Episode 287: A Practical Look at Private Equity w/ Steve Balaban & Epic Life w/ Justin Breen

22:11Well, we can argue that maybe they'd be paying those fees anyway to someone else, or maybe they wouldn't. That's an argument that's there. Also, on co-investments, there's deal origination fees. They're usually small, but that's also something that should be there. And then there's another layer of fees if you're paying someone to choose private equity funds for you, which is, I think we'll get to the retail options a little later, where you're paying someone to pick funds, they'll also get a management fee and a performance fee as well. This is one that I have not asked anything about. I've only seen it.

22:37We looked at BREIT, the Blackstone REIT, and to access it in Canada, you had to pay like an access fee to go through some offshore vehicle or something like that, which was like another percent on top of the regular fees. Is that typical being in Canada? So it depends where the domicile of the people raising money is from. But yeah, if there's extra structuring fees based on where you are in the world, you would have to pay it. Right. And so that's another question you want to ask. There's also some initial fees just to give you access to it. But, and then there's also in the new liquid private equities.

23:06So if let's say you're locked up for three years and you want to get out earlier, there could be a penalty fee. So there's different fees there as well. Man, it's crazy. It really does highlight though, that there's logically reasons for there to be alpha in this space, but net of fee alpha is what matters. And there's a whole lot of layers of fees to think about. Yeah. Yeah. So it depends on the vehicle you want to go to. And you want to look at how many layers that are in the fees. I think the challenge is people know that there's alpha in private equity. They want to access it. And then they access it to the people that they've been talking to, who then use a fund that then selects funds.

23:37And I think that's where it really adds up. So the concept I think everybody should understand, which everybody knows, but I'm just going to say it anyway. Private equity is an equity investment in private companies. Regardless of what you're doing, you have to find the company, you have to negotiate with the company, and it's owned by someone or some investor, and you have to buy it. And you have to do the whole process. Let's go through the whole process and explain how this works, right? Let's say they have someone to sell for them. The private company has someone to sell. So there's a teaser.

24:05You sign an NDA. After that, you get a SIM, confidential information memorandum, which you go through. After that, you might negotiate a letter of intent, an LOI or an indication of interest, an IOI. And then you sign that, which really is not binding. It might give you a no-shop agreement or something like that. After that, you get access to a data room. Now it's more virtual before it used to be more in-person. And then you negotiate a purchase and sell agreement. This stuff takes a lot of time. So it is not liquid. That being said, people want private equity and they want liquidity. So if you want both, you have to pay for the liquidity.

24:38And then it costs a lot of money because of what I just told you. And so it's just making that connection between the process of how it is to buy a company and all the people involved to make it liquid for you. Can you talk more about how family offices are actually using private equity in their portfolios? So it's kind of like the examples I gave, right? So I'll give you two different types. Okay. So you have a family that made their money through a certain business. Okay. So they still have this business. It's a large business and it's in a certain industry. Now they've made a lot of connections.

25:06They have a lot of suppliers, customers, and different people in the ecosystem that know them very well. So we can argue that if that family is going to invest directly, they have proprietary deal flow. They'll find out deals before anybody else. They have knowledge in this space. They have connections, right? And so a lot of times you'll have families that will go into the industries they know. Okay. So they're going to industries they know, and they don't pay really any fees. Well, there's always a transaction fee. So you might have a lawyer for negotiating a deal and stuff like that, but you're not paying fees to a private equity fund because you're finding it themselves.

25:38Now, sometimes you'll have a family that wants to learn private equity that might invest in a private equity fund in my co-investment to eventually build a direct practice. Now, another way that family offices are using private equity is to diversify by geography. Okay. So what they might be doing is like the example I gave of a Singapore family that just came over from Hong Kong and is looking to invest in the West, I'll say. So Western Europe and North America. Now, one thing is a lot of time private equity is used not on an aggregate basis, but what they'll do is they'll use private equity to access to a market where there might not be the best public equity exposure there.

26:11So you might go, for example, European venture. You might want some access to that. And there's some pretty good venture funds that you can access for European venture, but you probably can't access the European venture as well, or European tech, for example, through the public market. So you might do European venture to get access to tech in Europe. You might do public equities to get access to different sectors. And it's kind of like just building an overall portfolio based on risk, but also sector and geography, and then dividing up the asset classes based on that. That all sounds sensible.

26:42Like that makes sense to me how a family office would get utility out of allocating that way. You made some allusions to how people just kind of want to get into private equity. When you talk to people in general, excluding the family offices that you're just describing, what reasons do you get for why people want to invest in private equity? So why do people want to invest in private equity? Well, the industry does a fantastic job of showing IRR, showing outperformance, and showing how alpha can be created. So these numbers really attract people to the industry. And all the points that the industry talks about on alpha being generated are all true.

27:18So they're all true, right? So all the things that we've talked about in private equity, if you're able to find a company, you're able to negotiate well, you're able to create value, there's actually alpha to be created. So that's what brings everybody to the industry. And also it's the fear of missing out. So they know someone else that went into private equity that says they have these returns. And so they want to get in on that. So that's usually what happens. And then a big issue, a big issue that I find happens a lot with family offices or larger investors that go into private equity, which I think we might cover a little later, but I'll just touch on it, is the fact that once there's a liquidation event, maybe they sold a business or whatever it is.

27:52Once there's a liquidation event and they want to be in private equity, they get so excited about all the pitches from all the private equity firms that they try to put all of their money in one vintage, right? In one year, even if they diversified across sectors and geographies, it's all in one year, which is a challenge, which I think we're going to cover a little later. Just to be clear, is responding to the industry sales pitches and FOMO and all that stuff, are those the right reasons to be investing in private equity? My opinion is kind of exactly what I just said. So in my opinion, an investor should figure out all of the constraints for their portfolio, their liquidity needs, time horizon, task considerations, unique circumstances, legal situation, develop a portfolio either by themselves or with a wealth manager or an advisor, okay, that says, what is the target return for my portfolio?

28:38And what is the level of risk? Then they should build a portfolio around that, then figure out how private equity fits into that portfolio. I think this is how most investments should be made. What I don't think is that you have an advertisement that says something is outperformance, something is going to outperform, and then you tell your wealth manager, put this in my portfolio. I think the idea is you have to look at your situation, build your portfolio, and figure out how it fits in your portfolio. CPP Investments has a whole team called Total Portfolio Management that does a great job at integrating private equity, public equity, and many other asset classes in a portfolio context, which is what I think most investors should do.

29:18I do not believe investors should look at the pitch and put it in their portfolio without looking at their overall portfolio objective. So I have to ask you, Steve, you've done this for a long time and you said two things, outperformance attracts people. There's also a fear of missing out. So you talk about how private equity interacts with investor psychology. Yeah. So I'll do it from the perspective of valuations. Okay. So when you have a company that's traded on the stock market, it goes up and down on a regular basis. And we can argue that the stock market is fairly volatile. When a private equity fund owns a private company or a group of private companies, it reports usually every three months to their investors.

29:59And let's say you're in a time where the market's not going so well and the overall public markets go down a lot. Even if you have the similar companies in the private equity fund, just because of the nature of how things are evaluated and the sticky valuations, you actually don't have the private companies that go down as much. And so what ends up happening, you have sticky valuations. So over the long period, you don't have the big cyclical points that you have in public markets. And so that actually is positive, I would argue, for investors. There's lots of books written about the public markets where you have investors that try to time the market and end up actually mistiming it, right?

30:36When things go badly, they get scared and then they sell. And when things are going well, there's a lot of momentum and they buy more, right? Which is why a lot of instruments are made in the public markets that we recommend that the everyday investor should go into because it takes away this behavioral issue. Private equity kind of takes it away for you. So it's good, I would argue, from a psychological perspective for investors. It's challenging also because of the fact that when you actually run the numbers, it looks like it's less correlated than it really is. Yeah, I want to ask more about that.

31:05how much of the perceived diversification benefits from private equity come from that valuation lag as opposed to actual economic diversification benefits? It depends on the vehicle, right? So if you're looking at an aggregate vehicle, you're comparing an aggregate public market vehicle on global, and then you're looking at an aggregate private on the whole global, I would argue that's probably fairly correlated, but a main cause would be the valuation lag. That being said, right, if you're investing in a specific strategy, like I discussed before, that is, let's say, a European venture in a certain European country that might not be represented in the public markets, well, that would be fairly low correlated public markets because you might not even have that option.

31:39So I think it all depends on the strategy. But yes, on an aggregate basis, I believe a lot of it is because of the valuation lag. That's a big takeaway that it's like, if you put private equity into a portfolio optimizer, aggregate private equity, it's going to look good because of the valuation lag. But that doesn't mean there can't be diversification benefits if you're accessing equities in, like you said earlier, like a region or a country or a sector or something that just doesn't have public equities available. So there can be diversification, but the way it's often viewed is not where the actual diversification comes from.

32:11I guess the question is, is it private equity that's not adjusting fast enough, or is it public equity that's adjusting too quickly that might be irrational? That's the question, right? Now, I don't have a view on each one. I just want to bring up the point. I'm not going to argue to say that public equity is irrational, and I'm not going to say private equity is rational because I don't agree with that statement. But the idea, the argument from the private equity industry, and I told you, I'm always trying to get both sides of the argument. So the argument from the private equity industry is that actually, once things drop, it's more investors overreacting, and it's eventually going to come back.

32:45And you can't sell anyway. So in the long term, it's all going to be the same anyway. So it's not perceived diversification, it's actual diversification, which is the argument. Now, by the way, I'm not making that argument. I just want to present the argument so we can just kind of see the other side. So interesting. Yeah, that is interesting. So Steve, you mentioned vintage years. So how important is it to have different vintages in your portfolio? Imagine, imagine you're a family office or an investor and you have a big liquidation event in 2005. Okay. You hear about private equity, you get excited and you invest all your private equity allocation into private equity funds that are a 2005 vintage.

33:21The funds start buying companies regardless of industry in 2005 and 2006, right? and before the financial crisis. Then the financial crisis happens. Regardless of how good you are at picking managers, regardless of how good you are, most likely you have a lot of headwinds coming at you, right? So you're probably not going to perform that well. Contrast that with the family office that it starts investing in private equity in 2010. They have a big liquidity event and they invest in 2010. Then regardless of who you pick, it's going to go really well in 2011, 12, and 13. Now, obviously, depending on the industry, and I know there's some little factors that I'm not talking about.

33:57But overall, that's an issue. And so I would argue that investors should not, this is my opinion, I don't think investors should try to time the market. And so if you want to have a private equity allocation, you should build a private equity plan. So in other words, I would argue that you want to diversify for five years. So if let's say you have X amount you want to invest in private equity, I would divide that to 20 % a year, regardless of all the pitches that say, don't worry, in a downturn, we'll be fine. regardless of those pitches, 20 % a year into private equity. And that's what I would recommend.

34:29Now, a lot of these new vehicles, these liquid vehicles, try to do that as well. We can argue that they're trying to diversify per year. But when you're building a program on your own, I think it's extremely, extremely important. And there's also an argument in the industry is what exactly does the vintage year mean? Because sometimes it takes more than a year to actually raise the fund. So is it the beginning of the raise? Is it the first close? Is it the last close because a lot of them, what will happen is there'll be multiple closes and they'll bring some investors in the first close and then there'll be investors in the final close and they might buy something in the middle.

34:59And there's something called an interest equalization payment to make it all okay. You mentioned earlier, you kind of walked us through the process of buying a private company and how that relates to liquidity. Can you talk a little bit more about why private equity is typically illiquid? Okay. So it's illiquid because regardless of all the vehicles you have, It all goes down to first principles that you're buying a private company. And once you own a private company, regardless of how many people want out of the fund or whatever you have, at the end of the day, the company is private. And so to sell the company is a long process.

35:35To sell the company, there's negotiations. You have to get a certain price. It takes time. And so while there's mechanisms, which we'll get into later when we go into liquid private equity discussion on cash sleeves, on lines of credit. But at the end of the day, the company is private and people need to not forget that and realize that they're paying for liquidity. So if private equity is illiquid, how does liquid private equity work? Okay, so I'll give three different examples. I'll give you an example of the third-party evergreen funds. I'll give you an example of the open-ended first-party funds.

36:10And then I'll give you an example of some things that private wealth managers are doing for their clients to make it liquid. Okay, so let's start with third-party evergreen funds. These are the funds that are raised by firms such as HarborVest, Northleaf, Hamilton Lane, Partners Group, where in the portfolio, there's an element of secondaries, an element of directs, an element of primaries. Depending on the firm, there's different percentages. And then what ends up happening is they take money, they take subscriptions from investors. Then what there usually is, depending on the firm, there's a lockup period.

36:39It could be two years. Most of the time, it's three years. Sometimes there's a penalty to sell early, but usually it's three years. After that, there are redemptions. Redemptions are usually quarterly, sometimes monthly. And in your redemptions, you can sell your stick. Now, of course, they have to have redemption gates because otherwise, if everybody sold your private companies underneath, what would you do? So what they do is they have these gates on redemption. Usually it's 5 % of net asset value. So not everybody tries to sell at once. You mentioned BREIT. This is what happened to BREIT during the pandemic when all of the commercial real estate firms went down on the public markets.

37:12And then everybody wanted their money out of BREIT because they had sticky valuations and they had to gate those people. So there's redemption gates at 5 % of net asset value, but then there's also this sleeve, right? So a cash sleeve and then a line of credit to try to smooth out the subscriptions coming in and the redemptions going out just to make sure there's enough liquidity in there. So that's kind of the liquid private equity for the third-party evergreen funds. You're seeing more and more of these first-party open-ended funds. So KKR, something called K-prime. They used to have actually something called Cygnus in Canada, which no longer exists.

37:43You have EQT Nexus, which is EQT, one of the largest private equity firms in Europe that has a fund. And you have a lot of private equity firms that are looking to go this way. So TPG just bought Angelo Gordon. CVC just bought DIF. So Angelo Gordon is a private credit fund. DIF is an infrastructure fund. And they're trying to get different asset classes so that they can go after what they say is the private wealth channel. So these first party companies are trying to do it internally. They're arguing that there's less letters of fees, but we can get into that argument if we have to. The third one is through the private wealth channel.

38:14So there's different opportunities that your wealth manager advisors can access it. So there's feeder funds such as Moonfair that have agreements with private equity firms such as Primera to chop it up in a way that people can kind of access. And then in the US, you have Opto Investments, which was started by the old CEO of CPP Investments, Mark Machen. And so they basically have a technology platform that they let RIAs kind of access into private equity funds. And this is all driven by the fact that, and again, this is my opinion, that the private equity industry has kind of raised a lot of money from pensions and other types of investors.

38:45There's this data from Bain that says 50 % of the investable assets comes from the private wealth channel, but only 12 % of the assets invested in alternatives comes from that channel. And so the idea is that there's this white space and they're trying to raise from this white space or creating these other vehicles. What are the trade-offs for investors with liquid private equity as opposed to more direct illiquid approaches that you talked about earlier? So if you're going to look at liquid private equity, the main thing on why these exist is because of a few things. One is the minimum amount.

39:18You can get into a liquid private equity vehicle. There's no minimum, some$25 ,000 is what we're looking at. We're a closed-end fund, which are the ones I was talking about before. A million, five million depends on the fund, right? So access is a big thing, which is why they've been created. Another thing is they do the best they can to make it liquid. And in these attritional ways, you're just not liquid. And they do the best you can to also diversify across vintages because they're continually raising and continually deploying. So that's why these liquid private equity funds exist. Because I don't think the everyday investor that wants to get a private equity just hasn't been able to access it because of the current structure.

39:52So it's not like liquid private equity versus illiquid private equity, a lot of people don't have that second option. So it's liquid private equity compared to any other types of investment. And so the main trade-off is the access to private equity versus the fees to get access to liquid private equity. That's kind of what you're looking at. And then I think when any investor is looking at any of these vehicles, I think it's important to meet multiple firms if you can. And I think, or have a wealth manager advisor that you trust and ask them their process on how they selected the firm that's a partnership with their company.

40:24So what are your thoughts in general, Steve, on these private assets being available through the private wealth channels? I think it's important for the retail investor or any investor in the private wealth channel that's going to invest to kind of understand this in detail or to work with someone that fully understands it. When I say work with someone, probably their existing wealth manager and advisor and ask the questions that you need answers. And hopefully your wealth manager and advisor has done that due diligence on these products for you so they can answer the questions that you have. And then once you have all the answers to questions, make a decision once you have all of the information.

40:59How does it fit into your portfolio, right? Does it make sense for your portfolio? What are your other options? What are the pros and cons of liquid private equity versus other options? There's lots of options to invest these days, right? So don't just invest in, like, I think it's a little dangerous when someone says, okay, I'm going to invest because of the fact that private equity sounds good. and it outperforms based on some number that I read. I think it's important that they go into detailed due diligence. What about access? Through these more liquid vehicles, are you still getting access to the best funds?

41:28That's up to you to decide. I gave you lots of different options of different companies. All of them invest in different private equity funds. There's some overlap, but they all invest in different private equity funds. That's the number I saw a little while ago. I think it was last year. I think they said 11 ,000 funds around private equity funds around the world, but I don't have a full definition on it, but it's around that number, right? And so I think it's to kind of figure out what they're investing in. I think most numbers, aggregate numbers might be biased by the top performers that you might not have access to.

41:58And also the survivorship bias, because a lot of private equity funds get raised and then you don't hear from them again. And so I don't know to say out of all of our providers who has the best private equity fund offerings, I would say to do your own due diligence and what ends up happening actually for the retail channel that I think is going to happen. I think what's going to happen is your current advisor is not really going to have an option. I think you're going to have more and more of the banks partner with like BMO, just partner with Partners Group. And I think you're going to have more and more of the banks partnering with these firms.

42:26And so you'll have the one option available to you if you want to go through the channel that you're used to. And I think it's just asking the questions that you want answered. Right. Vanguard did that too, right? They partnered with a huge firm as well. HarborVest. I think Vanguard's with HarborVest. I was going to say, I believe you can go through HarborVest directly. For that, I'm almost positive instead of through RadenVar now, but I don't know that much about the Vanguard HarborVest product on whether it's the same or different than the current one. Okay. Interesting. It matters a lot, right?

42:50Because my understanding in private equity is being different from public equity is that the dispersion in returns from managers is huge relative to the dispersion in public equity manager returns. Oh yeah, for sure. So you look at buyout growth in venture. In venture is extreme. You might've had a video actually where you showed the dispersions. If not, maybe we can overlay it on this podcast, But the dispersions in venture capital are huge between your top quartile and your bottom quartile. So fun fact, and I know we've talked about this before. So there's actually a really good academic article out of the University of Virginia, Darden, that talks about benchmarking and private equity.

43:21And what the academic article says is that 50 % of private equity funds say that they're in the top quartile. Those that don't know are the top 25%. And the way they do that is because the industry, so we talked about PME before, but that's not really what the industry uses as benchmark. They don't use Russell 2000 or S &P 600. What they usually use is they use benchmarks from PitchBook, from Prequin, and from Cambridge Associates. Now, these are good benchmarks. The challenge is they don't all have the same things in their benchmarks, and there's different sector benchmarks and different types of benchmarks.

43:53And so the paper kind of goes into detail on how private equity funds compare their funds to what benchmark and why they can all say they're top quartile. I'm always careful when I say the word top quartile because the question is, according to who? And so with that said, going back to your point, yes, there's a lot of dispersion in private equity. So I would argue, I'm more and more with family offices, but usually when family offices are investing in private equity funds, the recommendation is once you have the geography and the sector that you want to invest in, you want to figure out your risk level and you want to kind of figure out the size of the deals that they're going to.

44:25And then what you want to do is you want to meet at least three managers with that strategy and you want to interview each one. And then you want to kind of create this criteria, but basically you're going to say, okay, here are all the things I'm looking for in a private equity fund. And then you're going to kind of rate them based on that strategy. And that's how you would do it, as opposed to looking at some of these benchmarks. Because the challenge with some of these benchmarks is they're reliable for what we have, but they're not the most reliable. We've seen marketing materials from a retail distribution channel, just leave it at that, suggesting that private equity has a 5 % return premium over public equity.

44:59How should investors who see numbers like that assess that type of claim? I think investors are used to shopping for things and are used to marketing coming at them, saying that you have the best network, you have the highest return. People are used to this. And so sometimes you think about it and say, okay, wait a second, how is this number calculated, right? And so it's one of many things to just realize. I think for marketing materials, there'll be more and more private equity offerings come out. And if you're the private equity firm, you can choose the timeframe where your data comes from.

45:28You can choose the benchmark. and some of the private equity funds that were in the University of Virginia study, which are most of them, they're gonna choose the benchmark that helps them look the best, right? And so that's just the nature of how people are gonna market, right? They're gonna market and they get the choice of the benchmark. They'll choose the benchmark they want. They get a choice of time frame. They'll choose the timeframe you want. And so as a buyer, you just know whenever you buy anything, you don't just rely on marketing materials. You do your own due diligence. I would recommend you meet, if you're gonna go with someone that's 5%, That's as I've said, interview three other people that are claiming something similar, ask them some questions, and then you can kind of figure it out.

46:05But I would argue never anything in private equity. When you get something in marketing material, get something in a nice pitch deck, you always need to question everything. It goes back to people that do direct private equity when they get the SIMs and they get this number called adjusted EBITDA. So you probably want to ask how it's been adjusted. I want to go back to capital calls that we talked about earlier. How big a practical issue is it in the way that capital is committed to up front and then called for in the back end by these private equity investments? Okay, so originally, originally actually was an issue because what happened was is the private equity firm would go to buy a company and then it would be hard to actually get the money to come in so quickly because when you buy a company, it's not like you can really choose your own timing, right?

46:49So basically what ends up happening is you have to rush and get the money that was always a challenge. So that's how subscription lines actually came up in the first place to actually help give a little bit of gap for the investor to have a little time before the investment was made. So that's actually why it existed in the first place because of the massive issues you have with it. So that's on the private equity fund side. On the investor side, sophisticated investors now have full teams to figure out how to deal with this, right? So you have the total portfolio approach, like I mentioned, a CPP investment.

47:18Most of our big pensions in Canada are fairly sophisticated when it comes to private equity, and they have a good way to manage these commitments. That being said, you're a family office investor. A lot of this is new to them, is this idea where, wait a second, I just committed$100 million and I'm only giving 20. What do I do with the other 80? And the private equity fund says, well, you deal with that. We'll deal with your 20. And by the way, have your money ready for us to call. And so it is a challenge in the industry. And I think investors that are looking to invest directly into private equity funds.

47:47So not the liquid private equity vehicles, because they take care of this for you. But if you're going to invest in closed-end private equity funds on your own, you really need to figure this out. Maybe you can describe the issue that I'm referring to and then talk about how much an issue you think it is. The conflict of interest that exists when a fund sells assets that it has invested in to a continuation fund. So it's like a fund selling private equity assets to a fund that it's friendly with, which can cause, I don't know, you just talk about that? 100%. So why don't I explain GP-led secondaries and continuation funds, and then I'll talk about the conflict I was just talking about.

48:21Okay. So let's go back to me having the private equity fund and Cameron being my investor. We're again, assuming he's the only investor, even though usually you have many investors. Okay. So Cameron's going to give me a hundred million dollars. I'm going to take 20, 30 upfront. As I find companies, I'm going to buy, create value, and then sell and give Cameron his money back. Let's say around year seven, eight, and nine, I still have a company or companies, but I don't believe the market is good enough to sell them. Or maybe I haven't finished how I'm going to create value on them. Okay? So what I can do as the GP is I can lead a secondary transaction.

48:56Now, secondary transaction is if we back up into, let's say, year five or year six, and Cam decides he wants to sell and no longer be with a private equity fund, he can find another LP to sell his stake to. And that's called an LP-led secondary transaction. So that's an example of how secondaries start. But in years seven, eight, and nine, before the fund ends, buy the company or companies. I can go to Cam. And for this example, actually, let's say there's multiple investors. And I can say, Cam, look, there's more value I want to create in this company. So here's what we're going to do. I'm going to create as the GP, a special purpose vehicle called the continuation fund.

49:32And then what's going to happen is the continuation fund is going to buy, let's just say it's one company for simplicity. I'm going to buy this one company, it's called the single asset continuation fund, and I'm going to bring the company into the continuation fund. And by the way, Cam, I'm going to give you the option if you want to roll over your stake. Okay? Now, usually what happens is not all of the LPs want to roll over their stake. As I mentioned, pensions are fairly sophisticated and they plan to get this capital in that probably has a use for something else. Okay. So then what happens is some of your LPs are going to want to sell.

50:02Some are going to want to stay on. So that's the idea of a GP led secondary and a continuation fund. Now here's the conflict of interest. At what price do you sell? Okay. Cause you're selling to yourself. Now I'll give you why you want to have a high price and why you want to have a low price. You want to have a high price because as the GP, you technically get to collect performance fees because it's an exit. But now the most of the performance fees are actually rolled over into the continuation funds, you actually can't collect it out. But the problem is if you have too high of a price, all the LPs will want to get out and you won't be able to attract new LPs.

50:34Okay, so then maybe you want to have a lower price. If you want to have a lower price, you'll attract new LPs. And what's very common now is stapled commitments. So because it's a lower price, you can tell new LPs, look, we've been trying to raise money for you for a while, we'll give you access at a low valuation, but we need you to commit to our next fund. Okay. So the challenge is having a fair way to value this because some people might want to value it lower, some higher. And the industry will argue these balance each other out. So we get a fair valuation and we use an independent valuator.

51:05This was an issue in the new SEC, August, 2023, new guidelines, which are over 600 pages. But one of the things they talk about is how valuation is done in GP led secondaries. And they talk about the idea where an extra independent opinion needs to come in. And we can argue about how independent that independent opinion is. But that's the idea. The idea is you have a 10-year fund, a year seven, eight, and nine. You have these GPs that want to continue holding on. Back in the day, they used to just extend it like a year or two, but now they split up the LPs and sell it to themselves. And like I said earlier, NAV loans are also kind of used now a little more.

51:38GP-led secondaries were getting pretty big compared to LP-led secondaries in 2022. And now you'll see different methods, but I think they're still going to come on depending on what happens in the public markets, right? This will happen a lot if public markets go down. You make me think of another question, Steve. Is there a trend at all in the industry towards some sort of permanent kind of equity instead of rolling it over every eight to 10 years? There are permanent vehicles. And a lot of times it's using insurance capital. So a lot of the private equity firms will work with insurance companies or will own various insurance companies.

52:07So we did a video on this on our YouTube channel, right? And so they're basically having these permanent vehicles that are long. There's also other longer life funds. So like Altus, for example, in Toronto, they have some junior fund. And by the way, their management fees on invested capital. And a lot of the bigger players like CVC and Blackstone also have longer life funds that are 17-year. But yeah, they do have the permanent capital. The challenge with the permanent capital vehicle is really on the structure of how private equity professionals are going to get paid. Because a lot of times they get paid on the performance fees.

52:36And technically, management fees should be just covering your costs. And we can argue if they are or not, but let's just say they are. And so that's actually another argument for something I didn't talk about here, but I think maybe it would be good to talk about is the different types of waterfalls. What do you think? like a deal by deal and a hole of fun. So let's say again, Cam, I take$100 million, I get a commitment from you, and I'm investing 20 to 30 million. Now, let's say I've invested, for simplicity's sake, 10 million in 10 different companies. And let's say I sell the first company that I paid$10 million for, I sell it for 20 million.

53:06Okay? Now, remember, my hurdle rate is 8%. I've doubled my money. And for simplicity's sake, let's say I only held the company for one year. So I've made 100 % on that company and my hurdle rate's 8%. And so the question is, do I get to accept the performance fee or not? So one argument would be yes, because I doubled my money on that deal. I got 100 % IRR. One argument would be no, because Cam committed to me, you committed$100 million and you haven't got your$100 million back. And so the right answer in the private equity industry is it depends on what you negotiated in your limited partnership agreement.

53:42A deal by deal waterfall, also known as an American waterfall, is just like what it sounds like on deal by deal is when the performance meet gets collected. And a whole of fund is after Cam gets$100 million back plus the 8%, then I started collecting. So this also affects the timing of cash flows to the private equity firm, which I think will impact this idea of permanent funds. Wow. So Ben, you can correct me on this, but I think we've been pitched more on private debt than any other asset class over the past few years. Steve, what risk do you see with these fund flows going into private debt?

54:16Okay. So let's look at the pros and cons of private debt in this market. Now, by the way, it's interesting because private debt originally was called private debt because debt is when you loan money. And now you're seeing people call it private credit. Credit's like a credit card where you have access to it because you have lines of credit as well in there and they figure that kind of covers it. Okay. So I'll use the words private debt and private credit interchangeably, but just wanted to kind of talk about that quickly. Okay. So let's say you're in a private debt fund in 2024. Well, interest rates are higher.

54:46So is that good or bad? Well, it's very good because of the fact that you get higher returns. It's probably not so good because the economy is probably not so great and there'll be more defaults. And so the balance is, are these extra returns outweighing the defaults? And then the argument for the industry is actually they are. And the other argument for the industry is that these private debt funds have the expertise to get a high recovery rate when they default. Because in private debt, you're a little higher on the capital structure than the private equity firm. And so if you're higher on the capital structure, if the company does poorly, you actually can restructure it and maybe get the most out of it.

55:23Now, there's another point on private debt that I'd like to mention. So back years ago, the CFA Institute asked me to create a private debt section for the CFA materials. For any of your listeners that are writing the CFA exams, they probably saw my name on the alternative investment section. So originally we created this private debt section. Okay. So what we did is we had four categories for the private debt section. We called it direct lending, mezzoline loans, venture debt, and distress debt. Okay. So for those people that are writing their CFA exams, remember those four. But I would argue that since we wrote that, there's actually a fifth type of loan that comes up that I think people need to be aware of when they're investing in private credit.

55:58And I would call that specialty loans. Okay. An example of a specialty loan would be what I talked about earlier, these NAV loans. Okay. So private credit firms will give private equity funds capital, and they will use the portfolios, the group of portfolios, okay, as collateral. Now this is different than subscription lines, which use commitments as collateral. So they're going to use this. And so as an investor, you're investing in the private credit fund, which is now investing in these NAV loans. Now, NAV loans are just one example of these specialty loans. There are tons of these specialty loans.

56:36As an investor in a private credit or debt fund, what you're doing is you're investing in one of these five, specialty loans, venture debt, distress debt, mezzanine debt, and direct lending. And my recommendation is you have to fully understand the strategy. If it's going to be in direct loans, direct loans, which is where most of the private debt industry has grown from since the financial crisis, right? Because after the financial crisis, Dodd-Frank came out, and then there were more restrictions on banks, and then the private debt industry really kind of blew up, and mainly because of these direct loans.

57:06Well, if they're direct loans, you get an idea of the underlying companies. And if it's a blind pool where they haven't bought it yet, you can actually look at their previous funds to see the types of deals they have, and you get a little more insight into the type of investments. I find that as an investor, if you're looking at private credit or private debt, you want to fully understand where it's going into. It's going into companies that make sense. Then you can actually understand the companies and then make a decision there. But if it starts going into these specialty loans, this is where it gets a little more complex as an investor to do your due diligence.

57:33And so you hope that if you're with an advisor or wealth manager, that they fully understand these complex specialty loans. I don't know if that answers your question. That's a lot of good information. Anytime I see, and I know there's always nuance, but anytime I see something getting pitched, like Cameron said, that we've seen this pitched to us a lot, and it's true. People approach us all the time for pitching their product or their security or whatever, but it seems like we've heard about this more than anything else. And whenever that happens, I worry about, I don't know, valuations in the asset class, just general risk with too much capital flowing in.

58:07Do you worry about that at all in this space? So the industry has really not been tested, right? Because the industry has kind of really grown since after the financial crisis. So in my opinion, if you're going to invest in it, make sure you understand what happens in the event that the industry gets tested, which is, I'm a little more on the side of the direct loans, because then you can actually see through it, but there's different structures, and it's making sure you understand it. And you really understand, so in private debt, usually there's an interest rate that gets paid on a regular basis.

58:35But the main risk is in a regular event, the main risk is that there's defaults. And so I think when you're doing due diligence on private debt, what is really, really, really important is that you fully understand the process of what happens if this company fails. What is the process, right? What happens if the structure is bad? Because you've probably seen those graphs where it's basically risk and return, and then you have everything that kind of goes linear, and then you have whoever's selling you their product is highest return, lowest risk, right? You've probably seen those, and you can substitute a lot of products for dependence on the private debt firm, right?

59:09So I think it's your job as the investor, especially with more pitches coming out, to really try to understand the downside. The upside is really easy to understand. Higher interest rates, you might get 10 % return, 12 % return. Some of these PIC loans that you've seen, the paid-in-kind loans are now getting up to 20%. So that's easy to understand. The hard part to understand is what happens when it blows up, which I think is where you're coming with your question. And it's unproven, right? This industry is new and it hasn't hit a big downturn like we saw in 2008. So it'd be interesting to see how it plays out.

59:42Yeah. I'm personally, and for our clients, happy to be on the sidelines for that one. Yeah. Okay. Okay. I got you. Yeah. There are a bunch of risks in there and you really, really have to uncover what's going on. You'd spend some time to fully understand it. Yeah. Makes sense. Steve, this has been great. I want to ask you before we finish up, if you can talk about the private equity certificate that you're launching through the CFA Society Toronto. And maybe in addition to that, you mentioned that you've written some of the CFA curriculum. If you can talk about that too, that'd be worthwhile. Sounds good.

1:00:10So I guess on the certificate, so this is a couple of years in the making. We have over 70 videos of just me talking like I'm talking now, except easier to follow because there's graphics next to my head when I'm speaking. So that should be okay. Plus there is 60 like real world problems. There's quizzes, there's an exam. And at the end, there's a certification in private equity. And that's kind of set up for investors, wealth managers, advisors, and service providers as they're talking to their clients to fully understand what's going on, as well as give them this resource that after they do the exam and hopefully do okay, they can actually go back into the resource and actually see what's going on.

1:00:45And just to quickly mention, we have a coupon code for Rational Reminder listeners because we are launching it in January and we'd love for your listeners to go through it. As for the CFA curriculum, there's continually advances getting done in the CFA curriculum, and there's going to be a new private markets portion to level three, which is pretty exciting for the CFA Institute, as well as multiple certificates. There's a data analytics certificate and multiple certificates that are coming out in the CFA Institute, which is fairly exciting. Super cool. Awesome. Steve, final question for you. How do you define success in your life?

1:01:15So this is going to be probably a different answer than most. I absolutely love helping people. That's why I teach at the university. And so if I can help in my lifetime, as many people as possible, like that would be how I would define success. There's that book, I forget the guy's name. It's called Flow. Remember you guys, I don't know if you've read that, where he talks about like, when do you feel like you're doing something where you're just kind of in the flow? Like, what are you really, really passionate about? And for me, it's after a class that I've been teaching at the University of Waterloo, and I'm able to help some of my students, or it's after a workshop where I'm able to help people, I just absolutely love it.

1:01:51So if I can kind of do that, which is why I'm spending most of my time teaching these days, that's what I would say is helping as many people as I can around the world. That's awesome. That's Mihaly Csikszentmihalyi. That's who wrote that book. Okay. I'm happy you're the one that got to say it, not me, because I definitely wouldn't have said that properly. So thanks, Ben. I knew it, but I thought I'd let Ben do the proper pronunciation because I've mucked it up before. So Steve, this is great to have you on. Thank you both for having me. I really appreciate it. Awesome. Thanks a lot, Steve. And thanks for the course for the listeners.

1:02:21It's going to be awesome to check it out. Incredible conversation. Just loved having Steve on. So let's go to a quick review of a previous episode. And with that, here we go. So in episode 188 in early 2022, we were joined by Professor Eilid Fischbach from the Booth School of Business to talk about the science of motivation and goal setting. She is also the author of the excellent book, Get It Done. She started that conversation by explaining the difference between intrinsic and extrinsic goals. So intrinsic are goals for personal desire and extrinsic are goals for other factors such as money or recognition.

1:02:59and what are the characteristics of an effective goal such as how specific should a goal be, what should it not be and whether goals should be quantifiable. We also talked about the power of commitment devices to help you achieve your goals. We also discussed how you can become intrinsically motivated to achieve a goal and how our relationship with our future self can impact that motivation. And another interesting part was when she described what a goal system is and how it can be effective at achieving multiple goals. So during this time of the year, when many people do set goals, this is an excellent episode to revisit, to better understand the science of goal setting.

1:03:37And that was Professor Ayelet Fischbach on episode 188. I also want to mention that she just released a TEDx Chicago talk a couple of weeks ago. And we'll share that link in the show notes as well. But if you Google Ayelet Fischbach TEDx Chicago, it comes up right away. an excellent, excellent presentation on goal setting. Okay. So let's go to a quick book review. Very quick because of the author with us this week. So I want to highlight a book that I read late last year, kept showing up in my feed and it's called Epic Life, How to Build Collaborative Global Companies While Putting Your Loved Ones First, which I thought was an interesting title.

1:04:20The author is Justin Breen. So I read the book and the book is a collection of 30 ideas that he has collected through his personal networking. And Justin's a very interesting, I think Ben, fair to say, somewhat eclectic individual who kind of comes at the world in a different way. And it's an interesting way of even engaging with us that you'll hear in a minute. and it's from connecting with these people that he's come up with this list of ideas about how you can be more successful. And I thought it'd be neat to have him just come on to talk in general. I think he did give us some concrete ideas and he talked about the power of networking, which is what he does.

1:05:02And he's got incredible focus in his life, which is what I thought was interesting. And it kind of gives us permission to say no to things that aren't important in our life. So once you've defined your purpose, what can you do to stay focused on that purpose through the year? And then why would it matter in that purpose to connect with other people? So he talked about that. So he is a renowned entrepreneur, author, and speaker. He's been in publications such as Forbes, Inc., and Entrepreneur. He's the founder and CEO of BR Epic Communications, which is a PR firm that helps businesses grow by creating compelling stories and building strong relationships with the media.

1:05:40So again, the book is Epic Life. It's a collection of 30 ideas clearly spelled out that are super easy to implement. So I think we're all hoping to have epic lives. And I think reading this book and listening to Justin will give some insights into how you might be able to at least come closer to having an epic life. So with that, let's go to our conversation with Justin Breen.

1:06:07Justin Breen, welcome to the Rash Reminder podcast. Yeah, We the North. I was looking at your site, Sensible Investing, Sensible. And all I do is talk to visionaries all day. And I think most visionaries, humans think they're talking nonsense until it makes sense. And then it's like, oh, that makes sense. But it takes a while for people to understand that it makes sense sometimes. Well, I think people realize that it makes sense to have you on to kick off 2024. I like your link to We the North in basketball. You may know Ben's background in basketball. I didn't know that. That's interesting, but I don't believe in randomness.

1:06:48So we live in the United States, but love Canada, wearing the Canada men's soccer national team uniform now, seeing O Canada at minor league baseball games and love Canada. Great people. So let's kick it off. One of the things that struck me in your book is that naming your year can actually be transformational. Can you talk about that? Well, I don't believe in randomness. So we just had our latest graphic network meeting and we had about 30 folks on there. They're all visionaries. And then we talked about this very topic and just this background. I've been naming my years for several years now.

1:07:32And then a good friend of mine, former PR partner, Joe Martin, it was his idea. And I'm like, oh, that's a good idea. I'll start doing that. And focusing the entire year on one word or one phrase, it just kind of manifests itself. So again, just as background, 2020 was global growth. So every day say global growth. 2021 was no limits. So when you have no limits, there are no limits. 2022 was Epic Life, which became the name of Epic Life Book. Again, manifests itself. 2023, last year was NetWorks, two words, Networks, and then Brapic Network. That's when it's really taken off. And then this year is Century Club.

1:08:18That's getting Brapic Network to 100 members. we're halfway there. But more importantly, I plan to live until at least 2100. So I look at Brepic Network as a century club that gets me through the rest of the century. So that's the background on it. And then our members asked to provide their answer to naming their year. And then here are some of the words that they said. And I'm saying this because I think it will provide the audience and you perhaps and me some good ideas for the year. So here are some of the words that they chose. So joy, simplify, presence, exponential growth, excellence, purpose, appreciation, fulfillment, impact, nations, increase, freedom, why, awareness, patterns, partnership, blessed, anti-fragile, maximize impact, inner circle, and restore relationships.

1:09:23That's about half of the things they gave. I don't want to spend the whole show recapping that, but it's all different and it's all collaborative. It was really interesting. What process do you find works in deciding what to name your year? great question so i am not a process person but i am a pattern person and then the key to life is like there's good and bad habits so the best patterns become the best habits and then the best habits become the best rituals so naming my year is a ritual and i'm very low in ideation most of the visionaries I talk to are very, very high in that. They're all over the place.

1:10:08Endless, shiny object. I'm not like that. I'm an activator who doesn't overthink. I just do it and then see what happens. With the naming my years, because I'm so low in ideation, to have myself do the ideas takes a long time. So I start thinking about the next year in August or September. and then I even start, it's like the year begins for me in August or September, if that makes sense. So I was thinking about Century Club in August or September, and then whatever 2025 becomes, I'll start thinking about that in August or July or something, and then that's what it'll become. But the key to the process as well is saying it every day, every single day.

1:10:56So I say Century Club every day, every single day. How does this all link back to one's purpose? Well, you're a great thinker and simplifier with that question, a great thinker. I see us having this conversation in Greece or something in like 2000 years ago. And then now we have the technology to fast track it or communicate it, but it's the same type of thinking. It's the same type of thinking. And I live a very simple life, very simple life. People from the outside think it's very complex, but it's not. I only do two things. One, spend time with my family. Two, connect visionaries to serve humanity.

1:11:41So not humans, not business owners, not consultants, just pure visionaries. And by having that ultra focus, a part of the mechanism or the flywheel or the trigger to doing that is naming years. So everything that I do, the purpose and the family are the litmus test. So if it doesn't match what the purpose is or spending time with my family, I just don't do it or it's a bad idea. So naming years, that adds to the purpose. it focuses even more on the purpose. How does defining purpose affect your mindset? Thank you for asking that for your audience. I appreciate that. But that's everything. Without that, there's nothing.

1:12:31I mean, to me, without family and purpose, there's nothing. Without family and purpose, there's nothing. And without mindset, I don't think there's a purpose. So So again, my brain, very simple. Everything's a pattern or a habit or a ritual. So my favorite pattern is right mindset attracts right network, creates right opportunities. So right mindset attracts right network, creates right opportunities. And that mindset, to answer your earlier question, it just goes into the purpose. So purpose of life is to connect visionaries to serve humanity. and I can't do that if I don't have the right mindset because if I don't have the right mindset, I don't have the right network of visionaries and then there's no opportunity.

1:13:18So, I can't do my purpose without that mindset. Can't do it. Okay, this is the question I've been most looking forward to asking you because in the podcast I've listened to you, you talk so much about the power of networking. So, how does one develop that skill of networking and like what does it even mean? Well, it is a skill. I mean, it literally is my purpose. So it's more than a skill. And I think you're born with a certain set of gifts. I've always been like this and just kept refining it. But I think it's first acknowledging that that's one of the gifts is to build a network because there's certain people that's naturally what they're good at.

1:13:59They're good at connecting or building a network. And then, oh, that's my gift or my purpose. Do something about it. So I just, oh, I'm good at that. Let's just keep doing that. And I really want to think and answer your question to the best of my ability, because you're a deep thinker and you've waited a long time to ask that question. And I'm guessing with your three quick start and seven follow through, you've thought for hours and hours about waiting to ask that question. So I want to do it justice and slow my brain down for once. I'm 46 years old 46 April 10th I'm 47 so kind of almost 47 and it took most of my life of talking like this to understand I didn't necessarily belong in human society even though we're all humans I'm not really and it was important to go through that journey or struggle or being completely misunderstood by most of society.

1:15:06To understand that I wasn't this person. I always knew I was this person floating out here. I just didn't know it until meeting more of those people. And then again, to answer your earlier question, if these are the people that understand you or share your mindset or want to help you with your purpose and you can help them with theirs, then that's the network. That's the network. So I certainly hope it doesn't take folks 40-plus years. I think that's the point of the second company, the Brepic Network, is so people don't have to do that, so they can find people quicker who actually do understand them.

1:15:52but I think for anyone going through building a company or finding a purpose in life I think it's a lifetime exercise a lifetime exercise so I've spent my whole life doing this and I'll never stop doing it and it will be very interesting to see how that continues to evolve. Do you have any advice you'd give to younger people who might be new to connecting and networking? nothing to me has ever been a cost ever like in my whole life nothing's been a oh what does that cost very rarely have said that even though i just said it but networking or building a company or building a family or i don't know whatever you're building it's always an investment and you can't know who you are or who you are not unless you put yourself out there to find people who resonate with you.

1:16:46And just as if not more important, don't resonate with you. Most people do not resonate with how I talk. I'm very aware of that. It just so happens the people that do are top entrepreneur visionaries on planet or those who will make the investment to do that. For most of my life, I did not know that. Maybe subconsciously or unconsciously, but certainly not consciously. You're either born a visionary or you're not. So if you are a visionary, you go out and figure out who you are and who you're not, and then just keep writing bigger checks to be in cooler rooms. That's what I do. And then just created own room with the coolest people.

1:17:31Your book has 30 ideas that you've collected. How important are ideas like these as people pursue their goals? I really appreciate the tone and the calmness of this interview. Most of the folks I talk to are very high quick start and we're just going, this one, I always try to mirror the host. So I'm really slowing down. So thank you for that. That's a gift. That's a gift to get me to slow down. But for me, no, I'm serious because this is how I learn in real time. I just like to hit the record button and think. And I don't like brief shows that's annoying to me. Just hit the button. So ideas are meaningless to me without action and investment.

1:18:17They're meaningless. Most of the people I talk to, they're endless ideation. Endless. There's a working genius assessment. It's really good. Lansioni, Patrick Lansioni. And then I'm a discernment galvanized. So most people I talk to are wonder, invent or something, and I'm discernment galvanized. So you're blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah. And then no, no, no, no, no, no, no. Yes. Activate. Yes. Connection. Yes. Pattern. And then focus on the pattern. So those ideas in the book, the 30 ones, those are not, I mean, they are ideas, but they're actionable ideas that I'm actually doing.

1:18:58And then the visionaries that I talked to are doing, they weren't just ideas that they were not doing. They were ideas that they were taking action on and living their lives with those. So I almost look at them as principles or rituals. They're almost like rituals, really. To me, they're not really ideas. They've gone beyond that because to me, ideas are worthless without doing something about it. They're meaningless. You ask yourself two questions every day. Can you tell us what they are and why listeners might want to have their own two questions? Tremendous. So again, very simple person, very simple.

1:19:42And I was a journalist for 20 years before starting first company with zero business background. So I don't know anything really about business and I don't really want to know. It doesn't interest me. It never has. So there are only two questions that I ask myself every day that matter, only two, because less is more simplifier. So one, did I have a good experience that day with my family? Every single day since I started doing that, this has been years now, the answer to that has been yes. Okay, good experience that day with my family, yes. Two, did network grow on a global level? every day the answer to that has been yes because you like the nuts and bolts of things network growing on a global level to me means doing a show like this having a one-on-one meeting being in an entrepreneur group posting something on social media that highlights someone else and how great they are someone emailing me an intro me emailing someone else an intro this is what i do day and I never get tired of it because it's connecting visionaries to serve humanity.

1:20:52But I have found by focusing on family and network, all this business owner stuff has taken care of itself because of ultra focus. I don't really think about revenue or employee. I never really think about that stuff. What I do think about is talking to visionaries and then my brain's kind of like a CRM. It's just how for visionaries. And then I can just like, oh, someone three years ago said this, this would be a good intro. I connected two visionaries. A couple of years ago, I talked to a visionary whose child died and I hadn't talked to him in a couple of years, but then I talked to another visionary a couple of days ago whose child died.

1:21:37So I connected them based on their children die. And I just said, oh, you will bond over your mutual understanding of what actually matters in life. And that to me is what connectivity truly is. It certainly is about what you do, but really to me, it's more about who you are and what you've been through because it's a common understanding. What advice would you give to someone who wants to become a high achiever no advice for that no no no no the high achiever won't they'll just do it no no no no a high achiever never asked that question there's no chance they would ever ask that and i know ben likes that answer i always know when the host is asking for their audience because they're trying to be nice and then i'm dead last in empathy on strength finders but for visionaries it's empathy endless but if someone asks something that's a ridiculous like you're trying to be relating to your audience that that's no because a high are you kidding me no no no high achievers not gonna no they're just gonna keep doing it again my litmus test is my father who was 61 when i was born he was a world war ii hero and he was shot down multiple times in combat many times without a parachute and then he would just get back into another plane so he's not asking me and people like that aren't asking me what high achievers done on you just they just do it so that's what a visionary is they're not gonna overthink things they're just gonna execute we'll see how you respond to my next question and again i've heard you talk about free time before how important is it to have the ample or the right amount of free time in your life because that is a constant struggle over so many people?

1:23:25I mean, again, I only ask myself two questions every day that matter. So again, sometimes the answer's said before the question's asked. That's what I mean. So I just want to spend time with my family and connect visionaries to serve humanity. And visionaries never make excuses. So get back into the plane without a parachute after another one's been shot down. But no, obviously free time is essential. And again, there's good habits and bad habits. Bad habit is overworking or drinking, cheating on your spouse. Good habit is spending time with family and then connecting visionaries based on purpose.

1:24:01I think that's a pretty good habit. And then again, ideas are meaningless without execution. So a bad idea, I'm going to execute not doing that. Oh, you're overworking. You're not seeing your family. Bad idea. Not going to do that. Not doing that. You have kids, Justin. How do you encourage good habits in your kids? Well, I don't really need to do that. Our sons are nine and 11. They're both nine quick starts. They're both maniacs. That's a compliment. They're unemployable. Also a compliment. The nine-year-old already is planning to take over both companies. And then the 11-year-old, his fastest 5K is 20 minutes, 38 seconds.

1:24:42So I don't really need to say. Oh, oh. So my wife's a pediatrician and the COO of Brepic Network, and she's literally like the nicest person on the planet. So she knows how to quote unquote parent or raise children or whatever. I know how to spend time with them. I don't necessarily know how to raise them, but my advice for them, even though I hate saying that word, but felony, bad misdemeanor. Okay. So that's my parenting. Don't do anything that will like permanently, but you want to get in trouble. that's fine. I mean, all entrepreneurs are good at getting in trouble in some capacity. They're like little pranksters.

1:25:18But my dad died when I was 13. So I know what it's like not to have a dad around it. That's a bad idea. So I'm not going to be that. I'm not going to not be around for my children. Not going to do it. Well, thanks for joining us. Great to see you. Congratulations on the book and we wish you a great 2024. Thank you. I really enjoyed this interview. Really got me to think and slow down. I'm very grateful for that. Awesome.

1:25:43How are you, Ben? First after show of 2024. What's happening? Well, as listeners know, we launched a new podcast, a limited series with Dr. Mark Soth, aka The Loony Doctor. What did we launch it in? November? December? December, mid-December. Yeah. Mid-December, yeah. And I haven't checked recently, but it spent like a couple of weeks at the top of the Canadian Apple podcast charts, which is a black box. Apple intentionally does not disclose exactly how they calculate their chart positions, but it's some combination of listening duration, engagement through reviews and ratings, download numbers, all that kind of stuff.

1:26:29And so MoneyScope was number one in investing and business categories for like a couple of weeks, I think, which is Rational Reminder has been number one in investing several times. I don't know if we've hit number one in business before. Don't think so. And even on investing, we were there very briefly. Yeah. The craziest part to me was that MoneyScope was high up on the all podcast charts, which is the top, I think, 300 podcasts in Canada. It was number 15 or 16 at one point of all podcasts in Canada. And that's a chart that Rational Reminder has never appeared on at all. I don't have an explanation for why that happened, but it was pretty cool to see.

1:27:12It's also been pretty successful on YouTube. It's got just under 2 ,000, well, 1 ,670 subscribers on that channel, which is pretty good for a brand new channel. It's a phenomenal podcast. Listeners, you got to go check it out. The chemistry you guys have is great. It's amazing how much content comes out. And I know you have notes, but you can't tell you guys have notes. It's that well done, but it gives proper amount of airtime to really important topics in such a beautifully structured and systematic way. It works beautifully. It's like a great course on financial literacy and it's not until episode 11 you get into issues that are specific to incorporated professionals.

1:27:54Yeah, that's something that I've seen online a few times. I've seen someone comment on Reddit that they're really enjoying the Money School podcast and someone replies saying, isn't that for Canadian doctors? And it's not just for Canadian doctors. Most of the content, not even just for Canadians, most of the content is going to be applicable to anybody in any country. The difference between that and Rational Reminder is that on MoneyScope, we're not trying to hide our Canadian-ness. On Rational Reminder, we try to cater to a global audience because we know our audience is global. On MoneyScope, we are speaking to a Canadian audience.

1:28:26However, most of the concepts are either applicable globally or easy enough to translate globally. Very well done. Yep. Anyway, so that's been cool. We'll see how the next few episodes get received. We've only released the first handful and we've got many more to go. There's no recent reviews. And I don't know about you, Ben, but LinkedIn, I'm getting inundated with people with sales pitches. People wanting to promote the podcast, want us to distribute their investment product. People want to scale our advisory practice, marketing services. It never ends. I don't know what happened in the past month, but it's like multiple every day like that.

1:29:06No, I'm not getting that. Good for you. I did get one letter from a professional colleague that had a chance to meet at Future Proof last year. Seth reached out to say, through your podcast, I got through 12 books this year, nowhere near 23 and 23, but a huge improvement. Here's my question. Your half hour a day of reading books is correct do you also fit in time to read magazines journals etc thanks I've had this question a fair amount I put a note on Twitter and I say this not to brag that is not the point at all but I did complete 61 books last year and yeah there were some flights in there that I read a bit more and there was a vacation I read a bit more but the bulk of the reading is just from my 45 minute daily habit and I swear to you if you just do 45 minutes a day the books melt away.

1:29:56And yes, of course, during the day, we're all reading periodicals and stuff for work. So I only do the reading in the mornings and it just works. It just works. And I'm also happy to say that the challenge will continue. Like I said at the top, you can go to rationalminder.ca. There's a tab there, 24 and 24. We'll show you how to sign up. You go into the Beanstack app, which is where you track the books you read. You might want to go back and check out episode 237, where we interviewed Beanstack co-founder Felix Lloyd, talked about the app. And we also interviewed Daniel Doyle, who's co-founder of one of my favorite apps, Readwise, which is the tool I use to capture my notes from Kindle.

1:30:33So if you're into this stuff, I'm going to go check out episode 237. Also hope that my 421 friends on Beanstack will continue this year in the challenge. Actually just finished and Ben, you're going to love this book or I'll send you my notes. My first book of the year called The Geek Way by Andrew McAfee. I'd love to get him on the podcast. I've reached out. We'll see if he can come on. But The Geek Way is basically a management book on how geeks, we're all self-professed geeks, how we prefer to operate in a much more freewheeling, thought-driven, challenging environment as opposed to a typical hierarchical environment that kind of grew up in the last 50 to 100 years.

1:31:14so it's a phenomenal book. Of course, we'll try to get more authors on this year and we have a lot of really cool authors coming up in the next few weeks. Speaking of which, next week, Scott Rick will be here. He's author of the book Tightwads and Spendthrifts, Navigating the Money Minefield in Real Relationships. That book was just released on January 9th and it's gold, I would argue, for anyone who's in a relationship. It's a really good book. The wheels were spinning for me. I talked to my wife about it afterwards. I said that I just read this book and I was thinking about, because you can't not think about your own relationships as you're reading the book, because that's what it's about.

1:31:48Lots of really good empirical stuff in there. It's just scientific stuff, I guess, because there's theory and evidence supporting it for all sorts of different things from like what type of partner you should choose and how having a partner with different spending tendencies can affect relationships and how to deal with it and how to set up bank accounts. So all that very, very practical stuff, but it all stems from a scientific perspective. Here's why we might expect things to work out this way. Theoretically, here's the evidence. And in some cases, even here's some conflicting evidence. And then usually the point we'll finish with Scott's own research on probably the right way to interpret things and his opinion, but really good.

1:32:27Like for the rational reminder listener type person who wants to think about how money affects relationships and how to deal with money in relationships, this book is exquisite for that type of thinker. The part that really struck me was the tight wad's got to be a tight wad all the time to get their way because all it takes is one spendthrift and you've blown all the events with the tight wad was able to maintain control. Yep. I thought that's so fascinating. The tight wad's always going to be a tight wad if that's their value framework is. Yeah. Well, he talks about ways that tight wads can loosen up a little too.

1:33:02But my interpretation of the point that you just brought up was that the result of a spend thrift, like someone that spends loosely, the results of a loose spender's actions are irreversible. Whereas a tightwad could always choose to spend more or their partner could convince them to spend more or could spend more on their own. So like if a really miserly person is in a relationship with a loose spender, the loose spender can say, well, screw you, I'm going to go spend anyway. They have that option, but the reverse is not true. Where if the spender spends all the household's money, the miserly person, there's no recourse.

1:33:38They can't say, screw you, I'm going to go get all that money back. So one's irreversible and one's not anyway. That'll be, I'm sure, a great episode because the book was excellent. And then in two weeks time, inspired by the whole Dave Ramsey kerfuffle proclamation that 8 % withdrawal rate was safe. We welcome three of, I would argue, the world's finest experts in retirement thinking, David Blanchett, Wade Pfau, and Michael Finca. They'll be here. Inspired by the Dave Ramsey situation, for sure. But we also got the opportunity to ask about Scott Cederberg's recent research. And like you said, Cameron, these are three of the best guys to give their informed perspective on that research.

1:34:20And they did give us very informed perspective and lots of really interesting insights that I think will add more color to the recent episode with Scott Cedarburg. Yeah, they're so good. In three weeks time, Morgan Housel's back to talk to us about his recently released book, Same as Ever. As always, we're on LinkedIn and on X. I'd love to hear from listeners on LinkedIn as opposed to people trying to sell us stuff. So that'd be great. Keep an eye out on our feeds for upcoming webinars. We'll be launching the 2024 series shortly. Check out the documentary that Ben mentioned at the top, Tune Out the Noise.

1:34:55The URL and the access code will be in the show notes. If you want to take Steve's private equity course, you can save some money on that. Anything else, Ben? I did want to mention that in the Rational Miter community, in the topic for the Scott Cederberg episode, Scott was very active in that discussion for a couple of days and then it was the holidays. He had to go, but He spent a lot of time answering people's questions in there. So if anybody came away from that episode with questions, there's a good chance they were answered by Scott himself in the Rational Minor community, which is pretty cool.

1:35:26And the other thing in that topic, there are people who have anonymous accounts, but I know that they're finance PhDs who are also adding their commentary and their thoughts on the episode. So the Rational Minor community is nuts because everyone's anonymous, right? But behind the anonymous names, there are some just ridiculously brilliant people. So I think that was a big episode and the Scott Cedarbrook episode was a big episode in terms of the amount of discussion that it created. And so I'm sure lots of people have questions and the discussion, if people want more to think about on that topic, the discussion in the community was excellent.

1:36:00The audience loves Scott. He's so good. His research is so, it's so practical. I agree. Anything else? Nope. I think that's good. All right. Thanks for listening. Thank you.