#71 - David Rutherford: Navy Seal Mindset, Embracing Fear

29:10I'm done. But the greats, it's learning to perform the basics as close to perfection as possible in perpetuity, right? And it's just going and going and going. And that way, when your environment, when your operational environment changes, it doesn't affect you. Like one of the most common things that I ask advisors out there is I, you know, how long have you been in the business? So Alex, how long have you been in the business? 26 years. Was it anything like it is today when you started? There are some things that are timeless, but a lot changes. And what are the things that are timeless? You know, core principles like, you know, It's important to be diversified.

29:50You know, markets are cyclical. They're volatile. There's a lot of unknowns. Those things are pretty timeless. And it's just, you know, a different day. You know, the same principles often apply. And those principles are derivative of how you express that to the relationships that matter most to you, right? And so what is the core idea behind, you know, your profession is the quality and competency of that relationship and the ability to deliver trust on a regular reoccurring basis. The person who trusts you is the person that will be able to rein in that fear, right? Alter their perception of, oh my God, the sky is falling based on the rapport that you've spent years and years and years cultivating.

30:40Now, the modalities with which you deliver that safety, deliver that consistency evolve for sure, because markets are evolving and new products are evolving and different concepts and different levels of wealth and opportunities that present with that. So, but at its core, right, it's you and it's all the different reps you've done, the thousands of phone calls you've logged, the different times and places in the volatility of those markets, It's how you see the specific reactions emotionally to those fluctuations and you knowing specifically how to handle that client in that moment, in that environment.

31:19And that's elite right there. The thing that strikes me with what you just talked about is a lot of it is confidence. So for the athlete, it's self-confidence that comes from repeating that process. And when you're in a stressful environment, you have the confidence that you can fight through it. And that takes many, many hours and reps to do. The example that you just described is the clients having confidence in our approach, our strategy, et cetera, because they've seen it time and time again. The other really amazing attribute to high performers is that when they do fail, they don't allow the failure to dominate their focus, right?

32:01They fail. They learn immediately from it. They adapt the failure, whatever the incremental evaluation is, right? That little thing. Well, this is what specifically caused that failure. Okay, get rid of the rest. That's what now I integrate. I go back to train with that failure now integrated into my overall consciousness of the training profile. And then the next time I face it, I know exactly what to do in this moment because I've already trained that out of me. Yeah, and you know that you just got a little bit better. Yes. Well, you do, but again, here's the other thing. You only really know when you're on the battlefield, right?

32:42You can train and train and train and train, but the one thing, and that's why when people ask us what's the real difference between special operations and everything else is we train more than everybody else. We put ourselves in as many scenarios as humanly possible prior to the event. Like when you look at the bin Laden raid, those guys at Damnik, they hit a mock facility that they had built at a secret base. They hit that thing. They practiced hitting it like 150 plus times, right? And it was so funny, one of the last ones and a friend of mine that I had gone through, Hell Week was, his name's Rob O 'Neill.

33:29And Rob was one of the team leaders of that. And he's like, all right, does anybody have any more ideas or what we need to do? And so one of the junior guy on the team was like, yeah, what if the helicopter crashes? So he's like, Roger, we're going to practice the helicopter crashing. Well, what happened? The helicopter crashes. Now, any other time, an event like that could be catastrophic for the psyche of the team and the individuals. But because they had rehearsed it, because they had at a minimum restructured the perception of it to acknowledge it as a high possibility, when it happened, it was seamless what they did.

34:05And, you know, they were able to conduct what I believe was one of the most successful operations in U.S. history because of the preparation, their professionalism, and the recognition that in the midst of a failure, they didn't allow the failure to distract them in real time. they adapted and moved on to what the, what was the preliminary plan was, wasn't affected. And I think a lot of time under those extreme environments, under stress, under whatever, the unknown, when the unknown is kind of hammering, I call it the negative insurgency, right? With that, that external thing that's always looking to tear you away from your success.

34:43You know, when that hits you, if you allow that emotional tsunami to overwhelm you, then And you're essentially, you're operationally ineffective. And now you have to get someone else to come in and backfill you. You can think of that as the unknown enemy, you know, risks that are off your radar. And I believe there are a lot of these risks in the world of investing, particularly today. Let me ask you something about mental toughness and resilience, as that's obviously important in the topics we've covered so far, but also if you're running a business or you're trying to fight through a challenging market environment.

35:21Are there any frameworks that you use for making sound decisions in high stress or uncertain situations? I did this little experiment with the never quit mindset where I went back, I used to have a real big podcast with Marcus Luttrell, the lone survivor. And for three years, we went on this really fun adventure of interviewing people from all walks of life, what their greatest never quit story was. And we interviewed Secretary Perry. We interviewed Mark Wahlberg. We interviewed Lance Armstrong, Diana Nyad, who swam from Cuba to Florida at 64 years old. Just some unbelievable guests that we had on.

36:08And they told these remarkable stories. And then when COVID hit, you know, that idea of the never quit mindset really kind of emerged, you know, because people were pretty emotionally distraught and many people had their livelihoods, including me, destroyed as a result of that. And so I dug in and I went back and I reevaluated kind of all of those shows and tried to segment them into these core ideas, which ended up emerging from not only those, but also my experience in the teams and as an instructor in the various places I've taught. And, you know, what really kind of emerged was these core attributes.

36:50One was work ethic, right? People who seem to have a powerful work ethic, when, you know, the proverbial, you know, excrement hits the fan, right? You know, a lot of people will stop, but other people will dig in and work. One of the places I see it quite a bit is I see it when, you know, people have a loved one die early or tragically. What do they do? They go back and they dig into work, right? And they work through it, right? That's what that whole thing comes from, you know, just work through it. And I think that's a really interesting one. The other one is the idea of defiance, right? to defy that which you believe is trying to tear you down it's kind of like the chip in your shoulder one and define others define concept you know the big one was really when people certain people who feel uh like they're undervalued right when someone tells you you stink you're never gonna make it you're never gonna do it you're never like i mean if i had a dollar for everybody told me there was no way I was going to make it through the SEAL training, you know, I'd be a pretty wealthy man because of where I was coming from out of college.

38:09Like people couldn't believe it. They're like, you're going to do what? Never going to happen. And so that defiance thing. That can drive you for certain people, right? Some people that tear you down, but for others, they can drive you. That's right. And several, you know, I've got several close, close friends that are really successful. And that's the thing that's their motivation every day, that defiance. The other one is kind of this aha moment. Like it's this revelatory experience, kind of where you get to the bottom of that sensation of failure or fear, and you realize, I'm not doing this anymore.

38:46I'm done. And you just change. And then you allow that bottom sensation or, you know, that awakening moment, that revelatory consciousness, right? That thing, that life-altering experience or event. And then that just provokes profound focus and purpose in people's lives. And then they chase that purpose for a period of very strong focus during that. I'll call it the focused obsession. And then the final one is really this idea of your, it's like the love of your life. Like people have a real strong sense of gratitude where they come from, their families inspire them deeply. They love what they do, right?

39:32Those people that you just like, whoa, that person is really full, right? Their cup is full and it's infectious. Like, man, I want some of what they got. And they just are able to structure that perception to realize that, you know, life is imbued with suffering and pain, and it's just part of it, but it's what's going to make me more appreciative and grateful and my desire when I sacrifice for others. And that was really the core in that people's willingness to sacrifice for others. So, you know, I think within that never quit moment, those are some attributes that I really believe are profound.

40:10Another big topic that you brought up earlier is teamwork. And I guess part of that is leadership. Obviously, you need this for business. You can think of a portfolio as having a team of components that each have a role to play in a diversified portfolio. But as a SEAL, you literally put your life in the hands of your team. What would you say makes a great team? And why is the team so critical for success? Team is everything. I mean, it's the essence of all success within every human being, whether that success is Machiavellian or the success is divine in nature, right? Team orientation is the grand power behind all societies and civilizations and cultures.

40:54And so, like, how do you cultivate the team orientation at the highest level? I believe that there's a sequence that forms great culture, but once you're committed to that team, it's four things. It's a high-level commitment, Mike Monsoor, willing to die for his teammates. Training, it's going through the program no matter how hard or how long it takes. right? And then once you have that training, that reinforces your ability to communicate at the highest level. That very honest, focused, direct approach to communication in those strong teams is a profoundly distinguishing characteristic. The greatest teams I've ever worked with are the teams that communicate in the most sincere and honest ways.

41:39And then finally, the leadership portion of that. And, you know, there's really four core ideas behind the leadership development. And first and foremost, you know, you've got to be willing to be cold, wet and sandy with everybody with you. Now, in our training apparatus, that's legit. Our officers go through the same training as us. And many times they get even a greater beat down than we do. They take more heat because the responsibilities are greater. The other is a grander sense of situational awareness. I always see what you always hear on big leaders is they try and parse out the critical aspects that they need to focus on.

42:21Well, the reality is that if your junior man doesn't feel worthy that you're interested in what they're doing, then that's going to really, really have an impact negatively on your organization. But the biggest one is those junior managers. The junior managers are the key to the success of every small business, big business, whatever. And if the investment in those people is not dialed in, that's where you start having really significant trust. So be situationally aware of the different levels of input and influence in your organization. That's huge. And then within those lower levels, if there's no concept that there's a responsibility within them to lead, right, and that's the way you look at the representation of your organization, like you are a leader.

43:11You lead in the community. You lead around. And then you're training those people to become a leader, even if that means they go out and start their own business and say, hey, thank you so much. That's the ultimate thing because you've influenced them and given them enough of these ideas. And if you do it the right way, you pay them well, you give them the growth trajectory, show them the path, they will become as loyal as anybody else. And then finally, as you talked before, Alex, the ability to analyze in the appropriate time what the actual battlefield looks like and then to take risks. And that's the number one thing that I see more often than not is leaders unwilling to take risks because most of that has to do with the lack of work they've done in developing their team.

44:00They just don't trust their team. They don't trust that if I'm going to take this huge risk, expand into another city or state or whatever, if I don't believe in my team, then I'm not going to take that risk. Right. And that's, that's, I think the biggest challenge is taking smart dialed in risk as a result of the strength of your team beneath you. Yeah. And a lot of it is self-reinforcing, right? Meaning you have the reps, you have the training, you have the tests to make sure the training is working and then you make the improvements and you do all that well. Then you build confidence in yourself and your role as part of the team and confidence in the team itself.

44:38And then you're more likely to fight through painful experiences. And I guess that reinforces that self-confidence. So let's talk about peak performance. What does it take to achieve peak performance? And how do science and psychology play a role? And which do you think is more important? First and foremost, the skill set needs to be identified. What is the specific skill set that I want to be elite on, right? Now, obviously, every single thing can be distilled down, and that's what we do, right? If I'm teaching introduction to tactical pistol, there are eight core fundamentals. When you're static on a flat range facing a target, a paper target, these eight core things.

45:30So each one of those eight things need to be trained and replicated, iterated over, let's call it 500 to 1 ,000 rounds. Then once I see proficiency there, now I'll put in the next thing, which is basic movement, facing movement, you know, face left, face right, right? Facing the other way, doing a full turnaround. Then I add in moving, walking left, walking right, right? And so what you're doing is you're stacking the things that are measurable, right? And that's the way that first and foremost, you have to identify the skill set specifically and then break out what are the measurement, the things that can be measured in that experience.

46:15The other is the recognition of now when you establish how you're going to train that, right so often people want to put a finite timeline on that well for everybody's going to train at a different rate now what you can do is the more dialed in your training regimen is you can get a greater group of people up to speed faster but they have to be willing to experience the pain at the higher level what people need to understand is that most of most everybody there's We call it the 40 % rule. It was made famous by David Goggin's book he did with, what's his name, Jesse Eisman, I think, where he spent 30 days with him.

46:57And every human being gives an input. Well, they have about 40 % more to give. There's 40 % more effort they can give. Now, if you're just getting 15 % of a person's total capability, you're in a problem. And so really what it comes down to is how do you force that behavioral shift? And it's conditioning, right? It's the recognition. This is the standard. And this is the standard of the expectation of your organization. We expect you to be willing to at least give us this on this many times. But so often people don't lay that out. As they're bringing people in, they don't establish it correctly in the right culture.

47:37And so that becomes a difficult aspect. All right. So now you've got people that are committed. They're willing to go the extra mile. They want to push themselves heavily against a particular skill set. Now, it's like, all right, how do we know establishing the correct training and then giving them the opportunity in a real-world environment to test that knowledge base and then to do so over and over and over and over and over again? And I think that's where you can begin to really, really advance your organization. The hardest, though, like I said, is every human being has this variable of how they perceive pain and then what they're willing, how hard they're willing to push themselves in order to not overcome it, but like we continuously say, to restructure their perception of it.

48:25So it's a motivational tool instead of an impediment. And I suppose peak performance doesn't have a finish line. You can always get better. A hundred percent. Right. And so how important is embracing failure and learning from mistakes for continuous growth? It's absolutely the most important aspect of training. If you're not building, I see all these continuing education things. And my old man was an attorney. And my God, I forget. It seemed like every other quarter he was going to some estate planning conference in Orlando or Tallahassee or wherever it was in order to keep his credentials up to speed or some tax thing or whatever.

49:10And it was always like you show up and you sit there, you click your boxes and you're done with it. Well, this is your profession. Is it enhancing you? Are you making yourself better? Are you really pushing yourself? And that becomes the real challenge, I think, for people is, you know, is that ability to like to push yourselves when you don't feel like pushing yourselves. And that's what peak performance is, is to recognize that we have these, you know, these plateaus in our lives. Well, the better you get, the plateaus aren't bigger. They're teeny. They're like, oh, I improved by one half measurement of a metric that I used to measure against this particular skill set.

49:54and to be good with that. And that's really what it becomes. It's those small, like minuscule little pieces that you begin to sharpen the edge with, with the more dedication you have to seeking out that information. And that's probably what separates those who are elite performers from those who are just merely good. Yeah, you know, I think there's always the age-old argument that talent plays a role too. right are you intellectually capable are you physically capable are you emotionally capable are you spiritually capable and i think that does play a role in specific things but life is this great bell curve right of right and there's the majority of people who live within the bell curve of that capability and so if you're in that bell curve and you don't there isn't something that precludes you from, from advancement, then yeah, it's the willingness to expose yourself to that pain day in and day out.

50:55And, and that, and to recognize that the pain is the purpose, right? That's the pathway. And then, you know, like I'm, I'm out in California right now and my wife just ran her first marathon, you know, she trained in Florida on the flat and, you know, out here, the whole thing was hills and elevation gain and loss. And it was 85 degrees when she ran in Florida. And it was, with the day she started, it was 42 degrees out, never going over 55. And it was rainy and no sun. And so the reality is the operational environment is going to change. You're going to evolve through your age, maturity, wisdom.

51:34But the construct of high peak performance doesn't change. It's your willingness to train and train and train, and then the willingness to put yourself on that battlefield and take those big risks. And I suppose in the world of investing or business, training is less physical and more learning and studying and talking to people who know more than you do and learning from your mistakes and so on. I don't know, man. And I think you look at the science that's out there now and with the Huberman lab, and there's so much science that indicates sleep performance, your intake, what you're putting in your body for your cognitive acuity, right?

52:19I mean, sleep, there are more advisors I have met that do not sleep well. And a lot of times, a lot of that has to do with their physical health. So if your physical health is poor, you're not sleeping, that means your cognitive abilities are going to suffer. Certainly your emotional instability heightens. And now all of a sudden, you're under duress and stress. That's the core physically. That's where everything begins. And so, you know, I mean, there's no shortage of fine dining and experiences that are more conducive to comfort in the financial services industry than, you know, really putting yourself out on that anvil.

53:02And so, you know, but yeah, I think education is massive. But like, what aspects of education? I often ask advisors, you know, how many books about interrogation have you read? You know, how many books about profiling, psychological profiling have you read? Or forensic, psychological forensics, right? Or, you know, listening courses or whatever it might be, much less, you know, understanding the markets at a deep, deep level and being an expert in your field. Because, you know, complacency kills for sure. I mean, we would see that quite a bit as guys got older and they became more reticent in their knowledge base and those skill sets.

53:48But what changes? Weapon systems change. Communications change. Certainly what we've seen in the Ukraine-Russia war and the war in Gaza, we've seen a radical shift in what the battlefield looks like. That's going to translate to the next kinetic war our people see. So what are we doing? We're adapting. That training's changed. All the training profiles, where we're training. I mean, they're training in trench warfare again. They're training in drone warfare. They're training in, you know, electronic weaponry. So, you know, it really is if you're sedentary, you're complacent, the way I express it to a lot of teams out there is your enemy, which is your competitor, they're adapting right now.

54:34They're training hard. And my sense is there's an underestimation of the importance of psychology and all of this, because there's relationships, you're dealing with people. And so studying how that works from a science standpoint is probably very important as well. A hundred percent. You asked me in the beginning what being a team guy was about, and is it more physical or psychological? And I mean, obviously, once you can do a thousand pushups in a day, once you can run a four-mile timed run on the beach and the prerequisite timing, you're there, right? And other than some type of injury, you just keep getting better and better.

55:13You get stronger, faster, all that. Well, the same is true with all these other skill sets, right? I mean, it's really about that dedication and what you're trying to accomplish. So I think the psychology of human performance, I mean, obviously, that's what I've spent the last 30 years really trying to understand on all these different planes. And I've had this really unique experience of not only within special operations, but at Blackwater, at the CIA, working with football teams. And, you know, this year I worked with the Penn State men's hockey team who went to their first final Frozen Four.

55:55I worked with, you know, the entire Penn State athletic department and all of their student athletes at the beginning of the year. And I'm learning. I'm like, this year I learned about hockey. And I was like, oh, my God, okay, what are the finer points? And, you know, the three or four dialogues I had with, you know, Coach Kodosky before I spoke to the team, you know, was essential in teaching what's unique about this particular skill set in this sport, this idea behind hockey. And so it really is a never-ending process of understanding, right, not only your own individual performance metrics and training, but really how it integrates into the battlefield that you're engaged in.

56:40So let's close with two topics that I know you commonly emphasize, purpose and adaptability. Both are very relevant in the world of investing. Obviously, for purpose, you need to know what your North Star is, what direction are you rowing. And then for adaptability, markets are always changing and investing is changing. So you need to be able to adapt. So on purpose, how do you find and maintain a sense of purpose? And why are strong values so important for long-term success? That's the ultimate question right there, right? I mean, dating back thousands of years, who am I and why am I here? I think fundamentally just asking yourselves that question more often.

57:25I try and have the individual clients that I work with when I give them their inventory, which is their initial three-page questionnaire, the last question is, what's your purpose? And if you're not sure, answer this. Who am I? Why am I here? And that will get us going. And I just don't think people do it enough. I ask this question more than any question I ask when I'm giving lectures or speeches or presentations is, all right, what's your purpose? And, you know, the top four answers I get are pretty straightforward. One, my family, you know, be a better father, husband, all that. The other is altruistic in nature.

58:03I want to leave the world a better place. I want to have an impact. You know, that whole thing. And then, which is strong to understand because this generation that's coming up, they're much more integrated with altruism than they are within that kind of traditional estimation of purpose and ambition, right? The other is faith-based or spirituality. I want to serve God or serve, you know, I want to be a spiritual person. I want to be a good person. And then the final one is I don't know. And I think a lot more people struggle with that than they care to admit. But within your business, I mean, what is your purpose?

58:39Your purpose is to provide the absolute best financial advice and service that you can to your clients. Well, that's great. And what is that? And most teams, good teams, can write that out. They can show me, all right, here is the profile of how I do that, step by step, one, two, three, four. And the more clear that is, the better you are. And that's why I find it fascinating when I ask this question just to the audience or to individuals, like, what's your purpose? They tell me these things. Then I say, well, what is your step-by-step process? You'd say, I want to be a great father. Okay, well, what does that look like?

59:17What does that look like daily? What does that look like weekly, monthly? like how often you talked about virtue or, or, or the other, you know, the morals or, you know, these ideas, like how often do you sit your child down in front of a whiteboard or, you know, on a piece of paper with a journal and say, son, or for me, you know, you know, my daughters, you know, I want you to explain to me in detail what you believe integrity means. And then I listen. And then all of a sudden I pull out, you know, the definition. Then I say, all right, this is how I see it. This is how I see it relative to you.

59:55This is how you should see it. And I teach that, right? John and I sit down pretty regularly with our kids once a month at least and say, all right, this is what we're not seeing. This is what needs to be adapted. This is what needs to be adjusted. Then do you understand this? No. Okay, well, let's teach what this is. And so purpose is a derivative of clarity, right? When you know that feeling inside you, but then people feel something, but then they don't place in what we talked about earlier, that real definitive step-by-step process of how to choose it. Now, the other thing that I think is much more frustrating for people, and this is kind of a tough pill to swallow, is that the purpose that you have at 14 is going to be different than at 24, 34, 44, certainly 54, or 64 and, you know, to recognize that in particular in your industry, people's purpose will change from the moment they come and start working with you till the moment they're retiring and moving into that, you know, philanthropic stage of their lives.

1:00:56And do you really understand what their purpose is? And if you're good, they can come to you with that grand idea and you can help them drill down very specifically on what that is. And by teaching them the expertise you have the markets, the expertise you have in developing the appropriate portfolio and how to manage the volatility. That's what reinforces and goes back to that. The ultimate purpose, which is that the relationships that we have in our life are strong, they're fruitful, and they give us the meaning that we ultimately really want to have. As environments change, whether on the battlefield or in investing, some principles remain constant while others need to adapt.

1:01:40In my experience, the real challenge is knowing where to draw that line. On the investing side, many react to market volatility instead of recognizing that downturns can reveal weaknesses in their core principles. For example, if you're truly well-diversified, you don't need to be as reactive. How do you approach being committed to your core principles while remaining adaptable in other areas? That's like a two-part question for y 'all, right? It's one you and you've been doing this 26 years. And so you've gone through the highs and lows. Whereas, you know, I think prior to there's a lot of people in the industry, what the average age of the advisor right now is what 61 years old, right?

1:02:22And half of those advisors will be gone in the next 10 years. What is the other crazy stuff? It's something like$35 trillion in wealth is going to change hands from the baby boomers into these next millennials and Gen Zs. And so are you prepared to deal with that group? Are you prepared to engage them? Do you have the training to bring them on board? Have you actively started to talk to them? Like we have one of the people that I'm part of this advisor consulting group, and we have some of the best people in the industry on a variety. But this woman on our team, Jackie Wilkie, is like she does that.

1:03:04She gives you a full script on how to engage your clients on the legacy people, how to keep them apart, how to bring them in. And so now you're talking generational transition for people committed to you. Like that's a critical understanding and what to do on how to develop that. you know and then young people coming into the industry the biggest advice i have for them is is go find gentlemen like you and ask them to be your mentor and they don't have to be your peers or the people you're on the same team with it can be somebody you met or you know or someone whatever but find those mentors and and be educated because the real world stuff right the real world after actions reports, the real world experiences, those who've gone through, what, 87 savings and loan stuff, who went through the dot-com bubble in 2000, or the catastrophic circumstances of 08, 09, right?

1:04:01And then COVID, people who manage that, the wealth of information in you all is staggering. So seek them out and learn from that. And that's the other thing is like, don't allow your, your pride or your, your fear to get in the way of going out there and asking for help and get people that are experienced to teach you and train you what they know. Oh, Dave, this has been an enlightening conversation. I feel like I learned a lot and I appreciate you taking the time. Thank you, Alex, so much for having me on. Good luck. God bless you. Thanks for listening. We hope you enjoyed this episode. Please visit our website at insightfulinvestor.org to access past shows and learn more about our podcast.

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