Invest Like The Best
Episode 269 Everything Compounds
Invest Like The Best

Episode 269: Everything Compounds

Invest Like The Best

Episode 269

Everything Compounds

Gaurav Kapadia is the founder of investment firm XN. We cover his approach to building XN around a culture of rigor and kindness, how he finds remarkable businesses to invest in, and the imperative to increase diversity and inclusivity in the industry.

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[00:03:05] - [First question] - What led to kindness and rigor becoming pillars in XN’s company culture

[00:05:30] - The types of situations where it’s hardest to be kind or rigorous 

[00:07:58] - Asking one question that can stump a founder can be a display of rigor

[00:08:58] - An example of looking at a situation and reducing the problem to a single variable

[00:12:51] - How he trains investors and team members to consider outcomes that would be obvious in hindsight

[00:14:28] - Developing the art of interacting with company management

[00:17:54] - Dimensions that typically find their way into his presentations and what tends to create complexity 

[00:21:13] - Whether or not rigor has declined in public markets over the years

[00:21:55] - Why fewer talented people are going into public markets

[00:23:01] - What it felt like when he first started XN and being successful at a young age 

[00:28:58] - Being impressed with his peers and rooting for each other

[00:30:33] - The nature of public versus private investing today writ large 

[00:32:32] - How he gets to know a company when he’s never heard of them before

[00:35:20] - Reasons he won’t invest from a personal policy standpoint

[00:36:01] - Common problems he encounters that companies are dealing with

[00:37:32] - Defining the strike zone of companies to invest in where he can be best-in-class

[00:39:10] - The insane valuations of public markets in recent years especially in tech

[00:40:42] - Why there are so few great businesses and common attributes of the great ones

[00:44:12] - Biggest problems in the investment industry writ large  

[00:45:48] - The most remarkable business he’s ever seen  

[00:49:22] - How he would teach investors to deploy XN’s operating partner model

[00:51:32] - His perspective and thoughts on diversity in the investing industry

[00:56:58] - A business or institution he would own outright personally 

[00:57:37] - What outside of investing most has his attention lately

[00:59:50] - Key touchpoints of coming from Queens and going to Hunter

[01:02:15] - What stands out looking back on his relationship with his parents and how hard they worked to build a better life for their family

[01:04:10] - Two things that manifest in a system that is seemingly rigged towards the wealthy and the problem with generational wealth

[01:05:29] - What has him most excited and optimistic about the future in the investing landscape today

[01:08:16] - Investing mentors deserve gratitude for believing in their pupils

[01:09:12] - The kindest thing anyone has ever done for him  

Everything Compounds

Introduction

Patrick
Our guest today is Gaurav Kapadia, founder of investment firm, XN. Gaurav is a veteran of the investing arena. We cover his lessons while rising to partner at TPG-Axon, co-founding, Soroban Capital and his decision to launch XN in 2020. We then discuss his approach to building XN around the culture of rigor and kindness, the importance of relationships in investing and finding investments that are obvious in retrospect. Please enjoy my conversation with my friend, Gaurav Kapadia.

The Twin Pillars of Kindness and Rigor

Patrick
All right. So Gaurav, we're going to start with a matrix that I've been thinking a lot about since you sent it to me first. It's a cultural touchdown here at XN, which is this twin notion of kindness and rigor. Those are two terms in the investment world, or maybe in the world that some people might think are at odds with one another, meaning if you're kinder, you're less rigorous. If you're more rigorous, you're more of a dick. I think you're aspiring to have your activities and your firm's activities live in a unique quadrant in this matrix. So I'd love to spend quite a bit of time here to start. What's the story that led up to that decision of that as a cultural touchdown for what you're building here at XM?

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