David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403)

23:24even if you get it right more than you get it wrong. Whereas this grinding hamburger, as we call it, is a repeatable style. When you think about that style in the equity markets, it calls to mind quantitative strategies. You're looking for those micro inefficiencies. How much of that's quantitative versus qualitative? That's a great question. Those micro inefficiencies at that level, I'd say are more quantitative than qualitative. There are going to be some qualitative overlays on things like this bond really doesn't trade that much. Maybe that's a little quantitative looking at liquidity, what is that worth?

23:55But that's going to be highly quantitative. There'll be other things that are less. There are times when we'll trade between issuers. So of course, now that's not certainly no arbitrage in that. The other beautiful thing about the bond market is people have to come back and issue them because they mature or there's M &A. So you could be looking at two issuers, Verizon and AT &T, and maybe our credit research folks have whatever views they have. They like Verizon and dislike AT &T or vice versa. But if one's coming to market, that deal has to clear that day. And so those are times where we may step in and be a liquidity provider to the street, take advantage of new issue concession, and maybe opposite our credit research views on the name for a little while because it's just too good to pass up.

24:38So that has a lot of qualitativeness because obviously if the view is that credit's very risky, we shouldn't play with fire. If the view is no, it's fine. It's just not our favorite credit, then it's worth playing in the name a little bit as the new issue concession comes and we kind of to work out of the position. In the physical strategies, as you call them, when you think about those small inefficiencies, sometimes you think of marrying that with leverage. I'm kind of curious how you think about leveraging the strategies. We've had clients come in saying, can you dial up the alpha? I can't eat information ratio.

25:07We have really high information ratios and meaningful alpha, but we'll be the first to say, we're not going to try and beat a benchmark by 100 over 150. And so then either be leverage or how can you dial things up in fixed income markets? And I think this is what makes them persist. It's not easy to do. The cost to borrow a bond would make that opportunity go away. On one level, I don't like that because we have this machine and we'd love to lever it up a little and make a little more money on it. And for clients, and that's higher alpha and higher fees. But the flip side of it, I think that's why it's often ignored is because when you're making other large bets, like we're going to get way overweight credit or we're going to get short interest rate exposure, this just seems like rounding.

25:46and I think a lot of market participants just leave us alone and we trade it. So we're not against leverage because we do a lot of that in derivatives, just to be very clear, I wouldn't want to suggest that. It's just leverage in this case wouldn't be able to achieve a goal of a superior return. But the last thing on how we think about what we really do is we provide liquidity to the broker -dealer community when we're doing this. Broker -dealers really aren't dealers anymore. Ever since 2008, as Dodd -Frank came in, being enacted slowly over time, the dealer's balance sheets have just shrunk to be just a shell of what they once were.

26:21So they don't inventory bonds or many bonds anymore. So as a result, when they're trading and they're trying to make money in their fixed income trading desk and what have you, they have a little inventory. Given our style and how we run, we make it very clear our bonds are always available for sale dot dot at the right price. So we provide that inventory, both taking down bonds or selling bonds. And it's been really wonderful because the dealer's balance sheets have just vanished. And I don't really see that changing with the regulatory environment. How about the philosophy that you bring to the overlay strategies?

26:55There's something where you better bring risk control there because that is capital L leverage in a lot of cases. First, it's working with the client to make sure the derivative strategy makes sense. There's a lot of things pitched often by the dealer side, Wall Street side, that we don't really believe in. And we will go in and talk to clients. And we've frequently done this. We put some surgeon general's warnings on things. We're like, here's where that doesn't work. And our clients are smart too. So they may want to proceed with various strategies, but we have certainly talked clients out of strategies.

27:25So first is make sure the strategy is right, it's designed right, and it has the right gearing. We're very importantly, want to make sure we have the right amount of collateral. If you're leveraging something up, better make sure you have collateral and also what's your first source, second source, tertiary source, et cetera, of collateral. So those are huge upfront discussions. That's part of that strategic partnership of spending time. What are you trying to achieve with this? And is this the right instrument? And do we need to use swaps? Can we use just simply the futures market? Should we use both markets?

27:54Spend a lot of time upfront with clients on that. And then when it comes over the wall to us, okay, now go run it. It could be a tail risk hedge strategy or a portable alpha strategy. Then that's where our attention to detail maybe kicks into hyperdrive. Going back pre -financial crisis, we spent a lot of time refining. I would argue our ISDAs are best in class. Who wants to read an ISDA document? Almost no one. But before 08, so when this business started to take off in 2002 and three and four, we were arguing with dealers on making sure both parties were collateralizing all the time. And that was not the standard.

28:28And we demanded we collateralize and we'd collateralize them and vice versa. And they would argue we're AA rated or whoever it was, could have been Lehman, could have been anyone. And we said, in most cases, this is a near, if not fully funded pension backed by a whole nother organization. So we're the better credit here. And you can imagine how those arguments went. They were like, no, no, no, we're whomever, Goldman Sachs or JP Morgan or whatever. They were humbled a little at after 08, so we don't have those arguments. So fortunately, with a lot of work, we got those ISTAs set up at that moment to be collateralized fully in each direction.

29:02So we'd post, they would post, and that kept us out of a lot of trouble in 08, 09, and still a scary time in a lot of ways, but that was critically important. And it's not just collateral. There were other terms in the ISTAs that gave us rights to exit on downgrade and a bunch of things, but a huge amount of attention to detail. If there's one part of our business that's not forgiving to an heir, I mean, nothing really is, but you have a lot of zeros behind some of these notional amounts. So it's systems, it's processes, but most importantly, it's people and assigning the right people and building the right people to be able to run these really complicated and large programs.

29:37As you're developing this organization, getting the right people and growing from what it was when you joined to what it is today, how have you thought about the culture that makes that all work. I guess as a self -appointed culture czar, long before I had any of these titles because I believed in it so much. So there are curses of growth and there's things that make you anxious. First is trying to always have that mindset of still being a startup, an insurgent in the industry is critical to our success. I've taken some terminology from Bain Consulting, which is the founder's mentality. The idea of you want every employee to think like an owner and have the mentality of the original founders of the company.

30:17And we are 100 % employee owned. It's an enormous competitive advantage of ours. And I want 400 -ish people to have an owner's mindset. That's a necessary condition, of course, to be an owner, capital O owner. So the first thing is to make sure each individual, and we hire the type of individuals who have that owner's mindset, that they're thinking, what would I do if this were my P &L and the right thing to do? And Importantly in our industry, ownership means you want long tenured clients. We're not a transactional business. So if you're an owner of an asset management firm, you're not thinking about a deal or revenue this quarter or whatever.

30:53The value is winning clients that you have for a long time. So if individuals have that owner's mindset and they're thinking of approaching our clients that way and the Wall Street community that way, what have you, that's going to go a long way to certainly maintain it. And then you start growing. One day you're 100 people and then 200 and then nearly 400. And it's trying to look at what we've done that works and maybe that we've gotten lucky on. For example, career development, being candidly honest on this, it just happened. We had a lot of smart people. They'd help other people along in their career.

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32:52How have you thought about this challenge of the right pace of growth? We used to always use the term spigot. Open the spigot, close the spigot a little bit. I don't know that we always get that right, but what we knew, a big limiter on the growth of NISA is how many clients can we digest in a given year. If we have a little over 400 billion in assets, we have just over 200 clients. So they tend to be pretty large, obviously. And it also almost by inference says we couldn't add 50 clients next year. That's an impossibility. The one way we have managed that is being careful about how we roll out adjacent products.

33:28So we have innovated. But at different times, particularly I'll say times after the financial crisis in the mid -tens where people were de -risking and the phone was close as it could ever be to ringing off the hook, make hay while the sun shines. Let's not be really dabbling in new things. Let's pull in some of the other opportunities and focus less on those right now. And then there's times where, And I think we're in a transitional moment now where there's partly because we've built such a great team. Partly some of our clients are near the end of their glide path journey. So there's less de -risking to do.

33:58We've been able to have another little mini shot of innovation in the last several years now. When you're trying to figure out one of those challenges, like what's the right cadence of growth or how are you going to address the challenge for a client? What's the way you do that internally as an organization? Well, at the client level, it always starts with the client team. And we've always been great about then pulling in, well, who do we think could help solve this for the client internally? And also importantly, have a lot of conversations with the client, make sure we understood it, a lot of looping.

34:28Is this what you really want or not? A term that comes from Bain that I adopted. There's this idea of the paradox of growth, that as an organization, you start, you're nimble, you're an insurgent, you're an entrepreneurial firm. I'd like to think we were all those things. We grow. We're having some success. Great. But as you grow, you get bigger. And as you get bigger, inherently, there's complexities. Bureaucracy can creep in and you can become sluggish and less nimble. And so the more you grow, the more it stifles growth and it stifles innovation. And so one of the anecdotes that we've adopted is the idea of micro battles.

35:00And so what those are is when you identify an area where you say, huh, this could be interesting, or maybe it's a new product or, hey, we want to see if there's other ways to get alpha in this product, things we haven't tried before. And you pull a team together across the firm, depending on what's needed. Client team, portfolio management strategies, it generally pulls from every area. Operations, often technology, I mean, the amount of data that goes into almost anything we do. So you pull a small team, but you give them pretty much carte blanche and a very short amount of time. And the idea, it's kind of the fail fast idea is like, here's what we'd love to have.

35:35But as opposed to me, making the project can give unlimited time. I'd rather, what can you accomplish in four weeks, six weeks? And if you can accomplish something meaningful, but even if it's not the full goal, that's usually better than finding out in a year that, man, I don't know this is going to work. What it does is it energizes folks. To be very clear, it tires people out. The term is a sprint. It's a serious sprint and they're not all going to work. Also, we're very clear that that's okay. That's not a failure. That means we've found something that's not working for that product area, that client segment.

36:07But we've had enough really successful micro battles that people are excited. It's almost confidence instilling that, hey, we can do something meaningful and impact the firm. And I think it's a great way to re -inject also that owner's mindset. There's no doubt because you almost give an ownership mentality definitionally in what can be explored. Also, there's a responsibility that comes with that. You need to back it up with data. You need to spend time on something that we think is going to be useful. So we've used those quite a bit over the years and they've been really powerful and also fun just because people get to work with folks they haven't worked with as much before, create some great dynamics internally.

36:41What are some examples of some of those successes? So I mentioned those completion engagements. So that's an area that's grown, depending on how you measure it, 25 % a year for the last five plus years. I mean, an asset management, maybe, but for things like private credit. You can't say that about anything. And that's clients looking to hire us to complete the hedge of their liability. And we've had huge growth in both the assets, number of clients, et cetera. It's been great. But with that comes scalability issues. One great micro battle that was done was scalability. How can we quickly scale this product better than we're doing it now?

37:17And some of the results that came back were just in a short amount of time, almost full revamps of systems, how we ingest data, the robustness of how we ingest data. It was incredible what the team did. They felt empowered and to have impact. That was a really fun example of a huge success. If you want to set a team off to go do a micro battle, tackle a project, what have you figured out of the rules of engagement that make that successful? Probably still learning on that. I think the one is a lot of freedom. The term servant leader gets used a lot these days. But one key element is not putting the most senior people in the micro battle.

37:57Because even though I think we have intellectually humble senior folks, can't help but there's going to be deference to that view. So I've never been a member of one, but even a group below me wouldn't be a member because at the end of it, I can always get their views on things. That's not what I'm looking for. So a big element is making sure it's just a notch below. Not that there aren't senior people involved, but where it's individuals where there's no one in the room who's going to have immediately some sense of a proxy of a mandate. I think that's critically important. And then the other is just that reminder of best idea wins.

38:32And particularly in this arena, this is not winning arguments. It's not trying to get your view across. It is truly the best idea because you're going to have to come and prove it to others if you want to implement that. And so a big reminder of that goes out always each time we launch one of those. So we've had this big change in rate environment. I'm curious as you're having these conversations with their clients, what are the needs that you and your team have been addressing over the last couple of years? Depending on where they were in their hedging journey, there's times where there's maybe therapy sessions is what it comes down to.

39:02Maybe for us too. We manage a lot of long bonds. So obviously our AUM was affected when interest rates go up at the pace they did in a year and a half. The fortunate thing is every one of our clients who are using LDI strategies, completion strategies, derivatives, et cetera, from day one, even though rates seem to only go down forever, we made it very clear, this is a hedge. This is not to make money. We're always going to compare it to the liability. And when you're partially hedged, you actually want to lose money on the hedge. You want rates to go up because you're partially hedged. That means the other portion, you're picking up ground on your liability.

39:34That didn't happen so much for about 10 years. So a key element was the upfront work before the rate sell -off occurred, which is, this is a hedge. This is not a money machine. And our clients, even though at times it seemed like it, rates kept falling. And my gosh, in the financial crisis, we had clients where everything was losing money and this hedge is just kicking off billions of dollars. Don't forget, it's a hedge. So I think that's a huge part of it. And so then when the rate sell -off came, the vast majority of our clients, some were fully hedged, but usually if you were fully hedged, it meant you were fully funded and you weren't looking for any upside.

40:06So the vast majority of our clients viewed it the right way, which is, I'm not all the way there yet. I'm still on my glide path. This is a great opportunity. And we've seen that. In the last year and a half, clients have systematically increased either their allocation of fixed income or they've increased their hedge by adding more derivatives to the portfolio. At the end of the day, our clients have seized the opportunity and hedged much more. Every now and then, every couple of years, you hear murmurs about concerns about the funding of the retirement system in the U .S. Given all the changes, we'd love your perspective on where we are and how you're helping your clients get to where they need to go.

40:43I'll say three main segments in the DB space. I'm taking that as DB because DC is a whole nother challenge. Corporate, the union, multi -employer, and then public pension plan. So corporates have gotten wildly well -funded. They're on average over 100 % now. PBGC is more than fully funded. The corporate situation has really gotten to a great place. and not just is it so well funded, it's also de -risked so much. The risk of being underfunded is so much lower than it used to be. Virtually every client has some version of a glide path where they've de -risked. So when you have a client that's 105, 110 % funded and maybe 20 % risk assets, 80 fixed, it's hard to get below fully funded, even if we had a GFC.

41:25It's in really great shape. Some of them got a little more funded than they expected maybe over time. and that's why there's discussions and a little bit of action on plan reopenings. Well, I can use surplus and I can predictably chip away and my funded status can go up half a percent a year, one in a very safe, reasonable asset allocation. Well, the company has use for that. They can give benefits. So the single employer is obviously in great shape. The multi -employer had a lot of challenges clearly, and that has been addressed with the SFA program and being addressed as we speak. And there's a lot of history of what went wrong there.

41:56And some of it was just less union jobs amongst other things, and maybe some other decisions that could have been different. So that's in good shape, thanks to government assets, to be sure. And then public funds get always a lot of trouble, catch a lot of heat over their funded status. And clearly some are not well -funded, and there's going to have to be hard decisions in various states or cities. But I think the sneaky thing about rates going up is, I don't think it's as appreciated. Public funds don't mark their liabilities to market, like corporate plans. When we were looking in, plans would have a 7 % or 8 % expected return.

42:26And they had that on their assets, but they use that to discount their liabilities. Well, when the long bond's two and a half, I can't wrap my head around, how are you going to actually get eight on average for 30 years? That's going to be tough. When the long bond's four and a half, and then by the way, plans typically they're down more in a six range now, six and a half, 7%. These are very achievable return assumptions. Funded status for the public plans has improved. Again, there are some that have some risks, but given where interest rates are, particularly if maybe they embark on strategies, invest a little more in bonds, longer bonds, not LDI -like, but just take advantage of the fact that they can lock up 4 .5 % or 6 % in credit securities for years, they're in better shape too.

43:07Have a little ways to go, but definitely have improved. What opportunities are you most excited about? The biggest probably is how we use our derivative platform more broadly. As clients have gotten to know what that is, whether it be how to utilize it in tail risk hedging programs. I think there's a lot of beta in hedge funds. We have as an investment philosophy, don't confuse alpha with beta. And we're very regimented on that. We deliver true alpha, not beta, disguised as alpha. I think there's increasingly a view that some component of hedge fund returns are known inefficiencies. And it could be inefficiencies in the commodity market, et cetera, that are not extractable and you shouldn't pay 2 in 20 and maybe not even 1 in tend for it.

43:49And so our derivative platform, we've built some portfolios that are effectively hedge fund replacements or components of hedge fund replacements. There's always going to be the hedge funds that you got to pay them everything. They're just that good, I guess. Fine. There's a lot that I think our clients are coming around to think there's a cheaper way to do this. And one that I shouldn't be giving up that much of the upside. And so that's been exciting. We recently actually were just in the midst of launching all things for fixed income manager, a high yield product, which we've never had. And super excited about it.

44:17It's more of a systematic strategy than a deep fundamental credit. We had a client who just really loved the strategy and seeding a strategy is hard when we haven't run high yield. So I'm endeared to them forever for seeding this strategy. Actually, oddly, we have two clients kind of funding. When you have a look into the scale and scope of your clients, 400 billion is only what they have with you. Imagine you see a lot of things that happen in the fixed income markets that also could be cause for concern at the high level. And I'd love to get your sense of what you see as some of the biggest potential risks lurking out there.

44:53Well, private credit's an area of concern for me, undoubtedly. At this point, I'm either early or dead wrong on it being a point of concern. But when you're loaning to companies at SOFR plus 500, and that meant you're loaning at 500, where everyone's over zero, and now that's 950. And there's a lot of turns of leverage on a lot of these companies. I'm surprised there hasn't been more pain. There's been some pain, of course, but I would have guessed we would have seen it by now. There's a lot of areas of our economy that have been really insulated from the Fed activity. Consumers have been, right?

45:21Mortgage rates are fixed. Most people have a 3 % mortgage or whatever. That was an area where I was like, if there's going to be a squeaky wheel, this is it. It hasn't happened. I'll be the first to admit, I would have thought we'd see more of that by now. I think what I didn't appreciate there is it's always funny to say there's distributions aren't coming back. It's a terrible IPO market. I said, why is it terrible when the S &P is at near all -time highs? Is that a bad time? We're not in a recession. I think it's because now all the earnings, all the E are going to the credit managers. So the pains maybe hit the private equity side of things.

45:51If we continue and rates stay high here, I don't see how there's not more pain in private credit. Now, private credits, there's a huge range of what that even means, how levered they are, what types of middle market. I'm sure there are pockets that are wonderful and great, but that's an area of concern for me in the fixed income markets. But again, I would have told you that almost a year ago and not much terrible has happened. You look at the growth of private credit. There's a lot of pools of capital going there that you say it's almost a spread. Their cost of capital is less than what they're able to earn.

46:19You also see that happening a lot in the insurance side with all these worlds coming together. And I'd love to get your perspective on what you're seeing with insurance cost of capital coming in the private credit market. Yeah, that's referred to as permanent capital, which I always find that is a little odd term that your policyholders call permanent capital. I'm not an insurance expert, far from it, but we of course have credit research analysts who spend more time on this. But clearly there is a very, very different model for the private equity -backed insurers. A lot of insurers are using private credit to be sure, but the private equity -backed are using it much more and other products, whether it be CLOs and using a lot of offshore reinsurance.

46:57that concerns me, particularly when they're involved in pension risk transfers, where they're selling annuities to take pensions off companies' books. That's concerning because they seem to have a little different risk model. That doesn't mean they're risky. It doesn't mean they're going to default, but that's a space where DOL guidance is you have to choose the safest available annuity. And I struggle with that. And I'm sure they're all very smart and they're picking good private credit securities, but they are inherently riskier. You can't have that big of a free lunch. I've written on this.

47:25Many insurers issue what are called funding agreement -backed notes. Those are policy -level notes. They're parapesu with policyholders. So they're a really great market measure of what's the risk of an insurer. And you just see it in that data. The private equity -backed have a different spread, meaning a much higher spread than what I'll call traditional. The traditionals are using private credit to a degree, just not nearly to the extent. So to me, there is a riskiness. I'm a big Hyman -Minsky fan. At the end of the day, right, stability breeds instability. it's working. It has worked. And until it spectacularly doesn't somewhere in our economy, I don't know if this is the area, but it certainly has a potential to be.

48:02How do you think about protecting against that possibility? It comes down to asset allocation. I started going back to my JP Morgan description as working on asset allocation, not the active side. And I'm a fan of the old Brinson studies that are ancient now, but they're still right, which is asset allocation. And I say that as an active manager. It's going to dwarf what we can do for you. So the first thing is all things in moderation. There's no such thing as poison. It's the dose that kills you. So if you're an institutional investor, even though I'm concerned about private, and we were just talking to a client today, they're investing in private credit, but it's in a few percent.

48:34That's very reasonable. One positive is from what I can tell, most of those assets are held in strong hands and they're dispersed as opposed to the banking sector. So the existence of private credit and its role, including even insurers honing it to an amount makes a lot of sense and it's spreading it out into strong hands to where if there is, if I'm right and that asset class was far, far too expensive, the pain gets spread around, which means we don't have massive economic repercussions as opposed to when the pain's focused. If it were focused in insurance, that would be terrible. If it's focused on banking, that would be terrible.

49:09So that is one great thing. There's been a great disintermediation there that I think is a positive of, quote, the shadow banking of private credit. But main thing is asset allocation ultimately is the salve on everything and making sure there's genuine diversification and the related, making sure you don't have sneaky beta. I know you had Cliff Astin on recently. I know he's talked about this. It annoys me a bit that private assets don't get marked at all. And that doesn't make them less risky. In fact, they're probably more risky, typically, than a public market equivalent. So that's an arena where I think sometimes if clients are getting lulled into that and then they allocate a little more and a little more, whether it's another Minsky moment.

49:46Keep allocating, keep allocating. Like, wait, how did we get that much in private credit? And that's what can happen. And we've never seen that environment. That's what worries me is that sneaky beta that shows up at the wrong time. Dave, what do you think NISA looks like five years from now? Hopefully a lot like what we are, which is working closely with clients and having fun working closely with clients. We've had various epoch would be too strong of a word of different times of innovation and then making hay while the sun shined. In the middle there, there's this financial crisis where it was just terrifying, but everything happily worked out.

50:14I think we are in a little mini epoch of innovation and working with clients. A couple of new products I alluded to. We don't bring out new, wildly different products. They're always near adjacencies. I think just a continued, measured, but maybe slightly accelerated innovation in the environment we're in. A little bit of mental bandwidth freeing up for a host of reasons. We've built out a great technology team. Sometimes you have technology debt. We had a huge technology debt from growing as much as we did. And we did some massive projects that have freed some capacity for some innovations. I think it's just going to be listening to clients very near adjacencies and continuing to evolve in a pretty measured way.

50:51David, I want to make sure I get a chance to ask you a couple of closing questions. What is your favorite hobby or activity outside of work and family? That is an easy one. It is woodworking. Always loved it. I started it before I had kids and I had less disposable income than I had kids and I literally stopped and everything kind of rusted. And then Providence, maybe, as my kids got to the age where they didn't want me around as much, I started to rebuild my shop. I had a little more disposable income, so I have a pretty nice shop at this point. And Providence was basically built it all out right before COVID hit.

51:21So at this point, all the furniture in my office I've made. The last thing was I took delivery of a desk that was a unique build. I'm a huge St. Louis fan. All the wood I use is actually from St. Louis city trees that are downed that a company goes out and grabs them and rough mills them. And so I have this huge live edge slab that's the top of my desk that I'm super excited about. What's one fact that most people don't know about you? My best friends in the world, I've known since kindergarten. When it does come up, people are always stunned by it that I have a big group of friends, most of which went to the same little Catholic school on the south side of St.

51:59Louis and we still hang out together. One of the best ideas literally professionally or otherwise ever had is when it got harder with kids and whatever, 15 years ago, this is maybe the part shouldn't be fit for print, but once a month, we all pick a tiny dive bar somewhere in South St. Louis, descend upon it and just hang out and get to see each other because we didn't get to see each other as much as we used to. And the only beer you can drink is bush beer because that's what we are. If the bar runs out of bush beer, it is definitely time to go home in a South City Bar. So it's a good indicator.

52:26What's your biggest pet peeve? Professionally, it's preambles that get you away, allow you to say something after that that has no consequence. Like really, a pet peeve is I'm not a market timer, but that's the same. Somebody says, don't take offense, but that's certainly something that particularly the market timing one bothers me. The other non -adherence to closing times at restaurants or bars. I think this goes back to the Ted Drew's had no closing time. Triggered a thought when we were talking about Ted Drew's before. My wife and I would both worked there, nothing was worse than people coming up at midnight and keeping us open a little longer.

52:56So one thing when I'm out with people and you can look around in the restaurants, it's like, we got to go. These people want to go home. It's like, do you know we're keeping these poor people here? That's a huge pet peeve of mine. Which two people have had the biggest impact on your professional life? So many have. I mentioned Phil sending me to JP Morgan, Mike actually hiring me. But professionally, one is super easy. Jess Yao, founding CEO of Nyssa. It was a true pleasure to apprentice under him. We're still close, close friends. I think when things go from Gen 1 to Gen 2 in our industry, people don't even speak to each other, much less we have dinner.

53:30He still comes in and has lunch frequently. But professionally, just to see him at his craft, learn from him, hopefully at times try and improve on things as well, try to be better. But he had a profound, profound impact. I think I've shown the gratitude, but I'm sure I haven't shown it enough. The other, it will sound gratuitous, is my wife. The reason being is she made a decision when our oldest was born, which is almost 21 years ago now, she made the hard decision that she wanted to stay home with the kids. And there's obviously a lot of different pathways, but that was undoubtedly her vocation and calling.

54:01She was great at it. I bring that up professionally is, boy, did it allow me to put my head down and work and know that Kate's got stuff covered and it allowed me to do my thing and travel a lot and hustle and know she was there. I hope my kids would think I've been very present, particularly for the role I have. I'd like to think I have been, but I know as parents, we were present because she was present and I'm super proud of her. About a year ago now, she's opened an online fabric store and following a new passion. So she's been great and I wouldn't be where I am in my career without her and I don't tell her that enough.

54:36What's the best advice you ever received? Last thing on Ted Drew's, but somehow that came up earlier. Your mom doesn't work here was the advice. So what that means in context was I was always a hard worker and a hustler and whatever. And I was new there, maybe like third or fourth shift. And we ran out of malt powder. And so I run in back and fill something up and run back and I'm happy because I'm hustling. And that was a place you had to hustle. That's why they paid you what they did and came back and I was, okay, great. And go about. And the manager came up to me and said, Dave, your mom doesn't work here.

55:06And he walks me back and he shows me I made a bit of a mess, kind of in the hustling, forgot about it. I felt so little at that moment. So in one level, you'd say, oh, maybe he could have said it better. But I remember it. And what I took away from it is you can't do things half -ass. You've got to do things right, and you've got to do it diligently, and the details matter. And I can remember that. I can remember how crappy I felt for so long after that. The last one, professional advice I read once is people would be surprised because it seems like I love presenting. And I do love presenting, but I used to get really nervous, be totally honest.

55:39And I'd get more nervous probably than I should have. And I read somewhere that presenting is like a present. It's like a gift. What we do, it's like, if you're handing out a hundred dollar bills, would you be nervous? You'd never be nervous. And even when I'm pitching business, which I love to do, I kind of came around to, I believe in what we do. I really believe in that. And so this is a gift and you can choose or not buy into it. Great. But it really got my nervous energy down and allowed me to enjoy. That was really great advice that I read somewhere. All right, Dave, last one. What life lesson have you learned that you wish you knew a lot earlier in life?

56:12I wish I knew more about stoicism. I'm a modern day stoic. So if anyone follows another podcaster and author, Ryan Holiday. So interestingly, I studied Latin and Greek in high school of all things. I almost went off of all things to study the classics instead of finance. Now that would have been a twist. I was familiar with the Epictetus of the world, Cato's and Marcus really as the philosopher king, but I really came across this much more recently, his writings that just make it more modern. And stoicism has a terrible connotation of emotionless as opposed to it's managing your emotions and not letting them control you.

56:45And particularly in an industry where markets are just bullies all the time and things break the wrong way. And what I love about it is I think I always had a lot of this element. It's just helped codify it for me and helped me remind myself at times, you can only control what you can control. Everything else that's out of it, get over it. And in fact, you can control very little. I mean, it comes down to almost just your thoughts. For anyone who hasn't come across it, I think it's really powerful to help balance you, particularly in our industry. As I said, that can humble you fast. Dave, thanks so much for sharing this great story of how you've worked with clients for so long.

57:19It's been an absolute pleasure. And thanks so much for having me on. 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.

57:52Thank you.