Gaurav Kapadia - Everything Compounds

**Patrick O'Shaughnessy** (0:00)
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**SPEAKER_2** (2:10)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
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**Patrick O'Shaughnessy** (2:33)
My 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 a 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. All right, so Gaurav, we're gonna start with a matrix that I've been thinking a lot about since you sent it to me first. It's a cultural touchstone 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. And 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 touchstone for what you're building here at XN?

**Gaurav Kapadia** (3:40)
I think you're right. We strive to be in the upper right quadrant of kindness and rigor. I'll just take a step back, which is like you, I'm a student of so many investment organizations.
And one of the things that I found in the best places that stand the test of time is that they know what their culture is and it's all self-reinforcing. Kind of even goes back to our name, which is XN, which is, if you see our logo, X to the Nth power, which is everything compounds. That goes with culture too, but you also have to have a rubric to communicate what that culture means and a touchstone for people. At our first offsite, after we decided to raise outside capital, we said, like, how do we define who we are? How do we explain to internally and externally who we want to be? And there's so many micro examples. There's, I think we want to be the most ethical. We want to be the best partners. We want to be the most analytical, but how do you communicate that succinctly? And one of the things I found is exactly what you said. A lot of the most rigorous investment organizations have a reputation of being assholes for being unkind.