Former Makena Capital Management CEO David C. Burke, SEP ’19, says some of the lessons that served him best as a high-flying investment manager came from his days as a whitewater rafting guide for the Sierra Club and as a ski lift operator in Aspen.
“My clients were people who entrusted their life to me in a boat for three days,” he says. “There’s a service component where you have to be respectful and humble and do the schlep work without complaining, and deliver a great experience, because the people who get in those boats or ski in Aspen have very high expectations.”
It’s important to remember those lessons, he says: “When you’re 40 and have a fancy job, don’t forget where you came from.”
These days, Burke is an entrepreneur, investor, educator, and philanthropist. The cofounder of Makena, with $20 billion in assets under management, he served as the company’s CEO from 2013 until 2019. Prior to forming Makena in 2005, he was a managing director of the Stanford Management Company, overseeing Stanford University’s investments in private equity and venture capital.
Burke, a lifelong learner, says he came to the Stanford Executive Program “to take a step back from the day-to-day of my work — to learn, reflect, and build new relationships,” and left it with an idea for a new business called Selby Lane LLC, attracting significant investment from two established private equity firms.
Your resume reads like a guy who’s always on the move. What’s the story on that?
My dad was in the military for 28 years. By the time I was 10, I’d lived in eight different places. But my dad had back-to-back postings in the D.C. area, and I went to middle and high school in D.C. Then I spent eight out the next ten years at the University of Virginia. If people ask where I’m from, I usually say Virginia, even though I’ve been in California for close to 20 years.
How did that upbringing translate into your professional life?
I dabbled in a bunch of different things, from ski bumming and lifeguarding to my first “real” job in strategy consulting, graduate degrees, two low-budget trips around the world, a few different jobs in business, and some experiments with the law. A lot of my life for a few decades was crossing some things out, trying to find my way. I’d just get antsy if I wasn’t doing something newish every few years, and I wouldn’t settle for things that weren’t mostly or entirely right. Maybe it was my military family upbringing.
Tell us about this new company you’ve launched that was conceived at SEP.
One of the things we did at SEP was a design-thinking boot camp. In order to be truly innovative, you have to think about your customer’s problem that you want to solve. Part of the class is that you had to come up with a problem that’s an intractable issue in your industry. As I was doing this, I thought I had a good idea. And when I tested it with a few private equity firms they said, “If you want to start this business, we’ve got money for you. Do it with us.”
The suspense is killing us. What was the problem?
If you think about investment firms of all types, they are businesses themselves. Typically, they’re started and owned by a small number of founders, and the fundamental metrics of successful investment firms are often spectacular. But they can be capital-constrained for growth initiatives, they tend not to incur debt, and there are few sources of good advice for managing and growing (typically “ask around” and “figure it out yourself”). Also, there are few exit options for the owners other than letting those businesses wind down over time, or selling them for a low price to a next generation that is often much younger. But if you look at the numbers and what the business should be worth, they’re worth a lot.
So there’s a gulf between actual value and what they can sell them for?
Yes, and as a result, the people who start these things tend to drag their heels on a transition plan, work less over time, and eventually stay too long, and it can create tension among generations of colleagues. And because of this inefficiency, things don’t happen optimally and everybody’s dissatisfied. The founders get less than the value they’ve created, and the younger people get it — but years or even decades after they should. My idea was to create a company with permanent capital and the expertise to help investment firms manage themselves better, provide capital and thoughtful ideas to grow intelligently over time, put in place a more efficient and easily accessed mechanism to provide liquidity to outside and inside owners over time, dislodge the transition logjam, and get everybody what they want much more quickly.
The idea is to take a passive, minority ownership stake in select small- to medium-sized investment partnerships which need growth and transition capital and management advice. This will allow founders to think strategically about the evolution and growth of their firms, access capital for their plans, and transition ownership for themselves and others over time. It allows them to think more clearly about how long they want to work and hand the reins off to other generations if they wish to do that. And it allows the next generations to jump into leadership seats and get more ownership in their businesses. It also allows the third generation, maybe in their twenties, to have a runway ahead of them showing how all this might unfold.
Were there specific circumstances at SEP that enabled that idea to unfold as it did?
Stanford is always about thinking big. We are there with 225 other people aged 40 to 60 who also are in that mode. And then you bring 30 of the best faculty from the best business school in the world and throw everyone into that pot for six weeks? It’s an invigorating experience.
You seem particularly proud of your role underwriting the course at the University of Virginia that takes students to emerging markets abroad.
I’m a big believer in giving back and paying forward, and that learning should be a lifelong ambition, not something that ends when you get your undergrad or graduate degree. Five or six years ago, I started hearing about programs both at Stanford and Virginia that didn’t exist when I was in school, these interterms offering two-week, deep-dive classes between traditional semesters and quarters. I got intrigued by that notion and thought I would give it a try.
Something very different than book-learning and lectures.
If I think about what I have learned as an entrepreneur and investor for 20 or 30 years, one under-appreciated skill is on-the-fly, engaged interactions in a one-to-one or a small-group context. That’s the stuff these kids can use for their entire careers, regardless of their professional path. And understanding other people and cultures through engaged travel has been transformative to me. So in 2018, I decided to take 12 Virginia business school undergrads around the world and bring them to emerging markets, four or five days at each. I did the same with UVA law school students in 2019. The idea was to bring them to meet real people doing incredible things. I wanted to pick people who hadn’t traveled at all, where the experience might ignite a venture-capital-like spark.
What sort of people did they meet with?
In 2018, we met the Financial Times bureau chief in Hong Kong. In South Africa, we met Nicky Oppenheimer, who ran DeBeers diamonds for several decades and is now engaged in one of the continent’s largest sustainable wildlife management endeavors. In the UAE, we met former Jordanian deputy heads of state, a peace negotiator, a foreign minister, and social entrepreneurs. It was a little like throwing spaghetti on the wall to see what would stick. I didn’t know exactly which experience might spark a particular student, but sure enough, every one of them was transformed by what they saw. Several changed what they wanted to pursue as a career or in graduate studies, and several got actual first jobs from people we met. It was one of the most rewarding and fun things I have ever done. Over two years later, not a week goes by without some interaction with one of those 12 students, advice on careers and grad school, etc. And I’ve learned a great deal from them as well.
And you’re considering something similar at Stanford?
Yes, with the Knight-Hennessy Scholars Program, which offers a domestic travel course and an international travel course. Working with John Hennessy and Jeff Wachtel, we’ve spec’ed out a travel course titled “Private Conversations with World Leaders,” in which we will have private, off-the-record “fireside chats” with a dozen or so current and former heads of state. Unfortunately, the global pandemic has put this on hold.
One of the things that comes up when those students talk about the experience is your humility. How has that quality served you well in business?
The investment world has plenty of arrogance and “what’s in it for me” personalities. I’ve always been intrigued by the mix of traits that make elite investors the best at what they do. The ones I truly admire are the relatively small subset that are genuinely humble people. Life has a funny way of eventually humbling us all.
Anybody you know in the investment world who fits that description?
Doug Leone comes to mind. He is the current managing partner at Sequoia Capital, probably the best venture firm in history. Doug was born in Italy, grew up in New York, and despite his extraordinary success, he’s never forgotten where he came from. Doug said to me once, “Every day I wake up thinking today is the day I’m gonna get fired.” And he means it. Those humble roots make him scrappy even 40 years later.
What did you enjoy most about that CEO position at Makena?
The underlying investments and having a front row seat with those making them around the world, and the great friendships developed with those managers and our clients. We managed a $20 billion global portfolio, invested across every asset class. Part of the job was staying in touch directly with some of the great private equity investors in China and Japan and India and Europe, or with hedge fund managers and real estate managers there. I would meet with the senior person and hear their view of the world.
And the most stressful parts?
I was getting less time at home, at important stages in the lives of our teenage kids. I was traveling, mostly overseas, and I missed a lot of things with them. I had less of a balance in life, and you don’t get those years back.
How do you relieve stress?
I bike, run, and swim, or do gym stuff. It keeps me fit, and keeps my weight and blood pressure in check. And I’m a news junkie, so I read the papers and books, usually nonfiction, including books on tape. I am currently appreciating my Irish roots, so right now I’m listening to Frank McCourt’s Angela’s Ashes. I dropped my car off to get fixed this morning and biked about an hour home, so I listened to a few chapters in McCourt’s Irish brogue.
Any particular professors, books, or experiences at SEP that have become an important part of how you do business?
There was a professor who taught a course on happiness, Frederic Luskin. He lives in Santa Cruz and commutes over. He looks like he came out of a hippie commune in 1972 or a shaman out of the foothills of the Himalayas. He came in and sat in the chair and he said, “I want everyone to take a deep breath.” And he got all these people who were 40 or 50 years old and who had run companies and owned things to just look outside. He said, “If you’re here, you’re gonna be OK. And you are OK.” It was such a great grounding, and out of all the classes we had, he got the only standing ovation each of the three sessions we had him — a protracted standing ovation. It was great stuff.