Invest Like the Best with Patrick O'Shaughnessy

Alex Behring and Daniel Schwartz - Inside 3G Capital - [Invest Like the Best, EP.458]

February 10, 2026

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  • 3G Capital's distinctive model centers on making only one investment per fund, driven by the belief that truly great, actionable businesses are rare and require deep, focused operator attention. 
  • A great business, in 3G's view, must own the relationship with its end customers to avoid disintermediation, a lesson reinforced by observing the rise of private label brands in CPG. 
  • 3G prioritizes attracting and empowering top talent early by offering founder-like economics and ownership, fostering a culture of meritocracy where execution speed and alignment of incentives are paramount. 
  • The success of franchise models like Burger King stems from owning an iconic brand that attracts global entrepreneurs to invest their capital and labor to grow the business, creating a highly free cash flow generative, royalty-based model. 
  • The Kraft Heinz experience taught 3G Capital the critical importance of diligently underwriting business quality, especially avoiding significant customer concentration risk with large retailers, which historical financials often fail to reveal. 
  • While zero-based budgeting is a valuable tool for understanding and improving efficiency, the bulk of 3G Capital's investment success, particularly at RBI, has come from disciplined focus on business growth and securing long-term, owner-operator partnerships. 

Segments

Origin of One Investment Model
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(00:04:03)
  • Key Takeaway: The ‘one investment per fund’ model originated from the founders’ Brazilian roots and the realization that truly great businesses are rare and often not actionable.
  • Summary: The premise was established that great businesses are scarce, and since 3G commits significant personal capital and time, they must wait for the right single opportunity. This approach dictates a patient strategy, as finding one great business is already difficult, let alone ten. The pressure of concentrating capital drives rigorous analysis of potential downside scenarios.
Evolution of Great Business Criteria
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(00:08:21)
  • Key Takeaway: The definition of a great business has evolved to heavily favor companies that directly own the relationship with their end customers to mitigate disruption risk.
  • Summary: Technological change has increased the risk of disruption, requiring a more thorough analysis of this threat during due diligence. Businesses like CPG manufacturers are vulnerable when large retailers (like Costco with Kirkland) own the customer relationship. Conversely, restaurants (Burger King, Tim Hortons) and specialized manufacturers (Hunter Douglas) succeed because the brand owns the direct customer relationship.
3G Capital Structure Distinctions
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(00:11:23)
  • Key Takeaway: 3G’s structure is distinguished by a high proportion of house capital, an LP base skewed toward high-net-worth individuals, and mechanisms allowing for long-term investment horizons.
  • Summary: The firm’s partners are the largest investors in every deal, aligning incentives deeply with their limited partners. The capital base differs from traditional PE by including more high-net-worth families. Furthermore, partners often transition between operating and investing roles, enabling them to deploy experienced operators into portfolio companies.
Hunter Douglas Deal Genesis
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(00:13:36)
  • Key Takeaway: The Hunter Douglas acquisition resulted from a 15-year relationship-building process with the founding family, culminating when succession planning created an opening.
  • Summary: Alex Behring and Daniel Schwartz cultivated a long-term relationship with the family, including the son, David, who later became a 3G partner in the deal. David’s successful evolution of the business through transformational acquisitions increased 3G’s appreciation for the company. The final transaction was initiated when the founder sought a solution for family succession while ensuring a partner remained involved.
Hunter Douglas Business Appeal
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(00:17:04)
  • Key Takeaway: Hunter Douglas was appealing due to its dominant market position, infrequent purchase cycle that favors established brands, and a combination of scaled manufacturing and distribution.
  • Summary: The business is well-positioned with no concentrated customers or suppliers, operating in a large, stable market where products are custom-made, minimizing inventory risk. Its longevity, coupled with tailwinds like energy efficiency awareness, made it highly durable. Gaining distribution is difficult in this sector due to the necessary service and installation components.
Reasons for Model Rarity
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(00:21:34)
  • Key Takeaway: Firms like 3G are rare because the industry exerts pressure to diversify and raise larger funds, whereas 3G prioritizes sticking to what works well for their culture and capital.
  • Summary: There is a constant pull toward broader diversification, which 3G resists by focusing deeply on single opportunities. Staying relatively small allows 3G to offer founder-like economics and faster paths to partnership for top investment talent. Successful firms must find and stick to the model that works for their specific culture and people.
Lessons from Brazilian Railroad CEO
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(00:23:58)
  • Key Takeaway: Operating as a CEO taught the value of ‘managing by walking around’ to engage frontline employees and address operational hygiene issues that drive significant value creation.
  • Summary: The railroad’s primary value driver was improving service quality by focusing on asset utilization and safety, which required direct engagement with engineers. Simple, inexpensive fixes—like improving locomotive seating and crew quarters—drove significant goodwill and performance improvements. Incentivizing engineers through performance ranking led to substantial reductions in key costs like fuel.
Operational Playbooks and Ownership
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(00:26:55)
  • Key Takeaway: Effective operational improvement relies on aligning leadership as owners, implementing zero-based budgeting for cost visibility, and centralizing the ‘what’ while decentralizing the ‘how’.
  • Summary: Leaders must act as shareholders, viewing every expense as their own, which enables buy-in for cost optimization efforts like zero-based budgeting. Centralizing the ‘what’ (the goal) ensures alignment, while decentralizing the ‘how’ (the execution) pushes decision-making close to the problems, empowering good people who thrive on solving challenges.
Burger King CEO Stressful Period
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(00:31:56)
  • Key Takeaway: The most stressful period for Daniel Schwartz as CEO was navigating the negative press surrounding the proposed Tim Hortons merger, which threatened the deal’s viability.
  • Summary: The Bloomberg article, titled ‘Burger King is Run by Children,’ published during final merger negotiations with Tim Hortons, created significant doubt for the Canadian board. Schwartz had to work hard to counter factual inaccuracies and reassure the Tim Hortons stakeholders about the future brand independence under 3G’s ownership. The deal ultimately succeeded by emphasizing that the core Canadian owners/franchisees would thrive.
Learning from Warren Buffett
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(00:40:39)
  • Key Takeaway: Key lessons learned from Warren Buffett include his uncanny ability to quickly assess business quality and the importance of building long-term, respectful relationships even without immediate business needs.
  • Summary: Buffett possesses an encyclopedic knowledge that allows for rapid identification of good businesses, a trait 3G emulates by following their stable of companies over long periods. Buffett’s discipline regarding business quality—never compromising—is a core tenet 3G strives to adopt. Building relationships without immediate transactional needs is highly valued.
Talent Development and Early Bets
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(00:42:01)
  • Key Takeaway: 3G maximizes the success of young leaders by surrounding them with experienced mentors and offering responsibility and economics earlier than traditional firms.
  • Summary: The culture attracts talent by offering a high chance of an early bet on their potential, which is supported by experienced partners mentoring the promoted individual. For example, Daniel Schwartz was supported by Alex Behring as Executive Chairman while leading Burger King. This environment normalizes giving high responsibility to younger, highly capable individuals like Josh Cobza, who became CFO at 26.
Meritocracy in Compensation
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(00:52:17)
  • Key Takeaway: A true meritocracy requires allocating outsized equity awards based on perceived contribution potential, rather than attempting to be ‘fair’ through equal distribution.
  • Summary: Attempting to make everyone happy with compensation is impossible; the focus should be on meritocratic fairness, which often means unequal outcomes. Leaders must reserve the right to make exceptions and give superstars outsized awards, even if it contradicts preset pay curves. This approach attracts top performers who seek rewards commensurate with their potential impact.
Finding Young Superstar Talent
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(00:54:33)
  • Key Takeaway: The most effective way to find young talent is through word-of-mouth referrals and proactively cold-emailing individuals with impressive resumes who demonstrate extreme passion and ambition.
  • Summary: Identifying candidates who achieved significant milestones early for their age indicates hard work and ambition, which are strong predictors of future success. The key differentiator for top performers is that they ‘really, really, really wanted it.’ 3G often hired people on the spot after initial contact if they showed project-seeking passion rather than just job-seeking.
Brand Bigger Than Business Insight
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(00:57:17)
  • Key Takeaway: Burger King represented a unique opportunity where the global brand recognition far exceeded the current operational profitability of the business.
  • Summary: Daniel Schwartz had a lifelong affinity for the brand, which was well-known globally but underrepresented operationally in places like Brazil. The initial valuation seemed wrong, as the brand’s perceived worth was vastly higher than the equity required to purchase it. The opportunity lay in simplifying operations, fixing franchisee relations, and aggressively expanding the brand’s physical footprint globally.
Burger King Franchise Model Beauty
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(01:02:33)
  • Key Takeaway: The franchise model’s strength lies in leveraging global entrepreneurs to finance growth and maintain the brand for the brand owner.
  • Summary: The Burger King acquisition was initially met with consensus that 3G Capital overpaid, despite the sellers having already made a significant return. A strong franchise model allows the brand owner to benefit from entrepreneurs worldwide investing their capital and effort to grow the business and finance brand maintenance. This structure is a highly free cash flow generative, royalty-based model centered around iconic brands.
Scaling Burger King in France
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(01:04:32)
  • Key Takeaway: Successful international expansion relied on finding a local partner with demonstrated excellence in site selection and management.
  • Summary: The expansion in France, which grew to a 2 billion Euro plus business, was executed through a master franchise joint venture model. This approach favored well-capitalized local entrepreneurs, exemplified by the partnership with Olivier Bertrand, who had a proven record in the French restaurant sector. The initial success began with a single, highly popular airport location in the south of France.
Kraft Heinz Lessons Learned
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(01:06:30)
  • Key Takeaway: Failure to underwrite the quality of commoditized brands exposed Kraft Heinz to risks from private label competition, necessitating deeper diligence on business quality.
  • Summary: While the Heinz portion of the investment performed decently, the Craft side underperformed due to significant portions being commoditized and vulnerable to private label encroachment. This experience reinforced the need for more diligent evaluation of underlying business quality beyond past financials, leading to better underwriting for subsequent deals like Hunter Douglas and Skechers. A key lesson was avoiding large customer concentration risk with major retailers.
Skechers Growth and Distribution
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(01:09:07)
  • Key Takeaway: Skechers’ success is anchored by consistent double-digit CAGER growth, high customer loyalty, and a distribution model heavily reliant on its own stores and sites.
  • Summary: Skechers is the third-largest sneaker company globally, surprising many, with two-thirds of its business already outside the U.S. The growth is driven by excellent product development providing accessible value and a distribution advantage, as the bulk of sales come through its own 5,000-plus stores and websites, reducing reliance on big-box retailers. The management team, having founded the business over 30 years ago, has consistently delivered on aggressive growth targets.
Skechers Acquisition Dynamics
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(01:14:10)
  • Key Takeaway: The Skechers deal prioritized partnering with experienced owner-operators focused on continued growth over immediate cost optimization.
  • Summary: The sellers were attracted to 3G Capital’s long-term, owner-operator nature, contrasting with short-term private equity flips. For Skechers, the primary focus is maintaining and accelerating its existing growth trajectory, with efficiency improvements being secondary and never at the expense of growth. This contrasts with the Burger King acquisition, where 3G had to actively create the growth trajectory.
Platform Potential in Acquisitions
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(01:16:10)
  • Key Takeaway: Platform potential, like Burger King becoming RBI, is not a prerequisite for investment; the focus remains on finding forever businesses.
  • Summary: While Hunter Douglas engages in industry consolidation, Skechers is largely a mono-brand footwear company, making it less of an immediate platform for multiple acquisitions. The initial investment memo for Burger King did not explicitly plan for it to become a platform company that yielded massive returns. The core philosophy requires deep work to ensure the acquired business has the potential to be owned forever.
Zero-Based Budgeting Perspective
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(01:18:00)
  • Key Takeaway: Zero-based budgeting is a useful intellectual exercise for understanding and improving efficiency, but growth is the primary driver of 3G’s success, not cost-cutting alone.
  • Summary: Zero-based budgeting forces a ground-up understanding of the business, freeing up margin for investment and growth. However, the importance assigned to this process in 3G’s overall success is exaggerated, as the bulk of returns, such as at RBI, came from growing the restaurant count. Applying an ownership mentality means linking compensation to both cost adherence (zero-based budgeting) and revenue/growth goals.
Current Capital Markets View
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(01:21:13)
  • Key Takeaway: The current environment is characterized by more stretched valuations and abundant capital, making it harder to buy great businesses at reasonable prices than in the past.
  • Summary: 3G Capital does not claim success through macro prediction, but notes that capital remains abundant, leading to more expensive asset prices currently. They emphasize that finding a great business at a fair price has always been difficult, contrary to what younger partners sometimes perceive when looking back at past deals. Discipline on business quality and price remains paramount regardless of the macro climate.
Technology’s Role in Investments
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(01:23:26)
  • Key Takeaway: 3G prefers businesses that can be improved by technology (e.g., e-commerce, AI integration) rather than those that risk being completely disrupted by new technology.
  • Summary: The firm’s recent successful investments have a large physical component, making them harder to disrupt than pure ‘bits’ businesses. Technology like AI voice drive-throughs or better e-commerce experiences can enhance their existing restaurant and footwear businesses. They favor models where technology acts as an improvement lever, ensuring the core product—sneakers or burgers—remains essential.
Misconceptions About 3G Capital
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(01:25:27)
  • Key Takeaway: Outsiders often overestimate the focus on cost-cutting and underestimate the firm’s primary dedication to evaluating business quality and growth potential.
  • Summary: A significant portion of investment discussions is dedicated to determining if a business is truly good and assessing its growth potential, with cost opportunities being secondary. The firm is surprisingly lean relative to the global footprint of its holdings, and there is a high degree of groundedness and humility among partners, despite their success. They actively work to communicate the truth that growth focus outweighs cost-cutting narratives.
Future Vision and Long-Term Ownership
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(01:27:53)
  • Key Takeaway: 3G aims to be known as a great long-term home for founder-led and family-controlled businesses because long-term ownership decisions compound positively over decades.
  • Summary: The recent transactions reflect a desire to be viewed as a suitable home for iconic, founder-led family businesses, similar to the Buffet model. Businesses built slowly over time by owners who prioritize the long term make different, better decisions regarding talent development and initial investment that pay off over decades. These long-term owners deeply care about the business as part of their persona and pride.
Motivation and Kindest Acts
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(01:32:49)
  • Key Takeaway: Motivation stems from ensuring the firm’s long life and witnessing the growth of younger partners, while the kindest acts involved early, evidence-free bets on their potential.
  • Summary: The speakers remain motivated by building a firm with a long life and seeing the next generation of partners take responsibility and succeed. The kindest thing done for both was being given significant operational leadership roles (like running a railroad) at a young age before they had proven success, which provided the learning necessary for their later achievements.