Playing Infinite Games
The Value of True Alignment
Three days after the Oklahoma City Thunder won the NBA Finals, the Utah Jazz selected star Rutgers power forward Ace Bailey with the fifth pick in the 2025 NBA Draft. Bailey was projected to go somewhere in the top three, but prior to the draft, his agent held him out of every pre-draft workout with the only exposure to NBA teams coming from an individual 30-team workout in Chicago. His agent also instructed the Hornets and Jazz, who had the 4th and 5th picks, that Bailey would not report to either team if selected by them. Thankfully, cooler heads prevailed and Bailey eventually reported to Utah for camp and summer league, ending what could have been a disaster for a young player who hasn’t accomplished a thing yet. That is not the way to start an NBA career.
While situations like this are not without precedent, I couldn’t help but notice the stark contrast between Ace Bailey and his agent’s behavior and the selfless OKC team that just won the NBA Finals. Apparently this was lost on Bailey and his representatives.
I tweeted this after OKC won Game 7:
In a great post-game interview, long-time Thunder GM Sam Presti talked about the selflessness of this Thunder team, how much they all support and encourage each other, how little they allow personal accomplishments to get in the way of the broader mission at hand, and how they are genuinely happy for one another’s individual successes. It took Presti 20 years to build the OKC Thunder culture, but what exists today within the walls of OKC is exactly what you aim for when managing a professional sports organization. It starts from ownership at the top, and trickles down to every part of the organization.
It’s so incredibly difficult to craft a winning culture from scratch, because you need complete and total alignment from many different groups, all with varying interests, incentives, goals, motivations and character. My days in basketball revealed how difficult it was to build a championship winning team along with a strong culture. Without complete buy-in from all levels, including players, coaches, staff, agents, trainers, managers, families, you don’t stand a chance.
Omar Cooper, Ace Bailey’s agent, revealed very different motivations than those from the rest of the Utah organization. He is incentivized to maximize his client’s earnings, and was willing to risk alienating himself and his client from the team, ruining the kid’s reputation, messing with Bailey’s perception as a person and many other things by extracting demands before Bailey suits up for one game with the Jazz.
This is just one example, but the competing interests don’t stop there. Team owners have to balance spending money to win now and put a competitive product on the floor, while preserving flexibility to win in the future. GMs have to oversee the process of building for a championship future alongside coaches who always want to win now (and will be judged on today’s record when trying to get their next job). Players want to win, but also put up good statistical numbers so they can maximize their earning power independent of the team’s record, while lower level staff are trying to make an impact and work their way up, agents are seeking to maximize their client’s earnings, and so on and so forth. If you drew an incentive tree for each party involved in building an NBA team, it might have 100 different branches.
Yet the only way to be truly successful, for a long period of time, is to temporarily put individual interests aside for the greater good of the organization. Counterintuitively, by doing so, individual accolades will trickle down appropriately. The Spurs had a three-decade run of dominance by hammering home the idea that no individual was greater than the team. Alongside five NBA Championships, players got paid, coaches got promoted, GMs got recognized and the owner made money.
In the same post-game interview shared above, Sam Presti also talked about a new age of the NBA with a new age of player, who faces ‘all kinds of opportunities and forces telling players to do certain things’. He said this group has ‘been able to resist that’, which is a miracle in and of itself. This is accomplished partly by bringing good people into the organization, with a strict ‘no a**hole’ policy’, similar to what was in place when I worked with the Spurs. Evaluating the character of each individual, and the character of the people around them, and not bending on cultural fit, is a great start to fostering alignment.
But even with the right people, the best cultures involve creating a strong set of values that drive the behavior of the entire organization, selecting, punishing and rewarding for those values, and doing your best to get everyone on the same page. Thinking and acting in the best interest of the team. This is a near impossible task, because it has to be organic. Culture is not something you ‘implement’ but rather is inherently understood by all as a way of being. In addition, if one of the characters involved is out of whack, it can derail the entire system.
And I haven’t even mentioned what Pat Riley calls ‘the disease of more’. Success breeds very different ambition, motivations and desires from people involved. This can be a negative side effect of winning. We’ll see how the Thunder rebound from a championship winning season.
My guess is they will be fine, because they are doing a number of things that can’t be disrupted easily, such as making sacrifices, not looking for individual credit, cheering on their teammates, speaking with one voice and focusing on the bigger picture.
Decades ago, OKC was tasked with building their culture and getting the group aligned around the mission of long-term success. Today, anyone who walks through the facility doors - coaches, players, staff members, trainers - have to be 100% aligned with the culture and the mission. Employees will be filtered for it, players will be selected for it and it will be expected of everyone. No loose ends. Everyone chasing the same goal. That is a luxury only the best teams have, and demonstrates the value of true alignment.
Building a culture that adheres to the above blueprint is a really special thing. It’s also nearly impossible to disrupt as the underlying foundation is infinite. It’s the ultimate moat. You know it if you have it. Everyone else is scrambling to get there.
It’s incredibly hard to find true alignment in both a corporate setting or the investment business. Like our NBA example, businesses, management teams, lenders, investors, and shareholders each have varying degrees of ambition, desires, motivations, incentives and goals. True alignment takes place when the driving forces of an investment are in sync across a shared mindset and the same time frame. This is not the base rate. It’s so easy to enter into disrepair in this business.
Here too, there are so many competing interests. Very often, investment managers, thinking about their own P&L, are not aligned with their investors. The companies they invest in are not aligned with the investment manager or their shareholders. Shareholders are not aligned with the management teams, who, also thinking about their careers, are not aligned with anyone about how to drive value. The company’s themselves are not in alignment with customers. Ten different agendas before you’ve even bought one share.
But there are companies who are doing it right. Who have built or are building incredible cultures, where everyone is on the same page. There are companies who know they work for their customers and their stakeholders. There are companies who prioritize thinking long-term, but also winning now. There are businesses that deserve the longevity they’ve reached because of these factors and individual accolades have trickled down appropriately. And occasionally there are shareholders who desire a long term partnership. Berkshire Hathaway is far and away the best example of what true alignment looks like. FedEx is another. Patek Phillipe yet another.
Fred Smith, the founder of FedEx, who passed away last month, is a business idol of mine. His letters to shareholders are an absolute must read by managers and investors. His 1998 letter to shareholders is one of my favorites and is a master class in what a great culture looks like.
This is my favorite paragraph in the section titled Corporate Culture: The FDX Commitment:
In the past year, our companies have received more than their share of accolades, consistently ranking as one of the best places to work by publications such as Fortune and Working Mother. But I believe the true measure of our people is found in the thousands of stories that play out every day, all around the world – whether it’s a driver who springs into action to save the life of a stranger trapped in a wrecked car, a courier who drives 200 miles out of her way on Christmas Eve to deliver medicine to a sick child, or an employee who decides to walk 15 miles to work, in the middle of the night with snow and ice on the ground, when his regular ride falls through.
Our people are the faces of FDX, and I believe that our company has a very special bond with our employees, our customers, and our shareowners.
Try teaching someone through a corporate training or presentation how to spring to action and go above and beyond when a customer is in need. These are not things FedEx does. It’s who they are. There is no separation between doing the right thing, and what’s best for the business. Employees, customers and shareholders share an agenda. This is a rare and valuable thing, and how you compound at high rates of return for over 40 years.
The founders of Patek Phillipe, a 186 year old business, were thinking about the brand’s 200th anniversary, a date they would never see, in 1839. The brand’s tagline is:
"You never actually own a Patek Philippe. You merely look after it for the next generation."
Quality and long-termism are so built into the culture of Patek that they want the first watch a customer buys to be the watch for their family, for life. Think about how those values influence the everyday decisions made by the business.
For investment managers, there is a way to get as close to true alignment as possible, which starts with the manager (and the partners accepted) and ends with the companies you own.
I launched Greystone with a few questions in mind: how would I invest if this were 100% my capital, and what is the best way to structure the business and the investment strategy to give us a chance of compounding at incredibly high rates for a very long period of time? How do I align myself with my investors and the companies we invest in? How do we develop a foundation of deep mutual trust? How do I find people that are aligned with what I’m trying to accomplish?
I set out to answer these questions first and foremost, and then attempted to attract a capital base. That process is still ongoing, but so far, so good. As you can imagine, this approach is not suitable for many investors, but to date, despite a small asset base, I’ve been able to attract like-minded partners and those willing to tolerate volatility, ignore short term performance, and think long-term. This is and will continue to be an incredible advantage.
The way I’ve done that is through plenty of transparency, clear communication and inculcation surrounding our process and what we are trying to accomplish. There are now 20 quarters of letters on our site that hammer home what we are trying to do.
Most importantly, everything I do is centered around trying to compound capital at the highest rates of return for the longest period of time. I keep business costs extremely low (to encourage fragility and long term thinking as opposed to the imperative to grow AUM quickly), I don’t outsource my thinking, I back excellent operators and managers (most of the time), spend most of my time on investing related activities, and invest 95% of my capital alongside my partners.
The entire ethos of Greystone is to think and act with a long term view in mind. This is not something I’m doing. It’s part of who I am. I won’t be around to witness the 200th anniversary of Greystone, but I have my sights firmly set on celebrating 50 years of operations.
Next, I seek to invest in companies that share our philosophies around long-term value creation. Most importantly, this alignment isn’t forced. It’s an organic shared way of thinking and looking at the world based on common sense principles and a common sense approach. From an investment perspective, there is no greater force for driving strong returns than alignment around goals and a shared belief about what should be accomplished and how to think about the opportunity.
I don’t get to operate or even choose the strategy or way of thinking that a company adopts. I just get to choose whether or not to contribute our capital. But I have a long held belief that companies attract the shareholders (and results) they deserve, by acting in concert with all partners. Long-term investors have to consider the company’s relationship with all it’s stakeholders. At a minimum, understanding the strengths of these relationships is central to mitigating risk of permanent capital loss.
There are ways to try and evaluate alignment in management and companies themselves, starting with communicating how you view the opportunity set as an investor. My favorite thing to tell management team’s during an introduction is that I am not concerned with next quarters results, but rather the 3-5 year outlook, and how they are attacking that opportunity set, while seeing the relief (and sometimes confusion) in their eyes. But I’ve found this helps open up the discussion from one of fundamentals to one of business building and long term strategic thinking.
Other ways to evaluate alignment include filtering for a lack of ego, looking for a long track record of doing the right thing, finding high amounts of equity ownership relative to salary, hearing management admit mistakes, the ability to think independently and a willingness to create long-term value at the expense of short term metrics.
The longer I’m in this business, the more I realize the rarity of this approach. The investment business has changed significantly during the past few decades, as public market capital has become more concentrated into passive funds and large asset managers, shifting the opportunity set and incentive structure of all participants. Institutional capital is rife with short term thinking, misalignment and career risk agendas. The amount of short-termism prevalent in today’s market is astounding.
The current market structure is attempting to turn a craft that requires consistency and patience into events to be won or lost. Many market participants have attempted to gamify the investing of other people’s money, through volatility reduction and a focus on the short term. Most pod shops can forecast a companies quarterly EPS figures down to the cent, and position themselves accordingly. Company ownership changes hands on average every few months vs. nearly a decade in the 1960s.
Some market participants are very good at this game. But it’s at the expense of building the underlying foundations necessary to compound capital at high rates of return for long periods of time.
I prefer infinite games. Building a great culture. Sharing values. Adopting long-term thinking. Fostering alignment with all stakeholders. These are not events to be won or lost every three months. They are mindsets that are impossible to disrupt and open the door for companies and investors to earn outstanding results.
I’ve worked hard to embed these principles into how I manage capital, but also into the kinds of companies we choose to partner with. The most rewarding investments tend to occur when our philosophy aligns closely with how a business operates.
When the incentive tree has just a few strong branches.
Adam Wilk is the Founder and Portfolio Manager of Greystone Capital Management LLC, a small cap focused investment firm.
Adam can be reached at adam@greystonevalue.com