Brett Barth and Evan Roth – Stewarding Family Wealth at BBR (EP.433)

Brett Barth and Evan Roth are co-founders and Co-CEOs of BBR Partners, a multi-family office that oversees $32 billion on behalf of 180 families and is celebrating its 25th anniversary this year. Brett appeared on episode 3 of Capital Allocators eight years ago and is a regular contributor in our Friends Reunion shows. I've observed BBR's growth since first meeting Brett and Evan twenty-four years ago and was excited to hear more about their journey. Our conversation covers BBR's successes, missteps, and key lessons over the years. We discuss their investment philosophy and cultural principles, the "turbulent regimes" that cemented their approach with clients, and their shift in mindset from scrappy entrepreneurs to managers of an enduring business. Evan and Brett describe the business and investment decisions that allowed BBR to sustain success, create peace of mind for clients, and prepare for the next long chapter in BBR's story. Learn More Follow Ted on Twitter at @tseides https://twitter.com/tseides?lang=en or LinkedIn https://www.linkedin.com/in/tedseides/ Subscribe to the mailing list https://capitalallocators.com/ Access Transcript with Premium Membership https://capitalallocators.com/signup Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com https://thepodcastconsultant.com/)

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

• 0:01Ted Seides?

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• 0:46Ted Seides?

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• 1:29Ted Seides?

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• 2:14Ted Seides?

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• 2:58Ted Seides?

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• 3:32Ted Seides?

  Hello, I'm Ted Seides, and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation. Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can join our mailing list and access premium content at capitalallocators.com.

• 3:59Speaker 01

  All opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of capital allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators or podcast guests may maintain positions in securities discussed on this podcast.

• 4:18Ted Seides?

  My guests on today's show are Brett Barth and Evan Roth, co-founders and co-CEOs of BBR Partners, a multifamily office that oversees $32 billion on behalf of 180 families and is celebrating its 25th anniversary this year. Brett appeared on episode three of Capital Allocators eight years ago and is a regular contributor in our Friends reunion shows. I've observed BBR's growth since first meeting Brett and Evan 24 years ago and was excited to hear more about their journey. Our conversation covers BBR's successes, missteps, and key lessons over the years.

• 5:00Ted Seides?

  We discussed their investment philosophy and cultural principles, the turbulent regimes that cemented their approach with clients, and their shift in mindset from scrappy entrepreneurs to managers of an enduring business. Evan and Brett described the business and investment decisions that allowed BBR to sustain success, create peace of mind for clients, and prepare for the next long chapter in BBR's story. Before we get going, I was always fond of Mark Twain's quote, "There are lies, damn lies, and statistics." So when I tell you that this week Capital Allocators grew by 25%, you might think of all kinds of things. Maybe we released an episode that shot the lights out, introduced a new offering, or

• 5:45Ted Seides?

  summit where we're just plain crushing. Now while all those things have some semblance of truth, our growth this week came from the addition of Tamar Aarbach to the team as our new head of business development.

• 5:59Ted Seides?

  We were overwhelmed by the quality and quantity of interest for the role, but in truth, we started talking to Tamar before we announced the position. She and I met a while back in her early years in the business and were fortunate that her timing, interests and skillset matched perfectly with our needs. In short order, prospective podcast guests, Summit and Capital Allocators University attendees and sponsors will all get a chance to connect with Tamar. We're thrilled to have her and excited to see where we go next. Thanks so much for spreading the word about Capital Allocators 25% weekly growth for about 10 million percent compounded annually. How about that for lies, damn lies and statistics?

• 6:42Ted Seides?

  Please enjoy my conversation with Brett Barth and Evan Roth.

• 6:48Ted Seides?

  Evan, Brett, thanks so much for joining me.

• 6:50Speaker 02

  Ted, good to see you.

• 6:51Ted Seides?

  Great to see you, Ted. Well, we're going to do a fun perspective on your 25 years here at BBR. I thought it might be good to start with the two bookends. What did BBR look like at the beginning and what's BBR like today?

• 7:03Speaker 02

  In some ways, the bookend of the start is unrecognizable compared to what it's like today. There were five of us, day one, and it was early 2000. If you picture the environment, you had dot com bubble was raging, no end in sight there. You had five 20 something year olds gathering to be part of that internet rage by creating a business that was nothing like the internet. The five of us had an alignment in terms of what we believed and what we wanted for a business. And so we took that idea and we made some tough career choices to leave the good jobs that we had and start from scratch. So day one was in Brett's apartment.

• 7:47Speaker 02

  That was where we spent our first few months, surrounded by computer boxes and makeshift desks. And we got going. And where we are today is we have 190 people at the firm in three offices, New York, Chicago and San Francisco. We manage money exclusively for wealthy families. There are about 180 families where we're overseeing their wealth and that's $32 billion. So the average family wealth is about $150 million.

• 8:14Ted Seides?

  So if you take me back, you said you had a few ideas of what this business would be. What were those ideas back at the beginning?

• 8:21Speaker 02

  I'll give you the big idea, which is what it is today. And that is to deliver for wealthy families is to provide a singular pursuit to give them peace of mind that their financial needs were going to be met. How we were going to do that is very wrong. But what we wanted to do wasn't, and it is exactly what our mission is today. It's part of our culture. It's who we are. What we wanted to do is take the lessons that we had. Brett and I both came from Goldman and our other founding partners also came from big banks and say, there are some flaws in that model.

• 9:01Speaker 02

  What can we do differently as a boutique without legacy issues, without being a bank to be able to do it better?

• 9:11Speaker 03

  What do you think you got right? I think the investment philosophy we got right. In early 2000, most independent advisors were 60 40 and they picked stocks and bonds. And the big innovation, and you'll know as a Yale guy, Ted, it was David Swensen's pioneering investment management. I think it came out in early 2000, literally right as we started. And so then it became stocks, bonds and other. We had a philosophy that it wasn't about stocks, bonds and other. It was about building sophisticated portfolios that wealthy clients were not taking advantage of in the different ways, whether it was RIAs or banks or trust companies, thinking about long-term wealth and what they wanted to achieve with their wealth using sophisticated strategies.

• 9:55Speaker 03

  That was probably part of our very first deck and it's still part of how I describe how we think about it. So I definitely think how we invest has changed, but the philosophy behind how we think about investing and building portfolios purely philosophically has not changed at all. I think we nailed that from the beginning. It worked well from a timing perspective because if you think about the dot com boom being in full swing, the market hit its all time high within weeks of us starting. We actually started managing money technically April 1st, I believe. 2000, 2001, 2002 didn't do well for those 6040 portfolios or those, I hate to say, traditional alternatives. We did really well. And so I think that philosophy served us really well out of the box just by making

• 10:40Speaker 03

  money, not losing money for those families, those first few.

• 10:43Speaker 02

  What was interesting is our profile, we were young guys in our twenties. And so I think we were seen as dot com believers. We had that profile. It was our generation at the time that was leaving the big firms to go do startups. But we never believed in it. We always felt like it was a bubble. We always felt like we're too academic, we're too institutional in the way in which we think about investing. So our first few clients hired us knowing we weren't going to participate in any of the potential upside that was going to come through IPO allocations. It wasn't going to come through us betting on networking stocks at the time. And so we earned a decent amount of unexpected goodwill from our clients when to Brett's

• 11:28Speaker 02

  point, the market cracked so early after we got started and they were protected.

• 11:32Ted Seides?

  What were some of the other important first principles of your business as you laid it out in addition to this broadly diversified investment approach?

• 11:42Speaker 02

  Well, the principles really were to create peace of mind for wealthy families. Once that's your North Star, you build the whole firm around that. And that's still who we are today. Our services are oriented towards serving wealthy families. Our partners wake up thinking about how to serve wealthy families. Our employees come to the office every day thinking about wealthy families. Our investment strategies are always thought of from an after-tax family dynamics. We have family education practice groups internally that all are oriented towards supporting what a family needs to feel like everything's going to be okay. And I think one of those early aha moments for us was a few years into the business

• 12:24Speaker 02

  and we were meeting with a client who was a financial professional, successful on Wall Street. He said, I want you guys to know something. He's like, I've given my wife your business card. This was the day when actually there were business cards. And he's like, I told her, carry it in your wallet. If anything happens to me, that's the number you call. And it's like, okay, everything else has been placed. We've gotten the client in a place that he just feels like everything's going to be okay.

• 12:54Ted Seides?

  How do you build the culture of an organization around that idea of providing that peace of mind for your clients?

• 13:02Speaker 02

  It starts with everybody needs to row in the same direction. The idea of assembling a boat of rowers where the whole is more than the sum of its parts. And that's because you've just got to put that together where you've got complementary skills together. This is not to pick on Goldman. They are a great firm. We would not be here if it weren't for them. But that firm is where there's tension between the goals of the individual rep and the firm's goals. And we said, that's just not for us. Look, we had a huge advantage. We started in 2000, not in 1862. We could start from scratch and say, nobody at BBR gets paid on commission. Everything's oriented towards team. Put the team together.

• 13:46Speaker 02

  The person who's involved in a client relationship, who's handling moving money is just as vital as the person who's actually making decisions around investment strategies. And when everybody feels a sense internally of, oh, I matter, I care, I impact the relationship with the client, I think it brings out the best in them. That is a big secret sauce of how I wish we could replicate it, put it in paper. I think a lot of it's leadership by example, but in the end, that is what I think differentiates us.

• 14:16Ted Seides?

  What have been some of the biggest bumps in the road? So those initial principles, you were able to hold for 25 years. I imagine not everything was smooth along the way.

• 14:27Speaker 02

  So Brett and I always joke that he's the glass half-empty guy and I'm the glass half-full guy. Does that mean Brett's gonna answer the question?

• 14:33Speaker 03

  Well, so as it relates to that, it's interesting. There are a few firms that looked like us when we actually launched. I know we thought we had a very creative idea to provide this highly customized, high-touch, very full-service approach to families and to be their profit center. But over those first few years, and this is a great example of the half-full, half-empty, lots of firms started up. We were very early in this trend. And every time I heard about a new firm, or someone leaving a bank, or private equity firm backing a firm in this, I would walk over to Evan's desk and I'd be like, "We're toast. There are so many more competitors in this business." And every time Evan would look at me, he's like, "No, that means we're on to something and people are doing what we're doing."

• 15:16Speaker 03

  And so the space went from something we had to describe to one where ultimately we had to describe why we were different than others in that space. So I wouldn't say it's a stumbling block, but I think we were a little slow to realizing we were in an industry versus just different than everyone else in the broader sense. And I think it's because we were so focused on customization and so focused on service. And that's a good thing. It meant we didn't automate much. It meant that if a client needed something, we said yes. If that took more time, we ultimately spent more time and ultimately hired more people. It took a long time to realize that we could still do what we needed to do for our clients,

• 15:59Speaker 03

  but do it for them better and more efficiently if we automated processes, if we invested more in technology. Now, we ultimately got there, but I'm not sure I'd call that a stumbling block, but if the, one of the things I could do differently was realize no matter how complex or customized our clients are, there's still things we could have done better, more automated, because none of us had run a business before.

• 16:21Speaker 02

  One of the things we did right to determine what we were doing wrong is we brought in a consultant pretty early. It happened to be a friend of a client. This is several years into the business and says, "You probably could use some external help." Because to Brett's point, we really had never done this before. And consultant came in, took a look at our business and came back and he's like, "You're running this like a schmatta business." It's like Lower East Side textile business. He's like, "You get a client and then you go hire somebody." And he's like, "You're not going anywhere. Believe in yourself, basically, and hire for growth. Automate for growth." That, I think, maybe it would have come to us eventually, but to Brett's point, it came very slowly and we needed an outside perspective to basically hold a mirror up to us.

• 17:06Speaker 03

  Also, outside expertise was really helpful for us. The other thing we did in '07 was hire a management coach for us as founders. We all had mentors at Goldman and at GAM that we could look up to. But as Evan said, we were pretty young when we started this business. We hadn't managed very many people. And all of a sudden, we were managing a reasonable number of people. I don't think we were doing that well. We were gang tackling. We didn't understand the difference between accountability and responsibility. And so having someone come in and say, "Here's how you actually run a firm. Here's how I can be your coach to help you be a better executive and a better manager." 2007 was still pretty early in our journey, but that was an incredibly nice thing to

• 17:51Speaker 03

  have.

• 17:52Speaker 02

  This coach has continued to work with us since then. We've used him as needed, but it's also nice to have a coach that has seen from where you've come from and is still involved.

• 18:01Speaker 03

  And at this point, we use coaches for almost every single senior person around the firm. And it's not coaching to be remedial. It's coaching of saying, "I want to invest in you to be better at what you do to be here long-term."

• 18:13Ted Seides?

  What are some of the lessons you learned from your coach managing the team and leading that are both actionable and have stayed with you the most?

• 18:22Speaker 03

  Scorecards.

• 18:23Speaker 02

  Yeah.

• 18:24Speaker 03

  What you need to do at the beginning of every year is agree with the people who work for you, what their objectives are. Now, they don't need to be meaningfully different than the year before, but you and your direct reports need to agree on what they need to accomplish. Those things don't necessarily need to be X clients or Y investment performance, but they do need to be measurable. At the end of the year, you need to hold them accountable for those results. You can't give people a pass if they get a C on their report card. And at the same time, as entrepreneurs, we held things really close. You had to not hold it as close. That if you're going to hold them accountable, you had to trust them.

• 19:08Speaker 03

  And you also had to give them the responsibility to make the decisions to drive those outcomes.

• 19:11Speaker 02

  Yeah, and that had ripple effects across the board, not just in terms of some of our HR approach. Once you're more transparent with your staff, when you're working through what their goals are, you're more transparent than the next step with the firm. And so, we started doing town halls as a result of the feedback that we got from the coach. Our town halls are quarterly. It's everybody at the firm. We talk about what's gone right. We talk about what's gone wrong. We solicit anonymous questions. We answer every anonymous question that gets asked in those town halls. And I think that just opened us up in a way that wasn't, I think, comfortable for us to begin with. And it wasn't these private discussions that was the only way in which we would have healthy interaction with people. We could do it at a broader scale as well.

• 19:55Ted Seides?

  Any other lightbulb moments from your coaches?

• 19:58Speaker 03

  We were really good at learning from our mistakes. We made every mistake, but we never made them twice. And the coach looked at me and said, "Why make them the first time?" And, you know, we hired a COO. We hired technology folks. We hired a head of HR really early. It's like, "You guys don't know that stuff. And yes, you make mistakes, and then you don't make them a second time. Why don't you go get the expertise you need, you're a real firm, to not make those mistakes the first time?"

• 20:26Speaker 02

  The other lightbulb moment was when the coach said to each of us differently, which is, "You can't solve every problem." That is also a point that is, if you want your firm to grow and last in addition to you, to pass it on and have a real legacy, if you are, in the end, the bottleneck, every problem has to come through you because you've got this inflated vision of your capabilities of being able to untie every knot, your business is going to get stuck. And once you start thinking other people are as good as you are and are actually capable at figuring out a problem in a different way than you are, and you see that all the way through, you start to let go and trust other people at the firm.

• 21:07Speaker 03

  One of the things we grappled with, this is an interesting question to be reflective on, we've developed a real brand in this industry in a lot of ways, but it has nothing to do with our name, which is one of the worst names in the industry.

• 21:17Speaker 02

  That's not true. The discussion about what our name should be came down to, we can't come up with anything clever because we're not clever people, we're not creative, we didn't have any marketing people around, let's use our names, last letter of our name. And I was, "Okay, KKR kind of sounds like BBR. Maybe we'll get the halo effect from KKR by copying theirs." So that was as much thinking as we got.

• 21:39Speaker 03

  We got two bits of conflicting advice. One was, whatever you do, put your name on the door so that people know they're talking to a founder. And then the other bit of advice is, whatever you do, don't put your name on the door so the firm's not about you. And whether I talked about holding on to things too much, Evan just talking about things being the bottleneck, trying to have that mix of, we've got great people here, what do we have them do, or bringing out some expertise versus us doing? It went both ways for a long time, and I think it took us a while to get there, where I think it really just shouldn't be initials, right? The firm's not about Brett and Evan at all anymore. People ask me, "What happens if I get hit by a bus?" I'm like, "Well, I hope people are sad. That's really bad for me, it's probably bad for the bus."

• 22:23Speaker 03

  But it doesn't mean anything to BBR anymore.

• 22:25Speaker 02

  But let's not forget that the second part we chose intentionally was partners. We didn't do BBR Inc. or BBR LP or BBR Corp. We did have a premonition that it was going to be more than the three of us.

• 22:39Ted Seides?

  So if we look between the bookends, what have been the most important milestones in the business that led from those early examples of how you're getting better to where we are today?

• 22:52Speaker 02

  We'll do these in chronological order, not necessarily in terms of order importance. Brett made this point before, in '03 or '04, we hired our first HR director. We were 15 or 20 people at the time. It came from a discussion we had with another friend of ours who looked at our firm and said, "Your balance sheet only has human assets. You have no physical assets and you have no HR director? Something's not right." And that was like, "Okay, we really need to focus on talent, focus on hiring, focus on people, focus on career management." So that has been a long time coming, but that was a demarcation, a point that we made. And that was one of our early call centers and we made it. '08 and '09, that was new. Anybody who lived through that, I can still feel it.

• 23:35Speaker 02

  I remember the conversations you and I had around, "What does this mean for the banking system?" Questions that you don't ask yourself in business school, or certainly not anywhere from the 90s and the early 2000s that we had come from. Dotcom was totally different. This was a real fundamental stress that the banking system, the financial system, isn't going to work the way that it did. And it was a point where our clients were in freefall. They were in panic mode, no matter how much we diversified their portfolio and had lots of strategies that were uncorrelated, it didn't matter. And so, learning to get ahead of that is actually talking to our clients before they called us, telling them that we don't know. It's okay. This is new. We don't have a playbook.

• 24:18Speaker 02

  And then the other is, "Okay, this is going to create some tremendous opportunities. Do we have the guts to be able to invest in strategies that are down 80% or 90% because we know their true value is much higher than that?" And we did. We didn't get it 100% right at all, but we made some, at the time, big bets for our clients that said, "We think this is overdone and here's how we're going to take advantage of a total dislocation in the market."

• 24:49Speaker 03

  On that point, and it's something Ted, you and I have talked about in the past, right? I came from a background in derivatives and trading at the end when I was at Goldman. It was, listen, if you have a view, take the view versus let's have a trade that has four legs to it and over hedge it. Listen, it's cheap, buy it. I think we overcomplicated things for a little while and that made it clear that being overcomplicated wasn't good. The next big milestone, 2010, our third founding partner, Art Black, decided he wanted to leave. And to facilitate that, he wanted to be bought out. And so we brought in a third-party passive partner, these folks at Lincoln Peak, who are amazing and have been amazing partners for 15 years. They are passive, but they are incredibly value-added.

• 25:31Speaker 03

  And one of the ways they were incredibly value-added, in addition to facilitating the transition that needed to happen in the business at that time, was to say, you need to not just formulaically pay people, give them the transparency in the business. You got to make them stand by that partners of BBR partners. And that was the first time we started to make actual other partners of the business. And to this day, every year, we're making one, some years none, but usually it's one, two or three partners a year. Several years now, we've actually had multiple partners retire or getting ready to retire. But there's real partners of the firm, to the point where, back to it's not about me and Evan anymore. You got to stand behind being a partnership. That transition was a big deal.

• 26:15Speaker 03

  And I think that was really what got us thinking. Not only is it not just about us, and it's about everyone here at the firm, particularly the other senior people and the senior people-to-be as part of that development. But how do we think about the firm lasting generations from this? And making the decision that the company would never be for sale? And that how do we think about super long-term for how the firm be structured? And that was a huge mind shift for us.

• 26:41Ted Seides?

  How did that super long-term mindset change the investment or your business practices?

• 26:48Speaker 03

  I don't think it changed anything about how we ran the business or did our line jobs. I think it changed a lot about how we thought about people and how we thought about timeframe. That we weren't thinking about quarterly numbers or annual numbers. It was where are we going to be in five or seven years? Who works here that we want to be a partner three, five, seven years from now? Who do we want to be working with over the next 20 years? That change, I think, was an incredible cultural positive for everyone here. The culture was already set in terms of how we thought about investing and how we thought about servicing clients.

• 27:26Speaker 02

  I do think there probably were ways in which we acted subconsciously that we didn't realize. Because what also happened with Lincoln Peak is that they also provided Brett and I with some liquidity. So it'd been 10 years, we've been running the business, working a lot. But when Lincoln Peak came in, they were just the perfect provider for us for what we needed at that time. Once there's some liquidity off the table, and I think this is probably true for a lot of first-time founders, you relax. I think that our anxiety and stress, while we would say we were fun-loving guys and we didn't bring anybody down in the office. My guess is that that's not how everybody else would have described it. And once you just had a little bit more money in the bank and you knew you were going to be able to pay for your kids going to college,

• 28:09Speaker 02

  there was something about your mindset that shifted. And as part of that, too, I think we became more disciplined about saying no to prospective clients that weren't a good fit. We always wanted to be that way, but it's pretty hard in the beginning to say no to revenue. We made some mistakes along the way there, but once we were comfortable, once we knew we were a company built to last, we could then say, even for clients that wanted to hire us and that would have moved the bottom line, but there might have been a mismatch in fit and needs or whatever. I think we got better at being able to say no. So the quality of the clients, I think, improved because it was more of who we wanted to service and who wanted to hire us.

• 28:52Ted Seides?

  As we roll forward to the other bookend where we sit today, how do you think about the current state of play in the multifamily office space and where you fit into that landscape?

• 29:03Speaker 03

  I can't believe I'm actually saying this 25 years later. I think we're probably one of the largest, if not largest, independent boutique firms in the space. For us, going forward, I'd like to be able to say that for decades to come.

• 29:18Speaker 02

  The goal is to be small enough to care, but big enough to matter. And I don't know what dollar size that is. That's where we feel like we are today.

• 29:27Speaker 03

  We can have a boutique mindset as we get bigger. And so I think, again, part of the culture of the service and the customization just needs to not ever change. And that's part of our job to make sure that's the case.

• 29:40Speaker 02

  We look around and there's not a lot of firms like us anymore, who are independent, 100% focused on wealthy families. And yet, we think it's the right strategy. We think that works for us, to all the points that we've talked about today in terms of early decisions we made to create longevity. But now there are a lot of firms who used to look like us, who are now part of a much bigger suite of offerings. And they might be a firm that, in the past, like us, didn't manage any internal money, weren't private equity investors, weren't hedge fund managers, they themselves were allocators. Well, now they're not. Now they're at a product shop, they've got good products in-house, and that's who we're going to be seeing in RFP situations.

• 30:25Speaker 02

  And I think the same thing's on the service side. Firms that have sold to bigger shops that have internal accounting firms, that have internal insurance agents, that have focus on philanthropy internally. We are still a boutique, and at $32 billion, we're a big boutique. But it is different from firms who we thought of as in our space head to head, who are now multiple times our size because they're just part of much bigger institutions.

• 30:52Ted Seides?

  I'd love to unpack how this works. So as an example, I call Brett next week and say, "Hey, we just sold capital allocators for $2 billion cash. Hold out for more." I'm going to come in and talk to you guys. How do you start the process with a new prospect of what it is you're going to be delivering?

• 31:13Speaker 03

  The very first question I'd ask you is, "What do you think some money's for?" And our goal is to help you achieve those objectives. And for every individual family, those objectives are different or articulated differently.

• 31:28Speaker 02

  Yeah. If you were to line up and do a beauty contest and we lead with, congratulations, it's a big exit, way to go. Podcasts are really hitting it. And instead of like, okay, well, tell us everything you're invested in. It's back up, what's your wealth for? And that leads to a discussion. There are so many times in those first meetings where we're not opening books. We're not going through portfolios. Eventually you have to get there, but the first discussion is really orienting around, what is your mindset now that you've had this big exit around, is it enough? Are you going to work again? Is it too much? How much are you going to leave to your kids? How are you thinking about charity? Are you philanthropic?

• 32:13Speaker 02

  How did you grow up with money? Does this feel like you were due and it was meant to be? Or do you feel like you just hit the lottery? There are so many ways to figure out what it is that the money means to you that that drives all of our future discussions.

• 32:28Speaker 03

  Whether it be how you build a portfolio, how you structure your estate plan, how you think about taxes, how you think about philanthropy. So all those wealth management services as well as even the administrative stuff about the complexity that comes with that level of wealth. But we don't start with, here's all the stuff we can do for you. It's what do you want? And here's how we can deliver that for you. And I think that really differentiates us. And I think that's again, back to the culture of we want to provide value to these families and we want to do it in a very high quality and high service way.

• 33:00Speaker 02

  We get feedback from people who've gone through your process and then end up hiring us and we ask why? And they said, you're the only ones who just listened in that first meeting. You asked a lot of questions. Look, we're analytic people. We're investment people. It's not going to come without follow-up discussions where you can actually lay out some financial rationale. But if you don't know all the inputs, we just described them, the rationale is just a cookie cutter. It's a template. You could have any financial planning software come up with it. You gotta be able to figure out how to customize it. And every client is different. 190 families, we have 190 different portfolios, 190 different set of needs.

• 33:41Ted Seides?

  After doing that 190 times, so much of money is tied to psychology, as you said, people's experience growing up, maybe they have some sense of what they want to accomplish. How do you figure that out with them?

• 33:55Speaker 03

  It has always been the same philosophy, but how we've articulated it has gotten more and more sophisticated over time. And actually, the 08 experience was important for us. We always highlighted that you had to think long-term. We've always highlighted that as a family, your wealth has broken free of gravity. None of our clients need to figure out-

• 34:16Speaker 02

  When they can retire.

• 34:18Speaker 03

  Or how to pay for their kid's college. It's all multi-generational. But if you tell me I'm so long-term that I don't have to care about mark-to-market volatility, I would tell you, no, you're wrong. Because Evan highlighted in 08, one of our core philosophies, and I think one of the biggest value adds that any investment advisor can provide, is to rebalance and stay the course. I.e., we're losing money, let's buy. We've made more money than we should, let's sell. And let's rebalance back to those targets that are set based on what your objectives are and what you want to achieve. And if in 08, or 18, or 2020 with COVID, or 01, 02, our 25 years, we've gotten to live through some

• 35:02Speaker 03

  pretty ugly markets. We now sophisticatedly call them turbulent regimes. But we can say, here's how bad your portfolio will perform when things are bad. Are you comfortable that you'll buy more? And one of the things that's been really interesting to me, working with families, is you'll have a $500 million family, and you'll tell them, listen, in one of these really terrible markets, you'll probably lose 20%. And there are some families that'll say, 20%, big deal. That's not a big number. And then I'll say, well, you know, that's 500 million gets turned into 400 million. And their face turns white, and they're like, you mean I'd lose $100 million? Every generation before me, in total, added up, compounded, didn't have 100 million. How could you lose me 100 million? I'm like, well, then we're going to take less risk than that in the portfolio, right?

• 35:47Speaker 02

  Yeah.

• 35:47Speaker 03

  And so, having those conversations, and we now can do it with much better tools and much risk allocation, and we have much better data on what bad can look like, and using our imagination on what bad could look like different than it's been, so that people can stay those courses and we can be really long-term.

• 36:03Speaker 02

  There isn't a scientific methodology to getting to the exact right asset allocation that a family will not only stay the course during difficult times, but buy their losers and sell their winners to make sure that we stay rebalanced. And the reason that it's not just limited to necessarily the principal who made the wealth, it's the spouse, sometimes it's the kids, if you've been working together. And we want them all in the room together. Sometimes we actually separate it and actually have individual conversations. And it's always eye-opening to see the difference intra-family with their risk tolerance. And so what you think you're doing is providing the perfect plan for the person that's sitting across from you in terms of how much they can afford to lose and what their portfolio

• 36:48Speaker 02

  is. And then it's not, because they come back to you during a market downturn and say, "We need to change it." And we ask, "Well, what's happened? What's changed?" From the beginning of the conversation. And the reason is, well, they get home and their spouse is having a very difficult conversation with them and they're not sleeping well at night. So it really is a family discussion that we try to have as if not in the beginning, on an ongoing basis, so that you're always fine-tuning the portfolio with what those goals are and what that tolerance is.

• 37:16Ted Seides?

  So I'd love to turn from that over to the investment side. Once you have at least a sense of what you think, say, that asset allocation's going to be, why don't we start with the most important principles that you take in your investment approach?

• 37:31Speaker 03

  Sure. And I would say these are not revolutionary. They're core tenants, and I would hope that other thoughtful investment firms would have similar ones. But for us, it's long-term compounding. It's that diversification's the only free lunch in investing. I think we think about diversification a little bit differently. We've talked about mean reversion and rebalancing, but for us, that's also being comfortable being contrarian. And people talk about it, but I think you have to be very thoughtful about it ex ante so that you can do it in the moment, because it's really easy to talk about and really hard to do. And so you need to have the plan for it. And then a willingness to be, I call it tactical, but it's really opportunistic. We're not market timing, but...

• 38:14Speaker 03

  What's interesting in the market today is different than what's interesting in the market two years ago, six years ago, eight years ago. And so as much as we've got this long-term strategic plan, we need to understand that sometimes things are really interesting in certain sectors and other times they're really uninteresting and be flexible within that strategic plan, having those tactical shifts. But it's really more of taking advantage of opportunities.

• 38:38Ted Seides?

  You mentioned that you think about diversification differently. How do you think about it?

• 38:43Speaker 03

  So we allocate to strategies, not asset classes. And we talked a little while ago about David Swensen and stocks, bonds and other. We never talk about stocks or bonds or others. We talk about active equity or public equity strategies. And those public equity strategies could be passive or active. Those active equity strategies could be long or long short. Equity strategies could be private as well as public. And just because it's a private equity strategy doesn't make it some magical mystical alternative beast. And just because it's a public active equity strategy that's long and short also doesn't make it some mystical hedge fund beast either. So understanding what are the drivers of

• 39:23Speaker 03

  those returns? What's the right price to pay to get those returns? And who are the best practitioners in the spaces we want to be in, in each of those sub-strategies? I think that's different than certainly most other folks who just say, oh yeah, we're going to allocate to hedge funds. We've never allocated to hedge funds.

• 39:42Ted Seides?

  How do you then categorize those different strategies?

• 39:45Speaker 03

  So we break everything into stable returning lower risk strategies and higher returning higher risk strategies. And if you think about it, that's the 60/40. Your 40% in bonds are stable returning lower risk strategy and your 60% in equities are higher returning higher risk strategies. That's not, again, revolutionary. It's sort of evolutionary, but those are the strategies. And by the way, Bonds are one of the stable returning lower risk strategies and being long equities is another way to have a higher returning higher risk strategy. There's just so many other things we can do within both to build much more attractive portfolios.

• 40:20Ted Seides?

  On that opportunistic piece, how do you think about when to do it and how to size it?

• 40:26Speaker 03

  It really depends. Sizing is very client specific. And so I describe how we build portfolios for clients as a giant matrix. If you're a family here, you've got an advisory team that's thinking about your objectives, how you should be allocated, and all of the other wealth management services that go hand in hand with that asset location, portfolio construction, risk tolerance, how big things can be. So think of those as a column. And the rows are those strategies I just talked about. The investment research team's job is to define the rows and hire and monitor the managers that fill out those rows. There's lots of things that we're watching all the time.

• 41:10Speaker 03

  We still get a dashboard that I get every Friday afternoon at the close on where are spreads and where are different markets and where are relative values? We've even hired in the last few years, a market strategist to full time be focused not on predicting the equity market, but saying, listen, here's the risk reward and intermediate duration munis is an example today. What do we think of that? And holding our feet to the fire on those relative values because since we can invest in anything, esoteric, traditional, what's showing up as attractive? And often it's coming from the managers. Here's what I love. Here's what's big in our portfolio. I wish I could be bigger. And then us saying, okay, let's talk about being bigger and creating a joint venture with that manager, getting bigger.

• 41:54Speaker 03

  And then it's up to each individual client and their advisors to say, this is how much risk or illiquity we can handle.

• 42:05Ted Seides?

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• 42:42Speaker 03

  This is not an offer to sell or investment advice. Investing involves risk, including the loss of capital.

• 42:48Ted Seides?

  And now, back to the show.

• 42:52Ted Seides?

  As you go and look at how you're going to fill out those strategy rows, the manager selection process, what have you found have been the most important factors to your team in your decision to work with a manager?

• 43:08Speaker 03

  There are several. They tend to be people. They tend to be incentives. They tend to be specialization. And I would say that partnership of those people. I talk about it as the shower thought. What do they think about in the shower in the morning when they get up? What's the first thing they think about in the day? If it's about their portfolio and about their area of expertise, that's someone I want to do business with. And if they've structured their business in a way where they're compensated and they will be successful if they execute on that and we're aligned, then I'm not a client. I'm partners with them in doing that. Then our process is focused on regularly re-underwriting that

• 43:53Speaker 03

  so that it's has their approach changed? Has their passion changed? Have the key contributors to that process changed? Has the asset size gotten too big to execute on it? Has it gotten too small? Have they drifted so that we can then make a fire decision in advance of the performance being negative? And if performance is mediocre for a quarter or two, but none of those things have changed, then we can be a buyer of those dips and not use... One, two quarter, or even one, two-year performance to drive decisions. At some point, if it's just performance after a couple of years, maybe we've missed something on the underwriting. But it's to revisit the why did we hire you and what those key criteria are.

• 44:37Speaker 03

  We actually list those key criteria, come to a conclusion, and every quarter, we look at the previous quarter's conclusion just to make sure nothing's changed in our thought process.

• 44:46Ted Seides?

  What have been your favorite types of managers? And you could either go across strategies by size, by experience, all those criteria.

• 44:54Speaker 03

  When we started, there were inefficiencies in the market that were just really easy. Convertible arbitrage was cheap and you could make 1% a month. Convertible arbitrage is not even really a thing anymore. That doesn't mean there aren't people that we hire that do a good job doing capital structures that include convertibles and make money doing it, but that's an inefficiency that's gone.

• 45:14Speaker 02

  And we learned slowly that we needed to change expectations on returns in those strategies. I mean, we absolutely presented any of our stable return, low-risk, absolute return strategies as 1% a month. Merge your arb, convert arb, that alpha doesn't exist anymore.

• 45:32Speaker 03

  And so I think the most interesting alpha today comes from a lack of capital. And that lack of capital can either be because it's unfavored, and that goes to being contrarian. Something's cheap because people hate it. It can be a lack of capital because of a institutional or regulatory change. I mean, one of the things that I loved post 08 are things like the Volcker Rule, which took Goldman and Morgan Stanley out of proprietary trading businesses and at the same time took hedge funds where side pocket became a dirty word out of certain private credit-type businesses. That's a lack of capital. We could fill that void. Or interesting investments that once upon a time were pre-institutional and are now institutional.

• 46:17Speaker 03

  Carbon credits, music royalties. That's stuff that people do today that five, seven, 10 years ago, they didn't. So anything where I can figure out because it's hated, markets have changed, or it's pre-institutional that we can get excited about because of the fundamentals and the investment. And there's this kicker that liquidity is going to come in and going to allow us to take it. You know, we've done it in core real estate in the last couple of years. For 20-plus years, core real estate was uninvestable for us. In '22, core real estate became investable for us again, just from a lack of capital. It doesn't have to be esoteric.

• 46:54Ted Seides?

  What are some of the ways you've thought about changing the implementation of the investing? So you mentioned other people have evolved into doing direct investing alongside of just allocating to managers. As you've grown and scaled, how have you changed how you've gone about implementing the investment strategy?

• 47:12Speaker 03

  The single biggest change is our ability to do one-off things and our ability to put people in business and keep them in business. If we think there's an incredibly talented individual that needs a few hundred million dollars to execute their strategy, we're comfortable being that person. There are situations where managers have come to us and said, "Listen, these are my three favorite portfolio positions. They're 10% each." I'm like, "Great, let's create an SPV where, based on that theme, we own bigger pieces of them." And that doesn't work if you're giving them $10 million. But if you're giving them $50 or $100 or $200 million, they're happy to be in business with us. Credit managers, where we've done really interesting, short-duration, investment-grade

• 47:57Speaker 03

  credit with attractive returns on a big, separate account, but that's a separate account that only works on a few hundred million dollars. So that size has allowed us to co-invest with private equity managers, attractive fees and attractive deals. That doesn't work if you're writing $100,000 co-investment checks.

• 48:13Ted Seides?

  Alongside of those strategies, you mentioned a couple of characteristics that are common, like people, incentives, partnership. So when you say you want to be partners with good people, what does that mean as a BBR investment?

• 48:27Speaker 03

  A few things. One, that we know what they own and they know what they own. So for instance, people ask about what reporting do we want to see? And I always turn the question back around to the manager and say, what do you look at? I want to see what's their dashboard. And that's what I want them to share with us, not what they think some consultant wants to see. I don't need positions. It doesn't need to be a separate account. We just need to be on the same page on a somewhat regular basis about that we're looking at the same things and we're looking at them the same way. That when there's bad news, they share it with us. That when someone leaves, we get that call and I don't find out about it from someone else. It's that level of trust that they can give us bad news. We appreciate that not everything always goes perfectly.

• 49:12Speaker 03

  And that, you know, when we're doing a portfolio review, here are the things that worked and here are the things that didn't work. And so I think that level of honesty and integrity.

• 49:19Speaker 02

  It's trust. And how do you measure trust? Part of it is delivering on what you say you will deliver on from an investment standpoint, from an information transparency standpoint. What we don't love is learning about another manager that we own from a third party and we have to confront that manager with it. You have to trust but verify. We hire a new manager, by no means is that a lifetime contract. And it's easy to get complacent in this business. Complacent in the way in which you select managers. It's good enough, keep the manager. They're doing more or less what they say. They're within the ballpark of return and risk of expectations. But if you're trying for excellence, you can't ever get comfortable that it's just okay.

• 50:04Speaker 02

  And when it's not, be ready for all the commotion that comes with turnover. You got to tell the manager, you got to tell the client that things didn't work out the way that you planned. There's a barrier to exit. And we know we'll never get 0% turnover. No matter how great our systems are in selecting managers. And we want to get good at being able to turn over in advance of problems.

• 50:29Ted Seides?

  As you look at the markets you're participating in, over these last 25 years, you've grown a lot, so have a lot of your peers. There's more and more money going into the strategies that 25 years ago, you were one of the few people participating in for families. And now more and more you hear about the democratization of alternatives as an example. How are you thinking about the prospective returns in some of the places like private equity that have been so good for so long?

• 50:55Speaker 03

  Well, without question, they're going down. Private equity returns will be lower over the next 25 years than they've been over the past 25 years. Given where equity markets are today, I still think equities are worth owning, but equity market returns are going to be lower. On any metric you look at, the S and P is pretty expensive today. We still own it, but we're very dogmatic about rebalancing, thinking about taxes to take those profits because those returns are going to be less attractive. And by the way, if that's the case, private equity in lots of places now, it's more expensive than public equity. One of our big themes that's worked really well is understanding that change. One of my favorites, it's a geeky bar joke, but like, how many stocks are in the Wilshire 5000? And the answer is a lot less than 5000, right?

• 51:41Speaker 03

  And the reason for that is-

• 51:42Ted Seides?

  Does that really knock them dead at the bars?

• 51:43Speaker 03

  Yeah, really knocks them dead. Luckily, I've been married a long time. But that's because there's so many more companies staying private. There's an ecosystem for those companies to stay private. We've had a philosophy of that's going to continue to grow. That's going to hurt returns, but that's a ecosystem. And what I want to do is be somewhere in that ecosystem where I'm creating food for it and making money in a repeatable process. And so can we invest in businesses at still higher than I'd probably prefer 10 years ago multiples, but that are smaller businesses that managers can really add value, they can add acquisitions, they can grow the businesses.

• 52:25Speaker 03

  So then all of a sudden, a larger private equity firm that's part of that democratization will pay a higher multiple and it's now a big enough deal for them.

• 52:35Ted Seides?

  How do you think about that in an area like, say, hedge funds, where it's part of what you've done, but similarly, more and more capitals come in, more concentration in the industry?

• 52:45Speaker 03

  Alpha in stock picking is as hard as it's ever been. I'm not a big believer that that's going to mean revert in a meaningful way. Now, I do think you will ultimately see mean reversion in- The capitalization of stocks. The MAG7 is a phenomenon, the way the Nifty 50 was a phenomenon. GMO, Jeremy Grantham likes to talk about mean reversion, but he's like, but I don't know how far away from the mean and I don't know when it's going to revert. That's one that I'm really comfortable in the mean reversion, but I can't take a view on when or how. And so that means owning small cap stocks, owning non-US stocks is a more attractive go-forward proposition and that reversion is going to happen. But I think in those areas, there is more stock picking alpha than in US large cap

• 53:28Speaker 03

  stocks and that your ability to do that in on the run US equity is very low. And so from our perspective, we have a bifurcated view. We are passive for US large cap equities. We've been passive since day one. We own significantly fewer long, short equity hedge funds and we don't do any that do US large cap stocks with the exception of industrial focused firm that is doing some market timing around cycles and industries and commodity prices, both long and short, but not because they think that this one company is going to outperform that company. There's no market neutral long, short in our portfolio.

• 54:11Speaker 03

  There hasn't been in years and years and years. And so I think that is a phenomenon where it's been arbed away and it's too crowded and it's not worth competing in anymore. Well, let's turn to another crowded area. How about venture capital? I think it's less crowded today than it was three, four years ago. And so there's some interesting things. We are in a venture capital fund that's a 22 vintage that bought a lot of things in 23 and 24. It's about 60% invested and we just got a bid for two times NAV. We're not going to take it. I think that's a good vintage venture capital investment. We did not do venture capital probably for our first decade and the view is still the same today, which is venture capital is a mediocre asset class.

• 54:54Speaker 03

  We got to be in the top quartile managers. It is very difficult to be in top quartile venture capital managers, given their limited capacity. Given how that market has evolved and the number of really high-quality, smaller managers that may, but probably are not in Silicon Valley and are really, really specific in terms of their domain expertise and their ability to be the partner of choice to portfolio companies, we're very happy in venture capital today because it's also one of those areas where everyone's gotten burned, people have committed too much capital, whether they're institutions or big family offices. And so it's one of those places where there's not enough capital today for the business formation that's going on.

• 55:34Ted Seides?

  In the stable value portion of what you do, private credit has replaced Wall Street lending and become this big area for investing, particularly for a lot of families. Here's your thoughts on that space.

• 55:45Speaker 03

  We do a lot in, I would call, more esoteric credit. We do almost no on-the-run private credit. There's two reasons for that. One is, most of our clients are taxable, at least for a majority of their assets. And so, not all 10s are created equal. A 10 that is deferred and long-term capital gain down the road versus a 10 that's ordinary income is a very different outcome for most of our clients. That makes that 10, and I think I'm being generous today with 10, pretty unattractive. Two, we don't think coupon equals return. We've always been total return investors. Whenever we look at an asset class,

• 56:26Speaker 03

  it's all about, what am I going to get at the end? Whenever a client asks, what's the yield on my portfolio? It's like, no, no, what's the return on your portfolio? And so, in a lot of private credit strategies, I think people just assume that coupon being clipped is return. And by the way, if you were a bank, you'd have to take a loan loss reserve against it to report income, but not if you're a private credit fund. That's a little bothersome to me as well. But there's plenty of things. Chapter 13 bankruptcies. We're with a group that we've been with for years that does bridge loans to a very niche real estate sector that has an agency takeout, but it takes a couple of years for the agency takeout. You understand what you're investing in, and those generally generate mid-double-digit

• 57:09Speaker 03

  returns. And those are things that, once upon a time... A hedge fund would invest in, but they're too illiquid now. They're something that a Morgan Stanley or Citi would put on their prop book, but they can't for reg capital charges anymore. We've got a lot of sophisticated people and some really talented partners on our research team who are the go-to people of choice. And there's a lot of folks in these specialty finance and other niche areas that know we're a great call on that. And so as much as I'm dismissive of private credit, these longer duration niche credit opportunities continue to grow as part of our portfolio because from our perspective, even if a lot of it is ordinary income, earning mid to high double-digit returns because banks

• 57:51Speaker 03

  and other folks have exited those spaces is a lot more attractive than owning the S and P for incremental dollars today.

• 57:58Ted Seides?

  What are some of your other favorite new frontiers?

• 58:02Speaker 03

  I'll talk about some of the things we've done recently. Industrial outdoor storage. It's become a little more institutional, but two years ago, when we first did it, wasn't an asset class that anybody would own. That's, I think, particularly interesting. Other stuff that we've done, oh, bourbon aging? First of all, one, it's certainly not an institutional asset class. Two, people think we only do it because Evan's from Kentucky and is a huge bourbon fan. But three, there's actually terrible technicals because liquor consumption's going down and Brown Foreman's talking about volumes dropping. And so there's no capital going into that. And so the ability to be a structured lender to these small producers is incredibly interesting to us today. So that's one that we've done recently and are pretty excited about.

• 58:46Ted Seides?

  So as you look forward now to the next bookend, 25 years out, how do you think about how you're trying to position BBR for the next generation and the next generation after that?

• 58:59Speaker 02

  We do have a meritocracy here, much as we talk about teamwork. The meritocracy is that we want ambitious, successful people here at BBR to become partners. And when they're partners, they own the firm. It's not a profit share. It's not a formula. They have capital value. It has real equity value. And Brett and I and other founders are committed

• 59:23Speaker 02

  To providing our equity to this new generation of partners in a way that allows for us to be able to give people the chance to be able to say, just like it has for Brett and I, this is their firm. I don't think a lot of firms, especially ones who are selling out today, necessarily have that mindset. You have to be willing to be diluted. You have to be willing to know that you're not going to be selling at the highest print. But what you are getting is a firm that's going to be around a lot longer than we are. And then next is just a commitment to innovation. I think if we were just thinking about how do we manage existing clients and do it based on the way we've gotten successful in the beginning, which was rolling up our sleeves and saying, no job is too small. We're all

• 1:00:07Speaker 02

  going to figure it out and gang tackle. I think that's going to limit our ability to be able to be successful in the future. And so we now have an amazing CTO. We have an amazing head of innovation who are partners of the firm, who are rethinking the way in which we have structure in light of AI, in light of all of the changes that are going on. And we're committing real dollars to those efforts, both in terms of systems and in terms of people. And so it's just this mindset that you get into, a little bit of back to your question of what changed in 2010, which is if we were looking to try to maximize 2025 cash flow, we wouldn't do any of that. But if you're looking to maximize

• 1:00:46Speaker 02

  2035 cash flow, you're just much more willing to invest in long-term, positive NPV projects that will make us a better firm.

• 1:00:55Speaker 03

  And on the investment side, the thing that makes people the most successful in our investment team, and this is part of the culture we articulate it, is being intellectually curious and having thick skin. You've got to come up with interesting ideas and push the envelope. And you've got to be willing to have everyone else around the table shoot arrows at it.

• 1:01:13Ted Seides?

  There are a couple of aspects of the industry that have changed a lot. And we talked a little bit earlier about this consolidation wave. Have you thought about the strengths and weaknesses of staying independent, not just for BBR, but then also as you look at managers who are selling stakes, the strengths and weaknesses of that entire consolidation activity in the industry?

• 1:01:36Speaker 03

  I think there are managers that fall into two buckets. They are managers who focus on their investment returns and there are managers who focus on the enterprise value of their management company. And I think the decisions you make on people hiring, process, how you spend your personal capital on building your enterprise are different if you're thinking about how do I generate returns versus how do I maximize the enterprise value of my company? That's not to say we not do business with investment firms that are public or investment firms that don't have minority stakes, but it's more the exception than the rule because we're focused on people who are waking up and thinking about their returns and their strategies.

• 1:02:20Speaker 03

  And I would say we wake up thinking about how do we deliver returns for our clients and service for our clients so that our firm will be here and doing that decades from now, not because we ever want to sell it. And I'd expect the same of our money managers.

• 1:02:36Ted Seides?

  Brett, from when we first did this podcast eight years ago, there probably weren't that many people who knew about BPR. And there's this always interesting tension of being the quiet boutique that your clients love that they know who you are, maybe they'll make a referral versus being a business that other people know that has benefits maybe for your relationships with managers or your next client. How have you thought about that tension between starting as this little boutique and trying to build a brand around the firm?

• 1:03:04Speaker 03

  Well, I think there's a difference between brand and notoriety. When I think of brand, I think of our reputation. All of us have always been super, hyper-focused on our reputation, that we will always be acting in our clients' best interests, that we want to be making thoughtful investment decisions and continuously improving with that. I want to be known for that. We get opportunities as an investor because we are a partner of choice. I think that's part of our brand. It's not a marketing flip book approach to things. It's how do people think of you? And so we've always been hyper-focused on our reputation. And now I think Maybe it's brand instead of reputation because our reputation precedes us.

• 1:03:49Speaker 03

  And I'm not a marketing guy, but maybe what brand really means is that people know of you and have thoughts of you based on your reputation without you having to describe it to them.

• 1:04:00Speaker 02

  It's probably the same tension any luxury brand has, which is the more it's known, the more it's a commoditized product and the less it becomes a luxury item. We have no interest in moving towards a commodity business. If we can continue to grow with a handful of great families every year, our luxury will, in their mind, be only enhanced and that brand will only be enhanced. This is part of the challenge that will happen with consolidation, which is you can't be a boutique owned by PE, owned by a bank, and still be comfortable that you're going to still play just beneath the surface. Because scale matters in those firms, they need an exit.

• 1:04:45Speaker 02

  We don't. And since we don't, we're much more comfortable being able to continue to feel good about who we are, what values we have. Our three core values are integrity, empathy, and rigor. I don't know whether we could say that with that same level of confidence if we were focused more on brand awareness.

• 1:05:04Speaker 03

  Culture is so critically important to what we do for how people behave and how they act here. We've never bought anything. That doesn't mean we might not someday do something. We get approached all the time, but it's not part of our plan. It's not something we intend to do.

• 1:05:21Ted Seides?

  If we step away from BBR alongside the success you both have had, you've had the opportunity to serve on a bunch of different types of boards. Would love to hear about some of those experiences and the lessons you drew that helped you apply them into the business.

• 1:05:37Speaker 03

  I'll say a couple of things. One, some of those boards were better functioning than others without naming names. And so, things get difficult. And if the groups are functioning well, they can handle those difficulties much better. And the time to make sure you're functioning well is when things are good, not when things are bad. Functioning well means you've got a great group around the table. Those people bring diverse thought, significant expertise, and they're really thinking about that institution, whether it be a public company, private company, philanthropies, best interest at heart, not their own. And if you put all those things together and it functions well, it can handle difficulty. I'll name a positive one. I was on the Cowen board for a long time. I think

• 1:06:20Speaker 03

  the Cowen board really met all those criteria I talked about. We were approached for an acquisition. Having a public company get sold and how you think about the people and retention and culture and fit and public shareholders and your duties as an independent shareholder. I saw that board function at a really high level. It also taught me that I'll never be on another public company board.

• 1:06:41Speaker 02

  I'll take the other side of that is serving on nonprofit boards. I probably served on my first nonprofit board 10 years ago. And I came in guns blazing. I am going to professionalize this board. I'm going to run it like a business because I know what I'm doing because I've got BBR in my experience. And the truth is, if you try to run a nonprofit board as a business, it will fail. Giving space to see that there are people who are on the board, who work at a nonprofit, who are there for the passion and the mission and not to maximize shareholder value. And that means you have to accept a lot of inefficiencies. You have

• 1:07:22Speaker 02

  to be willing to step back. You can't say it's my way. I know how to do it. I think that it's actually contributed to a much greater sense of how to work within BBR, that a lot more patience for a lot of different kinds of perspectives. Yes, it's easier because people who work for philanthropies need to feel that they're getting other recognition other than necessarily their paycheck. As a board, you make sure you provide that is a matter of good governance and a lot of work in committees before you bring that to the leaders of that organization. And then I think part of it is that you're going to end your term on the board not having solved all the problems. Good governance, to me, there has to be term limits. And after

• 1:08:05Speaker 02

  your ninth year on the board, even if you feel like you are irreplaceable, you aren't. Somebody else can take your place on the board and will be good at it. So you know that the organization is going to survive past you. And you might not be able to say, all my fingerprints were on it, to make this organization cure cancer, make K through 12 education in Brooklyn the best it can possibly be, start up a community from scratch and have it go and build a building and be there forever. You have a role to play. And your role is as a board member, not as the co-CEO of BBR. For a lot of founders, entrepreneurs, I wish they knew what I know now when they started their board experience and were much more patient about trying to make impact.

• 1:08:49Speaker 03

  I think we've both been fortunate, though. One, because of the reputation of BBR, I think we've both been sought out as board members for different opportunities. You've got to learn to say no. And two, those board experiences have taught me a lot as someone running this company about seeing what other people do well, hearing from other people and their perspectives. Most importantly, BBR has also given Evan and I an opportunity to be extremely philanthropic, and we both care deeply about it. And if you are philanthropic, I think there is an obligation to spend time with some of those philanthropies you care the most about.

• 1:09:24Ted Seides?

  Great. Well, I want to make sure I get a chance to ask you both a couple of closing questions. Brett, you think you've answered these before, but you haven't.

• 1:09:31Speaker 03

  I should have relistened.

• 1:09:32Speaker 02

  You've shifted them up since episode eight.

• 1:09:35Ted Seides?

  So what's your favorite hobby or activity outside of work and family?

• 1:09:39Speaker 02

  I do trips with a bunch of friends that we call Go West, Young Man. And we will go find somewhere in the mountains. Been to Telluride, Moab, we just got back from Tucson. It's just an adventure experience. We do gravel bike riding, we do trail running, trail racing, and a lot of fun. And I think half the fun is, of course, that you're together with your old friends. The other half is being in a really cool place where you get head clearing time. And I think these closing questions don't always have to have a moral to the story, but I would say that it's an important part of being successful in business is having time outside of business.

• 1:10:20Speaker 02

  One of the principles that Brett and I believed very early on, and we started a sabbatical policy at BBR, that anybody who works at the firm for 12 years has extended time, months away from the firm, where they're disconnected. No emails, no texts, no Teams, no slacks, you are out there. So we've done our sabbatical, and I try to do these Go West trips as a little, we here or there is a way to capture some of that.

• 1:10:47Speaker 03

  So Evan and I are pretty different. Not only are we physically different size, and I'm the glass half empty, he's glass half full guy, I could give you 20 other ways that we're polar opposites, but yet another one is, he's a land lover, my happy place is on the water, near the water, on a boat.

• 1:11:00Ted Seides?

  What was your first paid job and what'd you take out of it?

• 1:11:04Speaker 03

  Little league umpire, seven bucks a game, and a free Coke.

• 1:11:07Speaker 02

  Whoa, you're calling balls and strikes? Were you good?

• 1:11:10Speaker 03

  Well, you rotated. Sometimes you called balls and strikes, and sometimes you had to be the guy in the infield. And the worst thing were the parents.

• 1:11:17Speaker 02

  Now you're one of them. I was a traffic guard at the Kentucky State Fair. I was 16 years old, I was four foot 10, I didn't weigh 100 pounds. It was a miserable job, sweltering in August heat in Kentucky, and I was really bad at it. I felt alone, I was dehydrated, and I knew that was not my skill set. I came from a family of accountants. I thought, I'm going to go do something very different. Definitely gave me an appreciation for jobs that I am underqualified to do.

• 1:11:48Ted Seides?

  How's your life turned out differently from how you expected it to?

• 1:11:52Speaker 02

  Sticking to the Kentucky theme, I thought I'd come to New York, work for a couple of years, validate that my Wharton degree was money well spent and prove to myself I could make it to the Big Apple. And then I would go back to Kentucky and take over, be the next generation for my family's accounting business. Spent a couple of years at Goldman and then was out for dinner with my dad at Eo Malino, I actually remember this, in West Village. And we finished dinner and go outside and I say, Dad, I'm ready to come home and I'm ready to join the business. And my dad said, You're what? He's like, you're gonna give all of this up to come back to Kentucky to argue with clients about billable hours? And he's like, Look, I'd love to have you, son, but stay here. That's

• 1:12:37Speaker 02

  the path I thought it was on, not on the BBR path.

• 1:12:39Speaker 03

  I started on the path I thought I would be on. I never wanted to be an entrepreneur. I went to Wharton. I wanted to be an investment banker. I went to go work at Goldman Sachs as an investment banker, and I thought I'd do that forever. And so if you told me that 25 years later, I would have started a business with one of my drunken idiot fraternity brothers who taught me how to handicap horses and drink bourbon, and that it would be this successful, I'm pleasantly surprised.

• 1:13:03Ted Seides?

  What's a mystery that you wonder about?

• 1:13:05Speaker 03

  How you drive the golf ball straight?

• 1:13:11Speaker 03

  I can't do it. I don't know how it's done.

• 1:13:15Speaker 02

  That's not ever a mystery you're gonna solve.

• 1:13:18Speaker 03

  Didn't ask a solvable mystery, just a mystery I wonder about. How do you drive a golf ball straight? Can't do it.

• 1:13:22Speaker 02

  The first thought is, my daughter's taking a class in high school on conspiracy theories. And she comes home every day with a different conspiracy theory, like how people believe that we didn't really land on the moon. And I just don't know how minds work. I really think I should, and I really would like to know more.

• 1:13:38Ted Seides?

  All right, last one. If the next five years are a chapter in your life, what's that chapter about?

• 1:13:43Speaker 03

  My last five years have been excellent. The role Evan and I get to play here at BBR, how I get to spend my time as my children have grown up, and how I get to spend time with them. Ex a pandemic, the last five years, life's been great for me. If my next five years looked exactly like my last five years, I'd be a really happy guy.

• 1:14:03Speaker 02

  I agree with all of that. You're settling into middle age year. The next five years is probably a lot less swashbuckling than it was when we were 30, and I'm good with that. And this is fun.

• 1:14:15Ted Seides?

  Evan, Brett, thanks so much for sharing the past, the current, and a look forward at BBR.

• 1:14:20Speaker 02

  Thanks, Ted.

• 1:14:21Ted Seides?

  Thank you, Ted. Thanks for listening to the show. To learn more, hop on our website at capitalallocators.com, where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one, and see you next time.