Ethan Penner- Defining Why Greatness is a Choice (#100)

[00:00:09] Speaker A: Hi, I'm John Co and welcome to Icons of DC Area Real Estate, a one on one interview show highlighting the backgrounds and career trajectory of leading luminaries in the Washington, DC area real estate market. The purpose of the show is to highlight their backgrounds and their experiences and some interesting stories about their current business as well as their past, and to cite some things that you might take away both from educational standpoint as well as lessons learned in the industry and some amusing and sometimes interesting background stories. So I'm hoping that you will enjoy the show. Before I introduce my guest, I'd like to share that both this podcast and the community I started in 2021, called the Iconic Journey in CRe, is now part of a new nonprofit organization with that same name. The new company will offer opportunities for sponsorship to grow the community both in membership and in programs. It also allows you as listeners to show your appreciation for this podcast, which has delivered episodes twice monthly since August 2019 with a charitable contribution. Transitioning the community and podcast into the nonprofit organization is underway. The community, which is open to commercial real estate professionals between the ages of 25 and 40 years old, is currently up to 65 members and growing. If you would like to learn more about either joining the community or contributing to the podcast, please reach out directly to me at John at Coenterprises coenterprases.com separately, my private company, Co enterprises, now will focus only on advisory work for early stage real estate firms and career counseling. If you have interest in learning more about its services, please review my [email protected]. Thank you for listening. Thank you for joining me for another episode of Icons of DC area Real Estate. Actually, this is the 100th episode of the podcast and I am extraordinarily pleased to introduce my unusual and pioneering guest on this show. And that is Ethan Penner, who was the founder of the CMBS commercial mortgage backed security industry back in the early 1990s, and he has recently written a book called Greatness is a choice, which we talk quite a bit about in the conversation. This interview was recorded live at the headquarters office of Walker and Dunlop in Bethesda in their beautiful space in front of an audience of members of the iconic journey, as well as a few of the team at Walker Dunlop. We discuss his trajectory into the mortgage industry via his challenging upbringing in a divorced household, starting his career in the savings and loan industry, and then to investment banking with Drexel Burnham Morgan Stanley, and then the mirror securities, where he ended up starting the CMBS industry. After seeing the devastation of the early 1990s with the SNL crisis as well as the banking dearth of capital. So his career after starting the CMBs just exploded because the market was just really needing capital. And he found a way to be a bridge from the bond market into the mortgage market with that vehicle. And so from about 19 92, 93 until 98, they were the top firm in the marketplace doing at Namira securities, doing tremendous volume. He was then let go for political reasons in 1998. And he talks about it and left the industry for several years, went to Hawai and he talks a little bit about that, meets his second wife and then emerges again in 2008 with CBRE and he talks about how he did that. They funded him for a while and then he joined, started his own company shortly thereafter. About two to three years later, he had success with his own company, kind of opportunistic, investing more in the debt side. Of course, that's his experience and expertise. But he decided after a lot of contemplation and going back to his faith, to start compiling writings, which he then built into his current book called greatness is a choice. And he talks quite a bit about that. We talk about his philosophies. The book is divided up into chapters with titles that are very interesting, and I won't go into them here, but we talk about them in the conversation. We talk a wide variety of subjects, including real estate, finance, interpersonal relationships with his family, his wife and his children, as well as his parents social issues in the markets today. His belief, believe it or not, in a 6th sense of who he is. And he talks a bit about that in relations to a herd mentality thought process in his book. So he's become quite a philosopher and he believes that we all have greatness in us if we choose to use it. So please enjoy this wide ranging conversation with Ethan Penner. So welcome to the icons of DC Area Real Estate podcast in front of a live audience today at Walker and Dunlop. I'm pleased to introduce Ethan Penner, CEO of Mosaic Real Estate Investors and author of greatness is a choice, his recently released book. We will infuse his biography in this conversation. We met each other over 25 years ago at the Mortgage Bankers conference in San Francisco. [00:06:55] Speaker B: Thank God we look the same. [00:06:58] Speaker A: When I'll never forget what you were wearing that night. He had a headdress on, I think that was probably several feet tall, and a coat, which I would call the Technicolor dream coat that you had on that night. [00:07:11] Speaker B: It was pink with black lines and I had just come from celebration of the chinese new year and that was my ox colors, apparently, because I'm a year of the ox, and I just flown in with some friends from Mexico for that party. And it was quite the party. [00:07:31] Speaker A: So his company, Namura, at the time, had Santana and Crosby, stills and Nash back to back that evening. For 3000 of us in mortgage banking, it was a very special night, huge event, and only one of many that his company hosted over several years. So, Ethan, since most of the audience is younger and may not understand the market cataclysm and reset of the late 1980s through the mid 1990s, perhaps share your career trajectory. Start at Drexel through Morgan Stanley to Jira through those times, and how you were fortunate enough to build the franchise. [00:08:11] Speaker B: You did well, I think the word fortunate is definitely a very relevant word to use and you reference, I think I wrote a book, and there's a chapter dedicated to the concept of timing and good timing, which is another way of saying good fortune or good luck. And I think that anyone's success is always a combination of hard work and a little bit of intelligence, or maybe a lot, depending upon the person, but also good timing, good fortune, good luck. And mine was definitely a combination of those things. Hopefully some intelligence was in there, too, but definitely good timing, good luck, good fortune was there. I came out of college, and it was a very challenging time in the early 1980s. It was a pretty deep recession. Interest rates were very, very high. As you remember, the ten year treasury was 1565. Okay, so when we think about high yields like we think of today, oh, my God, the tenure is at five. It was 15.65 when I got out of college. And that tends to squash economic vibrancy pretty soundly. We think about today's fed trying to tame economic inflation with 5% tenure. You can imagine how tame an economy could get with 15% tenure. So I got out in that time, and I took the first and probably only job I was offered in finance, which was in the mortgage business at a savings loan. I was fortunate enough to kind of work my way quickly onto Wall Street. Wall street had just adopted mortgages as a business that they were interested in, and the trading of mortgages had just kind of started, really around the time I got out of school. [00:10:05] Speaker A: So wasn't MBS was based on rmbs, right? [00:10:08] Speaker B: So what we call RMBs was just called MBs, right. There was no r or c. It was just mortgage backed securities was a new thing. [00:10:17] Speaker C: MBS. [00:10:19] Speaker B: Fannie and Freddie were participating, and I kind of started on Wall street. My first job was at Drexel as you suggest, John? I was trading non agency guaranteed. So credit risk intensive mortgages. I was the first class of traders ever on Wall street to make markets in credit risk instruments. And then me and people like me started to use structured finance techniques, which were very basic. Just taking a pool of loans and creating a senior 90% class and a junior 10% class, and getting the senior class rated by the rating agencies, typically aa, and selling those aa bonds to bond buyers. And I got lured away by Morgan Stanley, who wanted to get into that business, had not gotten into it yet. And I found myself running, starting from scratch and running, really, mortgage finance and mortgage trading for Morgan Stanley, not including Fannie's, Freddy's and Jenny's, at the age of 26, something like that. And I became the youngest principal in the history of the firm. And I love my career at Morgan Stanley. But then, as you point out, there was this incredible dislocation in commercial real estate. And it seemed obvious to me that the same securitization structured finance business that had been applied so successfully by people like me on Wall street to single family mortgages could be applied to commercial real estate and help solve the liquidity crisis that existed, which was. I don't think people today, just like people today, can imagine a ten year treasury at 15. I think it'd be also equally impossible to imagine not being able to get a mortgage at all. Okay? It didn't matter how great your property was, didn't matter the location, the occupancy, there were no lenders. I'm telling you that in 1990, and you remember this, 1990, 1991, if you had a loan on this, let's say this beautiful office building that we're sitting in, and it was 100% occupied, and you had a 50% loan to value exposure at a ten cap, there were no lenders for you. [00:12:41] Speaker A: Not only that, the lender. If you had a loan on it. [00:12:44] Speaker B: No, they didn't want you to pay it off. No, they would not roll it at all. They might give you a six month extension, but they wanted no part of that loan, and there were no other lenders to turn to. And so it was a weird moment where an industry, perhaps one of the largest industries in the United States, everyone was facing bankruptcy and insolvency. And this 30 year old kid, me, kind of had this idea that securitization could be the solution to this industry's liquidity crisis. No one else. Even though I wasn't the only one who came from this background, I guess I was the only one imbued with dreamer mentality. I think that when you do something that's never been done before. So securitization had never been applied to commercial real estate before. And when you go to do something that no one's ever done before, everyone tells you, well, if it could have been done, wouldn't it have been done already? Like, why you? And I was like, oh, well, I don't know, but I'm doing it. My answer to that is, I don't know, but I'm doing it. Everyone's other, I think everyone else probably just kind of figured if it was doable, someone else would have done it, so why bother? I guess I don't know either. I'm dumber, more stubborn, more persistent, maybe. I believe in myself. I don't really know what it was, but I just kind of ran through all the obstacles of doubt that existed in, how did you get the rating agencies on board? That was tough. So I'll tell you. Lately, because of my book, I'm doing a lot of speaking, podcasts, public speaking, and I enjoy very much when it's a real estate crowd and we could talk specifically about things like that. So how did I get the rating agencies to overcome what was a level ten fear of real estate that was pervasive in the world? Right? [00:14:44] Speaker A: It was. [00:14:45] Speaker B: And anyone like I left Morgan Stanley in order to pursue this opportunity. Why? Because real estate was the third rail of finance, and no one wanted to touch it because they feared losses, loss of job, loss of money. And Morgan Stanley was no different. And they said, listen, john Mack, who ran fixed income at the time and was my boss and ultimately ran the firm, said, we don't want any real estate exposure on our balance sheet at all. So if you want to leave and go do it, good luck, but you're not doing it here. And I said, well, I do want to leave. I do want to do it, so I'm leaving. And I left. How did I persuade the rating agencies? So I'm going to share a conversation with you and your audience. I sat in the room with the head of one of the rating agencies who was structured finance, mortgage finance guy, and I just started to explain to him the logic that at some attachment point, there is great safety in the loan. And he said, okay, I agree with that philosophically. He said, but this gives you an idea of how bad things were. He goes, but if there's any office exposure, we're not rating it. There's no investment grade, none for office, none. So we happened to be sitting in two world financial center where Nomura was headquartered. And I said to him, ron, we're sitting in this building, and even now, in a very depressed valuation moment, what do you think this building is worth? Just pick a number. And I don't remember what he picked, but maybe it was 400 million. It was a big number because it's a beautiful, big building. Let's say 400 million. I said, fine. If I had a $1 million first mortgage on this building, would it be rated investment grade? He goes, yeah, it'd be rated aaa. I said, well, there you go. Now we know that you will, in fact, rate office investment grade. And it's just a question of the attachment. But he goes, yeah, I guess you're right. [00:16:52] Speaker A: How much risk do you need? [00:16:53] Speaker B: I said, so it's not a million. It's going to be a bigger number than a million. And it just kind of went from there. But it was really for me to start that movement, that industry, that way of financing real estate. It involved a lot of salesmanship and communication and a tireless amount. Right. And a lot of skepticism, a lot of resistance. I had to convince insurance companies, the same people who were insurance company kind of lenders, that viewed this as a threat to their jobs. I had to somehow overcome that to make. [00:17:31] Speaker A: Somebody had to buy. [00:17:31] Speaker B: Make them buyers, right? I had to make them buyers. And the other bond buyers who had never bought real estate risk, didn't understand real estate risk and knew that people were literally dying on the vine with real estate risk. I had to persuade them to consider. So there was a lot of salesmanship involved, a lot of energy expended. And when people would meet me, because I was in my early thirty s at the time, they would frequently express shock, like how young I was, and I would tell them, listen, yeah, I'm young, but if I wasn't this young and didn't have this youthful energy, I don't know that I could do this, because it was a massive amount of energy and tireless salesmanship involved. [00:18:13] Speaker A: How did you know? You. I mean, obviously that conversation was interesting, but you just had this vision that it could happen, that this industry could come about. [00:18:22] Speaker B: Yeah, it seemed obvious to me. I knew that I understood the way bond buyers think, which is a relative value based thinking, and that's how I sold it. I would say, okay, listen, if a single, a corporate bond is trading at, whatever, 100 over treasuries, I know there's some level that a single, a real estate backed bond will trade. Maybe it's not 100, maybe it's 200. Maybe it's 300. Tell me the number. And the good news was that the real estate borrower had no other options. So whatever rate I had to charge them in order to placate the bond buyer, they were hugging and kissing me because their alternative was to lose the property. So it didn't matter. They were rate insensitive in that particular moment. [00:19:11] Speaker A: So that was the best time to make money in that industry once you got up and running. [00:19:16] Speaker B: Yes. And I'll tell you something, though, it taught me so much, being there, doing that and doing it in an aware state. So, as you suggest, it was the best time because there was no competition. I could charge the borrower anything I wanted and they would be happy. I could tell them whatever the loan value attachment point, and they would be happy. And the bond buyers were getting essentially bribed to take the bonds and getting overpaid for the risk, and they were happy. And we were making, even literally, Milken's. [00:19:56] Speaker A: Junk bonds probably didn't trade. [00:19:58] Speaker B: No. We were making fortunes in this process. Fortunes and making very safe loans at exorbitant rates. And what was interesting was that first year or two, everyone saw what we were doing and thought that we were going to blow up. And I never in my life took less risk, not before and not since, like, for me. But it reinforced to me this herd like thinking, and I write about that in my book, that to be great. And I felt that we were great. We were great at what we did, and we brought great value to the world of real estate and to the bond buying world. We brought incredible unique value that lasts to this day, 25 or 30 years later. And I think to be great, you must be willing to operate outside of the herd, and that's very hard to do, but we did it. And I'm very proud of what we accomplished. [00:20:59] Speaker A: So at the same time, I was a mortgage banker, and I was told that I had to go on straight commission in 1990, and I was completely out. And then in 92, we came back and I was bought by leg Mason. I want to work for them. The industry was slow to come back. The first cnbs loan I did, the spread was 360, I think, over the tenure. [00:21:25] Speaker B: Yeah. [00:21:26] Speaker A: And it was like life companies were, once they were back in, were in the twos at that time. [00:21:31] Speaker B: Right. [00:21:32] Speaker A: It's like, well, but look at the property type. I mean, look at where it is. What else is going to trade? It's not going to be a life company deal. [00:21:39] Speaker B: Right. [00:21:40] Speaker A: And so it was interesting, but you guys had in the mortgage banking business, it was like a tidal wave that came on that we never expect. It was like, from nothing to this massive amount of capital that just came suddenly out of. From Wall street into the market. [00:21:56] Speaker B: Well, really, we built a bridge so that the bond market can bring their money over the bridge and express it into real estate. And real estate has never been the same since. And I think that's incredible. Look, let's say there's x dollars of money chasing something. It doesn't matter what it is. It could be biding for your blazer. X dollars of money might be interested in your blazer. If through some innovation, I'm able to bring ten x or even two x money to bid for your blazer, your blazer just got more valuable. And so people have said to me, and I guess I hadn't thought about it in that moment, but no one, probably beside me, has had as big an impact on real estate values because I brought in this new pool of money that had a huge thing. It stayed and it stayed in real estate. And so the permanent impact to cap rates or real estate valuations turned out to be quite profound. I wasn't thinking about that at the time. I was thinking about, there's a huge problem that needs to be solved, and I am attracted to that. I'm attracted to voids. There was a void, and I thought I could solve for this void. [00:23:11] Speaker A: Before we go beyond that, I want to go way back now to your origin story. Okay, so we'll shift to your origin story. Your book, greatness is a choice, discusses several details about your childhood in Yonkers, New York. [00:23:23] Speaker B: Yeah. [00:23:24] Speaker A: And your family growing up poor, as you referenced. Talk about a bit about your parents. As you said, they were not good role models, yet you said you learned quite a bit from them. [00:23:35] Speaker B: Yeah. Well, look, I think that parenting, perhaps only rivaled by marriage, is something that we are literally blind and trying to figure it out on the fly. So I really don't condemn my parents for not necessarily being the best parents. My father was particularly inept at that. I don't fault him for that. What'd your dad do? My dad was a rabbi. [00:24:06] Speaker A: Oh, really? [00:24:07] Speaker B: And he was really good at giving advice, but he's one of those people who were not necessarily good at walking the walk in his own personal life and everyone's life's complex. My dad's life was certainly complex. And he came here as a one year old in 1922 from Poland, now the Ukraine, with his parents who didn't speak the language. The hardships that I think my ancestors. And I write about this in the book that my ancestors and everyone has an ancestor hardship story. You know what I mean? At some point, even for the people who can trace their ancestors to the Mayflower, probably coming here on the Mayflower was no easy journey. And when they got here, life wasn't. [00:24:53] Speaker C: Easy for them, either. [00:24:54] Speaker B: So I think everyone has a hardship ancestry story, and I do, too. And for me, it's not that far removed. Right. My grandparents had that story. My father and my mother were the children of immigrants who came here and really struggled. And I compare it, maybe I'll diverge a little bit to today's immigrant situation. And I would say there's a very big difference in their story and perhaps my childhood and maybe your childhood story in that my grandparents and my parents, too, they didn't come here thinking that this country owed them a damn thing, okay? They came here to leave a place where they felt they didn't have a great future for a place where they knew that they could have a fresh start, and they knew it would be hard. And I think my grandparents never once imagined that the day would involve any fun at all. Like, the word fun wasn't part of their vocabulary. They just worked, and they raised their kids, and they made every sacrifice. Their life was all about hardworking sacrifice. And I think their joy was serving their children and their grandchildren. I know that my grandmothers, in particular, my grandfathers, both died when I was young, but my grandmothers, the joy that they felt in kind of caring for me and being a grandmother, and believe me, they worked. It wasn't like they were. They were there for me, which was incredible. And I dedicated my book to a couple of people, including one of my grandmothers, because I've never seen such selfless giving in my life than her and one other woman that I dedicated the book to. But I kind of grew up in that background, and I say the word poor. I did use the word poor, and I use the word poor in an economic sense, but I'm not an economic being, which sounds strange because I'm a wall street guy by background, but I'm not an economic being. I didn't write a Wall street book, and I didn't write a finance book. I wrote a book about life and living and the observations I've had as a person who's lived a pretty interesting walkabout or journey in life. My parents were poor. I grew up with my mother because my parents were divorced when I was eight. And I don't think my mother had a week of savings, meaning if she didn't work that week, we were like one of the majority of Americans today who had no savings and had the pressure to make the money that week, to pay the bills, the grocery bills, the rent, whatever. And somehow we made it. And I grew up in a neighborhood filled with people like that. And I think that I love that. I treasure that. I'm proud of that, although I wasn't at the time. And I talk about that, too, about how, oh, perhaps I wish I was born in a more affluent place to a more affluent family and had that to kind of fall back on. But in reflection and even in the moment, I was proud of my mother. Very proud, and I still am. And when I say she wasn't the perfect mother, I am completely aware of the hardships that she faced every day just to pay the bills and survive as a single woman in the 1960s and 70s, where that was tough. And with two little kids and no help, my father is a different story. He didn't help, okay? But he also had his issues, and I forgave him long ago for feelings that I might have had that were not so powerful. [00:28:59] Speaker A: So growing up that way was a character builder for you to some extent. [00:29:01] Speaker B: Incredible character builder. I felt the burden of responsibility that I think a man feels when he has a family. By the time I was nine, because I was the man of the house, my father was gone. My little brother was a little kid and kind of a delinquent, too. And my mother had no one to turn to but me, and she treated me because she had no one else as an adult. So I was talked to as an adult, as a confidant, as a person to rely upon, not as a nine year old kid from the time I was nine years old. [00:29:38] Speaker A: Well, we'll get into this a little later, but it sounds like your father, because he was a rabbi, had some influence on you based on some of the things you said in your book, although you said you came back to religion later on, so I want to get into that a little bit later. [00:29:52] Speaker B: But it's interesting. I'm blessed to have a great education, and I don't mean college, right. I did not have a great college education. [00:30:02] Speaker A: Where did you go to college? [00:30:03] Speaker B: I don't remember. No, I do remember. I didn't really go too much. That's the thing, okay? I went for the tests. I went as little as I could because I didn't see it as any place to derive value. And I worked full time during college. I was a full time student and a full time worker. And I really just wanted to get out of college with the degree so I could have a better job. But I had an incredible elementary school education and I would say the most intellectually stimulated and the most intellectually challenged I've ever been in my life in any group, peer group, was 7th and 8th grade. Really? They were the smartest people I've ever been in a room with. We were challenged intellectually far more than I've ever been challenged in my life since. That says a lot, right? [00:30:56] Speaker A: Public school? [00:30:57] Speaker B: No, I went to a parochial school, otherwise known by jewish people as a yeshiva. I spent half the day learning only in Hebrew, except we learned the Talmud in Aramaic, which is the language Jesus sprung. So I was fluent in Hebrew, pretty good in Aramaic, and then I spent the other half the day speaking English and learning English, normal things that people spend their whole day in class, in school, I learn in half the day and I learn all the other stuff the other half the day. And I went to school from till 05:00 p.m. And by the time I got into 9th grade, I was like, I'm done with this. [00:31:36] Speaker A: Your father's influence? [00:31:37] Speaker B: No, not really. I mean, yes, maybe, but I think that my mother was also quite scholarly and I think they both wanted me to have that solid education. And I think that that was a big part of eastern european jewish immigrants put such a huge emphasis on education. I think they understood that a good education is the foundation for a well lived life, whether it's making money or not. Sure, education on higher levels does help income, but I think it just helps you live your life with clear thinking. Right. The Tommyutic studies that I had was like probably going to law school and just logical thinking, like just being able to understand and think things through in a logical, clear thinking way. And my book, I think, is a reflection of that way of thinking that was solidified in me in 7th and 8th grade. [00:32:38] Speaker A: So once you. Bar mitzvah, that was kind of the graduation for that then, right? [00:32:43] Speaker B: To some extent, that was almost known, actually. I think that for many young jewish men and women, the bar bhat mitzvah is a very important moment for me. I don't know, it was less. I wish it was more. I see it for my kids and it's been an amazing experience for them. I'm sad to say that for me it wasn't. It was more of like, it was expected of me, like going to college was expected of me. Getting bar mitzvah was expected of me. It was just like, almost like an obligation. Certainly it felt like an obligation. It was just expected of me. There was nothing celebratory for me about that, which is a bummer. And I know, like, I remember my first born son, God, bar mitzvah. I saw him change. Like, it literally changed him from a spoiled brat to a beautiful young man. Literally in that day. It was incredible. Maybe it wasn't that impactful for me, maybe because I wasn't a spoiled brat going into that. Maybe because of the burden of responsibility that had been invested in me since I was very young. So maybe I was a man because that's about becoming a man. And maybe I just became a man when the divorce happened at a much younger age. [00:34:04] Speaker A: So what was your high school experience, or did you have any fun there? [00:34:10] Speaker B: I liked sports and I played. [00:34:11] Speaker A: What did you do sports? [00:34:12] Speaker B: Basketball, baseball, football. I played around, actually, because I had this incredible intellectual foundation. I went to public high school, 10th and 11th, and then I graduated half year early, so I was barely there for twelveth. I never brought a book home, not a single book. I would do the homework during the class while the teacher was teaching. So one day my mother said, are you really going to school? Because I've never seen a book at home. And I literally didn't bring a book home. But I just say it was easy, given what I had been experienced and challenged with in my younger years. [00:34:49] Speaker A: So somehow all this was in New York, in the Yonkers. [00:34:53] Speaker B: All in New York, yeah. [00:34:54] Speaker A: And then somehow you went out to California. [00:34:57] Speaker B: Well, my dad, when my parents got divorced, my dad moved to. So. So from the time I was eight years old, I was visiting my dad in San Diego for a few weeks a year. And so I had this California exposure. And then the song California dreaming by the mamas and papas. Well, we were young at the time when that came out, and I knew what California was because of my dad. And I too would be sitting there in the winters of New York, wistfully, with tears coming down my eyes when I heard California. Why am I here? Why am I not? [00:35:33] Speaker A: Right? Right. [00:35:34] Speaker B: So I always liked California, and I understood the appeal of California. And people hear me talk and they say, well, you don't have a New York accent. And I think by the time I was about nine years old, I realized there is a New York accent and then there's a non New York accent in California. And I just decided, I don't need the New York accent. I'll go with the California neutral accent. [00:35:57] Speaker A: So you started your career in Huntington Beach, California. [00:35:59] Speaker B: I did. I did. I started a savings loan. It was the bottom of the, bottom of the bottom of the barrel of finance. [00:36:08] Speaker A: Sure. [00:36:08] Speaker B: And my pay was accordingly low. And I just grinded. [00:36:12] Speaker A: Were you a loan officer? To start with? [00:36:14] Speaker B: I was a loan officer trainee. [00:36:16] Speaker A: Okay. [00:36:17] Speaker B: And I learned a million great things that I wasn't aware I was learning in the moment because, you know, too young and perhaps stupid to actually appreciate what I was learning. But by osmosis, I got a much better mba than anyone who went to Harvard. And that year, it was one year. That foundation serves me to this day. I learned about corporate interactions. I learned about pettiness and corporate politics and jealousy and how it plays out in the corporate world. I learned about how regulated lenders are impacted by regulation and how that dance between regulators and regulatees occurs and how impactful that is to the industry that they're serving. I learned about what makes a good loan and what makes a bad loan. I learned things that were invaluable and again, serve me to this very day. And I feel like I was so blessed. And I learned also that if you really want to be great at something, you need to know how to do every function of that. Something from the most low level to the high. It reminds me of a friend of mine. There's a guy, I think everybody here has heard of the company montage hotels, and they have a pendry in Baltimore. That's beautiful. And the founder of montage is a guy named Alan Fursman, who has become a very good friend of mine. I adore Alan. And Alan is a giant in the hotel industry. And if you go to any montage or Pendry, you feel Alan, Alan is such a great CEO that you feel his care. He cares for people and you feel cared for. When you go to any of his hotels, it has his personal imprint. Alan started out as a doorman, the front doorman at a hotel. That was his first job in the hotel industry. And he's worked his way up from the guy at the front door to being the founder and CEO of a major international hotel company, luxury hotel company. I think that's been lost, perhaps more so than I've ever seen it, with the advent of technology, right? Technology has created billionaires and deca billionaires and centibillionaires from young men and women who are in their twenty s and didn't pay their dues. And so when we were growing up, we were taught you got to pay your dues. And Alan paid his dues today, no one wants to pay their dues because there's role models that we didn't have. Right. There were no 25 year old, well, there were no billionaires, by the way, when we were growing up. But even the wealthiest people, they were men, mostly men in their sixty s and beyond. Yeah, I'm not about inherited, but the people who made money, really, they didn't come into it till they were in their 60s, typically, and they had paid a lifetime of dues to get there. And I think that's what we were informed with when we set out in our career. And I actually am happy about that. I'm happy I traversed that journey, and I'm sure you are, too, that your success is the result of a lifetime of kind of grinding and learning along the way. And I think that's an important thing that I've come to understand about life, and hopefully I communicated it well. In my book, the purpose of life is not about winning. And I know so many people who now are so wealthy because of my journey. I've met many, many mega wealthy people, and as they get older and they are facing the end, they realize that the importance they placed upon wealth accumulation was misguided and it's oftentimes too late. I tell a story in my book of someone that I won't mention his name, and I didn't in the book because I don't want to hurt anybody. But he's a man known well in our industry, who is a friend and who is one such man. He's mega wealthy, and I know him now, and he's quite older, and he's very sad about how he chose to invest his time, his precious time, that it's so fleeting. And he gained massive wealth and massive admiration for his wealth and power that comes with that, but at the expense of experiencing love and other joys that he traded off for that. So what is it that we're here for? Why are we on earth, right? And I don't think it's for, like, it goes so much against you. Remember when we were young, too, Vince Lombardi was like a role model, even though we were both very young when he was in his career coaching the packers. But he was the most famous coach ever to his time, and he was famous for having said, winning isn't everything, it's the only thing. And that was his mantra. And everyone just hears that and repeats it and thinks, oh, that's great. I've come to think that's so wrong headed. So wrong headed. And it sends people down the path of my friend, who in his 80s chased that whole idea of Vince Lombardi won and ended up with nothing on. [00:42:15] Speaker A: The definition of winning. [00:42:16] Speaker B: Well, there you go. But I think we tend to think of winning different definition as the competition, whatever the competition is, whether it's the work competition for money accumulation or the football competition for winning the Super Bowl, I think that the winner in life has experienced a lot of learning and growth along the way in his or her journey. And I think it's all about that. I think it's all about we all have our journey, and it's unique to us, and we're here to learn and grow. And I think that when we see it that way, everyone is a winner. [00:42:51] Speaker A: It's the name of my community, the iconic journey crest. [00:42:57] Speaker B: Choice of words from a wise man. [00:43:01] Speaker A: So, since we discussed your career from there through your pinnacle at Numira recently, what happened when long term capital management collapsed and the russian debt crises hit 1998. Talk about that dramatic impact on your business and why you left Namira and how you weathered through that. [00:43:22] Speaker B: Well, they're not exactly related, although. [00:43:30] Speaker C: The. [00:43:31] Speaker B: Long term capital management collapse and the collapse of my business at Nomura were both attributable to the same russian bond default. So nobody imagined that a country would default other than Argentina, which everyone knows, defaults on their bonds regularly. No one imagined that Russia would default on its bonds obligation. Meaning, tell everyone that had loaned the money, tough noogies, we're not paying you back. Okay, just in layman's terms, what a bond default is. And that sent the global financial markets into a state of panic. And people all wanted to, because people act in herd like ways we know and plays out in financial markets all the time. So everyone reacted to the russian. The russian announcement that they were not going to repay their bond obligations. Everyone reacted as though the world that nobody would pay their bond obligations. Nobody. So they started. The only bond that they felt safe to own was us treasuries. And so they all sold everything except us treasuries. And then they sold whatever bonds they had and bought us treasuries. And so the spread in yield yields on us treasuries collapsed because everyone wanted to buy them. So their price went up and their yield went down, and yields on everything else went sky high, and their prices collapsed. Well, everyone on Wall street that traded credit, whether it was mortgage backed securities, commercial mortgage backed securities, corporate bonds, anything at the time, they were hedged by shorting treasuries. [00:45:26] Speaker A: Sure. [00:45:26] Speaker B: So if you worked on Wall street and you ran a credit business, as we did, you were long mortgages and short treasuries. That was the wrong position for that day. Okay. And so your mark to market losses were growing and growing larger by the day as that herd chased the opposite of that position. Right. I was already gone. So I had already left Nomora when this happened, although I had agreed it was all secret, I had agreed to stay on because we had our big soiree that September. The russian bond default happened in July of 1998. I had already left about a week or two before. [00:46:16] Speaker A: Had you seen the winds? [00:46:17] Speaker B: Nobody knew. Nobody knew. But I knew that we were in a vulnerable spot if something like that were to happen. But I didn't have a chance to address that risk. I had some ideas, actually, but I left. And I'll tell you the circumstances under which I left, they were not pleasant, but I agreed to stay on and I agreed to stay on the board of directors. And I continued to own a significant stake in the company. So its collapse was very painful for me because I owned a significant stake even after me leaving. That turned out to be worth very little. Now, the reason it turned out to be very little. No other firm on Wall street took any losses with the exception of long term credit and no mora. And the reason was because everybody else who had the same book, long mortgages or corporates and short treasuries, they just stayed the course. They didn't sell anything. And they knew that in time the panic would reverse itself, as all panics do. And by the first quarter of the next year, by roughly December, January, February of 98, 99, the whole trade reversed itself. And so spreads went back to normal. And if you didn't sell anything, you were fine. You didn't lock in any losses, and your paper losses ultimately were reversed. Nomura sold, and that was done. Long term capital was forced to sell because they were over leveraged. [00:47:52] Speaker A: They were 99%. [00:47:53] Speaker B: They were forced to sell. [00:47:54] Speaker C: Right. [00:47:56] Speaker B: But the other firms, first Boston, Solomon Lehman, they had as big or bigger losses on a mark to market basis that Nomura did. They just didn't sell. Now, why did Nomura sell? Nomura sold because I was gone and they didn't have faith in anybody there. And so they didn't understand the business and they didn't understand the impermanence of that mark to market loss, and they panicked. As we have seen in the financial markets, foreign investors, like Japanese do when they don't really understand what's going on, and they panic. Many people I know made a fortune buying from the Japanese. [00:48:38] Speaker A: Do you think you could have convinced them not? [00:48:39] Speaker B: They would never have sold. If I was there now, why wasn't I there? So that's the other. I had a guy that hired me at Nomora. I left Morgan Stanley, as I told you, to start pursuing this commercial real estate business, which later became known as cmBs. I was backed by Cargill and I had my own little company. And we did, I don't know, maybe a billion dollars worth of business. It was the first billion dollars of cmbs ever done. It wasn't called cmBs. We didn't name it then. And then someone introduced me to someone at Nomora, this particular individual who had been brought in with Max Chapman to kind of turn Nomora into a successful us operation who was obviously very big in Japan, had been in the US for 70 years with some operation that had never once made money. They had never made money in 70 years. And they brought kind of a Wall street legendary figure, Max Chapman, who was CEO of Kidder Peabody, to come run their us business. And he brought one of his right hand guys to run fixed income. That guy met me and he and I got along and he saw what I was doing and he gave me the capital to build my business. So it really wasn't Nomura. It was a brand new business with a financial backing of Nomora by virtue of this one individual who worked for Max. Well, this one individual who worked for Max when I got there was running fixed income and maybe making a million or two a year. But he had a percentage deal with no more. So he had a percentage of profits of every business that reported to him. Well, by virtue of my business reporting to him, he went from making a million a year to about 20 million a year. So he was very happy because I was his golden goose, right? He deserved it. He found me. He believed in me. He kind of paved the way so I didn't have to run into any internal obstacle. Yeah, to build my business and to run my business. Well, by 1997, we were too big for Nomura, and we needed to have our own corporate identity. We needed to have other investors, other lenders. We were dependent entirely upon Nomora for our financial backing, and we had outgrown them. They were now not doing as well in Japan. We were growing by leaps and bounds and growing internationally. And we deserved and needed our own corporate identity. And we were in the process of doing a spinoff. It's a longer story, it's a whole podcast story and maybe a whole NBA class story. But to kind of cut to basically the bottom line, this individual who hired me felt unthreatened by and unhappy about me leaving, even though I brought him with me in the spin off and was envious of the economic division of the to be formed new company and went to the Japanese and got permission to fire me, even though we were very good friends and I had two right hand guys and he needed one of them to agree to stay on and run the company. If he did fire me, that Boyd fellows, I won't name any names, but one of the two agreed to do that. Okay. One of the two said he would not do that. [00:52:20] Speaker A: Okay. [00:52:20] Speaker B: And I don't want to shame anyone or anything. I could write one of those books, by the way, which would be really painful for people to read. I'll never do that. But faced with that and being a 30 something year old, cocky, borderline arrogant God of Wall street with a lot of money, I didn't react positively or calmly to that news. I felt betrayed. I was betrayed. I never once looked in the mirror and asked myself, how did I let this happen? And maybe how did I help bring it about? What did I do to inspire people to act in this way? I know that now. I know relationships are give and take, but in that moment, I saw evil and I saw good. I saw myself as good and them as evil, and I saw myself as larger than life and someone who didn't need them or anyone. And I basically just said, screw you. Take the job and shove it. Take the company and shove it up your ass. I'm going to go recreate this without you. And I'm still going to own part of this, which I had a contract to do. And I think it's similar to Steve Jobs thinking, I created Apple. Screw you. Remember, they fired him. I'll go create Apple again. Well, he didn't do so. He tried. Next. It didn't work so well. Didn't work so well. And he ended up going back to being CEO of Apple. And that worked out quite well. I had a similar experience. Next. Didn't work out so well for me know. And we were both a little bit too full of ourselves, perhaps Steve Jobs and me. And not to compare myself to Steve Jobs, but I guess I was that in our industry at that time, and you live and learned. I mean, it's part of, like I say, learning and growing. I'm a different version of myself, thank God, than I was when I was in my late thirty s. And if I wasn't, I would have say I wasted the last 25 years of my life learning nothing. That was a great learning experience in the moment. I didn't understand how great of a learning experience was. I just felt betrayed and hurt and felt like the rug of my life had been pulled out from under me and lost about what that meant for my future. And I couldn't retell this story that I'm retelling you in short form without tears welling up in my eyes because I was filled with self pity. And I ended up figuring out, with some help, that I stumbled upon how debilitating self pity and victim mentality thinking is. And I was able to and coached to rethink that story and all stories where one feels victimized and rethink the story from the perspective of the active player instead of the passive player. Okay, I got hit by a bus, but why did I walk out into the street without looking? You know what I mean? It's that kind of thing. And you can cry, you get hit by a bus and you go, man. And the bus driver was texting and you go, well, that's a bad guy. He was texting, driving a bus. I got hit by him. But I also walked into the middle of the street and allowed myself to get hit by the bus. I wasn't a completely passive player. [00:55:44] Speaker A: You never saw any of this coming? [00:55:46] Speaker B: No. I was just like that person who walked into the street who got hit by a bus, by a texting bus driver. And it doesn't relieve the burden of responsibility from the texting bus driver when you think that way. But as you own your life and you own your bad stories and your painful stories, you can grow from that. You can't grow if it's always somebody else's fault. [00:56:11] Speaker C: That's right. [00:56:12] Speaker B: And you can't grow past it and become a productive human being. So I thank God that I was able to grow past that victim thinking, grow past that and tell that story in a different way. I really am lucky that I met my second wife and been a great foundation for me in my life and built a great new family, but also helped me prioritize life and what life means and what needs to be prioritized. And I think it was the greatest blessing that I was knocked off of my perch, so to speak, because if I wasn't knocked off, I would never have left. You're intoxicated by the position that you're in when you're in those kind of positions. And I'm sure I was, too. And I've developed into a person I'm proud to be. And I think the person that I was and was heading to become. Forget about even being proud of. I wouldn't have enjoyed my own life to the level that I have been blessed to enjoy it. [00:57:22] Speaker A: So did you have to go through therapy or what did you do? [00:57:25] Speaker B: No, I mean, not really. Actually, my sister in law, one of my sisters in law told me about a seminar that she went to. It was in LA, oddly enough. And I had a house or an apartment in LA at the time and she didn't know my background, so she wasn't telling me to go because she thought it would be good for me because of my background. She just thought it was great she had gone. And she said, you would love this, not knowing my background at all. And I was like, okay, I'll go because I have one of my philosophies is always go. If someone asks me to go, I believe that that's my destiny to go. I don't believe in coincidences. Right. And so if you're invited somewhere, there's a purposefulness to it, just like there's a purposefulness to everything. So I almost always go. And so I followed my own advice and she said, you would love it. And I said, well, it can't hurt to go and if it stinks, I'll leave. I don't have to spend the whole weekend. It was a weekend thing starting Friday morning. I figured, can't hurt to go and if I don't like it, I'll leave. And I learned this lesson, this very important lesson about victimhood and victim mentality thinking. And man, we could just look around the world today and blame so much of what is wrong in the world today by collective victim mentality thinking. That would be reversed immediately if they were able to understand what I was taught that day in that seminar. So it liberated me to live my life in a productive way. [00:59:04] Speaker A: So that was 1998. [00:59:06] Speaker B: Well, that seminar was 2000. It took me two years of tears and self pity before I stumbled upon that seminar. [00:59:15] Speaker A: And then eight years later you joined Cb. So what happened in that interim time? [00:59:21] Speaker B: Well, I met my second wife and my whole life changed. She's a very powerful woman and she's got a lot of amazing qualities. She opened my eyes to a different way of living life and prioritizing different things, family, health, fun and not work. And at the same time. So I wasn't really ready to go back to work. Mentally, I wasn't ready. I wasn't in a position after being betrayed where I felt I can trust people. And if you don't trust people, how do you work? Right? And so I had been betrayed by people I trusted. So I needed to reimagine life and regain my trust in humanity. And I need to get away a little bit. I had led such a big life, and I had so many people in my life. Like Michael Milken once said to me, we became friendly in my no more years. And he said to me, if you're dispensing capital, you'll never be lonely. And I wasn't know I had a lot of friends, right? I was dispensing capital, and I felt I needed to get away from everyone, disconnect from everyone, and see who was still my friend. Perhaps years know I'll resurface years later. And the best place to kind of do that is the big island of Hawaii. There was literally nobody there, and it's very far from everywhere. And so we moved to Hawaii. We spent about three years living on the big island. My wife, myself, we had a young daughter who was one at the time, and we enjoyed life. And it was beautiful. Three years. And it allowed me to clear my head. It allowed me to rebuild myself in a new way. And then I kind of got itchy to come back to work and be a producer again because that's so much of a part of who I am. [01:01:20] Speaker A: Keep your Wall Street Journal subscription when you were there. [01:01:22] Speaker B: Well, I pay attention. I definitely pay attention. [01:01:25] Speaker A: Okay. [01:01:26] Speaker B: So I came back to the world of work and production in 2006, and. [01:01:39] Speaker C: It was obviously. [01:01:42] Speaker B: Bull market. Like a crazy market that made no sense. I hate bull markets. So there was nothing there for me, because in a bull market, no one's paying anyone to be smart. In fact, being Smart is an obstacle to maxing out your return, because smart people see risk, and less smart people don't see risk. So their enthusiasm to buy is not impeded by any fear. And in a bull market, you're rewarded for buying more, not less. Right? I think bull markets tend to reward people who are a little less skilled or perhaps less ethical. Both. They just buy unimpeded by any concern for risk. That's not me. I'm not either of those people. [01:02:36] Speaker A: I could see something happening when I was in the real estate, I was working for Acmans. If at the time, I was in New York at the real estate board of whatever, the real estate board of New York meeting, and I was sitting there and watching a guy from, he was with either Bear Stearns or cs first Boston, and he was drawing this chart of cmBs, and he said, let's now tranche the a piece. So we tranched the a piece. I said, wait a minute, you're tranching the a piece and you're trying to sell the c position of the a piece as if it's, I mean, I said, wait a minute, there's too much math here. [01:03:14] Speaker B: Well, the lemon was dry, and they were trying to squeeze another drop or two out of the lemon, but it was dry. Yeah. And they were doing everything they can to find another drop out of that laminate, everything. So in the problems, obviously, cmbs went awry. Asset values were incredibly wrong because fueled by too much debt that was poorly priced, incorrectly priced. But the root of the problem was in the single family mortgage market, which I came from and I understood as well as I understand the commercial market and on the single family side, both because of public policy and also because of Wall Street's desire to squeeze more drops out of a lemon, that the lemon has. Literally hundreds of billions of dollars of loans were being extended to borrowers who had no ability to ever repay the loan. None. So how could that end? And when people say, well, securitization is a problem, it's like, no, if you have a sausage factory and you put beautiful, healthy meat, grass fed from animals that have been treated very humanely, into the sausage machine, you're going to have delicious and healthy sausages coming out the other side. On the other hand, if you put crappy meat from poorly treated animals into the sausage factory, the other side will produce very unhealthy sausages. Securitization is just the sausage factory. You put good loans in, you're going to get good bonds. You put bad loans in, you're going to get bad bonds. It's pretty simple. Securitization created that calamity, as much as food, creates obesity. Food doesn't create obesity. It's what you do with the food that creates obesity. And if you're eating good food and the right amount, you're going to be just fine. So I hear a lot of times. Are you personally, do you feel responsible for 2008? Not at all. I didn't make any bad loans. I didn't create a machine that kind of encouraged people to make bad loans. The system made bad loans. [01:05:26] Speaker A: So you started your enterprise at CBRE in that year? [01:05:31] Speaker B: I did, because I knew the world was going to fall apart. And I am attracted to those moments. Those are moments where smart, disciplined people are rewarded, where there is a differentiation. And I like those moments. And I like figuring things out. I like solving problems. I like all that stuff and I knew in 2007 that there would be historic problems coming from the excesses of 2005 and six. And I was right. And so I was attracted to come back to work. I did end up at CBRE. I was friends and am friends with Bret White, who was the CEO of the firm. Bret and I had no plans for me to go to work at CBRE. And we just went to go play golf the week of Christmas 2007. And he asked me, it was me and him and two other guys. And he called me and he said, could you come and just have lunch with me before the other guys come? Because I don't understand what's going on in the world. And you're my smartest financial friend, and I would like for you to explain it to me. And so I met him for lunch. I explained him what I thought was going on. I explained to him how there would be losers and how CBRE could respond in a way that might be capitalized upon that. And he asked me if I would ever consider coming to work at CBRE. And I told him, no. There's 35,000 people, public company. That's not really appealing to me. I'm an entrepreneurial guy. And he said, I said to him, but I guess you're the CEO. So if you could create an entrepreneurial island for me with an entrepreneurial deal that allowed me to own part of my business, I suppose I could use this platform in extremely productive ways. And so he said, okay, let's do that. And then I did ultimately join CBRE. I had a wonderful time there. [01:07:30] Speaker A: I mean, CBRE is brokers, right? Brokers are independent people. [01:07:34] Speaker B: CBRE is an amazing company. It is, as you know, amazing company. I loved my time there. I thought the people were first class through and through. I was so impressed with the company. And I still to this day, am deeply impressed with the company. [01:07:51] Speaker A: So you were there for how long? How long was it? [01:07:54] Speaker B: I was there for four or five years. There was a management change. As you know, Bret left. Brett was my rabbi. Bret had created that entrepreneurial island for me. And even though I had legal documentation for my deal with CBRE, let's just say the successor management team wasn't happy with that because I was an outlier. Like, I was the only person in the history of CBRE who owned part of their business. They didn't like that exception to the rule. They made me an offer that I could only refuse, and I did. [01:08:30] Speaker C: Okay. [01:08:31] Speaker B: So that's ultimately what left me to leave again. I don't necessarily blame them. I mean, I think that when you're running a big company, it's hard to have exceptions to rules. And I get a public company. I get it. I don't have any bad feelings. Bob Solentic, who wasn't necessarily directly involved, is a CEO, and we're very good friends. I have lunch with him a couple times a year. I really care for him as a person. He's been in my house. I have nothing against anyone. I think he made. And people made decisions with regards to me that they felt they had to make for the betterment of the company, and that was their job, to make those. [01:09:12] Speaker A: Were you making contrarian bets when you were? [01:09:14] Speaker B: Not at all. No, not at all. I was operating as I was supposed to, and I was running what was the most profitable part of the CBRE investors business. I was building a great business and delivering returns that were at or higher than we promised investors and growing the business. Well, I did my part. I think that the deal, the entrepreneur's deal that I cut, didn't sit well with them. [01:09:39] Speaker A: Got it. [01:09:39] Speaker B: And that's okay. [01:09:40] Speaker A: Understood. And then subsequently you formed a company. [01:09:44] Speaker B: Yeah, I decided to be a real entrepreneur instead of being an entrepreneur in an island of a big company. And that has been what I've been doing for the last, I guess, eight years or so. And we had a bunch of different pockets of money, separate accounts, primarily. But we had one large commingled fund. And the large commingled fund, I kind of dodged a bullet for myself and my investors in the sense that I saw that when Covid came in 2020, I felt that the world was entering a new risky period, that I didn't know how that risk would manifest itself negatively. I just knew that it would likely manifest itself negatively. I would never have imagined that the Fed would march interest rates up as they have. I think it's, by the way, incredibly stupid and destructive, unnecessarily destructive, but they did it. But I knew that something negative was likely to happen in the financial markets because of inspired by Covid. And that caused me to think, I want to get my investors liquidity because we were in illiquid positions. And so I spent the next 18 months, I shut the fund. It was an open ended fund, and I pursued liquidity. And I was able to consummate a merger with a publicly traded mortgage REIT that closed fortuitously in March of 2022 with no lockup. So literally, the peak price for mortgage reits, no lockup rates, had not yet begun to be marched up. We got out at the nick of time. Now, since that time, I've been uncomfortable with the market. I remain uncomfortable with the market. So I haven't launched any new vehicles. And I've been sitting around patiently because we both have been around this industry a long time, 40 years plus. And what we've seen is that when price action happens, that values go down abruptly. There's usually a years long period of nothing happens, because sellers obviously don't want to sell. Buyers don't want to pay yesterday's prices, they want to pay today's cheaper price. [01:12:14] Speaker A: Don't trade. [01:12:15] Speaker B: And until they're forced to, things don't trade. So I knew that was likely to occur, and I didn't want to go raise money, promise investors activity that I didn't think would happen. And it turns out I was right. And so I wrote a book, and instead of managing money, I basically became an author. [01:12:31] Speaker A: Let's talk about volatility for a minute. Okay, so you pioneered the CMBS business and grew it significantly up to 98. Then a hiccup occurred, and then it recovered in the 2000s, grew astronomically until the GFC in 2008, when it crashed once again, and then once again recovered. Talk about the volatility in this business and compare it with the lower beta life insurance lending business that had more slack and alternative options, allowing for diversification. Do you think CMBS is a sustainable business model, and could it evolve into something less volatile? [01:13:08] Speaker B: Okay, I think that the notion of volatility is a poorly and misunderstood notion. [01:13:20] Speaker A: Okay. [01:13:25] Speaker B: For those who are not seeing this, I'm holding up my iPhone. So if this iPhone in my hand today could fetch $100, I'm just picking a number, $100. And then tomorrow, there was a flood of this vintage iPhones hit the market. It would not be worth $100 anymore. It'd be worth something less and maybe substantially less than $100. Right? And if I was forced to sell this iPhone, I would find out exactly what the price that it would fetch, and I would go, man, the price of iPhones are very volatile. It was $100 yesterday, and now maybe $35 today. But if I didn't have to sell, and I just thought, well, people are paying a lot less. There's a lot more iPhones for sale. I just put in my pocket. I'm going to use it for another year and maybe two. Don't tell me what it's worth. I don't even care. It's not information I'm interested in. I wanted $100. There's not $100 bid. I don't need to know. So then, I don't know how volatile it is. I just know it's a little less than $100, but my price, $100, and there's no $100 bid. I think that the real estate industry. So Sam Zell, I would give him, and I would give. There was a guy at Merrill lynch who ran equity investment banking, real estate equity investment bank. Richard Salzman. Richard Salzman was the Ethan penner of Reits. And Sam Zell really was Richard's kind of like, horse that he rode to the success of creating today's mortgage real estate REIT industry, or the REIT. I created the debt side of that. What we both did was we brought real estate out of the closets and out of the conference rooms into the public market. And so now the public market was setting a price every minute for real estate, and that price was moving based on the public market's willingness to pay for real estate debt or real estate equity. And it was moving every minute before that. Before 1990, roughly 92 or 93, all of real estate was private, all of it. So the loans that were made by insurance companies or banks never saw the light of day. They were made and owned by that lender. Documents were sitting in a drawer, and when the loan matured, if the borrower couldn't repay it, then there was just a negotiation of an extension. Pay me a fee and we'll talk about it in a year or two. Right. And the same thing with real estate assets. There was no price discovery. And now, all of a sudden, with the advent of the REIT and the cmBs, there was price discovery. So when we look at CMBs or REITs, we see price volatility, because we have minute to minute, day to day market opinion of the value of those things. The real estate that is not in the public market, there's no opinion being expressed about its value minute to minute or day to day. But it's fairly safe to say that if that real estate were to be pulled out, if that loan was pulled out of the insurance company's drawer and sent out into the public market for price discovery, they would discover it's just as volatile as cmBs, you understand? [01:17:13] Speaker A: Well, because the markets are that way today. But when I grew up in the business and I started a prudential. [01:17:18] Speaker B: Yeah, but because there was no public. [01:17:20] Speaker A: No, we didn't have that. We didn't have trading mentality. [01:17:23] Speaker B: Well, there was no connectivity between the capital markets and real estate assets of any kind. I agree. No connectivity. [01:17:31] Speaker A: Real estate was looked at as. [01:17:32] Speaker B: But real estate was volatile. It's just that you didn't know it. [01:17:38] Speaker A: Well, that's true, because it didn't trade as much. [01:17:40] Speaker B: Well, there was no reason. It was a longer term, but there was no vehicle for trading. And so you sold when you were in the money and you didn't sell when you weren't in the money, and that was that. [01:17:53] Speaker A: It's interesting, though. I grew up in appraising property, and I was in the appraisal institute looking at long term value. And how did you come up with a cap rate? We had what was called the band of investment. You looked at what's the equity return you need? What's the debt return? So this was a scientific structure at that time. We didn't have Wall street to trade off, except inside the insurance companies. They were trading bonds, but they disconnected. [01:18:19] Speaker B: Real estate from that thing. [01:18:21] Speaker A: Well, they had to allocate their portfolios. [01:18:23] Speaker B: But they disconnected mortgages, but they disconnected, just like I think in venture capital is another place where they've done a very good job of disconnecting reality, as though there's something called gravity. But gravity doesn't apply to this area. I think it's just self deceit. Well, people live very happily in self deceit. [01:18:45] Speaker A: They like to tell you, life insurance companies will tell you, they allocate their assets accordingly based on risk, as their perception was at the time. [01:18:53] Speaker B: And I'm sure they were, but I think they were misunderstanding the risk of the real estate market. They're probably because there was no reminder. No, they didn't mark the market without the reminder. They don't know how risky it is. [01:19:06] Speaker A: No mark to market. [01:19:07] Speaker B: There's no reminder. [01:19:09] Speaker A: Yeah, I agree. I can argue with that. [01:19:11] Speaker B: By the way, I'm going to tell you a story. [01:19:13] Speaker A: Okay. [01:19:13] Speaker B: It inspired me to abandon my initial inclination to create cmbs. So my initial inclination was in 1988, not 1993. And in 1988, I was a young big shot at Morgan Stanley, trainer, running the credit risk mortgage business at Morgan Stanley. And I thought, why not go after that big giant market that no one seems to be after on Wall street called commercial real estate? So I started to dip my toe into that arena. And if you remember, Morgan Stanley owned a real estate brokerage company. No, there was another one, and I'm blanking on the name, but if I said it, you would. Brooks Harvey. Brooks Harvey. They own Brooks Harvey. So I moseyed over to talk to some of the guys at Brooks Harvey who were as far afield from bond trading desks where I lived, from an intellectual or knowledge based standpoint, as one could imagine. And they were telling me, I said, what's going on in the world of commercial mortgages? And they said, well, it just so happens we're arranging a mortgage right now for this office building in midtown Manhattan. And the lender was travelers Insurance company. And I said, well, what kind of terms are you getting the borrower? And it was like a ten year loan, and the rate on the loan was lower than the ten year us treasury. [01:20:46] Speaker A: Lower. [01:20:47] Speaker B: So think about this. Think about what disconnection means. Some imbecile, the CIO at travelers, is literally lending money to an office building, and all the risks attended with that, when all he had to do is buy the US ten year treasury and he'd have a better yield. And I thought, okay, there's no cmbs here. And I went back to the residential, forget this, this is insanity, because the disconnection created those kinds of, kind of. [01:21:21] Speaker A: Like, mortgage bankers love that pricing. [01:21:23] Speaker B: Of course, it made great sense to you as an intermediary, but as an investor, it made less than no sense as the world changed and the real estate market got exposed to the capital markets and relative value, which goes back to what we talked about at the beginning of this conversation, was now introduced to the real estate investment world. The world's never been the same for real estate, but they still do talk about, gee, CMBS is volatile, but how come my loan portfolio is not? And the reason is price discovery. You don't ask for price discovery. If you did, you'd find out it's very volatile. [01:22:03] Speaker A: Earlier this year, you were interviewed on another podcast and cited that the largest macro trend over the last 40 years was declining interest rates, and that has now changed. Howard Marks of Oak Tree Capital also made that observation recently and has recommended a reallocation of their investments. Internally. You indicated that you will be looking toward inflation protected investments, and due to the outstanding debt on the US balance sheet, inflation is inevitable. Perhaps elaborate on this and what strategies you would recommend to young professionals in our industry and in general, about where to place capital today. [01:22:45] Speaker B: Well, I think there was like three questions embedded in that question, so I'm going to try to address that. That's a good way to ask the question. All right, so I think, first of. [01:22:54] Speaker C: All. [01:22:57] Speaker B: I'll start with young people in the real estate industry. I love real estate for a variety of reasons. I love real estate. And as you and I were talking even before we started the podcast, primarily because real estate is a reflection of society's inclinations, right? And so if you want to be a good real estate investor, you must ask and answer the question, in what physical structures do people want to enjoy life? [01:23:31] Speaker C: Right? [01:23:32] Speaker B: And if you can answer that question, you're going to invest accordingly and do very well. And if you don't answer that question or even ask that question, you'll be stumbling and bumbling in your career. And I think too few real estate people think that way. So when I write a book on philosophy, which I did, and people think, well, why did a guy who's known in real estate write a book on philosophy? It's because I think philosophy and understanding human nature, human behavior is fundamental to being a good real estate person. And so I would tell young people today, the world is in a state of incredible, as you well know, incredible change. The things that were attractive in John Co. And Ethan Penner's journey in life as young men are very different today. People's desires of how to live life, where to live life, how to allocate their time, how to interact with each other, then where to interact with each other, those are very different than in our lifetime. And most of the real estate stock in the world today was built to answer that question for our lifetime and even generations before us. So that means there's a lot of shaking up that's going to occur in real estate. And shaking up is very rewarding for young, thoughtful, enterprising people. So I think the future of real estate is going to be exciting and very rewarding for people who think philosophically, who are students of human behavior, and could express themselves accordingly in this industry. It's very exciting. I think technology obviously will have a huge impact in answering some of those questions. And so I also talk in my book about intersections and how real estate itself is an intersection business, because it lives at the intersection of a lot of things, politics and zoning, tax policy, construction and design, finance, capital markets and economics, human behavior. Intersections. I would find intersections, live in intersections. It's fun and rewarding. So that's one. That's the last question you asked. The second question you ask about investing in inflationary places where inflation. I think inflation is one of the most poorly understood ideas in economics. I think that people often confuse cause and effect when thinking of inflation. So they look at higher interest rates as perhaps even the definition of inflation, or certainly the result of inflation. Sometimes maybe they think of it as the cause of inflation. I think of that as somewhat disconnected today. I think that the reason is because the federal government interest rates used in my bond trading years when the Fed had a much less invasive orientation towards the financial markets than they have expressed in the last decade and continue to express. Inflation was the market price for money, right, I'm sorry? Interest rates was the market price for money. So someone wanted to borrow, someone had money to lend, and interest rates was the price of that transaction. And it was largely a free market. So if there were more people wanting to borrow than wanting to lend, interest rates went up. If more people wanted to lend than to borrow, interest rates went down. Pretty simple. When 2008 happened and the world as we know it almost ended, the Fed decided that, as the Fed does, when they see worlds teetering on anarchy, that they needed to solve for that anarchic risk. And the only lever they have is to flood the market and the world with cheap dollars. And so they flooded. There's been $8 trillion of essentially new money has expressed itself since 2008 into the world. And that is, by definition, inflation. So if you go back to the economic definition of inflation, when the world word was, because the word inflation has been in the english language for a long time, but it only started to be used, I believe, around the 1920s or 30s in relation to economics. And the word was used to describe the inflation of money supply. That's what it was. So the word inflation originated in economics as a measurement of money supply. Money supply is inflating. Well, that's what happened. $8 trillion was conjured out of thin air and injected into the world by the Fed. That is the definition of inflation. And yet what was interesting is that during that $8 trillion infusion, which was historically large, interest rates remained historically low. And people were going like, well, there's no inflation. Interest rates are 1%. Yes, there is inflation. $8 trillion was created. It's just that interest rates were being suppressed, and they were being suppressed by the same powerful forces that had created the $8 trillion, which is go back to why I said I was very surprised to see the Fed allow rates. By the way, the word Fed allow is also a weird thing for a free market person like me to say. I grew up on a bond trading desk where the Fed didn't intrude, and so markets determined where rates went. But since 2008, the Fed has determined where interest rates go. The bond market is just there, but it's not really determining much. Supply and demand don't determine much. The Fed determines where rates go. And so I wouldn't make interest rate bets today. I think that interest rates are, if you say, what does the Fed, the US government need? They need interest rates to go back to 1%. Are they smart enough to know that? I'm not so sure. So I wouldn't make interest rate bets. I do, though, believe inflation is with us. Wherever interest rates go, it doesn't matter. And I think owning inflation protection assets, not owning cash, will continue to prove to be a good idea. So I think that answers most of your question. [01:30:40] Speaker A: So, Ethan, you are now a real estate lecturer at Pepperdy as well. Talk about your curriculum there and why you decided to teach. What lessons do you share with your students that they've probably never heard before? [01:30:56] Speaker C: Well, that's for sure. John, I'm not your typical guy in our industry, as you know, and I'm less typical than a college campus. I was attracted to teaching long ago. I like teaching. I feel like learning and teaching go hand in hand. And I think that you do them both at the same time. Right. I think that when you have a conversation with another human being, you're teaching and learning. And that's the fun part of human interactions. And so I've always seen it that way. And every time I was invited from my Wall street career to speak as a guest lecturer in a class or to a university or whatever, I would always accept. And then one day I was moving back out to California in about 2000, and I want to say twelve or 13, I'm not sure exactly which one I think something like that. And I got a call from a friend of mine who I had, who was a professor at USC's graduate business school and who I had guest lectured in his class numerous times. And he called me, it was July. And he said, I have kind of an emergency ask of you. The professor who teaches the mortgage backed securities class in graduate business school at USC accepted a job in the Obama administration and we're left one month before his class is about to begin with. No professor would you ever consider teaching a class, not just guest lecturing, but actually being the teacher for the class? And I said, sure. I said, yeah, I do it. And he warned me, when you guest lecture, you can improv, but when you're teaching a full semester, it's a lot more preparation involved than I think you are probably imagining. And I said, it's okay. I'm fine. I'll write the syllabus and I'll do all the things that you need to do. And I won't use a textbook, of course, because I don't believe in textbooks, especially in today's world, John, where things are continually evolving, right? The way things were done even five years ago or ten years ago are so much less relevant than one would imagine, let alone textbooks from 20 or 30 years. Literally completely irrelevant in most fields, including finance and real estate. So I said I would teach it, but I'm going to do it my way. She said fine. And I taught that class and I had great fun. It was a Thursday, you could imagine. So it was a Thursday evening class for graduate students. And so I realized what I was up against and I had a ta assigned to me, and his only job, I would give him money and his only job was to bring beer and pizza to the class. And that way I figured, okay, well, fair shot of getting their attention. [01:34:07] Speaker A: There it is. [01:34:08] Speaker C: Yeah, I did that. And that became a pretty popular class, I bet. The obvious reason. And since then I haven't looked back and I've taught pretty much every year. I switched to Pepperdine after a few years, not because I didn't like USC, I love the USC, but because it's just closer to my house and know that's a very important consideration. [01:34:30] Speaker B: Sure. [01:34:32] Speaker C: It was closer to my office, closer to my house, and I didn't want to sit in traffic and go to downtown LA. Now, I would say the motivation to teach is what I said. I like sharing. I find it a good learning experience. Right. I bounce my ideas off of 25 to 50 smart, aspiring young men and women and I invite them to call bullshit on me. And my class is a four. It's usually 4 hours, which is quite daunting when you think about teaching for four hour classes. But the only way that I thought it would work, and it does work, is to make it a lively conversation. And it is a lively conversation. So it's not one man lecturing for 4 hours or even an hour, which would be dreadful. I would never want to be on the receiving end of that, let alone or on the giving end. So it's a very engaging, lively, challenging conversation where I insist upon participation, I call on people and I insist upon them being forthright and know that I reward people who challenge me. So I learn a lot and I hope they learn a lot. And I guess the one thing giving you a long answer to your question, the one thing I would mention that is very special about the class I give, which beside the obvious, which is I give them real practical knowledge because I don't teach from a textbook, I teach from real life experience and what's going on in the world, but the big thing that I give them, which is covered in my book, in a chapter that I adore, which I thought of even calling the book this and actually called our website this intersection. So the website for my book, as you know, is called greatintersection.com. Greatintersection.com and intersections are where greatness occurs, it's where understanding occurs. And education and information absorbed in isolation is of very little value. And I really feel bad for students in all fields who are given knowledge in isolation and not really taught about the interconnectivity and this reciprocation of influence that one variable has with many, many other variables. I guess my focus would be finance, financial markets, real estate, securitization. But what I'm teaching is always the intersection of those things with politics, sociology, human behavior, all that stuff, economics. And so it's a very wholesome class or education at least that's what I'm aiming for. [01:37:27] Speaker A: Do you bring case studies in or do you just based on your experience? [01:37:31] Speaker C: Sometimes I do. So sometimes in a four hour class, I guess formatting it is interesting. So what I'll do, what I've been doing recently is take about half the class and focus on a topic. So let's say 2 hours of the four hour class is focused on a topic, a specific topic. It could be securitization, for example, or it could be about banking, it could be whatever. It could be about obsolescence in real estate. There's a topic and that's the thematic topic of the day. Let's say that takes an hour and a half. There's probably about a half hour on current events or things that are happening in the world in that week or that day that I want to cover. And then there's about an hour that's dedicated to case study and then I usually wrap up with about a half hour on a chapter or two of my book and discuss. [01:38:30] Speaker A: Oh, there you go. [01:38:32] Speaker C: So there's some philosophy there. [01:38:33] Speaker A: But you do have a textbook. [01:38:35] Speaker C: Yeah. [01:38:39] Speaker A: That'S great. [01:38:41] Speaker C: I love that. [01:38:42] Speaker A: Your book in some ways reminds me of meditations by the roman emperor Marcus Aurelius, which was a diary for his own use. I sense that this is how you started it as an essays of your own thinking. I may be wrong, but that was my suspicion. Clearly your religious awakening stimulated your passion to write much of its content. In retrospect, do you think you matured into this thinking? Talk about that evolution to a more spiritual life and put it in context of interpersonal relationships and business. [01:39:15] Speaker B: Well, I wrote. I'll start with the origins of the book I had always had in my mind, John, and I think I always had in my mind that it would be amazing to write something like my ideas about my. About life, right? My observations, my experiences and my ideas that I could hand physically to my children so that they may hand it to their children and be passed on generationally as some sort of a family heirloom. I wished that I had such a thing. I wish that I had something that goes back five or ten generations. Imagine if you had that, how valuable that would be in your life, right? And so I thought, well, I always thought, why don't I create that? So that was in my head. I'm an inveterate notetaker, so I use my iPhone notes section, and when I have ideas, I create a new note and I write my ideas and I write a few things. Around Christmas of 2020, it was Covid, and I was sitting having breakfast with my daughter, who was a high school senior experiencing high school from home because of COVID We were having breakfast together, and she asked me what I would be buying. My brother in law and his family, who were coming over for a small gathering for Covid, Christmas. And I said, well, I don't really like buying Christmas presents for adults. And three of the four of them were adults, one of them was a kid. And I thought, kid, I'll buy a lot of presents for. But the adults said, you know what? I'm going to write them. I write a book and I'm going to give them the book. And she laughed and said, well, it's ten days before Christmas. When are you going to write the book? And I said, well, I'm going to write it right now when we're done with breakfast. Well, by the time she came back to that table where I had not left for lunch, 4 hours later, I had finished 100 pages and 65 short chapters. Wow. And that became the foundation of this book. Then I went out and tried to print ten copies. So I'd have gifts for the family coming over and then some left over from my kids and such. And no printer would print fewer than 100 copies. So I printed 100 copies, and I had 90 more than I had plans for. And I just started giving them out to friends and people that came into my office, and it got circulated right. And it was really Ethan shorthand, but it was a shorthand version of this book. And the reviews I got from people who didn't even know me were inspirational to most probably the one I'll share that's most powerful one was someone in Abu Dhabi had gotten his hands on my book, and I didn't know the guy. It was a friend of Chris Ludeman. [01:42:09] Speaker A: Oh, sure. [01:42:11] Speaker B: We talked, and this individual said he loved my book and that every night that he has the opportunity to put his twelve year old son to bed, he keeps the book on the nightstand of his twelve year old. They read a chapter together and spend 15 minutes talking about it. And I thought how amazing that my book not only is reaching my kids, or hopefully my descendants, but that it's valuable enough for a father to use as a way to communicate ideas to his own son all the way around the world. Right? So that inspired me to think maybe I have something more here than just a family heirloom. And I let it sit for a year because I knew I had to rethink how I positioned the book so that someone who didn't know me might buy it. Took me about a year. I redid the book, printed another 100 copies, sent them out into the world, and through a friend who'd written books, his literary agent liked it. He gave it to this publishing house, and they kind of called me and said, we want to sign you to a contract. And then the book got, we went through an editing process, and here it is. So that's the book. [01:43:22] Speaker A: Great. The book titled greatness is a choice you define as not a gift, but an actual choice we can make. Throughout every day. You go on to say, the feeling of self worth I enjoy is the most valuable thing I possess. The question I want to ask is, how do you walk the tightrope of self worth? Humility, chutzpah, and arrogance. Also, please define chutzpah from your perspective and how it is different than arrogance. [01:43:56] Speaker B: Well, chutzpah is a Yiddish word, and I would say chutzpah is what I had leaned on so heavily to create the CMBS market. It's the belief in oneself, in the face of essentially universal doubt that you can do something that no one else has ever done. That's the epitome of chutzpah. Does it border on arrogance? Yeah, for sure. Did I kind of walk over the line once in a while in my life? For sure, I'm sure I did. And that deals with one of my favorite topics that I write in my book, a chapter called duality and the fine line, as you suggest, of, like, balancing opposing ideas. Right. Humility and arrogance. [01:44:54] Speaker A: Right. [01:44:54] Speaker B: Opposing things. Arrogance is a negatively connotational word. So I might choose humility or humility and high confidence, right. Because they seem like opposites, but they kind of have to coexist, I think, to be a fulfilled human being, you have to have 1ft in humility and 1ft in high degree of self confidence, right? And willingness to say, I could do what no one else has ever done. At the same time, be humble enough to know I'm just a guy, right? And that means all that it means on the frailty and fragility and all that stuff. And knowing that. And I think this balancing act that we have to walk think about, I use this as a good example of duality in my book. But if you realize how insignificant you are and you're honest about it, you're like, okay, I'm just a person. My lifespan is a flash in history. Nothing I do will ever be remembered, even cmbs. And maybe it'll exist, but they won't remember me, and that's fine. And I'm very insignificant, right? And I think from that you can live a fruitful life, from that you can have real relationships, from that you can. And not taking yourself so seriously, you can be healthy in every way. And you could let yourself off the hook when you fail, which is most of the time. On the other hand, if you don't have confidence to try things that are daring, you won't ever achieve anything. And so you need to say, well, my father used the phrase, everyone puts their pants on one leg at a time. Today, there's a less genteel way of saying that. But that was the genteel generation, our parents generation, and I never forgot that. And it inspired me. What that means inspired me to know that even though I'm no better than anybody else and none of us are particularly great in the sense that we're insignificant, we're also all created by the creator, whatever that means to you. And so we're also imbued with a lot of ability, and no one more than me or you. We all have a lot, and why not try? [01:47:37] Speaker A: So I started my podcast to share wisdom of real estate leaders who have experienced their careers with the early challenges and unknowns and found their way to success through a myriad of paths. The reason I did it was to inspire the inner spirit of young people who had the thirst for knowledge and understanding of not only what to do and how to do it, but why they did it and what drove them to do it. Is this similar to the understanding you encourage each of your students and readers to take away? [01:48:11] Speaker C: I think you said it really perfectly. I wouldn't even think edit that. Yes. The answer to that is yes. [01:48:18] Speaker A: That's great. I kind of figured that after reading your book that that was kind of the message you were trying to leave. So that allow someone else, more or less the old metaphor of you give somebody fish or you teach them how to fish. And that whole metaphor. [01:48:40] Speaker C: Yeah, the book is a call to awareness, call to thinking. It's not. Here's Ethan's ideas being shoved down your throat. That's absolutely not what it's about. [01:48:57] Speaker A: One of your book's chapters discusses risk. What does your gauge for risk look like? When do you think something is too risky to proceed? Can you cite an example of a difficult decision you made not to proceed on something you thought was too risky, but turned out to be a missed opportunity? [01:49:20] Speaker C: Oh, my God, I have so many of those, John. [01:49:24] Speaker A: What's one that comes to mind that. [01:49:26] Speaker C: Really was like, oh, shit, I wish. [01:49:28] Speaker A: I had done that. [01:49:30] Speaker C: Honestly. I have a lot of those. So one is, let's start with kind of a missed opportunity that I have so many that I chuckle about, but let's take one. So there is a guy who, unfortunately, sadly, recently passed. A guy named Gary Winnick. I don't know if you've ever heard the name Gary Winnick. So Gary Winnick grew up in Queens or Long Island, New York, and a born salesman. So, not surprisingly, he found his way on Wall street to working for Michael Milken, who understood the value of a born natural salesman and became an important part of the milken junk bond machine at Drexel. Gary was a salesman, right. I would not have considered Gary financial sophisticate. I would consider him more of a salesman and a dreamer. So when a salesman, also a great salesman, is also a dreamer, because they believe things that perhaps that can happen that most people maybe dismiss out of hand. And Gary had a very successful career. And I knew Gary a bit. We were both involved in philanthropy together. He's a lovely guy, as a personal guy, a nice family man. He actually married his high school sweetheart. And when he died at age 75, they had been married for, I want to say, 50 plus years. Nice family. He died prematurely about two or three years ago. Sadly, in his mid 70s. Gary called me when I was at Nomora, and I was king of the hill. And he said, I'm in New York because I was living in New York. He was an LA guy, and he had moved to LA with Mike. And he said, I want to buy you a drink. And I have a deal. That is huge. Okay. So I meet Gary, and we're at the St. Regis at the bar area and lounge, having a drink on a wintry evening. And I think I'd have dinner to go to, but I think I had an hour to hang out with Gary. And Gary tells me about his plan to lay undersea cable to connect the european and the US continent. And I said to him, gary, and he said, this is an incredible opportunity for securitization because it's real estate in a sense. It's cash flows. And you're the guy. And I'm telling you, John, if I had said yes, yes, I could have gotten it done. Yes, I could have probably gotten warrants for a big part of global crossing, which is the company he ended up creating. But instead, I said, you're a bond salesman. What the hell do you know about underwater cable? What are you talking about? And I just kind of, like, dismissed it out of thought, you know, Gary's kind of kooky. He's too much of a dreamer for me. I'm making enough money. I don't need this shit. [01:52:36] Speaker B: You know what I mean? [01:52:37] Speaker C: It was one of those things that I just said no, out of hand, without thinking about it more carefully, without even the older, more wiser, more mature version of me. I had plenty of people would have thrown two smart people at it and said, gary, meet with my two smart people. Give them all the information. We're going to dive really deep into this. [01:53:02] Speaker A: And see, literally. [01:53:06] Speaker C: I was too busy to get onto my dinner. And just like, you know, not going to. That's not going to work for me. I'm not interested. And within, I don't know, a year, global crossing was a large public company, and Gary was worth $10 billion at a time when $10 billion really mattered, it was a big deal. And to his credit, I mean, we remained friends. He never held it against me that I said no. Obviously, he did fine without me. But when you talk about missed opportunities and being dismissive of another person's dreams. [01:53:40] Speaker B: Which is really not what I'm known. [01:53:41] Speaker C: For, I'm actually known in our industry as being a facilitator of people's dreams. And I'm so proud of that, John, because I am that. But in that one moment, caught me in a moment where I was dismissive. I had become maybe too big for my own. Just, I think that's one of the risks of success, is becoming more closed, and it's also one of the risks of aging. And I've been blessed to have some nice things said about me in my life. I would say one of the ones that I treasure the most, like the compliment. I have a couple of compliments that I've gotten that really meant something very important to me. My firstborn son, Daniel, once said to me not that long ago that the thing he is most impressed with me about is my openness to change. He said, most people at a certain age and a certain level of success become closed and they stop learning and they stop becoming inquisitive and they stop growing as human beings. And I think, of course, we both are old enough to know and have seen that happen in generations older than us and now in our generation, and I'm not that way. I am naturally the person who says, I want to learn from everyone. I'm a yes guy. I'm open to change. I'm open to believing I'm wrong about something. But that day, that stupid day that. [01:55:13] Speaker B: Gary caught me, I wasn't in the. [01:55:15] Speaker C: Mood to learn anything new, and I wasn't in the mood to believing in Gary's dreams. And I paid a significant financial price for that. [01:55:23] Speaker A: But it wasn't risk that turned. It wasn't risk for you. [01:55:29] Speaker C: It had nothing to do with risk. Well, I guess we talk about risk in the sense of money lost, John. Yeah. I think that money is only one resource we measure. Time is much time. That's the biggest thing. [01:55:43] Speaker A: Yeah. [01:55:43] Speaker C: And so I didn't want to risk time on Gary and his quacky global crossing idea, and I also didn't want to risk reputation. Right. Like, maybe I get involved in this and it blows up and my beautiful reputation is tarnished a bit. [01:56:00] Speaker B: I don't know what it was that. [01:56:02] Speaker C: Caused me to be dismissive. I think it was mostly I just didn't really think he was the guy to pull it off. [01:56:09] Speaker A: In your position at Numira, that investment, to me, is not a real estate investment. That's an entrepreneurial venture capital type of. [01:56:21] Speaker C: Well, but the way he framed it, which was correct way to frame it, is that there would be cash flows I could securitize. And so while technically it wasn't real estate, I could have pulled it off through the securitization window that I played within, and I could have made something happen. But I was dismissive. [01:56:45] Speaker A: Right. It's a bond play. I mean, it was a bond investment. [01:56:48] Speaker C: But not necessarily secured by real estate per Se. [01:56:50] Speaker A: I don't know. [01:56:52] Speaker B: That would be a tough security to. [01:56:53] Speaker A: Sell, I think, if you're just securing it as cables underneath the ocean. [01:56:58] Speaker C: Yeah. But if you have contracts, if you have credit contracts, you could do it. There was ways to do it. Yeah. I just didn't even want to spend a minute on it? [01:57:07] Speaker A: I got it. That's cool. So it's interesting that you suggest not to share your unresearched opinions. And you have very few citations in the book and no footnotes or a bibliography. What are your favorite books and authors other than the Bible? Who has influenced your thinking? [01:57:30] Speaker C: Without question. I'll tell you who I love and then who. Both. I mean both. Herman Hessa. Yes, I love and mean. I adore his books. Maybe not every one of them. The Glass Bead game was a bit hard to penetrate, but Siddhartha, I think is the finest book ever written. And I read it as a teenager and then I picked it up again last year. And when I read it as a teenager, I really liked it, but I thought it was simplistic. And now with the benefit of age, I read it again last year and I thought I didn't really get it fully or appreciate. [01:58:17] Speaker B: Here's why. [01:58:18] Speaker C: I think it's the greatest book ever written. And I didn't think it when I first read it because when I read it as a 61 year old man versus a 15 or 16 year old young man, I got completely different messages and understand out of it. I think that's sign of a great book, right? That the same person, Ethan Pennard, can read it at different stages of life and appreciate it both times, but really understand different things. And I hope my book is that way. I hope my book is something that is readable. It is readable by a twelve year old and it's also readable by a 70 year old. And I believe that they'll get different things and both value out of it. My favorite book, I think that's the best book I've ever read. My favorite book of his too is Narcissus and Goldman, which is just a beautiful story about life's journey. And it's just so well written and it's so smart and there's so much great philosophical underpinnings to the story. The characters are the settings. [01:59:27] Speaker B: Amazing. [01:59:27] Speaker C: It's medieval Europe. It was beautiful. So I love those two books. I really admire George Orwell. I mean, those two books are timeless. And I frequently say when people ask me, how's your book sales going? Right now we're two or three weeks after the launch of the official availability of my book to be bought. How are book sales going? And I always say George Orwell's books probably didn't hit bestseller list the first year they were out. But here we are 70 or 80 years after they were written. And they're probably selling more today than they've ever sold. And I think that I want my book to have a journey. I don't know, like George Orwell's in the best case, where it's merit based, where people buy my book and they read it and they say, man, this is really good reading. And I learned so much from it, I want to pass it on to people. And then word of mouth, character. I think so much of marketing today, John, is just gimmicky to stuff, jam people, stuff things down people's throats, trick them into buying stuff. George Orwell's books were not distributed that way, and neither will my book be. And I pray that if I wrote something valuable that 50 and 70 years from now, my descendants will be proud to say, my great grandfather wrote this book. And look at it. It's really helped people today. So George Orwell's two books are inspirational. They're brilliant. He was an amazing man, a brilliant man, and I love his books. Ayn Rand is a controversial writer today. It's fashionable to dislike her amongst young people today because she was pretty harsh about expecting excellence out of people and when they didn't produce excellence, being, I don't know, quick to kind of toss them into the trash can, so to speak, in her judgment. But I think she did something that has never been done before or since, which is she wrote two, not one, 2000 plus page books that are literal page turners. Whether you agree with her ideology or you find faults in her ideology. What a storyteller. I mean, incredible storyteller. She really was amazing to write those two incredible books. And look, I find that most of what she believes and her stories kind of told philosophically resonate very positively with me. Do I think she maybe missed a few things? Yes, I do. But by and large, I would recommend those books to anybody. They're worth the 1000 page read. And that says a lot because, you know me, I'm a brevity lover. And I wrote a short because I'm a brevity lover. Her books are kind of out. They're outstanding long books. So I would say those books great are important to me. Those are important. [02:02:34] Speaker A: One mindset you bring up is the potential for magic. Your reference to helping most unmet needs of others will richly reward you. What is the most daunting challenge you took and how and why did it turn out the way it did? [02:02:53] Speaker B: The most daunting challenge that I've ever taken in my life. I would say it's a tie between two things, getting married a second time, in the face of the anecdotal evidence that I experienced in my marriage and my parents marriage, that marriage isn't really such a great spot, or at least I'm not really good at it. That's a courage and really learning how to commit myself to being a good partner in marriage, which I only recently feel I'm beginning to actually figure out after being with my wife for 24 years and being married, or with my first wife for 17. So I think that is a courageous thing to do, to be vulnerable and committed, really committed in a marriage. It takes courage. I also adopted a boy from Ethiopia, and that takes courage, too, to really just say, I'm going to make this work. It's hard to raise kids, even when they're your own biological kids, right? We all know that. And it is harder to raise kids who are adopted from other cultures and other circumstances. And it takes courage. But you know what? I think it takes courage to just bring your best every day, which is really what my book is about. My book is about kind of demystifying greatness, which we tend to assign to a rarefied group of people. We tend to agree that our athletic heroes are great, or we tend to agree that whoever our heroes are great, and we tend to ascribe their greatness to genetic gifts, perhaps, or to some better than human attributes that they possess, that we don't possess. And we shortchange ourselves when we allow that definition to be our governing definition. And I think my book is a direct rebuttal of that definition. My book is a direct challenge to me personally and to everyone who reads it to find the greatness within themselves, not in the same way that people think about greatness, which is typically like a lifetime achievement. I created cmbs, and therefore I'm great. That's not what I think about. When I think about greatness, I think about, did I show up on time? I'm honoring the person who was investing the only thing of value in their life, which is their life, their time. And I didn't make them wait. Did I show up and give 100% to them in that encounter? Am I here with you and the people who are listening and investing the only thing of value in your in their life, which is their time? Did I give them some value? Did I bring my 100% best self to this moment? If I did, I'm great. [02:06:11] Speaker A: There you go. [02:06:12] Speaker B: Did I cook a hamburger for my child and really, really try to make it a delicious hamburger? Or did I just mail in the effort right. And if I did the former, I brought my greatness to that moment. And when they tasted that hamburger, that greatness will elevate them in that moment, just as I hope this encounter with you and your audience elevates as well. Because I think greatness, we all have that magic. And when we touch it and we share with other people, it's an elevated moment for everybody. And the ripple effect of that, I think, can be profound. [02:06:47] Speaker A: One of my favorite sections in your book is fulfilling potential is fulfilling. Your dad said that there is no greater sin than unfulfilled potential. Learning your skills and talents and maximizing them in work you love is fulfilling. How did you come to learn this lesson? Did the concept of fulfillment change for you over your life? [02:07:10] Speaker B: Well, I think fulfilling potential is a very tricky thing. And that concept of fulfilling my potential continues to evolve. And I understand now that, as it should, I kind of found myself in my career, like many people do by default. It was the only job I got right. You know, I got this job in the mortgage lending business not because I liked mortgage lending or even knew what it was. It was just the first job I got offered in a recessionary moment, and I took it. And I've been trying to get out of the industry pretty much ever since that first job, and I just can't get out. Finally, I wrote a book as a philosopher, so maybe I'll be out now. But I've been trying to get out my whole life and find other potential because I know I have it. I'm not a mortgage guy. I'm human. I've got other qualities. And so when I'm seen through the prism of even the highest level, he created the modern mortgage market. That sounds pretty damn good. But I still hear it as he's a mortgage guy. And I, like, I'm not a mortgage guy. I'm more than that. I'm different than that. And so what is my potential? But then I realized. So I kind of fought that fight internally through my career. And at some point along that journey of fighting that fight internally, I began to realize that it's not at all important what we do, but how we do it, like I said, so it didn't matter whether I was a mortgage guy, a widget guy, an actor, a writer. It didn't matter. And it doesn't matter because those are just vehicles for being me. [02:09:05] Speaker A: There you go. [02:09:06] Speaker B: And it's just an excuse to bring me and do I bring me great or do I bring me shitty? That's the fulfilling of potential. [02:09:15] Speaker A: Another concept that resonates with me is your ripple effect. The impact on one life positively affects the entire world. It is the exact principle behind the community I've built and why, even if it grows to be hundreds, I still want to meet each one prior to joining the community. My guess is it's one of the reasons you wrote the book. [02:09:39] Speaker B: Yeah. There's a jewish teaching. I don't know. It's probably more broadly accepted, although I learned it in the context of jewish teaching. I'm sure it's taught in christian teaching and other religions, too, that to have saved one life or have to positively impacted one life is as though you've saved the whole world. And as I say in my book, I always thought that was like some kind of, you tell that myth to children, but I really understand that there's math behind that. So when I was thinking about, how do I market my book, right, I mean, I'm somewhat known in certain fields, right? I somewhat known in real estate. I'm somewhat known in finance. And there's plenty of people I can sell my book to or introduce my book to in the fields that I'm known, but nobody outside of those fields really knows me at all. And I'm thinking, well, how do you sell your book? Right? That challenge. I wrote a book. I'm pretty proud of it. And I started to think about this compounding math, and I realized that if I can persuade 15 people, 15, to become missionaries for my book, well, everyone knows 15 people. They can arm twist everyone, right? We all do. I think I know more than 15, but we all know everyone knows 15. And then if they each, in turn, arm twist 15 people. And if that goes on eight times, two and a half billion people will have bought my book. Well, eight times doesn't seem like a lot. Okay. But compounding is pretty damn powerful. Well, that got me thinking, because I started thinking about in the context of buying my book, it got me thinking about touching a person, right? This ripple effect that's not just about buying a book, but being influenced. So let's say I use this example because I actually thought of this in a particular moment. I was in Austria with a friend, and I overtipped the waitress. And the friend said to me, I don't know, didn't agree with my overtipping. Maybe the waitress wasn't as good in that person's mind as I thought, whatever it was. And I said to the person, I'm not going to miss the amount that I'm overtipping this individual. But if this overtipping puts that waitress in a kinder, better, happier frame of mind, it happened to be a very busy place in Vienna. Imagine how her elevated state of happiness because of this overtipping will influence the 100 or 200 people she serves that rest of that day. And then if they walk away because her spirit has elevated, they're now a little elevated. And imagine what that ripple effect of this extra ten or $20 that I've tipped her that maybe is not beyond what she was expecting. It's a cheap way to elevate the world, you know what I mean? And I thought, it's amazing. Right? So I do believe that we underestimate the impact, both positive and even negative, that we have in our own little way of touching people and how broadly that can rip them. [02:13:24] Speaker A: So, Julius Urban, Dr. J. Wrote the foreword of your book saying that you were an inspiration to him. Is he one of your idols? Who else is an idol? Either someone you know or not. And why? What characteristics and others do you most admire? [02:13:44] Speaker C: Well, my number one idol and role model that I grabbed when I was a teenager as being my role model that I wanted to kind of pattern myself after as a person, was a fictitious character played by Humphrey Bogart in Casablanca named Rick. Rick and Casablanca. I mean, why not? I mean, if we're going to pick role models, no. So I picked Rick from Casablanca because Rick was the embodiment of many things that I held and continue to hold very dear. One is he was understated and modest and humble. He was funny and self effacing. He was successful. He was kind. He thought about other people. He made sacrifices for other people. He was chivalrous. He was courageous. He had every attribute. If you asked me to make a checklist of attributes that I would love to embody, I think Rick covered most all of them in a way that I've never seen even a fictitious character cover. [02:15:08] Speaker B: So Rick's my hero. [02:15:11] Speaker C: He's been my hero since I met him as a viewer of Casablanca in my early teens. And nothing has changed. And I probably watch Casablanca at the very least once a year to just meet and revisit Rick. And I still cry at the incredible generosity of spirit that he displays when he sends the love of his life off with her husband in spite of the fact she has no love for her husband, because it was the right thing to do. And I try to do the right thing, too. And I think inspired by Rick, that's great. There's nobody who's a close second to. [02:15:52] Speaker B: Know because everybody else is real and. [02:15:54] Speaker C: Human with full of flaws, just like you and me. Right. But I do have tremendous admiration for Julius. I met Julius when I was 35 years old, so 28 or 29 almost years ago, and hit it off really well and became fast friends, best friends. And I've got to see Julius, I mean, many times in the public domain where his size, six, seven, and his visibility and his fame attracts continual and ever present attention. And I've never seen him act anything but gracefully and kind and patiently and respectfully to every overture. Can I take a picture? Can I have a hug? Can I have an autograph? Let me tell you about this story, about how you played this game. And I'll never forget, and the guy's amazing. And I've been around celebrities, famous people. Nobody's close, right? I mean, he is really commendable in his humanity, his humanness, his generosity of spirit. He's a beautiful person, and I'm so proud that he's my friend and that he was willing to write that forward. [02:17:27] Speaker A: One of the first professional basketball games I ever saw was he was playing for the Philadelphia 76 ers. And I grew up in Detroit, so. [02:17:38] Speaker C: I was the Pistons and the Sixers. [02:17:40] Speaker A: And I'll never forget, when he came down the court, he would come off the ground, literally at the top of the. [02:17:49] Speaker C: Yeah. [02:17:51] Speaker A: And fly through the air and slam. I've never seen anything like it. And I've seen Michael Jordan play, and I didn't see Jordan even do so. [02:18:00] Speaker C: Yeah, I would tell, you know, because your listeners are generally young, and many of them have never. They've heard the name Julius Irving. Maybe they've seen him speak, maybe they've seen a highlight of him in one or two shots. [02:18:16] Speaker B: But the Julius Irving that really was. [02:18:19] Speaker C: Something to behold was before the time you referenced when he was a New Jersey net and he was a New Jersey net. I think the ABA, Julius Irving caused the merger between the ABA and the NBA because the NBA, they know it's true. [02:18:36] Speaker B: They needed Julius Irving in their league. [02:18:38] Speaker C: Their league was not valid. Mean, how could you be the best sports league when you don't have the best player in the world in your league? It made no sense. So, honestly, Julius forced the merger between the ABA and the NBA because he. [02:18:55] Speaker B: Was in the ABA, and the NBA. [02:18:56] Speaker C: Needed him and the team he played for when the merger happened was the New Jersey Nets. They were the Long Island Nets at the time. They had not moved to New Jersey, and Julius was probably, I don't know, 24, 25, 23. And that version of Julius the NBA had never saw. I did, because I was an ABA fan. I was a basketball fan. I used to go to games to see him. And I'm telling you, it was breathtaking, as you suggest, to watch him play. The level of athleticism, Michael Jordan doesn't even come close. Now, Michael Jordan, one might say, is a better all around basketball player than Julius and certainly had greater success as a bull than Julius found. But Julius, with the Nets, won three straight ABA championships, won three straight ABA MVPs, won three straight ABA Finals, MVP in an ABA that was filled with stars. Okay, so I don't know. I think that a lot of really smart basketball people. He's in the discussion on who's the greatest player of all time, whether it's him or Michael Jordan or. Now some people say LeBron, which I think is absolutely absurd, but it doesn't matter. He was something to watch. Yeah. [02:20:21] Speaker A: So what is your definition of success and how has it changed during your life? [02:20:31] Speaker C: Well, it's definitely changed. As if it didn't. It would be pretty sad. Just like I always say to people, if you haven't changed your mind on some things over the course of your life, well, that's a pretty sad state about what you've learned along the way. Right. I didn't get brought into this earth with anywhere near perfect knowledge. So I've had to learn through observation and hard knocks, like everybody. And my definition about everything, including success, has evolved over time. I think that greatness, which is the title of my book, greatness of choice and success, maybe you would use them synonymously. And I think that I would answer the question for both. What does that mean as bringing your very best to your life? Your very best. It's not a competition. Right. Each human being is really living his and her own journey. It's a very personal journey, and it's almost like it's tailor made for you. I think that the people you meet along the way, the experiences that you have along the way, the lessons you learn along the way or don't learn along the way, that's all meant for you personally. And so if you bring it hard, as hard as you can, as good as you can in every moment of your day, to the best of your ability, you're going to learn the most, grow the most. And I think that's why we're here and have the most fulfillment as a result of that. So to me, success or greatness is not what I think younger people think, which is the amassment of money or trophies or championships those are cool things, of course, and it's nice to have. [02:22:23] Speaker B: Them, but you don't need any of. [02:22:25] Speaker C: Them to be great. Ask Charles Barkley, by the way. You don't need any trophies, and you don't need any know, greatness is a personal, and success is a very personal thing. And, you know, only, you know whether you've achieved it or not on a daily basis. And I think it's one that needs to be achieved daily. I don't think it's a lifetime achievement award. I think it's a grind every day. I think some days we all go to bed and we say, man, I really did it today. Like, today I'm so proud of who I was. And maybe the next day you go to bed, you go like, oh, God, I kind of missed something. Or I wasn't there, as I should have been, like with Gary Winnick, for example. [02:23:13] Speaker B: And I'm not proud of myself. [02:23:15] Speaker C: I judged somebody harshly. I was not attentive. I wasn't there fully for that person. I didn't make the right choices for myself, and I should have known better, but I wasn't in an aware state. I think awareness is a prerequisite for success and greatness. And I think that living in an aware state as best as we can is the formula for both. [02:23:39] Speaker A: That's great. You say that people fight. People that fight the herd mentality and dare to say the right thing are contrarians and their opinions are probably true. Perhaps cite examples of your contrarian thinking. What do you believe that very few others believe? [02:24:03] Speaker B: That's a wonderful question that I didn't come prepared to answer. Okay. As you know, I didn't come prepared to answer any question. [02:24:16] Speaker A: I know, but you're great at improv. [02:24:19] Speaker B: One of my chapters is live in improv, and I could explain that if you want. But I want to answer your question in the context of that philosophy. It. So I'll be controversial, and I'll be spiritual, and I'll answer your question with that. What we don't see, I think our senses that we lean on touch and vision and hearing and taste and smell, they serve us, obviously, but they also block us. And the reason I say they block us is because when things don't hit any of our senses, we just assume they're not there. So if we can't sense it according to our senses, we disbelieve it. And I believe that there's energy, and I think there's a lot of things we don't see. Touch, smell, hear, feel. That's real and more real than the things we can touch, see, smell, hear and feel. And I think one of them is knowledge. For example, where do ideas come from? Like, where does innovation come from? Real innovation, right? Yeah, but it's not manufactured inside of a brain. I think it's the channeling of energy that's external. There's a prayer in the jewish morning prayer thanking God for imbuing us with wisdom and knowledge. And I think that that's what I'm referring to, that there is a universal wisdom and knowledge that we can become conduits for. So I'm going to tell you a no more story that goes to this point and how I got to this. Well, it started with one day I found myself an important person in an industry and being asked to speak in front of big audiences, and I'd never done public speaking before. And like all novice public speakers, I wrote my speech out, literally wrote it word for word on yellow paper. And I went to the podium in Boston in front of a thousand people and started reading my speech. I'm self aware enough to have realized after a few minutes that this is really not going well, that I'm reading from this yellow pad into nobody's liking this. Nothing about this is interesting or human or real. So I took the bold step of crumpling up the yellow pad paste paper, throwing it on the floor at my feet, and now it's just me and the mic and the audience, and I had to give it a go. And I was about a minute of complete silence where I tried to think of, okay, what next? And then I went and I would say I would give myself a c plus performance on that first day. But I realized it was better than the f, that I would have given myself before when I was reading. And I decided, I'm going to do this forever. I'm never going to prepare. And then I went a step further and I decided, because, you know, you remember back in the early 90s when I was in nomora, I was the only game in town. So the path into my office was a full line of people every day trying to borrow money from me. And I decided, I don't want to know who's coming to meet me. I don't want to know who they are. I don't want to know their background, and I don't want to know why they're coming. I'm going to hear and feel them in their authenticity, and I'm going to be able to react organically and authentically to what I feel in that moment, I don't know. I just came to that philosophical foundation of how to deal with people, and I never looked back. And I continue to operate to this day that way. But I can remember being literally amazed. So a meeting would happen with someone I'd never met before. They would explain to me what they were looking to accomplish, what their deal was, what they wanted from me. I would react completely organically. They would walk out, and I would often sit there and think to myself in reflection, where did the brilliant words that just came out of my mouth come from? Because they were not in my head, they were not pre thought, they were not pre planned, but somehow words just flowed out of my mouth brilliantly and beautifully that were almost not even mine. And it was almost an out of body experience. Like I was watching a movie that I was in, and every meeting was like that. Meeting after meeting was like that. And that's when I really started to appreciate this whole idea of there's knowledge and wisdom that jews pray for in the morning that is there. It's in the universe. And I don't understand it. So when you think about thinking outside the herd, well, I don't think that's a conventional way of thinking, but I do believe it very deeply. And I say that prayer with conviction every morning. [02:30:20] Speaker A: That's an incredible story. Since the audience of the podcast is aimed at young real estate professionals, please offer your thoughts on where you'd be focused today on both the investment and development businesses, product types, geographies, niches. And then I have two more questions. And that's it. [02:30:39] Speaker B: Well, again, I go back to the human behavior question. Yes, ask yourself and ask others, where do human beings want to experience life, and how do they want to experience life and create the physical spaces that address those desires. [02:31:01] Speaker A: Great answer. It's a great answer. [02:31:05] Speaker B: In the locations that people want to. [02:31:07] Speaker A: Be in, it's kind of first principles, thinking. [02:31:10] Speaker B: Yeah, it's pretty simple. [02:31:12] Speaker A: Yeah, it really is. What advice would you give your 25 year old self today? [02:31:20] Speaker B: Okay, this is really, again, I'll go against the grain. It's in my book. It's under a chapter entitled advice giving is senseless. I wouldn't give my 25 year old self any advice. The reason is this one, and perhaps most importantly in this case, what a 62 year old man thinks is right and wrong. And their perspective on life is completely inappropriate for a 25 year old person to be thinking. I know because of I've lived life, how challenging life is, how likely efforts are to meet with failure, and we don't want 25 year old people thinking that way. We want them swinging for the fences and being bold and daring. I still want to be bold and daring. So I don't even want to give myself the advice of a 62 year old, let alone a 25 year old. So I would say I would not give any advice. If I was pressed, hard pressed to give advice, it would be the very basic stuff like trust children. Trust your instincts to your children. Trust your instincts. Okay. Character and values matter a ton. Way more than financial reward. Treasure each moment. Put yourself in the position to enjoy your life with people who you can enjoy your life with and who will uplift you. Those are the basics, but those are the obvious ones. All right. [02:33:00] Speaker A: This is a question I ask every guest. And in this case, because you live in Los Angeles, I'm going to ask it in a different way than I normally ask my DC folks. If you could post a statement on a billboard on the 405 in Los Angeles for millions to see, what would it say? [02:33:24] Speaker B: Live aware. Two words. Because you can't fit a lot of words on a billboard. Live aware. [02:33:31] Speaker A: That's great, Ethan. Thank you very much. [02:33:34] Speaker B: All right. [02:33:34] Speaker A: Appreciate it very much. [02:33:35] Speaker B: It's a pleasure to be with you. [02:33:37] Speaker A: Appreciate it. And thank you, audience, for coming. Now, maybe sign a book or two. [02:33:46] Speaker B: No, of course. Absolutely. [02:33:49] Speaker A: Any questions from anybody? I didn't leave it open, but if anybody has any questions before they leave. [02:33:59] Speaker B: All right, so earlier in the podcast, you were discussing how young people today don't pay their dues or don't have to. I think that young people today that were influenced by the outsized successes at early ages of people like Mark Zuckerberg and people like that, I think they're not as inclined because they have data points that John and I didn't have. [02:34:34] Speaker C: When we were 25. [02:34:36] Speaker B: So when someone says, you got to really grind for 20 years before you're going to see the benefits of your success, or at least ten or at least five or at least seven or whatever it is, you can point to real data points and say, old man, just look at this kid. He's 25 and he's worth $20 billion or $100 billion. What the hell are you talking about? And I would just say, I don't know. I don't really understand that. You know what I mean? It's not my generation. So I think I don't condemn young people for this. It's just they have data points that we didn't have, and that's going to naturally cause them to think differently. And I don't judge that right or wrong, but I do feel that the journey of paying dues is a reward. That in and of itself is a rewarding journey. And I think that I feel a little sorry for the Mark Zuckerbergs of the world. Even Mark Zuckerberg, who made chief success very young. I achieved success very young. I was at the top of this industry and the financial industry in my 30s, not my 20s, but in my thirty s. And I wish I had. In retrospect, it would have been better if it came to me when I was in my late forty s. I probably was too young to fully appreciate it. Well, given that information, would you agree. [02:35:58] Speaker A: That what they're doing at their age. [02:36:02] Speaker B: Right now is based off of data points like you said they have, that you didn't have, but they're actually choosing to be great in their moment by making decisions to pursue innovation while avoiding some of the pitfalls in terms of how they spend their time building that career and actually using that time to enjoy and put time into people. Yeah. Again, I don't say what I said to judge them or to judge a generational difference. It's just an observation, that's all. It's not righter or wronger. It just is. Sam, I like my journey. I wouldn't trade it for their journey, but I hope they feel the same way. You know what I mean? We all get to love our own journey. It's our own journey. [02:37:01] Speaker A: Go ahead, Sam. This has been a masterful, it's just been a wonderful opportunity to be in the room with you and hear your journey. At the risk of, again, sailing too close to the wind with the podcast, one of the very intriguing topics is that of interest rates and the fact. [02:37:23] Speaker C: That your career coincided with this great. [02:37:25] Speaker A: Theme of interest rate decline. But your career also blossomed in an era where America had, at least in hindsight, unprecedented peace of prosperity. Perhaps in your lifetime, and comparatively to the lifetimes of the people in this room, I would say it's fairly not a controversial statement to say that. [02:37:51] Speaker B: The. [02:37:51] Speaker C: Shores are more rocky now geopolitically, both domestically and abroad. [02:38:00] Speaker A: Without getting into politics per se, what would be sort of your great fears. [02:38:06] Speaker C: Or if you're looking around corners or. [02:38:08] Speaker A: For people building a career, what are sort of some of the geopolitical omens that maybe you're tracking that are a source of concern or maybe a source of opportunity in terms of navigating the market? [02:38:22] Speaker B: Well, I'm a very big believer in the divine perfection of the world, so I don't see the God versus the devil fight that some people see. And I also don't see randomness. Like, that's scary. I see perfection. And I see that when bad things, so called bad things, happen to me, they're brought to me as a gift, to elevate me, to teach me. We don't learn from our successes. We learn from our stumbles and our falling and our failure. The world is going through a growing period, a learning period. And I think it's only through the revealing of our shortcomings that are brought to the surface do we all get to see it in all of its glory or grossness so that we can address it. I think that hopelessness is a very bad formula for a society. I don't think we have to look overseas to see that we're fomenting in this country. Hopelessness. Hopelessness like we've never seen in this country before. I'll give you a statistic. So, in the New York public school system, New York is, whether you like New York or not, it's considered, like, the most powerful city in the world, even. Right? So New York public school system has about a little less than a million students. It's rounded up to a million students. 11% of those students are homeless, which means that after school, they go home to the street or to homeless shelters. 11%, 70% of those students live below the poverty line. How is the future of New York going to be anything but challenged with that reality? How do we allow this to occur as a society? How do we allow our leadership? How do we elect leadership that doesn't even address or acknowledge or point out, let alone come up with solutions to this hopelessness that is being built inside of New York City, the power center of our country, and other cities all over the country. So I think that I said the words live aware would be what my two words would be and what my book is a calling for. One of the biggest mistakes that I think my generation has made, and I think continues to be made in these generations, is too much trust in government and the process of government, too much trust in. When we turn the faucet, there's this trust that clean water is going to come out that we can drink. When we turn on our shower, that water is going to come out that won't harm our skin, it's clean. Or we flush our toilet, that the refuse will go somewhere safe, or that we buy food, that it's healthy for our bodies. That's all trust that we're investing in government. And I think that what we are learning is that that trust has been poorly invested with no checks and balances by the people in a democracy who are supposed to be aware and alert and investing that trust. So I think we're going to learn as a society that when you don't take that stuff seriously, there's going to be a big price to be paid and it'll be unfortunate and uncomfortable. And it's already unfortunate and already uncomfortable and manifesting itself in an argument and discussions in cities around this country that are divisive for sure and unhealthy for sure. And getting through that is going to be tough, but we will get through it. That's the other thing there's always going to be, because I believe, as I say in my last chapter, there's an inadvertent conspiracy amongst everyone to live tomorrow. Nobody wants today to be the last day they live, and no one wants the world to be ended as we know it. No matter whether we're poor, hopeless, homeless, rich, political, not political. We all want to get together and figure out how tomorrow can exist for all of us. And so I think that that inclination to solving problems will ultimately work. I believe in the american system. It's very uncomfortable when it's challenged and it is being challenged, but I believe that we'll come out of it okay. It's just going to be a bumpy road, and I think there's a lot of opportunity in being part of the solution instead of being part of the problem. I think the easy path is to be part of the problem, which is to be part of the divisive discussion, to be pro this and anti them. That's what everyone's defaulting to. I always go where no one's defaulted to, which is, hey, let's find a way to work together to create tomorrow. Be great. There's a lot of rewarding down there. Not a lot of people agree about it.