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Henry Ellenbogen - Man Versus Machine - [Invest Like the Best, EP.452]

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Henry Ellenbogen - Man Versus Machine - [Invest Like the Best, EP.452]

Invest Like the Best with Patrick O'Shaughnessy

2 DAYS AGO
Invest Like the Best with Patrick O'Shaughnessy

Invest Like the Best with Patrick O'Shaughnessy

2 DAYS AGO
OverviewShownoteHighlightsTranscriptChaptersPins

Shownote

My guest today is Henry Ellenbogen, founder and Managing Partner of Durable Capital Partners. Henry built his reputation at T. Rowe Price, where he led the New Horizons Fund and turned it into one of the best-performing small-cap growth portfolios in the c...

Highlights

In this episode, we sit down with Henry Ellenbogen, the founder and Managing Partner of Durable Capital Partners, to explore the philosophy and principles behind his distinctive approach to investing. With a career shaped by deep engagement with transformative companies and visionary leaders, Henry offers insights into how long-term value is built not just through financial acumen, but through understanding human behavior, organizational evolution, and structural change.
04:00
Investment philosophy centers on understanding people and change
06:45
Investing should follow scientific principles like balance in nature
08:14
About 1% of stocks compound wealth at 20% annually over 10 years
15:52
Domino's became the top-performing small-cap of the 2010s by improving its product and embracing technology for convenience.
23:55
Max is an excellent example of an Act II entrepreneur, understanding technology, recruiting well, being a good leader, and resilient
29:05
Write a memo justifying buying more shares at higher prices to align investment theses.
33:12
Bought more of Colliers when it sold off due to short-term macro concerns
35:03
Short-term alpha is won by humans paired with machines, not by algorithms alone.
41:30
Bought more of Duolingo in 2022 using the Dollar Cost Averaging Down strategy
42:29
AI affects all IP-based businesses, not just tech companies
45:31
Danaher's Business System (DBS) based on kaizen has influenced many Fortune 500 CEOs.
48:25
AI is like the start of Kaizen in the human work world
54:57
Duolingo's CEO Luis shows remarkable efficiency in product development with AI, achieving high DAUs and rapid growth.
1:00:17
Robotics costs may drop 15%-20% due to scale, human capital, and LLMs
1:01:30
Soft competitive advantages include human capital management and operating excellence
1:08:35
Reflecting on outcome differences improves investment discipline
1:18:34
Investing is an apprenticeship; the best investors improve with age.
1:19:18
Junior team members can provide critical investment insights, such as understanding the millennial mindset.
1:26:57
Off-sites focus on lookbacks, industry studies, and CEO talks instead of traditional team-building.
1:29:12
Only hire people who can one day lead the organization.
1:36:01
Netflix’s stock dropped from $280 to $70 during its streaming transition
1:36:32
Reed took the financial risk seriously and initiated discussions that led to proactive funding.
1:44:22
Greatness is about being a great person, not just a great athlete
1:45:45
His mom emphasized responsibility even when supporting his decision to leave Harvard

Chapters

Welcome to Invest Like The Best
00:00
Meet Henry Ellenbogen
04:00
Origin of Henry’s Investment Philosophy
05:29
Identifying the 1% of Great Companies
08:12
Patterns of Successful Compounders
12:53
Act Two Entrepreneurs and Teams
20:34
Building Durable Capital: Henry’s Act Two
25:43
Dollar Cost Averaging Up Strategy
30:11
Market Structure and Agency Problems
35:02
Impact of Quant Funds and Short-Term Capital
38:26
AI as Transformative Change
42:21
How Affirm Uses AI
45:30
Amazon’s Cost Curve Advantage
48:23
Leadership Through Change
51:48
Robotics and Physical Kaizen
56:54
Favorite Types of Competitive Advantages
1:01:29
Investment Memo Structure
1:05:25
2022 CEO Tour on Market Transition
1:09:21
Hiring and Developing Talent
1:19:18
Making Colleagues Better
1:24:09
Being Intellectually Honest in Investing
1:27:56
Lessons from Success
1:29:11
Case for Going Public
1:33:04
Netflix Transition Example
1:36:32
Two Types of Greatness
1:41:29
The Kindest Thing
1:45:42

Transcript

Patrick O'Shaughnessy: Here's an interesting question to think about. If your finance team suddenly had an extra week every month, what would you have them work on? Most CFOs don't know because their finance teams are grinding it out on lost expense report...