Steven F. Koltes OPC '74 Receives Alumni Award of Merit
The presentation of the Alumni Award of Merit to Steven F. Koltes OPC '74 — and his acceptance speech — were highlights of Alumni Weekend 2014.
The award is given "to a graduate of the William Penn Charter School whose character and outstanding achievement have reflected lasting credit upon this school."
Koltes, co-chairman of CVC Capital Partners, a venture capital firm headquartered in Luxembourg, visited Penn Charter with his wife Corinne and their children, Kalya and Troy.
As the Quakers Dozen say, “I’m a believer.” I can’t get over the Quakers Dozen with women. What a great innovation! I just wish it had happened a little earlier. I was also a Quakers Dozen. They have gotten better over the years, I must say.
This is a great honor. It is a meaningful event for me. My only regret is that my parents could not be here to see this today. My parents were huge fans of this school and, I might add, loyal donors for as long as they could write a check. This is something they could have understood. I can almost imagine my father putting his arm around me right now and saying ‘Wow. Penn Charter. Now I get it!’ Unfortunately, they could not quite make it.
When I think about the last 40 years since leaving Penn Charter in 1974, one word comes to mind, and that word is ‘luck.’ I have been one very lucky guy. I’ve been lucky in love, lucky with my family, lucky with my kids (my wife helped), lucky with where I got to live in the world – some very beautiful places, including the beautiful place we live today, Switzerland – and lucky professionally.
When I thought about luck and how it played out in my life, the one thing that struck me, surprisingly for me as I thought about it – was very small events, apparently unimportant things that sent me off in new directions.
I’ll give you an example. I came to Penn Charter in 1968. I have no idea why I came to Penn Charter, frankly, because I have three siblings, all older than I am, and all went to Germantown Friends. But for some reason I came to Penn Charter. Lucky step number one.
Lucky step number two: I arrived in September 1968, I was 12 years old, I was in seventh grade, and we had to pick a language. I picked French. I have no idea why I picked French, but I took French. I was 12 years old, and at that age you can’t expect a great judgment call on languages. Then I was told that the French class was full. Just filled up, and you have to pick another language. So I picked German. I have no idea why I picked German, but I picked German. And that little event, that one last individual, at the time guaranteed to have been a boy, who took the last French slot, meant that I took German, and having taken German I ended up going to Germany in 11th grade as PC’s exchange student, which turned out to be a very seminal event in my early life. Luck.
Fast forwarding to the early ’80s. I was in New York. I was working for Citicorp as a banker, and my boss was sent to Switzerland. I was happily working in New York. I had no thoughts about returning to Europe, but he called me up a year later and asked if I would like to join him in Switzerland. Now, he was a very unlikely person to be sent to Switzerland. He spoke no languages, always had worked in America. But he was nearing retirement and, just as all U.S. ambassadors that politicians want to do a favor for end up taking the Swiss ambassadorship, this guy was sent over to run the country. Anyway, he invited me over, and I went. Had he not been appointed head of [operations for] the country, I never would gone to Switzerland, and I probably never would have returned to Europe. Again a lucky event, very much out of my control.
Fast forward again a couple of weeks. I arrive in Switzerland. I knew nobody. In fact, it was exactly 31 years ago today that I walked into Citibank in Zurich. Nobody was there. I don’t know why nobody was there. It was either because I was very early, which is unlikely, or very late, which is likely. Finally, at the end of the hall I saw somebody and I went up to her and I asked if she could help me to the office of a particular individual. She said “Yes, of course.” She was very nice and took me upstairs. I chatted with her, talked to her, looked at her and thought “Switzerland is not bad.” That was the first person I met in Switzerland. Five years later, we were married. The very first person I met became my wife. Another little bit of very good fortune.
One last example. 1988. I was working for Citicorp Venture Capital, the predecessor of the company we now have, CVC Capital Partners. We hired two individuals, one a Scot, one a Dutchman to add to myself, an American, and a bunch of Brits (not many – we were about seven in total at the time). It was like a bad joke: the Scotsman, the Dutchman, the American… It really was like a bad joke, because we were diametrically opposed personalities. Nobody could ever have predicted that we would like each other let alone be able to manage a business together. Twenty-seven years from that date we are still running the same business together as co-chairmen. If one of the three of us had not been thrown into that cocktail, I am absolutely certain that we would not have got to where we are today. So again, these very small events that led in surprising directions. But what’s the point of talking about luck? There’s not much we can do about it. We certainly don’t want to advise our kids and grandchildren to go get lucky because they could take that the wrong way. It’s all out of our hands.
But is it really out of our hands? In my business the received wisdom is that good investors are lucky and great investors are very lucky, but both make their own luck. How can someone make his own luck? Well, our business is buying companies, good companies, and trying to make them into better companies. When we are reviewing a project, we look at what we call the “three Ps”: people, price, plan. These are the principles we adhere to. What we mean by that is we want to find the best people in the whole world to run that company, we want to buy it at a price that does not overstress the managers or the company, and we want a plan that is simple and understandable, with milestones and benchmarks so you can see where you are going. If we get those three Ps right, and we let go – step back to see what happens, our experience in over 300 acquisitions over 25 years is that they always do much better than we expected. So in a way that’s how we create luck, good or bad (of course, I am giving you the good example). We create our own luck by setting things up the right way, sticking to our principles and letting the mixture patiently do its thing.
Patience, in my view, is luck’s best friend. It’s a virtue that has been lost on all of us. Let’s face it, starting with me and everybody in this room, we have all lost a little bit of our ability to wait. We live in an era of three-minute attention spans and three-second communications. It is very hard to be patient. But patience is the friend of luck. If you set things up the right way and you let them work their magic, if you stick to your principles, it pays off. But you have to wait.
I’m going to close with an example of patience paying off. It’s taken again from the investment world, from my capitalist hero Warren Buffett. I was saying to my wife once, “If I had not met you, and he had been a lot younger, and he hadn’t lived in Omaha, Nebraska, and he wasn’t quite as unattractive, and he was a woman, I think I would have proposed to him.” But I never got that opportunity, although I have had the opportunity to meet him, and it is quite an extraordinary experience. In any case, in 1964, Warren Buffett set up his company called Berkshire Hathaway. If in 1965 my parents had looked at what he had done over the year, thought it was a pretty good job and invested $10,000 in his company, by 1968, the year I entered Penn Charter, their $10,000 would have been worth $17,000. That is a return of almost 20 percent a year. Pretty good. You could have forgiven my parents if they had thought, “We have another kid going to private school, it costs $2,000 a year, that times six is $12,000. I’ve got $17,000 now when I only had $10,000 three years ago. ‘Good instruction is better than riches’ so we’re going to take it out of Berkshire and put it in the bank to pay for this tuition.” But if instead of doing that, if they had waited patiently, seeing that this guy really knows what he’s doing (all of his companies are mini-cosmoses of what we do, setting things up and letting them run), if they had been as patient as he is, their $10,000 investment today would be worth $70 million. Same $10,000, same 19 percent-a-year return. Just a lot more years.
I would like to thank the board, and Darryl in particular, for this award. I must say, when I got it, I had to explain its importance to my wife, who is Swiss and went to public school and doesn’t really know what these sorts of things are like. It is very meaningful for me, so thank you very much. I’d like to thank Pete (Davis) in particular as president of the Alumni Society. He has done a fantastic job as the head of our little class of ’74, which is a very active class due greatly to his incredible engagement for this school. And I’d like to thank Darryl, Pete, Jack and Perry Canfield, if Perry’s here, for a very remarkable gesture they made last September by arriving unprompted at our mother’s memorial service. These sorts of gestures are what really set this school apart and give it the spirit that it has. It’s these kinds of things that make us all, everybody in this room, a little bit luckier than average. Thank you.