsea fan. Uh, I know you were part of the bidding process. What happened, Steve? Interviewing you, I feel really sad (laughs) that you didn't buy it.

    2. SPSteve Pagliuca43:15

       Well, I'm, I'm a Chelsea fan, which is why I became a Chelsea fan because I spent so much time with the people there and I loved, uh, meeting, uh, uh, people, people representing the women's team and, and the, the Pitch Association. It was a, it was a great, uh, i- it was a fantastic process and I, I met great people in, in that process. So, so I'll, I'll be, I'll be a Chelsea fan, uh, as, as well. Chelsea was an iconic asset and, and what we do with the PAX Group, which is my, my sports, uh, um, organization is, we wanna buy iconic, you know, assets that have, have really, really... Like the Celtics that have a strong fan base, that have potential to grow and, uh, and, and we view ourselves as stewards of these assets. You're really a steward. These are not... You know, it's not buying a company where you're trying to make more widgets. It's a company that is so ingrained in the community, so, so we- we really take a stewardship approach to this and, and we believe good things will happen. So I really love Chelsea for that aspect. I, I had had an apartment in London, as I said, in the early days of Bain, and it wasn't far. We- we- we're at Mayfair Place, so it's right down the road, like two, three miles down the road, so I was very excited about it. And we thought we had a great chance to win because the original RFP came out to say that they were only gonna have a few groups and they want a great steward and they don't want any debt on the business, z- zero debt. Which is... That's, that's a, that's a high hurdle because you're talking about purchase prices of, of two to three billion pounds with no debt. And, and we had a group that, that c- came up with that money and what was a very rich price, and unfortunately at the, at the last minute, um, they went away from that model and, uh, they allowed debt, the debt to go in the business and, and they asked for a much higher price than what we were talking about, so we, we had to drop out.

    3. HSHarry Stebbings44:59

       Hmm.

    4. SPSteve Pagliuca45:00

       And our issue was, you know, we wanted to, we wanted to... The way... We were... And could be a very good investment, but the way we, we, we do business is we wanna prepare for the worst and hope, hope for the best. And, and we thought there'd be a big investment into the stadium, there need to be big investment into, um, i- improvement of the facilities. We wanted to invest in players and, and, and we just determined that, that at the price that it was at, it was gonna be hard to make the kinds of investments that we wanted to do. That was our strategy, and the s- the, the folks that bought it, their strategy could work, it may be a different strategy. But it didn't work in the context of what we were trying to accomplish.

    5. HSHarry Stebbings45:35

       Do you regret not paying up? (laughs)

    6. SPSteve Pagliuca45:38

       (laughs) No. No, because, because, uh, uh, uh... (laughs) You know, the, a piece of, a piece of, uh, investment advice that was given to me by, by, uh, someone very early in my career was, "The only thing worse than losing a deal is doing a bad deal." And if you feel like there's not gonna be the capital there, you know, you're gonna struggle with it in, in the plan, you probably ought, you probably ought to back u- off. So, so no, I don't regret that. Although it could be a very good investment. I mean, with... It, it's, it's an iconic franchise and, and, uh, and so, so you know, everyone has a different view of price and where their limit is and where their capital is, and, and, uh, you know, we just felt for our strategy it didn't work.

    7. HSHarry Stebbings46:19

       What's the hardest thing about owning a club? What is

20. 46:22 – 48:00

    Hardest Part About Owning a Sports Team

    1. HSHarry Stebbings46:22

       like the single biggest challenge? The politics, the... You name it. The media scrutiny? What's the hardest?

    2. SPSteve Pagliuca46:28

       The, the hard- the hardest thing is, is, um, you know, your, your duty when you own a club is, is, is, is to try to win a championship. You know, I- I'm, I'm a huge fan as well as an owner, and so I love all the players at Atalanta, I love all the players on the Celtics and I get to know these players, you know, personally and, and, uh, we help each other wi- with various things. And then the general manager comes in and says, "Look, we can't win the championship unless we have a, uh, a better, uh, a new center," or, uh, you know, "We need a striker." And then they have to trade other players or sell other players, and that's very emotional because these are people, these are people you've been, you've, you've been friends with and it's, it's hard. And the good news is, both at Atalanta and the Celtics, is we take a lot of care in trying to take players' input and, and, and if they... And, and we tell them, "Look, our, our duty is to win here," and, and all the players are great. So for example, when we traded Al Jefferson, he was a, he was a, uh, a rookie that we drafted and I really... I loved the guy and I still love him today, but he got traded for Kevin Garnett. Kevin Garnett was one of the best players in the history of the NBA. So we said, we said, "Al, you know, we have an opportunity. They want young players. Kevin Garnett wants to come here. So it's a honor for you to be traded for one of the best players ever in the NBA." And Al went o- went on to have a great care- career in Minneapolis a- himself. But the hardest part is, you know, having those relationships and then seeing them go to another team.

    3. HSHarry Stebbings47:51

       Yeah. No, I, I totally get that. I, I do have to ask you one final thing, which is like, you know, risk mindset is a tough one that we touched on earlier. How do you analyze

21. 48:00 – 49:30

    Steve’s Risk Mindset

    1. HSHarry Stebbings48:00

       your mindset to risk? Having been through what you have done with Bain, with owning sports teams, how do you analyze your risk mindset today and how has it changed over time?

    2. SPSteve Pagliuca48:07

       Well, it's changed, it's ch- it's changed a bit over time. I've always believed in being diversified, and so I'm highly diversified. I don't have a, a large burn rate in my lifestyle, so I have tolerance for more risk because I can feed my family. So w- w- where do you spend that risk? I'm looking at things like biotech at this p- phase of my career that's highly risky but that, that can do great things for mankind.So I- so our family office has done about over 50 biotech investments. And the game there is you- you have to do a diversified portfolio. Hopefully, two or three will hit. My daughter-in-law, fortunately, we invested behind her and she formed a company. We're very proud of- of her. She formed a company that takes stem cells and is- is turning them into pancreatic cells to cure type one diabetes. And at the time when that started, that was a very risky venture six years ago, but it turns out that she's helped develop that product. She was a co-founder of the company and now a company Vertex has just bought the company and they're building it up and it- it looks like it's worked on the first patient. So, that's very gratifying to see that you can actually invest and have a good return on your money and then save lives. And so we're skewing our investment towards these riskier areas that can actually, uh, be very exciting and same thing in technology, artificial intelligence, the space world. So there's a whole area out there that I- that- that I'm investing in now that- that I probably wouldn't have invested into, you know, unless I had a diversified base a- as my backup.

    3. HSHarry Stebbings49:22

       Steve, final one before a quick fire. You have a- a very loving and successful relationship and marriage. I've learned so much from you this- this

22. 49:30 – 50:17

    Secret to a Happy Marriage

    1. HSHarry Stebbings49:30

       interview. I'm hoping you teach me here. What are the secrets to a loving and successful marriage?

    2. SPSteve Pagliuca49:36

       Uh, you know, prob- probably a good- great sense of humor, number one. And- and, uh, you have to have shared values like any partnership. You have to be willing to sacrifice for each other. And, you know- you know, my wife has been amazing in terms of she was a- a fund manager at Fidelity, an Harvard MBA, but has been taking large responsibility for, you know, managing four kids and- and, uh, as well as do- do all the business things in biotech. So I think the key is kind of, you know, mutual respect, uh, uh, and, uh, and shared values and if all else fails, a great sense of humor.

    3. HSHarry Stebbings50:04

       Great sense of humor, absolutely crucial. Uh, we're gonna do a quick fire round, Steve. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

    4. SPSteve Pagliuca50:12

       Great.

    5. HSHarry Stebbings50:13

       So what's the most recommended book? What should I read? What do you love?

23. 50:17 – 51:04

    Steve’s Favorite Book

    1. HSHarry Stebbings50:17

    2. SPSteve Pagliuca50:17

       You- you might not love these books, but I- I- I love... My mother w- was a history, uh, teacher and, uh, and so I- I love history books. So one of my favorite ones is John Adams, who was one of the founding fathers of America. And I think he's- he's the unsung, you know, hero of America because he's the guy behind the scenes, a crusty old New England guy that designed the kind of the state and democratic system and the constitution. He- he was the brains behind all that. He'd studied all the government civilization things from Greek and- and Locke and- and- and all the philosophies. And he came up with this checks and balances thing that worked so well for America for so many years. So- so, uh, it's amazing to learn of the intellectual firepower that he had and how he- how he really was fundamental to putting this whole country together.

    3. HSHarry Stebbings50:59

       I love that, and I haven't had that as a suggestion before.

    4. SPSteve Pagliuca51:01

       It's by McCullough.

    5. HSHarry Stebbings51:02

       December 2023,

24. 51:04 – 51:47

    2023 Macro Predictions

    1. HSHarry Stebbings51:04

       will we be better or worse macro-wise than we are today?

    2. SPSteve Pagliuca51:08

       You know, I'm an optimist, so I think we're gonna be better. Um, I could be wrong, but I think we're gonna be better. Um, uh, ho- hopefully, uh, we'll get through... We've- we've had kind of the tech bubble set in and people are going back to basics. Employment i- in the US is- is at- at a good pace right now. Inflation is down. The big wild card is- is gonna be the- the Russia-Ukraine situation. Does that spin out of control? The polarization that's happening between nations, but hopefully we're gonna move... We- we're hearing, we're hearing better news out of China. Hopefully we'll be in a better place. So I'd say we're gonna be markedly better, not out of the woods, but markedly better.

    3. HSHarry Stebbings51:43

       You mentioned you're an optimist. What are you most optimistic and hopeful for today?

25. 51:47 – 55:28

    Is Gen-Z entitled?

    1. HSHarry Stebbings51:47

    2. SPSteve Pagliuca51:47

       I'm really optimistic about, uh, this current generation, uh, the- the- the folks that we interview and- and hire into Bain Capital. They- they really have more of a sense of purpose that we have, maybe because we came out of this depression mentality that all we had to do was feed the family. They are driving things that we wanted to do for a long period of time. They're actually demanding and driving that. And so- so the industry of private equity is trying to become more diverse. We're actually becoming more diverse now because the people you hire are demanding it. We're a better organization for that. So we're only in the early innings of that but we've been trying to do that for years but we're actually starting to accomplish the early stages of that. We need to invest even more, but that's going to be successful because of the belief of the people coming in. They're also concerned about the planet, uh, global warming and- and they are much more concerned about the quality of life. People sometimes say that's a bad thing, but I think that's a good thing. The firms are responding to that. I- I find it very energizing and very optimistic even though there's daunting challenges like global- global warming, inequality, income equality. You know, we're facing that, but, you know, this generation is- is really put that on- on the forefront much- much more than so than we had done because I think we were just our mindset was you know, I've got to... I've got to make sure that my family's secure and they- they are... they have a broader horizon and- and- and- and a bolder vision than we do so I'm very uplifted by that.

    3. HSHarry Stebbings53:10

       Can I be honest? I think they're the most entitled generation. They want the salaries, they want the holidays, they want all the benefits, but actually they want, you know, the super nine-to-five work-life balance and, you know, finding oneself in Bali. Steve, the reason that I've been successful and you far, far more, because I worked seven days a week for years. I mean, I'm young but I look old. It's just about grinding and I don't find this generation grinds like I think it is needed. Am I being unfair? Am I too old? (laughs)

    4. SPSteve Pagliuca53:41

       I think you're being unfair. I- I think you're being unfair. I think... I think we, you know, here I think we may have gotten the grinding, you know, too far. Uh, uh, the- the- the- the, uh, we... The people we hire at Bain Capital, they work extremely hard. Uh, I think they're just much more judicious about how they use their time and- and- and some of the grinding is not necessary li- like some of the grinding of- of getting the- the, uh, extra spreadsheet that- that- that only relates to 0.2% of the business some of that- some of that stuff is not. So- so I think these people work as hard as ever but they've made it a priority to be more balanced and I- I said... I think that balance will be a good thing for- for making judgment and investment decisions and- and having a great life. So I'm very optimistic about this and- and uh, I see it at our company and the whole industry.... and hopefully it's gonna result because we won't have a planet here unless we start focusing on, on people working together to, to solve global warming, to solve income inequality or we're gonna have a lot of strife. So, my optimism is that, that this generation is as, uh, as we've picked up on that. And they criticized the generation of the '60s as well, the one that came before me, uh, but they made a lot of positive change on civil rights as well. But this, this generation, I think, is, is really committed to that.

    5. HSHarry Stebbings54:59

       Yeah. I totally agree with you. Uh, uh, sorry, I feel terrible now for my critique. Um, tell me, what do you believe that most around you disbelieve?

    6. SPSteve Pagliuca55:07

       The Celtics will win the NBA championship. (laughs)

    7. HSHarry Stebbings55:11

       Dude, I, I have no idea if that's likely-

    8. SPSteve Pagliuca55:13

       Yeah. Well-

    9. HSHarry Stebbings55:13

       ... but ............................

    10. SPSteve Pagliuca55:14

        ... I hope they, uh, uh, I hope they will, but I, I would say maybe, maybe I have a big ... I think people are good fundamentally, so a lot of people don't believe that but I think people are good fundamentally, and, and, uh, sometimes we have to pull that out of them, but, but I think people are, are good fundamentally.

26. 55:28 – 55:54

    What do you know now that you wish you’d known earlier?

    1. SPSteve Pagliuca55:28

    2. HSHarry Stebbings55:28

       What do you know now that you wish you'd known when you started investing?

    3. SPSteve Pagliuca55:33

       You know, I think I, I learned over time in investing that, that the people dimension is just as important, maybe more important than the analysis dimension. So, we grew up on, on the, the analysis-heavy culture of, of, uh, of, of, of being, being in a company, and we brought that over to Bain Capital, but I think we've realized over time, it's the combination of those two and the balance of those two that, that brings success.

27. 55:54 – 56:32

    What do you look for in emerging managers?

    1. SPSteve Pagliuca55:54

    2. HSHarry Stebbings55:54

       It was, you know, Chirag, Nivas, Moshi that introduced us. What do you look for in emerging managers, Steve?

    3. SPSteve Pagliuca56:00

       Well, first thing I look for is they, they have to have a passion for what they're investing into, and their passion has to extend to say they wanna do a great job for investors. So when someone comes in with a pitch and, and says, uh, you know, "I wanna do this and I'm gonna get a 20% carry," and that's the ones I shy away from. The ones that say, you know, "I wanna build the best set of biotech companies and I want our investors to be with me in that and co-invest with me and, and our, and, and if our investors do well, I'm gonna do well," you know, those, those are the folks that I like.

    4. HSHarry Stebbings56:30

       I totally get you. Tell

28. 56:32 – 58:32

    Steve’s 5-Year Plan

    1. HSHarry Stebbings56:32

       me, next five years, what are the plans? We do this show in 2028. Where will Steve Pagliuca be then?

    2. SPSteve Pagliuca56:39

       Hopefully alive. (laughs)

    3. HSHarry Stebbings56:43

       (laughs)

    4. SPSteve Pagliuca56:44

       (laughs)

    5. HSHarry Stebbings56:44

       You look in fine shape, my friend. Where, where ... Honestly, for a five-year plan, what would you like?

    6. SPSteve Pagliuca56:50

       I'll always be affiliated, uh, in some way with, with, with Bain Capital, helping Bain Capital. Uh, I'm gonna continue to build the, the sports group which I, which I love, and then, uh, continue to invest in these areas, uh, like biotech and artificial intelligence and, and s- and space, um, on a venture basis where we can create great companies but also, you know, leave, leave, leave a lasting impact. So, I, I, I don't think there's ever a real point where, where I'm gonna, um ... I wish I was better at golf, but, but, but I'm not gonna become a golf pro anytime soon. So, so I, I, I really am curious about all these areas and love working with the people and developing the next generation. Um, there's a concept that Doc Rivers pioneered at the, that the Celtics called, I don't know if you've heard of it, it's called ubuntu. And we won the championship with the ubuntu culture in 2008. Ubuntu is, is an African word that means that you, you are only here because other people have helped you get there, and so you need to help other people to get there. So we, we are all part of a system and we only succeed or fail based on how others help us. And so, and so I, I think, uh, my, my ... Our investing, we can have win-win. Our investing can, can actually help a lot of people. It can be fun to mentor those people and leave something of lasting impact, and that's what we wanna do at Bain Capital and that's what I'd like to do with my, my family office going forward. So hopefully I'll, I'll still be alive those five years to get that done and, and, uh, and, uh, and keep moving on.

    7. HSHarry Stebbings58:18

       Steve, before the show, everyone just told me how humble, graceful, and elegant you are as a person. I've loved doing this. It's shows like this which make me so grateful to do what I do, so thank you so much for joining me. Thank you so much for being so open and honest, and I've really loved this.

Episode duration: 58:32