E276: Lessons from Allocating $70B as CIO at the University of Texas

Why do the biggest investing breakthroughs come not from complexity, but from simplicity and why is that so hard for smart people to accept? In this episode, I talk with Britt Harris, one of the most experienced institutional investors in the world, about what really drives long-term investment success inside large pools of capital. Britt explains why simplicity beats complexity, how scale creates negotiating power and structural advantage, and why engagement — not intelligence — is the true separator of performance. We discuss how innovation in investing is usually recombination, not invention, why empowered teams outperform credentialed ones, and how leaders can systematically create cultures that compound.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Weisburd?

  You have one of the most prolific backgrounds of any guests on the podcast, from your time as a CIO of UTIMCO, the University of Texas Endowment, which is the second largest endowment, to your time as CIO of Texas Permanent and Texas Teachers Retirement System, and even a brief stint as CEO of Bridgewater Associates, which is the largest hedge fund on the market. So let's start at UTIMCO. What gets easier when you have a pool of capital like $70 billion?

• 0:31Speaker 01

  What gets easier is negotiations. So let's just, do you have a big number on your back? Negotiations a lot easier.

• 0:40Speaker 01

  People come to me and say, Brett, you know, tell us how you negotiate so well. And I'll say, well, first of all, get $100 billion on your back, and then see how it works out. So your ability to dictate terms, or modify terms, or to get organizations to do things that they probably wouldn't do for smaller operations is one.

• 1:03David Weisburd?

  You mentioned with funds, you're able to negotiate better terms. Does that just come down to fees and co-invest? Are there other strategic benefits?

• 1:12Speaker 01

  So how much do you know about strategic partnerships? Just use as an example.

• 1:17David Weisburd?

  Tell me more.

• 1:20Speaker 01

  In the very beginning, it was to deliver numbers, to deliver, you know, returns daily. Run these big funds. I want to know my positions daily.

• 1:35Speaker 01

  Well, we can't do that because it's an accounting kind of structure because of the banks. I said, wait a minute, don't you report daily for the mutual funds?

• 1:45Speaker 01

  And so I remember we were going around. I asked there were a bunch of firms and I asked the first one, can you do it? And he said, no. Second one, can you do it? He said, no. The third one, can you do it? And he said, no. The fourth guy said, I can't believe it. We've been doing this for three or four years. And I'm going to give these people the benefit of that. They weren't lying. They really thought they couldn't do it.

• 2:05Speaker 01

  Yeah, but when they go back and they tell their people and I was sitting in there telling, telling one of our top clients that we couldn't do something. And then the guy next to me said they do it all the time. You guys tell me we couldn't do it. That made us look bad. The so pretty soon we have better numbers. You know, they're more accurate, getting them earlier, you know, than other people. That'd be one example.

• 2:27David Weisburd?

  One of the most underrated things is this four minute mile. Roger Bannister broke the four minute mile. It people thought it was literally impossible for many years. And then after he broke it, I think eight people broke it within like two months. I think that applies to all aspects. People just think they can't do something. But once you actually show them that they somehow magically do it. And it's not that they didn't want to do it. Sometimes they just don't think that they can do it.

• 2:51Speaker 01

  Yes, absolutely. Everybody said this is impossible and then they buy into it. Then one guy doesn't buy into it, breaks it and said, well, I gotta, I gotta reset my entire framework. And part of the job of the, of the CEO or the boss is to inject that mindset into as many people as possible. Most people unfortunately think that what they can do is very contained. Yep. They, they can't do anything other than this and that's all that's possible. And then somebody says, well, but if you show them that somebody else is doing it or show them how they can do it. And then you have to have people who want to do better. You know, they want, they want to do better. They want the extra responsibility. They want to improve.

• 3:34Speaker 01

  And surprisingly, that's not a, that's not a large percentage of people.

• 3:38David Weisburd?

  How would you define that?

• 3:40Speaker 01

  Here's some managerial science for you. The, if you have a hundred people in your organization, in your church, in your Quads Club, in your investment group, and whatever it is, you have a hundred people. Your prior should be that thirty, thirty of them are fully engaged. Thirty of them, they come to work every day. They give their all from sunup to sundown. They do it whether the project is exciting or not exciting. Those are real professionals and that's their, they're fully engaged, that thirty percent. Fifty percent of the people are partially engaged.

• 4:15Speaker 01

  Sometimes they're engaged, sometimes they're not engaged. Now, some of that are people who like, they're not really interested in having a big career. You know, they're kind of like, I need a certain amount of money. I like this company. I want to come in at five. I want to leave at eight. I want to get $10. And that's totally rational. That's all of it.

• 4:36Speaker 01

  But then you have some really highly capable people.

• 4:40Speaker 01

  Who, for whatever reason is they just can't, they cannot stay engaged long enough to complete projects. Um, one of my, one of my, one of my bucket list things is to teach at every Ivy League school. So I've, I've got most of them, but for why?

• 4:59David Weisburd?

  What are you missing?

• 5:00Speaker 01

  I'm missing Stanford, you know, kind of a west coast crowd. The, and um, so I get a, get a chance to speak at Princeton. And I just learned this concept about fully engaged and. So I, it wasn't, wasn't a big class from 15 people or so. And I said, look, I'm really honored to be here. I'm going to admit something to you in my early 50s. Like I, I would have never gotten into this school. You know, the require, the intellectual requirement to get into Princeton.

• 5:30Speaker 01

  Are beyond what I could have, what I could have satisfied. But, and it's just not false humility. It's just a fact that I don't really care. I've been, I've done fine. Just pointing that out. So, cause I have a question for him, which I want you to use your higher intellect to answer. And the question is this. I've run eight companies and I've had a lot of people from Princeton work for me, a lot. And I love it. They're fantastic. But I've never worked for somebody from Princeton.

• 6:05Speaker 01

  So how do you explain that? How do you explain that I could never sit next to you in school? But you're, I'm going to be your boss.

• 6:14Speaker 01

  And a big part of that answer is I'm fully engaged and you're not.

• 6:19Speaker 01

  And a fully engaged person will outperform a partially engaged person, even if their doubt is less than the partially engaged person is guaranteed.

• 6:34Speaker 01

  So I get asked all the time, what can I do to be more successful?

• 6:37David Weisburd?

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• 7:22Speaker 01

  And I said, you're going to be, are you fully engaged? Because if you're fully engaged, you will be in the top third. And then there's stuff you do after that.

• 7:31David Weisburd?

  So you mapped out 30 fully engaged people, 50 kind of on the fence, 20 presumably just lost causes.

• 7:40Speaker 01

  Well, they're terrorists. They're working against the organization.

• 7:43David Weisburd?

  So within those 50, how many of those could be managed or motivated into full engagement in your experience?

• 7:50Speaker 01

  Not many.

• 7:52Speaker 01

  The, you know, if you're, if you're type of person who just is not naturally fully engaged, you don't really have the, the.

• 8:06Speaker 01

  Kind of the effort gene.

• 8:10David Weisburd?

  And it's not a talent gene, it's an effort gene.

• 8:13Speaker 01

  Yeah, you know, you you make the effort, you stay with it long enough. And you know, you care about something enough that you're curious about something enough that you just stay there till it's done. I mean, I'll give some examples, the. You know, I've had some really, really smart, lots of really smart PhDs, you know, working with me. And I'm just a bachelor, you know. And I'll go over and if, let's say it's you and I'm, you know, I'll work with you to kind of get some models up and running. And, you know, we'll work together. And then I'll say, look, you know, this is going, this seems like it's going well. I've got other folks that I need to tend to and.

• 8:56Speaker 01

  You know, so you're good, right? Kind of like, you're up.

• 9:02Speaker 01

  But if I come back a week later, you're back down again.

• 9:07Speaker 01

  I just think people have to ask themselves honest questions about, am I?

• 9:13Speaker 01

  Am I fully engaged? And the, we have one genius. Every single person is a genius at one thing. What do you think that is? Everyone in the world is a genius at this. What do you think it is?

• 9:28David Weisburd?

  Staying alive.

• 9:30Speaker 01

  No, because a lot of us don't. We have an effort of trying to stay alive. We're, we all have a G's in trying to, that we can rationalize that we're okay.

• 9:41Speaker 01

  You know, that we're not the bad guy, you know, that we're doing, you know, that we have somehow, you know, produce as much or more than other people. When I'm at my classes, you know, about two thirds of the way through, I'll, I'll throw a question out there to them and bunch among many. The question is, do you think you've contributed more than half, more than half of the class has or less than half of the class has? I deliberately don't put an average. So what do you think happens?

• 10:11David Weisburd?

  Eighty, ninety percent say more than half.

• 10:13Speaker 01

  Yes, at least eighty percent put themselves in an upper group. And several people will roll right in average. Because, you know, they just can't, they can't say below average, they just can't do it. You know, but you know, that obviously just math is half of them below average and half of them above average. So people have to be realistic with themselves and ask themselves, you know, am I? Am I really fully engaged? And it's, and what people do is, well, I did this one thing. And, you know, you might've done ten things, but I did this one thing. And then they'll say, well, the one thing I did was more important than ten things you did. Cause they get to grade themselves. There's this new idea of empowerment. And I would say that every boss in the world is half decent, wants to empower everybody he can.

• 10:58Speaker 01

  Everybody she can.

• 11:01Speaker 01

  But that people don't say, well, what do you have to do to be empowered? It's not just you want to be empowered, it's kind of, that's, that's good that you want to be empowered, but. You know? What do you need to do to deserve to be empowered? And it's not, it's not.

• 11:18Speaker 01

  You're, you're, it's not your impression of yourself.

• 11:23Speaker 01

  So I'll give you a little formula.

• 11:27Speaker 01

  Customer plus empathy plus development plus agreement equals empowerment.

• 11:34Speaker 01

  I don't care that much about how you think you're doing, although I do care. I care more about how your customer thinks you're doing.

• 11:42Speaker 01

  You know, that's the most important thing. How does your customer think you're doing? I think I'm doing great. Well, if your customer thinks you're not doing great. And the customer's, you know, the one we're trying to take care of, you're not going, doing great. The, so you gotta think about the customer. Empathy means that.

• 11:59Speaker 01

  Then people will say, well, I want to collaborate with the customer. Well, you gotta earn that. If you start throwing empathy with what they want to get accomplished.

• 12:09Speaker 01

  And you can get behind what they're doing and then add to it. You know, you're, you're going to partner up with your customer. And people say, well, I don't have a customer, I'm all internal. Yes, you do. There's a thing called next operation is customer. Whoever you give that report to is your customer.

• 12:23Speaker 01

  The, then we offer great development. And did you take the development or did you not take the development? And the most important thing. Among many for a professional person is they, they keep their word. You make agreements and you keep your agreements.

• 12:41Speaker 01

  If you don't, you can't and you shouldn't advance if you're somebody who doesn't keep your agreements.

• 12:50David Weisburd?

  Preparing for this interview, I learned that you've innovated on over three trillion in financial projects with a T. Tell me about your process for creating new financial instruments.

• 13:02Speaker 01

  I remember a story I was watching that they had the, they had the guy who created the Apple Watch and they had the world's most famous architect. And so, and they were there because they want to talk about creativity.

• 13:18Speaker 01

  And that's the world's most famous architect looked like he was probably in his early eighties, looked very good shape and he looked very cool, but as you know, he was older. And somebody asked him a question like that and he said, I haven't recreated anything new. I've just been built on top of what other people prepared before me. There's two types of creativity. There's one type that there's something that's never been thought of. It's nobody's, and somebody just creates something completely out of their own mind, completely from scratch. And that thing changes the world. That's, I'm not that kind of creative.

• 13:59Speaker 01

  The, you know, I look around and say, I have all these things and here I don't have this. And so therefore I need to, we have one, one firm that when we engaged them, they, you know, we had, and our, what we needed was somebody had a growth and a value portfolio. And I called it, you know, we needed, we need a plane with, you know, two wings. And this firm at the time, this is a long time ago, said, well, we don't do growth. You know, we only do value.

• 14:31Speaker 01

  And we weren't trying to be mean about it. It's just kind of like,

• 14:35Speaker 01

  we, you know, we're not here to buy a one, one, um, one wing plane. We need you to put a growth portfolio up. And so eventually they relented. They put a growth portfolio up.

• 14:49Speaker 01

  And now that growth strategy is huge. And can you imagine if they didn't have a growth portfolio?

• 14:53David Weisburd?

  I wonder, as you talk about these two different models of innovation, whether there's even some, something as making something from scratch. I wonder if it's just people that are not aware of where they're getting ideas and whether all innovation really comes from the second tier, which is putting things together in a new way.

• 15:08Speaker 01

  It's largely putting together things. But there, it's not zero. You know, Michelangelo would be a type of person that he didn't start from anything. Remember, he even said, I don't even, when he was, when he was doing his sculptures, he would even say, I don't even know what the guy's going to look like until I find him in the marble. You know, if you were to try to find something that Michelangelo did ahead of time, like a little sketch or a plaster of Paris, that thing would be worth millions of dollars because there's nothing. But yes, you're right. It's most creativity is looking at what, what world around you and just adding the next thing to it.

• 15:45David Weisburd?

  One idea that immediately came to mind, I'm sure you know, tax loss harvesting right now is one of the hottest trend, if not the hottest trend, trend in taxable and high net worth. And now people are actually doing this in other areas. So right now it's long, short, public equities. David Kabler's family office is now actually doing it in real estate. Yesterday, somebody pitched me doing this around crypto because there's more volatility. So I wonder if that's the kind of innovation that you've done in your career, which is taking something and iterating one or two steps on it, seeing what the market naturally is buying and tweaking in a way that really resonates maybe to a new market or to larger town.

• 16:27Speaker 01

  Yeah, I try to, I try to differentiate between a fan

• 16:33Speaker 01

  or, um, you know, a gimmick that's, you know, really attractive, but in the beginning, but it's really not that. So I'm, I don't know anything about tax loss harvesting, but I'm skeptical that it's going to be a great idea on a long-term basis.

• 16:51David Weisburd?

  Tell me about the complexity syndrome.

• 16:56Speaker 01

  It turns out that there's a thing called complexity syndrome. And complexity syndrome is if you're highly educated, then you want to believe complexity is better than simplicity. You know, what's the purpose of all this education? If, if, you know, making things more complicated isn't better than keeping things simple. But I think all practical people know that simplicity is actually the highest form of reliability, not complexity. You make something more complex, maybe it's more powerful at times, but it's less reliable.

• 17:30David Weisburd?

  What's an example of that? What, what's something that's over complicated that, that's simplified?

• 17:36Speaker 01

  A race car. The, you know, that race car is going to go faster and do all those kinds of things, but it's also going to be in the shop, you know, a lot more. The, um, the baseline is can I get to my target return with the simplest things possible? Can I do it with liquid assets? Can I do it just with index funds? Our products are meant to be next generation products, but not in a supersonic kind of way, just kind of like we're not going to be. It's going to be more simple. It's going to not require a lot of illiquidity. It's not going to be highly levered and it's not going to cost as much.

• 18:16David Weisburd?

  Brett, this is an absolute masterclass. We have to do a second recording soon. Thanks so much for jumping on the podcast.

• 18:22Speaker 01

  My pleasure. Thank you very much. Take care.

• 18:24David Weisburd?

  That's it for today's episode of How I Invest. If this conversation gave you new insights or ideas, do me a quick favor. Share with one person in your network who'd find it valuable or leave a short review wherever you listen. This helps more investors discover the show and keeps us bringing you these conversations week after week.