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Today’s guest is David Beatty, co-founder and managing partner of Veriti Management. On today’s episode, he is going to share the value of Direct Index for helping Faith Driven Investors screen for deals that reflect the investors’ Christian values. 

You’ve heard of positive screens and negative screens, but Dave joined us to explore how Faith Driven Investors can invest at a high degree of excellence using both positive and negative screens, as well as using direct indexing to customize their filters. 

If you’re interested in public equities, or already involved, today’s episode is for you…

Episode Transcript

Some listeners have found it helpful to have a transcription of the podcast. Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it. The FDI movement is a volunteer-led movement, and if you’d like to contribute by editing future transcripts, please email us.

Dave Beatty: It’s just common, you know, have you ever disagreed with someone about what’s allowable behavior and, you know, the chapter really encourages us to come at it with love, and I’m both convicted by that. And also doesn’t say, though it doesn’t deny Paul is really one who ate meat and thought it was fine. So he wasn’t saying both positions were right. He was talking about how we love one another. So I’ve just been thinking about how that applies and the work we’re trying to do together and Faith Driven Investor and.

Henry Kaestner: Welcome back to the Faith Driven Investor podcast. I’m here with Luke, my partner, Sovereign’s Capital

Dave Beatty: Luke, welcome.

Luke Roush: Wonderful to be here.

Henry Kaestner: It’s great to have you back. And we’ve got Dave Bayti in the house all the way from Boston, Massachusetts. Dave, thanks for being with us.

Dave Beatty: Thank you for having me, Henry.

Henry Kaestner: So today’s a big deal. We’re going to get into an asset class and investment strategy that is doubly new. Number one, we rarely talk about public equity investing and then as a subset that we’ve never talked about, direct index investing. And so we’re going to do both of those. And the reason why I think that this is super important is that while we all do get excited about private equity investments because of the ability to work with the company owner and being able to really talk about chaplaincy and faith driven employee resource groups and just the individual discipleship of the entrepreneur that we’re working with, most private equity investments are not accessible to 90 percent plus people that would want to get into faith driven investments. The minimums are too high. The lockups are too long. A whole list of reasons why a lot of times private equity investments aren’t successful. And yet where we’re coming to understand through the leadership of people like Dave and others is that we can get a lot of the spiritual integration we’re looking for in our portfolio from public equities as well. And that’s because public equities are run by Christ followers. Many of them are where there is somebody like a Pat Gelsinger from VMware is really serious about his faith and really serious about excellence in the work that he does. And there’s just great spiritual integration in play. And to help us to understand the world of public equity investments and then in particular, as I said before, direct index investments. We’ve got Dave Beedi with us on the program. So, Dave, thank you very much for joining us.

Dave Beatty: I love the topic. Love you, Henry, and look forward to the discussion.

Henry Kaestner: Thank you, brother. So before we get into what you do right now, Varity Daintree, some of your companies start at the beginning. Who are you? Where do you come from? You found yourself on the Faith Driven Investor podcast. So presumably your Christian faith is a part of your life. When did it start? Help us understand who Dave Barry is.

Dave Beatty: Well, you know, I’m an old guy, so I should think what’s really relevant here, maybe I’ll organize it by some places that were turning points for me and faith that connected with values or place kind of the nexus of faith and vocation kind of around that. I’m remembering when I was I was probably like 13. You know, I’m in middle school, which means it’s already difficult. Right. And my family was one of those that provided meals, but never any other time, really. And I only prayed when I needed something. And I remember this distinct realization like this probably isn’t how it’s supposed to work, either I need to be all in or I’m not in on this thing, you know, kind of a matter of my conscience. Right. And so actually, soon after that, I really went deeper with God. So that’s one turning point I remember. And then another one would be in college. And I was good at science and I chose to do the humanities and history and government and that kind of thing. This isn’t the way you should think about things. I’m just confessing how I I was thinking, gee, you know, if you’re a scientist, you just get stuck in a lab and you’re not really where decisions are made and where you have those choices about what matters and have influence for God. So I studied history and so forth. I thought process. Right. And then I think and grad school kind of a similar thought process. And I studied not for profit management, or at least that’s what I started at business school. And it was very conscious, like, how can I make a difference for God? I’m not saying that was a good choice. In fact, I found out it wasn’t later because later in my 20s, I was working for a not for profit and I was a controller and I just had the distinct impression, you know, I’m really not making a difference here and this doesn’t really suit me. So I quit my job and just did consulting. Well, I kind of took a semi sabbatical and thought God and read books. And I mean, I’m an action guy. So doing this is actually kind of hard, you know, like take time to think about it and talk to people and pray, you know. And I kind of realize I think I want to go into finance. It’s where I have talents is where I have interest. And there’s all sorts of moral ambiguity and ways to influence things for God. So that’s when I got engaged. I could tell kind of how that path went. But eventually it ended up I started a company, multifamily office,

Henry Kaestner: say that last part again, I’m just in front of myself, just kind of gravitated towards that statement. I’m drawn into finance because I’m good at it. I’m interested in it. And there’s all this moral ambiguity. Say more about that.

Dave Beatty: Well, it was the sense I was thinking of going into personal financial advice for. And I saw how, you know, the typical advisor was somebody at Goldman Sachs or Merrill Lynch, and I kind of comprehended the conflicts involved and how could it be done differently? And I just like there are unending questions of what it means to follow God in those circumstances. I’m interested in that.

Henry Kaestner: So if you’re at Goldman Sachs, maybe I’m being presumptuous or prescriptive here, but if you’re one of the traditional Waterhouses and you get paid on assets under management is probably morally ambiguous for you to think about suggesting that your client lean into their heart and give away 20 million dollars to their favorite African orphanage,

Dave Beatty: they can be giving the money away. And of course, you know, I’m an old guy. So this is back when commissions were dominant. So just the fact of you got paid on whatever you recommended and that was a conflict. And I actually started out wanting to study taxes because a lot of taxes permeated issues and they were often ignored. And that’s kind of the backdrop for how I happened to be a very doing direct indexing to get you. You know, it’s a matter of conscience, you know, and that’s part of what we’re dealing with in Faith Driven Investor.

Luke Roush: So direct indexing is something that’s probably a new concept for some of the listeners of the podcast. Could you give them just a brief overview of what it is, how it works and how you use it as sort of a screen or filter for some of your clients?

Dave Beatty: Sure. First of all, know that it’s just hot right now. The two biggest companies in the space are being sold and that’s just got announced in the last couple of months. And it’s that Parametric and Aperio. And I could talk more about that. Direct indexing has been around for quite a while, but not really big. So it’s natural you might not have heard of it. It really means you’re acquiring the public equities in a separately managed account. But think of it as mimicking what an index fund or an ETF would do. So I would describe that as writing three ways. The passive wave or indexing the second wave would be tax efficient and the third way would be around values and ESG and all that. It’s writing all those waves in one package and I explain how it works, but that’s the big picture of what it’s doing.

Luke Roush: How individualized is your approach at Varity or is it is it something where, you know you’ve got a menu and people choose off the menu, or do you actually consult with them to try to understand for believers who are clients or others who are values driven in different ways? Maybe just speak to a little bit of how you help folks arrive at the right product, so to speak?

Dave Beatty: Yeah, typically, Luke, what do most people do? That’s where people start because it’s so complicated. What do most people do? They just want to know it’s possible. That’s the first step. But if you really want to get into it, you can customize it however you want. So, yeah, we have menus. My goodness. We had a I say client. We really have advisors are our clients and their end clients. So this is an end client working with advisor and they’re coming from some faith perspective, but they’re also Armenian. And they were like, I don’t want to invest in Turkey. So they went deep down that path and now they have nothing niche. Yeah. So they could express that in their portfolio. And that was tremendously satisfying and motivating for them.

Henry Kaestner: So I happen this goes hand in hand with some of the other things that might be obvious to some about investing in terms of tax harvesting and some of the other controls that you give and maybe just go through that real quickly. So somebody listening to S.C., I think I get it so I can invest in an index. I understand that the index tends to be two thirds of the financial managers anyway, and index team can have really, really low expenses. OK, help me to understand, what are the three or four things that a parametric or a verity can provide you that make this really super compelling? It’s such a hot space right now.

Dave Beatty: Yeah, that’s a good way to ask it, Henry. I find most people that can’t get to the values until they understand the core part. So let’s say you didn’t even care about the value slice. Like I said, two waves. One, it’s just it’s an index product. So you want to get the results of the index and let’s say it’s five hundred. Can I invest in it at low cost? Well, of course you can. You can go buy the spider ETF, that really low cost or whatever vehicle. So why would you do something else? Well, you can if you had enough money, you can just go replicated in your own account. You buy all five hundred stocks in the right proportions and you get exactly the results of the index. You can do that. Well, why would you want to ETFs just fine? Well, if you had enough money and you can do that at low cost, all of a sudden you can add tax benefits because you can get first thing we do is we do sampling. You don’t have to actually buy all five hundred to get the same results. You can buy a couple hundred. And using statistics get very close to. The same results. So that’s the first step. The next step is, and you still have some oil stocks, you still have some tech stocks, you still have some consumer stocks, but if you classically cook goes up, Pepsi goes down, you can sell Pepsi by Coke and still be mimicking the index so you can actually harvest losses. Sometimes short term losses get a tax benefit now and at least defer taxes, and it’s surprising the benefit and I could go over that. So that’s the reason you have a separate account. You’re using sampling and you get the index results, but better even after your expenses. Your result after taxes is better than you can get with the ETF. So that’s step one. And once somebody becomes convinced of that, we say, well, you also can express your values. And it could be anything, could just be environmental concerns. It could be your issue is abortion, whatever, because you’re sampling. It helps you imagine it. Oh, you mean I don’t have to buy every drug stock I can avoid Johnson and Johnson, that manufacturers abortifacients and buy this other drug stock and still have exposures and still get the results of the index a little more? A little less maybe. But really close. Yes, you can do that.

Luke Roush: How do you think I’d love to just have you expound on that a little bit, that the S&P delivers eight percent this year and you’ve got someone who is not incorporating their values. How do you think about sort of the bips benefit of being able to do tax loss harvesting relative to maybe like an eight percent benchmark? And then maybe also talk about two different scenarios, someone who’s really narrowly defined, like I’m really sensitive to abortion and alcohol and tobacco and gambling and all these things. How do you think about the likely track near for them versus and then maybe somebody else who’s not so narrow but does have a couple of issues that they’re really sensitive to call it sort of abortion and perfectly OK.

Dave Beatty: So your first part of your question is around essentially the benefits of the tax. Is it really worth it? And then we’ll shift to the values on the I’m calling it tax. So that’s my lingo. You know, you don’t know what investment Alpha is will on taxes if you’re saving taxes. We’re just calling that the alpha. And if you can save present value about one percent a year on your taxes, that’s real money. And if the cost of the direct indexing is a fraction of a percent, so your tax benefit is usually multiples of your cost

Luke Roush: down to 70 or 80 bips on an eight percent base. Is that accurate?

Dave Beatty: Yeah. If you had a target and remember, we do have tracking here. So if the index got eight percent, well, most of the time you might be between seven and nine. On average, you still have eight. And then you have tax alpha, let’s call it on average, an extra one percent will after taxes, you’re really getting, you know, better. Now, what makes that even I could give you lots of detail about what makes the tax AlphaBeta worse. It actually diminishes over time. It’s usually a lot more than one percent up front. It’s less later. Another thing to understand is if you’re charitably minded, I could explain how, but you could double your tax benefit. So it could even be more than that, approximately one percent. So it’s for real. It’s predictable. No investment, alpha, hard to predict. Tax Alpha, very predictable. Even in up markets, you still get it. So that’s the first part. Is it OK to move over to your question on the value?

Luke Roush: Absolutely. Absolutely. Thank you.

Dave Beatty: OK, yeah. If you have those concerns, you listed a few and the ears were kind of the classic conservative Christian. You know, I want to screen out a few things tobacco, alcohol, etc., abortion, maybe those usually. And we could show you a menu. And actually, how many would drop out of the S&P 500 when you did those restrictions? That’s not going to increase your tracking error around the index. Every time you take something out, you screen it out. It means you’ve reduced your universe, which means we have fewer tools to work with in trying to still mimic the index. So, yes, it ups your tracking error a bit, Luke, but we can estimate that change. And I’ve never seen anyone balk at their when you can have a problem, if somebody just says, you know, you’re taking lots of stocks out of your universe, say you say, you know, it’s not just you low carbon, it’s I don’t want anything with carbon in it. You take up all the oil stocks, you start up and you’re tracking your substantially. You can see where I’m going. And we can always estimate that for people ahead of time so they know what they get into. Even in our menu, it kind of shows you how many stocks might I weed out if I have that exclusion.

Luke Roush: That’s helpful. So, Dave, I’m going to ask an obvious question then I want Henry to chime in. But we have good clarity on why many investors choose not to do either real estate, invest in your private equity venture investing just because of the long whole time, illiquid, high beta or high binary outcomes. But why doesn’t everybody do this? Maybe just speak to that. It seems everybody holds public stocks or most people hold public stocks. What’s the constraining factor?

Dave Beatty: Really? Good question. One, there is an issue about minimums. It’s so easy to just go buy the ETF. And it’s cheap and it’s easy and direct indexing, the minimums are coming down, but typically start thinking you need at least two hundred fifty five hundred thousand dollars in a separate account to do it. So that’s a deterrent. Most of the rest is honestly, I just think people becoming accustomed to it. It’s really hot. Now, look look at the sales that just happened of the two biggest players in the space. There’s a reason that the biggest players, Parametric and their parent, Eaton Vance, was just announced in the last couple of months to be purchased by Morgan Stanley. And just in the last couple of weeks, we heard the second biggest player in the direct indexing Space Aperio, an announcement of their acquisition by BlackRock. And all the biggest players you can think of in financial services are pushing hard into this. They see it answers the trends and ESG customization, personalization. It is a big movement. If people aren’t paying attention now, they will be.

Henry Kaestner: So if you’re listeners from Goldman Sachs, listen to that. Here’s the time they Badi Varity management. They’re the number three guy out there in the space. You snooze, you lose. TOTUS is a is a Christ follower. As you look at and have looked at the public equity market. What are the opportunities that you see for somebody driven by their faith to not only necessarily say no abortifacients or nothing that has makes money on pornography? And actually, before I go there, do you have the ability to when somebody comes to you and says, listen, I know that I know that I don’t want to be involved in pornography, but I have no idea which of the companies in the S&P 500 might benefit from that and where that might be de minimus. Do you have resources analyst, something where you can go back and say, OK, well, X, Y, Z company has gets two percent of their income from adult entertainment or somebody else gets a trace amount, but it’s less than one percent and maybe it’s de minimis. Do you walk people through how they can go ahead and say, OK, yes, that’s right. I want to get that screened out or do they need to come to you having already done their own research?

Dave Beatty: Most of the time they come to us and they can work off the menu and we can help them with that if you take it. I’m not sure what example to use, but first, let me describe what’s possible. Even on our menus, we have essentially strict and broader exclusions. So you can say in this area, I just want to have zero tolerance or very tight. I don’t want to get close to abortifacients in another area. Maybe it’s around alcohol. You’re saying I’m interested, but help me understand the area and we could help someone understand. There’s the manufacturers, the distributors. Here’s the impact of advertising in the space. Advertising is the one of the most predatory effects of the industry. You know, it’s often very specifically targeted in inner city neighborhoods next to a high school, et cetera. You know, we can go through some of those in education about the space and then we can show them how to apply it. It can have materiality limits that are based on just percentage of revenues. They could have materiality limits that are based on district dollar limits. I want no more than X dollars of revenue. Does that give you a window into it, Henry?

Henry Kaestner: No, I think that that’s good. So in many cases, you’re able to guide somebody through this process to go then let’s take the other places headed, which is as a Christ follower, understanding that Christian leaders have an impact to make, have the ability to make an impact in really any sector of life in the military, in the arts, in government, and then also in business. What does it look like for Christ to say, I want to invest in leaders that share my values and maybe it doesn’t have to do with a specific product or category, but maybe it’s the type of leader want you riff on that a little bit. And just when you see the future of the industry and some of the different things that you’re looking at, Varity, give us a sneak peek into how you’re thinking about advising clients, maybe some of the new product segments that you think might be able to be possible for the Faith Driven Investor.

Luke Roush: That’s going to also try and just interject. That’s also going to tie into this idea of how do we move beyond just things that we’re trying to stay away of, but how do we identify leaders that are positively impacting the world that they’re operating within?

Dave Beatty: OK, that’s great, Luke. But back to your question, Henry, I have to say, I think you’ve educated me on that more than I can educate you, because Verity is like these other companies. We start with publicly available databases to help people with their screens. And we don’t have good databases on Christian leaders and companies. And some of the perspective that you’ve drawn, we are working on some of those things, but we don’t have it off the shelf. So it’s not easy to be my first answer on that.

Henry Kaestner: But it’s in development, right?

Dave Beatty: It’s in development, yes. With your help and there’s other places, look, you’re getting the positive and negative screens like one of the positive screens we’re working on with our partner. Bright Light is a positive screen around racial reconciliation. Henry, I know you and your team, you’ve been very interested in the positive screens and how can we approach it, and that’s really appealing. In the past, traditionally, most of the best data is to help with negative screens. We do have positive screens. We have ESG data. And I could talk more about that. There’s a lot to talk about there. We have the UN Sustainable Development Goals, the UN Stig’s that we can use positively, but we’re working on how we can use more positive screens. But there are all of the peace, the positive and the negative together are what best help the investor apply their values.

Henry Kaestner: Tell us, what does that look like? How do you invest positively towards racial reconciliation? How do you say, gosh, Coca-Cola program towards racial reconciliation is outstanding, but Delta is not so much or vice versa. What does that look like?

Dave Beatty: I’m not going to give you a very complete or intelligent answer yet, although I think we’re close to being able to roll it out. But I would say it reflects some of what else we see in the marketplace. The ESG positive screens come from lots of companies. This is a very indirect way of answering and they’re problematic. What the data is, they’re usually very dated, 12 to 18 months plus old. They’re self reported. They’re defined very differently by different players in the marketplace. The cross correlations between some Mkhize ESG data and another is usually in the order of like point five, five to point six for your investment. People here well, understand that’s very low correlation and environmental scores. It’s higher. But when you get into the governance once, like, are there women on the board and so forth, there’s a few that correlate highly. But the labels are inconsistent. It’s very difficult area to apply. So I think the first thing I would meant is this industry still has a long way to go. There’s a lot of efforts you may be reading about to try to synchronize how we define ESG and the kind of force, a certain point of view on companies about how to approach those issues. And sometimes for Christian investor, those can be very welcome and sometimes they may not be. When you dig underneath, they may not align with your values. So I think that’s one of the things Varity is trying to work at, is to try to make these things less opaque for the Christian investor so they can understand them and make those choices. And we’re trying to make the right filters and screens available to those Christian investors. Very serves anyone I’m saying. But there’s a particular gap in the marketplace in what’s available to the Christian investor.

Henry Kaestner: Let me just ask this. Another kind of fundamental question back to direct investing is presumably something out of our listeners are having the wheels turn in their head, say I am just drawn to regional investing. I want to invest in the heartland. And so out of five hundred companies, maybe two hundred and twenty of them are headquartered not on the coast. And that’s just where I’m drawn to. I’m just coming up with an example. If I came to you with a list of two hundred and twenty, could you tell me if I gave you that list, all the stock samples get uploaded into this incredible cloud computer that you have. Could you then come back to me and say, well, Henry, based on that list, our data would tell you that you’re likely to be within four hundred basis points of the index or three hundred. Can you give that type of a sensitivity analysis? Because I’m intrigued by what you’re saying before, which is you don’t need to have all five hundred of the companies to approximate the returns of the S&P 500. You can do it on something less. So does your technology allow us to be able to say, if I give you my custom list, this is how close you can expect to track it with plus or minus in error?

Dave Beatty: Yes, and that’s not very technology. We have to layer technology onto the tools in the marketplace. But there are a number of tried and true third party tools that have been in use for decades to do exactly that. So if we did the screening and it was companies in the Midwest, etc., and we got our reduced universe, the tools do allow you to come back and predict. And you told us my benchmark is Russell one thousand or whatever you said we’d say how much the universe would be reduced and what your new tracking error would be. Yes, that’s tried and true technology that we can use.

Luke Roush: So as customers kind of come inbound to you, you talked a little bit about just asset thresholds that people need to be able to meet for today. It makes sense for them. What are most people coming in asking for? What are the first two or three questions? And maybe that’s illustrated for some of the investors who are listening to this interview to understand how they might be able to either send folks your way or have a conversation about direct investing in a values driven manner with some of their clients, maybe just kind of where do people start?

Dave Beatty: Typically, remember, we work with both. Investment advisers and with institutions, when the institutions come, it’s always they come in with their values, they want applied and it’s very targeted and specific. When an adviser comes, it depends. And we’ve had advisers come in and all it is, it’s only about tax. So that’s what drives it. That’s what they want to get. And we do that for them. And then some other advisers, it’s mostly Christian clients, and they’ve had some client who’s really important to them, that this issue is important to them when they’re finally realizing, you know, Verity can help us make this client happy. It could be they have a tax transition issue because the direct indexing is a great multitool. It’s not just put cash in the account. You can have a sum manager that’s not done well for them, an active manager pick it and they want to migrate it to passive. And we can take in those positions some very low basis and migrated into a direct indexing solution with a lot lower transition tax cost than they otherwise would have to pay and start layering in values or whatever they want same time. So it’s a real multitool to solve lots of problems with advisors.

Luke Roush: Makes sense to me. I think as advisors, there’s clearly margin pressure in that industry and I think there’s a lot of folks that are reevaluating how they align either with the White House or go independent and have a little bit more flexibility to deliver more customized solutions to their clients that they can’t maybe instead of a major White House. So I think that the value for our eyes is very clear to me. Is that where you see most of the growth in your sector? Is that why these other two front runners got bought?

Dave Beatty: Most of the growth has been in private client assets, but I’ve been surprised at the trajectory we have in the institutional space, and that’s with mostly faith based clients. And Verity is very responsive to that. So that’s been a thrill for us. If you look at the major players, Parametric, I was talking to one of the parametric staff just within the last well year and a half or so, and they said it was only about 10 percent of their overall assets that were being applied with values, which is a remarkably low percentage for all the talk you get in the marketplace. So that’s changing. But that gives you an idea where the industry is now.

Henry Kaestner: Yeah. So, Dave, I’m grateful for a time. I’m grateful for you helping us understand direct indexing the opportunities. I hope that our listeners are thinking about different ways that this can apply to their portfolio and what are the different ways that their values might be able to impact the type of portfolio that they put together that would look to an index, take advantage of some of the tax harvesting that you’re talking about, and participate more generally in the public equity space. Because, again, so much of our focus on this podcast has been on the private equity space, which continues to be really, really compelling. But we find, of course, that our faith can guide us in every asset class, how we do our real estate investing, how we do our private equity investing, of course, how we can now understand how to do it with our public equity investing. So thank you for that. We look forward to staying in touch with you, hearing about the developments that you’re seeing in the market and just how Faith Driven Investor might be able to apply this to their portfolios. We’d like to close out every one of our interviews with asking our guests what they’re hearing from God through his word. And it doesn’t need to be this morning, though. It could be, but sometime within the last week or so where you really feel that God is speaking to you and then maybe some area that we can be praying for you about.

Dave Beatty: Thank you. It’s interesting because in just the last couple of weeks, I was marinating a bit on Romans fourteen. Now that’s where it talks about the strong and the weak brother, you know, who thinks that they can eat meat and who thinks that they shouldn’t and so forth. And it really does apply to the conversations we have around faith based investing, you know, to not judge one another, even when we have different opinions. It’s just common. You know, have you ever disagreed with someone about what’s allowable behavior? And, you know, the chapter really encourages us to come at it with love. And I’m both convicted by that. And also doesn’t say, though it doesn’t deny Paul is really one who ate meat and thought it was fine. So he wasn’t saying both positions were right. He was talking about how we love one another. So I’ve just been thinking about how that applies and the work we’re trying to do together. And Faith Driven Investor

Henry Kaestner: says very interesting. So maybe the extrapolation of that, of course, is somebody might say, gosh, my faith tells me that I shouldn’t invest in anything that has a carbon footprint or it produces things in somebody else might not have that. And what your application is here is that let’s not be judgmental necessarily. Maybe there’s some other areas that are maybe less the greater, but maybe not. But you’re. Larger point is, what I’m hearing from you is that you’re hearing from God that we’re to be known for our love for one another, not to judge what is helpful for somebody to come to know God in one instance may be different for somebody in another instance. And so let’s make sure that we’re erring on the side of loving and understanding and not judging.

Dave Beatty: That’s right. And whatever our opinion, all of us, in the end, the Romans, 14, says, you know, every need shall bow and every tongue give praise to God, whatever our opinion, which is probably a good note to end on. Indeed. Indeed.

Henry Kaestner: Dave, I’m grateful for you. Thank you.

Dave Beatty: Thank you, guys. So good to be on this journey with you.

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Not every Faith Driven Investor is called to a Christian-based investing fund or job. In fact, many of the people listening to this podcast work in secular markets, which is exactly why we talked to Andrew Manton today.

Andrew is the Portfolio Manager for the Shelton International Select Equity strategy. We had an interesting conversation with him about how he is operating in a non-Christian company but is now evangelizing the firm and the salespeople based on how he is managing his fund. 

Today, you’ll hear him describe how rather than joining a Christian-specific fund, he sees his current work as an opportunity to live out his faith.

Episode Transcript

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Andrew Manton: I was asking for advice on how they worded things in their prospectus and how they talk to clients who might be faith based and might not know how they go about finding their way in the overall context of the investing world, because it doesn’t have to be binary, doesn’t have to be your faith based. You just talked to faith based advisors and that’s how your marketing to that’s all you really want to talk to.

Henry Kaestner: Welcome back to the Faith Driven Investor podcast. We’ve got a special guest today in the virtual studio, Andrew Manton and Andrew is a guy that’s got a really neat story. We spent a good amount of time on the podcast talking about private equity. We have talked about public equities before. We tend to focus on some of the fun groups, the fun families that are more specific in the faith driven space or in the value space. But today we’ve got a guy who is a portfolio manager who is really serious about his faith, and he works in a largely secular firm and he’s going to share with us about his story and what does it look like for him. And our hope through this, of course, is that if you’re listening to this and you’re motivated by your faith and you’re working on Wall Street, you’re working in financial services, that some part of Andrew’s story might be an encouragement to you as you look to be salt and light and look to the guy to guide you and what you’re doing as you invest with excellence. So, Andrew, welcome to the program. Thanks for joining us.

Andrew Manton: Thanks. Great to be here.

Henry Kaestner: So we love to hear about the personal backgrounds and the faith journeys of all of our guests, whether it’s on the Faith Driven Entrepreneur podcast or Faith Driven Investor podcast, of course. So tell us who you are, where you come from, and weave your faith journey into that as well, please.

Andrew Manton: Sure. Yeah. So as you said, I work for a company called Shelton Capital Management and I’m a portfolio manager for a couple of mutual funds, both international ones and international. One is a purely M fund.

Henry Kaestner: And that’s what I mean. Emerging markets.

Andrew Manton: Emerging markets, correct? Yeah. So I’ve been on Wall Street persay for about 20 years, a little over when I came out of grad school, right around two dozen ETFs, I went to the Asia Asset Management, which is Deutsche Bank’s asset management group, and was hired by an international team there. And we almost immediately jumped to another firm called Victory Capital. And then that happened right before the bubble burst, really. So the firm that we were at victory went from about 50 billion to 16 over the course of about five years. So it was very difficult for us

Luke Roush: in the wrong direction,

Andrew Manton: wrong direction, very difficult to raise money. So from a business standpoint, wasn’t the best place to be. So I left there to go to another company, a small company. I wanted to kind of take away the big firm risk, as it were, and went to a small company. And within a year that from one from about 10 billion to one billion. So I had a firm but shrank quite a bit again. And that firm just had to fold because of the loss of revenue there. So eventually found my way to share some capital. And I was about five years ago and I’ve been here ever since. But the international strategy that I’ve been running now for 12 years has a 12 track record. However, when we got here, we sort of had to start over from a mutual fund standpoint. So we have a mutual fund. It’s almost a five year track record now. And I just took over my firm, just bought another company last year and we took over an IBM fund as well. But three years ago, I was feeling pretty lost. Business wasn’t great, wasn’t getting a whole lot of recognition. The performance is really good. The funds, which is something, was missing. My wife and I for a long time were talking about how we could kind of weave in the kingdom to what I do day to day. And so we would talk quite a bit about setting up another fund to either mirror what I was doing or set up some kind of a giving fund with proceeds from the fund I was managing. And nothing really felt right. And I didn’t know how I was going to look. We prayed a lot about it together, but three years ago I got a phone call from a group down in Alabama and they said, hey, you know, we’re a faith based firm. We put models together of faith based mutual funds for faith based advisors. You know, we’ve been we need a new international fund. We’ve been following you performances. Great. We ran through all the companies to our screen. They screen out fine. You know, by chance, do you run any money for faith based groups or organizations? And I jumped up thinking that this is like the first time I get a chance to actually talk about my faith and what and how I picked stocks and how I incorporate that and what I do and just kind of hit me that. Well, this could be a great thing. So through that phone call, we started talking a little bit more and they said, you know, this sounds great. You should really take a look at this faith based industry now, this faith based investing industry. There’s a group of companies that are pretty exciting that are doing some interesting things, and you really should be a part of it. So I did that. And through that connection, I met a lot of people at various of the firms like Eventide Ameriprise. And very quickly, I got connected to a lot of people that told me their story and what they were doing.

Luke Roush: So, Andrew, just out of curiosity, who was the first person that called you and said, hey, have you ever thought about Cole Pearson?

Andrew Manton: It was awesome,

Luke Roush: awesome

Andrew Manton: So shoutout to Cole. But yeah, he’s really the one that really. Into this and through him very quickly, I met a lot of people, so, you know, the great thing about this is that everybody is so eager to help, whereas in most of Wall Street, nobody wants to help. It’s kind of you’re on your own and it’s your own island. So you go through that, though, I start taking a look at the space. And it was a big difference from what I saw then versus 10 years ago when I looked at the group of funds that were out there and the industries that were in the space world 10 years ago. If I’m being honest, it wasn’t all that exciting. There was a bunch of firms out there, not a bunch of few firms that were doing a lot of negative screening, and they were just kind of applying a screen to an index to pass a strategy, basically.

Henry Kaestner: So before I’m going to interject just one thing, because this is really important. This is much of what the media, the podcast is going to be. I do want to come back to the beginning, though. Did you grow up in a Christian home? Are you an adult convert? I, for instance, worked on Wall Street in the 90s as a secular guy and got caught up in all that. And I’m curious about how you came to have an active faith. Walk us through that a little bit. Where’d you grow up?

Andrew Manton: So I’m from Chicago. I grew up in a suburb north of Chicago. I grew up in the Catholic Church, actually went to a Catholic school my whole life. And I did not have a good experience. A lot of things happened to me that were not positive. So, yeah, I think I, like many teenagers to college age kids, fell out of the church for sure. In fact, quite the opposite way. I mean, I was studying very secular things. I was very far away from the church at that point for a time. It wasn’t until I really got married again. And my wife, who was a Lutheran at the time, we started talking about what is our marriage going to look like? How are we going to raise our kids, things like that? Were this whole idea of faith came back into my life and was telling Justin that we moved down to Dallas not too long ago,

Henry Kaestner: by the way, is our executive producer and the executive director of Faith Driven Investor.

Andrew Manton: I was telling Justin that we moved to Dallas for a couple of years after we got married. And you know, where I grew up in Chicago was very much a denominational thing. You went to a certain church and I didn’t really know anything different. But down in Dallas, there’s a lot of just Christian churches, non-denominational churches. And that’s when I really kind of realized that there’s this whole movement going on that is beyond being this or that. And it’s just it’s all about the Bible. So we found a church down there and started going. And it happened to be like most churches are in Texas. It was a megachurch. And I didn’t think I like a megachurch, but I fell in love with it. The pastor really spoke to me in ways that I’d never heard before, just about our truth in the Bible and who God wants us to be. And growing up in a Catholic church, there was a different conversation. It was a different way of thinking about the Bible and just that denomination of Catholicism. So through that, I got baptized again and really started to pick up where I once was when I was much younger and my faith. I went to grad school after that, and then we moved to the northeast where I am now in Connecticut. And we often joke know there’s been some revivals that have gone for this area. But the Northeast is not necessarily a place where we think of great religious awakenings happening. But there’s really a lot of things happening here that are kind of remarkable. I have an incredible group of friends that I’ve met here. There’s a ministry that we’re very close with and tied to now here in Bridgeport, Connecticut. Most of my friends are found through that ministry. And we have a men’s group now that’s at the

Henry Kaestner: Bridgeport Rescue Mission.

Andrew Manton: No, but we do work with them as well. We give to them. But the ministry is called we want more. But through that and just the brothers that I have now, through that, it’s really been something I just never would have thought was possible growing up.

Luke Roush: So, Andrea, I’d love to just kind of jump back into the story of what you do and how you feel. God’s presence in picking stocks and thinking about both negative screenname, but also positive screening. How do you go about that work? I mean, it’s a topic of interest. It’s a topic of particular relevance right now. So I’d love to just get kind of your philosophy around what that looks like in your current context.

Andrew Manton: You know, the way that I do it is very simple, really, the question that I ask when I look at a company is what’s the business? Is it on coal? Is it positive to society or not? Is it going to be adding fruit to people’s lives or not? And that’s kind of the first question we start with, and that’s what we’ve always done.

Luke Roush: So just to follow up on that, when you say fruit. How does that manifest itself in the context that you’re looking for?

Henry Kaestner: And give us some examples of some companies like, oh, my goodness, that’s exactly the type of

Luke Roush: jobs, what is human flourishing look like in the world of Andrew Amen stock picker extraordinaire?

Andrew Manton: Yeah, there’s so many examples that every company has its own, really. I try to pick apart what the businesses and then see what the product or service is. So, you know, one example in Indonesia, Indonesia is a fascinating country, is the fourth most populous country.

Luke Roush: I used to live in Indonesia.

Andrew Manton: I think I read that look.

Luke Roush: Good example.

Andrew Manton: Yeah. So you probably know you probably heard of bankruptcy out there.

Luke Roush: Oh, yeah, sure. Bankruptcy.

Andrew Manton: Yeah. So that’s one company we invest in. And the thing about bankruptcy yet, and you probably know a lot about microlensing as well in that part of the world, but Indonesia is interesting in that it has a state run micro lending program and it’s run through the banks. And Bank Rakyat is one of the biggest banks that uses this program. But Indonesia’s got its own challenges and banking because it’s an archipelago, its people are hard to reach. You can’t just set up a branch in one place because people just can’t get there. Yeah, yeah. So they are people. They give people a phone, basically. And there’s bankers all over the country walking around meeting farmers and people that have never been bank before and giving them loans.

Luke Roush: I think Montrachet actually did a deal either with Gergich or grab we were early investors and grab it to where both companies. And that provides maybe a really interesting distribution network for what Bank Rakyat is doing.

Andrew Manton: Distribution is definitely the key there because they have to be creative. It’s very high tech, which doesn’t necessarily you wouldn’t think of that in that part of the world. But it is. And the bankers are very unique and they’re walking around. Thanks. They can issue a loan to anybody on the street or in a village. So it’s an incredibly well-run program. It’s the state oversees the program. And so the banks are capped and what they can lose, but they’re highly incentivized to get loans out and do it quickly to other banks or the non bank.

Luke Roush: As you get into like a company like this, do you fly over and meet with the management team and try to see what it looks like on the ground? Are you doing it from a distance? How do you think about really kind of getting to know the company?

Andrew Manton: Yeah, usually from a distance. I mean, bankruptcy, it’s a huge company. So they come here. We’ll see in at conferences. I would love to say that every company we invest in, we go and see what they’re doing in various parts of the world, that we just find the resources for that, for one thing. But again, that’s why we say to larger cap companies, because we know who they are, they have a reputation. We’ve seen management before. And so it’s usually just more formal settings or a lot of phone calls.

Henry Kaestner: So I’m fascinated that you talking through this so you have this faith awakening when you’re in Texas, you come back up to Connecticut and obviously played in some ministries and become more alive in your faith and you’re alive enough in your faith that you have gone on to a reasonably public podcast. Not like we’re as big as Joe Rogan, but pretty big podcast to talk about your faith in investing. What do your coworkers make of your faith, how important it is to you and how it informs how you think about picking stocks? What does that look like?

Andrew Manton: Yeah, well, it was a concern when I first started bringing this up, I mean, again, this is three years ago when I started getting excited about this and wanted to talk about it more and more. So really, I stood up and one of our company meetings one time and I said, look, I’m a Christian and this is how I look at stocks. And at the time, I was nervous because I didn’t know how that was going to be perceived, but I was really surprised and the warm welcome that I got from that. And Shelton has been incredibly open minded about this incredibly welcoming and huge advocates of mine through this whole process. So they’ve allowed me to add some language to our perspectives about this. It’s been interesting to see how individually people have come up to me and ask questions. The sales team usually gets me on the phone call and we have a prospective client that they’re talking to. So it usually happens in the first or second phone call. And so they get to hear me talk to them and we’ll talk about things that they might be used to pray in the call. We might talk about

Henry Kaestner: your praying with your customers on a call. Yeah, that’s how does that come up before I go too far away. So what does it look like to change the wording in the prospectus to identify the fact that faith is something that you value and helps to inform how you steward LPI capital?

Andrew Manton: Yeah, so that was something I wasn’t sure of either. Again, reaching out to others in the community for advice on this was critical. It was introduced to Robin John at Eventide. He took an hour and a half an hour for a phone call to talk about what they were doing. I was asking for advice on how they worded things in their prospectus and how they talk to clients who might be faith based and might not know how they go about finding their way in the overall context of the investing world. Because it doesn’t have to be binary, doesn’t have to be your faith based. You just talked to faith based advisors and that’s how your marketing to that’s all you really want to talk to a lot of my clients or they may or may not know my faith. I don’t know. And there’s some that doesn’t come up at all. But it was really important to me to get some advice on this. So, Robin, walk me through how he would do it and help me kind of find the language that I felt comfortable with in the shelter and felt comfortable with to it. Just a little bit of language talking about how we want to just buy companies that are doing good things, some specifics around that and things that we won’t invest in as well. But it’s not like in your face language saying, you know, we’re not doing this and that and we stay away from everything that we use in stocks. It’s more gentle language saying that, look, we’re trying to do the right thing here. We’re trying to invest in companies that are just having a positive impact in the world.

Henry Kaestner: You find people that as you talk through that say so refreshing. And I’m also motivated by my Christian faith. And I’ve just I’ve never come across somebody that brings that up in a presentation like this.

Andrew Manton: Yeah, occasionally. I mean, it it’s usually that I know who the person is that I’m talking to. And so they’re either aware of it or again, it’s not a faith based conversation. But the adviser is not somebody that we know through Kingdome Advisors or has been introduced to us. And I might be a little bit more guarded sometimes in how I talk about it. The message is the same. We’re still out there trying to buy companies that are doing good and we’re just through that. We stay away from things that aren’t. It’s that simple, really. And the way I view it is it’s taking ESG to a whole other level. Really know people don’t want to buy things that are polluting the world. The companies that are contributing to that, which is great, is a great thing. But we seldom in that conversation do they talk about what they are investing in. And if those companies are really good companies, I mean, a lot of people don’t care about investing in things like companies that contribute to the gambling industry. Alcohol, tobacco, cannabis. Yes, things like that. That’s a whole nother conversation I think we should be having. I think that the faith based, world based investors should be leading the way and talking about those things because there’s a whole nother avenue we’re not going down right now.

Luke Roush: So you’ve got a global perspective. And as you talk about some of what you were just sharing on in terms of things that we as Christ followers should be known for, not known for, do you find that message relevant outside the US because it feels like it’s kind of picking up steam inside the US, but what do you experience external? And then also I want you to come back and just talk a little bit more about what prayer looks like and across cultural context, because some people would say it’s challenging enough to do here in the US, but you’re actually doing it globally, which is pretty exciting. So maybe just comment on both those things.

Andrew Manton: Yeah, I mean, I think it’s definitely really depends on the part of the world, too. I mean, so if we’re talking about companies in Europe, for example, I mean, Europe, the EU is founded on this whole premise of equality. It’s all about everybody’s equal. And that’s a pretty nice value, a virtue that I as a Christian can get behind. So it’s relevant when we’re talking to those companies. It’s relevant. They care what I think from that point of view. And I do feel like I have a voice and they listen. So when we’re talking to them, I think it’s certainly relevant and they’re receptive to it. When I’m talking about European companies to American investors, it does take a little bit of explaining because there’s things that maybe a European company would do that is not new or different, but just a little bit more liberal. Let’s say, again, this whole idea of equality means that they’re signing on to the UN standards of code of conduct for different things and their human rights initiative. So they might be giving to organizations that we might not agree with, but it’s in the spirit of equality. And again, that spirit can get behind. So that’s Europe. But there’s other parts of the world, too, that are very different. I mean, China, as we all know, is got a lot of challenges. Other controversial governments like Russia or the GCC countries, you know, much different stories. And you have to think about each culture, each country as you’re going into it. We have policies around certain countries. We won’t invest in Russia at all.

Luke Roush: And that’s where I was going to go. Maybe just some overarching kind of rules of the road for Christ followers who are out there. Listen to this message thinking about, OK, I want to do this. I think maybe I’m called to do something. Internationally, where should I start or where should I avoid any council on that?

Andrew Manton: Yeah, I mean, for us again, it’d be much easier if we had this very broad rules. But we have to go country by country. So for Russia, in my experience, it’s just not easy. It’s corruption. It’s just such a part of that country and it’s reverberates into the corporate world way too much. And so we just that risk to us is just not worth it. So we stay away from Russia. China is another is something I talk a lot about. The Communist Party has definitely changed in the last 20 years quite a bit. And Americans really, up until a couple of years ago were unaware of now what has been happening in China, the moves that they were making, the policies they had in place. And it was frustrating, certainly from an investing standpoint, to watch companies certainly that we invest in and in Europe, for example. And even here in the US, IP is being stolen or attempted to be stolen every day. So if we’re talking to a technology company in Europe, we have to ask questions about what, if anything, has been stolen. How long will it be until China starts a company that’s going to mimic what you guys do? So we talk a lot about IP theft. Certainly the human rights issues that are going on in China is something that we are very concerned with. And all of that limits what we invest in. In China. We still invest in China, but just to a very limited degree, yes, we stay away from companies that have anything to do with the state. So any state involvement, either through ownership or subsidies, companies that are usually on the list of the top industries that China is trying to go after and trying to strengthen. And it’s usually a lot of the tech areas

Luke Roush: coming back to Russia just for a moment. Many of us have followed the news of the Michael Calfee trial and some pretty significant developments even there in the last day or so. Has that experience kind of resonated in your world or is it more segmented off into private equity? Hasn’t stretched into public equity?

Andrew Manton: Yeah. And again, because we stay away from Russia, it’s not

Luke Roush: that wasn’t what led you away from Russia. Something else.

Andrew Manton: Now, we’ve had this policy in place for a long time. It’s just it’s a frustrating part of the world to invest in. But that country is different in how it’s run versus China, for instance.

Henry Kaestner: Tell us about some of the areas in the world that you are pretty excited about in an area or markets that you think are overlooked, that you think deliver good value and growth opportunities for your clients?

Andrew Manton: Yeah, I think in other parts of Southeast Asia, Indonesia is definitely one. Vietnam is definitely one that we’re looking at a lot more these days. Like about Vietnam. Yeah, they’re going to pick up traction companies that are looking to diversify supply chains away from China. That’s going to take a long time, but they’ll be beneficiaries slowly. And it’s kind of starting from a low base. So I think that they’ll definitely be beneficiaries of that over time. India, of course, will also be that they already have the infrastructure in place, I think to a large degree to benefit from that. And they continue to advance infrastructure projects to help that along. So that’s definitely an area. I mean, it’s dodgy areas like in Europe, Western Europe, for example. And then they have great companies that people overlook or don’t think about or maybe are household names, but they’re run by very good management teams and they produce returns to shareholders that are really good. And I can point to studies proving that some of the best foreign companies are actually in Europe and not the US. And certainly there’s good ones in the US, of course, that we of. But there’s a lot more in other places outside the US.

Henry Kaestner: How do you see as an investor, how do you see covid changing in the global markets? Maybe in a different way. I mean, obviously there’s some themes about working from home and the advancement of some technologies in telecommunications, in Zoom’s, et cetera. But maybe it’s something that a lot of people might not see coming down the pike that you think is different because of this era we’re living in.

Andrew Manton: But, yeah, besides what you just said, I think everything is just going to speed up in terms of being digitized. We invest in one company, for example, in Brazil. It’s called Arco Platform, and it’s a education company. And what they do is they basically taken the whole education experience from kindergarten to, I think through high school now digitized it. They sell their platform basically to schools or school districts and schools are run a little different down there, but they’ll sell the whole package. And it’s a whole curriculum. Along with the technology to schools. The schools will use this to teach all their students and it’s digitized all the way from the student to the teacher to the parents. So it’s the parents can track what the students are doing. The teachers are seeing what the students are doing. They get instant feedback on different things. And this is something that’s pretty advanced. But it’s taking place in Brazil right now. And I think the interesting things that might be more important going for. Or as we have these periods where there’s lockdowns or just the need to be flexible, so that’s one example that I want

Luke Roush: without going into all the detail of sheltered capital strategy. So Brazil is here now. Indonesia is here now. Vietnam is interesting. Now, what’s next? Fast forward five years where the regions of the world that you’re most excited about in the future.

Andrew Manton: I think Africa is always interesting. It seems to disappoint in many ways. But, you know, as we look at frontier markets, persay, there’s certainly a lot going on in Africa. I think that that could be something that’s maybe a little longer than five years down the road, but 10 years

Henry Kaestner: job growth there, apparently more in Africa than India and China combined because the just the age of the population. Right, right.

Andrew Manton: Yeah. It’s got demographics on its side. So that’s pretty exciting. You know, education is something that’s going to have to fill in there. But, yeah, I think that that is definitely a huge region that could could benefit from.

Luke Roush: So two practical limitations that I think oftentimes keep investors from wanting to wade into overseas public markets. One is questions about currency risk, and the second is questions about liquidity. How do you think about those things in the context of your work and that if there’s a faith overlay to some of that love to get your perspective there?

Andrew Manton: Well, you know, we are fundamental investors and part of our work investing overseas is to really have a stance or a view on the currency of the country that we’re investing in. So that’s part of what we do. We don’t hedge currency, but we have to believe that the country, the currency is not at risk of some kind of devaluation, let’s say. So that’s what I would say on currency. And the other thing is the companies that we’re investing our Large-Cap. So the average market cap of anything in our portfolio is a weighted average, is about one hundred billion dollars. So they’re big. So in most markets in the world, those are not going to have a problem with liquidity when we have liquidity rules around what we can invest in. So there needs to be a certain amount of liquidity in a stock and a company for us to invest in it.

Luke Roush: How about Insider Holdings? Some of these companies are pretty tightly held, at least in Indonesia and the Jakarta Exchange. Do you have any things you look at their practical counsel?

Andrew Manton: Yeah, again, it’s country by country. Every country in Asia, it seems like from Korea to Japan, they all have a certain culture there in the way that there is insider holding and or cross holding. So it’s something that we have to consider for sure. You know, there’s no hard and fast rules about that, but we have to understand what the connection is. You know, I love to say that we always want we really do always want an independent board, that’s for sure, made up of outsiders and that are not connected to the CEO in any way. So that’s one thing that we do really scrutinize. But the whole thing is country by country. It’s more about what’s normal in that country.

Henry Kaestner: And then and it’s been great having you with us. It’s really neat to hear encouraging to hear a faithful story of the way that you look at investing, the way that you look at the world, the way that you’re culturally appropriate when some witness with others in your firm and with customers and really appreciate you spending time and just being faithful out there. One of the things we like to do whenever we close out any of our podcasts is get an understanding from our guest about what they’re hearing and God’s word. And it doesn’t necessarily need to be today, though. It definitely could be. But maybe something over the last week or last month that you really feel that God is speaking to you about through his word.

Andrew Manton: I’m sure, you know, for me lately, I mean, anxiety has always been a part of my life to some degree, and that’s something I struggle with. And I’ll often look when I have a problem that comes up like anxiety or something else, I’ll look to the Bible, look to certain verses for inspirational things to see if something pops out. Lately I’ve been doing that. It’s just anxiety. And what’s really been popping out of me, really, is that my heart is really not in the right place. When I think about this, why do I really need I’ve been asking why do I really need to look for these things that I look to quite often and try to feel better? In other words, where is my heart really? Is it really that I just need comfort right now or am I really not believing that I have strength? And so the thing is, it’s going

Henry Kaestner: to be very hard in your position. You’re going to bed every night with open positions around the world. Yeah. You’ve raised money from from investors. They get a sense that you’re going to make the good bets. And undoubtedly, at least over the short term, I bet you have a good number of stocks that don’t look really good and promising in the short run. And that’s that’s got to be really hard.

Andrew Manton: Yeah, it has been lately. I’ve been underperforming the last month or so, and it’s because of where we are in the market. I tend to underperform when the market is getting very frothy. I tend to be very valuation aware and so we cut and or sell positions before they can get too expensive. So we tend to miss out on the last little bit to the market. So but through this, it’s caused a little bit of anxiety, but, you know, I’ve got this rock that I got at the Bible Museum a long time ago in Washington, D.C., and it’s Philippians for 13. And I looked at it the other day and it just hit me that why am I not looking to my strength, the strength that I get through him? Why do I dwell on that? Why do I dwell on the anxiety? And so I’ve been having these thoughts around that. And I guess where my heart is when it comes to issues that quickly pop up like anxiety instead of that ravaging my day or my moods or my just the way I feel and ask why am I not looking to my strength? Why am I not going to the strength which we all have within through? So that’s kind of what I’ve been thinking about a lot recently.

Henry Kaestner: That’s very good. Thank you very much.

Andrew Manton: Thank you, guys.

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Episode Transcript

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Collin Timms: That morning, I put on my clothes and I, I reached out into the cupboard and I thought of a wad of notes. It was a good bundle. It was ten thousand rupees. And I put it into my pocket and I left home and I said a small prayer and I said, God, let me start every day like this with a lot of money in my pocket and good intentions in my heart.

Henry Kaestner: Welcome back to the Faith Driven Investor podcast. It’s awesome to have you all back, William, my co-host. How are you?

William Norvell: It’s good to be here. It’s a great day to talk about investing, you know?

Henry Kaestner: Well, actually, every day is a great day to talk about investing. Today, though, is not only that, it’s a great day to talk about investing and take a little bit of a side trip to India, which is one of my favorite countries. If you haven’t been, you need to go. This is going to sound too pejorative. It’s much better than this. But I call it an assault on the senses. But it’s just an overwhelming to the senses. It’s just the sights in the smells and it’s the colors. I mean, just the colors in India are just amazing. So today we’re in Bengaluru, which a lot of people also know is Bangalore, of course. And we’re talking to Colin Temes from Gardian Bank. And this is one of those times for you as a listener to go and spend some time in the show notes because there are some links to some videos that will do a better job than William and I will about talking about the impact of Colin and Gardian Bank and what it’s made on our lives. You’ll be able to be brought into it through this great partnership we have with Faith EMCO and Faith in CO is itself an initiative out of Seattle Pacific. And this is actually really good time for us to plug the small group, the FDE group that we have. The FDE group is a collaboration that we’ve done with the Faith and initiative in Seattle Pacific and then also with JD Grear. We have an eight week series where we bring together cohorts of entrepreneurs all around the world. We have three hundred of them going through it right now, I think in the next one. Our plan is I think in the fall we have a thousand faith driven entrepreneurs going through these groups. And what you do is you have this three minute story at the beginning and then you have teaching from JD Greer for about 15 minutes. And then there’s a group facilitation. It’s really a cool thing because you get to participate in it with other entrepreneurs at your stage all around the world. And so it’s a lot of fun. So that’s Seattle Pacific. That’s a plug for them. And then also for the FDE group, which you’ll find both of those on our website. But before any more time goes by. Colin Timms, thank you for joining us. Welcome to the program.

Collin Timms: My pleasure to be here and talk to you, Henry.

Henry Kaestner: Well, thank you. And as we get started, we do this, of course, with every guest we have. We’d love for you to give us a flyover of who you are. Who are you, where do you come from? What are the steps in your professional life that have gotten you here? But but we have faith into that, too. When did faith become a part of your work?

Collin Timms: Well, I’m basically an Indian. I have this strange name calling Daems because and what they call an Anglo-Indian, you know, some God knows how many generations ago there was some ancestor of mine who came out of the United Kingdom. And we are the legacy of the one hundred years of British rule in India, a very, very small community of people. So I grew up in a small town about 60 kilometers away from Bombay and basically lived most of my early life in a lower middle class family with dreams of doing well, doing business and becoming a rich man one day. And many of my ambitions met with success and many of my dreams came true. And that’s when I realized that there has to be more to life than just making money, because making money ended up becoming much too easy. And there was a internalization of thought and introspection for a few years. And then I felt that in the rediscovering of the practical part of the Christian faith, of service, of helping people is where the greatest satisfaction, the deep satisfaction and wellbeing for me. And that’s the part I was set on roughly about maybe about twenty five years ago. And I’ve been on that path ever since.

Henry Kaestner: So we was going to get more into the banking part later. But I do want to ask one thing, because some number of people are going to be thinking India banking. Is this microfinance? Can you give us just a quick description of what Gardian Bank does? And then I want to kind of get back into how you get into that a little bit more, because I know there’s some great stories on that. But Gardian Bank, would you consider yourselves in microfinance or are you somewhere in the middle? Is it a more traditional banking? Just tell us what Cardium Bank is real quick, please.

Collin Timms: So it’s important to understand the financial services landscape of India. There are various kinds of banks in India. They’re government owned banks, which we call the PSU banks, public sector unit banks. They are the large bank like State Bank of India and so on. Then there are commercial banks with a privately owned private commercial banks like they see the product in the US and so on. And then they would be foreign banks will set up shop in India for many, many years, like Citibank and Standard Chartered, ANZ within days and so on. And then there are regional banks that are set up in the cooperative structure. Urban cooperative banks and regional cooperative banks, Gardian Bank is something that I founded about 22 years ago, and at that time, the way I set up a bank with the least amount of entry point capital was a co-operative bank. And so I went in for that kind of a structure. So we are an urban co-operative bank, which means that we can do all banking activities, unlike nonbanking finance companies. Microfinance is largely done in India by one banking finance companies, which are restricted to only giving out loans, raising capital through borrowings and not through public deposits. But there is a co-operative bank and take public deposits and give out that money in various ways, including microfinance. So we do a wide spectrum of financial services, but we are also restricted in many ways because of our cooperative structure. And that is one of the negative points of being a co-operative bank the way we are. But right now, we’re in the process of transitioning from a co-operative bank into commercial small finance bank. So the new banking entity that has been created in India to look at the bottom of the pyramid financing and what we are called a priority sector financing in India, and those are all small finance banks, but they are in the company structure legally. They are designed to be companies, unlike what we are right now, cooperatives, and they can operate nationally and without the restrictions that we are faced with right now.

Henry Kaestner: So I’ve long been taken with microfinance. I used to serve on the board of a great ministry called Hope International that engages in that. But one of the things that I was impressed with when I went and spent some time with India was that it didn’t seem that there are many institutions that could help small companies that were hiring people. Microfinance did some great things in terms of financial poverty alleviation and spiritual poverty alleviation, and I’ve continued to be drawn to that. But again, it didn’t seem that there’s much set up. If I had a bike shop and I wanted to expand to the next town and I wanted to hire five or 10 workers. Is that something that you all can do? A guardian?

Collin Timms: Yes. To microfinance is the main objective is to draw people out of poverty. I do have a foundation for the Bridge Foundation, which has been involved in microfinance for over 30 years now. So we understand microfinance very, very well, microfinance, the Bridge Foundation and most microfinance organizations around the world. Their main objective is to impact poverty. Microfinance is a means used to impact poverty, and the microfinance is directed to micro enterprises that somebody started could be in a village or a small village, petty shop or a basket of things that she buys from the market and says door to door. The idea is to empower people to lift themselves out of poverty with a little bit of financial support from the institution and a lot of entrepreneurial zeal and hard work from the individuals themselves. Now, it is quite different from banking. What we do is, is a wide spectrum of banking, which may include microfinance. We do have a microfinance program, but we also do other forms of other financial services for the individual. So it would handhold the individual right from getting a loan of maybe one hundred dollars right up to getting a loan of a million dollars. The entire spectrum can be offered by an institution like Gardian Bank.

Henry Kaestner: So, Colin, tell us about the story, the origin story of guarding back how to get started. What drew you to it?

Collin Timms: Well, like I was saying, I reached a point in my life where I began to introspect and look inwards and try to find that level of satisfaction and peace that I just could not find in acquiring companies and building businesses and chasing dreams and opportunities. And I was skilled at business, and that’s what I understood. I knew and I didn’t know how to serve. What should I do? I knew I needed to do something with this. I knew I felt very deeply that God blessed me with a lot of good fortune, a lot of blessings of health and happy family and everything. And I needed to give back and I wasn’t sure how. And then I got a call from my local pastor and he said that I know you’re a businessman and I have this guy who was talking about doing a small business and maybe you can talk to him and maybe you can help him out. He wants to borrow some money from me. I don’t have any money to give him, but maybe you find it worthwhile to help him out, to lend him some money. So I told him, I’ll come to your office if you call him to the office at a certain time, and I’ll come then and have a word with him. And that morning I put on my clothes and I. I reached out into the. But then I thought of a lot of notes. It was a good panel, it was ten thousand rupees and I put it into my pocket and I left home and I said a small prayer and I said, God, let me start every day like this with a lot of money in my pocket and good intentions in my heart. And my prayer has been answered. I start every day like that. It’s never changed. And that’s where it started from and from. That led to trying to seek opportunities to use this skill that God had bestowed on me, of understanding businesses very quickly, looking for opportunities and developing them. And somewhere along the way, the opportunity arose to start a bank. I’m no banker. I’m an engineer by profession. I’m not even a financial expert of any kind. But I read about banking. I learned whatever there is to learn about banking. And I managed to get two thousand six hundred people to put small amounts of money together and created own bank. Sometimes people tell me that it is a miracle that it’s happened and I completely agree with them. I look back and I wonder how the hell did I do it myself, you know? So that’s how it happened. Along the way, it has been bordering on obsession with me, completely focused on it. Even now I go to the bank every day, do I don’t have to do so, but it’s going and be still functioning. The bank has to operate and I still feel I have to be that not much to do with Seppo. Encourage the staff and make them feel that, you know, if you are going to face this, I’ll be the first one to face it. But that’s how it is. That’s been the journey and the motivation for me. I’m not a great churchgoer. I don’t go to church that much. I don’t give sermons and I don’t sing. I can’t sing to save my life. I don’t I don’t have any other way of glorifying was serving God. All I know is to go and do my work and Zarian back. And I believe that’s the way I got Amen.

William Norvell: It sounds like you’re doing a good job at it, which is fantastic. And one of the things I would love to dig into is the early days of Christianity and moneylending, because, you know, I’ve got a little history that’s actually worked for a Sharia compliant private equity firm for a few years. And, you know, we had all kinds of intricate rules where we weren’t allowed to use gold and metal in some contracts because they’re used as of money. And as you know, Sharia compliant debt is a very intricate structure. I would imagine you’ve probably seen more of it than I have, but you know how to get around it, because they had a pretty good sense that, you know, the Bible actually had some negative things to say about debt and lending. And I think a lot of people probably listening here maybe have thought those things before of, wow, is the Bible telling us not to engage in that? Should I get a home loan? Should I not? I mean, those are specific questions, but I’d love to have you take us to. What do you think the Bible says? What do you think early Christianity had to do with lending and money and sort of the banking practices as we see them today?

Collin Timms: So that’s a disclaimer. I’m no theologian and I’m no expert on Christianity and the theology.

William Norvell: Well, you’re in good company now. None of us are great theologians either.

Collin Timms: So I read a paper sometime back that talked about the concept of banking, which is the concept of money lending. And what I gathered from that is that the early Christians were basically people who lived in fear. And they were in most of the time that the years and they lived in very close knit communities. And before that, the concept of money lending has always been there. As long as there’s been a rich man and a poor man, there’s been a concept of money lending. But what the early Christians introduced was the whole concept of community money. And that’s what banking is largely, you know, no banker sits around with. It’s not his money. He’s lending out. He’s lending the money of the community. So the community contributes money through savings, through deposits, and that money is then lent out to people. This is a concept that I would like to believe was invented by the questions that people contributed their resources together and then lent it out to those in need and those in need who took those resources that did not get it as a gift or a donation. They were obliged to pay it back and pay it back with interest. And that’s how the corpus was protected and the purpose continued to grow. And I believe that that is the earliest form of banking that I can think of.

William Norvell: Well, that’s fascinating. I had never heard that before, and as you run, Gardian, how do you feel? You know, obviously, you know, I assume truth and integrity and things like that are there. But is there any other ways in which your faith sort of influence, how you try to think about lending practices, how you try to think about interest rates? I don’t know what else there could be, but just are there any other ways that you feel your faith influences how you run the bank and the actual practices that go on there?

Collin Timms: I think the most I get asked this a lot, what is an institution, how do you define an institution? And largely institutions are defined by their values and what defines us. Then we call ourselves Christians use a set of values that we choose to live our lives by. I don’t believe it is the big Krosby that Amen X or the the caller. There’d be a way around that makes or the kind of preaching and the words that we speak. But it’s the deeds, it’s what we do and the values by which we do our daily work in whatever it is that we do is what defines us as Christians. If we want to be called followers of Christ, if we want to be called Christ, like in whatever it is that we do, we need to do it that way. And I think in banking, the sweet spot for applying those values, I have found in to sum it up in one word, empathy. You know, banking can become very, very impersonal, but banking can become very low touch, high tech and distant and cold because you’ll find many bankers tell you that you can get too close to the borrower you can’t get because at some point you’ve got to go and recover the money from him. You have to say no to him. Sometimes you have to deny him some services or some facilities. So it’s very difficult to do that when you’re close to somebody. And what is and what is lost out of that is the aspect of empathy. So this is something that I think we consciously want to correct in Gardendale. It’s not that we sanction every loan that comes across the loan officers desk. There is many times that he has to deny the person surveys say, or even fire a subordinate. But you do everything with a degree of empathy. You do it with that feeling. And you know that in many ways is, I think, the distinctive factor that is there. And once you bring this whole element of empathy and once you feel the way that other person feels, it is very difficult to do all the negative things that unfortunately sometimes happen in banking, which is like a mis selling or overselling that and pushing people into debt, and it can be avoided and so on, because you know that this is going to come back to bite you sooner or later and it is against your core values. So I think empathy is the strongest factor that drives us.

William Norvell: That’s good. That’s good. I think that’s a great way. And especially with banking. Right, exactly. What you just talked about, how so many people, if you can’t get into their shoes with empathy and understand what’s best for them, they can go wrong. Right. And there’s no shortage of headlines of banks not serving their customers well and ending up in fraud and in the wrong places. So I love that. And I’m glad you were able to talk through that. And that leads me to think about could you tell us about your average customer? Who is it that you’re serving mostly with Guardian Bank? And how do you think about that empathy? How do you think about serving them well and what’s best for them?

Collin Timms: Our average customer would be, you know, in the Indian demographic you have if you draw economic pyramid, the economic profile of the population would form a pyramid with the largest portion being at the bottom, being the poorest people living on less than five dollars or ten dollars a month. And then there are different layers of that pyramid going up to the very top, the people living in billion dollar homes you may have read about. So India has it all. You know, we have the entire economic pyramid and it is a very, very flat, which means the bottom is very large. We have almost 200 or 300 million people that we got in banks of the layer of the economic pyramid that is slightly above the bottom most. We are, unfortunately, as a bank we are unable to. So those who had abject poverty and need without a job, homeless people like that. But we serve the lower middle class profile and that can be defined as people with a monthly income of anything between maybe three hundred dollars to about maybe a thousand dollars a month, between three hundred dollars to a thousand dollars a month combined family income, maybe two people earning that that kind of money. So that would be the profile of our client base. And they would be made up of schoolteachers, factory workers, you know, taxi drivers, people who made servants, janitors, shop assistants, all that the entire blue collar working community that we would be serving that is largely guarding bank serves at present. We do have about in terms of numbers, about ten, fifteen percent for the wealthy, a set of people. And we serve their needs, too. But we believe our calling is in serving this layer of the demographic.

William Norvell: That’s great. And you said three hundred dollars. A thousand dollars of. And let you know we have a primarily US based audience, we do have some international audiences. I mean, could you let us into a layer deeper that maybe don’t understand the Indian market quite as much? Are you helping them sort of checking and savings accounts? Are they getting loans on homes, loans to businesses that Henry talks about? What services are you typically offering your average customer?

Collin Timms: First of all, to have a savings account and to be able to generate some savings? We call it in our direct deposit account. We encourage them to save to put away a small amount of their income every month towards a saving food, then using that account for conducting all the other transactions that they would have to. And definitely a big need is, you know, providing them with the capital required for their house when they want to buy a housing loan, a loan for education of their children, both short term and long term loans on education and then business loans for them to recapitalize or roll small businesses into bigger ones. Those are very much what we do, create supplementary income by maybe adding an extra room to the house and renting that room out and finding supplementing them for what they do. We encourage them to create supplementary income to, in addition to the existing income, also loans to buy vehicles buying a two wheeler scooter that goes for the motorcycle gets them from point A to point B faster, makes them more efficient in whatever it is that they are doing. And a lot of them also get loans to buy a car to improve the quality of life and mobility and things like that. So it’s a very wide spectrum of lending. We do a lot of work also in health care and education. That’s going to be our focus going forward. Has care lending because healthcare is a serious issue. And, you know, you’re reading about what’s happening in India right now. It is nothing but exposing in the most cruelest form possible the weakness of our healthcare infrastructure in this country. It has always been like that, but it took a 19 second wave to completely laid back. So we want to be very active in that space going forward.

Henry Kaestner: Macfarlan the majority of our listeners know how big India is and they know it’s such a large market and they may even understand a little bit about the culture. Maybe they’ve heard some things about Modi and Hindu nationalism and what that means for Christian aid workers in ministries. But can you talk just a little bit about what to look for Western European or American investor to think about coming into India can happen? I mean, what does it look like? And does any council you’ve got and here’s what I’m trying to do here. I’m trying to make this actionable of sorts. We probably have somewhere, you know, a thousand people listen as podcasts and they’re mostly accredited investors in the United States. And what I want for them to be able to do is to be inspired, encouraged by the stories we bring them. I also want them to be able to see that they can actually take steps and action and say, you know what, I’m going to get involved in India. There’s ways for me to participate. The need is there now, especially to be able to invest in businesses because so many people have a heart for India but can’t do that through Christian missionaries in ministries anymore. I’m hoping that you might be able to speak to that in response. I hope investors think about, yes, I can roll up my sleeves, I can get involved in India. It’s not insurmountable. And boy, the time to invest is now because some of the other things that I might have otherwise done with my donation capital have been removed from me.

Collin Timms: Well, there’s definitely scope to invest in a country like India simply because there is just so much to be done. You know, any field you can speak of, there is so much to be done. I’m no expert in other things, but I can tell you about banking and the Guardian Bank journey. We started out in bank 20 years ago with a very, very small capital, just thirty like. So we’re pleased with that, maybe about fifty thousand dollars or so. And today we have a net worth of six or seven million dollars. And we are on the brink of our next big leap in growth to convert ourselves from a cooperative into a small finance bank, go national with what we do and be able to offer the products and services of what we offer in the way we want to offer it in a strategic manner focused on health care and education in this country across the length and breadth of this country. Now, that is a huge, huge potential because right now we are in the urban district only of Bangalore and being able to serve maybe four or five million people in this city alone. But imagine when the canvas that we are looking at is one point three billion people across the country. The growth potential is tremendous in whatever it is that can be done. This leads to two things. One is tremendous opportunity for economic investment. That’s one way of looking at it. A great economic investment, a great save. Investment into an organization that can give you a reasonably good return over a long period of time, that can give you maybe three or four extra done in five years. In addition, a very powerful social impact, because if you choose and make the right investment into the right kind of organizations, the social impact that it can develop and deliver in terms of transformation of lives, of people that that organization touches is immense. Now, there may be many opportunities for economic return and financial return in many jurisdictions, many geographies around the world. But a combination of financial return along with social impact. Your best bet is countries like India, where there is a huge canvas to bubble here in terms of both economic growth as well as social development. So my message to your investors is to choose organizations whose institutions that are on a growth trajectory and with a viable scaling up plan and with very sound management people who have proved themselves in terms of integrity and capacity to deliver on the promises. And I don’t think you can go wrong. There are many, many examples of success stories that we can talk about.

William Norvell: Macfarlan great advice. Thanks for sharing that with our audience. So in addition to Gardian, are there other great companies that you might point some folks to to check out the research, to look into?

Collin Timms: Or there are many, many companies in the engineering space that are companies in the pharmaceutical space. They have great growth stories. You know, we got a company in India called Glenmont Pharmaceuticals started by England and said today it’s grown into a billion dollar company, started very small, and whoever invested in a friend of mine from UK was an early stage investor in it, cashed out with hundreds of millions of dollars. So, you know, there are great stories in the technology space, you name it. There are great stories. It would take a little bit of effort and handholding to find the right, because you can imagine there are many, many, many entrepreneurs and many people, many areas to invest many slots to put that check into. But you need to be patient and be vigilant about where you want to invest in the kind of place you want to invest in for those who would be interested in bankers in the next phase of its growth. And if there is any interest to anybody who is watching this, we could send information memorandum to them and they can look at it. If this space is of any interest to them, that’s great.

William Norvell: And actually, my last question before we wrap up would be along those lines. Could you maybe give a closing, I guess, please, not the right word, because that’s a little too strong. But, you know, high growth startups, equity, things like that are very exciting to people these days. Crowdfunding is taking off. Could you maybe give a closing, I guess, plea for why banking, such as what you do a guardian, is so important for the economic development of people that obviously God cares about because he made us all. But could you maybe just ERG our audience to pay a little more attention to the lending aspect of the investment landscape?

Collin Timms: I think the key factor here is sustainability. I’ve been a businessman all my life and I’ve chased the 10x return and ended up with no return. And then I have learned to be satisfied with the two and a half X return, and I know I’ll get that fixed if I put it in the right place. So sustainability over a long period of time is extremely important, especially when you are investing in a developing country like India and a developing jurisdiction. Now, there are many, many unforeseen circumstances and many factors that can interfere with your venture. Excel spreadsheet growth plans know it’s very easy to draw those things up, but it’s very difficult to foresee all legislative changes, regulatory changes, interest rate shocks, currency shocks, natural disasters. And you are seeing lockdowns and things like go with it you and completely disrupt and transform business plans and business trajectories. So it’s very important to focus on very strong and stable kind of businesses, especially in developing markets that have a long term sustainability and a long term growth. And banking happens to be one of them. Manufacturing is another one if you get it right, if you get the manufacturing right, almost every second person in India, whereas Bata shoes, you know Bato. He’s a check individual who Kamia some seventy five years ago to India and invested here, and it’s a household name. I mean, I don’t think Bato is as famous in the Czech Republic as it is in India. So, you know, people have come here and invested very, very early on and benefited a great deal, but they’ve invested in something that is long term sustainable. So my suggestion to people with capital is, you know, the higher the return and you know this, I shouldn’t be telling you this, the higher the return, the higher the risk. But there is a large number of unseen circumstances in countries like India and countries in the developing world that you have to take cognizance of. And maybe you should recalibrate your thinking to a more reasonable rate of return. And in return, you what you would get is more social impact and I think more long term sustainability.

William Norvell: That was pretty good. That was pretty good. Thank you so much for walking us through that. And I think hopefully you’ll have a lot of people more interested in the space than they were before they started this podcast as we wrap up. We love watching where God can intersect our listeners and our guests. And so the question we love to ask is, is there a place in God’s word in scripture that you might want to share with our audience that’s been particularly meaningful to you or could be something you read this morning, but a scripture verse or a story from Scripture that maybe has guided some of who you are and where you are today?

Collin Timms: Well, if there is one thing that motivates me and guides me and keeps me coming back to the plow is that this feeling that I have and it permeates my thoughts and permeates my subconscious, my dreams, I just feel I have to keep doing the best I can in whatever it is that I’m doing. And I believe that is my calling, that I have to do more and more of that. And whenever I, I get bouts of doubt in that, it comes in the form of the I look around me and still see so much of poverty and still see so much of misery, especially in these times when we’re seeing this and what’s happening in college and all of that, then God gives me some small successes and that just to get my chin up again and just to remind me that what I am expected to do is to do the best that I can do and leave the rest to him. I have more control over what will happen. And God doesn’t appear to me the way he does to people in scripture and all of that. But this is something that I keep feeling from deep within is that I have to continue to do the best that I can do.

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When we say, ‘bring your whole authentic self to work,’ what if faith is your number one identifier? Can you still bring your authentic self to work? That’s the question Sue Warnke is asking. 

Sue works for Salesforce as the Senior Director of Content Experience, and she was part of the team that started Faithforce San Francisco at Salesforce—an interfaith employee resource group. It’s one of the newest and the fastest growing Equality Groups at Salesforce with over 3200 members in over 20 regional hubs across 5 continents. 

In addition to sharing her best practices on her blog Leanership.org, today, Sue will share how Faithforce got started, how her personal faith influenced her involvement, and what it takes to start a successful Employee Resource Group.

Episode Transcript

Some listeners have found it helpful to have a transcription of the podcast. Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it. The FDI movement is a volunteer-led movement, and if you’d like to contribute by editing future transcripts, please email us.

Sue Warkne: I think the reason this has sprung up so much in Silicon Valley is Silicon Valley is such a home of diversity and equity and equality that, you know, when you say things like bring your full, authentic self to work, we are an inclusive company. We care about diversity. You then have to ask the question, well, what if faith is my primary identifier? Can I bring my full, authentic self to work? And you have to answer that our executives, our leaders in Silicon Valley have to have an answer to that.

Henry Kaestner: All right, welcome to the Faith Driven Investor podcast. I’m here with my co-host, William Norvell. William, good morning.

William Norvell: It’s a good morning here, moving into the afternoon, but it’s still pretty good indeed.

Henry Kaestner: Oh, actually, yes, it is the afternoon. And, you know, our listeners don’t care what time of day it is. They really do. But they do care about our host today, Sue Warnke. Sue, welcome.

Sue Warkne: Thank you. Nice to be here.

Henry Kaestner: So this is a big deal for us because we’re going to be talking about a topic that’s near and dear to my heart. And just to set the stage a little bit. I am well, at least in my mind, a little bit semi famous for going out on the road, leaving my home here in Northern California and talking about faith and entrepreneurship and faith and investing. And and a couple of years ago, back when we could travel, I would go around and be in Atlanta, I’d be in Nashville or in Dallas. And I’d be saying, where do you think is the Center for the Faith and Work Movement in the United States? And if I was in Nashville, they’d say Atlanta. If I was in Atlanta, maybe they’d say Nashville or they’d say Dallas. If I was in Dallas, as you know, they would say Dallas. Right. Because it’s all about Dallas and Begbie. But I would say in each case, no, I will submit to you that the Center for the Faith and Work Movement in the United States is actually in Silicon Valley, where there are new or resurgent faith in the work groups at Google and Facebook, at Apple, at Intuit, at Dropbox and at Salesforce. They have something called faith force. And most people’s jaws drop. And I think it’s really an important development. And here’s why I want to tell you why I think this episode is important and then hopefully we’ll cover it again at the end. I think that this is important because this is a podcast is focused on Faith Driven Investor. And when we come to understand that corporate America and some of the what would be thought of is the largest secular corporations in America and some of the most secular cities in America have embraced the role that faith plays in their corporate cultures. That has relevance, I think, for every business everywhere. So if your business in Kenosha, Wisconsin, or Albemarle, Virginia, and you think, well, I can’t really encourage a bunch of Christians getting together and maybe praying together or folks that are from a Muslim faith getting together and celebrating Ramadan or something like that together, there is some great precedent. And as Christians and this is a podcast is focused on followers of Jesus Christ, there’s great precedent for this working well and in a respectful atmosphere, letting truth stand out in the marketplace of ideas. So for those of you who are on boards or investors, there’s an opportunity to be able to point to some of these illustrations and maybe ask if it’s appropriate the company that you are an investor in or that you sit on the board on. So today we can understand more about that through the life and the career of a really neat woman named Sue Warnke, who has been a leader at Faith for us at Salesforce, one of the most technologically advanced and progressive, at least in terms of the products and services that they provide companies in the world. Sue, thank you for being with us. One of the things we really want to be able to do before we get into this topic is understand a little bit about your background. I know a bit about it. It’s very interesting to me. And you were a little bit different than maybe some of the other guests that we’ve had on. And that is that, like me, you’re an adult convert to the Christian faith. What’s that all about?

Sue Warkne: So I grew up in Utah in a really religious environment and we were not religious. So I was sort of two things came out of that. And one way I was an outsider and the other way I was the target of evangelism. The whole town, it felt like I wanted to convert my family. So I built a big wall against faith throughout my life. And, you know, I was very anti faith, actually, and pursued other gods, I would say the gods of accomplishment and success. And that works really well, actually. And I got, you know, a great career at Salesforce. And I have a wonderful husband and I have three teenagers right now and sort of had everything. But several years ago, about six years ago, I felt a void. I really did feel that void like, well, what else is there and am I really on the right path? And I felt like I was supposed to do something more meaningful. So I ended up quitting my job and pursued a new role in leadership development, which was very meaningful, but didn’t at all fill the void. And then something very important happened, which was that I fell flat on my face in this new job. So I failed. Worse than you can really fail on a job because I had to sell some of the classes that I was teaching and I was terrible at it. I think I hit one percent of my quota, so I just wasn’t used to failing. So that was a big deal. And my son has some health problems. So, you know, I faced kind of the end of myself, the end of my ability to fix that. And luckily, obviously a very blessed way things came into my life one by one, whether it was a song or music or somebody randomly praying for me that led me to Jesus to a really surprising conversion. To Christianity about four years ago.

Henry Kaestner: Wow, so tell us a little bit more about what that was like, because you have at that point time, you have a husband, you have kids, and all of a sudden their mom is saying, actually, I think that the whole purpose of life is a bit different than we had thought. How did they receive that? How did your friends and coworkers receive that?

Sue Warkne: Yeah, I mean, it was quite a shock because I wasn’t just agnostic. I mean, I was really antireligious most of my life and kind of known for that. I was the person in college that would send articles to my friends arguing against religion. So it was really shocking to my family for sure. I mean, one day their mom becomes a born again Christian after telling them that nobody really knows the truth. It’s all good, you know, believe whatever you want. So that was difficult for a few months. You know, we had a lot of interesting conversations in my household, but my husband is wonderful and supportive and they’ve all kind of watched me go through this process and start talking about it and watched the effect that it’s had on other people, including faith force, which we’re going to get into, including just a lot of people benefiting from me telling this very surprising story. And so they’re very proud of me. They’re very supportive and proud and kind of on their own faith journeys.

Henry Kaestner: Gotcha. OK, very cool. OK, so Faith Four starts at about the same time. Yeah. I mean maybe, maybe, maybe not. But I think it from my memory, it starts about the same time that you came to face off four years ago or so. Yeah. Is that related.

Sue Warkne: Definitely. So, you know, I converted to Christianity, I was baptized and, you know, several things improved in my life. I definitely had a purpose. Relationships got healed. And very quickly, I got an offer to come back to Salesforce. And with that offer, I knew that I was coming back for a purpose. It wasn’t just to do my job, but it was really to be a person of faith in this environment and just follow whatever God wanted me to do, which was really scary. I mean, not just coming out to my family about this, but my whole work family that knew me for seven years. And so I had to figure out, well, what does it mean to be a person of faith in this environment? Can you be. And so what I did is I started to search other comments internally on our message board. Is there anybody out there talking about faith? And I found two things. One is a couple, other just very few. It started with one other Christian and we found each other and we set up a time to pray, which was just incredible because I realized in that moment I OK, I can have both. I don’t exactly know how, but I can have both. Nothing terrible happened. We prayed and it was, you know, a really good moment. And then that group turned into five people and then ten and then two hundred and then five hundred. So definitely Christians had a home at Salesforce. But that felt to me, not the whole story. It felt that God was definitely pulling people out of hiding. But the bigger story was really transforming how this company operates and how faith in general is perceived as an element of identity. So we found other faiths, Muslims and Sikhs and Hindus and a group of people proposed this new group about the same time. So, yes, we can have prayer groups, but that’s not everything. Let’s actually talk to the leadership and say, you know, is this could this be an employee resource group the same as any other employer resource group?

Henry Kaestner: So it’s all fascinating. OK, so as you go ahead and you put this together and you think about making this an employee resource group, do two things. No. One, tell us what an employee resource group is. That’s going to be a term that some people aren’t going to know what that means, what that stands for. And then also, as you formed that, what’s your hope for people that are part of the Force Employee Resource Group?

Sue Warkne: Yeah, so I came in so a couple trailblazers had already started the process, so I came in after them. But an employee resource group, it is what it says. It’s to provide resources to employees on different topics. So there’s usually most companies have a women’s group and a black employee group, an LGBTQ group. So it’s a place where you can feel safe and share resources, have community, but a lot more than that. It’s to share resources out to the rest of the company about your group. So, for example, right now with, you know, racial tension being so high, we have some of our more racial focused employee resource groups. We have a black employee resource group and a Latino group and Asian-American groups. They’re sharing resources with the rest of the company about how this is impacting them, how to talk to them, how to support them. And similarly, faith for us. We share resources out when it’s holidays, when we say this is how you can greet your employees this month for, you know, if you have Muslim employees, if you have Sikh employees, when there is a tragic attack on people of faith like Sri Lanka or Christchurch, we come together to mourn and to talk about the impact of this on employees. So it’s almost. Chaplain, like in a way that it’s a service, a group of people that know how to talk about faith effectively in the workplace and serve both the community and those who are outside of the community within the company.

William Norvell: So thank you so much. So good to see you again. Yeah. Everybody might think we know all of our guests. Sometimes we do. Sometimes we don’t. But I’ve gotten the chance to get to know, Sue and see her talk on this topic at length. And I mean, I guess I’m just inspired by some of the way, you know, you went really and have to go really deep on this is not a side project or a group you put together, you know, on the edge. Right. I mean, you’ve flooded it in amazing ways. And the scale is something that I’m just consistently just surprised by. I mean, when we talk about equality groups, Salesforce, as you might know the number, I mean, tens of thousands of employees. Right. How does the equality groups work? How many people are involved in them? And then maybe four specifically just to give our listeners a vantage point.

Sue Warkne: Yeah. So we do have about sixty thousand employees. About half of the employees are involved in at least one employee resource group. Faithfulness to everybody’s surprise, once it launched about three and a half years ago, became the fastest growing employee resource group in company history. So it is right now about thirty two hundred employees in 20 different cities all around the world, from Israel to Mexico to Australia, Singapore. So it’s become a huge rallying point for Salesforce and it is quite big.

William Norvell: Wow, that’s amazing. Over five percent of the workforce, I mean, just in looking for an outlet, looking for people who can understand who they are at a deeper level, that’s just fascinating.

Sue Warkne: Yeah, people usually will align with inequality. We call them equality groups that represent their number one or number two identifiers. So to be part of faith us, it probably means that faith in some way is probably the number one way that you would define yourself over gender, over race, over other aspects of your identity. And there is a big population for whom that is a reality.

William Norvell: And I know you’ve spoken at national conferences and things like that, you know, talking about this, talking about faith force. How come, you know, Henry made the pitch earlier that Silicon Valley is the leader. Is that because we live here and we happen to know people that work at those organizations that tell us about them? Or are these quite common in organizations around the country? Are they growing or are they declining? Tell us a little bit of the landscape of what’s happening in the world.

Sue Warkne: Yeah, I think they are quite common. I lean on the research of Brian Graham of the Religious Freedom and Business Foundation. He has the preeminent research there, which shows 20 percent of Fortune 500 companies do have an official faith presence, meaning their public website talks about faith, inclusion and faith diversity. So that could be pretty shocking to folks that 20 percent of Fortune 500. So there is some kind of presence. And of the other 80 percent, there’s probably secret groups that are meeting for prayer and Bible study and fellowship. So it is quite common. I think the reason this has sprung up so much in Silicon Valley is Silicon Valley is such a home of diversity and equity and equality that, you know, when you say things like bring your full, authentic self to work, we are an inclusive company. We care about diversity. You then have to ask the question, well, what if faith is my primary identifier? Can I bring my full, authentic self to work? And you have to answer that our executives, our leaders in Silicon Valley have to have an answer to that. And anything other than absolutely is potentially discriminatory. It is marginalizing. So I think these companies have really, you know, built up this value of equality so much that they’ve really had to say, well, what about this aspect of identity? And luckily, they have stepped to the plate and opened the door to it.

William Norvell: Now, it’s really interesting. And, you know, it’s funny because. Right. I mean, the old classic saying don’t talk about religion and politics at work. Right. But with that, I’m interested. How have you seen it impact the lives of people? You know, we love stories here. Do you have a story or two that you could share with us on the lives of employees and how? You know, I would imagine it makes them better human beings, but also better workers and feel more part of an organization that they work for.

Sue Warkne: Yeah, I’ll share a quick one about a Christian man and then another one about a Muslim man. So Christian man. So when we first had the Christian prayer groups and that was just starting, you know, this man joined on Zoome and he just had this look of shock on his face. And I noticed he was tearing up and I said, what’s that about? And he said he was an older man. And he said, I have wanted this for twenty years. I have just wanted to pray, you know, and it just meant so much to him. He’d wished for this. He had feared he would never be able to kind of integrate these two lives. So it just. Gave him the sense of belonging, of peace, of kind of reconciliation. The stress lifted off of him. But an even more important example of that is this Muslim man I’ll tell you about. And I think it’s good for Christians to know to what our brothers and sisters of other faiths are going through as well, not just thinking about what it’s like to be a Christian in these environments, but this man, he’s an engineer and he was looking tired. And so his manager said, you know, what’s going on? And he looked down and the manager, you know, said, it’s OK, you can tell me. And he mumbled under his breath, I’m fasting for Ramadan. And the manager said something very important. And he said, Oh, tell me more about that. And the man looked up and he said, well, I’m fasting from sunup to sundown for the purpose of gaining compassion for those in need, which blew the manager away. He didn’t know about Ramadan and he said something even more important, which was, how can I support you? That one question changed this man’s life. This thing that he thought he had to hide his entire career was something that not only was OK and safe, but something that the manager cared about and even wanted to support. This engineer went back and the manager encouraged him to teach people about Ramadan. He taught his team about Ramadan. Some people fasted with him. We kind of just celebrated with him. They came together to celebrate Eid at the end of it all together, this engineer brags about his manager. He is doing fantastic. He recruits people, says this is the best place to work. I’ve had employees come up to me in the old days when we were in person and say, faith first is why I’m here. I heard people talk about faith force and I didn’t feel safe to pray at my company. So I left and I came here. We have top talent that are not only staying, but they are recruiting their friends because of faith for. So it is a huge business impact. It’s a morale impact to feel safe and seen and then it’s a business impact to be able to keep top talent and recruit their friends.

William Norvell: OK, you just set up the next question without knowing it. Or maybe, you know, maybe you just sensed it. Maybe that was the spirit working from an investor standpoint. Right. Is this something people should be looking forward to? Would you make an argument that this leads to greater employee retention, therefore more productive workers, therefore a better overall? I’m not saying you have to make that argument, but how would you think about that from an investor standpoint?

Sue Warkne: I definitely think so. I mean, it has had a very big business impact. I mentioned the recruiting and the retention and the productivity of just feeling safe. But there’s other things there are. You think of innovation. So I think of Nike. Nike innovated recently with Nike hejab for the Muslim community, which just took off. You know, that came out of realizing that faith identities matter. We at Salesforce support tons of nonprofits, including many, many who are Christian nonprofits, you know, that go out in disaster relief or anti sex trafficking. And they use Salesforce to track fundraising churches, huge churches use Salesforce to track, you know, their messaging out to their congregation. And we learn from that. Salesforce learns from that and improves the way that we service nonprofits because of churches and because of Christian nonprofits. So innovation is another aspect. And then, you know, our customers are Christian. As I mentioned, we have lots of Christian customers and they’re expecting that the company that they are paying to service them is faith tolerant. They expect that and they fear when that isn’t the case. So it’s not only a benefit to the company and the employees and the products that they sell, but it really does build trust with customers when they can see, OK, this is a faith friendly company.

Henry Kaestner: OK, so I’m going to voice something that’s probably in the back of a lot of our listeners minds. Again, we have a vast majority Christian audience, as you might imagine. And I think that some number of people are probably thinking, gosh, it seems strange if I’m driven by my faith as an investor or I know that the entrepreneur, the CEO, is driven by their Christian faith to be able to celebrate Ramadan and to be able to lift up different religions makes me feel a little strange. And so, therefore, I think I’m maybe I’m getting the fact that that can lead to employee retention, but the orthodoxy of my faith is in conflict and, you know, what does it look like? And so what I want to ask you is and I’ve never used this term before, but what does it look like to bring together faiths which have mutually exclusive, exclusive faith claims and worldviews? And part of us there’s a dissonance there, which is, gosh, how can you do that? Aren’t you going ahead and necessarily injecting conflict in? And then if you’re a Christian and you believe that there is the way, the truth and the life, how do you celebrate some? As somebody else who clearly doesn’t believe that and would love to convince somebody else to their way of thinking, I think that not being able to overcome that dissonance is what is holding back lots of people. How do you because you’ve identified yourself as a born again Christian. How do you persevere through that? How do you think through that?

Sue Warkne: Yeah, this is one of my favorite topics because I don’t come from a church background. To me, this is no big deal. Like, of course, you can talk to anybody and you know, but but when I talk to people that come from a more church background, they do feel a lot of worry and fear. And I understand it. I totally get it. I mean, I have poured myself through the Bible and through God’s word, and it’s very clear what we are to do and not do. And we’re not to worship other gods and we are not to worship idols. And anything of that nature is serious. And I believe that. So, you know, how could I, for example, go celebrate Eid or celebrate, you know, a pagan holiday or something like Beltane is coming up for me first. So I have really clear guidelines. I just have very super clear policies and guidelines. And same with faith for Sophie, Force does three things we give back. We do tons of volunteering events, helping the homeless. Every faith agrees and helping those in need refugees, et cetera. So we give back. We do celebrate holidays and I’ll explain how we do and do not do those. And we educate. So we teach managers about, you know, what holidays mean. Don’t say happy Yom Kippur, for example, because that’s a somber holiday, you know, in the old days, don’t have a big buffet party. When you have team members who are fasting, you know, we educate. But the celebration piece is the part that people are afraid of because they don’t want to cross the line and offend God. And so we say within that celebration, in my mind, if I’m not worshiping other gods or praying to other gods in those celebrations, then I think it’s a great way to have faith conversations. So going and partaking in a meal for Eid, you know, and learning about their culture, learning about, you know, my Muslim colleagues is a wonderful way, I think, to show them love, to show that maybe their perception of Christianity isn’t accurate. And a quick story of that. When I first got my very first budget of faith, it was an official thing. A Muslim man set up time with me and he said very quietly, he said, see, I’ve been trying to have an Eid celebration for three years and keep getting turned down. Do you think I could have just a little bit of your budget? And I looked at him and this just outpouring of love came out of me and I said, you can have it all. And he looked at me shocked and he said he said, Why? Because he knew as a Christian I was out, you know, and proud. And he said, why would you do that? And I said, Because I love you. Because of my faith. I love you and I want to support you. And we had the biggest celebration ever. It was like hundreds of people came through and it was this coming together. And the comment was, wow, that’s not what I thought Christianity was like. So it is an enormous opportunity to destigmatize Christianity and to heal wounds. It’s not about worshiping Allah or other gods. It’s about loving our neighbor. And what better way than to just talk to them and see them and listen to them? It’s not following their text. It’s just loving them.

Henry Kaestner: OK, that’s fascinating. So I want to get a little bit and I think that you’re right, by the way, it’s not just fascinating and I personally disagree with you. I think that I think that we’re called to love our neighbor. And of course, in the Bible, Jesus mentions the parable, the Good Samaritan, which is somebody from a different nation and different faith tradition, was the one that was ultimately used to illustrate what it looks like to love your neighbor. And so, as your heart is, what does it look like for me to love somebody? Because as I understand it, from what you’re seeing, as you’re trying to overcome some perceptions about where Christians are thought of, particularly in this environment which you are at in Silicon Valley, in San Francisco, oftentimes from having lived out here, Christians are thought of as being judgmental. And, you know, judge, not lest you be judged. There are some different aspects of let them know you buy your love. Right. And so you’re leaning into that in a way that seems to be super winsome and it’s very, very compelling. There are different ways, though, to set up employee resource groups. One is the way that you all have done it. And presumably there are also other companies that say, well, we’re going to have a Christian employee resource group and we have a Jewish one and a Muslim one. And so there’s not going to be as much of an intermingling. And presumably you miss some of that opportunity to have some of the activities you’re talking about. So there are probably pros and cons of each. But can you walk us through some of the different models you’ve seen? And then if you’re an investor listening as podcast, how you might coach them or suggest them that they introduce this to the. Company they sit on the board of or invest in.

Sue Warkne: Yeah, there are multiple, though you touched on the main two of like separate groups or an interfaith group with faith force and other companies that are interfaith. They still have siloed groups because in those groups you do specific things that wouldn’t be appropriate at the interfaith level. So prayer and Bible study, we still have a Christians at Salesforce group and it’s still hundreds of people and they meet for prayer and Bible study. That doesn’t happen at Faith Force and Muslims, Muslims at Salesforce go and pray together at certain times of the day. That’s not a faith force activity. So prayer, worship, scriptural reading happens in those siloed groups intentionally because that is really where worship is happening. And there’s a couple of reasons. I think the interfaith model is more successful and truly most companies are turning toward it. So a lot of companies, they started with the more siloed groups and they are now creating interfaith kind of umbrella’s over that. It’s much more palatable to HRR to go to them and talk about the term faith, diversity, faith, inclusion. That is something that matches their other language of equality and inclusion. So it’s a much easier sell and you avoid a lot of conflict. So with the siloed groups, you can imagine there’s a couple of things. One is potential competition like, oh, well, how much budget did the Jewish group get? Did we get the same amount of budget? And what about a very small group? You know, like Shenzhen is a faith group, right. I mean, this might be five people. Do they get budget? What about the 12 other potential religions, world views that might pop up that would have a right to that budget as well, including a satanic group, which does happen, including, you know, an atheist group or all these different groups? It’s a lot of pressure for an H.R. organization to have to say yes to siloed groups because it’s unknown what’s going to come at them in the future. Are there 20 other, you know, the Spaghetti Monster group that’s going to expect budget as well. So make it easy on them and suggest this interfaith model and feel peace that you’re not advocating other gods. You’re not lifting up something you don’t find truthful. You’re simply opening up a way to have conversation and celebration. And by the way, the fact that we organize these events together is what leads to just the most incredible breakthrough conversations. Right? Because I meet somebody at an event or another event, a SUKA event first and have incredible conversations that lead to more conversations that lead to hopefully them seeing a glimpse of Jesus Amen, amen.

William Norvell: I hate to come to a close, but that’s what we have to do. Now, I’ve got a feeling we’re going to get a lot of questions on this one. So we might have to we might have to have you back. I just think this is such a pertinent topic. I think every company can consider can think through whether, you know, this fits them and fits their employee group. And just so grateful for you taking the time to walk through how you’ve seen it work and some of the different ways to go about it. As we do come to a close, one of the things we love to do is try to figure out a way that God’s word and his scripture can transcend our guest and our listeners lives. And so what we always love to ask at the end is, is there anything that God has placed on your heart through his word lately, whether it’s in the season, whether it could be this morning, whether it could be something you meditated on your whole life, but just maybe something that you feel the spirit is telling you to share with our audience, we’d be grateful. Mm.

Sue Warkne: Yeah. I’ve been very meditative the past month about what am I supposed to do now. My faith force is a success. Do they really need me at the helm anymore. I don’t feel that they do. I feel like God is redirecting me somewhere else and so I’m just trying to be really attentive to that. So the image I keep getting in my daily reading is about settlements. I have a quote here have twice actually on my way. So this is from Solms. So faithfulness springs forth from the earth and righteousness looks down from heaven. The Lord will indeed give what is good and our land will yield its harvest. So I feel like this year is all about building roots and being planted and seeing what fruit comes from that, you know, faith forces and success. Let’s be ready for what’s next.

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David Batstone’s entrepreneurial journey begins at his favorite restaurant in San Francisco. As he recalls, he loved the tandoori chicken, but he didn’t realize that he was eating in the center of a human trafficking ring that had brought over 500 teenagers from India into the United States for the purpose of forced labor. 

A journalist and venture capitalist, David couldn’t reconcile the fact that human slavery was happening in his own backyard. So, he decided to do something about it. The result is Not for Sale, a book where he breaks down how business can fix the $31 billion human trafficking epidemic.

Today, he’s with us to share that journey of how God opened his eyes to the brokenness in the world and gave him a vision for how to fix it.

Episode Transcript

Some listeners have found it helpful to have a transcription of the podcast. Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it. The FDI movement is a volunteer-led movement, and if you’d like to contribute by editing future transcripts, please email us.

David Batstone: Like I thought, look, I was at the end of a river pulling bodies out as they were drowning and flailing, and that’s compassion and something is very important. Part of my spiritual journey is to practice compassion, but at the same time is wisdom, and that is to look upstream and say, well, how are these bodies falling in? Like, what are the systems and what are the people, the demand behind it? How do we solve the problem there?

Henry Kaestner: Welcome back to the Faith Driven Entrepreneur podcast. We’ve got a special guest today, David Batstone is in the House talking about the ministry that he started with regards to human trafficking. And, David, it’s great to have you on the program. Thank you very much for being here.

David Batstone: It’s a real pleasure to talk to some brothers about my heart.

Henry Kaestner: So there’s so much to talk about with what is on your heart. And I want to get into that, provide our listeners a context about the industry and the problem that you’re looking to solve and how you as an entrepreneur have gone about solving that problem. But before we do that, love to start our show every time by asking our guests who they are, where they come from, what their faith journey has been, and really bring us up to that moment in your life when all of a sudden this became a big, big deal for us. So what is it like growing up brings up to speed?

David Batstone: Well, you know, I grew up in the Midwest and I grew up in a evangelical background, the Plymouth brother. And maybe some people who are listening are familiar with the Plymouth Brethren. But it’s a small community that very much values the scripture and looked for ways to implement it in the life of the church and in the community around. And I went I went to Westmont College, which is a Christian evangelical school. And in Santa Barbara. Really? Really. Yeah. And I went on to get an objective and studied theology and have a Ph.D. in theology. And so, you know, today I’m a venture capitalist and teach business at the University of San Francisco. I don’t know if I’m probably the only business professor in entrepreneurship that has a Ph.D. in theology.

Henry Kaestner: Then you may be the only one. The only one I know Rusty.

Rusty Rueff: I don’t know any others either. So whether or not that you’re the only one, we’re going to give it to you today. You got that badge, you know.

David Batstone: Yeah, a dash. My dreams. I had one thing I stand up for.

Henry Kaestner: OK, so tell us I want you to take us back to the restaurant that you used to frequent that you later found out was a center of human trafficking. So this is a restaurant, the United States, correct?

David Batstone: Yeah, it’s in the San Francisco Bay Area. And I was a venture capitalist in Silicon Valley at the time, and I was also a professor teaching University of San Francisco. So it wasn’t like I was looking for another gig, Henry. I mean, you know, my life was full and it was just a shock to learn that my favorite restaurant I would go to regularly. You know, I love the Italys and Poppadoms and Teriyaki Chicken. Yeah, but I learned that this restaurant had trafficked young girls from the ages of 14 to 19, over 500 young girls. Oh, my goodness. Into the San Francisco Bay Area for the purpose of forced labor. First in this restaurant, they were being forced to work against their will and then they’d be taken out the brothels and fruit and vegetable fields in California. I didn’t discover it and that was part of my journey. The trafficker kept these young girls and fifteen to twenty in an apartment and there was a natural gas leak that killed one girl and injured others. And when the police showed up, they said, we need to get you away from the gas and we’re more worried about him and pointed to the trafficker. And so front page of my newspaper, I read it and I’ve been going to this place for years. And I was like, how could I not see this? How could have been blind to it? And it’s really funny how, you know, when we often say we pray that God would give us some wisdom or teach us a path or open a door. And I could have changed my philosophy on this because I think God is always putting things in front of us. It’s how we respond to those things. That’s how it builds our character, the way we respond to things that God puts in front of us. It’s not like we need to somehow go out and find it. It’s there. And I can’t tell you why. That was a defining moment of my life. I had to do something about it because I’m sure many other people went to that restaurant. I said, well, that’s a very bizarre experience. But for me, it was a calling. I had to respond to it.

Henry Kaestner: That’s incredible, the size and scope, and it’s just right there, I think that when we think about human trafficking, we think that, yes, we’ve heard about girls coming from Nepal or India, but we generally think that they I don’t know, they go to Amsterdam or they go to some other places. It’s far from us. But that many girls, it’s not two or three or 500 through a restaurant in San Francisco. Reasonably civilized city. That’s incredible.

David Batstone: I’m shocking. So I should call in other people that, you know, if you heard of this and some friends in L.A. said, well, yeah, we just had a sewing factory in East Los Angeles where 112 girls from Thailand were imprisoned and forced to sew clothes every day. And they would then be locked into rooms in the same facility where they were sewing clothes. And then I called friends in the Texas area, Houston and Dallas, and they would tell me of these bars or cantinas where young girls would be lined up with a numbers printed on their chest and a man would come to get a beer and then point to number 30 for who he wanted to buy for a night or weaker. And it was just, you know, just so shocking to me that this was a part of, you know, my country and my reality that I felt like, OK, I need to really understand this. So I took a leave of absence from my university and my venture capital bank. And I went around the world for a year, follow the money. I went from San Francisco to Bangalore and went from Los Angeles to Thailand. I went from Houston and Dallas to Peru and Guatemala. So, you know, basically follow the money to understand this trade in people.

Henry Kaestner: So I was going to ask you, so you’re an entrepreneur, you’ve been a venture capital. You understand it. Entrepreneurs solve problems. You see that there’s clearly a problem. But instead of doing something right away, you say, I want to fully understand the problem, let’s follow the money. So what an incredible adventure that must have been. Oh, you know, I wish that there’s a documentary filmmaker along with you as you kind of leave San Francisco in this restaurant and then you go to Bangalore and you’re in the back alleyways. So you spent a year trying to understand the problem, following the money. And at some point in time, you’re like, I got it. There’s a big problem. I think I have a sense about how I might address it. What was that?

David Batstone: It’s funny how we have an accepted paradigm of how you approach a concern, whether it’s social, environmental. And I’m sure everyone listening today has something that they really care about, whether it’s malaria or global warming or extreme poverty. So it’s very funny, though, that many of us, when we attempt to address these problems, we open our heart and we shut down our brain. At least that’s what I did, because here I was a venture capitalist in Silicon Valley. And when I confronted with this problem of trafficking, you know, over 40 million individuals living in some form of forced bondage or slavery, what I did is I started a bad business model called a nonprofit, a charity. And now I do want to clarify, I don’t think charities are all bad or wrong or they’re foolish, but they are not sustainable and they’re not scalable. And if you really want to address a problem of the magnitude we’re talking about, you need to develop a business model that has the scalability to it to actually solve the problem. So what I did is I set up a nonprofit and we would go to churches and rotary clubs and schools and, you know, we get donations and then we build a shelter. And I mean, we were good at it. It was fine. It was great. But it was small and it was very difficult to build something that would actually, I believe, solve the problem.

Rusty Rueff: But you did find a way to release the talents that God had given you. And one of the things I find fascinating about your story, and I think it should be enlightening to all entrepreneurs. And I remember, you know, we were much younger than when you wrote Not for Sale, when you and I first met years and years ago in San Francisco. But I was impressed then and I’m still impressed now that you not only had the heart for it, but as you started to allude and get into. You also had some skills, some talents that you’d been given that all you needed to do was sort of look inside of yourself and say, wait a minute, I can do something with this. And you had these journalism skills. That you uncovered, so take us through that and then take us into, you know, what you ended up doing with those writing skills.

David Batstone: I appreciate that, Rusty, because it is I think many people listening. They say, well, how could I do? I like to do something more meaningful. I’d love to be involved and say works that that would bring about a benefit for the world. And oftentimes they don’t think about, well, what do I know best and who do I know best and what would be the process I would follow. And I guess I started to look at the fact that in Silicon Valley, if I wanted to build an enterprise, what I do is I’d find the best capital, the best talent and cutting edge technology. And I would build a company based on that that would be profitable and would reach internationally. And in the case I said, well, what if I took those same skills, that same kind of formula, and I applied it to human trafficking? And the first thing to do is bring together the best talent, so I got 50 people who, you know, the smartest people I knew, the most successful, you know, the founder of Twitter was one of them. I got the founder of the largest health care online company. I got a you got a baseball player for the San Francisco Giants, like people who are successful. And I said, look, help me come up with a business model or a business plan for a very specific situation. And this situation is in the Amazon of Peru, my nonprofit not for sale. We build a shelter for young kids coming from native or indigenous communities in the Amazon. They’re being trafficked into Lima. Help us come up with a business model. So we had a 24 hour period where we brainstormed and had a competition. The winning idea was to start a company that would source the wonderful assets or ingredients that come out of the Amazon. These super herbs like Mocha Mocha suddenly pay a fair wage, create an economic platform that would provide long term security for the native communities, put into a beverage, sell it in mainstream grocery stores and return profits back to those communities. It’s a wonderful, beautiful idea. Unless you’re the guy on Monday morning that now has to start this company, that’s a beverage. Right. And I knew nothing about beverage. And so, again, I thought, OK, what would I do if I was in Silicon Valley now? What would I do if I was just another charity? Well, I go and find the best beverage maker in the world who could use these herbs and put them into the beverage and make a wonderful product. And that’s what I did. I just found the best beverage maker in the world, hired them, paid them what Coca-Cola would have paid him. I didn’t pay them a nonprofit salary in equity in the company. And, you know, fast forward six years. We are now the number one health beverage in America. Rebel groups extract Barberi leaves rebel, and we have now returned over a million dollars back to those communities through our profit sharing. We’re sourcing ingredients in three countries now and we choose the ingredient based on the most impact, not the cheapest ingredient. But where will we have the most impact on poor communities? So over 30000 families, one hundred twenty thousand people, more or less, are being empowered in poor, rural, exploited communities. So to me, this was like a revelation. It’s taking the same principles and mission that I had a nonprofit, but embedding the DNA into a enterprise, a for profit enterprise.

Rusty Rueff: Well, I got to give you a plug, because unless I’m wrong, Serena Williams is on your side, right, with Rebel, right. I see her on television all the time.

David Batstone: We got we’re fortunate. We have so many. Rubirosa is a great actress. She’s a bit one of our big ambassadors, Michael Franti, who’s a musician. So we get a lot of actually actors, musicians, artists who come to us and say, is there any way I could be an ambassador for your brand? And that’s the great thing about, you know, doing well by doing good. People want to be a part of it.

Rusty Rueff: Yeah, that’s awesome. So it reminds me of and we all know the story of Esther did write in the book of Esther. And Mordechai says to her, you know, is it that you’ve been called for such a time just as this? Do you feel like God specifically prepared and equipped you to make the headway into this sort of massive, let’s call it a massive force of evil in this world? Did you have that Esther moment?

David Batstone: Oh, very much so. You know, coming out of that experience of understanding that in my own backyard was this trafficking of hundreds of young girls from Bangalore. I just could not walk away. It was a calling. And to have walked away would have meant for me a betrayal of a character that I was being called to fill. And, you know, I suppose even today, now, 15 years later, people ask me, well, gosh, know, aren’t you just being overwhelmed by this evil or by the enormity of the problem? And I say, you know, for whatever reason, I’m more inspired by what we do achieve and the people we can rescue and save and the empowerment that does happen, that inspires me more than the enormity of what we haven’t done. And I think once you’re on that calling, then your inspiration comes through your daily walk and not through some kind of expectation of how much of it you’re going to solve.

Rusty Rueff: So I’m going to encourage everybody to jump on Amazon and go back and get that book not for sale, because it tells your story and it tells the story of the beginnings of what you tried to conquer. If you were writing an epilog or a new chapter for not for sale, what would it say right now?

David Batstone: I would say I’d say it’s the art of being a rebel and of course, is the name of the first company we started. We now have 10 companies, by the way. And I could talk about some of those if you’d like. But the art of being a rebel, meaning that we’re so much through social media or through advertising or just through our environment that we live in, that we’re so, you know, told to what makes us valuable, what we should consume or what career we should pursue. And to be a rebel, anything in the best sense is to hear a different voice, to follow a different path. And that requires us to have a strong spiritual grounding that we realize that where the world is going and what is named as what is valuable, what will make me a success may not be what’s true for my character. And so I think the art of being a rebel is about choosing a path that you’re going to follow, regardless of what the rest of the world tells you.

Henry Kaestner: So I’m fascinated by, you know, we’ve been around the space long enough to know that there’s this thing of impact investing, and so there are social entrepreneurs that come out of programs like Praxis and others that really have a desire to really make an impact on communities in many cases, work with them on the business side, which I love, which is there’s injustices in this world. Yes, there’s an opportunity for philanthropy. But in terms of providing dignity rather than dependency, there’s a place for the markets in all of this. You teach about social entrepreneurship in innovative entrepreneurship in San Francisco. I’m wondering what you do as you take a 19, 20 year old student that is starting to understand the enormity of the injustice in this world. They’ve got a heart for these things. What is it that you do as you train them, as you give them this kind of alternate imagination and you equip them? What do you tell them? How do you get them trained up?

David Batstone: Hmm. What I find my students is they are looking for a bridge to tie together with their heart. And talent is what they’re really passionate about and their expectation of creating a life that is, you know, financially responsible and maybe having a family. And and they feel like they have to choose between the two. And probably the most helpful thing that I do in my classroom is to help them understand that their skills are needed all over the world. And there’s incredible opportunities for them to deploy investment or accounting or, you know, their entrepreneurial passion in environments that are basically untouched. And so there’s so much opportunity in the world today, the way that we’re rewriting our energy systems and the way that we’re going to be moving into new economies of transport. And this is every area health care is going to transform that. I would say to my students that even though you’re getting the message that, wow, it’s almost like you’re nineteen eighty four, you wish you joined the Beatles, it’s over. There’s nothing new and there’s nothing in the truth of the matter is, is that you’re living in the most exciting moments in history and you can use your skills to build livlihood not only for yourself but for those who typically are being left out of the world economic picture today. So I really do encourage them to think bigger than simply can I get a job at Goldman Sachs or Apple?

Henry Kaestner: So I think that you’re probably finding this new generation is really, really open to that in a way, not the to options weren’t. Do you ever see there’s a book that we all know called When Helping Hurts by guy named Brian Fisher, talking about some great intentions? And what are things like that might go wrong? What are the unintended consequences? Are there examples when impact investing or social entrepreneurship might also go wrong, where somebody comes at it with the right intentions, wants to really address an injustice, but there’s something that they don’t see that ends up maybe even doing more harm than good. And I shouldn’t focus on the negative side because there’s so much positive that can happen. And yet there are probably some examples where it’s done poorly as well.

David Batstone: Absolutely. The best way to talk about poor examples is start with my own life. You know, when I first started working in social entrepreneurship, I was in Latin America and I tried to create economic opportunities for poor communities and teach them agricultural skills or teach in the show or whatever skills training. And you often find this in the nonprofit or ministry world that we train people to do a job. But some of that we never think about is, well, if there’s no ecosystem, if there’s not a environment where then there’s investment opportunity or there is a supply chain or a demand for the products or services, then really you’re equipping someone for a very disappointing and frustrating life. And I find this is not only within a training program, but say, in well hearted people who want to teach people in Africa how to grow mangoes better. OK, but how do you think about the system that allows for that success, whatever investment that might be for that community? And so I suppose from the start, you need to think about both the demand and the supply and the ability to use your investment in a way that those communities can actually begin to build out an economy and a platform that will sustain itself over a long period of time. Unfortunately, I find that many social impact enterprise groups. What they do is that they have a very, you know, three to five year investment and then it dries up and it goes away.

Rusty Rueff: So, David, I want to go a little deeper into sort of the faith journey that you took. Right. That at the time when you said, I’m walking away from all of this and I’m going to travel around the world and I’m going to go solve or I’m going to try to solve or try to understand sex trafficking, that’s as much of a faith journey is sitting there going, I’m going to solve world hunger. I mean, because it’s a big thing, like you were trying to put your arms around so we can. Call that a faith journey, but let’s also call it a faith journey, you know, with your faith. Take us through that journey that God put you on and share some of the stories, maybe ups and downs of your own personal faith journey as you embarked on this.

David Batstone: You know, it’s really interesting, Rusty, that we like to make heroes out of people when we see the whole narrative. So while it’s very heroic, but everyone’s journey, whether it’s a hero’s journey or not, starts with just one step. And that’s the hardest step, is to say I’m going to leave my security and my comfort to do something. And it it’s scary to take that one step. And I honestly was not thinking of anything beyond, you know, I need to understand how this was happening in my backyard. My one step is I’m going to go to India and Thailand, follow the trail of trafficking from California to Asia and just understand it. It was curiosity. And also, if I made it visible, I was going to go back to my venture capital firm at my university. But what happened is that you made that one step. Then I met this woman who in northern Thailand, she had rescued twenty seven kids who were in karaoke bars being forced to sell their bodies to male clients. And she was living out in an empty field without any resources. And so I went, oh, man, OK, I have a second step. I’ll take. I promised I would build her a home. That was OK. Now I’m going to, you know, write this book about my understanding of what we’ve learned and to build a home. Then I’ll go back to my life. And that just keeps cascading. So, you know, the fact that not for sale does what it does today, if you think, oh, my gosh, it’s wonderful, what you do is that, you know, that I’ve just been stumbling my way toward it now. You know, there’s been a lot of ups and downs and things that I wish we had done differently. And, you know, one saying I learned and gone I really would love is that we don’t mind stumbling because it makes us move forward more quickly. And I think that’s probably than my journey is. Like I’d like to say that there was clarity, but probably reluctantly. I took each step and then you look back and say, well, God really blessed that narrative. God bless that journey

Henry Kaestner: or take us forward in a second to some of the other ventures that you’re involved with and energy and a number of different projects. I want to go backwards, though, first, which is to go into this kind of atwar about understanding the larger ecosystem. And I’m compelled not only about the stories of where these girls come from, but also through to the demand side. And part of me is just thinking, oh, my goodness, if you can have prostitution where people have numbers on their chest and dozens and dozens of girls being sold in the field, what role does the demand side have in the equation on trafficking?

David Batstone: Well, it really is. The preponderance of the problem is that there is a demand for either the use of someone’s labor or their body for someone else’s pleasure or someone else’s greed. So, you know, after five years of my first five years of not for sale, Henry, what I felt like I thought like I was at the end of a river pulling bodies out as they were drowning and flailing. And that’s compassion. And something is very important. Part of my spiritual journey is to practice compassion, but at the same time is wisdom, and that is to look upstream and say, well, how are these bodies falling in? Like, what are the systems and what are the people, the demand behind it? How do we solve the problem there? And I suppose I don’t see there’s enough of that being done within the anti trafficking movement to actually solve the problem of the area of demand and not only the supply problem, that is people who are the consequences of these actions. So I think it’s really important to understand that demand side. And, you know, it’s everything from factories to agricultural fields to brothels to fishing industry, fishing boats. I mean, it’s embedded in so many systems that one thing that I felt as a business entrepreneur, I’m probably the best thing I could do is rather run after every one and kind of try and stop. All of the negativity was to start creating models of desire in the world that I wanted to live in. I’m sure other people want to live in as well. Start designing companies where there’s dignity and goodness at the core of the company in the DNA of the company, thereby inspire other young entrepreneurs to be able to want to live that life and pursue those dreams.

Henry Kaestner: So I want to get into that. But one last thing, the deterrent part, because I’m just thinking right through the demand side. I mean, the demand for lust and all that stuff, I mean, is biblical. We all know it. We all know that it’s inside of us. I’m wondering, you know, some number of people have there’s a debate about whether the death penalty is a deterrent or not. I wonder how, though deterrence enters into the demand side of the equation with sex trafficking, is somebody listening to this? Can you lobby your legislator to be able to have stricter rules? Does that even work? Do you find that rules are just lax enough and that just authorities kind of look the other way even in America, does deterrence and punishment work or is that just a myth?

David Batstone: Deterrence is effective and I think there’s different levels of deterrence. One is simply prosecution and rule of law that actually takes seriously the practice of same sex trafficking. I remember when we first started not for sale. I mean, it was hard to get, you know, local police officials and FBI to believe the extent of the problem in our American cities. And, you know, I’m not trained as a law enforcement officer, but I my team and I, we would have to go undercover with a camera and go into these brothels and massage parlors and the like and then take that footage to law enforcement. And it’s changed now. It is a much more of an awareness and a much more of a compliance with that in the United States at least. But so that’s one of the other is I think probably the biggest deterrence is the public shaming that comes from being exposed. It’s really interesting. I’m in Sweden right now. This interview in Sweden, what they’ve done is they put in newspapers or on billboards and shaming the johns and the demand side. And, you know, all too often it’s the victims is the young women who are kind of shamed or put into the spotlight. And, you know, it’s remarkable the level to which that puts another fear of the social community even more than in many cases, just the being arrested.

Henry Kaestner: Yeah. OK, so I want to move forward towards your equipping some of these entrepreneurs to solve more problems, to create these businesses where business is done the right way. You’ve got just business and not for sale was maybe your first foray into that, but you’ve not stopped there. You’re in Sweden right now on an energy deal. Walk us through some of the different projects you’re working on.

David Batstone: Certainly, you know, part of this was it’s an ongoing evolution of understanding how could we scale the solution? And that’s really the objective here is not for me to be able to come on your show. And I could tell you three stories of young women or boys. And that’s a fantastic again, I don’t want to undersell that, but is being able to say, look, now we can impact millions because it’s the size of this, the scope of that. So, you know, I had a great entrepreneur come to me and I’m always looking for entrepreneurs. And he said, look, I have this idea of being able to assist big companies with mobility. And so if you look at the big tech companies or the big pharmaceutical companies or retail companies, they’re hiring people from all over the world. They want talent and they’ll move them around the world. So they’re in mobility. And so I thought about this, you know, look at all make an investment in your company and I’ll get behind you to be able to get the Apple, Facebook, Googles, Nike’s, and those are all our customers today for this company. But you have to take one percent of all the revenue. We generate one percent of the gross revenue and dedicate it to those people who are in mobility, refugees, human trafficking victim. But they don’t have those services. They don’t have someone to help them say when you come to a new city, find a place for your children to go to school or find a dentist. And so basically, we created a concierge service that now is global. This company, we’re the only investors in it, and it’s called velocity. And now we do have Apple, Facebook, Google, Nike, Twitter, all the companies, Nike, Walmart, Starbucks, they all pay us to take care of their employees. And what we’re doing is we’re taking some of that revenue directly to those communities that also are in deep need of mobility. Security.

Rusty Rueff: That’s very cool. That’s actually inspiring, David, that you’ve extended what you’ve done into, you know, organizations that we all know that needed to be shook at their core to say this is something important. And, you know, to that point, you know, on this podcast, you have the ears now of thousands of entrepreneurs, Faith driven entrepreneurs. What would you like to tell them about how they can, even in the earliest stages, you know, use their businesses to do more than just create a bottom line profit? And how would you like to see Faith driven entrepreneurs, you know, solving these types of problems?

David Batstone: I’ve been involved in a lot of faith driven entrepreneurial events. You know, there’s great things like businesses, Mission BAM and The Lion’s Den. And, you know, I could go on and on with faith driven organizations. And I guess my message continually to them is you’re not thinking big enough. You know, it’s almost as if it’s a ministry that we’re stamping a Bible verse on top of or some kind of a mission. But, you know, it’s not about transforming the business. And what I want to see is that we transform business, that we actually redeem the business model to bring about goodness for the community. And that requires thinking, you know, with grabble, my goal is to compete with Coca-Cola. Right. With velocity. I want to be the number one mobility company in the world. Doesn’t sacrifice my mission. My mission is at the heart of all that I do. But I have to think bigger. And I think entrepreneurs are making. Or God too small, they’re making their mission too insignificant and they’re not saying that, you know, this is a warrior’s test, is a lions task, and it’s to start to build the best companies in the world, but with faith and values of the center of the company.

Rusty Rueff: Yeah, we had Tony Evans on the podcast recently, the pastor of Cliff Fellowship Bible Church in Dallas, and he had a great sort of calling out to Faith driven entrepreneurs, to King Demised. Their business kingdom is your business, you know. And as I listened to that and I listened to you, sort of what I read into all of this is, look, the core of what we do, we might be out there running a agricultural business or cleaning business or a technology business. But if we’re faith driven entrepreneurs, you know, we are to give back, take our talents and our skills and kingdom is our business, but also to find these areas where we have the skills, talents and maybe resources, maybe financial resources that we need to put to help those that can’t be helped. And I’m going to turn this over to Henry to close this out. But I want to continue to encourage you, David, and thank you for the work that you’ve done in such an important area that’s happening all around us that, you know, we don’t see. You had to look into the shadows and you had to go into the shadows to find it. And I appreciate the courage and the journey that you took to get there.

David Batstone: Well, thank you. I appreciate it, Rusty. You know, now my being in Sweden today, I think the other thing that spiritual vision gives you is the audacity to think that you can start to kingdom eyes the world we live in. And, you know, right now I’m really compelled not only to the work of my own people and dignity of people, but also the planet. And how do we rethink and redesign the world so that the planet is something that has the same dignity. But God made it with, you know, working with all the big car companies, Tesla, GM, Ford, for the next generation of car. We’re recycling all the batteries. We’re extracting the minerals that they need for the batteries. But it’s done all with a new kind of technology that is going to just really remarkably change the way that transport is done so that companies, American Battery Technology Company, we also have a hydrogen company. So rethink the world, redesign it, put values at the very center of it

Henry Kaestner: by saying, that’s awesome. So much more to go to. I think that we could do an episode on each one of those ideas about how you’re looking to solve for them, how you’re tracing the money and the problem, just like you did with child trafficking and understanding how the supply chain works and things like energy and how it needs to be redeemed and what does it look like right down to the end user. So we’re going to come back to that. For now. We want to ask you, as we do all of our guests, what you’re hearing from God through his word and doesn’t need to be this morning. But it very well could be. But maybe the last week or last couple of weeks now, as one of the things that unites all of our guests together is God is at work. One of our guests has said Auslan is on the move and he’s very much at work. And what’s your sense with all that?

David Batstone: I’ve been drawing recently to the Proverbs, I’ve been reading a lot of the proverbs. And one of the problems over the last week I’ve been thinking a lot about is Proverbs 17. Twenty two about a cheerful heart is good medicine, but a crushed spirit dries up the bones. And I just think about what do I surround myself with, what is a cheerful heart? You know, the people around me and I guess in a very glib way of saying is that toxic people really do dry your bones, cheerful people, people who have a good heart, people who are positive, they inspire you. And, you know, I just don’t think a lot about time is precious, relationships are precious. And to surround yourself with people who are hopeful and encourage you, they want to see you succeed. And, you know, if people are a negative force in your life, get rid of them, walk away because they never get better. I know it sounds harsh, but really it’s about building communities of hope and inspiration and faith.

Henry Kaestner: David, thank you very much for being with us. Great joy. Thank you for being one of those people that is a positive force in the midst of all this going on with covid being able to look at some of the challenges that can be solved and getting out there and doing it creatively and then also inspire the next generation through your work in school. That’s super cool as well. Thank you.

David Batstone: Thank you very much. Entrain Rusty really been good to connect with you today.

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If you’re involved in Private Equity, you simply have to listen to today’s guest. And if you’re not involved in Private Equity, well, you’re still going to want to listen to Brent Beshore because in addition to taking an alternative approach to private equity, he’s an all around interesting person. 

When it comes to PE, Brent doesn’t want to replace the founder. He doesn’t want to run up debt. And he doesn’t have a timeline for when he wants to sell. How does that work in practice? 

Hear the CEO and Founder of Permanent Equity tell you himself…

Episode Transcript

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Brent Beshore: It’s impossible to make good long term decisions if you’re short term in nature and use short term capital. And again, this kind of goes down to the structure, you know, when your time horizon is stretched to eternity. It does fundamentally change the way that you think about the day to day and the things that previously were anxiety filled. Frustrating not to say that I’m never frustrated or anxiety filled. That’s not true at all. But certainly a lot of that stuff has faded away. And I find myself a lot more comfortable that I worship a living God, that sovereign.

Henry Kaestner: Welcome back to the Faith Driven Investor podcast, Brant, be sure. In the House, Brant, welcome.

Brent Beshore: Thank you so much.

Henry Kaestner: One of the things that we do, many of our listening audience may not know this, but we do a couple of different things before we actually go live with you. One is that we do our infamous three to one clap to sync up our audio tracks, which sometimes works out really well and sometimes doesn’t. But the other one is more materially is that we pray. We pray for you, the listener. We pray for the technology, and we just pray generally for the guest in our time together. And in the prayer today, William had mentioned something that I thought was really interesting, alluded the fact that at one point in time he cold called our guest today. Brant and I had known that. And so, William, what was that all about?

William Norvell: Absolutely. You know, I have been following Brett’s career and sort of what he was doing, permanent equity when we were getting started with the lower middle market side of sovereigns and had run into a couple of roadblocks. Honestly, just that I thought he could understand from what I had read, from what I had heard. We’re going to find out later. I think Brant is a brilliant communicator, both with his writings and with what he talks. No pressure.

Brent Beshore: Brant, can we lower the bar of expectation?

William Norvell: Nope, nope, nope. We’re sick of a brilliant or signaler brilliant his writings and what he gives away and the thoughts and the way he catalyzes those are just really, really well done. And I said, you know what? I think this guy is going to be able to help with this problem. I have. And I forgot how I found your number or whatever, but I got your note and you were gracious to get on and spend to get half an hour with me walking through it. It was super helpful for what I was doing. And from then we found out we had a shared faith and we’ve been able to connect on other things. And gosh, I want to say it’s like three years from now. Now we find ourselves on this podcast and with tons of mutual friends. And as I was praying, it’s just like I am just always amazed at the plan God is writing that we don’t know, that we have no clue what God is up to. And we find ourselves here collaborating in a deeper friendship and in a friendship with more people. It’s just fun. It’s just fun. Indeed.

Henry Kaestner: Indeed. And I’ve been looking forward to this. You know, it’s infrequent that we have guests on the podcast out of the Faith Driven Entrepreneur podcast or the Faith Driven Investor podcast that, like me, our adult converts who came to faith later in life. And so Brant and I share that. And I think we can get into a little bit. In fact, maybe we’ll even to start there and just bring us up to speed with who you are, where you come from, your early days. Growing up, you’re wrestling with faith the time before you became an investor.

Brent Beshore: Yeah, well, again, thank you for having me on the show. I don’t think is particularly interesting for me to tell people about my background growing up in Joplin, Missouri. But, yeah, I grew up in Joplin, Missouri, southwest corner of the state. My dad worked for the same company for a long time. My mom was a college professor and we attended most of the time, attended a Presbyterian church in Joplin growing up as a PC USA church. And it just never clicked for me. I mean, I can remember when I was a real young kid, you know, I’ve always felt a pretty significant battle with pride. I didn’t realize at the time it was a battle with pride. But I can remember being six or seven years old, sitting in vacation, Bible school. And, you know, they kept talking about all this stuff. And I was like, this all seems very far fetched. And I don’t know why they keep talking about. But they had great sex, you know, and that’s what really mattered to me. And, you know, the fat kid, as long as you can just feed me snacks and I’ll pretty much go along with anything. So, you know, but I can just remember from a young timelike, just I just wasn’t a believer. Like I didn’t believe. I thought it was made up. And I didn’t see a lot of people who centered their life on it. It felt very much like religion. And now that I’m finding I mean, I think there’s a huge split. And I certainly have gone through this phase. And I think in my faith journey, is it not really being about God and being about me and it being about my religious performance. And so, you know, kind of continued on. I remember I asked my mom to drive me to the church when I was fourteen, probably. And anyway, I just had a lot of questions. I had a lot of questions about why God was who he claimed God was and why I couldn’t have faith. And I pretty much made up my mind at that point that I was an atheist. But, you know, this guy was an amazing human beings names Bill Christmas since passed an incredible teacher, kind, loving, gentle man who spent an hour with a punk, prideful fourteen year old kid who was pounding him with all kinds of questions, which I thought were incredibly novel. And come to find out, we’re like the little baby steps that you first start thinking about when you’re thinking about faith. I walked out of there and I was just convinced that there was no God and I was convinced that, you know, I’d kind of go along with whatever society wanted me to, but I wasn’t going to have any faith. I went to college, a school in the East Coast. All my professors were pretty much atheist. I mean, maybe some of them had some a little bit of faith here and there, but not much took religion classes from people who made fun of Abraham and, you know, said that it was all just a ruse to control people. And so, you know, became more and more hardened and got into new atheism. It was a very attractive, you know, the Dawkins of the world and the Hitchens of the world and got into sort of a really condescending view of faith. And that was really my life until kind of mid to late twenties. I mean, I woke up when I was. Twenty seven, twenty eight, I had gotten lucky a few times, and I really say lucky, I mean, obviously now I would say providential, but truly I couldn’t explain why I had been successful. I mean, I look back and point to a few things in hindsight, but I woke up with a beautiful wife who loved me. We didn’t have any kids yet, but I had more money than I needed. And a career which was seemingly on a really great trajectory. And I just felt empty and hollow inside. And I just thought there had to be something more than this. I was just kind of at the point where I was like, what is going on? And around that same time, I met some people who just acted very differently and who loved in a way that I didn’t know was possible and who didn’t have egos and who just were delight to be around and had fun and just lived free. And I was so attracted to me and I kept getting to know these people. And I said, what is it about you? What do you know? They say, oh, well, I mean, we’re followers of Jesus. And I was like, Oh, come on, please, seriously, that’s the thing, you know? And they took me under their wing and fed me lots of books and fed me meals. And it was a long, slow, painful journey to faith. Like God just wouldn’t let go is how I would describe it. And so yeah.

Henry Kaestner: So yeah, OK. So I completely identify with that. Twenty it was my age and and there’s some wrestling involved too. One of the things that’s impacted me recently is spending some time in jail packers knowing God. And yesterday I’ve been struggling a little bit with some of the Genesis stories. I mean there’s a lot to just be curious about, you know, in the tent and some of these between Abraham, Isaac and Jacob, they’re not always exemplars. Right. And I was particularly struggling with the Jacob story and and Jay Packers’, knowing God, he did a great job of talking about the wrestling with God story, which I had not fully understood, and putting the hip out of place. And one of the things that helped me about that lesson was just understand that Jacob just went and grabbed God, wanted to get out of there. You know, as the story goes, God said, let me go. And Jacob wouldn’t let him go until he got the blessing. And I thought, wow, that’s really interesting. As sinful as far as I am, there’s some precedent here that is messed up, as Jacob was. I mean, he was a deceiver. I mean, that’s his name. It just really kind of messed up in his dealings. But he wanted God. He wanted a guy. He wrestled with God. But in wrestling with God, he knew enough to know that he really wanted to hold on to him, and he did until God got his blessing. And do you see parts of that wrestling with God in your own life?

Brent Beshore: Yeah, I mean, this was a huge I think when I was a hardcore atheist, I looked at myself as being smart and capable and competent. I could I could do things. I didn’t need anybody. I didn’t I certainly didn’t need God. And then, you know, I was reading the Bible. Everyone’s an idiot in the Bible pretty much, right. Everyone but Jesus pretty much an idiot. And thankfully, because I’m an idiot, too, it gives me a lot of hope that God to work through me. I mean, literally, if you look at all the biggest figures in the Bible, I mean, they were all messed up in their own ways and God redeems them. Right. And I think that’s where the story for me of wrestling with God is really wrestling with who am I and wrestling with the deep seated sense that I have in my life. And the more that God brings them to the surface, the more that I wrestle with God with them. It’s amazing. It’s a I mean, it’s what a gift. I see things that have had a grip on my life for my whole life. And I still, by the way, so much, very much an idiot. So but it’s amazing to see those things lose grip. And for me to change my heart, to actually change towards people and to truly love and care for people in a way that I didn’t even know was possible.

Henry Kaestner: Very interesting. OK, so it looks going to take us to a conversation about permanent equity. You have a day job. Your faith informs a day job and will impact that a little bit, too. But you are the first person that we’ve had on the Faith Driven Investor podcast that is auditing seminary classes. So you’re serious about building out your knowledge? How do you have time and what brings you to it? Because you’ve been doing this for a little while, too, right?

Brent Beshore: Yeah. Yeah, I started let’s see, this is my third or fourth semester now of adding seminary classes. I mean, just a great opportunity. There’s a cohort at my local church that was going through Covenant seminaries classes, and I was lucky enough to be brought along. And it’s a great group of people and just trying to learn and explore. And I mean, how do I find time? I don’t know. God sort of I think makes time for it. And I love it. I mean, I’m a huge nerd and I love to read and learn. And I think if anything, if I’m being honest, it’s a lot easier for me to learn about God than to be in a relationship with God. And I think that’s actually something that I’ve been struggling with in seminaries. I’m very drawn to the intellectual side, the knowledge and the sort of apologetics and the defense of the faith and being thoughtful and logical about why I believe what I believe, which I think is a bad thing at all. I think that you can have a right doctrine and have a horrible, sinful heart that has turned away from God. And I think that’s something that I’ve actually been struggling with. As you know, I would say anybody listening who I don’t want them to find it intimidating like the Amen, amen. An area like I don’t want to be like this is somehow impressive, like for me, honestly, the more that I focus on my relationship with God and the less that I care about knowing more than everyone else. And I think that’s the comparative side of me. The prideful side of me, I think is it comes through in that the more I just want to focus on God, the better it is. And so I would say is being a seminary or reading, you know, you’re obviously a huge reader, Henry, as well. And, you know, I think that’s great. I think, though, that I’m learning the more I mature in my faith, the more I’m just really trying to focus on who got it and being relationship.

Henry Kaestner: You know, I think that’s really interesting. And I think that a lot of investors probably aren’t in the same spot. I know that I am as an investor, you do want to know a lot. You want to know about your industry. You want to know about your model. You want to know about deal structures. And so I think that we have a propensity in our relationship with God, with three thousand plus pages in a Bible to know as much of the text as we can to know systematic theology, to know the writings of what field or Spurgeon are and just gone. But the deep personal relationship where God is our father, ABBA is really hard for us. So that’s a great encouragement. You hit on something personal for me and likely for others as well.

Luke Roush: How do you think know. So just as somebody who’s an adult convert to faith, a lot of times that actually kind of changes everything about how you think about family, how you think about fatherhood, being a husband in an investor, maybe to speak a little bit to when you had this awakening, you’d had some success already as an investor, how did your coming of faith impact how you thought about shepherding capital? And maybe that dovetails into, you know, what I perceived to be a fairly novel structure in your fund with an evergreen structure. So you had any comments on that?

Brent Beshore: Yeah. I mean, the short version is it changed everything. I mean, I think that the things that hasn’t changed or the things that I’m still holding on to, that I haven’t surrendered to God and that somehow I want to go and wallow in my blood in that area in my life, that I’m learning more and more to have a distaste for. I mean, I still have those areas of my life that I haven’t. And I think that know in the business world looking at is everyone’s job around me to serve me. I mean, which is really as the boss, as the CEO. I mean, I had a mentality that was look like I don’t know how to say it. It was all about me. Right. And it was about we are going to work for me. I’m going to make money for me. Everything was around me. And that’s the exact opposite of the gospel, right? I mean, we worship a savior who willingly gave his life and who gave up everything for us. And, you know, what is the purpose of life? I mean, I think prior to becoming a believer, it was to amass as much. I mean, it was it was gain and it was to try to make as much as I possibly could and get as much as I possibly could and experience as much as I possibly could. And, you know, a lot of those tastes have changed in the more that I’m able to love people. I mean, that’s really comes down to. Right. And what does it mean to love somebody? It means not to love them in the way that you want to be loved. It’s to love them in the way that they want to be loved and that they should be loved. And so what does it look like in a business deal? You know, I saw am wrestling with a lot of this. I mean, to be completely frank, the challenge I have is it’s easy for a deal to look Zero-Sum. And I don’t think it ever is right. And I think there’s always an opportunity to collaborate with people and to make more. And that’s what God wants us to do, right? God wants us to love one another through the structured business, to grow the garden, to grow the cities, to encourage human flourishing. And I think that, you know, capitalism is an amazing, amazing vehicle, a gift from God to be able to do that. And so I don’t see conflict with that except for I see conflict with my own sinful nature, how I frankly, I want to be smarter than other people. I want to get a good deal. And I think that oftentimes when I feel that pull of wanting to do better in a comparative way, I think that’s where I’m in danger of harming the deal. I’m in danger of, you know, setting things up poorly and suffering the consequences down the road. And so when it comes down to it, the biggest thing, which is we’re in the investment business, we’re in the negotiation business, we’re buying companies or at least buying majority stakes in companies. We want to do it in a way that honors the people that we’re working with. And we want to work with them after the closing. And we want to have them feel good about it. We want to have them excited about the future. And oftentimes my son screws that up. You know, if I’m just being honest, like we’re all messy. I explained some of the other day, like, how can you be a believer? I say, well, look, the Bible explains a world that I see around me, the history that I experienced and predicts the future better than any other system I’ve ever been aware of by a mile. And one of the core doctrines is the doctrine of sin, right. Paired with the doctrine, the Imago day. And when you pair those two things together, it says that, look, we all have this incredible darkness in us that wants to come out, that’s comparative, that’s sinful, and we want to use it everywhere. And by the way, were made in the image of God. And if we fully appreciated each other, we’d be tempted to worship each other. Right. I mean, that’s how beautiful it is. I think in the ideal world that comes through. Right. I mean, you get this incredible excitement around a deal about the possibility of it. And it feels like the Imago day, right? It feels like we’re going to come together to build something more. And then you got everyone sending everyone’s messing this kind of junk all over, right, and you’ve got the lawyers are junk and we’re junk and we’ve got all this junk together. And it’s just it causes a mess. And so I think most of my job these days is trying to weed through the mess and look at my own self and my messiness and say, OK, how can I minimize the mess that I’m going to be putting into this transaction and really just try to figure out how I can give grace to people and how I can love people despite them, maybe not always having the best intentions like, oh my, perhaps I don’t either. You know, I should never be surprised by it.

Luke Roush: Yeah. Yeah. Maybe any kind of quick thoughts on things that got easier when you became aware of your faith and how you executed as an investor and then things that got harder as you became aware of that.

Brent Beshore: Yeah. So I mean, I would say the thing that became easier so it’s impossible to make good long term decisions if you’re short term in nature and you’ve short term capital. And again, this kind of goes back to the structure. You know, when your time horizon is stretched to eternity, it does fundamentally change the way that you think about the day to day and the things that previously were anxiety filled. Frustrating not to say that I’m never frustrated or anxiety filled. That’s not true at all. But certainly a lot of this stuff has faded away. And I find myself a lot more comfortable that I worship a living God, that sovereign. And that has I mean, there you go, Sovereign’s Capital. It’s almost like it’s intentional, you know, well played, well played. Except I’m just trying to plug in there for you. You’re welcome. 20 bucks. Anyway, when you stretch your time horizon to eternity, it changes the way that you can look at individual short term issues and allows you to think, frankly, much more clearly about what’s really important, what’s not. And for me, that has enabled a lot better relationships and frankly, it’s enabled a lot better transactions. What has gotten harder? Man, I used to love to get a good deal, like a good deal, like I used to love to be able to be like, look, I’m smarter. This is how I arrange things. So I did. And oftentimes I was doing it in a zero sum sort of fashion. And even though I still have the tendency to want to go there, I think trying to create win win win scenarios, you know, sort of if you think about all the stakeholder groups, because oftentimes we just think about the seller and the buyer. There’s a lot of other stakeholder groups than those two parties. Right? Certainly the seller, the buyer. You have the investors behind us. Right, that are our clients as well. You have the employee base. You have a leadership team. You have the vendors who most people don’t think about. You have the communities in which they sit. And of course, then you have the clients. How do you create a scenario where you’re encouraging flourishing among all those groups? And yes, you are sitting at the Nexus Point, right. That’s the beauty of capitalism. And you’re able to share in the flourishing. But that’s when things are really exciting, is when you get to do that. That’s where you should make money. You should make money because you’ve enabled a unique form of flourishing and you get to share in the benefits of that. You should not make money and you should not try to screw somebody over right out, do somebody in negotiation. And so I think that’s where that’s become a lot more difficult. And like I said, I’m still struggling with the day to day.

Luke Roush: So maybe just for some of our listeners who may not understand permanent equity, permanent capital or evergreen models, maybe to share a little bit about how that works and how it differs from what most people would be familiar with in a closed end time.

Brent Beshore: Yes, a traditional private equity. So we are a private equity in the sense that we are buying private securities, private equities, the equity side of the debt or equity. We’re on the equity side and we’re buying them from private companies, small private companies. And so how traditional private equity works, though, sort of beyond just the name itself, is you’re typically going to buy something you’re in levered up to a lot of debt on it. You’re going to try to optimize it within a short window of time, typically two to five years, and then you’re going to sell it to somebody else because their investors expect their money back. And in the process of that, you’re going to kind of do whatever it takes, right? I mean, like I said, it’s impossible, make good long term decisions with short term capital. If your time horizons two to five years, you’re going to make decisions that are going to benefit the company and going to show up in that time horizon. So what we do is in many ways the exact opposite of that. So we buy with no intention of selling the business. We are typically not using debt in our transactions. We are partnering with the leadership team that’s already there, certainly helping augment skill sets. We want to be helpful in how we do that. We are not coming in and clearcutting the leadership team, and then we’re really trying to encourage them to reinvest back in the business and treat people well and like I said, encourage flourishing. And so it just looks very, very different in practice. Right. I mean, how we’re able to structure our deals, how we’re able to operate the companies post close, it feels very different. And then, of course, we are not putting the company through another traumatic sort of sale scenario within a fairly short period of time. We’re able to do that because the capital raise. So the model that we created, which I think is unique, at least we haven’t or anybody else who’s done it this way, is we basically run funds that are very long dated so that our investors give us their capital for the better part of. Three decades and then there’s some options to renew if we want to continue forward, but it’s functionally indefinite capital writing three decades is a long time and so we’re able to come in and certainly generate a good return. That’s a focus of ours. In fact, we want to be world leading in the returns that we’re generating, but we’re generating in a very different way. So instead of levering up the company and hoping to get a big pop on the exit, we are trying to run these companies extremely well and create a flourishing within the companies that then we can share in on the way up, as opposed to trying to set out, negotiate and then sell it to somebody else who can work it out, negotiate them as well.

Henry Kaestner: So the better part of three decades feels like a long time. And maybe I say that just because I know that some of our investors have told us, you know, with our 12 year fund, that feels like a very long time. And and I think that it does. Do you offer liquidity along the way in the event that somebody is like, gosh, I love what you’re doing, but, you know, it’s been 10 years and you get some things they got to do.

Brent Beshore: Yeah. So there’s no guarantee liquidity along the way. What we’re used to doing is a lot of the businesses that we’re getting involved in have excess cash that’s coming out of them beyond what’s required or even what can be reasonably responsibly reinvested back into the companies. And so that cash flow stream that is aggregated and then goes out to the investors about once every six months to a year, depending on the situation. So there is a sort of a distribution stream that’s coming out of these companies. And of course, there’s always secondary liquidity. Somebody could sell their stake and we have a process for that internally. Thankfully, we really never had to. I mean, I think one time somebody, because they were funding a startup, had to balance some small position for them. Other than that, there’s a lot of trust. And I think that’s one of the things that’s beautiful is that, you know, our investors have given us a tremendous amount of leeway and trust and we don’t take that lightly. I mean, we know we have the best investors in the world with the best capital structure we think in the world, and that allows us to do things other people can’t do. It allows us to put trust into people that other people can’t put trust in and allows us to invest in industries that other people can invest in and situations that would be impossible. And so we consider that to be our core advantages, that we have better capital than everyone else. And then, of course, post close. We want to treat people kindly and generously, but also with a high expectation for excellence. So oftentimes those two things seem in conflict and we don’t think there’s any conflict between those two. God calls us to excellence. Do unto the Lord. Right. Whatever your hands find, do unto the Lord. Like we want people to pursue excellence and excellence both in their job and their career, but also excellence beyond what is the product look like? What is the service customer service look like now? Are we falling way, way short all the time? One hundred percent. We live in a fallen, broken thistles and thorns world. Totally get that. But we certainly want to aspire to be excellent. And so that’s where we drive our returns from.

Luke Roush: How does that approach just around time frame? How does that influence kind of where you hunt for the right kind of partnership opportunities, recognizing that not every company is conducive to generating Alpha over a thirty year run? How do you think about focus and concentration?

Brent Beshore: Yeah, that’s a great question. So one of the first filters we put it through is do we think this company is going to be around and the demand for this product is going to be around in twenty, thirty years? Spot on. Right. And if we don’t think it’s something that’s going to be around for a really long time, we won’t get involved in that. Like for us is nice because it weeds out a tremendous amount of fabs, a tremendous amount of we call them Hustle’s right. These are maybe the companies doing great media companies grown a lot, but we just don’t have a high degree of confidence that it’s going to continue on, at least in a shape or form that we can predict. And so it gets us into a lot of things that are what we call Main Street businesses. Right. So if you look at our current portfolio, right, we’re in construction. We think that the world will continue to build things. I think construction’s been going on for a while and probably will continue for a while. Right. And, you know, subsegments of that, like we’re partners in the nation’s largest swimming pool builder as an example. Right. One of our jokes that we say in our offices that people have been dipping their bodies in water for pleasure for, you know, millennia. And we think that will continue. And so we’re not concerned about the new app that’s going to make you feel like you’re swimming in a swimming pool. I think there’s just a tactile experience and a a shared familial experience. There’s a community experience, too. Swimming is a

Henry Kaestner: global warming play.

Brent Beshore: You know, we build in Arizona and it’s an oven already and getting hotter. And so we think that that’s probably pretty good for pool sales as well. But yeah, anyway, we try to be involved in things that we think are enduring and that are going to last for quite a while.

Henry Kaestner: Brant does not shy away from talking publicly on podcasts about different verticals that are interesting and beyond construction swimming pools. I remember hearing the story where you’re talking about how pet crematoriums were a very interesting high margin play. I think maybe since said that maybe that played out a little bit. But tell us more about some of the verticals that you’ve seen and are interested in.

Brent Beshore: I mean, I think one of my favorite parts of my job is to get to see all these unusual little missions that you never would have expected otherwise. Right? I mean, there’s behind every wine bottles exampled. There’s the things that you never think about, which is where does the sand come that forms the glass, right? How do you develop new molds for the punting at the end of the bottle? How do you develop the foil? Right. How do you do the ink that goes on the foil? What are all the different chemicals that are used and what are all the different methodologies and equipment that’s used to harvest? And how do you think about the storage of those things? I mean, we’ve literally looked at them using the wine business as an example of sort of interesting angles, like I would never buy a winery. Right. I shouldn’t say that. As soon as I say never got an interesting way of humbling me and I end up doing the things I say I never will, which I guess if I’m being honest, if I somehow stumble on a great wine investment, that’s probably a good thing. So I guess I’m happy to eat my work. But if you look at the wine business, I mean, owning a vineyard, there’s a lot of non-economic reasons why people own wineries. And so any time you have non-economic reasons for participation in an industry, you’re going to see a dramatic decrease in the return set. And so whenever we look at an industry, one of the first things we look at is we call it the sexiness factor of how sexy is the industry, how much interest is there other than economics to participate in the industry. And so this is where you get into really weird economics around things like wine and movies and restaurants even, and anything that’s sort of a consumer ish thing that people would pick up and look at. But beneath the surface of those industries, there’s all these little niches and interesting things that you can see. And so I just love seeing all the different business models. I mean, I would say, yeah, there’s certain areas like crematoriums. I joke that all you need is a storefront oven, which is kind of crude, but it’s true. And there’s a lot of emotional reasons why you don’t want to just put Fluffy in the backyard, that you want to have a proper burial and all of those things that come along with that, I would say that any more. What’s interesting to me is not trying to formulate my own interesting things that I want to go pursue. And I’m just fascinated by all the things that come to us that I just never even knew existed as using example in the wine business. I mean, we’ve looked at everything from machinery to new genetic techniques for grafting grapes to different vine and all these different things that you would never imagine that you look at. And that kind of goes for every single industry. And so I just love the variety and all the different ways that you can serve a customer. And I think that the best job in the world,

William Norvell: you’ve been thoughtful. You spent a lot of time coming up with this vehicle and everybody’s really interested in brands vehicle. He’s always super open handed. You’ve written extensively on your twenty seven year vehicle. You’ve written extensively on how it kind of works. The question I want to ask is we’ve got an audience of Faith Driven Investor do you fundamentally and I don’t know if I know the answer to this, do you fundamentally believe the 10 year, 12 year fund is broken? Do you think tonnes of Faith Driven Investor should be using the permanent equity model? Do you think it’s another tool in the tool chest and there’s a great number of tools, or do you see the market going? What encouragement would you have for other Faith Driven Investor to maybe starting a fund? How would you encourage them to think about what might be the right fit for them and what God might be calling them to?

Brent Beshore: That’s a great question. And look, I want to be clear. There’s been a lot of people who served a lot of companies and a lot of investors by using a traditional two and twenty ten year, 12 year, whatever the shorter term vehicle it would be. And I’m not going to sit here and say I know more than them. What I would say is that logically, when you think about first principles, the more optionality that you can have, the value of an option is in being able to make a decision down the road. And if you talk to any private equity investor has been doing it for very long and you ask him what’s the most painful company experience in their career, most of the time it’s not the one that went to zero. That’s actually not the thing that they’re most upset about. The one that they’re most upset about is the one that they just had a tiger by the tail. They knew that the thing was going to grow for decades. And they just I mean, the thing was a bonanza and they had to go and sell it. And they knew that the guy who they were going to sell it to or the woman they were going to sell to was going to experience an unbelievable ride up. And then they were going have to sell it to somebody else. Right. And so you get these really weird situations where it doesn’t make economic sense, it doesn’t make cultural sense to have to sell something, but you have to sell it. And I think the longer you can stretch that time horizon, it doesn’t mean you have to hold everything. I mean, this is something that’s very different than I think people would assume. Sometimes sellers will say it us. OK, so you’re pledging to never sell our business and we say absolutely not. That’s not at all what I’m saying. I think there are good reasons to sell and bad reasons to sell. Do you think there’s anything wrong with selling? And they’ll say, well, yeah, I mean, if you’re going to sell my business, then why wouldn’t I just sell it to traditional private equity? I said, you’re selling the business so there can’t be anything inherently wrong with selling. Right. It’s what are you selling for the right reasons or the wrong reasons? And I think a really, really bad reason to sell is the time clock stopped. Right. And you’re being forced to there are good reasons to sell, which is somebody would be a better owner of that asset than you are. Somebody would be able to encourage flourishing in that asset more than you can. They would be able to bring a skill set. They would bring as I’m going to slip into consultancy gear and going to use that word synergy. Right. They can bring synergy the table more than we can. So I would just say is from a fund structure standpoint, I encourage people to think about this as look optimally, it would be an indefinite sort of holdco structure. I think there are even problems with that. And Henry touched on it earlier with liquidity. And, you know, how do you make sure you get the right mix of investors? And, look, everything’s going to be complicated, but I think the longer you can stretch your time horizon, the better. Would it actually show up and returns? Would it actually show up in the value of the company? I think it depends on the company. It depends on the people. It depends on their mentality. But it never hurts to gain optionality. And I think that in this case, for where private equity is today, I think there’s a lot of people waking up, both CPAs and LPs. Right. I mean, there’s on both sides of the ledger saying I think it’s better to go longer as long as we have some checks in place and that we can be responsible for it. The other thing is just I mean, frankly, I’m thirty eight when we raise the first fund, I was thirty five. Thirty four. I mean, I’ve done it on my own with my own capital since my mid 20s. We first raised our capital as my early to mid 30s. If you’re going to have a long time horizon, you also got to have a long time horizon. That makes sense. So I mean, most people who get into private equity didn’t follow my path. Like, I joke that I’m the Forrest Gump of private equity for a reason. I kind of fell backwards into it. And so most people are spinning out in their forties and you’re just probably not going to have a 30 year time horizon in your 40s as a GP. And so I think there’s some very good reasons potentially in that situation to not have a longer time horizon.

William Norvell: Superville, that’s great. Says I think about moving towards our clothes. And Luke and Henry, jump in here. Just kind of you know, if you had one or two pieces of advice or investors on the other side of this podcast, they’re out there. They may be looking for venture capital companies. They may be looking for long term hold companies. They may be looking at the public markets. What do you think Jesus has taught you about how you look at investing? What would be one or two pieces of advice or thoughts that you would say, you know, this is something I’ve just been really thinking over as an investor that I think Jesus has shown me.

Brent Beshore: Yeah, I mean, I think one of the lessons that I repeatedly learned that I think is just cause God wants us on our knees, God wants our whole heart, God wants our whole self. And I don’t think that you should take investing and put it off to the side. And O’Henry is really passionate about this, too. And I applaud a lot of the things that he said and talked about. This is going to bring your whole self in your whole life and put it in God’s hands. And so when it comes to investing, you know, I would say having the humility to say, God, I don’t know, lead me and guide me, you give me wisdom. Don’t sort of move investing off to the side and have it be something where your analytical over here and your hard nosed and met people who it’s almost like they’re Christians on Sundays and maybe Christians on Mondays and Tuesdays. But when they talk to GPS on Wednesdays and Thursdays, they’re definitely not believers. Right. And I think that that compartmentalization is really detrimental to both their life and their returns probably over time as well, as well as it’s really detrimental to the people who are trying to invest. And so practically, what does that look like? It means that try to be kind and gentle and understanding and trying to figure out what is the thing that that investor, if you’re going to put your capital with an investor, what are they really trying to achieve and why are they trying to achieve it? And what makes you confident that the thing that that has created success in the past is going to be sustained? I think there’s a lot of people rushing into different areas. And I mean, certainly right now there’s a huge rush of people into what I call lower middle market private equity and pursuing all kinds different structures, which is wonderful. Right. And there’s a tremendous amount of need. And I’m not discouraging that in any way. But I would say is I’ve seen people who with no track record and with very little expertize in the space, raise money from people just because they say, hey, there’s this idea that I have. And the reality of it is, William, as you know, I mean, I’m preaching to the choir here. It’s brutally difficult. One of the things I want to make sure people get from my comments is, you know, I’m not being flippant when I say that I’ve gotten on my knees every single time after we close the transaction and prayed to God would rescue me. That’s literally true every single time we’ve ever made an investment. I’ve had a moment after close where I thought I shouldn’t have done this. This was a mistake. And look, God has rescued us. And I think that the area, the market people can look at and see, OK, you’re paying half of the multiples that you’re paying in the public markets. That’s really attractive. Look at the yields you can get. The reason why it’s cheap is because it’s really, really, really hard and it’s really fraught with risk. And these companies can go to zero very quickly. And so I would just say is, if you’re an investor thinking about entering into small business, private investing, take it slow work with somebody who’s done it for a while, learn the ropes. A lot more things sound good than are actually true. And I say that comes back down to humility. And God wants us humble and dependent and follow that from the Bible.

Henry Kaestner: It is it is all in the Bible

William Norvell: brand, I think said it so well. Like, one of the best ways that God lives with us is to pour his word into us and let us pour over his word with him. And so we do, as you know, love to ask, just like is there a verse is there a story that is helping bring some of those things you just articulated to life during this season? Right. I mean, God’s word just moves with us through the seasons of life and just wondering if there is something God’s been using in your life to help bring some of these thoughts to mind.

Brent Beshore: Yeah, first of all, it’s a great question. I’ll tell you, there’s no one verse or no one story. And I think you can see this repeated in the Bible. And this has taken me a long time and only recently has been a somewhat of a revelation to me is that I, for most of my life, have focused on the content of what I say and not how I say it. I focused on being correct in my logic and being thoughtful in how I would write something out. Right. Like that’s how I think is how I would write. And oftentimes what it does is it causes me relational issues because I don’t say things with a loving heart and with a goal of helping somebody understand. And this is just my own pride in my junk’s sort of coming through. But when I think about Jesus at the well, with woman at the well. Right. I mean, it’s the most beautiful story of love and acceptance while also not shying away from truth. There’s a lot of ways you can say truth without hurting the other person in the process. And I think that recently, you know, when I think about the story of the prodigal son. Right. And like just how the father was so loving and accepting of him coming back and loving and kind towards the older brother who I identify with a lot as well. Right. And I identify, unfortunately, both brothers in different ways. And I think that the whole point is the content of our conversations, the content of our interactions with others. It might only be 20 percent of really what people hear. And I think so often it’s the other big chunk is how you say it with the right tone, with the right kindness and love wrapped around it. So not to. Shy away from truth, I think you can get squishy and, you know, if you don’t have any truth in it, just all grace. And I think that that’s not loving actually either as well. But I just need to focus way more on that. And that’s something that recently I’ve tried to focus on more and stumbling my way through it. But I think just really trying to be thoughtful of who is the other person, what do they need and what is a way in which I can communicate with them in a way that shows them I care and that I’m for them. And even when I’m saying things that maybe are opposed to what they would hope, I would say

William Norvell: I mean, I’m in

Henry Kaestner: front. I’m grateful for you. I’m grateful for you taking the time for you, sharing what you’re doing. I think a bunch of different approaches, I think are really, really important. And I think that it’s particularly helpful for me. My big one takeaway, I mean, there are lots of different things about the model I think are important. Lots of different approaches to working with entrepreneurs and investments. And how we think about that that are unique and interesting would even get into the fact that you’ve got this really unique advantage of being in the center of the country and being able to take a look at some of these businesses that might otherwise be overlooked. And you had a really, really, really interesting. But the one thing that I’m going to take away from this is what we talked about before, which is that as an investor endeavors to know God and enjoy him forever, we have to be conscious of our propensity towards having both knowledge and academic knowledge at the expense of a close, intimate relationship with the founder and the owner of the universe. And that remains probably my greatest challenge. And you helped put some words to that, that I think that resonate with me and I hopefully a lot of our listeners. So thank you for that. Thank you for your time.

Brent Beshore: Yeah. I really appreciate you having me on. Thank you so much. And it’s a pleasure. Keep up the great work.