Ken Bacon- Intelligent and Networked (#85)

Bio

Kenneth Bacon is Co-founder and Managing Partner of RailField Partners. Prior to forming RailField, Ken spent 19 years at Fannie Mae, most recently as Executive Vice President and Head of the Multifamily Business. During his tenure, Ken oversaw a portfolio of $195 billion in assets, consisting of multifamily mortgages, conventional equity, low-income housing tax credits and mezzanine debt. Prior to running the multifamily division, he was responsible for the management of the American Communities Fund, and the affordable lending and community development initiatives of Fannie Mae.

Ken was previously Director of the Office of Securitization for the Resolution Trust Corporation (“RTC”) and held officer positions at Morgan Stanley and Kidder Peabody. Ken currently serves as Chairman of the Board of Welltower, a publicly traded REIT, as well as serving on the board of directors of Comcast, Ally Financial and Arbor Realty Trust. He is active in several non-profit and trade groups, including the Real Estate Executive Council, the National Multifamily Housing Council, Martha’s Table and the Urban Institute.

He is an alumnus and former trustee of Stanford University, where he received his B.A. He also holds a M.Sc. in International Relations from the London School of Economics where he studied as a Marshall Scholar, and a M.B.A. from Harvard Business School. In recognition of his service to the Marshall Scholars program, he was awarded an Order of the British Empire by the British government.

Show Notes

Role and Responsibilities at Rayfield

• Ken describes his role as a door opener, investor finder, and part of the investment committee with John Siegel. (7:10)
• Process of Deal Evaluation [7:40]
• Ken explains the process of evaluating deals with John Siegel and Todd Watkins, and how they prioritize avoiding losses over making profits. (8:00)

Origin Story & Early Education

• Ken talks about growing up in Houston, Texas during a segregated society, and his parents’ backgrounds as a physician and a school teacher. (9:40)
• Father’s Education- [10:15]
• Ken talks about his father’s education and upbringing among the richest people in the country- Grew up in Lake Forest, IL (11:30)
  • Reason for Attending Fisk [12:20]
    • Ken explains why his father ended up attending a historically black college, Fisk, in Nashville.
• Mother’s Background [13:00]
  • Ken talks about his mother’s background and how she met his father, leading to their move to Houston.
  • Growing up in a culture of education [14:00]
  • Ken talks about the importance of education in his family and how it influenced him. (16:30)
  • Role models in a segregated neighborhood (17:10)
• Ken talks about how growing up in a segregated neighborhood provided him with role models who looked like him. (17:30)
  • Realities of segregation
• Ken discusses the limited options available to black people in terms of mortgages and careers during segregation, as well as instances of police brutality. (18:15)
  • Childhood friends’ success [20:00]
• Ken talks about his successful childhood friends, including a news anchor and a Harvard graduate. (21:00)
  • From boardrooms to jail (22:15)
• Ken shares stories of both successful and incarcerated childhood friends. (22:30)
• Brother’s education [23:30]
  • Ken discusses his brother’s education and how he integrated a predominantly white school- Lake Forest Academy valedictorian
• Growing up with role models [25:00]
• Ken talks about his childhood and how his father exposed him to different cultures and history, including meeting famous musicians and politicians. (25:30)
  • Count Basie, Bobby Blue Bland came to his home
• Barbara Jordan and affordable housing [26:30]
  • Ken talks about his father’s involvement in Barbara Jordan’s campaign and his own work with affordable housing, including an upcoming speaking engagement.
• Racial awakening in Illinois [28:15]
  • Ken discusses his experience with racism in Evanston, Illinois, which was a surprise to him after growing up in the South where racism was more overt
• Ken discusses his experience taking honors classes in Illinois and the challenges he faced as a black student. (30:00)
  • Teacher asked him to take AP classes (31:15)
• Applying to college (32:45)
• Ken talks about his experience applying to college and the challenges he faced due to his race and grades. (33:15)
  • Ken talks about his high school years, including his academic achievements and helping his friends with their grades. (34:15)
• Elitism and education [35:30]
  • Ken talks about how elitism is often associated with class and race, and how one of his teachers believed in him. (36:00)

Stanford

• Choosing a university- Went to Stanford [36:30]
• Ken talks about his decision to attend Northwestern University and his ties to the University of Michigan. (37:45)
• Falling in love with Stanford (38:20)
  • Ken talks about falling in love with a church in the foothills and how it still takes his breath away today when he visits.
• Applying to universities
• Ken talks about applying to universities and how his brother convinced him not to apply to Berkeley and how his mother always pushed for the best. (38:50)
  • Getting involved in student politics [41:50]
  • Ken talks about getting involved in student politics and taking anthropology courses on Africa and the West Indies. (42:00)
  • Interest in academia [43:15]
  • Ken talks about his interest in academia and his desire to become a professor.
    • Received a Marshall Scholarship to study in London (44:30)

London School of Economics

• Arrival in London [46:00]
  • Ken talks about his arrival in London in the 1970s and the class disparities he observed. (46:15)
  • Interest in business [46:40]
• Ken talks about his interest in business, sparked by conversations with students from former British colonies studying law and business. (46:50)
• Ken talks about how he got interested in business while studying in London and meeting people from the investment banking industry. (48:20)
• Recycling the Oil Dollars [49:40]
  • Ken talks about attending an event in 1976-77 about recycling oil dollars and meeting people from Saudi Arabia, Kuwait, and JP Morgan. (50:00)
• Ken talks about how segregation made him associate business and wealth with race and how seeing people who looked like him achieve extraordinary wealth in London changed his orientation. (51:30)

Harvard Business School

• Ken talks about his experience selling oil field supply companies for IBM and his decision to pursue an MBA at Harvard. (52:30)
• Ken’s experience at Harvard Business School [53:45]
  • Ken discusses his experience at Harvard Business School, including the relationships he formed with classmates and professors. (54:15)
  • How Ken got into finance [56:00]

Investment Banking- Kidder Peabody & Morgan Stanley

• Ken talks about how he accidentally ended up in investment banking after attending a reception for Kidder Peabody in public finance. (57:10)
  • Joining Kidder Peabody [58:00]
  • Ken talks about his experience joining Kidder Peabody in public finance and how he got to work with people in Texas. (58:15)
    • Dealing with people in Texas [59:00]
  • Ken shares his experience dealing with people in Texas and how he was able to communicate with them effectively. (59:30)
  • Learning about securitization [1:00:15]
• Ken talks about how he learned about securitization while working at Kidder Peabody and his role in the company’s securitization efforts. (1:00:45)
• Ken talks about his experience at Morgan Stanley during the late 80s and the savings and loans crisis. (1:01:45)
• Soul Searching [01:03:15]
  • Ken discusses his decision to leave investment banking and look for something outside of banking.

Resolution Trust Corporation (RTC)

• Ken talks about his work at the Resolution Trust Corporation Oversight Board and the fight to bundle and sell non-performing commercial mortgages through securitization. (1:04:10)
  • Meeting Wall Street Titans [1:06:30]
  • Ken talks about his encounters with famous Wall Street figures such as Ace Greenberg at Bear Stearns and his opinion on their honesty and charisma. (1:07:00)
• Comparison of Investment Banks [01:07:45]
  • Ken compares the risk management and transparency of Goldman Sachs and Bear Stearns, and mentions other investment banks and traders he respected.

Fannie Mae

• Mission and Money at Fannie Mae [1:10:20]
  • Ken discusses his motivation for joining Fannie Mae, which was to make money while doing good by putting people in housing. He also talks about his personal aspirations and values. (1:10:30)
  • Ken’s motivations [01:10:50]
  • Ken discusses his motivations for working in the multi-family investment industry, including his desire to address the wealth gap between black and white communities. (1:11:30)
  • The origins of Fannie Mae’s multi-family program [01:13:30]
    • Ken discusses the origins of Fannie Mae’s multi-family program and the individuals who started and ran it, including Larry Dale and Adrian Corbiere. (1:13:45)
• Assessing risk management in the financial industry [01:15:20]
  • Ken discusses the role of risk management in the financial industry, including the failures of some individuals and the importance of imagination in anticipating potential risks.
  • The Origins of Mortgages [01:14:05]
    • Ken discusses the history of mortgages and how it was a field for those who didn’t fit in corporate finance. (1:16:45)
  • Lessons from the 2008 Financial Crisis [1:17:45]
    • Ken discusses how ignoring risk and not listening to advice led to the downfall of firms like Lehman Brothers and Merrill Lynch. (1:18:30)
• The Differences Between Fannie Mae and Freddie Mac [01:19:20]
  • Ken explains the historical roots and differences between the Fannie Mae and Freddie Mac programs, including their focus on underwriting and borrower concerns. (1:19:30)
  • Distinction between HUD and Fannie/Freddie [01:21:30]
    • Ken discusses the differences between the lending processes of HUD and Fannie/Freddie, and the challenges of government bureaucracy in lending. (1:22:00)
• Control over lenders in Fannie/Freddie
  • Ken talks about how he purposely kept the number of lenders small in Fannie/Freddie to maintain control and prevent fraud. (1:24:00)
• Relationships in business
  • Ken shares his philosophy on business relationships, drawing from his mother’s advice on marriage and the importance of embracing shared values. (1:24:30)
  • Relationships Matter [1:25:45]
  • The importance of building relationships in the lending industry and how it affects business success. (1:26:15)
• Building Trust [01:27:45]
  • The significance of trust in business relationships and how it can help resolve conflicts and overcome challenges.
• Different Types of Business Relationships [01:28:19]
  • Comparison of different types of business relationships and how they affect the level of effort and trust required.
• The impact of the global financial crisis [01:29:57]
  • Ken talks about the impact of the global financial crisis on his business and personal life.
• The government takeover [01:30:24]
  • Ken talks about the moment he found out about the government takeover and his initial reaction.
• Sticking it out [01:32:58]
  • Ken talks about his decision to stay and stick it out through the crisis, despite personal and professional challenges.
• Ken’s experience during the 2008 financial crisis [01:34:57]
  • Ken talks about his experience during the 2008 financial crisis, including a conversation with a colleague and the aftermath of not receiving a bonus.
• Threats and security concerns [01:37:33]
  • Ken discusses threats and security concerns he faced after his compensation was made public and how he responded to them.
• Ken’s decision to leave Fannie Mae [01:39:04]
  • Ken talks about his decision to leave Fannie Mae after feeling tired of being associated with the negative legacy of the company’s lobbying efforts.
• Burnout at Fannie Mae [01:40:40]
  • Ken talks about being burnt out and tired of fighting at Fannie Mae, and how many executives had left by 2009.

Railfield

• Starting Railfield [01:42:19]
  • Ken talks about how he started Railfield with Darren Thompson, and how they got the name for the company.
• Advisory work at Artemis [01:43:26]
• Ken talks about how Railfield got contracts with an insurance company, a government agency, and an online real estate platform, and how they ended up at Artemis.
• Starting Railield [01:45:13]
  • Ken talks about how he started Railfield, a multi-family investment firm, and the opportunity that presented itself.
• Losing Money and Starting as an Entrepreneur [01:47:56]
  • Ken talks about losing money and starting as an entrepreneur at that stage in life, and the emotional support he received from his friends.
• Dispute about Bonus at Morgan Stanley [01:48:58]
  • Ken talks about a dispute he had about his bonus at Morgan Stanley and the advice his mother gave him.
• Relationships and Growth [01:50:57]
  • Ken talks about the importance of building relationships and how it helped Railfield grow, including the role of Ric Campo and Hal Holliday.
• Finding Money and Deals [01:52:11]
  • Ken discusses the challenges of finding money and deals for Rayfield, including how they found family offices and the role of Greg Pinola and John Pacarro.
• Selling Deals [01:52:57]
  • Ken talks about the success of Railfield in 2021, including doing 400 million in deals and selling 200 million.
• Relationships Matter [01:55:05]
  • Ken talks about the importance of relationships in business and how they helped his firm secure a deal with Citibank.
• Acquisition Strategy [01:55:21]
  • Ken discusses his firm’s acquisition strategy, which focuses on secondary and tertiary markets, and how they choose which markets to invest in.
• Concerns about Rent Control [01:58:21]
  • Ken expresses his concerns about rent control and how it can make it difficult for his firm to invest and manage their tenant base.
• Avoiding high-cost markets [01:59:12]
  • Ken explains why he avoids markets like New York and California due to the high cost of insurance and labor.
• Investigating Amazon’s housing equity fund [02:00:37]
  • Ken discusses his familiarity with Amazon’s housing equity fund and how it aligns with his investment strategy.
• Why he’s not a developer [02:02:20]
  • Ken explains why he’s not a developer, citing his lack of experience, risk aversion, and age as factors.
• Affordable Housing Challenges [02:05:25]
  • Ken discusses private companies like Amazon stepping up to affordable housing challenges and whether he sees this as a trend.
• Removing TOPA Register and Rent Control [02:09:36]
  • Removing the TOPA register and rent control in the District of Columbia could open up opportunities for investment to improve housing and offer incentives for affordable housing with density. Ken expresses his skepticism about TOPA and how it discourages outsiders from coming to the market.
• Law Firms and Affordable Housing [02:09:58]
  • Ken discusses the regulatory process and how it discourages the production of affordable housing, mentioning the involvement of law firms.
• Legal Infrastructure and Doing Business [02:11:27]
  • Ken discusses the legal infrastructure in Washington D.C. and how it affects doing business, including the involvement of attorneys.

Board Memberships

• Ken’s Board Experiences [02:12:35]
  • Ken talks about how he earned opportunities to participate in corporate boards, including his relationship with Comcast executives and his knowledge of the company.
• Board Memberships [02:14:19]
  • Ken talks about his experience serving on various boards, including Comcast’s, and how diversity played a role in his appointment.
• Progress and Diversity [02:16:16]
  • Ken discusses the need for progress in diversity and inclusion in the country and how it is happening, despite the myths that there aren’t enough qualified people.
• Roots of Success [02:17:17]
  • The importance of understanding someone’s roots and upbringing in driving their success, and Ken agrees, citing his own experience growing up.

Social & Philosophical Thoughts

• Role Models and Income Mobility [02:19:02]
  • Ken talks about the importance of having role models and how income mobility is becoming less common, especially in rural America.
• Resolving Social Pandemics [02:22:00]
  • The interviewer asks Ken about the social pandemic driven by divisiveness, including racial and gender configurations, and how the US can come together to resolve these issues.
• Changing Attitudes in Younger Generations [02:22:39]
  • Ken talks about the changing attitudes in younger generations, including the significant number of children of immigrants attending universities, and how his children do not see ethnicity as the first thing when talking about their friends.
• Impact of Immigration on Inflation [02:24:37]
  • Ken discusses the impact of immigration on inflation and wages in the US.
• Impact of Office Market Decline on Multi-Family Properties [02:26:39]
  • Ken talks about the ripple effects of the office market decline on multi-family properties and the importance of business activity in supporting restaurants.
• Encouraging Business Formation in Central Business Districts [02:28:07]
  • Ken suggests tax breaks and security measures to encourage the formation of businesses in central business districts and the creation of food courts to attract workers.
• ESG and Business Success [02:29:59]
  • Ken discusses the importance of ESG metrics in the commercial real estate sector and how they impact long-term success.
• Incorporating Diversity in Business [02:32:00]
  • Ken talks about the importance of diversity in business and how it drives trends in the country.

Personal Thoughts

• Proud Moments in Career [02:33:38]
  • Ken shares his biggest wins, including supporting diverse businesses and inspiring others, and his involvement in the dust program.
• Real Estate Developments [02:35:41]
  • Ken talks about the tangible impact of real estate developments in neighborhoods and mentions specific projects he is proud of.
• Loss of Affordable Housing [02:36:59]
  • Ken discusses the loss of Fannie Mae and the unfair blame placed on affordable housing for the financial crisis, as well as the loss of an idea that big banks could help close the homeownership gap.
• Diversity in Corporate America [02:39:40]
  • Ken expresses surprise and satisfaction with the progress made in diversity in corporate America, citing examples of women and people of color in leadership positions in major companies.
• Traps for black executives [02:41:33]
  • Ken talks about the two traps that black executives should avoid: the anger trap and the trap of ignoring feedback due to race.
• Balancing race and setbacks [02:42:38]
  • Ken discusses the challenge of balancing the impact of race on setbacks and not obsessing over it.
• Billboard Statement [02:44:22]
  • Ken shares his advice for a billboard message: “Listen. Read. Think. Act. Love.”

Postscript

• Kevin Dean gives his perspectives and asks John Coe his observations

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