The Michael & Ben Origin Story (EP.378)

0:00Alright. Okay. Cheers, Ben, and thank you for spilling that floater on my new white sneakers. Sorry. There might be some music in the background. Let's just, uh, let's just pool noise. That's what that is. Rinse takes your laundry and hand delivers it to your door, expertly cleaned and folded, so you could take the time once spent folding and sorting and waiting to finally pursue a whole new version of you. Like tea time you. Mmm. Or this tea time you. Or even this tea time you. So did you hear about Dave? Or even tea time, tea time, tea time you. Mmm. So update on Dave. It's up to you. We'll take the laundry.

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1:16Welcome 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.

1:50Rate cut, rate cut. Who's excited for the rate cut? You okay? Guys, this is Ben's flu game. I have had multiple flu games on the podcast. What is that? This is Ben's first time playing through an injury. He can't even get... What happened to you? I hurt my knee. I'm okay. Don't worry about it. No, no, no. He's a modest man. A man of few words. Ben was going for a 5K this morning just to, you know, get loose. He got pierced. Tell the story. Why am I telling your story? What happened? I jumped into an agave plant on accident. I had blood streaming down my leg My whole leg went numb I'm going to sue someone So Ben went out to the intrawebs And what did you Google?

2:4030 people were walking by And I'm limping And there's blood everywhere And I was just mad I couldn't get my workout in It turns out I don't know why Ben won't tell you the story The full story It turns out that these agave plants are poisonous And Ben's leg has been numb all day So he's fighting through this. Let's hear it for Ben.

3:02All right. So before we get started, you know, we've got to thank our friends at YCharts. I go over the top. I guess I try to every week explaining what they do for me, but it is true. It's not just words. I really do rely on YCharts for everything, everything and everything. So YCharts, Sean, Caleb, Rushi, Cara, the whole team, thank you very much for everything you do for us. They have a tent right over there. Where? Go see them. It's that way. That way, okay. All right, so somebody reminded me that last year, Ben spilled one of these drinks on my new sneakers. Do you remember that? Duncan spilled it.

3:40It was Duncan? Yes, Duncan brought him out and spilled it all over you, all over the machines. He was fixing the mics, and he spilled it. Well, so yesterday, Ben and I were enjoying a Miami Vice poolside, and sure enough, the floater, the brown floater, all over my new white sneakers. And then Michael threw his shoe in the pool. You guys having fun? Can we get some energy? Anybody? Anybody? All right. All right. So we're going to do something a little bit different today for the live show. We spend a lot of time talking about markets and equal weight and this factor. Who gives a shit, right? We're here to have fun.

4:14This is not the time or the place for market talk, okay? We're in a bull market. Everything's copacetic. We don't need to go there. I got an email a couple of weeks ago. Hey, Mike, look at this. Look at this. Look at us. The funny thing is that he wouldn't let me put my arms around him, so I had to hold him back like an idiot. And it's not very comfortable. Oh, that's a, okay, good times. All right, so I got an email. Michael, you got kicked out of college twice, and then you got the CFA charter hold. I heard that was, like, really hard. How did you do that? How did you get to Reynoldsworth Management?

4:51And I'm like, I've told this story a million times, But I think I underappreciated the fact that not everybody has been listening for five years. Or when did we start the podcast? 2017. So that's not five years. It's seven years. And our audience has grown. And I'm sure a lot of people have heard our story, our origin story. Certainly Dave, Adam, and Clint in the front row. And I don't know your name, but I love the shirt. Have heard this story before. So it might be repetitive for them. But for a lot of you who are unfamiliar with our origin story, how Ben and I got to where we are, we're going to take you through it.

5:26So that'll take up most of the time. And then, you know what? No teasers. Let's just get into it. So, Ben, you had a much more traditional path to this industry than I did. You were not kicked out once or twice, right? You actually graduated on time? Four and a half years. Oh, really? Oh, the truth comes out. What happened? That's on time. I wasn't ready to find a job yet. Okay. All right, so I don't know the story. So how did you get into the industry? My only preparation, I remember talking to my guidance counselor in college, and they're kind of like, what do you want to do? And I'm like, I want to work at a cool firm with cool people.

6:04And they're like, oh, great idea, dude. What do you want to do? And I'm a senior. I have no idea. I have no clue. So I went to Philadelphia and did an internship, and I worked for an investment bank and an analyst. And the guy tells me, yeah, in my first 12 months here, I had three days off. And, you know, I'm going out every night with my friends to the bars. And I said, well, that's not for me. And I worked in the markets and got to know them a little bit, but I had no idea what I wanted to do. And I was not employable at all. I did better than you in school. I was a 3-2 kind of guy. My first two semesters did not equal a 3-2.

6:39Michael shared his transcripts on Animal Spirits a couple weeks ago. and it was like a 1.3. 1.4 and then a 1.1. And he's like, actually not that bad. And I'm like, 1.4? I don't know what you need to do. I got a D plus in intro to microeconomics. Yeah, you're not getting hired by the Fed. So I was one of those people, I say all the young people I talk to these days in college, they're so much more informed than I was back then. And I was just so naive that I just thought, I'm just going to find a good job. And I was not employable at all. And I couldn't find a job. I tried to get hired into banking.

7:12Wait, what year was this? 1990? 2005. Okay. I graduated school. Wait, why were you not employable? Because I didn't know anything. I knew nothing. I didn't do anything in school. I didn't read one book. I coasted on Common Sense and Street Smarts, I guess. Ben was an athlete. For those of you who haven't seen the clip, Ben's stats were like Christian McCaffrey in high school. It almost looked fake. You were quite a – Ben was a running back. Yeah, it didn't translate into college, though. I was too focused on extracurriculars. And so I quit football after a couple of years, and I really didn't know what I wanted to do.

7:48I remember all these people telling me, I'm going to go into investment banking. I'm going to be this. And I interviewed at a few banks, and they all wanted me to be in a sales role. You're not a salesman. No offense. No, it's true. And so I was dating my now wife, and she went back to postgraduate school, and I moved across the state to take a job because it's the only one I could find as an analyst. And I was working in institutional consulting for pensions and endowments and I couldn't have told you back then what one of those was. And I learned more in my first three years in the job than I did in all of college.

8:20And stuff that I still hold on to to this day. My boss then, it was a small firm and he taught about asset allocation and risk profile and time horizon. Were you getting paid well? No, not at all. I made like$30 ,000 out of school. All my friends were making way more money than me. They had way cooler jobs. You are one pathetic loser. Yeah, you want to work 40 hours a week. So I didn't know what, but that was a great, I think for young people, it's kind of like learning versus earning. Some people could do both, I guess, but I was learning and I lived in the opposite side of the state for my wife and I would work, I'd get home, I would work out, and I would read for like three hours every night.

8:59And that was like my education into understand because I realized immediately I know nothing that these people are talking. We were meeting with JP Morgan and Merrill Lynch and all these firms and these asset managers. I knew nothing. And it was a lot harder back then. Today, you know, like I said, kids are more informed, but they have more areas to access that information. So what was your job? I was an analyst. I started out as a performance analyst. I was literally calculating performance by hand. That's why I'm such a good Excel person. When I say proficient on my resume in Excel, I was proficient and and so I was like a performance analyst but I learned every and I remember the first time my boss he would write a quarterly letter to every one of his one of his clients who were the clients foundations mostly it was hospitals and insurance companies and some family offices and these hospitals would all have six different accounts it was a pension and endowment and a foundation and liability for malpractice and each one of them had their own investment policy statement it had its own asset allocation it had its own you know different setup and it was great.

10:01And that, and a lot of these would come with all the money in one pile and our boss would go, no, no, no, that doesn't make any sense. Each of these needs its own. It has its own goals. So to have its own plan. And, and I learned all, and he would document the investment policy statement and like the stuff that he taught me back then, I'm still, I still kind of hold onto to this day. So I learned so much from this guy. And I remember he would write a quarterly letter to these people and it would be, you know, a page and a half. And he told me, he's like, Ben, you'll know you've made it when you can actually write one of these.

10:28and I knew nothing so I couldn't have back then and that was kind of the goal like oh I need to you know shore up the communication skills so is this the company that you were at until you joined us no so I did that for three years it was kind of before I even started it was like I'm going to train you for three years then I'm going to kick you out and go do something else which was perfect because I then I learned my wife and I got married I wanted to find a job in Chicago or Grand Rapids moved back to Grand Rapids because that's my wife found a job and And then for 10 years, I worked for a billion-dollar endowment fund because I was the only person in West Michigan who had any experience in that space.

11:07And learned a lot about that. It was like a brand-new pile of capital. These billionaires in West Michigan had passed away within a year of each other and left a billion dollars for this medical research institute, and they said the endowment is going to fund us. Who was the family? Can you share? Yeah, it was the Van Andel family. They were one of the owners of Amway. Not a pyramid scheme. No, it's a Ponzi. And so it was a really good learning experience there too. And I got exposed to all these different areas of the markets. We were investing in private equity and venture capital and hedge funds and meeting with money managers all the time.

11:42They would come to us and pitch us. I was constantly taking pitch meetings. And so it was a really good experience. But after 10 years or so, I realized I don't want to just work for this one client. Wait, before we get to you getting sick of it, what was it like for you during the GFC? Like, what were you doing? I took the job in July 2007, which is right when some of those credit funds were blowing up. And it, you know, not knowing, studying a little bit of market history, not knowing very much, I had no idea what I was getting myself into. Luckily, our fund was sitting on a huge cash pile. And so we slowly but surely put it to work.

12:17You were timing the market. But I got this job in July 2007. And the next two years was just like, you know, walking through flames, basically. And that still, I think, is, to me, going through that experience shaped so many of my views today. And for some people, I think they got shaped in the wrong way. To me, I mean, I'm reading Warren Buffett books, and I'm thinking, by when there's blood in the streets, and everyone else is in the fetal position going, no, this is the end of the world. I remember getting a call from one of our hedge fund managers saying, it was September, it was a Friday, I still remember to this day, go to the ATM, get as much cash as you can out of the ATM right now, because on Monday, the banks might not open.

12:56I mean, it was a crazy, and for me, being the young guy on the team, I thought it was amazing. Because I'm thinking, this is great. I'm never going to buy stock prices lower than I am today. Stock market was down 60 % almost, right? So you did that, but for like six more years, you were there. Yeah, I worked that job for 10 years. Did you like graduate into a higher role? Yeah, so I started taking on more responsibilities, and I was beating my head against the wall. and Josh Brown, I started reading The Reform Broker. Actually, I think I started reading Doug Cass and Todd Harrison at the street.

13:32And that led me to read Barry, and that led me to read Josh. And so I think probably 2011, 2012, I started getting into financial blogs, not really knowing what it was. And I'm seeing Josh and Barry are posting every day. And I'm reading these guys, and I'm thinking, oh, okay, I'm on the same wavelength as these guys. They're in a different place than me or area, but the way that they're talking and speaking and their values, that resonates with me. Josh wrote a piece about hedge funds and I wrote him this really long email out of the blue. I remember that because I was there. It was called Confession, right?

14:05What was the title of the blog post? So I wrote Josh an email and he said, great, he wrote me back one, awesome. Whatever, he just sent me there, write it in a blog, and if it's good, I'll post it on my blog. And so for like 10 days, I worked on this thing. I had to get it perfect. I sent it to my brother and like proofread it and I sent it to Josh. And I said, you can't post my name on this because I have a job and they'll fire me. And they posted this anonymous. Josh posted an anonymous post for me. And it kind of blew up a little bit. Everyone was reading it. And I felt like Larry David in Curb where he puts his anonymous donation on the wing.

14:39Like, shit. So it was confessions of an institutional allocator. Is that right? Yeah. And I had been, I read my blog for about, I don't know, six or eight months at that point. No one was reading it. And Josh said, this is a great piece, man. A lot of people are reading it. And so I said, oh, by the way, I write at this blog, check it out. And that was my introduction into, like, the blogging world. And Josh, you know, was reading it and sharing it a little bit on his LinkFest. And Todd has picked it up at a normal returns. And that was kind of how I got discovered a little bit. How did we meet?

15:10I was thinking about this. You started blogging. I don't remember. One of us sent a DM to the other one. I definitely slid into a DM. I think you. Ben would never. I think you slid into my DMs and you said, hey, I like your stuff. I said, I like your stuff. I like your style. And Ben said, I like your moves. We started talking about, you were like, what are your thoughts on asset allocation? What? That's not true. No, you guys were overhauling your portfolios a little bit. That's true. And you said, I want to talk to you about this. And I would travel to New York two or three times a year meeting with managers or conferences.

15:47And that was around the time that Phil Perlman was putting together that Yahoo Finance contributors thing. That ended well. Yeah. But it was a great start. So I came for a conference and Phil said, all right, I'm going to put you together. So the three of us went to dinner. You and Phil? And that's how we met. Is Phil here? Where's that guy? No? All right. Love that guy. And so then what? What year was that? 2013, 14? Probably 2013, 14. When did you join us? I joined September 2015. So I'm working on 10 years almost, I guess. So I remember one time I told Josh, I'm like, I enjoy the job I'm doing.

16:22I could probably stay there for the rest of my career, and it would be like a safe path for me. And you guys, I remember you started the firm. You guys made all the announcements, and I said, oh, that's the kind of firm I'd want to work with. There was no remote work then, really. And so one of these times I'm talking to Josh, and I'm kind of complaining as I always did. I just wasn't happy in what I was doing. And Josh said, what do you want to do, man? He finally cut through it and said, stop complaining. What do you want to do? And I told him, I just want to work with other clients. I want to work with small institutions.

16:48I want to work with individuals. I want to, like, do something else. And he said, do that for us. And I said, really? He said, yeah. And I remember talking to Barry, and Barry said, all right, here's the schools in Manhattan. You'll move here. And our daughter was like one years old. My wife's like, yeah, okay, buddy. We're going to move from Grand Rapids to New York. Okay. And that never got off the ground. And I came out there one time, and I think I said to you, we're at some bar for a Wisdom Tree event or something. And I said, hey, man, listen, I can't move to New York. It's not going to work.

17:18Why can't I just stay in Grand Rapids? How many clients do we even have in New York? and you were like, oh yeah, we get all of our clients from the internet. Why do you need to be here physically? And that was the start of Ritholtz as a remote work destination. Do you remember your earliest experience in working with us? It's been a long time. I don't really remember. I came to New York to announce like, hey, Ben is going to join Ritholtz. So it was you, Josh, Chris, Barry, Patrick, and Erica. So I was number seven. Not too far behind me. Remember Joey and Dan and Alex joined a few months later.

17:51Bill. So I go to New York and Josh said, I'm going to get you on CNBC. We're going to announce you're going to work for us. We had the whole push. And I show up there and we go out to eat at the, remember the favorite little Mexican place we used to go to? Salvation Taco. That was it. Barry gets up to give a speech. Welcoming, glad to have Ben here. A speech to who? Who was there? Me and Chris? Like I said, there was like five of us. And Barry lays out at that meal, six or seven of us, Barry says, we're building the infrastructure for a billion-dollar firm. We had$140 million in assets when I joined.

18:29You're going to report directly to David Rosenberg. And Barry says, I mean, listen, we have to be a billion-dollar firm because we can't even afford Ben's salary. And I'm like, what? So Ben's salary was a lot higher than mine than we joined him. but I forgive you. It worked out. It's okay. So when I joined, we were a startup. And I'm telling my in-laws and my parents and friends, I'm joining this new firm. And I worked for this prestigious billionaire family in West Michigan, which was seen as like, you don't leave that kind of thing. Did you show them a picture of us? They were like, so you're going to work with these guys that you met on the internet?

19:08With this bald asshole? And to me, it made total sense. Yes, because this firm is going to – and the funny thing is when Barry laid out that billion-dollar vision, none of us laughed. Of course we are. And we were, again, very naive. Do you remember what our AUM was when you joined us? It was 140, I think, wasn't it? 140. 140, 150, probably. So the market's cooperating. We're like, I don't know, we're five-something billion. So it worked out okay. Thank you. Thank you. Thank you. So I think surprising the amount of growth we've seen, but also we kind of laid the foundation. And I think the greatest thing about it is that people always ask us about the content side of things.

19:53But we all started the content thing without any sort of plan. It was not a master plan. No, we never had it. Josh was blogging before. Barry was blogging before. I was. And we all came together and we were like, oh, this actually works. Let's put our foot on the gas pedal. and do more and do podcasts and do YouTube. But that was never like we sat down and brainstormed and laid it out. It just sort of happened organically. Yeah. So how Animal Spirit started. So I shared an office with Josh. We were sub... Is it sub-leasing or sub-letting? I don't know. We were doing one or the other. We were renting space from somebody.

20:28And Josh and I were in an office that was like 8x8. And I was on the phone with Ben all day, talking to Mark and whatever. We would call each other like five times a day. Yeah, and Barry, myself, and Josh. Sorry, Chris wasn't invited. Barry, myself, and Josh were on Patrick O'Shaughnessy's podcast. And when we were done recording, Patrick said to me, why don't you and Ben start a podcast? I was like, yeah, I was self-conscious. I was a newly bald. I just didn't have a lot of self-esteem. And I said, yeah, you know, he's like, just don't worry about the world needs. If you want to start a podcast, start a podcast.

21:05So I'm eternally grateful for Patrick O'Shaughnessy for telling us to start a podcast. It's been, I don't know, we started in November 2017. So it's been a hell of a run. And we appreciate. We couldn't figure out a name, remember? Oh, we had a horrible name. I remember what it was. Josh is good at naming stuff. So Josh named it. I told Josh, he goes, no, no, no, no. Call it animal spirits. But he also, Josh has a lot of force in a lot of things. He said, you guys are going to run us up to talk about in like two months. This is a freezing cold take from Josh. Josh didn't have the balls to tell me, but he told Chris, and Chris told me, that you guys are going to run out of things to talk about after one episode.

21:42And seven years in, not bad. I love you. Cheers.

21:49All right. So we've got eight minutes left, and we've got to save some time for we're doing something different from recommendations. I can't tell my story in four minutes, but let's just say this. I was lost. I was wandering the valley metaphorically homeless and absolutely no direction to go and The backstory whatever you could there's places that you could hear that if you want to if you're curious, but I Was really like really and truly I had nowhere to go I had no connections I had Like this weird inner confidence that if somebody would just give me a chance that I had something to offer to the world but I wasn't able to, I wasn't able to show like display outward confidence.

22:34I never had the chutzpah to like open doors myself. And so I was just in a bad place. And it was 2011, the spring of 2011, and I had my last job opportunity. And I got an email as I'm sitting down with one of my good friends at the Knicks game. It was game three of the 2011 playoffs. I'm a lifelong Knicks fan. We were in a long, dry spell, worse than my career prospects. And I get an email. This is one of those light bulb moments for me. I get an email as we're sitting down. Sorry, I can't help you. And at this point, I'm just like, all right, so I guess that's it. I guess I got to get a job at Starbucks or Verizon or whatever, make minimum wage, and that's it.

23:14And whatever. So it was bad. So I get the email. I sit down. My friend's like, what's wrong? I told him. The Knicks are getting blown out. And Mario Chalmers, my hero, hit a three in the third quarter to put us down 20 when I said, I'm out of here. I'm out of here. My friend said, where are you going? It's game three of the playoffs. I got to go home. I'm not feeling good. I need to figure out what to say to my wife, my girlfriend at the time. I just, I mean, it was in a dark place. I got to go. So I get on the train and I'm on my BlackBerry. And Josh Brown, who, Josh was my North Star at the time.