(Bloomberg) -- Thoma Bravo Managing Partner Orlando Bravo said the private equity firm was looking for an unconventional benefit when it opened an office in Miami: less groupthink.

The Puerto Rican-born billionaire moved to Miami in 2020 after working for more than 25 years in Thoma Bravo’s San Francisco office, and the software-focused buyout firm announced the next year that it was opening an office in the Florida city’s Brickell financial district.

Bravo wanted to promote the kind of independent thinking that becomes less likely when employees all live in the same place, he said on an episode of “Bloomberg Wealth with David Rubenstein.”

“You start basically talking the same way, thinking the same way, using the same terms, using the same phrases,” Bravo said. “And I’m very, very protective of our culture, our next generation, and the way to think differently.” 

It’s hard to match Silicon Valley as a hub of innovation or New York as a financial center, Bravo said. But Miami has the potential to become a “really important center of commerce and industry,” he said. 

The firm hasn’t had trouble finding talent in Miami, Bravo said, noting that its business model means it doesn’t have to hire many “young professionals” each year. 

“We want people that are willing to take a risk, that are willing to bet on this mission 100% and that want to do something a little bit differently,” he said. “So we attract the talent that we actually want.” 

Bravo didn’t head straight to private equity. After growing up in Puerto Rico and graduating from Brown University, he had a stint at Morgan Stanley. He then earned an MBA and a law degree from Stanford University before joining his current firm.

While his early attempts at making deals didn’t pan out, he had more success when the dot-com bubble burst. 

“You could buy software assets, that recurring revenue stream, for nothing,” Bravo said. “It was the opportunity of a lifetime.”

The firm made five times its investment after taking the software company Prophet 21 private, and made big returns from other software deals. The company went all in on the industry.

During his interview with Bloomberg, Bravo also explained how his firm can capitalize on elevated interest rates and called Thoma Bravo’s investment in failed crypto exchange FTX a “huge mistake.”

For more insights from the biggest names in investing, watch “Bloomberg Wealth with David Rubenstein.” Bravo’s interview airs May 7 at 9 p.m. ET. The interview has been condensed and edited for clarity.

People do buyouts to achieve a better rate of return than you can get in the public markets. Is that too difficult to do these days?

Private equity firms, the good ones, definitely beat the public markets. Think about software. The value creation advantage of the ownership model of private equity, where you have one owner, with one management team, with one agenda, with very clear goals and that owner is deeply involved in the success of that business — that creates the profitable growth that investors are actually looking for the in the public markets. 

That value and the way companies are running private equity in our industry, in software, is so superior to the way they’re running the public markets. And that delta is what creates a much higher rate of return.

If interest rates go down as is expected sometime this year, will that help your business or does it make that much difference? 

It doesn’t really make that much difference. 

Interest rates are high because inflation is high. That means that the products you’re selling to your customers, which are productivity enhancing, are worth a lot more. And you can participate in that value through pricing with your customers. When interest rates are high, the add-on acquisitions that your companies can pursue may be cheaper, especially if they’re not that well run, and you capitalize on that opportunity. So it really is a wash.

A famous investment you made, but relatively small for your standards, was in FTX. So how did you do that investment? And what is your general view on crypto?

So our core business, 95% of it is what we’ve been discussing up to this point: the buyout business. We buy the entire company, hopefully in partnership with management. We have continued to do that consistently. We started, a few years ago, a growth equity fund. It’s a small part of our business where we make minority investments in growing companies. 

Overall, my personal view is that blockchain technology and crypto has important use cases and has a place in the software and technology ecosystem. 

Now, the transaction that you mentioned was obviously a huge mistake. 

If you go to a cocktail party and somebody comes up to you and says, “I have $100,000 I’d like to invest,” what do you recommend? 

Sometimes they do, and I give them the most boring answer ever: S&P 500.

Just buy an index? 

Buy the index. You don’t have to worry about the quarterly earnings of a company. Did something change? Did somebody change management? You don’t have to make this your full-time job. Just buy the index, and you’re going to be OK.

What would you say has been the best investment advice you’ve ever received?

I was in a meeting a long time ago, when I was getting started, and there was a young partner that was advocating for a deal where the economics of the business were not that proven. Call it venture-y that way. And Carl Thoma did not like the deal, and he said, “I really don’t like this.” 

And the partner said, “Well, Carl, if you want to make money, you have to take risk.” And he said, “Not that kind.” 

“Not that kind” is the best investment advice, therefore. And what that meant to me is, “Think about how you just minimize risk as much as possible from what you know and from what you can tell in that business, instead of levitating too much and focusing on other things.”

To be somebody who’s successful like you in the buyout world, what would you recommend that somebody do?

There’s one component of our industry that people need to focus on, and it’s not technical, and that’s communication skills. Focus on being a phenomenal communicator. Invest in that. Think about it. We have to convince a company to sell to us. 

That takes years of relationship and effort. Why would somebody sell you their billion-dollar software company growing at 20%? Just because? No way. People hang on to these great assets. And then, how do you get on the same page with the executive team of that company even if they’re existing or new? It requires just amazing communication. 

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