1 00:00:06,160 --> 00:00:08,800 Speaker 1: Welcome our trillance. I'm Joel Webber and I'm Eric bel 2 00:00:08,840 --> 00:00:14,840 Speaker 1: Tunis Eric. We're coming out of summer. There's a topic 3 00:00:15,160 --> 00:00:19,759 Speaker 1: that we've talked about a little bit before, uh, and 4 00:00:19,840 --> 00:00:22,000 Speaker 1: it's one that's sort of parallel to the E t 5 00:00:22,160 --> 00:00:24,919 Speaker 1: F world. And we've got a great, great guest today. 6 00:00:24,920 --> 00:00:28,400 Speaker 1: Who's gonna I hope illuminate a little bit more about it, 7 00:00:28,400 --> 00:00:31,760 Speaker 1: who's joining us and what are we gonna talk about? Yeah, so, uh, 8 00:00:31,920 --> 00:00:34,600 Speaker 1: we got probably the perfect guest for this, Patrick O'Shaughnessy. 9 00:00:35,000 --> 00:00:36,519 Speaker 1: A lot of people know him. He's got one of 10 00:00:36,560 --> 00:00:39,919 Speaker 1: the most popular podcasts called invest like the Best, highly recommended, 11 00:00:40,159 --> 00:00:43,839 Speaker 1: very interesting, great interviewer. I was on at once and 12 00:00:44,040 --> 00:00:47,960 Speaker 1: my Twitter follower account jumped by like five immediately, which 13 00:00:47,960 --> 00:00:50,720 Speaker 1: was like at the time ten percent pop. I had 14 00:00:50,760 --> 00:00:53,760 Speaker 1: never appeared on anything where I got that immediate hit 15 00:00:53,840 --> 00:00:56,960 Speaker 1: on Twitter. So just to give you some idea of 16 00:00:56,960 --> 00:01:00,200 Speaker 1: how the Riachi has now, that's his side gig. His 17 00:01:00,320 --> 00:01:03,720 Speaker 1: main gig is O'Shaughnessy U Asset Management, which is a 18 00:01:03,720 --> 00:01:08,200 Speaker 1: asset manager that it's interesting. I met Patrick behind backstage 19 00:01:08,200 --> 00:01:10,640 Speaker 1: at et f i Q, which is the TV show 20 00:01:10,640 --> 00:01:12,520 Speaker 1: I do, and he had just filed for an e 21 00:01:12,600 --> 00:01:16,080 Speaker 1: t F but then over time decided not to launch 22 00:01:16,120 --> 00:01:18,679 Speaker 1: it and go into direct indexing instead. This is a 23 00:01:18,680 --> 00:01:22,000 Speaker 1: little bit what Morgan Stanley did. A couple issuers started 24 00:01:22,040 --> 00:01:25,640 Speaker 1: to prepare direct indexing platforms. Now for people out there, 25 00:01:26,080 --> 00:01:27,640 Speaker 1: I'll just break it down like this. You know you 26 00:01:27,640 --> 00:01:32,640 Speaker 1: can get music in vinyl, compact discs, cassette tapes, streaming, right, 27 00:01:32,680 --> 00:01:35,040 Speaker 1: there's many ways to get your Bob Dylan's song right, 28 00:01:35,680 --> 00:01:38,480 Speaker 1: same with investing. Right, you've got mutual funds, e t 29 00:01:38,680 --> 00:01:41,039 Speaker 1: f s, and I would say direct indexing, or Patrick 30 00:01:41,040 --> 00:01:43,520 Speaker 1: calls it custom indexing, is sort of one of the 31 00:01:43,560 --> 00:01:46,720 Speaker 1: newer waves, although it's actually an older wave because it's 32 00:01:46,760 --> 00:01:48,880 Speaker 1: it's a separately managed to count where you just own 33 00:01:48,920 --> 00:01:51,280 Speaker 1: all the stocks yourself. And that used to be hard 34 00:01:51,280 --> 00:01:54,160 Speaker 1: for retail because and so institutions did it. But now 35 00:01:54,200 --> 00:01:57,640 Speaker 1: with trading getting cheaper, it's now more available to retail, 36 00:01:57,720 --> 00:02:00,640 Speaker 1: so it's been democratized and it's been that is a 37 00:02:00,720 --> 00:02:02,920 Speaker 1: sort of a wave of the future, and so I 38 00:02:03,000 --> 00:02:05,440 Speaker 1: think it's important to go over this because it is 39 00:02:05,480 --> 00:02:08,240 Speaker 1: an avenue investors have availed to the available to them, 40 00:02:08,280 --> 00:02:10,560 Speaker 1: and it's also a topic we debate on our team 41 00:02:10,560 --> 00:02:13,000 Speaker 1: a lot. How big will this get? And it's a 42 00:02:13,280 --> 00:02:15,000 Speaker 1: it's like E S G in my opinion in terms 43 00:02:15,000 --> 00:02:18,240 Speaker 1: of one of those uh things that isn't No one's 44 00:02:18,280 --> 00:02:21,239 Speaker 1: totally on the same page about some people very bullish, 45 00:02:21,280 --> 00:02:23,400 Speaker 1: some people less so. So I think we should dig 46 00:02:23,400 --> 00:02:26,040 Speaker 1: into the pros and cons and sort of the future 47 00:02:26,080 --> 00:02:29,200 Speaker 1: of this area. Alright, I think you did a pretty 48 00:02:29,200 --> 00:02:32,400 Speaker 1: good uh summary there. We'll see if Patrick takes issue 49 00:02:32,400 --> 00:02:36,760 Speaker 1: with that. So again Patrick O'Shaughnessy, CEO of OSAM, which 50 00:02:36,760 --> 00:02:42,160 Speaker 1: is part of Franklin Templeton, this time on trillions invest 51 00:02:42,280 --> 00:02:47,200 Speaker 1: Like Patrick O'Shaughnessy, Patrick, welcome joints, Joel and Eric. Thanks 52 00:02:47,240 --> 00:02:50,239 Speaker 1: so much for having me. Okay, Patrick, um, I want 53 00:02:50,280 --> 00:02:53,919 Speaker 1: to ask you first and foremost about direct indexing, which 54 00:02:54,000 --> 00:02:58,239 Speaker 1: you call customer indexing. Why why does the world need that? Well, 55 00:02:58,360 --> 00:03:01,480 Speaker 1: I think it's important to define the difference between direct 56 00:03:01,520 --> 00:03:03,920 Speaker 1: and custom indexing. Direct indexing, as Eric points out, as 57 00:03:04,000 --> 00:03:06,840 Speaker 1: is quite old. It's been around for decades. I think 58 00:03:06,960 --> 00:03:11,440 Speaker 1: it is a very simple, uh product. You take whatever 59 00:03:11,480 --> 00:03:14,000 Speaker 1: exposure you want, let's say it's the SP five. You 60 00:03:14,080 --> 00:03:17,440 Speaker 1: own all or most of the stocks directly in a 61 00:03:17,480 --> 00:03:21,000 Speaker 1: separate account for each investor, and you trade those stocks 62 00:03:21,040 --> 00:03:23,880 Speaker 1: to generate tax losses, which become an asset to the investor, 63 00:03:23,960 --> 00:03:25,840 Speaker 1: which is possible because of the separate accounts. So the 64 00:03:25,840 --> 00:03:28,320 Speaker 1: separate account is the key sort of vehicle. But the 65 00:03:28,360 --> 00:03:32,400 Speaker 1: strategy is really deliver the SMP five returns effectively, but 66 00:03:32,520 --> 00:03:35,280 Speaker 1: give me this extra asset of tax losses that I 67 00:03:35,280 --> 00:03:37,760 Speaker 1: can use to offset gains elsewhere. You might call this 68 00:03:37,840 --> 00:03:40,040 Speaker 1: tax alpha. There's a lot of different terms for it, 69 00:03:40,320 --> 00:03:42,520 Speaker 1: and that's the strategy. That's it, And you're not trying 70 00:03:42,520 --> 00:03:44,360 Speaker 1: to do anything else, and you're not trying to outperform 71 00:03:44,480 --> 00:03:47,600 Speaker 1: the index. You're not trying to do anything customer specialized. Uh, 72 00:03:47,640 --> 00:03:50,800 Speaker 1: you just are getting exposure plus this tax boost. Custom 73 00:03:50,840 --> 00:03:53,800 Speaker 1: indexing is something that I think has only been made 74 00:03:53,800 --> 00:03:55,640 Speaker 1: possible and we were the first to do it. We 75 00:03:55,920 --> 00:03:58,320 Speaker 1: came up with that term custom indexing in the last 76 00:03:58,400 --> 00:04:01,320 Speaker 1: three or four years because of software and technology. So 77 00:04:01,720 --> 00:04:04,800 Speaker 1: what custom indexing brings to the table is a million 78 00:04:04,880 --> 00:04:10,520 Speaker 1: other considerations that each investor might have, preferences, circumstances, attack 79 00:04:10,600 --> 00:04:14,320 Speaker 1: situation that's different than than others, which can be accommodated 80 00:04:14,440 --> 00:04:17,440 Speaker 1: in the strategy itself. So whereas direct indexing is very 81 00:04:17,480 --> 00:04:20,960 Speaker 1: much one size fits all, custom indexing is one size 82 00:04:21,000 --> 00:04:24,240 Speaker 1: fits one, which is enabled by technology. And obviously we 83 00:04:24,240 --> 00:04:26,479 Speaker 1: can go into it to see how people use this 84 00:04:26,520 --> 00:04:28,239 Speaker 1: because we've got the data. We've got you know, nearly 85 00:04:28,279 --> 00:04:30,960 Speaker 1: two thousand accounts that have been open a bit north 86 00:04:30,960 --> 00:04:34,039 Speaker 1: of three billion dollars managed to the platform today, so 87 00:04:34,320 --> 00:04:36,080 Speaker 1: we can tell you, you you know, how people use this 88 00:04:36,160 --> 00:04:39,719 Speaker 1: to customize. But I do think that, like anything interesting, 89 00:04:39,760 --> 00:04:43,760 Speaker 1: it's something enabled by relatively new technology and allows things 90 00:04:43,800 --> 00:04:46,599 Speaker 1: to be much more tailored to the individual versus you know, 91 00:04:46,640 --> 00:04:49,360 Speaker 1: just give me the SMP. Okay, so you're like a 92 00:04:49,400 --> 00:04:54,320 Speaker 1: civilo tailor, but with with better scissors, uh for a 93 00:04:54,400 --> 00:04:59,880 Speaker 1: terrible comparison technology, enhanced scissors maybe. UM. But I'm curious 94 00:04:59,880 --> 00:05:01,440 Speaker 1: in part because we talked to a lot of people 95 00:05:01,640 --> 00:05:04,960 Speaker 1: who are in the E t F world and look 96 00:05:04,960 --> 00:05:06,720 Speaker 1: at E t F S as like a great technology, 97 00:05:06,720 --> 00:05:09,320 Speaker 1: and you basically kind of like looked in the headlights 98 00:05:09,360 --> 00:05:11,160 Speaker 1: of the E t S and we're like, I'm gonna 99 00:05:11,160 --> 00:05:13,800 Speaker 1: do something different than that. Why and how do you 100 00:05:13,800 --> 00:05:15,920 Speaker 1: feel about E t F. So I guess there's there's 101 00:05:15,920 --> 00:05:18,600 Speaker 1: there's two angles on this, both of which matter. H 102 00:05:18,760 --> 00:05:21,200 Speaker 1: One is the business angle from our perspective, and two 103 00:05:21,240 --> 00:05:23,400 Speaker 1: is the investing angle from the customer's perspective, So I'll 104 00:05:23,400 --> 00:05:26,360 Speaker 1: touch on both. When we filed for that e t F, 105 00:05:26,920 --> 00:05:30,080 Speaker 1: it was because we wanted to do something more accessible 106 00:05:30,080 --> 00:05:32,520 Speaker 1: than what we had done in the past, and e 107 00:05:32,600 --> 00:05:34,680 Speaker 1: t f s were obviously big and growing and remain 108 00:05:34,760 --> 00:05:37,600 Speaker 1: big and growing. But when we stared at this from 109 00:05:37,600 --> 00:05:41,280 Speaker 1: a business competition standpoint, it kind of looked like the 110 00:05:41,320 --> 00:05:44,760 Speaker 1: worst possible scenario you could imagine in business. There was 111 00:05:44,880 --> 00:05:48,760 Speaker 1: effectively unlimited competition. You felt like we were entering a 112 00:05:48,839 --> 00:05:52,760 Speaker 1: pure commodity game. You're entering a pure price war where 113 00:05:52,760 --> 00:05:54,880 Speaker 1: you're just there's no there is no pricing power, you're 114 00:05:54,880 --> 00:05:59,280 Speaker 1: a price taker. There's insane competition for mind share and 115 00:05:59,480 --> 00:06:02,400 Speaker 1: pre exist sting, you know, guerrillas. It just sort of 116 00:06:02,400 --> 00:06:04,080 Speaker 1: felt like, this is the worst This is actually the 117 00:06:04,160 --> 00:06:08,200 Speaker 1: worst idea we've ever had. Um and hold Joel, Joel, 118 00:06:08,240 --> 00:06:10,120 Speaker 1: that is exactly why I call it the terror Dome. 119 00:06:11,120 --> 00:06:14,240 Speaker 1: It is brutal. It really is. Uh he just described it. 120 00:06:14,320 --> 00:06:16,680 Speaker 1: I can I can understand that that take takes a 121 00:06:16,760 --> 00:06:19,640 Speaker 1: tardom that feels like buying lottery tickets like some some 122 00:06:19,760 --> 00:06:22,120 Speaker 1: payoff right. There are some et F franchises that come 123 00:06:22,160 --> 00:06:24,919 Speaker 1: from nowhere, you know, ARC is the prime example, and 124 00:06:24,960 --> 00:06:27,240 Speaker 1: become huge and great businesses. But the number of dead 125 00:06:27,880 --> 00:06:30,960 Speaker 1: uh in that battlefield is insane. And so as we 126 00:06:31,120 --> 00:06:33,920 Speaker 1: as I, as we and I got deeper into that consideration, 127 00:06:34,000 --> 00:06:36,559 Speaker 1: we just thought, this is just a terrible idea, uh, 128 00:06:36,760 --> 00:06:39,360 Speaker 1: but we still want to apply. We were technology experts. 129 00:06:39,400 --> 00:06:41,719 Speaker 1: We had built all this technology for our own purposes 130 00:06:42,040 --> 00:06:45,560 Speaker 1: as quantitative factor investors for years, for for a decade, 131 00:06:46,040 --> 00:06:48,360 Speaker 1: and we started to ask the question, how could we 132 00:06:48,800 --> 00:06:51,799 Speaker 1: take what we've built for our own purposes and effectively 133 00:06:51,800 --> 00:06:54,240 Speaker 1: turn it over to others. Very inspired by the Amazon 134 00:06:54,360 --> 00:06:56,640 Speaker 1: Web Services story. In fact, I spent a lot of 135 00:06:56,640 --> 00:06:59,720 Speaker 1: personal time with executives. They're understanding how they did that, 136 00:07:00,080 --> 00:07:02,080 Speaker 1: taking something they had built for the retail business and 137 00:07:02,320 --> 00:07:05,960 Speaker 1: repurposing it as a general technology. And we came up 138 00:07:06,000 --> 00:07:08,039 Speaker 1: with this idea of custom indexing, which was to say, 139 00:07:08,080 --> 00:07:10,640 Speaker 1: take the tools we've built to build our own strategies 140 00:07:10,640 --> 00:07:12,960 Speaker 1: and do whatever you want with them. You know, blend 141 00:07:13,000 --> 00:07:15,800 Speaker 1: passive and active factor exposure in whatever ratios you want, 142 00:07:16,400 --> 00:07:19,400 Speaker 1: add custom filters, add add overweights to certain things that 143 00:07:19,440 --> 00:07:22,480 Speaker 1: you care more about. Incorporate you know, something like a 144 00:07:22,520 --> 00:07:26,320 Speaker 1: low basis concentrated stock position into your portfolio and let 145 00:07:26,400 --> 00:07:29,240 Speaker 1: us work around it in a tax advantaged way. Um. 146 00:07:29,640 --> 00:07:32,000 Speaker 1: We found very quickly people care a lot about taxes, 147 00:07:32,200 --> 00:07:34,640 Speaker 1: and they care about more than just tax alpha earned 148 00:07:34,640 --> 00:07:37,840 Speaker 1: through loss harvesting. They care about managing their taxes overall 149 00:07:38,280 --> 00:07:41,320 Speaker 1: with the use of their portfolio. And we saw all 150 00:07:41,320 --> 00:07:43,760 Speaker 1: these use cases people just sort of clawing them out 151 00:07:43,800 --> 00:07:46,520 Speaker 1: of us. UM. So really early on. I have this 152 00:07:46,600 --> 00:07:50,160 Speaker 1: theory now that uh, in business, for a new product, 153 00:07:50,880 --> 00:07:54,480 Speaker 1: something that's gonna work tends to work really fast. You 154 00:07:54,520 --> 00:07:56,960 Speaker 1: tend to see a pool of demand that was unmet 155 00:07:57,360 --> 00:08:00,320 Speaker 1: that people are ravenous for. And our early experiences with 156 00:08:00,400 --> 00:08:03,920 Speaker 1: Canvas the platform was that basically everybody said yes like 157 00:08:03,920 --> 00:08:07,160 Speaker 1: our our our hit rate on a demo of software 158 00:08:07,520 --> 00:08:10,240 Speaker 1: was basically everyone buying it more or less on the spot. 159 00:08:10,720 --> 00:08:13,560 Speaker 1: And most of those early partners have scaled, you know, 160 00:08:13,720 --> 00:08:16,640 Speaker 1: tremendously with us with tons of assets on the platform. 161 00:08:16,720 --> 00:08:19,760 Speaker 1: And so I think I think this latent demand for customization, 162 00:08:20,360 --> 00:08:25,000 Speaker 1: especially around really two things deep customization of taxes beyond 163 00:08:25,080 --> 00:08:28,320 Speaker 1: loss harvesting and back to your question of why people 164 00:08:28,320 --> 00:08:32,960 Speaker 1: need this and UH, customization of the blend between passive 165 00:08:33,080 --> 00:08:35,559 Speaker 1: and active factor exposures so that you don't have to 166 00:08:35,640 --> 00:08:37,199 Speaker 1: choose the E t F that has you know, whatever 167 00:08:37,960 --> 00:08:40,120 Speaker 1: values have any five percent passive you can you can 168 00:08:40,120 --> 00:08:42,920 Speaker 1: build your own. UH. And we see tremendous variation on 169 00:08:42,960 --> 00:08:47,280 Speaker 1: those two dimensions across the platform. UM, let's explore the 170 00:08:47,280 --> 00:08:49,440 Speaker 1: tax ALFHA I think for people out there, we've said 171 00:08:49,480 --> 00:08:52,960 Speaker 1: that word and tax less harvesting. Just explain this right, 172 00:08:53,040 --> 00:08:56,480 Speaker 1: so UM I would I'll talk about how the mutual 173 00:08:56,480 --> 00:08:58,560 Speaker 1: fund and et F works, and then you can do 174 00:08:58,920 --> 00:09:02,800 Speaker 1: the custom indexing in a mutual fund. Unfortunately, you get 175 00:09:02,800 --> 00:09:05,240 Speaker 1: a tax bill even if you're just sitting there. It's 176 00:09:05,240 --> 00:09:08,800 Speaker 1: probably the worst case scenario of all the structures because 177 00:09:08,840 --> 00:09:12,880 Speaker 1: the manager has to sell stocks to meet people leaving 178 00:09:12,880 --> 00:09:17,120 Speaker 1: the fund. That generates a taxable event that people sitting 179 00:09:17,120 --> 00:09:20,679 Speaker 1: there now have a capital gains distribution. The E t 180 00:09:20,840 --> 00:09:23,440 Speaker 1: F kind of solved for that. You don't get those 181 00:09:23,679 --> 00:09:29,280 Speaker 1: tax distributions. You you pay taxes when you sell it. UH, 182 00:09:29,360 --> 00:09:32,360 Speaker 1: and that really is a big deal for taxable accounts. 183 00:09:32,400 --> 00:09:34,360 Speaker 1: That's i'd say a top three advantage of the E 184 00:09:34,480 --> 00:09:37,800 Speaker 1: t F custom index, saying tries to take this even further, 185 00:09:37,840 --> 00:09:40,960 Speaker 1: and I'll I'll let Patrick describe it, but explain how 186 00:09:41,520 --> 00:09:44,480 Speaker 1: that tax alpha works relative to maybe the E T 187 00:09:44,640 --> 00:09:47,920 Speaker 1: F or selling. I think it's important to highlight limitations 188 00:09:47,920 --> 00:09:51,680 Speaker 1: of this approach to which is you need fairly low 189 00:09:51,760 --> 00:09:55,000 Speaker 1: turnover strategies for tax alpha to be a thing and 190 00:09:55,040 --> 00:09:58,040 Speaker 1: to work. Like you're never if you want a momentum 191 00:09:58,080 --> 00:10:00,160 Speaker 1: factor exposure, which is a strategy that turns out over 192 00:10:00,200 --> 00:10:02,360 Speaker 1: a lot like you should just buy any TF like that, 193 00:10:02,480 --> 00:10:05,880 Speaker 1: There's no way that turnover strategy is ever going to 194 00:10:05,960 --> 00:10:08,440 Speaker 1: have a tax alpha advantage on top of the ALP 195 00:10:08,640 --> 00:10:11,600 Speaker 1: the potential for excess return advantage from the factor. So 196 00:10:11,960 --> 00:10:15,880 Speaker 1: what that crossover point is probably like annual turnover something 197 00:10:15,960 --> 00:10:19,599 Speaker 1: like that. So we're really talking about low turnover strategies 198 00:10:19,640 --> 00:10:23,400 Speaker 1: here when we're talking about the potential tax advantage of 199 00:10:23,960 --> 00:10:26,199 Speaker 1: pure loss harvesting. I think there are other tax advantages 200 00:10:26,280 --> 00:10:29,040 Speaker 1: we can talk about that are independent of turnover, but 201 00:10:29,400 --> 00:10:31,920 Speaker 1: the famous one loss harvesting. You know, you need a 202 00:10:31,920 --> 00:10:34,360 Speaker 1: low turnover strategy. So that's that's the first, I think 203 00:10:34,400 --> 00:10:38,400 Speaker 1: key important point. But the concept itself is honestly pretty straightforward. 204 00:10:38,679 --> 00:10:41,680 Speaker 1: Let's just imagine a you know, a pair of you know, 205 00:10:41,720 --> 00:10:43,880 Speaker 1: all the car companies. Let's say they're all owned in 206 00:10:43,960 --> 00:10:47,520 Speaker 1: the sp they have similar characteristics. They tend to have 207 00:10:47,840 --> 00:10:51,080 Speaker 1: decently high correlation with one another. UM. One thing you 208 00:10:51,080 --> 00:10:53,600 Speaker 1: can do is monitor of the portfolio. We do it 209 00:10:53,640 --> 00:10:56,760 Speaker 1: on a daily basis and basically say, okay, what positions 210 00:10:56,800 --> 00:10:59,600 Speaker 1: that we've bought for this investor are trading at some 211 00:10:59,640 --> 00:11:03,000 Speaker 1: sort of loss where we can do a trade book 212 00:11:03,120 --> 00:11:07,439 Speaker 1: that loss, which is a taxable loss, and reinvest the 213 00:11:07,480 --> 00:11:12,280 Speaker 1: proceeds in a basket of securities which have conceptually similar 214 00:11:12,320 --> 00:11:14,679 Speaker 1: profiles as the one that we sold, so that our 215 00:11:14,760 --> 00:11:18,959 Speaker 1: overall exposure to the SMP five remains very constant. The 216 00:11:19,000 --> 00:11:21,120 Speaker 1: technical term for this would be tracking er. So we 217 00:11:21,160 --> 00:11:24,120 Speaker 1: have a tracking your budget. We can't get too different 218 00:11:24,320 --> 00:11:27,080 Speaker 1: than the underlying benchmark as we do this. If the 219 00:11:27,080 --> 00:11:29,640 Speaker 1: tracking your budget was really large, which is one of 220 00:11:29,640 --> 00:11:32,280 Speaker 1: the things that we allow on the platform because sometimes 221 00:11:32,280 --> 00:11:34,520 Speaker 1: people don't. Sometimes people say I have a huge gain, 222 00:11:34,559 --> 00:11:36,720 Speaker 1: I want to offset it generate as much loss as 223 00:11:36,800 --> 00:11:38,719 Speaker 1: humanly possible. I don't give a crap if I track 224 00:11:38,760 --> 00:11:41,319 Speaker 1: the SMP five hundred this year. That's something that traditional 225 00:11:41,640 --> 00:11:44,920 Speaker 1: direct indextors don't allow for but we see it happen. Um, 226 00:11:44,960 --> 00:11:47,640 Speaker 1: if you tracking your budget was five, which is huge, 227 00:11:48,280 --> 00:11:50,360 Speaker 1: we can generate a lot more losses. If it's one, 228 00:11:50,440 --> 00:11:52,880 Speaker 1: which is sort of the standard tracking our budget of one, 229 00:11:53,320 --> 00:11:55,560 Speaker 1: you're you're highly constrained. You can't do too much of 230 00:11:55,559 --> 00:11:59,000 Speaker 1: it because you start to stray from the underlying index itself. 231 00:11:59,120 --> 00:12:01,880 Speaker 1: So UM, that's the concept is you sell stuff that's 232 00:12:01,880 --> 00:12:04,719 Speaker 1: had a lost reinvested in similar stuff so that your 233 00:12:04,800 --> 00:12:09,000 Speaker 1: overall exposure remains fairly constant, and you you track pretty 234 00:12:09,000 --> 00:12:11,240 Speaker 1: tightly with the with the underlying index that you've chosen, 235 00:12:11,440 --> 00:12:14,719 Speaker 1: but you've generated this loss along the way. Um, And look, 236 00:12:14,760 --> 00:12:17,680 Speaker 1: there are drawbacks to this. I think as you mature 237 00:12:18,000 --> 00:12:21,120 Speaker 1: a single account, Let's say you know, you invest in 238 00:12:22,600 --> 00:12:24,520 Speaker 1: million dollars into an s m A and do this 239 00:12:24,559 --> 00:12:27,839 Speaker 1: loss harvesting over time, as markets tend to go up, 240 00:12:28,120 --> 00:12:30,920 Speaker 1: your opportunity for lost harvesting is very dependent on the 241 00:12:30,920 --> 00:12:33,440 Speaker 1: market environment that you're in. So markets straight up into 242 00:12:33,480 --> 00:12:35,200 Speaker 1: the right this isn't going to be as good as 243 00:12:35,200 --> 00:12:37,280 Speaker 1: a strategy. And one of the things that we found 244 00:12:37,840 --> 00:12:40,600 Speaker 1: when we launched was that, frankly, we thought the benefits 245 00:12:40,640 --> 00:12:43,880 Speaker 1: of tax less harvesting were somewhat overstated. You'd see, you know, 246 00:12:43,920 --> 00:12:47,480 Speaker 1: benefits like two d basis points of excess return, which 247 00:12:47,720 --> 00:12:49,800 Speaker 1: we just could We actually had a crisis of confidence. 248 00:12:49,800 --> 00:12:51,960 Speaker 1: We couldn't replicate this. We thought we were going we 249 00:12:51,960 --> 00:12:54,280 Speaker 1: were driving ourselves crazy, and then we when you dig 250 00:12:54,280 --> 00:12:57,000 Speaker 1: into the methodology of others, you realize, oh, they picked 251 00:12:57,000 --> 00:12:59,440 Speaker 1: like the absolute best ten year period. They haven't done 252 00:12:59,440 --> 00:13:01,760 Speaker 1: a bunch of that. Um They've made the best possible 253 00:13:01,800 --> 00:13:05,440 Speaker 1: assumptions on the tax law and what's usable and how 254 00:13:05,480 --> 00:13:08,200 Speaker 1: much offsetting gain you'll have to to actually be able 255 00:13:08,200 --> 00:13:11,599 Speaker 1: to capture that benefit. Um So, we saw very rosy 256 00:13:11,640 --> 00:13:14,600 Speaker 1: assumptions behind that number. But even with our we think 257 00:13:14,640 --> 00:13:17,920 Speaker 1: more conservative assumptions, we saw like seventy eight basis points 258 00:13:17,920 --> 00:13:21,600 Speaker 1: of annual pick up over just the what we call 259 00:13:21,640 --> 00:13:24,080 Speaker 1: the e t F equivalent, so buying s p y, 260 00:13:24,200 --> 00:13:26,480 Speaker 1: holding it, selling it, paying the tax at the end 261 00:13:27,000 --> 00:13:29,280 Speaker 1: versus doing it along the way as as you do 262 00:13:29,320 --> 00:13:32,240 Speaker 1: in in custom indexing. UM. So, we just think there's 263 00:13:32,240 --> 00:13:35,920 Speaker 1: a huge obvious long term benefit. It is is that 264 00:13:36,040 --> 00:13:38,760 Speaker 1: seven year eighty basis points like an annualized number over 265 00:13:38,840 --> 00:13:41,320 Speaker 1: ten years, or just how how much does it vary 266 00:13:41,360 --> 00:13:45,880 Speaker 1: its annualized over ten year holding periods, and uh, it 267 00:13:46,000 --> 00:13:49,080 Speaker 1: is the average of lots of vintages, So there's lots 268 00:13:49,080 --> 00:13:51,120 Speaker 1: of senior periods in history that we can study this on. 269 00:13:51,200 --> 00:13:52,840 Speaker 1: Like I said, most of the other studies pick one 270 00:13:52,880 --> 00:13:55,280 Speaker 1: that starts in like oh nine or oh eight or 271 00:13:55,280 --> 00:13:58,040 Speaker 1: oh seven when you have obvious, like huge upfront losses 272 00:13:58,080 --> 00:14:00,400 Speaker 1: that you can be booking. So it looks really good. 273 00:14:00,800 --> 00:14:03,640 Speaker 1: The range is pretty wide, Like there's ten year periods 274 00:14:03,760 --> 00:14:07,280 Speaker 1: where there's effectively zero net benefit to doing this. UM, 275 00:14:07,280 --> 00:14:11,160 Speaker 1: there's negative We didn't observe a negative one, so uh, 276 00:14:11,360 --> 00:14:13,559 Speaker 1: zero was sort of the lower bound, and like two 277 00:14:14,120 --> 00:14:17,120 Speaker 1: something was like the upper bound. So obviously we don't 278 00:14:17,200 --> 00:14:19,320 Speaker 1: know we we don't control the market, so we don't 279 00:14:19,320 --> 00:14:20,960 Speaker 1: know which of the which we're in that range it 280 00:14:21,000 --> 00:14:24,120 Speaker 1: will fall. Seven year eighty was sort of the average UM. 281 00:14:24,200 --> 00:14:26,560 Speaker 1: But we think that's a pretty darn good trade, especially 282 00:14:26,560 --> 00:14:29,200 Speaker 1: when you layer on all the other customization benefits that 283 00:14:29,520 --> 00:14:32,840 Speaker 1: basically everyone uses. So I mean, I'm curious, you're now 284 00:14:32,960 --> 00:14:36,880 Speaker 1: part of Franklin Templeton and that merger happened almost a 285 00:14:36,960 --> 00:14:40,720 Speaker 1: year ago, right, so yeah, so how did that? How 286 00:14:40,760 --> 00:14:43,160 Speaker 1: did that come together and why did you decide to 287 00:14:43,240 --> 00:14:45,800 Speaker 1: link up with someone? Ye, so uh to rewind time, 288 00:14:46,000 --> 00:14:49,200 Speaker 1: this was called April of two thousand and twenty one 289 00:14:49,760 --> 00:14:52,960 Speaker 1: of last year, we got a call from Franklin. We 290 00:14:52,960 --> 00:14:55,440 Speaker 1: weren't trying to sell the business. We weren't running any 291 00:14:55,440 --> 00:14:58,960 Speaker 1: sort of process or anything. We got a really memorable 292 00:14:58,960 --> 00:15:01,640 Speaker 1: call I did from a guy named Roger Paradiso at 293 00:15:01,640 --> 00:15:04,480 Speaker 1: Franklin Templeton who is now the executive chairman and sort 294 00:15:04,480 --> 00:15:08,520 Speaker 1: of the person responsible for OSAM at Franklin Templeton's he's 295 00:15:08,560 --> 00:15:13,240 Speaker 1: osam's executive chairman now. And UH, Roger basically said, we 296 00:15:13,320 --> 00:15:16,920 Speaker 1: have been doing research on these platforms like yours for 297 00:15:17,000 --> 00:15:19,760 Speaker 1: a long time. We think that the one you've built 298 00:15:19,800 --> 00:15:21,800 Speaker 1: is the best, and we want to we want to 299 00:15:21,840 --> 00:15:25,800 Speaker 1: partner with you. And he he actually knew more about 300 00:15:26,040 --> 00:15:29,960 Speaker 1: Canvas on that first call, having never talked to us 301 00:15:30,400 --> 00:15:33,240 Speaker 1: than probably anyone that I had ever talked to about 302 00:15:33,280 --> 00:15:35,920 Speaker 1: the platform outside of our firm um. So it was 303 00:15:35,920 --> 00:15:38,880 Speaker 1: clear they had done their homework and understood what we 304 00:15:38,920 --> 00:15:42,160 Speaker 1: think of as this huge market opportunity and for a 305 00:15:42,160 --> 00:15:45,040 Speaker 1: new category that we had created. And UH, it moved 306 00:15:45,160 --> 00:15:47,480 Speaker 1: very quickly from there. I actually was in California. I 307 00:15:47,520 --> 00:15:49,960 Speaker 1: flew back, I completely cut my trip off, flew back 308 00:15:50,000 --> 00:15:53,440 Speaker 1: the next day, hiked with Roger for hours in the 309 00:15:53,520 --> 00:15:55,800 Speaker 1: local woods, which is something I like to do, and 310 00:15:56,040 --> 00:15:58,880 Speaker 1: got to know each other very quickly, and it unfolded 311 00:15:58,920 --> 00:16:00,920 Speaker 1: from there. We didn't, you know, we run like a 312 00:16:01,000 --> 00:16:03,960 Speaker 1: process like it just it was clear that they wanted 313 00:16:04,080 --> 00:16:06,880 Speaker 1: us for very good reasons and that they brought to 314 00:16:06,920 --> 00:16:10,240 Speaker 1: the table effectively all the things that we didn't have. So, 315 00:16:10,360 --> 00:16:13,320 Speaker 1: you know, we we had been a relatively small boutique 316 00:16:13,320 --> 00:16:17,040 Speaker 1: firm um for twelve years or so at that time, 317 00:16:17,560 --> 00:16:20,560 Speaker 1: and uh, we had a two and a half person 318 00:16:21,040 --> 00:16:24,960 Speaker 1: sales team, which is not big. And while while those 319 00:16:24,960 --> 00:16:26,880 Speaker 1: two and a half, you know, I think we're the 320 00:16:26,880 --> 00:16:29,440 Speaker 1: equivalent of like seven or ten normal sales people, they 321 00:16:29,440 --> 00:16:32,440 Speaker 1: were incredible. There's only so much hours in the day. 322 00:16:32,760 --> 00:16:34,920 Speaker 1: And we had hit upon this new thing that that 323 00:16:35,440 --> 00:16:37,280 Speaker 1: you know, we had never been a big sales organization. 324 00:16:37,400 --> 00:16:39,960 Speaker 1: We frankly didn't know how to scale a sales organization. 325 00:16:40,400 --> 00:16:42,720 Speaker 1: And Franklin, with a trillion and a half of assets 326 00:16:42,800 --> 00:16:45,680 Speaker 1: under management or whatever it is, had one of the 327 00:16:45,800 --> 00:16:49,400 Speaker 1: you know, most scaled up distribution forces with relationships everywhere 328 00:16:49,520 --> 00:16:52,480 Speaker 1: in our entire industry, and that to us felt like 329 00:16:52,560 --> 00:16:55,120 Speaker 1: sort of a match made in heaven um. And indeed, 330 00:16:55,120 --> 00:16:56,880 Speaker 1: that's you know, what we've seen so far is that 331 00:16:57,200 --> 00:16:59,520 Speaker 1: they bring a bazooka to the knife fight that we 332 00:16:59,520 --> 00:17:02,800 Speaker 1: were fighting. And we're only peter or nine months into this, 333 00:17:02,840 --> 00:17:05,399 Speaker 1: so it's it's still fresh and new. But that's the 334 00:17:05,440 --> 00:17:16,000 Speaker 1: story behind the partnership. I was at Franklin Templeton about 335 00:17:16,040 --> 00:17:18,359 Speaker 1: three months ago. I took a trip to sand France, 336 00:17:18,400 --> 00:17:20,440 Speaker 1: so a bunch of clients went went out there. Did 337 00:17:20,440 --> 00:17:24,040 Speaker 1: you wasn't it interesting how they share a campus with roadblocks, 338 00:17:25,160 --> 00:17:27,479 Speaker 1: So you've got these sort of like this asset manager 339 00:17:27,520 --> 00:17:30,480 Speaker 1: guys walking around and then you've got these like roadblocks 340 00:17:30,520 --> 00:17:34,440 Speaker 1: employees like mixed together. I thought it was interesting. It's 341 00:17:34,440 --> 00:17:37,400 Speaker 1: a great obviously get the best weather out there as well, 342 00:17:37,440 --> 00:17:39,920 Speaker 1: but it's I was I didn't realize. I'm a student 343 00:17:39,960 --> 00:17:42,159 Speaker 1: of asset management as a as an industry and as 344 00:17:42,160 --> 00:17:45,040 Speaker 1: a business. I find it sort of endlessly fascinating. It's 345 00:17:45,080 --> 00:17:47,600 Speaker 1: where I spent my whole career, so both in the 346 00:17:47,640 --> 00:17:49,520 Speaker 1: public and now for me on the private side too 347 00:17:49,760 --> 00:17:53,080 Speaker 1: with a venture capital firm that I run. But but 348 00:17:53,240 --> 00:17:59,119 Speaker 1: the the technology interest and actions of the big asset 349 00:17:59,119 --> 00:18:02,639 Speaker 1: managers has always intrigued me. And what we saw with 350 00:18:02,680 --> 00:18:06,440 Speaker 1: Franklin was a clear commitment. And it's a family owned 351 00:18:06,440 --> 00:18:09,080 Speaker 1: and run firm in many ways, right the Johnson family 352 00:18:09,440 --> 00:18:11,560 Speaker 1: is the controlling shareholder still frankly, even though it's a 353 00:18:11,560 --> 00:18:14,439 Speaker 1: publicly traded stock with sort of a rich history of 354 00:18:14,520 --> 00:18:17,800 Speaker 1: long term decision making. And I think good long term 355 00:18:17,800 --> 00:18:21,600 Speaker 1: decision making often comes back to investments in technology, and 356 00:18:21,600 --> 00:18:24,439 Speaker 1: and we felt that on the receiving end of that, 357 00:18:24,560 --> 00:18:27,040 Speaker 1: really the attention and the focus, let's say, in the 358 00:18:27,080 --> 00:18:31,720 Speaker 1: due diligence process, uh, Franklin onto Us was was crazy 359 00:18:31,840 --> 00:18:34,480 Speaker 1: deep dives into what we had built, which we loved 360 00:18:34,480 --> 00:18:36,400 Speaker 1: because we've been building it for twelve years. Real, I mean, 361 00:18:36,520 --> 00:18:38,639 Speaker 1: Canvas in many ways is like a new layer on 362 00:18:38,760 --> 00:18:40,880 Speaker 1: top of technology we've been working on for a long 363 00:18:40,920 --> 00:18:44,159 Speaker 1: long time. We'd always had much bigger headcounts and technology 364 00:18:44,160 --> 00:18:46,880 Speaker 1: than than our peers, and uh, I think the best 365 00:18:46,880 --> 00:18:48,680 Speaker 1: firms are committed to that sort of thing. And so 366 00:18:49,080 --> 00:18:52,000 Speaker 1: the headquarters being you know, on the same campus or 367 00:18:52,080 --> 00:18:53,880 Speaker 1: right next to road Blocks and and many other firms 368 00:18:53,960 --> 00:18:56,959 Speaker 1: lic ROA Blocks. I think it's fascinating and more than 369 00:18:57,000 --> 00:18:58,720 Speaker 1: I could say for a lot of the more East 370 00:18:58,720 --> 00:19:04,160 Speaker 1: Coast mindset set managers. One thing that's important to note 371 00:19:04,160 --> 00:19:07,600 Speaker 1: here there has been a total trend of big asset 372 00:19:07,640 --> 00:19:13,040 Speaker 1: managers buying direct indexing and customer indexing platforms, namely Morgan 373 00:19:13,119 --> 00:19:16,239 Speaker 1: Stanley with Parametric. Just curious if your take on that 374 00:19:16,320 --> 00:19:20,680 Speaker 1: deal or I believe black Rock bought on perio UM. 375 00:19:20,840 --> 00:19:23,520 Speaker 1: I mean, I'm assuming you're out there kind of selling 376 00:19:23,560 --> 00:19:26,520 Speaker 1: against those other shops. I mean, do you have any 377 00:19:26,760 --> 00:19:30,520 Speaker 1: you know, comment on the other compos I think the 378 00:19:31,080 --> 00:19:33,200 Speaker 1: most of the deals that you've seen that are huge, 379 00:19:33,240 --> 00:19:36,280 Speaker 1: that are very big, Parametric and Imperio being big deals, 380 00:19:36,280 --> 00:19:39,720 Speaker 1: big M and A deals in in that world. Those 381 00:19:39,720 --> 00:19:42,200 Speaker 1: firms are excellent firms. They've been around a long time. 382 00:19:42,680 --> 00:19:46,120 Speaker 1: They do more traditional direct indexing UM. Maybe with some 383 00:19:46,240 --> 00:19:49,560 Speaker 1: templated customization you can pick a few colors, not just 384 00:19:49,640 --> 00:19:52,639 Speaker 1: black and you know the model t joke. But more 385 00:19:52,680 --> 00:19:56,639 Speaker 1: or less they're direct indexing firms. Uh. The interface between 386 00:19:56,760 --> 00:20:00,000 Speaker 1: customer and firm is not a soft web based software 387 00:20:00,000 --> 00:20:02,600 Speaker 1: a layer, and I'm sure that those firms will trend 388 00:20:02,680 --> 00:20:05,480 Speaker 1: in that direction. UM. But it's one thing to build 389 00:20:05,480 --> 00:20:07,840 Speaker 1: from scratch with that is your intention, and it's another 390 00:20:07,880 --> 00:20:10,000 Speaker 1: to lay one on top of a you know, very 391 00:20:10,080 --> 00:20:14,480 Speaker 1: mechanical turkey operations heavy business, which is I think I 392 00:20:14,520 --> 00:20:16,080 Speaker 1: don't want to speak out of turn. I don't know 393 00:20:16,080 --> 00:20:19,480 Speaker 1: those businesses intimately well, but I think the M and 394 00:20:19,520 --> 00:20:21,720 Speaker 1: A you've seen there, and then you've also seen some 395 00:20:21,760 --> 00:20:24,679 Speaker 1: of the younger technology companies that really didn't get distribution 396 00:20:25,320 --> 00:20:27,520 Speaker 1: but built interesting technology have been brought up to by 397 00:20:27,560 --> 00:20:30,560 Speaker 1: these asset managers. And I think the trend is kind 398 00:20:30,560 --> 00:20:34,520 Speaker 1: of obvious, which is platform shifts matter. If you missed 399 00:20:34,520 --> 00:20:36,960 Speaker 1: E T f S as a big asset management firm, 400 00:20:37,119 --> 00:20:41,600 Speaker 1: you lost. I mean you could. You cannot miss major 401 00:20:41,640 --> 00:20:45,040 Speaker 1: platform shifts as a big incumbent. Go study Facebook transition 402 00:20:45,119 --> 00:20:47,439 Speaker 1: to mobile. That's kind of the best example of this, 403 00:20:47,520 --> 00:20:49,840 Speaker 1: Like they ultimately got it right, but initially it was 404 00:20:49,920 --> 00:20:53,800 Speaker 1: kind of a kind of a crap show, and it's 405 00:20:53,840 --> 00:20:57,080 Speaker 1: just critical. You cannot miss a major change. And so 406 00:20:57,119 --> 00:21:01,440 Speaker 1: if if s M a chassis custom and direct indexing 407 00:21:02,359 --> 00:21:06,800 Speaker 1: is the next, you know, major winds changing category. I 408 00:21:06,800 --> 00:21:09,560 Speaker 1: think all the big firms recognized this, and even if 409 00:21:09,560 --> 00:21:12,480 Speaker 1: they're wrong, to be fair, they still have to make 410 00:21:12,520 --> 00:21:14,840 Speaker 1: the bat they've got to have a player in the hunt. 411 00:21:14,920 --> 00:21:18,600 Speaker 1: So I think that's what's driving it. Here's where I 412 00:21:18,680 --> 00:21:21,800 Speaker 1: debate my team others in the industry on custom indexing 413 00:21:21,800 --> 00:21:26,360 Speaker 1: and direct indexing. I agree. I know, especially advisors tell 414 00:21:26,359 --> 00:21:28,800 Speaker 1: me some of their clients hate taxes and this really 415 00:21:29,440 --> 00:21:31,960 Speaker 1: everyone held some tax run and I can see and 416 00:21:32,000 --> 00:21:36,320 Speaker 1: everyone does. Yeah, ultra high net worth types. Um, you know, 417 00:21:36,359 --> 00:21:39,640 Speaker 1: I get the use case. I see this more as 418 00:21:39,840 --> 00:21:45,959 Speaker 1: not a game changer, but a sort of new pass 419 00:21:46,040 --> 00:21:49,560 Speaker 1: option for people not like so it was positioned sometimes 420 00:21:49,600 --> 00:21:51,679 Speaker 1: as the E T F killer, and I the reason 421 00:21:51,800 --> 00:21:55,840 Speaker 1: I am slightly I'm not bearished embarrassed versus the hype 422 00:21:55,840 --> 00:21:58,280 Speaker 1: that like that kind of hype. And here's why. And 423 00:21:58,320 --> 00:22:00,440 Speaker 1: I want to get your take on this. Over the 424 00:22:00,480 --> 00:22:03,600 Speaker 1: past twenty years thirty even, we've seen a trend towards 425 00:22:03,640 --> 00:22:08,119 Speaker 1: three things, cheap, passive, and simple. This does kind of 426 00:22:08,119 --> 00:22:11,400 Speaker 1: try to reverse all three of those, and I think 427 00:22:11,440 --> 00:22:15,680 Speaker 1: that's why. Unless you're really into the tax part of it, 428 00:22:15,880 --> 00:22:18,840 Speaker 1: or really a hardcore E s G person, I can 429 00:22:18,880 --> 00:22:21,840 Speaker 1: see that use case. It doesn't seem like it's going 430 00:22:21,880 --> 00:22:24,200 Speaker 1: to be able to dislodge a lot of the cheap 431 00:22:24,600 --> 00:22:26,680 Speaker 1: beta E t f s and index funds that we've 432 00:22:26,680 --> 00:22:29,760 Speaker 1: seen in the core of portfolios over the past thirty years. Um, 433 00:22:30,040 --> 00:22:33,200 Speaker 1: am I wrong? Or do you see it like completely 434 00:22:33,760 --> 00:22:36,840 Speaker 1: being coming the next thing and getting fifty market share 435 00:22:36,880 --> 00:22:38,920 Speaker 1: of the funds? So maybe let's talk about cheap, passive 436 00:22:38,960 --> 00:22:42,520 Speaker 1: and simple. The first thing is the beauty of technology 437 00:22:42,640 --> 00:22:45,879 Speaker 1: is is cost savings that get usually passed on to 438 00:22:46,000 --> 00:22:49,040 Speaker 1: the end uh the end user. If you take into 439 00:22:49,040 --> 00:22:51,480 Speaker 1: account of taxes, which in my mind is just it's 440 00:22:51,520 --> 00:22:55,119 Speaker 1: probably the biggest single costs that comes with investing right period. 441 00:22:55,160 --> 00:22:57,640 Speaker 1: Like if you just do the math, the tax fee 442 00:22:57,720 --> 00:23:00,119 Speaker 1: that you pay is the one you should care the 443 00:23:00,160 --> 00:23:03,119 Speaker 1: most about, right especially because everything so I mean all 444 00:23:03,200 --> 00:23:05,080 Speaker 1: beta is so cheap right now, Like you know, five 445 00:23:05,160 --> 00:23:07,439 Speaker 1: versus four basis points is not going to matter. But 446 00:23:07,760 --> 00:23:10,200 Speaker 1: a big difference in tax bill that compounds over time 447 00:23:10,359 --> 00:23:12,520 Speaker 1: matters enormously. So I think you have to look at 448 00:23:13,080 --> 00:23:15,560 Speaker 1: all that matters is after tax money in the investor's 449 00:23:15,560 --> 00:23:17,680 Speaker 1: pocket at the end of whatever investing cycle it is 450 00:23:17,720 --> 00:23:20,280 Speaker 1: we're talking about. So taxes matter a great deal. So 451 00:23:20,280 --> 00:23:23,800 Speaker 1: when you talk about cheaper, that's seventy eight basis points 452 00:23:23,840 --> 00:23:27,000 Speaker 1: that you're picking up relative to the spy equivalent you 453 00:23:27,040 --> 00:23:30,600 Speaker 1: know et F strategy is ten x the you know 454 00:23:30,680 --> 00:23:34,200 Speaker 1: your fee that you're paying annually for R S p 455 00:23:34,400 --> 00:23:36,720 Speaker 1: Y E t F. So I think on the cheaper side. 456 00:23:36,920 --> 00:23:39,560 Speaker 1: The reason that we're seeing this grow so quickly on 457 00:23:39,600 --> 00:23:43,440 Speaker 1: our platform is mostly that right it's people are convinced 458 00:23:43,480 --> 00:23:46,119 Speaker 1: that taxes are one of the costs and this is 459 00:23:46,160 --> 00:23:48,600 Speaker 1: a great way to reduce those costs and cost compound 460 00:23:48,640 --> 00:23:52,680 Speaker 1: over time. UM Passive is the second thing I think 461 00:23:52,760 --> 00:23:54,480 Speaker 1: I have. I don't want the exact staff, but it's 462 00:23:54,520 --> 00:23:58,000 Speaker 1: something like in the six low sixties, maybe mid sixties, 463 00:23:58,359 --> 00:24:00,880 Speaker 1: per cent of the assets on the plot form are passive. 464 00:24:01,240 --> 00:24:03,879 Speaker 1: So when we launched Canvas, you can do it. You 465 00:24:03,880 --> 00:24:06,600 Speaker 1: can build whatever strategy you want on canvas. We don't 466 00:24:06,840 --> 00:24:08,720 Speaker 1: We don't tell you what to do. So we were 467 00:24:08,840 --> 00:24:11,520 Speaker 1: very curious to know, like, what would people do. The 468 00:24:11,560 --> 00:24:14,640 Speaker 1: answer is that two thirds of their portfolio is passive 469 00:24:14,840 --> 00:24:18,800 Speaker 1: and about you know, the remaining thirty or so is 470 00:24:18,800 --> 00:24:21,720 Speaker 1: is active factor exposures. When you blend those together, the 471 00:24:22,000 --> 00:24:25,320 Speaker 1: management fee is relatively low. It's not sp y low, 472 00:24:25,359 --> 00:24:28,919 Speaker 1: but it's relatively low. Uh. The if factor in the 473 00:24:28,960 --> 00:24:32,160 Speaker 1: next effective effective taxes you could argue it's even lower 474 00:24:32,200 --> 00:24:35,440 Speaker 1: than sp y. Um it is fairly passive, like it's 475 00:24:35,480 --> 00:24:39,800 Speaker 1: dominated by passive assets, and then simple is the last one. 476 00:24:39,960 --> 00:24:43,080 Speaker 1: There's no doubt that buying spy and never doing anything 477 00:24:43,200 --> 00:24:45,800 Speaker 1: is simpler than like, you know, pushing and pulling levers 478 00:24:45,800 --> 00:24:49,359 Speaker 1: and customizing things. There's also no doubt that the people 479 00:24:49,400 --> 00:24:52,879 Speaker 1: that benefit the most from this uh in an absolute sense, 480 00:24:53,000 --> 00:24:56,560 Speaker 1: have more complicated portfolios. They've got these you know, concentrated 481 00:24:56,560 --> 00:24:59,679 Speaker 1: stock positions, They've got other tax considerations that care about 482 00:25:00,080 --> 00:25:02,520 Speaker 1: you know, individual issues that they want to through an 483 00:25:02,520 --> 00:25:05,600 Speaker 1: E s G lens governed in the portfolio. It's it's 484 00:25:05,600 --> 00:25:08,160 Speaker 1: a minority, but it's a very vocal minority for those 485 00:25:08,200 --> 00:25:10,919 Speaker 1: that care, they care a lot. It's like of the 486 00:25:10,920 --> 00:25:13,760 Speaker 1: assets that would that would be true for the E 487 00:25:13,880 --> 00:25:16,320 Speaker 1: s G thing. So you're right, it is. It is 488 00:25:16,359 --> 00:25:20,840 Speaker 1: more complicated in a general sense, but that doesn't mean 489 00:25:20,920 --> 00:25:23,560 Speaker 1: there's not a massive pool of demands. So I don't 490 00:25:23,560 --> 00:25:25,919 Speaker 1: think you're wrong. I don't think that E T S 491 00:25:25,920 --> 00:25:29,560 Speaker 1: will be displaced as a huge, maybe even primary vehicle. 492 00:25:30,119 --> 00:25:32,000 Speaker 1: But when you start to factor some of these things 493 00:25:32,000 --> 00:25:34,440 Speaker 1: in and things will only get simpler. Providers will get 494 00:25:34,440 --> 00:25:36,840 Speaker 1: simpler and simpler over time, Like it'll be a couple 495 00:25:36,840 --> 00:25:39,359 Speaker 1: of clicks, it'll be a couple of things if the 496 00:25:39,600 --> 00:25:41,840 Speaker 1: s m A and operations technology allow this to be 497 00:25:41,880 --> 00:25:44,439 Speaker 1: as cheap as an s P Y E t F 498 00:25:44,960 --> 00:25:46,879 Speaker 1: and everyone can get one with you know, ten thousand 499 00:25:46,920 --> 00:25:49,560 Speaker 1: dollars or something are minimums two and fifty thou which 500 00:25:49,600 --> 00:25:51,720 Speaker 1: probably will be that for a while, but that number 501 00:25:51,720 --> 00:25:53,800 Speaker 1: will come down because of technology over time, because of 502 00:25:53,840 --> 00:25:57,359 Speaker 1: fractional share trading over time, etcetera. So I guess I 503 00:25:57,359 --> 00:26:02,440 Speaker 1: would challenge the the better passive I'm sorry, cheaper passive 504 00:26:02,520 --> 00:26:04,840 Speaker 1: simple by saying this is kind of a lot of 505 00:26:04,880 --> 00:26:08,600 Speaker 1: those same things. Actually, uh, and it will only get 506 00:26:08,640 --> 00:26:12,199 Speaker 1: better over time. Okay, So, Patrick, another backstory question that 507 00:26:12,280 --> 00:26:15,000 Speaker 1: I wanted to ask you about was your dad, who 508 00:26:15,200 --> 00:26:18,040 Speaker 1: you inherited the firm from, and and I'm curious what 509 00:26:18,280 --> 00:26:22,920 Speaker 1: you learned from him. Yeah, so, uh, the literal sequences 510 00:26:23,000 --> 00:26:26,119 Speaker 1: he started. He was one of the pioneering quant researchers 511 00:26:26,119 --> 00:26:28,280 Speaker 1: in the nineties actually late eighties, just when he started 512 00:26:28,280 --> 00:26:30,639 Speaker 1: doing that research. So like some of the early dogs 513 00:26:30,640 --> 00:26:32,879 Speaker 1: of the DOWD research that was empirical. A lot of 514 00:26:32,880 --> 00:26:35,960 Speaker 1: the early factor research around quality and value and momentum. 515 00:26:36,520 --> 00:26:38,800 Speaker 1: Uh he was doing that with you know, Cliff Assness 516 00:26:38,880 --> 00:26:41,280 Speaker 1: and Joseph Connor Shock and some of the very famous 517 00:26:41,720 --> 00:26:44,720 Speaker 1: kind of mid nineties quant researchers. He started the firm 518 00:26:44,720 --> 00:26:48,399 Speaker 1: called Shaughnessy Capital Management in n that became part of 519 00:26:48,440 --> 00:26:51,600 Speaker 1: bear Stearns in two thousand and one. Uh we then 520 00:26:51,680 --> 00:26:54,440 Speaker 1: spun out of bear Sterns in two thousand seven, which 521 00:26:54,520 --> 00:26:56,720 Speaker 1: is right when I graduated college. Like literally the like 522 00:26:56,960 --> 00:26:59,520 Speaker 1: month or week that I graduated college was when OSAM 523 00:26:59,600 --> 00:27:02,400 Speaker 1: was starting. So technically I was o Sam's first employee. 524 00:27:03,160 --> 00:27:06,040 Speaker 1: I didn't know anything about finance or investing. I don't 525 00:27:06,040 --> 00:27:08,119 Speaker 1: think I knew what an equity was, and I had 526 00:27:08,119 --> 00:27:11,679 Speaker 1: studied philosophy in school, and uh so you know, I 527 00:27:11,720 --> 00:27:14,760 Speaker 1: got a very unfair lucky you know, sliding into home 528 00:27:15,040 --> 00:27:18,840 Speaker 1: head started my career because of timing, and I sort 529 00:27:18,840 --> 00:27:20,879 Speaker 1: of fell in love with the quant research part of 530 00:27:20,920 --> 00:27:24,359 Speaker 1: all this. But uh, you know, my my dad, my parents, 531 00:27:24,359 --> 00:27:27,159 Speaker 1: I should say, they were very lazy, fair Like they 532 00:27:27,200 --> 00:27:28,679 Speaker 1: didn't tell us what to do. They didn't tell us 533 00:27:28,680 --> 00:27:30,879 Speaker 1: what to like or learn or study. And so I 534 00:27:31,040 --> 00:27:33,399 Speaker 1: actually hadn't even read my dad's books until you know, 535 00:27:33,440 --> 00:27:36,560 Speaker 1: fairly late in life, and it's always kind of been 536 00:27:36,600 --> 00:27:38,439 Speaker 1: that way, you know. I guess the big thing my 537 00:27:38,520 --> 00:27:41,680 Speaker 1: dad taught me is like, figure everything out for yourself. 538 00:27:42,320 --> 00:27:45,320 Speaker 1: Don't come to me with questions. Like you figure it out. 539 00:27:45,359 --> 00:27:47,439 Speaker 1: That's what That's what I did. That's what people I 540 00:27:47,480 --> 00:27:50,359 Speaker 1: respect to. So, you know, there's a library card, here's 541 00:27:50,400 --> 00:27:52,800 Speaker 1: a bunch of books in the living room, Like, you 542 00:27:52,840 --> 00:27:54,600 Speaker 1: figure it out. You come up with your own solutions. 543 00:27:55,040 --> 00:27:58,320 Speaker 1: And so well we've been you know, fun collaborators and 544 00:27:58,320 --> 00:28:02,439 Speaker 1: and obviously deep partners for a long long time. His 545 00:28:02,800 --> 00:28:07,680 Speaker 1: method was to, uh really hand off responsibility. So when 546 00:28:07,680 --> 00:28:11,520 Speaker 1: I took the business over as CEO in two thousand 547 00:28:11,640 --> 00:28:14,520 Speaker 1: and eighteen, at the start of two and eighteen, it 548 00:28:14,640 --> 00:28:16,840 Speaker 1: wasn't here's the business, like, this is what you should 549 00:28:16,880 --> 00:28:19,440 Speaker 1: do with it. It was here's the business, you tell 550 00:28:19,480 --> 00:28:22,360 Speaker 1: me or we're going to do with it. And uh, 551 00:28:22,480 --> 00:28:25,280 Speaker 1: you know, it took a year of searching before we 552 00:28:25,320 --> 00:28:29,040 Speaker 1: alighted on canvas. So Canvas was literally on a whiteboard 553 00:28:29,080 --> 00:28:33,119 Speaker 1: in my office at the end of prototype was ready 554 00:28:33,160 --> 00:28:35,679 Speaker 1: in three months, and then we went to market with 555 00:28:35,720 --> 00:28:40,360 Speaker 1: it November. So it happened fast. Uh, but I guess 556 00:28:40,400 --> 00:28:42,520 Speaker 1: the thing I learned is like you have to figure 557 00:28:42,560 --> 00:28:45,640 Speaker 1: things out for yourself. Like you cannot tell people what 558 00:28:45,800 --> 00:28:48,080 Speaker 1: to do. You can support them in a lot of ways. 559 00:28:48,120 --> 00:28:49,440 Speaker 1: You can give them a lot of space, you can 560 00:28:49,440 --> 00:28:51,680 Speaker 1: give them a safety net, you can give them um 561 00:28:52,040 --> 00:28:54,760 Speaker 1: peace of mind. But for anyone to figure anything really 562 00:28:54,800 --> 00:28:57,800 Speaker 1: interesting out, they have to do with themselves. And uh, 563 00:28:57,880 --> 00:29:02,160 Speaker 1: I think that's a pretty pretty good singular lesson. Did 564 00:29:02,200 --> 00:29:06,880 Speaker 1: the philosophy Uh did help you at all in this role? Uh? 565 00:29:07,120 --> 00:29:09,560 Speaker 1: Have you brought it? And who's your favorite philosopher? Uh? 566 00:29:09,640 --> 00:29:12,800 Speaker 1: My favorite philosopher is a guy named Arthur Schopenhauer, who's 567 00:29:12,800 --> 00:29:17,520 Speaker 1: a lesser, lesser known, you know, continental europe philosopher, kind 568 00:29:17,520 --> 00:29:20,480 Speaker 1: of obscure, kind of a curmudgeon. But the reason I 569 00:29:20,520 --> 00:29:22,920 Speaker 1: like him so much is that he was the person 570 00:29:22,960 --> 00:29:26,640 Speaker 1: that introduced the West to a lot of the Eastern philosophy. 571 00:29:26,800 --> 00:29:30,520 Speaker 1: So Eastern philosophy is popular or common now in the West. 572 00:29:30,640 --> 00:29:33,680 Speaker 1: Before Chopinauer don't even knew it existed, And so he 573 00:29:33,760 --> 00:29:37,040 Speaker 1: was my He was also an incredibly clear writer. I mean, 574 00:29:37,120 --> 00:29:39,280 Speaker 1: there's a lot of these philosophersy read and it's like, 575 00:29:39,360 --> 00:29:40,959 Speaker 1: I have no idea, what the hell these guys are 576 00:29:40,960 --> 00:29:44,239 Speaker 1: saying it is all this lingo and terminology. It just 577 00:29:44,320 --> 00:29:48,120 Speaker 1: feels like a ridiculous argument for insiders that is inaccessible. 578 00:29:48,160 --> 00:29:53,400 Speaker 1: Whereas Chopinauer wrote very clean, simple language, talked about very basic, 579 00:29:53,440 --> 00:29:56,360 Speaker 1: simple things in life health, wrote a lot about health. 580 00:29:56,400 --> 00:29:59,640 Speaker 1: A lot of philosophers didn't write about health. Um, Schopenauer did. 581 00:29:59,800 --> 00:30:01,840 Speaker 1: But but more than anything, he introduced me to the 582 00:30:01,880 --> 00:30:06,560 Speaker 1: Eastern philosophers, which uh, I would say are my like 583 00:30:06,920 --> 00:30:10,200 Speaker 1: operating system or way of thinking about life and work 584 00:30:10,240 --> 00:30:14,080 Speaker 1: in the world and everything else. So yeah, it directly 585 00:30:14,400 --> 00:30:18,280 Speaker 1: continues to I still read that stuff constantly. It influences 586 00:30:18,360 --> 00:30:22,240 Speaker 1: my behavior every day. Um, there's even individual passages I 587 00:30:22,240 --> 00:30:25,160 Speaker 1: can point to that that form a lot of my worldview. 588 00:30:25,560 --> 00:30:28,200 Speaker 1: What cooler pursuit than trying to figure out, you know, 589 00:30:28,280 --> 00:30:30,680 Speaker 1: what the hell is going on in life? Uh? I 590 00:30:30,720 --> 00:30:33,440 Speaker 1: just think it's a really interesting exercise for anybody, and 591 00:30:33,520 --> 00:30:36,440 Speaker 1: Chopinhum made it accessible. So he's probably my favorite. Love 592 00:30:36,480 --> 00:30:46,600 Speaker 1: that your podcast invest like the best. What's your your 593 00:30:46,840 --> 00:30:49,960 Speaker 1: number one takeaway or lesson that you've learned from someone 594 00:30:50,000 --> 00:30:52,760 Speaker 1: and applied to your life to benefit from? Well, uh, 595 00:30:53,440 --> 00:30:57,120 Speaker 1: to tie it to this conversation, I would say, almost 596 00:30:57,240 --> 00:31:01,720 Speaker 1: all of Canvas. Everything we did with Canvas was us 597 00:31:01,880 --> 00:31:06,280 Speaker 1: stealing outright lessons, specific lessons you could even I think 598 00:31:06,480 --> 00:31:11,240 Speaker 1: almost as like business spells um that I learned from others. 599 00:31:11,040 --> 00:31:15,320 Speaker 1: The way that we launched and built the product was 600 00:31:15,640 --> 00:31:20,840 Speaker 1: wholesale taken from a guy named Chathan Putugunta. I'll never forget. 601 00:31:20,840 --> 00:31:23,920 Speaker 1: I flew out there and showed Chathan, who's a partner 602 00:31:23,920 --> 00:31:25,720 Speaker 1: at Benchmark Capital kind of one of probably the most 603 00:31:25,760 --> 00:31:30,080 Speaker 1: famous VC firm with Sequoia, and uh said, look, here's 604 00:31:30,120 --> 00:31:33,520 Speaker 1: here's the product that we've built. We think it's it's great. Uh, 605 00:31:33,560 --> 00:31:36,680 Speaker 1: it's built on all this proprietary technology. Blah blah blah, um, 606 00:31:37,520 --> 00:31:39,280 Speaker 1: what would you do with this? And he told me, 607 00:31:39,640 --> 00:31:41,400 Speaker 1: And what he told me was was kind of the 608 00:31:41,400 --> 00:31:44,840 Speaker 1: opposite of my own instinct. I think of him as 609 00:31:44,840 --> 00:31:48,200 Speaker 1: the sort of you know, Obi Wan of of enterprise software. 610 00:31:48,600 --> 00:31:50,320 Speaker 1: And so we just listened, like we just did what 611 00:31:50,400 --> 00:31:55,040 Speaker 1: he said and it worked ridiculously well, uh and much 612 00:31:55,080 --> 00:31:57,680 Speaker 1: better than the plan that I had for distributing Canvas. 613 00:31:58,040 --> 00:32:00,240 Speaker 1: And it was counterintuitive. And and so I think the 614 00:32:00,320 --> 00:32:02,360 Speaker 1: number one lesson I have is just like, there is 615 00:32:02,440 --> 00:32:05,520 Speaker 1: so much to learn from so many people from literally 616 00:32:05,560 --> 00:32:08,640 Speaker 1: every person across so many disciplines that can then be 617 00:32:08,720 --> 00:32:11,440 Speaker 1: applied back to your thing. Um, I actually think you 618 00:32:11,440 --> 00:32:14,160 Speaker 1: should spend more time spent away from your own industry 619 00:32:14,160 --> 00:32:18,000 Speaker 1: when you're studying business or whatever. Study around it, like 620 00:32:18,040 --> 00:32:21,320 Speaker 1: to study adjacencies, study other strategies and see if they 621 00:32:21,360 --> 00:32:24,080 Speaker 1: apply to what what you can do, because I do 622 00:32:24,200 --> 00:32:26,680 Speaker 1: think in many ways, like our story would not have 623 00:32:26,720 --> 00:32:29,960 Speaker 1: been nearly as interesting had we not borrowed these ideas 624 00:32:30,000 --> 00:32:33,880 Speaker 1: from lots of other different fields. And uh, I guess 625 00:32:33,920 --> 00:32:36,280 Speaker 1: the second lesson is just like if you expose what 626 00:32:36,360 --> 00:32:40,080 Speaker 1: you're learning as you go, it is a magical process. 627 00:32:40,200 --> 00:32:43,760 Speaker 1: Like you you attract people that like the same stuff, 628 00:32:44,080 --> 00:32:46,280 Speaker 1: that have similar motivations, that want to work on the 629 00:32:46,280 --> 00:32:49,920 Speaker 1: same projects. Recruiting becomes easier, sales becomes easier, you get 630 00:32:49,920 --> 00:32:53,000 Speaker 1: more ideas, you build a distribution channel yourself. You know, 631 00:32:53,040 --> 00:32:55,440 Speaker 1: we reach millions of people a month with our podcasts, 632 00:32:55,440 --> 00:32:59,040 Speaker 1: Like it's it's a it's a big platform, and it's 633 00:32:59,120 --> 00:33:02,080 Speaker 1: all because of me talking to people asking them questions 634 00:33:02,160 --> 00:33:05,680 Speaker 1: like that. That sounds so weird to me, and when 635 00:33:05,720 --> 00:33:08,000 Speaker 1: I started it, I didn't intend any of this, but 636 00:33:08,080 --> 00:33:11,880 Speaker 1: it's really a smart idea to chase curiosity and learn 637 00:33:11,880 --> 00:33:15,200 Speaker 1: in public a bit. And uh, yeah, it's it's it's 638 00:33:15,240 --> 00:33:17,920 Speaker 1: it's the reason for a lot of things I treasure most. 639 00:33:18,560 --> 00:33:23,400 Speaker 1: I love. This audio is a weird platform. Uh there's 640 00:33:23,440 --> 00:33:27,719 Speaker 1: this crazy idea called the Guttenberg parentheses, which is this 641 00:33:27,760 --> 00:33:31,400 Speaker 1: notion that we may look back in time. I don't 642 00:33:31,400 --> 00:33:33,240 Speaker 1: know if I agree, but it's an interesting idea. We 643 00:33:33,280 --> 00:33:35,880 Speaker 1: may look back in time from the printing invention of 644 00:33:35,920 --> 00:33:39,360 Speaker 1: the printing press to the dawn of the internet as 645 00:33:39,440 --> 00:33:42,800 Speaker 1: like the era when the written word was dominant by 646 00:33:42,800 --> 00:33:46,560 Speaker 1: far you know of any communication exchange or medium, and 647 00:33:46,640 --> 00:33:49,280 Speaker 1: that the parentheses might be that this is the only 648 00:33:49,320 --> 00:33:51,280 Speaker 1: period in history where the written word is is the 649 00:33:51,320 --> 00:33:54,280 Speaker 1: dominant form of communication. And the reason that is at 650 00:33:54,360 --> 00:33:58,320 Speaker 1: least interesting to consider, I think is, Uh, audio is 651 00:33:58,520 --> 00:34:01,760 Speaker 1: way easier to create and it's way easier to consume 652 00:34:02,080 --> 00:34:04,520 Speaker 1: than the written word. It doesn't need to be as perfect. 653 00:34:04,680 --> 00:34:06,240 Speaker 1: You get a lot more there's a lot more room 654 00:34:06,280 --> 00:34:10,920 Speaker 1: for error. The audience penetration is some orders of magnitude bigger, 655 00:34:11,000 --> 00:34:13,640 Speaker 1: Like you know, I wrote a book and in the 656 00:34:13,680 --> 00:34:16,360 Speaker 1: first you know, ten minutes of the release of a 657 00:34:16,360 --> 00:34:18,960 Speaker 1: new episode of a podcast, like ten times as many 658 00:34:19,000 --> 00:34:21,520 Speaker 1: people listen to a new podcast episode every single week 659 00:34:22,000 --> 00:34:24,200 Speaker 1: has read the book that took me a year to write. 660 00:34:24,800 --> 00:34:26,759 Speaker 1: I just think that's kind of staggering when you think 661 00:34:26,800 --> 00:34:29,319 Speaker 1: about the leverage it represents. So if it's ten times 662 00:34:29,320 --> 00:34:32,440 Speaker 1: easier to create, ten times easier to listen to, I 663 00:34:32,480 --> 00:34:34,120 Speaker 1: just think you can do a lot more with audio. 664 00:34:34,200 --> 00:34:37,120 Speaker 1: That's interesting. And if you look at our you know, corpus, 665 00:34:37,680 --> 00:34:40,839 Speaker 1: it's like we've we've written hundreds of books. Uh, if 666 00:34:40,840 --> 00:34:43,080 Speaker 1: you add up, the word counts. So I think audio 667 00:34:43,160 --> 00:34:47,160 Speaker 1: is like a sneaky, interesting communication method. It's also the oldest, 668 00:34:47,320 --> 00:34:48,960 Speaker 1: you know, like that that's this is how stuff was 669 00:34:49,000 --> 00:34:53,160 Speaker 1: communicated down through most of history. Um. So I'm very 670 00:34:53,160 --> 00:34:55,879 Speaker 1: intrigued by audio as a medium. And everyone always asked 671 00:34:55,880 --> 00:34:58,200 Speaker 1: about write another book, and it's like, I guess I could. 672 00:34:58,280 --> 00:34:59,640 Speaker 1: But in the time it would take to write one 673 00:34:59,680 --> 00:35:01,120 Speaker 1: of those, I could do like a hundred of these. 674 00:35:01,160 --> 00:35:05,880 Speaker 1: So uh, maybe I'll just do that. I agree with 675 00:35:05,920 --> 00:35:08,960 Speaker 1: all that. I would make two comments. One The good 676 00:35:08,960 --> 00:35:11,359 Speaker 1: thing about books, like you know, like your dad, you 677 00:35:11,360 --> 00:35:14,399 Speaker 1: didn't care for twenty years, and then when you did, 678 00:35:14,440 --> 00:35:17,319 Speaker 1: it was right there for you. Like books have a way, 679 00:35:17,520 --> 00:35:19,719 Speaker 1: they have a way of lasting, like they're they're a 680 00:35:19,760 --> 00:35:22,680 Speaker 1: little bit more permanent. I think, um, that would be 681 00:35:22,760 --> 00:35:24,719 Speaker 1: my case for writing a book, because I agree with you, 682 00:35:24,760 --> 00:35:27,240 Speaker 1: it's a it's a pain in the ass, and unless 683 00:35:27,280 --> 00:35:29,719 Speaker 1: you like get real lucky you write the best book, 684 00:35:29,760 --> 00:35:33,440 Speaker 1: you're probably gonna not, you know, sell a ton of copies. 685 00:35:33,480 --> 00:35:36,239 Speaker 1: But at least it's always out there. I don't, I don't, 686 00:35:36,280 --> 00:35:39,560 Speaker 1: I don't agree. You know. I look yesterday, Uh, I 687 00:35:39,640 --> 00:35:42,080 Speaker 1: just had the numbers here. There's an episode we released 688 00:35:42,120 --> 00:35:43,960 Speaker 1: a couple of years ago with John Collinson, who's the 689 00:35:44,000 --> 00:35:46,000 Speaker 1: one of the co founders of Stripe, obviously a big, 690 00:35:46,000 --> 00:35:48,880 Speaker 1: you know, very popular technology company, who was listening to 691 00:35:49,000 --> 00:35:52,439 Speaker 1: thousands of times yesterday. Yesterday. It's two years old, and 692 00:35:53,040 --> 00:35:54,719 Speaker 1: we don't even know, like this stuff has not been 693 00:35:54,760 --> 00:35:57,040 Speaker 1: around for twenty years to know if there's going to 694 00:35:57,080 --> 00:36:00,600 Speaker 1: be I would suspect that the very best episodes will 695 00:36:00,640 --> 00:36:02,959 Speaker 1: live effectively forever just as long as a book would. 696 00:36:03,480 --> 00:36:05,960 Speaker 1: And they're more accessible. They're easier. I can I can 697 00:36:05,960 --> 00:36:09,320 Speaker 1: get one of my phone in seven seconds versus a 698 00:36:09,360 --> 00:36:11,840 Speaker 1: book that I have to like seek out and go after. No, 699 00:36:12,160 --> 00:36:13,840 Speaker 1: I'm not saying one's better than the other. I just 700 00:36:13,880 --> 00:36:16,160 Speaker 1: think I think it's on the same level. And we 701 00:36:16,239 --> 00:36:19,080 Speaker 1: see that in the data that very old episodes get 702 00:36:19,320 --> 00:36:22,799 Speaker 1: crazy amounts of new listeners despite being years old. Yeah, 703 00:36:22,880 --> 00:36:25,359 Speaker 1: you might be right. Um. Also would add the other 704 00:36:25,400 --> 00:36:28,880 Speaker 1: comment I had was video I get I'm just blown 705 00:36:28,880 --> 00:36:31,720 Speaker 1: away by the numbers TikTok puts up. And I find 706 00:36:31,760 --> 00:36:35,399 Speaker 1: that younger people are just so into that, And I'm 707 00:36:35,480 --> 00:36:38,600 Speaker 1: wondering because as analysts and pundits that which is what 708 00:36:38,640 --> 00:36:42,200 Speaker 1: I am, we're constantly sort of trying to make sure 709 00:36:42,200 --> 00:36:45,320 Speaker 1: we're not missing anything because, as you say, like writing 710 00:36:45,360 --> 00:36:48,719 Speaker 1: a research note, can it starts to get feel a 711 00:36:48,760 --> 00:36:52,239 Speaker 1: little old timey and a lot of information is now 712 00:36:52,280 --> 00:36:55,600 Speaker 1: put out through audio now videos. Um. A lot of 713 00:36:55,600 --> 00:36:59,400 Speaker 1: other pundits in different industries use video a lot, short videos, 714 00:36:59,400 --> 00:37:02,480 Speaker 1: short form and polished videos. Um, what's your take on 715 00:37:02,560 --> 00:37:05,080 Speaker 1: that kind of way of communicating to this sort of 716 00:37:05,160 --> 00:37:07,640 Speaker 1: newer TikTok general on, my take is that you know, 717 00:37:07,680 --> 00:37:10,799 Speaker 1: we should probably do it, but I don't care. I 718 00:37:10,840 --> 00:37:13,000 Speaker 1: hate it. I don't want to be on video. I 719 00:37:13,080 --> 00:37:17,040 Speaker 1: want long form discussions. I want to I want the 720 00:37:17,080 --> 00:37:19,759 Speaker 1: lower pressure. I think I think video creates a sort 721 00:37:19,760 --> 00:37:22,080 Speaker 1: of weird pressure on people, both on me and on 722 00:37:22,120 --> 00:37:25,880 Speaker 1: the guest. Uh. I just don't like it, um and 723 00:37:25,880 --> 00:37:28,640 Speaker 1: and life is too short to just optimize for the 724 00:37:28,920 --> 00:37:32,560 Speaker 1: you know, the greatest reach, the greatest downloads, whatever. And 725 00:37:32,680 --> 00:37:34,759 Speaker 1: maybe I'll change my tune on this, but I have 726 00:37:34,840 --> 00:37:37,560 Speaker 1: said note to video a lot, and I don't really 727 00:37:37,560 --> 00:37:40,120 Speaker 1: care if it means the audience is smaller. I think 728 00:37:40,120 --> 00:37:42,920 Speaker 1: we reached the audience that we want to reach with 729 00:37:42,960 --> 00:37:46,320 Speaker 1: pretty high penetration and saturation. And we're having these minor 730 00:37:46,360 --> 00:37:49,840 Speaker 1: hour and a half long conversations in crazy detail about 731 00:37:49,840 --> 00:37:53,600 Speaker 1: like esoteric business and investing topics. This is not people 732 00:37:53,680 --> 00:37:57,080 Speaker 1: trying to get like a dopamine hit on TikTok um. 733 00:37:57,120 --> 00:37:59,759 Speaker 1: I think TikTok could be a fantastic distribution strategy for us. 734 00:37:59,760 --> 00:38:01,160 Speaker 1: I think we put the effort in, it would be 735 00:38:01,160 --> 00:38:04,000 Speaker 1: worth it in a dollars and cents and you know, 736 00:38:04,320 --> 00:38:08,400 Speaker 1: spock like way. Um. But it's just it's just not 737 00:38:08,480 --> 00:38:10,239 Speaker 1: for me. I just hate it. Like when I think 738 00:38:10,280 --> 00:38:15,400 Speaker 1: of communicating, when I look at TikTok it just doesn't 739 00:38:15,840 --> 00:38:19,440 Speaker 1: match my brain wiring. Whereas Twitter, it's natural, it's Twitter 740 00:38:19,480 --> 00:38:22,200 Speaker 1: feels native to me. Uh, you know, conversing with people, 741 00:38:22,200 --> 00:38:26,000 Speaker 1: putting out charts, short form writing. Um TikTok feels totally 742 00:38:26,040 --> 00:38:29,160 Speaker 1: undeath every time every time I've tried it. It feels 743 00:38:29,200 --> 00:38:32,959 Speaker 1: like I'm like manufacturing something. And and to be clear, 744 00:38:33,000 --> 00:38:35,640 Speaker 1: like I'm an investor. I'm interested in investing. I'm interested 745 00:38:35,680 --> 00:38:40,280 Speaker 1: in taking capital and owning really good businesses with that capital, 746 00:38:40,480 --> 00:38:43,719 Speaker 1: owning American the size of American business making. You know, 747 00:38:43,760 --> 00:38:46,239 Speaker 1: I do a lot of early stage private investing, Like 748 00:38:46,360 --> 00:38:48,799 Speaker 1: that is what interests me. I just happened to have 749 00:38:48,960 --> 00:38:52,040 Speaker 1: this other thing that I use as a learning vehicle 750 00:38:52,120 --> 00:38:56,160 Speaker 1: that creates a virtuous circle. Like I almost cringe at 751 00:38:56,160 --> 00:38:59,360 Speaker 1: the word part whenever I hear the word podcast. I'm like, um, 752 00:38:59,560 --> 00:39:02,040 Speaker 1: it's just I'm not like the media side for its 753 00:39:02,080 --> 00:39:04,759 Speaker 1: own sake, it's just not that interesting to me. Like 754 00:39:04,800 --> 00:39:07,200 Speaker 1: I'm interested in the content of it. And that's why 755 00:39:07,200 --> 00:39:08,879 Speaker 1: I do it every week, and I have been for 756 00:39:08,920 --> 00:39:11,360 Speaker 1: six years now, and we'll probably do it for you know, 757 00:39:11,360 --> 00:39:15,200 Speaker 1: if I'm lucky to live another sixty years. And uh so, 758 00:39:15,640 --> 00:39:18,160 Speaker 1: you know, I think it's I think I'm wrong, but 759 00:39:18,239 --> 00:39:21,520 Speaker 1: I don't care. Okay, to bring it back to the 760 00:39:21,520 --> 00:39:23,680 Speaker 1: E T F s at the end of this podcast, 761 00:39:24,280 --> 00:39:25,920 Speaker 1: I want to ask you what your favorite E t 762 00:39:26,040 --> 00:39:32,400 Speaker 1: F ticker is s p Y. Come on, man, I 763 00:39:32,400 --> 00:39:35,719 Speaker 1: mean look, I think it's the answer. Uh. Well, you 764 00:39:35,760 --> 00:39:37,920 Speaker 1: have mentioned SPY a lot in this interview. That seems 765 00:39:37,960 --> 00:39:39,960 Speaker 1: to be your Is that your bogey? Is that your 766 00:39:39,960 --> 00:39:42,560 Speaker 1: what you're selling against? Effective? I just think back to 767 00:39:42,560 --> 00:39:47,520 Speaker 1: your point in simplicity, Uh, sp Y has beaten a 768 00:39:47,640 --> 00:39:52,759 Speaker 1: staggering percentage of investors of every stripe of you know, 769 00:39:52,840 --> 00:39:58,640 Speaker 1: pick your asset class, pick your uh, you know, public, private, credit, equity, 770 00:39:59,120 --> 00:40:02,919 Speaker 1: US global. I don't care how you slice it. It's 771 00:40:03,040 --> 00:40:06,960 Speaker 1: just shocking. It's the first question I ask in every context, 772 00:40:07,080 --> 00:40:09,640 Speaker 1: like why not Spy? Like even if I'm making a 773 00:40:09,680 --> 00:40:11,880 Speaker 1: personal early stage investment, like okay, I'm gonna put X 774 00:40:11,880 --> 00:40:13,840 Speaker 1: dollars into this, why am I not putting that X 775 00:40:13,880 --> 00:40:16,520 Speaker 1: dollars in Spy? To me? That is and maybe the 776 00:40:16,560 --> 00:40:18,360 Speaker 1: perfect thing is v T I or whatever. The total 777 00:40:18,400 --> 00:40:21,080 Speaker 1: market is not just the SPI. That's that's probably better, 778 00:40:21,719 --> 00:40:24,399 Speaker 1: But the SMP has this amazing you know, mental availability 779 00:40:24,400 --> 00:40:28,120 Speaker 1: and brand um and it's pretty close close enough. So 780 00:40:28,480 --> 00:40:31,840 Speaker 1: to me, it is the opportunity cost, right, it's everyone's 781 00:40:31,840 --> 00:40:36,160 Speaker 1: opportunity costs as an investor and should be taken very, 782 00:40:36,239 --> 00:40:39,200 Speaker 1: very seriously. So that's probably why it's my favorite as 783 00:40:39,320 --> 00:40:42,000 Speaker 1: a ticker. Maybe it's not the best. Eric's the master 784 00:40:42,080 --> 00:40:44,640 Speaker 1: of clever tickers. I don't know them. I spent very 785 00:40:44,640 --> 00:40:46,560 Speaker 1: little time like a d t f S, but the 786 00:40:46,880 --> 00:40:49,200 Speaker 1: I don't I actually don't own ets. But the extent 787 00:40:49,200 --> 00:40:52,560 Speaker 1: to which I would or uh would change to that 788 00:40:52,600 --> 00:40:56,319 Speaker 1: strategy or recommend that someone else changed that strategy hard 789 00:40:56,360 --> 00:40:59,200 Speaker 1: to beat. Spy Patrick was Johnesty. Thanks so much for 790 00:40:59,239 --> 00:41:05,240 Speaker 1: joining us on trially. It's thanks guys, Thanks for listening 791 00:41:05,239 --> 00:41:07,480 Speaker 1: to Trillions until next time. You can find us on 792 00:41:07,480 --> 00:41:11,880 Speaker 1: the Bloomberg terminals, Bloomberg dot com, Apple Podcast, Spotify, and 793 00:41:11,920 --> 00:41:14,160 Speaker 1: wherever else you like to listen. We'd love to hear 794 00:41:14,200 --> 00:41:17,160 Speaker 1: from you. We're on Twitter. I'm at Joel Webber Show, 795 00:41:17,320 --> 00:41:21,560 Speaker 1: He's at Eric Faltinus. This episode of Trillions was produced 796 00:41:21,560 --> 00:41:31,640 Speaker 1: by Stacy Wongs bite O