Private Equity Spotlight: Troy Phillips on the Power of Cash Flow and People

[00:00:00] Sean Mooney: Welcome to the Karma School of Business podcast about the private equity industry, business best practices, and real time trends. I'm Sean Mooney, BluWave's founder and CEO. In this episode, we have a fantastic conversation with Troy Phillips, partner with BPOC. Enjoy. So I am super excited to be here today with Troy Phillips, Troy, thanks for joining us today.

[00:00:41] Troy Phillips: Hey, thanks, Sean. I really appreciate you inviting me on.

[00:00:44] Sean Mooney: I've been looking forward to this one for a while here, so I'm really happy that we're able to kind of wrestle schedules and make this happen because this is going to be a really fun one.

[00:00:53] Troy Phillips: It should be. I look forward to it.

[00:00:55] Sean Mooney: The way I love to kick these off, Troy, is to kind of learn more of the story of our guests. And so, Troy, it'd be really helpful if you could kind of walk me through how you got into this private equity industry.

[00:01:07] Troy Phillips: Well, I grew up in a town in central Illinois. Went to school and studied finance always with the goal of being an investor.
My father was a financial advisor and he used to always tell me the easiest way to make money is to have the money work for you. So that always led me down the path of wanting to invest in some way. I don't think I knew what that meant. I had no idea what private equity was growing up in Decatur, Illinois, but came out of school and went to New York as an investment banking analyst.
And, you know, from there, the logical progression was to private equity because it. Build on the deal skills you learned, but you were starting to invest. I actually thought from there that I wanted to become a stock picker and I was going to move to the public markets, tried that my summer of business school.
And I hated it. I guess it was too used in private equity to having access to information and the ability to call up management whenever I wanted and have a conversation about what was going on in the business. You can't really do that with big public companies. You get the 10 K, the 10 Q and maybe 30 minutes in a one on one at a conference, but that's about it.
Yeah. Or you get the IR guy who they're all pretty good at filibustering and just telling you what they want you to know.

[00:02:16] Sean Mooney: I love that background. And in some ways, what a gift from your father to kind of teaching you the elements of value from kind of a child age and having that innate curiosity is probably in your genes.

[00:02:29] Troy Phillips: Maybe, yeah, he had a lot of different careers and I think whether it was, you know, working as a pipe fitter or he had a whole bunch of jobs as a kid. Once he became a financial planner, I thought, I said, Hey, this is a lot easier than breaking your back, you know, laying pipe or whatever. So he wanted to instill that in me.

[00:02:46] Sean Mooney: I love that. I grew up in a family business as well in that kind of environment. So I had to work in the back of manufacturing plants. That definitely was, I think, part of the reason I was given these jobs where they would have like plant level bonuses with whomever like messed with me the most.
Having me pour concrete in like the far back of the plant with like 50 bags I'd have to hand mix in the Texas heat. And then I started studying a lot harder, so I think it worked. But I remember as a kid at one point, like after some of these former experiences, I asked to borrow some money to try to invest in stocks.
Potash Corp of Saskatchewan did very well for me for many years. And then the Russians broke the monopoly and it went to hell, but I also learned the other side of that equation. But then I too kind of started off in investment banking and I think we kind of came up in a similar time. And that was kind of what you're alluding to is that imperfect information and the difficult making decisions.
And then what would also drive me nuts is like the short term rationality of public markets, like, why is it doing this? I know this makes sense.

[00:03:51] Troy Phillips: Oh, yeah. I mean, I started my private equity career right in the heat of the dot com bubble.

[00:03:56] Sean Mooney: Yeah.

[00:03:57] Troy Phillips: And even though I was at a buyout firm, you're looking at dot coms because everyone was afraid of missing out and you're looking at this, this makes no sense.
But there was certainly a mania going on back then, and I actually think that was a great lesson to see early in your career when you don't have much on the line, you're just getting paid a salary and a bonus that, hey, things like this don't last forever, and people got hurt on the other side of it, and you just got to remember that

[00:04:25] Sean Mooney: it's such a good point in those manias.
And I remember to your point the same deal where it was like enterprise value per eyeball. I don't know if you remember that, like, click on a website and you're like, this is nuts.

[00:04:36] Troy Phillips: Yeah.

[00:04:36] Sean Mooney: So I think we've kind of had to follow similar paths towards rationality.

[00:04:40] Troy Phillips: Whenever someone creates new metrics to value a business, it's probably not a good sign.

[00:04:46] Sean Mooney: I think that's a thousand percent right. That makes a ton of sense. And so you found this natural progression and I don't know about you, but I really appreciated that maybe more perfect information, but also a slower and steadier and more fundamentals based approach to kind of figuring things out.

[00:05:02] Troy Phillips: Yeah, exactly.
You got to understand the business, understand what its long term prospects were, had time to do a lot of market work, really get to know the management team and how they think and how they're addressing issues or potential challenges in the future. It just seemed to be a much more logical way to invest.

[00:05:20] Sean Mooney: Yeah, that resonates on many levels before we jump into some of the more meaty portions of our conversation here the other thing I always love to ask is What is one of the things that we would know you better if troy we knew this about you

[00:05:33] Troy Phillips: I think in fact a lot of people find Interesting about me is that when I was in college, the university of Notre Dame, I won the on campus boxing tournament three consecutive years at the 200 pound weight class.
I had never boxed before, but went and watched the fights my freshman year and decided I wanted to try it. And ended up being pretty good at it. It's not because I'm some tough guy. Those fights are one in the training. And if you're disciplined about your training, especially at the heavier weight classes, you'll still be able to throw punches in the third round when the other guy probably can't breathe anymore.
And there's a lot of lessons that I still call upon is like. When you get punched in the nose, how do you respond? If you do get hit, don't get mad at the other person. You should get mad at yourself because you knew how to block that punch. You just didn't do it. Those are all things that probably a little different than most people think about boxing is that it's not necessarily a tough guy sport.
It's more about discipline and thinking about how do you respond when things don't go your way.

[00:06:33] Sean Mooney: That's a great metaphor. I've never heard about it that way or thought about it that way, but what a great kind of training for the industry you're in now, where you got to be methodical, you got to be steady, it's the old Mike Tyson thing, like everyone's got a plan until they get punched in the nose, and then like figuring out a way around it.
To your point, it's about the preparation and the tenacity and working through challenges versus like all gas, no brakes, like throwing punches in a windmill.

[00:06:58] Troy Phillips: Yeah. And when something bad happens in the business, I'm usually more frustrated with myself that I didn't anticipate it. You rarely get surprised by things that you thought about.
It's usually something like, wow, I didn't diligence that. I didn't think that was a risk.

[00:07:10] Sean Mooney: Were you a high school athlete before that, or did you have natural athleticism to kind of make it a good enough approach to jumping into the ring?

[00:07:18] Troy Phillips: Yeah, I was a pretty good high school football player, and so I wasn't afraid of contact.
I was a defensive end and offensive guard, so I was hitting someone every play, so it wasn't anything I was concerned about someone hitting me.

[00:07:30] Sean Mooney: Your tears dried quickly if they did get hit.

[00:07:33] Troy Phillips: Right. And I wasn't shy about hitting someone either. So

[00:07:38] Sean Mooney: that's one of the great things about Notre Dame is yeah, at least for my vision from the outside, there's so many kind of competitive former high school athletes who are also really smart.

[00:07:47] Troy Phillips: Yeah. I mean, I always loved the school. I grew up Catholic, Catholic grade school, Catholic high school. So it seemed natural, but they since shut it down. But when I went there, the intramural football was full pads, full contact. So I still got to play football. Real football is a student there.

[00:08:04] Sean Mooney: Notre Dame is such an amazing institution, and for me, as a Sean Mooney, I grew up in an Irish Catholic kind of family, and like a blue collar upbringing, and that's like the dream of any kid's family.
My mom, my entire life, hoped that I would go to Notre Dame. And so, we're doing college tours my junior year, and I saw at Notre Dame, to this day, the best college football game I've ever seen in my life. Notre Dame versus Penn State. With Lou Holtz, for those of you listening, who've seen the move Rudy, all the scenes where it was snowing were filmed in this game.
And it was this epic deal where it came down to the last two minutes and the quarterback Rick Meyer rallied the team, took them back through it into the end zone, and it was one of the rare years Lou Holtz's team wasn't up for the national championship, just outside of it. So they decided to go for it and not even go to overtime.
They throw it into the end zone. And who was the running back? It wasn't, uh,

[00:08:58] Troy Phillips: it was Reggie Brooks.

[00:08:58] Sean Mooney: Reggie Brooks catches it in the corner, ends up, the stadium goes insane, everyone rushes the field, they tear down the goalposts, and it was like one of the most insane, amazing experiences I've probably ever had in sports in my life.

[00:09:12] Troy Phillips: So, we have a similar experience. That was the very first Notre Dame football game I ever attended.

[00:09:18] Sean Mooney: No way! We were both there.

[00:09:19] Troy Phillips: Yeah, it was my senior year of high school. Our parish priest got his tickets, went up with him, and sat with all the priests during the game, which was kind of fun because they were into it.

[00:09:29] Sean Mooney: They probably had a better source of beer than the other kids, so, you know.

[00:09:34] Troy Phillips: Well, they, a remarkable number of them had flasks on them, which was kind of funny watching the priest take nips during the game.

[00:09:41] Sean Mooney: So I was staying with my cousin in Zahm, the dorm there. Oh, yep. It was a fun and a long night and an early morning when my dad knocked on the door to take, to grab it.
He had a lot of fun with the color green that I was wearing and it wasn't, uh, it wasn't Irish green, maybe it was, it was my version of green. I just didn't have to buy the Jersey. That was all time best football experience I ever had, including growing up in Texas. We'll talk further after the episode on this.
So maybe turning the page here, Troy, one of the things that I really love the opportunity when I get to have conversations with people like you who achieve so much and still so much to go is kind of your perspective on what makes a good business. And so I'm curious as you kind of see the flow of business opportunities and investment opportunities coming in from your vantage, how do you think about breaking this down and saying, you know, yeah, this is a company that I think has real potential.

[00:10:38] Troy Phillips: Yeah. There's obviously a whole battery of work you do around diligence to get under the covers and you make sure you are buying a good business, but I think there's kind of three shortcuts or. Quick items that we look at to think about is it a business worth really spending time on and digging in, you know, our firm only invests in healthcare.
So with that compliance is important in every business, but it's especially important in healthcare compliance with laws, billing practices. Licensing all the things you have to do. It's a pretty good barometer of how good the business is operationally. They have a really strong compliance program, passing audits, they're collecting their money.
That shows that the management team is paying attention to the details because you can't get paid. Medicare is going to find you if you are making mistakes, if you're not doing things the right way. So compliance is in many ways the best barometer of how strong operationally a business is. Second, most of the businesses we invest in are founder owned and managed still, and we are usually the first institutional capital.
And so the management team usually has a breadth of experiences. We don't need everyone in the team, but we do look for certain members of that team to have had bigger company experience. There's nothing scarier than waking up and realizing that your management team is running the biggest business they've ever run every day.
We like them to know what scale looks like, how to scale a business. And again, that doesn't need to be everyone, but we need a few members on the team that have that experience. And then probably the third is looking at their customer base. And in healthcare, that could mean payers as much as referral sources or patients.
But if they're working with UnitedHealthcare, Blue Cross Blue Shield and Aetna, Cigna, or if they're, you know, working with big manufacturers and they're a vendor, uh, as vendors, you feel pretty good. Big companies work with quality organizations. They have a way to assess who they want to work with, and they don't make mistakes that often.
So those are really sort of the shortcuts that when you're looking at a SIP that comes across your desk and you can pretty quickly say, okay, robust compliance program, management team with some big scale experience and logos that you recognize. Those are kind of shortcuts to say, Hey, okay, this goes in the pile.
We're going to spend some time on.

[00:13:02] Sean Mooney: I love that. In some ways, Troy, I think you just gave like a masterclass that kind of cut to the chase, you know, save your money on the NBA, do that too. But it's this whole idea of like, does the company get the details? Do they know the most basic elements of their business and the foundation of what's going to make them successful?
They have a really good team, not only for where they are, but a few steps down the chessboard. As you think about multiple ahead, are they going to know how to go there without doing it for the first time? And then lastly, do they have great customers who are going to say, yeah, this is a good company.
Give those three things. Welcome to the masterclass of business. I think that's a great example for any business builder who is going to be thinking about how they build a company that's built to last and be exceptional or go from good to great. Those are really good notions that I think everyone should think about.

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So maybe as we

[00:14:14] Sean Mooney: kind of build on this, I'm curious, a lot of the name of the game today in private equity is this whole notion of value creation. And I think that's one of the really fun things about the industry and exciting things is this kind of notion of good to great, which is a great book. Thank you, Mr.
Collins. Yep. There's so much more that the private equity firms are doing to kind of support that journey that was probably a little different than when you and I first both came up in PE, like in the early 2000s. And so I'm curious, Troy, what are some of the things that you all are doing to help your companies go along that journey in terms of bringing them support?

[00:14:57] Troy Phillips: You're correct. I mean, it has definitely changed when I started my private equity career and really probably for the first half of it, it was. Buy a good business and let it keep doing what it's doing. Maybe try to give it a little more help to do things more quickly, whether in capital for acquisitions.
But Hey, if you bought a good business, you're going to make a good return today. It's so much more competitive. You have to go in with a very detailed value creation plan. What are you going to do to make this business better? And how quickly can you do it? Each one is different. We customize it as part of the investment process for the business, but it really, we look at it through four primary lenses.
The first and probably the most important going back to our earlier part of the conversation is human capital. How do you think about the team? Where are there gaps? Where are the people hitting the end of the runway? How are you going to supplement that team? Often if it's a founder owned business, how are you going to help with a potential transition?
You know, often those founders are viewing that first private equity deal as the first step towards them transitioning out of the business You know that plan around the human capital is where we probably spend most of our time making sure One, we have a plan, but two, we have alignment with the seller or the management team as to what that plan is going to look like.
We don't want there to be a surprise where we, you know, shortly after closing, say, Hey, we think we need to top grade this position. And if you find out you can't do that because that's the founder's brother in law, the CEO's brother in law. And they're

[00:16:31] Sean Mooney: just had like heart palpitations. Yeah,

[00:16:34] Troy Phillips: right. You know, after human capital, I think the next one that we really lean into is organic growth.
How do you accelerate the organic growth of the business? Nothing can drive value more quickly and everyone's willing to pay for organic growth, whether that's investment in sales and sales team. Is it a change to go to market strategy is an expansion of products or services. How are you going to accelerate that organic growth?
Maybe it's opening more DeNovo locations, but putting in place the resources to make sure that can happen very early in the investment cycle. Because the thing about organic growth is you don't really get paid for it until year two, three, four, as it starts to compound on itself. So doing it in year four of your investment doesn't work.
You got to do it early. After that, we always look at inorganic growth. I think every one of our investments will look at some level of acquisition. It may not be the primary driver of value, but we want to be out there seeing if there are acquisitions that make sense. Some, they want to do a deal a quarter, others, they're going to do maybe one deal or no deals during their ownership period, but they will always be looking.
And then finally, for our firm, it's probably the one that we focus least on, but operational improvements, hardcore ops, reducing costs, being more efficient. Now that we don't want our companies to operate efficiently with an efficient cost structure, but we don't necessarily view that as how we're going to make our money.
We're gonna make the money by growing the business and having the right team in place. And if you have the right team, they're probably gonna run the business pretty efficiently. As far as how do we help the teams, I think our approach is much more, you know, pull versus push. We work closely with the management teams.
We're talking to them on a weekly basis. And if it's working right, we know what their challenges are. We will offer them or have them ask, can you find someone who can help with this? That may be our experience that we've seen this and we can tell them, Hey, this is how other companies have done it. Maybe we introduced them to someone else in the portfolio.
One of the benefits of only investing in health care is we have a lot of similarities across the portfolio where CEOs can talk to one another and get the benefit of that experience they have. We have operating partners and advisors that we can have spend time with the company and then we have numerous consultants and resources that we have tapped in various situations that we can deploy within a firm.
But we rarely, unless the business is struggling, do we impose that on the team? We want the team to embrace it and really say, Hey, we need help here. And how can you help us?

[00:19:11] Sean Mooney: I really appreciate your approach there. And it strikes me on multiple levels. And one of the things I think I love about the private equity industry is that.
Folks like your firm, you use the word and versus or, and then so, so much in life and business, people make these binary choices. We're going to do this or that. And then what I heard is a, you have kind of some common principles, but custom ways to implement them. Everything is not the same. And then B it's, we're going to do multiple things versus just one.
And so you're going to invest in your people and get the right people on the bus and the right seats. You're going to really think thoughtfully about top line growth, but you're also going to do acquisitions, just not one or the other, and then you're going to improve the business. So like every element of the business.
By the time one of your portfolio companies gets through the journey with you, it's like checking all the boxes in terms of just being that kind of conversation we talked earlier, like going from good to great or good or to great, you know, kind of a thing.

[00:20:08] Troy Phillips: Yeah. I mean, our best investments often are checking multiple boxes.
They have strong organic growth, you know, same store growth is strong. They're also able to do acquisitions at a fairly rapid clip. They also are benefiting from scale operationally, and they have a good management team. I mean, when you have businesses that click all those boxes and you have a, I mean, the one thing we didn't talk about, which is, I guess, inherent in the acquisitions is multiple arbitrage.
If you can have strong organic growth, Do acquisitions, have multiple arbitrage, high cash flow, all of those are value creators, probably going to do pretty well, versus I only have one of those and occasionally things happen and that growth engine may break, but if you have nothing else to fall back on, you're going to struggle.

[00:20:56] Sean Mooney: I think that's, once again, right on in terms of the way to approach building a business. You're creating something that not only creates value for upstream beneficiaries and stakeholders that you all serve, but also it creates an economic benefit in the country by delivering something better into more places and creates this more efficient delivery of offerings that are really important.

[00:21:22] Troy Phillips: Yeah. That's probably the one thing about private equity that doesn't get enough press is the value it does create more broadly than it does for the investors. Thanks, Armando. I appreciate you having me. As a healthcare investor, we have a pretty firm rule that every investment has to do at least one of three things.
It has to either provide greater access to care, higher quality of care, or lower cost of care. If it doesn't do one of those three things, it's not for us. So, I know healthcare private equity, there's a lot of noise about it. Generally, though, I think most of our peers even take that approach. We are looking to provide more efficient care at a lower cost and provide greater access.
All those things take capital, given the current environment, and we're able to provide that.

[00:22:06] Sean Mooney: That's another good point that I think is lost on people who view this industry from the outside and don't really understand this is how it works. And so I think it's a point that's really important for people to appreciate and understand, whether it's in one industry or the other, it's this common improvement.
And in some ways you do that because that's what drives outcomes, not only for the end stakeholders, but also for upstream pension firms and investors in private equity firms. So it's this everyone wins kind of approach and you can't necessarily. Have one versus the other. So it's kind of like we talked about earlier.
It's and versus or so I appreciate you making that point. Right? And so maybe as we turn the page here, Troy, I'm curious, what are some of the top value creation opportunities? Maybe that you all are engaging with your portfolio today that maybe others should also be thinking about?

[00:22:54] Troy Phillips: You used to hear a lot of people talk about how today every business is an I.
T. Business. Well, I think there's a lot of truth to that. Certainly I. T. Is important. I think you can also today say every business is a staffing business. As we saw certainly in 22, the war for talent became very real and I think it's only going to continue. Again, I'm going back to what I know, which is healthcare.
If you look at the number of physicians retiring each year, it is dwarfing the number of new physicians coming out of med school. And then you factor in the aging of America, there's a significant physician shortage. There's also a nurse's shortage, physical therapist shortage. I mean, you go down the line, everything requires more people.
And so our board meetings for everyone, our businesses, every meeting now we are talking about human capital and staffing plans, recruiting plans. Retention plans. How are we attracting and retaining our people? And this isn't just the C suite. It is that 15 an hour employee at the front desk at a physical therapist office.
How are we making sure that person stays? And it's not just money. Obviously, wages are important, but it's, are you providing the flexibility? Are you providing the career path? Are you making them feel valued? All those things have to be thoughtful. I think the real challenge we have as the owner of the business and the investor is finding a really good human resources executive.
50, 100, 200 million business is really hard. You know, there's just not that many out there. They're usually working for larger organizations, but someone who can come in, have a very thoughtful plan of how they're going to engage the employees, reduce turnover, attract the best employees. It's probably the thing we are spending the most time on across our portfolio.

[00:24:42] Sean Mooney: You bring up a really, really excellent point. And I was talking with a friend of mine who is a senior level investment banker, who we probably all know, and he was referencing how the private equity firm, you know, we were talking about the difference between hedge funds and private equity firms. Hedge funds find value, private equity firms create value.
And as you look at some of the research we've done, whether it's saying 5, 000 otherwise, we see that the PE industry is a huge job creation engine. And the reason it's a job creation engine is because of this whole mandate. Like we got to grow these businesses. You got to transform them. You got to take them from a caterpillar to a butterfly to be successful.
And that means creating all these jobs. But in the kind of post COVID era, it's really hard. And one of the, I think most exciting kind of metamorphosis of private equity that we've seen from our vantage here, which is just really cool because it's a large swath of private equity using this engine, and we get to kind of statistically significantly see how the PE world changes.
And if we went back to the first quarter of 2018, 17 or 18 percent of the projects were human capital. The first quarter of 2024, close to 50%. And it's recruiters, it's interim executives, it's organizational effectiveness, it's coaching, it's employee engagement studies, it's throughout the whole stack. And some might be saying, Oh, well, that's because they want returns.
Like, no, well, if the motivations are driving an altruistic outcome, that's still really good. And I do think there's an economic benefit to what you all are doing in your point on the C. H. R. O. Also really struck me is because in covid there was no such thing as ever is like an interim C. H. R. O. And then we started getting call after call after call.
And so today we have this like one of one ecosystem of these amazing interim C. H. R. O. S. That in their large part, kind of what you're talking like, they have to almost go in and set the stage before you can even bring that next level up because it's usually, you know, someone who was an office manager who was doing it or your CFO wore like one of 50 hats and that was in theirs or their control or something like that, or your COO had that as their hat.

[00:26:43] Troy Phillips: Certainly in the lower middle market, your head of HR was very much a tactical blocking and tackling benefits, recruiting open positions. There was not a lot of strategy to it. There wasn't, okay, how are we going to be the employer of choice? What do we need to do? What are we hearing from our employees in an engagement survey?

[00:27:03] Sean Mooney: Yeah.

[00:27:04] Troy Phillips: I don't think many of my companies ever did engagement surveys into the last three years. And now everyone's doing it. Yeah. This idea of ENPS or whatever, your employee net promoter score. Everyone's asking it at the board level. Like, what is it? How are we measuring it? It's been a big change post COVID.
Whether it's just the next generation being more open to changing roles, whether it's because the tail end of the baby boomers saw COVID as an opportunity to retire early. It's hard to find people and keep them.

[00:27:30] Sean Mooney: And I think it's one of the best trends in the industry. And it's not just in private equity.
I think it's everywhere where they're just figuring out there's strategic value and value creation related to getting this right. So Troy, I think we've dared to be a little bit introspective here and maybe to bring it full circle, we're going to go introspective once again, which is always a very scary thing for me personally, to think about some of the prior things I've gone through in life.
But I think you're going to have a much easier time at this. So Troy, if you were to dare to go into the Wayback Machine and think about meeting your 22 year old self, what would be one of the pieces of advice that you might share with 22 year old Troy that you wish you knew then?

[00:28:13] Troy Phillips: First, I'd probably say what multiple people said to me, but I didn't believe and I probably still want to believe I was 22, which is everything's going to be okay.
It's going to work out and you're not going to have to worry about things as much as you do. Anyone who achieves at a relatively high level is probably driven by some level of anxiety. But I think someone saying that again would be probably one of the first things I'd say to them, just because even though you're going to ignore it, I think it's still worth saying to young people.
Probably the advice that I didn't hear as much of that I would share with myself back at 22 was learn to be much more strategic in my communication. Maybe it was that boxing mentality or whatever, but I tended to be very direct and I thought, Hey, why waste time by trying to be indirect? Let's just be very direct.
And over time, I think I learned that, Hey, you're dealing with people with feelings, emotions, egos. It's a lot easier to get them to see that they are potentially making the wrong decision on their own versus just flat out telling them, especially if you're young and working with older executives, they don't want to have that 27 year old know it all fresh out of Harvard business school, telling them why they're wrong.
We saw this case study and this is why you don't do that. No, they don't want to hear that. It's more ask the questions, see how they answer and try to lead them to the answer versus, you know, just tell them. And that's just not external. It's also internal private equity. For the most part, you know, there are some big firms now, but even those I'm sure have their dynamics are relatively small partnerships and how you discuss things with your partners.
How do you communicate with them? There's a lot of value to being indirect in your communication, asking questions, raising concerns, but not speaking in absolutes that I didn't really learn until probably, you know, the second half of my thirties, to be honest. So it took me probably way too long, probably 15 years to learn.
I probably should have known a lot sooner, which is running straight into a fight isn't always as good as avoiding the fight.

[00:30:28] Sean Mooney: I think that's such great advice. And it's candidly something I still struggle with. It's one of those things where. I think a lot of people in private equity were pretty direct.
It's time that we're linear, logical, and in general, you know, you want to get things done, they're kind of achievement oriented, so you want to make a good point. So, and it's really hard to kind of have the patience and kind of like your earlier point, I was like, it's going to be okay. Those are things that I too, I think I've made progress on, but as a, an unfully formed adult, I still like constantly try to get better at that.
And I think I still have a long way to go just because it's, you know, the art of humanity is very complex. And I remember one of my mentors at a prior private equity firm would always kind of coach us in the Socratic method. To your point, it's like, ask questions to kind of elicit truth and get people there.
And to your point, I really appreciate that perspective. Like sometimes it's not best to go running head in, give it some time and ask the questions. And then you'll probably get to a better mutual outcome either way, because then it's a conversation and a dialogue versus a monologue.

[00:31:34] Troy Phillips: Yeah, I remember being so frustrated in my late 20s working at another private equity firm.
I would do work with this one partner who never saw a deal he didn't like, and we'd go in front of the senior partner, the managing partner, and He would never just say, this is a bad deal. I knew it was a bad deal. I knew there was no way we're going to do it here to say, well, let's dig into this. Let's dig into that.
And after 2 or 3 weeks, it became obvious that you couldn't do it. He knew this immediately, but rather than just shoot down his younger partner. He allowed him to run with it. And now, unfortunately, I was the one who had to do all the analysis and all the work three weekends, knowing that it was going nowhere, but it was a real art to watch how he managed that, where, you know, there's no way this guy is going to let this deal happen, but he just didn't come out and say it.
He made the team do the work where it became obvious.

[00:32:33] Sean Mooney: And I think that's another great kind of nuanced point where, you know, hopefully then that you give them the opportunity to learn and grow. And then maybe at some point they learned to kind of cut bait and get through that journey, but let's also be honest, there's sometimes downsides to it, particularly as a junior professional, because then you have three weekends of work.
Yep.
Was it, uh, you know, sometimes you've got to go through the pain and suffering for growth. I think these are really, really thoughtful points. And I've actually, uh, taken some notes, not only on this one, but throughout our conversation here, because that's one of the things I love doing most is I get to borrow all these insights from people like you, Troy, who've got good things to say that I haven't figured out yet.
Yeah.

[00:33:18] Troy Phillips: Wow. I appreciate you having me on and thank you to BluWave and Karma School of Business for inviting me. I've enjoyed the conversation and hopefully I did share something of interest to someone.

[00:33:30] Sean Mooney: Yeah, a thousand percent. And so I appreciate you a taking time to, to share your perspectives and insight and wisdom here.
Cause I know you're really busy and I 100 percent have learned things I wish I knew before. So that is an incredibly generous gift. So thanks so much, Troy. It was great speaking with you.

[00:33:45] Troy Phillips: Yeah. Thank you, Sean. I enjoyed it.

[00:33:57] Sean Mooney: That's all we have for today. Special thanks to Troy for joining. If you'd like to learn more about Troy Phillips and BPOC, please see the episode notes for links. Please continue to look for the Karma School of Business Podcast anywhere you find your favorite podcasts. We truly appreciate your support.
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Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.

BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.