Engineering an “Unboring” Investment Portfolio with Tad Fallows

It's equally reasonable and especially you have significant assets, you can afford to handle that volatility to say, well no, what I care about more is where AM I in 20 years? Not how smooth the path is.

So that's an interesting thing that a lot of people I think take that latter perspective of worrying more about returns and less about volatility.

Welcome to Truly Passive Income. I'm Neil Henderson.

And I'm Clint Harris. And today's guest is Tad Fallows.

He's the co founder and managing director of Long Angle, a private, no solicitations peer community of almost 6,000 very high net worth founders and operators across 45 countries.

He previously bootstrapped iLab solutions from zero to industry leader before an all cast acquisitions by Agilent and now leads data driven research on how the wealthy actually allocate de risk and spend. So Tad, appreciate you joining us today. This is going to be a really interesting conversation. I'm excited about it.

So thanks for joining us and why don't you tell us a little bit about yourself.

Yeah, thanks so much for having me here.

Well, as you mentioned there, the group that I run today, Long Angle, a group about 6,000 people as you said, across 45 countries, although mostly in the US and heavily first generation wealth creators.

So that means a lot of entrepreneurs, people in tech, people in finance etc, who are in a situation where they have significantly more assets than they grew up with.

So maybe they grew up middle class and now they find themselves with you know, 10 or $20 million and have a bunch of new opportunities and new challenges and want to get advice on those from people in the same situation, not somebody who's trying to sell them something. So that's the purpose of the kind of solicitation free peer to peer community. And we don't charge membership fees I should mention.

So that's kind of the group. And in terms of just a quick thumbnail on myself as you mentioned there, shortly out of college I bootstrapped a software company.

We got to about a hundred employees before selling it to a strategic acquirer.

And that was really what led me to this of, you know, my personal journey looked a lot like the other members of the community of, you know, until my mid-30s.

These going from six figures to eight figures and then having a whole bunch of these new questions and trying to figure out, you know, which ones were, were important and how to go about answering those.

I would imagine there's got to be a huge difference between people that created that wealth during their lifetime versus people that Inherited it. This has got to be a different breed. Like these are people that are bootstrapped, they're scrappy, they're nimble.

Is that what you find in that community?

Yes, I think that's right. And you know, very humble.

And I think there are our community, it's not exclusively first generation, that's probably 95%, but there are some people who are second, third, fourth generation, really great, really, you know, thoughtful people. There are some important differences in terms of how they approach things.

Part of it comes from that background of I think if you grow up with wealth from day one, some of the stuff you may just sort of intuitively know the answer to the question or may be done for you. So in terms of, hey, how do I structure my estate?

If grandpa made the money, then probably grandpa already structured everything and you got a set of advisors in there, you have your different tax planning in place, et cetera.

But then also in terms of, I'd say maybe one of the biggest differences is from a risk tolerance perspective where somebody who was both, you know, fortunate enough and hard working enough and skilled enough to generate significant wealth, especially early in their career, they not going to want to lose it. But they probably have a perspective of, hey, you know, if that $10 million evaporated tomorrow, if I really had to, I could go make it again.

And so if you then think about, well, what do I want to do with that money again, let's say you think I've got 40 or 50 years left. What I tend to see is with the, you know, second, third, fourth generation, there is a real emphasis on capital preservation.

You know, they didn't create that wealth.

And there's a sense of you're more of the steward for that wealth and making sure that you, you know, grow and amplify it and pass on both the money and the values to the next generation.

Whereas I think the first generation has a perspective of, okay, yes, I don't want to lose it, but also I don't want to just settle for, put on bonds and sell for 4% returns for the next 20 years or the next 50 years. Again, if I've got 25 million, I earn 4%. I could say, well, I'm getting a million dollars a year, that's all I need.

Or I could say, well, over the next 50 years, if I get equity like returns, If I get 10% on that compounding over the next 50 years, I can have much more impact, whether it's on my children, whether it's on philanthropic giving, whether it's on the own spending I want to do. But I think there is a probably a more hands on and a more willingness to tolerate volatility from those first generation wealth creators.

Yeah, they had to take some risks to get there. Typically that makes a lot of sense. So let me ask you this. So at Long Angle you mentioned no fees and no solicitation. Sounds great so far, right?

What are the problems that you guys are solving and how are you creating value for the people that are partnered with you and how are you guys creating value for yourselves?

Sure, that's a great question.

So I would say, you know the typical if I were to summarize the problem for and problem again, I will recognize you can put that in air quotes, say well this is the world's tiniest violin if your problem is you're trying to figure out how to manage $20 million.

But both the challenge and the opportunity is that it's a new set of questions that if you didn't grow up in that situation, you know, you haven't had exposure to. So I think umbrella insurance is a good example.

You know, typical insurance might cover a million dollars or a couple million dollars of liability cap and for most people that's going perfectly fine. If there's damage above that, you're just going to kind of settle.

But if you are a deep pockets where you do have 10 or $20 million, then you need umbrella insurance to be able to cover, you know, a more significant payout to disincentivize, you know, the claimant's lawyer from trying to go after everything you have. Just one example. A lot of people aren't, you know, didn't grow up thinking about weren't aware of it or again, you know, estate tax planning.

Your conventional advice will be look for a couple. It's a $30 million exemption. No one's ever going to hit that. So don't worry about estate taxes.

And yes, that is accurate but also not helpful if you are actually thinking, well maybe I don't have 30 million today but again if I'm only 40 and I've got I'm halfway there, I'm pretty sure I'm going to be over that limit by the time, you know, I go ahead and so need to think about those things. So I think their challenge is a new set of questions they haven't expressed before. And the it's how do I get unbiased advice for that?

So I can go go to Credit Suisse or Goldman Sachs or a life insurance agent and they're Going to have all the advice in the world and some of it will be very good advice. But how do I figure out if the barber is telling me I need a haircut or if I actually do need a haircut?

And so that really was the reason this was out. Pure self interest. My co founder and I, we set this up because we said, okay, we have this challenge, we want this advice.

Let's get together a dozen of our friends who either, you know, have sold their companies, they started hedge funds, you know, people who are in this situation and just. It's not that any of those people has the perfect answer, but they can share their actual experience.

And I can believe that what they're telling me is true to the best of their knowledge because they don't have a reason where they're trying to sell it to me. So that's the problem we're trying to solve, is that information and community for people in that situation, the way that we try and add value.

There is a few things we. Where we started was really just as a private online community, so think, you know, kind of like a glorified Slack channel.

Over time we really built it out. It's more like a private version of Facebook or Reddit or something like that where people will. Now they've got 6,000 people.

There's all kinds of threads, whether it's, hey, I've never been to Japan before, but we're going to Tokyo. What are, you know, the best restaurants, the best experiences to have in Tokyo, or hey, I've outgrown my cpa.

And so, you know, I really need to find somebody who can handle these international issues or these crypto issues or whatever it is.

So a lot of those online discussions and then over the past five years as we've been running this community, we've determined a certain set of needs that are probably under addressed for this demographic. So some of it's around community. We do peer advisory groups, guys who meet or women who meet once a month on a recurring basis.

Kind of total confidentiality, total openness, and give each other advice. One of the things that we do is syndicated private market investments.

So if you look at our typical member, one thing we find that's probably different in our community than most is the two thirds of the members totally manage their own portfolios. They don't work with a wealth manager in any way, which is funny. That's one thing.

If you ask your Credit Suisse, hey, can I, can I responsibly manage my portfolio of $20 million? They'll say no way, you know, that much money, you need professional help.

But I can tell you, you know, statistically, two thirds of the people are doing it all themselves. They say 75 basis points doesn't sound like a lot of money, but on $20 million, that's 150 grand a year post tax. Like I can do it myself, thank you.

But they'll do that for their public portfolio, you know, public equities, maybe their bonds, you know, maybe some directly owned real estate. But they want access for some, many of them for some portion of their portfolio to private market investments like private credit, private equity.

And those the minimums are so high and getting access and underwriting them is complex enough that I can't personally go to KKR and say, hey, here's a check for a hundred thousand. They might have a $10 million minimum for their fund. So I'm not going to put my whole net worth into a single vintage of one private equity fund.

But we sort of collectively will do 100 people each putting 100 grand in to hit that minimum and also leveraging the collective expertise to, you know, find best in class across a lot of these asset classes. So those are a couple examples of the, the things that we do in the community.

So I've got two questions that pop to mind because you're a no solicitation group and you said you charge no fees, how you stay in business?

Yeah, sure, that's a great question. So I say we don't have membership fees for basically for these syndicated investments. As I talk about, there's zero pressure to invest in them.

And I'd say most members join our community just looking for the community, looking for the conversation. And that's perfectly fine if that's all people do.

But then a lot of them, once they get in there and they see, you know, it's only once or twice a month that we'll have one of these. So it's not like, hey, here's the deal of the day.

But it's as we come across, a good one, which again, on average is maybe 15 a year across all these different asset classes. Litigation finance, oil and gas venture, what have you.

We'll share that with the group and we'll set up a, a feeder fund or a special purpose vehicle, which again allows us to lower the minimum from the seven figures to the six figures.

And then in those cases we charge basically a 1% management fee on those for both the direct costs of administering the SPV audit, et cetera, as well as that's what allows us to make the economics of the overall community sustainable?

And sorry, one follow up question, and it's an easy one is, is how do people, like, how do people get into the community? I mean you've got some sort of, have to have some sort of gatekeeping.

Yeah, yeah. So if anybody is interested in joining here they can just go to our website, longangle.com there's also a bunch of data there. As I said.

We do these benchmarking reports where we survey our members. They can download any of that.

We, we try and publish as much as we can publicly to share, but there's a button there to apply and our process is if you hit that button there's like three questions. So it takes like 30 seconds to fill out but that sets you up for an interview with a current member.

And we have a couple of dozen of our more active members volunteer to have interviews with candidates and it's really to you know, share information about hey, how it works and then learn about the candidate. We don't have one target profile.

Like we'd easily be just 5,000 guys like me, you know, all 40 year old white guys who started software companies and. But then you're only going to get one point of view.

So we actually proactively want a diversity of professional backgrounds, geographic backgrounds, age, gender, etc. To you know, be able to bring complex or you know, a wide variety of perspectives.

So any of your members who are interested in joining, really the biggest thing that we're trying to do in those interviews is keep the solicitation free.

So make sure nobody is joining with an intent of getting investors, an intent of getting clients, you know, but other than that, if somebody's coming with their learning hat on and wants to share information and learn information, those are the kinds of people we want as members.

That's awesome. I can't wait to talk about the survey. I think that's super exciting. But before we get there I want to ask you about like what are the types of.

So we back up. Neil and I predominantly do real estate, right. We're in the self storage space. We buy big box retail buildings and we convert them.

And so in terms of the alternative investments, we're mostly pigeonholed into thinking about real estate because that's what we do, that's the space in which we live.

But this is a very broad, broad topic and you've got everything from crypto to ATMs to vineyards and everything else and especially the rise of debt funds as variable rate debt really got crushed over the last couple years. So what are these types of investors investing in these days? What are they avoiding?

What are the trends that you've seen over the last few years kind of bring us up to speed and what that consumer is looking for in terms of an offering?

Yeah, I would say what they're looking for, an offering more than any one asset class, is actually the characteristic of people wanting high equity like returns. So let's call that, you know, mid teens or above expected returns, but lower correlation.

I'm not going to say zero correlation because, you know, famous last words, you get to a crash and everything, you know, correlation increases amongst everything but, but less than perfect correlation.

Because if you look at something like, you know, the s and P500 index, that is a fantastic investment, you know, your historic 8 to 10% returns over a very long period of time.

But the challenge is, and so it would not be irresponsible, put all your eggs in that, that S and P basket with a low cost index fund and just, you know, call it a day. I'm not saying if somebody wants to do that, that's perfectly fine.

But the downside is you can have, you know, a really bad year and lose half the money. You can even have a really bad decade and you know, be stagnant or even down for the decade.

So your, your holy grail, as you know, Ray Dalio of Bridgewater said, would be if you could find 10 or 20 different asset classes, all of which had double digit expected returns but were totally uncorrelated with each other, then you're going to get a very smooth 15% a year and you're going to, you know, be the next Warren Buffett. That's an unrealistic nirvana to shoot for.

But the closer you can get there, the more asset classes you can layer together that have less correlation but all individually have high expected returns, then I think that that's where people are going. So what that leads to is not a single asset class like something like real estate.

And as you guys know, even within real estate, that's not one asset class. If you look at self storage versus office versus multifamily, you know, we see this today. If you've been office, you've gotten hammered.

If you've been in, you know, industrial, you've done just fine. So that's a good example of if you're in real estate, you should be in multiple because you can't predict the future. So same idea.

If we look outside real estate, I guess I can say the big asset Class is there. Private equity is probably the elephant in the room. And again, like everything else within private equity, you can kind of peel away the onion.

You can say there's mega cap private equity, which is almost like shadow buying an S and P index fund because they're buying multi billion dollar companies and you know, running them very professionally all the way down to the truly micro cap stuff. So a really interesting example of that micro cap stuff and maybe the kind of thing our members would like called search funds.

And the basic idea in a search fund is you are finding some recent graduate of a top tier business school. Historically it was basically just Harvard and Stanford business school. It's gotten a little bit more diverse, but not a lot more diverse than that.

And you're giving them, you and a few other investors are seeding them with a couple hundred thousand dollars to live over the next couple of years and spend that time, quote, searching for a company to buy.

And then they'll find some company with maybe a million or 2 million of EBIT and they'll go, the founder, you know, might be a 20 person company, the founder wants to retire, they'll pay him five times earnings to buy that company.

And then the idea is you got this young scrappy one or two guys or girls who recently graduated, maybe they'll double the EBIT, so it goes from 1 million to 2 million and they'll go through a proper banker process when they sell it five years later. And so rather than getting five times, they get 10 times.

Well now all of a sudden you've gotten a 4x on your money without taking that much risk or that much complexity because you paid 5 million to buy the 1 million VBIT and now you turned into 2 and you sell it for 20 million, you got 4x your money. So you know, that's an example on the other extreme end of the spectrum of private equity.

And, and I think the kind of thing that people like because the challenge with that, the entire asset class has a few billion dollars of aum. If you look across every search fund out there, it's not something you can go buy, you know, stock for.

And even if you can find one of the sponsors who does the search fund investing, unless you personally want to go to every business school and interview these guys and convince them to take your money. These sponsors, they can only absorb, you know, tens of millions. And so they're very selective about what LPs they deal with.

And you know, they want a lot of discretion around the data and that sort of thing. So getting access to that. And then beyond private equity, there's a lot of really interesting asset classes that are.

Can I almost that private equity is probably the most correlated with public equities because it's still just equity. If you look at something like litigation finance, what you're doing there is you're basically finding people with lawsuits.

And this may sound bad, but actually, if you dig deeper, I think it's actually a good thing where let's say you've got somebody who's a truly, you know, a very legitimate claimant. They had some, you know, claim against a big company where that company caused them damages.

The challenge may be, I can't afford to spend a million dollars to take Johnson Johnson all the way through the court system, even though they actually caused me these damages. And maybe I don't, you know, either can't find or I don't want to give a plaintiff's attorney, you know, a 50% cut of that judgment.

But basically you can invest in these lawsuits there.

And so the upside then is just based on how do those lawsuits turn out, which has effectively zero correlation with how the public stock market is doing. You know, oil and gas might be another one where you can have phenomenal returns, you know, in the mid double digits.

And again, there is some correlation to the overall economic cycle.

But if you look like if we get into, you know, a bigger war with Iran and they shut down the Straits of Hormuz, that may be bad for the S and P, but that's going to be phenomenal for the Permian Basin. And so you get these, you know, different kinds of correlations. Those are a few examples of them.

So I just want to make sure, for the stupid people in the room, mainly me, that I understand what you're talking about.

When you talk about correlation and what you're talking about, you're not just talking about trying to uncorrelate from necessarily the US Stock market, but you're trying to build a portfolio of uncorrelated assets, from stocks to private equities to oil and gas to LI. You know, it's just things that, you know, one of them may be hitting 25 RR this year, while the other one's only doing two.

But, but like, when you average it all out, it's going to be up around 15%, is that correct?

That's right. Each one will have an expected return. That is a very attractive one. And yeah, you're trying to just mitigate.

So any one hiccup somewhere, again, you know, Covid, nobody could have predicted that was coming, nobody would have predicted the effect on office space. And the same thing across all of these asset classes.

What's the biggest pitfall that you think you guys do a good job of helping people avoid? If they connect with your community versus people that should have connected with your community sooner?

I would say, as I said, you know, this is not exclusively around investing and so there's a lot of, you know, other non investing things.

If I were to look though first at the investing, I think one of the biggest challenges is if you look at public markets again like the stock or the bond market and I think to a significant degree the real estate market, although not quite as much, those markets are very efficient which means there's all the informations out there. Everybody knows how much Nvidia's earnings, everybody knows, you know, what the analysts say Nvidia is going to make.

And so the price that is set by the market, there is going to be a pretty fair price. So if you just blindfold yourself and throw darts at the wall and pick stocks, if you pick 20 of them, you are basically going to mirror the S&P 500.

Nobody can really beat it. But you're not going to lose to it by much either. If you pick randomly.

If you look at private markets on the other hand, both from the fee structure perspective and just the quality of sponsor, if you pick there is not efficient price discovery.

So if you pick randomly, I mean, you guys know this with real estate, if you go with a bad sponsor, you will get bad returns regardless, regardless of the decade, regardless of the interest rate, you know you're going to get bad returns. It could be outright fraud, it could just be, you know, lazy.

It could be that the fee structure, you know, I had one guy tell me that his fee structure was 1% with a 10 promote. It's like, all right, that sounds super fair. Then it turns out that 10 promote was the LP gets 10% and the GP is keeping 90%.

Like well that that's just insane. But again, you know, those are out there. It's not illegal, it's pure transparency.

But you really, I think if you don't know what you're doing again you can just have fun with the stock market. You'll do fine because the prices are all right. That's not true in the private market.

So that's probably the biggest mistake is I think if you don't have a way to really properly get your top quartile sponsors again, as you guys know, in real estate, if you do a top quartile sponsor, you're going to do great. But how do you find them? How do you properly underwrite them? How do you make sure the fees are fair? How do you get access to them?

I think that that's kind of in the investing world, probably the biggest thing there.

As you guys started surveying your community and getting to know these people more and pulling data out of that group, what are some of the, the things that surprised you? What, what have you learned from that that shaped the way that, that you do your job?

I mean, one thing that's really interesting is if you look at, in this surveys, about 2/3 of people don't have a wealth manager, a third do. So if you run a big enough survey, you get very statistically significant sample sizes in both.

If you look at the portfolio allocation across the people who work with a wealth manager and those who do not, asset class by asset class, line by line, they are identical. So there's a number of reasons why you might want to work with a wealth manager. I don't have any religious opposition.

You know, maybe you don't have time. It may be that you don't have any interest in managing this stuff.

You know, if you're a busy surgeon, you just want to be worried about your patients, not the stock market. That's fine.

It may be that you know yourself and you know, the next time there's a crisis, I'm going to sell at the bottom and I'm going to regret it and I'm going miss the bounce back. Those all could be valid reasons. Or maybe you're worried as you pass away, your spouse needs someone to, you know, help hold their hand.

But if it is, hey, this wealth manager is going to help me beat the market or give me some special secret allocation other people don't have. I would say the data shows that is not the reason to work with a wealth manager. You'll end up in statistically the exact same allocation.

And so you have to believe that you're partnering with them for some other reason. One other thing that, that's pretty interesting is if you look at, a lot of people would talk about a quote 60, 40 portfolio as being the benchmark.

So that's 60% stocks, 40% bonds. Maybe if we're talking real estate, you say, okay, 20% real estate. But anyway, that is basically the benchmark.

Those two asset classes, if we look at our members, they are less than 10% in bonds. So almost all of their assets are in something with a higher expected return than that. Flip side is they have extremely low leverage.

Only maybe 5% of their total portfolio is borrowing, you know, including the mortgage on their primary home. So very little leverage. But then when they put their money to work, it's all in higher expected returns.

And I think that really comes down to, you know, a perspective I have is that there's a. People often treat volatility and risk as synonyms, but I think those are really two very different things.

If you ask Warren Buffett what's risk, he says that is the risk of a permanent loss in capital, not a paper change. So Berkshire Hathaway many times over the course of his career has lost 50% of its market value, but he doesn't see that as well.

We didn't actually become 50% less valuable. It's just the paper mark moved around and it always comes back because the underlying business is still sound there.

And so I think it is perfectly reasonable to say, hey, I care a lot about volatility. I don't want to see that paper mark moving around. But I think it's equally reasonable.

And especially you have significant assets, you can afford to handle that volatility. To say, well, no, what I care about more is where AM I in 20 years? Not how smooth the path is.

So that's an interesting thing that a lot of people, I think, take that latter perspective of worrying more about returns and less about volatility.

You mentioned the debt is rare in your cohort and when used is modest. Your groups are not using a lot. How do sophisticated families decide which liabilities are truly additive versus lifestyle leverage in disguise?

Yeah, it's a great question. I mean, I think here it'll be more anecdotal rather than quantitative because we're not asking them, hey, exactly why did you take this?

But I would say in principle, as people look at it, the leverage that they're putting on is really mostly to lever up an investment. And so the most obvious example is in real estate.

As you guys know, you're very unlikely to make really strong long term returns with zero leverage on real estate. Maybe you get lucky and buy farmland in front of a highway or something like that.

But in general, the way that you go from okay, low risk returns to really compelling returns is to put a reasonable and responsible amount of leverage. That's probably not 90% leverage, but maybe it's 50, maybe 60, you know, something like that to get where you want to be.

And so I think people extend that same concept to their other investments.

For example, if you've got a big stock portfolio, it is Very possible to borrow against that portfolio and you can get low today, you could probably borrow it five, five and a half percent against your portfolio. If you're borrowing maybe 10% to buy more stocks, you'll probably do fine.

On average, the stock market's going to beat 5% and so you'll juice your returns a little bit.

But if you start borrowing 60% and then the market crashes and you get a capital call and you're a for seller at low price, that's going to be catastrophic. Or if you're borrowing just to fund your vacation. Yeah. Again, you know, there's no excess return there.

So I would say people really look at it to put some amount of leverage that goes back into that underlying asset, but in general, probably to keep it modest and to try and make your excess return by being in the right asset class. Class as opposed to trying to really lever up something that is not compelling by itself.

I love that.

Let me, I want to ask a question here that's a little bit of a shift of gears and there's so much to dig into, what we've already talked about that I feel a little bit foolish asking this question.

But I'm a father of a five and a half year old and a two and a half year old and I'm not going to have you on here with your experience and background and network and not ask this question. So I grew up on, grew up one of six children, lower middle class.

And I know that anything I want in life for my family, I'm going to have to create it for myself. And we live in Wilmington, North Carolina, in a small beach town, Carolina beach.

And it's not the richest beach town around, but it's a lot more money than I grew up around. One of the concerns that I have is raising a couple little jerks, right. I want to focus on my wife.

And I believe that money does not buy happiness, but it does create opportunity. What you do with that opportunity is up to you and that's going to look different for everybody.

But we're looking for that freedom of purpose that comes with financial time and location independence and hope to use that to develop character in our kids. Because if I just.

If we make a bunch of money and we give the money to our kids and three generations later the money's probably gone and they're probably bad people versus trying to focus more on experiences and time that we can like.

My idea is with them that we want to involve a lot of travel, not to resorts, but to like Nicaragua and and mission trips in places that are going to give them a little bit of global perspective and hopefully create empathy. But I have no idea if that's going to work.

That's just my idea of what we probably should be doing and, and to create that character in, in them that hopefully can insulate them from the materialism that comes of, of a moderately wealthy community that we're raising them in. But you've seen this work. You've got 6,000, you know, test examples right there in front of you.

So, like, families worry about raising grounded kids among abundance. What have you seen? Do people worry about that? Are people focused on how do you solve that problem? And what have you seen actually work?

And am I going down a pathway that's proven to not stand up to the test of time?

Well, first of all, do people worry about it? Absolutely. I would. I mean, in reality, again, let's say you've got 10 or 20 million dollars. Are you actually gonna run out of money?

No, you're gonna be fine. The real thing that people are worried about is their health and their families. You know, that that's a place where you actually have risk here.

And money can't buy solutions to those problems. It can help, but it can't solve them.

So, absolutely, that, that is probably the number one concern among our members, is how do I make wealth an asset and not a liability in my children's lives? I wouldn't claim to have the answers, but I think there's probably maybe three things that I would say.

And this is also talking with some people who've made their whole careers and done a lot of research on, okay, how do you raise successful children with wealth? And I use that term successful because you could define that however you want to. That could be, hey, they are financially successful.

It could be they're in happy, stable marriages. Could be that they are productive members of society who give back to their community. It's probably all the above, right?

If you don't have all those things, you know, you're not going to consider your kids successful. So a few things that I think both I've seen firsthand and that the research seems to indicate. One is honesty.

So don't pretend you don't have the money and don't tell your kids because, you know, what are you teaching them? You're teaching them, this is something to be ashamed of. You're not actually going to keep the secret.

Maybe, quote, best case, they find out when you pass away that you've been lying to them all along and now they're inheriting a bunch of money at 60 that they don't need anymore, but they could have used before.

So you know, don't, don't try and keep it a secret and because you know, there are real stories, people googling their father and that's when they find out their dad sold the company for a hundred million dollars. You know, they didn't know and that's just not the way for it to come out. That's one I think related.

And you know, this is maybe a little bit more complex than the honesty, but really parenting, as you guys know, it's about role modeling. Your kids don't actually care how much money you have. They care about spending time with you and they don't care what you say. They care.

They look at what you actually do. So I think, you know, best example of this is I'm here in Dallas. I, you know, happen to live in a pretty affluent neighborhood here.

Maybe more than one you're talking about. So there's a lot of multi general generational wealth in the community, but really great, well grounded, just good humans.

And if you look at what they do, you know, you may have a billion dollars, but if you're spending your time, you know, I'm, I'm a Boy Scout Scout leader. So I put on the uniform every Monday night.

I go there, I'm at the campouts and these other dads there have far more money than I do, but they are showing their kids, hey, you know, it's not, maybe we've got a private jet, maybe we don't. But I don't need a private jet. What I'm doing here is I'm showing up at the Boy Scout meeting and I'm helping teach the kids.

And then I'm at the camp out and I'm sleeping on the same floor. Everyone else is in a tent just like everybody else. And so I think that that role modeling, there's really no way around that.

That may be bad news because it's harder, right? It would be easy just to stay at the Ritz and tell your kids, hey, you know, you ought to not be comfortable with creature comforts.

But mom and I are going to stay at the Ritz, but that's not actually going to work, right? You got to actually whatever you live and demonstrate is what they're going to absorb.

And then a third thing, this is not from first person experience, but there's a woman named Covey Pitts, Pitt Edwards, who's done a lot of research on this and, and you Know, she studied kids who grew up in wealth and became successful in the ways we're talking about.

And one of the key characteristics she saw there is, is that all of those successful children, then adults at some point during their adult life, particularly early on, live totally within their means.

So they may have been beneficiaries of very large trust fund, but both that first person experience, but even more proving to themselves, hey, I am capable of, you know, living off of what I earn.

I think that gives them a sense of kind of mental health and psychological comfort that if they didn't put this money together, they may be worried, hey, if something goes wrong, there's a crash, it disappears, I can't exist without it. They prove themselves that, that, that's not true. They are capable of, of standing on their own two feet.

And the research shows that makes a long, a very strong long term impact in terms of well adjusted kids.

You talked about this. It's very uncomplicated, which is, but you said it's hard, which is just good role modeling. You know, I mean that's, that's so much of it.

You know, how not to raise a jerk. Don't be a jerk. You know, it's just some, it's, it's harder for some people. I'm not pointing any fingers.

Well, you're talking about the mission trips and philanthropy. You know, if you're actually showing them, hey, we're donating to this cause and this is, you know, whatever percent you feel is appropriate.

But that transparency and I'm, I'm, I'm doing this, I'm not just saying it. I think that that's the way you do it.

I think we're speaking the same language because to me that's what it is, is like, okay, here's a cause that we as our family are buying in on because it's a cause that we believe in and we're going to take action steps to pursue that together and use that as a point of bringing us together as a family. Because this is something that collectively we have a focus on.

And honestly almost treating it like the, hopefully the character development that comes through that is, is an ancillary benefit, right? That like this is what your mom and I are focusing on. You're gonna be a part of this.

When there's a day that you get to decide whether or not you're a part of it, I hope that you choose that you are. Because this is something that we care about.

And through that have that be something that involves travel, that involves empathy, that involves, you know, recognition of gratitude for where you live because you've seen other people with less opportunity and you're looking for ways that. How do you help them? You know, like that happiness doesn't.

It's when the people that are giving oftentimes seem to get more out of things than the people that are receiving it. Right. If it's done in the right way with the right intentions.

And so that's kind of my idea is like raising children through positive action that they can see, but having it be a decision, like a family decision. This is what we're doing. This is what we care about. This is what we're. We're focused on and having a purpose.

More so than, like, you can say that you can write the check to support whatever conservatory you want, but, like, the idea is like, how do you make it a curriculum, Right? How do you make it a lifestyle? Something that's.

That's bigger than that, something of eternal significance or at least significantly more significance than just money. Right. That's. That's the idea of what we're going for. But again, it's all. It's well intended, right.

For millennia, everyone has well intended ritual for their children. And there's a lot of bad kids that have come out of that. Right. I was one of them. And I like to think that I've grown out of some of that.

But the reality is we all have. Every kid learns differently, and there's going to be different situations that you have to adapt to.

But that's, that's one of the things that there's no, there's no real guidebook on that. But I believe that there's tremendous value in community, which I think is what you have built, right? You.

You've built this community that is sounds to me like built on honesty and transparency and sometimes vulnerability and just leaving pride at the door. And let's talk about that. We have unique challenges that other people aren't going to be able to understand. But here we're in a sacred place.

Let's lay the cards on the table. Let's have an open conversation about. I think that community provides a lot of value. And the data that comes out of that is, wow.

Like, that's amazing.

Yeah, I, you know, agree with, with everything you said there.

Yeah, that wasn't, that wasn't really a question. That was more of a statement. I just, I've seen a lot of people try. Community's a buzzword, right? Can I be honest?

Like, community is kind of a buzzword of we're going to build this community of investors or this community that are coming to this Facebook group or whatever.

It's not often you see people pull it off in a meaningful way, which I'm not surprised that you have, because you obviously had success doing the same thing with a company and you created tremendous value there. So it just makes sense that you would see that again. And honestly, five years ago, it kind of feels like you were doing it before. It was cool. Right?

A lot of people got pushed to the online digital communities because they were forced to through the pandemic and adapting a new technology that we didn't really use before. Seems to me like maybe you were on the early side as an early adapter of that technology to push people into this community.

But you have to, you don't, you don't have these people all in one area of the country. Right. But I think within that space is there's opportunity to, to gain a lot of value there.

If you're willing to listen and if you're willing to share, I love that. What's next? Where's the community?

What's your, what's your goal of what you're trying to accomplish, of how you can better serve the people in your community or, or the value that you can provide?

You know, I think we really want it. We've tried to do from day one is just, you know, initially we started this. You're asking, hey, how do you keep the lights on?

We had no way to keep the lights on. We just said, hey, we want a group of people together here and talking.

And we've tried to be pretty disciplined about not saying, hey, is there some service we'd like to sell to people? But what is it that the members are telling us they want? And that can kind of sound like a grab bag of things.

Some of it is this access to private market investments. Some as people saying, hey, I want, I want put together.

You might call it masterminds, except not focused on, you know, say real estate investing, but just kind of more life focused masterminds. Some of it's around, hey, we'd like to do more meetups. We'd like these benchmarking surveys.

Some of those things generate revenue, but some of them, again, like meetups or surveys, doesn't generate revenue and not really be driven by, hey, what do we want to sell? But just what do people say they need? I think if I look at, you know, what are we hearing in terms of other, other things that people are.

Say they're interested in a lot of that is coming around now to hey, how do I find best in class service providers?

Whether that's around lawyers, accountants, insurance providers or yeah in this world of insurance you can get to some of these Nichier needs there like a good example is people saying hey, I don't want to work in a W2 job anymore because I've got plenty of money but I can't figure out how to get health insurance if I don't get a W2 job. So trying to find good ways to get yeah that non employer health insurance and you know in some states their ACA Obamacare exchanges have good plans.

In other states they really don't have good plans.

They need other options and you know, things like that same, you know hey I need to get 10 million of umbrella insurance but my company only give me 3. You know how do I get access to more there?

It's a funny story you were talking about hey you know, early adopters online stuff when I remember the sort of fortunate to be an early adopter in the tech world because when I first met my future father in law, you know going on 20 years ago now, I just started the software company and we were taking a totally remote model then. So everything you know, we didn't have a head office. We just had at that point maybe five employees spread across the country.

And I think he was highly skeptical.

So this guy who wants to marry my daughter, you know his business is a PO box and you know working from his, his porch somewhere in you know, rural Massachusetts. So yeah it's, it's funny some of the stuff that seems crazy at the time now that sounds totally normal to have virtual companies.

So think about what, what's coming next, what, what's crazy today that's going to seem standard in the future?

Well I'm going to ask you to put your crystal ball hat on here for just a second and kind of selfishly is, is you know that's we talk about remote work and that's just exploded since COVID But we're, we are starting to see a shift back it like there's a lot of companies are going yeah, we're done with this, we can't do this anymore. I saw, I got an article sent from my sister who lives in New York City. New York City office is booming. Like it's like 91% occupancy in New York City.

They're it is back to work in New York City. I'm curious, is there any like any discussion or even just like your general feeling on where office.

Like, where is office going to go the next five, 10 years?

Yeah, it's a great question.

I'm sure there's people more qualified than me to say, so I can really only speak to what I see as the potential demand driver there from knowing a lot of people who run companies. And I don't think we're ever going to get back to where we were.

Like, if I look at, you know, our organization here, we've been hiring people and we're looking for very talented people. And I would say one of our biggest advantages in hiring people is we say, hey, you can work wherever you want to.

So maybe you want to move back to Idaho or you want to move back to, you know, Vermont to be with the family and JP Morgan is not going to let you do that. But now we, we can hire you there.

So being able to cast that global footprint for talent and being able to make that an option that people can live wherever they want to and you're not going to change their pay whether they're in a higher, low cost of living area. Just you, you pay. We're going to pay you what you're worth. And it's great if your dollar goes a long way in Iowa, you know, good for you.

So I think, I think you'll probably have both. You will have the more traditional companies.

You know, my wife, she works for a big fortune, probably 50 company and they, she goes in the office three days a week. So they've kind of settled on a hybrid there. But of course they need all the office space because even if it's not five, you still need it three.

So I think we'll end up somewhere in between. I mean, in my mind, the question is probably just is there low enough construction for long enough that you get the absorption?

I mean, my understanding is that your, your real class A is going to do fine because you're not down to zero. The office need. There's a set of companies that decided they need it.

And those companies are probably less price sensitive because if they decide they want it, even if they don't, quote, have to have an office, then they're probably willing to pay up for a good office.

I don't really know what you do in an Overbuilt market with the class B and class C, because I think, you know, total demand is going to be lower than it was historically. So it probably takes a long time with no construction before you totally fill that up.

And I'm not really sold on this conversion stuff to, you know, residential everything. You hear as well, you don't have the right stairwells, you don't have the right ventilation. It's not going to meet code. Nobody, you know this reason.

Nobody wants to sleep in the conference room. So, you know, I. I'm still not particularly bullish on office myself, but that's probably for lack of sophistication.

I think in the right cities and the right markets, you can probably get great returns. But if you look at the. The mean return, it's probably still going to be low would be my guess.

It's also hard to find capital right now for that because it's still a little bit of a taboo topic. So question I have for you about long angle. I've got two questions left. One of them is the last question that we ask everybody.

Just for the sake of time, we'll start wrapping up. Although I really don't want to.

But on long angle, just for the listener's sake and mine, what is the minimum that you guys accept for somebody applying to long angle to try to join your community?

Yeah, so our minimum is where the SEC defines a qualified client, which is 2.2 million or above in assets outside of your primary residence.

I would say that most of our members are probably in the 5 to $100 million range because a lot of these sort of complexities and challenges we talk about really come into more full force. Over 5 million. But the minimum is the 2.2 million there.

Great. All right, last question. We ask every guest. Is there a book that you find yourself recommending? Usually we ask, like, hey, what's your favorite book?

But the reality is, like, within your community, the people that you're talking to, probably earlier people that come in. But within your community, is there a book or a resource that you find yourself recommending to friends and colleagues more than any other?

Yeah, that. That is a great question. I mean, I'll probably give you a couple of answers to that.

I think that as I mentioned Covey Pitt Edwards, her book on raising kids, I want to just. I think it is called Raised Healthy, Wealthy and Wise. It's gonna be something along those lines. You can look at it. But I. I think it's.

Yeah, Raised Healthy, Wealthy and Wise. So that one is good. Is Just a framework of what she did there. As I said, you know, she works for a multi family office.

They've got lots of extremely wealthy clients, you know, more than that $10 million range, probably in the, you know, many tens or hundreds of millions. But looked at a large sample set of kids who came out well, being raised in that kind of environment and looked for those common patterns.

So I gave you one example in terms of people who they all at some point lived within their own means. But she has, you know, half a dozen different characteristics there. And so there's no one right answer on raising kids.

But I find that to be a really useful primer.

And then the other one I'd give you, which is totally not in the world of investing, but I think especially as we look today with a, you know, very complex political environment and a lot of people feeling like, you know, whichever side of your red blue divide you're on, feeling like, hey, those people on the other side are crazy. I don't even understand where they're coming from, et cetera.

There's a history book that it's probably 30 or 40 years old now called Albion's Seed by David Hackett Fisher, who's a great longtime historian, I think, at Brandeis, where he talks about basically these four different initial cultures of the US settling in Boston, Philadelphia, kind of lowland Virginia and upland Virginia, and where they came from and kind of their backgrounds and mentalities from England and how those different mentalities came over to the US and how much of you see those same different kind of cultures and philosophies play out, you know, even through today and kind of backgrounds on why people have these different concepts of, you know, what does freedom mean?

Does that mean my freedom to, you know, do whatever I want, my freedom to have a gun or my freedom from fear and somebody else having a gun and all that kind of stuff. So I find that just a super useful book that I read it again probably 20 years ago now.

But it's really helpful framework in thinking about and trying to, you know, understand different perspectives of US culture.

I love that. Two suggestions that we've never had before out of 140 something episodes. So that's well done. That's awesome.

Every time we do one of these and we get a book that I haven't read before, it usually cost me money and I think you just cost me twice as much. So well done. Listen, Tad Fallows, managing director of Long Angle, I want to say thank you.

We actually, this has been a great episode we were talking about beforehand like what to expect out of this. And I think you, you meet expectations and exceed them.

And I think that you're in a fascinating line of work and I know that you provide a lot of value for the people in your community. Thank you for providing value for us as well.

If more people want to hear about what you're up to, connect with you, about joining Long Angle or getting more information, what would be the best way for them to do that?

I think just go to our website there. As I mentioned, we publish a lot of research for you to download if you want to.

And then if it looks interesting, just hit that apply button and I'll set you up for an interview with a current member who'll just tell you more about it and, you know, see if it seems like a fit for you. So that'd be my recommendation. The longangle.com Excellent.

All right, we'll put that in the show notes. Tad Fallows, thank you so much. We really appreciate your time. Thanks for joining us today.

Thank you. Neil and Clint, thank you so much.

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