(Bloomberg) -- The private equity industry has no shortage of outsize characters — but few were bigger than David Bonderman, who died this week at the age of 82.
Bonderman co-founded TPG Inc. back in the early 1990s and along the way became one of the faces of a booming world of dealmaking, engineering takeovers of everything from Continental Airlines to Burger King to J Crew. Always an iconoclast, he specialized in transactions that few others would touch. Bonderman built the firm far from Wall Street, with offices in San Francisco and Fort Worth, Texas. He chose khakis over suits and invited rock stars to his annual investor meetings.
Bonderman later applied that same contrarian streak to sports investing, becoming a co-owner of the National Hockey League’s Seattle Kraken and rebuilding an arena steps from where he had worked as a security guard when he attended the University of Washington.
Few knew him better than Jim Coulter, his TPG co-founder, who met Bonderman when the two started working for the Bass family in Fort Worth almost 40 years ago. Coulter joined Bloomberg’s Jason Kelly in New York to talk about Bonderman and his profound influence on the investing world and beyond. This interview was edited and condensed for clarity.
David was many things, but he was never boring. We used to laugh that David often brought a rock ‘n’ roll backbeat into rooms that were used to classical music. It was a very different style.
He was known for his ridiculous socks. I mean, they were just ridiculous. When others were drinking fine wine, he was drinking Diet Coke. He flew a thousand hours a year to meetings anywhere. His style was informal. It was direct. He couldn’t stand obfuscation, and that style was a different wind in the industry at the time, and it opened up the opportunity for different types of styles to really flourish. It’s an industry that had incredible talent among its founding brethren, but David brought a little bit of a different attitude and frankly a lot of fun into a very serious business.
You guys started out as three people in 1992-93, but now you have thousands of employees and a quarter trillion dollars in assets. How does that grow into something this big?
Culture and curiosity. At a time when the industry was very much about finance, very much focused in New York, we came out of a family office in Texas. We set up on the West Coast. I used to say that we were playing the same game, but differently. We were the West Coast offense of private equity. And to do that, you have to get a culture of curiosity and problem solving. And I think at the first fundraise we did for TPG, our tagline was contrarianism, complexity and change, at a time the industry was more focused on franchise businesses and finance. Those kinds of problem-solving and a different approach really were what David brought to the business in the early days.
You said David was a polymath investor. What does that actually mean in practice?
Polymath is from the Greek, and it’s basically a person who has broad and diverse interests, but uses that knowledge and interest to solve problems. David really didn’t come to investing until his 40s. Think about that. He had several careers before he was a litigator.
He argued in front of the Supreme Court. He taught law at Tulane. He studied Islamic law in Tunis. This was a person that never took a finance class. Didn’t know accounting. And yet he brought that broad experience and problem-solving expertise to the problems of investing, and his ability to use the different experiences he had to solve problems really created his style, and it’s a polymath style.
How did that work? What was he doing as a dealmaker that really set him apart?
If you think about some of his signature deals, they were deals that everyone saw, but no one else was willing to take on. And it wasn’t that he was taking on more risk. It was that he saw something different.
Take the Continental Airlines deal. Legendary deal in the industry. The most hated company in America. The biggest bankruptcy in US history. It sat there for two years. Dave and I put together a deal that carved out a new Continental and took it from worst to first in seven years. Warren Buffett said that airlines were financial sinkholes. David, over and over, made successful investments in airlines.
When others saw the S&L crisis, David saw the S&L opportunity. We created the good bank-bad bank structure for American savings when working with Bass, and then we exported that structure around the world to do bank rescues in China, in Korea. Again, deals that no one else did.
So tell me about the decision that you guys made in 1992, that you’re going to go after Continental. What was that moment like?
Somewhere between deeply interesting and absolutely terrifying. No one else is showing up, we have no money, we have to put together the money, do the deal, etc. And it was one of the most fascinating business problems I’ve ever seen. What motivated us was the problem and the opportunity. It was like a hunk of marble and you had to see what was inside it. For us, we probably didn’t know better. If someone was starting a business today, this particular deal would have, in capitals at the bottom, “Don’t try this at home.” But we did try it at home, and that made all the difference.
How did you know that there was a business to be built out of doing this? And what was that decision like to create an entirely new firm?
After we did the Continental deal, we had a long discussion because at that time, there were two ways we could have gone. We could have kept doing deal by deal, which is the Richard Rainwater model, or we could build a firm. We made the call then that the industry was going to develop in a way that you had to have broader resources and a more permanent structure really to be able to not serve us, but to serve the people that would join the firm. We needed to have a future for them.
So we brought in a third partner, Bill Price, who was kind of our operating side of the business. And we decided to name it not after ourselves, but a name that was kind of low key and could be what it was going to be beyond us. And I think that decision to build a firm and the generosity that that implied really was part of David’s legacy.
The industry is institutionalizing as it goes public. You guys are the last of the big firms to do that. How much was David driving that?
There’s more than 4,500 private equity firms. We used to all know each other. That evolution is one of the more interesting stories in business. I went back a few years ago for our 30th anniversary, and I looked at the growth of the industry over the period. TPG has been there. It’s grown 15% a year, compounded for 30 years. That growth has been extraordinary.
He was also personally extraordinarily important in opening up Asian private equity. TPG was one of the first firms to go to Asia in 1994, and David was instrumental in both driving that move and building the business throughout the region.
I’ve heard people say that he would literally get on a plane to go have lunch in Shanghai. He was very much a practitioner of the art of showing up. Is that a fair assessment?
David always viewed the business — and I think we all should — as very personal. If you’re going to solve problems, it’s so much easier to do it in person. And he was so quick on his feet that to actually get in the room with someone was one of his greatest strengths.
Secondly, he had always been an internationalist. He loved traveling. After traveling incessantly for work, when he got a week off, he would travel. I was talking to his assistant the other day who was relating to me, the budgeting people at TPG had asked for next year’s budget. She gave them the hours, and they asked for the hotel costs.
And she said, there aren’t hotels. Because David used to fly overnight, get off the plane, shower at the private terminal and go. He didn’t use hotels because that was the way he went. For him, it was part hobby, part interest. But it was absolutely a tool for getting done what he could get done and, frankly, one of his superpowers.
I’m sure you’re hearing from lots of different people. What are the messages that you’re getting? What are the notes and the calls you’re getting that surprise you?
Actually it doesn’t surprise me, because one thing that’s clear is that David has touched so many people over the years in his inimitable style. My phone has been lighting up from all over the world, from people I haven’t heard from in 20 years. People reach out to say how much David shaped his or her career, from the CEO of Goldman to the CEO of JPMorgan to the top investment partnerships around the world. The messages have been not just about him as an investor or partner, but him as a person.
He’s always been interested in people of all sorts. I mean, who else hitchhikes across Africa for a year? His ability to connect with people and welcome them into the industry from all nationalities, from all backgrounds, is another contribution he made to the industry.
This is a massive industry. How do you take that Bonderman ethos – where he’s calling into an investment committee meeting from Timbuktu – to a publicly traded company? How do you really institutionalize that culture?
Fight conformity in all ways. If you were starting this business today, sometimes I think the people who are looking at it feel they have to learn finance in their crib and have to go through internships.
David came to this in his forties. He brought that wide set of experiences. And I think the understanding that you can ask different questions, approach problems in different ways is something the industry needs to stay true to today. The spirit of problem-solving, curiosity, a little bit of courage, put together with a broad view, is something the industry still needs.
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