Live from Future Proof 2025 (EP. 429)

0:00Welcome to Animal Spirits. We are live from Huntington Beach, Year 4 at Future Proof. and we are excited to do the show in front of the best audience of fans in the world. Today's show from the beach is brought to you by Sprott ETFs. Looking to add some shine to your portfolio? An investment in the Sprott silver miners and physical silver ETF SLVR may help you do just that. Silver is not only a precious metal with value as a currency, but... That's right, Ben. It's not just a valuable currency. It's also a critical material for energy, electronics, healthcare, automotive technology, and more. visit SprottETFs.com or call 1-888-622-1813 for disclosure and prospectus information containing investment objectives, risks, charges, and expenses, which should be read carefully.

0:44Alps Distributors, Inc. is the distributor for the Sprott ETFs. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

1:32This is not our music. Is that our music? That is... That is? Alright, I don't listen to the podcast. It doesn't sound like our music. How we doing? Everybody having fun? Is California the best? Yes? Yes! Yes, it is the best. I was told. I didn't occur to me. But yeah, there's no bugs. There's no bugs. A downside of California, maybe I'm nitpicking here, but I don't know about you guys. So we have beaches on the East Coast. I go to one. But there's something about the California sand. The sand sticks in my ear. And I don't know, it buries itself in my brain. I'm cleaning my ear out for three weeks.

2:18But other than that, I can't complain. Are you okay? I'm good. All right. Before we get started, I want to mention We've got these snazzy hats. We've had a lot of people ask you about them. Pat Metzay, what's up, man? Idonshop.com, if you want them. There was a really handsome guy at Reynolds Wells who said, we need some trucker hats. I'm not naming any names. And these have been hot, and everyone wants one. Idonshop.com. Okay, so I feel like a lot of pressure to redeem ourselves. Most of you weren't in Miami last year, but we bombed. We bombed. Well, they put us on the stage at 8 a.m. the night after Michael's 40th birthday.

2:59So hungover adjusted. It wasn't that bad, but it wasn't great. So, all right, we're going to turn it up this year. Last year in California, we did our origin stories. And no offense, but we had 30 minutes and you took like 23 of them. Oh, really? I did? You did. Okay. That's okay. Listen, I like... You still holding on to that one all this time later? No, no, not at all. Jeez. I love letting you cook, and we're going to—this is very high. We're going to—thank you. We're going to do it again. This is Ben's show. It is 10 years of Ben Carlson at Ritholtz Wealth Management.

3:41Well, and I thought we could give some lessons learned that we've— because we've been reminiscing a lot because we're middle-aged now, and that's what we do when you're middle-aged. Remember that time? Yeah. And I thought it'd be interesting to kind of do a look back at us building Ritholz Wealth Management from what was a startup when I joined. We were squarely a startup firm to now what is a much more mature firm. And I think we've moved on from being startup people to more mature people in some ways. I feel very mature. Very grown up. When Ben started with us in 2015, Bitcoin was at$228. God, what an idiot I was.

4:22Oh, my God. Yeah, it's a lot higher right now than$228. NVIDIA was split adjusted$0.54. It's higher than that right now. The S &P was$1 ,900. It's now$6 ,500. and the Dow was at 16 ,000. That's 45 ,000. I hand up. I didn't see that coming. Did not envision that we were about to embark on one of the best bull markets of all time. Did you? Of course, I knew it. That's why I joined the firm. Nailed it. All right, so Ben, I'm going to tee you up. So here's what we're going to do, okay? I don't know if you guys listen to the podcast, but I've been getting very into audiobooks lately. So I'm going to read the entire post and you are all going to listen like an audio book.

5:15Just kidding. Okay. All right. But we'll start here. So when Ben joined Red Holtz Wealth Management, we were managing$140 million. This was in the fall of 2015. You were the seventh employee and you wrote. We were started by that point. No one really took us seriously, but we took ourselves seriously, and that's all that mattered. That brought a tear to my eye. Well, so I remember, what was the name of the taco place we used to go to right by our firm? Salvation Taco. Rest in peace and peace. So that was the taco place we'd go to, and I came to New York the first week I joined the firm. We'd go out to lunch.

5:51Barry and Josh stand up to say a few words. Wait, to say a few words to who? Like welcoming me to the firm. Okay. Yeah. It was me, you, Chris, Barry, Josh, Patrick. Patrick and Erica. And Erica. and Barry said, hey, we're building the infrastructure for a billion dollar firm, even though we're not close to that yet. 50, 50. Yeah. And the funny thing is, is I say it's some combination of confidence and like being naive that we all believed it at the time, even though we were so far away from that. But then Barry aside says, yeah, we can't even afford Ben's salary at this point. Hopefully we can grow into that.

6:28And where is Barry? Is he here? No. But I think I wrote in the post. Very inspiring, right? You're like, wow, that's a great decision. Well, and you know, you've talked, we had like, we were bootstrapped at the time. There was no outside investors. It was all us and trying to like make it work. And there was times when like meeting payroll was difficult. There was, um, remember we were, we were leasing computers from the Apple store, which I still don't really quite understand. You were making 40 % more than I was when you started. That was an, that was an ego hit. A little gut punch. Hey, listen, no one told me.

7:05But yeah, we were squarely a startup. You guys had the crappy little office. I had my own little office, and I've come to New York once every other month or something. And we got slack the very first day. And it's funny to think back now. It seems so easy. But someone asked us last night, like, how were the early years? And it was, you know, it was a slow stair step. And they said, well, when did the growth really hit? And I was thinking about this. Like, sometimes luck is a huge part of success. we were a remote firm kind of by accident. I remember we were at a bar one night. Wisdom Tree was throwing a party.

7:39Maybe you don't remember this. I don't remember this. And Barry and Josh wanted me to move to New York. I live in West Michigan. We just had our first daughter. My wife was like, are you out of your mind? We're not moving to Manhattan. I'm like, all right, I guess this isn't going to work. And I said to you, how many clients do we have in New York? And you were like, I don't know, a handful. Most of our clients find us from the internet all over the country. And I said, so why do I need to move to New York and I'll be with my family? And you go, oh yeah, just stay in Grand Rapids. It's fine. We'll figure it out.

8:05And we literally created a remote firm on the fly. So then COVID hits, we're totally paperless. We have way more people who live and work all over the country. And not that we would have kept our fingers crossed for a pandemic, but that was one of the best things that ever happened to our firm in terms of growth, because everyone else in the entire country, in the world was brought into this Zoom world and this paperless, go anywhere, trust people on the internet. And that was a boon for us, right? And not like we expected that to happen. We thought we were pretty forward thinking in these terms, but it was a stroke of luck.

8:41And that was, to that point, by far the biggest year we'd ever had in 2020. Yeah, that was definitely an inflection point for us. What do you think is, all right, you know, you wrote the blog, but I have to ask what you think is the biggest lesson. Let's talk about, you wrote about client fit being one of the most important things that we've stuck to it over the years. So when I joined the firm, you guys said, listen, client fit is huge. And Chris Venn, who is our kind of wealth management architect, I hate to give him props because he's just going to love it all day. There he is. Look at him smiling.

9:11But he said from day one, you know, client fit is huge. And that means the client obviously has to like what we do, like what we put out, like our process and how we handle client relationships. but we have to have a fit with a client too. There can't be all these red flags that the client wants you to do these things that you either can't or won't do. And I think, to be honest, at first I felt like, okay, that's like good lip service, but we'll bend over backwards to get any client we can because we're not that big and we need to grow. So my very first week, every person who reached out and said, hey, I heard Ben is joining the firm.

9:41I want to talk to you guys about managing my money. Chris and I hop on the phone and this guy says, you know, he starts bragging immediately. Listen, I got$25 million. If we include my brother and my father, We're talking 100 million. Basically, like, what are you going to do for me? Goldman says they're going to do this. Morgan Stanley's going to do this. Merrill Lynch will do this. And this guy, you know, is kind of sitting back going, all right, come on. Feed me grapes while I'm laying on a hammock or whatever. And Chris goes, all right, I'm going to have to stop you right there. And the guy, he said, listen, someone.

10:13Sir. Dude, the wealth feed. Some guy just nailed it. There's a podcast going on. If you want a teddy bear. But Chris says to the guy, listen, some firm or advisor is going to tell you that they're going to be able to give you what you want. They're not going to be able to, but they're going to tell you they are. That's just not us. We can't, this is, it would not be a good fit. There's too many red flags. Just what you're asking us to do is not something that we're willing or able to do. And I thought, Chris, you're insane. This guy's got$100 million. Let's do whatever we can. So it's easy to say that when you're a bigger firm, yeah, client fit matters because that's it's easy, but we were doing it from day one.

10:52That's not entirely true. Well, of course, but that was, yes. You know what I think was the final, like, oh shit, like we actually, Chris is not completely moronic. He might be onto something. Remember when we were, oh, remember when. I'm doing it. I'm doing remember when, the old guy thing. Damn it. There was a time we were at Dana Point and. Oh, geez, yeah. That was it. Yeah, one of our original conferences, right? So we met these two South African brothers. I don't even know where, whatever. They had a lot of money. I don't know how much, but we have this trend following model that we have been using since 2014 to mitigate the large drawdowns that don't exist anymore.

11:39I wish we never did that. And they were asking us a million different questions about what if this and what if that? And literally, we spent the entire conference in a room doing different sort of back tests for these assholes who didn't give us any money. And it didn't even end there. It kept going. You remember that? Yeah, they had a lot of zero hedge-ish questions that we probably should have been, yes, ding, ding, ding, this isn't going to work. But yeah, you're right. We did try to do stuff. And I think we've learned to slowly but surely. And yeah, no one's ever perfect at these things. Sometimes a client comes on and you realize after the fact, this isn't going to work, but it's got to be a two-way street, obviously.

12:21So a lot of advisors will take a bad client for obvious reasons, right? We all got to put bread on the table. But if you are with a firm that is a team, which most of us are, it's not just about you. It's about your traders that have to unwind this nonsense. It's about your ops, people that have to deal with the annoying emails. It's about the cash management. it's everything and it's really selfish to, yeah, they'll fire us in two years, but whatever, I'll take it in the meantime. No, we don't do that. We used to do that. Not anymore. All right, moving on. Overnight success is overrated. When I joined the firm, I assumed all these wealthy families and big institutions would throw us their money.

12:58It didn't happen right away and that was for the best. So I came from the institutional world and foundations and endowments. And the big lesson for me there was how much, like I learned all about career risk and how many of these people were working for committees and organizations and having to do things that they didn't really necessarily agree with or want to do. But it's like, listen, this is the job. This is what they're telling me to do. I have to do it. So I thought, great. This is not the way that I want to manage money. I don't think it's the right way to do things. I think there's a better way to do things.

13:29And I thought, well, when I joined Ritholtz, all these huge institutions are just going to throw us money. And it didn't happen right away. And it was a little bit of an ego hit. I thought, wait a minute. Why isn't this working? And we didn't have the institutional knowledge back then. And when I say institutional, I don't mean those types of investors. I mean, we didn't have like that level of expertise. It took, you have to take like a stair-step function almost to get to that point where you've had some reps and you have to put it in. We always like to say that like expertise or experience is not the same thing as expertise.

13:59But for some things, you just have to put in the time to figure out how to do it better. And then once you have a few of those situations and circumstances, then you can better deal with clients that come in at that level and stuff. So I got something for you. Okay. Okay. A little twist? Yeah. No, I think that I did a panel earlier today on content. And I think that's obviously been the big thing. And a lot of advisors ask us about the content piece and how they can do it. And I think the biggest surprise to me is just the flywheel effect of the content. I assumed, hey, when I join the firm, all the people who read my blog, who want us to like me or the firm and like our process, they'll give us their money.

14:44And then eventually that well will run dry. And then we'll have our business will be built on referrals because the people like Barry and the people like Josh and you and that will just that will eventually go dead. I never considered the fact that the longer and more and consistently we produce content, eventually those people come to us because they have stuff going on in their life. Not because, oh, I like these guys. I'm going to throw them money. And I think the flywheel effect is something that I think we all probably underestimated. And it's like compounding. It's back-loaded. Is there a question?

15:22No, I'm being nostalgic here. I'm just thinking back. Don't you think that that's something that obviously we put our foot on the gas when we realized how important content was? And it wasn't, we've all talked about, we all started our own sort of blog stuff separate from each other. We never said, let's start blogs and then we'll all come together like Voltron as one and then we'll create a firm. Like it never was that thing. We all just did it because we enjoyed it. But I think once we realized like, oh, this is a very powerful tool for client retention and for prospecting and marketing and all these things, then we put our foot on the gas and really figured it out.

15:59But it wasn't like on day one we had these grand ideas that this is going to be a machine for us. So I am a goldfish. Like I see – I don't see outside the fishbowl. I got kicked out of college twice as most listeners know. So I am very much like one day at a time. I don't think about the future. I don't plan for the future. But you're right. I guess I assume that when we started, it's Barry's name. Barry was the person that people were familiar with. And I think I figured that once that well ran dry, then I don't know. We would figure something else out. We'd be like a lot of other firms that you, yeah, now it's time to get off the horse and find your clients.

16:39Yeah, it didn't really occur to me that Josh was going to have the career that he had. I think he's overrated, but I guess people sort of like him. I definitely didn't anticipate the podcast and the YouTube and that we would have people coming to us. So I think the biggest thing that I got wrong about our business, and I said this to our team last night. So me, Josh, Barry, and Chris meet twice a year to talk about the business. And we never spoke about asset milestones, like ever. It just didn't really come up. But maybe like we were excited about the first billion. I'm sure. I don't think we, as a firm, we've never really had goalposts or benchmarks that like you have to hit this.

17:21No, we never spoke like that. It was always about like, what are we doing? What's working? What's not working? Where do we want to spend money? And it was that sort of stuff. And I remember it was 2018, I believe, maybe 2017. I can't remember. Whatever. We were in Barry's backyard and I had this really great idea to just get to$3 billion. This was the time that I threw out a number. Let's get to$3 billion and like, let's just all really enjoy ourselves. Then we're going to coast. Yeah. Yeah. Um, and in hindsight, it was so misguided because what I never could have envisioned was that getting to$3 billion was going to require an army of highly motivated people.

18:10and I didn't think about these people because they didn't exist. It was like whatever, 10 of us. And so when we got to$3 billion, I don't know how many employees we were, but it was so far gone. The train left the station and at that point in time, you can't obviously tell people like, all right, this is it for us. Nobody's going to get any more money. Close the ladder behind you. Yeah, like sorry, this is it. And so now my primary motivation is making sure that I deliver on the promise that I made to everybody that I hired. Like, we're never going to stop. We are highly, highly competitive people.

18:48And I want everybody who's here to feel like, outside of finding their spouse, this was the single best decision that they've made in their entire career. And if you feel that, Ritholtz people, make some noise. All right. Thank you. Like your work spouse, too, right? My work spouse. I love you, Ben. No, but I think I don't mean to get like philosophical, but that I think that mindset, Patrick O'Shaughnessy says like the growth of her goals mindset. I do think there's something to that not having like these benchmarks for our advisors saying, hey, now you have to manage 10 million and then it's got to be 20 by the end of the year and it's got to be 30.

19:23There's none of those those internal benchmarks in terms of looking over your shoulder. And I think one of I'm not trying to say we got everything right, but one of the things we did get right is that we wanted to grow in the right way. And not saying we always did that, but I think that was one of the things. No, this is it. Like somebody asked me, what am I most proud of at Reynolds Wealth Management? And immediately, there's no number two, it's the people. And this is why we were able to build the way that we've done it. And one thing that I got very right, even though I've got a lot wrong, is that if it's not an obvious yes, it's a no.

19:58Like that's our mantra and it's not lip service and the proof is in the pudding. We've hired 27 advisors and one and a half didn't work out. And listen, nobody's perfect, but we take that really seriously. And when you onboard somebody, everything has to go right. Philosophy in terms of how they want to handle their clients, obviously like how they think about managing money, how they think about ambition and balancing the act of lifestyle and career ambitions. And it's like, for us, there is no balance. And we go hard. I don't know what else to say. And it's just, it served us well. And that is how we're going to continue to grow with the right people only.

20:37That's it. Well, the one question that we always get, and we talk about this every couple of years, but people will say, how do you guys have so much time to, you're running a firm, but you're also producing all this content. How do you have time to do both? So I wake up at 3.30, four on the weekends. Listen to three audio books. but I think part of it is not only hiring the right people but for whatever reason in our sick brains this is the stuff that really interests us where you and I don't golf um do you do fantasy football I do but I my partner does the heavy lifting okay but but we don't have a lot of honestly hobbies and that sounds kind of loser-ish but but that this is the stuff that we enjoy doing too I think that's that's part of it especially on the content side of things do you think about the next 10 years?

21:25I don't think that way. But do you ever go there? Sometimes? Oh, yeah. Come on, be honest. No, sure. Nobody's listening. And I think if I tried to map it out, I'd be completely wrong whatever I tried to say. But I think one of the things that we've realized is, and I don't want this to come back to bite me, but we like being an independent firm. And I think just because we're kind of a man. We will never take outside money, so stop asking, but there is a price for everything, so. Yeah, just NVIDIA valuation. You can't put a price on freedom, but I don't know. That's a bill? Yeah. I think that's, we're kind of a band of misfits in a lot of ways, and I don't think we would do well inside of, like, a big corporate structure.

22:07I know I wouldn't because I think we're just too used to doing things our own way. But we've had to become, I don't know, a little more corporate as we've grown, too, because we have a lot of people in our firm now. Almost 80. all right what else what else is going on uh what else we got uh what all right all right time for some stand-up we done no no i i think i think there's also a lot of unintended consequences along the way you and i kind of started this podcast as a lark in 2017 and we already we at the time thought oh god everyone's doing a podcast do we need to do one i've told this story before, but whatever.

22:46It's a new audience. New people are here. I was mortified the week that we were starting a podcast. Now, talking into a microphone is difficult. It requires practice. And there's something that happens when the camera goes on and you see a red light, your brain gets twisted. I can't describe it, but it's hard. And I got butterflies for the first three years. Remember, we have five or six podcasts. We did a practice podcast. Yeah, those are great. That never saw the light of day. We should resurface those. But anyway, the week that we started, the New Yorker ran a headlock, like a cartoon. I'm thinking of stopping a podcast.

23:23And I was just like, oh. But so I'm thinking through the unintended consequences of it. Think about how many people we've hired because we put it out on the podcast. Hey, we're hiring for this advisor position or this CSA position. Almost all of them. So that, and not like we ever could have envisioned, like this is going to be a way that we bring in other people too because they follow us So it is interesting just to think about all the offshoots that you asked me about the next 10 years. How many other things are we not considering now that could go different paths? Think about how many times we tinkered with the conference business.

23:56We started out in a stuffy, what was it, like a Yale something in New York, right? What was it, Chris? The Union League Club. Yeah, so it was this stuffy old, you know, they had, you know, mahogany and wood panels. And we just quickly realized that kind of thing is not us. So especially when the future-proof people came to us and Matt Middleton said, we're thinking of doing this, we immediately said, yes. I don't know if it's going to work, but that sounds exactly like something that we would want to be part of. All right. Ben, talk about the different type of pool guys. i didn't know i was coming i had to come up with bits no i was making the point earlier i i snuck away for some pool time earlier i just needed to decompress a little bit and uh i ordered some fish tacos and maybe another miami vice at the pool i don't know you're only supposed to have one per day but uh you know what the worst thing about the pool is you eating at the pool is horrible no one can ever look comfortable or cool eating at the pool because you're bending over a table and you're doing this thing and it doesn't work.

25:05That's it? All right. No, you're right. Definitely doesn't work. All right. This is a conference of, I'm very proud. This is a very diverse conference. This is a very male-dominated industry and there are a lot of different types of people there, which is wonderful, but still there are a lot of guys. And one thing that guy says, I never really thought about this until two weeks ago I was at Bowie Bar on Long Island with my partner, Chris, and there was a group of guys and one guy walks over and he goes, I hear the guy go, there he is. And I said, you know what? I'm a big, there he is guy. And who isn't?

25:43I got that here at this conference a dozen times, maybe more. And then I was thinking about the different types of ways that guys say there he is. and there are some nuances and some subtleties to the naked observer, which is a phrase I used last week. Ever called me out on that? That's a phrase. Naked observer now. The naked observer. You all know what I'm talking about. So to the naked observer, there he is might be indistinguishable from this guy, but in reality, very, very different things. But I thought the reason you say there he is is because you don't remember someone's name. Isn't that the whole point?