Transcript
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Alongside Artos, you own a piece of the Los
Angeles Dodgers, the Golden State Warriors, and
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Liverpool among others.
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Why are you investing into sports franchises?
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If you want a live event that's sports, the
only way to do that currently is through
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professional sports.
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That is a massive sea change, and it means that
those who have the content are able to set
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effectively the rates that they want from an
advertising perspective.
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When you own a NFL team, a baseball team, a
basketball team, a hockey team, you own your 1
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30th or 1 32nd of the entire league.
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And in the case of the NFL, just the
distribution from the league itself is over
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$400,000,000 a year.
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Just because you own 1 32nd, you could lose
every single game.
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But if you own 1 32nd, you're gonna get that
$400,000,000 check.
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Christopher, I've been excited to chat.
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Welcome to podcast.
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Thank you for having me.
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I really appreciate it.
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Thank you for jumping on.
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Christopher, you own a piece of the Los Angeles
Dodgers, Golden State Warriors, and Liverpool,
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among others, alongside Arctos.
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Why are you investing into sports franchises?
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You know, it's funny because everybody asks me
why we're doing sports, and they assume it's
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because it's cool and it's fun and it's really
neat to talk about.
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And it is cool and it is fun and it is really
neat to talk about, but that's not actually why
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we're involved in sports.
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Candidly, I didn't realize that we had a team
in the world series and the dodgers until
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literally somebody told me that we did because
I don't follow sports that much.
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I'm a take one step back to go 2 steps forward.
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So we're a very, very thematic investment firm.
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That's the way we're wired.
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That's the way we've always been.
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And so the theme that we're focused on in this
situation is the change of consumer behavior,
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specifically cord cutting.
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And the moving from cable and broadcast to
streaming services has created a huge problem
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for advertisers because of the fact that they
can't reach their audience.
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Because most people aren't gonna watch a
commercial unless they just don't have a
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choice, and that's almost only with a live
event.
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So in 2005, as an example, 13 of the top 100
live events were sports.
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Last year, it was 97 of the top 100 events for
live sports.
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Live you know, we're we're sporting events.
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That is a massive sea change, and it means that
those who have the content are able to set
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effectively the rates that they want from an
advertising perspective.
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That feeds into the business model.
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Well, if you want a live event that's sports,
the only way to do that currently is through
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professional sports.
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And so that's why we're involved in
professional sports.
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It is an irrefutable trend.
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It's an irrefutable tailwind, and we love what
is happening in the overall, you know, theme
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that we're involved in.
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How did you get involved in all these sports
teams, and how do these opportunities present
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themselves?
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So we have some great partners, and we we're
very open to partnering with everybody who's
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doing something in sports.
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It's pretty much not a week that goes by right
now that we do not hear about something.
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You know, it's pretty logical.
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We allocate very large amounts of capital.
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People want our capital.
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Therefore, they show us what we're interested
in.
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We have told the world this is our one of our
major themes, and so therefore, they wanna, you
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know, help us invest in that theme, whether it
be a transaction that they're working on
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privately or they have a fund that obviously is
investing in that particular sector.
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They obviously are going to bring it to us.
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And that's how we really got involved because
we saw the trend of cord cutting.
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And whenever we see a theme, we go really deep
into our knowledge and understanding of all the
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key players in that particular theme.
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Then we try to determine, best we can, is
what's the best risk reward way to take
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advantage of that?
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And that ultimately led us, in this case,
sports.
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We kinda put the word out and then, you know,
Arctos was the first group that was involved in
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being able to get permission to own
professional sports teams in multiple leagues
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as a private equity firm.
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That happened with baseball, then happened with
hockey, it happened with basketball, etcetera.
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And then most recently, obviously, the NFL has
has permissioned a few firms to be able to
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participate in the NFL in a very limited way,
and we're still working on the rules.
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We don't know exactly what those are going to
be yet, but they're taking shape very quickly.
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And so pretty much all of the major sports
franchises now are accessible to private equity
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in the right situation without conflicts,
etcetera, and we're just really excited about
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being able to participate in all of the above.
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A lot of critics would say that owning sports
franchises relies on the greater fools theory
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that somebody will pay more money for it.
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How do you underwrite a sports franchise?
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You know, it's it's I would agree with that
statement 20 years ago.
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I would probably even agree with that statement
10 years ago.
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And I was the greatest skeptic by far.
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Yeah.
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Everybody that we've invested with in sports
will tell you the same thing.
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Christopher was the greatest skeptic that they
had to deal with.
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It took 18 months from start of our diligence
to deciding that we were going to get involved
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because of that skepticism.
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I always thought it was just a trophy asset, no
pun intended, but that just people wanted to
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own it because it was something they could brag
about.
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And for a long time, that was kind of true.
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What has changed is the business models of
these businesses where they have raving fans,
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otherwise known as fanatics fans, that are
generational.
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Had a great conversation actually with Sam from
Fenway Sports Group, that is, you know, the
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Boston Red Sox, etcetera.
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One of the things when they're deciding what
they're going to invest in, they literally ask
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the owners of a stadium, how many people want
to have their ashes sprinkled on your stadium?
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That is a raving fan.
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That is a fanatic.
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That is multigenerational.
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So that is why it made sense to understand it
because of cord cutting, but it made more sense
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because the durability and the consistency of
the revenue models.
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This is what really got me across the finish
line in especially in North America.
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When you own a NFL team, a baseball team, a
basketball team, a hockey team, you own your 1
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30th or 1 32nd of the entire league.
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And in the case of the NFL, this is public
knowledge that literally just the distribution
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from the league itself is over $400,000,000 a
year.
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Just because you own 1 32nd, you could lose
every single game.
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But if you own 1 32nd, you're gonna get that
$400,000,000 check.
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That's a nice head start.
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So the underwriting question that you ask is
most of these businesses are underwritten like
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any other.
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What is their growth rate?
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What is their durability?
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The great thing about these businesses in North
America is that it is a legal monopoly.
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So you can really know the durability of the
revenues are going to come from the league
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itself.
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They're going to come from the sponsorships,
and then they're also going to come from the
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fan experience.
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And you have to do a good job in all of the
above.
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But when you think about the naming rights on a
stadium, that may be a 10 year contract or even
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a 20 year contract.
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You're gonna get that payment no matter what.
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If you own a piece like the Golden State
Warriors, the suites there last I heard,
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there's like a 2 year waiting list to be able
to get and to buy a suite at a very healthy
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price.
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So you have these very durable and resilient
revenues that are much less vulnerable to
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economic swings.
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So we look at all of the above, but when you
look at metrics, just to answer your question
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as specifically as I can, most of these trade
is a multiple of revenue.
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Certainly, the cash flow underneath it is going
to be factored into that.
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You're going to look at the DCF on it.
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But a lot of people don't realize that you
actually, if you're a taxable investor, can,
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not always, but can sometimes get actual tax
benefits from the ownership of that.
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Maybe they own real estate and you can
appreciate that, or maybe there's some goodwill
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that they can, you know, amortize.
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So there's lots of other ways to generate
returns as long as you do a good job, take
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great care of your players, take great care of
your fans.
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You do a wonderful job.
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It's a fantastic business that is evolving
quickly because of what's happening from the
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theme of cord cutting and the ability to really
capture more and more of the fan experience.
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And I could literally talk about this for the
entire time, but I'm not going to.
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But what I will tell you that is the thing
people do not understand enough is how the fan
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experience is changing.
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So right now, there's technology out there
where I have a 2 year old grandson.
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When he's, you know, 8 or 9 or 10 years old,
I'm sure he's gonna have a favorite team.
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And I literally will be able to, on my phone,
if I buy a subscription to something, I'll be
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able to put his face and his name on the jersey
of the quarterback who's playing the game.
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That's going to be a lot of fun to watch him
just get all excited to see, oh, my goodness.
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Look at why I threw a touchdown.
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So being able to have that kind of fan
engagement is just going to increase,
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obviously, advertising revenue.
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It's going to increase subscription revenue,
and it's going to be able to take that content
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that is virtually impossible to replicate and
is a monopoly and deliver that in a new and
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advanced way to the audience.
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All of that is why we get very excited about
sports and all of that goes into the
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underwriting.
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You wrote the holy grail of investing with Tony
Robbins.
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I'm about halfway through, and you've
interviewed some of the top investors in the
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world.
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What are some common themes among these top
investors that you've observed?
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One of the things we really did when we chose
the the the folks, many of whom we own stakes
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in their firms or we've invested with them, we
know them very well, is these are people that
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are focused on adding value.
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You know, obviously, the world of private
equity has had its ups and its downs over time
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from a reputational standpoint.
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You know, barbarians at the gate and all of
those kinds of things and, you know, people
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just trying to strip out the value and lay off
all these people and then make money from that.
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K?
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There are still some firms that do that, but
they're very, very rare.
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When you look at the people that we interviewed
for the book, they are business builders or
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they're value creators in whatever way that
might be.
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Whether it be private credit, obviously, is
different than private equity.
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But what we loved about this group is how they
are passionate about how do we not only deliver
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great returns for the investors that give them
capital, but also how can they grow businesses,
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grow jobs, increase the value of these
companies, and in most cases, add significant
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value to society as well because of the way
that they're growing these companies and
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obviously driving the economy.
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That was a key theme for us is that these
people are passionate about truly adding value,
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which ultimately leads to adding alpha and not
just being beta.
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Right?
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There's nothing wrong with beta, but if you're
going to invest in somebody for alpha, you
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gotta know how they're going to create it.
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The other thing that is most consistent as we,
you know, we interviewed these folks, they all
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have very consistent playbooks.
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What is their differentiating factor?
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What is their unique value proposition?
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Why is it that they're really better than
anyone else?
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Whether you talk at Robert Smith, you know, in
enterprise software, you talk about Ramsey
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Musalum, you know, at Veritas and dealing with
government related type businesses.
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You know, all of them across every spectrum,
they have a repeatable process, which is why
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they've had persistent returns.
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And then the last thing that I'll say that
really was a thread that intertwined among all
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of them is that they are so very, very focused
on culture and developing their team into what
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is the best version of themselves and really
building that in such a way that is
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sustainable, not just for 1 generation, but for
2 generations, 3 generations of their
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businesses.
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And those are all really critical things that
we believe people need to focus on as investors
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as well.
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So you have their systems, you have their
culture.
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What parts of their businesses are compounding?
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What's becoming stronger over time, and what
stays the same?
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You know, success leaves clues.
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I'll quote Tony in that regard.
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Most of these firms, the the compounding effect
comes from just having more reps.
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You know, it's something to where somebody has
done you know, I'll use Michael Reese at at
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Dial as an example, now Blue Isle.
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If you've done 3 GP state transactions, you've
got 3 reps.
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If you've done 60, you got a lot more reps.
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And you've seen all the various things that
could potentially trip you up or that you may
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have just, oops.
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We we did okay, but we kinda missed that.
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We need to watch for that next time.
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So the compounding effect of being able to
truly see where the puck is going, to use the
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sports analogy, and to anticipate, that just
comes with time and it comes with persistence
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of seeing a lot of different environments, but
also being able to endure lots of different
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settings, economies, cycles in business or just
the economy in general, that is where I see the
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most compounding effect occur.
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And the other thing that cannot be lost is the
compounding of personnel.
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00:11:30,455 --> 00:11:36,215
When you have a great reputation, when you have
a great track record, people want to work for
222
00:11:36,215 --> 00:11:37,115
that business.
223
00:11:37,220 --> 00:11:41,779
You become the de facto first place if somebody
wants to be in a particular sector.
224
00:11:41,779 --> 00:11:46,740
If you wanna be in oil and gas, you're gonna
wanna work for NCAP or Quantum, 2 people we
225
00:11:46,740 --> 00:11:49,080
interviewed for the book, Bob Zork, Will Van
Loeb.
226
00:11:49,139 --> 00:11:51,139
You want to work for those 2 firms.
227
00:11:51,139 --> 00:11:55,815
They have proven how strong they are and how
somebody can develop in a great system.
228
00:11:55,875 --> 00:11:56,995
It's no different than sports.
229
00:11:56,995 --> 00:11:58,434
Everybody wants to play for the best team.
230
00:11:58,434 --> 00:12:01,154
Well, if you've got a great team, people are
gonna want to play for you.
231
00:12:01,154 --> 00:12:05,620
And if you are able to attract great talent,
you have a chance to continue to be able to win
232
00:12:05,620 --> 00:12:06,179
in the future.
233
00:12:06,179 --> 00:12:09,939
When you look across these managers, you're
also investing dozens of other managers.
234
00:12:09,939 --> 00:12:12,339
You see these 2 conflicting factors.
235
00:12:12,339 --> 00:12:15,459
1 is the growth of how much money they have to
invest to AUM.
236
00:12:15,459 --> 00:12:18,315
The other one is their skill and their
compounding of skills.
237
00:12:18,315 --> 00:12:22,554
What's the sweet spot in terms of where do you
want to be investing in a manager's career?
238
00:12:22,554 --> 00:12:26,174
That's an interesting question because I'm
going to answer it in 2 different directions.
239
00:12:26,394 --> 00:12:32,235
So as most people know, we're one of the
largest, if not the largest investor in GP
240
00:12:32,235 --> 00:12:33,389
Stakes in the world.
241
00:12:33,389 --> 00:12:39,070
We have over 95 different firms that we own
stakes in, everything from the VISTAs, the
242
00:12:39,070 --> 00:12:43,409
Encaps, the Quantums, the Golubs, some of the
very best brands in all of the world.
243
00:12:43,470 --> 00:12:47,789
But we also own stakes in firms that people
have never heard of that are much more younger
244
00:12:47,789 --> 00:12:51,985
in their life cycle as a business, if you will,
or they're in the middle market.
245
00:12:52,125 --> 00:12:56,144
The answer as a general partner is you want to
own growing businesses.
246
00:12:57,245 --> 00:12:58,445
Tony says this all the time.
247
00:12:58,445 --> 00:13:02,259
Would you rather pay the 2 in 20 or would you
rather receive the 2 and 20?
248
00:13:02,259 --> 00:13:07,059
Well, I kinda prefer to receive the 2 and 20 by
owning stakes in these various businesses and
249
00:13:07,059 --> 00:13:08,259
those in that invest.
250
00:13:08,259 --> 00:13:10,980
Obviously, you're paying those those those fees
and that carry.
251
00:13:10,980 --> 00:13:13,540
So growth is what is the driver there.
252
00:13:13,540 --> 00:13:16,825
When you're an investor as an LP, you kinda
gotta put a different hat on.
253
00:13:16,825 --> 00:13:20,745
And that doesn't mean that somebody can't raise
a $20,000,000,000 fund like one firm is doing
254
00:13:20,745 --> 00:13:22,585
right now and deliver great results.
255
00:13:22,585 --> 00:13:24,365
In some ways, it's kind of helpful.
256
00:13:24,504 --> 00:13:25,945
In some ways, it's hurtful.
257
00:13:25,945 --> 00:13:27,225
It depends on the strategy.
258
00:13:27,225 --> 00:13:32,690
And there are definitely strategies that don't
deserve or should not have as much capital
259
00:13:32,690 --> 00:13:35,990
deployed as people are trying to raise funds to
invest in that strategy.
260
00:13:36,049 --> 00:13:41,330
That is where we get really concerned as an LP
investing with somebody who just because they
261
00:13:41,330 --> 00:13:44,404
can raise more money, even though it's not
great for the strategy.
262
00:13:44,544 --> 00:13:49,745
So there's all kinds of data about how first
time funds tend to outperform later stage funds
263
00:13:49,745 --> 00:13:50,784
or more mature funds.
264
00:13:50,784 --> 00:13:53,264
Well, at the same time, there's massive amounts
of dispersion.
265
00:13:53,264 --> 00:13:58,620
So for the audience here, career risk is a much
bigger deal if you go into an early stage
266
00:13:58,620 --> 00:14:02,460
manager, but you also may be a hero because you
deliver much stronger results.
267
00:14:02,460 --> 00:14:04,620
And the the reasons are logical.
268
00:14:04,620 --> 00:14:07,500
If somebody's first fund, they know it has to
work.
269
00:14:07,500 --> 00:14:10,620
They will not get a second opportunity if that
first one is not great.
270
00:14:10,620 --> 00:14:12,879
So you really have to look at it across the
strategy.
271
00:14:13,235 --> 00:14:15,254
And what we try to do is being thematic.
272
00:14:15,315 --> 00:14:18,915
Look for the theme, what's the best risk
reward, and then what is the very best way to
273
00:14:18,915 --> 00:14:21,335
do that if it's a smaller niche opportunity?
274
00:14:21,394 --> 00:14:23,795
Well, then you want a smaller niche type
manager.
275
00:14:23,795 --> 00:14:28,660
If it is something that is a broad based theme
then you probably wanna be with the 800 pound
276
00:14:28,660 --> 00:14:32,660
gorilla who has the ability to own that market
and to dominate that market.
277
00:14:32,660 --> 00:14:36,420
That is another thing that is a little bit
unusual about us, and it ties to your question.
278
00:14:36,420 --> 00:14:38,200
We love sector specialization.
279
00:14:38,580 --> 00:14:44,684
The more refined someone's approach is, the
better we believe, not always, but in most
280
00:14:44,684 --> 00:14:48,524
cases, they have an information advantage, they
have a deal flow advantage, they have a
281
00:14:48,524 --> 00:14:52,950
diligence advantage, they have the ability to
know where all the moving parts are.
282
00:14:53,110 --> 00:14:56,149
So we love investing across the entire
landscape.
283
00:14:56,149 --> 00:14:59,669
But if I'm a GP, obviously, it's much more
about the growth of the business.
284
00:14:59,669 --> 00:15:02,230
If I'm an LP, you know, we're investing in a
fund right now.
285
00:15:02,230 --> 00:15:03,590
It's a $400,000,000 fund.
286
00:15:03,590 --> 00:15:07,524
They will not raise another fund in the future
at more than maybe $450,000,000 because they
287
00:15:07,524 --> 00:15:11,225
know the strategy must stay small to deliver
the results.
288
00:15:11,285 --> 00:15:14,404
And they are much more about the 20 than they
are about the 2.
289
00:15:14,404 --> 00:15:18,425
And so you've got to know as an investor, you
have to know what is their true motivation.
290
00:15:18,644 --> 00:15:20,590
Is it the 2 or is it the 20?
291
00:15:20,590 --> 00:15:25,470
Is that a common theme that you see among the
asset managers that scale, that they started
292
00:15:25,470 --> 00:15:31,250
out very specialist and became very good at one
thing, or do they start in multiple strategies?
293
00:15:31,550 --> 00:15:32,769
There's definitely both.
294
00:15:32,910 --> 00:15:38,264
I would say that more often than not, firms
have had one very specific niche that they're
295
00:15:38,264 --> 00:15:41,144
really, really good at maximizing, and then
they broaden.
296
00:15:41,144 --> 00:15:43,625
You know, HIG is another firm that we own a
stake in.
297
00:15:43,625 --> 00:15:48,345
They're a great example of a firm that has
relatively small funds across all of their
298
00:15:48,345 --> 00:15:51,580
different verticals, but they have added lots
and lots of verticals.
299
00:15:51,580 --> 00:15:56,220
So they have grown dramatically, I mean, from
13,000,000,000 to 50,000,000,000 if I remember
300
00:15:56,220 --> 00:15:58,139
the numbers correctly, since we took our state.
301
00:15:58,139 --> 00:16:02,059
In that situation, they didn't do it by just
raising a bigger fund, a bigger fund, and a
302
00:16:02,059 --> 00:16:03,179
bigger fund, and a bigger fund.
303
00:16:03,179 --> 00:16:04,375
They went horizontally.
304
00:16:04,375 --> 00:16:08,534
And then you have other firms like Avista,
because I mentioned them before, where they
305
00:16:08,534 --> 00:16:13,654
have grown by getting bigger and bigger funds,
and then they'll roll out a middle, you know, a
306
00:16:13,654 --> 00:16:14,615
midsize strategy.
307
00:16:14,615 --> 00:16:18,214
Then they have a small cap strategy, and then
they have a credit strategy and all these other
308
00:16:18,214 --> 00:16:18,375
things.
309
00:16:18,375 --> 00:16:20,750
So they're diversifying, but all about
enterprise software.
310
00:16:20,750 --> 00:16:22,829
So they have not deviated from that.
311
00:16:22,829 --> 00:16:25,250
And there's not neither one of them is wrong or
right.
312
00:16:25,309 --> 00:16:29,309
What I will tell you as an investor, what
matters the most is what can be most commonly
313
00:16:29,309 --> 00:16:30,829
repeated, most easily repeated.
314
00:16:30,829 --> 00:16:32,350
What is going to be most persistent?
315
00:16:32,350 --> 00:16:35,665
That's the keyword that I tell our team when
we're coaching our team.
316
00:16:35,665 --> 00:16:36,725
It's about persistency.
317
00:16:36,865 --> 00:16:40,705
And there is a big difference between
consistency and persistency, in at least our
318
00:16:40,705 --> 00:16:41,105
mind.
319
00:16:41,105 --> 00:16:42,384
Some people might disagree with that.
320
00:16:42,384 --> 00:16:43,105
But for us Is
321
00:16:43,105 --> 00:16:45,045
one historical, one forward looking?
322
00:16:45,184 --> 00:16:45,825
A little bit.
323
00:16:45,825 --> 00:16:47,585
I'd phrase it slightly differently.
324
00:16:47,585 --> 00:16:52,789
What I would say is persistency is you have
done the same thing in the same way and gotten
325
00:16:52,789 --> 00:16:57,269
consistent results as opposed to consistency
just means your numbers have been good over a
326
00:16:57,269 --> 00:16:58,149
long period of time.
327
00:16:58,149 --> 00:16:58,309
Okay?
328
00:16:58,309 --> 00:17:00,549
And again, some people would disagree with that
definition.
329
00:17:00,549 --> 00:17:02,230
That's what it is for us and it works for us.
330
00:17:02,230 --> 00:17:07,184
But to me, if somebody has had great results,
but one day they were, you know, buying apples
331
00:17:07,184 --> 00:17:11,424
and the next day they were buying oranges, but
they got, you know, 20% compounded annually
332
00:17:11,424 --> 00:17:15,525
over both apples and oranges, well, that's not
bad, and that is consistency.
333
00:17:15,919 --> 00:17:17,440
But I don't know what the next one's gonna be.
334
00:17:17,440 --> 00:17:20,079
When they buy pears, are they gonna get the
same 20% or not?
335
00:17:20,079 --> 00:17:23,440
As opposed to somebody's like, we buy apples,
we do apples, and we don't do anything but
336
00:17:23,440 --> 00:17:26,400
apples, and that's all we do, and we deliver
consistent results.
337
00:17:26,400 --> 00:17:28,579
Well, that's persistency in our definition.
338
00:17:28,720 --> 00:17:31,460
You want returns on a risk adjusted basis.
339
00:17:31,565 --> 00:17:37,484
You want somebody doing something unspectacular
in a spectacular fashion, something that that
340
00:17:37,484 --> 00:17:39,644
you could reliably rely on them for.
341
00:17:39,644 --> 00:17:44,400
You have, from what I understand, one of the
top track records on the downside.
342
00:17:44,460 --> 00:17:47,279
Only 4% of your deals have ever lost money.
343
00:17:47,339 --> 00:17:52,559
At the same time, you're investing into pretty
innovative businesses and business models.
344
00:17:52,619 --> 00:17:55,279
How do you have such a low hit rate when it
comes to investing?
345
00:17:55,339 --> 00:18:00,335
The good news is that the batting average is so
high because of the fact that we are unwavering
346
00:18:00,955 --> 00:18:02,335
in our focus on the downside.
347
00:18:02,394 --> 00:18:06,075
And a lot of other people may say something
similar to this, but this is literally the way
348
00:18:06,075 --> 00:18:08,235
every single conversation starts in an
organization.
349
00:18:08,235 --> 00:18:09,434
What's the worst case scenario?
350
00:18:09,434 --> 00:18:11,515
If we can live with that, the upside will take
care of itself.
351
00:18:11,515 --> 00:18:15,369
And we will dive into every single possible
thing.
352
00:18:15,369 --> 00:18:16,409
How can this go wrong?
353
00:18:16,409 --> 00:18:18,409
How could we be wrong in our assumptions?
354
00:18:18,409 --> 00:18:20,009
How could somebody do us wrong?
355
00:18:20,009 --> 00:18:20,329
Right?
356
00:18:20,329 --> 00:18:22,809
That's the nicest way I can say of putting it
that way.
357
00:18:22,809 --> 00:18:25,694
How can something happen that we just
completely didn't expect?
358
00:18:25,855 --> 00:18:26,095
Right?
359
00:18:26,095 --> 00:18:28,914
What will happen to our investment if that were
to occur?
360
00:18:29,134 --> 00:18:34,494
We tend to stay away from very highly leveraged
strategies because of that fear about the
361
00:18:34,494 --> 00:18:34,994
unknown.
362
00:18:35,134 --> 00:18:40,494
There was a tremendous number of great
businesses that were destroyed because of just
363
00:18:40,494 --> 00:18:44,710
over leverage even though the businesses didn't
necessarily get hurt that bad.
364
00:18:44,710 --> 00:18:45,910
Leverage cuts both ways.
365
00:18:45,910 --> 00:18:49,830
It can drive a lot of returns, but it also can
create a tremendous amount of problems.
366
00:18:49,830 --> 00:18:55,670
In our situation, we focus so much on that
downside that it means that we're going to just
367
00:18:55,670 --> 00:18:57,424
not be surprised most of the time.
368
00:18:57,424 --> 00:19:01,904
Again, the world will change everybody's
perception and surprise you at some times.
369
00:19:01,904 --> 00:19:02,224
Right?
370
00:19:02,224 --> 00:19:04,224
Everyone will be surprised at different points.
371
00:19:04,224 --> 00:19:10,230
What I will say is that it's really, really
rare in the 4% of times where we have lost
372
00:19:10,230 --> 00:19:12,950
money or we are underwater at this time.
373
00:19:12,950 --> 00:19:15,750
And that's to define that for the audience real
quickly.
374
00:19:15,750 --> 00:19:20,390
It's 96% of all investments we've made in the
private markets over 24 years are either a
375
00:19:20,390 --> 00:19:23,109
realized gain or an unrealized gain as we sit
here today.
376
00:19:23,109 --> 00:19:25,125
And we're very proud of that batting average.
377
00:19:25,285 --> 00:19:29,444
But we're not surprised why when something
doesn't go according to plan.
378
00:19:29,444 --> 00:19:32,404
And it doesn't mean we're not afraid of you
know, we're totally afraid of risk.
379
00:19:32,404 --> 00:19:33,444
We will take risk.
380
00:19:33,444 --> 00:19:37,444
But if we know 0 is a real possibility, we
better make sure that we're gonna get the
381
00:19:37,444 --> 00:19:41,110
upside to pay for it because we want as much
positive asymmetry as we can.
382
00:19:41,110 --> 00:19:45,670
Most of the time, if we feel like we got 20 to
50 percent of downside, we wanna make sure that
383
00:19:45,670 --> 00:19:47,029
we're at least 5 times that.
384
00:19:47,029 --> 00:19:51,269
You know, 3 to 5 times is kind of our minimum
threshold depending on the probability adjusted
385
00:19:51,269 --> 00:19:56,015
outcome of how accurate that forecast is going
to be and how much we can really protect
386
00:19:56,015 --> 00:19:57,154
ourselves on the downside.
387
00:19:57,214 --> 00:20:00,434
You know, that is to me the where everybody
should start the conversation.
388
00:20:00,575 --> 00:20:03,694
But every single person who comes in and we
look at 1500 investments a year.
389
00:20:03,694 --> 00:20:07,109
Every single person that comes in wants to tell
us about all the upside case.
390
00:20:07,269 --> 00:20:09,429
And we have to reprogram them to say, look.
391
00:20:09,429 --> 00:20:12,390
I don't want to care about your I don't care
about your upside case.
392
00:20:12,390 --> 00:20:13,670
I wanna look at your downside case.
393
00:20:13,670 --> 00:20:15,109
I wanna know if you've done all the work.
394
00:20:15,109 --> 00:20:17,990
And if somebody says, well, we don't think that
could happen, bye.
395
00:20:17,990 --> 00:20:18,710
Thank you very much.
396
00:20:18,710 --> 00:20:19,964
We'll be the fastest no in the west.
397
00:20:20,044 --> 00:20:21,005
If somebody says, no.
398
00:20:21,005 --> 00:20:23,904
We absolutely positively know that this can
happen.
399
00:20:24,125 --> 00:20:27,804
Here's why here's why we're you know, we don't
think it's gonna happen, but here's what we're
400
00:20:27,804 --> 00:20:29,644
doing to mitigate that risk if it were to
happen.
401
00:20:29,644 --> 00:20:30,684
Now you've got our attention.
402
00:20:30,684 --> 00:20:35,390
You know, when we shorted subprime with John
Paulson in 2,007, 2008, everybody knows what
403
00:20:35,390 --> 00:20:38,430
John did, made $20,000,000,000 for investors in
a short period of time.
404
00:20:38,430 --> 00:20:39,549
We were a small piece of that.
405
00:20:39,549 --> 00:20:43,710
But what John does not get enough credit for is
how little risk we actually took.
406
00:20:43,710 --> 00:20:47,654
Compared to what people saw in The Big Short,
which is a fantastic movie, we did not have
407
00:20:47,654 --> 00:20:48,795
that kind of downside.
408
00:20:49,015 --> 00:20:53,255
Mathematically, we basically could not have
lost more than 20% of our money no matter how
409
00:20:53,255 --> 00:20:57,255
wrong we were, and yet we had the opportunity
to make 5, 6, 7, 10 times our money.
410
00:20:57,255 --> 00:21:00,234
That is the positive asymmetry that we'd love
to find again.
411
00:21:00,460 --> 00:21:04,380
Doesn't happen very often, but that's the way
that we focus on it and what I would encourage
412
00:21:04,380 --> 00:21:06,380
everybody who's an investor to think about.
413
00:21:06,380 --> 00:21:10,380
Unpack the details of the trade reference in
The Big Short, the movie.
414
00:21:10,380 --> 00:21:12,400
Tell me about how it was structured.
415
00:21:12,515 --> 00:21:15,154
So I'll take one step back to go 2 steps
forward.
416
00:21:15,154 --> 00:21:17,235
I'll use that again because I do think it's
really helpful.
417
00:21:17,235 --> 00:21:18,055
We're thematic.
418
00:21:18,355 --> 00:21:19,235
So here was the theme.
419
00:21:19,235 --> 00:21:21,235
We believe the housing bubble was going to
burst.
420
00:21:21,235 --> 00:21:24,869
I was totally convinced that that was going to
happen, and I had no idea how to short a house.
421
00:21:24,869 --> 00:21:29,670
I'd had money with John Paulson personally for,
at that time, almost 13 years.
422
00:21:29,670 --> 00:21:34,390
And when he told us what he was doing on the
housing market to take advantage of that bubble
423
00:21:34,390 --> 00:21:36,869
bursting, we were completely, you know, bought
in.
424
00:21:36,869 --> 00:21:40,815
It took us about 45 days to figure out what the
heck he was talking about with CDOs and CDO
425
00:21:40,815 --> 00:21:42,335
Squareds and all those other kinds of things.
426
00:21:42,335 --> 00:21:47,214
But once we understood it and we saw how he was
approaching it, it was such a unique model.
427
00:21:47,214 --> 00:21:52,440
And so we absolutely went all in, so to speak,
on taking advantage of what we thought was just
428
00:21:52,519 --> 00:21:53,799
a no brainer of a theme.
429
00:21:53,799 --> 00:21:57,000
There's only a few times in people's career
that you look back and go, okay.
430
00:21:57,000 --> 00:21:57,879
This is a no brainer.
431
00:21:57,879 --> 00:22:03,240
The tech bubble of 99, you know, the SPAC
bubble of 2021, obviously, you know, buying at
432
00:22:03,240 --> 00:22:04,379
the bottom in 2009.
433
00:22:04,759 --> 00:22:08,894
There there are very few times, and you have to
make sure you maximize returns during those
434
00:22:08,894 --> 00:22:11,154
periods of dislocation, upside and downside.
435
00:22:11,215 --> 00:22:16,414
So what John did, which was very well
articulated in the book, it's a wonderful book
436
00:22:16,414 --> 00:22:19,775
called The Greatest Trade Ever, and it's
specifically about John Paulson, which is why
437
00:22:19,775 --> 00:22:22,894
it wasn't really referenced in the book because
Michael Lewis knew there already been a book
438
00:22:22,894 --> 00:22:23,640
written about John.
439
00:22:23,720 --> 00:22:27,180
But so that trade was effectively buying puts
on mortgages.
440
00:22:27,480 --> 00:22:31,160
I'm going to be overly simplistic in my
explanation here, but buying puts on mortgages.
441
00:22:31,160 --> 00:22:36,200
Well, if you buy a put on any asset, security,
currency, whatever, the most you can lose is
442
00:22:36,200 --> 00:22:37,335
the premium that you put out.
443
00:22:37,414 --> 00:22:41,815
So there are more details behind the scenes
that I would let John explain if you wanted to
444
00:22:41,815 --> 00:22:42,714
share that publicly.
445
00:22:42,774 --> 00:22:47,654
But if you buy a put on a mortgage when it's
trading at a 100 and it goes to 0, you make a
446
00:22:47,654 --> 00:22:48,134
lot of money.
447
00:22:48,134 --> 00:22:53,210
And if you buy a put on a mortgage that nobody
thinks is possibly going to go bankrupt, you
448
00:22:53,210 --> 00:22:56,329
can buy that premium, that put for very, very,
very little.
449
00:22:56,329 --> 00:23:00,730
So overly simplistic in one particular trade
with a very high profile name that went to 0,
450
00:23:00,730 --> 00:23:05,964
we literally put up less than 1 quarter of 1%
to buy that effectively put, CVS technically,
451
00:23:06,025 --> 00:23:10,684
and literally it turned into a $90 gain, 25¢
$90.
452
00:23:10,825 --> 00:23:14,345
That's the kind of magnitude, but that's why we
had so much downside protection.
453
00:23:14,345 --> 00:23:17,625
Because if all you're doing is you can lose
your puts, the premium on the puts, well, you
454
00:23:17,625 --> 00:23:18,869
know what your downside is.
455
00:23:18,950 --> 00:23:23,910
As opposed to people that short a stock and,
you know, somebody shorts NVIDIA 300 and
456
00:23:23,910 --> 00:23:27,029
watches it go to 800, that's a really, really
painful ride.
457
00:23:27,029 --> 00:23:30,549
In our particular case, we obviously just
bought puts on those mortgages, made a
458
00:23:30,549 --> 00:23:35,244
tremendous amount of money, and really used it
as a hedge and a protection against the rest of
459
00:23:35,244 --> 00:23:39,805
our portfolio that we felt confident was gonna
get hurt if the housing bubble burst.
460
00:23:39,805 --> 00:23:42,525
And that trade with John Paulson really put you
guys on the map.
461
00:23:42,525 --> 00:23:43,884
It was definitely a seminal moment.
462
00:23:43,884 --> 00:23:48,125
I mean, it was something that very few people
had the courage to go against what appeared to
463
00:23:48,125 --> 00:23:49,529
be an irrefutable trend.
464
00:23:49,529 --> 00:23:51,450
I cannot tell you how many people told me.
465
00:23:51,450 --> 00:23:52,409
Oh, you don't understand.
466
00:23:52,409 --> 00:23:54,029
Housing prices never go down.
467
00:23:54,649 --> 00:23:55,369
Is that true?
468
00:23:55,369 --> 00:23:55,869
No.
469
00:23:56,089 --> 00:23:58,750
So, therefore, it was so much convincing.
470
00:23:58,809 --> 00:24:02,730
And, obviously, what John did, which has been
documented, and it was really well done in The
471
00:24:02,730 --> 00:24:07,755
Big Short, is it you find the the fulcrum
security, which for us in our particular case,
472
00:24:07,755 --> 00:24:11,515
it was the triple b's and some of the double
b's, a few single a's.
473
00:24:11,515 --> 00:24:17,434
But, you know, that's where the really dramatic
default rate assumptions of the world were
474
00:24:17,434 --> 00:24:18,315
totally wrong.
475
00:24:18,315 --> 00:24:23,140
Nobody believed that the waterfall, to get
really wonky for a second, that the waterfall
476
00:24:23,140 --> 00:24:27,460
of defaults would get to such an extreme that
those triple b's would be impaired.
477
00:24:27,460 --> 00:24:32,954
Well, they were also very inexpensive to buy
puts on those securities, CDSs, in because of
478
00:24:32,954 --> 00:24:34,954
that perception, which was completely wrong.
479
00:24:34,954 --> 00:24:41,035
And so during the GFC, they obviously had a
much larger default rate occur, and so those
480
00:24:41,035 --> 00:24:44,410
securities were completely blown out because of
the way the waterfalls work.
481
00:24:44,410 --> 00:24:46,970
And the trade was essentially a first
principles trade.
482
00:24:46,970 --> 00:24:51,069
You were just not allowing the market to
gaslight you into false assumptions.
483
00:24:51,210 --> 00:24:55,849
You know, it's hard, and I love the way that
you put that because most of the time and SPAC
484
00:24:55,849 --> 00:25:00,275
bubble of 21, just as a perfect example, These
assumptions that these businesses were going to
485
00:25:00,275 --> 00:25:05,154
grow forever and ever and ever, amen, and never
have, you know, reality matter to them.
486
00:25:05,154 --> 00:25:08,835
I mean, I everybody can go to our website, and
you can read every single quarterly letter that
487
00:25:08,835 --> 00:25:10,775
I've ever written going back all the way to
2,001.
488
00:25:10,835 --> 00:25:15,880
And if you go back and you read the 3rd quarter
of 2021 letter, I used Rivian as a perfect
489
00:25:15,880 --> 00:25:16,279
example.
490
00:25:16,279 --> 00:25:18,220
I think Rivian makes an amazing product.
491
00:25:18,359 --> 00:25:20,140
I think it's a cool, cool automobile.
492
00:25:20,200 --> 00:25:25,160
But I also saw that at one point, Rivian was
trading for more than all of the other auto
493
00:25:25,160 --> 00:25:27,315
manufacturers combined with the exception of
Tesla.
494
00:25:27,554 --> 00:25:30,355
That was absurd at that point in the company's
life cycle.
495
00:25:30,355 --> 00:25:34,855
So I used it as the, quote, unquote, poster
child of the excess of the bubble of 2021.
496
00:25:35,315 --> 00:25:40,000
And so, no, we were not willing to let people
gaslight us, to use your term, to believe that
497
00:25:40,000 --> 00:25:43,759
their assumptions, that that wonderful words,
it's different this time.
498
00:25:43,759 --> 00:25:44,079
Okay?
499
00:25:44,079 --> 00:25:45,200
Most of the time, it's not.
500
00:25:45,200 --> 00:25:49,200
There are some rare exceptions, but that's
something to where my spidey sense just goes
501
00:25:49,200 --> 00:25:50,019
off the charts.
502
00:25:50,160 --> 00:25:52,240
When everybody says, Christopher, you don't
understand.
503
00:25:52,240 --> 00:25:53,775
It's just different this time.
504
00:25:53,775 --> 00:25:56,894
You know, I'm not an old man, but people
sometimes wanna think, oh, you just don't get
505
00:25:56,894 --> 00:25:57,055
it.
506
00:25:57,055 --> 00:25:57,214
No.
507
00:25:57,214 --> 00:25:57,714
No.
508
00:25:57,855 --> 00:26:00,894
I got it in 1999 when we shorted, you know, the
Internet bubble.
509
00:26:00,894 --> 00:26:06,255
I got it in 2002 when we bought everything post
the, you know, the the the recession of 2021 or
510
00:26:06,255 --> 00:26:07,375
2,001, 2002.
511
00:26:07,375 --> 00:26:09,859
We absolutely made a ton of money from buying
stuff.
512
00:26:09,859 --> 00:26:11,299
We don't mind risk.
513
00:26:11,299 --> 00:26:14,339
We do mind doing things that just are not
smart.
514
00:26:14,339 --> 00:26:14,819
Hey.
515
00:26:14,819 --> 00:26:17,059
We'll be right back after a word from our
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516
00:26:17,059 --> 00:26:21,380
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517
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518
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519
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520
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524
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525
00:26:48,750 --> 00:26:51,855
That's z.carta.comforward/10x pod.
526
00:26:51,855 --> 00:26:55,954
You've had some very interesting trades and
themes that you uncovered historically.
527
00:26:56,335 --> 00:27:01,295
What's the theme or asset that you're really
excited about today that seems non obvious to
528
00:27:01,295 --> 00:27:01,795
others?
529
00:27:01,934 --> 00:27:04,029
Non obvious is the key term there.
530
00:27:04,029 --> 00:27:08,670
I knew exactly what I was going to say until
you said that little nugget there.
531
00:27:08,670 --> 00:27:10,829
So great question in that regard.
532
00:27:10,829 --> 00:27:15,390
The theme that I think people do understand
that they don't appreciate enough is
533
00:27:15,390 --> 00:27:16,335
professional sports.
534
00:27:16,575 --> 00:27:18,974
And we will go well beyond professional sports.
535
00:27:18,974 --> 00:27:23,214
We're working on multiple things in college
athletics as well, which is a completely unique
536
00:27:23,214 --> 00:27:26,034
new situation for the first time in history in
college.
537
00:27:26,174 --> 00:27:28,015
So there's lots of things around sports.
538
00:27:28,015 --> 00:27:33,180
I don't think people fully appreciate how
dramatic cord cutting has changed the way the
539
00:27:33,180 --> 00:27:38,559
business models of these live event teams, the
live event businesses have had their models
540
00:27:38,619 --> 00:27:41,180
changed by cord cutting in a positive way.
541
00:27:41,180 --> 00:27:42,460
So I don't think that's fully appreciated.
542
00:27:42,460 --> 00:27:46,134
I also don't think everybody says they
understand the growth of private assets and
543
00:27:46,134 --> 00:27:48,554
that more and more people are going to be
investing in alts.
544
00:27:48,615 --> 00:27:51,174
That I don't think people fully appreciate how
much it is.
545
00:27:51,174 --> 00:27:54,295
Because when you look at wealth, and some
people get this, when you look at just high net
546
00:27:54,295 --> 00:27:58,289
worth investors compared to institutions, the
amount of money they have exposure to
547
00:27:58,369 --> 00:28:00,289
alternative investments is literally so small.
548
00:28:00,289 --> 00:28:01,730
Some reports say as little as 1.
549
00:28:01,730 --> 00:28:03,590
Other reports say as much as 3%.
550
00:28:03,650 --> 00:28:03,809
K.
551
00:28:03,809 --> 00:28:04,690
But it's 1 to 3.
552
00:28:04,690 --> 00:28:08,130
It's somewhere in there compared to
institutions that might have 20 to 30 or
553
00:28:08,130 --> 00:28:09,490
endowments that might have 50.
554
00:28:09,490 --> 00:28:13,575
So the amount of growth there is something I
don't think fully is appreciated by the
555
00:28:13,575 --> 00:28:17,974
marketplace, obviously, by the owner of the
firms, you know, a part owner of the firms that
556
00:28:17,974 --> 00:28:19,355
are managing those assets.
557
00:28:19,414 --> 00:28:24,454
Obviously, that gives us tremendous opportunity
to benefit from that tailwind of growth to
558
00:28:24,454 --> 00:28:25,170
private assets.
559
00:28:25,250 --> 00:28:29,170
The other thing I don't think people are, to to
the point of your question, that they're fully
560
00:28:29,170 --> 00:28:32,470
appreciating is what is happening in the world
of military readiness.
561
00:28:32,529 --> 00:28:36,470
This is an area that, yes, because of Ukraine,
it got more attention.
562
00:28:36,529 --> 00:28:40,695
Yes, because of what's going on in the, you
know, discussion around Taiwan and what's
563
00:28:40,695 --> 00:28:41,654
happened in the Middle East.
564
00:28:41,654 --> 00:28:43,735
It has gotten more discussion, but not enough.
565
00:28:43,735 --> 00:28:48,535
The vast majority of the militaries military
powers around the world, they are still using
566
00:28:48,535 --> 00:28:50,634
19 eighties, 19 nineties technology.
567
00:28:50,775 --> 00:28:57,220
They have not fully embraced what tech, what
AI, what machine learning, what just new types
568
00:28:57,220 --> 00:29:03,220
of software have the ability to do to protect
people and to ultimately reduce the risk of
569
00:29:03,220 --> 00:29:05,880
loss of life, you know, in a military
environment.
570
00:29:06,255 --> 00:29:10,815
So everything from new types of, you know,
defense weaponry, obviously, the Iron Dome's
571
00:29:10,815 --> 00:29:13,775
gotten all the attention over the last year
around Israel.
572
00:29:13,775 --> 00:29:18,575
There are so many examples of where technology
is being used in a way to reduce the risk of
573
00:29:18,575 --> 00:29:22,649
loss of life, to be able to be much more
efficient, much more effective, and to where
574
00:29:22,649 --> 00:29:28,970
you can have a more significant deterrence
because of an advanced technology skill set, k,
575
00:29:28,970 --> 00:29:31,690
or or tech stack, if you wanna call it that.
576
00:29:31,690 --> 00:29:35,450
There's so much happening here in the United
States right now that most people have no idea
577
00:29:35,450 --> 00:29:39,695
is happening About everything from the way that
we're, you know, protecting our soldiers, the
578
00:29:39,695 --> 00:29:44,494
way that we're able to, you know, protect our
key infrastructure, that's nobody knows about
579
00:29:44,494 --> 00:29:44,654
it.
580
00:29:44,654 --> 00:29:46,894
They just know about the big planes and the big
boats.
581
00:29:46,894 --> 00:29:50,894
What's happening on autonomous right now,
what's happening in drones, what's happening in
582
00:29:50,894 --> 00:29:56,470
software is phenomenal for the benefit of the
United States, and I think it's gonna be a big
583
00:29:56,470 --> 00:29:58,789
beneficiary to a lot of our allies around the
world.
584
00:29:58,789 --> 00:30:02,150
You're famous in the industry for having a very
strong culture.
585
00:30:02,150 --> 00:30:03,609
Tell me about the CAS culture.
586
00:30:03,750 --> 00:30:04,549
Thank you for that.
587
00:30:04,549 --> 00:30:05,505
I appreciate it.
588
00:30:06,384 --> 00:30:08,704
The culture for us is we're a Wall Street firm.
589
00:30:08,704 --> 00:30:10,625
We just have to be based in Houston, Texas.
590
00:30:10,625 --> 00:30:16,224
But we are going to be the very best that we
can be, and we're not going to ever just accept
591
00:30:16,224 --> 00:30:16,724
mediocrity.
592
00:30:17,345 --> 00:30:22,109
Our core quarterly theme this quarter is a
quote that usually is attributed to Saint
593
00:30:22,109 --> 00:30:22,609
Jerome.
594
00:30:22,669 --> 00:30:24,049
Good, better, best.
595
00:30:24,190 --> 00:30:27,970
Never let it rest until your good is better and
your better is best.
596
00:30:28,190 --> 00:30:30,829
That is the way that we operate every single
day.
597
00:30:30,829 --> 00:30:33,230
We want to be the very, very best that we can
be.
598
00:30:33,230 --> 00:30:36,345
And we've done our annual 360s for a long time.
599
00:30:36,345 --> 00:30:41,065
And the thing that makes me more proud every
single year is that we believe collectively as
600
00:30:41,065 --> 00:30:45,545
a group that our greatest promises, and I'll
talk about our promises in a second, but our
601
00:30:45,545 --> 00:30:51,660
greatest strength is the two promises of we
will put our partners first, make raving fans
602
00:30:51,660 --> 00:30:55,980
of our investors, and that we will exhibit a
higher standard of work ethic.
603
00:30:55,980 --> 00:30:56,619
Those 3.
604
00:30:56,619 --> 00:30:58,160
Those are the 3 consistently.
605
00:30:58,380 --> 00:31:02,765
And if somebody puts their investors first, if
somebody makes them a raving fan and works
606
00:31:02,765 --> 00:31:04,605
their butts off, good things are gonna happen.
607
00:31:04,605 --> 00:31:09,005
So we do have a culture built around those
concepts, and we use our principles, which are
608
00:31:09,005 --> 00:31:09,884
all on our website.
609
00:31:09,884 --> 00:31:11,005
You can go read them.
610
00:31:11,005 --> 00:31:12,045
They're more outward facing.
611
00:31:12,045 --> 00:31:13,984
But then internally, we have our promises.
612
00:31:14,089 --> 00:31:18,650
And our promises are the way that we agree with
each other that we're going to engage.
613
00:31:18,650 --> 00:31:20,509
They're going to be things like do with
excellence.
614
00:31:20,570 --> 00:31:23,609
I will do the right thing at the right time in
the right way.
615
00:31:23,609 --> 00:31:24,990
I will avoid the source.
616
00:31:25,049 --> 00:31:27,345
I will avoid gossip and go directly to the
source.
617
00:31:27,424 --> 00:31:29,424
You know, I will exhibit a higher standard of
work ethic.
618
00:31:29,424 --> 00:31:30,544
I will think outside the box.
619
00:31:30,544 --> 00:31:32,625
I will see the forest, not the trees.
620
00:31:32,625 --> 00:31:35,765
Every single one of our team goes through
something we call Cass University.
621
00:31:35,825 --> 00:31:40,544
And literally for the 1st 30 days of their
employment, some people 3 weeks, some people 5
622
00:31:40,544 --> 00:31:43,970
weeks depending on the role, they are literally
not allowed to go into the whirlwind.
623
00:31:43,970 --> 00:31:48,470
Their job is to understand what we do, how we
do it, and just be a student.
624
00:31:48,529 --> 00:31:53,009
That's hard if somebody's in the middle of the
whirlwind because the whirlwind will eat that
625
00:31:53,009 --> 00:31:54,484
well intentioned time.
626
00:31:54,545 --> 00:31:55,984
So we have our promises.
627
00:31:55,984 --> 00:32:00,865
We literally, quarterly, every single quarter,
we will grade people on how they're doing
628
00:32:00,865 --> 00:32:02,005
compared to our promises.
629
00:32:02,144 --> 00:32:03,345
And by the way, we all fail.
630
00:32:03,345 --> 00:32:07,680
We can all do better, but we are going to
strive for excellence in every one of those
631
00:32:07,680 --> 00:32:08,160
promises.
632
00:32:08,160 --> 00:32:12,480
And if we treat each other that way and we
treat our investors that way and our partners
633
00:32:12,480 --> 00:32:17,599
that we invest with honorably, with respect,
being above board in everything that we do, and
634
00:32:17,599 --> 00:32:22,005
at the same time be wickedly smart and
determined to be the very best, we're usually
635
00:32:22,005 --> 00:32:23,044
going to have good results.
636
00:32:23,044 --> 00:32:26,325
I don't think there's a single CEO in the
country that doesn't want to have an excellent
637
00:32:26,325 --> 00:32:26,804
culture.
638
00:32:26,804 --> 00:32:31,605
Talk to me about how you enforce that, and what
tools do you use in order to create this
639
00:32:31,605 --> 00:32:32,325
excellent culture?
640
00:32:32,325 --> 00:32:39,059
It's something to where we have borrowed,
adapted, adopted from so many different places
641
00:32:39,200 --> 00:32:41,200
what we consider to be best practices.
642
00:32:41,200 --> 00:32:43,279
Again, Tony's quote, success leaves clues.
643
00:32:43,279 --> 00:32:46,880
So when you talk about the book Good to Great,
the four disciplines of execution, you know,
644
00:32:46,880 --> 00:32:49,134
the all the various books out there, The One
Thing.
645
00:32:49,134 --> 00:32:53,214
I mean, I could literally go down an entire
list of of books that we had every single
646
00:32:53,214 --> 00:32:54,414
person on our team read.
647
00:32:54,414 --> 00:32:56,335
That's part of what Cass University is all
about.
648
00:32:56,335 --> 00:32:57,615
They have a fixed reading list.
649
00:32:57,615 --> 00:32:59,454
They must absolutely read those.
650
00:32:59,454 --> 00:33:03,119
They then provide a 1 page summary of not just
what the book says because we already know what
651
00:33:03,119 --> 00:33:04,960
the book says, but what did they take away from
it?
652
00:33:04,960 --> 00:33:09,759
What did they, you know, think about how they
would maybe suggest that we think about things
653
00:33:09,759 --> 00:33:10,159
differently?
654
00:33:10,159 --> 00:33:14,799
Or what does it actually mean to them about
what they can practically do to utilize that to
655
00:33:14,799 --> 00:33:16,304
be successful in their role.
656
00:33:16,304 --> 00:33:21,184
But the one of the key takeaways is every
single person that has ever been in management
657
00:33:21,184 --> 00:33:23,744
and leadership and been successful about it
will say the same thing.
658
00:33:23,744 --> 00:33:28,865
You must say the same thing over and over and
over and over and over and over again and never
659
00:33:28,865 --> 00:33:29,365
waver.
660
00:33:29,559 --> 00:33:31,160
Again, another great quote out there.
661
00:33:31,160 --> 00:33:34,700
People will get whatever level that they
expect.
662
00:33:34,759 --> 00:33:35,259
K?
663
00:33:35,640 --> 00:33:37,500
People will get whatever they tolerate.
664
00:33:37,799 --> 00:33:39,480
This is another way that people will say that.
665
00:33:39,480 --> 00:33:39,799
Right?
666
00:33:39,799 --> 00:33:41,480
I coached high school football for 4 years.
667
00:33:41,480 --> 00:33:43,095
I played, you know, football in college.
668
00:33:43,095 --> 00:33:47,575
What I can tell you is that every single coach
is going to repeat themselves to where they can
669
00:33:47,575 --> 00:33:49,994
literally repeat it in their head while they're
sleeping.
670
00:33:50,055 --> 00:33:51,335
It's just ingrained there.
671
00:33:51,335 --> 00:33:54,295
But every single player is going to also know
that.
672
00:33:54,295 --> 00:33:59,079
And we utilize so much from the coaching world
to be able to do what we do at CAS.
673
00:33:59,079 --> 00:34:04,680
I mean, as a great example, if I was walking
down the Galleria Mall here in Houston, and I
674
00:34:04,680 --> 00:34:10,280
saw one of my former players who hasn't played
for me for 25 years, and I literally just
675
00:34:10,280 --> 00:34:13,285
yelled at the top of my voice, what happens to
tall trees?
676
00:34:13,345 --> 00:34:16,065
He would literally, without even thinking about
it, say they get cut down.
677
00:34:16,065 --> 00:34:18,625
Because he knows in practice, he heard it every
single day.
678
00:34:18,625 --> 00:34:21,905
If you play football and you're standing
straight up, somebody's gonna knock you on your
679
00:34:21,905 --> 00:34:22,305
butt.
680
00:34:22,305 --> 00:34:27,030
So it is very critical that you have a blow
base, a low center of gravity.
681
00:34:27,030 --> 00:34:30,070
So if you get hit from one side or the other,
you're not gonna get knocked over.
682
00:34:30,070 --> 00:34:31,269
What happens to tall trees?
683
00:34:31,269 --> 00:34:32,410
They get cut down.
684
00:34:32,469 --> 00:34:35,590
Most of the people that listen to this podcast
will remember that a year from now.
685
00:34:35,590 --> 00:34:38,550
So you must have sayings that people will
understand in football.
686
00:34:38,550 --> 00:34:39,829
Fast hands equals fast feet.
687
00:34:39,829 --> 00:34:40,309
Right?
688
00:34:40,309 --> 00:34:41,110
Low man wins.
689
00:34:41,110 --> 00:34:41,445
Yeah.
690
00:34:41,605 --> 00:34:44,005
Whatever it may be, you're going to be able to
remember that.
691
00:34:44,005 --> 00:34:46,985
So if we say over and over to our team, we will
do with excellence.
692
00:34:47,045 --> 00:34:50,724
Then if somebody does something that's not
great, one of their peers will go to them.
693
00:34:50,724 --> 00:34:51,605
And this is the key.
694
00:34:51,605 --> 00:34:56,489
The very best teams of any type are not managed
by their coach.
695
00:34:56,730 --> 00:35:00,429
They're managing themselves, and it's that peer
to peer accountability.
696
00:35:00,570 --> 00:35:03,530
Somebody looks over and says, you know, you
know, by the way, that's not done with
697
00:35:03,530 --> 00:35:03,849
excellence.
698
00:35:03,849 --> 00:35:04,809
We can do better than that.
699
00:35:04,809 --> 00:35:06,329
Let's let's let's try it again.
700
00:35:06,329 --> 00:35:10,744
That is how we're able to build a culture to
where people know what the rules of engagement
701
00:35:10,744 --> 00:35:11,065
are.
702
00:35:11,065 --> 00:35:12,845
They understand the terminology.
703
00:35:13,065 --> 00:35:16,265
They're all singing from the same hymnal or
playing for the same playbook, whatever
704
00:35:16,265 --> 00:35:19,465
illustration you wanna use, and they're able to
hold each other to account.
705
00:35:19,465 --> 00:35:23,390
And then we have very, very consistent regular
checks.
706
00:35:23,390 --> 00:35:25,070
A lot of firms do annual reviews.
707
00:35:25,070 --> 00:35:25,550
I get it.
708
00:35:25,550 --> 00:35:26,590
I understand why.
709
00:35:26,590 --> 00:35:31,230
We have for years done quarterly reviews
because I don't want primacy and recency to be
710
00:35:31,230 --> 00:35:32,829
the impact on that annual review.
711
00:35:32,829 --> 00:35:36,590
If you do it in December, you're gonna remember
what happened in November really, really well.
712
00:35:36,590 --> 00:35:38,655
You're not gonna remember what happened in
January very well.
713
00:35:38,655 --> 00:35:41,535
As opposed to if you do it in April, you're
gonna remember what happened in January,
714
00:35:41,535 --> 00:35:44,735
February, March a lot more than you will, you
know, 9 months later.
715
00:35:44,735 --> 00:35:46,175
So we want that constant feedback.
716
00:35:46,175 --> 00:35:47,375
We want it to be immediate.
717
00:35:47,375 --> 00:35:51,239
We wanna avoid gossip, which for us is not like
I can't believe he's wearing those shoes.
718
00:35:51,400 --> 00:35:53,880
It's, you know, why do we do it this way?
719
00:35:53,880 --> 00:35:57,880
If somebody cannot control the decision that
you're asking about, you're talking to the
720
00:35:57,880 --> 00:35:58,440
wrong person.
721
00:35:58,440 --> 00:36:02,519
If somebody doesn't understand why the drapes
are a certain way or why the video was done a
722
00:36:02,519 --> 00:36:05,804
certain way or why the presentation looks a
certain way, go to the source.
723
00:36:06,045 --> 00:36:06,844
Ask that person.
724
00:36:06,844 --> 00:36:07,964
They may have a really good answer.
725
00:36:07,964 --> 00:36:09,405
Maybe you have a better suggestion.
726
00:36:09,405 --> 00:36:09,964
That's great.
727
00:36:09,964 --> 00:36:11,164
That's where dialogue comes from.
728
00:36:11,164 --> 00:36:14,844
But being able to have peer to peer
accountability, consistent rhythm.
729
00:36:14,844 --> 00:36:18,144
I actually love that there was a book that we
use called Traction by Gina Whitman.
730
00:36:18,389 --> 00:36:20,069
Very, very impactful on our business.
731
00:36:20,069 --> 00:36:21,929
So I love their illustration.
732
00:36:22,230 --> 00:36:25,269
You know, everybody's familiar with, you know,
the the heartbeat.
733
00:36:25,269 --> 00:36:25,510
Right?
734
00:36:25,510 --> 00:36:26,230
It goes like this.
735
00:36:26,230 --> 00:36:27,429
It goes up, and it comes down.
736
00:36:27,429 --> 00:36:28,069
It goes like this.
737
00:36:28,069 --> 00:36:29,269
It goes up, and it goes down.
738
00:36:29,269 --> 00:36:33,405
And, of course, what happens in somebody when
they're working out really, really hard?
739
00:36:33,644 --> 00:36:35,164
It's very, very, very, very quick.
740
00:36:35,164 --> 00:36:35,664
Alright?
741
00:36:35,885 --> 00:36:38,364
We want our meeting cadence to be the same way.
742
00:36:38,364 --> 00:36:39,664
We have a weekly cadence.
743
00:36:39,804 --> 00:36:40,925
We have a monthly cadence.
744
00:36:40,925 --> 00:36:42,045
We have a quarterly cadence.
745
00:36:42,045 --> 00:36:43,265
We have an annual cadence.
746
00:36:43,324 --> 00:36:48,539
Because if we as a organization are beating
faster, we're going to get more stuff done.
747
00:36:48,539 --> 00:36:53,019
And that ultimately is what drives success in
any business of any type in in our industry or
748
00:36:53,019 --> 00:36:58,460
any other is the more consistent we are and the
faster that we pulse, the more stuff we're
749
00:36:58,460 --> 00:36:59,420
gonna get accomplished.
750
00:36:59,420 --> 00:37:05,295
And then the last thing I would say regarding
that is that it's so much the teaching and the
751
00:37:05,295 --> 00:37:08,494
intentionality of that teaching, using the word
coaching again.
752
00:37:08,494 --> 00:37:13,454
So in football, you want to train somebody on
your on your offense how to run a new play.
753
00:37:13,454 --> 00:37:17,454
The first thing that you do is you show them on
a chalkboard or a whiteboard what's supposed to
754
00:37:17,454 --> 00:37:17,760
happen.
755
00:37:17,840 --> 00:37:19,039
This person blocks this person.
756
00:37:19,039 --> 00:37:21,119
This person runs this way, blocks this person.
757
00:37:21,119 --> 00:37:21,920
You show it to them.
758
00:37:21,920 --> 00:37:26,800
Then in a perfect world, you show them a video
of somebody executing that exact play very
759
00:37:26,800 --> 00:37:28,960
successfully, a college, an NFL team, whatever.
760
00:37:28,960 --> 00:37:31,119
Then what you're going to do is you're gonna go
to the field.
761
00:37:31,119 --> 00:37:33,744
You're gonna walk through it one step at a
time.
762
00:37:33,744 --> 00:37:39,585
Literally step, step, step, and you coach every
single step until it's perfect.
763
00:37:39,585 --> 00:37:41,344
Then what you do is you jog through it.
764
00:37:41,344 --> 00:37:43,505
Then what you do is you run through it.
765
00:37:43,505 --> 00:37:49,809
Then you come back and you put a defense in
front of them, and you step, step, step, then
766
00:37:49,809 --> 00:37:54,050
you jog through it, then you run through it,
then you put the pads on and you go full speed
767
00:37:54,050 --> 00:37:56,690
and everything, obviously, you find out what
didn't work.
768
00:37:56,690 --> 00:37:57,089
Right?
769
00:37:57,089 --> 00:37:59,030
So then you coach and you correct.
770
00:37:59,409 --> 00:38:04,445
That is what needs to happen in any business,
And we try to take that approach in all of the
771
00:38:04,445 --> 00:38:05,644
coaching that we do with our team.
772
00:38:05,644 --> 00:38:08,625
What is the difference between good managing
and good coaching?
773
00:38:08,765 --> 00:38:13,085
I love the question because of the fact that
most people think they're the same thing.
774
00:38:13,085 --> 00:38:13,885
They're not.
775
00:38:13,885 --> 00:38:14,579
Not at all.
776
00:38:14,900 --> 00:38:18,579
Management is is somebody doing what they're
supposed to be doing, when they're supposed to
777
00:38:18,579 --> 00:38:20,340
be doing, and how they're supposed to be doing
it.
778
00:38:20,340 --> 00:38:21,640
That is managing.
779
00:38:21,780 --> 00:38:27,700
Coaching is truly running side by side with
them the best you can and helping them become
780
00:38:27,700 --> 00:38:29,160
the best version of themselves.
781
00:38:29,255 --> 00:38:34,535
What I will tell you as a coach, there were
many times that I would literally get down in,
782
00:38:34,535 --> 00:38:38,614
you know, on the offensive line and I would
show somebody the first step where hand
783
00:38:38,614 --> 00:38:42,949
placement should be, exactly how you get, you
know, through to the 2nd level.
784
00:38:42,949 --> 00:38:45,269
Whatever it may be, I would actually do that
with them.
785
00:38:45,269 --> 00:38:46,230
That is coaching.
786
00:38:46,230 --> 00:38:48,710
Management is going to be, okay.
787
00:38:48,710 --> 00:38:51,670
I'm grading you on the film and you didn't do
as well.
788
00:38:51,670 --> 00:38:55,925
Well, that's still part of coaching, but
management is gonna be, you know, is somebody
789
00:38:55,985 --> 00:38:58,144
doing the IC memo the way they're supposed to?
790
00:38:58,144 --> 00:38:59,765
Are they asking the right questions?
791
00:38:59,905 --> 00:39:03,585
And are they doing you know, if they're in a
capital formation role, are they making the
792
00:39:03,585 --> 00:39:03,905
calls?
793
00:39:03,905 --> 00:39:05,184
Are they having the meetings?
794
00:39:05,184 --> 00:39:06,465
Are they doing the follow-up?
795
00:39:06,465 --> 00:39:11,010
All of that stuff can be managing many times
just by looking just like in football, a film.
796
00:39:11,010 --> 00:39:11,410
Right?
797
00:39:11,410 --> 00:39:12,630
You look at their statistics.
798
00:39:12,690 --> 00:39:14,050
You look at everything in the CRM.
799
00:39:14,050 --> 00:39:15,809
You see are they doing what they're supposed to
be doing.
800
00:39:15,809 --> 00:39:18,130
And sometimes you have to come alongside them
and say, okay.
801
00:39:18,130 --> 00:39:20,849
Here are the things we gotta get better at, and
here's an improvement plan.
802
00:39:20,849 --> 00:39:23,625
But coaching is actually shoulder to shoulder.
803
00:39:23,625 --> 00:39:25,885
I'm helping you be the best version of
yourself.
804
00:39:25,945 --> 00:39:32,025
For a CEO that wants to build a great culture,
what's the percentage of turnover that they
805
00:39:32,025 --> 00:39:33,565
should expect in the early years?
806
00:39:33,625 --> 00:39:36,789
It's totally dependent on the industry and the
type of people.
807
00:39:36,849 --> 00:39:41,090
Obviously, the younger someone is, the more
turnover is just natural because of the fact
808
00:39:41,090 --> 00:39:44,289
that they're trying to figure out what they
wanna do, and they're gonna go potentially try
809
00:39:44,289 --> 00:39:46,130
multiple things, and that's fine.
810
00:39:46,130 --> 00:39:50,505
So that turnover percentage is going to be
higher than somebody who's 15, twenty 5 years.
811
00:39:50,505 --> 00:39:54,065
What I can tell you if you're trying to reverse
the culture, you're gonna have to break a lot
812
00:39:54,065 --> 00:39:54,684
of glass.
813
00:39:54,824 --> 00:40:00,284
You're going to truly have to potentially do a
complete metamorphosis of your organization.
814
00:40:00,505 --> 00:40:04,889
If your culture is bad, those same people are
not likely going to be the strong culture that
815
00:40:04,889 --> 00:40:05,369
you want.
816
00:40:05,369 --> 00:40:08,650
You may have to part ways with a lot of really
good people.
817
00:40:08,650 --> 00:40:12,250
And, you know, it's something to where that's
unfortunate, but that is the reality.
818
00:40:12,250 --> 00:40:16,489
It's one of the things that makes certain
people really good at turnaround situations is
819
00:40:16,489 --> 00:40:20,964
they're able to go into circumstances where
they're able to say, look, you know, I think
820
00:40:20,964 --> 00:40:23,764
these are all good people, but they're the
wrong people or they're on the wrong seats on
821
00:40:23,764 --> 00:40:24,164
the bus.
822
00:40:24,164 --> 00:40:28,565
And that's the other thing I think more than
anything else we've done well is we've done our
823
00:40:28,565 --> 00:40:28,885
best.
824
00:40:28,885 --> 00:40:32,484
We obviously don't get it right every time, but
we try to get people in the seat on the bus
825
00:40:32,484 --> 00:40:37,170
that's going to give them the best opportunity
to be fulfilled because people who enjoy what
826
00:40:37,170 --> 00:40:39,570
they do are more likely to work harder at it.
827
00:40:39,570 --> 00:40:43,170
They're more likely to be good at it, and
they're more likely to be, you know, happy
828
00:40:43,170 --> 00:40:43,489
about it.
829
00:40:43,489 --> 00:40:47,714
You can take somebody who's the best bean
counter in the world, but they had a massive
830
00:40:47,714 --> 00:40:50,275
need for variety, and you put them in the
corner and say, hey.
831
00:40:50,275 --> 00:40:51,634
You're gonna count beans all day long?
832
00:40:51,634 --> 00:40:53,394
They'll be good at it, but they're not gonna be
happy.
833
00:40:53,394 --> 00:40:57,795
So probably one of the biggest changes for us
was about a decade ago when we really started
834
00:40:57,795 --> 00:41:02,349
learning enough about people using a lot of
Tony's, you know, coaching materials and other
835
00:41:02,349 --> 00:41:04,510
other firms as well to be able to say, okay.
836
00:41:04,510 --> 00:41:07,469
Is this going to be something people enjoy
doing every day?
837
00:41:07,469 --> 00:41:08,670
They feel fulfilled by it.
838
00:41:08,670 --> 00:41:09,949
It meets who they are.
839
00:41:09,949 --> 00:41:12,110
Then they're likely to be very, very good.
840
00:41:12,110 --> 00:41:17,534
And so any CEO who wants that great culture,
you need to understand who your team is right
841
00:41:17,534 --> 00:41:19,635
now, what makes them tick.
842
00:41:19,855 --> 00:41:23,215
And if they're in the wrong seat on the bus,
move them to a different seat.
843
00:41:23,215 --> 00:41:27,960
But if they're a cultural cancer, get them off
the bus as fast as you can.
844
00:41:28,039 --> 00:41:30,839
People ask me all the time, what's the greatest
mistake that I've made in their career?
845
00:41:30,839 --> 00:41:34,139
And, obviously, over 24 years of running this
business, I've made a lot of mistakes.
846
00:41:34,359 --> 00:41:38,679
The greatest mistake by far is early on, I
hired very quickly and I fired very slowly.
847
00:41:38,679 --> 00:41:38,920
Right?
848
00:41:38,920 --> 00:41:41,174
That was devastating to the organization.
849
00:41:41,315 --> 00:41:45,875
What we learned the hard way was hiring very
slowly and firing very quickly.
850
00:41:45,875 --> 00:41:48,434
If somebody's not a fit, everybody knows
they're not a fit.
851
00:41:48,434 --> 00:41:49,554
We just made a mistake.
852
00:41:49,554 --> 00:41:50,434
It does happen.
853
00:41:50,434 --> 00:41:53,255
Somebody was a chameleon during the interview
process.
854
00:41:53,315 --> 00:41:54,054
It happens.
855
00:41:54,230 --> 00:41:56,230
Just move them off the bus as quickly as you
can.
856
00:41:56,230 --> 00:41:58,630
It's one of the, you know, books out there
delivering happiness.
857
00:41:58,630 --> 00:42:02,469
They actually at Zappos, they would offer
somebody money after they finish training to
858
00:42:02,469 --> 00:42:02,969
leave.
859
00:42:03,510 --> 00:42:05,190
Have you ever thought about doing that?
860
00:42:05,190 --> 00:42:06,710
So we do kind of the same thing.
861
00:42:06,710 --> 00:42:09,824
We have you know, we learned a lot from
delivering happiness book is about, you know,
862
00:42:09,824 --> 00:42:11,664
trying to make sure people are out of the
whirlwind.
863
00:42:11,664 --> 00:42:14,625
That's a big part of where Keiser University
comes from along with a lot of other books.
864
00:42:14,625 --> 00:42:18,224
But at the end of that period, we do have a
speed bump, and we're gonna decide collectively
865
00:42:18,224 --> 00:42:18,784
arm in arm.
866
00:42:18,784 --> 00:42:20,385
We're gonna go to the other side of the speed
bump.
867
00:42:20,385 --> 00:42:23,744
We're gonna get feedback from everybody that's
involved in their teaching and their coaching.
868
00:42:23,744 --> 00:42:26,559
And if we all look at each other and go, wrong
seat.
869
00:42:26,559 --> 00:42:27,679
We're gonna try a different seat.
870
00:42:27,679 --> 00:42:32,000
Or if they say, this is just somebody who's not
a fit for our bus, we will we will move them
871
00:42:32,000 --> 00:42:34,320
on, move them off the bus for sure.
872
00:42:34,320 --> 00:42:38,894
We've we don't want to ever do that, but it's
better for them to not be in a position they're
873
00:42:38,894 --> 00:42:41,375
not happy with for a couple of years and then
move on.
874
00:42:41,375 --> 00:42:42,734
Let them move on with their life.
875
00:42:42,734 --> 00:42:44,894
And more importantly, don't damage the culture.
876
00:42:44,894 --> 00:42:48,654
That's one of the hidden reasons why the
delivering happiness works because somebody
877
00:42:48,654 --> 00:42:52,029
that doesn't want to be in a culture, they
might themselves have a friction of quitting.
878
00:42:52,029 --> 00:42:55,789
So you're also enabling them to find a place
that they belong in.
879
00:42:55,789 --> 00:42:59,329
How much damage could a single employee bring
to an organization?
880
00:42:59,469 --> 00:43:00,029
A lot.
881
00:43:00,029 --> 00:43:04,589
I mean, it's hard to define, but someone can
literally destroy a culture if they're a big
882
00:43:04,589 --> 00:43:06,369
enough cancer in that culture.
883
00:43:06,775 --> 00:43:11,275
Most of the time, you know, if it's a really
good culture, the other people will identify
884
00:43:11,335 --> 00:43:11,994
that person.
885
00:43:12,054 --> 00:43:14,775
They will either coach them up or they'll coach
them out.
886
00:43:14,775 --> 00:43:20,369
And that is a way that we really tell our folks
is that, you know, as we've grown so fast, it's
887
00:43:20,369 --> 00:43:22,130
really, really hard to know for sure.
888
00:43:22,130 --> 00:43:24,369
We do our best, but we're going to make
mistakes.
889
00:43:24,369 --> 00:43:28,130
And it's not just leadership who needs to
decide that person's not a fit.
890
00:43:28,130 --> 00:43:32,210
If 5 or 6 like this happened recently, you
know, to where 5 or 6 people come and say, I'm
891
00:43:32,210 --> 00:43:33,269
not sure if you're aware.
892
00:43:33,474 --> 00:43:37,014
It's another great thing about quarterly
reviews because you can have those things more,
893
00:43:37,074 --> 00:43:39,714
you know, more frequently to be able to get
that feedback.
894
00:43:39,714 --> 00:43:40,514
You know, just say, look.
895
00:43:40,514 --> 00:43:44,434
This person is not working out, and they're
actually starting to become a distraction for
896
00:43:44,434 --> 00:43:44,934
everybody.
897
00:43:45,155 --> 00:43:49,219
We just need to let them go because it's not
fair to the rest of the team that's busting
898
00:43:49,219 --> 00:43:53,380
their hump and trying to be excellent in all we
do to have this person who's just kind of okay
899
00:43:53,380 --> 00:43:56,420
with mediocrity and just doesn't get it and
doesn't wanna work that hard.
900
00:43:56,420 --> 00:43:59,219
Again, we made a mistake in hiring, so that's
shame on us.
901
00:43:59,219 --> 00:44:03,554
We're not gonna duplicate that mistake or
compound that mistake by leaving them on the
902
00:44:03,554 --> 00:44:03,954
bus.
903
00:44:03,954 --> 00:44:06,195
We need to coach them up, and we need to coach
them out.
904
00:44:06,195 --> 00:44:10,775
The quarterly reviews are allowing you to
triangulate feedback on a single employee,
905
00:44:10,994 --> 00:44:14,594
which both leads to better decision making as
well as empowering you as a leader.
906
00:44:14,594 --> 00:44:15,094
Correct.
907
00:44:15,280 --> 00:44:19,119
And we have lots and lots of other tools that
we use throughout the year, including our
908
00:44:19,119 --> 00:44:22,880
annual 360, which is exhausting, but incredibly
valuable.
909
00:44:22,880 --> 00:44:26,480
Every single year, I spend so much of my life
focused on those 360.
910
00:44:26,480 --> 00:44:27,764
I'm like, is this really worth it?
911
00:44:27,764 --> 00:44:29,844
And every time I finish those, I'm like, oh my
gosh.
912
00:44:29,844 --> 00:44:30,804
That was so worth it.
913
00:44:30,804 --> 00:44:35,924
Because we identify very objectively where
people are strong, where people you know, it's
914
00:44:35,924 --> 00:44:37,045
another one of our promises.
915
00:44:37,045 --> 00:44:38,984
Embrace our strengths, design around our
weaknesses.
916
00:44:39,125 --> 00:44:42,005
Every one of us have a superpower, and every
one of us have a kryptonite.
917
00:44:42,005 --> 00:44:45,579
We need to know what our superpower is, and we
need to make sure we don't get close to the
918
00:44:45,579 --> 00:44:46,059
kryptonite.
919
00:44:46,059 --> 00:44:50,619
So therefore, we can design around it if we
know and we have constant feedback from the
920
00:44:50,619 --> 00:44:55,500
individual, as well as obviously their peers,
as well as their supervisor and the other
921
00:44:55,500 --> 00:44:57,914
people that they engage with across the
organization.
922
00:44:58,135 --> 00:45:02,614
And going back to the culture question, it has
to be not just little silos of capital
923
00:45:02,614 --> 00:45:04,855
formation is great and investor relations is
great.
924
00:45:04,855 --> 00:45:05,574
It's got to be.
925
00:45:05,574 --> 00:45:09,094
We're all great because we're all working
together, rowing the boat in the same
926
00:45:09,094 --> 00:45:12,394
direction, and everybody is pulling in
sequence.
927
00:45:12,500 --> 00:45:13,400
I use a lot of personality.
928
00:45:13,619 --> 00:45:16,019
And it even starts in the recruiting process.
929
00:45:16,019 --> 00:45:16,420
Right?
930
00:45:16,420 --> 00:45:20,339
You have signed you have opt in to your culture
at a pretty early stage.
931
00:45:20,339 --> 00:45:20,659
Correct.
932
00:45:20,659 --> 00:45:25,219
And if somebody is not going to be successful
in our culture, they don't feel like they
933
00:45:25,219 --> 00:45:26,260
embrace our culture.
934
00:45:26,260 --> 00:45:26,985
That's fine.
935
00:45:27,385 --> 00:45:30,105
It nobody our culture is not a perfect fit for
everybody.
936
00:45:30,105 --> 00:45:33,465
And if somebody doesn't fit our culture, it's
not gonna be good for them.
937
00:45:33,465 --> 00:45:34,425
That's not gonna be good for us.
938
00:45:34,425 --> 00:45:36,184
So let's make sure we identify it early.
939
00:45:36,184 --> 00:45:37,704
Let's be very transparent about it.
940
00:45:37,704 --> 00:45:38,744
Let's be very honest about it.
941
00:45:38,744 --> 00:45:42,820
I mean, obviously, Bridgewater for decades has
had one of the most unique and extreme
942
00:45:42,820 --> 00:45:45,780
cultures, but yet it was massively successful
for them.
943
00:45:45,780 --> 00:45:49,380
Well, people knew when you went to work for
Bridgewater, that's what you were gonna get.
944
00:45:49,380 --> 00:45:51,380
And if you didn't know that, you just weren't
paying attention.
945
00:45:51,380 --> 00:45:55,460
In our world, obviously, it's not as extreme
culture as many of the things that they had
946
00:45:55,460 --> 00:45:58,155
done there, but we do have what we do.
947
00:45:58,155 --> 00:46:01,914
And if people don't like the way that we do
things, the way that we market, the way that we
948
00:46:01,914 --> 00:46:03,994
approach things, the way we invest, that's
okay.
949
00:46:03,994 --> 00:46:06,075
What we do is not perfect, but it is proven.
950
00:46:06,075 --> 00:46:10,875
And if somebody's not willing to buy into that
this is proven and it's been successful for 24
951
00:46:10,875 --> 00:46:14,190
years, made a lot of mistakes along the way,
and we tried to learn from them.
952
00:46:14,190 --> 00:46:17,789
That is, you know, literally another one of our
promises is that, you know, recognize our
953
00:46:17,789 --> 00:46:20,110
mistakes, own our mistakes, and grow from them.
954
00:46:20,110 --> 00:46:21,630
So that is part of it.
955
00:46:21,630 --> 00:46:22,750
We're not going to be perfect.
956
00:46:22,750 --> 00:46:26,924
But if somebody knows we're striving for
excellence and this is the way we go about
957
00:46:26,924 --> 00:46:31,164
doing it and they opt into it, they should have
a lot of fun, make a heck of a lot of money,
958
00:46:31,164 --> 00:46:35,724
and most importantly, deliver great results for
the investors that invest with us.
959
00:46:35,724 --> 00:46:36,174
As your profile in the industry has grown and
across the world, you now have a book with Tony
960
00:46:36,174 --> 00:46:36,181
Robbins.
961
00:46:36,181 --> 00:46:39,949
How do you make sure has grown and across the
world, you now have a book with Tony Robbins.
962
00:46:39,949 --> 00:46:41,505
How do you make sure that you're getting
963
00:46:41,505 --> 00:46:41,615
the feedback from the
964
00:46:41,615 --> 00:46:42,049
organization that you need to be a better
leader?
965
00:46:42,049 --> 00:46:43,409
The 3 sixties are there.
966
00:46:43,409 --> 00:46:44,369
I get reviewed just like everybody else
967
00:46:44,369 --> 00:46:45,650
does, and it's sometimes really painful.
968
00:46:45,650 --> 00:46:48,630
But we embrace a culture of healthy conflict,
another promise.
969
00:46:52,715 --> 00:46:52,954
Right?
970
00:46:52,954 --> 00:46:56,394
If people are not willing to tell me when I'm
not doing well, I can't grow.
971
00:46:56,394 --> 00:46:59,355
There's not a single football player, and
again, I'll use football because that was my
972
00:46:59,355 --> 00:46:59,594
sport.
973
00:46:59,594 --> 00:47:02,715
There's not a single football player who's
like, I don't want anybody to tell me how I can
974
00:47:02,715 --> 00:47:03,114
be better.
975
00:47:03,114 --> 00:47:05,820
If they are that way, then they're not gonna be
successful.
976
00:47:05,900 --> 00:47:09,519
They may be gifted beyond belief, but they're
never gonna reach their full potential.
977
00:47:09,579 --> 00:47:13,420
If somebody is like, I know I'm really good at
what I do, but I need to be coached.
978
00:47:13,420 --> 00:47:14,300
I need to get better.
979
00:47:14,300 --> 00:47:15,260
I need to practice.
980
00:47:15,260 --> 00:47:16,239
I need to improve.
981
00:47:16,380 --> 00:47:18,224
I need to get more and more reps.
982
00:47:18,224 --> 00:47:21,905
You know, again, that's a beautiful thing about
this day and age and, you know, every single
983
00:47:21,905 --> 00:47:22,625
coach has said this.
984
00:47:22,625 --> 00:47:25,825
Most people have never played football, have
never heard it, but the eye in the sky don't
985
00:47:25,825 --> 00:47:26,224
lie.
986
00:47:26,224 --> 00:47:26,704
Right?
987
00:47:26,704 --> 00:47:29,985
The film will tell you exactly what you thought
you did on that play.
988
00:47:29,985 --> 00:47:31,425
I didn't step with the wrong foot, coach.
989
00:47:31,425 --> 00:47:32,730
Honest, I really, really didn't.
990
00:47:32,730 --> 00:47:32,969
Okay.
991
00:47:32,969 --> 00:47:34,170
Well, the eye and the sky don't lie.
992
00:47:34,170 --> 00:47:34,570
We'll see.
993
00:47:34,570 --> 00:47:37,369
Most of the time, they step with the wrong
foot, which is why they got knocked on their
994
00:47:37,369 --> 00:47:37,869
butt.
995
00:47:37,929 --> 00:47:40,409
So that is for us the same thing here.
996
00:47:40,409 --> 00:47:46,105
Every speech that I make, every podcast that I
do, I want the team to critique me and tell me
997
00:47:46,105 --> 00:47:48,025
what I can do better, how I can improve.
998
00:47:48,025 --> 00:47:52,025
And we want to have everybody in the
organization take the same approach to
999
00:47:52,025 --> 00:47:57,385
rehearse, to work together, to be able to role
play, whatever the case might be, even for our
1000
00:47:57,385 --> 00:47:58,025
investment team.
1001
00:47:58,025 --> 00:48:00,819
We just came back from New York, and we were
with meetings here.
1002
00:48:00,819 --> 00:48:01,940
We want them to role play.
1003
00:48:01,940 --> 00:48:02,179
Okay.
1004
00:48:02,179 --> 00:48:04,819
If you were leading that meeting, what
questions would you ask?
1005
00:48:04,819 --> 00:48:05,859
Where would you dig?
1006
00:48:05,859 --> 00:48:10,579
How would you, you know, try to define or,
identify what it is or the key strengths and
1007
00:48:10,579 --> 00:48:11,880
weaknesses of that organization?
1008
00:48:11,940 --> 00:48:17,385
We want them to do that with each other and do
that with reps that are consistent in private,
1009
00:48:17,444 --> 00:48:20,964
so when the bullets start flying in the real
world that they know how to handle it.
1010
00:48:20,964 --> 00:48:26,644
That is what excellence is, and that's why we
want everybody all the way from the top of the
1011
00:48:26,644 --> 00:48:30,885
organization to the newest people in the
organization to be able to truly get that
1012
00:48:30,885 --> 00:48:35,340
feedback, which comes from embracing culture,
healthy conflict, and elevate our teammates and
1013
00:48:35,340 --> 00:48:35,820
help them grow.
1014
00:48:35,820 --> 00:48:37,039
Another one of our promises.
1015
00:48:37,260 --> 00:48:38,300
That is what we want.
1016
00:48:38,300 --> 00:48:42,860
And if they do it, everybody wins and everybody
makes more money and everybody has more
1017
00:48:42,860 --> 00:48:46,494
fulfilment because of that constant feedback
across the organization.
1018
00:48:46,795 --> 00:48:51,755
Culture like reputation, there's always a
stated culture and an actual culture.
1019
00:48:51,755 --> 00:48:55,035
And when those kind of come together, it's it's
a beautiful thing.
1020
00:48:55,035 --> 00:49:00,440
You're lobbying with Tony Robbins, Congress in
order to expand access to alternatives to the
1021
00:49:00,440 --> 00:49:00,840
masses.
1022
00:49:00,840 --> 00:49:02,039
Tell me a little bit about that.
1023
00:49:02,039 --> 00:49:04,860
We're very excited about the progress that
we've we're making.
1024
00:49:05,159 --> 00:49:09,340
Earlier this year, the house of representatives
passed in an overwhelming fashion.
1025
00:49:09,534 --> 00:49:14,255
You know, I can't remember the exact count was,
but call it 378 out of 435 people voted for
1026
00:49:14,255 --> 00:49:20,655
legislation that would allow investors of any
income level, of any net worth level, to be
1027
00:49:20,655 --> 00:49:21,775
able to take a test.
1028
00:49:21,775 --> 00:49:26,429
The SEC would create the test, and then if they
pass that test, they can become an accredited
1029
00:49:26,429 --> 00:49:26,909
investor.
1030
00:49:26,909 --> 00:49:31,389
That enables them to have access to things that
they currently are not allowed to invest in.
1031
00:49:31,389 --> 00:49:36,429
The government of the United States or any
country should not tell people what they can
1032
00:49:36,429 --> 00:49:37,869
and cannot invest in.
1033
00:49:37,869 --> 00:49:38,909
That is not freedom.
1034
00:49:38,909 --> 00:49:41,264
At the same time, people need to know what
they're doing.
1035
00:49:41,264 --> 00:49:45,905
So I fully support that there needs to be a
level of knowledge for people to invest in
1036
00:49:45,905 --> 00:49:47,744
things that are a little bit harder to
understand.
1037
00:49:47,744 --> 00:49:49,744
It's one thing to go out and buy Apple stock.
1038
00:49:49,744 --> 00:49:53,025
A lot of people that buy Apple stock, they
don't understand that it actually can go down
1039
00:49:53,025 --> 00:49:53,610
and go up.
1040
00:49:53,769 --> 00:49:54,090
Right?
1041
00:49:54,090 --> 00:49:59,769
But if they are willing to sit and take a test
to become accredited, they should be able to
1042
00:49:59,769 --> 00:50:05,050
invest in anything that some very, very rich
person that happened to inherit a lot of money
1043
00:50:05,050 --> 00:50:06,090
but doesn't have a clue.
1044
00:50:06,090 --> 00:50:08,784
And there's obviously a lot of people that do
have a clue, but there's we all know people
1045
00:50:08,784 --> 00:50:10,545
that have inherited a bunch of money, don't
have a clue.
1046
00:50:10,545 --> 00:50:13,824
They can invest in anything they want, but yet
this person that's really, really smart,
1047
00:50:13,824 --> 00:50:17,824
intelligent, but has chosen to work for charity
or has chosen to be a teacher or has chosen to
1048
00:50:17,824 --> 00:50:21,184
do some other very worthy profession, they're
not allowed to invest.
1049
00:50:21,184 --> 00:50:21,824
That's not right.
1050
00:50:21,824 --> 00:50:26,679
I mean, one of our former Fed chairs, literally
when they took over as Fed chair, they were not
1051
00:50:26,679 --> 00:50:27,880
an accredited investor.
1052
00:50:27,880 --> 00:50:28,519
That's insane.
1053
00:50:28,519 --> 00:50:32,920
They were the most powerful monetary person in
the world, yet they could not invest in other
1054
00:50:32,920 --> 00:50:36,039
things that some others could do, the things
that other people could do.
1055
00:50:36,039 --> 00:50:40,764
So in his case, he then never made enough money
because he was an academic.
1056
00:50:40,764 --> 00:50:43,164
But once he became Fed chair, he obviously made
enough money.
1057
00:50:43,164 --> 00:50:44,764
He could be an accredited investor at that
point.
1058
00:50:44,764 --> 00:50:47,324
There's no there should not be an arbitrary
dollar amount.
1059
00:50:47,324 --> 00:50:49,804
So the good news is is that it passed the
house.
1060
00:50:49,804 --> 00:50:51,449
It's been in the senate for a while.
1061
00:50:51,609 --> 00:50:56,170
Governor, excuse me, senator Tim Scott just
actually filed along with basically the entire
1062
00:50:56,170 --> 00:51:00,089
senate finance committee, a new legislation
that will be kind of a sister legislation to
1063
00:51:00,089 --> 00:51:00,329
this.
1064
00:51:00,329 --> 00:51:04,545
What we're really hopeful is that before year
end, regardless of who wins the election, that
1065
00:51:04,545 --> 00:51:10,224
during the session between the election and the
next inauguration, that the senate will pass,
1066
00:51:10,224 --> 00:51:14,385
the house will reconcile with them, they'll get
it to the president's desk, and the president
1067
00:51:14,385 --> 00:51:19,010
will sign it to allow people to actually have
the opportunity to be able to take the test, to
1068
00:51:19,010 --> 00:51:23,269
be able to invest as an accredited investor,
and to be able to have at least the opportunity
1069
00:51:23,329 --> 00:51:27,170
to be able to invest in things that potentially
could get them a higher return, in many cases,
1070
00:51:27,170 --> 00:51:27,809
less risk.
1071
00:51:27,809 --> 00:51:32,414
How should people keep in contact with you and
learn more about CAS and everything that you're
1072
00:51:32,414 --> 00:51:32,894
working on?
1073
00:51:32,894 --> 00:51:35,054
So kazinvestments.com is the website.
1074
00:51:35,054 --> 00:51:36,275
It's very user friendly.
1075
00:51:36,335 --> 00:51:38,755
We can you can reach us, reach our team.
1076
00:51:38,815 --> 00:51:41,614
You can look at a lot of the things that we're
involved in right now.
1077
00:51:41,614 --> 00:51:45,394
But certainly, we also are on LinkedIn, and on
Twitter.
1078
00:51:45,639 --> 00:51:47,000
So people can follow us there.
1079
00:51:47,000 --> 00:51:51,400
We're much more active on LinkedIn as well as,
obviously, our website is where there's just a
1080
00:51:51,400 --> 00:51:55,960
tremendous amount of information, both
educational and informational, on that site.
1081
00:51:55,960 --> 00:51:58,519
And and also make sure to check out this book.
1082
00:51:58,519 --> 00:51:59,480
I'm halfway through it.
1083
00:51:59,480 --> 00:52:00,280
It's really good.
1084
00:52:00,280 --> 00:52:05,994
It's it's both accessible as well as, a lot of
the endowments and pensions will will enjoy
1085
00:52:05,994 --> 00:52:06,795
reading it as well.
1086
00:52:06,795 --> 00:52:08,554
And thank you, Christopher, for taking the
time.
1087
00:52:08,554 --> 00:52:09,675
Well, I appreciate it very much.
1088
00:52:09,675 --> 00:52:13,034
The one thing about the book that I'll say
before we close is that we wrote it
1089
00:52:13,034 --> 00:52:17,230
intentionally to where people that are very,
very sophisticated will get a lot out of it,
1090
00:52:17,230 --> 00:52:18,670
and those that are brand new.
1091
00:52:18,670 --> 00:52:21,710
One of the things I'm most proud of, New York
Times number one bestseller.
1092
00:52:21,710 --> 00:52:22,269
That's great.
1093
00:52:22,269 --> 00:52:23,070
I love that.
1094
00:52:23,070 --> 00:52:28,510
But what I'm most proud of is how many times I
hear about adults, parents that are buying
1095
00:52:28,510 --> 00:52:32,684
copies and giving it to their children because
it is understandable for a young person, but it
1096
00:52:32,684 --> 00:52:37,405
also is very interesting for somebody that is,
you know, an advanced person in the world of
1097
00:52:37,405 --> 00:52:37,905
finance.
1098
00:52:37,964 --> 00:52:42,639
And for everyone in our industry, reading the
interviews in the back, the second half, with
1099
00:52:42,639 --> 00:52:47,840
some of the top investors of our time, not just
today, but of all time, is something that
1100
00:52:47,840 --> 00:52:49,280
everybody will get value from.
1101
00:52:49,280 --> 00:52:50,400
So thank you for that.
1102
00:52:50,400 --> 00:52:51,119
I really enjoyed the
1103
00:52:51,199 --> 00:52:53,360
And speak speaking I'm looking at the back.
1104
00:52:53,519 --> 00:52:56,844
You got Ray Dalio recommending it, Carl Icahn.
1105
00:52:56,844 --> 00:52:58,465
So you're in good great company.
1106
00:52:58,525 --> 00:52:59,325
Thank you very much.
1107
00:52:59,325 --> 00:52:59,920
This has been fun.
1108
00:52:59,920 --> 00:53:00,035
Thank
1109
00:53:00,035 --> 00:53:01,025
thank you, Christopher.
1110
00:53:01,246 --> 00:53:02,306
Thank you for listening.
1111
00:53:02,527 --> 00:53:07,507
The 10x Capital podcast now receives more than
a 170,000 downloads per month.
1112
00:53:07,726 --> 00:53:10,867
If you are interested in sponsoring, please
email me at david@10xcapital.com.
