Bruce Flatt on Value, Discipline, and Durability

Brookfield CEO Bruce Flatt reveals the investment philosophy behind building one of the world's largest alternative asset managers with over a trillion dollars under management. At the core of Brookfield's strategy is a disciplined focus on downside protection that has delivered 19% annualized returns over 30 years. Flatt identifies three major trends driving their investments: digitalization (including AI infrastructure), global energy transition, and reindustrialization as supply chains shift. The conversation explores Brookfield's approach to risk management, their expansion into insurance, and their meritocratic culture. When Shane presses for clarity on Brookfield's complex corporate structure, Flatt provides rare insights into how the organization's design creates both operational flexibility and investment opportunities. What separates Brookfield from competitors? Patient capital: the discipline to wait for extraordinary opportunities and the financial strength to act when others can't. If you want to understand how the smartest capital allocators think and what it takes to build something enduring, this episode is essential listening. Thanks to these sponsors for supporting our show: NordVPN: EXCLUSIVE NordVPN Deal ➼ nordvpn.com/KNOWLEDGEPROJECT. Try it risk-free now with a 30-day money-back guarantee Shopify: Sign up for your one-dollar-per-month trial period at shopify.com/shane. All lowercase. ShipStation: Get a 60-day free trial at www.shipstation.com/knowledgeproject. The opinions shared on this podcast belong solely to those expressing them. Hosts and guests may hold positions in the securities discussed. This podcast is intended to provide general information only and should not be considered financial advice. (00:02:56) Changes in Investing Over the Past 25 Years (00:04:51) How Private Enterprise Has Built Our Tech Infrastructure (00:07:08) Implications and Opportunities of Passive Investing (00:09:08) Advantages of Private Companies (00:12:36) Three Investment Themes (00:15:11) Winners in Digitalization (00:16:45) Application of Artificial Intelligence in Businesses (00:21:44) Transition to Low-Carbon Energy (00:25:24) Future of Data Centers (00:27:32) De-globalization of Industry (00:29:59) Implications of Manufacturing Repatriation (00:31:11) Long-term Prospects for America (00:36:20) Approach to Risk and Debt (00:37:48) Impact of Interest Rates (00:40:47) Managing Market Dislocations (00:42:30) Long-term Investing Strategy (00:45:06) History and Future of Brookfield (00:47:55) Exploration of Private Markets and Insurance (00:48:48) Investment Decision Process (00:55:18) Understanding Brookfield's Structure (00:59:40) Positioning of Brookfield's Businesses (01:00:21) Talent and People Management at Brookfield (01:02:58) Focus on Downside Protection (01:05:03) Accountability in Investment Decisions (01:06:32) Understanding Investment Cycles (01:08:14) Learning and Training in the Organization (01:09:06) Postmortem Analysis of Investments (01:11:14) Consideration of Geopolitical Risks Newsletter - The Brain Food newsletter delivers actionable insights and thoughtful ideas every Sunday. It takes 5 minutes to read, and it’s completely free. Learn more and sign up at fs.blog/newsletter Upgrade — If you want to hear my thoughts and reflections at the end of the episode, join our membership: ⁠⁠⁠⁠⁠⁠⁠fs.blog/membership⁠⁠ and get your own private feed. Watch on YouTube: @tkppodcast Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:00Speaker 00

  The fundamentals of investing hasn't changed at all. Buying great things or great businesses, holding for long periods of time, earning cash returns. What's changed is the environment around it. The whole backbone of the world is changing. Behind your phone or your computer, you can have this podcast on your cellphone and go for a run in the morning. How that gets delivered to you is data center storing it, fiber delivering it to you, going to a tower and bringing it down to your phone wireless. And all of that needs enormous amounts of infrastructure and all of that is built by private enterprise.

• 0:39Speaker 00

  50% of the backbone of what we own today did not exist as an asset class for investment 20 years ago.

• 0:46Shane Parrish?

  Well, you have over a trillion dollars in management now.

• 0:50Speaker 00

  It sounds like a lot of money.

• 0:52Shane Parrish?

  It is a lot of money. It's a trillion dollars.

• 0:54Speaker 00

  But it's not that much when you do what we do.

• 1:06Shane Parrish?

  Welcome to The Knowledge Project. I'm your host, Shane Parrish. In a world where knowledge is power, this podcast is your toolkit for mastering the best of what other people have already figured out.

• 1:20Shane Parrish?

  If you want to take your learning to the next level, consider joining our membership program at fs.blog/membership. As a member, you'll get my personal reflections at the end of every episode, early access to episodes, no ads, including this, exclusive content, hand-edited transcripts, and so much more. Check out the link in the show notes for more. Most investors see markets as a race to outperform every quarter. Our guest today, however, sees them as a marathon measured in decades. As CEO of Brookfield Asset Management, he's quietly spent decades building a trillion-dollar business, investing patiently in the invisible machinery of the global economy. While others chase short-term returns, flat position Brookfield to capitalize on massive

• 2:05Shane Parrish?

  global shifts from digitalization and low-carbon energy to a reshaped global supply chain, years before they appeared on anyone else's radar. In this rare public conversation, it's only the second podcast he's ever done, flat reveals not just what he invests in, but how he thinks. From spotting trends early to structuring deals for resilience across economic cycles, to placing big, bold bets that compound steadily over time, he offers a masterclass in patient, disciplined investing. Whether you're allocating capital, building a business, or simply navigating uncertainty, you'll learn how one of today's most influential but private investors sees around economic corners and why his ability to ignore short-term noise might be his greatest competitive advantage of all.

• 2:51Shane Parrish?

  It's time to listen and learn.

• 2:57Shane Parrish?

  The opinions shared on this podcast belong solely to those expressing them. Hosts and guests may hold positions in the securities discussed. This podcast is intended to provide general information only and should not be considered financial advice. I want to start with how investing has changed over the past 23 years, I think, since you've been CEO.

• 3:19Speaker 00

  Look, on the first level, I'd say it hasn't changed at all. What investing is about is to buying great things or great businesses, holding for long periods of time, earning cash returns. And that hasn't changed at all. So the fundamentals of investing are exactly the way they were before. What's changed is the environment around it. And I mentioned a couple of things. First one is many businesses are publicly traded. And the indexing of and passive investing has changed the publicly traded market for investments. It's very different than the actual investments. The investments are still the same and what we do is still the same.

• 4:03Speaker 00

  How they trade in the market and whether they're included in indexes has changed how they trade in the public markets. So I think that is probably the fundamental biggest thing. The second thing, and this is...

• 4:18Speaker 00

  I'd say maybe the most simple way to say it is 50% of the things that we invest in today did not exist as an investment asset class for investors like us 20 years ago. 50% and we invest in the backbone of the global economy. Like, these are simple things. We deliver your water in the morning. We sow the road you drive on in the afternoon. We deliver your power to your house. We, the data center that powers your phone, we own. Those are all really backbone things. So what we do is backbone. This is not innovative venture capital that we're doing.

• 4:59Speaker 00

  But 50% of the backbone of what we own today did not exist as an asset class for investment 20 years ago.

• 5:07Shane Parrish?

  What percentage of that would you say is a new, new things versus governments maybe privatizing some of the services they used to deliver?

• 5:17Speaker 00

  When we started in infrastructure 25 years ago, we were among the first. We thought that it would be governments privatizing and to some extent it is. And it's not, they're not privatizing because they have a hard time selling assets. What they do is they're just not investing. Therefore, private enterprise takes it up. But the biggest area of investment today is really just the whole backbone of the world is changing. So the digitization of the whole world between, behind your phone or your computer, as you know, laptops didn't exist before. The internet didn't exist before. Cell phones didn't exist before.

• 6:01Speaker 00

  Today, you can have this podcast on your cell phone and go for a run in the morning. How that gets delivered to you is data center storing it, fiber delivering it to you, going to a tower and bringing it down to your phone wireless. And all of that needs enormous amounts of infrastructure and all of that is built by private enterprise. Virtually every, all, in fact, not, not virtually, all of that is delivered to you as an individual, and this is eight billion people in the world, getting that delivered to them in various forms. It's all delivered by private money. And, and that's what's changed. It's, before, historically, that was built out by governments.

• 6:45Speaker 00

  Today, it's being built out by private enterprise. You know, to use an example, we own all of the telecom towers, not all, but we own a very substantial portion of the telecom towers in India. They deliver all the phone wireless infrastructure to many individuals in India, and that was originally built by Reliance Industries' G O. We bought it from them and we support their and other telecom companies' activities through those telecom towers. And historically, that would have been built by government. But it was, that's built by private enterprise.

• 7:24Shane Parrish?

  Let's go back to the rise of passive, maybe versus historically more active investing. What implications do you see? What opportunities are created?

• 7:33Speaker 00

  Look, in every, in everything, when there's a, when I say there's a problem, there's always an opportunity. And I think that's the Chinese symbol, right? Problem and opportunity. For some companies, smaller, midsize, don't fit indexes, they will be lost within public markets investing, because active investors may not be investing in those sectors anymore. And if you don't fit the indexes, you have no buyers. Increasingly, though, what it's doing is it's creating a large disparity in some securities at points in time between the price of them in the market and the value of the underlying assets.

• 8:16Speaker 00

  Back to, you asked me first question, what has changed in the investing world? And I said, nothing. That's related to value.

• 8:25Speaker 00

  What's changed is the price of some things trades up and down. If, over the last 18, 24 months, if you've been one of the big technology stocks in the world, everyone needed or wanted to buy you in the indexes and therefore their multiples traded very high. But if you were something that didn't neatly fit the indexes, it traded at a low price, the opportunities are that we can take those companies private. So we took a large container shipping company private. It had one analyst and nobody following it. It fit in no indexes.

• 9:04Speaker 00

  It was a $6 billion company and we took it private and it's been an exceptional investment. So we continue to, I'd say, capitalize on opportunities where we understand the value and the price is not trading at that in the markets.

• 9:24Speaker 02

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• 9:53Speaker 03

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• 10:19Shane Parrish?

  What can you do with a private company that you can't do with a public company?

• 10:23Speaker 00

  Well firstly, you don't have to look at what the price is versus the value. You just know what the value is and you run it for what it is. But secondly, we can operate differently, finance differently, invest for the future, and run a business like somebody should just run it. If you and I owned a business privately, we wouldn't care about the markets. We wouldn't care about whether the stock went up or down tomorrow morning. We'd just run our business. Cash flow comes out, we decide, should we dividend it out to ourselves to use together? Or should we keep it in the business and invest? And that's really the difference is, all you look at is the fundamentals of your business,

• 11:08Speaker 00

  if you're private. And if you're public, people tend to get distracted by the trading price of the security, when it's not really relevant. Some businesses need access to capital and have to raise capital, and therefore their price is important. But most businesses that are listed don't need access to capital. They're only listed because they're large and they happen to be, they need owners, and therefore they're in the public markets. They're never issuing equity, and therefore the price of the security in the market really doesn't matter. And in fact, it's a distraction, which is why when people often ask me, what happened

• 11:53Speaker 00

  with the alternatives industry and why did it grow the extent that it grew over the last 25 years? And it's really grown that way because private assets are, the fundamentals are exactly, perfectly matched to the fundamentals of what institutional investors want to have in their portfolios. And maybe even more importantly, by owning them privately, they don't have to have the distraction of the public market. They don't have to get confused that you and I bought a telecom tower business. It generates a 6% yield.

• 12:34Speaker 00

  It grows at 4% every year, and we don't have to invest much cash flow into it, so it's free cash flow. And if it's privately owned, it's just, we just watch the cash flow and keep growing and try to enhance the business and grow it. And that's what we do privately. If it trades in the public market, and today it's worth $20 and tomorrow because of whatever happens in the markets, it's worth 10, nothing changed in the business. And that distraction is what causes people issues. They sometimes make rash decisions. And I'd say that's maybe the biggest enhancement to long-term investors by having private assets.

• 13:18Shane Parrish?

  I take it you're not an efficient market hypothesis person?

• 13:22Speaker 00

  You know, I, no, the answer is no. The markets are never efficient. In fact, very seldom do they ever trade at the, at the actual value of securities. Either, most of the, most of the time, they trade above or below. Very seldom do they trade at the value. But yes, I guess there are many theories in life.

• 13:47Shane Parrish?

  Let's talk about some of the trends going on in the world today that you see from your aperture that you think have a long runway that we're maybe just beginning on or maybe in the middle innings on.

• 13:58Speaker 00

  So we generally have three sort of themes that we invest around, or we have a few themes we invest around at all points in time today. We have three. The first one is just the digitalization of everything and the amount of capital that's being invested behind that digitalization. And really what it is, is there are many, many, many, many trillions of dollars going into the movement of information into the cloud.

• 14:37Speaker 00

  Onto your phone and just the digitalization of everything behind it. And that has been enhanced, increased, enhanced by artificial intelligence and the networks being set up now to harness artificial intelligence. And maybe the most simplest way to explain it is everyone thinks of artificial intelligence as chat GPT. I'm gonna get it to write my cooking class memorandum. But really, where the money is going to be made is the application of artificial intelligence into business.

• 15:22Speaker 00

  And simply stated, that's taking processes in service and industrial businesses and making them more efficient by using advanced robotics who have learned how to make, how to run those processes from models run on artificial intelligence. And we're in the very, very early stages of that. But from an infrastructure standpoint, the amount of money being put behind this is in amounts which have almost never been seen invested before. So that's sort of the first theme we have of investment.

• 16:03Speaker 00

  And it both affects our operating businesses because we're now applying artificial intelligence in our business to make them better and they'll be more productive. And we're also investing and supporting many of the technology companies with their funding for the re-digitalization of the world.

• 16:22Shane Parrish?

  Let's spend a few minutes on digitalization before we move on in the sense of there's vast data centers being created today. I would love to hear your thinking on whether that investment is going to be where winners are accrued or are we overinvesting as we typically do in booms and busts? And then walk me through sort of like how you see winners emerging in this from end to end, right? You generate energy, you lease data centers, you walk me through how you see that.

• 16:56Speaker 00

  So there's no straight line in investing to success. And usually, at points in time, people will lose money because they get overexcited. But we're in a period of time where this is a major, major build-out of what's going on. The clear winners in this AI revolution are going to be the major technology companies. That's sort of easy. They're very sophisticated. They have large balance sheets and capital to deploy. They've already developed models, and they're going to be very, very... They're going to win. They're going to win. And they have the data. And they have enormous amounts of data. So they're going to win.

• 17:41Speaker 00

  That's easy. Like, I'm not sure there's anything that's helpful to anyone listening to this if I tell you, "Oh, you should buy Google." These are going to be great companies, and they're going to continue to be great. The winners that are unknown today are the companies that are going to figure out how to apply artificial intelligence into their businesses and make them better. There are many businesses today where you cannot get people to operate the businesses. There just aren't enough people. And if you can therefore deploy robotics into businesses and shrink the amount of

• 18:26Speaker 00

  labor you need, or there are plants that are being operated in Asia that had high-dollar value, that's why they went there, but high-dollar value products, but they went there because there was high labor component. If you can shrink the labor component, many of those plants can come back to where the demand is, specifically, I'd say, the United States. So the unknown winners are going to be the companies that can apply artificial intelligence into their businesses and make them more efficient and more profitable. And I think those that do it will win. Those that don't, some will fall behind.

• 19:11Speaker 00

  But the productivity advances we see over the next 20 years probably will be unprecedented for a period of time. Certainly, we haven't seen it for a long time in business across America.

• 19:22Shane Parrish?

  Is there anybody you're tracking externally that you would never acquire, that you admire how they're applying sort of technology?

• 19:30Speaker 00

  You know, we're in the early, early stages of this, and so we're trying to learn from everybody. We're talking to many. We've, of course, given their scale, we have access to very significant resources, and we can talk to most people. So we talk to all the technology greats. We deal with all of them fundamentally in our business. In addition to that, we're continuing to learn and apply these technologies within our business. And what I can tell you is the early learnings of our business, some of our industrial businesses are, and why I have, why I can, why I say the things I just said to you, is that the

• 20:11Speaker 00

  early learnings are that the advancement of productivity is very, very significant.

• 20:19Shane Parrish?

  And you see that in your battery, like you guys make half the batteries in the world, don't you?

• 20:23Speaker 00

  Look, our, we make just under half of the car batteries. So we make the little car battery that starts your car, you know, when you get up in the morning, it doesn't start, and you have to go get a new one. So that normally, that half of those, half of those will come from us.

• 20:38Shane Parrish?

  Yeah.

• 20:40Speaker 00

  That are out there, and it's an amazing business, and we continue to re, you know, we're always trying to optimize businesses. Our job is to invest in businesses and make them better so that they will grow greater amounts of cash flow, so we can continue to invest in the businesses and provide dividends to our owners. And so as we try to make these better, we're applying artificial intelligence into all our businesses, including that battery business, which is, and why it's a perfect one for these type of applications, is we have 25,000 people and 20 plants. We do very repetitive process.

• 21:22Speaker 00

  And as a result, and we have $9 billion of costs within the business, if you can improve those by 30%, that's a lot of money to the bottom line. And it can be very significant for the company.

• 21:36Shane Parrish?

  Is there another example that stands out about how you're applying AI to the businesses that you control?

• 21:41Speaker 00

  You know, every single business we have, we have a healthcare business where we have, we approve your healthcare in the United States. If you need a back surgery and you need authorization from your insurance company to do it, we take the phone call from you and we approve it online. We approve your $150,000 operation or not. And our agents do that. And today, the amount of information we can put up when you call in is incredible. Even from two years ago is incredible.

• 22:21Speaker 00

  And that just helps us make better decisions quicker and serve our clients who are the healthcare companies better. And but it's everywhere. You know, the putting, we're, you know, we're applying these type of things in all the businesses, but we're in the, we're in the first inning of this. So it's, anybody that hasn't started should start. And it's not too late. We're in the early innings of the application of this.

• 22:53Shane Parrish?

  It's exciting to see where it's going. So we have a trend of digitalization. What other big trends do you see?

• 22:59Speaker 00

  The second one is that there is a transition of the world to low carbon energy. And I say it that way because what's really important here is we just have less carbon out there. And but what's, what's even more important today is that solar and wind, which is where we're, which is what's filling the gap, are the lowest cost energy sources for power in the world in most countries today. And why that's really important is it doesn't matter whether you choose to have less carbon or don't care about less carbon. What you do choose is to pay less for your power.

• 23:43Shane Parrish?

  Yeah.

• 23:43Speaker 00

  And, and that, that, that's the, the simple economics are today. If you go to somebody and say, do you want to pay more for your power? They will say, they will say, no, I don't want to pay more for the power. I'd rather pay less. And, and as a result of it, the lowest cost power in most countries of the world is solar and wind, therefore you're going to choose solar and wind. So it's inexorable that we're going to build out most more solar and wind in the world. In the United States today, there's no doubt we're drilling more oil, which is, remember, oil is not used in power. Oil is used for basically cars, chemicals and planes. They, it goes into jet engine fuel, goes into car engine fuel, and it goes into chemicals.

• 24:28Speaker 00

  And that has nothing to do with power. Oil's not used for power. Natural gas is, and a natural gas is one of the great assets the United States has. It's going to export it for a long time. It's going to use a lot of it in America. Eventually batteries and nuclear will be the baseload and it won't be natural gas. But it's being shipped elsewhere in the world. And where it's going to is needed for baseload because they, they, they, they need that, that baseload power, or it's replacing coal, which is hugely beneficial to the world.

• 25:07Speaker 00

  So natural gas is an incredibly important bridge fuel in America and long-term fuel in many other places in the world. So the LNG market in the United States is extremely important and very lucrative for a long period of time.

• 25:23Shane Parrish?

  Let me make sure I understand this. So wind and solar, low cost, and then gas is sort of the baseload when there's no wind or solar because we don't yet have the batteries to time shift?

• 25:33Speaker 00

  You know, we have, we have baseload capacity in the US, which is nuclear. That will continue to grow. We can talk about nuclear if we have time later. What's happening in, in grids is that you need something to stabilize the grids and to store when, because remember solar, the sun only shines during the day, it's usually dark at night. And wind actually usually only blows at night. But you normally don't have, the, the incidence of both together are not always the case. And you have to have something to bridge one of those. And increasingly

• 26:16Speaker 00

  In past, nuclear's done that and gas has done that. Increasingly, battery storage at scale, distributed, will help both with transmission bottlenecks, but also with the two offsetting amounts.

• 26:35Shane Parrish?

  How do you see the trend with like data centers in terms of electrical use? Do you see that continuing to be because these take a long time to permit to get into place, or do you see that reducing in time?

• 26:47Speaker 00

  So the reason why, one of your questions earlier, which I really didn't answer, was our data centers, are we going to get in trouble with the amount of money that's going into data centers? And the answer is no, and it's largely because it takes a long time to permit a data center. You need to find power to power the data center, and the needs of the technology companies are very significant. And on top of that, energy usage everywhere is going up. And as a result of that, it just takes time to bring sites on, and most sites today that are available to be built are already contracted to somebody for the next 20 years.

• 27:32Speaker 00

  So we're at a point in time where it's, we're now trying to entitle new sites, and we're, because of our vast real estate business, our vast power business, our vast data center business, we're as skilled and as integrated as they are to entitle new sites, but it takes time. And we've got some really exciting, large sites coming, but these most, the earliest big one that's going to come on that's brand new that we're entitling will, and even though it has enormous advantages because of it already has power, it'll be years away.

• 28:14Shane Parrish?

  And so like all your risk is, you're de-risk because you're not doing it unless it's contracted out, is that?

• 28:20Speaker 00

  Generally, yes. We're not, we don't, we've, in past, we never have, and I don't think we, we need to take risk on that. And therefore, it's like when we build an office building, you know, you let it to a bunch of tenants, then you build it for them. And you don't have to take the risk on that, in particular in these, because of the demand for it.

• 28:43Shane Parrish?

  And what's the third trend that you see?

• 28:46Speaker 00

  So, so the, the third trend that we identified a long time ago, and I'd say it's changed even more, but is more relevant today than ever, which is just the deglobalization of industry, and I, or I'd call it the re-industrialization of countries because of what's going on in the world. And that started with COVID. It started with the Asia-West issues, which, as you can imagine, that one has only, the, the, since we coined that four years ago, five years ago, it's only increased,

• 29:30Speaker 00

  given what's been going on. But increasingly, many companies are moving industrial capacity back to Western markets, where on balance, they can make sense of putting plants there. Part of it's for supply chain. Pharmaceuticals now need to be next, some of it needs to be next to customer, because they get caught during COVID that all of a sudden, all my manufacturing's in China, how do I get it here? It can't get out of China, what am I gonna do? So increasingly, those type of things, but, but also with tariffs and with other things,

• 30:14Speaker 00

  you're going to relocate manufacturing capacity back to, to other markets and, and be more local. And what I would say is, things, many things went to Asia, and a lot of them will stay there, and the Asian markets will be fine with this, because they've, they've now matured to the point where they are service economies in themselves. But many products that have been developed there will move back to America, because the labor components with robotics coming in are becoming less and less and less. So the reason for them to be in Asia is less there today than it's ever been.

• 30:59Speaker 00

  And on top of that, if there happens to be a tariff long, if there is a tariff longer term, then, then it's even gonna quicken that process.

• 31:10Shane Parrish?

  What do you see as the second order, either opportunities or challenges to that sort of, call it repatriation of manufacturing?

• 31:21Speaker 00

  Look, I think China, it's an economy in itself today. It's 1.5 billion people, they're getting richer every day, they're turning into a consumer service society. There's not that much of manufacturing that's relevant to them. I think they will, they will do extremely well as a country on their own. But there are some countries in the world where they haven't yet transformed themselves to be service economies and they're reliant on jobs that were from outsourced manufacturing. And if you can do that closer to consumer, those countries may have some issues.

• 32:01Speaker 00

  On balance, for Western countries, I'll just take the US as an example, you're bringing some jobs back, maybe not as many as left before to make the product, but if that product comes back, you've actually added jobs. And, and that's very positive, which sort of leads to the long-term story of America, which is, the long-term story of America is extremely strong because the US today has energy, capital, and technology dominance. Energy, capital, and technology dominance. There's nobody in the world that has a technology businesses that the US has.

• 32:46Speaker 00

  There's nothing in the world that has the capital markets the US has. And the US, just by nature, has dominance, nature and some hard work, has dominance in oil, in gas, in solar and in wind, and has dominance in nuclear. And those five things together give it energy dominance in the world for a long, long period of time. And so I think those three, those three things are going to make, on top of one of the greatest GDPs in the world, an entrepreneurial class, manufacturing moving back, at least

• 33:28Speaker 00

  to some extent, a lot or to some extent, on balance, it's going to be positive for, for growth. The US has a pretty... Good runway going forward.

• 33:39Shane Parrish?

  It sounds like you think we're at an inflection point for productivity. And some of the job losses will be offset by sort of the remanufacturing coming back to the US. How do you, where do you think we are in that trend, like that game, I guess?

• 33:56Speaker 00

  There is no straight line in anything. Everyone always thinks that somebody says something and it's going to happen tomorrow morning. Usually, usually it happens in greater amounts, but it takes longer periods of time and takes slower than you think it would happen. I would say we're in the early stages of all of this. We're seeing, going to see productivity advances and nobody just flips a switch. Thing is, nobody ever flips a switch. These are incremental changes over very long periods of time. But it's, what it means is that, is that the application of greater intelligence into businesses

• 34:35Speaker 00

  is going to make business better, more efficient, more productive and, and better, better, better for the world, frankly. That, that just makes us all smarter.

• 34:50Shane Parrish?

  You mentioned real estate. How has that changed over the past, I would say 10, but specifically five years?

• 34:57Speaker 00

  You know, again, I would say over the past 25, 30 years, 10 years, five years, these things always just evolve. And, you know, industrial capacity used to be just used for manufacturing, storage of goods. And today it's used for transportation of many goods that are delivered to homes. So industrial has changed enormously changed as a business over the past 10 years. Retail has changed because people used to do all their shopping in stores. Today, what they do is they do very bespoke shopping in stores and they want experiences in stores.

• 35:42Speaker 00

  But if you want to buy paper towels, you usually don't go to the mall. You just order it online. And, but, but if you want to have a meal and you want to go and try on a shirt or a pair of pants or have some fun for the afternoon, you go to the mall. And that's, that's what's changed is that commodity goods, if you own commodity. If you own almost today commodity, anything, it's bad. If you own commodity office, bad. You own commodity retail, bad. You own commodity industrial, bad. In fact, if you own commodity hotels, bad. Yeah. If you, what's great today is all of those things in the top 25%.

• 36:22Speaker 00

  And our, our view always has been buy the best, own the best, buy the best, continue to reinvest into the best. And so our real estate is among the best in the world. And we continue to experience some, some great numbers. Look, over the last five years, because of COVID and because of other things, and because interest rates went up by 400, 500 base points, all of that disrupted the real estate market. But the, the worst is behind us by far. We're looking in the rear view mirror by, by what happened in real estate. And in fact, this time, the fundamentals are actually pretty good in most things.

• 37:07Speaker 00

  It's just, there are some people that have capital structures that aren't built for these financing markets, and therefore they have to put capital in to be able to deleverage or whatever they have to do, or, or somebody also take over the asset. But that's not a huge issue across the world.

• 37:31Speaker 02

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• 38:00Speaker 03

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• 38:26Shane Parrish?

  Maybe spend a few minutes and sort of like take me behind the scenes in how you think about risk and how you think about interest rates and how you think about debt when it comes to assets.

• 38:36Speaker 00

  Our, uh, our fundamental thesis of investing is that you should put a prudent amount of debt on assets that can withstand markets. If you can, then you should fix it because you know your cost. And, um, and from time to time, if you got it wrong, you put a little, make sure you have a little more money around to put it in and, and support your asset. So, um, we've always conservatively financed our businesses and assets. All of our financing is asset by asset by asset by asset, or business by business by business by business. So any debt that we accumulate onto our consolidated balance sheet

• 39:17Speaker 00

  is just the accumulation of a whole bunch of single asset financings. And, um, and it's not that we ever want to or think that we will give back assets or not live up. In fact, our reputation is with our lenders is that we're one of the best sponsors in the world to borrow, lend money to because we support our businesses. But buying, having asset by asset by asset financing allows you to just deal with the situation one by one by one. And, and its duration, I mean, they're spread over long, long periods of time. And, um, and with interest rates, I think the most important thing to remember is

• 40:00Speaker 00

  we don't borrow the treasury rate. Only the government borrows at treasury rates. And what we borrow at is treasury rate plus spread.

• 40:11Shane Parrish?

  Yeah.

• 40:11Speaker 00

  And historically, spreads were 200 basis points and interest rates were, uh, 300 basis points. And therefore you borrowed at five. And when COVID, when COVID hit, interest rate, the treasury rate went to zero. And what the most of the lenders said to us is, I'm not going to lend to it at 200 over and give you three. I'm widening that out to 350. So I'll give you five or four and a half. And therefore, before we were borrowing at five, and in COVID, we were borrowing at four and a half. So when people say, oh geez, you got all this financing in COVID, yes, maybe some people did,

• 40:56Speaker 00

  and some people got very low rates because rates were zero and they might have borrowed at two at an extreme point in time, but not very much. And most of it, lenders just widened the spread out. Today, base rates are high. We're back to five. Guess what? Spreads are the lowest they've ever been in history. We just did a 30-year Brookfield Corporation financing. So we're borrowing money for 30 years, fixed for that time period, and it's 125 over. So spreads, spreads, basically, all-in coupons are important. And that's

• 41:38Speaker 00

  really important to remember about investing in real assets, real estate, but also infrastructure, renewables, et cetera.

• 41:47Shane Parrish?

  What distortions do you see by sort of like historically low interest rates? And even by today's standards, you mentioned they went up, they have gone up quite a bit, but historically, they're still well below average?

• 41:59Speaker 00

  Yeah, look, I think that maybe is the most important point to note here is that interest rates aren't that high. They're higher than they were because interest rates went to zero. And for a number of years after the financial crisis, they were close to zero. And now they're actually in a normal, a relatively normal range. I'm sure we're going to see another few, another 50, 100 base points off of the short rates. And we're going to settle into just a regular range of rates. But these rates are actually pretty normal and for our business,

• 42:43Speaker 00

  very constructive. And the things that we can do and we're refinancing it, because the coupons aren't that much different than what they were before.

• 42:53Shane Parrish?

  People, we talked about sort of dislocations providing opportunities and you know, maybe spend a few minutes walking me through how you think of positioning to manage the recycle, but not only maintain your assets, but also take advantage of dislocations in the market.

• 43:09Speaker 00

  So the first thing one has to do when there are dislocations in the market is make sure that you have been, you were prepared for it. So the one thing you should do always when times are really good is ensure that you're preparing for the down markets that's coming. The ones that don't usually aren't successful in the fullness of time. But if you are prepared, the first order of business is let's double down and make sure that we're fully prepared. But then secondly, and I'd say coming out of recessions or cycles, coming out of the bottom, what's most important is just have everything you have intact. Do not lose anything,

• 43:54Speaker 00

  do not lose too much, and keep going because there'll be many people who will have lost stuff.

• 44:01Speaker 00

  What's even better to enhance the business is at that point in time, as the market's starting to recover, and once you're comfortable, we've taken care of all the things within our business, that you can then invest capital into new businesses at that point in time and add to your entity. And if you can, that's the difference between the great winners in long-term investing and the, and those that are just in the middle.

• 44:35Shane Parrish?

  You have almost, well, you have over a trillion dollars in management now. How do you fend off the pressure to deploy that money?

• 44:45Speaker 00

  It sounds like a lot of money.

• 44:47Shane Parrish?

  It is a lot of money.

• 44:48Speaker 00

  It sounds like a lot of money.

• 44:50Shane Parrish?

  It's a trillion dollars.

• 44:51Speaker 00

  But it's not that much when you do what we do. A couple of years ago, we bought Deutsche Telecoms, a half a Deutsche Telecoms telecom tower business in Germany, in Austria, it's $20 billion transaction. We're building for Microsoft $13 billion of power plants. We're building with Intel a $32 billion fabrication plant in Arizona. You know, I can go through the list. These are large transactions that consume significant amounts of capital that earn excellent long-term returns.

• 45:28Speaker 00

  And I would just use that to say, we're, we've been doing this a long time. What we promise our investors and our clients is that we will take moderate amounts of risk, not no risk, but moderate amounts of risk and earn good, good returns over long periods of time. We won't shoot the lights out. You're not going to get 45% returns every year. And we're not trying for that.

• 45:59Shane Parrish?

  But average returns over an above-average period of time equal outstanding returns.

• 46:05Speaker 00

  Yeah, and that's the point. The point is, we've earned, our parent companies earned 19% return, annualized returns for 30 years. When you compound up, which doesn't sound like very much, 19% returns annualized for 30 years, like it just, when you say that in that line, doesn't sound like that much. But I think that's a million dollars became almost $200 million over that period of time, or $1,000 became $200,000. It's a lot. And so, so the point is.

• 46:36Speaker 00

  Success in investing isn't about making a lot of money in a short period of time. What it's really about is earning reasonable returns over very long periods of time. And, look, that's Berkshire Hathaway. Berkshire Hathaway is successful because they have been able to deploy capital at reasonable rounds of turn over very long periods of time. And that's the success of long-term investing.

• 47:05Shane Parrish?

  Is that a company you look up to?

• 47:07Speaker 00

  Look, they've done an incredible job in their business over a very long period of time.

• 47:13Shane Parrish?

  Maybe you mentioned over 30 years. Walk me through a little bit of the history of Brookfield and then the future, where we're going.

• 47:20Speaker 00

  So, we started as an operating business. We just invested for ourselves. We had the businesses that we basically have today. Infrastructure, real estate, renobles, and industrial service, we call private equity today, businesses, and credit lending. Those were our five businesses. We did it for ourselves and we lent money. And 25 years ago, we decided that we could take those skills we had and turn them into a business to be able to manage some of our money and some of our institutional or other

• 48:01Speaker 00

  clients' money and offer alternatives into those funds. When it started, nobody wanted to invest with us because they didn't really understand alternatives. And today, that's turned into a trillion-dollar business. It's been extremely successful largely because these products are ideal for institutional and retail clients to invest into. And the past 25 years has been about institutional. And this comment is not meant to say that they won't be investing, but their increase

• 48:42Speaker 00

  from going from zero to some of them are at 30, 40, 50% alternatives. When you go from zero to 50, you can't go to 100. So, a lot of them are at their numbers. But what's happening today, and to your question of the future, is it the same phenomena?

• 49:01Speaker 00

  Is now happening in retail. Retail being individuals. 401ks in the US are going to open up to alternatives. I think plans around the world will open up to alternatives. Alternatives are ideal products for retail as well. In fact, they're almost more ideal because you're saving for your retirement. And what better to have in there than a product that earns a reasonable return over a very long-term, long period of time and can compound. And so the, the future of our asset management business is really about that, the opening

• 49:43Speaker 00

  up of retail and continued growth of retail wealth with our products. Doing the same things that we do for institutions, exact same. But now just opening up in different types of products that are suited or tailored for individuals.

• 50:01Shane Parrish?

  What does that mean? Maybe walk me through it because, you know, I've always thought you've had these available to people. I could go buy Brookfield Infrastructure on the public market.

• 50:09Speaker 00

  You, you can buy it in the public market that fits in a stock portfolio, but you, to date, we haven't offered you a product for your 401k in the private market.

• 50:22Shane Parrish?

  Okay.

• 50:23Speaker 00

  That was open to you to say, do you want to buy infrastructure with us and just own a bunch of data centers and different things like that? We happen to have a couple of listed ones that are very unique, but, but the, what people want is private assets within their portfolios and that's going to increase, I'd say exponentially over the next 20 years.

• 50:49Shane Parrish?

  So retail is sort of the future, but another big area that you're investing in is insurance. Maybe walk me through some of the opportunities you see over the next 20 or 30 years in insurance.

• 50:59Speaker 00

  Yeah, so outside of our asset management business, we decided to take a portion of our capital and put it into insurance five years. ago was a fortuitous time because we bought some excellent insurance companies. At a point in time where they weren't doing very well because interest rates were extremely low and they weren't earning very high returns on their capital. Fast forward four years later, the companies are doing extremely well. We're making $2 billion a year of cash flow within the business. And and insurance for us is is I'd say the following firstly, and maybe just to go back, our goal was.

• 51:42Speaker 00

  Get in the insurance business, not not because we wanted to be in insurance. What our goal is, is our clients come to us because they.

• 51:56Speaker 00

  They want our investment skills. What we have is a very unique offering is a bunch of investment skills that can create products. For long term investors. Our insurance company now being $120 billion of assets is a perfect long term. Investor into all of the things we do from our asset management business. So we have a special.

• 52:22Speaker 00

  Special expertise to be able to offer because we have access to our investment products or great. We have greater access or greater comfort. With all the investment products to be able to put into the insurance companies than most other. Groups out there. Maybe there's a few other others like us, but not very many. And therefore we have a special benefit for that. So we we've chosen annuities. In the United States largely so far, we've now just got licensed in the United Kingdom. But. Why annuities? What appeals to you about that? It's just because they're they're low risk liabilities.

• 53:03Speaker 00

  We we're not taking on high risk on the liability side. Our goal originally was in getting into this. Was don't take risk on the liabilities, earn our money on the asset side. And and we have this unique ability to earn excess returns on the asset side. And our goal was put. Very significant amounts of capital and over capitalize the businesses. Which allows us to do things in the on the asset side of the balance sheet, which is very. Different than many insurance companies.

• 53:36Shane Parrish?

  Like what?

• 53:37Speaker 00

  You know, we can own real estate to a greater extent. We can own alternatives to a greater extent. We can own infrastructure to a greater extent. We can own high yield bonds as opposed to just fixed income on the market. All the things that we do for our clients, we can put them in the insurance company. And they may take more capital, but we've over capitalized the company. So we started with $4 billion. We've increased the capital, I think, to 16, 17 billion dollars of book equity

• 54:10Speaker 00

  within the business. We continue to over capitalize. But on top of that, we have another 100 billion, 150 billion dollars of capital up top that if we need more money, we'll put it in the insurance companies to ensure they're healthy and better than any that are out there. And we have an excellent relationship with the regulators.

• 54:30Speaker 00

  And explain all these things to them and are very transparent with all the transactions we do with them. And we happen to have some very unique things that we can do because, you know, for example, if we own an office building and somebody owns the other half and they want to sell and we know that's a really cheap price they're going to sell at.

• 54:53Speaker 00

  That's a great real estate investment for our, for our insurance company. Very seldom do people have that opportunity with our knowledge and access to opportunities. So it's a pretty unique offering and, and that's what we, what we bring to the table.

• 55:09Shane Parrish?

  Do you think you'll get out of annuity, well, stay in annuities, but expand into other businesses? I'm imagining short duration stuff is probably a property and casualty is not, doesn't lend itself to that type of investing, but maybe reinsurance or?

• 55:24Speaker 00

  Yeah, look. I would say we wanted to start, this is a 25 year venture. We're five years in. We wanted to start to make sure that we knew what we were doing. We met all our regulators, we earned their respect.

• 55:43Speaker 00

  And we we operate, we could operate and figure out what were all the risks. We've been in it five years, we're very comfortable. Over time, we may branch out into other types of

• 55:58Speaker 00

  other products that we can understand that fit our skill set. And and that's really what's important to us. So first, we're expanding internationally, writing annuities or pension risk transfer annuities, which are both are very similar.

• 56:16Speaker 00

  So instead of, instead of going out of our comfort zone on the type of liability, what we're doing today is we're expanding to the UK. And which is a big pension risk transfer market and that that's just a different way to expand.

• 56:32Shane Parrish?

  Are the pension risk defined benefit or defined contribution?

• 56:36Speaker 00

  These are pension risk transfer means, which happens in the US, Canada and the UK largely, those three places in the world.

• 56:47Speaker 00

  What it means is that if there's a corporation that has a defined benefit plan that wants to get it off their balance sheet. So they, they have a $10 billion plan, there's 10 billion assets, 10 billion liabilities. They can commute that plan to us and we can, our insurance company can take it. So they're no longer on the hook for the plan, they're no longer at risk on the assets or the liabilities. We've assumed that risk. We will now pay their pensioners. And they gave us the assets to earn over time. Hopefully, the the amount of money to pay all their pensioners. And if not, we're on the hook for it, not them.

• 57:24Shane Parrish?

  Can you spend a few minutes walking me through the machinery of Brookfield and why you've structured it the way you have?

• 57:30Speaker 00

  I would just say.

• 57:32Shane Parrish?

  Like, I'll preface this with, like, one of the criticisms from the outside in is that it's super complicated. There's a lot of different entities and moving parts. How do you think through that?

• 57:43Speaker 00

  So I would just say that, yes, there are probably more pieces of Brookfield. First, I might disagree first by saying there are many companies in the world that are large like us, and they have as many pieces as we do. That's the first point. So I'm not sure that's actually a true statement, but I'll take your points at face value. And I would just say each one of the pieces we've set up has been highly thought through and contributes a lot to the business. These are not random things we've done. They're

• 58:24Speaker 00

  very specific, and they contribute enormous value in the long term to the company. And because of that, we have to explain them more to maybe, sometimes have to explain them more to investors. But for our friends, they understand exactly why those pieces are there and what they do for us and what each accomplishes. In the short term, I could, we could wave a wand and get rid of all those, as you denote, complicated parts. We could wave the wand and get rid of them all. In the long term, it would be bad for shareholders.

• 59:08Speaker 00

  Less returns would be earned. We would be more at financial risk. We would have, we have the maximum amount of flexibility within our structure to be able to go through, deal with opportunities, risks, and everything that's out there. So I just, I, look, we can always do better on explaining the pieces, and we try all the time, and it's incredibly, our reputation's incredibly important to us. So when people criticize us about our structure or different things that are there, we try to double down and make sure we explain

• 59:50Speaker 00

  it all to people. But what I, I would just say that each of those pieces is really important and contribute a lot to the business.

• 59:59Shane Parrish?

  Hypothetically, if you were to all put it under one umbrella, how would that change the opportunity set available to you?

• 1:00:06Speaker 00

  It would just mean dilution to some shareholder. And, for example, we spun off our asset management business two years ago. There's a whole group of US investors, largely, that buy asset management businesses that only want to be invested in asset management. They don't want to own assets that we own. They don't want to be invested in insurance. They don't want to do all the other things we do. They don't want to change. Like, our parent company, Brookfield Corporation, it has changed in 35 years in many different ways and many different times for the benefit of all of us.

• 1:00:48Speaker 00

  But you need to, you need to trust us when we're changing. Brookfield Asset Management is a pure-play asset management business that's asset-light, that will probably never be anything different. You can trust us for that, and that's what it is. So they're just, they're just different audiences. And, and it just allows us to have a security, which is tailored to that audience. And if we want to offer it to somebody in the public markets or to, or to another alternative manager we want to merge in or something, it gives us the opportunity to do that and not have to deal with all the other issues that we have. What about your insurance business?

• 1:01:33Speaker 00

  Or what about your investments? Or what, what are you going to do next? And, and it just allows us to do that. So I don't, we could do it. It just would take away a lot of the great benefits we have in the organization.

• 1:01:46Shane Parrish?

  If you put your investor Bruce hat on, which of the businesses do you think is the best positioned for the next 15 years? And I'm not asking returns. I just mean which business do you think is the best competitively positioned?

• 1:02:00Speaker 00

  I just think they're all different. They're all totally different. Everything we invest into has enormous opportunity going forward as long as we execute properly. But they're, each one of them's different. I get excited, I could, I could get excited about having all of my net worth in every single one of them. And, and they're all pretty exciting going forward.

• 1:02:27Shane Parrish?

  Maybe spend a few minutes on talent and people. Brookfield is known to take really big bets with what, from the outside looking in, would be young people. What do you see in people that gives you the confidence to take bets in them? How do you build a culture where meritocracy rises and people can take big bets?

• 1:02:47Speaker 00

  So, we've always had the view that, well firstly, we're an extreme meritocracy. This is a partnership. It's partnership of individuals. When, when we leave the partnership, our shares that, if you're an owner or controller of the partnership, they go away. They go on to somebody else. So, nobody's family will ever, will ever be part of this partnership. It's a meritocracy. Second, we've always had the view that a cross between wise, older

• 1:03:24Speaker 00

  people and smart, aggressive, young people, both give you the gravitas to deal with situations which you need a little history, but also allow you to be, allow you to know more about what's going on today. I'm positive our 30-year-olds today in the business know more about technology than I do because they've grown up with it differently. It allows us to be faster, better, quicker.

• 1:04:01Speaker 00

  To every new trend in the world and what's going on out there. And it also, I'd say, creates a culture where people want to be here and get ahead. Because they know they can. And so, I, look, we brought, to the partners and to our senior people, three years ago, we brought Conor Teske forward as the next person that will be the CEO of the asset management business. That was internally vetted, it was externally vetted, and today we're in the process of him continuing to meet clients and investors and all those kinds of things.

• 1:04:46Speaker 00

  And I think he's 37 years old today. He's incredibly passionate, talented, and he'll bring through a whole new group of people within the company. And re-energizing businesses is what makes them better and different.

• 1:05:04Shane Parrish?

  Walk me through some of those meetings where you're making a big investment decision. What goes on behind the scenes? How do you quantify risk? Where do you spend your time on deals?

• 1:05:13Speaker 00

  Our investment process is, we only invest in things that we deal with and know. We have people on the ground and our knowledge of the business. And we're, our investment committees are normally only focused on downside protection. Upside will always take care of itself. And whether you shoot for 16%, 22%, 29%, 18%, none of those matter. They're all great. What's really important is, what are the risks? How, what can go wrong? How bad could it get? And how do we deal with it if that happens?

• 1:05:58Speaker 00

  And so, we spend virtually all of our time on downside protection at our investment committees, and that's all that's important to us.

• 1:06:06Shane Parrish?

  When you're wrong, where are you typically wrong? And you haven't been wrong a lot.

• 1:06:10Speaker 00

  No, no, look, we make mistakes. We try to make small mistakes. I'd say that's it. When we're wrong, where are we wrong? We're wrong in increment, in small ways, which aren't

• 1:06:25Speaker 00

  Have you, you don't know about them very much because in the last 35 years, we've been right generally on the large things and nothing has been irreparably harmful. And, and that's because the things we do are small incremental and when we make mistakes, we, we, we make them along the way. And we encourage people to keep learning and, and growing because if you don't make some mistakes, you never advance, but do not make big mistakes. And that's, I'd say that's the biggest thing we try to impress across the organization.

• 1:07:09Shane Parrish?

  You mentioned the investment committee. I just wonder behind the scenes, are investment decisions signed off by, by one person? Or is it a committee that signs off? And if it's a committee, how do you hold people accountable or responsible for those?

• 1:07:24Speaker 00

  So our, usually what happens is some transaction came into the company some way, or we had an idea and we went and talked to somebody and the transaction came about. It's then approved by today because we have these vast businesses. It's approved in the business, but then we have one committee that it's almost like an allocation committee up top because we want to know how many, across the organization, we want to know how many transactions are happening at any one point in time. So we're not compromising, like you said, how could you make a mistake? If everybody made a massive transaction at the same point in time, what we're probably betting on is a cycle. And you may not want that, and if you do, you better knowingly do it.

• 1:08:09Speaker 00

  And so in addition to all the deals being approved down below where accountability comes from, we have an oversight committee that approves everything that goes on in the organization, which includes six or eight of us. And, and that approves everything really just to be a final governor over the entire organization.

• 1:08:37Shane Parrish?

  Are there patterns to cycles that you notice in advance of them happening where you're like, we're at the first inning or we're at the late stages? What are the signs that you look for?

• 1:08:49Speaker 00

  I would just say that cycles are never the same, but they sort of rhyme and they look similar. So the one thing of having wise, older guys around, I'll consider myself that today. I used to be a young, unwise individual. I'll try to consider myself. I know I'm old, just not sure I'm wise. But I, some of the reason for having the wiser individuals around

• 1:09:27Speaker 00

  is having the elongated knowledge of what goes on in cycles and what goes on in periods. And we've seen this before is helpful. Sometimes it's a hindrance. Sometimes it's very helpful for context. And therefore, that's what makes great organizations, I think, in our view, is that you have the combination of the tenacity and passion to make investments and be successful, tempered by the knowledge and skills of past

• 1:10:11Speaker 00

  and what's gone wrong, to be able to bring together risk management and drive to succeed.

• 1:10:21Shane Parrish?

  I'm curious, like, how you would teach me to that knowledge of cycles? Like, how would you pass that on to somebody in your organization? Or me, if you were to sort of hear the things I look for or don't look for?

• 1:10:34Speaker 00

  You know, I would say, in general, we don't do training.

• 1:10:39Speaker 00

  Quote, unquote. But every day, every single person in this organization is learning. And it's a, it's a learn by osmosis process. We have open plan in the place, including myself, never had an office. And, and people talk to one another and it's very interactive. And therefore, well, I started off by saying, we don't train anybody. We train them every single day. And it's just different than sending people to school.

• 1:11:13Shane Parrish?

  Do you do like postmortems after an investment? And what's the

• 1:11:16Speaker 00

  Oh, yeah, especially the bad ones.

• 1:11:18Shane Parrish?

  What goes into those? Like, walk me through that. Take me behind the scenes and

• 1:11:22Speaker 00

  We try to look at, look, the, the successful ones, you can usually identify and know what happened. The unsuccessful ones are harder to identify what happened.

• 1:11:38Speaker 00

  But often there are, there are reasons why. And it either comes down to execution.

• 1:11:45Speaker 00

  You didn't, you didn't execute properly.

• 1:11:48Speaker 00

  You had, you mistimed the market. Or you just made a bad, bad, flawed investment decision. And those are the worst. You mistimed the market, nah, you know, it's okay.

• 1:12:03Speaker 00

  But making flawed investment decisions is really bad.

• 1:12:09Shane Parrish?

  Is that where you, you've got the business strength wrong? The competitive dynamics wrong? You don't understand?

• 1:12:16Speaker 00

  I, I just, sometimes it's we're, sometimes we're pushing out into areas which are adjunct to what we do. And we probably shouldn't have. We really didn't know what we were doing. And not often does it happen, but once in a while.

• 1:12:30Shane Parrish?

  How, how much of your investment decision? You, you focus on the downside, but how much of it is like we're modeling it the next five years? And then we're tracking to that model? Or?

• 1:12:42Speaker 00

  The only thing I tell you about a model is produced in an investment committee is it will never be exactly what happens. But I'd say if you get the, we're trying to get the trends right is really what it is, is in investing, it's can you get the trend right? And I would say most of our investing is we're trying to get the price right for value. And therefore, often, we're buying at a discount to what we think is the value of something. And therefore, that's an important thing to note.

• 1:13:19Shane Parrish?

  How do you think about the geopolitical risk?

• 1:13:23Speaker 00

  We invest in backbone infrastructure largely. And even our private equity businesses are backbone infrastructure-type businesses. Therefore, what's important for us is to go to good countries with good people that you can operate with the standards we operate with and that those countries respect rule of law and will, over time, be good places to invest. We don't really sell over borders. So in the United States, where we are, we own data centers and telecom towers and real estate and industrial facilities and all of the things that we own in the US.

• 1:14:06Speaker 00

  And we make batteries and we, et cetera. All of those are consumed by individuals or companies in the United States. They're not shipped. We make power. It's used within state. So politics don't really matter to us. You know, they do in the margin, but on balance, as long as you invest in a good country, you're going to be fine.

• 1:14:33Shane Parrish?

  And by good, I'm assuming you mean stable, rule of law. How do you think you're good?

• 1:14:38Speaker 00

  Good means...

• 1:14:40Speaker 00

  For us, it has to be large enough to be able to invest. We can't have small countries, just not because they're not good. They're not good places to invest. It's just not meaningful to us. When you have a trillion dollars things, the benefit or the

• 1:14:56Shane Parrish?

  drawback.

• 1:14:57Speaker 00

  Yeah, the drawback is that is that you can't go to a little country. Like, we can't invest a hundred million dollars. It's not relevant to us. So we need large places. We'd like them to have. We need to operate with the standards that we operate globally with.

• 1:15:19Speaker 00

  We need to be, we'd like to have large GDP. We'd like to have it growing. And we'd like to have a currency that's relatively.

• 1:15:28Speaker 00

  It doesn't have to, doesn't have to grow better than everyone else. It just has to stay consistent. If it's highly volatile, not good. If it goes down over the long periods of time, bad. So we'd rather pick countries with those

• 1:15:43Speaker 00

  those factors. And, but it all comes down to price. Like, some, some have all that and then you, you invest when you can. But, but for us, we have to have people on the ground. So we pick those countries very methodically. We put people on the ground. We invest from time to time, new investments, when we find the opportunities.

• 1:16:06Speaker 00

  But we don't randomly go to countries. Like, this is not a random business. This is hard work. Therefore, we have to be in country, be able to action an opportunity when it comes. And therefore, if we're not in a country and somebody calls us with an opportunity, we just say, sorry, we're not set up to do that. Can't, no can do.

• 1:16:25Shane Parrish?

  It seems like part of your secret sauce is not only doing that in advance, but also you seem to prove the model before you take outside investors into it.

• 1:16:35Speaker 00

  You know, like, I would say, we have a large amount of capital ourself. We've always invested ourself. We want to make mistakes with our own money first, not with others. Our reputation with our clients is the only thing we have. And, and that's really important to us. And, and we try to incrementally grow to process. For example, we, we have a massive platform in the United States. So we started an insurance in the United States.

• 1:17:05Speaker 00

  Now, we're going to the UK to do the same thing we did in the United States. And we just got licensed to do that. But it, we now have all the experience we have from the United States. We probably couldn't have started there.

• 1:17:22Shane Parrish?

  Right.

• 1:17:22Speaker 00

  Because we just didn't have the same presence there as we had here.

• 1:17:25Shane Parrish?

  And we always end these interviews with the same question, which is, what is success for you?

• 1:17:32Speaker 00

  Brookfield is one of the great investment management groups in the world today. And 20 years from today, success is that it is bigger, broader, more relevant to clients, and continues to do exactly what it does today for everybody and earn reasonable returns with downside risk protected. And if we can do that, we'll have felt success of all of this.

• 1:18:15Shane Parrish?

  Thanks for listening and learning with us. The Farnham Street Blog is where you can learn more about my new book, Clear Thinking: Turning Ordinary Moments Into Extraordinary Results. It's a transformative guide that hands you the tools to master your fate, sharpen your decision-making, and set yourself up for unparalleled success. Learn more at fs.blog/clear. Until next time.