TransDigm: Foundations with Nick Howley [50X, EP.1]

**SPEAKER_1** (0:00)
Today, we're dropping a special episode in the Invest Like the Best feed. You will hear the first episode of 50X, a new series from Will Thorndike and the team at Compounding Labs.
Will's book, The Outsiders, is one of the best business and investing books that you'll find. Now, you will hear him continuing his work in the hosting chair as he looks in detail at investments that have appreciated at least 50-fold. First up is TransDigm. Colossus was excited to partner with Will as he sits down with management and investors behind these legendary investments. Make sure to subscribe in your preferred podcast player.

**Will Thorndike** (0:41)
Welcome to 50X. I'm your host, Will Thorndike, author of The Outsiders and a co-founder at Compounding Labs. 50X aims to dissect the anatomy of investments that have appreciated at least 50-fold. We dive into each investment's origins, evolution, and eventual outcome, exploring key themes around long-term value creation, ranging from operations, capital allocation, and culture, to pivotal buy and sell decisions. We track the often circuitous route to exceptional long-term returns and study how that rarest of investment commodities, conviction, gets created, maintained, threatened, and sometimes lost.
To access proprietary research and exclusive materials, please visit 50xpodcast.com. 50X is produced by Compounding Labs in collaboration with Colossus.
Compounding Labs is a partnership of long-term business builders that invests in elite recurring revenue companies in niche markets. We are defined by a uniquely long-term capital base, a multi-decade time horizon, and a highly entrepreneurial ethos. To learn more, please visit compoundinglabs.com.

**SPEAKER_4** (1:45)
All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts and podcast guests may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

**Will Thorndike** (2:00)
Before we jump in, this episode is brought to you by Tegus.
The team at Tegus has built a full company intelligence platform aimed at streamlining the investment research process. In preparation for the 50X series, we actively use Tegus to gain qualitative insights beyond traditional reported data. Today we're speaking with Alex Wolff, an investor at the Investment Group of Santa Barbara, also known as IGSB. Alex is both a user and an investor in Tegus, which makes him a particularly insightful guest in discussing the business. In the first part of our conversation, you will hear about Alex's investing background and the role primary research plays in his investment process. Why don't we start, would you mind just talking a little bit about your current role at IGSB and a little bit about your arc?

**Alex Wolff** (2:48)
Yeah, so I am a partner at the Investment Group of Santa Barbara.
For those of you who don't know us, we are a totally principal investment firm, meaning 100% of the capital belongs to the partners of the firm. We have no outside investors. We never have, and I don't believe we ever will.
And our focus is owning a very small number of the best businesses that we can find in the world with the same approach that anyone would do with their own money, which is find great businesses and ride them for as long as they can. I joined IGSB eight years ago as a partner and really set out to focus on how we could lengthen the duration of assets that we owned and really started focusing more and more on our early stage investing efforts, trying to find businesses early on, but in particular entrepreneurs early on, that we could partner with that were similarly aligned around building value for the very long term. Our focus has really been almost exclusively on B2B software, not because any of us are technologists by trade, but more because when we look around the world, it's a very cheesy and overused term at this point, but we really believe we're still at the early stages of digital transformation. We truly believe in 20 or 30 years, every single business will be a software enabled business. So we believe the tailwinds and the opportunities behind this industry are huge. And obviously that's a really critical part of owning a business for multi-decade periods, is the business actually has to have the market tailwinds and the business model to sustain over those periods. And that's one of the many reasons why we've chosen to focus on B2B SaaS.

**Will Thorndike** (4:32)
What role does primary research play in your investing process?

**Alex Wolff** (4:37)
Yeah, so primary research is for us really the entire place where we find value add. It's worth going back and thinking about how the history of fundamental analysis has changed over the last 50 years.